FAC3764
EXAM PACK
2025
, lOMoARcPSD|41752181
FAC3764 Assessment 5 – Suggested Solution
QUESTION 1
(a) Discuss whether the passenger travel operation meets the requirements to be classified as
a disposal group held for sale in terms of IFRS 5, Non-current Assets held for Sale and
Discontinued Operations, on 31 December 2023.
For the passenger travel operations to be classified as a disposal group held for sale, the following
criteria must be met:
The carrying amount must be recovered principally through a sale transaction rather than through
continuing use. For this to be the case, the travel operation must be available for immediate sale in its
present condition subject to only to terms that are usual and customary for sales of such assets (or
disposal groups) and its sale must be highly probable.
The public announcement stated that the passenger travel operation is being sold as is, which
implies that it is available for immediate sale in its present condition.
For the sale to be highly probable, the following criteria must further be met:
o The appropriate level of management must be committed to a plan to sell the disposal group
The decision to dispose of the passenger travel operation was taken by Velaphi’s board of
directors, who are the appropriate level of management. The decision of the board and
subsequent actions indicate that there is a commitment to the plan to sell
o An active programme to locate a buyer and complete the plan must have been initiated
On the 3 December management of Velaphi commenced with the documentation of a
formal detailed plan to sell the passenger travel operation
o The disposal group must be actively marketed for sale at a price that is reasonable in relation
to its current fair value
A public announcement to explain Velaphi’s plans to sell the passenger travel operation
was made on 31 December 2023, indicating that the passenger travel operation is being
sold at its fair value.
o The sale should be expected to qualify for recognition as a complete sale within one year from
the date of classification
There is an expectation that the sale will be finalised on the 31 May 2024, which is within
one year from the date of classification
o Actions required to complete the plan should indicate that it is unlikely that significant changes
to the plan will be made or that the plan will be withdrawn
The board’s actions show a commitment to complete the sale. There is no reason to believe
that significant changes to the plan will be made or that the plan will be withdrawn
Based on the above discussion, it can be concluded that the passenger travel operation meets the
requirements to be classified as a disposal group held for sale in terms of IFRS 5 on 31 December 2023.
Available marks: [8.5]
Maximum marks: [6]
1
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, lOMoARcPSD|41752181
FAC3764 Assessment 5 – Suggested Solution
(b) Assuming that the passenger travel operations complied with all the requirements to be
classified as a disposal group held for sale on 31 December 2023:
Prepare the journal entries in the financial records of Velaphi Ltd to account for the
classification of the disposal group as held for sale in terms of IFRS 5 Non-current Assets
Held for Sale and Discontinued Operations on 31 December 2023.
Dr Cr
R R
31 December 2023
J1 Disposal Group Held For Sale (DGHFS) (SFP) Note 1 174 450 000
Buses: Cost (SFP) 11 000 000
Aircrafts: Cost (SFP) 250 000 000
Investment Property (SFP) 2 950 000
Trade Receivables (SFP) 320 000
Accumulated Depreciation: Aircrafts (SFP) C2 86 800 000
Accumulated Depreciation: Buses (SFP) C1 2 750 000
Trade payables (SFP) 270 000
Reclassify individual assets and liabilities to DGHFS
Note 1: Student may alternatively reclassify each asset/liability into its DGHFS account (e.g.
DGHFS: Inventory) instead of using one combined account.
Note 2: For depreciable assets (buses and aircrafts), we cannot eliminate/reclassify the
carrying amounts using journals because there is no account for carrying amounts. The cost
and accumulated depreciation of depreciable assets should be eliminated instead.
J2 IFRS 5 Impairment Loss (P/L) C4 3 450 000
DGHFS – Buses (SFP) C5 166 010
DGHFS – Aircrafts (SFP) C5 3 283 99
Allocation of impairment loss on disposal group after reclassification
Note 3: We cannot simply credit the disposal group held for sale, we must credit the relevant
accounts to which the impairment is allocated.
Calculations
C1 Buses R
Cost 11 000 000
Carrying amount 8 250 000
Accumulated Depreciation 2 750 000
Alternatively: 11 000 000/6 x 1.5 = 2 750 000
C2 Aircraft R
Cost 250 000 000
Carrying amount 163 200 000
Accumulated Depreciation 86 800 000
Alternatively: (250 000 000 – 2 000 000)/20 x 7 = 86 800 000
C3 Total carrying amount ** R
Buses 8 250 000
Aircrafts 163 200 000
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, lOMoARcPSD|41752181
FAC3764 Assessment 5 – Suggested Solution
Investment property 2 950 000
Trade Receivables 320 000
Trade Payables (270 000)
174 450 000
C4 Impairment of DGHFS R
Fair value less cost to sell (given) 171 000 000
Carrying amount ** 174 450 000
(3 450 000)
C5 Impairment Allocation R
Total assets to be allocated to
Buses 8 250 000
Aircraft 163 200 000
171 450 000
Allocation
Busses (3 450 000 x 8 250 450 000*) (166 010)
Aircraft (3 450 000 x 163 200 000/ 171 450 000) (3 283 990)
(3 450 000)
*Note: Do not award this mark if investment property is included (wrong principle)
Total marks: [12]
3
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EXAM PACK
2025
, lOMoARcPSD|41752181
FAC3764 Assessment 5 – Suggested Solution
QUESTION 1
(a) Discuss whether the passenger travel operation meets the requirements to be classified as
a disposal group held for sale in terms of IFRS 5, Non-current Assets held for Sale and
Discontinued Operations, on 31 December 2023.
