PFRS for SME’s

Below SME or micro entities

-May use full PFRS or PFRS for SME’s

Reason for standards: Simplify ng reporting.

Part 1:

Wide range of users: Internal and external users

Not for customized purpose

Kahit ka qualified ka sa PFRS for SMEs, again (for

simplification only),
pwede ka pa din gumamit ng Full PFRS,

Ayaw magkaroon ng transition kasi may comparative period

na gagamitin. ( As of very beginning of the comparative
earliest period, adjustment will take)

Ex. Reporting period Dec. 31,2020

Comparative period ay Dec. 31,2019
Need: Prepared Jan 1,2019
But for PFRS for SME’s :3rd FS is not required but need to prepare the comparative period

Adopted mula sa IFRS, pero may konting modification ng SEC.

No. 1 dapat hindi nagbebenta ng stocks or hindi nanghihingi

ng capital sa public

*If publicly listed na SME’s :Full PFRS ang gagaitin

*Fiduciary capacity = based on trust on confidence,
ipagkakatiwala ang properties (ex. Bank, insurance, trust
fund)

No. 2: range of assests and liabilities

No.3 NOT TO FILE TO SRC RULE 68. 1( publicly listed)

No. 4 hindi dapat magiisue sa public market ng ordinary or preference share

No. 5 just like no. 2

No. 6 not public utility, Meralco, transportation and not water utility.

If you will observe, most of the provisions are required for FULL PFRS only.kaya sila
excempt for PFRS for SME’s

No.1 parent company is using FULL PFR , therefore subsidiary needs to follow the same
guidelines, even if SME

No. 2 like no. 1 but a foreign parent

No. 3 foreign parent moving to FULL PFRS

No. 4 exceed the quantitative threshold na 3m TO 350M (asset) ,250m(LIAB)

the increase must be SIGNIFICANT and CONTINUING (Malaki at magtutuloy,tuloy)

No. 5 group compliying to Full PFRS

No. 6 foreign compliying to Full PFRS

No. 7 IPO (listed sa PSE), if magbebenta ng authorized capital

No. 8 subsidiary comply with Full PFRS

No. 9 required for FULL PFRS

SME’s= 3M above to 350M assets, 3M above to 250M (liabilities)

Micro = below 3m (allowed for Full PFRS or PFRS SME’s )

Note 1 : Allowed to Income tax basis of accounting (minsan cash basis at minsan accrual)
-yung accrual if nagmamater ang mga recievables at tsaka nagpapautang sila

Note 2: allowed sa cash basis kasi di mahalaga ang recievables or hindi sila
nagpapautang
 If lilipat or first-time adopter ng PFRS for SME’s,
Initial adoption:
Since comparative basis, 2 periods should be used. Yung
earliest period

Note: if hindi ka na SME then lilipat na sa FULL PFRS, as of the

beginning ang financial statements ay ia-adjust.

Micro entities : PFRS for SME’s

Its either tumaas or bumababa ang quantitive threshold,

Magkakaroon ng pagbabago sa NEXT ACCOUNTING PERIOD
na magiging FULL PFRS or other accounting bases

--Yung change sa change sa size must be significant (20% or

more of the assets and liabilities) and continuing if pataas,
-need na lumipat sa PFRS for FULL

-if bumababa naman ang size , its either PFRS FULL or PFRS
for SME’s, maalin sa piliin.
Part 2: PFRS for SME’s notes

Different accounts and treatments

* Purpose ng PFRS for SME’s: to disregard those
disclosure , accounting procedures, accounting
policies… that are not necessary for decision
making process
**therefore, immaterial and irrelevant
***to reduce the workloads

Major Differences of Full PFRSs and PFRS for SMEs

(a) Full PFRSs = requires 3rd balance sheet

(b) PFRS for SMEs= doesn’t req. 3rd BS

-Only requirement: if there is adjustment
in retained earnings . The comparative
amount ay i-include ang earliest
comparative period sa second column.

