UPDATES IN FINANCIAL REPORTING STANDARDS

STATEMENT OF FINANCIAL POSITION result in FS that achieve a fair

presentation
FINANCIAL STATEMENTS  Fair presentation requires
 Are structured presentation of an an entity to
entity’s financial position and result of o Select accounting
its operation policies based on PAS
 End product of the financial reporting 8, observing the
process hierarchy in formulating
accounting policies
GENERAL PURPOSE FINANCIAL o Present information
STATEMENTS in a manner that
 Are those intended to meet the needs provides relevant,
of users who are not in a position to reliable, comparable
require an entity to prepare reports and understandable
tailored to their particular information information
needs o Provide additional
 Cater most of the common needs of disclosures when
wide range of external users compliance with specific
requirements of the
PURPOSE OF FINANCIAL STATEMENTS IFRS is insufficient to
enable the users to
PRIMARY OBJECTIVE: To provide understand the impact
information about the financial position, of a particular
financial performance, and cash flows transaction

SECONDARY OBJECTIVE: To show the ADOPTED BY FRSC:

results of management’s stewardship over A. PFRS (based on IFRS and originally
the entity’s resources promulgated by IASB)
B. PAS (based on IAS and originally
COMPLETE SET OF FINANCIAL promulgated IASC)
STATEMENT C. Interpretations originated by the:
1. Statement of financial position a. International Financial
(Balance Sheet) Reporting Interpretations
2. Statement of profit or loss and other Committee
comprehensive income (Income b. Standing Interpretations
Statement) Committee
3. Statement of changes in equity c. Philippine Interpretations
4. Statement of cash flows Committee
5. Notes
6. Additional statement of fp (if certain DEPARTURE FROM STANDARDS
circumstances occurred)  In extremely rare circumstances, the
management shall depart from the
GENERAL FEATURES OF FINANCIAL specific requirements of the IFRS
STATEMENTS when it concludes the compliance
would make the financial information
a. FAIR PRESENTATIION AND misleading, provided further that the
COMPLIANCE WITH PFRS regulatory framework, requires or
 Fair presentation requires does not prohibit such departure.
faithful presentation of the
effects of transactions, other In such circumstances, the entity shall
events and conditions in make the following disclosures:
accordance with the definitions a. FS present fairly the entity’s
and recognition criteria of alie financial position, financial
(asset liab income exp) performance, and class flows;
 Application of IFRS with b. It has complied with applicable
additional disclosures, when IFRS, except that it has
necessary is presumed to departed from a particular
UPDATES IN FINANCIAL REPORTING STANDARDS
requirement to achieve a fair  When the enterprise has a
presentation history of profitable
c. Title of IFRS from which the operations and ready
entity has departed, the nature access to financial
of departure and reason why resources, no detailed
treatment would be analysis is necessary to
misleading, and the treatment evaluate the capacity of the
adopted enterprise to continue
d. Financial impact of departure operations in the future.
on each item that have been  When enterprise is aware of
reported in complying with the significant uncertainties
requirement that may cast doubt upon the
entity’s ability to continue as a
gc, management may consider
reviewing the basis
In rare circumstances when management
believes that departure from IFRS is 3. ACCRUAL BASIS
necessary to achieve the objective of FS, but  Transactions and events are
relevant regulatory framework prohibits recognized when they occur
departure, the enterprise shall reduce the  Transactions are recorded and
perceived misleading aspects of compliance reported in the FS of the periods to
by disclosing: which they relate
a. Title of Standard or Interpretation in
question, the nature of requirement,
and the reason why management  Expenses are recognized on the basis
concluded that complying with the of:
requirement is so misleading that it o Direct matching – a direct
conflicts with the objective of financial association between costs
statements; and incurred and earning of specific
b. the adjustments in each item that items of income
management has concluded would be o Systematic and rational
necessary for fair presentation allocation – systematic
allocation acquired to periods
2. GOING CONCERN of benefit (dep.)
 FS should be prepared in Going
Concern basis unless management NOTE:
either intend to liquidate the  accrual basis of accounting and
enterprise or cease in trading or has expense recognition principles
no realistic alternative but to do so. do not allow the recognition
 When not prepared in Going Concern, of assets for costs which are
entity need to disclosed in the notes not expected to provide
the: probable future economic
o The fact that fs are not benefits to the enterprise
prepared in going concern  accrual basis applies revenue
basis; recognition principles
o The basis on which the fs are o revenue is recognized at
prepared the point of delivery of
o The reason why not in going goods and services
concern basis provided that it would
result to an inflow of
NOTE: benefits
 The management should
assess the ability of the 4. MATERIALITY AND AGGREGATION
enterprise to continue  Each material item should be
operations for a period of at presented separately
least, but not limited to,  Immaterial amounts of similar
twelve months. nature of functions should be
UPDATES IN FINANCIAL REPORTING STANDARDS
aggregated as one-line item on the net basis reflects the substance of the
face of financial statements transaction or other event, ex. netting
 The details comprising the amounts, any income with related expenses
if relevant to the decision needs of the arising on the same transaction
users will be presented in the notes
 Material 6. FREQUENCY OF REPORTING
o if its non-disclosure would  Presented at least annually
influence decision or evaluation  (In exceptional cases) if statement of
of the user financial position date changes and fs
o depends on the size and nature are prepared for a period longer or
of the item judged shorter than one year, that fact should
be disclosed.
NOTE:  The reason for using shorter or longer
 the process of aggregation than one year and the fact that
and classification involves comparative are not entirely
the presentation of comparable should be disclosed
condensed and classified  Reporting annually does not prevent
information. the enterprise from presenting
 If item taken individually interim FS (shorter than one year)
will call the attention of
the user – item is 7. COMPARATIVE INFORMATION
presented as single line  Should be disclosed in respect of the
 If item is not considered preceding period
significant – aggregated  Comparative narrative and descriptive
with other items information shall likewise be included
 Materiality is considered a when it is relevant to an
threshold for recognition understanding of the current period’s
fs

