QUESTION BANK 8

More likely than not. a. Reasonably possible b. Highly probable

b. Highly probable — One condition to be considered is that the sale must be highly probable

Significantly more likely than probable. a. certain b. highly probable c. 90% to 99% probability d. reasonably possible

b. highly probable — PFRS 5 Appendix A defines highly probable as significantly more likely than probable.

Which of the following statements regarding presentation of remeasurement gains and losses on non current assets or disposal groups? I. Changes in fair values less costs to sell of non-current assets (or disposal group) held for sale not meeting the conditions of a discontinued operation and subject to the limitations on reversal of impairment losses are recognized as gains or losses and included in profit or loss from continuing operation. II. Changes in fair values less costs to sell of disposal groups qualifying as discontinued operations are recognized as gains or losses and included in profit or loss from discontinued operation. a. True, true b. True, false c. False, true d. False, false

c. False, true — PFRS 5 Paragraph 33-33A

Which of the following assets is within the scope of PFRS 5? a. Assets arising from employee benefits b. Investment property carried under the fair value model c. Deferred tax assets d. Intangible assets

d. Intangible assets — All other choices are included in the list of measurement exceptions.

Which of the following statements is incorrect? a. An entity shall present a non-current asset classified as held for sale and the assets of a disposal group classified as held for sale separately from other assets in the balance sheet. b. Those assets and liabilities (of a disposal group) shall be offset and presented as a single amount. c. The major classes of assets and liabilities classified as held for sale shall be separately disclosed either on the face of the statement of financial position or in the notes, subject to exceptions as provided in PFRS 5. d. An entity shall present separately any cumulative income or expense recognized directly in equity relating to a non-current asset (or disposal group) classified as held for sale. e. If the disposal group is a newly acquired subsidiary that meets the criteria to be classified as held for sale on acquisition, disclosure of the major classes of assets and liabilities is not required

a. An entity shall present a non-current asset classified as held for sale and the assets of a disposal group classified as held for sale separately from other assets in the balance sheet. — PFRS 5 Par 38 states that the situation mentioned should be in the statement of financial position

It is a component of an entity that either has been disposed of, or is classified as held for sale, and i. represents a separate major line of business or geographical area of operations, ii. is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or iii. is a subsidiary acquired exclusively with a view to resale. a. Discontinued operation b. Non-current assets held for sale c. Disposal group d. Non-going concern entity

a. Discontinued operation — The requirements to be classified as discontinued operation can be seen in PFRS 5.32.

The amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties in an arm's length transaction. a. fair value b. fair value less cost to sell c. net realizable value d. replacement cost

a. fair value — This is stated under IAS 32.

When an entity acquires a non-current asset (or disposal group) exclusively with a view to its subsequent disposal, it shall classify the non-current asset (or disposal group) as held for sale at the acquisition date only if the one-year requirement is met and it is highly probable that the other criteria as provided in PFRS 5 will be met within a. 12 months after balance sheet date b. 12 months from date of acquisition c. 6 months from date of acquisition d. 3 months from date of acquisition

b. 12 months from date of acquisition — This can be seen in the IFRS 5.13.

A non-current asset (or disposal group) classified as held-for-sale should be measured at a. acquisition cost plus necessary costs b. at depreciated cost c. at the lower of carrying amount and fair value d. at the lower of carrying amount and fair value less cost to sell

c. at the lower of carrying amount and fair value — If a non-current asset is classified as held for sale it must be measured at the lower of carrying amount and fair value.

Profit or loss for the period from discontinued operations a. does not include severance pay or employee termination costs b. does not include expected losses on eventual disposal of the component c. does not include employee relocation expenses and future rentals on long-term leases d. does not include expected gains on eventual disposal of the component

c. does not include employee relocation expenses and future rentals on long-term leases — Employee relocation expenses and future rentals on long-term leases is not included in the profit or loss for the period from discontinued operations.

A component unit that is considered a discontinued operation is a. An extraordinary item. b. A separate line of business or a class of customer. c. An unrelated group of assets held for sale. d. A set of operations and cash flows clearly distinguishable from the rest of the entity for operational and financial reporting purposes.

d. A set of operations and cash flows clearly distinguishable from the rest of the entity for operational and financial reporting purposes. — A component can be clearly distinguishable operationally and for financial reporting purposes if the assets and liabilities and the revenue and expenses are directly attributable to the component.

