Philippine Institute of Certified Public Accountants

EASTERN METRO MANILA REGION

PAS 1, PRESENTATION OF
FINANCIAL STATEMENTS
Preparing Your 2013
Financial Statements
Presentation Outline
• Basic Financial Statements
• Notes to Financial Statements
BASIC FINANCIAL
STATEMENTS
Components of
Financial Statements

a) Statement of financial position

b) Single statement of comprehensive income, or a separate
income statement and a separate statement of
comprehensive income
c) Statement of changes in equity
d) Statement of cash flows
e) Notes to FS
f) a statement of financial position as at the beginning of the
earliest comparative period when an entity applies an
accounting policy retrospectively or makes a retrospective
restatement of items in its financial statements, or when it
reclassifies items in its financial statements.
Identifying the
Financial Statements
• Name of the enterprise
• Description of the financial statement presented
and whether it covers an individual enterprise or a
group of companies
• Period covered (should be comparative, two years
at least)
• Presentation currency
• The level of rounding used in presenting amounts in
the financial statements.
 Example

ABC MANUFACTURING COMPANY

(A Wholly Owned Subsidiary of XYZ Holdings Corporation)
STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 2013 AND 2012
(Amounts in Thousands of Philippine Pesos)
• Company name
• Parenthetical disclosure
• Statement title
• Statement date
• Presentation currency and level of rounding
Statement of Financial Position –
Entity shall present current and non-current classification

Example:

Date of sale: August 30, 2013

Cut-off date: December 31, 2013
Expected collection date: October 31, 2014

How will you classify the receivable from such sale?

Current or Non-current?
Statement of Financial Position –
Current Assets and Current Liabilities

Current Assets Current Liabilities

– Expected to be realised in, or – Expected to be settled in the
intended for sale or entity’s normal operating
consumption in, the entity’s cycle; or
normal operating cycle; or – Held primarily to be traded; or
– Held primarily to be traded; or – Due to be settled within 12
– Expected to be realised within months after reporting period;
12 months after reporting or
period; or – No unconditional right to
– Cash or cash equivalents defer settlement

All other assets & liabilities are classified as non-current

 Statement of Financial Position –
Current Assets and Current Liabilities
ASSETS LIABILITIES AND EQUITY
Current Liabilities
Current Assets Accounts payable P xxx
Cash P xxx Taxes payable xxx
Accounts receivables xxx xxx
Inventory xxx Non-current Liabilities
Prepayments xxx Loans payable xxx
xxx Due to parent xxx
Non-current Assets xxx
Property and equipment xxx Equity
Due from parent xxx Capital stock xxx
Intangibles xxx Deposit for future subs. xxx
xxx APIC xxx
xxx
Total assets P xxx Total liabilities and equity P xxx
 Statement of Financial Position –
Minimum Content
• Property, plant and equipment • Trade and other payables
• Investment property • Provisions
• Intangible assets • Financial liabilities
• Financial assets • Liabilities and assets for current tax
• Investments • Deferred tax liabilities and deferred tax
• Biological assets assets
• • Liabilities included in disposal groups
Inventories
classified as held for sale
• Trade and other receivables
• Non-controlling interest, within equity
• Cash and cash equivalents
• Issued capital and reserve
• Assets held for sale and assets
included in disposal groups

Additional line items allowed when relevant to

understanding of an entity's financial position
The Statement of Comprehensive Income

Presentation of income and expense in two-ways:

• single statement of comprehensive income; or,
• separate statement of income and a statement
of comprehensive income.
Statement of Comprehensive Income –
Separate Statement of Income

• Presentation of Revenues and Expenses

• Analysis of Expenses based on their:

– Nature
– Function
Statement of Comprehensive Income –
Statement of (Other) Comprehensive Income

• Profit or loss
• Total comprehensive income
• Each component of other
for the period attributable
comprehensive income to:
classified by nature – non-controlling interest
• Share of the other – owners of the parent
comprehensive income of
associates and joint ventures
accounted for using the equity Additional line items allowed
method when relevant to
• Total comprehensive income understanding of an entity’s
financial performance
Statement of Changes in Equity
An entity shall present a statement of changes in equity
showing on the face of the financial statements the following:

• Total comprehensive income showing separately:

– Amounts attributable to owners of the parent, and
– To non-controlling (minority) interests

• Retrospective adjustments or reclassifications in accordance

with PAS 8
Statement of Cash Flow

• Operating Activities
• Investing Activities
• Financing Activities
 Statement of Cash Flow

Operating Activities (common examples)

• cash receipts from the sale of goods and the
rendering of services
• cash receipts from royalties, fees, commissions
and other revenue
• cash payments to suppliers for goods and services;
• cash payments to and on behalf of employees
• cash payments or refunds of income taxes
 Statement of Cash Flow

Reporting Cash Flows from Operating Activities

 Direct - major classes of gross cash receipts and gross cash
payments are disclosed.

