Page 11 - 11. COMPILER QB - INDAS 105

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period end i.e., December 31, 2018. The fair value as on 31 December, 2018 is lower than the carrying value
of the disposal group as on that date.
Required:

(i) Assess whether the manufacturing unit can be classified as held for sale and reasons thereof. If yes,

then at which date?
(ii) The measurement of the manufacturing unit as on the date of classification as held for sale.
(iii) The measurement of the manufacturing unit as at the end of the year.

Solution

(i) Assessment of manufacturing unit whether to be classified as held for sale
The manufacturing unit can be classified as held for sale due to the following reasons:
(a) The disposal group is available for immediate sale and in its present condition. The regulatory approval

is customary and it is expected to be received in one year. The date at which the disposal group is

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classified as held for sale will be 31 July, 2018, i.e., the date at which management becomes
committed to the plan.

(b) The sale is highly probable as the appropriate level of management i.e., board of directors in this case

have approved the plan.
(c) A firm purchase agreement has been entered with the buyer.
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(d) The sale is expected to be complete by 31 March, 2019, i.e., within one year from the date of
classification.

(ii) Measurement of the manufacturing unit as on the date of classification as held for sale
Following steps need to be followed:

Step 1: Immediately before the initial classification of the asset (or disposal group) as held for sale,

the carrying amounts of the asset (or all the assets and liabilities in the group) shall be measured in
accordance with applicable Ind AS.
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This has been done and the carrying value of the disposal group as on 31 July, 2018 is determined at
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Rs 5,200 lakh. The difference between the carrying value as on 31 December, 2017 and 31 July, 2018
is accounted for as per Ind AS 36.

Step 2: An entity shall measure a non-current asset (or disposal group) classified as held for sale at the
lower of its carrying amount and fair value less costs to sell.

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The fair value less cost to sell of the disposal group as on 31 July, 2018 is Rs 3,500 lakh (i.e. Rs
3,700 lakh - Rs 200 lakh). This is lower than the carrying value of Rs 5,200 lakh. Thus, an impairment
loss needs to be recognised and allocated first towards goodwill and thereafter pro-rata between assets of

the disposal group which are within the scope of Ind AS 105 based on their carrying value.

Thus, the assets will be measured as under:
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