IFRS 5 – NCA – HFS example – ACCA SBR
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There is quite a lengthy discussion below regarding the costs to sell being charged to SPL, as per my understanding the costs to sell is not specifically reducing the value of the asset hence it is being expensed to SPL whereas if the question had specifically stated that the Asset had been impaired due to a decrease in its fair value it would 100% be charged to OCI but it is only limited to that amount as the cost to sell the asset is always charged to SPL. Hope this helps and If there is any mistake in my explanation do correct me 🙂
Hello,
Shouldn’t we first offset the impairment against the revaluation surplus (as taught in the previous chapter) and only take any excess to the p/l?
That is what I thought so.. don’t know why the impairment goes straight to P&L.
Sir, i thought we are using 13,900 as carrying amount and not 15,400 which is the fair value
Please do reply.
Thank you Sir
Watch Previous lecture, revaluation model PPE are revalued to fair value at the date the PPE is classified as held for sale. An gain goes through OCI. This fair value becomes the carrying amount that is then compared to fair value less cost to sell. Any difference is impairment through profit or loss.
So true
it means the Fair value less cost sales will always be used as against CV. because that will always be lower than CV
mayowa is right, this seems stupid, because FV is the new CA, so FVLCS will always be the lower? seems a silly way of doing it in my opinion.
ah nevermind, i understand now it’s the same as what happened with investment properties. At the date of reclassification we value at FV with gains/losses to OCI. Then after this date we classify at the lower of the new CA and FVLCS, but this inevitable loss goes to P/L. Obviously Mayowas point is still valid that it is a bit silly. But thats annoyingly the rules and we just have to follow them. It will just end up splitting gains/losses between OCI (at/prior to reclassification) and P/L (after reclassification)
there will just be immediately a loss to report to P/L if there are any Costs to Sell.
We assumption that this example, IFRS 5 uses Revaluation model. If IFRS 5 uses cost model, so use 13.9 as Initial cost of IFRS 5.
But then I do not understand the phrase „ Non-current asset held for sale is valued at the lower of the carrying value and fair value less costs to sell.“ which comes from the notes…
As this is following the revaluation model, the notes specify that the asset should be immediately revalued before being classified as HFS. Therefore, the 15,400 is now considered as the new carrying value as 13,900 resulted from a previous revaluation that currently did not apply to the asset anymore. Please correct if i am wrong
Sir, the value of NCA HFS is lower of carrying value and fair value less cost to sell….
I thought the carrying value here is 13,900.
Expecting your answer and clarification.
Thank you