PAS 1 PRESENTATION OF FINANCIAL STATEMENTS c.
To produce cash inflows or avoid cash
Statement of Financial Position outflows.
d. To receive cash by selling the economic
GENERAL OBJECTIVE OF FINANCIAL STATEMENTS resource.
➢ Financial Statements are directed to all common users e. To extinguish a liability by transferring
and not specific users. an economic resource.
➢ It provides information about the financial position, ➢ CURRENT ASSETS
financial performance and cash flows of an entity that is a. The asset is cash or cash equivalent unless the
useful to a wide range of users in making economic asset is restricted to settle a liability for more than
decisions. twelve months after the reporting period.
a. Assets b. The entity holds the asset primarily for the
b. Liabilities purpose of trading.
c. Equity c. The entity expects to realize the asset within
d. Income and expenses, including gains and losses twelve months after the reporting period.
e. Contributions by and distributions to owners in d. The entity expects to realize the asset or intends
their capacity as owners. to sell or consume it within the entity’s normal
f. Cash flows operating cycle.
➢ Financial Statements shall be presented at least ➢ NONCURRENT ASSETS
annually, otherwise the following are disclosed:
a. Property, plant and equipment
a. The period covered by the financial statements.
b. The reason for using a longer or shorter period. b. Long-term investments
c. The fat that amounts presented in the financial
c. Intangible assets
statements are not entirely comparable.
d. Deferred tax assets
COMPONENTS OF FINANCIAL STATEMENTS e. Other noncurrent assets
1. Statement of Financial Position • LIABILITIES
2. Income Statement - Is defined as a present obligation of an entity to
3. Statement of Comprehensive Income transfer an economic resource as a result of past
4. Statement of Changes in Equity events.
5. Statement of Cash Flows • TRANSFER AN ECONOMIC RESOURCE
6. Notes, comprising a summary of significant accounting a. Obligation to pay cash.
policies and other explanatory notes. b. Obligation to deliver goods or noncash
resources.
c. Obligation to provide services at some
STATEMENT OF FINANCIAL POSITION future time.
d. Obligation to exchange economic
• Is a formal statement showing the assets, liabilities and
resources with another party on
equity to evaluate such factors as liquidity, solvency and
unfavorable terms.
the need for additional financing.
e. Obligation to transfer an economics
• ASSETS
resource if specified uncertain future
- Is defined as a present economic resource
event occurs.
controlled by the entity as a result of past events, and
• PAST EVENT
the economic resource is a right that has the
a. An entity has already obtained
potential to produce economic benefits.
economic benefits.
• RIGHTS
b. An entity must transfer an economic
a. Rights that correspond to an obligation
resource.
of another entity.
➢ CURRENT LIABILITIES
b. Rights that do not correspond to an
a. The entity expects to settle the liability within the
obligation of another entity.
entity’s normal operating cycle.
c. Rights established by contract or
b. The entity holds the liability primarily for the
legislation.
purpose of trading.
• POTENTIAL TO PRODUCE ECONOMIC
c. The liability is due to be settled within twelve
BENEFITS
months after the reporting period.
a. To receive contractual cash flows
d. The entity does not have a right to defer
b. To exchange economic resources with
settlement of the liability for at least twelve
another party on favorable terms
months after the reporting period.
➢ NONCURRENT LIABILITIES NOTES TO FINANCIAL STATEMENTS
a. Noncurrent portion of long-term debt
• It provides narrative description or disaggregation of
b. Finance lease liability
items presented in the financial statements that do not
c. Deferred tax liability
qualify for recognition, and necessary disclosures
d. Long-term obligations to company officers
required by Philippines Financial Reporting Standards
e. Long-term deferred revenue
(PFRS).
• EQUITY
➢ RECOGNITION
- Is the residual interest in the assets of the entity after
- It is the process of capturing for inclusion in the
deducting all of its liabilities or simply “net assets”.
financial statements an item that meets the
a. Owner’s equity in proprietorship
definition of an asset, liability, equity, income or
b. Partner’s equity in a partnership
expense; and is reported as carrying amount.
c. Stockholders’ equity or shareholders’ equity in
➢ DERECOGNITION
a corporation
- The removal of all or part of a recognized asset or
➢ SHAREHOLDERS’ EQUITY
liability from the statement of financial position.
- Is the residual interest of owners in the net assets of
a corporation measured by the excess of assets over
liabilities. FORMS OF STATEMENT OF FINANCIAL POSITION
- The elements constituting shareholders’ equity with
a. REPORT FORM
their equivalent IAS term are:
- Sets forth the three major sections in a downward
PHILIPPINE TERM IAS TERM sequence of assets, liabilities, and equity.
Capital stock Share capital b. ACCOUNT FORM
Subscribed capital stock Subscribed share capital - The presentation follows that of an account, where
Preferred stock Preference share capital the assets are shown on the left side and the
Common stock Ordinary share capital liabilities and equity is on the right side.
