PFRS for SMEs Full PFRS

I. Assets (Definition) Same Same

II. Liabilities (Def’n) Same Same
III. Equity
1. Issuance of Equity Equity instruments are measured Same except that full PFRS is
Shares t FV of the consideration not explicit but the application
received or receivable (net of in practice is the same.
direct issue cost).
IV. Income
1. Recognition of Revenue section covers all Same, however includes a
Revenue revenue transactions within four separate standard for
broad categories: construction Contracts
1. Sale of goods
2. Rendering of services
3. Use by others of entity’s
resources (interest,
royalties, etc.)
4. Construction Contracts
2. Government Grant
 Measurement & According to nature of grant: Measurement
Recognition 1. Income recognized 1. Capital and Income
immediately upon receipt ApproachRecognition
of grant with no specified 2. Revenue recognized
future performance. when conditions are
2. Income recognized when met.
conditions are met. 3. Revenue recognized
3. Deferred income. when grant is
receivable.
V. Expenses
1. Definition Same Same
2. Recognition Same Same
3. Borrowing Costs Expensed outright Costs directly attributable to
acquisition-capitalized
Other borrowing costs-
expensed
Chapter 18: SMEs - Definition

Chapter 19: SMEs - QUALITIES AND GENERAL FEATURES

I. QUALITATIVE CHARACTERISTICS

FULL PFRS PFRS FOR SMEs

 Fundamental qualitative characteristics  Principal qualitative characteristics
 Relevance  Understandability
 Predictive Value  Relevance
 Confirmatory Value  Materiality
 Materiality  Reliability
  Faithful Representation  Substance over form
 Completeness  Prudence
 Neutrality  Completeness
 Free from error  Comparability
 Enhancing qualitative characteristics  Timeliness
 Understandability  Balance between benefit and cost
 Comparability
 Verifiability
 Timeliness

II. ELEMENTS OF FINANCIAL STATEMENTS

FULL PFRS PFRS FOR SMEs

 Definition  Definition
 same with PFRS for SMEs  same with full PFRS
 Recognition  Recognition
 same with PFRS for SMEs  same with full PFRS
 Measurement  Measurement
 Present value  Historical Cost
 Realizable value  Fair Value
 Historical cost
 Current cost

III. GENERAL FEATURES

Full PFRS and PFRS for SMEs have the same provisions on the general features in the preparation of
financial statements.

Chapter 21: SMEs - Statement of comprehensive income

Differences Full PFRS PFRS for SMEs

Components of other
comprehensive income
-unrealized gain or loss on ----
investment in equity instrument
measured at FV thru P/L
-gain or loss translating the Same
financial statement of foreign
operation
-revaluation surplus during the ---
year
-unrealized gain or loss from Same
derivative contracts designated
as cash flow hedge
-remeasurement of defined Same
 benefit plan
Presentation of single Not Permitted If the only change in equity are
statement of income and the results of the ff;
retained earnings -profit or loss
-payment of dividends
-prior period errors
-changes in accounting policy

Chapter 22: SMEs-Notes to Financial Statements

PFRS for SMEs Full PFRS

1. Presentation in a systematic Mandated (as far as practicable) Mandated (as far as practicable)
manner
2. Cross-reference between Mandated Mandated
each item in the financial
statements
3. Disclosure of information Mandated Mandated
about key sources of
estimation uncertainty.
4. Disclosure about judgment Mandated Mandated
apart from those involving
estimation.
5. Structure same same
6. Order of presenting the same same
notes
7. Segment Reporting Not required Required
8. Earnings per share Not required Required
9. Interim financial reporting Not required Not required*
10. Related and unrelated same same
parties classification
11. Related party disclosure same same
12. Key management same same
personnel compensation
13. Events after the end of same same
reporting period
14. Date of authorization for same same
 issue

