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Assets held for sale

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Assets held for sale

  • This topic has 3 replies, 2 voices, and was last updated 4 years ago by P2-D2.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • September 8, 2020 at 9:10 pm #584225
    Gigakutkha
    Participant
    • Topics: 26
    • Replies: 11
    • ☆

    Hi,
    if an asset is held under revolution method, before classification as held for sale, it is revalued (creating revaluation reserve in OCI) and then it is impaired by Cost to Sell amount (to hold it min[NBV, FVLCS]).
    In LSBF, they say that this impairment is charged to P&L (ie the impairment does not reduce OCI). Do they really mean that the impairment does not reduce OCI or did they mean SPLOCI?

    here is the exercise with LSBF’s explanation:
    Westville owns a property, bought on 31 December 20W7, to which it applies the
    revaluation model of IAS 16. The property was estimated to have a useful life of 50
    years at acquisition. It was revalued to $450,000 at the last year end, 31 December
    20X7. Halfway through 20X8 when the fair value was $470,000, it was classified as
    held for sale, with expected selling costs of $10,000.
    Answer: Prior to classification, It is revalued prior to classification as held for sale to its fair value of $470,000, giving rise to a revaluation surplus of $31,250. This is recognised as other comprehensive income in Westville’s statement of profit or loss and other comprehensive income in the year ended 31 December 20X8.
    On classification as held for sale: The property is held at the lower of fair value ($470,000) or fair value less costs to sell ($470,000 – $10,000 = $460,000), so $460,000.
    An impairment loss of $10,000 is therefore recognised in Westville’s statement of
    profit or loss in the year ended 31 December 20X8.

    September 10, 2020 at 3:53 pm #584794
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7141
    • ☆☆☆☆☆

    Hi,

    The asset is definitely revalued to FV and the gain taken through OCI. The impairment I then believe is taken through profit or loss. I’ve included the link to the standard – https://www.iasplus.com/en/standards/ifrs/ifrs5

    It says “After classification as held for sale. Calculate any impairment loss based on the difference between the adjusted carrying amounts of the asset/disposal group and fair value less costs to sell. Any impairment loss that arises by using the measurement principles in IFRS 5 must be recognised in profit or loss [IFRS 5.20], even for assets previously carried at revalued amounts.”

    So it looks like it is correct.

    Thanks

    September 11, 2020 at 7:56 pm #585183
    Gigakutkha
    Participant
    • Topics: 26
    • Replies: 11
    • ☆

    thank you 🙂

    September 14, 2020 at 5:04 pm #585593
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7141
    • ☆☆☆☆☆

    You’re welcome!

  • Author
    Posts
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