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Hi Mr Mike, I have a question relating to mock exam in Bpp’s test bank page number 166
Could you explain it please?
Sometimes standard’s criterion about discontinued operation can’t be explained in the question such as below.Radar’s sole activity is the operation of hotels all over the world.After a period of declining profitability. Radar’s management took the following steps during the year ended 31 March 20X3
1)it entered into negotiations with a buyer to sell all of its hotels in country A
2)It diposed of two-loss making hotels in country BA)1
B)2
c)Both of them
D)neither of themAnswer: A
1)does represent withdrawal from a separate geographical area, so qualifies to be classified as a discontinued opertion.
2)does not represent withdrawal from either a geographical area or a major line of business(as it has hotels in country B) so would not be treated as a discontinued operation
The answer does not appear logically correct.1-even has still not made a decision to sell it still in negotiation but 2 has already disposed of two-loss making hotels .Both question mention different region or country.
This question is totally wrong.
You haven’t identified the question for me!
Does the question specifically restrict your consideration to discontinued operations or is the door left open for you to consider also assets held for sale
The hotels in country A sounds to me like an asset held for sale that s being actively marketed and, as you correctly state, it is a defined geographical area
The two hotels in country B are (by implication) are not the only hotels in country B operated by Radar – if they were the only 2 Radar hotels the question would have read something like …
“2) It disposed of both of its hotels in country B because they were both loss making”
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