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

Gorse Co classified a building as held for sale on 1 March. Its carrying amount then was $1,200,000 after depreciation to that date, with a remaining useful life of 20 years at that time and a fair value less costs to sell of $1,300,000. On 31 December, the sale had not happened because the buyer withdrew, and management decided to stop marketing the building and keep using it. Fair value less costs to sell at that date is $1,250,000 and recoverable amount is $1,400,000. At what amount should the building be measured on reclassification back to property, plant and equipment?

The building is measured at $1,150,000. IFRS 5 requires the lower of its pre-classification carrying amount adjusted for depreciation that would have been charged, here $1,200,000 less $50,000, and its recoverable amount of $1,400,000. The lower figure is $1,150,000.

1. A$1,250,000, its fair value less costs to sell at the decision date
2. B$1,400,000, its recoverable amount
3. C$1,200,000 less depreciation of $50,000 that would have been charged had it not been classified as held for sale, i.e. $1,150,000Correct
4. D$1,300,000, its fair value less costs to sell at classification