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dear tutor
it read on the paper ” a manual journal has been posted by the finance director to reclassify the assets as current assets and to adjust the value of the assets for impairment and reversal of depreciation charged from the date at which the assets met the criteria to be classified as held for sale”
is this journal a correct accounting treatment for HFS, it was non- current asset, is it because it’s going to sell, then reclassified as current asset? I don’t understand why FD treat it like this way, IFRS5 required this? is it a right way doing so?
Many thanks
It will be shown on the SoFP as a separate category of asset:
“An entity shall present a non-current asset classified as held for sale and the
assets of a disposal group classified as held for sale SEPARATELY from other assets
in the statement of financial position.”Also from IFRS 5:
“an asset classified as held for sale … is not depreciated.”So it would be correct to reverse any depreciation after classification as held for sale.
You may find it helpful to download SBR notes for reference (also FR).
Thanks tutor, I think my main confusion is “reclassified as current asset”, I understand we need to separate HFS from the normal classification, and stop depreciation. should it be asset held for sale rather than current asset?
many thanks
Personally, I think the idea of having to post a journal to change the classification of an amount from non-current to current of vice versa is a bit strange and unnecessary – though presumably this is what happens in wholly computerised financial reporting systems.
I think it’s correct to call it a current asset – because it’s not non-current – but it would have to be presented separately.
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