[THEORY] Noncurrent Assets Held For Sale Flashcards
An entity shall classify a noncurrent asset as held for sale when:
a. The carrying amount of the asset or disposal group will be recovered through a sale transaction.
b. The carrying amount of the asset or disposal group will be recovered through continuing use.
c. The noncurrent asset or disposal group is to be removed from active use.
d. The asset is available for immediate sale in its present condition, and the sale is highly probable.
ANSWER: d. The asset is available for immediate sale in its present condition, and the sale is highly probable.
Non-current asset or disposal group is classified as held for sale when the asset is available for immediate sale in the present condition, and the sale is highly probable. For the sale to be highly probable, which of the following statements is incorrect?
a. Management must be committed to a plan to sell the asset.
b. An active program to locate a buyer and complete the plan must have been initiated.
c. The asset must be actively marketed for sale at a reasonable price in relation to the fair value.
d. The sale is expected to qualify for recognition as a completed sale within two years from the date of classification of the asset as held for sale.
ANSWER: d. The sale is expected to qualify for recognition as a completed sale within two years from the date of classification of the asset as held for sale.
An entity acquired a subsidiary exclusively with a view to selling it. The subsidiary met the criteria to be classified as held for sale. At the end of the reporting period, the subsidiary has not been sold, and six months have passed since the acquisition. How will the subsidiary be measured in the statement of financial position at the date of the first financial statements after acquisition?
a. At fair value
b. At the lower of cost and fair value less cost of disposal
c. At carrying amount
d. In accordance with applicable IFRS
ANSWER: b. At the lower of cost and fair value less cost of disposal
In order for a noncurrent asset to be classified as held for sale, the sale must be highly probable. What does this mean?
a. The future sale is likely to occur.
b. The future sale is more likely than not to occur.
c. The sale is certain.
d. The probability is higher than more likely than not.
ANSWER: d. The probability is higher than more likely than not.
An entity shall measure a noncurrent asset or disposal group classified as held for sale at:
a. Carrying amount
b. Fair value less cost of disposal
c. The lower of carrying amount and fair value less cost of disposal
d. The higher of carrying amount and fair value less cost of disposal
ANSWER: c. The lower of carrying amount and fair value less cost of disposal
How should the assets and liabilities of a disposal group classified as held for sale be shown in the statement of financial position?
a. The assets and liabilities shall be offset and presented as a single amount.
b. The assets of the disposal group shall be shown separately as current assets, and the liabilities of the disposal group shall be shown separately as current liabilities.
c. The assets and liabilities shall be presented as a single amount and as a deduction from equity.
d. There should be no separate disclosure of assets and liabilities that form part of a disposal group.
ANSWER: b. The assets of the disposal group shall be shown separately as current assets, and the liabilities of the disposal group shall be shown separately as current liabilities.
What is the treatment of any gain on a subsequent increase in the fair value less cost of disposal of a noncurrent asset classified as held for sale?
a. The gain shall be recognized in full.
b. The gain shall not be recognized.
c. The gain shall be recognized but not in excess of the cumulative impairment loss previously recognized.
d. The gain shall be recognized but only in retained earnings.
ANSWER: c. The gain shall be recognized but not in excess of the cumulative impairment loss previously recognized.
A noncurrent asset that is to be abandoned shall not be classified as held for sale because:
a. The carrying amount will be recovered principally through continuing use.
b. The noncurrent asset is difficult to value.
c. It is unlikely that the noncurrent asset will be sold within twelve months.
d. It is unlikely that there will be an active market for the noncurrent asset.
ANSWER: a. The carrying amount will be recovered principally through continuing use.
An entity classified a noncurrent asset accounted under the cost model as held for sale at the current year-end. Because no offers were received at an acceptable price, the entity decided at the end of the next year not to sell the asset but to continue to use it. The asset shall be measured at the end of the next year at what amount?
a. The lower of carrying amount and recoverable amount
b. The higher of carrying amount and recoverable amount
c. The lower of the carrying amount on the basis that the asset had never been classified as held for sale and recoverable amount
d. The higher of the carrying amount on the basis that the asset had never been classified as held for sale and recoverable amount
c. The lower of the carrying amount on the basis that the asset had never been classified as held for sale and recoverable amount
An entity recently moved to a new building. The old building is being actively marketed for sale, and the entity expects to complete the sale in four months. Which statement is incorrect regarding the old building?
a. It will be reclassified as an asset held for sale.
b. It will be classified as a current asset.
c. It will no longer be depreciated.
d. It will be measured at historical cost.
ANSWER: d. It will be measured at historical cost.
