TODAY’S

TOPIC:
NONCURRENT ASSETS
HELD FOR SALE & DO
REFRESH 2: REVIEW OF
THEORY OF ACCOUNTS
RELEVANT STANDARD:
PFRS 5: NCA HELD FOR SALE
& DISCONTINUED OPERATIONS
 Noncurrent Assets Held for Sale
if its carrying value will be recovered
through a sale transaction rather than
through continuing use;
 Disposal Group
or Discontinued Operation
 A disposal group 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;
 INCLUSION OF GOODWILL
The group may include goodwill
acquired in a business combination if
the group is a cash generating unit to
which goodwill has been allocated.
 Criteria for Classification as HFS
 The asset or disposal group is available for immediate
sale in its present condition subject only to terms that
are usual and customary for sale of such assets or disposal
group;
 The sale must be highly probable;
 For the sale to be considered highly probable, the following
conditions must be met:
 High Probable Sale
 Management must be committed to a plan to sell the asset
or disposal group;
 An active program to locate a buyer and complete the plan
must have been initiated;
 The sale is expected to be a “completed sale” within one
year from the date of classification as held for sale;
 Extension of plan to sell beyond one year for reasons
beyond control shall be irrelevant if sufficient evidence
exists that the entity remains committed to its plan.
 High Probable Sale
 The asset or disposal group must be actively marketed for
sale at a sales price that is reasonable in relation to its fair
value;
 Actions required to complete the plan indicate that it is
unlikely that the plan will be significantly changed or
withdrawn.
 PRTC CRITERIA
rogram to locate
easonable price
ime to qualify
ommitment to a PTS
 Measurement of Assets Held for Sale
 PFRS 5 requires the measurement of NCA held for
sale at the lower of its carrying amount or fair
value less cost to sell;
 Fair value is the amount for which an asset could
be exchanged, or a liability settled, between
knowledgeable and willing parties in an arm’s
length transaction;
 Measurement of Assets Held for Sale
 Cost to sell is the incremental cost directly
attributable to the disposal of an asset or disposal
group but excluding finance cost and income tax
expense;
 PFRS 5 provides that a noncurrent asset classified
as held for sale shall not be depreciated.
 Write-down of Value to FV less CTS
 If the fair value less cost to sell is lower than
carrying amount of the asset or disposal group,
the write down to fair value less cost to sell is
treated as an impairment loss;
 If the noncurrent asset is a disposal group, the
impairment loss is apportioned across the assets;
 Write-down of CV to FV less CTS
 This means that any goodwill is written off first and
any remainder of the impairment loss is allocated
pro-rata to the noncurrent assets based on their
carrying amount in accordance with PFRS 5;
 If subsequently there is an increase in the fair
value less cost to sell, PFRS 5 provides that an
entity shall recognize a gain but not in excess of
any impairment loss previously recognized;
Re-valued asset classified as held for sale
 When an entity adopts the revaluation model for
the measurement of assets, any asset classified
as held for sale should be re-valued to fair value
immediately prior to the classification as held for
sale;
 The additional revaluation surplus is equal to the
fair value at the classification date less the
carrying amount at that date;
 Re-valued asset classified as held for sale
 Any cost to sell at classification date should be
recognized as impairment loss for the period and
deducted from the asset held for sale;
 However, at subsequent year end, the re-valued
asset classified as held for sale shall be measured
at the lower of carrying amount or fair value less
cost to sell.
 Abandoned Non current asset
 An entity shall not classify as held for sale a
noncurrent asset or disposal group that is to be
abandoned;
 This is because its carrying amount will be
recovered principally through continuing use;
 Abandoned Non current asset
 An entity shall not also account for a noncurrent asset that
has been temporarily taken out of use as if it had been
abandoned;
 An entity shall measure the noncurrent asset that ceases
to be classified as held for sale at the lower of carrying
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 or its recoverable amount at the date of the
subsequent decision not to sell.
 Presentation of Asset Classified as HFS
 It shall not be reclassified as current assets until
they meet the criteria to be classified as held for
sale;
 It shall be classified as current asset when held for
sale;
 If the noncurrent asset is a disposal 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;
 Presentation of Asset Classified as HFS
 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;
 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;
 Discontinued Operation
 Refers to 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;
 Discontinued Operation
 Is part of a single coordinated plan to dispose of a
separate major line of business or geographical
area of operations;
 Is a subsidiary acquired exclusively with a view to
resale;
 Discontinued Operation
 A component of an entity may be a subsidiary, a
major line of business or geographical segment
whose operations and cash flows can be clearly
distinguish, operationally and for financial
reporting purposes, from the rest of the entity.
 Treatment of Discontinued Operation
 PFRS 5 prohibits the retroactive classification as a
discontinued operation when the discontinued criteria are
met after the end of reporting period;
 A component is classified as held for sale if the carrying
amount will be recovered principally through a sale
transaction rather than through continuing use;
 Examples of discontinued operations are the following:
 Examples of Discontinued Operations
 Selling by a diversified entity of a major division that
represents the entity’s 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
meat packing business;
 Selling by a communications entity of all its radio stations.
The entity’s remaining activities are television stations and
a publishing house.
 Examples which are not Disc. Operations
 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, factory or branch to achieve
productivity, improvement or other cost saving.
 MULTIPLE CHOICE
QUESTIONS QUIZZER
NCA HELD FOR SALE
QUESTION NO. 1

ANSWER: A
QUESTION NO. 2

ANSWER: B
QUESTION NO. 3

ANSWER: A
QUESTION NO. 4

ANSWER: C
QUESTION NO. 5

ANSWER: D
QUESTION NO. 6

ANSWER: A
QUESTION NO. 7

ANSWER: C
QUESTION NO. 8

ANSWER: B
QUESTION NO. 9

ANSWER: B
DISCONTINUED
OPERATION
QUESTION NO. 1

ANSWER: A
QUESTION NO. 2

ANSWER: A
QUESTION NO. 3

ANSWER: B
QUESTION NO. 4

ANSWER: C
 TOPICS

PAS 18 PAS 38

PAS 40 PAS 16

PFRS 5 ToA.1312CD
That’s all
folks!!