CHAPTER 1

CONCEPTUAL FRAMEWORK
Objective of financial reporting

TECHNICAL KNOWLEDGE

To know the nature of the Revised Conceptual Framework.

To describe the purpose and usefulness of a Conceptual Framework.

To understand the authoritative status of a Conceptual Framework.

To understand the objective of financial reporting.

To know the limitations of financial reporting.

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CONCEPTUAL FRAMEWORK
The Conceptual Framework is the summary of terms and concepts that underlie the
preparation and presentation of financial statements for external users.

The Conceptual Framework describes the concepts for general purpose financial reporting.

The Conceptual Framework provides the foundation for Standards that:

a. Contribute to transparency by enhancing international comparability and

quality of financial information.
b. Strengthen accountability by reducing information gap between the providers of
capital and the people to whom they have entrusted their money.
c. Contribute to economic efficiency by helping investors to identify opportunities
and risks across the world.

Purposes of Revised Conceptual Framework

a. To assist the International Accounting Standards Board to develop IFRS standards
based on consistent concept.
b. To assist preparers of financial statements to develop consistent accounting policy
when no Standard applies to a particular transaction or other event or where an
issue is not yet addressed by an IFRS.
c. To develop accounting policy when a standard allows a choice of an accounting
policy.
d. To assist all parties to understand and interpret the IFRS Standards.

Authoritative status of Conceptual Framework

If there is a standard or interpretation that specifically applies to a transaction, the
standard or interpretation overrides the Conceptual Framework.

However, it is to be stated that the Conceptual Framework is not an International Financing

Reporting Standards.

Nothing in the Conceptual Framework overrides any specific International Financing

Reporting Standard.

In case where there is a conflict, the requirement of the International Financing Reporting
Standards shall prevail over the Conceptual Framework.

Users of financial information

Users may be classified into two, under Conceptual Framework for Financial Reporting:

a. Primary users
b. Other users
The Primary users include the existing and potential investors, lenders and other creditors.

The Other users include the employees, customers, governments and their agencies, and the
public.

Primary users

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The primary users of financial information are the parties to whom general purpose
financial reports are primarily directed.

Existing and other investors

Existing and potential investors are concerned with the risk inherit in and return provided
by their investments.

The investors need information to help them determine whether they should buy, hold, or
sell.

Shareholders are also interested in information which enables them to assess the ability of
the entity to pay dividends.

Lenders and other creditors

Lenders and other creditors are interested information which enables them to determine
whether their loans, interest thereon and other amounts owing to them will be paid when
due.

Other users
These are users of financial information other than the existing and potential investors,
lenders and other creditors. Reports are not directed to them primarily.

Employees
Employees are interested in information about the stability and profitability of the entity.

The employees are interested in the information which enables them to assess the ability of
the entity to provide remuneration, retirement benefits, and employment opportunities.

Customers
Customers have an interest in information about the continuance of an entity especially
when they have a long-term involvement with or are dependent to entity.

Government and other agencies

Government and other agencies are interested in the allocation of resources and therefore
the activities of the entity.

These users require information to regulate the activities of the entity, determine taxation
policies and as a basis for national income and similar statistics.

Public
Entities affect members of the public in a variety of ways.

Financial statements may assist the public by providing information about the trend and
the range of its activities.

OBJECTIVE OF FINANCIAL REPORTING

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The overall objective of financial reporting is to provide financial information about the
reporting entity that is useful to existing and potential investors, lenders and other
creditors in making decisions about providing resources to the entity.

Target users
Financial reporting is directed primarily to the existing and potential investors, lenders and
other creditors which compose the primary user group. The reason is that they have the
most critical and immediate need for information in financial reports.

As a matter of fact, the primary users of financial information are the parties that provide
resources to the entity.

The management of the reporting entity is also interested in financial information about
the entity. However, the management needs to rely on general purpose financial reports
because it is able to obtain or access additional financial information internally.

Specific objective of financial reporting

The overall objective of financial reporting is to provide information that is useful for
decision making. Accordingly, the specific objectives of financial reporting are:

a. To provide information useful in making decision about providing resources to the

entity.
b. To provide information useful in assessing the cash flow prospects of the entity.
c. To provide information about entity resources, claims, and changes in resources and
claims.

Economic decision
Existing and potential investors need general purpose financial reports in order to enable
them in making decisions whether to buy, sell, or hold equity investments.

Existing and potential lenders and other creditors need general purpose financial reports in
order to enable them in making decisions whether to provide or settle loans and other forms
of credit.

Assessing cash flow prospects

Decisions by existing and potential investors about buying, selling, or holding equity
instruments depend on the returns that they expect from an investment, for example,
dividends.

Similarly, decisions by existing and potential lenders and creditors about providing or
settling loans and other forms of credit depend on the principal and interest payments or
other returns that they expect.

Economic resources and claims

General purpose of reports provides information about financial position about the
reporting entity.

Financial position is information about entity’s economic resources and the claims against
the reporting entity.

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Economic resources are the assets and the claims are the liabilities and equity of the entity.

Information about the nature and amount of an entity’s economic resources and claims can
help users identify the entity’s financial strength and weakness.

Otherwise stated, information about financial position can help users to assess the entity’s
liquidity, solvency, and the need for additional financing.

 Liquidity is the availability of cash in the near future to cover currently maturing
obligations.
 Solvency is the availability of cash over a long term to meet financial commitments
when they fall due.

Changes in economic resources and claims

General purpose financial reports also provide information about the effect of the
transactions and other events that change the economic resources and claims.

Changes in economic resources and claims result from financial performance and from
other events or transactions, such as issuing debt or equity instruments.

Financial performance of an entity comprises revenue, expenses and net income or loss for
a period of time.

In other words, financial performance is the level of income earned by the entity through
the efficient and effective use of its resources.

Usefulness of financial performance

Information about the financial performance helps users to understand the return and the
entity has produced on the economic resources.

Information about financial performance during a period is useful in assessing the entity’s
ability to generate future cash inflows from operations.

Accrual accounting
Accrual accounting means that income is recognized when earned regardless of when
received and expense is recognized when incurred regardless of when paid.

Limitations of financial reporting

a. General purpose financial reports do not and cannot provide all of the information
that existing and potential investors, lenders and other creditors need.
b. General purpose financial reports are not designed to show the value of an entity
but the reports provide information to help the primary users estimate the value of
the entity.
c. General purpose financial reports are intended to provide common information to
users and cannot accommodate every request for information.
d. To a large extent, general purpose financial reports are based on estimate and
judgment rather than exact depiction.

