UNIVERSITY OF PERPETUAL HELP SYSTEM DALTA

CALAMBA CAMPUS, BRGY. PACIANO RIZAL,

CALAMBA CITY, LAGUNA, PHILIPPINES

Chapter 27: PFRS 5 Non-Current Assets Held For Sale
Financial Accounting
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Decommissioning liability
IFRIC 1 defines decommissioning liability as an obligation to
dismantle remove and restore an item of property plant and
equipment as required by law or contract. The
decommissioning liability is capitalized as cost of the
property and initially recognized at present value
Change in decommissioning liability
a. A decrease in decommissioning liability is deducted
from the cost of the asset
b. An increase in decommissioning liability is added to the
cost at the asset
Distribution of noncash asset to owners
The distribution of noncash asset to owners is actually
payment of property dividend to shareholders. IFRIC 17
paragraph 11 provides that an entity shall measure a
liability to distribute noncash asset as a dividend to its
owners at the fair value of the asset to be distributed.
EDMUND E. HILARIO, CPA, MBA
1stSEMESTER 2019 – 2020
instrument issued shall be recognized as gain or loss on
extinguishment. The gain or loss on extinguishment shall
be reported as a separate line item in the income statement
Member’s shares in cooperative entities
Member’s shares in cooperative entities may be classified as
equity or liability depending on the terms and conditions of
the financial instrument. Member’s shares in cooperative
entities are classified as equity if the members did not have
a right to request for redemption under either of the
following conditions
a. If the entity has an unconditional right to refuse
redemption of the member’s shares
b. If redemption is unconditionally prohibited by law
regulation or the entity’s charter

The dividend payable is initially recognized at the fair value

of the noncash asset on date of declaration and is increased
or decreased as a result of the change in fair value of the
asset at year end and date of settlement. The offsetting
debit or credit is through equity or directly retained
earnings.

Settlement of dividend payable

IFRIC 17 paragraph 14 provides that when an entity settles
the dividend payable the difference between the carrying
amount of the dividend payable and the carrying amount of
the asset distributed shall be recognized as gain or loss on
distribution of property dividend

Measurement of noncash asset distributed

Paragraph 15A of PFRS 5 provides that an entity shall
measure a noncurrent asset classified for distribution to
owners at the lower of carrying amount and fair value less
cost to distribute. Accordingly if the fair value less cost to
distribute is lower than the carrying amount of the asset at
the end of the reporting period the difference is
accounted for as impairment loss

Extinguishment of financial liability

How should an entity initially measure the equity instrument
issued to extinguish a financial liability? Actually this
transaction is simply known as equity swap. An equity
swap is the issuance of share capital by the debtor to the
creditor in full or partial payment of an obligation. IFRIC 19
provides that the equity instrument issued to extinguished a
financial liability shall be measured at the following amounts
in the order of priority
a. Fair value of equity instrument issued
b. Fair value of liability extinguished
c. Carrying amount of liability extinguished

The difference between the carrying amount of the financial

liability and the initial measurement of the equity