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CMA Intermediate · Financial Accounting · Property, Plant and Equipment (AS 10)

Regarding a gain arising on derecognition of an item of PPE, which statement agrees with AS 10?

The gain is included in the statement of profit and loss when the item is derecognised, and it is not classified as revenue as defined in AS 9. It is therefore not shown as revenue from operations, and it is not credited to a capital reserve or set against other assets.

  1. AIt is credited to the capital reserve in all cases
  2. BIt is included in the statement of profit and loss when the item is derecognised, and is not classified as revenue as defined in AS 9Correct
  3. CIt is deducted from the cost of the remaining PPE of the same class
  4. DIt is shown as revenue from operations in the statement of profit and loss

Explanation

AS 10 says the gain or loss on derecognition is included in the statement of profit and loss when the item is derecognised, subject to AS 19 on sale and leaseback. Gains must not be classified as revenue under AS 9, which rules out showing it as revenue from operations.

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