PFRS 5 NOTES

Five Basic Concepts concerning the standards:

1. Know when will an asset be held for sale

2. Measurement when asset is to be classified as held for sale
3. How should it be presented
4. How should the assets and liabilities of a disposal group be presented
5. How should the results of the operations of a non-current asset held for sale be reported in the
FS

Split into two parts

1. Treatment as to non-current asset held for sale

2. Rule on how to report discontinued operations
 Group of assets can have its own liabilities, can generate its own cash or revenues.
 If magdecide na nga i-sell na ang asset, then these grouo of asset will stop generating cash and
revenues. Matawag na sya ug DISCOUNTINUED OPERATION.
 Since D.O na siya, we need to know how to present the income/revenues and expenses that
were earned and incurred by these group of assets.
 Dili sya pwedi i-group together sa all other incomes and expenses because they represent a
separate component of the entity.
 They represent a part of the entity that will be disposed.
 Need i-separate ang operations sa discountinued operations so that financial statement users
will not be misled nga the income and expense presented sa FS kay the same sa income and
expenses nga ma present in the subsequent years.
 D.O is a result of reclassifying an asset as held for sale.
 The purpose is para ang mga group of assets nga ibaligyaay, ang mga income and expenses nga
na earn and na incurred, mapresent separately sa others nga nagpadayon pa para dili
maparehas sa income and expenses sa subsequent years. Besides, once it is held for sale, it is a
discountinued operations na, these grouo of asset’s income and expenses will cease to exist.
 Disposal groups are group of assets with some directly associated liabilities dispose in a single
transaction.
 Talking about D.G, it is not limited to non-current assets anymore. The grouping is now based on
their capabilities of generating cash by themselves.
 The group is to be measure at the lower of its carrying amount and fair value less costs to sell.
 If non-current asset siya tapos it is intended for sale na, then its classification in the FS changes,
it becomes current assets.
 There will be assets nga ma dispose not through sale but through giving the assets to the
shareholders (Property Dividends). PFRS 5 will now be applicable. Instead of fair value less costs
to sell, it is now fair value less costs of distribution. Instead of saying it is an asset held for sale,
it is an asset held for distribution.
 When classifying an asset as being held for sale, the intention is to the value of the asset
principally through a sale transaction rather than continuing use.
 Assets should possess the ability to provide future economic benefits. Comes in two forms:
1. In the form of money in the event it will be sold
 2. Benefits of its use
 As to when the asset be held for sale:
1. It must be available for sale in its present condition
2. Its sale must be highly probable

 An asset can be highly probable if :

1. Management must be committed to a plan to sell the asset.
2. Active program to locate a buyer and complete plan must be initiated.
3. Actively marketed for sale at a reasonable price in relation to its value.
4. The sale must be completed within one year within the date of classification.
5. No expected changes of the plan to sell the asset.
 Aside from selling or distributing an asset, it can also be held for sale if there are transactions
relating to exchange of non-current assets for other non-current assets, as long as there is a
commercial substance (result of a change in the cash flows of the entity).
 If the criteria of an asset held for sale is met after the reporting period, do not reclassify the
asset as held for sale, it must remain the same.
 If non-current assets are not to be held for sale, it is to be abandoned, then that group of assets
could now be considered as a discontinued operations.
 Any increase in the cost will be reported in the profit or loss.
 If the criteria is no longer met by an asset held for sale, then it ceases to be an asset held for
sale.
 Component of an entity will have been a cash-generating unit or a group of cash-generating
units while being held for sale.
 Discontinued operations is a component of an entity that either has been disposed of or
classified as held for sale.
 An entity shall disclose:
1. Single amount in the SCI comprising the total of:
(a) Profit or loss of discontinued operations
(b) Gain or loss from the measurement to fair value less costs to sell or, this is when we are
changing the carrying amount.
 In the SFP, the assets and liabilities will be presented separately.
 In case, an asset will be reclassified, do not adjust the prior period, continue to present it as held
for sale even if the present period is not held for sale.
 Key takeaways:
1. Measurement - lower between the carrying amount and fair value less costs to sale
2. Classification – it becomes a current asset
3. As to the results of the operations, single amount in the income statement, separated in the
SFP.
4. The two forms as to when an asset can be held for sale: It must be available for sale in its
present condition and its sale must be highly probable.
5. Fluctuations in the changes of carrying amount be presented in profit or loss.