Bendol, Jerrika Camille A.

PETITION: UPFRS

ACTIVITY No.4

“International financial Reporting Standard 5 Non – Current Assets

Held For sale and Discounted Operations “

Objective The standard aims to clarify the accounting treatment for assets
held for sale and the presentation of discontinued operations. It applies to all
recognized non-current assets and disposal groups of an entity, with specific
exceptions for assets covered by other IFRSs. Measurement Assets classified
as held for sale are measured at the lower of carrying amount and fair value
less costs to sell. Depreciation ceases for these assets. Presentation Assets
held for sale and the results of discontinued operations are presented
separately in the financial statements. Disposal Groups A disposal group is a
collection of assets, possibly with associated liabilities, that are being
disposed of together. The group is measured at the lower of its carrying
amount and fair value less costs to sell. Exclusions The measurement
provisions of this IFRS do not apply to certain specific assets, such as
deferred tax assets, assets arising from employee benefits, and financial
assets within the scope of IAS 39. Disclosures The standard outlines specific
disclosure requirements for non-current assets held for sale and discontinued
operations.

Classification as Held for Sale

Principal Market The asset or disposal group must be available for immediate
sale in its present condition in the principal market.

High Probability of Sale The sale must be highly probable, meaning the
entity must be committed to a plan to sell the asset, have an active program
to locate a buyer, and the plan must have been initiated.
Completion Timeline The sale is expected to be completed within one year
from the date of classification.

Sales Price The sales price must be reasonable in relation to the asset’s fair
value.

Control The entity must have control over the asset and the sale process.

Substantial Completion The entity must have completed the plan to sell the
asset or disposal group, or it is unlikely that significant changes to the plan
will be made or the plan will be withdrawn.

Classification as Held for Distribution to Owners Immediate Distribution The

asset or disposal group must be available for immediate distribution to the
owners. High Probability of Distribution The distribution must be highly
probable, meaning the entity is committed to distributing the asset, and
actions to complete the distribution have been initiated. Completion Timeline
The distribution is expected to be completed within one year from the date of
classification. Significant Changes: It is unlikely that significant changes to
the distribution will be made or the distribution will be withdrawn.

Important Notes:

One-Year Requirement: If the criteria for classification as held for sale are not
met within one year, the asset or disposal group is no longer considered held
for sale. Reporting Period: If the criteria for classification as held for sale are
met after the reporting period, the entity should not classify the asset or
disposal group as held for sale in the financial statements. Disclosures: The
standard outlines specific disclosure requirements for non-current assets (or
disposal groups) classified as held for sale or as held for distribution to
owners.

- Principal Market: An asset or disposal group must be available for

immediate sale in its present condition, subject to terms that are usual and
customary for sales of such assets.

- High Probability: The entity must be committed to a plan to sell the asset,
actively seeking a buyer and completing the plan. The plan must have been
initiated.
- Fair Value: The sales price should be reasonable in relation to the asset’s
current fair value.

- Timeframe: The sale is expected to be completed within one year from the
date of classification, unless a specific exception applies.

- Control: The entity must have control over the asset and the sale process.

- Substantial Completion: The entity must have substantially completed the

plan to sell the asset or disposal group, or it is unlikely that significant
changes to the plan will be made or the plan will be withdrawn.

Sale Plan Involving Loss of Control:

- Subsidary Sale: If the sale plan involves loss of control of a subsidiary, all
assets and liabilities of that subsidiary are classified as held for sale when
the criteria in paragraphs 6-8 are met.

- Non-Controlling Interest: The entity retains a non-controlling interest in the

subsidiary after the sale.

Extension of Sale Period:

- Circumstances: Events or circumstances may extend the period to

complete the sale beyond one year.

- Continued Commitment: The entity must remain committed to selling the

asset or disposal group, and there must be sufficient evidence that the entity
remains committed to its plan to sell.

Exchange Transactions:

- Commercial Substance: Sale transactions include exchanges of non-

current assets for other non-current assets when the exchange has
commercial substance in accordance with IAS 16 Property, Plant and
Equipment.

Acquisition of Assets Held for Sale:

 - One-Year Requirement: If an entity acquires a non-current asset or
disposal group exclusively with a view to its subsequent disposal the
entity acquires a non-current asset or disposal group exclusively with a
view to its subsequent disposal, it shall classify the non-current asset

IFRS 5 deals with the recognition of impairment losses and reversals, as

well as changes to a plan of sale for non-current assets classified as held
for sale.

