BSA-1

PAS 41 Accounting for Biological Assets/ Agricultural Activity.

 Biological Assets
Assets that are living plant or animal owned by a business for agricultural activity.
 Agriculture Activity
The management by an entity for the:
Biological transformation (growth) of biological asset for the purpose of sale.
Biological transformation (reproduction) of biological asset for the purpose of
creating biological asset.
Biological transformation of biological asset for the purpose of harvesting agriculture
produce from that asset.
 Application of IAS 41
The standard applies to account for the following when they relate to agricultural
activity:
1. Biological assets, except for bearer plants (IAS 16)
 Biological assets are living animal or plant.
 Bearer plants (versus consumable) is a living plant that:
Used in the production or supply of agricultural
produce;
Expected to bear produce for more than one period;
and
Has a remove likelihood of being sold as agricultural
produce, except for incidental scrap sales. (Maturity will be
reached eventually)
2. Agricultural produce at the point of harvest; and
3. Conditional or unconditional grants relating to a biological asset measured at its
fair value less costs to sell.
 AIS 41 does not apply to:
 Land related to agricultural activity;
 Bearer plants related to agricultural activity. However, this standard applies to
the produce on those bearer plants;
 Intangible aspects related to agricultural activity; and
 Right-of-use assets arising from a lease of land related to agricultural activity.
 Recognition
 An entity shall recognize a biological asset or agricultural produce when, and
only when:
 The entity controls the asset as a result of past events
(Purchased a Cow from procreation);
 It is probable that future economic benefits with the asset will
flow to the entity; (milk production) and
 The fair value or cost of the asset can be measured reliably
(Baby Calf fair value)
  Measurement
Biological Asset
A biological asset (cow, chicken, cotton
plants) shall be measured on initial
recognition and at the end of each reporting
period at its fair value less costs to sell
 Except where the fair value cannot
be measured reliably.
(Fair Value – Costs to sell)
Agricultural Asset
Agricultural produce harvested (eggs, milk,
apple, cherries etc) from an entity’s biological
assets shall be measured at its fair value less
costs to sell at the point of harvest.
 Such measurement is the cost at that
date when applying IAS 2 Inventories
or another applicable standard.

 Subsequent Measurement
Biological Assets Agricultural Assets
 A gain of loss arising on initial  A gain or loss arising on initial
recognition of a biological asset at a recognition of agricultural produce
fair value less costs to sell at fair value less cost to sell shall be
(transportation, commission, included in profit or loss for the
admission fee) and from a change in period in which it arises.
fair value less costs to sell of a 
biological asset shall be included in
profit or loss for the period in which it
arises.
 A loss may arise on initial recognition
of a biological asset, because costs to
sell are deducted in determining fair
value less costs to sell of a biological
asset.
 A gain may issue on initial recognition
of a biological asset, such as when a
calf is born.
 If FAIR VALUE is not measurable – biological asset is measured at cost less
accumulated Depreciation and impairment. Depreciation start when the asset is
mature.
 Biological Assets – IFRS requires companies to carry biological assets at fair value, with
revaluation gains or losses recognized in each period’s income statement.
 Exception for bearer plants.

PAS 32 FINANCIAL INSTRUMENTS

 Financial Instrument
o Any contract that gives rise to both:
1. Financial asset of one’s entity;
2. Financial Liability; or
3. Equity instrument of another entity
  Financial asset
o Is any asset that is a;
1. Cash
2. Equity instrument of another entity
3. Contractual right to:
 Receive cash/ another financial asset
 Exchange financial liabilities with another entity
(favorable condition)
 Contracts settled in the entity’s own equity instruments
o Non-derivative
o Derivative
 Financial Liability
o Contractual obligation to:
1. Deliver cash / another financial asset
2. Exchange financial instruments with another entity (unfavorable
conditions)
o Contract settled in the entity’s own equity instruments
1. Non-derivative
2. Derivative
 Equity Instrument
Any contract that evidences a residual interest in the assets of an entity after deducting
all of its liabilities.
 Presentation of Financial Instruments
Classify financial instrument on initial recognition as a:
 Financial Liability;
 Financial Asset; or
 Equity instrument
According to substance of contractual arrangement
 Compound Financial Instruments
A non-derivative financial instrument with both liability and equity element.
 Treasury shares
o Own shares of an entity
Offsetting a financial asset and a financial liability
o Presenting the liability and asset as 1 single net amount

PAS 28: INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

Associate – an entity, including an unincorporated entity such as a partnership, over which the investor
has significant influence
Significant influence – the power to participate in the financial and operating policy decisions of the
investee but is not control or joint control over those policies.

