TOA — Class Notes

8/9/2019 TOA — Class Notes

1/54

June 18 06/18/2014

IS (prepared first after the operating cycle)

– ut !hen you start your usiness" siye#pre $S ang inuuna

– IS is prepared first efore $S ecause the %I& !ill affect the $S (it

!ill e i#alanced' the capital part !ill e erroneous)

– possile results of IS

• net inco#e total inco#e total e*penses

• net loss total inco#e + total e*penses

• rea,e-en total inco#e . total e*penses

– since 200" inancial erfor#ance is the ne! na#e of ()

– tri-ia 3!e are in red #eans the usiness is at a loss' if 3in lac,"

there is net inco#e

&ash lo! State#ent

5 !hen you su#it to $I" you need to su#it audited IS 7 &ash lo!

State#ent 7 $alance Sheet

• #ore sheets needed depending on type/nature of usiness

5 i#portance sho!s the inflo!/receipts/collection

outflo!s/disurse#ents/pay#ent of cash

5 the difference et!een cash inflo!s and outflo!s #ust e the cash

alance at the end of the reporting period

• this is !hy &ash lo!s #ust e prepared first efore the $S (affects

the current section of the $S)

o the a#ount of & should e e9ual to the totality of cash and

cash equivalents

o !hen #aa# !as as,ed" she said S& #ay e prepared after

$S since for#er is for chec,s and alance

&:;=>I=? % I@;@&I;A ;&&%B@


2/54

o ;#erican Institute of &;s

5 ;ccounting definition

• ;&; definition

o D art of recording" classifying" summarizing in significant

#anner and in ter#s of transaction e-ents !hich are in part

at least of a financial character" and interpreting resultsthereof

=nu#erates phases" stages" aspects of accounting

Italics are the four phases of accounting

;) ecording

5 initially (efore EournaliFing)" you ha-e to gather docu#ents Ge*H %"

in-oices (


3/54

urchases Eournal for credit' #ay e e*tended to

purchases of #erchandise" e9uip#ent" etc on

credit =*a#ples of !hat is to e posted sa Ceneral Aedger na

lang ;J=s for depreciation" pro-ision for doutful

accounts" accruals (


4/54

o Mr Salary Expense GIS

o &rH Accrued Salary Expense G$S' liaility

Meferrals re5collections (opposite of accrued inco#e) -s

repay#ents (opposite accrued e*pense)

– re5collections 5 #oney is !ith you ut you ha-enLt rendered ser-ice

• #ethod 1 Aiaility #ethod

• #ethod 2 Inco#e #ethod

– repay#ents 5 pay first efore you get the enefit

• #ethod 1 ;sset #ethod

• #ethod 2 =*pense #ethod

5 ;ll four needs ;J=s

5 only accruals need re-ersing entries' deferrals donLt

$) &lassifying

O) osting to the ledger

&) Su##ariFing

S1 deter#ine account alances' y su##ariFing in ledger (get

alance per account thru < accounts or total deit – total credit)

S2


5/54

Q create the re-ersing entries (optional) only the day after end of

reporting period

QQ ;n accountant can oo,,eep' ut oo,,eeper cannot do accounting

M) Interpreting

5 interpretation of S y accountant prepared y bookkeeper

5 #easure the our $asic %Eecti-es of usiness

• Ai9uidity #easures short5ter# sol-ency' short5ter# ones are

usually one year or less

• Sol-ency e*a#ple – if creditor ,a" and potential detor is sol-ent "

detor has capacity to pay' #easures if orro!er can orro! long5

ter# oligations' orro!ed #ore than a year/operating cycle

• Staility

• rofitaility

Introduction

5 ;ccounting is an integrated communication process

• =le#ents of &o##unication

o Source

;ccount for the business

$ecause it is the usiness that transacts !ith

other usinesses

o essages

;ccount for financial position

;ccount for financial performance

;ccount for cash position/activities

o &hannels


6/54


7/54

– presentation is di-ided into

• Cloal ar,ets

o S and inancial eporting

o ;ccounting and &apital allocation

o :R Standards

• %Eecti-e inancial eporting

o Ceneral5urpose S

general purpose that e-eryone #ust e enefitted

equally N ?hat infor#ation is gi-en to internal #ust e gi-en to

e*ternal

o &apital pro-iders

gi-e info to capital pro-iders a,a shareholders and

creditors

o =ntity prospecti-e

identify the current condition of the fir# and !hat is its

future condition

o Mecision5usefulness

so as to #a,e sound econo#ic decisions

• Standard Setting %rganiFations

o I%S&%

ang BS;

