PFRS for SMEs

SMALL AND MEDIUM-SIZED ENTITIES are entities that:

a. do not have public accountability
b. publish general purpose financial statements for external users

PFRS for SMEs

-effective for annual periods beginning on or after January 1, 2010

SUMMARY PFRS 3 PFRS for SMEs

1) Method Acquisition Purchase
2) Capitalized Cost of BC Consideration Transferred Cost of BC
-CT + CC + NCI + PHI -CoBC + CC + DC (as per description)
3) Direct Cost Expensed Capitalized
4) NCI @FV or Prop sh @Prop Share only
-no amt for GW relating to NCI
5) Goodwill Excess of CT, NCI, PHI Over FVNA Cost, Excess of Cost of BC over FVNA
-impairment -amortized of UL (10 yrs if silent)

METHODS ACQUISITION METHOD PURCHASE METHOD

a. Identifying the acquirer
b. Determining the acquisition date;
c. R&M identifiable assets acquired,
liab assumed, and NCI in EE
d. R&M GW or GoBP
a. Identifying an acquirer.
b. Measuring the BC cost
c. Allocating BC cost to A acquired,
L, and prov for conti liab assumed

FORMULA PFRS 3 PFRS for SMEs

CT Cost of BC
CT xx CT xx
CC xx CC xx
PHI xx DC xx
NCI @ > of FV and PS xx NCI @ PS xx
Less: FVNA (xx) Less: FVNA (xx)
GW xx GW xx

RE, beg xx RE, beg xx

GoBP xx GoBP xx
Less: DC and IDC (xx) Less: IDC only (xx)
RE, end xx RE, end xx

DRECT COSTS (capitalized)
1) Legal Costs for BC
2) Finder/Consultant/Audit/
Acctg/Professional's Fee
3) Due Diligence Costs
4) Gen and admin costs of
maintaining internal acquisition
INDIRECT COSTS (expensed to RE)
1) Stock exchange listing fees
2) Cost of updating system
3) Allocated Overhead and
Executive Salaries
ALLOCATED TO DC AND EXP
1) Opinion of Counsel/Tax/Audit
2) Prospectus design and printing
SHARE ISSUANCE COSTS (charged to APIC/RE)
1) SEC Registration Costs
2) Printing Costs of Share certifictes
3) Legal Fees for SEC Reg.
4) CPA Audit fee for SEC reg.
5) Documentary stamp tax
6) Other percentage tax
7) Newspaper publication fees
8) Underwriting fees
 CONSOLIDATION @ DoA (for mergers only)
COMPUTATION
Guidelines Assets of ER immediately
*if question is net increase, exclude ER ER @ BV xx
*BV of ER - no further adjj. Inv in Sub xx
*Over - decrease by, FV < BV Less: Cash (CT) (xx)
*Under - increase by, FV > BV Assets (0 if CT is Cash) xx

Conso Assets Conso Liabilities

ER @ BV xx ER @ BV xx
EE @ FV ER @ FV
EE @ BV xx EE @ BV xx
Under (Over) xx (xx) xx Under (Over) xx (xx) xx
GW xx Bonds issued (less DIC) xx
Less: CT (xx) CC (fixed amt) xx
Exp/SIC/DIC Paid (xx) Unpaid Expenses xx
Conso Assets xx Conso Liabilities xx

RE (ER only) Conso SHE (ER only)

RE, beg xx Share Capital (+ issued @ par value) xx
Add: GoBP xx APIC (add issued @ excess)
Less: Paid & Unpaid Expenses (xx) (add CC fixed shares)
SIC excess to APIC (xx) (less SIC, excess to RE) xx
Conso RE xx Conso RE xx
NCI (for stock acqui) xx
Conso SHE (ER only) xx
*SHE = BVNA of EE

