PAS 1 Presentation of Financial Statements
Prescribes the basis for the presentation of general
purpose financial statements, the guidelines for their
structure, and the minimum requirements for their
content to ensure comparability.
Financial Statements
Are the structured representation of an entity's
financial position and results of its operations.(PAS
1 Paragraph 9)
Financial Statements
These are the end product of the financial
reporting process and the means by which the
information gathered and processed is
periodically communicated to users. These
pertain only to that entity and not to the
industry where the entity belongs or the
economy.
General purpose financial statements/Financial
Statements
Are those intended to meet the needs of users
who are not in a position to require an entity to
prepare reports tailored to their particular
information needs.(PAS 1 Paragraph 7)
General Purpose Financial
Statements/Financial Statements
These are the subject matter of the Conceptual
Framework and the PFRSs
IFRSs
An entity shall prepare and present general purpose
financial statements in accordance with the
_____________________.
Common users
General purpose financial statements are directed to
all __________________ and not to specific users.
Primary Objective of FS
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.
Secondary Objective of FS
To show the results of management's stewardship
over the entity's resources.
Financial Statements
To meet the objective of
__________________________________, these
must provide information about the following:
a. Assets
b. Liabilities
c. Equity
d. Income and expenses, including gains and losses
e. Contributions by and distributions to owners in
their capacity as owners
f. Cash Flows
Financial Statements
A complete set of ___________________
comprises the following components:
1. Statement of Financial Position;
2. Income Statement
3. Statement of comprehensive income;
4. Statement of changes in equity;
5. Statement of cash flows;
6. Notes;
(5a) Comparative informations; and
7. Additional statement of financial
position(required only when certain instances
occur).
Annually
Financial statements shall be presented at least
_______________.
Fair Representation
It is a feature of financial statements wherein these
statements faithfully representing the effects of
transactions and other events in accordance with the
definitions and recognition criteria for assets,
liabilities, income and expenses set out in the
Conceptual Framework. It also requires the proper
selection and application of accounting policies,
proper presentation of information, and provision of
additional disclosures whenever relevant to the
understanding of the financial statements.
PFRSs
Compliance with the ________________ is
presumed to result in fairly presented financial
statements.
PAS 1
Requires an entity whose financial statements
comply with PRFSs to make an explicit and
unreserved statement of such compliance in the
notes. However, an entity shall not make such
statement unless it complies with all the
requirements of PFRSs.
Relevant regulatory framework
PAS 1 permits a departure from a PFRS
requirement if the
__________________________________________
______ requires or allows such a departure.
Relevant Regulatory Framework
Refers to the accounting principles and other
financial reporting requirements prescribed by a
government regulatory body.
Going Concern
Financial Statements are normally prepared on a
_____________________ basis unless the entity
has an intention to liquidate or has no other
alternative but to do so.
Accrual basis of accounting
All financial statements shall be prepared using the
_____________________________________
except for the statement of cash flows, which is
prepared using cash basis.
Line item
Each material class of similar items is presented
separately. A class of similar items is called a
_________________.
Dissimilar items
Are presented separately unless they are immaterial.
Individually, immaterial items are aggregated with
other items.
Offsetting
Assets and liabilities or income and expenses are
presented separately and are not offset, unless
______________ is required or permitted by a
PFRS.
Offsetting
Is permitted when it reflects the substance of the
transaction. Examples of this are the following:
a. Presenting gains or losses from sales of assets net
of the related selling expenses.
b. Presenting at net amount the unrealized gains and
losses arising from trading securities and from
transaction of foreign currency denominated assets
and liabilities, except if they are material.
c. Presenting a loss from a provision net of a
reimbursement from a third party.
Reporting period
If an entity changes its ___________________ to a
period longer or shorter than one year, it shall
disclose the following:
a. The period covered by the financial statements:
b. The reason for using a longer or shorter period,
and
c. The fact that amounts presented in the financial
statements are not entirely comparable.
