DipIFR Syllabus B. Elements of financial statements - Assets Held for Sale - Past Papers ^{11 / 15}

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:

(b) 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. (10 marks)

Required:
Provide answers to the questions raised by the managing director.

Note: The mark allocation is shown against each of the two questions above.

You are the financial controller of Omega, a listed entity which prepares consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). The managing director, who is not an accountant, has recently been appointed. She formerly worked for Rival, one of Omega’s key competitors. She has reviewed the financial statements of Omega for the year ended 30 September 2014 and has prepared a series of queries relating to those statements:

Query Three
‘I was confused when I looked at the statement of financial position and saw that the assets and liabilities were divided up into three sections and not two. The current and non-current sections I understand but I don’t understand the ‘non-current assets held for sale’ and ‘liabilities directly associated with non-current assets held for sale’ sections. Please explain the meaning and accounting treatment of a non-current asset held for sale. Please also explain how there can be liabilities directly associated with non-current assets held for sale.’ (4 marks)

Required:
Provide answers to the three queries raised by the managing director. Your answers should refer to relevant provisions of International Financial Reporting Standards

Note: The mark allocation is shown against each of the three issues above.

Delta is an entity which prepares financial statements to 30 September each year. Each year the financial statements are authorised for issue on 30 November. During the year ended 30 September 2013 the following transactions occurred:

(b) On 1 June 2013, Delta decided to dispose of the trade and assets of a business it had acquired several years previously. This disposal does not involve Delta withdrawing from a particular market sector. The carrying values on 1 June 2013 of the assets to be disposed of were as follows:

Delta offered the business for sale at a price of $46·5 million, which was considered to be reasonably achievable. Delta estimated that the direct costs of selling the business would be $500,000. These estimates have not changed since 1 June 2013 and Delta estimates that the business will be sold by 31 March 2014 at the latest.

None of the assets of the business had suffered obvious impairment at 1 June 2013. At that date the inventories and trade receivables of the business were already stated at no more than their recoverable amounts. (7 marks)

Required:
Explain and show (where possible by quantifying amounts) how the three events would be reported in the financial statements of Delta for the year ended 30 September 2013. You do not need to quantify amounts which are only shown in the notes to the financial statements.

Note: The mark allocation is shown against each of the three events above.
You should assume that all transactions described here are material