FAR.

Statement of Comprehensive Income

STATEMENT OF COMPREHENSIVE INCOME (SCI)

● Traditionally it is called Income statement or
Profit & Loss (P/L)
● Composed of Income statement and other comprehensive income
● Shows the financial performance of the company
● Consists of Income and Expenses (including revenue and gains as well as operating
expenses, finance cost and losses)

An entity shall present all items of income and expenses recognized in a period:
● In a single SCI or
● In two statements;
● A statement displaying components of profit or loss (separate income statement) and;
● A second statement beginning with profit or loss and displaying components of other
comprehensive income (statement of comprehensive income)

INFORMATION (LINE ITEMS) PRESENTED IN THE SCI

As the minimum, the SCI shall include line items that present the following amounts for the period:
a. Revenue
b. Finance costs;
c. Share of the profit or loss of associates and joint ventures accounting for using the equity
method;
d. Tax expense (Both Current Income tax and Deferred income tax)
e. A single amount comprising the total of:
– The post-tax profit or loss of discontinued operations and
– The post-tax gain or loss recognized on the measurement to fair value less costs to sell or on
the disposal of the assets or disposal group (s) constituting the discontinued operation;
f. Profit or loss
g. Each components of other comprehensive income classified by nature (excluding amounts in
letter h)
h. Share of the other comprehensive income of associates and joint ventures accounted for using
the equity method; and
i. Total comprehensive income

NOTE: An entity shall disclose the following items in the SCI as allocations of profit or loss for the
period:
j. Profit or loss for the period attributable to:
i. non-controlling interests and ii. Owners of the parent
k. Total comprehensive income for the period attributable to:
i. non-controlling interests, and ii. Owners of the parent

Other comprehensive income comprises items of income and expense (including reclassification
adjustments that are not recognized in profit or loss as required or permitted by other PFRSs

COMPONENTS OF OCI (EDFRDAC)

NOTE: Components of the other comprehensive income (OCI)
1, Unrealized gain or loss on EQUITY INVESTMENT measured at FVTOCI,
. Unrealized gain or loss on DEBT INVESTMENT measured at FVTOCI.
. Gain or loss from translation of the FS of a foreign operation.
. REVALUATION SURPLUS during the year.
. Unrealized gain or loss from DERIVATIVE CONTRACTS
designated as Cash Flow Hedge.
. REMEASUREMENTS of defined benefit plan, including ACTURIAL GAINS OR LOSS.
. Change in FV attributable to CREDIT RISK of a financial liability designated at FVTPL.

– Certain items must be disclosed either on the face of SCl or in the notes, if material including:
● Write-downs of inventories to net realizable value or of PPE to recoverable amount, as well
as reversals of such write downs
● Restructurings of the activities of an entity and reversals of any provisions for the costs of
restructuring
● Disposals of items of PPE
● Disposals of investment
● Discontinuing operations
● Litigation settlements
● Other reversals of provisions

NOTE: An entity shall present an analysis of expenses recognized in profit or loss using a
classification based on either their nature or their function within the entity, whichever provides
information that is reliable and more relevant. Analysis can be in the form of:

"Nature of expense method' - according to nature (ex. Depreciation, purchase of materials,

transport costs, employee benefits and advertising costs).

Function of expense method or cost of sales method' - classify expenses

according to function as part of cost of sales (ex. Costs of distribution or administrative activities).
At a minimum, an entity discloses its cost of sales under this method separately from other
expenses:

NOTE: If the entity used the function of expense method, additional disclosure is required about the
nature of expenses, including depreciation, amortization and employee benefits expenses.

An entity shall not present any items of income or expenses as extraordinary items, in the SCl or
separate income statement (if presented), or in the notes.

FAR. Accounting Policies, Changes in Accounting Estimates & Errors Part 2

CHANGE IN ACCOUNTING ESTIMATE ILLUSTRATION

A machinery costing P500,000 is estimated to have a useful life of 5 years. At the beginning of the
3rd year, the original life is changed to 8 years. Thus, the machinery has a remaining life of 6 years.
Question: Do we have to correct the past depreciation?
Answer: NO correction shall be made, instead, the remaining CA of P300,000 (P500,000 less
P200,000 depreciation for 2 years) is now allocated over 6 years or a subsequent annual
depreciation of P50,000.

