CFAS - Philippine Accounting Standards

AE14- Conceptual Framework and Accounting Standards
FOREWORD
The Conceptual Framework (or “Concepts Statements”) is a body of interrelated

objectives and fundamentals. The objectives identify the goals and purposes of financial
reporting and the fundamentals are the underlying concepts that help achieve those
objectives. Those concepts provide guidance in selecting transactions, events and
circumstances to be accounted for, how they should be recognized and measured, and
how they should be summarized and reported.
The framework provides a basic reasoning on which to consider the merits of

alternative solutions to complex financial accounting or reporting problems. Although it
does not provide all the answers, the framework narrows the range of alternative
solutions by eliminating some that are inconsistent with it. It thereby contributes to
greater efficiency and consistency in the standard-setting process by avoiding the
necessity of having to redebate fundamental issues such as “what is an asset?” time and
time again.
The framework further helps users of financial reporting information to better

understand that information and its limitations. It also provides a frame of reference for
understanding the resulting standards. That frame of reference is useful to preparers
who apply those standards and to auditors who examine the resulting reports, as well
as to students who study accounting and the faculty who teach it. Thus, this module is
created to simplify the learning students will be acquiring at the convenience of their
own home without sacrificing the quality of instructions.
BUKIDNON STATE UNIVERSITY ACCOUNTANCY DEPARTMENT

Philippine Accounting Standards (PAS)

-Adapted from the CPA Licensure Examination Syllabi/TOS
MODULE 2
Introduction
Accounting Standards are authoritative statements of how particular types of
transaction and other events should be reflected in financial statements. Accordingly,
compliance with accounting standards will normally be necessary for the fair
presentation of financial statements.
Accounting standards issued by the Accounting Standards Council (ASC) were
renamed to correspond better with the issuances of the IASC and IASB. Philippine
Accounting Standards (PASs) correspond to the adopted International Accounting
Standards (IASs). Philippine Financial Reporting Standards (PFRSs) correspond to the
adopted International Financial Reporting Standards (IFRSs). SFASs and SFASs/IASs
not superseded by revised IASs and new IFRSs will be re-issued as PASs. Previously,
standards issued by the ASC were designated as SFASs.
Course Learning Outcome

Apply the financial reporting standards relating to assets, liabilities, equity, and small
and medium-sized entities on theoretical problems and cases.
Topic Learning Outcome
At the end of this module, the students will be able to:

 Recognize assets, liabilities, equity, and small and medium-sized entities from
each other using applicable standards.
 Determine the presentation and disclosure requirements for certain assets,
liabilities, equity, and small and medium-sized entities.
 Analyze cases related to assets, liabilities, equity, and small and medium-sized
entities

TOPIC 1: PAS 1 Presentation of Financial Statements
Objective of PAS 1
PAS 1 prescribes the basis for presentation of general purpose financial statements to
improve comparability both with the entity's financial statements of previous periods
(intra-comparability) and with the financial statements of other entities (inter-
comparability).
Read:
http://www.picpa.com.ph/frsc.html?article=Philippine%20Financial%20Reporting%20Standards&page
=FRSC&main_menu=PFRSs
General purpose financial statements

 intended to serve users who do not have the authority to demand financial
reports tailored for their own needs
 cater to most of the common needs of a wide range of external users.
 the subject matter of the Conceptual Framework and the PFRSs.
Complete set of financial statements
*comparative information in respect of the preceding period; and additional

statement of financial position (required only when certain instances occur)

General Features
 *When an entity changes the end of its reporting period and presents financial
statements for a period longer or shorter than one year, an entity shall disclose
the following:
a. The period covered by the financial statements,
b. The reason for using a longer or shorter period, and
c. The fact that amounts presented in the financial statements are not entirely
comparable.
 **unless:

a. it is apparent that another presentation or classification would be more
appropriate following a significant change in the nature of the entity’s operations
or a review of its financial statements; or
b. a PFRS requires a change in presentation.
Additional Statement of Financial Position
An additional statement of financial position is presented as at the beginning of

the preceding period when an entity:
1. Applies an accounting policy retrospectively, or
2. Makes a retrospective restatement of items in its financial statements, or
3. reclassifies items in its financial statements.
…..and the effect of the event to the statement of financial position as at the
beginning of the preceding period is material.
Statement of financial position
A statement of financial position may be presented as either

Classified Unclassified (based on liquidity)
- distinctions between current and -Showing no distinction between

non-current assets and liabilities current and non-current items
Current Assets
An entity shall classify an asset as current when:

Current Liabilities
An entity shall classify a liability as current when:
Currently maturing long-term liabilities

General rule: Currently maturing long term liabilities are presented as current
liabilities. Exceptions:
1. Refinancing agreement is fully completed on or before the balance sheet date –
non-current liability
2. Refinancing agreement after the balance sheet date but before the financial
statements are authorized for issue – noncurrent liability if the entity expects, and
has the discretion, to refinance it on a long-term basis under an existing loan facility.
Breach of loan agreement
General rule: A liability that is payable on demand is a current liability.
Exception: It is presented as non-current liability if the lender provides the entity,
on or before the balance sheet date, a grace period ending at least 12 months after the
balance sheet date to rectify a breach of loan covenant.
Presentation of Deferred taxes
Deferred tax liabilities (assets) are presented as noncurrent items in a classified
statement of financial position, irrespective of their expected dates of reversal.
Minimum line items in the statement of financial position
a. Property, plant and equipment;
b. Investment property;
c. Intangible assets;
d. Financial assets (excluding amounts shown under (e), (h) and (i));
e. Investments accounted for using the equity method;
f. Biological assets;
g. Inventories;
h. Trade and other receivables;

i. Cash and cash equivalents;
j. Assets (or disposal groups) classified as held for sale in accordance with PFRS 5;
k. Trade and other payables;
l. Provisions;
m. Financial liabilities (excluding amounts shown under (k) and (l));
n. Liabilities and assets for current tax, as defined in PAS 12 Income Taxes;
o. Deferred tax liabilities and deferred tax assets, as defined in PAS 12;
p. Liabilities included in disposal groups classified as held for sale in accordance
with PFRS 5;
q. Non-controlling interests, presented within equity; and
r. Issued capital and reserves attributable to owners of the parent
Order/ Format of Presentation

PAS 1 does not prescribe the order or format in which an entity presents items.
Statement of Profit or Loss and Other Comprehensive Income

An entity shall present all items of income and expense recognized in a period:
Extraordinary items
PAS 1 prohibits the presentation of any items of income or expense as
extraordinary items in the statement(s) presenting profit or loss and other
comprehensive income or in the notes.
Other comprehensive income for the period

Note: OCI may be presented either (a) net of tax or (b) gross of tax.
Reclassification adjustments
Reclassification adjustments are amounts reclassified to profit or loss in the
current period that were recognized in other comprehensive income in the current or
previous periods.
Total comprehensive income
Total comprehensive income comprises all components of
1. Profit or loss; and
2. Other comprehensive income.
Presentation of Expenses
1. Nature of expense method
2. Function of expense method
If an entity classifies expenses by function, it shall disclose additional
information on the nature of expenses.
Disclosure of dividends
Dividends declared by an entity are disclosed either in the (a) notes or (b)
statement of changes in equity.
Order of presentation of disclosures in the Notes

WHAT HAVE I LEARNED SO FAR?

