nas Resa The Review School of Accountancy W Tel, Noss 784-3989 / 735.9807 PRACHICAL ACCOUNTING | : (Uber Lspenilla OPERATING SE An operating segment - is a component of wr entity 1) That eng es. in business activities fom Which it may cam rev wes and incur expenses 10g {o transwetions with other components of the same fincluding revenues and expenses + entity) b) Whose operat ker ind assess its performance, results are regularly eevieWed by the entity's chief operating decision m to make decisions about resources to be allvewted 10 the sepmien and ©) For which discrete financial information i§ availabt An operating sezment may engage in t example. star-up operations may he operat ess activities [or which it has yet to cam revenues. for egmcnts belore carning revenues, Not every part of an entity is necessarily an ¢ erutihy segment of part of an operating Segment For example. a corporate headquarters or some functional departments may not eam revenues or may eam revenues that are Gnly incidental 10 the activities of the entity and world not be operating segments. Post-cmployinent benefit plans ure aot operatiny se Chief operai title. ‘That function is 10 alldcate resources to aid assess the performance of the operating z segments of an entity, Often the chicf operaling dceision maker officer or chief operating officer but, tor example it inay be a aieoup of excemtive directors 0 others decision maker Wentifies 4 function. not necessarily a manager with a specific an entity 15 tly chief exceutive 0 and tivities, Generally, an operating segment has a seyment manayer whe 1s directly accountable maintains regular contact with the chief operating decision maker to discuss operating financial results. forecasts. or plans for function, not necessarily a manager with a specific title. The chief operating decision maker also may be the Segment manager for some Operating stements. \ single manager may be the segment manager for more than onc operating Segment identifies a segment. [he term segment mani An entity shall report separately information about each ope a) has been identified in accordance with criteria of reporting by exceeds the quantitative thresbokd sexe Quantitative Thresholds An entity shall report separately information abow following quantitative thresholds a) [ts revenue, including both sale ing segment tha meets any of’ the tO external customers and inter-seement sales’ or transfers, is 10% oF more of the combined revenue. inicrnal and external, of all operati segments, b) ‘The absolute amount ot its reported profit oF lobs & 10% or more of the greater, in absolute amount, of (1) the combined reported profit of all operating segments that did not report a loss and (2) the combined reported loss of sll operating semen that reported a loss ©). Its assets are 10% or more of the combined assets of all opetating segments, Page 1reportable, and separately disclosed, if management believes that information about the segment would be useful (0 users of the financial statements, An entity may combine information about operating segments that do not meet the quantitative thresholds with information about other operating segments that do not meet the quantitative thresholds to produce a reportable segment onty ifthe operating segments have similar economic. characteristics and share a majority of the aggregation criteria. If total external revenues reported by“operating segments constitute less than 75% of the centity’s revenue, additional operating segments should be identified as reportable segment, even if they do not meet the 10% thresholds until at feast 75% of the entity's revenue is included in reportable segments, Information about other business activities and operating segments that are not reportable shall be combined and disclosed in an “all other segments” category separately from other reconciling items in the reconciliations described below. ‘The sources of the revenue included in the “all other segments” category shall be described. If management judges that an operating segment idemtitied as reportable in the immediately preceding period js of continuing significance information about the segment shal! continue to be reported separately in the current petiod even if it’s no longer meets the criteria for reporting, If an operating segment is identified as a reportable segment'in the current period in accordan with the quantity thresholds, prior period segment data that is presented