THE ACCOUTANCY PROFESSION
 Statement of Financial Position
DEFINITONS OF ACCOUNTING
According to:
1. Accounting Standard Council (now: Philippine Financial Reporting
Council)
 A service activity. Its function is to provide quantitative
information, primarily financial in nature, about economic
entities, that is intended to be useful in making economic
decision
2. Committee on Accounting Terminology of American Institute of
Certified Public Accountants
 It is the art of recording, classifying and summarizing in a
significant manner and in terms of money, transactions and
events which are in part at least of a financial character and
interpreting the results thereof..
3. American Accounting Association in its Statement of Basic
Accounting Theory
 It is the process of identifying, measuring and communicating
economic information to permit informed judgement and
decision by users of the information.
OBJECTIVE OF ACCOUNTING
 Accounting is a service activity which is intended to provide
quantitative information that is financial in nature about the
economic entities or transaction or events of entities that is intended
to be useful in making economic decisions of the user of the
quantitative information.
QUANTITATIVE INFORMATION
 Transformed as financial statements
 Undergo the process the 10 process of the accounting cycle
 Statement of Comprehensive Income
 Statement of Cash Flows
 Statement of Changes in Equity
 Notes to Financial Statements
GUIDE ON HOW TO PREPARE THE FINANCIAL STATEMENTS
 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(GAAP)
 Sets the accounting rules, procedures and practices.
 Evolved through time changing with the needs of the society as
new types of transaction occur in the trade of incomers,
accounting develop rules and procedures in recording them.
 Represent the rules, procedures, practice and standards followed
in the preparation and presentation of financial statements.
 Like laws that must be followed in financial reporting.
 Developed on the basis of experiences of accountants, economic
decision makers, users of financial statements, reason, custom,
usage, and practical necessity.
 FORMAL GAAP/ INFORMAL GAAP
 Informal Gaap those gaap that is being used but not yet
pronounced by the accounting standard body.
 Formal GAAP, those principles that are already pronounced
known as PAS/ PFRS.
 PAS is adopted from the IAS ( old but still applicable,
made by the IAS)
 PFRS is adopted from the IFRS (new made by the IASB)
WHO PROMULGATE THE PAS/PFRS
 Financial Reporting Standard Council (FRSC)
  Formerly known as Accounting Standard Council LIMITATION OF PUBLIC PRACTICE
 Composition:
RA 9298
 1 member on the
 Board of Accountancy  Passed the CPALE
 Securities and Exchange Commission
 Bangko Sentral ng Pilipinas RA 10912 – law mandating and strenghting the continuing professional
 Bureau of Internal Revenue development (CPD) Program for all profession, including the accountancy
 Commission on Audit profession
 Financial Executive Institute of the Philippines  CPD CREDIT UNITS
 2 members of Accredited national professional  15 units to renew professional license
organization
 120 units to be accredited to practice public accounting
 Public Practice
renewable every 3 years ( accreditation from BOA)
 Commerce and Industry
 3 years of meaningful experience
 Academe or education
 Government
 A chairman who is a senior accounting practitioner
 14 members and 1 chairman
 The one who issues the PAS/ PFRS

ACCOUNTANCY PROFESSION

Republic Act no. 9298

 law that regulates the practice of accountancy in the Philippines

 Philippine Accountancy Act of 2004

4 AREAS

1. Public Accounting
 Auditing, Taxation, and Management Advisory Services
2. Private Accounting
 Accounting, Chief Accountant, Internal Auditor, Controller
3. Government Accounting
4. Academe or Education

