Philippine Financial Reporting Standards (PFRS) - Updates, Application and Impact

Philippine Financial Reporting
Standards (PFRS) Updates,

Application and Impact
15 November 2013
A member firm of Ernst & Young Global Limited
Agenda
New pronouncements effective 31 December 2013

year-end
New pronouncements effective subsequent to

31 December 2013 year-end
PFRS Updates, Application and Impact

15 November 2013
Page 2
May 22, 2008
Page 1
Presentation title
New pronouncements effective for

31 December 2013 year-end
Amendment to Philippine Accounting Standards (PAS) 1, Presentation of Items

of Other Comprehensive Income (OCI)
Amendments to PFRS 1, Government Loans
Amendments to PFRS 7, Disclosures - Offsetting Financial Assets and Financial

Liabilities
PFRS 10, Consolidated Financial Statements; PAS 27, Separate Financial

Statements
PFRS 11, Joint Arrangements; PAS 28, Investments in Associates and Joint
Ventures
PFRS 12, Disclosure of Interests in Other Entities
PFRS 13, Fair Value Measurement
PAS 19, Employee Benefits (Amendments)
Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a

Surface Mine
Annual Improvements to PFRSs - 2009-2011 Cycle

15 November 2013
Page 3
Amendments to PAS 1, Presentation of Items of

Other Comprehensive Income (OCI)
What has changed?
Items in OCI to be grouped into:
What has not changed?
Items that will be reclassified to profit or loss (P&L) in future periods

Items that will never be reclassified to profit or loss
Nature of items that can be recognized in OCI

Determination as to which items in OCI can be reclassified to P&L
in future periods
Transition
Comparative period(s) should conform to changes in current

period

15 November 2013
Page 4
May 22, 2008
Page 2
Presentation title
Illustration
New presentation of items of OCI
20XA
xxx
20XB
xxx
xxx
xxx
xxx
xxx
xxx
(xxx)
xxx
xxx
Other comprehensive income for the year, net of tax
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
Total comprehensive income for the year
xxx
xxx
Profit for the year

Other comprehensive income:
Items that will not be reclassified to profit or loss:
Gains on property revaluation
Actuarial gains (losses) on defined benefit pension plan
Income tax relating to items that will not be reclassified
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations
Net gain on available-for-sale financial assets
Net movement on cash flow hedges
Income tax relating to items that may be reclassified

15 November 2013
Page 5
Impact
Enables easier identification of the potential impact that

OCI items may have on future P&L
As the amendments only affect presentation of items

already recognized in OCI, no significant implementation
costs are expected.

15 November 2013
Page 6
May 22, 2008
Page 3
Presentation title
Amendments to PFRS 1, Government loans
The amendments add an exception to the retrospective

application of PFRSs to require that first-time adopters apply
the requirements in PFRS 9, Financial Instruments1, and
PAS 20, Accounting for Government Grants and Disclosure of
Government Assistance, prospectively to government loans
existing at the date of transition to PFRS.
However, entities may choose to apply the requirements of

PFRS 9 and PAS 20 to government loans retrospectively if
the information needed to do so has been obtained at the
time of initially accounting for that loan.
Impact: These amendments give first-time adopters the same

relief as existing preparers of PFRS financial statements.
If PFRS 9 is not yet adopted, references to PFRS 9 in the amendments shall be read as references
to PAS 39.
15 November 2013
Page 7
PFRS 7, Disclosures (Amendments)

Offsetting financial assets and financial liabilities
New disclosure requirements
Gross
amounts
Amounts
offset in
accordance
with PAS 32
Net amounts
presented in
SFP
Amounts subject
to master netting
agreements that
do not result in
net presentation
Net amounts
C=A- B
E=C-D
Retrospective application
Impact:
Provides information useful in evaluating the effect of netting

arrangements on an entitys financial position
Retrospective application creates a need to gather related data
and information to make these disclosures
15 November 2013
Page 8
May 22, 2008
Page 4
Presentation title
New and revised standards on consolidation

and joint arrangements
PFRS 10
PFRS 11
Consolidated Financial
Joint Arrangements
Statements
PFRS 12
Disclosures of Interests
in Other Entities
PAS 27
Separate Financial
Statements (2011)
PAS 28
Investments in
Associates and Joint
Ventures (2011)