or hil ;S" S" I&;" C;;" ;ccounting &ouncil in

the hil

o I;S$

o :ierarchy of ISS

• inancial eporting &hallenges

o olitical =n-iron#ent

o =*pectations Cap !hat pulic thin,s accountants should do

-s !hat accountants thin, they can do


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o =thics

e*H !hat is e*pected y o!ner #ay e different fro#

the e*pectations of the creditors

o International &on-ergence

e*a#ple it #ay affect t!o different countries

o Significant inancial eporting Issues

Cloal ar,ets GA% 1

5 &haracteristics of accounting

• 1 Identification" #easure#ent and co##unication of financial

infor#ation aoutD

o Identify

o easure to ,no! if sol-ent" li9uid" stale" or profitale

o &o##unicate

• 2 =cono#ic entities to

• O Interested parties

o these are the users discussed ao-e

5


9/54

o @ote disclosures

• 5 ;dditional Infor#ation

o residents letter

o rospectuses

o eports filed !ith go-ern#ental agencies

o =n-iron#ental i#pact state#ents

In BS" there is such thing as =n-iron#ental ;ccounting

Meal !ith ho! co#panies can sa-e the

en-iron#ent

In hil" re9uired ang en-iron#ental accounting ut not

e-eryone is co#plying

o @e!s releases

=*a#ple classified ads section saying di-idends are

declaredN

o orecasts

o =tc

5 ;ccounting and &apital allocation

• resources are li#ited (resources include hu#an)H =fficient use of

resources often deter#ines !hether a usiness thri-esH

o inancial reporting


10/54

• CloaliFation de#ands a single set of high59uality international

accounting standardsH So#e ele#ents

o single set

o consistency in application and interpretation

o co##on disclosure

o co##on high59uality auditing standards and practices

o etc

%Eecti-e of inancial ;ccounting

5 ro-ide financial infor#ation aout reporting entity that is useful to D

in #a,ing decisions in their capacity as capital pro-iders

• resent and potential e9uity in-estors

• Aenders" and

• %ther creditors

5 general5purpose S

• pro-ide financial reporting info to a !ide -ariety of users

• try to pro-ide info at the least cost

5 entity perspecti-e

• co#panies -ie!ed as separate and distinct fro# o!ners

5 decision5usefulness

• in-estors are interested in assessing the co#panyLs

o 1H aility to generate net cash inflo!s" and

o 2H #anage#ents aility to protect and enhance the capital

pro-idersL in-est#ents

5 e-ie! Ruestion %Eecti-e of financial reporting places #oste#phasis on reporting to capital providers$ general purpose fs are preparedpri#arily for external users

Standard Setting %rganiFations Glo P


11/54

I;S$

• issues IS' =9ual to S

• standards used on #ost foreign e*changes

• IS used in o-er 11P countries

;S$

• Issues S;S

Mue rocess

– %rder of #a,ing a standard

• esearch" Miscussion paper" =*posure draft" then it eco#es a

Standard

5 IS contains

• IS " I;S" Interpretations

&hallenges GA%

5 =*pectations Cap

• !hat pulic thin,s accountants should do -s !hat accountants thin,

they can do

5 Significant financial reporting issues

• non5financial #easure#ents

• for!ard5loo,ing info

• sort assets

• ti#eliness

5 =thics in the en-iron#ent of in;cc

•

ifrs doesnLt al!ays pro-ide an ans!er• D


12/54

A=;@I@C %$J=&=S

– descrie usefulness of conceptual fra#e!or,

– efforts to construct conceptual fra#e!or,

– understand the oEecti-e of financial reporting

– identify 9ualitati-e characteristics of accounting infor#ation

– define the asic ele#ents of S

– asic assu#ptions of accounting

– e*plain the application of the asic principles of accounting

– descrie the i#pact that constraints ha-e on reporting accounting

infor#ation

%A!&E

• &onceptual fra#e!or,

o @eed

o Me-elop#ent

o %-er-ie!