CONCEPTUAL FRAMEWORK
 History of Conceptual Framework
April 1989 - Framework for the preparation and presentation of
Financial statements (the framework) was approved by the IASC
Board
July 1989 - Framework was published
April 2001 – Framework was adopted by the IASB
September 2010 – Conceptual Framework for Financial Reporting
2010 approved by the IASB
March 2018 – Conceptual Framework for Financial Reporting 2018
( the framework) published
 Definition
 Is a complete, comprehensive and single document
promulgated by the IASB
 It is a summary of the terms and concepts that underlie the
preparation and presentation of financial statements for external
users.
 Describes the concepts for general purpose financial reporting
 It attempt Provide an overall theoretical foundation for
accounting.
 Intended only to guide the standard setters, the preparers and
used of financial information in preparation and presentation of
statements
 Underlying theory for the development of accounting standards
and revision of previously issued standards
 Used in the future standard decisions but no changes will be
made on the current PFRS/IFRS
 Conceptual Framework provides the foundation for
standards that:
 Contribute to transparency by enhancing the international
comparability and quality of information
 Strengthen accountability by reducing the information gap
between the provider of capital and the people whom they
entrusted the money
 Contribute to economic efficiency by helping the investors to
identify opportunities and risk around the world
 Purposes of Revised Conceptual Framework
1. To assist the International Accounting Standards
Board (IASB) to develop IFRS based on consistent
concepts
2. To assist preparers of financial statements to develop
consistent accounting policy
3. To assist preparers of financial statements to develop
accounting policy when a standard allows a choice of
an accounting policy
4. To assist all parties to understand and interpret the
IFRS standards
 Authoritative Status
1. Conceptual Framework is not an accounting standard.
2. If there is a standard or an interpretation that
specifically applies to a transaction, the standard or
interpretation overrides the Conceptual Framework.
3. In the absence of a standard or an interpretation that
specifically applies to a transaction, management
shall consider the applicability of the Conceptual
Framework in developing and applying an
accounting policy that results in information that is
relevant and reliable.
4. Nothing in the CONCEPTUAL FRAMEWORK
overrides any specific ACCOUNTING
STANDARDS.
\

 USERS OF FINANCIAL INFORMATION LIMITATIONS OF FINANCIAL REPORTING

1. PRIMARY USERS
1. General purpose financial report do not and cannot provide all of the
 Existing and potential investors
information that existing and potential investors, lenders and other
 Lenders and other creditors
creditors need.
2. SECONDARY
2. not designed to show the value of an entity but the reports provide
 Employees information to help the primary users estimate the value of the entity
 Customers 3. Intended to provide common information to users and cannot
 Government agencies accommodate every request for information
 Public 4. To a large extend, reports are based on estimate and judgement
rather than exact depiction
SCOPE OF REVISED CONCEPTUAL FRAMEWORK
UNDERLYING ASSUMPTIONS AND BASIC ACCOUNTING
1. Objective of financial reporting
PRINCIPLES
2. Qualitative characteristics of useful financial information
3. Financial statements and reporting entity Underlying Assumptions
4. Elements of financial statements
5. Recognition and derecognition  Accounting assumptions are the basic notions or fundamental
6. Measurement premises on which the accounting process is based.
7. Presentation and disclosure  Also known as postulates
8. Concepts of capital and capital maintenance  Serve as the foundation or bedrock of accounting to avoid
misunderstanding but rather enhance the understanding and
SPECIFIC OBJECTIVES OF FINANCIAL REPORTING usefulness of the financial statements.
1. To provide information useful in making decisions about providing 1. Going Concern (Continuity Assumption)
resources to the entity  The only one mentioned in the Conceptual Framework
2. To provide information useful in assessing the cash flow prospects  Means that in absence of evidence on the contrary the
of the entity accounting entity is viewed as continuing in operation
3. To provide information about entity resources, claims and changes indefinitely.
in resources and claims. Refers to the assets, performance, liabilities  Financial statements is normally prepared on the assumption that
and equity. the entity will continue in operation for the foreseeable future,
  Very foundation of the cost principle, that is why assets are
normally recorded at cost. As a general rule, meaning they will
benefit at a current period and future period. Any assets that will
benefit on the current period will be expenses outright. However,
some IFRS some assets are measures at fair value.
 It should be recorded at cost because we view business
establishments to continue operations at a foreseeable future.
 If there is an evidence that an entity will experience losses
GOING CONCERN is abandoned
2. ACCOUNTING ENTITY (Entity Concept)
 Regards the business enterprise as separate and distinct from its
owners and from other business enterprises.
 Subsidiary and Parent entity can have consolidated information
3. TIME PERIOD (PERIODICITY CONCEPT)
 Concept behind providing financial accounting information
about the economic activities of an enterprise for specified time
periods.
4. MONETARY UNIT (STABLE MONETARY UNIT CONCEPT)
 Philippine peso is a reasonable unit of measure and that its
purchasing power is relatively stable.
 quantifiablity and stability of peso
BASIC PRINCIPLES
1. Objectivity Principle
 States that all business transactions that will be entered in
the accounting records must be duly supported by verifiable
evidence.
2. Historical Cost
 Means that all properties and services acquired by the
business must be recorded at its original acquisition cost.
3. Revenue Recognition Principle
 States that income is recognized in the accounting period
when the goods are delivered or services are performed.

