CFAS

• Employee benefits


  May arise from contractual agreements, legislation, or informal practices that create constructive obligations
• Categories of employee benefits under PAS 19

  • Short-term employee benefits
  • Post-employment benefits
  • Other long-term employee benefits
  • Termination benefits
• Short-term employee benefits


  Those that are due to be settled within 12 months after the end of the period in which the employees have rendered the related services
• Short-term employee benefits


  • Salaries, wages, and SSS, PhilHealth and Pag-IBIG contributions
  • Paid vacation leaves and sick leaves
  • Profit-sharing and bonuses
  • Non-monetary benefits (e.g., free goods or services)
• Accounting for short-term employee benefits

  • Actuarial valuations are not necessary to measure the obligation or the cost
  • They are not discounted
• Accounting for short-term employee benefits

  1. Employee benefits are recognized as expense (or as part of the cost of another asset) and as an accrued liability, to the extent they are unpaid, after the employee has rendered service and becomes entitled to payment

  2. If payments exceed the benefits earned by employees, the excess is recognized as a prepaid asset
• Recognition of short-term employee benefits

  They are recognized periodically, e.g. salaries are usually paid every 15th and 30th of the month
• PAS 1 does not prescribe the order or format in which a single entity presents items
• Income and expenses may be presented

  • In a statement of profit or loss and other comprehensive income
  • In two statements- an income statement and a statement of other comprehensive income (OCI)
• OCI comprises


  • Changes in revaluation surplus
  • Remeasurements of the net defined benefit liability (asset)
  • Unrealized gains and losses on FVOCI investments
  • Translation gains and losses on foreign operation
  • Effective portion of gains and losses on hedging instruments in a cash flow hedge
• OCI items are not recognized in profit or loss as required by other PFRSS
• Reclassification adjustments are amounts reclassified from OCI to profit or loss
• OCI may be presented net or gross of related taxes
• Total comprehensive income includes all non-owner changes in equity. It comprises profit or loss and other comprehensive income
• Presenting extraordinary items in the financial statements, including the notes, is prohibited
• Expenses may be presented using

  • Nature of expense method
  • Function of expense method
• Additional disclosure is required when the function of expense method is used
• Dividends are disclosed either in the statement of changes in equity or in the notes
• Owner changes in equity are presented in the statement of changes in equity. Non-owner changes in equity are presented in the statement of comprehensive income
• The notes is an integral part of the financial statements. It presents information regarding the basis of preparation of financial statements, information required by the PFRSS and other information not required by PFRSS but is relevant to users of financial statements
• Inventories


  Goods held for sale in the ordinary course of business and materials/supplies to be consumed in production
• Measurement of inventories


  Lower of cost and net realizable value (NRV)
• Cost of inventories


  • Costs of purchase
  • Costs of conversion
  • Other costs incurred in bringing inventories to present location and condition
• Trade discounts, rebates and other similar items


  Deducted in determining the costs of purchase
• Costs excluded from inventory

  • Abnormal costs
  • Storage costs, unless administrative costs
  • Selling costs
• Cost formulas permitted under PAS 2


  • Specific identification
  • FIFO
  • Weighted average
• Specific identification


  Used for inventories which are not ordinarily interchangeable
• Net realizable value (NRV)

  Estimated selling price in the ordinary course of business less estimated costs of completion and sale
• Inventories are usually written down to NRV on an item by item basis
• Raw materials inventory is not written down below cost

  If the finished goods in which they will be incorporated are expected to be sold at or above cost
• Reversals of inventory write-downs shall not exceed the amount of the original write-down
• Depreciation


  The systematic allocation of the depreciable amount of an asset over its useful life
• Depreciable amount


  The cost of an asset, or other amount substituted for cost, less its residual value
• Residual value


  The estimated amount that an entity would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life
• Useful life


  The period over which an asset is expected to be available for use by an entity; or the number of production or similar units expected to be obtained from the asset by an entity
• Each significant part of an item of PPE is depreciated separately
• Depreciation is recognized as expense (in profit or loss) unless it is included in the cost of producing another asset
• Cost model


  An accounting policy where an entity chooses to measure PPE at cost less accumulated depreciation and impairment losses
• Revaluation model


  An accounting policy where an entity chooses to measure PPE at fair value less accumulated depreciation and impairment losses
• Changes in depreciation method, useful life or residual value are treated as changes in accounting estimate