NONCURRENT ASSET

HELD FOR SALE

DISCONTINUED OPERATION
INTERMEDIATE ACCOUNITNG
VOLUME III
CHAPTER 8
CHAPTER 9
• noncurrent asset
• an asset that does not meet the definition of a current asset
• may be an individual asset, like land and building, or a disposal
group
• disposal group
• a group of assets to be disposed of, by sale or otherwise, together
as a group in a single transaction, and liabilities directly associated
with those assets that will be transferred in the transaction
• includes goodwill acquired in a business combination if the group
is a cash generating unit to which goodwill has been allocated
 NONCURRENT ASSET HELD FOR
SALE
• PFRS 5, paragraph 6, provides that
• A noncurrent asset or disposal group is classified as held for sale if
the carrying amount will be recovered principally through a sale
transaction rather than through continuing use.

• The entity does not intend to use the asset as part of its on-going
business but intends to sell it and recover the carrying amount
principally through sale.
 Conditions for Classification as Held for
Sale
• A noncurrent asset or disposal group shall be classified as held for
sale if the following conditions are present:
a. The asset or disposal group is available for immediate sale in
the present condition subject only to terms that are usual and
customary for sale of such assets or disposal group.
The current condition of the asset should be adequate to be
effectively “sold as seen”
b. The sale must be highly probable
 Definition of Highly Probable
1. Management must be committed to a plan to sell the asset or disposal
group.
2. An active program to locate a buyer and complete the plan must have
been initiated.
3. The sale is expected to be a “completed sale” within one year from the
date of classification as held for sale.
Extension of the one-year period does not preclude the asset or disposal
group from being classified as held for sale if the delay is caused by events or
circumstances beyond the entity’s control.
4. The asset or disposal group must be actively marketed for sale at a sale
price that is reasonable in relation to its fair value.
5. Actions required to complete the plan indicate that it is unlikely that
the plan will be significantly change or withdrawn.
 Measurement of Asset Held for Sale
• PFRS 5, par 15, provides that an entity shall measure a noncurrent
asset or disposal group classified as held for sale at the lower of
carrying amount or fair value less cost of disposal.
• Fair value is the amount for which an asset could be exchanged, or
a liability settled, between knowledgeable and willing parties in an
arm’s length transaction.
• Cost to sell (disposal) is the incremental cost directly attributable
to the disposal of an asset or disposal group but excluding finance
cost and income tax expense.
PFRS 5, par 25, further provides that a noncurrent asset classified as
held for sale shall not be depreciated.
 Writedown to Fair Value less Cost of
Disposal
• If the fair value less cost of disposal is lower that carrying amount of
the asset or disposal group, the writedown to fair value less cost of
disposal is treated as an impairment loss.
• If the noncurrent asset is a disposal group, the impairment loss is
apportioned across the assets based on carrying amount after writing
any goodwill first.
• any goodwill is written off first
• any remainder of the impairment loss is allocated prorate to the
other assets based on their carrying amount
 Subsequent Increase in Fair Value
• If subsequently there is an increase in the fair value less cost
to sell,
• PFRS 5, par 21, provides that an entity may recognize a
gain but not in excess of any impairment loss previously
recognized.
 Illustration I DATE ACCOUNT TITLE & EXPLANATION DEBIT CREDIT

• On January 1, 2019, an entity 2022

Jan 1 Equipment held for sale 3,650,000
acquired an equipment at a cost Accumulated Depreciation 1,350,000
of P5,000,000 to be used in the Equipment 5,000,000
ordinary course of business. To remove equipment from PPE
and classified it as held for sale
• The equipment has an estimated
COMPUTATION
useful life of 10 years and a COST 5,000,000
residual value of P500,000. Less: Accum. Depreciation (3 yrs) 1,350,000
• On January 1, 2022, the Carrying Amount – Jan 1, 2022 3,650,000
equipment was classified as held
for sale.
 Illustration I DATE ACCOUNT TITLE & EXPLANATION DEBIT CREDIT

