Sai

ntPaulSchoolofBusi
nessandLaw
Campeti
cRoad, Pal
o,Ley
te
THEORYOFACCOUNTS j
procabo,
CPA

CONCEPTUALFRAMEWORK

FI
NANCIALACCOUNTI NG
- Provi
deinformati
on(
fi
nanci
al)
.
- Usedfor“decisi
onmaki
ng”.

COMPONENTSOFFI
NANCI
ALACCOUNTI
NG

A.I
denti
fyi
ng
 theanalyt
ical
component
.
 “recogni
ti
onornonr
ecogni
ti
onofbusi
nessact
ivi
ti
esasACCOUNTABLEev
ent
s.”

Not
e:anev
enti
saccount
abl
eifi
thasanef
fectonAsset
s,Li
abi
l
iti
esandequi
ty.

B.Measur
ing
 t hetechni
calcomponent
.
 “ theassi
gningofpesoamount
stot
heaccount
abl
eeconomi
ctr
ansact
ionsandev
ent
s.

Note:t
hemeasur
ementbasi
susedar
eHi
stor
icalcost
,cur
rentcost
,real
i
zabl
eval
ueand
pr
esentval
ue.

C.Communi cati
ng
 t hef or
mal component
.
 “ theprocessofprepar
inganddi
str
ibut
ingaccount
ingr
epor
tst
opot
ent
ial
user
sof
account i
nginf
ormati
on.

Not
e:I
mpli
citi
nthecommunicat
ionpr
ocessaret
heRECORDI
NG,
CLASSI
FYI
NGand
SUMMARIZINGaspect
sofaccount
ing.

 RECORDI NG
-theprocessofsy
stematical
l
ymai
ntai
ningr
ecor
dsofal
lbusi
nesst
ransact
ions.
-alsoknownasjournal
i
zing.

 CLASSI
FYING
-t
hegroupi
ngofsimi
laract
ivi
tiesi
ntothei
rrespect
ivecl
asses.
-t
hisi
saccompli
shedbypostingtotheledger.

 SUMMARIZING
-t
hepr
eparati
onoff
inanci
alst
atement
s.

MAI
NAREASOFACCOUNTI NG
1.Publ
icAccount
ing
-composedofindi
vi
dual
pract
it
ioner
sandf
ir
mswhor
enderser
vicest
othepubl
i
cforaf
ee.

2.Pri
vat
eAccount
ing
-composedofi
ndi
vidual
pract
it
ioner
swhoar
eempl
oyedi
npr
ivat
ebusi
nessent
it
ies.
Page1of1
 3.Gover
nmentAccounti
ng
- composedofi
ndiv
idualpracti
ti
onersandfi
rmswhor
enderser
vicest
othegov
ernmentsuch
ascust
odyandadminist
rationoffunds.

UNDERLYI
NGASSUMPTI ONSINACCOUNTI NG
1.Accr ual
-meanst hati
ncomeisrecogni
zedwhenearnedr
egar
dlessofwhenr
ecei
vedandexpensei
s
recogni
zedwhenincurr
edregardl
essofwhenpai
d.

2.GoingConcern
-meanst hati
ntheabsenceofev
idencet
othecont
rar
y,t
heent
it
yisv
iewedascont
inui
ngi
n
operat
ionindef
ini
tel
y.

Not
e:goi
ngconcer
nist
hef
oundat
ionof“
costpr
inci
ple.
”

3.Account
ingenti
ty
-undert
hisassumption,
theent
it
yissepar
atef
rom t
heowner
s,manager
s,andempl
oyees
whoconstit
utetheenti
ty.

4.Ti
meperiod
-r
equi
resthatt
heli
feofanent
it
yissubdi
vi
dedi
ntot
imeper
iodsoraccount
ingper
iodswhi
ch
ar
eusuall
yofequall
engt
h.

5.Monet
aryuni
t
-hast
woaspect
s,QUANTI
FIABI
LITYandSTABI
LITYOFPESO.

Quanti
fi
abi
li
ty
-meansthatasset
s,l
i
abi
li
ti
es,capi
tal
,i
ncomeandexpensesbest
atedi
nter
msofauni
t
ofmeasurewhichi
sthePhi
li
ppinepeso.

St
abil
it
yofPeso
-meansthatpurchasingpoweroft
hepesoisst
abl
eorconst
antandt
hati
tsi
nst
abi
l
ityi
s
i
nsi
gnif
icantandtherefor
emaybeignored.

CONCEPTUALFRAMEWORK
-I sasummar yoft
hetermsandconceptsthatunder
li
etheprepar
ati
onandpr
esent
ati
onof
fi
nanci
alstat
ements.
- Concernedwi t
hgeneral
-pur
posef
s(incl
udingconsofs)t
hatisdi
rect
edtot
hecommonneedsof
awiderangeofusers

USERSANDTHEI RINFORMATI ONNEEDS

 I
nvestors
-theproviderofri
skcapit
al,
areconcer
nedwi
ththeri
skinher
enti
nandt heret
urnpr
ovi
dedby
thei
rinvestment.Theyneedinf
ormati
onwhet
hertheyshoul
dbuy,hol
d,orsell
.

 Employees
-interest
edini
nformat
ionaboutt
hestabi
li
tyandprof
itabi
l
ityoft
heenti
ty.Theyar
einterested
ininformati
onwhichenabl
esthem t
oassesstheabil
i
tyoftheenti
tyt
oprov i
deremuneration,
reti
rementbenefi
tsandopport
uni
ti
es.
Page2of2
  Lenders
-areint
erest
edini
nformat
ionwhi
chenabl
est
hem t
odet
ermi
newhet
hert
hei
rloansand
i
nterestt
hereonwi
llbepai
dwhendue.

 Suppl
i
ersandtradeCredi
tors
-i
nter
estedini
nformati
onwhi
chenabl
est
hem t
odet
ermi
newhet
heramount
sowi
ngt
othem
wil
lbepaidonmat ur
it
y.

 Customers
-int
erestedini
nfor
mati
onaboutt hecont
inuanceoft
heent
it
yespeci
all
yift
heyhav
eal
ong
terminvolvementwi
thordependentontheentit
y.

 Gov
ernmentsandt hei
ragencies
-int
erestedintheal
locati
onofresourcesandt heref
oretheacti
vi
ti
esoftheenti
ty.These
usersrequir
einfor
mat i
ontoregulat
et heacti
vi
tiesoftheenti
ty,
deter
minetaxat
ionpolici
es
andasabasi sofnationali
ncomeandsi mi
larstati
sti
cs.

 Publi
c
-i
nter
estedi
ninformat
ionespeci
all
yiftheentit
yaffectmember
soft hepubl
i
cinav
ari
etyof
ways.Exampl
eiftheenti
tyhassubstanti
alcontr
ibuti
onsi
ntheeconomy.

BASI
SPURPOSEOFCONCEPTUALFRAMEWORK

1. AssisttheFRSCi ndevelopingaccounti
ngstandardst
hatwillr
epresentPhil
ippineGAAP.
2. Assistprepar
ersofFSi napplyingaccounti
ngstandar
dsandi ndeali
ngwi t
hi ssuesnoty
et
coveredbyGAAP.
3. AssisttheFRSCi nit
srev i
ewandadopt ionofIFRS.
4. AssistusersofFSininterpreti
ngtheinf
ormationcont
ainedintheFS.
5. Assistaudit
orsinforminganopi ni
onast owhetherFSconformst oPhil
i
ppineGAAP.

Note:concept
ualfr
amewor ki
snotaPFRS.Nothingi
nthi
sfr
amewor
kov
err
idesanyspeci
fi
cPFRS.I
n
caseofconfli
ct,
therequi
rementofPFRSpr
evai
ls.
SCOPEOFCONCEPTUALFRAMEWORK

1.C-onceptsofcapit
alandcapital
maintenance.
2.O-bj
ect i
veofFS.
3.Q-ual
itati
vechar
acteri
sti
csthatdet
erminetheusef
ulnessofi
nfor
mat
ioni
n FS.
4.E-l
ement sofFS(def
ini
ti
on,r
ecognit
ionandmeasurement )
.

Note:conceptualfr
amewor kappl
iestotheFSofallcommerci
al,i
ndustr
ialandbusinessrepor
ti
ng
ent
iti
es,whetherpublicorpri
vat
esector.However
,speci
alpur
poseFS( ex.Prospectusesand
computati
onspr eparedfort
axati
on)areoutsi
dethescopeoftheframewor k.

OBJECTIVEOFFINANCI
ALSTATEMENTS
-Topr
ovidei
nfor
mat
ionaboutt
hefi
nanci
ali
nformati
onaboutt
hef
inanci
alposi
ti
on,
per
formanceand
cashfl
owsofanent
it
ythati
susef
ultoawiderangeofuser
sinmaki
ngeconomicdeci
sions.

-
FSal
soshowt her
esult
softhest
ewar
dshi
pofmanagementort
heaccount
abi
l
ityofmanagement
f
ort
heresour
cesentr
ustedt
oit.
Page3of3
 Note:managementhast
hepri
maryr
esponsi
bil
i
tyf
ort
hepr
epar
ati
onandpr
esent
ati
onoft
he
f
inanci
alst
atementsoft
heent
it
y.

Fi
nanci
alPosi
ti
on
- Compr i
sesi
tsassets,l
i
abil
it
ies,andequi
tyatapart
icul
arti
me.I
tpert
ainstotheeconomic
r
esour
ces,l
iqui
dit
y,sol
vency,f
inanci
alst
ruct
ureandcapaci
tyf
oradaptat
ionofanentit
y.

Fi
nanci
alPerf
ormance
- Compr i
sesit
srevenue,
expenses,
andneti
ncomeorl
ossf
oraper
iodoft
ime.

CashFlows
-I nformati
onaboutt
hecashf
lowsisusef
uli
nordert
oassesst
heoper
ati
ng,
inv
est
ingand
f
inanci
ngacti
vi
ti
esoft
heenti
tydur
ingaper
iod.

ACCOUNTI
NGCONCEPTS
1.Ent
ityTheory-t
heaccounti
ngobject
ivei
sgear
edtowardpr
operi
ncomedet
ermi
nat
ion.Pr
oper
matchingofcostagai
nstr
evenueistheul
ti
mateend.

Asset
s=Li
abi
l
iti
es+Equi
ty

2.Pr
opr
iet
aryTheor
y-t
heaccount
ingobj
ect
ivei
sdi
rect
edt
owar
dpr
operv
aluat
ionofasset
s.

Asset
s–Li
abi
l
iti
es=Equi
ty

3.Resi
dualEqui
tyTheor
y-t heaccounti
ngobj
ecti
veispr
operv
aluati
onofasset
s.Thi
sisappl
i
cabl
e
wheret
herearetwoclassesofsharehol
der
s,ordi
nar
yandpref
erence.

Asset
s–Li
abi
l
iti
es–Pr
efer
enceShar
ehol
der
s’Equi
ty=Or
dinar
yShar
ehol
der
s’Equi
ty

4.FundTheory-t
heaccounti
ngobjecti
vei
snei
therproperi
ncomedet ermi
nati
onnorpr
oper
val
uati
onofasset
sbutthecustodyandadmi
nistr
ationoffunds.Exampl
e,gover
nment
account
ingandfi
duci
aryaccount
ing.

Fund=cashi
nfl
ows–cashout
fl
ows

FI
NANCIALREPORTI NG
- Encompassesnotonl yFSbutal soothermeansofcommuni cat
ingi
nf or
mat i
onthatrelat
es
di
rectl
yorindirectl
ytothefinancialaccounti
ngpr ocess.
- Themai nproductisthef i
nancial r
eport
s,whichincludesfinanci
alhighli
ghts,summar yof
i
mpor t
antf i
nancialfi
gures,analysi
soffinanci
alstatementsandsi gnifi
cantrati
os.Al
soi ncl
udes
nonfi
nanciali
nformat i
onsuchasdescr i
ptionofmaj orproductsandl i
sti
ngofcor por
ateof f
icer
s
anddirect
ors.

OBJECTI
VEOFFINANCIALREPORTING
1.Topr
ovi
deinf
ormati
onusefuli
ninvestment
,credi
tandsimilardecisi
on.
2.Topr
ovi
deinf
ormati
onusefuli
nassessingcashfl
owpr ospects.
3.Topr
ovi
deinf
ormati
onaboutenti
tyresour
cesclai
mst othoser esour
cesandchangesi
nthem.

Page4of4
QUALI
TATIVECHARACTERI STICS
- Thequal it
iesorattri
butesthatmaket hefi
nanci
alaccounti
nginformat i
onusefult
ot heuser
s.
- Qual i
tat
ivecharacteri
sti
csthatrel
atetothecontentofthefi
nancialstatementsaretherel
evance
andreli
abil
it
y.Thesear ethepri
mar ychar
acteri
sti
cs.
- Qual i
tat
ivecharacteri
sti
csthatrel
atetothepresentat
ionofthefinancialst
atementsarethe
underst
andabil
ityandcompar abil
i
ty.Thesearethesecondaryqualit
ies.

Rel
evance
- Meanst hecapacit
yofinformati
ontomakeadi ff
erenceinadecisi
onbyhelpi
ngusersform
predict
ionsabouttheout
comeofpast,presentandf ut
ureevent
s,orconf
ir
m orcor
rectfut
ure
expectati
ons.
- Orsimpl y,
thecapaci
tyofinfor
mati
ontoi
nf l
uenceadeci si
on.

1.Pr
edi
cti
veval
ue-whenitcanhelpusersi
ncr
easet
hel
i
kel
i
hoodofcor
rect
lyoraccur
atel
y
pr
edi
cti
ngorfor
ecast
ingt
heinformati
on.

2.Feedbackv
alue-wheni
tenabl
esuser
stoconf
ir
m orcor
rectear
li
erexpect
ati
ons.

3.Timel
iness-meanspr
ovi
dingi
nfor
mat
iont
othedeci
sionmakerwhi
l
eithast
hecapaci
tyt
oaf
fect
deci
sion.

Not
e:t
hemosti
mpor
tantat
tri
but
eofquar
ter
lyori
nter
imf
inanci
alst
atement
sisi
tst
imel
i
ness.

Rel
i
abilit
y
- Thedegr eeofconfi
denceusersplaceuponthetr
uthful
nessofther
epresentat
ionsi
nthe
financialstat
ements.
- Thequal i
tyofinf
ormati
onthatassuresuser
sthattheinf
ormati
onisfr
eef r
om biasander
ror
,and
faithful
lyrepr
esentswhati
tpurportstorepr
esent
.

1.Fai
thf
ul r
epresentat
ion-t
heact
ual
eff
ect
soft
het
ransact
ionsshoul
dbepr
oper
lyaccount
ed
i
nthefinancialst
atement
s.

2.Substanceoverform -t
heinformat
ionist obeaccount
edinaccor
dancewiththei
rsubst
ance
andreali
tyandnotmer el
ytheirl
egalform.
3.Neutr
alit
y-theinfor
mat i
oncontai
nedi ntheFSmustbef r
eefrom bi
as.Thei
nformati
on
shoul
dnotf avoronepartyt
ot hedetr
imentoftheotherpar
ty.

4.Conser
vat
ism -whenal
ter
nat
iveexi
st,
theal
ter
nat
ivewhi
chhast
hel
eastef
fectont
heequi
ty
shoul
dbechosen.

5.Compl eteness-r equir

esthatr
elevanti
nfor
mat i
onshouldbepresent
edi
nawaythat
faci
l
itatesunder standi
ngandav oi
dserroneousimpli
cati
on.Thi
sisther
esul
toft
hest
andar
d
ofadequat edisclosureorthepri
ncipl
eoffulldi
scl
osure.

Under
standabil
it
y
- Requiresthatfi
nanci
ali
nfor
mati
onmustbecompr ehensibl
eorint
ell
i
gibl
etobeusef
ul.
- Usersareassumedt ohaveareasonabl
eknowl
edgeoft heeconomicact
ivi
ti
esandaccount
ing

Page5of5
 andwi
l
li
ngnesst
othest
udyt
hei
nfor
mat
ionwi
thr
easonabl
edi
l
igence.

Compar
abi
l
ity
- Theabi
li
tytobri
ngtoget
herf
orthepur
poseofnoti
ngpoi
ntsofli
kenessanddi
ff
erence.
Comparabi
li
tymaybemadewithi
nanenti
tyorbet
weenandacrossenti
ti
es.

1.Consi
stency-thispri
nci
pler
equi
rest
hatt
heaccount
ingmet
hodsandpr
act
icesshoul
dbeappl
i
ed
onauniform basisf
rom per
iodt
operi
od.

Note:consistencydoesnotmeant hatnochangeinaccounti
ngmethodcanbemade.I fthe
changewi l
lresulttoamoreusefulandmeaningfuli
nfor
mat i
on,
thensuchchangeshouldbe
madewi thfulldiscl
osur
eofthechangeandt hepesoeffectt
her
eof.

ACCOUNTINGCONSTRAINTS
- Thefact
orst
hatmayaff
ectt
her
elev
anceandr
eli
abi
l
ityoff
inanci
alaccount
ingi
nfor
mat
ion.

1.Ti
mel
i
ness-“
rel
evanti
nfor
mat
ionmayl
osei
tsr
elev
ancei
fther
eisunduedel
ayi
nit
srepor
ti
ng”
.

2.Cost
-benef
it-“t
hebenef
itder
ivedf
rom i
nfor
mat
ionshoul
dexceedt
hecosti
ncur
redi
nobt
aini
ng
thei
nfor
mat i
on”.

3.Materi
ali
ty-“
informati
onismat eri
ali
fit
somissionormisst
atementcoul
dinf
luencet
he
economicdecisionoftheuserstakenonthebasisoft
heFS”.
-Affectedbythesizeornatur
eoftheitem.

4.Balancebet
weenrel
evanceandrel
iabil
i
ty-theover
ri
dingconsi
der
ati
oni
showbestt
osat
isf
ythe
economicdeci
sionmakingneedsoftheusers.

ELEMENTSOFFI NANCI ALSTATEMENTS

- Refertothequanti
tati
v einformati
onshowninthest
atementoffi
nancial
posi
ti
onandstatement
offi
nancialperf
ormance( incomestat
ement).
- Elementsthataredir
ect l
yr el
atedt
othemeasurementoffi
nanci
alinf
ormati
onareasset
s,
li
abil
i
tiesandequit
y.
- Elementsdirect
lyr
elatedt othemeasurementofper
formancear
eincomeandexpenses.

Assets-t
heresourcescont
rol
ledbyt
heenti
tyasaresul
tofpasttr
ansact
ionorev
ent
sandf
rom
whichfut
ureeconomicbenefi
tsar
eexpect
edtofl
owt ot
heentit
y.

Li
abili
ti
es-ar
epresentobl
i
gati
onoftheenti
tyar
isi
ngfr
om pasttr
ansacti
onsorevent
sthe
sett
lementofwhi
chisexpect
edtoresul
tinanoutf
lowfr
om theenti
tyofresour
cesembodyi
ng
economicbenef
it
s.

Equi
ty-i
sther
esi
dual
int
eresti
ntheasset
soft
heent
it
yaf
terdeduct
ingal
lofi
tsl
i
abi
l
iti
es.

Income-thei ncr
easei
neconomicbenef
itduri
ngtheaccounti
ngperi
odinthefor
m ofi
nfl
owor
i
ncr easei
nassetordecreasei
nli
abi
li
tyt
hatresul
tsini
ncreaseinequi
ty,
othert
hancont
ri
but
ionf
rom
equitypar
ti
cipants.

Expense-t
hedecr
easei
neconomi
cbenef
itdur
ingt
heaccount
ingper
iodi
nthef
orm ofout
fl
owor
Page6of6
 decr
easeinassetori
ncr
easei
nli
abi
l
ityt
hatr
esul
tsi
nequi
ty,
othert
hancont
ri
but
ionf
rom
equi
typar
ti
cipant
s.

RECOGNITI
ONOFELEMENTS
- Therepor
tingofanasset
,li
abi
l
ity
,incomeorexpenseont
hef
aceoft
hef
inanci
alst
atement
sof
anenti
ty.

1.Assetrecognit
ionpr i
nciple
- Assetisrecognizedwheni ti
sprobabl
ethatfut
ureeconomicbenef
it
swi
l
lfl
owt
otheent
it
yand
theassethasacostorv al
uethatcanbemeasur edrel
i
ably.
-Inherentinassetr ecogniti
onpri
ncipl
eisthecostpri
ncipl
e.

2.Li
abil
i
tyrecognit
ionpr i
nci
ple
- Li
abil
i
tyisrecognizedwheni ti
sprobabl
ethatanoutf
lowofresour
cesembody
ingeconomi
c
benef
it
swi l
lberequiredfortheset
tl
ementofapresentobl
i
gationandt
heamountcanbe
measuredreli
abl
y .

3.I
ncomer ecognit
ionpri
nci
ple
-Incomei srecognizedwhenitisprobabl
ethatincr
easeinfut
ureeconomicbenef
it
srel
atedt
oan
i
ncreaseinanassetoradecr easeinli
abi
li
tyhasarisenandthatt
heincr
easecanbemeasured
r
eli
ably.

Not
e:t
hecondi
ti
onf ori
ncomerecogniti
onisbasi
call
ypresentatt
hepointofsal
ewhichisalso
t
hepoi
ntofdel
i
very.Thereasoni
st hatatt
hepointofsal
e,theent
ityhasal
readytr
ansf
erredto
t
hebuyert
hesi
gnif
icantri
sksandrewardsofownershipofthegoods.

Excepti
ontothepointofsale
1.I nst
all
mentmethod
2.Costr ecover
ymet hodorSunkcostmet
hod
3.Cashmet hod
4.Per cent
ageofcompl et
ionmethod
5.Pr oducti
onmethod

Defi
nit
ionofI
ncome
-encompassesbot
hRev
enueandGai
ns

Revenue-ar
isesint
hecourseofordinaryr
egularacti
vit
iesofanent
it
yandi
sref
err
edt
oinav
ari
ety
ofnamesincludi
ngsal
es,
fees,i
nterest,
div
idends,royal
tiesandr
ent
.

Gai
ns-repr
esentot
herit
emsthatmeetthedef
ini
ti
onofi
ncomeanddonotar
isei
nthecour
seof
or
dinar
yregul
aract
ivi
ti
esofanenti
ty.

Rev
enuefr
om saleofgoods
- PAS18onr evenuer ecogni
ti
onprovi
desthefoll
owingcondi
ti
ons:
1.Theenti
tyhastransferredt
othebuyerthesi
gnifi
cantri
sksandrewardsofownershi
pofthe
goods.
2.Theenti
tyret
ainsnei t
hercont
inui
ngmanageriali
nvolv
ementnoreffect
ivecont
rolov
ert
hegoods
sol
d.
3.Theamountofr evenuecanbemeasur edrel
i
ably.
Page7of7
 4.I
tisprobablethateconomicbenefi
tsassociat
edwitht
hetransact
ionwi
l
lfl
owtotheenti
ty.
5.Thecostsincurredortobeincur
redinrespectoft
hetr
ansacti
oncanbemeasuredrel
i
ably.

4.Expenser ecogni
tionpr
inciple
- Expensesar erecogni
zedi fiti
sprobabl
ethatadecreasei
nfutur
eeconomicbenef
it
srel
atedt
oa
decreaseinassetorani ncreaseinli
abi
li
tyhasoccurr
edandthatthedecr
easei
neconomic
benefit
scanbemeasur edr eli
abl
y.

Def
ini
ti
onofexpense
- Encompasseslossesaswel
last
hoseexpensest
hatar
isei
nthecour
seoft
heor
dinar
yregul
ar
acti
vit
iesoft
heentit
y.

Mat
chingpri
ncipl
e
- Expenserecogni
ti
onprinci
plei
stheappli
cati
onoft
hemat
chi
ngpr
inci
ple.
-“ Thegenerati
onofrev
enueiswithoutanycost”
.

1.Causeandef f
ectassociat
ion
- Theexpenseisrecognizedwhenther
evenueisalr
eadyrecogni
zed.
-“ Di
rectmatchi
ng”.
- Examplesi
ncludecostofsales,
doubt
fulaccount
s,warr
antyexpenseandsal
escommi
ssi
ons.

2.Systemat i
candr at
ionalallocati
on
- Somecost sareexpensedbysi mplyallocati
ngthem overtheper
iodsbenef
it
ed.Thereasonfor
thi
sist hatthecostwillbenefitf
utureper i
odsandthatthereisanabsenceofadir
ectorclear
associati
onoft heexpensewi t
hspecificrevenue.
- Exampl esincl
udedepr eciati
on,amor t
izati
onandal l
ocati
onofprepaymentsanddefer
redcharges.

3.Immediaterecogniti
on
- Thecostincurredisexpensedout ri
ghtbecauseofuncer tai
ntyoffutur
eeconomicbenef
it
sor
dif
fi
cult
yofreliabl
yassociatingcert
aincostwithfuturerevenues.
- Examplesincludeoffi
cers’salar
ies,
mostadmi nistr
ativ
eexpense, adver
ti
singandmostsel
li
ng
expenses,amountt olawsuitsandwor thl
essintangibl
es.

MEASUREMENTOFELEMENTS
1.Hist ori
calcost
2.Cur rentcost
3.Real iz
ablev al
ue
4.Pr esentvalue

Note:theper
formanceofanent
it
yisdet
ermi
nedusi
ngt
woappr
oachesnamel
y,capi
talmai
ntenance
andtransact
ionappr
oach.

1.Tr
ansacti
onapproach
-
thetr
adit
ional
preparat
ionofani
ncomest
atement
.

2.¬Capi
tal
mai
ntenance
Page8of8
 - Neti
ncomeoccur
sonl
yaf
tert
hecapi
tal
usedf
rom t
hebegi
nni
ngoft
heper
iodi
smai
ntai
ned.

1.Financialcapital
-I stheabsol utemonet ar
yv alueoft henetassetscontri
butedbytheshareholdersandtheval
ueof
theincreasei nnetassetsr esult
ingfrom ear
ningsretai
nedbyt heenti
ty.
- BasedonHi stori
calcost
- Neti ncomeoccur swhent hef i
nancialornominalamountoft henetassetsattheendofthe
periodexceedst hefinancialornomi nalamountoft henetassetsatthebeginningoft
heperi
od,
afterexcludingdist
ri
butionst oandcont ri
buti
onsbyowner sduri
ngtheperiod.

2.Phy sicalcapital
-I sthequant i
tati
vemeasur eofthephy si
calproduct
ivecapaci t
ytoproducegoodsandser vices.
- Thisr equiresthatproductiv
eassetsbemeasur edatcur r
entcost.
- Physi calcapitali
sequal t
ot henetassetsoftheentit
yexpr essedi
nt er
msofcur rentcost
.
- Neti ncomeoccur swhent hephy si
calproducti
vecapitaloftheenti
tyattheendoft heper
iod
exceedst hephy si
calproducti
vecapit
alatthebeginningoft heperi
od,afterexcl
uding
distri
butionst oandcont r
ibuti
onsfrom ownersduringt heperi
od.

STATEMENTOFCOMPREHENSI
VEI
NCOME

COMPONENTSOFFI
NANCI
ALSTATEMENTS

Bef
ore Now
I
ncomeSt at
ement Stat
ementofComprehensi
veIncome
BalanceSheet Stat
ementofFi
nancial
Posit
ion
StatementofChangesinEquity Stat
ementofChangesinEquit
y
CashFl owStat
ement Stat
ementofCashFlows
Explanator
ynotestoFinanci
alst
atement
s Expl
anat
orynot
estoFinanci
al
Stat
ements

STATEMENTOFCOMPREHENSI VEINCOME
- incl
udest
hecomponentsofneti
ncomeorl
ossandt
hecomponent
sofot
hercompr
ehensi
ve
i
ncomeduri
ngaper
iod.

Met
hodsofPresentati
on
1.SeparateStatements
a.I ncomeSt at
ement–displayi
ngthecomponent
sofneti
ncomeorloss.
b.St at
ementofComprehensiv
eincome–beginni
ngwithneti
ncomeorlosspl
ust
he
component sofot
hercomprehensiv
eincome.

2.Singl
eStat
ement s
-combinedincomest
atementandot
hercompr
ehensi
vei
ncome.

Component
sofSCI:
1.Profi
torLoss
-composedofincomeandexpenses.
a.Income
Consi
deredi
fther
eis:

Page9of9
 ↑economi cbenefi
t.
 ↑asset
 ↓l i
abil
i
ty
 ↑equi t
y
1. Revenue–incomet hatari
sesfr
om ordi
naryact
ivi
ti
es.
2. Gai
ns–i ncomet hatar
isesfr
om per
ipher
alacti
vi
ti
es.

b.Expenses
Consider
edifther
eis:
↓economi cbenef
it.
 ↓asset
 ↑l i
abi
li
ty
 ↓equity
1. Expenses–cost sthatari
sesfr
om ordi
naryacti
vit
ies.
2. Losses–cost sthatari
sesfr
om peri
pheralact
ivi
ti
es.

3. OtherCompr ehensi
veIncome
- includesitemsofi ncomeandexpensest hatarenotr ecogni
zedinprof
itorl
ossbutar
e
recognizeddirect
lyasr equi
redorper mittedbyaccount ingstandar
ds.I
tincl
udest
he
foll
owingi t
ems:
a.Unr eal
izedgainorl ossonAv ai
lableforsalesecur i
ti
es.
b.Gainorl ossfrom forei
gncur r
encyt r
anslation.
c. Unreal
izedgainorl ossoncashf lowhedge–t heef fecti
veporti
on.
d.Changei nreval
uationsurpl
us.
e. Act
uar i
algainorlossusingfullrecognit
ionappr oach.

I
ncomeStatementapproachofpresentati
on
1.Capitalmaintenanceapproach
*Therei
sincomei fCapit
al Endisgr
eat
ert
hanCapi
tal
begi
nni
ng.

I
ncome=Capi
tal
End>Capi
tal
Begi
nni
ng

2.Tr
ansact
ionsapproach
*Ther
eisincomeifRevenueisgreat
erthanExpenses.
*Thi
sisconsider
edthetradi
ti
onalpr
eparat
ionofincomest
atementi
nconf
ormi
tywi
tht
he
GAAP.

I
ncome=Rev
enue>Expenses

Tr
ansact
ionapproachcaneitherbe:
1.FunctionalPresentat
ion
-cl
assif
iesexpensesaccordi
ngtoitsFUNCTION.
-al
socalledasCostofSalesMet hod.
Ex.Costofsales,Sel
li
ngexpense,Admini
str
ati
veexpense,
Otherexpense.

2.Nat
ural
Present
ati
on
Page10of10
 -cl
assif
iesexpensesaccordi
ngtoi
tsNATURE.
-al
socal l
edasNat ur
eofExpenseMethod.
Ex.Depreciat
ion,
Rentexpense,
Sal
ari
esandwages,
etc.

Recognit
ionofI ncomeandExpenses
1.I ncome
Recogni zedif
:
a. Probable-↑i
neconomicbenef
it
.
b. Measurable–“amountcanbemeasur
edr
eli
abl
y.
”

2.Expenses
Recognizedif
:
a. Probable-↓i
neconomicbenef
it
.
b. Measurable–“amountcanbemeasur
edr
eli
abl
y.
”

Mat
chi
ngPr
inci
ple
- “Thegener
ati
onofr
evenuei
snotwi
thoutanycost
.”

Caneit
herbe:
1.CauseandEf f
ectAssoci ati
on
-theexpenseisrecognizedwhent herev
enuei
salr
eadyrecogni
zed.
Ex.Costofsales,Doubtfulaccount
s,Warr
ant
yexpense,
Salescommissi
ons.

2.Systemati
candRat i
onalAllocat
ion
-thecostisal
locat
edov ertheperi
odsbenef
it
ed.
Ex.Depreci
ati
on,Amortizati
on,al
l
ocat
ionofprepay
ment
sanddef
err
edchar
ges.

3.Immedi ateRecogniti
on
-thecosti sexpensedoutri
ghtbecauseofuncertaint
yoffutureeconomi
cbenefi
tsor
diff
icul
tyofr el
i
ablyassoci
ati
ngcost swit
hfuturerevenues.
Ex.Officer’
ssalar
ies,mostadministr
ati
veexpenses,adver
tisi
ng,mostsel
l
ingexpenses,
losses.

Measur
ementofI
ncomeandExpense
1.Income–measuredatFAIRVALUEofconsi
der
ationrecei
vedorrecei
vabl
e.
2.Expense–measuredatFAIRVALUEoft
heconsiderat
ionpai
d/sacri
fi
cedordue/
pay
abl
e.

Recognit
ionofRevenuef r
om Sal eofgoods
Revenueisrecognizedwhenal lofthefoll
owi ngaremet :
1.Theent erpri
sehast ransferredtothebuy erthesignifi
cantri
sksandr ewar
dsofownershipof
thegoods.
2.Theent erpri
ser et
ainsneithercontinui
ngmanager iali
nvolv
ementt othedegr
eeusuall
y
associ
atedwithowner shipnoref fecti
vecont r
olov ert
hegoodssol d.
3.Theamountofr evenuecanbemeasur edr el
i
ably.
4.I ti
sprobablethattheeconomi cbenefitsassociatedwiththetransacti
onwil
lfl
owtothe
enter
pri
se.
5.Thecost sincurredort obei ncurr
edinr espectofthet r
ansacti
oncanbemeasur edrel
iabl
y.
Page11of11
Recognit
ionofRev enuefrom Render i
ngofSer vi
ces
Revenuei srecognizedwhenal lofthefoll
owi ngaremet:
1.Theamountofr evenuecanbemeasur edr el
i
ably.
2.I ti
spr obablethattheeconomi cbenefitsassociat
edwi ththetransact
ionwi
ll
flowtothe
enterpri
se.
3.Thecost sincurredort obeincurr
edinr espectofthetransact
ioncanbemeasur edrel
iabl
y.
4.Thest ageofcompl et
ionofthetransactionatthebalancesheetdat ecanbemeasured
rel
iably.

Recognit
ionofRevenuefrom Inter
est,
Royalt
iesandDi vi
dends
Revenueisrecognizedwhenallofthefol
lowingaremet :
1.I ti
sprobablethattheeconomicbenefitsassoci
atedwit
hthet
ransact
ionwi
l
lfl
owt
othe
enter
pri
se.
2.Theamountofr ev
enuecanbemeasur edreli
abl
y.

Not
e:
 Int
er estshouldberecognizedonatimepr
oporti
onbasist
hattakesint
oaccountthe
eff
ect iveyi
eldontheasset .
 Roy alt
iesshouldberecognizedonanaccr
ualbasisi
naccordancewiththesubst
ance
ofther elevantagr
eement .
 Divi
dendsshoul dberecognizedwhent
hesharehol
der’
sri
ghttorecei
vepaymentis
established.

STATEMENTOFFI
NANCI
ALPOSI
TION

COMPONENTSOFFI
NANCI
ALSTATEMENTS

Bef
ore Now
I
ncomeSt at
ement Stat
ementofComprehensiveIncome
BalanceSheet Stat
ementofFi
nancialPosit
ion
StatementofChangesinEquity Stat
ementofChangesinEqui t
y
CashFl owStat
ement Stat
ementofCashFlows
Explanator
ynotestoFinanci
alst
atement
s Expl
anat
orynot
estoFi nanci
al
Stat
ements

STATEMENTOFFINANCI ALPOSITI
ON
- astatementshowingt
hecompany
’sr
esour
ces(
asset
s),
obl
i
gat
ions(
li
abi
l
iti
es)
,andequi
tyat
agi
venpointi
ntime.

El
ementsofaSt
atementofFinanci
al Posit
ion(BalanceSheet
)
1.Assets
 Resourcescont r
oll
edbyt heent i
ty.
 Resultofpastevent s.
 I nf
lowofeconomi cbenef i
ts.
 Costcanbemeasur edreli
ably
.

2.Li
abi
li
ti
es
 Presentobl
i
gationofanent
it
y.
 Ari
sesf r
om pastevent
s.
Page12of12
  Outf
lowofeconomi
cbenefi
ts.
 Costcanbemeasur
edrel
iably
.

3.Equi
ty
 Ther
esi
dual
int
erestoft
hecompany
’sasset
saf
terdeduct
ingt
hel
i
abi
l
iti
es.

