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Which of the following items should be classed as an asset held for sale
a) Maykorn co’s head office building is to be demolished at which point the land will be put up for sale. A number of prospective bidders have declared an interest and land is expected to sell within a few months of demolition
b) An item of plant was put up for sale at the start of the year for $500000. 6 parties have made a bid to Maykorn co for the plant but none of these bids have been above $20000
c) A chain of retail outlets are currently advertised for sale. Maykorn co has provisionally accepted a bid subject to surveys being completed. The surveys are not expected to highlight any problems. The outlets are currently empty
d) A brand name which Maykorn co purchased in 20×2 is associated with sale of potientially harmful products. Maykorn co has decided to stop producing products under this brand , which is currently held within intangible assets
Sir correct ans is C but please can you explain that why c is correct and why others are wrong?
Also for asset HFS certain criteria should be met that asset must be available for sale, sale must be highly probable, asset should be marketed at reasonable price, sale is expected to be completed withing 12 months of of its classification as HFS, and it is unlikely that plan with be changed/withdrawn.
Sir how option C meet the above criteria?
a) and d), the assets are not being sold but are effectively being scrapped, so will not meet the IFRS 5 criteria.
b) we have not accepted the offer and so it is currently not being sold.
c) meets all the criteria of IFRS 5
Thanks
But sir as we know that the criteria is that asset must be available for sale, sale must be highly probable and sale must be completed within 1 year from date of classification, so in b) plant is put for sale, in the criteria it is not necessary that sale has been made, its just that asset must be available for sale. So why b) cannot be the correct answer?
Secondly, in c) the price is not mentioned and one of the condition of the criteria is that asset must be actively marketed at a reasonable price
b) isn’t going to be highly probable if the offers we have received are that low.
c) would you advertise them at a price that isn’t reasonable? I doubt it.
Thanks
Sir in a) it will be demolished and then put up for sale, so I agree it be scrapped, but in d) why we are saying that it will be scrapped?
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