Chapter 11 Noncurrent Asset held for sale and Discounted operations

What comprises the discontinued operation if it is presented as a single amount in the statement of comprehensive income?

I – The profit or loss of discontinued operation

II – The gain or loss recognized on the measurement to fair value less costs to sell or on the disposal of the asset constituting the discontinued operation

Both I and II

Which of the following is correct regarding the measurement of a non-current asset classified as held for sale?

It is measured at the lower of its carrying amount and fair value less costs to sell.

Which of the following is correct with regards the reversal of impairment loss for noncurrent asset held for sale?

The gain on reversal of impairment loss is allowed but not in excess of any impairment loss previously recognized

ABC Company has an equipment amounting to P365,000 on January 1, 20x2. ABC decided to reclassify the equipment as held for sale on that date. The fair value was P200,000, the cost of disposal was P10,000 and the value in use was P250,000. ABC Company uses cost method in measuring the equipment. The carrying amount of noncurrent asset held for sale on the date of reclassification is.

P190,000

ABC Company has an equipment amounting to P365,000 on January 1, 20x2. ABC decided to reclassify the equipment as held for sale on that date. The fair value was P200,000, the cost of disposal was P10,000 and the value in use was P250,000. ABC Company uses cost method in measuring the equipment. The impairment loss to be recognized on the date of reclassification is

The difference between the carrying amount of an equipment and the fair value less cost of disposal

An entity is preparing its financial statements. It has a non-current asset held for sale. Which of the following disclosures is not a requirement under PFRS 5?

The identity of the prospective buyer.

ABC Company has an equipment with a carrying amount of P365,000 on January 1, 20x2. ABC decided to reclassify the equipment as held for sale on June 30 20x2. On the date of reclassification the fair value of the equipment was P400,000 and the cost of disposal was P10,000. ABC Company uses revaluation model in measuring the equipment. The carrying amount of noncurrent asset held for sale on the date of reclassification is.

P390,000

Which of the following statement is correct in the presentation of comparative amounts of discontinued operation in the statement of comprehensive income?

Amounts of profit or loss for the prior periods shall be restated in the current year to separately show the income and expense arising from the component of an entity that was discontinued in the current year.

A company is marketing an asset for sale, and the sale is considered highly probable. However, due to a sudden and significant economic downturn, the sale is delayed beyond the initial 12-month period. Management remains committed to the sale. How should the asset be treated in the financial statements?

The asset remains classified as "held for sale" and is continuously re-measured.

The analysis of the single amount of the profit or loss from discontinued operation may be presented in the

Notes or in the statement of comprehensive income

Which of the following statement is correct in the presentation of comparative amount of discontinued operation in the statement of financial position?

Assets and liabilities related to discontinued operation for the prior period shall not be restated to reflect the classification in the statement of financial position for the latest period presented.

ABC company decides to sell its machinery currently being used in its production process. ABC company was able to identify a buyer and agreed to sell the item once the prefabricated parts and the commission to construct the new machinery as a replacement will be completed.

The machinery cannot be considered as held for sale.

The disclosures of the net cash flows attributable to the operating, investing and financing activities of discontinued operations may be presented

Either in the notes or in the financial statements

Profit or loss from a discontinued operation should be presented in the statement of comprehensive income:

As a separate line item below profit or loss from continuing operations.

Noncurrent asset held for sale will be measured at

Lower of its carrying amount and fair value less costs to sell

An asset is classified as held for sale on March 31, 20x1. The company's financial year ends on December 31. The sale is not completed until June 30, 20x2. What is the correct accounting treatment for the asset during the period from March 31, 20x1, to June 30, 20x2?

The asset is not depreciated from March 31, 20x1, to June 30, 20x2.

