Financial Accounting IFRS 5 NonCurrent Assets Held for
- Slides: 25
Financial Accounting IFRS 5 Non-Current Assets Held for Sale & Discontinued Operations Samantha Karandagoda
Non Current Assets Held For Sale • Every asset has a life cylce –Acquisition –Usage (Depreciation) –Disposal • Some Assets are Awaiting Sale As of the Accounting Date • Criteria
Criteria • Available for Immediate Sale in Current Condition • Sale is Highly Probable • A Reasonable Price is Set • Sale Happens within 1 year from the Date of Classification
Measurement of Value • Lower of The Carrying Amount Fair Value – Cost of Disposal • Not Depreciated After Classified as “Held for Sale” • If “Carrying Amount < Value of Asset”, then an Impairment Charge Arises against profit
Presentation & Disclosure • Separate Asset Disclosure Just Below the Current Assets Section
Discontinued Operations
Discontinued Operations • A Component of an Entity that Either Has Been Disposed or Classified As Held for Sale AND –Represents a Major Line of Business/Geo. Area. –A Part of a Single Co-Ordinated Plan to Dispose –Subsidiary Acquired with a View to Resale
Disclosure • Income Statement: –Profit or Loss After Tax –Gain or Loss on Disposal of Assets –Gain or Loss Arising from the Adjustment of Carrying Value vs Fair Value (Impairment)
Disclosure • Income Statement Notes: –Revenues, Expenses, Profit or Loss Before Tax, Income Tax Expense –Related Tax Expense –Gain or Loss Arising from the Adjustment in Value –Gain or Loss of the Disposal
Disclosure • Statement of Cash Flows: –Net Cash Flows from Operating, Investing & Financing Activities –Description of the Discontinued Operation/Non Current Asset –Description of the Facts & Circumstances of the Sale –Expected Manner & Timing of Disposal
Financial Accounting IAS 20 Government Grants & IAS 40 Investment Properties Samantha Karandagoda
IAS 20 Government Grants
Government Grants • Government Provides Incentives to Businesses through Grants • Revenue Grants –Money for wages • Capital Grants –Money to Purchase Non Current Assets
General Principles • Prudence: –Recognize Upon Conditions Have Been Complied & There’s a Reasonable Assurance the Grant Will Be Received • Accruals –Should be Matched with the Expenditure towards with they were given for
Definitions • Government: –Government Bodies, Agencies, Local/National/International • Government Assistance: –Actions by Government to Provide Economic Benefits • Government Grants –Assistance in the form of transfer of resources to an entity
Definitions • Government: –Government Bodies, Agencies, Local/National/International • Government Assistance: –Actions by Government to Provide Economic Benefits • Government Grants –Assistance in the form of transfer of resources to an entity
Revenue Grants • If Grant is Paid Upon Certain Expenditures are Incurred, they should be matched with the expenditure • If Grant is Paid on a Different Basis, then it should be matched with identifiable costs of achieving the objective
Presentation of Revenue Grants • Allowed to Present Either: –As a Credit in the Statement of Profit or Loss –Deducted from the Related Expense
Capital Grants • Permitted to Either: –Write off the Grant Against the Cost of the Non Current Asset and Depreciate the Reduced Cost –Treat the Grant as a Deferred Credit and Transfer a Portion to other income each year (offsetting the higher depreciation charge on the original cost)
Repayment of Grants • Sometimes the Grant May Be Needed to Pay Back (to the Government) –E. g. when the conditions are breached • Revenue Grants –Reduce Deferred Income –Recognize the Balance of the Repayment Immediately as an Expense
Repayment of Grants • Sometimes the Grant May Be Needed to Pay Back (to the Government) –E. g. when the conditions are breached • Revenue Grants –Reduce Deferred Income –Recognize the Balance of the Repayment Immediately as an Expense
IAS 40 Investment Properties
Investment Property • Investment Property is Land or Building Held to Earn Rentals, or for Capital Appreciation or both, rather than for Use in the Entity or for Sale by the Entity in the Ordinary Course of the Business –Excludes owner occupied property
Accounting Treatment • Initially Measured At Cost –Include Directly Attributable Expenditure (Professional Fees, Transaction Costs) • Use Either: –Cost Model: Use the Cost Model as per IAS 16 (however must disclose the fair value) –Fair Value Model: Revalue for Fair Value at Yr End, Show Losses/Gains & No Depreciation
Financial Accounting IAS 20 Government Grants & IAS 40 Investment Properties Samantha Karandagoda
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