CFAS Midterm Notes because employee service does not

increase the amount of the benefit.

PAS 19 EMPLOYEE BENEFITS
(When the absences occur)
- Are “all forms of consideration given by 2. Post-employee benefits
an entity in exchange for service - Are employee benefits (other than
rendered by employees” (pas 19.8) termination benefits) that are payable
after the completion of employment.
Post-employment benefit plans are
Four Categories of employee benefits under classified as either:
PAS 19 1. Defined contribution plans
1. Short-term employee benefits - the employer commits to
- Are employee benefits (other than contribute to a fund which will be
termination benefits) that are due to be used to pay for the retirement
settled within 12 months after the end benefits of the employees.
of the period in which the employees - risk that retirement benefit may
render the related service. be insufficient rests with the
employee.
Recognition and measurement 2. Defined benefit plans
When an employee has rendered service to - The employer commits to pay
an entity during an accounting period, the retiring employees a definite
entity shall recognize the undiscounted amount.
amount of short-term employee benefits - risk that retirement benefit may
expected to be paid in exchange for that be insufficient rests with the
service: employer,

- as a liability (accrued expense), after Other relevant terms

deducting any amount already paid. - Contributory – both the employee and
- as an asset (prepaid expense) if the employer contributes for the
amount paid is in excess of the retirement benefits of the employee
undiscounted amount of the benefits
incurred; - Non-contributory – only the employer
- as an expense, unless the employee contributes for the retirement benefits
benefit forms part of the cost of an of the employee.
asset, e.x as part of the cost of - Funded – a fund is transferred to a
inventories or property, plant and trustee who will manage the fund. The
equipment. trustee assumes obligation of paying
Short-term compensated absences retirement benefits out from the fun
and directly to retiring employees.
• Accumulating compensated absences
are those that are carried forward and - Unfunded – no fund is transferred to a
can be used in future periods if the trustee. The employer retains the
current period’s entitlement is not used obligation of paying retirement benefits
in full. Accumulating compensated to employees.
absences may either be Accounting for defined contribution plan
1. Vesting – wherein employees are
entitled to a cash payment for unused - The accounting for defined contribution
entitlement on leaving the entity; or plans is straightforward because the
2. non-vesting – wherein employees are reporting entity’s obligation for each
not entitled to a cash payment for period is determined by the amounts to
unused entitlement on leaving the be contributed for that period.
entity. Consequently, no actuarial assumptions
(When the employees render service are required to measure the obligation
that increases their entitlement to or the expense and there is no
future compensated absences) possibility of any actuarial gain or loss.
• Non-accumulating compensated Accounting for defined benefit plan
absences are those that are not carried
forward. No liability or expense is - The accounting for defined benefit
recognized until the absences occur, plans is complex because actuarial
assumptions are required to measure
 the obligation and the expense and - Actuarial assumptions are an entity’s
there is a possibility of actuarial gains best estimates of the variables that will
and losses. Obligations are measured on determine the ultimate cost of
a discounted basis. providing post-employment benefits.
1. Demographic assumptions about the
Accounting procedures for defined benefit plans
future characteristics of employees who
Step 1: determine the deficit or surplus are eligible for benefits. Demographic
(deficit)surplus=FVPA-PV of DBO assumptions deal with matters such as:
a. Morality, both during and after
Step 2: determine the net defined benefit employment
liability (asset) b. Rates of employee turnover,
- If there is a deficit, the deficit is the net disability and early retirement
defined benefit liability c. The proportion of plan members
- If there is a surplus, the net defined with dependents who will be
benefit asset is the lower of the surplus eligible for benefits
and the asset ceiling d. Claim rates under medical plans
2. Financial assumptions, dealing with
(The asset ceiling is the present value of any items such as:
economic benefits available in the form of e. The discount rates
refunds from the plan or reductions in f. Future salary and benefit levels
future contributions to the plan) g. Future medical costs, if any,
including cost of administering
claims and payments
h. The expected rate of return on plan
assets

Actuarial assumption – discount rate

- The rate used to discount post-

employment benefit obligations shall be
determined by reference to market
yields at the end of the reporting period
on high quality corporate bonds.
Definition of terms - In countries where there is no deep
1. Current service cost – is the increase in market in such bonds, the market yields
the present value of a defined benefit at the end of the reporting period on
obligation resulting from employee government bonds shall be used.
service in the current period.
2. Past service cost – is the change in the 3. Other long-term employee benefits
present value of the defined benefit - Are employee benefits (other than post-
obligation resulting from a plan employment benefits and termination
amendment or curtailment. benefits) that are due to be settled
3. Gain or loss on settlement – the beyond 12 months after the end of the
difference between the present value of period in which the employees render
the defined benefit obligation and the the related service.
settlement price. - Other long term employee benefits are
4. Interest cost on the defined benefit accounted for using the procedures
obligation – is the increase during a applicable for a defined benefit plan.
period in the present value of a defined However, all of the components of the
benefit obligation which arises because net benefit cost are recognized in profit
the benefits are one period closer to or loss.
settlement.
5. Actuarial gains and losses – see changes 4. Termination benefits
in the present value of the defined - Are employee benefits provided in
benefit obligation resulting from exchange for the termination of an
experience adjustments and the effects employee’s employment as a result of
of changes in actuarial assumptions. either:
1. An entity’s decision to terminate an
employee’s employment before the
Actuarial Assumptions normal retirement date; or
 2. An employee’s decision to accept d. Government procurement policy
an entity’s offer of benefits in that is responsible for a portion of
exchange for the termination of the entity’s sales, and
employment. e. Public improvements that benefit
the entire community.
Measurement
Recognition
Termination benefits are initially and
subsequently recognized in accordance with the Government grants are recognized if
nature of the employee benefit. there is reasonable assurance that:
a. The attached conditions will be
a. If the termination benefits are payable
complied with; and
within 12months, the entity shall
b. The grants will be received.
account for the termination benefits
similarly with short-term employee Classifications of government grants according
benefits. to attached condition
b. If the termination benefits are payable
a. Grants related to assets – grants whose
beyond 12 months, the entity shall
primary condition is that an entity
account for the termination benefits
qualifying for them should purchase,
similarly with other long-term benefits.
construct or otherwise acquire long-
c. If the termination benefits are, in
term assets.
substance, enhancement to post-
b. Grants related to income – grants other
employment benefits, the entity shall
than those related to assets.
account for the benefits as post-
employment benefits. Initial measurement

