EVENTS AFTER THE REPOTING PERIOD, DISCONTINUED OPERATION AND NON-CURRENT

ASSETS HELD FOR SALE (NCAHFS)

1. Events after the reporting period are:

a. Adjusting events c. non-adjusting events
b. Both adjusting and non-adjusting d. Neither adjusting nor non-adjusting

2. In relation to the set of 2022 FS, an event after the balance sheet date is one that
a. Occurs after 2022 but before the 2022 FS are issued.
b. Requires an appropriate adjusting entry to be made as of the end of 2022.
c. Involves uncertainty as to possible gain or loss that ultimately resolves in 2023 or later.
d. Occurs after the 2022 FS are issued.

3. Adjusting events are those that

a. Are indicative of conditions that arose after the reporting period.
b. Are indicative of conditions that arose at the end of accounting period.
c. Provide evidence of conditions that existed at the end of the accounting period.
d. Provide evidence of conditions that existed after the FS were authorized for issuance.

4. Which of the following is NOT an adjusting event after the reporting period?
a. The resolution after the end of reporting period of a court case that confirms that the company had a legal
or constructive obligation at the end of reporting period.
b. The discovery of fraud or errors that shows that the FS were incorrect.
c. Dividends to holders of equity instruments proposed or declared after the reporting period.
d. The bankruptcy of a customer, resulting in a loss on a trade receivable outstanding as of the end of
reporting period.

5. Non-adjusting events after the reporting period are accounted for by (select the best answer)
a. Adjusting the amounts recognized in the FS.
b. Not adjusting the amounts in the FS without disclosure.
c. Recognizing the events directly in equity.
d. Disclosing in the notes, if significant to the evaluation of user.

6. What are the disclosures required for a non-adjusting event?

a. The nature of event
b. The estimates of its financial effects
c. A statement that the estimate of its financial effect cannot be made
d. All of the above

7. Which of the following events after the reporting period requires adjustment in the entity’s FS for the period just
ended?
a. A major business combination after the end of the reporting period.
b. Exploration of major assets by the government after the reporting period.
c. Announcing the plan to discontinue an operation after the reporting period.
d. All of the above
e. None of the above

8. An entity built a new factory building during 2022 at a cost of P62 million. At December 31, 2022, the carrying
value of the building was P55 million. Subsequent to year-end, March 20, 2023, the building was destroyed by fire
and the claims against insurance company proved futile because the cause of fire is negligence on the part of the
caretaker of the building. If the authorization of the FS was April 2, 2023, the entity should:
a. Write off the carrying value to its scrap value because the insurance claim would not fetch any
compensation.
b. Make provision for half of the carrying value of the building.
c. Recognize impairment for the carrying value of the building as of December 31, 2022.
 d. Disclose the non-adjusting event in the notes to FS.
e. Adjust the amount of the building to at least 10% of the carrying amount.

9. An entity built a new factory building during 2022 at a cost of P62 million. At December 31, 2022, the carrying
value of the building was P55 million. Subsequent to year-end, March 20, 2023, the building was destroyed by fire
and the claims against insurance company proved futile because the cause of fire is negligence on the part of the
caretaker of the building. If the authorization of the FS was April 2, 2023, the entity should:
a. Write off the carrying value to its scrap value because the insurance claim would not fetch any
compensation.
b. Make provision for half of the carrying value of the building.
c. Recognize impairment for the carrying value of the building as of December 31, 2022.
d. Disclose the non-adjusting event in the notes to FS.
e. Adjust the amount of the building to at least 10% of the carrying amount.

10. Which of the following events after the reporting period would require adjustment in the financial statements?
a. Partial loss of plant as a result of flood.
b. Out of court settlement of a lawsuit the amount of which was lesser than the amount recognized at year
end.
c. Decline in value of equity investment at fair value through profit or loss.
d. Retirement of a long-term debt at a significant amount of loss.
e. Declaration of stock dividend before FS was authorized for issue.

11. Which of the following events after the reporting period would require adjustment in an entity’s FS?
a. Decline in market value of investments between the end of the reporting period and the date when the FS
was authorized for issue.
b. Out of court settlement of pending litigation existing as of the date of the balance sheet for which a
reasonable amount for damages was accrued as advised by the legal counsel.
c. Major business combination after the reporting period.
d. Abnormally large changes after the reporting period in asset prices of foreign exchange rates.

12. Adjustment of FS are required for those events after the reporting period which: (select the best answer)
a. Have material effect on the user’s valuation of information presented in the FS
b. Occurred prior to issuance of FS
c. Are unusual and material
d. Provide additional information for determining the amounts relating to conditions exists at the end of
reporting period.

