4701: CASH & CASH EQUIVALENT

COMPOSITION
Cash Items Cash Equivalent
1. PCF (BICO & REO) • 3-month rule
2. Cash-in-Bank • Presence of maturity date
3. Traveler’s & Manager’s check • Debt investment Acquired 3
4. Bank draft and Money order • Equity investment months or less
5. Unrestricted Compensating Balance Redeemable preference share with mandatory redemption
6. Cash set aside for current operation
7. Foreign currency Translated to PH Closing rate PCF Shortage/Overage
Correct PCF PCF
PETTY CASH FUND Imprest balance Bad accom. check
Per count xx Expenses
Emptied envelope (xx) BICO REO Advances/IOUs
Balance before SH/OV
Collections (xx)
Expenses & advances xx
(after BS date) _________ Per count 1. Replenishment *overage *shortage
(after BSD or BSD) 2. Employee’s Good Check Correct PCF, BSD
3. Officer’s Good Check
BANK RECONCILIATION
Bank Books
Unadjusted Balance xx Unadjusted balance xx
DIT xx Credit Memo xx
OC (xx) Debit Memo (xx)
Errors + xx/(xx) Errors + xx/(xx)
Adjusted balance xx Adjusted balance xx
 PROOF OF CASH
CBPM RCM DCM CBCM
Unadjusted balance per xx xx xx xx
BOOKS
CM, PM xx (xx)
CM, CM xx xx
DM, PM (xx) (xx)
DM, CM xx (xx)
Errors xx(xx) xx(xx) xx(xx) xx(xx)
Adjusted balance xx xx xx xx
Unadjusted balance per BANK xx xx xx xx
DIT, PM xx (xx)
DIT, CM xx xx
OC, PM (xx) (xx)
OC, CM xx (xx)
Errors xx(xx) xx(xx) xx(xx) xx(xx)
Adjusted balance xx xx xx xx
Proof of Cash GUIDE
Prior Month Errors
A. Corrected in CM CBPM RCM DCM CBCM
1. ↑ R (xx) (xx)
2. ↑ D xx (xx)
3. ↓R xx (xx)
4. ↓D (xx) (xx)
 B. Not yet Corrected in CM
1. ↑ R (xx) (xx)
2. ↑ D xx xx
3. ↓R xx xx
4. ↓D (xx) (xx)
Current Month Errors
A. Corrected in CM CBPM RCM DCM CBCM
1. ↑ R (xx) (xx)
2. ↑D (xx) (xx)
3. ↓R
4. ↓ D
B. Not yet Corrected in CM
1. ↑ R (xx) (xx)
2. ↑ D (xx) xx
3. ↓R xx xx
4. ↓D xx (xx)
Legend: CBPM – Current Balance Prior Month; RCM – Receipts Current Month; DCM – Disbursement Current Month; CBCM –
Current Balance Current Month; R – Receipts; D – Disbursement; CM – Current Month
 4702: RECEIVABLES
Accounts Receivables
Beg. Balance 1) Collections from credit
1) Credit sales customers Allowance for Bad Debts
2) SDL (net method) 2) Sales discount (gross method) *write-off Beg. Balance
3) Recovery 3) Sales Returns & Allowances *Recovery
4) Dishonored notes from credit customers
4) Recovery, if not yet included Bal. before adj.
*Gross A/R
*A/R ledger balance
in the above collections *BDE
5) write-off Ending balance
6) Settlement by issuing notes (% of AR or Aging of Receivable)
Ending balance
Aging of Receivables (Pro-forma)
Age Amount % of Non-collection ABD
xx xx
AR, end ABD, end
Interest-bearing Note: Lump sum (PV of 1)
Date NI EI Amortization/Discount CV/AC
 SP of NCA sold xx
For Gain/Loss: CV of NCA Sold (xx)
PV of FCI xx Gain or Loss xx
→ Face Value xx
→ Interest xx Basis for interest each year:
DP, if any xx Date Collection Balance
basis for
interest each year
SP of NCA sold, sales, xx
Service Inc.
To get PV of FCI
Interest-bearing Note: Installment; Unequal payments (PV of OA 1)
Date Face + Interest = PV of FCIFCI x PV of 1
each year each
paid
period
(less principal)
PRO-FORMA
Date NI EI Amortization Collection of FV CV/AC
NR = ER NR > ER NR < ER
1. Current portion of CV @ Collection of CV next year Collection of FV + Premium Collection of FV – discount
BS date amortization next year amortization next year
2. Non-current portion of CV Remaining FV @ BS date CV/AC next year in Amortization table
@ BS date next year
 Non-interest Bearing Note
1. To get PV of FCI and DNR 2. Proforma
Date Collection of Interest Amort of Applied to CV/AC
Face Value FV Discount Principal
PV of FCI DNR
4M x 2.6730 excess
Initial CV Fair Value of Asset/ Service or Note (PV of FCI)
Amortization (CV/AC x ER) DISCOUNT in all cases
Interest income Effective Interest
Interest Receivable @ BS date 0
CV/AC, BS date AC or Remaining PV of note/FCI
Current portion CV, BSD Collection of face value less Discount Amort. next
year
Non-current portion of CV, BSD CV/AC next year in the amortization table
 Allowance for Credit Loss
Loans Receivable Beg. Balance
Face Value xx Interest/Accretion = ACL, beg x ER *Interest/Accretion
Direct Origination Costs (DACs) xx
Bal. before adj.
Less: Direct Origination fee (xx) ACL bef. Adj. = ACL, beg + Interest/Accretion
Initial CV/PV of loan xx *credit/impairment loss
(PV of FCI)
ACL, end xx Ending balance
ACL before adjustment (xx)
Credit/impairment loss xx
Stage 1 Stage 2 Stage 3
1) Estimated Credit Loss 12-month Lifetime Lifetime
2) ACL, end PV of ECL x PD PV of ECL x PD 1) CV of A/R xx
(face value + IR, if any)
2) PV of revised A/R xx
ACL, end xx
If no previous s1 & s2, it is also
impairment loss.
3) CV of LR, BS date (Net AC) Gross AC xx Gross AC xx
ACL, end xx ACL, end xx PV of revised receivables/ Net AC
Net AC xx Net AC xx
4) Interest Income ER x Gross AC ER x Gross AC ER x Net AC
ACL – Allowance for Credit Loss PD – Probability of Default
Receivable Financing
Forms Loan Sale CV, BS date Gain or Loss
1) Pledging ✓ × Balance, BS date None
2) Assignment ✓ × Balance, BS date None
3) Factoring ✓ ✓ 0 = if without recourse ✓ = if without recourse
4) Discounting ✓ ✓ 0 = if without recourse ✓ = if without recourse
Deductions to arrive at PROCEEDS
1) Pledging
- hypothecation
- general assignment • Service charge AR unassigned
2) Assignment • Total interest deducted in AR assigned xx
- specific assignment advance + AR unassigned xx AR assigned
- Equity = Assigned AR balance less LP balance (if discounted Total A/R reported @ BSD xx
3) Factoring (AR) • Factor’s fee (based on AR AR factored xx Sales Price (less TC if any) xx
Default: without recourse (sale) factored) Factoring fee (xx) CV of AR factored (xx)
With recourse (loan) • Factor’s holdback (based on AR Sales/ Purchase Price xx (AR – allowance, if any) _______
G/L on factoring xx
factored or sales price) Factor’s holdback (xx) (if w/o recourse)
Proceeds xx
4) Discounting (NR) • Discount charged by the bank Face Value xx
Default: with recourse (loan) (maturity value x Discount rate x Discount period) Total Interest for the entire term xx
Without recourse (sale) (customer) _________
Maturity value xx
Discount for the remaining term (bank) (xx)
Proceeds xx
Proceeds (less TC if any) xx
CV of NR discounted (xx)
(face value + interest earned) _______
G/L on discounting xx
(if w/o recourse) Interest earned = Face value x Int. rate x Holding period
(customer)
Note: Due to :L
Advances from :L Due From :A
Advances To :A
 4703: INVENTORIES
Initial recognition: at cost
Components of cost: Periodic Perpetual
Purchase • Weighted Average • Moving average
Purchase price xx • Average periodic • Average perpetual
𝑇𝐺𝐴𝑆
Import duties xx Wtd. Ave. Unit Cost =
Non-refundable purch. Taxes xx 𝑇𝑈𝐴𝑆
Trade discount & rebate (xx)
FAQS:
xx
Cost of EI = EI units x WAUC
Conversion COGS = Unit sold x WAUC
DL + FOH xx LCNRV
Directly Attributable Cost xx NRV = Est. SP – Est. CTS – Est. CTC
COST xx ✓ Cost > NRV = Writedown/ impairment loss
✓ Cost < NRV = No writedown/ impairment loss
Buyer Note
1. Free Alongside Ship (FAS) Include Exclude cost alongside the vessel
In transit → Shipping point
2. Cost, Insurance, Freight (CIF) Include Exclude cost of Insurance and
In transit → Shipping point Freight
3. Delivered Ex-Ship (DES) Exclude
4. Buyback/Repurchase Agreement Exclude Owner: Seller
(inventory financing)
5. Bill & Hold and special order Include
6. Layaway sale (installment, stated) Include If fully paid @ BS date
Methods of Recording Writedown and Reversal of Writedown
Direct Method Allowance
1) COGS Inventory @ LCNRV Inventory @ cost
2) Allowance account - none - Contra- inventory
3) EI reported @ SFP LCNRV Cost xx
Allowance (xx)
xx
Raw Materials Measurement WD to NRV?
