RSQ - The Review School of Accowtamen, Page 11 LECTURE NOTES in THEORY of ACCOUNTS (FAR & AFAR) PAS 34: INTERIM FINANCIAL REPORTS + ENTITIES COVERED BY INTERIM REPORTING STANDARDS. 1, Certain companies required by Securities and Exchange Commission (SEC) & the ‘Philippine Stock Exchange (PSE) to publish interim FS! 2. Certain companies that elect to publish an interim financial report. + INTERIM FINANCIAL REPORT. ‘An interim financial report means @ financial report containing either a complete set of FS or a set of condensed FS for an interim period™. As a minimum requirement, an interim financial report should include the following components: 1. Condensed balance sheet 2. Condensed income statement ? 3. Condensed statement showing either changes in equity or comprehensive income 4. Condensed cash flow statement 5. Selected explanatory notes Basic and diluted earnings per share should be preserted on thé face of an income statement, complete or Condensed, for an interim period + SELECTED EXPLANATORY NOTES", ‘An enterprise should include the following information, as @ minimum, in the notes to its interim FS, if ‘material and if not disclosed elsewhere in the interim ‘nancial report: 1. “A statement'that the same accounting policies ard methods of computation are followed in the interim FS as compared with the most recent annual FS or, if those policies or methods have been changed, a description of the nature and effect of the change. Explanatory comments about the seasonality or cyclicality of interim operations ‘The ature and amount of items affecting assets, liabilities, equity, net income or cash flows that are unusual because of their nature; size or incidence. 4. The natufe and amount of changes in estimates of amounts reported in prior interim periods of the current financial year or changes in the estimates of amounts reported in prior financial years if those changes have a material effect in the current interim period. 5S. Issuances, repurchase and repayments of debt and equity securities 6. Dividend paid (aggregate or per share) separately for ordinary shares and other shares 7 Segment revenue and segment result for business segments or geographical segments, whichever is the primary basis of segment reporting 8." Material events subsequent to the end of the interim period that have not been reflected in the FS for the interim: period oy ‘ gree 9. The effect of changes in composition of the enterprise during the interim period, including business combinations, acquisition or disposal of subsidiaries and long-term investments, restructurings, and discontinued operations. 10, Changes in contingent liabilities or contingent assets since the last annual BS date + PERIODS for which INTERIM FS are REQUIRED to be FRESENTED. Interim reports should include interim FS for periods as follows: ; 1. Balance sheet as of the end of the current interim.period and a comparative 8S as of the end of the immediately preceding financial year, 2. Income: statements for the current interim period and cumulatively for the current financial year to date, with comparative income statements for the comparable interim periods (current and year-to- date) of the immediately preceding financial year. 3. Statement showing changes. in, equity cumulatively for the current financial year’ to date, witht ‘comparative statement for the comparable year-o-date period of the immediately preceding financial year. 4. Cash flow statement cumulatively for the current financial year to date, with a comparative statement for the comparable year-to-date period of the imirediately preceding financial year, st ‘The SEC and PSE require companies eovered by the reportorial requirements of Revised Securities Act. 0 file quarterly interim financial reports within 45 days after the end of each of the first three quarters: Also, the SEC requires companies covered by the Rules on Commercial Papers and Finaricing Act to file quarterly finaneial reports within 45 days after each year-end. An interim period 18 4 financial reporting period shorter tan a full financial year. Interim financial reports may be Presented monthly, quarterly or semiannually ‘An example of kinds of disclosures as required by PAS 34, par 17 ar as follows: °=) (@) write-down of inventories to net realizable value and the ‘eversal of such a write-dowa (b), recognition ofa toss from the impairment of PPE and intangibles and the reversal of such an impairment loss (©) reversal of any provision for the costs of restructuring (2) acquisitions and disposals of items of PPE. (©) commitments for the purchase of PPE (D), litigation settlements (2) corrections of fundamental errors in previously reported financial data (h) any debt default or breach of a debt covenant that has not been corrected subsequently (i)_telated party transactions Samy, BBKeSG - The Keview School of Uccourtoneg, Fage tz LECTURE NOTES in THEORY of ACCOUNTS (FAR & AFAR) PERS 8: OPERATING SEGMENTS + RATIONALE. ‘An entity shall disclose information to enables users of FS to evaluate the nature and financial effects of the business activities In which it engages and the economic environments in which it operates, + ENTITIES COVERED BY OPERATING SEGMENT STANDARDS. 1. Entities whose equity or debt securities are publicy traded. 