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Q3 ACCA P2 – Sept_DEC 2016 (A) – See Acca Solution – IAS 32/IAS 10 (B) Per IFRS 5, for assets to be classified as held...

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Q3 ACCA P2 – Sept_DEC 2016

(A) – See Acca Solution – IAS 32/IAS 10

(B) Per IFRS 5, for assets to be classified as held for sale, 2 issues need to be met 1) 2)

Were the assets available for immediate sale at 31-8-16 – Due to a lack of evidence to the contrary, we can assume this to be the case Was the sale “highly probable”?? In particular, can we reply positively to the question, is the sale expected to take place within 1 year from the date of classification as “held for sale”??

Evolve’s acceptance of a binding offer in August 2016 and the publication of this information indicated a high probability of sale. The finalisation of the agreement on 20 September 2016 only confirmed the situation existing at 31 August 2016. Further, Evolve cannot apply IFRS 5 measurement criteria without classifying the item as held for sale in its Statement of Financial Position. Other criteria which indicate that the non current assets should be disclosed as held for sale is the fact that the sale occurred within 12 months as classification as held for sale, and the asset was actively marketed for sale at a sale price which has been accepted. Therefore the items should be classified as held for sale and separately presented on the face of the statement of financial position in current assets. C) Key point is that IFRS 3 does not apply where the acquisition is not of a business. In this specific case, the acquisition was essentially that of an asset and therefore the measurement requirements of IFRS 3 would not apply. Instead the cost model of IAS 40 is to be adopted with the Investment Property carried at $10m. The tax expense is not linked to the bringing the asset to the condition necessary for its operations , as the asset would have been operational without the tax. So, the tax should be expensed, not capitalised.