INTERMEDIATE ACCOUNTING 3

Chapter 1: Statement of Financial Position

Objective of PAS 1
- PAS 1 prescribes the basis for presentation of general-
purpose financial statements to improve comparability
both with the entity's financial statements of previous
periods and with the financial statements of other
entities.
- PAS 1 permits departure from a PFRS requirement.
And when an entity departs from that requirement it
shall disclose the following;
i. that all other PFRSs are complied with.
ii. the title of the PFRS which the entity has
departed.
iii. the financial effect of the departure.

Financial Statements
2. Going Concern
- the structured representation of an entity’s financial
position and result of its operation. - financial statements are normally prepared in a going
concern basis unless;
- it is the end product of the financial reporting process.
 the entity has an intention to liquidate
Primary Objective: provide info’s about the financial
 the entity has no other alternative but to do so
position, financial performance, and cash flows of an
entity that is helpful for decision making. - the assessment of going concern is at least 12 months
from the reporting date.
Secondary Objective: to show results of management’s
stewardships over the entity’s resources. - if entity has history of profitable operations and ready
access to financial resources, the entity then is a going
concern without detailed analysis.
General Purpose Financial Statements
- if entity has material uncertainties to continue as a
- caters to the common needs of wide range of external going concern, those uncertainties shall be disclosed.
users.
- if entity is not going concern, its FS shall be prepared
- intends to meet the needs of users who are not in a using another basis.
position to require an entity to prepare reports.
- subject matter of Conceptual Framework and PFRSs.

Complete set of Financial Statements

3. Accrual Basis of Accounting
1. Statement of financial position (aka balance sheet)
- an entity shall prepare its financial statements, except
2. Statement of profit or loss and other comprehensive
for cash flow information, using the accrual basis of
income (aka statement of comprehensive income)
accounting.
3. Statement of changes in equity
4. Statement of cash flows
5. Notes
(5a) comparative information in respect of the 4. Materiality & Aggregation
preceding period; and - Each material class of similar items must be presented
6. A statement of financial position as at the beginning separately in the financial statements.
of the preceding period when an entity applies an
accounting policy retrospectively or makes a
retrospective restatement of items in its financial
5. Offsetting
statements, or when it reclassifies items in its
financial statements. - Assets and liabilities, and income and expenses, shall
not be offset unless required or permitted by a PFRS.
*income statement is different from statement of profit
or loss and other income as well as statement of - Measuring assets net of valuation allowances are not
comprehensive income offsetting.

General Features of Financial Statement 6. Frequency of reporting

1. Fair Presentation and Compliance with PFRSs - An entity shall present a complete set of financial
statements (including comparative information) at least
- compliance with the PFRSs is presumed to result in
annually.
fairly presented financial statement.
When an entity changes the end of its reporting period
- entity shall not make statements unless it complies with
and presents financial statements for a period longer or
all the requirements of PFRS.
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Chapter 1: Statement of Financial Position
shorter than one year, an entity shall disclose the
following;
i. The period covered by the financial statements:
ii. The reason for using a longer or shorter period,
and
iii. The fact that amounts presented in the financial
statements are not entirely comparable. Current Assets
An entity shall classify an asset as current when:

7. Comparative Information 1. it expects to realize the asset or intends to sell or

- An entity shall present comparative information in
respect of the preceding period for all amounts reported
in the current period’s financial statements, unless other
standards permit or require otherwise.
Intracomparability – comparing FS from another
period
Intercomparability – comparing FS to other entity
8. Consistency of presentation
- An entity shall retain the presentation and classification
of items in the financial statements from one period to
the next unless:
a. it is apparent that another presentation or
classification would be more appropriate
following a significant change in the nature of
the entity’s operations or a review of its financial
statements; or
b. a PFRS requires a change in presentation.
consume it, in its normal operating cycle;
2. it holds the asset primarily for the purpose of trading;
3. it expects to realize the asset within twelve months
after the reporting period; or
4. the asset is cash or a cash equivalent unless the asset is
restricted from being exchanged or used to settle a
liability for at least twelve months after the reporting
period.
Current Liabilities
An entity shall classify a liability as current when:
1. it expects to settle the liability in its normal operating
cycle;
2. it holds the liability primarily for the purpose of
trading;
3. the liability is due to be settled within twelve months
after the reporting period; or

Additional Statement of Financial Position 4. the entity does not have an unconditional right to defer
settlement of the liability for at least twelve months after
A statement of financial position as at the beginning of the reporting period.
the preceding period shall be presented when an entity;
1. Applies an accounting policy retrospectively or
2. Makes a retrospective restatement of items in its Currently Maturing Long-Term Liabilities
financial statements, or
General rule: Currently maturing long term liabilities
3. When it reclassifies items in its financial
are presented as current liabilities.
statements
Exceptions:
….and the effect of the event to the statement of
financial position as at the beginning of the preceding 1. Refinancing agreement fully completed on or
period is material. before the balance sheet date – noncurrent liability
2. Refinancing agreement after the balance sheet date
but before the financial statements are authorized
Statement of Financial Position for issue – non-current liability if the refinancing is
at the discretion of the entity.
A statement of financial position may be presented as
either
1. Classified (current/non-current distinction) –
showing current and noncurrent assets and
liabilities, or
2. Unclassified (based on liquidity) – showing no Breach Of Loan Agreement
distinction between current and noncurrent items
General rule: A liability that is payable on demand is a
*unclassified presentation is used when it provides current liability.
information that is reliable and more relevant.
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Chapter 1: Statement of Financial Position
Exception: It is presented as non-current liability if the
lender provides the entity, on or before the balance
sheet date, a grace period ending at least 12 months
after the balance sheet date to rectify a breach of loan
covenant.

Presentation Of Deferred Taxes

Deferred tax liabilities (assets) shall be presented as
noncurrent items in a classified statement of financial
position, irrespective of their expected dates of
reversal.

Minimum Line Items in The Statement of Financial

Position
a. Property, plant and equipment;
b. Investment property;
c. Intangible assets;
d. financial assets (excluding amounts shown under
(e), (h) and (i));
e. Investments accounted for using the equity
method;
f. Biological assets;
g. Inventories;
h. Trade and other receivables;
i. Cash and cash equivalents;
j. Assets classified as held for sale (Groups classified
as held for sale) in accordance with PFRS 5;
k. Trade and other payables;
l. Provisions;
m. Financial liabilities (excluding amounts shown
under (k) and (l));
n. Liabilities and assets for current tax, as defined in
PAS 12 Income Taxes;
o. Deferred tax liabilities and deferred tax assets, as
defined in PAS 12;
p. Liabilities included in disposal groups classified as
held for sale in accordance with PFRS 5;
q. Non-controlling interests, presented within equity;
and
r. Issued capital and reserves attributable to owners
of the parent

Order/ Format of Presentation

PAS 1 does not prescribe the order or format in which
an entity presents items.