Financial Statement o Definition: cash flows are the cash receipts and

o Definition: FS are a structured financial payments arising from the operating, investing
representation of the financial position and and financial activities of the entity.
performance of an entity. o Presentation: in the Statement of Cash Flow
o Preparation: prepared on accrual basis except for o Usefulness (objective): in assessing the ability of
cash flow information. the entity to generate cash and cash equivalents.

o Components: 6 components Financial Reporting

1. Statement of Financial Performance o Definition: financial reporting is the provision of
2. Income Statement financial information about the entity to external
3. Statement of Comprehensive Income users that is useful to them in making economic
decisions and accessing the effectiveness of the
4. Statement of Changes in Equity entity’s management.
5. Statement of Cashflows o Done through the presentation of the annual
6. Notes, comprising a summary of financial statements.
significant accounting policies and o However, financial reporting encompasses not
other explanatory information only financial statement but also other means of
communicating information that relates directly
or indirectly to the financial accounting process,
o Objective: is to provide information about such as:
the financial position, financial performance
and cash flows of an entity that is useful to a 1. Financial highlight
wide range of users in making economic 2. Summary of important financial figures
decision. 3. Analysis of financial statement
In order to achieve this objective, financial 4. Significant ratios
statements provide information about:
 Assets
 Liabilities
 Equity o General Objective of financial reporting:
 Income and expenses (including gains “Provide information that is useful for decision
and losses) making”
 Contributions by and distributions to
owners in their capacity as owners. Conceptual Framework for Financial Reporting,
 Cash flows sates:
“the objective of financial reporting is to provide
Statement of Financial Position: financial information about the reporting entity
o Composition: assets, liabilities and equity at that is useful to existing and potential investors,
particular moment of time. lenders and other creditors in making decisions
o Pertains to the liquidity, solvency, and the need about the providing resources to the entity.
of the entity for additional financing.
o Specific objective of Financial Reporting:
Statement of Financial Performance:
As stated by the Conceptual Framework for
o AKA: Results of Operation Financial Reporting:
o Composition: revenue, expenses and net income 1. To provide information useful in making
investment and credit decisions about
or loss of an entity for a period of time
providing resources to the entity.
o Performance, defined: performance is the level
2. To provide information useful in
of income earned by the entity through the
assessing the cash flow prospects of the
“efficient” and “effective use” of its resources.
entity
o Presentation: in the Income Statement and
Statement of Comprehensive Income.
3. To provide information about the entity’s
resources, claims and changes in
resources and claims.
Cash Flows
o Targets users of Financial Reporting Have the most
 Existing and potential investors critical and
immediate need for
information of
  Lenders recognition criteria for assets, liabilities, income and
 Other creditors expenses laid down in the Conceptual Framework.

Is a primary user of financial information Q4: What do fair presentation requires the entity to do?
– parties that provide resources to the entity. - Select and apply accounting policies in
accordance with PFRS
Note: information that meets the needs of the specified - Present information, including accounting
primary users is likely to meet the needs of others users, policies, in a manner that provides relevant and
such as: faithful represented information.
 Employees - Provide additional disclosure if necessary for the
 Customers users to understand the entity’s financial
 government and their agencies. statement.

o Limitations of Financial Reporting: Q5: Can an entity rectify inappropriate accounting

 Do not and cannot provide all of the policies by disclosure of accounting policy or by notes
information that existing and potential or explanatory information?
investors, lenders and other creditors need. - No.
 Do not design to show the value of a When an entity departs from a standard, entity should
reporting entity – but rather “estimate” the disclose the ff:
value of the entity. a Management has concluded that FS is
“because not all people deserve to know your real fairly presented
worth” b It has complied with applicable
standards and interpretation, except that
Responsibility for financial statements it has departed from a particular
Q1: Who shall have the primary responsibility to prepare requirement to achieve fair presentation.
and present the financial statement? c The title of the standard or interpretation
- Management from which entity has departed. The
Q2: What are the responsibilities of the Board of treatment adopted.
