ACCA Strategic Business Reporting (SBR) Practice Exam

Which of the following statements about held for sale assets is true?

1. Depreciation should cease from the date of classification

2. They should always be revalued upwards

3. They should not be recognised as losses

4. They should remain in non-current assets

The correct answer is: Depreciation should cease from the date of classification

When an asset is classified as held for sale, it is an indication that the asset's carrying amount will be recovered through a sale rather than through continued use. According to the relevant IFRS standards, specifically IFRS 5 "Non-current Assets Held for Sale and Discontinued Operations," depreciation of the asset must cease from the date it is classified as held for sale. This is because, once the asset is expected to be sold rather than used, its value is no longer depreciated based on usage, and instead, it is measured at the lower of its carrying amount and fair value less costs to sell. This classification reflects the intent to sell the asset and ensures that the financial statements provide a true and fair view of the financial position, by not continuing to recognize depreciation that does not apply in the context of an asset being actively marketed for sale. As such, this understanding of when to cease depreciation aligns with the accounting principles governing non-current assets held for sale.