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Chapter 4.1 Accounts Receivable

The document provides an overview of loans and receivables under applicable accounting standards PFRS 9 and PFRS 15. It defines key terms like receivable and discusses the classification of receivables as to source and statement of financial position. It also covers the initial and subsequent measurement of receivables.

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30 views3 pages

Chapter 4.1 Accounts Receivable

The document provides an overview of loans and receivables under applicable accounting standards PFRS 9 and PFRS 15. It defines key terms like receivable and discusses the classification of receivables as to source and statement of financial position. It also covers the initial and subsequent measurement of receivables.

Uploaded by

2021315379
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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LOANS AND RECEIVABLES - GENERAL OVERVIEW

APPLICABLE ACCOUNTING STANDARDS

 Philippine Financial Reporting Standards (PFRS) 9 - Financial instruments


 PFRS 15 (Revenue from Contract with Customers)

DEFINITION OF IMPORTANT TERMS

 RECEIVABLE is a financial asset that represents a contractual right to receive cash or


another financial asset from another entity.
 It represents the amount collectible from customers and others, most frequently arising
from the sale of merchandise, claims for money lent, or the performance of services.
 Under PFRS 15 par. 108, a receivable is an entity's right to consideration that is
UNCONDITIONAL.
 A right to consideration is unconditional if only the passage of time is required before
payment of that consideration is due.

CLASSIFICATION AS TO SOURCE

 Trade Receivables - claims arising from sale of merchandise or services in the ordinary
course of business operation.
a) Accounts receivable - open account; not supported by a promissory note.

b) Notes receivable — is a formal claim against another that is


evidenced by a written promise called "Promissory note" or a written order to pay at a
later time called "Time draft."

 Negotiable promissory note is an unconditional written agreement to pay a certain sum


of money on a specific or determinable date to order of the payee or to bearer.

 ONLY negotiable Promissory Note is included as part of Notes Receivable. Dishonored


Notes Receivable do not qualify as Notes Receivable in the Statement of Financial
Position as well as overdue notes. They are classified as Accounts Receivable together
with accrued interest.

 Non-trade receivables - claims that arises from sources other than from the sale of goods or
services in the normal course of business.
EXAMPLES OF NONTRADE RECEIVABLES

Loans to officers, shareholders, directors and Noncurrent if due more than 12


1
employees months from the reporting date
Long-term investment, unless
2 Advances to affiliates collectible within one (short-term
year investment)
Advances to supplier for acquisition of Current
3 Current asset
asset merchandise
Accrued income receivables such as Current
asset dividends receivable, accrued rent income,
4 Current asset
accrued royalties income and accrued interest on
bonds investments
Deposits to guarantee performance or Current
5 asset payment or to cover possible damages or Current asset
losses
Deposit with creditors, claims for losses Current
6 Current asset
asset and damages
Claims receivables from common Current asset
carriers for damaged or lost goods; claims
7 Current asset
against creditors for returned, damaged, or lost
goods
8 Claims for tax refunds or rebates Current asset
Normally classified as other
9 Special deposit on contract bids noncurrent assets unless collectible
within one year (current asset)
Debit balance of creditors account that may Current asset if material, otherwise it
10
arise from overpayments may be netted

CLASSIFICATION AS TO STATEMENT OF FINANCIAL POSITION


1. CURRENT
a) Trade receivables - generally classified as current because of the concept of normal
operating cycle notwithstanding the period from the reporting date.
b) Nontrade receivables - classified as current only if they are reasonably expected to
be realized in cash within 12 months after the reporting date.
INITIAL RECOGNITION
Receivables are recognized simultaneously with the recognition of revenue under PFRS 15.
The entity shall recognize revenue to depict the transfer of promised goods/services to customers
in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services (PFRS 15.2)

MEASUREMENT
PFRS 15 REVENUE FROM CONTRACT WITH CUSTOMERS

 Revenue are recognized simultaneously with the recognition of revenue under PFRS 15
Revenue from Contract with Customers.

 Under PFRS 15, revenue should be measured at the amount of the transaction price
(excluding estimates of variable consideration or amounts collected on behalf of 3rd
parties such as sales taxes/VAT).
PFRS 9 FINANCIAL INSTRUMENTS

 Financial assets (ex. Receivables) are initially measured at Fair Value + Transaction
Cost.
Any difference between PFRS 15 and PFRS 9 measurement shall be presented as
EXPENSE (ex. Impairment loss).

SUBSEQUENT MEASUREMENT

 Amortized Cost (Net Realizable Value) using Effective Interest Method

 Amortized Cost is the amount at which the receivable is measured initially minus
principal payments,+ or - the cumulative amortization of any difference between the
initial amount recognized and the principal maturity less reduction for impairment or
uncollectible.

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