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6PFRS 5- nca-held-for-sale amp discontinued operations
BS accountancy (University of Cebu)
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Chapter 4
Non-current Assets Held for Sale and Discontinued
Operations
NAME:
Professor:
Section:
Date:
Score:
QUIZ 1:
1. If a noncurrent asset is sold after the end of the reporting period but before the financial
statements are authorized for issue, that asset is classified as current asset in the statement of
financial position.
2. PFRS 5 Non-current Assets Held for Sale and Discontinued Operations applies only to noncurrent
assets. Current assets are outside the scope of this standard.
3. According to PFRS 5, a non-current asset (or disposal group) is classified as held for sale if its
carrying amount will be recovered principally through continuing use rather than through a sale
transaction.
4. For purposes of applying the provisions of PFRS 5, an exchange transaction with commercial
substance may be treated as a sale.
5. Noncurrent assets classified as held for sale in accordance with PFRS 5 are measured at fair
value less costs to sell.
6. The assets and liabilities of a disposal group shall be offset and the net amount is presented as
either asset or liability.
7. Investment properties measured under the fair value model are within the scope of PFRS 5.
8. Property, plant and equipment measured under the revaluation model are within the scope of
PFRS 5.
9. “Highly probable” means more likely than not.
10. Meeting the criteria for held for sale classification after the balance sheet date but before the
financial statements are authorized for issue is a non-adjusting event after the reporting period.
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ANSWERS TO QUIZ 1:
1. FALSE
6.
2. TRUE
7.
3. FALSE
8.
4. TRUE
9.
5. FALSE
10.
FALSE
FALSE
TRUE
FALSE
TRUE
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NAME:
Professor:
Section:
Date:
Score:
QUIZ 2:
1. Non-current assets are presented as current items in the statement of financial position
a. only when they are expected to be sold within 12 months from the end of reporting period.
b. only if they are actually sold after the reporting period but before the date of authorization of
the financial statements for issue.
c. only when they qualify as held for sale assets under PFRS 5.
d. never presented as current items.
2. A noncurrent asset classified as held for sale in accordance with PFRS 5 has not been sold after a
year. The asset shall continue to be presented as held for sale under PFRS 5 if
a. the delay is due to events beyond the entity’s control
b. the entity remains committed to its plan to sell the asset
c. the noncurrent asset is actually sold after the reporting period but before the financial
statements were authorized for issue.
d. a and b
3. Which of the following statements is true regarding the accounting treatment of costs to sell
under PFRS 5?
a. Costs to sell are added to the fair value when determining the measurement basis for an
asset held for sale
b. Costs to sell are never discounted because held for sale assets should be sold within one year
c. Costs to sell are discounted if it is expected that the sale will be made beyond one year.
d. a and c
4. According to PFRS 5, gains and losses on remeasurement of assets held for sale are
a. recognized in profit or loss
b. recognized in other comprehensive income
c. recognized only for impairment losses
d. not recognized
5. Which of the following is included in profit from continuing operations?
a. extraordinary items
c. other comprehensive income
b. discontinued operations
d. income tax expense
Use the following information for the next two questions:
VISAGE APPEARANCE Co. is committed to a plan to sell its headquarters building and has
initiated actions to locate a buyer. As of this date, the building has a carrying amount of ₱5,000,000, a
fair value of ₱6,000,000 and estimated costs to sell of ₱200,000.
6. VISAGE Co. has an intention to transfer ownership of a building to a buyer after it vacates the
building. How should VISAGE Co. classify the headquarters building?
a. Included under property, plant and equipment at ₱5,000,000.
b. Included under property, plant and equipment at ₱5,800,000.
c. Classified as held for sale at ₱5,000,000
d. Classified as held for sale at ₱5,800,000
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7. VISAGE Co. will continue to use the building until the construction of a new headquarters is
completed. How should VISAGE Co. classify the headquarters building?
a. Included under property, plant and equipment at ₱5,000,000.
b. Included under property, plant and equipment at ₱5,800,000.
c. Classified as held for sale at ₱5,000,000
d. Classified as held for sale at ₱5,800,000
8. PERAMBULATE STROLL Co. is a commercial leasing and finance company. As of year-end,
PERAMBULATE holds equipment that is available either for sale or lease. PERAMBULATE is
not yet decided whether to sell or to lease the equipment. The equipment has a carrying amount
of ₱1,000,000, fair value of ₱1,200,000 and costs to sell of ₱50,000. How should PERAMBULATE
Co. classify the equipment?
a. Inventory, ₱1,000,000
c. Held for sale, ₱1,150,000
b. Investment property, ₱1,250,000 d. Held for sale, ₱1,000,000
9. In Baer Food Co.’s 20x3 single-step income statement, the section titled “Revenues” consisted of
the following:
Net sales revenue
Results from discontinued operations:
Loss from discontinued component Z including loss on disposal of ₱1,200
Less: Tax benefit
Interest revenue
Gain on sale of equipment
Cumulative change in 20x1 and 20x2 income due to change in
depreciation method (net of ₱750 tax effect)
Total revenues
187,000
16,400
4,000
(12,400)
10,200
4,700
1,500
191,000
In the revenues section of the 20x3 income statement, Baer Food should have reported total revenues
of
a. 197,200
b. 215,400
c. 203,700
d. 201,900
10. During 20x4, Lopez Corporation disposed of Pine Division, a major component of its business.
Lopez realized a gain of ₱500,000, net of taxes, on the sale of Pine's assets. Pine's operating
losses, net of taxes, were ₱600,000 in 2004. How should these facts be reported in Lopez's
income statement for 2004?
Total Amount to be Included in
Income from
Results of
Continuing Operations
Discontinued Operations
a.
600,000 loss
500,000 gain
b.
100,000 loss
0
c.
0
100,000 loss
d.
500,000 gain
600,000 loss
“A fool shows his annoyance at once, but a prudent man overlooks an insult.” (Proverbs 12:16)
- END
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SOLUTIONS TO QUIZ 2:
1.
2.
3.
4.
5.
6.
7.
8.
C
D
C
A
D
C 5,000,000 lower of carrying amount and fair value less costs sell
A – not available for immediate sale in its present condition
A – Sale is not highly probable
A
Solution:
9.
187,00
0
10,20
0
197,200
Net sales revenue
Interest revenue
Adjusted total revenues
10. C (600,000 loss – 500,000 gain) = 100,000 loss
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