Chapter 18: SMEs - Definition

PFRS for SMEs Full PFRS

I. Assets (Definition) Same Same
II. Liabilities (Defn) Same Same
III. Equity
1. Issuance of Equity
Shares
Equity 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
Revenue
Revenue section covers all
revenue transactions within four
broad categories:
1. Sale of goods
2. Rendering of services
3. Use by others of entitys
resources (interest,
royalties, etc.)
4. Construction Contracts
Same, however includes a
separate standard for
construction Contracts
2. Government Grant
Measurement &
Recognition
According 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.
Measurement
1. Capital and Income
ApproachRecognition
2. Revenue recognized
when conditions are
met.
3. Revenue recognized
when grant is
receivable.
V. Expenses
1. Definition Same Same
2. Recognition Same Same
3. Borrowing Costs Expensed outright Costs directly attributable to
acquisition-capitalized
Other borrowing costs-
expensed
Chapter 19: SMEs - QUALITIES AND GENERAL FEATURES

I. QUALITATIVE CHARACTERISTICS

FULL PFRS

PFRS 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 STATEMENTS

FULL PFRS

PFRS 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 FEATURES
Full 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

Differences Full PFRS PFRS 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
operation
Same
-revaluation surplus during the
year
---
-unrealized gain or loss from
derivative contracts designated as
cash flow hedge
Same
-remeasurement of defined
benefit plan
Same
Presentation of single
statement of income and
retained earnings
Not Permitted If 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 Statements
PFRS for SMEs Full PFRS
1. Presentation in a systematic
manner
Mandated (as far as practicable) Mandated (as far as practicable)
2. Cross-reference between
each item in the financial
statements
Mandated Mandated
3. Disclosure of information
about key sources of
estimation uncertainty.
Mandated Mandated
4. Disclosure about judgment
apart from those involving
estimation.
Mandated Mandated
5. Structure same same
6. Order of presenting the
notes
same same
7. Segment Reporting Not required Required
8. Earnings per share Not required Required
9. Interim financial reporting Not required Not required*
10. Related and unrelated
parties classification
same same
11. Related party disclosure same same
12. Key management
personnel compensation
same same
13. Events after the end of
reporting period
same same
14. Date of authorization for
issue
same same

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


Chapter 23: SMEs-ACCOUNTING CHANGES

Full PFRS PFRS for SMEs
I. Selection of Accounting Policies
A. If there is an accounting
standard related to a
transaction, follow the
standard.
Applicable Applicable
(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 issues
Applicable Applicable
2. The definition, recognition
criteria and measurement of
assets, liabilities, income
and expenses

Applicable

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

Applicable

Not Applicable
II. Consistent application of
accounting policies
same same
III. Changes in accounting policies
shall be treated: Retrospectively
same same
prospectively, if it is impracticable
to apply the new accounting policy
retrospectively
same same
IV. Changes in accounting
estimates shall be treated
prospectively
same same
V. Correction of prior period
errors shall be treated
retrospectively
same same



Chapter 24 SMEs INVENTORIES AND REVENUE
INVENTORIES
Full PFRS PFRS for SMEs
Definition same same
Measurement Lower of cost and net realizable
value
Lower of cost and estimated
selling price less cost to complete
and sell
Costs of purchase same same
Costs of conversion same same
Other costs same same
Cost formulas same same
Impairment The 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.