5. OFFSETTING
 Deducting one item from another item
of different nature and presenting only
the net
 NOT considered offsetting:
o Presenting receivables net of When an enterprise makes retrospective
the related allowance for bad adjustment for any one or combination
debts of the ff:
o Property, plant and equipment a. Change in accounting policy
net of accumulated b. Correction of prior period errors
depreciation c. Reclassification or amendments of
 Examples: items
o G/L from sales of assets net of
the related selling exp Three statements of FP shall be
o Net amount of the unrealized presented, namely as at:
G/L arising from trading a. The end of current period
securities and from translation b. The end of the immediate prior period
of foreign currency and
o Loss from a provision net of a c. The beginning of the preceding period
reimbursement from a 3rd party
This is done to ensure comparability of
NOTE: prior year information with the current
General rule: Offsetting not allowed, period
unless required or permitted
RECLASSIFICATION
Exception: Offsetting is also allowed Entity shall disclose:
and applied when presenting on the a. The nature of reclassification
UPDATES IN FINANCIAL REPORTING STANDARDS
b. The amount of each item or class of receivable nd payable
items reclassified collectible due beyond 12
c. The reason for the reclassification beyond 12 mons
mons  Deferred tax
When it is impracticable to reclassify  Investment liability
comparative amounts, an entity shall disclose in associate
the reason for not reclassifying  Investment
property
 Intangible
8. CONSISTENCY OF PRESENTATION assets
 Manner of presentation shall be  Deferred
retained from period to period, unless tax asset
the changes is more useful to the
users
 If presentation is changed, REFINANCING AGREEMENT
comparative fs for prior period shall be  Long-term obligation maturing within
represented 12 months after the reporting period
 Replacement of an existing debt with
MANAGEMENT’S RESPONSIBILITY OVER a new one but with different terms
FINANCAIL STATEMENTS  Current: Refinancing not at the
 The management is responsible for an discretion of entity
entity’s fs including:  Noncurrent: if the entity expects and
o The preparation of fs has the discretion to refinance it on a
o Internal control over financial long term basis under an existing
reporting loan facility
o Going concern assessment
o Oversight over the financial LIABILITIES PAYABLE ON DEMAND
reporting process  Current: even if the lender agreed,
o Review and approval of after the reporting period and
financial statements before the authorization of the fs
not to demand payment. The entity
does not have an unconditional right
to defer settlement in this case
 Noncurrent: lender provides by the
end of the reporting period a grace
period ending at least twelve months
after the reporting period,
o the entity can:
 rectify the breach
CURRENT CURRENT LIAB  the lender cannot
ASSETS demand immediate
 CCE  A/P repayment
 A/R  Salaries
 Non-trade Payable Example:
receivable  Dividends
collectible payable
within 12  Income
mons (Current) tax
 Held for payable
trading  Unearned
securities revenue
 Inventory  Portion of Case 1: On Jan. 5, 2022, the bank gives
 Prepaid notes/loans/bo entity A a chance to rectify the breach of
assets nd payable loan agreement within the next 12
due within 12 months and promises not to demand
mons immediate repayment.
NONCURRENT NONCURRENT
ASSETS LIABILITIES CURRENT because the grace period is
 PPE  Portion of received after the reporting date
 Non-trade notes/loans/bo
UPDATES IN FINANCIAL REPORTING STANDARDS