for comparative purposes should be restated to reflect the newly reportable segment as a separate segment, even if that segment did not satisiy the 10% thresholds in the prior period, unless the necessary information is not available and the cast to develop it would be excessive. Disclosure An entity shall disclose information to enable users of its nature and financial effects of the business activities in which it in which it operates. fatements to evaluate the engages and the economic nancial An. entity shall disclose the following for each period’ for which an income statement is presented: 3) general information 1) factors used: to ident the entity’s reportable segments, including the basis of organization (for example, whether management has chosen to organize the entity around differences in products and services, geographical areas, regulatory environment, of a combination of factors and whether operating segments have been aggregated), and 2). Types of products and services from which each reportable segment derive its revent b)_ Information about reported segment profit or loss, including specified revenues and expense included in reported segment profit or loss, segment assets, segment Hiabilities and the basis of measurement. ©) ‘Reconciliations of the totals of sepment revenues, reporied segment profit ‘assets, segment liabilities, and other material segment items to correspanding entity amounts. loss, segment Reconciliations of balance sheet amounts for reportable scements to the entity's: balance sheet amounts are required Yor each «late at whi a halance sheet is presented. Information for prior periods shall be restatedReSA / PRACTICAL ACCOUNTING 1 Information about profit or loss, assets and liabilitie An entity shall report a measure of profit or lass and total assets for each reportable segment, An entity shall report @ measure of liabilities Ror each reportable seyment if such an amount is regularly provided to the chief operating déelsion maker. An entity shall also disclose the following about cach reportable segment il the specilicd mounts are included in the measure of ly provided (o the chief operating decision maker. even i not included in that measure of segment profttor segment profit of loss reviewed by the chiebOperating decision maker. or are otherwise regula b) Revenues from transitions with other operating seymeiits uf the same entity ©) Interest revenue ‘ 4) Interest expense ©) Depreciation and amortization ) Material items of income and expense disclosed in accordance with paragraph 86 i TAS/PAS 8) The entity’s interest ih the protit or loss of assoeiates and joint Ventures accounted for the equity method bh) Income tax expense or income, and i) Material non-cash items other (han depreciation and amortization: entity shall report interest reve separately trom inte st expense for each reportable nt unless a majority of the segment:s revenues are from interest and the chief operating decision maker rclies primarily on net interest revenue ty sssess the performance of the segment and make decisions about resources to he allocated to. the seement, In that situation. a emily may report that se of its interest expense and diselose that it has done An entity shail disclose the following about each te cument if the specified amounts are hiet operatin included in the measure of seyment assets reviewed | Jecision maker oF are otherwise regularly. provided 10 the chiet « lecision maker. eve if not included in the measure of segment asset a) Te amount of investment in associates and joint \emures accounted by the cquity method, und b) The amounts of additions to r assets. post-employment bes sets and rights insing under insurance contracts Measureme The amount of each segment item rep. decision maker. for the purposes of maki and assessing its performance. Adjustments and climinat financial statements and allocations of revenues. exp in determini segment’ prc assets and liabilities that are liabilities that are used by the chief decision muker shall be reported for that sepment. It all he the measure reported to the chief operating decisions about allocating resources to the segment ns made in preparing an entity’s and gains or losses shall be included ss only if re included in the measures of the reported seymnent profit o: ‘of loss that is used by the chief operating decision maker. Similarly, only those nthe measures of segment’s assets and seement’s amounts are allocated to reported segment profit or los or liabilities, those amounts shall be allocated on a reasonable basisi 7 aaa Rane ae Team ity ey cS). 