TOPIC # I
(ENABLING TASK )
Problem 1: Write “true” if the statement is correct. Write “false” if the statement is
wrong. Write your answers below.
1. 6.
2. 7.
3. 8.
4. 9
5. 10.
1. The application of PFRSs, with additional disclosure when necessary, is presumed to

result in financial statements that achieve a fair presentation.
2. According to PAS 1, an entity shall make an explicit and unreserved statement of
compliance with the PFRSs in the notes only if the entity complies with all the
requirements of PFRSs.
3. PAS 1 encourages, but does not require, the presentation of the preceding year’s
financial statements as comparative information to the current year’s financial
statements.
4. According to PAS 1, assets and liabilities or income and expenses are offset, unless
separate presentation is required or permitted by a PFRS.
5. According to PAS 1, PFRSs apply to financial statements as well as to other
information presented in an annual report, a regulatory filing, or another document.
6. According to PAS 1, the line item “cash and cash equivalents” should always be
presented first in the statement of financial position.
7. PAS 1 prescribes an order or format of presenting items in the financial statements.
8. An entity may omit the notes when presenting general purpose financial statements.
9. If profit or loss is P100 while other comprehensive income is P20, total
comprehensive income must be P130.
10. PAS 1 encourage, but does not require, the disclosure of an entity’s domicile and
legal form, its country of incorporation and the address of its registered office and a
description of the nature of its operations and its principal activities.

TOPIC 2: PAS 2 Inventories
Inventories are assets:

a. Held for sale in the ordinary course of
business (Finished Goods);
b. In the process of production for such sale
(Work In Process); or
c. In the form of materials or supplies to be
consumed in the production process or in the
rendering of services (Raw materials and
manufacturing supplies).
Read: https://icpa.ph/community/13-lesson-financial-accounting-and-reporting/178-inventories-pas-2
Financial Statement Presentation

All items that meet the definition of inventory are presented on the statement of
financial position as one line item under the caption “Inventories.” The breakdown of this line
item (as finished goods, WIP and Raw materials) is disclosed in the notes.
Inventories are normally presented in a classified statement of financial position as
current assets.
Measurement
Inventories are measured at the lower of cost and net realizable value (NRV). The cost of
inventories comprise all costs of purchase, costs of conversion and other costs incurred in
bringing the inventories to their present location and condition.
Net realizable value (NRV) is the estimated selling price in the ordinary course of
business less the estimated costs of completion and the estimated costs necessary to make the
sale.
Costs that are EXPENSED when incurred
1. Abnormal amounts of wasted materials, labor or other production costs.
2. Selling costs, for example, advertising and promotion costs and delivery expense or
freight out.
3. Administrative overheads that do not contribute to bringing inventories to their present
location and condition.
4. Storage costs, unless those costs are necessary in the production process before a further
production stage, (e.g., the storage costs of partly finished goods may be capitalized as cost
of inventory, but the storage costs of completed finished goods are expensed).
Cost Formulas
1. Specific identification - shall be used for inventories that are not ordinarily
interchangeable (i.e., used for inventories that are unique). Cost of sales is the cost of the
specific inventory that was sold.

2. FIFO – cost of sales is based on the cost of inventories that were purchased first.
Consequently, ending inventory represents the cost of the latest purchases.
3. Weighted Average Cost – cost of sales is based on the average cost of all inventories
purchased during the period.
 Wtd. Ave. Cost = (TGAS in pesos ÷ TGAS in units)
Write down of inventories
Inventories are usually written down to net realizable value on an item by item basis. If
the cost of an inventory exceeds its NRV, the inventory is written down to NRV, the lower
amount. The excess of cost over NRV represents the amount of write-down.
Reversal of write-downs
The amount of reversal to be recognized should not exceed the amount of the original
write-down previously recognized.
Recognition as an expense
The carrying amount of an inventory that is sold is charged as expense (i.e., cost of sales)
in the period in which the related revenue is recognized. Likewise, the write-down of
inventories to NRV and all losses of inventories are recognized as expense in the period the
write-down or loss occurs.
TOPIC 3: PAS 7 Statement of Cash Flows
Statement of Cash Flows

 provides information about the
sources and utilization (i.e., historical
changes) of cash and cash equivalents
during the period
 presents cash flows according to the
following classifications:
1. Operating activities
2. Investing activities
3. Financing activities
Read: https://icpa.ph/community/13-lesson-financial-accounting-and-reporting/179-cash-flow-
statements-pas-7
Activities
1. Operating activities include transactions that enter into the determination of profit or
loss. These transactions normally affect income statement accounts.
2. Investing activities include transactions that affect long-term assets and other non-
operating assets.

3. Financing activities include transactions that affect equity and non-operating liabilities.
Examples of cash flows from Operating Activities
a. cash receipts from the sale of goods, rendering of services, or other forms of income
b. cash payments for purchases of goods and services
c. cash payments for operating expenses, such as employee benefits, insurance, and the like,
and payments or refunds of income taxes
d. cash receipts and payments from contracts held for dealing or trading purposes
Examples of cash flows from Investing Activities
a. cash receipts and cash payments in the acquisition and disposal of property, plant and
equipment, investment property, intangible assets and other noncurrent assets
b. cash receipts and cash payments in the acquisition and sale of equity or debt instruments
of other entities (other than those that are classified as cash equivalents or held for trading)
c. cash receipts and cash payments on derivative assets and liabilities (other than those that
are held for trading or classified as financing activities)
d. loans to other parties and collections thereof (other than loans made by a financial
institution)
Examples of cash flows from Financing Activities
a. cash receipts from issuing shares or other equity instruments and cash payments to
redeem them
b. cash receipts from issuing notes, loans, bonds and mortgage payable and other short-
term or long-term borrowings, and their repayments
c. cash payments by a lessee for the reduction of the outstanding liability relating to a lease.
Core principle
On Interests and Dividends
Reporting cash flows from operating activities
Direct Method Indirect Method
-shows each major class of gross cash -adjusts accrual basis profit or loss for
receipts and gross cash payments the effects of changes in operating
assets and liabilities and effects of non-
cash items

TOPIC 4: PAS 8 Accounting Policies, Changes in Accounting Estimates Errors
Objective and Scope

PAS 8 prescribes the criteria for selecting, applying, and changing accounting policies
and the accounting and disclosure of changes in accounting policies, changes in accounting
estimates and correction of prior period errors.
Read: https://icpa.ph/community/13-lesson-financial-accounting-and-reporting/180-net-profit-or-loss-
for-the-period-fundamental-errors-and-changes-in-accounting-policies-pas-8
Accounting Policies
Accounting policies are “the specific principles, bases, conventions, rules and practices
applied by an entity in preparing and presenting financial statements.” (PAS 8.5)
Accounting policies are the relevant PFRSs adopted by an entity in preparing and
presenting its financial statements
PFRSs
Philippine Financial Reporting Standards (PFRSs) are Standards and Interpretations
adopted by the Financial Reporting Standards Council (FRSC). They comprise the following:
1. Philippine Financial Reporting Standards (PFRSs);
2. Philippine Accounting Standards (PASs); and
3. Interpretations

