Eastern Cape Fashions Ltd is a fashion retailer with stores in three different zones - Port Elizabeth, Umtata and Queenstown. Their Queenstown store has made a loss for the last two consecutive years. On 30 September 2019 a detailed plan to discontinue the Queenstown store operations was approved by the board of directors and a public announcement was made. The plan involved the once off sale of assets and liabilities.

On 31 March 2020 there was no realistic opportunity for withdrawal of the sale arrangements and a binding sale was concluded. It is expected that the plan for discontinuance of the Queenstown store will be completed by the 31 August 2020. Eastern Cape Fashions Ltd has a 30 June financial year end.

Extract from the statement of financial position at 30 June 2020:

Queenstown (R's) Port Elizabeth and Umtata (R's)

Property, plant and equipment 8 000 000 40 000 000

Current assets 1 600 000 8 000 000

Longterm liabilities 3 600 000 7 000 000

Current liabilities 2 400 000 3 000 000

Extract of performance for continuing operations for the period ended 30 June 2020:

2020 2020 2019

Port Elizabeth (R's) Umtata (R's) Port Elizabeth and Umtata (R's)

Revenue 32 000 000 20 000 000 50 000 000

Cost of sales 14 400 000 9 600 000 20 000 000

Other expenses. 12 000 000 5 200 000 18 000 000

Extract of performance for discontinuing operations for the period ended 30 June 2020:

2020 2019

Revenue 7 900 000 6 400 000

Cost of sales 5 000 000 5 800 000

Other expenses 4 800 000 1 100 000

Cost of discontinuance:

2020 (R's)

Provision for direct costs of discontinuance (tax deductible) 132 000

Severance pay paid to employees (not tax deductible) 560 000

Fines paid due to cancellation of contracts ( not tax deductible) 120 000

Other Information for the year ended 30 June 2020:

2020 (R's) 2019 (R's)

Finance costs (continuing operations) 600 000 420 000

Additional information:

• The Queenstown store was closed on 30 June 2020.
• The assets and liabilities of the Queenstown store meet all the criteria to be classified as a
• disposal group.
• On 31 March 2020 the fair value less costs to sell the disposal group was R2 300 000.
• There is no difference between the tax base and the carrying amount of the property, plant
• and equipment.
• There are no temporary differences other than those evident from the question.
• Assume the tax rate is 28% for all the periods presented.

Required:

Q.3.1

Prepare the statement of profit and loss and other comprehensive income of Eastern Cape Fashions Ltd for the year ended 30 June 2020 according to the requirements of IFRS 5, Noncurrent assets held for sale, and discontinued operations.

Accounting policy notesare notrequired.

Comparative figuresarerequired.

Show all workings as marks will be allocated. (40)

Q.3.2

Prepare the tax expense note as it would appear in the notes to the financial statements of Eastern Cape Fashions Ltd for the year ended 30 June 2020.

Comparative figuresarerequired. (10)

Q.3.3

Prepare the note of noncurrent assets held for sale for the year ended 30 June 2020 according to the requirements of IFRS 5, Noncurrent assets held for sale, and discontinued operations. (10)