7 teSA ‘The Review School of Accountiney ; BW Tel. Nos. 734-3989 / 735-9807 PRACTICAL ACCOUNTING 1 e ei GC, Uberita/G. Vispenilla Discontinued operation and Non-current asset held for disposal Non-current asset held for disposal: Classitieatio Classification iy a nomcurrnt ast (Or dla proup) as ell for vale 1 is sareying amount will be recovered pert gh sa asa rahe than hoa ota os and subs wo he olan cons Fe cal group) must he available Jor impede salen present condition sabjest only Ltr that are ore tale of auch as-is (or Apo roups) an its sale must be highly probable (PERS S, paragraph visa 1. eT a sae wo be highly peohable: the appropriate level of management must fx comenitted to a plan to vel the asset (or ciepasal arp). and un ative programme to hee a buyer an complete ne pln amt bave osm tated (PERS S, paragraph 8) eo earerye ihe asset (or disposal group) must be actively marketed for leat x price tat is reason i reliion ta its eee vals Theale stoukt be expected to qualify for recognition as completa sale within one year om the dat are ition However, an exicasion of the period required to complcte a sus docs nok preclude an asset (or disposal roan) tom Bl classi eld Fr sale ihe delay is caved by event or cncumstanes beyond the ety conta armors salient evidence that thy ens eins commit its panto ell the wet Cot disposal group PERS 8, paragraph 9) ‘he following sitottts in which suxt events. circumalans Atte date am entity cin bel 09 pn to sella Grou a user) sill impose conditions on the transfer OF IE 0 complete the sal a fy expects that others the pera required 10 prouph it reasons Tor disposal eroup) shat will este AT Actions ndcessiry 10 respond 40 woe conditions, cannot be initiate vil alter a fim punehase comment ‘bane and Ad. A frm purchase commitnsent is highly probable within one Taree Wane fem putchase eommitent snd ao esta huyer or ers unexpectedly ipod Goins om ths At eit rant aoel (ordinal group) previews elasiicd a held forsake Unat wil extn the period required Wo complete ths sls, and 11-Fimety actions novemsary to respoad fo the conditions hae Bee taker ord 1.2. A favorable resolution on the delaying factors expected using ths fois one year pio, circumstances aie that were previously conde unthely and asa result nom aan rsa or disposal group) previously classtied ay hel fr sale isnot sold hy the end of that pee, and CL During the initial anc-yeur period. the entity (ook ae the change in circumstances. {The nonecurecnt asset (or disposal group) is Deing. tively marker that reasonable, given the change in circumstances. and eee tne (ar disposal group) is available for imoretiae al i ty presen won subject any Ur terms that arc ust and customary andthe sales highly prohable ata Measurement OF Nom-Current Assets (Or Disposal Groups) Classified As Meld For Disposal ‘am entity shall measure a non-current asset (oF Uispeal urOUp) fair value less est to sel ts carey ing ammount and Recognition of Impairment Losses and Reversals An entity shall neeogaize an impalement ows for amy i val fess cost v0 sl for subsequcnt wniedaien of the dose (ar disposal group) fair ‘An catty shall recognize 2 gain for any subsequen sir value hes cusis to sell OF an asset, but not in exeess oF the ‘Gamulative impairment loss tha has been recopni7ed Changes to a Plan Sale Han eas has classified an ass (or displ group) a het Go sal, fut th eiteria in PETES. paraga that he enity shall cease wo elasify the aset (or disposal! group) a held for sul 9 anc anger Presentation of Non-Current Asset oF Disposal Group Classified As Hef for S te An enity shal prea a rancurent asst cised het for ale ai he avs of pal yroup sani ws el Kora astro eter ast inthe halance seth ait othe upon sou else hed sae sal Be pened eaiey from aher habs i the Balance set "howe sss ad Hales shal ot Be oft al reste ine Searing clawes afaeactx and Habiics Pusiied a Held forsale shall be separately clos citron he ace ofthe Falance sheet oe tm the ne except forte major assets nd i ip of aewly acquire sabidiancs elsif __TANIST acim ety hal pec separa a simulatve mime or expense espn daly In eqy eatine Wa . ae pocurrent asset (ar disposal grinp) classed ws held tor cae ihlgs a dispersalReSA The Review School of Accountancy ‘Bel. No. 735-9807 & 734-3989 PRACTICAL ACCOUNTING C.Uberita/C. Espenila/M Operat ¢ Segment, Discontinued Operation and Non-current Asset Held-for-Sale Coli lon 16% gapectel Aa Yaaue ‘. 