EMPLOYEE BENEFITS Contribution Made to the Plan xxx

Total Benefit Cost (xxx)

Bonus Overfunding/(Underfunding) xxx

1. Bonus BEFORE Bonus and Tax

FVPA, End xxx
B = Br * NI PBO, End (xxx)
Prepaid/(Accrued) Benefit Cost xxx
2. Bonus AFTER Bonus, BEFORE Tax

B = Br * (NI-B)
asdasdsadas
3. Bonus BEFORE Bonus, AFTER Tax

B = Br * (NI-T)
T = Tr * (NI-B)

4. Bonus AFTER Bonus and Tax

B = Br * (NI-B-T)
T = Tr * (NI-B)

Employee Benefit Expense

Current Service Cost xx

Past Service Cost Service Cost xx
Loss (Gain) on Settlement xx
Interest Expense xx
(Interest Income) Net Interest xx
Interest of Effect (Asset Ceiling)
Total Benefit Expense/Defined Benefit Cost (P/L) xx

Actuarial (Gain) Loss xx

(Gain) Loss on Actual Return of Plan Assets xx
Remeasurement of Effect xx
Defined Benefit Cost (OCI) Net Remeasurement

Total Defined Benefit Cost xx

End Beg
FVPA xx xx
PBO (xx) (xx)
Surplus (Deficit) xx xx
Asset Ceiling (xx) (xx)
Effect of Asset Ceiling xx - xx xx
Interest on Effect (Beg. Effect of AC * Rate) (xx)
Remeasurement of Effect xx

FVPA
FVPA, Beg Settlement Price (Early)
Interest Income Benefits Paid
Gain on Actual Return Loss on Actual Return
Contribution FVPA, End

PBO
CA of Settlement (Early) PBO, Beg
Benefits Paid Interest Expense
Actuarial Gain (Decrease) Current Service Cost
PBO, End Past Service Cost
Actuarial Loss (Increase)
INCOME TAX
Under/Over Provision
• Debit Balance/Under Provision increases Tax
Expense.
• Credit Balance/Over Provision decreases Tax
Expense.
Deferred Tax
• Difference between Accounting from Taxable
Profit is either Permanent or Temporary
Differences.
Permanent Differences
• Caused by certain items not being taxable or
deductible.
• Differences that only affect tax computation of
one period.
• Differences which have no deferred tax
consequences.
Non-Deductible Expenses (Add):
• Items not allowed to be deducted from taxable
revenue, ex:
o Fines/Penalties/Surcharges form
violation of law.
o Premiums paid on life insurance for
officers and employees. (Company is
the beneficiary.
o Loss on expropriation of property.
o Impairment loss on goodwill. (If
problem is silent)
o Charitable contributions in excess of tax
liabilities.
o Client Excess Limit in entertaining
expenses or fines.
Non-Taxable Revenues (Subtract)
• Income already subject to final tax, ex:
o Interest Income on time or savings
deposit.
o Interest Revenue from government
bonds, treasury bills, or municipal
bonds.
o Gains subject to capital gains tax.
• Income exempted from income taxation, ex:
o Intercompany dividends received from
a domestic corporation.
o Proceeds from life insurance where the
company is the beneficiary.
Temporary Differences
• Difference between the CA of the asset/liability
in the SFP and its tax base.
• Known Examples:
o Certain Types of Income and Expenses
that are taxed on cash basis, rather than
accruals.
o The difference between a non-current
asset’s depreciation expense and the
tax allowances given.
Taxable Temporary Difference (TTD)
• Future Taxable Amount (FTA)
• Gives rise to Deferred Tax Liability (DTL)
o Multiply with Current/Future Enacted
Tax Rate.
• Deduct from Income Subject to Tax
o CA of Asset > Tax Base
o CA of Liability < Tax Base
o Accounting Expense < Tax Expense
o Accounting Revenue > Tax Revenue
• Known Examples:
o Interest Receivable Taxed on Cash Basis.
o Assets/Liabilities revalued upwards to
Fair Value.
o Depreciation claimed on tax return in
excess of per book.
o Unrealized Loss on Investment of
Trading Securities.
Deductible Temporary Difference (DDT)
• Future Deductible Amount (FDA)
• Gives rise to Deferred Tax Asset (DTA)
o Multiply with Current/Future Enacted
Tax Rate.
• Add to Income Subject to Tax
o CA of Asset < Tax Base
o CA of Liability > Tax Base
o Accounting Expense > Tax Expense
o Accounting Revenue < Tax Revenue
• The carryforward of Unused Tax Losses &
Credits.
• Known Examples:
o Accrued Expenses Taxed on Cash Basis.
o Assets/Liabilities revalued downwards
to Fair Value.
o The difference between Bad Debts
Expense and Ending Balance of
Uncollectible Accounts.
o Unrealized Gain on Investment of
Trading Securities.
o Other Income
Revaluation Effect (Base sa hw ko na not sure) • Increase or Decrease in DTL or DTA
o Get Beginning “Revaluation
• Revalued Upward: DTL; Revalued Downward:
Surplus/Loss * Rate = DTL/DTA”
DTA.
o Get End “Revaluation Surplus/Loss *
• Current Tax Expense
Rate = DTL/DTA”
o Decrease remaining balance at cost
o Beg DTL/DTA – End DTL/DTA =
from Pretax Income.
Increase/Decrease in DTA

