Consideration on disposal

Learning objectives

• Determine the consideration on disposal under the transaction price requirements and its link with IFRS 15.L2, L3
• Calculate, from the case data, the amount relating to the consideration on disposal and justify the basis of calculation.L2, L3
• Record the entry relating to the consideration on disposal and state its effect on the financial statements.L2, L3

Normative references

• IAS 40 §69Gain or loss on retirement or disposal: the difference between the net disposal proceeds and the carrying amount, recognised in profit or loss for the period, unless IFRS 16 requires otherwise on a sale and leaseback.
• IAS 40 §70Derecognition: the amount of consideration included in profit or loss is determined under the IFRS 15 requirements for determining the transaction price (paras. 47 to 72); subsequent changes to its estimate follow the IFRS 15 requirements on changes in the transaction price.

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

3 questions

• A management accountant comments on the gain or loss on disposal of an investment property. Which of the statements is incorrect?L2
• Ostrane sells an investment property. The price of {deferred_price} is payable in one year, which is a significant financing component (teaching assumption); the annual discount rate is {rate}. Selling costs amount to {disposal_costs} and the carrying amount of the property is {carrying_amount}. Calculate the net disposal proceeds and the gain or loss on disposal.L3
• Pelvane sells an investment property with a carrying amount of {carrying_amount}. The price is {deferred_price}, payable in one year; its present value, which represents the consideration measured under the transaction price, is {present_value_of_price} (teaching assumption). There are no selling costs. Record the disposal entry.L3