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FAR- REVIEWER

The document outlines the Philippine Financial Reporting Standards (PFRS) and Philippine Accounting Standards (PAS), detailing key topics such as revenue recognition, leases, and financial instruments. It emphasizes the importance of understanding the structure of financial statements and the application of accounting standards in practical scenarios. Additionally, it provides study tips for mastering financial accounting and reporting concepts.

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Lyka Rodriguez Rebong
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15 views4 pages

FAR- REVIEWER

The document outlines the Philippine Financial Reporting Standards (PFRS) and Philippine Accounting Standards (PAS), detailing key topics such as revenue recognition, leases, and financial instruments. It emphasizes the importance of understanding the structure of financial statements and the application of accounting standards in practical scenarios. Additionally, it provides study tips for mastering financial accounting and reporting concepts.

Uploaded by

Lyka Rodriguez Rebong
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1.

Philippine Financial Reporting Standards (PFRS) and Philippine Accounting


Standards (PAS)

 These are the accounting rules that guide how businesses prepare financial statements.
 Key topics to review:
o PFRS 1 to PFRS 17: Cover topics like leases, revenue, and financial instruments.
o PAS 1 to PAS 41: Cover foundational concepts like the presentation of financial
statements and accounting for income taxes.
o Focus on newly updated standards, as they are often emphasized in exams (e.g.,
PFRS 15: Revenue from Contracts with Customers).

Example: PFRS 16 tells you how to account for leases (e.g., renting office space). You treat
leases as both an asset and a liability in most cases.

2. Conceptual Framework

 The underlying theory of accounting:


o Objective: Provide useful financial information.
o Qualitative Characteristics: Relevance, faithful representation, comparability,
verifiability, timeliness, and understandability.
o Elements of Financial Statements: Assets, liabilities, equity, revenue, expenses.
o Recognition and Measurement: When and how items should be included in
financial statements.

3. Presentation of Financial Statements (PAS 1)

 Learn the structure and content of key financial statements:


o Statement of Financial Position (Balance Sheet): Shows assets, liabilities, and
equity.
o Statement of Comprehensive Income (Income Statement): Details revenues,
expenses, and profit/loss.
o Statement of Changes in Equity: Tracks changes in the company’s equity.
o Statement of Cash Flows (PAS 7): Shows cash inflows and outflows.

Example: The balance sheet shows the financial health of the business at a specific point in
time.
4. Accounting for Assets, Liabilities, and Equity

 Assets:
o Inventory (PAS 2): Costing methods (FIFO, Weighted Average).
o Property, Plant, and Equipment (PAS 16): Depreciation, revaluation.
o Intangible Assets (PAS 38): Patents, trademarks.
o Impairment of Assets (PAS 36): Testing for loss in asset value.
 Liabilities:
o Provisions and Contingencies (PAS 37): Estimating liabilities.
o Financial Liabilities (PFRS 9): Loans and borrowings.
 Equity:
o Share capital, retained earnings, reserves.

Example: Depreciation reduces the value of a company’s equipment over time.

5. Revenue Recognition (PFRS 15)

 Five-Step Model:
1. Identify the contract with the customer.
2. Identify performance obligations.
3. Determine the transaction price.
4. Allocate the price to performance obligations.
5. Recognize revenue when obligations are satisfied.

Example: If a company provides a service over six months, revenue is recognized gradually
over those six months.

6. Leases (PFRS 16)

 Focus on the Lessee’s Accounting:


o Recognize a right-of-use asset and a lease liability.
o Lease payments are split into principal and interest.
 Lessors classify leases as operating or finance leases.

Example: Renting office space is now treated as both an asset (you have the right to use the
space) and a liability (you owe rent payments).

7. Financial Instruments (PFRS 9)

 Classification and Measurement:


o Amortized Cost, Fair Value Through Profit or Loss (FVTPL), Fair Value Through
Other Comprehensive Income (FVOCI).
 Impairment: Expected Credit Loss (ECL) model for bad debts.
 Hedge Accounting: Managing risks in currency or interest rates.

Example: If a company invests in stocks, the value of those stocks may change and must be
reported in the financial statements.

8. Statement of Cash Flows (PAS 7)

 Operating Activities: Cash flows from the company’s core business.


 Investing Activities: Buying or selling assets like equipment.
 Financing Activities: Borrowing money or paying dividends.

Direct vs. Indirect Method: Know how to prepare cash flows using both methods.

9. Earnings Per Share (EPS) (PAS 33)

 Basic EPS Formula:


Basic EPS=Net Income - Preferred DividendsWeighted Average Shares Outstanding\
text{Basic EPS} = \frac{\text{Net Income - Preferred Dividends}}{\text{Weighted
Average Shares Outstanding}}
 Learn about diluted EPS, which accounts for convertible securities like stock options.

10. Adjustments and Corrections in Financial Reporting

 Prior Period Errors (PAS 8):


o Fix errors in previous years by adjusting retained earnings.
 Changes in Accounting Policies: Apply retrospectively (adjust prior periods).
 Estimates: Adjust prospectively (only future periods).

Example: If you find a mistake in last year’s financial statement, you correct it by restating that
year’s numbers.

Study Tips for FAR

1. Master the basics first: Focus on financial statements and their elements.
2. Understand the standards (PFRS and PAS): Learn the application of each standard in
practical scenarios.
3. Practice computations: Many topics like EPS, leases, and financial instruments involve
solving numerical problems.
4. Focus on recent updates: Newly implemented standards like PFRS 15 (Revenue) and
PFRS 16 (Leases) are heavily tested.
5. Use past CPALE questions: Familiarize yourself with how topics are tested.

Let me know if you’d like sample problems or detailed examples for specific topics!

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