Income Statement Liability Method

• Focuses on Timing Differences ONLY in the computation of deferred tax asset/liability.

• All Timing Differences are Temporary Differences, but not vice-versa.

Accounting Income xxx

Permanent Differences:
Add: Non-Deductible Expense xxx
Less: Non-Taxable Revenues (xxx)
Accounting Income Subject to Tax xxx
Temporary Differences
Add: Increase in FDA xxx * future enacted tax rate - DTA
Income Tax
Less: Increase in FTA (xxx) * future enacted tax rate + DTL
Expense
Taxable Income xxx + CTL

Balance Sheet Method

• Considers all Temporary Differences, including Timing Differences.

• Simply get the differences between the carrying amounts of assets/liabilities on the SFP with their respective tax
base.
LESSEE ACCOUNTING PV(Previous) * (1+%) – Payment = PV(Current)

Depreciation of RUA
Lease Liability
RUA(CA)/Lease Term
• PV of Lease Payments not yet paid.
• Subsequent: Similar to Amortized Cost. Interest • Lease with Transfer of Title/Purchase Option
is computed using Effective Interest Method. o Useful Life
• Computation: o Residual Value
• Lease that reverts back to lessor
Payments (Fixed/Variable)
o Shorter of Useful Life or Lease Term
+ Residual Value (Guaranteed Only)
o Useful Life (Use RV)
+ Renewal Option (Reasonably Certain)
o Lease Term (Use Guaranteed RV)
+ Termination Option (NOT Reasonably Certain not to
terminate) Reassessment
+ Purchase Option (Reasonably Certain)
• Use Revised Discount Rate
ANNUITY RATE(?) o Change in Lease Term, Purchase Option,
Floating Interest Rate (Variable).
Simple = 1+i^(-n)
o Use Unrevised otherwise.
Ordinary = (1-(1+i^(-n)))/i
Lease Modification
• Payable at the end
Separate lease
Advance = (1-(1+i^(-n)))/i
• Account as a new lease
• Payable at the beginning • No gain/loss
• n is less by 1
Not Separate, Not Decrease
Advance of 1 = ((1-(1+i^(-n)))/i)+1
• Adjust Lease Liability, also RUA
• Includes first payment • No gain/loss
• n is less by 1
Not Separate, Decrease
Right of Use Asset (RUA)
• Decrease RUA
• Initially recognized at Cost. • Gain/Loss in P/L
• Subsequent: Cost Model, Revaluation Model, or
FV Model.
• Computation:

Initial Measurement of Lease Liability

+ Prepaid payment (In case of payable Jan. 1 & Lease
Bonus)
+ Initial Direct Cost
- Lease Incentives RECEIVED.
+ Dismantling/Restoration Cost
+ Lease Bonus

• Initial Direct Cost, Includes:

o Commissions (Even employees acting as
selling agents)
o Legal Fees (From execution of the lease)
o Lease Document Preparation Cost (After
execution)
o Consideration paid for guaranteed residual
value from unrelated third party.

