Philippine Accounting Standard 1 recognised in profit or loss as required or permitted by other

Presentation of Financial Statements IFRSs.

Objective The components of other comprehensive income include:

(The line items for amounts of OCI shall be grouped as follows)
This Standard prescribes the basis for presentation of general purpose
financial statements to ensure comparability both with the entity’s OCI that will be reclassified subsequently to profit or loss
financial statements of previous periods and with the financial
statements of other entities. It sets out overall requirements for the 1. (Unrealized) gain or loss on debt investment at FVOCI
presentation of financial statements, guidelines for their structure and
minimum requirements for their content. 2. (Unrealized) gain or loss on futures contract (hedging instrument,
derivative contract) designated as a cash flow hedge / the effective
Scope portion of gains and losses on hedging instruments in a cash flow
hedge (see IAS 39)
An entity shall apply this Standard in preparing and
presenting general purpose financial statements in 3. Translation gain or loss on foreign operation / gains and losses
accordance with International Financial Reporting Standards arising from translating the financial statements of a foreign
(IFRSs). operation (see IAS 21 The Effects of Changes in Foreign Exchange
Rates)
Definitions
4. (Unrealized) gain or loss on available for sale investment - gains
The following terms are used in this Standard with the and losses on remeasuring available-for-sale financial assets (see IAS
meanings specified: 39 Financial Instruments: Recognition and Measurement); (OCI that
may be recycled to profit or loss) – basis, PAS 39 old standard of
General purpose financial statements (referred to as ‘financial financial instrument
statements’) are those intended to meet the needs of users
who are not in a position to require an entity to prepare
reports tailored to their particular information needs. OCI that will not be reclassified subsequently to profit or loss
(recycled to retained earnings)
Impracticable Applying a requirement is impracticable when
the entity cannot apply it after making every reasonable effort 1. (Unrealized) gain or loss on equity investment at FVOCI
to do so.
2. Net ‘’remeasurement’’ gain or loss on defined benefit plan (actuarial
International Financial Reporting Standards (IFRSs) are gains and losses on defined benefit plans recognised in accordance
Standards and Interpretations adopted by the International with paragraph 93A of IAS 19 Employee Benefits)
Accounting Standards Board (IASB). They comprise:
(a) International Financial Reporting Standards; 3. Gain or loss on credit risk of a financial liability designated at FVPL
(b) International Accounting Standards; and (FV option)
(c) Interpretations developed by the International Financial
Reporting Interpretations Committee (IFRIC) or the former 4. Revaluation surplus during the year (changes in revaluation surplus
Standing Interpretations Committee (SIC). (see IAS 16 Property, Plant and Equipment and IAS 38 Intangible
Assets)
Material Omissions or misstatements of items are material if
they could, individually or collectively, influence the economic Owners are holders of instruments classified as equity.
decisions that users make on the basis of the financial
statements. Materiality depends on the size and nature of the Profit or loss is the total of income less expenses, excluding
omission or misstatement judged in the surrounding the components of other comprehensive income.
circumstances. The size or nature of the item, or a
combination of both, could be the determining factor. Reclassification adjustments are amounts reclassified to profit
or loss in the current period that were recognised in other
 Assessing whether an omission or misstatement could comprehensive income in the current or previous periods.
influence economic decisions of users, and so be material,
requires consideration of the characteristics of those users. Total comprehensive income is the change in equity during a
The Framework for the Preparation and Presentation of period resulting from transactions and other events, other
Financial Statements states in paragraph 25 that ‘users are than those changes resulting from transactions with owners
assumed to have a reasonable knowledge of business and in their capacity as owners.
economic activities and accounting and a willingness to
study the information with reasonable diligence.’ Therefore,  Total comprehensive income comprises all components of
the assessment needs to take into account how users with ‘profit or loss’ and of ‘other comprehensive income’.
such attributes could reasonably be expected to be
influenced in making economic decisions.  Although this Standard uses the terms ‘other comprehensive
income’, ‘profit or loss’ and ‘total comprehensive income’, an
Notes contain information in addition to that presented in the entity may use other terms to describe the totals as long as
statement of financial position, statement of comprehensive the meaning is clear. For example, an entity may use the
income, separate statement of comprehensive income (if term ‘net income’ to describe profit or loss.
presented), statement of changes in equity and statement of
cash flows. Notes provide narrative descriptions or Financial statements
disaggregations of items presented in those statements and
information about items that do not qualify for recognition in Purpose of financial statements
those statements.
Financial statements are a structured representation of the financial
Other comprehensive income comprises items of income and position and financial performance of an entity. The objective of
expense (including reclassification adjustments) that are not financial statements is to provide information about the
financial position, financial performance and cash flows of an
entity that is useful to a wide range of users in making 3. Accrual basis of accounting
economic decisions. Financial statements also show the results of 4. Materiality and aggregation
the management’s stewardship of the resources entrusted to it. To 5. Offsetting
meet this objective, financial statements provide information about an 6. Frequency of reporting
entity’s: 7. Comparative information
8. Consistency of presentation
(a) assets;
(b) liabilities; Fair presentation and compliance with IFRSs
(c) equity;
(d) income and expenses, including gains and losses; 15 Financial statements shall present fairly the financial
(e) contributions by and distributions to owners in their capacity as position, financial performance and cash flows of an entity.
owners; and Fair presentation requires the faithful representation of the
(f) cash flows. effects of transactions, other events and conditions in
accordance with the definitions and recognition criteria for
This information, along with other information in the notes, assists assets, liabilities, income and expenses set out in the
users of financial statements in predicting the entity’s future cash flows Framework. The application of IFRSs, with additional
and, in particular, their timing and certainty. disclosure when necessary, is presumed to result in financial
statements that achieve a fair presentation.
Complete set of financial statements
16 An entity whose financial statements comply with IFRSs
A complete set of financial statements comprises: shall make an explicit and unreserved statement of such
compliance in the notes. An entity shall not describe financial
(a) a statement of financial position as at the end of the statements as complying with IFRSs unless they comply with
period; all the requirements of IFRSs.
(b) income statement for the period
(c) a statement of comprehensive income for the period; In virtually all circumstances, an entity achieves a fair presentation by
(d) a statement of changes in equity for the period; compliance with applicable IFRSs. A fair presentation also requires an
(e) a statement of cash flows for the period; entity:
(f) notes, comprising a summary of significant accounting
policies and other explanatory information; and (a) to select and apply accounting policies in accordance with IAS 8
(g) a statement of financial position as at the beginning of the Accounting Policies, Changes in Accounting Estimates and Errors. IAS 8
earliest comparative period when an entity applies an sets out a hierarchy of authoritative guidance that management
accounting policy retrospectively or makes a retrospective considers in the absence of an IFRS that specifically applies to an item.
restatement of items in its financial statements, or when it
reclassifies items in its financial statements. (b) to present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
An entity may use titles for the statements other than those information.
used in this Standard.
(c) to provide additional disclosures when compliance with the specific
An entity shall present with equal prominence all of the requirements in IFRSs is insufficient to enable users to understand the
financial statements in a complete set of financial statements. impact of particular transactions, other events and conditions on the
entity’s financial position and financial performance.
 Many entities present, outside the financial statements, a
financial review by management that describes and explains An entity cannot rectify inappropriate accounting policies
the main features of the entity’s financial performance and either by disclosure of the accounting policies used or by
financial position, and the principal uncertainties it faces. notes or explanatory material.
Such a report may include a review of:
19 In the extremely rare circumstances in which management
(a) the main factors and influences determining financial concludes that compliance with a requirement in an IFRS
performance, including changes in the environment in which would be so misleading that it would conflict with the
the entity operates, the entity’s response to those changes objective of financial statements set out in the Framework,
and their effect, and the entity’s policy for investment to the entity shall depart from that requirement in the manner
maintain and enhance financial performance, including its set out in paragraph 20 if the relevant regulatory framework
dividend policy; requires, or otherwise does not prohibit, such a departure.

(b) the entity’s sources of funding and its targeted ratio of 20 When an entity departs from a requirement of an IFRS in
liabilities to equity; and accordance with paragraph 19, it shall disclose:

(c) the entity’s resources not recognised in the statement of (a) that management has concluded that the financial
financial position in accordance with IFRSs. statements present fairly the entity’s financial position,
financial performance and cash flows;
 Many entities also present, outside the financial statements,
reports and statements such as environmental reports and (b) that it has complied with applicable IFRSs, except that it
value added statements, particularly in industries in which has departed from a particular requirement to achieve a fair
environmental factors are significant and when employees presentation;
are regarded as an important user group. Reports and
statements presented outside financial statements are (c) the title of the IFRS from which the entity has departed,
outside the scope of IFRSs. the nature of the departure, including the treatment that the
IFRS would require, the reason why that treatment would be
so misleading in the circumstances that it would conflict with
General features the objective of financial statements set out in the
Framework, and the treatment adopted; and
1. Fair presentation and compliance with IFRSs
2. Going concern
(d) for each period presented, the financial effect of the Accrual basis of accounting
departure on each item in the financial statements that would
have been reported in complying with the requirement. An entity shall prepare its financial statements, except for
cash flow information, using the accrual basis of accounting.
21 When an entity has departed from a requirement of an
IFRS in a prior period, and that departure affects the amounts Materiality and aggregation
recognised in the financial statements for the current period,
it shall make the disclosures set out in paragraph 20(c) and An entity shall present separately each material class of
(d). similar items. An entity shall present separately items of a
dissimilar nature or function unless they are immaterial.
23 In the extremely rare circumstances in which management
concludes that compliance with a requirement in an IFRS  Financial statements result from processing large numbers of
would be so misleading that it would conflict with the transactions or other events that are aggregated into classes
objective of financial statements set out in the Framework, according to their nature or function. The final stage in the
but the relevant regulatory framework prohibits departure process of aggregation and classification is the presentation
from the requirement, the entity shall, to the maximum extent of condensed and classified data, which form line items in
possible, reduce the perceived misleading aspects of the financial statements. If a line item is not individually
compliance by disclosing: material, it is aggregated with other items either in those
statements or in the notes. An item that is not sufficiently
(a) the title of the IFRS in question, the nature of the material to warrant separate presentation in those
requirement, and the reason why management has concluded statements may warrant separate presentation in the notes.
that complying with that requirement is so misleading in the
circumstances that it conflicts with the objective of financial  An entity need not provide a specific disclosure required by
statements set out in the Framework; and an IFRS if the information is not material.

(b) for each period presented, the adjustments to each item in Offsetting
the financial statements that management has concluded
would be necessary to achieve a fair presentation. 32 An entity shall not offset assets and liabilities or income
and expenses, unless required or permitted by an IFRS.
 For the purpose of paragraphs 19–23, an item of information
would conflict with the objective of financial statements  Measuring assets net of valuation allowances—for example,
when it does not represent faithfully the transactions, other obsolescence allowances on inventories and doubtful debts
events and conditions that it either purports to represent or allowances on receivables—is not offsetting.
could reasonably be expected to represent and,
consequently, it would be likely to influence economic  IAS 18 Revenue defines revenue and requires an entity to
decisions made by users of financial statements. When measure it at the fair value of the consideration received or
assessing whether complying with a specific requirement in receivable, taking into account the amount of any trade
an IFRS would be so misleading that it would conflict with discounts and volume rebates the entity allows. An entity
the objective of financial statements set out in the undertakes, in the course of its ordinary activities, other
Framework, management considers: transactions that do not generate revenue but are incidental
(a) why the objective of financial statements is not achieved to the main revenue-generating activities. An entity presents
in the particular circumstances; and the results of such transactions, when this presentation
reflects the substance of the transaction or other event, by
(b) how the entity’s circumstances differ from those of other netting any income with related expenses arising on the
entities that comply with the requirement. If other entities in same transaction. For example:
similar circumstances comply with the requirement, there is
a rebuttable presumption that the entity’s compliance with (a) an entity presents gains and losses on the disposal of
the requirement would not be so misleading that it would non-current assets, including investments and operating
conflict with the objective of financial statements set out in assets, by deducting from the proceeds on disposal the
the Framework. carrying amount of the asset and related selling expenses;
and
Going concern
(b) an entity may net expenditure related to a provision that
When preparing financial statements, management shall is recognised in accordance with IAS 37 Provisions,
make an assessment of an entity’s ability to continue as a Contingent Liabilities and Contingent Assets and reimbursed
going concern. An entity shall prepare financial statements on under a contractual arrangement with a third party (for
a going concern basis unless management either intends to example, a supplier’s warranty agreement) against the
liquidate the entity or to cease trading, or has no realistic related reimbursement.
alternative but to do so. When management is aware, in
making its assessment, of material uncertainties related to  In addition, an entity presents on a net basis gains and
events or conditions that may cast significant doubt upon the losses arising from a group of similar transactions, for
entity’s ability to continue as a going concern, the entity shall example, foreign exchange gains and losses or gains and
disclose those uncertainties. When an entity does not prepare losses arising on financial instruments held for trading.
financial statements on a going concern basis, it shall disclose However, an entity presents such gains and losses
that fact, together with the basis on which it prepared the separately if they are material.
financial statements and the reason why the entity is not
regarded as a going concern. Frequency of reporting

 In assessing whether the going concern assumption is An entity shall present a complete set of financial statements
appropriate, management takes into account all available (including comparative information) at least annually. When
information about the future, which is at least, but is not an entity changes the end of its reporting period and presents
limited to, twelve months from the end of the reporting financial statements for a period longer or shorter than one
period. year, an entity shall disclose, in addition to the period covered
by the financial statements:
(a) the reason for using a longer or shorter period, and Structure and content
(b) the fact that amounts presented in the financial
statements are not entirely comparable. Identification of the financial statements

Comparative information An entity shall clearly identify the financial statements and
Except when IFRSs permit or require otherwise, an entity distinguish them from other information in the same
shall disclose comparative information in respect of the published document.
previous period for all amounts reported in the current
period’s financial statements. An entity shall include  IFRSs apply only to financial statements, and not necessarily
comparative information for narrative and descriptive to other information presented in an annual report, a
information when it is relevant to an understanding of the regulatory filing, or another document. Therefore, it is
current period’s financial statements. important that users can distinguish information that is
prepared using IFRSs from other information that may be
 An entity disclosing comparative information shall present, useful to users but is not the subject of those requirements.
as a minimum, two statements of financial position, two of
each of the other statements, and related notes. When an An entity shall clearly identify each financial statement and
entity applies an accounting policy retrospectively or makes the notes. In addition, an entity shall display the following
a retrospective restatement of items in its financial information prominently, and repeat it when necessary for the
statements or when it reclassifies items in its financial information presented to be understandable:
statements, it shall present, as a minimum, three statements
of financial position, two of each of the other statements, (a) the name of the reporting entity or other means of
and related notes. An entity presents statements of financial identification, and any change in that information from the
position as at: end of the preceding reporting period;

(a) the end of the current period, (b) whether the financial statements are of an individual
entity or a group of entities;
(b) the end of the previous period (which is the same as the
beginning of the current period), and (c) the date of the end of the reporting period or the period
covered by the set of financial statements or notes;
(c) the beginning of the earliest comparative period.
(d) the presentation currency, as defined in IAS 21; and
41 When the entity changes the presentation or classification
of items in its financial statements, the entity shall reclassify (e) the level of rounding used in presenting amounts in the
comparative amounts unless reclassification is impracticable. financial statements.
When the entity reclassifies comparative amounts, the entity
shall disclose: Statement of financial position

(a) the nature of the reclassification; Information to be presented in the statement of financial
(b) the amount of each item or class of items that is position
reclassified; and
(c) the reason for the reclassification. As a minimum, the statement of financial position shall
include line items that present the following amounts:
42 When it is impracticable to reclassify comparative
amounts, an entity shall disclose: (a) property, plant and equipment;
(b) investment property;
(a) the reason for not reclassifying the amounts, and (c) intangible assets;
(b) the nature of the adjustments that would have been made (d) financial assets (excluding amounts shown under (e), (h)
if the amounts had been reclassified. and (i));
(e) investments accounted for using the equity method;
Consistency of presentation (f) biological assets;
An entity shall retain the presentation and classification of (g) inventories;
items in the financial statements from one period to the next (h) trade and other receivables;
unless: (i) cash and cash equivalents;
(j) the total of assets classified as held for sale and assets
(a) it is apparent, following a significant change in the nature included in disposal groups classified as held for sale in
of the entity’s operations or a review of its financial accordance with IFRS 5 Non-current Assets Held for Sale and
statements, that another presentation or classification would Discontinued Operations;
be more appropriate having regard to the criteria for the (k) trade and other payables;
selection and application of accounting policies in IAS 8; or (l) provisions;
(m) financial liabilities (excluding amounts shown under (k)
(b) an IFRS requires a change in presentation. and (l));
(n) liabilities and assets for current tax, as defined in IAS 12
 For example, a significant acquisition or disposal, or a review Income Taxes;
of the presentation of the financial statements, might (o) deferred tax liabilities and deferred tax assets, as defined
suggest that the financial statements need to be presented in IAS 12;
differently. An entity changes the presentation of its financial (p) liabilities included in disposal groups classified as held for
statements only if the changed presentation provides sale in accordance with IFRS 5;
information that is reliable and more relevant to users of the (q) non-controlling interest, presented within equity; and
financial statements and the revised structure is likely to (r) issued capital and reserves attributable to owners of the
continue, so that comparability is not impaired. When parent.
making such changes in presentation, an entity reclassifies
its, comparative information in accordance with paragraphs An entity shall present additional line items, headings and
41 and 42. subtotals in the statement of financial position when such
presentation is relevant to an understanding of the entity’s decreasing order of liquidity provides information that is
financial position. reliable and more relevant than a current/noncurrent
presentation because the entity does not supply goods or
When an entity presents current and non-current assets, and services within a clearly identifiable operating cycle.
current and non-current liabilities, as separate classifications
in its statement of financial position, it shall not classify  In applying paragraph 60, an entity is permitted to present
deferred tax assets (liabilities) as current assets (liabilities). some of its assets and liabilities using a current/non-current
classification and others in order of liquidity when this
 This Standard does not prescribe the order or format in provides information that is reliable and more relevant. The
which an entity presents items. Paragraph 54 simply lists need for a mixed basis of presentation might arise when an
items that are sufficiently different in nature or function to entity has diverse operations.
warrant separate presentation in the statement of financial
position. In addition: Current assets

(a) line items are included when the size, nature or function 66 An entity shall classify an asset as current when:
of an item or aggregation of similar items is such that (a) it expects to realise the asset, or intends to sell or
separate presentation is relevant to an understanding of the consume it, in its normal operating cycle;
entity’s financial position; and (b) it holds the asset primarily for the purpose of trading;
(c) it expects to realise the asset within twelve months after
(b) the descriptions used and the ordering of items or the reporting period; or
aggregation of similar items may be amended according to (d) the asset is cash or a cash equivalent (as defined in IAS 7)
the nature of the entity and its transactions, to provide unless the asset is restricted from being exchanged or used to
information that is relevant to an understanding of the settle a liability for at least twelve months after the reporting
entity’s financial position. For example, a financial institution period.
may amend the above descriptions to provide information
that is relevant to the operations of a financial institution. An entity shall classify all other assets as non-current.

 58 An entity makes the judgement about whether to present 67 This Standard uses the term ‘non-current’ to include tangible,
additional items separately on the basis of an assessment of: intangible and financial assets of a long-term nature. It does not
prohibit the use of alternative descriptions as long as the meaning is
(a) the nature and liquidity of assets; clear.
(b) the function of assets within the entity; and
(c) the amounts, nature and timing of liabilities. 68 The operating cycle of an entity is the time between the acquisition
of assets for processing and their realisation in cash or cash
 The use of different measurement bases for different classes equivalents. When the entity’s normal operating cycle is not clearly
of assets suggests that their nature or function differs and, identifiable, it is assumed to be 12 months. Current assets include
therefore, that an entity presents them as separate line assets (such as inventories and trade receivables) that are sold,
items. For example, different classes of property, plant and consumed or realised as part of the normal operating cycle even when
equipment can be carried at cost or at revalued amounts in they are not expected to be realised within 12 months after the
accordance with IAS 16. reporting period. Current assets also include assets held primarily for
the purpose of trading ((examples include some financial assets
Current/non-current distinction classified as held for trading in accordance with
IAS 39) and the current portion of non-current financial assets.
60 An entity shall present current and non-current assets, and
current and non-current liabilities, as separate classifications Current liabilities
in its statement of financial position in accordance with 69 An entity shall classify a liability as current when:
paragraphs 66–76 except when a presentation based on (a) it expects to settle the liability in its normal operating
liquidity provides information that is reliable and more cycle;
relevant. When that exception applies, an entity shall present (b) it holds the liability primarily for the purpose of trading;
all assets and liabilities in order of liquidity. (c) the liability is due to be settled within twelve months after
the reporting period; or
61 Whichever method of presentation is adopted, an entity (d) it does not have an unconditional right to defer settlement
shall disclose the amount expected to be recovered or settled of the liability for at least twelve months after the reporting
after more than twelve months for each asset and liability line period (see paragraph 73). Terms of a liability that could, at
item that combines amounts expected to be recovered or the option of the counterparty, result in its settlement by the
settled: issue of equity instruments do not affect its classification.

