Professional Documents
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MW 1:30-
b. Comparability
c. Verifiability
d. Timeliness
SMEs- Statement of Financial Position
The components of financial statements of an SME are similar to those
provided by full PFRS.
However, a single statement of income and retained earnings is not
permitted under full PFRS. A statement of changes in equity is always
required.
In addition, under full PFRS, the third statement of financial position as at
the beginning of earliest comparative period shall be prepared:
a. When an entity applies an accounting policy retrospectively.
b. When an entity makes a retrospective restatement.
c. When an entity reclassifies items in its financial statements.
The third statement of financial position is not required under PFRS for
SMEs.
Full PFRS and PFRS for SMEs require practically the same line items to be
presented on the face of the statement of financial position.
However, the following items are required to be presented under full PFRS
but not under PFRS for SMEs:
a. Total of assets classified as held for sale.
b. Total of liabilities included in disposal group classified as held for
sale.
Moreover, full PFRS requires presentation of investments in associates but
not investment in joint ventures.
PFRS for SMEs requires presentation of both investments in associates and
investments in joint ventures.
Full PFRS and PFRS for SMEs have the same provision on the current and
noncurrent separate presentation, and the definition of current assets,
noncurrent assets, current liabilities and noncurrent liabilities.
SMEs- Comprehensive Income Cash Flows
Under full PFRS, the components of other comprehensive income include
the following:
1. Gain or loss from translation of the financial statements of a foreign
operation.
2. Remeasurements, including actuarial gain or loss on projected
benefit obligation
Both the PFRS for SMEs and full PFRS have the same definitions of a
financial instrument, financial asset and financial liability.
SMEs- Associate
The significant difference between the PFRS for SMEs and full PFRS lies in
the measurement of the investment in associate.
Under PFRS for SMEs, all investments in associates are accounted for
using any one of the cost model, equity method or the fair value model.
In other words, only one accounting policy or one model shall be applied
in accounting for all investments in associate.
Under full PFRS, the investor has no accounting policy choice. The
investments in associates shall be accounted for using the equity method
only.
Moreover, 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 transactions.
SMEs- Investment Property
Under PFRS for SMEs, investment property is measured at fair value if the
fair value can be measured reliably without undue cost or effort on an
ongoing basis.
Otherwise, the investment property is accounted for as property, plant
and equipment using the cost-depreciation-impairment model.
Full PFRS allows accounting policy choice of either fair value model or cost
model.
If the entity follows the cost model, the fair value of the property must be
disclosed.
However, when an investment property is held by a lessee under an
operating lease, the entity must follows the fair value model for all of the
investment properties.
SMEs- Property, Plant and Equipment
Full PFRS provides that an entity shall choose the cost model or
revaluation model as an accounting policy and shall apply that policy to
an entire class of property, plant and equipment.
Under PFRS for SMEs, property, plant and equipment shall be measured
using the cost model only.
The PFRS for SMEs and full PFRS are the same with respect to other
matters related to property, plant and equipment, such as depreciation
Under full PFRS, the useful life of an intangible asset is either finite
or infinite.
If the useful life cannot be estimated reliably, there is no assumption
of 10 years.
4.) Under PFRS for SMEs, all intangible assets, including goodwill, are
amortized.
Under full PFRS, intangible assets with a finite useful life are
amortized over the useful life and intangible assets with intangible
assets with indefinite assets with indefinite useful life are not
amortized but tested for impairment.
5.) Under PFRS for SMEs, intangible assets are tested for impairment
when there is an indication that the asset may be impaired.
Under full PFRS, intangible assets with a finite useful life are tested
for impairment when there is an indication that the asset may be
impaired.
Intangible assets with indefinite useful life are tested for impairment
annually and whenever there is an indication that the asset may be
impaired.
SMEs- Impairment of Assets
Full PFRS and PFRS for SMEs are practically the same with respect to the
following:
a. Recognition and measurement of impairment loss
b. Definition of fair value less cost of disposal value in use
c. Internal and external indicators of impairment
d. Reversal of impairment
The notable difference is as follows:
Under PFRS for SMEs, assets, including goodwill, are tested for impairment
when there is an indication that the asset may be impaired.
Under full PFRS, assets with a finite useful life are tested for impairment
when there is an indication that the asset may be impaired.
However, the following assets are tested for impairment annually and
when there is an indication that the asset may be impaired:
a.)
Goodwill
b.)
Intangible assets with an indefinite useful life on an intangible
asset not yet available for use.
SMEs- Provisions and Contingencies
There are no significant differences between PFRS for SMEs and full PFRS
with respect to provisions and contingencies.
The PFRS for SMEs and full PFRS share the same principles for accounting
and reporting provision and for disclosing contingent liabilities and
contingent assets.
SMEs- Leases
PFRS for SMEs and full PFRS are practically the same with respect to the
accounting and reporting the leases.
The PFRS for SMEs applies to all leases, except the following:
a.) Leases in the exploration industry
b.) Licensing agreement for such items as motion picture films, video
recording, plays, manuscripts, patents and copyrights
c.) Investment property
d.) Biological assets
e.) Leases that could result in a loss to either party as a result of
contractual terms that are unrelated to changes in the price of
leased assets, changes in foreign changes rate or a default by one
of the counterparties
f.) Onerous operating leases
SMEs-Employee Benefits
Full PFRS and PFRS for SMEs share the same principles for the recognition
and measurement of the following:
a.) Short-term employee benefits
b.) Defined contribution plans
c.) Other long-term employee benefits
d.) Termination benefits
Full PFRS and PFRS for SMEs also share many of the principles for the
recognition and measurement of defined benefit plans.
1.) Under both full PFRS and PFRS for SMEs, all past service costs are
now registered as expense immediately regardless of vesting.
2.) Under full PFRS, all remesurements of defined benefit plans,
including actuarial gain and loss are recognized through other
comprehensive income.
However, amounts recognized in other comprehensive income are
not subsequently recycled to profit or loss but may be transferred
within equity or retained earnings.
Under PFRS for SMEs, actuarial gain and loss are: