‭1‬
‭Chapter‭‬‭‬1‬
‭CONCEPT‭‬‭‬AND‭‬‭‬NATURE‭‬‭‬OF‭‬‭‬ACCOUNTING‬
‭ efinition:‭‬‭‬The‭‬‭‬term‭‬‭‬“accounting”‭‬‭‬has‭‬‭‬been‭‬‭‬technically‬
D
‭defined‭‬‭‬in‭‬‭‬various‭‬‭‬ways‭‬‭‬by‭‬‭‬different‭‬‭‬recognized‬
‭accounting‭‬‭‬associations‭‬‭‬worldwide.‬
•‭ ‭‬‭‬The‭‬‭‬Committee‭‬‭‬on‭‬‭‬Accounting‭‬‭‬Terminology‭‬‭‬of‭‬‭‬the‬
‭American‭‬‭‬Institute‭‬‭‬of‭‬‭‬Certified‭‬‭‬Public‭‬‭‬Accounting‬
‭(AICPA)‭‬‭‬defines‭‬‭‬accounting‭‬‭‬as‭‬‭‬follows:‭‬‭‬“Accounting‬
‭is‭‬‭‬the‭‬‭‬art‭‬‭‬of‭‬‭‬recording,‭‬‭‬classifying,‭‬‭‬and‭‬‭‬summarizing‭‬‭‬in‬
‭a‭‬‭‬significant‭‬‭‬manner‭‬‭‬and‭‬‭‬in‭‬‭‬terms‭‬‭‬of‭‬‭‬money,‬
‭transactions‭‬‭‬and‭‬‭‬events‭‬‭‬which‭‬‭‬are‭‬‭‬in‭‬‭‬part‭‬‭‬at‭‬‭‬least‭‬‭‬of‭‬‭‬a‬
‭financial‭‬‭‬character‭‬‭‬and‭‬‭‬interpreting‭‬‭‬the‭‬‭‬results‭‬‭‬thereof.”‬
•‭ On‭‬‭‬the‭‬‭‬other‭‬‭‬hand,‭‬‭‬the‭‬‭‬Financial‭‬‭‬Reporting‭‬‭‬Standard‬
‭Council‭‬‭‬(FRSC),‭‬‭‬which‭‬‭‬adopted‭‬‭‬the‭‬‭‬standards‭‬‭‬issued‬
‭by‭‬‭‬the‭‬‭‬International‭‬‭‬Accounting‭‬‭‬Standard‭‬‭‬Board‬
‭(IASB)‭‬‭‬defines‭‬‭‬accounting‭‬‭‬as‭‬‭‬follows:‭‬‭‬“Accounting‭‬‭‬is‬
‭service‭‬‭‬activity.‭‬‭‬Its‭‬‭‬function‭‬‭‬is‭‬‭‬to‭‬‭‬provide‭‬‭‬quantitative‬
‭information,‭‬‭‬primarily‭‬‭‬financial‭‬‭‬in‭‬‭‬nature,‭‬‭‬about‬
‭economic‭‬‭‬entities,‭‬‭‬that‭‬‭‬is‭‬‭‬intended‭‬‭‬to‭‬‭‬be‭‬‭‬useful‭‬‭‬in‬
‭making‭‬‭‬economic‭‬‭‬decisions.”‬
•‭ There‭‬‭‬are‭‬‭‬common‭‬‭‬denominators‭‬‭‬that‭‬‭‬are‭‬‭‬highlighted‬
‭by‭‬‭‬the‭‬‭‬two‭‬‭‬definitions.‭‬‭‬These‭‬‭‬are:‬
‭1.‭‬‭‬Accounting‭‬‭‬is‭‬‭‬a‭‬‭‬service‭‬‭‬activity.‬
‭ .‭‬‭‬The‭‬‭‬main‭‬‭‬objective‭‬‭‬is‭‬‭‬to‭‬‭‬provide‭‬‭‬quantitative‬
2
‭information.‬
‭ .‭‬‭‬The‭‬‭‬information‭‬‭‬is‭‬‭‬financial‭‬‭‬in‭‬‭‬character‭‬‭‬about‭‬‭‬the‬
3
‭economic‭‬‭‬entities.‬
‭ .‭‬‭‬The‭‬‭‬information‭‬‭‬is‭‬‭‬intended‭‬‭‬in‭‬‭‬making‭‬‭‬economic‬
4
‭decisions.‬
•‭ ‭‬‭‬In‭‬‭‬other‭‬‭‬words,‭‬‭‬accounting‭‬‭‬in‭‬‭‬process‭‬‭‬is‭‬‭‬ultimately‬
‭providing‭‬‭‬information‭‬‭‬about‭‬‭‬the‭‬‭‬economic‭‬‭‬activities‭‬‭‬of‬
‭a‭‬‭‬business‭‬‭‬entity.‭‬‭‬The‭‬‭‬usual‭‬‭‬procedures‭‬‭‬involve‭‬‭‬are:‬
‭ .‭‬‭‬Identification,‭‬‭‬measurement,‭‬‭‬and‭‬‭‬recording‭‬‭‬of‬
1
‭business‭‬‭‬transactions.‬
‭2.‭‬‭‬Processing‭‬‭‬the‭‬‭‬quantitative‭‬‭‬information;‭‬‭‬and‬
‭3.‭‬‭‬Communication‭‬‭‬of‭‬‭‬information‭‬‭‬to‭‬‭‬interested‭‬‭‬users.‬
•‭ Accounting‭‬‭‬is‭‬‭‬an‭‬‭‬analytical‭‬‭‬and‭‬‭‬constructive‭‬‭‬process‬
‭of‭‬‭‬identifying,‭‬‭‬measuring,‭‬‭‬recording‭‬‭‬direct‭‬‭‬financial‬
‭information‭‬‭‬to‭‬‭‬be‭‬‭‬communicated‭‬‭‬to‭‬‭‬interested‭‬‭‬users‭‬‭‬at‬
‭the‭‬‭‬right‭‬‭‬place‭‬‭‬and‭‬‭‬at‭‬‭‬the‭‬‭‬right‭‬‭‬time.‭‬‭‬The‭‬‭‬schematic‬
‭diagram‭‬‭‬indicates‭‬‭‬that‭‬‭‬data,‭‬‭‬transaction,‭‬‭‬or‭‬‭‬events‭‬‭‬are‬
‭measured,‭‬‭‬processed‭‬‭‬and‭‬‭‬finally‭‬‭‬communicated‭‬‭‬to‭‬‭‬the‬
‭interested‭‬‭‬users.‭‬‭‬The‭‬‭‬final‭‬‭‬product‭‬‭‬of‭‬‭‬measuring‭‬‭‬and‬
‭processing‭‬‭‬events‭‬‭‬and‭‬‭‬transactions‭‬‭‬is‭‬‭‬the‭‬‭‬financial‬
‭statement.‬
‭ NALYTICAL‭‬‭‬AND‭‬‭‬CONSTRUCTIVE‭‬‭‬PROCESS‬
A
‭OF‭‬‭‬ACCOUNTING‬
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‭ ‬ ‭Measuring‭‬‭‬refers‭‬‭‬to‭‬‭‬the‭‬‭‬process‭‬‭‬of‭‬‭‬determining‬
‭and‭‬‭‬assigning‭‬‭‬the‭‬‭‬monetary‭‬‭‬value‭‬‭‬of‭‬‭‬business‬
‭transactions‭‬‭‬and‭‬‭‬events.‭‬‭‬Only‭‬‭‬business‬
‭transactions‭‬‭‬that‭‬‭‬are‭‬‭‬quantifiable‭‬‭‬are‭‬‭‬have‬
‭monetary‭‬‭‬value‭‬‭‬should‭‬‭‬be‭‬‭‬recorded.‭‬‭‬For‬
‭example,‭‬‭‬the‭‬‭‬hiring‭‬‭‬of‭‬‭‬an‭‬‭‬employee‭‬‭‬cannot‭‬‭‬be‬
‭considered‭‬‭‬atransaction‭‬‭‬that‭‬‭‬should‭‬‭‬be‭‬‭‬given‬
‭accounting‭‬‭‬recognition‭‬‭‬since‭‬‭‬the‭‬‭‬act‭‬‭‬of‭‬‭‬hiring‬
‭toes‭‬‭‬do‭‬‭‬not‭‬‭‬have‭‬‭‬monetary‭‬‭‬value.‭‬‭‬This‭‬‭‬type‭‬‭‬of‬
‭transaction‭‬‭‬then‭‬‭‬will‭‬‭‬not‭‬‭‬be‭‬‭‬recorded‭‬‭‬in‭‬‭‬the‬
‭books‭‬‭‬of‭‬‭‬accounts.‬
‭ ‬ ‭Processing‭‬‭‬of‭‬‭‬information‭‬‭‬implies‭‬‭‬to‭‬‭‬major‬
‭accounting‭‬‭‬activities‭‬‭‬to‭‬‭‬be‭‬‭‬undertaken,‭‬‭‬(a)‬
‭thegrouping‭‬‭‬of‭‬‭‬similar‭‬‭‬transactions,‭‬‭‬and‭‬‭‬(b)‭‬‭‬the‬
‭preparation‭‬‭‬of‭‬‭‬financial‭‬‭‬statement.‬
‭ ‬ ‭Communication‭‬‭‬refers‭‬‭‬to‭‬‭‬the‭‬‭‬issuance‭‬‭‬of‬
‭complete‭‬‭‬set‭‬‭‬of‭‬‭‬financial‭‬‭‬statement‭‬‭‬to‭‬‭‬various‬
‭usersand‭‬‭‬interpretation‭‬‭‬of‭‬‭‬the‭‬‭‬data‭‬‭‬in‭‬‭‬the‬
‭financial‭‬‭‬statement.‭‬‭‬The‭‬‭‬financial‭‬‭‬statement‭‬‭‬is‬
‭considered‭‬‭‬the‭‬‭‬final‭‬‭‬product‭‬‭‬of‭‬‭‬accounting.‬
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✔
‭The‭‬‭‬accounting‭‬‭‬process‭‬‭‬involves‭‬‭‬the‭‬‭‬following‭‬‭‬steps:‬
‭1.‭‬‭‬Analyzing‭‬‭‬transactions‬
‭2.‭‬‭‬Journalizing‭‬‭‬or‭‬‭‬recording‬
‭3.‭‬‭‬Posting‬
‭4.‭‬‭‬Preparing‭‬‭‬the‭‬‭‬trial‭‬‭‬balance‬
‭5.‭‬‭‬Adjusting‭‬‭‬entries‬
‭6.‭‬‭‬Preparing‭‬‭‬worksheet‬
‭7.‭‬‭‬Preparing‭‬‭‬financial‭‬‭‬stamen‬
‭8.‭‬‭‬Closing‭‬‭‬entries‬
‭9.‭‬‭‬Preparing‭‬‭‬the‭‬‭‬post-closing‭‬‭‬trial‭‬‭‬balance‬
‭10.‭‬‭‬Reversing‭‬‭‬entries‬
‭1.‬ T
‭ he‭‬‭‬FRSC‭‬‭‬issues‭‬‭‬its‭‬‭‬Standards‭‬‭‬in‭‬‭‬a‭‬‭‬series‭‬‭‬of‬
‭pronouncements‭‬‭‬called‭‬‭‬Philippine‭‬‭‬Financial‬
‭ReportingStandards‭‬‭‬(PDRSs).‭‬‭‬These‭‬‭‬consists‬
‭of:‭‬‭‬Philippine‭‬‭‬Financial‭‬‭‬Reporting‭‬‭‬Standards‬
‭(PFRSs)‭‬‭‬which‭‬‭‬correspond‭‬‭‬to‭‬‭‬International‬
‭Financial‭‬‭‬Reporting‭‬‭‬Standards‭‬‭‬(IFRSs)‬
‭2.‬ ‭Philippine‭‬‭‬Accounting‭‬‭‬Standards‭‬‭‬(PASs)‬
‭which‭‬‭‬correspond‭‬‭‬to‭‬‭‬the‭‬‭‬International‬
‭Accounting‭‬‭‬Standards‭‬‭‬(IASs)‬
‭2‬
‭3.‬ P
‭ hilippine‭‬‭‬Interpretations‭‬‭‬(PIs)‭‬‭‬which‬
‭correspond‭‬‭‬to‭‬‭‬interpretations‭‬‭‬of‭‬‭‬the‬
‭International‭‬‭‬Financial‭‬‭‬reporting‬
‭Interpretations‭‬‭‬Committee‭‬‭‬(IFRIC)‭‬‭‬of‭‬‭‬the‬
‭IASB.‬
‭FINANCIAL‭‬‭‬STATEMENTS‬
‭ inancial‭‬‭‬Statements‭‬‭‬are‭‬‭‬the‭‬‭‬final‭‬‭‬product‭‬‭‬of‭‬‭‬the‬
F
‭accounting‭‬‭‬system.‭‬‭‬They‭‬‭‬are‭‬‭‬structured‭‬‭‬representations‬
‭of‭‬‭‬the‭‬‭‬financial‭‬‭‬position,‭‬‭‬financial‭‬‭‬performance,‭‬‭‬and‬
‭cash‭‬‭‬flow‭‬‭‬of‭‬‭‬an‭‬‭‬entity.‬
‭A‭‬‭‬complete‭‬‭‬set‭‬‭‬of‭‬‭‬financial‭‬‭‬statements‭‬‭‬comprises‭‬‭‬the‬
f‭ ollowing:‬
❖
❖
❖
❖
❖
‭ ‬ ‭Statement‭‬‭‬of‭‬‭‬financial‭‬‭‬position‭‬‭‬(balance‭‬‭‬sheet)‬
‭ ‬S
‭ tatement‭‬‭‬of‭‬‭‬comprehensive‭‬‭‬income‭‬‭‬(income‬
‭statement)‬
‭ ‬ ‭Statement‭‬‭‬of‭‬‭‬changes‭‬‭‬in‭‬‭‬equity‬
‭ ‬ ‭Statement‭‬‭‬of‭‬‭‬cash‭‬‭‬flows‭‬‭‬(cash‭‬‭‬flow‭‬‭‬statement),‬
‭and‬
‭ ‬ ‭Notes,‭‬‭‬comprising‭‬‭‬a‭‬‭‬summary‭‬‭‬of‭‬‭‬significant‬
‭accounting‭‬‭‬policies‭‬‭‬and‭‬‭‬other‭‬‭‬explanatory‬
‭notes.‬
‭ ‬ ‭Comparative‭‬‭‬Financial‭‬‭‬Statement‬
❖
‭Statement‭‬‭‬of‭‬‭‬financial‭‬‭‬position‬
‭ he‭‬‭‬elements‭‬‭‬directly‭‬‭‬related‭‬‭‬to‭‬‭‬the‭‬‭‬measurement‭‬‭‬of‬
T
‭financial‭‬‭‬position‭‬‭‬are:‬
‭1.‭‬‭‬Assets‬
‭2.‭‬‭‬Liabilities‬
‭3.‭‬‭‬Equity‬
‭ he‭‬‭‬financial‭‬‭‬position‭‬‭‬of‭‬‭‬a‭‬‭‬business‭‬‭‬entity‭‬‭‬is‭‬‭‬usually‬
T
‭expressed‭‬‭‬in‭‬‭‬terms‭‬‭‬of‭‬‭‬its;‬
‭ iquidity‬‭refers‭‬‭‬to‭‬‭‬the‭‬‭‬ability‭‬‭‬of‭‬‭‬a‭‬‭‬business‭‬‭‬entity‬‭to‬
L
‭settle‭‬‭‬its‭‬‭‬currently‭‬‭‬maturing‭‬‭‬financial‭‬‭‬obligation.‬
‭Solvency‬‭is‭‬‭‬the‭‬‭‬ability‭‬‭‬of‭‬‭‬a‭‬‭‬business‭‬‭‬to‭‬‭‬pay‭‬‭‬its‭‬‭‬long‬
‭term‭‬‭‬financial‭‬‭‬obligation.‬
‭ inancial‭‬‭‬structure‬‭indicates‭‬‭‬the‭‬‭‬amount‭‬‭‬of‭‬‭‬capital‬‭or‬
F
‭resources‭‬‭‬financed‭‬‭‬by‭‬‭‬creditors‭‬‭‬and‭‬‭‬the‭‬‭‬amount‬
‭provided‭‬‭‬by‭‬‭‬owners.‭‬‭‬The‭‬‭‬analysis‭‬‭‬of‭‬‭‬the‭‬‭‬financial‬
‭structure‭‬‭‬of‭‬‭‬the‭‬‭‬business‭‬‭‬focuses‭‬‭‬on‭‬‭‬the‭‬‭‬right‭‬‭‬side‭‬‭‬of‬
‭the‭‬‭‬accounting‭‬‭‬equation‭‬‭‬(Asset=‭‬‭‬Liabilities‭‬‭‬+‭‬‭‬equity)‬
‭ apital‭‬‭‬for‭‬‭‬adaptation‬‭refers‭‬‭‬to‭‬‭‬the‭‬‭‬ability‭‬‭‬of‭‬‭‬a‬
C
‭business‭‬‭‬to‭‬‭‬invest‭‬‭‬excess‭‬‭‬available‭‬‭‬resources‭‬‭‬or‭‬‭‬raise‬
‭needed‭‬‭‬funds‭‬‭‬through‭‬‭‬borrowing‭‬‭‬without‭‬‭‬difficulty‭‬‭‬in‬
‭times‭‬‭‬of‭‬‭‬need.‬
‭Statement‭‬‭‬of‭‬‭‬Comprehensive‭‬‭‬Income‬
‭ he‭‬‭‬statement‭‬‭‬of‭‬‭‬comprehensive‭‬‭‬income‭‬‭‬reflects‭‬‭‬the‬
T
‭operating‭‬‭‬performance‭‬‭‬of‭‬‭‬the‭‬‭‬business.‭‬‭‬The‭‬‭‬elements‬
‭directly‭‬‭‬related‭‬‭‬to‭‬‭‬the‭‬‭‬measurement‭‬‭‬of‭‬‭‬profit‭‬‭‬are:‬
1‭ .‭‬‭‬Income,‭‬‭‬and‬
‭2.‭‬‭‬Expenses‬
‭Income‭‬‭‬and‭‬‭‬expenses‭‬‭‬may‭‬‭‬be‭‬‭‬presented‭‬‭‬in‭‬‭‬the‭‬‭‬income‬
‭statement‭‬‭‬in‭‬‭‬different‭‬‭‬ways‭‬‭‬to‭‬‭‬provide‭‬‭‬information‬
‭relevant‭‬‭‬for‭‬‭‬economic‭‬‭‬decision.‭‬‭‬Example,‭‬‭‬it‭‬‭‬is‭‬‭‬common‬
‭practice‭‬‭‬to‭‬‭‬distinguish‭‬‭‬between‭‬‭‬items‭‬‭‬of‭‬‭‬income‭‬‭‬and‬
‭expenses‭‬‭‬arising‭‬‭‬from‭‬‭‬the‭‬‭‬ordinary‭‬‭‬course‭‬‭‬of‭‬‭‬the‬
‭business‭‬‭‬of‭‬‭‬the‭‬‭‬entity‭‬‭‬and‭‬‭‬those‭‬‭‬that‭‬‭‬do‭‬‭‬not.‬
‭ tatement‭‬‭‬of‭‬‭‬Changes‭‬‭‬in‭‬‭‬Equity‬
S
‭The‭‬‭‬movements‭‬‭‬and‭‬‭‬changes‭‬‭‬in‭‬‭‬the‭‬‭‬owner’s‭‬‭‬equity‬
‭section‭‬‭‬of‭‬‭‬the‭‬‭‬balance‭‬‭‬sheet‭‬‭‬are‭‬‭‬reflected‭‬‭‬in‭‬‭‬the‬
‭statement‭‬‭‬of‭‬‭‬changes‭‬‭‬in‭‬‭‬equity.‬
‭ tatement‭‬‭‬of‭‬‭‬Cash‭‬‭‬Flow‬
S
‭A‭‬‭‬statement‭‬‭‬of‭‬‭‬cash‭‬‭‬flows‭‬‭‬shall‭‬‭‬report‭‬‭‬cash‭‬‭‬flows‭‬‭‬(cash‬
‭flows‭‬‭‬and‭‬‭‬outflows)‭‬‭‬during‭‬‭‬the‭‬‭‬period‭‬‭‬classified‭‬‭‬by‬
‭operating,‭‬‭‬investing,‭‬‭‬and‭‬‭‬financing‭‬‭‬activities.‬
‭ he‭‬‭‬difference‭‬‭‬between‭‬‭‬the‭‬‭‬cash‭‬‭‬inflows‭‬‭‬and‭‬‭‬outflows‬
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‭is‭‬‭‬the‭‬‭‬net‭‬‭‬cash‭‬‭‬flows.‭‬‭‬The‭‬‭‬net‭‬‭‬cash‭‬‭‬flows‭‬‭‬are‭‬‭‬finally‬
‭added‭‬‭‬to‭‬‭‬the‭‬‭‬beginning‭‬‭‬of‭‬‭‬the‭‬‭‬cash‭‬‭‬balance,‭‬‭‬and‭‬‭‬the‬
‭sum‭‬‭‬represents‭‬‭‬the‭‬‭‬ending‭‬‭‬cash‭‬‭‬balance.‬
‭Notes‭‬‭‬and‭‬‭‬Disclosure‭‬‭‬of‭‬‭‬accounting‭‬‭‬policies‬‭.‬
‭ he‭‬‭‬notes,‭‬‭‬as‭‬‭‬far‭‬‭‬as‭‬‭‬practicable,‭‬‭‬shall‭‬‭‬be‭‬‭‬presented‭‬‭‬in‭‬‭‬a‬
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‭systematic‭‬‭‬manner.‭‬‭‬Each‭‬‭‬item‭‬‭‬in‭‬‭‬the‭‬‭‬financial‬
‭statements‭‬‭‬shall‭‬‭‬be‭‬‭‬crossed‭‬‭‬reference‭‬‭‬to‭‬‭‬any‭‬‭‬related‬
‭information‭‬‭‬in‭‬‭‬the‭‬‭‬notes.‭‬‭‬For‭‬‭‬example,‭‬‭‬the‭‬‭‬item‭‬‭‬cash‬
‭and‭‬‭‬cash‭‬‭‬equivalent‭‬‭‬in‭‬‭‬the‭‬‭‬statement‭‬‭‬of‭‬‭‬financial‬
‭position‭‬‭‬must‭‬‭‬be‭‬‭‬explained‭‬‭‬fully‭‬‭‬as‭‬‭‬to‭‬‭‬measurement‬
‭and‭‬‭‬valuation‭‬‭‬in‭‬‭‬the‭‬‭‬notes.‬
‭ he‭‬‭‬Following‭‬‭‬are‭‬‭‬users‭‬‭‬and‭‬‭‬their‭‬‭‬information‭‬‭‬needs.‬
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‭They‭‬‭‬use‭‬‭‬financial‭‬‭‬statements‭‬‭‬in‭‬‭‬order‭‬‭‬to‭‬‭‬satisfy‭‬‭‬some‬
‭of‭‬‭‬their‭‬‭‬different‭‬‭‬needs‭‬‭‬for‭‬‭‬information.‬
‭1.‬‭Investors.‬‭Providers‭‬‭‬of‭‬‭‬risk‭‬‭‬capital‭‬‭‬and‭‬‭‬their‬
‭advisers‭‬‭‬are‭‬‭‬concerned‭‬‭‬with‭‬‭‬the‭‬‭‬risk‭‬‭‬inherent‭‬‭‬in‭‬‭‬and‬
‭return‭‬‭‬provided‭‬‭‬by‭‬‭‬their‭‬‭‬investment.‬
2‭ .‬‭Employees.‬‭Employees‭‬‭‬and‭‬‭‬their‭‬‭‬representative‬
‭groups‭‬‭‬are‭‬‭‬interested‭‬‭‬in‭‬‭‬information‭‬‭‬about‭‬‭‬the‭‬‭‬stability‬
‭and‭‬‭‬profitability‭‬‭‬of‭‬‭‬their‭‬‭‬employees.‬
3‭ .‬‭Lenders.‬‭Lenders‭‬‭‬are‭‬‭‬interested‭‬‭‬in‭‬‭‬information‬‭that‬
‭enables‭‬‭‬them‭‬‭‬to‭‬‭‬determine‭‬‭‬whether‭‬‭‬their‭‬‭‬loans,‭‬‭‬and‭‬‭‬the‬
‭interest‭‬‭‬earned‭‬‭‬will‭‬‭‬be‭‬‭‬paid‭‬‭‬when‭‬‭‬due.‬
‭4.‬‭Supplier‭‬‭‬and‭‬‭‬other‭‬‭‬trade‭‬‭‬creditors.‬‭Suppliers‭‬‭‬and‬
‭other‭‬‭‬trade‭‬‭‬creditors‭‬‭‬are‭‬‭‬interested‭‬‭‬in‭‬‭‬information‭‬‭‬that‬
‭enables‭‬‭‬them‭‬‭‬to‭‬‭‬determine‭‬‭‬whether‭‬‭‬amounts‭‬‭‬owing‭‬‭‬to‬
‭them‭‬‭‬will‭‬‭‬be‭‬‭‬paid‭‬‭‬when‭‬‭‬due.‬
‭5.‬‭Customers.‬‭Customers‭‬‭‬have‭‬‭‬an‭‬‭‬interest‭‬‭‬in‬
‭information‭‬‭‬about‭‬‭‬the‭‬‭‬continuance‭‬‭‬of‭‬‭‬an‭‬‭‬entity,‬
‭especially‭‬‭‬when‭‬‭‬they‭‬‭‬have‭‬‭‬a‭‬‭‬long-term‭‬‭‬involvement‬
‭3‬
‭ ith‭‬‭‬or‭‬‭‬are‭‬‭‬dependent‭‬‭‬on,‭‬‭‬the‭‬‭‬entity.‬
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‭6.‬‭Government‭‬‭‬and‭‬‭‬their‭‬‭‬agencies‬‭.‭‬‭‬They‭‬‭‬are‬
‭interested‭‬‭‬in‭‬‭‬the‭‬‭‬allocation‭‬‭‬of‭‬‭‬resources‭‬‭‬and‭‬‭‬therefore‬
‭the‭‬‭‬activities‭‬‭‬of‭‬‭‬entities.‬
‭7.‬‭Public.‬‭Entities‭‬‭‬affect‭‬‭‬members‭‬‭‬of‭‬‭‬the‭‬‭‬public‭‬‭‬in‬‭a‬
‭variety‭‬‭‬of‭‬‭‬ways.‬
‭8.‬‭Management.‬‭Management‭‬‭‬is‭‬‭‬interested‭‬‭‬in‭‬‭‬the‬
‭information‭‬‭‬contained‭‬‭‬in‭‬‭‬the‭‬‭‬financial‭‬‭‬statements‭‬‭‬that‬
‭will‭‬‭‬help‭‬‭‬carry‭‬‭‬out‭‬‭‬its‭‬‭‬planning,‭‬‭‬decision‭‬‭‬making‭‬‭‬and‬
‭control‭‬‭‬responsibilities.‬
‭Objective‭‬‭‬of‭‬‭‬financial‭‬‭‬statements‬
‭ he‭‬‭‬objective‭‬‭‬of‭‬‭‬financial‭‬‭‬statements‭‬‭‬is‭‬‭‬to‭‬‭‬provide‬
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‭information‭‬‭‬about‭‬‭‬the.‬
‭1.‭‬‭‬Financial‭‬‭‬position‬
‭2.‭‬‭‬Operating‭‬‭‬performance‬
‭3.‭‬‭‬Changes‭‬‭‬in‭‬‭‬financial‭‬‭‬position‬
‭Underlying‭‬‭‬Assumptions‬
‭ he‭‬‭‬framework‭‬‭‬mentioned‭‬‭‬two‭‬‭‬underlying‭‬‭‬assumption‬
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‭to‭‬‭‬meet‭‬‭‬the‭‬‭‬objective‭‬‭‬of‭‬‭‬accounting,‭‬‭‬namely,‭‬‭‬the‬
‭1.‭‬‭‬Accrual‭‬‭‬assumptions‬
‭2.‭‬‭‬Going‭‬‭‬concern‭‬‭‬assumption‬
‭ ccrual‭‬‭‬assumption‭‬‭‬means‭‬‭‬that‭‬‭‬the‭‬‭‬effects‭‬‭‬of‬
A
‭transactions‭‬‭‬and‭‬‭‬other‭‬‭‬events‭‬‭‬are‭‬‭‬recognized‭‬‭‬when‭‬‭‬they‬
‭occur‭‬‭‬and‭‬‭‬not‭‬‭‬as‭‬‭‬cash‭‬‭‬or‭‬‭‬its‭‬‭‬equivalent‭‬‭‬is‭‬‭‬received‭‬‭‬or‬
‭paid.‭‬‭‬It‭‬‭‬provides‭‬‭‬early‭‬‭‬warning‭‬‭‬to‭‬‭‬the‭‬‭‬analyst‭‬‭‬or‭‬‭‬user‬
‭that‭‬‭‬the‭‬‭‬item‭‬‭‬appearing‭‬‭‬on‭‬‭‬the‭‬‭‬face‭‬‭‬of‭‬‭‬the‭‬‭‬financial‬
‭statements‭‬‭‬are‭‬‭‬recognized‭‬‭‬and‭‬‭‬measured‭‬‭‬using‭‬‭‬the‬
‭accrual‭‬‭‬concept.‭‬‭‬For‭‬‭‬example,‭‬‭‬the‭‬‭‬net‭‬‭‬profit‭‬‭‬or‭‬‭‬income‬
‭appearing‭‬‭‬on‭‬‭‬the‭‬‭‬statement‭‬‭‬of‭‬‭‬comprehensive‭‬‭‬income‬
‭is‭‬‭‬not‭‬‭‬cash‭‬‭‬income‭‬‭‬but‭‬‭‬rather‭‬‭‬accrual‭‬‭‬income.‬
‭Going‭‬‭‬concern‭‬‭‬assumption‭‬‭‬means‭‬‭‬the‭‬‭‬financial‬
‭statements‭‬‭‬are‭‬‭‬prepared‭‬‭‬on‭‬‭‬the‭‬‭‬assumption‭‬‭‬that‭‬‭‬an‬
‭entity‭‬‭‬will‭‬‭‬continue‭‬‭‬in‭‬‭‬operation‭‬‭‬for‭‬‭‬the‭‬‭‬foreseeable‬
‭future.‭‬‭‬An‭‬‭‬example‭‬‭‬of‭‬‭‬the‭‬‭‬application‭‬‭‬of‭‬‭‬going‭‬‭‬concern‬
‭concept‭‬‭‬of‭‬‭‬accounting‭‬‭‬is‭‬‭‬the‭‬‭‬computation‭‬‭‬of‬
‭depreciation‭‬‭‬based‭‬‭‬on‭‬‭‬expected‭‬‭‬economic‭‬‭‬life‭‬‭‬of‭‬‭‬fixed‬
‭assets‭‬‭‬rather‭‬‭‬than‭‬‭‬their‭‬‭‬current‭‬‭‬market‭‬‭‬value.‭‬‭‬The‭‬‭‬going‬
‭concern‭‬‭‬concept‭‬‭‬is‭‬‭‬applicable‭‬‭‬to‭‬‭‬the‭‬‭‬company’s‬
‭business.‭‬‭‬If,‭‬‭‬for‭‬‭‬example,‭‬‭‬a‭‬‭‬company‭‬‭‬closes‭‬‭‬a‭‬‭‬small‬
‭business‭‬‭‬segment‭‬‭‬or‭‬‭‬discontinues‭‬‭‬one‭‬‭‬of‭‬‭‬its‭‬‭‬products‬
‭and‭‬‭‬continues‭‬‭‬with‭‬‭‬others,‭‬‭‬it‭‬‭‬does‭‬‭‬not‭‬‭‬mean‭‬‭‬that‭‬‭‬the‬
‭company‭‬‭‬is‭‬‭‬no‭‬‭‬longer‭‬‭‬a‭‬‭‬going‭‬‭‬concern‭‬‭‬because‭‬‭‬the‬
‭going‭‬‭‬concern‭‬‭‬concept‭‬‭‬is‭‬‭‬applicable‭‬‭‬to‭‬‭‬the‭‬‭‬entity‭‬‭‬not‭‬‭‬to‬
‭the‭‬‭‬particular‭‬‭‬segment‭‬‭‬of‭‬‭‬business‭‬‭‬or‭‬‭‬product.‬
‭Qualitative‭‬‭‬Characteristic‬
I‭ t‭‬‭‬refers‭‬‭‬to‭‬‭‬the‭‬‭‬attributes‭‬‭‬that‭‬‭‬make‭‬‭‬the‭‬‭‬information‬
‭provided‭‬‭‬in‭‬‭‬the‭‬‭‬financial‭‬‭‬statements‭‬‭‬useful‭‬‭‬to‭‬‭‬users.‬
‭ he‭‬‭‬four‭‬‭‬principal‭‬‭‬qualitative‭‬‭‬characteristics‭‬‭‬are:‬
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‭Understandability.‬‭An‭‬‭‬essential‭‬‭‬quality‭‬‭‬of‭‬‭‬the‬
‭information‭‬‭‬provided‭‬‭‬in‭‬‭‬financial‭‬‭‬statement‭‬‭‬is‭‬‭‬that‭‬‭‬it‭‬‭‬is‬
‭readily‭‬‭‬understandable‭‬‭‬by‭‬‭‬the‭‬‭‬users.‭‬‭‬The‭‬‭‬concept‭‬‭‬of‬
‭understandability‭‬‭‬is‭‬‭‬enhanced‭‬‭‬in‭‬‭‬making‭‬‭‬notes‭‬‭‬to‭‬‭‬the‬
‭financial‭‬‭‬statements.‬
‭Relevance‬‭.‭‬‭‬Information‭‬‭‬has‭‬‭‬the‭‬‭‬quality‭‬‭‬of‭‬‭‬relevance‬
‭when‭‬‭‬it‭‬‭‬influences‭‬‭‬the‭‬‭‬economic‭‬‭‬decision‭‬‭‬of‭‬‭‬users.by‬
‭helping‭‬‭‬them‭‬‭‬evaluate‭‬‭‬past,‭‬‭‬present,‭‬‭‬or‭‬‭‬future‭‬‭‬events‭‬‭‬or‬
‭confirming,‭‬‭‬or‭‬‭‬correcting‭‬‭‬their‭‬‭‬past‭‬‭‬evaluation.‭‬‭‬For‬
‭example,‭‬‭‬in‭‬‭‬the‭‬‭‬decision‭‬‭‬to‭‬‭‬replace‭‬‭‬equipment‭‬‭‬that‭‬‭‬has‬
‭been‭‬‭‬used‭‬‭‬for‭‬‭‬the‭‬‭‬past‭‬‭‬six‭‬‭‬years,‭‬‭‬the‭‬‭‬original‭‬‭‬cost‭‬‭‬of‭‬‭‬the‬
‭equipment‭‬‭‬does‭‬‭‬not‭‬‭‬have‭‬‭‬relevance.‭‬‭‬In‭‬‭‬other‭‬‭‬words,‭‬‭‬the‬
‭original‭‬‭‬cost‭‬‭‬is‭‬‭‬irrelevant‭‬‭‬or‭‬‭‬is‭‬‭‬not‭‬‭‬relevant‭‬‭‬in‭‬‭‬the‬
‭decision‭‬‭‬to‭‬‭‬replace‭‬‭‬the‭‬‭‬equipment.‭‬‭‬What‭‬‭‬will‭‬‭‬have‬
‭relevance‭‬‭‬are‭‬‭‬the‭‬‭‬future‭‬‭‬amounts,‭‬‭‬such‭‬‭‬as‭‬‭‬the‭‬‭‬cost‭‬‭‬of‬
‭the‭‬‭‬new‭‬‭‬equipment,‭‬‭‬and‭‬‭‬the‭‬‭‬savings‭‬‭‬that‭‬‭‬will‭‬‭‬occur‬
‭when‭‬‭‬the‭‬‭‬old‭‬‭‬equipment‭‬‭‬is‭‬‭‬replaced.‬
‭Reliability.‭‬‭‬I‬‭nformation‭‬‭‬has‭‬‭‬the‭‬‭‬quality‭‬‭‬of‭‬‭‬reliability‬
‭when‭‬‭‬it‭‬‭‬is‭‬‭‬free‭‬‭‬from‭‬‭‬material‭‬‭‬error‭‬‭‬or‭‬‭‬bias.‭‬‭‬Otherwise‬
‭stated,‭‬‭‬reliability‭‬‭‬refers‭‬‭‬to‭‬‭‬the‭‬‭‬level‭‬‭‬of‭‬‭‬confidence‭‬‭‬that‬
‭users‭‬‭‬place‭‬‭‬on‭‬‭‬truthfulness‭‬‭‬of‭‬‭‬the‭‬‭‬information.‭‬‭‬For‬
‭example,‭‬‭‬the‭‬‭‬reliable‭‬‭‬evidence‭‬‭‬for‭‬‭‬financial‬
‭transactions‭‬‭‬or‭‬‭‬event‭‬‭‬that‭‬‭‬records‭‬‭‬in‭‬‭‬financial‬
‭statements‭‬‭‬is‭‬‭‬including‭‬‭‬original‭‬‭‬documents‭‬‭‬(invoices,‬
‭contract,‭‬‭‬receipt,‭‬‭‬banks‭‬‭‬statements,‭‬‭‬etc.),‭‬‭‬information‬
‭that‭‬‭‬generates‭‬‭‬from‭‬‭‬the‭‬‭‬third‭‬‭‬party,‭‬‭‬or‭‬‭‬information‭‬‭‬that‬
‭prepared‭‬‭‬by‭‬‭‬the‭‬‭‬auditor.‬
‭This‭‬‭‬is‭‬‭‬how‭‬‭‬reliable‭‬‭‬evident‭‬‭‬from‭‬‭‬auditor’s‭‬‭‬perspective.‬
‭The‭‬‭‬Framework‭‬‭‬mentioned‭‬‭‬the‭‬‭‬following‭‬‭‬elements‭‬‭‬in‬
‭order‭‬‭‬that‭‬‭‬the‭‬‭‬information‭‬‭‬will‭‬‭‬be‭‬‭‬reliable:‬
‭Faithful‭‬‭‬representation‬
‭Substance‭‬‭‬over‭‬‭‬form‬
‭Neutrality‬
‭Prudence‬
‭Completeness‬
‭ omparability.‬‭Information‭‬‭‬has‭‬‭‬the‭‬‭‬quality‭‬‭‬of‬
C
‭comparability‭‬‭‬when‭‬‭‬users‭‬‭‬can‭‬‭‬compare‭‬‭‬the‭‬‭‬financial‬