(a) Full PFRSs = preparation of SCI (

option: magkasama ang Income statement
at Statement of OCI ; or magkahiwalay )

(b) PFRS for SMEs= not required to

prepare OCI
-tsaka lang magrereport kapag may OCI

(no notes)
 (a) Full PFRSs =Components of OCI (RAFAH)
1 Revaluation surplus (PPE and investment property;
2 Actuarial Gain or losses (arise from no. 3) other term ay
(Available for sale securities)***
3 remeasurement of defined benefit liability (arise form
employee benefits)
4 transalating the FS of Foreign operation
5 Hedging securities (parts of Derivatives

(b) PFRS for SMEs=

=same as Full PFRS except Unrealized G&L in FV of
investments , not available under SME
**kaya hindi na pinagpreprepare ng OCI

Additional info:
*** term is not being used today.
Classified: Financial Instruments identified :
1) Fin Assets Measured at FV ( FAPL (dati ay trading securities ang term) and FAOCI ) and
2) Fin Assets measured at Amortized cost

(a) Full PFRSs = Hindi pwededng pagsamahin State. Changes in

Equity at income statement. It must be SEPERATELY.

(b) PFRS for SMEs= Pwedeng pagsamahin ang presentation of

Changes in Equity at Income statement if ang changes lang ay :
a.Profit or Loss; b.Payment of dividends; c. Corrections of prior
period errors ; and d. Changes in accounting policy

but if there are changes like Issuance of shares, acquisition of

treasury shares at katulad ng transactions na yan, DAPAT
separate ang SCE at IS kasi para hindi magulo ang presentation

(a) Full PFRSs =

Review: Noncurrent Asset Held for sale : investment property
or PPE decide to sell in a year or less and have complete plans to
sell it. Like finding a buyer.

(b) PFRS for SMEs=

No need of classifications ng noncurrent asset held for sale.

Stay As Is ang investment property and PPE.

Kapag nabenta ang PPE: debit cash and accumulated
depreciation credit PPE

Kapag nabenta ang Investment Property : Debit Cash Credit

Investment property
(a) Full PFRSs =
No.7 : Ang Disclosure of Operating Segment at Earnings per
share ay ginagawa normally sa Public Listed Companies and Big
Companies in PSE.
-They have branches na kailnagan makitan ang EPS for investor
purposes.

(b) PFRS for SMEs=

does not require disclosure of OSI at EPS.

(a) Full PFRSs =

Prepare either:
(1) full or complete financial statements
(2) condensed financial statements (mga importante lang)

(b) PFRS for SMEs=

no provision. No guidance ng pagprepare ng FS. Kasi simplified
ang FS

(a) Full PFRSs = Financial Instrument are Classified into:

I. FV [ FAPL (trading securities) at FAOCI (available sale of
securities) ]
II. Amortized Cost (held to maturity investment) ex. Bonds.

(b) PFRS for SMEs= Financial instrument are classified into:

I. Basic- (noncomplex instrument) ex. Investment in equity or
debt instrument. [ subsequently measured: Amortized cost
model, except those classified to FAPL ]

II. Nonbasic- includes derivatives.

(a) Full PFRSs =

-Kapag hindi Profit or Loss, it will be classified as OCI

(b) PFRS for SMEs=

II. Nonbasic- includes derivatives. [ all are –[ subsequently

measured at FVPL ]

If FV can’t be determined: Cost less impairment.

-Walang OCI or sales of securities
-not include to designate Financial asset at FAPL.
(a) Full PFRSs =
Pas 28 investment in associate- having investment more than
20% or 50% of one corporation. (has significant influence, has
income or share to the corp.)
=Use equity method= debit investment associate; credit cash
=ex. When dividend payment

Pas 27 Ex. Corp A, may investment kay Corp B at si Corp C ay

subsidiary.

Corp A (parent corp.) needs to prepare:

1) separate financial statements (at cost or equity method or
FV)
2) consolidated financial statements (equity method
gagamitin if may subsidiary)

(b) PFRS for SMEs= Investment associate can be chosen

either the Cost or equity or FV model

(a) Full PFRSs = IDOC** [ it has no separate accounting

treatment required]
**Ex. Corp A acquired Corp B. The price of Corb B is based on
the net assets (value of all equity after deducting all liabilities) of
Corp A.
Kapag binayaran ni Corp B si Corp A ng sobra sa net assets yun
ay goodwill.
*** bawal ang amortization at impairment testing

(b) PFRS for SMEs= the Goodwill will be separated.

And the Goodwill will be amortized over the ESTIMATED USEFUL
LIFE.
-if can’t be determined : best estimate of mngt. Not >10years

no notes. See table…

(a) Full PFRSs =
Agriculture has two types Biological assets at agricultural
produce.
= Bearer plants are part of PPE

(b) PFRS for SMEs=

= no same provision or treatment provided for agriculture.

