Conceptual

Framework
and
Accounting ACCTG 103

Standards S.Y. 2021-2022

2nd Semester
 Presentation
of Financial
Statements
Philippine Accounting Standards (PAS) 1

2
 Learning Objectives
• Enumerate and describe the general features of financial
statement presentation.
• Enumerate and describe the components of a complete set of
financial statements.
• State the acceptable methods of presenting items of income and
expenses.
• Differentiate between the statement of profit or loss and other
comprehensive income and the statement of changes in equity.
• State the relationship of the notes with the other components of a
complete set of financial statements. 3
 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 (intra-comparability) and with the
financial statements of other entities (inter-
comparability).
4
 Scope of PAS 1

PAS 1 applies to all general purpose

financial statements that are prepared
and presented in accordance with Philippine
Financial Reporting Standards (PFRSs).

5
 General Purpose Financial Statements

• are those intended to serve users who do not have the

authority to demand financial reports tailored for their
own needs.
• cater to most of the common needs of a wide range of
external users.
• are the subject matter of the Conceptual Framework
and the PFRSs.

6
 Purpose of Financial Statements

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.
Secondary Objective
To show the results if management’s stewardship
over the entity’s resources.
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 Complete set of Financial Statements

1. Statement of financial position

2. Statement of profit or loss and other comprehensive income
3. Statement of changes in equity
4. Statement of cash flows
5. Notes
(5a) comparative information in respect of the preceding period; and
6. Additional statement of financial position (required only when certain
instances occur)
8
 General Features of Financial
Statements

1. Fair Presentation and Compliance with PFRSs

2. Going concern
3. Accrual Basis of Accounting
4. Materiality & Aggregation
5. Offsetting
6. Frequency of reporting
7. Comparative Information
8. Consistency of presentation
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 Fair Presentation and Compliance with
PFRSs

• The application of PFRSs, with additional disclosure when

necessary, is presumed to result in financial statements that achieve a fair
presentation.
• PAS 1 requires an entity whose financial statements comply with PFRSs to
make an explicit and unreserved statement of such compliance in the
notes.

Source: PLDT INC Audited Financial Statements as at

and for the years ended December 31, 2020 and 2019 10
 Going concern

An entity is not a going concern if, as of the financial

reporting date or prior to the date of authorization of the
financial statements for issue, management either:
a. Intends to liquidate the entity or to cease trading, or
b. Has no realistic alternative but to do so.

Note: The assessment of going concern is at least 12 months.

11
 Accrual Basis of Accounting

An entity shall prepare its financial statements, except

for cash flow information, using the accrual basis of
accounting.

12
 Materiality & Aggregation

Each material class of similar items must be presented

separately in the financial statements

13
 Offsetting

Assets and liabilities, and income and expenses, shall not

be offset unless required or permitted by a PFRS.
Measuring assets net of valuation allowances are not
offsetting. Example:
• obsolescence allowances on inventories
• allowances for doubtful accounts on receivables,
• accumulated depreciation on property, plant, and equipment

14
 Frequency of reporting

An entity shall present a complete set of financial statements

(including comparative information) at least annually.
When an entity changes the end of its reporting period and
presents financial statements for a period longer or shorter than
one year, an entity shall disclose the following:
• The period covered by the financial statements,
• The reason for using a longer or shorter period, and
• The fact that amounts presented in the financial statements are not
entirely comparable.

15
 Comparative Information

PAS 1 requires an entity to

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.

Source: PLDT INC Audited Financial Statements as at

and for the years ended December 31, 2020 and 2019
16
 Additional Statement of financial
position

An additional statement of financial position is presented as at

the beginning of the preceding period when an entity:
1. Applies an accounting policy retrospectively, or
2. Makes a retrospective restatement of items in its financial
statements, or
3. reclassifies items in its financial statements.

…. and the effect of the event to the statement of financial position as at

the beginning of the preceding period is material.

17
 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.