Recognit
ionofAsset
sandLiabi
l
iti
es
1.Assets
a.Probabl
e-↑economi cbenef
it
s.
b.Measurabl
e–“ costcanbemeasur
edr
eli
abl
y.
”

2.Li
abil
i
ties
a.Pr obabl
e-↓economicbenef
it
s.
b.Measur abl
e–“costcanbemeasur
edr
eli
abl
y.
”

CLASSI
FICATI
ONOFASSETS
1.CurrentAssets
Anassetshoul dbeclassif
iedascur r
entifi
tsati
sfi
esanyofthefol
l
owing:(PAS1,par
.57)
a.Expect edtober eal
ized,heldforsal
eorconsumptionint
henormalcourseoft
he
enter
prise’
soperatingcycle.
b.Hel dprimari
lyforthepurposeofbei ngtr
aded.
c. Expectedtober eal
izedwithintwelv
emont hsaf
terbal
ancesheetdate.
d.Cashorcashequi valent–notr est
ri
cted.

Cashandcashequival
ents
 Includespet
tycashf unds,cashinbank,
cashonhandandanycashequi
val
ent
.
 Shoul dbeunrest
ri
ctedf oruse.

Hel
dforTrading
 Thi scategor
yrefer
stoTRADINGSECURI TI
ES.
 Acqui redpri
nci
pall
yfort
hepurposeofgenerat
ingpr
ofi
tfr
om shor
t-
ter
mfl
uct
uat
ions
i
npr i
ceordealer
’smargi
n.

Expect
edtobereal
izedwi t
hintwel
vemont hs
 Thi
scategoryrefer
st oSHORT-TERM NONTRADERECEI VABLES.
 Theyarecl
assifi
edascur r
entasset(
Nontraderecei
vabl
e)iftheyar
ecoll
ect
ibl
ewi
thi
n
oneyearfr
om theendofr epor
ti
ngper i
od,
thelengthofoperati
ngcycl
e
notwi
thst
anding.

Real
i
zed,soldorconsumed
 Thi scat
egoryr efer
stoTRADERECEI VABLES,I
NVENTORIES,andPREPAYMENTS.
 Theyar eclassifi
edascurrentasset
sbecauset heyar
eexpectedtober
eali
zed,sol
dor
consumedwi thinthenor
mal operat
ingcycleoroneyear
,whichev
erisl
onger.

Pr
esentati
onofCur rentAsset
s
a.CashandCashEqui val
ent s.
b.FinancialAssets(Tr
adingSecur
it
iesandAv
ail
abl
eforSal
eSecur
it
ies–cur
rent
)
c.Tradeandot herrecei
vables.
d.Inventori
es.
Page13of13
 e.Pr
epai
dExpenses.

2.Non-cur
rentAsset
s
-ot
herassetsnotclassi
fi
edascur
rentasset
.

Pr
esent
ati
onofNon- currentl
iabil
i
ties
a.Proper t
y,plantandequi pment.
b.Long- t
ermi nvestment s.
c. I
ntangibl
easset s.
d.Ot hernon-currentassets.

CLASSI
FICATIONOFLI ABILI
TIES
1.Cur rentLiabil
it
ies
Aliabil
i
tyshoul dbecl assifi
edascurrentifitsat
isf
iesanyofthefol
lowing:(PAS1, par
.60)
a.Expectedt obeset tl
edi nthenor
mal courseoftheenter
pri
se’soperati
ngcy cl
e.
b.Heldpr i
mar i
lyforthepur poseofbeingt r
aded.
c.Duet obeset tl
edwi thintwelv
emont hsaf tert
hebalancesheetdate.
d.Entit
ydoesnothav et heunconditi
onal r
ighttodeferset
tl
ementoft heli
abil
ityf
orat
l
eastt welvemont hsaf terBSdate.

Long-
ter
m debtf
all
ingduewithinoney ear
 Classif
iedascur r
entevenif
:
a.Or i
ginalterm waslongerthantwelvemont hs.
b.Anagr eementtorefi
nanceorr eschedulepaymentonalong-ter
m basi
sis
completedaf t
ert
her epor
tingperiod.
 Classif
iedasnon- cur
renti
f:
a.Theent i
tyhasthediscret
iontorefinanceorrol
loveranobl
igati
onforatl
east
twel
vemont hsaf
terreporti
ngperiod.

Br
eachofCov
enants
 Classi
fi
edascurr
enti
f:
a.Theborrowi
ngagr
eementarebreachedorvi
olat
ed.(Ev
eni
fthel
enderagr
eed
nott
odemandpaymentaf
tert
heendoft heperi
od).

 Cl
assi
fi
edasnon-curr
enti
f:
a.Thelenderhasagreedonorbefor
et heendoft
herepor
ti
ngper
iodt
opr
ovi
de
agr
aceperi
odendingatleastt
welvemonthsaft
erBSdate.

Pr
esentati
onofCur rentLiabi
li
ti
es
1.Tradeandot herpay abl
es.
2.CurrentProvi
sions
3.Short-
term borrowings.
4.Currentporti
onofl ong-
term debt
.
5.Currenttaxli
abili
ty.

2.Non-curr
entLi
abil
it
ies
-al
lotherli
abi
l
iti
esnotcl
assi
fi
edascur
rentl
i
abi
l
iti
es.

Pr
esent
ati
onofNon-cur
rentLi
abi
li
ti
es
1.Non-cur
rentpor
tionofl
ong-
ter
m debt
.
Page14of14
 2.Fi
nanceleaseliabil
i
ty .
3.Defer
redtaxli
abili
ty.
4.Long-
term obl
igati
onst ocompanyof
fi
cer
s.
5.Long-
term def
er r
edr evenue.

Est
imat
edLiabil
it
ies
 areobl i
gationswhichexi
stattheendoft hereport
ingper
iodal
thought
het
imi
ngandamount
isindefini
te.
 Canbecl assif
iedascurr
entornon-cur
rent.
 Ex .Esti
mat edliabi
l
iti
esf
orPremiumsandWar rant
ies.

Cont
ingentLi
abil
i
ty
 PresentObli
gati
on.
 Notprobable.
 Notmeasur abl
e.
 Canbepr obabl
eormeasur
abl
ebutnotbot
h.

Tr
eat
mentofConti
ngentLiabil
it
y
1. I
fPossi
ble–Disclosed.
2. I
fremot
e–Notdi scl
osed.

Not
e:I
ftheobli
gat
ioni
sprobabl
eandt
heamountcanbemeasur
edr
eli
abl
y,t
heobl
i
gat
ioni
snot
acont
ingentl
i
abil
i
tybutaPROVISI
ON.

Cont
ingentAsset
 APossi bleasset.
 Arisesfrom pasteventort
ransact
ion.
 Out comeisnotwi t
hinthecontr
oloftheent
it
y.

Tr
eat
mentofCont i
ngentAsset
1. I
fvir
tuall
ycer
tai
n–Recor ded(
nol
ongerconsi
der
edascont
ingentasset
).
2. I
fprobable–Discl
osed.
3. I
fpossibl
e–Notdi scl
osed.
4. I
fremote–Notdi scl
osed.

SHAREHOLDERS’ EQUITY
- t heresi
dualint
erestofowner
sint
henetasset
sofacor
por
ati
onmeasur
edbyt
heexcessof
assetsoverli
abi
li
ties.

OldTer m( Phili
ppi
neTer m) IASTerm
Capital St
ock ShareCapi tal
Subscr i
bedCapi t
alStock Subscr i
bedShar eCapital
PreferredStock Prefer enceShar eCapit
al
CommonSt ock Ordinar yShar eCapit
al
AdditionalPaid-inCapital SharePr emi um
RetainedEar nings(defi
cit) Accumul atedPr of
it
s(Losses)
RetainedEar ningsAppr opr
iat
ed Appr opr i
ati
onReser ve
Revaluat i
onSur plus Reval uationReserve
Treasur yStock Treasur yShar e

Page15of15
 For
msofSt
atementofFinanci
alPosit
ion
1.Repor tForm
-Thi
sf or
m setsfort
hthethr
eemaj
orsect
ionsi
nadownwar
dsequenceofasset
s,
li
abi
li
ti
esandequi t
y.

2.AccountForm
-Thepresent
ationfol
l
owsthatofanaccount
.Theassetsar
eshownont helef
tside
andtheli
abil
i
tiesandequi
tyontheri
ghtsi
deofthestat
ementoff
inanci
alposi
tion.

CASHANDCASHEQUI
VALENTS

CASHANDCASHEQUI VALENTS
- Cashincludesmoneyandanyot hernegot
iabl
einstr
umentthati
spayabl
einmoneyand
acceptablebybankfordeposi
tandimmedi at
ecredi
t.
- Incl
udeschecks,bankdraft
sandmoneyor dersbecauset
heseareaccept
abl
ebybankfordeposi
t
andimmedi atecr
edit
.

Note:f
oranassettobeconsi
deredascashani tem mustbeconsi
deredasunrest
rict
edinuse.Thi
s
meansthatthecashmustbeimmedi at
elyavai
labl
einthepaymentofcurr
entobli
gati
onsandnot
subj
ecttoanyrest
ri
cti
ons,
contr
actualorother
wise.

1. Cashonhand
–includesundeposi
tedcashcol
l
ect
ionsandothercashit
emsawai t
ingdeposi
t.Ex.
Customer’scheck,
cashi
er’
sormanager’
schecks,t
ravel
er’
schecks,
bankdraft
sandmoney
orders.

2.Cashi
nbank
–incl
udesdemanddeposi
torchecki
ngaccountandsav
ingsdeposi
twhi
char
eunr
est
ri
cted
astowit
hdrawal
.

3.Cashf
undsetasi
def
orcur
rentpur
posessuchaspet
tycashf
undpay
rol
lfundanddi
vi
dendf
und.

CASHEQUI VALENTS
-Areshor tterm highlyl
iqui
dinvestmentsthatarereadi
lyconver
ti
blei
ntocashandsonear
theirmat urit
yt hattheypresenti
nsigni
fi
cantriskofchangesintheval
uebecauseofchanges
i
ni nterestrat es.
-Onl yhighlyl i
quidinvestmentsthatar
eacquiredthreemonthsbeforematuri
tycanqual
i
fyas
cashequi valents.

Not
e:t
hedat
eofpur
chasemustbet
hreemont
hsbef
oremat
uri
ty.

VALUATI
ONOFCASH
1.Faceval
ue-gener all
y
2.Curr
entexchanger ate–cashinf or
eigncurrency
3.Esti
matedreal
izablev al
ue–ifthebankorf inanci
ali
nst
it
uti
onhol
dingt
hef
undsoft
he
companyisinbankr uptcyorf
inanci
al di
ff
icult
y.

Note:thecapt
ion“cashandcashequi
val
ents”shoul
dbeshownasfir
sti
tem amongthecur
rent
assets.However
,thedetai
l
smustbediscl
osedinthenot
estofi
nanci
alstat
ements.

Page16of16
I
.Invest
mentofexcesscash(t
imedeposi
t,moneymar keti
nstrument,
treasur
ybill
s)
a.Threemonthsorless–“cashandcashequiv
alents”
b.Mor et
hanthreemonthstooneyear–“temporaryinvestmentorshort
-ter
mi nv
est
ment
”
c. Moret
hanoney ear–noncurr
entasset“l
ong-t
ermi nvest
ment”

I
I.Cashf undforcer tainpurpose
a.Cur r
entpur pose–par tof“cashandcashequi valent”
(ex.Pet
tycashfund,pay r
ollf
und,t
ravel
fund, i
nterestf und,
divi
dendf undandt axfund).
b.Noncur rentpur pose–i ti
spar tof“
long-terminvestment”(
ex.Si
nkingfund,prefer
enceshar
e
redempt ionf und,conti
ngentfund,insurancefund,andfundfort
heacqui si
ti
onorconstruct
ion
ofpr operty,plantandequipment .

I
II
.Bankoverdraft
-Whent hecashinbankaccounthasacredi
tbal
ance.Thi
sistheresul
tofi
ssuanceofchecks
inexcessoft hedeposi
ts.
-Classif
iesascurrentl
i
abil
it
yandshouldnotbeoff
setagai
nstotherbankaccount
swithdebi
t
balances.

Not
e:bankov
erdr
afti
snotper
mit
tedi
nthePhi
l
ippi
nes.

Except
iontot herul
eonoverdr
aft
-Offsetagai
nstot
herbankaccountwi
thdebi
tbal
ancei
fthebankmai
ntai
nst
woormor
e
accountsinonebank.
-Ift
heamounti si
mmat er
ial

I
V.Compensati
ngbalance
-Takesthef
orm ofmi
nimum checki
ngordemanddepositaccountbal
ancet
hatmustbe
maintai
nedi
nconnect
ionwi
thabor r
owingar
rangementwithabank.

a.notl
egall
yrestr
ict
ed–par tofcash
b.l
egal
lyrest
ri
cted
1.shor
t-
term –“cashheldascompensati
ngbal
ance”
2.l
ong-t
erm –“noncurr
entinvest
ment”

Note:i
ftheprobl
em i
ssil
ent,notlegal
l
yrest
ri
cted(
Conr
adoVal
i
x),
legal
l
yrest
ri
cted(
Conr
ado
Uberi
ta)
,legal
lyr
est
ri
cted(i
npr acti
ce)
.

V.Undel
i
ver
edchecks
-Whentheyhav
ebeenmer
elydr
awnandr
ecor
dedbutnotgi
vent
othepay
ees.

Cash xx
Account
spay
abl
exx

VI
.Postdatedchecks
-Meanschecksaredrawn,recor
dedandal
readygi
vent
opay
eesbutt
heybearadat
e
subsequenttobal
ancesheetdat
e.

Cashxx
Account
spay
abl
exx

Page17of17
 VI
I.St
alechecks
-Whent hechecksar
enotencashedbyt
hepay
eeswi
thi
nar
elat
ivel
ylongper
iodoft
ime.

Note:thebanki
ngpr
act
icedi
ctat
est
hatchecksnotencashedwi
thi
nsi
xmont
hsshal
lbe
consider
edstal
e.

1.I
mmat eri
al
Cashxx
Miscel
laneousi
ncomexx

2.Mater
ial
Cashxx
Account
spay
abl
exx

VI
II
.Wi
ndowdressi
ng
-Wheneversomebooksar
el ef
topenbey ondtheendofaccounti
ngperi
odforthepurposeof
showingabett
erpi
ctur
eofthefinanci
alhighl
i
ghtsandprof
itact
ivi
ti
esofthebusi
ness.

I
X.Lappi
ng
-Apract
iceusedforconceal
i
ngacashshort
age.I
tconsi
stsofmisappr
opri
ati
ngacol l
ect
ion
fr
om onecustomerandconceal
i
ngthi
sdefal
cati
onbyapplyi
ngsubsequentcol
lect
ionmade
fr
om anothercust
omer.

X.Ki
ti
ng
-Anotherdevi
ceusedt
oconcealacashshortage.
-Thisisusual
l
yemployedatt
heendoft hemonth.
-Itoccur
swhenacheckisdrawnagainstafi
rstbankanddeposi
ti
ngt
hesamechecki
na
secondbanktocovert
heshort
ageinthelat
terbank.

ACCOUNTI
NGFORCASHSHORTAGE

Cashshor
tagexx
Cashxx

1.Cashi
er/cust
odian
Duefr
om cashierxx
Cashshort
age xx

2.Causeisuncl
ear
Lossfr
om cashshor
tagexx
Cashshort
age xx

ACCOUNTI
NGFORCASHOVERAGE

Cashxx
Cashov
eragexx

1.Cashi
er/cust
odian
Cashoveragexx
Payabletocashi
erxx
Page18of18
 2.Noclai
m
Cashover
agexx
Miscel
l
aneousi
ncomexx

I
MPRESTSYSTEM
- Asy stem i
sasystem ofcontr
olofcashwhichrequi
resthatal
lcashr
ecei
ptsshoul
dbedeposi
ted
i
ntactandall
cashdisbursement
sshouldbemadebymeansofcheck.
- Ther earet
imesthatthi
sbecomesi mpract
ical
especial
l
ywhensmal l
amountsarepai
dsoit
becomesnecessarytoestabl
i
shapet t
ycashfund.

1.I
mprestf
undsystem
-Usual
lyf
oll
owedinhandl
i
ngpet
tycasht
ransact
ions.

Theper
ti
nentaccount
ingpr
ocedur
esar
e:
a.Establ
i
shmentoffund

Pet
tycashfund xx
Cashinbank xx

b.Pay
mentofexpensesoutofthef
und
-Nojour
nal
entr
y(onlyapett
ycashvoucheri
spr
epar
ed)
.

c. Repl
eni
shmentofpet
tycashpay
ment
s

Expenses xx
Cashinbank xx

d.Adj
ust
mentf
orunr
epl
eni
shedexpenses

Expenses xx
Pettycashf
undxx

e. I
ncr
easei
nfund

Pet
tycashfund xx
Cashinbank xx

f
. Decr
easei
nfund

Cashi
nbank xx
Pet
tycashf
und xx

2.Fl
uct
uatingfundsy
stem
-Thechecksdrawntoreplenisht
hefunddonotnecessari
lyequal
thepett
ycash
disbursement
s.Ther
eplenishmentchecksar
esi
mplydr awnupontherequestoft
hepet
ty
cashier.

a.Est
abl
i
shmentoff
und

Page19of19
 Pet
tycashfund xx
Cashinbank xx

b.Pay
mentofexpensesoutoft
hef
und

Expenses xx
Pett
ycashf
undxx

c. Repl
eni
shmentori
ncr
easeoft
hef
und

Pet
tycashfund xx
Cashinbank xx

d.Noadj
ust
mentatt
heendoft
heper
iodbecausepet
tycashexpensesar
erecor
dedout
ri
ght
.

e. Decr
easei
nthef
und

Cashi
nbank xx
Pet
tycashf
und xx

BANKRECONCI LIATI
ON
- Astatementwhichbri
ngsi
ntoagr
eementthecashbal
anceperbookandt
hecashbal
anceper
bank.
- necessaryonl
yforademanddeposi
taccount
.

Bankst
atement
-amont hl
yreportoft
hebankt othedeposi
torshowi
ngthecashbal
anceperbankatthe
beginni
ng,t
hedepositsacknowledged,
thecheckspai
d,ot
herchar
gesandcredi
tsandthe
dail
ycashbalanceperbankduringthemonth.

Reconci
l
ingi
tems
1.Bookreconcil
i
ngi
tems
a.creditmemos
b.debitmemos
c. er
rors

2.Bankreconci
li
ngi t
ems
a.deposi ti
ntransi
t
b.out st
andingchecks
c. er
rors

Adj
ust
edBal
anceMet
hod

Bookbalance xx Bankbal ance xx

Add:Credi
tmemos xx Add: Depositi
nTransi
t xx
Total xx Total xx
Less:Debi
tmemos (
xx) Less: Outst
andi
ngchecks (
xx)
Err
ors xx Err
ors xx
Adjust
edbookbal
ance xx Adjustedbankbalance xx

Page20of20
 Cr
edi
tmemos
-r
epresent
ingdeposi
tscr
edi
tedbythebankt
otheaccountoft
hedeposi
torbutnotr
ecor
ded
bythedeposi
torascashr
eceipt
s.

a.notesrecei
vabl
ecollect
edbybank
b.proceedsofbankloan
c. matur
edtimedepositst
ransf
err
edbyt
hebankt
otheaccountoft
hedeposi
tor

Debi
tmemos
-ref
ertoit
emsnotr epr
esent
ingcheckspaidbybankwhi
char
echargedordebi
tedbyt
he
banktotheaccountofthedeposi
torbutnotyetr
ecor
dedbyt
hedeposi
torascash
di
sbursements.

a.NSFornosuf fici
entfundchecks
b.Technical
lydefect
ivechecks
c. Bankservi
cecharge
d.Reductionofloan

Deposi
tint
ransi
t
-arecoll
ect
ionsal
readyrecordedbyt
hedeposit
orascashrecei
ptsbutnoty
etr
ecor
dedby
thedeposit
orascashreceipt
sbutnotyetr
efl
ectedonthebankstat
ement.

a.col
lect
ionsal
readyf
orwardedtothebankbutt
oolat
et oappeari
nthebankstat
ement
.
b.Undeposit
edcoll
ect
ionsorthosest
il
li
nthehandsofthedeposit
or(cashonhand)
.

Out
standingchecks
-checksal
readyr
ecor
dedbyt
hedeposi
torascashdi
sbur
sement
sbutnoty
etr
efl
ect
edont
he
bankstat
ement.

a.checksdrawnforpay
mentandal
readygiv
entopayeesbutnoty
etpr
esent
edf
orpay
ment
.
b.Cert
ifi
edchecks–deduct
ionf
rom t
otal
outst
andi
ngchecks

For
m ofbankreconci
li
ati
on
a.adjust
edbalancemethod–t hebookbalanceandthebankbal
ancear
ebr
oughtt
oacor
rect
cashbalancethatmustappearonthebalancesheet
.

b.booktobankmethod–thebookbal
anceisreconci
l
edwi
tht
hebankbal
anceort
hebook
bal
anceisadj
ust
edtoequalt
hebankbalance.

c. banktobookmethod–thebankbal
anceisreconci
l
edwi
tht
hebookbal
anceort
hebank
bal
anceisadj
ust
edtoequalt
hebookbalance.

Pr
epar ati
onofadjusti
ngentri
es
-onlythebookreconcil
ingit
emsrequi
readj
ust
ingentr
iesonthebookofthedeposit
or.The
adjustmentsarenecessaryt
obri
ngthecashbalancet
oitscorr
ectbal
anceforst
atement
presentat
ionpurposes.

PROOFOFCASH
- anexpandedreconci
l
iat
ioninthati
tincl
udesproofofrecei
ptsanddi
sbur
sement
s.
- usef
ulindi
scoveri
ngpossibl
ediscr
epanciesi
nhandlingcash.
Page21of21
Adj
ust
edbal
ancemet
hod
Pr
evi
ousMont
h(PM) Cur
rentMonth(CM)
Bal
ance Receipt
s Disbur
sements Bal
ance
Balanceperbook xx xx xx xx
Credi
tMemo
PM xx (
xx)
CM xx xx
DebitMemo
PM (
xx) (xx)
CM xx (xx)
Err
ors xx(xx) xx(xx) xx(xx) xx(xx)
Adj
ustedbookbalance xxxx xxxx xxxx xxxx

Balanceperbank xx xx xx xx
Depositint
ransi
t
PM xx (
xx)
CM xx xx
Outstandi
ngchecks
PM (
xx) (xx)
CM xx (xx)
Err
ors xx(xx) xx(xx) xx(xx) xx(xx)
Adj
ustedbankbalance xxxx xxxx xxxx xxxx

LOANSANDRECEI
VABLES

LOANSANDRECEI VALBLES
- nonderivat
ivef
inancialasset.
- withf
ixedordet er
mi nablepay ments.
- mayormaynothav efixedordet erminablepayments.
- notquotedinanact i
v emar ket(nottraded).
- theholdercanrecoversubst antial
l
yal lofi
tsinvest
ment.
- theholderdoesnothav etheintenti
ont oholdthem tomatur
it
y.

CONCEPTOFRECEIVABLES
- aFINANCIALASSET.
- repr
esentacont
ract
ual
rightt
orecei
vecashoranot
herf
inanci
alassetf
rom anot
herent
it
y.

1.TradeReceivabl
es
-clai
msar i
singf
rom sal
eofmer
chandi
seorser
vicesi
ntheor
dinar
ycour
seofbusi
ness.
-classi
fi
edasCURRENTASSET.

a.Account
sReceivabl
es
-openaccount
sornotsuppor
tedbypr
omi
ssor
ynot
es.

b.NotesRecei
vabl
es
-suppor
tedbyfor
mal
promi
set
opayi
nthef
orm ofnot
es.

Page22of22
2.Nontr
adeReceivabl
es
-cl
aimsari
singfrom sour
cesot
herthanthesaleofmerchandiseorser
vicesi
ntheor
dinar
y
cour
seofbusiness.
-cl
assi
fi
edasCURRENTASSETi fcoll
ecti
blewit
hinoneyear.
-cl
assi
fi
edasNONCURRENTASSETi fcoll
ect
ibl
eafteroneyear.

Note:Forbanksandot
herf
inanci
ali
nst
it
uti
ons,
recei
vabl
esr
esul
tpr
imar
il
yfr
om l
oanst
o
customers.

Exampl
esofNont
raderecei
vables
1.Advancestoshareholder
s, dir
ector
s,off
icer
sandempl
oyees.
 current–collecti
blewi t
hinoneyear.
 noncurrent–col l
ectibl
ebey ondoneyear
.

2. Adv
ancest
oaf
fi
li
ates–t
reat
edasl
ong-
ter
minv
est
ment
.

3. Adv
ancest
osuppl
i
ers–t
reat
edascur
rentasset
.

4.Subscr
ipt
ionsrecei
vabl
e
 current–coll
ect
ibl
ewithinoneyear
.
 deductionfr
om subscr
ibedshar
ecapit
al–col
l
ect
ibl
ebey
ondoney
ear
.

5.Debi
tbalanceincr
edit
orsaccount
 current–coll
ecti
blewithi
noneyear
.
 ifamountisnotmat er
ial–canbeoffset
tedandshownasnetaccount
s
pay abl
e.

6. Speci
aldeposi
toncont
ractbi
ds–nor
mal
l
ycl
assi
fi
edasnoncur
rentasset
.

7. Accr
uedi
ncome–cur
rentasset
.

8. Cl
aimsr
ecei
vabl
e–cur
rentasset
.

MEASUREMENTOFRECEI VABLES
A.Ini
ti
alMeasurement
1. Shor
t-
term -@ FACEVALUE

2.Long-
ter
m
a.I nt
erestbear
ing-@ FACEVALUE

b.Non-
int
erestbear
ing-@ PRESENTVALUE

B.SubsequentMeasur
ement-@ AMORTI
ZEDCOST

AccountsReceiv
able
A.Init
ialMeasur
ement-@ FaceVal
ue

B.SubsequentMeasur
ement-@ NETREALI
ZABLEVALUE

Not
e:Netr
eal
i
zabl
eval
uei
scomput
edasI
nit
ialamountl
essdeduct
ionsf
rom or
dinar
ycour
seof
Page23of23
busi
nessact
ivi
ti
es.

Deduct
ionsf
rom Account
sRecei
vable
1.Allowancef
orFreightChar
ge
2.Allowancef
orSalesReturn
3.Allowancef
orSalesDiscount
4.Allowancef
orDoubt f
ulAccount
s

FREI
GHTCHARGE
I
. Ter
msr
elat
edt
oFr
eightchar
ge

1.FOBDesti
nat
ion
-owner
shi
pofgoodsarev est
edtothebuy
eruponreceiptofgoods.
-sel
l
erpayst
hefrei
ghtchargeuptopoi
ntofdest
inat
ion.

2.FOBShippi
ngPoint
-owner
shipofgoodsarev est
edtot
hebuyeruponshipmentofgoods.
-buy
erpaysthefr
eightchargefr
om shi
pmenttopoi
ntofdesti
nati
on.

3.Fr
eightCollect
-f
reightchargeisact
ual
l
ypai
dbyt
hebuy
er.

4.Fr
eightPrepai
d
-f
reightchar
geisal
readypai
dbyt
hesel
l
er.

ALLOWANCEFORSALESRETURNS
-consi
der
edasadeduct
ionf
rom sal
es

Sal
esr
eturn xx
All
owancef
orsal
esr
etur
n xx

SALESDI
SCOUNT
-areduct
ionf
rom i
nvoi
cepr
ice.

Not
e:Cashdiscountcaneitherbesal
esdiscount–discountont
hepar
toft
hesel
l
eror
pur
chasedi
scount–di scountonthepar
toft hebuy
er.

1.Gr
ossMet hod
-i
nit
ial
lyr
ecordssal
esatgrossamount.
-r
ecordssalesdi
scountaccounti
fpay
menti
smadeondi
scountper
iod.

2.NetMet hod
-i
nit
ial
lyrecordssal
esatnetamount.
-donotr ecor
dsalesdi
scountaccounti
fpay
menti
smadeondi
scountper
iodsi
ncei
t
al
readyrecordedthetr
ansact
ionatnet.

ACCOUNTI NGFORBADDEBTS
- theassumedpor t
ionofthecr
editt
hatcannotbecoll
ect
ed.
- consideredassel
li
ngexpenseifcr
edi
tandcollect
ioni
sundert
hechar
geoft
hesal
es
manager.
Page24of24
- consideredasadmini
str
ati
veexpensei
fcr
edi
tandcol
l
ect
ioni
sundert
hechar
geofanof
fi
cer
otherthanthesal
esmanager.

1.Al
lowanceMethod
-r
equir
esther
ecogni
ti
onofabaddebtl
ossi
ftheaccount
sar
edoubt
ful
ofcol
l
ect
ion.

a.Consi
dereddoubtf
ulofcoll
ecti
on
Doubt
fulAccounts xx
AllowanceforDoubtf
ulaccount
s xx

b.Consi
deredwor t
hlessoruncoll
ect
ibl
e
Al
lowancefordoubt f
ulaccount
s xx
Accountsrecei
vable xx

c.Recover
yofaccountsprevi
ouslywri
tt
enoff
Accountsrecei
vabl
e xx
All
owancefordoubtf
ulaccount
s xx

Cash xx
Account
srecei
vabl
e xx

2.DirectWr i
te-
offMethod
-requir
esr ecogni
ti
onofbaddebtl
ossonl
ywhent
heaccount
spr
ovedt
obewor
thl
ess
oruncollecti
ble.

a.Consi
der
eddoubt
fulofcol
l
ect
ion
Noentr
y.

b.Consi
deredwort
hlessoruncol
l
ect
ibl
e
Baddebts xx
Accountsrecei
vabl
e xx

c.Recover
yofaccountspr
evi
ousl
ywri
tt
enoff
Accountsr
eceiv
able xx
Baddebts xx

Cash xx
Account
srecei
vabl
e xx

METHODSOFESTI MATINGDOUBTFULACCOUNTS
1.AgingofAccountsRecei
v abl
e
-i
nv ol
vesananalysi
softheaccount swher etheyar eclassi
fi
edintonotdueorpast
due.
-pastdueaccountsareclassi
fiedinter
msofl engthofper i
odtheyarepastdue.
-anallowanceisdet
erminedbymul t
ipl
yi
ngt het ot
al ofeachclassi
fi
cat
ionbythe
rateorpercentofl
ossexperiencedbyt heent i
tyforeachcategory.
-amountcomput edrepr
esentst heREQUI REDALLOWANCEFORDOUBTFUL
ACCOUNTSATTHEENDOFTHEPERI OD.

2.Per
centofAccount
sRecei
vabl
e
Page25of25
 -hastheadvantageofpr esent
ingtheaccountsreceiv
ableatesti
matednet
real
i
zablev al
ue.
-anal
lowancei sdet er
minedbymul t
iplyi
ngendi
ngbal anceofaccount
srecei
vabl
e
byacer t
ainrate.
-ther
esult
ingbal ance/amountist
her equir
edbalancefortheal
lowancefor
doubtful
account s.

3.PercentofSales
-hastheadvantageofpresenti
ngpropermatchi
ngofcostagainstrevenue
becausebaddebtlossisdirectl
yrel
atedt
osalesandreport
edi ntheyearof
sale.
-acertai
nrateismult
ipl
i
edbyt heamountofsalestodeter
minet hedoubtful
accountsexpense.

LOANSRECEIVABLE
-recei
vablesofbanksandotherf
inanci
ali
nst
it
uti
ons.
-caneitherbeshort
-t
erm orl
ong-
term.

Ori
ginat
ionFees–t
hef
eeschar
gedbyt
hebankagai
nstt
hebor
rowerf
ort
hecr
eat
ionof
t
heloan.

1.Ori
ginat
ionfeesr
ecei
vedf
rom bor
rower
-r
ecognizedasunear
nedi
nter
esti
ncomeandamor
ti
zedov
ert
het
erm oft
he
l
oan.

2.Dir
ector i
ginati
oncosts
-ori
ginati
onf eesnotchar
geabl
eagainstt
heborrower.
-of
fsetteddirect
lyagai
nstanyunear
nedorigi
nat
ionfeesr
ecei
ved.

Not
e:Ori
ginat
ionfeesreceiv
ed>Di r
ectori
ginat
ioncost=Unear
nedi
nter
esti
ncome*
*amortizat
ionwilli
ncreasei
nter
esti
ncome.

Or
igi
nat
ionf eesrecei
ved<Dir
ector
igi
nat
ioncost=Di
rector
igi
nat
ioncost
s**
*
*amor t
izationwil
ldecr
easei
nter
esti
ncome.

Pr
incipalamountofr eceiv
able xx
Ori
ginati
onf eesrecei
ved (
xx)
Di
rectorigi
nationcostincurr
ed xx
I
nit
ialcarry
ingamountofl oan xx

Note:Becauseoftheor
igi
nat
ionfeesreceivedandthedir
ector
igi
nati
oncosts,
aNEW
EFFECTIVERATEmustbecomput ed.Theef f
ect
iverat
eiscomputedthr
oughthe“
TRI
AL
ANDERROR”or“ INTERPOLATION”appr oach.

I
mpai
rmentofLoan
-t
obeassessedatev
eryendofr
epor
ti
ngper
iodt
odet
ermi
neanyi
mpai
rmentl
oss.

Obj
ect
iveev
idenceofimpairment
1.Signif
icantf
inanci
aldi
ff
icul
tyoft
heissuerorobl
igor.
2.Breachofcont r
act,
suchasdefaul
tordeli
nquencyinint
erestorpr
inci
pal
pay
ment
.
Page26of26
 3.Debtrestr
ucturi
ng
4.Probabil
i
tyoftheborrower’
sbankr
uptcyorot
herf
inanci
alr
eor
gani
zat
ion.
5.Di
sappear anceofanacti
vemarket
.
6.Decreaseintheesti
matedfutur
ecashflows.

Measur
ementofImpairment
-measuredasthedif
ferencebet
weent hecarry
ingamountoftheloanandthepr
esent
val
ueofest
imatedfut
urecashflowsdiscountedattheor
igi
naleff
ect
iver
ateofthe
l
oan.
-theamountoflossshallber
ecognizedi
npr of
itorl
oss.

RECEI
VABLEFI
NANCING
-t
hefi
nanci
alf
lexi
bil
i
tyorcapabi
l
ityofanent
it
ytor
aisemoneyoutofi
tsr
ecei
vabl
es.

1.Pledgi
ngofAccountsReceivable
2.AssignmentofAccountsReceivabl
e
3.Factori
ngofAccountsRecei
v abl
e
4.Discounti
ngofNotesReceiv
abl e

Pl
edgeofAccount sReceivabl
e
-receiv
ableisconsider
edasacol l
ater
al secur
it
yforthepay mentoft
heloan.
-theaccount i
ngentrymadeistheaccount i
ngfortheloanonly.
-i
ft heloanisdiscount
ed,thei
nter
estfortheloanisdeductedinadvance.
-consideredasbor r
owingsonly
.
-i
sgener al,becauseal
laccountsr
eceivableserv
eascol l
ateral
secur
it
yforthel
oan.

Assi
gnmentofAccountsReceivabl
e
-meansthatabor r
owercalledtheassignort
ransfersi
tsr
ight
si nsomeofi tsaccounts
recei
vabl
et oalendercall
edtheassigneeinconsider
ati
onforal oan.
-i
sspecifi
c,becausespecif
icaccountsrecei
vableserv
eascollateralsecur
it
yforthe
loan.

1.Noti
fi
cat
ionBasi
s
-cust
omersarenot
if
iedt
omaket
hei
rpay
ment
sdi
rect
lyt
otheassi
gnee.

2.Nonnoti
fi
cat
ionBasi
s
-cust
omersarenoti
nfor
medt
hatt
hei
raccount
shav
ebeenassi
gned.

Not
e:*Theassigneeusual
lyl
endsonlyacertai
npercent
ageofthef
acevalueofthe
account
sassignedbecausetheassi
gnedaccountsmaynotbeful
lyreal
i
zed.
Thepercentagemaybe70%, 80%or90%.
*Theassi gneechar
gesint
erestf
ortheloan,
servi
cechar
georfi
nancecharge
andassignment .