If a loss is expected from the proposed sale or abandonment of a segment of business, the estimated loss shall be provided a. at disposal date b. at balance sheet date c. date the criteria for classification as held for sale are met d. earlier of (a) and (c)

d. earlier of (a) and (c) — PFRS 5 Paragraph 41.d

Which of the following statements is (are) correct? I. In the income statement, presentation and disclosure of income taxes applicable to discontinued operations need not be disclosed on the face of the income statement. Disclosure may be made in the notes to the financial statement. II. The disposal of two or more unrelated assets that individually do not constitute a component of an entity shall not be combined and accounted for as disposal of a segment of a business. a. I only b. II only c. I and II d. Neither I nor II

a. I only — PFRS 5 paragraph 41 enumerates when an entity shall disclose the following information in the notes in the period in which a non-current asset (or disposal group) has been either classified as held for sale or sold

Any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation shall be included I. in profit or loss from continuing operations II. in profit or loss from discontinued operations III. adjustment to the beginning balance of retained earnings a. I only b. Either II or III c. Either I or III d. Either I, II or III

a. I only — PFRS 5, paragraph 37, any gain or loss on the remeasurement of a non-current asset (or disposal group) classified as held for sale that does not meet the definition of a discontinued operation shall be included in profit or loss from continuing operations.

Which of the following criteria is not required for a component's results to be classified as discontinued operations? a. Management must have entered into a sales agreement. b. The component is available for immediate sale. c. The operations and cash flows of the component will be eliminated from the operations of the entity as a result of the disposal. d. The entity will not have any significant continuing involvement in the operations of the component after disposal.

a. Management must have entered into a sales agreement. — Stated under Appendix A of PFRS 5

If disposal occurs in the same period that the component meets the criteria to be classified as held for sale a. PFRS 5 Non-current Assets Held for Sale and Discontinued Operations prohibits re-presenting the disclosures for prior periods presented in the financial statements so that the disclosures relate to all operations that have been discontinued by the reporting period for the latest period presented b. The gain or loss on disposal of discontinued operations is the actual gain or loss c. PFRS 5 does not require classification as discontinued operation in the current financial statements d. a single amount of pre-tax profit or loss from discontinued operations should be presented after profit for the year from continuing operations

a. PFRS 5 Non-current Assets Held for Sale and Discontinued Operations prohibits re-presenting the disclosures for prior periods presented in the financial statements so that the disclosures relate to all operations that have been discontinued by the reporting period for the latest period presented — PFRS 5 prohibits re-presenting the disclosures for prior periods.

Which of the following statements is incorrect? a. PFRS 5 specifies that assets or disposal groups that are classified as held for sale are carried at fair value less costs to sell. b. PFRS 5 specifies that an asset classified as held for sale, or included within a disposal group that is classified as held for sale, is not depreciated. c. PFRS 5 specifies that an asset classified as held for sale, and the assets and liabilities included within a disposal group classified as held for sale, are presented separately in the statement of financial position. d. PFRS 5 specifies that assets classified as non-current in accordance with PAS 1 Presentation of Financial Statements shall not be reclassified as current assets until they meet the criteria to be classified as held for sale in accordance with this PFRS.

a. PFRS 5 specifies that assets or disposal groups that are classified as held for sale are carried at fair value less costs to sell. — According to PFRS 5, paragraph 15, provides that an entity shall measure a non current asset or disposal group classified as held for sale at lower of carrying amount or fair value less cost of disposal.

How should the income from discontinued operations be presented in the income statement? a. The entity should disclose a single amount on the face of the income statement with analysis in the notes or a section of the income statement separate from continuing operations. b. The amounts from discontinued operations should be broken down over each category of revenue and expense. c. Discontinued operations should be shown as a movement on retained earnings. d. Discontinued operations should be shown as a line item after gross profit with the taxation being shown as part of income tax expense.

a. The entity should disclose a single amount on the face of the income statement with analysis in the notes or a section of the income statement separate from continuing operations. — Discontinued operations are reported on the income statement separately from continuing operations

In order for a noncurrent asset to be classified as held for sale, the sale must be highly probable. "Highly probable" means that 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.

a. The future sale is likely to occur. — If the sale is highly probable, within 12 months of classification as held for sale.

According to PFRS 5, non-current assets (or disposal groups) to be abandoned include I. non-current assets (or disposal groups) that are to be used to the end of their economic life II. non-current assets (or disposal groups) that are to be closed rather than sold a. True, true b. True, false c. False, true d. False, false

a. True, true — This is under PFRS 5.13.

If a component of an entity qualified as a discontinued operation during the year a. all of its results of operations, before and after date of classification as discontinued operation, will be classified as discontinued operations b. results of operations of the component prior to classification as discontinued operation will be shown under continuing operation, only results of operations after classification as discontinued operation will be presented under discontinued operations c. PFRS 5 Non-current Assets Held for Sale and Discontinued Operations prohibits a component to be classified as discontinued operations during the year. Such classification should only be made at the beginning of the year or at the end of the financial reporting period. d. the component is deemed sold only when a purchase commitment has been obtained from a financially capable buyer

a. all of its results of operations, before and after date of classification as discontinued operation, will be classified as discontinued operations — PFRS 5 paragraph 33-35 requires discontinued operations to be presented separately in the financial statements.

