2021 Cfas Mte Wreviewer Quizlet

11/6/21, 12:32 PM OVERVIEW OF ACCOUNTING Flashcards | Quizlet
Social Science / Economics / Finance
OVERVIEW OF ACCOUNTING
Terms in this set (110)
Accounting is "the process of identifying, measuring, and

communicating economic information to permit informed judgments
AAA Definition of Accounting
and decisions by users of the information." - (American Association of
Accountants)
1. Identifying
Three important activities included in the

2. Measuring
definition of accounting
3. Communicating
is the process of analyzing events and transactions to determine

Identifying
whether or not they will be recognized.
https://quizlet.com/606700855/overview-of-accounting-flash-cards/ 1/21
refers to the process of including the effects of an accountable event in

Recognition the statement of financial position or the statement of comprehensive
income through a journal entry.
one that affects the assets, liabilities, equity, income or expenses of an

accountable event entity. It is also known as economic activity, which is the subject matter
of accounting.
Types of events or transactions External events and Internal events
External events are events that involve an entity and another external party.
Exchange (reciprocal transfer)
Types of External event Non-reciprocal transfer
External event other than transfer
an event wherein there is a reciprocal giving and receiving of economic

resources or discharging of economic obligations between an entity
Exchange (reciprocal transfer) and an external party.
Examples: sale, purchase, payment of liabilities, receipt of notes

receivable in exchange for accounts receivable, and the like.
is a "one way" transaction in that the party giving something does not
receive anything in return while the party receiving does not give
anything in exchange.
Non-reciprocal transfer Examples: donations, gifts or charitable contributions, payment of taxes,

imposition of fines, theft, provision of capital by owners, distributions to
owners', and the like
an event that involves changes in the economic resources or obligations

of an entity caused by an external party or external source but does not
External event other than transfer involve transfers of resources or obligations.
Examples: changes in fair values and price levels, obsolescence,

technological changes, vandalism, and the like.
Internal events are events that do not involve an external party.
Upgrade to remove ads Only $47.88/year
Production
Types of Internal events

Casualty
the process by which resources are transformed into finished goods.

Production Examples: conversion of raw materials into finished products,
production of farm products, and the like.
an unanticipated loss from disasters or other similar events. Examples:

Casualty
loss from fire, flood, and other catastrophes.
involves assigning numbers, normally in monetary terms, to the

Measuring
economic transactions and events.
opinion When measurement is affected by estimates
fact When measurement is unaffected by estimates
a) Estimates of uncollectible amounts of receivables.
b) Depreciation and amortization expenses, which are affected by

estimates of useful life and residual value.
examples of opinion in measuring

c) Estimated liabilities, such as provisions.
d) Retained earnings, which is affected by various estimates of income

and expenses
a) Ordinary share capital valued at par value
examples of fact in measuring b) Land stated at acquisition cost
c) Cash measured at face amount
is the process of transforming economic data into useful accounting

information, such as financial statements and other accounting reports,
Communicating
for dissemination to users. It also involves interpreting the significance
of the processed information.
recording
three aspects in communicating classifying
summarizing
refers to the process of systematically committing into writing the

recording identified and measured accountable events in the journal through
journal entries.
involves the grouping of similar and interrelated items into their

classifying
respective classes through postings in the ledger.
putting together or expressing in condensed form the recorded and

summarizing classified transactions and events. This includes the preparation of
financial statements and other accounting reports.
Basic purpose of accounting to provide information that is useful in making economic decisions.
a separately identifiable combination of persons and property that uses

economic entity
or controls economic resources to achieve certain goals or objectives.
one that carries out some socially desirable needs of the community or
Not-for-profit entity its members and whose activities are not directed towards making
profit; or
Business entity one that operates primarily for profit.
Production
Exchange
Consumption
Examples of Economic activities

Income Distribution
Savings
Investment
the process of converting economic resources into outputs of goods

Production and services that are intended to have greater utility than the required
inputs.
the process of trading resources or obligations for other resources or

Exchange
obligations
Consumption the process of using the final output of the production process.
the process of allocating rights to the use of output among individuals

Income Distribution
and groups in society.
the process of setting aside rights to present consumption in exchange

Savings
for rights to future consumption.
the process of using current inputs to increase the stock of resources

Investment
available for output as opposed to immediately consumable output
Quantitative information
Types of information provided by

Qualitative information
accounting
Financial information
Quantitative information information expressed in numbers, quantities, or units.
information expressed in words or descriptive form. Found in the notes

Qualitative information to financial statements as well as on the face of the other financial
statements.
information expressed in money is also quantitative information

Financial information
because monetary amounts are normally expressed in numbers.
Types of accounting information classified General purpose accounting information

as to users' needs Special purpose accounting information
designed to meet the common needs of most statement users. This

information is provided under financial accounting General purpose
information is governed by generally accepted accounting principles
General purpose accounting information (GAAP) represented by the Philippine Financial Reporting Standards
(PFRSs),
designed to meet the specific needs of particular statement users. This

Special purpose accounting information information is provided by other types of accounting other than
financial accounting, e.g., managerial accounting, tax basis accounting.
accounting is a body of knowledge which has been systematically

As a social science
gathered, classified and organized.
As a practical art accounting requires the use of creative skills and judgment.
Accounting identifies and measures economic activities, processes

Accounting as an information system information into financial reports, and communicates these reports to
decision makers.
Accounting is often referred to as a "language of business" because it is

Accounting as a language of business
fundamental to the communication of financial information.
1. Recognizing a problem
2. Identifying alternative solutions
3. Evaluating the alternatives
steps in problem solving

4. Selecting a solution from among the alternatives
5. Implementing the solution
Accounting concepts refer to the principles upon which the process of accounting is based.
Double-entry system each accountable event is recorded in two parts-debit and credit.
the entity is assumed to carry on its operations for an indefinite period

Going concern assumption of time. Meaning, the entity does not expect to end its operations in the
foreseeable future
the entity is viewed separately from its owners. Accordingly, the

personal transactions of the owners among themselves or with other
Separate entity
entities are not recorded in the entity's accounting records. This
concept defines the area of interest of the accountant.
a. Assets, liabilities, equity, income and expenses are stated in terms of a

common unit of measure, which is the peso in the Philippines; and
Stable monetary unit

b. The purchasing power of the peso is regarded as stable or constant
and that its instability is insignificant and therefore ignored.
the life of the entity is divided into series of reporting periods. An

accounting period is usually 12 months and may either be a calendar
Time Period (Periodicity/ Accounting
year or a fiscal year period. A calendar year period starts on January 1
period)
and ends on December 31 of that same year. A fiscal year period also
covers 12 months but starts on a date other than January 1.
information is material if its omission or misstatement could influence

Materiality concept economic decisions. Materiality is a matter of professional judgment and
is based on the size and nature of the item being judged.
Cost-benefit (Cost constraint! Reasonable the cost of processing and communicating information should not
assurance) exceed the benefits to be derived from it.
the effects of transactions and other events are recognized when they
occur (and not as cash is received or paid) and they are recorded in the
Accrual Basis of accounting
accounting records and reported in the financial statements of the
periods to which they relate.
Historical cost concept (Cost principle) the value of an asset is determined on the basis of acquisition cost.
all of the components of a complete set of financial statements are

interrelated. The preparation of a worksheet (and the eventual
completion of the financial statements) recognizes that the financial
Concept of Articulation statements are fundamentally interrelated and interact with each other.
Accordingly, when users use the financial statements in making
decisions, they need to use each financial statement in conjunction with
the other financial statements.
this principle recognizes that the nature and amount of information

included in the financial statements reflect a series of judgmental trade-
offs. The trade offs strive for:
Full disclosure principle a. sufficient detail to disclose matters that make a difference to users,
yet
b. sufficient condensation to make the information understandable,

keeping in mind the costs of preparing and using it.
the financial statements are prepared on the basis of accounting

principles that are applied consistently from one period to the next.
Changes in accounting policies are made only when required or
Consistency concept
permitted by the PFRSS or when the change results to more relevant
and reliable information. Changes in accounting policies are disclosed
in the notes.
costs are recognized as expenses when the related revenue is

Matching (Association of cause and effect)
recognized.
the accounting objective is geared towards proper income

determination. Proper matching of costs against revenues is the ultimate
Entity theory
end. This theory emphasizes the income statement and is exemplified by
the equation "Assets Liabilities + Capital."
the accounting objective is geared towards the proper valuation of

Proprietary theory assets. This theory emphasizes the importance of the balance sheet and
is exemplified by the equation "Assets-Liabilities Capital."
1. this theory is applicable when there are two classes of shares issued,
ie, ordinary and preferred. The equation is "Assets - Liabilities -
Residual equity theory Preferred Shareholders' Equity- Ordinary Shareholders' Equity." This
theory is applied in the computation of book value per share and return
on equity.
the accounting objective is neither proper income determination nor

proper valuation of assets but the custody and administration of funds.
Fund theory The objective is directed towards cash flows, exemplified by the formula
"cash inflows minus cash outflows equals fund." This concept is used in
government accounting and fiduciary accounting.
the process of converting non-cash assets into cash or claims for cash.
Realization
It is also the concept that deals with revenue recognition.
is the use of caution when making estimates under conditions of

uncertainty, such that assets or income are not overstated and liabilities
Prudence (Conservatism) or expenses are not understated. In other words, when exercising
prudence, the one which has the least effect on equity is chosen.
Matching concept (Direct association of costs that are directly related to the earning of revenue are recognized
costs and revenues) as expenses in the same period the related revenue is recognized.
costs that are not directly related to the earning of revenue are initially
Systematic and rational allocation recognized as assets and recognized as expenses over the periods their
economic benefits are consumed, using some method of allocation.
costs that do not meet the definition of an asset or ceases to meet the
Immediate recognition definition of an asset, are expensed immediately. Examples include
casualty losses and impairment losses.
Accounting assumptions (Accounting are the fundamental concepts or principles and basic notions that
postulates) provide the foundation of the accounting process.
is logical reasoning in the form of a set of broad principles that (i)

provide a general frame of reference by which accounting practice can
be evaluated and (ii) guide the development of new practices and
Accounting theory
procedures. It is the organized set of concepts and related principles
that explain and guide the accountant's action in identifying measuring
OVERVIEW OF ACCOUNTING communicating accounting information
Financial accounting
Management accounting
Cost accounting
Auditing
Tax accounting
Government accounting
Common branches of accounting

Fiduciary accounting
Estate accounting
Social accounting
Institutional accounting
Accounting systems
Accounting research
is the branch of accounting that focuses on general purpose financial

Financial accounting
statements.
refers to the accumulation and communication of information for use by

internal users or management. An offshoot of management accounting
is management advisory services which includes services to clients on
Management accounting
matters of accounting finance, business policies organization
procedures, product costs, distribution, and many other phases of
business conduct and operations.
is the systematic recording and analysis of the costs of materials, labor,

Cost accounting
and overhead incident to production.
is the process of evaluating the correspondence of certain assertions

Auditing
with established criteria and expressing an opinion thereon.
the preparation of tax returns and rendering of tax advice, such as the
Tax accounting determination of the tax consequences of certain proposed business
endeavors.
refers to the accounting for the government and its instrumentalities,

placing emphasis on the custody of public funds, the purposes for
Government accounting
which those funds are committed, and the responsibility and
accountability of the individuals entrusted with those funds.
refers to the handling of accounts managed by a person entrusted with

Fiduciary accounting
the custody and management of property for the benefit of another.
refers to the handling of accounts for fiduciaries who wind up the affairs
Estate accounting
of a deceased person.
the process of communicating the social and environmental effects of

Social accounting
an entity's economic actions to the society.
Institutional accounting the accounting for non-profit entities other than the government.
the installation of accounting procedures for the accumulation of

Accounting systems financial data and designing of accounting forms to be used in data
gathering.
pertains to the careful analysis of economic events and other variables

to understand their impact on decisions, Accounting research includes a
Accounting research broad range of topics, which may be related to one or more of the
other branches of accounting, the economy as a whole, or the market
environment.
refers to the process of recording the accounts or transactions of an

Bookkeeping
entity.
refers to the process of recording the accounts or transactions of an

Accountancy
entity.
Practice of Public Accountancy
Practice in Commerce and Industry
Four sectors in the practice of accountancy

Practice in Education/Academe
Practice in the Government
involves the rendering of audit or accounting related services to more

Practice of Public Accountancy
than one client on a fee basis.
refers to employment in the private sector in a position which involves

decision making requiring professional knowledge in the science of
Practice in Commerce and Industry accounting and such position requires that the holder thereof must be a
certified public accountant.
employment in educational institution which involves teaching of