Fact
ori
ngofAccount
sRecei
vable
-sal
eofaccount
srecei
vableonaWI
THOUTRECOURSENOTI
FICATI
ONBASI
S.

Not
e:*Inf
actor
ing,anentit
ysell
sit
saccountsrecei
vabletoabankorfi
nanceent
it
y
cal
l
edaf actor.
*
Agai norlossi
sr ecogni
zed–thedif
ferencebetweenproceedsr
ecei
vedand
Page27of27
 car
ryi
ngv
alue.

1.CasualFact
ori
ng
-consi
deredasordi
narysal
eofreceiv
able.
-di
ffer
encebetweensalespr
iceoverbookval
uei
sconsi
der
edgai
norl
oss.

2.Factori
ngwi t
hacont inuingagr eement
-therei
sacont inuingagr eementbetweenthef i
nancecompanyandtheenti
ty.
-thefactorassumest hecr editandcoll
ecti
onfuncti
on.
-thefactorusuall
ychar gesacommi ssi
on.
-thefactoral
sowi thholdsanamountaspr otect
ionagai
nstcust
omer’
sretur
nsand
al
lowancesandot herspeci al
adjust
ment s(FACTORSHOLDBACK) .

Not
e:Fact
or’
shol
dbacki
sar
ecei
vabl
efr
om f
act
orandcl
assi
fi
edascur
rentasset
.

Not
esReceiv
abl
e
-ar
eclai
mssuppor
tedbyf
ormal
promi
sest
opayusual
l
yint
hef
orm ofnot
es.

Not
e:Whenapr
omi
ssor
ynot
emat
uresandi
snotpai
d,i
tissai
dtobedi
shonor
ed.

Measur
ementofNotesRecei
vabl
e
1.Ini
ti
alMeasurement
a.shor
t-
term -@ f
aceval
ue

b.l
ong-ter
m
1.i
nterestbeari
ng-@ facev
alue
2.noni
nt er
estbear
ing-@ pr
esentv
alue

2.SubsequentMeasur
ement-@ amor
ti
zedcost

Di
scount
ingofNotesReceiv
able
-meansthatthepayeemayobtai
ncashbyindorsi
ngi
t.Thus,
legal
l
ythepay
eebecomes
anendorserandthebankbecomesanendorsee.

1.Wit
hrecourse
-meansthattheendorsershal
lpaytheendorsee(bank)i
fthemakerdishonor
sthe
not
e.Thi
sisthecontingentli
abi
li
tyorsecondaryl
i
abili
tyoftheendor
ser.

a.Condit
ionalsal
eofNotesRecei
vabl
e
-ther
ei saneedt
orecogni
zeacontingentl
i
abi
l
ity–“
not
erecei
vabl
e
discounted”.

Note:Noter
ecei
vabl
edi
scount
edaccountisdeduct
edfrom t
otalnot
esreceiv
able
whenprepar
ingt
hestat
ementoff
inanci
alposit
ionwit
hdiscl
osureoftheconti
ngent
l
iabi
li
ty.

b.SecuredBorrowi
ng
-thenoterecei
vabl
eisnotder
ecogni
zedbuti
nsteadanaccount
ingli
abi
li
tyi
s
recordedatanamountequalt
othefaceamountofthenot
ereceiv
abledi
scount
ed.

Page28of28
 2.Withoutrecourse
-meanst hattheendorserav
oidsfut
urel
i
abi
l
ityev
eni
fthemakerr
efusest
opayt
he
endorseeont hedateofmaturi
ty.

Ter
msi
ndi
scounti
ngofnotes
1.NetProceeds
-thedi
scountedval
ueoft
henot
erecei
vedbyt
heendor
serf
rom t
heendor
see.

NetPr
oceeds=Mat
uri
tyv
alue–Di
scount

2.Matur
it
yval
ue
-t
heamountdueont
henot
eatt
hedat
eofmat
uri
ty.

Mat
uri
tyVal
ue=Pr
inci
pal
+Int
erest

3.Matur
it
ydat
e
-t
hedateonwhi
cht
henot
eshoul
dbepai
d.

4.Pr
inci
pal
-t
heamountappear
ingont
hef
aceoft
henot
e.I
tisal
sor
efer
redt
oasFACEVALUE.

5.Inter
est
-theamountofi
nter
estf
ort
hef
ull
ter
m oft
henot
e.

I
nter
est=Pr
inci
pal
xrat
ext
ime

6.Inter
estrat
e
-therateappear
ingont
hef
aceoft
henot
e.

7.Ti
me
-t
heper
iodwi
thi
nwhi
chi
nter
estshal
laccr
ue.

8.Di
scount
-t
heamountofi
nter
estdeduct
edbyt
hebanki
nadv
ance.

Di
scount=Mat
uri
tyv
aluexdi
scountr
atexdi
scountper
iod

9.Di
scountRate
-t
herateusedbythebankincomputingt
hediscount.
-i
fnodiscountr
atei
sgiven,t
heint
erestr
atei
ssafelyassumedast
hedi
scountr
ate.

10.Di
scountper
iod
Page29of29
 -t
heper
iodofti
mefrom t
hedateofdi
scount
ingt
omat
uri
tydat
e.
-t
heUNEXPIREDTERM ofthenot
e.

I
NVENTORI
ES

I
NVENTORY
- asset
sheldforsaleintheordinarycour
seofbusi
ness.
- asset
sheldinproducti
onf orsale.
- Materi
alsorsuppl
iestobeconsumedi npr
oducti
onprocess.
- Costofrender
ingaserv i
ce.

Cl
assesofInvent
ories
1.Manuf actur
ingConcer
n
-onethatbuy sgoodswhi
char
eal
ter
edorconv
ert
edi
ntoanot
herf
orm bef
oret
heyar
emade
avail
ableforsal
e.

1.RawMater
ial
s
–goodst
obeusedi
nthepr
oduct
ionpr
ocess.

2.GoodsinProcess
–areparti
all
ycompletedpr
oduct
swhi
chr
equi
ref
urt
herpr
ocessorwor
k
bef
oretheycanbesold.

3.Fi
nishedGoods
-complet
edproduct
swhi
char
ereadyf
orsal
e.

2.Tradi
ngConcern
-onethatbuy
sandsellsgoodsi
nthesamef or
m purchased.
-thet
erm merchandi
seinv
entor
yisgener
all
yappl
iedtogoodshel
dbyt
radi
ngconcer
n.

3.Serv
iceConcer
n
-onethatof
fer
sser
vicesf
oraf
ee.

Note:Allgoodstowhichtheent
it
yhastit
leshallbeincl
udedinthei nv
entory,
regar
dlessof
l
ocation.Thisi
ncl
udesgoodsownedandonhand, goodsintransitandsoldFOBdest i
nat
ion,
goodsi ntr
ansi
tandpurchasedFOBshippi
ngpoi nt
,goodsoutonconsi gnment ,
goodsinthehand
ofsalesmenoragents,andgoodshel
dbycust omeronappr ovaloront r
ial
.

I
. Ownershi
poft hegoodsi ntransit
a.FOBDest i
nati
on
-owner shipofgoodspur chasedistransfer
redonlyuponrecei
ptofthegoodsbythe
buyeratthepointofdest i
nati
on.
-thegoodsi ntransitaresti
llt
hepropertyofthesell
er.
-thesellershal
llegall
yber esponsi
bleforfrei
ghtchargesandotherexpensesupt
o
thepointofdestinati
on.

b.FOBshippi
ngpoint
-ownershi
pist
ransf
err
eduponshi
pmentofgoods.
-thegoodsint
ransi
tar
ethepr
oper
tyoft
hebuyer.
Page30of30
 -t
hebuyershal
ll
egal
l
yberesponsi
bleforf
reightchar
gesandot
herexpensesf
rom
thepoi
ntofshi
pmentt
othepointofdest
inati
on.

I
I. Fr
eightTerms
a.Fr ei
ghtCollect
-t
hef r
eightchargeont
hegoodsshi
ppedshall
becol
l
ect
edbyt
hecommoncar
ri
er
from t
hebuy er.
-t
hef r
eightchargei
sactual
l
ypai
dbythebuyer.

b.Fr
eightPrepaid
-t
hef r
eightchargeont
hegoodsshi
ppedi
sal
readypai
dbyt
hesel
l
er.

I
II
. Mar
it
imeShi ppingTer ms
a.FreeAlongside( FAS)
-thesellerbearsal l
expensesandr iski
nv ol
vedindeli
veri
ngthegoodstothedockor
shippingar ea.
-thebuy erbearst hecostofl oadingandshipment.
-ti
tl
epassest othebuy erwhent hecarri
ertakespossessi
onoft hegoods.
b.Cost,i
nsur anceandf reight(CIF)
-thebuy eragreest opayi nal umpsum t hecostofthegoods,insur
ancecostand
frei
ghtchar ge.
-thesellermustpayf orthecostofl oadi
ng.
-ti
tl
eandr i
skofl ossshal lpasstothebuy erupondeli
veryofthegoodstothecar
rier
.

c. Ex-shi
p
-thesell
erbear
sallexpensesandri
skofl
ossunt
ilt
hegoodsar
eunl
oaded.
-ti
tleandri
skoflossshallpasst
othebuy
er.

I
V. Consignment
-amet hodofmar keti
nggoodsinwhichtheowner (
consignor)t
ransf
ersphysical
possessionofcertai
ngoodstoanagent (
consignee)whosel l
sthem ontheowner ’
s
behalf.
-consignedgoodsshouldbeincludedi
nconsignor’
sinventoryandexcludedfrom t
he
consignee’
sinventory.
-frei
ghtandotherhandli
ngchargesongoodsoutonconsi gnmentarepartofthecost
ofgoodsconsi gned.

V. AccountingforInv entori
es
a.Per i
odicSy stem
-call
sforthephy sicalcounti
ngofgoodsonhandattheendoft
heaccount
ingper
iod
todet er
mi nequant i
ti
es.
-giv
esact ual orphy si
calinventori
es.
-generall
yusedwhent hei nventor
yit
emst
urnov
erisrapi
dandhav
esmal l
peso
investment .

b.Perpetual
System
-requir
esthemai ntenanceofrecordscal
l
edst ockcar
dsthatusual
l
yof
ferarunni
ng
summar yoft heinventor
yinflowandoutfl
ow.
-givesbookorper petuali
nventor
ies.
-commonl yusedwhent heinventor
yit
emst ur
nov eri
ssl
owandhav el
argepeso
Page31of31
 i
nvest
ment
.

VI
. Di
scount
s
a.TradeDiscounts
-deducti
onsf r
om theli
storcatal
ogpri
cei
nordert
oar
ri
veatt
hei
nvoi
cepr
icewhi
ch
i
stheamountact ual
lychar
gedt ot
hebuyer
.
-notrecordedinthecompany’sbooks.

b.CashDiscount
s
-deduct
ionsfr
om t
heinvoi
cepr
icewhenpay
menti
smadewi
thi
nthedi
scountper
iod.
-thepur
poseistoencour
agepr
omptpayment.

1.PurchaseDi scounts
-cashdiscountont hepartoft
hebuyer
.
-deduct
edf rom purchasestoar
ri
veatnetpur
chases.

2.SalesDiscount
s
-cashdi
scountonthepar
tofthesel
ler
.
-deduct
edf r
om sal
est
oarri
veatnetsal
es.

VI
I. Met
hodsofr ecor
dingpur
chases
a.GrossMet hod
-purchasesandaccount
spayabl
ear
erecor
dedatgr
oss.

b.NetMet hod
-purchasesandaccount spayablearerecordedatnet
.
-thecostrepresentt
hecashequi val
entpriceonthedateofpay
mentandt
her
efor
e
thetheoreti
call
ycorrecthi
stor
icalcost.

VI
II
. MeasurementofInvent
ory
a.Lowerofcostornetr eal
izabl
evalue
b.CostshallbedeterminedbyusingFIFOorWeight
edAverageMethod.
c. Speci
fi
cIdent
ifi
cati
onMet hod–forassett
hataresegr
egatedf
orspeci
fi
cpr
oject
s.

I
X. Costofinventori
es
a.CostofPur chase
-compr i
sesthe1)Pur chaseprice,2)Importdut i
es,
3)Ir
revocabl
etaxes,4)Fr
eight
charges,5)Handl i
ngandot herdirect
lyattr
ibutabl
ecosts.
-tr
adediscount sandrebatesandsi mil
aritemsar edeductedindet
erminingt
hecost
ofpurchase.
-i
fpurchasedwi thdeferr
edset t
lementt er
ms, thedif
fer
encebetweenpurchasepri
ce
andamountpai disrecogni
zedasi nt
erestexpense.

b.CostofConv er
sion
-i
ncludescostdirectl
yrel
atedtoconver
ti
ngmat
eri
alsi
ntof
ini
shedgoodssuchas
dir
ectlaborandf act
oryoverhead.

c. Ot
hercosti
ncur
redi
nbr
ingi
ngt
hei
nvent
ori
est
othei
rpr
esentl
ocat
ionandcondi
ti
on.

Page32of32
 Not
e:t
hesecostsar eexcludedf rom t hecostofinvent
oriesandrecognizedasexpensesi n
t
heper
iodi
nwhi cht heyar eincurr ed.
1.Abnor malamount sofwast edmaterial
s,l
aborandot herproducti
oncosts.
2.St oragecost s,unlesst hesecostsarenecessaryintheproductionprocesspri
or
toaf urtherproduct i
onst age.
3.Admi nistrat
iveov erheadst hatdonotcontr
ibutetobringi
nginventor
iestothei
r
presentl ocat
ionandcondi tion.
4.Di str
ibutionorsel li
ngcost s.

X. CostDet erminant
a.Fi rstin,Firstout( FIFO)
-assumest hatthegoodsf irstpurchasedarefi
rstsoldandconsequent l
ythegoods
remai ni
ngi ntheinv entoryatt heendoft heperiodarethemostr ecent
lypurchased
orpr oduced.
-thei nvent oryisthusexpr essedi nter
msofr ecentornewpr iceswhilet
hecostof
goodssol di srepresent ati
v eofearli
eroroldprices.
Not e:Inper iodofi nfl
ationorr i
singpri
ces,theFIFOmet hodwoul dresul
ttothehighestnet
i
ncome.Howev er,i
naper iodofdef lat
ionordeclini
ngprices,
theFIFOmet hodwoul d
resulttot hel owestneti ncome.
1.FI FO–Per iodic
2.FI FO–Per pet ual

b.Wei
ghtedAv er
age
1.Wei ghtedAver
age–Per i
odi
c
-theaverageuni
tcostiscomputedbydiv
idingt
hetot
alcostofgoodsav
ail
abl
e
forsal
ebyt het
otalnumberofunit
savai
lablef
orsal
e.

2.Wei ghtedAverage–Perpet
ual
-al
soknownasMOVI NGAVERAGEmethod.
-underthismethod,anewweight
edav
erageuni
tcostmustbecomput
edaf
ter
ever
ypur chase.

c. Lastin,
Lastout( LIFO)
-assumest hatthegoodslastpurchasedar
efir
stsol
d.
-theinv
entoryisthusexpressedintermsofear
li
erorol
dpr
icesandt
hecostofgoods
soldisrepresentati
veofrecentornewpri
ces.

1.LI
FO–Per
iodi
c
2.LI
FO–Per
petual

d.Specif
icIdent
ifi
cati
on
-meanst hatspecif
iccostsar eattri
butedtoidenti
fi
editemsofi nv
entor
y.
-requi
resrecordswhi chwi l
lclear
lydeter
mi netheactualcostsofgoodsonhand.
-appropr
iateforinventori
est hataresegregatedforaspecifi
cproj
ectandi
nventor
ies
thatarenotor di
naril
yinterchangeable.

XI
. Measur
ementatLowerofCostorNRV
a.NetReali
zabl
eValue
-istheest
imat
edsell
ingpri
ceint
heor
dinar
ycour
seofbusi
nessl
essest
imat
edcost
t
ocompleteandcosttosel
l.
Page33of33
 -usual
l
ywr
it
tendownonani
tem byi
tem basi
s.

b.Cost
-t
heamountofpur
chasepr
icepl
usdi
rect
lyat
tri
but
abl
ecost
.

XI
I. Account i
ngf ori
nvent
orywrit
e-down
a.Di rectMet hod
-theinv ent
oryisr
ecordedatthel
owerofcostornetr
eal
izabl
eval
ue.
-anyl ossoninvent
orywrit
e-downisbur
iedi
nthecostofgoodssol
d.

b.All
owanceMet hod
-theinv
entor
yisr ecordedatcostandanyl ossoninvent
orywr i
te-downisaccount
ed
forseparat
ely.
-underthi
smet hod,al ossaccount“l
ossoni nv
entorywri
te-
down”i sdebit
edanda
v al
uat
ionaccount“ al
lowanceforinvent
orywrite-
down”iscredit
ed.

XI
II
. Pur
chaseCommi tments
-areobli
gati
onsoftheenti
tytoacqui
recert
aingoodssomet i
meinthef
utur
eata
fi
xedpri
ceandfixedquanti
ty.
-anylosseswhichareexpect
edt oar
isef
rom fi
rm andnoncancel
abl
ecommitment
s
shal
lberecogni
zed.

-i
fther
eisdecl
inei
npurchasepr
iceaft
erapurchasecommi
tmenthasbeenmade,
a
l
ossisrecor
dedintheperi
odofthepr
icedecl
ine.

I
NVENTORYESTIMATION
- theappr
oxi
mationoftheval
ueoftheinv
ent
orywheni
tisnotpossi
bletotakephysicalcount
,
oreveni
fphysi
calcounti
spossi
ble,t
hesamemayprovecostl
y,di
ff
icul
torinconvenientat
themoment.

a.GrossPr ofitMethod
-oftenusedt oestimatethev al
ueofani nv
entor
yfrom accounti
ngrecordswithouttaki
ng
phy si
cal count
.
-basedont heassumpt i
ont hattherat
eofgrosspr
ofitremainsapproxi
matelythesame
from periodtoper i
odandt herefor
etherati
oofcostofgoodssoldt onetsalesis
relati
velyconstantfrom peri
odt operi
od.

Comput
edasfol
l
ow:
COSTOFGOODSAVAILABLEFORSALE(
COGAS) xxxx
COSTOFSALES (
xxxx)
ENDI
NGINVENTORY xxxx

Comput
ati
onofcostofsal
escanbe:
1.BasedonSales
-computedbymult
ipl
yi
ngcostr
ati
owi
thnetsal
es.

2.BasedonCost
-comput
edbymul
ti
ply
ingsal
esr
ati
owi
thnetsal
es.
Page34of34
 Note:I
ncomputi
ngfort
henetsal
es,theSalesAll
owanceandSalesDi
scountar
e
DISREGARDED.I
tisf
orther
easonthattheseit
emsdecreasedt
heamountofsales,
howevert
heydonotaff
ectt
hevolumeofgoodssol d.

b.Retai
lInventor
yMethod
-general
lyemploy
edbydepar t
mentstor
es,supermarketsandotherr
etai
lconcer
ns
wheret herei
sawidevari
etyofgoods.
-camet oitsnamebecausethesel
li
ngpri
ceorr et
ail
priceist
aggedtoeachitem.

Thefol
l
owinginformat i
oni srequiredindeter
mi ni
ngretaili
nventorymethod.
1.Beginninginventoryatcostandatr et
ail
.
2.Purchasesatcostandatr etai
l
.
3.AdjustmentssuchasMar kup,Mar kupCancelati
on,Mar kdown,MarkdownCancel
ati
on,
Department alTransfer,
Breakage,Shrinkage,
Thef t,DamagegoodsandEmpl oyee
Discount.
Computedasfollows:
COSTOFGOODSAVAI LABLEFORSALE@ RETAI L xxxx
NETSALES (xxxx)
ENDINGINVENTORY@ RETAI L xxxx
xCOSTRATI O %
ENDINGINVENTORY@ COST xxxx

Costr
ati
oFor
mul
a:
COGAS@ COST
Costr
ati
o=
COGAS@ RETAI
L

Ret
ail
Inv entoryConsi der ati
ons
1.I nit
ialmar kup
-originalmar kuponcostofgoods.
2.Or iginalretai
l
-thesal espr i
ceatwhi chthegoodsar ef i
rstof f
eredforsal
e.
3.Addi ti
onalmar kup
-increasei nsalespr i
ceovertheori
ginal salespr i
ce.
4.Mar kupCancel ation
-decr easeinsal espr icebutnotbelowor igi
nal salespr
ice.
5.Netaddi t
ionalmar kup
-mar kupl essmar kupcancellat
ion.
6.Mar kdown
-decr easeinsal espr icebel
owt heoriginalsalespr i
ce.
7.Mar kdowncancel lat
ion
-increasei nsalespr i
cebutnotabov eor i
ginalsalespri
ce.
8.NetMar kdown
-mar kdownl essmar kdowncancelati
on.
9.Mai ntainedMar kup
-differencebet weencostandsal espriceaf tertheaboveadjust
ment
s.

Ot
heradj
ustmentsandtheirt
reatment
1.Pur chasedi
scount
-deductedf
rom purchases@ costonl
y.
Page35of35
 2.Pur chaser eturn
-deduct edf rom pur chases@ costandr etail
.
3.Pur chaseal l
owance
-deduct edf rom pur chases@ costonl y.
4.Fr eighti n
-additiont opur chases@ costonl y.
5.Depar t
ment altransferi n
-additiont opur chases@ costandr etail
.
6.Depar t
ment altransferout
-deduct i
onf r
om pur chases@ costandr etai
l.
7.Sal esdi scountandsal esall
owance
-disregar ded.
8.Sal esr et urn
-deduct edf rom sales.
9.Empl oy eedi scount s
-addedt osal es.
10.Nor malshor tage, shr i
nkage,spoil
age,breakage
-deduct edf rom COGAS@ r etai
l.
11.Abnor malshor tage,shr i
nkage,spoil
age,breakage
-deduct edf rom COGAS@ costandr etail
.

Ret
ail
inventor
yapproaches
1.Conservati
veApproach
-i
ncl
udesnetmar kup,
excludesnetmar
kdownandi
ncl
udesbegi
nni
ngi
nvent
oryi
n
comput
ingforthecostrat
io.

2.Aver
ageCostApproach
-i
ncl
udesnetmarkup,i
ncl
udesnetmar
kdownandi
ncl
udesbegi
nni
ngi
nvent
oryi
n
comput
ingfort
hecostrat
io.

3.FI
FOApproach
-i
ncl
udesnetmar
kup,
incl
udesnetmar
kdownbutdonoti
ncl
udebegi
nni
ngi
nvent
ory
i
ncomputi
ngfort
hecostr
ati
o.

AGRI
CULTURE

AGRI
CULTURE(PAS41)
- appl
i
estothefol
l
owi
ng:

1.Biol
ogicalAsset
s
-areli
vinganimal
sandl
i
vingpl
ant
s.

2.Agri
cul
tur
alProduce
-t
heharvest
edproductofanent
it
y’
sbi
ologi
cal
asset
s.

3.Gov
ernmentGr
antr
elat
edt
oBi
ologi
cal
Asset
s

Not
e:PAS41isappl
iedt
oagri
cul
tur
alpr
oduceatt
hepoi
ntofhar
vest
.Ther
eaf
ter
,PAS2
oni
nvent
ori
esshal
lbeappl
i
ed.

Page36of36
Agr
icul
tur
e
- t hemanagementbyanent i
tyofthebiologi
calt
ransfor
mationandhar
vestofbiological
asset
sf orsaleorf orconversionint
oagr i
cul
tur
alproduceonint
oaddi
tional
biological
asset
s.
- Exampl esofagr i
cul t
uralactiv
ityi
ncludes:
1.Raisinglivest
ock
2.Annual orper ennialcropping
3.Cultivati
ngor chardsandpl antat
ions
4.Floricul
ture
5.Aquacul ture,
includingfishfarming

Feat
uresofagri
cul
tur
alact
ivi
ty
a.Capabil
i
tytochange
-Liv
ingani
malsandplant
sar
ecapabl
eofbi
ologi
cal
transf
ormat
ion.

b.Managementofchange
-themanagementofagri
cult
ural
act
ivi
tyt
ofaci
li
tat
ethebi
ologi
caltr
ansf
ormati
onby
enhanci
ngoratl
eaststabi
li
zi
ngcondi
ti
onsnecessar
yfort
heprocesstotakepl
ace.

c. Measurementofchange
-thechangei
nquali
tyorquant
it
ybr
oughtaboutbybi
ologi
cal
transf
ormat
ionor
harvest
.

Bi
ologi
cal
Transformat
ion
- compr isest
hepr ocessofgrowth,
degener
ati
on,producti
onandpr
ocr
eat
iont
hat
causequali
tat
iveorquanti
tati
vechangesi
nabiological
asset
.

1.Assetchanges
a.Gr owth
-i
ncreaseinquanti
tyori
mprov
ementinqual
i
tyoranani
mal
orplant
.
b.Degener ati
on
-decreaseinquant
it
yordet
eri
orat
ioni
nqual
it
yofanani
malorpl
ant
.

c. Procreati
on
-creati
onofaddi
ti
onal
li
vi
ngani
mal
orpl
ant
.

2.Pr
oduct
ionofagr
icul
tur
alpr
oduce

Recogni
ti
onofbi
ologicalassetoragr i
cult
uralpr
oduce
a.Theent i
tycontrolstheassetasaresul
tofpastevents.
b.Itisprobabl ethatfutur
eeconomicbenefi
tsassoci
atedwit
htheassetwi
l
lfl
ow
totheentit
y .
c. Thefairvalueorcostoft heassetcanbemeasuredreli
abl
y.

Measur
ement
1.Biol
ogi
calasset
-measuredatfai
rval
uel
esscost
stosel
l
.

2.Agr
icul
tural
produce
-measuredatfai
rval
uel
esscost
satt
hepoi
ntofhar
vest
.
Page37of37
 Fai
rval
ueofbi ologi
calasset
- t herei sapresumptionthatf
airv
aluecanbemeasuredrel
iabl
yforabiol
ogi
cal
asset
.
- iff airval
ueisunreli
able,t
hebiol
ogical
assetshal
lbemeasuredatcostl
ess
accumul ateddepreciat
ionandanyaccumulatedi
mpair
mentloss.

Fai
rval
ueofagri
cult
uralpr
oduce
- Inallcases,anent
it
yshallmeasureagr
icul
tur
alpr
oduceatt
hepointofhar
vestatf
air
val
uelesscosttosel
l.
- Thef ai
rvalueofagri
cul
tur
alproducest
opsatthepoi
ntofhar
vest
.

Det
ermi
nat
ionoff
airv
alue
PAS41set
soutsever
alway
sofmeasur
ingf
airv
aluewhi
chi
ncl
udet
hef
oll
owi
ng:

1.Quotedpr i
ceinanact ivemarket.
2.Mostr ecentmarkettransacti
onprice.
3.Marketpr i
ceforsimilarassetwit
hadj ust
menttorefl
ectanydif
fer
ences.
4.Sectorbenchmar k,suchasv al
ueofanor chardperhectare,
orval
ueofcatt
leper
ki
logram.
5.Presentvalueofexpect ednetcashflowsf r
om t
heasset .

Accounti
ngforGai norLoss
1.Bi ol
ogicalasset
-anygainorlossonini
ti
alr
ecogni
ti
onandsubsequentchangesi
nfai
rval
uel
esscost
tosell
shallbeincl
udedi
nPROFITORLOSS.

2.Agri
cul
turalproduce
-anygainorlossari
singf
rom i
nit
ial
recogni
ti
onatf
airv
aluel
esscostt
osel
lshal
lal
so
beincl
udedinPROFI TORLOSS.

Note:Anent i
tyshalldi
scl
osetheaggregat
egainorlossari
singont
heini
ti
alr
ecognit
ion
ofbiol
ogicalassetsandagri
cult
uralpr
oduceandfrom thechangei
nfai
rval
uelesscostto
sel
lofbiologi
calassets.

Gov
ernmentgrant
1.Unconditional
-r
ecognizedasincomeati
tsf
airv
aluel
esscostt
osel
l
.

2.Condi
ti
onal
-r
ecogni
zedasi
ncomeonl
ywhent
hecondi
ti
onsat
tachi
ngt
othegr
antar
emet
.

I
NVESTMENTS

I
NVESTMENTS
-asset
sheldforaccr
etionofweal
ththr
oughdist
ri
but
ion(ex.Int
erest,
royal
ti
es,di
vidends
andrental
s).
-asset
sheldforcapi
talappr
eci
ati
onorforot
herbenefi
tstotheinvesti
ngenti
tysuchas
thoseobtai
nedthr
ought r
adi
ngrel
ati
onshi
p.

Reasonsf
orhol
dingi
nvest
ment
:
Page38of38
 1.Accr
etionofweal th
2.Capi
talappreciati
on
3.Ownershipcont r
ol
4.Meeti
ngbusi nessrequi
rement
s
5.Prot
ection

Fi
nanci
alI
nstr
uments
- anycontractthatgi
vesri
setoaf i
nancialassetofoneent
iyandaf
t i
nanci
all
i
abi
l
ityor
anequi
tyinst
rumentofanotherenti
ty.
- encompassesaf i
nanci
alasset
,afinanciall
i
abil
it
yandanequit
yinst
rument.

Fi
nanci
alasset
:
Anyassett hati
s:
1.Cash
2.Acont ractualr
ightt
orecei
vecashoranotherfi
nanci
alassetf
rom anot
herent
ity
.
3.Acont ractualr
ightt
oexchangefinanci
ali
nst
rumentwithanot
herenti
tyunder
condit
ionsthatarepot
enti
all
yFAVORABLE.
4.Anequi tyi
nstr
umentofanotherenti
ty.

Fi
nanci
all
i
abil
it
y
Anyli
abi
li
tythati
sacontractualobli
gati
on:
1.Todel i
vercashorot
herf i
nancialassett
oanotherent
it
y.
2.Toexchangef i
nanci
alinstr
ument swithanot
herenti
tyundercondi
ti
onst
hatar
e
pot
enti
all
yUNFAVORABLE.

Equi
tysecuri
ty
- encompassesanyi
nstr
umentrepr
esenti
ngownershi
psharesandr
ight
,war
rant
sor
opt
ionst
oacqui
reordi
sposeofownershi
pshar
esatafixedordet
ermi
nabl
epri
ce.

CLASSI
FICATIONOFI NVESTMENTS
A.I nvest
mentinequit
ysecuri
ti
es
B.I nvest
mentindebtsecur
it
ies
C.I nvest
mentproper
ty
D.Ot herinv
estments

I
NVESTMENTINEQUITYSECURITIES
- repr
esent
sowner
shipinteresti
nanequity(ex.Or
dinar
yshar
eorprefer
enceshare)or
theri
ghtt
oacqui
reowner shipi
nter
est(
ex.Shareopti
ons,
sharewar
rantsandetc.
).

Note:Thi
ster
m doesnotencompasscal
l
abl
eorr
edeemabl
epr
efer
enceshar
e,t
reasur
y
shareandconver
ti
blebonds.

1.Small
inv
est
ments
2.I
nvest
menti
nsubsi
diar
y
3.I
nvest
menti
nassoci
ate

SMALLI
NVESTMENTS
- ar
einvest
ment
sint
hei
nvest
ee’
sst
ockwi
thoutcont
rol
l
ingi
nter
estorsi
gni
fi
cant
i
nfl
uence.
Page39of39
1.InvestmenttoPr ofitorLoss
-alsoknownasTr adingSecurit
y.
-acquiredpri
ncipal l
yf ort
hepurposeofgenerat
ingapr
ofi
tfrom shor
t-
ter
m
fluct
uationsi
npr iceordeal er
’smargi
n.
-generallymarketable( wi
threadil
ydet
erminabl
emarketv
alue).

Measurement:
a.Ini
tialRecogni
ti
on
-measur edatFAIRVALUE.
-transacti
oncosti
ncur
redi
sconsi
der
edasout
ri
ghtexpense.

b.SubsequentRecognit
ion
-measur edatFAIRVALUE.
-changesinfairv
aluesubsequentt
oacqui
sit
ionar
erepor
tedi
nthepr
ofi
tor
l
ossoft heperi
odofsuchchange.

Recl
assif
icat
ionofInv
est
menttoProf
itorLoss
-t
ransferi
nandoutoft
hiscat
egoryisnotal
l
owedbyt
hest
andar
ds.

2.Inv
est
menttoOCIorEqui
ty
soknownasAv
-al ai
labl
eforSal
eSecur
it
y.

Measur
ement:
1.Ini
ti
alr
ecognit
ion
a.Market
able
-measuredatFAI
RVALUEpl
usTRANSACTI
ONCOST.

b.Non-
mar ket
abl
e
-measuredatFAI
RVALUEpl
usTRANSACTI
ONCOST.

2.Subsequentrecognit
ion
a.Marketabl
e
-measuredatFAI RVALUEorIMPAIREDVALUE(ift
her
e’sobj
ect
ive
evi
denceofi mpairment
).
-anychange(incr
easeordecr
ease)i
srepor
tedi
nequit
y.

b.Non-market
abl
e
-measuredatHISTORI
CALCOSTorBOOK/ CARRYINGVALUE.
-i
fsecuri
ti
esareimpai
red,
iti
srepor
tedatI
MPAIREDVALUE.

I
mpai
rmentofAvail
ableforsale–Equi t
y
-Thecumulati
velossthathasbeenr ecognizeddir
ectl
yinequi
tymustbe
removedfr
om equityandrecognizedinprofitorl
oss.Thi
sincl
udesany
decl
inei
nfairval
uealreadyrecognizedinequitypl
ustheimpai
rmentloss.

Acqui
sit
ionofinvestment
a.Di vidends-on
-i
facquiredorsol
dbet
weent
hedat
eofdecl
arat
ionanddat
eofr
ecor
d.
Page40of40
 -t
hecostofacqui
ri
ngt
heinst
rument
sincl
udestheamountpai
dfort
he
i
nstr
umentsplust
heamountpai
dfort
hedivi
dends.

b.Ex-div
idend
-i
facqui r
edorsol
dbet
weenthedateofrecor
danddateofpayment
.
-thecostofacqui
ri
ngt
heinst
rumentsi
ncludeonl
ytheamountpai
dfort
he
i
nst r
ument .

Accounti
ngforDivi
dendsonEquit
yI nstr
uments
1.Cashdi vi
dend
-r
ecognizedasincomeatt hedat
eofdecl
arat
ion.
-measuredatFaceValue.

2.Proper
tydivi
dend
-r
ecognizedasincomeatthedat
eofdecl
arat
ion.
-measuredatFairVal
ueofthepr
oper
ty.

3.Sharedivi
dend
-notrecogni
zedasincome.
-memoent r
yonl
yismadetoacknowl
edget
her
ecei
ptofnewshar
es.

a.SmallDi
vidends
-i
fdi
v i
dendislessthan20%.
-r
ecordedatFairValue.

b.LargeDiv
idends
-i
fdivi
dendis20%orabov
e.
-recor
dedatParval
ue.

4.Sharesinl
ieuofcashdivi
dends
-recogni
zedasincome.
-measuredatfai
rvalueoftheshar
es.

5.Cashinlieuofshar
edivi
dends
-notrecogni
zedasdiv
idendincome.
-thecashrecei
vedist
heproceedsoftheasi
fsal
eofshar
es.

Accounti
ngforshar eri
ght
s
a.Uponr ecei
pt
-thecarryi
ngvalueoft
heequi
tyi
nstr
umentisall
ocatedusingtheper
centageofthei
r
separatemarketval
uesov
erthecombinedmarketvaluesoftheequi
tyandtheshare
ri
ghts.

1.Right
s-on
-meanst hattheequit
yinst
rumenti
scurrent
lytr
adedwiththeri
ghtt
oacquire
addit
ionalshares.
-themar ketvalueoft
heequit
yinst
rumental
readyincl
udesthemarketv
alueof
thesharer i
ghts.