Case 2: On Dec. 31, 2021, the bank

gives entity A a chance to rectify the
breach of loan agreement within the next
12 months and promises not to demand
immediate repayment.

NONCURRENT because the grace period

is received by the reporting date

CURRENT ASSETS

Compute the total current liabilities

Current liabilities

Bank overdraft 5,000

Trade a/p (+dr. bal.) 25,000
Notes payable (2000*2) 4,000
Interest payable 15,000
Bonds payable 35,000
Compute the current assets Discount on bonds (15,000)
Dividends 5,000
Current asset Income tax payable 22,000
Total Current assets 96,000
Cash 5,000
Trade a/r (+cr bal.) 25,000  Bank overdrafts are repayable on
Held for trading securities 40,000 demand
FVPL 15,000  A/P should not have abnormal
Prepaid Assets 5,000 balance, therefore add back the debit
Total Current assets 90,000  Only the currently maturing portion of
N/P is CL (semi-annual, 2 times a year
 A/R should not have abnormal payment)
balances, therefore add back and  If Silent: Interest payable, cash
present as liabilities dividends payable and income taxes
 FVPL are current assets payable - current
 FVOCI is noncurrent if silent. If  Bonds payable and discount is current
expected to realize within 12 months because they mature within 12
from the end of reporting period, the months
investment is current
 Deferred tax asset is noncurrent  Share dividends payable is not a
irrespective of their expected reversal liability but rather a contra-equity item
dates  DTL are presented as non-current
 Sinking fund is noncurrent if silent  Contingent liability is disclosed only
 Appropriate reserves for contingencies
CURRENT LIABILITIES are components of equity.

CURRENT AND NONCURRENT LIABILITIES

UPDATES IN FINANCIAL REPORTING STANDARDS

Compute the current liabilities

Current liabilities
Current liabilities
10% NP 40,000
Interest payable (60k*.12*9/12) 5,400 16% BP 50,000
14% Mortgage 30,000 Interest payable (100k*.18*3/12) 4,500
Interest payable (30k*.14*6/12) 2,100 Total Current liabilities 54,500
Total Current liabilities 77,500
Current
Current  16% Bonds because they mature on
 10% NP is current because the December 31, 2022
refinancing agreement is not at the  18% serial bonds interest, none of the
discretion of ABC Co. serial bonds is currently maturing but
 No interest recorded because the the interest will accrue for 3 months
payment dates are on July 1 and from Sept. 30
December 31.  It is presumed that there are no
 14% Mortgage is current because it is unpaid interest on 16% and 15%
due on demand. Since the interest because their interest payment is
payable account has no balance, the every year end
unpaid interest for the 3rd and 4th
quarters must not have been recorded
yet. The accrued interest is included in
CL

