PFRS for SMEsFull PFRS

I. Assets (Definition)SameSame

II. Liabilities (Defn)SameSame

III. Equity

1. Issuance of Equity SharesEquity instruments are measured t FV of the consideration received or receivable (net of direct issue cost).Same except that full PFRS is not explicit but the application in practice is the same.

IV. Income

1. Recognition of RevenueRevenue section covers all revenue transactions within four broad categories:1. Sale of goods2. Rendering of services3. Use by others of entitys resources (interest, royalties, etc.)4. Construction ContractsSame, however includes a separate standard for construction Contracts

2. Government Grant

Measurement & RecognitionAccording to nature of grant:1. Income recognized immediately upon receipt of grant with no specified future performance.2. Income recognized when conditions are met.3. Deferred income.Measurement1. Capital and Income ApproachRecognition2. Revenue recognized when conditions are met.3. Revenue recognized when grant is receivable.

V. Expenses

1. DefinitionSameSame

2. RecognitionSameSame

3. Borrowing CostsExpensed outrightCosts directly attributable to acquisition-capitalizedOther borrowing costs- expensed

Chapter 18: SMEs - DefinitionChapter 19: SMEs - QUALITIES AND GENERAL FEATURES

I. QUALITATIVE CHARACTERISTICSFULL PFRSPFRS FOR SMEs

Fundamental qualitative characteristics Relevance Predictive Value Confirmatory Value Materiality Faithful Representation Completeness Neutrality Free from error Enhancing qualitative characteristics Understandability Comparability Verifiability Timeliness

Principal qualitative characteristics Understandability Relevance Materiality Reliability Substance over form Prudence Completeness Comparability Timeliness Balance between benefit and cost

II. ELEMENTS OF FINANCIAL STATEMENTSFULL PFRSPFRS FOR SMEs

Definition same with PFRS for SMEs Recognition same with PFRS for SMEs Measurement Present value Realizable value Historical cost Current cost Definition same with full PFRS Recognition same with full PFRS Measurement Historical Cost Fair Value

III. GENERAL FEATURESFull PFRS and PFRS for SMEs have the same provisions on the general features in the preparation of financial statements.

Chapter 21: SMEs - Statement of comprehensive income

DifferencesFull PFRSPFRS for SMEs

Components of other comprehensive income-unrealized gain or loss on investment in equity instrument measured at FV thru P/L----

-gain or loss translating the financial statement of foreign operationSame

-revaluation surplus during the year---

-unrealized gain or loss from derivative contracts designated as cash flow hedgeSame

-remeasurement of defined benefit planSame

Presentation of single statement of income and retained earningsNot PermittedIf the only change in equity are the results of the ff;-profit or loss-payment of dividends-prior period errors-changes in accounting policy

Chapter 22: SMEs-Notes to Financial StatementsPFRS for SMEsFull PFRS

1. Presentation in a systematic mannerMandated (as far as practicable)Mandated (as far as practicable)

2. Cross-reference between each item in the financial statementsMandatedMandated

3. Disclosure of information about key sources of estimation uncertainty.MandatedMandated

4. Disclosure about judgment apart from those involving estimation.MandatedMandated

5. Structuresamesame

6. Order of presenting the notessamesame

7. Segment ReportingNot requiredRequired

8. Earnings per shareNot requiredRequired

9. Interim financial reportingNot requiredNot required*

10. Related and unrelated parties classificationsamesame

11. Related party disclosuresamesame

12. Key management personnel compensationsamesame

13. Events after the end of reporting periodsamesame

14. Date of authorization for issuesamesame

*Some entities are required by SEC and Phil. Stock Exchange

Chapter 23: SMEs-ACCOUNTING CHANGES

Full PFRSPFRS for SMEs

I. Selection of Accounting Policies

A. If there is an accounting standard related to a transaction, follow the standard. ApplicableApplicable(if the effect would be material)

B. In the absence of an accounting standard, management shall consider the following sources from the hierarchy of guidance:

1. The requirements and guidance in PFRS on similar related issuesApplicableApplicable

2. The definition, recognition criteria and measurement of assets, liabilities, income and expenses ApplicableApplicable

3. Most recent pronouncement of other standard setting bodies, other accounting literature and accepted industry practices.ApplicableNot Applicable

II. Consistent application of accounting policies samesame

III. Changes in accounting policies shall be treated: Retrospectivelysamesame

prospectively, if it is impracticable to apply the new accounting policy retrospectivelysamesame

IV. Changes in accounting estimates shall be treated prospectivelysamesame

V. Correction of prior period errors shall be treated retrospectivelysamesame

Chapter 24 SMEs INVENTORIES AND REVENUEINVENTORIESFull PFRSPFRS for SMEs

Definitionsamesame

MeasurementLower of cost and net realizable valueLower of cost and estimated selling price less cost to complete and sell

Costs of purchasesamesame

Costs of conversionsamesame

Other costssamesame

Cost formulassamesame

ImpairmentThe loss on inventory writedown is a component of cost of goods sold rather than an impairment loss.The excess of the carrying amount over the selling price less cost to complete and dispose shall be recognized as impairment loss.