‭statements‭‬‭‬of‭‬‭‬an‭‬‭‬entity‭‬‭‬through‭‬‭‬time‭‬‭‬to‭‬‭‬identify‭‬‭‬trends‬
‭in‭‬‭‬its‭‬‭‬financial‭‬‭‬position‭‬‭‬and‭‬‭‬performance.‬
‭Accounting‭‬‭‬Constraints‬
✔
‭ ‬ ‭Accounting‭‬‭‬constraints‭‬‭‬refers‭‬‭‬to‭‬‭‬the‭‬‭‬elements‬
‭that‭‬‭‬affect‭‬‭‬the‭‬‭‬qualitative‭‬‭‬characteristics‭‬‭‬of‬
‭relevance‭‬‭‬and‭‬‭‬reliability.‭‬‭‬The‭‬‭‬constraints‬
‭enumerated‭‬‭‬in‭‬‭‬the‭‬‭‬framework‭‬‭‬are:‬
‭ ‬ ‭Timeless.‬‭If‭‬‭‬there‭‬‭‬is‭‬‭‬undue‭‬‭‬delay‭‬‭‬in‭‬‭‬reporting‬
‭of‭‬‭‬information,‭‬‭‬it‭‬‭‬may‭‬‭‬lose‭‬‭‬its‭‬‭‬relevance.‭‬‭‬To‬
‭provide‭‬‭‬information‭‬‭‬on‭‬‭‬a‭‬‭‬timely‭‬‭‬basis,‭‬‭‬it‭‬‭‬may‬
‭often‭‬‭‬be‭‬‭‬necessary‭‬‭‬to‭‬‭‬report‭‬‭‬before‭‬‭‬all‭‬‭‬aspects‬
‭of‭‬‭‬a‭‬‭‬transaction‭‬‭‬or‭‬‭‬other‭‬‭‬event‭‬‭‬are‭‬‭‬known,‭‬‭‬thus‬
‭impairing‭‬‭‬reliability.‬
‭ ‬ ‭Balance‭‬‭‬between‭‬‭‬benefits‭‬‭‬and‭‬‭‬cost‬‭.‭‬‭‬The‬
‭balance‭‬‭‬between‭‬‭‬benefit‭‬‭‬and‭‬‭‬cost‭‬‭‬is‭‬‭‬a‬
✔
✔
‭4‬
✔
‭
✔
‭
p‭ ervasive‭‬‭‬constraint‭‬‭‬rather‭‬‭‬than‭‬‭‬a‭‬‭‬qualitative‬
‭characteristic.‬
‬ ‭Balance‭‬‭‬between‭‬‭‬qualitative‭‬‭‬characteristics‬‭.‬
‭In‭‬‭‬practice‭‬‭‬a‭‬‭‬balancing,‭‬‭‬or‭‬‭‬trade-off,‭‬‭‬between‬
‭qualitative‭‬‭‬characteristics‭‬‭‬is‭‬‭‬often‭‬‭‬necessary.‬
‭Generally,‭‬‭‬the‭‬‭‬aim‭‬‭‬is‭‬‭‬to‭‬‭‬achieve‭‬‭‬an‭‬‭‬appropriate‬
‭balance‭‬‭‬among‭‬‭‬the‭‬‭‬characteristics‭‬‭‬to‭‬‭‬meet‭‬‭‬the‬
‭objective‭‬‭‬of‭‬‭‬financial‭‬‭‬statements.‬
‬ ‭True‭‬‭‬and‭‬‭‬Fair‭‬‭‬view/‭‬‭‬Fair‭‬‭‬presentation‬‭.‬
‭Financial‭‬‭‬statements‭‬‭‬are‭‬‭‬frequently‭‬‭‬described‬
‭as‭‬‭‬showinga‭‬‭‬true‭‬‭‬and‭‬‭‬fair‭‬‭‬view‭‬‭‬of,‭‬‭‬or‭‬‭‬as‬
‭presenting‭‬‭‬fairly,‭‬‭‬the‭‬‭‬financial‭‬‭‬position,‬
‭performance,‭‬‭‬and‭‬‭‬changes‭‬‭‬in‭‬‭‬financial‭‬‭‬position‬
‭of‭‬‭‬an‭‬‭‬entity.‬
‭Elements‭‬‭‬of‭‬‭‬Financial‭‬‭‬Statements‬
‭ he‭‬‭‬three‭‬‭‬elements‭‬‭‬directly‭‬‭‬related‭‬‭‬to‭‬‭‬the‭‬‭‬measurement‬
T
‭of‭‬‭‬financial‭‬‭‬position‭‬‭‬in‭‬‭‬the‭‬‭‬statement‭‬‭‬of‬
‭financialposition‭‬‭‬are‭‬‭‬assets,‭‬‭‬liabilities,‭‬‭‬and‭‬‭‬equity.‬
‭ ssets‬‭are‭‬‭‬resources‭‬‭‬controlled‭‬‭‬by‭‬‭‬the‭‬‭‬entity‭‬‭‬because‬
A
‭of‭‬‭‬past‭‬‭‬events‭‬‭‬and‭‬‭‬from‭‬‭‬which‭‬‭‬future‭‬‭‬economic‬
‭benefits‭‬‭‬are‭‬‭‬expected‭‬‭‬to‭‬‭‬flow‭‬‭‬to‭‬‭‬the‭‬‭‬entity.‬
‭Liabilities‬‭are‭‬‭‬present‭‬‭‬obligations‭‬‭‬of‭‬‭‬the‭‬‭‬entity‬‭arising‬
‭from‭‬‭‬past‭‬‭‬events,‭‬‭‬the‭‬‭‬settlement‭‬‭‬of‭‬‭‬which‭‬‭‬is‭‬‭‬expected‬
‭to‭‬‭‬result‭‬‭‬in‭‬‭‬an‭‬‭‬outflow‭‬‭‬from‭‬‭‬the‭‬‭‬entity‭‬‭‬of‭‬‭‬resources‬
‭embodying‭‬‭‬economic‭‬‭‬benefits.‬
‭Equity‬‭is‭‬‭‬the‭‬‭‬residual‭‬‭‬interest‭‬‭‬in‭‬‭‬the‭‬‭‬assets‭‬‭‬of‭‬‭‬the‬‭entity‬
‭after‭‬‭‬deducting‭‬‭‬all‭‬‭‬its‭‬‭‬liabilities.‬
‭ he‭‬‭‬elements‭‬‭‬directly‭‬‭‬related‭‬‭‬to‭‬‭‬the‭‬‭‬measurement‭‬‭‬of‬
T
‭performance‭‬‭‬in‭‬‭‬the‭‬‭‬statement‭‬‭‬of‭‬‭‬comprehensive‬
‭income‭‬‭‬are‭‬‭‬income‭‬‭‬and‭‬‭‬expenses.‬
‭Income‬‭is‭‬‭‬increase‭‬‭‬in‭‬‭‬economic‭‬‭‬benefits‭‬‭‬during‭‬‭‬the‬
‭accounting‭‬‭‬period‭‬‭‬in‭‬‭‬the‭‬‭‬form‭‬‭‬of‭‬‭‬inflows‭‬‭‬and‭‬‭‬or‬
‭enhancement‭‬‭‬of‭‬‭‬assets‭‬‭‬or‭‬‭‬decrease‭‬‭‬of‭‬‭‬liabilities‭‬‭‬that‬
‭result‭‬‭‬in‭‬‭‬increase‭‬‭‬in‭‬‭‬equity,‭‬‭‬other‭‬‭‬than‭‬‭‬those‭‬‭‬relating‭‬‭‬to‬
‭contributions‭‬‭‬from‭‬‭‬equity‭‬‭‬participants.‬
‭Expenses‬‭are‭‬‭‬decrease‭‬‭‬in‭‬‭‬economic‭‬‭‬benefits‭‬‭‬during‬‭the‬
‭accounting‭‬‭‬period‭‬‭‬in‭‬‭‬the‭‬‭‬form‭‬‭‬of‭‬‭‬outflows‭‬‭‬or‭‬‭‬depletions‬
‭of‭‬‭‬assets‭‬‭‬or‭‬‭‬incurrence‭‬‭‬of‭‬‭‬liabilities‭‬‭‬that‭‬‭‬result‭‬‭‬in‬
‭decrease‭‬‭‬in‭‬‭‬equity,‭‬‭‬other‭‬‭‬than‭‬‭‬those‭‬‭‬relating‭‬‭‬to‭‬‭‬equity‬
‭participants.‭‬‭‬.‬
‭Recognition‭‬‭‬Principles‬
‭ he‭‬‭‬framework‭‬‭‬enumerates‭‬‭‬four‭‬‭‬recognition‭‬‭‬principles‬
T
‭to‭‬‭‬be‭‬‭‬observed‭‬‭‬in‭‬‭‬the‭‬‭‬preparation‭‬‭‬and‭‬‭‬presentation‭‬‭‬of‬
‭the‭‬‭‬financial‭‬‭‬statements‭‬‭‬as‭‬‭‬follows:‬
‭ sset‭‬‭‬recognition‭‬‭‬principle.‬‭The‭‬‭‬asset‭‬‭‬recognition‬
A
‭principle‭‬‭‬dictates‭‬‭‬that‭‬‭‬an‭‬‭‬asset‭‬‭‬is‭‬‭‬recognized‭‬‭‬in‭‬‭‬the‬
‭statement‭‬‭‬of‭‬‭‬financial‭‬‭‬position‭‬‭‬when‭‬‭‬it‭‬‭‬is‭‬‭‬probable‭‬‭‬that‬
‭the‭‬‭‬future‭‬‭‬economic‭‬‭‬benefits‭‬‭‬will‭‬‭‬flow‭‬‭‬to‭‬‭‬the‭‬‭‬entity‭‬‭‬and‬
‭the‭‬‭‬asset‭‬‭‬has‭‬‭‬a‭‬‭‬cost‭‬‭‬or‭‬‭‬value‭‬‭‬that‭‬‭‬can‭‬‭‬be‭‬‭‬measured‬
‭reliably.‬
‭ iability‭‬‭‬recognition‭‬‭‬principle.‬‭Liability‭‬‭‬is‬
L
‭recognized‭‬‭‬in‭‬‭‬the‭‬‭‬statement‭‬‭‬of‭‬‭‬financial‭‬‭‬position‭‬‭‬when‬
i‭t‭‬‭‬is‭‬‭‬probable‭‬‭‬that‭‬‭‬an‭‬‭‬outflow‭‬‭‬of‭‬‭‬resources‭‬‭‬embodying‬
‭economic‭‬‭‬benefits‭‬‭‬will‭‬‭‬result‭‬‭‬from‭‬‭‬the‭‬‭‬settlement‭‬‭‬of‭‬‭‬a‬
‭present‭‬‭‬obligation‭‬‭‬and‭‬‭‬the‭‬‭‬amount‭‬‭‬can‭‬‭‬be‭‬‭‬measured‬
‭reliably.‭‬‭‬For‭‬‭‬example,‭‬‭‬inventory‭‬‭‬ordered‭‬‭‬from‭‬‭‬supplier‬
‭but‭‬‭‬not‭‬‭‬yet‭‬‭‬received‭‬‭‬will‭‬‭‬not‭‬‭‬be‭‬‭‬considered‭‬‭‬liability.‬
‭Income‭‬‭‬Recognition‭‬‭‬Principle.‬‭Income‭‬‭‬is‭‬‭‬recognized‬
‭in‭‬‭‬the‭‬‭‬statement‭‬‭‬of‭‬‭‬comprehensive‭‬‭‬income‭‬‭‬when‭‬‭‬an‬
‭increase‭‬‭‬in‭‬‭‬future‭‬‭‬economic‭‬‭‬benefits‭‬‭‬related‭‬‭‬to‭‬‭‬an‬
‭increase‭‬‭‬to‭‬‭‬an‭‬‭‬asset‭‬‭‬or‭‬‭‬a‭‬‭‬decrease‭‬‭‬of‭‬‭‬a‭‬‭‬liability‭‬‭‬has‬
‭arisen‭‬‭‬that‭‬‭‬can‭‬‭‬be‭‬‭‬measured‭‬‭‬reliably.‬
‭ xpense‭‬‭‬Recognition‭‬‭‬Principle.‬‭Expenses‭‬‭‬are‬
E
‭recognized‭‬‭‬in‭‬‭‬the‭‬‭‬statement‭‬‭‬of‭‬‭‬comprehensive‭‬‭‬income‬
‭when‭‬‭‬a‭‬‭‬decrease‭‬‭‬in‭‬‭‬future‭‬‭‬economic‭‬‭‬benefits‭‬‭‬related‭‬‭‬to‬
‭a‭‬‭‬decrease‭‬‭‬in‭‬‭‬an‭‬‭‬asset‭‬‭‬or‭‬‭‬an‭‬‭‬increase‭‬‭‬of‭‬‭‬a‭‬‭‬liability‭‬‭‬has‬
‭arisen‭‬‭‬that‭‬‭‬can‭‬‭‬be‭‬‭‬measured‭‬‭‬reliably.‭‬‭‬Recognition‭‬‭‬of‬
‭expense‭‬‭‬also‭‬‭‬occurs‭‬‭‬simultaneously‭‬‭‬with‭‬‭‬the‬
‭recognition‭‬‭‬of‭‬‭‬an‭‬‭‬increase‭‬‭‬in‭‬‭‬liabilities‭‬‭‬or‭‬‭‬decrease‭‬‭‬in‬
‭assets.‬
‭ he‭‬‭‬Framework‭‬‭‬mentioned‭‬‭‬four‭‬‭‬methods‭‬‭‬or‭‬‭‬procedures‬
T
‭of‭‬‭‬recognizing‭‬‭‬expense‭‬‭‬in‭‬‭‬the‭‬‭‬statement‭‬‭‬of‬
‭comprehensive‭‬‭‬income,‭‬‭‬namely,‬
‭Matching‭‬‭‬of‭‬‭‬Cost‭‬‭‬with‭‬‭‬Revenue.‬‭This‭‬‭‬process‭‬‭‬of‬
‭recognizing‭‬‭‬expense‭‬‭‬involves‭‬‭‬the‭‬‭‬simultaneous‬
‭recognition‭‬‭‬of‭‬‭‬revenues‭‬‭‬and‭‬‭‬expenses‭‬‭‬that‭‬‭‬result‬
‭directly‭‬‭‬and‭‬‭‬jointly‭‬‭‬from‭‬‭‬the‭‬‭‬same‭‬‭‬transactions‭‬‭‬and‬
‭events.‬
‭Systematic‭‬‭‬and‭‬‭‬Rational‭‬‭‬Allocation.‬‭This‭‬‭‬method‭‬‭‬of‬
‭recognizing‭‬‭‬expense‭‬‭‬is‭‬‭‬used‭‬‭‬when‭‬‭‬the‭‬‭‬economic‬
‭benefits‭‬‭‬expected‭‬‭‬from‭‬‭‬the‭‬‭‬assets‭‬‭‬will‭‬‭‬benefit‭‬‭‬more‭‬‭‬han‬
‭one‭‬‭‬accounting‭‬‭‬period.‭‬‭‬Oftentimes,‭‬‭‬this‭‬‭‬method‭‬‭‬applies‬
‭to‭‬‭‬the‭‬‭‬expenses‭‬‭‬of‭‬‭‬using‭‬‭‬property,‭‬‭‬plant‭‬‭‬and‭‬‭‬equipment‬
‭by‭‬‭‬simply‭‬‭‬allocating‭‬‭‬the‭‬‭‬cost‭‬‭‬on‭‬‭‬systematic‭‬‭‬and‬
‭rational‭‬‭‬basis.‬
‭Immediate‭‬‭‬Recognition.‬‭Under‭‬‭‬this‭‬‭‬expense‬
‭recognition‭‬‭‬principle,‭‬‭‬expenses‭‬‭‬are‭‬‭‬recognized‬
‭immediately‭‬‭‬in‭‬‭‬the‭‬‭‬statement‭‬‭‬of‭‬‭‬comprehensive‭‬‭‬income‬
‭under‭‬‭‬the‭‬‭‬following‭‬‭‬instances:‬
✔
✔
‭ ‬ ‭when‭‬‭‬expenditures‭‬‭‬produce‭‬‭‬no‭‬‭‬future‬
‭economic‭‬‭‬benefits;‬
‭ ‬ ‭when‭‬‭‬expenditures‭‬‭‬do‭‬‭‬not‭‬‭‬quality‭‬‭‬for‬
‭recognition‭‬‭‬in‭‬‭‬the‭‬‭‬statement‭‬‭‬of‭‬‭‬financial‬
‭position.‬
‭ he‭‬‭‬relationship‭‬‭‬that‭‬‭‬exists‭‬‭‬between‭‬‭‬revenues‭‬‭‬and‬
T
‭expenses‭‬‭‬in‭‬‭‬the‭‬‭‬immediate‭‬‭‬recognition‭‬‭‬principle‭‬‭‬is‬
‭considered‭‬‭‬indirect.‬
‭Non-Matching‭‬‭‬Principle.‬‭The‭‬‭‬last‭‬‭‬method‭‬‭‬of‬
‭recognizing‭‬‭‬expense‭‬‭‬in‭‬‭‬the‭‬‭‬statement‭‬‭‬of‭‬‭‬comprehensive‬
‭income‭‬‭‬mentioned‭‬‭‬in‭‬‭‬the‭‬‭‬Framework‭‬‭‬occurs‭‬‭‬in‭‬‭‬those‬
‭cases‭‬‭‬when‭‬‭‬a‭‬‭‬liability‭‬‭‬is‭‬‭‬incurred‭‬‭‬without‭‬‭‬the‬
‭recognition‭‬‭‬of‭‬‭‬an‭‬‭‬asset.‭‬‭‬Concrete‭‬‭‬example‭‬‭‬under‭‬‭‬this‬
‭expense‭‬‭‬recognition‭‬‭‬principle‭‬‭‬is‭‬‭‬when‭‬‭‬a‭‬‭‬liability‭‬‭‬under‬
‭product‭‬‭‬warranty‭‬‭‬arises.‬
‭MEASUREMENT‭‬‭‬OF‭‬‭‬ELEMENTS‬
‭5‬
‭ easurement‭‬‭‬is‭‬‭‬the‭‬‭‬process‭‬‭‬of‭‬‭‬determining‭‬‭‬the‬
M
‭monetary‭‬‭‬amount‭‬‭‬at‭‬‭‬which‭‬‭‬the‭‬‭‬elements‭‬‭‬of‭‬‭‬the‬
‭financial‭‬‭‬statements‭‬‭‬are‭‬‭‬to‭‬‭‬be‭‬‭‬recognized‭‬‭‬and‭‬‭‬carried‭‬‭‬in‬
‭the‭‬‭‬statement‭‬‭‬of‭‬‭‬financial‭‬‭‬position‭‬‭‬and‭‬‭‬statement‭‬‭‬of‬
‭comprehensive‭‬‭‬income.‭‬‭‬This‭‬‭‬involves‭‬‭‬the‭‬‭‬selection‭‬‭‬of‬
‭the‭‬‭‬basis‭‬‭‬of‭‬‭‬measurement.‭‬‭‬Several‭‬‭‬different‬
‭measurement‭‬‭‬bases‭‬‭‬are‭‬‭‬employed‭‬‭‬to‭‬‭‬different‭‬‭‬degrees‬
‭and‭‬‭‬in‭‬‭‬varying‭‬‭‬combinations‭‬‭‬in‭‬‭‬financial‭‬‭‬statements.‬
‭They‭‬‭‬include‭‬‭‬the‭‬‭‬following:‬
‭Historical‭‬‭‬cost.‬‭Assets‭‬‭‬are‭‬‭‬recorded‭‬‭‬at‭‬‭‬the‭‬‭‬amount‬‭of‬
‭cash‭‬‭‬or‭‬‭‬cash‭‬‭‬equivalents‭‬‭‬paid‭‬‭‬or‭‬‭‬the‭‬‭‬fair‭‬‭‬value‭‬‭‬of‬
‭consideration‭‬‭‬given‭‬‭‬to‭‬‭‬acquire‭‬‭‬them‭‬‭‬at‭‬‭‬the‭‬‭‬time‭‬‭‬of‭‬‭‬their‬
‭acquisition.‭‬‭‬Liabilities‭‬‭‬are‭‬‭‬recorded‭‬‭‬at‭‬‭‬the‭‬‭‬amount‭‬‭‬of‬
‭proceeds‭‬‭‬received‭‬‭‬in‭‬‭‬exchange‭‬‭‬for‭‬‭‬the‭‬‭‬obligation,‭‬‭‬or‭‬‭‬in‬
‭some‭‬‭‬circumstances,‭‬‭‬at‭‬‭‬the‭‬‭‬amounts‭‬‭‬of‭‬‭‬cash‭‬‭‬or‭‬‭‬cash‬
‭equivalents‭‬‭‬expected‭‬‭‬to‭‬‭‬be‭‬‭‬paid‭‬‭‬to‭‬‭‬satisfy‭‬‭‬the‭‬‭‬liability‬
‭in‭‬‭‬the‭‬‭‬normal‭‬‭‬course‭‬‭‬of‭‬‭‬business.‬
‭Current‭‬‭‬cost.‬‭Assets‭‬‭‬are‭‬‭‬carries‭‬‭‬at‭‬‭‬the‭‬‭‬amount‭‬‭‬of‬‭cash‬
‭or‭‬‭‬cash‭‬‭‬equivalents‭‬‭‬that‭‬‭‬would‭‬‭‬have‭‬‭‬to‭‬‭‬be‭‬‭‬paid‭‬‭‬if‭‬‭‬the‬
‭same‭‬‭‬or‭‬‭‬an‭‬‭‬equivalent‭‬‭‬asset‭‬‭‬was‭‬‭‬acquired‭‬‭‬currently.‬
‭Liabilities‭‬‭‬are‭‬‭‬carried‭‬‭‬at‭‬‭‬undiscounted‭‬‭‬amount‭‬‭‬of‭‬‭‬cash‬
‭or‭‬‭‬cash‭‬‭‬equivalents‭‬‭‬that‭‬‭‬would‭‬‭‬be‭‬‭‬required‭‬‭‬to‭‬‭‬settle‭‬‭‬the‬
‭obligation‭‬‭‬currently.‬
‭Realizable‭‬‭‬value.‬‭Assets‭‬‭‬are‭‬‭‬carried‭‬‭‬at‭‬‭‬the‭‬‭‬amount‬‭of‬
‭cash‭‬‭‬or‭‬‭‬cash‭‬‭‬equivalents‭‬‭‬that‭‬‭‬could‭‬‭‬currently‭‬‭‬be‬
‭obtained‭‬‭‬by‭‬‭‬selling‭‬‭‬the‭‬‭‬assets‭‬‭‬in‭‬‭‬an‭‬‭‬orderly‭‬‭‬disposal.‬
‭Liabilities‭‬‭‬are‭‬‭‬carried‭‬‭‬at‭‬‭‬their‭‬‭‬settlement‭‬‭‬values;‭‬‭‬that‭‬‭‬is,‬
‭the‭‬‭‬undiscounted‭‬‭‬amounts‭‬‭‬of‭‬‭‬cash‭‬‭‬or‭‬‭‬cash‭‬‭‬equivalents‬
‭expected‭‬‭‬to‭‬‭‬be‭‬‭‬paid‭‬‭‬to‭‬‭‬satisfy‭‬‭‬the‭‬‭‬liabilities‭‬‭‬in‭‬‭‬the‬
‭normal‭‬‭‬course‭‬‭‬of‭‬‭‬business.‬
‭Present‭‬‭‬value.‬‭Assets‭‬‭‬are‭‬‭‬caried‭‬‭‬at‭‬‭‬present‭‬‭‬discounted‬
‭value‭‬‭‬of‭‬‭‬the‭‬‭‬future‭‬‭‬net‭‬‭‬cash‭‬‭‬flows‭‬‭‬that‭‬‭‬the‭‬‭‬item‭‬‭‬is‬
‭expected‭‬‭‬to‭‬‭‬generate‭‬‭‬in‭‬‭‬the‭‬‭‬normal‭‬‭‬course‭‬‭‬of‬
‭business.Liabilities‭‬‭‬are‭‬‭‬carried‭‬‭‬at‭‬‭‬the‭‬‭‬present‬
‭discounted‭‬‭‬value‭‬‭‬of‭‬‭‬the‭‬‭‬future‭‬‭‬net‭‬‭‬cash‭‬‭‬outflows‭‬‭‬that‬
‭are‭‬‭‬expected‭‬‭‬to‭‬‭‬be‭‬‭‬required‭‬‭‬to‭‬‭‬settle‭‬‭‬the‭‬‭‬liabilities‭‬‭‬in‭‬‭‬the‬
‭normal‭‬‭‬course‭‬‭‬of‭‬‭‬business.‬
‭CONCEPT‭‬‭‬OF‭‬‭‬CAPITAL‬
‭ nother‭‬‭‬area‭‬‭‬covered‭‬‭‬by‭‬‭‬the‭‬‭‬Framework‭‬‭‬is‭‬‭‬the‭‬‭‬concept‬
A
‭of‭‬‭‬capital.‭‬‭‬This‭‬‭‬concept‭‬‭‬relates‭‬‭‬to‭‬‭‬the‭‬‭‬measurement‭‬‭‬of‬
‭the‭‬‭‬items‭‬‭‬that‭‬‭‬affect‭‬‭‬the‭‬‭‬capital‭‬‭‬of‭‬‭‬the‭‬‭‬owners.‬
‭ rofit‭‬‭‬is‭‬‭‬frequently‭‬‭‬used‭‬‭‬as‭‬‭‬a‭‬‭‬measure‭‬‭‬of‭‬‭‬performance‬
P
‭or‭‬‭‬as‭‬‭‬the‭‬‭‬basis‭‬‭‬for‭‬‭‬other‭‬‭‬measures,‭‬‭‬such‭‬‭‬as‭‬‭‬return‭‬‭‬on‬
‭investment‭‬‭‬or‭‬‭‬earning‭‬‭‬per‭‬‭‬share.‭‬‭‬The‭‬‭‬elements‭‬‭‬directly‬
‭related‭‬‭‬to‭‬‭‬the‭‬‭‬measurements‭‬‭‬of‭‬‭‬profit‭‬‭‬are‭‬‭‬income‭‬‭‬and‬
‭expenses.‬
‭The‭‬‭‬recognition‭‬‭‬and‭‬‭‬measurement‭‬‭‬of‭‬‭‬income,‭‬‭‬expenses‬
‭and‭‬‭‬profit‭‬‭‬depends‭‬‭‬in‭‬‭‬part‭‬‭‬on‭‬‭‬the‭‬‭‬concept‭‬‭‬of‭‬‭‬capital‭‬‭‬and‬
‭capital‭‬‭‬maintenance‭‬‭‬used‭‬‭‬by‭‬‭‬the‭‬‭‬entity‭‬‭‬in‭‬‭‬preparing‭‬‭‬its‬
‭financial‭‬‭‬statements.‬
‭In‭‬‭‬measuring‭‬‭‬the‭‬‭‬financial‭‬‭‬performance,‭‬‭‬an‭‬‭‬entity‭‬‭‬may‬
‭use‭‬‭‬the‭‬‭‬following‭‬‭‬approaches:‬
‭1.‬‭Transaction‭‬‭‬approach‬‭computes‭‬‭‬profit‭‬‭‬by‭‬‭‬deducting‬
‭expenses‭‬‭‬incurred‭‬‭‬from‭‬‭‬income‭‬‭‬realized.‭‬‭‬If‭‬‭‬the‭‬‭‬income‬
‭is‭‬‭‬more‭‬‭‬than‭‬‭‬expenses,‭‬‭‬the‭‬‭‬difference‭‬‭‬is‭‬‭‬known‭‬‭‬as‬
‭profit;‭‬‭‬otherwise,‭‬‭‬the‭‬‭‬difference‭‬‭‬is‭‬‭‬termed‭‬‭‬net‭‬‭‬loss.‬
‭In‭‬‭‬formula,‭‬‭‬the‭‬‭‬profit‭‬‭‬or‭‬‭‬loss‭‬‭‬is‭‬‭‬computed‭‬‭‬as‭‬‭‬follows:‬
2‭ .‬‭Capital‭‬‭‬maintenance‭‬‭‬approach‬‭calculates‭‬‭‬profit‬‭by‬
‭determining‭‬‭‬the‭‬‭‬excess‭‬‭‬amount‭‬‭‬after‭‬‭‬maintaining‭‬‭‬the‬
‭value‭‬‭‬of‭‬‭‬the‭‬‭‬beginning‭‬‭‬capital.‭‬‭‬There‭‬‭‬are‭‬‭‬two‭‬‭‬variations‬
‭in‭‬‭‬the‭‬‭‬Framework‭‬‭‬to‭‬‭‬determine‭‬‭‬profit‭‬‭‬or‭‬‭‬loss‭‬‭‬using‭‬‭‬the‬
‭capital‭‬‭‬maintenance‭‬‭‬approach.‭‬‭‬These‭‬‭‬are‭‬‭‬the:‬
‭Financial‭‬‭‬Capital.‬‭Under‭‬‭‬this‭‬‭‬concept,‭‬‭‬a‭‬‭‬profit‭‬‭‬is‬
‭earned‭‬‭‬only‭‬‭‬if‭‬‭‬the‭‬‭‬financial‭‬‭‬amount‭‬‭‬of‭‬‭‬the‭‬‭‬net‭‬‭‬assets‭‬‭‬at‬
‭the‭‬‭‬end‭‬‭‬of‭‬‭‬the‭‬‭‬future‭‬‭‬exceeds‭‬‭‬the‭‬‭‬financial‭‬‭‬amount‭‬‭‬of‬
‭net‭‬‭‬assets‭‬‭‬at‭‬‭‬the‭‬‭‬beginning‭‬‭‬of‭‬‭‬the‭‬‭‬period,‭‬‭‬after‬
‭excluding‭‬‭‬any‭‬‭‬distributions‭‬‭‬to,‭‬‭‬and‭‬‭‬contributions‭‬‭‬from,‬
‭owners‭‬‭‬during‭‬‭‬the‭‬‭‬period.‭‬‭‬However,‭‬‭‬if‭‬‭‬the‭‬‭‬amount‭‬‭‬of‬
‭net‭‬‭‬assets‭‬‭‬at‭‬‭‬the‭‬‭‬end‭‬‭‬of‭‬‭‬the‭‬‭‬period‭‬‭‬is‭‬‭‬less‭‬‭‬that‭‬‭‬net‭‬‭‬assets‬
‭at‭‬‭‬the‭‬‭‬beginning‭‬‭‬of‭‬‭‬the‭‬‭‬period,‭‬‭‬there‭‬‭‬arises‭‬‭‬net‭‬‭‬loss.‭‬‭‬He‬
‭term‭‬‭‬“net‭‬‭‬assets”‭‬‭‬refers‭‬‭‬to‭‬‭‬the‭‬‭‬excess‭‬‭‬of‭‬‭‬the‭‬‭‬total‭‬‭‬assets‬
‭over‭‬‭‬the‭‬‭‬total‭‬‭‬liabilities‭‬‭‬of‭‬‭‬the‭‬‭‬business.‬
‭The‭‬‭‬profit‭‬‭‬or‭‬‭‬loss‭‬‭‬is‭‬‭‬computed‭‬‭‬as‭‬‭‬follows:‬
‭ inancial‭‬‭‬capital‭‬‭‬maintenance‭‬‭‬can‭‬‭‬be‭‬‭‬measured‭‬‭‬in‬
F
‭either‭‬‭‬nominal‭‬‭‬monetary‭‬‭‬units‭‬‭‬or‭‬‭‬units‭‬‭‬of‭‬‭‬constant‬
‭purchasing‭‬‭‬power.‭‬‭‬This‭‬‭‬is‭‬‭‬adopted‭‬‭‬my‭‬‭‬most‭‬‭‬entities‭‬‭‬in‬
‭preparing‭‬‭‬their‭‬‭‬financial‭‬‭‬statements.‬
‭Physical‭‬‭‬Capital.‬‭Under‭‬‭‬this‭‬‭‬concept,‭‬‭‬profit‭‬‭‬is‭‬‭‬earned‬
‭only‭‬‭‬if‭‬‭‬the‭‬‭‬physical‭‬‭‬productive‭‬‭‬capacity‭‬‭‬or‭‬‭‬operating‬
‭capacity‭‬‭‬of‭‬‭‬the‭‬‭‬entity‭‬‭‬at‭‬‭‬the‭‬‭‬end‭‬‭‬of‭‬‭‬the‭‬‭‬period‭‬‭‬exceeds‬
‭the‭‬‭‬physical‭‬‭‬productive‭‬‭‬capacity‭‬‭‬at‭‬‭‬the‭‬‭‬beginning‭‬‭‬of‭‬‭‬the‬
‭period‭‬‭‬after‭‬‭‬excluding‭‬‭‬any‭‬‭‬distributions‭‬‭‬to‭‬‭‬and‬
‭contributions‭‬‭‬from,‭‬‭‬owners‭‬‭‬during‭‬‭‬the‭‬‭‬period.‭‬‭‬The‬
‭concept‭‬‭‬of‭‬‭‬physical‭‬‭‬capitals‭‬‭‬defines‭‬‭‬capital‭‬‭‬in‭‬‭‬terms‭‬‭‬of‬
‭the‭‬‭‬physical‭‬‭‬productive‭‬‭‬capacity‭‬‭‬and‭‬‭‬profit‭‬‭‬represents‬
‭the‭‬‭‬increase‭‬‭‬in‭‬‭‬that‭‬‭‬capital‭‬‭‬over‭‬‭‬the‭‬‭‬period.‭‬‭‬An‭‬‭‬example‬
‭of‭‬‭‬productive‭‬‭‬capacity‭‬‭‬of‭‬‭‬an‭‬‭‬entity‭‬‭‬may‭‬‭‬be‭‬‭‬units‭‬‭‬of‬
‭output‭‬‭‬per‭‬‭‬day.‭‬‭‬The‭‬‭‬physical‭‬‭‬capital‭‬‭‬concept‭‬‭‬requires‬
‭the‭‬‭‬adoption‭‬‭‬of‭‬‭‬the‭‬‭‬current‭‬‭‬cost‭‬‭‬as‭‬‭‬the‭‬‭‬basis‭‬‭‬of‬
‭measurement.‬
‭Selection‭‬‭‬of‭‬‭‬Methods‬
‭ he‭‬‭‬selection‭‬‭‬of‭‬‭‬the‭‬‭‬appropriate‭‬‭‬concept‭‬‭‬of‭‬‭‬capital‭‬‭‬by‬
T
‭an‭‬‭‬entity‭‬‭‬should‭‬‭‬be‭‬‭‬based‭‬‭‬on‭‬‭‬the‭‬‭‬needs‭‬‭‬of‭‬‭‬the‭‬‭‬users‭‬‭‬of‬
‭its‭‬‭‬financial‭‬‭‬statements.‬
‭A‭‬‭‬financial‭‬‭‬concept‭‬‭‬od‭‬‭‬capital‭‬‭‬should‭‬‭‬be‭‬‭‬adopted‭‬‭‬if‭‬‭‬the‬
‭users‭‬‭‬of‭‬‭‬financial‭‬‭‬statements‭‬‭‬are‭‬‭‬primarily‭‬‭‬concerned‬
‭with‭‬‭‬the‭‬‭‬maintenance‭‬‭‬of‭‬‭‬nominal‭‬‭‬invested‭‬‭‬capital‭‬‭‬or‬
‭the‭‬‭‬purchasing‭‬‭‬power‭‬‭‬of‭‬‭‬invested‭‬‭‬capital.‭‬‭‬However,‭‬‭‬if‬
‭the‭‬‭‬main‭‬‭‬concern‭‬‭‬of‭‬‭‬the‭‬‭‬users‭‬‭‬is‭‬‭‬with‭‬‭‬the‭‬‭‬operating‬
‭capacity‭‬‭‬of‭‬‭‬the‭‬‭‬entity,‭‬‭‬a‭‬‭‬physical‭‬‭‬concept‭‬‭‬of‭‬‭‬capital‬
‭should‭‬‭‬be‭‬‭‬used.‭‬‭‬The‭‬‭‬concept‭‬‭‬chosen‭‬‭‬indicates‭‬‭‬the‭‬‭‬goal‬
‭to‭‬‭‬be‭‬‭‬attained‭‬‭‬in‭‬‭‬determining‭‬‭‬profits,‭‬‭‬even‭‬‭‬though‭‬‭‬there‬
‭may‭‬‭‬be‭‬‭‬some‭‬‭‬measurement‭‬‭‬difficulties‭‬‭‬in‭‬‭‬making‭‬‭‬the‬
‭6‬
c‭ oncept‭‬‭‬operational.‭‬‭‬The‭‬‭‬selection‭‬‭‬of‭‬‭‬the‭‬‭‬measurement‬
‭bases‭‬‭‬and‭‬‭‬concept‭‬‭‬pf‭‬‭‬capital‭‬‭‬maintenance‭‬‭‬will‬
‭determine‭‬‭‬the‭‬‭‬accounting‭‬‭‬model‭‬‭‬used‭‬‭‬in‭‬‭‬the‬
‭preparation‭‬‭‬of‭‬‭‬the‭‬‭‬financial‭‬‭‬statement.‭‬‭‬Different‬
‭accounting‭‬‭‬models‭‬‭‬exhibit‭‬‭‬different‭‬‭‬degrees‭‬‭‬of‬
‭relevance‭‬‭‬and‭‬‭‬reliability.‭‬‭‬However,‭‬‭‬as‭‬‭‬of‭‬‭‬this‭‬‭‬writing,‬
‭the‭‬‭‬two‭‬‭‬concepts‭‬‭‬of‭‬‭‬capital‭‬‭‬maintenance‭‬‭‬mentioned‭‬‭‬in‬
‭the‭‬‭‬Framework‭‬‭‬in‭‬‭‬determining‭‬‭‬the‭‬‭‬financial‬
‭performance‭‬‭‬of‭‬‭‬the‭‬‭‬entity‭‬‭‬are‭‬‭‬not‭‬‭‬commonly‭‬‭‬applied.‬
‭At‭‬‭‬present,‭‬‭‬the‭‬‭‬most‭‬‭‬common‭‬‭‬and‭‬‭‬popular‭‬‭‬method‬
‭adopted‭‬‭‬in‭‬‭‬determining‭‬‭‬the‭‬‭‬financial‭‬‭‬performance‭‬‭‬of‬
‭the‭‬‭‬entities‭‬‭‬is‭‬‭‬the‭‬‭‬transaction‭‬‭‬approach.‬
‭CHAPTER‭‬‭‬2‬
‭ RESENTATION‭‬‭‬OF‭‬‭‬FINANCIALS‬
P
‭STATEMENTS‬
‭Philippine‭‬‭‬Accounting‭‬‭‬Standard‭‬‭‬(PAS)‭‬‭‬1,‭‬‭‬Presentation‬
‭of‭‬‭‬Financial‭‬‭‬Statements,‭‬‭‬outlines‭‬‭‬the‭‬‭‬provisions‭‬‭‬and‬
‭requirements‭‬‭‬in‭‬‭‬preparing‭‬‭‬and‭‬‭‬presenting‭‬‭‬the‭‬‭‬financial‬
‭statements.‬
‭ AS‭‬‭‬1‭‬‭‬(referred‭‬‭‬to‭‬‭‬as‭‬‭‬‘Standard’‭‬‭‬in‭‬‭‬this‭‬‭‬Chapter)‭‬‭‬is‬
P
‭effective‭‬‭‬in‭‬‭‬the‭‬‭‬Philippines‭‬‭‬for‭‬‭‬annual‭‬‭‬periods‬
‭beginning‭‬‭‬on‭‬‭‬after‭‬‭‬January‭‬‭‬1,‭‬‭‬2005.‭‬‭‬It‭‬‭‬shall‭‬‭‬be‭‬‭‬applied‬
‭to‭‬‭‬all‭‬‭‬general‭‬‭‬purpose‭‬‭‬financial‭‬‭‬statements‭‬‭‬prepared‬
‭and‭‬‭‬presented‭‬‭‬in‭‬‭‬accordance‭‬‭‬with‭‬‭‬Philippine‭‬‭‬Financial‬
‭Reporting‭‬‭‬Standards.‬
t‭hose‭‬‭‬intended‭‬‭‬to‭‬‭‬meet‭‬‭‬the‭‬‭‬needs‭‬‭‬of‭‬‭‬users‭‬‭‬who‭‬‭‬are‭‬‭‬not‬
‭in‭‬‭‬a‭‬‭‬position‭‬‭‬to‭‬‭‬demand‭‬‭‬reports‭‬‭‬tailored‭‬‭‬to‭‬‭‬meet‭‬‭‬their‬
