PPSAS 1 & PPSAS 33-Presentation of FS and First Time Adoption of Accrual - For AGIA

SEMINAR/WORKSHOP on the
PHIL. PUBLIC SECTOR ACCOUNTING

STANDARDS (PPSAS)
18 September 2019
AGIA
Session 1 – PPSAS 1 & PPSAS 33 Slide 1 of 35
LEGAL BASES/AUTHORITY
1987 Philippine Constitution, Article IX
D, 2(2) “The Commission [on Audit] shall
have exclusive authority, subject to the
limitations in this Article, xxx and
promulgate accounting and auditing
rules and regulations, including those for
the prevention and disallowance of
irregular, unnecessary, excessive,
extravagant, conscionable expenditures
of government funds and properties.”
2

Presidential Decree (PD) 1445, State
Audit Code of the Philippines, Section 25 (4)
“(4) To promulgate auditing and

accounting rules and regulations so
as to facilitate the keeping, and
enhance the information value, of the
accounts of the government.”

COA Office Order No. 2010 118 dated 19 Feb. 2010
PUBLIC SECTOR ACCOUNTING STANDARDS
BOARD (PSASB)
FUNCTIONS:
 Assist the COA CP in formulating and
implementing accounting standards for the public
sector;
 Establish and maintain linkages with int’l. bodies,
professional org., and the academe on acctg and
relatedrelated fields on financial mngt
4

Objectives of PPSAS
The PPSAS set out the recognition,
measurement, presentation and disclosure
requirements for financial reporting in the
Phil. gov’t.
It shall issue transitional provision to
address specific concerns not yet covered
by PPSAS
When the need arises, supplemental or
Phil. Application Guidelines (PAGs)
shall be issued

LEARNING OBJECTIVES
 Identify the features, structure and content

of the financial statements enumerated
under PPSAS 1
 Identify the reporting requirements for GCs

classified as Non-GBEs which falls within
the scope of PPSAS 33

SESSION OVERVIEW
IPSAS 1
IPSAS
33
PAGs
PAG
10/3/201 7
9

PPSAS 1 - OBJECTIVE
To prescribe the manner in which

general purpose financial statements
should be presented to ensure
comparability both with the entity’s
financial statements of previous periods
and with the financial statements of
other entities.
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9

PPSAS 1 - SCOPE
This standard shall be applied to all
general purpose financial
statements prepared and presented
under the accrual basis of
accounting in accordance with
PPSAS.

WORKSHOP 1
1. Resources controlled by an entity as a result of

past events and from which future economic
benefits or service potential are expected to flow
to the entity.
A. Assets
B. Liabilities
C. Net Assets/Equity
D. Revenues
E. Expenses

2. Present obligations of the entity arising from
past events, the settlement of which is expected
to result in an outflow from the entity of
resources embodying economic benefits or
service potential.
A. Assets
B. Liabilities
D. Revenues
E. Expenses

3. Are decreases in economic benefits or service
potential during the reporting period in the form
of outflows or consumption of assets or
incurrences of liabilities that result in the
decreases in net assets/equity, other than those
relating to distributions to owners.
A. Assets
B. Liabilities
D. Revenues
E. Expenses

4. Gross inflow of economic benefits or service
potential during the reporting period when those
inflows result in an increase in net assets/equity,
other than increases relating to contributions from
owner
A. Assets
B. Liabilities
D. Revenues
E. Expenses

5. Residual interest in the assets of the entity after
deducting all its liabilities
A. Assets
B. Liabilities
D. Revenues
E. Expenses

5. Intended to meet the needs of users who are
not in the position to demand reports tailored to
meet their particular information needs.
A. General Purpose Financial Statements
B. Special Purpose Financial Statements
C. Condensed Interim Financial Statements

To provide information
about the financial position,
Objective financial performance, and
of General cash flows of an entity that
Purpose is useful to a wide range of
Financial users in making and
Statements evaluating decisions
about the allocation of
resources.

 Sources, allocation, and uses of financial
resources;
 How the entity financed its activities and met its
cash requirements;
 Evaluating the entity’s ability to finance its
activities and to meet its liabilities and
commitments;
 Financial condition of the entity and changes in it;
and
 Evaluating the entity’s performance in terms of
service costs, efficiency, and accomplishments.