(a) Full PFRSs =

initial recognition
Biological assets is measured :
I. FV less cost to sell.
II. If impossible of impractical: cost less acc. Dep. And acc.
Imp. losses

(b) PFRS for SMEs=

Biological assets is measured :
I. If FV is readily determinable: FV – cost to sell.
II. If FV is not readily determinable: cost less acc. Dep. And
acc. Imp. losses

(a) Full PFRSs = RandD

Research cost = expensed
Development cost=
I.expensed or
II. capitalized expenditure (ex. discovering an equipment, if the
research for that equipment materialized it will be part of
developmental cost)

(b) PFRS for SMEs=

research cost and development cost = EXPENSED outright

(a) Full PFRSs =

Intangible assets with
I. finite useful life – amortized
II. Indefinite useful life – tested for impairment at least
annually.

(b) PFRS for SMEs=

Intangible assets are CONSIDERED to have finite useful life
- shall not >useful life.
ex. Patent an franchise may expiration years
-if can’t be determined: best estimate of mngt. Not >10years
(a) Full PFRSs = There must be at least an ANNUAL review of the
Dep., Amort, UL and RV.

(b) PFRS for SMEs=

-not required to review
-There will be a review only of the Dep., Amort, UL and RV if there is a
significant change amount.

(a) Full PFRSs =

Amort of goodwill from Business Combination ** [ not required to be
amortized or tested for impairment ]

(b) PFRS for SMEs=

Initial recognition:
the Goodwill will be measured: cost less acc. Dep. And acc. Imp.
Losses
-if can’t be determined : best estimate of mngt. Not >10years

(a) Full PFRSs =

Classification of Gov’t Grant:
I. Grant rel. to asset or I Grant rel. to Income

recognition: matching of income and expense

(b) PFRS for SMEs=

Classification of Gov’t Grant: none

recognition: see table.

**For more details: Check Intermediate Acctng 1

(a) Full PFRSs =
Gov’t grant measured :
I.Cash recieved
II.Fair value of receivable.
III.CA of L/P to the Gov’t w/ repayment is forgiven
IV. Discount on L/P to Govt

Non monetary grant measured:

I. FV received
II. Nominal account/ Zero + direct cost

(b) PFRS for SMEs=

Gov’t grant measured :
Fair value of received or receivable.

Non monetary grant measured:

Fair value of received or receivable. (no alternative
measurement)

(a) Full PFRSs =

Borrowing cost ( gastos sa pangungutang na gagawin sa
Qualifying asset <asset that takes time on a none repetitive basis
and not enlarge in amount or volume> )
3 classification: general ; specific; or both

= magiging part ng capitalized expenditure or pwedeng

icapitalize and BC na DIRECTLY ginamit sa pagcreate ng
Qualifying asset.

(b) PFRS for SMEs=

Borrowing cost = EXPENSED outright

(a) Full PFRSs =

Value in use means projection of cash flows for the next years
- Timeframe = maximum of 5 years
- unless justified: limit will be extrapolated ( can be EXTENDED)

(b) PFRS for SMEs=

Cash flow projections: - No specific timeframe
and may extrapolate beyond the period COVERED.
 (a) Full PFRSs =
DEFINED CONTRIBUTION PLAN = undiscounted bases
service not within 12 months = discounted

(b) PFRS for SMEs=

DEFINED CONTRIBUTION PLAN = undiscounted basis

(a) Full PFRSs =

DEFINED BENEFIT LIABILITY = projected unit credit method

(b) PFRS for SMEs=

DEFINED BENEFIT LIABILITY = will use( projected unit credit
method) only IF HINDI KA MAGAGASTUSAN or WALANG
Effort

**Project unit credit method is used when there are many

employees. Required to hire actuary to determine ang makukuha
ng bawat employee

(a) Full PFRSs =

Reporting period : example is Dec. 31
I.Adjusting events = adjusting entries
II. Non-adjusting events = disclosure only if both are material

(b) PFRS for SMEs=

I. Disclosed only if dividends are issue after the end of reporting

period and
II. Can have a SEGREGATED COMPONENT OF retained earnings,

(a) Full PFRSs =

KMP (incharge of planning, directing or in short nagmamanage sa
company)
RECOGNIZED and disclose : SPOTS
- Dapat naka-segregate per category

(b) PFRS for SMEs=

Recognition and disclosure ay : In aggregate amount only