• Monetary grants are measured at the

a. Amount of cash received; or
PAS 20 ACCOUNTING FOR GOVERNMENT
b. The fair value of amount receivable;
GRANTS AND DISCLOSURE OF GOVERNMENT
or
ASSISTANCE
c. Carrying amount of loan payable to
- Government grants are assistance government which repayment is
received from the government in the forgiven; or
form of transfers of resources in d. Discount on loan payable to
exchange for compliance with certain government at a below-market rate
conditions. of interest.
- Government grants excluded • Non-monetary grants (e.x land and
government assistance whose vale other resources) are measured at the
cannot be reasonably measured or a. Fair value of non-monetary asset
cannot be distinguished from the received.
entity’s normal trading transactions. b. Alternatively, at nominal amount or
zero, plus direct costs incurred in
Examples of government grants preparing the asset for its intended
a. Receipt of cash, land, or other non- use.
cash assets from the government
subject to compliance with certain Accounting for government grants
conditions • The main concept in accounting for
b. Receipt of financial aid in case of gov’t grants is the Matching Concept.
loss from a calamity • This means that the gov’t grant is
c. Forgiveness of an existing loan from recognizes as expense the related cost
the government for which the grant is intended to
d. Benefit of a government loan with compensate.
below-market rate of interest
Presentation of Government grants related to
The following are not government assets
grant:
• Government grants related to assets
a. Tax benefits, are presented in the statement of
b. Free technical or marketing advice, financial position either by:
c. Provision of guarantees,
 a. Gross presentation – the grant is Factors in determining functional currency
presented as deferred income
Primary factors
(liability); or
b. Net presentation – the grant is An entity’s functional currency is:
deducted when computing for the
carrying amount of the asset. 1. The currency that mainly influences:
- Sales prices
Presentation of Government grants related to - Cost of goods sold/Cost of services
income provided
• Grants related to income are Secondary factors
sometimes presented in the income
2. The currency in which funds from
statement either by:
financing activities are generated.
a. Gross presentation – the grant is
presented separately or under a 3. The currency in which receipts from
general heading such as “other operating activities are usually retained.
income”, or Foreign currency transactions
b. Net presentation – the grant is
deducted in reporting the related • Initial recognition: The foreign currency
expense. amount is translated at the spot
exchange rate at the date of the
Repayment of Gov’t. Grants transaction.
• A government grant that becomes • Subsequent recognition: At the end of
repayable is accounted for as a change each reporting period:
in accounting estimate that is treated 1. Foreign currency monetary items
prospectively under PAS 8 are retranslated using the closing
rate;
2. Non-monetary items that are
measured at historical cost in a
PAS 21 THE EFFECTS OF CHANGES IN FOREIGN
foreign currency shall be translated
EXCHANGE RATES
using the exchange rate at the date
Two ways of conducting foreign activities of the transaction; and
3. Non-monetary items that are
1. Foreign currency transactions –
measured at fair value in a foreign
individual entities often enter into
currency shall be translated using
transactions in a foreign currency.
the exchange rates at the date
2. Foreign operations – groups often
when the fair value was
include overseas entities.
determined.
Two main accounting issues
Monetary Items
• Exchange rates are constantly changing.
- Are units of currency held and assets
Therefore, the principal issues in
and liabilities to be received or paid in a
accounting for foreign activities are
fixed or determinable number of units
determining:
of currency.
1. Which exchange rate(s) to use; and
2. How to report the effects of Recognition of exchange differences
changes in exchange rates in the
• When a foreign currency transaction
financial statements.
occurred in one period and settled in
Functional currency another period:
a. The exchange difference between
• When preparing financial statements, a
the transaction date and the end of
reporting entity must identify its
reporting period is recognized in
functional currency.
the period of transaction, while
• Functional currency is the currency of b. The exchange difference between
the primary economic environment in the end of the previous reporting
which the entity operates. period and the date of settlement is
• The primary economic environment in recognized in the period of
which an entity operates is normally the settlement.
one in which it primarily generates and • When a foreign currency transaction
expends cash. occurred and settled in the same
 period, all the exchange difference is Qualifying asset
recognized in that period.
• Qualifying asset is an asset that
Foreign operations necessarily takes a substantial period of
time to get ready for its intended use or
• A foreign operation is an entity that is a
sale. Depending on the circumstances,
subsidiary, associate, joint venture or
any of the following may be qualifying
branch of a reporting entity, the
assets:
activities of which are based or
A. Inventories
conducted in a country or currency
B. Manufacturing plants
other than those of the reporting entity.
C. Power generation facilities
Translation to the presentation currency D. Intangible assets
E. Investment properties measured
1. Assets and liabilities are translated at under cost model
the closing rate at the date of the • The following are not qualifying assets
statement of financial position. a. Financial assets, and inventories
2. Income and expenses, including other
that are manufactured, or
comprehensive income, are translated
otherwise produced, over a short
at spot exchange rates at the dates of period of time.
the transactions. For practical reason, b. Assets that are ready for their
average rates for a period may be used,
intended use or sale when acquired
if they provide a reasonable
are not qualifying assets.
approximation of the spot rates when c. Assets that are routinely
the transactions took place. However, if
manufactured or otherwise
exchange rates fluctuate significantly,
produced in large quantities on a
the use of the average rate is
repetitive basis.
inappropriate. d. assets measured at fair value.
3. The resulting exchange difference is
recognized in other comprehensive Commencement of capitalization
income.
• The capitalization of borrowing costs as
PAS 23 BORROWING COSTS part of the cost of a qualifying asset
commences on the date when all of the
Core principle
following conditions are met:
- “Borrowing costs that are directly a. The entity incurs expenditures for
attributable to the acquisition, the asset;
construction or production of a b. The entity incurs borrowing costs;
qualifying asset form part of the cost of and
that asset. Other borrowing costs are c. It undertakes activities that are
recognized as an expense.” (PAS 23.1) necessary to prepare the asset for
its intended use or sale.
Borrowing costs

- Borrowing costs are interest and other Suspension of capitalization

costs incurred by an entity in
connection with the borrowing of • Capitalization of borrowing costs shall
funds. be suspended during extended periods
of suspension of active development of
Borrowing costs may include: a qualifying asset.
1. interest expense on financial liabilities
or lease liabilities computed using the Cessation of capitalization
effective interest method
2. Exchange differences arising from • An entity shall cease capitalizing
foreign currency borrowings to the borrowing costs when substantially all
extent that they are regarded as an the activities necessary to prepare the
adjustment to interest costs. qualifying asset for its intended use or
sale are complete.
Determining borrowing costs eligible for b. sale in the ordinary course of
capitalization business” (pas40)

1. Qualifying assets financed through Investment property PPE (owner-occupied

Specific property)
Held to earn rentals or Held for use in the
borrowing for capital production or supply of
Interest expense on specific borrowing Less: appreciation or both. goods or services or for
administrative purposes
Investment income earned on specific
borrowing Generates cash flows Generates cash flows in
largely independently conjunction with the
= Borrowing cost eligible for capitalization of the other assets other assets held by an
held by an entity. entity.
Includes only land and May include assets other
Determining borrowing costs eligible for
building than land and building
capitalization
Accounted for under Accounted for
2. Qualifying assets financed through PAS40 under PAS16
General borrowing

