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Hello Sir, For PYQ Sept/Dec 2019 Q1 part (b), I need your clarification to some examiner answer, Thank you.
1.point 1 & 2 refer to CA (net asset of Primal Burgers Co) and RA respectively?
2.point 3 “how the disposal fits in with the Group restructuring as a whole”. Is it refers to Disposal group of IFRS 5?
3. Point 4: Why need to determine the anticipated profit on disposal as this cannot be recognised in the SOPL due to prudence concept?
4.For the last point, how the sale of Primal Burgers Co will affect on group’s FS and impact of the structure of the Group(segmental reporting?)?
1. If by RA you mean realisable/revalued amounts then yes – this would be relevant to auditing the amount at which it will be included as held for sale.
2 – yes, this is all about Primal Burgers which is a disposal group (i.e. a group of assets with associated liabilities for which disposal is intended in a single transaction).
3. You are correct – profit on sale cannot be recognised until it is sold but if the potential share price suggested a loss on disposal that might suggest that some impairment has been overlooked.
4. Yes this would have a bearing on segmental reporting since Ryder is listed and PB is clearly a segment. But it any case, recognising PB as a disposal group means that all the line items of assets/liabilities will no longer be included in the group SoFP – the assets of PB will be shown separately as “non-current assets held-for sale” and the liabilities will be shown separately (as liabilities directly associated with non-current assets classified as held for sale”) – the amount are not offset. It is not for the auditor to perform the consolidation – so the auditor would obtain the client’s workings.
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