 Indirect method - profit or loss is adjusted for:

 non-cash transactions;
 deferrals or accruals of operating cash receipts or payments;
and,
 income or expense associated with investing or financing
cash flows.
 Statement of Cash Flow
Indirect Method
Direct Method
Income before tax XXX
Cash collected from customers XXX Adjustments for:
Cash paid for inventories (XXX) Depreciation and amortization XXX
Cash paid for rent (XXX) Interest expense XXX
Cash paid to employees (XXX) Impairment loss XXX
Cash paid for utilities (XXX) Gain on sale of machinery XXX
Taxes paid (XXX) Operating income before
Interest paid (XXX) working capital changes XXX
Cash flow from operating Increase in trade receivables (XXX)
activities XXX Decrease in trade payables XXX
Cash generated from operations XXX
Cash paid for income taxes XXX
Net cash from operating activities XXX
 Statement of Cash Flow

Investing Activities (common examples)

• cash payments to acquire and receipts from
sales of property, plant and equipment,
intangibles and other long-term assets
• cash receipts from sales of equity or debt
instruments of other entities and interests in
joint ventures
 Statement of Cash Flow

Financing Activities (common examples)

• cash proceeds from issuing shares or other equity
instruments
• cash payments to owners to acquire or redeem the
entity’s shares
• cash proceeds from issuing debentures, loans, notes,
bonds, mortgages and other short-term or long-term
borrowings
• cash repayments of amounts borrowed
Statement of Cash Flow

• Non-cash transactions- investing and financing activities

that do not require the use of cash or cash equivalents

• Examples of non-cash transactions:

– conversion of debt to equity;
– acquisition of an entity by means of an equity issue; and,
– acquisition of assets by means of assuming directly related
liabilities or by finance lease.
Statement of Financial Position and
Statement of Cash Flow
ASSETS Operating LIABILITIES AND EQUITY
Current Assets Current Liabilities
Cash P xxx Accounts payable P xxx
Accounts receivables xxx Taxes payable xxx
Inventory xxx xxx
Prepayments xxx Non-current Liabilities
xxx Loans payable xxx
Non-current Assets Due to parent xxx
Property and equipment xxx xxx
Equity Financing
Due from parent xxx
Intangibles xxx Capital stock xxx
xxx Deposit for future subs. xxx
Investing APIC xxx
Total assets P xxx xxx
Total liabilities and equity P xxx
NOTES TO FINANCIAL
STATEMENTS
Composition of Notes to Financial
Statements

• Corporate Information and Status of Operation

• Accounting Policies

• Disclosures on Specific Accounts

• Other Required Disclosures

Corporate Information
and Status of Operations

• Registered name and legal form

• The name of ultimate parent (major shareholders)

and the percentage of ownership

• Equity interest in investee companies (if any)

• Registered address
Corporate Information
and Status of Operations

• Date and place of incorporation

• Description of the nature of operations and its

principal activities

• Date of authorization of financial statements and who

authorized

• Status of operations (going concern issue)

 Registered name
and legal form;
date and place of
incorporation;
Nature of the
operations and
principal
activities

name of ultimate
parent and % of
ownership

Registered
address

Date of
authorization
of FS and who
authorized

Status of operations
Composition of Notes to Financial
Statements

• Corporate Information and Status of Operation

• Accounting Policies

• Disclosures on Specific Accounts

• Other Required Disclosures

Accounting Policy

• Basis of Preparation

• Impact of New Accounting Standard

• Information about Judgments

• Information about Key Sources of Estimation Uncertainty

• Significant Policy for each significant item in the financial

statements
Basis of Preparation

Statement of Compliance with PFRS

The financial statements of the Company have been prepared in accordance
with Philippine Financial Reporting Standards (PFRS). PFRS are
adopted by the Financial Reporting Standards Council (FRSC) from the
pronouncements issued by the International Accounting Standards Board.
 
The financial statements have been prepared using the measurement bases
specified by PFRS for each type of assets, liabilities, income and expense.
The measurement bases are more fully described in the accounting policies
that follow.
 Adoption of New
Accounting Standards

• Effective in current year that are

relevant to the entity
Nature
• Effective in current year that are not
relevant to the entity
Impact

• Effective subsequent to current year

but not adopted early
Exercise

Judgment
VS.
Judgment vs Estimate

• Useful lives of property, plant and equipment

• Distinction between operating and finance leases

• Whether an item is a provision or contingency

• Determining the net selling prices of inventories

• Allowance for impairment of trade and other

receivables
Judgment vs Estimate

• Impairment of non-financial assets

• Retirement and other benefits

• Provision for restoration of leased property

• Distinction between Investment Property and

Owner-managed Properties
Judgment vs Estimate
What to disclose?

• Policy or nature of such item

• Factors considered

• Key assumptions

• Sources of estimation uncertainty

• Impact or Effect in the financial statements

Composition of Notes to Financial
Statements

• Corporate Information and Status of Operation

• Accounting Policies

• Disclosures on Specific Accounts

• Other Required Disclosures

Significant Accounting Policies
for each specific account

• Materiality
• Nature and Composition
• Recognition Criteria
• Initial Measurement
• Subsequent Measurement
• Derecognition Criteria
- END OF OTHER REQUIRED
DISCLOSURES -