*Some entities are required by SEC and Phil. Stock Exchange

Chapter 23: SMEs-ACCOUNTING CHANGES

Full PFRS PFRS for SMEs

I. Selection of Accounting Policies
A. If there is an accounting Applicable Applicable
standard related to a (if the effect would be material)
transaction, follow the
standard.
B. In the absence of an
accounting standard,
management shall
consider the
following sources from the
hierarchy of guidance:
1. The requirements and Applicable Applicable
guidance in PFRS on similar
related issues
2. The definition, recognition
criteria and measurement of Applicable Applicable
assets, liabilities, income
and expenses
3. Most recent pronouncement
of other standard setting Applicable Not Applicable
bodies, other accounting
literature and accepted
industry practices.
II. Consistent application of same same
accounting policies
III. Changes in accounting policies same same
shall be treated: Retrospectively
prospectively, if it is impracticable same same
to apply the new accounting policy
retrospectively
IV. Changes in accounting same same
estimates shall be treated
prospectively
V. Correction of prior period same same
errors shall be treated
retrospectively
 Chapter 24 SMEs – INVENTORIES AND REVENUE

INVENTORIES

Full PFRS PFRS for SMEs

Definition same same
Measurement Lower of cost and net realizable Lower of cost and estimated
value selling price less cost to
complete and sell
Costs of purchase same same
Costs of conversion same same
Other costs same same
Cost formulas same same
Impairment The loss on inventory The excess of the carrying
writedown is a component of amount over the selling price
cost of goods sold rather than an less cost to complete and
impairment loss. dispose shall be recognized as
impairment loss.

REVENUE

PFRS for SMEs and full PFRS share the same principles for the recognition of revenue from sale of
goods, rendering of services, interest, royalties, dividends and other significant type of revenue.

CHAPTER 25: SMEs – BASIC FINANCIAL INSTRUMENTS

 Full PFRS PFRS for SMEs
I. Financial Instrument
a. Definition same same
1. Financial Assets same same
2. Financial Liabilities same same
3. Equity Instruments Under the scope of the Outside the scope of the standard
standard
b. Categorization No distinction as to basic Distinguishes basic financial
financial instruments and instruments and financial
financial instruments not instruments not qualifying as
qualifying as basic financial basic financial instruments
instrument
c. Examples Financial Instruments Basic financial instruments
includes: includes:
a. Cash or currency and a. Cash
cash in bank b. Demand and fixed term
b. Receivables deposits
(accounts, notes, c. Trade accounts and notes
loans, and bonds) receivable
c. Investments in equity d. Loans receivable
instruments issued by e. Commercial papers or
other entities commercial bills
d. Payables (accounts, f. Investments in
notes, loans, and nonputtable ordinary
bonds) shares
e. Preference shares g. Investments in
with mandatory nonconvertible and
redemption date nonputtable preference
f. Ordinary and shares
preference share h. Commitment to receive a
capital loan if the commitment
g. Warrants or options cannot be net settled in
cash
i. Accounts payable
j. Loans from banks and
other third parties
k. Bonds and similar debt
instrument
l. Loans to or from
subsidiaries or associates
that are due on demand
d. Initial Measurement
1. Transaction price same same
(cost less
impairment)
2. FV through P/L same same
3. Amortized Cost same same
e. Subsequent
 Measurement
1. Transaction Price same same
(cost less
impairment)
2. FV through P/L same same
3. Amortized Cost same same
f. Impairment of Asset
1. Measured at same same
amortized cost
2. Measured at cost less The difference between the The difference between the
impairment carrying amount of asset and carrying amount of asset and the
present value of estimated best estimate of the amount that
future cash flows discounted would have received if assets
at market rate of interest for were sold
similar asset
3. Reversal of same same
impairment

