COLLEGE OF ACCOUNTANCY

C-AE14 Conceptual Framework and Accounting Standards

First Semester | AY 2020-2021

MODULE 14
A. Course Code – Title : C-AE14 – Conceptual Framework and Accounting Standards
B. Module No – Title : MO 14 PAS 1 Presentation of Financial Statements
C. Time Frame : 1 week – 3 hours
D. Materials : Syllabus or course outline, writing materials

1. Overview

This module discusses the salient provisions of IAS 1 or PAS 1 Presentation of Financial
Statements. It sets the overall requirements for the presentation of financial statements, guidelines
for their structure and minimum requirements for their content.

Be sure to read and understand the complete Standard. This module only discusses the
salient points and not every paragraph in the said Standard. If you have questions pertaining to
some items in PAS 1, feel free to ask them during the online sessions or through the Google
Classroom or any other previously agreed upon means.

2. Desired Learning Outcomes

Our goal is that, upon completing this module, you will be able to accomplish the following
learning outcomes:
 “I can explain the general features/overall considerations in the presentation of
financial statements as identified in PAS 1.”
 “I can discuss how the information are presented in the different components of the
financial statements.”

3. Content/Discussion

PAS 1 sets out the requirements for the presentation of financial statements which includes
the guidelines for their structure and minimum requirements for their contents. Entities are
required to present a complete set of financial statements at least annually. Comparative amounts
for the preceding year are to be presented as well, both in the face of the financial statements and in
the corresponding notes.

An explicit and unreserved statement of compliance with the IFRS Standards shall be
included in the notes by the entity presenting such financial statements. An entity must not
describe financial statements as complying with IFRS Standards unless they comply with all the
requirements of the Standards. The application of IFRS Standards, with additional disclosure when
necessary, is presumed to result in financial statements that achieve a fair presentation. IAS 1 also
deals with going concern issues, offsetting and changes in presentation or classification.

This Standard has the following contents:

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 COLLEGE OF ACCOUNTANCY
C-AE14 Conceptual Framework and Accounting Standards
First Semester | AY 2020-2021

Lesson 1 – General Features

Fair presentation and compliance with IFRSs

Financial statements are required to be presented fairly as set out in the framework and in
accordance with IFRS and are required to comply with all requirements of IFRSs.

Going concern
Financial statements are required to be prepared on a going concern basis (unless entity is in
liquidation or has ceased trading or there is an indication that the entity is not a going concern).

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 COLLEGE OF ACCOUNTANCY
C-AE14 Conceptual Framework and Accounting Standards
First Semester | AY 2020-2021

Accrual basis of accounting

Entities are required to use accrual basis of accounting except for cash flow information.

Materiality and aggregation

Each material class of similar assets and items of dissimilar nature or function is to be presented
separately.

Offsetting
Offsetting of assets and liabilities or income and expenses are not permitted unless required by
other IFRSs

Frequency of reporting and comparative information

A complete set of financial statements (including comparative information, unless impractical) shall
be presented at least annually.

When an entity changes the end of its reporting period and presents financial statements for a
period longer or shorter than one 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

(b) the fact that amounts presented in the financial statements are not entirely comparable.

Consistency of presentation
An entity is required to retain presentation and classification from one period to the next.

Lesson 2 – Identification of the Financial Statements

Financial statements must be clearly identified and distinguished from other information in the
same published document, and must identify:
a. Name of the reporting entity
b. Whether the financial statements cover the individual entity or a group of entities
c. The statement of financial position date (or the period covered)
d. The presentation currency
e. The level of rounding used

Lesson 3 – Components of Financial Statements

A complete set of financial statements comprises of the following components:

 a statement of financial position as at the end of the period;
 a statement of profit and loss and other comprehensive income for the period. Other
comprehensive income is those items of income and expense that are not recognized in
profit or loss in accordance with IFRS Standards. IAS 1 allows an entity to present a single

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 COLLEGE OF ACCOUNTANCY
C-AE14 Conceptual Framework and Accounting Standards
First Semester | AY 2020-2021

combined statement of profit and loss and other comprehensive income or two separate
statements;
 a statement of changes in equity for the period;
 a statement of cash flows for the period;
 notes, comprising a summary of significant accounting policies and other explanatory
information; and
 a statement of financial position as at the beginning of the preceding comparative period
when an entity applies an accounting policy retrospectively or makes a retrospective
restatement of items in its financial statements, or when it reclassifies items in its financial
statements.