Recognition of Impairment Losses and Reversals:

Impairment Loss: An entity shall recognize an impairment loss for any

initial or subsequent write-down of the asset (or disposal group) to fair
value less costs to sell, to the extent that it has not been recognized in
accordance with paragraph 19.

Gain Recognition: An entity shall recognize a gain for any subsequent

increase in fair value less costs to sell of an asset, but not in excess of the
cumulative impairment loss that has been recognized either in accordance
with this IFRS or previously in accordance with IAS 36 Impairment of Assets.

Gain Recognition for Disposal Groups: An entity shall recognize a gain for any
subsequent increase in fair value less costs to sell of a disposal group:

To the extent that it has not been recognized in accordance with paragraph
19, but

Not in excess of the cumulative impairment loss that has been recognized,
either in accordance with this IFRS or previously in accordance with IAS 36,
on the non-current assets that are within the scope of the measurement
requirements of this IFRS.

Impairment Loss Allocation: The impairment loss (or any subsequent gain)
recognized for a disposal group shall reduce (or increase) the carrying
amount of the non-current assets in the group that are within the scope of
the measurement requirements of this IFRS, in the order of allocation set out
in paragraphs 104(a) and (b) and 122 of IAS 36 (as revised in 2004).

Gain or Loss Recognition at Derecognition: A gain or loss not previously

recognized by the date of the sale of a non-current asset (or disposal group)
shall be recognized at the date of derecognition. Requirements relating to
derecognition are set out in Paragraphs 67-72 of IAS 16 (as revised in 2003)
for property.
IFRS 5 focuses on the presentation and disclosure requirements for non-
current assets classified as held for sale, and for discontinued operations.

Presentation and Disclosure

Financial Effects: An entity shall present and disclose information that

enables users of the financial statements to evaluate the financial effects of
discontinued operations and disposals of non-current assets (or disposal
groups).

Presenting Discontinued Operations:

Component of an Entity: A component of an entity comprises operations

and cash flows that can be clearly distinguished, operationally and for
financial reporting purposes, from the rest of the entity. In other words, a
component of an entity will have been a cash-generating unit or a group of
cash-generating units while being held for use.

Discontinued Operation: A discontinued operation is a component of an

entity that either has been disposed of, or is classified as held for sale,

Represents a separate major line of business or geographical area of

operations, Is part of a single co-ordinated plan to dispose of a separate
major line of business or geographical area of operations, or a subsidiary
acquired exclusively with a view to resale.

Disclosure Requirements: An entity shall disclose:

A single amount in the statement of comprehensive income comprising the

total of

The post-tax profit or loss of discontinued operations, and The post-tax gain
or loss recognized on the measurement to fair value less costs to sell or on
the disposal of the assets (or disposal group)

IFRS 5 continues the discussion on presenting discontinued operations,

focusing on the specific disclosures required.

Presenting Discontinued Operations (Continued):

 Analysis of Single Amount: An analysis of the single amount . The revenue,
expenses, and pre-tax profit or loss of discontinued operations.

The related income tax expense as required by paragraph 81(h) of IAS 1.

Additional disclosures related to discontinued operations.

Presentation of a Non-Current Asset or Disposal Group Classified as Held for

Sale:

- Separate Presentation: An entity shall present a non-current asset classified

as held for sale and the assets of a disposal group classified as held for sale
separately from other assets in the statement of financial position.

- Liabilities Presentation: The liabilities of a disposal group classified as held

for sale shall be presented separately from other liabilities in the statement
of financial position.

- Offsetting: Those assets and liabilities shall not be offset and presented as a
single amount.

- Major Classes: The major classes of assets and liabilities classified as held
for sale shall be separately disclosed either in the statement of financial
position or in the notes, except as permitted by paragraph 39.

Additional Disclosures:

- Newly Acquired Subsidiary: If the disposal group is a newly acquired

subsidiary that meets the criteria to be classified as held for sale on
acquisition (see paragraph 11), disclosure of the major classes of assets and
liabilities is not required.

- Prior Periods: An entity shall not reclassify.

It also covers the withdrawal of IAS 35.

