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CFAS
Overview of accounting
Republic Act 9298—Philippine Accountancy Act of 2004
Activities
Identifying, measuring, communicating (includes recording, classifying,
summarizing----bonus: interpreting)
Valuation by facts and opinion—nakadepende sa ESTIMATES
ECONOMIC ACTIVITIES: PECISI
1. Production
2. Exchange
3. Consumption
4. Income Distribution
5. Savings
6. Investments

Accounting Concepts
- Principles where accounting process is based
Accounting assumptions or postulates
- Fundamental concepts
- Provide foundation of the acctg process
accounting theory (conceptual framework and PFRS)
- Organized set of concepts
- Explain and guide CPAs action in acctg process
1. Double-entry system
2. Going concern assumption
3. Separate entity
4. Stable monetary unit
5. Time period
6. Materiality
7. Cost-benefit
8. Accrual basis of acctg
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9. Historical cost
10. Concept of articulation
11. Full disclosure principle
12. Consistency
13. Matching
14. Entity theory
15. Proprietary theory
16. Residual equity theory
17. Fund theory
18. Realization
19. Prudence
20. Matching concept
21. Systematic and rational allocation
22. Immediate recognition

Common branches of accounting

1. Financial acctg
2. Management acctg
3. Cost acctg
4. Auditing
5. Tax acctg
6. Govt acctg
7. Fiduciary acctg
8. Estate acctg
9. Social acctg
10. Institutional acctg
11. Acctg systems
12. Acctg research

Sectors in accounting practice

1. Practice of Public Accountancy
2. Practice in Commerce and Industry
3. Practice in Education/ Academe
4. Practice in the Government
Accounting Standards
PFRS/GAAP by FRSC
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A. PFRS
B. PAS
C. Interpretations
Hierarchy of Reporting Standards
1. PFRS
2. Judgment
Shall: PFRS requirements
Conceptual Framework
May: Pronouncements
Acctg Literature

Accounting Standard-setting bodies

1. FRSC (14 representative + 1 chairperson)
2. PIC
3. BOA
4. SEC
5. BIR
6. BSP
7. CDA
International Accounting Standards
-IASB—establishe April 1, 2001
- part of IASCommittee foundation, now IFRS foundation since July 1, 2010
1. IFRS---PFRS
2. IAS--PAS
3. Interpretation
Other Relevant International Organizations
1. IFRIC—int’l fin. Reporting interpretations committee
2. IFRS advisory Council
3. IFAC—Int’l federation of Accountants
4. IOSCO—int’l org. of securities commissions
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Conceptual Framework for Financial Reporting

- For General-purpose FR
To assist IASB in developing standards
To assist prepares in developing acctg policies
To assist all parties in understanding and interpreting standards
Standard
- Promote transparency
- Strengthen accountability
- Contribute to economic efficiency

Scope of Conceptual Framework

1. Objective of financial reporting
- To provide information useful for decision-making.

Economic phenomena= financial position and changes in economic resources

and claims (Financial Performance)
Assessment in prospects for future net cash inflows and management
stewardship (how well entity manages their resources)

2. Qualitative characteristics of useful financial information

a. Fundamental
a. Relevance
i. Predictive value—predictions for future outcomes
ii. Confirmatory value—confirmation about those predictions
b. Faithful representation
i. Completeness—provision of accuracy
ii. Neutrality—presented without bias
iii. Free from error—no errors in description and process
b. Enhancing (V-CUT)
a. Comparability
b. Verifiability—different users come into agreement—direct verification
(include observation) or indirect verification (checking the inputs)
c. Timeliness
d. Understandability--clear and concise
Four-step materiality process (entity-specific aspect of relevance)
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1. Identify potentially material information

2. Assess the factuality of materiality
3. Organize information to make it understandable and conveys message well
4. Review if all is set, based on FS complete set

Cost- pervasive constraint on ability to provide useful information

3. Financial statements and the reporting entity

FS—contains information on financial state and performance of an entity
Reporting entity—
Consolidated FS—both parent and subsidiaries
Unconsolidated FS—parent alone
Combined FS—FS of two or more entities not all link by parent-subsidiary
relationship (e.g. subsidiary and subsidiary)

4. Elements of FS
1. Asset
a. Right
b. Potential to Produce Economic benefits
c. control
[Link]
[Link]
[Link] of economic resource
[Link] obligation as a result of past events

3. Equity
4. Income
5. Expense
5. Recognition and derecognition
Recognition—including in FS an itme that meets definition of one of the elements
Criteria: all must be met
a. Meet definition
b. Relevant and faithfully represented
Derecognition
-removal of assets or liabilities previously recognized
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Unit of account—kanang mga sulod sa chart of accounts, where recognition criteria and
measurement concept are applied
6. Measurement
1. Historical cost—consideration paid + transaction cost (kung asset, minus kung
liability)
o Updated over time
2. Current value
a. Fair Value
b. Value in Use and Fulfilment value
Value in use—para gamiton; as asset
Fulfilment Value—para mag-satisfy ug liability; as liability
c. Current cost
Consideration in selecting measurement basis
A. Nature of information
B. Quali characteristics
C. Cost constraint
Measurement uncertainty—kanang walay madetermine na measurement sa observation
Outcome uncertainty—kung naa bay inflow or outflow
Existence uncertainty—kung naa bay asset or liability

7. Presentation and disclosure

Requisites for effective communication
a. Presentation and disclosure objectives and principles
Flexibility
Comparability

b. Classification—sorting of ADELOI
In terms of A and L, current ug noncurrent
c. Aggregation—adding together ALOIE that have shared characteristics
- Summarizes large volume of detail

8. Concepts of capital and capital maintenance

Concepts of Capital
a. Financial Concept—investment money or invested purchasing power
b. Physical Concept—entity’s productive capacity
Concept of capital maintenance—
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- for determination of profits

- for distinguishing return on, from return of, capital.
a. Financial Capital Maintenance—net asset, end - net asset, beg
b. Physical Capital Maintenance—productive capacity, end – productive capacity, beg
Both excluding distribution to and from owners during the period

PAS 1
- Basis for GP FS
- Guidelines for structure
- Minimum requirements
- All three to ensure comparability
FS—structured representation of an entity’s Financial Position and performance
-for most of common needs of primary/external users
Purpose:
a. Provide information about entity’s net cash inflow
b. Management stewardship
Complete set of FS
1. Fin Position
2. Fin performance and OCI
3. SCE
4. SCF
5. Notes
6. Additional statements of Fin Position
General Features
1. Fair Presentation and Compliance with PFRS
- Explicit and unreserve statement of such compliance in the NOTES.
- Departure from a PFRS requirement
- Kung misleading ang pagcomply sa PFRS
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2. Going Concern
- Unless maagliquidate
- At least, 12 months

3. Accrual Basis of Accounting

- Except cash flow nga cash basis
4. Materiality and Aggregation
-material na similar items—separately
-dissimilar—separately gihapon
-dissimilar na immaterial—aggregated

5. Offsetting
- A and L, I and E—not offset unless required by PFRS
- Permitted when it reflects the substance of the transaction
6. Frequency of reporting
- At least annually
If shorter or longer, disclosed
a. Period covered
b. Reason of use
c. Fact of incomparability
7. Comparative Information
- Minimum, entity presents TWO FS and RELATED NOTES.
Additional Statement of Fin. Position (dated as at the beginning of the preceding period
- Presented only when instances occur such as:
a. Applies accounting policy retrospectively
b. Makes retrospective restatement of item in FS
c. Reclassifies item in FS
d. A-C should be material.
8. Consistency of presentation
- Unless changes is
a. Required by PFRS
b. Result to more relevant and more reliable

STRUCTURE AND CONTENT OF FS

1. Name
2. Whether it is for a group or individual entity
3. Date: end or period covered
4. Presentation currency
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5. Level of rounding used

Fin Position: as at/as of the end of

Others: for the period
MANAGEMENT RESPONSIBILITY over FS
- Expressly stated in Statement of Management’s Responsibility for Financial Reporting,
signed by chairman of the board. CFO, CEO
1. Preparation and fair presentation of FS
2. Internal control over fin. Reporting
3. Going concern assessment
4. Oversight of the fin. Rep. process
5. Review and approval of FS

