Held for sale, disposal groups, discontinued operations

Question 1

Define an asset that is held for sale

Answer 1

One that the entity plans to recover its value by selling it, rather than using it in the business

Question 2

Revaluation of an asset that is held for sale

Answer 2

if the asset had previously been revalued, then the asset should be revalued before it is classified as held for sale

Question 3

4 Criteria of assets held for sale

Answer 3

Available for immediate sale
Actively seeking a buyer
High probability of sale
Sale within one year

Question 4

3 classifications of assets held for sale

Answer 4

1. Non-current to current asset
2. Cease depreciation
3. Value at the lower of the carrying amount and the fair value less costs to sell

Question 5

Revaluation of assets held for sale

Answer 5

If an asset is being classified as held for sale, and has previously been evaluated, you must revalue it again before re-classification.

Question 6

Discontinued operations

Answer 6

A component of an entity that at year has has either been disposed of or is classified as held for sale AND

• Represents a separate major line
• Is part of a single co-ordinated plan to dispose of a major line
• Is a subsidiary acquired exclusively with a view to sell

Question 7

Component

Answer 7

Has operations and cash flows that can be clearly distinguished, operationally and financially, from the rest of the entity

Question 8

P&L treatment of Discontinued operations

Answer 8

You need to split out results from activities that are discontinued and those that are not.

• Trading losses up to date of disposal
• Losses made on disposal
• Related redundancy costs