CFAS CHAPTERS 8-10 (MILLAN BASED)
CHAPTER 9: STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE STATEMENT
Statement of profit or loss and other
comprehensive statement
A single statement of profit or loss and
other comprehensive income (Statement of
Comprehensive Income); or
Two statements – (1) A statement of profit
or loss (Income Statement) and (2) Statement
Presenting Comprehensive Income
o So, mayroong dalawang way of
presenting na inaallow ang standard.
First, single statement and yung isa
is in two statements
PAS 1 requires an entity to present
information on the following:
Profit or loss
Other Comprehensive Income
Comprehensive Income – includes income
from your profit and loss and the income
from your other comprehensive income
Examples of Single Statement Presentation
Example of Two Statement Presentation
Profit or Loss
Profit or loss is income less expenses,
excluding the components of other comprehensive
income
Transaction Approach
o Usually, entities will prefer to
present their profit or loss under
transaction approach
o Method or approach wherein your
computing your profit or loss for the
period is called transaction
approach
Income and Expenses are usually
recognized in profit or loss unless:
They are items of other comprehensive
income; or
They are required by other PFRSs to be
recognized outside of profit or loss
*Basically, lahat ng items ng income and expenses
by default pumapasok sila sa profit or loss unless
standard says otherwise.*
*Standards actually have a list of OCI, so pag hindi
pumapasok yung item na yon sa list, then that
income or expense should be included in your profit
or loss*
The following are not included in determining the 4. Transactions  Recognized
profit or loss during the period with owners directly in
(e.g., insurance equity.
Transactions Accounting of share capital, Transactions
1. Correction of  Direct declaration of during the
price period adjustment to dividends, and period are
error the beginning the like) presented in
If ever there are balance of the statement
errors retired of changes in
committed in earnings. The equity
the prior adjustment is Examples:
period, they will presented in
not affect the the statement Correction of price period error
profit or loss of of changes in
the current but equity
rather they will
be reflected in
the beginning
balance of your
retained
earnings
2. Change in  Similar
accounting treatment to
policy correction of
prior period
error
3. Other  Changes during
comprehensive the period are
income presented in
Basically, the the “other
cumulative comprehensive
balance of your income” section  Hindi mo na babaguhin yung FS mo nung
other of the
2020 since it has been authorized na,
comprehensive statement of
instead, yung mga errors in 2020 will be
income will not comprehensive
corrected sa beg. balance ng RE ng 2021
be included or income.
even the Cumulative Method: (Utility bill na 10,000)
change during balances are
the period of presented in  If naaccrue or nabayaran yung entry in
your OCI will the equity 2021, you have to reverse the original entry
not form part section of the because that is not related sa 2021 FS
on your P/L. statement of
instead, it is financial Original Entry:
presented on position
the equity
section in
statement of
financial
position
Reversing Entry:
 If ever di pa rin
nag entry ng accrual in 2021, you have to:
Dr: RE 10,000 ; Cr: Accrued Liability 10,000
Profit or loss line items
Revenue, presenting separately interest
revenue;
o Through interest revenue, makikita
agad ni readers or users kung
papaano niuutilize ni company yung
cash niya
o Cash when used properly can
provide passive income
o Ex. You can actually deposit your
cash in a short term deposit and
earned interest revenue from that
o Kaya siya pinepresent separately
Finance cost;
o Magkano ba yung interest na
binabayad ng company dun sa loans
na hinihiram niya
Gains and losses arising from the
derecognition of financial assets measured
at amortized cost;
o Financial assets – usually are being
measured at amortized cost
o So basically upon derecognition, the
gains and losses arising are
recognized in profit or loss
o Ex. Selling of receivables to a third
party. Orig. price 100,000 then
nabenta mo ng 102,000. Yung 2,000
Circumstances that would give rise to the separate
is gain mo na siya
disclosure of items of income and expense
Impairment losses and impairment gains on
include:
financial assets;
o Nagkakaroon ng impairment if the
financial asset is not completely
recoverable
o Ex. Notes Receivable. Yung
pinautang mo is in financial distress
at hindi na talaga makakabayad, you
have to recognize your notes
receivable on its net realizable value
o The difference between its book
value and net realizable value is
actually recognized as impairment
loss/gain
Gains and losses on reclassifications of
financial assets from amortized cost or
FVOCI to FVPL
o You can actually reclassify the gains
and losses of financial assets from
amortized cost or FVOCI to FVPL
based on the its criteria for
reclassification
o It will affect the P/L of the current
period
Share in the profit or loss of associates and
joint ventures
o Associate – you hold a 20-50% of its
outstanding capital stock
o Net income during the period should
be allocated based on your
percentage of holding
o Joint Ventures – two companies
joining in order to form a new
company
o Both information affects the
company’s P/L
Tax expense
Result of discontinued operations
o Branches ng company na nag iincur
ng loss kaya need nila isara
o As a result, need siya ireport sa