1. Presented below are four segments that have been identified-by Fatey Product Kx 3,000 Total Revert Operatin Segments (Unaiiiated) Eplem a Profit (Los Idertitiable Assets ‘ 255,000 30,000, P900,000 ¢ B 600,000- (55.000), 300,000. . 25,008 6.000 450,000 90,008 3,000 % 25,000 Tre,e00 r z For which of the set OH 4 < 229 Would information have w be disclosed a. Segments A,B, C, and D bi: Segments 4, B, and C ©, Segments A'and B. d Segments A and D 2. Buddy Company aid its divisions ate en, ed solely in manufacturing operstion The following to the indiistries in which operitions were conducted for the Segments Revenue from Revenue from Operating Prosi Identitiable Asset ‘outside within A 18,000,000 2,000,000 = 24 3,600,000 40,000,000 R 13,000,000 3,000,000 = "ust .» 2,800,000 6,000,000 acm [oc 5,000,000 7,000,000 = 2 3's00,000 28,000,000 Dd 4,500,000 1,500,000 = @% | 200,000 16,000,000 4b 4S S%5.400,000 3,600,000 > 400,000 14,000.00 a ' 3,000,000 Ouse Goo 00: 6,000,001 Total 300,000 100,000 12,000,000 70,000,000 se W = 1404 Sao xl = Gua 4 sing the quantitative tnreshotd*FGN® Mian} Feporable seements does Buddy Company h a) six ©) four by five 4) thre C3. Operating protit and loss figures for the seven segments of Mobile Company a how Operating Prost Opgniting Los 14,000.00 2,000,004 8,000,000: 0 $00,000, Pp 900,000 Q 2,000,000 Total 34,900,000 *t.~ 24m 5,300,000 Using the quantitative threshold, which of the above operating segments are report prof < oriterion” 2) segments K, Ly Mand ? ©). sexments K, M, and N by segments N, O and Q 4. Fixture Company, a listed company and is subject 10 the requirements of PERS. 8. comprehensive income for the year ended December 31, 2015, the company reported among its operating 72,000,000. What is the minimum amount of revenue of reportable operatin, 2) 6,000,000 ©). 13,200,000 b) 7,700,000 1d) 45,000,000ReSA/PRACTICAL ACCOUNTING 1: Discontinued Operation, Operating Seaments & NCAHES 6 ‘On January 1, 2014, Power Company approved a plan to dispose of a business seement. 1t is expected that the . sale will ogcur on April 30, 2015. On December 31, 2014, the carrying value of net assets of the segment was 4,000,000 and the net recoverable amount was 3,600,000. During 2014, the ‘company paid employ severance and relocation costs of P200,000 as a direct result of the discontinuing operations, The revenues and. —°% ‘expenses of the disconti ‘during 2014 were: Income tax rate is 38%, ws segm Wen Z Revenues Expenses Ce January 1 10 December 31 4.400.000 5,800,000, a ec How much will be reported as loss from ordinary activities of the discontinued sé a) 1,000,000 ©) 1,400,000 b) 1.300.000 d) 2,000,000 ment during 20142 Ar gh~ Ok - ) On September 1, 2014, Polo Company approved a formal plan to sella business segment. ‘The sale will occur in March 2015. The seement had « profit before tax of P1,400,00dluring the entire year of 2014, the carrying val ‘of the segment was P8,000,000 and the recoverable g the year 2015 the segment has yet to be disposed of, Throughout the year 2015 the seyment had a profit before tax of P400,000. The carrying value of the segment as of December 31, 2015 is P8,400,000. Income tax rate is 35%. How much will be reported as income from ordinary activities of the discontinued se; of tax in 20182 4, 260000 Gane cusle 2400 ©) $20,000 b. 455,000 ) 845,000 The carrying value of building C on December 31, 2013 is P8,000,000 and had remaining useful life of 20 years. Iis the company’s policy to depreciate all ts buildings using the straight-line method. Gn January 2; 2014, Chamber Company committed to a plan to sell building C and classified this asset as held tor sale. Building C was priced at P9,000,000, which is equal to its Tair market value. During 2014, the market conditions that existed at the date the building was classified initially as held for sale deteriorate and as a result, the asset is not sold at the end of the-@N@=OF 2014. During 2014. the company actively solicited but did not receive any reasonable offers to purchase the building and, in response, reduced the price to P8,500,000. ‘The building continues to be actively marketed at a price that is reasonable given the change in market conditions. In 2015 the market conditions deteriorate further, and the building is yet to be sold’ by the end of 2015, Chamber Company believes that the market conditions will improve and has not further reduced the price of the building, The building continues to be held for sale at a price in excess of its current fair value (Question L: In Chamber Company's December 31, 2014 balance sheet, the buil a) should be included as property, plant & equipment valued at P7.600.000. 