Since 1977
FAR
FAR.2912-Non-current Assets Held For Sale
DISCUSSION PROBLEMS
1. An entity shall classify a non-current asset or disposal
group as “held for sale” when
a. The carrying amount of the asset or disposal group
will be recovered through a sale transaction.
b. The carrying amount of the asset or disposal group
will be recovered through continuing use.
c. The noncurrent asset or disposal group is to be
abandoned.
d. The noncurrent asset or disposal group is idle or
retired from active use.
2. To be classified as non-current asset held for sale
a. The asset must be available for immediate sale in
its present condition subject only to terms that are
usual and customary for sales of such assets.
b. The sale of the asset must be highly probable.
c. Both a and b.
d. Neither a nor b.
3. In accordance with PFRS 5, for a sale of the asset to
be highly probable:
I. Management is committed to a plan to sell
II. An active program to locate a buyer is initiated
III. The asset is being actively marketed for sale at a
sales price reasonable in relation to its fair value
IV. The sale is expected to qualify for recognition as
a completed sale within one year from the date of
classification (subject to limited exceptions)
V. Actions required to complete the plan indicate
that it is unlikely that plan will be significantly
changed or withdrawn
a. I, II, III, IV and V
b. I, III, IV and V only
c. I, IV and V only
d. I and IV only
4. The directors of The Rangimoe Company decided at a
board meeting on February 28 that a major machine
tool should be sold. Trade magazines reported recent
transactions in non-current assets of a similar age at
P500,000, but the board decided that the asking price
should be P750,000. The board also decided that as a
program of repairs to the tool needed to be carried out,
an agent should not be contracted with for the sale of
the item until the repairs were completed, which was on
May 31.
On July 31 the board agreed to reduce the asking price
to P500,000. A deal was agreed with a buyer on
August 31 and completion of the sale took place on
November 30.
In accordance with PFRS5 Non-current assets held for
sale and discontinued operations, the asset should be
classified as held for sale on
a. February 28
b. May 31
c. July 31
d. August 31
5. Which statement is incorrect regarding measurement
of non-current asset held for sale?
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OCAMPO/CABARLES/SOLIMAN/OCAMPO
OCTOBER 2020
a. Immediately before the initial classification of the
asset as held for sale, the carrying amount of the
asset will be measured in accordance with
applicable PFRSs.
b. Non-current asset classified as held for sale is
measured at the lower of its carrying amount and
fair value less costs to sell.
c. An impairment loss is recognized in the profit or
loss for any initial and subsequent write-down of
the asset to fair value less costs to sell.
d. Non-current asset classified as held for sale shall
continue to be depreciated.
Use the following information for the next two questions.
The Delap Company accounts for non-current assets using
the cost model. On 25 April 2020 Delap classified a non-
current asset as held for sale in accordance with PFRS5. At
that date the asset's carrying amount was P32,000, its fair
value was estimated at P22,000 and the costs to sell at
P3,200. On 15 May 2020 the asset was sold for net
proceeds of P17,400.
In Delap's statement of comprehensive income for the year
ended 30 June 2020:
6. What amount should be included as an impairment loss?
a. P13,600 c. P10,000
b. P13,200 d. Nil
7. What amount should be included as loss on disposal?
a. P14,600 c. P4,600
b. P13,200 d. P1,400
8. Which statement is incorrect regarding impairment of
assets classified as ‘held-for-sale’ in accordance with
PFRS 5?
a. Impairment must be considered both at the time of
classification as held for sale and subsequently.
b. Immediately prior to classifying an asset as held
for sale, any impairment loss is recognized in profit
or loss unless the asset had been measured at
revalued amount under PAS 16 or PAS 38, in which
case the impairment is treated as a revaluation
decrease.
c. After classification as held for sale, impairment loss
is the difference between the adjusted carrying
amounts of the asset and fair value less costs to
sell.
d. Any impairment loss that arises by using the
measurement principles in PFRS 5 must be
recognized in profit or loss, except for assets
previously carried at revalued amounts.
9. Classification as ‘asset held-for-sale’ will most likely
result in an immediate charge to profit or loss for
which of the following non-current assets?
a. Biological assets
b. Intangible assets
c. Investment property measured using the cost
model
d. Property, plant and equipment using the
revaluation model
FAR.2912
EXCEL PROFESSIONAL SERVICES, INC.

