PAS 29 Summary - This document summarizes PAS 29 of

Conceptual Framework and Accounting Standard.

BS Accountancy (Palawan State University)

Studocu is not sponsored or endorsed by any college or university

Downloaded by Cristine Mae Castro (cristinemaecastro7@gmail.com)
PAS 29 FINANCIAL REPORTING IN
HYPERINFLATIONARY ECONOMIES

I. NATURE
PAS 29 prescribes the restatement procedures for the financial statements of an
entity whose functional currency is the currency of a hyperinflationary economy.
PAS 29 does not prescribe an absolute rate at which hyperinflation is deemed to
arise. This is a matter of judgment. Instead, PAS 29 provides the following indicators
which an entity considers when determining the existence of hyperinflation.
a. The general population prefers to keep its wealth in non-monetary assets
or in a relatively stable foreign currency. Amounts of local currency held
are immediately invested to maintain purchasing power.
b. The general population regards monetary amounts not in terms of the
local currency but in terms of a relatively stable foreign currency. Prices
may be quoted in that currency;
c. Sales and purchases on credit take place at prices that compensate for the
expected loss of purchasing power during the credit period, even if the
period is short;
d. Interest rates, wages and prices are linked to a price index; and
e. The cumulative inflation rate over three years is approaching, or
exceeds, 100%.

PAS 29 prohibits the presentation of the required information as supplement to

unrestated financial statements. PAS 29 discourages the separate presentation of the
financial statements before restatement.

II. TRANSACTION
Entity A operates in a hyperinflationary economy. Entity A’s building has a carrying
amount of 1M on December 31, 20x2. The building was acquired on June 21, 20x0.
The general indices are as follows:
June 21, 20x0 100
December 31, 20x1 150
Average – 20x2 180
December 31, 20x2 200

The building’s carrying amount is restated as follows:

1M 200 current priceindex , Dec. 31, 20 x 2

x = 100 Historical price index , June 21, 20 x 2

Downloaded by Cristine Mae Castro (cristinemaecastro7@gmail.com)

 =2M restated amount to current measuring unit as of Dec. 31, 20x2

Assume that the 20x2 depreciation expense on the building is 200,000. The depreciation is
restated in the same manner as follows: (200K x 200/100) = 400K.

Assume further that the carrying amount of the building is 1.2M on December 31, 20x1.
This corresponding figure is restated also in the same manner as follows : (1.2M x 200/100)
= 2.4M.

III. DISCLOSURES
a. The fact that the financial statements, including corresponding figures,
have been restated for changes in the general purchasing power of the
reporting currency.
b. Whether the financial statements are based on historical cost or current cost.
c. The identity and level of the price index at the end of the reporting
period and the movements during the current and previous periods.

Downloaded by Cristine Mae Castro (cristinemaecastro7@gmail.com)

 PAS 32 FINANCIAL INSTRUMENTS
PRESENTATION
I. NATURE
PAS 32 prescribes the principles for presenting financial instruments as liabilities or
equity and for offsetting financial assets and financial liabilities.

PAS 32 complements PFRS 9 Financial Instruments, which prescribes the recognition

and measurement of financial assets and financial liabilities, and PFRS 7 Financial
Instruments: Disclosures, which prescribes the disclosures for financial instruments.

PAS 32 applies to all types of financial instruments except the following for which
other standards apply:
a. Investments in subsidiaries, associates and joint ventures;
b. Employer’s rights and obligations under employee benefit plans and
share- based payments; and
c. Insurance contracts

PAS 32 applies to instruments designated to be measured at fair value through

profit or loss and contracts for the future purchase or delivery of a commodity or other
nonfinancial items that can be settled net.

I. TRANSACTION

Entity A issues convertible bonds with face amount of 1,000,000 for 1,050,000.
Each 1,000 bond is convertible into 8 shares with par value of 100 per share. On
issuance date, the bonds are selling at 98 without the conversion option.

Downloaded by Cristine Mae Castro (cristinemaecastro7@gmail.com)

 The issue price is allocated to the liability and equity components as follows:

Issue price 1,050,000

Fair value of debt instrument without equity feature 980,000
Equity Component 70,000

II. PRESENTATION
The issuer classifies a financial instrument, or its component parts, as a financial
asset, a financial liability or an equity instrument in accordance with the substance
of the contract (rather than its legal form) and the definitions of a financial asset, a
financial liability and an equity instrument.
When determining whether a financial instrument is a financial liability or an equity
instrument, the overriding consideration is whether the instrument meets the
definition of a financial liability.