15 November 2013
Page 9
Interaction between PFRS 10, 11, 12 and

PAS 28
Control alone?
yes
no
Consolidation in accordance
with PFRS 10
Joint control?
Disclosures in accordance
with PFRS 12
yes
no
Define type of joint

arrangement in accordance with
PFRS 11
Joint operation
yes
Account for assets, liabilities,

revenues and expenses
Account for the investment in

accordance with PAS 28
Disclosures in accordance with

PFRS 12
Disclosures in accordance with

PFRS 12
15 November 2013
Page 10
May 22, 2008
Joint venture
Significant
influence?
Page 5
Presentation title
no
PFRS 9
or PAS 39
PFRS 10, Consolidated Financial Statements

PAS 27, Separate Financial Statements
PFRS 10 contains a single model for consolidation
New definition of control:

POWER
RETURNS
Current ability to
direct relevant
activities that affect
investees returns
Exposure or rights to
variable returns from
involvement in the
investee
LINKAGE
Ability to use power
to affect the amount
of investors returns
No bright lines consider all facts and circumstances
Continuous reassessment of control required
PAS 27 only deals with separate financial statements

15 November 2013
Page 11
Impact
Financial statement impact
New and broader definition of control may result in changes to a

consolidated group:
On transition to PFRS 10 and

In future reporting periods due to continuous reassessment
Business impact
Increased use of judgment

New (revisions to) processes and systems may be needed
Impact to key financial metrics
Compliance with bank covenants and regulatory requirements
Structuring transactions and arrangements

15 November 2013
Page 12
May 22, 2008
Page 6
Presentation title
Jointly controlled
entities
Recognize its assets, liabilities,

expenses, and its share of
income.

revenue, and expenses, and/or
its relative shares thereof.
Equity method or proportionate

consolidation
Joint operations
Joint ventures
The parties with joint control have

rights to the assets and obligations
for the liabilities of the arrangement.
The parties with joint control have

rights to the net assets of the
arrangement.

revenue, and expenses, and/or
its relative shares thereof
Equity method
Joint ventures
Jointly controlled
assets
Joint arrangements
Jointly controlled
operations
PFRS 11
PAS 31
PFRS 11, Joint Arrangements

PAS 28, Investments in Associates and Joint Ventures

15 November 2013
Page 13
Classification of a joint arrangement
Legal form of
the separate
vehicle
Does the legal form of the separate vehicle

give the parties rights to the assets, and
obligations for liabilities, relating to the
arrangement?
Yes
No
Contractual
terms of the
arrangement
Do the contractual terms of the arrangement

specify that the parties have rights to the
assets, and obligations for the liabilities,
relating to the arrangement?
Yes
No
Is the arrangement designed so that
Other facts and
circumstances
The parties have rights to substantially all

of the economic benefits of the JA?
The JA depends on the parties on a

continuous basis for settling the liabilities?
No
Joint venture
15 November 2013
Page 14
May 22, 2008
Page 7
Presentation title
Yes
Joint
operation
Impact
New classification may change accounting for arrangements

previously considered to be jointly controlled entities as they may
be potentially classified as joint operations
Significant change for entities currently applying proportionate
consolidation to account for jointly controlled entities
Business impact
New (revisions to) processes and systems may be needed
Impact to key financial metrics

15 November 2013
Page 15
PFRS 12, Disclosures of Interests in Other

Entities
Integrates disclosures for subsidiaries, joint arrangements,

associates and structured entities into a single standard
Disclosures should enable users to understand:
Nature of, and risks associated with, interests in other entities

Effects of those interests on financial position, financial
performance, and cash flows

15 November 2013
Page 16
May 22, 2008
Page 8
Presentation title
Main changes to disclosure requirements
Significant judgements and assumptions regarding

whether an entity has control, joint control or significant
influence
Summarized financial information for:
Subsidiaries that have NCI that is material