Transitional Provisions:

Prospective Application: The IFRS shall be applied prospectively to non-

current assets (or disposal groups) that meet the criteria to be classified as
held for sale and operations that meet the criteria to be classified as
discontinued after the effective date of the IFRS, provided that the valuations
and other information needed to apply the IFRS were obtained at the time
those criteria were originally met.

- Retrospective Application: An entity may apply the requirements of the IFRS

to all non-current assets (or disposal groups) that meet the criteria to be
classified as held for sale and operations that meet the criteria to be
classified as discontinued after any date before the effective date of the
IFRS, provided the valuations and other information needed to apply the IFRS
were obtained at the time those criteria were originally met.

Effective Date:

General Effective Date: An entity shall apply this IFRS for annual periods
beginning on or after 1 January 2005. Earlier application is encouraged. If an
entity applies the IFRS for a period beginning before 1 January 2005, it shall
disclose that fact.

- Amendments: Various amendments have been made to the standard over

time, with specific effective dates for each amendment. For example, IAS 1
(as revised in 2007) amended the terminology used throughout IFRSs. An
entity shall apply those amendments for annual periods beginning on or after
1 January 2009. If an entity applies IAS 1 (revised 2007) for an earlier period,
the amendments shall be applied for that earlier period.

Withdrawal of IAS 35:

Superseded Standard: This IFRS supersedes IAS 35 Discontinuing

Operations.

IFRS 5 Multiple Choice Questions:

1. What is the primary objective of IFRS 5?

a) To define the accounting treatment for non-current assets held for sale.

b) To provide guidance on how to measure non-current assets held for sale.

c) To clarify the presentation and disclosure requirements for non-current

assets held for sale and discontinued operations.
d) To establish the criteria for classifying an asset as held for sale.

Answer: c) To clarify the presentation and disclosure requirements for non-

current assets held for sale and discontinued operations.

2. Which of the following assets is NOT excluded from the scope of IFRS
5?

a) Deferred tax assets

b) Assets arising from employee benefits

c) Financial assets within the scope of IAS 39

d) Non-current assets measured at fair value less costs to sell in accordance

with IAS 41

Answer: d) Non-current assets measured at fair value less costs to sell in

accordance with IAS 41

3. What is the measurement basis for a non-current asset classified as

held for sale?

a) Carrying amount

b) Fair value

c) Lower of carrying amount and fair value less costs to sell

d) Historical cost

Answer: c) Lower of carrying amount and fair value less costs to sell

4. When does depreciation cease for a non-current asset classified as

held for sale?
a) When the asset is classified as held for sale.

b) When the asset is actually sold.

c) When the asset is removed from the disposal group.

d) When the asset is no longer used in operations.

Answer: a) When the asset is classified as held for sale.

5. What is a disposal group?

a) A collection of assets that are being sold individually.

b) A collection of assets that are being sold as a single unit.

c) A collection of assets that are being used in operations.

d) A collection of assets that are being held for future use.

Answer: b) A collection of assets that are being sold as a single unit.

6. What is the measurement basis for a disposal group?

a) Carrying amount

b) Fair value

c) Lower of carrying amount and fair value less costs to sell

d) Historical cost

Answer: c) Lower of carrying amount and fair value less costs to sell
 7. What is the timeframe for completing the sale of an asset or disposal
group classified as held for sale?

a) Within one month

b) Within three months

c) Within six months

d) Within one year

Answer: d) Within one year

8. Which of the following is NOT a criterion for classifying an asset or

disposal group as held for sale?

a) The asset must be available for immediate sale in its present condition.

b) The sale must be highly probable.

c) The entity must have control over the asset and the sale process.

d) The entity must have already found a buyer.

Answer: d) The entity must have already found a buyer.

9. When is an asset or disposal group classified as held for distribution to

owners?

a) When the entity is committed to distributing the asset to its owners.

b) When the entity has received a request from its owners to distribute the
asset.

c) When the entity has decided to sell the asset and distribute the proceeds
to its owners.
d) When the entity has completed the distribution of the asset to its owners.

Answer: a) When the entity is committed to distributing the asset to its

owners.