Presentation of Financial Position

a. Classified—current and noncurrent, general use
b. Unclassified (based on liquidity)
c. Also, mixed presentation
Refinancing agreement—current
Kung naay discretion under existing loan facility, Noncurrent
Liabilities payable on demand
- After reporting date—current
- By the reporting date—noncurrent
P/L and OCI
- Single statement
- Two statements
Kailangan present jud ang duha
P or L
Income
Expense
Profit or Loss (transaction approach)

P/L presents amounts:

1. Revenue
2. Finance cost
3. Gains/loss, from derecognition at AC
4. Impairment gain/losses
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5. Reclassification from AC/FVOCI—FVPL

6. Share in profit/loss of associates and joint ventures
7. Tax expense
8. Result of discontinued operation
EXPENSE PRESENTATION
A. Nature of expense method—aggregated to their nature and are not reallocated
according to their function (Dep, Purchases
B. Function of expense method (cost of sales method)—classifies expenses according to
function (COGS, Distribution cost
Other Comprehensive Income (OCI)
-items of P and L not recognized in P/L as required by PFRS; usually accumulated

Reclassification adjustments—OCI reclassified to P/L

- FV changes in FVOCI, debt instrument
- Translation differences on foreign operation
- Effective portion of cash flow hedges
Presentation of OCI
1. Kung allowed ang reclassification adjustments
2. Kung dili allowed ang reclassification adjustments

TOTAL COMPREHENSIVE INCOME

- P/L plus OCI, exclusive atong changes from transaction with owners. Meaning, walay labot
tong mga equity or transaction sa owners.
- Non-owner changes in equity
Statement of Changes in Equity (SCE)
a. Effects of change in acctg policy
b. Correction of prior period error
c. Total Comprehensive income
d. Reconciliation between CA beg and end, showing separately changes resulting from:
a. P/L
b. OCI
c. transaction with owners
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PAS 37
- Accounting and disclosure sa 1. Provisions, 2. Contingent Liabilities, and 3. Contingent Asset
- Except, executory contract, unless onerous, ug katong covered by PFRS
PROVISION
- Liability of uncertain timing and amount
- Recognized and disclosed
- Presented separately
Recognition Criteria
a. Present obligation
Obligating event—past events that creates present obligation
Walay labot ang future or possible obligations
b. Probable
o More likely than not
c. Reliably estimated
CONTINGENT LIABILIITIES
- Wala na-meet ang tanang criteria,
- Not recognized
- A possible obligation
- Not probable or not reliably estimated
- DISCLOSED only
Kung probable, recognized and disclose
Kung possible, disclose lang
Kung remote, ingnore
CONTINGENT ASSET
- Disclosed only kung probable. Kung dili, ignore diretso
MEASUREMENT
- At best estimate
- Kung nag-involve ug large population of items, at expected value
- Kung continuous range of possible outcome, at mid-point
- Time value of money is material, discounted to present value
RECORDING OF PROVISION
Expense/loss
Liability account
Sometimes, form part sa cost sa asset like sa restoration and decommissioning cost.
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CHANGES IN PROVISION
- Accounted PROSPECTIVELY, meaning, i-accrued or reverse, if any.
USE OF PROVISION
- Only for expenditure nga intended ato originally.
RESTRUCTURING
- Planned and controlled by management, that materially changes either:
- scope of business
- manner business is conducted
o sale or termination of operation
o closure of business location or relocation of business activities (reorganization
o changes in management structure
o fundamental reorganization
DISCLOSURE:
a. reconciliation of each class of provision showing:
i. beginning balance
ii. additions
iii. deductions
iv. ending balance
b. comparative information is not required
c. brief description for each class of provision of the:
i. nature
ii. timing
iii. uncertainties
iv. assumptions
v. reimbursements

PAS 10
Events after the reporting period
- between end of reporting period and date FS are authorized for issue, bisag dili final or
subject to further approval
Types of events after the reporting period
1. Adjusting
--requires adjusting
- Settlement of a court case
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- Receipt of information that asset is impaired

o Bankruptcy after reporting period
o NRV of sale of inventories
- Etc.
2. Non-adjusting
--disclose lang sa notes if material

Dividends—dili siya liability

Going Concern—prohibited if:
a. Intends to liquidate
b. Cease trading
c. No realistic alternative

PAS 24 RELATED PARTY DISCLOSURE

- Parent ft. subsidiaries
- Necessary kung naapektuhan ba ang FS sa ana nga relationship
When can one say related parties?
a. If it has ability to affect decisions of other party through control, significant
influence or joint control
DISCLOSURE
- Relationship between parent and subsidiaries
a. Bisag walay transaction
- Key management personnel compensation
a. Short-term employee benefits
b. Post-employee benefits
c. Other long-term benefits
d. Termination benefits
e. Share-based payments
- Related party transactions
a. Transfer of resources between sa naghimo sa FS (reporting entity) ug ang related
party

Related party transactions ug ang ilang outstanding balances—disclosed separate or individual

FS, eliminated atong consolidated FS
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Government-related entities—controlled by government, Disclose:

a. Name sa gov’t ug relationship
b. Nature and amount sa transaction
c. Others nga significant

PAS 7
- Presentation of cash flow—CASH BASIS, enhance inter-comparability
Helps users assess: ATN
o Ability to generate cash
o Timing and certainty of generation
o Needs to utilize

Classification of Cash Flow

1. Operating Activities
-revenue-producing activities
-Income ug expense
- Sale ug purchase
Special items
▪ Held for trading securities
▪ Loan transactions of financial institutions
PRESENTATION OF OPERATING ACTIVITIES
a. Direct—shows major class of gross cash receipt ug gross cash payment
-mao ni ag nakasanayan nato.
b. Indirect—gina-adjust ang P/L
PAS 7 ENCOURAGES DIRECT METHOD, but does not require.
2. Investing Activities
-acquisition and disposal of noncurrent assets and other investments
-non-current assets (kay ang current sa operating man)
-liabilities
3. Financing Activities
-affect entity’s equity CAPITAL, and BORROWING STRUCTURE.
-equity
-borrowings
EXCLUDED:
1. Bank overdrafts nga dili ma-offset sa cash.
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2. Exchange difference, foreign currency

Only affecting CCE aare included, ag mga dili kay disclose lang.

Option 1 Option 2
Interest Income received O I
Interest expense paid O F
Dividend income received O I
Dividend paid to owners F O
Option 1: O kay mga income ug expense man
F kay transaction with owners mana, mausob ang equity
Option 2: I kay investment mana silla
F kay gikan sa borrowing
O kay para maka-assess sa ability to pay dividend out of operating cash
flows
Change in ownership interests in subsidiaries
- Kung nagka loss or obtaining of control—INVESTING
- Kung wala lang—FINANCING
PAS 2
Primary issue: determination of cost
- finished goods
- Work-in process
- Raw materials
Measurement: LCNRV
COST
- Purchase cost—net of discounts
- Conversion cost—direct labor, production overhead
- Other cost—storage cost nga NECESSARY sa production process
COST FORMULAS:
1. Specific Identification—not ordinarily interchangeable
2. FIFO
3. Weighted Average—
compute sa weighted average unit cost—calculated in a periodic basis
= TGAS in pesos / TGAS in unit.
▪ Ang answer kay mao dayon ang price gamiton
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Or the moving average (as each additional purchase is made)—mag-usob ang

weighted ave. cost every naay sale, ang answer kay i-imultiple sa units sold to
compute for total cost of sale
NET REALIZABLE VALUE
- Estimated price – estimated cost to complete and estimated cost to sell
Cost> benefit,
- Damaged
- Becomes obsolete
- Decline price
- Cost to sell/complete increase

If any of these happened, cost of the inventory is written down to NRV

Amount written down is expense.
If mo-increase napod ang NRV, ma-reverse ang na-writedown up to the original write-down
WRITE DOWN ON AN ITEM BY ITEM BASIS
- Pag ang cost> NRV, naay writedown
Pag sa raw material C>NRV, dayn kung ang NRV, finished goods > Cost, finished goods,
pwede na dili i-writedown ang sa raw materials, if expected to be sold at cost or above cost
RAW FINISHED
C 60 100
NRV 50 120
Cost of inventory= 60+100