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CHAPTER 2
CONCEPTUAL FRAMEWORK
Qualitative characteristics

TECHNICAL KNOWLEDGE

To identify the qualitative characteristics of accounting information.

To identify the fundamental qualitative characteristics.

To identify the enhancing qualitative characteristics.

QUALITATIVE CHARACTERISTICS

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These are the qualities or attributes that make financial accounting information useful to the
users.

The objective is to ensure that the information is useful to the users in making economic
decisions.

Under the Conceptual Framework of Financial Reporting, qualitative characteristics are

classified into fundamental qualitative characteristics and enhancing qualitative
characteristics.

o Fundamental qualitative characteristics

The fundamental qualitative characteristics relate to the content or substance of financial

information.

The fundamental qualitative characteristics are relevance and faithful representation.

Information must be both relevant and faithfully represented if it is to be useful.

 Relevance
In the simplest term, relevance is the capacity of the information to influence a decision

To be relevant, the financial information must be capable of making difference in the

decisions made by users.

Information that does not bear on economic decisions is useless.

To be useful, information must be relevant to the decision making needs of users.

Materiality
Materiality is a practical rule in accounting which dictates that strict adherence to GAAP is
not required when the items are not significant enough to affect the evaluation, decision,
and fairness of the financial position.

The materiality concept is also known as the doctrine of convenience.

The relevance of information is affected by its nature and materiality.

Materiality is relativity
Materiality of an item depends on relative size rather than absolute size.

What is material for an entity may be immaterial for another.

E.g. an error of P100, 000 in the financial statements of a multinational entity may not be
important but may be so critical for small entity.

When is an item material?

There is no strict or uniform rule for determining whether an item is material or not.

Very often, this is dependent on good judgment, professional expertise, and common sense.

“An item is material if knowledge of it would affect or influence the decision of the
informed users of the financial statements”.
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Information is material if its omission or misstatement could influence the economic decision
that the users make on the basis of financial information about an entity.

 Faithful representation
Faithful representation means that the actual effects of the transaction shall be properly
accounted for and reported in the financial statements.

Ingredients of faithful representation

I. Completeness
II. Neutrality
III. Free from error

I. Completeness

Completeness requires that relevant information should be presented in a way that facilitates
understanding that avoids erroneous implication.

Standard of adequate disclosure

The standard of adequate disclosure means that all significant and relevant information
leading to the preparation of financial statements shall be clearly reported.

In other words, the standard of adequate disclosure is best described by disclosure of any
financial facts significant enough to influence the judgment the informed users.

II. Neutrality

A neutral depiction is without bias in the preparation or presentation of financial

information, meaning free from bias.

To be neutral is to be fair.

Prudence
The revised Conceptual Framework has reintroduced the concept of prudence.

Prudence is the exercise of care and caution when dealing with the uncertainties in the
measurement process such that assets or income are not overstated and liabilities or
expenses are not understated.

Neutrality is supported by the exercise of prudence.

III. Free from error

Free from error means there are no errors or omissions the description of the phenomenon
or transaction.

Free from error does not mean perfectly accurate in all aspects

o Enhancing qualitative characteristics

The enhancing qualitative characteristics relate to the presentation of form of the financial
information.

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The enhancing qualitative characteristics are comparability, understandability, verifiability,
and timeliness.

Relevant and faithfully represented financial information is useful but the information
would be most useful if it is comparable, understandable, verifiable, and timely.

Comparability
Comparability means the ability to bring together for the purpose of nothing points of
likeness and difference.

Comparability may be made within an entity or between or across entities.

Comparability within an entity is the quality of information that allows comparison within a
single entity through time or from one accounting period to the next.

Comparability within an entity is also known as horizontal comparability or intra-

comparability.

Comparability between and across entities is the quality of information that allows
comparisons between two or more entities engaged in the same industry.

Comparability across entities is also known as inter-comparability or dimensional

comparability.

Consistency
Consistency is not the same as comparability.

In a broad sense, consistency refers to the use of the same method for the same item,
either from period to period within an entity or in a single period across entities.

Comparability is the goal and consistency helps to achieve that goal.

In a limited sense, consistency is the uniform application of accounting method from

period to period within an entity,

On the other hand, comparability is the uniform application of accounting method

between and across entities in the same industry.

Understandability
Understandability requires that financial information must be comprehensible or intelligible
if it is to be most useful.

Accordingly, the information should be presented in a form and expressed in terminology

that a user understands.

Understandability is very essential because relevant and faithfully represented information

may prove useless if it is not understood by users.

Verifiability
Verifiability means that different knowledgeable and independent observes could reach
consensus, although not necessarily complete agreement, that a particular depiction is a
faithful representation.

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In the other words, verifiability implies consensus.

Accordingly, verifiability helps assure users that information represents the economic
phenomenon or transaction it purports to represents.

Types of verification
Verification can be direct or indirect.

Direct verification means verifying an amount or other representation through direct

observation, for example, counting cash.

Indirect verification means checking the inputs to a model, formula or other technique and
recalculating the inputs using the same methodology. E.g. FIFO or LIFO.

Timeliness
Timeliness means that financial information must be available or communicated early
enough when a decision is to be made.

Generally, the older the information, the less useful it is.

However, some information may continue to be timely long after the end of the reporting
period because some users may need to identify and assess trends.

Timeliness enhances the truism that without knowledge from the past, the basis of prediction
will usually be lacking and without interest in the future,, knowledge of the past is sterile.

What happened in the past would become the basis of what would happen in the future.

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CHAPTER 3
CONCEPTUAL FRAMEWORK
Financial statements and reporting entity
Underlying assumptions

TECHNICAL KNOWLEDGE

To know the general objective of financial statements.

To identify a reporting entity.

To explain the assumptions underlying the preparation of financial statements.

GENERAL OBJECTIVE OF FINANCIAL STATEMENTS

Financial statements provide information about economic resources of the reporting entity,
claims against the entity and changes in the economic resources and claims.

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Financial statements provide financial information about an entity’s assets, liabilities,
equity, income and expenses useful to users of financial statements in:

a. Assessing future cash flows to the reporting entity.

b. Assessing management stewardship to the entity’s economic resources.