If, in the current year, a disposal group (component of an entity) is classified as discontinued operation, a. an entity shall re-present the disclosures for prior periods presented in the financial statements so that the disclosures relate to all operations that have been discontinued by the reporting period for the latest period presented. b. an entity shall not re-present the disclosures for prior periods presented in the financial statements so that the disclosures relate to all operations that have been discontinued by the reporting period for the latest period presented. c. only the current year financial statements should disclose the component as discontinued operation; comparative financial statements should disclose the component as continuing operation d. presenting profit or loss from discontinued operation at post-tax is prohibited

a. an entity shall re-present the disclosures for prior periods presented in the financial statements so that the disclosures relate to all operations that have been discontinued by the reporting period for the latest period presented. — Defined under PFRS 25 paragraph 33

According to PFRS 5, this refers to the incremental costs directly attributable to the disposal of an asset (or disposal group), excluding finance costs and income tax expense. a. costs to sell b. relevant cost c. variable cost d. opportunity cost

a. costs to sell — Cost to sell are incremental costs according to PFRS 5.

Non-current assets held for sale and assets and liabilities of disposal groups shall be presented in the classified statement of financial position as part of a. current items b. non-current items c. neither current nor non-current d. equity

a. current items — Assets of the disposal group shall be described as "noncurrent assets classified as held for sale" presented separately as a single amount under current assets. Liabilities of the disposal group shall be described as "liabilities directly associated with noncurrent assets classified as held for sale" presented separately as a single amount under current liabilities.

Presenting profit or loss from discontinued operations at net of tax is an application of a. interperiod tax allocation b. intraperiod tax allocation c. substance over form d. materiality

a. interperiod tax allocation — Interperiod tax allocation allocates the income tax expense to the periods in which revenues are earned and in which expenses are incurred.

The single amount of loss for the period from discontinued operations a. is presented after profit or loss from continuing operations b. is presented after gross income but before other income c. is presented after profit before taxes d. is presented only in the notes

a. is presented after profit or loss from continuing operations — Income (or Loss) from Discontinued Operations is a line item on an income statement of a company below Income from Continuing Operations and before Net Income. It represents the after tax gain or loss

When an entity acquires a non-current asset (or disposal group) exclusively with a view to its subsequent disposal, it shall classify the non-current asset (or disposal group) as held for sale at the acquisition date a. only if the "sale within one-year" requirement is met and it is highly probable that any other criteria that are not met at that date will be met within a short period following the acquisition (usually within three months). b. only if all of requirements in PFRS 5 are met c. only if the "available for immediate sale" criteria is met and it is highly probable that any other criteria that are not met at that date will be met within a short period following the acquisition (usually within 12 months). d. under no circumstances

a. only if the "sale within one-year" requirement is met and it is highly probable that any other criteria that are not met at that date will be met within a short period following the acquisition (usually within three months). — Refer to IFRS 5 paragraph 11

Adjustments in the current period to amounts previously presented in discontinued operations that are directly related to the disposal of a discontinued operation in a prior period shall be classified a. separately in discontinued operations b. in income from continuing operations c. in income from continuing operations with additional disclosure in the notes d. as an adjustment of the beginning balance of the retained earnings account

a. separately in discontinued operations — PFRS 5, paragraph 35.

The adjustment in the carrying amount of the non-current asset ceasing to be classified as held for sale a. shall be in profit or loss from continuing operation in the period in which the criteria are no longer met b. shall be in profit or loss from discontinued operation in the period in which the criteria are no longer met c. shall be charged to the beginning balance of accumulated profits and losses d. shall be made in the next accounting period subsequent to the change of classification

a. shall be in profit or loss from continuing operation in the period in which the criteria are no longer met — PFRS Paragraph 28

If an entity ceases to classify a component of an entity as held for sale, the results of operations of the component previously presented in discontinued operations in accordance with PFRS 5 a. shall be reclassified and included in income from continuing operations for all periods presented b. shall be reclassified and included in income from continuing operations for results of operations of the current year and included as an adjustment to the beginning balance of retained earnings the comparative financial statements c. shall be reclassified and included as an adjustment to the beginning balance of retained earnings for all periods presented d. shall not be reclassified and included in income from discontinued operations for comparative financial statements and included in income from continuing operations for current period

a. shall be reclassified and included in income from continuing operations for all periods presented — PFRS 5 Paragraph 36

If the criteria to classify the component as "held for sale" is met in a period before it is disposed of, a. the amount of the loss (if applicable) on disposal is an estimated loss resulting from the write-down of the group of assets to their estimated fair value less costs to sell b. PFRS 5 does not require the one-year requirement anymore for as long as the component is available for immediate sale in its present condition c. The gain or loss on disposal of discontinued operations is the actual gain or loss d. an impairment loss should be recognized

a. the amount of the loss (if applicable) on disposal is an estimated loss resulting from the write-down of the group of assets to their estimated fair value less costs to sell — One of the objectives of PFRS 5 is requiring assets that meet the criteria to be classified as held for sale to be measured at the lower of carrying amount and fair value less costs to sell, and depreciation on such assets to cease.