• On January 1, 2019, an entity 2022

Jan 1 Equipment held for sale 3,650,000
acquired an equipment at a cost Accumulated Depreciation 1,350,000
of P5,000,000 to be used in the Equipment 5,000,000
ordinary course of business. The To remove equipment from PPE
equipment has an estimated and classified it as held for sale
useful life of 10 years and a
Jan 1 Impairment Loss 1,750,000
residual value of P500,000. Equipment held for sale 1,750,000
• On January 1, 2022, the To measure equipment held for sale at the
equipment was classified as held lower of carrying amount and fair value
less cost of disposal
for sale.
• On such date, the fair value less COMPUTATION
cost of disposal was estimated at Carrying Amount 3,650,000
P1,900,000. Fair Value less cost of disposal 1,900,000
Impairment Loss 1,750,000
LOWER – Impairment Loss
 Illustration I DATE ACCOUNT TITLE & EXPLANATION DEBIT CREDIT

• On January 1, 2019, an entity 2022

Jan 1 Equipment held for sale 3,650,000
acquired an equipment at a cost of Accumulated Depreciation 1,350,000
P5,000,000 to be used in the Equipment 5,000,000
ordinary course of business. The To remove equipment from PPE
equipment has an estimated and classified it as held for sale
useful life of 10 years and a
residual value of P500,000. Jan 1 Impairment Loss 1,750,000
Equipment held for sale 1,750,000
• On January 1, 2022, the To measure equipment held for sale at the
equipment was classified as held lower of carrying amount and fair value
for sale. less cost of disposal

• On such date, the fair value less Jun 30 Cash 1,500,000

cost of disposal was estimated at Loss on sale of equipment 400,000
P1,900,000. Equipment held for sale 1,900,000
• On June 30,2022, the equipment To record sale of equipment
PROBLEM 6-1 & 2
was sold for P1,500,000.
LOWER – LOSS ON SALE
 Illustration II DATE ACCOUNT TITLE & EXPLANATION DEBIT CREDIT

• On January 1, 2019, an entity 2020

Dec 31 Equipment held for sale 2,400,000
acquired an equipment at a cost of Accumulated Depreciation 1,600,000
P4,000,000 to be used in the Equipment 4,000,000
ordinary course of business. The To remove equipment from PPE
equipment has an estimated and classified it as held for sale
useful life of 5 years and no
residual value. NO ENTRY is required because the equipment
held for sale is measured at the carrying amount
• On December 31, 2020, the which is lower than FV less cost of disposal.
equipment was classified as held The GAIN is not recognized because any
for sale. gain should not be anticipated at the point
• On such date, the fair value less of classification as held for sale.
cost of disposal was HIGHER
estimated at Jun 30 Cash 2,900,000
P3,000,000. Gain on sale of equipment 500,000
• On July 21 the equipment was sold Equipment held for sale 2,400,000
To record sale of equipment
forHIGHER
P2,900,000.
– GAIN on sale
 Subsequent Increase in Fair Value
• If subsequently there is an increase in the fair value less cost
to sell,
• PFRS 5, par 21, provides that an entity may recognize a
gain but not in excess of any impairment loss previously
recognized.
PROBLEM 6 - 8
 Revalued Asset Classified as Held for Sale
• PFRS 15, paragraph 18, provides that
• When an entity adopts the revaluation model for the remeasurement
of assets, any asset classified as held for sale should be revalued to
fair value immediately prior to classification as held for sale.
• The additional revaluation surplus is equal to the fair value at the
classification date less the carrying amount at that date.
• Any cost of disposal at classification date should be recognized as
impairment loss for the period and deducted from the asset held for
sale.
• At subsequent year-end, the revalued asset classified as held for sale
shall be measured at the lower of carrying amount and fair value less
cost of disposal.
 Illustration III DATE ACCOUNT TITLE & EXPLANATION DEBIT CREDIT