The financial statement is provided in the following:

1. Statement of financial position, by recognizing assets, liabilities, and equity.

2. Statement of financial performance, by recognizing income and expenses.
3. Other statements and notes by presenting and disclosing information about:
a. Recognized assets, liabilities, equity, income and expenses
b. Unrecognized assets and liabilities
c. Cash flows
d. Contribution from equity holders and distribution to equity holders
e. Method, assumption and judgment in estimating amount presented

Types of financial statements

The revised Conceptual Framework recognizes three types of financial statements.

1. Consolidated financial statements – these are the financial statements prepared

when the reporting entity comprises both the parent and its subsidiaries.
2. Unconsolidated financial statements – these are the financial statements
prepared when the reporting entity is the parent alone.
3. Combined financial statements – these are the financial statements when the
reporting entity comprises two or more entities that are not linked by a prent and
subsidiary relationship.

Consolidated financial statements

Consolidated financial statements provide information about the assets, liabilities, equity,
income and expenses of both the parent and its subsidiaries as a single reporting
entity.

The parent is the entity that exercises control over the subsidiaries.

Consolidated information is useful for existing and potential investors, lenders, and other
creditors of the parent in their assessment of future net cash inflows to the parent.

Unconsolidated financial statements

Unconsolidated financial statements are designed to provide information about the
parent’s assets, liabilities, income and expenses and not about those of the subsidiaries.

Unconsolidated information is useful for existing and potential investors, lenders, and
other creditors of the parent because a claim against the parent typically does not give the
holder of that claim against subsidiaries.

Combined financial statements

Combined financial statements provide financial information about the assets, liabilities,
equity, income and expenses of two or more entities not linked with parent and
subsidiary relationship.

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Reporting entity
A reporting entity is an entity that is required or chooses to prepare financial statements.

A reporting entity is not necessarily a legal entity.

Accordingly, the following can be considered a reporting entity:

a. Individual corporation, partnership or proprietorship

b. The parent alone
c. The parent and its subsidiaries as single reporting entity
d. Two or more entities without parent and subsidiary relationship as a single
reporting entity
e. A reportable business segment of an entity

Reporting period
The reporting period is the period when financial statements are prepared for general
purpose financial reporting.

Financial statements may be prepared on an interim basis, for example three months, six
months or nine months.

Interim financial statements are required but optional.

However, financial statements must be prepared on an annual basis or a period of twelve

months.

UNDERLYING ASSUMPTIONS
Accounting assumptions also known as postulates.

Accounting assumptions serve as the foundation or bedrock of accounting to avoid

misunderstanding but rather enhance the understanding and usefulness of the financial
statements.

The Conceptual Framework for Financial Reporting mentions only one assumption, namely
going concern.

However, implicit in accounting are the basic assumptions of accounting entity, time period
and monetary unit.

Going concern
The going concern or continuity assumption means that in the absence of the evidence to
the contrary, the accounting entity is viewed as continuing in operation indefinitely.

In other words, financial statements normally prepared on the assumption that the entity
will continue in operations for the foreseeable future.

Accounting entity
In financial accounting, the accounting entity is the specific business organization, which
may be proprietorship, partnership or corporation.

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Under assumption, the entity is separate from the owners, managers, and employees who
constitute the entity

Accordingly, the transactions of the owners shall not be merged with the transaction of the
owners.

The reason for the entity assumption is to have a fair presentation of financial statements.

Each business is an independent accounting entity.

The shareholder is not the corporation and the corporation is not the shareholder.

Time period
The time period assumption requires that the indefinite life of an entity is subdivided into
accounting periods which are usually of equal length for the purpose of preparing financial
reports of financial position, performance and cash flows.

By convention, the accounting period or fiscal period is one year or a period of twelve
months.

Accounting period may be calendar year or a fiscal year.

Calendar year is a twelve-month period that ends on December 31.

A fiscal year is a twelve-month period that ends on any month when the business is at the
lowest or experiencing slack season.

Monetary unit
The monetary assumption has two aspects, namely quantifiability and stability of the peso.

The quantifiability aspect means that the assets, liabilities, equity, income and expenses
should be stated in terms of a unit of measure which is the peso in the Philippines.

The stability of the peso assumption means that the purchasing power of the peso is stable
and constant and that instability is significant and therefore may be ignored.

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CHAPTER 4
CONCEPTUAL FRAMEWORK
Elements of financial statements

TECHNICAL KNOWLEDGE

To identify the elements directly related to the measurement of financial

position and financial performance.

To understand the concept of asset, liability and equity.

To understand the concept of income and expenses.

ELEMENTS OF FINANICAL STATEMENTS

The elements of financial statements refer to the quantitative information reported in the
statement of financial statement.

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Elements directly related to the measurement of financial position are:

a. Asset
b. Liability
c. Equity

Elements directly related to the measurement of financial performance are:

a. Income
b. Expenses

The Conceptual Framework identifies no elements that are unique to the statement of
changes in equity because such statement comprises items that appear in the statement of
financial position and the income statement.

Equity is the residual interest in the assets of the entity after deducting all of the liabilities.

ASSET
Under the Revised Conceptual Framework an asset is defined as a present economic
resource controlled by the entity as a result of past event.

An economic resource is a right that has the potential to produce economic benefits.

Right
Right that has potential to produce economic benefits may take the following forms:

1. Rights that correspond to an obligation of another entity

a. Right to receive cash.
b. Right to receive goods or services.
c. Right to exchange economic resource with another party on favorable terms.
d. Right to benefit from an obligation of another party if a specified uncertain
future event occurs.
2. Rights that do not correspond to an obligation of another entity
a. Right over physical objects such as property, plant, and equipment or
inventories.
b. Right to intellectual property.
3. Rights established by contract or legislation such as owning a debt instrument of an
entity instrument or owning a registered patent.

Potential to produce economic benefits

An economic resource is a right that has the potential to produce economic benefits.

The economic resource is present right that contains the potential and not the future
economic benefits that the right may produce.

An economic resource could produce economic benefits if an entity is entitled :

a. To receive contractual cash flow.

b. To exchange economic resources with another party on favorable term.
c. To produce cash inflows or avoid cash outflows.
d. To receive cash by selling the economic resource.

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 e. To extinguish a liability by transferring an economic resources.

Control of an economic resource

An entity controls an asset if it has the present ability to direct the use of the asset and obtain
the economic benefits the flow from it.

Control may arise if an entity enforces legal rights.

If there are no legal rights, control can still exist if an entity has other emans of ensuring
that no other party can benefit from an asset.

LIABILITY
Under the Revised Conceptual Framework, a liability is defined as a present obligation of an
entity to transfer economic resources as a result of past event.