Total interest expense on general borrowings Examples of investment property

Divide by: Total general borrowings a. Land held for long-term capital
appreciation rather than for short-term
= Capitalization rate sale in the ordinary course of business.
b. Land held for a currently undetermined
future use.
Average expenditure on the asset c. A building owned by the entity (or held
by the entity under a finance lease) and
Multiply by: Capitalization rate
leased out under one or more operating
= Borrowing cost that may be eligible for leases.
capitalization d. A building that is vacant but is held to
be leased out under one or more
operating leases
The amount computed in the formula above e. Property that is being constructed or
shall be compared with the actual borrowing developed for future use as investment
costs incurred during the period. The amount to property.
be capitalized is the lower amount.
Examples of items that are not investment
property

Financial statement presentation a. Property intended for sale in the

ordinary course of business or property
• Qualifying assets are not segregated acquired exclusively with a view to
from other assets in the financial subsequently disposal in the near future
statements. They are presented as or for development and resale.
regular assets under their normal b. Property being constructed or develop
classification as provided under other on behalf of third parties (PFRS15
standards. Revenue from contracts with customer)
c. Owner-occupied property (PAS16) and
PAS 40 INVESTMENT PROPERTY owner-occupied property awaiting
disposal.
Investment property d. Property that is lease to another entity
- Is “property (land or a build – or a part under a finance lease.
of a building – or both) held (by the Property that is partly investment property and
owner or by the lessee under finance partly owner-occupied
lease) to earn rentals or for capital
appreciation or both, rather than for: • If the portions could be sold separately
a. use in the production or supply of (or leased out separately under a
goods or services or for finance lease), an entity accounts for
administrative purposes; or the portions separately. The portion
being rented out under operating lease
 is classified as investment property and Fair value model
the portion used as owner-occupied is
• After initial recognition, an entity that
classified as property, plant, and
chooses the fair value model shall
equipment.
measure all of its investment property
• If the portion could not be sold
at fair value, except in cases where the
separately, the property is investment
exemptions under PAS40 applies
property only if an insignificant portion
• Changes in fair values are recognized in
is held for use in the production or
profit or loss.
supply of goods or services or for
administrative purposes. If the owner- • Depreciable assets classified as
occupied portion is significant, the investment property measured under
entire property is classified as property, fair value model are not depreciated.
plant, and equipment. • If the fair value of an item of investment
property cannot be determined reliably
Ancillary services to occupants on initial recognition, such item is
subsequently measure under the cost
• When ancillary services are provided to
model.
the occupants of a property held, the
property is classified as investment
property if the services are insignificant
to the arrangement as a whole.
Cost model
Measurement
Initial: cost • After initial recognition, an entity that
Subsequent: either the cost model or chooses the cost model shall measure
fair value model all of its investment property at cost
less any accumulated depreciation and
impairment losses in accordance with
• The following are excluded from the PAS 16 Property, plant, and equipment.
cost of investment property and are Transfers
expensed immediately:
a. Start-up costs (unless they are • Transfers to, or from, investment
necessary to bring the property to property shall be made when, and only
the condition necessary for it to be when, there is a change in use,
capable of operating in the manner evidenced by:
intended by management) a. Commencement of owner-occupation,
b. Operating losses incurred before for a transfer from investment property
the investment property achieves to owner-occupied property;
the planned level of occupancy b. Commencement of development with a
c. Abnormal amounts of wasted view to sale, for a transfer from
material, labor or other resources investment property to inventories;
incurred in constructing or c. End of owner-occupation, for a transfer
developing the property from owner-occupied property to
investment property; or
d. Commencement of an operating lease
Change in accounting policy to another party, for a transfer from
• A change from the cost model to the inventories to investment property.
fair value is accounted prospectively
• A change from the fair value model to
the cost model is not permitted. PAS41 AGRICULTURE

Determining fair value - Is applied to account for the following

when they relate to agriculture activity:
• PAS40 requires all entities to determine a. Biological assets, except for bearer
the fair value of investment property plants
whether it uses the cost model or fair b. Agricultural produce at the point of
value model. Fair values determined are harvest; and
used for measurement and disclosure c. Unconditional government grants
purposes if the entity uses the fair value related to a biological asset
model and for disclosure purposes only
if the entity uses the cost model.
 measured at its fair value less cost Agricultural activity
to sell
• PAS 41 applies to biological assets,
- Does not applied to the following:
agricultural produce and gov’t grants
a. Land (PAS16 PPE and PAS40
only when they relate to agricultural
INVESTMENT PROPERTY)
activity.
b. Bearer plants related to agricultural
activity (PAS16). However, PAS41 • Agricultural activity is the management
applies to the produce on those by an entity of the biological
bearer plants. transformation of biological assets for
c. Government grants related to sale, into agricultural produce, or into
bearer plants (PAS20 acctg. for additional biological assets.
gov’t grants and disclosure of gov’t Common features of agricultural activity
assistance).
d. Intangible assets (PAS38 Intangible a. Capability to change – living animals
assets) and plants are capable of biological
• PAS41 is applied to agricultural produce transformation
at the point of harvest. After the point b. Management of change – management
of harvest, PAS2 inventories or other facilitates biological transformation by
applicable standard is applied. enhancing, or at least stabilizing,
conditions necessary for the process to
Nature of asset take place. - Harvesting from
• Living animal or Biological asset unmanaged sources is not agricultural
plant (PAS41) however, activity.
bearer plants are c. Measurement of change – the change
classified as in quality or quantity brought about by
Property, plant and
biological transformation is measured
equipment
and monitored as a routine
• Unprocessed Agricultural produce
(PAS41) management function.
harvested
product Recognition
• Processed Inventory (PAS2)
harvested A biological asset or agricultural produce is
product recognized when:

a. The entity controls the asset as a result

of past events;
b. It is probable that future economic
benefits associated with the asset will
flow to the entity; and
c. The fair value or cost of the asset can be
measured reliably.