CONCLUSION:
Sa pagpresent sa operating activities, direct or indirect
Sa investing ug financing, presented separately at gross amount, unless qualified for net
presentation

PAS 41
Agriculture—farming, process of producing crops and raising livestocks
1. Biological asset
2. Agricultural produce at point of harvest, otherwise, inventory
3. Unconditional gov’t grants related to biological asset measured at FV less cost to sell
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BIOLOGICAL ASSET—living animal or plant

a. Consumable biological asset (PAS 41)
o To be harvested as agricultural produce
o Sold as biological asset
b. Bearer biological asset (PAS 16)
o Held to bear produce
Ang living plant held to bear produce is not biological asset but Bearer Plant (PAS 16)
Bearer plant
- Production/supply of agricultural produce
- Expected to bear produce for more than one period
- Remote Likelihood of being sold
AGRICULTURAL PRODUCE
- Ag harvested produce
- Naa pa sa ilang natural state and not yet processed, or else, it is inventories.

At point of harvest—PAS 41—only if under agricultural activity

Processed—PAS 2
All unprocessed are BIOLOGICAL assets.

Agricultural Activity—management by an entity of the biological transformation and harvest

Common features:
a. Capability to change
b. Management of change
c. Measurement of change
Biological Transformation: quali and quanti- changes of biological asset:
i. Asset changes through:
a. Growth—increase in quantity/ improvement of quality
b. Procreation—creation of additional living animals/plants
c. Degeneration—decrease in quantity or deterioration of quality
ii. Production of Agricultural produce
RECOGNITION:
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- Meet asset recognition + reliable measurement of FV or cost

PARA SA AGRICULTURAL PRODUCE, IN ALL CASES,

MEASUREMENT: FV less cost to sell, initially ug subsequently
If dili ma-determine anf FV, edi initially, COST
Subsequently, Cost less acc. Dep – acc. Impairment loss
Only until FV can be determined
GOVERNMENT GRANTS
- Only katong related sa bio-asset nga mmeasure at FV less cost to sell
- Katong sa cost kay dili madetermine ang FV, PAS 20.
1. Unconditional—P/L when it becomes receivable
2. Conditional—P/L when conditions are met
3. Conditional but the terms of the grant allow part of it to be retained according to the
time that has elapsed—portion in P/L as time passes (straight-line basis)
DISCLOSURE: LANTAWAS BOOK. DAGHAN KAAYO.

PAS 16
Principal issues:
- Recognition as asset
- Measurement of carrying amount
- Recognition of depreciation charges
PPE
- Tangible assets
- Used in business
- Long-term in nature
RECOGNITION:
a. Probable
b. Reliably measures
Spare parts, Stand-by eqpt, servicing equipment—PPE kung na-meet ang recognition,
otherwise, inventory.
Safety and environmental eqpt—PPE
INITIAL MEASUREMENT: COST
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- Cash price equivalent

- If deferred, CPE – total payment= interest over the credit period.
- Including directly attributable, pero katong dili kay EXPENSE OUTRIGHT.
- Less disposal proceeds of samples generated

Kung through exchange of properties: Order of Priority

4. FV of asset given up
5. FV of asset received
6. CA of asset given up—used also kung lack of commercial substance.

a. Replacement cost—PPE kung na-meet ang recognition

b. Major inspection—same sa A.
SUBSEQUENT MEASUREMENT: COST MODEL OR REVALUATION MODEL
COST MODEL
- Cost – acc. Dep – acc. Impairment loss
Depreciation starts when asset is available for use
Depreciation stops when asset is:
a. derecognized
b. held for sale under PFRS 5
c. fully depreciated, when CA= 0 or residual value
Depreciation Method
i. straight-line method
ii. diminishing balance method
iii. units of production method
PAS 16 does not prescribe any method, depende sa management. Prohibits the use of
method based on revenue.
REVALUATION MODEL
- Fair value less sub. Acc. Dep less sub. Impairment Loss
- Applied to ENTIRE CLASS of PPE.
- Simultaneously otherwise, on a rolling basis (as on the case of bearer plant)
ACCOUNTING:
- Increase or decrease of Carrying Amount—didto sa OCI
- Accumulated kay sa EQUITY, under revaluation surplus”
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- Revaluation surplus= FV- Carrying amount

REVALUATION, AYHA DEPRECIATION
a. Impairment gain— reversal sa previous impairment loss
b. Impairment loss—decrease in excess sa revaluation surplus nga balance
Pilay i-transfer sa retained earnings?
- Kung non-depreciable ang assrt, TANAN, WHOLE
- Kung depreciable, portion lang.
REVALUATION SURPLUS/ useful life
Cost, 1M – FV, 800K – FV, 1.3M
So, naay impairment loss nga 200K (800-1M)
Next, naay increase, 500 (1.3M-800K)
500-200= revaluation surplus nga 300
200—P/L
300—OCI,
Ang accumulate is didto sa EQUITY, ex. Naay balance, i-add na didto.

DERECOGNITION:
- Disposed or sold
- No future economic benefits
CA – net disposal proceed = gain or loss on disposal, if any, didto sa P/L

PAS 23
Borrowing cost—interest expense
- CAPITALIZABLE
- Cost directly attributable sa qualifying asset
- Qualifying asset—takes substantial period of time to get ready
CAPITALIZATION OF BORROWING COSTS
- Capitalized if avoidable
STARTS: must meet all
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1. Expenditure are being incurred

2. BC are incurred
3. Activities for preparation are being undertaken
SUSPENDED:
A. During extended period which development is interrupted
NOT SUSPENDED:
A. If TEMPORARY delay is necessary
CEASES:
a. If substantially complete
SPECIFIC BORROWING
- Specifically for the purpose of obtaining a qualifying asset
Cap BC = Actual Borrowing – Investment Income
((Cost x interest) – investment income)
GENERAL BORROWING
- For more than one purpose
Cap BC = Ave. Expenditure x Capitalization rate
HOW:
1. Compute for average expenditure
a. Ag mge expenses I-multiply sa pila sila ka-month nagamit.
Jan. 1 12/12
Jan. 31 11/12
April 1 9/12
b. Itotal pod dayon to get the average expenditure

2. Compute for the Capitalization Rate

a. Ag imong mga giutang, i-multiply sa ilang interest rate
Dayn itotal.
b. Next, i-total pod katong imong giutang tanan.
c. I-divide. A/B
d. Kuha na ang rate
3. I-multiply dayon si 1 ug 2.
4. Compare anang 2.a or the actual borrowing cost, katong total interest expense. Kung
asay LOWER, mao toy cost
DISCLOSURE:
1. Capitalized BC
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2. Cap Rate

PAS 40
- Land, building, property
- For rentals, capital appreciation
- INITIALLY, At cost
- SUBSEQUENTLY, COST MODEL or FAIR VALUE MODEL
BY PURCHASE:
o Purchase price
o Direct attributable cost
- If deferred, CPE ang cost.
- Cost-CPE = interest expense recognized over the period
BY EXCHANGE
a. With commercial substance—order of Priority
b. Lacks commercial substance—CA of asset given

- Requires determination of Fair Value

FV in FV model, measurement purpose
FV in Cost model, disclosure purpose

Cost Model—PAS 16
o Depreciated ang asset
o Tested for impairment

Fair Value Model—now

o Asset is not depreciated
o Integral parts of the investment property are NOT recognized separately, included sa
measurement sa property
TRANSFERS to or from investment property
- Only when there is change in use

PAS 20
Gov’t Grants
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- Subsidies, subventions, premium

Exclude those cannot me reliably measured and cannot be distinguished from normal trading
transaction but, if significant, i-disclose lang.