The new definition clarifies that a liability is the obligation to transfer an economic
resource and not the ultimate outflow of economic benefits.

Essential characteristics of liability

a. The entity has an obligation.

The entity liable must be identified. It is not necessary that the payee or the entity to
whom the obligation is owed be identify.

b. The obligation is to transfer economic resources.

c. The obligation is a present obligation that exists as result of past event.

This means that a liability is not recognized until it is incurred.

Obligation
An obligation is a duty or responsibility that an entity has no practical ability to avoid.
Obligations can either be legal or constructive.

Obligations can be legally enforceable as a consequence of a binding contract or statutory

requirement.

Constructive obligations arise from normal business practice, custom and a desire to
maintain good business relations or act in an equitable manner.

Definition of income
Income is defined as increases in assets or decreases in liabilities that result in increases in
equity, other than those relating to contributions from equity holders.

The definition of income compasses both revenue and gains.

Revenue arises in the course of the ordinary regular activities and is referred to by variety
of different names including sales, fees, interest, dividends, royalties, ad rent.

The essence of revenue is regularity.

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Gains represent other items that meet the definition of income and do not arise in the
course of ordinary regular activities.

Gains include gain from disposal of non-current asset, unrealized gain or trading
investments and gain from expropriation.

Statement of financial performance

A Revised Conceptual Framework introduced the term statement of financial performance.

This statement refers to the statement of profit or loss and a statement presenting other
comprehensive income.

The statement of profit or loss is the primary source of information about an entity’s
financial performance. As a general rule, all income and expenses are included in profit or
loss.

Definition of expense
Expense is defined as decreases in assets or increases in liabilities that result in decrease in
equity, other than those relating to distributions to equity holders.

Expenses compass losses as well as those expenses that arise in the course of the ordinary
regular activity.

Expenses that arise in the course ordinary regular activities include cost of goods sold,
wages and depreciation.

Losses do not arise in the course of the ordinary regular activities and include losses
resulting from disasters.

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CHAPTER 5
CONCEPTUAL FRAMEWORK
Recognition and measurement

TECHNICAL KNOWLEDGE

To define recognition of the elements of financial statements.

To know the recognition criteria for asset, liability, income and expense.

To define measurements of the elements of financial statements.

To be aware of the various financial attributes for measuring asset, liability,

income and expenses.

RECOGNITION

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The Revised Conceptual Framework defines recognition as the process of capturing for
inclusion in the financial statements an item that meets the definition of an asset, liability,
equity, income or expense.

The amount at which an asset, a liability or equity is recognized in the statement of

financial position is reported as carrying amount.

The recognition of expense happens simultaneously with the recognition of a decrease in

asset or increase in liability.

Recognition criteria
Only items that the definition of an asset, a liability, equity are recognized in the statement of
financial position.

Similarly, only items that meet the definition of income or expense are recognized in the
statement of financial performance.

Point of sale income recognition

The basic principle of income recognition is that income shall be recognized when earned.

But the question is when is income considered to be earned?

With respect of goods in the ordinary course of business, the point of sale unquestionably
the point of income recognition.

The reason is that, the entity passes to the buyer the legal title of the goods at the point of
sale.

Expense recognition
The basic expense recognition means that expenses are recognized when incurred.

But the question is when are expenses are incurred?

Actually, the expense recognition principle is the application matching principle.

The matching principle requires that the cost and expenses incurred in earning a revenue
shall be reported in the same period.

The matching principle has three applications namely:

a. Cause and effect association

b. Systematic and rational allocation
c. Immediate recognition

Cause and effect association

Under this principle, the expense is recognized when the revenue is already recognized.

This concept commonly referred as the matching of cost with revenue, involves the
simultaneous or combined recognition of revenue and expenses that result directly and
jointly from the same transactions or event.

The best example is the cost of merchandise inventory.

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Other examples include doubtful accounts, warranty expense and sales commissions.

Systematic and rational allocation

Under this principle, some costs are expensed by simply allocating them over the periods
benefited.

The reason for this principle is that the cost incurred will benefit future periods and that
there is an absence of a direct or clear association of expense with specific revenue.

Concrete examples include depreciation of property, plant and equipment, amortization of

intangibles, and allocation prepaid event, insurance and other prepayments.

Immediate recognition
Under this principle, the cost incurred is expense outright because of uncertainty of future
economic benefits or difficulty of reliably associating certain costs with future revenue.

An expense is recognized immediately when:

a. When expenditure produces no future benefits.

b. When cost incurred does not qualify or ceases to quality for recognition as an asset.

Examples include officer’s salaries and most administrative expenses, advertising and most
selling expenses, amount to settle lawsuit and worthless intangibles.

Derecognition
The Revised Conceptual Framework introduced the term derecogniton

Derecognition is defined as the removal of all or part of a recognized asset or liability from
the statement financial position.

Derecognition normally occurs when an item no longer meets the definition of an asset or a
liability.

Derecognition of an asset occurs when the entity loss control of all or part of the asset.

Derecognition of a liability occurs when the entity no longer has a present obligation for all
or part of the liability.

MEASUREMENT
Measurement is defined as quantifying in monetary terms the elements in the financial
statements.

The Revised Conceptual Framework mentions two categories:

a. Historical cost
b. Current value

HISTORICAL COST
The historical cost of an asset is the cost incurred in acquiring or creating the asset
comprising the consideration paid plus transaction cost.

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The historical cost of a liability is the consideration received to incur the liability minus
transaction cost.

Simply stated, historical cost is the entry price or entry value to acquire an asset or to incur
a liability.

An application of historical cost measurement is to measure financial asset and financial

liability at amortized cost.

Historical cost is the measurement basis most commonly adopted in preparing financial
statements.

In addition, historical cost is generally well understood and verifiable.

Historical cost updated

1. Historical cost of an asset is updated because of:
a. Depreciation and amortization
b. Payment received as a result of disposing part or all of the asset
c. Impairment
d. Accrual of interest to reflect any financing component of the asset
e. Amortized cost measurement of financial asset
2. Historical cost of a liability is updated because of:
a. Payment made or satisfying an obligation to deliver goods
b. Increase in value of the obligation to transfer economic resources such that
the liability becomes onerous (heavy obligation)
c. Accrual of interest to reflect any financing component of the liability
d. Amortized cost measurement of financial liability

CURRENT VALUE
Current value includes:

1. Fair value
2. Value in use for asset
3. Fulfillment value for liability
4. Current cost

Fair value
Fair value of an asset is the price that would be received to sell an asset in an orderly
transaction between market participants at measurement date.

