IA 3 - PRELIMS

Year 2024 - 2025 INTERMEDIATE ACCOUNTING III GO FUTURE CPA

GO FUTURE CPA !!
01 Financial Statements d. Based on estimate and judgement rather
than exact depiction
 Structured financial representation of financial
position and performance 01.5 Responsibilities of FS
 End product of financial acounting Management: peparation, presentation and
 Means by which information is periodically safekeeping of FS
communicated to users
01.1 General Purpose Financial Statements Shareholders: interested in information
 Intended to meet the needs of users who 01.6Identifications of FS
are not in the position to require an entity (1) Name of Reporting entity
to prepare reports (2) Inditions whether FS pertains to
 Directed to all common users individual entity or group of entities
01.2 Objectives of FS (3) Date of reporting period
1. Primary: provide information about the (4) Presentation currencu
entities financial position, financial (5) Truncation – levelof rounding
performance and cash flows
2. Secondary: show the results of
management’s stewardship on resources
entrusted
01.3Components of FS

x = As of + = For the
FS Flow Statement
Statement of Financial Perf x 002 General Features of FS
Statement of Financial Position +
Statement of Cash Flows + Summary

Notes to Financial Statements + 1. Fair represnetation

2. Going concern
Additional SFP x
3. Accrual basis
- Comparative indormation with respect to 4. Materiality and agrregation
preceeding period 5. Offsetting
- Statement of Financial position at the 6. Frequency of report
beginning of preceeding period 7. Comparative information
01.4 Limitations of FS 8. Consistency of presentation
a. Do not and cannot provide all of the
information that existing and potential 02.1 Accrual Basis
investors, leaders and creditors need  Recorgnized when they occue and not a
b. Not designed to show the value of a cash or cash equivalent
reporting entity but help primary users  Income is recognized when earned
c. Intented to provide common information to regarless when received and expense is
users and cannot acconomdate ever recognized when incurred regardkess
specific request when paid

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 All FS except Statement of Cash Flows: o Accounts recieveabe
cash basis 02.7 Consistency of Presentation
02.2 Frequency of Reporting  Unifrom on all periods
 At least annual  Allowed to change the presentations
 If ever shorter/longer, disclose: o Permitted by PFRS
o The period covered o Result to more relevant and
o Reason reliable info
o The fact that the amount precented  If changes: reclassify compatative
is not equal 12 mons, and not amounts unless impractable
entirely comparable o Diclose the
02.3 Fair Presentation  Nature
 Achieved upon compliance w/ all relevant  Amount
PFRS  Reason
o Statement of compliance – Notes o Impractible:
 Rare case: compliance may be  Reason
misleading: PAS 1 allows departure but  Nature
entity shall disclose:  Minimum requirement of FS: TWO
o Conclusion of management at to 02.8 Aggregation and Materiality
FS fairness  A class of similar items: Line Items
o Compliance with all PFRS except  Aggregation: adding together of ALEIE
certain that have similar characteristucs
o Financial effect of departure for  Classification: sorting of ALEIE based on
each period presented similar characteristics
 An entity cannot rectify inappropriate  Disagregation: separation of an item into
accounting policies component parts
 Final Stage: presentation of condensed
02.4 Going Concern
and classified data form line items in
 Unless the entity is to be
primary FS
liquidated/ceased operation
Note
 Assesment of at least 12 months from the
reporting date ● Aggregating information may omit useful
information by providing insufficient detal
02.5 Comparative Information
● Disaggregating information may be so detailed to
 For all amounts and for certain narrative
obscure material information
information ● Use judgement to determine how much detail is
 In respect of the previous period for all needed
amounts reported in current period’s FS
 Include narrative and descriptive
information when relavant 03 Additional Financial Statement
02.6 Offsetting Required when:
 Generally permited on income statement 1. Entity applied accounting policy
items as long as allowed by PFRS retrospectively
 When material: cannot be offsent 2. make retrospective restatement of items
 Examples: 3. reclassifies item
o Gain or Loss on Disposal of asset Present three FS at:
o Foreigne xch and trace recurities 1. The end of current period
loss 2. The end of previous period

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3. Beginning of earliest comparative period
- No need for notes

