M.3.1 Noncurrent Asset Held For Sale

COLLEGE OF COMMERCE
MODULE 3 PACKET
AE 17 - INTERMEDIATE ACCOUNTING 3
MODULE 3.1 NONCURRENT ASSET HELD FOR SALE
Welcome to Module 3.1

In this module, we will discuss the nature, recognition, classification, measurement and presentation of
noncurrent asset held for sale. You are also expected to differentiate the ordinary noncurrent asset from
the noncurrent asset held for sale. During the discussion, you will be required to actively participate by
illustrating the transactions and the corresponding journal entries affecting the recognition as well as the
cessation of recognition of noncurrent asset held for sale.
When you see this symbol that is shown across the printed discussion, this represents an important
point for discussion or appreciation/appraisal to be rendered by the student. At the end of this module,
you will be answering multiple choice questions and straight problems focusing on the requirements to be
disclosed in the notes to the financial statements.
CONSULTATION HOURS:
Virtual time: During your class schedule
Phone or Messenger: Mondays to Fridays (5 PM to 7 PM)
LEARNING OUTCOMES:
By the end of this module, the students will be able to:
1. Discuss the nature, recognition, conditions for the classification, measurement and presentation of
noncurrent asset held for sale.
2. Differentiate the ordinary noncurrent asset from noncurrent asset held for sale and the reason for
separate presentation
3. Understand the effect of noncurrent asset held for sale in the financial position of an entity
4. Analyze how the presentation of noncurrent asset impacts the statement of financial position.
ASSESSMENT PLAN:
1. Graded recitation through interactive participation in a question and answer format during discussion
2. Problem solving games (points awarded to the first 5 students who can submit the correct answer
and solution)
3. Individual Submission and discussion of homework or learning tasks through research online
4. Summative examinations in multiple choice question format
LEARNING PLAN/SCHEDULE OF ACTIVITIES
STRATEGIES/DESCRIPTION/TOPICS/ TIME TO
ACTIVITIES
COURSE CONTENT COMPLETE
A. Assigned Reading 1. Read the definition and the nature of 0.5 hours
 Read noncurrent asset and noncurrent asset held for
1. Conceptual sale. 2.0 hours
2023-2024 Module Packets for AE 17 (Intermediate Accounting III) | College of Commerce |

University of San Agustin, Iloilo City, 5000, Philippines Page 1 of 15
COLLEGE OF COMMERCE
Framework on 2. Discuss your understanding of the transactions

recognition of assets relating to noncurrent asset held for sale.
2. Basic Accounting on 3. Illustrate the journal entries required in
the chapter relating accounting for noncurrent asset held for sale
to assets 4. Analyze the impact on the statement of
3. Intermediate financial position of a separate presentation for
Accounting on the noncurrent asset held for sale from the ordinary
recognition, noncurrent asset.
classification,
measurement and
presentation of
noncurrent asset and
noncurrent asset
held for sale
B. Lecture discussion 1. Define noncurrent asset classified as held for 0.5 hours
1. Read Chapter 8 of IA3 sale 4.0 hours
2. Watch Video 2. Distinguish between ordinary noncurrent asset
and noncurrent asset held for sale
3. Interactive participation 1.0 hour
3. Discuss the accounting i.e. recognition,
thru Q&A classification and measurement for noncurrent 2.0 hours
4. Graded recitation asset held for sale
4. Illustrate the journal entries in recording the 1.5 hours
transactions relating to noncurrent asset held
for sale.
5. Distinction of abandoned noncurrent asset from
temporarily abandoned noncurrent asset
6. Description of abandoned discontinued
operation
7. Explain the presentation of noncurrent asset
held for sale in the financial statements.
8. Define of discontinued operation
9. Illustrate the presentation of discontinued
operation in the financial statements
C. Synthesize the main points 1. Teacher summarizes the main points 1.5 hours
 Graded recitation discussed.
2. Students will be required to recite by sharing 1.0 hour
their understanding/learnings specifically
pointing out the important aspects that have
just been discussed regarding the journal
entries to record the different phases affecting
the noncurrent asset held for sale.
3. This will validate the achievement of learning
outcomes.
D. Assignment 1. Prepare a learning guide to illustrate the 2.0 hours