Practice in Education/Academe accounting, auditing, management advisory services, finance, business
law, taxation, and other technically related subjects.
employment or appointment to a position in an accounting professional

group in the government or in a government-owned and/or controlled
corporation, including those performing proprietary functions, where
Practice in the Government
decision making requires professional knowledge in the science of
accounting, or where civil service eligibility as a certified public
accountant is a prerequisite.
Philippine Financial Reporting Standards represent the generally accepted accounting principles (GAAP) in the
(PFRSs) Philippines.
Financial Reporting Standards Council (FRSC)
Philippine Interpretations Committee (PIC)
Board of Accountancy (BOA)
Accounting standard setting bodies and Securities and Exchange Commission (SEC)
other relevant organizations Bureau of Internal Revenue (BIR)
Bangko Sentral ng Pilipinas (BSP)
Cooperative Development Authority (CDA)
Financial Reporting Standards Council is the official accounting standard setting body in the Philippines
(FRSC) created under the Philippine Accountancy Act of 2004 (R.A. No. 9298).
15 Members :
1 Chairman
1 Board of Accountancy (BIR)
1 Commission on Audit (COA)
1 Securities and Exchange Commission (SEC)
FRSC is composed of... 1 Bangko Sentral ng Pilipinas (BSP)
1 Bureau of Internal Revenue (BIR)
2 Public Practice
2 Commerce and Industry
2 Academe/Education
2 Government
is a committee formed by the Accounting Standards Council (ASC), the

predecessor of FRSC, with the role of reviewing the interpretations of
Philippine Interpretations Committee (PIC)
the International Financial Reporting Interpretations Committee (IFRIC)
for approval and adoption by the FRSC.
is the professional regulatory board created under R.A. No. 9298 to

Board of Accountancy (BOA) supervise the registration, licensure and practice of accountancy in the
Philippines.
a chairperson and six (6) members appointed by the President of the

BOA is consist of... Philippines. The Board shall elect a vice-chairperson from among its
members for a term of one (1) year.
is the government agency tasked in regulating corporations and

Securities and Exchange Commission (SEC) partnerships, capital and investment markets, and the investing public.
Some
administers the provisions of the National Internal Revenue Code. These

provisions do not always reflect the goals of financial reporting.
Bureau of Internal Revenue (BIR)
However, they do at times influence the choice of accounting methods
and procedures.
influences the selection and application of accounting policies by banks

Bangko Sentral ng Pilipinas (BSP)
and other entities performing banking functions.
influences the selection and application of accounting policies by

Cooperative Development Authority (CDA)
cooperatives.
International Financial Reporting Interpretations Committee (IFRIC)
IFRS Advisory Council (previously known as the Standards Advisory

Other relevant international organizations Council 'SAC)
International Federation of Accountants (IFAC)
International Organization of Securities Commissions (OSCO)
is a committee that prepares interpretations of how specific issues

International Financial Reporting should be accounted for under the application of IFRS where:
Interpretations Committee (IFRIC) a. The standards do not include specific authoritative guidance; and
b. There is a risk of divergent and unacceptable accounting practices.
is a group of organizations and individuals with an interest in

IFRS Advisory Council (previously known as
international financial reporting. The Advisory Council's role includes
the Standards Advisory Council 'SAC)
advising on priorities within the IASB's work program.
is a non profit, non-governmental, non-political organization of

accountancy bodies that represents the worldwide accountancy
International Federation of Accountants profession. Its mission is to develop and enhance the profession to
(IFAC) provide services of consistently high quality in the public interest.
Membership to the IFAC is open to all accountancy bodies recognized
by law or consensus within their countries
International Organization of Securities is an international body of security commissions. The Philippine SEC is a
Commissions (OSCO) member of IOSCO.
(1) PFRSs
PFRSS comprise the following... (2) PASS
(3) Interpretations
11/6/21, 12:35 PM Conceptual Framework and Accounting Standards By Valix, Peralta, and Valix - Chapter 1 Flashcards | Quizlet
Conceptual Framework and Accounting Standards By Valix, Peralta, and

Valix - Chapter 1
Accounting Is a service entity.
Is the art of recording, classifying, and summarizing in a significant manner

Accounting and in terms of money, transactions, and events which are in part at least of
a financial character and interpreting the results thereof.
Is the process of identifying, measuring, and communicating economic

Accounting information to permit informed judgment and decisions by users of the
information.
To provide quantitative information, primarily financial in nature, about

Accounting Function economic entities, that is intended to be useful in the making of economic
decisions.
Transactions Economic activities of an entity are referred to
External transactions Economic events involving one entity and another entity.
Conceptual Framework and Accounting Standards By Valix, Peralta, and Valix - Chapt...
https://quizlet.com/519084463/conceptual-framework-and-accounting-standards-by-valix-peralta-and-valix-chapter-1-flash-cards/ 1/7
Internal Transactions Those economic activities involving one entity only.
Examples of Internal Transactions Production and Casualty
This accounting process is the recognition and nonrecognition of the

Identifying
business activities as accountable accounts.
This accounting process is the assigning of peso amount to the accountable

Measuring
economic transactions and events.
It is the original acquisition cost and the most common measure of financial
Historical Cost
transactions.
Current Value It includes fair value, value in use, fulfillment value and current cost.
The accounting process of preparing and distributing accounting reports to

Communicating
the potential users of the information.
Communicating The reason why accounting is called as universal language of business.
The process of systematically maintaining a record of all economic business

Recording or Journalizing
transactions after they have been identified and measured.
Is the sorting or grouping of similar and interrelated economic transactions

Classifying
into their respective classes.
A group of account which are systematically categorized into asset account,

Ledger liability account, owner's equity account, revenue account, and expense
account.
The preparation of financial statements which include the statement of

Summarizing financial position, income statement, statement of comprehensive income,
statement of changes in equity and statement of cash flows.
Measures business activities, process information into reports and

Accounting as Information System
communicates the reports to decision makers.
To provide quantitative financial information about a business that is useful

Overall Objective of Accounting to statement users particularly owners and creditors in making economic
decisions.
To supply financial information so that the statement users could make

Accountant's Primary Task
informed judgment and better decisions.
The law regulating the practice of accountancy in the Philippines. The law is
Republic Act No. 9298
known as Philippine Accountancy Act of 2004.
The body authorized by law to promulgate rules and regulations affecting

Board of Accountancy
the practice of the accountancy profession in the Philippines.
Composed of individual practitioners, small accounting firms and large

multinational organizations that render independent and expert financial
Public Accounting or Public Accountancy
services to the public.
The examination of financial statement by independent certified public

Auditing accountant for the purpose of expressing an opinion as to the fairness with
which the financial statements are prepared.
Services includes the preparation of income tax returns and determination

Taxation
of tax consequences of certain proposed business endeavors.
Generally to refer to services to clients on matter of accounting, finance,

Management Advisory Services business policies, organization procedures, product costs, distribution and
many other phases of business conduct and operations.
Major Objective of Private Accountant To assist management in planning and controlling the entity's operations.
Includes maintaining the records, producing the financial reports, preparing

Private Accounting
the budgets and controlling and allocating the resources of the entity.
Encompasses the process of analyzing, classifying, summarizing, and

Government Accounting communicating all transactions involving the receipt and disposition of
government funds and property and interpreting the results thereof.
Focus of Government Accounting The custody and administration of public funds.

The law mandating and strengthening the continuing professional

Republic Act No. 10912 development program for all regulated professions, including the
accountancy profession.
It refers to the inculcation and acquisition of advanced knowledge, skill,

Continuing Professional Development proficiency, and ethical and moral values after the initial registration of the
CPA for assimilation into professional practice and lifelong learning.
It is procedural and largely concerned with development and maintenance

Bookkeeping
of accounting records.
Bookkeeping It is the "how" of accounting.
Accountancy It refers to the profession of accounting practice.
Generally Accepted Accounting Principles It represents the rules, procedures, practice and standards followed in the
(GAAP) preparation and presentation of financial statements.
Process of Generally Accepted Accounting It is political process which incorporates political actions of various
Principle interested user groups as well as professional judgment, logic and research.
To identify proper accounting practices for the preparation and

Purpose of Accounting Standards
presentation of financial statements.
It creates a common understanding between prepares and users of financial

Accounting Standards
Conceptual Framework and Accounting Standards
statements particularlyBy
the Valix, Peralta,
measurement and
of assets Valix - Chapt...
and liabilities.
The accounting standard setting body created by the Professional

Regulation Commission upon recommendation of the Board of
Accountancy to assist the Board of Accountancy in carrying out its powers
and functions provided under R.A. Act No. 9298.
To establish and improve accounting standards that will be generally

Main Function of FRSC
accepted in the Philippines.
It is promulgated by the Financial Reporting Standards Council constitute

Accounting Standards the "highest hierarchy" of generally accepted accounting principles in the
Philippines.
It is composed of 15 members with a Chairman who had been or is presently

a senior accounting practitioner and 14 representative.
It was formed by the FRSC in August 2006 and has replaced the
Philippine Interpretations Committee (PIC) Interpretations Committee or IC formed by the Accounting Standards
Council in May 2000.
To prepare interpretations of PFRS for approval by the FRSC and to provide

Role of Philippine Interpretations Committee timely guidance on financial reporting issues not specifically addressed in
current PFRS.
It is an independent private sector body, with the objective of achieving

International Accounting Standards Committee
uniformity in the accounting principles which are used by business and
(IASC)
other organizations for financial reporting around the world.
International Accounting Standards Board It replaces the International Accounting Standards Committee or IASC.
(IASB)
International Accounting Standards Board Publishes standards in a series of pronouncements called International
(IASB) Financial Reporting Standards or IFRS.
It includes in the correct order research, discussion paper, exposure draft

IASB standard-setting process
and accounting standard.
It is primarily concerned with the recording of business transactions and the

Financial Accounting
eventual preparation of financial statements.
It is the accumulation and preparation of financial reports for internal users

Managerial Accounting
only.
It is the area of accounting that emphasizes reporting creditors and

investors.
It is the area of accounting that emphasizes developing accounting

Managerial Accounting
information for use within an entity.
It focuses on general purpose reports known as financial statements

intended for internal and external users.
11/6/21, 1:09 PM Conceptual Framework Flashcards | Quizlet
Conceptual Framework
conceptual framework prescribes the concepts for general purpose financial reporting
- assist the International Standards Board (IASB) in developing

Standards that are based on consistent concepts;
- assist preparers in developing consistent accounting policies when no

purpose of the conceptual framework
standards applies to a particular transaction or when a standard allows a
choice of accounting policy
- assist all parties in understanding and interpreting the standards
conceptual framework provides for the promote transparency and promote accountability
development of standards that...
conceptual framework promotes enhancing the international comparability and quality of financial
transparency by... information
conceptual framework promotes reducing the information gap between the providers of capital and the
Conceptual
accountability by... Framework entity's management
https://quizlet.com/613928181/conceptual-framework-flash-cards/ 1/14
- conceptual framework is not a PFRS
- when conflict arises, the PFRS will prevail
- in the absence of a standard, management shall consider the

status of conceptual framework
conceptual framework in making its judgement in developing and
applying an accounting policy that results in useful information
- PFRSs
- judgment where the management shall consider (1) requirements in

other PFRSs dealing with similar transactions and (2) conceptual
hierarchy of reporting standards framework
and management may consider (1) pronouncements issued by other

standard-setting bodies and (2) other accounting literature and industry
practices
- concerned with general purpose financial reporting
scope of the conceptual framework - general purpose financial reporting involved the preparation of
general purpose financial statements
- the objective of financial reporting
- qualitative characteristics of useful financial information
- financial statements and the reporting entity
conceptual framework provides the - elements of financial statements
concepts regarding the following: - recognition and derecognition
- measurement
- presentation and disclosure
- concepts of capital and capital maintenance
- to provide financial information about the reporting entity that is

useful to primary users in making decisions about providing resources
objective of financial reporting
to the entity
- forms a foundation of the conceptual framework
- those who cannot demand information directly from reporting entities
primary users - only the common needs of primary users are met by the financial
statements
primary users are either existing and potential investors or lenders and other creditors
other information that primary users branch general economic conditions and expectations, political events and
out for political climate, industry and company outlooks)
fundamental qualitative characteristics and enhancing qualitative

qualitative characteristics
characteristics
fundamental qualitative characteristics makes information useful for users
relevance can affect the decision of users
predictive value information can be used in making predictions
confirmatory value information can be used in confirming past predictions
materiality an entity-specific aspect of relevance
provides a true, correct, and complete depiction of what it purports to

faithful representation
represent
all information necessary for users to understand the phenomenon

completeness
being depicted is provided
neutrality information is selected and presented without bas
no errors in the description and in the process by which the information

free from error
is selected and applied
to provide information about the reporting entity's assets. liabilities,

objective and scope of financial statements
equity, income and expenses
financial statements are to provide ability to generate future net cash inflows and its stewardship over
information that is useful in assessing an economic resources
entity's
financial statements are prepared for a specific period of time and

reporting period include comparative information for at least on preceding reporting
period
- financial statements are prepared in the going concern assumption
going concern - the entity has neither the intention nor the need to end its operations
in the foreseeable future
- one that is required or chooses to prepare financial statements
reporting entity - not necessarily a legal entity
- can be a single entity or a combination of two or more entities
parent the controlling entity
Conceptualsubsidiary
Framework the controlled entity
consolidated financial statements both parent and its subsidiaries
unconsolidated financial statements parent alone
two or more entities that are not all linked by a parent-subsidiary

combined financial statements
relationship
enhancing qualitative characteristics enhance the usefulness of information
the information helps users in identifying similarities and differences

comparability
between different sets of information inter-comparability and
intra-comparability a single entity but in different periods
inter-comparability different entities in a single period
different users could reach consensus as to what the information

verifiability
purports to represent
direct verification involves direct observation like the counting of cash
involves checking the inputs to a model or formula and recalculating the
indirect verification outputs using the same methodology like checking the debits and
credits in the cash ledger and recalculating the ending balance
the information is available to users in time to be able to influence their

timeliness
decisions
users are expected to (1) have reasonable knowledge of business

understandability
activities and (2) willingness to analyze the information diligently
assets, liabilities, and equity relate to the entity's financial position
income and expenses relate to the entity's financial performance
a present resource controlled by the entity as a result of past events. an

asset economic resource is a right that has the potential to produce
economic benefits
three aspects in the definition of an asset right, potential to produce economic benefits, and control
right not necessarily to a physical object
- has potential to produce economic benefits for the entity
potential to produce economic benefits - potential need not be certain or likely, as long as the right exists and
that in at least on circumstance would produce economic benefits
entity has exclusive right over the benefits of an asset and the ability to
control
prevent others from accessing those benefits
a present obligation of the entity to transfer an economic resource as a

liability
result of past events
obligation, transfer of an economic resource, and present obligation as

three aspects in the definition of a liability
a result of past events
obligation a duty or responsibility that an entity has no practical ability to avoid
an obligation can either be a legal obligation or constructive obligation
an obligation that results from a contract, legislation, or other operation

legal obligation
of law
an obligation that results from an entity's actions that create a valid

constructive obligation expectation on other that the entity will accept and discharge certain
responsibilities
- obligation has a potential to require a transfer of an economic

resource
transformation of an economic resource - such potential need not to be certain or likely, as long as obligation
already exists and that in one circumstance would require the need of a
transfer of an economic resource
present obligation as a result of past events, - entity has gained economic benefits
present obligation exists if - entity will or may have to transfer an economic resource
- a contract that is equally unperformed, neither part has fulfilled its

obligations, or both parties have partially fulfilled their obligations to an
executory contracts equal extent
- establishes a combined right and obligation to exchange economic

resources
- if the entity performs first, the entity's combined right and obligation
the executory contract ceases to be
changes to an asset
executory when one party performs its