• irst le-el $asic %Eecti-es

• Second le-el unda#ental &oncepts

o Rualitati-e characteristics

o $asic ele#ents

•


13/54

o Su##ary of the structure

&onceptual fra#e!or,

5 &onceptual ra#e!or, estalishes concepts that underlie financial

reporting

5 @eed for conceptual fra#e!or,

• ule5#a,ing should uild on and relate to an estalished ody of

concepts

o rules are rules so they ha-e to e standardiFed

• =nales I;S$ to issue #ore useful and consistent pronounce#ents

o-er ti#e

o pronounce#ent rules and standards that #ust e follo!ed

y entities

5 in-erted triangle

• top assu#ptions

o going concern

o econo#ic entity

o #onetary unit

o accrual

o periodicity

opposite of going concern

says that the operations of usiness is di-ided into

e9ual periods or at definite inter-als the cut'off period is applied here

• top constraints

o cost

o #ateriality

• top principles

o full disclosure


14/54

o #easure#ent

o e*pense recognition

o re-enue recognition

• #iddle 9ualitati-e characteristics

o funda#ental 9ualities

o enhancing 9ualities

• #iddle ele#ents

o assets

o liailities

o e9uity

o inco#e

o e*penses

• otto#

o oEecti-e pro-ide financial information aout reporting entity

that is useful to present and potential equity investors

lenders and other creditors in their capacity as capital providers

a#ong I&" the one addressed here is K&o##unicateL

!ho is the reporting entity


15/54

o oEecti-es Identify" easure" &o##unicate

o #ain focus of in;cc is communication of financial infor#ation

pro-ided y issuing general'purpose Ss

assu#ption is that users ha-e reasonable kno(ledge of

usiness and financial accounting #atters to understand

the infor#ation applied in here is the BnderstandailityN

• le-el 2 funda#ental concepts

o 9ualitati-e ele#ents

funda#ental

1) ele-ance decision #ust e related to the

decision you are going to #a,e' #ust ha-e an

influence

• redicti-e -alue to forecast

• &onfir#atory -alue to -erify' to -alidate

o =*H $I -erifying the ta* payale

2) aithful epresentation should e acceptale

to users in good faith' papani!alaan dapat ng#ga Ss users

• free fro# error accurate

• neutrality free fro# ias

• co#pleteness disclosure

enhancing to distinguish etter infor#ation (#ore

useful) fro# inferior (less useful) for decision #a,ingpurposes

-erifiaility

co#paraility

understandaility

ti#eliness

o asic ele#ents

quantitatively (in #onetary units) represented

• le-el O recognition" #easure#ent and disclosure concepts


16/54

o ;ssu#ptions

Coing concern

life of the fir# is indefinite

=cono#ic entity

separate ) distinct

onetary unit

all transactions #ust e recorded in ter#s of

#oney

;ccrual

Substance over form can e applied here

pulic entities/go-ern#ent agencies in hilH" since

2001" ha-e eco#e #odified accrual asisN

;ctually" #i* of cash and #odified accrual asisga#it nilaH

eriodicity

indefinite life is di-ided into accounting periods

that are in equal inter-al

o rinciples

easure#ent

=*a#ple assets are recorded initially" at

historical/ac9uisition cost (;c9uisition cost .urchase price 7 other incidental cost)

• ut suse9uently" #easure#ent depends on

the type of asset

o =*a#ple if depreciale" net book

value' a,a carrying -alue

o =*a#ple If intangile" amortized

ecall patents are a#ortiFed

o-er 20 years

o =*a#ple Aand' realiFale -alue

ull disclosure

ertains to the 9uality of "ompleteness

include @otes to the ss

e-enue recognition


17/54

Mepends on the type of operations of the

usiness' Mifferent earning points Should e recogniFed !hen earned

ule (hen service is earned or goods are

delivered =* Install#ent sale uses Percentage of "ollection

=*pense recognition

ecord !hen incurred a,a !hen enefits !ere

recei-ed already

o &onstraints

&ost

ateriality

;ng contingent liaility p!edeng #aging #aterial

or i##aterial

;ns!ers to RuiFFes G


18/54


19/54

• @ote as long as #ay adEusted trial alance ,a na" p!ede ,a nang

gu#a!a ng Ss

•

• ;ccounting Infor#ation Syste# – $asic


20/54

• aEe

• financial state#ents

• closing entries

• 5 if deit entries are greater than credit entries" the account !ill

ha-e a deit alance

• – Summarizing process of getting alance in t account

• – Footing the process of adding colu#ns of nu#ers

•

• ;ccounting Infor#ation Syste# – deits and credits

• 5 account sho!s effect of transaction on a gi-en asset" liaility"

e9uity" re-enue or e*pense account

• an arrange#ent that sho!s the effect of transaction

• 5 doule5entry accounting syste# (t!o5sided effect)

