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Practical caseIFRS 5L1 · Fundamental

Five assets: held for sale or not, and the end of depreciation

3 documents6 tasks≈ 40 min
0 / 7 items completed
Standards
IFRS 5 — Non-current Assets Held for Sale and Discontinued Operations
Assistance levelFull guidance · strong assistance
  • Method: shown
  • Checklist: shown
  • Hints: shown
  • Step-by-step work: shown

Case brief

Situation

Verdalis SA (fictitious entity, mechanical engineering) closes its books on 31 December 20X5. The finance department must decide which of five assets, whose sale is being discussed internally, are presented as held for sale. It must also stop depreciating the asset that meets the criteria.

Your assignment

For each of the five situations, state whether the asset is classified as held for sale at the closing date and justify it with the facts of the case; for the classified asset, compute the 20X5 depreciation charge and the carrying amount at the classification date, record the reclassification (case data) and present its effect; conclude.

Work on this file as you would in practice: read the situation, open the documents, sort the useful information, then carry out the work requested. The solution is revealed once you submit.

Fundamental level: the method, help and references are shown.

Method

  1. Read the brief and the assignment.
  2. Open each document and spot the relevant data.
  3. Carry out the work in the suggested order.
  4. Submit, then read the conclusion and the model answer.

File checklist

  • Open each piece (0 / 3 consulted) · to do
  • Sort the information in the pieces · to do
  • Carry out the work (0 / 7) · to do
  • Submit the file, then assess yourself · to do

Documents

File documents

3 documents: open each one to read it.

Document 1Table

Register of the five situations

Register of situations at 31 December 20X5. Situation 1: a hydraulic press, unused since October and in working order. The board of directors decided on the sale on 15 November 20X5, a broker is mandated and the advertisement has been published since December; two potential buyers have visited the site. The asking price is 285,000 EUR against an independent appraisal value of 280,000 EUR (costs to sell negligible); the sale is expected within 6 months, with no unusual condition. Situation 2: a warehouse in Lyon, used every day for storage; management 'thinks it will sell it one day' but has taken no decision and started no action. Situation 3: a fleet of trucks whose sale is decided, but which remains in use for deliveries until replacement trucks arrive, expected in 18 months; the buyers would take delivery after that date. Situation 4: an assembly line offered since September at 900,000 EUR while the independent appraisal values it at 600,000 EUR; no offer has been received and management refuses to lower the price. Situation 5: a workshop in Rouen whose sale is decided, but the contract concluded with the buyer takes effect only at the end of the current operating lease, in 30 months.

Data

Key data from the documents

The figures of the documents, gathered for your work.

ItemValueFound in
Asking price of the press€285,000.00
Appraisal value of the press€280,000.00
Expected time to sell the press (in months)6 months
Time before delivery of the trucks (in months)18 months
Asking price of the assembly line€900,000.00
Appraisal value of the assembly line€600,000.00
Time before the workshop contract takes effect (in months)30 months
Cost of the press€480,000.00
Residual value of the press€0.00
Depreciation period of the press (in years)8 years
Accumulated depreciation of the press at 31 December 20X4€180,000.00
Training budget 20X6€12,000.00

Sorting the information

Not every document matters: identify those that affect the accounting treatment.

Part 1 · Classification · Analysis

Sort each document: does it affect the accounting treatment?

Drag each item into its category, or tap the category under the item.

To sort3

  • Register of the five situations

  • Record of the hydraulic press

  • Training budget

Relevant to the treatment0

    No effect0

      Questions

      Work programme

      6 tasks in the order of the file. Calculations, entries and effects on the financial statements are marked; written answers are self-assessed against the solution.

      1. Task 1Analysis

        For each of the five situations, is the asset classified as held for sale? Justify with the facts.

        Set out the facts, the question raised, then your analysis.

        This answer is not marked automatically: after submitting, you will compare it with the solution.

      2. Task 2Professional judgement

        Is the hydraulic press available for immediate sale and is the sale highly probable? Justify.

        Distinguish the case data, the assumption and your judgment.

        This answer is not marked automatically: after submitting, you will compare it with the solution.

      3. Task 3Calculation

        Compute the 20X5 depreciation charge of the press and its carrying amount at the classification date.

        Start from the data in the pieces, set the formula, check the unit and the order of magnitude.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Calculation

        Compute the 20X5 depreciation charge of the press and its carrying amount at the classification date.

        1. €
        2. €

        Checks

        • 0 / 2 steps entered
        • Amounts readable

        Result: Carrying amount of the press at the classification date

      4. Task 4Journal entries

        Record the reclassification of the press.

        Identify the accounts affected and the direction of each movement; check the balance.

        Calculator

        Click in an answer field to be able to insert the result.

        Part 1 · Journal entry · Journal entries

        Entry 1 of 1

        One line = one account and one side. Add a line if the entry needs more; the balance check updates live.

        1. Line 1

        2. Line 2

        TotalsDebit0Credit0

      5. Task 5Effects on the financial statements

        What is its effect on the financial statements?

        For each financial statement, state the line affected, the direction and the amount.

        Part 1 · Classification · Analysis

        State the direction of the effect on each financial statement aggregate.

        1. Financial position (balance sheet)

        2. Profit or loss

        3. Other comprehensive income

        4. Equity

      6. Task 6Conclusion

        Write the conclusion.

        Write a conclusion that cites the facts and the treatment chosen.

        This answer is not marked automatically: after submitting, you will compare it with the solution.

      Workspace

      Your working draft for this file: points noted, leads, intermediate calculations.

      Saved on this device only; never graded.

      Conclusion

      Submission and solution

      Complete every item of the file to submit it (0 / 7).

      Document this file

      These working papers use the data and results of this case.

      Normative references

      • IFRS 5 §6
      • IFRS 5 §7
      • IFRS 5 §8
      • IFRS 5 §25
      • IFRS 5 §38