Chapter 26 SMEs – ASSOCIATE

PFRS for SMEs Full PFRS

Definition same same
 Significant It is the power to participate in the
Influence financial and operating policy decision
of the associate but is not control or joint
venture over those policies. It is
presumed to exist when the investor
holds at least 20% of the investee’s
voting power. It is presumed not to exist
when less than 20% is held. These
presumptions may be rebutted if there is
a clear evidence to the contrary.
Measurement after An investor may account for all of its
initial recognition investments in associate using any one of
the following:
a) Cost Model
b) Equity Method
c) Fair Value Model
Areas covered under full PFRS but not in PFRS for SMEs include the following:
a) Guidance on significant influence
b) Consequences when an investment ceases to be an associate
c) Profit and loss from upstream and downstream transaction.
Chapter 27: SMEs - Investment Property
PFRS for SMEs
Definition Same
Initial Measurement
 Purchase Price Same
 Directly Attributable Same
Similar to PFRS for SMEs but in
addition, full PFRS give the
following indicators of significant
influence to be considered where
the investors hold less than 20% of
the voting power of the investee:
 Representation of BDO
 Participation in policy
making process
 Material transaction
between the investor and
the investee
 Interchange of managerial
personnel
 Provision of essential
information
The existence and effect of
potential voting rights that are
currently exercisable or convertible
are considered when assessing
whether an entity has significant
influence
Only equity method is used to
account for an investments in
associate. Some exceptions: When
the investments is classified as held
for sale.
Full PFRS
Same
Same
Same
 Costs
 Borrowing Costs Recognized as expense
Subsequent Investment property is
Measurement carried at fair value if
its fair value can be
measured reliably
without undue cost or
effort. Otherwise, the
cost model is used.
Fair value Same
Cost Model Treatment of PPE
following PFRS for
SMEs Section 17.
Transfers Same
FULL PFRS
PROPERTY, PLANT AND EQUIPMENT
1. Definition of PPE -same-
2. Initial and subsequent Either cost model or
measurement revaluation model
3. Noncurrent asset held for Measured at the lower of
sale carrying amount and fair
value less cost to sell –
Presented separately and no
longer depreciated
4. Depreciation method, -same-
Required to be
Capitalized
Management may
choose as its
accounting policy to
carry all its investment
properties at cost.
However, when an
investment property is
held by a lessee under
an operating lease, the
entity follows the fair
value model for all its
investment properties.
Same
Treatment of PPE
following AIS16
Same
PFRS for SME’s
-same-
Cost model only
Does not address noncurrent
asset held for sale - Not
separately presented
-same-
 useful life, residual value,
depreciation of significant
components, impairment
and derecognition
GOVERNMENT GRANT
1. Recognition of
government grant
2. Matching of income with
expenses or cost
3. Presentation of grants
relating to asset
BORROWING COST
1. Recognition of borrowing
cost
Recognize when there is
reasonable assurance that
the entity will comply with
specific conditions
Government grant is
recognized as income over the
periods necessary to match the
grant with the related cost for
which it is intended to
compensate
Grant related to asset may be
treated either as deferred
income or a reduction in the
carrying amount of the asset
Capitalized as part of the cost
of the asset if borrowing cost
is directly attributable to
acquisition, construction or
production of a qualifying
asset, otherwise, it shall be
expensed as incurred
Recognize when conditions are
actually satisfied
Does not allow an entity to
match the grant with the
expense for which it is intended
to compensate or the cost of the
asset that is used to finance
Grant is a deferred income
until the conditions are actually
satisfied
Expensed as incurred
Does not permit capitalization
of interest even if it is directly
attributable to the acquisition,
construction or production of a
qualifying asset

CHAPTER 28: SME’s – PROPERTY, PLANT AND EQUIPMENT

Government Grant and Borrowing Cost

CHAPTER 30: SMEs-IMPAIRMENT OF ASSETS

PFRS for SMEs Full PFRS

Scope Assets with the following
exceptions:
•Deferred tax assets.
•Employee benefits assets.
•Financial assets.
•Investment property carried at fair
value
• Biological assets carried at fair value
less estimated cost to sell
-same-
In addition excludes the following
assets:
•Inventories.
•Deferred acquisition costs
• Intangibles arising from
contractual rights under insurance
contracts.
• Non-current assets classified as
held for sale in accordance with
 PFRS 5
Formula -same- -same-
-same-
Unless the asset is carried at
revalued amount in accordance with
Impairment losses -same- another standard. In this case, the
impairment loss is treated as a
revaluation decrease in accordance
with that other standard.
Internal and
External -same- -same-
Indicators
Measuring
Recoverable -same- -same-
amount
Definition of Fair
Value less cost to
-same- -same-
sell and Value in
use
Cash Generating
-same -same-
Unit (CGU)