'b)_ should be inchided separately as non-current asset held for sale valued at P7,600,000 {6} should be reported separately as non-current asset held for sale and valued at P8,000,000, 4) should be reported separately as non-ctirrent asset held for disposal and valued at P8,500,000. Question 2: In Chamber Company's December 31, 2015 balance sheet, the building - 'a) should be inchided as property, plant & equipinent valued at P7.200,000, oe ) should be included among. the property, plant and equipment at P7,600,000. ‘) should be reported separately as non-current asset held for sale and valued at P8,500.000. 4d) should be reported separately as non-current asset held for disposal and valued at 9,000,000. On January 1, 2014, Strange Company classifies a hotel property as a non-current asset held for sale Immediately before classification as held for sale, the carrying amount of the property is P400,000,000 (cost of 500,000,000 and accumulated depreciation of P100,000.000) The hotel is depreciated on the straight line ‘method ata rate of 2% per annum, The estimate ofthe fair value fess cost to selon this date is P350,000,000.. [By December 31, 2014, no buyer could ‘ve identified. On this d ment concludes that the eriteria for classification could not be met, The estimate of the fair value fess cost to sell is revised to P340,000,000, However, based on management's approved cash flow forecast, the value in use is estimated at P39S,000,000. lnore deferred tax consideration. 3102 ReSA ‘The Review School of Accountancy ‘Tel. No. 735-9807 & 734-3989ReSA/PRACTICAL ACCOUNTING i Discontinued Operation, Operating Seaments & NCAHFS b Question 1° “What amount of impairment loss should Strange Company recognize ai the date the reclassified as held forsale? Yaar A a) None ‘ ©) P100,000,000 yp ik b) 50,000,000 3504 4) 130,000,000 We Question 2: What amount of impairment ecovery should Strange Company recoghize‘on the date the asset is 2 reclassified back to property, plant and equipment? a) Not ©) P40,000,000 b) P30,000,000 «) 45,000,000 9. Qn October 1, 2014, Builder Company has a building with a gost of P4,000,000 and accumulated depreciation ‘of P3,100,000. The company commits to a plan to sell the building by February 1, 2015. On October 1, 2014, tte Building Tas an estimated selling price of P800,000. and it is estimated th fed with the disposal of the building will be P120,000._On December 31, 2014, the estimated selling price of the building hhas increased to P1,200,000, with estimated selling gosts remaining at P120,000, selling costs assoc [01 < Question L: At the time of rectassification as held for sale, what amount should the noneurrent asset held for _sale pe recognized? a) P680,000 wife fh Teme ©) P800,000 b) P730,000 «d) P900,000 D Question 2: as held forsale What amount of loss should Builder Company recognize at the time the building was reclassified a) No ©) P120,000 b) P100,000 ) 230,000 ©) Question 3: As of December 31, 2014, what amount of gain on recovery should Builder Company recognize related to the asset held for sale? a) None WK =Crute © ©) P220,000° I rreK les b) P180,000 ‘ «) 400,000 10, On April 30, 2014, Mindful Company classifies amount of the property on this da property in Southern Tagalog as held for sale. The carrying is. P300,000,000 (cost of P400,000,000, accumulated depreciation of 60,000,000 anc accumulated impairment toss of P40,000,000). ‘The estimate of the fair value less cost to sell ‘on this date is P280,000,000. ‘On December 31, 2014, the estimate of the fir value less cost sell is P350,000,000.. ‘The sudden increase in the . fair value is attributed to the increase in demand for properties ‘earmarked as the Philippine Development Region by th log, when the 1 Wvermment as the next phase for economic growth, 8 Question 1; What isthe amount of impairment loss on April 30, 2014? tok a. None &. P30,000,000 3 b. P20,000,000 . P40,000,000 — Question 2: What is the amount of impairment Joss reversal on December 31, 2014 ' a. None €, PS0.000,000, b. 20,000,000 4. 60,000,000 3102 ReSA The Review School of Accountancy ‘Tel. No. 735-9807 & 734-3989 aren NO rv. se ah