Page 7 - 11. COMPILER QB - INDAS 105

QUESTIONS FROM PAST EXAM PAPERS

Q4 (MTP APRIL 2018)

A Ltd. is to sell a non-current asset, being a piece of land. The piece of land has been contaminated and will
require the entity to carry out Rs. 100,000 of work in order to rectify the contamination. If the land was not
contaminated, it could be sold for Rs. 300,000. With the contamination, it is worth only Rs. 200,000. The work

that is needed to rectify the contamination will extend the period of sale by one year from the date the land

is first marketed for sale.
ft t In the following situations, examine with suitable reasons whether land can be classified as held for sale

in accordance with Ind AS 105: Non-current assets held for sale and discontinued operations

Situation 1
The land is marketed for Rs. 300,000 and A Ltd. was not aware of the contamination till the time a firm

purchase commitment was signed with a purchaser. The purchaser found the contamination through a survey.
The purchaser signed the firm purchase commitment on condition that the contamination damage will be

rectified.

Situation 2
A Ltd. marketed the land for Rs. 300,000, knowing about the contamination when the proposal to sale the

land went in the market. However, A Ltd. marketed it with an agreement that it would carry out the
rectification work within few months from signing the firm purchase commitment.

Situation 3

A Ltd. knew about the contamination prior to float the proposal to sell the land and markets it for Rs.
200,000 with no obligation on itself to rectify or fix the contamination.

Solution

Situation 1

As far as the entity was aware, the land was marketed and available for immediate sale in its present
condition at a reasonable price. The event extending the one-year period was imposed by the buyer after the

firm purchase commitment was received and the entity is taking steps to address it. The land qualifies as held
for sale and continues to do so after it is required to carry out the rectification work.

Situation 2

The land is not available for immediate sale in its present condition when it is first marketed. It is being
marketed at a price that involves further work to the land. It cannot be classified as held for sale when it is

first marketed. It also cannot be classified as held for sale when a purchase commitment is received, because

11. 6