LApple, Basil, and Limon Pc specialize in producing luxury candles and perfume. You are the Finance Director at the company. Your team is currently preparing the draft consolidated financial statements for the year ending 30 September 2019. Your accounts junior is unsure about how to treat some transactions and has asked you for guidance. The background to the transactions concerned is given below:
The directors at Apple, MAX, and Limon Pc decided to close one segment of the business. This decision was taken on 31 August 2019 because the directors wanted to change direction and this segment no longer fits in the strategic plan of the company. The closure of the segment started on 6 October 2019 with the view to be completed by 31 December 2019.
The employees who were likely to be impacted by this course of action were informed of voluntary redundancy and notified on 6 September 2019.
Negotiations started with relevant stakeholders in regard to terminating current contracts related to the business segment and for the arrangement of the sale of assets.
The latest costing associated with the closure are: Redundancy cost amounts to £40 million Costs of redeploying and retraining staff who refuse the voluntary redundancy package equates to £8 million.
The site has a net book value of £10 million but the agreed sale price is £3 million. The operating losses of the business for the last quarter 2019 amounted to £8 million
Your accounts junior is not sure which of the above transactions should be treated as a liability and is also unsure whether or not the segment that is due to close needs to be shown separately in the financial statements.
Required
Explain to your accounts junior how the business segment, that is due to be closed, should be reported in the financial statements of Apple, MAX and Limon Ple for its year end 30 September 2019.