Question

Eggleton Ltd. decided to sell Danton Television Corp., a wholly-owned subsidiary, on September 30, 2017. It’s year-end is December 31, 2017. The Board of Directors approved a formal plan to dispose of the subsidiary and the sale qualifies for discontinued operations treatment. The following data regarding Danton’s operations include: operating loss for the 9- month period ending September 30, 2017 is $1.9 million (net of tax); operating loss for the final 3 months of 2017 is $700,000 (net of tax); estimated loss on sale of net assets for the year (net of tax) is $150,000.

a) Prepare the discontinued operations section of Eggleton’s Income Statement for the year ending December 31, 2017 [4 marks]

b) How should Eggleton present the discontinued operations of Danton on the Balance Sheet ?(Eggleton follows IFRS). [2 marks]

c) Would your answer to part ii. Change if Eggleton follows ASPE? [ 2 mark]

Answer 1

(a) Relevant Extracts of Income statement of Eggleton Ltd for the year ended December 31, 2017:

Particluars	Amount ($)
Loss from discountinued operations of (net of tax)	890,000
Loss on sale of discontinued business component	150,000
Total loss from discontinued operations	1,040,000

(b) Eggleton Ltd. should classify the discontinued operations of Danton as assets held for sale for the current period as well as all the prior period(s) being presented in the Balance sheet. The assets and liabilities of the discontinued operations shall be presented separately in assets and liability sections, respectively.

(c) No. ASPE doesnot apply to investments, including equity method accounted investments. In the given situation since Eggleton Ltd, is disposing off the investments held in Danton Televisions Corp., a wholly-owned subsidiary, APSE cannot be applied to the situation and hence the normal provisions of IFRS 5 applies