Comparative Information
PAS 1 requires an entity to present
________________________ in respect of the
preceding period for all amounts reported in the
current period's financial statements, unless another
PFRS requires otherwise.
Two
As a minimum, an entity presents ________ of each
of the statements and related notes.
Additional statement of financial position
A complete set of financial statements includes an
__________________________________________
_____________ when certain instances occur.
Those instances are as follows:
a. The entity applies an accounting policy
retrospectively, makes a retrospective restatement
of items in its financial statements, or reclassifies
items in its financial statements; and
b. The instance in (a) has a material effect on the
information in the statement of financial position at
the beginning of the preceding period.
as at the beginning of the preceding period
The opening (additional) statement of financial
position is dated
_______________________________________
even if the entity presents comparative information
for earlier periods.
Consistency of presentation
It is a feature of financial statements wherein the
presentation and classification of items in the
financial statements is retained from one period to
the next unless a change in presentation:
a. is required by a PFRS; or
b. results in information that is reliable and more
relevant.
Change in presentation
A __________________________ requires the
reclassification of items in the comparative
information. If the effect of a reclassification is
material, the entity shall provide the "additional
statement of financial position".
Management
The _________________ is responsible for an
entity's financial statements. The responsibility
encompasses:
a. the preparation and fair presentation of financial
statements in accordance with PFRSs;
b. internal control over financial reporting;
c. going concern assessment;
d. oversight over the financial reporting process;
and
e. review and approval of financial statements.
Statement of Management's Responsibility for
Financial Statements
The responsibility of the management are expressly
stated in a document called
__________________________________________
_______, which is attached to the financial
statements as a cover letter. This document is
signed by the entity's
a. Chairman of the Board(or equivalent)
b. Chief Executive Officer(or equivalent), and
c. Chief Financial Officer(or equivalent)
Statement of Financial Position
Is a formal statement showing the three elements
comprising financial position namely, assets,
liiabilities and equity. It also shows the entity's
financial condition as at a certain date. It includes
line items that present the following amounts:
a. Property, plant and equipment;
b. Investment property;
c. Intangible assets;
d. Financial Assets (excluding (e), (h) and (i));
e. Investments accounted for using the equity
method;
f. Biological assets;
g. Investments;
h. Trade and other receivables;
i. Cash and cash equivalents;
j. Assets held for sale, including disposal groups;
k. Trade and other payables;
l. Provisions;
m. Financial liabilities (excluding (k) and (l));
n. Current tax liabilities and current tax assets;
o. Deferred tax liabilities and deferred tax assets;
p. Liabilities included in disposal groups;
q. Non-controlling interests; and
r. Issued capital and reserves attributable to owners
of the parent. (PAS 1 Paragraph 54)
Asset
Defined as resource controlled by the entity as a
result of past events and from which future
economic benefits are expected to flow to the entity.
Essential Characteristics
The _______________________________ of an
asset are:
a. The asset is controlled by the entity.
b. The asset is the result of a past transaction or
event.
c. The asset provides future economic benefits.
d. The cost of the asset can be measured reliably.
Current, noncurrent
Assets are classified only in two, namely
_________________ and _________________.
Classified
A _________________ presentation shows
distinctions between current and noncurrent assets
and current and noncurrent liabilities.
Unclassified
An __________________ presentation (also called
based on liquidity) shows no distinction between
current and noncurrent items.
Classified
A ______________________ presentation shall be
used except when an unclassified presentation
provides information that is reliable and more
relevant.
Mixed presentation
PAS 1 also permits ______________________,
presenting some assets and liabilities using a
current/noncurrent classification and others in order
of liquidity. This may be appropriate when the
entity has diverse operations.
Classified
A _____________________ presentation highlights
an entity's working capital and facilitates the
computation of liquidity and solvency ratios.
Working Capital
This can be computed by deducting the current
liabilities from current assets.
Operating cycle
The _________________ of an entity is the time
between the acquisition of assets for processing and
their realization in cash or cash equivalents.
