Professional Documents
Culture Documents
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When an entity departs from a standard, entity should disclose the ff:
Management has concluded that FS is fairly presented
It has complied with applicable standards and interpretation, except that it has departed
from a particular requirement to achieve fair presentation.
The title of the standard or interpretation from which entity has departed. The treatment
adopted
Financial impact of the departure on each item that would have been reported in
complying with the requirement
Going concern is relevant when mgt shall make an estimate of the expected outcome of
future events, such as recoverability of AR and useful life of noncurrent assets
Uncertainties regarding the ability of the entity to continue as a going concern shall be
fully disclosed
Investment income is presented separately in the income statement
Materiality is relativity and nature of an item(bribe)
Expenditure related to a provision and any reimbursement from a third party can be offset
and only the net expenditure is presented as expense in the income statement
Offsetting can be displayed when gains and losses from trading securities are netted
against each other
Entity shall disclose comparative information in respect of the previous period for all the
amounts reported in the current periods financial statements
The outcome of uncertain events at the end of the preceding period and is yet to be
resolved, are disclosed in the current period ( legal dispute). Users shall benefit from
information that an uncertainty existed at the end of the immediately preceding period,
and steps have been taken during the current period to resolve the uncertainty.
When entity makes retrospective restatement, 3 statement of FS shall be presented: end of
the current period, previous period, beginning of the earliest comparative period.
Financial structure-source of financing for assets. Indicates how profits and cash flows
will be distributed between creditors and owners
Financial flexibility- use its available cash for unexpected requirements and investment
opportunities or raise cash through borrowing and sale of securities or sale of assets
without disrupting normal operations.
Cash equivalents are held for the purpose of meeting short-term cash rather than for
investment purposes
In cash equivalents, what is important is the date of purchase which should be 3 months
or less before maturity
Financial asset held for trading or trading securities
Nontrade receivable should be classified as current asset if collectible within 1 year,
operating cycle notwithstanding
Current assets:
Cash and cash equivalents
Held for trading
Expected to be realized within 12months(nontrade receivables)
Realized, sold, or consumed(trade receivable, inventory, prepayments)
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An entity whose financial statements comply with PFRS shall make an explicit and
unreserved statement of such compliance in the notes.
An entity cannot rectify inappropriate accounting policies either by disclosure of the
accounting policies used or by notes or explanatory information
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Noncurrent liabilities:
Noncurrent portion of a long-term debt
Finance lease liability
Deferred tax liability
Long-term obligations to entity officers
Long-term deferred revenue\
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Control is the power to govern the financial and operating policies of an entity
Affiliates- parent, subsidiaries, fellow subsidiaries
Key management personnel-POSDICON
Close family members of individual are related parties
Related party transactions and outstanding balances are eliminated in the preparation of
Consolidated FS
Accounting recognition of a transfer of resources is normally based on the price agreed
upon between the parties. Between unrelated parties, there may be a degree of flexibility
in the price setting process
Close family members of an individual includes the spouse, children and dependents.
Adjusting events:
Bankruptcy of customers
Sale of inventories gives evidence about NRV
Nonadjusting:
Business combination after the reporting period
Plan to discontinue an operation
Abnormally large changes in asset price and foreign exchange rates
Change in tax rate enacted
An entity shall disclose the date when the FS are authorized for issue and who gave the
authorization
If the entitys owners or others have the power to amend the FS after issue, entity shall
disclose such fact
Development stage entity shall disclose cumulative net losses with a descriptive title,
deficit accumulated during the development stage in SHE
Comprehensive income includes:
profit/loss
other comprehensive income
Profit or loss is the bottom line in the traditional income statement
Other comprehensive income comprises items of income and expenses including
reclassification adjustments that are not recognized in profit/loss
Unrealized gains/loss on investment in equity instruments measured at fair value through
other comprehensive income
Gain/loss from translating the FS of a foreign operation
Change in revaluation surplus
Unrealized gain/loss from derivative contracts designated as cash flow hedge
Actuarial gains or loss on defined benefit plan in accordance with the full recognition
approach
Reclassification adjustments are amounts reclassified to profit/loss in the current period
that were recognized in other comprehensive income in the current or previous periods.
