WEDNESDAY

PFRS 2
1. TRUE of FALSE. The Corporation Code of the Philippines allows corporations to issue share
in exchange of promissory notes and future services.
Answer: FALSE. The Services should be rendered first before the issuance of
shares accdg. to the code.
2. On February 1, 20x1, Gulaman Company offered its employees share options subject to the
offer being ratified in the shareholders’ general meeting. The share options offer was approved in
the shareholders’ general meeting held on March 1, 20x1. the company issued share options on
April 1, 20x1. The fair value of the share options vary between these dates. For purposes of PFRS
2, the share options should be valued at the fair value determined on
a. February 1, 20x1
b. March 1, 20x1
c. April 1, 20x1
d. any of these
ANSWER: B
3. On January 1, 20x4, XYZ Company has granted 600 share options to each of its 100 employees
conditional upon the employees must remain on the company’s employ. The options vest in three
years’ time. Each share option has a fair value of Php100 on grant date. Information in employee
departure is as follows:
Jan. 1, 20x4 - estimate of employee departure is 4%

Dec. 31, 20x4 - revision of estimate of employee departure is 5%
Dec. 31, 20x5 - revision of estimate of employee departure is 6%
Dec. 31, 20x6 - actual employee departure is 5%
How much is the total salaries expense?

Computation:
(600 shares x 100 employees) x 95% x Php100 = Php 5,700,000
4. Arigathanks Company agrees to compensate its employees through issuance of equity shares.
The company will issue 1,000 shares to its key employees in exchange to their services. The fair
value of the shares is Php20 and its subscription price is Php10. What is the recognized salaries
expense at the end of the period?
Answer: 1,000 shares x Php20 = Php20,000
5. If the amount stated from the previous question cannot be determined, how salaries expense are
going to be measured? Compute.
Answer: Intrinsic value will be used.

(Php20 - Php10) x 1,000 = Php 10,000
6. What is the difference between share option plans and share appreciation rights?
Answer: Share option plans are equity-settled share-based payment

transaction while share appreciation rights are cash-settled share-based payment
transaction.
PFRS 3
1. Define business combinations.
- A business combination occurs when one company acquires another or when two or
more companies merge into one. After the combination, one company gains control over the
other.
2. What are the requirement when accounting business combinations using the acquisition method?
- Identifying the acquirer

- Determining the acquisition date
- Recognizing and measuring the identifiable assets acquired, liabilities assumed and
any non-controlling interest in the acquiree
-Recognizing and measuring goodwill or a gain from a bargain purchase
For questions 3-5:
3. Compute for the Fair Value of Identifiable Net Assets Acquired
3,950,000 - 1,000,000 = 2,950,000

4. Compute for the NCI's Proportionate Share in Identifiable Net Assets
2,950,000 x 25% = 737,500

5. Compute for the Goodwill / (Gain on a Bargain Purchase)
2,500,000 + 737,500 = 3,237,500 - 2,950,000 = 287,500

PFRS 5
1. What is a disposal group?
A group of assets to be disposed of in a SINGLE TRANSACTION and liabilities

directly associated with those assets that will be transferred in the transaction.
2. Give the two main conditions for classification as held for sale.
The asset or disposal group is available for immediately sale in its present
condition and The sale must be highly probable.
3. TRUE OR FALSE. Abandoned non-current assets are classified as held for sale.
FALSE. (Isa sa mga condition for classification as held for sale is ‘Management must
be committed to a plan to sell the asset or disposal group.’ Pero dahil in-abandon yung NCA
na ‘yon, ibigsabihin, hindi na nameet yung condition na ‘yan.
4. TRUE OR FALSE. Non-current asset held for sale should be presented as non-current asset
in the statement of financial position.
FALSE. Non-current assets should be presented as current asset. And there should
be no depreciation to be recognized once a non-current asset is reclassified as NCAHFS.
5. According to PFRS 5, define discontinued operations.
A component of an entity that either has been disposed of or is classified as held for
sale, AND
Represents a major line of business or geographical area of operations.
Is part of a single coordinated plan to dispose of a separate major line of

business or geographical area of operations; or
Is a subsidiary acquired exclusively with a view to resale.
6. Give one scenario to classify a component as discontinued operation.
When the entity has ACTUALLY DISPOSED the operation.

When the operation MEETS THE CRITERIA to be held as held for sale.
PFRS 6
1. It is the search for mineral resources, including minerals, oil, natural gas and similar non-
regenerative resources AFTER the entity has obtained legal rights to explore in a specific
area.
 Exploration for and evaluation of mineral resources
2. It is the expenditures incurred in connection with the exploration and evaluation of mineral
resources BEFORE the technical feasibility and commercial viability of extracting a
mineral resource is demonstrable.
 Exploration and evaluation expenditures
3. When is PFRS 6 applicable?