 When it is difficult to distinguish a change in accounting policy from a change in accounting
estimate, the change is treated as a change in an accounting estimate.
An entity shall change an accounting policy only if the change:
1. is required by a PFRS; or
2. results to a more relevant and reliable information about an entity’s financial position,
performance, and cash flows.
Examples
Changes in Accounting Policy Changes in Accounting Estimate
1. Change from FIFO cost formula for 1. Change in depreciation or amortization

inventories to the Average cost formula methods
2. Change in the method of recognizing revenue 2. Change in estimated useful lives of

from long-term construction contracts depreciable assets
3. Change to a new policy resulting from the 3. Change in estimated residual values of
requirement of a new PFRS depreciable assets
4. Change in financial reporting framework, 4. Change in required allowances for

such as from PFRS for SMEs to full PFRSs impairment losses and uncollectible accounts
5. Initial adoption of the revaluation model for 5. Changes in fair values less cost to sell of non-
property, plant, and equipment and intangible current assets held for sale and biological
assets assets
6. Change from the cost model to the fair value

model of measuring investment property
7. Change in business model for classifying

financial assets resulting to reclassification
between financial asset categories
Errors
Errors include the effects of:
1. Mathematical mistakes
2. Mistakes in applying accounting policies
3. Oversights or misinterpretations of facts; and
4. Fraud


TOPIC # II, III, and IV
(ENABLING TASK )
Short Essay. PAS 2- Inventories

Prepare brief notes for a company board meeting to answer the following points for the
directors:
1. Explain the term ‘inventories’ as defined by IAS 2, Inventories.
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
2. State which costs should be included when measuring the value of inventories
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
3. State which costs should NOT be included when measuring the value of inventories.
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
True/False. PAS 7- Statement of Cash Flows
Write “true” if the statement is correct. Write “false” if the statement is wrong. Write
your answers below.
4. 5. 6. 7. 8.
4. Cash flows are presented in the statement of cash flows into four activities.
5. Non-financial institutions have the option of classifying interest income received as
either investing activities or operating activities.
6. Cash flows relating to income and expenses are normally classified as investing
activities in the statement of cash flows.
7. Only transactions that have affected cash and cash equivalents are included in the
statement of cash flows. Non-cash transactions are excluded and disclosed only.
8. According to PAS 7, the indirect method of presenting cash flows relating to operating
activities shows each major class of gross cash receipts and gross cash payments.

Problems Solving. PAS 8- Accounting Policies, Changes in Estimates and Errors
The bookkeeper of Latsch Company, which has an accounting year ending December 31,
made the following errors:
 A ₱1,000 collection from a customer was received on December 29, 20x0, but not
recorded until the date of its deposit in the bank, January 4, 20x1.
 A supplier's ₱1,600 invoice for inventory items received in December 20x0 was not
recorded until January 20x1. (Inventories at December 31, 20x0 and 20x1, were
stated correctly, based on physical count.)
 Depreciation for 20x0 was understated by ₱900. In September 20x0, a ₱200 invoice
for office supplies was charged to the Utilities Expense account. Office supplies are
expensed as purchased.
 December 31, 20x0, sales on account of ₱3,000 were recorded in January 20x1.
 Assume that no other errors have occurred and that no correcting entries have been
made. Ignore income taxes.
9. Assume the same facts as above. Working capital at December 31, 20x0, was __________
10. Assume the same facts as above. Total assets at December 31, 20x0, were ____________
Show your solutions:

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TOPIC 5: PAS 10 EVENTS AFTER THE REPORTING PERIOD
Events after the Reporting Period

Events after the reporting period are “those events, favorable or unfavorable, that occur
between the end of the reporting period and the date that the financial statements are
authorized for issue.” (PAS 10)
Read: https://icpa.ph/community/13-lesson-financial-accounting-and-reporting/181-events-after-the-
balance-sheet-date-pas-10
Two Types of Events After the Reporting Period
Date of authorization of the financial statements

This date is the date when management authorizes the financial statements for issue
regardless of whether such authorization for issue is for further approval or for final issuance to
users.
Examples
Adjusting Events Non-Adjusting Events
1. The settlement after the reporting period of a 1. Changes in fair values, foreign exchange rates,
court case that confirms that the entity has a interest rates or market prices after the
present obligation at the end of reporting period reporting period
2. The receipt of information after the reporting 2. Casualty losses (e.g., fire, storm, or
period indicating that an asset was impaired at earthquake) occurring after the reporting period
the end of reporting period* but before the financial statements were
authorized for issue
3. The determination after the reporting period 3. Litigation arising solely from events occurring
of the cost of asset purchased, or the proceeds after the reporting period
from asset sold, before the end of reporting
period
4. The discovery of fraud or errors that indicate 4. Major ordinary share transactions and
that the financial statements are incorrect potential ordinary share transactions after the
reporting period
5. Major business combination after the

reporting period
6. Announcing a plan to discontinue an operation

after the reporting period
7. Declaration of dividends after the reporting

period

* For example:
a. The bankruptcy of a customer that occurs after the reporting period may indicate
that the carrying amount of a trade receivable at the end of reporting period is impaired.
b. The sale of inventories after the reporting period may give evidence to their net
realizable value at the end of reporting period
Disclosures
TOPIC 6: PAS 12 Income Taxes
Read: https://icpa.ph/community/13-lesson-
financial-accounting-and-reporting/182-
income-taxes-pas-12
Accounting Profit vs. Taxable Profit
 The varying treatments of economic activities between the PFRSs and tax laws result to
permanent and temporary differences.
Examples

*Permanent Differences **Temporary Differences
1. Interest income on government bonds 1. ***Taxable temporary differences –

and treasury bills arise, for example, when financial income
is greater than taxable income or the
carrying amount of an asset is greater than
its tax base
2. Interest income on bank deposits 2. Deductible temporary differences arise

in case of the opposites of the foregoing
3. Dividend income
4. Fines, surcharges, and penalties arising

from violation of law
5. Life insurance premium on employees

where the entity is the irrevocable
beneficiary
*Permanent differences are those that do not have future tax consequences.
**Temporary differences are those that have future tax consequences.
***Taxable temporary differences result to deferred tax liabilities while deductible temporary
differences result to deferred tax assets.
Deferred taxes
 If the increase in deferred tax liability exceeds the increase in deferred tax asset, the
difference is deferred tax expense. If it is the opposite, the difference is deferred tax income
or benefit.
 A deferred tax asset is recognized only to the extent that it is realizable.
 Deferred taxes are measured using enacted or substantially enacted tax rates that are
applicable to the periods of their expected reversals.
 Deferred tax assets and liabilities are not discounted.
 Deferred tax asset and liabilities are presented as non-current.
TOPIC 7: PAS 16 Property, Plant and Equipment
Read:
https://www.iasplus.com/en/standards/ias/ias16

