Remedial – Midterm (Flexi kits)

Q01

This is a collection of assets to be disposed of together as a group in a single transaction and its related
liabilities.
a. Noncurrent assets held for sale
b. Cash-generating units
c. Disposal group
d. Abandoned assets

Q02

If the disposal group includes goodwill attributable to a cash-generating unit, what is the implication?
a. The goodwill is to be included in the disposal group classification.
b. The goodwill is to be impaired immediately.
c. The goodwill is to be allocated to components of the disposal group and will be impaired on a pro-rata
basis
d. The goodwill will remain in the financial statements of the entity as a stand-alone asset.

Q03

Which standard covers non-current assets held for sale and discontinued operations?

a. IAS 38

b. IAS 41

c. IFRS 5

d. IFRS 6

Q04

Which of the following is false?

a. The separate presentation of disposal groups (under IFRS 5) in the statement of financial position
under is retrospective.
b. A disposal group may be a part only of a cash-generating unit.
c. IFRS 5 requires that 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.
d. Assets that are being used in operations are not precluded from classification as held for sale.

Q05

This is smallest identifiable group of assets that generates cash inflows that are largely independent of
the cash inflows from other assets or groups of assets.
a. Cash-generating unit
b. Noncurrent assets held for sale
c. Goodwill
d. Discontinued operation

Q06

Operations and cash flows that can be clearly distinguished, operationally and for financial reporting
purposes, from the rest of the entity is known as
a. Cash-generating unit
b. Component of an entity
c. Disposal group
d. Reporting entity

Q07
It is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
a. Current value
b. Present value
c. Committed value
d. Fair value

Q08

Which of the following is not a characteristic of firm purchase commitment?

a. Agreement between related parties
b. Usually legally enforceable
c. Specifies all significant terms
d. Includes a disincentive for nonperformance

Q09

Which of the following is in between virtually certain and probable?

a. Possible
b. Certain
c. Highly probable
d. Remote

Q10

This is the present value of estimated future cash flows expected to arise from the continuing use of an
asset and from its disposal at the end of its useful life.
a. Value in use
b. Recoverable amount
c. Fair value
d. Amortized cost

Q11
Which of the following is within the scope of measurement requirements of IFRS 5?
a. Deferred income tax assets
b. Assets arising from employee benefits
c. Investment property accounted for under cost model
d. Biological assets measured at fair value less cost to sell

Q12

This is the incremental costs directly attributable to the disposal of an asset (or disposal group),
excluding finance costs and income tax expense.

a. Costs to sell

b. Costs to complete

c. Sunk costs

d. Period costs

Q13

This is the higher of an asset’s fair value less costs of disposal and its value in use.

a. Fair value
b. Market value
c. Carrying amount
d. Recoverable amount

Q14
An agreement with an unrelated party, binding on both parties and usually legally enforceable, that
specifies all significant terms, including the price and timing of the transactions, and includes a
disincentive for non-performance that is sufficiently large to make performance highly probable.
a. Sale contract
b. Firm purchase commitment
c. Executory contract
d. Acquisition agreement

Q15
What do you call a component of an entity that either has been disposed of or is classified as held for
sale and is part of a single co-ordinated plan to dispose of a separate major line of business or
geographical area of operations
a. Disposal group
b. Discontinued operation
c. Cash-generating unit
d. Operating segment

Q16
Statement I: An entity should classify as held for sale a non-current asset that is to be abandoned.
Statement II: An entity shall not account for a non-current asset that has been temporarily taken out of
use as if it had been abandoned. 
a. True; True
b. True; False
c. False; True
d. False; False

Q17
Statement I: An entity shall classify a non-current asset (or disposal group) as held for sale if its carrying
amount will be recovered principally through a sale transaction rather than through continuing use. 
Statement II: An extension of the period required to complete a sale precludes an asset (or disposal
group) from being classified as held for sale.
a. True; True
b. True; False
c. False; True
d. False; False

Q18
Statement I: If an entity reclassifies an asset 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 for sale, then
the change in classification is considered a continuation of the original plan of disposal.
Statement II: A component of an entity comprises operations and cash flows that can be clearly
distinguished, operationally and for financial reporting purposes.
a. True; True
b. True; False
c. False; True
d. False; False

Q19
Statement I: When the sale is expected to occur beyond one year, the entity shall measure the costs to
sell at their present value. 
Statement II: An entity shall recognize an impairment loss for any initial or subsequent write-down of the
asset.
a. True; True
b. True; False
c. False; True
d. False; False
Q20
Statement I: Abandoned assets can be accounted for in accordance with IFRS 5.
Statement II: Temporarily idle assets can be accounted for in accordance with IFRS 5.
a. True; True
b. True; False
c. False; True
d. False; False

Q21

A non-current asset should be classified as held for sale only if:

a. Its carrying amount will be recovered wholly through continuing use rather than through a sale
transaction

b. Its carrying amount will be recovered wholly through a sale transaction rather than through
continuing use

c. Its carrying amount will be recovered principally through continuing use rather than through a sale
transaction

d. Its carrying amount will be recovered principally through a sale transaction rather than through
continuing use

Q22

The conditions which must be satisfied in order for the sale of an asset to be deemed "highly probable"
include:

a. Management is considering a plan to sell the asset

b. A completed sale is expected within five years

c. The asset is being marketed at a price which greatly exceeds its fair value

d. None of the above.

Q23

A disposal group always consists of a number of cash-generating units.

a. True

b. False
Q24

On 1 November 2020, a company which prepares financial statements to 31 March each year classifies a
non-current asset as held for sale. The asset's carrying amount on 1 November 2020 is P40,000 and its
fair value less costs to sell is P35,000. The asset is still held on 31 March 2021, when its fair value less
costs to sell is P27,500. The impairment losses that should be recognized are:

a. 1 November 2020   Pnil
31 March 2021   P12,500

b. 1 November 2020   P5,000
31 March 2021   P7,500

c. 1 November 2020   P5,000
31 March 2020   P12,500

d. 1 November 2020   ₱nil
31 March 2021   ₱nil

Q25

An asset which ceases to be classified as held for sale should be measured at the lower of its carrying
amount before being classified as held for sale (less any depreciation that would normally have been
charged in the meantime) and:

a. The lower of fair value less costs to sell and value in use at the date of the decision not to sell

b. Value in use at the date of the decision not to sell

c. The higher of fair value less costs to sell and value in use at the date of the decision not to sell

d. Fair value less costs to sell at the date of the decision not to sell