LESSON: NONCURRENT ASSETS HELD FOR SALE - disposal/actual sale: compare the carrying amount (latest

measurement) vs. selling price.

Non-current Asset - residual definition; all assets that does not
meet the definition of a current asset. (e.g., land, building, → > = loss
disposal group, etc.)
→ < = gain
- (disposal group) a group of assets to be disposed of in a
single transaction, and liabilities directly associated with
those assets that will be transferred in the transaction. Illustration 1: On January 1, 2022, Pepper Company acquired a
building at a cost of P 10,000,000 to be used as administrative
office. The building has an estimated useful life of 10 years and
Non-current Asset Held for Sale - a non-current asset or a a residual value of P 2,000,000.
disposal group that is held for sale. (recover the carrying
On January 1, 2026, the equipment was classified as held for
amount through sale, not through use)
sale. On such date, the fair value was estimated to be P
- not to be depreciated upon reclassification as held for sale. 7,000,000 and the estimated cost of disposal to be P 500,000.
(presented as part of current assets)
On September 30, 2026, the equipment was sold for P
6,300,000.
Conditions for Classification as Held for Sale:

i. the asset or disposal group is available for immediate sale ▪ Required:

in its present condition. (can be sold as seen)
a. How much is the measurement of the non-current asset
ii. the sale must be highly probable. held for sale on January 1, 2026? (P 6,500,000)

→ management must be committed to a plan to sell the b. How much is the impairment loss to be recognized on
asset or disposal group. January 1, 2026? (P 300,000)

→ an active program to locate a buyer and complete the plan
must have been initiated.
→ sales price is reasonable.
→ sales is expected to be completed within 1 year from date
of reclassification.
→ actions required to complete the plan indicate that it is
unlikely that the plan will be significantly changed or
withdrawn.
c. How much is the loss on disposal of the asset on
September 30, 2026? (P 200,000 - loss)
d. If the fair value of the asset on January 1, 2026 is equal to
P 8,000,000:
i. How much is the measurement of the non-current asset
held for sale on January 1, 2026? (P 6,800,000)
ii. How much is the impairment loss to be recognized on
January 1, 2026? (P 0)

Measurement of Non-current Asset Held for Sale

Acquisition Cost - Building 10,000,000
- carrying amount vs. fair value less cost to sell (cost of Accumulated Depreciation
(3,200,000)
disposal), whichever is lower. (initial and subsequent [(10,000,000 - 2,000,000) ÷ 10] x 4
measurement) Carrying Amount, 1/1/2026 6,800,000
vs. Fair Value less Cost of Disposal
→ exclusive of finance cost and income tax expense. (6,500,000)
(7,000,000 - 500,000)
Impairment Loss 300,000
- if carrying amount is higher than the fair value less cost to sell,
Initial Measurement (NCAHFS - lower) 6,500,000
recognize difference as impairment loss.

→ recognized in profit or loss. Carrying Amount, 9/30/2026 6,500,000

Selling Price (6,300,000)
→ for a disposal group: Loss on Disposal 200,000

▪ allocate first to goodwill.

Carrying Amount, 1/1/2026 6,800,000
▪ remaining impairment loss is to be allocated prorata to the vs. Fair Value less Cost of Disposal
(7,500,000)
other non-current assets based on carrying amounts. (8,000,000 - 500,000)
Impairment Loss 0
- subsequent increase in fair value: recognize gain but not in Initial Measurement (NCAHFS - lower) 6,800,000
excess of any impairment loss previously recognized.
Revalued Asset Classified as Held for Sale 6/30/2023: Remeasurement on Reclassification Date
Land 1,500,000
▪ revalue asset on the date of reclassification at fair value. (if Revaluation Surplus 1,500,000
fair value on date of reclassification is greater than the
previous carrying amount, difference is recognized as 6/30/2023: Reclassification to NCAHFS
additional revaluation surplus - OCI) Non-current Asset Held
7,500,000
for Sale
▪ reclassify asset from NCA to held for sale. (cost to sell is Land 7,500,000
recognized as impairment loss in profit or loss)
Impairment Loss 700,000
▪ subsequent measurement: carrying amount vs. fair value
Non-current Asset Held
less cost to sell, whichever is lower. 700,000
for Sale
▪ disposal/actual sale: compare the carrying amount (latest
measurement) vs. selling price. Abandoned Non-current Asset - not classified as non-current
asset held for sale, whether permanently or temporarily
→ > = loss abandoned.