FINANCIAL LIABILITY EQUITY INSTRUMENT

The entity has a contractual obligation to pay The entity has no obligation to pay cash
or cash or another financial asset or to another financial asset or to exchange
exchange financial instruments under financial instruments under potentially
potentially unfavorable condition. unfavorable condition

FINANCIAL LIABILITY FINANCIAL INSTRUMENT

• The contract requires the delivery of The contract requires the delivery
(a) variable number of the entity’s (receipt) of a fixed number of the
own equity instruments in exchange entity’s own equity instruments in
for a fixed amount of cash or another exchange for a fixed amount of
financial asset or (b) a fixed number cash or other financial asset.
of the entity’s own equity instruments
in exchange for a variable amount of Example: a share option that
cash or another financial asset. gives the holder a right to buy a
• Examples: fixed number of the issuer’s
a. Variable number for fixed shares for a fixed price.
amount:
- A contract to deliver as

Downloaded by Cristine Mae Castro (cristinemaecastro7@gmail.com)

 many shares as are equal
to the value of a fixed
amount of cash, say
100,000 or a fixed number
of units of a commodity,
say 50 grams of gold.
b. Fixed number for a variable
amount:
- A contract to deliver 1,000
own equity instruments in
exchange for an amount
of cash equal to the value
of 10 grams of gold.

NOTES:
FINANCIAL ASSET/ LIABILITY EQUITY INSTRUMENTS
• Variable number for a fixed amount. • Fixed number for a fixed amount
• Fixed number for a variable amount.

Downloaded by Cristine Mae Castro (cristinemaecastro7@gmail.com)

 PAS 33 EARNINGS PER SHARE
I. NATURE
PAS 33 prescribes the principles in computing and presenting earnings per share
(EPS) to promote inter – and intra- comparability of performance of entities.

PAS 33 recognizes the EPS data may have limitations – particularly on ‘earnings’
which is the numerator in the EPS calculation. Therefore, the focus of PAS 33 is on
the consistent determination of the denominator of the EPS calculation.

PAS 33 require publicly listed entities, including those in the process of enlisting, to
present EPS information. A publicly listed entity is one whose ordinary shares or
potential ordinary shares are traded in a public market (e.g Philippine Stock Exchange
‘PSE’)

Non-publicly listed entities are not required to present EPS information. However, if
they choose to do so, they will need to apply PAS 33.

II. PRESENTATION
The two EPS (basic and diluted) are presented with equal prominence on the face
of the statement of profit or loss and other comprehensive income. If the entity
uses a ‘two-statement’ presentation as described in PAS 1, it presents the EPS only
in the separate statement of profit or loss.
EPS is presented every time a statement of profit or loss and other
comprehensive income is presented, including comparatives. If diluted EPS is
presented for at least one period, it will be presented for all periods, even if it
equals basic EPS.

Basic and diluted EPS are presented even if the amounts are negative (i.e., loss per
share)
If an entity reports discontinued operations, it presents basic and diluted EPS for
each of the following:
a. Profit or loss from continuing operations,
b. Results of discontinued opeartions, and
c. Profit or loss for year.

An entity is not required to present EPS on other comprehensive income and total
comprehensive income.

Downloaded by Cristine Mae Castro (cristinemaecastro7@gmail.com)

PAS 34 INTERIM FINANCIAL
REPORTING
I. NATURE
PAS 34 prescribes the minimum content of an interim financial report and the
recognition and measurement principles in complete or condensed financial
statements for an interim period.
PAS 34 does not mandate which entities should produce interim financial reports.
PAS 34 is applied when an entity chooses, or is required by the government or
other institution, to publish interim financial report that complies with PFRSs.
PAS 34, however, encourages publicly listed entities to provide at least a semi-
annual financial report for the first half of the year to be issued not later than 60
days after the end of the interim period.

II. PRESENTATION
An interim financial report is a financial report prepared for an interim period and
contains either:
a. A complete set of financial statements as described in PAS 1; or
b. A set of condensed financial statements as described in PAS 34

An entity presenting an interim financial report has the option of applying either
PAS 1 or PAS 34.

a. The entity applies PAS 1 if it opts to provide a complete set of

financial statements in its interim financial report.
b. The entity applies PAS 34 if it opts to provide a condensed set of
financial statements in its interim financial report.