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 Structure and Content of Financial
Statements
a.
The following information shall be b.
displayed prominently and repeatedly: c. d.
e.
a. The name of the reporting entity
b. Whether the statement are for the
individual entity or for a group of
entities
c. The date and end of the reporting
period or the period covered by the
financial statements.
d. The presentation currency
e. The level of rounding used Source: PLDT INC Audited Financial Statements as at
and for the years ended December 31, 2020 and 2019
19
 Management Responsibility over
Financial Statements

The management is responsible

for an entity’s financial statements.
a. The preparation and fair
presentation of FS in accordance
with PFRSs
b. Internal control over financial
reporting
c. Going concern assessment
d. Oversight over the financial
reporting process
e. Review and approval of financial
statements. Source: PLDT INC Audited Financial Statements as at 20
and for the years ended December 31, 2020 and 2019
 Statement of Financial Position

• Shows the entity’s financial condition as at a certain

date.
• PAS 1 does not prescribe the order or format of
presenting items in the statement of financial position.

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 Statement of Financial Position

A statement of financial position may be presented as

either
• Classified – showing distinctions between current and
noncurrent assets and liabilities, or
• Unclassified (based on liquidity) – showing no
distinction between current and noncurrent items

Note: PAS 1 permits a mixed presentation

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 Current Assets and
Current Liabilities

Current Assets Current Liabilities

An entity shall classify an asset as current when: An entity shall classify a liability as current when:

• it expects to realize the asset or intends to sell • it expects to settle the liability in its normal
or consume it, in its normal operating cycle operating cycle

• it holds the asset primarily for the purpose of • it holds the liability primarily for the purpose
trading of trading

• it expects to realize the asset within twelve • the liability is due to be settled within twelve
months after the reporting period; or months after the reporting period; or

• the asset is cash or a cash equivalent unless the • the entity does not have an unconditional right
asset is restricted from being exchanged or to defer settlement of the liability for at least
used to settle a liability for at least twelve twelve months after the reporting period.
months after the reporting period. 23
 Operating Cycle

The operating cycle of an entity is the time between the

acquisition of assets for processing and their realization
in cash or cash equivalents. When the entity’s normal
operating cycle is not clearly identifiable, it is assumed to
be 12 months. (PAS1.68)

24
 Presentation of Deferred Taxes

Deferred Tax Assets and

Liabilities are always
presented as
noncurrent items in a
classified statement of
financial position,
regardless of their
expected dates of reversal.
Source: PLDT INC Audited Financial Statements as at
and for the years ended December 31, 2020 and 2019

25
 Currently maturing long-term
liabilities

General rule: Currently maturing long term liabilities

are presented as current liabilities.
Exceptions:
• Refinancing agreement is fully completed on or before the
balance sheet date – non-current liability
• Refinancing agreement after the balance sheet date but
before the financial statements are authorized for issue –
noncurrent liability if the entity expects, and has the
discretion, to refinance it on a long-term basis under an
existing loan facility. 26
Currently maturing long-term
liabilities

Source: PLDT INC Audited

Financial Statements as at and
for the years ended December
31, 2020 and 2019
27
 Breach of Loan Agreement

General rule: A liability that is payable on demand is a

current liability.
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.

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 Minimum Line Items in the Statement
of Financial Position

a. Property, plant and equipment; n. Liabilities and assets for current tax, as
b. Investment property; defined in PAS 12 Income Taxes;
c. Intangible assets; o. Deferred tax liabilities and deferred tax
d. Financial assets (excluding amounts shown assets, as defined in PAS 12;
under (e), (h) and (i)); p. Liabilities included in disposal groups
e. Investments accounted for using the equity classified as held for sale in accordance with
method; PFRS 5;
f. Biological assets; q. Non-controlling interests, presented within
g. Inventories; equity; and
h. Trade and other receivables; r. Issued capital and reserves attributable to
i. Cash and cash equivalents; owners of the parent
j. Assets (or disposal groups) classified as held
for sale in accordance with PFRS 5; Note: PAS 1 does not prescribe the order
k. Trade and other payables;
l. Provisions; or format in which an entity presents
m. Financial liabilities (excluding amounts items.
shown under (k) and (l)); 29
Statement of Financial Position

Source: PLDT INC Audited Financial Statements as at

and for the years ended December 31, 2020 and 2019 30
 Statement of profit or loss and other
comprehensive income

An entity shall present all items of income and expense

recognized in a period:
• in a single statement of profit or loss and other
comprehensive income; or
• in two statements: (1) a statement displaying the profit or
loss section only (separate ‘statement of profit or loss’ or
‘income statement’) and (2) a second statement beginning
with profit or loss and displaying components of other
comprehensive income.

