Name: Ernie Jane G.
Villanueva February 19,2022
Topic # 4 NON CURRENT ASSET HELD FOR SALE
NON CURRENT ASSET HELD FOR SALE(NCAHFS)
-A non current asset or disposal gain is classified as held for sale if the carrying amount will be
recovered principle through a sale transaction rather than through continuing use.
NCA WITHIN THE SSCOPE OF PFRS 5:
1. Property plant and equipment (Pas 16) NCAHFS XX
2. Investment Property (Pas 40) PPE XX
3. Investment Associate (Pas 28)
4. Intangible Asset (Pas 58)
PROBLEM:
1. The measurement provisions of PFRS 5 apply to which of the ff. assets?
a. Deferred tax assets
b. Biological assets
c. Investment properties that are accounted for in accordance with the fair value model
d. Property, plan and equipment that are accounted for in accordance with the revaluation
model
ANS: D
NCA HELD FOR SALE------------------------------------------No more Depreciation
-------------------------------------------Current Asset
NCA HELD FOR SALE disposal group---------------------Liabilities do not offset
Condition: 1. Available for immediate sale at present condition
2. Highly probable
PROBLEM:
2. To be classified as non-current asset held for sale
a. The asset must be available for immediate sale in its present condition subject only to
terms that are usual and customary for sale of such assets
b. The sale of asset must be highly probable
c. Both a and b
d. Neither a nor b
ANS: C
Definition of “Highly probable”
-For sale to be highly probable, the ff. condition must be met:
[Link] to a plan to sell
[Link] program to locate buyer
[Link] to be sold within one year
[Link] price is reasonable
[Link] to change plan
PROBLEM:
3. In accordance with PFRS 5, for a sale asset to be highly probable:
I. Management is committed to a plan to sell
II. An active program to be locate a buyer is initiated
III. The asset is being actively marketed for sale at a sales price reasonable in relation to its
fair value
IV. The sale is expected to qualify for recognition as a completed sale within 1 year from the
date of classification (subject to limited exceptions)
V. Actions required to complete the plan indicate that it is unlikely that plan will be
significantly changed or withdrawn.
a. I, II, III, IV and V
b. I,III, IV and V only
c. I, IV and V only
d. I and IV only
ANS: A
Property, NCAHFS SOLD year 1
plan and Initial CA Gain or
equipment Impairmen loss on sale
Intangible t
asset
Investmen
t in
associate
Investmen
t property
BALANCE SHEET SOLD year 2
YEAR END Gain or loss on
Subsequen sale
t CA
Add
impairmen
t
Reversal
Reclass back
Initial CA
classification
Gain or loss on
reclassificatio
n
NCAHFS
Initial CA
Impairment
Initial measurement-initial carrying amount
Fair value less cost to sell P XX
C.A before reclassification (XX)
Initial measurement (LOWER) P XX
CA
Cost P XX
Acc. Depreciation (Annual x age) (XX)
C. A before reclassification P XX
IMPAIRMENT
C.A before reclassification P XX
Initial measurement (LOWER) (XX)
Impairment loss P XX
PROBLEM
Salvador Company 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
4. How should Salvador classify the headquarters building?
a. Included under PPE at 5,000,000
b. Included under PPE at 5,800,000
c. Classified as held for sale at 5,000,000
d. Classified as held for sale at 5,800,000
ANS: C
6M-200K= 5,800,000
5,000,000 (LOWER)
5. Salvador Company will continue to used the building until construction of a new headquarters
is completed. How should Salvador Company classify the headquarters building?
a. Included under PPE at 5,000,000
b. Included under PPE at 5,800,000
c. Classified as held for sale at 5,000,000
d. Classified as held for sale at 5,800,000
ANS: A
6M-200K= 5,800,000
5,000,000 (LOWER) because nagpatuloy pa sya kahit in the next year na..i reclass back na sy kaya
maging PPE na sya not NCAHFS
6. An asset that meets the criteria for classifications as held for sale should be measured in the
statement of financial position at
a. Carrying amount in accordance with the pfrs applicable to that asset
b. Fair value less costs to sell
c. The lower of A and B
d. The higher of A and B
ANS: C
7. On December 31,2021 Barcela company 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
80,000.
Compute the initial carrying amount and impairment
ANS:
1,400,000-80,000= 1,320,000
4,000,000-2,400,000=1,600,000
280,000
IMPAIRMENT:
1,600,000
1,320,000(LOWER)
NCAHFS 1,320,000
Impairment 280,000
Acc depre 2,400,000
PPE 4,000,0000
8. On January 1,2025, Nether Company classifies a hotel property a non-current asset held for
sale. Immediately before the classification as held for sale the cost of the property is 100,000
and accumulated depreciation of 40,000. The hotel is depreciated on the straight line method
with a useful life of 10 years . The estimate of the fair value less cost to sell is on this date is
62,000
Compute initial carrying amount and impairment
ANS:
62,000,
100,000-40,000=60,000(LOWER)
IMPAIRMENT
100K-40K=60K
-60K