PURPOSE AND STATUS -​ Financial Position: information

Main Purpose: Guide the International on economic resources and

Accounting Standards Board (IASB) in claims against the reporting
developing International Financial entity.
Reporting Standards -​ Financial Performance: helps
Purpose: users understand the return that
1.​ Preparers: Assist them in the entity produced from its
developing consistent accounting economic resources.
policies WHEN NO IFRS ^Affected by Accrual
APPLIES. Accounting: Since accrual
2.​ Auditors: Assist in forming focuses on the effects of
opinions in compliance with IFRS transactions when they occur and
3.​ Users: Assist them in interpreting not about cash
informatiuon in financial receipts/payments. It is
statements. considered to provide a better
4.​ IASB: Assist in promoting basis for assessing past and
harmonization in regulations, future performance.
standards, and procedures. ^Affected by Past Cash
5.​ Others: Provides information to Flows: Useful in assessing the
those who are interested in the entity’s ability to generate future
work of IASB. net cash inflows.
Conceptual Framework is the b.​ Changes in Economic
foundation of IFRS but it is not a IFRS Resources and Claims
Standard. Meaning, IFRS still prevails -​ Entity’s resources may also
as CF does not override any standard in change not only because of
IFRS. financial performance but also
Scope of Conceptual Framework: through issuing additional
1. Objective of general purpose ownership shares.
financial reporting
-​ Provide financial information 2. Qualitative Characteristics of
about the reporting entity that is Useful Financial Information.
useful in making decisions about -​ Identifies the types of information
providing resources to the entity. that are likely to be most useful.
-​ Primary Users: Investors, a.​ Fundamental Qualitative
Lenders, Creditors. Characteristics.
-​ Other Users: Employees, -​ Relevance (Predictive
Suppliers, Government, Public value, Confirmatory value,
a.​ Information on Economic Materiality)
resources, claims, and
changes.
 -​ Faithful Representation -​ Income
(Complete, Neutral, Free Increase in economic benefits
from Error) that causes an increase in equity,
b.​ Enhancing Qualitative a.​ Revenue - came from
Characteristics ordinary activities of entity
-​ Comparability b.​ Gains - other increases
-​ Verfiability -​ Expenses
-​ Timeliness Decrease in economic benefits
-​ Understandability that causes a decrease in equity.