Directors? d Financial impact of the departure on
- In discharging its responsibilities, reviews and each item that would have been reported
authorizes the financial statement for issue in complying with the requirement
before these are submitted to the shareholder of B. Going Concern
the entity.  AKA: continuity assumption
Assets are normally recorded at original
General features of financial statements: acquisition cost. As a rule, market value is
a fair presentation ignored unless required by a standard.
b going concern e.g. PAS 16 requires that PPE should be
c accrual basis subsequently recorded using either: Cost model
d materiality and aggregation or Revaluation model.
e offsetting
f frequency of reporting Relevance of Going Concern
g Comparative information Going concern is relevant when management
h Consistency of preparation shall make an estimate of the expected outcome
of future events, such as recoverability of AR
A. Fair Presentation and useful life of noncurrent assets (foundation
B. of cost principle).
Q3: How is “fair presentation” achieved?
– if the financial statements are prepared in Q6: In what instance the going concern shall be
accordance with the Philippines Financial suspended?
Reporting Standard which represent the GAAP - Financial statement shall be prepared on a going
in the Philippines, with additional disclosure, if concern basis unless management intends to
necessary (presumed fairly presented). liquidate the entity or cease trading or has no
realistic option but to do so.
Fair Presentation, defined
Faithful representation of the effects of transactions and
other events in accordance with the definition and
Q7: What shall the entity do if there are uncertainties
regarding the ability of the entity to continue as a going
INVENTORY
concern?
- Uncertainties shall be fully disclosed
“If the financial statements are not prepared on
going concern basis, such fact shall be disclosed
together with the measurement basis and the Q10: What shall the company do if the line item is not
reason thereof (p. 10). “ individually material?
- It is aggregated with other items either in those
Q8: In making assessment about the going concern statements or in the notes
assumption, management shall take into account all - Example: an investor’s share in the net income
available information about the future which is? of an associate is presented as a separate line
- At least twelve months from the end of reporting item in the income statement, however, if this
period. amount is not individually material, it may be
aggregated with other income.
C. Accrual Basis
Q11: When is an item material?
 Entity shall prepare the financial statement on - Relative
accrual basis - There is no strict or uniform rule for determining
Recognition using accrual method whether an item is material or not.
- Income is recognized when earned regardless of - Very often, this is dependent on good
when received judgement, professional expertise and common
- Expense is recognized when incurred regardless sense.
of when paid.
General guide for materiality:
Accrual accounting most essential in: “An item is material if knowledge of it would affect the
The recognition of decision of the informed users of the financial
- Accounts receivable statement”
- Prepaid expense
- Accrued expense Materiality is a relativity
- Deferred income Q12: Materiality of an item depends on?
- Accrued income - Relative size rather than absolute size.
- What is material for one entity may be
D. Materiality and Aggregation immaterial for another.
o An entity shall present separately -
 each material of “similar” items Factors of Materiality
 items of “dissimilar” nature or function a. Relative size of the item in relation to the
unless they are immaterial total of the group to which the item belongs
(e.g. the amount of advertising cost to total
Q9: What is the final stage in the process of aggregation administrative expense)
and classification? b. Nature of the item – an item may be
- Presentation of condensed and classified data “inherently” material because of its very nature
which for line items in the financial statement. it affects economic decision
GR Assets and liabilities, and income and e.g. A bribe of 20,000php is material to both
expenses, when material, shall not be offset small and large entities.
against each other.
XP Offsetting may be done when it is required or E. Offsetting
N permitted by another PFRS - See offsetting examples on p.14

 Cash on hand F. Frequency of Reporting

Presented as one Q13: An entity shall present a complete set of financial
 Petty cash fund
item in: statements at least?
 Cash in bank - Annually
 Cash equivalent “CASH AND CASH
EQUIVALENT”
 Finished goods
 Goods in process
 Raw materials
Q14: What shall an entity do if it changes the end of the
reporting period and presents financial statements for a
period longer or shorter than one year?