- if the other party performs first, the entity's combined right and
obligations
obligation changes to a liability
- the residual interest in the assets of the entity after deducting all its
equity liabilities
- equity = assets - liabilities
increase in assets, or decreases in liabilities that result in increases in

income equity, other than those relating to the contributions from holders of
equity claims
decreases in assets or increases in liabilities, that result in decreases in

expense equity, other than those relating to distributions to holders of equity
claims
- process of including in the statement of financial position or the

statements of financial performance an item that meets the definition of
recognition one of the financial statement elements
- involves recording the item in words and in monetary amounts and

including that amount in the totals of either of those statements
- it meets the definition of an asset, liability, equity, income or expense

and
recognition criteria - recognizing it would provide useful information, which is relevant and
faithfully represented
- relevance
- uncertain where an asset or liability exists
- asset or liability exists, but the probability of an inflow or outflow of

economic benefits is low
may not provide relevant information if

* but the presence of one or both does not automatically lead to the
non-recognition of the items
level of measurement uncertainty and other factors can affect an item's

Faithful Representation
faithful representation but not necessarily its relevance
- exists if an asset or liability needs to be estimated
- high level of measurement uncertainty does not necessarily lead to

the non-recognition of an asset or liability if the estimate provides
measurement uncertainty
relevant information and is clearly and accurately described
- measurement uncertainty can lead to non-recognition if an estimate is

exceptionally difficult or exceptionally subjective
- for assets: consideration paid to acquire asset plus transaction costs
historical cost - for liability: consideration received to incur the liability minus the
transaction costs
- depreciation, amortization, or impairments of assets
historical cost is updated over time to depict - collection or payments that extinguish part or all of an asset or liability
the following - unwinding of discount or premium when the asset or liability is

measured at amortized cost
current value fair value, value in use, fulfillment value
price that would be received to sell an asset or paid to transfer a

fair value liability, in an orderly transaction between market participants at the
measurement date
present value of the cash flows or other economic benefits that an

value in use entity expects to derive from the use of an asset and from its ultimate
disposal
present value of the cash or other economic resources that an entity

fulfillment value
expects to be obliged to transfer it fulfils a liability
- for assets: cost of an equivalent asset at the measurement date

comprising the consideration that would be paid at measurement date
current cost plus transaction costs
- for liability: the consideration that would be received for an equivalent

liability at the measurement date
entry values current and historical cost are entry values
exit values fair value, value in use, and fulfilment value are exit values
considerations when selecting a - nature of information provided by a particular measurement basis
measurement basis - qualitative characteristics, cost constraint, and other factors
- not measured directly, the different between assets and liabilities
- cannot be expected to be equal to the entity's market value nor the

measurement of equity
amount that can be raised from either selling or liquidating the entity
- generally positive although some of its components can be negative
information is communicated through presentation and disclosure in the

presentation and disclosure
financial statements
- focusing on presentation and disclosure objectives and principles

rather on rules
- classifying information by grouping similar items and separating

effective communication requires dissimilar items
- aggregating information in a matter that is not obscured either by

excessive detail or by excessive summarization
- presentation and disclosure objectives and principles
- objectives are specific in the standards
presentation and disclosure objectives and - principles include (1) use of entity-specific information is more useful
principles that standardized descriptions and (2) duplication of information is
usually unnecessary
- combining similar items and separating dissimilar items
classification
- offsetting of assets and liabilities is generally not appropriate
offsetting occurs when an asset and a liability with separate units of

offsetting account are combined and only the net amount is presented in the
statement of financial position
income and expenses are classified as profit or loss and other comprehensive income
recognized either in
aggregation combining similar items and separating dissimilar items
- regarded as the invested money
financial concept of capital

- synonymous with equity, net assets, net worth
capital is regarded as the entity's productive capacity like units of

physical concept of capital
output per day
11/6/21, 12:32 PM PAS 1 Flashcards | Quizlet
PAS 1
normal operating cycle 12 months
prescribe the basis for the information of general purpose financial

PAS 1 - presentation of financial statements
statements, the guidelines for their structure, ensure comparability.
Inter-comparability Different entities in a single period
PAS 1 applies: the preparation and presentation of general financial statements.
terminology used in PAS 1 suitable for profit-oriented entities
structured representation of an entity's Financial Statements

financial position and result of its operations,
the end product of of the financial reporting Financial Statements

process which is periodically communicated to
users.
PAS 1
https://quizlet.com/616576573/pas-1-flash-cards/ 1/10
intended to meet the needs of external users general-purpose financial statements

who are not in a position to require an entity to
prepare reports tailored to their needs.
Intra-comparability a single entity but in different periods.
subject matter of the Conceptual framework general purpose financial statements
to provide information about the financial position, financial performance,

primary objective of Financial
and cash flows of an entity that is useful to a wide range of users in making
statements/general purpose
economic decisions
secondary objective of financial statements to show the result of management's stewardship over the entity's resources.
is different from "statement of profit or loss and income statement

other comprehensive income" or "statement of
comprehensive income"
PAS 1 requires an entity whose financial fair presentation and compliance with PFRS
statements comply with PFRS to make an
explicit and unreserved statement of such
compliance in the notes.
PAS 1
management shall asses the entity's ability to Going concern

continue, taking into account all available
information about the future, minimum of 12
months from the reporting date.
financial statements are prepared with the Going Concern

expectation that a business will remain in
operation indefinitely
Frequency of reporting financial statements are prepared at least annually.
all FS shall be prepared using accrual basis except for the statement of cash
Accrual basis of accounting
flows which is prepare using cash basis.
Each material class of similar items is to be Materiality and aggregation

presented separately in the financial
statements, eg the classification of assets as
non-current and current
dissimilar items are separated unless they are Materiality and aggregation
immaterial. individually immaterial items are
aggregated with other items.
PAS 1
assets and liabilities or income and expenses Offsetting

are presented separately and are not offset
unless offsetting is required and permitted by
PFRS
1. the period covered by the FS
if an entity changes its reporting period longer

2. the reason of using a longer or shorter period
or shorter than 1 year it shall disclose:

3. the fact that amounts presented in the FS are not entirely comparable.
an entity presents two of each of the Comparative information

statements and related notes
It is the presentation and classification of Consistency of Information

financial statement items on a uniform basis
from one accounting period to the next
Management is responsible for an entity's financial statements
shows distinctions between current and Classified presentation

noncurrent assets and liabilities
based on liquidity; shows no distinction Unclassified presentation

between current and noncurrent items.
PAS 1
presenting some assets and liabilities using current/noncurrent classification

PAS 1 permits a mixed presentation
and others in order of liquidity.
it highlights an entity's working capital and classified presentation

facilitates the computation of liquidity and
solvency ratios
the time between the acquisition of assets for operating cycle

processing and their realization in cash or cash
equivalents.
assets expected to be realized, sold, or Current assets

consumed in the entity's normal operating
cycle
expected to be settled in the entity's normal Current Liabilities

operating cycle
refers to the replacement of an existing debt Refinancing

with a new one but with different terms.
refinancing normally entails a fee or penalty.
a refinancing where debtor is under financial trouble debt restructuring

distress
PAS 1
long-term obligations that is maturing within 12 current obligation

months after the reporting period, even if
refinancing agreement is completed
if entity has the right, at the end of the noncurrent obligation

reporting period, to roll over the obligation for
at least 12 months after the reporting period
under an existing loan facility or credit line.
are presented as noncurrent items in a Deferred tax liabilities (assets)

classified statement of financial position,
irrespective of their expected dates of reversal.
PAS 1 does not prescribe the order or format in which an entity presents
Order/ Format of Presentation
items.
disclosed in either in the statement of change Dividends

in equity or in the notes.
(1) a statement displaying the profit or loss section only (separate 'statement
two statements presentation of income and of profit or loss' or 'income statement') and (2) a second statement
expense beginning with profit or loss and displaying components of other
comprehensive income.
income less expenses, excluding the components of other comprehensive

Profit or loss
income
PAS 1
PAS 1 prohibits the use of this in the statement extraordinary items

of profit or loss and other comprehensive
income or in the notes
Expenses are aggregated according to their Nature of expense method

nature
an entity classifies expenses according to their Function of expense method

function
this method is simpler to apply because it nature of expense method

eliminates considerable judgement needed in
reallocating expenses according to their
function
comprises items of income and expense Other Comprehensive Income (OCI)

(including reclassification) that are not
recognized in profit or loss as
required/permitted by other PFRS
reclassification adjustment for gains Deduction in OCI and an addition to profit or loss.
are amounts reclassified to profit or loss in the reclassification adjustment

current period that were recognized in other
comprehensive income in the current or
previous periods.
PAS 1
reclassification adjustment for loss Addition to OCI and a deduction from profit or loss
on changes in revaluation surplus, derecognition of equity instruments

reclassification do not arise: designated at FVOCI and remeasurements of the net defined benefit
liability(asset)
The change in equity during a period resulting Total comprehensive income

from transaction and other events, other than
those changes resulting from transactions with
owners in their capacity as owners.
disposal of a foreign operation, derecognition reclassification adjustments arise on:

of debt instruments measured at FVOCI or
when cash flow hedge becomes ineffective or
affects profit or loss.
provides information in addition to those presented in the other financial

notes statements. an integral part of a complete set of FS
PAS 1 requires an entity to present the notes in a systematic manner.
integral part of FS Notes
requires the proper selection and application of accounting policies, proper

Fair presentation presentation of information and provision of additional disclosures
whenever relevant to the understanding of the FS
PAS 1
permits the departure from a PFRS requirement PAS 1
Line item Class of similar items
requires particular disclosures to be presented PAS 1

either in the notes or on the face of the other
financial statements
The responsibilities are expressly stated in a Statement of Management' Responsibility for Financial Statements
document called
shows the entity's financial condition as at a Statement of Financial position

certain date
does not prescribe the order or format of PAS 1

presenting items in the statement of financial
position.
the entity does not have the right at the end of Current Liabilities
the reporting period to a defer a settlement of
the liability for at least 12 months
Cash or Cash equivalent, unless restricted from Current Assets

being exchanged or used to settle a liability for
at least 12 months after the reporting period
PAS 1
liabilities that are payable upon the demand of current

the lender are classified as
FVPL fair value through profit or loss
FVOCI Fair value through other comprehensive income
are presented in the statement of changes in Retrospective adjustments and retrospective restatements
equity as adjustments to the opening balance
of retained earnings rather than as change in
equity during the period.
non-owner changes in equity are presented in the statement of comprehensive income
owner changes in equity presented in the statement of changes in equity
as at the end statement of financial position dated
for the period other financial statements dated
PAS 2
are assets in the process of production for inventories

such sale (work in process)
PAS 2 prescribes the accounting treatment for inventories
the primary issue in the accounting for the determination of cost to be recognized as asset and carried
inventories according to PAS 2 forward until it is expensed.
provides guidance in the determination of PAS 2

cost of inventories, including the use of cost
formulas, their subsequent measurement
and recognition as expense
are assets held for sale in the ordinary inventories

course of business (finished goods)
PAS 2
are assets in the form of materials or inventories

supplies to be consumed in the production
process or in rendering of services (raw
materials& manufacturing supplies)
refers to the necessary, normal or usual ordinary course of business

business activities of an entity
inventories are measured at: lower of cost and net realizable value
this includes the purchase price, import Purchase cost

duties, non-refundable or non-recoverable
purchase taxes, transport, handling and
other costs directly attributable to the
acquisition of the inventory
refers to the costs necessary in converting Conversion costs

raw materials into finished goods.
necessary in bringing the inventories to their Other costs

present location and condition
PAS 2
deal with the computation of cost of Cost formulas

inventories that are changed as expense
when the related revenue is recognized as
well as the cost of unsold inventories at the
end of the period that are recognized as
asset
this shall be used for inventories that are not Specific Identification
ordinarily interchangeable and those that
are segregated for specific projects.
under this formula, inventories that were FIFO

purchased or produced first are sold first,
and unsold inventories at the end of the
period are those most recently purchased
or produced.
under this formula, cost of sales and ending Weighted Average

inventory are determined based on the
weighted average cost of beginning
inventory and all inventories purchased or
produced during the period.
PAS 2
refers to "cost of assumptions" meaning they Cost formulas

pertain to the flow of costs and not
necessarily to the actual physical flow of
inventories
can be used regardless of of which item of inventory is physically sold