4. Expense Recognition Principle
 Expenses should be recognized in the accounting period in
which goods and services are used up to produce revenue
and not when the entity pays for those goods and services.
5. Adequate Disclosure
 Requires that all relevant information that would affect the
user’s understanding and assessment of the accounting entity
be disclosed in the FS.
6. Materiality
 Only concerned with information significant enough to affect
decisions.
7. Consistency Principle
 Use the same accounting method from period to period to
achieve comparability over time within a single enterprise.
8. Accrual Basis
 The effects of transactions and other events are recognized
when they occur and not as cash or its equivalent is received
or paid. This means that the accountant records revenues as
they are earned and expenses as they are incurred.

QUALITATIVE CHARACTERISTICS
 Faithful Representation
 Qualities or attributes that make financial accounting
information useful to the users
 Objectives is to ensure that the information is useful to the users
in making economic decisions
2 classifications
1. Fundamental Qualitative Characteristicsbvb
 Relate bo the content and substance of the information
- Relevance & faithful representation
2. Enhancing Qualitative Characteristics
- Understandability. Comparability, verifiability, timeliness
FUNDAMENTAL QUALITATIVE CHARACTERISTICS
 Relevance
- information has the quality of relevance when it influences
the economic decisions of users by helping them evaluate
past, present or future events, or confirming, or correcting,
their past evaluations.
- Capacity the information to influence a decision
- 3 ingreidents
1. Predictive Value - It is used to make predictions of, for
instance, future cash flows or income
2. Feedback Value - It is used to confirm or correct the
decision maker’s earlier expectations.
3. Materiality - Only concerned with information
significant enough to affect decisions.
- Known as the doctrine of convenience
- Relative size rather than absolute size
- What is material for one entity may be immaterial for
another
- Based on professional judgement
- Information must represent faithfully the transactions and
other events it either purports to represent or could
reasonably expected to represent.
- Must match what really existed or happened
- 3 ingredients
1. Completeness
- Information must be complete within the bounds of
materiality and cost. An omission can cause false or
misleading information and thus be un reliable and deficient.
- Results of standard of adequate/full disclosure
 All significant and relevant information leading to the
preparation of financial statements shall be clearly reported.
2. Neutrality
- Free from bias.
- Prudence
 The exercise of care and caution when dealing with the
uncertainties in the measurement process such that assets or
income are not overstated and liabilities or expenses are not
understated
- Conservatism
 Means that when alternatives exist, the alternative whoch has
least effect on equity should be chosen
 When in doubt record loss and do not record any gain
3. Free from error
 - Means there are no errors or omissions the description of the - financial information must be available or
phenomenon or transaction. communicated early enough when a decision is to be
- Substance Over form made.
 Transactions and events are accounted in accordance with - The older the information, the less useful
their substance and not merely their legal form