When the economic benefits from a non-current asset (or disposal group) will be realized more if it is to be sold rather than continually used a. the non-current asset (or disposal group) will be classified as "held for sale" and presented as part of current assets in a classified statement of financial position b. the non-current asset (or disposal group) will be classified as "held for sale" and presented as part of noncurrent assets in a classified statement of financial position c. the non-current asset (or disposal group) will be classified as "held for sale" only if management expects to earn profit from the disposal d. the non-current asset (or disposal group) will be classified as "held for sale" only if management expects to abandon the non-current asset (or disposal group)

a. the non-current asset (or disposal group) will be classified as "held for sale" and presented as part of current assets in a classified statement of financial position — According to PFRS 5, assets classified as held for sale is presented separately in the Statement of Financial Position

If non-current assets (disposal groups) held for sale ceases to be classified as held for sale, a. the previous presentation and disclosures are retained for the previous financial statements b. the previous financial statements are restated to provide disclosures which are comparable and relevant c. adjustment to the carrying amount of the non-current asset (or disposal group) shall be made in retained earnings d. adjustment to the carrying amount the non-current asset (or disposal group) shall be made in discontinued operations

a. the previous presentation and disclosures are retained for the previous financial statements — PFRS 5 paragraph 40

If an entity removes an individual asset or liability from a disposal group classified as held for sale, a. the remaining assets and liabilities of the disposal group to be sold shall continue to be measured as a group only if the group meets the criteria for classification as disposal group. b. the remaining assets and liabilities should not be presented as held for sale c. the remaining assets and liabilities of the disposal group should be reclassified back to their previous classification; disclosure should be made d. the remaining assets and liabilities of the disposal group should be reclassified back to their previous classification since the disposal group cannot be sold as a group anymore; previous financial statements should be restated

a. the remaining assets and liabilities of the disposal group to be sold shall continue to be measured as a group only if the group meets the criteria for classification as disposal group. — Stated in IFRS 5 Paragraph 29

Which of the following statements is incorrect? a. An entity shall not account for a non-current asset that has been temporarily taken out of use as if it had been abandoned. Par 14 b. An entity shall measure a non-current asset (or disposal group) classified as held for sale at fair value less costs to sell. c. When the sale is expected to occur beyond one year, the entity shall measure the costs to sell at their present value. Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost. Par 17 d. An entity shall recognize an impairment loss for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. Par 20 e. An entity shall recognize a gain for any subsequent increase in fair value less costs to sell of an asset, but not in excess of the cumulative impairment loss that has been recognized either in accordance with PFRS 5 or previously in accordance with PAS 36 Impairment of Assets. Par 21

b. An entity shall measure a non-current asset (or disposal group) classified as held for sale at fair value less costs to sell. — PFRS 5 Par 15 states that An entity shall measure a non-current asset (or disposal group) classified as held for sale at the lower of its carrying amount and fair value less costs to sell.

According to PFRS 5, this comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. a. Responsibility center b. Component of an entity c. Division within an entity d. Cash generating unit

b. Component of an entity — This is based from PFRS 5.31, presenting discontinued operations.

Assets which are previously classified as non-current in accordance with PAS 1 Presentation of Financial Statements when they meet the criteria to be classified as held for sale are to be presented separately on the face of the balance sheet and included as a. Non-current asset b. Current asset c. Neither current nor noncurrent d. Any of these

b. Current asset — PFRS 5, paragraph 3, states that noncurrent assets that is already classified as held for sale shall be presented separately as current assets.

Which of the following statements correctly relate to the classification of a non-current asset (or disposal group) to held for sale? a. An entity shall classify a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through continuing use rather than through a sale. b. For an asset to be classified as a non-current asset (or disposal group) as held for sale, the asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) and its sale must be probable. c. The appropriate level of management must be committed to a plan to sell the asset (or disposal group), and an active program to locate a buyer and complete the plan will be initiated at least 12 months from the date of reclassification. d. The asset (or disposal group) must be actively marketed for sale at a price that reflects a reasonable profit. e. The sale should be expected to qualify for recognition as a completed sale within one year from the date of classification. f. Sale transactions do not include exchanges of non-current assets for other non-current assets even when the exchange has commercial substance in accordance with PAS 16 Property, Plant and Equipment. g. all of these

b. For an asset to be classified as a non-current asset (or disposal group) as held for sale, the asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) and its sale must be probable. — PFRS 5 paragraph 7

To which of the following types of asset do the measurement provisions of PFRS5 Non-current assets held for sale and discontinued operations apply? I. Financial assets II. Intangible development assets III. Leasehold buildings IV. Biological assets V. Contractual rights under insurance contracts a. I, IV, V b. II, III c. II, III, IV d. III

b. II, III — Financial Assets, Biological Assets and Contractual rights under insurance contracts are scoped-out assets.

