Non-Current Assets Held for Sale and
Discontinued Operation
Held-for-Sale Classification
In general, the following conditions must be met for an
asset (or disposal group) to be classified as held-for-sale:
 The asset or disposal group is available for
immediate sale in its present condition subject
only to terms that are usual and customary for
sale of such assets or disposal group.
 The sale must be highly probable
Highly Probable:
 Management is committed to a plan to sell
 An active program to locate a buyer is initiated
 The sale is expected to be a “completed sale”
within 1 year from the date of classification as
held for sale with exceptions


The asset is being actively marketed for sale at a
sales price reasonable in relation to its fair value
Actions required to complete the plan indicate
that it is unlikely that plan will be significantly
changed or withdrawn
Assets classified as noncurrent in accordance with PAS 1
shall not be reclassified as current assets until they meet
the criteria to be classified as held for sale in accordance
with PFRS 5. Assets of a class that an entity would
normally regard as noncurrent that are acquired
exclusively with a view to resale shall not be classified as
current unless they meet the criteria to be classified as
held-for-sale in accordance with PFRS 5.
Abandoned Noncurrent Assets
The assets need to be disposed of through sale.
Therefore, operations that are expected to be wound
down or abandoned would not meet the definition (but
may be classified as discontinued once abandoned)
Abandonment means that the noncurrent asset (disposal
group) will be used to the end of its economic life, or the
noncurrent asset (disposal group) will be closed rather
sold.
Disposal Group
A disposal group is a group of assets, possibly with some
associated liabilities, which an entity intends to dispose of
in a single transaction. The measurement basis required
for noncurrent assets classified as held-for-sale to the
group as a whole, and any resulting impairment loss
reduces the carrying amount of the noncurrent assets in
the disposal group in the order of allocation required by
PAS 36.
Measurement
 After classification as held for sale
Noncurrent assets or disposal group that are
classified as held for sale are measured at the
lower of carrying amount and fair value less cost
to sell

Impairment
An impairment loss is recognized in the profit or
loss for any initial and subsequent write-down of
the asset or disposal group to fair value less cost
to sell
If the NCA is a disposal group, impairment loss is
apportioned across the assets. First, to goodwill any
remainder is allocated pro rata to the NCA based on
carrying amount.