10. What is the timeframe for completing the distribution of an asset

or disposal group classified as held for distribution to owners?

a) Within one month

b) Within three months

c) Within six months

d) Within one year

Answer: d) Within one year

11. What is the treatment of a non-current asset or disposal group

that is to be abandoned?

a) It is classified as held for sale.

b) It is classified as held for distribution to owners.

c) It is not classified as held for sale or held for distribution to owners.

d) It is reclassified as a current asset.

Answer: c) It is not classified as held for sale or held for distribution to

owners.

12. How is a non-current asset or disposal group classified as held for

sale measured?
a) At carrying amount

b) At fair value

c) At the lower of carrying amount and fair value less costs to sell

d) At historical cost

Answer: c) At the lower of carrying amount and fair value less costs to sell

13. What is the treatment of impairment losses on non-current

assets classified as held for sale?

a) They are recognized in profit or loss.

b) They are recognized in other comprehensive income.

c) They are not recognized.

d) They are recognized in equity.

Answer: a) They are recognized in profit or loss.

14. What is the treatment of impairment losses on disposal groups

classified as held for sale?

a) They are allocated to the non-current assets in the disposal group.

b) They are recognized in profit or loss.

c) They are recognized in other comprehensive income.

d) They are not recognized.

Answer: a) They are allocated to the non-current assets in the disposal

group.
 15. What is the treatment of a non-current asset that ceases to be
classified as held for sale?

a) It is measured at carrying amount.

b) It is measured at fair value.

c) It is measured at the lower of carrying amount and fair value less costs to
sell.

d) It is measured at historical cost.

Answer: c) It is measured at the lower of carrying amount and fair value less
costs to sell.

16. What is the treatment of gains or losses on the remeasurement

of a non-current asset or disposal group classified as held for sale that
does not meet the definition of a discontinued operation?

a) They are recognized in profit or loss.

b) They are recognized in other comprehensive income.

c) They are not recognized.

d) They are recognized in equity.

Answer: a) They are recognized in profit or loss.

17. How are discontinued operations presented in the financial

statements?

a) They are presented as a separate line item in the statement of

comprehensive income.
b) They are presented as a separate line item in the statement of profit or
loss.

c) They are presented as a separate line item in the statement of changes in

equity.

d) They are not presented separately.

Answer: a) They are presented as a separate line item in the statement of

comprehensive income.

18. What is the treatment of adjustments related to discontinued

operations that are made in the current period?

a) They are recognized in profit or loss.

b) They are recognized in other comprehensive income.

c) They are not recognized.

d) They are recognized in equity.

Answer: a) They are recognized in profit or loss.

19. What is the treatment of gains or losses on the remeasurement

of a non-current asset or disposal group classified as held for sale that
meets the definition of a discontinued operation?

a) They are recognized in profit or loss.

b) They are recognized in other comprehensive income.

c) They are not recognized.

d) They are recognized in equity.

Answer: b) They are recognized in other comprehensive income.

 20. What is the treatment of the net cash flows attributable to the
operating, investing, and financing activities of discontinued
operations?

a) They are presented in the statement of cash flows.

b) They are presented in the notes to the financial statements.

c) They are not presented separately.

d) They are presented in the statement of changes in equity.

Answer: b) They are presented in the notes to the financial statements.

Non-current Assets Held for Sale.

Problem No.1

Joanna Company accounted for noncurrent assets using cost model. On

October 30, 2024, the entity classified a noncurrent asset as held for sale.

At that date, the carrying amount was P1,500.000, the fair value was
estimated at P1,100,000 and the cost at P150,000.

On December 31, 2019, the asset was sold for net proceeds of P800,000.

1. What amount should be reported as impairment loss for 2019?

a. 550,000

b. 400,000
c. 700,000

d. 0

2. What amount should be recognized as loss on disposal for 20192

a. 550,000

b. 700,000

c. 150,000

d. 0

Solution:

Carrying amount.
1,500,000

Fair value less cost of disposal (1,100,000-150,000) ( 950,000)

Impairment loss.
550.000

Question 2:

Sale price.
800,000

Carrying amount on December 31, 2019, date of sale. (950,000)

Loss on disposal.
(150.000)

Problem No.2

Amelia Company accounts for noncurrent assets using the revaluation

model. On June 30, 2021, the entity classified a land as held for sale.

At the date, the carrying amount was P2,900,000 and the balance of the
revaluation surplus was P200,000.