‭particular‭‬‭‬information‭‬‭‬needs.‬
‭ he‭‬‭‬scope‭‬‭‬of‭‬‭‬PAS‭‬‭‬1‭‬‭‬has‭‬‭‬the‭‬‭‬following‭‬‭‬features:‬
T
‭a.‭‬‭‬It‭‬‭‬does‭‬‭‬not‭‬‭‬apply‭‬‭‬to‭‬‭‬special-purpose‭‬‭‬financial‬
‭reports.‬
‭b.‭‬‭‬It‭‬‭‬does‭‬‭‬not‭‬‭‬apply‭‬‭‬to‭‬‭‬the‭‬‭‬structure‭‬‭‬and‭‬‭‬content‭‬‭‬of‬
‭condensed‭‬‭‬interim‭‬‭‬financial‭‬‭‬statements‭‬‭‬prepared‭‬‭‬in‬
‭accordance‭‬‭‬with‭‬‭‬PAS‭‬‭‬34,‭‬‭‬Interim‭‬‭‬Financial‭‬‭‬Reporting.‬
c‭ .‭‬‭‬It‭‬‭‬does‭‬‭‬not‭‬‭‬deal‭‬‭‬with‭‬‭‬recognition,‭‬‭‬measurement‭‬‭‬and‬
‭disclosure‭‬‭‬of‭‬‭‬specific‭‬‭‬transactions‭‬‭‬and‭‬‭‬other‭‬‭‬events.‬
‭Those‭‬‭‬concerns‭‬‭‬are‭‬‭‬dealt‭‬‭‬with‭‬‭‬in‭‬‭‬other‭‬‭‬Standards‭‬‭‬and‬
‭Interpretations.‬
d‭ .‭‬‭‬It‭‬‭‬users‭‬‭‬terminology‭‬‭‬that‭‬‭‬is‭‬‭‬suitable‭‬‭‬for‬
‭profit-oriented‭‬‭‬entities,‭‬‭‬including‭‬‭‬public‭‬‭‬sector‬
‭business‭‬‭‬entities.‬
e‭ .‭‬‭‬In‭‬‭‬the‭‬‭‬event‭‬‭‬entities‭‬‭‬with‭‬‭‬not-for-profit‭‬‭‬activities‭‬‭‬in‬
‭the‭‬‭‬private‭‬‭‬sector,‭‬‭‬public‭‬‭‬sector‭‬‭‬or‭‬‭‬government‭‬‭‬seek‭‬‭‬to‬
‭apply‭‬‭‬PAS‭‬‭‬1,‭‬‭‬there‭‬‭‬may‭‬‭‬need‭‬‭‬to‭‬‭‬amend‭‬‭‬the‭‬‭‬descriptions‬
‭used‭‬‭‬for‭‬‭‬particular‭‬‭‬line‭‬‭‬items‭‬‭‬in‭‬‭‬the‭‬‭‬financial‬
‭statements‭‬‭‬for‭‬‭‬the‭‬‭‬financial‭‬‭‬statement‭‬‭‬themselves.‬
‭Informations‭‬‭‬provided‭‬‭‬by‭‬‭‬financial‭‬‭‬statements:‬
‭1.‭‬‭‬Assets‬
‭ he‭‬‭‬objective‭‬‭‬of‭‬‭‬Philippine‭‬‭‬Accounting‭‬‭‬Standard‬
T
‭PAS‭‬‭‬1‭‬‭‬are:‬
‭1.‭‬‭‬To‭‬‭‬prescribe‭‬‭‬the‭‬‭‬basis‭‬‭‬for‭‬‭‬presentation‭‬‭‬of‬
‭general-purpose‭‬‭‬financial‭‬‭‬statement;‬
‭2.‭‬‭‬To‭‬‭‬ensure‭‬‭‬comparability‭‬‭‬both‭‬‭‬with‭‬‭‬the‭‬‭‬entity’s‬
‭financial‭‬‭‬statements‭‬‭‬of‭‬‭‬previous‭‬‭‬periods‭‬‭‬and‭‬‭‬with‭‬‭‬the‬
‭financial‭‬‭‬statements‭‬‭‬of‭‬‭‬other‭‬‭‬entities;‭‬‭‬and‬
‭2.‭‬‭‬Liabilities‬
‭ .‭‬‭‬To‭‬‭‬set‭‬‭‬our‭‬‭‬overall‭‬‭‬requirements‭‬‭‬for‭‬‭‬the‭‬‭‬presentation‬
3
‭of‭‬‭‬financial‭‬‭‬statements,‭‬‭‬guidelines‭‬‭‬for‭‬‭‬their‭‬‭‬structure‬
‭and‭‬‭‬minimum‭‬‭‬requirements‭‬‭‬for‭‬‭‬their‭‬‭‬content.‬
‭6.‭‬‭‬Cash‭‬‭‬Flows‬
✔
✔
✔
‭ ‬ ‭Proper‭‬‭‬Presentation‬
‭ ‬C
‭ omparability‬
‭ ‬ ‭Structure‭‬‭‬&‭‬‭‬Minimum‭‬‭‬Requirements‬
‭ he‭‬‭‬proper‭‬‭‬application‭‬‭‬of‭‬‭‬the‭‬‭‬minimum‭‬‭‬requirements‬
T
‭of‭‬‭‬PAS‭‬‭‬1‭‬‭‬will‭‬‭‬result‭‬‭‬in‭‬‭‬proper‭‬‭‬presentation‭‬‭‬of‭‬‭‬financial‬
‭statements‭‬‭‬and‭‬‭‬comparability‭‬‭‬of‭‬‭‬information‭‬‭‬within‭‬‭‬the‬
‭entity‭‬‭‬and‭‬‭‬other‭‬‭‬entities.‬
‭SCOPE‭‬‭‬OF‭‬‭‬PAS‭‬‭‬1‬
‭The‭‬‭‬standard‭‬‭‬shall‭‬‭‬be‭‬‭‬applied‭‬‭‬by:‬
‭ .‭‬‭‬Entities‭‬‭‬that‭‬‭‬prepare‭‬‭‬and‭‬‭‬present‭‬‭‬general‭‬‭‬purpose‬
1
‭financial‭‬‭‬in‭‬‭‬accordance‭‬‭‬with‭‬‭‬International‭‬‭‬Financial‬
‭Reporting‭‬‭‬Standards;‭‬‭‬and‬
‭ .‭‬‭‬Entities‭‬‭‬whether‭‬‭‬or‭‬‭‬not‭‬‭‬they‭‬‭‬need‭‬‭‬to‭‬‭‬prepare‬
2
‭consolidated‭‬‭‬financial‭‬‭‬statements‭‬‭‬or‭‬‭‬separate‭‬‭‬financial‬
‭statements.‭‬‭‬General‭‬‭‬purpose‭‬‭‬financial‭‬‭‬statements‭‬‭‬are‬
‭3.‭‬‭‬Equity‬
‭4.‭‬‭‬Income‭‬‭‬and‭‬‭‬Expenses‬
‭5.‭‬‭‬Changes‭‬‭‬in‭‬‭‬Equity‬
‭ URPOSE‭‬‭‬OF‭‬‭‬FINANCIAL‭‬‭‬STATEMENTS‬
P
‭Financial‭‬‭‬statements‭‬‭‬are‭‬‭‬structured‭‬‭‬representation‭‬‭‬and‬
‭cash‭‬‭‬flows‭‬‭‬of‭‬‭‬an‭‬‭‬entity.‭‬‭‬It‭‬‭‬also‭‬‭‬includes‭‬‭‬the‭‬‭‬notes‭‬‭‬which‬
‭contain‭‬‭‬additional‭‬‭‬information‭‬‭‬like‭‬‭‬definition‭‬‭‬of‭‬‭‬the‬
‭item,‭‬‭‬measurement‭‬‭‬or‭‬‭‬valuation‭‬‭‬procedures‭‬‭‬and‬
‭disclosures‭‬‭‬requirements.‬
‭The‭‬‭‬basic‭‬‭‬objective‭‬‭‬of‭‬‭‬general‭‬‭‬purpose‭‬‭‬financial‬
‭statements‭‬‭‬communication,‭‬‭‬that‭‬‭‬is,‭‬‭‬to‭‬‭‬provide‬
‭information‭‬‭‬about‭‬‭‬the‭‬‭‬following:‬
‭1.‭‬‭‬Financial‭‬‭‬position‬
‭2.‭‬‭‬Financial‭‬‭‬performances‬
‭3.‭‬‭‬Cash‭‬‭‬flows‬
4‭ .‭‬‭‬Management‭‬‭‬stewardship‭‬‭‬of‭‬‭‬resources.‬
‭The‭‬‭‬information‭‬‭‬provided‭‬‭‬in‭‬‭‬the‭‬‭‬financial‭‬‭‬statements,‬
‭long‭‬‭‬with‭‬‭‬other‭‬‭‬information‭‬‭‬in‭‬‭‬the‭‬‭‬notes,‭‬‭‬assets‭‬‭‬user‭‬‭‬in‬
‭predicting‭‬‭‬the‭‬‭‬entity’s‭‬‭‬future‭‬‭‬cash‭‬‭‬flows‭‬‭‬and,‭‬‭‬in‬
‭particular,‭‬‭‬their‭‬‭‬timing‭‬‭‬and‭‬‭‬certainly‬
‭7‬
‭ he‭‬‭‬process‭‬‭‬of‭‬‭‬predicting‭‬‭‬the‭‬‭‬earning‭‬‭‬potentials‭‬‭‬and‬
T
‭financial‭‬‭‬capabilities‭‬‭‬of‭‬‭‬an‭‬‭‬entity‭‬‭‬is‭‬‭‬made‭‬‭‬through‭‬‭‬the‬
‭analysis‭‬‭‬of‭‬‭‬the‭‬‭‬different‭‬‭‬information‭‬‭‬contained‭‬‭‬on‭‬‭‬the‬
‭financial‭‬‭‬statements.‬
‭ he‭‬‭‬following‭‬‭‬reports‭‬‭‬and‭‬‭‬statements‭‬‭‬are‭‬‭‬outside‭‬‭‬the‬
T
‭meaning‭‬‭‬of‭‬‭‬the‭‬‭‬general‭‬‭‬purpose‭‬‭‬financial‭‬‭‬statements‬
‭described‭‬‭‬above‭‬‭‬and‭‬‭‬therefore‭‬‭‬outside‭‬‭‬the‭‬‭‬scope‭‬‭‬of‬
‭Philippines‭‬‭‬Financial‭‬‭‬Reporting‭‬‭‬Standards:‬
‭1.‭‬‭‬A‭‬‭‬financial‭‬‭‬review‭‬‭‬by‭‬‭‬management‭‬‭‬that‭‬‭‬describes‬
‭and‭‬‭‬explains‭‬‭‬the‭‬‭‬main‭‬‭‬features‭‬‭‬of‭‬‭‬the‭‬‭‬entity’s‬
‭performance,‭‬‭‬financial‭‬‭‬position‭‬‭‬and‭‬‭‬the‭‬‭‬principal‬
‭uncertainties‭‬‭‬it‭‬‭‬faces;‬
‭ .‭‬‭‬Environmental‭‬‭‬reports‭‬‭‬and‭‬‭‬value‭‬‭‬added‭‬‭‬statements,‬
2
‭particularly‭‬‭‬in‭‬‭‬industries‭‬‭‬in‭‬‭‬which‭‬‭‬environmental‬
‭factors‭‬‭‬are‭‬‭‬significant;‭‬‭‬and‬
‭ .‭‬‭‬Reports‭‬‭‬and‭‬‭‬statements‭‬‭‬when‭‬‭‬employees‭‬‭‬are‬
3
‭regarded‭‬‭‬as‭‬‭‬an‭‬‭‬important‭‬‭‬user‭‬‭‬group.‬
‭A‭‬‭‬report,‭‬‭‬outside‭‬‭‬the‭‬‭‬meaning‭‬‭‬of‭‬‭‬the‭‬‭‬general‭‬‭‬purpose‬
‭financial‭‬‭‬statements,‭‬‭‬may‭‬‭‬include‭‬‭‬a‭‬‭‬review‭‬‭‬of‭‬‭‬the‬
‭following:‬
‭a.‭‬‭‬Main‭‬‭‬factors‭‬‭‬and‭‬‭‬influences‭‬‭‬determining‭‬‭‬financial‬
‭performance,‭‬‭‬including‭‬‭‬changes‭‬‭‬in‭‬‭‬the‭‬‭‬environment‭‬‭‬in‬
‭which‭‬‭‬the‭‬‭‬entity‭‬‭‬operates;‬
‭ .‭‬‭‬Entity’s‭‬‭‬policy‭‬‭‬for‭‬‭‬investment‭‬‭‬to‭‬‭‬maintain‭‬‭‬and‬
b
‭enhance‭‬‭‬financial‭‬‭‬performance,‭‬‭‬including‭‬‭‬its‭‬‭‬dividend‬
‭policy‬
‭c.‭‬‭‬Entity’s‭‬‭‬sources‭‬‭‬of‭‬‭‬funding‭‬‭‬and‭‬‭‬its‭‬‭‬targeted‭‬‭‬ratio‭‬‭‬of‬
‭liabilities‭‬‭‬to‭‬‭‬equity;‭‬‭‬and‬
‭d.‭‬‭‬Entity’s‭‬‭‬resources‭‬‭‬not‭‬‭‬recognized‭‬‭‬in‭‬‭‬the‭‬‭‬statement‭‬‭‬of‬
‭financial‭‬‭‬position‭‬‭‬in‭‬‭‬accordance‭‬‭‬with‭‬‭‬PFRS.‬
‭FAIR‭‬‭‬PRESENTATION‬
‭ inancial‭‬‭‬statements‭‬‭‬shall‭‬‭‬present‭‬‭‬fairly‭‬‭‬the‭‬‭‬financial‬
F
‭position,‭‬‭‬financial‭‬‭‬performance‭‬‭‬and‭‬‭‬flow‭‬‭‬of‭‬‭‬an‭‬‭‬entity.‬
‭The‭‬‭‬standard‭‬‭‬does‭‬‭‬not‭‬‭‬require‭‬‭‬true‭‬‭‬financial‭‬‭‬statements.‬
‭Financial‭‬‭‬statements‭‬‭‬are‭‬‭‬fairly‭‬‭‬presented‭‬‭‬when‭‬‭‬they‬
‭include‭‬‭‬all‭‬‭‬necessary‭‬‭‬information‭‬‭‬that‭‬‭‬will‭‬‭‬influence‬
‭the‭‬‭‬decision‭‬‭‬of‭‬‭‬the‭‬‭‬economic‭‬‭‬issues.‬
‭Basic‭‬‭‬Features‭‬‭‬of‭‬‭‬Fair‭‬‭‬Presentation‬
‭The‭‬‭‬following‭‬‭‬are‭‬‭‬the‭‬‭‬salient‭‬‭‬features‭‬‭‬of‭‬‭‬fair‬
‭presentation‭‬‭‬requirements:‬
‭ .‭‬‭‬Fair‭‬‭‬presentation‭‬‭‬requires‭‬‭‬the‭‬‭‬faithful‭‬‭‬representation‬
1
‭of‭‬‭‬the‭‬‭‬effects‭‬‭‬of‭‬‭‬transactions,‭‬‭‬other‭‬‭‬events‭‬‭‬and‬
‭conditions‭‬‭‬in‭‬‭‬accordance‭‬‭‬with‭‬‭‬the‭‬‭‬definition‭‬‭‬and‬
‭recognition‭‬‭‬criteria‭‬‭‬for‭‬‭‬assets,‭‬‭‬liabilities,‭‬‭‬income‭‬‭‬and‬
‭expenses.‬
‭2.‭‬‭‬An‭‬‭‬application‭‬‭‬of‭‬‭‬the‭‬‭‬Philippine‭‬‭‬Financial‭‬‭‬Reporting‬
‭Standards,‭‬‭‬with‭‬‭‬additional‭‬‭‬disclosure‭‬‭‬when‭‬‭‬necessary,‬
‭is‭‬‭‬pressured‭‬‭‬to‭‬‭‬result‭‬‭‬in‭‬‭‬financial‭‬‭‬statements‭‬‭‬that‬
‭achieve‭‬‭‬a‭‬‭‬fair‭‬‭‬presentation.‬
‭ .‭‬‭‬An‭‬‭‬entity‭‬‭‬whose‭‬‭‬financial‭‬‭‬statements‭‬‭‬comply‭‬‭‬with‬
3
‭PFRSs‭‬‭‬shall‭‬‭‬make‭‬‭‬an‭‬‭‬explicit‭‬‭‬and‭‬‭‬unreserved‭‬‭‬statement‬
‭of‭‬‭‬such‭‬‭‬compliance‭‬‭‬in‭‬‭‬the‭‬‭‬notes.‬
4‭ .‭‬‭‬Financial‭‬‭‬statements‭‬‭‬shall‭‬‭‬not‭‬‭‬be‭‬‭‬described‭‬‭‬as‬
‭complying‭‬‭‬with‭‬‭‬PFRSs‭‬‭‬unless‭‬‭‬they‭‬‭‬comply‭‬‭‬with‭‬‭‬all‭‬‭‬the‬
‭requirements‭‬‭‬of‭‬‭‬PFRSs.‬
I‭ ndicators‭‬‭‬of‭‬‭‬Compliance‭‬‭‬with‭‬‭‬Fair‭‬‭‬Presentation‬
‭The‭‬‭‬following‭‬‭‬are‭‬‭‬indicators‭‬‭‬of‭‬‭‬compliance‭‬‭‬with‭‬‭‬fair‬
‭presentation‭‬‭‬requirements‭‬‭‬of‭‬‭‬financial‭‬‭‬statements:‭‬‭‬1.‬
‭An‭‬‭‬entity‭‬‭‬applies‭‬‭‬all‭‬‭‬applicable‭‬‭‬Philippine‭‬‭‬Financial‬
‭Reporting‭‬‭‬Standards.‬
2‭ .‭‬‭‬An‭‬‭‬entity‭‬‭‬selects‭‬‭‬and‭‬‭‬applies‭‬‭‬accounting‭‬‭‬policies‭‬‭‬in‬
‭accordance‭‬‭‬with‭‬‭‬PAS‭‬‭‬no.8,‭‬‭‬Accounting‭‬‭‬policies,‬
‭Changes‭‬‭‬in‭‬‭‬Accounting‭‬‭‬Estimates‭‬‭‬and‭‬‭‬errors.‬
‭3.‭‬‭‬An‭‬‭‬entity‭‬‭‬presents‭‬‭‬information,‭‬‭‬including‭‬‭‬accounting‬
‭policies,‭‬‭‬in‭‬‭‬a‭‬‭‬manner‭‬‭‬that‭‬‭‬provides‭‬‭‬relevant,‭‬‭‬reliable,‬
‭comparable‭‬‭‬and‭‬‭‬understandable‭‬‭‬information.‬
4‭ .‭‬‭‬An‭‬‭‬entity‭‬‭‬provides‭‬‭‬additional‭‬‭‬disclosures‭‬‭‬when‬
‭compliance‭‬‭‬with‭‬‭‬the‭‬‭‬specific‭‬‭‬requirements‭‬‭‬in‭‬‭‬PFRSs‭‬‭‬is‬
‭insufficient‭‬‭‬to‭‬‭‬enable‭‬‭‬users‭‬‭‬to‭‬‭‬understand‭‬‭‬the‭‬‭‬impact‭‬‭‬of‬
‭particular‭‬‭‬transactions,‭‬‭‬other‭‬‭‬events‭‬‭‬and‭‬‭‬conditions‭‬‭‬on‬
‭the‭‬‭‬entity’s‭‬‭‬financial‭‬‭‬position‭‬‭‬and‭‬‭‬financial‬
‭performances.‬
‭ EPARTURE‭‬‭‬FROM‭‬‭‬COMPLIANCE‭‬‭‬WITH‬
D
‭PFRSs‬
I‭ n‭‬‭‬the‭‬‭‬extremely‭‬‭‬rare‭‬‭‬circumstances‭‬‭‬in‭‬‭‬which‬
‭management‭‬‭‬concludes‭‬‭‬that‭‬‭‬compliance‭‬‭‬with‭‬‭‬a‬
‭requirement‭‬‭‬if‭‬‭‬PFRSs‭‬‭‬would‭‬‭‬be‭‬‭‬misleading‭‬‭‬that‭‬‭‬it‬
‭would‭‬‭‬conflict‭‬‭‬with‭‬‭‬the‭‬‭‬objective‭‬‭‬of‭‬‭‬financial‬
‭statements‭‬‭‬set‭‬‭‬out‭‬‭‬in‭‬‭‬the‭‬‭‬Framework,‭‬‭‬the‭‬‭‬entity‭‬‭‬shall‬
1‭ .‭‬‭‬Depart‭‬‭‬from‭‬‭‬that‭‬‭‬requirement‭‬‭‬if‭‬‭‬the‭‬‭‬relevant‬
‭management‭‬‭‬framework‭‬‭‬requires‭‬‭‬does‭‬‭‬not‭‬‭‬prohibit‬
‭such‭‬‭‬departure;‭‬‭‬or‬
‭2.‭‬‭‬Reduce‭‬‭‬misleading‭‬‭‬aspects‭‬‭‬of‭‬‭‬compliance‭‬‭‬if‭‬‭‬the‬
‭relevant‭‬‭‬regulatory‭‬‭‬framework‭‬‭‬prohibits‭‬‭‬departures.‬
‭Query:‭‬‭‬What‭‬‭‬indicates‭‬‭‬conflict‭‬‭‬between‭‬‭‬compliance‬
‭requirements‭‬‭‬of‭‬‭‬PFRS‭‬‭‬and‭‬‭‬the‭‬‭‬objective‭‬‭‬of‭‬‭‬financial‬
‭statements?‬
‭Answer:‭‬‭‬An‭‬‭‬item‭‬‭‬of‭‬‭‬information‭‬‭‬would‭‬‭‬conflict‭‬‭‬with‬
‭the‭‬‭‬objective‭‬‭‬of‭‬‭‬financial‭‬‭‬statements‭‬‭‬when‭‬‭‬it‭‬‭‬does‭‬‭‬not‬
‭represent‭‬‭‬faithfully‭‬‭‬the‭‬‭‬transactions,‭‬‭‬other‭‬‭‬events‭‬‭‬and‬
‭conditions‭‬‭‬that‭‬‭‬it‭‬‭‬either‭‬‭‬purports‭‬‭‬to‭‬‭‬represent‭‬‭‬or‭‬‭‬could‬
‭reasonably‭‬‭‬be‭‬‭‬expected‭‬‭‬to‭‬‭‬represent‭‬‭‬and,‭‬‭‬consequently,‬
‭it‭‬‭‬would‭‬‭‬likely‭‬‭‬to‭‬‭‬influence‭‬‭‬economic‭‬‭‬decisions‭‬‭‬made‬
‭by‭‬‭‬users‭‬‭‬of‭‬‭‬financial‭‬‭‬statements.‬
‭Framework‭‬‭‬Does‭‬‭‬Not‭‬‭‬Prohibit‭‬‭‬Departure‬
‭ hen‭‬‭‬an‭‬‭‬entity‭‬‭‬departs‭‬‭‬from‭‬‭‬the‭‬‭‬requirements‭‬‭‬of‭‬‭‬the‬
W
‭Standards‭‬‭‬because‭‬‭‬compliance‭‬‭‬with‭‬‭‬the‭‬‭‬Standard‬
‭would‭‬‭‬be‭‬‭‬in‭‬‭‬conflict‭‬‭‬with‭‬‭‬the‭‬‭‬objective‭‬‭‬of‭‬‭‬financial‬
‭statements,‭‬‭‬and‭‬‭‬the‭‬‭‬regulatory‭‬‭‬framework‭‬‭‬does‭‬‭‬not‬
‭prohibit‭‬‭‬departure,‭‬‭‬the‭‬‭‬entity‭‬‭‬shall‭‬‭‬disclose:‬
‭a.‭‬‭‬That‭‬‭‬management‭‬‭‬has‭‬‭‬concluded‭‬‭‬that‭‬‭‬the‭‬‭‬financial‬
‭statements‭‬‭‬presents‭‬‭‬fairly‭‬‭‬the‭‬‭‬entity’s‭‬‭‬financial‬
‭8‬
‭ osition,‭‬‭‬financial‭‬‭‬performance‭‬‭‬and‭‬‭‬cash‭‬‭‬flows.‬
p
‭b.‭‬‭‬That‭‬‭‬it‭‬‭‬has‭‬‭‬complied‭‬‭‬with‭‬‭‬applicable‭‬‭‬Standards‭‬‭‬and‬
‭Interpretations,‭‬‭‬except‭‬‭‬that‭‬‭‬it‭‬‭‬has‭‬‭‬departed‭‬‭‬from‭‬‭‬a‬
‭particular‭‬‭‬requirement‭‬‭‬to‭‬‭‬achieve‭‬‭‬a‭‬‭‬fair‭‬‭‬presentation;‬
‭c.‭‬‭‬The‭‬‭‬title‭‬‭‬of‭‬‭‬the‭‬‭‬Standard‭‬‭‬or‭‬‭‬Interpretation‭‬‭‬from‬
‭which‭‬‭‬the‭‬‭‬entity‭‬‭‬has‭‬‭‬departed,‭‬‭‬the‭‬‭‬nature‭‬‭‬of‭‬‭‬the‬
‭departure,‭‬‭‬including‭‬‭‬the‭‬‭‬treatment‭‬‭‬that‭‬‭‬the‭‬‭‬Standard‭‬‭‬or‬
‭Interpretation‭‬‭‬would‭‬‭‬require,‭‬‭‬the‭‬‭‬reason‭‬‭‬why‭‬‭‬that‬
‭treatment‭‬‭‬would‭‬‭‬be‭‬‭‬misleading‭‬‭‬in‭‬‭‬the‭‬‭‬circumstances‬
‭that‭‬‭‬it‭‬‭‬would‭‬‭‬conflict‭‬‭‬with‭‬‭‬the‭‬‭‬objective‭‬‭‬of‭‬‭‬financial‬
‭statements‭‬‭‬set‭‬‭‬out‭‬‭‬in‭‬‭‬the‭‬‭‬Framework,‭‬‭‬and‭‬‭‬the‭‬‭‬treatment‬
‭adopted;‭‬‭‬and‬
‭d.‭‬‭‬For‭‬‭‬each‭‬‭‬period‭‬‭‬presented,‭‬‭‬the‭‬‭‬financial‭‬‭‬impact‭‬‭‬of‬
‭the‭‬‭‬departure‭‬‭‬on‭‬‭‬each‭‬‭‬item‭‬‭‬in‭‬‭‬the‭‬‭‬financial‭‬‭‬statements‬
‭that‭‬‭‬would‭‬‭‬have‭‬‭‬been‭‬‭‬reported‭‬‭‬in‭‬‭‬complying‭‬‭‬with‬
‭requirements.‬
‭Framework‭‬‭‬Prohibits‭‬‭‬Departure‬
‭ hen‭‬‭‬an‭‬‭‬entity‭‬‭‬departs‭‬‭‬from‭‬‭‬a‭‬‭‬requirement‭‬‭‬of‭‬‭‬a‬
W
‭Standard‭‬‭‬because‭‬‭‬compliance‭‬‭‬of‭‬‭‬the‭‬‭‬requirement‬
‭would‭‬‭‬result‭‬‭‬to‭‬‭‬conflict‭‬‭‬to‭‬‭‬the‭‬‭‬objective‭‬‭‬of‭‬‭‬financial‬
‭statements,‭‬‭‬and‭‬‭‬the‭‬‭‬regulatory‭‬‭‬framework‭‬‭‬prohibits‬
‭departure,‭‬‭‬the‭‬‭‬management‭‬‭‬shall‭‬‭‬reduce‭‬‭‬the‭‬‭‬perceive‬
‭misleading‭‬‭‬aspects‭‬‭‬of‭‬‭‬compliance‭‬‭‬by‭‬‭‬disclosing‬
‭a.‭‬‭‬The‭‬‭‬title‭‬‭‬of‭‬‭‬the‭‬‭‬Standard‭‬‭‬in‭‬‭‬questions,‭‬‭‬the‭‬‭‬nature‭‬‭‬of‬
‭the‭‬‭‬requirement,‭‬‭‬and‭‬‭‬the‭‬‭‬reason‭‬‭‬why‭‬‭‬management‭‬‭‬has‬
‭concluded‭‬‭‬that‭‬‭‬complying‭‬‭‬with‭‬‭‬the‭‬‭‬requirements‭‬‭‬is‭‬‭‬so‬
‭misleading‭‬‭‬that‭‬‭‬it‭‬‭‬conflicts‭‬‭‬with‭‬‭‬the‭‬‭‬objectives‭‬‭‬of‭‬‭‬the‬
‭financial‭‬‭‬statements;‭‬‭‬and‬
‭b.‭‬‭‬The‭‬‭‬adjustments‭‬‭‬to‭‬‭‬each‭‬‭‬item‭‬‭‬in‭‬‭‬the‭‬‭‬financial‬
‭statement‭‬‭‬that‭‬‭‬management‭‬‭‬has‭‬‭‬concluded‭‬‭‬would‭‬‭‬be‬
‭necessary‭‬‭‬to‭‬‭‬achieve‭‬‭‬fair‭‬‭‬presentation‬
‭MANAGEMENT‭‬‭‬CONSIDERATION‬
‭ hen‭‬‭‬assessing‭‬‭‬whether‭‬‭‬complying‭‬‭‬with‭‬‭‬a‭‬‭‬specific‬
W
‭requirement‭‬‭‬in‭‬‭‬a‭‬‭‬Standard‭‬‭‬or‭‬‭‬an‭‬‭‬Interpretation‭‬‭‬would‬
‭be‭‬‭‬so‭‬‭‬misleading‭‬‭‬that‭‬‭‬if‭‬‭‬would‭‬‭‬conflict‭‬‭‬with‭‬‭‬the‬
‭objective‭‬‭‬of‭‬‭‬financial‭‬‭‬statements‭‬‭‬set‭‬‭‬out‭‬‭‬in‭‬‭‬the‬
‭Framework,the‭‬‭‬management‭‬‭‬considers:‬
‭a.‭‬‭‬Why‭‬‭‬the‭‬‭‬objective‭‬‭‬of‭‬‭‬financial‭‬‭‬statement‭‬‭‬is‭‬‭‬not‬
‭achieved‭‬‭‬in‭‬‭‬the‭‬‭‬particular‭‬‭‬circumstances;‭‬‭‬and‬
‭b.‭‬‭‬How‭‬‭‬the‭‬‭‬entity’s‭‬‭‬circumstances‭‬‭‬differ‭‬‭‬from‭‬‭‬those‭‬‭‬of‬
‭other‭‬‭‬entities‭‬‭‬that‭‬‭‬comply‭‬‭‬with‭‬‭‬the‭‬‭‬requirements.‭‬‭‬If‬
‭other‭‬‭‬entities‭‬‭‬in‭‬‭‬similar‭‬‭‬circumstances‭‬‭‬comply‭‬‭‬with‭‬‭‬the‬
‭requirement,‭‬‭‬there‭‬‭‬is‭‬‭‬a‭‬‭‬rebuttable‭‬‭‬presumption‭‬‭‬that‭‬‭‬the‬
‭entity’s‭‬‭‬compliance‭‬‭‬with‭‬‭‬the‭‬‭‬requirements‭‬‭‬would‭‬‭‬not‬
‭be‭‬‭‬so‭‬‭‬misleading‭‬‭‬that‭‬‭‬it‭‬‭‬would‭‬‭‬conflict‭‬‭‬with‭‬‭‬the‬
‭objective‭‬‭‬of‭‬‭‬financial‭‬‭‬statements‭‬‭‬set‭‬‭‬out‭‬‭‬in‭‬‭‬the‬
‭Framework.‬
‭ he‭‬‭‬following‭‬‭‬guidelines‭‬‭‬should‭‬‭‬be‭‬‭‬observed‭‬‭‬in‭‬‭‬the‬
T
‭preparation‭‬‭‬and‭‬‭‬presentation‭‬‭‬of‭‬‭‬financial‭‬‭‬statements‬
‭relative‭‬‭‬to‭‬‭‬going‭‬‭‬concern‭‬‭‬assumption:‬
‭1.‭‬‭‬The‭‬‭‬management‭‬‭‬shall‭‬‭‬make‭‬‭‬an‭‬‭‬assessment‭‬‭‬of‭‬‭‬an‬
‭entity’s‭‬‭‬ability‭‬‭‬to‭‬‭‬continue‭‬‭‬as‭‬‭‬a‭‬‭‬going‭‬‭‬concern.‬
‭2.‭‬‭‬When‭‬‭‬management‭‬‭‬is‭‬‭‬aware,‭‬‭‬in‭‬‭‬making‭‬‭‬its‬
‭assessment,‭‬‭‬of‭‬‭‬material‭‬‭‬uncertainties‭‬‭‬related‭‬‭‬to‭‬‭‬events‬
‭or‭‬‭‬conditions‭‬‭‬that‭‬‭‬may‭‬‭‬cast‭‬‭‬significant‭‬‭‬doubt‭‬‭‬upon‭‬‭‬the‬
‭entity’s‭‬‭‬ability‭‬‭‬to‭‬‭‬continue‭‬‭‬as‭‬‭‬a‭‬‭‬going‭‬‭‬concern,‭‬‭‬those‬
‭uncertainties‭‬‭‬shall‭‬‭‬be‭‬‭‬disclosed‬
‭3.‭‬‭‬When‭‬‭‬financial‭‬‭‬statements‭‬‭‬are‭‬‭‬not‭‬‭‬prepared‭‬‭‬on‭‬‭‬a‬
‭going‭‬‭‬concern‭‬‭‬basis,‭‬‭‬the‭‬‭‬fact‭‬‭‬shall‭‬‭‬be‭‬‭‬disclosed,‬
‭together‭‬‭‬with‭‬‭‬the‭‬‭‬basis‭‬‭‬on‭‬‭‬which‭‬‭‬the‭‬‭‬financial‬
‭statements‭‬‭‬are‭‬‭‬prepared‭‬‭‬and‭‬‭‬the‭‬‭‬reason‭‬‭‬why‭‬‭‬the‭‬‭‬entity‬
‭is‭‬‭‬not‭‬‭‬regarded‭‬‭‬as‭‬‭‬a‭‬‭‬going‭‬‭‬concern.‬
‭4.‭‬‭‬The‭‬‭‬management‭‬‭‬shall‭‬‭‬take‭‬‭‬into‭‬‭‬account‭‬‭‬all‬
‭available‭‬‭‬information‭‬‭‬about‭‬‭‬the‭‬‭‬future‭‬‭‬in‭‬‭‬assessing‬
‭whether‭‬‭‬the‭‬‭‬going‭‬‭‬concern‭‬‭‬assumption‭‬‭‬is‭‬‭‬appropriate.‬
‭5.‭‬‭‬When‭‬‭‬an‭‬‭‬entity‭‬‭‬has‭‬‭‬a‭‬‭‬history‭‬‭‬of‭‬‭‬profitable‭‬‭‬operation‬
‭and‭‬‭‬ready‭‬‭‬access‭‬‭‬to‭‬‭‬financial‭‬‭‬resources‭‬‭‬in‭‬‭‬times‭‬‭‬of‬
‭need,‭‬‭‬a‭‬‭‬conclusion‭‬‭‬that‭‬‭‬the‭‬‭‬on‭‬‭‬going‭‬‭‬concern‭‬‭‬basis‭‬‭‬of‬
‭accounting‭‬‭‬is‭‬‭‬appropriate‭‬‭‬without‭‬‭‬detailed‭‬‭‬analysis.‬
6‭ .‭‬‭‬The‭‬‭‬management‭‬‭‬before‭‬‭‬it‭‬‭‬can‭‬‭‬satisfy‭‬‭‬itself‭‬‭‬that‭‬‭‬the‬
‭ongoing‭‬‭‬concern‭‬‭‬is‭‬‭‬appropriate,‭‬‭‬in‭‬‭‬other‭‬‭‬cases,‭‬‭‬should‬
‭consider‭‬‭‬the‭‬‭‬following‭‬‭‬wide‭‬‭‬range‭‬‭‬of‭‬‭‬factors‭‬‭‬relating‭‬‭‬to‬
‭a.‭‬‭‬Current‭‬‭‬and‭‬‭‬expected‭‬‭‬profitability:‬
‭b.‭‬‭‬Debt‭‬‭‬repayment‭‬‭‬schedules:‭‬‭‬and‬
‭c.‭‬‭‬Potential‭‬‭‬sources‭‬‭‬of‭‬‭‬replacement‭‬‭‬financing.‬
‭ CCRUAL‭‬‭‬BASIS‬
A
‭An‭‬‭‬entity‭‬‭‬shall‭‬‭‬prepare‭‬‭‬its‭‬‭‬financial‭‬‭‬statements,‭‬‭‬except‬
‭for‭‬‭‬cash‭‬‭‬flow‭‬‭‬information,‭‬‭‬using‭‬‭‬the‭‬‭‬accrual‭‬‭‬basis‬
‭accounting.‬
‭ nder‭‬‭‬this‭‬‭‬basis,‭‬‭‬the‭‬‭‬effects‭‬‭‬of‭‬‭‬transactions‭‬‭‬and‭‬‭‬other‬
U
‭events‭‬‭‬are‭‬‭‬recognized‭‬‭‬when‭‬‭‬they‭‬‭‬occur‭‬‭‬and‭‬‭‬not‭‬‭‬as‭‬‭‬cash‬
‭is‭‬‭‬received‭‬‭‬or‭‬‭‬paid‭‬‭‬and‭‬‭‬they‭‬‭‬are‭‬‭‬recorded‭‬‭‬in‭‬‭‬the‬
‭accounting‭‬‭‬records‭‬‭‬and‭‬‭‬reported‭‬‭‬in‭‬‭‬the‭‬‭‬financial‬
‭statements‭‬‭‬of‭‬‭‬the‭‬‭‬periods‭‬‭‬to‭‬‭‬which‭‬‭‬they‭‬‭‬relate.‬
‭ inancial‭‬‭‬statements‭‬‭‬prepared‭‬‭‬on‭‬‭‬the‭‬‭‬accrual‭‬‭‬basis‬
F
‭inform‭‬‭‬users‭‬‭‬not‭‬‭‬only‭‬‭‬of‭‬‭‬past‭‬‭‬transactions‭‬‭‬involving‭‬‭‬the‬
‭payment‭‬‭‬and‭‬‭‬receipt‭‬‭‬of‭‬‭‬cash‭‬‭‬but‭‬‭‬also‭‬‭‬of‭‬‭‬obligations‭‬‭‬to‬
‭pay‭‬‭‬cash‭‬‭‬in‭‬‭‬the‭‬‭‬future‭‬‭‬and‭‬‭‬of‭‬‭‬resources‭‬‭‬that‭‬‭‬represent‬
‭cash‭‬‭‬to‭‬‭‬be‭‬‭‬received‭‬‭‬in‭‬‭‬the‭‬‭‬future.‭‬‭‬Financial‭‬‭‬statements‬
‭prepared‭‬‭‬on‭‬‭‬the‭‬‭‬accrual‭‬‭‬basis‭‬‭‬provide‭‬‭‬the‭‬‭‬type‭‬‭‬of‬
‭information‭‬‭‬about‭‬‭‬past‭‬‭‬transactions‭‬‭‬and‭‬‭‬other‭‬‭‬events‬
‭that‭‬‭‬is‭‬‭‬most‭‬‭‬useful‭‬‭‬to‭‬‭‬users‭‬‭‬making‭‬‭‬economic‬
‭decisions.‬
‭GOING‭‬‭‬CONCERN‬