Noncurrent
 12% note is noncurrent because the
refinancing is under the discretion of
the entity. The accrued interest of
April to December is recorded in CL
UPDATES IN FINANCIAL REPORTING STANDARDS

Cash
Unadjusted 15,000
Contribution to sinking funds (2,000)
Unreplenish petty cash (1,500)
Unreleased checks 30,500
Total Current assets 42,000

A/R
Unadjusted 40,000
ABD (5,000)
Total AR 35,000

Inventory
Unadjusted 40,000
Unsold inventory (12k/1.20) 10,000
Consigned goods included (5,000)
Total Inventory 45,000

Prepaid Asset
Unadjusted 5,000
Noncurrent asset (2,000)
Total Prepaid asset 3,000

Liabilities
AP Unadjusted 20,000
Debit Balance 6,000
Unreleased checks 30,500
Consigned goods included (5,000)
Interest - NP 5,000
Total Liabilities 56,500
UPDATES IN FINANCIAL REPORTING STANDARDS

Expense 1,500 Current assets

Petty cash fund 1,500 Cash 42,000
A/R 35,000
Sinking fund 2,000 Advances to suppliers (cr. Bal) 6,000
Inventory 45,000
Cash in bank 2,000
Prepaid income tax 8,000
Prepaid assets 3,000
Cash in bank 30,500 Land held for sale 28,000
A/P 30,500 Total 167,000

A/R 3,000 Current Liabilities

Advances 3,000 Accounts payable 51,500
Advances from customers (dr. Bal) 3,000
Sales 12,000 Interest Payable 5,000
Total 59,500
A/R 12,000

Working capital 107,500

Inventory 10,000
COGS 10,000

A/P 5,000
Inventory 5,000

Advances to suppliers 6,000

A/P 6,000

Interest expense 5,000

Interest payable 5,000
UPDATES IN FINANCIAL REPORTING STANDARDS

 Equity in assigned receivables (diff

between bal. of assigned and
outstanding balance of related loan) is
a disclosure only
 NR – discounted is deducted from total
receivables and disclosed as
contingent liability
 The shares of abc co. inappropriately
included in “held for trading
securities” are treasury shares.
They are presented as unallocated
deduction from shareholder’s equity
 If the related fund is current, then
bond sinking fund also current
 Advances to subsidiary are presented
as noncurrent if silent
Compute for the working capital  Deferred charges are prepaid assets
but in long term
Current assets  Cash surrender value is included as
Petty cash fund 5,000 part of other long-term investments
Cash in bank Bdo (15000+10000-3000) 22,000
Cash in bank Metrobank 5,000
A/R - unassigned 28,500
A/R - assigned 25,000
N/R 45,000
N/R Discounted (20,000)
Advances from employees - IOU 2,000
Held for trading securities (20k-4k) 16,000
Inventory (62k-30k+12k) 44,000
Bond sinkingfund 100,000
Total 272,500

A/R 35,000
Uncollectible (4,000)
Accounts w special credit term - 625*4 (2,500)
Adjusted A/R 28,500
Compute the following:
Current Liabilities 1. Noncurrent liabilities 1/1/21
Accounts payable (40k-30k fob d+12k fob sp) 22,000 2. Current assets 12/31/21
Est. warranty 14,000 3. NCA 12/31/21
Loans payable 15,000
1) CA + NCA = CL + NCL + Equity
Accrued exp 13,000 600,000 2,000,000 = 450,000 1,300,000 850,000
Bonds Payable 100,000 2) WC, 1/1 = CA - CL
Premiums on BP 8,000 600,000 450,000
WC, 1/1 = 150,000
Total 172,000 WC, 12/31 *2 = 300,000