1) NRV > Cost Cost No
2) NRV < Cost NRV / replacement cost Yes
Retail Inventory Method
Step 2: Adjusted Net Sales
Step 1: TGAS
Cost Retail Sales xx
Beginning Inventory xx xx Sales Returns (xx)
Purchases xx xx Employee Discount xx
Freight In xx Normal loss xx
Purchase returns (xx) (xx)
Adjusted Net sales xx
Purchase discount & allowances (xx) Note: Ignore Sales Discounts and allowances in computing Net Sales
Mark-up xx → no physical return/transfer
Mark-up cancellation (xx)
Step 3: Retail Inventory Method
Mark-down (xx)
1) TGAS @ Retail xx
Mark-down cancellation xx
2) Adjusted Net Sales (xx)
Departmental transfer – IN xx xx
Est. EI @ Retail xx
Departmental transfer – OUT (xx) (xx)
Cost ratio %
Abnormal Loss (xx) (xx) Est. EI @ cost xx
TGAS xx xx
 ADJUSTMENT TO NUMERATOR AND DENOMINATOR
Average FIFO Conventional
None Deduct BI NONE
𝑻𝑮𝑨𝑺 @ 𝑪𝑶𝑺𝑻
CR = None Deduct BI Add back Net Markdown
𝑻𝑮𝑨𝑺 @ 𝑹𝑬𝑻𝑨𝑰𝑳
Gross Profit Method CPR based on Sales 4704: PROPERTY PLANT & EQUIPMENT
TGAS @ Cost xx Adj. Net Sales x CR
Initial recognition: at cost
Est. COGS (xx)
CPR based on Cost Components of cost:
___ Adj. Net Sales ÷ CR 1) Purchase price xx
Est. EI xx Import duties xx
Non-refundable purch. Taxes xx
Trade discount & rebate (xx)
2) Directly Attributable Cost xx
Damaged goods @ NRV (xx) 3) PV of Est. Dismantling cost xx
Per count xx Undamaged goods @ Cost (xx)
Est. shortage or Est. inventory
loss due to theft xx loss due to casualty xx Initial cost of PPE xx
1) Purchase Price: Mode of Acquisition
a. Cash basis Cash paid
b. Deferred payment basis
→ short-term with available cash discount NET method
→Long-term Cash equivalent price (if no cash equivalent price);
PV of future cash outflows xx
Downpayment , if any xx
Xx
 c. Issuance of shares
d. Donation
e. Construction of own asset
f. Exchange
With commercial substance:
FV asset given up
Cash paid/ given up or
Cash received
Purchase price
Gain or loss:
FV asset given up (SP) xx
CV asset given up xx_
Gain or loss xx(xx)
2) Not DACs [TARA SOGO]
Training cost
Abnormal loss
Relocation/Reorg. Cost
Administrative cost
1) FV of asset received
2) FV of shares issued @ acquisition date
Whichever is more determinable
FV of Asset received
DM + DL + FOH + Capital Borrowing Cost
a. FV with commercial substance
b. CV w/o commercial substance
of asset given up adjusted for any cash paid (+) or
cash received (-)
Without commercial substance:
xx CV asset given up xx
xx Cash paid/ given up or xx
(xx) Cash received (xx)
xx Purchase price xx
Gain or Loss: none
Selling cost
Opening a new facility
General overhead cost
Operating loss (Initial)
Borrowing Cost
1) Specific Borrowing 2) General borrowing only
Actual interest xx *Actual interest
Income, if any (xx) Whichever is lower =
*Ave. interest
Capitalized BC xx capitalized BC
(WAAE x AIR)
3) Hybrid (Specific & general) 𝑇𝑜𝑡𝑎𝑙 𝐴𝑐𝑡𝑢𝑎𝑙 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡
Note: AIR =
𝑇𝑜𝑡𝑎𝑙 𝑏𝑜𝑟𝑟𝑜𝑤𝑖𝑛𝑔
Step 1: Get WAAE
Step 3: Allocate WAAE
Date Expenditures
1/1 800,000 x 12/12 = 800,000
1,100,000
4/30 300,000 x 8/12 = 200,000
11/1 600,000 x 2/12 = 100,000
SB GB (excess)
WAAE 1,100,000
Step 2: Get AIR (usually in general borrowing) 1M x 12% x12/12 =
• 3M x 10% = 300,000 100,000 x 12% x12/12 = 12,000
120,000
• 2M x 15% = 300,000 vs.
Income 0______
Actual int: 600,000
5M 600,000 Cap. BC 120,000
Total borrowing Total actual interest
600,000
= 12% Actual expenditures 1,700,000
5,000,000
(800K + 600K + 300K)
Capitalized Borrowing Cost 132,000
(120K +12K)
1,832,000
Depreciation
Time factor:
Multiple asset:
𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡
1) SL → 1) Group (similar) Composite rate x cost
𝑢𝑠𝑒𝑓𝑢𝑙 𝑙𝑖𝑓𝑒
2) Composite (dissimilar)
𝑈𝑠𝑒𝑓𝑢𝑙 𝑙𝑖𝑓𝑒
2) SYD → 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡 𝑥 𝑆𝑌𝐷
Note:
𝑇𝑜𝑡𝑎𝑙 𝑑𝑒𝑝.𝑐𝑜𝑠𝑡
3) Declining balance → CV, beg x Fixed rate* Composite life =
𝑇𝑜𝑡𝑎𝑙 𝑎𝑛𝑛𝑢𝑎𝑙 𝑑𝑒𝑝.
𝑇𝑜𝑡𝑎𝑙 𝑎𝑛𝑛𝑢𝑎𝑙 𝑑𝑒𝑝.
2 (𝐷𝐷𝐵)𝑜𝑟 1.5 (150% 𝐷𝐷𝐵) Composite rate =
∗ 𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡.