Change in reporting entity

● What is a reporting entity?

– Those whole filed either stand-alone FS, or Separate and Consolidated FS or
Combined FS.
● What is a change in reporting entity?
– Change whereby entities change their nature and report operations in such a way that the
FS are in effect those of a different reporting entity.
● What is the accounting treatment for the change?
– Change in Accounting Policy and therefore shall be treated RETROSPECTIVELY OR
RETROACTIVELY

ABSENCE OF ACCOUNTING STANDARD

● In the absence of specific accounting standards that applies specifically to a transaction or
event, management shall use Judgement in Selecting and Applying Accounting Policy
(RELEVANT AND FAITHFULLY REPRESENTED)
● Hierarchy of Guidance which Management may use when selecting accounting policies in
such circumstances: |
 . Requirements of the current standards dealing with similar matters.
. Definition, recognition criteria and measurement concepts of ALE & IE in the Conceptual
Framework for Financial Reporting.
. Most recent pronouncements of other standard-setting bodies that use similar CF, other
accounting literature and accepted industry practices.

PRIOR PERIOD ERRORS

– are omissions and misstatements in the FS for one or more periods arising from a failure to
use or misuse of reliable information that:
● Was available when FS for those periods were authorized for issue.
● Could reasonably be expected to have been obtained and taken into account in the
preparation and presentation of those FS.

What is the accounting treatment for Prior Period Errors?

- PP/E shall be corrected RETROSPECTIVLY (Retrospective Restatement) b adjusting the opening
balances of the RETAINED EARNINGS & affected
ASSETS and LIABILITIES.
- If impracticable to determine the cumulative effect @ the beginning of the current period of an
error on all prior periods →
Restate PROSPECTIVELY.

FAR. Impairment of Assets Part 2

NOT INCLUDED IN THE ESTIMATES OF FUTURE CASH FLOWS (IN COMPUTING VALUE IN USE)
<REFI>
. Future cash flows relating to RESTRUCTURING to which the entity is NOT YET COMMITTED.
. Future costs of improving or ENHANCING the asset's performance.
. Cash inflows or outflows from FINANCING activities.
. INCOME TAX receipts or payments.

IMPAIRMENT LOSS RECOGNITION

● CA > RA = difference is IMPAIRMENT LOSS
● CA should be reduced to RA
● Timing of recognition of IL: IMMEDIATELY
● Where to present the IL: PROFIT & LOSS (PL)/Income
Statement
 FAR. Comparison between PFRS for SMEs and PFRS for SEs

Scope

Full PFRS
● Public Interest Entities
● Non-public interest entities with Total Assets of more than 350M or Total Liabilities of more
than 250M
PFRS for SME
• Non-public interest entities with Total Assets of 100M to 350M and Total Liabilities of 100M than
250M
PFRS for SE
• Non-public interest entities with Total Assets or Total Liabilities of less than 100M

Highlights of Differences and Similarities (SE vs SME)

Major Differences
● Income tax
● Post-
employment benefits
● Other
Comprehensive income
● Correction of error
● Judgment and estimates

Other Differences

● Investment in Subsidiary
● Investment in traded securities
● Inventory
● Leases
● Property and equipment
● Agriculture
● Share-based transactions

Similarities

● Revenue
● Foreign currency transactions
● Borrowing costs
● Impairment
 ● Investment property
● Related party disclosures
● Provisions and contingencies
● Investment in associates and joint ventures
● Business
combination
● Government grants

Major Differences

. No Deferred taxes
. No Actuarial computation
. No Other Comprehensive Income
. No restatement of prior year
. No Disclosure of significant judgment and estimates

Income Tax

PFRS for SME

Income tax expense must include:
● Current tax expense; and
● Deferred tax expense

PFRS for SE
Income tax expense includes:
● Current tax expense; and
● Deferred tax expense (Optional)

Post-Employment Benefits

PERS for SME

Retirement benefit expense consists of:
• Service costs
Interest costs
Expected Return on Plan Assets
Projected unit credit method is used if it is possible to do so without undue cost or effort.
Actuarial gains or losses are rotif or loss or oliately in either comprehensive income.
PERS for SE
Retirement benefit expense is calculated using the accrual approach in accordance with the
minimum retirement benefits required under RA 7641, or company policy if superior than that
provided by RA
7641.
No consideration of changes in future salary rates and service perio
No recognition of actuarial gains/losses.

