Pas 1 – Presentation of Financial Statements

FINANCIAL STATEMENTS
are structured. financial representation of the financial position and financial performance of an entity.
▪ OBJECTIVE OF FINANCIAL STATEMENTS
1. PRIMARY OBJECTIVE: To provide information about the financial position, financial performance
and cash flows of an entity that is useful to a wide range of users in making economic decisions.
2. SECONDARY OBJECTIVE: To show the results of the management's stewardship of the resources
entrusted to it.
To meet this objective, the financial statements provide information about the following:
1. Asset
2. Liabilities
3. Equity
4. Income and Expenses
5. Contributions by and Distributions to owners in their capacity as owners
6. Cash Flows

General Features of Financial Statements

 FREQUENCY OF REPORTING -An entity shall present a complete set of financial statements at least
annually.
An entity shall disclose:
 The period covered by the financial statements
 The reason for using a longer or shorter period
 The fact that amounts presented in the financial statements are not entirely comparable

 FAIR PRESENTATION & COMPLIANCE WITH PERS - Fair presentation is achieved if the financial
statements are prepared in accordance with PFRS which represent the Generally Accepted Accounting
Principles in the Philippines.
 . FAIR PRESENTATION & COMPLIANCE WITH PERS - Fair presentation requires an entity
a) To select and apply accounting policies in accordance with PFRS
b) To present information that provides relevant, reliable, comparable, and understandable information.
c) To provide additional disclosure necessary for the users to understand the entity's financial statement.
 GOING CONCERN
 ACCRUAL BASIS - Accrual accounting means that income is recognized when earned regardless of
when received and expenses is recognized when incurred regardless of when paid.
 . MATERIALITY AND AGGREGATION - An entity shall present separately each material class of
similar items. A class of similar items is called a "LINE ITEM". Dissimilar items are presented
separately unless they are immaterial.

 . COMPARATIVE INFORMATION
 PAS 1 requires an entity to present comparative information in respect of the preceding period for all
amounts and for certain narrative information in the current period's FS.

 OFFSETTING - Applicable to Income and Expense if permitted by PFRS. The reporting of assets net
valuation allowance is not offsetting.
 .CONSISTENCY OF PRESENTATION - Shall be uniform from one accounting period to the next
- Any changes are allowed:
1. Permitted by PFRS;
2. Results to more relevant and reliable information.

✓Statement of Financial Position

✓ Statement of profit or loss and other comprehensive income or Statement of Comprehensive Income

✓ Statement of Changes in Equity

✓ Statement of Cash Flow

✓ Notes

✓ Additional Statement of Financial Position (THIRD BALANCE SHEET)

 The entity applies an accounting retrospectively
 The entity corrected prior period errors through retrospective restatement
 The entity reclassifies items in the financial statements
Before significant amendments of PAS 1, this statement was simply called "balance sheet", however, it was
renamed.
PAS 1 requires presentation of classified statement of financial position where current assets or liabilities are
separated from non-current assets or liabilities. Basically, the asset or liability is current when it is expected to
be recovered or settled within 12 months after the reporting period.
Further sub-classifications of the line items shall be disclosed either directly in the statement of financial
position or in the notes, such as disaggregation of property, plant and equipment into dasses, and similar. Also,
certain information related to the share capital, reserves and a few others shall be included in the statement of
financial position, the statement of changes in equity or in the notes.
PAS 1 does NOT prescribe the precise format of the statement of financial position. Instead, several formats are
acceptable if they fulfil all requirements outlined above.
The statement of comprehensive income has 2 basic elements:
1. Profit or loss for the period: here, all items of income and expenses must be recognized.

2. Other comprehensive income: items recognized directly to equity or reserves, such as changes in
revaluation surplus, gains, or losses from subsequent measurement of available-for-sale financial assets,
etc.
As opposed to US GAAP, PAS 1 prohibits to report any transaction or item as extraordinary items.
Profit or loss for the period, as well as total comprehensive income shall be both presented in allocation
 attributable to non-controlling interests and
 attributable to owners of the parent.
The entity might choose to classify expenses recognized in profit or loss for the period by their nature or by
their function.
PAS 1 requires disclosure of certain items separately, either in the statement of comprehensive income, or in
the notes. These items are as follows: write-downs of inventories and property, plant and equipment, their
reversals, restructuring of activities and reversals of related provisions, disposals of property, plant and
equipment, disposals of investments, discontinuing operations, litigation settlements and other reversals of
provisions.
Comprehensive Income is classified into two:
1. Profit/Loss (P/L) or
2. Other Comprehensive Income (OCI).
General rule: An income is part of profit or loss unless it will be classified as OCI.
As a minimum, the statement of changes in equity must contain the following items:
1. Total comprehensive income for the period, showing separately amounts attributable to owners of the
parent and to non-controlling interests
2. The effect of retrospective application or restatement for each component of equity (if applicable)
3. The reconciliation between the carrying amount at the beginning and the end of the period for each
component of equity. Here, the following changes shall be disclosed separately:
o those resulting from profit or loss
o or resulting from other comprehensive income
o resulting from transactions with owners (contributions, distributions, and changes in ownership)

Also, PAS 1 prescribes to present amount of dividends recognized as distributions and the related amount per
share on the face of the statement of changes in equity or in the notes.
The notes are meant to be the document accompanying numerical financial statements listed above. They
should provide additional information not contained in the numbers, the basis of preparation of the financial
statements and some additional information that might be relevant.

PAS 1 sets that the notes shall contain a statement of compliance with PFRS, summary of significant accounting
policies applied, supporting information for the numbers presented in the financial statements and other
disclosures.