Joint ventures
Associates
Nature and risks related to structured entities
Consolidated and unconsolidated

15 November 2013
Page 17
Impact
Financial statement impact requires more extensive

disclosures
Practical issues:
How will you gather and summarize required information, both for
implementation, and on an ongoing basis?
Do you have a legal right to obtain information?
For joint ventures and associates, is it impracticable or would there
be undue cost to obtain PFRS financial statements?
At what level should information be aggregated (for immaterial joint
ventures and associates)?
Business impact
New (revision to) processes and systems may be needed

15 November 2013
Page 18
May 22, 2008
Page 9
Presentation title
Transition
PFRS 10,11 and 12
Beginning
comparative
Date of initial
application
First year
reporting
01 Jan 12
01 Jan 13
31 Dec 13
Retrospective adjustment only for the annual period immediately preceding

the date of initial application (may present adjusted comparative information
for any earlier comparative periods)
The disclosure requirements need not be applied for any period presented
that begins before the first annual period immediately preceding the first
annual period for which PFRS 12 is applied
The requirement to present comparative information for the disclosures

related to unconsolidated structured entities is removed
15 November 2013
Page 19
PFRS 13, Fair Value Measurement
Clarifies definition of fair value

Fair value: price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction
between market participants at the measurement date
(an exit price).
Single framework for how to measure fair value
Does not change when fair value is used
Applies to financial and non-financial assets and

liabilities
Applies to recurring and non-recurring measurements
Applied prospectively as of the beginning of the annual
period in which PFRS 13 is initially adopted
15 November 2013
Page 20
May 22, 2008
Page 10
Presentation title
Fair value measurement

What changed?
Clearly an exit price
Use principal market
Highest and best use for nonfinancial assets
Fair value of liabilities and equity instruments considered

from perspective of market participants who hold as
assets
More disclosures for nonfinancial assets

15 November 2013
Page 21
Impact
Consider whether entity has appropriate expertise,

processes, and systems
Significant increase in required disclosures for nonfinancial instruments that are measured at fair value
(e.g., investment property measured using fair value,
some biological assets)
If PFRS 13 will change amount recognized, consider:
Covenant compliance
Remuneration plans
Shareholder communications
Analyst expectations
15 November 2013
Page 22
May 22, 2008
Page 11
Presentation title
PAS 19 (Revised), Employee Benefits

Immediate
recognition
Corridor approach removed
Removing
expected
returns
New
distinction
New
disclosures
Recognize changes in value of pension assets and liabilties as

they occur
Actuarial gains and losses will be recognized in full in OCI
Post-employment benefits
Expected returns are no longer recognized in P&L

Interest expense (income) recognized on the net defined benefit
liability (asset) based on bond yields
Short-term vs long-term employee benefits
The distinction between long-term and short-term benefits will be

based on when an employee is expected to receive the benefit
rather than when the employee becomes entitled to it
Disclosure requirements
Improvement of disclosure requirements that will better show the

characteristics of defined benefit plans and the risks arising from
those plans
Disclosures on amount, timing and uncertainty of future cash flows
15 November 2013
Page 23
Impact
Significant impact on accounting, however little impact

on processes, data and information systems
Possible exceptions:
Entities affected by new requirements for distinguishing short-term

and long-term employee benefits
Requirements for additional disclosures (e.g., quantitative
sensitivity of the defined benefit obligation or DBO, separate impact
of demographic and financial assumptions)

15 November 2013
Page 24
May 22, 2008
Page 12
Presentation title
Philippine Interpretation IFRIC20, Stripping

Costs in the Production Phase of a Surface Mine
Requires capitalization of production stripping costs as part of an asset

if certain criteria are met
Classified as:
Inventory, if benefits realized in current period

Noncurrent asset (stripping activity asset), if the benefit is the improved
access to ore, recognized as addition to or enhancement of existing asset,
e.g., mine asset
Initially measured at cost plus directly attributable overhead
Subsequently measured using either:
Cost model
Or
Revaluation model
To be applied prospectively to production stripping costs incurred after

the earliest comparative period presented
15 November 2013
Page 25
Annual Improvements to PFRSs

