PAS 1 Presentation of Financial Statements b.

The reason for using a longer or shorter period

C The fact that amounts presented in the financial
FINANCIAL STATEMENTS - are the means by which statements are not entirely comparable
information accumulated and processed in financial
accounting is communicated to the users; structured 7. Comparative Information
financial representation of the financial position and Financial statements shall be presented with
financial performance of an entity comparative figures of the financial statements of the
preceding year.
"General purpose" financial statements are statements
that have been prepared for use by those who are not in Retrospective- looking back; Prospective-looking forward
a position to require an entity to prepare reports tailored and in the future.
to their particular needs.
8. Consistency of Presentation Presentation and
OBJECTIVE OF FINANCIAL STATEMENTS classification of financial statement items shall be
To provide information about the financial position, uniform from one reporting period to the next.
financial performance, and cash flows of an entity that is
useful to a wide range of users in making economic COMPONENTS OF FINANCIAL STATEMENTS
decisions.
1. Statement of financial position
GENERAL FEATURES of Financial Statements Formal statement showing the three elements
comprising financial position, namely assets, liabilities
1. Fair Representation and Compliance with PFRS and equity.
Faithful representation; requires an entity to select and
apply accounting policies in accordance with PFRS to Presentation of statement of financial position:
present information in a manner that provides relevant,
reliable, comparable, and understandable information, a. Classified-shows distinctions between current
and to provide additional disclosures necessary for the and noncurrent assets and current and
users to understand the entity's financial position and noncurrent liabilities
financial performance. b. Unclassified-also called based on liquidity,
shows no distinction between current and
2. Going Concern noncurrent items
Entity is viewed as continuing in operation indefinitely. If
financial statements are not prepared on a going ASSET
concern basis, this fact shall be disclosed together with Resource controlled by the entity as a result of past
the measurement basis and reason therefor. events and from which future economic benefits are
expected to flow the entity.
3. Accrual Basis of Accounting
All financial statements shall be prepared using the Essential characteristics of an asset
accrual basis of accounting except for the statement of 1. The asset is controlled by the entity
cash flows which is prepared using cash basis. 2. The asset is the result of a past transaction or event.
3. The asset provides future economic benefits
4. Materiality and Aggregation 4. The cost of the asset can be measured reliably.
An entity shall present separately each material class of
similar items. "Line items" is a class of similar items. Operating Cycle- time between the acquisition of assets
Dissimilar items are presented separately unless they for processing and their realization in cash or cash
are immaterial. Individually Immaterial items are equivalents.
aggregated with other items.
Classifications of asset
5. Offsetting
Assets and liabilities, and income and expenses, when CURRENT ASSETS
material, shall not be offset against each other.
Offsetting may be done when it is permitted by another PAS 1 paragraph 66 provides that an entity should
PFRS. classify asset as current asset when:

6. Frequency of Reporting a. The asset is cash or cash equivalent unless the asset
Financial statements are prepared at least annually.. is restricted from being exchanged or used to settle a
liability for at least 12 months after the reporting period.
When an entity changes the end of its reporting period
and presents financial statements for a period longer or b. The entity holds the asset primarily for the purpose of
shorter than one year, an entity. shall disclose: trading.

a. The period covered by the financial statements

c. The entity expects to realize the asset within twelve C. the settlement of the liability requires an outflow of
months after the reporting period. resources embodying economic benefits.

D. the entity expects to realize the asset or intends to CURRENT LIABILITIES

use or consume it within the entity's operating cycle.
PAS 1 paragraph 69 provides that an entity should
PAS 1 paragraph 54, the line items under current assets classify a liability as current when:
are (listed in order of liquidity):
A. The entity expects the liability to settle within the
A. cash and cash equivalents entity's normal operating cycle.
B. financial assets at fair value such as trading securities B. the entity holds the liability primarily for the purpose of
and other investments in quoted equity instruments. trading.
C. trade and other receivables C. the liability is due to be settled within 12 months after
D. inventories. the reporting period.
E. prepaid expenses. D. the entity does not have an unconditional right to
defer settlement of the liability for at least 12 months
NONCURRENT ASSETS after the reporting period.

