ACCA Strategic Professional · Strategic Business Reporting (International) · Non-current assets
Alder plc decides on 1 November to sell a production line and signs a binding sale agreement on 20 December. The reporting date is 31 December. The buyer will take delivery in March, and the sale is highly probable to complete. The line's carrying amount is $800,000 and fair value less costs to sell is $900,000. How should Alder measure the line at 31 December?
The production line is measured at $800,000. Once held-for-sale criteria are met, IFRS 5 requires the lower of carrying amount and fair value less costs to sell, and an unrealised increase to $900,000 is not recognised. Depreciation also ceases from classification.
- A$900,000, as it is classified as held for sale and measured at fair value less costs to sell
- B$800,000, as it is classified as held for sale and measured at the lower of carrying amount and fair value less costs to sellCorrect
- C$800,000, as it continues to be depreciated within property, plant and equipment until delivery
- D$900,000, by revaluing it upwards through profit or loss
Explanation
The criteria are met at the reporting date (available for immediate sale, highly probable, committed plan). IFRS 5 measures at the lower of carrying amount and fair value less costs to sell, so $800,000. Gains above carrying amount are not recognised, so $900,000 is wrong. Depreciation stops once classified as held for sale.
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