→ < = gain

→ transfer the remaining balance of revaluation surplus to Presentation of Assets Classified as Held for Sale - these
retained earnings. assets are presented as current assets.

Illustration 2: On January 1, 2022, Pepper acquired a land at a
cost of P 4,500,000. The land is measured at fair value in
accordance with the revaluation model.
On December 31, 2022, the fair value of the land was P
6,000,000.
On June 30, 2023, the land was reclassified as held for sale. On
such date, the fair value was estimated at P 7,500,000 and the
cost of disposal at P 700,000.
On December 31, 2023, the land was sold for P 8,000,000.
▪ Required:
Change in Classification (from NCAHFS → NCA)
- measurement: carrying amount, as if not reclassified as held
for sale (with recognition of depreciation) or the recoverable
amount, whichever is lower.
→ recoverable amount is: fair value less cost to sell vs. value
in use, whichever is higher.
→ if the carrying amount of the NCAHFS before change in
classification is higher than the carrying amount of the NCA
after change in classification, difference is recognized as loss
on reclassification; otherwise, difference is recognized as
gain.

a. How much is the measurement of the non-current held for

sale on June 30, 2023? (P 6,800,000) Illustration 3: Pepper Company purchased building for P
b. How much is the impairment loss to be recognized on 10,000,000 on January 1, 2022 with a useful life of 10 years and
June 30, 2023? (P 700,000) no residual value.

c. How much is the gain on disposal of the asset on On December 31, 2023, Pepper classified the asset as held for
December 31, 2023? (P 500,000 - gain) sale. The fair value of the equipment on that date is P 6,600,000
and the cost of disposal is P 300,000.

On December 31, 2024, Pepper believed that the criteria for

Acquisition Cost - Land 4,500,000
classification as held for sale can no longer be met.
vs. Fair Value, 12/31/2022 6,000,000
Accordingly, Pepper decided not to sell the asset but continue
Revaluation Surplus 1,500,000
Carrying Amount, 12/31/2022 6,000,000 using it. The fair value less cost to sell and value in use on that
vs. Fair Value, 6/30/2023 7,500,000 date is P 7,200,000 and P 7,000,000, respectively.
Additional Revaluation Surplus 1,500,000
▪ Required:
Impairment Loss (cost of disposal) 700,000
Initial Measurement (NCAHFS) 6,800,000 a. How much is the measurement of the non-current held for
sale on December 31, 2023? (P 6,300,000)
Carrying Amount, 12/31/2023 7,500,000
Selling Price (8,000,000) b. How much is the impairment loss to be recognized on
Gain on Disposal 500,000 December 31, 2023? (P 1,700,000)
 c. How much is the measurement of the building on i. when the entity has actually disposed the operation; or
December 31, 2024 after the change in classification? (P
ii. when the operation meets the definition or criteria to be
7,000,000
held for sale.
d. How much is the gain on reversal on December 31, 2024?
→ no retroactive classification.
(P 700,000 - gain)

Conditions for Classification as Held for Sale:

Acquisition Cost - Building 10,000,000
Accumulated Depreciation i. the asset or disposal group is available for immediate sale
(2,000,000)
[(10,000,000 ÷ 10) x 2] in its present condition. (can be sold as seen)
Carrying Amount, 12/31/2023 8,000,000
vs. Fair Value less Cost of Disposal ii. the sale must be highly probable.
(6,300,000)
(6,600,000 - 300,000)
→ management must be committed to a plan to sell the
Impairment Loss 1,700,000
Initial Measurement (NCAHFS - lower) 6,300,000 asset or disposal group.

→ an active program to locate a buyer and complete the plan

Carrying Amount, 12/31/2024 (not held for must have been initiated.
sale) 7,000,000
[8,000,000 - (8,000,000 ÷ 8)] → sales price is reasonable.
vs. Recoverable Amount (higher) → sales is expected to be completed within 1 year from date
▪ FVLCTS = 7,200,000 7,200,000 of reclassification.
▪ V in U = 7,000,000
Measurement of Building (lower) 7,000,000 → actions required to complete the plan indicate that it is
unlikely that the plan will be significantly changed or
Carrying Amount, 12/31/2024 (before withdrawn.
6,300,000
change in classification)
Carrying Amount, 12/31/2024 (not held for
7,000,000
sale) Scenario which are not Discontinued Operations
Gain on Reclassification/Reversal 700,000
a. phasing out a product line within a product group
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
b. shifting of production from one location to another
LESSON: DISCOUNTINUED OPERATIONS c. closing of a facility, factory, or branch to achieve
productivity improvement or other cost savings
Discontinued Operation - a component of an entity that either
has been disposed of or is classified as held for sale, and:
Income Statement Presentation
i. it represents a separate major line of business or
geographical area of operations; - disclose a single amount = income or loss from discontinued
operations, which includes:
ii. it is part of a single coordinated plan to dispose of a major
line of business or geographical area of operations; a. after-tax profit or loss from discontinued operation

iii. it is a subsidiary acquired exclusively with a view to resale. b. after-tax gain or loss on measurement to fair value less
cost to sell