300,000 = 800,000 - 500,000

Working capital 100,500
3) Equity
500,000 850,000
 IOUs represent advances to 1,200,000
1,550,000
employees and presented as current
CA + NCA = CL + NCL + Equity
receivables 800,000 2,750,000 = 500,000 1,500,000 1,550,000

 The pledged accounts receivables are

properly included in CR
UPDATES IN FINANCIAL REPORTING STANDARDS
Preparation of Statement of financial NOTES:
position
UPDATES IN FINANCIAL REPORTING STANDARDS
STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME

SINGLE STATEMENT PRESENTATION

Statement of P/L and OCI

Revenue 100
Expenses (80)
P/L 20
OCI 10
Comprehensive income 30

TWO STATEMENT PRESENTATION

Statement of P/L or IS
Revenue 100
Expenses (80)
P/L 20

Statement of OCI
P/L 20
OCI 10
Comprehensive income 30

Presenting only income statement is

PROHIBITED

PROFIT OR LOSS
Income xxx
Less: Expense xxx
P/L xxx
 Also called as transaction approach
 Recognized in P/L unless:
o They are items of OCI or
o They are required by other
standards to be presented
outside

NOT INCLUDED IN DETERMINING P/L

Transaction Accounting
1. Correction of prior ® Direct adjustment
period error to the beg. Bal of re.
® Presented in
statement of
changes in equity
2. Change in ® Similar treatment
accounting policy with correction of
prior
3. OCI ® changes are
presented on OCI
® Cumulative
balance are
presented in the
equity sec. of BS
4. Transactions with ® statement of
owners changes in equity
UPDATES IN FINANCIAL REPORTING STANDARDS

b. Function of expense method (Cost

of sales method) – classifies
The profit or loss section includes: expenses according to their function;
a. Revenue, presenting separately additional disclosure needed
interest revenue Example:
b. Finance costs o COS (presented separately)
c. Gains and losses arising form the o Distribution costs
derecognition of financial assets o Administrative expenses
measured at amortized cost
d. Impairment losses and gains Revenue xx
e. Gains and losses on reclasifications COS (xx)
from amortized cost or FVOCI to FVPL Gross Profit xx
f. Share in the P/L of associates and joint Other Income xx
ventures Distribution Costs (xx)
g. Tax expense Adm. Expenses (xx)
h. Result of discontinued operations Finance Costs (xx)
Other expenses (xx)
Separate disclosure of items: Profit before tax xx
a. Write-downs of inventories Income tax expense (xx)
b. Restructuring of activities Profit after tax xx
c. Disposals of items of PPE
d. Disposals of investments
Administrative expenses is a residual
e. Discontinued operations
category of expenses. An expense is included
f. Litigation settlements
here if it does not qualify under other
g. other reversals
classification
EXTRAORDINARY ITEMS
 PAS 1 prohibits the presentation of
this in statement of p/l and oci

PRESENTATION OF EXPENSES

a. Nature of expense method –

aggregated according to their nature
and are not reallocated according to
their functions
Example:
o Depreciation
o Purchase of materials
o Transport costs
Selling expenses Administrative expenses
o Employee benefits
Advertising 10 Insurance 50
o Advertising costs
Freight-out 5 Legal 6
Rent exp 1/2 2 Rent exp 1/2 2
Sales com. 7 Doubtful 8
24 66
 Interest exp – finance cost
 Cost of inventories sold – COS
 Freight in – COS
 Loss on disposal of asset – other
expense and disclosed

OTHER COMPREHENSIVE INCOME (OCI)

 Includes income and expenses not
recognized in P/L
UPDATES IN FINANCIAL REPORTING STANDARDS

