Lessons in Accounting

• Overview of Accountancy
• Standard Setting Process
• Conceptual Framework of FR
• Accounting Process (Cycle)
• RePresentation Statements (PAS1)

Overview of Accounting & Accountancy practice

Code of Ethics (Internal Rules)
Practice of Accountancy
Accountancy Law (R.A. 9298)

Practice of Accountancy
Scope of Practice (Sectors)
Academe/Education
Government Service
Industry/Commerce
Public Practice
Others
Related Services (Compilations, Agreed-upon procedures, Review engagements)
Audit Services (Internal, Compliance, External Audit)
Services (Consulting, Accounting, Taxation)

Nature of Accounting
• A service activity. Its function is to provide quantitative information, primarily financial in nature, that is
intended to be useful in making economic decisions.
• It is the process of identifying, measuring, and communicating economic information to permit informed
judgment and decisions of the users of the information.
• The art of recording, classifying and summarizing in a significant manner, and in terms of money, transactions or
events, which are, in part, at least of a financial character, and interpreting the results thereof.
• It is the language of business. In layman, it is a means of communication.

Standard Setting Process

• Nature of Preface to PFRS/FRSC
- Sets out the objectives and due process of the FRSC and explains the scope, authority and timing of
application of Philippine FRSs.
- Once it was established, the FRSC resolved that all Standards and Interpretations issued by the ASC continue
to be applicable unless and until they are amended or withdrawn by the FRSC.
• Objectives of FRSC
General Objectives of FRSC
- to develop, in the public interest, a single set of high quality, understandable and enforceable accounting
standards that require high quality, transparent and comparable information in financial statements, etc.
Specific Objectives
- to promote the use and rigorous application of those standards; and
- to work for the convergence of Philippine accounting standards with International Financial Reporting
Standards (IFRSs) issued by the IASB.
• Intro. to PFRS & FRSC/PIC/TF
Composition of FRSC/PIC
The FRSC consists of a Chairman plus members who are appointed by the BOA and include representatives from
ACPAE, ACPACI, ACPAPP, GACPA, the BOA, BSP, BIR, COA, Finex & SEC. The PIC members were appointed by the
FRSC and include accountants in public practice, the academe and regulatory bodies and users of financial
statements.
 Role of PIC
The FRSC formed the PIC to assist the FRSC in establishing and improving financial reporting standards in the
Philippines. The role of the PIC is principally to issue implementation guidance on PFRSs.
• Scope/Authority/Jurisdiction/Powers
The FRSC issues its Standards in a series of pronouncements called Philippine Financial Reporting Standards
(PFRSs). These consist of the following:
(a) Philippine Financial Reporting Standards (PFRSs) [these correspond to International Financial Reporting
Standards (IFRSs)];
(b) Philippine Accounting Standards (PASs) [these correspond to International Accounting Standards (lASs)]; and
(c) Philippine Interpretations [these correspond to Interpretations of the International Financial Reporting
Interpretations Committee (IFRIC) of the IASB and the Standing Interpretations Committee (SIC) of the IASC;
these also include Interpretations developed by the PIC.
• Extra (transitory) provisions
• Steps in the process
Steps Involve in Due Process
- consideration of pronouncements of the IASB;
- formation of a task force, when deemed necessary, to give advice to the FRSC;
- issuing for comment an exposure draft approved by a majority of the FRSC members; comment period will
be at least 60 days, unless a shorter period (not less than 30 days) is considered appropriate by the FRSC;
- consideration of all comments received within the comment period and, when appropriate, preparing a
comment letter to the IASB; and
- approval of a standard or an interpretation by a majority of the FRSC members.
Timing of Application
PFRSs apply from a date specified in the document. New or revised PFRSs set out transitional provisions to be applied on
their initial application.