Additional paid capital Share premium
Retained earnings (deficit) Accumulated profit (losses)
Retained earnings appropriated Appropriation reserve LINE ITEMS IN STATEMENT OF FINANCIAL POSITION
Revaluation surplus Revaluation reserve
• PAS 1, paragraph 54, states that as a minimum, the face
Treasury stock
of the statement of financial position shall include the
following line items:
1. Cash and cash equivalents
• CURRENTLY MATURING LONG-TERM DEBT
2. Financial asset (other than 1,3 & 6)
- A liability is due to be settled within twelve months
3. Trade and other receivables
after the reporting period is classified as current,
4. Inventories
even if:
5. Property, plant and equipment
a. The original term was for a period longer than
6. Investment in associates accounted for by the equity
twelve months.
method
b. An agreement to refinance or to reschedule
7. Intangible assets
payment on a long-term basis is completed
8. Investment property
after the reporting period, the obligation is
9. Biological assets
classified as noncurrent liability.
10. Total of asset classified as held for sale and assets
➢ COVENANTS
included in disposal group classified as held for sale.
- Are restrictions on the borrower as to undertaking
11. Trade and other payables
further commitments; if certain conditions are
12. Current tax liability
breached, the liabilities become payable on
13. Deferred tax asset and deferred tax liability
demand:
14. Provisions
a. CURRENT
15. Financial liabilities (other than 11 & 14)
- Not complied with at the reporting date. 16. Liabilities included in disposal group classified as held
b. NONCURRENT for sale
- Complied with at the reporting date. 17. Noncontrolling interest
18. Share capital and reserves
- Complied with after the end of the reporting period
does not affect the classification of the liability at the
end of current reporting period. However, an entity
shall disclose information about noncurrent
liabilities subject to future covenants.
PAS 1 PRESENTATION OF FINANCIAL STATEMENTS • ADMINISTRATIVE EXPENSES
An Introduction; Income Statement - Constitute costs of administering the business.
a. Doubtful accounts
INCOME STATEMENT
b. Office salaries
• A formal statement showing the financial performance c. Expenses of general executives
of an entity for a given period of time. d. Expenses of general accounting and credit
a. INCOME department
- Increases in assets or decreases in liabilities that e. Office supplies used
result in increases in equity, other than those relating f. Certain taxes
to contributions from equity holders. g. Contribution
b. EXPENSE h. Professional fees
- Decreases in assets or increases in liabilities that i. Depreciation of office building and office
result in decreases in equity, other than those equipment
relating to distributions to equity holders. j. Amortization of intangible assets
➢ FINANCIAL PERFORMANCE • OTHER EXPENSES
- Is primarily measured in terms of the level of income - Those expenses which are not directly related to the
earned by the entity through the effective and selling and administrative function.
efficient utilization of its resources. a. Loss on sale of trading investment
- Also known as the results of operations of an entity. b. Loss on disposal of PPE
c. Loss on sale on NC investment
• TRANSACTION APPROACH
d. Casualty loss — flood, earthquake, fire
- The traditional preparation of income
➢ NO MORE EXTRAORDINARY ITEMS
statement in conformity with accounting
- PAS 1, paragraph 87, specifically mandates that an
standard. entity shall not present any items of income and
• CAPITAL MAINTENANCE APPROACH expenses as extraordinary either on the face of the
- The net income occurs only after the capital income statement or statement of comprehensive
used from the beginning of the period is income or in the notes.
maintained.
COST OF GOODS SOLD OF MERCHANDISING CONCERN
a. FINANCIAL CAPITAL
- Capital is synonymous with net assets Beginning inventory 500,000
or equity of the entity based on Net purchases 2,000,000
historical cost. Goods available for sale 2,500,000
b. PHYSICAL CAPITAL Ending inventory (300,000)
Cost of goods sold 2,200,000
- The quantitative measure of the
========
physical productive assets to produce
Gross purchases 1,900,000
goods and services, and requires to be
Freight in 150,000
measured at current cost, rather than
Total 2,050,000
historical cost. Purchase returns & allowance (20,000)
➢ SOURCES OF INCOME Purchase discounts. (30,000)
a. Sales of merchandise to customers Net purchases. 2,000,000
b. Rendering of services ========
c. Use of entity resources COST OF GOODS SOLD OF MANUFACTURING CONCERN
d. Disposal of resources other than products
Beginning raw materials 500,000
➢ COMPONENTS OF EXPENSE
Net purchases 2,000,000
a. Cost of goods sold or cost of sales
Raw materials available for use 2,500,000
b. Distribution costs or selling expenses
Ending raw materials (300,000)
c. Administrative expenses
Raw materials used 2,200,000
d. Other expenses
Direct labor 3,000,000
e. Income tax expense
Factory overhead 1,500,000
➢ CLASSIFICATIONS OF EXPENSES
Total manufacturing cost 6,500,000
• DISTRIBUTION COSTS
Beginning goods in process 900,000
- Constitute costs which are directly related to selling,
Total cost of goods in process 7,400,000
advertising and delivery of goods to customers.