Measurement

• A biological asset shall be measured on

initial recognition and at the end of
each reporting period at its fair value
less costs to sell.
• Agricultural produce harvested from an
Consumable vs. Bearer biological assets entity’s biological assets shall be
measured at its fair value less costs to
Biological assets are either consumable or
sell at the point of harvest. Such
bearer.
measurement is the cost at that date
a. Consumable – those that are to be when applying PAS2 Inventories or
harvested as agricultural produce or another applicable standard.
sold as biological assets. E.x timber • A biological asset is measured at cost
b. Bearer – those other than consumable less accumulated depreciation and
biological assets. E.x fruit tree accumulated impairment loss if the fair
• PAS41 applies to both consumable and value of the biological asset cannot be
bearer animals. However, PAS41 only to measured reliable on initial recognition.
consumable plants but not to bearer
Definitions
plants
 • Fair value is the price that would be specifications or are able to sustain
received to sell an asset or paid to regular harvests.
transfer a liability in an orderly b. Immature biological assets are
transaction between market those that have not yet attained
participants at the measurement date. harvestable specifications or are
• Costs to sell are the incremental costs not yet able to sustain regular
directly attributable to the disposal of harvests.
an asset, excluding finance costs and 3. Disclosure of breakdown of total “Gain
income taxes (e.x commissions to (loss) from changes in FVLCS) during the
brokers, levies by regulatory agencies period attributable to price change and
and commodity exchange, and transfer physical change
taxes and duties)
• Costs to sell do not include transport
costs, advertising costs, income taxes, PFRS 1 FIRST-TIME ADOPTION OF PHILIPPINE
and interest expense. FINANCIAL REPORTING STANDARDS
• If location is a characteristic of the
First PFRS financial statements
biological asset, the price in the
principal (or most advantageous) • Are the “the first annual financial
market shall be adjusted for the statements in which an entity adopts
transport costs. PFRSs, by an explicit and unreserved
statement of compliance with PFRSs”.
Gains and losses
(PFRSs1.3)
• A gain or loss arising on initial • Financial statements are considered
recognition of a biological asset at fair “First PFRSs financial statements” if the
value less costs to sell and from a previous financial statements:
change in fair value less costs to sell of a a. Were prepared in accordance with
biological asset shall be included in other reporting standards not
profit or loss for the period in which it consistent with the PFRS; or
arises b. Did not contain an explicit and
unreserved statement of
Nature of Accounting
compliance with PRFSs; or
government grant procedure
c. Contained an explicit and
Government grant Recognize income equal
unreserved statement of
(a) is unconditional to fair value of the
and (b) relates to grant when the grant compliance with some, but not all,
biological asset becomes receivable PFRSs; or
measured at FVLCS d. Were prepared using some, but not
Government grant Recognize income only all, applicable PFRSs; or
is conditional when condition is met e. Prepared in accordance with PFRSs
Relates to Account for the grant but were used for internal reporting
biological asset under PAS20 purposes only; or
measured at cost f. Did not contain a complete set of
Is conditional but a Recognize income using financial statements as required
portion of the straight – line method under PAS1 Presentation of
grant is retained Financial Statements.
according to the g. The entity did not present financial
time that has
statements in previous periods.
elapsed
• PFRS 1 is applied only once
• An entity presenting its first PFRS
Encourage disclosures financial statements is called a “first-
time adopter”
Disclosure of the following information is
encouraged but not required: Recognition and measurement
1. Disclosure of consumable and bearer • PFRS 1 requires an entity to prepare
biological assets. and present an opening PFRS statement
2. Disclosure of mature and immature of financial position at the date of
biological assets. transition to PFRSs.
a. Mature biological assets are those • The date to transition to PFRSs is the
that have attained harvestable beginning of the earliest period for
which an entity presents full
 comparative information under PFRSs in instead of paying in cash the entity
its first PFRS financial statements. The issues its own shares of stocks or share
application of the PFRSs stars on this options; or
date. 2. Cash-settled share-based payment
transaction – is a transaction whereby
Accounting policies
an entity acquires goods or services and
• The entity selects its accounting policies incurs an obligation to pay cash at an
based on the latest versions of PFRSs as amount that is based on the fair value
at the current reporting date. The of equity instruments; or
selected policies are then applied to all 3. Choice between equity-settled and
financial statements presented together cash-settled
with the first PFRS financial statements. • Equity instrument is a contract that
evidences a residual interest in the
Retrospective application assets of an entity after deducting all of
• In general (but subject to some its liabilities.
exceptions which will be discussed Core principle
momentarily), PFRS 1 requires
retrospective application of the • An entity shall recognize in profit or loss
accounting policies selected by the first- and financial position the effects of
time adopter. share-based payment transactions,
• PFRS 1 requires an entity to do the including expenses associated with
following in its opening PFRS statement transactions in which share options are
of financial position: granted to employees.
a. Recognize all assets and liabilities
Recognition
whose recognition is required by
PFRSs; • Goods and services received in share-
b. Not recognize items as assets or based payment transactions are
liabilities if PFRSs do not permit recognized when the goods are
such recognition; received or as the services are received.
c. Reclassify items recognized under Goods or services received that do not
previous GAAP that have different qualify as assets are recognized as
classifications under PFRSs; and expenses.
d. Apply PFRSs in measuring all
recognized assets and liabilities • The entity shall recognize:
(PFRS1.10) a. A corresponding increase in equity if
the goods or services were received in
Exceptions to the requirements of PFRS 1
an equity-settled share-based payment
• A first-time adopter is exempted from transaction, or
complying with the “retrospective b. A liability if the goods or services were
application” requirement of PFRS 1 if: acquired in a cash-settled share-based
a. The cost of compliance exceeds the payment transaction.
expected benefit.
Equity-settled share-based payment
b. Retrospective application requires
transactions
management judgements about
past conditions after the outcome Summary of initial measurement
of a particular transaction is already Transactions with non- Transactions with
known. employees employees and others
providing similar
Presentation and disclosure services
Goods or services Goods or services
• The first PFRS financial statements shall
acquired from non- acquired from
include at least one-year comparative
employees are employees and others
information. measured using the providing similar
PFRS 2 Share-based payments following order of services are measured
priority: using the following
Scope of PFRS 2 1. Fair value of order of priority:
goods or 1. Fair value of
1. Equity-settled share-based payment services equity
transaction – is a transaction whereby received at instruments
an entity acquires goods or services and measurement granted at
 date. grant date Employee share option plans – equity settled
2. Fair value of 2. Intrinsic value
equity • Share option is a contract that gives the
instrument holder the right, but not the obligation,
granted at to subscribe to the entity’s shares at a
measurement fixed or determinable price for a
date. specified period of time. Some share
options given to employees may not
require any subscription price, meaning
• Equity instrument granted is the right
shares will be issued to the employees
(conditional or unconditional) to an
in consideration merely for services
equity instrument of the entity
rendered.
conferred by the entity on another
party under a share-based payment Measurement of compensation
arrangement.
• Since employee share option plan is a
• Measurement date is the date at which
transaction with an employee, the
the fair value of the equity instruments
following order of priority shall be used
granted is measured for the purposes of
to measure the services received
PFRS 2.
(salaries expense):
a. For transactions with non-
1. Fair value of equity instruments
employees, the measurement date
granted at grant date
is the date when the entity receives
2. Intrinsic value
the good or service.
b. For transactions with employees Recognition of equity-settled share-based
and others providing similar compensation plans
services, the measurement date is
grant date. 1. If the share options granted vest
immediately, salaries expense shall be
• Grant date is the date at which the
recognized in full with a corresponding
entity and the counterparty agree to a
increase in equity at grant date.
share-based payment arrangement,
2. If the share options granted do not vest