Component of An Entity - this may be a:

Balance Sheet Presentation
a. subsidiary
b. major line of business → asset: non-current asset held for sale (current)

c. geographical segment → liability: current liability

; whose operations and cashflows can be clearly distinguished

from from the rest of the entity. Notes Disclosure

- its assets, liabilities, revenues, and expenses are directly a. impairment loss, if any (when carrying amount is higher
attributable to the component. than fair value less cost to sell)

b. component of income or loss from discontinued

Classifying a Component as a Discontinued Operation operations (revenues/income, expenses/losses)
 c. gain or loss on disposal (part of income or loss from LESSON: INTERIM FINANCIAL REPORTING AND REPORTING
discontinued operations) BY OPERATING SEGMENTS

d. termination cost of employees Interim Period - a financial reporting period shorter than a full
financial year.

Illustration 1: Pepper Company has 2 segments, Ivana and

Alawi. On October 1, 2022, the board of directors of Pepper Interim Financial Report - a financial report containing either a
Company decided to dispose of segment Alawi. complete set of financial statements (as described in IAS 1:
Presentation of Financial Statements) or a set of condensed
On November 30, 2022, Pepper Company signed a contract to
financial statements for an interim period.
sell segment Alawi but the sale is expected to be completed by
March 31, 2023.

On December 31, 2022, the carrying amount of the assets of
segment Alawi was P 8,000,000 and the carrying amount of the
liabilities was P 3,200,000. The fair value of segment Alawi is P
4,500,000 while estimated cost of disposal is P 300,000.
The sale contract required Pepper to terminate certain
employees of segment Alawi. The expected termination cost is
P 300,000 to be paid on August 31, 2023.
Minimum Components of an Interim Financial Report
- an interim financial report shall include, at a minimum, the
following components:
i. a condensed statement of financial position;
ii. a condensed statement(s) of profit or loss and other
comprehensive income;

The accounting records of Pepper Company showed the iii. a condensed statement of changes in equity;
following information for 2022: iv. a condensed statement of cashflows; and

Segment Ivana Segment Alawi v. selected explanatory notes

Sales 9,000,000 7,000,000
Cost of Goods Sold 4,600,000 4,400,000
Expenses 1,200,000 800,000 Form and Content of Interim Financial Statements - if an entity
Income Tax Rate 30% 30% publishes a complete set of financial statements in its interim
financial report, the form and content of those statements shall
▪ Required: Prepare the income statement of Pepper conform to the requirements of IAS 1 for a complete set of
Company for the year ended December 31, 2022. financial statements.

