pas

• PAS 7 Statement of Cash Flows


  Objective: To require the provision of information about the historical changes in cash and cash equivalents of an entity through a Statement of Cash Flows, which classifies cash flows during the period from operating, investing, and financing activities
• Benefits of cash flow information


  • Enables users to evaluate the changes in net assets of an entity, its financial structure (including its liquidity and solvency) and its ability to affect the amounts and timing of cash flows to adapt to changing circumstances and opportunities
  • Helps assess the power of the entity to generate cash and cash equivalents
  • Enables users to develop models to evaluate and compare the present value of the future cash flows of different entities
  • Enhances the comparability of the reporting of operating performance by different entities because it eliminates the effects of using different accounting treatments for the same transactions and events
• Cash


  Cash on hand and demand deposits
• Cash equivalents


  Short‑term, highly liquid investments that are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value
• Cash flows


  Inflows and outflows of cash and cash equivalents
• Cash equivalents are held to meet short‑term cash commitments rather than for investment or other purposes. For an investment to qualify as a cash equivalent, it must be readily convertible to a known amount of cash and be subject to an insignificant risk of changes in value. Therefore, an investment usually qualifies as a cash equivalent only when it has a short maturity of three (3) months or less from the date of acquisition. Equity investments are excluded from cash equivalents unless they are, in substance, cash equivalents, for example, in the case of preferred shares acquired within a short period of their maturity and with a specified redemption date
• Bank borrowings are generally considered to be financing activities. However, in some countries, bank overdrafts repayable on demand are integral to an entity's cash management. In these circumstances, bank overdrafts are included as a component of cash and cash equivalents. A characteristic of such banking arrangements is that the bank balance often fluctuates from positive to overdrawn
• Presentation of a statement of cash flows

  • Operating activities
  • Investing activities
  • Financing activities
• Operating activities


  The principal revenue‑producing activities of the entity and other activities that are not investing or financing activities (i.e., cash receipts from the sale of goods, cash payments to suppliers for goods and services, etc.)
• Investing activities


  The acquisition and disposal of long‑term assets and other investments not included in cash equivalents (i.e., cash payments to acquire property, plant and equipment, intangibles and other long‑term assets, cash receipts from sales of property, plant and equipment, intangibles and other long‑term assets, etc.)
• Financing activities


  Activities that result in changes in the size and composition of the contributed equity and borrowings of the entity (i.e., cash proceeds from issuing shares or other equity instruments, cash payments to owners to acquire or redeem the entity's shares, etc.)
• Cash flows from interest and dividends received and paid shall each be disclosed separately. Each shall be classified consistently from period to period as either operating, investing or financing activities
• Cash flows arising from taxes on income shall be separately disclosed and classified as cash flows from operating activities unless they can be specifically identified with financing and investing activities
• Reporting cash flows from operating activities

  • Direct method
  • Indirect method
• Direct method


  Major classes of gross cash receipts and gross cash payments are disclosed
• Indirect method


  Profit or loss is adjusted for the effects of transactions of a non‑cash nature, any deferrals or accruals of past or future operating cash receipts or payments, and items of income or expense associated with investing or financing cash flows
• Cash flows arising from transactions in a foreign currency shall be recorded in an entity's functional currency by applying to the foreign currency amount the exchange rate between the functional currency and the foreign currency at the cash flow date. The cash flows of a foreign subsidiary shall be translated at the exchange rates between the functional currency and the foreign currency at the dates of the cash flows
• When accounting for an investment in an associate, a joint venture, or a subsidiary accounted for by use of the equity or cost method, an investor restricts its reporting in the statement of cash flows to the cash flows between itself and the investee, for example, to dividends and advances
• The aggregate cash flows from obtaining or losing control of subsidiaries, or other businesses shall be presented separately and classified as investing activities. The aggregate amount of the cash paid or received as consideration for obtaining or losing control of subsidiaries or other businesses is reported in the statement of cash flows net of cash and cash equivalents acquired or disposed of as part of such transactions, events or changes in circumstances
• Reporting cash flows on a net basis

