A group of assets to be disposed of, by sale or otherwise, together as a group in a single transaction, and liabilities directly associated with those assets that will be transferred in the transaction. The group includes goodwill acquired in a business combination if the group is a cash-generating unit to which goodwill has been allocated in accordance with IAS 36 Impairment of Assets or if it is an operation within such a cash-generating unit.

Since the Fair value is lower, the asset should be measured at GH¢245,000 (W3) in the statement of financial position. (1 mark)

Since the Fair value is lower, the asset should be measured at GH¢245,000. Need for impairment loss of (GH¢307,500-245,000) = GH¢62,500
Dr Cost of sales                              62,500
Cr NCA held for sale                                            62,500

(1 mark)

Classification as held for sale is a non-adjusting event after the reporting period (IAS 10 para 22(c)). Therefore the definition of a discontinued operation is not met as the assets are neither discontinued in the period nor classified as held for sale at the year end.

For an operation not yet sold or abandoned to meet the definition of discontinued operation, it must meet the IFRS 5 held for sale criteria. All of these criteria were met at the previous year end, however at the current year end the operation was not sold within 12 months of classification and the period is expected to be extended well past this. However, where the period is extended by an event beyond the entity’s control such as this IFRS 5 Appendix B permits classification as held for sale (and therefore treatment as a discontinue operation) to continue provided the other criteria are still met, which appears to be the case here.

Identification of the reportable operating segment as a discontinued – 1 mark
Explanation of the treatment – 1 mark

IFRS 5
• The issue here is whether the closure of the division should be accounted for as a discontinued operation under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. A discontinued operation is defined as ‘a component of an entity that either has been disposed of or is classified as held for sale and:
a) represents a separate major line of business or geographical area of operations, or
b) is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations, or
c) is a subsidiary acquired exclusively with a view to resale.’
• As the discontinued operation has not been disposed of at the year end, it can only be classified as discontinued in the 2018 financial statements if it meets the definition of ‘held for sale’. Disposal groups are classified as held for sale if ‘their carrying amount will be recovered principally through a sales transaction rather than through continuing use’.
• This is not the case here as most of the assets are being redeployed elsewhere in the business.
• The small assets could potentially be classified as held for sale if all the relevant criteria, but not as a discontinued operation.

IAS 37
• Provision should be made for a redundancy costs if a constructive obligation exists at the year end. This appears to be the case as, assuming a detailed formal plan for the restructuring has been made, and the entity has raised a valid expectation in those
affected that the restructuring will be carried out by notifying them of the redundancy before the year end.

IAS 10
• As the annual financial statements were not scheduled to be released until after the closure of the division, the closure should be disclosed as a non-adjusting event after the reporting period due to its significance to the business (it is a separate operating
segment).                                                                                                        (3 points for 6 marks)

In general, the following conditions must be met for an asset (or ‘disposal group’)
to be classified as held for sale:

• Management is committed to a plan to sell the asset. i.e. an active programme to locate a buyer is initiated and the asset is being actively marketed for sale.
• is available for immediate sale.
• the sale is highly probable, within 12 months of classification as held for sale (subject to limited exceptions). The selling price is reasonable in relation to its fair value.
• actions required to complete the plan indicate that it is unlikely that plan will be significantly changed or withdrawn.
  

As the plant appears to have met the criteria to be classified as held for sale on 30 June 2015, it will be classified as held for sale on 30 June 2015at lower of:
Carrying value on the date of classification
Its fair value less cost to sell on the same date

If fair value less cost to sell is lower than the carrying value of asset on the date of classification the difference will be impairment loss.The asset classified as held for sale is not depreciated after being classified as held for sale.The asset will be presented separately from other assets, as a separate line item in the statement of financial position under current assets at GHS24,000.