04 Manager’s Responsibility for FS

1. Preparation and fair representation of FS
accrdng to PFRS
2. Internal Control over Fin. Rep.
3. Going Concern Assesment
4. Oversight over financial reporting process
5. Review and apporval of FS

“Statement of Management’s Responsibility fot

FS” signed by:
1. Chairman of the board
2. CEO
3. CFO

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STATEMENT OF FINANCIAL POSITION PRESENTATION (liquid to least liquid)
 showing the ALE – balance sheet 1. CCE
 used by external users to evaluate factors 2. Financial assets held for trading and
equity instruments
LIQUIDITY – ability of the entity to meet currently 3. Trade and other receivables
maturing obligations 4. Inventories
SOLVENCY – availability of cash over the long- 5. Prepaid expenses
term to meet maturing obligations
Non- current Assets
Current and Noncurrent Distinction - Residual definition
 when an entity supplied goods or services a. PPE
within a clearly identifible operating cycle, b. Long term investments
the separate classification is useful c. Intangible assets
information, d. Other non-current assets
Current Asstes  Requisites
 Asset is a CCE unless restricted to settle *Deferred Tax Asset – non-current
for more than 12 months after the
reporting period Minimum Line Items Classifications
 The entity holds the asset primarily for the CCE CA
purpose of trading
 The entity expects to realize the asset Financial Assets
- FVPL CA
within 12 months after the reporting period - FVOCI NCA
 The entity expects to realize or sell or - Amortized Cost NCA
consume within normal operating cycle
Trade and Other recievables CA

HELD FOR SALE: Inventories CA

1. Aquired principally for the purpose of PPE NCA
selling Invesment in associate NCA
2. Initial recognition, part of portfolio of
Intangible assets NCA
identified financial instruments unless
there is evidence of short-term profit Investment property NCA
taking Biological Assers CA
3. Derivative, execpt f financial guarantee Assets held for sale CL
contract of effective hedging instrument
CLTrade and other payables CL

REALIZED WITHIN 3 MONS – Short-term non- Current tax liability CL

trade recievables Defferered tax asset/lib NCA/NCL
- sources other that sale Provisions CL
- current if collectible within one yr
Financial Liabilities
- FVPL CL
REALIZED, SOLD OR CONSUMED - Amortized Cost NCL
- trade recievables, invetories and
Liabilities held for sale CL
prepayments
OPERATING CYCLE Non-controlling interest
- time between acquisition of assets and Share capital and reserves
their realization to CCE
- Silent: 12 mons

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STATEMENT OF FINANCIAL PERFORMANCE c. Loss on sale of non current
- Primarily measured in trms of lebel investment
of income earned by the entity d. Loss on sale of intangible asset
through the effectve and efficient e. Casulty loss
utilization of resources f. Expropriation loss
PRESENTATION LINE ITEMS IN INCOME STATEMENT
1. Two-statement approach 1. Required by IFRS 18 –
- Income statement a. Revenye, separate from interest
- Statement of Comprehensive revenue and insurance rev
Income b. Operating expenses
2. Single Statement Approach c. Share in net income or loss of
- Combined statement showing all in associate and joint venture using
a single statement of equity method
comprehensive income d. Income tax expense
o P/L e. Single amount for discontinued
o Components of OCI operations
INCOME STATEMENT: showing the profit or loss 2. Required by IFRS 9 - Financial
of an entity for a period of time intstruments
- Expenses, gains, losses and net a. Interest revenue
income b. Impairment loss and reversal
PROFIT OR LOSS: total income less expenses c. G/L on derecognition of financial
excluding components of OCI asset at amortized cost
- P/L is the bottom line in the d. G/L on reclassification of financial
traditional fs asset from AC to FVPL
- May use net income or net loss e. G/L from reclassifciation of
financial asset from FVOCI to
DEFINITION OF EXPENSES FVPL
1. Selling expenses or distribution costs 3. Required by IFRS 17 - Insurance
a. Salesmen’s salaries Contracts
b. Sales commissions a. Insurance revenue
c. Traveling and marketing exoenses b. Income and expenses from
d. Advertising and publicity expenses insurance and reinsurance
e. Frieght out contract
f. Depreciation of delivery equipment c. Finance income and expenses
and store equipment
2. Administrative expenses *Entity shall present in IS an alloc of P/L for the
a. Doubtful accounts period attributable to noncontrolling interest and
b. Office salaries and expenses of owners of the parent
general excecution
c. Office supplies expense CATEGORIES IN THE INCOME STATEMENT
d. Contributions to charity 1. Operating Category
e. Professional fees a. Residual approach
f. Depreciation of office building and b. Do not generate a return individually
office equipment c. PPE and Intangible assets
3. Other expenses 2. Investing Category
a. Loss on sale of trading investment
b. Loss on sale of PPE

