Question Tag: Discontinued Operations

Search 500 + past questions and counting.

  • Filter by Professional Bodies

  • Filter by Subject

  • Filter by Series

  • Filter by Topics

  • Filter by Levels

  • 30 Marks

AAA – Nov 2016 – L3 – Q1 – Forensic Auditing

Evaluate significant audit issues related to fraud by the MD/CEO, disclosure of discontinued operations, and audit responsibilities for internet banking.

Havana Bank Plc was listed on the Nigerian Stock Exchange in February 2015. There was an initial public offer in the same period with proceeds of N5 billion. Part of the proceeds was expected to be utilized to strengthen the bank’s internet banking facility.

In November of the same year, the Managing Director/Chief Executive Officer (MD/CEO) proceeded on a three-week vacation to the United Kingdom but did not return at the time of concluding the audit of the 2015 financial statements early in 2016. It was observed that the MD/CEO had absconded with documents relating to the public offer. It was also noted that he kept drawing cash whilst in the United Kingdom amounting to N922 million.

The Bank closed its Gambian operations in June 2015 because it had made losses for two consecutive years. Prior to the two years before the closure, the operations in Gambia had grown into a network of five branches, contributing 15 percent of the gross income and 9.5 percent of the net profits of the group. The closure was not disclosed in the financial statements, but reference was made to the closure in the directors’ report.

As the Audit Manager in the firm of Chartered Accountants that audits Havana Bank Plc, you are required to:
a. Identify and explain the significant audit matters you will consider in forming an opinion in relation to the missing documents and the cash drawings by the absconded MD/CEO. (10 Marks)
b. Analyse and evaluate your views on the non-inclusion of the discontinued Gambian operations in the financial statements. (10 Marks)
c. Explain FIVE duties, as an auditor, in relation to the bank’s internet banking. (10 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – Nov 2016 – L3 – Q1 – Forensic Auditing"

  • 13 Marks

CR – May 2018 – L3 – SB – Q3b – Impairment of Assets (IAS 36)

valuate discontinuation conditions and prepare profit or loss statement for Bamgbose Plc with comparative figures.

Bamgbose Plc. is a long-established travel agent, operating through a network of retail outlets and online store. In recent years, the business has seen its revenue from the online store grow strongly, and that of retail outlets decline significantly. On July 1, 2017, the board decided to close the retail network at the financial year end of December 31, 2017, and put the buildings up for sale on that date. The directors are seeking advice regarding the treatment of the buildings in the statement of financial position as well as the treatment of the trading results of the retail division for the year. The following figures are available at December 31, 2017:

  • Carrying amount of buildings: ₦30.0 million
  • Fair value less costs to sell of buildings: ₦25.8 million
  • Other expected costs of closure: ₦5.85 million

Required:

(i) Outline the conditions which must be met in order to present the results of an operation as “discontinued” and the accounting treatment that applies when such a classification is deemed appropriate. (5 Marks)

(ii) Draft the statement of profit or loss for Bamgbose Plc. for year ended December 31, 2017, together with the comparative figures for 2016, taking the above information into account. (8 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – May 2018 – L3 – SB – Q3b – Impairment of Assets (IAS 36)"

  • 7 Marks

CR – May 2018 – L3 – SB – Q3a – Impairment of Assets (IAS 36)

Outline conditions for classifying assets as held for sale and their accounting treatment under IFRS 5.

(a) “IFRS 5 Non-current Asset held for Sale and Discontinued Operations” sets out the principles governing the measurement and presentation of non-current assets that are expected to be realized through sale rather than through continuing use. The standard also deals with reporting the results of operations that qualify as discontinued.

Required:

Discuss the conditions which must be met for a non-current asset to be classified as being “held for sale” and explain the accounting treatment that applies when such a classification is deemed appropriate. (7 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – May 2018 – L3 – SB – Q3a – Impairment of Assets (IAS 36)"

  • 13 Marks

FR – May 2021 – L2 – Q3b – Impairment of Assets (IAS 36)

Prepare a statement of profit or loss for Wizkid Bottling Company Plc showing continuing and discontinued operations.

