@rrhdamcpa

NON-CURRENT ASSET HELD FOR SALE & DISCONTINUED OPERATIONS Total Revenues 4.5M
Total Expense (4.080M)
Non-current assets (or disposal groups) classified as held for sale (PFRS 5): Discontinued Operations, before tax 447.5K
1. Must be available for immediate sale in its present condition. Tax Expense (134,250)
2. Sale must be highly probable. Net Income from Discontinued Operations 313,250
 The CV of the asset will be recovered through a sale of transaction. Net Income from Discontinued Operations (2M x 70%) 1.4M
Profit or Loss 1,713,250
MEASUREMENT OF A NON-CURRENT ASSET HELD FOR SALE (NCAHFS)
ILLUSTRATION
Mars Corporation has two business segments, Segment A and Segment B. Segment A’s business
1. Carrying Value Results:
operations is continuing. Segment B met the criteria to be classified as “Held for Sale”. Mars
2. Fair Value – CTS (Recoverable 1. CV < RA
Amount) - The NCAHFS is initially recognized at Corporation was able to dispose segment B on September 1, 2023. Net proceeds from the sale
CV, no impairment loss. totalled 20M while the segment’s carrying value on September 1, 2023 was 18M.

2. RA < CV The following pertains to the results of the operation of Segment A & B during 2023:
- The NCAHFS is initially recognized at
RA, difference is “Impairment Loss” Segment A Segment B
 Discontinued Operation Jan. 1 – Dec. 31, 2023 Jan. 1 – Aug, 2023
 Pro-forma entry: Revenues 25,000,000 12,000,000
NCA Held for Sale XX Selling and general expenses 15,000,000 15,000,000
Impairment Loss XX Income Tax rate (35%)
Acc. Depreciation XX
Asset (cost) XX Net Selling Price 20M NL D.O (650K)
Carrying Value (18M) NI from C.O (25M – 15M) x 65% 6.5M
*No depreciation. Gain on Sale 2M PL 5.850M
*If at year-end, the NCAHFS is still unsold, Revenues 12M
the asset shall be remeasured. Expenses (15M)
Discontinued Operations, before tax (1M)
CV > RA ADDITIONAL IMPAIRMENT LOSS Tax benefit (35%) (350K)
CV < RA INCREASE IN VALUE OF ASSET Net Loss Discontinued Operations (650K)

 An entity shall recognize a gain for any subsequent increase in FV LESS COST TO SELL ILLUSTRATION
of an asset, but not in excess of the cumulative impairment loss that has been recognized. On Jan. 1, 2023, Jupiter Co. classified a property as non-current asset held for sale. At that time, the
asset’s carrying amount was 64K with an estimated fair value of 48K and an estimated cost to sell of
ILLUSTRATION 3.8K. The property is depreciated using the straight-line method with a remaining useful life of 10
IMPAIRMENT LOSS years. On Dec. 31, 2023 the property has an estimated fair value of 70K and a cost to sell 2K.
ASSET TOTAL
PAS 36 PFRS 5
Equipment (NCAHFS) 100K 40K 140K (1) The initial valuation of the non-current asset classified as held for sale on Jan. 1, 2023.
(2) The amount of impairment loss to be recognized at the date or reclassification non-current asset
Recoverable Amount 500K Recoverable Amount 560K held for sale.
Carrying Value (390K) Carrying Value 390K (3) The correct valuation of the non-current asset held for sale on Dec. 31, 2023.
Increase in Value 110K Increase in Value 170K
CV 64K NCAHFS 44.2K(1)
NCAHFS 110K NCAHFS 140K FV – CTS 44.2K Impairment Loss 19.8K(2)
Gain on Impairment Reversal 110K Gain on Impairment Reversal 140K Impairment Loss 19.8K Property 64K

CHANGES TO A PLAN OF SALE FV – CTS (70K - 2K) 68K NCAHFS 19.8K

CV (44.2K) Gain – 19.8K Gain 19.8K
 If an entity has classified an asset held for sale, but the criteria as NCAHFS are no longer Increase 23.8K Excess – 4K – Ignore CV 12/31/23: 44.2K + 19.8K
met, the entity shall cease to classify the asset as held for sale. = 64K (3)