- The entity shall disclose:
1. The period covered by the financial 2 Investment income is presented separately in the
statements income statement
2. The reason for using a longer or shorter 3 Expenditure related to a provision and any
period reimbursement from a third party can be offset
3. The fact that amounts presented in the and only the net expenditure is presented as
financial statement are not entirely expense in the income statement
comparable. 4 Offsetting can be displayed when gains and
losses from trading securities are netted against
G. Comparable Information each other

Q15: How is “comparable” information achieved? GR Entity shall disclose comparative information
- Through consistency in respect of the previous period for all
amounts reported in the current period’s
F. Consistency of Preparation financial statement.
Principle of Consistency XP When permitted or require otherwise by PFRS.
Requires that the accounting methods and practices shall N
be applied on a uniform basis from period to period. 5 Entity shall disclose comparative information in
respect of the previous period for all the
Q16: does consistency mean there is no change in amounts reported in the current period’s
accounting method can be made? financial statements
- No. It is inappropriate for an entity to leave 6 The outcome of uncertain events at the end of
accounting policies unchanged when better and the preceding period and is yet to be resolved,
acceptable alternatives exist. are disclosed in the current period ( legal
- Therefore, if the change will result to dispute). Users shall benefit from information
information that is faithfully represented and that an uncertainty existed at the end of the
more relevant to the users, then such change immediately preceding period, and steps have
should be made. been taken during the current period to resolve
the uncertainty.
Change in the presentation and classification criteria: 7 When entity makes retrospective restatement, 3
a. When it is required by another PFRS statement of FS shall be presented: end of the
b. If significant change will demonstrate a more current period, previous period, beginning of the
appropriate revised presentation and earliest comparative period.
classification 8 Financial structure-source of financing for
Q17: What is the responsibility of an entity when there is assets. Indicates how profits and cash flows will
a change in the presentation and classification? be distributed between creditors and owners
- An entity should fully disclose the change and 9 Financial flexibility- use its available cash for
the peso effect of the change. unexpected requirements and investment
Third Statement of Financial Position opportunities or raise cash through borrowing
Required when an entity: and sale of securities or sale of assets without
a. Applies an accounting policy retrospectively disrupting normal operations.
b. Makes retrospective restatement of items in the 10 Cash equivalents are held for the purpose of
financial statement meeting short-term cash rather than for
c. Reclassifies items in the financial statement investment purposes
11 In cash equivalents, what is important is the date
Q18: What are the 3 statements of financial position? of purchase which should be 3 months or less
1. The end of the current period before maturity
2. The end of the previous period 12 Financial asset held for trading or trading
3. The beginning of the earliest comparative securities
period. 13 Nontrade receivable should be classified as
current asset if collectible within 1 year,
operating cycle notwithstanding
14 Current assets: 6 Noncurrent receivables fall into other noncurrent
a Cash and cash equivalents assets
b Held for trading 7 Abandoned property and long-term refundable
c Expected to be realized within deposits are other noncurrent assets
12months(nontrade receivables) 8 Covenants are attached to borrowing
d Realized, sold, or consumed(trade arrangements which represents undertakings by
receivable, inventory, prepayments) the borrower. These are restrictions on the
15 Operating cycle- between processing of assets borrower as to undertaking further borrowings,
and their realization in cash paying dividends, maintaining specified working
16 Noncurrent assets: capital. If breached, the liability becomes
a PPE payable on demand.
b Long-term investments 9 Grace period is a period within which the
c Intangible assets borrower can rectify breach and during which
d Other noncurrent assets the lender cannot demand immediate payment
17 Exploration, evaluation asset, mineral rights and 10 Current liabilities:
resources held for sale and biological assets are a Trade and other payables
separate line items. PAS16 on PPE doesn’t b Current provisions
apply to them c Short-term borrowing(loans)
18 Examples of long-term investments: d Current portion of a long-term debt
a. Investment in equity and bond e Current tax liability
securities
b. Joint venture 11 Noncurrent liabilities:
c. Subsidiaries a Noncurrent portion of a long-term debt
22. Financial liabilities held for trading are financial b Finance lease liability
liabilities that are incurred with an intention to c Deferred tax liability
repurchase them in the near term(quoted debt d Long-term obligations to entity officers
instrument). e Long-term deferred revenue\
23. Sound value or depreciated replacement cost
12 Range of outcome may be described as:
a Probable
1 An entity whose financial statements comply b Reasonably possible
with PFRS shall make an explicit and c Remote
unreserved statement of such compliance in the
notes. 13 Contingent asset is only disclosed when it is
2 An entity cannot rectify inappropriate probable. If it is only possible or remote, no
accounting policies either by disclosure of the disclosure is required.