12 months
When the entity's normal operating cycle is not
clearly identifiable, the duration is assumed to be
________________.
current
Assets and liabilities that are realized or settled as
part of the entity's normal operating cycle (e.g.,
trade receivables, inventory, trade payables, and
some accruals for employee and other operating
costs) are presented as ________________, even if
they are expected to be realized or settled beyond
12 months after the reporting period.
12 months
Assets and liabilities that do not form part of the
entity's normal operating cycle (e.g., non-operating
assets and liabilities) are presented as current only
when they are expected to be realized or settled
within ________________ after the reporting
period.
noncurrent
Deferred tax assets and liabilities are always
presented as ___________________ items in a
classified statement of financial position, regardless
of their expected dates of reversal.
current
PAS 1, paragraph 66, provides that an entity shall
classify an asset as _________ when:
a. The asset is cash or cash equivalent unless the
asset is restricted to settle a liability for more than
twelve months after the reporting period.
b. The entity expects to realize the asset within
twelve months after the reporting period.
c. The entity expects to realize the asset or intends
to sell or consume it within the entity's normal
operating cycle.
liquidity
Current assets are usually listen in the order of
______________.
current assets
PAS 1, paragraph 54, provides that as a minimum,
the line items under ________________________
are:
a. Cash and cash equivalents
b. Financial assets at fair value such as trading
securities and other investments in quoted equity
instruments
c. Trade and other receivables
d. Inventories
e. Prepaid Expenses
noncurrent
PAS 1, paragraph 66, simply states that an entity
shall classify all other assets not classified as
current as ______________.
Noncurrent
___________________ assets include the
following:
a. PPE
b. Long-term investments
c. Intangible assets
d. Deferred tax assets
e. Other noncurrent assets
Property, Plant, and Equipment
PAS 16, paragraph 6, defines
__________________________ as tangible assets
which are held by an entity for use in production or
supply of goods and services, for rental to others, or
for administrative purposes and are expected to be
used during more than one period.(E.g., land,
building, machinery, equipment, furniture, fixtures,
patterns, molds, dies and tools)
land
Most property, plant and equipment, except
__________, are presented at cost less accumulated
depreciation.
Investment
The International Accounting Standards Committee
defines ___________________ as an asset held by
an entity for the accretion of wealth through capital
distribution, such as interest, royalties, dividends
and rentals, for capital appreciation or for other
benefits to the investing entity such as those
obtained through trading relationships.
Intangible Asset
An __________________________ is simply
defined as an identifiable nonmonetary asset
without physical substance.(E.g., patent, franchise,
copyright, lease right, trademark and computer
software)
Goodwill
It is an example of unidentifiable intangible asset.
Liability
A ___________________ is defined as present
obligation of an entity arising from past events, the
settlement of which is expected to result in an
outflow from the entity of resources embodying
economic benefits.
Essential Characteristics
The _______________________ of a liability are:
a. The liability is the present obligation of a
particular entity.
b. The liability arises from past transaction or event.
c. The settlement of the liability requires an outflow
of resources embodying economic benefits.
Current, noncurrent
Liabilities are also classified as
__________________ and __________________.
current
PAS 1, paragraph 69, provides that an entity shall
classify a liability as _______________ when:
a. The entity expects to settle the liability within the
entity's normal operating cycle.
b. The entity holds the liability primarily for the
purpose of trading.
c. The liability is due to be settled within twelve
months after the reporting period.
d. The entity does not have an unconditional right to
defer settlement of the liability for at least twelve
months after the reporting period.
current liabilities
PAS 1, paragraph 54, provides that as a minimum,
the face of the statement of financial shall include
the following line items for
_______________________.
a. Trade and other payables
b. Current provisions
c. Short-term borrowing
d. Current portion of long-term debt
e. Current tax liability
Trade and other payables
The term _________________________________
is a line item for accounts payable, notes payable,
accrued interest on notes payable, dividends
payable and accrued expenses.
