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I have been looking at your model answer for sales and leaseback example 7 part ii. Is it not more appropriate to treat the transactions separately, firstly the sale then the lease. The sales recognized in accordance with IFRS 15, lease in accordance with IFRS 16 and the disposal of non-current assets in accordance with IAS 1.
Is it not also more appropriate to recognize the asset at revalued amount before the sale. In my understanding; non-current assets held for sale are firstly recognized at the revalued amount. Even though the asset was never transferred to inventory, I still feel it’s more appropriate to fair value the asset before the sale, given the fact that the fair value of ten million is given in the question.
The right of use retained was recognized at R6 486 257 because it was calculated based on the carrying value of R8 400 000. I feel it’s understated because the fair value is R10 000 000. The accounting treatment is not in accordance with qualitative characteristic of relevance.
NCA held for sale are measured at lower of:
– carrying value
– FVCTS
There is absolutely no requirement to remeasure an asset to FV UNLESS there is a policy of revaluationI take your point about relevance – but that’s down to the standard writers! as is understandability!
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