2.Ex-
ri
ght
s
Page41of41
 -meanst
hattheequi
tyinst
rumentsar
esepar
atel
ytr
aded.
-t
hemarketv
alueoftheequit
yinst
rument
sissepar
atef
rom t
hemar
ketv
alue
oft
hesharer
ight
s.

b.Uponex erci
se
-thecostassignedtothenewsharesacqui r
edwill
bedebit
edt oasepar
ate
i
nv est
menti nequi
tyaccount(
tradi
ngorav ai
labl
eforsal
e).
-thecostassignedshouldi
ncl
udet heamountpaidinacquir
ingnewsharespl
ust
he
costassignedtotheri
ghtsbei
ngexer ci
sed.

c. Uponexpir
ation
-i
fthesharerightswerenotexer
cisedandhadtheyexpi
red,
thecostassi
gnedt
oan
expi
redsharerightsshoul
dbechargedtoLossonShareRights.

I
NVESTMENTI
NEQUI
TY&I
NVESTMENTI
NASSOCI
ATE

Cl
assi
fi
cati
onofInv
est
menti nEqui
tySecur
it
ies
1.I nv
estmenti
nSubsidi
ary
2.I nv
estmenti
nAssociate
3.Smal lI
nvest
ments

I
NVESTMENTINSUBSI DI
ARY
- Whent heownershi
pinter
estismor ethan50%.
- Theentit
yhasControlovert
heot herenti
ty.
- AccountedunderCostorPurchaseMet hod.

I
NVESTMENTINASSOCI ATE
- Whent heownershi
pi nt
erestis20%to50%.
- Theentit
yhasSignif
icantInf
luenceovert
heot
herent
it
y.
- AccountedunderEquityMethod.

Associ
ate
- i sanenti
ty,i
ncludi
nganun- i
ncor
porat
edentit
ysuchasapartnershi
p,ov
erwhi chthe
i
nvest
orhassignif
icanti
nfl
uenceandthati
sneit
herasubsi
diarynoranint
erestina
j
ointv
ent
ure.

Measur
ement
EquityMet hod
- amet hodofaccount ingwherebytheinvestmentisini
tiall
yr ecor
dedatcostand
adjustedt her
eaf t
erforpost-
acquisi
ti
onchangei ntheinv estor’
sshareofnetasset
sof
theinvest ee.
- Thepr ofitorlossoft hei
nvestori
ncludestheinvestor
’sshar eoftheprofi
torlossof
theinvest eeadjustedfort
heef f
ectofanyf ai
rvaluedif
f erencesrecogni
zedon
acquisiti
onoft heassociate.

1.Ini
ti
alRecogni
ti
on
-measuredathist
ori
cal
cost(
Thef
airv
aluepl
ust
ransact
ioncosti
ncur
red)
.

2.SubsequentRecogni
ti
on
Page42of42
 -thecostandcar
ryi
ngval
ueoft
heequi
tysecuri
ti
esisincreasedordecr
easedto
recogni
zethei
nvest
or’
sshar
eofthepr
ofi
torlossoftheinvesteeaf
tert
hedateof
acquisi
ti
on.

I
NVESTMENTINDEBTI NSTRUMENTS
- repr
esentcr
editor
’scl
aim wi
thfi
xedamountandusual
lysomeint
erestobl
igat
ion(ex.
Governmentsecuri
ti
es,cor
porat
ebonds,
conver
ti
blebonds,commerci
alpaper
, et
c.)
.

Cl
assi
fi
cat
ionofDebtSecurit
ies
1.TradingSecuri
ti
es
2.Av ail
abl
eforSaleSecuri
ti
es
3.Hel dtoMatur
itySecuri
ti
es

I
NVESTMENTTOPROFI TORLOSS( TRADINGSECURI TI
ES)
Measurement:
1.I
nit
ialRecognit
ion
-measuredathistor
icalcost(f
airval
uewhichi
sthet r
ansact
ionpr
ice)
.
-Anytransact
ioncostincurr
edisrecogni
zedoutr
ightasanexpense.

2.SubsequentRecogni
ti
on
-remeasuredatf
airv
al ue.
-anyincr
easeordecreaseinthev al
ueofthedebti
nstr
umenti
srecogni
zedin
prof
itorl
oss.
-notsubj
ecttoamortizati
onsincetheyar
esoldwit
hinaver
yshortper
iodofti
me.

I
NVESTMENTI NAVAI LABLEFORSALESECURITIES
Measurement:
1.I
nit
ialRecogni
ti
on
-measuredathi
stor
ical
cost(
fai
rval
uepl
usanyt
ransact
ioncosti
ncur
red)
.

2.SubsequentRecogniti
on
-remeasuredatfairv
alue.
-anyincreaseordecreasei
nthevalueofthedebtinst
rumenti
srecognizeddi
rect
ly
i
nequi t
y.
-subj
ectt oamorti
zati
onbecausetheyaregeneral
l
yheldforalongerperi
odof
ti
me.

I
NVESTMENTI
NHELDTOMATURI
TYSECURI
TIES

Hel
dtomat
uri
tyinvest
ments
- Non-der
ivat
ivef
inancialasset
s.
- Wit
hf i
xedordeterminablepaymentsandfi
xedmatur
it
y.
- Theenti
tyhastheposi t
iveint
ent
iontohol
dthem t
omat ur
it
y.

Measurement:
1.I
nit
ialRecogni
ti
on
-measuredathi
stor
ical
cost(
fai
rval
uepl
usanyt
ransact
ioncosti
ncur
red)
.

2.SubsequentRecogni
ti
on
Page43of43
 -notremeasuredbutreportedatamort
izedcost
.
-incr
easesordecreasesasar esul
tofmarketfl
uct
uati
onsarenotrecogni
zed.
-ifther
eisobject
iveevidenceofimpai
rmentthedebtsecur
it
yshouldbe
remeasuredatit
simpairedv al
ue.

TheTai
ntingRul es
Whenanent it
ydur i
ngt hecurrentfi
nancialy earhassol dorreclassi
fiedmor ethanan
i
nsi gni
f i
cantamountofhel dtomat uri
tyinvest ment sbef oremat uri
ty,i
tisprohibi
tedfrom
classifyi
nganyf inancialassetasheldt omat uri
tyf oraper i
odoft woy earsafterthe
occur r
enceoft hisev ent.Furt
hermore,alltheent ity’sheldtomat uri
tyinvestmentsmust
ber eclassif
iedintotheav ail
ableforsalecat egoryandmeasur edatf ai
rvalue.Inasensea
penal t
yisimposedf orachangei nmanagement ’sintenti
on.Whent heprohibi
tionends(at
theendoft hesecondy earfoll
owingthet ainting),thepor t
fol
iobecomescl eansedandt he
entityisoncemor eablet oassetthatithast hei ntentandabi l
itytoholddebti nstruments
tomat ur i
ty.

Changeint
hecategoryofadebtinstr
ument
1.AFStoHTM
-measuredatamor ti
zedcostratherthanatfairv
alue.
-theamor t
izedcostoft
heinvestmenti nav
ailabl
eforsal
eont
hedat
eoft
ransf
erwi
l
l
becomet hecostofthenewcat egory
.

Note:Theamor t
izedcostistheexpectednetcashi
nfl
owbasedf
rom hol
dingthe
i
nvestmenttil
lmat ur
it
ydiscountedattheef
fecti
ver
atewhi
chist
herateattheti
me
t
heor i
ginali
nvestmentwasi ni
ti
all
yrecogni
zed.

2.HTM toAFS
-measur edatfai
rv al
ueatt hedateoftr
ansf
errat
herthanatamor tizedcost
.
-thedif
ferenceofthef airv
alueandtheamorti
zedcostisrecognizedasunreali
zed
gainorlosstober eportedinthestat
ementofcomprehensiveincomeundert he
categor
yot hercomprehensi v
eincome.

I
NVESTMENTPROPERTY

I
nvest
mentPr
operty
- Apropertyheldbytheownerort
hel
esseeunderaf
inancel
easet
oear
nrent
alsorf
or
capi
talappreci
ati
onorboth.
- Canbel andorbuil
dingorbot
h.

Measur
ement
1.Ini
ti
alRecogni
ti
on
-Ini
ti
all
yrecor
dedatcost(
fai
rval
uepl
usdi
rect
lyat
tri
but
abl
ecost
).

2.SubsequentRecogni
tion
a.CostModel
-measuredatcostlessaccumul
ateddepr
eciat
ionlessanyaccumul
ated
i
mpairmentlosses.
-i
fcostmodel isf
oll
owed,thef
airval
ueofthepropert
yshoul
dbedisclosed.

b.Fai
rVal
ueModel
Page44of44
 -thefai
rv al
uepol
icyrequi
rest
heent
erpr
isetor
eval
ueit
sinv
estment
propert
ieseachyear,
anygainorl
ossbei
ngincl
udedi
nthenetprof
itorl
ossf
or
theperi
od.

Note:Ifanentityhaspreviousl
ymeasur edaninvestmentpropert
yatfairval
ue,it
shallconti
nuetomeasur etheproper
tyatfairv
alueuntildi
sposal(orunti
lthe
propertybecomesowner -
occupiedpropert
yortheent i
tybegi
nstodev el
opt he
propertyforsubsequentsaleintheordinar
ycourseofbusiness)evenif
compar ablemar kett
ransacti
onsbecomel essfrequentormarketpri
cesbecome
l
essr eadil
yavailabl
e.

Tr
ansf
ert
oorf rom InvestmentPropert
yClassifi
cati
on(
transf
erundert
hefai
rvaluemodel)
1.InvestmentPr opert
ytoProperty,
PlantandEquipment
-itshouldbecar ri
edatfairval
ue.
-thef ai
rv al
ueatthedateoft r
ansferbecomesthedeemedcostforsubsequent
account i
ngunderPAS16.

2.Invest
mentPr opert
ytoI
nventory
-itshouldbecarri
edatf
airval
ue.
-thefairval
ueatthedat
eoft r
ansferbecomest
hedeemedcostf
orsubsequent
accountingunderPAS2.

3.Propert
y,pl
antandequipmentt oInv
estmentProper
ty
-i
tshouldbecar r
iedatfai
rvalueuptothedateoftr
ansfer
.
-anygainorlossisaccountedforasreval
uat
ionsurpl
usordef
ici
tinequi
tyi
n
accordancewithPAS16.

4.Inventor
iestoInvestmentPropert
y
-itshouldbecarriedatfai
rvalue.
-anydi f
fer
encebet weenthefairval
ueandpr
evi
ouscar
ryi
ngamountatt
hedat
eof
transf
erisrecognizedinprof
itorloss.

5.Proper t
y,plantandequipment(sel
f-
construct
edordev eloped)toInvestmentPr oper
ty
-whenconst ructi
onordevelopmentofasel f
-const
ructedpropertyiscompl eteit
shoul dbet r
ansferredtoi
nvestmentproperty
.Until
thispointthepropertyisaccounted
forunderPAS16.
-iftheinvest mentproper
tyi
st obecarri
edatf ai
rvalue,anydiff
erencebetweenf air
valueandpr evi
ouscarryi
ngamountatt hedateoftransfershouldber ecognizedin
profitorloss.

Tr
ansf
erunderthecostmodel
- Whenanent it
yhasapol i
cyofcar r
yingtheinv
estmentpr oper
tyatthecostmodel,
proper
tiestransferr
edi nthesamewayandundert hesameci r
cumstancesas
descri
bedont heabov etr
ansfers.Howev er
,suchtransfersdonotchangethecarr
ying
amountoft hepr opert
yt r
ansferr
ed,thatis,
nor ev
aluati
ongainsorlossari
se,nort
hey
changet hecostoft hepropertyformeasurementordi scl
osurepurposes.

FUNDANDOTHERI
NVESTMENTS

Fund–i
sdef
inedascashandot
herasset
ssetasi
def
oraspeci
fi
cpur
poseei
therbyr
easonof
Page45of45
 t
heact
ionofmanagementorbyvi
rtueofacont
ractorlegal
r equi
rement
.
-maybeinthefor
m ofcash,
securi
ti
esandotherassets.

1.Curr
ent(cur
rentasset
)
-i
ncludespett
ycashfund,
pay
rol
lfund,
int
erestf
und,
div
idendf
und,
andt
axf
und.

2.Non-curr
ent(long-
terminvest
ment)
-i
ncludessinkingfund,pr
efer
enceshar
eredempt
ionf
und,
repl
acementf
und,
plant
expansi
onfund, conti
ngencyfundandi
nsur
ancef
und.

PROPERTY,
PLANT&EQUI
PMENT

PROPERTY,PLANTANDEQUI PMENT
- Tangi bleassets.
- Usedi nbusi ness(usedinpr
oducti
on,
suppl
yofgoodsorser
vices,
forr
ent
alpur
posesandf
or
administr
ati
v epur
poses).
- Ex pectedtobeusedov eraper
iodofmoret
hanoneyear
.

RECOGNI
TIONOFPPE
1.Probabl
e→ economicbenef
it
.
2.Measurabl
e→ “canbemeasuredr
eli
abl
y”.

MEASUREMENTOFPPE
a.Ini
ti
alRecogni
ti
on
-measuredatCOST.

Note:Costi
stheamountofcashorcashequi
val
entpai
dandthefai
rval
ueoftheother
consider
ati
ongi
vent
oacquireanassetatt
heti
meofacquisi
ti
onorconst
ruct
ion.

b.SubsequentRecogni
ti
on
1.CostModel
-measuredatCOSTLESSACCUMULATEDDEPRECI ATI
ONANDACCUMULATED
IMPAIRMENTLOSS.
2.Rev al
uati
onModel
-measuredatREVALUEDAMOUNT( f
airv
alueatdat
eofrev
aluat
ionl
esssubsequent
accumulat
eddepreci
ati
onandaccumulat
edimpair
mentl
oss).

El
ementsofCost
a. Purchasepri
ce( i
ncludi
ngi mportduti
es&nonr ef
undablepurchasetaxes–afterdeduct
ing
tr
adediscountsandr ebates)
.
b. Dir
ectl
yattr
ibutablecosts–br i
ngingtheassettoit
slocat
ionandcondi t
ionnecessaryf
orit
s
i
ntendeduse.
c. Costofdismant l
i
ngandr emov i
ngt heit
em andrestor
ingthesiteonwhichiti
slocated.

Di
rect
lyatt
ri
butablecosts( Examples)
1.Costofempl oyeebenefitsdi
rect
lyat
tri
but
abl
efr
om t
heacqui
sit
ionorconst
ruct
ionofPPE.
2.Costofsi tepreparat
ion.
3.Ini
ti
aldel i
ver
yandhandl i
ngcost.
4.Inst
allat
ionandassembl ycost.
5.Professionalfees.
Page46of46
 6.Costoft
est
ing.

ACQUI
SITI
ONOFPROPERTY
1.Cashbasi s
2.Onaccountsubj ectt
ocashdiscount
3.Install
mentbasis
4.Issuanceofdebtinst
rumentorequit
yinst
rument
5.Ex change
6.Donat ion
7.Gov ernmentgrant
8.Const ruct
ion

Acqui
sit
iononCashbasi s
- t hecostoft heit
em ofpropert
y ,
plantandequipmenti
stheCashPr iceEquivalentatthe
recognit
iondate.
- Thecostoft heassetacquiredincl
udesthecashpaidplusdir
ectl
yat t
ri
butablecostssuchas
frei
ght,i
nstall
ati
oncostandot hercostnecessar
yinbr
ingingtheassettothelocationand
condit
ionforitsint
endeduse.

Acqui
sit
iononAccount
- i facqui redonaccountsubj ecttocashdi scount,t
hecostoft heassetisequaltotheinv
oice
priceminust hediscount,whethertakenornot .
- I fthediscountisnottaken,itischargedt opurchasediscountlostandshownasot her
expense.
Acqui
sit
iononi nstall
mentbasi s
- i facqui redoninstall
mentbasi s,i
tscostist hecashpriceequival
ent.
- Theexcessoft heinstal
l
mentpr iceov erthecashpriceistreat
edasani nt
eresttobe
amor ti
zedov erthecredi
tper i
od.
- Howev er ,
ifPPEwasacqui redbyi nstall
mentandt hereisnoav ai
labl
ecashprice,t
heassetis
recordedatanamountequal topresentv al
ueofallpay ments.

I
ssuanceofdebtinst
rumentorequi
tyinst
rument
- thecostofthePPEisthefairmarketv
alueort
heassetr
ecei
vedorsecur
it
iesi
ssued
whicheveri
sclear
lydet
erminabl
e.

Issuanceofshar
ecapital/
equi
tyinstruments(
Vali
xappr
oach)
:
a.Fai rval
ueofthepropertyr
eceived.
b.Fai rval
ueofthesharecapit
al.
c. Parv al
ueorstat
edv al
ueoftheshar ecapi
tal
.

Issuanceofbondspay able/debtinst
rument
s(Val
i
xappr
oach)
:
a.Fai rvalueofbondspay able.
b.Fai rvalueofassetreceived.
c. Facev alueofbondspay able.

Exchange
- Thecostofani t
em ofPPEacquiredinexchangeforanonmonetaryassetoracombinat
ion
ofmonetaryandnonmonetaryassetismeasuredatfai
rval
ue,unlesstheexchange
tr
ansact
ionlackscommercialsubstance(PAS160.
Computedasf ol
lows:
Page47of47
 Exchange:
Val
ueRecei
ved=Val
uePar
tedWi
th

1.WithCommercialsubstance(Vali
xApproach):
-Anygai
norlossisfull
yr ecogni
zed.
a.Nocashi nvolv
ed
i.Fai rval
ueofpr opert
ygiven
i
i.Fai rval
ueofpr opert
yrecei
ved
i
i
i.Costorbookv al
ueofpropert
ygiven

b.Cashisi
nvol
ved
i.Fairv
alueofassetgi
venpl
uscashpayment(pay
or)
.
i
i.Fairv
alueofassetgi
venminust
hecashrecei
ved(r
eci
pient
).

2.Wit
houtCommer ci
alsubstance(
Vali
xApproach)
:
-Gainorl
ossisnotrecogni
zed.
a.Nocashi nv
olved
i
.Bookv al
ueofproper
tygiven
i
i
.Bookv al
ueofproper
tyrecei
ved

b.Cashisi
nvol
ved
i.Bookval
ueofassetgi
venpl
uscashpayment(pay
or)
.
i
i.Bookval
ueofassetgi
venminust
hecashrecei
ved(r
eci
pient
).

Commerci
al substance:
- t heev entort
ransact
ioncausi
ngt
hecashf
lowsoft
heent
it
ytochangebyr
easonoft
he
exchange.

a.Thecashflowoft
heassetrecei
veddi
ff
ersfr
om t
hecashf
lowoftheassettransf
err
edand
thedi
ff
erencei
ssigni
fi
cantrel
ati
vet
othefai
rval
ueoft
heassetexchanged.

b.Theenti
ty-
specifi
cvalueoft
hepor t
ionoft
heentit
y’soper
ati
onsaffectedbyt
hetr
ansacti
on
changesasar esul
toftheexchangeandtheexchangeissi
gnif
icantrel
ati
vet
othefai
rval
ue
oftheassetexchanged.

Tr
ade-
in
- aform ofexchange.
- I
nvolvesanon-dealeracqui
ri
ngtheassetfr
om adeal
er.
- Usual
lyinvol
vesasi gni
fi
cantamountofcash.

Recordedasfol
lows:(Val
ixApproach)
1.Fai rv
alueofassetgiv
enpluscashpay ment
2.Tr adeinval
ueofassetgivenpluscashpayment(
inef
fect
,thi
sist
hef
airv
alueoft
heasset
recei
ved)
.

Donat
ion
1.Sharehol
ders
a.Wi threst
ri
cti
on
Page48of48
 -r
eport
edasdonatedcapi
tal
.
b.Wit
houtrest
ri
cti
on
-r
eport
edasdonatedcapi
tal
.

2.Non-shar
eholders(ex.Gov ernmentGr
ant
)
c. Withrestri
cti
on
-r
epor t
edasl iabil
it
y .
d.Wi thoutrestr
iction
-r
epor t
edasot herincome.

Const
ructi
on
Thecostofsel
fconstructedPPEshal
li
ncl
ude:
1.CostofDirectMaterial
s
2.CostofDirectLabor
3.CostofFactoryOverhead

Note:Whentheactualcostofconstruct
ioni
slessthanthepriceatwhicht
heconstr
uctedasset
canbepurchasedfrom outsidepar
ti
es,thedi
ff
erenceisnotincomebutSAVING.Thissavi
ngwill
bereal
izedi
nthefutureperiodsbyreasonofl
owerdepr eci
ati
onchargesontheasset
.

Wheretheactualcostofconstruct
ioni
smorethanthepr
iceatwhichtheassetcanbepurchased
fr
om outsi
departi
es,stil
ltheconst
ruct
edassetshal
lber
ecordedatactualcost
.Thedi
ff
erenceis
notl
ossont heconstructi
on.

I
nter
veni
ngOper at
ions
- Oper ati
onsthatoccurinconnecti
onwiththeconst r
uctionordevelopmentofani t
em ofPPE
butarenotnecessarytobri
ngt hei
tem t
ot helocati
onandcondi t
ionforitsi
ntendeduse.
- Thei ncomeandr elat
edexpensesofincidentaloperat
ionsarerecognizedinprof
itorl
ossand
i
ncludedinthei
rrespecti
veclassi
fi
cat
ionofincomeandexpenses.

Der
ecogni
ti
on
- MeansthatthecostofthePPEtogetherwitht
herel
atedaccumulat
eddepreci
ati
onshal
lbe
r
emovedfr
om thecompany ’
srecor
ds.
- Computedasthediffer
encebetweennetproceedsandcarr
yingval
ueoftheit
em.
- Gainorl
ossonDer ecogni
ti
onshallbeincl
udedinprof
itorl
ossandtreat
edasotheri
ncome.

Ful
l
ydepr
eci
atedpr oper
ty
- Whenbookv alueisequaltoZeroorbookv al
uei sequalt
oresidualval
ue.
- Thecostoff ul
lydepreci
atedassetr emai
ninginservi
ceandther el
atedaccumul
ated
depreciati
onordinar
il
yshallnotberemovedf rom t
heaccounts.
- Enti
tiesareencouragedbutnotr equir
edt
odi scl
osefull
ydepreciat
edpropert
y.

Pr
oper
tycl
assif
iedasheldf orsale
- Iftheassetisavail
ablef orimmedi atesal
einit
spr esentcondi
tionwit
hinoney earfrom t
he
dateofclassif
icati
onashel dforsale.
- Suchassetshal lbeexcludedf rom PPEbutpresent edseparat
elyascurrentasset.
- Anent i
tyshallmeasur eanoncur rentassetcl
assif
iedashel dforsal
eatt helowerofit
s
carryi
ngamountorf airvaluelesscosttosell
.
- Thewr it
e-downt ofairvaluelesscosttoselli
streatedasani mpairmentloss.
Page49of49
 - PFRS5,par.25pr
ovi
dest
hatanoncur
rentassetcl
assi
fi
edashel
dforsal
eshal
lnotbe
depr
eci
ated.

BORROWI
NGCOSTS
- Areinterestandot hercost
sthatanenti
tyincursi
nconnect
ionwithborrowingoff
unds.
- Thisdef i
nit
ionencompassesi nter
estanallt
ypesofborr
owing,i
ncludi
ngfinancel
easesand
ancil
larycostsincurredinconnect
ionwit
har r
angementofborr
owing.PAS23asamended
provi
dest hatborrowingcostsincl
ude:

a.Int er
estexpensecalcul
atedusingtheeffecti
veint
erestmethodasdescr
ibedinPAS
39.
b.Fi nancechargewithrespecttoafinancelease.
c. Exchangediffer
encearisi
ngf r
om forei
gncurrencyborrowi
ngtotheext
entthati
s
regardedasanadjustmentt oint
erestcost.

Accounti
ngforborrowingcost
1.Ifthebor r
owingisdirect
lyat
tri
but
abl
etotheacquisit
ion,
construct
ionorpr
oducti
onofa
qual
if
yingasset,theborr
owingcosti
srequi
redtobecapi t
ali
zedascostoftheasset
.
Thecapital
izat
ionofborrowi
ngcosti
smandat or
yf oraquali
fyi
ngasset.

2.Al
lot
herbor
rowi
ngcost
sshal
lbeexpensedasi
ncur
red.

Assetf
inancedby“Speci
fi
cborrowing”
- Theamountofcapi tali
zableborr
owi
ngcosti
stheactualborr
owingcosti
ncur
redduri
ngthe
per
iodl
essanyinv
est mentincomef
rom t
hetempor
aryinvestmentoft
hoseborr
owings.

Bor
rowi
ngCost=Act
ual
Bor
rowi
ngCost–I
nvest
mentI
ncome

Assetf
inancedby“ generalborr
owi ng”
- Theamountofcapi t
alizableborr
owingcostisequaltotheaveragecarryi
ngamountofthe
assetduri
ngt heperi
odmul ti
pli
edbyacapi t
ali
zat
ionrateoraverageint
erestr
ate.
- Thecapi tal
izableborrowingcostshallnotexceedtheactuali
nteresti
ncurr
ed.
- Capi t
ali
zati
onr ateorav eragerat
eisequaltothetotalannual
bor r
owingcostdivi
dedbythe
tot
algeneralborrowingsout st
andingduri
ngtheperiod.

Bor
rowi
ngCost=Av
erageassetxAv
erageI
nter
estRat
e

Commencementofcapital
i
zati
on
Thecapi
tal
izati
onofborr
owingcost
saspartofthecostofaqual
i
fyi
ngassetshal
lcommence
whenthefoll
owingthr
eecondi
ti
onsarepr
esent:

1.Whentheenti
tyi
ncursexpendi
tur
esfortheasset
.
2.Whentheenti
tyi
ncursborr
owingcosts.
3.Whentheenti
tyunder
takesact
ivi
ti
esthatar
enecessar
ytopr
epar
etheassetf
ort
hei
ntended
useorsal
e.

Page50of50
LAND,
BUI
LDI
NGANDMACHI
NERY

LandAccount
1.Usedaspl antsit
e–t reatedasPPE.
2.Hel df
oracur r
entl
yundet ermineduse–t reatedasInvestmentPr
opert
y.
3.Hel df
orl
ong- t
erm capit
al appreci
ati
on–t reatedasInvest
mentProper
ty.
4.Hel df
orcurrentsal
e–t reatedasI nvent
ory.

Costchargeabletoland
1.Pur chasepr ice.
2.Legal feesandot herexpendi turesf orestabli
shingcleant i
tl
e.
3.Br oker’
scommi ssion.
4.Escr owf ees.
5.Feesf orr egistrationandt ransferoft i
tl
e.
6.Costofr elocat i
onorr econstructionofpr opertybel
ongi ngtoother
sinordertoacquir
e
possession.
7.Mor tgages, encumbr ancesandi nterestonsuchmor tgagesassumedbybuy er.
8.Unpai dtaxesupt odat eofacqui siti
onassumedbybuy er.
9.Costofsur vey.
10.Costofcl ear i
nganddemol i
shingunwant edoldstructures,l
essproceedsfr
om salv
age.
11.Payment st ot enant stoinducet hem t ov acatetheland.
12.Costofper manenti mpr ovement ssuchascostofgr ading,l
evel
ingandlandf
il
l.
13.Costofopt i
ont obuyt heacqui redl and.Ifthelandisnotacquired,t
hecostofopti
oni s
expensedout right.

LandI
mprov
ement s
1.Subjecttodepr
eciation
-chargedtoaspeci alaccount“l
andimprovement
s”.Ex.Fences,
watersy
stems,
drai
nagesystems, si
dewalks,pavement
sandcostoft r
ees,shr
ubsandothe
l
andscapi
ng.
-shouldbedepr eci
atedov ert
heirusef
ull
if
e.

2.Notsubjecttodepreci
ati
on
-chargedtothelandaccount.Ex.Costofsurv
eying,costofcl
ear
ing,costofgradi
ng,
leveli
ngandlandfi
ll
,costofsubdivi
dingandothercostofpermanentimprovement.

Speci
alassessments
- Taxespai dbythel
andownerasacont
ri
but
iont
othecostofpubl
i
cimpr
ovement
s.
- Treatedaspar hel
tofcostoft and.

Real
propert
ytaxes
- General
ly,t
reat
edasoutr
ightexpense.
- Ifassumedbyt hebuy
er,
thisar
ecapi t
ali
zedbutonl
yupt
othedat
eofacqui
sit
ion.

Bui
l
dingAccount
a.Costofbuildi
ngwhenpur chased
1.Purchasepri
ce.
2.Legalfeesandotherexpensesi
ncur
redi
nconnect
ionwi
tht
hepur
chase.
Page51of51
 3.Unpaidtaxesupt odateofacqui
siti
on.
4.Int
erest,
liensandotherencumbrancesonthebuil
dingassumedbyt hebuyer
.
5.Payment stotenantstoi
nducethem tovacat
ethebuildi
ng.
6.Anyrenov ati
ngorremodeli
ngcostsincur
redtoputabuildi
ngpurchasedinacondi
ti
on
sui
tableforitsi
ntendedusesuchasl i
ght
ingi
nstal
lati
ons,par
ti
ti
onsandrepair
s.

b.Costofbuildi
ngwhenconst ructed
7.Mat erialsused, l
aborempl oyedandov erheadincurr
edduringtheconstr
ucti
on.
8.Bui l
dingper mi torl icense.
9.Ar chit
ectf ee.
10.Superintendentf ee.
11.Costofexcav ation.
12.Costoft empor arybui ldi
ngsusedasconst r
ucti
onof f
icesandtool
sormat erial
sshed.
13.Expendituresincur reddur i
ngt heconstructi
onperiodsuchasinterestonconstructi
on
l
oansandi nsur ance.
14.Expendituresf orser vi
ceequi pmentandf ixt
uresmadeaper manentpartofthe
str
ucture.
15.Costoft empor arysaf et
yfencear oundconst r
ucti
onsi t
eandcostofsubsequent
remov althereof .Howev er,theconstructi
onofaper manentfenceaf t
erthecompl et
ion
ofthebui l
dingi sr ecogni zedasl andimpr ov
ement .
16.Safetyinspectionf ee.

Si
dewalks,pavement
s,par
kinglot
,dri
veways
1.Partofbluepri
nt
-treatedaspar
tofbuil
dingaccount
.

2.Notpartofbl
uepri
nt
-char
gedtolandi
mpr
ovement
saccount
.

Cl
aimsf
ordamages
1.Wherei
nsuranceistakenduri
ngtheconst
ruct
ionofabuil
ding,
thecostofi
nsur
anceis
char
gedtothebuil
dingaccount.
2.Wheret
heinsuranceisnottaken,
thepaymentfordamagesshoul
dbeexpensedoutr
ight
.

Bui
l
dingFi
xt ur
es
1.Immov able
-I
ft heyareat
tachedt
othebui
l
dinginsuchamannerthattheremov
alt
her
eofmay
destroythebui
ldi
ng,t
heyar
echargedt
ot hebui
l
dingaccount
.

2.Movabl
e
-Theyar
echar
gedt
ofur
nit
ureandf
ixt
uresanddepr
eci
atedov
ert
hei
rownusef
ull
i
fe.

Vent
il
ati
ngsystem,l
ight
ingsystem,el
evat
or
1.Parofbluepri
nt
-chargedtobuil
dingaccount

2.Notpartofbluepri
nt
-char
gedt o“buil
dingi
mprovements”accountanddepr
eci
atedov
ert
hei
rusef
ull
i
feor
remaini
nglif
eoft hebui
ldi
ngwhicheveri
sshorter
.
Page52of52
Speci
fi
cpri
nci
plesonl
andandbuil
ding
a.I
flandandbui
ldi
ngareacquir
edatasingl
ecost,t
hesi
ngl
ecosti
sal
l
ocat
edt
othel
andand
bui
ldi
ngonthebasi
softheirr
elat
ivef
airv
alue.

b.Ifl
andandanol
dbuil
dingwhi
chi
stober
azedar
eacqui
redatasi
ngl
ecost
,thesi
ngl
ecosti
s
all
ocat
edtot
helandonly
.

Thenetcostofr
azi
ngt
hebui
l
ding,
(costofr
azi
ngmi
nussal
vage)i
schar
gedt
othel
and
account
.

I
fsubjectt
oal easecont
ract
,anypay
mentst
ot enant
stoinducethem t
ovacat
ethepr
emi
ses
bef
oretheleaseexpir
ati
onareal
sochar
getothelandaccount.

c. I
fthebuil
dingownedbyt heenti
tyisl
easedtotenant
sandt hebuil
dingisdemol
ishedtomake
r
oom fortheconstr
ucti
onofanewone, anypayment
stot enant
stoi nducet
hem t
ov acat
e
t
hebuildi
ngshallbechargedtothecostofthenewbuil
ding.

Machi
ner
yAccount
Whenmachi neryispur chased, thecostnor mallyi
ncludesthef oll
owing:
1.Pur chasepr i
ce.
2.Freight,handling,storageandot hercostr el
atedtot heacquisit
ion.
3.Insurancewhi l
eint ransit.
4.Install
ati
oncost ,
includingsi tepr eparati
onandassembl ing.
5.Costoft est i
ngandt ri
alrun, andot hercostnecessar yi
npr epari
ngt hemachineryf
orit
s
i
ntendeduse.
6.Initi
alestimateofcostofdi smant l
ingandr emovingt hemachi neryandr est
ori
ngthesi
teon
whichitislocated, andforwhi cht heent i
tyhasapr esentobligati
on.
7.Feepai dt oconsul tantsforadv i
ceont heacquisi
tionofthemachi nery.
8.Costofsaf etyrai
l andpl atf
or m sur roundingmachi ne.
9.Costofwat erdev i
cet okeepmachi necool .

Note:
Ifamachiner
yismovedt
oanewl ocat
ion,t
heundepr
eciat
edcostoftheol
dinst
all
ati
on
costi
sexpensedandthenewi
nst
all
ati
oncostischar
gedtothenewasset.

SUBSEQUENTEXPENDI
TURES

Gener
ally
:tr
eatedasanexpense
Speci
fi
call
y:canbetreat
edasASSET( capi
tal
i
zed)if
:
a.Pr obabl
e→ economicbenefi
t.
b.Measur abl
e→ “costcanbemeasuredrel
iabl
y”.

1.Addit
ions
-Modifi
cati
onsoralterati chi
onswhi ncreasethephysicalsi
zeorcapaci
tyoft
heasset.
a. Newuni t–depr eciat
edoveri
tsusefulli
fe.
b. Expansi
on,enlargementorextensionofoldasset–depreciat
edoveri
tsusef
ulli
feor
remaini
ngli
feoft heassetwhicheveri
sshor t
er.

2.I
mpr
ovement
sorbet
ter
ment
s
Page53of53
 -Aremodifi
cati
onsoralt
erati
onswhi
chincreaset
heserviceli
feort
hecapaci
tyoft
he
asset
.
-Theyrepr
esentrepl
acementwithabet
terorsuper
iorquali
ty.
-Theyarenormall
ycapit
ali
zed.

3.Replacements
-I
nvolvessubsti
tuti
onofanequal
orl
esserqual
i
ty.
-Theyarenormallycapi
tal
i
zed.

4.Repair
s
-Thoseexpendi
turesusedtorest
oreasset
stogoodoper
ati
ngcondi
ti
onupont
hei
r
breakdownorreplacementofbr
okenpart
s.

c. Extr
aor
dinar
yRepai
rs–shoul
dbecapi t
ali
zed.
d.Or di
nar
yRepair
s–chargedtoexpenses.

5.Rearrangementcost
-Ther elocat
ionorrei
nst
all
ati
onofanassetwhi
chprov
estobel
esseff
ici
enti
nitsor
igi
nal
location.
-costiscapital
izedandamorti
zedovert
heremai
ningl
if
eoft
heassett
owhichitper
tai
ns.

DEPRECI
ATI
ON
- Thesy st
emat i
call
ocati
onofthedepreciabl
eamountofanassetov eri
tsusefull
if
e.
- Treatedasexpensei nt
hefaceofthefinancial
stat
ements.
- Beginswhenanasseti savail
ablef
oruseandceaseswhent heasseti
sderecogni
zed.
- Shallbediscont
inued,i
ftheasseti
sclassif
iedas“hel
dforsale”
.

Ki
ndsofDepreciati
on
1.Phy sicalDepr eci
ati
on
-Relatedt othedepreciabl
easset’swearandt
earanddeter
iorat
ionoveraperi
od.
2.Funct ional/EconomicDepreci
at i
on
-ari
sesf rom obsolescenceorinadequacyoft
heassett
oper f
orm ef
fi
cient
ly.

