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CFA Level I · CFA Level I Exam · Analyzing Income Statements

A company classifies a component as held for sale at year-end, and it qualifies as a discontinued operation under IFRS. The component's carrying amount is 80 and its fair value less costs to sell is 65. The company most likely records:

The company records a 15 loss within discontinued operations and re-presents prior-period income statements. Held-for-sale assets are measured at the lower of carrying amount (80) and fair value less costs to sell (65), giving the 15 write-down. Comparatives are restated so the component is shown separately for consistency.

  1. AA loss of 15 in discontinued operations, with no restatement of prior periods
  2. BA loss of 15 in continuing operations, with prior periods unchanged
  3. CA loss of 15 in discontinued operations, with prior-period income statements re-presentedCorrect

Explanation

Assets held for sale are measured at the lower of carrying amount and fair value less costs to sell, so a 15 write-down is recognized. For a discontinued operation, the write-down is included in the discontinued operations line, and comparative income statements are re-presented to show the component separately.

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