‭ inancial‭‬‭‬statements‭‬‭‬shall‭‬‭‬be‭‬‭‬prepared‭‬‭‬on‭‬‭‬a‭‬‭‬going‬
F
‭concern‭‬‭‬basis‭‬‭‬unless‭‬‭‬management‭‬‭‬either‭‬‭‬intends‭‬‭‬to‬
‭liquidate‭‬‭‬the‭‬‭‬entity‭‬‭‬or‭‬‭‬to‭‬‭‬cease‭‬‭‬trading,‭‬‭‬or‭‬‭‬has‭‬‭‬no‬
‭realistic‭‬‭‬alternative‭‬‭‬but‭‬‭‬to‭‬‭‬do‭‬‭‬so.‬
‭CONSISTENCY‭‬‭‬OF‭‬‭‬PRESENTATION‬
‭ he‭‬‭‬presentation‭‬‭‬and‭‬‭‬classification‭‬‭‬of‭‬‭‬items‭‬‭‬in‭‬‭‬the‬
T
‭financial‭‬‭‬statements‭‬‭‬should‭‬‭‬be‭‬‭‬retained‭‬‭‬from‭‬‭‬one‬
‭period‭‬‭‬to‭‬‭‬the‭‬‭‬next.‭‬‭‬An‭‬‭‬entity,‭‬‭‬however,‭‬‭‬is‭‬‭‬not‭‬‭‬precluded‬
‭9‬
f‭ rom‭‬‭‬changing‭‬‭‬the‭‬‭‬presentation‭‬‭‬and‭‬‭‬classification‭‬‭‬of‬
‭information‭‬‭‬on‭‬‭‬the‭‬‭‬face‭‬‭‬of‭‬‭‬the‭‬‭‬financial‭‬‭‬statements.‬
I‭ NSTANCES‭‬‭‬TO‭‬‭‬CHANGE‭‬‭‬STATEMENT‬
‭PRESENTATION‬
s‭ eparate‭‬‭‬presentation‭‬‭‬on‭‬‭‬the‭‬‭‬face‭‬‭‬of‭‬‭‬the‭‬‭‬financial‬
‭statements‭‬‭‬may‭‬‭‬nevertheless‭‬‭‬be‭‬‭‬sufficiently‭‬‭‬material‬
‭for‭‬‭‬it‭‬‭‬to‭‬‭‬be‭‬‭‬presented‭‬‭‬separately‭‬‭‬in‭‬‭‬the‭‬‭‬note‭‬‭‬6.‭‬‭‬The‬
‭specific‭‬‭‬disclosure‭‬‭‬requirement‭‬‭‬in‭‬‭‬a‭‬‭‬Standard‭‬‭‬need‭‬‭‬not‬
‭be‭‬‭‬satisfied‭‬‭‬if‭‬‭‬the‭‬‭‬information‭‬‭‬is‭‬‭‬not‭‬‭‬material.‬
‭The‭‬‭‬principle‭‬‭‬of‭‬‭‬consistency‭‬‭‬is‭‬‭‬abandoned‭‬‭‬when:‬
a‭ .‭‬‭‬It‭‬‭‬is‭‬‭‬apparent,‭‬‭‬following‭‬‭‬a‭‬‭‬significant‭‬‭‬change‭‬‭‬in‭‬‭‬the‬
‭nature‭‬‭‬of‭‬‭‬the‭‬‭‬entity’s‭‬‭‬operations‭‬‭‬or‭‬‭‬a‭‬‭‬review‭‬‭‬of‭‬‭‬its‬
‭financial‭‬‭‬statements,‭‬‭‬that‭‬‭‬another‭‬‭‬presentation‭‬‭‬or‬
‭classification‭‬‭‬would‭‬‭‬be‭‬‭‬more‭‬‭‬appropriate‭‬‭‬having‭‬‭‬regard‬
‭to‭‬‭‬the‭‬‭‬criteria‭‬‭‬for‭‬‭‬the‭‬‭‬selection‭‬‭‬and‭‬‭‬application‭‬‭‬of‬
‭accounting‭‬‭‬policies‭‬‭‬in‭‬‭‬PAS‭‬‭‬8:‭‬‭‬or‬
‭ .‭‬‭‬A‭‬‭‬Standard‭‬‭‬or‭‬‭‬an‭‬‭‬Interpretation‭‬‭‬requires‭‬‭‬a‭‬‭‬change‭‬‭‬in‬
b
‭presentation‬
‭ ONDITION‭‬‭‬FOR‭‬‭‬CHANGE‭‬‭‬IN‬
C
‭PRESENTATION‬
‭An‭‬‭‬entity‭‬‭‬changes‭‬‭‬the‭‬‭‬presentation‭‬‭‬of‭‬‭‬its‭‬‭‬financial‬
‭statements‭‬‭‬only‭‬‭‬if:‬
‭a.‭‬‭‬The‭‬‭‬changed‭‬‭‬presentation‭‬‭‬provides‭‬‭‬information‭‬‭‬that‬
‭is‭‬‭‬reliable‭‬‭‬and‭‬‭‬is‭‬‭‬more‭‬‭‬relevant‭‬‭‬to‭‬‭‬users‭‬‭‬of‭‬‭‬the‭‬‭‬financial‬
‭statements;‭‬‭‬and‬
‭ .‭‬‭‬The‭‬‭‬revised‭‬‭‬structure‭‬‭‬is‭‬‭‬likely‭‬‭‬to‭‬‭‬continue,‭‬‭‬so‭‬‭‬that‬
b
‭comparability‭‬‭‬is‭‬‭‬not‭‬‭‬impaired.‬
‭ hen‭‬‭‬making‭‬‭‬such‭‬‭‬changes‭‬‭‬in‭‬‭‬presentation,‭‬‭‬an‭‬‭‬entity‬
W
‭reclassifies‭‬‭‬its‭‬‭‬comparative‭‬‭‬information.‭‬‭‬For‭‬‭‬example,‬
‭an‭‬‭‬entity‭‬‭‬that‭‬‭‬changes‭‬‭‬in‭‬‭‬financial‭‬‭‬statements‬
‭presentation‭‬‭‬for‭‬‭‬the‭‬‭‬period‭‬‭‬ending‭‬‭‬2015‭‬‭‬must‭‬‭‬reclassify‬
‭its‭‬‭‬2014‭‬‭‬financial‭‬‭‬statements‭‬‭‬in‭‬‭‬order‭‬‭‬to‭‬‭‬attain‬
‭consistency‭‬‭‬of‭‬‭‬presentation.‬
‭ ATERIALITY‭‬‭‬AND‭‬‭‬AGGREGATION‬
M
‭Materiality‭‬‭‬is‭‬‭‬a‭‬‭‬constraint‭‬‭‬in‭‬‭‬presenting‭‬‭‬information‭‬‭‬on‬
‭the‭‬‭‬financial‭‬‭‬statements.‬
‭PAS‭‬‭‬1,‭‬‭‬Presentation‭‬‭‬of‭‬‭‬Financial‭‬‭‬Statements,‭‬‭‬has‬
‭underlined‭‬‭‬the‭‬‭‬following‭‬‭‬guidelines‭‬‭‬on‭‬‭‬materiality‭‬‭‬and‬
‭aggregation:‬
‭1.‭‬‭‬Omission‭‬‭‬or‭‬‭‬misstatement‭‬‭‬of‭‬‭‬items‭‬‭‬are‭‬‭‬material‭‬‭‬if‬
‭they‭‬‭‬could,‭‬‭‬individually‭‬‭‬or‭‬‭‬collectively,‭‬‭‬influence‭‬‭‬the‬
‭economic‭‬‭‬decision‭‬‭‬of‭‬‭‬users‭‬‭‬taken‭‬‭‬on‭‬‭‬the‭‬‭‬basis‭‬‭‬of‭‬‭‬the‬
‭financial‭‬‭‬statements.‬
‭2.‭‬‭‬Materiality‭‬‭‬depends‭‬‭‬on‭‬‭‬the‭‬‭‬size‭‬‭‬and‭‬‭‬nature‭‬‭‬of‭‬‭‬the‬
‭omission‭‬‭‬or‭‬‭‬misstatement‭‬‭‬judged‭‬‭‬in‭‬‭‬the‭‬‭‬surrounding‬
‭circumstances.‭‬‭‬The‭‬‭‬size‭‬‭‬or‭‬‭‬nature‭‬‭‬of‭‬‭‬the‭‬‭‬item,‭‬‭‬or‭‬‭‬a‬
‭combination‭‬‭‬of‭‬‭‬both,‭‬‭‬could‭‬‭‬be‭‬‭‬the‭‬‭‬determining‭‬‭‬factor.‬
‭3.‭‬‭‬Each‭‬‭‬material‭‬‭‬class‭‬‭‬of‭‬‭‬similar‭‬‭‬items‭‬‭‬shall‭‬‭‬be‬
‭presented‭‬‭‬separately‭‬‭‬in‭‬‭‬the‭‬‭‬financial‭‬‭‬statements.‭‬‭‬Items‬
‭of‭‬‭‬a‭‬‭‬dissimilar‭‬‭‬nature‭‬‭‬of‭‬‭‬function‭‬‭‬shall‭‬‭‬be‭‬‭‬presented‬
‭separately‭‬‭‬unless‭‬‭‬they‭‬‭‬are‭‬‭‬immaterial.‬
‭4.‭‬‭‬If‭‬‭‬a‭‬‭‬line‭‬‭‬item‭‬‭‬is‭‬‭‬not‭‬‭‬individually‭‬‭‬material,‭‬‭‬it‭‬‭‬is‬
‭aggregated‭‬‭‬with‭‬‭‬other‭‬‭‬items‭‬‭‬either‭‬‭‬on‭‬‭‬the‭‬‭‬face‭‬‭‬of‭‬‭‬the‬
‭financial‭‬‭‬statements‭‬‭‬or‭‬‭‬in‭‬‭‬the‭‬‭‬notes.‬
‭5.‭‬‭‬An‭‬‭‬item‭‬‭‬that‭‬‭‬is‭‬‭‬not‭‬‭‬sufficiently‭‬‭‬material‭‬‭‬to‭‬‭‬warrant‬
‭OFFSETTING‬
I‭ t‭‬‭‬is‭‬‭‬important‭‬‭‬that‭‬‭‬assets‭‬‭‬and‭‬‭‬liabilities,‭‬‭‬and‭‬‭‬income‬
‭and‭‬‭‬expenses,‭‬‭‬are‭‬‭‬reported‭‬‭‬separately.‭‬‭‬Assets‭‬‭‬and‬
‭liabilities,‭‬‭‬and‭‬‭‬income‭‬‭‬and‭‬‭‬expenses,‭‬‭‬shall‭‬‭‬not‭‬‭‬be‭‬‭‬offset‬
‭unless‭‬‭‬required‭‬‭‬or‭‬‭‬permitted‭‬‭‬by‭‬‭‬a‭‬‭‬Standard.‬
‭For‭‬‭‬example,‭‬‭‬overpayment‭‬‭‬of‭‬‭‬a‭‬‭‬debtor‭‬‭‬should‭‬‭‬not‭‬‭‬be‬
‭offset‭‬‭‬with‭‬‭‬receivable‬
‭ ffsetting‭‬‭‬in‭‬‭‬the‭‬‭‬income‭‬‭‬statement‭‬‭‬and‭‬‭‬in‭‬‭‬the‭‬‭‬balance‬
O
‭sheet,‭‬‭‬except‭‬‭‬when‭‬‭‬offsetting‭‬‭‬reflects‭‬‭‬the‭‬‭‬substance‭‬‭‬of‬
‭the‭‬‭‬transaction‭‬‭‬or‭‬‭‬other‭‬‭‬event,‭‬‭‬detracts‭‬‭‬from‭‬‭‬the‭‬‭‬ability‬
‭of‭‬‭‬users‭‬‭‬both‭‬‭‬to‭‬‭‬understand‭‬‭‬the‭‬‭‬transactions,‭‬‭‬other‬
‭events‭‬‭‬and‭‬‭‬conditions‭‬‭‬that‭‬‭‬have‭‬‭‬occurred‭‬‭‬and‭‬‭‬to‭‬‭‬assess‬
‭the‭‬‭‬entity’s‭‬‭‬future‭‬‭‬cash‭‬‭‬flows.‬
‭The‭‬‭‬concept‭‬‭‬of‭‬‭‬offsetting‭‬‭‬does‭‬‭‬not‭‬‭‬refer‭‬‭‬to‭‬‭‬measuring‬
‭assets‭‬‭‬net‭‬‭‬of‭‬‭‬valuation‭‬‭‬allowances,‭‬‭‬as‭‬‭‬in‭‬‭‬the‭‬‭‬progress‭‬‭‬of‬
‭deducting‭‬‭‬obsolescence‭‬‭‬allowance‭‬‭‬on‭‬‭‬inventories‭‬‭‬or‬
‭doubtful‭‬‭‬account‭‬‭‬on‭‬‭‬receivables.‬
‭ OMPARATIVE‭‬‭‬INFORMATION‬
C
‭The‭‬‭‬information‭‬‭‬provided‭‬‭‬on‭‬‭‬the‭‬‭‬face‭‬‭‬of‭‬‭‬the‭‬‭‬financial‬
‭statements‭‬‭‬will‭‬‭‬provide‭‬‭‬greater‭‬‭‬value‭‬‭‬to‭‬‭‬the‭‬‭‬users‭‬‭‬if‭‬‭‬it‬
‭possesses‭‬‭‬the‭‬‭‬element‭‬‭‬of‭‬‭‬comparability.‭‬‭‬The‭‬‭‬basic‬
‭objective‭‬‭‬of‭‬‭‬comparability‭‬‭‬is‭‬‭‬to‭‬‭‬assist‭‬‭‬users‭‬‭‬of‭‬‭‬financial‬
‭statements‭‬‭‬in‭‬‭‬making‭‬‭‬economic‭‬‭‬decisions‭‬‭‬by‭‬‭‬allowing‬
‭trends‭‬‭‬in‭‬‭‬the‭‬‭‬assessment‭‬‭‬of‭‬‭‬trends‭‬‭‬in‭‬‭‬financial‬
‭information‭‬‭‬for‭‬‭‬productive‭‬‭‬purposes.‬
‭In‭‬‭‬applying‭‬‭‬the‭‬‭‬concept‭‬‭‬of‭‬‭‬comparability‭‬‭‬of‬
‭information,‭‬‭‬the‭‬‭‬following‭‬‭‬requirements‭‬‭‬should‭‬‭‬be‬
‭observed:‬
‭1.‭‬‭‬Comparison‭‬‭‬shall‭‬‭‬be‭‬‭‬included‭‬‭‬for‭‬‭‬narrative‭‬‭‬and‬
‭descriptive‭‬‭‬information‭‬‭‬when‭‬‭‬it‭‬‭‬is‭‬‭‬relevant‭‬‭‬to‭‬‭‬an‬
‭understanding‭‬‭‬of‭‬‭‬the‭‬‭‬current‭‬‭‬period’s‭‬‭‬financial‬
‭statements.‬
‭2.‭‬‭‬Comparative‭‬‭‬information‭‬‭‬shall‭‬‭‬be‭‬‭‬disclosed‭‬‭‬in‬
‭respect‭‬‭‬of‭‬‭‬the‭‬‭‬previous‭‬‭‬period‭‬‭‬for‭‬‭‬all‭‬‭‬amounts‭‬‭‬reported‬
‭in‭‬‭‬the‭‬‭‬financial‭‬‭‬statements‭‬‭‬except‭‬‭‬when‭‬‭‬a‭‬‭‬Standard‭‬‭‬or‬
‭an‭‬‭‬Interpretation‭‬‭‬permits‭‬‭‬or‭‬‭‬requires‭‬‭‬otherwise.‬
‭3.‭‬‭‬When‭‬‭‬the‭‬‭‬presentation‭‬‭‬or‭‬‭‬classifications‭‬‭‬of‭‬‭‬items‭‬‭‬in‬
‭the‭‬‭‬financial‭‬‭‬statements‭‬‭‬is‭‬‭‬amended,‭‬‭‬the‭‬‭‬comparative‬
‭amount‭‬‭‬shall‭‬‭‬be‭‬‭‬reclassified‭‬‭‬unless‭‬‭‬the‭‬‭‬reclassification‬
‭is‭‬‭‬impracticable.‬
4‭ .‭‬‭‬When‭‬‭‬comparative‭‬‭‬amounts‭‬‭‬are‭‬‭‬reclassified,‭‬‭‬an‬
‭entity‭‬‭‬shall‭‬‭‬disclose:‬
‭a.‭‬‭‬the‭‬‭‬nature‭‬‭‬of‭‬‭‬the‭‬‭‬reclassification;‬
‭b.‭‬‭‬the‭‬‭‬amount‭‬‭‬of‭‬‭‬each‭‬‭‬items‭‬‭‬or‭‬‭‬class‭‬‭‬of‭‬‭‬items‭‬‭‬that‭‬‭‬is‬
‭reclassified;‭‬‭‬and‬
‭c.‭‬‭‬the‭‬‭‬reason‭‬‭‬for‭‬‭‬the‭‬‭‬reclassification‬
‭5.‭‬‭‬When‭‬‭‬it‭‬‭‬is‭‬‭‬impracticable‭‬‭‬to‭‬‭‬reclassify‭‬‭‬comparative‬
‭10‬
a‭ mounts,‭‬‭‬an‭‬‭‬entity‭‬‭‬shall‭‬‭‬disclose:‬
‭a.‭‬‭‬the‭‬‭‬reason‭‬‭‬for‭‬‭‬not‭‬‭‬reclassifying‭‬‭‬the‭‬‭‬amounts;‭‬‭‬and‬
‭b.‭‬‭‬the‭‬‭‬nature‭‬‭‬of‭‬‭‬the‭‬‭‬adjustments‭‬‭‬that‭‬‭‬would‭‬‭‬have‭‬‭‬been‬
‭made‭‬‭‬if‭‬‭‬the‭‬‭‬amounts‭‬‭‬had‭‬‭‬been‭‬‭‬reclassified.‬
‭ EPORTING‭‬‭‬PERIOD‬
R
‭Financial‭‬‭‬statements‭‬‭‬shall‭‬‭‬be‭‬‭‬presented‭‬‭‬at‭‬‭‬least‬
‭annually.‬
‭When‭‬‭‬the‭‬‭‬date‭‬‭‬of‭‬‭‬an‭‬‭‬entity’s‭‬‭‬statement‭‬‭‬of‭‬‭‬financial‬
‭position‭‬‭‬changes‭‬‭‬and‭‬‭‬the‭‬‭‬annual‭‬‭‬financial‭‬‭‬statements‬
‭are‭‬‭‬presented‭‬‭‬for‭‬‭‬a‭‬‭‬period‭‬‭‬longer‭‬‭‬or‭‬‭‬shorter‭‬‭‬than‭‬‭‬one‬
‭year,‭‬‭‬an‭‬‭‬entity‭‬‭‬shall‭‬‭‬disclose,‭‬‭‬in‭‬‭‬addition‭‬‭‬to‭‬‭‬the‭‬‭‬period‬
‭covered‭‬‭‬by‭‬‭‬the‭‬‭‬financial‭‬‭‬statements,‭‬‭‬the‭‬‭‬following:‬
‭a.‭‬‭‬the‭‬‭‬reason‭‬‭‬for‭‬‭‬using‭‬‭‬a‭‬‭‬longer‭‬‭‬or‭‬‭‬shorter‭‬‭‬period;‭‬‭‬and‬
‭b.‭‬‭‬the‭‬‭‬fact‭‬‭‬that‭‬‭‬comparative‭‬‭‬amounts‭‬‭‬for‭‬‭‬the‭‬‭‬income‬
‭statement,‭‬‭‬statement‭‬‭‬of‭‬‭‬changes‭‬‭‬in‭‬‭‬equity,‭‬‭‬cash‭‬‭‬flow‬
‭statement‭‬‭‬and‭‬‭‬related‭‬‭‬notes‭‬‭‬are‭‬‭‬not‭‬‭‬entirely‭‬‭‬comparable‬
‭DISCLOSURE‭‬‭‬OF‭‬‭‬ACCOUNTING‭‬‭‬POLICIES‬
‭ hilippine‭‬‭‬Accounting‭‬‭‬Standard‭‬‭‬(PAS)‭‬‭‬8,‭‬‭‬Accounting‬
P
‭Policies,‭‬‭‬Changes‭‬‭‬in‭‬‭‬Accounting‭‬‭‬Estimates‭‬‭‬and‭‬‭‬Errors,‬
‭prescribes‭‬‭‬the‭‬‭‬criteria‭‬‭‬for‭‬‭‬selecting‭‬‭‬and‭‬‭‬changing‬
‭accounting‭‬‭‬policies,‭‬‭‬together‭‬‭‬with‭‬‭‬the‭‬‭‬accounting‬
‭treatment‭‬‭‬and‭‬‭‬disclosure‭‬‭‬of‭‬‭‬changes‭‬‭‬in‭‬‭‬accounting‬
‭policies,‭‬‭‬changes‭‬‭‬in‭‬‭‬accounting‭‬‭‬estimates‭‬‭‬and‬
‭correction‭‬‭‬of‭‬‭‬errors.‬
‭PAS‭‬‭‬8‭‬‭‬is‭‬‭‬intended‭‬‭‬to‭‬‭‬enhance‭‬‭‬the‭‬‭‬relevance‭‬‭‬and‬
r‭ eliability‭‬‭‬of‭‬‭‬an‭‬‭‬entity’s‭‬‭‬financial‭‬‭‬statements,‭‬‭‬and‭‬‭‬the‬
‭comparability‭‬‭‬of‭‬‭‬those‭‬‭‬financial‭‬‭‬statements‭‬‭‬over‭‬‭‬time‬
‭and‭‬‭‬with‭‬‭‬a‭‬‭‬financial‭‬‭‬statement‭‬‭‬of‭‬‭‬other‭‬‭‬entities‬
‭ isclosure‭‬‭‬requirements‭‬‭‬for‭‬‭‬accounting‭‬‭‬policies,‬
D
‭except‭‬‭‬those‭‬‭‬for‭‬‭‬changes‭‬‭‬in‭‬‭‬accounting‭‬‭‬policies,‭‬‭‬are‭‬‭‬set‬
‭out‭‬‭‬in‭‬‭‬PAS‭‬‭‬1,‭‬‭‬Presentation‭‬‭‬of‭‬‭‬Financial‭‬‭‬Statements.‬
‭Objectives‭‬‭‬of‭‬‭‬PAS‭‬‭‬8:‬
‭Selection,‭‬‭‬changes‭‬‭‬and‭‬‭‬disclosure‭‬‭‬of‬
‭It‭‬‭‬is‭‬‭‬important‭‬‭‬for‭‬‭‬the‭‬‭‬users‭‬‭‬to‭‬‭‬be‭‬‭‬informed‭‬‭‬of‭‬‭‬the‬
‭ easurement‭‬‭‬basis‭‬‭‬or‭‬‭‬bases‭‬‭‬used‭‬‭‬in‭‬‭‬the‭‬‭‬financial‬
m
‭statement,‭‬‭‬because‭‬‭‬the‭‬‭‬basis‭‬‭‬on‭‬‭‬which‭‬‭‬the‭‬‭‬financial‬
‭statement‭‬‭‬is‭‬‭‬prepared‭‬‭‬significantly‭‬‭‬affects‭‬‭‬their‬
‭analysis.‬
‭The‭‬‭‬measurement‭‬‭‬bases‭‬‭‬are‭‬‭‬Historical‭‬‭‬Cost,‭‬‭‬Current‬
‭Cost,‭‬‭‬net‭‬‭‬realizable‭‬‭‬value‭‬‭‬and‭‬‭‬Fair‭‬‭‬or‭‬‭‬Recoverable‬
‭Value.‭‬‭‬The‭‬‭‬widely‭‬‭‬used‭‬‭‬measurement‭‬‭‬basis‭‬‭‬is‭‬‭‬historical‬
‭cost.‬
‭When‭‬‭‬more‭‬‭‬than‭‬‭‬one‭‬‭‬measurement‭‬‭‬basis‭‬‭‬is‭‬‭‬used‭‬‭‬in‭‬‭‬the‬
‭financial‭‬‭‬statements,‭‬‭‬for‭‬‭‬example,‭‬‭‬when‭‬‭‬particular‬
‭classes‭‬‭‬of‭‬‭‬assets‭‬‭‬are‭‬‭‬revalued,‭‬‭‬it‭‬‭‬is‭‬‭‬sufficient‭‬‭‬to‭‬‭‬provide‬
‭an‭‬‭‬indication‭‬‭‬of‭‬‭‬the‭‬‭‬categories‭‬‭‬of‭‬‭‬assets‭‬‭‬and‭‬‭‬liabilities‬
‭to‭‬‭‬which‭‬‭‬each‭‬‭‬measurement‭‬‭‬basis‭‬‭‬is‭‬‭‬applied.‬
‭In‭‬‭‬deciding‭‬‭‬whether‭‬‭‬a‭‬‭‬particular‭‬‭‬accounting‭‬‭‬policy‬
‭should‭‬‭‬be‭‬‭‬disclosed,‭‬‭‬management‭‬‭‬considers‭‬‭‬whether‬
‭disclosure‭‬‭‬would‭‬‭‬assist‭‬‭‬users‭‬‭‬in‭‬‭‬understanding‭‬‭‬how‬
‭transactions,‭‬‭‬other‭‬‭‬events‭‬‭‬and‭‬‭‬conditions‭‬‭‬are‭‬‭‬reflected‬
‭in‭‬‭‬the‭‬‭‬reporting‭‬‭‬financial‭‬‭‬performance‭‬‭‬and‭‬‭‬financial‬
‭position.‬
‭Disclosure‭‬‭‬of‭‬‭‬particular‭‬‭‬accounting‭‬‭‬policies‭‬‭‬is‬
‭especially‭‬‭‬useful‭‬‭‬to‭‬‭‬users‭‬‭‬when‭‬‭‬those‭‬‭‬policies‭‬‭‬are‬
‭selected‭‬‭‬from‭‬‭‬alternatives‭‬‭‬allowed‭‬‭‬in‭‬‭‬the‭‬‭‬Standards‭‬‭‬and‬
‭Interpretations.‬
‭ ach‭‬‭‬identity‭‬‭‬considers‭‬‭‬the‭‬‭‬nature‭‬‭‬of‭‬‭‬its‭‬‭‬operation‭‬‭‬and‬
E
‭the‭‬‭‬policies‭‬‭‬that‭‬‭‬the‭‬‭‬users‭‬‭‬of‭‬‭‬its‭‬‭‬financial‭‬‭‬statements‬
‭would‭‬‭‬expect‭‬‭‬to‭‬‭‬be‭‬‭‬disclosed‭‬‭‬for‭‬‭‬that‭‬‭‬type‭‬‭‬of‭‬‭‬entity.‭‬‭‬For‬
‭example,‭‬‭‬an‭‬‭‬entity‭‬‭‬subject‭‬‭‬to‭‬‭‬income‭‬‭‬taxes‭‬‭‬would‭‬‭‬be‬
‭expected‭‬‭‬to‭‬‭‬disclose‭‬‭‬its‭‬‭‬accounting‭‬‭‬policies‭‬‭‬for‭‬‭‬income‬
‭taxes,‭‬‭‬including‭‬‭‬those‭‬‭‬applicable‭‬‭‬to‭‬‭‬deferred‭‬‭‬tax‬
‭liabilities‭‬‭‬and‭‬‭‬assets.‭‬‭‬When‭‬‭‬an‭‬‭‬entity‭‬‭‬has‭‬‭‬significant‬
‭foreign‭‬‭‬operations‭‬‭‬or‭‬‭‬recognition‭‬‭‬of‭‬‭‬foreign‭‬‭‬exchange‬
‭gains‭‬‭‬and‭‬‭‬losses‭‬‭‬would‭‬‭‬be‭‬‭‬expected.‬
‭When‭‬‭‬business‭‬‭‬combinations‭‬‭‬have‭‬‭‬occurred,‭‬‭‬the‬
‭policies‭‬‭‬used‭‬‭‬for‭‬‭‬measurement‭‬‭‬of‭‬‭‬goodwill‭‬‭‬and‬
‭minority‭‬‭‬interest‭‬‭‬are‭‬‭‬disclosed.‬
‭An‭‬‭‬accounting‭‬‭‬policy‭‬‭‬may‭‬‭‬be‭‬‭‬significant‭‬‭‬because‭‬‭‬of‬
‭the‭‬‭‬nature‭‬‭‬of‭‬‭‬the‭‬‭‬entity’s‭‬‭‬operation‭‬‭‬even‭‬‭‬if‭‬‭‬amounts‭‬‭‬for‬
‭current‭‬‭‬and‭‬‭‬prior‭‬‭‬periods‭‬‭‬are‭‬‭‬not‭‬‭‬material.‬
‭1.‭‬‭‬Accounting‭‬‭‬policies‬
‭2.‭‬‭‬Accounting‭‬‭‬estimates‬
‭3.‭‬‭‬Correction‭‬‭‬of‭‬‭‬Errors‬
‭ CCOUNTING‭‬‭‬POLICIES‬
A
‭Accounting‭‬‭‬Policies‭‬‭‬are‭‬‭‬the‭‬‭‬specific‭‬‭‬principles,‭‬‭‬bases,‬
‭conventions,‭‬‭‬rules,‭‬‭‬and‭‬‭‬practices‭‬‭‬applied‭‬‭‬by‭‬‭‬an‭‬‭‬entity‬
‭in‭‬‭‬preparing‭‬‭‬and‭‬‭‬presenting‭‬‭‬financial‭‬‭‬statements.‬
‭ n‭‬‭‬entity‭‬‭‬shall‭‬‭‬disclose‭‬‭‬in‭‬‭‬the‭‬‭‬summary‭‬‭‬of‭‬‭‬significant‬
A
‭accounting‭‬‭‬policies:‬
‭ .‭‬‭‬The‭‬‭‬measurement‭‬‭‬basis‭‬‭‬or‭‬‭‬(bases)‭‬‭‬used‭‬‭‬in‭‬‭‬preparing‬
1
‭the‭‬‭‬financial‭‬‭‬statements;‭‬‭‬and‬
‭2.‭‬‭‬The‭‬‭‬other‭‬‭‬accounting‭‬‭‬policies‭‬‭‬used‭‬‭‬are‭‬‭‬relevant‭‬‭‬to‭‬‭‬an‬
‭understanding‭‬‭‬of‭‬‭‬the‭‬‭‬financial‭‬‭‬statements.‬
‭ ELECTION‭‬‭‬AND‭‬‭‬APPLICATION‭‬‭‬OF‬
S
‭ACCOUNTING‭‬‭‬POLICIES‬
‭When‭‬‭‬a‭‬‭‬Standard‭‬‭‬or‭‬‭‬an‭‬‭‬Interpretation‭‬‭‬especially‬
‭applies‭‬‭‬to‭‬‭‬a‭‬‭‬transaction,‭‬‭‬other‭‬‭‬event‭‬‭‬or‭‬‭‬condition,‭‬‭‬the‬
‭accounting‭‬‭‬policy‭‬‭‬or‭‬‭‬policies‭‬‭‬applied‭‬‭‬to‭‬‭‬that‭‬‭‬item‭‬‭‬shall‬
‭be‭‬‭‬determined‭‬‭‬by‭‬‭‬applying‭‬‭‬the‭‬‭‬Standard‭‬‭‬or‬
‭Interpretation‭‬‭‬and‭‬‭‬considering‭‬‭‬any‭‬‭‬relevant‬
‭Implementation‭‬‭‬Guidance‭‬‭‬issued‭‬‭‬by‭‬‭‬the‭‬‭‬Financial‬
‭Reporting‭‬‭‬Standard‭‬‭‬Council‭‬‭‬(FRSC).‬
‭In‭‬‭‬the‭‬‭‬absence‭‬‭‬of‭‬‭‬a‭‬‭‬Standard‭‬‭‬or‭‬‭‬an‭‬‭‬Interpretation‭‬‭‬that‬
‭especially‭‬‭‬applies‭‬‭‬to‭‬‭‬a‭‬‭‬transaction,‭‬‭‬other‭‬‭‬event‭‬‭‬or‬
‭condition,‭‬‭‬management‭‬‭‬shall‭‬‭‬use‭‬‭‬its‭‬‭‬judgment‭‬‭‬in‬
‭developing‭‬‭‬and‭‬‭‬applying‭‬‭‬an‭‬‭‬accounting‭‬‭‬policy‭‬‭‬that‬
‭results‭‬‭‬in‭‬‭‬information‭‬‭‬that‭‬‭‬is‭‬‭‬relevant‭‬‭‬and‭‬‭‬reliable.‬
‭FACTORS‭‬‭‬TO‭‬‭‬CONSIDER‭‬‭‬IN‭‬‭‬THE‭‬‭‬ABSENCE‬
‭11‬
‭ F‭‬‭‬A‭‬‭‬STANDARD‬
O
‭The‭‬‭‬management‭‬‭‬shall‭‬‭‬consider‭‬‭‬the‭‬‭‬following‬
‭guidelines‭‬‭‬in‭‬‭‬applying‭‬‭‬its‭‬‭‬judgment‭‬‭‬in‭‬‭‬developing‭‬‭‬an‬
‭accounting‭‬‭‬policy‭‬‭‬in‭‬‭‬the‭‬‭‬absence‭‬‭‬of‭‬‭‬specific‭‬‭‬Standard:‬
‭ .‭‬‭‬Adopt‭‬‭‬the‭‬‭‬accounting‭‬‭‬policy‭‬‭‬that‭‬‭‬results‭‬‭‬in‬
1
‭information‭‬‭‬that‭‬‭‬is‭‬‭‬relevant‭‬‭‬to‭‬‭‬the‭‬‭‬economic‭‬‭‬decision‬
‭making‭‬‭‬needs‭‬‭‬of‭‬‭‬users.‬
‭2.‭‬‭‬Apply‭‬‭‬the‭‬‭‬accounting‭‬‭‬policy‭‬‭‬that‭‬‭‬results‭‬‭‬in‭‬‭‬reliable‬
‭financial‭‬‭‬statements.‭‬‭‬Financial‭‬‭‬statements‭‬‭‬are‭‬‭‬reliable‬
‭when‭‬‭‬they:‬
‭a.‭‬‭‬Represent‭‬‭‬faithfully‭‬‭‬the‭‬‭‬financial‭‬‭‬position,‭‬‭‬financial‬
‭performance‭‬‭‬and‭‬‭‬cash‭‬‭‬flows‭‬‭‬of‭‬‭‬the‭‬‭‬entity;‬
‭ .‭‬‭‬Reflect‭‬‭‬the‭‬‭‬economic‭‬‭‬substance‭‬‭‬of‭‬‭‬transactions,‬
b
‭other‭‬‭‬events‭‬‭‬and‭‬‭‬conditions,‭‬‭‬and‭‬‭‬not‭‬‭‬merely‭‬‭‬the‭‬‭‬legal‬
‭form;‬
‭c.‭‬‭‬Are‭‬‭‬neutral,‭‬‭‬i.e.‭‬‭‬free‭‬‭‬from‭‬‭‬bias;‬
‭d.‭‬‭‬Are‭‬‭‬prudent;‭‬‭‬and‬
‭e.‭‬‭‬Are‭‬‭‬complete‭‬‭‬in‭‬‭‬all‭‬‭‬material‭‬‭‬respects.‬
‭3.‭‬‭‬Refer‭‬‭‬to,‭‬‭‬and‭‬‭‬consider‭‬‭‬the‭‬‭‬applicability‭‬‭‬of,‭‬‭‬the‬
‭following‭‬‭‬sources:‬
‭a.‭‬‭‬The‭‬‭‬requirements‭‬‭‬and‭‬‭‬guidance‭‬‭‬in‭‬‭‬Standards‭‬‭‬and‬
‭Interpretations‭‬‭‬dealing‭‬‭‬with‭‬‭‬similar‭‬‭‬and‭‬‭‬related‭‬‭‬issues;‬
‭and‬
‭b.‭‬‭‬The‭‬‭‬definitions,‭‬‭‬recognition‭‬‭‬criteria‭‬‭‬and‬
‭measurement‭‬‭‬concepts‭‬‭‬of‭‬‭‬assets,‭‬‭‬liabilities,‭‬‭‬income‭‬‭‬and‬
‭expenses‭‬‭‬in‭‬‭‬the‭‬‭‬Framework.‬
‭ .‭‬‭‬Consider‭‬‭‬the‭‬‭‬most‭‬‭‬recent‭‬‭‬pronouncement‭‬‭‬of‭‬‭‬other‬
4
‭standard-setting‭‬‭‬bodies‭‬‭‬that‭‬‭‬use‭‬‭‬a‭‬‭‬similar‭‬‭‬conceptual‬
‭framework‭‬‭‬to‭‬‭‬develop‭‬‭‬accounting‭‬‭‬standards,‭‬‭‬other‬
‭accounting‭‬‭‬literature‭‬‭‬and‭‬‭‬accepted‭‬‭‬industry‭‬‭‬practices,‬
‭to‭‬‭‬the‭‬‭‬extent‭‬‭‬that‭‬‭‬these‭‬‭‬do‭‬‭‬not‭‬‭‬conflict‭‬‭‬with‭‬‭‬the‭‬‭‬sources‬
‭in‭‬‭‬Philippine‭‬‭‬Financial‭‬‭‬Reporting‭‬‭‬Standards.‬
‭ ONSISTENCY‭‬‭‬OF‭‬‭‬ACCOUNTING‭‬‭‬POLICIES‬
C
‭An‭‬‭‬entity‭‬‭‬shall‭‬‭‬select‭‬‭‬and‭‬‭‬apply‭‬‭‬its‭‬‭‬accounting‭‬‭‬policies‬
‭consistency‭‬‭‬for‭‬‭‬similar‭‬‭‬transactions,‭‬‭‬other‭‬‭‬events‭‬‭‬and‬
‭conditions,‭‬‭‬unless‭‬‭‬a‭‬‭‬Standard‭‬‭‬or‭‬‭‬an‭‬‭‬Standard‭‬‭‬or‭‬‭‬an‬
‭Interpretation‭‬‭‬specially‭‬‭‬requires‭‬‭‬or‭‬‭‬permits‬
‭categorization‭‬‭‬of‭‬‭‬items‭‬‭‬for‭‬‭‬items‭‬‭‬for‭‬‭‬which‭‬‭‬different‬
‭policies‭‬‭‬may‭‬‭‬be‭‬‭‬appropriate.‬
I‭ f‭‬‭‬a‭‬‭‬Standard‭‬‭‬or‭‬‭‬an‭‬‭‬Interpretation‭‬‭‬requires‭‬‭‬or‭‬‭‬permits‬
‭such‭‬‭‬categorization,‭‬‭‬an‭‬‭‬appropriate‭‬‭‬accounting‭‬‭‬policy‬
‭shall‭‬‭‬be‭‬‭‬selected‭‬‭‬and‭‬‭‬applied‭‬‭‬consistency‭‬‭‬to‭‬‭‬each‬
‭category.‬
‭ HANGES‭‬‭‬IN‭‬‭‬ACCOUNTING‭‬‭‬POLICIES‬
C
‭An‭‬‭‬entity‭‬‭‬shall‭‬‭‬change‭‬‭‬an‭‬‭‬accounting‭‬‭‬policy‭‬‭‬only‭‬‭‬if‭‬‭‬the‬
‭change‬
‭a.‭‬‭‬Is‭‬‭‬required‭‬‭‬by‭‬‭‬a‭‬‭‬Standard‭‬‭‬or‭‬‭‬an‭‬‭‬Interpretation;‭‬‭‬or‬
‭b.‭‬‭‬Results‭‬‭‬in‭‬‭‬the‭‬‭‬financial‭‬‭‬statements‭‬‭‬providing‭‬‭‬reliable‬
‭and‭‬‭‬more‭‬‭‬relevant‭‬‭‬information‭‬‭‬about‭‬‭‬the‭‬‭‬effects‭‬‭‬of‬
‭transactions,‭‬‭‬other‭‬‭‬events‭‬‭‬or‭‬‭‬conditions‭‬‭‬on‭‬‭‬the‭‬‭‬entity’s‬
f‭ inancial‭‬‭‬position,‭‬‭‬financial‭‬‭‬performance‭‬‭‬and‭‬‭‬cash‬
‭flows.‬
‭Users‭‬‭‬of‭‬‭‬financial‭‬‭‬statements‭‬‭‬need‭‬‭‬to‭‬‭‬be‭‬‭‬able‭‬‭‬to‬
‭compare‭‬‭‬the‭‬‭‬financial‭‬‭‬statements‭‬‭‬of‭‬‭‬an‭‬‭‬entity‭‬‭‬over‭‬‭‬time‬
‭to‭‬‭‬identify‭‬‭‬trends‭‬‭‬in‭‬‭‬its‭‬‭‬financial‭‬‭‬position,‭‬‭‬financial‬
‭performance‭‬‭‬and‭‬‭‬cash‭‬‭‬flows.‬
‭The‭‬‭‬following‭‬‭‬are‭‬‭‬not‭‬‭‬changes‭‬‭‬in‭‬‭‬accounting‭‬‭‬policies:‬
1‭ .‭‬‭‬The‭‬‭‬application‭‬‭‬of‭‬‭‬an‭‬‭‬accounting‭‬‭‬policy‭‬‭‬for‬
‭transactions,‭‬‭‬other‭‬‭‬events‭‬‭‬or‭‬‭‬conditions‭‬‭‬that‭‬‭‬differ‭‬‭‬in‬
‭substance‭‬‭‬from‭‬‭‬those‭‬‭‬previously‭‬‭‬occurring;‭‬‭‬and‬
‭2.‭‬‭‬The‭‬‭‬application‭‬‭‬of‭‬‭‬a‭‬‭‬new‭‬‭‬accounting‭‬‭‬policy‭‬‭‬for‬
‭transactions,‭‬‭‬other‭‬‭‬events‭‬‭‬or‭‬‭‬conditions‭‬‭‬that‭‬‭‬did‭‬‭‬not‬
‭occur‭‬‭‬previously‭‬‭‬or‭‬‭‬were‭‬‭‬immaterial.‬
‭ PPLICATION‭‬‭‬OF‭‬‭‬CHANGES‭‬‭‬IN‬
A
‭ACCOUNTING‭‬‭‬POLICIES‬
‭The‭‬‭‬following‭‬‭‬guidelines‭‬‭‬shall‭‬‭‬be‭‬‭‬observed‭‬‭‬when‭‬‭‬an‬
‭entity‭‬‭‬changes‭‬‭‬its‭‬‭‬accounting‭‬‭‬policies:‬
‭1.‭‬‭‬An‭‬‭‬entity‭‬‭‬shall‭‬‭‬account‭‬‭‬for‭‬‭‬a‭‬‭‬change‭‬‭‬in‭‬‭‬accounting‬
‭policy‭‬‭‬resulting‭‬‭‬from‭‬‭‬initial‭‬‭‬application‭‬‭‬of‭‬‭‬a‭‬‭‬Standard‬
‭in‭‬‭‬accordance‭‬‭‬with‭‬‭‬the‭‬‭‬specific‭‬‭‬transitional‭‬‭‬provision,‬
‭if‭‬‭‬any‭‬‭‬in‭‬‭‬that‭‬‭‬Standard.‬
‭2.‭‬‭‬An‭‬‭‬entity‭‬‭‬that‭‬‭‬changes‭‬‭‬an‭‬‭‬accounting‭‬‭‬policy‭‬‭‬upon‬
‭initial‭‬‭‬application‭‬‭‬of‭‬‭‬a‭‬‭‬Standard‭‬‭‬that‭‬‭‬does‭‬‭‬not‭‬‭‬include‬
‭specific‭‬‭‬transitional‭‬‭‬provision‭‬‭‬applying‭‬‭‬to‭‬‭‬that‭‬‭‬change,‬
‭or‭‬‭‬changes‭‬‭‬an‭‬‭‬accounting‭‬‭‬policy‭‬‭‬voluntarily,‭‬‭‬it‭‬‭‬shall‬
‭apply‭‬‭‬the‭‬‭‬change‭‬‭‬retrospectively.‭‬‭‬In‭‬‭‬other‭‬‭‬words,‬
‭change‭‬‭‬in‭‬‭‬accounting‭‬‭‬policies‭‬‭‬should‭‬‭‬be‭‬‭‬handled‬
‭retroactively.‭‬‭‬Retrospectively‭‬‭‬application‭‬‭‬means‬
‭applying‭‬‭‬a‭‬‭‬new‭‬‭‬accounting‭‬‭‬policy‭‬‭‬to‭‬‭‬transactions‭‬‭‬as‭‬‭‬if‬
‭that‭‬‭‬policy‭‬‭‬had‭‬‭‬been‭‬‭‬applied.‬
3‭ .‭‬‭‬When‭‬‭‬a‭‬‭‬change‭‬‭‬in‭‬‭‬accounting‭‬‭‬policy‭‬‭‬is‭‬‭‬applied‬
‭retrospectively,‭‬‭‬the‭‬‭‬entity‭‬‭‬shall‭‬‭‬adjust‭‬‭‬the‭‬‭‬opening‬
‭balance‭‬‭‬of‭‬‭‬each‭‬‭‬affected‭‬‭‬component‭‬‭‬of‭‬‭‬equity‭‬‭‬for‭‬‭‬the‬
‭earliest‭‬‭‬prior‭‬‭‬period‭‬‭‬presented‭‬‭‬and‭‬‭‬the‭‬‭‬other‭‬‭‬balance‭‬‭‬of‬
‭each‭‬‭‬other‭‬‭‬comparative‭‬‭‬amounts‭‬‭‬disclosed‭‬‭‬for‭‬‭‬each‬
‭prior‭‬‭‬period‭‬‭‬presented‭‬‭‬as‭‬‭‬if‬
‭the‭‬‭‬new‭‬‭‬accounting‭‬‭‬policy‭‬‭‬had‭‬‭‬always‭‬‭‬been‭‬‭‬applied.‬
‭LIMITATION‭‬‭‬ON‭‬‭‬RETROSPECTIVE‬
‭APPLICATION‬
‭Change‭‬‭‬in‭‬‭‬accounting‭‬‭‬policies‭‬‭‬should‭‬‭‬be‭‬‭‬handled‬
‭retrospectively‭‬‭‬except‬
‭1.‭‬‭‬When‭‬‭‬it‭‬‭‬is‭‬‭‬impracticable‭‬‭‬to‭‬‭‬determine‭‬‭‬the‬
‭period-specific‭‬‭‬effect‭‬‭‬on‭‬‭‬comparative‭‬‭‬information‭‬‭‬for‬
‭one‭‬‭‬or‭‬‭‬more‭‬‭‬prior‭‬‭‬periods‭‬‭‬presented:‭‬‭‬or‬
‭2.‭‬‭‬When‭‬‭‬it‭‬‭‬is‭‬‭‬impracticable‭‬‭‬to‭‬‭‬determine‭‬‭‬the‬
‭cumulative‭‬‭‬effect‭‬‭‬at‭‬‭‬the‭‬‭‬beginning‭‬‭‬of‭‬‭‬the‭‬‭‬current‭‬‭‬period‬
‭to‭‬‭‬all‭‬‭‬prior‭‬‭‬periods.‬
‭When‭‬‭‬it‭‬‭‬is‭‬‭‬impracticable‭‬‭‬to‭‬‭‬determine‭‬‭‬the‬
‭period-specific‭‬‭‬of‭‬‭‬changing‭‬‭‬an‭‬‭‬accounting‭‬‭‬policy‭‬‭‬on‬
‭comparative‭‬‭‬information‭‬‭‬for‭‬‭‬one‭‬‭‬or‭‬‭‬more‭‬‭‬prior‭‬‭‬periods‬
‭presented,‭‬‭‬the‭‬‭‬entity‭‬‭‬shall‭‬‭‬apply‭‬‭‬the‭‬‭‬new‭‬‭‬accounting‬
‭policy‭‬‭‬to‭‬‭‬the‭‬‭‬carrying‭‬‭‬amounts‭‬‭‬of‭‬‭‬assets‭‬‭‬and‭‬‭‬liabilities‬
‭as‭‬‭‬at‭‬‭‬the‭‬‭‬beginning‭‬‭‬of‭‬‭‬the‭‬‭‬earliest‭‬‭‬period‭‬‭‬for‭‬‭‬which‬
‭retrospective‭‬‭‬application‭‬‭‬is‭‬‭‬practicable,‭‬‭‬which‭‬‭‬may‭‬‭‬be‬
‭the‭‬‭‬current‭‬‭‬period‭‬‭‬and‭‬‭‬shall‭‬‭‬make‭‬‭‬a‭‬‭‬corresponding‬
‭adjustment‭‬‭‬to‭‬‭‬the‭‬‭‬opening‭‬‭‬balance‭‬‭‬of‭‬‭‬each‭‬‭‬affected‬
‭12‬
c‭ omponent‭‬‭‬of‭‬‭‬equity‭‬‭‬for‭‬‭‬that‭‬‭‬period.‭‬‭‬The‭‬‭‬adjustment‭‬‭‬is‬
‭usually‭‬‭‬made‭‬‭‬to‭‬‭‬retained‭‬‭‬earnings.‭‬‭‬However,‭‬‭‬the‬
‭adjustments‭‬‭‬may‭‬‭‬be‭‬‭‬made‭‬‭‬to‭‬‭‬another‭‬‭‬component‭‬‭‬of‬
‭equity.‬
‭When‭‬‭‬it‭‬‭‬is‭‬‭‬impracticable‭‬‭‬to‭‬‭‬determine‭‬‭‬the‭‬‭‬cumulative‬
‭effect,‭‬‭‬at‭‬‭‬the‭‬‭‬beginning‭‬‭‬of‭‬‭‬the‭‬‭‬current‭‬‭‬period,‭‬‭‬of‬
‭applying‭‬‭‬a‭‬‭‬new‭‬‭‬accounting‭‬‭‬policy‭‬‭‬to‭‬‭‬all‭‬‭‬prior‭‬‭‬periods,‬
‭the‭‬‭‬entity‭‬‭‬shall‭‬‭‬adjust‭‬‭‬the‭‬‭‬comparative‭‬‭‬information‭‬‭‬to‬
‭apply‭‬‭‬the‭‬‭‬new‭‬‭‬accounting‭‬‭‬policy‭‬‭‬prospectively‭‬‭‬from‬
‭the‭‬‭‬earliest‭‬‭‬data‭‬‭‬practicable.‭‬‭‬Applying‭‬‭‬a‭‬‭‬requirement‭‬‭‬is‬
‭impracticable‭‬‭‬when‭‬‭‬the‭‬‭‬entity‭‬‭‬cannot‭‬‭‬apply‭‬‭‬if‭‬‭‬after‬
‭making‭‬‭‬reasonable‭‬‭‬effort‭‬‭‬to‭‬‭‬do‭‬‭‬so.‬
‭ACCOUNTING‭‬‭‬ESTIMATES‬
‭ ‭‬‭‬change‭‬‭‬in‭‬‭‬accounting‭‬‭‬estimate‭‬‭‬is‭‬‭‬an‭‬‭‬adjustment‭‬‭‬of‬
A
‭the‭‬‭‬carrying‭‬‭‬amount‭‬‭‬of‭‬‭‬an‭‬‭‬asset‭‬‭‬or‭‬‭‬liability,‭‬‭‬or‭‬‭‬the‬
‭amount‭‬‭‬of‭‬‭‬the‭‬‭‬periodic‭‬‭‬consumption‭‬‭‬of‭‬‭‬an‭‬‭‬asset,‭‬‭‬that‬
‭results‭‬‭‬from‭‬‭‬the‭‬‭‬assessment‭‬‭‬of‭‬‭‬the‭‬‭‬present‭‬‭‬status‭‬‭‬of‭‬‭‬and‬
‭expected‭‬‭‬future‭‬‭‬benefits‭‬‭‬and‭‬‭‬obligations‭‬‭‬associated‬
‭with,‭‬‭‬assets‭‬‭‬and‭‬‭‬liabilities.‭‬‭‬Change‭‬‭‬in‭‬‭‬accounting‬
‭estimates‭‬‭‬result‭‬‭‬from‭‬‭‬new‭‬‭‬information‭‬‭‬or‭‬‭‬new‬
‭development‭‬‭‬and,‭‬‭‬accordingly,‭‬‭‬not‭‬‭‬correction‭‬‭‬of‭‬‭‬errors.‬
‭By‭‬‭‬its‭‬‭‬nature,‭‬‭‬revision‭‬‭‬of‭‬‭‬an‭‬‭‬estimate‭‬‭‬does‭‬‭‬not‭‬‭‬relate‭‬‭‬to‬
‭prior‭‬‭‬periods.‬
‭Estimation‭‬‭‬involves‭‬‭‬judgment‭‬‭‬based‭‬‭‬on‭‬‭‬the‭‬‭‬latest‬
‭available,‭‬‭‬reliable‭‬‭‬information.‭‬‭‬For‭‬‭‬example,‭‬‭‬estimates‬
‭may‭‬‭‬be‭‬‭‬required‭‬‭‬on‭‬‭‬the‭‬‭‬determination‭‬‭‬of‭‬‭‬the‭‬‭‬following:‬
‭a.‭‬‭‬bad‭‬‭‬debts‬
‭b.‭‬‭‬Inventory‭‬‭‬obsolescence‬
‭c.‭‬‭‬Fair‭‬‭‬value‭‬‭‬of‭‬‭‬financial‭‬‭‬assets‭‬‭‬or‭‬‭‬financial‭‬‭‬liabilities‬
‭d.‭‬‭‬Useful‭‬‭‬lives‭‬‭‬of‭‬‭‬depreciable‭‬‭‬assets‬
‭e.‭‬‭‬Warranty‭‬‭‬obligations‬
‭The‭‬‭‬use‭‬‭‬of‭‬‭‬reasonable‭‬‭‬estimates‭‬‭‬is‭‬‭‬an‭‬‭‬essential‭‬‭‬part‭‬‭‬of‬
‭the‭‬‭‬preparation‭‬‭‬of‭‬‭‬financial‭‬‭‬statements‭‬‭‬and‭‬‭‬does‭‬‭‬not‬
‭undermine‭‬‭‬their‭‬‭‬reliability.‬
‭A‭‬‭‬change‭‬‭‬in‭‬‭‬the‭‬‭‬measurement‭‬‭‬base‭‬‭‬applied‭‬‭‬is‭‬‭‬a‭‬‭‬change‬
‭in‭‬‭‬accounting‭‬‭‬policy‭‬‭‬and‭‬‭‬not‭‬‭‬a‭‬‭‬change‭‬‭‬in‭‬‭‬accounting‬
‭estimates.‬
‭ REATMENT‭‬‭‬OF‭‬‭‬CHANGE‭‬‭‬IN‭‬‭‬ACCOUNTING‬
T
‭ESTIMATES‬
‭ he‭‬‭‬effect‭‬‭‬of‭‬‭‬a‭‬‭‬change‭‬‭‬in‭‬‭‬accounting‭‬‭‬estimates‭‬‭‬shall‭‬‭‬be‬
T
‭recognized‭‬‭‬prospectively‭‬‭‬by‭‬‭‬including‭‬‭‬it‭‬‭‬in‭‬‭‬profit‭‬‭‬or‬
‭loss‭‬‭‬in:‬
‭A.‭‬‭‬The‭‬‭‬period‭‬‭‬of‭‬‭‬the‭‬‭‬change,‭‬‭‬if‭‬‭‬the‭‬‭‬change‭‬‭‬affect‭‬‭‬that‬
‭period‭‬‭‬only:‭‬‭‬or‬
‭B.‭‬‭‬The‭‬‭‬period‭‬‭‬of‭‬‭‬the‭‬‭‬change‭‬‭‬and‭‬‭‬future‭‬‭‬period,‭‬‭‬if‭‬‭‬the‬
‭change‭‬‭‬affects‭‬‭‬both.‬
‭Prospective‭‬‭‬application‭‬‭‬means‭‬‭‬recognizing‭‬‭‬the‭‬‭‬effect‬
‭of‭‬‭‬change‭‬‭‬in‭‬‭‬the‭‬‭‬accounting‭‬‭‬estimate‭‬‭‬in‭‬‭‬the‭‬‭‬current‭‬‭‬and‬
‭future‭‬‭‬period‭‬‭‬affected‭‬‭‬by‭‬‭‬the‭‬‭‬change.‭‬‭‬In‭‬‭‬other‭‬‭‬words,‬
‭the‭‬‭‬effect‭‬‭‬of‭‬‭‬change‭‬‭‬in‭‬‭‬accounting‭‬‭‬estimates‭‬‭‬is‭‬‭‬shown‬
‭as‭‬‭‬part‭‬‭‬of‭‬‭‬the‭‬‭‬profit‭‬‭‬and‭‬‭‬loss‭‬‭‬of‭‬‭‬the‭‬‭‬current‭‬‭‬and‭‬‭‬future‬
‭period‭‬‭‬affected‭‬‭‬by‭‬‭‬the‭‬‭‬change.‭‬‭‬For‭‬‭‬example,‭‬‭‬change‭‬‭‬in‬
‭the‭‬‭‬estimate‭‬‭‬of‭‬‭‬the‭‬‭‬amount‭‬‭‬of‭‬‭‬bad‭‬‭‬debts‭‬‭‬affect‭‬‭‬only‭‬‭‬the‬
‭current‭‬‭‬period’s‭‬‭‬profit‭‬‭‬or‭‬‭‬loss‭‬‭‬and‭‬‭‬therefore‭‬‭‬is‬
r‭ ecognized‭‬‭‬in‭‬‭‬the‭‬‭‬current‭‬‭‬period.‭‬‭‬However,‭‬‭‬a‭‬‭‬change‭‬‭‬in‬
‭the‭‬‭‬estimated‭‬‭‬life‭‬‭‬of‭‬‭‬depreciable‭‬‭‬assets‭‬‭‬affects‬
‭depreciation‭‬‭‬expense‭‬‭‬for‭‬‭‬the‭‬‭‬current‭‬‭‬period‭‬‭‬and‭‬‭‬for‬
‭each‭‬‭‬future‭‬‭‬period‭‬‭‬during‭‬‭‬the‭‬‭‬asset’s‭‬‭‬remaining‭‬‭‬useful‬
‭life.‬
‭In‭‬‭‬both‭‬‭‬cases,‭‬‭‬the‭‬‭‬effect‭‬‭‬of‭‬‭‬the‭‬‭‬change‭‬‭‬relating‭‬‭‬to‭‬‭‬the‬
‭current‭‬‭‬period‭‬‭‬is‭‬‭‬recognized‭‬‭‬as‭‬‭‬income‭‬‭‬or‭‬‭‬expense‭‬‭‬in‬
‭the‭‬‭‬current‭‬‭‬period.‭‬‭‬The‭‬‭‬effect,‭‬‭‬if‭‬‭‬any,‭‬‭‬on‭‬‭‬the‭‬‭‬future‬
‭period‭‬‭‬is‭‬‭‬recognized‭‬‭‬as‭‬‭‬income‭‬‭‬or‭‬‭‬expense‭‬‭‬in‭‬‭‬those‬
‭future‭‬‭‬periods.‬
‭ ISCLOSURE‭‬‭‬OF‭‬‭‬CHANGE‭‬‭‬IN‭‬‭‬ACCOUNTING‬
D
‭POLICY‬
‭An‭‬‭‬entity‭‬‭‬shall‭‬‭‬disclose‭‬‭‬the‭‬‭‬nature‭‬‭‬and‭‬‭‬amount‭‬‭‬of‭‬‭‬a‬
‭change‭‬‭‬in‭‬‭‬an‭‬‭‬accounting‭‬‭‬estimate‭‬‭‬that‭‬‭‬has‭‬‭‬an‭‬‭‬effect‭‬‭‬in‬
‭the‭‬‭‬current‭‬‭‬period‭‬‭‬or‭‬‭‬is‭‬‭‬expected‭‬‭‬to‭‬‭‬have‭‬‭‬an‭‬‭‬effect‭‬‭‬in‬
‭future‭‬‭‬periods,‭‬‭‬except‭‬‭‬for‭‬‭‬the‭‬‭‬disclosure‭‬‭‬of‭‬‭‬the‭‬‭‬effect‬
‭on‭‬‭‬future‭‬‭‬periods‭‬‭‬when‭‬‭‬it‭‬‭‬is‭‬‭‬impracticable‭‬‭‬to‭‬‭‬estimate‬
‭that‭‬‭‬effect.‭‬‭‬If‭‬‭‬the‭‬‭‬amount‭‬‭‬of‭‬‭‬file‭‬‭‬effect‭‬‭‬in‭‬‭‬future‭‬‭‬periods‬
‭is‭‬‭‬not‭‬‭‬disclosed‭‬‭‬because‭‬‭‬estimating‭‬‭‬it‭‬‭‬is‭‬‭‬impracticable,‬
‭an‭‬‭‬entity‭‬‭‬shall‭‬‭‬disclose‭‬‭‬that‭‬‭‬fact.‬
‭ RRORS‬
E
‭Errors‭‬‭‬include‭‬‭‬mathematical‭‬‭‬mistakes,‭‬‭‬mistakes‭‬‭‬in‬
‭applying‭‬‭‬accounting‭‬‭‬policies,‭‬‭‬oversights‭‬‭‬or‬
‭misinterpretations‭‬‭‬of‭‬‭‬facts,‭‬‭‬and‭‬‭‬fraud.‬
‭ rior‭‬‭‬Period‭‬‭‬errors‭‬‭‬are‭‬‭‬omissions‭‬‭‬from,‭‬‭‬and‬
P
‭misstatement‭‬‭‬in,‭‬‭‬the‭‬‭‬entity’s‭‬‭‬financial‭‬‭‬statements‭‬‭‬for‬
‭one‭‬‭‬or‭‬‭‬more‭‬‭‬prior‭‬‭‬periods‭‬‭‬arising‭‬‭‬from‭‬‭‬a‭‬‭‬failure‭‬‭‬to‭‬‭‬use‬
‭or‭‬‭‬misuse‭‬‭‬of,‭‬‭‬reliable‭‬‭‬information‭‬‭‬that‬
‭a.‭‬‭‬Was‭‬‭‬available‭‬‭‬when‭‬‭‬financial‭‬‭‬statements‭‬‭‬for‭‬‭‬those‬
‭period‭‬‭‬where‭‬‭‬authorized‭‬‭‬for‭‬‭‬issue;‭‬‭‬and‬
‭b.‭‬‭‬Could‭‬‭‬reasonably‭‬‭‬be‭‬‭‬expected‭‬‭‬to‭‬‭‬have‭‬‭‬been‭‬‭‬obtained‬
‭and‭‬‭‬taken‭‬‭‬into‭‬‭‬account‭‬‭‬in‭‬‭‬the‭‬‭‬preparation‭‬‭‬and‬
‭presentation‭‬‭‬of‭‬‭‬those‭‬‭‬financial‭‬‭‬statements.‬
‭Errors‭‬‭‬can‭‬‭‬arise‭‬‭‬in‭‬‭‬respect‭‬‭‬of‭‬‭‬the‭‬‭‬recognition,‭‬‭‬measure‬
‭and‭‬‭‬presentation‭‬‭‬or‭‬‭‬disclosure‭‬‭‬of‭‬‭‬elements‭‬‭‬of‭‬‭‬financial‬
‭statements.‬
‭ inancial‭‬‭‬Statements‭‬‭‬do‭‬‭‬not‭‬‭‬comply‭‬‭‬with‭‬‭‬PFRS‭‬‭‬if‭‬‭‬they‬
F
‭contain‭‬‭‬either‭‬‭‬material‭‬‭‬errors‭‬‭‬or‭‬‭‬immaterial‭‬‭‬errors‬
‭made‭‬‭‬intentionally‭‬‭‬to‭‬‭‬achieve‭‬‭‬a‭‬‭‬particular‭‬‭‬presentation‬
‭of‭‬‭‬an‭‬‭‬entity’s‭‬‭‬financial‭‬‭‬position,‭‬‭‬financial‭‬‭‬performance‬
‭or‭‬‭‬cash‭‬‭‬flows.‬
‭ REATMENT‭‬‭‬OF‭‬‭‬ERRORS‬
T
‭An‭‬‭‬entity‭‬‭‬shall‭‬‭‬correct‭‬‭‬material‭‬‭‬prior‭‬‭‬period‭‬‭‬errors‬
‭retrospectively‭‬‭‬in‭‬‭‬the‭‬‭‬first‭‬‭‬set‭‬‭‬of‭‬‭‬financial‭‬‭‬statements‬
‭authored‭‬‭‬for‭‬‭‬issued‭‬‭‬after‭‬‭‬their‭‬‭‬discovery‭‬‭‬by:‬
a‭ .‭‬‭‬Restating‭‬‭‬the‭‬‭‬comparative‭‬‭‬amount‭‬‭‬for‭‬‭‬the‭‬‭‬prior‬
‭period(s)‭‬‭‬presented‭‬‭‬in‭‬‭‬which‭‬‭‬error‭‬‭‬occurred;‭‬‭‬or‬
‭b.‭‬‭‬If‭‬‭‬the‭‬‭‬error‭‬‭‬occurred‭‬‭‬before‭‬‭‬the‭‬‭‬earliest‭‬‭‬prior‭‬‭‬period‬
‭presented,‭‬‭‬restating‭‬‭‬the‭‬‭‬opening‭‬‭‬balances‭‬‭‬of‭‬‭‬asset,‬
‭liabilities‭‬‭‬and‭‬‭‬equity‭‬‭‬for‭‬‭‬the‭‬‭‬earliest‭‬‭‬prior‭‬‭‬presented.‬
‭In‭‬‭‬other‭‬‭‬words,‭‬‭‬errors‭‬‭‬should‭‬‭‬be‭‬‭‬handled‭‬‭‬retroactively‬
‭or‭‬‭‬retrospectively.‭‬‭‬Retrospective‭‬‭‬restatement‭‬‭‬is‬
‭correcting‭‬‭‬the‭‬‭‬recognition,‭‬‭‬measurement‭‬‭‬and‭‬‭‬disclosure‬
‭13‬
‭ f‭‬‭‬amounts‭‬‭‬of‭‬‭‬elements‭‬‭‬of‭‬‭‬financial‭‬‭‬statements‭‬‭‬as‭‬‭‬if‭‬‭‬a‬
o
‭prior‭‬‭‬period‭‬‭‬error‭‬‭‬had‭‬‭‬never‭‬‭‬occurred.‬
‭ IMITATION‭‬‭‬OF‭‬‭‬RETROSPECTIVE‬
L
‭RESTATEMENT‬
‭A‭‬‭‬prior‭‬‭‬period‭‬‭‬error‭‬‭‬shall‭‬‭‬be‭‬‭‬corrected‭‬‭‬by‭‬‭‬retrospective‬
‭restatement‭‬‭‬except‬
‭a.‭‬‭‬When‭‬‭‬it‭‬‭‬is‭‬‭‬impracticable‭‬‭‬to‭‬‭‬determine‭‬‭‬the‬
‭period-specific‭‬‭‬effect;‭‬‭‬or‬
‭b.‭‬‭‬When‭‬‭‬it‭‬‭‬is‭‬‭‬impracticable‭‬‭‬to‭‬‭‬determine‭‬‭‬the‬
‭cumulative‭‬‭‬effect‭‬‭‬of‭‬‭‬the‭‬‭‬error‭‬‭‬.‬
‭The‭‬‭‬correction‭‬‭‬of‭‬‭‬a‭‬‭‬prior‭‬‭‬period‭‬‭‬error‭‬‭‬is‭‬‭‬excluded‭‬‭‬from‬
‭profit‭‬‭‬or‭‬‭‬loss‭‬‭‬for‭‬‭‬the‭‬‭‬period‭‬‭‬in‭‬‭‬which‭‬‭‬file‭‬‭‬error‭‬‭‬is‬
‭discovered.‭‬‭‬Any‭‬‭‬information‭‬‭‬presented‭‬‭‬about‭‬‭‬the‭‬‭‬profit‬
‭period,‭‬‭‬including‭‬‭‬any‭‬‭‬historical‭‬‭‬summaries‭‬‭‬of‭‬‭‬financial‬
‭data,‭‬‭‬is‭‬‭‬restated‭‬‭‬as‭‬‭‬far‭‬‭‬back‭‬‭‬as‭‬‭‬is‭‬‭‬practicable.‬
‭When‭‬‭‬it‭‬‭‬is‭‬‭‬impracticable‭‬‭‬to‭‬‭‬determine‭‬‭‬the‭‬‭‬amount‭‬‭‬of‭‬‭‬an‬
‭error‭‬‭‬for‭‬‭‬all‭‬‭‬prior‭‬‭‬periods,‭‬‭‬the‭‬‭‬entity‭‬‭‬restates‭‬‭‬the‬
‭comparative‭‬‭‬information‭‬‭‬prospectively‭‬‭‬from‭‬‭‬the‬
‭earliest‭‬‭‬date‭‬‭‬practicable.‬
‭ ISCLOSURE‭‬‭‬OF‭‬‭‬PRIOR‭‬‭‬PERIOD‭‬‭‬ERRORS.‬
D
‭An‭‬‭‬entity‭‬‭‬shall‭‬‭‬disclose‭‬‭‬the‭‬‭‬following:‬
‭ .‭‬‭‬The‭‬‭‬nature‭‬‭‬of‭‬‭‬prior‭‬‭‬period‭‬‭‬errors:‬
1
‭2.‭‬‭‬The‭‬‭‬amount‭‬‭‬of‭‬‭‬the‭‬‭‬correction‭‬‭‬for‭‬‭‬each‭‬‭‬prior‭‬‭‬period‬
‭presented;‬
‭3.‭‬‭‬Each‭‬‭‬financial‭‬‭‬statement‭‬‭‬line‭‬‭‬item‭‬‭‬affected;‬
‭4.‭‬‭‬Basis‭‬‭‬and‭‬‭‬diluted‭‬‭‬earnings‭‬‭‬per‭‬‭‬share‭‬‭‬if‭‬‭‬applicable;‬
‭ .‭‬‭‬The‭‬‭‬amount‭‬‭‬of‭‬‭‬correction‭‬‭‬at‭‬‭‬the‭‬‭‬beginning‭‬‭‬of‭‬‭‬the‬
5
‭earlier‭‬‭‬prior‭‬‭‬period‭‬‭‬presented,‭‬‭‬and‬
‭ .‭‬‭‬If‭‬‭‬retrospective‭‬‭‬restatement‭‬‭‬is‭‬‭‬impracticable‭‬‭‬for‭‬‭‬a‬
6
‭particular‭‬‭‬prior‭‬‭‬period,‭‬‭‬the‭‬‭‬circumstances‭‬‭‬that‭‬‭‬led‭‬‭‬to‬
‭the‭‬‭‬existence‭‬‭‬of‭‬‭‬the‭‬‭‬condition‭‬‭‬and‭‬‭‬a‭‬‭‬description‭‬‭‬of‭‬‭‬how‬
‭and‭‬‭‬from‭‬‭‬when‭‬‭‬the‭‬‭‬error‭‬‭‬has‭‬‭‬been‭‬‭‬corrected.‬
I‭ MPRACTICABILITY‭‬‭‬OF‭‬‭‬RETROSPECTIVE‬
‭RESTATEMENT‭‬‭‬OF‭‬‭‬PRIOR‭‬‭‬PERIOD‭‬‭‬ERRORS‬
‭The‭‬‭‬following‭‬‭‬instances‭‬‭‬may‭‬‭‬indicate‭‬‭‬the‬
‭impracticability‭‬‭‬to‭‬‭‬adjust‭‬‭‬comparative‭‬‭‬information‭‬‭‬for‬
‭one‭‬‭‬or‭‬‭‬more‭‬‭‬prior‭‬‭‬periods‭‬‭‬to‭‬‭‬achieve‭‬‭‬comparability‬
‭with‭‬‭‬the‭‬‭‬current‭‬‭‬period:‬
‭a.‭‬‭‬The‭‬‭‬data‭‬‭‬may‭‬‭‬not‭‬‭‬have‭‬‭‬been‭‬‭‬collected‭‬‭‬in‭‬‭‬prior‬
‭periods‭‬‭‬in‭‬‭‬a‭‬‭‬way‭‬‭‬that‭‬‭‬allows‭‬‭‬either‭‬‭‬retrospective‬
‭application‭‬‭‬of‭‬‭‬a‭‬‭‬new‭‬‭‬accounting‭‬‭‬policy‭‬‭‬or‭‬‭‬retrospective‬
‭restatement‭‬‭‬to‭‬‭‬correct‭‬‭‬prior‭‬‭‬period;‬
‭b.‭‬‭‬The‭‬‭‬entity‭‬‭‬makes‭‬‭‬estimates‭‬‭‬in‭‬‭‬applying‭‬‭‬an‬
‭accounting‭‬‭‬policy‭‬‭‬to‭‬‭‬elements‭‬‭‬of‭‬‭‬financial‭‬‭‬statements‬
‭recognized‭‬‭‬or‭‬‭‬disclosed‭‬‭‬in‭‬‭‬respect‭‬‭‬of‭‬‭‬transactions,‬
‭other‭‬‭‬events‭‬‭‬or‭‬‭‬conditions.‬
I‭ n‭‬‭‬order,‭‬‭‬therefore,‭‬‭‬to‭‬‭‬apply‭‬‭‬retrospectively‭‬‭‬a‭‬‭‬new‬
‭accounting‭‬‭‬policy‭‬‭‬or‭‬‭‬correct‭‬‭‬a‭‬‭‬prior‭‬‭‬period‭‬‭‬error,‭‬‭‬it‭‬‭‬is‬
‭required‭‬‭‬that‭‬‭‬the‭‬‭‬information‬
a‭ .‭‬‭‬Provides‭‬‭‬evidence‭‬‭‬of‭‬‭‬circumstances‭‬‭‬that‭‬‭‬existed‭‬‭‬o‬
‭the‭‬‭‬date‭‬‭‬at‭‬‭‬which‭‬‭‬the‭‬‭‬transaction,‭‬‭‬other‭‬‭‬events‭‬‭‬or‬
‭conditions‭‬‭‬occurred;‭‬‭‬and‬
‭b.‭‬‭‬Would‭‬‭‬have‭‬‭‬been‭‬‭‬available‭‬‭‬when‭‬‭‬the‭‬‭‬financial‬
‭statements‭‬‭‬for‭‬‭‬that‭‬‭‬prior‭‬‭‬period‭‬‭‬were‭‬‭‬authorized‭‬‭‬for‬
‭issue.‬
‭FINANCIAL‭‬‭‬STATEMENTS‬
‭Statement‭‬‭‬of‭‬‭‬Comprehensive‭‬‭‬Income‬
‭ ‭‬‭‬structured‭‬‭‬financial‭‬‭‬statement‭‬‭‬that‭‬‭‬shows‭‬‭‬the‬
A
‭financial‭‬‭‬performance‭‬‭‬of‭‬‭‬a‭‬‭‬business‭‬‭‬entity‭‬‭‬for‭‬‭‬a‭‬‭‬given‬
‭period.‬
‭Income‬
‭Increases‬ ‭in‬ ‭economic‬ ‭benefits‬ ‭during‬ ‭the‬ ‭accounting‬
‭period‬‭in‬‭the‬‭form‬‭of‬‭inflows‬‭or‬‭enhancement‬‭of‬‭assets‬
‭or‬ ‭decreases‬ ‭of‬ ‭liabilities‬ ‭that‬ ‭result‬ ‭in‬ ‭increases‬ ‭in‬
‭equity‬ ‭other‬ ‭than‬ ‭those‬ ‭relating‬ ‭to‬ ‭contributions‬ ‭from‬
‭equity‭‬‭‬participants.‬
‭Expenses‬
‭Decreases‬ ‭in‬ ‭economic‬‭benefits‬‭during‬‭the‬‭accounting‬
‭period‬ ‭in‬ ‭the‬ ‭form‬ ‭of‬ ‭outflows‬ ‭or‬ ‭depletion‬ ‭or‬
‭incurrences‬ ‭of‬ ‭liabilities‬ ‭that‬ ‭result‬ ‭in‬ ‭decrease‬ ‭in‬
‭equity,‬ ‭other‬ ‭than‬ ‭those‬ ‭relating‬ ‭to‬ ‭distribution‬ ‭to‬
‭equity‭‬‭‬participants.‬
‭Recognition‭‬‭‬of‭‬‭‬Income‭‬‭‬and‭‬‭‬Expenses‬
‭●‬ ‭It‭‬‭‬is‭‬‭‬probable‭‬‭‬that‭‬‭‬any‭‬‭‬future‭‬‭‬economic‬
‭benefit‭‬‭‬associated‭‬‭‬with‭‬‭‬the‭‬‭‬item‭‬‭‬will‭‬‭‬flow‬
‭to‭‬‭‬or‭‬‭‬from‭‬‭‬the‭‬‭‬entity;‭‬‭‬and‬
‭●‬ ‭The‭‬‭‬item‭‬‭‬has‭‬‭‬a‭‬‭‬cost‭‬‭‬or‭‬‭‬value‭‬‭‬that‭‬‭‬can‭‬‭‬be‬
‭measured‭‬‭‬with‭‬‭‬reliability.‬
‭Income‬
‭1.‬ ‭Income‭‬‭‬is‭‬‭‬recognized‭‬‭‬when‭‬‭‬revenue‭‬‭‬has‬
‭been‭‬‭‬earned‭‬‭‬already‭‬‭‬where‭‬‭‬it‭‬‭‬can‭‬‭‬be‬
‭measured‭‬‭‬reliably‭‬‭‬and‭‬‭‬has‭‬‭‬some‭‬‭‬sufficient‬
‭degree‭‬‭‬of‭‬‭‬certainty.‬
‭2.‬ ‭An‭‬‭‬increase‭‬‭‬in‭‬‭‬an‭‬‭‬asset‭‬‭‬or‭‬‭‬a‭‬‭‬decrease‭‬‭‬or‭‬‭‬a‬
‭liability‭‬‭‬has‭‬‭‬risen‭‬‭‬that‭‬‭‬can‭‬‭‬be‭‬‭‬measured‬
‭reliably.‬
‭Expense‬
‭1.‬ ‭A‭‬‭‬decrease‭‬‭‬in‭‬‭‬future‭‬‭‬economic‭‬‭‬benefits‬
‭related‭‬‭‬to‭‬‭‬a‭‬‭‬decrease‭‬‭‬in‭‬‭‬assets‭‬‭‬or‭‬‭‬an‬
‭increase‭‬‭‬of‭‬‭‬a‭‬‭‬liability‭‬‭‬has‭‬‭‬risen‭‬‭‬that‭‬‭‬can‭‬‭‬be‬
‭measured‭‬‭‬reliably.‬
‭2.‬ ‭Expense‭‬‭‬is‭‬‭‬recognized‭‬‭‬when‭‬‭‬it’s‭‬‭‬incurred‬
‭already‭‬‭‬where‭‬‭‬it‭‬‭‬can‭‬‭‬be‭‬‭‬measured‭‬‭‬reliably‬
‭and‭‬‭‬has‭‬‭‬some‭‬‭‬sufficient‭‬‭‬degree‭‬‭‬of‬
‭certainty.‬
‭3.‬
‭Methods‭‬‭‬of‭‬‭‬Recognizing‭‬‭‬Expenses‬
‭1.‬ ‭Matching‭‬‭‬cost‭‬‭‬with‭‬‭‬revenue‬
‭2.‬ ‭Systematic‭‬‭‬and‭‬‭‬rational‭‬‭‬allocation‬
‭3.‬ ‭Immediate‭‬‭‬recognition‬
*‭ Note:‭‬‭‬refer‭‬‭‬to‭‬‭‬chapter‭‬‭‬1‬
‭Determination‭‬‭‬of‭‬‭‬Profit‬
‭●‬ ‭Capital‭‬‭‬Maintenance‭‬‭‬Approach‬
‭14‬
1‭ .‬ ‭Financial‭‬‭‬Capital‭‬‭‬Maintenance‬
‭2.‬ ‭Physical‭‬‭‬Capital‭‬‭‬Maintenance‬
‭●‬ ‭Transaction‭‬‭‬Approach‬
‭*Note:‭‬‭‬refer‭‬‭‬to‭‬‭‬chapter‭‬‭‬1‭‬‭‬(edited)‬
‭Example:‭‬‭‬Capital‭‬‭‬Maintenance‭‬‭‬Approach‬
‭Titanium‭‬‭‬Company‭‬‭‬provides‭‬‭‬the‭‬‭‬following‭‬‭‬data‭‬‭‬for‭‬‭‬the‬
‭current‭‬‭‬year:‬
‭ y‭‬‭‬reason‭‬‭‬of‭‬‭‬changes‭‬‭‬in‭‬‭‬prices‭‬‭‬and‭‬‭‬inflation‭‬‭‬rates,‭‬‭‬the‬
B
‭total‭‬‭‬assets‭‬‭‬and‭‬‭‬liabilities‭‬‭‬on‭‬‭‬January‭‬‭‬1‭‬‭‬had‭‬‭‬a‭‬‭‬current‬
‭cost‭‬‭‬of‭‬‭‬P2,100.00‭‬‭‬and‭‬‭‬P1,400.00‭‬‭‬respectively.‬
‭Financial‭‬‭‬Capital‭‬‭‬Maintenance‬
‭Physical‭‬‭‬Capital‭‬‭‬Maintenance‬
‭ osses‬ ‭represent‬ ‭other‬ ‭items‬ ‭that‬ ‭meet‬ ‭the‬
‭3.‬ L
‭definition‬ ‭of‬ ‭expenses‬ ‭and‬ ‭may‬ ‭or‬ ‭may‬ ‭not‬
‭arise‬‭in‬‭the‬‭course‬‭of‬‭the‬‭ordinary‬‭activities‬‭of‬
‭an‭‬‭‬entity.‬
‭ tatement‭‬‭‬of‭‬‭‬Comprehensive‭‬‭‬Income‬
S
‭PAS‬‭1‬‭requires‬‭an‬‭entity‬‭to‬‭present‬‭information‬‭on‬‭the‬
‭following:‬
‭ ‬ ‭Profit‭‬‭‬or‭‬‭‬loss;‬
●
‭●‬ ‭Other‭‬‭‬comprehensive‭‬‭‬income;‭‬‭‬and‬
‭●‬ ‭Comprehensive‭‬‭‬income‬
‭Note:‬ ‭Presenting‬ ‭income‬ ‭statement‬ ‭separately‬ ‭is‬
‭allowed,‬ ‭provided,‬ ‭a‬ ‭separate‬ ‭comprehensive‬ ‭income‬
‭will‭‬‭‬be‭‬‭‬presented.‬
‭ orms‭‬‭‬of‭‬‭‬Income‭‬‭‬Statemen‬‭t‬
F
‭PAS‬ ‭1,‬ ‭paragraph‬ ‭99,‬ ‭provides‬ ‭that‬ ‭an‬ ‭entity‬ ‭shall‬
‭present‬‭an‬‭analysis‬‭or‬‭expenses‬‭recognized‬‭in‬‭profit‬‭or‬
‭loss‬ ‭using‬‭a‬‭classification‬‭based‬‭on‬‭either‬‭the‬‭function‬
‭of‬‭expenses‬‭or‬‭their‬‭nature‬‭within‬‭the‬‭entity,‬‭whichever‬
‭provides‭‬‭‬information‭‬‭‬that‭‬‭‬is‭‬‭‬reliable‭‬‭‬and‭‬‭‬more‭‬‭‬relevant.‬
‭Accordingly,‬ ‭the‬ ‭income‬ ‭statement‬ ‭may‬ ‭be‬ ‭presented‬
‭in‭‬‭‬two‭‬‭‬ways,‭‬‭‬namely‬‭functional‭‬ ‭‬and‭‬‭‬natural‬‭.‬
‭ ransaction‭‬‭‬Approach‬
T
‭Is‬‭the‬‭traditional‬‭method‬‭of‬‭determining‬‭net‬‭income‬‭or‬
‭profit‬ ‭in‬ ‭accordance‬ ‭with‬ ‭the‬ ‭Philippine‬ ‭Accounting‬
‭Standards.‬
‭Income‬
‭1.‬ ‭Revenue‬
‭a.‬ ‭Arises‬ ‭in‬ ‭the‬ ‭course‬ ‭of‬ ‭the‬ ‭ordinary‬
‭activities‬‭of‬‭an‬‭entity‬‭and‬‭is‬‭referred‬‭to‬
‭by‬ ‭a‬ ‭variety‬ ‭of‬ ‭different‬ ‭names.‬ ‭It‬
‭includes‬ ‭sales,‬ ‭fees,‬ ‭interests,‬
‭dividends,‭‬‭‬royalties,‭‬‭‬and‭‬‭‬rent.‬
‭2.‬ ‭Gains‬
‭a.‬ ‭Represent‬ ‭other‬ ‭items‬ ‭that‬ ‭meet‬ ‭the‬
‭definition‬ ‭of‬ ‭income‬ ‭and‬ ‭may‬‭or‬‭may‬
‭not‬ ‭arise‬ ‭in‬‭the‬‭course‬‭of‬‭the‬‭ordinary‬
‭activities‭‬‭‬of‭‬‭‬an‭‬‭‬entity.‬
‭b.‬ ‭Gains‬‭represent‬‭increases‬‭in‬‭economic‬
‭benefits‬ ‭and‬ ‭as‬ ‭such‬ ‭are‬ ‭not‬ ‭different‬
‭in‭‬‭‬nature‭‬‭‬from‭‬‭‬revenue.‬
‭c.‬ ‭Gains‬ ‭may‬ ‭arise‬ ‭from‬ ‭the‬ ‭disposal‬ ‭of‬
‭non‭‬‭‬–‭‬‭‬current‭‬‭‬assets.‬
‭d.‬ ‭Presented‬ ‭separately‬ ‭in‬ ‭the‬ ‭income‬
‭statement.‬
‭Expenses‬
‭1.‬ ‭Encompasses‬ ‭losses‬‭as‬‭well‬‭as‬‭those‬‭expenses‬
‭that‬ ‭arise‬ ‭in‬ ‭the‬ ‭course‬ ‭of‬ ‭the‬ ‭ordinary‬
‭activities‭‬‭‬of‭‬‭‬the‭‬‭‬entity.‬
‭2.‬ ‭Expenses‬ ‭arise‬ ‭in‬ ‭the‬ ‭ordinary‬ ‭course‬ ‭of‬
‭business.‬
‭ x.:‭‬‭‬Forms‭‬‭‬of‭‬‭‬Income‭‬‭‬Statement‬
E
‭ADG‭‬‭‬&‭‬‭‬Co.‭‬‭‬provided‭‬‭‬the‭‬‭‬following‭‬‭‬information‭‬‭‬for‭‬‭‬the‬
‭year‭‬‭‬2020:​‬
‭15‬
‭Nature‭‬‭‬of‭‬‭‬Expense‭‬‭‬Method‬
‭Function‭‬‭‬of‭‬‭‬Expense‭‬‭‬Method‬
‭16‬
‭ wo‬ ‭Statement‬ ‭comprising‬ ‭(1)‬ ‭statement‬ o
‭ f‬
‭●‬ T
‭profit‬ ‭or‬ ‭loss‬ ‭and‬ ‭(2)‬ ‭statement‬ ‭of‬
‭comprehensive‭‬‭‬income‬
‭ ote:‬ ‭Presenting‬ ‭income‬ ‭statement‬ ‭separately‬ ‭is‬
N
‭allowed‬ ‭provided‬ ‭it‬ ‭a‬ ‭separate‬‭comprehensive‬‭income‬
‭will‭‬‭‬be‭‬‭‬presented.‬
‭ rofit‭‬‭‬or‭‬‭‬Loss‬
P
‭Is‬‭income‭‬‭‬less‭‬‭‬expense‬‭,‭‬‭‬excluding‭‬‭‬components‭‬‭‬of‭‬‭‬other‬
‭comprehensive‭‬‭‬income.‬
‭Income‭‬‭‬and‭‬‭‬expenses‭‬‭‬are‭‬‭‬usually‭‬‭‬recognized‭‬‭‬in‭‬‭‬profit‬
‭or‭‬‭‬loss‭‬‭‬unless:‬
‭●‬ ‭They‭‬‭‬are‭‬‭‬items‭‬‭‬of‭‬‭‬other‭‬‭‬comprehensive‬
‭income;‭‬‭‬or‬
‭●‬ ‭They‭‬‭‬are‭‬‭‬required‭‬‭‬by‭‬‭‬other‭‬‭‬PFRS‭‬‭‬to‭‬‭‬be‬
‭recognized‭‬‭‬outside‭‬‭‬of‭‬‭‬profit‭‬‭‬or‭‬‭‬loss.‬
‭Presentation‬
‭●‬ ‭Single‬ ‭Statement‬ ‭of‬ ‭profit‬ ‭or‬ ‭loss‬ ‭and‬ ‭other‬
‭comprehensive‭‬‭‬income‭‬‭‬statement‭‬‭‬or;‬
‭The‬‭profit‬‭or‬‭loss‬‭section‬‭shows‬‭line‬‭items‬‭that‬‭present‬
t‭he‭‬‭‬following‭‬‭‬amounts‭‬‭‬for‭‬‭‬the‭‬‭‬period:‬
‭●‬ ‭Revenue‭‬‭‬presenting,‭‬‭‬separately‭‬‭‬interest‬
‭revenue.‬
‭●‬ ‭Finance‭‬‭‬costs‬
‭●‬ ‭Gains‭‬‭‬and‭‬‭‬losses‭‬‭‬arising‭‬‭‬from‭‬‭‬derecognition‭‬‭‬of‬
‭financial‭‬‭‬assets‭‬‭‬at‭‬‭‬amortized‭‬‭‬costs.‬
‭●‬ ‭Impairment‭‬‭‬losses‭‬‭‬and‭‬‭‬impairment‭‬‭‬gains‭‬‭‬on‬
‭financial‭‬‭‬assets.‬
‭●‬ ‭Gains‭‬‭‬and‭‬‭‬losses‭‬‭‬on‭‬‭‬reclassification‭‬‭‬of‬
‭financial‭‬‭‬assets‭‬‭‬from‭‬‭‬amortized‭‬‭‬cost‭‬‭‬or‭‬‭‬fair‬
‭value‭‬‭‬through‭‬‭‬profit‭‬‭‬other‭‬‭‬comprehensive‬
‭income‭‬‭‬to‭‬‭‬fair‭‬‭‬value‭‬‭‬through‭‬‭‬profit‭‬‭‬or‭‬‭‬loss.‬
‭●‬ ‭Share‭‬‭‬in‭‬‭‬the‭‬‭‬profit‭‬‭‬or‭‬‭‬loss‭‬‭‬of‭‬‭‬associate‭‬‭‬and‭‬‭‬joint‬
‭ventures.‬
‭●‬ ‭Tax‭‬‭‬expenses;‭‬‭‬and‬
‭●‬ ‭Result‭‬‭‬of‭‬‭‬discontinued‭‬‭‬operations.‬
‭Circumstances‬ ‭that‬ ‭would‬ ‭give‬ ‭rise‬ ‭to‬ ‭the‬ ‭separate‬
‭disclosure‭‬‭‬of‭‬‭‬items‭‬‭‬and‭‬‭‬expense‭‬‭‬include:‬
‭●‬ ‭Write‭‬‭‬–‭‬‭‬downs‭‬‭‬of‭‬‭‬inventories‭‬‭‬to‭‬‭‬net‭‬‭‬realizable‬
‭value‭‬‭‬or‭‬‭‬of‭‬‭‬property,‭‬‭‬plant,‭‬‭‬and‭‬‭‬equipment‭‬‭‬to‬
‭recoverable‭‬‭‬amount,‭‬‭‬as‭‬‭‬well‭‬‭‬as‭‬‭‬reversals‭‬‭‬of‬
‭such‭‬‭‬write‭‬‭‬–‭‬‭‬downs;‬
‭●‬ ‭Restructurings‭‬‭‬of‭‬‭‬activities‭‬‭‬of‭‬‭‬an‭‬‭‬entity‭‬‭‬and‬
‭reversals‭‬‭‬of‭‬‭‬any‭‬‭‬provisions‭‬‭‬of‭‬‭‬restructuring‬
‭costs;‬
‭●‬ ‭Disposals‭‬‭‬of‭‬‭‬items‭‬‭‬of‭‬‭‬property,‭‬‭‬plant‭‬‭‬and‬
‭equipment.‬
‭●‬ ‭Disposals‭‬‭‬of‭‬‭‬investments.‬
‭●‬ ‭Discontinued‭‬‭‬operations;‬
‭17‬
‭‬ L
●
‭ itigation‭‬‭‬settlements;‭‬‭‬and‬
‭●‬ ‭Other‭‬‭‬reversals‭‬‭‬of‭‬‭‬provisions.‬
‭PAS‭‬‭‬7‭‬‭‬Statement‭‬‭‬of‭‬‭‬Cash‭‬‭‬Flows‬
‭ he‬‭s‬‭tatement‭‬‭‬of‭‬‭‬cash‭‬‭‬flows‬‭provides‭‬‭‬information‬
T
‭about‭‬‭‬the‭‬‭‬sources‭‬‭‬and‭‬‭‬utilization‭‬‭‬(i.e.,‭‬‭‬historical‬
‭changes)‭‬‭‬of‭‬‭‬cash‭‬‭‬and‭‬‭‬cash‭‬‭‬equivalents‭‬‭‬during‭‬‭‬the‬
‭period.‭‬‭‬The‭‬‭‬statement‭‬‭‬of‭‬‭‬cash‭‬‭‬flows‭‬‭‬presents‭‬‭‬cash‬
‭flows‭‬‭‬according‭‬‭‬to‭‬‭‬the‭‬‭‬following‭‬‭‬classifications:‬
‭ perating‬‭activities‬‭include‭‬‭‬transactions‭‬‭‬that‭‬‭‬enter‭‬‭‬into‬
O
‭the‬‭determination‭‬‭‬of‭‬‭‬profit‭‬‭‬or‭‬‭‬loss‬‭.‭‬‭‬These‭‬‭‬transactions‬
‭normally‭‬‭‬affect‬‭income‭‬‭‬statement‭‬‭‬accounts.‬
‭Examples‭‬‭‬of‭‬‭‬cash‭‬‭‬flows‭‬‭‬from‭‬‭‬Operating‭‬‭‬Activities‬
‭●‬ ‭cash‭‬‭‬receipts‭‬‭‬from‭‬‭‬the‭‬‭‬sale‭‬‭‬of‭‬‭‬goods,‭‬‭‬rendering‬
‭of‭‬‭‬services,‭‬‭‬or‭‬‭‬other‭‬‭‬forms‭‬‭‬of‭‬‭‬income‬
‭●‬ ‭cash‭‬‭‬payments‭‬‭‬for‭‬‭‬purchases‭‬‭‬of‭‬‭‬goods‭‬‭‬and‬
‭services‬
‭●‬ ‭cash‭‬‭‬payments‭‬‭‬for‭‬‭‬operating‭‬‭‬expenses,‭‬‭‬such‭‬‭‬as‬
‭employee‭‬‭‬benefits,‭‬‭‬insurance,‭‬‭‬and‭‬‭‬the‭‬‭‬like,‭‬‭‬and‬
‭payments‭‬‭‬or‭‬‭‬refunds‭‬‭‬of‭‬‭‬income‭‬‭‬taxes‬
‭●‬ ‭cash‭‬‭‬receipts‭‬‭‬and‭‬‭‬payments‭‬‭‬from‭‬‭‬contracts‬
‭held‭‬‭‬for‭‬‭‬dealing‭‬‭‬or‭‬‭‬trading‭‬‭‬purposes‬
I‭ nvesting‭‬‭‬activities‬‭include‭‬‭‬transactions‭‬‭‬that‭‬‭‬affect‬
‭long-term‭‬‭‬assets‬‭and‭‬‭‬other‬‭non-operating‭‬‭‬assets.‬
‭Examples‭‬‭‬of‭‬‭‬cash‭‬‭‬flows‭‬‭‬from‭‬‭‬Investing‭‬‭‬Activities‬
‭●‬ ‭cash‭‬‭‬receipts‭‬‭‬and‭‬‭‬cash‭‬‭‬payments‭‬‭‬in‭‬‭‬the‬
‭acquisition‭‬‭‬and‭‬‭‬disposal‭‬‭‬of‭‬‭‬property,‭‬‭‬plant‭‬‭‬and‬
‭equipment,‭‬‭‬investment‭‬‭‬property,‭‬‭‬intangible‬
‭assets‭‬‭‬and‭‬‭‬other‭‬‭‬noncurrent‭‬‭‬assets‬
‭●‬ ‭cash‭‬‭‬receipts‭‬‭‬and‭‬‭‬cash‭‬‭‬payments‭‬‭‬in‭‬‭‬the‬
‭acquisition‭‬‭‬and‭‬‭‬sale‭‬‭‬of‭‬‭‬equity‭‬‭‬or‭‬‭‬debt‬
‭instruments‭‬‭‬of‭‬‭‬other‭‬‭‬entities‭‬‭‬(other‭‬‭‬than‭‬‭‬those‬
‭that‭‬‭‬are‭‬‭‬classified‭‬‭‬as‭‬‭‬cash‭‬‭‬equivalents‭‬‭‬or‭‬‭‬held‬
‭for‭‬‭‬trading)‬
‭●‬ ‭cash‭‬‭‬receipts‭‬‭‬and‭‬‭‬cash‭‬‭‬payments‭‬‭‬on‭‬‭‬derivative‬
‭assets‭‬‭‬and‭‬‭‬liabilities‭‬‭‬(other‭‬‭‬than‭‬‭‬those‭‬‭‬that‭‬‭‬are‬
‭held‭‬‭‬for‭‬‭‬trading‭‬‭‬or‭‬‭‬classified‭‬‭‬as‭‬‭‬financing‬
‭activities)‬
‭●‬ ‭loans‭‬‭‬to‭‬‭‬other‭‬‭‬parties‭‬‭‬and‭‬‭‬collections‭‬‭‬thereof‬
‭(other‭‬‭‬than‭‬‭‬loans‭‬‭‬made‭‬‭‬by‭‬‭‬a‭‬‭‬financial‬
‭institution)‬
‭ inancing‭‬‭‬activities‬‭include‭‬‭‬transactions‭‬‭‬that‭‬‭‬affect‬
F
‭equity‬‭and‬‭non-operating‭‬‭‬liabilities.‬
‭Examples‭‬‭‬of‭‬‭‬cash‭‬‭‬flows‭‬‭‬from‭‬‭‬Financing‭‬‭‬Activities‬
‭●‬ ‭cash‭‬‭‬receipts‭‬‭‬from‭‬‭‬issuing‭‬‭‬shares‭‬‭‬or‭‬‭‬other‬
‭equity‭‬‭‬instruments‭‬‭‬and‭‬‭‬cash‭‬‭‬payments‭‬‭‬to‬
‭redeem‭‬‭‬them‬
‭●‬ ‭cash‭‬‭‬receipts‭‬‭‬from‭‬‭‬issuing‭‬‭‬notes,‭‬‭‬loans,‭‬‭‬bonds‬
‭and‭‬‭‬mortgage‭‬‭‬payable‭‬‭‬and‭‬‭‬other‭‬‭‬short-term‭‬‭‬or‬
‭long-term‭‬‭‬borrowings,‭‬‭‬and‭‬‭‬their‭‬‭‬repayments‬
‭●‬ ‭cash‭‬‭‬payments‭‬‭‬by‭‬‭‬a‭‬‭‬lessee‭‬‭‬for‭‬‭‬the‭‬‭‬reduction‭‬‭‬of‬
‭the‭‬‭‬outstanding‭‬‭‬liability‭‬‭‬relating‭‬‭‬to‭‬‭‬a‭‬‭‬lease.‬
‭Remember‭‬‭‬the‭‬‭‬ff:‬
‭ ‬ O
➔
‭ perating‬‭activities‬‭affect‭‬‭‬profit‭‬‭‬or‭‬‭‬loss‬
‭➔‬ ‭Investing‭‬‭‬activities‬‭affect‭‬‭‬non-current‭‬‭‬assets‬
‭and‭‬‭‬other‭‬‭‬investment‬
‭➔‬ ‭Financing‭‬‭‬activities‬‭affect‭‬‭‬borrowings‭‬‭‬and‬
‭equity‬
‭Core‭‬‭‬principle‬
‭➔‬ ‭Include‬‭only‭‬‭‬transaction‭‬‭‬that‭‬‭‬have‭‬‭‬affected‬
‭cash‭‬‭‬and‭‬‭‬cash‭‬‭‬equivalents‭‬‭‬(‭‬‭‬purchase‭‬‭‬of‭‬‭‬assets‬
‭by‭‬‭‬paying‭‬‭‬cash)‬
‭➔‬ ‭Exclude‬‭transactions‭‬‭‬that‭‬‭‬have‭‬‭‬ot‭‬‭‬affected‭‬‭‬cash‬
‭and‭‬‭‬cash‭‬‭‬equivalents‭‬‭‬(purchase‭‬‭‬if‭‬‭‬assets‭‬‭‬by‬
‭issuing‭‬‭‬notes‭‬‭‬payable‭‬‭‬or‭‬‭‬shares‭‬‭‬of‭‬‭‬stocks‬
‭Interests‭‬‭‬and‭‬‭‬Dividends‬
‭Reporting‭‬‭‬cash‭‬‭‬flows‭‬‭‬from‭‬‭‬operating‭‬‭‬activities‬
‭1.‬ ‭Direct‭‬‭‬method‬‭-‭‬‭‬shows‭‬‭‬each‭‬‭‬major‭‬‭‬class‭‬‭‬of‬
‭gross‬‭cash‭‬‭‬receipts‭‬‭‬and‬‭gross‬‭cash‭‬‭‬payments.‬
‭a.‬
‭2.‬ ‭Indirect‭‬‭‬method‬‭-‭‬‭‬adjusts‭‬‭‬accrual‭‬‭‬basis‭‬‭‬profit‬
‭or‭‬‭‬loss‭‬‭‬for‭‬‭‬the‭‬‭‬effects‭‬‭‬of‭‬‭‬changes‭‬‭‬in‭‬‭‬operating‬
‭assets‭‬‭‬and‭‬‭‬liabilities‭‬‭‬and‭‬‭‬effects‭‬‭‬of‭‬‭‬non-cash‬
‭items.‬
‭Statement‭‬‭‬of‭‬‭‬Financial‭‬‭‬Position‬
‭●‬ ‭Shows‭‬‭‬the‭‬‭‬entity’s‭‬‭‬financial‭‬‭‬condition‭‬‭‬as‭‬‭‬at‭‬‭‬a‬
‭certain‭‬‭‬date.‭‬‭‬It‭‬‭‬includes‭‬‭‬line‭‬‭‬items‭‬‭‬that‭‬‭‬present‬
‭the‭‬‭‬following‭‬‭‬amounts.‬
‭●‬ ‭Evaluates‭‬‭‬an‭‬‭‬entity’s‭‬‭‬liquidity,‭‬‭‬financial‬
‭flexibility,‭‬‭‬ability‭‬‭‬to‭‬‭‬generate‭‬‭‬profits‭‬‭‬and‭‬‭‬its‬
‭solvency.‬
‭●‬ ‭Liquidity:‭‬‭‬refers‭‬‭‬to‭‬‭‬the‭‬‭‬availability‭‬‭‬of‬
‭cash‭‬‭‬in‭‬‭‬the‭‬‭‬near‭‬‭‬future‭‬‭‬after‭‬‭‬taking‬
‭account‭‬‭‬of‭‬‭‬the‭‬‭‬financial‭‬‭‬commitment‭‬‭‬of‬
‭the‭‬‭‬period.‬
‭●‬ ‭Financial‭‬‭‬Flexibility:‭‬‭‬ability‭‬‭‬to‭‬‭‬take‬
‭effective‭‬‭‬actions‭‬‭‬to‭‬‭‬alter‭‬‭‬the‭‬‭‬amounts‬
‭and‭‬‭‬timings‭‬‭‬of‭‬‭‬cash‭‬‭‬flows‭‬‭‬so‭‬‭‬that‭‬‭‬it‭‬‭‬can‬
‭respond‭‬‭‬to‭‬‭‬unexpected‭‬‭‬needs‭‬‭‬and‬
‭opportunities.‬
‭●‬ ‭Solvency:‭‬‭‬Availability‭‬‭‬of‭‬‭‬cash‭‬‭‬over‭‬‭‬the‬
‭longer‭‬‭‬term‭‬‭‬to‭‬‭‬meet‭‬‭‬financial‬
‭commitment‭‬‭‬as‭‬‭‬they‭‬‭‬fall‭‬‭‬due.‬
‭ lements‭‬‭‬of‭‬‭‬Financial‭‬‭‬Position‬
E
‭Assets‬
‭Resources‬ ‭controlled‬ ‭by‬ ‭the‬ ‭entity‬ ‭as‬ ‭a‬ ‭result‬ ‭of‬ ‭past‬
‭events‬ ‭and‬ ‭from‬ ‭which‬ ‭future‬ ‭economic‬ ‭benefits‬ ‭are‬
‭expected‭‬‭‬to‭‬‭‬flow‭‬‭‬to‭‬‭‬the‭‬‭‬entity.‬
‭Liabilities‬
‭Present‬ ‭obligations‬ ‭of‬ ‭the‬ ‭entity‬ ‭arising‬ ‭from‬ ‭past‬
‭events,‬ ‭the‬ ‭settlement‬ ‭of‬ ‭which‬ ‭are‬ ‭expected‬‭to‬‭result‬
‭in‬ ‭an‬ ‭outflow‬ ‭from‬‭the‬‭entity‬‭of‬‭resources‬‭embodying‬
‭economic‭‬‭‬benefits.‬
‭18‬
‭ quity‬
E
‭Residual‬ ‭interest‬ ‭in‬ ‭the‬ ‭assets‬ ‭of‬ ‭the‬ ‭entity‬ ‭after‬
‭deducting‭‬‭‬all‭‬‭‬its‭‬‭‬liabilities.‬
‭Resources‬ ‭controlled‬ ‭by‬ ‭the‬ ‭entity‬ ‭as‬ ‭a‬ ‭result‬ ‭of‬ ‭past‬
‭events‬ ‭and‬ ‭from‬ ‭which‬ ‭future‬ ‭economic‬ ‭benefits‬ ‭are‬
‭expected‭‬‭‬to‭‬‭‬flow‭‬‭‬to‭‬‭‬the‭‬‭‬entity.‬
‭ ecognition‭‬‭‬Criteria‭‬‭‬(old)‬
R
‭Is‭‬‭‬the‭‬‭‬process‭‬‭‬of‭‬‭‬incorporating‭‬‭‬in‭‬‭‬the‭‬‭‬statement‭‬‭‬of‬
‭financial‭‬‭‬position‭‬‭‬an‭‬‭‬item‭‬‭‬that‭‬‭‬meets‭‬‭‬the‭‬‭‬definition‭‬‭‬of‬
‭an‭‬‭‬element‭‬‭‬and‭‬‭‬satisfies‭‬‭‬the‭‬‭‬criteria‭‬‭‬for‭‬‭‬recognition‭‬‭‬set‬
‭out‭‬‭‬in‭‬‭‬the‭‬‭‬framework.‬
‭Criteria‭‬‭‬for‭‬‭‬recognition‬
‭●‬ ‭It‭‬‭‬is‭‬‭‬probable‭‬‭‬that‭‬‭‬any‭‬‭‬future‭‬‭‬economic‬
‭benefit‭‬‭‬associated‭‬‭‬with‭‬‭‬the‭‬‭‬item‭‬‭‬will‬
‭flow‭‬‭‬to‭‬‭‬or‭‬‭‬form‭‬‭‬the‭‬‭‬entity.‬
‭●‬ ‭The‭‬‭‬item‭‬‭‬has‭‬‭‬a‭‬‭‬cost‭‬‭‬or‭‬‭‬value‭‬‭‬that‭‬‭‬can‭‬‭‬be‬
‭measured‭‬‭‬with‭‬‭‬reliability.‬
‭Recognition‭‬‭‬criteria‭‬‭‬(New)‬
‭An‭‬‭‬item‭‬‭‬is‭‬‭‬recognized‭‬‭‬if:‬
‭●‬ ‭it‬‭meets‭‬‭‬the‭‬‭‬definition‬‭of‭‬‭‬an‭‬‭‬asset,‭‬‭‬liability,‬
‭equity,‭‬‭‬income‭‬‭‬or‭‬‭‬expense;‬‭and‬
‭●‬ ‭recognizing‭‬‭‬it‭‬‭‬would‬‭provide‭‬‭‬useful‬
‭information‬‭,‭‬‭‬i.e.,‭‬‭‬relevant‭‬‭‬and‭‬‭‬faithfully‬
‭represented‭‬‭‬information.‬
‭Line‭‬‭‬Items‬
‭●‬ ‭Property,‭‬‭‬plant‭‬‭‬and‭‬‭‬equipment‬
‭●‬ ‭Investment‭‬‭‬property‬
‭●‬ ‭Intangible‭‬‭‬assets‬
‭●‬ ‭Financial‭‬‭‬assets‭‬‭‬(other‭‬‭‬than‭‬‭‬e,h,‭‬‭‬and‭‬‭‬i)‬
‭●‬ ‭Investment‭‬‭‬accounted‭‬‭‬for‭‬‭‬using‭‬‭‬the‭‬‭‬equity‬
‭method‬
‭●‬ ‭Biological‭‬‭‬assets‬
‭●‬ ‭Inventories‬
‭●‬ ‭Trade‭‬‭‬and‭‬‭‬other‭‬‭‬receivables‬
‭●‬ ‭Cash‭‬‭‬and‭‬‭‬cash‭‬‭‬equivalents‬
‭●‬ ‭Trade‭‬‭‬and‭‬‭‬other‭‬‭‬payables‬
‭●‬ ‭Provisions‬
‭●‬ ‭Financial‭‬‭‬liabilities‬
‭●‬ ‭Liabilities‭‬‭‬and‭‬‭‬assets‭‬‭‬for‭‬‭‬current‭‬‭‬tax‬
‭●‬ ‭Deferred‭‬‭‬tax‭‬‭‬liabilities‭‬‭‬and‭‬‭‬deferred‭‬‭‬tax‭‬‭‬assets‬
‭●‬ ‭Minority‭‬‭‬interest‬
‭●‬ ‭Issued‭‬‭‬capital‭‬‭‬and‭‬‭‬reserves‭‬‭‬attributable‭‬‭‬to‬
‭equity‭‬‭‬holder‭‬‭‬of‭‬‭‬the‭‬‭‬parent‬
‭ he‭‬‭‬statement‭‬‭‬of‭‬‭‬financial‭‬‭‬position‭‬‭‬shall‭‬‭‬also‭‬‭‬include‬
T
‭line‭‬‭‬items‭‬‭‬that‭‬‭‬present‭‬‭‬the‭‬‭‬following‭‬‭‬amounts:‬
‭●‬ ‭The‭‬‭‬total‭‬‭‬assets‭‬‭‬classified‭‬‭‬as‭‬‭‬held‭‬‭‬for‬
‭sale‭‬‭‬and‭‬‭‬assets‭‬‭‬included‭‬‭‬in‭‬‭‬disposal‬
‭groups‭‬‭‬properly‭‬‭‬classified‭‬‭‬as‭‬‭‬held‭‬‭‬for‬
‭sale.‬
‭●‬ ‭Liabilities‭‬‭‬included‭‬‭‬in‭‬‭‬disposal‭‬‭‬groups‬
‭properly‭‬‭‬classified‭‬‭‬as‭‬‭‬held‭‬‭‬for‭‬‭‬sale‬
‭Additional‭‬‭‬line‭‬‭‬items‭‬‭‬shall‭‬‭‬be‭‬‭‬presented‭‬‭‬when‭‬‭‬such‬
‭presentation‭‬‭‬is‭‬‭‬relevant‭‬‭‬to‭‬‭‬understanding‭‬‭‬the‭‬‭‬entity’s‬
‭financial‭‬‭‬position.‬
‭●‬ ‭The‭‬‭‬nature‭‬‭‬and‭‬‭‬liquidity‭‬‭‬of‭‬‭‬assets‬
‭‬ T
●
‭ he‭‬‭‬function‭‬‭‬of‭‬‭‬assets‭‬‭‬within‭‬‭‬the‭‬‭‬entity‬
‭●‬ ‭The‭‬‭‬amounts,‭‬‭‬nature,‭‬‭‬and‭‬‭‬timing‭‬‭‬of‬
‭liabilities‬
‭Classification‭‬‭‬of‭‬‭‬Assets‬
‭●‬ ‭Current‭‬‭‬Assets‬
‭●‬ ‭It‭‬‭‬is‭‬‭‬expected‭‬‭‬to‭‬‭‬realized‭‬‭‬in,‭‬‭‬or‭‬‭‬is‬
‭intended‭‬‭‬for‭‬‭‬sale‭‬‭‬or‭‬‭‬consumed‭‬‭‬in‭‬‭‬the‬
‭entity’s‭‬‭‬normal‭‬‭‬operating‭‬‭‬cycle;‬
‭●‬ ‭It‭‬‭‬is‭‬‭‬held‭‬‭‬primarily‭‬‭‬for‭‬‭‬the‭‬‭‬purpose‭‬‭‬of‬
‭being‭‬‭‬traded;‬
‭●‬ ‭It‭‬‭‬is‭‬‭‬expected‭‬‭‬to‭‬‭‬be‭‬‭‬realized‭‬‭‬within‬
‭twelve‭‬‭‬months‭‬‭‬after‭‬‭‬the‭‬‭‬date‭‬‭‬of‭‬‭‬the‬
‭statement‭‬‭‬of‭‬‭‬financial‭‬‭‬position‬
‭●‬ ‭It‭‬‭‬is‭‬‭‬cash‭‬‭‬or‭‬‭‬cash‭‬‭‬equivalents‭‬‭‬unless‭‬‭‬it‭‬‭‬is‬
‭restricted‭‬‭‬from‭‬‭‬being‭‬‭‬exchanged‭‬‭‬or‬
‭used‭‬‭‬to‭‬‭‬settle‭‬‭‬a‭‬‭‬liability‭‬‭‬for‭‬‭‬at‭‬‭‬least‭‬‭‬12‬
‭months‭‬‭‬after‭‬‭‬the‭‬‭‬date‭‬‭‬of‭‬‭‬the‭‬‭‬statement‬
‭of‭‬‭‬financial‭‬‭‬position‬
‭●‬ ‭Non‭‬‭‬–‭‬‭‬current‭‬‭‬Assets‬
‭●‬ ‭Long‭‬‭‬term‭‬‭‬in‭‬‭‬nature‬
‭Presentation‬
‭●‬ ‭Unclassified:‬‭shows‭‬‭‬no‭‬‭‬distinction‭‬‭‬between‬
‭current‭‬‭‬and‭‬‭‬non‭‬‭‬–‭‬‭‬current‭‬‭‬items.‬
‭●‬ C
‭ lassified:‬‭shows‭‬‭‬distinctions‭‬‭‬between‭‬‭‬current‬
‭and‭‬‭‬non‭‬‭‬–‭‬‭‬current‭‬‭‬assets‭‬‭‬and‭‬‭‬current‭‬‭‬and‭‬‭‬non‭‬‭‬–‬
‭current‭‬‭‬liabilities.‬
‭●‬ A
‭ ssets‭‬‭‬are‭‬‭‬classified‭‬‭‬and‭‬‭‬presented‭‬‭‬in‬
‭decreasing‭‬‭‬order‭‬‭‬of‭‬‭‬liquidity.‬
‭●‬ ‭Liabilities‭‬‭‬are‭‬‭‬generally‭‬‭‬classified‭‬‭‬and‬
‭presented‭‬‭‬based‭‬‭‬on‭‬‭‬time‭‬‭‬of‭‬‭‬maturity‬
‭such‭‬‭‬that‭‬‭‬liabilities‭‬‭‬which‭‬‭‬are‭‬‭‬currently‬
‭due‭‬‭‬are‭‬‭‬listed‭‬‭‬first.‬
‭ ote:‬‭classified‬‭presentation‬‭shall‬‭be‬‭used‬‭except‬‭when‬
N
‭an‬ ‭unclassified‬ ‭presentation‬ ‭provides‬ ‭information‬‭that‬
‭is‭‬‭‬reliable‭‬‭‬and‭‬‭‬more‭‬‭‬relevant.‬
‭Current‭‬‭‬Assets:‭‬‭‬Line‭‬‭‬Items‬
‭19‬
‭‬
●
‭●‬
‭●‬
‭●‬
‭●‬
‭ ash‭‬‭‬and‭‬‭‬Cash‭‬‭‬Equivalents‬
C
‭Financial‭‬‭‬Assets‬
‭Trade‭‬‭‬and‭‬‭‬other‭‬‭‬receivables‬
‭Inventories‬
‭Prepaid‭‬‭‬expenses‬
‭Cash‬
‭●‬ ‭Money‬
‭●‬ ‭Includes‭‬‭‬undeposited‭‬‭‬cash‭‬‭‬collections‬
‭in‭‬‭‬the‭‬‭‬form‭‬‭‬of‭‬‭‬bills‭‬‭‬and‭‬‭‬coins.‭‬‭‬On‭‬‭‬hand‬
‭or‭‬‭‬in‭‬‭‬bank.‬
‭●‬ ‭Included‭‬‭‬only‭‬‭‬if‭‬‭‬they‭‬‭‬are‭‬‭‬considered‬
‭legal‭‬‭‬tender‭‬‭‬and‭‬‭‬in‭‬‭‬circulation.‬
‭●‬ ‭Money‭‬‭‬substitutes‬
‭●‬ ‭Cash‭‬‭‬items‭‬‭‬in‭‬‭‬the‭‬‭‬form‭‬‭‬of‭‬‭‬customer’s‬
‭checks,‭‬‭‬bank‭‬‭‬drafts,‭‬‭‬money‭‬‭‬orders,‬
‭manager’s‭‬‭‬check,‭‬‭‬cashier’s‭‬‭‬checks,‭‬‭‬or‬
‭traveler’s‭‬‭‬checks.‬
‭●‬ ‭Included‭‬‭‬if‭‬‭‬acceptable‭‬‭‬for‭‬‭‬immediate‬
‭credit.‬
‭●‬ ‭Current‭‬‭‬Working‭‬‭‬funds‬
‭●‬ ‭Funds‭‬‭‬set‭‬‭‬aside‭‬‭‬to‭‬‭‬meet‭‬‭‬current‭‬‭‬needs‬
‭like‭‬‭‬petty‭‬‭‬cash‭‬‭‬fund,‭‬‭‬interest‭‬‭‬fund,‬
‭payroll‭‬‭‬fund,‭‬‭‬and‭‬‭‬dividend‭‬‭‬fund.‬
‭●‬ ‭Included‭‬‭‬if‭‬‭‬maintained‭‬‭‬for‭‬‭‬current‬
‭operation‭‬‭‬of‭‬‭‬business.‬
‭Cash‭‬‭‬Equivalents‬
‭●‬ ‭Short‭‬‭‬term‭‬‭‬liquid‭‬‭‬investments‭‬‭‬that‭‬‭‬are‭‬‭‬readily‬
‭convertible‭‬‭‬to‭‬‭‬known‭‬‭‬amounts‭‬‭‬of‭‬‭‬cash‭‬‭‬and‬
‭which‭‬‭‬are‭‬‭‬subject‭‬‭‬to‭‬‭‬an‭‬‭‬insignificant‭‬‭‬risk‭‬‭‬of‬
‭changes‭‬‭‬in‭‬‭‬value.‬
‭●‬ ‭Short‭‬‭‬maturity‭‬‭‬of‭‬‭‬three‭‬‭‬months‭‬‭‬from‭‬‭‬the‭‬‭‬date‬
‭of‭‬‭‬purchase.‬
‭Miscellaneous‭‬‭‬Topics‬
‭●‬ ‭Foreign‭‬‭‬Currency‬
‭●‬ ‭Valued‭‬‭‬at‭‬‭‬current‭‬‭‬exchange‭‬‭‬rate;‭‬‭‬can‭‬‭‬be‬
‭presented‭‬‭‬as‭‬‭‬current‭‬‭‬or‭‬‭‬non‭‬‭‬current‬
‭●‬ ‭Bank‭‬‭‬Overdraft‬
‭●‬ ‭Result‭‬‭‬of‭‬‭‬over‭‬‭‬issuance‭‬‭‬of‭‬‭‬checks‬
‭against‭‬‭‬the‭‬‭‬amount‭‬‭‬of‭‬‭‬deposits‭‬‭‬in‭‬‭‬the‬
‭bank‭‬‭‬bringing‭‬‭‬a‭‬‭‬credit‭‬‭‬balance‭‬‭‬in‭‬‭‬the‬
‭cash‭‬‭‬in‭‬‭‬bank‭‬‭‬account.‬
‭●‬ ‭Do‭‬‭‬not‭‬‭‬offset‭‬‭‬against‭‬‭‬other‭‬‭‬bank‬
‭accounts‭‬‭‬unless‭‬‭‬immaterial‭‬‭‬or‭‬‭‬two‬
‭several‭‬‭‬bank‭‬‭‬accounts‭‬‭‬are‭‬‭‬maintained‭‬‭‬in‬
‭the‭‬‭‬same‭‬‭‬bank.‬
‭●‬ ‭Post‭‬‭‬Dated‭‬‭‬Checks‬
‭●‬ ‭Not‭‬‭‬part‭‬‭‬of‭‬‭‬cash‭‬‭‬and‭‬‭‬cash‭‬‭‬equivalents;‬
‭considered‭‬‭‬as‭‬‭‬trade‭‬‭‬and‭‬‭‬other‬
‭receivables.‬
‭●‬ ‭Compensating‭‬‭‬Balance‬
‭●‬ ‭Required‭‬‭‬balance‭‬‭‬maintained‭‬‭‬by‭‬‭‬the‬
‭borrower‭‬‭‬with‭‬‭‬the‭‬‭‬bank‭‬‭‬in‭‬‭‬connection‬
‭with‭‬‭‬a‭‬‭‬loan.‬
‭Financial‭‬‭‬Assets‬
‭‬ C
●
‭ ash‬
‭●‬ ‭Equity‭‬‭‬Instrument‭‬‭‬of‭‬‭‬another‭‬‭‬entity;‬
‭●‬ ‭Contractual‭‬‭‬right‬
‭●‬ ‭To‭‬‭‬receive‭‬‭‬cash‭‬‭‬or‭‬‭‬other‭‬‭‬financial‭‬‭‬assets‬
‭from‭‬‭‬another‭‬‭‬entity.‬
‭●‬ ‭To‭‬‭‬exchange‭‬‭‬financial‭‬‭‬assets‭‬‭‬or‬
‭financial‭‬‭‬liabilities‭‬‭‬with‭‬‭‬another‭‬‭‬entity‬
‭under‭‬‭‬conditions‭‬‭‬that‭‬‭‬are‭‬‭‬potentially‬
‭favorable‭‬‭‬to‭‬‭‬the‭‬‭‬entity;‬
‭●‬ ‭Contract‭‬‭‬that‭‬‭‬will‭‬‭‬or‭‬‭‬may‭‬‭‬be‭‬‭‬settled‭‬‭‬in‭‬‭‬the‬
‭entity’s‭‬‭‬own‭‬‭‬equity‭‬‭‬instrument‭‬‭‬and‭‬‭‬is‬
‭●‬ ‭A‭‬‭‬non‭‬‭‬–‭‬‭‬derivative‭‬‭‬for‭‬‭‬which‭‬‭‬the‭‬‭‬entity‬
‭is‭‬‭‬obliged‭‬‭‬to‭‬‭‬receive‭‬‭‬a‭‬‭‬variable‭‬‭‬number‬
‭of‭‬‭‬the‭‬‭‬entity’s‭‬‭‬own‭‬‭‬equity‭‬‭‬instrument;‬
‭or‬
‭●‬ ‭A‭‬‭‬derivative‭‬‭‬that‭‬‭‬will‭‬‭‬or‭‬‭‬may‭‬‭‬be‭‬‭‬settled‬
‭other‭‬‭‬than‭‬‭‬by‭‬‭‬the‭‬‭‬exchange‭‬‭‬of‭‬‭‬a‭‬‭‬fixed‬
‭amount‭‬‭‬of‭‬‭‬cash‭‬‭‬or‭‬‭‬other‭‬‭‬financial‭‬‭‬assets‬
‭for‭‬‭‬a‭‬‭‬fixed‭‬‭‬number‭‬‭‬of‭‬‭‬the‭‬‭‬entity’s‭‬‭‬own‬
‭equity‭‬‭‬instrument‬
‭●‬ ‭Equity‭‬‭‬Instrument‬
‭●‬ ‭Is‭‬‭‬any‭‬‭‬contract‭‬‭‬that‭‬‭‬evidences‭‬‭‬a‭‬‭‬residual‬
‭interest‭‬‭‬in‭‬‭‬the‭‬‭‬assets‭‬‭‬of‭‬‭‬an‭‬‭‬entity‭‬‭‬after‬
‭deducting‭‬‭‬all‭‬‭‬of‭‬‭‬its‭‬‭‬liabilities.‬
‭●‬ ‭Financial‭‬‭‬Instrument‬
‭●‬ ‭Is‭‬‭‬any‭‬‭‬contract‭‬‭‬that‭‬‭‬gives‭‬‭‬rise‭‬‭‬to‭‬‭‬a‬
‭financial‭‬‭‬asset‭‬‭‬of‭‬‭‬one‭‬‭‬entity‭‬‭‬and‭‬‭‬a‬
‭financial‭‬‭‬liability‭‬‭‬or‭‬‭‬equity‭‬‭‬instrument‬
‭of‭‬‭‬another‭‬‭‬entity.‬
‭Categories‭‬‭‬of‭‬‭‬Financial‭‬‭‬Assets‬
‭●‬ ‭Financial‭‬‭‬Assets‭‬‭‬at‭‬‭‬Fair‭‬‭‬Value‭‬‭‬(include)‬
‭●‬ ‭Classified‭‬‭‬as‭‬‭‬current‭‬‭‬assets‬
‭●‬ ‭Held‭‬‭‬for‭‬‭‬trading‬
‭●‬ ‭Those‭‬‭‬whose‭‬‭‬designation‭‬‭‬at‭‬‭‬initial‬
‭recognition‭‬‭‬are‭‬‭‬at‭‬‭‬fair‭‬‭‬value‭‬‭‬through‬
‭profit‭‬‭‬or‭‬‭‬loss‬
‭●‬ ‭investment‭‬‭‬in‭‬‭‬quoted‭‬‭‬equity‬
‭instruments‬
‭●‬ ‭Financial‭‬‭‬Assets‭‬‭‬at‭‬‭‬Amortized‭‬‭‬Cost‬
‭●‬ ‭Classified‭‬‭‬as‭‬‭‬non‭‬‭‬current‭‬‭‬assets‬
‭●‬ ‭It‭‬‭‬is‭‬‭‬intended‭‬‭‬to‭‬‭‬hold‭‬‭‬and‭‬‭‬collect‬
‭contractual‭‬‭‬cash‭‬‭‬flows‭‬‭‬on‭‬‭‬a‭‬‭‬specified‬
‭date;‬
‭●‬ ‭The‭‬‭‬contractual‭‬‭‬cash‭‬‭‬is‭‬‭‬solely‭‬‭‬for‬
‭payment‭‬‭‬of‭‬‭‬principal‭‬‭‬and‭‬‭‬interest‭‬‭‬on‭‬‭‬the‬
‭principal‭‬‭‬amount‭‬‭‬outstanding.‬
‭Trade‭‬‭‬and‭‬‭‬Other‭‬‭‬Receivables‬
‭●‬ ‭Non‭‬‭‬derivative‭‬‭‬financial‭‬‭‬assets‭‬‭‬with‭‬‭‬fixed‭‬‭‬or‬
‭determinable‭‬‭‬payments‭‬‭‬that‭‬‭‬are‭‬‭‬not‭‬‭‬quoted‭‬‭‬in‬
‭an‭‬‭‬active‭‬‭‬market.‬
‭●‬ ‭Credit‭‬‭‬balances‭‬‭‬should‭‬‭‬not‭‬‭‬be‭‬‭‬offset‭‬‭‬and‬
‭classified‭‬‭‬as‭‬‭‬liabilities.‬
‭●‬ ‭Trade‭‬‭‬receivables‬
‭●‬ ‭Arise‭‬‭‬from‭‬‭‬the‭‬‭‬ordinary‭‬‭‬course‭‬‭‬of‬
‭business‭‬‭‬operations;‭‬‭‬collectible‬
‭within‭‬‭‬one‭‬‭‬year‭‬‭‬or‭‬‭‬normal‬
‭20‬
o‭ perating‭‬‭‬cycle‭‬‭‬of‭‬‭‬the‭‬‭‬business‬
‭whichever‭‬‭‬is‭‬‭‬longer.‬
‭●‬ ‭Non‭‬‭‬trade‭‬‭‬receivables‬
‭●‬ ‭Claims‭‬‭‬that‭‬‭‬do‭‬‭‬not‭‬‭‬arise‭‬‭‬from‬
‭ordinary‭‬‭‬course‭‬‭‬of‭‬‭‬business‬
‭operations‬
‭●‬ ‭Disregards‭‬‭‬the‭‬‭‬one‭‬‭‬year‭‬‭‬test.‬
‭Inventories‬
‭●‬ ‭Classes‭‬‭‬of‭‬‭‬Inventories‬
‭●‬ ‭Trading‭‬‭‬Business:‭‬‭‬Merchandise‬
‭Inventory‬
‭●‬ ‭Manufacturing‭‬‭‬Business:‬
‭●‬ ‭Finished‭‬‭‬goods‭‬‭‬inventory;‭‬‭‬goods‬
‭in‭‬‭‬process‭‬‭‬inventory;‭‬‭‬raw‬
‭materials‭‬‭‬inventory;‭‬‭‬tools‬
‭inventory‬
‭●‬ ‭PAS‭‬‭‬2‭‬‭‬defines‭‬‭‬inventories‭‬‭‬as‭‬‭‬assets:‬
‭●‬ ‭Held‭‬‭‬for‭‬‭‬sale‭‬‭‬in‭‬‭‬the‭‬‭‬ordinary‭‬‭‬course‭‬‭‬of‬
‭business;‬
‭●‬ ‭In‭‬‭‬the‭‬‭‬process‭‬‭‬of‭‬‭‬production‭‬‭‬for‭‬‭‬such‬
‭sale;‬
‭●‬ ‭In‭‬‭‬the‭‬‭‬form‭‬‭‬of‭‬‭‬materials‭‬‭‬or‭‬‭‬supplies‭‬‭‬to‬
‭be‭‬‭‬consumed‭‬‭‬in‭‬‭‬the‭‬‭‬production‭‬‭‬process‬
‭or‭‬‭‬in‭‬‭‬the‭‬‭‬rendering‭‬‭‬of‭‬‭‬service.‬
‭Cost‭‬‭‬of‭‬‭‬Inventories‬
‭●‬ ‭All‭‬‭‬cost‭‬‭‬of‭‬‭‬purchase,‭‬‭‬conversion,‭‬‭‬and‭‬‭‬other‬
‭costs‭‬‭‬incurred‭‬‭‬in‭‬‭‬bringing‭‬‭‬the‭‬‭‬inventories‭‬‭‬to‬
‭their‭‬‭‬present‭‬‭‬location‭‬‭‬and‭‬‭‬condition.‬
‭●‬ ‭Cost‭‬‭‬of‭‬‭‬purchase‬
‭●‬ ‭Includes‭‬‭‬purchase‭‬‭‬price,‭‬‭‬import‭‬‭‬duties,‬
‭freight‭‬‭‬in,‭‬‭‬business‭‬‭‬taxes‭‬‭‬and‭‬‭‬other‬
‭incidental‭‬‭‬cost‭‬‭‬to‭‬‭‬acquisition.‬
‭●‬ ‭Decreased‭‬‭‬by‭‬‭‬discounts,‭‬‭‬trade‬
‭allowances‭‬‭‬and‭‬‭‬rebates.‬
‭●‬ ‭Cost‭‬‭‬of‭‬‭‬Conversion‬
‭●‬ ‭Includes‭‬‭‬direct‭‬‭‬materials,‭‬‭‬direct‭‬‭‬labor,‬
‭and‭‬‭‬manufacturing‭‬‭‬overhead.‬
‭●‬ ‭Exclude‭‬‭‬abnormal‭‬‭‬amounts‭‬‭‬of‭‬‭‬wasted‬
‭materials,‭‬‭‬labor‭‬‭‬and‭‬‭‬production‭‬‭‬cost.‬
‭●‬ ‭Storage‭‬‭‬cost‭‬‭‬unless‭‬‭‬necessary‭‬‭‬in‭‬‭‬the‬
‭production‭‬‭‬before‭‬‭‬proceeding‭‬‭‬to‭‬‭‬the‬
‭next‭‬‭‬stage‭‬‭‬of‭‬‭‬production‬
‭●‬ ‭Administrative‭‬‭‬cost‭‬‭‬that‭‬‭‬do‭‬‭‬not‬
‭contribute‭‬‭‬to‭‬‭‬bringing‭‬‭‬inventories‭‬‭‬to‬
‭their‭‬‭‬present‭‬‭‬location‭‬‭‬and‭‬‭‬condition‬
‭Cost‭‬‭‬of‭‬‭‬Inventories‬
‭●‬ ‭Net‭‬‭‬Realizable‭‬‭‬Value‬
‭●‬ ‭Equal‭‬‭‬to‭‬‭‬the‭‬‭‬estimated‭‬‭‬selling‭‬‭‬price‬
‭minus‭‬‭‬the‭‬‭‬estimated‭‬‭‬cost‭‬‭‬of‭‬‭‬completion‬
‭and‭‬‭‬estimated‭‬‭‬cost‭‬‭‬to‭‬‭‬sell‬
‭Determination‭‬‭‬of‭‬‭‬Cost‭‬‭‬of‭‬‭‬Inventories‬
‭Prepaid‭‬‭‬Expenses‬
‭●‬ ‭Includes‭‬‭‬all‭‬‭‬prepayments‭‬‭‬made‭‬‭‬that‭‬‭‬are‬
‭expected‭‬‭‬to‭‬‭‬be‭‬‭‬consumed‭‬‭‬within‭‬‭‬one‭‬‭‬year‭‬‭‬from‬
‭the‭‬‭‬date‭‬‭‬of‭‬‭‬the‭‬‭‬statement‭‬‭‬of‭‬‭‬financial‭‬‭‬position.‬
‭Current‭‬‭‬Assets‭‬‭‬Section‬
‭Notes‭‬‭‬to‭‬‭‬Financial‭‬‭‬Statement‬
‭Non‭‬‭‬-‭‬‭‬current‭‬‭‬Assets:‭‬‭‬Line‭‬‭‬Items‬
‭●‬ ‭Property‭‬‭‬Plant‭‬‭‬and‭‬‭‬Equipment‬
‭●‬ ‭Long‭‬‭‬–‭‬‭‬term‭‬‭‬investments‬
‭●‬ ‭Intangibles‬
‭●‬ ‭Other‭‬‭‬non‭‬‭‬current‭‬‭‬assets‬
‭Property‭‬‭‬Plant‭‬‭‬and‭‬‭‬Equipment‬
‭●‬ ‭PAS‭‬‭‬16‭‬‭‬defines‭‬‭‬property,‭‬‭‬plant‭‬‭‬and‭‬‭‬equipment‬
‭as‭‬‭‬tangible‭‬‭‬items‭‬‭‬that‭‬‭‬are‬
‭●‬ ‭Held‭‬‭‬for‭‬‭‬use‭‬‭‬in‭‬‭‬the‭‬‭‬production‭‬‭‬or‬
‭supply‭‬‭‬of‭‬‭‬goods‭‬‭‬or‭‬‭‬services‭‬‭‬for‭‬‭‬rental‭‬‭‬to‬
‭others,‭‬‭‬or‭‬‭‬for‭‬‭‬administrative‭‬‭‬purposes;‬
‭and‬
‭●‬ ‭Expected‭‬‭‬to‭‬‭‬be‭‬‭‬used‭‬‭‬during‭‬‭‬more‭‬‭‬than‬
‭one‭‬‭‬period.‬
‭●‬ ‭Measurement‭‬‭‬of‭‬‭‬PPE‭‬‭‬at‭‬‭‬recognition‬
‭●‬ ‭Shall‭‬‭‬be‭‬‭‬measured‭‬‭‬at‭‬‭‬cost‬
‭●‬ ‭Cost‭‬‭‬of‭‬‭‬an‭‬‭‬item‭‬‭‬of‭‬‭‬PPE‬
‭●‬ ‭Purchase‭‬‭‬price,‭‬‭‬including‭‬‭‬import‬
‭duties‭‬‭‬and‭‬‭‬non‭‬‭‬refundable‬
‭purchases‭‬‭‬taxes,‭‬‭‬after‭‬‭‬deducting‬
‭trade‭‬‭‬discounts‭‬‭‬and‭‬‭‬rebates.‬
‭●‬ ‭Any‭‬‭‬cost‭‬‭‬directly‭‬‭‬attributable‭‬‭‬to‬
‭bringing‭‬‭‬the‭‬‭‬asset‭‬‭‬to‭‬‭‬the‭‬‭‬location‬
‭and‭‬‭‬condition‭‬‭‬necessary‭‬‭‬for‭‬‭‬it‭‬‭‬to‬
‭be‭‬‭‬capable‭‬‭‬of‭‬‭‬operating‭‬‭‬in‭‬‭‬the‬
‭manner‭‬‭‬intended‭‬‭‬by‭‬‭‬management.‬
‭21‬
‭●‬ T
‭ he‭‬‭‬initial‭‬‭‬estimate‭‬‭‬of‭‬‭‬the‭‬‭‬cost‭‬‭‬of‬
‭dismantling‭‬‭‬and‭‬‭‬removing‭‬‭‬the‬
‭item‭‬‭‬and‭‬‭‬restoring‭‬‭‬the‭‬‭‬site‭‬‭‬on‬
‭which‭‬‭‬it‭‬‭‬is‭‬‭‬located.‬
‭Measurement‭‬‭‬of‭‬‭‬PPE‭‬‭‬after‭‬‭‬Recognition‬
‭●‬ ‭An‭‬‭‬entity‭‬‭‬shall‭‬‭‬choose‭‬‭‬either‭‬‭‬the‭‬‭‬cost‭‬‭‬model‭‬‭‬or‬
‭the‭‬‭‬revaluation‭‬‭‬model‭‬‭‬as‭‬‭‬its‭‬‭‬accounting‭‬‭‬policy‬
‭and‭‬‭‬shall‭‬‭‬apply‭‬‭‬that‭‬‭‬policy‭‬‭‬to‭‬‭‬an‭‬‭‬entire‭‬‭‬class‭‬‭‬of‬
‭PPE.‬
‭●‬ ‭Cost‭‬‭‬Model‬
‭●‬ ‭Carried‭‬‭‬at‭‬‭‬cost‭‬‭‬less‭‬‭‬any‭‬‭‬accumulated‬
‭depreciation‭‬‭‬and‭‬‭‬any‭‬‭‬accumulated‬
‭impairment‭‬‭‬loss.‬
‭●‬ ‭Revaluation‭‬‭‬Model‬
‭●‬ ‭Carried‭‬‭‬at‭‬‭‬revalued‭‬‭‬amount,‭‬‭‬being‭‬‭‬its‬
‭fair‭‬‭‬value‭‬‭‬at‭‬‭‬the‭‬‭‬date‭‬‭‬of‭‬‭‬the‭‬‭‬revaluation‬
‭less‭‬‭‬any‭‬‭‬subsequent‭‬‭‬accumulated‬
‭depreciation‭‬‭‬and‭‬‭‬subsequent‬
‭accumulated‭‬‭‬impairment‭‬‭‬loss.‬
‭●‬ ‭Revaluation‭‬‭‬shall‭‬‭‬be‭‬‭‬made‭‬‭‬with‬
‭sufficient‭‬‭‬regularity‭‬‭‬to‭‬‭‬ensure‭‬‭‬that‭‬‭‬the‬
‭carrying‭‬‭‬amount‭‬‭‬does‭‬‭‬not‭‬‭‬differ‬
‭materially‭‬‭‬form‭‬‭‬that‭‬‭‬which‭‬‭‬will‭‬‭‬be‬
‭determined‭‬‭‬using‭‬‭‬fair‭‬‭‬value‭‬‭‬at‭‬‭‬the‭‬‭‬date‬
‭of‭‬‭‬the‭‬‭‬statement‭‬‭‬of‭‬‭‬financial‭‬‭‬position.‬
‭Class‭‬‭‬of‭‬‭‬Property,‭‬‭‬Plant‭‬‭‬and‭‬‭‬Equipment‬
‭●‬ ‭A‭‬‭‬grouping‭‬‭‬of‭‬‭‬assets‭‬‭‬of‭‬‭‬similar‭‬‭‬nature‭‬‭‬and‭‬‭‬use‬
‭in‭‬‭‬an‭‬‭‬entity’s‭‬‭‬operation‬
‭●‬ ‭If‭‬‭‬an‭‬‭‬asset’s‭‬‭‬carrying‭‬‭‬amount‭‬‭‬is‭‬‭‬increased‭‬‭‬as‭‬‭‬a‬
‭result‭‬‭‬of‭‬‭‬revaluation,‭‬‭‬the‭‬‭‬increase‭‬‭‬shall‭‬‭‬be‬
‭credited‭‬‭‬directly‭‬‭‬to‭‬‭‬equity‭‬‭‬under‬‭revaluation‬
‭surplus.‬
‭●‬ ‭Increases‭‬‭‬shall‭‬‭‬be‭‬‭‬recognized‭‬‭‬in‭‬‭‬profit‭‬‭‬or‭‬‭‬loss‬
‭to‭‬‭‬the‭‬‭‬extent‭‬‭‬that‭‬‭‬it‭‬‭‬reverses‭‬‭‬a‭‬‭‬revaluation‬
‭decrease‭‬‭‬of‭‬‭‬the‭‬‭‬same‭‬‭‬asset‭‬‭‬previously‬
‭recognized‭‬‭‬in‭‬‭‬profit‭‬‭‬or‭‬‭‬loss.‬
‭●‬ ‭If‭‬‭‬an‭‬‭‬asset’s‭‬‭‬carrying‭‬‭‬amount‭‬‭‬is‭‬‭‬decreased‭‬‭‬as‭‬‭‬a‬
‭result‭‬‭‬of‭‬‭‬a‭‬‭‬revaluation,‭‬‭‬the‭‬‭‬decrease‭‬‭‬shall‭‬‭‬be‬
‭recognized‭‬‭‬in‭‬‭‬profit‭‬‭‬or‭‬‭‬loss.‬
‭●‬ ‭However,‭‬‭‬the‭‬‭‬decrease‭‬‭‬shall‭‬‭‬be‭‬‭‬debited‭‬‭‬to‬
‭equity‭‬‭‬under‬‭revaluation‭‬‭‬surplus‬‭to‭‬‭‬the‭‬‭‬extent‬
‭of‭‬‭‬any‭‬‭‬existing‭‬‭‬credit‭‬‭‬balance‭‬‭‬with‭‬‭‬respect‭‬‭‬to‬
‭asset.‬
‭Long‭‬‭‬Term‭‬‭‬Investments‬
‭●‬ ‭Are‭‬‭‬assets‭‬‭‬held‭‬‭‬by‭‬‭‬an‭‬‭‬entity‭‬‭‬intended‭‬‭‬to‬
‭accumulate‭‬‭‬wealth‭‬‭‬or‭‬‭‬resources‭‬‭‬by‭‬‭‬means‭‬‭‬of‬
‭capital‭‬‭‬distribution‭‬‭‬in‭‬‭‬the‭‬‭‬form‭‬‭‬of‭‬‭‬royalties,‬
‭interests,‭‬‭‬dividends,‭‬‭‬rentals,‭‬‭‬capital‬
‭appreciation,‭‬‭‬or‭‬‭‬other‭‬‭‬benefits‭‬‭‬obtained‬
‭through‭‬‭‬trading‭‬‭‬relationships‭‬‭‬with‭‬‭‬the‭‬‭‬intention‬
‭of‭‬‭‬holding‭‬‭‬the‭‬‭‬investments‭‬‭‬for‭‬‭‬more‭‬‭‬than‭‬‭‬one‬
‭year.‬
‭Intangible‬
‭●‬ ‭PAS‭‬‭‬38‭‬‭‬defines‭‬‭‬an‭‬‭‬intangible‭‬‭‬asset‭‬‭‬as‭‬‭‬an‬
‭identifiable‭‬‭‬non‭‬‭‬–‭‬‭‬monetary‭‬‭‬asset‭‬‭‬without‬
‭physical‭‬‭‬substance.‬
‭●‬ ‭Identifiability‭‬‭‬criterion:‬
‭ ‬ I‭ s‭‬‭‬separable‬
●
‭●‬ ‭Arises‭‬‭‬from‭‬‭‬contractual‭‬‭‬or‭‬‭‬other‭‬‭‬legal‬
‭rights.‬
‭●‬ ‭The‭‬‭‬definition‭‬‭‬of‭‬‭‬an‭‬‭‬intangible‭‬‭‬asset‭‬‭‬requires‬
‭an‭‬‭‬intangible‭‬‭‬asset‭‬‭‬to‭‬‭‬be‭‬‭‬identifiable‭‬‭‬to‬
‭distinguish‭‬‭‬it‭‬‭‬from‭‬‭‬goodwill.‬
‭Recognition‭‬‭‬of‭‬‭‬Intangible‭‬‭‬Asset‬
‭●‬ ‭An‭‬‭‬intangible‭‬‭‬asset‭‬‭‬shall‭‬‭‬be‭‬‭‬recognized‭‬‭‬if:‬
‭●‬ ‭It‭‬‭‬is‭‬‭‬probable‭‬‭‬that‭‬‭‬the‭‬‭‬expected‭‬‭‬future‬
‭economic‭‬‭‬benefits‭‬‭‬that‭‬‭‬are‭‬‭‬attributable‬
‭to‭‬‭‬the‭‬‭‬asset‭‬‭‬will‭‬‭‬flow‭‬‭‬to‭‬‭‬the‭‬‭‬entity;‭‬‭‬and‬
‭●‬ ‭The‭‬‭‬cost‭‬‭‬of‭‬‭‬the‭‬‭‬asset‭‬‭‬can‭‬‭‬be‭‬‭‬measured‬
‭reliably.‬
‭●‬ ‭An‭‬‭‬entity‭‬‭‬shall‭‬‭‬assess‭‬‭‬the‭‬‭‬probability‭‬‭‬of‬
‭expected‭‬‭‬future‭‬‭‬expected‭‬‭‬economic‭‬‭‬benefits‬
‭using‭‬‭‬reasonable‭‬‭‬and‭‬‭‬supportable‭‬‭‬assumptions‬
‭that‭‬‭‬represent‭‬‭‬the‭‬‭‬management’s‭‬‭‬best‭‬‭‬estimate‬
‭of‭‬‭‬the‭‬‭‬set‭‬‭‬of‭‬‭‬economic‭‬‭‬conditions‭‬‭‬that‭‬‭‬will‬
‭exist‭‬‭‬over‭‬‭‬the‭‬‭‬useful‭‬‭‬life‭‬‭‬of‭‬‭‬the‭‬‭‬asset.‬
‭Measurement‭‬‭‬of‭‬‭‬Intangible‭‬‭‬Assets‬
‭●‬ ‭Measure‭‬‭‬initially‭‬‭‬at‭‬‭‬cost‬
‭●‬ ‭Subsequent‭‬‭‬measurement:‬
‭●‬ ‭Cost‭‬‭‬model‭‬‭‬or‭‬‭‬revaluation‭‬‭‬model‭‬‭‬as‭‬‭‬its‬
‭accounting‭‬‭‬policy.‬
‭●‬ ‭If‭‬‭‬an‭‬‭‬intangible‭‬‭‬asset‭‬‭‬is‭‬‭‬accounted‭‬‭‬for‬
‭using‭‬‭‬the‭‬‭‬revaluation‭‬‭‬model,‭‬‭‬all‭‬‭‬the‬
‭other‭‬‭‬assets‭‬‭‬in‭‬‭‬its‭‬‭‬class‭‬‭‬shall‭‬‭‬also‭‬‭‬be‬
‭accounted‭‬‭‬for‭‬‭‬using‭‬‭‬the‭‬‭‬same‭‬‭‬model,‬
‭unless‭‬‭‬there‭‬‭‬are‭‬‭‬no‭‬‭‬active‭‬‭‬market‭‬‭‬for‬
‭those‭‬‭‬assets.‬
‭Class‭‬‭‬of‭‬‭‬intangible‭‬‭‬assets‬
‭●‬ ‭Grouping‭‬‭‬of‭‬‭‬assets‭‬‭‬of‭‬‭‬similar‭‬‭‬nature‭‬‭‬and‭‬‭‬use‭‬‭‬in‬
‭any‭‬‭‬entity’s‭‬‭‬operation.‬
‭●‬ ‭Broadly‭‬‭‬classified‭‬‭‬as‭‬‭‬identifiable‭‬‭‬and‬
‭unidentifiable.‬
‭●‬ ‭The‭‬‭‬classes‭‬‭‬of‭‬‭‬intangible‭‬‭‬assets‭‬‭‬are‬
‭disaggregated‭‬‭‬(aggregated)‭‬‭‬into‭‬‭‬smaller‬
‭(larger)‭‬‭‬classes‭‬‭‬if‭‬‭‬these‭‬‭‬results‭‬‭‬in‭‬‭‬more‭‬‭‬relevant‬
‭information‭‬‭‬for‭‬‭‬the‭‬‭‬users‭‬‭‬of‭‬‭‬the‭‬‭‬financial‬
‭statements.‬
‭Other‭‬‭‬non‭‬‭‬current‭‬‭‬assets‬
‭●‬ ‭This‭‬‭‬is‭‬‭‬the‭‬‭‬line‭‬‭‬items‭‬‭‬that‭‬‭‬present‭‬‭‬non‭‬‭‬–‭‬‭‬current‬
‭assets‭‬‭‬not‭‬‭‬falling‭‬‭‬under‭‬‭‬the‭‬‭‬classification‭‬‭‬of‬
‭property,‭‬‭‬plant,‭‬‭‬and‭‬‭‬equipment,‭‬‭‬long‭‬‭‬term‬
‭investment,‭‬‭‬or‭‬‭‬intangibles.‬
‭Non‭‬‭‬-‭‬‭‬current‭‬‭‬Asset‭‬‭‬Section‬
‭Notes‭‬‭‬to‭‬‭‬Financial‭‬‭‬Statement‬
‭22‬
‭●‬
‭ iabilities‬
L
‭Characteristics‭‬‭‬of‭‬‭‬Liabilities‬
‭●‬ ‭It‭‬‭‬is‭‬‭‬a‭‬‭‬present‭‬‭‬obligation‭‬‭‬of‭‬‭‬an‭‬‭‬entity,‭‬‭‬and‭‬‭‬not‭‬‭‬a‬
‭future‭‬‭‬commitment.‬
‭●‬ ‭It‭‬‭‬is‭‬‭‬legally‭‬‭‬enforceable‭‬‭‬as‭‬‭‬a‭‬‭‬consequence‭‬‭‬of‬
‭binding‭‬‭‬contract‭‬‭‬or‭‬‭‬statutory‭‬‭‬requirements,‭‬‭‬or‬
‭when‭‬‭‬the‭‬‭‬asset‭‬‭‬is‭‬‭‬delivered.‬
‭●‬ ‭It‭‬‭‬arises‭‬‭‬from‭‬‭‬business‭‬‭‬practice,‭‬‭‬customs,‭‬‭‬and‭‬‭‬a‬
‭desire‭‬‭‬to‭‬‭‬maintain‭‬‭‬good‭‬‭‬business‭‬‭‬relations‭‬‭‬or‬
‭act‭‬‭‬in‭‬‭‬an‭‬‭‬equitable‭‬‭‬manner.‬
‭●‬ ‭The‭‬‭‬settlement‭‬‭‬of‭‬‭‬the‭‬‭‬obligation‭‬‭‬usually‬
‭involves‭‬‭‬the‭‬‭‬giving‭‬‭‬up‭‬‭‬of‭‬‭‬an‭‬‭‬entity’s‭‬‭‬resource.‬
‭Financial‭‬‭‬Liabilities‬
‭●‬ ‭Provide‭‬‭‬financing‭‬‭‬on‭‬‭‬a‭‬‭‬long‭‬‭‬–‭‬‭‬term‭‬‭‬basis.‬
‭●‬ ‭Not‭‬‭‬due‭‬‭‬for‭‬‭‬settlement‭‬‭‬within‭‬‭‬12‭‬‭‬months‭‬‭‬after‬
‭the‭‬‭‬statement‭‬‭‬of‭‬‭‬financial‭‬‭‬position‭‬‭‬date‭‬‭‬are‭‬‭‬non‬
‭–‭‬‭‬current‭‬‭‬liabilities.‬
‭●‬ ‭Classified‭‬‭‬as‭‬‭‬current‭‬‭‬when‭‬‭‬they‭‬‭‬are‭‬‭‬due‭‬‭‬to‭‬‭‬be‬
‭settled‭‬‭‬within‭‬‭‬12‭‬‭‬months‭‬‭‬after‭‬‭‬the‭‬‭‬date‭‬‭‬of‭‬‭‬the‬
‭statement‭‬‭‬of‭‬‭‬financial‭‬‭‬position,‭‬‭‬even‭‬‭‬if:‬
‭●‬ ‭The‭‬‭‬original‭‬‭‬term‭‬‭‬was‭‬‭‬for‭‬‭‬a‭‬‭‬period‬
‭longer‭‬‭‬than‭‬‭‬twelve‭‬‭‬months;‭‬‭‬and‬
‭●‬ ‭An‭‬‭‬agreement‭‬‭‬to‭‬‭‬refinance,‭‬‭‬or‭‬‭‬to‬
‭reschedule‭‬‭‬payments,‭‬‭‬on‭‬‭‬a‭‬‭‬long‭‬‭‬–‭‬‭‬term‬
‭basis‭‬‭‬is‭‬‭‬completed‭‬‭‬after‭‬‭‬the‭‬‭‬balance‬
‭sheet‭‬‭‬date‭‬‭‬and‭‬‭‬before‭‬‭‬the‭‬‭‬financial‬
‭statements‭‬‭‬are‭‬‭‬authorized‭‬‭‬for‭‬‭‬issue.‬
‭Current‭‬‭‬Liabilities:‭‬‭‬Line‭‬‭‬Items‬
‭●‬ ‭Trade‭‬‭‬and‭‬‭‬other‭‬‭‬payables‬
‭●‬ ‭Provisions‬
‭●‬ ‭Liabilities‭‬‭‬for‭‬‭‬current‭‬‭‬tax‬
‭●‬ ‭Current‭‬‭‬portion‭‬‭‬of‭‬‭‬non‭‬‭‬–‭‬‭‬current‭‬‭‬financial‬
‭liabilities‬
‭●‬ ‭Short‭‬‭‬–‭‬‭‬term‭‬‭‬loans‬
‭●‬ ‭Warranty‭‬‭‬Payable‬
‭Non‭‬‭‬-‭‬‭‬current‭‬‭‬Liabilities:‭‬‭‬Line‭‬‭‬Items‬
‭●‬ ‭Long‭‬‭‬–‭‬‭‬term‭‬‭‬borrowing‭‬‭‬(non‭‬‭‬–‭‬‭‬current‭‬‭‬portion)‬
‭●‬ ‭Deferred‭‬‭‬tax‭‬‭‬liability‬
‭●‬ ‭Finance‭‬‭‬lease‭‬‭‬liability‬
‭●‬ ‭Long‭‬‭‬–‭‬‭‬term‭‬‭‬deferred‭‬‭‬revenue‬
‭Bonds‭‬‭‬Payable‬
‭ quity‬
E
‭Presentation‭‬‭‬of‭‬‭‬Equity‬
‭1.‬ ‭Sub‭‬‭‬-‭‬‭‬classified‭‬‭‬in‭‬‭‬the‭‬‭‬statement‭‬‭‬of‭‬‭‬financial‬
‭position.‬
‭2.‬ ‭An‭‬‭‬entity‭‬‭‬shall‭‬‭‬disclose‭‬‭‬the‭‬‭‬following,‭‬‭‬either‬
‭on‭‬‭‬the‭‬‭‬face‭‬‭‬of‭‬‭‬the‭‬‭‬statement‭‬‭‬of‭‬‭‬financial‬
‭position‭‬‭‬or‭‬‭‬in‭‬‭‬the‭‬‭‬notes:‬
‭For‭‬‭‬each‭‬‭‬class‭‬‭‬of‭‬‭‬share‭‬‭‬capital:‬
‭3.‬ ‭The‭‬‭‬number‭‬‭‬of‭‬‭‬shares‭‬‭‬authorized;‬
‭4.‬ ‭The‭‬‭‬number‭‬‭‬of‭‬‭‬shares‭‬‭‬issued‭‬‭‬and‭‬‭‬fully‬
‭paid,‭‬‭‬and‭‬‭‬issued‭‬‭‬but‭‬‭‬not‭‬‭‬fully‭‬‭‬paid;‬
‭5.‬ ‭Par‭‬‭‬value‭‬‭‬share,‭‬‭‬or‭‬‭‬that‭‬‭‬the‭‬‭‬shares‭‬‭‬have‬
‭no‭‬‭‬par‭‬‭‬value.‬
‭6.‬ ‭A‭‬‭‬reconciliation‭‬‭‬of‭‬‭‬the‭‬‭‬number‭‬‭‬of‬
‭shares‭‬‭‬outstanding‭‬‭‬at‭‬‭‬the‭‬‭‬beginning‭‬‭‬and‬
‭at‭‬‭‬the‭‬‭‬end‭‬‭‬of‭‬‭‬the‭‬‭‬period.‬
‭●‬ ‭The‭‬‭‬rights,‭‬‭‬preferences,‭‬‭‬and‭‬‭‬restrictions‬
‭attaching‭‬‭‬to‭‬‭‬that‭‬‭‬class‭‬‭‬including‬
‭restrictions‭‬‭‬on‭‬‭‬the‭‬‭‬distribution‭‬‭‬of‬
‭dividends‭‬‭‬and‭‬‭‬the‭‬‭‬repayments‭‬‭‬of‬
‭capital;‬
‭●‬ ‭Shares‭‬‭‬in‭‬‭‬the‭‬‭‬entity‭‬‭‬held‭‬‭‬by‭‬‭‬the‭‬‭‬entity‬
‭or‭‬‭‬by‭‬‭‬its‭‬‭‬subsidiaries‭‬‭‬or‭‬‭‬associates;‭‬‭‬and‬
‭●‬ ‭Shares‭‬‭‬reserved‭‬‭‬for‭‬‭‬issue‭‬‭‬under‭‬‭‬options‬
‭and‭‬‭‬contracts‭‬‭‬for‭‬‭‬the‭‬‭‬sale‭‬‭‬of‭‬‭‬shares,‬
‭including‭‬‭‬the‭‬‭‬terms‭‬‭‬and‭‬‭‬amounts.‬
‭A‭‬‭‬description‭‬‭‬of‭‬‭‬the‭‬‭‬nature‭‬‭‬and‭‬‭‬purpose‭‬‭‬of‭‬‭‬each‬
‭reserved‭‬‭‬within‭‬‭‬equity.‭‬‭‬Reserves‭‬‭‬within‭‬‭‬the‭‬‭‬equity‬
‭includes:‬
‭a.‬ ‭share‭‬‭‬premium‬
‭b.‬ ‭appropriate‭‬‭‬reserves‬
‭c.‬ ‭revaluation‭‬‭‬surplus‭‬‭‬reserve‬
‭d.‬ ‭foreign‭‬‭‬currency‭‬‭‬translation‭‬‭‬reserve‬
‭ vents‭‬‭‬after‭‬‭‬the‭‬‭‬date‭‬‭‬of‭‬‭‬the‭‬‭‬statement‭‬‭‬of‭‬‭‬financial‬
E
‭position‬
‭●‬ ‭PAS‭‬‭‬10,‭‬‭‬paragraph‭‬‭‬3,‭‬‭‬defines‭‬‭‬events‭‬‭‬after‭‬‭‬the‬
‭reporting‭‬‭‬period‭‬‭‬as‭‬‭‬those‭‬‭‬events,‭‬‭‬whether‬
‭favorable‭‬‭‬or‭‬‭‬unfavorable,‭‬‭‬that‭‬‭‬occur‭‬‭‬between‬
‭the‭‬‭‬end‭‬‭‬of‭‬‭‬reporting‭‬‭‬period‭‬‭‬and‭‬‭‬the‭‬‭‬date‭‬‭‬on‬
‭which‭‬‭‬the‭‬‭‬financial‭‬‭‬statements‭‬‭‬are‭‬‭‬authorized‬
‭for‭‬‭‬issue.‬
‭Types‭‬‭‬of‭‬‭‬Events‭‬‭‬after‭‬‭‬the‭‬‭‬reporting‭‬‭‬period‬
‭23‬
‭●‬ A
‭ djusting‭‬‭‬Events‬
‭Events‬ ‭after‬ ‭the‬‭reporting‬‭period‬‭are‬‭those‬‭that‬
‭provide‬ ‭evidence‬‭of‬‭conditions‬‭that‬‭exist‬‭at‬‭the‬
‭end‭‬‭‬of‭‬‭‬the‭‬‭‬reporting‭‬‭‬period.‬
‭●‬ ‭Non‭‬‭‬Adjusting‭‬‭‬Events‬
‭Events‬ ‭after‬ ‭the‬ ‭reporting‬ ‭period‬ ‭are‬
‭those‬‭that‬‭are‬‭indicative‬‭of‬‭conditions‬‭that‬‭arise‬
‭after‭‬‭‬the‭‬‭‬end‭‬‭‬of‭‬‭‬reporting‭‬‭‬period.‬
‭Format‬
‭●‬ ‭The‭‬‭‬balance‭‬‭‬sheet‭‬‭‬can‭‬‭‬be‭‬‭‬presented‭‬‭‬in‭‬‭‬either‬
‭Report‭‬‭‬Format‬‭or‭‬‭‬the‬‭Account‭‬‭‬Format.‬
‭●‬ R
‭ eport‭‬‭‬Format:‬‭list‭‬‭‬the‭‬‭‬asset‭‬‭‬followed‬
