No. 125 Brgy.

San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

PRESENTATION OF FINANCIAL STATEMENTS

Item PFRS for SMEs PFRS for Small Entities
Qualitative characteristics of information Qualitative Characteristics Basic Features
presented and Basic Features
Understandability Fair presentation
Relevance Compliance with the PFRS for SEs
Materiality Going concern
Substance over form Frequency of reporting
Prudence Consistency of presentation
Completeness Comparative information
Comparability Materiality and aggregation
Timeliness
Balance between benefit and cost
Undue cost or effort
Accrual basis Applied Applied
Formulation of accounting policies Based on Based on
• PFRS for SMEs • PFRS for Small Entities (SEs)
• Pervasive recognition and measurement bases No additional guidelines are provided, as
• Requirements of PFRS for those with no provisions in the PFRS for SMEs logic suggests that Small Entities’ transactions
are simple and addressed in the PFRS for SEs.
Complete set of financial statements Same as in full PDRS, except that when an entity makes retrospective adjustments due to change in Same as in PFRS for SME. In as much as no other
accounting policy or correction of prior period error, there is no additional requirement to present a comprehensive income is presented for a small
statement of financial position as at the beginning of the prior period. entity, an income statement is prepared instead
of the statement of comprehensive income.
Allowed to present a combined statement of income and retained earnings when changes in equity arise
only from profit or loss, payment of dividends, corrections and changes in accounting policy.
Minimum line items in the statement of Same as in full PFRS, except there are no requirements for separate line presentation of the following: There are no prescribed minimum line items, but
financial position • Assets classified as held for sale suggests presentation of major accounts either
• Liabilities relating to disposal groups classified as held for sale on the face of the statement of financial position
• Investments in associates and joint ventures or in the notes.

1|P a g e R.SORIANO | B.C.VILLALUZ|J.P.BINALUYO

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

Minimum line items on the face of the Same as in full PFRS except that impairment loss is not required to be presented separately. There are no prescribed minimum line items.
statement of comprehensive income or
statement of income
Statement of changes in equity Same as in full PFRS, but does not provide option for presentation of dividends. There are no specific guidelines.

Note: The full PFRS provides options for

presentation of dividends: either in the
statement of changes in equity or in the notes.
Changes in accounting policies Same as in full PFRS but does not require a restated statement of financial position as at the beginning of There is no requirement for restatement of
the prior year. comparative prior period. The cumulative
amount is shown as adjustment to the beginning
balance of equity of the current period. The
balances of the assets and liabilities of the
current period are adjusted.
Correction of prior period errors Same as in full PFRS but does not require a restated statement of financial position as at the beginning of There is no requirement for restatement of
the prior year. comparative prior period. The cumulative
amount is shown as adjustments to the beginning
balance of equity of the current period. The
balances of the assets and liabilities of the
current period are adjusted.
Earnings per share presentation Not required Not required
Notes to financial statements Same as in full PFRS except sensitivity analysis is not required. Same as in full PFRS except that the following are
not required to be disclosed:
a. Sensitivity analysis
b. Key sources of judgements
c. Key sources of estimation uncertainty
Disclosure requirements Substantially reduced due to the following reasons:
• Some topics are not included in PFRS for SMEs;
• Some measurement principles are simplified;
• Some opinions are omitted; and
• Cost-benefit is considered

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 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

ACCOUNTING TREATMENTS FOR FINANCIAL STATEMENT ELEMENTS

Element/ Transaction PFRS for SMEs PFRS for Small Entities
Inventories Same as in full PFRS Costing procedures are the same as in full PFRS, except inventories are
subsequently measured at the lower of cost of market value. Market
value is the probable selling prince to willing buyers as of reporting date.
Investments in associates Use either the equity model or Same as in PFRS for SMEs except small entities can choose freely
(a) The cost model for investments with no published price quotations and measurement at fair between the cost model and the fair value model.
value is impracticable, and
(b) The fair value model for investments with published price quotations and fair value can be
determined reliably without undue cost and effort.
Elements in associations and Under both fair value model and cost model, dividends are reported as income without regard to
joint ventures (continued) the sources of dividends
Investment in jointly Use either the equity model or No such account is used, as an entity with investment in jointly controlled
controlled entities (a) The cost model for investments with no published price quotations and measurement at fair entities may not qualify as small entity.
value is impracticable, and
(b) The fair value model for investments with published price quotations and fair value can be
determined reliably without undue cost and effort.
Under both fair value model and cost model, dividends are reported as income without
regard to the sources of dividends.
Basic equity investments Designed as at FV through profit or loss, for instruments with published price quotations and FV can Initially measured at cost, including transaction cost.
(neither investment in be determined reliably without undue cost and effort, accounted for at cost. Subject to impairment,
associates nor investment in which is taken in profit or loss. At reporting date, they are measured at the lower of cost or fair value,
joint ventures) with impairment taken to profit or loss.
Debt instruments Initially recognized at transaction price and subsequently amortized using the effective interest Same as in PFRS for SMEs.
method. Impairment loss and reversal of impairment are recognized based on objective of
impairment and recovery, respectively.
Investment property Same as in full PFRS for immediate recognition, except borrowing costs are expensed. Same as in the PFRS for SMEs.

Investment property held under operating lease is initially measured at the lower between fair value
and present value of minimum lease payments.

3|P a g e R.SORIANO | B.C.VILLALUZ|J.P.BINALUYO

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

Investment property whose fair value can be determined reliably without undue cost or effort shall
be subsequently measured using the fair value model. All other investments shall be measured using Same as in PFRS for SMEs, except that no further requirement to disclose
the cost model. fair value under the cost model.
Research and development Recognized as expense when incurred. Same as in PFRS for SMEs.
costs
Intangible assets whose Amortized based on management’s best estimate, but not to exceed 10 years. Same as in PFRS for SMEs.
estimated useful life cannot
be determined reliably.
Income tax Same as in full PFRS Choice between accrual of
(a) Current tax only (payable or receivable) and
(b) Current and deferred income tax.

When (b) is opted, both the current and deferred taxes are recognized in
profit or loss.
Leases Account as finance lease when the lease transfers substantially the risks and rewards of ownership Account for all leases as operating lease.
to the lessee. Otherwise, record the lease (based on old PAS 16 under full PFRS). However, under
operating leases, there is no requirement to account for lease payments under the straight-line
approach.
Borrowing costs Recorded as expenses Same as in PFRS for SMEs.
Employee benefits Same as in PFRS except that the use of projected unit credit method (PUCM) may be waived if entity All employee benefit costs are taken to profit or loss, unless it forms part
is not able to use it without undue cost or effort. A simplified approach that ignores future salary of an asset account.
increases, future services and mortality of current employees is used in lieu of PUCM.
Option may be exercised to treat actuarial gains and losses in
(a) Profit or loss or
(b) Partly in profit or loss and partly in OCI.
Disclosure requirements Substantially reduced Substantially reduced
Source: Empleo, P.M. (2020). Intermediate Financial Reporting. La Limariza Printing Press.

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