CFAS Reviewer
Stable Monetary Unit (Monetary Unit Assumption)
- A, L, Eq, In, Exp = peso in the Phil
- Purchasing power of peso is regarded as stable or
constant and that its instability is insignificant &
therefore ignored.
- To be useful, should be stated in Common
denominator (ex-dollar -covert to peso)
Relevance
- Capable (forecast future period) of making
difference in the decisions made by users. It has the
following:
Confirmatory Value (Feedback Value) - the
information can used in confirming previous
predictions.
Predictive Value – the information can be used to
make predictions.
*Both are interrelated.
PAS 1: General Purpose Financial Statement
- Those statements that cater to the common needs
of a wide range of primary (external) users
- Its purpose is to provide information about the
financial position, financial performance, and cash
flows of an entity that is useful to a wide range of
users in making economic decisions.
- Subject matter of Conceptual Framework and
PFRSs.
Statement of Profit or Loss
- Income less expenses, excluding the components of
OCI.
- The excess of income over expenses is profit, while
the deficiency is loss
- PAS 1 prohibits the presentation of extraordinary
items in the statement of profit or loss and other
comprehensive income or in the notes.
- May be presented:
(a) in a single statement of profit or loss and
other comprehensive income
(b) in two statements – an income statement
and a statement presenting comprehensive
income
Statement of Other Comprehensive Income
- comprises items of income and expense (including
reclassification adjustments) 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.
Components:
a. Changes in revaluation surplus
b. Remeasurements of the net defined benefit
liability (asset)
c. Gains and losses on investments designated or
measured at fair value through other
comprehensive income (FVOCI)
d. Gains and losses arising from translating the
financial statements of a foreign operation
e. Effective portion of gains and losses on
hedging instruments in a cash flow hedge
f. Changes in fair value of a financial liability
designated at fair value through profit or loss
(FVPL) that are attributable tom changes in
credit risk
g. Changes in the time value of option when the
option’s intrinsic value and time value are
separated and only the changes in the intrinsic
value is designated as the hedging instrument
h. Changes in the value of the forward elements
of forward contracts when separating the
forward element and spot element of a
forward contract and designating as the
hedging instrument only the changes in the
spot element, and changes in the value of the
foreign currency basis spread of a financial
instrument when excluding it from the
designation of that financial instrument as the
hedging instrument.
Statement of Retained Earnings
-
PAS 2: Inventory
Cost Formulas:
- First-In, First-Out
Under this formula, it is assumed that inventories
that were purchased or produced first are sold first,
and therefore unsold inventories at the end of the
 period are those most recently purchased or
produced.
Accordingly, cost of sales represents costs from
earlier purchases while the cost of ending inventory
represents costs from the most recent purchases.
- Last-In, First-Out
a method used to account for inventory, where the
most recently produced items are recorded as sold
first. Under LIFO, the cost of the most recent
products purchased (or produced) are the first to
be expensed as cost of goods sold (COGS) – which
means the lower cost of older products will be
reported as inventory.
Timeliness
- Info is timely if it is available to users in time to be
able to influence their decisions
PAS 7: Statement of Cash Flows
Operating Activities
- Affect profit or loss
- Primarily derived from the principal revenue-
producing activities of the entity.
- Usually include cash inflows and outflows in items
of income and expenses, or those that enter into
the determination of profit or loss (i.e., included in
the income statement)
Examples:
- Cash receipts from the sale of goods, rendering
services or other forms of income.
- Cash payments for purchases of goods and
services; for operating expenses, such as employee
benefits, insurance and the like, and payments or
refunds of income taxes.
- Cash receipts and payments from contracts held for
dealing or trading purposes.
- Trade payables, accrued expenses and other
operating liabilities
Special items included:
- Buying and selling held for trading securities or
inventory acquired for resale (whether FA and FL)
- Acquisition, rentals, subsequent sale, operating
liabilities
- Loan transactions of financial institutions (e.g.
banks)
Investing Activities
- Non-current assets and other investments
- Involve the acquisition and disposal of noncurrent
assets and other investments.
Examples:
- PPE, capital expenditure, investment property,
plant and equipment, investment property,
intangible assets and other noncurrent assets
- Collecting loans, acquiring and disposal investment
- Notes Receivable (payment) – umutang
- Acquisition and sale of equity or debt instruments
- Derivative assets and liabilities (other than those
that are held for trading or classified as financing
activities)
Financing Activities
- Affect the entity’s equity capital and borrowings
structure.
- Non-operating or non-trade liabilities
Examples:
- Issuing shares, notes, loans, bonds, mortgage
- Cash payments by lessee for reduction of the
outstanding liability reality to a lease
- Bank overdrafts that cannot be offset to cash
PAS 8: Changes in Accounting Estimates and Errors
- Many items in financial statements can only be
measured through estimation, because of
uncertainties inherent the business activities.
- Necessary to provide relevant information.
- Essential part of financial reporting and do not
undermine the reliability of financial reports.
- Involve judgments based on latest available
information.
- Result from new information or new developments
and, accordingly, are not correction of errors.
- Accounted for by prospective application –
recognizing the effects of the change in profit or
loss.
Examples:
a. NRV of inventories
b. Depreciation
c. Bad debts
d. Fair value of FA/L
e. Provisions
PAS 10: Events after Reporting Period  CR and LR are opposites. For ex, credit risk
includes the possibility that an entity cannot
- Those events favorable and unfavorable, that occur
collect on its receivables, while liquidity risk
between the end of reporting period and the date
includes possibility that an entity cannot pay its
when the FS are authorized for issue.
payables.
- Example: End of reporting period is December 31,
20x1, its financial statement is authorized for issue Market Risk
on March 31, 20x2. Events after the reporting
The risk the fair value or future cash flows of a financial
period are those occur within January 1, 20x2 to
instrument will fluctuate because of changes in market
March 31, 20x2.
prices
- Date of authorization of the FS -date when
management authorizes the FS for issue regardless Types
of whether such authorization is final or subject to
further approval. -Currency risk ( risk that FV or Future cash flows of a FI
will fluctuate bcz of forex rates changes
Two types:
- Interest rate risk( risk that FV or future cash flows of a
-Adjusting -provide evidence of conditions that existed financial instrument will fluctuate bcz of changes maket
at the end of the reporting period. interest rates.
-Non adjusting -indicative of conditions arose after the - other price risk( risk that FV or FC flows of FI bza of
reporting period. changes in market prices.
Dividends declared after reporting period are not
liability at the end of the reporting period bcz no
present oblige exists at the end of the reporting period)

Depreciation (PAS 16)

Systematic allocation of depreciable amount of an asset

over its useful life

-does not exist when the asset becomes idle or is retired

from active use.

PFRS 7:

Credit Risk

The risk that one party to a financial instrument will

cause a financial loss for the other party by failing to
discharge an obligation

Liquidity Risk

The risk that an entity will encounter difficulty in

meeting obligations associated with financial liabilities
that are settled by delivering cash or another financial
asset.