All statements are required to be presented with equal prominence.

STATEMENT OF FINANCIAL POSITION

 Present current and non-current items separately; or

 Present items in order of liquidity.

The statement of financial position shall include line items that present the following amounts:
(a) property, plant and equipment;
(b) investment property;
(c) intangible assets;
(d) financial assets (excluding amounts shown under (e), (h) and (i)); (da) groups of
contracts within the scope of IFRS 17 that are assets, disaggregated as required by
paragraph 78 of IFRS 17;
(e) investments accounted for using the equity method;
(f) biological assets within the scope of IAS 41 Agriculture;
(g) inventories;
(h) trade and other receivables;
(i) cash and cash equivalents;
(j) the total of assets classified as held for sale and assets included in disposal groups
classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations;
(k) trade and other payables;
(l) provisions;
(m) financial liabilities (excluding amounts shown under (k) and (l)); (ma) groups of
contracts within the scope of IFRS 17 that are liabilities, disaggregated as required by
paragraph 78 of IFRS 17;
(n) liabilities and assets for current tax, as defined in IAS 12 Income Taxes;
(o) deferred tax liabilities and deferred tax assets, as defined in IAS 12;
(p) liabilities included in disposal groups classified as held for sale in accordance with IFRS
5;
(q) non-controlling interests, presented within equity; and
(r) issued capital and reserves attributable to owners of the parent.

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 COLLEGE OF ACCOUNTANCY
C-AE14 Conceptual Framework and Accounting Standards
First Semester | AY 2020-2021

An entity shall present additional line items (including by disaggregating the line items listed in
paragraph 54), headings and subtotals in the statement of financial position when such
presentation is relevant to an understanding of the entity’s financial position.

Further information required to be presented on the face or in the notes is detailed in IAS 1.79-80.

Current assets
 Expected to be realised in, or is intended for sale or consumption in the entity’s normal operating
cycle
 Held primarily for trading
 Expected to be realised within 12 months
 Cash or cash equivalents

All other assets are required to be classified as non-current.

Current liabilities
 Expected to be settled in the entity’s normal operating cycle
 Held primarily for trading
 Due to be settled within 12 months
 The entity does not have the right at the end of the reporting period to defer settlement of the
liability for at least 12 months. (R)

All other liabilities are required to be classified as non-current.

Equity
An entity shall disclose the following, either in the statement of financial position or the statement
of changes in equity, or in the notes:

(a) for each class of share capital:

(i) the number of shares authorised;
(ii) the number of shares issued and fully paid, and issued but not fully paid;
(iii) par value per share, or that the shares have no par value;
(iv) a reconciliation of the number of shares outstanding at the beginning and at the end of
the period;
(v) the rights, preferences and restrictions attaching to that class including restrictions on
the distribution of dividends and the repayment of capital;
(vi) shares in the entity held by the entity or by its subsidiaries or associates; and
(vii) shares reserved for issue under options and contracts for the sale of shares, including
terms and amounts; and

(b) a description of the nature and purpose of each reserve within equity.

An entity without share capital, such as a partnership or trust, shall disclose information equivalent
to that required by paragraph 79(a), showing changes during the period in each category of equity
interest, and the rights, preferences and restrictions attaching to each category of equity interest.

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C-AE14 Conceptual Framework and Accounting Standards
First Semester | AY 2020-2021

STATEMENT OF COMPREHENSIVE INCOME

 An entity presents all items of income and expense recognised in a period, either:
- In a single statement of comprehensive income
- In two statements: a statement displaying components of profit or loss (separate income
statement) and a second statement of other comprehensive income.

 Information required to be presented in the:

- Statement of comprehensive income is defined in IAS 1.82-87
- Profit or loss as defined in IAS 1.88
- Other comprehensive income in IAS 1.90-96
- Further information required to be presented on the face or in the notes to the Statement of
Comprehensive Income is detailed in IAS 1.97.

 Entities must choose between ‘function of expense method’ and ‘nature of expense method’ to
present expense items

Example of function of expense method:

Example of nature of expense method:

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C-AE14 Conceptual Framework and Accounting Standards
First Semester | AY 2020-2021

 Line items within other comprehensive income are required to be categorised into two categories:
- Those that could subsequently be reclassified to profit or loss
- Those that cannot be re-classified to profit or loss.

