Financial statements based on

Philippine accounting standards (pas)

PRESENTED BY: GROUP 1
FINANCIAL STATEMENTS'
- objective is to provide information
concerning the financial position,
performance, and cash flow of a
company needed by various users in
making sound economic decisions.
According to Philippine Accounting Standards (PAS)
# 1, an accomplished collection of financial
statements should include the following:

1. Statement of Financial Position (Balance Sheet)

2. Income Statement
3. Statement of Comprehensive Income
4. Statement of Changes in Equity
5. Statement of Cash Flows
6. Notes to the Financial Statements
STATEMENT OF FINANCIAL
POSITION
- Presents the company's financial
position at a given period.
- Users of this statement, utilize it in evaluating
the company's liquidity, solvency, financial
structure, and the capacity for adaptation.
- 3 ELEMENTS: Assets, Liabilities and Equity
 ASSETS AND THEIR
CLASSIFICATION
Assets are “resources controlled” by the
entity as a result of past transactions
and events from which future economic
benefits are expected to flow in the
entity.
 CLASIFFICATIONS:
1. Current Assets
- It is cash or equivalent to cash
- The company intends to hold it for the purpose of
trading it
- The company expects to realize the assets within
12 months
- The company use or sell within the normal
operating cycle
* Current assets are typically arranged in the order of
liquidity
2. Noncurrent Assets
 LIABILITES AND THEIR
CLASSIFICATION
- Obligations of the firm from past
transactions or events
- The payment of which is expected to
result in an outflow of economic
resources or assets.
 CLASIFFICATIONS:
1. Current Liabilities
- The firm is expected to pay the liability within
its normal operating cycle
- The firm holds the liability for the purpose of
trading
- When the liability can be paid within
12 months
2. Noncurrent Liabilities
Shareholder's Equity (SHE)
AND ITS COMPONENTS
- The shareholder's equity or simply equity, in
its raw meaning, is the excess of the firm's
assets over the firm's liabilities.
Three basic components of the shareholder's
equity of a corporation:
- share capital
- reserves
- regains earnings
SHARE CAPITAL- consists of issuance
of the company's own share at their
par or stated value.
RESERVES- consists of issuance of the
company's own share above par/
stated value or additional paid in
capital or sometimes called premium
on share capital.
RETAINED EARNINGS- consists of,
among other things, the accumulated
earnings of the company, prior period
adjustments for errors, dividends
declared/ paid, effect of changes in
accounting policy and appropriated
retained earnings.
INCOME STATEMENT AND
ITS FORMS
INCOME STATEMENT- presents the result of the firm's
operation or performance for a given time.
- Consists of revenue and expenses.
- In the provisions of PAS #1, it states that a business shall
present the income statement using either the functional
approach (cost of sales method) or natural approach.
- Natural approach considers the nature of expense
while functional approach follows the function of
expenses.
FUNCTIONAL APPROACH- the expenses are
classified in accordance with their functions namely:
cost of sales , selling expenses, administrative
expenses and other expenses.
- This is the typical income statement format used by
most companies.
NATURAL APPROACH- all expenses are clustered
and totaled. The sum of the expenses is deducted
from the sum of revenues to get the income before
gains.
 Company A Company A
Income Statement
Income Statement
For the Year Ended June 31, 2011
For the Year Ended June 31, 2011

Sales $305,610
Sales $789,160
Expenses:
Cost of Goods Sold −445,940
Beginning Inventory $16,800
Gross Profit $343,220
Purchases 184,100
Operating Expenses:
Ending Inventory −21,050
Selling Expenses $109,310
Administrative Expen Depreciation Expense 14,790
127,270
ses
Rent Expense 21,000
Total Operating Expenses −236,580
Salaries and Wages E
38,320
Operating Income $106,640 xpense
Supplies Expense 3,510
Other Incomes/Expenses:
Utilities Expense 6,900
Gain on Sale of Equipment $3,570
Interest Expense 375
Interest Expense −1,150
Total Expenses −264,745
Net Other Incomes/Expenses: 2,420

Net Income $104,220 Net Income $40,865

FUNCTION NATURE
 STATEMENT OF
COMPREHENSIVE INCOME
- Consists of recognized gains and loses that are
not included in the income statement but are
found in the equity section of the SPF or more
clearly, at the statement's of changes in equity.
 STATEMENT RETAINED
EARNINGS
The Statement Retained Earnings discloses the
results of the current years operation, which
bring about changes in the company's retained
earnings.

