ACCA Past papers IFRS 5

ACCA past paper Dec 2015 (10 marks)


You are the financial controller of Omega, a listed company which prepares consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). Your managing director, who is not an accountant, has recently attended a seminar and has raised two questions for you concerning issues discussed at the seminar:

Another delegate was discussing the fact that the entity of which she is a director is relocating its head office staff to a more suitable site and intends to sell its existing head office building. Apparently the existing building was advertised for sale on 1 July 2015 and the entity anticipates selling it by 31 December 2015. The year end of the entity is 30 September 2015. The delegate stated that in certain circumstances buildings which are intended to be sold are treated differently from other buildings in the financial statements. Please outline under what circumstances buildings which are being sold are treated differently and also what that different treatment is.

Provide answers to the question raised by the managing director.


The accounting treatment of buildings to be sold is governed by IFRS 5 – Non-Current Assets Held for Sale and Discontinued Operations.

A building would be classified as held for sale if its carrying amount will be recovered principally through a sale transaction, rather than through continuing use.

For this to be the case, the asset must be available for immediate sale in its present condition. Also management must be committed to a plan to sell the asset and an active programme to locate a buyer must have been initiated. Further, the asset must be actively marketed for sale at a reasonable price. In addition, the sale should be expected to be completed within one year of the date of classification as held for sale (although there are certain circumstances in which the one-year period can be extended). Finally it should be unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

Immediately prior to being classified as held for sale, assets should be stated (or re-stated) at their current carrying amount under relevant International Financial Reporting Standards. Assets then classified as held for sale should be measured at the lower of their current carrying amount and their fair value less costs to sell. Any write down of the assets due to this process would be regarded as an impairment loss and treated in accordance with IAS 36 – Impairment of Assets.

Assets classified as held for sale should be presented separately from other assets in the statement of financial position

Examiners Feedback

Part (b) was well answered on the whole, with a pleasing level of knowledge being displayed regarding the ‘held- for-sale’ issues in IFRS5.

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