STATEMENT OF CHANGES IN EQUITY

Information required to be presented:

 Total comprehensive income for the period, showing separately attributable to owners or the
parent and non-controlling interest

 For each component of equity, the effects of retrospective application/restatement recognised in

accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

 The amounts of transactions with owners in their capacity as owners, showing separately
contributions by and distributions to owners

 For each component in equity a reconciliation between the carrying amount at the beginning and
end of the period, separately disclosing each change

 Amount of dividends recognised as distributions to owners during the period (can alternatively
be disclosed in the notes)

 Analysis of each item of OCI (alternatively to be disclosed in the notes).

STATEMENT OF CASH FLOWS

Cash flow information provides users of financial statements with a basis to assess the ability of the
entity to generate cash and cash equivalents and the needs of the entity to utilise those cash flows.
IAS 7 sets out requirements for the presentation and disclosure of cash flow information.

NOTES TO FINANCIAL STATEMENTS

The notes shall:
(a) present information about the basis of preparation of the financial statements and the
specific accounting policies used in accordance with paragraphs 117–124;
(b) disclose the information required by IFRSs that is not presented elsewhere in the financial
statements; and
(c) provide information that is not presented elsewhere in the financial statements, but is
relevant to an understanding of any of them.

An entity shall, as far as practicable, present notes in a systematic manner. In determining a

systematic manner, the entity shall consider the effect on the understandability and comparability
of its financial statements. An entity shall cross-reference each item in the statements of financial

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 COLLEGE OF ACCOUNTANCY
C-AE14 Conceptual Framework and Accounting Standards
First Semester | AY 2020-2021

position and in the statement(s) of profit or loss and other comprehensive income, and in the
statements of changes in equity and of cash flows to any related information in the notes.

THIRD STATEMENT OF FINANCIAL POSITION

A third statement of financial position required when an entity changes accounting policies, or
makes retrospective restatements or reclassifications:
 Opening statement is only required if impact is material
 Opening statement is presented as at the beginning of the immediately preceding comparative
period required by IAS 1 (e.g. if an entity has a reporting date of 31 December X2 statement of
financial position, this will be as at 1 January X1)
 Only include notes for the third period relating to the change.

4. Progress Check:

1. Briefly explain the following general features/overall considerations in the

presentation of financial statements:
a. Fair presentation and compliance with IFRSs

b. Going concern

c. Accrual basis of accounting

d. Materiality and aggregation

e. Offsetting

f. Frequency of reporting and comparative information

g. Consistency of presentation

2. Briefly discuss how information is presented in the following components of a

complete set of financial statements:
a. Statement of Financial Position

b. Statement of profit or loss and comprehensive income for the period

c. Statement of changes in equity

d. Statement of cash flows

e. Notes

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 COLLEGE OF ACCOUNTANCY
C-AE14 Conceptual Framework and Accounting Standards
First Semester | AY 2020-2021

After completing this progress check, can you now say that you have achieved our learning
outcomes?

 “I can explain the general features as identified in PAS 1.”

 “I can discuss how the information are presented in the different components of the
financial statements.”

5. Evaluation – to be uploaded as a separate Google Form

E. References
Cabrera, M. E., Ocampo, R. R., & Cabrera, G. A. (2018). Conceptual Framework and Accounting
Standards. Manila, Philippines: GIC Enterprises & Co., Inc.

Empleo, P. M., & Robles, N. S. (2019). The Philippine Financial Reporting Conceptual
Framework and Accounting Standards. Mandaluyong City, Philippines: Millennium Books,
Inc.

IFRS Foundation. (2017). ifrs.org. Retrieved June 11, 2020, from https://www.ifrs.org/use-
around-the-world/use-of-ifrs-standards-by-jurisdiction/philippines/#participant

International Accounting Standards Board. (2018, March). Conceptual Framework for

Financial Reporting. London, United Kingdom.

Millan, Z. V. (2019). Conceptual Framework and Accounting Standards. Baguio City,

Philippines: Bandolin Enterprise Publishing and Printing.

Valix, C. T., Peralta, J. F., & Valix, C. A. (2019). Conceptual Framework and Accounting
Standards. Manila, Philippines: GIC Enterprises & Co., Inc.

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