Amortization of Lease Liability

PV of LL (Beg)
- Applicable to Principal
- Annual Payment
+ Interest Expense
= PV of LL (End)
LESSOR ACCOUNTING Sales and Leaseback

If transfer is not a sale

Finance Lease
• Recognize Financial Liability equal to Transfer
• Considered if:
Proceeds.
o Transfer of ownership
o Purchase Option (Reasonably Certain) If transfer is a sale
o Major Part of Useful Life (75%)
o PV of Lease Payments is (90%) of the FV • Measure RUA in proportion to the previous CA
o Specialized in Nature of the right retained.
• Recognition: • Recognize Gain/Loss based on the rights
o Derecognize lease asset and recognize Net transferred.
Investment. • Measurement of:
• Direct Costs are outright expensed. • Lease Liability
o Account for the leaseback as financial lease.
Net Investment (Direct/Sales) o PV of Lease Payments.
PV of Gross Rentals • RUA
+ Residual Value (Guaranteed/Unguaranteed) o Proportion to the CA of the right retained.

Gross Investment (Direct/Sales) If Selling Price not equal to Fair Value:

Gross Rentals Fair Value

+ Residual Value (Guaranteed/Unguaranteed) - Selling Price
= (Additional Financing)/Prepayment
Cost of Asset (Direct)
Total Gain/Loss:
Cost of Machinery
+ Initial Direct Cost Fair Value
- Carrying Amount
• If Initial Direct Cost paid by lessor, include in = Gain/(Loss)
Net Investment and compute new Implicit Rate
by interpolation. RUA

Total Sales and Cost of Sales (Sales) PV of LL + FV - SP * (CA/FV)

Gain Recognized on the Transfer

GRV URV
Total Sales (FV-CA) * ((CA-RUA)/CA)
PV Gross Rentals Base Base
Residual Value + Gain Not Recognized on the Retain

Total Gain - Gain Recognized

Cost of Sales
Cost of Machinery Base Base
Initial Direct Cost + +
Residual Value -

Profit Same

Note:

• If Sales Type Lease will not revert back to lessor,

Residual Value (Guaranteed or not) will be
ignored.
• Sales Type Lease with Purchase Option is
treated like Sales Type with Guaranteed RV.

Operating Lease

• Recognize lease payments as income on a

straight-line basis, or other pattern otherwise.

