Gain or loss on derecognition

Learning objectives

• Calculate the gain or loss on disposal of an item of property, plant and equipment.L1, L2
• Record the disposal of an item of property, plant and equipment and the resulting gain or loss.L2
• Explain why the gain on disposal is not presented as revenue.L2, L3

Normative references

• IAS 16 §68The gain or loss on derecognition is recognised in profit or loss (unless IFRS 16 requires otherwise on a sale and leaseback); gains are not classified as revenue.
• IAS 16 §71Gain or loss on derecognition = net disposal proceeds (if any) − carrying amount of the item; recognised in profit or loss in accordance with para. 68.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

3 questions

• An entity sells a forklift truck with a cost of {cost}, whose accumulated depreciation at the disposal date amounts to {accumulated_depreciation}. The sale price is {sale_price} and the costs of disposal are {disposal_costs}. What gain on disposal should be recognised in profit or loss?L1
• An entity sells a truck for {proceeds} in cash. At the disposal date, with depreciation recognised up to that date, the truck is carried at a cost of {cost} with accumulated depreciation of {accumulated_depreciation}. Record the derecognition entry.L2
• A service entity sells a used machine for 12,000. The machine had a cost of 40,000 and accumulated depreciation of 30,000 at the disposal date. The accountant presented 12,000 as revenue and 10,000 as cost of sales. What is the error?L3