Question 1

Trent bought an asset at a cost of Ȼ120,000 on 1 January 2011 and depreciated it straight line

over 10 years.

The asset’s residual value is nil and depreciation is charged pro-rate on a monthly basis.

On 30 November 2014, Trent classified the asset as a non-current asset held for sale in

accordance with the rules of IFRS 5 Discontinued operations and non-current assets held for

sale. At that date the fair value of the asset was Ȼ70,000 and the costs to sell were Ȼ 2,000.

The asset had not been sold by the 31 December 2014 reporting date.

Prepare extracts from the financial statements for the year-ended 31 December 2014.

Question 2

On January 2011, Milner Co bought a stamping machine for Ȼ 20,000. It has an expected useful

life of 10years and nil residual value. On 30 September 2013. Milner Co decides to sell the

machine and starts actions to locate a buyer. The machines are in short supply, so Milner value

at 30 September 2013 is Ȼ 13,500 and it will cost Ȼ 500 to dismantle the machine and make it

available to the purchaser. The machine has not been sold at the year end.

At what should the machine be stated in Milner Co.’s statement of financial position at

31 December 2013?

Question 3(KP)

Konate produced yellow and sold Red. However, half way through the year ended 31

March 2016, the Red business was closed and the assets sold off, incurring losses on the
disposal of non-current assets of Ȼ76,000 and redundancy costs of Ȼ 37,000. The

directors recognised the continuing business at a cost of Ȼ 98,000.

Trading results may be summarised as follows:

Yellow Red

Ȼ’000 Ȼ’000

Revenue 650 320

Cost of Sales 320 150

Distribution 60 90

Administration 120 110

Other trading information (to be allocated to continuing operations) is as follows:

Ȼ’000

Finance Costs 17

Tax 31

Required:

1. Draft the statement of profit or loss for the year ended 31 March 2016

2. Explain how an IFRS Discontinued Operations presentation can make information

more useful to users of financial statements.

Question 4(OP)

Alisson’s car manufacturing operation has been making substantial losses. Following a

meeting of the board of directors, it was decided to close down the car manufacturing

operation on 31 March 2016. The company’s reporting date is 31 December and the car

manufacturing operation is treated as a separate operating segment.

Explain how the decision to close the car manufacturing operation should be treated

in Alisson’s financial statements for the years ending 31 December 2015 and 2016.

Question 5(OP)

Robertson Co Statement of Profit or Loss and Other Comprehensive Income for the year

ended 31 December 2017

Ȼ000 Ȼ000

2017 2016

Revenue 700 550

Cost of sales (300) (260)

Gross profit 400 290

Distribution costs (100) (70)

Administrative expenses (70) (60)

Profit from operations 230 160

During the year the entity ran down a material business operation with all activities

ceasing on 30 March 2017

The results of the operation for 2017 and 2016 were as follows:

Ȼ000 Ȼ000

2017 2016
Revenue 60 70

Cost of sales (40) (45)

Distribution costs (13) (14)

Administrative expenses (10) (12)

Loss from operations (3) (1)

The entity made gains of Ȼ7,000 on the disposal of non-current assets of the discontinued

operation. These have been netted off against administrative expenses.

Required

Prepare the Statement of Profit or Loss and Other Comprehensive Income for the year

ended 31 December, 2017 for Robertson Co, complying with the provisions of IFRS 5,

disclosing the information on the face of the Statement of Profit or Loss and Other

Comprehensive Income. Ignore taxation.

Question 6(KP)

Naby is in the process of preparing its financial statements for the year ended 31 October

2016. The company’s principal activity is in the travel industry, mainly selling package

holidays (flights and accommodation) to the general public through the internet and retail

level agencies. During the current year the number of holidays sold by travel agencies

declined dramatically and the directors decided at a board meeting on 15 October 2016

to cease marketing holidays through its chain of travel agents and sell off the related high-

street premises. Immediately after the meeting an announcement was made in the press.

The directors wish to show the travel agencies’ result as a discontinued operation in the
financial statements to 31 October 2016. Due to the declining business of the travel

agents, on 1 August 2016. Naby expanded its internet operations to offer car facilities to

purchasers of its internet holidays.

The following are extracts from Naby’s statement of profit or loss results-year ended:

31 October 31 October

2016 2015

Internet Travel Car Total Total

Agencies Hire

Ȼ’000 Ȼ’000 Ȼ’000 Ȼ’000 Ȼ’000

Revenue 23,000 14,000 2,000 39,000 40,000

Cost of Sales (18,000) (16,500) (1,500) (36,000) (32,000)

Gross Profit/Loss 5,000 (2,500) 500 3,000 8,000

Operating Costs (1,000) (1,500) (100) (2,600) (2,000)

Profit/Loss before Tax 4,000 (4,000) 400 400 6,000

The results for the travel agencies for the year ended 31 October 2015 were

Revenue Ȼ 18 million

Cost of Sales Ȼ 15million and

Operating exps Ȼ 1.5million

Required
1. State the definition of both non-current assets held for sale and discontinued operations

and explain the usefulness of information for discontinued operations

2. Discuss whether the directors’ wish to show the travel agencies’ results as a

discontinued operations is justifiable

3. Assuming the closure of the travel is a discontinued operation, prepare the extracts

from the Statement of profit or loss of Naby for the year ended 31 October 2016 together

with comparatives. Show the required analysis of the discontinued operations