 After legal rights are obtained but before technical feasibility and commercial
viability are demonstrable
4. Give at least three examples of expenditures

 Acquisition of rights to explore
 Topographical, geological, geochemical and geophysical studies
 Exploratory drilling
 Trenching
 Sampling
 Activities in relation to evaluating the technical feasibility and commercial
viability of extracting a mineral resource
5. Give one indication for impairment under PFRS 6

 the right to explore has expired or will expire in the near future and is not
expected to be renewed
 expenditures for further exploration and evaluation activities are significantly
higher than expected
 exploration and evaluation activities in specific area have to be discontinued
because no mineral resources have been discovered
 the carrying amount of the exploration and evaluation asset is unlikely to be
fully recovered
PFRS 7
Financial Instruments: Disclosure
(Answers given can be paraphrased at the student’s discretion, provided that the modified
answers are still in lined with the original ones.)
1. PFRS 7 outlines the required information to be disclosed when presenting financial
instruments. What are the two major categories that classify the information required by
the PFRS 7?
ANSWER: Information about the significance of financial instruments to an entity’s

financial position and performance; and information regarding the nature and extent of
risks originating from those financial instruments, both in qualitative and quantitative
terms, and how the entity manages those risks.
2. Entities can designate their financial assets to be measured at fair value through profit
and loss. If so, what are the necessary disclosures required by the PFRS 7 under this kind of
circumstance?
ANSWER: If entities decided to measure their financial assets at FVPL, they shall
state the exposure of the financial assets to credit risk, and what are the changes in fair value
that can be attributed to the changes in credit risk.
3. Other disclosures under significance of financial instruments shall contain the

accounting policies for financial instruments, hedge accounting, and the presentation of fair value.
What are the two necessary points that shall reflect upon the fair value presentation under other
disclosures?
ANSWER: There should be a disclosure of each class of financial asset and financial
liability which is required to be in a way that comparison between their fair values and
carrying amounts can be made. Also, disclosure of fair value is NOT required when the
carrying amount comes close to the value of fair value
4. Under PFRS 7, credit risks and liquidity risks are said to be the opposite of each other.
Provide a brief explanation that proves the legibility of the statement.
ANSWER: Credit risk is a risk wherein an entity will suffer a financial loss due to
counterparty failing to pay its obligations whereas liquidity risk pertains to the risk that
an entity will not meet their obligations from financial liabilities to be settled with cash or
another financial asset.
5. PFRS 7 prescribes entities to provide both quantitative and qualitative disclosures for
each type of risk discussed. Differentiate the qualitative and quantitative disclosures by
giving examples of what is described in each context.
ANSWER:
Qualitative - describes how the entity is exposed to the risks, how the risks arose and
how the entity manages those risks. It also includes policies, objectives, and processes
in managing the risks.
Quantitative - provides a summary of quantitative data about the exposures to the
risk and disclosures about the concentration of the risks present.
6. Market risk has three components, based on what causes the change in future cash flows
or fair value. Enumerate those three and provide a concise explanation for each.
ANSWER:
- Currency risk - the risk where foreign exchange rate changes cause the fluctuations
in cash flows or fair values;
- Interest rate risk - fluctuations are caused by the changes in interest rates;
- Other price risk - fluctuations are caused by the changes in other market prices,
such as commodity prices, equity prices, etc.

WEDNESDAY

Uploaded by

Copyright:

Available Formats

WEDNESDAY

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

WEDNESDAY

Uploaded by

Copyright:

Available Formats

PFRS 2

Jan. 1, 20x4 - estimate of employee departure is 4%

How much is the total salaries expense?

Answer: 1,000 shares x Php20 = Php20,000

Answer: Intrinsic value will be used.

Answer: Share option plans are equity-settled share-based payment

- Identifying the acquirer

3. Compute for the Fair Value of Identifiable Net Assets Acquired

3,950,000 - 1,000,000 = 2,950,000

2,950,000 x 25% = 737,500

2,500,000 + 737,500 = 3,237,500 - 2,950,000 = 287,500

A group of assets to be disposed of in a SINGLE TRANSACTION and liabilities

5. According to PFRS 5, define discontinued operations.

Is part of a single coordinated plan to dispose of a separate major line of

6. Give one scenario to classify a component as discontinued operation.

When the entity has ACTUALLY DISPOSED the operation.

3. When is PFRS 6 applicable?

4. Give at least three examples of expenditures

5. Give one indication for impairment under PFRS 6

ANSWER: Information about the significance of financial instruments to an entity’s

3. Other disclosures under significance of financial instruments shall contain the

You might also like