Which of the following statements is true? a. An entity shall not depreciate a non-current asset while it is classified as held for sale or while it is part of a disposal group classified as held for sale. However, intangible assets classified as held for sale should still be amortized. b. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale shall continue to be recognized. c. If an entity has classified an asset (or disposal group) as held for sale, but the criteria in for classification to held for sale are no longer met, the entity shall cease to classify the asset (or disposal group) as held for sale. Such change is treated retrospectively. d. The entity shall include any required adjustment to the carrying amount of a non-current asset that ceases to be classified as held for sale in the beginning balance of the retained surplus and in the income from continuing operations in the period in which the criteria for classification to held for sale are no longer met. e. If an entity removes an individual asset or liability from a disposal group classified as held for sale, the remaining assets and liabilities of the disposal group should also cease to be classified as held for sale.

b. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale shall continue to be recognized. — PFRS 5 paragraph 25

How should the assets and liabilities of a disposal group classified as held for sale be shown in the balance sheet? a. The assets and liabilities should be offset and presented as a single amount. b. The assets of the disposal group should be shown separately from other assets in the balance sheet, and the liabilities of the disposal group should be shown separately from other liabilities in the balance sheet. c. The assets and liabilities should 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.

b. The assets of the disposal group should be shown separately from other assets in the balance sheet, and the liabilities of the disposal group should be shown separately from other liabilities in the balance sheet. — PFRS 5, paragraph 38.

A non-current asset or a disposal group shall be classified as held for sale if certain conditions provided under PFRS 5 are met. Which of the following is among those conditions? a. the asset or disposal group must be available for immediate sale in its present condition subject only to terms that are usual and customary and the sale must be probable. b. an appropriate level of management must have received a purchase commitment for the sale of the asset c. an active program to locate a buyer and complete the plan will yet to be initiated d. actions required to complete the plan should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn:

b. an appropriate level of management must have received a purchase commitment for the sale of the asset — The appropriate level of management is not included in the conditions given under PFRS 5.13.

If the criteria for classification as held for sale are met after the reporting period but before the authorization of the financial statements for issue, a. an entity shall classify a non-current asset (or disposal group) as held for sale in the financial statements when issued; no further disclosures required b. an entity shall classify a non-current asset (or disposal group) as held for sale in the financial statements when issued; disclosure should be made in the notes. c. an entity shall not classify a non-current asset (or disposal group) as held for sale in the financial statements when issued; no further disclosures are required

b. an entity shall classify a non-current asset (or disposal group) as held for sale in the financial statements when issued; disclosure should be made in the notes. — PFRS 5 Paragraph 12

This refers to the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. a. component of an entity b. cash-generating unit c. division of an entity d. responsibility center

b. cash-generating unit — The cash-generating unit is the smallest identifiable group of assets.

It is 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. The group includes goodwill acquired in a business combination if the group is a cash-generating unit to which goodwill has been allocated or if it is an operation within such a cash-generating. a. discontinued operations b. disposal group c. cash generating unit d. component of an entity

b. disposal group — Refer to IFRS 5.8

An agreement with an unrelated party, binding on both parties and usually legally enforceable, that (a) specifies all significant terms, including the price and timing of the transactions, and (b) includes a disincentive for non-performance that is sufficiently large to make performance highly probable. a. forward contract b. firm purchase commitment c. futures contract d. option contract

b. firm purchase commitment — Refer to IFRS Appendix A for the definition of Firm Purchase Commitment

If the criteria for classification as discontinued operation are met after the reporting period but prior to authorization of financial statements for issue, an entity a. shall classify the component of an entity as discontinued operation in those financial statements when issued. b. shall disclose only the information in the notes c. shall classify the component of an entity as discontinued operation in those financial statements when issued and shall make the necessary disclosures in the notes d. shall do nothing

b. shall disclose only the information in the notes — PFRS paragraph 41.a 41.b and 41.d

Costs or adjustments directly associated with the decision to dispose of a component of an entity a. should be recognized and shown as part of discontinued operations only if they relate to impairment losses b. should not be recognized and shown as part of discontinued operations c. should be recognized and shown as part of discontinued operations d. should be recognized and shown as part of continuing operations

b. should not be recognized and shown as part of discontinued operations — Explained under PFRS 5 paragraph 35

An entity shall not classify as held for sale a non-current asset (or disposal group) that is to be abandoned. This is because a. the realizable value of such asset may be zero or negative b. the asset's carrying amount will be recovered principally through continuing use c. the asset's carrying amount may exceed the recoverable amount, in which case the continued use may be detrimental to the company d. the asset may be obsolete and the replacement cost may be so material not to warrant replacement

b. the asset's carrying amount will be recovered principally through continuing use — This is according to PFRS 5.13.

When an entity expects that the sale of a non-current asset (or disposal group) extends beyond one year and the exceptions to the one-year requirement are met, a. the non-current asset (or disposal group) should be reclassified back to its original classification without exceptions b. the comparative financial statements should be restated to reflect a valid and relevant comparative information c. cost to sell should be discounted to its present value d. the sale is not highly probable, classifying the non-current asset (or disposal group) would adversely affect the entity's current ratio and working capital

b. the comparative financial statements should be restated to reflect a valid and relevant comparative information — An 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.