Characteristics of PPE
a. Tangible assets – items of PPE have physical substance
b. Used in normal operations – items of PPE are used in the production or supply of goods
or services, for rental, or for administrative purposes
c. Long-term in nature – items of PPE are expected to be used from more than a year
Examples of items of PPE
a. Land used in business
b. Land held for future plant site
c. Building used in business
d. Equipment used in the production of goods
e. Equipment held for environmental and safety reasons
f. Equipment held for rentals
g. Major spare parts and long-lived stand-by equipment
h. Furniture and fixture
i. Bearer plants
Recognition
The cost of an item of property, plant and equipment shall be recognized as an asset only
if:
a. it is probable that future economic benefits associated with the item will flow to the
entity; and
b. the cost of the item can be measured reliably.
Initial measurement
An item of PPE is initially measured at its cost.
Elements of Cost
1. Purchase price, including non-refundable purchase taxes, after deducting trade discounts
and rebates.
2. Costs directly attributable to bringing the asset to the location and condition necessary
for it to be capable of operating in the manner intended by the management.
3. Present value of decommissioning and restoration costs to the extent that they are
recognized as obligation
Examples of directly attributable costs
a. Costs of employee benefits arising directly from the construction or acquisition of PPE;
b. Costs of site preparation;
c. Initial delivery and handling costs (e.g., freight costs);
d. Installation and assembly costs;

e. Testing costs, net of disposal proceeds of samples generated during testing; and
f. Professional fees.
Cessation of capitalizing costs to PPE
Recognition of costs in the carrying amount of an item of PPE ceases when the item is in
the location and condition necessary for it to be capable of operating in the manner intended by
management.
Measurement of Cost
The cost of an item of PPE is the cash price equivalent at the recognition date. If payment
is deferred beyond normal credit terms, the difference between the cash price equivalent and
the total payment is recognized as interest over the period of credit unless such interest is
capitalized in accordance with PAS 23 Borrowing Costs.
Acquisition through exchange
If the exchange has commercial substance, the asset received from the exchange is
measured using the following order of priority:
a. Fair value of asset Given up
b. Fair value of asset Received
c. Carrying amount of asset Given up
 If the exchange lacks commercial substance, the asset received from the exchange is
measured at (c) above.
Subsequent measurement
Subsequent to initial recognition, an entity shall choose either:
(a) the cost model or
(b) the revaluation model
 as its accounting policy and shall apply that policy to an entire class of PPE.
Cost Model
After recognition, an item of PPE is measured at its cost less any accumulated
depreciation and any accumulated impairment losses.
Depreciation
Depreciation is the systematic allocation of the depreciable amount of an asset over its
estimated useful life.
When computing for depreciation, each part of an item of PPE with a cost that is
significant in relation to the total cost of the item shall be depreciated separately.
Depreciation begins when the asset is available for use, i.e., when it is in the location and
condition necessary for it to be capable of operating in the manner intended by management.
Depreciation ceases when the asset is derecognized or when it is classified as “held for
sale” under PFRS 5, whichever comes earlier.
Selection of depreciation method

There are various methods of depreciation. The entity shall select the method that most
closely reflects the expected pattern of consumption of the future economic benefits embodied
in the asset.
However, a depreciation method that is based on revenue that is generated by an
activity that includes the use of an asset is not appropriate.
The Straight-line method of Depreciation
 Straight line method – depreciation is recognized evenly over the life of the asset by
dividing the depreciable amount by the estimated useful life.
Depreciation = (Historical cost – Residual value) ÷ Estimated useful life
Changes in depreciation method, useful life, and residual value
A change in depreciation method, useful life, or residual value is a change in accounting
estimate accounted for prospectively.
Prospective accounting means the change affects only the current period and/or future
periods. The change does not affect past periods.
Revaluation Model
After recognition as an asset, an item of PPE whose fair value can be measured reliably
shall be carried at a revalued amount, being its fair value at the date of the revaluation less any
subsequent accumulated depreciation and subsequent accumulated impairment losses.
Revaluation surplus
Fair value* xx
Less: Carrying amount (xx)
Revaluation surplus – gross of tax xx
 The fair value is determined using an appropriate valuation technique, taking into
account the principles set forth under PFRS 13.
Frequency of revaluation
For items with significant and volatile changes in fair value, annual revaluation is
necessary. For items with insignificant changes in fair value, revaluation may be made every 3
or 5 years.
Revaluation applied to all assets in a class
If an item of PPE is revalued, the entire class of PPE to which that asset belongs shall be
revalued.
The items within a class of PPE are revalued simultaneously to avoid selective
revaluation of assets and the reporting of amounts in the financial statements that are a mixture
of costs and values as at different dates.
Subsequent accounting for revaluation surplus
Revaluation is initially recognized in other comprehensive income unless the

revaluation represents impairment loss or reversal of impairment loss, in which case it is
recognized in profit or loss.
Subsequently, the revaluation surplus is accounted for as follows:
1. If the revalued asset is non-depreciable, the revaluation surplus accumulated in equity is
transferred directly to retained earnings when the asset is derecognized.

2. If the revalued asset is depreciable, a portion of the revaluation surplus may be
transferred periodically to retained earnings as the asset is being used.
Derecognition
The carrying amount of an item or PPE shall be derecognized:
a. on disposal; or
b. when no future economic benefits are expected from its use or disposal

TOPIC # V, VI and VII
(ENABLING TASK AFTER EVERY INPUT/NOTES)
Short Problem.
PAS 10- EVENTS AFTER THE REPORTING PERIOD
Instruction: State whether the following events are adjusting or non-adjusting events after the
reporting period. All events took place after the end of the reporting period but before the
financial statements are authorized for issue. Write your answers below:
1. 6.
2. 7.
3. 8.
4. 9.
5. 10.
1. The entity guarantees the debt of another entity.

2. Settlement of a contingent event at an amount below the provision recognized as at the end of
the reporting period.
3. Major acquisition of a competitor company.
4. The actual sale of noncurrent assets held for sale provides information on the asset’s fair
value less costs to sell as at the end of the reporting period.
5. The resolution of a contingent event which provides evidence of the entity’s obligation to pay
bonus to a key management personnel for the services he has rendered during the reporting
period.
6. The conditions under PFRS 5 Non-current Assets Held for Sale and Discontinued Operations
for classifying a noncurrent asset or disposal group as held for sale are met.
7. Change in income tax rate.
8. The discovery that the accumulated patent amortization is understated.
9. A board resolution to change the depreciation method used for buildings.
10. Adoption and announcing of a formal plant to close a business segment.

PAS12- INCOME TAXES

Instruction: Identify what is required. Write your answer below:
11. 12. 13. 14. 15.
11. These are differences that have future tax consequences.