Complete Set of Financial Statements

PERS for SMEs
Complete set of FS includes:
● Statement of Financial Position
● Statement of Income
Statement of Cash Flows
Statement of Changes in Equity
⼝
Statement of Comprehensive
Income
• Notes to Financial Statements
Statement of income and retained earnings may be presented in place of Statement of changes in
equity and Statement of comprehensive income

PERS for SE
Complete set of FS includes:
Statement of Financial Position
Statement of Income
Statement of Cash Flows
Statement of Changes in Equity
Notes to Financial Statements

Statement of income and retained earnings may be presented in place of Statement of changes in
equity and Statement of comprehensive income

Correction of Error
PFRS for SME
Effects of correction of errors are accounted for retrospectively.
Restatement of
Comparative FS is required

PFRS for SE
Effects of correctionDo errors are accounted for an adjustment of the opening Retained Earnings of
the current period.
No Restatement of
Comparative FS

Disclosure about Judgment and Estimates

PFRS for SME

Disclosure of information about key sources of estimation, uncertainty and judgment is required

PFRS for SE
Disclosure of information about key sources of estimation, uncertainty and judgment is not
required.

Other differences

● Investment in Subsidiary
● Investment in traded securities
● Inventory
● Leases
● Property and equipment
● Agriculture
● Share-based transactions

Investment in Subsidiary

PFRS for SME

Consolidated Financial Statements are required.

PFRS for SE
Option to prepare consolidated FS or account for the investment in subsidiary using the equity
method
Basic Financial Instruments

PFRS for SME

Debt instruments are measured at amortised cost

Debt instruments that are classified as current are measured at the undiscounted amount

Investments in traded securities are measured at fair value through P&L

PFRS for SE
• Debt instruments are measured at amortised cost

Debt instruments that are classified as current are measured at the undiscounted amount
Investments in traded securities are measured at the lower of cost or fair value

Inventory

PFRS for SME

Inventories are
measured at the lower of cost and estimated selling price less cost to sell and cost to complete

PFRS for SE
Inventories are measure at the lower of cost or market

Leases

PFRS for SME

Leases are classified either:
Operating lease; or
Finance lease
Lease payments under operating leases are recognized as income/expense on a straight-line basis
over the lease term
Required to disclose future lease payments

PFRS for SE
All leases are accounted for as an operating lease
Lease payments shall be recognized as income/expense when earned/incurred
Not required to disclose future lease payments

Property Plant and Equipment

PERS for SME

Property, plant and equipment can be measured using:
Cost-depreciation-impairment model;
Revaluation model

PFRS for SE
Property, plant and equipment can be measured using:
Cost-depreciation-impairment model; or
• Fair value model

Agriculture

PFRS for SME

Biological assets are accounted for at fair value less cost to sell if de fri nave sviey
undue costs or effort Otherwise, biological assets are accounted for at cost less accumulated
depreciation and accumulated impairment losses

PERS for SE
Biological assets may be accounted for using:
● Cost Model; or
● Current market price model

Share based transactions

PFRS for SME

Equity-settled- the goods or services received, and the increase in equity, at the fair value of the
goods or services received.
Cash-settled - goods or services acquired and the liability incurred are measured at the fair value of
the liability.

PFRS for SE
Equity-settled- the goods or services received, and the increase in equity, with reference to the net
asset value of the equity instruments granted.
Cash-settled - goods or services acquired and the liability incurred are measured at the fair value of
the liability.

Similarities
● Revenue
● Foreign currency transactions
● Borrowing costs
● Impairment
● Investment property
● Related party disclosures
● Provisions and contingencies
● Investment in associates and joint ventures
● Business combination
● Government grants

FAR. Interim Financial Reporting (PAS 34)

INTERIM FINANCIAL REPORTING

INTERIM FINANCIAL REPORTING MEANS THE PREPARATION AND PRESENTATION OF FINANCIAL
STATEMENTS FOR A PERIOD OF LESS THAN ONE YEAR

INTERIM FINANCIAL REPORTS MAY BE PRESENTED MONTHLY, QUARTERLY OR SEMI-ANNUALLY.

QUARTERLY INTERIM REPORTS ARE THE MOST COMMON!