REVENUEPFRS for SMEs and full PFRS share the same principles for the recognition of revenue from sale of goods, rendering of services, interest, royalties, dividends and other significant type of revenue.

CHAPTER 25: SMEs BASIC FINANCIAL INSTRUMENTS

Full PFRSPFRS for SMEs

I. Financial Instrument

a. Definitionsamesame

1. Financial Assetssamesame

2. Financial Liabilitiessamesame

3. Equity InstrumentsUnder the scope of the standardOutside the scope of the standard

b. CategorizationNo distinction as to basic financial instruments and financial instruments not qualifying as basic financial instrumentDistinguishes basic financial instruments and financial instruments not qualifying as basic financial instruments

c. ExamplesFinancial Instruments includes:a. Cash or currency and cash in bankb. Receivables (accounts, notes, loans, and bonds)c. Investments in equity instruments issued by other entitiesd. Payables (accounts, notes, loans, and bonds)e. Preference shares with mandatory redemption datef. Ordinary and preference share capitalg. Warrants or options

Basic financial instruments includes:a. Cashb. Demand and fixed term depositsc. Trade accounts and notes receivabled. Loans receivablee. Commercial papers or commercial billsf. Investments in nonputtable ordinary sharesg. Investments in nonconvertible and nonputtable preference sharesh. Commitment to receive a loan if the commitment cannot be net settled in cashi. Accounts payablej. Loans from banks and other third partiesk. Bonds and similar debt instrumentl. Loans to or from subsidiaries or associates that are due on demand

d. Initial Measurement

1. Transaction price (cost less impairment)samesame

2. FV through P/Lsamesame

3. Amortized Costsamesame

e. Subsequent Measurement

1. Transaction Price (cost less impairment)samesame

2. FV through P/Lsamesame

3. Amortized Costsamesame

f. Impairment of Asset

1. Measured at amortized costsamesame

2. Measured at cost less impairmentThe difference between the carrying amount of asset and present value of estimated future cash flows discounted at market rate of interest for similar assetThe difference between the carrying amount of asset and the best estimate of the amount that would have received if assets were sold

3. Reversal of impairmentsamesame

Chapter 26 SMEs ASSOCIATEPFRS for SMEsFull PFRS

Definitionsamesame

Significant InfluenceIt is the power to participate in the financial and operating policy decision of the associate but is not control or joint venture over those policies. It is presumed to exist when the investor holds at least 20% of the investees voting power. It is presumed not to exist when less than 20% is held. These presumptions may be rebutted if there is a clear evidence to the contrary.Similar to PFRS for SMEs but in addition, full PFRS give the following indicators of significant influence to be considered where the investors hold less than 20% of the voting power of the investee: Representation of BDO Participation in policy making process Material transaction between the investor and the investee Interchange of managerial personnel Provision of essential informationThe existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether an entity has significant influence

Measurement after initial recognitionAn investor may account for all of its investments in associate using any one of the following:a) Cost Modelb) Equity Methodc) Fair Value ModelOnly equity method is used to account for an investments in associate. Some exceptions: When the investments is classified as held for sale.

Areas covered under full PFRS but not in PFRS for SMEs include the following:a) Guidance on significant influenceb) Consequences when an investment ceases to be an associatec) Profit and loss from upstream and downstream transaction.

Chapter 27: SMEs - Investment PropertyPFRS for SMEsFull PFRS

DefinitionSameSame

Initial Measurement Purchase Price Directly Attributable Costs Borrowing Costs

SameSame

Recognized as expenseSameSame

Required to be Capitalized

Subsequent MeasurementInvestment property is carried at fair value if its fair value can be measured reliably without undue cost or effort. Otherwise, the cost model is used.Management may choose as its accounting policy to carry all its investment properties at cost. However, when an investment property is held by a lessee under an operating lease, the entity follows the fair value model for all its investment properties.

Fair valueSameSame

Cost ModelTreatment of PPE following PFRS for SMEs Section 17.Treatment of PPE following AIS16

TransfersSameSame

FULL PFRSPFRS for SMEs

PROPERTY, PLANT AND EQUIPMENT

1. Definition of PPE-same--same-

2. Initial and subsequent measurement Either cost model or revaluation modelCost model only

3. Noncurrent asset held for saleMeasured at the lower of carrying amount and fair value less cost to sell Presented separately and no longer depreciatedDoes not address noncurrent asset held for sale - Not separately presented

4. Depreciation method, useful life, residual value, depreciation of significant components, impairment and derecognition-same--same-

GOVERNMENT GRANT

1. Recognition of government grantRecognize when there is reasonable assurance that the entity will comply with specific conditionsRecognize when conditions are actually satisfied