FIFO or Weighted average
first.
the estimated selling price in the ordinary Net Realizable Value

course of business less estimated costs of
completion and the estimated costs
necessary to make sale,.
different from fair value NRV
amount of write-down recognized as expense
write-downs of inventories are usually item by item basis

carried our on an
the best evidence of NRV for raw materials replacement cost
the carrying amount of an inventory that is expense

sold is charge as
PAS 2
raw materials inventory not written down bellow cost
reversals of inventory write-downs shall not exceed the amount of the original write down
write downs of inventory to their NRV are profit or loss

recognized in
may be calculated on a periodic basis or as Weighted average

each additional purchase is made
refers to the net amount that an entity NRV

expects to realize from the sale of inventory
in the ordinary course of business
Entity-specific value NRV
the market for the inventory would take Fair value

place between market participants at the
measurement date
PAS 7
operating, investing, financing three types of activities classified in cash flows
cash comprises cash on hand and demand deposits
short-term, highly liquid investments that can be readily converted to a

cash equivalents specific amount of cash and which are relatively insensitive to interest rate
changes
cash flows inflows and outflows of cash and cash equivalents
operating activities the principal revenue producing activities of the entity
PAS 7
the acquisition and disposal of long term assets and other investments not
investing activities
included in cash equivalents
activities that result in changes in the size and composition of the

financing activities
contributed equity and borrowings of the entity
True/False: Cash equivalents are held for short term commitments rather
True
than investment purposes.
True/False: Cash equivalents have a maturity date of three months or more

False
from the date of acquisition.
False True/False: All equity investments are excluded from cash equivalents.
True/False: Cash flows include movements between items that constitute

False
cash or cash equivalents.
True/False: Operating activities generally deal with current assets and

True
liabilities.
True/False: A sale of an item of plant that gives rise to a gain or loss

False
included in the profit or loss is part of operating activities.
PAS 7
True/False: Cash payments to acquire assets held for rental to others and
True subsequently held for sale are part of operating activities.
True/False: Cash flows arising from the purchase and sale of dealing or
False
trading securities are classified as investing activities.
True/False: Cash advances and loans made by financial institutions are

True
classified as operating activities.
True/False: Only expenditures that result in a recognized asset in the

True statement of financial position are eligible for classification as investing
activities.
False True/False: Investing activities generally deal with noncurrent liabilities.
True/False: Separate disclosure of financing activities is important because it

True is useful in predicting claims on future cash flows by providers of capital to
the entity.
the method whereby major classes of gross cash receipts and payments are
direct method
disclosed
the method whereby profit or loss is adjusted for effects of transactions of a

indirect method noncash nature, deferrals, accruals, and items of income or expense
associated with investing or financing cash flows
PAS 7
True/False: Entities are required to present cash flows using the direct
False
method.
True/False: Cash flows may be reported on a net basis when they reflect the
True activities of the customer and when turnover is quick, amounts are large,
and maturities are short.
True/False: Cash flows of a financial institution cannot be presented on a net

False basis when cash receipts and payments are for acceptance and repayment
of deposits with a fixed maturity date.
the process of applying to the foreign currency amount the exchange rate
translation
between the functional currency and the foreign currency
True/False: Cash flows of a foreign subsidiary shall be translated at the date

True
of cash flows.
True/False: Unrealised gains and losses arising from changes in foreign

False
currency exchange rates are part of cash flows.
True/False: Cash flows from interest and dividends paid and received shall
False
be presented on a net basis.
PAS 7
True/False: Interest paid and received and dividends received may be

classified as operating because they enter into determination of profit or
False loss. Alternatively, they may be classified as investing only because they are
costs of obtaining return on investments.
True/False: Dividends paid may be classified as investing because they are

False costs of obtaining financial resources. Alternatively, they may be classified
as operating to determine the ability of the entity to pay dividends.
True/False: Cash flows arising from taxes on income are always classified as
False
operating activities.
the aggregate cash flows arising from obtaining or losing control of

investing activities subsidiaries or other businesses shall be presented separately and classified
as __
cash flows arising from changes in ownership interests in a subsidiary that

financing activities
do not result in a loss of control shall be classified as __
True/False: The entity may or may not disclose the amount of significant
False cash and cash equivalent balances held that are not available for use by the
group, together with a commentary by management.
PAS 7
True/False: An entity is required to present a reconciliation of the amounts in

True its cash flows with the equivalent items reported in the financial position.
identify: operating, investing, financing
operating
cash receipts from sale of goods and rendering services
operating
cash receipts from royalties, fees, commissions
operating
cash payments to suppliers
operating
cash payments to and on behalf of employees
operating cash receipts and payments of insurance entities for premiums, claims,
annuities
operating
cash payments or refunds of income taxes unless specified as others
operating cash receipts and payments from contracts held for dealing or trading
purposes
PAS 7
investing cash payments to acquire PPE, intangibles, including capitalized

development costs and self constructed property
investing
cash receipts from sales of PPE and intangibles
investing cash receipts and payments to acquire equity or debt instruments of other
entities and interests in joint ventures
investing
cash advances and loans made to other parties
investing
cash receipts from repayment of advances and loans made to other parties
investing cash receipts and payments for future contracts, forward contracts, option
contracts, and swap contracts
financing
cash receipts from issuing shares or other equity instruments
PAS 7
financing cash payments to owners to acquire or redeem the entity's shares
financing cash receipts from issuing debentures, loans, notes, bonds, mortgages, and
other borrowings
financing
cash repayments of amounts borrowed
financing cash payments by a lessee for the reduction of the outstanding liability
relating to a lease
11/6/21, 12:36 PM PAS 8 & 10 Flashcards | Quizlet
PAS 8 & 10
The specific principles, bases, conventions, rules and practices applied by

accounting policies
an entity in preparing and presenting financial statements
Philippine Financial Reporting Standards are Standards and Interpretations adopted by the Financial Reporting
(PFRSs) Standards Council (FRSC)
When it is difficult to distinguish a change in accounting policy from a

change in an accounting estimate
change in accounting estimate, the change is treated as a
is required by a PFRS; results to a more An entity shall change an accounting policy only if the change:
relevant and reliable information
weighted average Change from FIFO to the ________ cost formula for inventories
PAS 8 & 10
https://quizlet.com/625385248/pas-8-10-flash-cards/ 1/6
fair value Change from the cost model to the ________ model
revaluation Change from cost model to the ________ model of measuring ppe
business Change in ________ model for classifying financial asset
Change in the method of recognizing _________ from long term construction

revenue
contracts.
policy Change to a new ________ resulting from the requirement of a new PFRS.
financial reporting framework Change in ________,such as from PFRS for SMEs to full PFRS
Transitional provision, retrospective and 3 orders of priority

propective application
If an entity changes an accounting policy, it shall refer first to any specific

transitional provision
provision of the PFRS that specifically deals with that accounting policy.
If there is no transitional provision, the entity shall account for the change
retrospectively
using this application.
PAS 8 & 10
If retrospective application is impracticable, the entity is allowed to account

prospectively
for the change using this application.
means adjusting the "opening balance of each affected component of

equity" for the earliest prior period presented and the other comparative
retrospective application
amounts disclosed for each prior period presented as if the new accounting
policy had always been applied.
a retrospective treatment is _________ if the prior period effects cannot be

impracticable determined or if it requires significant estimates and assumptions to havre
ben made.
voluntary change .
beginning the amount of adjustment is determined as of the ______ of the year change.
If comparative information is presented, the FS of the prior period

restated
presented shall be _______ to conform with the new accounting policy.
essential part of financial reporting and do not undermine the reliability of

estimates
financial reporting.
means that the change is applied to transactions, other events and

Prospective application
conditions from the date of change in accounting policy.
PAS 8 & 10
it is an adjustment of the carrying amount of an asset or a liability, or the

change in accounting estimate amount of the periodic consumption of an asset.it is a normal recurring
correct or adjustment of asset and liability.
normally results from a change in measurement basis (FIFO TO WEIGHTED

change in accounting policy
AVE)
normally results from changes on how the expected inflows and outflows of
change in accounting estimate
economic benefits are realized from assets or incurred on liabilities.
it is _________ under the prospective application if the beg. balance of retained

not restated
earnings and the previous FS.
missapplication of accounting policies, mathematical mistakes, oversights,

errors
misinterpretations of facts, and fraud.
material errors those that cause the FS to be misstated.
intentional errors errors are fraud. Fraud does not comply with PFRS.
error of commission is doing something wrong
error of omission not doing something that should be done
PAS 8 & 10
a type of error, in the current period period that were discovered either
current period errors
during the current period, but before the FS were authorized.
errors in one or more prior periods that were only discovered, corrected by
prior period errors
retrospestive restatement.
restating the comparative amounts for the prior periods presented in which
the error occurred or if the error occurred before the earliest prior period
retrospective restatement
presented, restating the opening balances of assets, liabilities and equity for
the earliest prior period presented
Those events both favourable and unfavourable which occur between the
Events after the reporting period end of the reporting period and the date on which the financial statements
are authorised for issue.
are events that provide evidence of conditions that existed at the end of the
Adjusting events after the reporting period
reporting period
Non-adjusting events after the reporting are events that are indicative of conditions that arose after the reporting
period period. (disclosed if material)
declared after the reporting period are not recognized as liability at the end
Dividends of reporting period because no present obligation exists at the end of
reporting period.
PAS 8 & 10
PAS 10 ________ the preparation of financial statements on a going concern

basis if management determines after the reporting period either that it
prohibits
intends to liquidate the entity or to cease trading, or that it has no realistic
alternative but to do so.
PAS 12
True/False: Deferred tax accounting is applicable to all entities, whether

True
public or nonpublic entities.
an entity whose equity and debt securities are traded in a stock exchange
public entity or over the counter market and are registered with SEC in preparation for
sale of the securities
the net income for the period before deducting income tax expense,
accounting income
appearing on the traditional income statement
the income for the period determined in accordance with the rules
established by the taxation authorities upon which income taxes are
taxable income payable or recoverable, appearing on the ITR in accordance with the
income tax law, excess of taxable revenue over tax deductible expense and
exemptions for the period as defined by the BIR
are items of revenue and expense which are included in either accounting
permanent differences
income or taxable income but will never be included in the other
PAS 12
True/False: Temporary differences pertain to nontaxable revenue and

False nondeductible expenses.
True/False: Permanent differences do not give rise to deferred tax asset and
True
liability because they have no future tax consequences.
True/False: When the entity is the beneficiary of a life insurance policy on an

officer or employee, the premium paid by the entity is not deductible as
True
expense for tax purposes but said premium is an expense for financial
reporting purposes.
are items of income and expenses which are included in both accounting
temporary differences
income and taxable income but at different time periods
the amount of income tax payable in future periods with respect to a

deferred tax liability
taxable temporary difference
the temporary difference that will result in future taxable amount in

taxable temporary difference
determining taxable income of future periods
True/False: A deferred tax liability arises when taxable income is higher

False
accounting income because of future taxable amount.
PAS 12
True/False: Temporary differences that result in accounting income higher

than taxable income include the following:
a) revenues and gains are deductible for tax purposes in the current period
False but deductible for accounting purposes in future periods
b) expenses and losses are included in accounting income of the current

period but are taxable in future periods
True/False: The total income tax expense is based on accounting income

True and the current tax expense or income tax payable is based on taxable
income.
True/False: A deferred tax asset shall be recognized for all deductible

temporary differences and operating loss carryforward when it is probable
True
that taxable income will be available against which the deferred tax asset
can be used.
is an excess of tax deductions over gross income in a year that may be

operating loss carryforward
carried forward to reduce taxable income in a future year
True/False: A deferred tax asset arises when accounting income is higher

False
than taxable income because of the future deductible amount.
PAS 12
True/False: Temporary differences that result to taxable income higher than

accounting income include the following:
a) revenues and gains are included in taxable income of the current period
but are included in accounting income of future periods deductible for tax
True
purposes in the current period but deductible for accounting purposes in
future periods
b) expenses and losses are deducted from accounting income in the

current period but are deductible for tax purposes in future periods
current tax liability the current tax expense or the amount of income tax actually payable
True/False: Under our income tax law, income tax for corporations is
True
payable every quarter.
If the amount of tax already paid for the current period exceeds the amount
current tax asset
actually payable for the period, the excess is recognized as a _
True/False: A current tax asset is a prepaid income tax and shall be classified
True
as current asset.
True/False: A current tax liability or current tax asset shall be measured

True using the tax rate that has been enacted and effective at the end of the
reporting period.
True/False: Deferred tax liability is presented as current liability and

False
deferred tax asset is presented as noncurrent asset.
PAS 12
False True/False: A deferred tax asset or deferred tax liability shall be discounted.
11/6/21, 12:41 PM PAS 12 INCOME TAXES Flashcards | Quizlet
PAS 12 INCOME TAXES

Accounting profit is profit or loss for a period before deducting tax expense
is profit (loss) for a period, determine in accordance with the rules

