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Hello
Hello
This question deals with IFRS 5.
A paragraph in the answer states the following:“Any impairment loss which arises by using the measurement principles in IFRS 5 must be recognized in profit or loss. For assets carried at fair value prior to initial classification, the requirement to deduct costs to sell from fair value will result in an immediate charge to profit or loss.”
My question is why would it result in an immediate charge to the profit or loss? Somehow I thought that the selling costs would have been recognized in the profit or loss when it was actually being sold.
Regards
Hi,
We revalue the asset to is fair value immediately prior to reclassification as NCA-HFS. If we are therefore comparing the carrying value, which is now the fair value, to the FVLCTS then the FVLCTS will always be lower. It will also be lower by the costs to sell figure, so this figure will be taken through profit or loss immediately.
I do hope IFRS 5 gets examined for you as it looks like you’ve been spending a fair bit of time on studying it.
Thanks
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