being when the entity and the
counterparty have a shared until the employee completes a
specified period of service, the entity
understanding of the terms and
shall recognize the related
conditions of the arrangement.
compensation expense as the services
• Intrinsic value is the difference between
are rendered by the employee over the
the fair value of the shares to which the
vesting period.
counterparty has the conditional or
unconditional right to subscribe or the In the absence of evidence to the contrary, it
right to receive and the subscription shall be presumed that the share options vest
price (if any) that the counterparty is immediately.
required to pay for those shares.
Cash-settled share-based payment transactions
Share-based compensation plans
• A cash-settled share-based payment
• Share-based compensation plan is an transaction is one whereby an entity
arrangement whereby an employee is acquires goods or services and incurs an
given compensation in return for obligation to pay cash at an amount
services rendered in the form of the that is based on the fair value of equity
entity’s equity instruments or cash instruments.
based on the fair value of the entity’s • The goods or services acquired and the
equity instruments or a choice of liability incurred on cash-settled share-
settlement between equity instrument based payment transactions are
and cash. Examples: measured at the fair value of the
a. Employee share options (equity- liability.
settled)
b. Employee share appreciation rights
(cash settled) • At the end of each reporting period and
c. Compensation plans with a choice even on settlement date, the liability
of settlement between (1) and (2) shall be remeasured to fair value.
above
 Changes in fair value are recognized in the compound instrument and its
profit or loss. components as follows:
A. If the fair value of one settlement
alternative is the same as the other, the
Employee share appreciation rights (SARs) –
fair value of the equity component is
cash-settled
zero, and hence the fair value of the
• A share appreciation right is a form of compound financial instrument is the
compensation given to an employee same as the fair value of the debt
whereby the employee is entitled to component.
future cash payment (rather than an B. If the fair values of the settlement
equity instrument), based on the alternatives differ, the fair value of the
increase in the entity’s share price from equity component will be greater than
a specified level over a specified period zero, in which case, the fair value of the
of time. compound financial instrument will be
greater than the fair value of the debt
Measurement of compensation component.
• The liability for the future cash payment • If the entity has the right to choose
on share appreciation rights shall be settlement between cash (or other
measured, initially and at the end of assets) or equity instruments, the entity
each reporting period until settled, at has not granted a compound
the fair value of the share appreciation instrument.
rights. Changes in fair value are • In such case, the entity shall determine
recognized in profit or loss. whether it has a present obligation to
settle in cash and shall account for the
Recognition of cash-settled share-based share-based payment transaction
compensation plans accordingly.
a. If the share appreciation rights granted • If the entity has a present obligation to
vest immediately, the entity shall settle in cash, it shall account for the
recognize the related compensation transaction as a cash-settled share-
expense on the services received in full based payment transaction.
with a corresponding increase in liability • If the entity has no present obligation to
at grant date. settle in cash, it shall account for the
b. If the share options granted do not vest transaction as an equity-settled share-
until the employee completes a based payment transaction.
specified period of service, the entity
shall recognize the services received,
and a liability to pay for them, as the PRFS 3 BUSINESS COMBINATIONS
employee renders service during that
Definition of a Business Combination
period.
- A business combination is “a
Share-based payment transactions with cash
transaction or other event in which an
alternatives
acquirer obtains control of one or more
• If the counterparty has the right to businesses.” (PFRS 3)
choose settlement between cash (or
Control
other assets) or equity instruments, the
entity has granted a compound • An investor controls an investee when
instrument. the investor is exposed, or has rights, to
• For transactions with non-employees, variable returns from its involvement
the equity component is computed as with the investee and has the ability to
the difference between the fair value of affect those returns through its power
goods or services received and the fair over the investee.
value of the debt component at the • Control is normally presumed to exist
date the goods or services are received. when the ownership interest acquired
in the voting rights of the acquiree is
more than 50% (or 51% or more).
• For transactions with employees and • Control may exist even if the acquirer
others providing similar services, the holds less than 50% interest in the
entity shall measure the fair value of voting rights of acquiree, such as in the
following cases:
 1. The acquirer has the power to • The acquisition date is the date on
appoint or remove the majority of which the acquirer obtains control of
the board of directors of the the acquiree.
acquiree; or
2. The acquirer has the power to cast
the majority of votes at board
meetings or equivalent bodies
within the acquiree; or
3. The acquirer has power over more
than half of the voting rights of the
acquiree because of an agreement
with other investors; or
4. The acquirer has power to control
the financial and operating policies
of the acquiree because of a law or Consideration transferred
an agreement.
• The consideration transferred in a
Accounting for business combinations business combination is measured at
fair value.
• Business combinations are accounted
• Examples of potential forms of
for using the acquisition method. This
consideration include:
method requires the following:
1. Cash,
1. Identifying the acquirer;
2. Other assets,
2. Determining the acquisition date; and
3. A business or a subsidiary of the
3. Recognizing and measuring goodwill.
acquirer,
This requires recognizing and measuring
4. Contingent consideration,
the following:
5. Ordinary or preference equity
a. Consideration transferred
instruments, options, warrants and
b. Non-controlling interest in the
member interests of mutual
acquiree
entities.
c. Previously held equity interest in
the acquiree Acquisition-related costs
d. Identifiable assets acquired and
liabilities assumed on the business • Acquisition-related costs are costs the
combination. acquirer incurs to effect a business
combination.
• Acquisition-related costs are recognized
Identifying the acquirer as expenses in the periods in which they
• The acquirer is the entity that obtains are incurred, except for the following:
control of the acquiree. The acquiree is a. Costs to issue debt securities
the business that the acquirer obtains measured at amortized cost –
control of in a business combination. included in the initial measurement
of the resulting financial liability.
• The acquirer is normally the entity that:
b. Costs to issue equity securities – are
a. Transfers cash or other assets and
accounted for as deduction from
incurs liabilities;
share premium. If share premium is
b. Issues its equity interests (except in
insufficient, the issue costs are
reverse acquisitions);
deducted from retained earnings.
c. Receives the largest portion of the
voting rights;
d. Has the ability to elect or appoint or
to remove a majority; Non-controlling interest (NCI)
e. Dominates the management of the • Non-controlling interest (NCI) is the
combined entity; equity in a subsidiary not attributable,
f. Significantly larger of the combining directly or indirectly, to parent.
entities;
• NCI is measured either at:
a. Fair value, or
g. Initiated the combination b. The NCI’s proportionate share of
Determining the acquisition date the acquiree’s identifiable net
assets.
 • A non-current asset (or disposal group)
is classified as “held for sale” if all of the
Previously held equity interest in the acquiree
following conditions are met:
• Previously held equity interest in the 1. The asset or disposal group is
acquiree pertains to any interest held available for immediate sale in its
by the acquirer before the business present condition subject only to
combination. terms that are usual and customary;
and
2. The sale is highly probable (i.e.,
Net identifiable assets acquired significantly more likely than not).
• On acquisition date, the acquirer shall i. Management is committed to a
recognize, separately from goodwill, the plan to sell the asset;
identifiable assets acquired, the ii. An active program to locate a
liabilities assumed and any non- buyer has been initiated;
controlling interest in the acquiree. iii. The sale price is reasonable in
• Any unidentifiable asset of the acquiree relation to its current fair value;
(e.g., any recorded goodwill by the iv. The sale is expected to be
acquiree) shall not be recognized. completed within one year; and
• The identifiable assets acquired and the v. It is unlikely that the plan of sale
liabilities assumed are measured at will be withdrawn.
their acquisition-date fair values. Exception to the one-year requirement