- if an entity publishes a set of condensed financial statements

Carrying Amount - Assets 8,000,000 in its interim financial report, those condensed statements
Carrying Amount - Liabilities (3,200,000) shall include, at a minimum, each of the headings and subtotals
Carrying Amount - Net Assets, 12/31/2022 4,800,000 that were included in its most recent annual financial
vs. Fair Value less Cost of Disposal statements and the selected explanatory notes as required.
4,200,000
(4,500,000 - 300,000)
- additional line items or notes shall be inlcuded if their
Impairment Loss 600,000
omission would make the condensed interim financial
statements misleading.
Segment Segment
Ivana Alawi
Sales 9,000,000 7,000,000
Significant Events and Transactions
Cost of Goods Sold (4,600,000) (4,400,000)
Gross Profit 4,400,000 2,600,000 - an entity shall include in its interim financial report an
Expenses (1,200,000) (800,000) explanation of events and transactions that are significant to
Termination Cost (300,000) an understanding of the changes in financial position and
Impairment Loss (600,000)
performance of the entity since the end of the last annual
Income before Tax 3,200,000 900,000
reporting period.
Income Tax Rate (960,000) (270,000)
Income from Continuing - information disclosed in relation to those events and
2,240,000
Operations transactions shall update the relevant information presented in
Income from Discontinued the most recent annual financial report.
630,000 630,000
Operations
Net Income 2,870,000 - the following is a list of events and transactions for which
disclosures would be required if they are significant: (the list is
not all inclusive)
 a. write-down of inventories to net realizable value and the
reversal of such write-down;
b. recognition of a loss from the impairment of financial
assets, property, plant and equipment, intangible assets,
assets arising from contracts with customers, or other
assets, and the reversal of such impairment loss;
c. reversal of any provisions for the cost of restructuring;
d. acquisitions and disposals of items of property, plant, and
equipment;
e. commitments for the purchase of property, plant, and
equipment;
f. litigation settlements;
g. correction of prior period errors;
h. changes in the business or economic circumstances that
affect the fair value of the entity’s financial assets and
financial liabilities, whether those assets or liabilities are
recognized at fair value or amortized cost;
i. any loan default or breach of a loan agreement that has not
been remedied on or before the end of the reporting period;
j. related party transactions;
k. transfers between levels of the fair value hierarchy used in
measuring the fair value of financial instruments;
l. changes in the classification of financial assets as a result
of a change in the purpose or use of those assets; and
m. changes in contingent liabilities or contingent assets
Other Disclosures
▪ a statement that the same accounting policies and method
of computation are followed in the interim financial
statements as compared with the most recent annual
financial statements or, if those policies or methods have
been changed, a description of the nature and effect of the
change.
▪ explanatory comments about the seasonality or cyclicality
of interim operations.
▪ the nature and amount of items affecting assets, liabilities,
equity, net income, or cashflows that are unusual because of
their nature, size, or incidence.
▪ the nature and amount of changes in estimates of amounts
reported in prior interim periods of the current financial year
or changes in estimates of amounts reported in prior financial
years.
▪ issues, repurchases, and repayments of debt and equity
securities.
▪ dividends paid (aggregate or per share) separately for
ordinary shares and other shares.
▪ segment information.
▪ events after the interim period that have not been reflected
in the financial statements for the interim period.
▪ the effect of changes in the composition of the entity during
the interim period, including business combinations,
obtaining or losing control of subsidiaries, and long-term
investments, restructurings, and discontinued operations; in
the case of business combinations, the entity shall disclose
the information required by the standard.
▪ for financial instruments, the disclosures about fair value
required by IFRS 13 and IFRS 7.
▪ for entities becoming, or ceasing to be, investment entities,
as defined in IFRS 10, the disclosures in IFRS 12.
▪ the disaggregation of revenue from contracts with
customers required by IFRS 15.
Periods for which Interim Financial Statements are Required to
be Presented
- interim reports shall include interim financial statements
(condensed or complete) for periods as follows:
▪ statement of financial position as of the end of the current
interim period and a comparative statement of financial
position as of the end of the immediately preceding financial
year.
▪ statements of profit or loss and other comprehensive
income for the current interim period and cumulatively for the
current financial year to date, with comparative statements
of profit or loss and other comprehensive income for the
comparable interim periods (current and year-to-date) of the
immediately preceding financial year.
→ as permitted by IAS 1, an interim report may present for
each period a statement(s) of profit or loss and other
comprehensive income.
▪ statement of changes in equity cumulatively for the current
financial year to date, with a comparative statement for the
comparable year-to-date period of the immediately preceding
financial year.