Wizkid Bottling Company Plc specializes in the production of alcoholic wine known as Blue Bull and a soft drink called “Wiz-Cola,” operating two divisions: Blue Bull and Wiz-Cola. Due to high labor costs and raw material shortages for wine production, the Blue Bull division has incurred significant operating losses. Management decided to close down the Blue Bull division and drew up a plan to discontinue its operations.

On February 1, 2019, the Board of Directors of Wizkid Bottling Company Plc approved and immediately announced the formal plan.

The following figures are available for the current and prior year ending March 31:

2019 2018
Blue Bull Wiz-Cola Blue Bull Wiz-Cola
Revenue 235,000 1,570,000 250,000 1,250,000
Cost of sales 175,000 505,000 200,000 450,000
Admin. expenses 35,000 311,000 25,000 255,000
Distribution costs 20,000 186,500 10,000 157,500
Other operating 15,000 124,500 10,000 102,500
expenditure
Taxation expense (3,000) 130,500 1,500 85,000

Additional Information:

  • Severance pay of N42.5 million was incurred between February 1, 2019, and March 31, 2019.
  • An evaluation of the recoverability of assets in the Blue Bull Division in terms of IAS 36 led to recognizing an impairment loss of N9.5 million, which is included in other operating expenses above.

Required:

i. Draft the statement of profit or loss for Wizkid Bottling Company Plc for the years ended March 31, 2019, and 2018, in compliance with IFRS 5, showing continuing and discontinuing operations.
(10 Marks)

ii. List additional disclosures required by IFRS 5 for the discontinued operations in the financial statements for the year ended March 31, 2019.
(3 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – May 2021 – L2 – Q3b – Impairment of Assets (IAS 36)"

  • 20 Marks

CR – May 2021 – L3 – Q5 – Financial performance of Shop First Ltd

Analyze the financial performance of Shop First Ltd for 2020 and discuss the effects of discontinued operations and contingencies.

Shop First Ltd operates supermarket chains across the sixteen (16) regions of Ghana. The firm has been in commercial operation for more than two decades, growing its operations through an effective supply chain and financial management. However, in the last few years, keen competition and worsening general economic performance have steadied the consistent growths experienced over the years, resulting in the entity disposing off part of its operations. Below are the financial statements of Shop First Ltd:

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – May 2021 – L3 – Q5 – Financial performance of Shop First Ltd"

  • 4 Marks

FR – May 2020 – L2 – Q2b – Classification of Discontinued Operations under IFRS 5

Assess the classification of certain operations as discontinued operations under IFRS 5 for two scenarios.

In accordance with IFRS 5: Non-Current Assets held for Sale and Discontinued Operations, explain with reasons whether each of the following could most likely be classified as a discontinued operation in this year’s financial statements:

i) A reportable operating segment that met the definition of held for sale after the year-end but before the financial statements were authorised for issue.
ii) A division of a business, classified as held for sale, that was correctly treated as a discontinued operation in last year’s financial statements but which has not been sold by this year-end due to the sale being referred to the Securities and Exchange Commission (SEC). SEC is not expected to report its findings until 6 months after this year-end.

 

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – May 2020 – L2 – Q2b – Classification of Discontinued Operations under IFRS 5"

  • 5 Marks

FR – Mar/Jul 2020 – L2 – Q2a – Non-current Assets Held for Sale under IFRS 5

Explanation of the criteria required for assets to be classified as held for sale under IFRS 5.

IFRS 5 sets out requirements that specify the accounting treatment for Non-current Assets Held for Sale and the presentation and Discontinued Operations.
Required:
Explain the criteria to be met before assets can be classified as held for sale in accordance with IFRS 5.
(5 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – Mar/Jul 2020 – L2 – Q2a – Non-current Assets Held for Sale under IFRS 5"

  • 2 Marks

FR – May 2018 – L2 – Q2e – Financial Reporting Standards and Their Applications

Identify the criteria to be met for an asset to be classified as held for sale in accordance with IFRS 5.

In accordance with IFRS 5: Non-Current Assets Held for Sale and Discontinued Operations, a non-current asset (disposal group) is classified as “held for sale” if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. However, to qualify to be classified as held for sale, a detailed criteria must be met.

Required:
Identify any TWO criteria to be met before an asset can be classified as held for sale. (2 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – May 2018 – L2 – Q2e – Financial Reporting Standards and Their Applications"

  • 5 Marks

FR – Aug 2022 – L2 – Q5b – Financial Reporting Standards and Their Applications

Determine whether Rivoli Hotel Ltd’s disposal and refurbishment decisions meet the criteria for classification as discontinued operations under IFRS 5.