objection
No _____________ can be raised if the trade
accounts and notes payable are separately
presented.
noncurrent
PAS 1, paragraph 69, provides that all liabilities not
classified as current are classified as
__________________. Examples of these are:
a. Noncurrent portion of long-term debt
b. Financial lease liability
c. Deferred tax liability
d. Long-term obligations to company officers
e. Long-term deferred revenue
current
A liability which is due to be settled within twelve
months after the reporting period is classified as
_________, even if:
a. The original term was for a period longer than
twelve months
b. An agreement to refinance or to reschedule
payment on a long-term basis is completed after the
reporting period and before the financial statements
are authorized for issue.
noncurrent
If the refinancing on a long-term basis is completed
on or before the end of the reporting period, the
refinancing is an adjusting event and therefore the
obligation is classified as ________________.
noncurrent
If the entity has the discretion to refinance or roll
over an obligation for at least twelve months after
the reporting period under an existing loan facility,
the obligation is classified as _______________
even if it would otherwise be due within a shorter
period.
discretion
If an obligation is to be classifies as noncurrent, the
refinancing or rolling over must be at the
__________ of the entity.
current liability
If the refinancing or rolling over is not at the
discretion of the entity, the obligation is classified
as a _______________________.
Refinancing
Refers to the replacement of an existing debt with a
new one but with different terms, e.g., an extended
maturity date or s revised payment schedule. It is
normally entails a fee or penalty.
troubled debt restructuring
A refinancing where the debtor is under financial
distress.
Loan facility
Refers to a credit line.
current
Liabilities that are payable upon the demand of the
lender are classified as _______________.
Current
A long-term obligation may become payable on
demand as a result of a breach of a loan provision.
Such an obligation is classified as _____________
even if the lender agreed, after the reporting period
and before the authorization of the financial
statements for issue, not to demand payment.
noncurrent
The liability is ________________ if the lender
provides the entity by the end of the reporting
period (e.g., on or before December 31) a grace
period ending at least twelve months after the
reporting period, within the entity can rectify the
breach and during which the lender cannot demand
immediate repayment.
Covenants
Are often attached to borrowing agreements which
represent undertakings by the borrower. These are
actually restrictions on the borrower as to
undertaking further borrowings, paying dividends,
maintaining specified level of working capital and
so forth. Under these, if certain conditions relating
to the borrower's financial situation are breached,
the liability becomes payable on demand.
current
PAS 1, paragraph 74, provides that liability is
classified as ________________ even if the lender
has agreed, after the reporting period and before the
statements are authorized for issue, not to demand
payment as a consequence of the breach.
noncurrent
PAS 1, paragraph 75, provides that the liability is
classified as ________________ if the lender has
agreed on or before the end of reporting period to
provide a grace period ending at least twelve
months after the end of reporting period.
Equity
Is the residual interest in the assets of the entity
after deducting all of its liabilities.
Equity
Simply stated, _____________ means net assets or
total assets minus liabilities.
Owner's Equity
The term use in reporting the equity of
proprietorship.
Partners' Equity
The term used in reporting the equity of a
partnership.
Stockholders' Equity/Shareholders' Equity
The term used in reporting the equity of a
corporation.
owners
Under PAS 1, paragraph 7, the holders of
instruments classified as equity are simply known
as ______________.
Shareholders' equity
Is the residual interest of owners in the net assets of
a corporation measured by the excess of assets over
liabilities.
Notes to the financial statements
Provide narrative description or disaggregation of
items presented in the financial statements and
information about items that do not qualify for
recognition. These are used to report information
that does not fit into the body of the financial
statements in order to enhance the understandability
of the financial statements. Its purpose is to provide
the necessary dsiclosures required by PFRSs.
Report Form
This form sets forth the three major sections in a
downward sequence of assets, liabilities and equity.
Account Form
The presentation follows that of an account,
meaning, the assets are shown on the left side and
the liabilities and equity on the right side of the
statement of financial position.
