Question

IFRS 16

The agreed contract price is $96,000. How should this price be allocated to performance obligations? Llama limited sells and equipment on January 01, 2019 which she bought on January 01,2016 for $6,000, and has been depreciating the equipment each year at 25% per annum on a straight line basis.

It trades this equipment in for new one costing $10,000 pays the supplier $9,200 in cash. What is the gain or loss on the disposal of the old equipment?

Unicorn Express Co. pays $80,000 to replace a major component of a factory machine. The faulty component that is replaced is sold for $4,000. The carrying amount of the machine before the replacement is $900,000, of which $20,000 relates to the faulty component being replaced.

Calculate the revised carrying amount of the machine after the replacement occurs and the profit or loss disposal of the faulty component.

Answer 1

1) Where a contract has multiple performance obligations, an entity will allocate the transaction price to the performance obligations in the contract by reference to their relative standalone selling prices. If a standalone selling price is not directly observable, the entity will need to estimate it. IFRS 15 suggests various methods that might be used, including:

 Adjusted market assessment approach

 Expected cost plus a margin approach

 Residual approach (only permissible in limited circumstances).

2) Carryig value on Jan 01,2016 $6,000

Depreciation 25% of 6,000 = 1,500 every year straight line

Carrying value on Jan 01,2019 = 6,000 - (1,500 * 3)

= 1,500

Gain or Loss on Disposal

Equipment Received = 10,000

Less: Cash =  9,200

Less: OldEquipment given up = 1,500

Loss = (700)

3) Carrying Amounto the nw machine is 900,000 - 20,000 + 80,000 = 960,000

Loss = 20,000 - 4,000 = 16,000