13. Non-adjusting events after the balance sheet date should be disclosed if:
a. Non-disclosure would affect the amount presented in the FS
b. Non-disclosure would affect the valuation of users of the FS to make proper evaluations and decisions.
c. They relate to condition existing at the end of reporting period.
d. They are unusual and material.

14. Which of the following indicate that an existing liability of the entity be presented as part on the non-current
assets as of the balance sheet date?
a. Refinancing on long-term basis occurring between the end of the reporting period and the date of financial
statements. The refinancing is not at the discretion of the entity and there is no arrangement for
refinancing.
b. Refinancing on a long-term basis of a currently maturing loan for at least twelve months after the balance
sheet date under an existing loan facility
c. A currently maturing notes payables with original term of 5 years.
d. Receipt from a lender of a grace period to rectify a breach of a long-term loan agreement ending at least
twelve months after the end of the reporting period and before the FS are authorized for issue.
15. Which of the following events after the reporting period will require adjustments in the financial statements for
the period just ended?
a. The entity announced the discontinuation of its beer manufacturing division.
b. The entity entered into agreement to purchase major supplier.
c. Destruction of major production plant by an earthquake.
d. A mistake was discovered in the calculation of the allowance for uncollectible accounts resulting to the
understatement of trade receivables.

16. On December 31, 2022, an entity carried a receivable from a major customer who had been suffering from a
financial distress as early as June 2022. The authorization date of FS is on February 14, 2023. The customer filed
bankruptcy on February 5, 2023. The entity should:
a. Disclose the fact that the customer has declared bankruptcy.
b. Make a loss provision for this event in its FS as opposed to disclosure.
c. Ignore the event took place after the end of reporting period.
d. Reverse the sale pertaining to this receivable in the comparative statement for the period.

17. Which of the following is classified as a non-adjusting event after the reporting period?
a. The resolution after the issuance of the FS that confirms that the entity has a present obligation as of the
end of the reporting period.
b. The bankruptcy of a customer arising from fire occurring after the end of reporting period, resulting to a
loss on trade receivables.
c. The discovery of fraud or errors after the end of reporting period and before the issuance of FS.
d. Determination after the end of reporting period and before the issuance of FS of the cost of assets
purchased before the end of reporting period.
e. Unfavorable court decision of an on-going existing as of end of reporting period before the FS was
authorized for issue.

18. Financial Statements are said to be authorized for issue when:

a. The management reviews the FS and issued secretary’s certificate for the authorization of issuance.
b. The FS was filed with SEC.
c. The FS was filed with BIR.
d. Supervisory body made up of solely non-executives approves the FS submitted by the management.
e. The shareholder approves the FS during the annual meeting.

19. It is a component of an entity that has been disposed of or is classified as held for sale.
a. Non-current assets held for sale
b. Discontinued operation
c. Continued operation
d. Disposal group held for sale

20. Operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes,
from the rest of the entity.
a. Component of the entity
b. Cash generating unit
c. Discontinued operation
d. Disposal group

21. A discontinued operation is a component of an entity that either has been disposed of or is classified as held for
sale and:
a. represents a separate major line of business or geographical area of operations;
b. is part of a single coordinated plan to dispose of a separate major line of business or geographical area of
operations
c. is a subsidiary acquired exclusively with a view to re-sale
d. All of the above
e. None of the above
 22. If an entity reclassifies an asset (or disposal group) directly from being held for sale to being held for distribution
to owners, or directly from being held for distribution to owners to being held for sale, then the change in
classification is considered a continuation of the original plan of disposal. The entity:
a. shall not follow the guidance when classification ceases to account for this change. The entity shall apply
the classification, presentation and measurement requirements in this IFRS that are applicable to the new
method of disposal.
b. shall measure the non-current asset (or disposal group) in terms of the requirement of this Standard and
recognize any reduction or increase in the fair value less costs to sell/costs to distribute of the non-current
asset (or disposal group).
c. shall not change the date of classification. This does not preclude an extension of the period required to
complete a sale or a distribution to owners if the conditions are met for a sale beyond one year.
d. All of the above
e. None of the above

23. An entity shall classify a non-current asset or disposal group as held for sale when the:
a. Carrying amount of the asset or disposal group will be recovered through sale
b. Carrying amount of the asset or disposal group will be recovered through continuing use
c. Non-current asset or disposal group will be abandoned.
d. Non-current asset or disposal group is idle or retired from active use.