12. This type of difference will give rise to deferred tax liability.
13. Deferred tax assets and deferred tax liabilities do not alter the tax to be paid in the current
period. However, they cause tax payments to either increase or decrease when they reverse in a
future period. The reversal that will cause an increase in tax payment ______
14. During the period, deferred tax assets increase by ₱400 while deferred tax liabilities
increase by ₱500. The net change of ₱100 is a _____
15. At the end of the period, Entity A has taxable temporary difference of ₱100,000. Entity A’s
income tax rate is 30%. Entity A’s statement of financial position would report _____ (indicate if
asset or liability)
PAS 16- PROPERTY, PLANT AND EQUIPMENT

Use the following information for the next five questions:
Entity A acquires equipment on January 1, 20x1. Information on costs is as follows:
Purchase price, gross of trade discount 1,000,000
Trade discount available 10,000
Freight costs 20,000
Testing costs 30,000
Net disposal proceeds of samples generated
during testing 5,000
Present value of estimated costs of dismantling the
equipment at the end of its useful life 6,209
Show your solution:

16. How much is the initial cost of the equipment?
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17. The equipment has an estimated useful life of 10 years and a residual value of ₱200,000.
Entity A uses the straight line method of depreciation. How much is the carrying amount of the
equipment on December 31, 20x3?
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18. On December 31, 20x3, Entity A revalues the equipment at a fair value of ₱820,000. There is
no change in the residual value and the remaining useful life of the asset. How much is the
revaluation surplus on December 31, 20x3?
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19. How much is the depreciation expense in 20x4?
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20. Entity A sells the equipment for ₱870,000 on January 1, 20x5. Entity A incurs selling costs of
₱20,000 on the sale. How much is the gain (loss) on the sale?
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CPA Mock Board Examination

(MAIN TASK)
Multiple Choice. MARK FULLY with PENCIL No. 2. the letter of your choice on the
answer sheet provided. Make the mark DARK but do not use too much pressure.
ERASURES ARE STRICTLY NOT ALLOWED.

1. Accounting has been given various definitions, which of the following is not one of those
definitions?
a. Accounting is a service activity. Its function is to provide quantitative information, primarily
financial in nature, about economic entities that is intended to be useful in making economic
decisions.
b. Accounting is the art of recording, classifying, and summarizing in a significant manner and
in terms of money, transactions and events which are, in part of at least, of a financial
character and interpreting the results thereof.
c. Accounting is a systematic process of objectively obtaining and evaluating evidence
regarding assertions about economic actions and events to ascertain the degree of
correspondence between these assertions and established criteria and communicating the
results to interested users.
d. Accounting is the process of identifying, measuring, and communicating economic
information to permit informed judgment and decisions by users of information.
2. Which of the following statements is true?

a. The basic purpose of accounting is to provide information about economic activities
intended to be useful in making economic decisions.
b. All events and transactions of an entity are recognized in the books of accounts.
c. General purpose financial statements are those statements that cater to the common and
specific needs of a wide range of external users.
d. The accounting process of assigning numbers, commonly in monetary terms, to the
economic transactions and events is referred to as classifying.
3. The accounting standards used in the Philippines are adapted from the standards issued by the
a. Federal Accounting Standards Board (FASB).
b. International Accounting Standards Board (IASB).
c. Philippine Institute of Certified Public Accountants (PICPA).
d. Democratic People's Republic of Korea Accounting Standards Committee (DPKRASC).
4. Which of the following statements is incorrect regarding the basic accounting concepts?
a. One of ABC Co.’s delivery trucks was involved in an accident. Although no lawsuits have yet
been filed against ABC, ABC recognized a liability for the probable loss on the event. This is
an application of the prudence or conservatism concept.
b. Under the consistency concept, the financial statements should be prepared on the basis of
accounting principles which are followed consistently.
c. Under the entity theory, the business is viewed as a separate entity. Therefore, the personal
transactions of the business owners are not recorded in the business’ accounting records.
d. The time period concept means that financial statements are prepared only at the end of the
life of a business.
5. Entity A appropriates ₱1M to fund employee benefits for the last quarter of the following year.
Entity A deposits the ₱1M fund in a payroll account. This economic activity is most appropriately
referred to as
a. production. b. savings. c. exchange. d. investment.
6. It is the branch of accounting that focuses on the preparation of general purpose financial
statements.
a. Financial accounting c. All-purpose Accounting
b. General Accounting d. All-around accounting
7. These are events that do not involve an external party.

a. external events b. nonreciprocal c. internal events d. special event

8. Entity A computes for its profit or loss periodically instead of waiting until the end of the life of
the business before doing so. This is an application of which of the following accounting concepts?
a. historical cost c. accrual basis
b. stable monetary unit d. time period or reporting period
9. This refers to the use of caution in the exercise of judgments needed in making estimates
required under conditions of uncertainty, such that assets or income are not overstated and
liabilities or expenses are not understated.
a. faithful representation b. prudence c. consistency d. relevance
10. The bottom part of each of Entity A’s financial statements states the following “This statement
should be read in conjunction with the accompanying notes.” This is most likely an application of
which of the following accounting concepts?
a. articulation b. consistency c. accrual basis d. time period
11. Which of the following events is considered as an internal event?

a. sale of inventory on account d. conversion of raw materials into finished goods
b. provision of capital by owners e. payment of liabilities
c. borrowing of money
12. Which of the following events is considered as an external event?

a. Production d. provision of capital by owners
b. payment of taxes e. b, c and d
c. gifts and charitable contributions
13. Financial statements are said to be a mixture of fact and opinion. Which of the following items is
factual?
a. cost of goods sold c. retained earnings
b. discount on capital stock d. patent amortization expense
14. This concept defines the area of interest of the accountant. It determines which transactions are
recognized in the books of accounts and which are not.
a. Articulation b. Matching c. Separate entity d. Full disclosure
15. A CPA employed as an accountant in a government agency is considered to be in

a. private practice. b. public practice. c. academe. d. service.
16. Which of the following statements is correct?

I. Accounting provides qualitative information, financial information, and quantitative
information.
II. Qualitative information is found in the notes to the financial statements only.
III. Accounting is considered an art because it is supported by an organized body of knowledge
IV. Accounting is considered a science because it involves the exercise of skill and judgment.
V. Measurement is the process of assigning numbers to objects such inventories or plant assets
and to events such as purchases or sales.
VI. All quantitative information is also financial in nature.
VII. The accounting process of assigning peso amounts or numbers to relevant objects and
events is called identification.
a. I and V b. I, II, VI and V c. I, II, III, IV and V d. II, VI and V
17. Which of the following statements about the Norwalk Agreement is correct?
a. The Norwalk Agreement requires all domestic companies in the U.S. to prepare financial
statements in accordance with the IFRSs.