Financial Statements
are structured representation of the financial position,
financial performance and cash flow of an entity.
The responsibility for the fair presentation and

reliability of financial statements rests with the
management of the reporting agency, particularly
the head of finance/accounting office and the head
of agency or his authorized representative. (PAG 3)

A. The information must be readily
WORKSHOP # 2 understandable to users of the financial

statements, and information were clearly
presented, with additional information supplied
1. Understandability as needed to assist in clarification.
B. requires financial information to be relevant
to the decision making needs of the users.
2. Relevance
C. Requires the financial information to be
3. Materiality true and fair and free from misstatement.
D. Requires accountants and auditors to
focus on financial information which is
4. Faithful presentation expected to affect the decisions of the users
E. Requires the information to communicate the
5. Comparability underlying economics of the company's
business.
6. Verifiability F. Requires disclosure of financial information
not to be excessively delayed
7. Timeliness G. Requires the financial information to be
. comparable across periods and across
10/3/201 21
companies. 9

COMPONENTS OF FINANCIAL STATEMENT
Statement of Financial Position
Statement of Financial Performance
Statement of Changes in Net Assets/Equity
Statement of Cash Flows

COMPONENTS OF FINANCIAL STATEMENT
Statement of Comparison of Budget and Actual

Amounts
Notes, comprising a summary of significant

accounting policies and other explanatory
notes
Comparative information in respect of the

preceding period (Paragraphs 53 and 53A of
PPSAS 1)

OVERALL CONSIDERATION
Fair Presentation and
Compliance with
PPSASs
Comparative
Information Going
Concern
Consistency of
Offsetting Presentation
Materiality and
Aggregation

STRUCTURE AND CONTENT
 Identification of the Financial Statements

 Reporting Period
 FS shall be presented at least annually
 Par. 67 pertains to cases when entities might
change its reporting date. This is not applicable
since the reporting date is fixed for all entities.
(PAG 6)
Timeliness

THE STATEMENT OF FINANCIAL POSITION
 Current and non-current classification

of assets and liabilities
 Condensed and Detailed
 Comparative Presentation

FINANCIAL ASSETS (FA)
FINANCIAL LIABILITIES (FL)
FA
 Cash or
 A contractual right to receive cash or another financial
asset from another entity; or
FL
 a contractual obligation to pay cash or another financial
asset from another entity; or

Workshop # 3 FINANCIAL OR NOT FINANCIAL
1. Cash
2. Trade receivables
3. Inventory
4. Marketable securities
5. Prepaid rent
6. Property equipment
7. Intangible assets
8. Investment property
9. Refundable rental deposit
10.Advances to related parties
11.Notes payable
12.Trade payable
13.Accrued expenses
14.Unearned revenue
15.Bank loans
16.Income tax payable
17.Advances from stockholders 10/3/201
9
28

CURRENT AND NON-CURRENT PRESENTATION
Current Assets
 Held for sale or consumption

 Held primarily for trading
 To be realized within one year
 Unrestricted cash or a cash
equivalent
All other assets shall be classified as non-
current.
CURRENT AND NON-CURRENT PRESENTATION
Current Liabilities
 Held•aprimarily forreceive
contractual rightto trading
cash or
another financial asset from another entity;
 Expected to be in the entity’s normal
or
• to exchange financial assets or financial
operating cycle
liabilities with another entity under
conditions that are potentially favourable to
 Expected/Due to be settled within
the entity;
twelve months
 No unconditional right to defer
settlement

EXCHANGE TRANSACTIONS
Exchange Transactions are

transactions wherein one entity
receives assets or services, or
has liabilities extinguished, and
directly gives approximately
equal value (primarily in the
form of cash, goods, services,
or use of assets) to another
entity in exchange.
(PPSAS 9 and 23)
Session 1 – PPSAS 1 & PPSAS 33 31 Slide 31 of 35

Non- Exchange Transactions
(PPSAS 9 & 23)
Non-exchange transactions are
transactions where an entity either
receives value from another entity
without directly giving
approximately equal value in
exchange, or gives value to another
entity without directly receiving
approximately equal value in
exchange.
Session 1 – PPSAS 1 & PPSAS 33 32 Slide 32 of 35

THE STATEMENT OF FINANCIAL PERFORMANCE
All items of revenue and expense recognized

in a period shall be included in surplus or
deficit, unless a PPSAS requires otherwise.

