Full Pfrs vs. Pfrs For Smes

Diaz Murillo Dalupan and Company
Full IFRS vs. PFRS for SMEs

Atty. Bethuel V. Tanupan
DipIFRS, CPA, CMA, DipIFRS, MM Partner for Technical Standards
Seminar Outline
Full IFRS vs IFRS for SMEs
Accounting Framework and first-time adoption Financial Statements Income and Expenses Financial Assets & Liabilities Non-financial assets Non-financial liabilities and equity Other Topics
Accounting Framework and firsttime adoption

IFRS for SMEs Full IFRS Apply to all entities that issue general purpose FS.
Scope
No public accountability Small listed entities not included.
Accounting Framework and first-time adoption
Publicly accountable entities

Files or is in the process of filing FS with SEC or other regulatory organizations for the purpose of issuing any class of instrument in a public market Holds assets in a fiduciary capacity for a broad group of outsiders
(banks, insurance companies, securities brokers and dealers, pension funds.

IFRS for SMEs Full IFRS Include historical cost, current cost, realizable value, present value.
Measurement bases
Usually historical cost subject to impairment. Fair Value on certain accounts.
Fair Value Measurement

IFRS for SMEs
Certain categories of financial instruments Investments in associates and joint ventures Investment property and agricultural assets
FULL IFRS
Investment Property, biological assets and certain categories of financial instruments

IFRS for SMEs Full IFRS
First time adopter
Presents its first Presents its first annual FS that annual FS that conform with IFRS conform to IFRS. for SMEs regardless of whether its previous framework was full IFRS.

IFRS for SMEs Full IFRS The beginning of the earliest period for which full comparative information is presented in accordance with full IFRS.
Date of transition
The beginning of the earliest period for which full comparative information is presented in accordance with IFRS for SMEs
Reconciliation required
Equity reported under its previous financial reporting framework to its equity under IFRS for SMEs for both the transition date and end of the latest period presented in the entitys most recent annual FS under its previous financial reporting framework Profit or loss reported under its previous financial reporting framework for the latest period in its most recent annual FS to its profit or loss under IFRS for SMEs for the same period.
Mandatory exceptions from retrospective application (no change in accounting policy)

Derecognition of financial assets and liabilities Hedge accounting Estimates Discontinued operations Measuring non-controlling interests
Some optional exemptions from retrospective application (See IFRS FOR SMEs 35.10)
FV or revaluation as deemed cost for PPE, investment property or intangible assets. Deferred income tax Arrangements containing a lease
General exemption from retrospective application

On the ground of impracticability.
Impracticable is defined as when the entity cannot apply it after making every reasonable effort to do so.
Financial Statements
IFRS for SMEs Full IFRS Not allowed.
Combined statement of income and retained earnings
Allowed if the only changes to equity of an entity are a result of profit or loss, payment of dividends, correction of prior period errors or change in accounting policy
Income and Expenses

IFRS for SMEs Full IFRS Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying asset as part of the cost of that asset are capitalized.
Borrowing costs
All borrowing costs are expensed.
Income and Expenses

IFRS for SMEs Full IFRS May be recognized immediately or amortized into P/L over a period not exceeding the expected remaining working lives of participating employees
Actuarial Gains and Losses
Recognized in FULL in profit or loss or in other comprehensive income (without recycling) in the period in which they occur.
Income and Expenses

IFRS for SMEs Full IFRS Recognized as an expense on a SL basis over the average period until the plan amendments vest.
Past Service Costs
Recognized in FULL in profit or loss in the period in which they occur
Financial Assets and Liabilities

Categories Basic and complex FVTPL financial Held to maturity instruments investments Loans and receivables Available-for-sale financial assets

Examples of basic and more complex financial instruments
Basic: Cash, Trade Not applicable accounts and Notes receivable/payable , Loans from banks/3rd parties, Commercial Paper, Bonds

IFRS for SMEs Full IFRS Not applicable
Examples of basic and more complex financial instruments
COMPLEX: Asset-backed securities and repurchase agreements. Options, rights, warrants, futures, forward contracts and interest rate swaps that can be settled in cash or by exchaging another financial instrument. Hedging instrument. Commitments to make a loan to another entity. Investments in another entitys equity instrument. Investment in covertible debt.