• On January 1, 2019, an entity 2019

Jan 1 Land 2,500,000
acquired an land at a cost of Cash 2,500,000
P2,500,000. To record acquisition of land
• The land is measured at fair value
Dec 31 Land 500,000
in accordance with the Revaluation Surplus 500,000
revaluation model. To record revaluation to fair value
• On December 31, 2019, the fair
value of the land was P3,000,000.
COMPUTATION
Fair Value – Dec 31, 2019 3,000,000
HIGHER – Revaluation Carrying Amount 2,500,000
Revaluation Surplus 500,000
 Illustration III DATE ACCOUNT TITLE & EXPLANATION DEBIT CREDIT

• On June 30, 2020, the land was 2020

Jun 30 Land 500,000
classified as held for sale. Revaluation Surplus 500,000
• On such date, the fair value was To record revaluation of land at FV on the
estimated at P3,500,000 and the date of classification as held for sale
Jun 30 Land held for sale 3,500,000
cost of disposal at P100,000.
Land 3,500,000
COMPUTATION To remove the land from PPE and classify
Fair Value – Jun 30, 2020 3,500,000 it as held for sale
Carrying Amount-Dec 31,2019 3,000,000 Jun 30 Impairment Loss 100,000
Revaluation Surplus 500,000 Land held for sale 100,000
To recognize the cost of disposal
• On December 31, 2020, the land Dec 31 Cash 3,350,000
was sold for P3,350,000. Loss on sale of equipment 50,000
Land 3,400,000
LOWER – LOSS on sale To record sale of equipment
Dec 31 Revaluation Surplus 1,000,000
PROBLEM 6- 3,4,5 Retained Earnings 1,000,000
To record reclassification
Abandoned Noncurrent Asset
• PFRS 5, paragraph 13, provides that
• An entity shall not classify as held for sale a noncurrent asset or disposal
group that is to be abandoned.
• because its carrying amount will be recovered principally through continuing
use or the noncurrent asset is to be used until the end of its economic life.
Temporarily Abandoned
• PFRS 5, paragraph 14, provides that
• An entity shall not account for a noncurrent asset that has been temporarily
taken out of use as if it had been abandoned.
• EXAMPLE
• An entity ceases to use a manufacturing plant because demand for its product
has declined.
• The plant is maintained in workable condition and it is expected that it will be
brought back into use if demands picks up. (NOT ABANDONED)
 Change in Classification
• Circumstances could arise leading to the noncurrent asset no longer being
classified as held for sale.
• a decision not to sell the noncurrent asset
• The criteria for being classified as held for sale may no longer be met.
• PFRS 5, par 27, provides that the entity shall measure the noncurrent
asset that ceases to be classified as held for sale at the lower of:
a. Carrying amount before the asset was classified as held for sale
adjusted for any depreciation or amortization that would have
been recognized if the asset had not been classified as held for
sale
b. Recoverable amount at the date of the subsequent decision not
to sell.
 Illustration III DATE ACCOUNT TITLE & EXPLANATION DEBIT CREDIT

• An entity purchased equipment 2019

Jan 1 Equipment 5,000,000
for P5,000,000 on January 1, 2019 Cash 5,000,000
with a useful life of 10 years and To record purchase of equipment
no residual value.
Dec 31 Depreciation 500,000
• On December 31, 2020, the entity Accumulated Depreciation 500,000
reclassified the asset as held for To record depreciation for the year
sale. 2020
Dec 31 Depreciation
• The fair value of the equipment 500,000
Accumulated Depreciation 500,000
on December 31, 2020 is
To record depreciation for the year
P3,300,000 and the cost of
disposal is P100,000. Dec 31 Equipment held for sale 4,000,000
Accumulated Depreciation 1,000,000
Equipment 5,000,000
To remove equipment from PPE
and classified it as held for sale
 Illustration III DATE ACCOUNT TITLE & EXPLANATION DEBIT CREDIT