  • Cash receipts and payments on behalf of customers when the cash flows reflect the activities of the customer rather than those of the entity
  • Cash receipts and payments for items in which the turnover is quick, the amounts are large, and the maturities are short
• Investing and financing transactions that do not require cash or cash equivalents shall be excluded from a statement of cash flows. Such transactions shall be disclosed elsewhere in the financial statements in a way that provides all the relevant information about these investing and financing activities
• An entity shall provide disclosures enabling users of financial statements to evaluate changes in liabilities arising from financing activities, including both cash flows and non-cash changes
• An entity shall disclose the components of cash and cash equivalents and present a reconciliation of the amounts in its statement of cash flows with the equivalent items reported in the statement of financial position
• An entity shall disclose, together with a commentary by management, the amount of significant cash and cash equivalent balances held by the entity that are not available for use by the group
• PFRS 1 First-time Adoption of Philippine Financial Reporting Standards


  Objective: To ensure that an entity's first PFRS financial statements, and its interim financial reports for part of the period covered by those financial statements, contain high-quality information that is transparent for users and comparable over all periods presented, provides a suitable starting point for accounting following PFRSs, and can be generated at a cost that does not exceed the benefits
• An entity shall use the same accounting policies in its opening PFRS statement of financial position and throughout all periods presented in its first PFRS financial statements. Those accounting policies shall comply with each PFRS effective at the end of its first PFRS reporting period with certain exceptions. An entity shall not apply different versions of PFRSs that were effective at earlier dates. An entity may apply for a new PFRS that is not yet mandatory if that PFRS permits early application
• An entity shall, in its opening PFRS statement of financial position: Recognize all assets and liabilities whose recognition is required by PFRSs; Not recognize items as assets or liabilities if PFRSs do not permit such recognition; Reclassify items that it recognized following previous GAAP as one type of asset, liability or component of equity but are a different type of asset, liability or component of equity following PFRSs; and Apply PFRSs in measuring all recognized assets and liabilities
• The accounting policies an entity uses in its opening PFRS statement of financial position may differ from those it used for the same date using its previous GAAP. The resulting adjustments arise from events and transactions before transitioning to PFRSs. Therefore, an entity shall recognize those adjustments directly in retained earnings (or, if appropriate, another category of equity)
• Application


  Entity A is allowed, but not required, to apply PFRS in its first PFRS financial statements
• Opening PFRS statement of financial position


  1. Recognize all assets and liabilities whose recognition is required by PFRSs

  2. Not recognize items as assets or liabilities if PFRSs do not permit such recognition

  3. Reclassify items that it recognized following previous GAAP as one type of asset, liability or component of equity but are a different type of asset, liability or component of equity following PFRSs

  4. Apply PFRSs in measuring all recognized assets and liabilities
• The accounting policies an entity uses in its opening PFRS statement of financial position may differ from those it used for the same date using its previous GAAP
• The resulting adjustments arise from events and transactions before transitioning to PFRSs
• An entity shall recognize those adjustments directly in retained earnings (or, if appropriate, another equity category) at the transition date to PFRSs
• Estimates following PFRSs at the date of transition to PFRSs

  Shall be consistent with estimates made for the same date following previous GAAP (after adjustments to reflect any difference in accounting policies) unless there is objective evidence that those estimates were in error
• Comparative information in an entity's first PFRS financial statements

  • At least three (3) statements of financial position
  • Two (2) statements of profit or loss and other comprehensive income
  • Two (2) separate statements of profit or loss (if presented)
  • Two (2) statements of cash flows
  • Two (2) statements of changes in equity and related notes
• This PFRS does not require historical summaries of selected data for periods before the first period for which they present full comparative information following PFRSs to comply with the recognition and measurement requirements of PFRSs
• An entity shall label the previous GAAP information prominently as not being prepared following PFRSs
• An entity need not quantify the adjustments that would make the previous GAAP information comply with PFRSs
• An entity shall explain how the transition from previous GAAP to PFRSs affected its reported financial position, financial performance and cash flows
• Reconciliations in an entity's first PFRS financial statements


  • Reconciliation of its equity reported following previous GAAP to its equity per PFRSs for both the date of transition to PFRSs and the end of the latest period presented in the entity's most recent annual financial statements under the previous GAAP
  • Reconciliation of its total comprehensive income following PFRSs for the latest period in the entity's most recent annual financial statements
  • Disclosures that PAS 36 Impairment of Assets would have required if the entity had recognized any impairment losses or reversals for the first time in preparing its opening PFRS statement of financial position