Accounting Rules
Specific Standards
General Standards
Conceptual Framework
• Nature
• Status
• Territorial scope or jurisdiction
• Objective of financial reporting
• Purpose or purposes
Nature of Framework
A conceptual framework can be defined as a system of ideas and objectives that lead to the creation of a consistent
set of rules and standards. Specifically in accounting, the rule and standards set the nature, function and limits of
financial accounting and financial statements.
• Sets out the concepts, postulates, assumptions and terms that underlie the preparation and presentation of FS
for external users.
• It is concerned with general purposes financial statements.
• The framework applies to the financial statements of
– Industrial, business, commercial R.E.
– Public or private sector
– Separate or consolidated FS
– Specialized entities
Nature and Status of Conceptual Framework
• Describes the objective and basic qualitative concepts underlying general purpose financial statements
• Is the priority source for preparers or auditors seeking a standard or interpretation
• The Framework is NOT an accounting standard and a principle to be applied.
• In case of conflict with any FRS or PAS, the FRS or PAS prevail over the framework
General Purpose Financial Statements
• Produced at least annually
• For a wide range of primary users
• For privately owned and state- owned business enterprises
• Prepared for users who are not in the position or power to demand reports suited for their information needs.
• Financial Statements prepared for general purpose meet the common needs of the primary users.
• FS also show the results of stewardship of management, or the accountability of management for the resources
entrusted to it.
Complete Set of Financial Statements (General Purpose)
• Financial Position Statement;
• Accounting policies & explanatory notes;
• Comprehensive Income Statement;
• Equity changes statement;
• Statement of cash flows.

Financial Statements’ General Users

• Customers;
- Maybe interested in information about the continuance of an entity, especially when they have a long-term
involvement, or are dependent on, the entity.
- May need information to determine most reliable sources of consumer products at the most reasonable price
and at the best quality.
• Public, in general;
- Entities affect the public in a variety of ways.
- They may make a substantial contribution to the local economy including the number of people they employ
or the suppliers they patronize.
- Maybe interested in information about its prosperity and range of its activities.
• Agencies of the government;
- Interested in the allocation of resources and their activities.
- Maybe interested in information that enable them to regulate the activities of the entities.
- May need information to determine taxation policies and for use as basis for national income and similar
statistics.
• Lenders;
- Interested in information that enables them to determine whether their loans, and the interest attaching to
them, will be paid when due.
• Investors;
- Concerned with the risk inherent in, and the return provided by, their investment.
- May need information to help them determine whether they should buy, hold or sell their investments.
- Shareholders are also interested in information which enables them to assess the ability of the entity to pay
dividends.
• Employees;
- Interested in information about the stability and profitability of their employers.
- They are also interested in information which enables them to assess the ability of the entity to provide
remuneration, retirement benefits and employment opportunities.
• Suppliers & other short term creditors
- Maybe interested in information that enables them to determine whether amounts owing to them will be
paid when due.
- They are likely to be interested in an entity over a shorter period than lenders unless they are dependent
upon the continuation of the entity as a major customer.

Users and their information needs

• Primary users: Lenders, Investors & Other short-term creditors.
• Secondary users: Others such as Customers, Public in general, Agents of the government, Employees.
• Information needs include forecasting economic decisions and some non-financial information
Purpose/s of Framework to assist:
Kinds of users of FS/CF
• Auditors of FS in their Formulation of opinion
• Preparers of FS in their Application of PAS/FRS
• Users in their Interpretation of FS/PAS/FRS
Standard-setters in their Review, adoption, etc.
• Others in Understanding of the work of SS.
Scope or Coverage of Framework
For consistent with the FRSC’s statement, the Framework consists of the following part:
• Definitions of elements of Financial Statements
• Objectives of Financial Reporting;
• Recognition/Derecognition Principles
• Measurement Basis/Assumptions
• Qualitative Characteristics of useful financial information
• Concept of Capital and Capital Maintenance.
• Reporting entity and financial statements
• Presentation and disclosures
The elements of financial statements
re financial position (balance sheet)
– Assets; controlled resources expected to reap future benefits
– Liabilities; a present obligation requiring resources to settle
– Equity; the residual interest in assets minus liabilities
re performance (income statement)
– Income; increases in economic benefits from inflows, asset enhancements, or decreased liabilities
– Expenses; decreases in economic benefits from outflows, asset depletions, increased liabilities
The objective of financial reporting
Provide information
• about the enterprise’s financial position, changes in it, and performance
• that is useful to users
– primarily for economic decision making
– secondarily recording past stewardship
The objective of financial statements
Financial position (via balance sheet)
• addresses assets owned, amounts owed, residual equity interests in net assets
• is affected by resources controlled, financial structure, liquidity/solvency, and adaptability
Performance (via statement of income, profit and loss, or performance)
• is the entity’s ability to earn a profit on the resources invested in it
• helps forecasting cash flows
• now includes an equity statement
Income/expenses now reported as equity:
• Fair value changes in for-sale assets
• Assets remeasured to fair value now reported in ‘revaluation reserve’
• Foreign currency translation adjustments
Financial position changes involve cash (and cash equivalents) flowing through its
• operations
• investments
• financing