• An entity purchased equipment Dec 31 Impairment Loss 800,000

Equipment held for sale 800,000
for P5,000,000 on January 1, 2019 To measure the equipment held for sale at
with a useful life of 10 years and the lower of FV less cost of disposal and
no residual value. carrying amount
• On December 31, 2020, the entity COMPUTATION
Fair Value less cost of disposal 3,200,000
reclassified the asset as held for Carrying Amount 4,000,000
sale. Impairment Loss ( 800,000)
• The fair value of the equipment
on December 31, 2020 is
P3,300,000 and the cost of
disposal is P100,000.
 Illustration III DATE ACCOUNT TITLE & EXPLANATION DEBIT CREDIT
• On December 31, 2021, the fair value Dec 31 Equipment held for sale 300,000
of the equipment is P3,800,000 and Gain on Reclassification 300,000
the cost of disposal is P200,000. To measure the equipment that ceases as
held for sale.
• On the same date, the entity believed COMPUTATION
that the criteria for classification as Carrying Amount – Dec 31, 2020 4,000,000
held for sale can no longer be met. Depreciation that would been
500,000
• The entity decided not to sell the recognized if not held for sale
asset but continue to use it. CARRYING AMOUNT – Dec 31, 2021 3,500,000
RECOVERABLE AMOUNT
• PFRS 5, paragraph 28, states that any (3,800,000 – 200,000) 3,600,000
adjustment to the carrying amount of
noncurrent asset that ceases to be Measurement of Equipment - LOWER 3,500,000
classified as held for sale should be Carrying Amount-per book 3,200,000
included in profit or loss. GAIN ON RECLASSIFICATION 300,000
• If revaluation model, any adjustment
shall be treated as a revaluation
increase or decrease.
 Illustration II DATE ACCOUNT TITLE & EXPLANATION DEBIT CREDIT
• On December 31, 2021, the fair value Dec 31 Equipment held for sale 300,000
of the equipment is P3,800,000 and Gain on Reclassification 300,000
the cost of disposal is P200,000. To measure the equipment that ceases as
held for sale.
• On the same date, the entity believed
that the criteria for classification as Dec 31 Equipment 3,500,000
held for sale can no longer be met. Equipment held for sale 3,500,000
• The entity decided not to sell the To reclassifiy the asset as PPE.
asset but continue to use it. 2022
Dec 31 Depreciation 500,000
• PFRS 5, paragraph 28, states that any Accumulated Depreciation 500,000
adjustment to the carrying amount of
To record depreciation for the year
noncurrent asset that ceases to be (3,500,000 / 7 years)
classified as held for sale should be
included in profit or loss. PROBLEM 6- 6, 7, 9
• If revaluation model, any adjustment
shall be treated as a revaluation
increase or decrease.
 Reversal of an impairment loss
• PAS 36, paragraph 114, provides that “an impairment loss recognized for an asset in prior years
shall be reversed if there has been a change in the estimate of the recoverable amount”.
• If the recoverable amount of an asset that has previously been impaired turns out to be higher
than the asset’s current carrying amount, the carrying amount of the asset shall be increased
to new recoverable amount.
• However, PAS 36, paragraph 117, provides that “the increased carrying amount of an asset due
to a reversal of an impairment loss shall not exceed the carrying amount that would have been
determined, had no impairment loss been recognized for the asset in prior years.” 
• The reversal of the impairment loss shall be recognized immediately as income in the income
statement.
• But any reversal of an impairment loss on a revalued asset shall be treated as a revaluation
increase, meaning, credited to income to the extent that it reverse a previous revaluation
decrease, and the excess credited directly to revaluation surplus.
• Pas 36, paragraph 124, explicitly provides that “an impairment loss recognized for goodwill shall
not be reversed in a subsequent period.”
 Reversal of an Impairment 1,200,000
Dec 31 Impairment Loss
Loss
• On December 31, 2019, the statement Accumulated Depreciation 1,200,000
of financial position shows the following 2020 To record impairment
balances: Dec 31Depreciation Expense 650,000
Accumulated Depreciation 650,000
Machinery 8,000,000
To record depreciation
Accum. depreciation P5,600,000
(10-yr life, 2 yrs expired) 1,600,000 5,600,000
CARRYING AMOUNT with NO IMPAIRMENT
CARRYING AMOUNT with IMPAIRMENT 4,550,000
Carrying amount 6,400,000 REVERSAL of IMPAIRMENT 1,050,000
• On the same date, the recoverable
amount of the machinery is determined Dec 31 Accumulated Depreciation 1,050,000
to be its fair value less cost of disposal GAIN on reversal of impairment 1,050,000
of P5,200,000. / 8 yrs CA = P4,550,000 To record reversal of impairment
• On December 31, 2020, the recoverable
LOWER of the RECOVERABLE AMOUNT and
amount of the machinery is P6,000,000,
indicating a reversal of impairment loss. CARRYING AMOUNT with NO IMPAIRMENT
 Revaluation Increase / Decrease
• Reversal of Revaluation Increase (Revaluation Surplus)
• When an asset’s carrying amount is decreased as a result of revaluation, the
decrease shall be recognized as an expense.
• A revaluation decrease shall be charged directly against any revaluation
