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sooha
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help me please with this question from kaplan
which two of the following must exist for and operation to be classified as a discontinued operation in accordance with IFRS 5 Non -current asset held for sale and discontinued operation
– it represent a separate major line of business or geographical area
– it is a subsidiary
– it has has been sold or is classified as held for sale
-it is considered not to be capable of making a future profit following a period of lossesthe answer in kaplan is
– it represent a separate major line of business or geographical area
– it has has been sold or is classified as held for saleis that correct ? aren’t discontinued operation is not held for sale ? and consider making loss ?
P2-D2
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Hi,
Yes, that is correct as per the rules in IFRS 5. For it to be considered discontinued then we need to ensure that it is a separate line of business as otherwise it would not be relevant to the users of the accounts. It also needs to either have been sold in the year (hence no longer in operation or part of the business) or held for sale (so no intention to have it continue to operate as part of the business next year).
We don’t have to have the business as loss making, we could quite easily be disposing of a profit making business and it therefore be discontinued.
Thanks
sooha
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