Fair value of liability is the price that would pay to transfer a liability in an orderly
between market participants at the measurements date.

Fair value is not adjusted for transaction cost. The reason is that such cost is a characteristic
of the transaction and not of the asset or liability.

Value in use
Value in use is the present value of the cash flows that an entity expects to derive from the
use of an asset and from the ultimate disposal.

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Value in use does not include transaction cost on acquiring the asset but includes
transaction cost on the disposal of the asset.

Fulfillment value
Fulfillment value is the present value of cash that an entity expects to transfer in paying
or settling a liability.

Fulfillment value does not include transaction cost on incurring a liability but includes
transaction cost in fulfillment a liability.

Fair value, Value in use, and Fulfillment value are exit price or exit value.

Current cost
Current cost of an asset is the cost of an equivalent asset at the measurement date
comprising the consideration paid and transaction cost.

Current cost of a liability is the consideration that would be received less any transaction
cost at measurement date.

Similar to historical cost, current cost is also based on the entry price or entry value but
reflects market conditions on measurement date.

NOTE: The IASB did not mandate a single measurement basis because the
different measurement bases could produce useful information under different
circumstances.

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CHAPTER 6
CONCEPTUAL FRAMEWORK
Presentation and disclosure
Concepts and capital

TECHNICAL KNOWLEDGE

To know the guideline in the presentation and disclosure of financial

information.

To understand presentation and disclosure as an effective communication tool.

To define the two concepts of capital.

To determine net income under the financial capital and physical capital

concept.

PRESENTATOIN AND DISCLOSURE

The presentation and disclosure can be an effective communication tool about the
information in financial statements.

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The reporting entity communicates information about its assets, liabilities, equity, income
and expenses by presenting and disclosing information in the financial statements.

Effective communication in financial statements will make the information more relevant,
contributes faithful representation, enhances understandability, and comparability of
information in the financial statements.

Classification
Classification is the sorting of assets, liabilities, equity, income and expenses on the basis of
shared or similar characteristics.

Failed to classify them based on their nature and characteristics will contrast on the
effective communication in financial statements.

Classification of income and expenses

Income and expenses are classified as components of profit loss and components of other
comprehensive income.

The Revised Conceptual Framework has introduced the terms statement of financial
performance to refer to the statement of profit and loss together with the statement
presenting other comprehensive income.

The statement of profit or loss is the primary source of information about an entity’s
financial performance for the reporting period.

CAPITAL MAINTENANCE
The financial performance of an entity is determined using two approach, namely
transaction approach, and capital maintenance approach.

The transaction approach is the traditional preparation of income statement.

The capital maintenance approach means that net income occurs only after the capital used
from the beginning of period is maintained.

The distinction between return of capital and return on capital is important to the
understanding of net income.

Shareholders invest in entity to earn a return on capital or an amount in excess of their

original investment.

Return of capital is an erosion of the capital invested in the entity.

*Two concept of financial maintenance:

1. FINANCIAL CAPITAL

Financial capital is the monetary amount of the net assets contributed by

shareholders and the amount of the increase in net assets resulting from earnings
retained by entity. It is based on historical cost and adopted by most entities.

Under this method, net income occurs “when the nominal amount of the assets at
the end of the year exceeds the nominal amount of the net assets at the beginning of

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 the period, after excluding distributions to and distributions by owners during the
period.”

2. PHYSICAL CAPITAL

Physical capital is the quantitative measure of the physical productive capacity to

produce goods and services.

This concept requires that productive assets be measured at current cost, rather
than historical cost.

Under this method, net income occurs “when the physical productive capital of the
entity at the end of the year exceeds the physical productive capital at the beginning
of the period, also after excluding distributions to and distributions from owners
during the period.”

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CHAPTER 7

PAS 1

PRESENTATION OF FINANCIAL STATEMENTS

Statement of financial position

TECHNICAL KNOWLEDGE

To identify the components of financial statements.

To understand the objective of financial statements.

To know the preparation of a statement of financial position.

To identify the minimum line items to be presented in a statement of financial

position as a required by IFRS.

To understand the current and non-current classification of assets and

liabilities.

INTRODUCTION
PAS 1 prescribes the basis for the presentation of general purpose financial statements, and
ensure comparability.

FINANICAL STATEMENTS

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Financial statements are the means by which the information accumulated and processed
in financial accounting is periodically communicated to the users.

Financial statements are the end product or main output of the financial accounting process.

General purpose of financial statements

Financial statements are those intended to meet the needs of users who are not in a
position require an entity to prepare reports tailored to their particular information needs.

In other words, general purpose financial statements are directed to all common users and
not to specific users.

Components of financial statements

a. A complete set of financial statements comprises the following:
b. Statement of financial position (Balance sheet)
c. Statement of profit or loss and other comprehensive income.
d. Statement of changes in equity.
e. Statement of Cash Flow (PAS 7)
f. Notes; (5a) Comparative information
g. Additional statement of financial position (required only when certain instances
occur).
A. Statement of financial position (Balance sheet)
It shows the entity’s financial condition as at a certain date.

PAS 1 does not prescribe the order or format of presenting items in the statement of
financial position.

Can be presented either showing current or non-current distinction (classified) or based on

liquidity (unclassified)

PAS 1 encourages the classified presentation.

B. Statement of profit or loss and other comprehensive income.

Income and Expenses may be presented in either:
a) A single statement of profit or loss and other comprehensive income
b) Two statements - 1. Statement of profit or loss (income statement) 2.
Statement presenting comprehensive income.
 Presenting a separate income statement is allowed as long as a separate statement
showing comprehensive income is also presented. Presenting only an income
statement is prohibited.

C. Statement of changes in equity.

Effects of change in accounting policy (retrospective application) or correction of prior
period error (retrospective restatement)

Total comprehensive income for the period

For each component of equity, a reconciliation between the carrying amount at the
beginning and the end of the period, showing separately changes resulting from:

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 a. profit or loss
b. other comprehensive income
c. Transaction with owners, e.g., contributions by and distribution to owners.

D. Statement of Cash Flow (PAS 7)

E. Notes; (5a) Comparative information
a. Provides information in addition to those presented in the other financial
statement.
b. Integral part of a complete set of financial statements.
c. PAS 1 requires an entity to present the notes in a systematic manner.
d. Notes are prepared in a necessarily detailed manner.

F. Additional statement of financial position

(required only when certain instances occur).

 Reports that are presented outside of the financial such as financial reviews by
management, environmental reports and value added statements, are outside the
scope of PFRSs.

