Non current assets held for sale and discontinued

Non current assets held for sale and discontinued operation IFRS 5/ HKFRS 5

Q 7: Self Test Question 2 p. 72 : Part 1. A& : discontinued operation Statement of comprehensive income for the year ended 20 x 1 20 x 0 31 December 20 X 1 $’ 000 3, 000 (1, 000) 2000 (400) (900) 700 (210) Revenue Cost of sales Gross profit Distribution costs Administrative expenses Profit before tax Income tax expense Profit for the year 490 Other* comprehensive income for the year, net of tax 40 Total comprehensive income for the year 530 $’ 000 2, 200 (700) 1, 500 (300) (800) 400 (120) 280 30 310 *eg. Fair value change of available for sales or PPE or translation of foreign entity during year

Part 2. During the year the company ran down a material business operation with all activities ceasing on 26 December 20 x 1. The results of the operation for 20 X 0 and 20 X 1 were as follows: 20 x 1 20 x 0 $’ 000 • Revenue (ceasing operation) 320 • Cost of sales (ceasing operation) (150) • Gross profit (ceasing operation) 170 • Distribution costs (ceasing operation) (120) • Administrative expenses (ceasing operation) (100) • Loss before tax (50) • Income tax expense (ceasing operation) 15 • Loss for the year (35) Other comprehensive income for the year, net of tax 5 Total comprehensive in come for the year (30) $’ 000 400 (190) 210 (130) (90) (10) 3 (7) 4 (3)

• The company recognized a loss of $ 30, 000 on initial classification of the assets of the discontinued operation as held for sale, followed by a subsequent gain of $ 120, 000 on their disposal in 20 x 1. These have been netted against administrative expenses. The income tax rate applicable to profits on continuing operations and tax saving on the discontinued operation’s losses is 30%. • Required • Prepare the statement of comprehensive income for the year ended 31 December 20 x 1 for AZ complying with the provision of HKFRS 5.

A&Z Answer 7: continuing & discontinued operation Statement of comprehensive income for the year ended 31 December 20 x 1 20 X 1 $’ 000 Revenue( 3, 000 – 320 ceasing operation) 2, 680 Cost of sales (1, 000 - 150 ceasing operation) (850) Gross profit 1, 830 Distribution costs(400 - 120 ceasing operation) (280) Administrative expenses (900 - 100 ceasing operation) (800) Profit before tax 750 Income tax expenses (210 + 15 ceasing operation) (225) Profit for the year from continuing operations 525 Loss for the year from discontinued operations (35) PROFIT FOR THE YEAR 490 (no change, remain) Other comprehensive income for the year, net the tax 40 (no change, remain) TOTAL COMPREHENSIVE INCOME FOR THE YEAR 530 (no change, remain)

Answer 7 A&Z continuing & discontinued operation Statement of comprehensive income for the year ended 31 December 20 x 0 20 X 0 $’ 000 Revenue(2, 200 – 400 ceasing operation) 1, 800 Cost of sales (700 - 190 ceasing operation) (510) Gross profit 1, 290 Distribution costs(300 – 130 ceasing operation) (170) Administrative expenses (800 - 90 ceasing operation) (710) Profit before tax 410 Income tax expenses (120 + 3 ceasing operation) (123) Profit for the year from continuing operations 287 Loss for the year from discontinued operations (7) PROFIT FOR THE YEAR 280 (no change, remain) Other comprehensive income for the year, net the tax 30 (no change, remain) TOTAL COMPREHENSIVE INCOME FOR THE YEAR 310 (no change, remain)

Question • Financial position -31 st December 2016 • Non-current asset 10, 000 (cost 20, 000 - A. D. 5, 000*2 yrs) • • • Current asset Current liabilities Non-current liabilities Total net asset Equity 20, 000 5, 000 10, 000 15, 000 • Company identify 100% of non-current asset & 100% non current liabilities that should classified as held for sales on 31 st December 2016.

• A)available for immediate sales +sales is probable +5 points • B) No depreciation and amortisation. • It recorded depreciation 5, 000. Cr Dep Dr. AD 5, 000 • Compare (20, 000 -5000) =15, 000 and 5, 000 • Pick lower one. Answer is 5, 000. • Dr. Asset of a disposal group classified as ? eld for sales 5, 000 Cr. Non-current asset 15, 000 Cr. Loss regard classification of ? FS 10, 000 -I/S Cr. Liabilities directly associated wit? Disposal

• B) Assumption that yearly depreciation method is used and classification requirements are met during the year.