Met
hodsofDepreciat
ion
1.EqualorUni
form ChargeMethods
-Consi
dersdepreciat
ionasafunct
ionoft
imer
athert
hanasaf
unct
ionofusage.

a.Strai
ghtLi
ne
b.CompositeMethod
c. Gr
oupMethod

2. Var
iabl
eChar
georUse-f
actorMet
hods
-Consi
der
sdepr
eciat
ionasafunct
ionofuser
athert
hanpassageoft
ime.

a.Worki
ngHoursorSer
viceHours
b.Out
putorPr
oducti
onMet hod

3.DecreasingChar georAccel
eratedorDimini
shi
ngBalance
-provideshigherdepr
eci
ationintheearl
i
eryear
sandlowerdepr
eci
ati
oni
nthel
ater
yearsofthelif
eoftheasset.
Page54of54
 -t
hisisonthephi
losophythatnewasset
saregeneral
l
ycapabl
eofpr
oduci
ngmor
e
revenuei
ntheearl
ieryear
sthaninthel
atery
ears.

c. Sum ofYear
’sDigi
ts
d.Decli
ningBalanceMethod

4.Ot
herMethods
e. I
nventor
yorappr
aisal
f. Reti
rementMet
hod
g.ReplacementMethod

St
rai
ghtLi
neMethod
-Theannualdepr
eci
ati
onchargei
scalcul
atedbyal
locati
ngt
hedepr
eci
abl
eamount
equal
l
yov ert
henumberofyearsofest
imatedusef
ulli
fe.

Depr
eciableAmount
Annual
Depr
eci
ati
on=
Usef
ulLife

Composi
teMethod
-Asset
sthataredi
ssimil
arinnatur
eorassetst
hathavedif
fer
entphy
sicalchar
act
eri
sti
cs
andvarywi
delyinusef
ulli
fe,ar
egroupedtoget
herandtr
eatedasasingl
eunit.
-Composit
eli
feoftheassetshouldbedetermi
ned.

Composi
teLi
fe=Tot
alDepr
eci
abl
eAmount÷Tot
alAnnual
Depr
eci
ati
on

-Composi
ter
ateoft
heassetshoul
dbedet
ermi
ned.

Composi
teRat
e=Tot
alAnnual
Depr
eci
ati
on÷Tot
alCost

Gr
oupMet
hod
-Assetst
hataresi
mil
ari
nnatur
eandi
nesti
matedusef
ull
i
fear
egr
oupedandt
reat
edasa
si
ngleuni
t.
-Treat
edthesamewayastheComposi
teMethod.

Wor
kingHoursMethod
-Adepreci
ati
onrat
eperhourshoul
dbedet
ermi
ned.

Depr
eci
ati
on=Act
ual
Hour
sWor
kedxDepr
eci
ati
onRat
eperHour

Dep’
nRat
eperHour=Depr
eci
abl
eAmount÷Est
imat
edSer
viceHour
s

Out
putorPr
oduct
ionMet
hod
Page55of55
 -Adepr
eci
ati
onr
ateperhourshoul
dbedet
ermi
ned.

Dep’
n=Act
ual
Out
putPr
oducedxDepr
eci
ati
onRat
eperHour

Dep’
nRat
eperHour=Depr
eci
abl
eAmount÷Est
imat
edUni
tsofOut
put

Sum ofYear’
sDigi
ts
-provi
desfordepreci
ati
ont
hati
scomputedbymulti
ply
ingthedepr
eciabl
eamountbya
seri
esoffr
actionswhosenumer
atori
sthedi
giti
ntheli
feoftheassetandwhose
denominat
oristhesum oft
hedigi
tsi
ntheli
feoftheasset
.

Li
fe+1
SYDRat
e=Li
fe(
--
--
--
--
--
--
--
--
)
2

Annual
Dep’
n=SYDRat
exDepr
eci
abl
eAmount

Decl
i
ningBal anceMethod
-Afixedoruni
formrat
eismul
tipl
i
edbythedecl
i ngbookv
ni alueorundepr
eci
atedcostof
theassetinor
dertoar
ri
veatt
heannual
depreci
ati
on.

1.200%Decl
i
ning/
Doubl
eDecl
i
ningBal
anceMet
hod
1
DDBRat
e=-
--
--
--
-(2)
Li
fe

Annual
Dep’
n=DDBRat
exBookVal
ue

2.150%Decl
i
ningBal
anceMet
hod

1
150%DBRat
e=-
--
--
--
-(1.
5)
Li
fe

Annual
Dep’
n=150%DBRat
exBookVal
ue

I
nvent
oryMethod
-Consist
sofmerel
yest
imati
ngthevalueoftheassetattheendoftheper
iod.
-Depreci
ati
oni
scomputedasthedi
fferencebet
weent hebalanceoft
heassetaccount

Page56of56
 andthevalueattheendoft heyear
.
-I
nrecordingdepreci
ati
on,noaccumulat
eddepreciat
ionaccounti
smaint
ained.The
depr
eciat
ioniscredit
eddir
ectlytot
heassetaccount.
-Thi
sdepr eci
ati
onapproachisappli
edgeneral
l
ytoassetswhicharesmal
landr el
ati
vel
y
i
nexpensive.

Ret
ir
ementMethod
-Nodepreci
ati
onisrecordedunti
ltheassetisret
ired.Theamountofdepr
eciat
ioni
sequal
totheor
igi
nalcostoftheassetr
etiredminussalvageproceeds.
-Suit
abl
ewhenal argenumberofsi mil
ari
temsar eempl oy
edbytheenter
pri
seandthe
i
temsareconstantl
ybeingret
ir
edandr eplaced.

Repl
acement
-Nodepr eci
ati
onisrecordedunt i
lt sr
heasseti et
ir
edandreplaced.Theamountof
depreci
ationi
sequal t
ot hereplacementcostoft
heassetret
ired,
mi nussal
vageproceeds.
-Sui
tablewhenal argenumberofsi mi
lari
temsareemploy
edbyt heenterpr
iseandthe
it
emsar econstantl
ybeingretir
edandr epl
aced.

CHANGEI
NUSEFULLI
FE,
DEPRECI
ATI
ONMETHODANDSALVAGEVALUE

ChangeinUsefulLif
e
-Account
edf orasachangeinaccounti
ngest
imat
e.
-Thedepreci
ationchar
geforthecur
rentandf
utur
eper
iodsshal
lbeadj
ust
ed.

ChangeinSalvageValue
-Account orasachangei
edf naccounti
ngest
imat
e.
-Thedepreci
ationchar
gef
orthecur
rentandf
utur
eper
iodsshal
lbeadj
ust
ed.

ChangeinDepreciat
ionMethod
-Account
edf orasachangeinaccounti
ngest
imat
e.
-Thedepreci
ationchar
geforthecur
rentandf
utur
eper
iodsshal
lbeadj
ust
ed.

REVALUATI
ONOFAPROPERTY, PLANT&EQUIPMENT
- Happensonl
yift
heasset(
PPE)i
ssubsequent
lyr
ecor
dedundert
heRev
aluat
ionModel
.

Not
e:Whenani
tem ofPPEi
srev
alued,
theent
ir
ecl
assofPPEt
owhi
cht
hatassetbel
ongsshoul
d
ber
eval
ued.

BasisofReval
uati
on
1.Fairvalue
-Usual
lyequalt
othemar
ketv
aluedet
ermi
nedbypr
ofessi
onal
qual
i
fiedv
aluer
s.

2.Depreciat
edReplacementCost
-ReplacementcostofthePPEmi nusthecorrespondingaccumul at
eddepr
eciat
ion.
-Thisamounti sact
uall
ythe“soundv alue”ofanasset .
Note:Thediff
erencebetweenfairvalueordepr eci
atedrepl
acementcostandbookv al
ueof
thePPEi scal
ledreval
uati
onsurplus.Thisisalsocalledas“rev
aluati
oni
ncrement”.

Approachesinrecor
dingther
eval
uat
ion
1.Pr oport
ional
Approach
Page57of57
 -Theaccumul ateddepreciat
ionatthedat
eofreval
uati
onisrestat
edpropor
tionat
ely
wit
ht hechangei nthegrosscarr
yingamountoftheassetsothatthecar
ryi
ngamount
oftheassetafterreval
uati
onequalsthereval
uedamount.

2.Eli
minati
onApproach
-Theaccumulateddepr
eci
ati
onisel
iminat
edagainstt
hegr
osscar
ryi
ngamountoft
he
assetandthenetamountr
estat
edtothereval
uedamountoft
heasset
.

Tr
eatmentofRev al
uati
onSur pl
us
-consider
edasacomponentofot hercomprehensi
veincome(OCI)
.
-transf
err
eddir
ectl
yt or
etai
nedearni
ngswhent hesurpl
usisr
eali
zed.
-ifasseti
sdepreci
ated,par
toft
hesurplusi
sbeingreali
zedastheasseti
sused
(piecemealr
eal
izat
ion).

Tor
ecordreval
uati
on:
Asset xx
Reval
uati
onSur
plus xx

Tor
ecordpiecemealreali
zat
ion:
Reval
uationSur
plus xx
Retai
nedEar ni
ngs xx

Rev
ersalofarev aluati
onincrease
-Whenanasset ’scarr
yingamountisdecreasedasar esultofr
eval
uati
on,thedecrease
shallberecogni zedasexpense.
-Ther eval
uat i
ondecr easeshall
bechargeddirect
lyagainstanyrev
aluat
ionsurplustothe
extentthatthedecr easeisareversal
ofapr evi
ousrevaluati
onandthebalanceischarged
toexpense.

Tor
ecordr
eversalofreval
uat
ioni
ncr
ease:
Rev
aluati
onSur pl
us xx(upt
oamountofr
ev.i
ncr
ease)
I
mpairmentLoss xx
Asset xx

Rev
ersalofarevaluati
ondecr ease
-Whenanasset ’
scar r
yingamountisincreasedasar esul
tofreval
uat
ion,t
heincrease
shall
becr edi
tedtor evaluat
ionsur
plus.
-Ther ev
aluati
onincreaseshal l
berecognizedasincometot heext
entthati
treversesa
reval
uati
ondecr easeoft hesameassetpr evi
ousl
yrecognizedasanexpense.

Tor
ecor
dthereval
uat
iondecr
ease:
I
mpai
rmentLoss xx
Asset xx

Tor
ecordtherever
salofrev
aluati
ondecr
ease:
Asset xx
Reval
uati
ongain xx(upt
oamountofi
mpai
rmentl
oss)
Reval
uati
onSurplus xx

I
MPAI
RMENTOFAPROPERTY,
PLANT&EQUI
PMENT(
PAS36)
Page58of58
 - Af alli
nthemar ketvalueofanassetsot hatit
srecoverabl
eamountisnowlessthanit
s
carryi
ngamounti nt hestatementoffinanci
alposi
ti
on.
- Ifanasset scar
ryingamounti shigherthanit
srecoverabl
evalue,
theasseti
sjudgedt
ohav
e
sufferedanimpai r
mentl oss.Theassetther
eforeshouldbereducedbytheamountof
impairmentloss.
-
MeasurementofRecov erableAmount
Thehigherbetweent hefoll
owing:

1.Fai
rValuelessCosttoSell
-Theamountobt ai
nabl
efrom t
hesaleofanassetinar
m’sl
engt
htr
ansact
ionbet
ween
knowledgeabl
eandwi l
l
ingpar
ti
es,lesscostt
osell
.
-Alsocall
edas“netsel
li
ngpri
ce”.

Note:Costt osel
lareincrementalcost
sdi r
ect
lyat
tri
but
abl
etothesal
eofanassetor
cashgener ati
ngunit
.Exampl esincl
ude:
1.LegalCost s
2.Stampdut yandsimi l
artransacti
ontaxes
3.Cost sofremovi
ngt heasset
4.Directi
ncrementalcostst obri
ngtheasseti
ntocondi
ti
onforsal
e.

2.Val
uei nUse
-Ismeasuredast hepresentval
ueordiscountedval
ueoffut
urenetcashfl
ows(i
nfl
ows
l
essout f
lows)expectedtobederivedf
rom anasset.
-Thecashf l
owsar epretaxcashfl
owsandpr etaxdi
scountr
atei
sappliedi
ndet
ermini
ng
thepresentval
ue.

Tr
eat
mentofImpai
rmentLoss
-Thei
mpair
mentlossshallberecognizedi
mmedi at
elybyr
educingt
heasset
’scarr
ying
amountt
oit
srecover
ableamount .
-Thei
mpair
mentlossisrecognizedinprof
itorl
ossandpresent
edsepar
atel
yinthe
i
ncomestat
ement.

Tor
ecor
dimpair
mentloss:
I
mpai
rmentLoss xx
Accumulat
edDepr
eci
ati
on xx

Rev
ersalofani mpai r
mentl oss
-Ther eversaloft
hei mpair
mentl ossshal
l ber
ecognizedimmedi atelyasincomeint he
incomest atement.
-Anyr ev
er sal
ofani mpairmentlossonar eval
uedassetshall betreatedasarevaluati
on
increase, meaning,credi
tedtoi
ncomet otheextentthati
treversesapr evi
ousrevaluat
ion
decr ease,andanyexcesscr edit
eddi r
ectl
yt or
evaluati
onsurplus

I
mpai
rmentofaCashGener at
ingUni t(CGU)
CashGener
ati
ngUnit(CGU)
-Ist
hesmal l
estidenti
fiabl
egroupofasset
sthatgenerat
ecashinf
lowsf
rom cont
inui
ng
usethatar
elargelyindependentoft
hecashinf
lowsfrom ot
herasset
sorgr
oupofassets.

Tr
eat
mentofI
mpai
rmenti
naCGU
Page59of59
 PAS36,par
.104,pr
ovi
dest
hatwhenani
mpai
rmentl
ossisrecognizedf
oraCGU,
thi
s
l
ossshal
lbeall
ocat
edt
otheasset
soft
heuni
tint
hefol
l
owingor der:

1.Fi
rst,t
otheGOODWILL.
2.Then,toal
lot
herNONCASHasset
soft tonapr
heuni orat
ebasi
s,basedont
hei
r
carr
yingamount
.

GOVERNMENTGRANTS
GOVERNMENTGRANT
- Areassistancebygov ernmentintheform oftransfersofresour
cest oanentityi
nr et
urnfor
partorfuturecompl iancewithcer
tainconditi
onsr elat
ingtotheoperati
ngact i
vit
iesofthe
enti
ty.
- Somet i
mescal ledassubsi di
es,subventi
onsorpr emi ums.
- Aforgivableloanf rom gov er
nmentistreatedasagov ernmentgrantwhent hereisreasonable
assurancet hatt heent i
tywil
lmeetthetermsf orforgivenessoftheloan.
- Thebenef itofagov ernmentloanwithabel ow-mar ketrateofi
nter
estistreatedasa
governmentgr ant.Thebenef i
tismeasuredast hediffer
encebetweent heproceedsreceived
andthei ni
tialcar r
yingv al
ueoftheloan.

RECOGNITION&MEASURMENT
Gov er
nmentgr ants,i
ncludingnonmonet arygr
antsatf
airv
alue,
shal
lberecognizedwhenther
eis
reasonableassurancet hat:
a.Theent i
tywillcompl ywiththecondi
tionsatt
achi
ngtothem.
b.Thegr ant
swi l
l bereceived.
Gov er
nmentgr antsshall notberecogni
zedonacashbasisasthisi
snotconsistentwi
th
generall
yacceptedaccount i
ngpracti
ce.

CLASSI
FICATIONOFGOVERNMENTGRANTS
a.Gr antsrel
atedtoassets
-Thesearegov er
nmentgrantswhoseprimarycondi
tioni
sthatanentit
yqual
i
fyi
ngf
or
them shal
lpurchase,
constr
uctorother
wiseacquir
elong-
term asset
s.
b.Gr antsrel
atedtoi
ncome
-Thesearegov er
nmentgrantsot
herthanthoserel
atedtoassets.

ACCOUNTI
NGFORGOVERNMENTGRANTS
Gov
ernmentgrant
sshal
lber
ecognizedasi
ncomeov erperi
odsnecessar
ytomatcht
hem wi
th
t
herel
atedcostswhi
cht
heyarei
ntendedtocompensate,onasystemati
cbasi
s.

1.Thest
andardpr
ovidest
hat“
grants”i
nrecogni
ti
onofspeci
fi
cexpensesshal
lber
ecogni
zedas
i
ncomeov ert
heperi
odofther
elat
edexpense.

2.Thest
andardpr
ovidest
hat“gr
ants”rel
atedtodepr
eci
abl
eassetsshal
l ber
ecogni
zedas
i
ncomeov ert
heperi
odsandinproport
iontothedepr
eci
ati
onoftherel
atedasset
s.

3.Thestandardpr
ovidesthat“gr
ants”rel
atedtonondepreci
ableasset
srequi
ri
ngful
fi
ll
mentof
cert
aincondi
ti
onsshallberecognizedasincomeov ert
heperiodswhichbeart
hecostof
meetingthecondi
ti
ons.

4.Thestandardprov
idesthatagovernmentgr
antthatbecomesr
ecei
vableascompensati
onfor
expenseorlossesal
readyincur
redorfort
hepurposeofgivi
ngi
mmediatefi
nanci
alsuppor
ttothe
Page60of60
 enti
tywi
thnofurt
herr
elat
edcost
sshal
lber
ecogni
zedasi
ncomeoft
heper
iodi
nwhi
chi
t
becomesrecei
vabl
e.

PRESENTATI
ONOFGOVERNMENTGRANTS
1.Gov er
nmentgrant
srelatedtoasset
s,i
ncludi
ngnonmonet ar
ygrant
satfai
rval
ue,
shal
lbe
pr
esentedi
nthestat
ementoff i
nanci
alposit
ioni
neitheroftwoways:
a.Bysett
ingthegrantasdefer
redincome.
b.Bydeducti
ngthegr anti
narr
ivi
ngatthecarr
yingamountoftheasset
s.

2.Gov
ernmentgr antsrelatedt oi
ncomearepresentedasfol
lows:
a.Thegr antispresent edi
nt hei
ncomestatement,
eithersepar
atel
yorundert
hegener
al
heading“otheri ncome.”
b.Al t
ernativel
y,thegr anti
sdeductedf
rom therel
atedexpense.

Repay
mentofgov ernmentgrant
Agov ernmentgrantt
hatbecomesrepayabl
eshallbeaccount
edf orasachangeinaccount
ing
est
imat e.
1.Repay mentofagr antrel
atedt
oincomeshallbeappli
edfi
rstagainstanyunamor
ti
zed
deferr
edincomeandanyexcessshallberecogni
zedimmedi atel
yasanexpense.

2.Repaymentofagr
antr
elat
edt
oassetshal
lber
ecor
dedbyi
ncr
easi
ngt
hecar
ryi
ngamountof
theasset
.

WASTI
NGASSETS

WASTI
NGASSETS
- Refer
sto“mineral
resour
ces”.Theyarecal l
edassuchbecausetheyar
ephysical
l
yconsumed
andonceconsumed, t
heycannotber eplacedanymore.
- Mineral
resour
cesincl
udeminerals,
oil,natur
algasandsimi
larnonr
egener
ati
veresour
ces.

MEASUREMENT
c. Ini
ti
alRecogni
ti
on
-measuredatCOST.
Note:Costist
heamountofcashorcashequi
val
entpai
dandthefai
rval
ueoftheother
consider
ati
ongivent
oacqui
reanassetatt
heti
meofacquisi
ti
onorconst
ruct
ion.

d.SubsequentRecogni
ti
on
3.CostModel
-measuredatCOSTLESSACCUMULATEDDEPRECI ATI
ONANDACCUMULATED
IMPAIRMENTLOSS.
4.Rev al
uati
onModel
-measuredatREVALUEDAMOUNT( f
airv
alueatdat
eofrev
aluat
ionl
esssubsequent
accumulat
eddepreci
ati
onandaccumulat
edimpair
mentl
oss).

COSTOFWASTI NGASSET
a.Acquisit
ionCost
b.Expl
or at
ionCost
c.Devel
opmentCost
d.Esti
mat edRestor
ati
onCost

Page61of61
Acqui
sit
ionCost
- Thepr icepaidtoobtainthepropert
ycontai
ningthenaturalr
esource.
- I fthereisresi
dualvalue(landval
ue)af
tertheextract
ionofnatur
al r
esour
ce,
thesai
dshal
lbe
deductedfrom t
hetotalacquisi
ti
oncosttogetthedepletabl
ecost.

Expl
orat
ionCost
- Theexpendi t
ureincur
redbeforethetechni
calf
easibil
i
tyandcommercialvi
abil
i
tyofextr
acti
ng
amineralr
esourcearedemonst r
ated.
- Simplystated,t
heexplorat
ioncostisthecosti
ncurredinanat
tempttolocatethenat
ural
r
esourcethatcaneconomicall
ybeext r
actedorexploi
ted.

1.SuccessfulEff
ortMethod
-Onlytheexplorat
ioncostdir
ect
lyrel
atedtothedi scov
eryofcommer ci
all
yproduci
ble
natur
al r
esourceiscapit
ali
zedascostofther esourceproper
ty.
-Explor
ationcostrel
atedtounsuccessful
discoveryisexpensedint
heperiodincur
red.

2.Ful
lCostMet hod
-Allexpl
orat
ioncost
s,whethersuccessf
ulorunsuccessf
ular
ecapi
tal
i
zedascostoft
he
successfulr
esour
cediscov
ery.

Dev
elopmentCost
- Thecosti ncur
redtoexpl
oitorext
ractt
henat
ural
resour
cet
hathasbeenl
ocat
edt
hrough
successf
ulexpl
orat
ion.

1.TangibleDev el
opmentCost
-Thecostoft angibl
eequipmentisnotcapitali
zedascostofnaturalr
esource.I
tisset
upinasepar at
eaccount(Propert
y,PlantandEquipment)anddepreciat
edin
accordancewi thnormaldepreci
ati
onpol i
cies.
-Includestransportat
ionequi
pment ,heavymachinery
,tunnel
s,bunkerandmi ne
shaft.

2.I
ntangibl
eDevelopmentCost
-Thecostiscapi
tal
izedascostoft
henat
uralr
esource.
-I
ncludesdri
ll
i
ng,si
nkingmineshaf
tandconst
ruct
ionofwel
l
s.

Rest
orati
onCost
- Theest i
matedcost
sofrest
ori
ngt
hepr
oper
tyt
oit
sor
igi
nal
condi
ti
onaf
terext
ract
ion
act
ivi
ti
esar
ecomplete.

DEPLETION
- Thesy stemati
call
ocationoft hedepl
etabl
ecostofawast
ingassetov
ert
heper
iodt
henat
ural
r
esourceisext
ractedorpr oduced.
Depl
eti
onMet hod
a.Pr
oductionorOutputMet hod
Computedasf ol
lows:

Depl
etabl
eCost
Page62of62
 Depl
eti
onr
ateperuni
t=-
--
--
--
--
--
--
--
---
--
--
--
--
--
--
--
--
--
--
-
Esti
mat edunit
stobeextr
act
ed

Depl
eti
on=Depl
eti
onr
ateperuni
txAct
ual
uni
tsext
ract
ed

Rev
isi
onofdepletionrate
- Tobet reatedasachangei naccounti
ngesti
mat e.
- Changei naccount i
ngestimateistobehandledcurrent
lyandprospecti
vely
,ifnecessar
y .
- Thepr ocedureistor ev
isethedeplet
ionrat
eonapr ospecti
vebasis,t
hatis,bydivi
dingthe
remainingdepletablecostofthewast i
ngassetbytherevi
sedesti
mat eoftheproductiv
e
output.

Depr
eci
ati
onofmini
ngproper
ty
- Thedepreci
ati
onofequi
pmentusedi
nminingoperat
i sbasedont
onsi hel
i
feoft
he
equi
pmentort
heli
feoft
hewasti
ngasset
,whichev
erisshort
er.

1.St
raightLi
ne→ Li
feofequi
pment<Lif
eofwasti
ngasset.
2.OutputMethod→ Li
feofequi
pment>Lif
eofwasti
ngasset.

Note:Whentheoutputmethodisusedindepreci
ati
ngmi ni
ngproper
ty,i
ntheeventofshutdown,
suchmethodcannotbeused.Inthi
scase,thedepreci
ati
onintheyearofshut
downi sbasedon
theremai
ningl
if
eoft heequi
pmentfoll
owingthestrai
ghtli
nemethod.

Inot
herwor
ds,
theremaini
ngbookvalueoftheequi
pmentisdi
vi
dedbyt
her
emai
ningl
i
feoft
he
equi
pmentt
oarr
iveatt
hedepreci
ati
onintheyearofshut
down.

Whenoperat
ionsar
eresumed,thedepreciat
ionisagai
ncomputedfol
lowi
ngtheout
putmethod.
Buti
nthi
scase,anewdepreci
ationrateperuniti
scomputedbydiv
idi
ngtheremai
ningbook
val
ueoft
heequipmentbytheremainingorrevi
sedesti
mateofthedeposi
t.

Tr
ustf
unddoctri
ne
- Theshar ecapi
talofacorporati
onisconceivedasatrustf
undfortheprotecti
onofcr
edi
tor
s.
Consequently,
suchcapitalcannotberet
urnedtosharehol
der
sdur i
ngthelifeti
meoft
he
corporati
on.
- Accordingl
y,t
hecor por
ati
oncannotpaydi vi
dendsi
fithasadefici
tbecauset hi
swoul
dbe
tantamounttoareturnofcapitalt
oshareholder
s.

Wast
ingassetdoctr
ine
- Awast i
ngassetcorporat
ionoranentityengagedintheextr
acti
onofanat uralr
esource,can
l
egall
yretur
ncapitalt
oshareholder
sdur i
ngtheli
feti
meoft hecorpor
ation.
- Accor di
ngly
,awast i
ngassetcorporat
ioncanpaydi vi
dendnotonlytotheextentofretai
ned
earni
ngsbutalsototheextentofaccumulateddepleti
on.

Compl
eteFormul
a:Maximum di
vi
dendt
hatcanbedecl
aredandpai
dbyawast
ingasset
cor
por
ati
on:
Ret
ainedEar
nings xx
Page63of63
 Add:AccumulatedDepl
eti
on xx
Total xx
Less:Capi
tall
iqui
dat
edinpri
oryears xx
Unreali
zeddepl
eti
oninendingi
nvent
ory xx xx
Maximum divi
dend xx

I
NTANGI
BLEASSETS

I
NTANGI
BLEASSETS
- Ani denti
fi
ablenonmonetaryassetwit
houtphysi
calsubst
ance.
- Mustbecont r
oll
edbytheentit
yasar esul
tofpasteventandfr
om whi
chf
utur
eeconomi
c
benefi
tsareexpect
edtoflowtot heent
it
y.

RECOGNITI
ONOFI NTANGI BLEASSETS
1.Probabl
e–“ f
utureeconomi
cbenefi
t”
.
2.Measurabl
e–“ canbemeasuredrel
i
ably
”.

MEASURMENT
1.I
nit
ial
ly-@ COST
Thecostofanint
angibl
eassetdependsonthefoll
owi
ng:
1.Separ
ateAcqui
siti
on
2.Acqui
sit
ionaspartofBusi
nessCombinat
ion
3.Acqui
sit
ionbywayofagov er
nmentgrant
4.Acqui
sit
ionbyexchange
5.Acqui
sit
ionbysel
f-cr
eati
onorint
ernal
gener
ation

Separ
ateAcquisi t
ion
a.Acquiredsepar
atelyandinthefor
m ofcash
-thecosti
ncludesthepurchasepri
ce,
importdut
ies,
nonref
undabl
epur
chase
taxesanddirect
lyat
tri
butabl
ecostsaf
terdeduct
ingtr
adedi
scount
sandrebat
es.

b.Def
erredbey ondnormalcreditt
erms
-thecostisthecashpriceequi
val
ent.Thedif
fer
encebetweenthecashpr
ice
equiv
alentandtotal
pay mentsi
srecognizedasi
nter
estexpenseovert
hecredi
t
peri
od.

Acqui
sit
ionaspartofBusi
nessCombi nati
on
a.Ifanint
angibl
eassetisacquir
edinabusi
nesscombinat
ion,
thecostoft
hei
ntangi
ble
assetisbasedonisf
t ai
rvalueonthedat
eofacqui
sit
ion.

b.I
fther sanact
ei ivemarket,
thequotedmarketpr
icewhi
chi
susual
l
ythecur
rentbi
d
pri
ceprovi
dest
hemostreli
ableest
imateoff
airval
ue.

c.I
fthereisnoact
ivemarket
,thefairval
ueofthei
ntangi
bleasseti
sequaltotheamount
whichwouldbepaidbytheenti
t yf
ort nanar
heasseti m’
slengthtr
ansact
ionbetween
knowledgeabl
eandwil
li
ngparties.

Acqui
sit
ionbygov
ernmentgr
ant
Page64of64
 InaccordancewithPAS20,t
hei
ntangi
bleassetacqui
redbywayofgov
ernmentgr
antmay
beini
tial
lyrecor
dedatei
ther
:
a.Fai
rv al
ue

b.Nominalamountorzer
o,pl
usanyexpendi
tur
ethati
sdi
rect
lyat
tri
but
abl
etopr
epar
ing
theassetf
orit
sint
endeduse.

Acqui
sit
ionbyexchange
-Thecostofani tem ofPPEacqui
redi
nexchangef oranonmonet
aryassetora
combinati
onofmonet ar
yandnonmonetaryasseti edatf
smeasur ai
rval
ue,unl
esst
he
exchangetransacti
onlackscommerci
alsubstance(PAS16).

Comput
edasf
oll
ows:

Exchange:
Val
ueRecei
ved=Val
uePar
tedWi
th

I
nter
nal
lygenerat
ion
Thecostofani nt
ernall
ygener
atedi
ntangi
bleassetcompri
sesal
ldi
rectl
yatt
ri
butable
costsnecessarytocreat
e,pr
oduceandpreparetheassett
obecapableofoper
atingiti
n
themannerintendedbymanagement .

Examplesofdir
ectlyatt
ri
butablecostsare:
1.Costofmaterial
sandser vi
cesusedorconsumedi ngenerati
ngt heintangibl
easset.
2.Costsofemployeebenefitsarisi
ngfrom thegener
ati
onoft heintangibleasset.
3.Feestoregi
steralegalr
ight.
4.Amorti
zati
onofpat ent
sandl icensesthatareusedtogeneratetheintangibleasset
.

Note:PAS38expli
cit
lypr
ovidest
hat“
int
ernal
lygenerat
edbrands,mastheads,publi
shi
ng
ti
tl
es,cust
omerl
istsandit
emssimil
arinsubstanceshal
lnotberecognizedasintangi
ble
assets”
.

2.Subsequentr
ecogniti
on
a.CostModel–carri
edatcostl
essanyaccumul
atedamor
ti
zat
ionandanyaccumul
ated
i
mpairmentloss.

b.Rev
aluati
onModel–carri
edatr ev
aluedamount(Fai
rval
uel
essanysubsequent
amort
izat
ionandanysubsequentaccumul
atedimpair
mentl
oss)
.

I
NTANGI
BLEASSETS
a.I
dent
ifi
able
Iftheint
angibleasseti
sacquiredt hroughpurchase,t
her
eisat r
ansferoflegalr
ightt
hat
wouldmaket heassetident
if
iable.Mor eover
,ift
heassetcouldbesold,t
ransfer
red,
li
censed,rentedorsoldseparately
, t
hei nt
angi
bleasseti
sidenti
fi
abl
e.

Exampl
esofidenti
fi
abl
eintangi
bleasset
sar
e:
1.Patent
2.Copyri
ght
3.Fr
anchise
4.Trademarkorbrandname
Page65of65
 5.Leaseholdorleaseri
ghts
6.Comput erSoftwar
e
7.Fi
shingright
sandot herspeci
fi
cri
ght
s

b.Uni
dentifi
abl
e
Anintangi
bleassetisunident
ifi
ablei
fitcannotbesold,tr
ansf
erred,l
icensed,rentedor
exchangedseparatel
y.Theintangi
bleassetisinher
entinaconti
nuingbusi nessandcan
onlybeident
ifi
edwi t
htheentityasawhol e.Thi
sunidenti
fi
abl
eintangibl
easseti sref
err
ed
toasgoodwi l
l
.

AMORTI
ZATI
ONORI
MPAI
RMENT

1.I
ntangi
bleasset
swi
thl
i
mit
edl
i
fe–amor
ti
zedov
ert
hei
rusef
ull
i
fe

2.I
ntangi
bleasset
swithi
ndef
ini
tel
i
fe–subj oi
ectt mpai
rmentatl
eastannual
l
ywhenev
ert
her
eis
i
ndicat
ionthatt
heint
angi
blemaybeimpai
red.

Not e:Animpairmentl
ossonanintangibl
easseti
srecogni
zedifit
sr ecov
erabl
eamountisless
thant hecarr
yingamount
.Therecoverabl
eamountisthehigherbetweenfairv
aluel
esscostto
sellandv al
ueinuse.

Amor
ti
zationMethod
Themet hodofamortizat
ionshal
lref
lectt
hepatter
ninwhi
cht
hef
utur
eeconomi
cbenef
it
sfr
om
theassetareexpect
edt obeconsumedbyt heenti
ty.

However,
ifsuchpat
ter
ncannotbedet
ermi
nedr
eli
abl
y,hest
t rai
ghtl
i
nemet
hodofamor
ti
zat
ion
wi
llbeused.

PATENT
-anexcl
usiveri
ghtgr
antedbythegover
nmenttoaninv
entorenabli
nghi
mtocont
rol
the
manufact
ure,sal
eorot si
heruseofhi nvent
ionf
oraspeci
fi
edperiodoft
ime.

Not
e:Thel
egall
i
feofpat
enti
s20y
ear
sfr
om t
hedat
eoff
il
ingt
heappl
i
cat
ion.

CosofPatent
a.Pur chased–Purchasepr
iceanddirect
lyat
tri
but
abl
ecost
s.
b.I
nt ernal
lydev
eloped–costofli
censing

Legalfeesandothercostsofsuccessf
ull
yprosecut
ingordef
endi
ngapatentshal
lbeexpensed.
Ift
heliti
gat
ionisunsuccessf
ul,t
helegalcost
sandtheremaini
ngcostoft
hepatentshal
lbe
wri
ttenoffasloss.

Amorti
zat
ionofPatent
a.Or
igi
nalPat
ent
–amort
izedovert
hel
egal
li
feorusef
ull
i
fe,
whi
chev
eri
sshor
ter
.

Page66of66
 b.Compet
it
ivePatent
-acquir
edt oprot
ectanor
igi
nal
patent
.
-amor t
izedoverther
emaini
ngl
ifeoft
heol
dpat
ent
.

c.Rel
atedPatent
–acquiredi
nordert
oextendt helif
eoft
heoldpatent.
-amorti
zedovert
heextendedl i
fe.
-i
fther
ewer enoext
ensioninlife,
amort
izedoveri
tsownl
i
feandt
hecostoft
heol
d
pat
entistobeamorti
zedov ertheremai
nderofit
sli
fe.

COPYRI
GHT
- anexcl
usi
veri
ghtgrant
edbyt hegover
nmenttotheaut
hor,composerorar
ti
stenabl
i
nghi
m
topubl
i
sh,sel
lorot
herwisebenefi
tfr
om hi
sli
ter
ary,
musicalorar
ti
sti
cwork.

CostofCopy ri
ght
-consistsofal
lexpensesincur
redint
heproduct
ionofthewor
kincl
udi
ngthoserequi
red
toestabli
shorobtai
nt heri
ght.
-ifpurchased,
thecostincl
udesthecashpai
d,anddir
ectl
yat
tri
but
abl
ecostnecessar
yfor
i
tsintendeduse.

Amor
ti
zati
onofcopyright
-Theor
eti
call
y,thecostofthecopyri
ghtshal
lbeamorti
zedovertheusefulli
fe.I
npracti
ce,
i
tisoft
endiff
iculttoest
imatetheuseful
li
feofthecopyr
ight(
li
fet
imeoft heauthorpl
us
50yearsaf
terdeath).Thus,i
tisadvi
sabl
etowriteof
fthecostofthecopy r
ightagai
nstthe
rev
enueoffir
stpr i
nti
ng.

