Measurement on ceasing the classification

Learning objectives

• Calculate the measurement when the classification ceases: the lower of the carrying amount adjusted for depreciation that would have been recognised and the recoverable amount at the date of the change.L2, L3, L4
• Record the cessation of the classification and the related adjustment in profit or loss.L3, L4

Normative references

• IFRS 5 §27An asset (or disposal group) that ceases to be classified as held for sale or held for distribution (or ceases to be included in such a group) is measured at the lower of (a) its carrying amount before classification, adjusted for any depreciation, amortisation or revaluations that would have been recognised had it not been so classified, and (b) its recoverable amount at the date of the subsequent decision not to sell or distribute.

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

4 questions

• Tavrel gives up selling a machine classified as held for sale. Its carrying amount before classification was {carrying_before_classification}. The depreciation that would have been recognised had the machine never been classified amounts to {depreciation_not_recognised}. Calculate the carrying amount adjusted for the depreciation not recognised.L2
• Nerval ends the classification of a site as held for sale. Its carrying amount, adjusted for the depreciation not recognised, is {adjusted_carrying_amount}. Case assumption: its recoverable amount at the date of the decision not to sell is {recoverable_amount}. Calculate the measured amount on ceasing classification and the corresponding unfavourable adjustment.L3
• Four statements concern the measurement of an asset leaving the held-for-sale classification. Which one is wrong?L3
• Corvel had classified a building as held for sale at a carrying amount of €900,000. It gives up the sale after 18 months. Case convention: the annual depreciation that would have been recognised is €60,000, i.e. €90,000 for the period. The recoverable amount at the date of the decision is €840,000. At what amount is the building measured on ceasing classification?L4