COLLEGE OF COMMERCE
different phases and the corresponding journal

entries affecting the noncurrent asset held for
sale.
2. Answer all questions and solve all problems
from the textbook.
E. Summative Quiz 1. Take multiple question quiz for (to be 1 hour
announced)
PRINTED REFERENCES
1. Valix, C. T., Peralta, J. F. & Valix, C. A. M. (2022). Conceptual framework and accounting
standards. 2022 edition. Manila : GIC Enterprises & Co., Inc.
2. Cabrera, M.E.B, Ocampo, R. R. & Cabrera, G. A (2018). Conceptual framework and accounting
standards. 2018-2019 edition. Manila : GIC Enterprises & Co., Inc.
3. Valix, C. T., Peralta, J. F. & Valix, C. A. M. (2021). Financial Accounting Volume 1 2021. Manila :
GIC Enterprises & Co., Inc..
6. Valix, M. E. B, Cabrera, G. A. & Cabrera, B. A. (2022). Financial Accounting and Reporting

Fundamentals 2022 Edition. Manila : GIC Enterprises & Co., Inc..
7. Millan, Z. V (2022). Intermediate Accounting 3. 2022 Edition. Baguio City: Bandolin Enterprise
Web and Other Learning Resources

1. Overall Review of Financial Statements:
Mahutova, S., 2020. IAS 1 Presentation of Financial Statements: Summary. [online] Youtube.com.
Available at: <https://www.youtube.com/watch?v=Q1m76iMIepU> [Accessed 16 August 2022].
2. Accounting Changes:
Mahutova, S., 2022. IAS 8 Accounting Policies, Changes in Accounting Estimates, Errors. [image]
Available at: <https://www.youtube.com/watch?v=0tMHK8QeqTU&list=PLf-
MINbacZi0Du5nHaJWKKvlFCPp7D7NL&index=7> [Accessed 16 August 2022].
3. Provisions & Contingencies:

COLLEGE OF COMMERCE
Mahutova, S., 2022. IAS 37 Provisions, Contingent Liabilities and Contingent Assets - summary.
[image] Available at: <https://www.youtube.com/watch?v=cM9YQUegKUs&list=PLf-
4. Statement of Cash Flows:

Mahutova, S., 2022. IAS 7 Statement of Cash Flows: Summary. [image] Available at:
<https://www.youtube.com/watch?v=AXZmlI7XUj0&list=PLf-
5. Financial Reporting in Hyperinflationary Economies:

Mahutova, S., 2022. IAS 29 Financial Reporting in Hyperinflationary Economies: Summary.
[image] Available at: <https://www.youtube.com/watch?v=55luVuTYLY8&list=PLf-
COURSE CONTENT DISCUSSION
3.1.1 NONCURRENT ASSET HELD FOR SALE
✓ What is a noncurrent asset ?

 A noncurrent asset is an asset that does not meet the definition of a current asset.
❖ The noncurrent asset may be an individual asset, like land and building, or a disposal
group.
❖ What is a disposal group?
• It is a group of assets to be disposed of, by sale or otherwise, together as a group in a
single transaction, and liabilities directly associated with those assets that will be
transferred in the transaction.
✓ What is a noncurrent asset held for sale?

 PFRS 5 paragraph 6 provides that a noncurrent asset or disposal group is classified as held for
sale if the carrying amount will be recovered PRINCIPALLY through a SALE transaction
rather than through continuing use.
a. What does this mean?
1. The entity does NOT intend to use the asset for its business operations; AND
2. The assets are intended to be sold to recover the carrying amount.
 What conditions should be present for a noncurrent asset to be classified as held for sale?
1. The asset or disposal group is available for immediate sale in the present condition
subject only to terms that are usual and customary for sale of such assets for disposal group.
a. The current condition of the asset should be adequate to be effectively “sold as seen” or
“as is, where is.”
2. The sale must be highly probable.
b. When can a sale be considered as highly probable?
• When the following conditions must be met:
1. Management must be committed to a plan to sell the asset or disposal group

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2. An active program to locate a buyer and complete the plan must have been
initiated
3. The sale is expected to be completed sale within one year from the date of
classification as held for sale
o An extension of the one-year period does not preclude the asset or disposal
group from being classified as held for sale if the delay is caused by events or
circumstances beyond the entity's control.
4. The asset or disposal group must be actively marketed for sale at a sale price
that is reasonable in relation to the fair value.
5. Actions required to complete the plan indicate that it is unlikely that the plan will
be significantly changed or withdrawn.
 How is asset held for sale measured for accounting purposes?