Taxable profit (tax loss) established by the taxation authorities, upon which income taxes are
payable (recoverable).
the amount of current and deferred tax
income tax expense

in profit or loss for the period computed using PFRS.
income tax payable on taxable profit in the income tax return (ITR) for
current tax expense
the current period computed using the Philippine tax laws.
is the sum
Deferred tax expense (income or benefit) of the net changes in deferred tax assets and deferred tax liabilities
during the period.
PAS 12 INCOME TAXES

https://quizlet.com/625468548/pas-12-income-taxes-flash-cards/ 1/3
income tax recoverable in future periods on deductible temporary

Deferred tax asset
differences.
If the increase in deferred tax liability exceeds the increase in deferred

deferred tax expense
tax asset
If the increase in deferred tax asset exceeds the increase in deferred tax
deferred tax income
liability
Arise when income and expenses enter in the computation of either

Permanent differences
accounting profit or taxable profit but not both
Do not have future tax consequences, do not give rise to deferred tax
Permanent differences
assets and liabilities. Excluded from income tax return
arise when income and expense are recognize for financial reporting in
Temporary differences
one period but are recognized for taxation purposes in another period.
- arise, for example, when financial income is greater than taxable

income or the carrying amount of an asset is greater than its tax base.
Taxable temporary differences
Those that result to future taxable amounts when the carrying amount
of the asset or liability is recovered or settled.
PAS 12 INCOME TAXES

- arise in case of the opposites of the foregoing. Those that result to

Deductible temporary differences future deductible amount when the carrying amount of the asset or
liability is recovered or settled.
financial income > taxable income
Deferred tax liabilities carrying amount of an asset > its tax base carrying amount of a liability <
its tax base
financial income < taxable income carrying amount of an asset < its tax
Deferred tax assets
base carrying amount of a liability > its tax base
PAS 16
True/False: PPE are tangible assets held for use in production or supply, for
False rental, for administrative purposes, and are expected to be used for one
period.
An item of PPE shall be recognized as asset when it is _ that future

probable economic benefits will flow to the entity and its cost can be measured
reliably.
cost An item of PPE that qualifies for recognition as asset shall be measured at _.
the amount of cash paid and the fair value of the other consideration given
cost
to acquire an asset
True/False: Cost of PPE includes purchase price, import duties,

True
nonrefundable purchase taxes, after deducting trade discounts and rebates.
True/False: Cost of PPE includes initial estimate of cost of dismantling and

False restoring the site on which it is located for which an entity has no present
PAS 16 obligation.
True/False: Directly attributable costs do not include cost of relocation or

True
reorganizing operations.
cost model, revaluation model After initial recognition, PPE shall be measured using either the _ or the _.
True/False: The cost of PPE is the cash price equivalent at the recognition
True
date.
True/False: When PPE is acquired on account subject to cash discount, the

True
cost is invoice price less the discount, regardless if taken or not.
True/False: Cash discounts are generally considered as income instead of

False
reduction of cost.
When PPE is offered at a cash price and at an installment price and is

cash price
purchased at the installment price, it shall be recorded at _.
True/False: When PPE is acquired through share capital issuance, the asset is
recorded at the ff. priority:
False a) fair value of share capital
b) fair value of asset received
c) par value or stated value of share capital
PAS 16
True/False: When PPE is acquired through bonds payable issuance, the

asset is recorded at the ff. priority:
a) fair value of bonds payable
True
b) fair value of asset received
c) face amount of bonds payable
When PPE is acquired in exchange for a nonmonetary asset, cost is

cash payment
measured at fair value plus any __.
True/False: If the exchange has commercial substance, it is recognized at

False
carrying amount.
a notion when the event or transaction causes the cash flows to change or
commercial substance
differ significantly
True/False: The cost of a self-constructed PPE includes direct materials,

True direct labor, indirect cost and incremental overhead specifically identifiable
or traceable to the construction.
True/False: Gain or loss from derecognition of PPE shall not be included in

False
profit or loss.
True/False: Gains shall not be included in revenue but treated as other

True
income.
PAS 16
zero, residual value PPE is fully depreciated when the carrying amount is equal to _ or _.
True/False: The cost of fully depreciated asset remaining in service shall not
True
be removed from the accounts.
the systematic allocation of the depreciable amount of an asset over the

depreciation
useful life
True/False: Depreciation is not so much a matter of cost allocation, it is a

False
matter of valuation.
True/False: Depreciation is an expense, part of cost of goods sold or an

True
operating expense.
True/False: Depreciation begins when asset is available for use and ceases
True
when it is derecognized.
False True/False: Depreciation ceases when asset becomes idle temporarily.
depreciable amount the cost of an asset less the residual value
True True/False: The remainder of an item shall be depreciated separately.
the estimated net amount currently obtainable if the asset is at the end of
residual value
the useful life
PAS 16
True/False: If the residual value is equal to or greater than the carrying

True
amount, the depreciation is zero.
True/False: If fair value exceeds the carrying amount of the asset,

False
depreciation is not recognized.
the period over which an asset is expected to be available for use by the
useful life entity or the number of production or similar units expected to be obtained
from the asset
reflects the pattern in which the future economic benefits from the asset are
depreciation method
expected to be consumed by the entity
the method where the annual depreciation charge is calculated by

straight line method allocating the depreciable amount equally over the number of years of
useful life
the method that assumes that depreciation is more of a function of use

production method
rather than passage of time
these methods provide higher depreciation in the earlier years and lower in
diminishing balance or accelerated methods
later years
PAS 19
all forms of consideration given by an entity in exchange for service

Employee Benefits
rendered by employees or for the termination of employment
expense when employees have rendered employee benefits are recognized as

service
employee benefits earned by employees but not yet paid are

liabilities
recognized as
-contractual agreements
employee benefits may arise from: -legislation
-informal practices that create constructive obligations
PAS 19
those that are due to be settled within 12 months after the end of the
Short-term employee benefits
period in which the employees have rendered the related services.
-salaries, wages, SSS, Philhealth, pag-ibig
-paid vacation leaves and sick leaves
examples of short-term employee benefits

-profit-sharing and bonuses
- non-monetary
actuarial valuations are not necessary to measure the obligation or the

short-term employee benefits
cost.
expense and as and accrued liability, they employee benefits are recognized as
are unpaid, after the employee has rendered
service and becomes entitles to payment.
Short-term paid absences -vacation, holiday, maternity, paternity, and sick leaves
those that can be carried forward and used in future periods if not used
accumulating
in the current period.
vesting unused entitlement are paid in cash when employee leaves the entityy
non-vesting unused entitlement are not monetized
PAS 19
those that expire if not used in the current period and are not paid in
Non-accumulating
cash when the employee leaves the entity.
all unused entitlements are accrued and measured at the expected

Accumulating and vesting amount to be paid when those entitlements are used or monetized in a
future period
only the unused entitlements that are expected to be utilized are

Accumulating and Non-vesting accrued, taking into account the possibility that employees may leave
before they utilize those entitlements
unused entitlements are not accrued but recognized only when the
Non-accumulating
absences occur
are additional incentives given to eligible employees for a variety of

profit-sharing and bonuses reasons-the most obvious is to motivate the employees to be more
productive.
profit sharing and bonuses are recognized -the entity has a present obligation to pay for them
PAS
when: 19 - the cost can be measured reliably
are employee benefits(other than termination benefits and short-term

employee benefits) that are payable after the completion of
Post-employment benefits
employment
are provided to employees through post-employment benefits plans,

Post-employment benefits which are referred to in various names including "retirement plans" and
'pension schemes'
-can be a formal arrangement or it can also be informal
Post-employment benefits -can be contributory or non contributory

- can be funded or unfunded
both employee and employer contribute to the retirement benefits fund

contributory
of the employee
only the employer contributes to the retirement benefits fund of the

Non-contributory
employee
the retirement fund is isolated from the employer's control and is

funded transferred to a trustee(investment company) who undertakes to
manage the fund and pay directly the retiring employees
PAS 19
the employer manages any established fund and pays directly the
unfunded
retiring employees
the employer commits to make fixed contributions to a fund that will be

defined contribution plans
used to pay for the retirement benefits of the employees
the amounts of post-employment benefits to be received by

defined contribution plans employees depends on the amount of contributions to the fund
together with the investment income therefrom.
the risk that retirement benefits may be insufficient rest with the
defined contribution plans
employee
straightforward the accounting for defined contribution plans
expense and a liability (if unpaid) when Defined-Contribution Plan is recognizes the contribution as
employees have rendered service during a
period.
the amount of contribution is measure at an undiscounted amount if it is

Defined-Contribution Plans
due within 12 months; if due beyond 12 months it is discounted.
the employer commits to pay a definite amount of retirement benefits,

defined benefit plans
which can be determined using a plan formula.
PAS 19
defined benefit plans the account of promised benefits is independent of any fund balance
defined benefit plans the risk of fund insufficiency rest with the employer.
the amount of benefits that an employee will receive is dependent on

Defined-Contribution Plans
the fund balance.
actuarial assumptions are necessary to measure the obligation on a

defined-benefit plans
discounted basis. this result to actuarial gains or losses
-determine the deficit or surplus
defined-benefit plan steps: - determine the net defined benefit liability (asset)
-determine the defined benefit cost
Present value of define benefit obligation or represents the entity's obligation for the accumulated retirement
PV DBO benefits earned by employees to date.
determine using an actuarial valuation method called projected unit

PV of DBO
credit method
Projected unit credit method an actuarial valuation method
PAS 19
represents the balance of any fund set aside for the payment of the
Fair value of plan assets FVPA
retirement benefits
deficit if FVPA is less than PV DBO, the difference is
surplus if FVPA is greater than PV DBO, the difference is
Net defined benefit liability if there is deficit, the deficit is
surplus and asset ceiling if there is surplus, the net defined benefit asset is the lower of
the increase in the PV DBO resulting from employee service in the

Current service cost
current period
The change in the present value of the defined benefit obligation for
Past service cost employee service in prior periods, resulting from a plan amendment or
a curtailment
arises when employer's obligation to provide benefits is eliminated

gain or loss on settlement
other than from payment of benefits according to the terms of the plan
PAS 19
net interest on the net defined benefit is the change in the net defined benefit liability (asset) during the period
liability (asset) that arises from the passage of time.
Actuarial gains and losses changes in the PV DBO resulting from changes in actuarial assumptions
estimates of variables used in determining the ultimate cost of providing

Actuarial Assumptions
post-employment benefits.
Actuarial Assumptions this includes: demographic and financial assumptions
the discount rate used in measuring defined benefit obligations and

high quality corporate bonds
costs is based on
represents the investment income earned by the plan assets during the
Return on Plan Assets
year after deducting the costs of managing the fund and taxes
various unrelated employers contribute to a common fund that is

Multi-employer plans managed by a trustee to provide post-employment benefits to the
employees of the participating employers
contribution and benefit levels are determined without regard to the

Multi-employer plans
identities of the employees.
PAS 19
is one that is established by law and operated by the government. it is

mandatory for all entities within its scope and is not subject to control
state plans
or influence by the entity.
GSIS covers the government employees and SSS covers those in the
examples of state plans
private sector
an employer may pay insurance premiums to fund a post-employment

Insured benefits
benefit plan
if the employer retains the obligation to either pay directly the benefits
it is defined benefit plans to the employee or make good any deficiency if the insurer fails to pay
in full the benefits.
employee benefits (other than post-employment benefits and

termination benefits) that are due to be settled beyond 12 months after
Other long-term employee benefits
the end of the period in which the employees have rendered the
related service.
are accounted similar to defined benefit plans except that all the
Other long-term employee benefits
components of the defined benefit cost is recognized in profit or loss
PAS 19
those provided as a result of either the entity's decision to terminate the
Termination benefits employee before normal retirement date or the employee's decision to
accept the employer's offer of benefits in exchange for termination
arises from the employer's act of terminating an employee rather than

the obligation to pay termination benefits
from employee service.
benefits resulting from termination at the employee's request without

Post-employment benefits
the employer's offer are not termination benefits but___
liability and expense at the earlier dates: termination benefits are recognized as a
when the entity can no longer withdraw the
offer of those benefits and when the entity
recognizes restructuring costs under PAS 37
that involve payment of termination benefits
encourages, but does not require, involving qualified actuary in

PAS 19
measuring defined benefit obligations.
PAS 19 ...
Defined benefit plans requires actuarial valuation using the projected unit credit method
PAS 19
-long-term compensated absences
- jubilee or other long-term services
- long-term disability benefits
- profit-sharing and bonuses payable beyond 12 months after the end of

examples of other long-term employee
benefits the reporting period in which employees have rendered the related
services
- deferred compensation payable beyond 12 months after the end of

the period of which it is earned.
PAS 20
Accounting for Government Grants and Disclosure of Government

PAS 20
Assistance
accounting and disclosure of government grants and the disclosure of

PAS 20 prescribes:
other forms of government assistance
a. Government grants under hyperinflationary economies
b. Tax Benefits
PAS 20 DOES NOT apply to:

c. Government participation in the ownership of the entity
d. Government grants covered by PAS 41 AGRICULTURE
GOVERNMENT GRANTS also so called subsidies, subventions or premiums
assistance received from the government in the form of transfers of

