Chapter 4: Statement of Comprehensive Income (PAS 1)
Income Statement or Statement of Financial Performance
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Level of income earned, results of operations
Presents income, expenses, gains, losses and net income or loss for the period
Uses transaction approach
Useful in predicting/estimating future cash flows
Comprehensive Income
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Include P/L and OCI
Changes in equity other than those from transaction with owners in their capacity as owners.
Starts with Net income/loss plus OCI.
Presentation of Comprehensive Income
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Two- Statement – 1 statement for Income statement and another 1 for OCI
Single Statement – combined statement.
Other Comprehensive Income
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Income, expenses & reclassification not included or permitted by PFRS in P/L
Presentation of OCI: Line items for amounts in the period, classified by nature
OCI Reclassification Subsequently:
To P/L
Translating foreign operation
Derivatives contracts designated as cash flow
hedge
Debt investment measured at FVTOCI
Difference of total insurance and expected total
insurance
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To RE
Equity investment at FVTOCI
Change in Revaluation Surplus
Remeasurement of Defined Benefit Plan
Credit risk at FVTPL
Income= revenue + gains
Revenue= from ordinary course of business
Sales= from merchandising and manufacturing business
Gain= not from ordinary course of business
Components of Expense
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COGS or Cost of Sales
Operating Expenses:
o Distribution costs or Selling expenses (related to selling, advertising and delivering)
o Administrative expenses (expenses in operation not related to distribution/selling exp.)
Income tax expense
Other expenses (expenses and loss from peripheral or incidental transactions)
o
o
o
o
o
o
Loss on sale of trading
Loss on sale of PPE
Loss on sale on noncurrent or long-term investment
Loss on sale of intangible asset
Casualty loss
Expropriation loss
Unusual and infrequent items
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Shall not be present as extraordinary items because it has been eliminated, just record it as
Unusual and infrequent gain/loss
Included in other income or other expenses
Income and expense that requires disclosure
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Writedown of inventory or PPE
Disposal of PPE and investment
Restructuring and reversal of restructuring
Discontinued operation
Litigation Settlement
Other reversal of provision
Forms of Income Statement- no prescribed format
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Functional (by function)- COGS, distribution cost, administrative activities, etc
Natural (by nature)- Depreciation, purchases, transport cost, employee benefit, etc.
Chapter 5: Statement of Changes in Equity
Equity
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Residual interest or net assets
Subclassification
o Share Capital
o Share Premium
o Retained Earnings
Changes in Equity
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Shows the movement of components in equity. This includes:
o Comprehensive Income
o Effects of changes in policies and corrections of errors
o Changes from P/L, OCI and transaction of owners as their capacity as owners
Items to be disclosed in Retained Earnings
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Prior period errors (first item)
Net income or loss
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Dividends declared and paid (except shares)
Effect of change in accounting policy
Appropriation of Retained Earnings (Treasury shares, legal requirement, entity policy)
Conversion of preference shares into ordinary shares
Some OCI subsequently reclassified to RE
Retirement of Treasury shares
Chapter 6: Noncurrent Asset Held for Sale (PFRS 5)
Noncurrent asset – individual asset or a disposal group
Classified as Held for Sale if:
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CV will be recovered principally through a sale rather than continuing use
Conditions:
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Available for immediate sale in the present condition
Highly Probable
o The probability of future sales is higher than “more likely than not”
o Management committed to a plan to sell
o Active plan to locate a buyer and plan must be initiated
o Expected to sale within one year but extension of one-year will not cease from being
classified as Held for Sale
o Actively marketed and the sale price is reasonable
o Unlikely to withdrawn
Measurement: Cost Model
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Lower of CV or FV-COD
No depreciation
IF: CV<FV-COD: There’s expected gain but not recognized
IF: CV>FV-COD = There’s Impairment Loss
o Is subsequent there’s increase in FV-COD (CV<FV-COD), gain shall recognize but not in
excess of IL
Measurement: Revaluation Model
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Prior to classification as held for sale: Revalued to FV
o Revaluation Surplus = Increased in FV or the FV>CV
At classification date:
o Cost of disposal = IL
o Subsequent year-end, asset shall be measured at Lower of CV and FV-COD
Abandoned and temporarily abandoned: Shall not classify as held for sale because CV will be recovered
through continuing use.
Change in Classification: No longer to sell or cease to be classified as held for sale
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Measurement at date of change in classification: Lower of
o CV as if it had not been classified as held for sale; and
o Recoverable Amount, higher of:
 FV-COD and Value in Use
o Gain/loss on reclassification: New measurement – CV per book
Presentation:
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Noncurrent asset classified as held for sale: Current asset
Assets of disposal group: Separately as a single amount under current assets
Liabilities of disposal group: Separately as a single amount under current liabilities
Chapter 7: Discontinued Operation (PFRS 5)
Discontinued Operation
a. Major line of business or geographical area of operations that can distinguished form the rest of
entity
b. Part of single co-ordinated plan to dispose (a)
c. Subsidiary plan to sell
Timing of reporting:
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A component of entity classified as discontinued operation if:
o it has actually disposed operations
o meets the criteria as held for sale
 If it meets after the end of reporting period = will not classify as held for sale in
current FS.
If the component is disposed, the ALE is eliminated too.
Discontinuing operation maybe due from change of business segment
Examples of not discontinued operation
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Phasing out of product line within a product group
Shifting of production or activities from one location to another
Closing factory or facility for improvement
Inclusion in Discontinued Operation
a.
b.
c.
d.
ALE and operating income or losses attributable to discontinued operation
Impairment Loss = CV>FV-COD
Gain or loss from actual disposal
Termination cost and other costs incurred as a results of discontinuance
Presentation in Income Statement
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As a single amount and in after tax or post-tax
Below the income of continuing operations
Presentation in Financial Position
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As a single amount and under in current assets or current liabilities
At lower of CV and FV-COD, not depreciated