presentation of Financial Statements * 143 pROBLEMS 1. 10. . PAS 1 prescril . If profit or loss is PROBLEM 1; TRUE OR FALSE The application of PFRSs, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation. According to PAS 1, an entity shall .make an explicit and unreserved statement of compliance with the PFRSs in the notes only if the entity complies with all the requirements of PFRSs. PAS 1 encourages, but does not require, the presentation of the preceding year's financial statements as comparative information to the current year’s financial statements. According to PAS 1, assets and liabilities or income and expenses are offset, unless separate presentation is required or permitted by a PFRS. ‘According to PAS.1, PFRSs apply to financial statements as well as to other information presented in. an annual report, a regulatory filing, or another document. According to PAS 1, the line item “Cash and cash equivalents” should always be presented first in the statement of financial position. ibes an order or format of presenting items in the financial statements. An entity may omit the notes when Pp’ purpose financial statements. 100 while other 20, total comprehensive income must be #130. PAS 1 encourages, but does not require, the disclosure of an entity's domicile and legal form, its country of incorporation and the address of its registered office and a description of the nature of its operations and its principal activities. resenting general comprehensive income ishe basis » MUL sing ¢ fy PROBLEM eof PAST ey by pre cial statements ny to ensure comp oral pul representation of finan bd to ensul formation presented in 4 ts. urement princi) le financial ae ition and snag! ind expenses, * d. to — asset liabilities, incom icable . . appli setavs' the current period | jal_stal Entity A's. finandl financial statements in ith Entity A's iity is called comparable with ability is previous period. This 'YP¢ of comp extra-comparability a. Inter-comparability d. Intro-comparability b. Intra-comparability |. The scope of PAS 1 is a. the preparation and financial statements. : b. the recognition, measurement and disclosure requiremen for specific transactions and other events. c. the presentation of general purpose financial statements well as all other information contained in an entity’ annual report. d. all of these presentation of general purpo The statement of financial position is also called a. balance sheet. : ¢. positions statement. b. income statement. d. all of these When preparing financial Statements, PAS 1. requi management to assess the entity's ability to continue going concern. The assessment covers a minimum period of a. at least one year from the end of the reportin; ea b. at least two years from the end of the ee periodr svn of nami Sateen a na pret t least five years from the end of the reporting period, . ace ig no such requirement. d. jch of the following is not considered an appropriate ication of offsetting under PAS 1? APP resenting a gain from the sale of a noncurrent asset net of * ne related selling expenses. | b, Deducting foreign exchange losses from foreign exchange | "gains and presenting only the net amount. Deducting unrealized: losses from unrealized gains from x trading securities and presenting only the net amount. d. Deducting accumulated depreciation from the equipment account and presenting only the carrying amount. 1, PAS 1 requires an entity to provide an additional balance sheet dated as of the beginning of the preceding period if certain instances occur. Which of the following is not one of those instances? (Assume all of the following has a material effect), a. Retrospective application of an accounting policy. _ b. Retrospective restatement c: Reclassification of items in the financial statements d. Change in the frequency of reporting . The PERSs apply to which of the following? a. A management's review of the entity’s financial Performance during the period vis-a-vis its targets for that Period contained in the entity’s annual report, which also includes the entity's financial statements. Schedules, reconciliations and returns tequired by the, Bureau of Internal Revenue (BIR) to be filed together with the financial statements. ( Environmental reports required by the Department of Environment and Natural Resources (DENR) that are included in the entity’s annual report.“se — ther inforrr vans and ote? nation the 4 ey ee ine financial statements dim in e | ysed method of presenting , commonly jon. It facilitates the computation of statement of finance Vquidity and solvency ratios. a Classified p b Unclassi the following ver cycle under P. ve 9 ty, this is the usual time it take, aterials, process those i yon ¢. Classified as to liquidity p sentation d. Based on liquidity reflects the definition 10. Which of : of normal operating a ring entity, this is the usual time it takes for the entity to acquire raw materials, process those ray, materials into finished goods, sell the finished goods op account, and collect the receivables. : For a manufacturing entity, this is the usual time it takes for the entity to acquire raw materials on account ang settle the account. 4. For a manufacturing entity, this is the usual time it takes for the entity to sell finished goods on account and collec the receivables. 7 Fem c 3: MULTIPLE CHOICE “ a for the preparation and fair presentation y's financial statements in accordance with the PFRS’ : Accountant ¢. Auditor : . Management d. Government regulatory body nw The statement of fi i = t distinction (classifi ca ity (unclassified), PAS 1 sande & :nancial Statements offi ow e 1 Se ‘ ¢. combination of a and b ‘ nelassified presentation. d. none of these ich of the following is a current asset? ‘ ferred tax asset expected to reverse within 3 months * fom the reporting date , plant and equipment 0 Non-trade note receivable due in 13 months i Accounts receivable ich of the following statements is incorrect regarding the : sions of PAS 1? a, Anentity is required to present separate sections of profit or loss and other comprehensive income. p. Presenting an income statement or statement of profit or Joss in addition to a statement of other comprehensive income is permitted when an entity elects to use the “two- statement” presentation. Presenting an income statement or statement of profit or Joss alone without a statement of other comprehensive income is allowed. d. Presenting comprehensive. income as a note disclosure only is prohibited. 5, When a separate statement of profit or loss (income statement) is presented, ; a. it shall be displayed immediately before the statement presenting comprehensive income. b. it shall be displayed immediately after the statement presenting comprehensive income. © it shall be displayed alone. The entity may opt not to present information on comprehensive income. d. Any of these. 