- This topic has 1 reply, 2 voices, and was last updated 4 years ago by
.
- Posts
Kat has a year-end of 31 December.
On the 1st January 20X9, it classified one of its freehold properties
as held for sale. At that date the property had a carrying amount of
$667,000 and had been accounted for according to the revaluation
model. Its fair value was estimated at $825,000 and the costs to sell
at $3,000.
In accordance with IFRS 5 Non-current Assets Held for Sale
and Discontinued Operations, what amounts should be
recognised in the financial statements for the year to
31 December 20X9?
In the solution ? 3000 is taken as impairment cost . Whereas ?3000 is actually cost to sell. Why is it taken as impairment lossHi,
When the asset is held under the revaluation model it is revalued immediately prior to reclassification to its fair value. When we then compare the FV to the FV less costs to sell when it comes to the reclassification, the FV less costs to sell will always be lower. The asset is therefore held at this lower amount and the difference is recorded as an impairment. The impairment in this instance will always be the costs to sell as this is the amount that is the difference between the two figures used in the calculation.
Hope that clears it up.
Thanks
- You must be logged in to reply to this topic.