2009-2011 Cycle

15 November 2013
Page 26
May 22, 2008
Page 13
Presentation title
PFRS 1, First-time Adoption of PFRS

Repeated application of PFRS
Effective for annual periods beginning on or after 1 January 2013
Key requirements
Clarifies
that an entity that has stopped

applying PFRSs may choose either of the
following in order to resume reporting under
PFRSs:
Re-apply PFRS 1, even if it had applied
PFRS 1 in a previous reporting period
Or
Apply PFRSs retrospectively (i.e., as if it
had never stopped applying PFRSs)
in order to resume reporting under PFRSs
Implication
Prior to this amendment, it was not

clear whether an entity was permitted
or required to apply PFRS 1 more
than once. This amendment clarifies
that an entity that stopped applying
PFRS in the past and chooses, or is
required, to apply PFRS again, has
the option to re-apply PFRS 1.
An
entity must disclose the reasons why it

previously stopped and subsequently
resumed reporting under PFRSs.

15 November 2013
Page 27
PFRS 1, First-time Adoption of PFRS

Borrowing costs
Key requirements
Clarifies
that, upon adoption of PFRS, an

entity that capitalized borrowing costs under
previous GAAP:
May carry forward, without adjustment,
the amount previously capitalized in the
opening statement of financial position
at the date of transition
Is required to apply PAS 23, Borrowing
Costs, to subsequent borrowing costs,
including those incurred on qualifying
assets under construction
Additional
of PFRS

15 November 2013
Page 28
May 22, 2008
Implication
Page 14
Presentation title
relief to first-time adopters
PAS 1, Presentation of Financial Statements

Clarification of the requirements for comparative information
Key requirements
the difference between voluntary
additional comparative information and the
minimum required comparative information
Implication
Clarifies
Voluntary
Third
This
balance sheet
need to present the supporting notes
related to the third balance sheet
No
additional comparative
information
Present related notes for those
additional statements
additional balance sheet

provides users of the financial
statements with a starting point to
understand the impact of the change.

15 November 2013
Page 29
PAS 16, Property, Plant and Equipment

Classification of servicing equipment
Key requirements
Spare
parts, stand-by equipment and

servicing equipment are recognized as
property, plant and equipment (PPE) when
they meet the definition of PPE.
This
will help ensure that entities

consistently record and present
these assets.

15 November 2013
Page 30
May 22, 2008
Implication
Page 15
Presentation title
New pronouncements effective subsequent

to 31 December 2013 year-end
New or amended standard
or interpretation
Applicable to annual
periods beginning on or
after
PAS 32, Offsetting Financial Assets

and Financial Liabilities
(Amendments)
1 January 2014
Investment Entities, Amendments to

PFRS 10, PFRS 12 and PAS 27
1 January 2014
PFRS 9, Financial Instruments

Classification and Measurement
1 January 2015

15 November 2013
Page 31
PAS 32, Offsetting Financial Assets and

Financial Liabilities (Amendments)
Key requirements
Clarifies
May change assets and

liabilities eligible for net
presentation
Clarifies
Changes in offsetting may

impact leverage ratios and
regulatory capital
requirements
the meaning of currently

has a legally enforceable right to setoff
the criteria for nonsimultaneous settlement mechanisms
of clearing houses (e.g., batch
processing) to qualify for offsetting
Transition
Early application permitted
15 November 2013
Page 32
May 22, 2008
Page 16
Presentation title
Investment Entities, Amendments to PFRS

10, PFRS 12 and PAS 27
Key requirements
Group structure
Non-investment
entity parent
Consolidates all entities it

controls, including those
controlled through an
investment entity
Investment entity
(defined term)
Accounts for investments at

fair value through P&L,
except for those that provide
services that relate only to the
investment entity
Investments in subsidiary,
joint venture and associate
Accounting
May
simplify the
accounting in the case of
funds and similar entities
that qualify as investment
entities
May have little or no effect
on banks, insurers and
other entities with noninvesting activities in
addition to investing
activities
Venture capital
organizations, mutual funds, unit

trusts, investment-linked insurance funds and similar
entities retain the option in PAS 28 to measure
investments in associates and joint ventures at fair
value through P&L
Transition:
Retrospective application, subject to certain transition relief; early application permitted, which must be disclosed
15 November 2013
Page 33
PFRS 9, Financial Instruments