surplus to the extent that the decrease is a reversal of a previous revaluation
and the balance is charged to expense. (IMPAIRMENT)
ILLUSTRATION LAND 1,000,000
• The historical cost of land is P5,000,000 REVALUATION SURPLUS 1,000,000
and the land was revalued upward to
P6,000,000 two years ago. REVALUATION SURPLUS 1,000,000
• In the current year, the fair value of the REVALUATION LOSS 1,500,000
land has fallen to P3,500,000 or a LAND 2,500,000
revaluation decrease of P2,500,000.
Can use IMPAIRMENT LOSS
 Revaluation Increase / Decrease
• Reversal of Revaluation Decrease
• When an asset’s carrying amount is increased as a result of revaluation,
the increase shall be credited to revaluation surplus.
• A revaluation increase shall be recognized as income to the extent that it
reverses a revaluation decrease of the same asset previously recognized
as expense and the excess credited directly to revaluation surplus.
ILLUSTRATION
IMPAIRMENT LOSS 1,000,000
• The historical cost of land is P5,000,000 and the
LAND 1,000,000
land was revalued downward to conform with
the fair value of P4,000,000 by reason of slump
in land value. LAND 1,500,000
• In the current year, there has been a surge in GAIN on REVERSAL of 1,000,000
land prices and the land has now a fair value of IMPAIRMENT
P5,500,000 or a revaluation increase of REVALUATION SURPLUS 500,000
P1,500,000.
ILLUSTRATION Reversal of Impairment-Revalued Asset
• On January 1, 2011, an entity • Prepare journal entries from 2011-2014.
purchase a machine costing • Prepare a revaluation table.
P5,000,000. • Journal Entries to record the revaluation,
• The machine had a 10-year life subsequent depreciation & piecemeal
but no residual value. realization (2015 – 2017).
• On January 1, 2015, the entity Revaluation Table
COST
Replacement
Appreciation
(Jan. 1, 2015) Cost
change from cost model to Machinery 5,000,000 8,000,000 3,000,000
revaluation model. Accum. Dep'n 40% 2,000,000 3,200,000 1,200,000
• The machinery had a CA/ SV/ RS 3,000,000 4,800,000 1,800,000
replacement cost of P8,000,000
on January 1, 2015.
ILLUSTRATION Reversal of Impairment-Revalued Asset
• On December 31, 2017, three • Prepare a revaluation table.
years after revaluation, there • Journal Entry to record the revaluation
was an indication that the decrease.
machinery is impaired. 3,150,000
ACCUMULATED DEP’N
• The recoverable amount is REVALUATION SURPLUS 900,000
P1,050,000 on December 31, REVALUATION LOSS 450,000
2017. MACHINERY 4,500,000
The balance of the Revaluation Table Replacement
COST DECREASE
revaluation surplus on (Dec. 31, 2017) Cost
December 31, 2017 is Machinery 8,000,000 3,500,000 (4,500,000)
P900,000. (piecemeal Accum. Dep'n 70% 5,600,000 2,450,000 (3,150,000)
realization for 3-years) CA/ SV/ RS 2,400,000 1,050,000 (1,350,000)
ILLUSTRATION Reversal of Impairment-Revalued Asset
• On December 31, 2018, • Journal Entry to record 2018 depreciation.
the gross replacement • Prepare a revaluation table
cost is P6,000,000. • Journal entry to record revaluation.
• PAS 36, paragraph 120,
requires that the reversal MACHINERY 2,500,000
of an impairment loss on ACCUMULATED DEP’N 2,000,000
a revalued asset shall be GAIN ON REVERSAL of IMPAIRMENT 450,000
credited to income equal REVALUATION SURPLUS 50,000
to the amount of Replacement
COST INCREASE
impairment loss Cost
previously recognized, Machinery 3,500,000 6,000,000 2,500,000
and the remainder to Accum. Dep'n 80% 2,800,000 4,800,000 2,000,000
revaluation surplus. CA/ SV/ RS 700,000 1,200,000 500,000
 ILLUSTRATION Reversal of Impairment-Revalued Asset
• On June 30, 2019, the machinery was • Journal Entries to record
classified as held for sale. depreciation and piecemeal
• On this date the fair value of the realization of June 30.
machinery is P880,000 and the cost of • Journal entries on classification
disposal is P25,000. as held for sale.
• On December 31, 2019, the fair value • Journal entry for the
less cost of disposal of the machinery adjustment.
was P820,000. • Journal entry to record sale and
• The machinery was sold on January 15, full realization.
2020 for P810,000.
 Presentation of Asset classified as Held for Sale
• PFRS 5, paragraph 3, provides that
• Assets classified as noncurrent in accordance with PAS 1 shall not be reclassified as current
assets until they meet the criteria to be classified as held for sale.
• A noncurrent asset that is classified as held for sale shall be presented separately
as current asset
• PFRS 5, paragraph 38, provides that
• If the noncurrent asset is a disposal group classified as held for sale, the assets and liabilities
of the group shall be presented separately and cannot be offset as a single amount.
• assets of the disposal group
• as “noncurrent assets classified as held for sale” presented separately as a single amount
under current assets.
• liabilities of the disposal group
• “liabilities directly associated with noncurrent assets classified as held for sale” presented
separately as a single amount under current liabilities.
 Change in Method of Disposal
• IASB amended IFRS 5 to clarify the accounting treatment when an entity
reclassifies an asset or disposal group from “held for sale” to “held for