24. An entity shall measure a non-current asset held for sale or discontinued operation classified held for sale at
a. Carrying amount
b. Fair value less cost to sell
c. Lower of carrying amount and fair value less cost to sell
d. Higher of carrying amount and fair value less cost to sell

25. Which of the following statements regarding discontinued operations is valid?

a. The assets and liabilities of a disposal group classified as held for sale by an entity may be offset and
shown as a single item on the balance sheet of the entity.
b. The assets and liabilities of a disposal group of an entity must be shown separately in the assets and
liabilities section of the balance sheet and cannot be offset.
c. An adjustment in the subsequent period to the selling price of a component of an entity sold must be
reported as a retroactive adjustment in the prior-period FS on the entity in which the discontinued
operations was reported.
d. The gain or loss on disposal of a component of an entity classified as discontinued operation need not be
disclosed separately from the loss from operations of the discontinued segment.

26. The result of a discontinued operation, net of tax shall be presented

a. As a single amount on the face of income statement with no details disclose in the notes.
b. As a single amount on the face of income statement with appropriate disclosure of the details in the notes.
c. Side by side with continuing operations with details for revenues and expenses attributable to
discontinued operation shown on the face of income statement.
d. In the notes to FS only.

27. An entity shall recognize any subsequent increase in the fair value less cost to sell of a non-current asset held for
sale or disposal group classified as held for sale as
a. Deferred gain as component of equity
b. Deferred gain as component of liability
c. Gain entirely to be included in the profit or loss
d. Gain to be included in profit or loss but not in excess of the cumulative impairment loss previously
recognized.
28. IFRS 5 states that a non-current asset that is to be abandoned should not be classified as held for sale. The reason
for this is because
a. The carrying amount will be recovered principally through continuous use
b. It is di difficult to value
c. It is unlikely that the non-current asset will be sold within 12 months
d. It is unlikely that there will be an active market for non-current asset

29. A noncurrent asset or disposal group shall be classified as held for sale when
a. The sale is highly probable
b. The asset is available for immediate sale in the present condition
c. The sale is probable and the asset is available for sale in the present condition
d. The sale is highly probable and the asset is available for immediate sale in the present condition.

30. If the fair value less cost to sell is higher than the carrying amount of a non-current asset held for sale, the
difference is
a. Ignored
b. Accounted for as an impairment loss
c. Deferred gain as component of equity
d. Gain recognized in profit or loss

31. Non-current asset held for sale shall be presented in the statement of financial position as
a. Non-current asset
b. Current asset
c. Excluded from asset section but disclosed.
d. Either current or non-current

32. An entity put back an asset that was previously recognized as “held for sale” into active use, thus, the criteria for
the asset to be classified as “held for sale” no longer applies. For accounting purposes, the entity shall:
a. Continue to classify the asset as held for sale, until such date that the asset is retired or disposed of.
b. Reclassify the asset into previous classification at the lower of fair value less cost to sell and the carrying
amount when the asset was classified as held for sale.
c. Continue to classify the asset as held for sale and resume the depreciation.
d. Reclassify the asset into previous classification, measuring it at the lower of carrying amount had the asset
not been classified as held for sale and its recoverable amount as determined under IAS36, and then
subject the asset to depreciation/amortization.

33. An entity classified a non-current asset accounted for under the cost model as held for sale on December 31, 2021.
Because no offers were received at an acceptable price, the entity decide on July 1, 2022 not to sell the asset, but
continue to use it. In accordance with IFRS 5, the asset should be measured on July 1, 2022 at:
a. Lower of carrying amount and recoverable amount
b. The higher of carrying amount and recoverable amount
c. The lower of carrying amount on the basis that it had never been classified as held for sale and its
recoverable amount.
d. The higher of carrying amount on the basis that it had never been classified as held for sale and its
recoverable amount.

34. The discontinued operation section of the statement of comprehensive income is comprised of which one of the
following?
a. Profit from operation of the discontinued component of an entity and gain or loss from the disposal of the
discontinued component.
b. Post-tax profit or loss from the operation of the discontinued component, and the gain or loss from
disposal of the discontinued component
c. Post-tax profit or loss from the operation of the discontinued component, and the post-tax gain or loss
recognized on the measurement to fair value less cost to sell of net assets held for sale.
 d. Post-tax profit or loss of the discontinued operations of the component, and the post-tax gain or loss
recognized on the measurement to fair value less cost to sell or on the disposal of the assets of the
discontinued operations.

35. On November 30, 2022 Truthful Company approved a plan to dispose a cash generating unit (CGU) of its
business. The carrying value of CGU’s net assets was P800,000. During December, disposal costs incurred totaled
P75,000.

During the period January through November 2022, the CGU has a total revenue of P5,000,000 and
total selling and administrative costs of P5,080,000. The selling price of the CGU’s net assets on
December 31, 2022 is P980,000. Disposal costs of P150,000 is expected to be incurred on the sale. The
company is subject to 25% tax rate and reports profit from continuing operation.

Determine the single amount that will be reported as “Discontinued Operations” in profit
or loss for the year ended December 31, 2022.