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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?
A Statement of profit or loss gain $155,000
Statement of profit or loss impairment loss $3,000
Revaluation gain nil
B Statement of profit or loss gain $158,000
Statement of profit or loss impairment loss nil
Revaluation gain nil
C Statement of profit or loss gain nil
Statement of profit or loss impairment loss nil
Revaluation gain $155,000
D Statement of profit or loss gain nil
Statement of profit or loss impairment loss $3,000
Revaluation gain $158,000Why the answer is D, not C?
Hi,
The asset is held under the revaluation model, so will be revalued to fair value prior to the transfer of the PPE to a NCA-HFS. This gives the gain of 158 and we revalue from 667 to 825, which goes through OCI.
We then transfer the asset to the NCA-HFS category, where it is valued at the lower of the CV (=FV) and the FVLCTS (fair value less costs to sell). The FV is 825 and FVLCTS is 822 (825 – 3) and so the lower is the 822 which gives rise to the 3 being the impairment loss.
Hope that clears it up for you.
Thanks
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