On June 30,2021 the fair value was estimated at P3,300,000 and the cost of
disposal at P200,000
On December 31, 2021, the fair value was estimated at P3,250,000 and the
cost of disposal at P250,000

3.What is the adjusted carrying amount of the land on June 30,2021?

a. 3,100,000

b. 3,300,000

c. c. 2,900,000

d. 2,700,000

4. What is the adjusted carrying amount on the land on December 31, 2021?

a. 3,100,000

b. 3,300,000

c. 3,000,000
d. 3,250,000

5. What total amount should be reported as impairment loss for 2021?

a. 100,000
b. 300,000
c. 200,000
d. d. 50,000

6. What is revaluation surplus on December 31, 2021?

a. 600,000
b. 400,000
c. 200,000
d. 300,000

Solution:

Fair value June 30, 2019. 3,300,000

Carrying amount. 2,900,000

Revaluation surplus on classification date. 400.000

Revaluation surplus on June 30, 2019. 200.000

Total revaluation surplus - June 30, 2019. 600.000

Fair value June 30, 2021. 3,300,000

Costs of disposal. (200,000)

Adjusted carrying amount-June 30, 2021. 3,100,000

Fair value - December 31, 2021. 3,250,000

Costs of disposal. (250,000)

Fair value less costs to sell. 3,000,000

Thus, on December 31, 2021 the asset classified as held for sale should be
measured at the fair value less costs to sell of P3,000,000 because this
amount is lower than the carrying amount of P3,100,000. Accordingly, an
impairment loss of P100,000 should be recognized on December 31, 2021

Problem no.3

Jacqueline Company purchased equipment for P5,000,000 on January 1,

2021 with a useful life of 10 years and no residual value. On December 31,
2021, the entity classified the asset as held for sale.

The fair value of the equipment on December 31, 2021is P4,200,000 and the
cost of disposal is P50,000

On December 31, 2022, the fair value of the equipment is P3,500,000 and
the cost of disposal is P100,000.
On December 31, 2022, 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.

7. What is the impairment loss to be recognized on December 31, 2021?

a. 350,000

b. 300,000

c. 800,000

d. 750,000

Answer:

Cots
5,000,0000

Accumulated depreciation (5,000,000/10yrs). (500,000)

Carrying amount.
4,500,000

Fair value less cost to sell (4,200,000-50,000).

(4,150,000)

Impairment loss.
350.000

8. What is the measurement of the equipment that ceases to be held for sale
on December 31. 2022?

a. 4,000,000

b. 3,500,000

c. 3,400,000

d. 4,150,000
9. What amount should be recognized as gain or loss as a result of the
reclassification in 2022?

a. 750,000 gain

b. 750,000 loss

c. 150,000 gain

d. 150,000 loss

Answer:

Measurement of equipment.
3,400,000

Carrying amount
4.150.000

Loss on reclassification.
(750.000)

PROBLEM NO.4

ADO LTD. Has to rectify a serious fault in an item of plant that it has
constructed for a customer. The individual most likely outcome is hat the
repair will succeed at the first attempt at a cost of 400,000, but there is a
chance that a further attempt will be necessary, with an extra cost of
200,000.

What amount of provision should be recognised?

A. 400,000
B. 200,000
C. 0
D. 600,000

PROBLEM NO 5.
Camille Company accounted for noncurrent assets using the revaluation
model. On October 1, 2018, the entity classified a land as held for sale.

At the date, the carrying amount of the land was P5,000,000 and the balance
in the revaluation surplus was P1,500,000

At same date, the fair value of the land was estimated at P5,500,000 and the
cost of disposal at P100,000

On December 31, 2018, the fair value less cost of disposal at the land did not
change.

The land was sold on January 31, 2019 for P6,000,000

What is the adjusted carrying amount of the land on December 31, 2018

a. 5,000,000

b. 5,500,000

c. 5,400,000

Problem no.6

On January 1, 2019, Poe Company purchased land at a cost of P6,000,000.

The entity used the revaluation model for this asset.

The fair value of the land was P7,000,000 on December 31, 2019 and
P8,500,000 on December 31, 2020.

On July 1, 2021, the entity decided to sell the land and therefore classified
the asset as held for sale.

The fair value of the land on July 1, 2021 is P7,600,000. The estimated cost
of disposal is very minimal.