OCI includes:
 Changes in revaluation surplus
 Remeasurements of a net defined
benefit liability or asset  Reclassification adjustments to profit
 Gains and losses on investments or loss are always made at gross of
designated or measured at FVOCI tax. This is because the tax effects of
 Gains and losses arising from items or income or expenses that
translating the FS of foreign operation enter into the determination of profit
 Effective portion of gains and losses or loss from continuing operations
on hedging instruments in a cash flow are aggregated and presented in a
hedge single line item described as “income
 Changes in FV if a financial liability tax expense”
designated at FVPL
 Changes in the time value of option PRESENTATION OF OCI
 Changes in the value of the forward TYPE OF OCI RECLASSIFICATIO
elements of forward contracts N ADJUSTMENT?
A. changes in No
RECLASSIFICATION ADJUSTMENTS revaluation surplus
 OCI in the current or previous periods B. Remeasurements No
and reclassified as P/L of the net defined
 Arise on the disposal of a foreign benefit liability
operation, derecognition of debt (asset)
C. Fair value
instruments measured at FVOCI or
changes in FVOCI
when cash flow hedge becomes
- equity instrument No
ineffective or affects profit or loss (election)
 Do not arise on changes in - debt instrument Yes
revaluation surplus, derecognition of (mandatory)
equity instruments at FVOCI and D. Translation Yes
remeasurements of net defined differences on
benefit liability foreign operations
 Cumulative gains and losses were E. Effective portion Yes
reclassified from OCI to P/L of cash flow hedges

RECLASSIFICATI EFFECT IN EFFEC TOTAL COMPREHENSIVE INCOME

ON OCI T IN  Is the “change in equity during a
P/L period resulting from transactions and
GAIN DEDUCT ADD other events, other than those
LOSS ADD DEDUC changes resulting from transactions
T with owners in their capacity as
owners”.
 Sum of profit or loss and OCI
 Includes all ‘non-owner’ changes in
equity

Reclassification adjustment to other

comprehensive income?

ANSWER: (70,000) 100,000*.30

Reclassification adjustment to P/L

ANSWER: 100,000 and gross of tax

 Negative (deduction) because

reclassification adjustment is just
transferring an amount from oci to p/l
UPDATES IN FINANCIAL REPORTING STANDARDS
Profit 1,000 Accounts Receivable
a/r, beg - 400,000 collections on acc
OCI credit sales 450,000
Increase rv 500 50,000 a/r end
Remeasurements (100)
Accounts Payable
Net change (200) 200 1)
disc 2,000 30,000 a/p, beg
Comprehensive income 1,200 2) disbr 240,000 212,000 gross purc.
a/p, end -

Inventory
inv, beg - 2,000 disc.
freight in 7,000
gross purc. 212,000 197,000 COS
20,000 inv, end

Cash sales 60,000

Credit sales 450,000
Total sales 510,000
COS (197,000)
Gross profit 313,000

Accounts receivable turnover is a

financial ratio used to quantify an entity’s
effectiveness in extending credit and in
collecting receivables. It also shows the
number of times that a/r is received through
the year

Accounts receivable = Net credit sales

turnover Aver. A/R
= A/R beg +A/R end
Ave. A/R 2
Ave. A/R = 20000+80000
2
Ave. A/R = 50,000
4 = Net credit sales
50,000
Net credit sales = 200,000

Inventory turnover is a financial ratio that

shows the number of times an entity’s
inventory is sold and replaced over the period

Inventory = COS
turnover Aver. Inv
= Inv beg +Inv end
Ave. Inventory 2
UPDATES IN FINANCIAL REPORTING STANDARDS
= 60000 +30000 Sales 100%
COS (15%/25%) -60%
Ave. Inventory 2 Gross Profit 40%
Ave. Inventory = 45,000 Operating Expenses (15% of 100% or 25% of 60%) -15%
3 = COS Other Expenses -10%
Profit before tax 15%
45,000
COS = 135,000 Profit after tax 105,000
Divide by: 100%-30% 70%
Credit Sales 200,000 Profit before tax ₱ 150,000