Receipt of gov’t assistance

1. Appropriate accounting method
2. Improves comparability
Recognition
1. Attach conditions complied
2. Grants received
Types of grants
1. Related to asset
- To acquire or construct
2. Related to income
- Residual definition

Measurement
Monetary
- Cash received
- FV or receivable
Non-monetary
- FV of the received
- Nominal amount
Approaches to accounting of grant
- Capital Approach—used only on donations received from shareholder
- Income Approach—PAS 20

Accounting (MATCHING PRINCIPLE—dep. Expense ug income sa grant

- P/L
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o Grants to depreciable asset

Recognized in proportion sa depreciation expense ato nga asset
o Grants to non-depreciable asset
When the cost of fulfilling the attached condition are incurred
o Grants to financial aid
Immediate in P/L
Presentation
- Gross or net presentation
ASSET: Gross Net
BS-- deferred income deduction from CA
SCI-- separately deduction from depreciation charge
INCOME Gross Net
Reported separately deducted from the related expense

Repayment of grants (balusan ug bayad)

- Treated as change in accounting estimate
- Accounted prospectively
Repayment of grant related to income
- Deducted sa deferred income
- Excess in P/L
Repayment of grant related to Asset
- Increase in CA of asset

PFRS 6
Exploration for and evaluation of Mineral resource
- Search for mineral resources after obtaining legal rights to explore and determination of
technical feasibility and commercial viability
Exploration and evaluation expenditure
- Before atong technical feasibility and commercial viability are DEMONSTRABLE.
- Ig after na, tawag ana kay DEVELOPMENT COST
- Management’s judgement, dili mosunod atong hierarchy of reporting standard
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INITIAL MEASUREMENT
- Cost
SUBSEQUENT MEASUREMENT
- Cost model and revaluation model

Changes in Accounting Policy

- If mass reliable ug relevant

Classification of exploration and evaluation assets

Separate class of asset
Tangible
Intangible
Reclassification of exploration and evaluation assets
- Assess impairment first (PAS 36)
Impairment loss
- CA > recoverable amount

PFRS 5
- Accounting for assets held for sale, disposal group
- Presentation and disclosure of discontinued operation
Within its scope:
1. PPE
2. Investment property under cost model
3. Intangible assets
4. Investment in associate, subsidiary and joint venture
5.
DISPOSAL GROUP—assets sold in SINGLE transaction within 1 year
General Rule: reclassified back
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Exception:
1. Delay is Beyond entity’s control
2. Sufficient evidence that entity remains committed on selling the assets
NCA classified as held for sale—kung mas mag-benefit pa ang ibaligya kaysa gamiton
- Recovered principally through a sale transaction
Conditions for classification:
1. Available for immediate sale
2. Highly probable

Event after reporting period

- Na-recognize nga held for sale after the reporting period—dili held for sale sa current
- Non-adjusting event
Property dividend
- Held for distribution to the owners, kung:
1. Available for immediate distribution
2. Highly probable
NCA , to be abandoned
- Not held for sale

MEASUREMENT: INITIALLY AND SUBSEQUENTLY

- Lower of CA and FV less cost to sell
▪ Basta kanang murag inventory lower, lower jud na hahaha
Changes in FV less cost to sell—P/L as impairment gain or loss

Depreciation/Amortization
- Not depreciated nor amortized
- Recognize lang ug interest

Changes to a plan of sale

- If dili na siya magpa-held for sale
- Measure at the lower of CA and recoverable amount
- Recoverable amount is higher of FV less cost of disposal and value in use.
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Discontinued Operation
- Component of an entity
- Has been disposed or classified as held for sale AND:
o Represents a major line of business or geographical area of operation
o Part of a single coordinated plan to disposed
o Subsidiary acquired with a view to resale

Presentation:
- Statement of P/L and OCI as single amount
o Post-taax P/L
o

PAS 32
Financial Instrument: Presentation
- fin. asset and, fin. liability or equity instrument
fin asset:
o investment of equity and debt instrument of other entities
o receive
fin. Liabilities
o variable number; variable amount
o deliver
equity instrument
o fixed number; fixed amount

PRESENTATION:
- substance over legal form; definition of such financial instrument
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Redeemable Preference Share

- holder has right to redeem; issuer mandatorily obliged; fin liability
Callable Preference Shares
- issuer has right to call; equity instrument
Puttable Instrument
GR: Fin Liability
Exception: Equity instrument if
Naa siyay features of an equity instrument
Treasury shares/stocks
- issued but reacquired but not retired
- In BS or notes as deduction from equity
Interest, Dividend, Gains and Losses
- P/L if fin. Liability; directly to equity if equity instrument (deduction from retained earnings)
Transaction Cost
- If equity, deduction from equity
- If fin. Liability, included sa CA and amortized to P/L (premium or discount)
OFFSETTING (both must be met)
- legal right of setoff
- Intention to settle amounts on net basis

COMPOUND FINANCIAL INSTRUMENT

Issue price of liability
(FV of debt w/out equity feature)
Equity feature
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PFRS 9 FINANCIAL INSTRUMENTS

Recognition
- Only when the entity becomes a party
Classification: Subsequent Measurement: Financial Asset
a. AC
▪ Hold to collect; SPPI
b. FVOCI
▪ Hold to collect and sell; SPPI
▪ Investment in equity securities at Irrevocable election
c. FVPL
▪ Does not meet conditions of two; held for trading securities
▪ FA at Irrevocable designation if it eliminates accounting mismatch
Business Model
- How entity manages its fin. Asset to generate cash flow
- A matter of fact
- Results from higher aggregation
- Its assessment is forward looking
a. Hold to collect; debt instrument
Factors to consider when to collect:
i. Frequency, value, timing of sales, prior
ii. Reason for those sales
iii. Expectation of future sales activity
b. Hold to collect and sell (integral rather than incidental); debt instrument
i. Involve greater frequency and value of sales
Appropriate when?
a. To manage liquidity needs
b. Maintain particular interest yield profile
c. Match duration of fin asset and fin liability
c. Other business models: FVPL
Contractual Cash Flow Characteristics
- SPPI
- Only for debt instrument
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Financial Asset Measurement

Initially: FV + transaction cost
Subsequently: AC, FVOCI, FVPL

Gains and losses:

FVPL= P/L
FVOCI mandatory= OCI until derecognized or reclassification
FVOCI election= OCI; if derecognized, transferred to equity (retained earnings)
AC= P/L
Reclassification
- Only when entity changes its business model
- Reclassification date: first day of the first reporting period
- Applicable only to debt instruments
- Difference between CA and FV, reclassification—PL if FVPL ug AC; OCI if FVOCI

Impairment
- Uses expected credit loss model (ECL model)
- Only for FVOCI and AC
3 ECL Approaches
1. Simplified
2. Changes in lifetime ECL approach
3. General Approach (three-stage approach)
a. Stage 1—12-month ECL; Int. Rev through gross CA
• Credit risk has not increased significantly
b. Stage 2—Lifetime ECL; Int. Rev through gross CA
• Credit risk has Increased significantly
c. Stage 3—Lifetime ECL; Int. Rev through net CA (less loss allowance)
• Credit risk has Increased significantly
• There is objective evidence of impairment

Loss allowance—para sa ECL

Expected credit loss—weighted average of credit losses
Credit loss—cash flow due - cash flow received
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Derecognition:
a. Expire
- When collected, cancelled or uncollectible
b. Transferred, and transfer qualifies derecognition
- Transfer the rights
- Assumes obligation to remit collection
(All must be met)
i. Not obligated to pay
ii. Prohibited from selling
iii. Without material delay
iv. Prohibited in reinvesting collections
EVALUATION OF TRANSFER: CONTROL
a. If na-transfer substantially ang risks and rewards—i-derecognized
b. Kailangan naay CONTROL sa asset

Classification of Financial Liabilities

Subsequent measurement: AC
Exception:
FVPL—derivative liabilities, held for trading

Reclassification: prohibited
Measurement:
Initial: FV – transaction cost (FVOCI, AC)
FV (FVPL, transaction cost is expense
Subsequent: AC
Exception: FVPL kung held for trading
If designated at FVPL, measured at FV.
▪ Changes in FV attributable to credit risk is recognized in OCI and remaining sa P/L

