CHAPTER 1: STATEMENT OF a.

Assets (economic resources)

FINANCIAL POSITION
b. Liabilities (economic obligations)

c. Equity
Financial Statements
d. Income
- “structured representation of an
e. Expenses
entity’s financial position and
results of its operations.” f. Contributions/Distributions to,
owners; and
- end product of financial reporting
process, information gathered and g. Cash flows
processed is periodically
- along w/notes, helps users assess
communicated to users.
the entity’s prospects for future net
- entity only and not industry where cash inflows.
entity belongs or the economy as a
Complete set of financial statements
whole.
1. Statement of financial position

2. Statement of profit or loss and OCI

General purpose financial
statements 3. Statement of changes in equity

- to meet general user needs and 4. Statement of cash flows

cannot require reports tailored to
5. Notes
their particular information needs.
a. Comparative information
- cater most of common needs of a
wide range of external users. 6. Additional statement of financial
position (if required)

General Features of financial

Purpose of financial statements
statements
1. Primary objective
1. Fair Presentation and
- provide information about the Compliance w/PFRSs
financial position, performance,
- faithful representation of events
and cashflows that is useful to wide
and transactions
range of users in making economic
decisions. - compliance w/PFRS is presumed to
result in fairly presented financial
2. Secondary objective
statements.
- to show results of management’s
- inappropriate accounting policies
stewardship over the entity’s
cannot be rectified by mere
resources.
disclosures.
To meet objective, FS provide
- PAS 1 requires FS to comply w/PFRS
information about an entity's:
(all) to make an explicit and
 unreserved statement of such a. gains/losses from sales of
compliance in the notes. assets

- PAS 1 permits a departure from b. net amount of unrealized

PFRS requirement if the relevant gains and losses, exc:
regulatory framework requires or material
allows.
c. a loss from provision net of
2. Going Concern reimbursement from a
third party.
- general rule for preparation unless
entity has an intention to liquidate 6. Frequency of reporting
or no alt. to do so.
- Prepared at least annually
- taking into account all avl.
- If reporting period is longer/shorter
Information at least 12 months
than one year, it shall disclose the
from reporting date.
ff:
- must disclose material
a. Period covered
uncertainties
b. Reason
3. Accrual Basis of Accounting
c. Fact that amounts
- FS are required to be prepared
presented are not entirely
using accrual basis except cash
comparable.
flows as it is cash basis.
7. Comparative Information
4. Materiality and Aggregation
- minimum: entity presents two of
- each material class of similar items
each of the statements and related
is presented separately.
notes.
- “line item” class of similar items
Additional Statement of financial
- dissimilar items presented position
separately unless immaterial.
- instances when it is required:
- individually immaterial items are
a. entity applies an accounting
aggregated w/other items.
policy retrospectively,
5. Offsetting makes a retrospective
restatement of items in FS, or
- assets and liabilities or income and
reclassifies items in FS.
expenses are presented separately
and not offset, unless required by b. (a) has material effect on
PRFS. financial position in beginning
of preceding period.
- permitted when it reflects
substance of the transaction, 8. Consistency of presentation
examples:
 - Presentation and classification of - highlights entity’s working capital
items in FS is retained from one and facilitates liquidity and
period to next unless change: solvency ratios.

a. is required by PFRS b. Unclassified

b. results in information is - “based on liquidity”

reliable and more relevant
- No distinction between current and
Management’s Responsibility over noncurrent items.
FS
Note:
- management is responsible for an
- PAS 1 also permits mixed
entity’s financial statements. The
presentation (some assets and
responsibility encompasses:
liabilities using current/noncurrent
a. preparation and fair portion)
presentation of FS in accordance
- Working capital = Current A. –
w/PFRSs.
Current L.
b. internal control over financial
- If normal operating cycle is not
reporting
identifiable, it is assumed to be 12
c. going concern assessment months.
d. oversight over financial - Deferred tax assets and liabilities
reporting process are always noncurrent.
e. review and approval of FS. Refinancing agreement
- Expressly stated in “Statement of - Long term obligation maturing w/in
Management’s Responsibility for 12 months after the reporting
Financial Statements,” attached to period is current, even if
FS as cover letter. Signed by: refinancing agreement is
completed after reporting period
a. Chairman of board
and before financial statements are
b. Chief Executive Officer authorized for issue.
c. Chief Financial Officer - Noncurrent if entity has the right,
at the end of reporting period, to
Presentation of Financial Position
roll over the obligation for at least
a. Classified 12 months after reporting period
under an existing loan facility.
- shows distinction between current
and noncurrent assets and Refinancing
liabilities.
- replacement of existing debt w/a
- generally used new one but w/different terms.
 - where debtor is under financial
distress “troubled debt
restructuring”

- Loan facility refers to a credit line.

Liabilities payable on demand

- Current

- current, even if lender agreed, after

reporting period and before
financial statements are authorized
for issue, not to demand payment

- Noncurrent if lender provides the

entity by end of reporting period a
grace period at least 12 months
after the reporting period.