Repayment of government grants

Chapter 10 – Non-current assets held for sale Page 126 Illustration 2 Assume the facts are as in Illustration 1, except that on classification as held for sale, the fair value was estimated at CU80,000 and the costs to sell at CU3,000. The asset was sold on 30 June 2007 for CU77,000. a Upon re-classification as held for sale on 1 January 2007: i The asset is removed from its PPE category within non-current assets into the held for sale category ii The fair value less costs to sell of the held for sale asset is CU77,000 CU80,000 – CU3,000 = CU77,000. This is higher than the asset’s current carrying amount calculated in Illustration 1 as being CU73,000, so the asset remains measured at CU73,000 iii The gain is not recognised at this time, since any gain should not be anticipated at the point of reclassification. b Upon sale on 30 June 2007, a profit of CU4,000 is recognised in profit or loss for the period Proceeds of CU77,000 received less current carrying amount of CU73,000 Where an entity adopts the revaluation model for the measurement of assets, any asset classified as held for sale should be revalued to fair value immediately prior to the reclassification. Upon reclassification the costs to sell are deducted and recognised as an impairment loss as part of profit or loss for the period. Illustration 3 An entity carries its land at fair value. One piece of land had a carrying amount of CU60,000. On 1 January 2007 the asset was classified as held for sale, its fair value being estimated at CU70,000 and the costs to sell at CU2,000. The asset was sold on 30 June 2007 for CU67,000. On 1 January 2007 the land is revalued to CU70,000. The gain of CU10,000 is recognised in other comprehensive income as a revaluation surplus. The land is then classified as held for sale and the costs to sell of CU2,000 are recognised in profit or loss for the period, as an impairment loss. The carrying amount is now CU68,000. Upon its ultimate sale a further loss of CU1,000 is recognised as a loss on sale as the sale proceeds are less than the carrying amount. The revaluation surplus is now realised and it will be transferred to retained earnings.

4.1 Changes of plan

If a non-current asset classified as held for sale no longer meets the specific recognition requirements for such classification then it should be reclassified as a non-current asset. Should reclassification be necessary, the asset should then be measured at the lower of the carrying amount that it would have been recognised at had it not been reclassified and its recoverable amount. The carrying amount that the asset would have been recognised at is its carrying amount at the date of the original classification as held for sale was made, adjusted for depreciation or valuations that would otherwise have taken place. Recoverable amount is determined at the date the decision not to sell is made.