(a) no more than twelve months after the reporting period, An entity shall classify all other liabilities as non-current.
and
70 Some current liabilities, such as trade payables and some accruals
(b) more than twelve months after the reporting period. for employee and other operating costs, are part of the working capital
used in the entity’s normal operating cycle. An entity classifies such
 When an entity supplies goods or services within a clearly operating items as current liabilities even if they are due to be settled
identifiable operating cycle, separate classification of current more than twelve months after the reporting period. The same normal
and non-current assets and liabilities in the statement of operating cycle applies to the classification of an entity’s assets and
financial position provides useful information by liabilities. When the entity’s normal operating cycle is not clearly
distinguishing the net assets that are continuously circulating identifiable, it is assumed to be twelve months.
as working capital from those used in the entity’s long-term
operations. It also highlights assets that are expected to be 71 Other current liabilities are not settled as part of the normal
realized within the current operating cycle, and liabilities that operating cycle, but are due for settlement within 12 months after the
are due for settlement within the same period. reporting period or held primarily for the purpose of trading. Examples
are some financial liabilities classified as held for trading in accordance
 For some entities, such as financial institutions, a with IAS 39, bank overdrafts, and the current portion of non-current
presentation of assets and liabilities in increasing or financial liabilities, dividends payable, income taxes and other non-
trade payables. Financial liabilities that provide financing on a long- production supplies, materials, work in progress and finished
term basis (ie are not part of the working capital used in the entity’s goods;
normal operating cycle) and are not due for settlement within 12
months after the reporting period are non-current liabilities, subject to (d) provisions are disaggregated into provisions for
paragraphs 74 and 75. employee benefits and other items; and

72 An entity classifies its financial liabilities as current when they are (e) equity capital and reserves are disaggregated into
due to be settled within twelve months after the reporting period, even various classes, such as paid-in capital, share premium and
if: reserves.
(a) the original term was for a period longer than twelve months, and
(b) an agreement to refinance, or to reschedule payments, on a long- 79 An entity shall disclose the following, either in the
term basis is completed after the reporting period and before the statement of financial position or the statement of changes in
financial statements are authorised for issue. equity, or in the notes:

73 If an entity expects, and has the discretion, to refinance or roll over (a) for each class of share capital:
an obligation for at least twelve months after the reporting period
under an existing loan facility, it classifies the obligation as non- (i) the number of shares authorised;
current, even if it would otherwise be due within a shorter period. (ii) the number of shares issued and fully paid, and issued but
However, when refinancing or rolling over the obligation is not at the not fully paid;
discretion of the entity (for example, there is no arrangement for (iii) par value per share, or that the shares have no par value;
refinancing), the entity does not consider the potential to refinance the (iv) a reconciliation of the number of shares outstanding at
obligation and classifies the obligation as current. the beginning and at the end of the period;
(v) the rights, preferences and restrictions attaching to that
74 When an entity breaches a provision of a long-term loan class including restrictions on the distribution of dividends
arrangement on or before the end of the reporting period with the and the repayment of capital;
effect that the liability becomes payable on demand, it classifies the (vi) shares in the entity held by the entity or by its
liability as current, even if the lender agreed, after the reporting period subsidiaries or associates; and
and before the authorisation of the financial statements for issue, not (vii) shares reserved for issue under options and contracts for
to demand payment as a consequence of the breach. An entity the sale of shares, including terms and amounts; and
classifies the liability as current because, at the end of the reporting
period, it does not have an unconditional right to defer its settlement (b) a description of the nature and purpose of each reserve
for at least twelve months after that date. within equity.

75 However, an entity classifies the liability as non-current if the lender 80 An entity without share capital, such as a partnership or
agreed by the end of the reporting period to provide a period of grace trust, shall disclose information equivalent to that required by
ending at least twelve months after the reporting period, within which paragraph 79(a), showing changes during the period in each
the entity can rectify the breach and during which the lender cannot category of equity interest, and the rights, preferences and
demand immediate repayment. restrictions attaching to each category of equity interest.

76 In respect of loans classified as current liabilities, if the following 80A If an entity has reclassified
events occur between the end of the reporting period and the date the
financial statements are authorised for issue, those events are (a) a puttable financial instrument classified as an equity
disclosed as non-adjusting events in accordance with IAS 10 Events instrument, or
after the Reporting Period: (b) an instrument that imposes on the entity an obligation to
deliver to another party a pro rata share of the net assets of
(a) refinancing on a long-term basis; the entity only on liquidation and is classified as an equity
(b) rectification of a breach of a long-term loan arrangement; and instrument between financial liabilities and equity, it shall
(c) the granting by the lender of a period of grace to rectify a breach disclose the amount reclassified into and out of each category
of a long-term loan arrangement ending at least twelve months after (financial liabilities or equity), and the timing and reason for
the reporting period. that reclassification.

Information to be presented either in the statement of Statement of comprehensive income

financial position or in the notes
81 An entity shall present all items of income and expense
An entity shall disclose, either in the statement of financial recognised in a period:
position or in the notes, further subclassifications of the line
items presented, classified in a manner appropriate to the (a) in a single statement of comprehensive income, or
entity’s operations. (b) in two statements: a statement displaying components of
profit or loss (separate statement of comprehensive income)
 The detail provided in subclassifications depends on the and a second statement beginning with profit or loss and
requirements of IFRSs and on the size, nature and function displaying components of other comprehensive income
of the amounts involved. An entity also uses the factors set (statement of comprehensive income).
out in paragraph 58 to decide the basis of subclassification.
The disclosures vary for each item, for example: Information to be presented in the statement of
comprehensive income
(a) items of property, plant and equipment are
disaggregated into classes in accordance with IAS 16; 82 As a minimum, the statement of comprehensive income
shall include line items that present the following amounts for
(b) receivables are disaggregated into amounts receivable the period:
from trade customers, receivables from related parties,
prepayments and other amounts; (a) revenue;
(b) finance costs;
(c) inventories are disaggregated, in accordance with IAS 2 (c) share of the profit or loss of associates and joint ventures
Inventories, into classifications such as merchandise, accounted for using the equity method;
(d) tax expense; comprehensive income in the period that the adjustment is
(e) a single amount comprising the total of: reclassified to profit or loss. For example, gains realised on
(i) the post-tax profit or loss of discontinued operations and the disposal of available-for-sale financial assets are included
(ii) the post-tax gain or loss recognised on the measurement in profit or loss of the current period. These amounts may
to fair value less costs to sell or on the disposal of the assets have been recognised in other comprehensive income as
or disposal group(s) constituting the discontinued operation; unrealised gains in the current or previous periods. Those
(f) profit or loss; unrealised gains must be deducted from other
(g) each component of other comprehensive income classified comprehensive income in the period in which the realised
by nature (excluding amounts in (h)); gains are reclassified to profit or loss to avoid including them
(h) share of the other comprehensive income of associates in total comprehensive income twice.
and joint ventures accounted for using the equity method; and
(i) total comprehensive income.  An entity may present reclassification adjustments in the
83 An entity shall disclose the following items in the statement of comprehensive income or in the notes. An
statement of comprehensive income as allocations of profit or entity presenting reclassification adjustments in the notes
loss for the period: presents the components of other comprehensive income
after any related reclassification adjustments.
(a) profit or loss for the period attributable to:
 Reclassification adjustments arise, for example, on disposal
(i) non-controlling interest, and of a foreign operation (see IAS 21), on derecognition of
(ii) owners of the parent. available-for-sale financial assets (see IAS 39) and when a
hedged forecast transaction affects profit or loss (see
paragraph 100 of IAS 39 in relation to cash flow hedges).
(b) total comprehensive income for the period attributable to:
 Reclassification adjustments do not arise on changes in
(i) non-controlling interest, and
revaluation surplus recognised in accordance with IAS 16 or
(ii) owners of the parent.
IAS 38 or on actuarial gains and losses on defined benefit
plans recognised in accordance with paragraph 93A of IAS
19. These components are recognised in other
84 An entity may present in a separate statement of comprehensive income and are not reclassified to profit or
comprehensive income (see paragraph 81) the line loss in subsequent periods. Changes in revaluation surplus
items in paragraph 82(a)–(f) and the disclosures in paragraph may be transferred to retained earnings in subsequent
83(a). periods as the asset is used or when it is derecognised (see
IAS 16 and IAS 38). Actuarial gains and losses are reported
An entity shall present additional line items, headings and in retained earnings in the period that they are recognised
subtotals in the statement of comprehensive income and the as other comprehensive income (see IAS 19).
separate statement of comprehensive income (if presented),
when such presentation is relevant to an understanding of the Information to be presented in the statement of
entity’s financial performance. comprehensive income or in the notes

 An entity does not offset income and expense items unless When items of income or expense are material, an entity shall
the criteria in paragraph 32 are met. disclose their nature and amount separately.

An entity shall not present any items of income or expense as Circumstances that would give rise to the separate disclosure of items
extraordinary items, in the statement of comprehensive of income and expense include:
income or the separate statement of comprehensive income
(if presented), or in the notes. (a) write-downs of inventories to net realisable value or of property,
plant and equipment to recoverable amount, as well as reversals of
Profit or loss for the period such write-downs;
(b) restructurings of the activities of an entity and reversals of any
An entity shall recognise all items of income and expense in a provisions for the costs of restructuring;
period in profit or loss unless an IFRS requires or permits (c) disposals of items of property, plant and equipment;
otherwise. (d) disposals of investments;
(e) discontinued operations;
Other comprehensive income for the period (f) litigation settlements; and
(g) other reversals of provisions.
An entity shall disclose the amount of income tax relating to
each component of other comprehensive income, including 99 An entity shall present an analysis of expenses recognised
reclassification adjustments, either in the statement of in profit or loss using a classification based on either their
comprehensive income or in the notes. nature or their function within the entity, whichever provides
information that is reliable and more relevant.
An entity may present components of other comprehensive income
either:  100 Entities are encouraged to present the analysis in
(a) net of related tax effects, or paragraph 99 in the statement of comprehensive income or
(b) before related tax effects with one amount shown for the in the separate statement of comprehensive income (if
aggregate amount of income tax relating to those components. presented).

An entity shall disclose reclassification adjustments relating to Expenses are subclassified to highlight components of financial
components of other comprehensive income. performance that may differ in terms of frequency, potential for gain
or loss and predictability. This analysis is provided in one of two forms.
 Other IFRSs specify whether and when amounts previously
recognised in other comprehensive income are reclassified to The first form of analysis is the ‘nature of expense’ method. An entity
profit or loss. Such reclassifications are referred to in this aggregates expenses within profit or loss according to their nature (for
Standard as reclassification adjustments. A reclassification example, depreciation, purchases of materials, transport costs,
adjustment is included with the related component of other employee benefits and advertising costs), and does not reallocate
them among functions within the entity. This method may be simple to
apply because no allocations of expenses to functional classifications Information to be presented in the statement of changes in
are necessary. An example of a classification using the nature of equity
expense method is as follows:
106 An entity shall present a statement of changes in equity
as required by paragraph 10. The statement of changes in
equity includes the following information:

(a) total comprehensive income for the period, showing

separately the total amounts attributable to owners of the
parent and to non-controlling interest;
(b) for each component of equity, the effects of retrospective
application or retrospective restatement recognised in
accordance with IAS 8; and
(c) [deleted]
(d) for each component of equity, a reconciliation between the
carrying amount at the beginning and the end of the period,
separately disclosing changes resulting from:

(i) profit or loss;

(ii) other comprehensive income; and
(iii) transactions with owners in their capacity as owners,
The second form of analysis is the ‘function of expense’ or ‘cost of showing separately contributions by and distributions to
sales’ method and classifies expenses according to their function as owners and changes in ownership interests in subsidiaries
part of cost of sales or, for example, the costs of distribution or that do not result in a loss of control.
administrative activities. At a minimum, an entity discloses its cost of
sales under this method separately from other expenses. This method 106A For each component of equity an entity shall present, either in
can provide more relevant information to users than the classification the statement of changes in equity or in the notes, an
of expenses by nature, but allocating costs to functions may require analysis of other comprehensive income by item (see paragraph
arbitrary allocations and involve considerable judgement. An example 106(d)(ii)).
of a classification using the function of expense method is as follows:
An entity shall present, either in the statement of changes in
equity or in the notes, the amounts of dividends recognised as
distributions to owners during the period, and the related
amount of dividends per share.

 In paragraph 106, the components of equity include, for

example, each class of contributed equity, the accumulated
balance of each class of other comprehensive income and
retained earnings.

Changes in an entity’s equity between the beginning and the end of

the reporting period reflect the increase or decrease in its net assets
during the period. Except for changes resulting from transactions with
owners in their capacity as owners (such as equity contributions,
reacquisitions of the entity’s own equity instruments and dividends)
and transaction costs directly related to such transactions, the overall
change in equity during a period represents the total amount of
income and expense, including gains and losses, generated by the
entity’s activities during that period.
104 An entity classifying expenses by function shall disclose
additional information on the nature of expenses, including  IAS 8 requires retrospective adjustments to effect changes
depreciation and amortisation expense and employee benefits in accounting policies, to the extent practicable, except when
expense. the transition provisions in another IFRS require otherwise.
IAS 8 also requires restatements to correct errors to be
 105 The choice between the function of expense method made retrospectively, to the extent practicable.
and the nature of expense method depends on historical and Retrospective adjustments and retrospective restatements
industry factors and the nature of the entity. Both methods are not changes in equity but they are adjustments to the
provide an indication of those costs that might vary, directly opening balance of retained earnings, except when an IFRS
or indirectly, with the level of sales or production of the requires retrospective adjustment of another component of
entity. Because each method of presentation has merit for equity. Paragraph 106(b) requires disclosure in the
different types of entities, this Standard requires statement of changes in equity of the total adjustment to
management to select the presentation that is reliable and each component of equity resulting from changes in
more relevant. However, because information on the nature accounting policies and, separately, from corrections of
of expenses is useful in predicting future cash flows, errors. These adjustments are disclosed for each prior period
additional disclosure is required when the function of and the beginning of the period.
expense classification is used. In paragraph 104, ‘employee
benefits’ has the same meaning as in IAS 19. Statement of cash flows

Statement of changes in equity Cash flow information provides users of financial statements with a
basis to assess the ability of the entity to generate cash and cash
Structure and content equivalents and the needs of the entity to utilise those cash flows. IAS
7 sets out requirements for the presentation and disclosure of cash
Statement of changes in equity flow information.
 when those policies are selected from alternatives allowed in IFRSs. An
Notes example is disclosure of whether a venturer recognises its interest in a
jointly controlled entity using proportionate consolidation or the equity
Structure method (see IAS 31 Interests in Joint Ventures). Some IFRSs
specifically require disclosure of particular accounting policies,
112 The notes shall: including choices made by management between different policies
they allow. For example, IAS 16 requires disclosure of the
(a) present information about the basis of preparation of the measurement bases used for classes of property, plant and equipment.
financial statements and the specific accounting policies used
in accordance with paragraphs 117–124; 120 Each entity considers the nature of its operations and the policies
that the users of its financial statements would expect to be disclosed
(b) disclose the information required by IFRSs that is not for that type of entity. For example, users would expect an entity
presented elsewhere in the financial statements; and subject to income taxes to disclose its accounting policies for income
taxes, including those applicable to deferred tax liabilities and assets.
(c) provide information that is not presented elsewhere in the When an entity has significant foreign operations or transactions in
financial statements, but is relevant to an understanding of foreign currencies, users would expect disclosure of accounting policies
any of them. for the recognition of foreign exchange gains and losses.

121 An accounting policy may be significant because of the nature of

113 An entity shall, as far as practicable, present notes in a the entity’s operations even if amounts for current and prior periods
systematic manner. An entity shall crossreference each item are not material. It is also appropriate to disclose each significant
in the statements of financial position and of comprehensive accounting policy that is not specifically required by IFRSs but the
income, in the separate statement of comprehensive income entity selects and applies in accordance with IAS 8.
(if presented), and in the statements of changes in equity
and of cash flows to any related information in the notes. 122 An entity shall disclose, in the summary of significant
accounting policies or other notes, the judgements, apart
from those involving estimations (see paragraph 125), that
114 An entity normally presents notes in the following order, to assist management has made in the process of applying the entity’s
users to understand the financial statements and to compare them accounting policies and that have the most significant effect
with financial statements of other entities: on the amounts recognised in the financial statements.

(a) statement of compliance with IFRSs (see paragraph 16); 123 In the process of applying the entity’s accounting policies,
management makes various judgements, apart from those involving
(b) summary of significant accounting policies applied (see paragraph estimations, that can significantly affect the amounts it recognises in
117); the financial statements. For example, management makes
judgements in determining:
(c) supporting information for items presented in the statements of
financial position and of comprehensive income, in the separate (a) whether financial assets are held-to-maturity investments;
statement of comprehensive income (if presented), and in the (b) when substantially all the significant risks and rewards of
statements of changes in equity and of cash flows, in the order in ownership of financial assets and lease assets are transferred to other
which each statement and each line item is presented; and entities;
(c) whether, in substance, particular sales of goods are financing
(d) other disclosures, including: arrangements and therefore do not give rise to revenue; and
(d) whether the substance of the relationship between the entity and a
(i) contingent liabilities (see IAS 37) and unrecognised contractual special purpose entity indicates that the entity controls the special
commitments, and purpose entity.

(ii) non-financial disclosures, eg the entity’s financial risk management 124 Some of the disclosures made in accordance with paragraph 122
objectives and policies (see IFRS 7). are required by other IFRSs. For example, IAS 27 requires an entity to
disclose the reasons why the entity’s ownership interest does not
Disclosure of accounting policies constitute control, in respect of an investee that is not a subsidiary
even though more than half of its voting or potential voting power is
117 An entity shall disclose in the summary of significant owned directly or indirectly through subsidiaries. IAS 40 Investment
accounting policies: Property requires disclosure of the criteria developed by the entity to
(a) the measurement basis (or bases) used in preparing the distinguish investment property from owner-occupied property and
financial statements, and from property held for sale in the ordinary course of business, when
(b) the other accounting policies used that are relevant to an classification of the property is
understanding of the financial statements. difficult.

118 It is important for an entity to inform users of the measurement Sources of estimation uncertainty
basis or bases used in the financial statements (for example, historical
cost, current cost, net realisable value, fair value or recoverable 125 An entity shall disclose information about the
amount) because the basis on which an entity prepares the financial assumptions it makes about the future, and other major
statements significantly affects users’ analysis. When an entity uses sources of estimation uncertainty at the end of the reporting
more than one measurement basis in the financial statements, for period, that have a significant risk of resulting in a material
example when particular classes of assets are revalued, it is sufficient adjustment to the carrying amounts of assets and liabilities
to provide an indication of the categories of assets and liabilities to within the next financial year. In respect of those assets and
which each measurement basis is applied. liabilities, the notes shall include details of:

119 In deciding whether a particular accounting policy should be (a) their nature, and
disclosed, management considers whether disclosure would assist (b) their carrying amount as at the end of the reporting
users in understanding how transactions, other events and conditions period.
are reflected in reported financial performance and financial position.
Disclosure of particular accounting policies is especially useful to users
126 Determining the carrying amounts of some assets and liabilities significant assumptions that the entity uses in estimating the fair
requires estimation of the effects of uncertain future events on those values of revalued items of property, plant and equipment.
assets and liabilities at the end of the reporting period. For example, in
the absence of recently observed market prices, future-oriented Capital
estimates are necessary to measure the recoverable amount of classes
of property, plant and equipment, the effect of technological 134 An entity shall disclose information that enables users of
obsolescence on inventories, provisions subject to the future outcome its financial statements to evaluate the entity’s objectives,
of litigation in progress, and long-term employee benefit liabilities such policies and processes for managing capital.
as pension obligations. These estimates involve assumptions about
such items as the risk adjustment to cash flows or discount rates, 135 To comply with paragraph 134, the entity discloses the following:
future changes in salaries and future changes in prices affecting other
costs. (a) qualitative information about its objectives, policies and processes
for managing capital, including:
127 The assumptions and other sources of estimation uncertainty
disclosed in accordance with paragraph 125 relate to the estimates (i) a description of what it manages as capital;
that require management’s most difficult, subjective or complex (ii) when an entity is subject to externally imposed capital
judgements. As the number of variables and assumptions affecting the requirements, the nature of those requirements and how those
possible future resolution of the uncertainties increases, those requirements are incorporated into the management of capital; and
judgements become more subjective and complex, and the potential (iii) how it is meeting its objectives for managing capital.
for a consequential material adjustment to the carrying amounts of
assets and liabilities normally increases accordingly. (b) summary quantitative data about what it manages as capital. Some
entities regard some financial liabilities (eg some forms of
128 The disclosures in paragraph 125 are not required for assets and subordinated debt) as part of capital. Other entities regard capital as
liabilities with a significant risk that their carrying amounts might excluding some components of equity (eg components arising from
change materially within the next financial year if, at the end of the cash flow hedges).
reporting period, they are measured at fair value based on recently
observed market prices. Such fair values might change materially (c) any changes in (a) and (b) from the previous period.
within the next financial year but these changes would not arise from
assumptions or other sources of estimation uncertainty at the end of (d) whether during the period it complied with any externally imposed
the reporting period. capital requirements to which it is subject.

