Noncurrent asset – asset that does not meet the definition of a current asset.

 May be an individual asset, like land, 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.

Noncurrent asset held for sale – a noncurrent 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.

 Entity does not intend to use the noncurrent asset as part of the on-going business but instead
sells it to recover the principal carrying amount.
 CONDITIONS FOR CLASSIFICATION AS HELD FOR SALE
o The asset or disposal group is available for immediate sale in the present condition.
o The sale must be highly probable.

Measurement of asset held for sale – an entity shall measure at the lower of carrying amount or fair
value less cost of disposal.

Write-down to fair value less cost of disposal – if fair value less cost of disposal is lower than the
carrying amount, the write-down is treated as in impairment loss

Subsequent increase in fair value – if there is an increase in fair value less cost of disposal, an entity
shall recognize gain but not in excess of any impairment loss previously recognized.

Revalued asset classified as held for sale – when an entity adopts the revaluation model for the
measurement of assets, any asset classified as held for sale should be revalued to fair value immediately
prior to the 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.
 However, 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.

Abandoned noncurrent asset – an entity shall not classify as held for sale a noncurrent asset or disposal
group that is to be abandoned.

 This is because the 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 – an entity shall not account for a noncurrent asset that has been temporarily
taken out of use as if it had been abandoned.

Change in classification – There is a decision not to sell the noncurrent asset or the criteria for being
classified as held for sale may no longer be met.
  The entity shall measure the noncurrent asset that ceases to be classified as held for sale at the
lower between:
o Carrying amount before the asset was classified as held for sale adjusted for any
depreciation, amortization or revaluation that would have been recognized if the asset
had not been classified as held for sale.
o Recoverable amount at the date of the subsequent decision not to sell. The recoverable
amount is the higher between fair value less cost of disposal and value in use.

Presentation of asset classified as held for sale – shall be presented separately as current asset.

 The 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.
 The 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.

Change in method of disposal – when an entity reclassifies an asset or disposal group from “held for
sale” to “held for distribution to owners” or vice versa without any time lag.

 The change in classification is considered a continuation of the original plan of disposal.

 The entity shall continue to apply the “held for sale” or “held for distribution” accounting. (The
asset shall be measured at the lower between carrying amount and fair value less cost of
disposal or fair value less cost to distribute.
 At the time of reclassification, the entity shall recognize any impairment loss or subsequent
increase in fair value less cost of disposal or distribution.
 The change in classification does not, in itself, extend the period in which a sale has to be
completed.

Notes to financial statements – provide narrative description or disaggregation of items in the financial
statements and information about items that do not qualify for recognition.

 Notes to financial statements are used to report information that does not fit into the body of
the statements in order to enhance the understandability of the statements.

Purpose of notes to financial statements – is to provide the necessary disclosures required by Philippine
Financial Reporting Standards.

 Present information about the basis of preparation of the financial statements and the specific
accounting policies.
 Disclose the information required by Philippine Financial Reporting Standards that is not
presented in the financial statements.
 Provide additional information which is not presented in the financial statements but is relevant
to an understanding of the financial statements.

Order of presenting the notes – an entity normally presents notes in the following order to assist users
understand the financial statements and to compare them with financial statements of other entities;
  Statement of compliance with PFRS
 Summary of significant accounting policies used
 Supporting information or computation for line items presented in the financial statements
 Other disclosures, such contingent liabilities, unrecognized contractual commitments and
nonfinancial disclosures.

Compliance with PFRS – an entity whose financial statements comply with Philippine Financial
Reporting Standards shall make an explicit and unreserved statement of such compliance in the notes.

Accounting Policies – are defined as the specific principles, methods, practices, rules, bases and
conventions adopted by and entity in preparing and presenting financial statements.

 Significant accounting policies – The summary of significant accounting policies shall disclose the
following:
o The measurement basis used
o The accounting policies used

Disclosure of measurement basis – the measurement bases are historical cost and current value.
(current value includes fair value, value in use, fulfillment value and current cost.

Disclosure of accounting policies – management shall consider whether the disclosure would assist
users in understanding how transactions, other events and conditions are reflected in the financial
statements.

 Disclosure of judgement – an entity shall disclose in the summary of significant accounting

policies the judgement that management has made in the process of applying accounting
policies and that have a significant effect on the amounts recognized in the financial statements.
o Whether financial assets are to be measured at fair value of at amortized cost
o Whether in substance particular sales of goods are product financing arrangement and
therefore do not give rise to revenue.

Disclosure of notes are mandatory

 Disclosure of estimation uncertainty

Events after reporting period – as those events, whether favorable or unfavorable, that occur between
the end of reporting period and the date on which the financial statements are authorized for issue.

 Types of events after the reporting period (may require either adjustment or disclosure.
o Adjusting events after the reporting period are those that provide evidence of
conditions that exist at the end of reporting period.
o Non-adjusting events after reporting period are those that are indicative of conditions
that arise after the end of reporting period.
 Examples of adjusting events
o Settlements after the reporting period of a court case because it confirms that the entity
already had a present obligation at the end of reporting period.
o Bankruptcy of a customer which occurs after the reporting period.
o The determination after the period of the cost of assets purchased or the proceeds from
assets sold before the end of reporting period
o The determination after the reporting period of the profit sharing or bonus payment if
the entity has the present obligation at the end of reporting period to make such
payment.
o The discovery of fraud or errors that show the financial statements were incorrect.