profit and losses rin
Write-downs of inventories to net realizable
value or of property, plant and equipment
to recoverable amount, as well as reversals
of such write-downs
 o You need to have these items which
flow to you P/L have to be disclosed
in your notes
o You need to disclose saan ba siya
nanggagaling
Restructurings of the activities of an entity
and reversals of any provisions of
restructuring costs;
o Restructuring Activities – may
ginawa kang pagbabago sa
management mo sa company mo
Disposals of items of PPE
Disposals of investments
Discontinued operations
Litigation settlements
Other reversals of provisions
PAS 1 prohibits the presentation of
extraordinary items in the statement of profit or
loss and other comprehensive income or in the
notes
o Extraordinary Items – unusual items,
not expected to happen in the
future (example: calamities)
o Sabi ni standard, hindi recognized as
extraordinary items but rather, as
nonrecurring items
o Minsan kasi namimisunderstood ng
readers yung term na extraordinary
items
o You need to properly define yung
nature ng extraordinary items
o You can use Loss on Calamity na
item than using extraordinary
gain/loss
Presentation of Expenses
Nature of Expense Method
Under this method, expenses are
aggregated according to their nature (e.g.,
depreciation, purchases of materials,
transport costs, employee benefits and
advertising cost)
o Mas pinapahaba niya yung
presentation sa FS, since you are
required to disclose ano-ano ba
yung nagcocompose ng expenses
Function of Expense Method (Cost of Sales
Method
Under this method, an entity classifies
expenses according to their function (e.g.,
cost of sales, distribution costs,
administrative expenses, and other
functional classifications). At a minimum,
cost of sales shall be presented separately
from other expenses
If the function of expense is used, additional
disclosures on the nature of expenses shall
be provided
*Usually, ang ginagamit ng mga companies is
function of expense method, then they will just
provide disclosure on the note as o the breakdown
of that specific function*
Illustration
Other Comprehensive Income
Comprises items of income and expense
(including reclassification adjustments) that are not
recognized in profit or loss as required or permitted
by other PFRSs
o By definition, there are certain
income and expenses na pwede lang
pumasok sa other comprehensive
income. If yung income or expense
ay hindi pumasok sa list ng OCI, by
default need mo siya ipasok sa profit
or loss
 The components of OCI include the o All items of P/L at the end of the
following: period are being closed to retained
earnings, same as OCI
Changes in revaluation surplus
o Items of income and expenses in OCI
o The movement in the fair value of
instead of closing it to retained
PPE
earnings, cinocolose mo siya sa
Remeasurements of the net defined benefit
other comprehensive income which
liability (Assets)
is part of SFP during the period
o PAS 19 Employee Benefits or PAS 26
o Related to the fund needed by the Reclassification Adjustments
company in order for its employee
Are amounts reclassified to profit or loss in
to have employee benefits
the current period that were recognized in other
Gains and Losses on Investments
comprehensive income in the current or previous
designated or measured at FVOCI
periods
Gains and Losses arising from translating
the financial statements of a foreign Reclassification adjustments arise from the
operation following:
Effective portion of gains and losses on
o These are the ONLY items part of
hedging instruments in a cash flow hedge
reclassification adjustment
Changes in Fair Value of Financial liability
o Memorize lang muna ito (as per
designated FVPL that are attributable to
maam uy)
changes in credit risk
On disposal of foreign operations
o PFRS 9
Derecognition of debt instruments
Changes in the time value of option when
measured at FVOCI
the option’s intrinsic value and time value
o Discussed in PFRS 9
are separated and only the changes in the
When cash flow hedge becomes ineffective
intrinsic value designated as the hedging
or affects profit or loss
instrument
Changes in the value of the forward The amount reclassified is called the
elements of forward contracts when reclassification adjustment
separating the forward element and spot
A reclassification adjustment for a gain is a
element of a forward contract and
deduction in OCI and an addition to profit or loss
designating as the hedging instrument only
the changes in the spot element, and A reclassification adjustment for a loss is
changes in the value of the foreign currency an addition to OCI and a deduction from profit or
basis spread of a financial instrument when loss
excluding it from designation of that
o Hindi kasi pwedeng parehong mong
financial instrument as the hedging
iaadd at idededuct kasi
instrument
magkakaroon ng double deduction
Amounts recognized in OCI are usually or overstated/understated ng OCI
accumulated as separate components of equity
Reclassification adjustments do not arise o
o The accumulated amount of OCI changes in revaluation surplus, derecognition of
usually its being part of your equity equity instruments designated at FVOCI, and
section in SFP remeasurements of the net defined benefit liability
(Asset), on derecognition, the cumulative gains and
losses that were accumulated in equity on these
items are transferred directly to retained earnings,
rather than to profit or loss as a reclassification
adjustment
o Not all items under OCI will fall
under reclassification adjustments.
Pag wala siya don sa tatlong given,
yung reclassification niya will fall
part to retained earnings but not to
profit or loss
Presentation of OCI
The other comprehensive income section
shall group items of OCI into the following:
Those for which reclassification adjustment
is allowed; and
Those for which reclassification adjustment
is not allowed
Total Comprehensive Income
Total comprehensive income is a change in
equity during a period resulting from transactions
and other events, other than those resulting from
transactions with the owners in their capacity as
owners
o Composed of P/L and OCI
Total comprehensive income is the sum of
profit or loss and other comprehensive income
Statement of Changes in Equity
Shows the following information:
Effects of change in accounting policy
(Retrospective Application) or correction or
prior period error (Retrospective
Restatement)
Total Comprehensive Income for the period;
and
For each component of equity, a
reconciliation between the carrying amount
at the beginning and the end of the period
showing separately changes resulting from:
o Profit or loss
o Other comprehensive income
o Transaction with owners, e.g.,
contributions by and distributions to
owners
Retrospective adjustments and
retrospective restatements are presented in the
statement of changes in equity as adjustments to
the opening balance of retained earnings rather
than as changes in equity during the period
o If you’re going to present in your
statement of changes in equity the
retrospective adjustment and
retrospective restatements, they will
not form part in the changes in
equity, rather they will reflect on the
opening balance of retained
earnings
PAS 1 allows the disclosure of dividends,
and the related amount per share, either in the
statement of changes in equity or in the notes
CHAPTER 10: STATEMENT OF CASH FLOWS
Statement of Cash Flows
Is a component of financial statements
summarizing the operating, investing, and financing
activities of an entity
The statement of cash flows provides
information about the cash receipts and cash
payments of the entity during the period
Cash Equivalents
 The statement of cash flows is designed to
provide information about the change in an entity’s
cash and cash equivalents
o Part ng presentation ang cash and
cash equivalents
Cash comprises cash on hand and demand
deposit
Cash equivalents are short-term highly
liquid investments that are readily convertible to
known amount of cash and which are subject to an
insignificant risk of change in value
o 3 months
Operating Activities
Are the cash flows derived primarily from
the principle revenue producing activities of the
Are the cash flows derived from the equity
capital and borrowings of the entity
Between the entity and the owners – Equity
Financing
Between the entity and the Creditors –
Debt Financing
o Investments of share owners to the
entity are actually loan to the entity
– dividends
Non-Cash Transactions
Non-Cash investing and financing
transactions shall be disclosed only either in the
notes to financial statements or in a separate
schedule or in a way that provides all relevant
information about these transactions

entity
Investing Activities
Are the cash flows derived from the
acquisition and disposal of long-term assets and
other investments not included in cash equivalents

o Regarding letter E: kapag kasi cash

advances was made to a financial
institution, magfoform part siya sa
financing activities mo kaya may
effect rin siya sa investing activities
Financing Activities
 o Doesn’t affect your cash flows users to determine the ability of the entity to pay
dividends out of operating cash flows
Interest Paid and Interest Received
PAS 7 provides that interest paid and
interest received shall be classified as operating
cash flows because such items enter into
determination of net income or loss
o However, some companies classify it
as a part of financing cash flows.
Because it is a cost of obtaining
financial resources
Alternatively, interest paid may be classified
as financing cash flow because it is a cost of
obtaining financial resources
Alternatively, interest received may be
classified as investing cash flow because it is a
return on investment
For a financial institution, interest paid and
interest received are usually classified as operating
cash flows
o Dahil yung normal operating activity
ng bank is related sa
lending/borrowing
Dividends Received and Paid
PAS 7 provides that dividend received shall
be classified as operating cash flow because it
enters into the determination of net income
o Some companies are classifying
dividends received as a part of their
investing cash flow kasi return of
investment
Alternatively, dividend received may be
classified as investing cash flow because it is a
return on investment
PAS 7 provides that dividend paid shall be
classified as financing cash flow because it is a cost
of obtaining financial resources
Alternatively, dividend paid may be
classified as operating cash flow in order to assist