Evidence of existence of significant influence by an investor

 Representation on the board of directors or equivalent governing body of the investe
  Participation in policy-making processes
 Material transactions between the investor and the investee
 Interchange of managerial personnel
 Provision of essential technical formation
EQUITY METHOD:
 Investment in associates or joint ventures are accounted for using the equity method.
“ORDINARY SHARES HAS THE VOTE POWER AND NOT THE PREFERENCE SHARE”
DISCONTINUANCE OF THE USE OF EQUITY METHOD
 An investor starts to apply the equity method on the date it obtains significant influence and
ceases to apply the equity method on the date it loses significant influence.
 On the loss of significant influence, the investor shall measure at fair value any investment the
investor retains in the former associate. The investor shall recognize i profit or loss.

CLASSIFICATION OF RETAINED INTEREST

Loss of significant influence due to Accounting treatment
 Decrease of ownership interest below  Financial asset at fair value under PFRS 9
20%  Investment in subsidiary under PFRS 3
 Increase of ownership above 50% and PFRS 10

SHARE IN LOSSES OF ASSOCIATE

 If an investor’s share of losses of an associate equal or exceed its interest in the associate, the
investor discontinues recognizing its share of further losses.
 After the investor’s interest in the associate is reduced to zero, additional losses are provided
for; and liability is recognized, only to the extent that the investor has incurred.
 If the associate subsequently reports profits, the investor resumes recognizing its share of those
profits only after its share of the profits equals the share of losses not recognized.

PAS 40 Investment Property

Investment Property
 Is “property (land or a building – or a part of a building – or both) held to earn rentals for capital
appreciation or both, rather than for:
a. Use in the production or supply of goods or services or for administrative purposes; or
b. Sale in the ordinary course of business.”
Measurement
 Initial: Cost
 Subsequent: Either the Cost model or Fair value model
Change in accounting policy
 A change from the cost model to the fair value is accounted for prospectively.
 A change from the fair value model to the cost model is not permitted.

IAS 16: Property, Plant, and Equipment

  Adopted in 1993, many of this statement’s central provisions have been partof international
standards since 1970s.
IAS 16 covers the ff. aspects of accounting for fixed assets:
1. Recognition of initial costs of property, plant and equipment.
2. Recognition of subsequent cost
3. Measurement at initial recognition
4. Measurement after initial recognition
5. Depreciation
6. Derecognition (retirements and disposals)

1. Recognition of initial costs

o Cost includes
 Purchase prise
 All cost needed for asset to perform as intended
 Estimate of cost of dismantling and removing asset along with restoring
site
 Exchange of assets
2. Measurement subsequent to initial recognition
o Cost model
o Revaluation model
Fair value and Frequency of Revaluation
o FV of the asset at the revaluation.
 How much the asset could be exchanged between knowledgeable, willing
parties in an arm’s-length transaction.
o FV of land and buildings is usually determined through appraisals conducted by professional
qualified valuers.
o FV of plant and equipment is also usually determined through appraisal.
o Revalued amounts should not differ materially from fair values at the balance sheet date.
Accumulated depreciation with revaluation
1. Restate the accumulated depreciation proportionately with the change in the gross carrying
amount of the asset so that the carrying amount of the asset after revaluation equals its
revalued amount.
2. Eliminated the accumulated depreciation against the gross carrying amount of the asset, and
restate the net amount to the revalued amount of the asset.
What happens to Revaluation Surplus?
 Revaluation surplus in equity may be transferred to retained earnings when the surplus is
realized.
Realized through use of asset or upon its sale or disposal. Accordingly, the revaluation
surplus in equity may be transferred in one of two ways to retained earnings
1. A lump sum be transferred at the time the asset is sold or scrapped.
2. Within each period, an amount equal to the difference between depreciation on the revalued
amounts and depreciation on the historical cost of the asset may be transferred to retained
earnings.
DEPRECIATION
 This method should reflect the pattern in which the asset’s future economic benefits are
expected to be consumed;
o Straight line depreciation will not always be appropriate.
 Treat any changes prospectively
 Component Depreciation
DERECOGNITION
 Refers to the removal of an asset or liability from the balance sheet and the accounts.
 The carrying amount of an item of PPE is derecognized whem;
 Upon disposal; or
 No future economic benefits are expected from its use or disposal.
 The gain or loss from derecognition of an item of property, plant, and equipment is included in
net income.
 Should be classified as “noncurrent assets held for sale”
 IFRS 5, Noncurrent Assets held for sale and Discontinued Operations, provides guidance with
respect to the accounting treatment for noncurrent assets.

