PHILIPPINE INTERPRETATIONS COMMITTEE (PIC)
QUESTIONS AND ANSWERS (Q&As)
Q&A No. 2013-02
Conforming Changes to PIC Q&As – Cycle 2013
Introduction
This Q&A No. 2013-02 sets out the changes (i.e., amendments or withdrawal) to certain PIC
Q&As. These changes are made as a consequence of the issuance of new Philippine Financial
Reporting Standards (PFRS) and amendments to certain existing PFRS that are effective as of
August 31, 2013. The consequential amendments are set out in the same section as the
amended PIC Q&As attached to this Q&A No. 2013-02. In addition, a marked-up copy of the
amended PIC Q&A showing the changes made (i.e., new text is underlined and deleted text is
struck through) is attached as an appendix to the amended PIC Q&A.
The effective date of the amendments is included in the Q&As affected.
PIC Q&As Amended
The following table summarizes the changes made to the amended PIC Q&As:
PIC Q&As Amended
Amendments
PIC Q&A No. 2006-02: PAS 27.10(d) –
Clarification of criteria for exemption from
presenting consolidated financial statements
Change in the reference to the PFRS upon
which PIC Q&A No. 2006-02 was based as a
result of the issuance of the amended PAS 27,
Separate Financial Statements, and the new
PFRS 10, Consolidated Financial Statements
PIC Q&A No. 2009-01: Framework.23 and
PAS 1.23 – Financial statements prepared on
a basis other than going concern
1. Change in the reference to PFRS upon
which PIC Q&A No. 2009-01 was based as
a result of the issuance of The Conceptual
Framework on Financial Reporting and the
amendments to PAS 1, Presentation of
Financial Statements
2. Clarification on the composition of a
complete set of financial statements of an
entity prepared on a basis other than going
concern
1
PIC Q&As Withdrawn
The following table summarizes the basis and effective date of withdrawal of the Q&As
withdrawn:
PIC Q&As Withdrawn
PIC Q&A No. 2007-04: PAS 101.7 –
Application of criteria for a qualifying NPAE
Basis for Withdrawal
PIC Q&A No. 2007-04 contained the
consensus on certain issues relating to
paragraph 7 of Philippine Accounting Standard
(PAS) 101, Financial Reporting Standards for
Non-publicly Accountable Entities (NPAEs).
PAS 101 was withdrawn in October 2009 upon
the adoption by the Philippine Financial
Reporting Standards Council (FRSC) of the
PFRS for Small and Medium-sized Entities
(PFRS for SMEs), which became effective for
annual periods beginning on or after
January 1, 2010.
Consequently, PIC Q&A No. 2007-04 is
considered withdrawn effective as of
January 1, 2010, the effective date of PFRS
for SMEs.
PIC Q&A No. 2010-01: PAS 39.AG71-72 –
Rate used in determining the fair value of
government securities in the Philippines
PIC Q&A No. 2010-01 contained the
consensus on certain issues relating to
paragraph AG 71-72 of PAS 39, Financial
Instruments: Recognition and Measurement.
The said issues have been addressed in
PFRS 13, Fair Value Measurement, which
became effective for annual periods beginning
on or after January 1, 2013.
Consequently, PIC Q&A No. 2010-01 is
withdrawn and should no longer be applied for
annual periods beginning on or after
January 1, 2013, the effective date of
PFRS 13.
PIC Q&A No. 2011-01: PAS 1.10(f)
Requirements for a third statement of financial
position
PIC Q&A No. 2011-01 contained the
consensus on certain issues relating to
paragraph 10 (f) of PAS 1, Presentation of
Financial Statements. The said issues have
been clarified upon the issuance of the Annual
Improvements to PFRS 2009-2011 Cycle,
which became effective for annual periods
beginning on or after January 1, 2013.
2
Consequently, PIC Q&A No. 2011-01 is
withdrawn and should no longer be applied for
annual periods beginning on or after
January 1, 2013, the effective date of the
Annual Improvements to PFRS 2009-2011
Cycle.