𝑢𝑠𝑒𝑓𝑢𝑙 𝑙𝑖𝑓𝑒
Use Factor
Service hours Dep. Rate per hr. =
𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡
= Actual hrs x Depreciation rate per hr. 𝑇𝑜𝑡𝑎𝑙 𝑒𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 ℎ𝑜𝑢𝑟𝑠
Unit of output Dep. Rate per hr. =
𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡
= Actual units x Depreciation rate per unit 𝑇𝑜𝑡𝑎𝑙 𝑒𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 𝑢𝑛𝑖𝑡𝑠
Change in Accounting Estimates → Prospective Application (NOT retro)
i) Retrospective Application – policy ii) Retrospective Restatement – Error
STEP 1 STEP 2: Determine the revised method, revised residual
Cost xx value and remaining useful life
AD (xx)
CV @ date of change xx
Cap. Expenditure, if any xx
Revised cost for subsequent depreciation xx
Depletion/ Wasting Asset
Recovery from Impairment (Limit)
Cost of Wasting Asset (COWA) – [DEAR]
CV w/o impairment xx
1) Acquisition cost CV w/ impairment (xx)
2) Exploration cost Limit on recovery xx
(Gain on recovery)
Outcome Successful Full cost
efforts Impairment date Recovery date
Successful Capitalized Capitalized CV w/o Impairment xx xx
Unsuccessful Expensed Capitalized CV w/ Impairment (xx) (xx)
Impairment loss xx xx
3) Development cost → intangible
4) Restoration cost → PV (PV of single payment) Revaluation Surplus (for revaluation model only)
Recoverable value xx
1 𝐶𝑂𝑊𝐴−𝑅𝑒𝑐𝑜𝑣𝑒𝑟𝑎𝑏𝑙𝑒 𝑣𝑎𝑙𝑢𝑒
Depletion rate = (if more than CV w/o Impairment)
𝑇𝑜𝑡𝑎𝑙 𝑒𝑠𝑡.𝑢𝑛𝑖𝑡𝑠 𝑡𝑜 𝑏𝑒 𝑒𝑥𝑡𝑟𝑎𝑐𝑡𝑒𝑑 CV w/o Impairment (xx)
2 Revaluation Surplus xx
Depletion = 𝐴𝑐𝑡𝑢𝑎𝑙 𝑢𝑛𝑖𝑡𝑠 𝑥 𝐷𝑒𝑝𝑙𝑒𝑡𝑖𝑜𝑛 𝑟𝑎𝑡𝑒 1st time Based on cost Based on Revalued Amt
Gross xx xx
Updated at A/D (xx) (xx)
Impairment Net xx xx
impairment date
Impairment loss → RV < CV Fair Value
Sound value
Depreciated/
1
FVCTS Whichever Net replacement
2
Value in Use is higher
cost
1
Fair Value – Cost to sell
2
Value in Use (VIU)
PV of Net CF from continuing use xx
PV of Residual Value, if any xx
VIU xx
 4705: INTANGIBLES
1) PATENT
Legal life: 20 years or 5) GOODWILL
Useful life → if purchased through BUSCOM – asset
Cost: licensing & other related → if internally developed – outright expensed
Legal fees → subsequent costs are expensed in all cases
2) FRANCHISE 6) RESEARCH & DEVELOPMENT
Definite or useful life – shorter → development phase – recognized as intangible
Indefinite life – not amortized but asset
test for impairment Note: if cannot distinguish the research phase from
3) TRADEMARK development phase, it is as if the expenditure was
Legal life: 10 years (renewal) incurred during the research phase only.
→ not amortized but subject to
Impairment GUIDELINES:
a) Purchased – Purchase price or Cash • It is identifiable and non-monetary asset,
Price Equivalent non-current asset
b) Developed – filing fees, registry and other. • Life: finite → amortized
4) COMPUTER SOFTWARE Indefinite → not amortized
a) Expensed - before tech feasibility • Amortization: if silent → SL method
b) Capitalized – after tech feasibility → shorter rule: useful life vs. legal life
- Cost to produce product master • Initial recognition: at cost
c) Inventory – production/duplication • BS date measurement: cost model or
of software from the PM. revaluation model
• Expenses paid to defend – expensed
 4706A: INVESTMENT IN EQUITY SECURITIES
Investment in Equity Securities FVPL FVOCI
Initial cost PP PP + TC
Ordinary Share Preference share (exclude accrued
(voting) (non-voting)
dividend)
Dividend Income Income
CV, BS date FV FV
→ FVPL UG/UL current P/L section of SCI OCI section of SCI
→ FVOCI → FVPL UG/UL, ending` -none- Cost – FV
→ Investment in → FVOCI
Associate
cumulative (SHE of SFP)
(20% - 50%) G/L on sale (P/L) NSP – CV Actual cost to sell
Amount -none- Fair value - cost
transferred to RE
Equity Investment at FV upon sale
1) Trading → FVPL
2) Non-trading
a) Irrevocable choice to report UG/UL in P/L → FVPL Declaration Record Payment
b) Irrevocable choice to report UG/UL in OCI → FVOCI Dividend ON EX – Dividend
Date of acquisition Date of acquisition
Dividend FV Investment Inv. in Assoc
(equity method)
Cash Dividend income ↓ CV of Investment Investment D/R Investment only
(ROI)
Date of Acquisition: Date of Payment: Date of Acquisition:
Property (@FV) Dividend Income ↓ CV of Investment FVPL/FVOCI xx Cash xx FVPL/FVOCI xx
D/R xx D/R xx Expense (if FVPL) xx
Share/Bonus issue
Expense (if FVPL) xx
→ same class Memo entry Memo entry
Cash xx
→ Different class (@FV) Dividend income ↓ CV of Investment
 Memo entry CV of investment ↑↓ shares Value per shares
Share split/split UP ✓ No effect ↑ ↓
Reverse share ✓ No effect ↓ ↑
split/split DOWN
Notes:
1) Shares received in lieu of cash dividend (↑CV of Investment)
• Recognized as dividend income @ FV of shares received
• Recognized as Dividend income @ cash dividend that would have been received (if the FV of
shares received is not determinable/given)
2) Cash received in lieu of share dividend (↓CV of Investment)
• “As if” shares were received and later sold
• Gain or loss is recognized
PFRS 9: No impairment loss should be recognized on FVPL and FVOCI Equity Investment
 INVESTMENT IN ASSOCIATES
(20% to 50% interest)
Investment in Associate
1) Initial Cost PP + TC – Dividend ON
BB SNL (adjusted)
2) Dividend ↓CV of Investment SNI (adjusted) SOCI – loss
3) SNI/SNL/SOCI ↑↓ CV of Investment SOCI gain Dividends received
4) CV, BS date equity method Gain on BP Impairment loss
5) UG/UL -none- EB
6) G/L on sale to P/L NSP less CV
Unadjusted SNI(SNL) xx
7) Amortization of GW PAS 28: NO
Share in:
SME: Yes Understatement of expenses (xx)
Overstatement of Expenses xx
Associate with Preference share 1
Adjusted SNI(SNL) xx(xx)
SNI = % x (NI – Preference Dividends)
→ Cumulative – deduct PD whether declared or not
Cash paid to associate xx
→ Non-cumulative – deduct PD when declared only
FV of NA acquired (xx)
Note: Ignore any dividend in ARREARs/prior periods 2
GW or Gain on BP xx(xx)
Undeclared dividends in computing SNI
(applicable to cumulative only)
Note: Cash paid > FVNAA → GW
OCI: Income & expense items not directly reported in P/L Cash paid < FVNAA → GBP
Changes in Revaluation Surplus
Changes in FV (UG/UL) of FVOCI
Actuarial G/L on DBP
Translation G/L
G/L on Cash Flow Hedge
 Investment in Associates: Cessation
Cessation
• Loss of significant influence
• -Stop using the equity method
• Reclassify the remaining CV of investment at cessation date
• Difference between the remaining CV of Investment in Associate and FV at Cessation date to P/L
(whether reclassified to FVPL or FVOCI)
% of ownership will decrease due to
FV (S₱) xx unexercised pre-emptive right
CV (xx) Dilution
Cessation G/L xx Significant influence is retained
Before recycling of SOCI
FAQS:
1) Total Dilution gain or loss
Recycling of SOCI (xx) 2) CV of Investment in Associate
Total cessation xx a) SP of Investment “deemed’’ sold xx
on G/L (taken to P/L) b) CV of Investment “deemed’’ sold (xx)
c) Dilution G/L bef. recycling SOCI xx(xx)
d) Recycling of SOCI xx(xx)
Total Dilution G/L xx(xx)
sold unsold & reclassified 1Total proceeds from issuance of shares x % after dilution
% 𝑑𝑒𝑒𝑚𝑒𝑑 𝑠𝑜𝑙𝑑
x CV of investment before dilution 2
Gain/Loss G/L on reclassification 𝑜𝑟𝑖𝑔𝑖𝑛𝑎𝑙 %
3JE: Dilution loss xx Inv. In assoc. xx
Inv. In assoc. xx Dilution gain xx
FV Investment: Dividend Income - recognized only
when declared % 𝑑𝑒𝑒𝑚𝑒𝑑 𝑠𝑜𝑙𝑑
x SOCI 4
𝑜𝑟𝑖𝑔𝑖𝑛𝑎𝑙 %
1) Declaration Cumulative or
2) No declaration non-cumulative JE: UG xx Dilution loss xx
Dilution gain xx UL xx
Recycling: process whereby items previously recognized in OCI are subsequently reclassified to P/L
Reclassification adjustments: a) UG/UL of debt investments b) Translation G/L c) G/L on CFH
Alternative Solution: Total Dilution G/L
SP of Investment “deemed” sold xx
CV of Investment “deemed” sold (xx)
(without SOCI) ______
Total Dilution G/L xx(xx)
CV of Investment after Dilution G/L
CV of Investment before Dilution xx
+ Dilution G/L xx(xx)
Add back: SOCI (recycled) xx
Step Acquisition (FV Inv. → Inv. in Assoc.)