PFRS 7 Fin Instrument: Disclosure

Broadly classified into:
1. Significance of financial instrument
Financial Position
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▪ CA
▪ FA-FVPL—exposure to credit risk, relative change in FV
▪ FL-FVPL—change in FV, diff between CA and maturity value, cumulative gain or loss
▪ FA-FVOCI—investment, reason for election, dividend recognize, transfer of
cumulative gain or loss
▪ Disposal of FA-FVOCI—reason for disposal, FV derecognition date, cumulative gain
or loss
▪ Reclassification of FA—date, explanation, amount reclassified
▪ Offsetting—gross amounts, net amount presented in Fin. Position, description
▪ Collateral—CA of pledged asset, terms and conditions, FV of collateral
▪ Allowance account for credit losses—loss allowance
▪ Default and breaches—defaults and breaches, CA, remedy, terms
Statement of Comprehensive Income
▪ Net gains or net losses
▪ Total interest revenue and total interest expense
▪ Fee income and expense
Other Disclosure
▪ FV of each class
Not required if CA approximates FV

2. Nature and extent of risk (Qualitative and Quantitative

disclosure)
- Credit risk—will cause financial loss; concentration
- Liquidity risk—meeting obligations;
- Market risk—FV fluctuations by change in market prices; measured at FV
▪ Currency risk—foreign exchange rates; required if measured in foreign currency
▪ Interest rate risk—market interest rates; required if debt instrument with variable
interest rates
▪ Other price risks—other than the two
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PAS 28
- Application of equity method
Investment in Associate (IIA)
- Significant influence—power to participate in the financial and operating policy decisions
- 20%- 50% of the voting power
ACCOUNTING:
- Equity method
▪ Initially: COST
▪ Subsequently: COST adjusted for the investor’s share in the investee’s changes in
equity

IIA Investment Income

P/L increase Increase
Dividend decreaase No effect
OCI increase No effect (sa investor nga
OCI)

Application of the Equity method

- From the date investor obtained significant influence
- Recognize goodwill if cost>FV; cost<FV, income
Exception: if exempted sa pag-prepare sa consolidated FS

Investee’s FS and Accounting

- Si investee moy mag-adjust para mo-coincide ang FS niya kay investor
- Not exceeding 3 months ang end sa reporting period ni investor ug investee
Cumulative Preference Share
- Compute share in P/L after deducting 1-year dividends. Unhon jud dapat basta preference.
Share in Losses
- Only up to its interest in the associate
- Applied sa CA then, reverse order of priority in liquidation
Interest
a. CA
b. Investment in Preference shares
c. Unsecured, long-term receivables
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Discontinuance of Equity Method

- Loses significant influence
Investment to subsidiary, PFRS 3 and PFRS 10
Investment to regular investment, PFRS 9.

INVESTMENT IN JOINT VENTURE

- Investor uses PFRS 11 to determine kung ang interest is an IJV—uses dayon ang equity
method

PFRS 16 LEASES
- Conveys the right to use an asset for a period of time
Lessee- nanghulam, obtains the right to use
Lessor-nagpahulam, provides the right
Lease—right to control the use
Essential requisites:
▪ Right to obtain substantially all benefit from IDENTIFIED ASSET
• kailangan substantial ang benefit nga makuha or exclusive use of asset
throughout the period
▪ Right to direct the use
• Asset’s use is predetermined
• Has right to direct how and for what purpose the asset is used
▪ Identified asset
• basta kanang gi-identify, either explicit or implicit
• Portion of asset = if it is physically distinct—identified asset.
• Substantive substitution rights= dili identified asset
• Substantive—if only on a particular date; only during repairs or upgrading
• Protective rights—contractual restrictions to protect supplier’s interest;
define the scope of customer’s right of use
Lease Term: NON-CANCELLABLE period of a lease with both
35 | M A K A P A S A R K O S A Q E ! ! ! P A S A R Q E C U T I E E E ! !

a. Option to extend
b. Option to terminate
Lessee is reasonably certain to exercise option to extend or not to exercise option to terminate

Accounting for Leases by LESSEE

- Recognize lease liability—
▪ initially: PV (ordinary annuity) of lease payment, not yet paid
▪ Subsequently: similar to Financial Liabilities’ Amortized Cost
but remeasured to reflect reassessment or lease modifications
▪ Interest—Using effective interest method; unless part sa cost

▪ Fixed payment + Variable lease payment + Amount expected to be payable +

exercise price of a purchase option + termination penalties if reasonably certain

- Discount rate: using interest rate IMPLICIT in the lease; otherwise, incremental borrowing
rate ni lessee
- Recognize right of use asset
▪ Initially measured at COST
▪ Subsequently:
• Cost Model; depreciates using useful life
• Revaluation Model—class of PPE
• Fair Value Model—Investment property

• Useful life lang if naay transfer of ownership or reasonably certain exercise

of purchase option; In other cases, shorter of lease term and useful life
• Depreciation starts at commencement date

Recognition exemptions: EXPENSED on a straight-line basis

a. Short-term leases
• Katong walay purchase option
• Less than 12 months
b. Low valued asset
• Assessment is based when it is new; retrospective assessment
• Performed on absolute basis
c. Operating Lease

Separating the components of a contract

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- Account separately lease components and non-lease components

Lease component: based on relative stand-alone price (price that lessor would charge for a
component separately); estimate, if unavailable.

Lease of Multiple asset: separate lease component kung ma-meet ang:

a. Lessee can benefit either own or together
b. Neither highly dependent nor highly interrelated

Non-lease elements
- Separate element if it transfers goods or services to the lessee
Practical Expedient
- PFRS 16 allows entity to elect to account lease and non-lease as a single lease component

Accounting for leases by LESSOR

- Either finance lease or operating lease—SUBSTANCE over Form
- Involves transfer of risks and rewards
- Risks—possibility of losses
- Reward—expectation of profitable operation

Indicators of Finance lease:

a. Transfers ownership
b. Option to purchase at a price sufficiently lower than FV (Bargain purchase option—
BPO)
c. For the Major part of the economic life (75% of useful life)
d. PV of lease payments is at least substantially all (90%) the FV of asset at inception date
e. Of Specialized nature

Inception date and Commencement date

Inception:
- Lease classification
- Earlier of lease agreement date and commitment date

Commencement:
- Exercise right to use by lessee
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- Lessor makes underlying asset available for use by lessee

- Date of initial recognition

Measurement: Finance Lease

Initial: Net investment in the lease
- Recognizes receivable= net investment
Gross investment in the lease = Lease payment receivable + unguaranteed residual value
Net Investment in the lease = gross investment in the lease discounted at implicit interest rate
Unearned Finance Income = Gross – Net investment in the lease

Subsequent: similar to AC financial asset; depreciated

o Finance Income—using EIM
o Lease Payment applied against gross investment

OPERATING LEASE
- Same atong low valued asset ug short term leases

Lease of Land and Building

- Assess classification Separately
- Account based on relative fair values at the inception date

Subleases—underlying asset is re-leased by a lessee

Sales and Leaseback transactions—
- sells an asset and immediately leases it back from the buyer
- Iyang gibaligya dayn niupa napod siyas iyang gibaligyaan boang
- Determine whether it classifies as sale, PFRS 15.
If ni-qualify: AS SALE
Seller/lessee
- Measure right-of-use asset in proportion sa CA
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- Recognize only gain or loss

Buyer/lessor
- Account for the purchase of asset

Adjustments
a. SP not equal to FV
b. Lease payment is not on market rates
a. Below market terms—prepayment off lease payments
b. Above market terms—additional financing
Adjustment measurement: kung asay mas mauna ug determine
a. FV, consideration – FV, asset
b. PV, contractual payment – PV, payment at market rates

NOT A SALE
- Financing transaction
Seller: Fin Liability (PFRS 9)
Buyer: Fin Asset (PFRS 9)

PAS 38 INTANGIBLE ASSET

- Identifiable, non-monetary, without physical substance
Essential elements:
1. Identifiability (so as to distinguish from goodwill)
▪ Separable
▪ Arises from contractual obligation or legal rights
2. Control
3. Future economic benefits
Asset with both intangible and tangible elements
- Kung asay mas significant.
- Dapat dili significant or integral ang intangible para ma-separate siya
Initial Measurement: COST
Subsequent: cost model or revaluation model
a. Acquisition
- Purchase + direct costs
- If deferred, CPE; recognize interest expense here
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b. Part of business combination

