Held-for-sale measurement file: lower of, loss, reversal, disposal and ceasing the classification

Context

Mecanova SA (fictitious entity, food-processing business) closes its books on 31 December 20X5. On that day, the board classifies its packing line as held for sale: the criteria are met (case data). The 20X5 depreciation charge has not yet been recorded.

Assignment

Measurement file of the line

Purpose of the workpaper

For each asset (one instance per asset), enter the cost, residual value and useful life, the carrying amount immediately before classification (after the last depreciation charge), the fair value and the table of costs to sell. The file computes the last depreciation charge, the total costs to sell, fair value less costs to sell, the amount measured at the lower of the two, the loss and, depending on the situation, the reversal capped at the cumulative loss, the result of the disposal and the measurement on ceasing the classification. Fair value is a datum of the file; financing charges and income tax are not costs to sell. Then prepare the entries. The last charge is the full annual charge: the file assumes classification at the reporting date; for a classification during the year, enter the carrying amount after the charge prorated for the period elapsed. The measurement on ceasing the classification reflects only the missed depreciation; any loss down to the recoverable amount is recognised separately.

Questions of the file covered by this workpaper

• Compute the last depreciation charge and the carrying amount at the classification date.
• Add up the costs to sell.
• Compute fair value less costs to sell.
• Determine the amount measured (lower of the two bases).
• Compute the impairment loss.
• Record the depreciation, the reclassification and the loss.

• ContractRecord of the packing lineOpen
• MinutesMinutes of the boardOpen
• ScheduleAppraisal and costs to sellOpen
• MemoRelocation costsOpen