CIMA Exam CIMAPRA19-F01-1 Topic 5 Question 105 Discussion

Actual exam question for CIMA's CIMAPRA19-F01-1 exam

Question #: 105
Topic #: 5

On 31 March 20X1 OP decided to sell a property. On that date this property was correctly classified as held for sale in accordance with IFRS 5 Non-Current Assets Held For Sale And Discontinued Operations.

In the draft financial statements of OP for the year ended 31 October 20X1 this property has been included at its fair value, which was $520,000 lower than its carrying value. This has resulted in a charge to profit or loss, the result of which is that the draft financial statements show a loss of $450,000 for the year to 31 October 20X1. When the management board of OP reviewed the draft financial statements it was unhappy about the loss and decided that the property should be reclassified as a non-current asset and reinstated to its original value, despite the fact that its plans for the property had not changed.

In accordance with the ethical principle of professional competence and due care, which THREE of the following statements explain how this property should be accounted for in the financial statements of OP for the year ended 31 October 20X1?

AThe property should be treated as a non-current asset held for sale from 31 March 20X1.

BThe property should be treated as a non-current asset held for sale from 1 November 20X1.

CThe property should not be depreciated after 31 March 20X1.

DThe impairment of $520,000 should be shown as an expense in the statement of profit or loss.

EThe property should be depreciated until 31 October 20X1.

FThe property impairment should not be recorded until the sale has completed.

Show Suggested Answer

Suggested Answer: A

by Vivan at Jan 13, 2025, 12:09 PM

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Nickolas

1 months ago

Apparently, OP's management is so good at creative accounting, they should start their own magic show. 'Watch as we make a $520,000 loss disappear before your very eyes!'

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Carin

1 months ago

This is a tricky one, but the ethical thing to do is to follow the rules and record the impairment as an expense. I'm sure the management board would prefer to have a pretty picture, but that's not what accounting is about. Maybe they should try their hand at interior decorating instead.

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Patti

1 months ago

I can't believe OP is trying to hide the loss by reclassifying the property. That's a clear breach of ethical principles. Option D is the way to go, no matter how unhappy the management board might be. Maybe they should focus on improving the company's performance instead of fudging the numbers.

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Benton

13 days ago

Management should focus on transparency and improving performance rather than trying to hide losses.

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Jacquelyne

16 days ago

I agree, it's important to accurately reflect the financial position of the company.

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Lindsey

18 days ago

Option D is the correct choice. The impairment should be shown as an expense in the statement of profit or loss.

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Tyisha

19 days ago

Definitely, professional competence and due care are important. The property should be accounted for correctly, regardless of the management's unhappiness.

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Monroe

25 days ago

I agree, hiding the loss by reclassifying the property is not ethical. The management board should focus on improving performance.

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Emmett

29 days ago

Option D is the correct choice. The impairment should be shown as an expense in the statement of profit or loss.

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Marguerita

2 months ago

Option B is incorrect, as the property was already classified as held for sale on 31 March 20X1. Options C and E are also wrong, as the property should not be depreciated after the reclassification. The correct answers are A, D, and F.

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Noelia

6 days ago

F) The property impairment should not be recorded until the sale has completed.

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Adolph

8 days ago

D) The impairment of $520,000 should be shown as an expense in the statement of profit or loss.

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Ashleigh

13 days ago

A) The property should be treated as a non-current asset held for sale from 31 March 20X1.

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Alberto

2 months ago

Clearly, the property should be treated as a non-current asset held for sale from 31 March 20X1, as stated in option A. The impairment should also be shown as an expense in the statement of profit or loss, as per option D. I'm surprised OP is even considering reclassifying the property after already classifying it correctly.

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Teri

19 days ago

Absolutely, it's crucial for the financial statements to accurately reflect the true financial position of the company.

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Lourdes

1 months ago

It's important to follow the correct accounting treatment for assets held for sale.

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Dalene

1 months ago

Yes, and the impairment of $520,000 should be shown as an expense in the statement of profit or loss.

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Florencia

2 months ago

I agree, the property should definitely be treated as a non-current asset held for sale from 31 March 20X1.

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Matthew

2 months ago

But shouldn't the impairment of $520,000 be shown as an expense in the statement of profit or loss? That seems like a significant loss to ignore.

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Lorean

3 months ago

I agree with Ivory. It makes sense to account for it that way to reflect the correct status of the property.

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Ivory

3 months ago

I think the property should be treated as a non-current asset held for sale from 31 March 20X1.

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