❖ PFRS 5 paragraph 15 provides that an entity shall measure a noncurrent asset or disposal
group classified as held for sale at the LOWER of carrying amount or fair value less cost
of disposal.
• What is a carrying amount ?
o It is the transaction price at the time of the acquisition of the noncurrent asset that is
held for sale.
• What is a fair value ?
o It is the current valuation at which the noncurrent asset can be traded in a market for
such kind or type of asset where there is a willing seller and a willing buyer.
o For example, an appraisal value determined by an independent appraiser may be
used to establish the fair value of a noncurrent asset held for sale.
 Will the noncurrent asset held for sale be depreciated just like the ordinary noncurrent assets?
❖ Paragraph 25 provides that a noncurrent asset classified as held for sale shall not be
depreciated.
 If noncurrent asset held for sale will not be depreciated, being a noncurrent asset, how will the
amount be measured and presented in the statement of financial position?
❖ The noncurrent asset held for sale shall be subjected to
a. WRITEDOWN to FAIR VALUE LESS COST OF DISPOSAL.
• What is the treatment for a writedown?
1. If the fair value less cost of disposal is lower than carrying amount of the asset or
disposal group, the write down to fair value less cost of disposal is treated as an
impairment loss.
o An impairment loss is recognized because the amount reflected in the
statement of financial position (carrying amount) is higher or overstated
than what is actually realizable if the noncurrent asset is sold at the time of
valuation or writedown.
2. If the noncurrent asset is a disposal group, the impairment loss is apportioned
across the asset based on carrying amount after writing off any goodwill first.
b. SUBSEQUENT INCREASE IN FAIR VALUE

COLLEGE OF COMMERCE
• If subsequently there is an increase in the fair value less cost of disposal, PFRS 5
paragraph 21 provides that an entity shall recognize a gain but not in excess of any
impairment loss previously recognized.
Illustration 1
On January 1 2019 an entity acquired an equipment at a cost of 5,000,000 to be used. The
equipment has an estimated useful life of 10 years in a residual value of 500,000
On January 1 2022, the equipment was classified as held for sale. Search date, less was
at one 1,900,000. On June 30 2022 the equipment was for sold for 1,500,000
1. To remove the equipment from property, plant and equipment and classify it as
held for sale on January 1 2022
Equipment held for sale 3,650,000

Accumulated depreciation 1,350,000
Equipment 5,000,000
Cost 5,000,000
Carrying amount - January 1, 2022 3,650,000
2. To measure the equipment held for sale at a lower of carrying amount and fair
value less cost of disposal on January 1, 2022
Impairment loss 1,750,000

Carrying amount 3,650,000

Fair value less cost of disposal 1,900,000
Impairment loss 1,750,000
3. To record the sale of the equipment on June 30 2022
Cash 1,500,000
Loss on sale of equipment 400,000
Note that the equipment held for sale is no longer depreciated from January 1 to
June 30 2022
Illustration 2
On January1, 2019, an entity acquired an equipment at the cost of 4,000,000 to be used
in the ordinary course of business. The equipment has an estimated useful life of 5 years
and has no residual value.

COLLEGE OF COMMERCE
On December 31, 2020, the equipment was classified as equipment held for sale. On such
date, the fair value less cost of disposal was 3,000,000. On July 1, 2021 the equipment
was sold for 2,900,000.
1. To remove the equipment from property, plant and equipment and classify it as held
for sale on December 31 2020.

Equipment 5,000,000
Cost
Accumulated depreciation
Carrying amount - January 1, 2022
2. To measure the equipment held for sale at the lower of carrying amount and fair value
less cost of disposal on December 31, 2020.
No entry is required because the equipment held for sale is measured at the carrying
amount of 2,400,000 which is lower than fair value less cost of disposal.
Fair value less cost of disposal

Carrying amount
Expected gain
The gain is not recognized at this point because any game should not be anticipated at
the point of classification as held for sale.
3. To record the sale of equipment on July 1, 2021
Cash
Equipment held for sale
Gain on sale of equipment
c. REVALUED ASSET CLASSIFIED AS HELD FOR SALE