THE STATEMENT OF CHANGES IN NET
ASSETS/EQUITY
The overall change in net assets/equity during

a period represents the total amount of
surplus or deficit for the period, other
revenues and expenses recognized directly as
changes in net assets/equity, together with
any contributions by, and distributions to,
owners in their capacity as owners.

THE STATEMENT OF CASH FLOWS
Cash Flow information provides users of financial
statements with a basis to assess:
The ability of the entity to generate cash and cash

equivalents
The needs of the entity to utilize those cash flows

NOTES TO FINANCIAL STATEMENTS
 Present information about the basis of preparation of the
financial statements and the specific accounting policies
used;
 Disclose the information required by PPSASs that is not

presented on the face of the FS; and
 Provide additional information that is not presented on the

face of the FS, but that is relevant to an understanding of
any of them.

Minimum disclosure requirements for the notes
 Accounting policies
 Judgments that management has made that have the most
significant effect on the financial statements
 Key assumptions concerning the future
 Other disclosures
 the domicile and legal form of the entity;
 description of the nature of the entity‘s operations;
 reference to the relevant legislation;
 the name of the controlling entity and the ultimate controlling
entity of the economic entity (where applicable); and
 If it is a limited life entity, information regarding the length of
its life

PPSAS 33 - First-time
Adoption of Accrual Basis
PPSAS 33 - Objective
To provide guidance to a first-time adopter that
prepares and presents FSs following the adoption
of accrual basis PPSASs, in order to present high
quality information:
• That provides transparent reporting about a first‐time
adopter’s transition to accrual basis PPSASs;
• That provides a suitable starting point for accounting in
accordance with accrual basis PPSASs irrespective of
the basis of accounting the first‐time adopter has used
prior to the date of adoption; and
• Where the benefits are expected to exceed the costs.

PPSAS 33 - Scope
An entity shall apply PPSAS 33 when it

prepares and presents its annual
financial statements on the adoption
of, and during the transition to,
accrual basis PPSASs.

PPSAS 33
We are ready
PPSAS!
First-time Adopter
An entity that adopts accrual
basis PPSASs for the first time
and presents its first
transitional PPSAS FSs or its
first PPSASs FSs.

PPSAS 33
Date of adoption of PPSASs

The start of the reporting period in which
the first-time adopter adopts accrual
basis PPSASs.
COA Circular 2017-004

7.3 COA Circular 2017-004
b. First-time Adoption of Accrual Basis IPSASs (PPSAS

33)
 Non-GBEs which were not able to adopt the PPSAS in CY 2016 shall be
considered first-time adopter in CY 2017.
 Their CY 2017 PPSAS financial statements shall include the

following: a. Statements of Financial Position as at December 31,
2017, December 31, 2016 and January 1, 2016 (Opening
Statement of Financial Position); b. Statements of Financial
Performance for the years ended December 31, 2017 and 2016; .
c. Statements of Cash Flows for ~ended December 31,2017 and
2016; v' d. Statements of Changes in Net Assets/Equity for the
years ended December 31,2017 and 2016; e. Statement of
Comparison of Budget and Actual Amounts for CY 2017;and f.
Related notes including comparative information.
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52

PPSAS 33
Transitional PPSAS FSs

FSs prepared in accordance with
PPSAS 33 where a first-time
adopter cannot make an explicit
and unreserved statement of
compliance with the PPSASs.