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a. Investments in associate, Jv and
unconsolidated subsidiary accounted
using equity method
b. Investments in time deposit, treasury bills
and money market
c. Other assets that generate a return
individually and largly independent of the
entity;s other resources
3. Financing Category
a. Raising of finance such as bonds, loans,
notes and mortgages
b. Arise from transactions not involcing
raising of finance
i. Purchase of goods on
credit
ii. Finance lease
iii. DBO
4. Income Tax Categpry
5. Discontinued Operations Category

PRESENTATION OF EXPENSES
A. Function of Expense
a. Traditionala nd common for of
presentation
b. COGS method
i. COGS
ii. Selling and Admon
iii. OPEX
B. Natural Presentation
a. According to their nature
i. Operating
ii. Financing
iii. Investing

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1. Single Statement – statement of
STATEMENT OF COMPREHENSIVE INCOME Comprehensive Income
2. Two Statements
- Shows the financial performance for a
a. Income statement (Statement of
certain period
P/L)
- Provide a more comprehensive approach
b. Statement of Comprehensive
on financial performance, measured more
Income
broadly than traditional
Comprehensive Income – total changes in
FORMAT
equity excluding owner transactions
1. Function of Expense – Cost of Sales
- Components:
Method (COGS, OPEX, Admin and
o Profit or Loss
Selling)
o Other comprehensive Income/loss 2. Nature of Expense (Depreciation,
Purchase of raw materials, employee
benefits)

Reclassificati
on
Adjusment
Revaluation surplus
Unrealized gain from FVOCI investments
- Debt instrument OTHER COMPREHENSIVE INCOME
- Equity instrument - Reclassification adjustments that are not
Remasurements on Defined Benefit Plan recognized in profit or loss but req or
permitted by PAS
Translation gains and losses from foreign
operations
COMPONENTS OF OCI
Effective postion of G/L on hedging
instruments under cash flow hedgers
1. Unrealized G/L on equity investment
measured at FVOCI
Changes in the FV of FVPL financial liab
2. Unrealized G/L on debt investment
due to credit risk
measured a FVOCI
Changes in the time value of an option 3. G/L on translating the financial statements
contract when the option’s intrisic value
and time value are separated of a foreign operation
4. Unrealized G/L from derivative contracts
designated as cash flow hedge
APPROACHES OF COMPUTING CI
5. Remeasurement of DBP
Transactional Approach
- Per transaction basis
6. Change in FV attributable to credit reisk
- Conventional/traditional designated at FVPL
Capital Maintenance Approach
PRESENTATION OF OCI
PRESENTATION 1. Reclassified to P/L
2. Reclassified to retained earnings

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*Reclassification Adjustments – amount
reclassified to P/L in current period that were
recognized in OCI in current/prev

OCI THAT WILL BE RECLASSIFIED TO P/L

1. Unrealized G/L on debt investment
measured a FVOCI
2. G/L on translating the financial statements
of a foreign operation
3. Unrealized G/L from derivative contracts
designated as cash flow hedge

OCI THAT WILL BE RECLASSIFIED TO

RETAINED EARNINGS
1. Unrealized G/L on equity investment
measured at FVOCI
2. Remeasurement of DBP
3. Change in FV attributable to credit risk
designated at FVPL
4. Change in revaluation surplus

MANAGEMENT-DEFINED PERF MES.