129 An entity presents the disclosures in paragraph 125 in a manner (e) when the entity has not complied with such externally imposed
that helps users of financial statements to understand the judgements capital requirements, the consequences of such non-compliance.
that management makes about the future and about other sources of
estimation uncertainty. The nature and extent of the information The entity bases these disclosures on the information provided
provided vary according to the nature of the assumption and other internally to key management personnel.
circumstances. Examples of the types of disclosures an entity makes
are: 136 An entity may manage capital in a number of ways and be subject
(a) the nature of the assumption or other estimation uncertainty; to a number of different capital requirements. For example, a
(b) the sensitivity of carrying amounts to the methods, assumptions conglomerate may include entities that undertake insurance activities
and estimates underlying their calculation, including the reasons for and banking activities and those entities may operate in several
the sensitivity; jurisdictions. When an aggregate disclosure of capital requirements
(c) the expected resolution of an uncertainty and the range of and how capital is managed would not provide useful information or
reasonably possible outcomes within the next financial year in respect distorts a financial statement user’s understanding of an entity’s capital
of the carrying amounts of the assets and liabilities affected; and resources, the entity shall disclose separate information for each
(d) an explanation of changes made to past assumptions concerning capital requirement to which the entity is subject.
those assets and liabilities, if the uncertainty remains unresolved.
Puttable financial instruments classified as equity
130 This Standard does not require an entity to disclose budget
information or forecasts in making the disclosures in paragraph 125. For puttable financial instruments classified as equity
instruments, an entity shall disclose (to the extent not
131 Sometimes it is impracticable to disclose the extent of the possible disclosed elsewhere):
effects of an assumption or another source of estimation uncertainty at
the end of the reporting period. In such cases, the entity discloses that (a) summary quantitative data about the amount classified as
it is reasonably possible, on the basis of existing knowledge, that equity;
outcomes within the next financial year that are different from the (b) its objectives, policies and processes for managing its
assumption could require a material adjustment to the carrying obligation to repurchase or redeem the instruments when
amount of the asset or liability affected. In all cases, the entity required to do so by the instrument holders, including any
discloses the nature and carrying amount of the specific asset or changes from the previous period;
liability (or class of assets or liabilities) affected by the assumption. (c) the expected cash outflow on redemption or repurchase of
that class of financial instruments; and
132 The disclosures in paragraph 122 of particular judgements that (d) information about how the expected cash outflow on
management made in the process of applying the entity’s accounting redemption or repurchase was determined.
policies do not relate to the disclosures of sources of estimation
uncertainty in paragraph 125. Other disclosures

133 Other IFRSs require the disclosure of some of the assumptions An entity shall disclose in the notes:
that would otherwise be required in accordance with paragraph 125.
For example, IAS 37 requires disclosure, in specified circumstances, of (a) the amount of dividends proposed or declared before the
major assumptions concerning future events affecting classes of financial statements were authorised for issue but not
provisions. IFRS 7 requires disclosure of significant assumptions the recognised as a distribution to owners during the period, and
entity uses in estimating the fair values of financial assets and financial the related amount per share; and
liabilities that are carried at fair value. IAS 16 requires disclosure of
(b) the amount of any cumulative preference dividends not In some cases, the management of an entity is required to issue its
recognised. financial statements to a supervisory board (made up solely of non-
executives) for approval. In such cases, the financial statements are
An entity shall disclose the following, if not disclosed authorised for issue when the management authorises them for issue
elsewhere in information published with the financial to the supervisory board.
statements:

(a) the domicile and legal form of the entity, its country of
incorporation and the address of its registered office (or
principal place of business, if different from the registered
office);
(b) a description of the nature of the entity’s operations and
its principal activities;
(c) the name of the parent and the ultimate parent of the
group; and
(d) if it is a limited life entity, information regarding the
length of its life. Recognition and measurement
Philippine Accounting Standard 10 Adjusting events after the reporting period
Events after the Reporting Period
An entity shall adjust the amounts recognised in its financial
Objective statements to reflect adjusting events after the reporting
period.
The objective of this Standard is to prescribe:
The following are examples of adjusting events after the reporting
(a) when an entity should adjust its financial statements for events period that require an entity to adjust the amounts recognised in its
after the reporting period; and financial statements, or to recognise items that were not previously
recognised:
(b) the disclosures that an entity should give about the date when the
financial statements were authorised for issue and about events after (a) the settlement after the reporting period of a court case that
the reporting period. confirms that the entity had a present obligation at the end of the
reporting period. The entity adjusts any previously recognised
The Standard also requires that an entity should not prepare its provision related to this court case in accordance with IAS 37
financial statements on a going concern basis if events after the Provisions, Contingent Liabilities and Contingent Assets or recognises a
reporting period indicate that the going concern assumption is not new provision. The entity does not merely disclose a contingent liability
appropriate. because the settlement provides additional evidence that would be
considered in accordance with paragraph 16 of IAS 37.
Scope
This Standard shall be applied in the accounting for, and (b) the receipt of information after the reporting period indicating that
disclosure of, events after the reporting period. an asset was impaired at the end of the reporting period, or that the
amount of a previously recognised impairment loss for that asset
Definitions needs to be adjusted. For example:
The following terms are used in this Standard with the
meanings specified: (i) the bankruptcy of a customer that occurs after the reporting period
date usually confirms that a loss existed at the end of the reporting
Events after the reporting period are those events, favourable period on a trade receivable and that the entity needs to adjust the
and unfavourable, that occur between the statement of carrying amount of the trade receivable; and
financial position date and the date when the financial
statements are authorised for issue. (ii) the sale of inventories after the reporting period may give evidence
about their net realisable value at the end of the reporting period.
Two types of events can be identified:
(c) the determination after the reporting period of the cost of assets
(a) those that provide evidence of conditions that existed at purchased, or the proceeds from assets sold, before the end of the
the statement of financial position date (adjusting events reporting period.
after the reporting period); and
(d) the determination after the reporting period of the amount of
(b) those that are indicative of conditions that arose after the profit-sharing or bonus payments, if the entity had a present legal or
statement of financial position date (non-adjusting events constructive obligation at the end of the reporting period to make such
after the reporting period). payments as a result of events before that date (see IAS 19 Employee
Benefits).
In some cases, an entity is required to submit its financial statements
to its shareholders for approval after the financial statements have (e) the discovery of fraud or errors that show that the financial
been issued. In such cases, the financial statements are authorised for statements are incorrect.
issue on the date of issue, not the date when shareholders approve
the financial statements. Non-adjusting events after the reporting period

An entity shall not adjust the amounts recognised in its

financial statements to reflect non-adjusting events after the
reporting period.

Dividends

If an entity declares dividends to holders of equity

instruments (as defined in IAS 32 Financial
Instruments: Presentation) after the reporting period, the (a) a major business combination after the reporting period (IFRS 3
entity shall not recognise those dividends as a liability at the Business Combinations requires specific disclosures in such cases) or
end of the reporting period. disposing of a major subsidiary;

If dividends are declared after the reporting period but before the (b) announcing a plan to discontinue an operation;
financial statements are authorised for issue, the dividends are not
recognised as a liability at the end of the reporting period because no (c) major purchases of assets, classification of assets as held for sale
obligation exists at that time. Such dividends are disclosed in the notes in accordance with IFRS 5 Non-current Assets Held for Sale and
in accordance with IAS 1 Presentation of Financial Statements. Discontinued Operations, other disposals of assets, or expropriation of
major assets by government;
Going concern
An entity shall not prepare its financial statements on a going (d) the destruction of a major production plant by a fire after the
concern basis if management determines after the reporting reporting period;
period either that it intends to liquidate the entity or to cease
trading, or that it has no realistic alternative but to do so. (e) announcing, or commencing the implementation of, a major
restructuring (see IAS 37);
Deterioration in operating results and financial position after the
reporting period may indicate a need to consider whether the going (f) major ordinary share transactions and potential ordinary share
concern assumption is still appropriate. If the going concern transactions after the reporting period (IAS 33 Earnings per Share
assumption is no longer appropriate, the effect is so pervasive that this requires an entity to disclose a description of such transactions, other
Standard requires a fundamental change in the basis of accounting, than when such transactions involve capitalisation or bonus issues,
rather than an adjustment to the amounts recognised within the share splits or reverse share splits all of which are required to be
original basis of accounting. adjusted under IAS 33);

Disclosure (g) abnormally large changes after the reporting period in asset prices
or foreign exchange rates;
Date of authorisation for issue
(h) changes in tax rates or tax laws enacted or announced after the
An entity shall disclose the date when the financial reporting period that have a significant effect on current and deferred
statements were authorised for issue and who gave that tax assets and liabilities (see IAS 12 Income Taxes);
authorisation. If the entity’s owners or others have the power
to amend the financial statements after issue, the entity shall (i) entering into significant commitments or contingent liabilities, for
disclose that fact. example, by issuing significant guarantees; and

It is important for users to know when the financial statements were (j) commencing major litigation arising solely out of events that
authorised for issue, because the financial statements do not reflect occurred after the reporting period.
events after this date.
Philippine Accounting Standard 24
Updating disclosure about conditions at the end of the Related Party Disclosures
reporting period
Objective
If an entity receives information after the reporting period
about conditions that existed at the end of the reporting The objective of this Standard is to ensure that an entity’s financial
period, it shall update disclosures that relate to those statements contain the disclosures necessary to draw attention to the
conditions, in the light of the new information. possibility that its financial position and profit or loss may have been
affected by the existence of related parties and by transactions and
In some cases, an entity needs to update the disclosures in its financial outstanding balances, including commitments, with such parties.
statements to reflect information received after the reporting period,
even when the information does not affect the amounts that it Scope
recognizes in its financial statements. One example of the need to
update disclosures is when evidence becomes available after the This Standard shall be applied in:
reporting period about a contingent liability that existed at the end of
the reporting period. (a) identifying related party relationships and transactions;
In addition to considering whether it should recognise or change a
provision under IAS 37, an entity updates its disclosures about the (b) identifying outstanding balances, including commitments,
contingent liability in the light of that evidence. between an entity and its related parties;

Non-adjusting events after the reporting period (c) identifying the circumstances in which disclosure of the
items in (a) and (b) is required; and
If non-adjusting events after the reporting period are
material, non-disclosure could influence the economic (d) determining the disclosures to be made about those items.
decisions of that users make on the basis of the financial
statements. Accordingly, an entity shall disclose the following This Standard requires disclosure of related party
for each material category of non-adjusting event after the relationships, transactions and outstanding balances,
reporting period: including commitments, in the consolidated and separate
financial statements of a parent, venturer or investor
(a) the nature of the event; and presented in accordance with IAS 27 Consolidated and
(b) an estimate of its financial effect, or a statement that such Separate Financial Statements. This Standard also applies to
an estimate cannot be made. individual financial statements.

The following are examples of non-adjusting events after the reporting Related party transactions and outstanding balances with other entities
period that would generally result in disclosure: in a group are disclosed in an entity’s financial statements. Intragroup
related party transactions and outstanding balances are eliminated in
the preparation of consolidated financial statements of the group.
 (vi) The entity is controlled or jointly controlled by a person
Purpose of related party disclosures identified in (a).

Related party relationships are a normal feature of commerce and (vii) A person identified in (a)(i) has significant influence over
business. For example, entities frequently carry on parts of their the entity or is a member of the key management personnel of
activities through subsidiaries, joint ventures and associates. In those the entity (or of a parent of the entity).
circumstances, the entity has the ability to affect the financial and
operating policies of the investee through the presence of control, joint A related party transaction is a transfer of resources, services
control or significant influence. or obligations between a reporting entity and a related party,
regardless of whether a price is charged.
A related party relationship could have an effect on the profit or loss
and financial position of an entity. Related parties may enter into Close members of the family of a person are those family
transactions that unrelated parties would not. For example, an entity members who may be expected to influence, or be influenced
that sells goods to its parent at cost might not sell on those terms to by, that person in their dealings with the entity and include:
another customer. Also, transactions between related parties may not
be made at the same amounts as between unrelated parties. (a) that person’s children and spouse or domestic partner;
(b) children of that person’s spouse or domestic partner; and
The profit or loss and financial position of an entity may be affected by (c) dependants of that person or that person’s spouse or
a related party relationship even if related party transactions do not domestic partner.
occur. The mere existence of the relationship may be sufficient to
affect the transactions of the entity with other parties. For example, a Compensation includes all employee benefits (as defined in
subsidiary may terminate relations with a trading partner on IAS 19 Employee Benefits) including employee benefits to
acquisition by the parent of a fellow subsidiary engaged in the same which IFRS 2 Share-based Payment applies. Employee
activity as the former trading partner. Alternatively, one party may benefits are all forms of consideration paid, payable or
refrain from acting because of the significant influence of another—for provided by the entity, or on behalf of the entity, in exchange
example, a subsidiary may be instructed by its parent not to engage in for services rendered to the entity. It also includes such
research and development. consideration paid on behalf of a parent of the entity in
respect of the entity. Compensation includes:
For these reasons, knowledge of an entity’s transactions, outstanding
balances, including commitments, and relationships with related (a) short-term employee benefits, such as wages, salaries and
parties may affect assessments of its operations by users of financial social security contributions, paid annual leave and paid sick
statements, including assessments of the risks and opportunities facing leave, profit-sharing and bonuses (if payable within twelve
the entity. months of the end of the period) and non-monetary benefits
(such as medical care, housing, cars and free or subsidised
Definitions goods or services) for current employees;
The following terms are used in this Standard with the
meanings specified: (b) post-employment benefits such as pensions, other
retirement benefits, post-employment life insurance and post-
A related party is a person or entity that is related to the employment medical care;
entity that is preparing its financial statements (in this
Standard referred to as the ‘reporting entity’). (c) other long-term employee benefits, including long-service
leave or sabbatical leave, jubilee or other long-service
(a) A person or a close member of that person’s family is benefits, long-term disability benefits and, if they are not
related to a reporting entity if that person: payable wholly within twelve months after the end of the
period, profit-sharing, bonuses and deferred compensation;
(i) has control or joint control over the reporting entity;
(d) termination benefits; and
(ii) has significant influence over the reporting entity; or
(e) share-based payment.
(iii) is a member of the key management personnel of the Control is the power to govern the financial and operating
reporting entity or of a parent of the reporting entity. policies of an entity so as to obtain benefits from its activities.

(b) An entity is related to a reporting entity if any of the Joint control is the contractually agreed sharing of control
following conditions applies: over an economic activity.

(i) The entity and the reporting entity are members of the Key management personnel are those persons having
same group (which means that each parent, subsidiary and authority and responsibility for planning, directing and
fellow subsidiary is related to the others). controlling the activities of the entity, directly or indirectly,
(ii) One entity is an associate or joint venture of the other including any director (whether executive or otherwise) of
entity (or an associate or joint venture of a member of a group that entity.
of which the other entity is a member).
Significant influence is the power to participate in the
(iii) Both entities are joint ventures of the same third party. financial and operating policy decisions of an entity, but is not
control over those policies. Significant influence may be
(iv) One entity is a joint venture of a third entity and the other gained by share ownership, statute or agreement.
entity is an associate of the third entity.
Government refers to government, government agencies and
(v) The entity is a post-employment benefit plan for the similar bodies whether local, national or international.
benefit of employees of either the reporting entity or an entity
related to the reporting entity. If the reporting entity is itself A government-related entity is an entity that is controlled,
such a plan, the sponsoring employers are also related to the jointly controlled or significantly influenced by a government.
reporting entity.
  In considering each possible related party relationship, information about those transactions and outstanding
attention is directed to the substance of the relationship and balances, including commitments, necessary for users to
not merely the legal form. understand the potential effect of the relationship on the
financial statements. These disclosure requirements are in
addition to those in paragraph 17. At a minimum, disclosures
In the context of this Standard, the following are not related parties: shall include:

(a) two entities simply because they have a director or other member (a) the amount of the transactions;
of key management personnel in common or because a member of
key management personnel of one entity has significant influence over (b) the amount of outstanding balances, including
the other entity. commitments, and:

(b) two venturers simply because they share joint control over a joint (i) their terms and conditions, including whether they are
venture. secured, and the nature of the consideration to be provided in
settlement; and
(c)
(ii) details of any guarantees given or received;
(i) providers of finance,
(ii) trade unions, (c) provisions for doubtful debts related to the amount of
(iii) public utilities, and outstanding balances; and
(iv) departments and agencies of a government that does not control,
jointly control or significantly influence the reporting entity, simply by (d) the expense recognised during the period in respect of bad
virtue of their normal dealings with an entity (even though they may or doubtful debts due from related parties.
affect the freedom of action of an entity or participate in its decision-
making process). 19 The disclosures required by paragraph 18 shall be made
separately for each of the following categories:
(d) a customer, supplier, franchisor, distributor or general agent with
whom an entity transacts a significant volume of business, simply by (a) the parent;
virtue of the resulting economic dependence. (b) entities with joint control or significant influence over the
entity;
 In the definition of a related party, an associate includes (c) subsidiaries;
subsidiaries of the associate and a joint venture includes (d) associates;
subsidiaries of the joint venture. Therefore, for example, an (e) joint ventures in which the entity is a venturer;
associate’s subsidiary and the investor that has significant (f) key management personnel of the entity or its parent; and
influence over the associate are related to each other. (g) other related parties.

Disclosures
21 The following are examples of transactions that are disclosed if they
All entities are with a related party:

13 Relationships between a parent and its subsidiaries shall (a) purchases or sales of goods (finished or unfinished);
be disclosed irrespective of whether there have been (b) purchases or sales of property and other assets;
transactions between them. An entity shall disclose the name (c) rendering or receiving of services;
of its parent and, if different, the ultimate controlling party. If (d) leases;
neither the entity’s parent nor the ultimate controlling party (e) transfers of research and development;
produces consolidated financial statements available for (f) transfers under licence agreements;
public use, the name of the next most senior parent that does (g) transfers under finance arrangements (including loans and equity
so shall also be disclosed. contributions in cash or in kind);
(h) provision of guarantees or collateral;
 To enable users of financial statements to form a view about (i) commitments to do something if a particular event occurs or does
the effects of related party relationships on an entity, it is not occur in the future, including executory contracts* (recognised and
appropriate to disclose the related party relationship when unrecognised); and
control exists, irrespective of whether there have been (j) settlement of liabilities on behalf of the entity or by the entity on
transactions between the related parties. behalf of that related party.

 Paragraph 13 refers to the next most senior parent. This is Items of a similar nature may be disclosed in aggregate
the first parent in the group above the immediate parent except when separate disclosure is necessary for an
that produces consolidated financial statements available for understanding of the effects of related party transactions on
public use. the financial statements of the entity.

17 An entity shall disclose key management personnel Government-related entities

compensation in total and for each of the following 25 A reporting entity is exempt from the disclosure
categories: requirements of paragraph 18 in relation to related party
transactions and outstanding balances, including
(a) short-term employee benefits; commitments, with:
(b) post-employment benefits;
(c) other long-term benefits; (a) a government that has control, joint control or significant
(d) termination benefits; and influence over the reporting entity; and
(e) share-based payment.
(b) another entity that is a related party because the same
government has control, joint control or significant influence
18 If an entity has had related party transactions during the over both the reporting entity and the other entity.
periods covered by the financial statements, it shall disclose
the nature of the related party relationship as well as
26 If a reporting entity applies the exemption in paragraph International Financial Reporting Standards (IFRSs) are
25, it shall disclose the following about the transactions and Standards and Interpretations adopted by the International
related outstanding balances referred to in paragraph 25: Accounting Standards Board (IASB). They comprise:

(a) the name of the government and the nature of its (a) International Financial Reporting Standards;
relationship with the reporting entity (ie control, joint control (b) International Accounting Standards; and
or significant influence); (c) Interpretations developed by the International Financial
(b) the following information in sufficient detail to enable Reporting Interpretations Committee (IFRIC) or the former
users of the entity’s financial statements to understand the Standing Interpretations Committee (SIC).
effect of related party transactions on its financial statements:
(i) the nature and amount of each individually significant Material Omissions or misstatements of items are material if
transaction; and they could, individually or collectively, influence the economic
(ii) for other transactions that are collectively, but not decisions that users make on the basis of the financial
individually, significant, a qualitative or quantitative statements. Materiality depends on the size and nature of the
indication of their extent. Types of transactions include those omission or misstatement judged in the surrounding
listed in paragraph 21. circumstances. The size or nature of the item, or a
combination of both, could be the determining factor.
27 In using its judgement to determine the level of detail to be
disclosed in accordance with the requirements in paragraph 26(b), the Prior period errors are omissions from, and misstatements in,
reporting entity shall consider the closeness of the related party the entity’s financial statements for one or more prior periods
relationship and other factors relevant in establishing the level of arising from a failure to use, or misuse of, reliable information
significance of the transaction such as whether it is: that:

(a) significant in terms of size; (a) was available when financial statements for those periods
(b) carried out on non-market terms; were authorised for issue; and
(c) outside normal day-to-day business operations, such as the (b) could reasonably be expected to have been obtained and
purchase and sale of businesses; taken into account in the preparation and presentation of
(d) disclosed to regulatory or supervisory authorities; those financial statements.
(e) reported to senior management;
(f) subject to shareholder approval. Such errors include the effects of mathematical mistakes,
mistakes in applying accounting policies, oversights or
Philippine Accounting Standard 8 misinterpretations of facts, and fraud.
Accounting Policies, Changes in Accounting
Estimates and Errors Retrospective application is applying a new accounting policy
to transactions, other events and conditions as if that policy
Objective had always been applied.
1 The objective of this Standard is to prescribe the criteria for selecting
and changing accounting policies, together with the accounting Retrospective restatement is correcting the recognition,
treatment and disclosure of changes in accounting policies, changes in measurement and disclosure of amounts of elements of
accounting estimates and corrections of errors. The Standard is financial statements as if a prior period error had never
intended to enhance the relevance and reliability of an entity’s financial occurred.
statements, and the comparability of those financial statements over
time and with the financial statements of other entities. Impracticable Applying a requirement is impracticable when
the entity cannot apply it after making every reasonable effort
2 Disclosure requirements for accounting policies, except those for to do so. For a particular prior period, it is impracticable to
changes in accounting policies, are set out in IAS 1 Presentation of apply a change in an accounting policy retrospectively or to
Financial Statements. make a retrospective restatement to correct an error if:

Scope (a) the effects of the retrospective application or retrospective

restatement are not determinable;
This Standard shall be applied in selecting and applying (b) the retrospective application or retrospective restatement
accounting policies, and accounting for changes in accounting requires assumptions about what management’s intent would
policies, changes in accounting estimates and corrections of have been in that period; or
prior period errors. (c) the retrospective application or retrospective restatement
requires significant estimates of amounts and it is impossible
Definitions to distinguish objectively information about those estimates
that:
The following terms are used in this Standard with the (i) provides evidence of circumstances that existed on the
meanings specified: date(s) as at which those amounts are to be recognised,
measured or disclosed; and
Accounting policies are the specific principles, bases, (ii) would have been available when the financial statements
conventions, rules and practices applied by an entity in for that prior period were authorised for issue
preparing and presenting financial statements.
from other information.
A change in accounting estimate is an adjustment of the
carrying amount of an asset or a liability, or the amount of the Prospective application of a change in accounting policy and
periodic consumption of an asset, that results from the of recognising the effect of a change in an accounting
assessment of the present status of, and expected future estimate, respectively, are:
benefits and obligations associated with, assets and liabilities.
Changes in accounting estimates result from new information (a) applying the new accounting policy to transactions, other
or new developments and, accordingly, are not corrections of events and conditions occurring after the date as at which the
errors. policy is changed; and
(b) recognising the effect of the change in the accounting same accounting policies are applied within each period and from one
estimate in the current and future periods affected by the period to the next unless a change in accounting policy meets one of
change. the criteria in paragraph 14.

