What will be the income earned from the sale of vehicles? First 9 months were consolidated and last 3 months reported under IFRS 5 as discontinued. Does it make any sense? I would like to ask that if a company has a reportable segement (a division in opertion) and related PPE items (land, building and equipments) as per IAS 16 and during the year stop the operations and rent out the whole division to its subsidiary company. Dear Edmundo, or all the adjustments should be done in the current year. So, profit/loss on the disposal and all other revenues and expenses of discontinued operations enter to one single amount (i.e. With regard to any impairment, immediately before classification as held for sale, the impairment is recognized in line with the applicable IFRSs, for example, under IAS 36 for property, plant and equipment. Previous Section Next Section . Please check your inbox to confirm your subscription. Or the opposite situation. For example, a line that says “Amounts in equity relating to non-current assets held for sale”. 1) Yes, these 2 are closely linked. Meanwhile, the factory is working full-time and producing goods. Inventory(1/7/2017) 7 500 000 However, the plans for reconstructing were not fulfilled, and the management decided to sell the factory. And if so, in its separate financial statements there would be no depreciation and it’ll be extremely profitable? Test Bank for Financial Accounting: IFRS Edition, 3e 2 - 4. consultancy fees/ professional fees etc.) I think that the company just generated expenses. Review: This course gives a very good overview and fairly comprehensive examples of IFRS and GAAP to IFRS differences. Ifrs 5 1. This article was really helpful to me thank you so much Silva. This site uses cookies. For example, you would measure an item of property, plant and equipment under IAS 16. Thanks for the good work and helping us. You should classify a non-current asset as held for sale if its carrying amount will be recovered principally through a sale rather than continuing use. The evidence is that the sale contract has been prepared and the price and everything were confirmed by the seller. In hindsight I wish I had completed the IFRS Certificate Program first as it covered many issued that I came across through my work. IFRS 5 Non-current Assets Held for Sale and Discontinued Operations By:- Yohannes Negatu(ACCA,DipIFR) 2. Hello Madam, If a subsidiary company transfer whole business to its parent company through the Business Transfer agreement then this is called as discounted operation ?. I’m unsure. Test Bank for Intermediate Accounting: IFRS Edition, 2e. When you stop some operation, maybe you will have some assets held for sale in there. However, as for the reversal of impairment loss, I would recognize it in 2016. in the split between continuing (13 000) and discontinued (7 000) operation. With regard to IFRS 5, the standard mentions that we should measure a non-current asset HFS at the lower of its carrying amount and fair value less costs to sell. That’s the main measurement principle of IFRS 5. I see both concepts are same but do not know when a company can recognize the first or to recognize the second. University of Pennsylvania’s More Introduction to Financial Accounting teaches you how to read, understand, and analyze most of the information in the financial statements of companies.  Accounting Data Analytics with Python by the University of Illinois focuses on developing Python skills for assembling business data. is it included under IFRS 5 or not. It is completely separated from the business the company is usually in. -Joshua McIntyre. Do you just do an adjustment on the fair value that has increased? Sometimes, they are identical, sometimes, assets held for sale is a subgroup of discontinued operations. Please explain. All Rights Reserved. (but what is the useful life?) They haven’t made the sale as yet. Thanks in advance. Assets arising from employee benefits (IAS 19 Employee Benefits). Will it be R640 000 or do you deduct the vat amount that is included in the R80000 for each vehicle and then income would be R 556520 The largest difference between the US GAAP (Generally Accepted Accounting Principles) and IFRS is that IFRS is principle-based while GAAP is rule-based. Thanks for your knowledge sharing. The company is in a process of selling its subsidiary, a factory (which is a company as well). For example, a car dealer presents all vehicles for resale under IAS 2 Inventories, not under IFRS 5. The question: is this adjusting or non-adjusting event? There are pros and cons to both approaches, depending on how they are used. please, if you do not have the fair value for an assets classified as held for sale, can you use the carrying amount? So if i understood correctly, then i shall only disclose the profit/loss from discontinued operation separately in PL and do not classify its assets as separate line of item in SOFP, if i do not intend to sell them. IAS 16 outlines the accounting treatment for most types of property, plant and equipment. IFRS includes both International Financial Reporting Standards and International Accounting Standards. So the media business is only one among many other segments. IAS 2 Cost Formulas: Weighted average, FIFO or FOFO?! More specifically, you should present (IFRS5.33): The analysis of a single amount shall be reported in the notes or in the statement of comprehensive income. It means that if you derecognized your assets in their carrying amounts on disposal without revaluation to fair value less cost to sell, it’s OK, but you need to analyze total gain/loss on the disposal and calculate the amount attributable to remeasurement to fair value less cost to sell, and amount representing the gain/loss on the disposal. RE or gain? Test bank For