accounting policies used or by notes or 14 International term for Surplus is reserve
explanatory information 15 Relationships between parties and subsidiaries
shall be disclosed regardless of whether there
3 Reasons for investment: have been transactions between those related
a Accretion of wealth(royalties, dividends, parties
rentals, interest) 16 If there have been transactions between those
b Capital appreciation( fair value changes) related parties, an entity shall disclose the nature
c Ownership control of the related party relationship as well as
d Store of surplus funds information about the amount of transactions,
4 Long-term investments include: outstanding balances, provision for doubtful
a Investment property accounts, and expense recognized in the current
b Investment in securities and bonds year necessary for an understanding of the
c Cash surrender value potential effect of the relationship on the FS.
d preference share redemption fund 17 Notes to FS shall be highly detailed, precise,
complete and easily understood
5 Intangible asset is identifiable if: 18 An entity shall not describe FS as complying
a separable, capable of being transferred, with PFRS unless they comply with all the
licensed, rented or exchanged requirements of each applicable PFRS
b Arising from legal or contractual right
19 Accounting standards set out the required a profit/loss
recognition and measurement principles that an b other comprehensive income
entity shall follow in preparing its FS 35 Profit or loss is the bottom line in the traditional
20 Disclosure of judgements that management has income statement
made in the process of applying accounting 36 Other comprehensive income comprises items of
policies and that have a significant effect on the income and expenses including reclassification
amounts recognized( whether asset should be adjustments that are not recognized in profit/loss
measured at FV or amortized cost, finance lease a Unrealized gains/loss on investment in
or operating lease) equity instruments measured at fair
21 Disclosures(Nonfinancial): value through other comprehensive
a Legal form/country of income
incorporation/address of principal place b Gain/loss from translating the FS of a
of business foreign operation
b Nature of entitys operations c Change in revaluation surplus
c Parent name or ultimate controlling d Unrealized gain/loss from derivative
entity contracts designated as cash flow hedge
e Actuarial gains or loss on defined
22 Control is the power to govern the financial and benefit plan in accordance with the full
operating policies of an entity recognition approach
23 Affiliates- parent, subsidiaries, fellow 37 Reclassification adjustments are amounts
subsidiaries reclassified to profit/loss in the current period
24 Key management personnel-POSDICON that were recognized in other comprehensive
25 Close family members of individual are related income in the current or previous periods.
parties 38 Two options for presenting comprehensive
26 Related party transactions and outstanding income:
balances are eliminated in the preparation of 1 Two statements
Consolidated FS a Income statement-components of profit
27 Accounting recognition of a transfer of or loss
resources is normally based on the price agreed b Statement of comprehensive income-
upon between the parties. Between unrelated begins with profit or loss(separate
parties, there may be a degree of flexibility in statement)
the price setting process 2 Singe statement of comprehensive income—
28 Close family members of an individual includes combined statement showing components of
the spouse, children and dependents. profit/loss and components of other
29 Adjusting events: comprehensive income in a single statement
a Bankruptcy of customers 39 Correction of errors and the effect of changes in
b Sale of inventories gives evidence about accounting policies are accounted for as
NRV adjustment of the beginning balance of retained
30 Nonadjusting: earnings.
a Business combination after the reporting 40 Information about entity’s profitability is useful
period in predicting the capacity of the entity to
b Plan to discontinue an operation generate cash flows from its existing resources.