• PFRS 5 paragraph 18 provides the entity adopts the revaluation model for the
measurement of assets.
o Any asset classified as held for sale should be revalued to fair value
immediately prior to the classification as held for sale.
• What is the accounting treatment for the effects of the revaluation of assets?
1. If the fair value at the classification date less the carrying amount at that date
results in an excess of the revaluation amount, the excess shall be treated as
additional revaluation surplus.
Revaluation amount xx
Less: Fair value at classification date xx
Revaluation Surplus xx

COLLEGE OF COMMERCE
2. Any cost of disposal at classification date should be recognized as impairment

loss for the period and deducted from the asset held for sale.
3. At subsequent year end, the revalued asset classified as held for sale shall be
measured at the lower of carrying amount and fair value less cost of disposal.
Illustration 3
On January 1, 2019 an entity acquired land at the cost of 2,500,000.
The land is measured at fair value in accordance with the revaluation model.
On December 31, 2019 the fair value of the land was 3,000,000.
On June 30, 2020, the land was classified as held for sale.
On such date, the fair value was estimated at 3,500,000 and the cost of disposal at
100,000.
On December 31, 2020, the land was sold for 3,350,000.
Journal entries
1. To record the acquisition of land on January 1, 2019
Land 2,500,000
Cash 2,500,000
2. To revalue the land at fair value on December 31, 2019
Land 500,000
Revaluation surplus 500,000
Fair value - December 31, 2019 3,000,000

Cost 2,500,000
3. To revalue the land at fair value on the date of classification as held for sale on June
30, 2020
Land 500,000
Fair value - June 30, 2020 3,500,000

Carrying amount - December 31, 2019 3,000,000
Additional revaluation surplus 500,000
4. To remove the land from property, plant and equipment and classify it as held for sale
on June 30, 2020

COLLEGE OF COMMERCE
Land held for sale 3,500,000

Land 3,500,000
5. To recognize the cost of disposal as impairment loss on June 30, 2020
Impairment loss 100,000

Land held for sale 100,000
6. To record the sale of land on December 31, 2020
Cash 3,350,000
Loss on sale of land 50,000
Land held for sale 3,400,000
7. To transfer the revaluation surplus to retained earnings
Revaluation surplus 1,000,000

Retained earnings 1,000,000
 What is an abandoned noncurrent asset?

❖ PFRS 5 paragraph 13 provides that an entity shall not classify as held for sale a non-current
asset or disposal group that is to be abandoned.
❖ What is the abandoned noncurrent asset cannot be classified as asset held for sale?
• This is because the carrying amount will be recovered principally through continuing
use or the noncurrent asset is to be used until the end of its economic life.
❖ How should a temporarily abandoned noncurrent asset be treated?
• PFRS five paragraph 14 provides that an entity shall not account for a noncurrent asset
that has been temporarily taken out of use as if it had been abandoned.
o For example, an entity ceases to use a manufacturing plant because demand for its
products has declined.
o However, the plant is maintained in workable condition and is expected that it will be
brought back into use if demand picks up.
o In this case, the plant is not regarded as abandoned.
❖ Is a change in classification from held for sale to noncurrent asset or disposal group
permitted?
• This situation usually happens when there is a decision not to sell the non-current assets
anymore, thus, the criteria for being classified as held for sale may no longer be met.
• FRS 5 paragraph 27 provides that the entity shall measure the noncurrent asset that
ceases to be classified as held for sale at the lower of:
a. Carrying amount before the asset was classified as held for sale adjusted for any
depreciation or amortization that would have been recognized if the asset had not
been classified as held for sale
b. Recoverable amount at the date of the subsequent decision not to sell

COLLEGE OF COMMERCE
Illustration
An entity purchased equipment for 5,000,000 on January 1, 2019 with a useful life of 10
years and no residual value.
On December 31, 2020 the entity classified the asset as held for sale. The fair value of the
equipment on December 31, 2020 is 3,300,000 and the cost of disposal is 100,000.
On December 31, 2021 the fair value of the equipment is 3,800,000 and the cost of
disposal is 200,000.
On the same date, the entity believed that the criteria for classification as held for sale can
no longer be met. Accordingly, the entity decided not to sell the asset but to continue to
use it.
1. To record the purchase of equipment on January 1, 2019
Equipment 5,000,000
Cash 5,000,000
2. To record depreciation for 2019
Depreciation (5,000,000 / 10 years) 500,000