Qualitative Characteristics
 refers to the attributes that make the information provided in the financial statements useful to users.
 Two categories of qualitative characteristics are recognized under the conceptual framework: fundamental and
enhancing.
 Fundamental (relevance and faithful representation)
 - Relevance, including components of materiality, feedback and predictive value
- Faithful representation, includes: Neutrality, Freedom from error, Completeness

Enhancing Qualitative Characteristics

Comparability over time and different enterprises needs accounting policy disclosure. It Requires Regular reporting
periods Consistency of policies
Understandability requires Basic knowledge of accounting, business and economic activities; Diligence in the use of
information for their decision making needs.
Timeliness; Being available when it is needed
Verifiability; Objectivity and fairness

Concept of Capital Maintenance

Financial Capital Maintenance
• Net assets are measured based on historical costs.
Productive Capital Maintenance
• Net assets are measured based on current costs.

Recognition of the elements of financial statements

Recognition: the process of incorporating into the financial statement an asset, liability, income or expense that has
• probable economic benefits, and
• measurement reliability
Specific Principles used in Recording Financial Statements Elements
 Initial recognition
 Realization
 Association of cause and effect
 Systematic & rational allocation
 Immediate recognition
Recognition of the elements of financial statements
Special recognition criteria may apply to revenue from:
• the sale of goods
• the rendering of services
• interest, royalties and dividends
Recognition Principles
 General (applies to all elements)
– Historical (meets definition of any element
– Affects any element
– Reliably measurable
– Material in amount
 Special (applies to specific element)
– Accrual Principle (applies to A, L, & E)
– Realization Principle (applies to income)
– Matching Principles (applies to expenses)

Measurement of the elements of financial statements

Measurement: is the process of determining the monetary amounts at which the elements of the financial statements
are to be recognized and carried in the FS.
Specific Measurement Basis:
• Present value refers to the present discounted value of the future net cash inflow or net cash outflow that the
item is expected to generate (if an asset) or to be required to settle (if a liability) in the normal course of
business.
• Initial cost (value) refers to the amount of cash or cash equivalents paid or the fair value of the consideration
given to acquire (if an assets) or the amount of proceeds received in exchange or cash or cash equivalents
expected to be paid to satisfy an obligation (if a liability) in the normal course of business.
 • Net realizable value refers to the amount of cash or cash equivalents that could currently be obtained by selling
the asset in an orderly disposal or the undiscounted amounts of cash or cash equivalents expected to be paid to
satisfy the liabilities in the normal course of business.
• Current cost (value) refers to the amount of cash or cash equivalents that would have to be paid if the same or
an equivalent asset was acquired currently or the undiscounted amount of cash or cash equivalents that would
be required to settle the obligation currently.