Accounting policies 16 The following are not changes in accounting policies:

Selection and application of accounting policies
(a) the application of an accounting policy for transactions,
When an IFRS specifically applies to a transaction, other other events or conditions that differ in substance from those
event or condition, the accounting policy or policies applied to previously occurring; and
that item shall be determined by applying the IFRS. (b) the application of a new accounting policy for
transactions, other events or conditions that did not occur
IFRSs are accompanied by guidance to assist entities in applying their previously or were immaterial.
requirements. All such guidance states whether it is an integral part of
IFRSs. Guidance that is an integral part of IFRSs is mandatory. 17 The initial application of a policy to revalue assets in
Guidance that is not an integral part of IFRSs does not contain accordance with IAS 16 Property, Plant and
requirements for financial statements. Equipment or IAS 38 Intangible Assets is a change in an
accounting policy to be dealt with as a revaluation in
10 In the absence of an IFRS that specifically applies to a accordance with IAS 16 or IAS 38, rather than in accordance
transaction, other event or condition, management shall use with this Standard.
its judgement in developing and applying an accounting policy
that results in information that is: 18 Paragraphs 19–31 do not apply to the change in accounting policy
described in paragraph 17.
(a) relevant to the economic decision-making needs of users;
and Applying changes in accounting policies
(b) reliable, in that the financial statements:
(i) represent faithfully the financial position, financial 19 Subject to paragraph 23:
performance and cash flows of the entity; (a) an entity shall account for a change in accounting policy
(ii) reflect the economic substance of transactions, other resulting from the initial application of an IFRS in accordance
events and conditions, and not merely the legal form; with the specific transitional provisions, if any, in that IFRS;
(iii) are neutral, ie free from bias; and
(iv) are prudent; and
(v) are complete in all material respects. (b) when an entity changes an accounting policy upon initial
application of an IFRS that does not include specific
11 In making the judgement described in paragraph 10, transitional provisions applying to that change, or changes an
management shall refer to, and consider the applicability of, accounting policy voluntarily, it shall apply the change
the following sources in descending order: retrospectively.

(a) the requirements in IFRSs dealing with similar and related 20 For the purpose of this Standard, early application of an IFRS is not
issues; and a voluntary change in accounting policy.
(b) the definitions, recognition criteria and measurement
concepts for assets, liabilities, income and expenses in the 21 In the absence of an IFRS that specifically applies to a transaction,
Framework. other event or condition, management may, in accordance with
paragraph 12, apply an accounting policy from the most recent
12 In making the judgement described in paragraph 10, pronouncements of other standard-setting bodies that use a similar
management may also consider the most recent conceptual framework to develop accounting standards. If, following
pronouncements of other standard-setting bodies that use a an amendment of such a pronouncement, the entity chooses to
similar conceptual framework to develop accounting change an accounting policy, that change is accounted for and
standards, other accounting literature and accepted industry disclosed as a voluntary change in accounting policy.
practices, to the extent that these do not conflict with the
sources in paragraph 11. Retrospective application

Consistency of accounting policies 22 Subject to paragraph 23, when a change in accounting

policy is applied retrospectively in accordance with paragraph
An entity shall select and apply its accounting policies 19(a) or (b), the entity shall adjust the opening balance of
consistently for similar transactions, other events and each affected component of equity for the earliest prior period
conditions, unless an IFRS specifically requires or permits presented and the other comparative amounts disclosed for
categorisation of items for which different policies may be each prior period presented as if the new accounting policy
appropriate. If an IFRS requires or permits such had always been applied.
categorisation, an appropriate accounting policy shall be
selected and applied consistently to each category. Limitations on retrospective application

Changes in accounting policies 23 When retrospective application is required by paragraph

14 An entity shall change an accounting policy only if the 19(a) or (b), a change in accounting policy shall be applied
change: retrospectively except to the extent that it is impracticable to
determine either the period-specific effects or the cumulative
(a) is required by an IFRS; or effect of the change.
(b) results in the financial statements providing reliable and
more relevant information about the effects of transactions, 24 When it is impracticable to determine the period-specific
other events or conditions on the entity’s financial position, effects of changing an accounting policy on comparative
financial performance or cash flows. information for one or more prior periods presented, the
entity shall apply the new accounting policy to the carrying
15 Users of financial statements need to be able to compare the amounts of assets and liabilities as at the beginning of the
financial statements of an entity over time to identify trends in its earliest period for which retrospective application is
financial position, financial performance and cash flows. Therefore, the practicable, which may be the current period, and shall make
a corresponding adjustment to the opening balance of each
affected component of equity for that period. (a) the nature of the change in accounting policy;
(b) the reasons why applying the new accounting policy
25 When it is impracticable to determine the cumulative provides reliable and more relevant information;
effect, at the beginning of the current period, of applying a (c) for the current period and each prior period presented, to
new accounting policy to all prior periods, the entity shall the extent practicable, the amount of the adjustment:
adjust the comparative information to apply the new
accounting policy prospectively from the earliest date (i) for each financial statement line item affected; and
practicable. (ii) if IAS 33 applies to the entity, for basic and diluted
earnings per share;
26 When an entity applies a new accounting policy retrospectively, it (d) the amount of the adjustment relating to periods before
applies the new accounting policy to comparative information for prior those presented, to the extent practicable; and
periods as far back as is practicable. Retrospective application to a (e) if retrospective application is impracticable for a particular
prior period is not practicable unless it is practicable to determine the prior period, or for periods before those presented, the
cumulative effect on the amounts in both the opening and closing circumstances that led to the existence of that condition and a
statement of financial position for that period. The amount of the description of how and from when the change in accounting
resulting adjustment relating to periods before those presented in the policy has been applied.
financial statements is made to the opening balance of each
affected component of equity of the earliest prior period presented. Financial statements of subsequent periods need not repeat
Usually the adjustment is made to retained earnings. However, the these disclosures.
adjustment may be made to another component of equity (for
example, to comply with an IFRS). Any other information about prior 30 When an entity has not applied a new IFRS that has been
periods, such as historical summaries of financial data, is also adjusted issued but is not yet effective, the entity shall disclose:
as far back as is practicable.
(a) this fact; and
27 When it is impracticable for an entity to apply a new accounting (b) known or reasonably estimable information relevant to
policy retrospectively, because it cannot determine the cumulative assessing the possible impact that application of the new IFRS
effect of applying the policy to all prior periods, the entity, in will have on the entity’s financial statements in the period of
accordance with paragraph 25, applies the new policy prospectively initial application.
from the start of the earliest period practicable.
It therefore disregards the portion of the cumulative adjustment to 31 In complying with paragraph 30, an entity considers disclosing:
assets, liabilities and equity arising before that date. Changing an
accounting policy is permitted even if it is impracticable to apply the (a) the title of the new Standard or Interpretation;
policy prospectively for any prior period. Paragraphs 50–53 provide (b) the nature of the impending change or changes in accounting
guidance on when it is impracticable to apply a new policy;
accounting policy to one or more prior periods. (c) the date by which application of the IFRS is required;
(d) the date as at which it plans to apply the IFRS initially; and
Disclosure (e) either:
(i) a discussion of the impact that initial application of the IFRS is
28 When initial application of an IFRS has an effect on the expected to have on the entity’s financial statements; or
current period or any prior period, would have such an effect (ii) if that impact is not known or reasonably estimable, a statement to
except that it is impracticable to determine the amount of the that effect.
adjustment, or might have an effect on future periods, an
entity shall disclose: Changes in accounting estimates

(a) the title of the IFRS; As a result of the uncertainties inherent in business activities, many
(b) when applicable, that the change in accounting policy is items in financial statements cannot be measured with precision but
made in accordance with its transitional provisions; can only be estimated. Estimation involves judgements based on the
(c) the nature of the change in accounting policy; latest available, reliable information. For example, estimates may be
(d) when applicable, a description of the transitional required of:
provisions;
(e) when applicable, the transitional provisions that might (a) bad debts;
have an effect on future periods; (b) inventory obsolescence;
(f) for the current period and each prior period presented, to (c) the fair value of financial assets or financial liabilities;
the extent practicable, the amount of the adjustment: (d) the useful lives of, or expected pattern of consumption of the
(i) for each financial statement line item affected; and future economic benefits embodied in, depreciable assets; and
(ii) if IAS 33 Earnings per Share applies to the entity, for basic (e) warranty obligations.
and diluted earnings per share;
(g) the amount of the adjustment relating to periods before The use of reasonable estimates is an essential part of the preparation
those presented, to the extent practicable; and of financial statements and does not undermine their reliability.
(h) if retrospective application required by paragraph 19(a) or
(b) is impracticable for a particular prior period, or for periods An estimate may need revision if changes occur in the circumstances
before those presented, the circumstances that led to the on which the estimate was based or as a result of new information or
existence of that condition and a description of how and from more experience. By its nature, the revision of an estimate does not
when the change in accounting policy has been applied. relate to prior periods and is not the correction of an error.

Financial statements of subsequent periods need not repeat A change in the measurement basis applied is a change in an
these disclosures. accounting policy, and is not a change in an accounting estimate.
When it is difficult to distinguish a change in an accounting
29 When a voluntary change in accounting policy has an effect policy from a change in an accounting estimate, the change is
on the current period or any prior period, would have an effect treated as a change in an accounting estimate (with
on that period except that it is impracticable to determine the appropriate disclosure).
amount of the adjustment, or might have an effect on future
periods, an entity shall disclose:
36 The effect of a change in an accounting estimate, other 44 When it is impracticable to determine the period-specific
than a change to which paragraph 37 applies, shall be effects of an error on comparative information for one or more
recognised prospectively by including it in profit or loss in: prior periods presented, the entity shall restate the opening
balances of assets, liabilities and equity for the earliest period
(a) the period of the change, if the change affects that period for which retrospective restatement is practicable (which may
only; or be the current period).
(b) the period of the change and future periods, if the change
affects both. 45 When it is impracticable to determine the cumulative
effect, at the beginning of the current period, of an error on all
37 To the extent that a change in an accounting estimate prior periods, the entity shall restate the comparative
gives rise to changes in assets and liabilities, or relates to an information to correct the error prospectively from the earliest
item of equity, it shall be recognised by adjusting the carrying date practicable.
amount of the related asset, liability or equity item in the 46 The correction of a prior period error is excluded from profit or loss
period of the change. for the period in which the error is discovered. Any information
presented about prior periods, including any historical summaries of
Prospective recognition of the effect of a change in an accounting financial data, is restated as far back as is practicable.
estimate means that the change is applied to transactions, other
events and conditions from the date of the change in estimate. A 47 When it is impracticable to determine the amount of an error (eg a
change in an accounting estimate may affect only the current period’s mistake in applying an accounting policy) for all prior periods, the
profit or loss, or the profit or loss of both the current period and future entity, in accordance with paragraph 45, restates the comparative
periods. For example, a change in the estimate of the amount of bad information prospectively from the earliest date practicable. It
debts affects only the current period’s profit or loss and therefore is therefore disregards the portion of the cumulative restatement of
recognised in the current period. However, a change in the estimated assets, liabilities and equity arising before that date. Paragraphs 50–53
useful life of, or the expected pattern of consumption of the future provide guidance on when it is impracticable to correct an error for
economic benefits embodied in, a depreciable asset affects one or more prior periods.
depreciation expense for the current period and for each future period
during the asset’s remaining useful life. In both cases, the effect of the 48 Corrections of errors are distinguished from changes in accounting
change relating to the current period is recognised as income or estimates. Accounting estimates by their nature are approximations
expense in the current period. The effect, if any, on future periods is that may need revision as additional information becomes known. For
recognised as income or expense in those future periods. example, the gain or loss recognised on the outcome of a contingency
is not the correction of an error.
Disclosure
Disclosure of prior period errors
An entity shall disclose the nature and amount of a change in
an accounting estimate that has an effect in the current 49 In applying paragraph 42, an entity shall disclose the
period or is expected to have an effect in future periods, following:
except for the disclosure of the effect on future periods when
it is impracticable to estimate that effect. (a) the nature of the prior period error;
(b) for each prior period presented, to the extent practicable,
If the amount of the effect in future periods is not disclosed the amount of the correction:
because estimating it is impracticable, an entity shall disclose (i) for each financial statement line item affected; and
that fact. (ii) if IAS 33 applies to the entity, for basic and diluted
earnings per share;
Errors (c) the amount of the correction at the beginning of the
earliest prior period presented; and
41 Errors can arise in respect of the recognition, measurement, (d) if retrospective restatement is impracticable for a
presentation or disclosure of elements of financial statements. particular prior period, the circumstances that led to the
Financial statements do not comply with IFRSs if they contain either existence of that condition and a description of how and from
material errors or immaterial errors made intentionally to achieve a when the error has been corrected.
particular presentation of an entity’s financial position, financial
performance or cash flows. Potential current period errors discovered Financial statements of subsequent periods need not repeat
in that period are corrected before the financial statements are these disclosures.
authorised for issue. However, material errors are sometimes not
discovered until a subsequent period, and these prior period errors are Impracticability in respect of retrospective application and
corrected in the comparative information presented in the financial retrospective restatement
statements for that subsequent period (see paragraphs 42–47).
50 In some circumstances, it is impracticable to adjust comparative
42 Subject to paragraph 43, an entity shall correct material information for one or more prior periods to achieve comparability with
prior period errors retrospectively in the first set of financial the current period. For example, data may not have been collected in
statements authorised for issue after their discovery by: the prior period(s) in a way that allows either retrospective application
of a new accounting policy (including, for the purpose of paragraphs
(a) restating the comparative amounts for the prior period(s) 51–53, its prospective application to prior periods) or retrospective
presented in which the error occurred; or restatement to correct a prior period error, and it may be impracticable
(b) if the error occurred before the earliest prior period to recreate the information.
presented, restating the opening balances of assets, liabilities
and equity for the earliest prior period presented. 51 It is frequently necessary to make estimates in applying an
accounting policy to elements of financial statements recognised or
Limitations on retrospective restatement disclosed in respect of transactions, other events or conditions.
Estimation is inherently subjective, and estimates may be developed
43 A prior period error shall be corrected by retrospective after the reporting period. Developing estimates is potentially more
restatement except to the extent that it is impracticable to difficult when retrospectively applying an accounting policy or making
determine either the period-specific effects or the cumulative a retrospective restatement to correct a prior period error, because of
effect of the error. the longer period of time that might have passed since the affected
transaction, other event or condition occurred. However, the objective
of estimates related to prior periods remains the same as for estimates industries. When such inventories are measured at net
made in the current period, namely, for the estimate to reflect the realisable value, changes in that value are recognised in profit
circumstances that existed when the transaction, other event or or loss in the period of the change.
condition occurred. (b) commodity broker-traders who measure their inventories
at fair value less costs to sell. When such inventories are
52 Therefore, retrospectively applying a new accounting policy or measured at fair value less costs to sell, changes in fair value
correcting a prior period error requires distinguishing information that less costs to sell are recognised in profit or loss in the period
of the change.
(a) provides evidence of circumstances that existed on the date(s) as
at which the transaction, other event or condition occurred, and 4 The inventories referred to in paragraph 3(a) are measured at net
(b) would have been available when the financial statements for that realisable value at certain stages of production. This occurs, for
prior period were authorised for issue example, when agricultural crops have been harvested or minerals
have been extracted and sale is assured under a forward contract or a
from other information. For some types of estimates (eg an estimate government guarantee, or when an active market exists and there is a
of fair value not based on an observable price or observable inputs), it negligible risk of failure to sell. These inventories are excluded from
is impracticable to distinguish these types of information. When only the measurement requirements of this Standard.
retrospective application or retrospective restatement would require
making a significant estimate for which it is impossible to distinguish 5 Broker-traders are those who buy or sell commodities for others or
these two types of information, it is impracticable to apply the new on their own account. The inventories referred to in paragraph 3(b)
accounting policy or correct the prior period error retrospectively. are principally acquired with the purpose of selling in the near future
and generating a profit from fluctuations in price or broker-traders’
53 Hindsight should not be used when applying a new accounting margin. When these inventories are measured at fair value less costs
policy to, or correcting amounts for, a prior period, either in making to sell, they are excluded from only the measurement requirements of
assumptions about what management’s intentions would have been in this Standard.
a prior period or estimating the amounts recognised, measured or
disclosed in a prior period. For example, when an entity corrects a Definitions
prior period error in measuring financial assets previously classified as
held-to-maturity investments in accordance with IAS 39 Financial The following terms are used in this Standard with the
Instruments: Recognition and Measurement, it does not change their meanings specified:
basis of measurement for that period if management decided later not
to hold them to maturity. In addition, when an entity corrects a prior Inventories are assets:
period error in calculating its liability for employees’ accumulated sick
leave in accordance with IAS 19 Employee Benefits, it disregards (a) held for sale in the ordinary course of business;
information about an unusually severe influenza season during the (b) in the process of production for such sale; or
next period that became available after the financial statements for the (c) in the form of materials or supplies to be consumed in the
prior period were authorised for issue. The fact that significant production process or in the rendering of services.
estimates are frequently required when amending comparative
information presented for prior periods does not prevent reliable Net realisable value is the estimated selling price in the
adjustment or correction of the comparative information. ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make the
Philippine Accounting Standard 2 sale.
Inventories
Fair value is the amount for which an asset could be
Objective exchanged, or a liability settled, between knowledgeable,
1 The objective of this Standard is to prescribe the accounting willing parties in an arm’s length transaction.
treatment for inventories. A primary issue in accounting for inventories
is the amount of cost to be recognised as an asset and carried forward Net realisable value refers to the net amount that an entity expects to
until the related revenues are recognised. This Standard provides realise from the sale of inventory in the ordinary course of business.
guidance on the determination of cost and its subsequent recognition Fair value reflects the amount for which the same inventory could be
as an expense, including any write-down to net realisable value. It also exchanged between knowledgeable and willing buyers and sellers in
provides guidance on the cost formulas that are used to assign costs the marketplace. The former is an entity-specific value; the
to inventories. latter is not. Net realisable value for inventories may not equal fair
value less costs to sell.
Scope
Inventories encompass goods purchased and held for resale including,
2 This Standard applies to all inventories, except: for example, merchandise purchased by a retailer and held for resale,
or land and other property held for resale. Inventories also encompass
(a) work in progress arising under construction contracts, finished goods produced, or work in progress being produced, by the
including directly related service contracts (see IAS 11 entity and include materials and supplies awaiting use in the
Construction Contracts); production process. In the case of a service provider, inventories
(b) financial instruments (see IAS 32 Financial Instruments: include the costs of the service, as described in paragraph 19, for
Presentation and IAS 39 Financial Instruments: Recognition and which the entity has not yet recognised the related revenue (see IAS
Measurement); and 18 Revenue).
(c) biological assets related to agricultural activity and
agricultural produce at the point of harvest (see IAS 41 Measurement of inventories
Agriculture).
Inventories shall be measured at the lower of cost and net
3 This Standard does not apply to the measurement of realisable value.
inventories held by:
Cost of inventories
(a) producers of agricultural and forest products, agricultural
produce after harvest, and minerals and mineral products, to The cost of inventories shall comprise all costs of purchase,
the extent that they are measured at net realisable value in costs of conversion and other costs incurred in bringing the
accordance with well-established practices in those inventories to their present location and condition.
 element, for example a difference between the purchase price for
Costs of purchase normal credit terms and the amount paid, is recognised as interest
The costs of purchase of inventories comprise the purchase price, expense over the period of the financing.
import duties and other taxes (other than those subsequently
recoverable by the entity from the taxing authorities), and transport, Cost of inventories of a service provider
handling and other costs directly attributable to the acquisition of
finished goods, materials and services. Trade discounts, rebates and 19 To the extent that service providers have inventories, they measure
other similar items are deducted in determining the costs of purchase. them at the costs of their production.
These costs consist primarily of the labour and other costs of
Costs of conversion personnel directly engaged in providing the service, including
The costs of conversion of inventories include costs directly related to supervisory personnel, and attributable overheads. Labour and other
the units of production, such as direct labour. They also include a costs relating to sales and general administrative personnel are not
systematic allocation of fixed and variable production overheads that included but are recognised as expenses in the period in which they
are incurred in converting materials into finished goods. Fixed are incurred. The cost of inventories of a service provider does not
production overheads are those indirect costs of production that include profit margins or non-attributable overheads that are often
remain relatively constant regardless of the volume of production, such factored into prices charged by service providers.
as depreciation and maintenance of factory buildings and equipment,
and the cost of factory management and administration. Variable Cost of agricultural produce harvested from biological assets
production overheads are those indirect costs of production that vary
directly, or nearly directly, with the volume of production, such as In accordance with IAS 41 Agriculture inventories comprising
indirect materials and indirect labour. agricultural produce that an entity has harvested from its biological
assets are measured on initial recognition at their fair value less costs
The allocation of fixed production overheads to the costs of conversion to sell at the point of harvest. This is the cost of the inventories at that
is based on the normal capacity of the production facilities. Normal date for application of this Standard.
capacity is the production expected to be achieved on average over a
number of periods or seasons under normal circumstances, taking into Techniques for the measurement of cost
account the loss of capacity resulting from planned maintenance. The Techniques for the measurement of the cost of inventories, such as
actual level of production may be used if it approximates normal the standard cost method or the retail method, may be used for
capacity. The amount of fixed overhead allocated to each unit of convenience if the results approximate cost. Standard costs take into
production is not increased as a consequence of low production or idle account normal levels of materials and supplies, labour, efficiency and
plant. Unallocated overheads are recognised as an expense in the capacity utilisation. They are regularly reviewed and, if necessary,
period in which they are incurred. In periods of abnormally high revised in the light of current conditions.
production, the amount of fixed overhead allocated to each unit of
production is decreased so that inventories are not measured above The retail method is often used in the retail industry for measuring
cost. Variable production overheads are allocated to each unit of inventories of large numbers of rapidly changing items with similar
production on the basis of the actual use of the production facilities. margins for which it is impracticable to use other costing methods. The
cost of the inventory is determined by reducing the sales value of the
A production process may result in more than one product being inventory by the appropriate percentage gross margin. The percentage
produced simultaneously. This is the case, for example, when joint used takes into consideration inventory that has been marked down to
products are produced or when there is a main product and a by- below its original selling price. An average percentage for each retail
product. When the costs of conversion of each product are not department is often used.
separately identifiable, they are allocated between the products on a
rational and consistent basis. The allocation may be based, for Cost formulas
example, on the relative sales value of each product either at the stage
in the production process when the products become separately 23 The cost of inventories of items that are not ordinarily
identifiable, or at the completion of production. Most by-products, by interchangeable and goods or services produced and
their nature, are immaterial. When this is the case, they are often segregated for specific projects shall be assigned by using
measured at net realisable value and this value is deducted from the specific identification of their individual costs.
cost of the main product. As a result, the carrying amount of the main
product is not materially different from its cost. Specific identification of cost means that specific costs are attributed to
identified items of inventory. This is the appropriate treatment for
Other costs items that are segregated for a specific project, regardless of whether
they have been bought or produced. However, specific identification of
Other costs are included in the cost of inventories only to the extent costs is inappropriate when there are large numbers of items of
that they are incurred in bringing the inventories to their present inventory that are ordinarily interchangeable. In such circumstances,
location and condition. For example, it may be appropriate to include the method of selecting those items that remain in inventories could
non-production overheads or the costs of designing products for be used to obtain predetermined effects on profit or loss.
specific customers in the cost of inventories.
The cost of inventories, other than those dealt with in
Examples of costs excluded from the cost of inventories and paragraph 23, shall be assigned by using the first-in, first-out
recognised as expenses in the period in which they are incurred are: (FIFO) or weighted average cost formula. An entity shall use
the same cost formula for all inventories having a similar
(a) abnormal amounts of wasted materials, labour or other production nature and use to the entity. For inventories with a different
costs; nature or use, different cost formulas may be justified.
(b) storage costs, unless those costs are necessary in the production
process before a further production stage; For example, inventories used in one operating segment may have a
(c) administrative overheads that do not contribute to bringing use to the entity different from the same type of inventories used in
inventories to their present location and condition; and another operating segment. However, a difference in geographical
(d) selling costs. location of inventories (or in the respective tax rules), by itself, is not
IAS 23 Borrowing Costs identifies limited circumstances where sufficient to justify the use of different cost formulas.
borrowing costs are included in the cost of inventories.
The FIFO formula assumes that the items of inventory that were
An entity may purchase inventories on deferred settlement terms. purchased or produced first are sold first, and consequently the items
When the arrangement effectively contains a financing element, that remaining in inventory at the end of the period are those most recently
purchased or produced. Under the weighted average cost formula, the write-down of inventories to net realisable value and all
cost of each item is determined from the weighted average of the cost losses of inventories shall be recognised as an expense in the
of similar items at the beginning of a period and the cost of similar period the write-down or loss occurs. The amount of any
items purchased or produced during the period. The average may be reversal of any write-down of inventories, arising from an
calculated on a periodic basis, or as each additional shipment is increase in net realisable value, shall be recognised as a
received, depending upon the circumstances of the entity. reduction in the amount of inventories recognised as an
expense in the period in which the reversal occurs.
Net realisable value
 Some inventories may be allocated to other asset accounts,
The cost of inventories may not be recoverable if those inventories are for example, inventory used as a component of self-
damaged, if they have become wholly or partially obsolete, or if their constructed property, plant or equipment. Inventories
selling prices have declined. The cost of inventories may also not be allocated to another asset in this way are recognised as an
recoverable if the estimated costs of completion or the estimated costs expense during the useful life of that asset.
to be incurred to make the sale have increased. The practice of writing
inventories down below cost to net realisable value is consistent with Disclosure
the view that assets should not be carried in excess of amounts The financial statements shall disclose:
expected to be realised from their sale or use.
(a) the accounting policies adopted in measuring inventories,
Inventories are usually written down to net realisable value item by including the cost formula used;
item. In some circumstances, however, it may be appropriate to group (b) the total carrying amount of inventories and the carrying
similar or related items. This may be the case with items of inventory amount in classifications appropriate to the entity;
relating to the same product line that have similar purposes or end (c) the carrying amount of inventories carried at fair value
uses, are produced and marketed in the same geographical area, and less costs to sell;
cannot be practicably evaluated separately from other items in that (d) the amount of inventories recognised as an expense
product line. It is not appropriate to write inventories down on the during the period;
basis of a classification of inventory, for example, finished goods, or all (e) the amount of any write-down of inventories recognised
the inventories in a particular operating segment. Service providers as an expense in the period in accordance with paragraph 34;
generally accumulate costs in respect of each service for which a (f) the amount of any reversal of any write-down that is
separate selling price is charged. Therefore, each such service is recognised as a reduction in the amount of inventories
treated as a separate item. recognised as expense in the period in accordance with
paragraph 34;
Estimates of net realisable value are based on the most reliable (g) the circumstances or events that led to the reversal of a
evidence available at the time the estimates are made, of the amount write-down of inventories in accordance with paragraph 34;
the inventories are expected to realise. These estimates take into and
consideration fluctuations of price or cost directly relating to events (h) the carrying amount of inventories pledged as security for
occurring after the end of the period to the extent that such events liabilities.
confirm conditions existing at the end of the period.
 Information about the carrying amounts held in different
Estimates of net realisable value also take into consideration the classifications of inventories and the extent of the changes in
purpose for which the inventory is held. For example, the net these assets is useful to financial statement users. Common
realisable value of the quantity of inventory held to satisfy firm sales or classifications of inventories are merchandise, production
service contracts is based on the contract price. If the sales contracts supplies, materials, work in progress and finished goods.
are for less than the inventory quantities held, the net realisable value The inventories of a service provider may be described as
of the excess is based on general selling prices. Provisions may arise work in progress.
from firm sales contracts in excess of inventory quantities held or from
firm purchase contracts. Such provisions are dealt with under IAS 37  The amount of inventories recognised as an expense during
Provisions, Contingent Liabilities and Contingent Assets. the period, which is often referred to as cost of sales,
consists of those costs previously included in the
Materials and other supplies held for use in the production of measurement of inventory that has now been sold and
inventories are not written down below cost if the finished products in unallocated production overheads and abnormal amounts of
which they will be incorporated are expected to be sold at or above production costs of inventories. The circumstances of the
cost. However, when a decline in the price of materials indicates that entity may also warrant the inclusion of other amounts, such
the cost of the finished products exceeds net realizable value, the as distribution costs.
materials are written down to net realisable value. In such
circumstances, the replacement cost of the materials may be the best
available measure of their net realisable value.  Some entities adopt a format for profit or loss that results in
amounts being disclosed other than the cost of inventories
A new assessment is made of net realisable value in each subsequent recognised as an expense during the period. Under this
period. When the circumstances that previously caused inventories to format, an entity presents an analysis of expenses using a
be written down below cost no longer exist or when there is clear classification based on the nature of expenses. In this case,
evidence of an increase in net realisable value because of changed the entity discloses the costs recognised as an expense for
economic circumstances, the amount of the write-down is reversed (ie raw materials and consumables, labour costs and other costs
the reversal is limited to the amount of the original write-down) so that together with the amount of the net change in inventories
the new carrying amount is the lower of the cost and the revised net for the period.
realisable value. This occurs, for example, when an item of inventory
that is carried at net realisable value, because its selling price has
declined, is still on hand in a subsequent period and its selling price Philippine Accounting Standard 7
has increased. Statement of cash flows*