An entity shall classify a non-current asset (or disposal group) as held for sale when a. the non-current asset's (or disposal group's) carrying amount will be recovered principally through continuing use rather than through a sale transaction. b. the non-current asset's (or disposal group's) carrying amount will be recovered principally through a sale transaction rather than through continuing use. c. the non-current asset (or disposal group) has actually been disposed of. d. the non-current asset (or disposal group) is abandoned or taken out temporarily from use.

b. the non-current asset's (or disposal group's) carrying amount will be recovered principally through a sale transaction rather than through continuing use. — PFRS 5, paragraph 6, provides that a non current 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 a continuing use.

Profit or loss for the period from discontinued operations does not include a. the post-tax profit or loss of discontinued operations b. the post-tax expected gain on future disposal of the operation c. the post-tax gain or loss recognized on the measurement to fair value less costs to sell d. the post-tax gain or loss recognized on the disposal of the assets or disposal group(s) constituting the discontinued operation

b. the post-tax expected gain on future disposal of the operation — PFRS 5, paragraph 33 (a).

If after removal an individual asset or liability from a disposal group classified as held for sale, the remaining assets do not qualify to be classified as disposal group, (choose the incorrect statement) a. the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale shall still be classified as held for sale b. the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date. c. the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale should be reclassified back to their previous classification since the disposal group failed to be sold as a group. d. Any non-current assets that do not meet the criteria shall cease to be classified as held for sale.

b. the remaining non-current assets of the group that individually meet the criteria to be classified as held for sale shall be measured individually at the lower of their carrying amounts and fair values less costs to sell at that date. — Stated under Appendix A of PFRS 5

All of the following correctly relate to the provisions of PFRS 5 Non-current Assets Held for Sale and Discontinued Operations, except a. Costs to sell exclude finance costs and income tax expense. b. When the sale is expected to occur beyond one year, the entity shall measure the costs to sell at their present value. Any increase in the present value of the costs to sell that arises from the passage of time shall be presented in profit or loss as a financing cost. c. An entity shall measure a non-current asset (or disposal group) classified as held for distribution to owners at the lower of its carrying amount and fair value less costs to distribute. d. If the non-current asset (or disposal group) is acquired as part of a business combination, it shall be measured at fair value less costs to sell, not at fair value as required by PFRS 3 Business Combination. e. Events after reporting period involving classification as held for sale are treated as adjusting events after reporting period.

c. An entity shall measure a non-current asset (or disposal group) classified as held for distribution to owners at the lower of its carrying amount and fair value less costs to distribute. — The statement is included in the PFRS 5.15.

An entity acquires a subsidiary exclusively with a view to selling it. The subsidiary meets the criteria to be classified as held for sale. At the balance sheet date, the subsidiary has not yet been sold, and six months have passed since its acquisition. How will the subsidiary be valued in the balance sheet at the date of the first financial statements after acquisition? a. At fair value. b. At carrying value. c. At the lower of its cost and fair value less cost to sell d. In accordance with applicable PFRS.

c. At the lower of its cost and fair value less cost to sell — This is stated in the IFRS 5.11.

Which of the following assets is outside the scope of PFRS 5? a. Property, plant and equipment b. Investment property carried under the Cost model c. Deferred tax assets d. Intangible assets

c. Deferred tax assets — Deferred tax assets is included in the scoped-out assets of PFRS 5.

When a discontinued operation occur I. a company eliminates (or will eliminate) the results of operations and cash flows of a component of an entity from its ongoing operations, and II. there is no significant continuing involvement in that component after the disposal transaction. a. I only b. II only c. I and II d. None

c. I and II — Discontinued operations are the results of operations of a component of an entity that is either being held for sale or which has already been disposed of.

an entity shall not classify a non-current asset (or disposal group) as held for sale in the financial statements when issued; disclosure should be made in the notes. A non-current asset or a disposal group shall be classified as held for sale if which of the following conditions are met. I. the asset or disposal group must be available for immediate sale in its present condition subject only to terms that are usual and customary II. the sale must be highly probable. a. I only b. II only c. I and II d. I or II

c. I and II — PFRS 5 Paragraph 7

Events or circumstances may extend the period to complete the sale beyond one year. An extension of the period required to complete a sale does not preclude an asset (or disposal group) from being classified as held for sale if: I. the delay is attributable to events or circumstances beyond the entity's control II. there is sufficient evidence that the entity remains committed to its plan to sell the asset (or disposal group) a. I only b. II only c. I and II d. none

c. I and II — Refer to IFRS 5 Appendix B

A non-current asset or a disposal group shall be classified as held for sale if the asset or disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary and the sale is highly probable. Sale is highly probable if I. an appropriate level of management is committed to a plan to sell the asset II. an active program to locate a buyer and complete the plan will yet to be initiated III. the asset or disposal group must be actively marketed for sale at a price that reflects a reasonable profit IV. the sale (or exchange with commercial substance) should be expected to qualify for recognition as a completed sale within two years from the date of classification V. actions required to complete the plan should indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn: a. I, V b. I, II, V c. I, II, III, V d. I, II, III, IV, V

c. I, II, III, V — PFRS 5 Paragraph 8 states the conditions for the sale to be highly probable.

