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b) the requirement asks to comment on the matters to be considered and explain audit evidence you should expect to find during the file review in respect of each of the issues described above
The answer key says that the depreciation on the leased back asset should be based on the previous carrying value of 27m
Is it correct shouldn’t the depreciation be calculated on the new fair value of 37 million?
Only because we are looking for the year to 31 January, 20X3 and that’s the very date when the asset was sold
Whereas the asset will be included within the statement of financial position at the revised cost of $37 million, throughout the entire year it was a $27 million asset and, for the year to 31 January, 20X3, depreciation will be calculated on its original cost
Better?
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