PFRS FOR SME’s
Q What is PFRS for SMEs?
A simplified financial reporting
A standard for smaller businesses in the
Philippines.
PFRS FOR SME’s
Q Who can use PFRS for
SMEs?
SMEs with total assets between ₱3M-
A ₱350M or total liabilities between
₱3M-₱250MQ
PFRS FOR SME’s
What must an SME do if
it chooses to use full
Q PFRS instead of PFRS for
SMEs due to an
exemption?
Disclose in the notes to its financial
A statements the reasons for using full
PFRS
IFRS for SMEs- Business combination and goodwill
Q What is Contingent
Consideration?
An adjustment to the cost of a
A business combination that depends on
future events.
IFRS for SMEs- Business combination and goodwill
What are the
Q requirements for
Recognition of Assets
and Liabilities?
The future economic benefits must be
A probable, and the fair value can be
measured reliably.
IFRS for SMEs- Business combination and goodwill
How is Goodwill
Q Measured After Initial
Recognition?
A Cost LESS accumulated amortization
and accumulated impairment losses
IFRS for SMEs- Business combination and goodwill
ABC Corp. buys XYZ Company. ABC Corp. gives
Q
P500,000 in cash, assumes P100,000 of XYZ's
liabilities, and issues shares worth P50,000. They
also pay P10,000 in legal fees for the deal. What's
the cost of the business combination?
Cost = Cash Paid + Liabilities Assumed +
Value of Shares Issued + Direct Costs
A Cost = P500,000 + P100,000 + P50,000 +
P10,000
Cost = P660,000
Reverse Acquisition
A company switcheroo where a private
Q company takes over a public one, but for
accounting, the private company is seen
as the acquirer.
A reverse acquisition
Reverse Acquisition
Q
How are consolidated financial
statements presented after a reverse
acquisition?
A Issued under the legal parent's name, but
described as a continuation of the legal
subsidiary's financial statements.
Reverse Acquisition
Q What does Non-Controlling Interest
(NCI) represent in a reverse acquisition?
The share of the legal subsidiary's equity
A not exchanged for shares of the legal
parent.
Reverse Acquisition
TechStart, a private tech company, is booming but wants to go public quickly. It decides to take over
"OldPublic," a publicly listed company.
Before the Acquisition:
Q
TechStart has 1 million shares outstanding, with a fair value of \(50 per share.
OldPublic has 5 million shares outstanding, but they're only worth \)5 per share.
The Deal:
TechStart's owners get 80% of the combined company.
OldPublic's original shareholders retain 20% of the combined company.
Questions:
[Link] company is the legal acquirer and which is the accounting acquirer?
Legal Acquirer: OldPublic (because it issues shares in the
A transaction)
Accounting Acquirer: TechStart (because it's the one really taking
over)
Reverse Acquisition
TechStart, a private tech company, is booming but wants to go public quickly. It decides to take over
"OldPublic," a publicly listed company.
Q
Before the Acquisition:
TechStart has 1 million shares outstanding, with a fair value of \(50 per share.
OldPublic has 5 million shares outstanding, but they're only worth \)5 per share.
The Deal:
TechStart's owners get 80% of the combined company.
OldPublic's original shareholders retain 20% of the combined company.
Questions:
[Link] is the fair value of TechStart (the accounting acquirer)?
A 1 million shares * 50/share = 50 million
Equity Method
Q
What happens with undervaluation or
overvaluation in the identifiable net assets of
the investee?
A The investment is adjusted for
depreciation (or amortization)!
Equity Method
Big Corp. has a 25% stake in Small Co.,
costing ₱800,000 . Small Co. reports a net
Q loss of ₱100,000 .
Question: What's Big Corp.'s investment
account balance after the loss?
Big Corp.'s share of loss = 25% of
₱100,000 = ₱25,000
A Investment account balance =
₱800,000 (initial) - ₱25,000 =
₱775,000
Equity Method
Parent Ltd. owns 30% of Sub Inc. for
₱1,500,000 . Sub Inc. declares and pays
Q dividends of ₱200,000 .
What's the impact on Parent Ltd.'s investment
account?
A
Parent Ltd.'s share of dividends = 30% of
₱200,000 = ₱60,000
Investment account decreases by ₱60,000
Business Combination- SME
Small Co., an SME, acquires 100% of Tiny Inc.,
another SME. Small Co. pays ₱500,000 in cash and
issues shares worth ₱200,000 . At the acquisition
Q date, Tiny Inc.'s identifiable assets are worth
₱600,000 , and its liabilities are ₱100,000 .
[Link] is the total consideration transferred by Small
Co.?
Total Consideration Transferred:
A Cash paid: ₱500,000
Value of shares issued: ₱200,000
Total: ₱500,000 + ₱200,000 = ₱700,000
Business Combination- SME
Small Co., an SME, acquires 100% of Tiny Inc.,
another SME. Small Co. pays ₱500,000 in cash and
Q
issues shares worth ₱200,000 . At the acquisition
date, Tiny Inc.'s identifiable assets are worth
₱600,000 , and its liabilities are ₱100,000 .
[Link] is the fair value of Tiny Inc.'s net assets?
Fair Value of Tiny Inc.'s Net Assets:
A Identifiable assets: ₱600,000
Liabilities: ₱100,000
Net assets: ₱600,000 - ₱100,000 = ₱500,000
Business Combination- SME
Small Co., an SME, acquires 100% of Tiny Inc.,
another SME. Small Co. pays ₱500,000 in cash and
issues shares worth ₱200,000 . At the acquisition
Q date, Tiny Inc.'s identifiable assets are worth
₱600,000 , and its liabilities are ₱100,000 .
[Link] the goodwill (if any) arising from the
business combination.
Goodwill Calculation:
A Goodwill = Total Consideration Transferred -
Fair Value of Net Assets Acquired
Goodwill = ₱700,000 - ₱500,000 = ₱200,000