- FV at acquisition
c. Way of gov’t grant
- FV
- Nominal amount + direct costs
d. Exchange
- With commercial substance—Order of priority
- Without commercial substance—CA of asset given up
e. Internal generation
- Research phase—expensed
- Development—expensed; if conditions are met, capitalized;

Organizational cost/start-up cost

- Expensed when incurred
Subsequent expenditure
- Expensed

Amortization
- Finite: shorter of useful life legal life, if any
Patent: 20 years legal life
- Indefinite: not amortized but tested for impairment at least annually.
Amortization method
**does not prescribe any specific method
**prohibits methods based on revenue
- Straight-line
- Diminishing balance
- Unit of production
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PAS 36 IMPAIRMENT OF ASSET

- CA > recoverable amount, asset is impaired
o Excess is impairment loss
o CA= Cost -acc dep – acc. Imp. Loss
o Recoverable Amount = higher of FV less cost of disposal and Value in use
Indications of impairment
1. External sources
2. Internal sources
Required testing for impairment: any time but same time every year
1. Intangibles with INDEFINITE useful life
2. Intangibles not yet available of use
3. Goodwill—business combination
- Building
- Investment property
Estimates of cash flows/ cash flow projection
1. Based on Management’s best estimate
2. Based on Most recent financial budget
3. Based on Assets’ current condition
4. Cover a maximum of 5 years; otherwise, extrapolated
5. Translated using spot exchange rate, if based on foreign currency
Discount rate:
- Pre-tax rate
- Reflects current assessment
Recognizing and Measuring Impairment Loss
- P/L
- If CA is a revalued amount, revaluation surplus is decreased in OCI, excess to P/L
- Subsequently after impairment, depreciation is based na sa recoverable amount since
equal naman to sila, dili sa CA.
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CGU and Goodwill/ Corporate Asset

- Tested individually
- Pero kung dili possible nga ma-determine ang recoverable sa individual asset, as a group na
lang i-test
- Since unidentifiable man ang goodwill, i-allocate siya to each of the acquirer’s CGU in year
of business combination.
- If partially disposed, goodwill is allocated based on relative Fair values ato nga sold ug
unsold CGUs para madetermine ang gain or loss on disposal
Impairment loss sa CGU kay i-allocate based on
1. Goodwill
2. CGU based on CA
Pareha ra ug accounting ang Goodwill ug corporate asset

Reversal of Impairment Loss

- Recoverable amount > CA
- Difference is reversal on impairment loss, if naa nay na-recognize na impairment daan
o Recognized in P/L, unless carried at revalued amount, OCI
o Subsequent depreciation: based on revised CA

1. compute for CA of the recoverable amount

2. compute for CA of the would-be CA kung walay impairment loss
= Cost- Acc. Dep
3. deduct 2-1 = gain on reversal
4. New Recoverable - would-be CA = revaluation increase
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PFRS 13 FAIR VALUE MEASUREMENT

- Presumes going concern
- Market-based measurement
Requirements:
1. asset or liability
-
- characteristics affects asset/liab
o condition and location
o restriction on sale or use
- applied on a stand-alone or group, depending on the unit of account

2. Market/ Price
- Based on Current market conditions
- Principal market; otherwise, the most advantageous market
- Not adjusted for transaction cost but for any TRANSPORT COST(deduction)—Principal
Market
- Ug Most Advantageous market, iconsider ang transaction cost dayn mopili ug asay most
advantageous.
- Transaction price= entry price
- Fair value= exit price
o Difference of the two is gain/loss in P/L

3. Appropriate valuation techniques

- maximizes use of relevant observable inputs
- minimizes unobservable inputs
a. Market Approach
b. Cost Approach
c. Income Approach

Inputs based on bid and ask prices

Bid price—max price to buy an asset; asset position; asset held
Ask price—minimum price to sell an asset; liability position; asset to be acquired
Within bid-ask spread—that is most representative of FV is used to measure FV
Mid-market pricing
Fair Value Hierarchy
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1. Quoted price in active market

2. Observable data
3. Unobservable inputs (own data)

4. FOR NON-FINANCIAL ASSET: Highest and best use of asset; whether a combination or
stand-alone basis
Highest and best use
o Use of Non-financial asset that Help maximize the value of asset
- Takes account
o Physical characteristics
o Legal Restrictions
o Financial feasibility

PFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS

- Income
o Revenue and gains
o Increase in economic benefit
- Revenue
o Arising in the course of entity’s ordinary activity
PFRS 15—ang la-transact ni entity (ako) is treated as customer
- Applied over duration of the contract
Customer – one who obtains goods and services (output)
- Dili customer kung ni-participate sa activity sa entity

PFRS applies to INDIVIDUAL contracts with customer

- Kailangan naay kwarta involve
REVENUE RECOGNITION:
1. Identify the contract
**all must be met: PRE-ASSESSMENT
a. Approved
b. rights
c. Payment terms
d. Commercial substance
e. Probable of collection
▪ F. Walay revenue kung naa pay obligation or
▪ G. Contract is not yet terminated
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COMBINATION OF CONTRACTS
*Treated as single contract if:
A. package with single commercial objective
B. amount to be paid depends on the other contract
C. single performance obligation (pwede mausa)

2. Identify the performance obligation

• Do not include administrative tasks
May be:
- Distinct good or service
▪ Customer can benefit either own or together
▪ Promise to transfer is separately identifiable
- Series of distinct good that are substantially the same

3. Determine transaction price

▪ Amount of consideration
• Fixed or/and
• variable
▪ Excludes amount collected by third person (e.g. taxes)

4. Allocate transaction price to performance obligation

- Based on relative stand-alone price; otherwise, it is estimated by methods
▪ List price/contract price—not presumed to be the stand-alone pero pwede siya
- METHODS
▪ Adjusted market assessment approach
• Evaluating the market, including competitors’ price
▪ Expected cost plus margin approach
• Forecast expected cost and applying appropriate margin
▪ Residual approach
• Total transaction price – Stand-alone SP of the promised goods

5. Recognize revenue when performance is satisfied

REVENUE MEASUREMENT: at the amount of transaction price allocated
Satisfaction criteria:
▪ Control over goods is TRANSFERRED
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Performance obligation is satisfied:

a. Over time—control (AS)
- As entity progresses towards complete satisfaction of obligation
- Straight-line basis
CRITERIA:
i. Simultaneously receives and consumes benefits
ii. Enhances assets that entity controls
iii. Does not create asset with an alternative use
a. Restricted contractually
iv. Entity has enforceable right to payment for performance completed to
date
TO MEASURE PROGRESS: entity uses single method
i. Output method
• Based on direct measurement
ii. Input method
• Based on effort or inputs
• Revenue recognized on straight-line basis
b. At a point in time (WHEN; ONLY AFTER)
- When the performance obligation is satisfied
- Considers indicators of transfer of control
▪ Entity has Present right to payment
▪ Entity has transferred physical possession
▪ Customer has legal title
▪ Customer has significant risks and rewards of ownership
▪ Customer accepted the asset

Contract Cost
- Recognizable as asset—subject to conditions
- Cost as asset is amortized
a. Incremental cost
b. Cost to fulfill
FOR IMPAIRMENT LOSS
1. Recognized impairment loss sa other standard
2. Recognize impairment loss ani nga PFRS 15
a. Excess of CA over
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i. Remaining amount of consideration (CA)

ii. Less direct costs
3. CA in step 2 is included in CGU

Presentation:
- BS
▪ As contract asset or contract liability
• Contract liabilities
o Nakadepende ang amount s ana-receive na
consideration
o Recognized at the earlier of receiving consideration
and receive the right to the consideration
• Contract asset
o Conditional Right to the consideration
o Under PFRS 9
• Receivable
o Unconditional right to consideration
o Under PFRS 9

Disclosure: quali ug quanti

a. Contracts with customer
b. Significant judgment
c. Assets recognized

PAS 8 ACCOUNTING POLICIES, CHANGES IN ACCOUNTING

ESTIMATES AND ERRORS
ACCOUNTING POLICIES
- SPECIFIC principles,
47 | M A K A P A S A R K O S A Q E ! ! ! P A S A R Q E C U T I E E E ! !

