PFRS for Small Entities

(SEs) and PFRS for SMEs

A Closer Look at the Differences and Similarities
Scope
Highlights of Differences and
Similarities (SE vs SME)
Major Differences

1. No Deferred taxes
2. No Actuarial computation
3. No Other Comprehensive Income
4. No restatement of prior year
5. No Disclosure of significant judgment and estimates
Income tax

PFRS for SME PFRS for SE

� Income tax expense � Income tax expense
must include: includes:
� Current tax � Current tax
expense; and expense; and
� Deferred tax � Deferred tax
expense expense (Optional)
Post-Employment Benefits
PFRS 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
recognized immediately in either
profit or loss or other
comprehensive income.
PFRS 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 periods
� No recognition of
actuarial gains/losses.
Complete Set of Financial
Statements
PFRS for SMEs
PFRS for SE
� Complete set of FS includes: � Complete set of FS includes:
� Statement of Financial Position � Statement of Financial Position
� Statement of Income � Statement of Income
� Statement of Cash Flows � Statement of Cash Flows
� Statement of Changes in Equity � Statement of Changes in Equity
� Statement of Comprehensive
Income
� Notes to Financial Statements � Notes to Financial Statements

� Statement of income and retained � Statement of income and retained

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

PFRS for SME PFRS for SE

� Effects of correction of � Effects of correction of
errors are accounted errors are accounted
for retrospectively. for an adjustment of
the opening Retained
Earnings of the current
period.
� Restatement of � No Restatement of
Comparative FS is Comparative FS
required
Disclosure about Judgment
and Estimates

PFRS for SME PFRS for SE

� Disclosure of information � Disclosure of
about key sources of information about key
estimation, uncertainty sources of estimation,
and judgment is required
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 PFRS for SE

� Consolidated � Option to prepare
Financial Statements consolidated FS or
are required. account for the
investment in
subsidiary using the
equity method
Basic Financial Instruments

PFRS for SME PFRS for SE

� Debt instruments are � Debt instruments are
measured at measured at amortised
amortised cost cost
� Debt instruments that � Debt instruments that
are classified as are classified as current
current are are measured at the
measured at the undiscounted amount
undiscounted
amount � Investments in traded
securities are measured
� Investments in traded at the lower of cost or
securities are fair value
measured at fair
value through P&L
Inventory

PFRS for SME PFRS for SE

� Inventories are � Inventories are measure
measured at the lower at the lower of cost or
of cost and estimated market
selling price less cost to
sell and cost to
complete
Leases

PFRS for SME PFRS for SE

� Leases are classified � All leases are
either: accounted for as an
� Operating lease; or operating lease
� Finance lease
� Lease payments under � Lease payments shall
operating leases are be recognized as
recognized as income/expense
income/expense on a
straight-line basis over when earned/incurred
the lease term � Not required to
� Required to disclose disclose future lease
future lease payments payments
Property, plant and
equipment

PFRS for SME PFRS for SE

� Property, plant and � Property, plant and
equipment can be equipment can be
measured using: measured using:
� Cost-depreciation- � Cost-depreciation-
impairment model; impairment model;
or or
� Revaluation model � Fair value model
Agriculture

PFRS for SME PFRS for SE

� Biological assets are � Biological assets may
accounted for at fair
value less cost to sell if be accounted for
the fair value is readily using:
determinable without
undue costs or effort � Cost Model; or
� Otherwise, biological
assets are accounted � Current market
for at cost less price model
accumulated
depreciation and
accumulated
impairment losses
Share-based Transactions

PFRS for SME PFRS for SE

� Equity-settled- the goods � Equity-settled- the goods
or services received, and or services received, and
the increase in equity, at the increase in equity,
the fair value of the with reference to the net
goods or services asset value of the equity
received. instruments granted.

� Cash-settled - goods or � Cash-settled - goods or

services acquired and services acquired and
the liability incurred are the liability incurred are
measured at the fair measured at the fair
value of the liability. 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
Revenue

PFRS for SME PFRS for SE

� Revenue is the gross � Revenue is the gross
inflow of economic inflow of economic
benefits arising in the benefits arising in the
course of the ordinary course of the ordinary
activities. activities.
� Revenue is recognized � Revenue is recognized
using the accrual using the accrual
method method
� Revenue is measured at � Revenue is measured at
the fair value of the the fair value of the
consideration received consideration received
or receivable. or receivable.
Foreign Currency
Transactions

PFRS for SME PFRS for SE

� All foreign currency � All foreign currency
transactions are initially transactions are initially
recognized at the spot rate at recognized at the spot rate at
the transaction date. the transaction date.

� Monetary assets and liabilities � Monetary assets and liabilities

denominated in foreign denominated in foreign
currency are translated using currency are translated using
the closing rate as of the the closing rate as of the
reporting date. reporting date.