This statement links the income statement

results to the SFP.
STATEMENT OF CHANGES
IN EQUITY
The Statement of changes in equity
presents the development or changes
that occur in the shareholders' equity.
The following are presented in this statement:
1. The total or net comprehensive income
2. Effects brought about by the changes in accounting
policies or correction of errors.
3. Investment transactions of owners and dividends paid
to owners.
4. The beginning balance of each component in the
statement of changes in equity and the movements under
them that brought about the ending balances.
STATEMENT OF CASH FLOW
(BASED ON PAS #7)
The Statement of cash flow presents the
summary of the operating,
investing, and financing activities of firm.
 CASH FLOWS AND ITS
CLASSIFICATION
Cash flows - movement of cash.
It could be:
* inflow of cash - pertains to receipt
of cash
* outflow - disbursement of cash
 Movement of cash shall be
categorized as cash flows
from:
1. Operating Activities - activities related in the
generation of the principal revenue of the
firm.
* Principal revenue - main source of
revenue or income for the company.
Other examples of cash flows from operating
activities include:
• Cash receipts from rental fees, service fees,
professional fees, legal fees, tuition fee, etc.
• Cash used to pay salaries, utilities, purchases,
and payables
2. Investing Activities - cash flows from purcha
sing or selling long-term assets and other
long-term investments.
Example:
• Cash disbursement used to buy buildings, plants,
equipment, furniture, and other fixed assets.
• Cash receipts or payments from derivative transactions
like future or forward contracts, swap contracts, and
option contracts.
3. Financing Activities - company’s cash
inflows or outflows including its owners and
creditors.
* Borrowings included under this
category are non-trade payable.
Example:
• Cash receipts from issuing the company’s bonds or
notes
• Cash disbursement used to pay bank loan and other
form of borrowings.
Illustrative Examples of Financial
Statement

* Consolidated financial statements – consolida-

tion of financial statements made by a firm with
subsidiaries.
* Subsidiaries - independent corporations that
exist independently from their parent
corporation.
Notes To The Financial Statements
A. Corporate/Company Information - nature of the
business, associates or subsidiaries of the company, and
the principal activities of the company.
B. Basis of Preparing the Financial Statements and the
Statement of Compliance - could be at historical cost or
at fair value.
C. Summary of Significant Accounting Policies - used by
the company in carrying out their operations and
preparing their financial statements.
Excerpts from the Notes to Financial
Statement (ADA Corporation)

Corporate/Company Information
Example: The company was created in accordance with of
the Republic of the Philippines laws. The same entity is
registered with the Philippine Securities and Exchange
Commission (SEC) on July 22, 1966. ADA is considered the
leading and biggest oil refining and marketing company
in the Philippines. approximately a third of the country's
fuel requirement is provided by ADA Corporation.
Basis of Preparation
Example: The historical cost basis was used in the
creation of the financial statements of ADA Corporation
and subsidiaries. This is with the exception of accounts
like the financial assets, available-for-sale (AFS)
investment, and derivate financial instrument. Said
investment accounts are measured at fair value. The
consolidated financial statements are presented using the
Philippine peso as its currency denomination. All amounts
are rounded to the nearest millions, except when
otherwise indicated.
Statement of Compliance
Example: The consolidated financial statement o
f the firm were prepared in compliance with the
Philippine Financial Reporting Standards (PFRS)
Summary of significant accounting policies
Trade and Other Receivables Inventories

Trade and Other Receivables ₱12,779

At Cost:

Petroleum ₱12,358
Government ₱4,440

Others ₱1,374 Crude Oil and Others ₱17,332

Total ₱18,593
At net realizable value ₱581

Less: Allowance for impairement loss ₱724

Inventories - net ₱30,271

Net Realization value ₱17,869
Trade and Other Payables Other Noncurrent Liabilities

Account Payable ₱2,653

Asset retirement obligation ₱461

Accrued Expenses ₱957

Cylinder Deposits ₱243

Specific Taxes and other taxes pa ₱443

yable Cash bonds ₱173

Others ₱491
Others ₱37

Total ₱4,544 Total ₱914

Equity
Number of shares
Authorized - ₱1.00 par value 10,000,000 ₱10,000

Issued and Outstanding 9,375,104,497 ₱9,375

Cost of Goods Sold Selling and Administrative Expenses
Employee costs ₱1,481

Inventories ₱191,613
Purchased services and utilities ₱994

Depreciation & Amortization ₱978

Depreciation & Amortization ₱1,538

(see Note 20) Maintenance and repairs ₱530

Advertising ₱495

Employee costs ₱463

Rent ₱395

Others - net ₱1,673 Materials and office supplies ₱188

Total ₱195,287 Taxesand Licences ₱120

Impairment loss on trade and other receiv ₱50

ables

Expenses related to oil incident ₱94

Total ₱5,325
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