- Hierarchy of reporting standards

1. PFRS
PFRS, PAS, Interpretations
2. Judgement
a. Shall
ii. Requirements
iii. Conceptual framework
b. May
iv. Pronouncements
v. Other acctg literature
Changes in Accounting Policies (CAP)
- Only if required by PFRS
- Results to reliable and more relevant information
- Caused by change in measurement basis
Not changes in Accounting Policies
- Differ in substance
- Did not exist previously or were immaterial

Accounting for CAP (order of priority)

1. Transitional provision in PFRS
2. Retrospective application—adjusting the opening balance
3. Prospective application, if 2 is impracticable (prior periods cannot be determined)—
voluntary change

Changes in Accounting Estimate (CAE)

- caused by economic benefits
- Involves judgment based on latest available information
- Adjustment of the carrying amount of an asset
Effect on P/L
Accounting for CAE
- Prospective application
o Recognizing P/L either in
▪ Period of change
▪ Period of change and future periods
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- Dili na i-restate ang beginning balance sa retained earnings and previous FS (alangan
prospective man)

ERRORS
- Material error—misstated
- Intentional error—fraud

- Error of commission—doing something wrong

- Error of omission—not doing something that should have been done

- Current period errors—corrected by correcting entries

- Prior period errors—corrected by retrospective restatement
Retrospective Restatement (as if error had never occurred)
- Restating comparative amounts
- Restating the opening balance
Retrospective Application (as if policy had always been applied)

PAS 34 INTERIM FINANCIAL REPORTING

- Minimum content; recognition and measurement pricniples
PAS 34 encourages,
o Publicly listed entities (PSE)
▪ Semi-annual—submitted not later than 60 days after then end of interim period
Revised Securities Act
- SEC and PSE require certain entities to provide quarterly financial reports (within 45 days
after end of first three quarters)
INTERIM FINANCIAL REPORTS: options
a. Complete set of FS (PAS 1)
b. Condensed set of FS (PAS 34)
i. Headings
ii. Subtotal
iii. Selected explanatory notes
Significant events and transactions
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- The focus of interim FS

- Presents basi and diluted EPS kung within PAS 33 ang entity
- Discloses PFRS compliance

Periods for which Interim FS are presented

1. Semi-annual—June 30; December 31 (last year—para sa comparative) (only sa BS)
2. Quarterly—September 30; December 31 (last year—para sa comparative) (only sa BS)
Comparable year-to-date period
Cumulative basis—basis of Interim FS presentation
Kung highly seasonal ang business, disclosure of fin. Info for the latest 12 months ug
comparative info for the prior 12-month period

Two views on interim reporting

1. Integral view
2. Discrete view
PAS 34 adopts combination of the two views
Accounting Principle
a. Losses (discrete)
b. Cost (discrete)
c. Income tax expense (integral)
Measurement: year-to-date basis

PFRS 8 OPERATING SEGMENTS

- Requires disclosure of information needed in evaluating the nature and financial effects of
the business activities
o Help users:
▪ Better understand entity’s performance
▪ Better assess prospects for future cash flows
▪ Make more informed judgments
SCOPE
- Required: For separate/individual FS
- Required: Consolidated FS with a Publicly listed parent
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Operating Segment
- Component of an entity
- Business activities
- Chief operating decision maker—a function rather than a title
- Discrete financial information
To be operating segment
- Kailangan mag-earn kag revenue (profit center)
Reportable Segments if:
a. Used by management or results from aggregating
b. Qualified under quantitative thresholds
- Based on management’s judgement

Management Approach
- Used to identify reportable segments, on the basis of internal reports

Aggregation Criteria
- Segments have similar economic characteristics
- Similar
▪ Nature of products and services
▪ Nature of Production processes
▪ Type or class of customer
▪ Methods used for distribution of products or service
▪ Nature of regulatory environment
Quantitative Thresholds
- Kailangan mo-qualify bisag usa lang ana nga test
a. Revenue: 10% or more
b. P/L: 10% or more –greater in absolute amount of P/L: (kunng asay mas dako sa total sa P
ug L)
c. Asset: 10% or more
- Katong wala ni-qualify or also known as non-reportable segments kay i-combine and
disclose in an ALL OTHER SEGMENTS category
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PAS 12 INCOME TAXES

income tax expense=PFRS---STATEMENT OF COMPREHENSIVE INCOME
current tax expense= ITR, Philippine tax laws
bad debts expense—taxable only when worthless—sa taxation pero kung financial reporting
kay i-deduct siya.
Accounting profit—before deducting tax expense
Taxable profit/tax loss

Income tax expense—total amount included in P/L determination

o Current tax + deferred tax
Current tax expense—tax on the taxable profit for a period
Deferred tax expense (income/benefit) —sum of the net changes in deferred asset ug deferred
liabilities
Expense—if liab> asset
Income—if asset>liab

Tax Laws -Tax, PFRS = statement of comprehensive income

--basta kay katong na-compute using PFRS, didto sa SCI ibutang

a. Permanent differences
- Either accounting profit or taxable, NOT BOTH
- Excluded form ITR
- Non-taxable and already subjected to FIT
- DOES NOT GIVE RISE TO DEFERRED TAX ASSET OR LIABILITIES

b. Temporary differences
- Difference of Carrying amount and tax base
- Include timing differences—its effect REVERSES in one or more subsequent periods
i. Taxable temporary differences (+++)
▪ GIVE RISE TO DEFERRED TAX LIABILITIES, if multiplied by tax rate
▪ Accounting profit> tax profit
▪ CA, asset > tax base
ii. Deductible temporary differences (---)
▪ GIVE RISE TO DEFERRED TAX ASSET, if multiplied by tax rate.
▪ Accounting profit < tax profit
▪ CA, asset < tax base

- GIVE RISE TO DEFERRED TAX ASSET OR LIABILITIES

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1. Deferred tax asset

o Recoverable in Future periods in respect of:
▪ Deductible temp diff
▪ Carryforward of unused tax loss
▪ Carryforward of unused tax credits
o Higher tax, if reverse in future
2. Deferred tax liabilities
o Payable in Future periods in respect of:
▪ Taxable temporary differences
o Lower tax, if reverse in future

ACCOUNTING FOR DEFERRED TAX

- Required: Asset-liability method / balance sheet liability method
o Comprehensive approach
▪ Accounts both:
• timing diff (accounting profit – tax profit—reversed in subsequent
periods)
• temporary differences: difference between CA and Tax bases

Measurement— at tax rates

▪ prohibits discounting
Fin. Position Presentation-
- noncurrent
- permits offsetting
o has legally enforceable right
o relates to income taxes levied by the same taxation authority.
CURRENT TAXES
- nag-una ug bayad or wala pa nabayran
- permits offsetting
o has legally enforceable rights
o intention to settle in net basis
SCIncome presentation
- pareha ra gihapon sa usual
- current and deferred—P/L
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PAS 19: Employee Benefits (SPOT)

- all forms of consideration to employees (tanan)
o for service
o for termination of employment
Recognition:
- EXPENSE kung makarender ug service ang employees
- LIABILITIES kung na-earn pero wala pa nahatag
Arise from:
o Contractual agreement
o Legislation
o Informal practices that create constructive obligation
COVERS:
1. Short-term employee
- Not discounted
- Recognized periodically
Short-term paid absences—(mga sick leaves inana)
a. Accumulating—ma-carryforward
ii. Vesting—ma-monetized ang unused entitlement kung muhawa na
sa entity
iii. Non-vesting—dili ma-monetized
b. Non-accumulating—ma-expire
Profit-sharing and bonus plans
- Incentives given to ELIGIBLE employees
Recognized:
a. Present obligation
b. Measured reliably

