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ACCA Strategic Professional · Strategic Business Reporting (International) · Presentation and disclosure in financial statements

Rosewood plc decides to sell a manufacturing plant and meets all IFRS 5 criteria at 31 December 20X5. The plant has a carrying amount of $800,000, fair value of $900,000 and expected costs of disposal of $30,000. At what amount should the plant be measured when classified as held for sale?

The plant is measured at $800,000. IFRS 5 requires the lower of carrying amount and fair value less costs to sell, which is $870,000. Since carrying amount is lower, it is used, and no uplift to fair value is recognised.

  1. A$800,000Correct
  2. B$870,000
  3. C$900,000
  4. D$830,000

Explanation

IFRS 5 measures a disposal group held for sale at the lower of carrying amount and fair value less costs to sell. Fair value less costs to sell is $900,000 - $30,000 = $870,000, which is higher than the carrying amount of $800,000, so $800,000 applies. Gains above carrying amount are not recognised on classification.

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