• recording done y deiting at least one account and crediting

another

• deits #ust e9ual credits

•

• ;ccounting Infor#ation Syste# – accounting e9uation

•

• ;ccounting Infor#ation Syste# – Ss and o!nership structure

•

•

•


21/54

•


22/54

•

• inancial State#ents for erchandisers – inco#e state#ent

•

• inancial State#ents for erchandisers – State#ent of =

•

• inancial State#ents for erchandisers – State#ent of financial

position

•

• inancial State#ents for erchandisers – &losing entries

•

• or#s of $alance Sheet

• – inancial osition or# &;5&A to sho! &urrent @et ;ssets' then

add @&; –@&A

• – Inco#e su##ary is a Suspense Account, only appears at the end

of accounting period !hen you prepare closing entries

•

• Single5step IS

• @o separate section for &%CS and Cross rofit

• ;ll %perating e-enues and Cains reported first then %perating

=*penses and Aosses

•

• ulti5step IS

• Separate sections" -arious sutotals

• :as three co#ponents

o Cross profit (@et Sales – &%CS)

o %perating inco#e (a,a Inco#e fro# %perations)

o %ther inco#e/losses

• referred ecause of detailedness


23/54

•

• $asic ele#ents of IS

• @et sale

• &%CS

• %p=*

• %ther inco#e

•

• – Selling/Mistriution =*penses 5 to #a,e product #ore

salale/,no!n/acceptale

• – Ceneral ;d#inistrati-e 5 @ot related to sales/#oility of product

•

• erchandising/


24/54

• – di-idends of stoc,holders

• – paso, sa = ito hence net inco#e section

• issuance of stoc,

• t/s transactions

o recall

; MrH


25/54

o #ay e called gross #argin

• %perating inco#e

• %ther inco#e/losses

• Inco#e efore inco#e ta*es

• – State#ent of &o#prehensi-e Inco#e 18

•

• . S


26/54

•

• re9uency

• – alance sheet reflects conditions at a point in ti#e" usually" the

fiscal year end

• – if longer or shorter" discloseN

•

• or#at

• – follo!s alance sheet e9uation

• – ain ele#ents ;A=

• – assets and liailities are classified as &urrent or @on5current

•

• or#s

• 1) ;ccount for#

• left is ;' right is A=

• 2) eport for#

• sets forth O #aEor sections in do!n!ard se9uence

• called as such ecause this is ho! you read a reportN Start fro# top

• – eport and ;ccount are traditional/conventional !ays

• inancial osition or#at (search) recall #aa#Ls e*a#ple !herein

noncurrent #una so on till you get @et ;ssets and then e9uity

na#an

•

• Q @ote Q

• – =ntity shall present current and noncurrent" as separate

classification on face of So" e*cept !hen a presentation ased onliquidity pro-ides infor#ation that is #ore reliale and #orerele-antH ?hen that e*ception applies" all assets and liailities shall

e presented roadly in order of li9uidity

• 3in order of li9uidity Ia ang li9uidity for assets sa for liailities' if

assets" ased on ease of convertibility to cash$ if in ter#s of

liailities" !hich are payale earlier first

•

• Mefinition of ;sset


27/54

• – resources controlled by entity as a result of past transaction and

e-ents and fro# !hich future economic benefits are e*pected toflo! to the entity

• controlled

o !hen you ha-e o!nership o-er the asset' you need e-idences

of o!nership therefore e*H for land (deed of sale)' for supplies (official receipt)'

for pay#ent in ,ind (any docu#ent e-idencing

o!nership of asset)

• past transactions

• future econo#ic enefits

•

• &lassification of ;ssets

• 5 current assets

• 5 non5current assets

•

• ecognition of &urrent ;ssets

• 1) e*pected to e realiFed or intended to e sold or consu#ed in its

nor#al operating cycle

• operating cycle con-erted into cash (!hich #ay e longer than one

year)

• 2) it e*pects to realiFe the asset !ithin t!el-e #onths after the

reporting period"

• O) holds the asset pri#arily for the purpose of trading" %

• asset is used for uying or selling (3trading)

• 4) the asset is cash or a cash e9ui-alent unless the asset is

restricted fro# eing e*changed" or used to settle a liaility for at

least 12 #onths after the reporting period

• &ash and &ash =9ui-alent

o a-ailaility as #ediu# of e*change'

o acceptaility as settle#ent for liaility'

o acceptaility as an, deposit

• if restricted fro# eing e*changed @on5&urrent ;sset

o #oney restricted in a an, !ith condition is that it cannot e

pre5ter#inated is an In-est#ent account (@&;)


