3. PAS 1 Presentation of financial statements PDF

Preview

Summary

PAS 1 Presentation of Financial StatementsFinancial Statements – are means by which information accumulated and processed in financial accounting is communicated to the users; structured financial representation of the financial position and financial performance of an entity“ general purpose” finan...

Description

PAS 1 Presentation of Financial Statements Financial Statements – are means by which information accumulated and processed in financial accounting is communicated to the users; structured financial representation of the financial position and financial performance of an entity “general purpose” financial statements are statements that have been prepared for use by those who are not in a position to require an entity to prepare reports tailored to their particular interest.

8. Consistency of Presentation Presentation and classification of financial statement items shall be uniform from one reporting period to the next. COMPONENTS OF FINANCIAL STATEMENTS 1. Statement of Financial Position formal statement showing the three elements comprising financial position, namely assets, liabilities, and equity. Presentation of statement of financial position:

OBJECTIVE OF FINANCIAL STATEMENTS 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 decision

a. Classified – shows distinctions between current and noncurrent assets and current and noncurrent liabilities b. Unclassified – also called based on liquidity shows no distinction between current and noncurrent items Asset

GENERAL FEATURES of Financial Statements 1. Fair Representation and Compliance with PFRS Faithful representation requires an entity to select and apply accounting policies in accordance with PFRS to present information in a manner that provides relevant, reliable, comparable and understandable information, and to provide additional disclosures necessary for the users to understand the entity’s financial position and financial performance.

Resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow the entity Essential characteristics of an asset 1. The asset is controlled by the entity 2. The asset is the result of a past transaction or event 3. The asset provides future economic benefits 4. The cost of the asset can be measured reliably

2. Going Concern Entity is viewed as continuing in operation indefinitely. If financial statements are not prepared on a going basis, this fact shall be disclosed together with the measurement basis and reason therefor.

Operating Cycle – time between the acquisition of assets for processing and their realization in cash or cash equivalents.

3. Accrual Basis of Accounting All financial statements shall be prepared using the accrual basis of accounting except for the statement of cash flows which is prepared using cash basis.

CURRENT ASSETS PAS 1 paragraph 66 provides that an entity should classify asset as current when:

4. Materiality and Aggregation An entity shall present separately each material class of similar items. “Line items” is a class of similar items. Dissimilar items are presented separately unless they are immaterial. Individually immaterial items are aggregated with other items. 5. Offsetting Assets and Liabilities, and income and expenses, when material, shall not be offset against each other. Offsetting may be done when it is permitted by another PFRS 6. Frequency of Reporting Financial statements are prepared 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: a. The period covered by the financial statements b. The reason for using a longer or shorter period c. The fact that amounts presented in the

Classification of asset

a. The asset is cash or cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. b. The entity holds the asset primarily for the purpose of trading. c. The entity expects to realize the asset within twelve months after the reporting period. D. the entity expects to realize the asset or intends to use or consume it within the entity’s operating cycle. PAS 1 paragraph 54, the line items under current assets are (listed in order of liquidity): 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 ASSET PAS 1 paragraph 66 states that an entity shall classify all other assets not classified as current as

financial statements are not entirely comparable 7. Comparative Information Financial statements shall be presented with comparative figures of the financial statements of the preceding year. Retrospective – looking back; prospective – looking forward and in the future

noncurrent A. PROPERTY, PLANT AND EQUIPMENT PAS 16 paragraph 6, 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.

B. LONG-TERM INVESTMENTS IASC defines investment 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. C. INTANGIBLE ASSETS An identifiable nonmonetary asset without physical substance (PAS 38) D. DEFERRED TAX ASSETS E.OTHER NONCURRENT ASSETS Assets that do not fit in the definition of noncurrent assets - asset valuation accounts are neither assets nor liabilities. LIABILITY 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 of a liability a. The liability is the present obligation of a particular entity b. The liability arises from past transaction or event c. The settle of the liability requires an outflow of resources embodying economic benefits.

PAS 1 paragraph 7 The holders of instruments classified as equity are OWNERS. SHAREHOLDER’S EQUITY It is the residual interest of owners in the net assets of a corporation measured by the excess of assets over liabilities. PHILIPPINE TERM

IAS TERM

Capital Stock Subscribed Capital Stock Preferred Stock Common Stock Additional Paid in Capital Retained Earnings (deficit)

Share Capital Subscribe Share Capital Preference Share Capital Ordinary Share Capital Share Premium Accumulated Profits (Losses) Appropriated Reserve

Retained Earnings Appropriated Revaluation Surplus Treasury Stock

Revaluation Reserve Treasury Share

NOTES TO FINANCIAL STATEMENTS Provide narrative description or disaggregation of items presented in the financial statements and information about items that do not qualify for recognition. Purpose: to provide the necessary disclosures required by PFRS FORMS OF FINANCIAL POSITION

CURRENT LIABILITIES PAS 1 paragraph 69 provides that an entity should classify a liability as current when:

A. REPORT FORM This form sets form the three major sections in a downward sequence of assets, liabilities and equity

A. The entity expects the liability to settle within the entity’s normal operating cycle B. The entity holds the liability primarily for the purposes of trading. C. The liability is due to be settled within 12 months aftter the reporting period. D. The entity does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

B. ACCOUNT FORM The assets are shown on the left side and the liabilities and equity on the right side of the balance sheet

PAS 1 paragraph 54, the line items under current liability are: a. trade and other receivables b. current provisions c. Short term borrowing d. current portion of long term debt e. current tax liability NONCURRENT LIABILITIES PAS 1 paragraph 69 states that an entity shall classify all liabilities not classified as current are classified as noncurrent a. noncurrent portion of a long term debt b. finance lease liability c. deferred tax liability d. long term obligations to company officers

PAS 1, paragraph 54, balance sheet line items 1. cash and cash equivalents 2. Financial assets 3. Trade and other receivables 4. Inventories 5. Property, plant, and equipment 6. Investment in associates accounted for by the equity method 7. Intangible assets 8. Investment property 9. Biological asset 10. Total assets classified as held for sale and assets included in disposal group classified as held for sale 11. Trade and other payables 12. Current tax liabilities 13. Deferred tax asset and deferred tax liability 14. Provision 15. Financial liabilities 16. Liabilities included in disposal group classified as held for sale 17. Noncontrolling assets 18. Share Capital and reserves

e. long term deferred revenue EQUITY Residual interest in the asset of the entity after deducting all of its liabilities Working capital – current assets less current liabilities

PAS 1, paragraph 60, provides that an entity shall present current and noncurrent assets, liabilities on the face of the statement of financial position...