Sub-Lease

• If “head lease” is short-term/low value, sub-

lease is an operating lease.
Statement of Financial Position • Classify all other assets not classified as current
into non-current assets.
(Balance Sheet)
List of Non-Current Assets (Mema lang din)
Current Assets
• PPE
• Classify Asset when: o Land/Improvement
o Cash and Cash Equivalents must be o Building
unrestricted. o Machinery
o It expects to realize, intends to sell, or o Vehicles
consume it in its normal operating o Furniture & Fictures
cycle. o Office Equipment
o Holds the asset primarily for trading. o Patterns, Molds, Dies
o Expects to realize the asset within 12 o Tools
months after the reporting period. o Bearer Plants
o Investment matures within 3 months o Accumulated Depreciation (Contra)
from date of acquisition. • Long Term Investments
List of Current Assets (Mema lang to, familiarize lang) o Investment in Shares and Bonds
o Investment in Associate
• Cash and Cash Equivalents o Investment in Subsidiary
o Cash (Undeposited) o Investment Property
o Coins o Long-Term Funds
o Cash in Checking/Savings Accounts o Cash Surrender Value of Life Insurance
o Bank Drafts o Investment in Joint Venture
o Money Orders • Intangible Assets
o Short Term Cash Funds o Patent
o Commercial Paper o Trademark
o Money Market Funds o Copyright
o Short-Term Government Bonds o Franchise
o Treasury Bills o Lease Right
o Bank Overdraft (Contra, if part of Cash o Goodwill
Management) • Other Non-Current Assets
• Marketable Securities o Long-Term Advances to Employees
o Financial Assets at FVPL o Abandoned Property
o Financial Assets Held for Trading o Long-Term Refundable Deposit
• Trade and Other Receivables
Current Liabilities
o Accounts Receivable
o Notes Receivable • Classify Liability When:
o Other Receivables representing Claims o Expects to settle liability in its normal
o Advances to Employees operating cycle.
o Allowance for Bad Debts (Contra) o Holds the liability primarily for trading.
o Subscription Receivable (Collectible o Is due within 12 months after the
within 1 year). reporting period.
• Inventories o Entity doesn’t have an unconditional
o Merchandise Inventory (When right to defer settlement for at least 12
merchandising) months after the reporting period.
o Raw Materials Inventory
o Work in Process Inventory List of Current Liabilities
o Finished Goods Inventory • Accounts Payable
o Factory Supplies • Notes Payable
• Prepaid Expenses • Income Tax Payable
o Office Supplies • Withholding Tax Payable
o Service Supplies
• Accrued Expenses
o Prepaid Rent
• Unearned Revenue
o Prepaid Insurance
• Any other short-term payable
• Other Current Assets
• Serial Bonds Payable (Current Portion)
o Non-Current Asset Held for Sale
• Estimated Liabilities
Non-Current Assets
Non-Current Liabilities Preference Share
Preferred Stock
Capital
• Classify all other liabilities not classified as Additional Paid Capital Share Premium
current into non-current liabilities. Accumulated Profits
Retained Earnings (Deficit)
List of Non-Current Liabilities (Losses)
Retained Earnings
Appropriation Reserve
• Long-Term Notes Payable Appropriated
• Loans Payable Revaluation Surplus Revaluation Reserve
• Bonds Payable Treasury Stock Treasury Share
• Serial Bonds Payable (Non-Current portion)
• Mortgage Payable
Share Capital
• Any other Long-Term Payable.
• Estimated Liabilities • Portion of Paid in Capital representing total
par/stated value of shares issued.
Working Capital
Subscribe Share Capital
• Excess of Current Assets over Current Liabilities.
• Working Capital Ratio • Portion of Authorized Share Capital subscribed
o Current Assets/Current Liabilities but not yet fully paid, thus unissued.

Contingent Liability Subscription Receivable

• Either Probable or Measurable, no both. If both, • Deduction from the related subscribed share
it is considered as a Provision. capital.
• Not recognized in the financial statements, only • When collectible within 1 year, considered as
disclosed. Current Asset.
• Probable
Share Premium
o Likely to occur, more than 50%.
• Possible • Excess of the paid capital over the par/stated
o Less likely to occur, 50% or less. value.
• Remote
Retained Earnings
o Chance of occurring is very slight, 10%
or less. • Cumulative balance of:
o No disclosure needed. o Periodic Net Income/Loss
o Dividend Distributions
Contingent Asset
o Prior Period Errors
• Virtually Certain/Realized o Changes in Accounting Policy
o Recognized o Other Capital Adjustments
• Probable
Unappropriated Retained Earnings
o Disclose
• Possible/Remote • Portion that is free and can be declared as
o No disclosure dividends.