PAS 1, paragraph 57
Provides that the standard does not prescribe the
order of format in which items are to be presented
in the statement of financial position.
Income Statement
Is a formal statement showing the financial
performance of an entity for a given period of time.
financial performance
The _________________________________ of an
entity is primarily measured in terms of the level of
income earned by the entity through the effective
and efficient utilization of its resources. It is also
known as the results of operations of the entity.
Profit or Loss
Is income less expenses, excluding the component
of other comprehensive income.
Profit
The excess of income over expenses.
Loss
The deficiency of income over expenses.
Transaction approach
The _____________________ is the traditional
preparation of the income statement in conformity
with accounting standards.
Income statement
The __________________________ for a period
presents the income, expenses, gains, losses and net
income or loss recognized during the period.
financial performance
Information about __________________ is useful
in predicting future performance and ability to
generate future cash flows.
extraordinary items
PAS 1 prohibits the presentation of
__________________________ in the statement of
profit or loss and other comprehensive income or in
the notes.
Comprehensive Income
Is the change in equity during a period resulting
from transactions and other events, other than
changes resulting from transactions with owners in
their capacity as owners.
Comprehensive income
These includes:
a. components of profit or loss
b. components of other comprehensive income
Other comprehensive income/OCI
Comprises items of income and expenses including
reclassification adjustments that are not recognized
in profit or loss as required or permitted by PFRSs.
Other Comprehensive Income/OCI
The components of ____________________
include the following:
1. Unrealized gain or loss on equity investment
measured at fair value through other comprehensive
income.(Reclassify to retained earnings)
2. Unrealized gain or loss on debt investment
measured at fair value through other comprehensive
income.(Reclassify to profit or loss)
3. Gain or loss from translation of the financial
statements of a foreign operation.(Reclassify to
profit or loss)
4. Revaluation surplus during the year.(Reclassify
to retained earnings)
5. Unrealized gain or loss from derivative contracts
designated as cash flow hedge.(Reclassify to profit
or loss)
6. Remeasurements of defined benefit plan,
including actuarial gain or loss.(Reclassify to
retained earnings)
7. Change in fair value attributable to credit risk of
a financial liability designated at fair value through
profit or loss.(Reclassify to retained earnings)
two statements, single statement of comprehensive
income
An entity has two options of presenting
comprehensive income, namely:
___________________ and
_____________________.
Income
These are the different sources of
_______________:
a. Sales of merchandise to customers
b. Rendering of services
c. Use of entity resources
d. Disposal of resources other than products
Expense
The components of __________________ include
the following:
a. COGS or Cost of Sales
b. Distribution costs or selling expenses
c. Administrative expenses
d. Other expenses
e. Income tax expense
Distribution costs
Constitute costs which are directly related to selling,
advertising and delivery of goods to customers.
(E.g., salesmen's salaries, salesmen's commissions,
traveling and marketing expenses, advertising and
publicity, freight out, depreciation of delivery
equipment and store equipment)
Administrative expenses
Constitute cost of administering the business. These
ordinarily include all operating expenses not related
to selling and cost of goods sold. (E.g., doubtful
accounts, office salaries, expenses of general
executives, expenses of general accounting and
credit department, office supplies used, certain
taxes, contribution, professional fees, depreciation
of office building and office equipment,
amortization of intangible assets)
Other expenses
Are those expenses which are not directly related to
selling and administrative function. (E.g., loss on
sale of trading investments, loss on disposal of PPE,
loss on sale of noncurrent investment, casualty loss
- flood, earthquake, fire)
extraordinary
PAS 1, paragraph 87, specifically mandates that an
entity shall not present any items of income and
expense as ___________________ either on the
face of the income statement or statement of
comprehensive income or in the loss.
line items
PAS 1, paragraph 82, provides that as a minimum,
the income statement and statement of
comprehensive income shall include the following
___________________:
a. Revenue
b. Gain and loss from the derecognition of financial
asset measured at amortized cost as required by
PFRS 9.
