Use The Following Information For The Next Two Questions

PFRS 5
Non-current assets Held for Sale and Discontinued Operations
For Classroom Discussion:
Availability for immediate sale in present condition

Use the following information for the next two questions:
VISAGE APPEARANCE Co. is committed to a plan to sell its headquarters building
and has initiated actions to locate a buyer. As of this date, the building has a carrying
amount of ₱5,000,000, a fair value of ₱6,000,000 and estimated costs to sell of
₱200,000.
1. VISAGE Co. has an intention to transfer ownership of a building to a buyer after

it vacates the building. How should VISAGE Co. classify the headquarters
building?
a. Included under property, plant and equipment at ₱5,000,000.
b. Included under property, plant and equipment at ₱5,800,000.
c. Classified as held for sale at ₱5,000,000
d. Classified as held for sale at ₱5,800,000
2. VISAGE Co. will continue to use the building until the construction of a new
headquarters is completed. How should VISAGE Co. classify the headquarters
building?

DECORTICATE PEEL, Inc. is committed to a plan to sell a manufacturing facility
and has initiated actions to locate a buyer. As of this date, the building has a carrying
amount of ₱6,000,000, a fair value of ₱5,000,000 and estimated costs to sell of
₱200,000. At the plan commitment date, there is a backlog of uncompleted customer
orders.
3. DECORTICATE, Inc. intends to sell the manufacturing facility with its

operations. Any uncompleted customer orders at the sale date will be transferred
to the buyer. The transfer of uncompleted customer orders at the sale date will not
affect the timing of the transfer of the facility. How should DECORTICATE Co.
classify the manufacturing facility?
4. DECORTICATE, Inc. intends to sell the manufacturing facility, but without its
operations. The entity does not intend to transfer the facility to a buyer until after
it ceases all operations of the facility and eliminates the backlog of uncompleted
customer orders. How should DECORTICATE Co. classify the manufacturing
facility?

DEMOTIC POPULAR Co. acquires through foreclosure a property comprising land
and buildings that it intends to sell. The fair value of the land and buildings is
₱6,000,000 and costs to sell are ₱200,000. The related defaulted receivables have a
carrying amount of ₱5,000,000.
5. The entity does not intend to transfer the property to a buyer until after it
completes renovations to increase the property’s sales value. How should
DEMOTIC Co. classify the land and buildings?
b. Included under investment property at ₱5,000,000.
c. Included under investment property at ₱5,800,000.
6. After the renovations are completed and the property is classified as held for sale
but before a firm purchase commitment is obtained, the entity becomes aware of
environmental damage requiring remediation. The entity still intends to sell the
property. However, the entity does not have the ability to transfer the property to a
buyer until after the remediation is completed. The costs of renovations made
totaled ₱200,000. The estimated costs of remediation are ₱100,000. How should
DEMOTIC Co. classify the land and buildings?
b. Included under investment property at ₱6,000,000.
c. Included under investment property at ₱5,700,000.
Highly probable sale

7. PERAMBULATE STROLL Co. is a commercial leasing and finance company.
As of year-end, PERAMBULATE holds equipment that is available either for sale
or lease. PERAMBULATE is not yet decided whether to sell or to lease the
equipment. The equipment has a carrying amount of ₱1,000,000, fair value of
₱1,200,000 and costs to sell of ₱50,000. How should PERAMBULATE Co.
classify the equipment?
a. Inventory, ₱1,000,000 c. Held for sale, ₱1,150,000
b. Investment property, ₱1,250,000 d. Held for sale, ₱1,000,000
Highly probable sale

8. PHILANDERING FLIRTING Co. is committed to a plan to sell a property that is
in use. The transfer of the property will be accounted for as a sale and finance
leaseback. The property has a carrying amount of ₱1,000,000, fair value of
₱1,200,000 and costs to sell of ₱50,000. How should PHILANDERING Co.
classify the equipment?
a. Property, plant and equipment, ₱1,000,000
b. Investment property, ₱1,250,000
c. Held for sale, ₱1,150,000
d. Inventory, ₱1,000,000
Exception to one-year requirement

9. An entity in the power generating industry is committed to a plan to sell a disposal
group that represents a significant portion of its regulated operations. The sale
requires regulatory approval, which could extend the period required to complete
the sale beyond one year. Actions necessary to obtain that approval cannot be
initiated until after a buyer is known and a firm purchase commitment is obtained.
However, a firm purchase commitment is highly probable within one year. The
disposal group has a carrying amount of ₱10,000,000 and fair value less costs to
sell of ₱10,600,000. How should the entity classify the disposal group?
a. Held for sale, ₱10.6M c. Under previous classifications, ₱10M
b. Held for sale, ₱10M d. Under previous classifications, ₱10.6M