distribution to owners” or vice versa with any time lag.
a. The change in classification is a continuation of the original plan.
b. The entity shall continue to apply the “held for sale” or “held for
distributions” accounting.
The asset shall be measured at the lower between the carrying amount
and fair value less cost of disposal or fair value less cost to distribute.
c. At the time of the reclassification, the entity shall recognize any
impairment loss or subsequent increase in fair value less cost of disposal
or distribution.
d. The change in classification does not, in itself, extend the period in
which a sale has to be completed.
 Discontinued Operation
• Under Appendix A of PFRS 5
• 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 co-ordinated 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 resale.
 Component Classified as Held for Sale
• The discontinued operation is accounted for as a “disposal
group classified as held for sale”
• The component of an entity must be available for immediate
sale in the present condition and the sale must be highly
probable.
 Timing of reporting
• A component of an entity is classified as discontinued operation at the date
a. when the entity has actually disposed of the operation,
b. when the operation meets the criteria to be classified as “held for
sale”.
• PFRS 5, par 12,
• prohibits the retroactive classification as a discontinued operation when
the discontinued criteria are met after the end of reporting period.
• if the discontinued criteria are met after the end of reporting period, an
entity shall not classify the discontinued operation as held for sale in the
current financial statements.
 Component of an entity
• may be a subsidiary, a major line of business or geographical segment whose
operations and cash flows can be clearly distinguished, operationally and for
financial reporting purposes, from the rest of the entity.
• The component can be clearly distinguished operationally and for financial
reporting purposes if its assets and liabilities and its revenue and expenses are
directly attributable to the component.
• Assets, liabilities, income and expenses are directly attributable to the component
if they would be eliminated when the component is disposed of.
• A discontinued operation occurs when the operations or cash flows of the
component have been or will be eliminated from the ongoing operations of the
entity and the entity will have no significant continuing involvement in that
component after disposal.
Component classified as held for sale
• if its carrying amount will be recovered principally through a sale
transaction rather than through continuing use.
• available for immediate sale in its present condition
• the sale must be highly probable.
• the discontinued operation is accounted for as a “disposal group
classified as held for sale.”
 Examples of Discontinued Operation
a. Selling by a diversified entity of a major division that represents the
entity’s only activities in the electronics industry.
b. Selling by a meat packing entity of controlling interest in a furniture
entity. All other operations of the entity are in the meat packing
business.
c. Selling by an entity of all its radio stations. The entity’s remaining
activities are televisions stations and publishing house.
d. A conglomerate is engaged in commodity business, real estate,
manufacturing and construction business. Selling of any of the four
businesses is a discontinued operation
Examples which are not discontinued
operation
a. Phasing out of product line within a product group.
b. Shifting of production or marketing activities for a particular
line of business from one location to another.
c. Closing of a facility, factory or branch to achieve productivity
improvement or other cost saving.
 Income Statement Presentation
• PFRS 5, paragraph 33, provides that
• an entity shall disclose a single amount comprising the total of
post-tax profit or loss of the discontinued operation and the
post-tax gain or loss recognized on the measurement to fair
value less cost of disposal or on the disposal of the assets or
disposal group constituting the discontinued operation.
• the results of discontinued operation, net of tax shall be
presented as a single amount in the income statement below
the income from continuing operations.
 Included in the Discontinued Operation
a. The amount of revenue, expenses and income or loss attributable to the
discontinued operation during the current period and the related income
tax.
b. An impairment loss is recognized when the fair value less cost of disposal
of the discontinued operation is lower than the carrying amount. 
If the fair value less cost of disposal is higher than the carrying amount
the expected gain is not recognized.
c. Any gain or loss from the actual disposal of the assets and settlement of
the liabilities of a discontinued operation is recognized on the date of sale
or date of settlement.
d. The termination cost of employees and other costs which are directly
incurred as a result of the discontinuance.
 Presentation in Statement of Financial Position