 The entity shall measure a non-current asset that ceases to be classified as held for sale at
the lower of: ILLUSTRATION
 Its carrying amount before the asset was classified as held for sale, adjusted for any On Jan. 1, 2023, Neptune Co. classified a hotel property as non-current asset held for sale.
depreciation, amortization or revaluations that would have been recognized had the asset Immediately before the classification as held for sale, the carrying amount of the property is 400M
not been classified as held for sale; and (cost of 500M and accumulated depreciation of 100M). The hotel is depreciated on the straight-line
 Its recoverable amount at the date of the subsequent decision not to sell. method with useful life of 50 years. The estimate of the fair value less cost to sell on this date is
350M. On Dec. 31, 2023, no buyer could be identified. On this date, management concludes that the
DISCONTINUED OPERATION criteria for classification could not be met. The estimate of the fair value less cost to sell was revised
to 340M while the value in use at that time was estimated at 380M.
 DISCONTINUED OPERATION – 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 (1) The amount impairment loss to be recognized at the date asset was classified as held for sale.
geographical area of operations, is part of a single coordinated plan to dispose of a separate (2) The amount taken to profit or loss on the date the asset was reclassified back to property, plant
major line of business or geographical area of operations or is a subsidiary acquired and equipment.
exclusively with a view to resale. (3) The 2024 depreciation expense aft6er the asset was reclassified back to property, plant and
equipment.
Revenues XX
Expenses (XX) 1/1/23: CV 1/1/23 400M 500M
NCAHFS 350M FV – CTS 350M ÷ 50
Relocation/ Termination Cost (XX)
Acc. Dep. 100M Impairment Loss 50M 10M
Impairment Loss (XX)  If not yet sold
Impairment Loss 50M(1)
Gain (Loss) on Disposal (XX)  If sold Property 500M 100 ÷ 10M = 10 years; 50 – 10 = 40 years
Income Tax Benefit (Expense) (XX)
Discontinued Operation, net of tax XX 12/31/23: 1. CV 12/31/23 380M
CV if not been NCAHFS 2. RA 12/31/23 380M
ILLUSTRATION 350M x 39/40 = 341,250,000 CV 12/31/23
On September 1, 2023, Venus Co. approved a formal plan to sell a business segment. The segment RA 12/31/23 DE in 2024: 380M ÷ 39 = 9,743,590(3)
reported revenues and expenses of 3M and 1.6M, respectively during 2023. On December 31, 2023, 380M – 350M = 30M(2)
the carrying value of the segment was 8M and the estimated recoverable value was 7.7M. During
the year 2024, the segment reported revenues of 1.3M and expenses of 900K. The estimated
recoverable value of the segment on December 31, 2024 is 8.4M. Income Tax rate is 35%.

Compute for the amount to be reported as Discontinued Operations for the year 2024.

For 2023:
Total Revenues 3M FV – CTS 7.7M
Total Expenses (1.6M) CV 8M
Impairment Loss (300K) Impairment Loss 300K
Discontinued Operations, before tax 1.1M
Tax Expense (35%) (385K)
Net Income from Discontinued Operations 715K

For 2024: FV – CTS 8.4M

Total Revenues 1.3M CV 7.7M Gain – 300K
Total Expenses (900K) Increase 700K Excess – 400K
Gain on Recovery 300K  IGNORE
Discontinued Operations, before tax 700K x 65% = 455K

ILLUSTRATION
Earth Co. has several operating divisions. On Nov. 30, 2023, the company sold one of its division
that qualifies as a separate component to IFRS 5. On this date, the net assets of the division had a
book value of 800K. The division was sold for 850K and incurred a disposal cost of 22.5K. During
the period Jan. 1, 2023 through Nov. 30, 2023, the segment had total revenues of 4.5M and total
selling and administrative expenses of 4.080M. Income tax rate is 30%. Earth Co. generated pre-tax
profits of 2M from its continuing operations.

Compute for the single amount to be reported as Discontinued Operations in Earth’s Profit or Loss
Statement for the year 2023.

Net Selling Price (850K – 22.5K) 827.5K

Book Value (800K)
Gain on Sale 27.5K