Fair Value plus transaction cost. Fair value is normally the transaction price, unless part of the consideration is for something other than a financial instrument or the instrument bears an off-market interest rate.
Transaction price Initial measurement (including transaction
costs unless the instrument is measured at FVTPL). If payment is deferred or is financed by an interest rate that is not a market rate, PV of the future payments
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Held for trading FVTPL Held to maturity and loans and receivables amortized cost. Financial liabilities other than FVTPL amortized cost. Available for sale FV to equity. Investment in equity securities whose FV cannot be measured Cost less impairment.
Subsequent measurement
Basic debt instruments are measured at amortized cost using the effective interest method. Investments in nonconvertible and nonputtable ordinary sahres or preference shares are measured at FVTPL if FV can be measured reliably, otherwise, cost less impairment.

Impairment loss is measured as the difference between the carrying amount of the financial asset and the PV of estimated future cash flows discounted at the current market rate of return for a similar financial assets.
Assets measured at cost less impairment
Impairment loss is the difference between the assets carrying amount and the best estimate of the amount that the entity would receive for the asset if it were to be sold.
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Non-Financial Assets
IFRS for SMEs Full IFRS Borrowing costs are included in the cost of inventories under limited circumstances as identified in IAS 23.
Inventory other cost
Borrowing cost is an expense.
IFRS for SMEs Full IFRS Borrowing cost that are directly attributable to the acquisition, construction or production of a qualifying asset are to be capitalized.
Investment Borrowing costs are recognized as property initial expense. measurement
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IFRS for SMEs Full IFRS Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are required to be capitalized as part of the cost of that asset
PPE initial Borrowing cost measurement are recognized as an expense.
IFRS for SMEs Full IFRS Cost model or revaluation model.
PPE Cost less subsequent accumulated measurement depreciation and any impairment losses (cost model).
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IFRS for SMEs Full IFRS Significant parts may have different useful lives. Depreciation is calculated based on each individual parts life.
PPE Components approach
Cost of an item of PPE is allocated to its significant parts, with each part depreciated separately only when the parts have significantly different patterns of benefit or consumption.
Review , depreciation method, residual value and useful life at least at each annual reporting date and amended if expectations differ from previous estimates.
PPE Depreciable amount, method and depreciation period
Review depreciation method, residual value and useful life if there is an indication of change since the last reporting date and amended if expectations differ from previous estimates.
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Research costs are expensed as incurred. Development costs are capitalized when specific criteria are met.
Intangible asset research and development costs
All research and development costs are recognized as expense.
Cost model or Revaluation Model.
Cost model Intangible asset measurement after initial recognition
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IFRS for SMEs Full IFRS Either FINITE or INFINITE
Intangible Considered to be asset useful FINITE. life
Amortize those with finite useful life. Review amortization method and residual value at least each annual reporting period.
Intangible assets with finite useful life
Amortized on a systematic basis over the useful life. Useful life is presumed to be 10 years if a reliable estimate cannot be made. Review basis of amortization for any indication of change.
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Not amortized. Useful life is reviewed at each annual reporting period to determine whether events and circumstances continue to support an indefinite useful life assessment.
Intangible assets with indefinite useful life
Not applicable. All intangible assets are considered to have finite lives.
The following are tested for impairment irrespective of whether there is indication of impairment: 1) Intangible asset with an indefinite useful life or an intangible asset not yet available for use. 2) Goodwill.
Impairment of assets annual assessment of indicators
Assets (including goodwill) are tested for impairment when there is an indication that the asset may be impaired. The existence of impairment indicaotrs is assessed at each reporting date.
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Non-Financial Liabilities and Equity

If the contributions to a DC Plan do not fall within 12 months after the end of the period, the future contributions are discounted.
Retirement benefits measurement of defined contribution plans.
Contribution payable for a period to the fund is recognized as a liability for a DC plan after deducting any amount already paid.