Transitional PPSAS FSs
a) The entity prepared its most recent FS in
accordance with the IPSAS, Financial
Reporting under the Cash Basis of
Accounting;
b) Presented its most recent previous FS:

•In accordance with prescribed requirements that are
i. not consistent with PPSASs in all respects;
•In accordance with PPSASs in all respects, except that

the FS did not contain an explicit and unreserved
ii. statement that they complied with PPSASs;

(continuation)
• Containing an explicit statement of compliance with some, but
not all, PPSASs, including the adoption of the exemptions
provided in PPSAS 33 that affect fair presentation and
iii. compliance with accrual basis PPSASs;
•In accordance with PPSASs in all respects, except that

the FS did not contain an explicit and unreserved
ii. statement that they complied with PPSASs;
• Containing an explicit statement of compliance with some, but

not all PPSASs, including the adoption of the exemptions
provided in PPSAS 33 that affect fair presentation and
ii. compliance with accrual basis PPSASs;

(continuation)
• In accordance with prescribed requirements inconsistent

with PPSASs, using some individual PPSASs to account for
iii. items for which prescribed requirements did not exist ; or
•In accordance with prescribed requirements, with a

reconciliation of some amounts to the amounts
ii. determined in accordance with PPSASs;

c) Prepared FS in accordance with PPSASs for
internal use only, without making them
available to external users;
d) Prepared a reporting package in accordance

with PPSASs for consolidation purposes
without preparing a complete set of financial
statements as defined in PPSAS 1; or
e) Did not present FS for previous periods.

PPSAS 33
First PPSAS FSs

First annual FSs prepared in which
an entity complies with the accrual
basis PPSASs and can make an
explicit and unreserved statement
of compliance with those PPSASs.

Transitional PPSAS FS Vs. First PPSAS FS
Corporation C adopts accrual basis PPSASs on January 1,
2017 and elects to apply the three year relief for the
recognition of property, plant and equipment. It does not
adopt any other relief periods and recognizes all property,
plant and equipment by December 31, 2019.
First
Transitional First
Transitional
PPSAS FS PPSAS FS
PPSAS FS
2017 2018 2019

Date of
Adoption of
PPSAS

Corporation D adopts accrual basis PPSASs on January 1,
2017 and elects to apply the three year relief for the
recognition of property, plant and equipment. It does not
adopt any other relief periods and recognizes all property,
plant and equipment by December 31, 2018, a year earlier
than the expiration of the three year relief period by
December 31, 2019.
First
First PPSAS
Transitional
PPSAS FS Compliant
PPSAS FS
FS
2017 2018 2019

Date of
Adoption of
PPSAS

Corporation E adopts accrual basis PPSASs on January
1, 2017. It does not adopt any exemption in PPSAS 33
that affect fair presentation and its ability to claim
compliance with accrual basis PPSASs.
First PPSAS PPSAS

PPSAS FS Compliant Compliant
FS FS
2017 2018 2019

Date of
Adoption of
PPSAS

RECOGNITION AND MEASUREMENT
Opening Statement of
Financial Position
The first-time adopter’s statement
of financial position at the date of
adoption of PPSASs.
1. A first-time adopter shall prepare and present an

opening statement of financial position at the date
of adoption of PPSASs. This is the starting point for
its accounting in accordance with accrual basis
PPSASs.

Accounting Policies
2. On the date of adoption of accrual basis
PPSASs, a first-time adopter shall apply
the requirements of the PPSASs
RETROSPECTIVELY except if required, or
otherwise permitted, in PPSAS 33.

Accounting Policies
3. Unless the exemptions provided in PPSAS
33 are applied, a first time adopter shall,
in its opening statement of financial
position:
Recognize all assets and liabilities whose

recognition is required by PPSASs;
Not recognize items as assets or liabilities if
PPSASs do not permit such recognition;

Accounting Policies
Reclassify items that it recognized in
accordance with the previous basis of
accounting as one type of asset, liability or
component of net assets/equity, but are a
different type of asset, liability or component
of net assets/equity in accordance with
PPSASs; and
Apply PPSASs in measuring all recognized
assets and liabilities.

Accounting Policies
4. Adjustments resulting from the application of

accrual basis PPSASs to the opening statement of
financial position shall be recognized in the
opening balance of accumulated surplus or deficit,
in the period in which the items are recognized and
or measured, or if appropriate, another category of
net assets/equity.

Accounting Policies
5. A first-time adopter’s estimates in
accordance with PPSASs at the date of
adoption of PPSASs, shall be consistent
with estimates made in accordance with
the previous basis of accounting, unless
there is objective evidence that those
estimates were inconsistent with the
requirements in PPSASs.

PPSAS 33
Period of Transition
The period during which a first-time adopter
applies one or more of the exemptions in PPSAS
33 before it complies with the accrual basis, and
before it is able to make an explicit and
unreserved statement of compliance with such
PPSASs.

