PFRS for SMEs

Section 6 Statement of changes in equity

General
The statement of changes in equity
presents a reconciliation of equity
items between the beginning and
end of the period.
The following items are presented
on the face of the statement of
changes in equity:
Total comprehensive income
for the period, showing
separately the total amount
attributable to owners of the
parent and to noncontrolling interests.
For each component of the
equity, the effects of
changes in accounting
policies and corrections of
material prior-period errors.
For each component of
equity, a reconciliation
between the carrying
amount at the beginning
and the end of the period,
separately disclosing
changes resulting from (1)
profit or loss, (2) each item
of other comprehensive
income, and (3) the amount
of investments by and
dividends and other
distributions to owners.

(Combined)
Statement of income and
retained earnings

Full PFRS

Same as PFRS for

SMEs
[IAS 1.106]

The
amounts
of
dividends recognized
as distributions to
owners during the
period,
and
the
related amount per
share, are presented
either
in
the
statement
of
changes in equity or
in the notes.
[IAS 1.107]

[PFRS for SMEs 6.3]

A combined statement of income Not permitted.
and retained earnings can be
presented instead of both a
statement
of
comprehensive
income and a statement of
changes in equity if the only
changes to the equity of an entity
during the period are a result of
profit
or
loss,
payment
of

dividends, correction of prior-period

errors or changes in accounting
policy.
In addition to the line items
required in the statement of
comprehensive
income,
the
following items are presented in
the
(combined) statement of
income and retained earnings:
Retained earnings at the
start of the period.
Dividends declared and paid
or payable during the period.
Restatement of
retained
earnings for correction of
prior-period errors.
Restatement of retained
earnings for changes in
accounting policy.
Retained earnings at the end
of the period.
[PFRS for SMEs 6.4, 6.5]
Sample PFRS for SMEs
Following is an illustrative example of a Statement of Changes in Equity prepared
according to the format prescribed by IAS 1 Presentation of Financial Statements.
Karson Inc.
Statement of changes in equity
For the year ended 31st December 2016
Share Retained Revaluation
Capital Earnings
Surplus
PHP
Balance at 1 January 2015
Changes in accounting policy
Correction of prior period error
Restated balance

PHP

PHP

Total Equity
PHP

100,000

30,000

130,000

100,000

30,000

130,000

Changes in equity for the year 2015

Issue of share capital
Income for the year
Revaluation gain
Dividends
Balance at 31 December 2015

25,000
(15,000)

10,000
-

25,000
10,000
(15,000)

100,000

40,000

10,000

150,000

30,000
(20,000)

5,000
-

30,000
5,000
(20,000)

100,000

50,000

15,000

165,000

Changes in equity for the year 2016

Issue of share capital
Income for the year
Revaluation gain
Dividends
Balance at 31 December 2016

Note: Statement of income and retained earnings in full PFRS is not

permitted as stated in the table.

PFRS for SMEs

Section 7 Statement of cash flows
Content
The cash flow statement presents
the generation and use of cash by
category (operating, investing and
finance) over a specified period of
time.

Full PFRS

Same as PFRS for

SMEs.
[IAS 7.10-7.17]

Operating activities are the entitys

principal
Revenue-producing
activities.
Investing
activities
are
the
acquisition and disposal of noncurrent assets (including business
combinations) and investments.
Financing activities are changes in
the equity and borrowings.

Reporting cash flow from

operating activities

[PFRS for SMEs 7.1, 7.3, 7.4-7.6]

Operating cash flows may be
presented by using either the
direct method (gross cash receipts

Same as PFRS for

SMEs; however, PFRS
allows certain cash

and payments) or the indirect

method (adjusting net profit or loss
for non-operating and non-cash
transactions, and for changes in
working capital).

flows to be reported
on a net basis.
In addition, the direct
method
is
encouraged.
[IAS 7.18-7.20, 7.22]

Examples of non-cash transactions

are acquisition of assets by means
of a finance lease, or conversion of
debt to equity.

Reporting cash flow from

investing and financing
activities

Foreign currency cash

flows

[PFRS for SMEs 7.7, 7.18-7.19]

Cash flows from investing and
financing activities are reported
separately gross (that is, gross
cash receipts and gross cash
payments).