FRANCHI
SE
- Undert hefranchiseagreement,onepar
tycal
l
edt
hef
ranchi
sorgr
ant
scer
tai
nri
ght
sto
anot
herpartycal l
edthefranchi
see.
- Thef ranchi
semaybe:
a.Governmentandpr iv
ateent i
ty.
b.Pri
vateentit
ies.

CostofFr
anchi
se:
-t
hecostincludesthelumpsum paymentsf
ortheacquisi
ti
onoft
hefranchi
seandal
l
l
egalexpensesincurr
edinconnect
ionwit
htheacqui
sit
ionofther
ight
.

Note:Thelumpsum pay menti

sknownasini
ti
alfr
anchi
sefeeandther
eforethecostof
thefr
anchi
se.Ifthefranchi
seagreementr
equi
resthefr
anchi
seetomakeperiodi
c
paymentstothef r
anchisor,
suchpaymenti
sconsi
deredasexpenseandisknownas
peri
odicf
ranchisefee.

Amor
ti
zat
ionorI
mpai
rmentofFr
anchi
se

a.I
ffr
anchi
seisgr
antedf
oradef
ini
teper
iod–amor
ti
zedov
ert
heusef
ull
i
feordef
ini
teper
iod
whi
cheveri
sshort
er.

b.I
ffranchi
sei
sgr
ant
edi
ndef
ini
tel
y–notsubj
ectt
oamor
ti
zat
ionbutt
est ori
edf mpai
rment
annuall
y.

Page67of67
LEASEHOLDORLEASERI GHT
- Ther i
ghtacqui
redbythel
esseebyvi
rtueofacontr
actofleasetousethespeci
fi
cproper
ty
ownedbythelessorf
oradefi
nit
eper
iodofti
mei nconsi
derati
onforacert
ainsum ofmoney.

Pointstoconsi
deri
nLeasehol
d:
a.LeaseBonus–chargedtoprepai
drentandal
l
ocatedasr
entexpenseov
erthel
easet
erm.
b.Periodi
cpayment
s–r epor
tedasexpenseonthepar
toft
helesseeandi
ncomeonthepar
tof
thelessor
.

Amor
ti
zat
ionofLeasehol
d
- Amort
izedovert
helif
eoft
hel
ease.

LEASEHOLDI MPROVEMENTS
- Arealterationsormodi ficati
onsontheleasedpropertymadebythelessee.
- Legall
y, t
hisr ev
ertstot helessoratt
heendort er
mi nati
onofthel
easecontr
act.
- Classi
fiedaspr opert
y,plantandequipment.
- Depreciatedov erthelifeoftheleaseortheli
feoftheimprovement,
whicheveri
sshor
ter
.
- Residual valueisignored.

TRADEMARK
- asymbol
,si
gn,
sloganornameusedt
omar
kapr
oductt
odi
sti
ngui
shi
tfr
om ot
herpr
oduct
s.

CostofTr ademar k
a.Ifpur chased–pur chasepri
ceplusdi
rect
lyat
tri
butablecosts.
b.Ifi
nt ernall
ydev el
oped–thecostincl
udesexpendi
turesrequir
edtoestabl
i
shit
,incl
udi
ngfil
ing
fees,registr
yf eesandotherexpensesi
ncur
redinsecuringthetr
ademarksuchasdesigncostof
thetrademar k.

Note:I
fthetr
ademarkissuccessf
ull
yprosecut
edordef
ended,
theli
ti
gati
oncosti
sanoutri
ght
expensebecausesuchcosti
ssimplyint
endedtomaint
aint
heint
angibl
eassetr
athert
hanto
i
ncreasetheeconomicbenef
it.

Trademar ki
snotsubjecttoamorti
zationbutsubjectt
oimpairment.
GOODWILL
- Ar i
seswhenear ningsexceednormal earni
ngsbyreasonofgoodname,capabl
estaf
fand
personnel,
highcredi
tstandi
ng,reputat
ionforfai
rdeal
ings,
reput
ati
onf
orsuperi
orpr
oduct
s,
fav
or abl
elocati
onandal i
stofregularcust
omer s.

Recogniti
onofGoodwi l
l
a.I
nternal
lygenerated–notr
ecor
ded
b.Purchased–r ecogni
zedasanasset

Not
e:Theamountofgoodwi
l
lcannotexceedt
heamountpai
d.

MEASUREMENTOFGOOWI LL
a.Resi
dualApproach–Theexcessoft
hepur
chasepr
iceov
ert
henett
angi
bleandi
dent
if
iabl
e
asset
sisconsider
edgoodwil
l
.

b.Di
rectApproach–Goodwil
li
smeasuredont hebasi
soft
hef
utur
eear
ningsoft
heent
it
y.
1.Pur
chaseofaver
ageexcessear
nings
Page68of68
 2.Capital
i
zati
onofaver
ageexcessear
nings
3.Capital
i
zati
onofaver
ageearni
ngs
4.Presentval
uemethod

Note:Goodwilli
snotsubj
ecttoamorti
zati
onbuttestedannuallyf
ori
mpai r
ment.Goodwi l
ldoes
notgeneratecashfl
owsindependent
lyfr
om otherasset
sorgr oupofassetsandtheref
ore
recover
ableamountisdeter
minedforthecashgenerati
ngunittowhichgoodwil
lbelongs.

Whenanimpai
rmentl
ossisr
ecogni
zedforacashgener
ati
nguni
t,t
hisl
ossshal
lbeal
l
ocat
edt
o
t
heasset
softheuni
tint
hefol
lowi
ngorder:

a.Fi
rst,
tothegoodwi
llal
locat
edtothecashgener
ati
ngunit
.
b.Then,toal
lot
hernoncashasset
softhecashgenerat
inguni
tpr
orat
ebasedoncar
ryi
ng
amount .

RESEARCHANDDEVELOPMENTCOST
a.Resear
chPhase–or i
ginalandplannedi
nvest
igati
onunder
takenwi
tht
hepr
ospectofgai
ning
sci
enti
fi
cortechni
cal
knowl edgeandunderst
anding.

b.Devel
opmentphase–t
heappl
i
cat
ionoft
her
esear
chf
indi
ngsorot
herknowl
edget
oapl
anor
desi
gn.

Treat
mentofR&DCost
a.ResearchCost–expensedasi ncurred.
b.Devel
opmentCost–mayqual i
fyasintangi
bleasseti f:
1.Thecompleti
onofintangibl
easseti stechnicall
yfeasi
ble.
2.Therei
sanintent
iont ocompl et
etheintangibleassetanduseorsel li
t.
3.Therei
stheabil
it
yt ouseorsel lt
heintangibleasset.
4.Theint
angi
bleassetwi l
lgenerateprobablefutureeconomi cbenefi
ts.
5.Therei
stheavail
abili
tyofresourcesorfundi ngtocompl et
edev el
opmentandt
ouseor
sell
theasset
.
6.Therei
stheavail
abili
tytomeasur erel
iablytheexpendit
ur eatt
ri
butabl
etothei
ntangi
ble
assetdur
ingi
tsdevelopment .

Not
e:Acqui
redR&Di
srecogni
zedasanassetatcost
,ev
eni
facomponenti
sresear
ch.

LI
ABI
LITI
ES

ESSENTIALCHARACTERISTICS:
1.Thel
iabi
lit
yisaPRESENTOBLI GATI
ONofanentit
y.
2.Thel
iabi
lit
yari
sesf
rom PASTTRANSACTION/EVENT.
3.Thesett
lementoft
heli
abil
it
yrequi
resanOUTFLOW ofr
esour
cesembody
ingeconomi
cbenef
it
s.

MEASUREMENT
I
nit
ial
Measur ement
1.Short
-t
erm -@ FACEVALUE

2.Long-t
erm
a.Int
erestbear
ing-@ FACEVALUE

Page69of69
 b.Non-
int
erestbear
ing-@ PRESENTVALUE

SubsequentMeasur
ement-@ AMORTI
ZEDCOST

CLASSIFI
CATIONOFLI ABI
LITI
ES
1.Cur
rentli
abil
i
ties
2.Non-
currentl
iabi
li
ti
es

CURRENTLI ABILI
TIES
Anenti
tyshallcl
assif
yal i
abi
li
tyascurrentwhen:
1.Theenti
tyexpectstosettl
etheli
abil
itywi
thi
ntheenti
ty’
sNORMALOPERATI
NGCYCLE.
2.Theenti
tyholdstheli
abil
it
yprimari
lyfort
hepurposeofbei
ngTRADED.
3.Theli
abil
it
yisduet obesettl
edwithinTWELVEMONTHSAFTERBSDATE.
4.Theenti
tyDOESNOTHAVEANUNCONDI TI
ONALRIGHTTODEFERSETTLEMENTofthel
i
abi
l
ityf
orat
l
easttwelv
emont hsaf t
ertherepor
ti
ngper i
od.

NON- CURRENTLI ABI LITIES

Thenon- curr
entl i
abili
ti
esi saresi
dualdefi
nit
ion.Al
ll
iabi
l
iti
esnotcl
assi
fi
edascur
rentf
all
int
othi
s
category.Thi
si ncludest hefoll
owing:
1.Noncur r
entpor ti
onofl ong-
ter
m debt
2.Financeleasel i
abilit
y
3.Deferredtaxliabili
ty
4.Long-term obli
gat i
ont oentit
yoffi
cers
5.Long-term deferredr evenue

LONG- TERM DEBTFALLI NGDUEWI THINONEYEAR

 Cl assif
iedasCURRENTev enif:
1.Origi
nalterm wasforaperi
odlongerthantwel
vemonths.
2.Anagr eementtorefi
nanceort
or eschedul
epaymentonalong-
ter
m basi
siscompl
etedaf
tert
he
reporti
ngperiodandbeforet
heFSi sauthori
zedf
ori
ssue.

However,
iftheref
inanci
ngonalong-t
erm basi
siscomplet
edonorbef
oretheendofther
epor
ti
ng
per
iod,
therefi
nancingisanadj
ust
ingeventandther
efor
etheobl
i
gati
onisclassi
fi
edas
NONCURRENT.

Fur
ther
more,i
ftheenti
tyhasthediscr
eti
ont
or ef
inanceorrol
loveranobli
gat
ionforatl
easttwel
ve
monthsaf
tert
hereport
ingperi
odunderanexisti
ngloanfaci
li
ty,
theobli
gat
ioniscl
assif
iedas
NONCURRENTev enifi
twouldotherwi
sebeduewi thi
nashorterper
iod.

I
ftheref
inanci
ngorroll
i
ngov
eri
snotatt
hedi
scr
eti
onoft
heent
it
y,t
heobl
i
gat
ioni
scl
assi
fi
edas
CURRENTLI ABI
LITY.

COVENANTS
Covenantsarerestr
ict
ionsontheborr
owerastoundert
akingf
urt
herbor
rowi
ngs,
pay
ingdi
vi
dends,
mai
nt ai
ningspecif
iedlevel
orworki
ngcapi
talandsofort
h.

I
fcert
aincondi
ti
onsr
elat
ingt
othebor
rower
’sf
inanci
alsi
tuat
ionar
ebr
eached,
thel
i
abi
l
itybecomes
pay
ableondemand.

I
not
herwor
ds,
thel
i
abi
l
ityshal
lbecl
assi
fi
edasCURRENTev
eni
fthel
enderhasagr
eednott
o
Page70of70
demandpay
mentasaconsequenceofbr
each.

However,t
heliabi
li
tyshal
lbecl
assi
fiedasNONCURRENTifthelenderhasagr
eedonorbefor
ethe
endofthereporti
ngperi
odtoprovi
deagraceper
iodendi
ngatleasttwel
vemonthsaf
tert
hatdate.

ESTI
MATEDLI ABI LI
TIES
Est
imat
edliabil
it
iesareobl
i
gat
ionswhi
chexi
statt
heendofr
epor
ti
ngper
iodal
thought
hei
ramount
i
snotdefi
nite.

Anest
imat
edl
i
abi
l
ityi
sconsi
der
edasaPROVI
SIONwhi
chi
sbot
hpr
obabl
eandmeasur
abl
e.

Esti
matedliabi
li
ti
esareei
therCURRENTORNONCURRENTi nnat
ure.Exampl
esi
ncl
udeest
imat
ed
l
iabi
li
tyforpremium,awar
dpoints,
warr
ant
ies,
gif
tcer
ti
fi
cat
esandbonus.

PREMIUMS
Premi
umsareart
icl
esofv
aluesuchast
oys,di
shes,si
l
verware,andothergoodsandinsomecases
cashpay
ments,
givent
ocustomersasr
esul
tofpastsalesorsalespr
omot i
onacti
vi
ti
es.

ACCOUNTINGPROCEDURES:
1.Pur
chaseofpr
emi
ums
Pr
emiums xx
Cash xx

2.Dist
ri
buti
onofpr emiumst
ocust
omer
s
Premium expense xx
Premiums xx

3.Att
heendoft heyear
,ifpremiumsar
esti
ll
outst
andi
ng
Pr
emium expense xx
Esti
mat edpr
emi um l
i
abil
i
ty xx

FINANCIALSTATEMENTCLASSI FICATI
ON
1.Premiums–Cur rentasset
2.Esti
matedpr emium li
abil
it
y–Cur r
entl
iabi
l
ity
3.Premium expense–Sel li
ngexpense

WARRANTY
Homeappl iancesl
iketel
evisi
onset
s,st
ereoset
s,r
adi
osets,r
efr
iger
ator
sandthel
i
keareoft
ensold
underguaranteeorwarrant
ytoprovi
defreer
epai
rser
viceorr
epl
acementdur
ingaspeci
fi
edper
iodif
theproductsaredefect
ive.

ACCOUNTI
NGPROCEDURES:

a.AccrualApproach
>Att hetimeofsaleal
i
abi
l
ityf
orwar
rant
ycost
sar
isesandt
her
efor
eshoul
dbegi
venaccount
ing
recognit
ion.

Est
imatedwarrantyi
srecordedasfol
l
ows:
Warrant
yExpense xx
Est
imat edwarr
antyli
abi
li
ty xx
Page71of71
 Pay
mentofact
ual
war r
antycosts:
Est
imat
edwarrant
yliabi
l
ity xx
Cash xx

b.Expenseasincur
redApproach
>Theapproachofexpensi
ngwar r
ant
ycostonl
ywhenact
ual
l
yincur
red.

Est
imatedwarrant
y:
Notrecogni
zed!

Pay
mentofact
ualwar
rant
ycost
s:
War
rant
yexpense xx
Cash xx

GIFTCERTIFI
CATES
Manymegamal l
s,depar
tmentst
oresandsuper
mar
ket
ssel
lgi
ftcer
ti
fi
cat
eswhi
char
eredeemabl
e
inmerchandi
se.

ACCOUNTINGPROCEDURES:
1.Saleofgi
ftcert
if
icates
Cash xx
Giftcert
if
icat
espay
abl
e xx

2.Redempti
onofGC’s.
Gi
ftcer
ti
fi
catespay
abl
e xx
Sales xx

3.Expi
rati
onofGC’ s
Gi
ftcerti
fi
catespayabl
e xx
Forf
eitedgi
ftcer
ti
fi
cat
es xx

REFUNDABLEDEPOSI TS
Refundabledeposi
tsconsi
stofcashorpr
oper
tyr
ecei
vedf
rom cust
omer
sbutwhi
char
eref
undabl
eaf
ter
compliancewithcer
tai
ncondit
ions.

Thebestexampl
esofrefundabl
edeposi
tist
hecust
omerdeposi
tforr
etur
nabl
econt
ainer
sli
kebot
tl
es,
drums,t
anksandbar
rels.

ACCOUNTI NGPROCEDURE:
1.Cust
omerdeposi
t.
Cash xx
Contai
ner
’sdeposi
t xx

2.Cust
omerr et
urnscontai
ner
.
Cont
ainer’
sdeposit xx
Cash xx

3.Cust
omerf ai
ltor
etur
ncont
ainer
.
Cont
ainer’
sdeposi
t xx
Page72of72
 Cont
ainer
s xx
Gai
nonsaleofcont
ainer
s xx

BONUSCOMPUTATI ON
Largeenti
ti
esof
tencompensat
ekeyof
fi
cer
sandempl
oyeesbywayofbonusf
orsuper
iori
ncome
real
izedduri
ngt
heyear.

Themai
npurposeofthi
sschemeist
omot
ivat
eof
fi
cer
sandempl
oyeesbydi
rect
lyr
elat
ingt
hei
rwel
l
bei
ngt
othesuccessoftheent
it
y.

Thebonuscomputat
ionhasfourvari
ations:
1.Bonusi
sbefor
ebonusandbef oretax.
2.Bonusi
saft
erbonusbutbeforetax.
3.Bonusi
saft
erbonusandaftertax.
4.Bonusi
saft
ertaxbutbef
orebonus.

CUSTOMERLOYALTYPROGRAM
Thecust
omerloyal
typrogram i
sgener
all
ydesi
gnedt orewar
dcust
omer
sforpastpur
chasesandt
0
prov
idet
hem wit
hincenti
vestomakefurt
herpurchases.

I
fthecust
omerbuy
sgoodsorser
vices,
theent
it
ygr
ant
sthecust
omerawar
dcr
edi
tsof
tendescr
ibedas
“
point
s”.

RECOGNI TIONANDMEASUREMENT
UnderIFRIC13,anent
it
yshal
laccountf
ort
heawar
dcr
edi
tsasa“
separ
atel
ycomponentoft
hei
nit
ial
sal
etransacti
on”.

Thegranti
ngofawardcr
editsi
sef f
ecti
velyaccountedforasa“fut
uredeli
ver
yofgoodsorservi
ces”.The
fai
rval
ueoftheconsi
der
ationrecei
vedwi t
hr espectt
otheini
ti
alsal
eshallbeal
locat
edbetweenthe
awardcredi
tsandt
hesale.Theconsiderati
onallocat
edtotheawardcredi
tsismeasuredatf
airval
ue.

Thesubsequentr
ecogni
ti
onoft
heamountal
l
ocat
edt
otheawar
dcr
edi
tsasr
evenuedependsont
he
fol
l
owing:

1.Theent
it
ysuppli
estheawardi
tsel
f.
2.Athi
rdpart
ysuppli
estheawar
d.

Theentit
ysuppliest
heawardit
self
Theconsiderat
ionall
ocat
edtotheawar
dcredi
tsisi
nit
ial
lyr
ecogni
zedasdefer
redr
evenueand
subsequentl
yrecogni
zedasrev
enuewithi
ntheawar
dcr edi
tsar
eredeemed.

Theamountofrevenuerecognizedshal
lbebasedont
henumberofawar
dcr
edi
tst
hathav
ebeen
redeemedr
elat
ivetothetotal
numberexpectedtober
edeemed.

Athi
rdpart
ysuppliest
heawards
Theent
it
yshallassesswhet
heri
tiscoll
ecti
ngt
heconsi
derati
onall
ocat
edtotheawardcr
edi
tsonits
ownaccountasprinci
pal
int
hetransact
ion,
oronbehal
fofthethi
rdpar
tyasagentoft
hethi
rdpar
ty.

I
ftheent
it
yiscol
l
ect
ingt
heconsi
der
ati
onaspr
inci
pal
int
het
ransact
ion,
theamountofr
evenuei
sequal
Page73of73
t
othegr
ossconsi
der
ati
onal
l
ocat
edt
otheawar
dcr
edi
ts.

Ift
heentit
yiscol
lect
ingtheconsi
derat
ionasanagentofthethi
rdpart
y,t
heamountofrev
enueisequal
tothenetamountret
ainedonitsownaccount.Thisnetamounti
sthedif
fer
encebet
weenthe
consi
derati
onall
ocat
edt otheawardcr
edit
sandt heamountpayabl
etothethi
rdpar
tyf
orsuppl
yingt
he
awards.

Ther
evenuef
rom t
heawar
dcr
edi
tsshal
lber
ecogni
zedatt
hepoi
ntofi
nit
ial
sal
e.

PAYROLLTAXES
Theent
it
yasanempl oy
erisrequi
redtowi t
hhol
dfr
om t
hesal
ari
esofeachempl
oyeet
hef
oll
owi
ng:
1.I
ncometaxpayabl
ebytheempl oyee.
2.Empl
oyee’
scontri
but
iontotheSSS.
3.Empl
oyee’
scontri
but
iontoPhil
health.
4.Empl
oyee’
scontri
but
iontoPag-ibi
gFund.

Suchamountwi
thheldfr
om thesalar
iesoft
heemployeesshall
ber
ecogni
zedascur
rentl
i
abi
l
ityuni
t
remi
tt
edbytheenti
tytotheappropri
ategov
ernmentauthor
it
y.

Inaddi
tiont
ot heamountswit
hhel
dfr
om thesal
ari
esoftheemploy
ees,
theenti
tyi
srequi
redbyl
awto
makeacont r
ibuti
onforSSS,
Phil
heal
thandPag-
ibi
gfundrepr
esent
ingi
tsshar
einthebenef
it
softhe
employees.

DEFERREDREVENUE
Defer
redrev
enueorunear
nedrevenuei
sincomealr
eadyreceiv
edbutnotyetearned.I
tisconsi
der
edas
cur
rentl
iabi
li
tyi
freal
i
zabl
ewit
hinoneyearandnoncur
rentl
iabil
i
tyi
freal
i
zableformorethanoneyear
.

PROVI
SIONANDCONTI
NGENTLI
ABI
LITY

PROVI SI
ON
Provi
sionisanexist
ingl
iabi
l
ityofuncer
tai
nt i
mingoruncertai
namount.Theli
abil
it
ydef
ini
tel
yexistsat
theendofr epor
ti
ngperi
odbutt heamountisindef
ini
teorthedat
ewhent heobli
gati
oni
sduei salso
i
ndefinit
e,andinsomecases,thepayeecannotbeidenti
fi
edordeter
mined.

Actual
ly
,aprovi
sionmay beequi
val
entofanest
imat
edl
i
abi
l
ityorl
osscont
ingencyt
hati
sACCRUED
becauseiti
sbothprobableandmeasurabl
e.

RECOGNITON
1.Pr
esentobl
igat
ion(
legal
orconst
ruct
ive)
2.Pr
obable
3.Measur
able

MEASUREMENT
Theamountr
ecognizedasaprovisi
onshoul
dbetheBESTESTI
MATEoft
heexpendi
tur
erequi
redt
o
set
tl
ethepr
esentobli
gati
onattheendofrepor
ti
ngper
iod.

1.Conti
nuousrangeofout
comes–MIDPOI
NTist
obeused.
2.Lar
gepopulati
onofit
ems–EXPECTEDVALUE(
gener
atedbywei
ghi
ngpossi
bleout
comes)
.

EXAMPLESOFPROVI
SIONS
Page74of74
1.Warranti
es
2.Envi
ronmentalcontami
nati
on
3.Decommi ssi
oningorabandonmentcost
s
4.Courtcase
5.Guarantee

CONTI NGENTLI ABI LITY

1.Possibl
eobligation
2.Presentobl
igation
3.CanbePr obable
4.CanbeMeasur abl e

Notr
ecogni
zedi
nnt
hef
inanci
alst
atement
sbyshal
lbedi
scl
osedonl
y.

BONDSPAYABLE
Aformaluncondi
ti
onal
promi
se,madeunderseal
,topayaspecif
iedsum ofmoneyatadeter
minabl
e
fut
uredat
e,andtomakeperi
odi
cint
erestpay
mentatastat
edr at
euntil
thepri
nci
palsum i
spaid.

TYPESOFBONDS
1.Ter
m –wi
thasi
ngledat
eofmatur
it
y .
2.Ser
ial
–wit
haseri
esofmatur
it
ydates.

3.Mortgage–secur edbyamor tgageonreal

proper
ti
es
4.Col
lateral–securedbystocksandbonds
5.Debenture–wi t
houtcol
later
alsecur
it
y

6.Regi
ster
ed–r equi
rest
heregi
str
ati
onofthenameofthebondholder
s
7.Couponorbearer–thenameofthebondhol
der
sarenotrequi
redtober
egi
ster
ed

8.Converti
ble–canbeexchangef orsharesofthei
ssuingent i
ty
9.Call
able–maybecal ledinforredempt i
onpri
ortomat ur
it
ydate
10.Guaranteed–issuedwher ebyanotherpart
ypromisest omakepay mentiftheborr
owerfai
l
sto
doso
11.Junk–hi ghr
isk,hi
gh-yi
eldbondsi ssuedbyenti
ti
est hatareheav
il
yindebtedorinweak
fi
nanci
alcondi
tion.

Forustobeabl
etounderst
andtheconceptandpr
operaccount
ingofBONDSPAYABLEwef
ir
stneedt
o
consi
dert
heacti
vi
ti
esthatt
ranspi
rei
nthelif
ecycl
eofabondspay abl
e.

Thoseactivi
ti
esincl
udet
hef
oll
owi
ng:
1.Aut
horizati
on
2.I
ssuance
3.Amorti
zation
4.Ret
ir
ement

AUTHORIZATI ON
Account
ingf orbondauthor
izat
ionwi
l
ldef
erdependi
ngont
hemet
hodempl
oyedbyt
heent
it
ywhi
chcan
be:
1.Memor andum approach
Page75of75
-Noj
our
nal
ent
ryi
smade,
onl
yamemor
andum st
ati
ngt
hecompany
’samountofbondsaut
hor
ized.

2.Jour
nal
entryappr
oach
-Ajour
nalent
ryismadewhi
chi
ncl
udes:

Uni
ssuedbondspayabl
e xx
Author
izedbondspay
abl
e xx

I
SSUANCE
I
ssuanceofbondspay
abl
emaybeat
:

A.Face,
abov
ef ace,bel
owf ace(Nopremium/di
scount
,pr
emi
um,
discount
)
1.Face–no“gain/l
oss”toberecorded.Jour
nal
entryi
ssi
mpl
y

Asset xx
Bondspay
abl
e xx

2.Aboveface–a“ gai
n”i sr
ecognized(Pr
emium onbondspayabl
e).Jour
nalentr
ywoul dincl
udea
recogni
ti
onoftherelatedpremium.Thepremium onbondspayablei
saddedtot hefaceofthe
bondinordertodeterminethecarryi
ngval
ue.Thepremi
um onbondspay abl
eist obeamor t
ized
overtheli
feofthebonds.

Asset xx
Bondspayabl
e xx
Premi
um onbondspayabl
e xx

3.Belowface–a“ l
oss”isr ecogni
zed(Discountonbondspay abl
e).Jour
nal entr
ywouldi
ncl
udea
recogni
ti
onofther elateddiscount
.Thedi scountonbondspayableisdeductedtothef
aceofthe
bondinordertodet erminethecarry
ingv alue.Thedi
scountonbondspay ableist
obeamorti
zed
overtheli
feofthebonds.

Asset xx
Di
scountonbondspayabl
e xx
Bondspay
abl
e xx

B.Oni
nter
estdat
eorbetweenint
erestdat
es
1.Oni
nter
estdat
e
-Noaccount
ingpr
oblem i
smet .Pr
oceedsoft
hebondsi
ssuedi
sequal
tot
hei
ssuepr
ice.

2.Bet
weeninterestdates
-Anaccountingprobl
em i
smet .Pr
oceedsoft
hebondsi
ssuedi
ncl
udeanACCRUEDI
NTEREST
whi
chispaidbyt hebuyerori
nvest
or.

C.Wi
thShareWar rantsorConv ert
ibl
e
1.Wi
thShareWarrant s
-Consi edascompoundf
der i
nanci
ali
nstruments(meani
ng,t
woinst
rument
s–bondspay abl
e
andsharewar r
ants).
-Thetotalconsiderati
onshouldbedividedbetweenthetwoi
nst
rumentsbyusingthe
RESIDUALAPPROACH.
-Underther esi
dual appr
oach,thefai
rvalueofthebondspay
abl
eisconsi
deredfi
rstandt
he
Page76of76
 excessoft
het
otal
consi
der
ati
oni
sgi
vent
otheshar
ewar
rant
s.

2.Conv
ert
ibl
eBonds
-Consideredascompoundf inanci
ali
nst r
uments(meani
ng,twoinstr
ument
s–bondspay abl
e
andconv ersi
onpr i
vilege)
.
-Thetotalconsiderat i
onshouldbedividedbetweenthetwoinstr
umentsbyusingthe
RESIDUALAPPROACH.
-Underther esi
dual approach,thefai
rv al
ueofthebondspayabl
eisconsi
deredfi
rstandt
he
excessoft hetotalconsiderati
onisgiventotheconver
sionpri
vi
lege.

MEASUREMENT
Bondspayabl
eisi
nit
ial
l
yrecogni
zedatFACEVALUE.Aft
eri
nit
ial
recogni
ti
on,
bondspay
abl
eshal
lbe
measuredatAMORTIZEDCOSTusingtheEFFECTI
VEINTERESTMETHOD.

AMORTIZATION
Amorti
zat
ionoft
hebondspay
abl
ewi
l
ldependonwhet
hert
hebondi
sissuedat
:
1.Pr
emium ordi
scount

Amort
izat
ionofPREMIUM
Amort
izat
ionofaPremium onbondspay
abl
ewi
l
ldecr
easet
hei
nter
estexpenseaccount
,jour
nal
i
zedas
fol
l
ows:

Pr
emi
um onbondspay abl
e xx
Int
erestexpense xx

Amort
izat
ionofDI
SCOUNT
Amort
izat
ionofaPremi
um onbondspay
abl
ewi
l
lincr
easet
hei
nter
estexpenseaccount
,jour
nal
i
zedas
fol
l
ows:

I
nter
estexpense xx
Discountonbondspay
abl
e xx

2.Thebondsi
saTERM orSERI
AL

Ter
m bonds–canbeamor t
izedbyusi
ngt
hef
oll
owi
ngamor
ti
zat
ionmet
hod.
1.Eff
ectiv
einter
estmethod.
2.Str
aightli
nemethod

Ser
ialbonds–canbeamor ti
zedbyusingt
hef
oll
owi
ngamor
ti
zat
ionmet
hod.
1.Eff
ectiv
ei nter
estmethod.
2.Bondout standi
ngmet hod.
3.Str
aightli
nemet hod.

RETIREMENTOFBONDS
Reti
rementofbondswil
ldependonwhetherthebondswereret
ir
ed:
1.Onmat ur
it
ydate
-Noaccounti
ngprobl
em i
sencounter
ed.Thiswouldsi
mplyrequi
rethecancel
ati
onofthe
bondspayabl
eandofcourset
hepay mentoftheaccr
uedint
erestonthedateofmatur
ity
.

2.Bef
oremat
uri
tydat
e
Page77of77
-I
fthebondsareretir
epr i
ortomat uri
tydate,
thef oll
owingprocedur
esar ef ol
lowed:
1.Determinethecar r
yingvalueofthebondspay abl
eatthedat eofr et
irement
.
2.Determinethecar r
yingvalueofthediscount ,
bondissuecostandpr emium,ifanyatt he
dateofretir
ement .
3.Theaccr uedinter
estatthedateofr eti
r ementshouldbedet ermined.
4.Totalcashpay mentshoul dbecomput ed,thatis–reti
rementpr iceplusaccr
uedi nterest
.
5.Gainorl ossonr et
irementiscomput ed, thatis–reti
rementpr i
cemi nuscarryi
ngv alue.
6.Reti
rementi srecordedbycancelli
ngt heCVoft heaccountsr ecognizedabove.

SPECIALCONSI DERATIONSONBONDSPAYABLE
1.Recordi
nginter
estinbonds
Thefoll
owingarethetransacti
onst
hatmayaff
ectt
heinter
estexpenseaccountt
hatneedst
obe
consi
dered:
1.Paymentofinterest(maybeannual
l
yorsemi-
annual
ly
).

I
nter
estexpense xx
Cash xx

2.Accr
ual
ofi
nter
est(
att
heendoft
heper
iod)
.

I
nter
estexpense xx
Accruedint
.pay
abl
e xx

3.Accr
ual
ofi
nter
est(
att
hebegi
nni
ngoft
heper
iod–f
orbondsi
ssuedbet
weeni
nt.dat
es)
.

I
nter
estexpense xx
Accruedint
erestpay
able xx

4.Amor
ti
zat
ionofbonds(
eit
herPr
emi
um orDi
scountonbondspay
abl
e).

I
nter
estexpense xx
Discountonbondspay
abl
e xx

Or

Pr
emi
um onbondspay abl
e xx
Int
erestexpense xx

2.Accounti
ngf ort
reasurybonds
Theacquisit
ionoftreasurybondscall
sfort
hesameaccount
ingpr
ocedur
esaccor
dedt
oaf
ormal
ret
irementofbondspr i
ortothemat ur
it
y.

TheTreasur
ybondi
sdebitedatfaceval
ueandanyunr el
atedunamor
ti
zedpremium ordi
scountor
i
ssuecostshoul
dbecanceled.Anyaccr
uedint
erestpaidi
schargedt
oint
erestexpense.

Thedi
ff
erencebet
weent
heacquisi
ti
oncostandthecar
ryi
ngamountoft
het
reasur
ybondsi
s
tr
eat
edasgainorl
ossontheacqui
sit
ionoft
reasur
ybonds.

SHAREHOLDERS’
EQUI
TY

Page78of78
SHAREHOLDERS’EQUITY
Inacorpor
ati
on,
theowner’
scl
aim agai
nstt
heasseti
scal
l
edshar
ehol
der
s’equi
tyorst
ockhol
der
s’
equi
tyorsi
mplyequi
ty.

I
nor
derforustoful
l
yhaveacomplet
egraspofthesigni
fi
cantconcept
sregar
dingshareholder
s’equi
ty,
wef
ir
stneedtoknowandunder
standtheact
ivi
ti
esthataf
fectt
helif
eofthesharesofstocks.

Acti
vi
tiesthataf
fectt
hel
i
feoft
heshar
esofst
ocks.
1.Authori
zati
on
2.I
ssuance
3.Reacquisi
ti
on
4.Rei
ssuance
5.Reti
rement

AUTHORI ZATION
Account
ingf ort
heauthori
zati
onofshar
ecapit
alwil
ldependonwhatapproachi
sempl
oyedbyt
heenti
ty.
1.Memor andum Ent
ryMet hod
-Noentryismadet orecordtheaut
hori
zedsharecapi
tal
.Onl
yamemor andum i
smadefort
het
otal
author
izedsharecapit
al.

2.JournalEntryMethod
-Theauthorizati
ontoissueshar
ecapi
tal
isr
ecor
dedbydebi
ti
nguni
ssuedshar
ecapi
tal
andcr
edi
ti
ng
authori
zedshar ecapit
al.

Uni
ssuedsharecapit
al xx
Author
izedsharecapi
tal xx

I
SSUANCE
Account
ingf
ortheissuanceofsharecapi talwi
l
ldependontwofact
orsnamel
y:
A.Themethodused( Memor andum/journalent
rymethod)
1.Memorandum EntryMet hod
-Whensharecapit
alisissued,i
tiscreditedt
oSHARECAPI TALaccount
.

2.Jour
nalEnt
ryMethod
-Whensharecapi
tali
sissued,
iti
scr
edi
tedt
oUNI
SSUEDSHARECAPI
TALaccount
.

B.Atpar,bel
owpar,abovepar
1.I
ssuanceatpar
-noaccountingprobl
em i
smet
.No“gai
n/loss”
.Si
mpl
yrecor
dthei
ssuanceofshar
esatparas
f
oll
ows:
Asset
/Liabi
l
iti
es xx
Shar
eCapital xx

2.I
ssuanceatabovepar
-a“gai
n”ist
ober ecogni
zed.Recogni
zet
hei
ssuanceofshar
esasf
oll
ows:

Asset
/Liabi
l
iti
es xx
Shar
ecapital xx
Shar
epr emium xx

Page79of79
 3.I
ssuanceatbel
owpar
-a“l
oss”ist
oberecogni
zed.Recogni
zet
hei
ssuanceofshar
esasf
oll
ows:

Asset
s/Liabi
li
ti
es xx
Di
scountonshar ecapi
tal xx
ShareCapit
al xx

Not
e:Theaccountshar ecapi
t alisalway srecordedatparorstatedv al
ue.
Sharepremium accounti srecordedint heshar
eholders’equit
yaspartoft heshare
Premium account.
Discountonshar ecapitalaccounti sr ecor
dedintheshareholdersequit
yasadeduct i
on.
Ourcor porat
ioncodepr ohi bit
st heissueofshareatadi scount.Thus,t
hedi scountisnot
consider
edal osst othei ssuingent i
tybuttheshareholderisheldli
abl
et herefor
eand
accountedasdi scountliabil
ityoftheshar ehol
ders.

