Impairment Loss (xxx)
Net Carrying Value xxx
Revaluation Surplus/(Deficit) x/(x) (bal fig)
Disposal Proceeds (xxx)
(Gain) or Loss on Disposal (x)/x
Journal & Ledger entries will be made same as for non-current asset valued at cost.
An item of plant purchased 5 years ago at cost of $50,000
Cumulative depreciation charge is $25,000
Arrival of new technology after 2 years of acquisition has led to reduction in expected benefits from the plant. Therefore, impairment is recognized of $10,000.
An item of plant is revalued at $12,000 in the current year.
It was sold at year end for $10,000.
Calculate the profit or loss on disposal of revalued asset.
Cumulative depreciation charge means depreciation charges for all earlier years.
Impairment Loss (10,000)
Net Carrying Value 15,000
Revaluation Surplus/(Deficit) (3,000) (bal fig)
Disposal Proceeds (10,000)
(Gain)/Loss on Disposal 2,000
Note: Selling costs should be deducted from disposal proceeds. Possible selling costs could be:
- Commission paid
- Freight cost
- Labour cost
Cost is same as Gross carrying value/amount.
Net carrying value/amount (CV) is same as Net book value (NBV). Both are arrived after deducting depreciation and impairment loss. It is the value shown on the face of SFP.
Non-current assets made redundant should be derecognized as non-current assets. Its treatment will be done in accordance IFRS 5 discontinued operations.
Non-current assets made redundant should not be classified as current asset. In addition, non-current with remaining useful life of less than one year should not be classified as current asset.
Non-current assets still in use but fully depreciated to the depreciable amount should not be further depreciated.