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Presentation of Financial Statements (PAS 1)

Objective
The objective of PAS 1 is to prescribe the basis for presentation of general purpose financial
statements, to ensure comparability both with the entity's financial statements of previous
periods and with the financial statements of other entities. PAS 1 sets out the overall framework
and responsibilities for the presentation of financial statements, guidelines for their structure and
minimum requirements for the content of the financial statements. Standards for recognizing,
measuring, and disclosing specific transactions are addressed in other Standards and
Interpretations.
Scope
Applies to all general purpose financial statements, that are based on Philippine Financial
Reporting Standards. General purpose financial statements are those intended to serve users who
do not have the authority to demand financial reports tailored for their own needs.
Purpose of Financial Statements
The objective of general purpose financial statements is to provide information about the financial
position, financial performance, and cash flows of an entity that is useful to a wide range of users in
making economic decisions. To meet that objective, financial statements provide information about
an entity's:
Assets.
Liabilities.
Equity.
Income and expenses, including gains and losses.
Other changes in equity.
Cash flows.
That information, along with other information in the notes, assists users of financial statements in
predicting the entity's future cash flows and, in particular, their timing and certainty.
Components of Financial Statements
A complete set of financial statements comprises:
(a) A statement of financial position as at the end of the period;
(b) A statement of comprehensive income for the period;
(c) A statement of changes in equity for the period;
(d) A statement of cash flows for the period;
(e) Notes, comprising a summary of significant accounting policies and other explanatory
information; and
(f) A statement of financial position as at the beginning of the earliest comparative period when
an entity applies an accounting policy retrospectively or makes a retrospective restatement
of items in its financial statements, or when it reclassifies items in its financial statements.
Overall Considerations for Statement Presentation
Fair Presentation and Compliance with PFRSs
The financial statements must "present fairly" the financial position, financial performance and cash
flows of an entity. Fair presentation requires the faithful representation of the effects of
transactions, other events, and conditions in accordance with the definitions and recognition
criteria for assets, liabilities, income and expenses set out in the Framework. The application of
PFRSs, with additional disclosure when necessary, is presumed to result in financial statements
that achieve a fair presentation.
PAS 1 requires that an entity whose financial statements comply with PFRSs make an explicit
and unreserved statement of such compliance in the notes. Financial statements shall not be
described as complying with PFRSs unless they comply with all the requirements of PFRSs.

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Inappropriate accounting policies are not rectified either by disclosure of the accounting policies
used or by notes or explanatory material.
PAS 1 acknowledges that, in extremely rare circumstances, management may conclude that
compliance with an PFRS requirement would be so misleading that it would conflict with the
objective of financial statements set out in the Framework. In such a case, the entity is required to
depart from the PFRS requirement, with detailed disclosure of the nature, reasons, and impact of
the departure.
Going Concern
An entity preparing PFRS financial statements is presumed to be a going concern. If management
has significant concerns about the entity's ability to continue as a going concern, the uncertainties
must be disclosed. If management concludes that the entity is not a going concern, the financial
statements should not be prepared on a going concern basis, in which case PAS 1 requires a
series of disclosures.
Accrual Basis of Accounting
PAS 1 requires that an entity prepare its financial statements, except for cash flow information,
using the accrual basis of accounting.
Consistency of Presentation
The presentation and classification of items in the financial statements shall be retained from one
period to the next unless a change is justified either by a change in circumstances or a
requirement of a new PFRS.
Materiality and Aggregation
Each material class of similar items must be presented separately in the financial statements.
Dissimilar items may be aggregated only if the are individually immaterial.
Offsetting
Assets and liabilities, and income and expenses, may not be offset unless required or permitted
by a Standard or an Interpretation.
Comparative Information
PAS 1 requires that comparative information shall be disclosed in respect of the previous period for
all amounts reported in the financial statements, both face of financial statements and notes,
unless another Standard requires otherwise. If comparative amounts are changed or reclassified,
various disclosures are required.
Frequency of Reporting
There is a presumption that financial statements will be prepared at least annually. If the annual
reporting period changes and financial statements are prepared for a different period, the
enterprise must disclose the reason for the change and a warning about problems of comparability.
Balance Sheet
Current/Noncurrent Distinction
An entity must normally present a classified balance sheet, separating current and noncurrent
assets and liabilities. Only if a presentation based on liquidity provides information that is reliable
and more relevant may the current/noncurrent split be omitted.

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Current assets
An entity shall classify an asset as current when:
(a) It expects to realize the asset, or intends to sell or consume it, in its normal operating
cycle;
(b) It holds the asset primarily for the purpose of trading;
(c) It expects to realize the asset within twelve months after the reporting period; or
(d) The asset is cash or a cash equivalent (as defined in IAS 7) unless the asset is
restricted from being exchanged or used to settle a liability for at least twelve months
after the reporting period.
An entity shall classify all other assets as non-current.
Normal Operating Cycle The time between the acquisition of assets for processing and their
realization cash or cash equivalents. When the entitys normal operating cycle is not clearly
identifiable, its duration is assumed to be twelve months.
Current liabilities
An entity shall classify a liability as current when:
(a)
(b)
(c)
(d)

It expects to settle the liability in its normal operating cycle;

It holds the liability primarily for the purpose of trading;
The liability is due to be settled within twelve months after the reporting period; or
The entity does not have an unconditional right to defer settlement of the liability for at
least twelve months after the reporting period.

An entity shall classify all other liabilities as non-current.