PAS 23: Borrowing Costs

Borrowing Cost
 Are interest and other costs incurred by an entity in connection with the borrowing of funds.
Includes;
1. Interest calculated using the effective interest method;
2. Interest in respect of lease liabilities
3. Exchange differences arising from foreign currency borrowings to the extent that they
are regarded as adjustment to interest costs.
ACCOUNTING FOR BORROWING COSTS
 A qualifying asset is a discrete of an enterprise (not ordinarily or developed by an entity) that
takes substantial period of time to get ready for use of sale.
Power generation assets, facilities, investment property, inventories not produced on a
repetitive basis.
CAPITALIZING BORROWING COST
Specific Borrowings General Borrowings
 The actual interest cost incurred during The lower between:
the construction period less any interest  Actual interest cost incurred during
income on the temporary investment of period of construction; and
the borrowing proceeds.  Weighted average expenditures
multiplied by the weighted average
interest rate.

CESSATION OF CAPITALIZATION
 When substantially all the activities necessary to prepare the qualifying asset for its use or sale
are complete.
REQUIRES DISCLOSURES
 The amount of borrowing costs capitalized during the period.
 The capitalization rate used to determine the amount of borrowing costs eligible for
capitalization.

PFRS 6: EXPLORATION AND EVALUATION OF MINERAL RESOURCES

EXPLORATION AND EVALUATION
 The searched for mineral resources after an entity is obtained legal right to explore in a specific
area as well as the determination of the technical feasibility and commercial viability of
extracting the mineral resources.

Accordingly, exploration and evaluation expenditures do not include the followings;

 Before an entity has obtained the legal right to explore a specific area.
 After the technical feasibility and commercial viability of extracting a mineral resource are
demonstrated.
Exploration and evaluation expenditures include the followings;
 Acquisition of rights to explore
 Topographical, geological, geochemical and geophysical studies
 Exploratory drilling
 Trenching
 Sampling
 Activities in relation to evaluating the technical feasibility and commercial viability of extracting
a mineral resource
 General and administrative cost directly attributable to exploration and evaluation activities.
METHODS OF ACCOUNTING EXPLORATION
 Successful effort method
 Full cost method

PAS 19: EMPPLOYEE BENEFITS

 All forms of consideration given by an entity in exchange for service rendered by employees
4 categories
1. Short-term employee benefits
 Are employee benefits that are due to be settled within 12 months after the end
of the period in which the employees render the related service.
 When an employee has rendered services to an entity during an accounting period, the entity
shall recognize the undiscounted amount of short-term employee benefits expected to be paid
in exchange for that service.
 As liability (accrued expense) after deducting any amount already paid
 As an asset (prepaid expense) if the amount paid is in excess of the
undiscounted amount of the benefits incurred; provided, the prepayment will
lead to a reduction in future payments or a cash refund; and
 As an expense, unless the employee benefit forms part of the cost of an asset,
e.g., as part of the cost of inventories or property, plant and equipment
 o Short-term compensated absences
 Accumulating compensated absences are those that are carried forward and
can be used in future periods if the current period’s entitlement is not used in
full. Accumulating conpensated absences mat either be:
 Vesting
 Non-vesting
 Non-accumulating compensated absences are those that are not carried
forward.

