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If during mid-Year Management decides to sell an asset, therefore, that asset should be classified under current assets as per IFRS 5.
E.g The asset has a Carrying Value of 100 at the start of the year.
Should the depreciation be charged for 6 months?
Let’s say the depreciation for 6 months is 5. Then Carrying Value would be; 100 – 5= 95.The asset be classified lower of Carrying amount and Fair value less cost to sell. Now, what amount for measurement should be chosen as Carrying Amount,100 or 95?
Whether a company depreciates on a monthly basis, an annual basis pro-rated or an annual basis (full year in the year of purchase, none in the year of sale) is a matter for the directors to choose.
Because of this, I’m not able (nor is anyone else) to give you a definitive answer
Do you see that it’s not possible for me to answer?
Got that.
So, making it clearer.Making 3 scenarios so that i can understand it clearer.
1. Let’s say that the company depreciates on a monthly basis.
2. Let’s say that the company depreciates on an annual basis pro-rated.
3.Let’s say that the company depreciates on an annual basis (full year in the year of purchase, none in the year of sale)Implications of it, in each of it?
Thank you.
Going back to your original question, where an asset is reclassified from everyday use to AHFS, depreciate for the applicable period, reclassify, consider fair value less costs to sell. If that is lower than revised carrying value, impair to that lower level
Overall, it makes no difference in the bottom line whether you depreciate of impair down to recoverable amount and, for the likely amounts involved, that designation is not likely to be material
Ok?
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