Which of the following statements correctly relates to the provisions of PFRS 5? I. Once a component unit qualifies as held for sale, the assets are required to be tested for an impairment loss. II. The impairment loss on the remeasurement of a component is netted with the operational results to calculate the amount shown under discontinued operations. III. PFRS 5 prohibits the retrospective classification of as a discontinued operation when the discontinued operation criteria are met after the reporting period. IV. If a component of an entity qualifies as discontinued operation during the year, the results of its operations for the months prior to date of qualification is shown as part of continuing operations. a. II, III b. I, II, III c. II, III, IV d. I, II, III, IV

c. II, III, IV — The first statement contradicts PFRS 5 paragraph 20

The entity shall measure a non-current asset that ceases to be classified as held for sale (or ceases to be included in a disposal group classified as held for sale) at: I. its carrying amount before the asset (or disposal group) was classified as held for sale, adjusted for any depreciation, amortization or revaluations that would have been recognized had the asset (or disposal group) not been classified as held for sale II. its recoverable amount at the date of the subsequent decision not to sell. a. I or II b. I and II c. Lower of I and II d. Neither I nor II

c. Lower of I and II — Stated in PFRS 5, paragraph 27

Any gain on a subsequent increase in the fair value less cost to sell of a noncurrent asset classified as held for sale should be treated as follows: a. The gain should be recognized in full. b. The gain should not be recognized. c. The gain should be recognized but not in excess of the cumulative impairment loss. d. The gain should be recognized but only in retained earnings.

c. The gain should be recognized but not in excess of the cumulative impairment loss. — PFRS 5 Paragraph 21 provides that an entity shall recognize a gain but not in excess of any impairment loss previously recognized.

The objective of PFRS 5 is to specify the accounting for assets held for sale, and the presentation and disclosure of discontinued operations. In particular, PFRS 5 requires all of the following, except a. assets that meet the criteria to be classified as held for sale are to be measured at fair value less costs to sell b. depreciation on assets that meet the criteria to be classified as held for sale shall cease c. assets that meet the criteria to be classified as held for sale are to be presented separately on the face of the balance sheet d. the results of discontinued operations are to be presented separately in the income statement.

c. assets that meet the criteria to be classified as held for sale are to be presented separately on the face of the balance sheet — They are to be presented separately in the statement of financial position.

PFRS 5 requires a. assets that meet the criteria to be classified as held for sale to be measured at fair value less costs to sell b. depreciation on held for sale assets to cease but amortization should still be provided for c. assets that meet the criteria to be classified as held for sale to be presented separately on the face of the statement of financial position and the results of discontinued operations to be presented separately in the statement of profit or loss and other comprehensive income. d. assets and liabilities of a disposal group to be off-set and presented as one item on the face of the statement of financial position

c. assets that meet the criteria to be classified as held for sale to be presented separately on the face of the statement of financial position and the results of discontinued operations to be presented separately in the statement of profit or loss and other comprehensive income. — According to PFRS 5 assets classified as held for sale are not depreciated, measured a lower of carrying amount and fair value less cost of disposal and presented separately in Statement of Financial Position. Any adjustment to its carrying amount should be included in profit or loss.

Discontinued operations occur at the I. date the component is actually disposed of II. date the criteria for classification as held for sale are met by the component a. I only b. II only c. earlier of I or II d. later of I or II

c. earlier of I or II — PFRS 5 paragraph 12 prohibits the retroactive classification as a discontinued operation when the discontinued criteria are met after the end of reporting period.

PFRS 5 prohibits assets that will be abandoned from being classified as held for sale. However, if the assets to be abandoned are a major line of business or geographical area of operations, they are reported in discontinued operations a. at the date at which they are abandoned. b. at the date at which they are sold c. not reported in discontinued operations d. earlier of a or b

c. not reported in discontinued operations — Under Appendix A of PFRS 5

A non-current asset or disposal group held for sale or actually disposed of that is not a component of an entity a. shall be presented as continuing operation b. shall be presented as discontinued operation c. shall not be presented in the financial statements separately d. shall be disclosed only

c. shall not be presented in the financial statements separately — PFRS 5 states that a non-current asset or disposal group held for sale or actually disposed of that is a component of an entity shall be presented in the financial statements separately

The present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. a. discounted financial position b. discounted future cash flows c. value in use d. fair value

c. value in use — Value in use is the present value of future cash flows expected to be derived from an asset or cash-generating unit.

