IAS 16 · Workpapers (Step 4 of 5)
Workpaper assignment
- Course
- Exercises
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Derecognition
Flood, compensation and disposal of a production line
Section 1 of 9
Objective
Section brief
- What to document
- The engagement, its scope and the working mode chosen.
- Why
- A workpaper answers one precise question: framing it avoids off-topic work.
- How
- Read the objective and the assignment, then choose the mode (guided, semi-guided, professional).
- Expected result
- You know which question the workpaper must settle, and for which reporting date.
- Your role
- Preparer of the IAS 16 workpaper
- Level
- Expert
- Estimated time
- ≈ 35 min
- Progress
- 0 / 5 steps done (review excluded)
Context
Conserveries du Littoral (a fictitious company) has a 31 December reporting date and applies the cost model. Its packaging line No. 1, acquired on 1 January 20X0 for 1,200,000 and depreciated on a straight-line basis over 10 years with no residual value, is flooded on 30 September 20X2. It remains idle until it is sold in 20X3. The file handed to you contains documents of varying nature and reliability; management expects a professional memo on the treatment for 20X2 and 20X3.
Assignment
'Derecognition' workpaper: derecognition date, carrying amount, net proceeds and gain or loss.
Purpose of the workpaper
Determine the derecognition date (transfer of control), stop depreciation at that date, calculate the carrying amount derecognised and the gain or loss (net disposal proceeds less carrying amount), then record the depreciation for the period and the derecognition.
Questions of the file covered by this workpaper
- On what date is the line derecognised: board decision, contract signature or transfer of control?
- Calculate the revised annual charge after the impairment and the 20X3 charge up to derecognition.
- Calculate the carrying amount at the derecognition date, the net proceeds and the gain or loss on disposal.
- What journal entries do you record in 20X3 up to the derecognition of the line?
Documents in the file
Open the documents to pick out the relevant information.