Net total of : PV of the DB obligation at the end of the reporting period. Plus/minus any actuarial gains/losses not recognized due to the corridor method. Minus any unrecognized past service cost. Minus the FV at the reporting date of the plan assets out of which the obligations are to be settled directly.
Defined benefit liability
Net total of: PV of the DB obligation at the end of the reporting period Less that FV at the reporting date of plan assets (if any) out of which the obligations are to be settled directly.
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Projected unit credit method is required for calculating DB obligations. This method sees each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation.
Actuarial Valuation Method
Projected unit credit method is required if the information that is needed to make such a calculation is already available, or can be obtained without undue cost or effort. If not, an alternative method is permitted in which future salary progression, future service, and possible mortality during an employees period of service are not considered.

Expected return on plan assets is based on market expectations at the beginning of the period for returns over the entire life of the related obligation. It reflects cahgnes in the fair value of plan assets as a result of actual contributions and benefits paid. The difference between actual and expected returns on plan assets is an actuarial gain or loss.
Expected return on plan assets
No distinction between expected and actual report on plan assets. All changes in the fair value of plan assets are recorded in profit or loss.
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The concept of valuation allowance is not applicable. Instead, a deferred tax asset is only recognized to the extent that it is probable that there will be sufficient future taxable profit to enable recovery of the deferred tax asset. The net carrying amount of deferred tax asset is likely the same, but full IFRS does not require the disclosure of a valuation allowance.
Deferred tax recognition and measurement
Valuation allowance is recognized so that the net carrying amount of the deferred tax asset equals the highest amount that is more likely than not to be recovered.
Agriculture
Exemption from measurement at FV is only allowed if the FV cannot be measured reliably.
Recognition and measurement
Measure biological assets at FV less cost to sell where such FV is readily determinable without undue cost or effort. Where FV is not used, the entity may use cost less any accumulated depreciation and any accumulated impairment loss.
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Agriculture
Exemption from measurement at FV is only allowed if the FV cannot be measured reliably.
Recognition and measurement
The agricultural produce harvested from biological assets is measured at fair value less estimated cost to sell at the point of harvest. Gains or losses on initial recognition and from change in FV are recognized in profit or loss.
End of presentation.
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Full Pfrs vs. Pfrs For Smes

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Diaz Murillo Dalupan and Company

Full IFRS vs. PFRS for SMEs

Diaz Murillo Dalupan and Company

Diaz Murillo Dalupan and Company

Accounting Framework and firsttime adoption

No public accountability Small listed entities not included.

Diaz Murillo Dalupan and Company

Accounting Framework and first-time adoption

Publicly accountable entities

Diaz Murillo Dalupan and Company

Accounting Framework and first-time adoption

Usually historical cost subject to impairment. Fair Value on certain accounts.

Diaz Murillo Dalupan and Company

Accounting Framework and first-time adoption

Fair Value Measurement

Diaz Murillo Dalupan and Company

Accounting Framework and first-time adoption

First time adopter

Diaz Murillo Dalupan and Company

Accounting Framework and first-time adoption

Diaz Murillo Dalupan and Company

Accounting Framework and first-time adoption

Diaz Murillo Dalupan and Company

Accounting Framework and first-time adoption

Mandatory exceptions from retrospective application (no change in accounting policy)

Diaz Murillo Dalupan and Company

Accounting Framework and first-time adoption

Diaz Murillo Dalupan and Company

Accounting Framework and first-time adoption

General exemption from retrospective application

Diaz Murillo Dalupan and Company

Combined statement of income and retained earnings

Diaz Murillo Dalupan and Company

Income and Expenses

All borrowing costs are expensed.

Diaz Murillo Dalupan and Company

Income and Expenses

Actuarial Gains and Losses

Diaz Murillo Dalupan and Company

Income and Expenses

Past Service Costs

Recognized in FULL in profit or loss in the period in which they occur

Diaz Murillo Dalupan and Company

Financial Assets and Liabilities

Diaz Murillo Dalupan and Company

Financial Assets and Liabilities

Examples of basic and more complex financial instruments

Diaz Murillo Dalupan and Company

Financial Assets and Liabilities

Examples of basic and more complex financial instruments

Diaz Murillo Dalupan and Company

Financial Assets and Liabilities

Transaction price Initial measurement (including transaction

Diaz Murillo Dalupan and Company

Financial Assets and Liabilities

Diaz Murillo Dalupan and Company

Financial Assets and Liabilities

Assets measured at cost less impairment

Diaz Murillo Dalupan and Company

Inventory other cost

Borrowing cost is an expense.

Diaz Murillo Dalupan and Company