- Measue as a subtotal of income and
expenses that an entity uses in public
communication outside financial
statements to communicate to users in a
management view
- Entity may adopt some non-GAAP
measures on accounting policies that
differ from IFRS
- May exclude:
o Research and dev
o Impairment loss
o G/L from disposal of property
o PPE
o Casualty loss
- Disclose single note in FS about MPMS

DISCLOSURES
1. The aspect of financial performance that
the MPM communicates
2. How the MPM provides useful information
3. How the measure is calculated
4. Reconcilliation between MPM and most
directly comparable subtotal

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1. Share Capital: funds contributed by the
STATEMENT OF CHANGES IN EQUITY sharehilders equal to the par or stated value
- Shows the movement of equity during the 2. Share Premium: contributed by
year shareholders in excess of par or stated
- Information: value
i. Effect of retrospective application of 3. Retained earnings: unappropriated or
change in accounting policy appropriated
ii. Effect of reatement due to correction of
proper period errors PRESENTATIONS:
iii. Total comprehensive income 1. Comprehensive income for the period
iv. Reconcialliation of the beginning and 2. The effect of retrospective application
ending balance of each component or retrospective restatements
 P/L a. Application: adjustment of a
 OCI/OCL change in accounting policy
 Owner Transactions b. Restatement: correcting of prior
period errors
3. Reconcilliaton between the carrying
amount at the beginning and end of the
period to disclose:
a. Profit ot loss
b. Each iterm of OCI
c. Transactions with owners in their
capacity showing seoarately
contributions by and distributions
to owners
Note:
- Diclosure of dividends and dividends per Notes
share - The retained earnings shall be appropriated equal to
- Dividends to shareholders: deducted from the remaining cost of treasury shares
retained earnings
- Entity’s option
ITEMS DIRECTLY AFFECTING RETAINED
i. Statement of changes in Equity or
EARNINGS
ii. Notes to FS
4. Net income or loss for the period
5. Prior period errors
*Owner’s changes in equity are presented in the
a. Shown as an adjustment of the
statement of changes in equity
beginning balance of retained
earnings
*Non-owners changes in equity are presented in
IF:
the statement of comprehensive income
- Net income of prior period errors is
understated: added to retained earnings
EQUITY: residual interest in the assets of an
- If overstated: deducted from retained
entity after deducting all of liabilities
earnings
- Net assets = total assets – total liabilities
IF:
- May be subclassified in the SFP
- Net income of accounting policies is
understated: added to beginning retained
SUBCLASSIFICATIONS:
earnings

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RETIREMENT OF TREASURY SHARES:
- If more cost is more than original price,
charged to retained earnings
CINVERSION OF PREFERENCE SHARES TO
ORDINARY SHARES:
- If total par or stated value of ordinary is more
than og issue price, charged to retained
earnings

STATEMENT OF RETAINED EANRNINGS

- Changes affecting directly the retained
earnings
- Not a primary financial statement but pat of
SCE
DISCLOSURES:
a. Net income or loss for the period
b. Prior period errors
c. Dividends declared and paid to
shareholders
d. Effect of change in accounting policy
e. Appropriation of retained earnings

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NOTES TO FINANCIAL STATEMENTS OTHER DISCLOSURES

- Provide a narrative description or 1. Domicile of legal form of the entity, its
disaggregation of items resented on FS country of incorporation and address of
and other items that do not qualify for the regitered office
recognition 2. Description of the nature of the entity’s
- main purpose: to support other fs through: operations and principal activities
i. Narrative description 3. Name of the parent and ultimate parent of
ii. Supporting information and the entity
disaggregation 4. Length of the limited life of the entity
- Must be presented in structure and
organized manner DISCLOSURE OF SHARE CAPITAL
a. Number of shares authorized
STRUCTURE b. Shares issue and fully paid
1. General information of the entity c. Shares subscribed but ot fully paid
2. Statement of Compliance d. Par value per share or stated value of no
3. Summary of significant accounting policies par shares
4. Supporting information and aggregation e. Reconciliation of shares outstanding at
5. Other required disclosures the beginning and end of reporting period
PURPOSE PAR 132:
a. Present information about the basis of 1. Amounts of dividends proposed or
preparation of the FS and the specific declared before FS were authorized for
accounting policies issue
b. Disclose information required by the 2. Any comulative preference dividends not
PFRS recognized
c. Provide additional information not
presented in FS but is relevant
Note:
 Entity shall, as par as practicable, present notes in a
systematic manner
 Cross reference each item in the primary FS