28/54

• if used to settle a liaility for at least 12 #onths after the reporting

period

•

• ini#u# &urrent ;ssets

• – ;rranged according to li9uidity (capacity to con-ert/consu#e/use

such ite#s into cash !ithin one year/operating cycle)• &ash &ash =9ui-alents

• inancial ;ssets at > (such as


29/54

•

• Aiaility

• – present oligations of an entity arising fro# past transactions or

e-ents" the settlement of !hich is e*pected to result in an outflo(

fro# the entity of resources e#odying econo#ic enefits

•

• &urrent Aiailities

• 1) due to e settled !ithin entityLs nor#al operating cycle

• 2) due to e settled !ithin t!el-e #onths after reporting period

• O) entity holds pri#arily for the purpose of trading" %

• 4) entity does not ha-e an unconditional right to defer settle#ent of

the liaility for at least 12 #onths after the reporting period

• – note 3reporting period efore !as 3alance sheet during the

panahon of #aa#

•

• ini#u# &urrent Aiailities

• –


30/54


31/54

•


32/54

• D

•

• &ash lo! ro# %perating ;cti-ities

• – operating acti-ities are pri#arily the re-enue5generating acti-ities

of a co#pany

• – operating cash flo! is conceptually #ost near to net profit

• – #ain differences

• non5cash e*penses and non5cash re-enues (e*H depreciation

e*pense)

• non5operating ite#s (e* gain on disposal of tangile fi*ed assets)

•

• ethods of %perating &ash lo!s

• Indirect

• Start !ith @et rofit $efore


33/54

• authoriFing fss for issue

• od re-ie!s fss and atuEoriFes the# for issue

• at ti#es" entity is re9uired to su#it to shareholders for appro-al

after the fss ha-e een issued

• date of issue is that of #g#t

• if suEect #g#t is re9uired to issue its fss to a super-isory oard

• in such cases" the fss are authoriFed for issue !hen #g#t

authoriFes the# to the super-isory oard

•

• elated parties

• – ;ssociates parteners !ithin co#pany

• – >enturer co#panies !ho enter into te#porary partnerships

• – Uey #g#t personnel

• – &lose fa#ily #e#ers of an indi-idual

• e*H &hinese usiness o!ners' &hinese o!ner can transact !ith

• 1

• elated party transaction

• –


34/54

•

• sho! as taular for# this one in notes to fs

• iyong

o y a*is contains license agree#ents' guarantees and

collaterals" #g#t contracts including for deputation of

e#ployeeso * a*is contains holding co#pany" suisidaries" associates" etc

•

• ;ccounting =sti#ate

• – I;S 8 an adEust#ent of the &; of the asset or a liaility or the

a#ount of the periodic D

• – esti#ates need re-ision does

• – not a correction of an error

• –

• accounting

•

• change in acciunting policy

• – applicale lang if fro# non5gaap policy (e* AI%) to gaap policy

(ifo)

•

• rior eriod =rrors

• – o#issions for# and #isstate#ents in the S for one or #ore

periods arising for# a failire to use or #isuse of reliale info that

• !as a-ailale !hen S for those periods !ere authoriFed for issue

• could reasonale e e*pected to ha-e een otained and ta,en into

account in the preparation and preesentations of those Ss

•

• retrospecti-e restate#ent

• – correcting the recogniFtion" #easure#ent and disclosure a#ounts

of ele#ents of fs as if a prior period errors had ne-er occurred

• – if the error occurred efore the earliest prior period presented

opening alances of ;A= for the earliest prior period presented shalle restated


35/54

•

• disclosure

• – nature of the prior period errors

• – a#ount of correction for each prior period presented" to the

e*tent practicale

• for each S line ite# affected

• for asic and diluted =S

• – a#ount of correction of the D

• – if retrospecti-e restate#ent is i#practicale"

