Page 38 - CIMA MCS Workbook November 2018 - Day 1 Suggested Solutions

CIMA NOVEMBER 2018 – MANAGEMENT CASE STUDY

subject to an impairment review where recoverable amount is based upon fair value less selling
costs (value in use is not relevant as the entity has a commitment to sell the asset). From the date
of classification as held for sale, the asset will no longer be subject to depreciation and it can
continue to be used in the business until disposal.

IFRS 5 defines a discontinued operation is a component of an entity that either has been disposed
of or is classified as held for sale, and: represents either a separate major line of business or a
geographical area of operations. It should be distinguished and disclosed separately from
‘continuing operations’ in the SP&L.

Application to Grapple – assets held for sale
Grapple may have assets that meet the definition of held for sale or a discontinued operation. If
so, it should ensure that such assets or components of the business are correctly classified and
accounted for in the financial statements. This may arise, for example, upon acquisition of a new
subsidiary when parts of the business of that new subsidiary will be disposed of as unwanted by
Grapple, or when it has been decided that individual assets will be disposed of.

IFRS 8 Operating segments
IFRS 8 applies to listed entities, although non‐listed entities can also choose to apply the
requirements of the reporting standard. IFRS 8 requires that the performance of an entity is
analysed and reported on based upon its operational structure. An operating segment is a
segment of the business which has its performance reviewed by the entity’s chief decision‐maker
for purposes of decision‐making and control and also resource allocation.
An entity must summarise or aggregate its operating segments into a smaller number of
reportable segments. There is no maximum or minimum number of reportable segments,
although two criteria must be complied with to ensure that there is sufficient analysis as follows:

● any operating segment that accounts for 10% or more of any one of the following is a
reportable segment in its own right:
● gross revenues (i.e. including internal sales and transfer revenues
● total assets
● total profits (if an operating segment made an operating profit)
● total losses (if an operating segment made an operating loss)
● ensure that the reportable segments accounts for 75% or more of net revenues (after
elimination of transfer revenues, consolidation adjustments

If there is insufficient analysis based upon application of the criteria, one or more additional
reportable segments must be identified to ensure that there is sufficient segmental reporting.

Application to Grapple – operating segments
As Grapple is an unlisted entity, it does not need to comply with IFRS 8, although it could choose
to do so voluntarily.

Within the pre‐seen information, three product groups are identified: carbonated soft drinks and
mixers, still soft drinks and mixers and fruit juices. These three product groups could form the

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