→ Investment in Associate achieved in stages
→ Previously Held Interest (PHI) is measured at FV
Formula:
Addt’l shares acquired (ASA) at FV xx
Previously Held Interest (PHI) at FV xx
Initial Cost of Investment in Associate xx
(ASAPPHI at FV)
 4706B: INVESTMENT IN DEBT SECURITIES
FVPL FVOCI IAC
Initial cost (exclude AI) PP PP + TC PP + TC
Interest Income Nominal interest Effective interest Effective interest
(FV x NR) (AC x ER) (AC x ER)
Amortization of -none- Nominal – Effective Nominal – effective
Premium/Discount
CV, BS date Fair Value Fair Value Amortized cost
UG/UL
-current period P/L section OCI OCI of SCI -none-
- ending balance -none- SHE of SFP -none
(cumulative)
G/L on sale taken to P/L NSP less FV NSP less AC NSP less AC
Accrued interest (FV x NR): FV, NR, Time Fair Value, BS date (FVPL/FVOCI)
1
Date of Acquisition 1) Total amount
2
3
Date of Sale ≠ Interest payment dates 2) Quoted Price: FV x QP
BS date 3) Effective Rate: PV of FV & Interest
AC, BS date: (1) Amortization table
1) Date of Acquisition
(2) Shortcut: CV/AC x ER - Inflows
Initial cost: Exclude AI
Cash paid: Include AI Treatment & JE
2) Date of sale To record nominal interest Formula: FV x NR
G/L on sale: exclude AI Cash or I/R xx
Cash received: Include AI Int. Income xx
3) BS date: To record amortization Discount
Investment xx
Interest receivable xx (FVOCI & IAC) Int. Income xx
Interest income xx Premium
Int. Income xx
Investment xx
 UG/UL (Change in FV)
FVPL FVOCI
CV before rem. to FV, BS date xx AC, BS date xx
Fair Value, BS date (xx) FV, BS date (xx)
UG/UL, taken to P/L xx(xx) UG/UL, ending bal. (SHE of SFP) xx(xx)
RECLASSIFICATION
Reclassification of Debt Investment Reclassification of Equity Investment
• Change in business model Cessation: Investment in Associate → FV Investment
• Prospective application Step Acquisition: FV Investment → Investment in Associate
• Reclassification date – start of the next
accounting period following the change in BM
IAC to FVPL FVOCI
Initial CV FV FV
G/L on reclassification (AC – FV) P/L OCI
Amortization -none- NI -EI
Interest income Nominal Interest Effective Interest (based on ER)
CV, BS date FV FV
UG/UL, current period P/L section of SCI OCI section of SCI
UG/UL, Ending balance -none- Equity section of SFP
 FVPL to FVOCI IAC
Initial CV FV FV
G/L on reclassification (AC – FV) -none- -none-
Amortization NI – EI NI -EI
Interest income Effective Interest (based on new ER) Effective Interest (based on new ER)
CV, BS date FV AC
UG/UL, current period OCI section of SCI -none-
UG/UL, Ending balance SHE section of SFP -none-
FVOCI to FVPL IAC
Initial CV FV AC
Cumulative UG/UL balance Transferred to P/L Adjusted against FVA (back to AC)
Amortization -none- NI -EI
Interest income Nominal Interest Effective Interest (based on orig ER)
CV, BS date FV AC
UG/UL, current period P/L of SCI -none-
UG/UL, Ending balance SHE section of SFP -none-
 4706B: INVESTMENT PROPERTY & OTHER INVESTMENT
PAS 40
→ For rentals – Real Properties (i.e. land, building)
Purpose:
1) For rental to other under operating lease
2) Undetermined future use
3) Capital appreciation (speculation)
4) Under construction for use as investment property
CLASSIFICATION
Stream of Cashflow
1) Rental income – manage by independent 3rd Investment Property
party
2) Room Income -normal operations PPE
Ancillary Services
1) Insignificant – ex: maintenance & security Investment Property
2) Significant PPE
Portions used for operating services/purposes
1) Capable of being separated: significant/stand-
alone SP
a) Rentals Investment Property
b) Admin or production PPE
2) Not capable of being separated: insignificant/ NO
stand-alone SP
Majority of:
a) Rentals 100% Investment Property
b) Admin or production 100% PPE
Initial recognition: at COST General rule:
Net Purchase Price Pxx 1) FV/Cost model applies to ALL investment property
DACs xx 2) Property interest held under operating lease and qualified and
reported as IP has to use FV model only.
PV of any restoration cost xx
(dismantling cost) _____
Change in Use (Reclassification)
Total xx
1) Held for sale – Inventory
2) Owner-occupied property – PPE
Subsequent Measurement 3) For rentals – Investment property
1) Cost model
Cost xx If cost model was used:
1) The CV at date of reclassification is the initial carrying value of
Less: Accum. Dep’n (xx)
new reclassification
Accum. IL (xx) 2) No G/L on reclassification
Carrying Value xx
Date of reclassification
If FV model was used:
(PAS 16)
2) FV model – Fair Value 1) Investment property → Inventory
2) Investment property → PPE → FV on date of reclassification is
the initial CV of new
COST FV 3) Inventory → PPE reclassification.
Initial recognition cost cost 4) PPE → Investment Property → Difference = G/L on
Depreciation expense ✓ × reclassification
Impairment (CV > RV) ✓ × FV > CV = Increase → Gain on recovery, any
Changes in FV × ✓ (unrecovered IL) - P/L
(reported in P/L) → Revaluation Surplus - OCI
Rental income ✓ ✓ FV < CV = decrease → Charge to Revaluation Surplus
→ Excess: Impairment loss
Disposal/Sale of Investment Property
Cash Surrender Value (CSV)
Cost Model FV model
→ life insurance policy – the company is the
Net Selling Price Pxx Net Selling Price Pxx
beneficiary
Less: CV of IP (xx) Less: Prev. FV (xx)
→ CSV = value at the end of 3rd year
(@ date of sale) _____ G/L on sale xx
Life Insurance Expense (LIE)
G/L on sale xx
Payment of Premium (annual)
LIE xx
Expense xx
Established: Investment Income → Deduction to LIE
BSF xx ✓ If increase to CSV (no cash settlement)
Bond Sinking Fund Cash xx
CSV xx
Investment:
BSF xx LIE XX
SF Income xx ✓ If settled in cash (silent)
Expenses xx Cash xx
BSF xx LIE xx
Related cost on Increase in CSV → Deduction to LIE
Administration of fund Specific Investment: CSV xx
BSF – equity sec xx LIE XX
Cash/BSF xx Gain on insurance settlement:
Proceeds Pxx
Less: CV of CSV @date of death (xx)
BSF: T- Account Any unexpired portion of premium paid (xx)
Gain on insurance settlement xx
First time recognition of CSV: 1/3, 2/3 rule
CSV (100%) xx
LIE (1/3) xx
RE (2/3) xx
 4707: GOVERNMENT GRANT & AGRICULTURE
Government grant (PAS 20) 2
Grant related to Asset
Government Assistance
Depreciable Asset Choice:
1
Reimbursement of Past 1) Deferred Income (FV) approach [silent]
expense Current & future 2) Deduction to the cost of asset
2 Depreciable Asset
Related to Depreciable
assets Non-depreciable
Deferred income Deduction
3
Below market rate
of interest loan Government loan
Recognize the asset & Asset xx
1 unearned income at FV Cash xx
Reimbursement of expense
EXPENSES Asset xx GG is deducted from cost
Past Current & Future UI xx Cash xx
(already incurred) Asset xx
Immediately in P/L Recognize income in
the period where Unearned Inc xx Note: No Unearned
Cash xx expense was incurred Inc. form GG xx Income/Income from GG
Inc. from GG xx
Note: silent → SL
Pattern of expenses
Income from GG: condition was satisfied
PIT – one-time recognition
Period of time – every time the condition was satisfied
→ Pattern of expenses = Pattern of Income
 3
Below Market Rate Loan
Non-depreciable Asset • Difference of proceeds (FV) and PV of the loan is
the unearned income from government grant.
Deferred income Nominal Cash xx
Discount on NP xx
NP/LP (@face) xx
Land → FV Record the land at UI from GG xx
Unearned → FV nominal account
amortized! Land xx
• Amortization of discount = Income from GG
Cash xx Int. exp (EI) xx
Land xx Cash (NI) xx
UI xx
Disc Np/LP xx
Note: No recognition of
Same with:
UI from GG/ Income
Unearned Inc. xx from GG UI from GG xx
Inc. form GG xx Inc from GG xx
Interest free → nominal interest = 0
Nominal amount:
Deduction to UI Effect on P/L = 0
UI xx
Cash xx
Initial balance of UI
= FV – Nominal acct paid
 Price change → SADD [ ]
Agriculture (PAS 41) (Same Age, Different Date)
Biological Assets
→ living plants – XPN: bearer plants Physical change → SDDA [🐟]
→ living animals – XPN: zoo animals (Same Date, Different Age)
+ FV-CTS of newborn bearer animal
Initial & Subsequent measurement:
→ at FV less CTS Bearer Plants (PAS 16)
1) Used on production or supply of agricultural
Fair Value - CTS (@farm)
product
2) Expected to bear produce for more than 1
Inclusions:
period.
✓ Farm Gate Price Commission to brokers 3) Remote likelihood to be sold as agriculture
(active MP – Transpo cost) Levies to authorities
Transfer taxes & duties produce
× Active MP (Auction Price)
→ include transpo cost Exclusions: Initial cost of Bearer Plants: cost directly attributable to
Income taxes
Finance cost
Transpo cost &
other cost to
BP up to peak of MATURITY.
market Ready for commercial harvest
1) Direct Materials → seedlings
Changes in FVCTS is reported at P/L 2) Direct Labor → salaries Dual purpose
3) Overhead → depreciation of equipment Bearer → BA
1) Price change 4) Borrowing cost Plant
Mature → expense Single purpose
2) Physical change Immature → capitalized → PPE
 4708: DISCONTINUED OPERATIONS AND NON-CURRENT ASSET HELD FOR SALE
PFRS 5: Non-current Asset Held For Sale (Disposal group)
Can be classified as NCAHFS if:
1) Must be available for immediate sale in its present condition – the CV of the asset will be recovered
principally through a sale transaction
XPN: Customary for such sale (ex: transfer title, payment of regulatory fees)
2) The sale must be highly probable
Conditions (to be highly probable):
• Must be committed to a plan to sell the asset
• An active program to locate a buyer
• A completed sale within one year from the date of classification
Extension allowed if: 1) the delay is caused by events or circumstances beyond the entity’s
control and 2) there is a sufficient evidence that the management is still committed to plan
to sell the asset.
• Must be actively marketed for the sale at a price that is reasonable in relation to its current
fair value
Note: Abandoned assets is not qualified as NCAHFS; still a PPE.
Measurement: Initial Recognition
Whichever is LOWER:
a) Carrying Value
b) FVCTS (or Recoverable amount)
Results:
1) CV < RA
→ the NCAHFS is initially recognized at CV = No Impairment Loss
2) CV > RA
→ the NCAHFS is initially recognized at RA = recognized Impairment Loss (P/L as Discontinued
Operation)
NCAHFS xx
Impairment loss xx
Accum. Dep’n xx
Asset (Cost) xx
Note:
➢ Once it is reclassified as NCAHFS, it is NO LONGER SUBJECT TO DEPRECIATION
➢ If at year-end, the NCAHFS still unsold, the asset shall be remeasured.
Measurement: Subsequent – Increase/Decrease in FVCTS
1) Decrease – additional Impairment Loss
2) Increase - Gain on recovery but not to exceed any cumulative IL previously recognized;
Illustration:
Reclassification: NCAHFS → NCA
Whichever is LOWER:
• CV of NCA w/o Reclassification as NCAHFs
• RV (FVCTS or VIU, higher)
• Recognize G/L on reclassification
Discontinued operations
A component of an entity that either has been 1disposed of, or is 2classified as held for sale and 3represents a
separate major line of business or geographical area of operations, 4is a part of a single coordinated plan to
dispose of a separate major line of business or geographical area of operations or 5is a subsidiary acquired
exclusively with a view to resale
Revenues xx Present in the face of SCI as a component of P/L,
Expenses (xx) net of tax.
Relocation/termination cost xx
Impairment loss (if unsold) (xx) ➢ Income from continuing operation
G/L on disposal (if sold) xx(xx) ➢ Income from discontinued
Income tax benefit (expense) xx(xx) operation, net of tax
Discontinued operation net of tax xx
 4709: TRADE PAYABLES, PROVISIONS & OTHER CURRENT LIABILITIES
1
BREACH OF UNDERTAKING → LONG-TERM DEBT 2
REFINANCING OF SHORT-TERM DEBT
GR: classified as current liability → payable demand Q: Discretion or Right to Refinance at balance sheet date?
XPN: classified as NCL only if the lender agreed: × NO → CL
1) On or before the balance sheet date ✓ YES:
2) NOT to demand payment for at least 12 months → ST refinancing: current liability
after the balance sheet date → grace period to → LT refinancing
rectify the breach 1) Partial amount → a) CL b) NCL
2) Full amount → NCL
In a nutshell:
In a nutshell:
Original liability: NCL
Original liability: NCL
Current Liability? Non-current liability
Current Liability? Non-current liability
✓ Without discretion or ✓ With discretion or
GR XPN right at BSD
right at BSD
✓ Short term refinancing ✓ Long term refinancing
✓ Partial refinancing (Partial or Full)
3
Provision (PAS 37) Journal entry: Note:
• Liability of uncertain timing or amount Expense/Loss xx Est. Maximum amount xx
• Probable AND Measurable Provision xx Provision recognized (xx)
• Best estimate Contingent Liability xx
(disclosure only)
3.1 3.2
Onerous Contract: Non-cancellable Purchase Commitment Provision for Decommissioning/Restoration Cost
Idea: Unavoidable cost to fulfill the contract > Economic benefits
→ Cost/Loss to cancel the contract Provision
vs. LOWER → PROVISION BB xx
→ Cost/Loss to continue the contract Interest/Accretion xx
Expense xx
Warranty: Assurance vs. Service
Assurance Service BB × %
Separately sold × ✓
Stand-alone FV/SP × ✓ EB xx
Standard PAS 37 PFRS 15
P/L account Warranty Warranty
expense income
BS account Provision for Unearned Service Type Warranty (PFRS 15)
warranty warranty
Total Sales with WARRANTY
3.2
Assurance Type Warranty
Warranty Liability
Actual repairs xx BB xx Goods Warranty
Expired warranty xx Est. warrant cost xx
𝐩𝐞𝐬𝐨 𝐬𝐚𝐥𝐞𝐬
est. % ×
𝐮𝐧𝐢𝐭𝐬 𝐬𝐨𝐥𝐝
EB xx ✓ Outright income ✓ Unearned income
✓ Sales account ✓ Unearned warranty
Est. warranty cost xx
Expired warranty (xx) account*
Warranty expense for the period xx Allocate based on their relative FV
*Unearned warranty shall be realized as warranty income over the warranty period on straight line basis or
pattern of repairs.
Customer Loyalty Award Credits (CLAC) Accounting for Premium
Total Sales with CLAC Total Sales with PREMIUM
Goods CLAC Goods PREMIUM
✓ Outright income ✓ Unearned income ✓ Outright income ✓ Unearned income
✓ Sales account ✓ Unearned CLAC* ✓ Sales account ✓ Unearned premium
Allocate based on their relative FV account*
Allocate based on their relative FV
*Unearned CLAC shall be realized as CLAC *Unearned premium shall be realized as premium
income based on actual points redeemed. income based on actual premiums redeemed.
𝒂𝒄𝒕𝒖𝒂𝒍 𝒑𝒐𝒊𝒏𝒕𝒔 𝒓𝒆𝒅𝒆𝒆𝒎𝒆𝒅 𝒂𝒄𝒕𝒖𝒂𝒍 𝒑𝒓𝒆𝒎𝒊𝒖𝒎
𝑪𝑳𝑨𝑪 𝒊𝒏𝒄𝒐𝒎𝒆 = 𝒙 𝑼𝒏𝒆𝒂𝒓𝒏𝒆𝒅 𝑪𝑳𝑨𝑪 𝑷𝒓𝒆𝒎𝒊𝒖𝒎 𝒊𝒏𝒄𝒐𝒎𝒆 = 𝒙 𝑼𝒏𝒆𝒂𝒓𝒏𝒆𝒅 𝒑𝒓𝒆𝒎𝒊𝒖𝒎
𝑬𝒔𝒕.𝒑𝒐𝒊𝒏𝒕𝒔 𝒕𝒐 𝒃𝒆 𝒓𝒆𝒅𝒆𝒆𝒎𝒆𝒅 𝑬𝒔𝒕.𝒑𝒓𝒆𝒎𝒊𝒖𝒎 𝒕𝒐 𝒃𝒆 𝒓𝒆𝒅𝒆𝒆𝒎𝒆𝒅
Note: Note:
𝐸𝑠𝑡. 𝐹𝑉 𝑝𝑒𝑟 𝑝𝑜𝑖𝑛𝑡 = 𝐸𝑠𝑡. % 𝑜𝑓 𝑟𝑒𝑑𝑒𝑚𝑝𝑡𝑖𝑜𝑛 × 𝑈𝑛𝑒𝑎𝑟𝑛𝑒𝑑 𝐶𝐿𝐴𝐶 𝐸𝑠𝑡. 𝐹𝑉 𝑝𝑒𝑟 𝑝𝑟𝑒𝑚𝑖𝑢𝑚 = 𝐸𝑠𝑡. % 𝑜𝑓 𝑟𝑒𝑑𝑒𝑚𝑝𝑡𝑖𝑜𝑛 × 𝑆𝑃 𝑜𝑓 𝑝𝑟𝑒𝑚𝑖𝑢𝑚
Compensated Absences
in days! Bonus Formula:
Liability for Compensated Absences Formula
Paid/used leaves xx BB xx NI before B & T B = BR × NI
Expired leaves xx Expensed/Incurred
(if any) NI after B before T B = BR × (NI – B)
leaves xx
NI after B & T B = BR × (NI – B - T)
T = TR × (NI – B)
EB xx NI after T before B B = BR × (NI – T)
T = TR × (NI – B)
Current period
Unused & unexpired leaves ×
(days) salary rate B: Bonus BR: Bonus rate T: Tax
Compensated Absences Expense
Incurred leaves xx
Expired leaves (xx)
Increase in salary rate xx
Comp. Abs. Exp. xx
 4710: FINANCIAL LIABILITY AT AMORTIZED COST, DEBT RESTRUCTURING & OTHER NCL
Bonds Payable
Initial CV (excluding AI) Issue Price less TC Retirement of Bonds Payable
Amortization of Premium or Discount NI – EI
Interest expense AC × ER Before maturity date On maturity date
Interest payable, BS date Face value × NR
CV, BS date Amortized cost Total Retirement Price/Cash paid xx
Accrued Interest, if any xx No Gain or Loss on
Retirement Price of BP xx Retirement
Accrued interest (FV x NR): FV, NR, Time Amortized cost (xx)
(AC = Face Value)
1 G/L on retirement xx
Date of Issuance
≠
(taken to P/L)
2
Date of Retirement Interest payment dates
BS date
Compound Financial Instrument
Date of Issuance Date of Retirement 1) Bonds with warrants → Right to acquire
→ Initial cost: Exclude AI → G/L on sale: exclude AI 2) Convertible bonds → Right to exchange
→ Cash received: Include AI → Total cash paid: Include AI
Issue Price with warrants/conversion option
Amortized cost, BS date:
Liability (without) Equity
1) Amortization table (last column)
2) Shortcut method (AC × 1.ER – Outflows)
3) Face Value xx
PBP (DBP) xx(xx) → Total amount → SWO: warrants
CV/AC xx → Quoted Price x Face Value → SP – BCP:
→ Effective rate (PV of FV & Int)
convertible
Journal Entries:
Exercise of warrants Conversion of Bonds
1) Cash xx 1) BP (face value) xx
OS (par/SV) xx Premium of BP xx
SP – O xx Discount of BP xx
2) SWO xx OS (par/SV) xx
SP – O xx SP – O xx
2) SP – BCP xx
SP – O xx
Note: SP from issuance of share xx
SP from transfer of SWO/SP-BCP xx
Total amount credited to share premium xx
Retirement of Convertible Bonds
Retirement Price with Conversion Option
Liability (without) Equity (residual)
Retirement Price xx Retirement Price xx
AC/CV (xx) AC/CV (xx)
Gain/Loss xx Gain/Loss xx
Taken to P/L Taken to Equity
Debt Restructuring
FAQs:
1) Percentage of difference
2) Gain on debt restructuring
Percentage of Difference
Total CV of liability due ₱xx
PV of new cash flow using old ER
(accrued interest ÷ FV of Note)
→ PV of new principal (xx)
→ PV of new interest (xx)
Difference xx
Divide by: CV of liability ÷xx
Percentage of difference xx%
Gain on Debt Restructuring
Total CV of liability due ₱xx
PV of new cash flow using new ER (xx)
Gain on debt restructuring xx
 4711: LEASES (PFRS 16)
(determinate/specific asset & exchange of payment)
Operating Lease → Option Subsequent measurement:
1) Straight-line amortization of periodic payments Depreciation expense
2) Amortization of lease bonus ✓ CPO → use EUL
Cost xx
→ included in total prepaid expense Less: SV (xx)
× CPO ✓GRV → use EUL or
3) Contingent rent Depreciable cost xx Lease term whichever is
Finance Lease → default Divide: EUL ÷x shorter or earlier
(capital lease)
Depreciation expense xx
LESSEE SHALL RECOGNIZE: a) Lease Liability b) ROUA
CV of ROUA xx
1
Lease Liability → PV of: Inc(dec) LL xx(xx)
Increase (decrease) in LL due to:
a) Fixed or periodic payment (variable) Total xx
a) Variable lease payments SV (xx)
→ net of incentives (free rent)
b) Lease modification New depreciable cost xx
b) Certain Purchase Option (CPO) or EUL/LT ÷x
New depreciation expense xx
c) Guaranteed RV New PV of LL xx
d) Penalties upon cancellation of contract Old CV of LL xx
Increase in LL xx(xx)
2
Right of Use Asset (ROUA)
Initial recognition:
1) PV of LL (before deduction of initial payment) xx → reimbursement of IDC
2) Initial direct cost (paid by lessee): net of incentives xx
3) PV of any restoration cost (dismantling cost xx → use lease term
Initial cost of ROUA xx
LESSOR SHALL RECOGNIZE: a) Net Investment b) Unearned Interest Income
1
Net Investment
Gross Investment (undiscounted) Net Investment (PV)
Periodic payment (fixed or variable) xx PV of payment xx
CPO xx PV of CPO xx
Residual Value (GRV or UGRV) xx PV of RV xx
TOTAL GROSS INVESTMENT xx IDC paid by lessor xx
NET INVESTMENT xx
2
Unearned Interest Income
Gross investment xx SP vs. FV
Net investment (xx) SP = FV → no additional financing nor prepayments
Unearned Int. Inc xx SP > FV → additional financing → deducted from LL (presumed FV)
SP < FV → prepayments → added to LL (presumed FV)
*Sales Type Lease (Dealers, Manufacturers)
𝐹𝑉 𝑟𝑖𝑔ℎ𝑡𝑠 𝑟𝑒𝑡𝑎𝑖𝑛𝑒𝑑
→ lease contract – to sell the asset 𝑅𝑂𝑈𝐴 =
𝑇𝑜𝑡𝑎𝑙 𝐹𝑉
𝑥 𝐶𝑉 𝑜𝑓 𝐴𝑠𝑠𝑒𝑡
At inception:
1) Net Investment Lease Liability (presumed FV) xx
2) Unearned interest income Less: Additional financing (xx)
Add: prepayments xx
3) Gross profit
FV of rights retained xx
Sales/Revenue → Lease Liabilility
Cost of sales → Cost/CV of Asset – PV of UGRV Fair Value CV of Asset Gain (loss)
Sale and Leaseback Total xx xx xx
Selling Price (Transfer proceeds) Retained (xx) (xx) (xx)
FV of Assets Transferred xx xx xx
Gain/loss Retained → not recognized
CV of Assets Transferred → recognized
 4712: INCOME TAXES
FTALE (-) FDAAB (+)
Income Statement Approach
Accounting Income > Taxable Income ✓
Accounting Income < Taxable Income ✓
Accounting Expense > Taxable Expense ✓
Accounting Expense < Taxable Expense ✓
Balance Sheet Approach
Accounting Asset > Taxable Asset ✓
Accounting Asset < Taxable Asset ✓
Accounting Liability > Taxable Liability ✓
Accounting Liability < Taxable Liability ✓
Total Income Tax Expense (TITE)
Pretax Financial Income ₱xx
Permanent Difference:
→ Non-taxable revenue (xx) Current (CITE) Deferred (DITE)
→ Non-deductible expense (xx)
Financial Income Subject to Income Tax (FISIT) ₱xx × % = TITE
Temporary Difference:
→ Future Taxable Amount (xx) × % = DTL
→ Future Deductible Amount (xx) × % = DTA
Taxable Income ₱xx × % = Current IT expense
 4713: POST-EMPLOYEE BENEFITS
FVPA DBO
BB xx Benefits paid xx Benefits paid xx BB xx
Interest Income xx Settlement price xx CV of addt’l DBO settled xx Interest expense xx
Contributions xx CSC
PSC
Bal. before remeas. xx Bal. before remeas. xx
Remeasurement loss (OCI) xx Remeasurement gain (OCI) xx
Remeasurement gain (OCI) xx Remeasurement loss (OCI) xx
EB xx EB xx
Total Defined Benefit Cost
Profit or Loss OCI
Service cost Interest
Remeasurement/Actuarial G/L:
1) FVPA
1) Current *net interest or 2) DBO
2) Past net defined benefit asset/liab, beg × % 3) Effect of Asset Ceiling → impairment loss
3) Settlement G/L
Note: Total Defined Benefit Cost xx Actual Return on Plan Assets:
Contribution (xx) 1) P/L → Interest Income = FVPA, beg × %
Overfunding or Underfunding xx 2) OCI → Remeasurement G/L on FVPA
 4714: SHAREHOLDERS EQUITY
Total Contributed Capital (Paid-In Capital)
1) Share Capital → items recorded at par value or stated value
• Issued: Ordinary & Preference share
• Subscribed: Subscribed OS & Subscribed PS
• Distributable: Share dividends distributable or Share dividends payable
2) Share Premium
a) Excess over par or stated value
• Issued
• Subscribed
• Distributable (small bonus issue)
• Treasury shares (gain on retirement & reissuance)
b) Others
• SWO → bonds with warrants
• BCP → Convertible Bonds
• Donated Capital → donation of shares or assets by shareholders
• SOO → Equity settled share-based payment
Legal Capital
• Share capital
• Share premium → only excess over par or stated value
Treatment for Subscription Receivable
✓ If collected within 12 months after BS date → Current Asset as Non-Trade Receivable
✓ If collectible beyond 12 months after BS date → Contra-equity (i.e. deduction from subscribed SC)
 Share-based Compensation
Subscription with Delinquent Shares Equity settled Cash settled
Subscription receivable balance xx Date of grant Share options Share Appreciation
Auction expense xx (memo entry) Rights (SARs)
Interest xx BS date measurement0 CE xx CE xx
SOO xx SARs payable xx
Total offer price/ xx
Date of exercise or Cash xx
Receivable from highest bidder
payment OS xx SARs payable xx
SP xx Cash xx
Stock Right
Transaction Journal Entry SOO xx
Issuance Memo entry SP xx
1Based on fair value or intrinsic value (excess MP over Exercise Price)
Exercise Cash xx 2No. of options/SARs expected to vest [original less actual less estimated]
OS (par/SV) xx 3Vesting Period
SP – O xx 4No. of options/SARS expected to vest
Expiration No entry Original employees xx
Redemption RE xx Actual employees left (xx)
Cash xx Est. employees expected to leave (xx)
Note: No. of options/SARs expected to vest xx
✓ No. of SR issued → No. of Outstanding Shares No. of options/SARs × x
✓ Policy → i.e. no. of SR submitted to purchase certain no. of shares xx
✓ Cash received → based on exercise price Note:
1) Market-based condition
→ CE is recognized whether the condition is achieved or not
Equity Swap
Gain on debt restructuring → If condition is not achieved → SOO xx
CV of original liability (taken to P/L)
SP – expired options xx
FV of shares issued or FV of liability Share Premium
2) Non-market-based condition
Par value of shares issued (taken to equity)
→ no CE is recognized if the condition is not achieved
→ If condition is not achieved → SOO xx
CE xx
Share-based with Cash Alternative
→ settlement chosen by:
1) Employee – compound instrument
2) Employer – cash-settled (present obligation)
Total FV of Compound Instrument
Liability Equity
(based on FV of SARs at Date of grant) (residual amount)
Journal entries:
Transactions Journal Entry
SARs payable xx
Cash xx
Settlement in Cash
SOO xx
SP expired options xx
SARs payable xx
OS xx
SP xx
Settlement in Shares
SOO xx
SP-O xx
 4715: RETAINED EARNINGS
Share Dividends: Bonus Issue
Declaration Distribution
Small (less than 20%) RE @FV xx SDD (par) xx
SDD xx OS (par) xx
SP – O xx
Large (20% or more) RE @par xx SDD (par) xx
SDD (par) xx OS (par) xx
NOTE:
Share Capital Share Premium Retained Earnings SHE
Small Increases Increases Decreases No effect
Large Increase No Effect Decreases No effect
Property Dividends
Measurement of Liability Measurement of Asset
Declaration date Fair Value NCA (PFRS 5)
BS date Fair Value NCA (PFRS 5), Inventory (PAS 2),
Investment (PAS 9)
Distribution date Fair Value None
Increase FV (PDP) Decrease FV (PDP) Gain/Loss Formula
RE xx PDP xx CV of PDP (FV @ Distribution date) xx
PDP xx RE xx CV of asset distributed (xx)
G/L on distribution (to P/L) xx
Cash Dividends
Non-Participating Participating
Total cash dividends xx Total cash dividends xx
Dividends to outstanding PS (xx) Dividends to outstanding PS (xx)
(current year) (current year)
Dividends to outstanding PS (xx) Dividends to outstanding PS (xx)
(prior year, cumulative) ____________ (prior year, cumulative)
Excess cash dividends to OS xx Dividends to outstanding OS (xx)
Excess cash dividends to OS & xx
Quasi-Reorganization Change in Accounting Policy
• RETROspective application
• Elimination of Deficit (Negative RE) • Adjustment to the BEGINNING balance of RE
• Write down of asset → RE xx Cumulative Effect of Change in Accounting Policy (CECAP)
Asset xx Cumulative NI/NL taken to RE (old policy) xx
• Recording of unrecorded Liability Cumulative NI/NL taken to RE (new policy) (xx)
RE xx CECAP/Net Adj. to the beg. Bal of RE xx
Payable xx Or Ending bal. of RE last year
• Recapitalization (e.g. reduction of par)
• Revaluation (i.e. Revaluation Increase) Note: RE, beg – unrestated xx
Share Premium or RS before QR xx CECAP xx(xx)
Recap/Reval. Increase xx COPPE xx(xx)
SP or RS balance xx RE, beg restated xx
Elimination on accum. Deficit (xx)
SP or RS balance after QR xx
Counter Balancing Error
Net Income: Year 1 Net Income: Year 2
Effect of errors Adjustment Effect of errors Adjustment
↓Sales Understated Add Overstated Deduct
↓Purchases Overstated Deduct Understated Add
↓Accrued Expense Overstated Deduct Understated Add
↓Accrued income Understated Add Overstated Deduct
↓Prepaid expense Understated Add Overstated Deduct
↓Unearned income Overstated Deduct Understated Add
↓Ending Inventory Understated Add Overstated Deduct
↑Ending Inventory Overstated Deduct Understated Add
Non-counter Balancing Error
Net Income: Year 1 Net Income: Year 2 RE as of Year 2
Effect Adjustment Effect Adjustment Effect Adjustment
Erroneous Capital Expenditure
→ Cost Overstated Deduct NE None ↑CV Deduct
→ Depreciation expense Understated add understated Add
Erroneous Revenue Expenditure
→ Cost Understated Add NE None ↓CV Add
→ Depreciation expense overstated deduct overstated deduct
 4717: Book Value Per Share vs. Earnings Per Share
𝑺𝒉𝒂𝒓𝒆𝒉𝒐𝒍𝒅𝒆𝒓′ 𝒔 𝒆𝒒𝒖𝒊𝒕𝒚
Book Value Per Share: Formula: 𝑶𝒖𝒕𝒔𝒕𝒂𝒏𝒅𝒊𝒏𝒈 𝑺𝒉𝒂𝒓𝒆𝒔
Step 1: Determine the Total Shareholder’s Equity
Step 3: Determine if the Preference Share is
Share Capital Xx
NON-PARTICIPATING or PARTICIPATING
Share Premium Xx
Retained Earnings Xx NON-PARTICIPATING
Accumulated OCI Xx Total SHE xx
Treasury Share (xx) LV of Outstanding P/S (xx)
TOTAL SHE Xx Dividends to P/S (xx)
Notes:
Excess SHE to Ordinary xx
Subscription receivables: not included in the computation of SHE.
Liquidation Value = Par Value + Premium, if any
• If current: classified as asset (Trade Receivable)
If dividends is cumulative → div. in prior periods are
• If Non-current: deductible to SHE
included
➢ For CPALE purpose, disregard S/R. If it is netted from
subscription shares, add back because it should not be
PARTICIPATING
deducted.
Total SHE xx
Step 2: Determine the Total Outstanding Shares
LV of outstanding P/S (xx)
Ordinary Preference Dividends to P/S (xx)
Issued shares xx xx LV of outstanding O/S (xx)
Subscribed shares xx xx Dividends to O/S (xx)
Treasury Shares (xx) (xx) Excess SHE to O/S & P/S
Allocate the excess SHE based on par value of
Outstanding shares xx xx
outstanding shares (i.e PV x outstanding shares)
Additional Notes:
➢ If silent: P/S assumed to be NON-CUMULATIVE and NON-PARTICIPATING
➢ Preference dividends in ARREARS usually include the CURRENT period dividend
➢ 2 classes of P/S with different dividends rates and both are participating, the LOWER rate shall be
the basis for the allocation to the O/S.
SAMPLE PROBLEM:
 Earnings Per Share ➢ Cumulative: NI – P/D [declared or not]
1) Basic Earnings Per Share (BEPS) ➢ Non-cumulative: NI – P/D [declared only]
2) Diluted Earnings Per Share (DEPS)
Net income attributable to Ordinary P/D [How much?
𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒−𝑃𝑟𝑒𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝐷𝑖𝑣𝑖𝑑𝑒𝑛𝑑
Formula: Cumulative with Declaration FULL amount
𝑊𝐴𝑁𝑂𝑆𝑂 Cumulative with Declaration FULL amount
Weighted Average No. of Ordinary Share Outstanding
Non- cumulative with Declaration Declared only
Non- cumulative w/o Declaration None
1
Basic Earnings Per Share Full amt. of Dividend = Fixed rate x Par value per share x Outstanding P/S
(BEPS)
Sample Problem: WANOSO & BEPS
P/D [How much?
Cumulative with Declaration FULL amount
Cumulative with Declaration FULL amount
Non- cumulative
Note: Anywith Declaration Declared only
subsequent
Non- cumulative w/ochanges
Declaration None
➢ toNon-cumulative:
shares (bonus issue NI – P/D [declared only]
or split, additional
issuance, actual Note: Weighted Ave. (time
conversion & TS), element) – count from the
should be applied issuance date
retroactively.
2
Diluted Earnings Per Share (DEPS) POS Adj. to Numerator Adj. to Denominator
Potential Ordinary Share 1
CPS P/D is not deducted Converted shares
➢ Convertible Preference Shares1
2
➢ Convertible Bonds2 CB Add back int. exp, net Converted shares
of tax
➢ Options and Warrants3 3
(Exercise Price > Average Market Price)
O&W No adjustment No. of shares assumed
issued w/o consideration ÷
𝐴𝑑𝑗𝑢𝑠𝑡𝑚𝑒𝑛𝑡 𝑡𝑜 𝑁𝑢𝑚𝑒𝑟𝑎𝑡𝑜𝑟 Incremental shares
EPIS =
𝐴𝑑𝑗𝑢𝑠𝑡𝑚𝑒𝑛𝑡 𝑡𝑜 𝐷𝑒𝑛𝑜𝑚𝑖𝑛𝑎𝑡𝑜𝑟
= [(Ave. MP – EP) ÷ Ave.
Earnings Per Incremental Share MP] x No. of shares (O&W)
Sample Problem:
Sample Problem: Multiple Potential Ordinary Shares → rank it first based on EPIS (lowest to
highest) [O&W is always the top 1]
Step 1: Do the ranking of EPIS (lowest to highest EPIS)
Step 2: Compute BEPS (for comparison → Dilutive & anti-Dilutive)
Step 3: Compute the DEPS according to the ranking. (Note: Just copy the BEPS in computing the
No. 1 DEPS then apply the adjustment then do this to the next in rank)
 4718: STATEMENT OF CASH FLOWS
➢ Integral part of the entity’s basic FS
Primary purpose: To provide info about cash receipts and cash payments
Operating Activities Investing Activities Financing activities
→ Direct or Indirect method → Direct method only → Direct method only
→ Principal revenue-producing → Purchase of NCA for CASH → Cash receipts and
activities (primary activities → Sale of NCAS for CASH payments related to NCL
arising from normal operation) → Loan made to another → Short-term and Long-Term
→ Items taken to P/L entity (Incidental transaction borrowings (eg. Notes Payable
→ Working Capital Items (CA only) – Bank)
& CL) → Collection of loan made to → Cash receipts and payment
another entity (incidental only) related to equity
*sale of O/S and P/S for cash
*purchase and sale of T/S for
cash
*cash dividends paid
Note: Any transaction (sale or purchase) that do not involve a cash inflow and outflow, it is considered NON-CASH ACTIVITIES, and
NOT REPORTED in SCF
 Indirect Method of Presentation (Operating Activities only)
→ Conversion of Accrual basis NI to Cash basis NI
ADD to NET INCOME DEDUCT from NET INCOME
EXPENSE items that DECREASE NI but have no INCOME items that INCREASE NI but no
cash effect cash effect
Example: Depreciation expense Example: SNI of Associate
Items that DID NOT INCREASE NI but have cash Items that DID NOT DECREASE NI but have
effect cash effect
Example: Deferred revenue/Unearned revenue Example: Prepayments/Prepaid expense
 4716: STATEMENT OF COMPREHENSIVE INCOME
Element of FS at SCI:
OCI –Income & Expense items
1) Income
• Changes in Revaluation Surplus
2) Expenses
• Changes in FV Investment @
Forms of SCI:
a) Functional presentation – COS method FVOCI
• Actuarial G/L on defined benefit
Expenses → selling activities, administrative
plan
activities, & other activities.
• G/L on Translating the FS of a
foreign operation
• Effective G/L from CASH FLOW
HEDGING
Approaches in computing NI/NL
1) Transaction/Conventional –
Income less Expenses
2) Capital Maintenance – change in
b) Natural Presentation – nature of expense Capital after excluding the
method contributions from owners and
distributions to the owners (T-
Account capital)
 4716: STATEMENT OF FINANCIAL POSITION
CURRENT asset/Liabilities if:
1) Realize/settle in its normal operating cycle
2) For the purpose of trading
3) Realize or due to be settled within 12 months after reporting period
4) A: must be unrestricted from being exchanged or used
L: does not have an unconditional right/discretion to defer or postponed the settlement of
liability for at least 12 months after reporting period.
Note: All other assets/liabilities shall be classify as NON-CURRENT.
 4719: OPERATING SEGMENT & INTERIM FINANCIAL REPORTS
Reportable Segment (10% Threshold)
A segment is a reportable segment if it meets ANY of the following 10% thresholds:
1) Revenue test: The Internal and External REVENUES of the segment are 10% or more of
the Combined Internal and External Revenues of all segments
2) Profit or Loss Test: The segment result, whether profit or loss, of the segment is 10% or
more of the combined profits of all segments that reported a profit or the combined losses
of all segments that reported a loss, whichever is greater in absolute amount
3) Asset Test: The total ASSETS of the segment are 10% or more of the total assets of all
segments
Note: Indirect OPEX/Common costs may also be allocated based in the ratio of segment P/L before
common costs to total P/L before indirect opex/common costs.
For external revenue: 75% rule. Minimum total external revenue of the reportable segment →
75% of total external revenue.
Interim Reporting
→ Financial reporting shorter than a full financial year (e.g. Quarterly Financial Report; Monthly
Financial Report)
Applications to Matching Principle: Bases of Expenses
1) Cause and Effect Association – it is a process that involves the simultaneous or combined
recognition of revenue and expense that result directly and jointly from the same transactions or other
events. (e.g. COGS, Commission expense, Warranty expense under assurance type warranty)
No Revenue → No expense
2) Systematic and Rational Allocation – if an asset provides benefits for several periods, its cost is
allocated to the periods benefited in the absence of a more direct basis for relating the cost to revenue
(e.g. Depreciation expense, Amortization expense, Rent expense for the expired portion of rent paid in
advance)
3) Immediate recognition – In the absence of a direct means of associating cause and effect and the
asset does not provide benefits for several periods, the expense is immediately recognized in the
period incurred. (e.g. Losses from casualties, impairment loss)
Note: Any gain or loss taken to P/L should not be allocated and must be immediate recognized.