Rivoli Hotel Ltd’s sole activity is the operation of hotels in major cities across Ghana. After a period of declining profitability due to the COVID-19 pandemic, the company made the following decisions during the year ended 30 April 2022:

i) Rivoli Hotel Ltd disposed of all its hotels in City A.

ii) Rivoli Hotel Ltd refurbished all its hotels in City B to target the holiday and tourism market, shifting away from business clients.

Required:

Treating the two decisions separately, justify whether they meet the criteria for being classified as discontinued operations in the financial statements of Rivoli Hotel Ltd for the year ended 30 April 2022.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – Aug 2022 – L2 – Q5b – Financial Reporting Standards and Their Applications"

  • 5 Marks

CR – May 2018 – L3 – Q2d – IFRS 5: Non-current Assets Held for Sale and Discontinued Operations

Explain whether certain scenarios meet the criteria for classification as discontinued operations under IFRS 5.

Explain with justification, whether each of the following could most likely be classified as a discontinued operation under IFRS 5: Non-current Assets Held for Sale and Discontinued Operations in this year’s financial statements:
i) A reportable operating segment that met the definition of held for sale after the year-end but before the financial statements were authorised for issue. (1 mark)
ii) A reportable operating segment that was closed down during the financial year. The assets of the segment were broken up and used in other divisions of the company. (2 marks)
iii) A division of a business, classified as held for sale, that was correctly treated as a discontinued operation in last year’s financial statements, but which has not been sold by this year-end due to the sale being referred to the National Insurance Commission, which regulates the insurance industry. The commission is not expected to report its findings until 6 months after this year-end. (2 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – May 2018 – L3 – Q2d – IFRS 5: Non-current Assets Held for Sale and Discontinued Operations"

  • 30 Marks

AAA – Nov 2016 – L3 – Q1 – Forensic Auditing

Evaluate significant audit issues related to fraud by the MD/CEO, disclosure of discontinued operations, and audit responsibilities for internet banking.

Havana Bank Plc was listed on the Nigerian Stock Exchange in February 2015. There was an initial public offer in the same period with proceeds of N5 billion. Part of the proceeds was expected to be utilized to strengthen the bank’s internet banking facility.

In November of the same year, the Managing Director/Chief Executive Officer (MD/CEO) proceeded on a three-week vacation to the United Kingdom but did not return at the time of concluding the audit of the 2015 financial statements early in 2016. It was observed that the MD/CEO had absconded with documents relating to the public offer. It was also noted that he kept drawing cash whilst in the United Kingdom amounting to N922 million.

The Bank closed its Gambian operations in June 2015 because it had made losses for two consecutive years. Prior to the two years before the closure, the operations in Gambia had grown into a network of five branches, contributing 15 percent of the gross income and 9.5 percent of the net profits of the group. The closure was not disclosed in the financial statements, but reference was made to the closure in the directors’ report.

As the Audit Manager in the firm of Chartered Accountants that audits Havana Bank Plc, you are required to:
a. Identify and explain the significant audit matters you will consider in forming an opinion in relation to the missing documents and the cash drawings by the absconded MD/CEO. (10 Marks)
b. Analyse and evaluate your views on the non-inclusion of the discontinued Gambian operations in the financial statements. (10 Marks)
c. Explain FIVE duties, as an auditor, in relation to the bank’s internet banking. (10 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – Nov 2016 – L3 – Q1 – Forensic Auditing"

  • 13 Marks

CR – May 2018 – L3 – SB – Q3b – Impairment of Assets (IAS 36)

valuate discontinuation conditions and prepare profit or loss statement for Bamgbose Plc with comparative figures.

