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Hello Chris
Let us say there is a large restaurant business that has 600 chain of restaurants and has a reporting date of 31st December 2016. Let says the board of directors have made a decision to close ONLY 5 branches at 30th November 2016. At the previous year end of 31st Dec 2015, the annual turnover was $1,200 million, The 5 branches that were expected to close down made a combined total turnover of $5 million at 31st Dec 2015.
The IFRS 5 mentions a major line of business operations or major geographical area of operations. I am not sure whether it means it must have a material effect on the entity’s business or financial results?
I am NOT sure whether the decision to close ONLY 5 branches would qualify as a Discontinued operation under IFRS 5? If the answer is NO how should be presented?
Hi,
With regards the separate major line of business aspect, it doesn’t look like the 5 restaurants would be either separate or major to be classified as discontinued operations. The rest of the business is being carried on and would not suffer due to the closure of the 5 restaurants.
If the decision has been made to sell the restaurants then they would be treated as a non-current asset/disposal group held for sale. This would result in any potential impairment going through profit or loss, and then a profit or loss on disposal.
Thanks
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