ENTRIES
1) Merger (Books of ER only) *Working paper elimination entries
A of EE @ FV xx EE OSC xx
GW xx EE OSP xx
Exp xx EE ER xx
Cash (CT + Exp + SIC + DIC) xx Inv in Sub (BVNA) xx
L of EE @ FV (less DIC) xx NCI* xx
CC @ L xx
OSC (CT @ Par) xx EE Under A xx
OSP (CT @ excess) xx EE Over L xx
OSP (SIC & CC@E) xx EE Over A xx
RE (excess SIC) xx EE Over L xx
Inv in Sub (Under/Over) xx
2) Stock Acqui NCI* xx
*Books of ER
Inv in Sub xx *only NCI@FV w/ share in GW
Cash (CT) xx -share of NCI in GW
OSC (CT @ Par) xx = (GW - Control Prem) * NCI %
OSC (CT @ excess) xx = NCI don't have share on CC
 CONSOLIDATION - SUBSEQUENT TO DATE OF ACQUISITION
I. EXCESS = GW/GoBP + >/< in Asset
CT xx
CC (still based on CT if @ FV) xx *Over (BV > FV) = less in GW, add in NI
PHI xx *Under (BV < FV) = add in GW, less in NI
CC xx
Less: CVNA (xx)
GW/GoBP xx
Excess
>/< in Asset xx xx

II. CNI = NIATP + NCINIS in SoCI

Parent (P) Subsidiary (S) Conso NI
Unadj./Reported NI xx xx *m from DOA/12)
Less: Div Dec "from S to P" (xx) *Div Dec of S * P%
NI from Operations xx xx
Add: Over Inv/Dep&Amort(BV > FV) xx *for inv, applies to sold portion
Less: Under Inv/Dep&Amort(BV < FV) (xx) *excess/RUL from DOA
Adj. NI - Subsidiary (NIS) xx xx
Share of Parent in NIS (% owned) xx (xx)
Less: Share in IL (GW@PS / GW@FV) (xx) (xx)
NIATP/NCINIS xx xx xx
*NI Attributable to Parent
*NCI NI of Subsidiary

Share of P in IL if NCI @ FV = %interest if based on CT GW to NCI @FV @FV - @PS - Control Prem
-(100% to P if NCI @ Prop)
GW, NCI@Prop xx Parent NCI
/GW, NCI @ FV /xx @FV Partial Excess
Share of P 80% @PS Partial none

*impaired by = impairment
*impaired to = GW, end
'IL = GW, beg - GW, end

III. NCI Net Assets Subsidiary (NCINAS) in SHE/SoFP

NCI, beg @DoA xx
Add: NCINIS xx
Less: Div. Dec. "of S to NCI" (to P / % interest * NCI%) (xx)
NCINAS xx

IV. CONSO RE (CRE) in SoFP

RE, beg xx *Be careful if bal. given is
Add: NIATP xx @end or @ beg
Less: Div Dec. "by parent" xx
Add: GoBP xx *use RE, beg full BV of SHE
Less: DC and IDC "exp paid and unpaid" (xx)
CRE xx

V. CONSO SHE (CSHE) in SoFP

Ord and Pref Cap "of ER" xx
Add: Conso RE xx
NCINAS xx
Add: APIC "of ER" xx
Shares issued for BC xx
Less: SIC (xx)
CSHE xx
 CONSOLIDATION - SUBSEQUENT TO DATE OF ACQUISITION
Elimination Entries
1) Div Rev from S to P
a. Declared and Paid b. Include this If not paid (@parent%)
Div Rev (@ parent %) xx Div Pay xx
NCI (if < 100%) xx Div Rec xx
Div (RE) (@100%) xx

2) Inventory
a. Over b. Under
Inv xx COGS xx
COGS xx Inv xx

3) Depreciable/Intangible Assets (based on RUL, not EUL)

a. Over b. Under
AD/Accum Amort xx DE/AmorExp xx
DE/ Amort Exp xx AD/Accum Amort xx

4) IL(PFRS 3) /Amort(SMEs) of GW
-decrease in GW (GW,beg - GW,end)
-take note of decreased "to & by"
-ignore NCI share in entry
IL / Amort Exp (10 yrs) xx
GW xx