Wonderful Shoes Ltd is the holding company of Pretty Shoes Ltd (PSL) and Smart Shoes Ltd (SSL).  At the recent board meeting on 30 June 2014, the management decided to dispose of the entire operation of PSL as a going concern to an independent third party.  The assets of PSL at 31 December 2014 as presented in the consolidated financial statements are as follows:

                                                                                                                                    $000

Goodwill                                                                                                                     4,800

Intangible assets                                                                                              25,000

Property, plant and equipment                                                            96,600

Investment properties                                                                         33,200

Inventories                                                                                                      13,000

Accounts receivables                                                                          12,000

Bank overdraft                                                                                                (4,000)

                                                                                                                                    180,600

The management estimates that the intangible assets had a fair value of 27,500,000 and the accounts receivable is 80% recoverable.

Taking into consideration the range of price offered by the potential buyer, the management also estimates that the fair value less costs to sell the group of assets of PSL amounts to $170,000,000.

Required:

With reference to HKFRS 5 Non-current assets held for sale and discontinued operations:

a.       Explain and calculate the impairment loss to be made to each of the assets of PSL upon classification of disposal group as held for sale.  (7 marks).

b.      Based on your calculations in part (a), prepare journal entries with narrative to record the adjustment to individual asset account.  (5 marks)

c.       Show how the assets and liabilities associated with the retailing business will appear in the statement of financial position as at 31 December 2014.  (3 marks)

d.      If the sale of PSL is sold on 1 December 2014, explain how the operating results of PSL should be presented in the statement of profit or loss for the year ended 31 December 2014.  (5 marks)

e.       Discuss whether separate disclosure of ‘Non-current assets held for sale’ information is useful for investors’ decision-making.  (5 marks)

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