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IFRS 5 – Assets held for sales – Carrying value vs Fair value less cost to sell.

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › IFRS 5 – Assets held for sales – Carrying value vs Fair value less cost to sell.

  • This topic has 1 reply, 2 voices, and was last updated 2 years ago by Stephen Widberg.
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  • Author
    Posts
  • March 4, 2023 at 5:10 pm #680118
    Acastanot
    Participant
    • Topics: 1
    • Replies: 0
    • ☆

    Hi everyone. I am a bit confused about this topic and I hope that somebody can help me. In the notes in Chapter 11, as well as in the lecture video it is stated that „Non-current asset held for sale is valued at the lower of the carrying value and fair value less costs to sell.“

    But then, in Example 1, we are first translating to Fair Value,then calling this Fair Value „Carrying Value“ and comparing it with Fair Value minus costs to sell.

    If we proceed like this, is obvious that the „Carrying value“ will always be higher or at least the same as the fair value less cost to sell, as effectively, CV and FV are identical.

    Is that really so? If yes, how can this be a „prudential“ approach, if we are comparying the same number twice, only that once we have to take the selling costs out?

    March 6, 2023 at 7:41 am #680212
    Stephen Widberg
    Keymaster
    • Topics: 16
    • Replies: 3411
    • ☆☆☆☆☆

    If there is a policy of revaluation:

    1. Revalue to FV. If the asset goes up we credit OCI.
    2. This becomes the new CA.
    3. Compare to FVCTS. Loss to P&L.

    What does it mean? Selling costs are expensed in P&L.

    The situation does not arise if there is no policy of revaluation.

    I’ve never been enthusiastic about this……………….but it is the rule!

    🙂

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