8 General Features in the presentation of In rare circumstances, management shall
Financial Statements: depart form specific requirements of IFRS if it
would make the financial information
1. FAIR PRESENTATION AND
misleading. Entity shall make the following
COMPLIANCE WITH IFRS/PFRS
disclosures: (Par 20, IAS 1)
Financial statement shall
a. That the management has concluded
-present fairly the financial position, that the FS is presented fairly
financial performance and cash flows. b. It has complied with applicable IFRS
c. The reason why the treatment would be
-requires full faithful representation of the
misleading
effects of the transactions.
d. Financial impact of the departure on
- the application of IFRS is presumed to each item.
result in FS that achieve a fair presentation
Departure from the requirement shall
(Par 15, IAS 1)
reduce the misleading aspects of
Fair presentation requires (Par 17, IAS 8) compliance by disclosing: PAR 23, IAS 1
a. Select accounting policies based on a. Title of the Standard or Interpretation
PAS/IAS 8 b. Adjustments in each item in financial
b. Present information and accounting statement
policies that provides reliable, relevant,
comparable and understandable 2. GOING CONCERN
information.
FS should be prepared on a going concern
c. Provide additional disclosures in
basis unless the management intends to
compliance with the specific
LIQUIDATE the enterprise, CEASE TRADING,
requirements of IFRS
or has NO REALISTIC ALTERNATIVE.
Philippine Financial Reporting Standards
The following shall be disclosed in the
(PFRS) are adopted by the Financial Reporting
notes to financial statements when FS are NOT
Standards Council (FRSC). They comprise:
PREPARED on a going concern basis:
a. Philippine Financial Reporting Standard
a. The FACT that FS are not prepared on a
(based on IFRS promulgated by
going concern basis
International Accounting Standards
b. The BASIS on which FS are prepared
Board IASB)
c. The REASON why the enterprise is not
b. Philippine Accounting Standards (based
considered to be going concern.
on International Accounting Standards
promulgated by the International
Accounting Standards Committee IASC
c. Interpretations
IFRIC interprets the work of IASB
SIC- IASC
PIC
In assessing whether the enterprise is a GOING 4. MATERIALITY AND
CONCERN ENTITY the management should AGGREGATION
assess the
Materiality – threshold for recognition
a. Ability of the enterprise to continue its
Material item – presented separately
operations for a period at least but not
- Influence the decision of the user
limited to 12 months
- Materiality depends on the size and
b. Enterprise has a history of profitable
nature of the item judged
operations and ready access to financial
Immaterial item – presented in a one- line
resources
item
Management shall review the basis for the
The details will be presented in the
measurement of assets and liabilities.
notes to the financial statements
FS shall disclose
Process of aggregation – involves the
-basis for the presentation of FS presentation of condensed and classified
information .
-reason why the entity is not viewed as a going
concern If the item taken individually:
3. ACCRUAL BASIS OF ACCOUNTING - Will call the attention of the user
( SINGLE LINE ITEM)
-transactions or events are recognized WHEN
- Not considered significant (Aggregated
THEY OCCUR (received but not yet paid)
with other items)
Expenses are recognized:
5. OFFSETTING
- On a direct association between the costs
- Deducting one item from another item
incurred and the earning of specific items of
income (direct matching) of different nature
- Presenting the net on the face of
- by systematically allocating the cost of asset financial statement
acquired to periods of benefit (systematic and - NOT ALLOWED unless required or
rational allocation)
permitted by a standard or
Accrual basis of accounting and expense interpretation
recognition principle do not allow the recognition - ALLOWED AND APPLIED when
of assets for costs that do not provide economic presenting on the net basis
benefits. - NOT OFFSETTING – receivables net of
related allowance for bad debts and PPE
Accrual basis – REVENUE RECOGNITION
PRINCIPLE of accumulated depreciation
Revenue - earned but not yet paid
-Recognized at the point of delivery of
goods.
Expenses- incurred but not yet paid
6. FREQUENCY OF REPORTING 8. CONSISTENCY OF PRESENTATION
FS should be presented at least annually. Presentation and classification of items in the
FS should be the same from period to period
FS changes it should be prepared for a period unless: (PAR 45, IAS 1)
longer or shorter than one year
a. It is apparent, following a significant
Interim FS- period shorter than 1 year change in the nature of the entity’s
7. COMPARATIVE INFORMATION operations or a review of its financial
statements, that another presentation or
Should be disclosed in respect of the preceding classification would be more
period EXCEPT when IFRS permit or require appropriate;
otherwise. b. An IFRS requires a change in
Comparative and descriptive information shall presentation
be included.
In presenting information for the current year: When an entity reclassifies comparative
amounts, it shall disclose:
- To sets of FS are presented:
- Two statements of financial position a. The nature of the reclassification
(end of the current year and end of the b. The amount of each item or class of
prior year ) items that is reclassified
- Two statements of comprehensive c. The reason for the reclassification
income (PAR 41 IAS 1)
- Two statements of changes in equity Impracticable to reclassify comparative
- Two statements of cash flows (one set amounts – an entity shall disclose the reason
for the current year and one set for the for not reclassifying the amount and the nature
prior year of the adjustments that would have been made
- Two sets of notes if the amount had been reclassified.
Retrospective adjustment involves: ( PAR 42, IAS 1)
a. Change in accounting policy
b. Correction of prior period error
c. Reclassification of items in the FS
3 financial positions shall be presented
a. At the end of the current period
b. At the end of the prior period
c. At the beg of the preceding period