Qualities Under the Old Concept

 Relevance and reliability are the primary qualitative characteristics that relate to the proper contents of the
financial statements;
 Understandability and comparability are the secondary characteristics that relate to the proper presentation of
the financial statements.
Qualitative characteristics of financial statements
• Understandability, assuming reasonable business/econ./accounting knowledge diligent study of the information
• Relevance, including components of materiality, timeliness, feedback and predictive value, cost and benefit
association.
• Materiality refers to the ability of the information to influence a decision. It depends on the size of the item or
error judged in the particular circumstances of its omission or misstatement. It provides a threshold or cut-off
point rather than a primary qualitative characteristic.
• Comparability over time and different enterprises needs accounting policy disclosure. Relevance and reliability
are often traded-off, yet overriding priority of statements
• Reliability, includes factors such as:
• Faithful representation
• Substance over form
• Neutrality - Means free from bias. FS are not neutral if, by the selection or presentation of
information, they influence the making of a decision or judgement in order to achieve a
predetermined result or outcome.
• Prudence - Refers to the inclusion of a degree of caution in the exercise of judgements needed
in making the estimates required under conditions of uncertainty, such that assets or income
are not overstated and liabilities or expenses are not understated.
• Completeness
• Benefit/cost balance

Limitations of Characteristics
Expressed, including:
• Cost and benefit trade-off
• Balance among qualities
• Timeliness
Implied, including:
• Industry peculiarity
• Prudence/conservatism
• Materiality
• Emphasis on income
Underlying assumptions (old concept)
1. Accrual basis of accounting - Framework recognises when events occur, not when cash changes hands
2. Going concern - Framework assumes cash flow from operations, not from liquidation sales
Implied assumptions
1. Entity Assumption - Business is a separate person distinct from its owners
2. Periodicity/Time Period - Continuous life of the business can be divided in equal interval of time to facilitate
matching of income and expenses.
3. Monetary unit assumption - Effect of Events can be expressed in terms of stable monetary unit.
4. Deferral accounting - Recognition of some elements of the financial statements can be deferred pending
accomplishment of certain requirements or conditions.
Concept of Capital Maintenance
1. Financial Capital Concept - Performance is measured as the change in equity overtime after adjustment for
distribution to and contributions from owners measured based on historical cost.
2. Physical Capital Concept - Performance is measured as the change in equity overtime after adjustment for
distribution to and contributions from owners measured based on current cost.

ACCOUNTING INFORMATION SYSTEMS (AIS) & PROCESS

Accounting Information System
• Collects and processes transaction data
• Disseminates financial information to interested parties
• Factors determining AIS requirement
– nature and size of business
– volume of data
– information demands on system
Basic Inputs
• Event: usually causes changes in assets, liabilities and equity
• Transaction: external event involving exchange between at least 2 entities
• Account: shows effect of transactions on a specific asset or equity
– Real (permanent) accounts: asset, liability, equity
– Nominal (temporary) accounts: revenue, expense, dividends
• Ledger: records containing accounts
• Journal: book where events are initially recorded
• Posting: process of transferring entries from journal to ledger
• Trial balance: list of all open accounts and their balances
• Adjusting entries: end of period entries to bring accounts up to date

Outputs of Accounting Information System

• Financial statements: reflect final summarisation of accounting data
– Financial Position Statement
– Accounting policies & explanatory notes
– Compre Income Statement
– Equity Changes Statement
– Statement of Cash Flows
Basic Rules of Debits and credits
Equality of debits and credits provides basis for double-entry accounting system

Basic equation (Assets= Liabilities + Equity)

• The equation must be in balance after every recorded transaction
• This means that although elements of the equation change, the basic equality remains