Same as PFRS for

SMEs; however, PFRS
allows certain cash
flows to be reported
on a net basis.
[IAS 7.21-7.22]

[PFRS for SMEs 7.10]

Cash
flows
arising
from Same as PFRS for
transactions in foreign currencies SMEs.
are translated to the functional [IAS 7.25-7.28]
currency using the exchange rate
at the date of the cash flows.
Cash flows of a foreign subsidiary
are translated to the functional
currency using the exchange rate
at the date of the cash flows.
Unrealized gains and losses arising
from changes in foreign currency
exchange rates are not cash flows.
These gains and losses are
presented separately from cash
flows from operating, investing and
financing activities.
[PFRS for SMEs 7.11-7.13]

Sample PFRS for SMEs

(INDIRECT METHOD)
An entity that presents its statement of cash flows using the indirect method
recognized PHP7, 000 profit for the year ended 31 December 2016. Income in 2016
comprises PHP100, 000 revenue from the sale of goods, a gain of PHP750 on the

sale of an item of property, plant and equipment and an increase of PHP250 in the
fair value of its investment property. Expenses in 2016 comprise PHP50, 000 in cost
of goods sold, PHP42, 600 in staff costs, PHP800 in depreciation of its office
equipment, PHP100 amortization of its intangible assets and a decrease of PHP500
in the fair value of its investment in the publicly traded shares of another entity.
The entitys statement of financial position at 31 December 2016 includes PHP1,
700 trade receivables (2015: PHP1, 000), PHP1, 200 inventories (2015: PHP2, 200)
and PHP2, 000 trade payables (2015: PHP2, 400).
Extract from the entitys statement of cash flows for the year ended 31
December 2016

Sample Full PFRS

(DIRECT METHOD)

Note: In reporting cash flow from operating activity it is the same as PFRS
for SMEs; however, PFRS allows certain cash flows to be reported on a net
basis. In addition, the direct method is encouraged, as stated in the table.

PFRS for SMEs

Full PFRS

Section 8 Notes to Financial Statement

General
The notes are an integral part of Same as PFRS
the Financial Statements. Notes SMEs.
provide additional information to [IAS 1.112]
the amounts disclosed in the
primary statements.

Structure

[PFRS for SMEs 8.1-8.2]

Information presented in one of the
primary
statements
is
crossreferenced to the relevant notes
where possible.
The following disclosures are
included, as
a minimum, within the notes to the
financial
statements:
A
statement
of
compliance with PFRS
for SMEs.
Accounting policies.

for

Similar to PFRS for

SMEs; however, PFRS
generally has more
extensive disclosures
requirements, as well
as
a
sensitivity
analysis.
[IAS 1.222, 1.225,
1.229]

Key

sources
of
estimation uncertainty
and judgments.
Explanatory notes for items
presented in the financial
statements.
Information not presented in
the
primary
statements.

Where
applicable,
include disclosures

the

notes

Where
applicable,
the
notes
include disclosures of changes in
accounting policies and accounting
estimates, information about key
sources of estimation uncertainty
and judgments.

Information about
judgments

Information about key

sources of estimation
uncertainty

[PFRS for SMEs 8.2-8.7]

The judgments that management
has
made
in
applying
the
accounting policies and that have
the most significant effect on the
amounts recognized in the financial
statements are disclosed in the
notes.
[PFRS for SMEs 8.6]
The nature and carrying amounts
of assets and liabilities for which
estimates and assumptions have a
significant risk of causing a
material
adjustment
to
their
carrying amount within the next
financial period are disclosed in the
notes.

Similar to PFRS for

SMEs.
In
addition,
sensitivity analysis is
required.
[IAS 1.122]

Similar to PFRS for

SMEs.
In
addition,
sensitivity analysis is
required.
[IAS 1.125]

[PFRS for SMEs 8.7]

Sample PFRS for SMEs
PROBLEM (FROM VALIX BOOK FINANCIAL ACCOUNTING VOLUME III 2013)
SME C is the wholly-owned subsidiary of SME B.

In 2013, SME A acquired a controlling interest in SME B.

To align the end of their reporting period with that of their parent, SME B and SME C
immediately changed the end of their reporting period from the last day of
November to the last day of December.
Furthermore, SME B and SME C changed their names to SME AA and SME AAA,
respectively.
The entities prepare their financial statements in accordance with requirements of
PFRS for SMEs.
The currency unit of SME A is the functional currency and the presentation currency
of the entities.
REQUIRED:
Prepare an extract of the notes to SME AAs December 31, 2013 consolidated
financial statements with respect to developments.
ANSWER:

Note: Full PFRS is similar to PFRS for SMEs; however, PFRS generally has more
extensive disclosures requirements, as well as a sensitivity analysis as stated in the
table.

Source: https://www.nba.nl/Documents/Vaktechnisch-thema/externeverslaggeving/PFRSforSMEs/120201%205%20PWC%20Sims_diffs_PFRS_SMEs.pdf 1
http://accounting-simplified.com/financial/statements/statement-of-changes-inequity.html2
http://www.focusifrs.com/content/download/6521/34148/version/1/file/Module_7_ver
sion2011_1_Cash_Flows.pdf3