ORDER OF PRESENTATION
A. Statement of Compliance with PFRS
B. Summary of significant accouting policies
C. Supporting information or computation for
line items presented in primary FS
D. Other disclosures
a. Contingent liabilities
b. Unrecognized contractual
commitments
c. Non financial disclosures
SIGNIFICANT ACCOUNTING POLICIES
1. Measurement basis used
a. Historical cost and current value
2. Accounting policies used
a. Alteanatives in PFRS

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STATEMENT OF CASH FLOWS
- Summarizes the cash reciepts and cash
payments of the entity during the period
- Only FS that is prepared by using cash basis
of accounting to promote inter-comparability
- SCF is used in assessing: Direct method – itemized method; purely cash
i. The ability to generate cash and cash basis
equivalents Indirect method – accrual  cash basis
ii. The timing and certainty of the
generation of cash flows INDIRECT METHOD
iii. The need to utilize those cash flows
Classifications of Cash Flows
OPERATING ACTIVITIES
- Cash flows primarly derived from the
revenue-producing activity of the entity
- Cash inflows and outflows from income
statement items (income – result of the
operations)
- cash flows from trading securities (FVPL)
INVESTING ACTIVITIES
- Cash flows from sale and acquisition of long
term assets and investments
FINANCING ACTIVITY
- Cash flows resulting from equity capital and
borrowing

INTEREST AND DIVIDENDS

Cash Flows Option 1 Option 2
Interest Received Operating act. Investing act.

Dividend received Operating act. Investing act.

Interest Paid Operating act. Financing act.
Dividend Paid Financing act. Operating act.
Note: always choose Option 1 If prob is silent

PRESENTATION

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EVENTS AFTER THE REPORTING PERIOD (PAS 10) - Entity is required to submit FS to
- a.k.a subsequent events shateholders for approval after FS are
- occur between the reporting data and issued
authorization date i. Pero authorized parin on the date BOD
- may create adjusting entries or note issues it
disclosure
RELATED PARTIES (PAS 24)
TYPES - Entity/person that is related to another entity
1. Adjusting Events which is preparing a FS
 occur after the reporting period provide - Related if  It can affect the financial and
evidence to the conditions that exist as of operating policy
the reporting date i. Control– power to govern the financial
Examples and operating policy so that it can
obtain benefits
From Millan:
1. Resolution of court case  Ownership of more than half of voting
2. Bankruptcy of customers power
3. Sale of inventories ii. Significant influence – partipation of
4. Determination of net proceeds from selling of PPE an entity on the decision making
5. Determination of bonus and profit sharing
6. Discovery of error and fraud process but not control
 Ownership of 20% or more
From Valix:
 Or evidenced by
1. Settlement after the reporting period of an court case
so long as may present obli na at end of period a. Representation in BOD
2. Bankruptcy of customer after the RP b. Partici in Policy making process
3. Determination after RP of the cost of assets or c. Material transactions
proceeds befre the end of RP
d. Interchange of managerial personnel
4. Determination after RP of the profit sharing or bonus
payment if entity has present obli at end of RP e. Provision of essential technical
5. Discovery of fraud or errors that shows FS were information
incorrect iii. Joint Control - contractually agreed
sharing of control
2. Non- adjusting Events EXAMPLES
Examples 1. Affliates
- Parent and subsidiary relationstip
1. Business combination
2. Plan to discontinue an operation - Subsidiary and subsidiary relationship under
3. Major purhase and disposal of asset and same parent
expropriation of major asset by government - Owns more than 50% of an entity 
4. Destruction of major production plant by a fire PARENT
5. Announcing/commencing of major restructuring
6. Entering into significant commitments or contingent i. Investee as  SUBSIDIARY
liabilities 2. Associates
7. Commencing major litigation - Exercise significant influence
8. Change in tax rate enacted - Investor owns atleast 20%  ASSOCIATE
9. Major ordinary share transactions and potential
i. Subsidiaries and subsidary of an
ordinary share transactions
associate
Notes: 3. Venturer in a joint venture
- FS are authorized for issue when BOD - Fellow venturers are not related to each
revies the FS and authorizes it other

