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Dear Sir,
Could you please help with this question? Should we account for both disposal of plant and factory as a discontinued operation?
At a board meeting in June 20X3, Neutron Co’s directors made a decision to close down one of its factories by 30 September 20X3 and market both the building and the plant for sale. The decision had been made public, was communicated to all affected parties- and was fully implemented by 30 September 20X3.
The factory’s plant had a carrying amount of $2.2m, but is only expected to sell for $500,000, incurring $50,000 of selling costs. The factory itself is expected to sell for a profit of $1.2m.
What is the profit or loss on discontinued operations relating to property, plant and equipment for the year ended 30 September 20X3?
Hi,
We’re looking at a non-current asset held for sale as opposed to a discontinued operation in this instance as it is the disposal of PPE as opposed to a line of business or geographical area.
When looking at NCA-HFS we’d look at each asset individually and compare the CV to the FV less costs to sell, measuring the NCA-HFS at the lower.
Plant – FV less cost to sell look like being lower than the CV and so recognise at the lower on the SFP and then the difference is an impairment through profit or loss.
Factory – FV less cost to sell must be greater than the CV if expected to sell for a profit, so asset held at CV. No profit is recognised until it is eventually sold, presumably in the next accounting period.
Thanks
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