IFRS 5 NC-HFS

According to my text, “If a non-current asset is measured using a revaluation model and it meets the criteria to be classified as being held for sale, it should be revalued to fair value immediately before it is classified as held for sale. The asset is then revalued again at the lower of the carrying amount and the fair value less costs to sell. The difference is the selling costs and should be charged against profits in the period.”

example:
Nash purchased a building for its own use on 1 January 20X1 for $1m and attributed to it a 50-year useful life. Nash uses the revaluation model to account for buildings.

On 31 December 20X2, this building was revalued to $1.2m.

On 31 December 20X3, the building met the criteria to be classified as held for sale. Its fair value was deemed to be $1.1m and the costs necessary to sell the building were estimated to be $50,000.

Nash does not make a reserves transfer in respect of excess depreciation.

Answer:

The building would have been recognised on 1 January 20X1 at its cost of $1m and subsequently depreciated over its 50-year life.

By 31 December 20X2, the carrying amount of the building would have been $960,000 ($1m – (($1m/50) × 2 years)).

The building was revalued on 31 December 20X2 to $1.2m, giving a gain on revaluation of $240,000 ($1.2m – $960,000). This gain would have been recorded in other comprehensive income and held within a revaluation surplus (normally as a part of other components of equity).

The building would then have been depreciated over its remaining useful life of 48 years. Depreciation in the year ended 20X3 was therefore $25,000 ($1.2m/48). The building had a carrying amount at 31 December 20X3 of $1,175,000 ($1.2m – $25,000).

At 31 December 20X3, the building is held for sale. As it is held under the revaluation model, it must initially be revalued downwards to its fair value of $1,100,000. This loss of $75,000 ($1,175,000 –$1,100,000) is recorded in other comprehensive income because there are previous revaluation gains relating to this asset within equity.

My question is- How do we treat the impairment loss after classification to IFRS5? Should we charge to SOPL or reduce it from OCI as there is a corresponding surplus?

According to my text, “The building is then revalued to fair value less costs to sell. Therefore, the asset must be reduced in value by a further $50,000. This loss is charged to the statement of profit or loss.”