REVENUE
PFRS 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 PFRS PFRS for SMEs
I. Financial Instrument
a. Definition same same
1. Financial Assets same same
2. Financial Liabilities same same
3. Equity Instruments Under the scope of the
standard
Outside the scope of the
standard
b. Categorization No distinction as to basic
financial instruments and
financial instruments not
qualifying as basic financial
instrument
Distinguishes basic financial
instruments and financial
instruments not qualifying as
basic financial instruments
c. Examples Financial Instruments
includes:
a. Cash or currency and
cash in bank
b. Receivables
(accounts, notes,
loans, and bonds)
c. Investments in equity
instruments issued by
other entities
d. Payables (accounts,
notes, loans, and
bonds)
e. Preference shares
with mandatory
redemption date
f. Ordinary and
preference share
capital
g. Warrants or options

Basic financial instruments
includes:
a. Cash
b. Demand and fixed term
deposits
c. Trade accounts and
notes receivable
d. Loans receivable
e. Commercial papers or
commercial bills
f. Investments in
nonputtable ordinary
shares
g. Investments in
nonconvertible and
nonputtable preference
shares
h. Commitment to receive
a loan if the
commitment cannot be
net settled in cash
i. Accounts payable
j. Loans from banks and
other third parties
k. Bonds and similar debt
instrument
l. Loans to or from
subsidiaries or
associates that are due
on demand
d. Initial Measurement
1. Transaction price (cost
less impairment)
same same
2. FV through P/L same same
3. Amortized Cost same same
e. Subsequent Measurement
1. Transaction Price (cost
less impairment)
same same
2. FV through P/L same same
3. Amortized Cost same same
f. Impairment of Asset
1. Measured at amortized
cost
same same
2. Measured at cost less
impairment
The difference between the
carrying amount of asset and
present value of estimated
future cash flows discounted
at market rate of interest for
similar asset
The 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 impairment same same






Chapter 26 SMEs ASSOCIATE


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

Chapter 27: SMEs - Investment Property
PFRS for SMEs Full PFRS
Definition same same

Significant
Influence

It 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
information
The 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 recognition
An investor may account for all of its
investments in associate using any one of
the following:
a) Cost Model
b) Equity Method
c) Fair Value Model
Only equity method is used to
account for an investments in
associate. Some exceptions: When
the investments is classified as held
for sale.
PFRS for SMEs Full PFRS
Definition Same Same
Initial Measurement
Purchase Price
Directly Attributable
Costs
Borrowing Costs


Same
Same

Recognized as expense

Same
Same

Required to be
Capitalized
Subsequent
Measurement
Investment 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 value Same Same
Cost Model Treatment of PPE
following PFRS for
SMEs Section 17.
Treatment of PPE
following AIS16
Transfers Same Same











FULL PFRS PFRS for SMEs

PROPERTY, PLANT AND EQUIPMENT
1. Definition of PPE -same- -same-
2. Initial and subsequent
measurement
Either cost model or
revaluation model
Cost model only
3. Noncurrent asset held for
sale
Measured at the lower of
carrying amount and fair
value less cost to sell
Presented separately and no
longer depreciated
Does 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 grant
Recognize when there is
reasonable assurance that
the entity will comply with
specific conditions
Recognize 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 asset
Grant related to asset may be
treated either as deferred
income or a reduction in the
carrying amount of the asset
Grant is a deferred income
until the conditions are actually
satisfied
BORROWING COST
1. Recognition of borrowing
cost
Capitalized 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 incurred
Expensed 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 EQUIPMENT
Government Grant and Borrowing Cost


CHAPTER 30: SMEs-IMPAIRMENT OF ASSETS
PFRS for SMEs Full PFRS
Scope
Assets 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
-same- -same-
use
Cash Generating
Unit (CGU)
-same -same-
Allocation of
goodwill

Goodwill 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
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 indicators is
assessed at each reporting date
The 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 Tax
Section 29- Income Tax
Principles PFRS for SMEs FULL 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 allowance
5.2 Deferred Tax Liability
-presentation (noncurrent liability)
-recognition:
taxable temporary difference
exception:
1. initial recognition of Goodwill
resulting from a business
combination
2. initial recognition of assets and
liabilities in a transaction that is
not a business combination and
affects neither accounting nor
taxable income
3. undistributed profit/ unremitted
earnings from foreign




















x





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

















*











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 options
PFRS for SMEs
- must be measured at fair value on the date of grant
- the intrinsic value of share options is not mentioned as an alternative
FULL 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