ENHANCING QUALITATIVE CHARACTERISTICS

1. Verifiability
- Implies Consensus
- different knowledgeable and independent observers could
reach consensus, although not necessarily complete
agreement that a particular depiction is a faithful
representation
- direct and indirect
2. Comparabiltiy
- Users must be able to compare the financial statements
of an enterprise over time in order to identify trends in
its financial position and performance
- Ability to bring together for the purpose of noting points
of likeness and differences
- Ingredients
- Uniform application of accounting method between and
across entities in the same industry
 Consistency
 uniform application of accounting method from period to
period within an entity
 comparability is the goal and consistency helps to achieve
it
3. Understandability
- Users are assumed to have a reasonable knowledge Of
accounting.
4. Timeliness
 1. The assets is a present economic resource
2. The economic is a right that has the potential to produce
economic benefits
- Right that correspond to an obligation of another entity
Right to receive cash
Right to exchange economic resources (assets)
favourable on the part of the entity
- Right that do not correspond to an obligation of another
Elements of Financial Statements entity
Right over physical objects such as property,
Financial Statements plant and equipment or investories
 Portray the financial effects of transactions and other events by Right to intellectual property
grouping them into broad classes - Right established by contract or legislation
 Main product of accounting and identify the effects of the Owning a debt instrument or an equity or owning
transaction into the elements of the financial statements. a registered patent
 These are the broad classes – refers to the quantitative information 3. Control over the economic resource
reported on the financial statement (balance sheet) and income - It has the present ability to the direct the use of the asset
statements and obtain the economic benefit that flow from it ; the
 Elements of the financial statements are the building blocks in which control also include to prevent others in using such asset;
financial statements are constructed. may arise if the entity enforces legal rights
 Elements of Income Statement - Example: a land should have a contract in order to have a
 Income – Expenses = Profit control in using it.
 Elements of Financial Position
LIABILITIES
 Assets – Liabilities = Equity
 Under the revised conceptual framework it is defined as present
Financial Position
obligation of an entity to transfer an economic resource as a result of
ASSETS past events.
 3 essential characteristics
 Under the revised conceptual framework, it is defined as present 1. The entity has an obligation
economic resources controlled by the entity as result of past - The entity liable must be identified
events 2. The obligation to transfer an economic resource
 3 essential characterisics
 - It should result the settlement of the obligation will have
a transfer of asset or render services
3. The obligation is a present obligation that exists as a results of
past event
- This means that a liability is not recognized until it is
incurred, an obligation should already exists because of
past transactions.
EQUITY
 Residual interest in the asset of the entity after deducting all the
liabilities
FINANCIAL PERFORMANCE (INCOME STATEMENT)
INCOME
 Under conceptual framework, it is defined as increase in assets or
decrease in liabilities that results in increases in equity, other than
those relating to contributions from equity holders
 Effects in the elements in the financial position
 Income encompasses both revenue and gains.
Revenue arises in the course of the ordinary
regular activities and is referred to by variety of
different names including sales, fees, interest,
dividends, royalties and rent. Essence is
regularity.
Gains represent other items that meet the
definition of income and do not arise in the
course of the ordinary regular activities.
Examples are gain in the sale of property, plant
and equipment, gain on selling investment
EXPENSES
 Decreases in assets and increases in liabilities that results in
decreases in equity, other than those relating to distributions to
equity holders.
 Encompasses losses as well as those expenses that arise in the
course of the ordinary regular activities
Expenses that arise in the course of ordinary regular
activities such as cost of good sold, wages and depreciation.
Losses do not arise in the course of ordinary regular
activities and include losses resulting from disaster.
Examples include losses from fire, flood and as well as those
arising from disposal of noncurrent assets.
RECOGNITION
 The process of incorporating an item that meets the definition of an
element and satisfies the recognition criteria, into the statement of
financial position or statement of profit or loss and other
comprehensive income.
 Synonymous with recording
 Under the Revised Conceptual Framework it is the process of
capturing for inclusion in the financial statements an item that meet
the definition of an asset, liability, equity, income or expense.
 Recognition Criteria
1. It should meets the definition of asset, liability, equity, income
or expense.
2. The degree of uncertainty is probable. 90% and below
3. The amount can be measured reliably
ASSETS MEASUREMENT
 In recognizing assets, the important is its underlying substance
economic reality and not its legal form, Substance over form
principle should be applied.
 Cash transaction – cash payment
 the measurement is at phase amount
 Noncash or exchange transaction
(order of priority)
Fair value of the asset given ( asset given up is given)
Fair value of the asset received (asset given up is not given)
Carrying amount of the asset given up
 Application of Cost Principle
INCOME MEASUREMENT
 Income recognition Principle is important
- Income should be recognized once its earned.
- EXEMPTION: POINT OF SALE – Point of Income
recognition
Recognition of Income However, instalment
method are exempted.
Cost Recovery – all cost should be recoded before
recognizing the income
Production method., the income is based on the
production
Percentage of Completion
EXPENSES MEASUREMENT
 Expense Recognition Principle ( accrual basis)
- Expenses are recognized only once it is incurred
- Application of another principle which is Matching
Principle.
- APPLICATION OF THE MATCHING PRINCIPLE –
the generation of income or revenue is not without any
DERECOGNITION
cost, there must be cost in earning a revenue thus must be
recorded in the same period
- It requires that those costs and expense incurred in
earning a revenue shall be
- reported in the same period.
1. Direct association of matching ( Cost and effect
association) – the expense is recognized when
revenue is already recognized
Ex. COGS – tip chunk of an expense
2. Systematic and rational allocation – some costs are
expensed by simply allocating them over the periods
benefited
Ex. Depreciation – cost incurred of an asset or
acquiring an asset that will benefit in more than 1
year
Reason: The cost incurred will benefit future periods
and that there is an absence of a direct or clear
association of the expense with specific revenue.
3. Immediate recognition– the cost incurred is expensed
outright because of the uncertainty of future
economic benefits or difficulty of reliably associating
certain costs with future revenue:
Criteria when recognizing an expenses immediately:
1. When an expenditure produces no future
economic benefits.
Examples: loss from typhoon, loss from the
disposal of the building
2. When cost incurred does not qualify or ceases to
qualify for recognition as an asset
Examples: Salaries, Advertising, selling,
Administrative expenses.
 Defined as the removal of all or part of a recognized asset or liability
from the statement of financial position.
  It occurs normally when an item NO LONGER MEETS THE
DEFINITION OF AN ASSET OR A LIABILITY.
MEASUREMENT
 The process of determining the monetary amounts at which the
elements of the financial statements are to be recognized and carried
BASIC PRINCIPLES
in the statement of financial position and statement of
comprehensive income
 Under the Conceptual Framework, it is defined as quantifying in
monetary terms the elements in the financial statements
2 categories in measurement
1. Historical Cost ( original acquisition cost of an asset) – is the
cost incurred in acquiring or creating the asset comprising the
consideration paid plus transaction cost
Historical Cost of a liability – the consideration received to incur
the liability minus transaction cost
- Basic principle use in measuring
2. Current Value – used in measuring because there are elements
can be measured at estimates.
a. Fair Value – the price that would be received to sell an asset
in an orderly transaction between market participants at
measurement date
b. Value in use for asset – refers to the present value; use the
present value factor to compute
- The present value of the cash flows that an entity expects
to derive from the use of an asset and from the ultimate
disposal
- Present value applicable to an asset
c. Fulfilment value for liability – present value of cash than an
entity expects to transfer in paying or settling a liability
- Present value in application of paying a liability
d. Current cost – the cost of an equivalent asset at the
measurement date comprising the consideration paid and
transaction cost (ASSET)
- The consideration that would be received less any
transaction cost at measurement date. (LIABILITY)
1. Objectivity Principle - States that all business transactions that will
be entered in the accounting records must be duly supported by
verifiable evidence.
2. Historical Cost - Means that all properties and services acquired by
the business must be recorded at its original acquisition cost.
3. Revenue Recognition Principle - States that income is recognized in
the accounting period when the goods are delivered or services are
performed.
4. Expense Recognition Principle - Expenses should be recognized in
the accounting period in which goods and services are used up to
produce revenue and not when the entity pays for those goods and
services.
5. Adequate Disclosure- Requires that all relevant information that
would affect the user’s understanding and assessment of the
accounting entity be disclosed in the FS.
6. Consistency Principle - Use the same accounting method from
period to period to achieve comparability over time within a single
enterprise.
7. Accrual Basis - The effects of transactions and other events are
recognized when they occur and not as cash or its equivalent is
received or paid. This means that the accountant records revenues as
they are earned and expenses as they are incurred.

