Ifrs 5 practice questions answers

According to IFRS 5, Non-current Assets Held for Sale and Discontinued

Operations, a group of assets is classified as held for sale if its carrying amount
will be recovered through a sale transaction rather than through continuing
use. Therefore, the entity needs to account for the group of assets as held for
sale on 30 June 2018, and the following accounting treatments are required:

1. Recognition of impairment loss: The entity should recognize the

impairment loss on the group of assets as held for sale in accordance
with IAS 36, Impairment of Assets, up to the lower of the carrying
amount or fair value less cost to sell. As per the given information, a
cumulative impairment loss of $6.5 million was already recognized as of
1 October 2017, and the fair value less cost to sell of the group of assets
is $139.04 million ($145 million - $5.96 million). Therefore, the additional
impairment loss to be recognized on 30 June 2018 is $0.56 million
($139.04 million - $138.48 million).
2. Reversal of depreciation: The entity should stop depreciating the group
of assets as held for sale from the date it meets the criteria of held for
sale. Therefore, the depreciation on the factory building and plant and
equipment should be reversed from 1 January 2018 until 30 June 2018,
i.e. for 6 months. The depreciation to be reversed is $3.19 million
(($67.15 million - $6.72 million) x 10% x 6/12) for the factory building
and $1.5 million (($26.8 million - $4.02 million) x 15% x 6/12) for the
plant and equipment.
3. Measurement at the lower of carrying amount and fair value less cost to
sell: The group of assets as held for sale should be measured at the
lower of the carrying amount and fair value less cost to sell. As per the
given information, the carrying amount of the group of assets as at 30
June 2018 is $106.97 million ($14.14 million + $67.15 million - $6.72
million + $26.8 million - $4.02 million + $5.9 million + $3.48 million) and
the fair value less cost to sell is $139.04 million. Therefore, the group of
assets as held for sale should be measured at $106.97 million.
4. Disclosure: The entity should disclose the following information in the
notes to the financial statements:
  A description of the group of assets classified as held for sale, including
the nature of the assets, and the expected manner and timing of
disposal.
 The carrying amount of the group of assets as held for sale and the fair
value less cost to sell.
 The amount of impairment loss recognized on the group of assets as
held for sale during the period.
 A reconciliation of the carrying amount of the group of assets as held
for sale at the beginning and end of the period.
 The major classes of assets and liabilities classified as held for sale, and
the associated assets and liabilities.

In conclusion, the accounting treatment for the group assets in terms of IFRS 5
on 30 June 2018 includes recognizing impairment loss, reversing depreciation,
measuring the group of assets at the lower of carrying amount and fair value
less cost to sell, and making adequate disclosures in the financial statements.