Functions and Change A Modeling Approach to College Algebra 5th Edition by Bruce Crauder. – You can access Udemy’s IFRS courses using a computer, mobile phone or a TV. Is this correct? Now, would there be any change in treatment? Test Bank for Intermediate Accounting, IFRS Edition 15 - 20. Why have we classified these assets as held for sale though? The standard IFRS 5 lists some measurement exceptions and you can read about them in the later paragraphs, but you still need to present and disclose the information about these assets under IFRS 5. By using our website, you agree to the use of our cookies. I have a question relating to a parent and subsidiary A who signed an agreement to transfer lease and customer contracts from subsidiary A to parent by end of 2020. You can have an NCA without considering it “discontinued operation”. – post-tax gain or loss recognized in the re-measurement to fair value less costs to sell or on the disposal of assets constituting the discontinued operation. hello Sylvia, Model IFRS statements . Dear Silvia, I hope it’s what you asked. Dear Chintaka, Dear Hesham, AACSB: RT AICPA BB: CT AICPA FN: Reporting. Oh and one more question: according to your guidance, the presentation of result from discontinued operations is not included as such in the income statement (but in the comprehensive income staement). How can we account the asset held for sale and the accounting for the discontinued operation. Given the context, can we expense all related expenses (i.e. Let me point out that you should apply IFRS 5 for all non-current assets – no exception. Thank you Silva. Now when we prepare Statement of financial position for continuing operation the comparative period 2015 should be $20,000 less 7,000 = $17,000 ? Check out our Best Finance Courses.. 5 Best + Free IFRS Courses & Classes [DECEMBER 2020] It enters into the gain/loss on derecognition, i.e. Shall we increase the value upto FV-CTS of NCA-HFS ? 1 . Thanks and regards. If there is an increase in the fair value less costs to sell, BUT there is no measurement model given (cost or revaluation method). After you classify an asset as held for sale, you would recognize any impairment loss in profit or loss only. (costs that would not have occurred if the disposal hadnt happened but are not a cost to sell, so should not form part of the gain or loss on disposal). IFRS 5 sets a few criteria for the sale to be highly probable: The similar criteria also apply to assets held for distribution to owners. All other assets not excluded in the above list must be measured at lower of their carrying amount and fair value less costs to sell. There were also several costs associated with disposal that are not “costs to sell” i.e. Following my previous question, in the case that an asset is idle, shall we still depreciate the asset’s carrying amount (after impairment posting) over its remaining useful life? None of the buyers indicated that the price is too high. Statement of Financial Position before sales commenced. IFRS 5 — Non-current Assets Held for Sale and Discontinued Operations . If the Group has sold subsidiary company (the major seperate business line) in 2018, but has not prepared financial statements for previous years. IFRS 15 Praktische handvatten IFRS 15 - Revenue Recognition. 2) As written in answer 1) – the segment will be both discontinued operation and disposal group held for sale, therefore you need to 1) apply special accounting treatment as for disposal group held for sale and 2) present and disclose discontinued operation separately in the financial statements. financial instrument held for sale will still be measured under IFRS 9, not IFRS 5). Additionally, the entity is planning to sell part of its b… Hi 3. In eg 2 A Subsidiary was acquired Oct. 1 with a view for resale with requirements met 31 December, the reporting date. thank you for your knowledge sharing, simply amazing. Hello, Silvia your teaching materials including Video lecture regarding IFRS is so interesting. Two buyers actually attended the sale process, paid the deposit, however, eventually both of them gave up on buying the factory for other reasons. I am battling to distinguish whether or not IFRS 5 applies or not. 2. Represents a separate major line of business or geographical area of operations, Is a subsidiary acquire exclusively with a view to resale. Thanks again. Is a subsidiary acquire exclusively with a view to resale. Copyright © 2009-2020 Simlogic, s.r.o. Q – Because you change the plan of asset and you going to sell the asset within one year, so can we still keep the revaluation reserve as it is? – After completing this program, you will receive a digital badge that you can add to your digital profile. How does the impairment loss is recognized? Hi Silvia Maybe if you are more specific, then we can look to this closer. So these were the 5 Best IFRS Courses, Classes, Tutorials, Training and Certifications program available online. If a disposal group has been disclosed as held for sale, does it impact going concern considerations? S. Thanks for this wonderful article.It really made my day. That’s why the standard IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations was issued – to highlight the results of discontinued operations and to separate them from the results of ongoing or continuing activities. IFRS Financial Reporting covers conceptual details of various IAS and IFRS standards in-depth. Inventory(30/6/2018) 5 900 000 I’m not sure I got it fully. Q2: Do I need to present discontinued operation if i want to prepare Interim Condensed financial information for Q3 as of Septmber 30, 2018 or is this represent disposal such as any disposal in assets? Dear Silvia, I have a subsidiary which we intend to sale hence we classified it as asset held for sale. I understand your confusion. 