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 Key management personnel
compensation
o in total; and
o per category/type
Employee Benefits (SHOTS)
OTHER RELATED PARTIES o Short Term Employee benefits
1. Key Management Personnel  with o Post-Employment
managerial positions o Other long term
2. Close Family Member o Termination
- Spouse and Children o Share based
- Children of the spouse  Related Party Transaction
- Dependents of the individual and the spouse o Regardless whether price is
3. Individuals or shareholders owns charged or not
atleast 20% (incl close family members) o Disclose:
4. Post-employment benefit plans  Nature of Relationship
- Trust fund handled by a trsutee  Nature, term and amount of
the transaction as well as
Notes
AB
Not related:  Bad debts recognized on
- Providers of finance, labor unions, gov’t agencies
outstanding balances
unless they exercise control/significant influence
- Suppliers, customers *separate FS  disclosed
* consolidated FS  eliminated
RELATED PARTY TRANSACTIONS
- Transfer of resources and obligations within
related parties regardless whether a price is  Government Related Entities
charged o Disclose
- EXAMPLES:  Nature of relationship and
i. Purchase and sale of goods name of gov’t agency
ii. Purchase and sale of prop/asset  Information on nature and
iii. Rendering/receiving services amount of indiv significant
iv. Leases influences
v. Transfer of R and D o EXEMPTED from proving
vi. License agreement NORMAL DISCLOSURES ON:
vii. Finance agreements, incl loans and  Goc that has control, joint
equity contibutions in cash/kind control or significance
viii. Guarantee and collateral influence over entity
ix. Settlement of Liabilities  Other entities controlled by
same gov
DISCLOSURES
 Relationship between parents and MINIMUM DISCLOSURES
subsidies  CONTROL - Required to disclose the nature, info abt
o Disclose regardless of any related transactions and outstanding balances
party transactions between them - arm’s length transaction, mad eonly if can be
o Name of entity’s parent and if substanciated
none, ultimate controlling party
 If waz paren, next most a. Amount of transactions
senior parent na sisz

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b. Amount of oustanding bal, terms and
conditions whether secured or
unsecured, nature of consider
c. Allowance for doubtful accounts related
to the oustanding balance
d. DAE recognized durng the period

UNRELATED PARTIES
1. Two entities that have a director or key
management personnel in common
2. Providers offinance in the course of their
normal dealings with the entity
3. Single customer, supplier, frachisor or
general agent that an entity transacts a
significant volume of business by normal
dealings
4. Two venturers under same joint venture
a. Venturers are related to the JV

Notes
- Requires disclosure in the separate FS of parent,
subsidiary, associate or venturer
- Intragroup related party transactions and OB are
eliminated in the prep of consolidated FS

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NON-CURRENT ASSETS HELD FOR SALE CHANGES TO A PLAN OF SALE
 CA is to be recovered principally through a - NCAHFS ceases to be classified as held for
sale transaction (incidental) rather than sale
through continuing use
 Could be: - Reclassification measurement: (LOWER)
o Individual asset or i. FV – CTS on that date
o Disposal group ii. CA of Asset as if not reclassified as
NCAHFS
RECOGNITION Adjusted for depreciation not recognized
Both are required: - Difference between NCAHFS’ CA and
 Asset is available for immediate sale Reclassification measurement – G/L – F/L
o Condition = usual and cutomary
terms PRESENTATION
o “Sold as seen” - w/in current asset of SFP (separately)
- if disposal group asset - CA
 Sale is highly probable (all requisites)
liab – CL
o Active program/plan to sell the
asset and locate buyers
REVALUATION
o Management is commited to such
- Revalued to FV immediately prior to the
plan
classification as HFS
o The sale is complete w/n 1 year
- Revaluation Surplus = FV at classification –
from the data of classification as CA at that date
NCAHFS - Cost of disposal at classification should be
 EXP: caused by reason recognized as impairment loss and deducted
beyond control of entity = from HFS
NCAFHS - Subsequently measured at lower of CA or
o Sale is actively marketed at FV less CTS
reasonable price
o Actions indicate that it is ABANDONED NON CURRENT ASSET
UNLIKELY that the plan will be - Not classify as non curent because CA willl
changed/withdrawn be recovered thorugh continuing use