REACQUISITI
ON
Aft
ersubscri
ptionofshar
es,
someofthesubscr
iber
smaynotbeabletopayt
hebal
anceduei
nthei
r
subscr
ipt
ionleavi
ngtheshar
esi
ndel
inquencyandistobesol
datpubl
i
caucti
on.

Atthepubl
i
caucti
on,t
heshar
esaresoldtoaper
soncall
edthe“hi
ghestbi
dder
”.Ahighestbi
dderi
sthe
onewhoiswil
l
ingtopayt
he“off
erpr
ice”oft
hedeli
nquentshar
esfort
hesmall
estnumberofshares.

Theof f
erpri
cenormal
lyincl
udesthefol
lowing:
1.Balancedueonsubscript
ion
2.I
nterestaccr
uedonthesubscri
pti
ondue
3.Expensesofadver
ti
singandothercostsofsale

I
faft
ertwopubl
icauct
ionsthesharesofstocksar
enotsol
d,t
hecor
por
ati
oni
sobl
i
gedundert
hel
awt
o
pur
chaseorr
eacqui
reitsownsharesofstocks.

Thi
sreacqui
sit
ionofsharesofst
ockbyt
heenti
tyshal
l beaccount
edatCOSTandi
srecogni
zedas
TREASURYSHARES.I nsuchacase,t
heper
ti
nententr
iesareasfol
lows:

a.Tr
easur
yshares xx
Subscri
pti
onreceivabl
e xx
Int
eresti
ncome xx
Advanceondelinquencysal
e xx

b.Subscri
bedsharecapi
tal xx
Sharecapi
tal xx

REISSUANCE
Reissuanceofenti
ty’
sownsharesprevi
ouslyr
eacqui
redmaybedoneatcost,bel
owcost,orabovecost
.
1.Reissuanceatcost
-noaccount i
ngprobl
em i
smet.Reissuanceofshar
esatcosti
ssi
mplyrecor
dedatcost.No“gain/
loss”
i
s
recognized.

Cash xx
Page80of80
 Tr
easur
yshar
es xx

2.Reissuanceatbel
owcost
-rei
ssuanceofsharesatbelowcostistobeaccountedatt
het
otal
consi
der
ati
onr
ecei
ved.A“
loss”i
s
recognizedandischargedtothefol
l
owinginorder
:
1.Shar epremi
um –treasuryshar
es
2.Ret ai
nedearni
ngs

Cash xx
Shar
epremium-TS xx
Treasur
yshar
es xx

3.Rei ssuanceatabovecost
-reissuanceofsharesatabovecosti
stobeaccount
edatt
het
otal
consi
der
ati
onr
ecei
ved.A“
gai
n”
i
sr ecognized.

Cash xx
Treasur
yshar
es xx
Sharepremi
m-TS xx

RETIREMENT
Reti
rementofentit
y’sownshar
esprevi
ouslyr
eacqui
redmaybe:
1.Costisequaltoparval
ue
-si
mpl ycancel
theshareandit
srel
atedaccount
s.

Shar
ecapit
al xx
Treasur
yshar
e xx

2.Pari
sgreat
erthancost
-a“gai
n”i
srecognizedi
ncancel
l
ingt
heshar
eandi
tsr
elat
edaccount
s.

Shar
ecapit
al xx
Treasur
yshar
es xx
Sharepremi
um-TS xx

3.Pari
sl essthancost
-a“l
oss”i sr
ecognizedincancel
l
ingtheshar
eandi
tsr
elat
edaccount
s.Suchl
ossi
sdebi
tedt
othe
fol
lowingintheorder:
1.Sharepremium –origi
nali
ssuance
2.Sharepremium –TS
3.Retainedearni
ngs

Sharecapit
al xx
Sharepremium- OI xx
Sharepremium- TS xx
Retai
nedear ni
ngs xx
Treasuryshar
es xx

SPECIALCONSIDERATI
ONSINSHAREHOLDERS’
EQUI
TY
1.Pr
eincor
por
ati
onSubscr
ipt
ionr
equi
rement
Page81of81
-25%ofshar
esauthor
izedmustbesubscr
ibed.25%ofshar
essubscr
ibedmustbef
ull
ypai
d.Howev
er,
i
nnocase,shal
lbepai
di ncapi
tal
bel
essthanP5,000.

2.AccountingforOrgani
zati
onCost
Legalfees–r ecogni
zedasexpense
Incorpor
ati
onf ees–recogni
zedasexpense
Shareissuancecosts–debitedt
osharepremi
um,
ifshar
epr
emi
um i
sinsuf
fi
cient
,excessi
s
chargedtoexpense.

3.Account
ingforLegalCapi
tal
Theport
ionofthepaidincapi
talar
isi
ngfrom i
ssuanceofsharecapit
alwhi
chcannotber
etur
ned
tot
heshareholder
sinanyform dur
ingtheli
fet
imeofthecorporat
ion.

Theamountofl egalcapi
talisdeterminedasf ol
lows:
1.Parvalueshares–theaggr egateparvalueofsharesI
SSUED&SUBSCRI
BED.
2.No-parval
ueshares–t otalconsiderat
ionreceiv
ed.

4.Accounti
ngforr
edeemablepr
efer
enceshar
e
Aredeemabl
eprefer
enceshar
eisonewhichhasamandat
oryr
edempt
iondat
eoronewhi
chmust
beredeemedattheopt
ionoft
heholder
.

Aredeemablepref
erenceshar
eisconsi
deredaf
inanci
all
iabi
l
ityandt
her
efor
ecl
assi
fi
edascur
rent
Ornoncur
rentl
iabi
li
tydependi
ngontheredempt
iondate.

Ar
edeemabl
ePSi
snotconsi
der
edascompoundf
inanci
all
i
abi
l
ity
.

I
ssuanceofredeemabl
ePS
Cash/
otherasset xx
Redeemabl
ePS xx

Paymentofdivi
dends
I
nter
estexpense xx
Cash xx

RedemptionofPS
RedeemablePS xx
Lossonredempti
on xx
Cash xx

5.Accounti
ngf orconver
ti
blePS
Aconv er
ti
bleprefer
encesharei
sonewhichgivest
heholdertheri
ghtt
oexchanget
hehol
dings
forothersecuri
ti
esoftheissui
ngcor
porat
ion.
Aconv er
ti
blePSi snotconsi
der
edascompoundf i
nanci
all
iabil
i
ty.

Conversi
onfrom PStoCS
Pref
erencesharecapit
al xx
Sharepremi
um –PS xx
Ordi
narysharecapi
tal xx
Shar
epr emium –OS xx
Page82of82
6.Accounti
ngf orPSissuedwithsharewarrants
Aconverti
blePSisconsideredascompoundf i
nancial
li
abi
l
ity–thepref
erenceshareandthe
warr
ants.Thus,consider
ati
onr ecei
vedshall
beallocat
edbetweenthepref
erenceshareandthe
warr
antsont hebasisoftheirRELATIVEFAIRVALUE.

I
ssuanceofPSandwar rants
Cash xx
Pref
erenceshares xx
Sharepremium –PS xx
Sharewarrant
sout st
andi
ng xx

Exer
ciseofwar r
ant
s
Cash xx
Shar
ewar rantsout
standi
ng xx
Ordinar
ysharecapi
tal xx
Sharepremium xx

Expi
rat
ionofwar r
ants
Shar
ewar rant
soutstandi
ng xx
Sharepremium xx

Note:Shar
ewarrantsoutstandi
ngaccountisrepor
tedaspartofshar
epremium.
7.Accounti
ngforDonatedCapital
Donati
onsrecei
vedshallberecordedatthefai
rval
ueoft hei
temsrecei
ved.Account
ingf
ort
he
donat
ionsofcapit
alwil
ldependont hefoll
owing:

1.Sharehol
dersdonat
ion–r ecordedatfairvalueandcredi t
edt oDONATEDCAPI TALaccount
.
2.Nonshareholder
s–recordedatf ai
rvalueandr ecognizedasei t
heri
ncomeorliabi
l
ity
.
a.Donati
oni swi
threstr
ict
ions–r ecognizedasliabili
ty(unear
nedincome)
b.Donationiswi
thoutrest
rict
ions–r ecognizedasi ncome

8.Account i
ngforrecapi
tali
zati
on
Recapital
izat
ionoccurswhent her
eisachangei nthecapit
alstructur
eoft heenti
ty.Theold
sharesarecanceledandnewshar esareissued.Thetypi
calrecapital
izat
ionsare:
1.Changesfrom partonopar
2.Changesfrom nopartopar
3.Reducti
onofparv al
ue
4.Reducti
onofstatedvalue
5.Spli
tup
6.Spli
tdown
Changesi ntheparval
ueofshar ecapit
alshall
bechargedorcr edit
edt osharepremium.Ifan
i
ncreasei nsharecapi
talexceedsharepremium,theexcessshal l
bechar gedtoretai
nedearni
ngs.

Spl
i
tUp
- at r
ansacti
onwherebyt
heor
igi
nal
sharesar
ecal
ledinf
orcancel
ati
onandr
epl
acedbyal
arger
numberaccompaniedbyar
educt
ioni
ntheparv
alueorst
atedval
ue.

Spl
i
tDown
- ist
her
ever
seofspl
i
tup.I
tisat
ransact
ionwher
ebyt
heor
igi
nal
shar
esar
ecancel
edandr
epl
aced
Page83of83
 byasmal
l
ernumberaccompani
edbyani
ncr
easei
ntheparv
alueorst
atedv
alue.

Nof
ormal
ent
ryi
snecessar
ytor
ecor
dshar
espl
i
t.

Recapi
tal
i
zat
iondoesnotaf
fectt
het
otal
stockhol
der
s’equi
ty.

SHARE-
BASEDCOMPENSATI
ON

SHARE- BASEDCOMPENSATI ON
Share-basedcompensationpl
anisacompensati
onarrangementestabli
shedbytheent
it
ywherebyt
he
enti
ty’
sempl oyeesshal
lrecei
veshar
esofcapi
tali
nexchangefortheirser
vicesort
heenti
tyi
ncur
s
l
iabi
lit
iestotheemployeesinamountbasedonthepr
iceofitsshares.

Shar
e-basedcompensat
ioncanbe:

A.Equi
tyset
tl
ed
-Theenti
tyi
ssuesequi
tyi
nst
rument
sinconsi
der
ati
onf
orser
vicesr
ecei
ved.Exampl
eisshar
eopt
ions.

B.Cashsett
led
-Theenti
tyi
ncursl
i
abi
li
tyf
orser
vicesrecei
vedandt
hel
i
abi
l
ityi
sbasedont
heent
it
y’si
nst
rument
s.
Examplei
sshareappr
eci
ati
onri
ghts.

SHAREOPTI ONS
Shareopt
ionsaregr
antedtoof
ficersandkeyemploy
eestoenabl
ethem t
oacquireshar
esoft
heent
it
y
duri
ngaspecif
iedper
ioduponfulfi
l
lmentofcer
tai
ncondi
ti
onsataspeci
fiedpr
ice.

MEASUREMENTOFCOMPENSATI
ON

A.Fai
rval
uemethod
-Thecompensat
ioni
sequal
tot
hef
airv
alueoft
heshar
eopt
ionsont
hedat
eofgr
ant
.

B.Int
ri
nsicv
aluemethod
-Thecompensati
onisequaltothei
ntr
insi
cv al
ueoft
heshareopti
onsthatis–excessofmar
ketv
alue
overopti
onpri
ce.
-Tobeusedonlyift
hefairv
alueoftheshareopti
oncannotbeest
imat
edr el
iabl
y.

RECOGNI
TIONOFCOMPENSATI
ON

A.Vestimmediatel
y
-Theemployeeisnotr
equi
redt
ocompl
eteaspeci
fi
edper
iodofser
vicebef
oreuncondi
ti
onal
l
yent
it
led
totheshar
eoption.

B.Donotvesti
mmedi at
ely
-Thecompensati
onisrecogni
zedasexpenseov
ert
heser
viceper
iodorv
est
ingper
iod–f
rom t
hedat
e
ofgr
anttotheexer
cisedate.

SHAREAPPRECI ATIONRIGHT
Cashsett
ledshare-
basedcompensat
ionshal
lbereportedatf
airv
alueoftheli
abi
li
ty.Theent
it
yshal
l
remeasur
edthefairval
ueoft
heli
abil
i
tyateachreport
ingdateandatthedateofsettl
ementwit
hany
Page84of84
changesi
nfai
rval
uer
ecogni
zedi
npr
ofi
torl
oss.

MEASUREMENTOFCOMPENSATI ON
Thecompensat i
onisbasedont heFAI RVALUEOFTHELI ABI LI
TYatthereport
ingdateandshal
lbe
remeasuredatever
yyear-endunt i
li
tisfi
nall
yset
tl
ed.Anychangesi nfai
rval
ueareincl
udedinpr
ofi
tor
l
oss.Thef ai
rval
ueoftheliabil
it
yisequaltothe“
excessofthemar ketval
ueofshareovera
predet
erminedpri
ceforagi vennumberofsharesoveradefinit
evesti
ngperi
od”.

RECOGNI
TIONOFCOMPENSATI
ON

A.Vestimmediatel
y
-Theemployeeisnotr
equi
redt
ocompl
eteaspeci
fi
edper
iodofser
vicebef
oreuncondi
ti
onal
l
yent
it
led
totheshar
eoption.

B.Donotvesti
mmedi at
ely
-Thecompensati
onisrecogni
zedasexpenseov
ert
heser
viceper
iodorv
est
ingper
iod–f
rom t
hedat
e
ofgr
anttotheexer
cisedate.

RETAI
NEDEARNI
NGS

RETAINEDEARNI NGS
Retai
nedearni
ngsr epr
esentthecumul at
ivebal
anceofperi
odicnetincomeorloss,
div
idenddi
str
ibut
ions,
pri
orperi
oderror
s,changesi naccounti
ngpoli
cyandothercapit
aladjust
ments.
Thefoll
owingarethetransacti
onsthatmayaf f
ectt
heretai
nedearningsaccount
:

RETAI
NEDEARNI NGS
Ending xx Beginning xx
Netloss xx Netincome xx
Err
ors x x Err
ors xx
Div
idends xx

Thetransact
ionsthatmayaff
ecty
ourretai
nedear
ningsaccounthav
eal
readybeendi
scussedi
nthe
prev
iouschapters.Let
’sf
ocusontheaccount
ingf
ordivi
dends.

DI
VIDENDS
Di
vi
dendsaredi
str
ibut
ionsofear
ningsorcapi
tal
tot
heshar
ehol
der
sinpr
opor
ti
ont
othei
rshar
ehol
dings.
Di
vi
dendscanei
therbe:

A.Di
v i
dendsoutofear
nings
-di
vi
dendsoutofearni
ngsisalsocal
l
edas“
ret
urnoncapi
tal
”.Ret
urnoncapi
tal
encompassest
he
fol
lowingty
pesofdiv
idends

1.Cashdi
vidends
-tobeset
tl
edbyt hepay
mentofcashwhi
chcanei
therbebasedonanamountofpesopershar
e
Page85of85
 orper
centofpar
/st
atedv
alue.

Declarati
on
Retainedearni
ngs xx
Cashdi
videndspay
abl
e xx

Payment
Cashdi
vi
dendspay
abl
e xx
Cash xx

2.Proper
tydiv
idends
-tobesettl
edbythepay mentordi
stri
but
ionofnon-
cashasset.
-recor
dedatthefairv
alueoftheassetdi
str
ibut
edwithanychangeadj
ust
edt
oequi
ty.

Declarati
on
Retainedearni
ngs xx
Proper
tydi
vi
dendspay
abl
e xx

Payment
Proper
tydi
vi
dendspay
abl
e xx
Pr
oper
ty xx

3.Liabi
li
tydi
vidends
-l
iabil
it
ydivi
dendsareact
ual
l
ydef
err
edcashdi
vi
dends.Li
abi
l
itydi
vi
dendsmaybei
nthef
orm of
bondandscr i
p.

Bondsdi
vi
dends–appli
est
o“ l
ong-t
erm”li
abil
iti
esandpai
dwit
hint
erest.
Scr
ipdi
vi
dends-appl
i
esto“short
-t
erm”l
iabil
i
tiesandpai
dwit
horwithoutint
erest
.

4.Stockdivi
dends
-stockdiv
idendsar edi
stri
buti
onsoftheear
ningsoftheent
it
yinthef
orm oftheenti
ty’
sown
shares.Whenst ockdiv
idendsaredeclar
ed,
theret
ainedear
ningsoft
heenti
tyiscapi
tali
zed,
meaningtransferr
edtoshar ecapi
tal
.

a.Smal lst
ockdivi
dends
-i
ft hestockdiv
idendsisl
esst
han20%.
-report
edatf ai
rvalueont
hedateofdecl
arat
ion.

b.Largestockdiv
idends
-i
ft hestockdi
vi
dendis20%ormore.
-report
edatparvalueonthedat
eofdecl
arat
ion.

B.Di
videndsoutofcapit
al
Whencapit
alisret
urnedtoshar
ehol
ders,i
tisknownasdivi
dendoutofcapi
tal
orl
i
qui
dat
ing
di
vi
dend.Thiski
ndofdi v
idendi
sal
sorefer
redtoas“ret
urnofcapi
tal
”.

Asar ul
e,li
qui
dati
ngdivi
dendsar
epai dtotheshareholderswhentheenti
tyi
sdissol
vedand
l
iqui
dated.Duri
ngtheli
fet
imeoftheent i
ty,
iti
sil
legalt
or etur
ncapi
talt
othesharehol
der
s
becauseitwil
lbeinvi
olat
ionof“
trustfunddoctr
ine”.
Page86of86
 However,
wast
ingassetcorpor
ati
onsmaydecl
aredi
vi
dendswhi
char
einpar
tdi
str
ibut
ionsof
Ear
ningsandi
npartdi
stri
buti
onofcapi
tal
.

APPROPRIATI
ONOFRETAI NEDEARNINGS
Theappr
opri
ati
onofr
etai
nedear
ningsmaybedescr
ibedasf
oll
ows:

1.Legalappropri
ation
-ari
sesf r
om thefactthatthelegalcapi
talcannotberet
urnedtothesharehol
der
sunti
ltheent
ityis
di
ssolvedandl i
quidated.
-Thus,ifanenti
tyacqui r
esit
sownshar es,aport
ionoft
her et
ainedear
ningsmustbeappropr
iatedforan
amountequal tothecostoft hetreasur
yshares.

2.Contractualappropriat
ion
-ari
sesf r
om t hefactthatthet
ermsofthebondissueandpreferenceshareissuemayi mposerest
ri
cti
on
ont hepaymentofdi vidends.
-theappropriatedbalancemaybedescribedas“ret
ainedear
ningsappropriatedf
orsinki
ngfundorbond
redemption”and“ ret
ainedearni
ngsappropr
iat
edforredempti
onofpr ef
erenceshares”.

3.Volunt
aryordiscr
eti
onaryappropriat
ion
-i
samat terofdiscr
eti
onont hepartofmanagement .I
tmayarisefrom t
hefactthatmanagement
wishestopreser
v et
hefundsf orexpansionpur
posesorforcov
eringpossibl
elossesorcont
ingenci
es.

Theappropr
iat
ionaccountsmaybedescribedasfoll
ows:
a.Ret
ainedear
ningsappropr
iat
edf
orplantexpansion.
b.Ret
ainedear
ningsappropr
iat
edfori
ncreaseinworkingcapi
tal
.
c.Ret
ainedear
ningsappropr
iat
edf
orcont i
ngenci
es.

BOOKVALUE&EARNI
NGSPERSHARE

BOOKVALUEPERSHARE
Bookvaluepershar
eistheamountthatwoul
dbepaidoneachshareassumingtheenti
tyisli
qui
dat
ed
andtheamountavai
labl
etoshar
ehol
dersi
sexact
lyt
heamountrepor
tedassharehol
der
s’equit
y.

Thef
ormul
afort
hecomputati
onofbookval
uepershareis:
Tot
alShar
eholders’
Equit
y
Bookval
uepershar
e=
Numberofsharesoutst
andi
ng

Wheretherear
et woclassesofshar
ecapit
al,i
tisnecessar
yt oappor
ti
onthesharehol
der
s’equi
ty
betweenthepr
efer
enceshareandordi
nar
yshare.Thebookv al
uepershareshoul
dbecomputedas
fol
l
ows:

Pr
efer
enceShar
ehol
ders’Equi
ty
Bookv
alueperpr
efer
enceshar
e=
Pr
efer
enceShar
esOutstandi
ng

Or
dinar
yShar
ehol
ders’Equi
ty
Bookv
alueperor
dinar
yshar
e=
Or
dinar
yShar
esOutstandi
ng

Forpurposesofappor
ti
onmentbet
weent
hepr
efer
enceshar
eandor
dinar
yshar
e,t
hef
oll
owi
ng
procedur
esshouldbeobser
ved:
Page87of87
1.Anamountequaltotheparorstatedval
ueisal
locat
edtothepreferenceshareandor dinary
share.
2.Anybalanceoft
hesharehol
ders’equi
tyi
nexcessoftheparorstatedv al
ueisthenappor ti
oned
taki
ngint hel
oaccountt iqui
dat
ionv al
ueanddiv
idendri
ght
softhepr ef
erenceshareholders.

Comput
ati
onofamountandshar
esout
standi
ng:
Shares Amount
Sharecapit
alissued xx xx
Add:Sharecapitalsubscr
ibed xx xx
Total xx xx
Less:t
reasurysharesatpar (xx) (xx)
Amountandshar esoutst
anding xx xx

Liquidat
ionvalueofpref
erenceshar
e
Thel i
quidat
ionvalueist
heamountwhichthepref
erenceshar
ehol
der
snormall
yrecei
veupont
he
l
iquidati
onofthecor por
ati
on.Theli
qui
dat
ionval
uemaybemor et
hantheparv
alue.

Pref
erenceastoassets
Theprefer
encesharehol
der
sar
eent
it
ledt
opay
mentnotonl
yforl
i
qui
dat
ionv
aluebutal
sof
ordi
vi
dendi
n
arr
ears

Preferenceastodivi
dends
Thepr efer
encemeanst hatifdi
videndsaredeclaredthepref
erencesharehol
der
shav
ether
ightt
o
receiv
edi v
idendsfi
rstbefor
eordinarysharehol
dersarepaidadividend.
Whenpr ef
erencesharehaspreferenceastodividends,t
hedivi
dendr i
ghtmaybe:

1.Noncumulati
ve
-Thepref
erenceshar
eisent
it
ledonl
ytocur
renty
eardi
vi
dends.

2.Cumul
ati
ve
-Thepr
efer
enceshar
eisent
it
ledt
oal
ldi
vi
dendsi
nar
rear
s.

3.Nonpar
tici
pati
ng
-Thepref
erenceshar
eisent
it
ledt
orecei
veonl
ythedi
vi
dendsequal
tot
hef
ixedr
ate.

4.Parti
cipati
ng
-Thepref er
enceshareisenti
tl
edt
orecei
vedivi
dendsinexcessofthebasicorfi
xedr
ate.
-Part
ici
pat i
ngpref
erencesharemaybeful
lyparti
cipat
ingwi
thordi
naryshareonaprodatabasi
sor
part
icipati
ngonlytoacertai
namountorpercentage.

-However,bef
orethepref
erencesharecanpar
ti
cipate,
theordinar
yshareshoul
drecei
vef
ir
stan
amountequal t
othebasicprefer
encerat
e,meaningpref
erenceratet
imestheparval
ueofthe
ordi
naryshareoutst
andi
ng.

Specialnotes:
1.Intheabsenceofspeci f
icdesignati
on,prefer
enceshar ei
sassumedtobenoncumulat
iveand
nonparti
cipat
ing.
2.Divi
dendsi narrearsusuall
yincludecurrentdi
vidends.Div
idendsi
nar
rear
sinpri
oryear
sshallbe
specif
icall
ydisclosed,ot
herwise,ther
ear enoar r
earages.
Page88of88
3.Incasetherearet
woclassesofpref
erenceshar
ewithdi
ff
erentdi
vi
dendrat
esandbot
har
e
part
ici
pati
ng,thel
owerrat
eshall
bet hebasi
sforal
l
ocati
ontotheordi
nar
yshar
e.

EARNINGSPERSHARE
Theearningspersharefi
gurei
stheamountatt
ri
but
abl
etoever
yordi
naryshar
eoutst
andingduringt
he
peri
od.Thus,theearni
ngspershar
einf
ormati
onper
tai
nsonlyt
oordi
naryshar
e.I
tisnotnecessaryf
or
pref
erencesharebecausether
eisadefi
nit
erat
eofret
urnf
orsuchshar
e.

A.Basi
cearni
ngspershar
e
-computedasfol
l
ows:
Netincome–PSdi
vi
dends
BasicEPS=
WACSO

I
fthepr
efer
encesharei
scumulat
ive,
thepr
efer
encedivi
dendf
ort
hecur
renty
earonl
yisdeduct
edf
rom
t
heneti
ncome,whether
,suchdi
vi
dendisdecl
aredornot.

I
fthepref
erencesharei
snoncumulati
ve,
thepr
efer
encedi
vi
dendf
ort
hecur
renty
eari
sdeduct
edf
rom
neti
ncomeonl yi
fther
eisdecl
arat
ion.

B.Basiclosspershar
e
I
fhepr efer
enceshareiscumul
ati
ve,
thepr
efer
encedi
vi
dendi
saddedt
othenetl
osst
ogett
otal
losst
o
theordinar
ysharehol
ders.

I
fthepr
eferenceshar
eisnoncumulat
ive,
thepr
efer
encedi
vi
dendi
signor
edbecausepr
esumabl
yther
eis
nodecl
arat
ionsincet
herei
snetloss.

C.Dil
utedearni
ngspershar
e
Thecomput at
ionf
orDEPSissi
mil
arwi
thbasi
cear
ningspershar
eonl
ythatt
her
eist
hepr
esenceof
“di
l
utors”
.

Dil
utor
srefertopot
enti
alor
dinar
yshareswhi
chhast
heef
fectofdecr
easi
ngt
heBasi
cear
ningsper
shareori
ncreasi
ngthebasi
closspershar
e.

Thethr
eemaj orty
pesofpotenti
alor
dinar
yshar
esar
e:
1.Conver
ti
blebondspayable
2.Conver
ti
bleprefer
enceshare
3.Shar
eoptionandwar r
ant

Thecomputat
ionofdil
utedearni
ngspershar eisbasedonthe“asif”scenari
o:
a.“
Asif
”theconver
tibl
ebondpay ableisconvert
edintoor
dinar
yshar e.
b.“
Asif
”theconvert
ibl
eprefer
enceshar eisconvert
edint
oordinar
yshar e.
c.“
Asif
”theshareopti
onsandwar rantareexerci
sed.

I
nshor
t,t
hecomputat
ionofdil
utedear
ningspershar
ewi
l
lbeasf
oll
ows:
NetIncome
Di
lut
edear
ningspershare= +“
Asi
f”eff
ect
WACSO

Pr
esentat
ion
Anenti
tyshallpr
esentont
hef
aceoft
hei
ncomest
atementbasi
canddi
l
utedear
ningspershar
efor
i
ncomeorl oss.
Page89of89
Not
e:Publ
i
cent
it
iesar
erequi
redt
opr
esentear
ningspershar
e.

PFRSf
orSmal
landMedi
um-
sizedEnt
it
ies

SI
MPLIFI
EDVERSI ONOFFULLPFRS
- Somet opicsinIFRSsomitt
edifirrel
evantt
oSMEs
- WhereIFRShav eoptions,
onlythesimpleropt
ionisi
ncl
uded
- Recognit
ionandmeasur ementr equi
rementsweresi
mpli
fi
ed
- Reduceddi scl
osures
- Si
mplifi
eddr aft
ing

ScopeandDef
ini
ti
on:
DebtorEqui
tySecur
it
ynottraded
Nopubli
c i
npubli
cmarket(i
ntheprocessof
Account
abil
it
y issui
ng)
SME
Not
e:Anenti
tywi
thpubl
icac
I
sc
so
uuns
etabi
Gl
ei
t
ny
ec
ral
annotcl
aim compl
i
ance
Hwi
t
olht
dahs
see
I
FRSf
t
s io
nfr
i
dS
uME
cias
r(
ye
cv
ae
pnifi
actyas
j
uri
sdi
cti
onpermi
tsi
tsuse) pur poseFS pri
marybusiness(es)
SECNOTI CE/GUI DELINES
Cover
edcor por
ationsasSME’ s
1.Hav etotalassetsofbet weenP3mi l
li
onandP350mi l
li
onort otall
iabil
it
iesofbet
weenP3mi l
l
ion
andP250mi l
li
on;
2.Ar enotrequiredtof i
lefi
nancialstatement sunderSRCRul e68. 1;
3.Ar enotinthepr ocessoff i
li
ngt heirfi
nancialst
atement sforthepur poseofissui
nganyclassof
i
nstrumentsinapubl i
cmar ket;
4.Ar enotholdersofsecondar ylicensesi ssuedbyar egulat
or yagency ,
suchasbanks,invest
ment
houses,fi
nancecompani es,i
nsur ancecompani es,securi
tiesbroker/dealer
s,mutual
fundsand
pre-
needcompani es;and
5.Ar enotpublicutil
iti
es

Dat
eforappl yi
ngt hesi zecr i
ter
iaandf ortransiti
oni
ngt ofullPFRSort oPFRSf orSMEs
- ThePFRSf orSMEsshal lbeeffectiveforannualperiodsbeginningonoraf erJanuar
t y1, 2010,
exceptf orthegui dancei napplyi
ngt herequir
ement sofSect i
on23( Rev enue)inrecogni zing
revenuef rom agr eement sfortheconst r
ucti
onofr ealestatewhichshal lapplytoannual peri
ods
beginningonoraf t
erJanuar y1,2012.
- Amountoft otal assetsandt otall
iabil
i
tiesshall
bebasedont heentit
y’saudi t
edfinancial
statement sasofDecember31, 2009ori mmedi at
elyprecedingf i
scalyearasappr opriate.
- I ncaseofbr eachoft hresholdbyaSME, bef
oret r
ansiti
oningtoappl i
cableframewor k,det ermine
i
fev entt hatcausedt hechangei s:
 si gnif
icant( asagener alr
ule,20%ormor eoftotalassetsort ot
alli
abi l
i
ties)and
 cont inuing
signif
icantandcont inuing–basedonmanagement ’
sjudgment( quant i
tativ
e&qual i
tativ
e
factors)

Datef
orappl y
ingthesizecri
ter
iai
fthePFRSforSMEisadopt
edear
ly
Subsi
diari
esofapar entcompanythatuseful
lPFRS
- I fqual
if
iedasSME’ s,
mayuset hePFRSforSMEs.

Page90of90
Requi
redDi
scl
osures:
- Expl
anati
onofthet
ransi
ti
ontoPFRSf
orSMEs.
- Earl
yadopti
onofPFRSforSME’
s.

Resolut
ion: Exempt i
onf rom t hemandat oryadopt ionofPFRSf orSMEst hatmeetanyoft hef oll
owi ng
cr
iter
ia:
- I tisasubsi diaryofapar entcompanyr epor ti
ngunderf ullPFRS.
- I tisasubsi diaryofaf oreignpar entcompanyt hatwi l
lbemov i
ngtowardsI FRSpur suanttot he
foreigncount ry’
spubl i
shedconv ergencepl an.
- I tisasubsi diaryofaf oreignpar entcompanyt hathasbeenappl yi
ngthest andardsf oranon-
publ i
clyaccount ableent ityforl
ocal repor tingpur poses, andi sconsideri
ngmov ingt of ul
lPFRS
i
nst eadoft hePFRSf orSMEsi nor dert oal ignitspol i
cieswi ththeexpectedmov et of ullI
FRSby
i
t sforeignpar entcompanypur suantt oi tscount ry’spubl i
shedconv ergencepl an.
- I thasshor tter m projectionsthatshowt hati twi llbreacht hequant i
tati
vethreshol dsseti nt he
crit
er i
af oranSME, andt hebreachi sexpect edt obesi gnif
icantandcont i
nuingduet oitslong-
term effectont hecompany ’
sassetorl i
abi litysize.
- I tispar tofagr oup, eitherasasi gni
ficantj ointv entur eoranassoci atethatisr epor t
ingunderf ul
l
PFRS.
- I tisabr anchorof f
iceofaf or
eigncompanyr epor ti
ngunderf ullI
FRS.
- I thasconcr etepl anst oconductani nit
ial publ i
cof f
er i
ngwi thinthenexttwoy ears.
- I thasasubsi diarythati smandat edt orepor tunderf ullPFRS.
- I thaspr eparingf i
nanci al st
atement susi ngf ullPFRSandhasdeci dedtoliquidatei tsasset s.

CONCEPTSANDPERVASI VEPRINCIPLES
Obj
ect
iveoffi
nanci
alstatementsofSMEs:
- Topr ovi
deinformat i
onaboutfi
nanci
alposi
ti
on,per
formanceandcashf
lowsusef
ulf
ort
he
economicdecisi
on- maki
ngofabroadrangeofusers.