▪ statement of cashflows cumulatively for the current
financial year to date, with a comparative statement for the
comparable year-to-date period of the immediately preceding
financial year.
Materiality - in deciding how to recognize, measure, classify, or
disclose an item for interim financial reporting purposes,
materiality shall be assessed in relation to the interim period
financial data.
- in making assessments of materiality, it shall be recognized
that interim measurements may rely on estimates to a greater
extent than measurements of annual financial data.
Recognition and Measurement
- an entity shall apply the same accounting policies in its
interim financial statements as are applied in its annual
financial statements, except for accounting policy changes
made after the date of the most recent annual financial
statements that are to be reflected in the next annual financial
statements.
- however, the frequency of an entity’s reporting (annual, half-
year, or quarterly) shall not affect the measurement of its
annual results; to achieve this, measurements for interim
reporting purposes shall be made on a year-to-date basis.
- revenues that are received seasonally, cyclically, or
occasionally within a financial year shall not be anticipated or
deferred as of an interim date if anticipation or deferral would
not be appropriate at the end of the entity’s financial year.
→ examples include dividend revenue, royalties, and
government grants; additionally, some entities consistently
earn more revenues in certain interim periods of a financial
year than in other interim periods, for example, seasonal
revenues of retailers. (such revenues are recognized when
they occur)
- costs that are incurred unevenly during an entity’s financial
year shall be anticipated or deferred for interim reporting
purposes if, and only if, it is also appropriate to anticipate or
defer that type of cost at the end of the financial year.
- the measurement procedures to be followed in an interim
financial report shall be designed to ensure that the resulting
information is reliable and that all material financial
information that is relevant to an understanding of the financial
position or performance of the entity is appropriately disclosed.
- while measurements in both annual and interim financial
reports are often based on reasonable estimates, the
preparation of interim financial reports generally will require a
greater use of estimation methods than annual financial
reports.
Restatement of Previously Reported Interim Periods
- a change in accounting policy, other than one for which the
transition is specified by a new IFRS, shall be reflected by:
a. restating the financial statements of prior interim periods of
the current financial year and the comparable interim periods
of any prior financial years that will be restated in the annual
financial statements; or
b. when it is impracticable to determine the cumulative effect
at the beginning of the financial year of applying a new
accounting policy to all prior periods, adjusting the financial
statements of prior interim periods of the current financial year,
and comparable interim periods of prior financial years to apply
the new accounting policy prospectively from the earliest date
practicable.
Operating Segments - additional information about the
operations of an entity is provided through the reporting of
enterprise components.
- its purpose is to inform users of the financial reports of the
different types of products and services the company provides
and the different geographical areas in which it operates to help
understand the entity better.
- reporting by operating segments is required for companies
where their equity or debt securities are publicly traded; they
are also required for companies which are in the process of
issuing equity and debt securities in public securities market.
- an operating segment is a component of an entity:
a. that engages in business activities from which it may earn
revenues and incur expenses;
b. whose operating results are reviewed by the entity’s chief
operating decision maker for the purpose of assessing the
component’s performance and allocating enterprise
resources; and
c. for which discrete financial information is available.
- the approach of looking to an entity’s organizational and
management structure and its financial reporting system to
identify the entity’s segments for external reporting is called
the management approach.
a. an operating segment is one whose performance is being
monitored by a manager who is directly accountable to a
chief operating decision maker;
b. the chief operating decision maker is not a literal position,
but pertains to its function;
c. some components of an entity may be grouped together to
form one operating segment if they have similar economic
characteristics.
- reportable segments: a segment is said to be reportable when
an operating segment information is required to be disclosed.
Aggregation of Segments
- aggregation is allowed when there is similarity in:
i. the nature of products and services;
ii. the nature of the production process;
 iii. the type or class of customers for the products or services; How much would be reported as total losses and expenses for
the first quarter income statement?
iv. the methods used to distribute the products or provide the
services; and, Insurance Expense - 1st Quarter
20,000
v. if applicable, the nature of the regulatory environment. (80,000 ÷ 4 quarters)
Loss from Typhoon 420,000
Loss on Inventory Writedown 200,000
Quantitative Threshold Total Expenses and Losses P 640,000

