Hierarchy of Standards Objective of financial reporting

1. Specific PFRS (there is a specific standards) Investors- risk and return (u need to see the ability of the
(Like inventory) business to return the investment)
2. Related standards
3. Conceptual Framework (to know the record to - Ability to pay dividends (tinitignan if may
balance the financial statement) dividends na mapupunta sayo)
4. Other applicable acceptable accepted accounting Landers and other creditors – liquidity and solvency
principles
- Liquidity- ability to pay the currently maturing
obligations
Conceptual framework – general terms and concept that - Solvency- ability of the company to pay the
is used in preparing and presenting financial statement short term and long term obligations
for general purpose of financial statement Employees – stability and profitability
Special purpose of financial statement – used for specific - Stability- if kaya kang bayaran
purpose (hindi sakop ang conceptual framework)
- Profitability- to request for possible salary
Purpose of Conceptual Framework increase

IASB – (Accounting setting body) – thru the use of Costumers – continuity (long term relationship with
conceptual framework it develops IFRS based on suppliers)
consistent concepts.
Government – regulatory (if the company is following
Preprers of FS – to develop consistent accounting policy the regulations of the government)
for transactions
Public – various (iba ibang concern)
All parties- to understand
Objective: to provide financial information about the
Authoritative status – hanggang saan ang power – reporting entity that is useful to existing and potential
meaning investors, lenders, and other creditors in making decision

-a specific standard can overcome CF or Related Investors and lenders and other creditors – are primary
standard. users because sila ang nagbibigay ng

- Conceptual framework is not a standard (only Limitations of Financial Reporting – hindi lahat
general concept) nabibigay ng financial reporting

Underlying Assumptions (it is based on 10 accounting 1. Common needs

cycle) 2. Another user to control – this is not used to see
the value of an entity but they
1. Going concern (Continuity Assumption) – 3. Most of the amount on the fs are based on
viewed as continuing in operation indefinitely in estimation or judgement
the absence of evidence to the contrary. (Going
concern to continue he business) Qualitative characteristics of useful information
-accrued income -
Qualitative characteristics: (useful information is needed
2. Accrual Principle – addresses the recognition of
in qualitative characteristics – financial statement)
income and expenses against he cash basis
principle (u will record the transaction - Fundamental qualitative characteristics
regardless of the payment) Relevance – to make a difference in your
3. Accounting Entity concept – under this concept, decision.
the entity is viewed separately from its owners. Ingredients:
4. The period principle – under this principle, the 1. Predictive value
life of the entity is divided into a series of 2. Confirmatory value
reporting periods. (Need magreport)
- Calendar year (normal) (January 1 to December Materiality concept (aspect of looking if the info is
useful or not)
31)
- Fiscal year (can start from any day of the month - Based on relative side and not absolute
basta 1 year parin sya) - Information is useful if it provides true, correct
5. Monetary Unit Principle – bawat geographical and
area need ng basis like Philippines uses
Philippine peso. To be identifiable it needs to be Faithful representation (statefuly represented)
uniform. (No change of purchasing power of
Ingredients: completeness, neutrality (free from biased),
peso – the purchasing power is equal). (Stagnant
and free from error (narereport ng tama)
ang purchasing power)
- Ang kninikilala lang na underlying assumptions Aspect:
of CF is only the number 1
Conservatism – fs will be faithfully represented if we are Equity – is the residual interest in the assets of the entity
conservative. after deducting all of its liabilities.
Substance over form - hindi lahat ng nasa papel ay tama. - Net assets also known as equity.
Enhancing qualitative characteristics (these are Financial Performance (profitable or not the company)
characteristics that will enhance the information)
Income – is an inflow of future economic benefit that
1. Verifiable – consensual, there is agreement (the increases equity, other than contributions by owners.
observant is consensual)
2. Comparability – consistent from the previous - There is income if assets increases or there is a
year so it will be comparable. (dapat decrease in liabilities or increase of equity.
naiintindihan ng users) 2 types of income
- Fyfo method
- Weighted average method Revenue- ordinary course of business
3. Understandability – u need basic knowledge - At gross amount
4. Timeliness – the moment na need, dapat andun
- It will enhance the usefulness of the sf if it is in Gain- incidental or peripheral operations
time.
- At net amount
5. Cost Constrain- may limitation
- incidental
Chapter 3
Expense – is the decrease in economic entity during the
Tawag sa nagrereport ng FS – The reporting entity accounting
Types of financial statements:
1. Consolidated – if the parent and subsidiary did Chapter 5 Recognition and derecognition
one financial statement. (Parent company +
subsidiary/sister company) Recognition- is a term which means the process of
2. Unconsolidated/Individual – one sf for each reporting an asset, liability, income or expense on the
3. Combined – when 2 sister companies/subsidiary face of the financial statements of an entity.
(subsidiary + subsidiary) Recognition criteria:
Chapter 4: Elements of Financial Statements 1. It meets the definition of an assets, liability,
- Refers to the quantitative information shown in equity, income or expense and
2. Recognizing it would be useful information.
the statement of financial position and statement
of comprehensive income. Not useful
Quantitative Elements 1. If the asset or liability don’t have an inflow.
Financial Position (strength, or kung gaano kalakas) Expense recognition – when to recognize an expense.
Asset – resources controlled by entity from a past event - Is he application of matching principle
that brings economic entity. - Matching Principle – it requires the cost and
- Resources is not just physical expenses
- Controlled – power to govern the economic - Three application of the matching principle:
benefits and restrict to enjoy the economic - 1. Cause and effect association – if there is
benefits. related revenue then there is n expense
- Past events- cannot rise from future events 2. Systematic and Rational Allocation – cost is
- Economic benefits- pagpasok ng economic allocated to the benefit of the use through the
benefits through asests. numbers of years.
Liability – is present obligation of the entity to transfer n 3. Immediate recognition – it is okay if there is an
economic resource as a result of expense even if there is no revenue.
past event - Example: casualty loses

- Present obligation – ngayon na Chapter 6: Measurement

- To transfer- transfer of economic flow. - Is the process of determining the monetary
- Result of past events – there should be a past amounts at which the elements of the financial
transaction or events. statements of financial position and income
- Identification of the payee and certainty of statement.
liability is not requirement. You just need to - Gagamitin lang to if wala ito sa hierarchy
acknowledge to have the liability.
Entry Values: historical and current cost
Historical Coast – original cost
Current Coast – cost of an asset as of today.
Exit values: fair and value in use
Current Values:
1. Fair Value – price of an asset as of today batay
sa market.
- Not an entity specific measurement.
2. Value in Use
- If you continuously use of assets what is the
value of it.
Chapter 7: Presentation and Disclosure
Notes to disclosure- last part, what you want to say.
Effective communication makes information useful. It
requires:
1. Focusing
2. Classifying information by grouping similar
items and separating dissimilar items. (1 amount
for PPE. Property, plant and equipment)
(Aggregation – pag pinagsama sama)
Chapter 8: Concepts of Capital and Capital Maintenance