‭by‭‬‭‬the‭‬‭‬liabilities‭‬‭‬and‭‬‭‬owner’s‭‬‭‬equity‬
‭vertically.‬
‭●‬ A
‭ ccount‭‬‭‬Format:‬‭list‭‬‭‬the‭‬‭‬asset‭‬‭‬on‭‬‭‬the‬
‭left‭‬‭‬and‭‬‭‬liabilities‭‬‭‬and‭‬‭‬owner’s‭‬‭‬equity‬
‭on‭‬‭‬the‭‬‭‬right‭‬‭‬following‭‬‭‬the‭‬‭‬accounting‬
‭formula‭‬‭‬A‭‬‭‬=‭‬‭‬L‭‬‭‬+‭‬‭‬OE.‬
‭ tatement‭‬‭‬of‭‬‭‬Changes‭‬‭‬in‭‬‭‬Equity‭‬‭‬and‭‬‭‬Statement‭‬‭‬of‬
S
‭Cash‭‬‭‬Flows‬
‭ tatement‭‬‭‬of‭‬‭‬changes‭‬‭‬in‭‬‭‬equity‬
S
‭A‭‬‭‬financial‭‬‭‬statement‭‬‭‬containing‭‬‭‬the‭‬‭‬following:‬
‭●‬ ‭Net‭‬‭‬income‭‬‭‬or‭‬‭‬loss‭‬‭‬for‭‬‭‬the‭‬‭‬period.‬
‭●‬
‭Each‭‬‭‬item‭‬‭‬of‭‬‭‬income‭‬‭‬and‭‬‭‬expense‭‬‭‬for‭‬‭‬the‬
p‭ eriod‭‬‭‬that‭‬‭‬is‭‬‭‬recognized‭‬‭‬directly‭‬‭‬in‭‬‭‬equity‬
‭and‭‬‭‬the‭‬‭‬total‭‬‭‬of‭‬‭‬these‭‬‭‬items‭‬‭‬as‭‬‭‬required‭‬‭‬by‬
‭the‭‬‭‬PAS‬
‭●‬ ‭Total‭‬‭‬income‭‬‭‬and‭‬‭‬expenses‭‬‭‬for‭‬‭‬the‭‬‭‬period‬
‭showing‭‬‭‬separately‭‬‭‬the‭‬‭‬total‭‬‭‬amounts‬
‭attributable‭‬‭‬to‭‬‭‬equity‭‬‭‬holders‭‬‭‬of‭‬‭‬the‭‬‭‬parent‬
‭and‭‬‭‬to‭‬‭‬minority‭‬‭‬interest‬
‭ ‬ ‭For‭‬‭‬each‭‬‭‬component‭‬‭‬of‭‬‭‬equity,‭‬‭‬the‭‬‭‬effect‭‬‭‬of‬
●
‭changes‭‬‭‬in‭‬‭‬accounting‭‬‭‬policies‭‬‭‬and‬
‭corrections‭‬‭‬of‭‬‭‬errors.‬
‭Equity‬
‭●‬ ‭The‭‬‭‬residual‭‬‭‬interest‭‬‭‬in‭‬‭‬the‭‬‭‬assets‭‬‭‬of‭‬‭‬the‭‬‭‬entity‬
‭after‭‬‭‬deducting‭‬‭‬all‭‬‭‬its‭‬‭‬liabilities.‬
‭●‬ ‭The‭‬‭‬equity‭‬‭‬in‭‬‭‬the‭‬‭‬shareholders‭‬‭‬in‭‬‭‬the‭‬‭‬statement‬
‭of‭‬‭‬financial‭‬‭‬position‭‬‭‬may‭‬‭‬be‭‬‭‬sub‭‬‭‬–‭‬‭‬classified‬
‭as:‬
‭●‬ ‭Share‭‬‭‬capital‬
‭○‬ ‭Funds‭‬‭‬contributed‭‬‭‬by‭‬‭‬the‭‬‭‬shareholders.‬
‭(ordinary‭‬‭‬share‭‬‭‬capital‭‬‭‬and‭‬‭‬preference‬
‭share‭‬‭‬capital)‬
‭○‬ ‭Preference‭‬‭‬shareholders‭‬‭‬have‬
‭preference‭‬‭‬over‭‬‭‬ordinary‭‬‭‬shareholders‬
‭on‭‬‭‬the‭‬‭‬dividends‭‬‭‬and‭‬‭‬net‭‬‭‬asset‭‬‭‬of‭‬‭‬an‬
‭entity‭‬‭‬in‭‬‭‬the‭‬‭‬event‭‬‭‬of‭‬‭‬liquidation.‬
‭○‬ ‭The‭‬‭‬line‭‬‭‬items‭‬‭‬share‭‬‭‬capital‭‬‭‬includes‬
‭subscriptions‭‬‭‬made‭‬‭‬by‭‬‭‬shareholders‬
‭net‭‬‭‬of‭‬‭‬subscription‭‬‭‬receivables.‬
‭●‬ ‭Retained‭‬‭‬earnings‬
‭○‬ ‭Line‭‬‭‬item‭‬‭‬in‭‬‭‬the‭‬‭‬equity‭‬‭‬representing‬
‭accumulated‭‬‭‬net‭‬‭‬income‭‬‭‬(loss),‭‬‭‬errors‬
‭of‭‬‭‬prior‭‬‭‬periods,‭‬‭‬dividends‬
‭distribution,‭‬‭‬changes‭‬‭‬in‭‬‭‬accounting‬
‭policy‭‬‭‬and‭‬‭‬equity‭‬‭‬adjustments‭‬‭‬other‬
‭than‭‬‭‬those‭‬‭‬arising‭‬‭‬from‭‬‭‬contributions‬
‭from‭‬‭‬shareholders.‬
‭●‬ ‭Reserves‬
‭●‬ L
‭ ine‭‬‭‬items‭‬‭‬in‭‬‭‬the‭‬‭‬equity‭‬‭‬section‭‬‭‬that‬
‭includes:‬
‭●‬ ‭Appropriation‭‬‭‬reserve‬
‭●‬ ‭Transfer‭‬‭‬of‭‬‭‬an‭‬‭‬amount‬
‭from‭‬‭‬the‭‬‭‬retained‬
‭earnings.‬
‭●‬ ‭May‭‬‭‬be‭‬‭‬required‭‬‭‬by‭‬‭‬law‬
‭in‭‬‭‬order‭‬‭‬to‭‬‭‬give‭‬‭‬the‭‬‭‬entity‬
‭and‭‬‭‬its‭‬‭‬creditors‭‬‭‬and‬
‭added‭‬‭‬measure‭‬‭‬of‬
‭protection‭‬‭‬from‭‬‭‬the‬
‭effects‭‬‭‬of‭‬‭‬losses,‬
‭voluntary‭‬‭‬action‭‬‭‬of‭‬‭‬the‬
‭management,‭‬‭‬or‭‬‭‬because‬
‭of‭‬‭‬contractual‬
‭obligations.‬
‭●‬ ‭Share‭‬‭‬premium‬
‭●‬ ‭Represents‭‬‭‬the‭‬‭‬excess‬
‭amount‭‬‭‬contributed‭‬‭‬by‬
‭24‬
t‭he‭‬‭‬shareholders‭‬‭‬over‭‬‭‬the‬
‭par‭‬‭‬value.‬
‭ ‬ ‭Par‭‬‭‬value‭‬‭‬is‭‬‭‬the‭‬‭‬minimum‬
●
‭issue‭‬‭‬price‭‬‭‬of‭‬‭‬the‭‬‭‬shares.‬
‭Reserves‬
‭●‬ ‭Line‭‬‭‬items‭‬‭‬in‭‬‭‬the‭‬‭‬equity‭‬‭‬section‭‬‭‬that‭‬‭‬includes:‬
‭●‬ ‭Revaluation‭‬‭‬adjustment‬
‭●‬ ‭Represents‭‬‭‬the‭‬‭‬excess‭‬‭‬of‭‬‭‬the‬
‭depreciated‭‬‭‬replacement‭‬‭‬cost‭‬‭‬or‬
‭sound‭‬‭‬value‭‬‭‬of‭‬‭‬the‭‬‭‬revalued‬
‭property,‭‬‭‬plant,‭‬‭‬and‭‬‭‬equipment‬
‭over‭‬‭‬the‭‬‭‬book‭‬‭‬value‭‬‭‬(revaluation‬
‭model).‬
‭●‬ ‭Foreign‭‬‭‬currency‭‬‭‬translation‭‬‭‬reserve‬
‭●‬ ‭Rises‭‬‭‬from‭‬‭‬the‭‬‭‬translation‭‬‭‬of‬
‭financial‭‬‭‬elements‭‬‭‬or‭‬‭‬transaction‬
‭in‭‬‭‬foreign‭‬‭‬currency‭‬‭‬into‭‬‭‬the‬
‭functional‭‬‭‬currency‭‬‭‬of‭‬‭‬an‭‬‭‬entity‬
‭(translation‭‬‭‬gain‭‬‭‬or‭‬‭‬loss)‬
‭●‬ ‭PAS‭‬‭‬1‭‬‭‬requires‭‬‭‬all‭‬‭‬items‭‬‭‬of‬
‭income‭‬‭‬and‭‬‭‬expense‭‬‭‬recognized‬
‭in‭‬‭‬a‭‬‭‬period‭‬‭‬to‭‬‭‬be‭‬‭‬included‭‬‭‬in‬
‭income‭‬‭‬or‭‬‭‬loss‭‬‭‬unless‭‬‭‬another‬
‭standard‭‬‭‬or‭‬‭‬an‭‬‭‬interpretation‬
‭requires‭‬‭‬otherwise.‬
‭●‬ ‭PAS‭‬‭‬1‭‬‭‬requires‭‬‭‬the‭‬‭‬presentation‭‬‭‬of‬
‭a‭‬‭‬statement‭‬‭‬of‭‬‭‬changes‭‬‭‬in‭‬‭‬equity‬
‭that‭‬‭‬highlights‭‬‭‬an‭‬‭‬entity’s‭‬‭‬total‬
‭income‭‬‭‬and‭‬‭‬expenses.‬
‭Separate‭‬‭‬disclosure‬
‭●‬ ‭An‭‬ ‭‬entity‭‬‭‬shall‭‬‭‬also‭‬‭‬present,‭‬‭‬either‭‬‭‬on‭‬‭‬the‭‬‭‬face‬
‭of‭‬‭‬the‭‬‭‬statement‭‬‭‬of‭‬‭‬changes‭‬‭‬in‭‬‭‬equity‭‬‭‬or‭‬‭‬in‭‬‭‬the‬
‭notes,‭‬‭‬the‭‬‭‬following:‬
‭●‬ ‭Amount‭‬‭‬of‭‬‭‬transaction‭‬‭‬with‭‬‭‬equity‬
‭holders‭‬‭‬acting‭‬‭‬in‭‬‭‬their‭‬‭‬capacity‭‬‭‬as‬
‭equity‭‬‭‬holders,‭‬‭‬showing‭‬‭‬separately‬
‭distributions‭‬‭‬to‭‬‭‬equity‭‬‭‬holders;‬
‭●‬ ‭Balance‭‬‭‬of‭‬‭‬retained‭‬‭‬earning‭‬‭‬at‭‬‭‬the‬
‭beginning‭‬‭‬of‭‬‭‬the‭‬‭‬period‭‬‭‬and‭‬‭‬at‭‬‭‬the‬
‭balance‭‬‭‬sheet‭‬‭‬date,‭‬‭‬and‭‬‭‬the‭‬‭‬changes‬
‭during‭‬‭‬the‭‬‭‬period;‭‬‭‬and‬
‭●‬ ‭Reconciliation‭‬‭‬between‭‬‭‬the‭‬‭‬carrying‬
‭amount‭‬‭‬of‭‬‭‬each‭‬‭‬class‭‬‭‬or‭‬‭‬contributed‬
‭equity‭‬‭‬and‭‬‭‬each‭‬‭‬reserve‭‬‭‬at‭‬‭‬the‬
‭beginning‭‬‭‬and‭‬‭‬at‭‬‭‬the‭‬‭‬end‭‬‭‬of‭‬‭‬the‭‬‭‬period‬
‭separately‭‬‭‬disclosing‭‬‭‬each‭‬‭‬change.‬
‭Statement‭‬‭‬of‭‬‭‬Cash‭‬‭‬Flows‬
‭●‬ ‭Is‭‬‭‬a‭‬‭‬financial‭‬‭‬statement‭‬‭‬that‭‬‭‬provides‬
‭information‭‬‭‬about‭‬‭‬the‭‬‭‬historical‭‬‭‬changes,‬
‭inflows‭‬‭‬and‭‬‭‬outflows,‭‬‭‬in‭‬‭‬cash‭‬‭‬and‭‬‭‬cash‬
‭equivalents‭‬‭‬of‭‬‭‬an‭‬‭‬entity‭‬‭‬during‭‬‭‬the‭‬‭‬period‭‬‭‬of‬
‭operating,‭‬‭‬investing,‭‬‭‬and‭‬‭‬financing‭‬‭‬activities.‬
‭●‬ A
‭ ssess‭‬‭‬the‭‬‭‬ability‭‬‭‬of‭‬‭‬the‭‬‭‬entity‭‬‭‬to‭‬‭‬generate‭‬‭‬cash‬
‭and‭‬‭‬cash‭‬‭‬equivalents,‭‬‭‬the‭‬‭‬needs‭‬‭‬of‭‬‭‬the‭‬‭‬entity‭‬‭‬to‬
‭utilize‭‬‭‬those‭‬‭‬cash‭‬‭‬flows,‭‬‭‬and‭‬‭‬the‭‬‭‬timing‭‬‭‬and‬
‭certainty‭‬‭‬of‭‬‭‬their‭‬‭‬generation.‬
‭●‬ ‭Excludes‭‬‭‬movements‭‬‭‬between‭‬‭‬items‭‬‭‬that‬
‭constitute‭‬‭‬cash‭‬‭‬or‭‬‭‬cash‭‬‭‬equivalents‭‬‭‬because‬
‭these‭‬‭‬components‭‬‭‬are‭‬‭‬part‭‬‭‬of‭‬‭‬the‭‬‭‬cash‬
‭management.‬
‭●‬ ‭Statement‭‬‭‬of‭‬‭‬Cash‭‬‭‬Flows‬
‭●‬ ‭An‭‬‭‬entity‭‬‭‬shall‭‬‭‬prepare‭‬‭‬a‭‬‭‬cash‭‬‭‬flow‭‬‭‬statement‬
‭in‭‬‭‬accordance‭‬‭‬with‭‬‭‬the‭‬‭‬requirement‭‬‭‬of‭‬‭‬PAS‭‬‭‬7‬
‭and‭‬‭‬present‭‬‭‬it‭‬‭‬as‭‬‭‬an‭‬‭‬integral‭‬‭‬part‭‬‭‬of‭‬‭‬its‭‬‭‬financial‬
‭statement‭‬‭‬for‭‬‭‬each‭‬‭‬period‭‬‭‬for‭‬‭‬which‭‬‭‬financial‬
‭statements‭‬‭‬are‭‬‭‬presented.‬
‭ resentation‭‬‭‬of‭‬‭‬the‭‬‭‬statement‭‬‭‬of‭‬‭‬cash‭‬‭‬flows‬
P
‭The‭‬‭‬statement‭‬‭‬of‭‬‭‬cash‭‬‭‬flows‭‬‭‬shall‭‬‭‬report‭‬‭‬cash‭‬‭‬(inflows‬
‭and‭‬‭‬outflows)‭‬‭‬during‭‬‭‬the‭‬‭‬period‭‬‭‬classified‭‬‭‬by‬
‭operating,‭‬‭‬investing,‭‬‭‬and‭‬‭‬financing‭‬‭‬activities.‬
‭Operating‭‬‭‬Activities‬
‭●‬ ‭Revenue‭‬‭‬–‭‬‭‬producing‭‬‭‬activities.‬
‭●‬ ‭Key‭‬‭‬indicator‭‬‭‬of‭‬‭‬the‭‬‭‬extent‭‬‭‬to‭‬‭‬which‭‬‭‬the‬
‭operations‭‬‭‬of‭‬‭‬the‭‬‭‬entity‭‬‭‬have‭‬‭‬generated‬
‭sufficient‭‬‭‬cash‭‬‭‬flows‭‬‭‬to‭‬‭‬repay‭‬‭‬loans,‭‬‭‬maintain‬
‭the‭‬‭‬operating‭‬‭‬capability‭‬‭‬of‭‬‭‬the‭‬‭‬entity,‭‬‭‬pay‬
‭dividends,‭‬‭‬and‭‬‭‬make‭‬‭‬new‭‬‭‬investments‭‬‭‬without‬
‭recourse‭‬‭‬to‭‬‭‬external‭‬‭‬sources‭‬‭‬of‭‬‭‬financing.‬
‭●‬ ‭Cash‭‬‭‬Flows‭‬‭‬from‭‬‭‬Operating‭‬‭‬Activities:‬
‭Direct‭‬‭‬Method‬
‭●‬ ‭Information‭‬‭‬about‭‬‭‬major‭‬‭‬classes‭‬‭‬of‭‬‭‬gross‭‬‭‬cash‬
‭receipts‭‬‭‬and‭‬‭‬gross‭‬‭‬cash‭‬‭‬payments‭‬‭‬are‭‬‭‬disclosed‬
‭which‭‬‭‬may‭‬‭‬be‭‬‭‬obtained‭‬‭‬either:‬
‭●‬ ‭From‭‬‭‬the‭‬‭‬accounting‭‬‭‬records‭‬‭‬of‭‬‭‬the‭‬‭‬entity;‬
‭or‬
‭●‬ ‭By‭‬‭‬adjusting‭‬‭‬sales,‭‬‭‬cost‭‬‭‬of‭‬‭‬sales,‭‬‭‬operating‬
‭expenses,‭‬‭‬and‭‬‭‬other‭‬‭‬income‭‬‭‬from‭‬‭‬accrual‬
‭basis‭‬‭‬to‭‬‭‬cash‭‬‭‬basis.‬
‭●‬ ‭Cash‭‬‭‬Inflows‬
‭●‬ ‭Cash‭‬‭‬collection‭‬‭‬from‭‬‭‬customers.‬
‭●‬ ‭Dividends‭‬‭‬received,‭‬‭‬interest‭‬‭‬fees,‭‬‭‬and‬
‭royalties‬
‭●‬ ‭Other‭‬‭‬operating‭‬‭‬cash‭‬‭‬receipts‬
‭●‬ ‭Cash‭‬‭‬Outflows‬
‭●‬ ‭Cash‭‬‭‬payment‭‬‭‬to‭‬‭‬suppliers‭‬‭‬of‬
‭merchandise‬
‭●‬ ‭Operating‭‬‭‬expenses‭‬‭‬paid‬
‭●‬ ‭Interest‭‬‭‬paid‬
‭●‬ ‭Income‭‬‭‬taxes‭‬‭‬paid‬
‭25‬
‭Investing‭‬‭‬Activities‬
‭●‬ ‭Acquisition‭‬‭‬and‭‬‭‬disposal‭‬‭‬of‭‬‭‬long‭‬‭‬–‭‬‭‬term‭‬‭‬assets‬
‭and‭‬‭‬other‭‬‭‬investments‭‬‭‬not‭‬‭‬included‭‬‭‬in‭‬‭‬cash‬
‭equivalents.‬
‭●‬ ‭Cash‭‬‭‬flows‭‬‭‬represent‭‬‭‬the‭‬‭‬extent‭‬‭‬to‭‬‭‬which‬
‭expenditures‭‬‭‬have‭‬‭‬been‭‬‭‬made‭‬‭‬for‭‬‭‬resources‬
‭intended‭‬‭‬for‭‬‭‬general‭‬‭‬future‭‬‭‬income‭‬‭‬and‭‬‭‬cash‬
‭flows.‬
‭Financing‭‬‭‬Activities‬
‭●‬ ‭Result‭‬‭‬in‭‬‭‬changes‭‬‭‬in‭‬‭‬the‭‬‭‬size‭‬‭‬and‭‬‭‬composition‬
‭of‭‬‭‬the‭‬‭‬contributed‭‬‭‬equity‭‬‭‬and‭‬‭‬borrowing‭‬‭‬of‭‬‭‬the‬
‭entity.‬
‭●‬ ‭Cash‭‬‭‬flows‭‬‭‬activities‭‬‭‬between‭‬‭‬the‭‬‭‬entity‭‬‭‬and‬
‭the‭‬‭‬shareholders‭‬‭‬or‭‬‭‬between‭‬‭‬the‭‬‭‬entity‭‬‭‬and‭‬‭‬the‬
‭creditors‭‬‭‬are‭‬‭‬classified‭‬‭‬as‭‬‭‬financing‭‬‭‬activities‬
‭unless‭‬‭‬otherwise‭‬‭‬stated.‬
‭●‬ ‭Can‭‬‭‬be‭‬‭‬used‭‬‭‬in‭‬‭‬predicting‭‬‭‬claims‭‬‭‬on‭‬‭‬future‬
‭cash‭‬‭‬flows‭‬‭‬by‭‬‭‬providers‭‬‭‬of‭‬‭‬capital‭‬‭‬to‭‬‭‬the‭‬‭‬entity.‬
‭●‬ C
‭ ash‭‬‭‬Flows‭‬‭‬from‭‬‭‬Operating‭‬‭‬Activities:‬
‭Indirect‭‬‭‬Method‬
‭●‬ ‭Determined‭‬‭‬by‭‬‭‬adjusting‭‬‭‬the‭‬‭‬net‭‬‭‬income‭‬‭‬or‬
‭loss‭‬‭‬for‭‬‭‬the‭‬‭‬effect‭‬‭‬of‭‬‭‬the‭‬‭‬following:‬
‭●‬ ‭Changes‭‬‭‬during‭‬‭‬the‭‬‭‬period‭‬‭‬in‭‬‭‬inventories‬
‭and‭‬‭‬operating‭‬‭‬receivables‭‬‭‬and‭‬‭‬payables‭‬‭‬or‬
‭changes‭‬‭‬in‭‬‭‬current‭‬‭‬assets‭‬‭‬and‭‬‭‬current‬
‭liabilities‭‬‭‬except‭‬‭‬cash‭‬‭‬and‭‬‭‬cash‬
‭equivalents‭‬‭‬and‭‬‭‬non‭‬‭‬–‭‬‭‬trade‭‬‭‬accounts;‬
‭●‬ ‭Non‭‬‭‬–‭‬‭‬cash‭‬‭‬items‭‬‭‬such‭‬‭‬as‭‬‭‬depreciation,‬
‭provisions,‭‬‭‬deferred‭‬‭‬taxes,‭‬‭‬unrealized‬
‭foreign‭‬‭‬currency‭‬ ‭‬gains‭‬‭‬and‭‬‭‬losses,‬
‭undistributed‭‬‭‬profits‭‬‭‬of‭‬‭‬associates,‭‬‭‬and‬
‭minority‭‬‭‬interest;‭‬‭‬and‬
‭●‬ ‭All‭‬‭‬other‭‬‭‬items‭‬‭‬for‭‬‭‬which‭‬‭‬the‭‬‭‬cash‭‬‭‬effects‬
‭are‭‬‭‬investing‭‬‭‬or‭‬‭‬financing‭‬‭‬cash‭‬‭‬flows.‬
‭Dividends‬
‭●‬ ‭Dividends‭‬‭‬received‬
‭●‬ ‭Preferential‭‬‭‬treatment:‭‬‭‬classified‭‬‭‬as‬
‭operating‭‬‭‬cash‭‬‭‬flows‭‬‭‬because‭‬‭‬they‭‬‭‬enter‬
‭in‭‬‭‬the‭‬‭‬determination‭‬‭‬of‭‬‭‬income‭‬‭‬and‬
‭loss.‬
‭●‬ ‭Alternative‭‬‭‬treatment:‭‬‭‬may‭‬‭‬be‬
‭classified‭‬‭‬as‭‬‭‬investing‭‬‭‬cash‭‬‭‬flows‬
‭because‭‬‭‬they‭‬‭‬are‭‬‭‬returns‭‬‭‬in‭‬‭‬investment.‬
‭●‬ ‭Dividends‭‬‭‬payment‬
‭●‬ ‭Preferential‭‬‭‬treatment:‭‬‭‬classified‭‬‭‬as‭‬‭‬a‬
‭financing‭‬‭‬cash‭‬‭‬flow‭‬‭‬because‭‬‭‬they‭‬‭‬are‬
‭the‭‬‭‬cost‭‬‭‬of‭‬‭‬obtaining‭‬‭‬financial‬
‭resources.‬
‭●‬ ‭Alternative‭‬‭‬treatment:‭‬‭‬may‭‬‭‬be‬
‭classified‭‬‭‬as‭‬‭‬cash‭‬‭‬flows‭‬‭‬from‭‬‭‬operating‬
‭activities‭‬‭‬in‭‬‭‬order‭‬‭‬to‭‬‭‬assist‭‬‭‬users‭‬‭‬to‬
‭26‬
d‭ etermine‭‬‭‬the‭‬‭‬ability‭‬‭‬of‭‬‭‬an‭‬‭‬entity‭‬‭‬to‭‬‭‬pay‬
‭dividends‭‬‭‬out‭‬‭‬of‭‬‭‬operating‭‬‭‬cash‭‬‭‬flows.‬
‭Interest‬
‭●‬ ‭Interest‭‬‭‬received‭‬‭‬or‭‬‭‬paid‬
‭●‬ ‭Preferential‭‬‭‬treatment:‭‬‭‬both‭‬‭‬are‭‬‭‬usually‬
‭classified‭‬‭‬as‭‬‭‬operating‭‬‭‬cash‭‬‭‬flows‬
‭because‭‬‭‬they‭‬‭‬enter‭‬‭‬into‭‬‭‬the‬
‭determination‭‬‭‬of‭‬‭‬income‭‬‭‬or‭‬‭‬loss.‬
‭●‬ ‭Alternative‭‬‭‬treatment:‭‬‭‬interest‭‬‭‬paid‭‬‭‬may‬
‭be‭‬‭‬classified‭‬‭‬as‭‬‭‬financing‭‬‭‬cash‭‬‭‬flow‬
‭because‭‬‭‬they‭‬‭‬are‭‬‭‬the‭‬‭‬cost‭‬‭‬of‭‬‭‬obtaining‬
‭financial‭‬‭‬resources.‭‬‭‬Interest‭‬‭‬received‬
‭may‭‬‭‬be‭‬‭‬classified‭‬‭‬as‭‬‭‬investing‭‬‭‬cash‬
‭flows‭‬‭‬because‭‬‭‬they‭‬‭‬are‭‬‭‬return‭‬‭‬on‬
‭investments.‬
‭Taxes‭‬‭‬on‭‬‭‬Income‬
‭●‬ ‭Preferential‭‬‭‬treatment:‭‬‭‬usually‬
‭classified‭‬‭‬as‭‬‭‬cash‭‬‭‬flows‭‬‭‬from‭‬‭‬operating‬
‭activities.‬
‭●‬ ‭Alternative‭‬‭‬treatment:‭‬‭‬classified‭‬‭‬as‬
‭investing‭‬‭‬or‭‬‭‬financing‭‬‭‬activities‭‬‭‬as‬
‭appropriate‭‬‭‬when‭‬‭‬it‭‬‭‬is‭‬‭‬practicable‭‬‭‬to‬
‭identify.‬
‭ otes‭‬‭‬to‭‬‭‬Financial‭‬‭‬Statement‬
N
‭Contain‭‬‭‬information‭‬‭‬in‭‬‭‬addition‭‬‭‬to‭‬‭‬that‭‬‭‬presented‭‬‭‬in‭‬‭‬the‬
‭statement‭‬‭‬of‭‬‭‬financial‭‬‭‬position,‭‬‭‬statement‭‬‭‬of‬
‭comprehensive‭‬‭‬income,‭‬‭‬statement‭‬‭‬of‭‬‭‬changes‭‬‭‬in‭‬‭‬equity‬
‭and‭‬‭‬statement‭‬‭‬of‭‬‭‬cash‭‬‭‬flow.‬
‭Provide‭‬‭‬narrative‭‬‭‬descriptions‭‬‭‬or‭‬‭‬disaggregations‭‬‭‬of‬
‭item‭‬‭‬in‭‬‭‬those‭‬‭‬statement‭‬‭‬and‭‬‭‬information‭‬‭‬about‭‬‭‬items‬
‭that‭‬‭‬do‭‬‭‬not‭‬‭‬qualify‭‬‭‬for‭‬‭‬recognition‭‬‭‬in‭‬‭‬those‭‬‭‬statements.‬
‭Notes‭‬‭‬to‭‬‭‬Financial‭‬‭‬Statement:‭‬‭‬Purpose‬
‭●‬ ‭PAS‭‬‭‬I‬
‭●‬ ‭To‭‬‭‬present‭‬‭‬information‭‬‭‬about‭‬‭‬the‭‬‭‬basis‬
‭of‭‬‭‬preparation‭‬‭‬of‭‬‭‬the‭‬‭‬financial‬
‭statements‭‬‭‬and‭‬‭‬the‭‬‭‬specific‭‬‭‬accounting‬
‭policies‭‬‭‬used.‬
‭●‬ ‭To‭‬‭‬disclose‭‬‭‬the‭‬‭‬information‭‬‭‬required‭‬‭‬by‬
‭PFRS‭‬‭‬that‭‬‭‬is‭‬‭‬not‭‬‭‬presented‭‬‭‬in‭‬‭‬the‬
‭financial‭‬‭‬statements‬
‭●‬ ‭To‭‬‭‬provide‭‬‭‬additional‭‬‭‬information‭‬‭‬that‬
‭is‭‬‭‬not‭‬‭‬presented‭‬‭‬in‭‬‭‬the‭‬‭‬financial‬
s‭ tatements,‭‬‭‬but‭‬‭‬is‭‬‭‬relevant‭‬‭‬to‭‬‭‬an‬
‭understanding‭‬‭‬of‭‬‭‬any‭‬‭‬of‭‬‭‬them.‬
‭Notes‭‬‭‬to‭‬‭‬Financial‭‬‭‬Statement:‭‬‭‬Structure‬
‭●‬ ‭A‭‬‭‬statement‭‬‭‬of‭‬‭‬compliance‭‬‭‬with‭‬‭‬PFRS.‬
‭●‬ ‭A‭‬‭‬summary‭‬‭‬of‭‬‭‬significant‭‬‭‬accounting‭‬‭‬policies‬
‭applied‬
‭●‬ ‭Supporting‭‬‭‬information‭‬‭‬for‭‬‭‬items‭‬‭‬presented‭‬‭‬in‬
‭the‭‬‭‬financial‭‬‭‬statements‭‬‭‬in‭‬‭‬the‭‬‭‬order‭‬‭‬in‭‬‭‬which‬
‭each‭‬‭‬statement‭‬‭‬and‭‬‭‬each‭‬‭‬line‭‬‭‬item‭‬‭‬is‭‬‭‬presented.‬
‭●‬ ‭Other‭‬‭‬disclosures‭‬‭‬include‭‬‭‬contingent‭‬‭‬liabilities,‬
‭unrecognized‭‬‭‬contractual‭‬‭‬commitments,‭‬‭‬and‬
‭non‭‬‭‬–‭‬‭‬financial‭‬‭‬disclosures‭‬‭‬like‭‬‭‬the‭‬‭‬entity’s‬
‭financial‭‬‭‬risk‭‬‭‬management‭‬‭‬objectives‭‬‭‬and‬
‭policies.‬
‭Statement‭‬‭‬of‭‬‭‬Compliance‬
‭An‭‬‭‬entity‭‬‭‬whose‭‬‭‬financial‭‬‭‬statements‭‬‭‬comply‭‬‭‬with‬
‭PFRSs‭‬‭‬shall‭‬‭‬make‭‬‭‬an‭‬‭‬explicit‭‬‭‬and‭‬‭‬unreserved‭‬‭‬statement‬
‭of‭‬‭‬such‭‬‭‬compliance‭‬‭‬in‭‬‭‬the‭‬‭‬notes​‬
‭ ummary‭‬‭‬of‭‬‭‬significant‭‬‭‬accounting‭‬‭‬policies‭‬‭‬and‬
S
‭disclosures‬
‭●‬ ‭Management‭‬‭‬considers‭‬‭‬whether‭‬‭‬disclosure‭‬‭‬will‬
‭assist‭‬‭‬users‭‬‭‬in‭‬‭‬understanding‭‬‭‬how‭‬‭‬transactions,‬
‭other‭‬‭‬events,‭‬‭‬and‭‬‭‬conditions‭‬‭‬are‭‬‭‬reflected‭‬‭‬in‬
‭the‭‬‭‬reported‭‬‭‬financial‭‬‭‬performance‭‬‭‬and‬
‭financial‭‬‭‬position.‬
‭●‬ ‭Disclosure‭‬‭‬of‭‬‭‬particular‭‬‭‬accounting‭‬‭‬policies‭‬‭‬is‬
‭useful‭‬‭‬to‭‬‭‬users‭‬‭‬when‭‬‭‬those‭‬‭‬policies‭‬‭‬are‭‬‭‬selected‬
‭from‭‬‭‬alternatives‭‬‭‬allowed‭‬‭‬in‭‬‭‬Standard‭‬‭‬and‬
‭Interpretations.‬
‭●‬ ‭The‭‬‭‬summary‭‬‭‬shall‭‬‭‬disclose‭‬‭‬in‭‬‭‬the‭‬‭‬summary‭‬‭‬of‬
‭significant‭‬‭‬accounting‭‬‭‬policies:‬
‭●‬ ‭The‭‬‭‬measurement‭‬‭‬basis‭‬‭‬(or‭‬‭‬bases)‬
‭used‭‬‭‬in‭‬‭‬preparing‭‬‭‬the‭‬‭‬financial‬
‭statements;‭‬‭‬and‬
‭●‬ ‭The‭‬‭‬other‭‬‭‬accounting‭‬‭‬policies‭‬‭‬used‭‬‭‬are‬
‭relevant‭‬‭‬to‭‬‭‬an‭‬‭‬understanding‭‬ ‭‬of‭‬‭‬the‬
‭financial‭‬‭‬statements.‬
‭27‬
d‭ ate,‭‬‭‬that‭‬‭‬have‭‬‭‬a‭‬‭‬significant‭‬‭‬risk‭‬‭‬of‭‬‭‬causing‭‬‭‬a‬
‭material‭‬‭‬adjustment‭‬‭‬to‭‬‭‬the‭‬‭‬carrying‭‬‭‬amounts‭‬‭‬of‬
‭assets‭‬‭‬and‭‬‭‬liabilities‭‬‭‬within‭‬‭‬the‭‬‭‬next‭‬‭‬financial‬
‭year.‬
‭ ‬ ‭With‭‬‭‬respect‭‬‭‬to‭‬‭‬assets‭‬‭‬and‭‬‭‬liabilities,‭‬‭‬the‭‬‭‬note‬
●
‭shall‭‬‭‬include‭‬‭‬details‭‬‭‬of:‬
‭●‬ ‭Nature‬
‭●‬ ‭Carrying‭‬‭‬amount‭‬‭‬as‭‬‭‬of‭‬‭‬the‭‬‭‬date‭‬‭‬of‭‬‭‬the‬
‭statements‭‬‭‬of‭‬‭‬financial‭‬‭‬position.‬
‭●‬ A
‭ n‭‬‭‬entity‭‬‭‬shall‭‬‭‬disclose‭‬‭‬in‭‬‭‬the‭‬‭‬summary‭‬‭‬of‬
‭significant‭‬‭‬accounting‭‬‭‬policies‭‬‭‬the‭‬‭‬judgments‬
‭apart‭‬‭‬from‭‬‭‬those‭‬‭‬involving‭‬‭‬estimations‭‬‭‬that‬
‭management‭‬‭‬has‭‬‭‬made‭‬‭‬in‭‬‭‬the‭‬‭‬process‭‬‭‬applying‬
‭the‭‬‭‬entity’s‭‬‭‬accounting‭‬‭‬policies.‬
‭●‬ ‭An‭‬‭‬accounting‭‬‭‬policy‭‬‭‬may‭‬‭‬be‭‬‭‬significant‬
‭because‭‬‭‬of‭‬‭‬the‭‬‭‬nature‭‬‭‬of‭‬‭‬the‭‬‭‬entity’s‭‬‭‬operation‬
‭even‭‬‭‬if‭‬‭‬amounts‭‬‭‬for‭‬‭‬current‭‬‭‬and‭‬‭‬prior‭‬‭‬periods‬
‭are‭‬‭‬not‭‬‭‬material.‭‬‭‬It‭‬‭‬is‭‬‭‬also‭‬‭‬appropriate‭‬‭‬to‬
‭disclose‭‬‭‬each‭‬‭‬significant‭‬‭‬accounting‭‬‭‬policy‬
‭that‭‬‭‬is‭‬‭‬not‭‬‭‬specifically‭‬‭‬required‭‬‭‬by‭‬‭‬the‭‬‭‬PFRS.‬
‭Other‭‬‭‬disclosures‬
‭●‬ ‭An‭‬‭‬entity‭‬‭‬shall‭‬‭‬disclose‭‬‭‬in‭‬‭‬the‭‬‭‬notes:‬
‭●‬ ‭The‭‬‭‬amount‭‬‭‬of‭‬‭‬dividends‭‬‭‬proposed‭‬‭‬or‬
‭declared‭‬‭‬before‭‬‭‬the‭‬‭‬financial‬
‭statements‭‬‭‬were‭‬‭‬authorized‭‬‭‬for‭‬‭‬issue‬
‭but‭‬‭‬not‭‬‭‬recognized‭‬‭‬as‭‬‭‬a‭‬‭‬distribution‭‬‭‬to‬
‭equity‭‬‭‬holders‭‬‭‬during‭‬‭‬the‭‬‭‬period,‭‬‭‬and‬
‭the‭‬‭‬related‭‬‭‬amount‭‬‭‬per‭‬‭‬share;‭‬‭‬and‬
‭●‬ ‭The‭‬‭‬amount‭‬‭‬of‭‬‭‬any‭‬‭‬cumulative‬
‭preference‭‬‭‬dividends‭‬‭‬not‭‬‭‬recognized.‬
‭●‬ ‭Also,‭‬‭‬an‭‬‭‬entity‭‬‭‬shall‭‬‭‬disclose‭‬‭‬the‭‬‭‬following‭‬‭‬if‬
‭not‭‬‭‬disclosed‭‬‭‬elsewhere‭‬‭‬in‭‬‭‬any‭‬‭‬information‬
‭published‭‬‭‬with‭‬‭‬the‭‬‭‬financial‭‬‭‬statements:‬
‭●‬ ‭The‭‬‭‬domicile‭‬‭‬and‭‬‭‬legal‭‬‭‬form‭‬‭‬of‭‬‭‬the‬
‭entity,‭‬‭‬its‭‬‭‬country‭‬‭‬of‭‬‭‬incorporation‭‬‭‬and‬
‭the‭‬‭‬address‭‬‭‬of‭‬‭‬its‭‬‭‬register‭‬‭‬office‭‬‭‬(or‬
‭principal‭‬‭‬place‭‬‭‬of‭‬‭‬business,‭‬‭‬if‭‬‭‬different‬
‭from‭‬‭‬the‭‬‭‬registered‭‬‭‬office);‬
‭●‬ ‭A‭‬‭‬description‭‬‭‬of‭‬‭‬the‭‬‭‬nature‭‬‭‬of‭‬‭‬the‬
‭entity’s‭‬‭‬operation‭‬‭‬and‭‬‭‬its‭‬‭‬principal‬
‭activities;‭‬‭‬and‬
‭●‬ ‭The‭‬‭‬name‭‬‭‬of‭‬‭‬the‭‬‭‬parent‭‬‭‬and‭‬‭‬the‬
‭ultimate‭‬‭‬parent‭‬‭‬of‭‬‭‬the‭‬‭‬group.‬
‭Sources‭‬‭‬of‭‬‭‬Estimation‭‬‭‬Uncertainty‬
‭●‬ ‭An‭‬‭‬entity‭‬‭‬shall‭‬‭‬disclose‭‬‭‬in‭‬‭‬the‭‬‭‬notes‬
‭information‭‬‭‬about‭‬‭‬the‭‬‭‬key‭‬‭‬assumptions‬
‭concerning‭‬‭‬the‭‬ ‭‬future,‭‬‭‬and‭‬‭‬other‭‬‭‬key‭‬‭‬sources‬
‭of‭‬‭‬estimation‭‬‭‬uncertainty‭‬‭‬at‭‬‭‬the‭‬‭‬balance‭‬‭‬sheet‬