Equity Appropriated Retained Earnings

• Residual Interest of the Assets after deducting • Restricted, not for distribution.
Liabilities.
Deficit
• Increase by Profitable Operations/Contributions
by owners. • Debit balance in Retained Earnings. Not an
• Decreased by Unprofitable Asset but a deduction from SHE.
Operations/Distribution to Owners
Revaluation Surplus
• Terms Used:
o Owner’s Equity in Sole Proprietorship. • Excess of Sound Value over Carrying Amount.
o Partner’s Equity in Partnership.
o Shareholder’s Equity in Corporation. Sound Value

Philippines Term IAS Term • Equal to the Fair Value/Depreciated

Capital Stock Share Capital Replacement Cost.
Subscribed Share Depreciated Replacement Cost
Subscribed Capital Stock
Capital
Common Stock Ordinary Share Capital • Equal to Replacement Cost less Accumulated
Depreciation.
Carrying Amount

• Historical Cost less Accumulated Depreciation.

Treasury Shares

• Entity’s own shares that’s been issued then

reacquired.
• At cost, not an asset.
• Deduction from the SHE.
• When acquired, RE must be appropriated to the
extent of the cost of the treasury shares.

Shareholder’s Equity

Share Capital @ Par/Stated xxx

Subscribed Share Capital xxx
Subscription Receivable (xxx)
Retained Earnings (Unappropriated, less TS) xxx
Reserves:
Retained Earnings Appropriated xxx
OCI xxx
Treasury Shares (xxx)
Shareholder’s Equity xxx

Refinancing

• If the entity has the discretion to refinance/roll

over an obligation for at least 12 months after
the reporting period under an existing loan
facility, it is classified as non-current liability.
o If not at the discretion of the entity,
classified as current liability.

Covenants

• Attached to borrowing agreements, are actually

restrictions to the borrower, that if certain
conditions are breached, the liability becomes
payable on demand.
• Still classified as current if the lender agreed
after reporting period but before the
statements are authorized.
• Classified as non-current if the lender agrees on
or before the reporting period to provide a
grace period ending at least 12 months after the
end of the reporting period.
o During the grace period, lender cannot
demand payment.
STATEMENT OF COMPREHENSIVE Comprehensive Income Pro-Forma

INCOME Net Income xxx

OCI to be reclassified to P/L
Sources of Income Gain (Loss) from translating financial xxx
statements of a foreign operation
• Merchandise Unrealized Gain (Loss) on derivatives xxx
o Sales contract designation as cash flow hedge
o Sales Returns, Allowances, & Discounts Unrealized Gain (Loss) on debt xxx xxx
• Service investment measured at FVOCI
o Professional Fees Unrealized Gain (Loss) on equity xxx
o Media Advertising Commissions investment measured at FVOCI
o Insurance Agency Commissions Change in Revaluation Surplus xxx
o Admission Feeds Remeasurement of a Defined Benefit xxx
Plan
o Tuition Fees
Gain (Loss) attributable to credit risk of a xxx
• Use of Entity Resources
financial liability designated at FVPL
o Interest
Comprehensive Income xxx
o Rent
o Royalty
o Dividend Income asdsad
• Disposal of Resources
o Gain on Sale of Investment
o Gain on Sale of PPE
o Gain on Sale of Intangible Assets

Components of Expenses

• Cost of Goods Sold or Cost of Sales

• Distribution Costs or Selling Expenses
o Salesmen’s Salaries
o Sales Commission
o Traveling and Marketing Expenses
o Advertising and Publicity Expenses
o Freight Out
o Depreciation of Delivery/Store
Equipment
• Administrative Expenses
o Doubtful Accounts
o Office Salaries and Expenses of General
Executives
o Office Supplies Expense
o Contributions to Charity
o Professional Fees
o Depreciation of Office
Building/Equipment
o Amortization of Intangible Assets
• Other Expenses
o Loss on Sale of Trading Investment
o Loss on Sale of PPE
o Loss on Sale of Non-Current Investment
o Loss on Sale of Intangible Asset
o Casualty Loss from Natural Disaster
o Expropriation Loss
• Income Tax Expense
STATEMENT OF CHANGES IN EQUITY o Deducted from Retained Earnings and
added to Share Reserves (Share
Equity Premium)
o If canceled, add back to Retained
• Share Capital
Earnings
o Funds contributed at par/stated value.
o Reasons for Appropriation:
• Share Premium/Reserve ▪ Legal Requirements (Treasury
o Funds contributed in excess of Shares)
par/stated value. ▪ Contractual Requirement (Bond
• Retained Earnings Redemption)
o May be appropriated or ▪ Entity Policy (Appropriation for
unappropriated. Contingencies)
• Should present the ff:
o Comprehensive Income for the Period
o Effects of changes in accounting policies
and correction of errors.
o Reconciliation between the CA at the
beginning and end.

