soundharya lakshmi (CA Student) (25 Points)
16 June 2021As per IAS 37, Gains from future sale of assets shall not be adjusted against the measurement of Provision even if such assets are related to the provision. But why the gains shouldn't be adjusted and what it means by adjustment against provision?
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 16 June 2021
Hello,
The future events- measurement of a provision must only be recognised when there is objective evidence that the sale will occur. Here, possibility of sale not occurring=possibility of sale occurrence. Hence, the revenue standard kicks in reminding us that revenue must be recognised only when a performance obligation is fulfilled and no need for provisioning,
Then, a contingent asset can be recognised if the sales of asset is probable but virtually not certain.
However, you can recognise provisions for sale of asset only after getting into a binding sale agreement.
Now, coming to disposal of non current assets standard IFRS 5, a ‘held for sale ‘ classification is given to assets which are going to be disposed. Once Asset is classified for sale, this asset will be presented separately from other asset and liabilities associated with it will be presented separately from other liabilities. See? No provisioning is required for this standard and no chance of revaluation gains as the asset will be measured at FVLCD and not at revaluation model.
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 16 June 2021
Forgot mention, the provisions standard has a principle that
future operating losses and gain some from future sale of assets should not be recognised as a provision.
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 16 June 2021
One more thing, please don’t get confused by there isn’t no revaluation, that asset will be measured at FVLCD which means at market value at that date.
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