GENERAL FEATURES OF FINANCIAL STATEMENTS

1. Fair presentation and compliance with PFRSs

Faithfully representing, compliance with the PFRS is presumed to result in fairly

presented financial statements.

2. Going Concern

Management shall assess the entity's ability to continue as a going concern.

3. Accrual Basis of Accounting

All financial statements shall be prepared using accrual basis except statement
of cash flows which is prepared using cash basis.

4. Materiality and Aggregation

Each material class of similar items also known as "line item" is presented
separately.

5. Offsetting

Assets, liabilities, income, and expense are presented separately and are not
offset, unless offsetting is required or permitted by a PFRS. Presenting gains or
losses from sales of assets net of the related selling expenses.

i. Presenting at net amount the unrealized gains and losses arising

from trading securities and from translation of foreign currency
denominated assets and liabilities, except if they are material.
ii. Presenting a loss from a provision net of a reimbursement from a
third party.

 Measuring assets net of valuation allowances is not offsetting.

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 6. Frequency of reporting

Financial statements are prepared at least annually.

7. Comparative information

With respect of the preceding period.

8. Consistency of presentation

The presentation and classification of items is retained from one period to the
next unless a change in presentation:

a) required by a PFRS
b) Results in information that is reliable and more relevant.
 Change in presentation requires the reclassification of items in the comparative
information.

Types of comparability
a. Intra-comparability - comparability of financial statement of the same entity but
from one period to another.

b. Inter-comparability - comparability of financial statements between different

entities.

 Comparability requires consistency in the adoption and application of

accounting policies and in the presentation of financial statement.

Financial Statements
 Structured representation of an entity's financial and result of its operation.
 End product of the financial process.
 It only pertains to that entity and not to the industry where the entity belongs or the
economy as a whole.
 The PFRSs apply only to the financial statements and not necessarily to the other
information.
 Each of financial statements shall be presented with equal prominence and shall be
clearly identified and distinguished from other information in the same published
document.
PURPOSE OF THE FINANCIAL STATEMENTS
1. Primary objective - provides information that is useful to a wide range of users in
making economic decisions.

2. Secondary Objective - shows the result of management’s stewardship over the

entity's resources

To meet this objective, financial statements provide information about the following:

A. Assets (economic resources)

B. Liability

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C. Equity

D. Income

E. Expenses

F. Contributions by, and distributions to, owners;

G. Cash flow

MANAGEMENTS RESPONSIBILITY OVER FINANCIAL STATEMENTS

A. Preparation and fair presentation of financial statements in accordance with PFRSs.

B. Internal control over financial reporting.

C. Going concern assessment

D. oversight over the financial reporting process

E. Review and approval of financial statements.

REFINANCING AGREEMENT

 Long term obligation that is maturing within 12 months after the reporting period is
classified as current.

 Refinancing refers to the replacement of an existing debt with a new one but within
different terms, e.g., an extended maturity date or a revised schedule.

 Loan facility refers to a credit line.

PROFIT OR LOSS

- Income less expenses, excluding the components of other comprehensive income.

 Income and expenses are usually recognized in profit or loss unless:

a) They are items of other comprehensive income

b) They are required by other PFRSs to be recognized outside of profit or loss.

 PAS 1 prohibits the presentation of extraordinary items in the statement of profit or

loss and other comprehensive income or in the notes.

PRESENTATION OF EXPENSES

Expenses may be presented using either of the following methods

A. Nature of expense method- expenses are aggregated according to their nature and
not reallocated according to their functions within the entity. It is simpler to apply

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 because it eliminates considerable judgment needed in reallocating expenses
according to their function.

B. Function of expense method (cost of sales method) - Entity classifies expenses

according to their function. At a minimum, cost of sales shall be presented
separately from the expenses. If it is used additional disclosures on the nature of
expenses shall be provided.

OTHER COMPREHENSIVE INCOME

 Comprises items of income and expense that are not recognized in profit or loss as
required or permitted by other PFRSs.

 Amounts recognized in OCI are usually accumulated as separate components of

equity.

RECLASSIFICATION ADJUSTMENTS

 This are amounts reclassified to profit or loss in the current period that were
recognized in other comprehensive income in the current or previous periods.

 These are amounts reclassified from OCI to profit or loss.

TOTAL COMPREHENSIVE INCOME

 It is the change in equity during a period resulting from transactions and other
events, other than those changes resulting from transactions with owners in their
capacity as owners.

 Presenting information on comprehensive income, and not just profit or loss, helps
users better assess the overall financial performance of the entity.

Disclosure of dividends
Dividends declared by an entity are disclosed either;
A. Notes
B. statement of changes in equity

Order of presentation of disclosure in the notes

1. Statement of compliance with PFRSs.
2. Summary of significant accounting policies applied.
3. Supporting information for items presented in the other financial statement
4. Other disclosures

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CHAPTER 8

PAS 7

STATEMENT OF CASH FLOWS

TECHNICAL KNOWLEDGE

To identify the components of financial statements.

To understand the objective of financial statements.

To know the preparation of a statement of financial position.

To identify the minimum line items to be presented in a statement of financial

position as a required by IFRS.

To understand the current and non-current classification of assets and

liabilities.

INTRODUCTION
The statement of cash flows provides information about the sources and utilization (i.e.,
historical changes) of cash and cash equivalents during the period.

The statement of cash flows may also provide information on the quality of earnings of an
entity.

It can only be prepared on a cash basis.

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Definition of Terms
 Cash- cash on hand and cash in bank.
 Cash Equivalents are short term, highly liquid investments readily convertible to
cash.
1 year Treasury bill acquired 3 months before maturity date.
90 day money market instrument or commercial paper.
3 month time deposit
 Cash Flow includes inflows (sources) and outflows (uses) of cash and cash
equivalents.

CLASSIFICATION OF CASH FLOWS

1. Operating Activities
Include transaction that enter into the determination of profit or loss (income and
expenses)

a) Direct Method - shows each major class of gross cash receipts and gross cash
payments.

b) Indirect Method - Profit and loss is adjusted for the effects of non-cash items
and changes in operating assets and liabilities.

 PAS 7 does not require any particular method; both methods are acceptable.
 PAS 7 encourages the direct method because it provides information that
may be useful in estimating future cash flows.
 Indirect method is more commonly used because it is easier to apply.

