When an item of property, plant and equipment is classified as held for sale under IFRS 5, what happens to its depreciation?
Correct answer: C. It ceases from the date of classification
- A. It continues at double the normal rate
- B. It continues until the sale contract is signed
- C. It ceases from the date of classification
- D. It is transferred to accumulated capital
Explanation
Depreciation ceases when the asset is classified as held for sale because its carrying amount will be recovered mainly through sale rather than continuing use. The asset is instead subject to the measurement rules for non-current assets held for sale.
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About Depreciation and Non-Current Assets
Non-current assets are long-term resources recorded at cost and reduced by accumulated depreciation to show their carrying amount. Coverage includes straight-line and reducing-balance methods, residual value, useful life, depreciation adjustments, capital and revenue expenditure, and the profit or loss arising when an asset is disposed of.
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