Recognition as an expense Objective

34 When inventories are sold, the carrying amount of those Information about the cash flows of an entity is useful in providing
inventories shall be recognised as an expense in the period in users of financial statements with a basis to assess the ability of the
which the related revenue is recognised. The amount of any entity to generate cash and cash equivalents and the needs of the
entity to utilize those cash flows. The economic decisions that are Cash flows from operating activities are primarily derived from the
taken by users require an evaluation of the ability of an entity to principal revenue-producing activities of the entity. Therefore, they
generate cash and cash equivalents and the timing and certainty of generally result from the transactions and other events that enter into
their generation. the determination of profit or loss. Examples of cash flows from
The objective of this Standard is to require the provision of information operating activities are:
about the historical changes in cash and cash equivalents of an entity
by means of a statement of cash flow which classifies cash flows (a) cash receipts from the sale of goods and the rendering of services;
during the period from operating, investing and financing activities. (b) cash receipts from royalties, fees, commissions and other revenue;
(c) cash payments to suppliers for goods and services;
Scope (d) cash payments to and on behalf of employees;
(e) cash receipts and cash payments of an insurance entity for
An entity shall prepare a statement of cash flow in accordance premiums and claims, annuities and other policy benefits;
with the requirements of this Standard and shall present it as (f) cash payments or refunds of income taxes unless they can be
an integral part of its financial statements for each period for specifically identified with financing and investing activities; and
which financial statements are presented. (g) cash receipts and payments from contracts held for dealing or
trading purposes.
 Accordingly, this Standard requires all entities to present a
statement of cash flow. Investing activities

Definitions The separate disclosure of cash flows arising from investing activities is
important because the cash flows represent the extent to which
The following terms are used in this Standard with the expenditures have been made for resources intended to generate
meanings specified: future income and cash flows. Only expenditures that result in a
recognised asset in the statement of financial position are eligible for
Cash comprises cash on hand and demand deposits. classification as investing activities. Examples of cash flows arising
from investing activities are:
Cash equivalents are short-term, highly liquid investments
that are readily convertible to known amounts of cash and (a) cash payments to acquire property, plant and equipment,
which are subject to an insignificant risk of changes in value. intangibles and other long-term assets. These payments include those
relating to capitalised development costs and self-constructed
Cash flows are inflows and outflows of cash and cash property, plant and equipment;
equivalents.
(b) cash receipts from sales of property, plant and equipment,
Operating activities are the principal revenue-producing intangibles and other long-term assets;
activities of the entity and other activities that are not
investing or financing activities. (c) cash payments to acquire equity or debt instruments of other
entities and interests in joint ventures (other than payments for those
Investing activities are the acquisition and disposal of long- instruments considered to be cash equivalents or those held for
term assets and other investments not included in cash dealing or trading purposes);
equivalents.
(d) cash receipts from sales of equity or debt instruments of other
Financing activities are activities that result in changes in the entities and interests in joint ventures (other than receipts for those
size and composition of the contributed equity and instruments considered to be cash equivalents and those held for
borrowings of the entity. dealing or trading purposes);

Cash and cash equivalents (e) cash advances and loans made to other parties (other than
advances and loans made by a financial institution);
 Cash equivalents are held for the purpose of meeting short-
term cash commitments rather than for investment or other (f) cash receipts from the repayment of advances and loans made to
purposes. For an investment to qualify as a cash equivalent other parties (other than advances and loans of a financial institution);
it must be readily convertible to a known amount of cash
and be subject to an insignificant risk of changes in value. (g) cash payments for futures contracts, forward contracts, option
Therefore, an investment normally qualifies as a cash contracts and swap contracts except when the contracts are held for
equivalent only when it has a short maturity of, say, three dealing or trading purposes, or the payments are classified as
months or less from the date of acquisition. Equity financing activities; and
investments are excluded from cash equivalents unless they
are, in substance, cash equivalents, for example in the case (h) cash receipts from futures contracts, forward contracts, option
of preferred shares acquired within a short period of their contracts and swap contracts except when the contracts are held for
maturity and with a specified redemption date. dealing or trading purposes, or the receipts are classified as financing
activities.
 Cash flows exclude movements between items that
constitute cash or cash equivalents because these When a contract is accounted for as a hedge of an identifiable
components are part of the cash management of an entity position, the cash flows of the contract are classified in the same
rather than part of its operating, investing and financing manner as the cash flows of the position being hedged.
activities. Cash management includes the investment of
excess cash in cash equivalents. Financing activities
Presentation of a statement of cash flow
17 The separate disclosure of cash flows arising from financing
The statement of cash flow shall report cash flows during the activities is important because it is useful in predicting claims on future
period classified by operating, investing and financing cash flows by providers of capital to the entity. Examples of cash flows
activities. arising from financing activities are:

Operating activities (a) cash proceeds from issuing shares or other equity instruments;
(b) cash payments to owners to acquire or redeem the entity’s shares;
Reporting cash flows on a net basis
(c) cash proceeds from issuing debentures, loans, notes, bonds,
mortgages and other short or long-term borrowings; 22 Cash flows arising from the following operating, investing
or financing activities may be reported on a net basis:
(d) cash repayments of amounts borrowed; and
(a) cash receipts and payments on behalf of customers when
(e) cash payments by a lessee for the reduction of the outstanding the cash flows reflect the activities of the customer rather
liability relating to a finance lease. than those of the entity; and
(b) cash receipts and payments for items in which the
Reporting cash flows from operating activities turnover is quick, the amounts are large, and the maturities
are short.
An entity shall report cash flows from operating activities
using either: 23 Examples of cash receipts and payments referred to in paragraph
22(a) are:
(a) the direct method, whereby major classes of gross cash
receipts and gross cash payments are disclosed; or (a) the acceptance and repayment of demand deposits of a bank;
(b) funds held for customers by an investment entity; and
(b) the indirect method, whereby profit or loss is adjusted for (c) rents collected on behalf of, and paid over to, the owners of
the effects of transactions of a non-cash nature, any deferrals properties.
or accruals of past or future operating cash receipts or
payments, and items of income or expense associated with Examples of cash receipts and payments referred to in paragraph
investing or financing cash flows. 22(b) are advances made for, and the repayment of:

 Entities are encouraged to report cash flows from (a) principal amounts relating to credit card customers;
operating activities using the direct method. The direct (b) the purchase and sale of investments; and
method provides information which may be useful in (c) other short-term borrowings, for example, those which have a
estimating future cash flows and which is not available under maturity period of three months or less.
the indirect method. Under the direct method, information
about major classes of gross cash receipts and gross cash 24 Cash flows arising from each of the following activities of a
payments may be obtained either: financial institution may be reported on a net basis:

(a) from the accounting records of the entity; or (a) cash receipts and payments for the acceptance and
repayment of deposits with a fixed maturity date;
(b) by adjusting sales, cost of sales (interest and similar (b) the placement of deposits with and withdrawal of deposits
income and interest expense and similar charges for a from other financial institutions; and
financial institution) and other items in the statement of (c) cash advances and loans made to customers and the
comprehensive income for: repayment of those advances and loans.
(i) changes during the period in inventories and operating
receivables and payables; Foreign currency cash flows

(ii) other non-cash items; and Cash flows arising from transactions in a foreign currency
shall be recorded in an entity’s functional currency by
(iii) other items for which the cash effects are investing or applying to the foreign currency amount the exchange rate
financing cash flows. between the functional currency and the foreign currency at
the date of the cash flow.

 Under the indirect method, the net cash flow from operating The cash flows of a foreign subsidiary shall be translated at
activities is determined by adjusting profit or loss for the the exchange rates between the functional currency and the
effects of: foreign currency at the dates of the cash flows.

(a) changes during the period in inventories and operating Cash flows denominated in a foreign currency are reported in a
receivables and payables; manner consistent with IAS 21 The Effects of Changes in Foreign
Exchange Rates. This permits the use of an exchange rate that
(b) non-cash items such as depreciation, provisions, approximates the actual rate. For example, a weighted average
deferred taxes, unrealised foreign currency gains and losses, exchange rate for a period may be used for recording foreign currency
undistributed profits of associates, and non-controlling transactions or the translation of the cash flows of a foreign subsidiary.
interests; and However, IAS 21 does not permit use of the exchange rate at the end
of the reporting period when translating the cash flows of a foreign
(c) all other items for which the cash effects are investing or subsidiary.
financing cash flows.
Unrealised gains and losses arising from changes in foreign currency
Alternatively, the net cash flow from operating activities may exchange rates are not cash flows. However, the effect of exchange
be presented under the indirect method by showing the rate changes on cash and cash equivalents held or due in a foreign
revenues and expenses disclosed in the statement of currency is reported in the statement of cash flows in order to
comprehensive income and the changes during the period in reconcile cash and cash equivalents at the beginning and the end of
inventories and operating receivables and payables. the period. This amount is presented separately from cash flows from
operating, investing and financing activities and includes the
Reporting cash flows from investing and financing activities differences, if any, had those cash flows been reported at end of
period exchange rates.
21 An entity shall report separately major classes of gross
cash receipts and gross cash payments arising from investing Interest and dividends
and financing activities, except to the extent that cash flows
described in paragraphs 22 and 24 are reported on a net basis.
Cash flows from interest and dividends received and paid shall The aggregate cash flows arising from obtaining or losing
each be disclosed separately. Each shall be classified in a control of subsidiaries or other businesses shall be presented
consistent manner from period to period as either operating, separately and classified as investing activities.
investing or financing activities.
An entity shall disclose, in aggregate, in respect of both
 The total amount of interest paid during a period is disclosed obtaining and losing control of subsidiaries or other
in the cash flows statement whether it has been recognised businesses during the period each of the following:
as an expense in profit or loss or capitalised in accordance
with IAS 23 Borrowing Costs. (a) the total consideration paid or received;
(b) the portion of the consideration consisting of cash and
 Interest paid and interest and dividends received are usually cash equivalents;
classified as operating cash flows for a financial institution. (c) the amount of cash and cash equivalents in the
However, there is no consensus on the classification of these subsidiaries or other businesses over which control is
cash flows for other entities. Interest paid and interest and obtained or lost; and
dividends received may be classified as operating cash flows (d) the amount of the assets and liabilities other than cash or
because they enter into the determination of profit or loss. cash equivalents in the subsidiaries or other businesses over
Alternatively, interest paid and interest and dividends which control is obtained or lost, summarised by each major
received may be classified as financing cash flows and category.
investing cash flows respectively, because they are costs of
obtaining financial resources or returns on investments.  The separate presentation of the cash flow effects of
obtaining or losing control of subsidiaries or other businesses
 Dividends paid may be classified as a financing cash flow as single line items, together with the separate disclosure of
because they are a cost of obtaining financial resources. the amounts of assets and liabilities acquired or disposed of,
Alternatively, dividends paid may be classified as a helps to distinguish those cash flows from the cash flows
component of cash flows from operating activities in order to arising from the other operating, investing and financing
assist users to determine the ability of an entity to pay activities. The cash flow effects of losing control are not
dividends out of operating cash flows. deducted from those of obtaining control.

Taxes on income  The aggregate amount of the cash paid or received as

consideration for obtaining or losing control of subsidiaries
Cash flows arising from taxes on income shall be separately or other businesses is reported in the statement of cash
disclosed and shall be classified as cash flows from operating flows net of cash and cash equivalents acquired or disposed
activities unless they can be specifically identified with of as part of such transactions, events or changes in
financing and investing activities. circumstances.

