CHAPTER
7
Discontinued
Operation
Prepared by: Jan Stephanie V. Ramos
Discontinued
Operation Under Appendix A of PFRS 5 ;
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.
Is part of a single co-ordinated plan to dispose
of a separate major line of business or
geographical area of operations.
Is a subsidiary acquired exclusively with a view
to resale.
Discontinued
Operation
Accounted for :
Disposal group classified as
held for sale.
Discontinued Operation
Disposal Group
“is a group of assets to be disposed of, by sale or otherwise,
together as a group in a single transaction, and liabilities directly
associated with those assets that will be transferred in the
transaction.”
Discontinued Operation
Classification as Held for Sale
- Carrying amount will be recovered principally through a sale
transaction rather than through continuing use.
The component of an entity must be available
for immediate sale in the present condition and
the sale must be highly probable.
Component of an entity
Subsidiary
Major line of business
Geographical Segment
“Operations and cash flows that can
be clearly distinguished, operationally
and for financial reporting purposes,
from the rest of the entity.”
Assets
Liabilities
Revenue
Expenses
Are directly attributable to
the component.
IF they would be eliminated when the
component is disposed of.
D.O. occurs:
A company eliminates (or will
eliminate)
the
results
of
operations and cash flows of a
component from its ongoing
operations ;
There is no significant continuing
involvement in the component
after disposal.
Timing of Reporting
Entity has
actually
disposed of the
operation
Operation
meets the
criteria to be
classified as
held for sale
PFRS 5, Paragraph 12
Prohibits the retroactive classification
Criteria are met after the end of
reporting period.
Selling by an entity of all its
Selling by a diversified entity of a major
radio operations.
division that represents the entity’s
only activities in the electronics
industry.
Selling by a meat packing entity of
controlling interest in a furniture entity.
A
conglomerate
commodity
is
business,
engaged
real
in
estate,,
manufacturing and construction business.
01
Examples
Not Discontinued Operations
02
Phasing out of product line
within a product group.
Shifting
marketing
of
production
activities
for
or
a
particular line of business from
one location to another.
03
Closing of a facility, factory or
branch to achieve productivity
improvement
saving.
or
other
cost
Income Statement Presentation
PFRS 5,
PARAGRAPH 33,
An entity shall disclose a single amount
a. The amount of revenue, expenses and
comprising the total of the following :
a.
Post-tax
profit
or
loss
Included in
Discontinued Operation
income or loss
of
discontinued operations; and
b. Post-tax gain or loss recognized on the
measurement to fair value less costs to
sell or on the disposal of the assets
constituting the discontinued operation.
b. An impairment loss
FV- cost of disposal < carrying amount
c. Any gain or loss from the actual disposal
of the assets and settlement of the
liabilities
d. The termination cost of employees and
other costs.
PPTtemplate http://www.1ppt.com/moban/
Presentation in the Statement of
Financial Position
PFRS 5,
PARAGRAPH 38,
An entity shall also present separately on
the face of the statement of financial
position the following :
a. Assets of the component held for sale
separately from all other assets.
b. Assets of the component are measured
at the lower of fair value less cost of
disposal and their carrying amount.
c. Liabilities of the component separately
from all other liabilities.
PPTtemplate http://www.1ppt.com/moban/
d. Nondepreciation – noncurrent assets of
the component held for sale shall not be
depreciated.
PFRS 5,
PARAGRAPH 3,
Assets – single amount
Liabilities – single amount
current
assets
current liabilities
Offsetting is
Prohibited.
PFRS 5,
Paragraph 40,
Disposal Group = Held for sale in
the current year
An entity shall not reclassify or represent.
Prior period is not changed.
CASH FLOW PRESENTATION
PFRS 5,
Paragraph 33,
Net
cash
flows
Disclosed in the notes.
Operating
Financing
Investing
SEPARATELY.
THANK YOU