c Abnormally large changes in asset price 41 Two approaches for capital maintenance:
and foreign exchange rates a financial capital-monetary value of net
d Change in tax rate enacted assets. Historical cost
31 An entity shall disclose the date when the FS are b Physical capital-quantitative measure.
authorized for issue and who gave the Current cost\
authorization 42 Productive assets include inventories and PPE
32 If the entity’s owners or others have the power 43 Transaction approach is the conventional or
to amend the FS after issue, entity shall disclose traditional preparation of FS in conformity with
such fact PFRS. It is the matching approach. Offers
33 Development stage entity shall disclose detailed presentation of all income and expenses.
cumulative net losses with a descriptive title, 44 Sources of income:
“deficit accumulated during the development a Sale of merchandise
stage” in SHE b Rendering of services
34 Comprehensive income includes: c Use of entity’s resources
 d Disposal of resources other than control and there is sufficient evidence that the
products entity remains committed to its plan to sell the
45 Other income represents the revenue and gains asset.
from peripheral or incidental transactions of the 57 Any cost to sell at classification date should be
entity. Still part of the operating activities of the recognized as impairment loss for the period and
entity deducted from the asset held for sale
46 Unusual and infrequent items of income and 58 A plant is temporarily abandoned if a plant is
expenses are considered component of income maintained in workable condition and it is
from continuing operations. expected that it will be brought back into use if
47 separate disclosure of items of income and demand picks up.
expense include: 59 An entity shall measure a noncurrent asset that
a Writedowns ceases to be classified as held for sale at the
b Reversals lower of carrying amount that would have been
c Disposals recognized if the asset had not been classified as
d Discontinued operations held for sale and recoverable amount at the date
e Litigation settlement of subsequent decision not to sell.
48 Statement of RE is now a part of statement of 60 The assets and liabilities of the group shall be
changes in equity presented separately and cannot be offset as a
49 Income statement and statement of single amount (e.g. noncurrent asset classified as
comprehensive income include: held for sale and liabilities directly associated
a Gains or loss from derecognition of FS with noncurrent assets held for sale)
measured at amortized cost 61 A discontinued operation is defined as a
b Profit or loss component of an entity that either has been
50 Forms of income statement: disposed of or is classified as held for sale and:
a Functional presentation—traditional and (1) represents a separate major line of business
common form of income statement. (2) Is part of single coordinated plan to dispose
Cost of sales method (distribution and assets (3) Is a subsidiary acquired exclusively
admin). It provides more relevant with a view to resale.
information to users. 62 A component of an entity may be subsidiary, a
b Nature of expense presentation—group major line of business or geographical segment
all the expenses and income whose operations and cash flows can be clearly
51 Purpose of comprehensive statement is to distinguished operationally from the rest of the
provide a more comprehensive income entity. It can be clearly distinguished if its
information on financial performance measured assets, liabilities, etc are directly attributable to
more broadly than the income as traditionally the component and it is directly attributable if
computed they would be eliminated when the component
52 Net income is included in the determination of is disposed of.
RE unappropriated. The Net Other 63 A discontinued operation occurs when the
comprehensive income is carried to reserves or operations and cash flows of that component
shown separately in the statement of changes in have been or will be eliminated from the
equity ongoing operations of the entity and the entity
53 Associate and joint venture income accounted will have no significant continuing involvement
for using the equity method and Gain or loss in that component after its disposal
from derecognition of financial asset at 64 PFRS 5 prohibits the retroactive classification as
amortized cost are line items-separately shown. a discontinued operation when the discontinued
54 A noncurrent asset or disposal group is criteria are met after the end of the reporting
classified as held for sale if its carrying amount period.
will be recovered principally through a sale 65 Discontinued operation is accounted for as a
transaction rather than continuing use. “disposal group classified as held for sale”
55 The group includes goodwill acquired in a 66 The results of discontinued operation, net of tax
business combination if the group is a CGU to including impairment loss, gain or loss from
which the goodwill belongs. actual disposal and termination cost shall be
56 An extension of the 1 year period does not presented as a single amount in the income
preclude the asset or disposal group from being statement below the income from continuing
classified as held for sale if the delay is caused operations.
