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Non-current assets held for sale and discontinued operations
Example 1
Asset held for sale
On 1 January 20X4 Yohan purchased a machine for $60,000. The machine
is depreciated on a straight line basis over 4 years, with nil residual value.
On 31 October 20X5, following a decline in demand for its products, Yohan
decides to sell the machine and advertises it for sale at its fair value of
$33,000. A commission of 5% will be payable on the sale.
At 31 December 20X5, Yohan’s financial year-end, the machine remains
unsold.
Show the impact of the above on Yohan’s financial statements for the
year ended 31 December 20X5.
Solution
The machine is depreciated during the year up to the date of reclassification.
At this date depreciation ceases, and the asset is then valued at the lower of
carrying amount and fair value less costs to sell.
Statement of profit or loss year ended 31 December 20X5
$
Depreciation (W1) (12,500)
Impairment (W2) (1,150)
Statement of financial position 31 December 20X5
$
Current assets: Asset held for sale (W2) 31,350
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