SC SP RE
Balances – Beg. xx xx xx
Correction of Error xx
Change in Accounting Policy xx
Issuance in Excess xx xx
Issuance at Par xx
Comprehensive Income:
Net Income xx
OCI xx
Dividends Declared (xx)
Current Appropriation for xx (xx)
Contingencies
Balances – End. xx xx xx

Items Directly Affecting Retained Earnings

• Net Income/Loss
o Increases/Decreases RE
• Prior Period Errors
o Adjustments of the beginning balance
of RE
o If prior net income is understated, add
to RE. If overstated deduct from RE.
• Dividends Declared
o Deducted from RE.
• Effects of Changes in Accounting Policy
o Adjustments to Beginning Balances.
o If the effect of the change understates
prior net income, add to RE. If it
overstates, subtract from RE.
• Retirement of Treasury Shares
o If the cost is more than the original
price, the difference is charged to RE.
• Conversion of Preference into Ordinary Shares
o If the total par/stated value of the
Ordinary SC is more than the original
issue price of the Preference SC, the
difference is charged to RE.
• Appropriation of Retained Earnings
 o Any gain (loss) from actual disposal of
NCA HELD FOR SALE assets and settlement of liabilities.
Conditions for Classification o Termination cost of employees and
other costs directly incurred from the
• Available for immediate sale in present discontinued operation.
condition.
• Sale is highly probable: Income Statement
o Management committed to a plan to Sales xxx
sell. Cost of Sales (xxx)
o Active program to locate a buyer Gross Profit xxx
initiated. Expenses (xxx)
o Sale is expected to be complete within 1 Income Before Tax xxx
year. Income Tax Expense (xxx)
o Asset is actively marketed at a Income from Continuing Operation xxx
reasonable price Income from Discontinued Operation, Net of
xxx
o Actions Required to complete the plan Tax
indicates unlikely chance of change or Net Income xxx
withdrawal.

Measurement Disclosure Regarding Discontinued Operation

• Measured at the lower of Carrying Amount or Sales xxx

Fair Value less cost of disposal. Cost of Sales (xxx)
Gross Profit xxx
• Not to be depreciated.
Expenses (xxx)
• Subsequent increase in Fair Value
Impairment Loss (xxx)
o Recognize a gain on reversal of Gain (Loss) from Disposal of Asset xxx
impairment but not in excess of any Termination Cost (xxx)
previously recognized impairment. Income Tax Expense (xxx)
• When entity adopts revaluation model, asset Income from Discontinued Operation, Net of
xxx
should be revalued at Fair Value prior to Tax
reclassification.
o Any cost of disposal shall be recognized
as impairment loss for the period and
deducted from the asset.
o At subsequent year end, the revalued
asset held for sale shall be measured at
the lower of carrying amount and fair
value less cost of disposal.
• An NCA or Disposal group to be abandoned
shall not be classified as Held for Sale.

Change in Classification

• When NCA Held for Sale ceases to be classified

as such:
• Measured at the lower of:
o Carrying amount before classification
adjusted for any depreciation,
amortization, or revaluation that would
have been recognized if the asset
wasn’t classified as such.
o Higher recoverable Amount at the date
of the subsequence decision not to sell.

Discontinued Operation

• Included in Discontinued Operation

o Amount of revenue, expenses, and
income or loss attributable and the
related income tax.
o Impairment loss if any.