PAS 34 DOES NOT MANDATE WHICH ENTITIES ARE REQUIRED TO PUBLISH INTERIM FINANCIAL
REPORTS, HOW FREQUENTLY, OR HOW SOON AFTER THE END OF AN INTERIM PERIOD.

> THE SEC AND PSE REQUIRE ENTITIES COVERED BY THE REPORTORIAL REQUIREMENTS OF
REVISED SECURITIES ACT TO FILE QUARTERLY INTERIM FINANCIAL REPORTS WITHIN 45 DAYS
AFTER THE END OF THE FIRST THREE QUARTERS.

TWO VIEWS ON INTERIM FINANCIAL REPORTING

INTEGRAL VIEW - ANNUAL OPERATING EXPENSES ARE ESTIMATED AND THEN ALLOCATED TO
THE INTERIM PERIODS BASED ON FORECASTED REVENUE OR SALES VOLUME.
INDEPENDENT VIEW - NO ESTIMATIONS OR
ALLOCATIONS ARE MADE FOR INTERIM PURPOSES. ANNUAL OPERATING EXPENSES ARE
RECOGNIZED IN THE INTERIM PERIOD IN WHICH THEY ARE INCURRED.
PAS 34 ON INTERIM FINANCIAL REPORTING DOES NOT MENTION ABOUT THE TWO VIEWS

COMPONENTS OF AN INTERIM FINANCIAL

REPORT
PAS 34, PARAGRAPH 8, PROVIDES THAT AN INTERIM FINANCIAL REPORT SHALL INCLUDE, AT A
MINIMUM, THE FOLLOWING COMPONENTS:
a. CONDENSED STATEMENT OF THE FINANCIAL POSITION
b. CONDENSED STATEMENT OF COMPREHENSIVE INCOME
c. CONDENSED STATEMENT OF CHANGES IN EQUITY
d. CONDENSED STATEMENT OF CASH FLOW
e. SELECTED EXPLANATORY NOTES

> PAS 34, ALLOWS AN ENTITY TO PUBLISHED A SET OF CONDENSED FINANCIAL STATEMENTS
OR COMPLETE SETS OF FINANCIAL STATEMENTS IN THE INTERIM FINANCIAL REPORT.

DISCLOSURE OF COMPLIANCE WITH PFR PAS 34, PARAGRAPH 19, PROVIDES THAT IF AN
ENTITY'S INTERIM FINANCIAL REPORT IS A COMPLIANCE WITH PFRS, SUCH FACT SHALL BE
DISCLOSED.
EXAMPLES OF DISCLOSURES REQUIRED IN A CONDENSED INTERIM FINANCIAL REPORT INCLUDE:
● WRITEDOWN OF INVENTORIES TO NET REALIZABLE VALUE AND THE REVERSAL OF SUCH
WRITE-DOWN.
● RECOGNITION OF A LOSS FROM THE IMPAIRMENT OF PPE AND INTANGIBLE ASSETS AND
THE REVERSAL OF IMPAIRMENT LOSS.
● THE REVERSAL OF ANY PROVISIONS FOR THE COSTS OF RESTRUCTURING.
● THE ACQUISITIONS AND DISPOSAL OF ITEMS OF PPE.
● COMMITMENTS FOR THE PURCHASE OF PPE.
● LITIGATION SETTLEMENTS
● CORRECTIONS OF PRIOR PERIOD ERRORS IN PREVIOUSLY REPORTED FINANCIAL DATA
● ANY DEBT DEFAULT OR ANY BREACH OF A DEBT COVENANT THAT HAS NOT BEEN
CORRECTED SUBSEQUENTLY.
● RELATED PARTY TRANSACTION

PRESENTATION OF COMPARATIVE INTERIM STATEMENT

ILLUSTRATION: HALF YEARLY

IF AN ENTITY PUBLISHES INTERIM FINANCIAL REPORTS HALF YEARLY, THE FOLLOWING

COMPARATIVE FINANCIAL STATEMENTS ARE PRESENTED ON JUNE 30, 2020.
PRESENTATION OF COMPARATIVE INTERIM STATEME
. STATEMENT OF FINANCIAL POSITION
● Statement of financial position at the end of current interim period.
● Comparative statement of financial position at the end of preceding year
. INCOME STATEMENT
● Income statement for the current interim period
● Income statement cumulatively for the current financial year to date
● Comparative income statement for the comparable interim period of the preceding year
● Comparative income statement cumulatively for the comparable financial year to date of the
preceding year

