Topic 2 (Notes)

Question 1

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 thst will be transferred in the transaction.

Answer 1

DISPOSAL GROUP

Question 2

A noncurrent asset or disposal group is classified as ____________________ if the carrying amount will be recovered through a sale transaction, rather than through continuing use.

Answer 2

HELD FOR SALE

Question 3

The carrying amount of a noncurrent asset held for sale is recovered principally through ___________.

Answer 3

SALE

Question 4

A noncurrent asset or disposal group is classified as held for sale, if the following conditions are present:

Answer 4

[1] The asset or disposal group is available for immediate sale in the present condition subject only to the terms that are usual customary for sale of such assets or disposal group.

[2] The sale must be highly probable.

Question 5

For the sale to be highly probable, the following conditions must be met:

Answer 5

[1] Management must be committed to a plan to sell.
[2] There must be an active program to locate a buyer and complete the plan.
[3] Sale is expected to be completed within one year from date of classification as held for sale.
[4] Asset or disposal group must be actively marketed for sale at a sales price that is reasonable in relation to fair value.
[5] It is unlikely that the plan will be significantly changed or withdrawn.

Question 6

Measurement of asset held for sale

Answer 6

LOWER OF CARRYING AMOUNT OR FAIR VALUE LESS COSTS TO SELL/COSTS OF DISPOSAL

Question 7

Noncurrent assets held for sale are depreciated

Answer 7

FALSE

Question 8

If the fair value less cost of disposal is lower than the carrying amount of the asset or disposal group, the writedown to fair value less costs of disposal is treated as an _______________________.

Answer 8

IMPAIRMENT LOSS

Question 9

If the noncurrent asset is a disposal group, what is the treatment of the imparment loss?

Answer 9

THE IMPAIRMENT LOSS IS APPORTIONED ACROSS THE ASSETS BASES ON CA AFTER WRITING OFF ANY GOODWILL FIRST.

Question 10

If subsequently, there is an increase in the fair value less costs of disposal, PFRS 5 provides that an entity shall recognize again but not in excess of ______________________________________

Answer 10

IMPAIRMENT LOSS PREVIOUSLY RECOGNIZED

Question 11

ABC Co. will transfer the ownership of the building to the buyer after ABC Co. vacates the building.

Answer 11

The building will be classified as HELD FOR SALE. The criteria would be met at the plan commitment date because the time to vacate is necessary, usual, and customary for sales.

Question 12

ABC Co. will continue to use the building until the construction of a new building is completed.

Answer 12

The building will not be classified as heald for sale. The building is not available for immediate sale, due to the delay in transfer of the ownership imposed by the entity.

Question 13

ABC is not decided whether to sell or to lease the equipment.

Answer 13

The equipment is not classified as held for sale because the criterion for highly probable sale is not met as the ultimate form of the future transaction has not yet been determined.

Question 14

_______________________________ include those that are to be used to the end of their economic life or are to be closed rather than sold.

Answer 14

NONCURRENT ASSETS THAT ARE TO BE ABANDONED

Question 15

PFRS 5 allows retroactive classification as a discontinued operation when the discontinued criteria are met after the end of reporting period,

Answer 15

FALSE

Question 16

____________________ comprises operations and cash flows that can be clearly distinguished operationally and for financial reporting purposes, from the rest of the entity.

Answer 16

COMPONENT OF AN ENTITY

Question 17

Phasing out of product line within a product group

Answer 17

NOT DISCONTINUED OPERATION

Question 18

Shifting of production and marketing activities for a particular line of business from one location to another

Answer 18

NOT DISCONTINUED OPERATION

Question 19

Closing of a facility, factory, or branch to achieve productivity improvement or other cost saving

Answer 19

NOT DISCONTINUED OPERATION

Question 20

Selling by a diversified entity of a major division that represents the entity’s only acitivities in the electronics industry

Answer 20

DISCONTINUED OPERATION

Question 21

Selling by a meat packing entity of controlling interest in a furniture entity

Answer 21

DISCONTINUED OPERATION

Question 22

Selling by an entity of all its radio stations. The entity’s remaining activities are television stations and a publishing house

Answer 22

DISCONTINUED OPERATION

Question 23

A conglomerate is engaged in commodity business, real estate, manufacturing, and construction business

Answer 23

DISCONTINUED OPERATION

Question 24

Income or loss from discontinued operations, net of tax, shall be presented as a single amount in the income statement, below the _____________________________.

Answer 24

INCOME FROM CONTINUING OPERATIONS

Question 25

If the criteria for classification as held for sale are met after the reporting period but before the financial statement are authorized for issue, that event is treated as a _____________________ after reporting period.

Answer 25

NON-ADJUSTING EVENT