 Taxes on income arise on transactions that give rise to cash  Cash flows arising from changes in ownership interests in a
flows that are classified as operating, investing or financing subsidiary that do not result in a loss of control shall be
activities in a statement of cash flow. While tax expense may classified as cash flows from financing activities.
be readily identifiable with investing or financing activities,
the related tax cash flows are often impracticable to identify  Changes in ownership interests in a subsidiary that do not
and may arise in a different period from the cash flows of result in a loss of control, such as the subsequent purchase
the underlying transaction. Therefore, taxes paid are usually or sale by a parent of a subsidiary’s equity instruments, are
classified as cash flows from operating activities. However, accounted for as equity transactions (see IAS 27
when it is practicable to identify the tax cash flow with an Consolidated and Separate Financial Statements (as
individual transaction that gives rise to cash flows that are amended by the International Accounting Standards Board
classified as investing or financing activities the tax cash flow in 2008)). Accordingly, the resulting cash flows are classified
is classified as an investing or financing activity as in the same way as other transactions with owners described
appropriate. When tax cash flows are allocated over more in paragraph 17.
than one class of activity, the total amount of taxes paid is
disclosed. Non-cash transactions

Investments in subsidiaries, associates and joint ventures Investing and financing transactions that do not require the
use of cash or cash equivalents shall be excluded from a
 When accounting for an investment in an associate or a statement of cash flow. Such transactions shall be disclosed
subsidiary accounted for by use of the equity or cost elsewhere in the financial statements in a way that provides
method, an investor restricts its reporting in the statement all the relevant information about these investing and
of cash flow to the cash flows between itself and the financing activities.
investee, for example, to dividends and advances.
Many investing and financing activities do not have a direct impact on
 An entity which reports its interest in a jointly controlled current cash flows although they do affect the capital and asset
entity (see IAS 31 Interests in Joint Ventures) using structure of an entity. The exclusion of non-cash transactions from the
proportionate consolidation, includes in its consolidated statement of cash flows is consistent with the objective of a statement
statement of cash flows its proportionate share of the jointly of cash flows as these items do not involve cash flows in the current
controlled entity’s cash flows. An entity which reports such period. Examples of non-cash transactions are:
an interest using the equity method includes in its statement (a) the acquisition of assets either by assuming directly related
of cash flow the cash flows in respect of its investments in liabilities or by means of a finance lease;
the jointly controlled entity, and distributions and other (b) the acquisition of an entity by means of an equity issue; and
payments or receipts between it and the jointly controlled (c) the conversion of debt to equity.
entity.
Components of cash and cash equivalents
Changes in ownership interests in subsidiaries and other
businesses An entity shall disclose the components of cash and cash
equivalents and shall present a reconciliation of the amounts
in its statement of cash flow with the equivalent items Committee1 encourages publicly traded entities to provide
reported in the statement of financial position. interim financial reports that conform to the recognition,
measurement, and disclosure principles set out in this
 An entity discloses the policy which it adopts in determining Standard. Specifically, publicly traded entities are encouraged:
the composition of cash and cash equivalents.
(a) to provide interim financial reports at least as of the end of the first
Other disclosures half of their financial year; and

An entity shall disclose, together with a commentary by (b) to make their interim financial reports available not later than 60
management, the amount of significant cash and cash days after the end of the interim period.
equivalent balances held by the entity that are not available
for use by the group. Each financial report, annual or interim, is evaluated on its own for
conformity to International Financial Reporting Standards. The fact
There are various circumstances in which cash and cash equivalent that an entity may not have provided interim financial reports
balances held by an entity are not available for use by the group. during a particular financial year or may have provided
Examples include cash and cash equivalent balances held by a interim financial reports that do not comply with this
subsidiary that operates in a country where exchange controls or other Standard does not prevent the entity’s annual financial
legal restrictions apply when the balances are not available for general statements from conforming to International Financial
use by the parent or other subsidiaries. Reporting Standards if they otherwise do so.

Additional information may be relevant to users in understanding the If an entity’s interim financial report is described as complying
financial position and liquidity of an entity. Disclosure of this with International Financial Reporting Standards, it must
information, together with a commentary by management, is comply with all of the requirements of this Standard. Paragraph
encouraged and may include: 19 requires certain disclosures in that regard.

(a) the amount of undrawn borrowing facilities that may be available Definitions
for future operating activities and to settle capital commitments, The following terms are used in this Standard with the
indicating any restrictions on the use of these facilities; meanings specified:
(b) the aggregate amounts of the cash flows from each of operating,
investing and financing activities related to interests in joint ventures Interim period is a financial reporting period shorter than a
reported using proportionate consolidation; full financial year.
(c) the aggregate amount of cash flows that represent increases in
operating capacity separately from those cash flows that are required Interim financial report means a financial report containing
to maintain operating capacity; and either a complete set of financial statements (as described in
(d) the amount of the cash flows arising from the operating, investing IAS 1 Presentation of Financial Statements (as revised in
and financing activities of each reportable segment (see IFRS 8 2007)) or a set of condensed financial statements (as
Operating Segments). described in this Standard) for an interim period.

The separate disclosure of cash flows that represent increases in  In the interest of timeliness and cost considerations and to
operating capacity and cash flows that are required to maintain avoid repetition of information previously reported, an entity
operating capacity is useful in enabling the user to determine whether may be required to or may elect to provide less information
the entity is investing adequately in the maintenance of its operating at interim dates as compared with its annual financial
capacity. An entity that does not invest adequately in the maintenance statements. This Standard defines the minimum content of
of its operating capacity may be prejudicing future profitability for the an interim financial report as including condensed financial
sake of current liquidity and distributions to owners. statements and selected explanatory notes. The interim
financial report is intended to provide an update on the
The disclosure of segmental cash flows enables users to obtain a latest complete set of annual financial statements.
better understanding of the relationship between the cash flows of the Accordingly, it focuses on new activities, events, and
business as a whole and those of its component parts and the circumstances and does not duplicate information previously
availability and variability of segmental cash flows. reported.

Philippine Accounting Standard 34  Nothing in this Standard is intended to prohibit or discourage

Interim Financial Reporting an entity from publishing a complete set of financial
statements (as described in IAS 1) in its interim financial
Objective report, rather than condensed financial statements and
The objective of this Standard is to prescribe the minimum content of selected explanatory notes. Nor does this Standard prohibit
an interim financial report and to prescribe the principles for or discourage an entity from including in condensed interim
recognition and measurement in complete or condensed financial financial statements more than the minimum line items or
statements for an interim period. selected explanatory notes as set out in this Standard. The
Timely and reliable interim financial reporting improves the ability of recognition and measurement guidance in this Standard
investors, creditors, and others to understand an entity’s capacity to applies also to complete financial statements for an interim
generate earnings and cash flows and its financial condition and period, and such statements would include all of the
liquidity. disclosures required by this Standard (particularly the
selected note disclosures in paragraph 16) as well as those
Scope required by other Standards.
This Standard does not mandate which entities should be required to
publish interim financial reports, how frequently, or how soon after the Minimum components of an interim financial report
end of an interim period. However, governments, securities
regulators, stock exchanges, and accountancy bodies often An interim financial report shall include, at a minimum, the
require entities whose debt or equity securities are publicly following components:
traded to publish interim financial reports. This Standard
applies if an entity is required or elects to publish an interim (a) a condensed statement of financial position;
financial report in accordance with International Financial (b) a condensed statement or condensed statements of profit
Reporting Standards. The International Accounting Standards or loss and other comprehensive income;
(i) a condensed single statement; or (b) recognition of a loss from the impairment of financial assets,
(ii) a condensed separate income statement and a condensed property, plant and equipment, intangible assets, or other assets, and
statement of comprehensive income; the reversal of such an impairment loss;
(c) a condensed statement of changes in equity ; (c) the reversal of any provisions for the costs of restructuring;
(d) condensed statement of cash flows; and (d) acquisitions and disposals of items of property, plant and
(e) selected explanatory notes. equipment;
(e) commitments for the purchase of property, plant and equipment;
If an entity presents items of profit or loss in a separate (f) litigation settlements;
statement as described in paragraph 10A of IAS 1 (as (g) corrections of prior period errors;
amended in 2011), it presents interim condensed information (h) changes in the business or economic circumstances that affect the
from that statement. fair value of the entity’s financial assets and financial liabilities,
whether those assets or liabilities are recognised at fair value or
Form and content of interim financial statements amortised cost;
(i) any loan default or breach of a loan agreement that has not been
If an entity publishes a complete set of financial statements in remedied on or before the end of the reporting period; and
its interim financial report, the form and content of those (j) related party transactions.;
statements shall conform to the requirements of IAS 1 for a (k) transfers between levels of the fair value hierarchy used in
complete set of financial statements. measuring the fair value of financial instruments;
(l) changes in the classification of financial assets as a result of a
If an entity publishes a set of condensed financial statements change in the purpose or use of those assets; and
in its interim financial report, those condensed statements (m) changes in contingent liabilities or contingent assets.
shall include, at a minimum, each of the headings and
subtotals that were included in its most recent annual 15C Individual IFRSs provide guidance regarding disclosure
financial statements and the selected explanatory notes as requirements for many of the items listed in paragraph
required by this Standard. Additional line items or notes shall 15B. When an event or transaction is significant to an understanding
be included if their omission would make the condensed of the changes in an entity’s financial position or performance since
interim financial statements misleading. the last annual reporting period, its interim financial report should
provide an explanation of and an update to the relevant information
In the statement that presents the components of profit or loss for an included in the financial statements of the last annual reporting period.
interim period, an entity shall present basic and diluted earnings per
share for that period when the entity is within the scope of IAS 33 Other disclosures
Earnings per Share (2).
16A In addition to disclosing significant events and
If an entity presents items of profit or loss in a separate statement as transactions in accordance with paragraphs 15–15C, an entity
described in paragraph 10A of IAS 1 (as amended in 2011), it presents shall include the following information, in the notes to its
basic and diluted earnings per share in that statement. interim financial statements, if not disclosed elsewhere in the
interim financial report. The information shall normally be
IAS 1 (as revised in 2007) provides guidance on the structure of reported on a financial year-to-date basis.
financial statements. The Implementation Guidance for IAS 1
illustrates ways in which the statement of financial position, statement (a) a statement that the same accounting policies and
of comprehensive income and statement of changes in equity may be methods of computation are followed in the interim financial
presented. statements as compared with the most recent annual financial
statements or, if those policies or methods have been
An interim financial report is prepared on a consolidated basis if the changed, a description of the nature and effect of the change.
entity’s most recent annual financial statements were consolidated (b) explanatory comments about the seasonality or cyclicality
statements. The parent’s separate financial statements are not of interim operations.
consistent or comparable with the consolidated statements in the most
recent annual financial report. If an entity’s annual financial report (c) the nature and amount of items affecting assets, liabilities,
included the parent’s separate financial statements in addition to equity, net income or cash flows that are unusual because of
consolidated financial statements, this Standard neither requires nor their nature, size or incidence.
prohibits the inclusion of the parent’s separate statements in the
entity’s interim financial report. (d) the nature and amount of changes in estimates of amounts
reported in prior interim periods of the current financial year
Significant events and transactions or changes in estimates of amounts reported in prior financial
years.
15 An entity shall include in its interim financial report an explanation
of events and transactions that are significant to an understanding of (e) issues, repurchases and repayments of debt and equity
the changes in financial position and performance of the entity since securities.
the end of the last annual reporting period. Information disclosed in
relation to those events and transactions shall update the relevant (f) dividends paid (aggregate or per share) separately for
information presented in the most recent annual financial report. ordinary shares and other shares.

15A A user of an entity’s interim financial report will have access to (g) the following segment information (disclosure of segment
the most recent annual financial report of that entity. Therefore, it is information is required in an entity’s interim financial report
unnecessary for the notes to an interim financial report to provide only if IFRS 8 Operating Segments requires that entity to
relatively insignificant updates to the information that was reported in disclose segment information in its annual financial
the notes in the most recent annual financial report. statements):

15B The following is a list of events and transactions for which (i) revenues from external customers, if included in the
disclosures would be required if they are significant: measure of segment profit or loss reviewed by the chief
the list is not exhaustive. operating decision maker or otherwise regularly provided to
the chief operating decision maker.
(a) the write-down of inventories to net realisable value and the
reversal of such a write-down;
(ii) intersegment revenues, if included in the measure of twelve-month period may be useful. Accordingly, entities
segment profit or loss reviewed by the chief operating whose business is highly seasonal are encouraged to
decision maker or otherwise regularly provided to the chief consider reporting such information in addition to the
operating decision maker. information called for in the preceding paragraph.

(iii) a measure of segment profit or loss. Materiality

(iv) total assets for which there has been a material change In deciding how to recognise, measure, classify, or disclose an
from the amount disclosed in the last annual financial item for interim financial reporting purposes, materiality shall
statements. be assessed in relation to the interim period financial data. In
making assessments of materiality, it shall be recognised that
(v) a description of differences from the last annual financial interim measurements may rely on estimates to a greater
statements in the basis of segmentation or in the basis of extent than measurements of annual financial data.
measurement of segment profit or loss.
 While judgement is always required in assessing materiality,
(vi) a reconciliation of the total of the reportable segments’ this Standard bases the recognition and disclosure decision
measures of profit or loss to the entity’s profit or loss before on data for the interim period by itself for reasons of
tax expense (tax income) and discontinued operations. understandability of the interim figures. Thus, for example,
However, if an entity allocates to reportable segments items unusual items, changes in accounting policies or estimates,
such as tax expense (tax income), the entity may reconcile and errors are recognised and disclosed on the basis of
the total of the segments’ measures of profit or loss to profit materiality in relation to interim period data to avoid
or loss after those items. Material reconciling items shall be misleading inferences that might result from non-disclosure.
separately identified and described in that reconciliation. The overriding goal is to ensure that an interim financial
report includes all information that is relevant to
(h) Events after the interim period that have not been understanding an entity’s financial position and performance
reflected in the financial statements for the interim period. during the interim period.

(i) the effect of changes in the composition of the entity Disclosure in annual financial statements
during the interim period, including business combinations,
obtaining or losing control of subsidiaries and long-term 26 If an estimate of an amount reported in an interim period
investments, restructurings, and discontinued operations. In is changed significantly during the final interim period of the
the case of business combinations, the entity shall disclose financial year but a separate financial report is not published
the information required by IFRS 3 Business Combinations. for that final interim period, the nature and amount of that
change in estimate shall be disclosed in a note to the annual
(j) [deleted] financial statements for that financial year.

Disclosure of compliance with IFRSs IAS 8 requires disclosure of the nature and (if practicable) the amount
If an entity’s interim financial report is in compliance with this of a change in estimate that either has a material effect in the current
Standard, that fact shall be disclosed. An interim financial period or is expected to have a material effect in subsequent periods.
report shall not be described as complying with Standards Paragraph 16(d) of this Standard requires similar disclosure in an
unless it complies with all of the requirements of interim financial report. Examples include changes in estimate in the
International Financial Reporting Standards. final interim period relating to inventory write-downs, restructurings, or
impairment losses that were reported in an earlier interim period of the
Periods for which interim financial statements are required to financial year. The disclosure required by the preceding paragraph is
be presented consistent with the IAS 8 requirement and is intended to be narrow in
scope—relating only to the change in estimate. An entity is not
Interim reports shall include interim financial statements required to include additional interim period financial information in its
(condensed or complete) for periods as follows: annual financial statements.

(a) statement of financial position as of the end of the current Recognition and measurement
interim period and a comparative statement of financial
position as of the end of the immediately preceding financial Same accounting policies as annual
year;
(b) statements of profit or loss and other comprehensive 28 An entity shall apply the same accounting policies in its
income for the current interim period and cumulatively for the interim financial statements as are applied in its annual
current financial year to date, with comparative statements of financial statements, except for accounting policy changes
profit or loss and other comprehensive income for the made after the date of the most recent annual financial
comparable interim periods (current and year-to-date) of the statements that are to be reflected in the next annual
immediately preceding financial year. As permitted by IAS 1 financial statements. However, the frequency of an entity’s
(as amended in 2011), an interim report may present for each reporting (annual, half-yearly, or quarterly) shall not affect
period a statement or statements of profit or loss and other the measurement of its annual results. To achieve that
comprehensive income. objective, measurements for interim reporting purposes shall
(c) statement of changes in equity cumulatively for the be made on a year-to-date basis.
current financial year to date, with a comparative statement
for the comparable year-to-date period of the immediately 29 Requiring that an entity apply the same accounting policies in its
preceding financial year. interim financial statements as in its annual statements may seem to
(d) statement of cash flow cumulatively for the current suggest that interim period measurements are made as if each interim
financial year to date, with a comparative statement for the period stands alone as an independent reporting period. However, by
comparable year-to-date period of the immediately preceding providing that the frequency of an entity’s reporting shall not affect the
financial year. measurement of its annual results, paragraph 28 acknowledges that an
interim period is a part of a larger financial year. Year-to-date
 For an entity whose business is highly seasonal, financial measurements may involve changes in estimates of amounts reported
information for the twelve months up to the end of the in prior interim periods of the current financial year. But the principles
interim period and comparative information for the prior
for recognising assets, liabilities, income, and expenses for interim An entity that reports more frequently than half-yearly measures
periods are the same as in annual financial statements. income and expenses on a year-to-date basis for each interim period
using information available when each set of financial statements is
30 To illustrate: being prepared. Amounts of income and expenses reported in the
current interim period will reflect any changes in estimates of amounts
(a) the principles for recognising and measuring losses from inventory reported in prior interim periods of the financial year. The amounts
write-downs, restructurings, or impairments in an interim period are reported in prior interim periods are not retrospectively adjusted.
the same as those that an entity would follow if it prepared only Paragraphs 16(d) and 26 require, however, that the nature and
annual financial statements. However, if such items are recognised and amount of any significant changes in estimates be disclosed.
measured in one interim period and the estimate changes in a
subsequent interim period of that financial year, the original estimate Revenues received seasonally, cyclically, or occasionally
is changed in the subsequent interim period either by accrual of an
additional amount of loss or by reversal of the previously recognised Revenues that are received seasonally, cyclically, or
amount; occasionally within a financial year shall not be anticipated or
deferred as of an interim date if anticipation or deferral would
(b) a cost that does not meet the definition of an asset at the end of not be appropriate at the end of the entity’s financial year.
an interim period is not deferred in the statement of financial position
either to await future information as to whether it has met the Examples include dividend revenue, royalties, and government grants.
definition of an asset or to smooth earnings over interim periods within Additionally, some entities consistently earn more revenues in certain
a financial year; and interim periods of a financial year than in other interim periods, for
example, seasonal revenues of retailers. Such revenues are recognised
(c) income tax expense is recognised in each interim period based on when they occur.
the best estimate of the weighted average annual income tax rate
expected for the full financial year. Amounts accrued for income tax Costs incurred unevenly during the financial year
expense in one interim period may have to be adjusted in a
subsequent interim period of that financial year if the estimate of the Costs that are incurred unevenly during an entity’s financial
annual income tax rate changes. year shall be anticipated or deferred for interim reporting
purposes if, and only if, it is also appropriate to anticipate or
Recognition is the ‘process of incorporating in the statement of defer that type of cost at the end of the financial year.
financial position or statement of comprehensive income an item that
meets the definition of an element and satisfies the criteria for Use of estimates
recognition’.
The measurement procedures to be followed in an interim
 For assets, the same tests of future economic benefits apply financial report shall be designed to ensure that the resulting
at interim dates and at the end of an entity’s financial year. information is reliable and that all material financial
Costs that, by their nature, would not qualify as assets at information that is relevant to an understanding of the
financial year-end would not qualify at interim dates either. financial position or performance of the entity is appropriately
Similarly, a liability at the end of an interim reporting period disclosed. While measurements in both annual and interim
must represent an existing obligation at that date, just as it financial reports are often based on reasonable estimates, the
must at the end of an annual reporting period. preparation of interim financial reports generally will require a
greater use of estimation methods than annual financial
 An essential characteristic of income (revenue) and reports.
expenses is that the related inflows and outflows of assets
and liabilities have already taken place. If those inflows or Restatement of previously reported interim periods
outflows have taken place, the related revenue and expense
are recognised; otherwise they are not recognised. The 43 A change in accounting policy, other than one for which the
Framework says that ‘expenses are recognised in the transition is specified by a new IFRS, shall be reflected by:
statement of comprehensive income when a decrease in
future economic benefits related to a decrease in an asset or (a) restating the financial statements of prior interim periods
an increase of a liability has arisen that can be measured of the current financial year and the comparable interim
reliably… [The] Framework does not allow the recognition of periods of any prior financial years that will be restated in the
items in the statement of financial position which do not annual financial statements in accordance with IAS 8; or
meet the definition of assets or liabilities.’
(b) when it is impracticable to determine the cumulative
effect at the beginning of the financial year of applying a new
 In measuring the assets, liabilities, income, expenses, and accounting policy to all prior periods, adjusting the financial
cash flows reported in its financial statements, an entity that statements of prior interim periods of the current financial
reports only annually is able to take into account information year, and comparable interim periods of prior financial years
that becomes available throughout the financial year. Its to apply the new accounting policy prospectively from the
measurements are, in effect, on a year-to-date basis. earliest date practicable.

