Reference no: EM132660652

Today is January 3, 2021. On December 31, 2020, the board of directors of Mellew Limited ("Mellew"), a company using IFRS, approved a plan to sell the company's clothing division. The clothing division meets the definition of a "component" of Mellew, and the assets and liabilities of the clothing division meet the criteria of "held for sale."

• The company reviewed the property, plant and equipment associated with the clothing division and determined that their fair value less costs to sell is $108 million compared to a net book value of $125 million. As well, future losses of $32 million are expected to be incurred in fulfilling the contract obligations up to November 30, 2021, after which time an actual disposal is expected to occur.

• The clothing division had incurred before-tax operating losses of $62 million in 2020 and $50 million in 2019.

• In addition, during 2019, the company's management sold a parcel of land near the corporate head office. The land was sold for $160 million and had a carrying value of $150 million.

• Assume that earnings from all other sources were part of "Operating Income" (before income tax) and they amounted to $339 million in 2019 and $170 million in 2020. These foregoing amounts do not include any amounts pertaining to the clothing division, which is a discontinued operation, nor does it include the transaction pertaining to the sale of land, which is non-Operating income.

• Separately, in 2019, Mellew incurred $6 million of other comprehensive loss before income taxes. This other comprehensive loss relates to certain investments that the company holds and records at fair value.

• The applicable tax rate is Mellew's average income tax rate of 30%.

Required:

Problem 1: Prepare the comprehensive income statement for Mellew for 2020, beginning with "Operating Income" (i.e. the $339 million and the $170 million above). Also show the comparative amounts for 2019. Your first column of amounts should be 2020 and the second column should be 2019. Ignore earnings per share computations.