BPP MOCK EXAM Q1. Joey (P2 UK DEC 14)

Similarly in the same question regarding asset held for sale, why is the asset revalued to $15.4 m, although its carrying amount is $13.9 m, as per the suggested answer it is stated that revaluation is done as the fair value is material, I found it contradicting with IFRS 5 provision which states that asset should be carried at lower of its carried value and fair value less cost to sell. so shouldn't the asset be valued at $13.9 m? Kindly help sir, this thing is really getting over my head. p.s Question has given its value in use of $15.18 m as well.

@g1rocker said: For the calculation of Fair value of identifiable net asset do we need to show the break down of the components( i.e Retained earnings, OCE, and other assets) or can we directly put in the value given in the question?? i am confused as to why the recommended answer has shown the answer with components broken down as they come up with the same value as given in the question.

You need the breakdown so that you can look at the movement in both the retained earnings and OCI of the subsidiary. Thanks

@g1rocker said: Similarly in the same question regarding asset held for sale, why is the asset revalued to $15.4 m, although its carrying amount is $13.9 m, as per the suggested answer it is stated that revaluation is done as the fair value is material, I found it contradicting with IFRS 5 provision which states that asset should be carried at lower of its carried value and fair value less cost to sell. so shouldn't the asset be valued at $13.9 m? Kindly help sir, this thing is really getting over my head. p.s Question has given its value in use of $15.18 m as well.

Prior to transferring to a NCA-HFS, assets held under the revaluation model are revalued to fair value first ($15.4m) and then the IFRS 5 treatment is used. Thanks

@P2-D2 said: Prior to transferring to a NCA-HFS, assets held under the revaluation model are revalued to fair value first ($15.4m) and then the IFRS 5 treatment is used. Thanks

but sir, what about this question in kaplan Study test TYU-12 Non current asset , On 1 January 20X1, AB acquires a building for $200,000 with an expected life of 50 years. On 31 December 20X4 AB puts the building up for immediate sale. Costs to sell the building are estimated at $10,000. Required Outline the accounting treatment of the above if the building had a fair value at 31 December 20X4 of: (a) $220,000 (b) $110,000. The suggested solution is as below: Until 31 December 20X4 the building is a normal non-current asset and its accounting treatment is prescribed by IAS 16. The annual depreciation charge was $4,000 ($200,000/50). As such, the carrying amount at 31 December 20X4, prior to reclassification, was $184,000 ($200,000 – (4 × $4,000)). (a) On 31 December 20X4 the building is reclassified as a non-current asset held for sale. It is measured at the lower of carrying amount ($184,000) and fair value less costs to sell ($220,000 – $10,000 = $210,000). This means that the building will continue to be measured at $184,000. (b) On 31 December 20X4 the building is reclassified as a non-current asset held for sale. It is measured at the lower of carrying amount ($184,000) and fair value less costs to sell ($110,000 – $10,000 = $100,000). The building will therefore be measured at $100,000 as at 31 December 20X4. An impairment loss of $84,000 ($184,000 – $100,000) will be charged to the statement of profit or loss. what I am confused about is the answer to part b, why the building was still recognized at its carrying value i.e 184,000 rather than revaluing it to its fair value i.e 220,000. Isn't it supposed to be recognized at its fair value as on 31st Dec 20x4, before recognizing it as NCA-HFS?

The building is not held under the revaluation model, so is not revalued to fair value.