IFRS 5:

NONCURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS
A component of an entity that either been disposed of, or classified as held for sale;
- Represent a separate major line of business or geographical area of operations;
- Part of a single co-ordinated plan to dispose of a separate major line of business
or geographical area of operation; or
- Is a subsidiary acquired exclusively with a view to resale.
[ Component of an entity
- comprises operations and cashflows that can be clearly distinguished
operationally and for financial reporting purposes, from the rest of the entity.
- In other words, it may be a cash generating unit or a group of cash generating
unit.
Discontinued operations may be segment, a reporting unit, a subsidiary or an
asset group.]

When is a component classified as discontinued operation?

1. When the entity has actually disposed of the operations.
2. When the operation meets the following criteria:
• Carrying amount will be recovered through sale rather than continuing use.
• Asset must be available for immediate sale in their present condition
• Sale must be highly probable
[At the date the entity has disposed of the operation of the component, or at the date the
component meets all of the following criteria to be classified as NCAHFS. ]

Income Statement Presentation

- Entity shall disclose a single amount comprising the total of post-tax profit or
loss of the discontinued operation and the post-tax gain or loss recognized on the
disposal

Items included in discontinued operations:

1. Revenue, Expense and Income or Loss
• Attributable to the discontinued operation during the reporting period
2. Impairment Loss
• FV less cost of disposal is lower than the carrying amount of net assets
3. Gain or Loss
• From actual disposal of the assets and settlement of liabilities
4. Termination Costs
• of employees and other costs which are directly incurred as a result of
discontinuance.
On October 30, 2019, CBTL, a segment of Sassoon Corp., has a carrying amount of
400 million pesos. Sassoon Corp. signed a legally binding contract to sell CBTL.
The sale is expected to be completed on January 31, 2020 at a selling price of 350
million pesos.
Prior to January 31, 2020, the sale contract obliged Sassoon Corp to terminate the
employment of certain employees of CBTL incurring an expected termination cost of 10
million pesos to be paid on June 30, 2020.
CBTL’s revenue and expenses for 2019 were 100 million and 110 million, respectively.
Before income tax, what amount should be reported as loss from discontinued
operations for 2019?

a. 70 million
b. 20 million
c. 10 million
d. 50 million

San Miguel Corp. is a diversified entity with interest in real estate development, food
manufacturing and distribution and electronics. The electronics division was deemed to
be inconsistent with the long-term direction of the entity.
On June 30, 2021 the Board of Directors voted to approve the disposal of the division.
The sale is expected to occur in February 2022.
Revenues:
January – June 2021 50,000,000
July – December 2021 15,000,000
Expense:
January – June 2021 20,000,000
July – December 2021 10,000,000
Carrying Amount 100,000,000
FV less COD 95,000,000
Expected Termination Cost 5,000,000
Income Tax Rate 30%

What amount should be reported as net income from discontinued operation?

On September 2020, Polo Company approved a formal plan to sell a business segment.
The sale will occur in March 2021. The segment had a profit before tax of P1,400,000
during the entire year of 2016. The carrying value of the segment was P8,000,000 and
the recoverable amount was P7,700,000. During the year 2021, the segment has yet to
be disposed of. Throughout the year 2021, the segment had a profit before tax of
P400,000. The carrying value of the segment as of December 31, 2021 is P8,400,000.
Income tax rate is 35%.
How much will be reported as income from ordinary activities of the discontinued
segment, net of tax in 2021?
 a. 260,000
b. 455,000
c. 520,000
d. 845,000

Noncurrent Assets Held for Sale

Conditions for classification as held for sale

1. Carrying amount will be recovered through sale rather than continuing use.
2. Asset must be available for immediate sale in their present condition
3. Sale must be highly probable
a. Management must be committed to sell
b. An active program to locate a buyer
c. Sale is expected to be completed within one year from classification as held
for sale.
d. Actively marketed for sale at a price that is reasonable
e. Actions are unlikely to be significantly changed or withdrawn.
EX.
January 1, 2019, A building with a carrying amount of Php 10 million and had a
remaining useful life of 20 years was classified as asset held for sale. The building was
priced at Php 9 million which is equivalent to its fair value.
During 2019, the market conditions that existed at the date the building was classified
initially as held for sale deteriorated and as a result, the asset is not sold at the end of
2019. The company actively solicited but did not receive any reasonable offer to
purchase the building and, in response, reduced the price to Php 8 million.
Assumption # 1
In 2020, the market conditions deteriorated further and the fair value of the building
decreased by P500,000, but the company was able to sell the building for Php 7 million.
Assumption # 2
In 2020, the market conditions improved and the fair value of the building increased by
P3 million. the building was sold for Php 9.5 million by the end of 2020.
Assumption # 3
In 2020, the market conditions deteriorated further and the building is yet to be sold by
the end of 2020. The 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
for a price in excess its current fair value amounting to P9.2 million.
On April 1, 2020, Jatot Company has a machine with a cost of P1,000,000 and
accumulated depreciation of P750,000. On April 1, 2020, the entity classified the
machine as held for sale and decided to sell the machine within 1 year. The machine
had an estimated selling price of P100,000 and a remaining useful life of 2 years. It is
estimated that selling cost associated with the disposal of the machine will be P10,000.
On December 31, 2020, the estimated selling price of the machine had increase to
P150,000 with estimated selling cost of P20,000.
What amount should be recognized as gain on reversal of impairment on
December 31, 2020?