Question

Qasim Ltd has three divisions: a paper manufacturing division, a printing division and a clothing manufacturing division. On 1 April 2018 the directors of Qasim Ltd decided to sell the clothing division as it was not in line with the core activities of the company. This decision was announced to the employees and the public on 1 June 2018. The net assets of the clothing division as at 31 December 2018 were Rs.16 million (Rs.20 million assets less Rs.4 million liabilities).

On 10 May 2019 the board signed an agreement with Hashim Ltd to sell the clothing division for Rs.20 million. The net assets of the clothing division at this date were Rs.18 million (Rs.23 million assets and Rs.5 million liabilities). Qasim Ltd incurred redundancy costs of Rs.1 million which had been expected from the date the decision to sell the division was made. The redundancy costs are not reflected in the income statement information given below. The sale was completed on 1 July 2019 and the clothing division did not trade between 10 May 2019 and 1 July 2019.

The results of the clothing manufacturing division for 2018 and 2019 are as follows:
2018 2019
(to 1 July)
Rs.000 Rs.000
Turnover 65,000 40,000
Expenses (50,000) (32,000)
Operating profit 15,000 8,000
Tax charge (5,000) (3,000)

Required:
i) Restate Income statement with appropriate values.
ii) Prepare extracts (or description required for notes to the accounts) from the financial statements (including notes) of Qasim Ltd for 31 December 2018 and 2019 in accordance with IFRS 5 (Non-current Assets held for Sale and Discontinued Operations), including all relevant information on the face of the income statement.

Answer 1

i)

Income Statement of Clothing DIvision
	Year Ended (INR)
	2018	2019
Turnover	65,000,000	40,000,000
Extraordinary Item	-	2,000,000
Total	65,000,000	42,000,000
Expenses	50,000,000	32,000,000
Redundancy Expenses	-	1,000,000
Total	50,000,000	33,000,000
Profit Before Tax	15,000,000	9,000,000
Tax Charge	5,000,000	3,000,000
Profit After Tax	10,000,000	6,000,000

ii)

Balance Sheet (extract)	As On
	31/12/18 (INR)
Assets
Non Current Assets	xx
Current Assets	xx
Non-current Assets Classified as Held for Sale	20,000,000
Liabilities
Equity & Liabilities	xx
Non Current Liabilities	xx
Current Liabilities	xx
Liabilities associated with Non-current Assets classified as Held for Sale	4,000,000