c. Finance cost
d. Share in income or loss of associate and joint
venture accounted for using the equity method
e. Income tax expense
f. A single amount comprising discontinued
operations
g. Profit or loss for the period
h. Total other comprehensive income
i. Comprehensive income for the period being the
total of profit or loss and other comprehensive
income.
face
The following items shall be disclosed on the
___________ of the income statement and
statement of comprehensive income:
a. Profit or loss for the period attributable to
noncontrolling interest and owners of the parent.
b. Total comprehensive income for the period
attributable to noncontrolling interest and owners of
the parent.
function, nature
PAS 1, paragraph 99, provides that an entity shall
present an analysis of expenses recognized in profit
or loss using a classification based on either the
________________ of expenses or their
____________ within the entity, whichever
provides information that is reliable and more
relevant.
functional, natural
The income statement may be presented in two
ways, namely _______________ and
________________.
Functional presentation
This form classifies expenses according to their
functions as part of cost of goods sold, distribution
costs, administrative expenses and other expenses.
It is also known as the cost of goods sold method.
An entity using this form shall disclose additional
information on the nature of expenses, including
depreciation, amortization and employee benefit
costs.
Natural presentation
Under this form, expenses are aggregated according
to their nature and not allocated among the various
functions within the entity. In other words, the
expenses are no longer classified as cost of goods
sold, distribution costs, administrative expenses and
other expenses. In this form, the expenses which of
the same nature are grouped or aggregated and
presented as one item. It is also known as the nature
of expense method.
nature of expense method/natural presentation
The ____________________________ is simpler to
apply because it eliminates considerable judgment
needed in reallocating expenses according to their
function.
Reclassification adjustments
Are amounts reclassified to profit or loss in the
current period that were recognized in other
comprehensive income in the current or previous
periods.
net of tax, gross of tax
Items in OCI, including reclassification
adjustments, may be presented at either
___________________ or
____________________.
Statement of Comprehensive Income
The purpose of this statement is to provide a more
comprehensive information on financial
performance measured more broadly than the
income as traditionally computed.
Comprehensive Income
____________________________ for a period
includes the net income or loss for the period plus
or minus the components of other comprehensive
income.
Single statement of comprehensive income
This statement is the combined income statement
and statement of comprehensive income.
Statement of retained earnings
Shows the changes affecting directly the retained
earnings of an entity and relates the income
statement to the statement of financial position.
retained earnings
The important data affecting the
_________________________ that should be
clearly disclosed in the statement of retained
earnings are:
a. profit or loss for the period
b. prior period errors
c. dividends declared and paid to shareholders
d. effect of change in accounting policy
e. appropriation of retained earnings
Statement of changes in equity
Is a basic statement that shows the movements in
the elements or components of the shareholder's
equity.
statement of changes in equity
The ________________________ shows the
following information:
a. effects of change in accounting policy
(retrospective application) or correction of prior of
period error (retrospective restatement);
b. total comprehensive income for the period; and
c. For each of component of equity, a reconciliation
between the carrying amount at the beginning and
the end of the period, showing separately changes
resulting from:
i. profit or loss;
ii. other comprehensive income; and
iii. transactions with owners, e.g., contributions by
and distributions to owners.
Retrospective adjustments and retrospective
restatements
Are presented in the statement of changes in equity
as adjustments to the opening balance of retained
earnings rather than as changes in equity during the
period.
statement of changes in equity, notes
PAS 1 allows the disclosure of dividends, and the
related amount per share, either in the
___________________________ or in
___________.
Non-owner, owner
______________changes in equity are presented in
the statement of comprehensive income while
__________ changes are presented in the statement
of changes in equity.
Statement of Cash flows
Is a basic component of the financial statements
which summarizes the operating, investing and
financing activities of an entity. It provides
information about the cash receipts and cash
payments of an entity during a period.
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