Two options for presenting comprehensive income:
Two statements
Income statement-components of profit or loss
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A noncurrent asset or disposal group is classified as held for sale if its carrying amount
will be recovered principally through a sale transaction rather than continuing use.
The group includes goodwill acquired in a business combination if the group is a CGU to
which the goodwill belongs.
An extension of the 1 year period does not preclude the asset or disposal group from
being classified as held for sale if the delay is caused by events or circumstances beyond
the entitys control and there is sufficient evidence that the entity remains committed to
its plan to sell the asset.
Any cost to sell at classification date should be recognized as impairment loss for the
period and deducted from the asset held for sale
A plant is temporarily abandoned if a plant is maintained in workable condition and it is
expected that it will be brought back into use if demand picks up.
An entity shall measure a noncurrent asset that ceases to be classified as held for sale at
the lower of carrying amount that would have been recognized if the asset had not been
classified as held for sale and recoverable amount at the date of subsequent decision not
to sell.
The assets and liabilities of the group shall be presented separately and cannot be offset
as a single amount (e.g. noncurrent asset classified as held for sale and liabilities directly
associated with noncurrent assets held for sale)
A discontinued operation is defined as a component of an entity that either has been
disposed of or is classified as held for sale and: (1) represents a separate major line of
business (2) Is part of single coordinated plan to dispose assets (3) Is a subsidiary
acquired exclusively with a view to resale.
A component of an entity may be subsidiary, a major line of business or geographical
segment whose operations and cash flows can be clearly distinguished operationally from
the rest of the entity. It can be clearly distinguished if its assets, liabilities, etc are directly
attributable to the component and it is directly attributable if they would be eliminated
when the component is disposed of.
A discontinued operation occurs when the operations and cash flows of that component
have been or will be eliminated from the ongoing operations of the entity and the entity
will have no significant continuing involvement in that component after its disposal
PFRS 5 prohibits the retroactive classification as a discontinued operation when the
discontinued criteria are met after the end of the reporting period.
Discontinued operation is accounted for as a disposal group classified as held for sale
The results of discontinued operation, net of tax including impairment loss, gain or loss
from actual disposal and termination cost shall be presented as a single amount in the
income statement below the income from continuing operations.
If a disposal group is classified as held for sale in the current year, the results of the
disposal group fro prior period shall be represented as relating to discontinued operation
in the comparative income statement
If a disposal group is classified as held for sale in the current year, an entity shall not
reclassify or represent the assets and liabilities of the disposal group for the prior period.
Presentation of the assets and liabilities of the disposal group in the prior period is not
changed.
The net cash flows attributable to the activities of the discontinued operation shall be
separately presented in the statement of cash flows or disclosed in the notes.
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115. The method of accounting for income tax and the recognition of commission and
warranty cost based on sales is an application of the integral view.
116. Direct cost and revenue are best accounted for as incurred and earned which equates
an independent view. On the other hand, Indirect costs are more likely to require an
allocation process which is suggestive of integral view.
117. PAS34 allows an entity to publish a set of condensed financial statements or
complete set of financial statements
118. Condensed means that each of the headings and subtotals presented in the entity's
most recent annual financial statement is required but there is no requirement to include
greater detail unless this is specifically required by PAS34
119. PAS 34 assumes that financial statement users have an access to the entity's most
recent annual report so it is a superfluity to provide the same notes in the interim financial
report.
120. At interim date, it would be meaningful to provide only an explanation of the events
and transactions that are significant to the understanding of the changes in financial
position and financial performance since the last annual reporting.
121. Presentation of comparative interim statements for income and comprehensive
statement is current and cumulatively (6 months ending and 3 months ending).
