M2: Assets (IFRS 5 NCA Held for Sale)

Question 1

What should happen was NCA go from held for use in business to Current asset HELD FOR SALE?

Answer 1

 The asset must be available for sale in its present condition

The sale must be highly probable:
 Shareholders have approved the sale (if shareholder approval is required).
 The appropriate level of management must be committed to sell the asset.
 An active plan to locate a buyer must have been initiated.
 The asset must be marketed at a reasonable price compared to fair value
 A sale should be expected within 12 months of classification. It may extend beyond 12
months if management is still committed to the sale and the delay was caused by events
beyond the company’s control.
 Significant changes to the sale plan must be unlikely.

Question 2

If the NCA doesn’t meet all the criteria to be moved to current assets what happens?

Answer 2

It remains in PPE.

Question 3

What is the criteria for valuing Assets that are going to be held for sale?

Answer 3

Measured at lower of either:
1) PPE Carrying Amount (Cost - Accumulated Depreciation)
2) Fair Value less Costs to Sell (If this is lower, an impairment loss will be recognised in SPL)

Question 4

What needs to happen every year for Assets held for sale?

Answer 4

Each year end: remeasure at FVLCTS. (Fair value less costs to sell)

• This could result in further impairment loss or reversal of previous impairment loss if new FVLCTS is greater than the HFS Carrying amount.
• The asset cannot exceed the original carrying amount (PPE carrying amount).

Question 5

Do we depreciate assets that have moved to be held for sale?

Answer 5

No. They are no longer in use.

Question 6

What are the Presentation and Disclosure of HFS assets?

(SOFP, SPLOCI, SOCF)

Answer 6

SOFP: presented separately on face. Cannot offset HFS assets and liabilities

SPLOCI: Impairment gains/ losses recorded in expenses.

SOCF: Proceeds on sale in investing activities. Impairments from PPE to HFS will be added back
under operating activities section.

Question 7

What would happen if we couldn’t sell and then we moved it back to PPE?

Answer 7

We would then need to start depreciating again on the date we moved back.

We also would need to Cr the HFS and then Dr the PPE to bring it back.