10. An entity is committed to a plan to sell a manufacturing facility in its present
condition and classifies the facility as held for sale at that date. After a firm
purchase commitment is obtained, the buyer’s inspection of the property identifies
environmental damage not previously known to exist. The entity is required by the
buyer to make good the damage, which will extend the period required to
complete the sale beyond one year. However, the entity has initiated actions to
make good the damage, and satisfactory rectification of the damage is highly
probable. The manufacturing facility has a carrying amount of ₱10,000,000 and
fair value less costs to sell of ₱10,600,000. How should the entity classify the
manufacturing facility?
a. Held for sale, ₱10.6M c. PPE, ₱10M
b. Held for sale, ₱10M d. PPE, ₱10.6M

In 20x1, FORGETIVE CREATIVE Co. classified a property as held for sale. The
carrying amount prior to classification is ₱400,000 while fair value less cost to sell is
₱360,000. The property is being sold at ₱360,000.
During 20x1, the market conditions that existed at the date the asset was classified
initially as held for sale deteriorate and, as a result, the asset is not sold by the end of
that period. During that period, FORGETIVE actively solicited but did not receive
any reasonable offers to purchase the asset and, in response, FORGETIVE reduced
the price from ₱360,000 to ₱320,000. The fair value less costs to sell on December
31, 20x1 is ₱340,000.
11. How should FORGETIVE Co. classify the property in its 20x1 annual financial
statements?
a. Held for sale, ₱320,000 c. PPE, ₱340,000
b. Held for sale, ₱340,000 d. PPE, ₱400,000
12. During 20x2, the market conditions deteriorate further, and the asset is not sold by
December 31, 20x2. FORGETIVE Co. believes that the market conditions will
improve and has not further reduced the price of the asset. The fair value less costs
to sell on December 31, 20x2 is ₱300,000. If the property was not classified as
held for sale in 20x1, its carrying amount by this time would have been ₱350,000.
a. Held for sale, ₱300,000 c. PPE, ₱300,000
b. Held for sale, ₱320,000 d. PPE, ₱350,000
Event after reporting period

13. WAYFARER TRAVELER Co. is preparing its December 31, 20x1, current year
financial statements. A land included in WAYFARER’s property, plant and
equipment that did not qualify as held for sale as of December 31, 20x1 was
actually sold on January 5, 20x2. The financial statements were authorized for
issue on March 1, 20x2. On December 31, 20x1, WAYFARER has total current
assets of ₱9,000,000. Not included in this amount is the fair value less costs to sell
of the land amounting to ₱1,000,000. How much is the total current assets current
in WAYFARER’s December 31, 20x1 financial statements?
a. ₱8,000,000 c. ₱10,000,000
b. ₱9,000,000 d. ₱11,000,000
Measurement
14. On December 31, 20x1, STRIDENT HARSH-SOUNDING Co. classified its
building with a historical cost of ₱4,000,000 and accumulated depreciation of
₱2,400,000 as held for sale. All of the criteria under PFRS 5 are complied with.
On that date, the land has a fair value of ₱1,400,000 and cost to sell of ₱80,000.
The entry on December 31, 20x1 includes
a. a debit to building for ₱1,320,000
b. a credit to accumulated depreciation for ₱2,400,000
c. a debit to impairment loss for ₱280,000
d. No reclassification entry will be made on December 31, 20x1
Reversal of impairment loss

15. On December 31, 20x1, OBSTINACY STUBBORNESS Co. classified its
building with a carrying amount of ₱1,600,000 and fair value less cost to sell of
₱1,320,000 as held for sale.
The building was not sold in 20x2. However, the exception to the one-year
requirement was met. On December 31, 20x2, the fair value less cost to sell of
building is ₱1,240,000.
The building was not sold in 20x3. However, the exception to the one-year
requirement was still met. On December 31, 20x3, the fair value less cost to sell of
building increased to ₱1,680,000. How much is the gain on reversal of impairment to
be recognized on December 31, 20x3?
a. 440,000 b. 360,000 c. 280,000 d. 0
Allocation of impairment losses and reversals

