Accounting Online Program Certification Practice Test

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Which division of Anodyne plc could be considered a discontinued operation according to IFRS 5?

  1. Division X

  2. Division Y

  3. Division Z

  4. Activity W

The correct answer is: Division Y

In the context of IFRS 5, which deals with non-current assets held for sale and discontinued operations, a discontinued operation refers to a component of an entity that has been disposed of or is classified as held for sale and represents a separate major line of business. The reason why Division Y could be considered a discontinued operation is likely because it meets the criteria set forth in IFRS 5. This could include factors such as Division Y being sold or planned for sale, having a separate identifiable cash flow, or representing a significant portion of the organization’s operations. For a division to be classified as discontinued, it typically needs to have been a distinct business unit that contributed substantially to the company’s overall revenue and operations. The other divisions or activities mentioned, such as Division X, Division Z, and Activity W, may not meet the specific criteria outlined by IFRS 5. They may still be active lines of business or not significant enough in terms of cash flow and operational independence to warrant classification as discontinued. Therefore, Division Y stands out as it aligns with the definitions and conditions set by the IFRS for identifying discontinued operations.