Goodwill is allocated to the CGUs that

Goodwill acquired in a business
are expected to benefit from the
combination is allocated to the
synergies of the combination.
CGUs that are expected to benefit
If such allocation is not possible and the
from the synergies of the
reporting entity has not integrated the
combination.
Allocation of acquired business, the acquired entity is
Goodwill is tested for impairment at
goodwill measured as a whole when testing
the lowest level at which it is
goodwill impairment. If such allocation
monitored by management. CGUs
is not possible and the acquired business
may be grouped for testing, but the
is integrated, the entire group is
grouping cannot be higher than an
considered when testing goodwill
operating segment
impairment.

The following assets are tested for

impairment irrespective of whether
Assets (including goodwill) are tested
there is indication of impairment:
for impairment when there is an
Annual •Intangible assets with an indefinite
indication that the asset may be
assessment useful life or an intangible asset not
impaired. The existence of impairment
of indicators yet available for use.
indicators is assessed at each reporting
•Goodwill.
date
All other assets: same as PFRS for
SMEs
Reversal of
-same- -same-
Impairment
 CHAPTER 34: SMEs- Income Tax

Section 29- Income Tax

Principles PFRS for SMEs FULL PFRS

1. Scope
-all domestic and foreign taxes √ √
that are based on taxable
profits. √ √
-includes withholding taxes
that are payable by a subsidiary,
associate or joint venture on
distributions to the reporting entity.

2. Current Tax Liability √ √

3. Current Tax Asset ( Prepaid √ √

Income Tax)

4. Withholding tax on √ √
dividends

5. Kinds of Temporary
Differences:
5.1 Deferred Tax Asset √ √
-presentation (noncurrent
asset) √ √
-recognition: √ √
 deductible √ x
temporary
difference √ √
 carryover of net
operating loss √ √
 valuation
allowance √ √
5.2 Deferred Tax Liability
-presentation (noncurrent
liability) √ √
-recognition:
 taxable temporary
difference
 exception:
1. initial √ √*
recognition
of Goodwill
 resulting from
a business
combination
2. initial
recognition
of assets and
liabilities in a
transaction
that is not a
business
combination
and affects
neither
accounting
nor taxable
income
3. undistribute
d profit/
unremitted
earnings
from foreign
subsidiaries,
branches,
associates and
joint ventures
to the extent
that
investment is
essentially
permanent in
duration

note: *same prohibition applies, but

can be either domestic or foreign
investments

6. Measurement (future √ √
enacted tax rate)

7.Allocation for tax expense

- intraperiod tax allocation √ √
- interperiod tax allocation √ √

8. Offsetting**
- current tax asset and current √ √
tax liability √ √
- deferred tax asset and
 deferred tax liability

Note: **
 Conditions(SMEs):
Offsetting is allowed to
current and deferred tax
asset and liability if all are
met:
a. When the entity has a
legally enforceable right
to set off the amounts.
b. When the entity intends
either to settle on a net
basis or to realize the asset
and settle the liability
simultaneously.
 Conditions(FULL):
Offsetting is allowed to
deferred tax asset and
liability:
a. The deferred tax asset
and the deferred tax
liability relate to income
taxes levied by same tax
authority.
b. The entity has a legal
enforceable right to set off a current
tax asset against current tax liability.

Chapter 35: SMEs – Equity and Share –Based payment

From the book of Sir Valix:

1. The PFRS for SMEs and full PFRS are PRACTICALLY THE SAME with respect to the
recording of equity instruments, treasury share, compound financial instrument, dividends and
other related equity matters.

2. Share options
PFRS for SMEs
- must be measured at fair value on the date of grant
- the intrinsic value of share options is not mentioned as an alternative
FULL PFRS
- Shall be measured at fair value at the date of grant
- If the fair value of the share option cannot be measured reliably, the intrinsic
value of the share option is used