• PFRS 5, par 38, provides that an entity shall also present separately on
the face of statement of financial position the following :
a. Assets of the component held for sale separately from all other
assets.
b. Assets of the component held for sale are measured at the lower of
fair value less to cost of disposal and their carrying amount.
c. Liabilities of the components separately from all other liabilities. 
d. Nondepreciation – Noncurrent assets of the component held for
sale shall not be depreciated.
 Presentation in Statement of Financial Position
• PFRS 5, paragraph 3, provides that
• the assets of the component shall presented as a single amount under
current assets and the liabilities of the component shall be presented as a
single amount under current liabilities.
• The assets and liabilities of the component cannot be offset against the
other.
• PFRS 5, par 40,
• further provides that if a disposal group is classified as held for sale in the
current year, an entity shall not reclassify or re-present the assets and
liabilities of the disposal group for the prior period to reflect the “held for
sale” classification in the statement of financial position as of the current
reporting period.
• the presentation of the assets and liabilities of the disposal group in the
prior period is not changed.
Cash flow presentation
• PFRS 5, paragraph 33, provides that
• the net cash flows attributable to the operating, investing
and financing activities of a discontinued operation shall
be separately presented in the statement of cash flows or
disclosed in the notes.
 DISCLOSURE
ZETA COMPANY SALES 3,000,000
INCOME STATEMENT COST of SALES (1,400,000)
year ended December 31, 2019 GROSS INCOME 1,600,000
SALES 5,000,000 EXPENSES (500,000)
COST of SALES (2,500,000) IMPAIRMENT LOSS (200,000)
GROSS INCOME 2,500,000 EMPLOYEE TERMINATION COST (150,000)
EXPENSES (1,000,000) INCOME TAX (240,000)
INCOME before TAX 1,500,000 INCOME from DISCONTINUED OPERATION 510,000
INCOME TAX EXPENSE ( 480,000)
INCOME from Continuing Operations 1,020,000 FV less Cost of Disposal-Segment B 1,000,000
INCOME from Discontinued Operation – net of tax 510,000 CA of Net Assets – Segment B (1,200,000)
NET INCOME 1,530,000 IMPAIRMENT LOSS (200,000)
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