31
Statement of profit or loss and other
comprehensive income

Source: PLDT INC Audited Financial Statements as at

and for the years ended December 31, 2020 and 2019

32
 Statement of profit or loss and other
comprehensive income

PAS 1 requires an entity to present information on the following:

a. Profit or Loss
b. Other Comprehensive Income; and
c. Comprehensive income
Note: Presenting a separate income statement is allowed as long
as a separate statement showing comprehensive income is also
presented. Presenting only an income statement is
prohibited.
33
 Profit or Loss

Profit or loss is income less expenses excluding the

components of other comprehensive income.
Income and expenses are usually recognized in profit or
loss unless:
a. They are items of other comprehensive income; or
b. They are required by other PFRSs to be recognized outside
of profit or loss

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 Profit or Loss
The following are not included in determining the profit or loss
for the period:
Transaction
• Correction of prior period
• Change in Accounting Policy
• Other Comprehensive Income
• Transactions with owners
Accounting
 Direct Adjustment to the beginning balance of the retained
earnings. The adjustment is presented in the Statement of
Changes in Equity
 Direct Adjustment to the beginning balance of the retained
earnings. The adjustment is presented in the Statement of
Changes in Equity
 Changes during the period are presented in the “Other
Comprehensive Income. Cumulative balances are presented in
the equity section of the Statement of Financial Position.
 Recognized directly in equity. Transactions during the period
are presented in the statement of Changes in Equity.
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Transactions with owners

Source: PLDT INC Audited Financial Statements as at

and for the years ended December 31, 2020 and 2019

36
 Extraordinary items

PAS 1 prohibits the presentation of any items of income

or expense as extraordinary items in the statement(s)
presenting profit or loss and other comprehensive
income or in the notes.

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 Other comprehensive income

- comprises items of income and expense (including

reclassification adjustments) that are not recognized in
profit or loss as required and permitted by other PFRSs.
(PAS 1.7)
a. Changes in revaluation surplus d. Gains and losses arising from translating
b. Unrealized gains and losses on the financial statements of a foreign
investments in FVOCI securities operation
c. Remeasurements of the net defined e. Effective portion of gains and losses on
benefit liability (asset) hedging instruments in a cash flow hedge

Note: OCI may be presented either (a) net of tax or (b) gross of
tax.
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 Reclassification Adjustments

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.

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 Total Comprehensive Income

Total comprehensive income comprises all components

of
1. Profit or loss; and
2. Other comprehensive income.

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Total Comprehensive Income

Source: PLDT INC Audited Financial Statements as at

and for the years ended December 31, 2020 and 2019

41
 Presentation of Expenses

1. Nature of expense method

Expenses are aggregated according to their nature (depreciation,
purchase of materials, transport costs, employee benefits and advertising
costs) and are not reallocated according to their functions within the
entity

2. Function of expense method

Entity classifies expenses according to their function (cost of sales,
distribution costs, administrative expenses, etc.).
NOTE: If an entity classifies expenses by function, it shall
disclose additional information on the nature of expenses
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 Statement of Changes in Equity

• Effects if change in accounting policy or correction of prior

period error
• Total comprehensive income for the period; and
• For each component of equity, reconciliation of 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
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 Statement of Changes in Equity

• 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
• PAS 1 allows the disclosure of dividends, and the related
amount per share, either in the statement of changes
in equity or in the notes.

44
Statement of Changes in Equity

Source: PLDT INC Audited Financial Statements as at

and for the years ended December 31, 2020 and 2019

45
Disclosure of Dividends

Source: PLDT INC Audited Financial Statements as at 46

and for the years ended December 31, 2020 and 2019
 Statement of Cash Flows

PAS 1 refers the discussion and presentation of cash

flows to PAS 7 – Statement of Cash Flows.

47
 Notes to Financial Statements

• An integral part of a complete set of financial

statements
• Provides information in addition to those presented to
the other financial statements

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 Notes to Financial Statements

PAS 1 requires an entity to present the notes in a

systematic manner. Notes normally structures as follows:
1. Statement of compliance with PFRSs;
2. Summary of significant accounting policies applied;
3. Supporting information for items presented in the other
financial statements; and
4. Other disclosures.

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Questions?

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𝙧𝙚𝙖𝙘𝙝 𝙞𝙩.”
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 Exercises
Here goes the subtitle of your section

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