3. STATEMENT OF COMPREHENSIVE INCOME

● Statement of comprehensive income for the current interim period
● Statement of comprehensive income cumulatively for the current financial year to date
● Comparative statement of comprehensive income for the comparable interim period of the
preceding year
● Comparative statement of comprehensive income cumulatively for the comparable financial
year to date of the preceding year

4. STATEMENT OF CHANGES IN EQUITY

● Statement of changes in equity cumulatively for the current financial year to date
● Comparative statement of changes in equity for the comparable financial year to date of the
preceding year
5. STATEMENT OF CASH FLOW
● Statement of cash flows cumulatively for the current financial year to date
● Comparative statement of cash flows for the comparable financial year to date of the
preceding year

BASIC PRINCIPLES
1. PAS 34 PROVIDES THAT AN ENTITY SHALL APPLY THE SA ACCOUNTING POLICIES IN THE
INTERIM FINANCIAL STATEMENTS AS ARE APPLIED IN THE ANNUAL FINANCIAL STATEMENTS.
**MEASUREMENTS FOR THE INTERIM REPORTING PURPOSES SHALL BE MADE ON A YEAR TO
DATE BASIS.
. REVENUES FOR PRODUCTS SOLD OR SERVICES RENDERED ARE GENERALLY
RECOGNIZED FOR INTERIM REPORTS ON THE SAME BASIS AS FOR THE ANNUAL PERIOD.
. COSTS AND EXPENSES ARE RECOGNIZED AS INCURRED IN AN INTERIM PERIOD.
. THE PREPARATION OF INTERIM FINANCIAL REPORTS
GENERALLY REQUIRES A GREATER USE OF ESTIMATION THAT ANNUAL FINANCIAL
 .

REPORTS.

INVENTORIES
● ARE MEASURED FOR INTERIM FINANCIAL REPORTING BY THE SAME PRINCIPLES AS AT
FINANCIAL YEAR END.
● SHALL BE MEASURED AT THE LOWER COST OR NET REALIZABLE VALUE EVEN FOR INTERIM
PURPOSES.
DIVIDEND REVENUE, ROYALTIES AND GOVERNMENT GRANTS
● SHALL BE RECOGNIZED IN THE INTERIM PERIOD WHEN THEY OCCUR.

DEPRECIATION AND AMORTIZATION

● SHALL BE BASED ONLY ON ASSETS OWNED DURING THAT INTERIM PERIOD.

INCOME TAX

● INTERIM PERIOD INCOME TAX EXPENSES SHALL REFLECT THE SAME GENERAL PRINCIPLES
OF INCOME TAX ACCOUNTING APPLICABLE TO ANNUAL REPORTING.

FAR. The Philippine Financial Reporting Framework I Part 1

Philippine Financial Reporting Framework

Financial reporting framework is a set of accounting principles, standards, interpretations and
pronouncements that must be adopted in the preparation and submission of the annual financial
statements of a particular class of entities.
(Revised SRC Rule 68)

Financial reporting framework includes, but is not limited to:

● Philippine Financial Reporting Standards (full PFRS);
● Philippine Financial Reporting Standards for Small and Medium-sized Entities
(PFRS for SMEs); and
● Philippine Financial Reporting Standards for Small Entities (PFRS for SEs).
The SEC has the authority to prescribe the financial reporting framework to be used by corporations
under its jurisdiction.
In accordance with the Revised SRC Rule 68, entities are categorized into:
• Large and/or public interest;
Medium-sized;
Small; and Micro.
Entities
Large and/or public interest entities
Medium-sized entities
Small entities
Micro entities

Size Criteria
With total assets of more than P350 Million or total liabilities of more than
P250 Million
With total assets of more than P100 Million to P350
Million or total liabilities of more than P100 Million to
P250 Million
With total assets of between P3 Million to P100
Million or total liabilities between P3 Million to P100
Million
With total assets and liabilities of below P3 Million

Financial Reporting
Framework
Full PFRSs
PFRS for SMEs
PFRS for SEs
Option to use either:
PFRS for SEs; or Income tax basis