b. The Norwalk Agreement is a short-term convergence between the FASB and the IASB which
has long-time been abolished.
c. The Norwalk Agreement is a convergence between the FASB and the IASB to make their
existing financial reporting standards compatible and coordinate their future work
programs to ensure that once achieved, compatibility is maintained.
d. The Norwalk Agreement does not affect the financial reporting standards in the Philippines.
18. The process of identifying, measuring, analyzing, and communicating financial information
needed by management to plan, evaluate, and control an organization’s operations is called
a. financial accounting. c. managerial accounting.
b. tax accounting. d. auditing.
19. The PFRSs consist of all of the following except

a. PFRSs. b. PASs. c. Interpretations. d. Conceptual Framework.
20. It is the official accounting standard setting body in the Philippines. It is composed of a
chairperson and 14 members.
a. Financial Reporting Standards Committee (FRSC)
b. Financial Reporting Standards Council (FRSC)
c. Accounting Standards Committee (ASC)
d. Accounting Standards Council (ASC)
21. Financial reporting standards continuously change primarily in response to

a. users’ needs. c. government regulations.
b. political influence. d. changes in social environments.
22. Accounting is often called the "language of business" because

a. it is easy to understand.
b. it is fundamental to the communication of financial information.
c. all business owners have a good understanding of accounting principles.
d. accountants in many companies share financial information.
23. You are the accountant of ABC Co. During the period, your company purchased staplers worth
₱1,500. Although the staplers have an estimated useful life of 10 years, you have charged their
cost as expense. Which of the following is most likely to be true?
a. You are applying the concept of matching.
b. You are applying the concepts of materiality and cost-benefit consideration.
c. You are applying the concept of verifiability.
d. You are just lazy to compute for the periodic depreciation. 
24. All of the following statements incorrectly refer to the concepts in the Conceptual Framework
except
a. The Conceptual Framework is concerned with all-purpose financial statements.
b. Financial statements are prepared and presented at least annually and are directed toward
both the common and specific information needs of a wide range of users.
c. The objective of general purpose financial statements is similar to the objective of general
purpose financial reporting.
d. The financial statements prepared by a reporting entity comprising a parent and its
subsidiaries are referred to as ‘combined financial statements’.
25. What is the authoritative status of the Conceptual Framework?

a. It has the highest level of authority. In case of a conflict between the Conceptual Framework
and a Standard, the Conceptual Framework overrides that Standard.

b. If there is a Standard that specifically applies to a transaction, that Standard overrides the
Conceptual Framework. In the absence of such a Standard, the requirement of the
Conceptual Framework should be followed.
c. If there is a Standard that applies to a transaction, that Standard overrides the Conceptual
Framework. In the absence of such a Standard, the entity’s management should consider the
applicability of the Conceptual Framework in developing and applying an accounting policy
that will result in useful information.
d. The Conceptual Framework applies only to the IASB when developing or amending
Standards. A reporting entity should never use the Conceptual Framework.
26. The foundation of the Conceptual Framework is formed from

a. the qualitative characteristics that makes information useful to users.
b. the objective of general purpose financial reporting.
c. the concept of reporting entity.
d. the principles and objectives of presentation and disclosure of financial information.
27. What is the objective of general purpose financial statements according to the Conceptual
Framework?
a. To provide information about the financial position, financial performance, and changes in
financial position of an entity that is useful to primary users in making economic decisions.
b. To prepare and present a balance sheet, an income statement, a cash flow statement, and a
statement of changes in equity.
c. To prepare and present comparable, relevant, reliable, and understandable information for
investors and creditors.
d. To prepare financial statements in accordance with all applicable Standards and
Interpretations.
28. The primary users of financial statements under the Conceptual Framework include
I. Existing and potential investors
II. Employees
III. Lenders and other creditors
IV. Suppliers and other trade creditors
V. Customers
VI. Governments and their agencies
VII. Public
VIII. Professional accountants, including auditors
a. I and III b. I, II, III, IV, V, VI, VII c. I, II, III, IV, V, VI d. all of these
29. The Conceptual Framework broadly classifies the qualitative characteristics into
a. primary and secondary qualitative characteristics.
b. major and minor qualitative characteristics.
c. fundamental and enhancing qualitative characteristics.
d. cold and hot qualitative characteristics.
30. Identify the fundamental qualitative characteristics under the Conceptual Framework.
I. Relevance
II. Reliability
III. Faithful representation
IV. Comparability
V. Verifiability
VI. Timeliness
VII. Understandability
a. I and II b. I and III c. I, II, III, IV, V and VI d. IV, V, VI and VII

31. Identify the qualitative characteristics that enhance the usefulness of financial information.
I. Relevance
II. Reliability
III. Faithful representation
IV. Comparability
V. Verifiability
VI. Timeliness
VII. Understandability
a. I and II b. I and III c. II, III, IV, V and VII d. IV, V, VI and VII
32. Which of the following are considered aspects of the qualitative characteristic of relevance
under the Conceptual Framework?
I. Predictive value
II. Confirmatory value
III. Timeliness
IV. Materiality
a. I and II b. I, II and III c. I, II and IV d. I, II, III and IV
33. Under this qualitative characteristic, users are assumed to have a reasonable knowledge of
business activities and willingness to study the information with reasonable diligence.
a. Relevance c. Understandability
b. Faithful representation d. Comparability
34. Which of the following statements is incorrect concerning materiality?

a. Materiality can be assessed quantitatively or qualitatively
b. There are no specific materiality thresholds provided under the PFRSs
c. Materiality is a matter of judgment
d. Materiality is a quantitative matter. It should never be assessed qualitatively.
35. The elements of faithful representation do not include

a. comparability. B. neutrality. C. completeness. D. free from error.
36. The ability through consensus among measurers to ensure that information represents what it
purports to represent is an example of the concept of
a. relevance. B. comparability. C. verifiability. D. feedback value.
37. According to the Conceptual Framework, the pervasive constraint on the information that can be
provided by financial reporting is
a. materiality. B. historical. C. cost-benefit. D. going concern.
38. The element that is related to the measurement of an entity’s financial performance is
a. income. B. expenses. C. a and b d. neither a nor b
39. According to the revised Conceptual Framework, an item is recognized if

a. it meets the definition of an asset, liability, equity, income or expense.
b. recognizing it would provide useful information.
c. it is probable that the item will result to an inflow or outflow of economic benefits and its
cost can be measured reliably.
d. a and b
40. Which of the following may result to an expense?

a. Increase in asset c. Increase in liability

b. Decrease in liability d. Distribution to holders of equity claims
41. The Conceptual Framework uses the term “economic resources” to refer to
a. assets. B. equity. C. liabilities. D. income.
42. Which of the following is incorrect regarding the use of the term ‘reporting entity’ under the
Conceptual Framework?
a. A reporting entity one that is required, or chooses, to prepare financial statements.
b. A reporting entity must be a legal entity.
c. A reporting entity can be a parent and its subsidiaries viewed as a single entity.
d. All of these are correct.
43. The cost of inventory is recognized as expense

a. immediately. C. by systematic allocation.
b. using the matching concept. D. any of these as a matter of accounting policy choice
44. “I say red; you say green.” The information lacks which of the following qualitative
characteristics?
a. Relevance b. Verifiability c. Timeliness d. Colorfulness
45. Which of the following is not one of the decisions that primary users make?
a. deciding on how to run the day-to-day operations of the entity
b. deciding on whether to hold or sell investment in stocks
c. deciding on whether to buy investment in stocks
d. deciding on whether to extend loan to the reporting entity
46. Entity A is making a materiality judgment. Entity A considers an item to be material, and
therefore included in the financial statements, if it pertains to a related party transaction. What
type of materiality assessment is Entity A using?
a. Quantitative b. Qualitative c. Faithful representation d. Relevance
47. According to the Conceptual Framework, the needs of the primary users that are met by financial
statements are
a. all of their needs.
b. all of their common needs only.
c. majority of their common needs only.
d. substantially a majority of their common and specific needs only.
48. The term ‘liquidity’, as used in relation to the assessment of an entity’s financial position, refers
to
a. the entity’s ability to pay its short-term obligations.
b. the entity’s ability to pay its long-term obligations.
c. the entity’s ability to collect its current receivables.
d. the entity’s ability to flow like water.
49. The measurement bases described under the Conceptual Framework are least applicable to the
measurement of
a. assets. B. liabilities. C. equity. D. income.
50. Information on the utilization of economic resources is most useful when assessing an entity’s
a. management stewardship.
b. liquidity and solvency.
c. financial position and financial performance.
d. financial strengths and weaknesses, including the entity’s needs for additional financing.