 An entity that reports half-yearly uses information available  One objective of the preceding principle is to ensure that a
by mid-year or shortly thereafter in making the single accounting policy is applied to a particular class of
measurements in its financial statements for the first six- transactions throughout an entire financial year. Under IAS
month period and information available by year-end or 8, a change in accounting policy is reflected by retrospective
shortly thereafter for the twelve-month period. The twelve- application, with restatement of prior period financial data as
month measurements will reflect possible changes in far back as is practicable. However, if the cumulative
estimates of amounts reported for the first six-month period. amount of the adjustment relating to prior financial years is
The amounts reported in the interim financial report for the impracticable to determine, then under IAS 8 the new policy
first six-month period are not retrospectively adjusted. is applied prospectively from the earliest date practicable.
Paragraphs 16(d) and 26 require, however, that the nature The effect of the principle in paragraph 43 is to require that
and amount of any significant changes in estimates be within the current financial year any change in accounting
disclosed. policy is applied either retrospectively or, if that is not
 practicable, prospectively, from no later than the beginning
of the financial year. 5A The classification, presentation and measurement requirements in
this IFRS applicable to a non-current asset (or disposal group) that is
 To allow accounting changes to be reflected as of an interim classified as held for sale apply also to a non-current asset (or disposal
date within the financial year would allow two differing group) that is classified as held for distribution to owners acting in
accounting policies to be applied to a particular class of their capacity as owners (held for distribution to owners).
transactions within a single financial year. The result would
be interim allocation difficulties, obscured operating results, 5B This IFRS specifies the disclosures required in respect of non-
and complicated analysis and understandability of interim current assets (or disposal groups) classified as held for sale or
period information. discontinued operations. Disclosures in other IFRSs do not apply to
such assets (or disposal groups) unless those IFRSs require:
Philippine Financial Reporting Standard 5
Non-current Assets Held for Sale and Discontinued (a) specific disclosures in respect of non-current assets (or disposal
Operations groups) classified as held for sale or discontinued operations; or
(b) disclosures about measurement of assets and liabilities within a
Objective disposal group that are not within the scope of the measurement
1 The objective of this IFRS is to specify the accounting for assets held requirement of IFRS 5 and such disclosures are not already provided in
for sale, and the presentation and disclosure of discontinued the other notes to the financial statements.
operations. In particular, the IFRS requires:
Additional disclosures about non-current assets (or disposal groups)
(a) assets that meet the criteria to be classified as held for sale to be classified as held for sale or discontinued operations may be necessary
measured at the lower of carrying amount and fair value less costs to to comply with the general requirements of IAS 1, in particular
sell, and depreciation on such assets to cease; and paragraphs 15 and 125 of that Standard.

(b) assets that meet the criteria to be classified as held for sale to be Classification of non-current assets (or disposal groups) as
presented separately in the statement of financial position and the held for sale or as held for distribution to owners
results of discontinued operations to be presented separately
in the statement of comprehensive income. 6 An entity shall classify a non-current asset (or disposal
group) as held for sale if its carrying amount will be recovered
Scope principally through a sale transaction rather than through
continuing use.
2 The classification and presentation requirements of this IFRS apply
to all recognised non-current assets* and to all disposal groups of an 7 For this to be the case, the asset (or disposal group) must be
entity. The measurement requirements of this IFRS apply to all available for immediate sale in its present condition subject only to
recognized non-current assets and disposal groups (as set out in terms that are usual and customary for sales of such assets (or
paragraph 4), except for those assets listed in paragraph disposal groups) and its sale must be highly probable.
5 which shall continue to be measured in accordance with the
Standard noted. 8 For the sale to be highly probable, the appropriate level of
management must be committed to a plan to sell the asset (or
3 Assets classified as non-current in accordance with IAS 1 disposal group), and an active programme to locate a buyer and
Presentation of Financial Statements shall not be reclassified as current complete the plan must have been initiated. Further, the asset (or
assets until they meet the criteria to be classified as held for sale in disposal group) must be actively marketed for sale at a price that is
accordance with this IFRS. Assets of a class that an entity would reasonable in relation to its current fair value. In addition, the sale
normally regard as non-current that are acquired exclusively with a should be expected to qualify for recognition as a completed sale
view to resale shall not be classified as current unless they meet the within one year from the date of classification, except as permitted by
criteria to be classified as held for sale in accordance with this IFRS. paragraph 9, and actions required to complete the plan should indicate
that it is unlikely that significant changes to the plan will be made or
4 Sometimes an entity disposes of a group of assets, possibly with that the plan will be withdrawn. The probability of shareholders’
some directly associated liabilities, together in a single transaction. approval (if required in the jurisdiction) should be considered as part
Such a disposal group may be a group of cash-generating units, a of the assessment of whether the sale is highly probable.
single cash-generating unit, or part of a cash-generating unit.† The
group may include any assets and any liabilities of the entity, including 8A An entity that is committed to a sale plan involving loss of control
current assets, current liabilities and assets excluded by paragraph 5 of a subsidiary shall classify all the assets and liabilities of that
from the measurement requirements of this IFRS. If a non-current subsidiary as held for sale when the criteria set out in paragraphs 6–8
asset within the scope of the measurement requirements of this IFRS are met, regardless of whether the entity will retain a non-controlling
is part of a disposal group, the measurement requirements of this IFRS interest in its former subsidiary after the sale.
apply to the group as a whole, so that the group is measured at the
lower of its carrying amount and fair value less costs to sell. The 9 Events or circumstances may extend the period to complete the sale
requirements for measuring the individual assets and liabilities within beyond one year. An extension of the period required to complete a
the disposal group are set out in paragraphs 18, 19 and 23. sale does not preclude an asset (or disposal group) from being
classified as held for sale if the delay is caused by events or
5 The measurement provisions of this IFRS‡ do not apply to the circumstances beyond the entity’s control and there is sufficient
following assets, which are covered by the IFRSs listed, either as evidence that the entity remains committed to its plan to sell the asset
individual assets or as part of a disposal group: (or disposal group). This will be the case when the criteria in Appendix
(a) deferred tax assets (IAS 12 Income Taxes). B are met.
(b) assets arising from employee benefits (IAS 19 Employee Benefits).
(c) financial assets within the scope of IAS 39 Financial Instruments: 10 Sale transactions include exchanges of non-current assets for other
Recognition and Measurement. non-current assets when the exchange has commercial substance in
(d) non-current assets that are accounted for in accordance with the accordance with IAS 16 Property, Plant and Equipment.
fair value model in IAS 40 Investment Property.
(e) non-current assets that are measured at fair value less costs to sell 11 When an entity acquires a non-current asset (or disposal group)
in accordance with IAS 41 Agriculture. exclusively with a view to its subsequent disposal, it shall classify the
(f) contractual rights under insurance contracts as defined in IFRS 4 non-current asset (or disposal group) as held for sale at the acquisition
Insurance Contracts. date only if the one-year requirement in paragraph 8 is met (except as
permitted by paragraph 9) and it is highly probable that any other assets and liabilities in the group) shall be measured in accordance
criteria in paragraphs 7 and 8 that are not met at that date will be met with applicable IFRSs.
within a short period following the acquisition (usually within three
months). 19 On subsequent remeasurement of a disposal group, the carrying
amounts of any assets and liabilities that are not within the scope of
12 If the criteria in paragraphs 7 and 8 are met after the reporting the measurement requirements of this IFRS, but are included in a
period, an entity shall not classify a non-current asset (or disposal disposal group classified as held for sale, shall be remeasured in
group) as held for sale in those financial statements when issued. accordance with applicable IFRSs before the fair value less costs to sell
However, when those criteria are met after the reporting period but of the disposal group is remeasured.
before the authorisation of the financial statements for issue, the
entity shall disclose the information specified in paragraph 41(a), (b) Recognition of impairment losses and reversals
and (d) in the notes.
20 An entity shall recognise an impairment loss for any initial or
12A A non-current asset (or disposal group) is classified as held for subsequent write-down of the asset (or disposal group) to fair value
distribution to owners when the entity is committed to distribute the less costs to sell, to the extent that it has not been recognised in
asset (or disposal group) to the owners. For this to be the case, the accordance with paragraph 19.
assets must be available for immediate distribution in their present
condition and the distribution must be highly probable. For the 21 An entity shall recognise a gain for any subsequent increase in fair
distribution to be highly probable, actions to complete the distribution value less costs to sell of an asset, but not in excess of the cumulative
must have been initiated and should be expected to be completed impairment loss that has been recognised either in accordance with
within one year from the date of classification. Actions required to this IFRS or previously in accordance with IAS 36 Impairment of
complete the distribution should indicate that it is unlikely that Assets.
significant changes to the distribution will be made or that the
distribution will be withdrawn. The probability of shareholders’ 22 An entity shall recognise a gain for any subsequent increase in fair
approval (if required in the jurisdiction) should be considered as part value less costs to sell of a disposal group:
of the assessment of whether the distribution is highly probable.
(a) to the extent that it has not been recognised in accordance with
Non-current assets that are to be abandoned paragraph 19; but
(b) not in excess of the cumulative impairment loss that has been
An entity shall not classify as held for sale a non-current asset (or recognised, either in accordance with this IFRS or previously in
disposal group) that is to be abandoned. This is because its carrying accordance with IAS 36, on the non-current assets that are within the
amount will be recovered principally through continuing use. However, scope of the measurement requirements of this IFRS.
if the disposal group to be abandoned meets the criteria in paragraph
32(a)–(c), the entity shall present the results and cash flows of the 23 The impairment loss (or any subsequent gain) recognised for a
disposal group as discontinued operations in accordance with disposal group shall reduce (or increase) the carrying amount of the
paragraphs 33 and 34 at the date on which it ceases to be used. Non- non-current assets in the group that are within the scope of the
current assets (or disposal groups) to be abandoned include non- measurement requirements of this IFRS, in the order of allocation set
current assets (or disposal groups) that are to be used to the end of out in paragraphs 104(a) and (b) and 122 of IAS 36 (as revised in
their economic life and non-current assets (or disposal groups) that are 2004).
to be closed rather than sold.
24 A gain or loss not previously recognised by the date of the sale of a
An entity shall not account for a non-current asset that has been non-current asset (or disposal group) shall be recognised at the date
temporarily taken out of use as if it had been abandoned. of derecognition. Requirements relating to derecognition are set out in:

Measurement of non-current assets (or disposal groups) (a) paragraphs 67–72 of IAS 16 (as revised in 2003) for property,
classified as held for sale plant and equipment, and
(b) paragraphs 112–117 of IAS 38 Intangible Assets (as revised in
Measurement of a non-current asset (or disposal group) 2004) for intangible assets.

15 An entity shall measure a non-current asset (or disposal 25 An entity shall not depreciate (or amortise) a non-current asset
group) classified as held for sale at the lower of its carrying while it is classified as held for sale or while it is part of a disposal
amount and fair value less costs to sell. group classified as held for sale. Interest and other expenses
attributable to the liabilities of a disposal group classified as held for
15A An entity shall measure a non-current asset (or disposal sale shall continue to be recognised.
group) classified as held for distribution to owners at the
lower of its carrying amount and fair value less costs to Changes to a plan of sale
distribute*.
26 If an entity has classified an asset (or disposal group) as held for
16 If a newly acquired asset (or disposal group) meets the criteria to sale, but the criteria in paragraphs 7–9 are no longer met, the entity
be classified as held for sale (see paragraph shall cease to classify the asset (or disposal group) as held for sale.
11), applying paragraph 15 will result in the asset (or disposal group)
being measured on initial recognition at the lower of its carrying 27 The entity shall measure a non-current asset that ceases to be
amount had it not been so classified (for example, cost) and fair value classified as held for sale (or ceases to be included in a disposal group
less costs to sell. Hence, if the asset (or disposal group) is acquired as classified as held for sale) at the lower of:
part of a business combination, it shall be measured at fair value less
costs to sell. (a) its carrying amount before the asset (or disposal group) was
classified as held for sale, adjusted for any depreciation, amortisation
17 When the sale is expected to occur beyond one year, the entity or revaluations that would have been recognised had the asset (or
shall measure the costs to sell at their present value. Any increase in disposal group) not been classified as held for sale, and
the present value of the costs to sell that arises from the passage of (b) its recoverable amount at the date of the subsequent decision not
time shall be presented in profit or loss as a financing cost. to sell.*

18 Immediately before the initial classification of the asset (or disposal 28 The entity shall include any required adjustment to the carrying
group) as held for sale, the carrying amounts of the asset (or all the amount of a non-current asset that ceases to be classified as held for
sale in profit or loss* from continuing operations in the period in which (c) the net cash flows attributable to the operating, investing and
the criteria in paragraphs 7–9 are no longer met. The entity shall financing activities of discontinued operations. These disclosures may
present that adjustment in the same caption in the statement of be presented either in the notes or in the financial statements.
comprehensive income used to present a gain or loss, if any, These disclosures are not required for disposal groups that are newly
recognised in accordance with paragraph 37. acquired subsidiaries that meet the criteria to be classified as held for
29 If an entity removes an individual asset or liability from a disposal sale on acquisition (see paragraph 11).
group classified as held for sale, the remaining assets and liabilities of
the disposal group to be sold shall continue to be measured as a group (d) the amount of income from continuing operations and from
only if the group meets the criteria in paragraphs 7–9. Otherwise, the discontinued operations attributable to owners of the parent. These
remaining non-current assets of the group that individually meet the disclosures may be presented either in the notes or in the statement of
criteria to be classified as held for sale shall be measured individually comprehensive income.
at the lower of their carrying amounts and fair values less costs to sell
at that date. Any non-current assets that do not meet the criteria shall 33A If an entity presents the items of profit or loss in a separate
cease to be classified as held for sale in accordance with paragraph 26. statement as described in paragraph 10A of IAS 1 (as amended in
2011), a section identified as relating to discontinued operations is
Presentation and disclosure presented in that statement.

30 An entity shall present and disclose information that 34 An entity shall re-present the disclosures in paragraph 33 for prior
enables users of the financial statements to evaluate the periods presented in the financial statements so that the disclosures
financial effects of discontinued operations and disposals of relate to all operations that have been discontinued by the end of the
non-current assets (or disposal groups). reporting period for the latest period presented.

Presenting discontinued operations 35 Adjustments in the current period to amounts previously presented
in discontinued operations that are directly related to the disposal of a
31 A component of an entity comprises operations and cash flows discontinued operation in a prior period shall be classified separately in
that can be clearly distinguished, operationally and for financial discontinued operations. The nature and amount of such adjustments
reporting purposes, from the rest of the entity. In other words, a shall be disclosed. Examples of circumstances in which these
component of an entity will have been a cash-generating unit or a adjustments may arise include the following:
group of cash-generating units while being held for use.
(a) the resolution of uncertainties that arise from the terms of the
32 A discontinued operation is a component of an entity that either disposal transaction, such as the resolution of purchase price
has been disposed of, or is classified as held for sale, and adjustments and indemnification issues with the purchaser.
(b) the resolution of uncertainties that arise from and are directly
(a) represents a separate major line of business or geographical area related to the operations of the component before its disposal, such as
of operations, environmental and product warranty obligations retained by the seller.
(b) is part of a single co-ordinated plan to dispose of a separate major (c) the settlement of employee benefit plan obligations, provided that
line of business or geographical area of operations or the settlement is directly related to the disposal transaction.
(c) is a subsidiary acquired exclusively with a view to resale.
36 If an entity ceases to classify a component of an entity as held for
33 An entity shall disclose: sale, the results of operations of the component previously presented
in discontinued operations in accordance with paragraphs 33–35 shall
(a) a single amount in the statement of comprehensive income be reclassified and included in income from continuing operations for
comprising the total of: all periods presented. The amounts for prior periods shall be described
as having been re-presented.
(i) the post-tax profit or loss of discontinued operations and
36A An entity that is committed to a sale plan involving loss of control
(ii) the post-tax gain or loss recognised on the measurement to fair of a subsidiary shall disclose the information required in paragraphs
value less costs to sell or on the disposal of the assets or disposal 33–36 when the subsidiary is a disposal group that meets the
group(s) constituting the discontinued operation. definition of a discontinued operation in accordance with paragraph
32.
(b) an analysis of the single amount in (a) into:
Gains or losses relating to continuing operations
(i) the revenue, expenses and pre-tax profit or loss of discontinued
operations; 37 Any gain or loss on the remeasurement of a non-current asset (or
disposal group) classified as held for sale that does not meet the
(ii) the related income tax expense as required by paragraph 81(h) of definition of a discontinued operation shall be included in profit or loss
IAS 12; from continuing operations.

(iii) the gain or loss recognised on the measurement to fair value less Presentation of a non-current asset or disposal group
costs to sell or on the disposal of the assets or disposal group(s) classified as held for sale
constituting the discontinued operation; and
38 An entity shall present a non-current asset classified as held for sale
(iv) the related income tax expense as required by paragraph 81(h) of and the assets of a disposal group classified as held for sale separately
IAS 12. from other assets in the statement of financial position. The liabilities
of a disposal group classified as held for sale shall be presented
The analysis may be presented in the notes or in the statement of separately from other liabilities in the statement of financial position.
comprehensive income. If it is presented in the statement of Those assets and liabilities shall not be offset and presented
comprehensive income it shall be presented in a section identified as as a single amount. The major classes of assets and liabilities
relating to discontinued operations, ie separately from continuing classified as held for sale shall be separately disclosed either in the
operations. The analysis is not required for disposal groups that are statement of financial position or in the notes, except as permitted by
newly acquired subsidiaries that meet the criteria to be classified as paragraph 39. An entity shall present separately any cumulative
held for sale on acquisition (see paragraph 11). income or expense recognised in other comprehensive income relating
to a non-current asset (or disposal group) classified as held for sale.
39 If the disposal group is a newly acquired subsidiary that meets the Disposal group - A group of assets to be disposed of, by sale or
criteria to be classified as held for sale on acquisition (see paragraph otherwise, together as a group in a single transaction, and liabilities
11), disclosure of the major classes of assets and liabilities is not directly associated with those assets that will be transferred in the
required. transaction. The group includes goodwill acquired in a business
combination if the group is a cash-generating unit to which goodwill
40 An entity shall not reclassify or re-present amounts presented for has been allocated in accordance with the requirements of paragraphs
non-current assets or for the assets and liabilities of disposal groups 80–87 of IAS 36 Impairment of Assets (as revised in 2004) or if it is an
classified as held for sale in the statement of financial positions for operation within such a cash-generating unit.
prior periods to reflect the classification in the statement of financial
position for the latest period presented. Fair value - The amount for which an asset could be exchanged, or a
liability settled, between knowledgeable, willing parties in an arm’s
Additional disclosures length transaction.

41 An entity shall disclose the following information in the notes in the Firm purchase commitment - An agreement with an unrelated
period in which a non-current asset (or disposal group) has been either party, binding on both parties and usually legally enforceable, that
classified as held for sale or sold:
(a) specifies all significant terms, including the price and timing of the
(a) a description of the non-current asset (or disposal group); transactions, and (b) includes a disincentive for non-performance that
(b) a description of the facts and circumstances of the sale, or leading is sufficiently large to make performance highly probable.
to the expected disposal, and the expected manner and timing of that
disposal; Highly probable - Significantly more likely than probable.
(c) the gain or loss recognised in accordance with paragraphs 20–22
and, if not separately presented in the statement of comprehensive Non-current asset - An asset that does not meet the definition of a
income, the caption in the statement of comprehensive income that current asset.
includes that gain or loss;
(d) if applicable, the reportable segment in which the non-current Probable - More likely than not.
asset (or disposal group) is presented in accordance with IFRS 8
Operating Segments. Recoverable amount - The higher of an asset’s fair value less
costs to sell and its value in use.
42 If either paragraph 26 or paragraph 29 applies, an entity shall
disclose, in the period of the decision to change the plan to sell the Value in use - The present value of estimated future cash flows
non-current asset (or disposal group), a description of the facts and expected to arise from the continuing use of an asset and from its
circumstances leading to the decision and the effect of the decision on disposal at the end of its useful life.
the results of operations for the period and any prior periods
presented. Appendix B
Application supplement
Appendix A This appendix is an integral part of the IFRS.
Defined terms
Extension of the period required to complete a sale
This appendix is an integral part of the IFRS.
B1 As noted in paragraph 9, an extension of the period required to
Cash-generating unit - The smallest identifiable group of assets that complete a sale does not preclude an asset (or disposal group) from
generates cash inflows that are largely independent of being classified as held for sale if the delay is caused by events or
the cash inflows from other assets or groups of assets. circumstances beyond the entity’s control and there is sufficient
evidence that the entity remains committed to its plan to sell the asset
Component of an entity - Operations and cash flows that can be (or disposal group). An exception to the one-year requirement in
clearly distinguished, operationally and for financial reporting paragraph 8 shall therefore apply in the following situations in which
purposes, from the rest of the entity. such events or circumstances arise:

Costs to sell - The incremental costs directly attributable to the

disposal of an asset (or disposal group), excluding finance costs and
income tax expense. (a) at the date an entity commits itself to a plan to sell a non-current
asset (or disposal group) it reasonably expects that others (not a
Current asset An entity shall classify an asset as current when: buyer) will impose conditions on the transfer of the asset (or disposal
group) that will extend the period required to complete the sale, and:
(a) it expects to realise the asset, or intends to sell or consume it, in
its normal operating cycle; (i) actions necessary to respond to those conditions cannot be initiated
(b) it holds the asset primarily for the purpose of trading; until after a firm purchase commitment is obtained, and
(c) it expects to realise the asset within twelve months after the
reporting period; or (ii) a firm purchase commitment is highly probable within one year.
(d) the asset is cash or a cash equivalent (as defined in IAS 7) unless
the asset is restricted from being exchanged or used to settle a liability (b) an entity obtains a firm purchase commitment and, as a result, a
for at least twelve months after the reporting period.. buyer or others unexpectedly impose conditions on the transfer of a
non-current asset (or disposal group) previously classified as held for
Discontinued operation - A component of an entity that either sale that will extend the period required to complete the sale, and:
has been disposed of or is classified as held for sale and:
(i) timely actions necessary to respond to the conditions have been
(a) represents a separate major line of business or geographical area taken, and
of operations,
(b) is part of a single co-ordinated plan to dispose of a separate major (ii) a favourable resolution of the delaying factors is expected.
line of business or geographical area of operations or
(c) is a subsidiary acquired exclusively with a view to resale. (c) during the initial one-year period, circumstances arise that were
previously considered unlikely and, as a result, a non-current asset (or
disposal group) previously classified as held for sale is not sold by the 7 The term ‘chief operating decision maker’ identifies a function,
end of that period, and: not necessarily a manager with a specific title. That function is to
allocate resources to and assess the performance of the operating
(i) during the initial one-year period the entity took action necessary to segments of an entity. Often the chief operating decision maker of an
respond to the change in circumstances, entity is its chief executive officer or chief operating officer but, for
example, it may be a group of executive directors or others.
(ii) the non-current asset (or disposal group) is being actively
marketed at a price that is reasonable, given the change in 8 For many entities, the three characteristics of operating segments
circumstances, and described in paragraph 5 clearly identify its operating segments.
However, an entity may produce reports in which its business activities
(iii) the criteria in paragraphs 7 and 8 are met. are presented in a variety of ways. If the chief operating decision
maker uses more than one set of segment information, other factors
Philippine Financial Reporting Standard 8 may identify a single set of components as constituting an entity’s
Operating Segments operating segments, including the nature of the business activities of
each component, the existence of managers responsible for them, and
Core principle information presented to the board of directors.