PAS 1 paragraph 66 states that an entity shall classify all PAS 1 paragraph 54, the line items under current liability
other assets not classified as current as noncurrent. are:

NONCURRENT ASSETS include a. Trade and other receivables

A. PROPERTY, PLANT AND EQUIPMENT B. current provisions
PAS 16 paragraph 6, tangible assets which are held by c. Short term borrowing
an entity for use in production or supply of goods and D. current portion of long term debt
services, for rental to others, or for administrative E. current tax liability
purposes, and are expected to be used during more than
one period.

B. LONG-TERM INVESTMENTS NONCURRENT LIABILITIES

IASC defines Investment as an asset held by an entity
for the accretion of wealth through capital distribution, PAS 1 paragraph 69 states that an entity shall classify all
such as interest, royalties, dividends and rentals, for liabilities not classified as current are classified as
capital appreciation or for other benefits to the investing noncurrent.
entity such as those obtained through trading
relationships. A. noncurrent portion of a long term debt
B. finance lease liability
C. INTANGIBLE ASSETS C. deferred tax liability
An identifiable nonmonetary asset without physical D. long term obligations to company officers
substance (PAS 38). E. long term deferred revenue.

D. DEFERRED TAX ASSETS EQUITY

E. OTHER NONCURRENT ASSETS
Assets that do not fit in the definition of noncurrent Residual interest in the assets of the entity after
assets. deducting all of its liabilities.

LIABILITY Working Capital- current assets less current liabilities

Asset valuation accounts are neither assets nor

liabilities.

Present obligation of an entity arising from past events,

the settlement of which is expected to result in an
outflow from the entity of resources embodying
economic benefits.

Essential characteristics of a liability

a. The liability is the present obligation of a particular

entity The holders of instruments classified as equity are
b. The liability arises from past transaction or event.
OWNERS.
SHAREHOLDER'S EQUITy 18. Share capital and reserves

Is the residual interest of owners in the net assets of a

corporation measured by the excess of assets over
liabilities. PAS 1, paragraph 60, provides that an entity shall
present current and noncurrent assets, liabilities on the
face of the statement of financial position.

Notes to Financial Statements 2. Statement of comprehensive income

Provide narrative description or disaggregation of items COMPREHENSIVE INCOME

presented in the financial statements and information
about items that do not qualify for recognition. The change in equity during a period resulting from
transactions and other events, other than changes
Purpose: to provide the necessary disclosures required resulting from transactions with owners in their capacity
by PFRS. as owners.

FORMS OF FINANCIAL POSITION Includes:

A. REPORT FORM A. components of profit or loss

The total income less expenses, excluding the

components of other comprehensive income.
This form sets form the three major sections in a
downward sequence of assets, liabilities and equity. B. components of other comprehensive income

B. ACCOUNT FORM - The assets are shown on the left OTHER COMMPREHENSIVE INCOME
side and the liabilities and equity on the right side of the
balance sheet. Comprises items of income and expenses including
reclassification adjustments that are not recognized in
PAS 1, paragraph 54, balance sheet line items profit or loss as required or permitted by PFRS.

1. Cash and cash equivalents

2. Financial assets Components:

3. Trade and other receivables A. OCI that will be reclassified subsequently to profit or
loss when specific conditions are met.
4. Inventories
1. Unrealized gain or loss on equity investment
5. Property, plant and equipment measured at fair value through other comprehensive
6. Investment in associates accounted for by the equity Income.
method 2. unrealized gain or loss on debt investment measured
7. Intangible assets. at fair value through other comprehensive income.