51. This refers to the comparability of financial statements of the same entity but in different
periods.
a. Inter-comparability c. Intra-comparability
b. Extra-comparability d. Intro-comparability
52. Which of the following financial statements would not be dated as covering a certain reporting
period?
a. Statement of financial position
b. Statement of profit or loss and other comprehensive income
c. Statement of cash flows
d. Statement of changes in equity
53. Comprehensive income (or total comprehensive income) includes

a. Profit or loss d. a and b
b. Other comprehensive income e. All of these
c. Transactions with owners
54. What is the purpose of reporting comprehensive income?

a. To report changes in equity due to transactions with owners.
b. To report a measure of the overall financial performance of an entity.
c. To replace profit with a better measure.
d. To combine income from continuing operations with income from discontinued operations
and extraordinary items.
55. The information provided by financial reporting pertains to

a. individual business entities and the economy as a whole, rather than to industries or to
members of society as consumers
b. individual business entities, industries and the economy as a whole, rather than to members
of society as consumers
c. individual reporting entities, rather than to industries, the economy as a whole or members
of society as consumers
d. individual business entities and industries, rather than to the economy as a whole or to
members of society as consumers
56. Which of the following statements is correct when an entity departs from a provision of a PFRS?
a. The entity’s financial statements would be grossly incorrect; therefore, PAS 1 does not allow
such a departure.
b. PAS 1 permits such a departure if the relevant regulatory framework requires, or otherwise
does not prohibit, such a departure.
c. PAS 1 requires certain disclosures when an entity departs from a provision of a PFRS.
d. b and c
57. Which of the following statements is correct regarding the classification of financial liabilities as
current or noncurrent in accordance with PAS 1?
a. Currently maturing obligations are presented as current liabilities even if their original term
is longer than one year and even if a refinancing agreement is completed after the end of the
reporting period but before the financial statements are authorized for issue.
b. Currently maturing obligations are presented as noncurrent liabilities only if their original
term is longer than one year.
c. Currently maturing obligations are presented as noncurrent liabilities only if a refinancing
agreement is completed after the end of the reporting period but before the financial
statements are authorized for issue.

d. Currently maturing obligations are presented as noncurrent liabilities if a refinancing
agreement is completed after the financial statements are authorized for issue.
58. According to PAS 1, the judgments and estimates embodied in the financial statements, for
example, materiality judgments, assessments of uncertainty and risk, and the like, are the
responsibility of the entity’s
a. management. B. accountant. C. auditor. D. janitor.
59. Which of the following is not a disclosure requirement of PAS 1?

a. The financial effect of a departure when an entity departs from a PFRS requirement.
b. Any material uncertainties on the entity’s ability to continue as a going concern.
c. The recognition, measurement and disclosure of specific transactions and other events.
d. The reason for using a longer or shorter period when an entity changes the frequency of its
reporting.
60. An entity’s financial position or condition refers to which of the following?

a. The status of the entity’s assets, liabilities and equity.
b. The amount of return that the entity has generated from its economic resources during the
period.
c. The level of change in the entity’s economic resources and claims to those resources, also
referred to as the economic phenomena.
d. All of these.
61. Comprehensive income excludes which of the following

a. Revaluation surplus
b. Gains and losses from investments measured at fair value through profit or loss
c. Income tax expense
d. Distributions to owners
62. Entity A needs guidance in accounting for its inventories. Entity A should refer to which of the
following?
a. PAS 1 b. PAS 2 c. PAS 7 d. PAS 8
63. Entity A needs guidance in preparing its statement of changes in equity. Entity A should refer to
which of the following?
64. Entity A buys and sells artifacts. Each artifact is unique and not ordinarily interchangeable.
According to PAS 2, the cost formula that Entity A should use is
a. Specific identification. b. Weighted Average. C. FIFO. d. Any of these.
65. Entity A acquires inventories and incurs the following costs:

Purchase price, gross of trade discount 100,000
Trade discount 20,000
Non-refundable purchase tax, not included
in the purchase price above 5,000
Freight-in (Transportation costs) 15,000
Commission to broker 2,000
Advertisement costs 10,000
How much is the cost of the inventories purchased?

a. 102,000 b. 122,000 c. 97,000 d. 100,000
66. Which of the following is presented in the activities section of the statement of cash flows?

a. Purchase of a treasury bill three months before its maturity date.
b. Dividends paid this year although declared in a prior year.
c. Acquisition of equipment through issuance of note payable.
d. Bank overdrafts that can be offset.
67. In the statement of cash flows of a non-financial institution, interest income received is
presented under
a. operating activities. C. investing activities.
b. financing activities. D. a or c
68. An entity makes a change in accounting estimate. How does the entity recognize the effects of
the change in profit or loss?
a. Prospectively in the current period
b. Prospectively in the current and future periods
c. Retrospectively starting from the earliest period presented
d. a or b
69. At the end of the period, Entity A has deductible temporary difference of ₱100,000. Entity A’s
income tax rate is 30%. Entity A’s statement of financial position would report which of the
following?
a. 30,000 deferred tax asset c. 30,000 deferred tax expense
b. 30,000 deferred tax liability d. 30,000 income tax expense
70. You are a business manager. During the period, you have authorized the acquisition of a machine
that will be used in your company’s manufacturing activities in the next 5 years. In your
selection of an appropriate accounting policy for the recognition and measurement of the
machine, which of the following reporting standards is most relevant?
-END OF MOCK BOARD EXAMINATION-

(REINFORCEMENT TASK)
PART I
A. Make a list of your assets and explain why the items in your list meet the definition of an asset.
Be sure to make consider all the three aspects on the definition of an asset.
MY ASSETS EXPLANATIONS
1.
2.
3.
4.
5.
*Add additional sheets if necessary

B. Assess whether each item in the list qualifies for recognition in your personal statement of
financial position. Explain why an item is not recognized.
RECOGNITION CRITERIA
Yes* No EXPLANATIONS
1.
2.
3.
4.
5.
* Write a check mark under the “YES” or “NO” column

PART 2
A company has carried out its stock take at the end of its financial year. Included in its
inventories are the following items:
a. A table that cost the company P 1,250. This type of table usually sells for P 1,895 but it was
damaged in a flood and will therefore be sold at a significant discount. It is expected to sell
for P 450.
b. A wardrobe that cost the company P 720 and normally sells for P 995. The wardrobe has
been damaged and will cost approximately P 120 to repair at which point it can be sold for
P 750.
c. A dresser that was made to a customer’s own specifications and cost the company P 1,832
to make. Unfortunately, the customer went bankrupt and could not purchase the item. Due
to the unusual design the dresser was not easy to sell. After the year?end however, the
company sold the dresser for P 2,250 but incurred commission costs on the sale of P 105
and delivery costs of P 158.
REQUIREMENTS: (6 points)
State the value that each of the above items will be included at in the company’s year-end
inventory.
1-2 (a) _____________________________________________________________________________________________________
3-4 (b) _____________________________________________________________________________________________________
5-6 (c) _____________________________________________________________________________________________________
PART 3
In your own words, answer each question briefly. Points are indicated in the question.
7-8 What is the purpose of the cash flow statement?

