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Hello
If i understand correctly, the info below is ssying that even if there is a balance in the revaluation account, once an asset is held for sale, if it is impaired then that amount should go to the p & l. Can you please confirm if this is correct?Revaluing an asset held for sale might mean an impairment (revaluation downwards) is needed.
This must be recognised in profit or loss, even for assets previously carried at revalued amounts.Also, what happens if an asset held for sale is not sold within 12 months, how is that treated?
Hi Nari,
Good to see that you’re working hard in the run up to the exams.
Yes, that’s correct. Once the non-current asset has been reclassified as held for sale any impairments will go through profit or loss regardless of whether it was held under the revaluation model previously.
Any impairment on reclassification is treated as normal however, it is just the treatment after the reclassification that is different from normal.
Thanks
Thanks, if an asset held for sale is not sold within 12 months, does it remain as held for sale in the next 12 months or is it grouped back with PPE? I’m thinking it would depend on the possibility of it being sold in the next 12 months (year 2) but I’m not sure.
Hi,
If it hasn’t been sold in 12 months then it goes back to PPE. There would have to be some pretty strong evidence to say that it is then going to be put back for sale and sold again in the next year given it hasn’t been sold in the last 12 months. It would look to me like the company is just trying to avoid any depreciation charges in its financial statements by keeping the asset as held for sale, which would then create an ethical issue.
Thanks
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