Chapter 5 - Non-current Assets held for sale and discontinued operations

Question 1

What is an asset held for sale?

Answer 1

an asset whose carrying amount will be recovered principally through a sale transaction rather than continuing use

Question 2

The conditions must be met for an asset to be held for sale?

Answer 2

• available to sell in present condition
• sale is highly probable
• marketed at reasonable price
• sale expected within 1 year

Question 3

What is the double entry for non-current asset held for sale?

Answer 3

Dr Asset held for sale (current asset)
Cr Non-current asset

Question 4

How do we measure assets held for sale?

Answer 4

Lower of:
carrying amount
fair value less costs to sell

Question 5

Do we charge depreciation once asset reclassified?

Answer 5

no

Question 6

If there is no firm purchase commitment what conditions must be met?

Answer 6

• management have a committed plan to sell the asset
• there is an active programme to locate a buyer and
• the asset is being actively marketed at a price that is reasonable in relation to its fair value

Question 7

Assets held for sale must be presented where?

Answer 7

seperately from other assets in the face of the SFP

Question 8

What is a discontinued operation?

Answer 8

a component of an entity that has either been disposed of, or is classified as helf for sale

Question 9

What are the 3 additions to the component of entity?

Answer 9

• separate major line of business or geographical area
• part of single co-ordinated plan
• subsidiary acquired with a view of resale

Question 10

What is on the disclosure and face of the spl for discontinued operations?

Answer 10

Single figure that includes:
- profit for the year from discontinued opertaions
- gain or loss on disposal of assets or
- gain or loss from reclassification to asset held for sale