2. Post-employment
- Payable after completion of employment
o Employment benefits
- Through post-employment benefits PLANS /retirement plans / pension schemes
a. Formal arrangement (documented)
b. Informal arrangement (past practice)
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A. i. Contributory—both employer and employee

[Link]-contributory—only employer

B. i. Funded—isolated from employer’s control then, transferred to a trustee ayha i-bayad

directly the retiring employees
ii. non-funded—ang employer nag-manage and pays directly the retiring employees
C. i. defined contributions plans
o FIXED CONTRIBUTION sa employer (fixed retirement benefit cost)
o benefits depend on contribution and investment income
o risk of insufficient benefit—lies on employees
ACCOUNTING
▪ straightforward
▪ EXPENSE unless cost of an asset
▪ LIABILITIES when service is rendered
▪ UNDISCOUNTED if due less 12 months
▪ DISCOUNTED if due beyond 1 year
▪ No actuarial gain or loss
ii. defined benefits plan
o Definite amount determined using PLAN FORMULA
o risk of insufficient benefit—lies on employer
ACCOUNTING
- recognize actuarial assumptions to measure obligation on a DISCOUNTED basis
- retirement benefit cost is not necessary nga equal sa contribution due
- so, naay Gain
STEPS:
1. Determine deficit or surplus
= (PV of DBO) – (FVPA)—ending nga value
** DBO= defined benefit obligation
▪ Projected unit credit method ang gamiton to
determine
**PA= plan asset—fund

2. Determine the net defined benefit liability/asset

-if deficit, net defined liability—ag naa sa financial position
Mao ni ang answer sa number 1.
-if surplus, lower of surplus and asset ceiling
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3. Determine the defined benefit cost

= service cost + net interest on net defined benefit Liab/Asset +
remeasurements of the net defined benefit liability
a. Service cost (SC)
o Current SC
o Past SC
o Any gain or loss on settlement
b. net interest on net defined benefit Liab/Asset
o interest cost on the defined benefit obligation
o interest income on plan asset
o interest on the effect of the asset ceiling
c. remeasurements of the net defined benefit liability
o actuarial gain/loss
o diff between int. income on plan asset and return on
plan asset
o diff between int. on the effect of the asset ceiling and
change in the effect of the asset ceiling
a,b—P/L
c—SCI
multi-employer plans
- unrelated employerS
- either defined benefit plan or defined contribution plan
state plans
- REQUIRED: established by law; operated by gov’t
- ex: GSIS, SSS
- either defined benefit plan or defined contribution plan
insured benefits
- pay insurance premium to fund this benefit
- either defined benefit plan or defined contribution plan
o defined benefit plan kung
▪ if gi-retain ni employer ang obligation

3. Other long-term employee benefits (P/L)

o Other than termination and post-employment
o Due beyond 12 months
o Accounting: same atong defined benefit plan (ag 3 steps) but wala nay OCI, P/L na
tanan.
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4. Termination
Result of either:
a. Decision to terminate employee before retirement
b. Decision to accept employer’s offer as an exchange for termination
- Dili service-based benefit but EMPLOYER’S ACT OF TERMINATING THE EMPLOYEE
- Kung request ni employee, post-employment. Dapat employer jud moy magpaterminate
niya.
RECOGNITION: LIABILITY AND EXPENSE when
a. Entity can’t withdraw offer
b. Entity recognizes restructuring cost
MEASUREMENT: accord to NATURE
>12 months, other long-term benefits
< 12 months, short-term employee benefits
Substance, enhancement to post-employment, post-employment

PFRS 2 SHARE-BASED PAYMENTS

- Acquire ug goods/service, ang pambayad is own equity instrument or its cash equivalent
1. Equity-settled—
• Recognizes an increase in equity
2. Cash-settled—ang pambayad is cash based on FV of equity instrument
• Recognizes a liability
3. Choice between equity settles and cash-settled—counterparty is given a choice.

Equity-settled share-based payment transaction

Measurement:
Transaction with non-employees: FV of products received; otherwise,
(date entity receives good) FV of equity instrument granted

Transaction with employees: FV of equity instrument granted

(grant date—measurement date) Intrinsic value of shares of stocks

- Intrinsic value= subscription price differences

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Share-based Compensation Plan

- Given as bonuses or additional compensation
- Same ra sa taas pero here, through compensation
Ex.
a. Employee share option (equity-settled)
▪ Gives holder right to subscribe, but not obligation.
▪ With employees
▪ Not remeasured
Measurement
▪ FV of equity instrument at grant date
▪ Intrinsic value
For compensation expense:
Vest—entitled to shares without satisfying conditions
▪ Kung vest immediately
• Recognize in full
• Increase in equity at grant date
▪ If do not vest immediately
• Recognizes over the vesting period
• Basta kay magrecognize sa corresponding expense ana nga year deducted
by expenses sa previous periods—dili siya straight-line kay naay possibility
nga mag-change ang amount, especially kung naay change sa service
condition
Changes in service conditions
- Accounted prospectively
- Service conditions—be entitled to subscribe to the shares embodied in the
share options
- Mayntag makahinumdom ka giunsa to pag-account tong percent sa pinaka-
last year
- Pagbase lang sa last-year kay salaries are given at the end of period, not at the
beginning

b. Employee share appreciation rights (cash-settled)

▪ Employee is entitled to future cash payments
▪ remeasured
MEASUREMENT:
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- Liability—initially and until settled: FV of SARs; changes in P/L

- FV is derived from option pricing model
COMPENSATION Expense of SARs
- Same ra gihapon sa equity-settled, nga vest ug do not vest. Ingadto ra gihapon.

Cash-settled share-based payment transactions

- Acquires good, incurs obligation payable in cash, at an amount based on FV of equity
instruments
- Measured at FV of liability
- Liability is remeasured to FV, gain/loss to P/L

Ex. SARS—share appreciation rights to employee

c. Choice of settlement
- Kung kinsay gihatagan ana na choice: counterparty or the entity, siya moy-mag-apply

Counterparty has right of choice

- Then entity has granted compound instrument (both debt and equity instrument)
Transactions:
- With non-employees
▪ E=A-L
▪ Difference between FV of goods received – FV of debt component
- With employees
▪ If A=L, then E=0
▪ If A is not = L, then E>0
▪ Each component of compound instrument is accounted for separately
• Equity alternative on grant date
o Recognized as salaries expense
• Cash alternative
o Liability is remeasured to FV
Settlement of liability component
a. Equity-settled—directly to equity
b. Cash-settled—applied as settlement of liability
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Entity has right of choice

- Entity has not granted compound instrument
To account transaction, nakadepende sa kung ang entity has present obligation:
If yes, cash-settled
If no, equity-settled
Settlement
a. Cash-settled
- Cash payment is accounted as repurchase of equity interest

b. Equity-settled
- No accounting
- Just transfer of equity component to another

c. If entity elects settlement alternative: with higher fair value

i. Mag-recognize ug additional expense sa excess cash sa settlement

PAS 33
EPS-computing and presenting
- Focus on consistent determination of the denominator
- Requires Publicly listed entities (naa sa Phil Stock Exchange) to present EPS info.
- Required sa consolidated FS
EPS
- For ordinary shares
- Pilay profit ang na-earn kada ordinary share. (PROFITABILITY)
Types of EPS required for presentation
1. Basic EPS
= profit or loss minus Preferred dividend
WEIGHTED ave. no. of shares outstanding
NUMERATOR
- Ang profit is net of income tax expense
- Sa dividend, if cumulative, one year dividend, declared or not
- If non-cumulative, kato rang declared
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AMOUNTS TREATED LIKE PREFERRED DIVIDEND

- Amortization
- Gain or loss from settling or repurchasing preference shares
- Excess of FV of ordinary share or FV of ordinary shares issuable under original conversion
terms
DENOMINATOR
- Computed by applying time-weighting factor (days outstanding/total days in period)
o Ordinary shares, beg
o Issuance/reacquisition, during
OUTSTANDING SHARES
- Mo-participate sa dividend
- Issue shares + subscribe share – treasury shares

Retrospective Adjustment
- Issued WITHOUT corresponding change in resources

2. Dilute EPS