2. Investing Activities
Involve the acquisition and disposal of noncurrent asset and other investments.

3. Financing Activities
Include transaction that affects the entity's equity capital and borrowing structure.

GENERAL CONCEPT IN THE PREPARATION OF STATEMENT OF CASH

FLOWS
Prepared using cash basis, income recognized when collected and expense recognized
when paid.

Include only transaction that has affected cash and cash equivalents.

Exclude and disclose transactions that have not affected cash and cash equivalents.

DISCLOSURES
PAS 7 requires the following disclosures:

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a. Components of cash and cash equivalents and a reconciliation of amounts in the
statement of cash flows with the equivalent items in the statement of financial
position.
b. Significant cash and cash equivalents held by the entity that are not available for use
by the group, together with a management commentary.

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CHAPTER 9

PAS 8

ACCOUNTING POLICIES, ESTIMATE AND ERRORS

TECHNICAL KNOWLEDGE

To understand the concept of change in accounting policy.

To know the recognition and reporting of a change in accounting policy.

To understand the concept of a change in accounting estimate.

To know the recognition and reporting of change in accounting estimate.

To know the recognition and reporting of prior period errors.

INTRODUCTION
PAS 8 prescribes the criteria for selecting, applying, and changing accounting policies and
the accounting.

ACCOUNTING POLICIES

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 The specific principles, bases, conventions, rules, and practices applied by an entity in
preparing and presenting financial statement. (PAS 8.5)

Hierarchy of reporting standards:

1. PFRSs
2. Judgment

When making the judgment:

1. Management shall consider the following:

a) Requirements in other PFRSs dealing with similar transactions.
b) Conceptual Framework
2. Management may consider the following:
a) Pronouncements issued by other standard-setting bodies.
b) Other accounting literature and industry practices.

Scope of PAS 8 Description Accounting Treatment Effect Of Adjustments

Changes in Accounting Change in measurement a. transitional provision. On the beginning

Policy basis balance of retained
b. Retrospective
 Required by PFRSs application. (retained earnings, if accounted
earnings) for retrospectively.
 Result in reliable
and more relevant c. If b is impracticable,
prospective application

Change in Accounting Changes in the realization Prospective Application In the profit or loss
Estimate (or incurrence) of expected (profit or loss) current period or
inflow or outflow of current and future
economic benefits from periods, if the change
assets or liabilities. affects both.

Correction of prior period Misapplication of principles a. retrospective On the beginning of

error oversight or restatement retained earnings, if
misinterpretation of facts, accounted for
 Current Period b. if b is impracticable
and mathematical retrospectively
error prospective application
mistakes.
 Prior period Error
DISCLOSURE
1. Changes in accounting policies
2. Changes in accounting estimates
3. Correction of prior period errors

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CHAPTER 10

PAS 10

EVENTS AFTER THE REPORTING PERIOD

TECHNICAL KNOWLEDGE

To understand the concept of events after the reporting period.

To know the type of events after reporting period.

To understand the recognition of adjusting and non-adjusting events.

Events after reporting Period

Those events, favorable and unfavorable, that occurs between the end of the reporting
period and the date when the financial statements are authorized for issue. (PAS 10.3)

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The date of authorization of the financial statements is the date when management
authorizes the financial statement for issue regardless of whether such authorization is
final or subject to further approval.

TWO TYPES OF EVENTS AFTER THE REPORTING PERIOD

a) Adjusting events after the reporting period - events that provide evidence of
conditions that existed at the end of the reporting period. Its require adjustments of
amounts in the financial statements.

b) Non-adjusting events after the reporting period- events that is indicative of

conditions that arose after the reporting period. Do not require adjustments of
amounts in the financial statement.

DIVIDENDS
Dividends declared after the reporting period are not recognized as liability at the end of
reporting period because no present obligation exists at the end of the reporting period.

GOING CONCERN
PAS 10 prohibits the preparation of financial statements on a going concern basis if the
management determines after the reporting period either that it intends to liquidate the
entity or to cease trading, or that it has no realistic alternative but to do so.

DISCLOSURE
 Date of Authorization
 Adjusting Events
 Material Non-Adjusting Events

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CHAPTER 11

PAS 24

RELATED PARTY DISCLOSURES

TECHNICAL KNOWLEDGE

To understand the concept of related parties.

To know the requirement for disclosure of related party relationship.

To know the requirements for disclosure of related party trasactions.

INTRODUCTION
PAS 24 prescribes the guidelines in identifying related party relationships, transaction,
outstanding balances and commitments, and the necessary disclosures for these items.

Related party relationships are a common feature of business where they collide with other
businesses.

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Related party disclosures are necessary to indicate the possibility that an entity’s financial
position and performance might have been affected by the existence of such relationship.

RELATED PARTIES
Parties are related if one party has the ability to affect the financial and operating decisions
of the other party through control, significant influence, or joint control.

Control an investor controls an investee when the investor is exposed, or has rights,
to variable returns from its involvement with the investee and has the ability to affect those
returns through its power over the investee.

Significant influence is the power to participate in the financial and operating policy
decisions of an entity, but is not control over those policies. Significant influence may be
gained by share ownership, statute or agreement.

Joint control is the contractually agreed sharing of control over an economic activity.

Key management personnel are those persons having authority and responsibility
for planning, directing and controlling the activities of the entity, directly or indirectly,
including any director (whether executive or otherwise) of that entity.

Close members of the family of an individual one who may expected to influence, or be
influenced by, the person in his/her dealings with the reporting entity.( persons spouse,
their children and dependents )

A related party transaction is a transfer of resources, services or obligations between a

reporting entity and a related party, regardless of whether a price is charged.

DISCLOSURES
1. Parent-subsidiary relationship regardless of whether there have been transactions
between them

2. Key management personnel compensation broke down into the following categories
SPOTS and loans to key management personnel.

3. Related party transactions – nature of transaction and outstanding balances

4. Government related entities- transaction that is related with the government.

Disclosures that related party transactions were made on terms equivalent to those that
prevail in arm’s length transactions are made only if such terms can be substantiated.

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CHAPTER 12

PAS 34

INTERIM FINANCIAL REPORTING

TECHNICAL KNOWLEDGE

To know the basic principles of interim financial reporting.

To identify the components of an interim financial report.

To be able to prepare and present comparative interim financial statements.

INTRODUCTION
Interim financial reporting means the preparation and presentation of financial statements
for a period of less than a year.

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PAS 34 prescribes the minimum content of an interim financial report and the principles
for recognition and measurement in: complete (PAS 1); or condensed financial
statements (PAS 34) for an interim period.