PAS 1 COMPLETE SET OF FS PAS 34 CONDENSED SET OF FS

1. Statement of financial position 1. Condenses statement of
2. Statement of profit or loss and financial position
other comprehensive income 2. Condensed statement of profit
3. Statement of changes in equity or loss and other comprehensive
4. Statement of cash flows income
5. Notes 3. Condensed statement of
Comparative Information changes in equity
6. Additional statement of financial 4. Condensed statement of
position (required only when cash flows
certain instances occur) 5. Selected explanatory notes

Downloaded by Cristine Mae Castro (cristinemaecastro7@gmail.com)

III. RECOGNITION AND MEASUREMENT
The same accounting policies are used in interim reports as those used in annual
except for accounting policy changes made after the date of the most recent annual
financial statements that are to be reflected in the next annual financial statements.
IV. OTHER DISCLOSURES

In addition to significant events and transactions, the following are also disclosed in the
interim financial report:

a. A statement that the same accounting policies were used in the interim
financial statements as those in the latest annual financial statements. If there
have been changes, those changes are disclosed.
b. Explanation of seasonality or cyclicality of interim operation
c. Unusual items affecting the financial statement elements
d. Changes in accounting estimates
e. Issuances and settlements of debt and equity securities
f. Dividends paid
g. Segment information ( if the entity is covered by PFRS 8)
h. Events after the reporting period
i. Changes in the composition of the entity, e,g,. business combinations,
obtaining or losing control of subsidiaries, restructurings, and discontinued
operations
j. Disclosures on the fair value of financial instruments
k. Disclosures required by PFRS 12 when the entity becomes or ceases to be
an investment entity
l. Disaggregation of revenue from contracts with customers as required by PFRS 15.

Downloaded by Cristine Mae Castro (cristinemaecastro7@gmail.com)

 PAS 36 IMPAIRMENT OF ASSETS
I. NATURE
PAS 36 prescribes the procedures necessary to ensure that assets are not carried in
excess of their recoverable amount.
PAS 36 applies in accounting for the impairment of the following assets:
a. Property, plant and equipment
b. Investment property measured under the cost model
c. Investments in associates, joint ventures and subsidiaries
d. Intangible assets
e. Goodwill

II. TRANSACTION
On December 31, 20x1, Entity A determines that its building is impaired. The
following information is gathered.

Building 1,000,000
Accumulated depreciation 300,000
Fair value less costs of disposal 600,000
Value in use (VIU) 580,000

The impairment loss is computed as

follows:

Recoverable amount (higher of FVLCD and VIN) 600,000

Less: Carrying amount (700,000)
Impairment loss 100,000

Downloaded by Cristine Mae Castro (cristinemaecastro7@gmail.com)

PAS 37 PROVISIONS, CONTINGENT
LIABILITIES AND CONTINGENT ASSETS
I. NATURE
PAS 37 prescribes the accounting and disclosure requirements for provisions,
contingent liabilities and contingent assets to help users understand their nature,
timing and amount.
PAS 37 applies to the accounting for provisions, contingent liabilities and contingent
assets, except those arising from executor contracts, unless they are onerous, and
those that are covered by other PFRSs.

II. RECOGNITION
A provision is recognized when all of the following conditions are met:
a. The entity has a present obligation (legal or constructive) resulting from
a past event
b. It is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation; and
c. The amount of the obligation can be reliably

estimated. If any of the conditions is not met, no provision is

recognized.

III. MEASUREMENT
Provisions are measured at the best estimate of the amount needed to settle them
at the end of the reporting period.
Making the estimate requires management’s judgment, supplemented by
experience from similar transactions, and in some cases, reports from independent
experts. The estimate also considers events after the reporting period.
If the provision being measured involved a large population of items, the obligation
is measured at its “expected value”.