2. Post-employment benefits
 Employee benefits that are payable after the completion of employment. It is
classified as:
 Defined contribution plans
 Defined benefit plans

3. Other long-term employee benefits

 Employee benefits that are due to be settled beyond 12 months after the end of the period in
which the employees render the related service.
 Accounted for using the procedures applicable for a defined benefit plan. However, all of the
components of the net benefit cost are recognized in profit or loss.

4. Termination benefits
 Employee benefits provided in exchange for the termination of an employee’s employment as a
result either;
 An entity’s decision to terminate an employee’s employment before the normal
retirement date; or
 An employee’s decision to accept an entity’s offer of benefits in exchange for
the termination of employment.
 MEASUREMENT
 Termination benefits are payable within 12 months – similarly with short-term
employee benefits.
 Termination benefits beyond 12 months – similarly with other long-term
employee benefits.
 Termination benefits in substance, shall account for the benefits as post-
employment benefits.

PAS 20 ACCOUNTING FOR GOVERNMENT GRANTS AND DISCLOSURE OF GOVERNMENT ASSISTANCE

Government Grants
 Assistance received from the government in the form of resources in exchange for compliance
with certain conditions.
 Exclude government assistance whose value cannot be reasonably measured or cannot be
distinguished from the entity’s normal trading transactions.
Recognition
 The attached conditions will be complied with; and
  The grants will be received

CLASSIFICATIONS OF GOVERNMENT GRANTS ACCORDING TO ATTACHED CONDITION

 Grants related to assets – primary condition is that an entity qualifying for them should
purchase, construct, or otherwise acquire long-term assets.
 Grants related to income – grants other than those related to assets.
INITIAL MEASUREMENT
 Monetary Grants
 Amount cash received
 Fair value of amount receivable
 Amount of loan payable to government for which repayment is forgiven
 Discount on loan payable to government at a below-market rate of interest
 Non-monetary grants
 Fair value of non-monetary assets received
 Alternatively, at nominal amount or zero plus direct costs incurred in preparing
the asset for its intended use.
ACCOUNTING FOR GOV’T GRANTS
 MATCHING TYPE
 The gov’t is recognized as income as the entity recognizes as expense the related cost for which
the grant is intended to compensate.
GOV’T GRANTS RELATED TO ASSETS
 Gross presentation – the grant is presented as deferred income (liability).
 Net presentation – the grant is deducted when computing for the carrying amount of the asset.
GOV’T GRANTS RELATED TO INCOME
 Gross presentation – the grant is present separately or under a general heading such as “other
income”
 Net presentation – the grant is deducted in reporting the related expense.

PAS 21 THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES

FOREIGN CURRENCY TRANSACTIONS
 Individual entities often enter into transactions in a foreign currency.
FOREIGN OPERATIONS
 Groups often include overseas entities.
2 MAIN ACCOUNTING ISSUES
 While exchange rate(s) to use; and
 How to report the effects of changes in exchange rates in the financial statements.
FUNCTIONAL CURRENCY
 Is the currency of the primary economic environment in which entity operates.
FACTORS DETERMINING FUNCTIONAL CURRENCY
Primary factors
 The currency that mainly influences:
 Sales prices
 Cost of goods / cost or services provided
Secondary factors
 The currency in which funds from financing activities are generated.
 The currency in which receipts from operating activities are usually retained.
FOREIGN CURRENCY TRANSACTIONS
Initial recognition
 The foreign currency amount is translated at the spot exchange rate at the transaction.
Subsequent recognition
 Foreign currency monetary items are re-translated using the clothing-rate.
 Non-monetary items that are measured at historical cost in a foreign currency shall be
translated using the exchange rate at the date of the transaction
 Non-monetary items that are measured at fair value in a foreign currency shall be translated
using the exchange rates at the date when the fair value was determined.
MONETARY ITEMS
 Units of currency held and assets and liabilities to be received or paid in a fixed or determinable
number of units of currency.

FOREIGN OPERATIONS
 An entity that is subsidiary, associate, joint venture or branch of a reporting entity, the activities
of which are based or conducted in a country or currency other than those of the reporting
entity.

