Exam (elaborations)
Summary FAC3702 EXAM PACK 2023
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- University Of South Africa
Summary FAC3702 EXAM PACK 2023
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SummaryFAC3702
EXAM
PACK 2023
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SOLUTION 1: NON – CURRENT ASSETS HELD
FOR SALE & DISCONTINUED OPERATIONS;
PROPERTY, PLANT & EQUIPMENT &
IMPAIRMENT OF ASSETS
(a) According to IFRS 5.18 the carrying amount of a non-current asset (or all the assets
and liabilities in a disposal group) shall, immediately before the initial classification
as held for sale, be measured in accordance with the applicable IFRSs.
An entity shall measure a non-current asset (or disposal group) classified as held for
sale at the lower of its carrying amount (at the moment of reclassification) and fair
value less costs to sell – this adjustment is an impairment loss. (IFRS 5.15).
Calculation of carrying amount of all the individual assets in the disposal
group at 1 October 2020
R
Industrial paint machine (𝐶1) 455 838
Inventory – use net realizable value since lower than cost 105 000
Trade receivables 96 000
Total carrying amount 656 838
Calculations
C1. Carrying amount of Industrial paint machine
R
Carrying amount – 31 December 2019 478 840
3 425 (23 002)
Depreciation – 1 October 2020 [76 000 ∗ (584 000 − 73 600)]
Carrying amount – 1 October 2020 455 838
Calculation of fair value less costs to sell of the disposal group at 1 October 2020
Fair value less costs to sell = 𝑹𝟔𝟐𝟎 𝟎𝟎𝟎
Determine the lower of carrying amount and fair value less costs to sell at 1
October 2020
Measure the disposal group held for sale at the fair value less costs to sell of R620 000
as this is lower of the two figures calculated
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Calculate the impairment loss at 1 October 2020
Carrying amount less fair value less costs to sell
= 656 838 − 620 000
= 𝟑𝟔 𝟖𝟑𝟖
Conclusion
The corporate maintenance division will initially be recognized at R620 000 upon initial
classification as held for sale and an impairment loss of R36 838 will be recognized
upon initial classification.
(b) Extract of the Statement of Profit or Loss and Other Comprehensive Income of
Cleancorp Ltd for the year ended 31 December 2020
Discontinued Operations
R
Revenue (𝟒𝟏𝟎 𝟎𝟎𝟎 + 𝟐𝟐 𝟎𝟎𝟎) 432 000
Expenses (183 000 + 15 000 + 21 000 + 4 200 + 23 002) (246 202)
Profit before tax 185 798
Income tax expense (185 798 ∗ 28%) (52 023)
Profit after tax 133 775
Loss after tax on measurement (26 523)
Loss on measurement of non – current assets held for sale to (36 838)
fair value less costs to sell
Income tax benefit (36 838 ∗ 28%) 10 315
Profit for the year from discontinued operations 107 252
Other comprehensive income from discontinued operations -
Total comprehensive income from discontinued operations 107 252
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(c) Extract of the Notes to the Financial Statements for the year ended 31
December 2020
1. Intangible Assets
Purchased Internally
Manufacturing Generated
Rights Formula
R R
Carrying amount at beginning of year 1 084 571 137 250
Cost (𝐶2) 1 752 000 137 250
Accumulated amortization (𝐶1) (667 429) -
Additions at cost (𝐶2) - 803 750
Amortisation during year (𝐶1) (250 286) -
Impairment during year (16 775) -
Carrying amount at end of year 817 510 941 000
Cost 1 752 000 941 000
Accumulated amortization and impairment (934 490) -
The purchased manufacturing rights have a carrying amount of 817 510 and
remaining useful life of 40 months (3 years and 4 months) at year-end.
The internally generated disinfectant formula has a carrying amount of R941 000
and its` development is still ongoing at year end.
2. Impairment Loss
An impairment loss of R16 775 was recognised on the manufacturing rights and
was included in the other expenses line item in the statement of profit or loss and
other comprehensive income. This was due to the research study that determined
that the masks manufactured using the manufacturing rights were only 65%
effective. The recoverable amount was based on the value in use calculated by
using a pre-tax discount rate of 11.85%.
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