If an asset with a useful life of more than five years but will be recovered principally through a sale transaction rather than through continuing use will be classified as

Current asset

ABC Company has an equipment amounting to P365,000 on January 1, 20x2. ABC decided to reclassify the equipment as held for sale on that date. The fair value was P400,000 and the cost of disposal was P10,000. ABC Company uses revaluation model in measuring the equipment. The impairment loss to be recognized on the date of reclassification is

The cost of disposal

ABS company decides to sell a disposal group to TV9 due to lack of franchise to operate. The sale requires the approval from Securities and Exchange Commission. After one year, the SEC did not issue yet its final decision even though the TV9 already expresses its firm commitment to purchase and the sale is highly probable within one year.

The disposal group is still classified as held for sale even the one-year period already elapsed

Which of the following is correct in the presentation of profit or loss from discontinued operations in the statement of comprehensive income?

Profit or loss from continuing operation and discontinued operations is presented separately in the statement of comprehensive income.

In the statement of financial position, how should the assets and liabilities of a disposal group classified as held for sale be presented?

They are presented as a single line item for assets and a single line item for liabilities.

A component of an entity that either has been disposed of or is classified as held for sale and represents a separate major line of business or geographical area of operations.

Discontinued operation

Which of the following scenarios would most likely preclude the classification of a non-current asset as "held for sale" under PFRS 5?

The entity is currently using the asset in its operations, but plans to sell it at the end of its useful life.

A company has a disposal group with a carrying amount of P5,000,000. Its fair value less costs to sell is P4,700,000. The impairment loss of P300,000 should be recognized in:

Profit or loss

The difference between the carrying amount and fair value less cost to sell of an equipment classified as held for sale is

Impairment loss

How is the non-current asset classified as held for sale and the assets of a disposal group and its related liabilities be presented in the statement of financial position?

They are presented separately from other accounts as current assets and liabilities respectively.

A non-current asset is classified as "held for distribution to owners" under PFRS 5. How should this asset be measured?

At the lower of its carrying amount and fair value less costs to distribute.

More likely than not

Probable

When a non-current asset is classified as held for sale, which of the following accounting treatments ceases immediately?

Depreciation

A company plans to abandon a major production plant. This plant constitutes a discontinued operation. Under what circumstance would the plant be classified as a "non-current asset held for sale"?

The plant is to be abandoned, so it cannot be classified as held for sale.

Which of the following noncurrent asset whose carrying amount will be recovered principally through sale rather than continuing use.

I – Noncurrent asset held for sale

I – Noncurrent asset that is to be abandoned

I only

The following provides an evidence that the management is committed to a plan to sell the asset (or disposal group) and must reclassify the asset to noncurrent asset held for sale, except

The asset or disposal group has been actively marketed for sale at a price higher than its current fair value

A company reclassified a non-current asset as "held for sale" and recognized an impairment loss. In a subsequent period, the fair value less costs to sell of the asset increased above its original carrying amount. What is the maximum gain that can be recognized?

The amount of the previously recognized impairment loss.

Which of the following is statement is correct in the treatment of assets and liabilities related to noncurrent held for sale and disposal group?

The assets and liabilities shall not be offset and presented as a single amount

A company classified a major product line as a discontinued operation on December 31, 20x1. Which of the following is the most appropriate presentation for this discontinued operation in the 20x1 financial statements?

The results of the discontinued operation are presented as a single line item, "Profit/Loss from discontinued operations," after profit from continuing operations.

A company has a discontinued operation. The analysis of the single amount of profit or loss from this operation may be presented in:

Either the notes or in the statement of comprehensive income.

These are operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, form the rest of the entity

Component of an entity

If a noncurrent asset held for sale ceases to be recovered through sale transaction and will be reclassified back to noncurrent asset, the measurement of such asset is

Lower between the carrying amount before the asset was classified as held for sale adjusted for any depreciation or revaluation as if It has not been reclassified as held for sale and its recoverable amount at the date of subsequent decision not to

A discontinued operation is a component of an entity that either has been disposed of or is classified as held for sale and:

Represents a major line of business or geographical area of operations.

The presentation of profit or loss of discontinued operation and gain or loss on the measurement to fair value less costs to sell or on the disposal of the assets or disposal group constituting the discontinued operation must be.

After tax for both instances