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Pluto Ltd. TEMPORARILY STOPS USING a manufacturing plant on 30 September because demand has declined, but the plant is MAINTAINED in workable condition for future use. The accountant classified the plant as HELD FOR SALE under Ind AS 105 (lower of carrying amount and FV less costs to sell), and STOPPED CHARGING depreciation. Under Ind AS:
ACorrect — depreciation stops automatically when an asset is not in use
BINCORRECT — the plant is NOT held for sale (no commitment to sell, not actively marketed). It must continue to be presented as PPE, with DEPRECIATION CONTINUING under Ind AS 16, until impairment indicators trigger impairment testing under Ind AS 36
CCorrect — any temporary idle status triggers held-for-sale classification
DIncorrect — but only because the held-for-sale classification needs board approval first
Answer & Solution
Correct answer: B. INCORRECT — the plant is NOT held for sale (no commitment to sell, not actively marketed). It must continue to be presented as PPE, with DEPRECIATION CONTINUING under Ind AS 16, until impairment indicators trigger impairment testing under Ind AS 36
Ind AS 105 para 6-8 — for held-for-sale classification, recovery must be principally through SALE (not future use), the asset must be AVAILABLE FOR IMMEDIATE SALE, sale must be HIGHLY PROBABLE (committed plan + active programme to find a buyer + active marketing + expected completion within 12 months). Temporary idling for future use FAILS these criteria. The plant remains PPE; Ind AS 16 requires continuing depreciation; impairment is tested when indicators (e.g., reduced expected cash flows) emerge.
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