Question

On 31st December, 2017, Brooks Co. decided
to end operations and dispose of its assets within
three months. At 31st December, 2017, the net
realisable value
value of the equipment was below
historical cost. What is the appropriate measurement
basis for equipment included in Books' 31st
December, 2017 balance sheet?

(a) Historical cost
(b) Current reproduction cost
(c) Net realisable value
(d) Current replacement cost
​

Answer 1

The appropriate measurement basis is the Net realisable value.

• The codification offers guidelines on the accurate assessment of a company component's benefit or loss on proper disposal.
• Such evident determination must be focused towards reasonable estimates of key component's net realisable value. As Brooks plans to discontinue its operations, the realisable value is the suitable calculation basis for its equipment.
• All other costs, after an enterprise has chosen to discontinue its activities, are unsuitable calculation bases for assets as those sums do not represent the possible future gain of the entity, which is a function of assets