NON-CURRENT ASSET HELD FOR SALE AND DISCONTINUED OPERATION

1. On June 30, 2021, a company classified one of its non-current assets with carrying
amount of P2,500,000, as held for sale. The remaining carrying amount of the said asset
was five years. The company expected to sell the asset at P2,250,000 with expected cost
to sell of P150,000. On December 31, 2021, the asset had not yet been sold. However, the
company was still committed to sell the asset and the sale was still considered to be
highly probable. On that date, the company expected that the selling price would be
P2,750,000 with related cost to sell of P150,000. What amount of gain shall be
recognized on December 31, 2021?
a. P151,500
b. P350,000
c. P400,000
d. P5000,000

2. A company decided to sell one of its buildings and classified the same as held-for-sale.

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The sale was highly probable and was expected to be consummated within six months.
Details of the building and the sale were as follows:

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Cost P4,000,000
Accumulated depreciation 3,000,000
Fair value
Cost to dispose
2,250,000
375,000
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The building was sold after the end of the reporting period for P2,300,000, after incurring
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P325,000 disposal cost.

At what amount should the asset be measured on the company’s statement of financial
position at the end of the reporting period?
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a. P2,500,000
b. P2,250,000
c. P2,000,000
d. P1,875,000
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3. How was the profit (before income tax) during the year of sale be affected?
a. No effect.
b. Decrease of P2,500.
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c. Increase of P50,000.
d. Increase of P100,000.

4. On January 1, 2020, a company classified its hotel as non-current asset held for sale.
Immediately before the classification as held for sale, the carrying amount of the hotel
was P400,000,000 (cost of P500,000,000 and accumulated depreciation of
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P100,000,000). The hotel was depreciated using the straight-line method with a useful
life of 50 years. The estimate of the fair value less cost to sell on this date was
P350,000,000.

On January 1, 2021, no buyer could be identified. On this date, the company management
concluded that the criteria for classification could no longer be met. The estimate of the
fair value less cost to sell was revised to P340,000,000 while the value in use at that time
was estimated at P380,000,000.

What amount of impairment loss should the company recognize at the date the asset was
classified as held for sale?
a. P50,000,000
b. P100,000,000
c. P150,000,000
 d. P0

5. How much should be taken to profit or loss on the date the asset was reclassified back to
asset held for use?
a. P30,000,000
b. P50,000,000
c. P100,000,000
d. P0

6. How much was the depreciation expense in 2021 after the asset was reclassified back to
asset held for use?
a. P10,000,000
b. P8,974,359
c. P8,717,949
d. P9,743,590

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7. A company presented the following items on its Statement of comprehensive income.

ie
Revenues P400,000
Income from continuing operations 50,000
Net income 45,000
Income from operations
Selling and admin expenses
Income before income tax ev
110,000
250,000
100,000
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Determine the result of the discontinued operations.
a. P10,000 loss
b. P40,000 income
c. P50,000 income
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d. P5,000 loss

8. A company had two business segments: Segment A and Segment B. Segment A’s
business operation is continuing. On January 1, 2021, Segment B met the criteria to be
classified as held-for-sale. The board of directors was able to dispose segment B on
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September 1, 2021. Net proceeds from the sale were P9,000,000 while the segments’
carrying value on September 1, 2021, was P15,000,000. The following pertains to the
results of the operations of Segment A & B during 2021:
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Segment A Segment B
1/1/21 - 12/31/21 1/1/21 - 8/31/21
Revenues 72,000,000 3,000,000
Expenses 45,000,000 7,500,000
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The 2021 income tax rate was 30%.

How much shall be presented as loss from discontinued operations on the statement of
comprehensive income for the year ended December 31, 2021?
a. P1,800,000
b. P1,350,000
c. P7,350,000
d. P10,500,000

9. How much shall be presented as profit/loss on the statement of comprehensive income

10. Which of the following statements is true for non-current assets held for sale?
a. The asset must be measured at the lower of carrying amount and fair value.
b. Depreciation on the asset shall continue.
c. The asset must be presented separately in the statement of financial position.
d. All of the above statements are not correct.

11. Which of the following assets will be accounted for using IFRS 5 if they are classified as
held for sale (criteria of a highly probable sale were met)?
a. Land as investment property measured using the fair value model.
b. Mango trees classified as bearer plants, measured using the cost model.
c. Plan assets arising from employee benefits.
d. Investments at fair value through other comprehensive income.

12. Using IFRS 5, for the sale to be highly probable, one of the criteria is that the sale should

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be expected to qualify for recognition as a completed sale
a. within one year from the end of the reporting period.

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b. within one year from the date of classification of the noncurrent asset as held for sale.
c. within three months from the end of the reporting period.
d. within three months from the date of classification of the noncurrent asset as held for
sale.

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13. When an entity acquires a non-current asset exclusively with a view to its subsequent
disposal, it shall classify the non-current asset (or disposal group) as held for sale at the
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acquisition date only if the one-year requirement is met and it is highly probable that any
other criteria that are not met at that date will be met
a. within one year following the acquisition.
b. within three months following the acquisition.
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c. within one year after the end of the reporting period.

14. 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 is recovered through a sale.
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b. the carrying amount of the asset or disposal group is recovered through continuing
use.
c. the noncurrent asset or disposal group is to be abandoned.
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d. the noncurrent asset or disposal group is idle or retired from active use.

15. Any gain or loss on the remeasurement of a non-current asset (or disposal group)
classified as held for sale that does not meet the definition of a discontinued operation
a. shall be included in profit or loss from continuing operations.
b. shall be included in the income or loss from discontinued operations.
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c. shall be reported in the notes to financial statements.

END OF HANDOUT