2° Entities that are in the process of issuing equity or debt securities in public securities market. In the case of group of companies (i.e., parent and subsidiaries), PFRS 8 applies to the consolidated financial statements of the group only. + OPERATING SEGMENTS. ‘An operating segment is a component of an entity: ‘A). That engages in business activities from which it may eam revenues and incur expenses (including revenues afid expenses relating to transactions with other components of the same entity). B) Whose operating results are reqularly reviewed by the entity's chief operating decision maker™ to make decisions about resources to be allocated to the segment and assess its performance, and ©) For which discrete financial information is available. + REPORTABLE SEGMENTS. ‘An entity shall report separately information about en operating segment that meets any of the following quantitative thresholds: A) Its reported revenue, including both sales to external customers and intersegment sales or transfers, is 10% or more of the combined revenue, internal and external, ofall operating segments. 8) The absolute amount of its reported profit oF loss is 10% or more of the greater, in absolute amount, of (2) combined reported profit of all operating segments that did not report a'loss and (2) combined reported loss of all operating segments that reported a loss, C) Its assets are 10% or more of the combined assets of all operating segments. If the total external revenue reported by operating segments is. less than 75% of the entity's revenue, ‘additional operating segments should be identified 2s reportable segments, even if they do not meet the 10% thresholds, until at least 75% of entity's revenue Is included in reportable segments. + AGGREGATION OF OPERATING SEGMENTS. Two oF more operating segments may be aggregates into a single operating segment if the segments have similar economic characteristics and are similar in each of the following respects: A) the nature of the products and services, B) the nature of the production processes, C) the type or class of customer for their products and services, D) the methods used to distribute their products or provide their services, E) and if Spplicable, the nature of regulatory environment, for example, banking, insurance or public utilities. + DISCLOSURE OF OPERATING SEGMENT INFORMATION. ‘An entity shal disclose the following for each period for which an income statement is presented: 'A) General information® about the operating segment. B) Information about segment profit or loss**, segment assets*” and segment liabilities. C) Reconciliations of the totals of segment revenue, segment profit or loss, segment assets, segment liabilities ond other material segment items to corresponding entity amounts. + “ENTITY-WIDE DISCLOSURES. Entity-wide disclosures are additional information that is required to be disclosed by all entities if such information is not provided as part of the reportable segment information. An entity shall report information about: 1) products and services, 2) geographical areas-and 3) MAJOR CUSTOMERS**. “The chief operating decision maker idemiiies a function, not necessarily a manager with a specific title. That function is to allocate resources to and assess the performance of the operating segments of an entity. (PERS 8, par. 7) 55 An entity shall disclose the following general information atout an operating scement: (PFRS 8, par: 22) 1, Factors used to identify the reportable segments, including the basis of organization. (e-g., whether management has chosen to organize the entity around differences in products and services, geographical areas, regulatory environment, ‘ora combination of factors, and whether operating segments have been aggregated.) 2. Types of products and services from which each reportable segment derives its revenue. 56 ‘An entity shall disclose the following if included in the measure of profit or loss: (PFRS 8, par. 23) {@)_ Revenues trom external customers and transactions with other operating segments of the same entity (b) terest revenue and interest expense {(e) Depreciation and amortization (d), Material items of income and expenses and material noneash items other than depreciation and amortization (€)_ Interest in profit or loss of associates and joint venture cccounted for by the equity method (8) income tax expense ‘An entity shall disclose the following about each reportable seaiient ifthe specified amounts are included in the measure fof segment assets reviewed by chief operating officer: (PFRS 8, par, 24) (a). The amount of investments in associates and joint venture accounted for by the equity mietKod, and (6) The amounts of additions to non-current assets other than financial instruments, deferred tax assets, post-employment benefit assets and rights arising under insurance contracts. If revenues from transactions with a single extemal customer amount {0 10% or more of an entity’s revenue, the entity shall disclose that fact, total amount of revenues from each major customer, and the identity of the sezments reporting the revenues. The entity need not disclose the identity of a major customer or the amount of revenues that each segment reports from that customer. ° aa