• circu#stances that led to the co#diition

• ho! and fro# !hen the errors has een corrected

o types of errors

co##ission recorded ut #ade a #ista,e

o#ission did not record

counteralancing error !ill self5correct

• o-erstated no! ut understated sa ne*t

,aya = !ill correct on that year

• e*H =In-entory is o-erstated (#a,ing &%CS

for that year understated' Cross rofit and

@et Inco#e and = o-erstated') so$egIn-entory for year after is o-erstated

(o-erstated ang &%C;S T if =I is correct"&%CS then eco#es o-erstated 5

Crossrofit/@I and = is understated) so

nagalance lang non5counteralancing !ill not self5correct

• e*H orgot Mepreciation' if Mep=*p

understated 5 %p=* is understated" Cross

rofit o-er" @I o-er" = o-er

•

• Interi# inancial eporting

• – I;S O4 !hen an entity prepares interi# financial report

• – per#itting less infor#ation to e reported than in annual fss

• recognition #easure#ent" etc

•


36/54

• Mefinitions

• Interi# period shorter than a full financial year

o Inter occurring in et!een

• Interi# financial report contains either a co#plete or condensed

set of fss for an interi# period

o eports pro-ide #ore rel-ant and ti#ely info

o %ften #andated y securities regulators" go-Lt and stoc,

echanges

•

• I;S O4 Specifies the content of an interi# financial report that is

descried as confor#ing to ISH IasO4 does not #andate

• ?hich entities should pulish interi# frs

• D

•

• choice y the entity

• – #ay choose not to prepare interi# state#ents at all

• – #ay choose to prepare the# in accordance !ith ISs

• if they do and they descrie the fss to e in co#pliance !ith ISs

• – #ay e a co#plete set or condensed

• pulicly traded entities (sells e9uity shares and onds) are needed

to issue interi# fss

• 1) since they sho! profitaility" etc of fss" interi# fss are used to

encourage potential in-estors to uy shares of the stoc,s'

• 2) if the usiness is assessed y $I" it #ay re9uire interi# fss for

o if ir is gi-en an assess#ent notice" fss issued today are

suEect to assess#ent !ithin fi-e years' cleared ,a na after

the fifth period no!adays tho" 10 years na da! iyong period

• O) for financial institutions as creditors to #a,e a decision

papautangin ,a a nila or hindi

•

• ini#u# co#ponents of an interi# financl report


37/54


38/54

• (g) corrections of prior period errors'

• hanggang dito lang ang na5enu#erate

• (h) changes in the usiness or econo#ic circu#stances that affect

the fair -alue of the entityLs financial assets and financial liailities"

!hether those assets or liailities are recognised at fair -alue or

a#ortised cost'• (i) any loan default or reach of a loan agree#ent that has not

een re#edied on or efore the end of the reporting period'

• (E) related party transactions'

• (,) transfers et!een le-els of the fair -alue hierarchy used in

#easuring the fair -alue of financial instru#ents'

• (l) changes in the classification of financial assets as a result of a

change in the purpose or use of those assets' and

• (#) changes in contingent liailities or contingent assetsH

• 5 report only if any happenedN @o need to disclose if !ala

•

• disclosure of co#pliance !ith ifrs

• – state and the interi# state#ents #ust also e in co#pliance !ith

all ISs

•

• eriods for !hich interi# financial state#ents are re9uired to e

presented

• – state#ent of financial position if ;pril 2010 ang report" ang

co#parati-e ay ;pril 200

•

• #ateriality• – in deciding ho! to reco9niFe #easure classify or disclose an ite#

for interi# financial reporting purposes" #ateriality is re9uired to eassessed in relation to the interi# financial periodD

•

•

• recognition and #easure#ent

• – entities apply the sa#e accounting policies as in their last annual

fss

• e*cept #ay change s aaccounting policy" re9uired to i#ple#ent

retrospecti-ely T #eaning" if you need to restate prior records•


39/54


40/54

• – re-enues that are recei-ed seasonally" syclically or occasionally

!ithin a financial year should not e anticipated or deferred as of annteri# date" if anticipation or deferral !ould not e appropriate at

the end of the financial year

•

• treat#ent of une-en costs for the interi# period• ito ang ina5anticipate contrary sa tass

• 5 the rule on re-enues also applies to costsH &osts athat are

incurred une-enly during an entityLs financia year should eanticipated/deferred for interi# reporting purposes if" and only if" it

also appropriateD Gintegral approach' if other e*penses that isincurred

•

• treat#ent of year end onsues

• 5 a onus is anticipated for interi# reporting purposes if and only if

• aH onis is a legal oligation or past practice !ould #a,e the onusa constructi-e oligation for !hich the entity has no realistic

alternati-e ut to #a,e the pay#ents" and

o distriute integrally of it is a egal oligation

o you #ay esti#ate na#an if not a legal oligation

• H a relatale esti#ate of the oligation can e #ade

•

• %perating Seg#ents (IS 8)