PAS 24: RELATED PARTY DISCLOSURES

CORE PRINCIPLE
 The financial position and profit or loss of an entity may be affected by a related party
relationship even if related party transactions do not occur. The mere existence of the
relationship may be sufficient to affect the transactions of the entity with other parties
 Necessary disclosure, therefore, should be provided to draw users’ attention to the possible
effects of such relationships and transactions on the financial statements presented.
RELATED PARTIES
 A person or entity that is related to the reporting entity that is preparing its FS.
DEFINITION OF TERMS
 Control – an investor controls an investee when the investor is exposed, or has right, to variable
returns from its involvement with the investee and has the ability to affect those returns
through its power over the investee.
 Significant influence – the power participate in the financial and operating policy decisions of an
entity, but is not control over those policies. Significant influence may be gained by share
ownership, statute or agreement.
 Joint control – is the contractually agreed sharing of control over an economic activity.
 Key management personnel – persons having authority and responsibility for planning.
 Related party transaction – transfer of resources, services, or obligations between a reporting
entity and a related party, regardless of whether a price is charged.
PAS 26: ACCOUNTING AND REPORTING BY RETIREMENT BENEFIT PLANS.
 Applied by, for example, a trustee, when preparing the financial statements of a retirement
benefit plan.
FS OF A DEFINED CONTRIBUTION PLAN
 A statement of net assets available for benefits.
 A statement of changes in net assets available for benefits
 Accompanying notes to the FS.

PAS 33: EARNINGS PER SHARE

 A computation made for ordinary shares.
TYPES
 Basic earnings per share
Profit∨loss less Preferred dividends
Basic EPS =
Weighted average number of the outstandingordinary shares
 CONSIDERATION IN COMPUTING PROFIT LOSS
 Profit or loss should be net of income tax expense
 Profit or loss should be adjusted for the after-tax amounts of
preference dividends, differences arising in the settlement of
preference shares, and other similar effects of preference
shares classified as equity.
 ADJUSMENTS FOR PREFERENCE DIVIDENDS
 If the preference share are cumulative, one-year dividend is
deducted from profit or loss whether declared or not.
 If the preferences are non-cumulative, only the dividend
declared is deducted from profit or loss.
 WEIGHTED AVERAGE NUMBER OF OUTSTANDING ORDINARY SHARES
 Shares are usually time-weighted from the date consideration is
receivable. Thus:
 Shares issued outright are averaged from the
issuance date.
 Subscribed shares are averaged from the
subscription date.
 Treasury shares are averaged.
 Diluted earnings per share
 The amount of profit for the period per share.
 Only basic earnings per share is presented if an entity has no dilutive potential
ordinary shares.
 Diluted EPS =
Profit∨loss plus After tax interest expense on conv
Weighted average number of outstanding ordinary shares plus Incremental
arising the assumed con
¿
PAS 34: INTERIM FINANCIAL REPORTING
Definition of terms
 Interim reporting – pertains to the preparation and presentation of interim financial report for
an interim period.
 Interim period – a financial reporting period shorter than a full financial year.
 Interim financial report – a financial report constraining either:
 A complete set of FS
 A set of condensed FS
For an interim period.

FS UNDER PAS 1
 Statement of financial position
 Statement of profit or loss and other comprehensive income.
 Statement of changes in equity
 Statement of cash flow
 Notes, comprising a summary of significant accounting policies and other explanatory
information
 Statement of financial position as at the beginning of the preceding period.

CONTENT OF AN INTERIM FINANCIAL REPORT UNDER PAS 34

 Condensed statement of financial position
 Condensed statement of profit or loss and other comprehensive income
 Condensed statement of changes in equity
 Condensed statement of cash flows
 Selected explanatory notes

ADDITIONAL CONCEPTS
 Relevance over reliability
 Materiality and estimates
 Note disclosures

PAS 36: IMPAIRMENT OF ASSETS

Core principle
 Carrying amount > Recoverable Amount
IDENTIFYING AN ASSET THAT MAY BE IMPAIRED
 An entity asset at the end of each reporting period whether there is any indication that an asset
may be impaired. If any such indication exists, the entity shall estimate the recoverable amount
of asset.
 If there is no indication that an asset may be impaired, an entity is not required to estimate the
recoverable amount of asset.
REQUIRED TESTING FOR IMPAIRMENT
  Intangible asset w/ definite useful life
 Intangible asset not yet available for use
 Goodwill acquired in a business combination