Issues on Refinancing

An entity classifies its financial liabilities as current when they are due to be settled within
twelve months after the balance sheet date, even if:
a. The original term was for a period longer than twelve months; and

b. The intention is supported by an agreement to refinance, or reschedule the payments, on

a long-term basis is completed after the balance sheet date and completed before the
financial statements are authorized for issue.

If the entity has the discretion and has the discretion to refinance, or to roll over the
obligation for at least twelve months after the balance sheet date under an existing loan
facility, it classifies the obligation as non-current, even if it would be due with in a shorter
period.

Breach of a Loan Covenant

If a liability has become payable on demand because an entity has breached an
undertaking under a long-term loan agreement on or before the balance sheet date, the
liability is current, even if the lender has agreed, after the balance sheet date and
before the authorization of the financial statements for issue, not to demand payment as
a consequence of the breach. However, the liability is classified as non-current if the
lender agreed by the balance sheet date to provide a period of grace ending at least 12
months after the balance sheet date, within which the entity can rectify the breach and during
which the lender cannot demand immediate repayment.
Statement of comprehensive income
An entity shall present all items of income and expense recognized in aperiod:
(a) In a single statement of comprehensive income, or

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(b) In two statements: a statement displaying components of profit or loss (separate income
statement) and a second statement beginning with profit or loss and displaying components
of other comprehensive income (statement of comprehensive income).
Information to be presented in the statement of comprehensive income
As a minimum, the statement of comprehensive income shall include line items that present the
following amounts for the period:
(a) Revenue;
(b) Finance costs;
(c) Share of the profit or loss of associates and joint ventures accounted for using the equity
method;
(d) Tax expense;
(e) A single amount comprising the total of:
(i) The post-tax profit or loss of discontinued operations and
(ii) The post-tax gain or loss recognised on the measurement to fair value less costs to sell
or on the disposal of the assets or disposal group(s) constituting the discontinued
operation;
(f) Profit or loss;
(g) Each component of other comprehensive income classified by nature
(h) Share of the other comprehensive income of associates and joint ventures accounted for
using the equity method; and
(i) Total comprehensive income.
An entity shall disclose the following items in the statement of comprehensive income
as allocations of profit or loss for the period:
(a) Profit or loss for the period attributable to:
(i) Minority interest, and
(ii) Owners of the parent.
(b) Total comprehensive income for the period attributable to:
(i) Minority interest, and
(ii) Owners of the parent.

An entity shall present either an analysis of expenses using a classification based

on either the nature of expenses of their function with in the entity, whichever provides
information that is reliable and more relevant.
a. Nature of expense method Expenses are aggregated in the income statement
according to their nature and are not reallocated among various functions within the
entity.
Revenue
Other income
Changes in inventories of finished goods and work in
progress
Raw materials and consumables used
Employee benefit costs
Depreciation and amortization
Other expense
Total expense
Profit

X
X
X
X
X
X
X
(X)
X

b. Function of expense or cost of sales method Classifies expenses according to their

function as part of cost of sales or, for example, the cost of distribution or administrative
activities.
Revenue
Cost of sales
Gross profit
Other income
Distribution costs
Administrative expenses
Other expenses
Income before tax
Income tax expense
Net income

X
(X)
X
X
(X)
(X)
(X)
X
(X)
X

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An entity shall not present any items of income and expense as extraordinary items,
either on the face of the income statement or in the notes
Statement of changes in equity
An entity shall present a statement of changes in equity showing in the statement:
(a) Total comprehensive income for the period, showing separately the total amounts
attributable to owners of the parent and to minority interest;
(b) For each component of equity, the effects of retrospective application or retrospective
restatement recognized in accordance with IAS 8;
(c) The amounts of transactions with owners in their capacity as owners, showing separately
contributions by and distributions to owners; and
(d) For each component of equity, reconciliation between the carrying amount at the beginning
and the end of the period, separately disclosing each change.
An entity shall present, either in the statement of changes in equity or in the notes, the amount of
dividends recognized as distributions to owners during the period, and the related amount per
share.
Cash Flows Statement
Cash flow information provides users of financial statements with a basis to assess the ability of
the entity to generate cash and cash equivalents and the needs of the entity to utilize those cash
flows.
Notes to the Financial Statements
The notes must:
a.

Present information about the basis of preparation of the financial statements and
the specific accounting policies used;
b.
Disclose any information required by PFRSs that is not presented on the face of the
balance sheet, income statement, statement of changes in equity, or cash flow statement;
and
c.
Provide additional information that is not presented on the face of the balance sheet,
income statement, statement of changes in equity, or cash flow statement that is deemed
relevant to an understanding of any of them.
Notes should be cross-referenced from the face of the financial statements to the relevant note.
The notes should normally be presented in the following order:
a.
b.

A statement of compliance with PFRSs;

A summary of significant accounting policies applied, including:
a.
the measurement basis (or bases) used in preparing the financial statements; and
b.
the other accounting policies used that are relevant to an understanding of the
financial statements.
c.
Supporting information for items presented on the face of the balance sheet,
income statement, statement of changes in equity, and cash flow statement, in the order in
which each statement and each line item is presented; and
d.
a.
b.

Other disclosures, including:

Contingent liabilities and unrecognized contractual commitments; and
Non-financial disclosures, such as the entity's financial risk management
objectives and policies (see PAS 32).

Disclosure of judgments - an entity must disclose, in the summary of significant accounting

policies or other notes, the judgments, apart from those involving estimations, that management
has made in the process of applying the entity's accounting policies that have the most significant
effect on the amounts recognized in the financial statements.

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