Date approved by PIC: September 25, 2013 (Original signed)
PIC Members
Dalisay B. Duque, Chairman
Wilfredo A. Baltazar
Edmund A. Go
Rosario S. Bernaldo
Lyn I. Javier
Sharon S. Dayoan
Ma. Concepcion Y. Lupisan
Gina S. Detera
Wilson P. Tan
Ma. Gracia F. Casals-Diaz
Normita L. Villaruz
Date approved by FRSC: October 8, 2014
3
PHILIPPINE INTERPRETATIONS COMMITTEE (PIC)
QUESTIONS AND ANSWERS (Q&As)
Q&A No. 2006-02 (amended August 2013)
(See Appendix for copy showing amendments)
PFRS 10.4(a) - Clarification of criteria for exemption from presenting
consolidated financial statements
Background
Paragraph 4 of PFRS 10, Consolidated Financial Statements, which is effective for
annual periods beginning on or after January 1, 2013, provides four conditions when a
parent need not present consolidated financial statements. PFRS 10.4(a)(iv) states:
"its ultimate or any intermediate parent of the parent produces consolidated
financial statements available for public use that comply with International
Financial Reporting Standards (IFRS) or Philippine Financial Reporting
Standards (PFRS)." (emphasis added)
Issue 1
When are consolidated financial statements considered “available for public use"?
Consensus
The term “consolidated financial statements available for public use” refers to general
purpose financial statements1 which the public may avail of. This includes consolidated
financial statements of the ultimate or immediate parent that are:
•
posted in the website of the parent company or of its ultimate or any intermediate
parent, or
•
filed with the Philippine SEC (which become available to the public once filed) or
other bodies that make filed financial statements available to the public (e.g., the
Philippine Stock Exchange makes available financial statements of brokers and
dealers in securities).
Issue 2
Are consolidated financial statements of the ultimate or any intermediate parent
prepared in conformity with a financial reporting framework, other than IFRS or PFRS
acceptable for purposes of the exemption from the preparation of consolidated financial
statements?
Consensus
For Philippine financial reporting purposes, other financial reporting standards that are
converged or virtually converged with IFRS such as those of Australia, Singapore, Hong
Kong, or countries in the European Union2, or are conceptually similar to IFRS, such as
those of the United States, United Kingdom, or Canada, are deemed acceptable in
applying the provisions of PFRS 10.4(a) on the exemption from the preparation of
consolidated financial statements.
_________________________________
1
PAS 1, Presentation of Financial Statements, paragraph 3 defines general purpose financial
statements as those intended to meet the needs of users who are not in a position to demand
reports tailored to meet their particular needs. They include those that are presented
separately or within another public document such as an annual report or a prospectus.
2
Other countries’ financial reporting standards may become acceptable for purposes of the
exemption from consolidation as these other countries converge with IFRS.
1
Effective Date
The consensus in this Q&A is effective from December 18, 2006, the original date of
approval by the FRSC. The amendments to this Q&A are effective for annual periods
beginning on or after January 1, 2013, the effective date of PFRS 10, Consolidated
Financial Statements. Earlier application is permitted.
Date originally approved by PIC: November 7, 2006 (Original signed)
Date amendments approved by PIC: September 25, 2013 (Original signed)
PIC Members
Dalisay B. Duque, Chairman
Wilfredo A. Baltazar
Edmund A. Go
Rosario S. Bernaldo
Lyn I. Javier
Sharon G. Dayoan
Ma. Concepcion Y. Lupisan
Gina S. Detera
Wilson P. Tan
Ma. Gracia F. Casals-Diaz
Normita L. Villaruz
Date originally approved by FRSC: December 18, 2006
Date amendments approved by FRSC: October 8, 2014
2
Appendix
(Copy showing amendments)
Q&A No. 2006-02 (amended August 2013)
PAS 27.10(d) PFRS 10.4(a) - Clarification of criteria for exemption from presenting
consolidated financial statements
Background
Paragraph 10 of PAS 27, Consolidated and Separate Financial Statements, 4 of PFRS
10, Consolidated Financial Statements, which is effective for annual periods beginning
on or after January 1, 2013, provides four conditions when a parent need not present
consolidated financial statements. Paragraph 10(d) of the Standard PFRS 10.4(a)(iv)
states:
"the its ultimate or any intermediate parent of the parent produces consolidated
financial statements available for public use that comply with International
Financial Reporting Standards (IFRS) or Philippine Financial Reporting
Standards (PFRS)." (emphasis added)
Issue 1
When are consolidated financial statements considered “available for public use"?
Consensus
The term “consolidated financial statements available for public use” refers to general
purpose financial statements1 which the public may avail of. This includes consolidated
financial statements of the ultimate or immediate parent that are:
•
posted in the website of the parent company or of its ultimate or any intermediate
parent, or
•
filed with the Philippine SEC (which become available to the public once filed) or other
bodies that make filed financial statements available to the public (e.g., the Philippine
Stock Exchange makes available financial statements of brokers and dealers in
securities).
Issue 2
Are consolidated financial statements of the ultimate or any intermediate parent prepared
in conformity with a financial reporting framework, other than IFRS or PFRS acceptable for
purposes of the exemption from the preparation of consolidated financial statements?
Consensus
For Philippine financial reporting purposes, other financial reporting standards that are
converged or virtually converged with IFRS such as those of Australia, Singapore, Hong
Kong, or countries in the European Union2, or are conceptually similar to IFRS, such as
those of the United States, United Kingdom, or Canada, are deemed acceptable in
applying the provisions of PAS 27.10d PFRS 10.4(a) on the exemption from the
preparation of consolidated financial statements.
________________________
1
PAS 1, Presentation of Financial Statements, paragraph 3 defines general purpose financial
statements as those intended to meet the needs of users who are not in a position to demand
reports tailored to meet their particular needs. They include those that are presented separately
or within another public document such as an annual report or a prospectus.
2
Other countries’ financial reporting standards may become acceptable for purposes of the
exemption from consolidation as these other countries converge with IFRS.
1
Appendix
(Copy showing amendments)
Effective Date
The consensus in this Q&A is effective from December 18, 2006, the original date of
approval by the FRSC. The amendments to this Q&A are effective for annual periods
beginning on or after January 1, 2013, the effective date of PFRS 10, Consolidated
Financial Statements. Earlier application is permitted.
Date originally approved by PIC: November 7, 2006
Date amendments approved by PIC: September 25, 2013
PIC Members
Dalisay B. Duque, Chairman
Wilfredo A. Baltazar
Edmund A. Go
Rosario S. Bernaldo
Lyn I. Javier
Sharon G. Dayoan
Ma. Concepcion Y. Lupisan
Gina S. Detera
Wilson P. Tan
Ma. Gracia F. Casals-Diaz
Normita L. Villaruz
Date originally approved by FRSC: December 18, 2006
Date amendments approved by FRSC: October 8, 2014
2
PHILIPPINE INTERPRETATIONS COMMITTEE (PIC)
QUESTIONS AND ANSWERS (Q&As)
Q&A No. 2009-01 (amended August 2013)
(See Appendix for copy showing amendments)
Framework 4.1 and PAS 1.25 - Financial statements prepared on a basis other than
going concern
Issue 1
Are financial statements that are prepared on a basis of accounting other than a going
concern basis, which may sometimes be referred to as a liquidation basis, in compliance
with Philippine Financial Reporting Standards (PFRS)?
Background
Paragraph 4.1 of The Conceptual Framework for Financial Reporting states that financial
statements are normally prepared on the assumption that an entity is a going concern
and will continue in operation for the foreseeable future. Paragraph 25 of PAS 1,
Presentation of Financial Statements, states that financial statements shall be prepared
on a going concern basis unless management either intends to liquidate the entity or to
cease trading, or has no realistic alternative but to do so.
Hence, it is assumed that the entity has neither the intention nor the need to liquidate or
curtail materially the scale of its operations. If such an intention or need exists, the financial
statements may have to be prepared on a different basis and, if so, the basis used is
disclosed.
Paragraphs 14 to 15 of PAS 10 (revised 2010), Events after the Reporting Period,
provides that if the going concern assumption is no longer appropriate, the effect is so
pervasive that the Standard requires a fundamental change in the basis of accounting,
rather than an adjustment to the amounts recognized within the original basis of
accounting.
If management of an entity has the intention, needs to liquidate or curtails materially the
scale of its operations, then the financial statements will have to be prepared on a basis
which is other than a going concern basis, sometimes referred to as a liquidation basis.
Given appropriate disclosure as to the basis of accounting in a set of financial statements
prepared on a basis other than going concern, is it appropriate for management to make
an explicit and unreserved statement of compliance with PFRS in the notes to financial
statements?
Consensus
Yes, financial statements prepared on a basis other than going concern can be in
compliance with PFRS if the financial statements comply with all the requirements of
PFRS, including the relevant PFRS guidance for the measurement of assets, liabilities and
equity and recognition of income, expenses, gains and losses. For example:
 Non-current assets that are not carried at fair value and are intended for sale should
be measured using the principles in PFRS 5, Non-current Assets Held for Sale and
Discontinued Operations.
1
 Assets that are carried at fair value should be accounted for under the relevant PFRS;
for example, PAS 39, Financial Instruments: Recognition and Measurement1, for
financial assets and financial liabilities; PAS 40, Investment Property, for investment
properties.
 Provisions for liabilities should be recognized and measured in accordance with
PAS 37, Provisions, Contingent Liabilities and Contingent Assets, (i.e., only when there
is a present obligation).
In addition, a complete set of financial statements as required under PAS 1.10 should be
presented and the minimum line items required to be included in each of the financial
statements, if applicable to the entity, should also be considered. An entity need not
present a statement of comprehensive income (or a statement of income and a statement
of total comprehensive income) if it does not have any operations (both within and outside
the normal course of business) during the period covered by the financial statements
prepared on the basis other than going concern. The non-presentation of such statement
(assuming that other income items, if any, are not material), is consistent with the
provision of paragraph 31 PAS 1 which allows that disclosures need not be provided if the
information is not material. A disclosure, however, should be made in the notes to
financial statements to clearly indicate the omission of said statement as this information is
useful for regulatory purposes (for instance, the SEC allows an entity that has no
operations for the last two years not to present an income statement as part of its financial
statements).
Appropriate disclosures in accordance with paragraph 25 of PAS 1 should also be made
to describe the basis of accounting used in the preparation of the financial statements and
its impact on the accounting policies selected. PAS 1 requires the following disclosures:
 The fact that the financial statements are not prepared on a going concern basis,
 The basis on which the financial statements are prepared, and
 The reason why the entity is not regarded as a going concern.
The financial statements would state that the financial statements are in compliance with
PFRS. The change in the underlying basis to reflect that the entity is no longer a going
concern would be disclosed in the financial statements together with the impact on
management’s selection of accounting policies. This selection of accounting policies
would depend on how management expects to recover the assets of the entity and settle
its liabilities. These accounting policy changes would need to be permitted by and be in
compliance with the relevant PFRS.
Illustrative Disclosure (assuming that the entity will be liquidated)
Basis of preparation of financial statements
The stockholders of XYZ Company approved a plan of liquidation on
(date)
.
Accordingly, the Company has changed its basis of accounting for periods subsequent
to (date) , from the going-concern basis to the liquidation basis, whereby assets as
of (reporting date) are presented at estimated realizable values and liabilities, at
estimated settlement amounts.
Statement of compliance with Philippine Financial Reporting Standards
The financial statements of X Company have been prepared in accordance with
Philippine Financial Reporting Standards, on the basis described above.
____________________
1
PFRS 9 is the new standard that will replace PAS 39, Financial Instruments: Recognition and
Measurement, effective for annual periods beginning on or after January 1, 2015.