Classification and Measurement
Key requirements
Requires
classification of financial assets

on the basis of:
The objective of entitys business model
for managing the financial assets and
The characteristics of contractual cash
flows
All
PAS 39 classification and measurement

requirements for financial liabilities, other
than for those designated at fair value
through P&L (using the fair value option),
carried forward

Changes
classification
and measurement of
financial assets
For
liabilities designated at
fair value through P&L, fair
value changes attributable
to changes in credit risk
are presented in OCI
instead of P&L
Transition
Specific transition requirements on adoption
Phased early application permitted i.e., early adoption of financial assets only or financial assets and
financial liabilities permitted
Phased adoption to be removed when the final standard is issued
15 November 2013
Page 34
May 22, 2008
Page 17
Presentation title
Thank you
A member firm of Ernst & Young Global Limited
These presentation materials are provided to

you for your exclusive use and may not be
sold in part or their entirety to any third party.
Further, these materials may not be shown,
shared or transferred to any other third party
without the express written consent of SGV &
Co. These materials should not be used or
duplicated in whole or in part for any other
purpose.
2013 SGV & Co. All rights reserved.

15 November 2013
Page 36
May 22, 2008
Page 18
Presentation title

Philippine Financial Reporting Standards (PFRS) - Updates, Application and Impact

Загружено:

Сведения о документе

Оригинальное название

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Philippine Financial Reporting Standards (PFRS) - Updates, Application and Impact

Загружено:

Авторское право:

Доступные форматы

Philippine Financial Reporting

Standards (PFRS) Updates,

A member firm of Ernst & Young Global Limited

New pronouncements effective 31 December 2013

New pronouncements effective subsequent to

PFRS Updates, Application and Impact

May 22, 2008

New pronouncements effective for

Amendment to Philippine Accounting Standards (PAS) 1, Presentation of Items

Amendments to PFRS 1, Government Loans

Amendments to PFRS 7, Disclosures - Offsetting Financial Assets and Financial

PFRS 10, Consolidated Financial Statements; PAS 27, Separate Financial

PFRS 12, Disclosure of Interests in Other Entities

PFRS 13, Fair Value Measurement

PAS 19, Employee Benefits (Amendments)

Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a

Annual Improvements to PFRSs - 2009-2011 Cycle

Amendments to PAS 1, Presentation of Items of

What has changed?

Items in OCI to be grouped into:

What has not changed?

Items that will be reclassified to profit or loss (P&L) in future periods

Nature of items that can be recognized in OCI

Comparative period(s) should conform to changes in current

PFRS Updates, Application and Impact

May 22, 2008

Other comprehensive income for the year, net of tax

Total comprehensive income for the year

Profit for the year

PFRS Updates, Application and Impact

Enables easier identification of the potential impact that

As the amendments only affect presentation of items

PFRS Updates, Application and Impact

May 22, 2008

Amendments to PFRS 1, Government loans

The amendments add an exception to the retrospective

However, entities may choose to apply the requirements of

Impact: These amendments give first-time adopters the same

PFRS 7, Disclosures (Amendments)

New disclosure requirements

Provides information useful in evaluating the effect of netting

May 22, 2008

New and revised standards on consolidation

PFRS Updates, Application and Impact

Interaction between PFRS 10, 11, 12 and

Define type of joint

Account for assets, liabilities,

Account for the investment in

Disclosures in accordance with

Disclosures in accordance with

May 22, 2008

PFRS 10, Consolidated Financial Statements

PFRS 10 contains a single model for consolidation

New definition of control:

No bright lines consider all facts and circumstances

Continuous reassessment of control required

PAS 27 only deals with separate financial statements

Financial statement impact

New and broader definition of control may result in changes to a

On transition to PFRS 10 and

Increased use of judgment

PFRS Updates, Application and Impact

May 22, 2008