Financial statements and ownership structure

• Share capital and earned capital are reported in equity section of balance sheet
• Cash dividends are reported in
– cash flow statement
– statement of changes in equity
 • Revenues and expenses are reported in statement of comprehensive income
• Dividends, revenues and expenses are transferred to retained earnings at end of period
THE ACCOUNTING PROCESS
1. Analyze business transactions
2. Journalise the transactions
3. Post to ledger accounts
4. Prepare a trial balance
5. Journalise and post adjusting entries: prepayments/accruals
6. Prepare an adjusted trial balance
7. Prepare financial statements
8. Financial Position
9. Accounting Policies & Exp Notes
10. Compre Income Statement
11. Equity Changes Statement
12. Statement of Cash Flows
13. Journalise and post closing entries
14. Prepare a post-closing trial balance
Identifying and recording transactions and other events
• An item should be recognised if it is probable that future economic benefit will flow to or from the entity as a
result AND it can be measured reliably.
• Events are External: between entity and its environment and Internal: within entity
Kinds of Records
• General vs. Special Journals (Book of original entries)
• General vs. Subsidiary Ledgers (Book of final entries)
Journals
• A general journal is a chronological listing of transactions and other events and expressed in terms of debits and
credits to particular accounts
• Each journal entry has 4 parts: accounts and amounts to debited, accounts and amounts to be credited, date,
Narration/explanation
Special Journals
• Types of Special Journal: Sales, Purchase, Cash Receipts, Cash Payments
• Use of Special Journals: All sales on account, All purchase on account, All cash collections, All cash
disbursements
Posting
• Posting is the process of transferring items from general journal to general ledger . It is part of summarising and
classifying process
Trial balance
• The trial balance is a list of accounts and their balances at a given time
• The primary purpose of a trial balance is to prove debits = credits after posting
• If debits and credits do not agree, the trial balance can be used to uncover errors in journalising and posting
The steps for preparing a trial balance are:
1. List the account titles and their balances
2. Total the debit and credit columns
3. Prove the equality of the two columns
Adjusting entries
Adjusting entries are made in order to Record revenues in the period they are earned and Recognise expenses in the
period they are incurred. Adjusting entries are required each time financial statements are prepared. Adjusting entries
usually involve Deferrals and Accruals.
Types of adjusting entries
Deferrals
1. Prepaid expenses - Expenses that are paid in cash and recorded as assets before they are used or consumed. Expire
either with the passage of time (eg rent and insurance) or through use and consumption (supplies and depreciation)
2. Unearned revenues - Revenues received in cash and recorded as liabilities before they are earned. It is earned by
providing a service to the customer. e.g. rent, magazine subscriptions

Accruals
3. Accrued revenues - Revenues earned but not yet received in cash or recorded. Adjusting entry is required to: Show
receivable exists at balance date and Record income earned in the period.
4. Accrued expenses - Expenses that are incurred but not yet paid in cash or recorded. Adjusting entry is required to:
Show record obligations at balance date and Recognise expenses incurred in the period.
SUMMARY OF ADJUSTING NTRIES BEING MADE
(a) Accruals
(b) Deferrals
(c) Allowance for doubtful accounts
(d) Depreciation
(e) Inventory
- Under periodic system, adjustment to reflect the correct inventory on hand after every count must be made.
- Under perpetual system, adjustment is necessary only when the physical count did not tally with the records.
Adjusted trial balance
• The adjusted trial balance is prepared after all adjusting entries have been journalised and posted
• Its purpose is to show the effects of all financial events that have occurred during the accounting period
• The adjusted trial basis is the main basis for preparation of the financial statements.
Closing
• Temporary or nominal accounts relate to only a given accounting period (i.e. revenues, expenses, dividends) All
temporary accounts are closed at the end of the accounting period
• Permanent or real accounts are carried forward to future accounting periods (i.e. assets, liabilities, equity)
Permanent accounts are not closed.
Closing Entries
• Formally transfer net profit (loss) and owner’s drawings to owner’s capital
• Produce a zero balance in each temporary account
Income Summary
• A temporary account to which revenue and expense accounts are closed
• Used to match revenues and expenses
Inventory and cost of sales
• With a perpetual inventory system, purchases and sales are recorded directly in the Inventory account as they
occur
• With a periodic inventory system, a Purchases account is used, and the Inventory account is unchanged during
the period.
• Cost of sales will be the same under both systems.
Post-closing trial balance
• A post-closing trial balance is a list of all permanent accounts and their balances after closing entries are
journalised and posted
• The purpose of the post-closing trial balance is to prove the equality of the permanent accounts that are carried
forward to the next accounting period
Reversing entries
• Reversing entries are made at the beginning of the next accounting period.
• Their purpose is to simplify the recording of a subsequent transaction related to an adjusting entry.
• Prepared to exercise consistency and to facilitate standardization of recording
• They are most often used to reverse adjusting entries that relate to Accruals and Deferrals when expense or
income method is used
• Reversing entries are optional.
Using a Worksheet
• A worksheet is multiple-column form used for the adjustment process and preparing financial statements.
• It is not a permanent accounting record but rather an accountant’s tool.
 • The use of worksheet is optional, but if used provides the basis for preparation of the financial statements.
Steps in preparing a worksheet
1. Prepare trial balance.
2. Enter adjustments in adjustments columns.
3. Enter adjusted balances in adjusted trial balance columns.
4. Extend adjusted trial balance amounts to appropriate financial statement columns.
5. Total statement columns, calculate net profit (or loss) and complete worksheet.
Preparing financial statements from a worksheet
• A completed worksheet contains all the data required for preparation of financial statements.
• Using a worksheet, financial statements can be prepared before adjusting entries are journalised and posted.
• However, a worksheet is not a substitute for the financial statements.