MEASUREMENT TEMPORARILY ABANDONED

- Initially and subsequently measured at - Not account, not regarded as abandoned
LOWER between Carrying Amount and FV
– CTS CHANGE IN CLASSIFICATION
i. Writedown: treated as impairment loss - Ceases to be HFS at LOWER:
CA > FV – CTS = Impairment Loss i. CA before asset was classified as
- If disposal group – impairment loss HFS adjusted for any deprec, amort
i. Good will and reval that would have been
ii. Propotionately to other assets based recognized if asset was not classified
on CA across the assers as HFS
- In FV-CTS  gain on reversal of ii. Reverable amount at date of
impairement loss is limited on cumulative subsequent decisionn
a. HIGHER of FV – CTS and Value in Use
*NCAHFS is NOT subject to depreciation

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 IA 3 - PRELIMS
Year 2024 - 2025 INTERMEDIATE ACCOUNTING III GO FUTURE CPA
TIMING OF REPORTING
DISPOSAL GROUP PRESENTATION 1. When entity has actually disposed of
- Described as NC-HFS separetly in single 2. Operation meets the criteria of HFS
amount under CA
- Liabilities of disposal group shall be - PFRS 5, prevents retroactive classificationn
described as “liabilities directy assoiated as a DO if the criteria are meet AFTER
with NCA – HFS under CL reporting period
COMPONENT OF AN ENTITY
CHANGE IN METHOD OF DISPOSAL - Subsidiary, major line of business or
Held for sale to held to distribution to owners geographical segment
- Clearly distinguished operationally and for
1. Considered as continuation to the orginal financial reporting
plan i. Directly attributable to the component
2. Continue to apply HFS - They would be eliminated when component
3. Recognize any impairement loss or is disposed of
subsequen inc in FV – CTS - Occurs when operation and cash flows have
4. Does not in itelf extend the period in which been or will be eliminated from on going
the sale has to be completed operations, with no significant continuing
involvement
DISCONTINUED OPERATIONS
- Component of an entity that either has been EXAMPLES:
disposed of or classified as HFS and: 1. Selling by a diversified entity of a major
 Separete major line of division that only represent entity’s only
business/geographics area activities in electronic industry
 Part of single co-ordinated plan to 2. Selling by a meat packing entity of
dispose of a singlen major line controlling interest in a furniture entity
 Subsidiary acquired exclusiveky with a. All other operations are meet
a view to resalw packing
Held For Sale 3. Selling of all radio stations
a. Remaining activities are tvs
NCAHFS Individual asset/Disposal group
4. Conglomerate is engaged in commodity, real
Discontinued Operations Component of an entity estate and manu and construction
a. Any four is DO
 Separate major line of NOT DOS:
business/geographical area 1. Phasing out of product line within a
 Part of a single coordinated plan product segment
 Susidiary acquired exclusively w/ a view to 2. Shifting fo production or marketing acts
resale from one location to another
3. Closing of a facility factory or branch
*COMPONENT – result of operation that can be
clearly identified and separated from all other INCOME STATEMENT PRESENTATION
operations - a single amount compromising of post tax
 Available for immediate sale and highly income or loss of DO and post tax gain or
probable loss recognized in FV – CTS
* DO occurred at the EARLIER date of actual - single amount bellow continuinh operations
disposal or day when conditions being held for
sale were met INCLUDED IN DO

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 IA 3 - PRELIMS
Year 2024 - 2025 INTERMEDIATE ACCOUNTING III GO FUTURE CPA
1. revenue, expenses and income or loss
attributable to DO during the current period
and related income tax
2. impairment loss when FV – CTS is LOWER
than CA
a. if higher, expected gain is not
recogized
3. G/L from the actual disposal of assets and
settlement of liabilities of a DO at date of
sale
4. Termination cost or employees and ither
DACS

RESULT OF OPERATIONS
- Income or loss generated by discontinued
operations
- BEFORE and AFTER of reclassification are
part of DO
Sales/Revenue
(Direct Expenses)
(Impairment loss)  CA > FV - CTS
G/L on sale  Actually sold
(Termination cost)  x direct expense
Income/Loss from DO presented in P/L net of tax

PRESENTATION
- Income statement – P/L after tax
- Balance sheet (CA/CL)
- Asset directly relate to component – not
subject to depereciation

PRESENTATION IN SFP
- Separately as a single amount under CA
and liabilities separetly as a singleamoung
under CL
- Cannot be offset
- Asset of component = LOWER of FV – CTS
and CA
- Assets cannot be depreciated
- If classified as HFS in current year the prior
period presentation is not changed,

Lorraine Abigail Ham Corpuz, CPA Page 18