1 An entity shall disclose information to enable users of its 9 Generally, an operating segment has a segment manager who is
financial statements to evaluate the nature and financial directly accountable to and maintains regular contact with the chief
effects of the business activities in which it engages and the operating decision maker to discuss operating activities, financial
economic environments in which it operates. results, forecasts, or plans for the segment. The term ‘segment
manager’ identifies a function, not necessarily a manager with a
Scope specific title. The chief operating decision maker also may be the
segment manager for some operating segments. A single manager
2 This IFRS shall apply to: may be the segment manager for more than one operating segment.
If the characteristics in paragraph 5 apply to more than one set of
(a) the separate or individual financial statements of an entity: components of an organisation but there is only one set for which
(i) whose debt or equity instruments are traded in a public market (a segment managers are held responsible, that set of components
domestic or foreign stock exchange or an over-the-counter market, constitutes the operating segments.
including local and regional markets), or
(ii) that files, or is in the process of filing, its financial statements with 10 The characteristics in paragraph 5 may apply to two or more
a securities commission or other regulatory organisation for the overlapping sets of components for which managers are held
purpose of issuing any class of instruments in a public market; and responsible. That structure is sometimes referred to as a matrix form
(b) the consolidated financial statements of a group with a parent: of organisation. For example, in some entities, some managers are
(i) whose debt or equity instruments are traded in a public market (a responsible for different product and service lines worldwide, whereas
domestic or foreign stock exchange or an over-the-counter market, other managers are responsible for specific geographical areas. The
including local and regional markets), or chief operating decision maker regularly reviews the operating results
(ii) that files, or is in the process of filing, the consolidated financial of both sets of components, and financial information is available for
statements with a securities commission or other regulatory both. In that situation, the entity shall determine which set of
organisation for the purpose of issuing any class of instruments in a components constitutes the operating segments by reference to the
public market. core principle.

3 If an entity that is not required to apply this IFRS chooses to disclose Reportable segments
information about segments that does not comply with this IFRS, it
shall not describe the information as segment information. 11 An entity shall report separately information about each operating
segment that:
4 If a financial report contains both the consolidated financial
statements of a parent that is within the scope of this IFRS as well as (a) has been identified in accordance with paragraphs 5–10 or results
the parent’s separate financial statements, segment information is from aggregating two or more of those segments in accordance with
required only in the consolidated financial statements. paragraph 12, and

Operating segments (b) exceeds the quantitative thresholds in paragraph 13.

5 An operating segment is a component of an entity: Paragraphs 14–19 specify other situations in which separate
information about an operating segment shall be reported.
(a) that engages in business activities from which it may earn
revenues and incur expenses (including revenues and expenses Aggregation criteria
relating to transactions with other components of the same entity),
(b) whose operating results are regularly reviewed by the entity’s chief 12 Operating segments often exhibit similar long-term financial
operating decision maker to make decisions about resources to be performance if they have similar economic characteristics. For
allocated to the segment and assess its performance, and example, similar long-term average gross margins for two operating
(c) for which discrete financial information is available. segments would be expected if their economic characteristics were
similar. Two or more operating segments may be aggregated into a
An operating segment may engage in business activities for which it single operating segment if aggregation is consistent with the core
has yet to earn revenues, for example, start-up operations may be principle of this IFRS, the segments have similar economic
operating segments before earning revenues. characteristics, and the segments are similar in each of the following
respects:
6 Not every part of an entity is necessarily an operating segment or
part of an operating segment. For example, a corporate headquarters (a) the nature of the products and services;
or some functional departments may not earn revenues or may earn (b) the nature of the production processes;
revenues that are only incidental to the activities of the entity and (c) the type or class of customer for their products and services;
would not be operating segments. For the purposes of this IFRS, an (d) the methods used to distribute their products or provide their
entity’s post-employment benefit plans are not operating segments. services; and
(e) if applicable, the nature of the regulatory environment, for 21 To give effect to the principle in paragraph 20, an entity shall
example, banking, insurance or public utilities. disclose the following for each period for which an statement of
comprehensive income is presented:
Quantitative thresholds
(a) general information as described in paragraph 22;
13 An entity shall report separately information about an operating (b) information about reported segment profit or loss, including
segment that meets any of the following quantitative thresholds: specified revenues and expenses included in reported segment profit
or loss, segment assets, segment liabilities and the basis of
(a) Its reported revenue, including both sales to external customers measurement, as described in paragraphs 23–27; and
and intersegment sales or transfers, is 10 per cent or more of the (c) reconciliations of the totals of segment revenues, reported segment
combined revenue, internal and external, of all operating segments. profit or loss, segment assets, segment liabilities and other material
segment items to corresponding entity amounts as described in
(b) The absolute amount of its reported profit or loss is 10 per cent or paragraph 28.
more of the greater, in absolute amount, of (i) the combined reported
profit of all operating segments that did not report a loss and (ii) the Reconciliations of the amounts in the statement of financial position for
combined reported loss of all operating segments that reported a loss. reportable segments to the amounts in the entity’s statement of
financial position are required for each date at which a statement of
(c) Its assets are 10 per cent or more of the combined assets of all financial position is presented. Information for prior periods shall be
operating segments. restated as described in paragraphs 29 and 30.

Operating segments that do not meet any of the quantitative General information
thresholds may be considered reportable, and separately disclosed, if
management believes that information about the segment would be 22 An entity shall disclose the following general information:
useful to users of the financial statements.
(a) factors used to identify the entity’s reportable segments, including
14 An entity may combine information about operating segments that the basis of organisation (for example, whether management has
do not meet the quantitative thresholds with information about other chosen to organise the entity around differences in products and
operating segments that do not meet the quantitative thresholds to services, geographical areas, regulatory environments, or a
produce a reportable segment only if the operating segments have combination of factors and whether operating segments have been
similar economic characteristics and share a majority of the aggregated), and
aggregation criteria listed in paragraph 12.
(b) types of products and services from which each reportable
15 If the total external revenue reported by operating segments segment derives its revenues.
constitutes less than 75 per cent of the entity’s revenue, additional
operating segments shall be identified as reportable segments (even if Information about profit or loss, assets and liabilities
they do not meet the criteria in paragraph 13) until at least 75 per cent
of the entity’s revenue is included in reportable segments. 23 An entity shall report a measure of profit or loss for each reportable
segment. An entity shall report a measure of total assets and liabilities
16 Information about other business activities and operating segments for each reportable segment if such amounts are regularly provided to
that are not reportable shall be combined and disclosed in an ‘all other the chief operating decision maker. An entity shall also disclose the
segments’ category separately from other reconciling items in the following about each reportable segment if the specified amounts are
reconciliations required by paragraph 28. The sources of the revenue included in the measure of segment profit or loss reviewed by the chief
included in the ‘all other segments’ category shall be described. operating decision maker, or are otherwise regularly provided to the
chief operating decision maker even if not included in that measure of
17 If management judges that an operating segment identified as a segment profit or loss:
reportable segment in the immediately preceding period is of
continuing significance, information about that segment shall continue (a) revenues from external customers;
to be reported separately in the current period even if it no longer (b) revenues from transactions with other operating segments of the
meets the criteria for reportability in paragraph 13. same entity;
(c) interest revenue;
18 If an operating segment is identified as a reportable segment in the (d) interest expense;
current period in accordance with the quantitative thresholds, segment (e) depreciation and amortisation;
data for a prior period presented for comparative purposes shall be (f) material items of income and expense disclosed in accordance with
restated to reflect the newly reportable segment as a separate paragraph 97 of IAS 1 Presentation of Financial Statements (as revised
segment, even if that segment did not satisfy the criteria for in 2007);
reportability in paragraph 13 in the prior period, unless the necessary (g) the entity’s interest in the profit or loss of associates and joint
information is not available and the cost to develop it would be ventures accounted for by the equity method;
excessive. (h) income tax expense or income; and
(i) material non-cash items other than depreciation and amortisation.
19 There may be a practical limit to the number of reportable
segments that an entity separately discloses beyond which segment An entity shall report interest revenue separately from interest expense
information may become too detailed. Although no precise limit has for each reportable segment unless a majority of the segment’s
been determined, as the number of segments that are reportable in revenues are from interest and the chief operating decision maker
accordance with paragraphs 13–18 increases above ten, the entity relies primarily on net interest revenue to assess the performance of
should consider whether a practical limit has been reached. the segment and make decisions about resources to be allocated to
the segment. In that situation, an entity may report that segment’s
Disclosure interest revenue net of its interest expense and disclose that it has
done so.
20 An entity shall disclose information to enable users of its
financial statements to evaluate the nature and financial 24 An entity shall disclose the following about each reportable
effects of the business activities in which it engages and the segment if the specified amounts are included in the measure of
economic environments in which it operates. segment assets reviewed by the chief operating decision maker or are
otherwise regularly provided to the chief operating decision maker,
even if not included in the measure of segment assets:
 (f) the nature and effect of any asymmetrical allocations to reportable
(a) the amount of investment in associates and joint ventures segments. For example, an entity might allocate depreciation expense
accounted for by the equity method, and to a segment without allocating the related depreciable assets to that
(b) the amounts of additions to non-current assets* other than segment.
financial instruments, deferred tax assets, net defined benefit assets
(see IAS 19 Employee Benefits) and rights arising under insurance Reconciliations
contracts.
28 An entity shall provide reconciliations of all of the following:
Measurement
(a) the total of the reportable segments’ revenues to the entity’s
25 The amount of each segment item reported shall be the measure revenue.
reported to the chief operating decision maker for the purposes of (b) the total of the reportable segments’ measures of profit or loss to
making decisions about allocating resources to the segment and the entity’s profit or loss before tax expense (tax income) and
assessing its performance. Adjustments and eliminations made in discontinued operations. However, if an entity allocates to reportable
preparing an entity’s financial statements and allocations of revenues, segments items such as tax expense (tax income), the entity may
expenses, and gains or losses shall be included in determining reconcile the total of the segments’ measures of profit or loss to the
reported segment profit or loss only if they are included in the entity’s profit or loss after those items.
measure of the segment’s profit or loss that is used by the chief (c) the total of the reportable segments’ assets to the entity’s assets.
operating decision maker. Similarly, only those assets and liabilities (d) the total of the reportable segments’ liabilities to the entity’s
that are included in the measures of the segment’s assets and liabilities if segment liabilities are reported in accordance with
segment’s liabilities that are used by the chief operating decision paragraph 23.
maker shall be reported for that segment. If amounts are allocated to (e) the total of the reportable segments’ amounts for every other
reported segment profit or loss, assets or liabilities, those amounts material item of information disclosed to the corresponding amount for
shall be allocated on a reasonable basis. the entity.

26 If the chief operating decision maker uses only one measure of an All material reconciling items shall be separately identified and
operating segment’s profit or loss, the segment’s assets or the described. For example, the amount of each material adjustment
segment’s liabilities in assessing segment performance and deciding needed to reconcile reportable segment profit or loss to the entity’s
how to allocate resources, segment profit or loss, assets and liabilities profit or loss arising from different accounting policies shall be
shall be reported at those measures. If the chief operating decision separately identified and described.
maker uses more than one measure of an operating segment’s profit
or loss, the segment’s assets or the segment’s liabilities, the reported Restatement of previously reported information
measures shall be those that management believes are determined in
accordance with the measurement principles most consistent with 29 If an entity changes the structure of its internal organisation in a
those used in measuring the corresponding amounts in the entity’s manner that causes the composition of its reportable segments to
financial statements. change, the corresponding information for earlier periods, including
interim periods, shall be restated unless the information is not
27 An entity shall provide an explanation of the measurements of available and the cost to develop it would be excessive. The
segment profit or loss, segment assets and segment liabilities for each determination of whether the information is not available and the cost
reportable segment. At a minimum, an entity shall disclose the to develop it would be excessive shall be made for each individual item
following: of disclosure. Following a change in the composition of its reportable
segments, an entity shall disclose whether it has restated the
corresponding items of segment information for earlier periods.

(a) the basis of accounting for any transactions between reportable 30 If an entity has changed the structure of its internal organisation in
segments. a manner that causes the composition of its reportable segments to
change and if segment information for earlier periods, including interim
(b) the nature of any differences between the measurements of the periods, is not restated to reflect the change, the entity shall disclose
reportable segments’ profits or losses and the entity’s profit or loss in the year in which the change occurs segment information for the
before income tax expense or income and discontinued operations (if current period on both the old basis and the new basis of
not apparent from the reconciliations described in paragraph 28). segmentation, unless the necessary information is not available and
Those differences could include accounting policies and policies for the cost to develop it would be excessive.
allocation of centrally incurred costs that are necessary for an
understanding of the reported segment information. Entity-wide disclosures

(c) the nature of any differences between the measurements of the 31 Paragraphs 32–34 apply to all entities subject to this IFRS including
reportable segments’ assets and the entity’s assets (if not apparent those entities that have a single reportable segment. Some entities’
from the reconciliations described in paragraph 28). Those differences business activities are not organised on the basis of differences in
could include accounting policies and policies for allocation of jointly related products and services or differences in geographical areas of
used assets that are necessary for an understanding of the reported operations. Such an entity’s reportable segments may report revenues
segment information. from a broad range of essentially different products and services, or
more than one of its reportable segments may provide essentially the
(d) the nature of any differences between the measurements of the same products and services. Similarly, an entity’s reportable segments
reportable segments’ liabilities and the entity’s liabilities (if not may hold assets in different geographical areas and report revenues
apparent from the reconciliations described in paragraph 28). Those from customers in different geographical areas, or more than one of its
differences could include accounting policies and policies for allocation reportable segments may operate in the same geographical area.
of jointly utilized liabilities that are necessary for an understanding of Information required by paragraphs 32–34 shall be provided only if it
the reported segment information. is not provided as part of the reportable segment information required
by this IFRS.
(e) the nature of any changes from prior periods in the measurement
methods used to determine reported segment profit or loss and the Information about products and services
effect, if any, of those changes on the measure of segment profit or
loss. 32 An entity shall report the revenues from external customers for
each product and service, or each group of similar products and
services, unless the necessary information is not available and the cost
to develop it would be excessive, in which case that fact shall be Scope
disclosed. The amounts of revenues reported shall be based on the
financial information used to produce the entity’s financial statements. 2 This Standard shall be applied in the recognition,
measurement and disclosure of investment property.
Information about geographical areas
3 Among other things, this Standard applies to the measurement in a
33 An entity shall report the following geographical information, unless lessee’s financial statements of investment property interests held
the necessary information is not available and the cost to develop it under a lease accounted for as a finance lease and to the
would be excessive: measurement in a lessor’s financial statements of investment property
provided to a lessee under an operating lease. This Standard does not
(a) revenues from external customers (i) attributed to the entity’s deal with matters covered in IAS 17 Leases, including:
country of domicile and (ii) attributed to all foreign countries in total
from which the entity derives revenues. If revenues from external (a) classification of leases as finance leases or operating leases;
customers attributed to an individual foreign country are material, (b) recognition of lease income from investment property (see also IAS
those revenues shall be disclosed separately. An entity shall disclose 18 Revenue);
the basis for attributing revenues from external customers to individual (c) measurement in a lessee’s financial statements of property
countries. interests held under a lease accounted for as an operating lease;
(d) measurement in a lessor’s financial statements of its net
(b) non-current assets1 other than financial instruments, deferred tax investment in a finance lease;
assets, post-employment benefit assets, and rights arising under (e) accounting for sale and leaseback transactions; and
insurance contracts (i) located in the entity’s country of domicile and (f) disclosure about finance leases and operating leases.
(ii) located in all foreign countries in total in which the entity holds
assets. If assets in an individual foreign country are material, those 4 This Standard does not apply to:
assets shall be disclosed separately.
(a) biological assets related to agricultural activity (see IAS 41
The amounts reported shall be based on the financial information that Agriculture); and
is used to produce the entity’s financial statements. If the necessary (b) mineral rights and mineral reserves such as oil, natural gas and
information is not available and the cost to develop it would be similar non-regenerative resources.
excessive, that fact shall be disclosed. An entity may provide, in
addition to the information required by this paragraph, subtotals of Definitions
geographical information about groups of countries.
5 The following terms are used in this Standard with the
Information about major customers meanings specified:

34 An entity shall provide information about the extent of its reliance Carrying amount is the amount at which an asset is
on its major customers. If revenues from transactions with a single recognised in the statement of financial position.
external customer amount to 10 per cent or more of an entity’s
revenues, the entity shall disclose that fact, the total amount of Cost is the amount of cash or cash equivalents paid or the fair
revenues from each such customer, and the identity of the segment or value of other consideration given to acquire an asset at the
segments reporting the revenues. The entity need not disclose the time of its acquisition or construction or, where applicable,
identity of a major customer or the amount of revenues that each the amount attributed to that asset when initially recognised
segment reports from that customer. For the purposes of this IFRS, a in accordance with the specific requirements of other IFRSs,
group of entities known to a reporting entity to be under common eg IFRS 2 Share-based Payment.
control shall be considered a single customer. However, judgement is
required to assess whether a government (including government Fair value is the amount for which an asset could be
agencies and similar bodies whether local, national or international) exchanged between knowledgeable, willing parties in an
and entities known to the reporting entity to be under the control of arm’s length transaction.(old)
that government are considered a single customer. In assessing this,
the reporting entity shall consider the extent of economic integration  Fair value is the price that would be received to sell
between those entities. an asset or paid to transfer a liability in an orderly
Appendix A transaction between market participants at the
Defined term measurement date. (See IFRS 13 Fair Value
This appendix is an integral part of the IFRS. Measurement). (new)

Operating segment Investment property is property (land or a building—or part of

a building—or both) held (by the owner or by the lessee under
An operating segment is a component of an entity: a finance lease) to earn rentals or for capital appreciation or
both, rather than for:
(a) that engages in business activities from which it may earn
revenues and incur expenses (including revenues and expenses (a) use in the production or supply of goods or services or for
relating to transactions with other components of the same entity), administrative purposes; or
(b) whose operating results are regularly reviewed by the entity’s chief (b) sale in the ordinary course of business.
operating decision maker to make decisions about resources to be
allocated to the segment and assess its performance, and Owner-occupied property is property held (by the owner or by
(c) for which discrete financial information is available. the lessee under a finance lease) for use in the production or
supply of goods or services or for administrative purposes.
Philippine Accounting Standard 40
Investment Property 6 A property interest that is held by a lessee under an
operating lease may be classified and accounted for as
Objective investment property if, and only if, the property would
otherwise meet the definition of an investment property and
1 The objective of this Standard is to prescribe the accounting the lessee uses the fair value model set out in paragraphs 33–
treatment for investment property and related disclosure requirements. 55 for the asset recognised. This classification alternative is
available on a property-by-property basis. However, once this
classification alternative is selected for one such property
interest held under an operating lease, all property classified
as investment property shall be accounted for using the fair
value model. When this classification alternative is selected,
any interest so classified is included in the disclosures
required by paragraphs 74–78.

7 Investment property is held to earn rentals or for capital appreciation

or both. Therefore, an investment property generates cash flows
largely independently of the other assets held by an entity. This
distinguishes investment property from owner-occupied property. The
production or supply of goods or services (or the use of property for
administrative purposes) generates cash flows that are attributable not
only to property, but also to other assets used in the production or
supply process. IAS 16 Property, Plant and Equipment applies to
owner-occupied property.

8 The following are examples of investment property:

(a) land held for long-term capital appreciation rather than for short-
term sale in the ordinary course of business.
(b) land held for a currently undetermined future use. (If an entity has
not determined that it will use the land as owner-occupied property or
for short-term sale in the ordinary course of business, the land is
regarded as held for capital appreciation.)
(c) a building owned by the entity (or held by the entity under a
finance lease) and leased out under one or more operating leases.
(d) a building that is vacant but is held to be leased out under one or
more operating leases.
(e) property that is being constructed or developed for future use as
investment property.

9 The following are examples of items that are not investment

property and are therefore outside the scope of this Standard:

(a) property intended for sale in the ordinary course of business or in

the process of construction or development for such sale (see IAS 2
Inventories), for example, property acquired exclusively with a view to
subsequent disposal in the near future or for development and resale.
(b) property being constructed or developed on behalf of third parties
(see IAS 11 Construction Contracts).
(c) owner-occupied property (see IAS 16), including (among other
things) property held for future use as owner-occupied property,
property held for future development and subsequent use as
owneroccupied property, property occupied by employees (whether or
not the employees pay rent at market rates) and owner-occupied
property awaiting disposal.
(e) property that is leased to another entity under a finance lease.

10 Some properties comprise a portion that is held to earn rentals or

for capital appreciation and another portion that is held for use in the
production or supply of goods or services or for administrative
purposes. If these portions could be sold separately (or leased out
separately under a finance lease), an entity accounts for the portions
separately. If the portions could not be sold separately, the property is
investment property only if an insignificant portion is held for use in
the production or supply of goods or services or for administrative
purposes.