3. Elements of Financial Statements Recognition of the Elements of

-​ Underlying Assumption of the Financial Statements
Conceptual Framework: GOING -​ Recognition is the process of
CORCERN. including an item in the financial
Financial Position: statements.
-​ Assets: -​ This involves recording the item
1.​ Present Economic Resource - in words and monetary amount
any resource that the entity has (carrying amount)
the right to use, sell, or pledge -​ If an item meets the definition:
(doesn’t need to be an object). a.​ Probable that any future
2.​ Control - Entity has the present economic benefits will flow
ability to direct how a resource is from the item
used and obtain. b.​ Item has a cost or value
3.​ Potential to Produce Future that can be measure
Economic Benefits reliably.
-​ Liabilities: -​ A recognition of an item can
1.​ Present Obligation - duty or cause a recognition or
responsibility to act or perform in derecognition of another item.
a certain way. Any duty that an -​ Different Recognition Bases
entity has no practical ability to for Expenses:
avoid. It is always owed to 1.​ Matching cost with
another party. revenue
2.​ Obligation to transfer an 2.​ Systematical and rational
economic resource - allocation
3.​ Present obligation as a result of 3.​ Immediate recognition
past events. Derecognition of Elements
-​ Equity -​ Happens when item no longer
The residual interest in the assets meets the definition of:
of an entity after deducting all its 1.​ Asset: Entity losses control
liabilities. on all part of asset
 2.​ Liability: no longer has units or units of constant
present obligation for all purchasing power.
part of liability. -​ Physical Capital Maintenance:
Different Measurement Bases for profit is earned if the productive
assets and Liabilities capacity now is greater than the
1.​ Historical Cost - price you paid net assets at the beginning of
or borrowed upon the acquisition period; excluding the distributions
of asset/liability. and contributions of owners.
2.​ Current Cost
3.​ Realizable (Settlement) Value- MODULE 3: PAS 1 AND 7
amount you epect to receive if
the asset is sold now or the TOPICS:
amount you need to pay if you ●​ Preparation of Financial
settle the liability now (+ Statements (PAS 1)
interests) ●​ Statement of Cash Flows (PAS 7)
4.​ Present Value - present
discounted value. GENERAL PURPOSE FINANCIAL
STATEMENTS
4. Concepts of Capital and Capital Purpose: Provide information about the
Maintenance Financial Position, Financial
Performance and Cash Flow of an
Capital: entity.
-​ Financial Concept: Capital is -​ Structured Representation and
regarded as the invested money the end product.
or invested purchasing power.
And it is synonymous with equity, Structure and Content
net assets, or net worth. 1.​ Name or any identification of the
-​ Physical Concept: Capital is entity
regarded as the entity’s 2.​ If the financial statements are of
productive capacity. (units of an individual or a group of entities
output per day) 3.​ Date of ending period or the
Capital Maintenance: period covered
-​ Financial Capital Maintenance: 4.​ Presentation currency
profit is earned if the net assets 5.​ Level of rounding used in
now is greater than the net amounts
assets at the beginning of period;
excluding the distributions and Complete Set of Financial Statements
contributions of owners. It can be 1.​ Statement of Financial Position
measured in nominal monetary 2.​ Statement of Profit or Loss or
Comprehensive Income
 3.​ Statement of Changes in Equity 3.​ Materiality and Aggregation
4.​ Statement of Cash Flows -​ Each material class of
5.​ Notes similar item is presented
6.​ Comparative information with the separately.
preceding period -​ Line Item: Class of similar
7.​ Financial Position of the item
preceding year if it made a -​ Dissimilar items are
changes in records or presented separately
classfication. unless they are immaterial.
-​ Individually immaterial
General Features items are aggregated with
1.​ Fair presentation and other items.
compliance with PFRS 4.​ Offsetting
-​ Is faithfully representing in -​ An entity shall not offset
accordance with the any asset or liabilities
definitions and recognition unless required or
criteria of the elements in permitted by a PFRS.
the framework. -​ It is permitted when it
-​ Must give explicit and reflects the substance of
unreserved statements. the transaction.
-​ Some entity’s can be 5.​ Frequency of Reporting
misleading with PFS -​ Entity shall present a
compliance as they have complete set of FS
other standards to follow. It including comparative
is permitted by “departure information.
from a PFS requirement”. -​ There should be annual
2.​ Going Concern presenation.
-​ Management shall assess -​ A change in frequency
the entity;s ability to must be disclosed, both
continue as going concern the reason and the fact
from at laest 12 month that amounts are not
after the reporting date. comparable with past
-​ If there are any material statements.
uncetainties on the entity’s 6.​ Consistency of Presentation
ability as a going concern, -​ An entity shall retain its
it should be disclosed. consistency in
-​ If the entity prepared the presentation unless:
FS on a going concern a.​ Is required by
basis, factual reason PFRS
should be disclosed.
 b.​ Results in Profit or Loss
information is Other Comprehensive
reliable and more Comprehensive Income
relevance in Items that should be presented in
compliance with AS Profit & Loss
8. a.​ Revenue where interest revenue
is SEPARATED
STATEMENT OF FINANCIAL b.​ Finance cost
POSITION c.​ Gains and losses from
Presentation: derecognition assets
An SFP may be presented in a d.​ Impairment loss and gains
a.​ Classified: distinction between e.​ Share in profit or loss of
current and noncurrent associates
b.​ Unclassified: based on liquidity f.​ Tax expense
Classified is required unless g.​ Result of discontinued operations
unclassified gives more relevance for Presentation of Expenses
the entity. Mixed use of these two is also 1.​ Nature of Expense
allowed by PAS 1. 2.​ Function of Expense
Items to be presented in Other
STATEMENT OF PROFIT OR LOSS Comprehensive Income
AND OTHER COMPREHENSIVE -​ Includes items of income and
INCOME expenses that are not recognized
-​ Profit or Loss in the profit or loss as required by
-​ Other comprehensive income PFRS.
-​ Comprehensive income for the Determination
period (total of the two) -​ An entity shall present all items of
income and expenses UNLESS
-​ A seperate statement is allowed permitted by PFRS
as long as the 3 is disclosed. -​ An entity shall disclose the
a.​ Single Statement amount of INCOME TAX relating
Revenues to each item. It can be on the
Expenses SP&L, SCI, or in the Notes.
Profit or loss Reminder:
Other Comprehensive -​ If an item is MATERIAL, it should
Comprehensive Income be presented SEPARATELY.
b.​ Two-Statement -​ If an entity uses the function of
Revenues expense method, there should be
Expenses additional information on the
Profit or loss nature of expenses.
STATEMENT OF CHANGES IN 2.​ Investing Activities: Acquisition
EQUITY and disposal of noncurrent assets
-​ It should present: and other investment.
a.​ Total comprehensive ^Special Items:
income -​ Cash inflow/outflow from
b.​ For each component of sale or acquisition of
equity, a reconciliation equity or debt instruments
between the carying (unless it is held for
amount at the beginning trading)
and end of the period -​ From derivative assets
should be presented. -​ Loans for investing
PAS 1 allows the disclosure of dividends 3.​ Financing Activities: Those that
either in the SCOE or in the Notes. affect the entity’s borrowings and
contributed equity.
STATEMENT OF CASH FLOWS (PAS ^Special Items
7) -​ Issuing of shares
-​ PAS 1 refers the discussion of -​ From issuing notes,loans,
Cash Flows to PAS 7. bonds, and mortgage and
Definition of Terms their repayments
-​ Cash: Cash on hand or in bank -​ Only cash flows on
-​ Cash Equivalents: “short term, NON-OPERATING and
highly liquid investmentthat are NON-TRADE liabilities are
readily convertible to cash which in Financing.
are subject to an
INSIGNIFICANT RISK of Remember:
CHANGES IN VALUE” 1.​ Operating: Profit and Loss
​ ^ Only debt instruments that 2.​ Investing: Noncurrent Assets and
was acquired 3 months or less before Investments
their maturity date can qualify as cash 3.​ Financing: Borrowing and Equity
equivalents.
Classification of Cash Flows
1.​ Operating Activities: “revenue Reporting Cash Flows on a Net Basis
producing activities on the entity” -​ Sometimes, a combine amount
^Special Items included in: can be presented (net of inflows
-​ Cash flows from buying and outflows) instead of seperate
and selling held from listing. This is allowed in:
trading securities 1.​ For General Business:
-​ Income from renting out -​ Handling Money for
PPEs customers
 -​ Fast-moving, large Puttable financial instruments
transactions classified as equity
2.​ For Financial Institions: -​ Summary quantitative data
-​ Deposits -​ Objectives, policies, and
-​ Interbank processes
Transactions -​ The expected cash outflow on
-​ Loans redemption or repurchase
Interest, Taxes, and Dividends -​ Infomation about how the
-​ Cash flows from income tax shall expected cash outflow was
be separately disclosed and computed
classified as operating activities.
-​ Cash flows from _interest and
dividends shall be classified
separately.

NOTES TO FINANCIAL STATEMENTS

-​ Provides additional information
and serves as integral part of
completion.
-​ Present information about the
Basis of preparation of FS and
the specific accounting policies
used.
-​ Is in a systematic manner

Disclosure of Accounting Policies

-​ The measurement basis used
-​ Other accounting policies used
-​ Judgement of financial statement
Sources of Estimation of Uncertainty
-​ Shall disclose the assumptions it
makes and other major sources
of estimation uncertainty that can
cause MATERIAL ADJUSTMENT
to carrying amounts.
-​ The notes shall include
a.​ Nature
b.​ Carrying amount at the
end