6 Which of the following is not correct when an entity opts to come and expenses? use the “two-statement presentation” of inal pas? — oa of® comple a. The separate income statement forme Oi! pe disp! oe { set of financial statements and presentiny immediately before the ota! fe comprehensive income: anymore he bd. The profit of loss section is not ner “come: é statement presenting compre! ed to be present in the € The profit or loss section is reat es statement presenting compt i comprehensive incom, 4. The separate statement presen ee ioe begins with the amount of profi ly recognized j, Entity A reclassifies a gain yt i period’s profit. other com| hensive income tg Autresent 4. A PAS 1, now shoul een reclassification adjustment in the oe : prehen Me section of the statement of comprehenst ee ae a asanaddition c only aa c b. asadeduction d. none of these was _ Which of the following is a current liability? a. Deferred tax liability b. An obligation for which right to defer. 3 cA long-term obligation that becomes payable on demani because of a breach of loan agreement but the lence agrees before the balance sheet date to provide a gue period for the lender to rectify the breach. d. An obligation for which the entity has a conditional nz" to defer. the entity has an uncondition . According to PAS 1, items of other comprehensive incom“ Presented according to the following groupings a. ordinary and extraordinary items b. by nature and by function © those that are sul + of A ibsequent! fi fit 0! and those that : ly reclassified to pro!ration of Financ jal Statements = “ 4. continuing and discontinued operations When an entity changes the end of its reporting period and ts financial statements for a period longer or shorter than one year, an entity shall disclose all of the following, except ‘a. the period covered by the financial statements. b. the reason for using a longer or shorter period. the fact that amounts presented in the financial statements are not entirely comparable. d. a quantification of the possible adjustments that would eliminate the effects of the longer or shorter reporting period. 10. PROBLEM 4: FOR CLASSROOM DISCUSSION Scope 1. PAS 1 applies to which of the following? a. The preparation and presentation of general purpose financial statements. b. The recognition and measurement of specific assets, liabilities, income and expenses. c. The disclosure requirements for specific transactions and other events. d, All of these. General features 2. In 20x3, Entity A makes a retrospective application of an accounting policy that has a material effect on the information in the statement of financial position as at the beginning of the preceding period. Entity A wishes to provide comparative information in addition to the minimum requirement of PAS 1, ice. Entity A will be presenting its 20x3 financial statements together with the 20x2 and 20x1 financial statements. In this case, the additional statement of financial position required by PAS 1 will be dateda c. as at January |, 20x3. . ve - ae ; Re 4. for the period ended 20x14 . as at January 1, 20% resentation of, Be the nts. Whi nts to chan , its 3. Entity A wa classification of some items inv of the following statements is? a. Entity A can ma! e b. Entity A can make result in relial users of its financii c. Entity sheet dated as at d. Entity A can ™ irrevocable promi the next five years. financial stateme: provi the beginning of the preceding period. ake the change only if it makes ise not to make another change withi of Entity A shows line iter “Other noncurrer es,” Which of 4. The financial statements described as “Other current assets,” liabilities,” and “Miscellaneous expens following is correct? a. Entity A considers dissimilar and cannot similar items and are warrant separate presentation. b. Entity A considers the items included in these line items individually material but with dissimilar nature function. c. Entity A considers the items included in these line ite comprising a material class of similar items. d. ae ae of presenting items is unacceptable unde the items included in these line items be included in material classes also individually immaterial ¢ MS cee set of financial statements . According to PAS 1, a / ; , a complete set of financial st includes which of the anit 2 oo a. Income tax return ie eme™St 4 Cae sors’ reports > ‘ en 4 Ait of these Statement of financial position ws 1 requires an entity to present an additional statement of 6 al position as at the beginning of the preceding period een an entity makes any of the following, except a. the retrospective application of an accounting policy. b. the retrospective restatement of items in the financial statements. ¢ the reclassification of items in the financial statements. 4 the prospective application of a change in accounting estimate. sutement of financial position 7, The statement of financial position of which of the following entities does not show current and noncurrent distinctions among assets and liabilities? a. Banks and other financial institutions b. Mining companies « Trading enterprises d. Manufacturing firms 8 The principles of PAS 1 in relation to the classification of liabilities as current or noncurrent favor the current dassification. PAS 1 provides stricter conditions for classifying liabilities as noncurrent. Which of the following statements best reflects a valid reason for this? a. Noncurrent liabilities are usually more material in terms of size compared to current liabilities. b. Most primary users are concerned more with an entity's current liabilities when making economic decisions because of the shorter duration of time before they cause an outflow of economic resources.PAS) rent classificatic,, e' ditions for noneu : oe = ihe ‘potential misuse of classification in order, address the 5 present favorably the entity’s liquidity. a Allof these, ehensive income Statement of profit or loss and other compr Which A the following is not an acceptable method Presenting income and expenses? @ Presenting income and expenses that affect profit or loss and those that are components of other comprehensiy, income ina single statement. b. Presenting an income statement in addition to a statemen, that presents comprehensive income. c Presenting an income statement alone without a statement that presents comprehensive income. da. All of these are acceptable methods of presentation, 10. This method of Presenting expenses is more difficult to apply but has the potential of Providing more relevant inf formation to users. Its downside, however, is that it involves considerable judgment and may require arbitrary allocations, a. Nature of expense ¢. Classified presentation b. Function of expense d. Based on liquidity Notes 11. Which of the following is not a Purpose of the notes? a. to present information about the basis of Preparation of the financial Statements and the specific accounting Policies is not Statements but understanding of any of the financial d. to Tectify inappropriate accounting Presented elsewhere i is relevant to am l statements. Policies,