Use the following information for the next two questions. 15. Any gain on a subsequent increase in the fair value
less cost to sell of a noncurrent asset classified as held
The Verba Company accounts for non-current assets using
for sale should be treated as follows:
the revaluation model. On 30 June 2020, Verba classified a
a. The gain should be recognized in full.
freehold property as held for sale in accordance with PFRS5.
b. The gain should not be recognized.
At that date the property's carrying amount was P290,000
c. The gain should be recognized but not in excess of
and the balance on the revaluation reserve was P20,000. At
the cumulative impairment loss.
that date its fair value was estimated at P330,000 and the
d. The gain should be recognized but only in retained
costs to sell at P20,000. At 31 December 2020 the
earnings.
property's fair value was estimated at P325,000 and the
costs to sell at P25,000.
16. If Joy Corporation sold the plant on March 1, 2020 for
10. The asset should be carried in Verba's statement of a net proceeds of P351,000, what amount should be
financial position at 31 December 2020 at included as gain on disposal in the entity's statement of
a. P325,000 c. P300,000 comprehensive income for the year ended 31 December
b. P310,000 d. P290,000 2020?
a. P19,000 c. P11,000
11. What amount should be included as an impairment loss b. P12,000 d. P 1,000
in Verba's profit or loss for the year ended 31 December
2020? 17. An entity has an asset that was classified as held for
a. P30,000 c. P5,000 sale. However, the criteria for it to remain as held for
b. P10,000 d. Nil sale no longer apply. The asset should be measured at
a. The lower of its carrying amount and its recoverable
amount
Use the following information for the next three questions. b. The higher of its carrying amount and its recoverable
amount
An entity accounts for non-current assets using the c. The lower of its carrying amount on the basis that it
revaluation model. On 30 June 2020, the entity classified had never been classified as held for sale and its
two items of non-current assets as held for sale in recoverable amount
accordance with PFRS5. The following information relates to d. The higher of its carrying amount on the basis that it
these assets: had never been classified as held for sale and its
Asset 1 Asset 2 recoverable amount
Carrying amount before
classification as held for sale P400,000 P300,000 18. If Joy Corporation had not sold the plant as of
Revaluation surplus before December 31, 2020 and the recoverable amount at
classification as held for sale 60,000 30,000 that date is P315,00, the plant should be carried in
Fair value, 30 June 2020 450,000 260,000 Joy's statement of financial position at 31 December
Estimated costs to sell 20,000 12,000 2020 at
a. P370,000 c. P315,000
12. The total expense to be recognized in profit or loss b. P350,000 d. P305,000
related to these assets is
a. P42,000 c. P22,000 19. In the period in which the criteria are no longer met,
b. P32,000 d. Nil any required adjustment to the carrying amount of a
non-current asset that ceases to be classified as held
13. The net amount to be recognized in other for sale shall be included in
comprehensive income related to these assets is a. Profit or loss from continuing operations.
a. P50,000 c. P10,000 b. Profit or loss from discontinued operations.
b. P20,000 d. (P10,000) c. Other comprehensive income.
d. Retained earnings.
14. The balance of revaluation surplus as of 30 June 2020
after classification of the assets as held for sale is 20. A chain of bicycle shops holds bicycles for short-term
a. P110,000 c. P70,000 hire and for sale. The bicycles available for hire are
b. P 90,000 d. P50,000 used for two or three years and then sold by the shops
as second-hand models. All shops sell both new and
second-hand bicycles.
Use the following information for the next five questions.
The entity sold a new bicycle for P5,000 (cost P4,000)
On December 1, 2019, Joy Corporation decided to dispose and a second-hand bicycle for P1,000 (carrying
of an item of plant that is carried in its records at a cost of amount P500).
P450,000, with accumulated depreciation of P80,000.
Which statement is correct?
Depreciation on the plant since it was originally acquired
a. The bicycles for hire are reported in the statement
has been charged at P5,000 per month. The company
of financial position as property, plant and
undertook all the necessary actions to be able to classify
equipment.
the asset as held for sale. It is estimated that it could sell
b. The entity shall reclassify the bicycles for hire as
the plant for its fair value, P350,000, incurring P10,000
non-current assets held for sale when they cease
selling costs in the process.
to be rented and become held for sale.
On December 31, 2019, the plant had not been sold but, c. The difference between the net disposal proceeds
due to a shortage of this type of plant, there had been an and the carrying amount of the second-hand
increase in the fair value to P360,000 while expected costs bicycles is recognized as other income in profit or
to sell remain at P10,000. loss.
d. All of the above.

