CHAPTER 3:

Notes to Financial Statements – Provides narrative description or disaggregation

of items presented in the FS and information about items that do not qualify for
recognition.

Purpose: the standard of adequate disclosure: to provide the necessary disclosures

required by the PFRS.

Order of Presentation:

1. Statement of Compliance with PFRS

2. Summary of Significant Accounting Policies
Accounting Policies: the Specific principles, methods, practices, rules,
bases, and conventions, adopted by the entity in preparing the FS.
Disclose:
a. Measurement Basis
b. Relevant Accounting Policies used
Accounting Standards: Prescribe the accounting policy to be used.
Disclose: Policies useful to users in understanding the FS. For
instance, policy selected from alternatives allowed in the PFRS.
3. Supporting Information or Computation for the Line Items.
4. Other disclosures, such as contingent liabilities, unrecognized contractual
commitments and nonfinancial disclosures.
Disclosure of judgement – Judgement is usually present in the measurement and
classification of assets and in the recognition of income.
Disclosure of Estimation Uncertainty – Disclose uncertainties that have a
significant risk of resulting to material adjustment to the CA of Assets or Liabilities.
Other Disclosures:
- Domicile, legal form, country of incorporation, address.
- Nature of Operations and Prinicipal activites.
- Parent and ultimate parent of Group.
Also disclose: Cumulative preference dividend not recognized and proposed/declared
(but not paid) dividend before authorization of FS.
CHAPTER4:
Related Parties – parties are considered to be related if one party has:
1. Control – power to govern (>50%) or (51% and above). Ex. Subsidiary
2. Joint Control – contractual sharing of control (=50%). Ex. Joint Venture
3. Significant Influence – power to participate (≥20%). Ex. Associate
If the share ownership is below 20%, such entity is not a related party.
Examples of Related Parties:
1. Affiliates
2. Associates
3. Venturer. But not Co-venturers
4. Key Management Personnel.
5. Close family members of an individual.
6. Individuals with significant influence.
7. Post employment benefit plan

CHAPTER5:
Events after the reporting period – Occur between year end and authorization
date.
Adjusting Events: provide evidence of conditions that EXSITED at year end.
Treatment: Adjusting Entries.
1. Court Case
Loss on litigation XX
Estimated Liability XX
2. Bankruptcy of a Customer
Doubtful Account Expense XX
Allowance for doubtful account XX
3. A Sale which determines the NRV of inventory
(Adjust the CA of Inventory)
4. Determination of the cost of purchase/ proceeds of sale
5. Determination of bonus payment/ profit sharing
6. Discovery of Fraud

Nonadjusting Events: Indicative of Conditions that arose AFTER year end.

Treatment: Disclose if Significant.
1. Business Combination
2. Plan to Discontinue Operations
3. Major Purchase/ Disposal of Assets or Expropriation by Governemtn
4. Destruction by Fire
5. Major Ordinary Shares Transactions
6. Restructuring
7. Change in prices/ echange rates
8. Significant commitments or contingent liabilities
9. Commencing Litigation
10. Change in the tax rate