Presentation for changes in equity and cash flows is cumulatively only.
122. Major repairs, year-end bonuses, insurance, property taxes and depreciation are
allocated. The essence is that, an expense should be allocated to the four quarters if it
clearly benefits the interim periods.
123. Depreciation and amortization for an interim period shall be based only on assets
owned during the interim period
124. Paid vacation and holiday leave shall be accrued for interim purposes because these
are enforceable as legal commitments.
125. Gains or losses shall not be allocated.
126. Many entities diversified their operations to spread the risks of investment over a
number of industries and product lines to reduce dependence on any one set of suppliers
and customers.
127. The different industry segments in effect operate as separate entities within an
overall corporate umbrella.
128. Segment reporting is the disclosure of certain financial information about the
products and services an entity produces and the geographical areas in which an entity
operates. This is to enable investors and users make better assessment of each business
activity leading to the understanding of the performance of the entity as a whole.
129. One segment may be performing well and others may not. It becomes then necessary
to not only report total performance but also the individual performance.
130. Segment information is only required in the consolidated financial statements.
131. To be classified as operating segment(distinguishable component), separate financial
information must be available about the segment and its operating results shall be
regularly reviewed by a chief decision maker.
132. Chief operating decision maker is the one responsible for the allocation of resources
and assessing the performance of operating segments. It may be the CEO, COO or a
group of executive officers.
133. Operating segments are identitfied using the management approach. It means that
operating segments are identified based on the components of the entity that are
considered to be important for internal management reporting.
134. Reportable segment should meet any of the two quantitative thresholds: (1) segment
revenue should be atleast 10percent of the combined revenue of all operating segments
(2) absolute amount of profit or loss should be atleast 10percent of the greater between
the combined profit of all operating segments that reported a profit and combined loss of
all operating segment that reported a loss. (3) the assets of the segment are 10 percent or
more of the combined assets of all operating segments.
135. Even if a segment does not meet any of the quantitative thresholds, it can still be
reported or separately disclosed if management believes that information about the
segment would be useful to the users of the financial statements.
136. The total external revenue of the reportable operating segments should constitute 75
percent of the total external revenue of the segments. If the reportable segments do not
meet the 75 percent criteria, additional segments which have majority common
characteristics should be lumped into one reportable segment and included in the
reportable segments to satisfy the 75 percent criteria.
137. PFRS 8 suggests that if the number of reportable segments exceeds ten, it is likely
that the information may become too detailed and consequently lose its usefulnes, thus,
an entity shall consider whether a practical limit has been reached in the number of
segments reported.
138. Whenever a reportable segment no longer meets the 10percent quantitative
threshold, it will still be continued to be reported separately if management considers the
segment of continuing significance.
139. If an operating segment becomes reportable in the current period, the segment data
in the prior period shall be restated to reflect the newly reportable segment for
comparative purposes.
140. Prior period segment information shall not be restated if the necessary information is
not available and the cost to develop it would be excessive.
141. An entity shall disclose the general information, information about profit/loss,
segment assets and liabilities, and reconciliations for each reportable operating segment.
142. An entity shall disclose a measure of profit/loss under all circumstances while the
measure of segment assets and liabilities shall only be disclosed if such amount is
regularly provided to the chief operating decision maker.
143. The amount of segment revenue and expense, and segment assets and liabilities
disclosed for a reportable segment shall be the measure reported to the chief operating
decision maker.
144. The items to be disclosed must be specified in PFRS 8 and are included in the
measurement or regularly reported to the chief operating decision maker.
145. Entity-wide disclosures or additional information that should be disclosed if it is not
provided as part of the reportable segment information: (1) products and services (2)
geographical areas (3) major customers
146. A major customer is defined as a single external customer accounting for 10 percent
or more of an entitys external revenue
147. The entity shall disclose only its reliance on major customers, the total amount of
revenue from major customers and the identity of the segment(s) reporting the revenue.
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