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MuhammadNauman
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Accounitng Treatment IFrs 5--foreign operation

This analysis aligns with IFRS 5 requirements for classifying the Mumbai Division as a disposal group held
for sale. Here are the key takeaways:

1. Classification as 'Held for Sale'

 The Mumbai Division meets IFRS 5's criteria for 'held for sale,' provided:

o It is available for immediate sale.

o The sale is highly probable (actively marketed, management commitment, expected


completion within a year).

 The uncertainty surrounding Ketch's reliance on the component raises concerns about
availability for immediate sale.

2. Measurement of Assets Before and After Classification

 Before classification: Assets must be tested for impairment individually.

 After classification: Assets must be measured at the lower of:

o Carrying amount (£31.5m)

o Fair value less costs to sell (£27.68m)

 Impairment charge: £3.82m (allocated to PPE as no goodwill exists).

3. Post-Classification Considerations

 No depreciation is charged after classification as held for sale.

 Impairment charges follow IAS 36, reducing PPE values.

 Non-monetary assets (PPE) must be retranslated at the exchange rate at the impairment date.

4. Treatment as a Discontinued Operation

 The Mumbai Division qualifies as a discontinued operation because:

o It is a CGU (generating revenue, separately identifiable in reporting).

o It represents a major line of business with distinct operations.

o Users need separate disclosure to assess future financials.

5. Additional Impairment (August–September 2018)

 Further reduction in PPE value: £0.45m.


 This additional impairment must be recognized in the year-end accounts (30 Sept 2018).

This structured breakdown ensures compliance with IFRS 5 and provides clarity on impairment,
reclassification, and disclosure requirements.

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