Wilder decided to close one of its overseas branches. A board meeting was held on 20 November
Question:
Wilder decided to close one of its overseas branches. A board meeting was held on 20 November x4 where a detailed formal plan was presented to the board. The plan was formalized and accepted at that meeting. Meetings were held by management to determine the issues involved in the closure. Subsequently, letters were sent to the customers, suppliers and staff on 10 December x4. The estimated cost of restructuring was RM10 million, including staff retraining of RM1 million. The company wished to provide for the restructuring cost in the financial statements for the year ended 31 December x4. The plan was implemented in February x5.
Additionally, the operating lease on the present building is non- cancellable and runs for another three years. The annual rental is RM200,000, payable in advance and the lessor has offered to take a single payment of RM450,000 on 1 January x6 to settle the outstanding amount owing and terminate the lease on that date. The lessor has agreed to allow Wilder to sub-let the building at a rental of RM120,000 per year, payable in advance on 1 January x5.
The company needs advice on how to treat the above under FRS 137.
Intermediate Accounting IFRS
ISBN: 978-1119372936
3rd edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield