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    not mine

    Copyright:

    © All Rights Reserved
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    256 views6 pages

    CPA Handout

    Uploaded by

    May Litt
    not mine

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 6
    PRACTICAL ACCOUNTING 1 L a ReSA The Review School of Accountancy ‘BTel. No. 735-9807 & 734-3989 _€ Ubentia/C Espeniia’G Macaniola OPERATING SEGMENT/SEGMENT REPORTING (PERS 8) SCOPE ‘his standard apps only to entities whose deb and eyusly securities are publicly traded and by entities that are in the process of issuing equity oF debt sevuritics in public sccutitics markets (eNample, a company that isin the process of ‘making an initial public offering of shares for listing on the stock exchange) Other entives, particularly those that are significant entities and with diversified or with overseas operations. are encouraged to disclose segment information, If an entity whose securities are not publicly traded chooses to disclose seziment information voluntarily. it shall comply fally with the requarements ofthe staniard el only on the basis of the consolidated financial For listed parent entity, segment information sss « led. it will present segment information in its statements Ia subsidiary 1s its an entity whose ‘own separate financtal repo, Similarly, in the ease of listed entity with asaciates and Joint ventures, seement information need be presented only fon the basi °s financial statements. Uhis applies when the listed entity has no subsidiary and theretore does not issue consolidated financial atements. If the associate or joint venture i itself an entity whose secuitics are publicly ‘waded, it wil present seement information in ts own separate iinancial report. Ihe Core Principle Teporting requires an entity 10 disclose information 10 enable nsers of is financial statements 0 evaluate the ‘business dcivities 10 whieh if engages and the ceoaomic environments in which it ‘operates ity shall report separately wslormation about cach operating segmeat that has been identified as reponable, Information about the different business activities and the evonomic environments is important 0 users of flnancial statements because they assist uses. 44) Beiter understand the entity's past performance 'b) Better assess the entity's risks snd rewards. and '6) Make more informed judgements about the cmty as whole Operating Segment ~ i defined as “a component of an entity 3) that engages in business activities trom which it may carn reven ‘expenses relating to transactions with other components a the sane entity), 'b) whose operating results are regulary reviewed by the entity's chsf operating decision maker to make decisions about resources to be allocated to the segment and assess is performance, and ©) for which discrete financial information 1s available that sells prumarity and exclusively 1 other operating seements of the ‘scgameat if the entity is managed that way. Thus, vertically ble segments ifthat isthe way management allocated and cs and incur expenses (including revenues and PRS 8 requires that a component of an centy is included in the definition of ax operati Integrated operations may be identified as separate report assesses performance ofthe integrated operations tart-up” operation may qualify as an operating segment even if it has yet io eam revenues. The Note that a arms or ineurs oF will eam oF incur revenues and important characteristics are that it must be a business sctvity th being regularly reviewed by the chief operating decision maker and diserete financial information 1s available ‘he teem chief operating decision maker (CODM) used in PERSS wentiies a function, not necessarily w manager with 1 specified ti the performance of the operating segments of an fei. In pr officer (CHO) or chick operaing officer (COO) re directors or other senior managers may. however, be # eroup of exe Thresholds for Reportable Segments - an entity shall report separately any ofthe following quantitative thresholds 4) _ Its reported revenue, including both sales to external customers and intersegment sales or transfers, 1s 10% or move of the combuned revenue intemal an external, ofall operating segments b) The absolute amount ofits reported profit oF loss 1s 10%s or wore of the preater, in absolute amount, of (1) the combined reported profit ofall operating segments that did mol cepwt a fase and (2) the combined reported loss of all ‘operating segments that reported oss ©) assets are 10% or more of the combined assets of all operating se ormation about an operating segment that meets For an operating segment that does not meet any of the above quantitative thresholds, management may designate the segment to bbe reportable segment i the 3 information about the segment would be useful to users ofthe Financial statements. Note that this is a voluntary disclosure and may be appropriate when an operating segment, which is curently not significant, has potential to expand in the foreseeable future, for exainple when a reporting cavity has just recently ventured in a new business ‘which has potential o grow in the future periods ReSA/ PRACTICAL ACCOUNTING |___ Aer heel sleet. crn shal acne wives ual coca reves pal by ape see orotate 78% or mr ofthe nts enh a ext veve ses than 79% adn operating spent Stall be ented repre een they ot wt Th ane tse wt a ess 3% een ne tryorthe met looumation shat ther business sesivities and operating segments tha arent tepotabe shall be combined and disclosed in an sal her spsmens” eaepors sepatately fom oer reconsfing ms in the fecoreiiation eequied. The sources ofthe revenue include ia the all the segments” cates shall be dw rihod ‘rcptahle segment the ummcdite prcsceding peas.) my WoL meet the current period" management jedges tha th vert: sepnent is of continu ont oe pore sparc nthe curent pero tative thresholds citsea for esportability i Wf sibnficane, information about tat sep a operating sepment is identified as a reportable sym in the current perk, segment data for prot pti presente for comparative purposes shall he restated to reflect the newly reporahle segment asa separate sepment even if hal segment did mot sans te vest fv eprint por peri ons Te nessa maton st awa an tect dvekp i Example [ Scements R i c b Tol 1 ee aan [Toa 340 oo on) | 209001 6none, v,00 | 2,000 | 300.000 ee] so.oi0 | 110,000 20,000 180,000 | | iow. 000" | “7 360,000 fo Keporuble em 2 3010 | 000 Intersegmen’ | Total revenue [eof revenue Conclusion Ff tas ot pa otto [encase 6 " 1 00,000 s.000 100.000 4% 2 Te ased om the 10% thresholds for even, prot or fos and asst, on Gand Hare reporuble. Their combined sales constite ‘only 739s the wl extemal revenue. Hence, davon sepient (segment 1s alentfed as reportable seiner that he ‘combined exteratsales exceed 75%. Te her 3 spent are not reportable sepments. Information about thee nt epomable ‘cements are combined an disclosed the “al ohcr segments” alepoey ‘Resa ‘The Review School of Accountancy ‘Tel, No. 735-9807 & 734-3989 ReSA The Review School of Accountancy ‘RTel. No. 735-9807 & 734-3989 PRACTICAL ACCOUNTING © Uberta EspeniltaG, Macariola DISCONTINUED OPETATION AND HELD FOR SALE Discontinued operation PFRS 5. defines a discontinued operstion as “a component of an entity that either has ‘been disposed of o is elasified as held for sale and 4 represents a major line of husiness or geographical atea of operation, b. 4s part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or isa subsidiary acquired exclusively with a view to resale Disclosure of Discontinued Operation 4. single amount in the statement of profit or loss comprising the total of: 1. the post-tax profit or loss of discontinued operation; and 2. the posttax gain of loss recognized on the measirement to fair value less cost to sell, or the disposal of assets of disposal group(s) constituting the discontinued operation, bam analysis ofthe single amount in (a in 1 the revenue, expenses and pre-tax profit or loss of discontinued operations 2. the related income tax expense as required by PAS 2, 3. the eain or loss recognized on the measurement to fair value less costs 10 sell oF on the disposal of the assets or disposal group(s) constituting the discontinued operation; and 4. the related income tax expense as required hy PAS 12 Classification as Held for Sale — PFRS S prescribed that “an entity shall classify a non-current asset (oF disposal group) as held forsale if its carrying amount wil be recovered principally through a sale transaction rather than through continuing use ‘A Non-current Asset Held for Sale may be a single asset, such as a landed property held forsale. or an equity investment held for sale. A Non-current assets held for sale may constitute a disposal group. PFRS 5 defines a disposal group as “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. The group includes goodwill acquired in business combination, ifthe group isa cash-generating unit £0 which ‘goodwill has been allocated mv accordance with the requirements of PAS 36 impairment of assets, or if tis an ‘operation within such a cash generating unit". For example. a planned divestment of a subsidiary or a ‘geographical segment would qualify as a disposal group. Similarly, a planned disposal of a subsidiary or an ‘operation within the subsidiary. such as its manufacturing plant, would qualify as a disposal group Criteria for Classification: - to meet the classification requirement. the asset (or the disposal group) must be available for immediate sale in its present condition, subject only to terms that are usual and customary for Sales of such assets (or disposal group). and the sale must be highly probable. \ighly probable is defined in the standard as “significantly more likely than probable” For sale to be highly probable, the appropriate level of management must be committed te a plan to sell the asset (or disposal group), and an active program 10 locate « buyer and complete the plan must have been initiated. For major divestment decision, management's commitment would normally requite approval of the plan to dispose by the Board of Directors, or an equivalent governing body of the entity. The asset (or disposal roup) must be actively marketed for sale ata price that: reasonable in relation to its current fai value. The Sale shall be expected to qualify for recognition as ccmplcted sale within one year from the date of classification, except for circumstances beyond the control of management and actions required to complete the plan shal indicate that it is unlikely that significant changes to the plan will be made or thatthe plan will be withdrawn, Events of circumstances may’ extend the period to complete the sale beyond one year An extension of the period required to complete a sale does not preclude an asset (or disposal group) from being classified as held for sale, ifthe delay is caused by events or circumstances beyond the entity's control, there is sufficient ‘evidence that the entity remains commited t0 its pan to sell the asset (or disposal group). Measurement of Non-current Assets (or Disposal Groups? Held for Sale - IFRS 5 prescribes the “entity shall ‘measure a non-current asset (or disposal group) classified as held forsale at the lower of its carrying amount and fair value less cost to sell”. The carrying amount recorded for the asset (or disposal group) inthe statement Of financial position at the date of classification, as held for sale, The fair value is “the amount for which an asset could be exchanged between knowledgeable, willing paries in an arm's length transaction weasurement and Recognition of Im losses. the standard requires that immediately betre the in ‘lassificationof the asset (or disposal group) as held for sale, the carrying aumounts of the atset (oF all the assets Financial Accounting and Reporting Discontinued operation and Held for Sale and liabilities in the group) shall be measured jv accordance with theit applicable IFRS/IAS . In other words, a remeasurement of the assets and liabilities immediately before the initial classification is required before the ‘measurement basis of IFRS 5 18 applied. Upon classification and in applying the measurement basis, an entity shall recognize impairment loss Foray initial or subsequent write-down of the asset (or disposal group) to fait vale less cost to sell (On subsequent remeasurement of a disposal group, the carrying amounts of any assets and liabilities that are not within the scope of the measurement requirements of this IFRS, but are included in a disposal group classified a held for sale, shall be measured in aecordance with applicable IFRSVIAS before the fai value less cost to sell ‘of the disposal group is required, Recognition of sof Impairment losses - subsequent {0 its inital classification as non-current asset (or ‘dispose! group) held for sale, the fair vale less cost sell may increase when compared to it inital estimate TERS 5 requires that an entity shall recognize a aie for any subsequent increase in fair valueless cost to sell of an asset but not in excess ofthe cumulative impairnient los that has been recognized either in accordance with this IFRS 5 or previously in accordance with IAS 36 Impairment of Assets, ‘Changes to a Plan of Sale or (0 a Plan of Distribution to Owners - it is possible that an entity may change its plan to sell a non-current asset oF disposal group ser it has been classified as held forsale. Ia change in plan ‘ccurs, it is most likely to be caused by events or circumstances beyond the control of the entity rather than by its own revocation. A change in panto sell forthe may’ also oveur when the eriteria for classification are no longer met [the emity has elassitied an asset (or dispasal group) as held for sale or held for distribution to owners, but the sriteria for classification are no longer met, she entity shall ccase o clasifythe asset (or disposal group) as held forsale oF held for di IFRS 5 clarify that if an entity reclassifies an asset (or disposal group) directly from being held for sale to being held for distribution to owners, or directly from being held for distribution to owners to being held forsale. then ‘the change in classification is considered w continuation or the original plan of disposal ‘When the entity ceases the classification of a non-curont asset (oF disposal group) as held for sale or as held for distribution to owners, (oF ceases to be include! ma disposal group classified as held for sale or held for distribution to owners), it shall measure the asset or ulsposal group at the lower of 8) ts carrying amount before the asset (or disposal group) was classified as held for sale or as held for distribution to owners, adjusted for any depreciavon, amortization or revaluations that would. have recognized had the asset (or dispos! group) not been classified as held forsale of as held for distribution to owners, and b) ls recoverable amount the date of the subsequent decision not vo sel or distribute ‘The entity shal include any required adjustment to the earying amount of a non-current asst that ceases to be classified as held forsale or as held for distribution to owners in profit or loss from continuing operations in the Period in which the criteria for classification are no longer met, The entity shall present the same caption in the statement of comprehensive income used to prese:* 9 gain oF loss, if any, recognized in profit oF los Irom continuing operations. an entity removes an individual asset or liability trom a disposal group classified as held forsale or as hel for distribution to owmers. the remaining assets and liabilities of the disposal group to be sold oy wo be distributed to owners shall continue 10 be measured as a group only if the group mects the erieria for classification, Otherwise, the remaining non-current assets ofthe group that individually meets the erteria te be classified as held for sale or as held for distribution to owners, shall be measured individually atthe lower of their carrying amounts and fair values less cost to sell at that date. Any non-current asset that do not meet the criteria shall cease to be classified as held for sale or as held for distribution to owners and measured at lowes of its carrying amount that would have been determined, hat st not been classified as held for sale or as held for distribution to owners and its recoverable amo Presentation of Non-Current Asset or Disposal Group Held for Sale an entity shall present a non-current asset classified as held for sale and the asets of the disposal group classified as held forsale separately trom ‘other assets in the satement of financial postion. The liabilities ofa disposal group classified as held for sale shall be presented separately from other abilities in the statement of financial position. Those asscts and Hiabiliues shall not be offset and presented as a single amount. The major classes of assets and habilives ‘classified as held forsale shall be separately disclosed either on the face ofthe statement of financial position ot in the notes. An entity shall present separately any cumulative income or expense recognized direct in equ relating toa non-current asset (oF dspusal group) classified as held forsale ResA ‘The Review School of Accountancy Tel. No. 735-9007 & 734-3909, ReSA jew School of Accountancy The Revi 107 & 734-3989 ‘BTel. No. 735-98" HINANCIAL ACCOUNTING & REPOREING. Operati 1 uddy Company and its visions are engaged soll in manfixtring operations the followin da Mi ucts in which operations were conducted forthe year ended Dec 31-2018 Protit Identifiable Assets nents Revenue rom Reyna from ‘outsiders within A 18,000,000 2,000,000 3.000.000 40,000,000 346,000.00 8 13-000,000 500.008 $00,000 « 5,000,000 7,000,000 Sa00.000 2.000.000 Db 4,500,000 1,500,000 7.200.000 16,000,000 F 5.400.000 5.600.000 10.900 14,000,000 ' 000,100 ° “10,000 6,000 Total 448,900,000 17,198,000 0,000 [10,000,000 Using the quantitative threshold, how many reportable sezmnents does Buddy Company hays ay si ) four dy three by five 6m January 1. 2018, Power Company approved plan to dispone of Sale wall oceuron April 30, 2019. On Decennber 31, 2088. he earyin 4.000.000 and the net recoverable amount ws P3,600.000) jon costs of P200,000 as a direct rest of the discontinut DER wor Income tay rates 33%, ness segment. Tis expected that the fae of et assets of the Sons, the company: paid employees tions. The revenues and severance and reloc expenses of the discontinuing sexment during Ss00.000 Janary | to December 31 How much will be reported 2s los ftom ordinary activities of the discontinued segment dur a P1,000,000 © P1400,000" b,P1,300,000 3 P2.000,000 ‘a business seement. The sale will aceur in tx of P1-160.00 durin. the entire year of 2018. the earying value 500,000, During the year 2019 the segmes had a profit before tax of P400,000. The Income ta rate is 3. On September 1, 2018, Polo Company approved a fortna!pha o se March 2019 The segment had a profit before atthe segment was P8,000,000 and the recoverable amu" was P7. has yet to be disposed of Throughout the year 2019 the sexi Paring value ofthe segment as of Decetnber 31,2019 i P8400.00 How much will be reported 2s income from ordinary activities of the 260,000 &. 520,000 435,000 4 845.000 rent, net of tay in 20197 rating divisions) (m Oxtober |, 2018, management decided to sell one 1 has several oper Jing to HRS) The division was sold on December 1 separate component ace 4 Stamp Holding Compa ‘of its division that qualifies 2 7 aoe ean cing price of P14,000.000) Om thst date, the net assets ofthe division had a Book value epoo.000) oe the period January I, 2018 to the date ot disposal. the division report! a pret fos fom perations of P4200,000) The company’s mone tx fate is 30% 0 s Seer smpany generated ner as profs of P22.25,000 fa a continuing operations) At what sedi oom toting Company disclose separately moving ts discontinued operation the Deventer 31 2014 statement of comprehensive income” ‘all items of income OF 1s) pone (92,200,000) b (PI,s40.000) 4 (P2.940,000) ber 31, 2016 is P8.000.000 and had remamming useful te of 20 ust wing the straight-line method On January 2 sified this asset as held for sale 5 The carrying value of building C on De ‘years Iti the company's policy to depreciate all ts 23017, Chamber Company committed 10 a plan te scl Building € was priced at P9,000,000, which ts equal t0 it ing, C and lasified initially as held for sake 2017, the company conditions that existed a the date the busdons was, ‘oF the end of 2017. During {tw purchase the building and, m response, educett v marketed at a pris that 6 reasonable given the 3702 Page 102 During 2017, the mark deteriorate and as a resul, the asset 1s not sold al the en actively solicited but did not receive any reasonable efery the price to P8,500,000.. The buslding continues to be ocive change in marker conditions, ReSA/Financial Accounting & Reporting: Discontinued Operation, Operating Segments & NCAHFS In 2018 the market conditions deteriorate further, andl the bwikhing 1s yet t0 be sold by the end of 2018. Chamber-Company believes that the market conditions will improve and has not further reduced the prive ofthe uikling The building comtinaes te be Kell for sale at pve in excess of is curtent fir value b 7,600,000, \ should be reported separately ss nev-curtent set held for sale and valued at P8,500,000, 4. should be reported separately as non-current asset field for disposal and valued at 9.000.000. Om Getober 1, 2018, Ruilder Company has « buitding with a vost of P4,000,000 and accumulated depreciation 13,100,000, ‘The company commits to a pa to sel the build ry 1, 2019. On October |, 2018, hs busldi ated setling price of P800,0009, and its estimated that selling costs associated with the ‘posal ofthe building will be P2000. On De 201K, the estimated selling price ofthe building ed to PL.200.000, with este ted sell hing at 120,000, {Question [> What amount of loss should Builder Company recognize atthe time the build os hel for sale? a Nowe ©. P2000 b. PLo0.000 4. P220,000 was reclassified As of Devember 31, 2018, what amount of gain on recovery should Builder Company recognize Felated Go the asset held forse? a None ©. 220,000 bh. PIs0,000 Pan8.000 (On April 30, 2018, Mindful Company’ classifies a prcperty an Southern Tagalog as held for sale. The carry amount of the property on this vate 1 397.0010 (vost of PAH0,000,000, aceumulated depreciation at 60,000,000 and accumulated ionpairment oss wt 240,000,000), The estimate of the far value les cost 0 sell fn this date is P280,000,000, ‘On December 31. 2018, the estimate ofthe tarrvelue fos cast ses P3S0,000,000. ‘The sudden increase in the fair value is attributed to the inerease in demand for properties in Southern Tagalog, when the re ‘earmarked as the Philippine Development Reuion by the government asthe next phase for ccomoiic 8 Question 1; What isthe amount of impairwent loss en April 39, 20189 a None © P30,00.600 b. 20,000,000 1 P30,000,000 Question 2 What isthe amount oF impairment los reversal on December 31. 2018? a None © Ps0.a00.000 b, 20,000,000 «4 P50,000,000 8. The assets and fiabifties of a manufacturing plant of Joy Company form 2 disposal group. The criteria for classification are met on July 1, 2018. As of January 1, 2018 1 and liabilities of the plant are 2s follows: Goodwill allocated 200,000,000; Land and building. P100.000.000, Plant, machinery and equipment, PS00,000,000, f>vestnicnt property at fait value. 120,000,000: Receivables ‘nat financial assets, P80,000,000, Inventories, P 120,000,000. f.oans and borrowings, PSM, 000,000. ‘carying amount of the assets Prior tothe classification as non-current asst. field for sae, the land and building isrevalued at P125.000.000 Depreciation of plant, machinery and equipwnt is about 10% per atinum. The fair value of the investment Property at July | is P130,000,000. Afr dedueting allowance fos daubtfal debts, the receivables and Finan, assets are valued at P75,000,000. Testing tie inveitories for lower of cost and net realizable value results ta write-down of P10,000,000. Loans and borrowings are carried at th accounts approximates their fair values Imortzed cost basis and the amount in the Negotiation to dispose of the manutiacturing plait Vox Company is in the advanced sta willing 10 pay a price of P60S,000,000 to buy the manutacturs estimated at P3,500,000) plan as awe. ‘Cons af Snpeet ag ‘oF Soss atthe time the plant was reclassi Coe 35.00; Sms seam, 3702 ReSA ‘The Review S

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