• 5 core principle of &%M

• ifrs 8 is #andatory if

o det/e9uity instru#ents traded in a pulic #ar,eto fild/in process of filing instru#ents in a pulic #ar,et

• applies to

o consolidated fss

o co#pany only fss

o if oth are presented" applies to consolidated financial

state#ents

if oth are preesnte" seg#ent infor#ation is re9uired

for consolidated lang

• anage#ent approacE


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• MefH #eans that the operating seg#ents are identified on the asis

of the internal reports aout co#poonents of an entity that areregularly re-ie!ed y the &%M in oorder to allocate resources to

the seg#ent and to assess its perfor#ance

• :as 6 steps

o 1) Identify the cod# unction' not a title

%ne cod# per reporting eneity

$ody/person

:ighest le-el of #g#tH responsile for

esource allocation and

perfor#ance assess#ent

o 2) identify the operating seg#ents

1 is the co#ponent ale to earn re-enues"

2 co#ponentLs results re-ie!ed regularly y the &%M"

;@M

O descrete financial info for the co#ponent is a-ailale

Q @%


42/54

nature of D

o 4 reportale seg#ents (3reportale #eans they should e

included sa fss) seg#ent re-enue (internal and e*ternal) is 10W of

co#ined re-enue for all seg#ents (internal and

e*ternal) 10W of asolute co#ined profit or co#ined loss

&ash and &ash =9ui-alents

– O;s of 3unrestricted of cash

• acceptaility as #ediu# of e*change

• acceptaility as an, deposit

• a-ailaility for pay#ent as current oligations

5 co#pensating alance

• if co#pensating alance is not legally restricted" J= is MrH &ash on

hand 4P0< ' cash in an, representing co#pensating alance P0t

&rH Aoans ayale P00

• if co#pensating alance is legally restricted" J= is MrH &ash on hand

4P0< ' cash held as co#pensating alance P0t (Aong5ter#

In-est#ent account) &rH Aoans ayale P00

• co#pensating alance if hindi na,aayad ng a#ortiFation or

principal" dito iaa!as ng ang,o sa detor

an, o-erdraft credit alance in cash in a, account

due to the issuance of chec,s in e*cess of the a#ount

of deposit

• other an, accounts should e offset

• if sa#e an, accounts5 it #ay e offset against the other an,account !ith a deit alance

• 3an, o-erdraft account is a current liability account" not a contra5

asset account

– undeli-ered and postdated chec,s are added ac, to

cash alance

• undeli-ered #ade ut not yet issued

• postdated dra!n" #ay e issued" ut dated suse9uent the date of

$S stale chec, or chec,s long outstanding

• !hen chec,s are not ecashed y the payees !ithin a relati-ely longperiod of ti#e G6 #onths fro# the date of the chec, (#aturity date"not issue date)" @ot $S date

o if i##aterial5 Mr &ash' &r" isc Inco#e

o if #aterial – Mr &ash' &rH ;


43/54

o note %> is i,a! ang nag5issue ng chec,

cash =9ui-alent

5 short5ter# and highly5li9uid in-est#ents

readily con-ertile into cash

are ac9uired three #onths efore #aturity

• e*H O #o $S treasury ill/purchased O #os efore #aturity

• preference shares !ith specified rede#ption date and ac9uired O

#os efore rede#ption

• =*ceptions e9uity securities

&lassification of in-est#ent in


44/54

#ethods of handing petty cash

• i#prest syste# re9uires that all

•

Ci-en Pp# ang closing ti#e ng an,s

;H Meposits that are coins and currencies

• If deposited y Pp#" an, credits your account right a!ay

$H Meposits that are chec,s

• If deposited y P p#" not yet credited to your account right a!ay

ecause of &learing eriod

o &learing period is O days' during this period" an, chec,s if

the chec, issuer really has #oney pa

ecei-ales

inancial assets represent a contractual right to recei-e

cash or another financial asset

@ontrade recei-ales

• Inco#e ta* recei-ale arising !hen you ha-e ta* return' fro#

!ho# is this collectile ' due to e*cess ta*es paid in the past(e*cess of input ta*(#ada#i ,ang inili na in-entories) o-er output

ta* (pero #as ,onti ang naenta #o na in-entories))

o ;J= MrH %utput ta* MrH Inco#e


45/54

– ecognition of financial asset

• Initially at air >alue 7


46/54

In-entory >aluation

–

Cross rofit ethod

Bseful !hen

• esti#ating in-entory and cogs for interi# reports

• auditors are testing the o-erall reasonaleness of client in-entories

• preparing udgets and forecasts

• deter#ining the cost of in-entory lost" destroyed or stolen

•

$iological ;ssets

Mdefinitions and Scope

•

;griculture produce after point of har-est not part of ;griculture• Intangile assets