Ending goods in process (1,000,000)
a. Salesmen’s salaries
Cost of goods manufactured 6,400,000
b. Salesmen's commission
c. Traveling and marketing expenses Beginning finished goods 1,600,000
d. Advertising and publicity Goods available for sale 8,000,000
e. Freight out Ending finished goods (1,500,000)
f. Depreciation of delivery equipment and store Cost of goods sold 6,500,000
equipment ========
➢ FORMS OF INCOME STATEMENT ➢ STATEMENT OF COMPREHENSIVE INCOME
a. FUNCTIONAL PRESENTATION - The change in equity during a period resulting from
- Classifies expenses according to their function as transactions and other events, other than changes
part of cost of goods sold, distribution costs, resulting from transactions with owners in their
administrative expenses and other expenses. capacity as owners:
- Also known as cost of goods sold method. a. Components of profit or loss or income and
YANIE COMPANY expenses affecting net income.
Income Statement b. Components of other comprehensive income.
Year ended December 31, 2025 • PROFIT OR LOSS
- The total of income less expenses, excluding the
Note components of other comprehensive income, or
Net sales (1) 9,000,000
simply “net income” or “net loss”.
Cost of goods sold (2) (5,400,000)
Gross income 3,600,000 • OTHER COMPREHENSIVE INCOME
Other income (3) 900,000 - Comprising income or expenses that are recognized
Investment income (4) 500,000 in profit or loss or in traditional presentation of
Total income 5,000,000 income statement.
Expenses: ➢ COMPONENTS OF OCI
Distribution costs (5) 1,350,000
1. Unrealized gains or loss on debt investment
Administrative expenses (6) 1,000,000
Other expenses (7) 320,000 measured at fair value through OCI.
Finance cost (8) 200,000 (2,870,000) 2. Unrealized gains or loss on equity investment
Income before tax 2,130,000 measured at fair value through OCI.
Income tax expenses 580,000 3. Gains or loss from translation of financial statements
Net income 1,550,000 of a foreign operation.
========= 4. Revaluation surplus during the year.
Notes are the aggregation of the elements that have
5. Unrealized gains or loss on derivative contract
similar or shared characteristics and are included in
the same classification. designated as cash flow hedge.
6. Remeasurement of define benefit plan including the
[Link].
Gross NATURAL PRESENTATION 9,300,000
actuarial gains or loss.
- Expenses are aggregated according to their nature
SRA ( 100,000) 7. Change in fair value attributable to credit risk of the
and not allocated among the various functions
Sales discount
within an entity. ( 200,000) financial liability designated at fair value through
- It is also referred to as the nature of expense profit or loss.
Net sales. 9,000,000
method. LINE ITEMS
========
YANIE COMPANY • PAS 1, paragraph 82, states that as a minimum, the
Income Statement income statement and statement of comprehensive
Year ended December 31, 2025 income shall include the following line items:
1. Revenue
Note
2. Gain or loss from the derecognition of financial asset
Net sales (1) 9,000,000
measured at amortized cost as required by PFRS 9.
Other income (2) 900,000
Investment income (3) 500,000 3. Income and expenses from insurance and reinsurance
Total income 10,400,000 contract.
Expenses: 4. Finance income and expenses from insurance and
Increase in inventory (4) ( 500,000) reinsurance contract.
Net purchases (5) 5,900,000 5. Finance cost
Employee benefit costs (6) 1,400,000
6. Share in income or loss of associate and joint venture
Sales commission 180,000
Advertising 100,000 accounted for using the equity method.
Supplies expense (7) 120,000 7. Gain or loss on the reclassification of financial asset from
Delivery expense 250,000 amortized cost to fair value profit or loss.
Depreciation (8) 240,000 8. Gain or loss on the reclassification of financial asset from
Taxes and license 20,000 fair value other comprehensive income to fair value profit or
Doubtful accounts 40,000 loss.
Other expenses (9) 320,000
9. Gain or loss from extinguishment of a financial liability by
Finance cost (10) 200,000 (8,270,000)
issuing equity instrument as required by IFRIC 19.
Income before tax 2,130,000
10. Income tax expense
Income tax expense (580,000)
11. A single amount comprising discounted operation
Net income 1,550,000
======== 12. Net income or net loss for the period
Notes are the aggregation of the elements that have 13. Total other comprehensive income
similar or shared characteristics and are included in 14. Comprehensive income for the period being the total of net
the same classification. income or net loss and other comprehensive income.
SRA ( 100,000)