IV. DISCLOSURE
a. Reconciliation for each class of provision showing:
i. Beginning balance
ii. Additions (additional provisions recognized, unwinding of discount, and
effect of a charge in the discount rate)
iii. Deductions (amounts charged against the provision or reversed)
iv. Ending Balance

b. Comparative information is not required

Downloaded by Cristine Mae Castro (cristinemaecastro7@gmail.com)

c. For each of provision, a brief description of the:
i. Nature
ii. Timing
iii. Uncertainties
iv. Assumptions
v. Reimbursement

PAS 38 INTANGIBLE ASSETS

Downloaded by Cristine Mae Castro (cristinemaecastro7@gmail.com)

 I. NATURE
PAS 38 applies to all intangible assets except those that are specifically dealt with
under other standards.
For example, PAS 38 does not apply to goodwill acquired in a business
combination (PFRS 3), intangible assets held as inventory (PAS 2), and intangible
assets classified as held for sale (PFRS 5).

II. PRESENTATION
Intangible assets accounted for under PAS 38 are presented separately from goodwill.
Such intangible assets are aggregated and presented as one line item under the
heading “Intangible assets” or “Other intangible assets” in the statement of financial
position. The breakdown of the line item is disclosed in the notes. Goodwill is
presented separately under a line item described as “Goodwill”.

III. TRANSACTION

IV. RECOGNITION
An intangible asset is recognized when it meets the definition of an intangible
asset as well as the asset recognition criteria of “probable future economic
benefits” and “reliable measurement of cost”.

V. INITIAL MEASUREMENT
Intangible assets are initially measured as cost.
The measurement of cost depends on how the intangible asset is acquired.
Intangible assets may be acquired through:
a. Separate acquisition
b. Acquisition as part of a business combination
c. Acquisition by way of a government grant
d. Exchanges of assets; or
e. Internal generation

VI. SUBSEQUENT MEASUREMENT

After initial recognition, an entity chooses either the cost model or the revaluation
model as its accounting policy and applies that policy to an entire class of intangible
assets

COST MODEL REVALUATION MODEL

The intangible asset is carried at its cost less The intangible asset is carried at its fair value

Downloaded by Cristine Mae Castro (cristinemaecastro7@gmail.com)

any accumulated amortization and at the date of the revaluation less any
any accumulated impairment losses. subsequent accumulated depreciation and
subsequent accumulated impairment
losses.

VII. DISCLOSURE
The following are disclosed for each class of intangible assets distinguishing
between internally generated intangible assets and other intangible assets:
a. Whether the useful lives are indefinite or finite and, if finite, the useful
lives or the amortization rates used.
b. Amortization methods used;
c. Gross carrying amount and any accumulated amortization (aggregated
with accumulated impairment losses) at the beginning and end of the
period;
d. The line item(s) of the statement of comprehensive income in which
any amortization of intangible assets is included;
e. A reconciliation of the carrying amount at the beginning and end of
the period showing increases and decreases to intangible assets and
related accumulated amortization and accumulated impairment loss.
f. Changes in accounting estimates in accordance with PAS 8.
g. Intangible assets assessed as having indefinite useful lives and
reasons supporting the assessments.
h. Intangible assets acquired by way of a government grant and
initially recognized at fair value.
i. Any restriction on title to intangible assets
j. Contractual commitments to acquire intangible assets and the methods
and assumptions used in estimating fair values of intangible assets
k. Revaluation surplus recognized on revalued intangible assets and the
methods and assumptions used in estimating fair values of intangible
assets.
l. Aggregate amount of research and development expenditure recognized
as an expense during the period.
m. The following are encouraged, but not required, disclosures:
i. Description of any fully amortized intangible asset that is still in
use; and
ii. Brief description of significant intangible assets controlled by the
entity but not recognized as assets because they did not meet
the recognition criteria.

Downloaded by Cristine Mae Castro (cristinemaecastro7@gmail.com)

 PAS 40 INVESTMENT PROPERTY
I. NATURE
PAS 40 prescribes the accounting and disclosure requirements for investment
property.

II. TRANSACTION

III. RECOGNITION
An investment property is recognized when it meets the definition of an investment
property as well as the asset recognition criteria of “probable future economic
benefits” and “reliable measurement of cost.”

IV. INITIAL MEASUREMENT

An investment property is initially measured at cost. The measurement of cost
depends on the mode of acquisition.

V. SUBSEQUENT MEASUREMENT
After the initial recognition, an entity chooses either the cost model or the fair value
model as its accounting policy and applies that policy to all of its investment
property.
Only one model shall be used. Using both models selectively for items of
investment property is prohibited , except in the following cases

Downloaded by Cristine Mae Castro (cristinemaecastro7@gmail.com)