2
If the entity qualifies as a small or medium-sized entity (or SME), the financial
statements prepared on a basis other than going concern can be in compliance with
PFRS for Small and Medium-sized Entities (PFRS for SMEs) provided that this standard
is applied in the measurement of the assets, liabilities and equity and in the recognition
of income, expenses, gains and losses of the SME. Appropriate disclosures in
accordance with PFRS for SMEs should be made to describe the basis of accounting
and its impact on the accounting policies selected.
Effective Date
The consensus in this Q&A is effective from March 16, 2009, the original date of approval
by the FRSC. The amendments to this Q&A are effective from October 8, 2014, the date
these amendments were approved by the FRSC. Earlier application is permitted.
**
Date originally approved by PIC: February 18, 2009 (Original signed)
Date amendments approved by PIC: September 25, 2013 (Original signed)
PIC Members
Dalisay B. Duque, Chairman
Wilfredo A. Baltazar
Edmund A. Go
Rosario S. Bernaldo
Lyn I. Javier
Sharon G. Dayoan
Ma. Concepcion Y. Lupisan
Gina S. Detera
Wilson P. Tan
Ma. Gracia Casals-Diaz
Normita L. Villaruz
Date originally approved by FRSC: March 16, 2009
Date amendments approved by FRSC: October 8, 2014
3
Appendix
(Copy showing amendments)
Q&A No. 2009-01 (amended August 2013)
Framework.23 4.1 and PAS 1.23 25 - Financial statements prepared on a basis other
than going concern
Issue 1
Are financial statements that are prepared on a basis of accounting other than a going
concern basis, which may sometimes be referred to as a liquidation basis, in compliance
with Philippine Financial Reporting Standards (PFRS)?
Background
Paragraph 23 4.1 of the Framework for the Preparation and Presentation of Financial
Statements The Conceptual Framework for Financial Reporting states that financial
statements are normally prepared on the assumption that an entity is a going concern
and will continue in operation for the foreseeable future. Paragraph 23 25 of PAS 1,
Presentation of Financial Statements, states that financial statements shall be prepared
on a going concern basis unless management either intends to liquidate the entity or to
cease trading, or has no realistic alternative but to do so.
Hence, it is assumed that the entity has neither the intention nor the need to liquidate or
curtail materially the scale of its operations. If such an intention or need exists, the financial
statements may have to be prepared on a different basis and, if so, the basis used is
disclosed.
Paragraphs 10 14 to 15 of PAS 10 (revised 2010), Events after Balance Sheet Date the
Reporting Period, which became effective for annual periods beginning on or after
January 1, 2005 provides that if the going concern assumption is no longer appropriate,
the effect is so pervasive that the Standard requires a fundamental change in the basis
of accounting, rather than an adjustment to the amounts recognized within the original
basis of accounting.
If management of an entity has the intention, needs to liquidate or curtails materially the
scale of its operations, then the financial statements will have to be prepared on a basis
which is other than a going concern basis, sometimes referred to as a liquidation basis.
Given appropriate disclosure as to the basis of accounting in a set of financial statements
prepared on a basis other than going concern, is it appropriate for management to make
an explicit and unreserved statement of compliance with PFRS in the notes to financial
statements?
Consensus
Yes, financial statements prepared on a basis other than going concern can be in
compliance with PFRS if the financial statements comply with all the requirements of
PFRS, including the relevant PFRS guidance for the measurement of assets, liabilities and
equity and recognition of income, expenses, gains and losses. For example:
 Non-current assets that are not carried at fair value and are intended for sale should
be measured using the principles in PFRS 5, Non-current Assets Held for Sale and
Discontinued Operations.
1
Appendix
(Copy showing amendments)
 Assets that are carried at fair value should be accounted for under the relevant PFRS;
for example, PAS 39, Financial Instruments: Recognition and Measurement1, for
financial assets and financial liabilities; PAS 40, Investment Property, for investment
properties.
 Provisions for liabilities should be recognized and measured in accordance with
PAS 37, Provisions, Contingent Liabilities and Contingent Assets, (i.e., only when there
is a present obligation).
In addition, a complete set of financial statements as required under PAS 1.10 should be
presented and the minimum line items required to be included in each of the financial
statements, if applicable to the entity, should also be considered. An entity, need not
present a statement of comprehensive income (or a statement of income and a statement
of total comprehensive income) if it does not have any operations (both within and outside
the normal course of business) during the period covered by the financial statements
prepared on the basis other than going concern. The non-presentation of such statement
(assuming that other income items, if any, are not material), is consistent with the
provision of paragraph 31 PAS 1 which allows that disclosures need not be provided if the
information is not material. A disclosure, however, should be made in the notes to
financial statements to clearly indicate the omission of said statement as this information is
useful for regulatory purposes (for instance, the SEC allows an entity that has no
operations for the last two years not to present an income statement as part of its financial
statements).
Appropriate disclosures in accordance with paragraph 23 25 of PAS 1 should also be
made to describe the basis of accounting used in the preparation of the financial
statements and its impact on the accounting policies selected. PAS 1 requires the
following disclosures:
 The fact that the financial statements are not prepared on a going concern basis,
 The basis on which the financial statements are prepared, and
 The reason why the entity is not regarded as a going concern.
The financial statements would state that the financial statements are in compliance with
PFRS. The change in the underlying basis to reflect that the entity is no longer a going
concern would be disclosed in the financial statements together with the impact on
management’s selection of accounting policies. This selection of accounting policies
would depend on how management expects to recover the assets of the entity and settle
its liabilities. These accounting policyies changes would need to be permitted by and be in
compliance with the relevant PFRS standards.
Illustrative Disclosure (assuming that the entity will be liquidated)
Basis of preparation of financial statements
The stockholders of XYZ Company approved a plan of liquidation on
(date) .
Accordingly, the Company has changed its basis of accounting for periods subsequent
to (date) , from the going-concern basis to the liquidation basis, whereby assets as
of (reporting date) are presented at estimated realizable values and liabilities, at
estimated settlement amounts.
Statement of compliance with Philippine Financial Reporting Standards
The financial statements of X Company have been prepared in accordance with
Philippine Financial Reporting Standards, on the basis described above.
____________________
1
PFRS 9 is the new standard that will replace PAS 39, Financial Instruments: Recognition and
Measurement, effective for annual periods beginning on or after January 1, 2015.
2
Appendix
(Copy showing amendments)
If the entity is a non-publicly accountable entity (NPAE) qualifies as a small or mediumsized entity (or SME), the financial statements prepared on a basis other than going
concern can be in compliance with accounting principles generally accepted in the
Philippines applicable to NPAEs PFRS for Small and Medium-sized Entities (PFRS for
SMEs) provided relevant SFAS that this standard is applied in the measurement of the
assets, liabilities and equity and in the recognition of income, expenses, gains and losses
of the SME. Appropriate disclosures in accordance with paragraph 23 of SFAS 1
(revised 2000), Presentation of Financial Statements, PFRS for SMEs should be made to
describe the basis of accounting and its impact on the accounting policies selected.
Effective Date
The consensus in this Q&A is effective from March 16, 2009, the original date of approval
by the FRSC. The amendments to this Q&A are effective from October 8, 2014, the date
these amendments were approved by the FRSC. Earlier application is permitted.
**
Date originally approved by PIC: February 18, 2009
Date amendments approved by PIC: September 25, 2013
PIC Members
Dalisay B. Duque, Chairman
Wilfredo A. Baltazar
Edmund A. Go
Rosario S. Bernaldo
Lyn I. Javier
Sharon G. Dayoan
Ma. Concepcion Y. Lupisan
Gina S. Detera
Wilson P. Tan
Ma. Gracia Casals-Diaz
Normita L. Villaruz
Date originally approved by FRSC: March 16, 2009
Date amendments approved by FRSC: October 8, 2014
3