COS (135,000)
Sales (150k/15% profit before tax) 1,000,000
Gross Profit 65,000
CHECK:
Sales 1,000,000
COS (1M*60%) (600,000)
Gross Profit 400,000
Operating Expenses (15%*1M or 25%*600k) (150,000)
Other Expenses (10%*1M) (100,000)
Profit before tax 150,000
Income tax expense (45,000)
Profit after tax 105,000

Accounts Payable
30,000 a/p, beg
disbr 220,000 190,000 gross purc.
a/p, end -

Raw Materials
rm, beg -
purchases 190,000 140,000 RM used
50,000 rm, end

Work-in-process inventory
WIP, beg -
RM used 140,000
DL (50% of Rmused) 70,000 232,000 COGM
MOH (20% of PC)* 42,000
20,000 WIP, end

* 140000+70000

Finished Goods
FG, beg 25,000
COGM 232,000 257,000 COGS
- FG, end

TGAS 257,000
UPDATES IN FINANCIAL REPORTING STANDARDS
Sales (130k/65% Cost ratio) 200,000
COS (130,000)
Gross Profit 70,000
Operating Expenses (200k*13% of sales) (26,000)
Interest Expense (200k*5% of sales) (10,000)
Profit before tax 34,000
Income tax expense (34k*30% income rate) (10,200)
Profit after tax 23,800

 Under equity method, dividends

received from investment in associate
are accounted for as reduction from
the investment account
 Dividends declared are “owner
changes in equity”, thus accounted for
directly in equity, i.e as reduction from
retained earnings
 Correction of prior period errors are
direct adjustments to the opening
balance of retained earnings.
DISCONTINUED OPERATIONS

COMPONENT OF AN ENTITY
May be a
1. Subsidiary
2. Major line of business
3. Geographical segment

Whose operations and cash flows can be

clearly distinguished from the rest of
Cost = OPEX the entity (may sariling Asset Liabilities
Ratio Sales & COS Revenue and Expenses and will be
eliminate ones there’s discontinuance)
Cost = 13%
Ratio 20% A discontinued operation is a component
Cost = 65% of an entity that either has been disposed of,
Ratio or is classified as held for sale, and
a. represents a separate major line
of business or geographical area
of operations,
UPDATES IN FINANCIAL REPORTING STANDARDS
b. is part of a single coordinated  the revenue, expenses and pre-
plan to dispose of a separate major tax profit or loss of
line of business or geographical area discontinued operations;
of operations or  the related income tax expense
c. is a subsidiary acquired as required by paragraph 81(h)
exclusively with a view to resale. of IAS 12.
(32)  the gain or loss recognised on
the measurement to fair value
WHEN TO CLASSIFY A COMPONENT AS less costs to sell or on the
DISCONTINUED OPERATIONS: disposal of the assets or
1. when the entity has ACTUALLY disposal group(s) constituting
DISPOSED the operation the discontinued operation;
2. when the operation MEETS THE and
CRITERIA to be held as held for sale  the related income tax expense
a. available for immediate sale in as required by paragraph 81(h)
its present condition of IAS 12.
b. sale is highly probable
The analysis may be presented in
Kung kailan nangyari, tsaka lang sya i- the:
cclassify as discontinued operation  Notes OR
 the statement of
SCENARIO WHICH ARE NOT comprehensive income.
DISCONTINUED OPERATION o it shall be presented in
1. Phasing out a product lien within a a section identified as
product group relating to discontinued
2. Shifting of production from one operations, ie
location to another separately from
3. Closing of a facility, factory or branch continuing operations.
to achieve productivity improvement
or other cost savings. The analysis is not required for
disposal groups that are newly
acquired subsidiaries that meet the
criteria to be classified as held for sale
on acquisition (see paragraph 11).

c. the net cash flows attributable to the

operating, investing and financing
activities of discontinued operations.