Subsequent increases in fair value
A gain for any subsequent increase in fair value
less cost to sell of an asset can be recognized in
the profit or loss to the extent that it is not excess
of the cumulative impairment loss that has been
recognized in accordance with PFRS 5 or
previously in accordance with PAS 36.
Non-depreciation
Noncurrent assets or disposal groups that are classified as
held for sale shall not be depreciated.
Balance Sheet Presentation
Assets classified as held for sale, and the assets and
liabilities included within a disposal group classified as
held for sale, must be presented separately on the face of
the balance sheet.
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An entity shall not reclassify or represent amounts
presented for noncurrent assets or for the assets and
liabilities of disposal groups classified as held-for-sale in
the balance sheets for prior periods to reflect the
classification in the balance sheet for the latest period
presented.
No Retroactive Reclassification
PFRS 5 prohibits the retroactive reclassification as a
discontinued operation, when the discontinued criteria
are met after the balance sheet date.
Change in Classification
Lower of:
a. Carrying amount before the asset was
classified as held for sale adjusted for any depreciation or
amortization that would have been recognized if the
asset had not been classified as held for sale
PRACTICE QUIZZER
b. Recoverable value at the date of the
subsequent decision not to sell
DISCONTINUED OPERATION
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 separate major line of business or
geographical area of operations
 is part of a single coordinated plan to dispose of a
separate major line of business or geographical
area of operations, or
 is a subsidiary acquired exclusively with a view to
resale
A component of an entity comprises operations and cash
flows that can be clearly distinguished, operationally and
for financial reporting purposes, from the rest of the
entity. In other words, a component of an entity will have
been a cash generating unit or a group of cash generating
units while being held for use.
Income Statement Presentation
The sum of the post-tax profit or loss of the discontinued
operation and the post-tax gain or loss recognized on the
measurement to FV less cost to sell or FV adjustments on
the disposal of the assets (or disposal group) should be
presented as a single amount on the face of the income
statement.
Detailed disclosure of revenue, expenses, pre-tax profit or
loss, and related income taxes is required in either in the
notes or on the face of the income statement in a section
distinct from continuing operations. Such detailed
disclosures must cover both the current and all prior
periods presented in the financial statements.
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1. It 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
a. disposal group
b. noncurrent asset
c. discontinued operation
d. cash generating unit
2. An entity shall classify a noncurrent asset or disposal
group as “held for sale” when
a. the carrying amount of the asset or disposal
group will be recovered through continuing use
b. the carrying amount of the asset or disposal
group will be recovered through a sale
transaction
c. the carrying amount of the asset or disposal
group is to be abandoned
d. the carrying amount of the asset or disposal
group is idle or retired from active use
3. Noncurrent asset or disposal group is classified as “held
for sale” when the asset is available for immediate sale in
its present condition and the sale is highly probable. For
the sale to be highly probable, all of the following should
be considered, except
a.
b.
c.
d.
management must be committed to a plan to sell
the asset
an active program to locate a buyer and complete
the plan must have been initiated
the asset must be actively marketed for sale at a
reasonable price in relation to its current fair
value
The sale is expected to be a “completed sale”
within 2 years from the date of classification as
held for sale
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4. An entity shall measure a NCA or disposal group as held
for sale at
a. Carrying amount
b. FV less cost of disposal
c. Lower between A and B
d. Higher between A and B
5. Which of the following statements is incorrect
concerning presentation of NCA or disposal group
classified as held for sale?
a. An entity shall present a NCA held for sale and
the assets of a disposal group classified as held
for sale separately from other assets
b. The liabilities of a disposal group classified as held
for sale shall be presented from other liabilities.
c. The assets and liabilities of a disposal group
classified as held for sale shall not be offset as a
single amount
d. An entity shall depreciate a NCA classified as held
for sale or while it is part of a disposal group
classified as held for sale
6. An entity is planning to dispose a collection of
assets. The entity designates these assets as a
disposal group. The carrying amount of these
assets immediately before classification as held
for sale was P20M. Upon being classified as held
for sale, the assets were revalued to P18M. The
entity feels that it would cost P1M to sell the
disposal group. How would the reduction in the
value of the assets on classification as held for
sale be treated in the financial statements?
a. The entity recognizes an impairment loss of P3M
b. The entity recognizes an impairment loss of P2M
c. The entity recognizes a loss of P3M immediately
before classifying the disposal group as held for
sale.
d. The entity recognizes a loss of P2M immediately
before classification as held for sale and then,
recognizes an impairment loss of P1M.
7. If the fair value less cost of disposal is higher than the
carrying amount of a noncurrent asset classified as held
for sale, the difference is
a. Not accounted for.
b. Accounted for as an impairment loss.
c. Charged to depreciation.
d. Credited to retained.
8. Which of the following is not required for a
component’s results to be classified as discontinued
operation?
a. Management must have entered into a sale
agreement.
b. The component is available for immediate sale.
c. The operations and cash flows of the component
will be eliminated from the operations of the
entity as a result of the disposal.
d. The entity will not have any significant continuing
involvement in the operations of the component
after disposal.
9. The income or loss from discontinued operation should
be reported as
a. A prior period error
b. other income or other expense
c. An amount after income from continuing
operations and before net income
d. A bulk sale of plant assets included in income
from continuing operations
10. When a component of a business has been
discontinued during the year, this component’s operating
losses of the current period should be included in the
a. Income statement as part of revenues and
expenses.
b. Income statement as part of the loss on
disposal of the discontinued component.
c. Income statement as part of the income (loss)
from continuing operations.
d. Retained earnings statement as a direct
decrease in retained earnings.
11. When a component of a business has been
discontinued during the year, the loss on disposal should
a. Include operating losses of the current period.
b. Exclude operating losses during the period.
c. Be an extraordinary item.
d. Be an operating item.
12. On January 1, year 2, Shine Co. agreed to sell a
business component on March 1, year 2. The gain on the
disposal should be
a. Presented as an extraordinary gain.
b. Presented as an adjustment to retained
earnings.
c. Netted with the loss from operations of the
component as a part of discontinued
operations.
d. None of the above.
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13. A component of an entity is classified as discontinued
operation at the date
I. When the entity has actually disposed of the
operation
II. When the operation meets the criteria to be
classified as “held for sale”
a. I only
b. II only
c. Either I or II
d. Neither I nor II
14. PFRS requires that a single amount be disclosed
within the income statement for
a. The post-tax profit or loss on discontinued
operation and the pre-tax gain or loss on the
disposal of discontinued operation assets
b. The pre tax profit or loss on discontinued
operation and the post tax gain or loss on the
disposal of discontinued operation assets
c. The pre tax profit or loss on discontinued
operation and the pre tax gain or loss on
disposal of discontinued operation assets
d. The post tax profit or loss on discontinued
operation and the post tax gain or loss on the
disposal of discontinued operation assets
15. Which of the following statements in relation to
discontinued operations is TRUE?
a. Discontinued operations are shown as the last
category after income from continuing
operations
b. The discontinued operations consist only of
the gain or loss on disposal of the discontinued
component net of tax
c. The discontinued operations consist only of
the income or loss from operating the
discontinued component net of tax
d. The discontinued operations consist of the
income or loss from operating the
discontinued component net of
tax as
well as the gain or loss on disposal of
discontinued component net of tax
16. Which of the following is an example of discontinued
operation?
a. Phasing out of product line within a product
group
b. Shifting of production or marketing activities for
particular line of business from one location to
another
c. Closing of a facility, factory or branch to achieve
productivity improvement or other cost saving
d. Selling by a communications entity of all of its
radio stations. The entity’s remaining activities are
television stations and a publishing house
17. All of the following are examples of discontinued
operation, except
a. Selling by a diversified entity of a major division
that represents the entity’s only activities in the
electronics industry
b. Selling by a meat packing entity of controlling
interest in a furniture entity. All other operations of
the entity are in the meat packing business
c. A conglomerate is engaged in commodity business,
real estate, manufacturing and construction
business. The entity decides to sell its commodity
business.
d. Shifting of production or marketing activities for a
particular line of business from one location to
another.
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