• ar# land and uiilidng1

– if agricultural produce is no longer processed and sold

as is" they are in-entories na – ut if they are processed to eco#e products that are

the results of processing" in-entories pa rin – 3agricultural produce (see oo,) that are partially

processed and inco#plete are !or,5in5process

in-entoryH &o#pleted Kagricultural produce !ill eplaced in the

– e*a#ple of degeneration !ool re#o-ed fro# sheep

(nagdegenerate iyong sheep)H ;nother e*a#ple of

degeneration is iyong inahing aoy na hindi na p!ede#agprocreate ,asi #enopaused naH (,asi inahing aoy

is initially categoriFed as $iological ;sset)

degeneret


47/54

there is no such thing as leasing your iological assets

point of sale costs e*a#ples

• selling

• #ar,eting e*penses

• RBIV

•

• &otton pulp

• ; agricultural produce

• il,ing co!s

• $

• :oney eehi-es

• $

•

D ,aings of lansones a!aiting for #ar,et deli-ery• d

• dogs for stags

• $H il

• ice field

• &H =

• ;ni#als at alaon Foo

• $

•

• $anana losso#s and fritters


48/54

• ;

•

• oultry chic,ens at roina far#

• $

•

• 4P5day old chic,en

• MH finished goods in-entory

•


49/54

• rocessed honey

• M

•

•


50/54


51/54

• – e*a#ples

•

• for e9uities" as long as #ay -ariaility factor na" nagiging liaility

•

• ;ns!ers

• ; e9uity securities

• $ det securities

• & ppe

• M in-est#ent properties

• = in-entories

•

• 1 S food stalls

• MH in-est#ent properties

• 2 san eda co#p la

•

&H ppe• O portfolio of ordinary and preference shares

• ;H e9uity securities

• 4 d#ci condo units

• =H in-entories

• P ond certificates

• $H Met Securities

• 6 refrigerated !arehouses for rent

• MH in-est#ent property

• lrt trains


52/54

• &H =

• 8 s!i##ing pools of &ondos

• &H =

• >illarLs house and lot pac,ages

• = in-entories

• 10 ta#ayoLs catering deli-ery -ans

• & =

• 11 #adrigal grp of co#panies uildings for lease

• M in-est#ent property

• 12 nursing deptLs school usses

• & =

• 1O function roo#s for rent

• M in-est#ent property

• 14 Jolliee food and e-erage pac,ages

•

=H In-entory• 1P Star city rides and facilities

• &H =

• 16 Aoyola #e#orial colu#ary spaces for rent

• MH in-est#ent properties

• &olu#ary spaces inaglalagyan ng #ga cre#ated odies

• inapa5rent

• 1 ar,et Stalls

• MH in-est#ent property

•


53/54


54/54

•

• :edging

• – hedging #eans designating one or #ore heding instru#ents so

that their change in fair -alue or cash flo! is an offset" in !hile or in

part" to the change in fair -alue or cash flo! of a hedged ite#

•

• heding relationship – co#ponets

• hedging instru#ent deri-ati-e !hose f- or cash flo!s !ould e

e*pected to offset chages in the fair -alue or cash flo!s of thehedged ite#

• hedhedged ite#

• hedger

•

• #easure#ent of deri-ati-es

• at fair -alue" !hether asset or liaility

• fully disclose

•

• dr suscrition recei-ale (at issue price !hcih is ao-e par (contra

e9uity)

• cr susrscied capital (at

• cr share pre#iu# at P0

• 5 so you record ;pic on the date of suscription

•

• stoc, di-idend

• – at the ti#e of delcaration iyon lang ang hindi liaility deit cash

• de =

• cr Stoc, Mi-idends ayale (te#porary capital account)

•

• then

•

• dr Stoc, Mi-idends ayale

• crH Share &apital

•

• elo! 20W

•

– 1 and elo! s#all stoc,• – use fair market -alue

• dr

• cr

TOA — Class Notes

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