Qual
it
ati
vechar act
eristi
csofi
nfor
mati
oninf
inanci
alst
atement
s:
- Understandabi l
i
ty
- Relevance
- Reli
abili
ty
- Mat er
iali
ty
- Substanceov erform
- Prudence
- Compl eteness
- Compar abili
ty
- Timeliness
- Balancebet weenbenefi
tandcost

FI
NANCI ALSTATEMENTPRESENTATI ON
Setoff
inancialstatementspreparedinaccordancewiththeIFRSforSMEscompr i
ses:
- St at
ementoff i
nanci
alpositi
on
- St at
ementofcompr ehensiveincome(orasepar at
eincomestatementandstat
ementof
compr ehensiv
eincome
- St at
ementofchangesi nequity
- St at
ementofcashf l
ows( usingdir
ectorindi
rectmethod)
- Not es

Page91of91
  Ex pl
ici
tandunr eservedst atementofcompl i
ancewi ththeIFRSforSMEsmustbemadewhen,
andonl ywhen, fi
nancialst atement scompl ywithallrequi
rementsoftheI
FRSforSMEs
 Allowsat rueandf airoverridewhenr egulat
oryf r
amewor kpermits
 Combi nedst at
ementofi ncomeandr etai
nedear nings:
*Onlyprofi
torloss,dividends, err
orcor r
ection,changeinaccounti
ngpol
icy
 Thi r
dstatementoff inancial posit
ionnotr equir
ed
 Ifexpensespr esentedbyf unctioninstatementofcompr ehensi
veincome,t
henfur
ther
disclosurebynaturenotr equi redinnot es

CONSOLI
DATEDFI NANCI ALSTATEMENTS
ASMEthatisapar entpreparesconsol
idatedfi
nanci
alst
atementsunless:
- Entityisi
t selfasubsidiaryandi
tsulti
mateorint
ermedi
ateparent’sfi
nanci
alst
atementscomply
wit
hf ul
lIFRSsorI FRSf orSMEs; or
- Itsonlysubsi diar
ieswer eacqui
redwithint
ent
ionofsel
li
ngordi sposi
ngofthem wit
hinoneyear

Subsidi
ari
esconsoli
dat
edusingsamer
epor
ti
ngdat
easpar
ent
,unl
essi
mpr
act
icabl
e
Unif
orm account
ingpol
ici
es

SEPARATEFINANCI ALSTATEMENTS
- Permittedbutnotr equir
ed
- Account i
ngpol i
cychoicet oaccountf
oreachofi
nvest
ment
sinsubsi
diar
ies,
associ
atesand
joi
ntl
ycont roll
edentit
ies:
 Costl essimpairment ;
or
 Fai rvaluethroughpr ofi
torloss

ACCOUNTI
NGPOLI CYHEI RARCHY
- Whennospeci fi
cguidanceisavail
abl
eintheI FRSforSMEs, consi
deri
ndescendi
ngorder
:
 Guidanceint heIFRSforSMEsonsi milarandrelat
edissues
 Defini
ti
ons, r
ecognit
ioncrit
eri
aandmeasur ementconceptsinSect
ion2Concept
sand
PervasivePrinci
ples
- Mayconsiderful
l I
FRSs,butnotrequi
redtodoso
- Noref
erencemadet oconsideri
ngthepronouncement sofotherst
andard-
set
ter
s

FI
NANCIALI NSTRUMENTS
Account
ingpoli
cychoiceforal
lfi
nanci
ali
nst
rument
stoapplyei
ther
:
- Financi
al i
nst
rumentssecti
onsofI
FRSforSMEs;or
- IAS39pl usdiscl
osurer
equir
ementsofI
FRSforSMEs

Fi
nanci
ali
nstr
ument
sdealtwithi
ntwosecti
ons:
- Secti
on11–basicf
inanci
ali
nst
ruments
- Secti
on12–otherf
inanci
ali
nst
ruments

Twocl
assi
fi
cati
oncategor
ies:
1.Amor ti
zedcost
2.Fairval
uethroughprof
itorl
oss

BASICFI
NANCIALINSTRUMENTS
Exampl
esnormal
lywit
hinscopeofSect
ion11:
- Cash
Page92of92
 - Demandandf i
xed-
term deposits
- Debti
nstr
umentssuchasaccount s,notesandloansrecei
vabl
eandpay
abl
e
- Bondsandsimil
ardebtinstr
ument s
- I
nvest
ment si
nnon-converti
blepreferenceshares
- I
nvest
ment si
nnon-putt
ableor di
naryorpr ef
erenceshar
es
- Commitmentstorecei
veal oanthatcannotbeset tl
ednetincash

OTHERFINANCI ALINSTRUMENTS
Exampl
esnormal l
ywi t
hinthescopeofSect ion12:
- Opti
ons, ri
ghts,warr
ants,futur
es,f
orwards
- I
nterestrateswapst hatcanbeset t
ledneti
ncashorbyexchangi
nganot
herf
inanci
ali
nst
rument
- Quali
fyinghedginginstruments
- Asset-backedsecurit
ies
- Commi t
mentst omakeal oan
- Commi t
mentst oreceiv
eal oanthatcanbeset
tl
ednetincash

I
NVESTMENTI NASSOCI ATESANDJOI NTVENTURES
- Account ingpoli
cychoiceinconsol
idatedfi
nanci
alstat
ementsforall
associ
atesand/oral
lj
oint
ly
contr
oll
edentiti
es:
 Equi tymethod
 Costmodel (butfai
rvaluei
fpubli
cpr i
cequot
ationavai
l
able)
 Fairv al
uethroughprofi
torloss(butcosti
funduecostoreffor
t)
- Pr oport
ionat
econsolidati
onnotpermitted

I
NVESTMENTPROPERTY
Measur
ement :
- Fai rv
aluethroughprof
itorl
oss,
iff
airv
aluecanbedet
ermi
nedr
eli
abl
ywi
thout“
unduecostor
eff
ort”onanongoingbasis
- Ot herwiseaccount
edforasPPE

Mi
xed-
usepr operty
- Separ atedbet weeninvest
mentpropert
yandPPE
- I ff
airvalueofi nvest
mentproper
tycannotbedet
ermi
nedr
eli
abl
ywi
thoutunduecostoref
for
t,
accountf orentir
epropert
yasPPE

Pr
opert
yheldbyal esseeunderanoper ati
nglease
- Maybecl assifi
edasinvest
mentpr opert
yif:
 Ot herwisewoul dmeetdef
initi
onofinvestmentpr
opert
y;and
 I tsfairvaluecanbemeasur edwi t
houtunduecostoreff
ortonanongoi
ngbasi
s
- Classifi
cati
onal ter
nat
iveavai
l
abl eonapr oper
ty-
by-
proper
tybasi
s

PROPERTY,PLANTANDEQUI PMENT
Measur
ementaf terini
ti
alr ecognit
ion
- Costlessaccumul ateddepr eci at
ionandi
mpair
mentl
osses
- Componentaccount ingapplies
- Reval
uationmodel notpermi tted
- Revi
ewusef ull
ives, r
esidualv aluesanddepr
eci
ati
onmethodsonl
ywheni
ndi
cat
iont
heyhav
e
changed

Page93of93
I
NTANGIBLEASSETS( OTHERTHANGOODWI LL)
Measur
ementaf terini
ti
alr ecognit
ion
- Costl essaccumul atedamor ti
zationandimpairmentl
osses
- Rev al
uat i
onmodel notpermitted
- Amor t
izedov erusef ull
ife;
ifunablet orel
i
ablyest
imate,
presumedtobe10year
s
- Testf orimpai r
mentonl ywheni ndicati
oninall
cases
- Rev i
ewusef ull
ives, r
esidualvaluesandamor ti
zat
ionmethodsonl
ywhenindi
cat
iont
heyhav
e
changed

Usef
ull
ives
- Alli
ntangi
bleasset
sar
econsi
der
edt
ohav
efi
nit
eusef
ull
i
ves

Resear
chanddevelopmentexpendi
tur
e
- Expenseasincur
red
- Capit
ali
zat
ionofdevelopmentexpendi
tur
enotper
mit
ted

Acqui
redaspartofabusi nesscombinati
on
- Notrecognizedsepar at
elyf
rom goodwi
l
lifi
tsf
airvaluecannotbemeasuredr
eli
abl
y:
 Notsepar abl
ef r
om goodwil
l
 Nohistory/ev i
denceofexchangetr
ansact
ions,andesti
matesdependonimmeasur
abl
e
vari
ables

BUSINESSCOMBI NATIONSANDGOODWI LL
Recognit
ionandmeasur ementrequi
rementslargel
yconsist
entwit
hIFRS3(2004)rat
hert
hanI
FRS3
(2008)
:
- Def ini
ti
onofabusinesscombi nat
ion
- Tr eatmentoftr
ansacti
oncosts,cont
ingentconsider
ati
on,
conti
ngentl
i
abil
it
ies
- Cal cul
ati
onofgoodwillandnon-cont
roll
i
nginterest

Scopeconsi
stentwit
hIFRS3(2008):
- Businesscombinati
onsachi
evedbycont
ractal
oneandbusi
nesscombi
nat
ionsbet
weenmut
ual
enti
tiesnotexcl
udedfr
om scope

Goodwi
ll
- Calcul
ationofgoodwil
lconsistentwithI FRS3( 2004)
- Consideredtohaveafini
teusef ull
ife
- Subsequentmeasurementconsi st
entwi thi ntangi
bleassets,
i.
e.,
costl
essaccumul
ated
amor t
izati
onandimpairmentlosses
- Amor t
izedoverusef
ullif
e;ifunabletor eliablyesti
mate,presumedtobe10y ear
s
- Testedforimpair
mentonl ywheni ndication

EMPLOYEEBENEFI TS
Def
inedbenefi
tschemes
- Account ingpoli
cychoi ceforact
uar
ial
gai
nsorl
osses:
 Profi
torloss; or
 Othercompr ehensiveincome
- Cal cul
ationofobligati
on:
 Ifnecessaryinfor
mat i
oncanbeobtai
nedwi
thoutunduecostoref
for
t,usepr
oject
eduni
t
credi
tmet hodconsi st
entwit
hIAS19
Page94of94
  Ifnecessaryinfor
mat i
oncannotbeobtainedwit
houtunduecostoref
for
t,asi
mpl
i
fied
approachi sappli
ed
- Act
uari
alv al
uati
ons:
 Notrequi r
edannual l
y
 Roll
-forwardprocedures
- I
ntr
oduction,change,curt
ail
ment,
sett
lement
 Anygai norlossrecognizedi
nprofi
torlossincurr
entper
iod

Gr
oupplans
- Per mit
tedtor
ecogni
zechargebasedonreasonabl
eal
l
ocat
ionofgroupchar
ge(
ifpar
entpr
esent
s
consol
idat
edfi
nanci
alst
atementsunderf
ullI
FRSsorI
FRSforSMEs)

SPECIALIZEDINDUSTRI ES
Ext
racti
veacti
vit
ies
- Nospeci fi
cguidance
- Appl yr
elevantsect
ionsofI
FRSf
orSMEs

Agr
icul
ture
- Measur ebi
ologicalasset
satcostl
essaccumulat
eddepreci
ati
onandi
mpai
rmentl
ossesi
ffai
r
v al
uei
snotr
eliablydeter
minabl
ewit
houtunduecostoreff
ort

Ser
viceconcessions
- Account i
ngt r
eatmentl
iket
hatinful
lI
FRSs
- Notcl earwhethersamearrangement
swil
lbecl
assi
fi
edasser
viceconcessi
onar
rangement
s
underful
lIFRSsandIFRSforSMEs

TRANSI
TIONTOI FRSFORSME
- Transi
tional provisionsappl ytoallfi
rst
-t
imeadopter
soft
heIFRSforSMEs(
incl
udi
nganent
it
y
thatprev i
ousl yusedf ullIFRSs)
- Anent i
tycanbeaf i
rst -ti
meadopt eroftheI
FRSforSMEsonl
yonce
- Mandat oryexcept i
ons:
 Der ecogni tion
 Account ingest imat es
 Di scont inuedoper at ions
 Measur ingNCI
- Voluntaryexempt i
ons:
 Busi nesscombi nat i
ons
 Shar e-basedpay ment s
 Fai rv alueasdeemedcost
 Rev aluationasdeemedcost
 Cumul ativet ranslat iondi ff
erences
 Def erredi ncomet ax
 Ser v i
ceconcessi onar rangement s
 Ex tract i
veact ivi
ties
 Compoundf i
nanci al i
nstrument s
 Ar rangement scont ainingal ease
 Decommi ssioningl i
abi li
ti
es
 Separ atef i
nanci al statement s
Page95of95
 - Appl
ytr
ansi
ti
onal
prov
isi
onst
oear
li
estper
iodpr
act
icabl
e

OTHERDIFFERENCESFROM FULLPFRS
Bor
rowi
ngcosts
- Expensedasincur
red(capi
tal
i
zat
ionpr
ohi
bit
ed)

For
eigncurr
encytransl
ati
on
- Ondi sposalofafor
eignoperat
ioncumul
ativ
eexchangedi
ff
erencesr
elat
ingt
othatoper
ati
on
r
ecognizedinOCIarenotrecl
assi
fi
edtoprofi
torl
oss

Oper
ati
ngleases
- Ifpaymentsar
estr
ucturedtoincr
easei
nli
newi
thexpect
edi
nfl
ati
on,
thent
imi
ngofr
ecogni
ti
onof
incomeandexpendi
tureref
lectst
his

I
nvent
ori
es
- Permi
tt
edt
ousemostr
ecentpur
chasepr
icei
fthi
sappr
oxi
mat
escost

Rev
enue:construct
ionofreal
estat
e
- I faccountedforasasaleofgoods,
thenr
evenuer
ecogni
zedonl
yupondel
i
ver
yofcompl
etedr
eal
estatetothebuyer

I
mpai
rmentofnon-
fi
nanci
alasset
s
- Testfori
mpair
mentonlywheni
ndi
cat
ion

CONSI
DERATIONPRI ORTOADOPTI NGPFRSFORSMEs
- Localfinanci
al r
eport
ingrequir
ements
- Usersandcompar abi
lit
ytootherent
it
ies
- Businessimpact s
- Long-term goals
- Groupr eport
ing
- Cost

NCAHel
dforSal
eandDi
scont
inuedOper
ati
on(
IFRS5)

Ov
erv
iew
- I FRS5 outl
ineshowt oaccountfornon-currentasset
sheldforsale(
orfordistri
buti
ontoowners)
.
- I ngeneralterms,asset
s( ordi
sposalgr oups)heldforsal
ear enotdepreciat
ed,aremeasuredat
thelowerofcar r
yingamountandf airv
al uelesscoststosel
l,andarepresentedsepar
atel
yinthe
balancesheet. 
- Speci fi
cdisclosur
esareal sorequi
redf ordisconti
nuedoperati
onsanddi sposalsofnon-
curr
ent
assets.

NCAHELDFORSALE
- Anoncurrentasseti
sclassi
fi
edasheldforsal
eifi
tscar
ryi
ngamountwi
l
lber
ecov
eredpr
inci
pal
l
y
t
hroughasaletr
ansact
ionrathert
hanthr
oughcont
inui
nguse.

Condi
ti
onsf
orHeldforsaleclassi
fi
cati
on
1.Theassetordisposalgroupisavai
l
abl
efori
mmedi
atesal
eini
tspr
esentcondi
ti
onsubj
ectonl
y
Page96of96
 tot
ermsthatar
eusualandcust
omar
yforsal
eofsuchasset
sordi
sposal
group.
2.Thesal
emustbehighl
yprobabl
e.

Defini
ti
onofhi ghlyprobable
I
ngener al
, t
hef oll
owingconditi
onsmustbemetf oranasset( or'
disposalgr
oup'
)tobeclassifi
edashel d
forsal
e:
1.managementi scommi t
tedtoaplantosell
2.t heasseti savailabl
eforimmediat
esale
3.anact iv
epr ogrammet olocateabuyerisinit
iat
ed
4.t hesal ei shighlyprobable,wi
thi
n12mont hsofclassifi
cati
onashel dforsale( subjectto
li
mi tedexceptions)
5.t heasseti sbeingacti
velymarketedforsaleatasal espricereasonabl
einrel
ationtoi tsfai
r
value
6.act ionsr equi
redt ocompletetheplanindicatethati
ti sunli
kelyt
hatplanwil
lbesi gnif
icantl
y
changedorwi thdrawn

MEASUREMENT
- Noncur r
entassetordi
sposalgroupcl
assif
iedashel
dforsal
eismeasur
edatt
heLOWERofi
ts
carryi
ngamountorf ai
rval
uelesscostt
osel l
.
- Fi nancecostandincometaxesarenotincl
uded.

I
mpai
rment
- Happensi fFairValuelesscosttosel
lislessthanCarryi
ngValue
 Goodwi l
liswr i
ttenofff
irstandanyremainderoftheimpairmentlossisall
ocat
edprorate
totheot herassetsbasedont hei
rcarryi
ngamount .
- Ifsubsequentlythereisanincreasei
nthef ai
rval
uelesscosttosell,anenti
tymayrecognize
aGAINbutnoti nexcessofanyi mpair
mentl osspr
eviouslyr
ecognized.

ABANDONEDNONCURRENTASSET
- Anentit
yshal
lnotcl
assifyasheldforsal
eanoncurr
entassetordi
sposalgr
oupthati
st obe
abandoned.Thi
si s because i
ts car
ryi
ng amountwil
lbe recover
ed pri
nci
pal
lythrough
conti
nui
nguse.

CHANGEINCLASSIFICATION
- Anent i
tyshallmeasur
ethenoncurrentassetthatceasest
obecl assif
iedasheldforsal
eat
t
helowerof:
 Carryi
ngamountbef oret heassetwascl assi
fi
edashel df orsaleadjustedforany
depreci
ati
onoramor ti
zati
onTHATWOULDHAVEbeenr ecognizediftheassethadnot
beenclassifi
edashel
dforsale.
 Recoverableamountatthedateofthesubsequentdeci
sionnott osell.

FSPRESENTATI ON
- Pr esentedseparatel
yascur rentasset.
- Theasset sandliabi
li
tiesofthegr oupshallbepresent
edseparat
elyandcannotbeoffsetas
asingl eamount( di
sposalgr oup).Inotherwords,theasset
sofadi sposalgroupshallbe
describedas“noncurrentassethel df
orsale”asaseparat
eamountundercurrentassetsand
it
sliabil
it
iesundercurrentl
iabil
it
ies.

DI
SCONTI
NUEDOPERATION
- Acomponentofanent
it
ythatei
therhasbeendi
sposedofori
scl
assi
fi
edashel
dforsal
eand:
Page97of97
  Representsaseparat
emajorlineofbusi
nessorgeogr aphical
areaofoper
ati
ons.
 I
spar tofasi ngl
eco-or
dinatedplantodi sposeofasepar atemajorli
neofbusi
nessor
geographi
calareaofoper
ations.
 I
sasubsi diar
yacquir
edexclusiv
elywi
thaviewt oresale.

COMPONENTCLASSI FI
EDASHELDFORSALE
- I t
scar r
yingamountwi
l
lberecov
eredprinci
pal
l
ythr
oughasal etr
ansact
ionr
athert
hant
hrough
conti
nuinguse.
- Thecomponentmustbeav ai
l
ableforsalei
nitspr
esentcondi
ti
onandthesalemustbehighl
y
probabl
e.

FSPRESENTATI ON
- Ther esultsoft hedi sconti
nuedoper ation,netoftax,shallbepresent edasasingleamounti nt he
incomest atementbel owt heincomef r om conti
nuingoper at
ions.
- Theent it
yshal lal sopresentsepar atelyont hefaceoft hestat ementoff i
nancialpositi
ont he
foll
owi nginformat ion:
 Asset soft hecomponenthel dforsal eseparat
elyfrom allotherassets.
 Asset soft hecomponenthel df orsalearemeasur edatt heLOWERoff airval
uel esscostt o
sel
l andt heircarryi
ngamount .
 Li abili
ti
esoft hecomponent ssepar at
elyfr
om allotherli
abil
iti
es.
 Nondepr eciation–noncur rentasset softhecomponenthel df orsal
eshallnotbedepr eci
ated.

I
fadi sposalgr
oupiscl
assi
fi
edasheldforsaleinthecurrenty
ear,anent
it
yshallnotrecl
assi
fyor
re-
presenttheasset
sandli
abil
it
iesoft
hedi sposalgroupforthepri
orperi
odtor ef
lectt
he“held
forsale”cl
assi
fi
cati
oni
nthestat
ementoffinancialposi
ti
onasoft heendofthecurrentr
eport
ing
peri
od.

ACCOUNTI
NGFORLEASES(
IAS17)

Ov
erv
iew
- Pr escri
bestheaccount i
ngpoliciesanddisclosuresappli
cabl
et oleases,bothf orlesseesand
l
essors.
- Leasesar er equiredtobeclassifiedasei
therfinancel
eases(whichtransfersubstanti
all
yal lt
he
r
isksandr ewar dsofownershi
p, andgiveri
setoassetandl i
abi
li
tyrecogniti
onbythel esseeanda
r
eceivablebyt helessor
)andoper at
ingl
eases(whi chr
esul
tinexpenser ecogni
ti
onbyt helessee,
withtheassetr emaini
ngrecognizedbythelessor).

Obj
ect
iveofI
AS17
- Topr escri
be,forl
esseesandlessor
s,theappropr
iat
eaccount
ingpol
i
ciesanddi
scl
osur
est
o
appl
yinrel
ati
ontofi
nanceandoperat
ingl
eases.

Scope
- Appl iestoal ll
easesotherthanl
easeagr
eement
sformineral
s,oil
,natur
algas,andsimil
ar
regenerat
iveresour
cesandli
censi
ngagr
eement
sforf
il
ms,videos,pl
ays,manuscr
ipt
s,pat
ent
s,
copyright
s,andsimil
ari
tems.

Not
e:
Howev
er,
IAS17doesnotappl
yast
hebasi
sofmeasur
ementf
ort
hef
oll
owi
ngl
easedasset
s:
Page98of98
 - propertyhel
dbyl esseesthatisaccountedforasinvestmentproper
tyf
orwhi
cht
hel
esseeuses
thef ai
rval
uemodelsetouti nI AS40
- i
nv estmentpropertyprov
idedbyl essor
sunderoper at
ingleases
- biologi
calassetsheldbylesseesunderf i
nancel
eases
- biologi
calassetsprovi
dedbyl essorsunderoperat
ingleases

Cl
assi
fi
cati
onofl eases
1.FI NANCELEASE
 Thel easet r
ansf ersowner shipoft heassett othel esseebyt heendoft heleaseterm
 Thel esseehast heopt iont opur chaset heassetatapr icewhi chi sexpect edt obe
sufficientlylowert hanf ai
rv alueatt hedat et heopt i
onbecomesexer ci
sablet hat,atthe
incept ionoft hel ease,i tisreasonabl ycer tai
nt hattheopt ionwi llbeexer sed.(
ci Bargai
n
Pur chaseOpt ion)
 Thel easet ermi sfort hemaj orpar toft heeconomi clif
eoft heasset ,evenift i
tleisnot
transf ered.(
r 75%oft heeconomi clifeofanasset–Amer icanSt andard)
 Att hei nceptionoft helease,thepr esentv alueoft hemi ni
mum l easepay mentsamount sto
atleastsubst ant i
allyal
loft hef airvalueoft heleasedasset .(Atleast90%oft hef airval
ue
oft hel easedasset–Amer icanSt andar d)
 t hel easeasset sar eofaspeci al
izednat uresucht hatonlythel esseecanuset hem wi t
hout
maj ormodi fi
cationsbei ngmade

Ot
hersit
uationst hatmightal
sol eadtocl assif
icati
onasaf i
nanceleaseare:
 ifthel esseei sent i
tl
ed to cancelt helease,t helessor
'slossesassociat
ed witht he
cancell
ationar ebornebythel essee
 gainsorl ossesfrom fl
uctuationsi nt hefairvalueoftheresidualf
al lt
othelessee(for
example, bymeansofar ebateofl easepay ment s)
 thelesseehast heabil
it
yt ocont i
nuet ol easef orasecondaryperiodatar entthatis
substantiall
ylowerthanmar ketrent

ACCOUNTI NGBYLESSEES
1. FINANCELEASE
- Shoul dber ecor dedasanassetandal i
abili
tyatt hel oweroft hefairv al
ueoft heassetandt he
presentv alueoft hemi nimum l easepay ment s( discountedatt hei nterestr ateimpl iciti
nt he
l
ease, i
fpr acticable,orelseatt heentit
y'
si ncrement alborrowingrate)whi chev erislower .
- Fi nanceleasepay ment sshouldbeappor ti
onedbet weent hef i
nancechar geandt her educti
onof
theoutstandi ngl i
abili
ty(thefi
nancechar get obeal locatedsoast opr oduceaconst antper i
odic
rateofinterestont heremai ni
ngbal anceoft hel i
abil
ity).
- Thedepr eciationpol icyforassetshel dunderf inancel easesshouldbeconsi stentwi t
ht hatfor
ownedasset s.I ftherei snor easonablecer tai
ntyt hatthel esseewillobt ainowner shipatt he
endoft hel ease–t heassetshoul dbedepr eciatedov ertheshor t
eroft hel easet erm ort hel
ife
oftheasset .

Not
e:
- Component sofMinimum LeasePay ment s:
 Rentalpay mentsdur i
ngtheleaset erm.
 Anypay mentr equi
redunderabar gainpurchaseoption.
 Anyguar anteedresidualval
ueintheabsenceofbar gainpurchaseopt
ion.
- Conti
ngentrentandexecut orycostsar enotincl
udedint hecomputati
onofthemini
mum l
ease
payments.
- Ini
ti
aldi
rectcostsareincludedaspartoft heamountr ecognizedasanassetundert
hel
ease.
Page99of99
 2. OPERATI
NGLEASE
- Leasepay ment sshoul dber ecogni zedasanexpensei ntheincomest atementov erthelease
term onast raight-l
inebasis,unl essanot hersy stematicbasisismor er epresentati
veoft he
timepatter
noft heuser '
sbenefit
.
- Incenti
vesfort heagr eementofaneworr enewedoper at
ingleaseshoul dber ecognizedbyt he
l
esseeasar eductionoft her entalexpenseov ert heleaseterm,irr
espect i
veoft hei ncent
ive'
s
natureorform, orthet i
mingofpay ment s.
 Ex.Leasebonusi st r
eatedaspr epaidrentbyt helesseetobeamor tizedov ert
hel easeterm.
- Leaseholdi mpr ovement s made by t he lessee shal lbe depr eci
ated ov ert he li
fe oft he
i
mpr ovementsorl easet erm,whi chev erisshorter.
- Anysecur i
tydeposi tr ef
undableupont heleaseexpi rati
onisaccount edf orasanassetbyt he
l
essee.

ACCOUNTI NGBYLESSORS
1. FI
NANCELEASE
Di
rectFinanci ngLease
- Anar r
angementbet weenaf inancingent i
tyandalessee.
- Recogni zesonl yinterestincome
- GrossI nv estmenti sequalt o:
 Gr ossr ent alfortheent i
releaset erm plus
 Absol uteamountoft heresidualv al
ue–whet herguaranteedorunguar
anteed.(
Thi
sist
he
amountdebi tedtol easereceivable)
- Neti nvest menti nthel easeisequalt o:
 Costoft heassetpl us
 I ni
ti
al directcostpai dbythel essor
- Unear nedI nter esti
ncome
 Thedi fferencebet weenGr ossI nvest
mentandNetI nvestmentinthel
ease.
- Init
ialDirectCost
 Addedt ot hecostoft heassett ogett heneti
nvestment.

SalesTypeLease
- Amanuf actureroradeal
ert hatusesal easetofacil
it
atethesaleofi
tsproduct
.
- Recognizesinter
esti
ncomeandgr osspr of
it
- GrossInvestmentisequalto:
 Gr ossrentalfort
heent i
releaset erm pl
us
 Absol uteamountoft her esidualvalue–whet herguarant
eedorunguaranteed.(
Thi
sist
he
amountdebi tedt
oleaser eceivable)
- Netinvestmentisequalto:
 Pr esentvalueofthegrossr ental
spl us
 Pr esentvalueoftheresi
dual v
alue–whet herguarant
eedorunguaranteed.

- Unearnedinteresti
ncome
 Thedi fferencebetweenGrossInvestmentandNetI nvest
mentint
hel ease.
- Sal
es
 Theamounti sequaltotheNetInvestmentintheleaseorFai
rValueoftheassetwhi
chev
er
i
sl ower.
- CostofSales
 Equal tothecostoft heassetsoldplusi
nit
ialdir
ectcostpai
dbythelessor.

Page100of100
 - GrossProfi
t
 Sal esminuscostofsales
- I
niti
alDir
ectCost
 Ex pensedimmediatel
yinasal
est
ypel
easeasacomponentofcostofsal
es.

2. OPERATI
NGLEASE
- Shoul dbepr esent edi nthebal ancesheetoft hel essoraccor dingt othenat ureoft heasset .
- Leasei ncomeshoul dber ecogni zedov erthel easet er
m onast raight-
li
nebasi s,unlessanot her
systemat i
cbasi si smor er epresent ativeofthet imepat terninwhi chusebenef i
tisderivedf r
om
thel easedasseti sdi mi nished.( Theper i
odicr ent alreceivedbyt hel essorinanoper ati
ngl ease
i
ssi mpl yrecogni zedasr entincome) .
- Incent i
vesf ort heagr eementofaneworr enewedoper ati
ngl easeshoul dber ecognizedbyt he
l
essorasar educt ionoft her entalincomeov ert heleaset er m,i r
respectiveoft hei ncentive'
s
natur eorfor m, ort het i
mi ngofpay ment s.
 Ex.Leasebonus–shoul dber ecognizedasunear nedr entt obeamor ti
zedov erthel ease
term.
- Leasedpr oper tyr emai nsasanassetoft hel essorassuchhebear sal ltheowner shipand
execut orycost ssuchasdepr eciat i
onofl easedpr operty,realpr opertyt axes,insuranceand
mai ntenance.
- Ini
tialdi r
ectcost si ncurredshal lbeaddedt ot hecar ryi
ngamountoft hel easedassetand
recogni zedasanexpenseov ert heleaset erm.
- Secur it
ydeposi trefundabl eupont hel easeter m shal lbeaccount edforasal i
abili
tybythel essor.

SALEANDLEASBACKTRANSACTI ONS
- Forasaleandl easebacktransactiont hatr esultsinaf i
nancelease,anyexcessofproceedsov er
thecarr
yingamounti sdeferredandamor tizedov ertheleaseterm.
- Foratransact i
onthatresultsinanoper atinglease:
 ifthet ransacti
oni scl
ear l
ycarriedoutatf ai
rv al
ue-t heprofi
torlossshoul
dber ecognized
i
mmedi atel
y
 ifthesal epr i
ceisbelowf airvalue-pr of i
torlossshoul dber ecogni
zedimmediately
,except
i
fal ossi scompensat edf orbyf uturer ental
satbel owmar ketpri
ce,t
helossitshouldbe
amortizedov ertheperiodofuse
 ifthesal epriceisabov efairv alue-t heexcessov erfairvalueshouldbedef er
redand
amortizedov ertheperiodofuse
 ifthef airv al
ueatt het i
meoft het ransact i
oni slessthant hecarryi
ngamount–al oss
equaltot hediff
erenceshoul dber ecogni z
edi mmedi atel
y.

ACCOUNTI
NGFORI
NCOMETAX

Page101of101
 ACCOUNTI
NGI
NCOME-
--
-Fi
nanci
alAccount
ingI
ncome Per
manentDi
ff
erence

TAXABLEI
NCOME-
--
--
--
--
--
Taxat
ionI
ncome Tempor
aryDi
ff
erence

PERMANENTDI
FFERENCES

- Revenues/expensesincludedineitheraccountingincome/ t
axabl
eincomebutnotbot h
- Nontaxablerevenues&nondeduct ibleexpenses
- Havenof uturetaxconsequencesordonotr esulttoincomet axpayabl
e
- Examples:
 Gai nonsal eoflif
einsuranceofof f
icers&empl oyeeswher ethecor
porati
onisthebenef
ici
ary
 Di vi
dendr evenuereceivedbydomest iccorporati
onf r
om adomest i
ccorporat
ion
 Fines&penal ti
esforviolat
ionoflaw

TEMPORARYDI
FFERENCES

- Di
ff
erencesbet
weent he‘car
ryi
ngv
alue’ofanasset
/l
iabil
i
tyandt
he‘
taxbase’
- I
ncl
ude‘ti
mingdif
ference’
- Gi
veriseto‘
def
erredtaxasset’
or‘
defer
redtaxl
iabi
l
ity’

Ti
mingDif
ferences-it
emsofincome& expensei
ncl
udedi
nbot
haccount
ingi
ncome& t
axabl
e
ncomeatdi
i f
ferentt
imeper
iods

KindsofTemporar
yDiffer
ence
1.Taxabl
eTemporaryDiffer
ence
-Resul
tsi
n‘f
uturetaxableamount’
-Resul
tst
o‘defer
redtaxliabi
l
ity
’

2.Deducti
bleTempor ar
yDiff
erence
-Resul
tsin‘f
uturededucti
bleamount
’fr
om t
axabl
eincome
-Resul
tsto‘defer
redtaxasset’

Def
erredTaxLiabi
li
ty
- Incomet axpayabl
einfutur
eper
iodswi
thr
espectt
oat
axabl
etempor
arydi
ff
erence
- Arisesfr
om thefol
lowing:
(1)AI>TI
(2)CV>TaxBase( Asset)
(3)CV<TaxBase( Li
abil
it
y)

AI>TI(Futur
eTaxableAmounts)
- Rev enues&gai nsincl
udedinaccount
ingi
ncomeoft
hecur
rentper
iodbutt
axabl
einf
utur
e
per
iods
Ex.I
nst
allmentSal
e

- Expenses&lossesdeduct
ibl
efort
axpurposesi
ncurrentper
iodbutdeducti
bleforaccount
ing
purposesi
nfut
ureperi
ods
Ex.Dev
elopmentCost–capi
tal
i
zed&amor t
izedinaccount
ing,butcurr
entl
ydeducti
ble
Page102of102
 f
ort
ax

Defer
redTaxLi abil
it
y(notat
imingdi
ff
erence)
1.Assetreval
uedupwar dwit
hnoequival
entadjustmentfort
axpurposes
2.CVofi nvest
menti nsubsi
diar
yishi
gherthant axbasebecauseitdi
dnotdist
ri
but
eincometot
he
parent/i
nvestor.
3.Costofbusi nesscombinati
onaccountedaspur chasewithnoequi v
alentadj
ust
mentfort
ax
purposes

Def
erredTaxAsset
- Incomet axr ecoverableinfut
ureper
iodswi
thr
espectt
odeduct
ibl
etempor
arydi
ff
erence&
operati
nglosscar r
y f
orward
- Arisesfr
om thef ol
lowing:
(1)AI<TI
(2)CV<TaxBase( Asset)
(3)CV>TaxBase( Liabi
l
ity
)

AI<TI(Futur
eDeducti
bleAmount)
- Rev enues&gai
nsi ncl
udedi
nTIofcur
rentper
iodbutar
eincl
udedi
naccount
ingi
ncomeoff
utur
e
per
iods
Exampl
e:
 Rentreceiv
edinadv
ance

- Expenses&l ossesdeductibleforaccountingincomeofcurrentperi
odbutarededucti
blefort
ax
purposesinfutur
eperiods
Example:
 Pr obable&measur abl
elit
igat
ionloss
 Doubt fulaccount s – expensed f oraccount
ing purposes butdeduct
ibl
ef ortax
purposes
whenwr i
tt
enof f
 I mpairmentloss–i gnoredfortaxpurposesunt
ilasseti
ssold

MethodsofAccounting
1.I
ncomeSt atementApproach
-Focusesont i
mi ngdi
ff
erences(
dif
fer
encesaf
fect
ingI
/Sofoneper
iodt
hatwi
l
lrev
ersei
n
futureperi
od)

2.B/
SApproach
-Focusesonal
ltempor
arydi
ff
erencei
ncl
udi
ngt
imi
ngdi
ff
erence

Accounti
ngProcedures
1.Curr
entTaxExpense=TaxableIncomexTaxRate
*amountofi ncometaxpai
d/pay
abl
efort
hey
ear
*journalent
ry:

I
ncometaxexpense xx
I
ncomet axpay
abl
e xx

2.Def
err
edTaxLiabi
li
ty=Taxabl
eTempor
aryDi
ff
erencexTaxRat
e
*journalent
ry:
Page103of103
 I
ncometaxexpense xx
Def
erredtaxl
iabi
l
ity xx

3.Def
err
edTaxAsset=Deducti
bleTempor
aryDi
ff
erencexTaxRat
e
*jour
nalent
ry:

Def
err
edt axasset xx
Incomet axbenef
it xx

4.Tot
alI
ncomeTaxExpense:
Currenttaxexpense xx
Deferredtaxexpense xx
Incomet axbenefi
t xx
Totalincometaxexpense xx

OR

Taxabl
eIncome xx (
xtaxr
ate=Cur
renttaxexpense)
Taxabl
eTempor ar
yDiff
erence xx (
xtaxr
ate=Def
erredtaxexpense)
Deducti
bleTemporar
yDiffer
ence xx (
xtaxr
ate=I
ncomet axbenefi
t)
Accounti
ngIncome xx (
xtaxr
ate=Tot
alincometaxexpense)

Cur
rentTaxLiabil
i
ty
- Thecurrenttaxexpenseort
heamountofi
ncomet
axact
ual
l
ypay
abl
e
- Classi
fi
edascur r
entli
abi
li
ty

Cur
rentTaxAsset
- Excessoftaxpai
dovertaxpay
abl
efort
hecur
rentper
iod
- Classi
fi
edascurr
entasset

NOTE:Def
erredt
axasset&def
err
edt
axl
i
abi
l
itywi
l
lbepr
esent
edont
henoncur
rentpor
ti
on
oftheB/S.

Whent hingsgowr ongast heysomet imeswi l

l,
Whent her oadyou’
retrudgingseemsal luphil
l
,
Whent hef undsarelow,andt hedebtsarehigh,Andy ouwantt osmile,buty ouhave’tosigh,
Whencar ei
spr essingyoudownabi t
-Rest ,i
fy oumust,butdon’ tquit
.
Li
feisqueerwithitstwist
sandt urns,Asev eryoneofussomet i
mesl ear
ns,
Andmanyaf ail
uret ur
nsaboutWhenhemi ghthav ewonhadhest uckitout;
Don’ tgiv
eupt hought hepaceseemssl ow—Youmaysucceedwi thanot herblow.
Successisfail
uret ur
nedinsi
deout —Thesi lvertintoft
hecloudsofdoubt ,
Andy ounevercant ellhowcloseyouar e,I
tmaybenearwheni tseemssof ar;
So,st
icktot hef i
ghtwheny ou’rehar
desthit—It’
swhent hingsseem wor stthaty oumust n’
tquit
.

Page104of104
Page105of105