______________________________________________________________________________________________________________
______________________________________________________________________________________________________________
______________________________________________________________________________________________________________
______________________________________________________________________________________________________________
______________________________________________________________________________________________________________
______________________________________________________________________________________________________________
9-10 How do drawings affect the financial statements?
______________________________________________________________________________________________________________
______________________________________________________________________________________________________________
______________________________________________________________________________________________________________
______________________________________________________________________________________________________________
______________________________________________________________________________________________________________
______________________________________________________________________________________________________________
11-15 Which financial statement's structure is closest to that of the basic accounting equation?
Why?
______________________________________________________________________________________________________________
______________________________________________________________________________________________________________
______________________________________________________________________________________________________________
______________________________________________________________________________________________________________
______________________________________________________________________________________________________________

REFLECT ON YOUR PERFORMANCE

1. Put a check mark on the boxes below if the statement applies to you.
Throughout the module, I have:
◻ Recognized assets, liabilities, and equity from each other using applicable standards.
◻ Determined the presentation and disclosure requirements for certain assets, liabilities
and equity.
◻ Analyzed cases related to assets, liabilities and equity
2. Put a check mark on the sub-topics that you have been able to firmly grasp the concept on.
◻ The general features of financial statement preparation.
◻ The components of a complete set of financial statements.
◻ The acceptable methods of presenting items of income and expenses.
◻ The statement of profit or loss and other comprehensive income and the statement of
changes in equity.
◻ The relationship of the notes with the other components of a complete set of financial
statements.
◻ Definition of Inventories.
◻ Measure inventories and apply the cost formulas.
◻ The description of the statement of cash flows.
◻ Difference between the following: (1) Operating activities, (2) Investing activities, and (3)
Financing activities
◻ The classifications of the following in a statement of cash flows: (a) dividends received, (b)
dividends paid, (c) interest paid and (d) interest received
◻ Definition of the following and their examples: (1) Change in accounting policy, (2) Change
in accounting estimate, and (3) Error.
◻ Difference between the accounting treatments of the following: change in accounting policy,
change in accounting estimate, and correction of prior period error.
◻ Definition of Events after the reporting period.
◻ The accounting requirements for events after the reporting period.
◻ The scope and the fundamental principle of PAS 12.

◻ The terminology used in the accounting for current and deferred taxes
◻ The recognition, measurement and presentation of current and deferred taxes.

◻ The recognition criteria, initial measurement, and subsequent measurement of PPE.
◻ The principles of PAS 16 in basic computations of a PPE’s cost, depreciation, carrying

amount, and revaluation surplus as well as the gain or loss on its disposal.
Note: For the sub-topics left unmarked, it is highly encouraged that you review, practice, and
give more time on those concepts.

CFAS - Philippine Accounting Standards

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AE14- Conceptual Framework and Accounting Standards

The Conceptual Framework (or “Concepts Statements”) is a body of interrelated

The framework provides a basic reasoning on which to consider the merits of

The framework further helps users of financial reporting information to better

BUKIDNON STATE UNIVERSITY ACCOUNTANCY DEPARTMENT

Philippine Accounting Standards (PAS)

Course Learning Outcome

Topic Learning Outcome

At the end of this module, the students will be able to:

BUKIDNON STATE UNIVERSITY ACCOUNTANCY DEPARTMENT

TOPIC 1: PAS 1 Presentation of Financial Statements

General purpose financial statements

Complete set of financial statements

*comparative information in respect of the preceding period; and additional

BUKIDNON STATE UNIVERSITY ACCOUNTANCY DEPARTMENT

BUKIDNON STATE UNIVERSITY ACCOUNTANCY DEPARTMENT

Additional Statement of Financial Position

An additional statement of financial position is presented as at the beginning of

Statement of financial position

A statement of financial position may be presented as either

- distinctions between current and -Showing no distinction between

BUKIDNON STATE UNIVERSITY ACCOUNTANCY DEPARTMENT

An entity shall classify a liability as current when:

Currently maturing long-term liabilities

BUKIDNON STATE UNIVERSITY ACCOUNTANCY DEPARTMENT

Order/ Format of Presentation

Statement of Profit or Loss and Other Comprehensive Income

BUKIDNON STATE UNIVERSITY ACCOUNTANCY DEPARTMENT

BUKIDNON STATE UNIVERSITY ACCOUNTANCY DEPARTMENT

WHAT HAVE I LEARNED SO FAR?

1. The application of PFRSs, with additional disclosure when necessary, is presumed to

BUKIDNON STATE UNIVERSITY ACCOUNTANCY DEPARTMENT

TOPIC 2: PAS 2 Inventories

Inventories are assets:

Financial Statement Presentation

BUKIDNON STATE UNIVERSITY ACCOUNTANCY DEPARTMENT

TOPIC 3: PAS 7 Statement of Cash Flows

Statement of Cash Flows

BUKIDNON STATE UNIVERSITY ACCOUNTANCY DEPARTMENT

BUKIDNON STATE UNIVERSITY ACCOUNTANCY DEPARTMENT

TOPIC 4: PAS 8 Accounting Policies, Changes in Accounting Estimates Errors

Objective and Scope

BUKIDNON STATE UNIVERSITY ACCOUNTANCY DEPARTMENT

Changes in Accounting Policy Changes in Accounting Estimate

1. Change from FIFO cost formula for 1. Change in depreciation or amortization

2. Change in the method of recognizing revenue 2. Change in estimated useful lives of

4. Change in financial reporting framework, 4. Change in required allowances for

6. Change from the cost model to the fair value

7. Change in business model for classifying

BUKIDNON STATE UNIVERSITY ACCOUNTANCY DEPARTMENT

WHAT HAVE I LEARNED SO FAR?

Short Essay. PAS 2- Inventories

BUKIDNON STATE UNIVERSITY ACCOUNTANCY DEPARTMENT

Show your solutions:

BUKIDNON STATE UNIVERSITY ACCOUNTANCY DEPARTMENT

TOPIC 5: PAS 10 EVENTS AFTER THE REPORTING PERIOD

Events after the Reporting Period

Two Types of Events After the Reporting Period

Date of authorization of the financial statements

Adjusting Events Non-Adjusting Events

5. Major business combination after the

6. Announcing a plan to discontinue an operation