• An extension of the period required to

PFRS 5 NON-CURRENT ASSETS HELF FOR SALE complete a sale does not preclude an
AND DISCONTINUED OPERATIONS asset (or disposal group) from being
classified as held for sale if:
Core Principle 1. the delay is attributable to events
or circumstances beyond the
• A noncurrent asset is presented in the
entity’s control; and
classified statement of financial position
2. there is sufficient evidence that the
as current asset only when it qualifies to
entity remains committed to its
be classified as “held for sale” in
plan to sell the asset (or disposal
accordance with PFRS 5.
group)

Scope Event after reporting period

• PFRS 5 applies to the following non- • If the criteria for classification as held
current assets: for sale are met after the reporting
a. Property, plant and equipment period, an entity shall not classify a non-
b. Investment property measured current asset (or disposal group) as held
under the Cost model for sale in those financial statements
c. Investments in associate or when issued.
subsidiary or joint venture
d. Intangible assets
Non-current assets that are to be abandoned

• An entity shall not classify as held for

Classification of non-current assets (or disposal
sale a non-current asset (or disposal
groups) as Held for Sale
group) that is to be abandoned since
• A non-current asset (or disposal group) the asset’s carrying amount will be
is classified as held for sale or held for recovered through continuing use
distribution to owners if it carrying rather than principally through a sale.
amount will be recovered principally
through a sale transaction rather than
through continuing use. • An entity shall not account for a non-
current asset that has been temporarily
taken out of use as if it had been
Conditions for classification as held for sale abandoned.
Initial and subsequent measurement Non-current A single non- Statement of
asset held current asser financial
• Lower of carrying amount and fair value for sale (e.x position
less cost to sell. equipment)
• A write-down to fair value less cost to Disposal A group of Statement of
sell, and related reversal thereof, is group held assets (e.x financial
recognized in profit or loss. for sale equipment position
• Reversal of impairment is recognized as and
gain to the extent of cumulative inventories
impairment loss that has been and payables
recognized. directly
related to the
• Depreciation (amortization) ceases
equipment
during the period an asset is classified
and
as held for sale. inventories)
Discontinued A component Statement of
operation of an entity financial
Changes to a plan of sale (e.x a branch) position and
statement of
• A non-current asset that ceases to be profit or loss
classified as held for sale shall be and other
measured at the lower of the asset’s: comprehensive
1. Carrying amount before it was income.
classified as held for sale, adjusted
for any depreciation, amortization
Presentation of discontinued operations
or revaluation that would have
been recognized had the asset not • The results of operations of the
been classified as held for sale, and discontinued operations, including
2. Recoverable amount at the date of impairment losses and actual gain on
subsequent decision not to sell. disposal, is presented as a single
amount, net of tax, after profit or loss
Discontinued operations from continuing operations.
• If a component of an entity qualified as
• A discontinued operation is a discontinued operation during the year,
component of an entity that either has all of its results of operations, before
been disposed of or is classified as held and after classification date, shall be
for sale, and classified as discontinued operations.
1. Represents a major line of business
or geographical area of operations;
2. Is part of a single coordinated plan Direct costs associated to decision to dispose a
to dispose of a separate major line component
of business or geographical area of • Costs or adjustments directly associated
operations; or with the decision to dispose a
3. Is a subsidiary acquired exclusively component should be recognized and
with a view to resale shown as part of discontinued
operations. Examples of such costs
Component of an entity include:
1. such items as severance pay or
• A component of an entity comprises employee termination costs,
operations and cash flows that can be 2. additional pension costs,
clearly distinguished, operationally and 3. employee relocation expenses, and
for financial reporting purposes, from 4. future rentals on long-term leases
the rest of the entity. It can be cash
generating unit or group of cash Comparative information
generating units. • If, in the current year, a component of
an entity is classified as discontinued
operation, an entity shall re-present the
Classification Asset(s) being Presentation disclosures for prior periods presented
sold in the financial statements so that the
disclosures relate to all operations that
 have been discontinued by the - 0
reporting period for the latest period
presented. 2. Under a profit-sharing plan, Entity A
agrees to pay its employees 5% of its
Events after the reporting period
annual profit. The bonus shall be
• If the criteria for classification as divided among the employees currently
discontinued operation are met after employed as at year-end. Relevant
the reporting period but before the information follows: Profit for the year
financial statements are authorized for ₱8,000,000; Employees at the beginning
issue, the entity shall disclose the of the year 8; Average employees
information in the notes as non- during the year 7; Employees at the
adjusting event after the reporting end of the year 6. If the employee
period. benefits remain unpaid, how much
liability shall Entity A accrue at the end
Cessation of classification as held for sale: Effect of the year?
on comparative statement of financial position - 400,000
• The cessation of classification as 3. Which of the following instances does
discontinued operation is accounted for not preclude an entity from recognizing
retrospectively; while depreciation during a certain period?
• The cessation of classification as held - The asset becomes idle or is taken out
for sale (non-current assets and of active use.
disposal groups that are not 4. Which of the following is not
components of an entity) is accounted considered a government grant under
for prospectively. PAS 20?
- Tax breaks
FS presentation 5. Which of the following is not one of the
essential characteristics of a PPE?
• Non-current assets held for sale and
- primarily held for sale
assets and liabilities of disposal groups
6. You are the business owner of Entity A.
are presented as current assets (current
You have 10 employees, each earning
liabilities) but separately from the other
₱20,000 per month. You pay salaries on
assets and liabilities in the statement of
a bi-monthly basis. During the month of
financial position.
April 20x1, none of your employees
• An entity shall not offset the assets and
were absent, late or have rendered
liabilities of a disposal group.
overtime service. When will you
recognize the salaries expense (and at
QUIZ what amount) for the first payday in the
month of April 20x1? Timing of
recognition Amount recognized
PAS 16,19,20 - April 15 ; 100,000
1. Entity A has 20 employees who are each 7. Which of the following is considered a
entitled to one day paid vacation leave government grant under PAS 20?
for each month of service rendered. - Cancellation of an existing loan from
Unused vacation leaves cannot be the government
carried forward and are forfeited when 8. You are employed as an accountant.
employees leave the entity. All the Your company’s retirement plan states