For the passenger travel operations to be classified as a disposal group held for sale, the following
criteria must be met:
The carrying amount must be recovered principally through a sale transaction rather than through
continuing use. For this to be the case, the travel operation must be available for immediate sale in its
present condition subject to only to terms that are usual and customary for sales of such assets (or
disposal groups) and its sale must be highly probable.
The public announcement stated that the passenger travel operation is being sold as is, which
implies that it is available for immediate sale in its present condition.
For the sale to be highly probable, the following criteria must further be met:
o The appropriate level of management must be committed to a plan to sell the disposal group
The decision to dispose of the passenger travel operation was taken by Velaphi’s board of
directors, who are the appropriate level of management. The decision of the board and
subsequent actions indicate that there is a commitment to the plan to sell
o An active programme to locate a buyer and complete the plan must have been initiated
On the 3 December management of Velaphi commenced with the documentation of a
formal detailed plan to sell the passenger travel operation
o The disposal group must be actively marketed for sale at a price that is reasonable in relation
to its current fair value
A public announcement to explain Velaphi’s plans to sell the passenger travel operation
was made on 31 December 2023, indicating that the passenger travel operation is being
sold at its fair value.
o The sale should be expected to qualify for recognition as a complete sale within one year from
the date of classification
There is an expectation that the sale will be finalised on the 31 May 2024, which is within
one year from the date of classification
o Actions required to complete the plan should indicate that it is unlikely that significant changes
to the plan will be made or that the plan will be withdrawn
The board’s actions show a commitment to complete the sale. There is no reason to believe
that significant changes to the plan will be made or that the plan will be withdrawn
Based on the above discussion, it can be concluded that the passenger travel operation meets the
requirements to be classified as a disposal group held for sale in terms of IFRS 5 on 31 December 2023.
Available marks: [8.5]
Maximum marks: [6]
1
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, lOMoARcPSD|41752181
FAC3764 Assessment 5 – Suggested Solution
(b) Assuming that the passenger travel operations complied with all the requirements to be
classified as a disposal group held for sale on 31 December 2023:
Prepare the journal entries in the financial records of Velaphi Ltd to account for the
classification of the disposal group as held for sale in terms of IFRS 5 Non-current Assets
Held for Sale and Discontinued Operations on 31 December 2023.
Dr Cr
R R
31 December 2023
J1 Disposal Group Held For Sale (DGHFS) (SFP) Note 1 174 450 000
Buses: Cost (SFP) 11 000 000
Aircrafts: Cost (SFP) 250 000 000
Investment Property (SFP) 2 950 000
Trade Receivables (SFP) 320 000
Accumulated Depreciation: Aircrafts (SFP) C2 86 800 000
Accumulated Depreciation: Buses (SFP) C1 2 750 000
Trade payables (SFP) 270 000
Reclassify individual assets and liabilities to DGHFS
Note 1: Student may alternatively reclassify each asset/liability into its DGHFS account (e.g.
DGHFS: Inventory) instead of using one combined account.
Note 2: For depreciable assets (buses and aircrafts), we cannot eliminate/reclassify the
carrying amounts using journals because there is no account for carrying amounts. The cost
and accumulated depreciation of depreciable assets should be eliminated instead.
J2 IFRS 5 Impairment Loss (P/L) C4 3 450 000
DGHFS – Buses (SFP) C5 166 010
DGHFS – Aircrafts (SFP) C5 3 283 99
Allocation of impairment loss on disposal group after reclassification
Note 3: We cannot simply credit the disposal group held for sale, we must credit the relevant
accounts to which the impairment is allocated.
Calculations
C1 Buses R
Cost 11 000 000
Carrying amount 8 250 000
Accumulated Depreciation 2 750 000
Alternatively: 11 000 000/6 x 1.5 = 2 750 000
C2 Aircraft R
Cost 250 000 000
Carrying amount 163 200 000
Accumulated Depreciation 86 800 000
Alternatively: (250 000 000 – 2 000 000)/20 x 7 = 86 800 000
C3 Total carrying amount ** R
Buses 8 250 000
Aircrafts 163 200 000
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, lOMoARcPSD|41752181
FAC3764 Assessment 5 – Suggested Solution
Investment property 2 950 000
Trade Receivables 320 000
Trade Payables (270 000)
174 450 000
C4 Impairment of DGHFS R
Fair value less cost to sell (given) 171 000 000
Carrying amount ** 174 450 000
(3 450 000)
C5 Impairment Allocation R
Total assets to be allocated to
Buses 8 250 000
Aircraft 163 200 000
171 450 000
Allocation
Busses (3 450 000 x 8 250 450 000*) (166 010)
Aircraft (3 450 000 x 163 200 000/ 171 450 000) (3 283 990)
(3 450 000)
*Note: Do not award this mark if investment property is included (wrong principle)
Total marks: [12]
3
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