Use the following information for the next four questions:
On December 31, 20x1, INSOUCIANT CAREFREE Co. plans to dispose of a group
of its assets. Information on these assets is shown below:
Carrying amount on Carrying amount as
Dec. 31, 20x1 before remeasured immediately
classification as held for before classification as
sale held for sale
Inventory 9,600,000 8,800,000
Investment in FVOCI 7,200,000 6,000,000
Investment property (at cost model) 22,800,000 22,800,000
PPE (at cost model) 18,400,000 16,000,000
Goodwill 6,000,000 6,000,000
Total 64,000,000 59,600,000
INSOUCIANT Co. entity estimates that the fair value less costs to sell of the disposal
group amounts to ₱52,000,000.
16. How would the reduction in the value of the assets on classification as held for
sale be treated in the financial statements?
a. The entity recognizes a loss of ₱4.4M immediately before classification as
held for sale and then recognizes an impairment loss of ₱7.6M.
b. The entity recognizes an impairment loss of ₱12 million.
c. The entity recognizes an impairment loss of ₱7.6M.
d. The entity recognizes a loss of ₱12M immediately before classifying the
disposal group as held for sale.
17. How much is the carrying amount of the inventory after classification of the
disposal group as held for sale?
a. 8,800,000 b. 7,950,576 c. 7,899,324 d. 7,765,391
18. How much is the carrying amount of the Investment property (at cost model) after
classification of the disposal group as held for sale?
a. 22,800,000b. 21,859,794 c. 21,786,665 d. 20,766,298
19. How much is the carrying amount of the PPE (at cost model) after classification of
the disposal group as held for sale?
a. 16,000,000b. 15,780,740 c. 15,340,206 d. 15,211,612
Change to a plan of sale

20. On December 31, 20x1, INGENIOUS NATURAL Co. classified its building with
a carrying amount of ₱1,600,000 and fair value less costs to sell of ₱1,320,000 as
held for sale. Impairment loss of ₱280,000 was recognized on that date. The
building has a remaining useful life of 4 years and it was depreciated using the
straight-line method.
As of December 31, 20x2, the building was not yet sold and management decided not
to sell the building anymore. The fair value less cost to sell of the building on
December 31, 20x2 is ₱1,240,000 while the value in use is ₱1,220,000.
How much is the carrying amount of the building upon reclassification back to
property, plant and equipment?
a. 1,220,000 b. 1,320,000 c. 1,240,000 d. 1,200,000
Discontinued operations
21. On December 31, 20x1, INIMICAL UNFRIENDLY Co. entered into an
agreement to sell a component. On that date, INIMICAL estimated the gain from
the disposal to be made in 20x2 at ₱2,000,000 and the operating losses prior to the
date of sale to be ₱1,200,000. As a result of the sale, the component’s operations
and cash flows will be eliminated from the entity’s operations and the entity will
not have any significant continuing post-sale involvement in the component’s
operations. Accordingly, the component was classified as held for sale and
discontinued operations.
The component’s actual operating losses in 20x1 and 20x2 were ₱2,800,000 and
₱2,600,000, respectively, and the actual gain on disposal of the component in 20x2
was ₱1,600,000. INIMICAL’s income tax rate is 30%. Any income tax benefit is
expected to be realizable. There were no other temporary differences during the year.
What single, post-tax amounts should be reported for discontinued operations in

INIMICAL’s comparative 20x2 and 20x1 income statements, respectively?
a. (1,960,000), (700,000) c. (650,000), (1,950,000)
b. (560,000), (1,960,000) d. (700,000), (1,960,000)
Discontinued operations - Direct costs of disposal

22. On April 30, 20x1, ABROGATE ABOLISH Co. approved a plan to dispose of a
component of its operations. The disposal meets the requirements for
classification as discontinued operations.
From January 1 to April 30, 20x1, the component earned operating profit of ₱400,000
and from May 1 to December 31, 20x1, the segment suffered operating losses of
₱200,000.
The net assets of the component has a carrying amount of ₱32,000,000 as of April 30,
20x1. The fair value less costs to sell of the component is ₱26,000,000. Additional
estimated disposal loss includes severance pay of ₱220,000 and employee relocation
costs of ₱100,000, both of which are directly associated with the decision to dispose
of the segment. ABROGATE’s income tax rate is 30%. Any income tax benefit is
expected to be realizable. There were no other temporary differences during the year.
How much is the profit (loss) from discontinued operations to be reported in

ABROGATE's statement of profit or loss and other comprehensive income for the
year ended December 31, 20x1?
a. 4,564,000 b. 4,060,000 c. 4,340,000 d. 4,284,000

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PFRS 5

Non-current assets Held for Sale and Discontinued Operations

For Classroom Discussion:

Availability for immediate sale in present condition

1. VISAGE Co. has an intention to transfer ownership of a building to a buyer after

Availability for immediate sale in present condition

3. DECORTICATE, Inc. intends to sell the manufacturing facility with its

Availability for immediate sale in present condition

Highly probable sale

Highly probable sale

Exception to one-year requirement

Exception to one-year requirement

Exception to one-year requirement

Event after reporting period

Reversal of impairment loss

Allocation of impairment losses and reversals

Change to a plan of sale

What single, post-tax amounts should be reported for discontinued operations in

Discontinued operations - Direct costs of disposal

How much is the profit (loss) from discontinued operations to be reported in

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