Which of the following incorrectly relates to the provisions of PFRS 5? a. Sale transactions include exchanges of non-current assets for other non-current assets even when the exchange has commercial substance in accordance with PAS 16. b. Non-current assets (or disposal groups) held for sale must be tested for impairment at the date of initial classification and subsequently c. Non-current assets (or disposal groups) should not be depreciated during the period in which they are classified as held for sale d. Assets classified as non-current in accordance with PAS 1 shall be reclassified as current assets if they are sold after the balance sheet date but before the financial statements are authorized by management for issue.

d. Assets classified as non-current in accordance with PAS 1 shall be reclassified as current assets if they are sold after the balance sheet date but before the financial statements are authorized by management for issue. — Assets classified as non-current in accordance with IAS 1 Presentation of Financial Statements shall not be reclassified as current assets until they meet the criteria to be classified as held for sale in accordance with this IFRS

Which of the following statements is true? a. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale shall continue to be recognized. PAr 25 b. If an entity has classified an asset (or disposal group) as held for sale, but the criteria in for classification to held for sale are no longer met, the entity shall cease to classify the asset (or disposal group) as held for sale. Such change is treated retrospectively. Par 26 c. The entity shall include any required adjustment to the carrying amount of a non-current asset that ceases to be classified as held for sale in the beginning balance of the retained surplus and in the income from continuing operations in the period in which the criteria for classification to held for sale are no longer met. d. If an entity removes an individual asset or liability from a disposal group classified as held for sale, the remaining assets and liabilities of the disposal group should also cease to be classified as held for sale.

d. If an entity removes an individual asset or liability from a disposal group classified as held for sale, the remaining assets and liabilities of the disposal group should also cease to be classified as held for sale. — PFRS 5 Paragraph 29 states that some criteria are needed to be met. Once these criteria are not met, it is by then that the assets and liabilities will cease to be classified as held for sale.

Which of the following criteria do not have to be met in order for an operation to be classified as discontinued? a. The operation should represent a separate line of business or geographical area. b. The operation is part of a single plan to dispose of a separate major line of business or geographical area. c. The operation is a subsidiary acquired exclusively with a view to resale. d. The operation must be sold within three months of the year-end.

d. The operation must be sold within three months of the year-end. — Stated under Appendix A of PFRS 5.

A component of an entity is classified as "held for sale" when the following conditions are met (choose the incorrect one) a. Management is committed to a plan to sell. b. The component is available for immediate sale in its present condition. c. An active program to locate a buyer is initiated. d. The sale is highly probable within two years from the date of classification as held for sale.

d. The sale is highly probable within two years from the date of classification as held for sale. — The sale should be highly probable within one year from the date of classification as held for sale.

A non-current asset is an asset that a. is being depreciated or amortized b. is not expected to be realized within 12 months c. is restricted cash d. does not meet the definition of a current asset.

d. does not meet the definition of a current asset. — PAS 1, paragraph 66, states that what is not included in the definition of current assets is deemed classified as non current.

A non-current asset (or disposal group) that is acquired as part of a business combination exclusively with a view to its subsequent disposal shall be measured at initial recognition at a. fair value b. cost c. lower of cost or fair value d. fair value less costs to sell

d. fair value less costs to sell — According to IFRS 5.4.6.4, if an asset is acquired as part of a business combination it shall be measured at initial recognition at fair value less cost to sell.

Which of the following costs cannot be recognized and shown as part of discontinued operations? a. severance pay or employee termination costs b. employee relocation expenses c. future rentals on long-term leases d. future operating losses

d. future operating losses — Only the amount of revenue, expenses and income or loss attributable to the discontinued operation during the current period and the related income tax are included.

A disposal group that is a component of an entity is presented as discontinued operation when the disposal group (choose the incorrect) a. is classified as held for sale or actually disposed of and represents a major line of business or geographical area of operations b. is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations c. a subsidiary acquired exclusively with a view to resale d. is sold after the balance sheet date but before the financial statements are authorized for issue

d. is sold after the balance sheet date but before the financial statements are authorized for issue — Stated under Appendix A of PFRS 5.

When an investment in an associate previously classified as held for sale no longer meets the criteria to be so classified, a. it shall be accounted for using the equity method as from the date of its classification as held for sale. b. it shall be accounted for at fair value in the group statements c. it shall be accounted for at cost less impairment d. it shall be accounted for at amortized cost

d. it shall be accounted for at amortized cost — Stated under PFRS 5 paragraph 27

The higher of an asset's fair value less costs to sell and its value in use. a. the measurement for non-current assets held for sale b. the measurement for impairment losses of assets and liabilities c. the measurement for impairment losses of assets but not liabilities d. recoverable amount

d. recoverable amount — The recoverable amount of an asset is the higher amount of an asset's fair value less cost to sell and its value in use.

A component unit may be (choose the incorrect) a. a reportable segment or an operating segment b. a reporting unit c. a subsidiary d. an asset group e. a non-current asset used in conjunction with other assets to produce revenue

e. a non-current asset used in conjunction with other assets to produce revenue — A component are those whose operations and cash flows can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity.