LIABILITI E S , L E A S E S

FINAN C I A L S T A T EM EN T S
ACCT 1133

F OR P ROF IT ORG ANI ZA TION

F OR GOV E RN ME N T A ND NON
ACCOUNTING
LIABILITIES
• A LIABILITY IS RECOGNIZED ONLY WHEN ALL OF THE FOLLOWING ARE MET:
A. THE ITEM MEETS THE DEFINITION OF A LIABILITY; 
B. IT IS PROBABLE THAT AN OUTFLOW OF RESOURCES EMBODYING
ECONOMIC BENEFITS WILL BE REQUIRED TO SETTLE THE OBLIGATION;
AND 
C. THE OBLIGATION HAS A COST OR VALUE (E.G., FAIR VALUE) THAT CAN BE
MEASURED RELIABLY. 
• FINANCIAL LIABILITIES ARE INITIALLY MEASURED AT FAIR VALUE MINUS
TRANSACTION COSTS AND SUBSEQUENTLY MEASURED AT AMORTIZED COST ,
EXCEPT FOR FINANCIAL LIABILITIES AT FAIR VALUE THROUGH SURPLUS OR DEFICIT'
WHICH ARE INITIALLY AND SUBSEQUENTLY MEASURED AT FAIR VALUE. 

• PROVISION IS A LIABILITY OF UNCERTAIN TIMING OR AMOUNT. 

• CONTINGENT LIABILITY IS ONE THAT MEETS SOME BUT NOT ALL OF THE LIABILITY
RECOGNITION CRITERIA. A CONTINGENT LIABILITY IS NOT RECOGNIZED BUT
DISCLOSED ONLY, IF ITS OCCURRENCE OR SETTLEMENT IS REASONABLY POSSIBLE;
OTHERWISE, IT IS IGNORED. CONTINGENT ASSET IS NOT RECOGNIZED BUT
DISCLOSED ONLY IF ITS OCCURRENCE OR REALIZATION IS PROBABLE; OTHERWISE
IT IS IGNORED 

• A PROVISION IS MEASURED AT THE ENTITY'S BEST ESTIMATE OF THE AMOUNT

NEEDED TO SETTLE THE LIABILITY AT THE REPORTING DATE IF THE EFFECT OF TIME
VALUE OF MONEY IS MATERIAL, THE PROVISION IS MEASURED AT PRESENT VALUE.
LEASES
• A LEASE THAT TRANSFERS SUBSTANTIALLY ALL THE RISKS AND INCIDENTAL TO OWNERSHIP OF AN ASSET
IS A FINANCE LEASE. THAT DOES NOT IS AN OPERATING LEASE.

•  ANY OF THE FOLLOWING WOULD LEAD TO A FINANCE CLASSIFICATION: 

1. TRANSFER OF OWNERSHIP 
2. BARGAIN PURCHASE OPTION 
3. THE LEASE TERM IS FOR THE MAJOR PART OF THE ECONOMIC LIFE THE ASSET ("75% CRITERION'). 
4. THE PV OF THE LEASE PAYMENTS IS AT LEAST SUBSTANTIALLY ALL OF THE FAIR VALUE OF THE
LEASED ASSET ('90% CRITERION'). 
5. THE LEASED ASSET IS SPECIALIZED NATURE. 
• INCEPTION OF THE LEASE IS THE EARLIER OF THE DATE OF THE LEASE AGREEMENT AND THE DATE OF
COMMITMENT BY THE PARTIES TO THE PRINCIPAL PROVISIONS OF THE LEASE. CLASSIFICATION AND
MEASUREMENT ARE DONE ON THIS DATE. 

• COMMENCEMENT OF THE LEASE TERM IS THE DATE FROM WHICH THE LESSEE IS ENTITLED TO EXERCISE
ITS RIGHT TO USE THE LEASED ASSET. INITIAL RECOGNITION OF ANY ASSET OR LIABILITY IS MADE ON THIS
DATE.

• A LESSEE RECOGNIZES AN ASSET AND A LIABILITY FROM A FINANCE LEASE.  

• LEASE PAYMENTS ARE DISCOUNTED USING THE INTEREST RATE IMPLICIT IN THE LEASE, IF THIS IS
DETERMINABLE; IF NOT, THE LESSEE'S INCREMENTAL BORROWING RATE IS USED. 

• INITIAL DIRECT COSTS ARE GENERALLY CAPITALIZED. 

• THE LESSEE DEPRECIATES THE LEASED ASSET UNDER A FINANCE LEAST OVER THE SHORTER OF THE
ASSET'S USEFUL LIFE AND THE LEASE TERM THERE IS NO REASONABLE CERTAINTY THAT THE LESSEE WILL
OBTAIN OWNERSHIP OVER THE ASSET BY THE END OF THE LEASE TERM. 