Bamgbose Plc. is a long-established travel agent, operating through a network of retail outlets and online store. In recent years, the business has seen its revenue from the online store grow strongly, and that of retail outlets decline significantly. On July 1, 2017, the board decided to close the retail network at the financial year end of December 31, 2017, and put the buildings up for sale on that date. The directors are seeking advice regarding the treatment of the buildings in the statement of financial position as well as the treatment of the trading results of the retail division for the year. The following figures are available at December 31, 2017:

  • Carrying amount of buildings: ₦30.0 million
  • Fair value less costs to sell of buildings: ₦25.8 million
  • Other expected costs of closure: ₦5.85 million

Required:

(i) Outline the conditions which must be met in order to present the results of an operation as “discontinued” and the accounting treatment that applies when such a classification is deemed appropriate. (5 Marks)

(ii) Draft the statement of profit or loss for Bamgbose Plc. for year ended December 31, 2017, together with the comparative figures for 2016, taking the above information into account. (8 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – May 2018 – L3 – SB – Q3b – Impairment of Assets (IAS 36)"

  • 7 Marks

CR – May 2018 – L3 – SB – Q3a – Impairment of Assets (IAS 36)

Outline conditions for classifying assets as held for sale and their accounting treatment under IFRS 5.

(a) “IFRS 5 Non-current Asset held for Sale and Discontinued Operations” sets out the principles governing the measurement and presentation of non-current assets that are expected to be realized through sale rather than through continuing use. The standard also deals with reporting the results of operations that qualify as discontinued.

Required:

Discuss the conditions which must be met for a non-current asset to be classified as being “held for sale” and explain the accounting treatment that applies when such a classification is deemed appropriate. (7 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – May 2018 – L3 – SB – Q3a – Impairment of Assets (IAS 36)"

  • 13 Marks

FR – May 2021 – L2 – Q3b – Impairment of Assets (IAS 36)

Prepare a statement of profit or loss for Wizkid Bottling Company Plc showing continuing and discontinued operations.

Wizkid Bottling Company Plc specializes in the production of alcoholic wine known as Blue Bull and a soft drink called “Wiz-Cola,” operating two divisions: Blue Bull and Wiz-Cola. Due to high labor costs and raw material shortages for wine production, the Blue Bull division has incurred significant operating losses. Management decided to close down the Blue Bull division and drew up a plan to discontinue its operations.

On February 1, 2019, the Board of Directors of Wizkid Bottling Company Plc approved and immediately announced the formal plan.

The following figures are available for the current and prior year ending March 31:

2019 2018
Blue Bull Wiz-Cola Blue Bull Wiz-Cola
Revenue 235,000 1,570,000 250,000 1,250,000
Cost of sales 175,000 505,000 200,000 450,000
Admin. expenses 35,000 311,000 25,000 255,000
Distribution costs 20,000 186,500 10,000 157,500
Other operating 15,000 124,500 10,000 102,500
expenditure
Taxation expense (3,000) 130,500 1,500 85,000

Additional Information:

  • Severance pay of N42.5 million was incurred between February 1, 2019, and March 31, 2019.
  • An evaluation of the recoverability of assets in the Blue Bull Division in terms of IAS 36 led to recognizing an impairment loss of N9.5 million, which is included in other operating expenses above.

Required:

i. Draft the statement of profit or loss for Wizkid Bottling Company Plc for the years ended March 31, 2019, and 2018, in compliance with IFRS 5, showing continuing and discontinuing operations.
(10 Marks)

ii. List additional disclosures required by IFRS 5 for the discontinued operations in the financial statements for the year ended March 31, 2019.
(3 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – May 2021 – L2 – Q3b – Impairment of Assets (IAS 36)"

  • 20 Marks

CR – May 2021 – L3 – Q5 – Financial performance of Shop First Ltd

Analyze the financial performance of Shop First Ltd for 2020 and discuss the effects of discontinued operations and contingencies.

Shop First Ltd operates supermarket chains across the sixteen (16) regions of Ghana. The firm has been in commercial operation for more than two decades, growing its operations through an effective supply chain and financial management. However, in the last few years, keen competition and worsening general economic performance have steadied the consistent growths experienced over the years, resulting in the entity disposing off part of its operations. Below are the financial statements of Shop First Ltd:

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – May 2021 – L3 – Q5 – Financial performance of Shop First Ltd"

  • 4 Marks

FR – May 2020 – L2 – Q2b – Classification of Discontinued Operations under IFRS 5

Assess the classification of certain operations as discontinued operations under IFRS 5 for two scenarios.

