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Hello
1) May I know what is the significance(s) of having this standard as i couldn’t visualize its importance.
2) (a) How to differentiate a Held for sale under IFRS 5 and Normal Disposal of Asset under IAS16
(b) If the scenario is as below, what would be the answer?
Scenario : In 2013, ABC Company bought a motor vehicle at $2000, depreciation is
provided at 20% p.a. However, in 2015, the company decided to sell the motor
vehicle at $ 3000. The fair value of the motor vehicle in 2016 is $ 3500. So, is the
disposal of motor vehicle treated as held for sale or normal disposal of asset?Thank you
1. One important thing is that the accounting treatment for held-for-sale assets is different from those normal PPE assets (e.g. there is no depreciation for assets classified as HFS).
2. a) There are 6 conditions of which an asset must meet in order to be classified as HFS. If any is not met, you will still record in accordance with IAS16.
b) The company “decided to sell” the asset, but it has still not actually been sold. Assuming that all conditions for HFS have been met (e.g. ABC is actively looking for buyers, the vehicle is being marketed at a reasonable price and it can be sold at present condition), you need to treat the asset as HFS UNTIL it is actually sold out.
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