by events or circumstances beyond the entity’s
67 If a disposal group is classified as held for sale available not later than 60 days after the end of
in the current year, the results of the disposal interim period
group fro prior period shall be represented as 100. PAS34 does not mandate which entities are
relating to discontinued operation in the required to publish interim financial reports, how
comparative income statement frequently, or how soon after the end of an interim
68 If a disposal group is classified as held for sale period
in the current year, an entity shall not reclassify 111. SEC and PSC require entities covered by the
or represent the assets and liabilities of the reportorial requirements of Revised Securities Act and
disposal group for the prior period. Presentation Rules on Commercial Papers and Financing Act to file
of the assets and liabilities of the disposal group quarterly interim financial reports within 45 days after
in the prior period is not changed. the end of each of the first three quarters
69 The net cash flows attributable to the activities 112. Two views in financial reporting:
of the discontinued operation shall be separately a. Integral view—each interim period is an
presented in the statement of cash flows or integral part of the annual accounting period. Annual
disclosed in the notes. expenses are estimated and then allocated to the interim
70 If the assets to be abandoned constitute a major periods based on forecasted revenue or sales volume.
line of business or geographical area of Cost incurred which clearly benefit the entire year are
operations, they are reported in discontinued allocated to the interim periods benefited. The results of
operations at the date on which they are actually subsequent interim periods must be adjusted to reflect
abandoned. prior estimation errors. Estimation and allocation are
71 Examples of not changes in accounting policy: necessary to avoid creating misleading fluctuations in
A Changes in accounting policy interim period income. It would result to interim income
for transactions or events that which would be more indicative of the annual income
differ in substance and thus useful in predicting future operations and
B Application of new making informed decisions.
accounting policy for b. Independent view—Each interim period is
transactions that did not occur considered a separate accounting period with status
previously or that were equal to a fiscal year. The same expense recognition
immaterial rules shall apply as under annual reporting and no
72 A change in reporting entity is a change special interim accruals or deferrals are permitted. No
whereby entities change their nature and report estimations or allocations are made for interim purposes
their operations in such a way that the financial unless such estimations or allocations are allowed for
statements are in effect those of a different annual reporting.
reporting entity. It is actually a change in 113. Independent view argued that estimation and
accounting policy and shall be treated allocation may have undesirable effects like a significant
retrospectively to disclose what the statements drop in an earnings trend during the year may be
would have looked like if the current entity had obscured.
been in existence in the prior year 114. Essentially, the standard adopts a mix of the
73 Hierarchy of guidance: integral and independent views.
a Requirements of current standards 115. The method of accounting for income tax and the
dealing with similar matters recognition of commission and warranty cost based on
b Framework for the preparation and sales is an application of the integral view.
presentation of financial statements 116. Direct cost and revenue are best accounted for as
c Most recent pronouncements of other incurred and earned which equates an independent view.
standard-setting bodies that use similar On the other hand, Indirect costs are more likely to
framework, other accounting literature require an allocation process which is suggestive of
and accepted industry practices. integral view.
1 Interim financial reporting means the 117. PAS34 allows an entity to publish a set of
preparation and presentation of financial condensed financial statements or complete set of
information for a period of less than one year. It financial statements
may be presented monthly, quarterly or semi- 118. Condensed means that each of the headings and
annually. subtotals presented in the entity's most recent annual
2 Quarterly interim reports are the most common financial statement is required but there is no
although public traded entities are encouraged to requirement to include greater detail unless this is
provide interim financial reports at least specifically required by PAS34
semiannually and such reports are to be made
119. PAS 34 assumes that financial statement users have are considered to be important for internal management
an access to the entity's most recent annual report so it is reporting.
a superfluity to provide the same notes in the interim 134. Reportable segment should meet any of the two
financial report. quantitative thresholds: (1) segment revenue should be
120. At interim date, it would be meaningful to provide atleast 10percent of the combined revenue of all
only an explanation of the events and transactions that operating segments (2) absolute amount of profit or loss
are significant to the understanding of the changes in should be atleast 10percent of the greater between the
financial position and financial performance since the combined profit of all operating segments that reported a
last annual reporting. profit and combined loss of all operating segment that
121. Presentation of comparative interim statements for reported a loss. (3) the assets of the segment are 10
income and comprehensive statement is current and percent or more of the combined assets of all operating
cumulatively (6 months ending and 3 months ending). segments.