• A LESSOR RECOGNIZES THE LEASE PAYMENTS RECEIVABLE UNDER FINANCE LEASE AT AN AMOUNT EQUAL
TO THE NET INVESTMENT IN THE LEASE

• A LESSEE (LESSOR) UNDER AN OPERATING LEASE RECOGNIZES THE PAYMENTS AS EXPENSE (INCOME) ON A
STRAIGHT LINE BASIS ON LEASE TERM, UNLESS ANOTHER SYSTEMATIC BASIS IS MORE REPRESENTATIVE OF
THE TIME PATTERN OF THE USER'S BENEFIT.
FINANCIAL STATEMENTS
• THE RESPONSIBILITY OVER FINANCIAL STATEMENTS RESTS WITH THE ENTITY'S MANAGEMENT,
PARTICULARLY THE HEAD OF THE ENTITY JOINTLY WITH THE HEAD OF FINANCE/ACCOUNTING. 

• A PECULIAR FINANCIAL STATEMENT OF A GOVERNMENT ENTITY IS THE STATEMENT OF

COMPARISON OF BUDGET AND ACTUAL AMOUNTS. THIS STATEMENT SHOWS THE DIFFERENCES
BETWEEN BUDGETED AMOUNTS AND ACTUAL RESULTS FOR A GIVEN REPORTING PERIOD. 

• THE STATEMENTS OF FINANCIAL POSITION AND FINANCIAL PERFORMANCE ARE PRESENTED IN

COMPARATIVE, CONDENSED AND DETAILED FORMATS. 

• THE STATEMENT OF FINANCIAL POSITION OF A GOVERNMENT ENTITY SHOWS DISTINCTIONS

BETWEEN CURRENT AND NONCURRENT ASSETS AND LIABILITIES. 
• THE FOLLOWING ARE RECOGNIZED DIRECTLY IN EQUITY, RATHER THAN THROUGH SURPLUS OR DEFICIT:
(A) CORRECTION OF PRIOR PERIOD ERRORS;
(B) EFFECT OF CHANGES IN ACCOUNTING POLICIES; AND
(C) GAINS OR LOSSES ON REMEASURING AVAILABLE-FOR-SALE FINANCIAL ASSETS.

• GOVERNMENT ENTITIES PRESENT CASH FLOWS FROM OPERATING ACTIVITIES USING THE DIRECT METHOD. 
• ADJUSTING EVENTS ARE THOSE THAT PROVIDE EVIDENCE OF CONDITIONS THAT EXISTED AT THE REPORTING
DATE. THOSE THAT ARE INDICATIVE OF CONDITIONS THAT AROSE AFTER THE REPORTING DATE ARE NON-
ADJUSTING EVENTS. ADJUSTING EVENTS ARE RECOGNIZED. NON-ADJUSTING EVENTS ARE DISCLOSED ONLY,
IF MATERIAL. 

• A CHANGE IN ACCOUNTING POLICY IS ACCOUNTED FOR USING THE FOLLOWING ORDER OF PRIORITY:
(1) TRANSITIONAL PROVISION;
(2) RETROSPECTIVE APPLICATION;
(3) PROSPECTIVE APPLICATION.

• A CHANGE IN ACCOUNTING ESTIMATE IS ACCOUNTED FOR BY PROSPECTIVE APPLICATION.

• THE CORRECTION OF A PRIOR PERIOD ERROR IS ACCOUNTED FOR BY RETROSPECTIVE RESTATEMENT.
OTHER REPORTS
• IN ADDITION TO THE FINANCIAL STATEMENTS , GOVERNMENT ENTITIES ARE
ALSO REQUIRED TO PREPARE AND SUBMIT THE FOLLOWING REPORTS:
1. TRIAL BALANCES(PRE-CLOSING AND POST-CLOSING)
2. OTHER SCHEDULES:
A. REGIONAL BREAKDOWN OF INCOME
B. REGIONAL BREAKDOWN OF EXPENSES
DEADLINES ON SUBMISSION OF REPORTS

• PROVINCIAL OFFICES AND OPERATING UNITS:Reports Deadline Submit to:

Monthly TBs & SSs 10 days after end of Auditor,
the month Regional
Accountant
Quarterly FSs, TBs & SSs 10 days after the end
of quarter
Yearend FSs, TBs & SSs On or before Jan 20
of the following year

*TBs(trial balances), SSs( supporting schedules); FSs(financial statements)

• REGIONAL/BRANCH OFFICES
Reports Deadline Submit to:
Monthly TBs &SSs 10 days after end of Regional
the month Auditor,
Quarterly FSs, TBs &SSs 10 days after the end Central Office
of quarter Chief
Accountant
Yearend FSs, TBs &SSs On or before Jan 31
of the following year
• CENTRAL/HEAD/MAIN OFFICE
Report Deadline Submit to:
Monthly TBs & SSs 10 days after end of Regional Auditor,
the month Central Office Chief
Quarterly FSs, TBs & SSs 10 days after the Accountant
end of quarter
Yearend FSs, TBs & Feb 14 of the COA Auditor, DBM.
SSs( combined CO, Following year COA-GAS(Gov’t
ROs & Ous) Accountancy Sector)
THANK YOU!