Question

Billy’s Burgers (BB) is a franchisor that operates several corporate-owned restaurants as well as several franchised restaurants. The franchisees pay 3% of their sales revenues to BB in return for advertising and support. During the year, BB sold its corporate-owned stores to a franchisee. BB continues to monitor quality in its franchised operations and franchisees must buy all products from it. The corporate-owned stores are not considered a separate major line of business.

Would the sale qualify for discontinued operations treatment?

The sale (would not, would) qualify for discontinued operations treatment under IFRS.

Answer 1

IFRS 5 : Non current asset held for sale and Discountinued Operations

Discontinued Operation is the component of the entity that is sold or held for sale. and which will includes :

• Branches of billys burgers
• business in separate geographical location
• Subsidiary acquired to resell
• Major line of business of billys burgers

A branch or business in seperate geographical location or subsidiary or major line of business will be a Component of Entity when billy burgers can able to prepare financial records like statement of profit or loss, statement of cash flow , revenue , cost of goods etc seperately .

• Here billys burgers will not able to prepare finanical statements seperately for the corporate owned store.
• question clearly specified that corporate owned store is not considered as major line of business of billys burgers.

Therefore the sales of corporate owned store would not qualify for Discountinued Operation treatment under IFRS.