IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

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Wiley lFRS: Practicallmplementation Guide and Workbook

(a) The entity recognizes a loss of $2 million immediately before classification as held for sale and then recognizes an impairment loss of $1 million. (b) The entity recognizes an impairment loss of $3 million . (c) The entity recognize s an impairment loss of $2 million. (d) The entity recognizes a loss of $3 million immediately before classifying the disposal group as held for sale. Answer: (a) 5. In order for a noncurrent asset to be classified as held for sale, the sale must be highly probable . "Highly probable " means that (a) The future sale is likely to occur. (b) The future sale is more likely than not to oc– cur. (c) The sale is certain . (d) The probability is higher than more likely than not. Answer: (d) 6. An entity acquires a subsidiary exclusively with a view to selling it. The subsidiary meets the criteria to be classified as held for sale. At the balance sheet date, the subsidiary has not yet been sold, and six months have passed since its acquisition. How will the subsidiary be valued in the balance sheet at the date of the first financial statements after acquisition? (a) At fair value . (b) At the lower of its cost and fair value less cost to sell. (c) At carrying value. (d) In accordance with applicable IFRS . Answer: (b) 7. Any gain on a subsequent increase in the fair value less cost to sell of a noncurrent asset classified as held for sale should be treated as follows: (a) The gain should be recognized in full. (b) The gain should not be recognized. (c) The gain should be recognized but not in ex– cess of the cumulative impairment loss. (d) The gain should be recognized but only in retained earnings. Answer: (c) 8. An entity has an asset that was classified as held for sale. However, the criteria for it to remain as held for sale no longer apply . The entity should therefore (a) Leave the noncurrent asset in the financial statements at its current carrying value. (b) Remea sure the noncurrent asset at fair value. (c) Measure the noncurrent asset at the lower of

MULTIPLE·CHOICE QUESTIONS 1. How should the income from discontinued opera– tions be presented in the income statement? (a) The entity should disclose a single amount on the face of the income statement with analysis in the notes or a section of the in– come statement separate from continuing operations . (b) The amounts from discontinued operations should be broken down over each category of revenue and expense. (c) Discontinued operation s should be shown as a movement on retained earning s. (d) Discontinued operation s should be shown as Answer: (a) 2. How should the assets and liabilities of a disposal group classified as held for sale be shown in the bal– ance sheet? (a) The assets and liabilities should be offset and presented as a single amount. (b) The assets of the disposal group should be shown separately from other assets in the balance sheet, and the liabilities of the dis– posal group should be shown separately from other liabilities in the balance sheet. (c) The assets and liabilities should be presented as a single amount and as a deduction from equity. (d) There should be no separate disclosure of assets and liabilities that form part of a dis– posal group. Answer: (b) 3. An entity is planning to dispose of a collection of assets. The entity designates these assets as a disposal group . The carrying amount of these assets immedi– ately before classification as held for sale was $20 million. Upon being classified as held for sale, the assets were revalued to $18 million. The entity feels that It would cost $1 million to sell the disposal group. What would be the carrying amount of the disposal group in the entity's accounts after its classi– fication as held for sale? Answer: (c) 4. An entity is planning to dispose of a collection of assets . The entity designates these assets as a disposal group, and the carrying amount of these assets imme– diately before classification as held for sale was $20 million. Upon being classified as held for sale, the assets were revalued to $18 million . The entity feels that the fair value less cost to sell would be $17 mil– lion. How would the reduction in the value of the assets on classification as held for sale be treated in the financial statements ? a line item after gross profit with the taxa– tion being shown as part of income tax ex– pense. (a) $20 million. (b) $18 million. (c) $17 million . (d) $19 million .

its carrying amount before the asset was classified as held for sale (as adjusted for subsequent depreciation, amortization, or revaluations) and its recoverable amount at the date of the decision not to sell.