Accumulated depreciation 500,000
Depreciation (5,000,000 / 10 years) 500,000

Accumulated depreciation 500,000
4. To remove the asset from property, plant and equipment and classify it as held for
sale on December 31, 2020

Accumulated Depreciation 1,000,000
Equipment 5,000,000
5. To measure the equipment held for sale at the lower of fair value less cost of disposal
and carrying amount on December 31, 2020
Impairment loss 800,000

Equipment held for sale 800,000
Carrying amount 4,000,000
Fair value less cost of disposal (3,300,000 – 100,000) 3,200,000
Impairment Loss 800,000

COLLEGE OF COMMERCE
6. To measure the equipment that ceases as held for sale at the lower of carrying amount
adjusted for depreciation that would have been recognized had the equipment not
been classified as held for sale and the recoverable amount on December 31, 2021
Equipment held for sale 300,000

Gain on reclassification 300,000

Depreciation that would have been recognized in 2021 (500,000)
Recoverable amount (3,800,000 – 200,000) 3,600,000
Measurement of equipment - lower 3,500,000

Carrying amount per book - December 31, 2020 3,200,000
Gain on reclassification 300,000
Notes:
o On December 31, 2021, the equipment is measured at 3,500,000 because this is
lower than the fair value less cost of disposal of 3,600,000
o PFRS 5 paragraph 28 states that any adjustment to the carrying amount of a non-
current asset that ceases to be classified as held for sale should be included in profit
or loss.
o However, if the noncurrent asset is measured using the revaluation model before it
was classified as held for sale, any adjustment shall be treated as a revaluation
increase or decrease.
7. To reclassify the asset as property, plant and equipment on December 31, 2021
Equipment 3,500,000

Depreciation 500,000
Accumulated depreciation (3,500,000 / 7 years remaining) 500,000
 How is asset classified as held for sale presented in the statement of financial position?
❖ PFRS 5 paragraph 3 provides that assets classified as non-current in accordance with PAS 1
shall not be classified as current assets until they meet the criteria to be classified as held for
sale.
o Simply stated, a noncurrent asset that is already classified as held for sale shall be
presented separately as current asset.
o PFRS 5 paragraph 38 provides that if the noncurrent asset is a disposable group
classified as held for sale, the assets and liabilities of the group shall be presented
separately and cannot be offset as a single amount.

COLLEGE OF COMMERCE
o In other words, the assets of the disposal group shall be described as “noncurrent assets
classified as held for sale” presented separately as a single amount under current
assets.
o The liabilities of the disposal group shall be described as “liabilities directly associated
with noncurrent assets classified as held for sale” presented separately as a single
amount under current liabilities.
 What is a change in method of disposal?

❖ The IASB amended IFRS 52 clarify the accounting treatment when an entity reclassifies an
asset or disposal group from “held for sale” to “held for distribution to owners” or vice versa
without any time lag.
1. The change in classification is considered a continuation of the original plan of disposal.

2. The entity shall continue to apply the “held for sale” or “held for distribution” accounting.
• In other words, the asset shall be measured at the lower between carrying amount and
fair value less cost of disposal or fair value less cost to distribute.
3. At the time of reclassification, the entity shall recognize any impairment loss or subsequent
increase in fair value less cost of disposal or distribution.
4. The change in classification does not, in, expand in which a sale has to be completed.
3.1.2 DISCONTINUED OPERATION
✓ What is a noncurrent asset ?

 A noncurrent asset is an asset that does not meet the definition of a current asset.
Discontinued operations
Under appendix a of pf rs5 a discontinued operation is defined as a component of an entity that either
has been disposed of or is classified as held for sale and
• represents a separate major line of business or geographical area of operations;
• is a part of a single coordinated plan to dispose of a separate major line of business or
geographical area of operations;
• exclusively with a view to resale.
component classified as held for sale

the discontinued operation is accounted for as a “ disposal group classified as held for sale.”
the component of an entity must be available for immediate sale in the present condition and the sale
must be highly probable.
timing of reporting
a component of an entity is classified as discontinued operation at the date:
when the entity has actually disposed of the operation
when the operation meets the criteria to be classified as held for sale
pf rs5 paragraph 12 prohibits the retroactive classification as a discontinued operation when the
discontinued criteria are met after the end of reporting period