- a segment is reportable if it meets any of the following 10%
thresholds:
a. the revenue of the segment from sales to external
customers and transactions with other segments is 10% or
more of the total revenue, external and internal, of all
segments. (revenue test)
▪ costs and expenses that benefit more than one interim
period are allocated to the inteirm periods affected.
▪ gains and losses are not allocated over interim periods.
▪ LCNRV shall always be applied even in interim financial
reporting.

b. the results of the segment, whether profit or loss, is 10% or

more of the combined results of all segments in profit or the Problem 2: Faith Company’s incurrence of costs of operations
combined results of all segments in loss, whichever is greater are deemed uneven. As such, some costs and expenses relate
in absolute amount. (operating result/profit test) only to a certain time period. On February 1, 2021, the entity
c. the assets of the segment are 10% or more of the total incurred P 800,000 costs on advertising and promotions. Also,
assets of all segments. (asset test) the entity pays bonuses to their staff at year-end. For the whole
year, it is expected that bonuses will be paid in total amounting
- an entity may combine segments not meeting any of the 10%
to P 2,500,000. 30% would relate to the period ending March 31,
thresholds, provided these segments have similar
2021.
characteristics explained.
In the interim financial reports for the first quarter of 2021, how
- if the management concludes that a reportable segment in the
much advertising expense and bonuses would be presented?
immediately preceding period is of continuing significance, the
segment is considered to be reportable in the current period, Advertising and Promotions Expense
800,000
even if it does not meet any one of the 10% thresholds. (in full)
Bonuses (2,500,000 x 30%) 750,000
- the aggregate external revenues of the identified reportable
segments after testing shall be at least 75% of the total external
Problem 3: Nicole Company will be preparing its interim
revenues of the enterprise.
financial statements for the first quarter of 2021. It was
▪ if the total external revenue attributable to segments determined that total expenses for the first quarter amounted
deemed reportable constitutes less than 75% of the total to P 3,000,000. 30% of the expenses are variable selling and
consolidated external revenues of the enterprise, additional administrative expenses. Fixed selling and administrative
segments shall then be added and taken in and will be expenses include P 400,000 advertising expenses to be
deemed as reportable until the minimum 75% is met. incurred evenly during the period and depreciation expense for
the year amounting to P 1,040,000.
- if an operating segment is identified as reportable in the
current period in accordance with the testing done, segment What is the proper amount to be reported as total expense for
information for the preceding period shall also be disclosed the quarter ended March 31, 2021?
even if in that period, it was not deemed reportable.
Total Expenses: 3,000,000
▪ this shall not be done when the necessary information is not Variable Selling and Admin. (30%) 900,000
available or the cost to develop and extract the information Fixed Selling and Admin. (70%) 2,100,000
would be excessive.
Total Fixed Selling and Admin. 2,100,000
Less: Expenses to be Allocated
Problem 1: During the first quarter of 2021, Trixie Company paid Advertising Expense (400,000)
P 80,000 for a fire insurance premium for the whole year. Also, Depreciation Expense (1,040,000)
the entity suffered a loss from typhoon of P 420,000 and upon Other Fixed Expenses for the Quarter 660,000
applying LCNRV, there is a loss on inventory writedown during
the quarter amounting to P 200,000. Variable Selling and Admin. Exp. 900,000
Other Fixed Selling and Admin. Exp. 660,000
Advertising Expense - Quarter 1 100,000
 (400,000 ÷ 4)
Depreciation Expense - Quarter 1
260,000
(1,040,000 x 3/12)
Total Expenses - Quarter 1 P 1,920,000

Problem 4: Kaila Company prepared the following income

statement for the current year:

Sales 6,000,000
Cost of Goods Sold (2,800,000)
Gross Profit 3,200,000
Gain on Sale of Equipment 100,000
Total Revenue 3,300,000
Operating Expenses (500,000)
Loss on Casualty (300,000)
Income before Tax 2,500,000
Income Tax Expense (750,000)
Net Income 1,750,000

▪ third quarter sales were 30% of total sales.

▪ for interim reporting purposes, a gross profit rate of 40% can

be justified.

▪ variable operating expenses are allocated in the same

proportion as sales.

▪ fixed operating expenses are allocated based on passage of

time.

▪ of the total operating expenses, P 400,000 relate to variable

expenses and P 100,000 relate to fixed expenses.

▪ the equipment was sold on June 1.

▪ the casualty loss occurred on September 1.

How much is the income before tax in the interim financial

statements for the third quarter ended September 30, 2021?

Sales (30%) 1,800,000

Cost of Goods Sold (1,080,000)
Gross Profit (40%) 720,000
Gain on Sale of Equipment
-
(for Quarter 2)
Total Revenue 720,000
Variable Operating Expenses (30%) (120,000)
Fixed Operating Expenses (1/4) (25,000)
Loss on Casualty (for Quarter 3) (300,000)
Income before Tax - Quarter 3 275,000
 Identifiable Revenues
Segment Profit (Loss)
Assets External Internal Total
A 10,000,000 25,000,000 5,000,000 30,000,000 8,000,000
B 4,000,000 8,000,000 2,000,000 10,000,000 (3,000,000)
C 4,000,000 6,000,000 1,000,000 7,000,000 1,000,000
D 20,000,000 5,000,000 8,000,000 13,000,000 (4,000,000)
E 11,000,000 22,000,000 4,000,000 26,000,000 11,000,000

Totals 49,000,000 66,000,000 20,000,000 86,000,000 20,000,000 Profit

(7,000,000) Loss

Determinants
4,900,000 49,500,000 8,600,000 2,000,000
(10%)

Legend: (reportable) 75% of Total External Revenues 49,500,000

Total External Revenue (deemed
Asset Test reportable after 10% testing) 60,000,000
(Segment A, B, D, E)
91%
Revenue Test Result (60M ÷ 66M)
(reportable)
Profit Test

LESSON: CASH TO ACCRUAL ACCOUNTING