2. Matching of income with expenses or cost Government grant is recognized as income over the periods necessary to match the grant with the related cost for which it is intended to compensate Does not allow an entity to match the grant with the expense for which it is intended to compensate or the cost of the asset that is used to finance

3. Presentation of grants relating to assetGrant related to asset may be treated either as deferred income or a reduction in the carrying amount of the assetGrant is a deferred income until the conditions are actually satisfied

BORROWING COST

1. Recognition of borrowing costCapitalized as part of the cost of the asset if borrowing cost is directly attributable to acquisition, construction or production of a qualifying asset, otherwise, it shall be expensed as incurredExpensed as incurred Does not permit capitalization of interest even if it is directly attributable to the acquisition, construction or production of a qualifying asset

CHAPTER 28: SMEs PROPERTY, PLANT AND EQUIPMENTGovernment Grant and Borrowing Cost

CHAPTER 30: SMEs-IMPAIRMENT OF ASSETSPFRS for SMEsFull PFRS

ScopeAssets with the following exceptions: Deferred tax assets.Employee benefits assets.Financial assets.Investment property carried at fair value Biological assets carried at fair value less estimated cost to sell-same- In addition excludes the following assets:Inventories.Deferred acquisition costs Intangibles arising from contractual rights under insurance contracts. Non-current assets classified as held for sale in accordance with PFRS 5

Formula-same--same-

Impairment losses-same--same-Unless the asset is carried at revalued amount in accordance with another standard. In this case, the impairment loss is treated as a revaluation decrease in accordance with that other standard.

Internal and External Indicators-same--same-

Measuring Recoverable amount-same--same-

Definition of Fair Value less cost to sell and Value in use-same--same-

Cash Generating Unit (CGU)-same-same-

Allocation of goodwillGoodwill is allocated to the CGUs that are expected to benefit from the synergies of the combination.If such allocation is not possible and the reporting entity has not integrated the acquired business, the acquired entity is measured as a whole when testing goodwill impairment. If such allocation is not possible and the acquired business is integrated, the entire group is considered when testing goodwill impairment.

Goodwill acquired in a business combination is allocated to the CGUs that are expected to benefit from the synergies of the combination.Goodwill is tested for impairment at the lowest level at which it is monitored by management. CGUs may be grouped for testing, but the grouping cannot be higher than an operating segment

Annualassessmentof indicatorsAssets (including goodwill) are tested for impairment when there is an indication that the asset may be impaired. The existence of impairment indicators is assessed at each reporting dateThe following assets are tested for impairment irrespective of whether there is indication of impairment:Intangible assets with an indefinite useful life or an intangible asset not yet available for use.Goodwill. All other assets: same as PFRS for SMEs

Reversal of Impairment-same--same-

CHAPTER 34: SMEs- Income TaxSection 29- Income TaxPrinciplesPFRS for SMEsFULL PFRS

1. Scope-all domestic and foreign taxes that are based on taxable profits. -includes withholding taxes that are payable by a subsidiary, associate or joint venture on distributions to the reporting entity.

2. Current Tax Liability

3. Current Tax Asset ( Prepaid Income Tax)

4. Withholding tax on dividends

5. Kinds of Temporary Differences:5.1 Deferred Tax Asset-presentation (noncurrent asset)-recognition: deductible temporary difference carryover of net operating loss valuation allowance5.2 Deferred Tax Liability-presentation (noncurrent liability)-recognition: taxable temporary difference exception:1. initial recognition of Goodwill resulting from a business combination2. initial recognition of assets and liabilities in a transaction that is not a business combination and affects neither accounting nor taxable income3. undistributed profit/ unremitted earnings from foreign subsidiaries, branches, associates and joint ventures to the extent that investment is essentially permanent in duration

note: *same prohibition applies, but can be either domestic or foreign investments

x

*

6. Measurement (future enacted tax rate)

7.Allocation for tax expense - intraperiod tax allocation - interperiod tax allocation

8. Offsetting** - current tax asset and current tax liability - deferred tax asset and deferred tax liability

Note: ** Conditions(SMEs):Offsetting is allowed to current and deferred tax asset and liability if all are met:a. When the entity has a legally enforceable right to set off the amounts.b. When the entity intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. Conditions(FULL):Offsetting is allowed to deferred tax asset and liability:a. The deferred tax asset and the deferred tax liability relate to income taxes levied by same tax authority. b. The entity has a legal enforceable right to set off a current tax asset against current tax liability.

Chapter 35: SMEs Equity and Share Based payment

From the book of Sir Valix:

1. The PFRS for SMEs and full PFRS are PRACTICALLY THE SAME with respect to the recording of equity instruments, treasury share, compound financial instrument, dividends and other related equity matters.

2. Share optionsPFRS for SMEs - must be measured at fair value on the date of grant- the intrinsic value of share options is not mentioned as an alternativeFULL PFRS Shall be measured at fair value at the date of grant If the fair value of the share option cannot be measured reliably, the intrinsic value of the share option is used