COLLEGE OF COMMERCE
Stated otherwise, if the discontinued criteria are met after the end of reporting period, an entity shall not
classify the discontinued operation as held for sale in the current financial statements.
component of an entity
A component of an entity maybe a subsidiary, a major line of business or geographical segments whose
operations and cash flows can be clearly distinguished, operationally and for financial reporting
purposes, from the rest of the entity.
the component can be clearly distinguished operationally and for financial reporting purposes if the
assets and the liabilities and the revenue and expenses are directly attributable to the component.
Assets, liabilities, income and expense are directly attributable to the component if they would be
eliminated when component is disposed of.
accordingly, a discontinued operation occurs when the operations and cash flows of the component has
been or will be eliminated from the ongoing operations of the entity and the entity will have no significant
continuing involvement in the component after disposal
examples of discontinued operation

Selling by a diversified entity of a major division that represents the entities only activities in the
electronics industry
selling by a meat packing entity of controlling interest in a furniture entity
all other operations of the entity are in the meatpacking business
selling by an entity of all its radio stations
the entity's remaining activities are television stations and the publishing house.
a conglomerate is engaged in commodity business, real estate, manufacturing and construction
business
selling of any of the four businesses is a discontinued operations
examples which are not discontinued operation

phasing out of product line within a product group
shifting of production or marketing activities for a particular line of business from one location to another
closing of a facility, fact to or saving
Income statement presentation

Pf rs5 paragraph 33 provides that an 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 measurement
to fair value less to cost of disposal or on the disposal of the assets or disposal group continuing the
discontinued operation
simply stated, the income or loss from discontinued operation, net of tax shall be presented as a single
amount in the income statement below the income from continuing operations
included in discontinued operation

The amount of revenue, expense and income or loss attributable to the discontinued operation during
the current period and the related income tax

COLLEGE OF COMMERCE
an impairment loss is recognized when the fair value less cost of disposal of the discontinued operation
is lower than the carrying amount of the net assets
if the fair value less the cost of disposal is higher than the carrying amount, the expected gain
is not recognized.
any gain or loss from the actual disposal of the assets and settlement of the liabilities of a discontinued
operation is recognized on the date of sale or the date of settlement
the termination costs of employees and other costs which are directly incurred as a result of the
discontinuance.
presentation and statement of financial position

Pf rs5 paragraph 38 provides that an entity shall also present separately on the face of the statement of
financial position the following information:
assets of the component held for sale separately from all other assets
assets of the component held for sale are measured at the lower of fair value less to cost of disposal and
their carrying amount
liabilities of the component separately from all other liabilities
non depreciation - non current assets of the component held for sale shall not be depreciated
pf rs5 paragraph 3 provides that the assets of the component shall be presented as a single amount
under non current assets and the liabilities of the component shall be presented as a single amount
under current liabilities
the assets and liabilities of the component cannot be offset against the other
Pf rs5 paragraph 40 further provides that if a disposal group is classified as held for sale in the current
year, an entity shall not reclassify or re-present the asset and liabilities off the disposal group for the prior
period to reflect the ”held for sale” classification in the statement of financial position as of the end of the
current reporting period.
in other words the presentation of the assets and liabilities of the disposal group in the prior period is not
changed.
cash flow presentation

Psrs five paragraph 33 provides that the net cash flows attributable to the operating, in and financing of a
discontinued operation operation shall be separately presented in the statement of cash flows or
disclosed in the notes
Illustration
.Zeta company has two segments, A and B. on july 1 2019 the board of directors of the Zeta decided to
dispose off segment B, an apparel division.
on october 1 2019, Zeta Company signed a contract to sell segment B but the sale is expected to be
completed by january 31 2018.
on december 31 2019, the carrying amount of the assets of segment B was 3,000,000 and the carrying
amount of the liabilities was 1,800,000.

