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Hello Mike
Hope you are fine. Excuse me for asking too many questions! I know these questions get your time …My question is about AHFS , December 2014, Q1, note 6.
The asset should be recognised as AHFS at 31/3/2014. At this date we have:
CV = 13.9M.
FV-CTS= 15.4
cost of sale = 0.3
VIU = 15.81 -As far as I know (according to standard!), we should recognise the AHFS at the LOWER of of CV and FV-CTS! I mean at lower of 13.9M and 15.4 – 0.3 = 15.1. So it should be stated as 13.9M!
But the answer is saying another things!! ( revalued the asset to FV=15.4 !! )2- Also at the year end any impairment loss should be the difference between adjusted CV and FV-CTS! The adjusted CV is 13.9M and FV-CTS is again 15.1! So there is no impairment loss at all.That is all!!
But again the answer says another weird things! (I can not even understand it!!)I am totally confused with ACCA answer! What are the sources of these weird rules for AHFS in this question?!! At least I think it is not in complies with IFRS 5 AHFS (and of course I know I am wrong 🙁 )!!!
Many thank
Kind RegardsRecognition at the lower of carrying value and recoverable amount is done AFTER initial recognition.
But on the reclassification from PPE to IFRS5 asset held for sale, we need to set the AHFS at fair value.
This point is easily missed even from the Internet sites on IFRS5
After that revaluation exercise upon reclassification, THEN we start to consider impairments. But even then, there should in theory not be many since, to be classified as held for sale, the sale should be highly probable within 12 months
Does that help?
Hello Mike
Hope you are fine.in this question as you said we have the following results:
after classification held for sale:
CV=15.4
VIU=15.8
FV-CTS=15.4-0.3=15.1so there is no impairment and the value of asset is 15.4 at the year end(because there is no depreciation).at that date(i.e year end):
value=15.4
sale less costs to sell=15.6-0.3=15.3and so entries are
D:rec. 15.3
D:retained earning 0.1
C:PPE 15.4is it correct as it has the same effect as what Acca said?
in Acca the examiner remeasured the asset held for sale to fv-cts ie 15.1 and recognise loss=0.3(so D:retained earning,C:PPE)
and at the year end sold the asset for 15.3 and recognise profit=0.2 ie
D:rec 15.3
C:PPE 15.1
C:retained earning 0.2and the net effect is the same as what I said.
If what I said is wrong could you please explain me why it is wrong?and why the examiner remeasured the asset held for sale to fv-cts ie 15.1 in Acca?
Many thank
Kind RegardsHi,
The net effect you have is the same but it is usually easier to break things down in an exam question into smaller more manageable chunks, hence why they’ve adopted a step-by-step approach in the exam answer.
The asset held for sale has been measured at $15.1 m because on classification to an asset held for sale it is measured at the LOWER of the carrying value ($15.4 m) and the fair value less costs to sell (=$15.4 m – $0.3 m = $15.1 m)
Hope this helps
Thanks
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