Non Current Assets held for sale and discontinued operations

Question 1

What does an item of PPE on the SFP tell a user?

Answer 1

It tells a user that the entity will be using it in its operations for more than1 period and getting economic benefits from it

Question 2

What should financial statements provide?

Answer 2

Faithful representation

Question 3

What are Assets Held for Sale?

Answer 3

These are assets that are expected to be sold (not abandoned) within 12 months

Question 4

How are assets held for sale measured?

Answer 4

They are measured at the lower of:

> Carrying amount
Fair value less costs to sell
Any resulting loss: In P/L

AND depreciation stops

Question 5

Why does depreciation stop when an asset is classified as held for sale?

Answer 5

Because the entity is not using the asset any more, it is rather just keeping it for sale

Question 6

What is a Discontinued
operation?

Answer 6

A discontinued operation is a component of an entity disposed of or classified as held for sale
AND

• Represents a separate major line of business or
  geographical area of operation;
  OR

– Is part of a single co-ordinated plan to dispose of a separate line of business or geographical area of
business;
OR

– Is a subsidiary acquired exclusively for resale.

Question 7

What does a component of an entity comprise of?

Answer 7

A component of an entity comprises operations and
cash flows that can be clearly distinguished from the
rest of the entity both operationally and for financial reporting purposes