Interim financial report may be presented monthly, quarterly, or semiannually.

Quarterly interim reports are the most common; reports are to be made available not later
than 60 days after the end of the interim period.

Based on the standards, interim financial reporting is not that required. But applicable and
relevant now to accountants and as per request of the board or managers for some reason:
before paying tax, we are doing or reporting interim financial reports to BIR and SEC, it
could be complete or condensed financial statements; before obtaining loans , we also
report interim financial statements.

Components of an interim financial report

PAS 34, paragraph 8, provides that an interim financial report shall include, at a minimum,
the following components:

a. Condensed statement of financial position

b. Condensed statement of comprehensive income
c. Condensed statement of changes in equity
d. Condensed statement of cash flow
e. Selected explanatory notes.

The term “condensed” means an entity needs only to provide the minimum information
required under PAS 34.

Paragraph 8A provides that an entity can present items of profit or loss in a separate
condensed income statement.

Nothing in the standard is intended to prohibit or discourage an entity from publishing a

complete set of financial statements, rather than condensed financial statements and
selected explanatory notes.

In other words, PAS 34 allows an entity to publish a set of condensed financial statements
or complete set of financial statements in the interim financial reports.

Presentation of comparative interim statements

1. Statement of financial position

i. Statement of financial period at the end of current interim period.

ii. Comparative statement of financial position at the end of the preceding year.

2. Income Statement

3. Statement of comprehensive income

4. Statement of changes in equity

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5. Statement of cash flow

i. Income Statement / statement of comprehensive income / statement of changes in

equity / statement of cash flows cumulatively for the current financial year to date.
ii. Comparative Income Statement / statement of comprehensive income / statement
of changes in equity / statement of cash flows for the comparable financial year to
date of the preceding year.

 If an entity publishes interim financial reports half-yearly, the following

comparative financial statements are presented on June 30, 20x1.
 If an entity publishes interim financial reports quarterly, the following comparative
financial statements are included in the quarterly interim financial report on June
30, 20x1.

Basic principles and disclosures

1) PAS 34, paragraph 28, provides that an entity shall apply the same accounting policies
in the interim financial statements as are applied in the annual financial statements.
The measure of half-yearly or quarterly shall not affect the measurement of the annual
results. Therefore, measurement for interim financial purpose shall be made on year to
date basis.
2) Revenues from product sold or services rendered are generally recognized for interim
reports on the same basis as for the annual period.
3) Cost and expenses are recognized as incurred in interim period.
4) If an entity's business is highly seasonal, PAS 34 encourages disclosure of financial
information for the: latest 12 months; and comparative information for the prior 12-
month period in addition to the interim period financial statements.
5) Paragraph 41 provides that the preparation of interim financial reports generally
requires a greater use of estimation than annual financial reports.
6) Gain and losses shall not be allocated over the interim period.
a) The gain is reported in the interim period when realized.
b) And the loss is reported when incurred.
7) Income tax. Interim period income tax expense shall reflect the same general principles
of income tax accounting applicable to annual reporting. Paragraph 12 of Appendix B of
PAS 34 states that the interim period income tax expense is accrued using the annual
effective income tax rate applied to the pretax income of the interim period.

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CHAPTER 13

PFRS 8

OPERATING SEGMENTS

TECHNICAL KNOWLEDGE

To know the core principle of segment reporting.

To understand the concept of an operating segment.

To identify the criteria for the recognition of a reportable operating segment.

To identify the information required to be disclosed for a reportable operating

segment.

INTRODUCTION

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 “An entity shall disclose information to enable users of its financial statements to evaluate
the nature and financial effects of the business activities in which it engages and the
economic environments in which it operates.” (PFRS 8)

In other words, segment reporting is the disclosure of certain financial information about
the product and services an entity produces and the geographical areas which an entity
operates.

Scope of PFRS 8
• PFRS 8 applies to the separate, individual and consolidated financial statements of
an entity which is publicly listed or in the process of enlisting publicly.

•  An unlisted entity that chooses to apply PFRS 8 shall comply with all of the
requirements of PFRS 8; otherwise it shall not describe the information as segment
information.

• If a financial report contains both the consolidated and separate financial statements
of a parent that is within the scope of PFRS 8, segment information is required only
in the consolidated financial statements.

Operating segment
An operating segment is a component of an entity:

a. That engages in business activities from which it may earn revenue and incur
expenses, including revenue and expenses relating to transactions with other
components with the same entity.
b. Whose operating results are regularly viewed by the entity’s chief operating
decision maker to make decisions about resources to be allocated to the segment
and asses its performance.
c. And for which discrete financial information is available.

Identifying operating segments

The management approach is used in identifying operating segments.

Under Management approach, Operating segments are identified based on the components
of the entity that are considered to be important for internal management reporting
purposes.

Reportable operating segments

An entity shall report information about an operating segment that meets any of the
following quantitative thresholds:

1. The segment revenue is 10% or more of the combined revenue, external or internal,
of all operating segments.
2. The absolute amount of profit or loss of the segment is 10% or more of the greater
in absolute amount of:
a. Combined profit of all operating segments that reported a profit.
b. Combined loss of all operating segments that reported a loss.
3. Assets are 10% or more of the combined assets of all operating segments.

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Operating segments that do not meet any of the quantitative thresholds may be considered
reportable and separately disclosed on a voluntary basis if management believes that
information about the segment would be useful to the users of the financial statements.

Overall size test – 75% threshold

The total external revenue reported by reportable segments shall at least 75% of the
entity’s external revenue.

Aggregation of segments
Two or more operating segments may be aggregated into a single operating segment if the
segments have similar economic characteristics, and the segments share a majority of the
following five aggregation criteria:

1. Nature of the products or services;

2. Nature of the production process;

3. Type or class of customers

4. Marketing methods or the methods used to distribute their products or

provide their services; and

5. Nature of the regulatory environment, if applicable, e.g., banking, insurance

or public utilities.

Disclosures
• A major customer is a single external customer providing revenues of 10% or
more of an entity’s revenues.

• Entity-wide disclosures apply to all entities subject to PFRS 8 including those

entities that have a single reportable segment.

• Revenues from external customers attributed to the entity’s country of domicile

and attributed to all foreign countries in total from which the entity derives
revenues.

• Profit or loss, assets and liabilities. An entity shall disclose a measure of profit or
loss under all circumstances. However, an entity shall disclose a measure of total
assets and total liabilities for each reportable segment if such an amount is regularly
provided to the chief operating decision makers.

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