Вы находитесь на странице: 1из 20

NON-CURRENT ASSETS

HELD FOR SALE


Learning Objectives
• To understand the recognition of noncurrent assets held for sale
• To know the conditions for the reclassification of a noncurrent assets
as held for sale
• To know the measurement and presentation of noncurrent assets held
for sale
• To know the recognition of a noncurrent asset that ceases to be
classified as held for sale
Noncurrent Asset
• An asset that does not meet the definition of a current asset
• May be an individual asset (i.e. land, building) or a disposal group.

Disposal Group
- a group of assets to be disposed of together as a group in a single
transaction, and liabilities directly associated with those assets that will
be transferred in the transaction.
Noncurrent Asset Held For Sale
PFRS 5, par. 6 – “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.”
Noncurrent Asset Held For Sale
Conditions:
1. The asset or disposal group is available for immediate sale in the
present condition
2. The sale must be highly probable
Noncurrent Asset Held For Sale
Conditions to be met to consider sale as 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
4. The asset or disposal group must be actively marketed for sale at a
sale price that is reasonable in relation to the fair value
5. Actions required to complete the plan indicate that it is unlikely that
the plan will be significantly changed or withdrawn
Noncurrent Asset Held For Sale
Measurement
• Lower of carrying amount and fair value less cost of disposal
• Shall not be depreciated
If the fair value less cost of disposal is less than the carrying amount, the
difference is recorded as impairment loss. If the noncurrent asset held
for sale is a disposal group, the impairment loss is apportioned across
assets based on carrying amount.

Any subsequent increase in fair value less cost of disposal is recognized


as gain, but not in excess of the impairment loss previously recognized.

Presentation
• Current Asset
Noncurrent Asset Held For Sale
Example:
• Acquisition date of an equipment – January 1, 2020
• Cost – P5,000,000
• Residual value – P500,000
• Useful life – 10 years
The equipment was classified as held for sale on January 1, 2023, when
the fair value less cost of disposal was at P1,900,000. The equipment was
sold on June 30, 2023 at P1,500,000.
Requirements:
1. At what amount must the noncurrent asset held for sale be initially
measured?
2. How much is the impairment loss?
3. How much is the loss on disposal?
Noncurrent Asset Held For Sale
Solution – (1) At what amount must the noncurrent asset held for sale be
initially measured?

Carrying Value
Annual depreciation = (P5,000,000 – P500,000) / 10 years = P450,000

Since the fair value less cost of disposal of P1,900,000 is lower than the
carrying value, the noncurrent asset held for sale must be initially
measured at P1,900,000.
Noncurrent Asset Held For Sale
Solution – (2) How much is the impairment loss?

Journal Entry
Noncurrent Asset Held For Sale
Solution – (3) How much is the loss on disposal?

Journal Entry
Noncurrent Asset Held For Sale
Example:
• Acquisition date of an equipment – January 1, 2020
• Cost – P5,000,000
• Residual value – P500,000
• Useful life – 10 years
The equipment was classified as held for sale on January 1, 2023, when
the fair value less cost of disposal was at P1,900,000. The equipment was
sold on June 30, 2023 at P1,500,000.
Requirements:
1. At what amount must the noncurrent asset held for sale be initially
measured? – P1,900,000
2. How much is the impairment loss? – P1,750,000
3. How much is the loss on disposal? – P400,000
Abandoned Noncurrent Asset
• An entity shall not classify assets to be abandoned as held for sale
• This does not meet the conditions for classification as held for sale
(i.e. available for immediate sale in the present condition; and the
sale is highly probable)
Temporarily Abandoned Noncurrent Asset
• An entity shall not treat temporarily abandoned noncurrent assets as
abandoned.
Change of Classification
In cases wherein the asset ceases to be classified as held for sale, it shall
be measured at the lower between:
• The carrying amount of the asset on the basis that the asset had not
been classified as held for sale
• Recoverable amount at the date of the subsequent decision not to sell
Change of Classification
Example:
• Acquisition date of an equipment – January 1, 2020
• Cost – P5,000,000
• Residual value – P500,000
• Useful life – 10 years
The equipment was classified as held for sale on January 1, 2023, when
the fair value less cost of disposal was at P1,900,000.

On Dec. 31, 2023, the entity decided not to sell the equipment and
continue to use it instead. The fair value less cost of disposal on this
date is P2,500,000. Prepare the entry on reclassification.
Change of Classification
Solution:

Carrying value had the asset not been classified as held for sale

Since the fair value less cost of disposal of P2,500,000 is lower than
P3,200,000, the equipment must be measured at P2,500,000 upon
reclassification.
Change of Classification
Solution:

Gain on reclassification

Note: the gain on reclassification must not exceed the impairment loss
previously recognized. Since the impairment loss is P1,750,000, the
whole P600,000 can be recognized as gain.
Change of Classification
Solution:

Journal Entry
QUESTIONS?
END
References:
• PFRS 5 – Non-Current Assets Held for Sale
• Conceptual Framework and Accounting Standards by Valix, et. al. (2020 edition)

Вам также может понравиться