FINANCIAL REPORTING A7-FR1-17

HOMEWORK

NON CURRENT ASSETS HELD FOR SALE

Date: 06/08/2023

DeBeers Ltd is a listed company on the Stock Exchange with 8 subsidiaries, 4 based in the African
continent and another 4 in U.S.A. The company is producing gold, diamond and sliver which are being
extracted underground using different machines and other equipment.

The company is using 65% of its profits to acquire new assets and it has a financial year that ends on
30 June each year.

During the year 2021 the demand for diamond was very high which forced management to put all the
assets into operation to such an extent that they became less efficient and idle for 3 months.

On 31 January 2022 management took the decision to sell the following unproductive assets and these
assets were grouped into Group A (African Continent Assets):

Assets Date of Acquisition Cost (M)

Machinery 01/01/2018 2 800 000

Plant 01/07/2021 240 000

Land 110 000

Inventory (Cost 70 000 NRV 50000)

Debtors (40000 5% of credit losses/Bad debts were written off)

Liabilities (30000)

On 31 January 2022 the fair value of the asset was M890 000 and the cost to sell is M5000.
QP-ASM-001|Rev 004

The value in use of the all the assets in the disposal group is M800 000.

On 30 June 2022, the fair value less costs to sell of Group A (African Continent Assets) was given as
M1 140 000.

Mr Dereko, the newly appointed Financial Director is not sure whether some of the assets classified as
Group A (African Continent Assets) qualify to be recognised as Non-Current Assets held for Sale (IFRS
5). It is the policy of the company to depreciate its assets at the following rates:

Machinery 20% Straight line method

Plant 15% Reducing Balance method

The land was revalued to M115 000 on 30 June 2022.

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 1) Mention the criteria that must be met by each asset in order to be classified as a Non-Current
Asset held for sale (IFRS 5)? (1/2 a mark will be allocated for each criteria) (3)

2) Show all the necessary calculations and compile relevant journal entries from 2018 to 2022
including journals for all assets and liabilities transferred into Non-Current Assets held for
Sale? (30)

3) Show extracts of DeBeers Ltd for the following items for the year ending 30 June 2022:
a) Statement of Comprehensive Income? (5)
b) Statement of Financial position? (6)
QP-ASM-001|Rev 004

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