Question

Golf Inc. is a public company that has been in business since the 1980s. It owns and operates over 40 golf courses across Canada. It also owns and operates pro shops and dining facilities. On 1 November 20X4 GI announced it was going to sell three of its golf courses that were underperforming. They have had declining memberships over the past couple of years. GI is currently looking for a buyer. The asking prices are reasonable, and real estate agents expect that the courses will be sold before the spring of next year. The carrying amount of the land is $50,000 but the fair market value is $750,000. The equipment, for example golf carts, has a carrying amount of $600,000 and a fair market value of $450,000. GI has a December 31 year end.

 

Required:

How would GI account for the disposal of the three golf courses? Explain the impact on the financial statements.

Answer 1

It must be determined if the sale of the golf courses is a held for sale asset and / or a discontinued operation. The held for sale asset criteria has been met. The Board has made a decision to self the three golf courses. GI is looking for a buyer, expect to sell within one year and the asking prices are reasonable. The golf courses are available for sale immediately there are no restrictions that would prevent the sale. Depreciation would stop on the assets. They would be reclassified as a current held for sale asset at $50,000 for land plus $450,000 for equipment. There would be a $150,000 impairment loss on the equipment. The sale would not be considered a discontinued operation since they are still in the same business and there is no indication these three golf courses were in a specific geographical location.

It must be determined if the sale of the golf courses is a held for sale asset and / or a discontinued operation.