EFFECTIVITY DATE
An entity shall apply this PPSAS for

annual financial statements covering
periods beginning on January 1,
2017 per COA Resolution No. 2017-
006 dated April 26, 2017.

THANK YOU!

PPSAS 1 & PPSAS 33-Presentation of FS and First Time Adoption of Accrual - For AGIA

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SEMINAR/WORKSHOP on the

PHIL. PUBLIC SECTOR ACCOUNTING

Session 1 – PPSAS 1 & PPSAS 33 Slide 2 of 35

“(4) To promulgate auditing and

Session 1 – PPSAS 1 & PPSAS 33 Slide 3 of 35

Session 1 – PPSAS 1 & PPSAS 33 Slide 4 of 35

Session 1 – PPSAS 1 & PPSAS 33 Slide 5 of 35

 Identify the features, structure and content

 Identify the reporting requirements for GCs

Session 1 – PPSAS 1 & PPSAS 33 Slide 6 of 35

Session 1 – PPSAS 1 & PPSAS 33 Slide 7 of 35

To prescribe the manner in which

Session 1 – PPSAS 1 & PPSAS 33 Slide 8 of 35

Session 1 – PPSAS 1 & PPSAS 33 Slide 9 of 35

1. Resources controlled by an entity as a result of

Session 1 – PPSAS 1 & PPSAS 33 Slide 10 of 35

Session 1 – PPSAS 1 & PPSAS 33 Slide 11 of 35

Session 1 – PPSAS 1 & PPSAS 33 Slide 12 of 35

Session 1 – PPSAS 1 & PPSAS 33 Slide 13 of 35

Session 1 – PPSAS 1 & PPSAS 33 Slide 14 of 35

Session 1 – PPSAS 1 & PPSAS 33 Slide 15 of 35

Session 1 – PPSAS 1 & PPSAS 33 Slide 16 of 35

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The responsibility for the fair presentation and

Session 1 – PPSAS 1 & PPSAS 33 Slide 18 of 35

WORKSHOP # 2 understandable to users of the financial

Session 1 – PPSAS 1 & PPSAS 33 Slide 21 of 35

Statement of Financial Position

Statement of Financial Performance

Statement of Changes in Net Assets/Equity

Statement of Cash Flows

Session 1 – PPSAS 1 & PPSAS 33 Slide 22 of 35

Statement of Comparison of Budget and Actual

Notes, comprising a summary of significant

Comparative information in respect of the

Session 1 – PPSAS 1 & PPSAS 33 Slide 23 of 35

Session 1 – PPSAS 1 & PPSAS 33 Slide 24 of 35

 Identification of the Financial Statements

Session 1 – PPSAS 1 & PPSAS 33 Slide 25 of 35

 Current and non-current classification

Session 1 – PPSAS 1 & PPSAS 33 Slide 26 of 35

Session 1 – PPSAS 1 & PPSAS 33 Slide 27 of 35

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 Held for sale or consumption

Session 1 – PPSAS 1 & PPSAS 33 Slide 30 of 35

Exchange Transactions are

Session 1 – PPSAS 1 & PPSAS 33 31 Slide 31 of 35

Session 1 – PPSAS 1 & PPSAS 33 32 Slide 32 of 35

All items of revenue and expense recognized

Session 1 – PPSAS 1 & PPSAS 33 Slide 38 of 35

The overall change in net assets/equity during

Session 1 – PPSAS 1 & PPSAS 33 Slide 42 of 35

The ability of the entity to generate cash and cash

Session 1 – PPSAS 1 & PPSAS 33 Slide 44 of 35

 Disclose the information required by PPSASs that is not

 Provide additional information that is not presented on the

Session 1 – PPSAS 1 & PPSAS 33 Slide 45 of 35

Session 1 – PPSAS 1 & PPSAS 33 Slide 46 of 35

Session 1 – PPSAS 1 & PPSAS 33 Slide 48 of 35

An entity shall apply PPSAS 33 when it

Session 1 – PPSAS 1 & PPSAS 33 Slide 49 of 35

Session 1 – PPSAS 1 & PPSAS 33 Slide 50 of 35

Date of adoption of PPSASs