Practice Questions for IFRS-5
Question:1 Delta Ltd owns a factory building with the following details as of 31 December 2024:
• Carrying amount: $800,000
• Fair value: $750,000
• Costs to sell: $30,000
On 15 December 2024, the management committed to a plan to sell the building and actively began marketing
it. The sale is expected to be completed within 8 months.
Required:
a) Does the building qualify as held for sale under IFRS 5?
b) At what amount should the building be measured at 31 December 2024?
c) Prepare the journal entry to reclassify the asset.
Question:2 Phoenix Group has three divisions:
Division A (Electronics): Revenue $5m, Operating profit $800,000
Division B (Furniture): Revenue $3m, Operating profit $500,000
Division C (Clothing): Revenue $2m, Operating loss ($200,000)
On 1 July 2024, the board approved the sale of Division C, which represents a separate major line of business.
The sale was completed on 30 November 2024 for $4 million. The carrying amount of Division C's net assets
was $4.2 million on the date of sale.
Division C incurred an operating loss of $200,000 for the full year and $80,000 from 1 July to 30 November
2024.
Required:
Calculate the profit/loss from discontinued operations for the year ended 31 December 2024.
Question:3 On 1 October 2024, Gamma Ltd classified a warehouse as held for sale:
Carrying amount before reclassification: $1,200,000
Fair value less costs to sell (1 Oct): $1,150,000
The warehouse was reclassified and measured at $1,150,000, recognizing an impairment loss of $50,000.
By 31 December 2024 (year-end), the fair value less costs to sell increased to $1,280,000.
Required:
a) At what amount should the warehouse be measured at 31 December 2024?
b) Prepare the journal entry required at year-end.
Question:4 On 1 March 2024, Epsilon Ltd classified machinery as held for sale:
• Original carrying amount: $500,000
• Accumulated depreciation: $200,000
• Net carrying amount: $300,000
• Fair value less costs to sell: $270,000
The machinery was reclassified at $270,000 with an impairment loss of $30,000.
On 1 September 2024, the sale fell through due to market conditions beyond the company's control.
Management decided to continue using the machinery.
If the machinery had not been classified as held for sale, depreciation would have been charged at $20,000 for
the 6-month period (March to September 2024).
Required:
Calculate the amount at which the machinery should be measured on 1 September 2024 when it ceases to be
held for sale.
Question:5 Omega Ltd decided to sell a cash-generating unit (CGU) comprising:
Assets:
Land: Carrying amount $600,000, Fair value $650,000
Building: Carrying amount $800,000, Fair value $700,000
Equipment: Carrying amount $300,000, Fair value $250,000
Inventory: Carrying amount $100,000, Fair value $95,000
Liabilities:
Trade payables: $150,000
Costs to sell the entire disposal group: $45,000
Required:
a) Calculate the fair value less costs to sell of the disposal group
b) Determine the carrying amount of the disposal group
c) Calculate the impairment loss and allocate it to the appropriate assets
d) Show the measurement of each asset after classification as held for sale.
Question:6 Sigma Corporation decided to dispose of a business segment. The disposal group includes:
Non-current Assets:
Goodwill: $200,000
Property: $1,500,000
Equipment: $800,000
Current Assets:
Inventory: $150,000
Liabilities:
Loan payable: $400,000
Fair value of the disposal group: $2,000,000
Costs to sell: $80,000
Required:
a) Calculate the impairment loss
b) Allocate the impairment loss to the assets
c) Show the carrying amounts after impairment
Question:7 Lambda Corp classified a specialized manufacturing plant as held for sale on 1 January 2024:
• Carrying amount: $5,000,000
• Fair value less costs to sell: $4,800,000
The company actively marketed the property but received no suitable offers due to the specialized nature of the
facility.
On 31 December 2024 (12 months later), the plant had still not been sold. Fair value less costs to sell on this
date was $4,750,000. Management remains committed to selling and continues active marketing. The delay is
due to market conditions beyond the company's control.
Required:
a) Should the plant continue to be classified as held for sale after 12 months?
b) What is the measurement at 31 December 2024? c) What disclosure considerations are relevant?
Question:8 Theta Ltd has a delivery vehicle with the following details on 1 April 2024:
• Cost: $80,000
• Accumulated depreciation: $45,000
• Remaining useful life: 5 years
• Annual depreciation: $7,000
On 1 July 2024, the vehicle was classified as held for sale. Fair value less costs to sell on this date was $32,000.
On 31 December 2024 (year-end), the fair value less costs to sell increased to $36,000.
Required:
a) Calculate the carrying amount at 1 July 2024
b) Show journal entries at 1 July 2024
c) Show the measurement at 31 December 2024 d) Explain the depreciation treatment