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As per para 22 of IFRS 5, additional gains in excess of impairment loss (to the extent of reversal) on changes in Fair Value less costs are not recognised.
Example,
– on 1 Jan 20X6, a PPE immediately before classification applies IAS 16, carrying amount = $200.
– on the same date, the PPE is classified as NCA HFS and FV less costs = $180, value in use = $190. Hence impairment loss = $20
– on 1 May 20X6, FV less costs = $220Question:
1. Given that the asset is recognised at the new higher FV (gain of $40), how is the additional gain of $20 accounted for (in both SOFP and P/L) after reversing the impairment of $20?2. How would the value in use being different to the FV less costs of a NCA (or Disposal Group) affect accounting for NCA HFS or HFD, both on initial classification and subsequent reclassification?
Thank you
1. Reverse initial loss of 20 but do not recognise the extra 20. Carry at lower of CA (at time of classification as HFS) and FVCTS.
2. Value in use not relevant if HFS, as we are selling not using.🙂
Thanks for the response. I am still a little confused on the mechanics with the before and aftereffects of the classification on the books.
To put it into perspective, using my above example:
On 1 May 20X6
– the PPE is recognised at lower of CA (at time of classification) and FVCTS is $180
– reverse the impairment loss of $20 in PLOCIHowever, after classification the FVCTS is $220:
a) How do we account for the additional gain of $20, if the SOFP is going to reflect as $220?
b) Wouldn’t dropping the additional gain cause an imbalance in the books?
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