employees have rendered service that, upon retirement, an employee
throughout the current year and have (not less than 60 years but not more
taken a total of 150 days of vacation than 65 years of age) is entitled to a
leaves. The average daily rate of the lump sum payment equal to the
employees in the current period is employee’s final monthly salary level
₱1,000. However, a 5% increase in the multiplied by the number of years in
rate is expected to take into effect in service (not less than 10 years). At the
the following year. Based on Entity A’s end of month following the month of
past experience, the average annual retirement and every month thereafter,
employee turnover rate is 20%. How the retired employee is entitled to a
much will Entity A accrue at the end of monthly pension equal to one-eighth
the current year for unused (1/8) of the final monthly salary level.
entitlements? The monthly pensions cease upon
 death of the retired employee. revalues the equipment at a fair value
However, if the employee has of ₱820,000. There is no change in the
immediate dependent(s) with age of residual value and the remaining useful
less than 18 years, the dependent(s) will life of the asset. How much is the
be entitled to the monthly pensions, revaluation surplus on December 31,
which will cease when the dependent(s) 20x3?
reaches 18 years of age. What type of - 31,154
post-employment benefit plan does 13. In 20x1, Entity A proposes an
your company have? environmental clean-up project for a
- Defined benefits plan river. The government supports this
9. Entity A acquires equipment on January project and gives Entity A a ₱1M
1, 20x1. Information on costs is as monetary grant conditioned that the
follows: Purchase price, gross of trade money will only be spent on the
discount 1,000,000; Trade discount proposed project. The proposed project
available 10,000; Freight costs 20,000; is expected to take about 2 years to
Testing costs 30,000; Net disposal complete. Entity A starts the clean-up
proceeds of samples generated during project in 20x2. How should Entity A
testing 5,000; Present value of recognize income from the government
estimated costs of dismantling the grant?
equipment at the end of its useful life - over the period of the project as
6,209. The equipment has an estimated expenses are incurred
useful life of 10 years and a residual 14. According to PAS 16, the selection of an
value of ₱200,000. Entity A uses the appropriate depreciation method rests
straight-line method of depreciation. upon the entity’s
How much is the carrying amount of the - management.
equipment on December 31, 20x3? 15. The main concept used in recognizing
- 788,846 income from government grants is
10. If plotted on a graph (X-axis: time; Y- - matching
axis: ₱), the depreciation charges under 16. PAS 16 requires an entity to review the
the straight-line method would show. depreciation method and the estimates
- a straight-line. of useful life and residual value at the
11. Entity A acquires equipment on January end of each year-end. A change in any
1, 20x1. Information on costs is as of these is accounted for using
follows:Purchase price, gross of trade - prospective application.
discount 1,000,000; Trade discount 17. Imagine you are an employer (an
available 10,000; Freight costs 20,000; awesome one). When should you
Testing costs 30,000; Net disposal recognize short-term employee
proceeds of samples generated during benefits?
testing 5,000; Present value of - When the employees have rendered
estimated costs of dismantling the service in exchange for the employee
equipment at the end of its useful life benefits.
6,209. How much is the initial cost of 18. According to PAS 20, a government
the equipment? grant that becomes repayable is
- 1,041,209 accounted for
12. Entity A acquires equipment on January - prospectively.
1, 20x1. Information on costs is as
follows:Purchase price, gross of trade PAS 21-23
discount 1,000,000; Trade discount
available 10,000; Freight costs 20,000; 1. These are those which do not give rise
Testing costs 30,000; Net disposal to a right to receive (or an obligation to
proceeds of samples generated during deliver) a fixed or determinable amount
testing 5,000; Present value of of money.
estimated costs of dismantling the - Non-monetary items
equipment at the end of its useful life 2. You are an auditor. ABC Philippines Co.,
6,209. The equipment has an estimated your client, is not sure on what to
useful life of 10 years and a residual disclose in its financial statements as its
value of ₱200,000. Entity A uses the functional currency. Relevant
straight-line method of depreciation. information follows: ABC Philippines
On December 31, 20x3, Entity A Co. is a branch of ABC U.S. Co. ABC
 Philippines operates in a Philippine - (200,000)
Economic Zone Authority (PEZA) Special
Economic Zone. ABC Philippines is
engaged in the apparel business. All of 5. On January 1, 20x1, Entity A obtained a
its raw materials are imported from the 10%, ₱5,000,000 loan, specifically to
main office in the U.S. and all of its finance the construction of a building.
finished products are exported directly The proceeds of the loan were
to U.S. customers. The U.S. customers temporarily invested and earned
remit payments to the U.S. main office. interest income of ₱180,000. The
The U.S. main office will then provide construction was completed on
the Philippine branch its working capital December 31, 20x1 for total
needs. None of ABC Philippines Co.s’ construction costs of ₱7,000,000. How
finished products are sold in the much is the cost of the building on
Philippines. The raw materials imported initial recognition?
and finished goods exported are - 7,320,000
denominated in U.S. dollars. 2. ABC 6. An asset is being constructed for an
Philippines Co. is required to file enterprise's own use. The asset has
audited financial statements with the been financed with a specific new
Philippine Securities and Exchange borrowing. The interest cost incurred
Commission (SEC) and the Bureau of during the construction period as a
Internal Revenue (BIR). What is the result of expenditures for the asset is
presentation currency for the financial - a part of the historical cost of acquiring
statements to be filed with the said the asset to be written off over the
government agencies? term of the borrowing used to finance
- Philippine peso the construction of the asset.
3. You are an auditor. ABC Philippines Co., 7. Which of the following may not be
your client, is not sure on what to considered a “qualifying asset” under
disclose in its financial statements as its PAS 23?
functional currency. Relevant - An expensive private jet that can be
information follows: ABC Philippines purchased from a local vendor.
Co. is a branch of ABC U.S. Co. ABC 8. On December 1, 20x1, you imported a
Philippines operates in a Philippine machine from a foreign supplier for
Economic Zone Authority (PEZA) Special $100,000, due for settlement on
Economic Zone. ABC Philippines is January 6, 20x2. Your functional
engaged in the apparel business. All of currency is the Philippine peso. When
its raw materials are imported from the preparing the December 31, 20x1
main office in the U.S. and all of its statement of financial position, which of
finished products are exported directly the following will you translate to the
to U.S. customers. The U.S. customers closing rate?
remit payments to the U.S. main office. - accounts payable
The U.S. main office will then provide 9. Capitalization of borrowing costs
the Philippine branch its working capital - Shall be suspended only during
needs. None of ABC Philippines Co.s’ extended periods of delays in which
finished products are sold in the active development is delayed.