In accordance with IFRS 5: Non-Current Assets held for Sale and Discontinued Operations, explain with reasons whether each of the following could most likely be classified as a discontinued operation in this year’s financial statements:

i) A reportable operating segment that met the definition of held for sale after the year-end but before the financial statements were authorised for issue.
ii) A division of a business, classified as held for sale, that was correctly treated as a discontinued operation in last year’s financial statements but which has not been sold by this year-end due to the sale being referred to the Securities and Exchange Commission (SEC). SEC is not expected to report its findings until 6 months after this year-end.

 

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – May 2020 – L2 – Q2b – Classification of Discontinued Operations under IFRS 5"

  • 5 Marks

FR – Mar/Jul 2020 – L2 – Q2a – Non-current Assets Held for Sale under IFRS 5

Explanation of the criteria required for assets to be classified as held for sale under IFRS 5.

IFRS 5 sets out requirements that specify the accounting treatment for Non-current Assets Held for Sale and the presentation and Discontinued Operations.
Required:
Explain the criteria to be met before assets can be classified as held for sale in accordance with IFRS 5.
(5 Marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – Mar/Jul 2020 – L2 – Q2a – Non-current Assets Held for Sale under IFRS 5"

  • 2 Marks

FR – May 2018 – L2 – Q2e – Financial Reporting Standards and Their Applications

Identify the criteria to be met for an asset to be classified as held for sale in accordance with IFRS 5.

In accordance with IFRS 5: Non-Current Assets Held for Sale and Discontinued Operations, a non-current asset (disposal group) is classified as “held for sale” if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. However, to qualify to be classified as held for sale, a detailed criteria must be met.

Required:
Identify any TWO criteria to be met before an asset can be classified as held for sale. (2 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – May 2018 – L2 – Q2e – Financial Reporting Standards and Their Applications"

  • 5 Marks

FR – Aug 2022 – L2 – Q5b – Financial Reporting Standards and Their Applications

Determine whether Rivoli Hotel Ltd’s disposal and refurbishment decisions meet the criteria for classification as discontinued operations under IFRS 5.

Rivoli Hotel Ltd’s sole activity is the operation of hotels in major cities across Ghana. After a period of declining profitability due to the COVID-19 pandemic, the company made the following decisions during the year ended 30 April 2022:

i) Rivoli Hotel Ltd disposed of all its hotels in City A.

ii) Rivoli Hotel Ltd refurbished all its hotels in City B to target the holiday and tourism market, shifting away from business clients.

Required:

Treating the two decisions separately, justify whether they meet the criteria for being classified as discontinued operations in the financial statements of Rivoli Hotel Ltd for the year ended 30 April 2022.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "FR – Aug 2022 – L2 – Q5b – Financial Reporting Standards and Their Applications"

  • 5 Marks

CR – May 2018 – L3 – Q2d – IFRS 5: Non-current Assets Held for Sale and Discontinued Operations

Explain whether certain scenarios meet the criteria for classification as discontinued operations under IFRS 5.

Explain with justification, whether each of the following could most likely be classified as a discontinued operation under IFRS 5: Non-current Assets Held for Sale and Discontinued Operations in this year’s financial statements:
i) A reportable operating segment that met the definition of held for sale after the year-end but before the financial statements were authorised for issue. (1 mark)
ii) A reportable operating segment that was closed down during the financial year. The assets of the segment were broken up and used in other divisions of the company. (2 marks)
iii) A division of a business, classified as held for sale, that was correctly treated as a discontinued operation in last year’s financial statements, but which has not been sold by this year-end due to the sale being referred to the National Insurance Commission, which regulates the insurance industry. The commission is not expected to report its findings until 6 months after this year-end. (2 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "CR – May 2018 – L3 – Q2d – IFRS 5: Non-current Assets Held for Sale and Discontinued Operations"

Elevate your professional expertise across key business domains with our comprehensive training programs

Our offerings

Contact Info

  • +233203701923
    +233543919232
  • info@nbcinstitute.com

Customer

Get In Touch

Follow us on our social media and get daily updates.

Facebook-f Twitter Linkedin-in Envelope
error: Content is protected !!
Oops!

This feature is only available in selected plans.

Click here to view all plans

Click on the login button below to login if you’re already subscribed to a plan or click on the upgrade button below to upgrade your current plan.

Login
Upgrade Plan

If you’re not subscribed to a plan, click on the button below to choose a plan

Subscribe to a plan