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EXCEL PROFESSIONAL SERVICES, INC.

21. What is a ‘disposal group’ as defined in PFRS 5? 23. Excel Corp. plans to dispose of a group of net assets
a. A group of assets to be disposed of, by sale or that form a disposal group. The net assets at
otherwise, together as a group in a single December 31, 2020, are
transaction, and liabilities directly associated with Carrying amount
those assets that will be transferred in the Goodwill P 6,000,000
transaction. Property, plant, and equipment 18,000,000
b. Operations and cash flows that can be clearly Inventory 10,000,000
distinguished, operationally and for financial Financial assets at fair value 7,000,000
reporting purposes, from the rest of the entity. Financial liabilities ( 4,000,000)
c. The smallest identifiable group of assets that P37,000,000
generates cash inflows that are largely
Under applicable PFRSs, property, plant, and
independent of the cash inflows from other assets
equipment would be stated at P16 million and
or groups of assets.
inventory at P9 million. The fair value less cost to sell
d. Assets other than goodwill that contribute to the
of the disposal group is P25 million. Assuming that the
future cash flows of both the cash-generating unit
disposal group qualifies as held for sale, what is the
under review and other cash-generating units.
amount to be presented in the statement of financial
position as assets classified as held for sale?
22. Which statement is incorrect regarding a ‘disposal
a. P37,000,000 c. P29,000,000
group’ classified as held for sale in accordance with
b. P34,000,000 d. P25,000,000
PFRS 5?
a. The measurement basis required for non-current
24. PFRS 5 requires the following disclosures about assets
assets classified as held for sale is applied to the
(or disposal groups) that are held for sale:
group as a whole, and any resulting impairment
I. Description of the non-current asset or disposal
loss reduces the carrying amount of the non-
group
current assets in the disposal group in the order of
II. Description of facts and circumstances of the sale
allocation required by PAS 36.
(disposal) and the expected timing
b. Assets and liabilities included within a disposal
III. Impairment losses and reversals, if any, and
group classified as held for sale, must be
where in the statement of comprehensive income
presented separately on the face of the statement
they are recognized
of financial position.
IV. If applicable, the reportable segment in which the
c. An entity shall not reclassify or re-present amounts
non-current asset (or disposal group) is
presented for the assets and liabilities of disposal
presented in accordance with PFRS 8
groups classified as held for sale in the statements
of financial position for prior periods to reflect the a. I, II and III only c. II, III and IV only
classification in the statement of financial position b. I, II and IV only d. I, II, III and IV
for the latest period presented.
d. None, all the statements are correct. - now do the DIY drill -

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EXCEL PROFESSIONAL SERVICES, INC.