� Any resulting gains and losses � Any resulting gains and losses
are recognized in P&L are recognized in P&L
Borrowing Costs

PFRS for SME PFRS for SE

� All borrowing costs are � All borrowing costs are
recognized as expense recognized as expense
when incurred when incurred
Impairment of Assets
PFRS for SME
� An asset is subject to
impairment test when
there is evidence of
impairment
� Impairment loss is the
excess of the CV of the
asset and its
Recoverable Amount
� Recoverable amount is
the higher of the asset’s
� FV less cost to sell; and
� Value in use
PFRS for SE
� An asset is subject to
impairment test when
there is evidence of
impairment
� Impairment loss is the
excess of the CV of the
asset and its
Recoverable Amount
� Recoverable amount is
the higher of the asset’s
� FV less cost to sell; and
� Value in use
Investment Property

PFRS for SME PFRS for SE

� Investment property � Investment property
may be accounted may be accounted
for using: for using:
� Fair value model; or � Fair value model; or
� Cost-depreciation- � Cost-depreciation-
impairment model impairment model
Related Party Disclosures
PFRS for SME
� Related Party Relationship- disclose
� Parent-subsidiary relationship;
� Name of its parent and, if different,
the ultimate parent.
� Related Party Transactions – disclose
� Nature of relationship
� Nature of transactions including
terms and conditions
� Amount of transactions including
balances of assets/liabilities
� Any credit losses recognized on
related party receivables
� Disclose amount of key management
compensation in total
PFRS for SE
� Related Party Relationship- disclose
� Parent-subsidiary relationship;
� Name of its parent and, if different,
the ultimate parent.
� Related Party Transactions – disclose
� Nature of relationship
� Nature of transactions including
terms and conditions
� Amount of transactions including
balances of assets/liabilities
� Any credit losses recognized on
related party receivables
� Disclose amount of key management
compensation in total
Provision and Contingencies
PFRS for SME
� Provision is recognized when:
� There is a present obligation
� Amount can be measured
reliably
� The likelihood that a sacrifice
of economic resource will be
made is probable
� Contingent liabilities – disclose
if likelihood is reasonably
possible
� Contingent assets – disclose if
likelihood is probable or
reasonably possible
PFRS for SE
� Provision is recognized when:
� There is a present obligation
� Amount can be measured
reliably
� The likelihood that a sacrifice
of economic resource will be
made is probable
� Contingent liabilities – disclose
if likelihood is reasonably
possible
� Contingent assets – disclose if
likelihood is probable or
reasonably possible
Investment in Associates
and Joint Venture (JV)

PFRS for SME PFRS for SE

� Investment in � Investment in
associates and JV may associates and JV may
be accounted for be accounted for
using: using:
� Cost Method; or � Cost Method; or
� Equity Method � Equity Method
Business Combination

PFRS for SME PFRS for SE

� Business combination � Business combination
is accounted for using is accounted for using
the Purchase method the Purchase method
� Goodwill is recognized � Goodwill is recognized
as the excess of the as the excess of the
Cost over the FV of Cost over the FV of
the identifiable net the identifiable net
assets of the entity assets of the entity
acquired acquired
Government grants
PFRS for SME
� Government grants � Government grants
without future
performance conditions
are recognized in profit
or loss when the grant is
received or becomes
receivable
� Government grants with
performance conditions,
are recognized in profit
or loss only when the
conditions are met.
PFRS for SE
are classified as either:
� Monetary; or
� Non- monetary
� Accounting policy
option for non-monetary
grants:
� No recognition;
� Or recognized at fair
value
TRANSITION TO THE PFRS FOR SE’S
Major Differences

1. No Deferred taxes
2. No Actuarial computation
3. No Other Comprehensive Income
4. No restatement of prior year
5. No Disclosure of significant judgment and estimates
FIRST-TIME ADOPTER

� An entity is a first-time adopter if it prepares financial

statements in accordance with the PFRS for SE for the
first time and the entity
� Did not present financial statements in the previous
period;
� Presented its most recent previous financial statements in
conformity with other authoritative standards
Opening Statement of
Financial Position
� At transition date, an entity shall prepare an opening
statement of financial position.
Transition Date

� Transition date is the beginning of the earliest period

for which the entity presents full comparative
information in accordance with this Framework
PROCEDURES AT DATE OF
TRANSITION
� Prepare an opening statement of
financial position in accordance with this
PFRS
� Recognize
� Derecognize
� Reclassify
� Remeasure
� Treat the cumulative effect/adjustments
resulting from the above transition
directly to opening Retained Earnings
(or, if appropriate, other equity account)
 DISCLOSURES

� Explain how the transition has affected its financial statements

� Reconciliation of its equity for both
� The date of transition; and
� End of the latest period presented in the entity’s most recent annual financial
statements determined in accordance with its previous financial reporting
framework

� Reconciliation of profit or loss for the most recent financial statements

determined in accordance with its previous financial reporting framework.
� Description of the nature of each change in accounting policy
THANK YOU!!!