GOVERNMENT GRANTS
resources in exchange for compliance with certain conditions
PAS 20
a. Receipt of cash, land, and non-cash assets
b. Financial aid in case of loss from a calamity
Examples of Government Grants:

c. Forgiveness of an existing loan from the government
d. Government loan with below-market rate of interest
a. Tax benefits
b. Free Technical or marketing advice
Government assistance are NOT

c. Provision of guarantees
Government grants:
d. Government procurement policy that is responsible for a portion of
the entity's sales
a. Public improvements that benefit the entire community
NOT Government Assistance

b. Imposition of trading constraints on competitors
1. Grants Related to Assets
TYPES OF GOVERNMENT GRANTS

2. Grants Related to Income
grants whose primary condition is that the recipient entity should

1. Grants Related to Assets
acquire or construct a long-term assets
2. Grants Related to Income grants other than those related to assets
1. Monetary Grants
Measurement
2. Non-monetary Grants
PAS 20
- amount of cash received
Monetary Grants
- fair value of amount receivable
- fair value of the non-monetary asset received
Non-monetary Grants
- alternatively, at nominal amount
the price that would be received to sell an asset or paid to transfer a

FAIR VALUE liability in an orderly transaction between market participants at the
measurement date
1. Forgivable loan
Government Grants-Loan
2. Loan at below-market rate of interest or zero-interest
Forgivable Loan measured at the carrying amount of the loan forgiven
Loan at Below-Market Rate of Interest or measured as the difference between the initial carrying amount of the
Zero-Interest loan (PFRS 9) and proceeds received
1. Capital Approach
Approaches for Government Grants

2. Income Approach
Capital Approach grant is recognized outside profit or loss in equity
PAS 20
Income Approach grant is recognized in profit or loss over one or more periods
Capital approach is used only when donations are received from

PAS 20 uses INCOME APPROACH
shareholders
Government grants are "recognized in PROFIT or LOSS on a systematic

Accounting for Government Grants basis over the periods in which the entity recognizes as expenses the
related costs for which the grants are intended to compensate"
Accounting for Government Grants Government grants uses MATCHING CONCEPT
recognized in profit or loss over the periods and in the proportions in

Grants Related to Depreciable Assets
which depreciation expense on those assets is recongnized
recognized in profit or loss when the costs of fulfilling the attached

Grants Related to Non-depreciable Assets
condition are incurred
Grants Received as Financial Aid for recognized immediately in PROFIT or LOSS when the grant becomes
Expenses or Loss Already Incurred receivable (because the related cost have already been expensed)
Recognizing Government Grants in Profit or is PROHIBITED. As it violates the Accrual Basis of Accounting
Loss in Receipts Basis
PAS 20
1. Gross Presentation
Grants Related to Assets 2. Net Presentation
Gross Presentation (Statement of Financial presented as a deferred income(liability)

Position)
Net Presentation (Statement of Financial grant deducted from the carrying amount of the related asset
Position)
Gross Presentation (Statement of income from the grant is reported separately or included in 'Other
Comprehensive Income "Profit or Loss" income'
Net Presentation Statement of income from the grant is deducted from the depreciation charge
Comprehensive Income "Profit or Loss"
1. cash flows the receipt of the grant
In the Statement of Cash Flows these two 2. purchase of the related asset
are presented separately:
(even the entity uses the net presentation)
Grants Related to Income may presented 1. Gross Presentation
by: 2. Net Presentation
PAS 20
Gross Presentation (Statement of income from the grant is reported separately or included in 'Other
Comprehensive Income "Profit or Loss" income'
Net Presentation Statement of income from the grant is deducted from the depreciation charge
Comprehensive Income "Profit or Loss"
Deducted from related deferred income balance, if any. Any excess

Repayment of Grant Related to Income
recognized immediately as in profit or loss
Treated as a reduction in the deferred income balance or an increase in

Repayment of Grant Related to Asset
the carrying amount of the asset
a. Accounting policy and method of presentation
b. Nature and extent of government grants and other forms of

Disclosure (Government Grant) government assistance from which the entity has directly benefited
c. Unfulfilled conditions and contingencies attached to the government

grants
Grants Related to Assets may be presented 1. Gross Presentation
by: 2. Net Presentation
11/6/21, 12:46 PM PAS 20, 21, & 23 Flashcards | Quizlet
PAS 20, 21, & 23

prescribes the accounting and disclosure of government grants and the

PAS 20
disclosure of other forms of government assistance.
-accounting for government grants under hyperinflationary economies
-tax benefits such as income tax holidays, investment tax credits,

PAS 20 does not apply to accelerated depreciation allowances and reduced income tax rates
-government participation in the ownership of the entity
-government grants covered by pas 41 agriculture
sometimes called subsidies, subventions, or premiums,
government grants - are assistance received from the government in the form of transfers
of resources in exchange for compliance with certain conditions,
exclude government assistance whose value cannot be reasonably

government grants measured or cannot be distinguished from the entity's normal trading
transactions.
PAS 20, 21, & 23

https://quizlet.com/626764221/pas-20-21-23-flash-cards/ 1/11
-tax benefits
-free technical or marketing advice
forms of government assistance but are not -provision of guarantees
government grants: -government procurement policy that is responsible for a portion of the
entity's sales
are not government assistance and neither a. public improvements that benefit the entire community
disclosed nor recognized: b. imposition of trading constraints on competitors
government grants are recognized if there is - the attached conditions will be complied with and the grants will be
reasonable assurance that received
is not a conclusive evidence that the attached condition has been or will
the mere receipt of a grant
be satisfied.
grants whose primary conditions is that the recipient entity should

Grants related to assets
acquire or construct long-term assets.
Grants related to income grants other than those related to assets
monetary grants amount of cash received or fair value of amount receivable
PAS 20, 21, & 23

Non-monetary grants (land and other fair value of the non-monetary asset received or alternatively, at
resources) nominal amount
The price that would be received to sell an asset or paid to transfer a

fair value liability in an orderly transaction between market participants at the
measurement date.
a. forgivable loan- a loan that the lender (government) waives

govt grants in the form of loans repayment subject to certain conditions
b. loan at below-market rate of interest or zero-interest
forgivable loan is measured at the carrying amount of the loan forgiven.
loan at below-market rate of interest or is measured at the difference between the initial carrying amount of the
zero-interest loan determined in accordance with PFRS 9 and the proceeds received.
grant is recognized outside profit or loss or in equity.
Capital approach
this is only used when donations are received from shareholders
Income Approach grant is recognized in profit or loss over one or more periods.
Income Approach PAS 20 uses this approach
PAS 20, 21, & 23

are recognized in profit or loss on a systematic basis over the periods in

government grants which the entity recognizes as expenses the related costs for which the
grants are intended to compensate
the accounting of government grant uses this concept, such that the
matching concept related expenses is not yet recognized, the income from govt grant is
also not yet recognized.
are recognized in profit or loss over the periods and in the proportions
grants related to depreciable assets
in which depreciation expense on those asset is recognized
are recognized in profit or loss when the costs of fulfilling the attached
grants related to non-depreciable assets
condition are incurred.
grants received as financial aid for expenses are recognized immediately in profit or loss when the grant becomes
or losses already incurred receivable (because the related costs have already been expensed.
gross presentation (financial position) the grant is presented as a deferred income (liability)
net presentation (financial position) the grant is deducted from the carrying amount of the related asset
gross presentation (comprehensive income- the income from the grant is reported separately or included in 'other
profit/loss) income'
PAS 20, 21, & 23

net presentation (comprehensive income- the income from the grant is deducted from the depreciation charge.
profit/loss)
in the statement of cash flows, the cash flows from the receipt of the
presented separately
grant and the purchases of the related asset are
change in accounting estimate and a government grant that becomes repayable (e.g due to failure to
accounted for prospectively satisfy the attached condition) is treated as
is deducted from the related deferred income balance and any excess
repayment of grant related to income
is recognized immediately as in profit or loss
is treated as a reduction in the deferred income balance or an increase

repayment of a grant related to asset
in the carrying amount of the asset.
prescribes the accounting for foreign activities and the translation of

PAS 21
financial statements into a presentation currency.
these transactions need to be translated to philippine pesos before they

foreign currency transactions
can be recorded in the books of accounts
the overseas branch will normally maintain its accounting records and
foreign operations
prepare its financial statements in a foreign currency.
PAS 20, 21, & 23

which exchange rate(s) to use and how to principle issues in the accounting for foreign activities are determining
report the effects of changes in exchange
rates in the financial statements
currency of the primary economic environment in which the entity

Functional Currency
operates
is the currency in which the entity's cash inflows and outflows are
Functional Currency normally denominated into and is not necessarily the currency of the
country where the entity is based.
-the currency that mainly influences the entity consider these factors when determining its functional currency:
entity's sale prices and costs of goods or
services
- the currency in which the cash flows from

financing activities and operating activities
are usually generated and retained.
is not changed unless there is a change in underlying transactions,

Functional currency
events and conditions.
is accounted for by translating the financial statements into the new

a change in functional currency
functional currency prospectively from the date of change.
PAS 20, 21, & 23

Foreign currencies all currencies other than the entity's functional currency are considered
is a transaction that is denominated or requires settlement in a foreign

foreign currency transaction
currency.
is initially recognized by translating the foreign currency amount into

foreign currency transaction the functional currency using the spot exchange rate at the date of the
transaction.
the exchange rate for immediate delivery or the current exchange rate
spot exchange rate
on a given date.
the date on which the transaction first qualifies for recognition in

date of a transaction
accordance with PFRS
closing rate the spot exchange rate at the reporting date
monetary items are translated using closing rate
non-monetary items measured at historical are translated using exchange rate at the date of transaction
cost
are translated using exchange rate at the date when the fair value was
nonmonetary items measured at fair value
determined
PAS 20, 21, & 23
are currencies held and assets and liabilities to be received or paid in a

Monetary items fixed or determinable amount of money
are those which do not give rise to the receipt or payment of a fixed or
Non-monetary items
determinable amount of money.
The difference resulting from translating a given number of units of one

Exchange difference
currency into another currency at different exchange rates.
exchange difference arising from monetary items are recognized in _____

profit or loss
in the period in which they arise
if the gain or loss is recognized in OCI, the exchange component of the

Non-monetary items
gain or loss is also recognized OCI. and conversely in profit or loss.
OCI all resulting exchange differences are recognized in
are translated using closing rate at the date of the statement of financial
asset and liabilities
position
income and expenses are translated using exchange rates at the dates of the transactions
is a subsidiary, associate, joint venture or branch that is based in a

Foreign operation
PAS 20, 21, & 23 foreign country and is using a foreign currency.
the cumulative amount of exchange differences recognized in OCI and

reclassification adjustment
accumulated in equity is reclassified to profit or loss as
Borrowing costs that are directly attributable to the acquisition,

PAS 23 construction, or production of a qualifying asset are capitalized as cost
of that asset
expensed when incurred other borrowing cost are
borrowing costs (interest or finance costs) are costs incurred in relation to the borrowing of funds.
actual or imputed cost of equity or capital borrowing costs do not include
an asset that necessarily takes a substantial period of time to get ready

Qualifying Assets
for its intended use or sale
-inventories that take a long period of time to produce
- items of PPE(building) that take a long period of time to construct or

examples of qualifying assets:
to get ready for their intended use
- intangible assets that take a long period of time to develop
PAS 20, 21, & 23

-financial assets
- inventories that are routinely produced over a short period of time or

are not qualifying assets are mass-produced on a repetitive basis
- assets that are ready for their intended use or sale when acquired
- assets measured at fair value
are capitalized if they are avoidable, meaning they would not have been
borrowing costs
incurred if the expenditure on the qualifying asset had not been made.
expenditures for the asset are being capitalization of borrowing cost starts when
incurred, borrowing costs are being
incurred, and activities necessary to prepare
the asset for its intended use or sale are
being undertaken.
extended periods in which active capitalization is suspended during__

development is interrupted. Borrowing cost
during these periods are expensed
if substantial technical and administrative capitalization is not suspended

work is being performed or a temporary
delay is a necessary part of the
development process.
PAS 20, 21, & 23

the qualifying asset is substantially capitalization of borrowing cost ceases when

complete.
refers to funds borrowed specifically for the purpose of obtaining a

specific borrowing
qualifying asset.
are those obtained for more than one purpose; (the acquisition of a
general borrowing
qualifying asset and some other purposes)
LOWER of the amount computed using the the borrowing cost to be capitalized is the
formula of general borrowing and the actual
borrowing cost
-receipt of cash, land, or other non-cash assets from the government

subject to compliance with certain conditions
examples of government grants - receipt of financial aid and in case of loss from a calamity
-forgiveness of an existing loan from the government
-benefit of a government loan with below-market interest
PAS 24
True/False: Parties are considered to be related if one party has:
a) the ability to control the other
True
b) the ability to exercise significant influence over the other
c) joint control over the reporting entity
the power over the investee or the power to govern the financial and
control
operating policies of an entity so as to obtain benefits
True/False: Control is ownership directly or indirectly through subsidiaries of

False
half of the voting power of an entity.
the power to participate in the financial and operating policy decision of an

significant influence
entity, but not control of those policies
20 Significant influence may be gained by share ownership of _% or more.
True/False: Significant influence can be evidenced by interchange of

True
managerial personnel.
PAS 24
joint control the contractually agreed sharing of control over an economic activity
affiliates meaning the parent, the subsidiary, and fellow subsidiaries
associates meaning the entities over which one party exercises significant influence
joint venture includes the subsidiary or subsidiaries of the joint venture
persons having authority or responsibility for planning, directing, and

key management personnel controlling the activities of the entity, directly or indirectly including any
executive director or nonexecutive director
those family members who may be expected to influence or be influenced

close family members of an individual
by that individual in their dealings with the entity
they own directly or indirectly an interest in the voting power that gives
individuals
them significant influence
True/False: A related party transaction is a transfer of resources or