Presentation of Financial Statements (PAS 1)

Objective of PAS 1
• Prescribe the basis for presentation of general purpose financial statements;
• Ensure comparability both with the entity’s financial statements of previous periods and with the financial
statements of other entities.
• Sets out overall requirements for the presentation of financial statements;
• Provide guidelines for their structure and minimum requirements for their content.
• The recognition, measurement and disclosure of specific transactions and other events are dealt with in other
Standards and in Interpretations.
Scope of PAS 1
PAS 1 applies to all general purpose financial statements prepared and presented in accordance with Philippine Financial
Reporting Standards (PFRSs).
Except when otherwise provided in paragraphs 13-41, PAS 1 generally does not apply to the structure and content of
condensed interim financial statements prepared in accordance with PAS 34 Interim Financial Reporting.
This Standard applies equally to all entities and whether or not they need to prepare consolidated financial statements
or separate financial statements, as defined in IAS 27 Consolidated and Separate Financial Statements.
Scope of PAS 1 (FS Presentation Standard)
PAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions specifies additional
requirements for banks and similar financial institutions that are consistent with the requirements of this Standard.
PAS 1 uses terminology that is suitable for profit-oriented entities, including public sector business entities.
Entities with not-for-profit activities in the private sector, public sector or government seeking to apply this Standard
may need to amend the descriptions used for particular line items in the financial statements and for the financial
statements themselves.
Similarly, entities that do not have equity as defined in PAS 32 Financial Instruments: Disclosure and Presentation (eg
some mutual funds) and entities whose share capital is not equity (eg some cooperative entities) may need to adapt the
presentation in the financial statements of members’ or unit-holders’ interests.

FINANCIAL STATEMENTS:
 DEFINITIONS
- Means by which the information accumulated and processed in financial accounting is periodically
communicated to users.
- End products of the financial accounting process.
- Structured financial representation of the financial position, and financial performance of an entity.
 COMPONENTS
Financial Position Statement;
Accounting policies & explanatory notes
Comprehensive Income Statement
Equity changes statement
Statement of cash flows
 OBJECTIVES
 RESPONSIBILITIES
  ELEMENTS
 FEATURES
Going concern - An entity preparing financial statements is assumed to be a going concern. If doubt exists
about its ability to continue to operate indefinitely, such uncertainties must be disclosed and management’s
conclusion that such is the case would require a series of disclosures in the notes to FS.

Offsetting - Assets and liabilities, income and expenses should not be offset unless permitted or required by
a standard or interpretation.

Comparable information - Information shall be disclosed in respect of the previous period for all amounts
reported in the FS, both in the face and in the notes, unless another standard requires otherwise. In such a
case, various disclosures are also required.

Consistent presentation - Presentation and classification should be retained from one period to the next
unless a change is justified either by a change in circumstances or because required by a PFRS.

Fair presentation - This is achieve when financial statements are presented in accordance with PFRS. If
financial statements comply with PFRS an entity must make an explicit and unreserved statement of such
compliance in the notes. PAS 1 provides that an inappropriate application of accounting policies is not
rectified either by disclosure of the accounting policies used or by notes or explanatory material. In rare
circumstances that departure is allowed, detailed disclosures are required.
ALLOWED DEPARTURE
Compliance would result to misleading information; Framework requires departure or does not prohibit it.
CONDITIONS
Management conclude that the financial statements on the overall are fairly presented; It has complied
with applicable standards and interpretations, except that it has departed from a particular standard to
achieve a fair presentation; The title of the standard from which it has departed; The nature of the
departure; The treatment that the standard would have required; The reason why that treatment would
result to misleading information; The treatment adopted.