RECOGNIZING AND MEASURING AN IMPAIRMENT LOSS

 Impairment loss is recognized in profit or loss unless the asset is carried at revalued amount, in
which case revaluation surplus is decreased first and any excess is recognized in profit or loss.
The decrease in the revaluation surplus is recognized in other comprehensive income.
DEPRECIATION AFTER IMPAIRMENT
 After the recognition of an impairment loss, the depreciation charge for the asset shall be
adjusted in future periods to allocate the asset’s revised carrying amount, less its residual value,
on a systematic basis over its remaining useful life
CASH GENERATING UNIT (CGU)
 The smallest identifiable group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of assets.
REVEARSAL OF IMPAIRMENT LOSS
 (d) – (c) = Reversal of impairment loss recognized in other comprehensive income
 (c) – (b) = Reversal of Impairment loss recognized in profit or loss

PAS 37: PROVISIONS AND CONTINGENT LIABILITIES AND CONTINGENT ASSETS

DEFINITION OF TERMS:
 Provision – a liability of uncertain timing or amount
 Liability – a present obligation of the entity arising from past events, the settlement of which is
expected to result in an outflow from the entity of resources embodying economic benefits
 Obligating event – an event that creates legal or constructive obligation that results in an entity
having no realistic alternative to settling that obligation.
 Legal obligation – an obligation that derives from: a contract; legislation; or other operation
law.
 Constructive obligation – derives from an entity’s action
 Contingent liability – a possible obligation that arises from past events and whose existence will
be confirmed only by the occurrence or non-occurrence of one or more uncertain future events
not wholly within the control of an entity.
 Contingent asset – a possible asset that arises from past events the existence will be confirmed
only by the occurrence or non-occurrence of the entity.
 Onerous contracts – the unavoidable costs of meeting the obligations under the contract
exceed the economic benefits expected to be received under it.
 Restructuring – a program that is planned and controlled by management and materially
changes
CLASSES OF LIABILITIES
 Trade Payables
 Accruals
 Provisions
  Contingent Liabilities
RECOGNITION:
 Provisions shall be when all are present
 Present obligation
 Probable that an outflow
 Reliable estimate
 CONTINGENT LIABILITY
 Disclosed
 Except, if outflow of economic benefit is remote, do nothing
 CONTINGENT ASSETS
 Not disclosed
 Except if probable inflow of economic benefit, then Disclosed.

MEASUREMENT OF PROVISIONS
 Determined by the judgment of the management of the entity
 Uncertainties on the bet estimate
 Measured before tax
 Use present value when the effect of the time value of money is material
 Future events shall be reflected in the amount of a provision where there is a sufficient objective
evidence that they will occur
 Expected disposal of assets.
 Reimbursements
 Changes in and use of provisions, provisions shall be reviewed at the end of each reporting
period.

CHANGES IN PROVISIONS
 Provision shall be reviewed at the end of each reporting period and adjusted to reflect the
current best estimate.
 It is no longer probable that an outflow of resources embodying economic benefits will be
required to settle the obligation, the provision shall be reversed.

PAS 38: INTANGIBLE ASSET

 Intangible – unable to touched or grasped; no physical presence
 Asset – resource controlled by the company; result of past event; future economic benefit
Intangible asset
 Identifiable, non-monetary asset w/out any physical substance
INITIAL MEASUREMENT
 Shall be measured at any cost. May recognized through the ff.
 Separate Acquisition
 Purchase price
 Directly attributable cost
 Acquisition as a part of a business combination
 Acquisition by way of government grant
 Exchanges of assets
  Internally generated intangible assets
 Research phase
 Development phase

SUBSEQUENT MEASUREMENT
 Similar to PPE
 Cost model
 Revaluation model

AMORTIZATION OF INTANGIBLES
 Same concept with that of depreciating items of PPE
 Finite of indefinite
 Renewable legal wife
IMPAIRMENT OF INTANGIBLES
 Carrying amount of the asset exceeds its recoverable amount
 Recoverable amount of an intangible asset with an indefinite useful life
 Value in use = expected annual cash flows / discount rate