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problem regarding the acca question is to report a value of NCA after it has been classified as held for sale , but eventually the sale doesnt take place in one year time,
Now according standered a NCA that is no longer classified as held for sale should measured at lower of its carrying amount adjusted for depreciation(before and after classification) AND its recoverable amount……so the the reported value should be 36m rather tha 36.8 as chosen by book ???QUESTION (ACCA)>
As at 30 September 20X3 Dune’s property in its statement of financial position was:
Property at cost (useful life 15 years) $45 million
Accumulated depreciation $6 million
On 1 April 20X4 Dune decided to sell the property. The property is being marketed by a property agent at a
price of $42 million, which was considered a reasonably achievable price at that date. The expected costs to sell
have been agreed at $1 million. Recent market transactions suggest that actual selling prices achieved for this
type of property in the current market conditions are 10% less than the price at which they are marketed.
At 30 September 20X4 the property has not been sold.
At what amount should the property be reported in Dune’s statement of financial position as at 30 September
20X4?I think i am calculating depreciation in excess of what it actually is [ {45/15=3 so 6+3=9} then 45-9=36] ….dep at reporting date at
cost is 45m – 6 (acc-depreciation)=39 and fair value less cost to sell is 36.8
SO, now standard is applying which is lower of its carrying amount and recoverable value
so the lower value is 36.8 ……i guess now i am doing right ??You cannot calculate the carrying value correctly at the date of the decision made to sell the property, 1 April 20X4.
At the reporting date the carrying value is 45 – 6 = 39 but then you need to charge six months of depreciation so reducing it by 1.5 (6/12 of the annual charge of 3). This gives us a carrying value of 37.5 compared to your fair value less costs to sell of 36.8.
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