COLLEGE OF COMMERCE
the fair value less cost of disposal of segment B was 1,000,000.
the sale contract required Zeta Company to terminate certain employees of segment B.
the expected termination cost is 150,000 to be paid on june 30 2020.
the accounting records of Zeta Company showed the following information for 2019:
Segment A Segment B
Sales 5,000,000 3,000,000
cost of goods sold 2,500,000 1,400,000
Expenses 1,000,000 500,000
income tax 480,000 240,000
Presentation
The income statement of Zeta Company For the year ended december 31, 2019 will appear as follows:
Zeta Company
Income statement
Year ended december 31, 2019
Sales 5,000,000
cost of sales (2,500,000)
gross income 2,500,000
Expenses (1,000,000)
income before tax 1,500,000
income tax expense 480,000
income from continuing operations 1,020,000
income from discontinued operations, net 510,000
net income 1,530,000
Disclosure
The notes to financial statements should include the following disclosure with respect to the discontinued
operation.
Sales - segment B 3,000,000

cost of goods sold (1,400,000)
gross income 1,600,000
Expenses (500,000)
impairment loss (200,000)
employee termination costs (150,000)
income tax (240,000)
income from discontinued operations 510,000
fair value less cost of disposal of segment B 1,000,000

carrying amount of net assets - segment B (1,200,000)
impairment loss (200,000)


M.3.1 Noncurrent Asset Held For Sale

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COLLEGE OF COMMERCE

Welcome to Module 3.1

LEARNING PLAN/SCHEDULE OF ACTIVITIES

2023-2024 Module Packets for AE 17 (Intermediate Accounting III) | College of Commerce |

Framework on 2. Discuss your understanding of the transactions

2023-2024 Module Packets for AE 17 (Intermediate Accounting III) | College of Commerce |

different phases and the corresponding journal

6. Valix, M. E. B, Cabrera, G. A. & Cabrera, B. A. (2022). Financial Accounting and Reporting

Web and Other Learning Resources

3. Provisions & Contingencies:

2023-2024 Module Packets for AE 17 (Intermediate Accounting III) | College of Commerce |

4. Statement of Cash Flows:

5. Financial Reporting in Hyperinflationary Economies:

COURSE CONTENT DISCUSSION

3.1.1 NONCURRENT ASSET HELD FOR SALE

✓ What is a noncurrent asset ?

✓ What is a noncurrent asset held for sale?

2023-2024 Module Packets for AE 17 (Intermediate Accounting III) | College of Commerce |

 How is asset held for sale measured for accounting purposes?

b. SUBSEQUENT INCREASE IN FAIR VALUE

2023-2024 Module Packets for AE 17 (Intermediate Accounting III) | College of Commerce |

Equipment held for sale 3,650,000

Impairment loss 1,750,000

Carrying amount 3,650,000

3. To record the sale of the equipment on June 30 2022

2023-2024 Module Packets for AE 17 (Intermediate Accounting III) | College of Commerce |

Equipment held for sale 3,650,000

Fair value less cost of disposal

3. To record the sale of equipment on July 1, 2021

c. REVALUED ASSET CLASSIFIED AS HELD FOR SALE

2023-2024 Module Packets for AE 17 (Intermediate Accounting III) | College of Commerce |

2. Any cost of disposal at classification date should be recognized as impairment

On December 31, 2020, the land was sold for 3,350,000.

1. To record the acquisition of land on January 1, 2019

2. To revalue the land at fair value on December 31, 2019

Fair value - December 31, 2019 3,000,000

Fair value - June 30, 2020 3,500,000

2023-2024 Module Packets for AE 17 (Intermediate Accounting III) | College of Commerce |

Land held for sale 3,500,000

5. To recognize the cost of disposal as impairment loss on June 30, 2020

Impairment loss 100,000

6. To record the sale of land on December 31, 2020

7. To transfer the revaluation surplus to retained earnings

Revaluation surplus 1,000,000

 What is an abandoned noncurrent asset?

2023-2024 Module Packets for AE 17 (Intermediate Accounting III) | College of Commerce |

1. To record the purchase of equipment on January 1, 2019

2. To record depreciation for 2019

Depreciation (5,000,000 / 10 years) 500,000

3. To record depreciation for 2020

Depreciation (5,000,000 / 10 years) 500,000

Equipment held for sale 4,000,000

Impairment loss 800,000

2023-2024 Module Packets for AE 17 (Intermediate Accounting III) | College of Commerce |

Equipment held for sale 300,000

Carrying amount - December 31, 2020 4,000,000

Recoverable amount (3,800,000 – 200,000) 3,600,000

Measurement of equipment - lower 3,500,000

8. To record depreciation for 2022

2023-2024 Module Packets for AE 17 (Intermediate Accounting III) | College of Commerce |

 What is a change in method of disposal?

1. The change in classification is considered a continuation of the original plan of disposal.