On 1st September, 20X1, entity X plans to sell a group of assets and liabilities, which is classified as a disposal group. On 31st October, 20X1,…

Assessing whether the manufacturing unit can be classified as held for sale 1. The manufacturing unit can be classified as held for sale due to the following reasons: (i) 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 must be classified as held for sale is 31st October, 20X1, i.e., the date at which management becomes committed to the plan. (ii) The sale is highly probable as the appropriate level of management i.e., board of directors in this case have approved the plan. (iii) A firm purchase agreement has been entered with the buyer. (iv) The sale is expected to be complete by 30th June, 20X2, i.e., within one year from the date of classification. 2. Measurement of the manufacturing unit as on the date of classification as held for sale 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. The carrying value of the disposal group as on 31st October, 20X1 is determined at 2,600. The difference between the carrying value as on 31st March, 20X1 and 31st October, 20X1 is accounted for as per the relevant Ind AS. 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. The fair value less cost to sell of the disposal group as on 31st October, 20X1 is 1,750 (i.e. 1,850 - 100). This is lower than the carrying value of 2,600. Thus, an impairment loss needs to be recognised and allocated first towards goodwill and thereafter pro-rata between non-current 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: Particulars Carrying value - 31st October, 20X1 Impairment Carrying value as per Ind AS 105 – 31st October, 20X1 Goodwill 500 (500) - Plant and Machinery 900 (115) 785 Building 1,850 (235) 1,615 Debtors 1,050 - 1,050 Inventory 400 - 400 Creditors (250) - (250) Loans (1,850) - (1,850) 2,600 (850) 1,750 3. Measurement of the manufacturing unit as at the year end The measurement as at the end of the financial year shall be on similar lines as done above. The assets and liabilities in the disposal group not within the scope of this Standard are measured as per the respective Standards. The fair value less cost to sell of the disposal group as a whole is calculated. This fair value less cost to sell as at the year-end shall be compared with the carrying value as at the date of classification as held for sale. It is provided that the fair value as on the year end is less than the carrying amount as on that date – thus the impairment loss shall be allocated in the same way between the assets of the disposal group falling within the scope of this standard as shown above.