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ACCA Strategic Professional · Strategic Business Reporting (International) · Non-current assets

Birch Co classifies a machine as held for sale on 1 July. Its carrying amount just before classification is $500,000 after depreciation to that date. Fair value less costs to sell is $460,000 at 1 July and $440,000 at the 31 December year end. What is the total amount recognised in profit or loss for the machine for the period from 1 July to 31 December (excluding any depreciation before 1 July)?

The total loss is $60,000. The asset is written down by $40,000 on classification to $460,000, then by a further $20,000 at year end to $440,000. IFRS 5 requires losses on remeasurement to be recognised and prohibits depreciation while held for sale.

  1. A$40,000 impairment loss only
  2. B$60,000 impairment loss in totalCorrect
  3. C$100,000 impairment loss in total
  4. D$60,000 impairment loss plus six months' depreciation

Explanation

At 1 July write down $500,000 to $460,000, a $40,000 loss. At 31 December a further $20,000 write-down to $440,000 is recognised. Total $60,000. No depreciation is charged while held for sale, so the last option is wrong.

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