False
obligations between related parties, when price is charged.
True/False: PAS 24 requires disclosure of related party relationships where

True control exists irrespective of whether there have been transactions between
related parties.
PAS 24
True/False: An entity shall disclose key management personnel

False compensation in total but not for termination benefits.
True/False: PAS 24 requires disclosure of related party transactions and

True outstanding balances in the separate financial statements of a parent,
subsidiary, associate or venturer.
True/False: Intragroup related party transactions and outstanding balances

False are included in the preparation of consolidated financial statements of the
group.
True True/False: Two entities having a common director are unrelated parties.
True/False: Providers of finance, trade unions, public utilities and

False government agencies are related parties in their normal dealings with an
entity.
True/False: Customers, supplier, franchisor transacting with an entity for a

False significant volume by virtue of the resulting economic dependence are
related parties.
True/False: Two venturers sharing a joint control over a joint venture are
True
unrelated parties.
PAS 26
PAS 26 Accounting and Reporting by Retirement Benefit Plans
- also called pension schemes, superannuation schemes or retirement

benefit schemes
- views a retirement benefit plan as a reporting entity separate from the

employers of the participants in the plan
PAS 26 - applies to all retirement benefit plan whether formal or informal,

contributory or non-contributory, funded or unfunded and defined
contribution plan or defined benefit plan
- DOES NOT apply to government social security type arrangements and

employee benefits other than retirement benefits
transfer of assets to an entity (the fund) separate from the employer's entity
Funding
to meet future obligations for the payment of retirement benefits
PAS 26
Under a defined contribution plan, the employer's obligation is usually

Defined Contribution Plan discharged by making the agreed contributions
a. Statement of Net Assets Available for Benefits
Financial Statements of a Defined Contribution

b. Statement of Changes in Net Assets Available for Benefits
Plan
c. Accompanying notes to the financial statements
- the assets of a plan less liabilities other than the actuarial present value of
Net Assets Available for Benefits
promised retirement benefits
Under a defined benefit plan, the benfits to be received by employees are

Defined Benefit Plan
definite amounts which can be determine by reference to the plan formula
a. Statement of Net Assets Available for Benefits
b. Acturial present value of promised retirement benefits, distinguishing

Financial Statements of Defined Benefit Plan
between vested benefits and non-vested benefits
c. Resulting excess or deficit
benefits, the rights to which, under the conditions of a retirement benefits

Vested Benefits
plan, are not confitional on continued employment
Actuarial Present Value of Promised Retirement the present value of the expected payments by a retirement benefits plan to
Benefits existing and past employees, attributable to the service already rendered
PAS 28
associate an entity over which the investor has significant influence
True/False: A substantial or majority ownership by another investor does not

true
necessarily preclude an investor from having significant influence.
equity The investment in associate is measured using the _ method of accounting.
The equity method is based on the _ relationship between the investor and
economic
the investee.
False True/False: The investor and investee are viewed as separate units.
cost The investment is initially recorded at _.
True/False: The carrying amount is decreased by the investor's share of the

False profit of the investee and increased by the investor's share of the loss of the
investee.
PAS 28
True/False: The investor's share of the profit or loss of the investee is

True
recognized as investment income.
True/False: Dividends received from an equity investee reduce the carrying

True
amount of the investment.
True/False: If the investment is in ordinary shares, the equity method is not

False appropriate regardless of the percentage because the ordinary share is a
nonvoting equity.
True/False: The investment in associate accounted for using the equity

False
method shall be reported as a current asset.
True/False: Under the equity method, cash dividend is not an income but a
True
reduction of investment.
True/False: If the investor pays less than the carrying amount of the net
assets acquired, the difference is commonly known as "excess of cost over
False carrying amount" and may be attributed to the ff.:
a) undervaluation of investee's assets
b) goodwill
True/False: If the assets of the investee are fairly valued, the excess of cost
True
over carrying amount is attributable to goodwill.
PAS 28
True/False: If the excess is attributable undervaluation of depreciable asset,

True it is amortized over the remaining life of the depreciable asset.
True/False: If the excess is attributable to undervaluation of land, it is

False
amortized over the remaining life of the land.
True/False: If the excess is attributable to inventory, the amount is expensed

True
when the inventory is already sold.
True/False: If the excess is attributable to goodwill, it is included in the

True
carrying amount of the investment and not amortized.
True/False: The entire investment in associate including the goodwill is

True
tested for impairment at the end of each reporting period.
True/False: Any excess of the investor's share of the net fair value of the
associate's identifiable assets and liabilities over the cost of the investment is
True
included as income in the determination of the investor's share of the
associate's profit or loss.
True/False: If there is an indication that an investment in associate may be

False impaired, an impairment loss shall be recognized whenever the recoverable
amount exceeds the carrying amount of the investment.
PAS 28
is measured as the higher between fair value less cost of disposal and value
recoverable amount in use
True/False: Impairment loss recognized is applied to the investment as a

True
whole and recoverable amount is assessed for each individual associate.
True/False: When an associate has outstanding cumulative preference

False shares, the investor shall compute its share of earnings or losses after
deducting the preference dividends, when dividends are declared.
True/False: When an associate has outstanding noncumulative preference

shares, the investor shall compute its share of earnings or losses after
False
deducting the preference dividends, whether or not such dividends are
declared.
True/False: When an investor ceases to have significant influence, the

investment shall be accounted as follows:
a) Financial asset at FVPL
True
b) Financial asset at FVOCI
c) nonmarkeble investment at cost or investment in unquoted equity

instrument
True/False: When an associate is operating under severe long-term

False
restrictions, an investor shall cease to apply the equity method.
PAS 28
When significant influence is lost, the investor shall measure any retained
fair value investment in associate at __ on initial recognition as financial asset.
True/False: The difference between the carrying amount and fair value of
True
the retained investment shall be included in profit or loss.
True/False: The difference between the net proceeds from disposal and the
False
carrying amount is not recognized as gain or loss on disposal of investment.
True/False: An investment in associate shall not be accounted using the

True equity method if the investor is a parent that is exempt from preparing
consolidated financial statements.

False equity method if the investor's debt and equity instruments are traded in a
public market or over the counter market.

equity method if the ultimate or any immediate parent of the investor
True
produces consolidated financial statements available for public use that
comply with PFRS.
PAS 29
- under the _____, the purchasing power of money is assumed to be

stable monetary assumption stable
- therefore, inflation is ignored
- establish an absolute rate at which PAS 29 does not...

hyperinflation is deemed to arise
- it is a matter of judgement
indicators of hyperinflation read list of indicators of hyperinflation
- the exception to the stable monetary assumption
hyperinflation
- occurs when inflation is very high
PAS 29
general price level changes and the purchasing power of money have
inverse relationship
an...
if the general price level increases, this means that the purchasing
inflation
power of money has decreased
if the general price level decreases, this means that the purchasing
deflation
power of money has increased
the financial statements of an entity whose functional currency is the

measuring unit current at the end of the
currency of a hyperinflationary economy shall be stated in terms of
reporting period
the...
the comparative information for the previous measuring unit current at the end of the reporting period
period shall also be stated in terms of the...
presentation of information as a supplement to unrestated financial

not permitted
statements is...
discouraged separate presentation of the financial statements before restatement is...
only non-monetary items, statement of financial position amounts not

are restated when using the constant peso
already expressed in terms of the measuring unit current at the end of
accounting
the reporting period...
PAS 29
they are already expressed in terms of the monetary items are not restated because...
monetary unit current at the end of the
reporting period
- are money held and items to be received or paid in fixed or

determinable amount of money without reference to future prices of
monetary items
specific goods or services
- include monetary assets and monetary liabilities
examples of monetary liabilities read list of examples of monetary liabilities
examples of nonmonetary assets read list of examples of nonmonetary assets
examples of nonmonetary liabilities read list of nonmonetary liabilities
PAS 29
- non-monetary items measured at NRV of the following non-monetary items need not be restated
fair value as at the end of reporting period
- non-monetary items measured at revalued

amounts as at the end of the reporting
period
*if the NRV, fair value or revalued amount is

determined at a date other than the end of
reporting period, the nonmonetary item is
nevertheless restated
all items in the statement or profit or loss and other comprehensive

restated
income are...
historical cost x current price index (as of end of reporting

formula for restatement
period)/historical price index (as of acquisition date)
when impracticable to determine historical price indices, the _______ for

average general price index
the period may be used
net monetary items, end
gain or loss on net monetary position

less: net monetary items, end
formula (recognized in profit or loss)

= gain (loss) on net monetary position
11/6/21, 1:11 PM PAS 32, 33, 34, 36 Flashcards | Quizlet
PAS 32, 33, 34, 36

prescribes the principles for presenting financial instruments as

PAS 32 financial instrument: presentation liabilities or equity and for offsetting financial assets and financial
liabilities.
PAS 32 Complements PFRS 9 and PFRS 7
-investments in subsidiaries, associates and joint ventures
- employer's rights and obligations under employee benefit plans and

PAS 32 does not apply to the ff:
shared-based payments
- insurance contracts
is any contract that gives rise to a financial asset of one entity and a
financial instrument
financial liability or equity instrument of another entity
PAS 32, 33, 34, 36

https://quizlet.com/635136520/pas-32-33-34-36-flash-cards/ 1/18
is any asset that is cash, an equity instrument of another entity; a

contractual right to receive cash or another financial asset from another
entity, A contractual right to exchange financial instruments with another
financial asset
entity under conditions that are potentially favorable or a contract that
will or may be settled in the entity's own equity instruments and is not
classified as the entity's own equity instrument.
is any liability that is a contractual obligation to deliver cash or another

financial asset to another entity; a contractual obligation to exchange
financial assets or financial liabilities with another entity under
financial liability
conditions that are potentially unfavorable to the entity or a contract
that will or may be settled in the entity's own equity instruments and is
not classified as the entity's own equity instrument.
Any contract that evidences a residual interest in the assets of an entity

equity instrument
after deducting all of its liabilities
is the most basic financial instrument because it is the medium of

cash exchange and the basis of measurement of all financial statement
elements
encompasses both financial asset and financial liability both not the
financial instrument
entity's "own" equity instrument.
PAS 32, 33, 34, 36

-ordinary shares
examples of entity's 'own' equity instrument - non-redeemable preference shares
- stock options and warrants
-cash and cash equivalents
-receivables
examples of financial assets -investments in equity or debt instruments of other entities
-sinking fund and other long-term funds composed of cash and other
financial assets
-physical assets, inventories, PPE, investment property
-intangible assets
are not financial assets
-prepaid expenses and advances to suppliers
-the entity's own equity instrument
-payables
-lease liabilities
examples of financial liabilities -held for trading liabilities and derivative liabilites
-redeemable preference shares issues
- security deposits and other returnable deposits
-unearned revenues and warranty obligations that are to be settled by

future delivery of goods or provision of services
are not financial liabilities

-taxes, SSS, Philhealth, PAG-IBIG payables
-constructive obligations
PAS 32, 33, 34, 36
the entity has a contractual obligation to pay cash or another financial

asset or to exchange financial instruments under potentially unfavorable
financial liability
conditions
the entity has no obligation to pay cash or another financial asset or to

equity instrument
exchange financial instruments under potentially unfavorable conditions
is not an equity instrument merely because it is to be settled in the

a contract
entity's own equity instruments.
-Variable number for a fixed amount

Financial asset/ financial liability
-fixed number for a variable amount
equity instrument fixed number for a fixed amount
the absence of a contractual obligation to pay cash or another financial

an essential feature of equity instrument
asset
a preferred stocks which the holder has the right to redeem at a set
date.
redeemable preference shares -are classified as financial liability because when the holder exercises its
right to redeem, the issuer is mandatorily obligated to pay for the
redemption price.
PAS 32, 33, 34, 36

are preferred stocks which the issuer has the right to e call at a set date.
- are classified as equity instrument because the right to call is at the

callable preference shares discretion of the issuer and therefore has no obligation to pay unless it
chooses to call on the shares.
is one that gives the holder the right to return (put back) the instrument
to the issuer in exchange for cash or another financial asset or is
puttable instrument
automatically put back to the issuer upon the occurrence of a specified
future event
is a financial instrument, from the issuer's perspective, that contains both

Compound financial instruments a liability and an equity component. These components are classified
and accounted for separately.
and example of compound instrument which are bonds that can be

convertible bonds
converted into shares of stocks of the issuer.
are and entity's own shares that were previously issued but were
treasury shares
subsequently reacquired but not retired.
are presented/computed separately either in the statement of financial

treasury shares
position or in the notes as deduction from equity.
PAS 32, 33, 34, 36

transactions are recognized directly in equity. therefore, they do not

treasury shares
result to gains or losses.
interest, dividends, losses and gains in are recognized as income or expenses in profit or loss
financial liability
interest, dividends, losses and gains in equity are recognized directly in equity
instrument
financial asset and financial liability are - a legal right of setoff and
offset when it has both: - an intention to settle the amounts on a net basis or simultaneously
requires presenting financial assets and financial liabilities on a net basis

PAS 32 when doing so reflects an entity's expected future cash flows from
settling two or mote separate financial instruments
prescribes the principles in computing and presenting earnings per

PAS 33 earnings per share share to promote inter and intra-comparability of performance of
entities
Focus on the consistent determination of the denominator of the EPS