Accrual basis - PAS 1 requires that an entity prepare its financial statements, except for cash flow
information, using accrual basis of accounting

Reporting frequency - There is a presumption that FS will be prepared at least annually. If the annual
reporting period changes and FS are prepared for a different period, the entity must disclose the reason for
the change and the fact that FS are not entirely comparable.

Materiality and aggregation - Different items are presented separately unless immaterial. Similar items are
aggregated unless individually material in amount

BASIC CONTENTS OF FS
 Presentation currency (whether local or foreign currency)
 Financial statements component (whether F,A,C,E, or S)
 Reporting enterprise, date and period covered
 Statement type (whether separate or consolidated)
Items Disclosed Separately
 Gain or loss before tax on disposal of assets of discontinued operations
 Revenue from sale of goods or rendering of services
 Amount of profit or loss before tax during operations of a DO/S
 Profit or loss for the period
 Each component of OCI
Minimum Items Presented
 Finance costs
  Income tax expense
 Share of the profit or loss of associates and joint ventures under the equity method/Share of the OCI of
associates and joint ventures
 Total comprehensive income/Tax related to OCI
Other Components of CI
 Gain or loss from translating the FS of a foreign operation
 Unrealized gain or loss from derivative contracts designated as cash flow hedge;
 Unrealized gain or loss from financial assets carried at fair value through OCI
 Change in revaluation surplus
 Actuarial gain or loss on defined benefit plan in accordance with the “full recognition approach”
Disclosure either in Face or Notes
 Write-down of inventory to net realizable value;
 Write-downof PPE to recoverable amount;
 Other reversal of provision;
 Reversal of above write-downs;
 Restructuring of the activities of an entity;
 Reversal of any provision for the cost of restructuring;
 Litigation settlement
 Disposal of an item of PPE;
 Disposal of investment;
 Discontinued operation.
Minimum Items Presented
a. Financial assets & liabilities
b. Assets held for sale, assets and liabilities related to disposal group
c. Current tax assets & liabilities
d. Trade and other receivables/trade and other payables
e. Biological assets
f. Inventories
g. Deferred tax assets and liabilities
h. Share capital issued and reserve
i. Investment property
j. Non-controlling interest
k. Property, plant & equipment
l. Intangible assets
m. Property, plant & equipment
n. Equivalent cash & cash
Share capital & reserve
 Number of shares (A, I, P or N)
 Par Value
 Reconciliation of O/S, B & E
 Treasury shares, inc. those...
 Shares reserved for options, etc.
 Description of nature and purpose of each reserve
Forms of income statement
 Functional Presentation (COSM) - Traditional or common form; Classify expenses by function; Provides more
relevant information than natural.
 Natural Presentation

Functional Format
- Net Sales
- Cost of sales
- Gross income
- Other income
 - Investment income
- Total income
- Expenses
- Distribution
- Administration
- Other expenses
- Finance cost
- Income before tax
- Profit or loss

Natural Format
- Net sales revenue
- Other income
- Investment income
- Total Income
- Expenses
- Increase in inventory
- Net purchases
- Employee benefit expense
- Sales commission
- Advertising
- Supplies expense
- Delivery expense
- Depreciation
- Taxes and licenses
- Doubtful accounts
- Other expenses
- Finance cost
- Income before tax/Income Tax

Earned Capital Statement

 Net income
 Prior period errors
 Dividends declared and paid
 Effect of change in accounting policy
 Appropriation of retained earnings

Other Disclosures
 Domicile of the enterprise
 Country of incorporation
 Address of registered office
 Description of the operations
 Name of its parent

Equity Changes Statement

 Total Comprehensive income
 For each component of equity, the effect of changes in accounting policy and correction of errors
 For each component of equity, a reconciliation between the carrying amount at the beginning and end of the
period separately;

Statement of Changes
 Profit or loss
 Each item of other comprehensive income;
 Transactions with owners showing both distribution to and investments by owners