DO-IT-YOURSELF (DIY) DRILL

1. The measurement provisions of PFRS5 apply to which
of the following assets?
a. Deferred tax assets.
b. Biological assets.
c. Investment properties that are accounted for in
accordance with the fair value model.
d. Property, plant and equipment that are accounted
for in accordance with the revaluation model.
2. Which statement is incorrect regarding ‘held-for-sale’
classification in accordance with PFRS 5?
a. The assets need to be disposed of through sale.
Therefore, operations that are expected to be
wound down or abandoned would not meet the
definition.
b. An entity that is committed to a sale involving loss
of control of a subsidiary that qualifies for held-for-
sale classification under PFRS 5 classifies all of the
assets and liabilities of that subsidiary as held for
sale, even if the entity will retain a non-controlling
interest in its former subsidiary after the sale.
c. The classification, presentation and measurement
requirements of PFRS 5 also apply to a non-current
asset (or disposal group) that is classified as held
for distribution to owners.
d. All the statements are correct.
3. An entity acquires a subsidiary exclusively with a view
to selling it. The subsidiary meets the criteria to be
classified as held for sale. At the balance sheet date,
the subsidiary has not yet been sold, and six months
have passed since acquisition. How will the subsidiary
be valued in the balance sheet at the date of the first
financial statements after acquisition?
a. At fair value
b. At the lower of its cost and fair value less cost to
sell
c. At carrying value
d. In accordance with applicable PFRS
Before income taxes, how much should be recognized
as gain (loss) on sale of the disposal group?
a. P300,000 c. P1,000,000
b. (P600,000) d. (P1,300,000)
6. The Angelbert Company accounts for non-current assets
using the revaluation model. On 30 June 2019
Angelbert classified a freehold property as held for sale
in accordance with PFRS5. At that date the property's
carrying amount was P290,000 and the balance on the
revaluation reserve was P20,000. At that date its fair
value was estimated at P330,000 and the costs to sell at
P20,000. At 31 December 2019 the property's fair
value was estimated at P325,000 and the costs to sell at
P25,000.
If the asset was sold for a net proceeds of P285,000 in
2020, what amount should be included as loss on
disposal in the entity's statement of comprehensive
income for the year ended 31 December 2020?
a. P 5,000 c. P25,000
b. P15,000 d. P35,000
7. On April 1, 2020, Brandoni Company has a piece of
machinery with a cost of P1,000,000 and accumulated
depreciation of P750,000. On April 1, Brandoni
decided to sell the machine within 1 year. As of April
1, 2020, the machine had an estimated selling price of
P100,000 and a remaining useful life of 2 years. It is
estimated that selling costs associated with the
disposal of the machine will be P10,000. On December
31, 2020, the estimated selling price of the machine
had increased to P150,000, with estimated selling
costs increasing to P16,000. The gain on reversal of
impairment loss on December 31, 2020 is
a. P160,000 c. P44,000
b. P 50,000 d. P 0

4. The Phoenix Company accounts for non-current assets

using the revaluation model. On 30 June 2020 Phoenix 8. Sentosa Corporation plans to dispose of some assets
classified a non-current asset as held for sale in together as a group. Details of the disposal group at
accordance with PFRS5. At that date the property's December 31, 2020 are given below:
carrying amount was P300,000 and the balance on the Carrying Value as
revaluation reserve was P30,000. Fair value was amount at remeasured
estimated at P280,000 and the costs to sell at P20,000. 12/31/20 immediately
The value in use is not determinable. The asset is still before before
unsold at 31 December 2020. What amount should be classification classification
included in the entity's statement of profit or loss for the as held for as held for
year ended 31 December 2020? sale sale
a. P40,000 c. P10,000 Goodwill P 3,900,000 P 3,900,000
b. P20,000 d. Nil PPE (carried at
revalued
5. On January 1, 2020, CDO Corporation determined to amounts) 11,960,000 10,400,000
sell a group of assets within its shoe manufacturing PPE (carried at cost) 14,820,000 14,820,000
division, as it believed it was cheaper to buy the parts AFS financial assets 6,240,000 5,720,000
from China. The assets that it wanted to sell had the Inventory 4,680,000 3,900,000
following carrying amounts: Total P41,600,000 P38,740,000
Factory P22,000,000
The fair value less costs to sell of the disposal group is
Accumulated depreciation (12,000,000)
P33,800,000 while the value in use is P34,600,000.
Raw materials 3,800,000
Spare parts 2,200,000 In the books of accounts, the carrying amount of the
ledger account PPE (carried at cost) after allocation of
The management of CDO calculated the fair value less
impairment loss is
costs to sell of the disposal group to be P14,400,000.
a. P14.209 million c. P13.780 million
The assets were sold on February 15, 2020 for
b. P14.679 million d. P14.244 million
P15,400,000, with selling costs amounting to
P700,000.
J - end of FAR.2912 - J

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