Asset held for sale - Dec'14 first question

AAnton11y ago

Hello, Mike! I hope all is well with you. I have a question in regard to asset held for sale - P2 December'14 consolidation question. Answer suggests the following order of steps: 1.charge depreciation up to date when criteria were met; 2.revalue asset 3.do impairment test 4.measure to the lower of carrying amount and fair value less costs to sell. Is it a proper order of steps when dealing with assets held at revalued cost when there is a need to classify them as held for sale? I haven't found this order of steps in study books. When I solved this question I skipped step 2 and got a wrong answer.

MMikeLittleTutor11y ago#1

When we're moving an asset into the AHFS category we should: (1) depreciate it for the period before reclassification (2) revalue to fair value Then, at the year end (and each subsequent year end (though there shouldn't be any subsequent year ends if we sell it within twelve months!)) we should (3) consider whether the asset is impaired, and (4) impair it if necessary down to the lower of recoverable amount and carrying value Is that ok?

AAnton11y ago#2

Mike, I dont understand then where in your sequence of steps I can find requirement to measure AHFS at lower carrying amount and fv less cost to sell (in my message it was step 4). Also, is (2) also related to the assets held at historical value?

MMikeLittleTutor11y ago#3

The steps above are for assets held for sale - I believe that the steps apply whether the asset was carried at fair value or under the cost model. Between steps 2 and 3 I have written "Then, AT THE YEAR END........" That should tell you when steps 3 and 4 are to be carried out. "Lower of carrying amount and fair value less costs to sell" is the result of an impairment review and that's carried out at the year end Ok?

Hhoa11y ago#4

Dear Sir, I have a question in regard to this question. In step 3, the answer explain that No impairment loss is arise because VIU of 15.8 is higher FVLCTS. I understand the impairment loss arise if the CV( the fair value of 15.4 in this case) is lower the higher of VIu 15.8 and FVLCS 15.4. In this case, I think impairment loss arose. Please explain to me. Thank you for your support, Sir.

MMikeLittleTutor11y ago#5

We NEVER impair below recoverable amount - that's the rule Ok?

AAnton11y ago#6

Thanks, Mike. It has become clearer for me now (although it still look strange - requirement to remeasure to fair value despite the fact that is held at cost).

MMikeLittleTutor11y ago#7

That's the way it is! :-)