On December 31, 2021, the land was sold for P8,000,000.

What amount in OCI should be recognized in the statement of

comprehensive income for the year ended December 31, 2020?

a. 2,500,000

b. 1,500,000

c .400,000

d. 900,000
Problem no.7

Company Tanggol purchases a new machinery and receives a government

grant of 15,000 in respect of capital equipment costing 100,000. It
depreciates all plant and machinery at 20% per annum with straight-line
method.

If the company directly deducts the government grant from the value of the
asset. What is the amount of the Net Book Value of the machinery at the end
of the first year of the purchase?

A .85,000

B .68,000

C.80,000

D .100.000

Problem no.8

Duggan Ltd. took out a £12,000,000 6% loan on 1 January 2019 to build a

new stadium. The stadium was completed on 30th September 2019 and it
was brought into use on 1 January 2020. The loan borrowed to finance this
project was repaid on 31 March 2020.

According to IAS23, how much is the borrowing cost that can be recognised
at the end of year 2019?

A. 0
B. 900,000
C. 540,000
D. 720,000

Problem no. 9

Sakura Company accounted for noncurrent assets using the revaluation

model. On October 1, 2019, the entity classified a land as held for sale.

At that date. the carrying amount of the land was P5,000,000 and the
balance in the revaluation surplus was P1,500,000.

At same date, the fair value of the land was estimated at P5,500,000 and the
cost of disposal at P100,000.

On December 31,2019, the fair value less cost of disposal of the land did not
change. The land. was sold on January 31, 2020 for P6,000,000,
What amount should be recognized as impairment loss in 2019?

a. 200,000 b. 500,000 c. 100,000 d. 0

Problem no. 10

Angelika Company purchased equipment for P5,000,000 on January 1, 2019

with a life of 10 years and no residual value.

On December 31, 2020, the entity classified the equipment as held for sale.
The fair value of the equipment on December 31, 2020 was P3,000,000 and
the cost of disposal P100,000,

On December 31, 2021, fair value of the equipment was P3,800,000 and the
cost of dismissal P200,000. The value in use was determined to be
P3,300,000.

On December 31, 2021. the entity believed that the criteria for classification
as held for sale can no longer be met.

What amount of impairment loss should be recognized for 2020?

a. 289,000
b. b. 700,000
c. 0
d. D. 800,000

Problem no.1

On September 30, 2018, when the carrying amount of a major subsidiary

was P60,000,000, Yolly Company signed a legally binding contract to sell the
subsidiary. The sale is expected to be completed by January 31, 2019 at a
selling price of P62,000,000. In addition, prior to January 31, 2019, the sale
contract obliged the entity to terminate the employment of certain
employees of the business segment incurring an expected termination cost
of P4,000,000 to be paid on June 30, 2019. The segment's revenue and
expenses for 2018 were P40,000,000 and P52,000,000 respectively. The
income tax rate is 30%. What amount should be reported as loss from
discontinued operation for 2018?
 A. 6,800,000
B. 10,450,000
C. 10,569,000
D. 11,200,000

4,000,000 termination cost 40,000,000-52,000,000= (12,000,000)

16,000,000*.7=11,200,000

Problem 2.

Marian Company, a parent entity, approved on December 1, 2018 a plan to

sell its subsidiary. The sie is expected to be completed on March 31, 2019.
The subsidiary had assets with carrying amount of P30,000,000 including
goodwill of P3,000, 000 on December 31, 2018. The subsidiary made a loss
of P6,000, 000 from January 1 to March 1, 2019 and is expected to make a
further

loss of P4,000,000 up to the date of sale. At the date of approval of the

financial statements, the entity was in negotiation for the sale of the
subsidiary but no contract had been signed. The entity expects to sell the
subsidiary for P18,000,000 and to incur costs of disposal of P1,000,000. The
value in use of the subsidiary was estimated to be P 20,000,000. On
December 31, 2018, what is the measurement of the subsidiary which is
considered as a “disposal group classified as held for sale?

a. Lower 20,000,000 b. Above 20,000,0000 c. Lower 17,000,000 d.