55+ Experts have compiled this list of Best Five IFRS Courses, Classes, Tutorials, Training, and Certifications program available online for 2020.In this list, you will find paid and free resources that will help you learn more about IFRS. Dear Lexo, as soon as you have discontinued operation, then you have to perform impairment testing of your assets. Ahsan, Dear Siliva, thank you so much for the information provided on the website, it’s very useful. A full year Subsidiary met Held For Sale requirements From Oct 1. Do you simply just Dr Non-current assets held for sale and Cr Fair-value adjustment? However, IFRS 5 lists a few measurement exceptions (IFRS 5.5): Deferred tax assets (IAS 12 Income Taxes). (IFRS 5.32). For example, when you decide to stop one division, then you have a discontinued operation and you need to disclose it separately in the financial statements. So once a company decides to abandon an asset, an impairment test should be performed. operation as per IAS 12.81h and IFRS5 33.b.How to split current tax as well?,current and comparative year.Thank you everyone. Hi Josh, although not explicitly said in the standard – yes, you in fact do need to present it separately. In that case (argueing that the subsidiary represents a major line of business), does the disclosure of discontinued operations apply? When I lookup guidance from a Big4 firm, they note that the income statement should reflect the result form discontinued operations as well. Contractual rights under insurance contracts as defined in IFRS 4 Insurance Contracts. The contract was signed on January 5, 2017. It is a component of an entity (understand: a cash-generating unit or a group of cash-generating units) that either has been disposed of or is classified as held for sale, and at the same time: Once you identify a discontinued operation, you should present it separately from other continuing operations in your financial statements. The question is whether you should classify a non-current asset as held for sale in the case when you plan to stop using it, or abandon it. – for assets held for sale, you need to apply special accounting policy as defined in IFRS 5 (see above), and and all liabilities of that division would represent a disposal group. In this case, you would recognize any impairment loss in profit or loss, but sometimes also in other comprehensive income – that’s when you apply revaluation model for your property, plant and equipment and you have a revaluation surplus to decrease. Please could you assist. In 2015 we decided to sell a hotel and recognised it as asset held for sale. In IFRS 9 – Basics To Expert, you will gain a deeper understanding of “IFRS 9 and get insights on practical aspects of AS 9. That is if that segment represents a separate major line of your company’s business. My question is how do we value “Adjusted Carrying Amount” when measuring Impairment after classifying as held for sale? IFRS 5 refers to the International Financial Reporting Standards relating to Non-current assets held for sale and discontinued operations. Q – If asset measured FV and then categorized “Non-current asset held for sale” which point we need to reverse the revaluation gain in OCI to PL? Chartered Education IFRS MCQs have more than 1,100 questions. Do we present it as one line as well for a subsidiary held for sale? And i do both wen its discontinued aswell as i intend to sell them. IFRS seems to speak about the comprehensive income statement only. This is probably not the easiest way to earn CPE, but I think it would be very beneficial for anyone who has a relatively good understanding of US GAAP and needs to add IFRS to their skill set. there is a plan, asset is marketed etc.). Do you think IFRS 5 is applicable here? Can you please help me on following questions? In my understanding, IAS 36 would be ineffective if asset or disposal group has been classified as Asset Held for sale. I have a query regarding the disclosure for the Financial Statement. added to thh operating costs of these properties for the 6 months they operated?) What will be the income earned from the sale of vehicles? – The modules include worked examples to illustrate aspects of the standards in action. If you are renting the land and building out, then it’s logical to classify it as investment property under IAS 40. Magazines. When a company (or another entity) plans to sell an asset and / or stop some part of its business, then it might affect its future cash flows, profitability and overall financial situation. -30/06/2018 3 480 000 (IFRS 5.32), The post-tax profit or loss of discontinued operations, and. Deze pagina is een NL-extensie van de internationale IFRS-website van Deloitte: www.iasplus.com waarin onze global IFRS content is opgenomen. report “Top 7 IFRS Mistakes” They are still planning on doing the sale. Will the income be R640000? Assuming that it meets the criteria of NCA held of sale. Management has not changed the intention to sell the PPE after December 31, however, it does not seek for a buyer anymore actively. Dear Silvia, After the sale of subsidiaries, the media segment of the Group remains, continued by that last subsidiary and its parent. Asset held for sale can depreciate if still in operation?We are doing the impairment loss instead. How about the other asset that are not within the scope of IFRS 5 such as deferred tax expense and so on? The price was higher than what was estimated in 2015, therefore the quesiton is, whether impairment reversal should/could already be recognised in 2016? – You will earn CPE credits from this course. Hi Sofia, you need to look at what’s the primary factor defining the segment in this case – is it the nature of operations?

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