ACYATAN & CO.

CPAS
GUIDELINES FOR PFRS For Small Entities

1 Adoption of PFRS for Ses

Basis of Preparation of Financial Statements

The financial statements as at and for the year ended December 31, 2019 of the Company has been prepared in accordance
First Time Adoption with the Philippines Financial Reporting Standard for Small Entities (PFRS for SEs) as approved by the Financial Reporting
Standards Council, Board of Accountancy, and Securities and Exchange Commission (SEC) which was effective starting
January 1, 2019. The Company financial statements have been prepared on a historical basis.

* With diclosure on Transition to the PFRS for SEs, See Below Example in No.18

Basis of Preparation of Financial Statements

The financial statements as at and for the year ended December 31, 2019 of the Company has been prepared in accordance
Early Adoption with the Philippine Financial Reporting Standard for Small Entities (the “Framework”) as approved by the Financial
Reporting Standards Council, Board of Accountancy, and Securities and Exchange Commission (SEC). The Company adopted
the PFRS for SEs on January 1, 2018, earlier than its mandatory effective date of January 1, 2019, as allowed by the standard
itself and the existing SEC rules and regulations.

* Without the diclosure on Transition to the PFRS for SEs

2 Cash and Cash Equivalents Cash - Use when composition are Petty Cash, Cash on Hand and Cash in Bank
Cash & Cash Equivalents - use when there is moneymarket (3months or below term) included

3 Receivables Accounts Receivable or Trade Receivables - use when purely receivable from customers
Accounts and Other Receivable or Trade and Other Receivables - use when the compositions are receivables from
customers, receivables from employees, etc.

4 Inventory Merchandise Inventory - use when the Company's business industry is trading (supermarket, grocery, etc.)
Inventory - use when the Company's business industry is Manufacturing, or Trading & Manufacturing, or the composition
includes Office supplies inventory

5 Prepayments Prepaid Expenses - use when pertaining only to advance payment of expenses (insurance, rent, etc.
Prepaid Income Tax - use when it pertains only to creditable income tax/overpayment of tax
Prepayments - used when the compositions are prepaid expenses and prepaid (income) taxes

6 Property and Equipment Use "Property, Plant and Equipment" if there is a plant (normally used in manufacturing company) if not " Property and
Equipment" only
Disclose current year (2019) movements of Property and Equipment only no need for the previous year (2018)
Itemize the useful lives of Property and Equipment on the Significant Policy if there are 2 or more classification of P&E
Make sure the account name used in the significant policy is the same in the PPE notes.

7 Other Current Asset & Other Noncurrent Assets Use Other Current Asset/Other Noncurrent Assets if there are two or more composition if not use the account name of the
amount referring to. (e.g. Security Deposit)

8 Payables Trade Payables - used when engaged in Trading Business.

Accounts Payable - use when the composition are payable to supplier of goods and services (e.g. accounting fee, audit fee,
etc.)
Accounts Payable and Accrued Expenses - use when the compsoition are accounts payable and accrual of expenses
Accrued Expenses - use when the composition is purely accrual of expenses.

Accounts Payable and Other Payables - use when the comp0osition are accounts payable, taxes payable (except income tax
payable should be separate line item) and government regulatory payable (e.g. sss, philhealth, HDMF contribution/loan etc.)

9 Related Party Transactions Due from/to related party/ies (afficiates, officers, stockholders) should be presented as separate line item in the statements of
financial position

10 Equity PLEASE check with the client if there were increase in ACS, increase in subscription, dividend. It is UNFORGIVABLE if our
Firm processed the SEC requirement of the client and yet the changes were not reflected in the related account.
Capital Stock or Share Capital, any will do just make sure consistent in using the account name
APIC of Share Premium, any will do just make sure consistent in using the account name (If Share Capital was used, use
Share Premium)
Double Check the number of stockholders with the latest (2019 or 2020) GIS

11 Retained Earnings Check if Excess Retained Earnings.

Disclose appropriations if any with detailed plan.

12 Sales/Revenue/Income You may use "Rental Income" if purely earned from leased-out of properties

Use single statement of "Statements of income and Retained Earnings", if the only changes to equity in the current period or
13 Statements of Income and Retained Earnings any comparative period presented in the financial statements arise from profit or loss, payment of dividends, corrections of
prior period errors, and changes in accounting policy

14 Income Tax Use Tax Payable method

Disclose the NOLCO in the Notes to FS but don't recognized the DTA.
Make sure to include the NOLCO in the AITR
Double check the computation of Income Tax specially for Sole Proprietorship
 Please observe the new recognition and measurement of lease.

15 Leases Recognition of Rental Income - A lessor shall recognize all lease receipts as income in profit or loss in the period in which
they are earned.
Recognition of Rental Expense - A lessee shall recognize all lease payments as expense in profit or loss in the period in which
they are incurred.

Please observe proper presentation.

15 Statements of Cash Flows the amount should be " Net Income before Tax" not " Net Income for the year/ Net Income after Tax"
the amount should be "Income tax Paid" not "Income tax Payable"

16 Statements of Changes in Equity Do not show the Authorized Capital Stock, Par Value, Number of Shares.
This should just be disclosed in the Notes to FS.

Please avoid unnecessary disclosures. Do not include an accounting policy when there is no such account in the FS.
17 Excessive Disclosures
Exception: Retirement Benefits , Related Party Transactions and Relationships and Provisions and Contingencies.

Transition to the PFRS for Small Entities (SEs)

Transition Diclosure if no Reconciling item, however, if have The Company’s date of transition to the PFRS for SEs is at January 1, 2019. The Company prepared its opening PFRS for SEs
reconciling items, diclose the effects in the Notes, before Statement of Financial Position at that date.
18 Supplementary Information RR-15-2010.
The Company’s transition from PFRS for SMEs to PFRS for SEs did not have any significant effect on the Company’s Equity at
January 1, 2018 and December 31, 2018, and on the Net Income/(Loss) for the year ended December 31, 2018, hence, no
reconciliation is presented.