8. Investment property 3. Gain or loss from translation of the financial

statements of a foreign operation.
9. Biological asset
B. OCI that will not be reclassified subsequently to profit
10. Total assets classified as held for sale and assets or loss
included in disposal group classified as held for sale
4. revaluation surplus during the year.
11. Trade and other payables
5. Unrealized gain or loss from derivative contracts
12. Current tax liabilities designated as cash flow hedge.
13. Deferred tax asset and deferred tax liability 6. "remeasurements" of defined benefit plan, including
actuarial gain or loss.
14. Provisions
7. Change in fair value attributable to credit risk of a
15. Financial liabilities
financial liability designated at fair value through profit or
16. Liabilities included in disposal group classified as loss.
held for sale
Presentation of other comprehensive income
17. Non-controlling assets
PAS 1 paragraph 82A. provides that the statement of B. Gain and loss from the derecognition of financial
comprehensive income shall present line items for asset measured at amortized cost as required by PFRS
amounts of other comprehensive income during the 9
period classified by nature. C. Finance Cost
D. Share in income or loss of associate and joint
ventures accounted for using equity method
The line items for amounts of OCI shall be grouped as E. Income tax expense
follows. F. A single amount comprising discontinued operations
G. Profit or loss for the Period
PRESENTATION OF COMPREHENSIVE INCOME H. Total Other Comprehensive income
1. TWO STATEMENTS
1. Comprehensive income for the period being the total
A. An income statement showing the components of
of profit or loss and other comprehensive income.
profit or loss.
The following items shall be disclosed on the face of the
B. A statement of comprehensive income beginning with
income statement and statement of comprehensive
profit or loss as shown in the income statement plus or
income:
minus the components of other comprehensive income
A. profit or loss for the period attributable to
2. SINGLE STATEMENT OF COMPREHENSIVE
noncontrolling interest and owners of the parent
INCOME
B. total comprehensive income for the period attributable
This is the combined statement showing the components
to noncontrolling interest and owners of the parent.
of profit or loss and components of other comprehensive
income in a single statement.
FORMS OF INCOME STATEMENT
3. Income statement
A formal statemerit showing the financial performance of
PAS 1 paragraph 99. An entity shall present an analysis
an entity for a given period of time.
of expenses recognized in profit or loss using in
classification based on either the function of expenses or
SOURCES OF INCOME
their nature within the entity, whichever provides
A. Sales of merchandise to customers
information that is more reliable and more relevant.
B. Rendering of services.
C. Use of entity resources
2 ways to present an income statement
D. Disposal of resources other than products
1. FUNCTIONAL PRESENTATION/COST OF SALES
COMPONENTS OF EXPENSE
METHOD This form classifies expenses according to
A. Cogs or cOS
their function as part of cost of sales, distribution costs,
8. Distribution costs or selling expenses
administrative activities and other activities.
C. Administrative expenses
2. NATURAL PRESENTATION/NATURE OF EXPENSE
D. Other expenses
METHOD Expenses are aggregated according to their
E. Income tax expense
nature and not allocated among the various functions
within the entity.
DISTRIBUTION COSTS
constitute costs which are directly related to selling,
PAS 1 paragraph 105
advertising and delivery of goods to customers.
Because each presentation has merit for different types
of entities, management is required to select the
ADMINISTRATIVE EXPENSES
presentation that is reliable and more relevant.
constitute cost of administering the business. These
ordinarily include all operating expenses not related to
STATEMENT OF RETAINED EARNINGS
selling and cost of goods sold.
Shows the changes affecting directly the retained
OTHER EXPENSES
earnings of an entity and relates the income statement to
are those expenses which are not directly related to the
the statement of financial position.
selling and administrative function.
Should be disclosed in the statement of retained
An entity shall not present any items of income and
earnings:
expense as extraordinary items, either on the face of the
A. Profit or loss for the period
income statement or the statement of comprehensive
B. prior period errors
income or in the notes.
C. dividends declared and paid to shareholders
D. effect of change in accounting policy
PAS 1 paragraph 82, Income statement and statement
E. appropriation of retained earnings
of comprehensive income line items.
4. Statement of changes in equity
A. Revenue
Shows the movements in the elements or components of
the shareholders equity

5. Statement of cash flows

Summarizes the operating, investing and financing
activities of an entity.
6. Notes, comprising a summary of significant
accounting policies and other explanatory notes