Presentation for changes in equity and cash flows is 135. Even if a segment does not meet any of the
cumulatively only. quantitative thresholds, it can still be reported or
122. Major repairs, year-end bonuses, insurance, separately disclosed if management believes that
property taxes and depreciation are allocated. The information about the segment would be useful to the
essence is that, an expense should be allocated to the users of the financial statements.
four quarters if it clearly benefits the interim periods. 136. The total external revenue of the reportable
123. Depreciation and amortization for an interim period operating segments should constitute 75 percent of the
shall be based only on assets owned during the interim total external revenue of the segments. If the reportable
period segments do not meet the 75 percent criteria, additional
124. Paid vacation and holiday leave shall be accrued for segments which have majority common characteristics
interim purposes because these are enforceable as legal should be lumped into one reportable segment and
commitments. included in the reportable segments to satisfy the 75
125. Gains or losses shall not be allocated. percent criteria.
126. Many entities diversified their operations to spread 137. PFRS 8 suggests that if the number of reportable
the risks of investment over a number of industries and segments exceeds ten, it is likely that the information
product lines to reduce dependence on any one set of may become too detailed and consequently lose its
suppliers and customers. usefulnes, thus, an entity shall consider whether a
127. The different industry segments in effect operate as practical limit has been reached in the number of
separate entities within an overall corporate umbrella. segments reported.
128. Segment reporting is the disclosure of certain 138. Whenever a reportable segment no longer meets the
financial information about the products and services an 10percent quantitative threshold, it will still be continued
entity produces and the geographical areas in which an to be reported separately if management considers the
entity operates. This is to enable investors and users segment of continuing significance.
make better assessment of each business activity leading 139. If an operating segment becomes reportable in the
to the understanding of the performance of the entity as a current period, the segment data in the prior period shall
whole. be restated to reflect the newly reportable segment for
129. One segment may be performing well and others comparative purposes.
may not. It becomes then necessary to not only report 140. Prior period segment information shall not be
total performance but also the individual performance. restated if the necessary information is not available and
130. Segment information is only required in the the cost to develop it would be excessive.
consolidated financial statements. 141. An entity shall disclose the general information,
131. To be classified as operating information about profit/loss, segment assets and
segment(distinguishable component), separate financial liabilities, and reconciliations for each reportable
information must be available about the segment and its operating segment.
operating results shall be regularly reviewed by a chief 142. An entity shall disclose a measure of profit/loss
decision maker. under all circumstances while the measure of segment
132. Chief operating decision maker is the one assets and liabilities shall only be disclosed if such
responsible for the allocation of resources and assessing amount is regularly provided to the chief operating
the performance of operating segments. It may be the decision maker.
CEO, COO or a group of executive officers. 143. The amount of segment revenue and expense, and
133. Operating segments are identitfied using the segment assets and liabilities disclosed for a reportable
management approach. It means that operating segments segment shall be the measure reported to the chief
are identified based on the components of the entity that operating decision maker.
144. The items to be disclosed must be specified in
PFRS 8 and are included in the measurement or
regularly reported to the chief operating decision maker.
145. Entity-wide disclosures or additional information
that should be disclosed if it is not provided as part of
the reportable segment information: (1) products and
services (2) geographical areas (3) major customers
146. A major customer is defined as a single external
customer accounting for 10 percent or more of an
entity’s external revenue
147. The entity shall disclose only its reliance on major
customers, the total amount of revenue from major
customers and the identity of the segment(s) reporting
the revenue.

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