Philippines. The raw materials imported 10. Which of the following costs may not be
and finished goods exported are eligible for capitalization as borrowing
denominated in U.S. dollars. What is costs under PAS 23?
ABC Philippines Co.’s functional - Imputed cost of equity.
currency?
- U.S. dollar PAS 40-41
4. On December 1, 20x1, you imported a
machine from a foreign supplier for 1. Which of the following qualifies for
$100,000, due for settlement on classification as an investment
January 6, 20x2. Your functional property?
currency is the Philippine peso. The - Property that is currently being
relevant exchange rates are as follows: developed for future use as investment
Dec. 1, 20x1: ₱50:$1; Dec. 31, 20x1: property
₱52:$1; Jan. 6, 20x2: ₱47:$1. -
How much foreign exchange gain (loss)
2. Which of the following is considered an property under the fair value model
inventory rather than an agricultural after one year?
produce at the point of harvest? - 980,000
- Tea 9. Biological assets and agricultural
3. Which of the following statements is produce are recognized when all of the
incorrect regarding the accounting for following are present except
biological assets? - probable future event
- PAS 41 is used to account for both 10. The distinguishing characteristic that
consumable and bearer plants. identifies an investment property from
4. Which of the following is considered an the other assets of an entity is
agricultural produce? - it generates separately identifiable cash
- felled trees flows from the other assets of the
5. Which of the following is most likely an entity.
acceptable measurement for
agricultural produce: Initial PFRS 1-2
measurement ; Subsequent
measurement 1. The statement of financial position of
- fair value less costs to sell ; lower of ABC Co. as of January 1, 20x4 included
cost and NRV an allowance for bad debts computed
6. Entity A acquires an investment using the “aging of accounts receivable”
property for ₱1,000,000 cash. method. The “over 120 days” category
Additional costs incurred are as in the aging schedule included a
follows:• Repairs and ₱200,000 receivable which was actually
remodelling before occupancy, written off on January 5, 20x4 (the 20x3
₱50,000.• Legal costs of financial statements were authorized
transferring title to the property, for issue on March 1, 20x4). ABC Co.
₱20,000.• Repairs after could not have foreseen this event on
occupancy, ₱15,000.The investment December 31, 20x3. Does ABC Co. need
property is estimated to have a to revise its previous estimate of bad
remaining useful life of 10 years and a debts as of January 1, 20x4 (date of
residual value equal to 5% of initial cost. transition) on December 31, 20x5 (end
Entity A uses the straight line method of of first PFRS reporting period)?
depreciation. How much is the carrying - No. The receipt of the information on
amount of the investment property January 5, 20x4 is accounted for
under the cost model after one year? prospectively as a non-adjusting event
- 968,350 after the reporting period.
7. Under this model, an investment 2. Many shares and most share options
property is measured at cost less are not traded in an active market.
accumulated depreciation and Therefore, it is often difficult to arrive at
accumulated impairment losses. a fair value of the equity instruments
- Cost model being issued. Which of the following
8. Entity A acquires an investment option valuation techniques should not
property for ₱1,000,000 cash. be used as a measure of fair value in the
Additional costs incurred are as first instance?
follows:• Repairs and - Intrinsic value.
remodelling before occupancy, 3. PFRS 1 requires a first time adopter to
₱50,000.• Legal costs of do which of the following in the
transferring title to the property, opening PFRS statement of financial
₱20,000.• Repairs after position?
occupancy, ₱15,000.The investment - All of these
property is estimated to have a 4. Retrospective application of accounting
remaining useful life of 10 years and a policies means
residual value equal to 5% of initial cost. - as if PFRSs have been used all along.
Entity A uses the straight-line method 5. PFRS 1 requires an entity to prepare
of depreciation. The investment and present an
property has a fair value of ₱980,000 at - opening PFRS statement of financial
the end of Year 1. How much is the position.
carrying amount of the investment
 6. Under PFRS 1, the early application of 6. The acquisition date is
PFRSs that have not yet become - the date on which the acquirer obtains
effective as of the current reporting control of the acquiree.
period 7. On January 1, 20x1, ABC Co. acquired
- is permitted, but not required. 60% interest in XYZ, Inc. for ₱2,000,000
7. Elizabeth, a public limited company, has cash. ABC Co. incurred transaction
granted 100 share appreciation rights to costs of ₱100,000 in the business
each of its 1,000 employees in January combination. ABC Co. elected to
20X4. The management feels that as of measure NCI at the NCI’s proportionate
December 31, 20X4, 90% of the awards share in XYZ, Inc.’s identifiable net
will vest on December 31, 20X6. The fair assets. The fair values of XYZ’s
value of each share appreciation right identifiable assets and liabilities at the
on December 31, 20X4, is P10. What is acquisition date were ₱6,000,000 and
the fair value of the liability to be ₱3,500,000, respectively. How much is
recorded in the financial statements for the goodwill (gain on a bargain
the year ended December 31, 20X4? purchase)?
- P300,000 - 500,000
8. The date to transition to PFRSs is
8. According to PFRS 5, gains and losses on
- the beginning of the earliest period for
remeasurement of assets held for sale are
which an entity presents full
comparative information under PFRSs in - recognized in profit or loss.
its first PFRS financial statements.
9. An entity that presents its first PFRS
financial statements is referred to
under PFRS 1 as a PRELIM QUIZZES
- first-time adopter.
1. At the end of the period, Entity A has
deductible temporary difference of
100,000. Entity A’s income tax rate is
PFRS 3-5 30%. Entity A’s statement of financial
position would report which of the
1. The “excess of the acquirer’s interest in following? (gimultiply ang 30% sa 100k)
the net fair value of acquiree’s - 30,000 deferred tax asset.
identifiable assets, liabilities, and 2. Biological assets and agricultural
contingent liabilities over cost” produce are recognized when all of the
(formerly known as negative goodwill) following are present except
should be - probable future event
- Reassessed as to the accuracy of its 3. Which of the following assets can be
measurement and then recognized measured using the revaluation model?
immediately in profit or loss. - PPE and Investment
2. Assets that are classified as held for 4. According to PAS 23, borrowing costs
sale under PFRS 5 are are capitalized when
- not depreciated. - They relate directly to the acquisition,
3. According to PFRS 5, the assets and construction or production of a
liabilities of a disposal group are qualifying asset.
presented 5. Which of the following is not one of the
- separately on the face of the statement principal issues in the accounting for
of financial position. PPE?
4. Which of the following statements is - Recognition of carrying amount as
true regarding the accounting expense when the related revenue is
treatment of costs to sell under PFRS recognized.
5? 6. ABC Co. During the period your
- Costs to sell are discounted if it is company purchased staplers worth
expected that the sale will be made 1,500. Although the staplers have an
beyond one year. estimated useful life of 10 years.
5. The statement of profit or loss includes
which of the following?
- Discontinued operations.