The correct answer is: B. Profit or loss as a financing cost
The costs to sell are the incremental costs directly attributable to the disposal of an asset, excluding finance costs. When the sale is expected to occur beyond one year, the entity shall measure the costs to sell at their present value. Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost.
Explanation of each option:
- A. Capital Reserve A/c
A capital reserve is a reserve that is created when an entity receives a capital contribution from its owners. It is not used to offset expenses or losses, but rather to increase the entity’s equity.
- B. Profit or loss as a financing cost
A financing cost is an expense that is incurred by an entity in connection with the raising of finance. It includes interest expense, debt issue costs, and finance lease payments.
- C. General Reserve A/c
A general reserve is a reserve that is created by an entity to meet any unforeseen circumstances. It is not used to offset expenses or losses, but rather to provide a buffer against unexpected events.
- D. None of the above
This option is not correct because the increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost.