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- November 4, 2017 at 6:11 pm #414327
Dear Tutor,
Good day!
In lecture 2 of chap 13 on discontinued operations, while explaining the proforma of the SoPL you mentioned, “In the SoPL, in the discontinued operations section, we have 1 line item i.e. Profit/ (loss) from the discontinued operations. This figure includes the profit for the year + any gains/losses that arise on reclassification, potentially as a HFS operation”.
My question is when would we have gain on reclassification of asset as HFS? As I recall, when asset is reclassified as HFS, it is reclassified at amount which is lower of carrying value or fair value less costs of sale. And if that’s the case, we will either reclassify at the same carrying amount (means no profit or loss on reclassification) or the lower amount of fair value less cost (which will lead to impairment loss which will go to P/L).
Hence, I understand that we may have loss on reclassification (the impairment loss), however I don’t get it as to how or when we will have GAIN on reclassification.Thank you.
November 5, 2017 at 9:34 pm #414480Hi,
A discontinued operation is one that could be sold and if it has been sold then we may make a gain on disposal and hence it would be included within the discontinued operations line.
Thanks
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