INCOME STATEMENT PRESENTATION These disclosures may be

presented:
An entity shall disclose:  Notes OR
a. a single amount in the statement of  Financial statements.
comprehensive income comprising the
total of: These disclosures are not required
 the post-tax (after tax) profit or for disposal groups that are newly
loss of discontinued operations acquired subsidiaries that meet the
and criteria to be classified as held for sale
 the post-tax gain or loss on acquisition
recognized on the measurement
to fair value less costs to sell or d. the amount of income from
on the disposal of the assets or continuing operations and from
disposal group(s) constituting discontinued operations attributable
the discontinued operation. (33) to owners of the parent.

b. an analysis of the single amount in These disclosures may be

(a) into: presented:
UPDATES IN FINANCIAL REPORTING STANDARDS
 Notes OR the terms of the disposal
 Statement of Comprehensive transaction, such as the
Income resolution of purchase price
adjustments and
NOTES DISCLOSURE indemnification issues with the
1. Impairment loss, if any purchaser.
CA > FVLCTS - / b. the resolution of
CA < FVLCTS – no impairment loss uncertainties that arise from
and are directly related to the
2. Component of the Income or Loss from operations of the component
discontinued operations before its disposal, such as
a. Revenue environmental and product
b. Expenses warranty obligations retained
c. Income or Loss by the seller.
c. the settlement of employee
3. Gain of Loss on Disposal benefit plan obligations,
a. Part of income or loss from provided that the settlement is
discontinued operation directly related to the disposal
transaction
4. Termination Cost of Employees
If an entity ceases to classify a
If an entity presents the items of profit or loss component of an entity as held for sale,
in a separate statement as described in  recognized previously as discontinued
paragraph 10A of IAS 1 (as amended in operations shall be reclassified and
2011), a section identified as relating to included in income from continuing
discontinued operations is presented in operations for all periods presented.
that statement. (must be presented clearly The amounts for prior periods shall be
and separately as a discontinued operations) described as having been re-
(33A) presented. (36)

An entity shall re-present the disclosures An entity that is committed to a sale

in paragraph 33 for prior periods presented in plan involving loss of control of a subsidiary
the financial statements so that the shall disclose the information required in
disclosures relate to all operations that have paragraphs 33–36 when the subsidiary is a
been discontinued by the end of the reporting disposal group that meets the definition of a
period for the latest period presented. (34) discontinued operation in accordance with
paragraph 32. (36A)
ADJUSTMENTS
GAIN OR LOSSES RELATEING TO
Adjustments in the current period to CONTINUING OPERATIONS
amounts previously presented in  Any gain or loss on the
discontinued operations that are directly remeasurement of a non-current asset
related to the disposal of a discontinued (or disposal group) classified as held
operation in a prior period shall be classified for sale that does not meet the
separately in discontinued operations. The definition of a discontinued operation
nature and amount of such adjustments shall shall be included in profit or loss from
be disclosed. (35) continuing operations.

Examples of circumstances in which these

adjustments may arise include the following:
a. the resolution of
uncertainties that arise from
UPDATES IN FINANCIAL REPORTING STANDARDS

Income Statement
CA - Asset 8,000,000
CA - Liability (3,200,000) Sales 9,000,000
Net Asset 4,800,000 COGS (4,600,000)
Gross Profit 4,400,000
Net Asset 4,800,000 Expenses (1,200,000)
FVLCTS (4,200,000) Income before tax 3,200,000
Impairment Loss 600,000 Income tax (960,000)
Income from cont. operations 2,240,000
Income from disc. operations 630,000
Sales 7,000,000 Net Income 2,870,000
COGS (4,400,000)
Gross Profit 2,600,000
Expenses (800,000)
Termination Cost (300,000)
Impairment Loss (600,000)
Income before tax 900,000
Income tax (270,000)
Income from disc. Operations 630,000