Above 17,000,000

solution:

18,000,000-1,000,000=17,000,000 lower

Problem no.3

On September 30, 2020, when the carrying amount of the net assets of a
business segment was P 70,000,000, Youngstown Company signed a legally
binding contract to sell the business segment. The sale is expected to be
completed by January 31, 2021 at a sale price of P 60,000,000.
In addition, prior to January 31,2021, the sale contract obliged Youngstown
Company to terminate the employment of certain employees of the business
segment incurring an expected termination cost of P2,000,000 to be paid on
June 30,2021. The segment revenue and expenses for 2020 were
P40,000,000 and P45,000,000 respectively.

Before income tax, what amount should be reported as loss from

discontinued operation for 2020?

a.17, 000,000

b.12, 000,000

c.15, 000,000

d.7,000,000

Problem no.4

Iron man Company decide on August 1. 2020 to dispose of a component of

business. The component was sold on November 30, 2020. The net income
for 2020 included income of P 5,000,000 from operating the discontinued
segment from January 1 to the date of disposal. The entity incurred a loss on
the November 30 sale of P4, 500,000.

What amount should be reported as pre-tax income or loss from discontinued

operation

for 2020?

a.4, 500.000 loss

b.5, 400,000 income

c. 500,000 loss.

d. 500.000 income

Problem no.5
Dong Company committed to sell the comic book division a component of
the business on September 1, 2015. The carrying amount of the division was
P4, 000,000 and the fair value was P 3,500,000.

The disposal dates expected on June 1, 2016. The division reported an

operating loss of P 200,000 for the year ended December 31, 2015.

Before income tax, what amount of income or loss from discontinued

operation should reported for 2015?

a. 100, 000

b.800, 000

c.700,000

d.200, 000

Problem no 6

Sunshine Company has correctly classified the packaging operation as a

disposal group held for sale and as discontinued operation. For the year
ended December 31, 2020 this disposal group incurred trading loss after tax
of P 2,000,000 and the loss on remeasuring it to fair value less cost of
disposal was P1, 500,000.

What total amount of the disposal group’s losses should be included in profit
or loss for the year ended December 31, 2020?

a.3, 500,000

b.1,000,000

с. 6,000,000

d.1, 500,000

PROBLEM NO.7

Arnie Company committed to sell the comic book division a component of

the business on September 1, 2020. The carrying amount of the division was
P8, 000,000 and the fair value was P 7,500,000. The disposal dates expected
on June 1, 2021. The division reported an operating loss of P 800,000 for the
year ended December 31, 2020. Before income tax, what amount of income
or loss from discontinued operation should reported for 2020?

a.900,000.

b.300, 000

c.100,000

d.600, 000

Problem no. 8

On December 1, 2015, kagome Company committed to a plan to dispose of a

business component assets. The disposal meets the requirements to be
classified as discontinued operation. On that date, the entity estimated that
the loss from the disposition of the asset would be P 700,000 and the
components operating loss was P 200,000.

Before income tax, what amount of income or loss from discontinued

operation should reported for 2015?

a.900, 000

b.300, 000

c.700,000

d.100, 000

Problem no. 9

On January 1, 2020, Yuri Company had a division that met the criteria for
discontinuance of a business component. For the period January 1, through
October 15, 2020, the component had revenue of P 500,000 and expenses of
P 800,000. The assets of the component were sold on October 15, 2020 at a
loss of P 100,000.

What should Yuri repot the components operation for 2020?

a. 500,000 and 800,000 should be included in continuing operations

b. 400,000 should be reported as loss on discontinued operations

c. 2, 500,000 loss should be reported as an extraordinary loss

d. 6, 500,000 income should be reported as loss on discontinued operations

Problem no. 10

Bar’s Company has three segments, A, B and C. Segment C the closing

division is deemed inconsistent with the long-term direction of the entity.
Management has decided to dispose of Segment C. On November 15, 2015,
the board of directors of Bar’s Company voted to approve the disposal and
an announcement was made.

On that date the carrying amount of Segment C's net assets was P
90,000,000 and the fair value less cost of disposal was P 70,000,000.
Segment C's revenue and expenses for 2015 respectively were P 5,000,000
attributable to Segment C. There was no further impairment of assets
between November 15 and December 31, 2015.

Before income tax, what amount of income or loss from discontinued

reported for 2015?

a.13, 000,000 income

b.18, 000,000 income

c.30, 000,000 income

d.2, 000,000 loss