PRESENTATION AND DISCLOSURE AND CONCEPTS OF
CAPITAL
Presentation and disclosure
-
An effective communication tool about information in
financial statements
- Communicates the presentation and disclosure and helps
the user of the financial statements communicates about
its assets, liabilities, equity, income and expenses by
presenting and disclosing information in the financial
statements.
- It follows the qualitative characteristics to make the
information more relevant and contributes to a faithful
representation of an entity’s assets, liabilities, income
and expenses
 CLASSIFICATION
- Sorting of an assets, liabilities, equity, income and
expenses on the basis of shared or similar characteristics
- It includes the classifying the similar assets, liabilities,
equity, income, expenses that can be obscure relevant
information and reduced understandability, and
comparability. (back up by the qualitative characteristics
of preparing statements)
 CLASSIFICATION OF INCOME AND EXPENSES
 Components of Profit and Loss ( income statemnent)
- All income and expenses should be appropriately
classifies in the statement of profit or loss
- Income and expenses in operation
- Sales, operating expenses
 Components of Other Comprehensive Income ( Statement of
Comprehensive Income)
- The profit or loss and components of other
comprehensive income
- Other items of income and expenses that are presented
outside of profit or loss
o Realization of revaluation surplus, gain or loss on
differences of exchange foreign currency
transaction, unrealized gain or loss on investment
o Known as Extraordinary items or below the line
items
 Statement of Financial Position
 AGGREGATION
- More on accounts of assets and liabilities
- Adding together of assets, liabilities, equity, income and
expenses that have similar or shared characteristics and
are included in the same classification
- Cash and cash equivalents is the aggregated account of
cash and cash equivalents. In order to know what items
under the account, look into notes of financial statements
to know the composition of cash and cash equivalents.
Examples: Cash on Hand, cash on bank, petty cash fund
- Acc Receivable , trade and other receivables ( same sa
CCE) – aggregated account also
- Makes information useful by summarizing a large
volume in detail but may conceal some of the detail but
 is justified by putting a note (notes to financial
statements- detailed information is provided here)
- How the concepts of presentation and disclosure.
Classification and aggregation plus disclosure (notes to
financial statements)
CAPITAL MAINTENANCE
- Approach on how to determine/measure the financial
performance of an entity
- Transaction approach and capital maintenance approach
(2 categories)
- Transaction approach – preparation of income statement,
traditional preparation
2 concepts of conceptual maintenance approach
Compare the capital / equity but the distributions to and
contributions by owners should be excluded because it is
not part of the financial performance of an entity
 PHYSICAL CAPITAL
- Quantitative measure of the physical productive capacity
to produce goods and services
- It requires that productive assets be measured at
CURRENT COST rather than historical cost
- If there is an available current cost or fair market value
of the net assets beginning or at the end, it should be
used.
- Net income occurs when the physical productive capital
of the entity at the end of the year exceeds the physical
productive capital at the beginning of the period also

 FINANCIAL CAPITAL
- The monetary amount of the net assets contributed by
shareholders and the amount in net assets resulting from after excluding distributions to and contributions from
earnings retained by the entity. owners during the period
- Net income occurs when the nominal amount of the next
ILLUSTRATION
assets at the end of the year exceeds the nominal amount
of the net assets at the beginning of the period after Given
excluding distributions to and contributions by owners
during the period.
- The net income is measured/computed by comparing the FINANCIAL CAPITAL
net assets at the end and at the beginning
- Ex. Net Assets At the beginning – 100,000
Net Assets At the end – 150,000
Net income – 50,000
Net Assets = Assets – Liabilities
  Add dividend paid to exclude payment or distribution to owners than changes resulting from transactions with the owners
 Less the additional in their capacity as owners.
investments/additional capital to - In other words, comprehensive income includes the
exclude the contribution to following:
owner - Profit or loss
- Components of other comprehensive income
PHYSICAL CAPITAL
Profit or Loss

 It is the total of income less expenses, excluding the components of

other comprehensive income.
 This is the “bottom line” in the traditional income statement.
 An entity may use “net income” or “net loss” to described profit or
loss.
 Sources of Income:
Sales of merchandise to customer
Rendering of services
Use of entity resources
 Since there is a given current cost, it must be used rather than the Disposal of resources other than products
historical costs
 Components of expense:
STATEMENT OF COMPREHENSIVE INCOME

- It is a formal statement showing the financial

performance of an entity for a given period of time.
- The statement of comprehensive income illustrates the
financial performance and results of operations of a
particular company or entity for a period of time.

COMPREHENSIVE INCOME
Cost of Goods sold or Cost of Sales
- The term Comprehensive income is the change in equity Distribution costs or selling expenses
(net assets) of a business enterprise during a period from Administrative expenses
transactions and other events and circumstances, other Other expenses
 Income tax expense
OTHER COMPREHENSIVE INCOME
- It comprises items of income and expenses including
reclassification adjustments that are not recognized in
profit or loss as required orpermitted by PFRS.
- Components of OCI may include the following:
1. Unrealized gain or loss on equity investment
measured at FV through OCI.
2. Unrealized gain or loss on debt investment measured
at FV through OCI.
3. Gain or loss from translation of FS of a foreign
operation.
4. Revaluation surplus during the year.
5. Unrealized gain or loss from derivative contracts
designated as cash flow hedge.
6. Remeasurements of defined benefit plan, including
actuarial gain or loss.
7. Change in FV attributable to credit risk of financial
liability designated at fair value through profit or
loss.
Presentation of comprehensive income
An entity has two options of presenting the comprehensive income, namely:
1. Two statements:
a. An income statement showing the components of profit or loss.
b. A statement of comprehensive income beginning with profit or loss as
shown in the income statement plus or minus the components of OCI.
2. Single statement of comprehensive income
This is the combined statement showing the components of profit or loss
and components of OCI in a single statement. Under the revised conceptual
framework, it is known as statement of financial performance.
FINANCIAL STATEMENTS
8. The means by which the information accumulated
and processed in financial accounting is periodically
communicated to the users.
Components of Financial Statements
1. Statement of Financial Position
2. Income Statement
3. Statement of Comprehensive Income
4. Statement of Changes in Equity
5. Statement of Cash flows
6. Notes, comprising a summary of significant accounting policies and
otherexplanatory notes
STATEMENT OF FINANCIAL POSITION
9. A formal statement showing the three elements
comprising financial position, namely assets,
liabilities and equity.
10. Objective of the financial position is for the users to
evaluate factors such as LIQUIDITY, SOLVENCY
and THE NEED OF THE ENTITY FOR
ADDITIONAL FINANCING.
CLASSIFICATION OF ASSETS
1. Current Assets
 1. It is CASH OR CASH EQUIVALENT unless the asset is o Finance lease liability
restricted to settle a liability for more than 12 months. o Deferred tax liability
2. Hold primarily for the purpose of TRADING. o Long-term obligations to company officers
3. Entity expects to realize the asset within TWELVE MONTHS o Long-term deferred revenue
after the reporting period.
4. expects to realize the asset or intends to sell or consume it within SHAREHOLDERS EQUITY
the entity’s NORMAL OPERATING CYCLE.
- EQUITY is the residual interest in the assets of
2. Noncurrent Assets
the entity after deducting all its liabilities.
May include the following:
o Property, Plant and Equipment - SHAREHOLDERS’ EQUITY is the residual
interest of owners in the net assets of a
o Long-term investments
corporation measured by the excess of assets over
o Intangible assets
liabilities.
o Deferred tax assets
- May include the following accounts:
o Other Noncurrent assets
o Share Capital
CLASSIFICATION OF LIABILITIES o Subscribed share capital
o Share premium
1. CURRENT LIABILITIES o Accumulated profits (losses)/Retained
1. The entity expects to settle the liability within the entity’s earnings
NORMAL OPERATING CYCLE. o Revaluation reserve/surplus
2. Hold primarily for the purpose of TRADING.
o Treasury share
3. Due to be settled within TWELVE MONTHS after the reporting
period.
4. The entity DOES NOT HAVE AN UNCONDITIONAL RIGHT
to defer the settlement of the liability for at least 12 months after
the reporting period.
2. NONCURRENT LIABLITIES
- PAS 1, paragraph 69, provides that all liabilities
not classified as current are classified as
NONCURRENT.
- May include the following:

o Noncurrent portion of long-term debt