PAS 33
calculation
requires publicly listed entities, including those in the process of

PAS 33
PAS 32, 33, 34, 36 enlisting, to present EPS information.
is one of whose ordinary shares or potential ordinary shares are traded

publicly listed entity in a public market
is a computation made for ordinary shares. It is a form of profitability

Earning per share (EPS) ratio which provides a measure of how much profit(loss) each ordinary
share has earned(incurred) during the period.
is an equity instrument that is subordinate to all other classes of equity

ordinary share instruments. It participate in profit for the period after all other classes
of share (preference shares) have participated or deducted.
is one that has preference over other classes of shares, such as

preference share preference over dividends or preference over net assets in cases of
liquidation, but typically does not have voting rights.
-basic earnings per share
Two presentations of EPS

-diluted earnings per share
are those that are entitled to participate in dividends. Issued shares plus
outstanding shares
subscribed shares minus treasury shares.
are ordinary shares issuable for little or no cash or other consideration

contingently issuable ordinary shares upon the satisfaction of specified conditions in a contingent share
agreement.
PAS 32, 33, 34, 36
retrospectively EPS in previous periods are adjusted__
-capitalization or bonus issue(share and stock dividends)
-bonus element in any other issue, for example bonus element in a

an entity is eligible for retrospective
rights issue to existing shareholders
restatement when it issues any of the ff:
-a share split or stock split
-reverse share split or stock split-down
rights issue the exercise price is normally less than the fair value of the shares.
is calculated by adding the aggregated market value of the shares

immediately before the exercise of the rights to the proceeds from the
theoretical ex-rights fair value per share
exercise of the rights, and the dividing by the number of shares
outstanding after the exercise of the rights
is a financial instrument or other contract that may entitle its holder to

potential ordinary share
ordinary shares
-convertible ordinary shares
examples of potential ordianary shares -convertible bonds
-options, warrants and their equivalents
Financial instruments that give the holder the right to purchase ordinary
Options, warrants and their equivalents
shares
PAS 32, 33, 34, 36

are preference shares that are convertible into the issuer's ordinary
Convertible preference shares
shares
are dilutive if, when exercised, they decrease basic earnings per share
potential ordinary shares
or increase basic loss per share.
potential ordinary shares are antidilutive if, when exercised, they

antidilutive
increase basic earnings per share or decrease basic loss per share
convertible bonds and convertible are dilutive if their conversion decreases basic EPS or increases in the
preference shares basic loss per share
are dilutive if their exercise price is less than the market value of the
Options, warrants and their equivalents
ordinary shares, making the exercise favorable on the part of the holder.
the computation of diluted eps is based on the ___ that the dilutive
assumption
potential ordinary shares were converted or exercised.
when computing for diluted eps this method is used in computing for
treasury share method
the incremental shares.
the most dilutive potential ordinary share is ranked first, the least
multiple potential ordinary shares dilutive is ranked last. The most dilutive potential ordinary share is the
one with the least incremental EPS.
PAS 32, 33, 34, 36
the two EPS are presented with the equal prominence on the face of
the statement of profit or loss and other comprehensive income
presentation -EPS is presented every time a statement of profit or loss and other
comprehensive income is presented, including comparatives.
prescribes the minimum content of an interim financial report and the

PAS 34 interim financial reporting recognition and measurement principles in complete or condensed
financial statements for an interim period
does not mandate which entities should produce interim financial

PAS 34
reports.
is applied when an entity chooses, or is required by the government or

PAS 34 other institution, to publish interim financial report that complies with
PFRSs
encourages publicly listed entities to provide at least a semi-annual

PAS 34 financial report for the first half of the year to be issued not later than
60 days after the end of the interim period
A financial report containing either a complete set (PAS 1) of financial

interim financial report statements or a set of condensed(PAS 34) financial statements for an
interim period.
PAS 32, 33, 34, 36

interim period is a financial reporting period shorter than a full financial year
an entity presenting an interim financial report has the option of

PAS 34
applying either PAS 1 or PAS 34
means the entity need only provide the minimum information required
Condensed
under PAS 34
include each headings and subtotals that were included in the entity's
condensed interim FS most recent annual financial statements and the selected explanatory
notes required by PAS 34
are intended to provide an update on the latest complete set of annual

interim report
FS. i
focus on providing information on significant events and transactions

interim report that have occurred since the latest annual period, rather than
duplicating previously reported information
if business is highly seasonal, it encourages disclosure of financial

PAS 34 information for the latest 12 months and comparative information for the
prior 12 month period in addtion to the interim period FS
recognizes that interim measurements may rely on estimated to a

PAS 34
PAS 32, 33, 34, 36 greater extent than measurements of annual financial data
the interim period is considered as an integral part of the annual

Integral view accounting period.
Each interim period is a separate accounting period; interim period

discrete view must stand on its own; same principles and procedures as for annual
reports; no special accruals or deferrals.
argue that the estimation and allocation procedures for interim

proponents of the integral view expenses are necessary to avoid fluctuations in period-to-period results
that might be misleading to a financial statement users.
the use of this view arguably increases the predictive value of interim
integral view reports by showing interim performance that is indicative of what the
annual performance would be
argue that smoothing interim results for purposes of forecasting annual

proponents of the discrete view
performance may have undesirable effects.
PAS 34 adopts a combination of the two views (integral and discrete)
losses from the inventory write-downs, restructurings, or impairments in

an interim period are accounted for in the same way as in annual
PAS 34 accounting principles
financial statements.
Financial statements in previous interim periods are not restated.

PAS 32, 33, 34, 36
Cost that does not qualify as an asset in an interim periods is not

PAS 34 accounting principles deferred either to wait if it qualifies in the next period or to smooth
earnings over the interim periods within a financial year.
are based on the best estimate of the weighted average annual income
income tax expense in interim period
tax rate expected for the full financial year.
interim period are made on a year-to-date basis, so that the frequency

measurement of reporting (annual, semi-annual, or quarterly) does not affect the
measurement of annual results
revenues received seasonally, cyclically, or are not anticipated or deferred in the interim period if anticipation or
occasionally deferral is also not appropriate at the end of the annual period
are anticipated or deferred in the interim period only if it is also

cost incurred unevenly during the financial
anticipated or deferred in the interim period only if it is also appropriate
year
to anticipate or defer them at the end of the financial year.
prescribes the procedures necessary to ensure that assets are not

PAS 36 impairment of assets
carried in excess of their recoverable amount
PAS 32, 33, 34, 36

-PPE
-investment property measured under cost model
PAS 36 applies impairment for the ff asset: -investments in associates, joint ventures and subsidiaries
-intangible assets
-goodwill
if the carrying amount of an asset exceeds its recoverable amount, the

impaired
asset is ___
The carrying amount of an asset shall not exceed its recoverable

core principle of PAS 36 amount. if it exceed, the asset is impaired and the excess shall be
written-off as impairment loss.
carrying amount historical cost - accumulated depreciation
is the amount expected to be recovered from the sale or use of an

recoverable amount
asset. It is the higher of an asset's FVLCD and VIU
are incremental costs directly attributable to the disposal of an asset or

Cost of disposal
cash-generating unit, excluding finance costs and income tax expense
is the present value of the future cash flows expected to be derived

Value in use
from an asset or CGU
PAS 32, 33, 34, 36

external sources of information:
-significant decline in the asset's market value
- significant changes in the technological, market, economic, or legal

environment that adversely affect the recoverable amount of an asset
- increase in market interest rates that adversely affect the discount rate
used in calculating an asset's value in use, and consequently, its
indications of impairment recoverable amount.
internal sources of info:
-obsolescence or physical damage of an asset
-significant changes in the expected use of an asset that adversely

affect its recoverable amount
-indications that the economic performance of an asset is, or will be,

worse than expected
assets required at least annually even there are no indications of

impairment:
-intangible asset with indefinite useful life
required testing for impairment -intangible asset not yet available for use
-goodwill acquired in a business combination
these assets may be tested for impairment at any time during the annual
period provided it is performed at the same time every year.
is tested for impairment in relation to the CGU to which it has been

goodwill
allocated
PAS 32, 33, 34, 36

Is the higher of the assets fair value less costs to sell, and it's value in
recoverable amount
use
cost of disposal is deducted (except those that have been recognized

measuring fair value less cost of disposal
as liabilities)
examples of costs to be deducted:
-legal costs, stamp duty and similar transaction taxes

FVLCD
-costs of removing the asset
-direct incremental costs to bring an asset into condition for its sale
is the present value of the future net cash flows expected to be

Value-in-Use (VIU) deprived from the continuing use of an asset and from its disposal at
the end of its useful life.
is a pre-tax rate that reflects current assessments of the time value of

discount rate money and risks for which the future cash flow estimates have not been
adjusted.
is recognized immediately in profit or loss, unless the asset is carried at

impairment loss revalued amount, in which case, revaluation surplus-is decreased first
and any excess is recognized in profit or loss.
subsequent depreciation(amortization) is based on the asset's recoverable amount after impairment
PAS 32, 33, 34, 36

The smallest identifiable group of assets that generates cash inflows

Cash Generating Unit (CGU) that are largely independent of the cash inflows from other assets or
groups of assets.
are generally tested for impairment individually. and their recoverable

Assets
amounts are determined individually
an asset for which management is is tested for impairment separately even if it belongs to a CGU.
committed to dispose
is determined in a manner that is consistent with how the CGU's

CGU's carrying amount
recoverable amount is determined.
is allocated to each of the acquirer's CGUs in the year of the business

Goodwill recognized in a business combination. if the allocation cannot be completed before the end of
combination the year, it must be completed before the end of the immediately
following year
does not generate its own cash flows but it often contributes to the
goodwill
cash flows of multiple CGU's.
is an unidentifiable asset, it can only be tested for impairment if it is

Goodwill allocated to the CGUs that are expected to benefit form the synergies
of the combination
PAS 32, 33, 34, 36
is reallocated to the portions sold and unsold based on their relative

goodwill
values for purposes of determining the gain or loss on the disposal
is tested for impairment at least annually whether or not there are

indications of impairment.
Impairment of CGU A CGU is tested for impairment by comparing the CGU's carrying
amount, including any allocated goodwill, with the CGU's recoverable
amount.
if the recoverable amount of an individual asset cannot be determined,

no impairment loss is recognized for that asset is the CGU to which it
impairment of CGU
belongs is not impaired. This applies even if the individual asset's fair
value less costs of disposal is less than its carrying amount.
are assets that contribute to the future cash flows of several

corporate assets
departments or divisions within an entity
do not independently generate their own cash inflows, it needs to be

corporate assets
allocated to the various CGUs using the asset to test for impairment.
Options, warrants and their equivalents this would result to a dilution in the number of outstanding shares.

2021 Cfas Mte Wreviewer Quizlet

Uploaded by

Copyright:

Available Formats

You might also like

2021 Cfas Mte Wreviewer Quizlet

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

2021 Cfas Mte Wreviewer Quizlet

Uploaded by

Copyright:

Available Formats

11/6/21, 12:32 PM OVERVIEW OF ACCOUNTING Flashcards | Quizlet

Social Science / Economics / Finance

Accounting is "the process of identifying, measuring, and

Three important activities included in the

is the process of analyzing events and transactions to determine

refers to the process of including the effects of an accountable event in

one that affects the assets, liabilities, equity, income or expenses of an

Types of events or transactions External events and Internal events

Exchange (reciprocal transfer)

Types of External event Non-reciprocal transfer

External event other than transfer

an event wherein there is a reciprocal giving and receiving of economic

Examples: sale, purchase, payment of liabilities, receipt of notes

Non-reciprocal transfer Examples: donations, gifts or charitable contributions, payment of taxes,

an event that involves changes in the economic resources or obligations

Examples: changes in fair values and price levels, obsolescence,

Internal events are events that do not involve an external party.

Upgrade to remove ads Only $47.88/year

Types of Internal events

the process by which resources are transformed into finished goods.

an unanticipated loss from disasters or other similar events. Examples:

involves assigning numbers, normally in monetary terms, to the

opinion When measurement is affected by estimates

fact When measurement is unaffected by estimates

a) Estimates of uncollectible amounts of receivables.

b) Depreciation and amortization expenses, which are affected by

examples of opinion in measuring

d) Retained earnings, which is affected by various estimates of income

a) Ordinary share capital valued at par value

examples of fact in measuring b) Land stated at acquisition cost

c) Cash measured at face amount

is the process of transforming economic data into useful accounting

three aspects in communicating classifying

refers to the process of systematically committing into writing the

involves the grouping of similar and interrelated items into their

putting together or expressing in condensed form the recorded and

a separately identifiable combination of persons and property that uses

Business entity one that operates primarily for profit.

Examples of Economic activities

the process of converting economic resources into outputs of goods

the process of trading resources or obligations for other resources or

the process of allocating rights to the use of output among individuals

the process of setting aside rights to present consumption in exchange

the process of using current inputs to increase the stock of resources

Types of information provided by

Quantitative information information expressed in numbers, quantities, or units.

information expressed in words or descriptive form. Found in the notes

information expressed in money is also quantitative information

Types of accounting information classified General purpose accounting information

designed to meet the common needs of most statement users. This

designed to meet the specific needs of particular statement users. This

accounting is a body of knowledge which has been systematically

Accounting identifies and measures economic activities, processes

Accounting is often referred to as a "language of business" because it is

2. Identifying alternative solutions

3. Evaluating the alternatives

steps in problem solving

5. Implementing the solution