STRUCTURE AND CONTENT OF FINANCIAL STATEMENTS

Each of the financial statements shall be presented with equal prominence and shall be clearly identified
and distinguished from other information in the same published document.

The following information shall be displayed prominently and repeatedly whenever relevant to the
understanding of the information presented:

a. The name of the reporting entity

For Example:
ABC Corporation, Inc.
Financial Report for the Year Ended December 31, 2025
b. Whether the statements are for individual entity or for a group entities.

For Example: Individual entity:

XYZ Manufacturing Ltd.
Financial Statements for the Year Ended December 31, 2025

For Example: Group Entity

ABC Holdings Group

Consolidated Financial Statements for the Year Ended December 31, 2025

c. The Date of the end of the reporting period or the period covered by the financial statements

For Example – End of Reporting Period (Annual Statement):

ABC Corporation, Inc.
Financial Statements for the Year Ended December 31, 2025

For Example - Period Covered (Interim Statement):

XYZ Industries Ltd.
Financial Statements for the Six-Month Period Ended June 30, 2025
d. The presentation currency
 For Domestic currency all amount should be presented Peso Php unless otherwise stated
e. The level of rounding used (e.g. thousands, millions etc.)

MANAGEMENET RESPOSIBILITY OVER FINANCIAL STATEMENTS

The Management is responsible for an entity’s financial statements. The responsibility encompasses:

a. The preparations and fair presentation of financial statements in accordance with PFRSs;
b. Internal control over financial reporting
c. Going concern assessment
d. Oversight over the financial repor ting processes; and
e. Review and approval of financial statements.
The responsibilities are expressly stated in a document called “Statement of Management’s
Responsibility for financial Statements’ which is attached to the financial statements as a cover letter.
This document is signed by the entity’s

a. Chairman of the board

b. Chief Executive Officer
c. Chief Financial Officer

STATEMENT OF FINANCIAL POSITION

The statement of financial position shows the entity’s financial condition (i.e., status of assets, liabilities
and equity) as at a certain date. It includes Line items that present the following amounts:

a. Property Plant and Equipment

b. Investment Property
c. Intangible Assets
d. Financial Assets (excluding (e), (h), (i)
e. Investments accounted for using the equity method
f. Biological Assets
g. Inventories
h. Trade and other receivables
i. Cash and cash equivalents
j. Assets held for sale, including disposal groups
k. Trade and other payables
l. Provisions
m. Financial liabilities (excluding (k) and (l)
n. Current tax liabilities and current tax assets
o. Deferred tax liabilities and deferred tax assets
p. Liabilities included in disposal groups
q. Non-controlling interest
r. Issued capital and reserves attributable to owners of the parent.

PAS 1 does not prescribe the order or format of presenting items in the statement of financial position.
The foregoing is simply a list of items that are sufficiently different in nature or function to warrant
separate presentation.

PRESENTATION

A statement of financial position may be presented in a “classified” or an “unclassified” manner.

a. A classified presentation shows distinction between current and noncurrent assets and current
and noncurrent liabilities
b. An unclassified presentation (also called “based on liquidity”) shows no distinction between
current and noncurrent items.
A classified presentation shall be used except when an unclassified presentation provides information
that is reliable and more relevant. When that exception applies, assets and liabilities are presented in
order of liquidity (this is normally the case for banks and other financial institution)

Example: Classified Presentation (Standard for Most Entities)

ABC Manufacturing Ltd.

Statement of Financial Position as at December 31, 2025

Assets
Current Assets:

 Cash and Cash Equivalents — ₱5,000,000

 Trade and Other Receivables — ₱7,500,000

 Inventories — ₱4,000,000

 Prepayments — ₱1,000,000

Non-Current Assets:

 Property, Plant, and Equipment — ₱30,000,000

 Intangible Assets — ₱2,000,000

Liabilities
Current Liabilities:

 Trade and Other Payables — ₱6,500,000

  Short-Term Borrowings — ₱2,000,000

Non-Current Liabilities:

 Long-Term Loans — ₱15,000,000

Example: Unclassified Presentation (Liquidity-Based) for Financial Institutions

XYZ Bank
Statement of Financial Position as at December 31, 2025

Assets (Presented by Liquidity Order):

 Cash and Cash Equivalents — ₱20,000,000

 Financial Assets at Fair Value Through Profit or Loss — ₱15,000,000

 Loans and Advances to Customers — ₱50,000,000

 Investment Securities — ₱30,000,000

 Property, Plant, and Equipment — ₱5,000,000

Liabilities (Presented by Liquidity Order):

 Customer Deposits — ₱70,000,000

 Borrowings — ₱25,000,000

 Financial Liabilities at Fair Value Through Profit or Loss — ₱10,000,000

 Other Liabilities — ₱5,000,000

PAS 1 also permits a mixed presentation, i.e. presenting some assets and liabilities using
current/noncurrent classification and others in order of liquidity. This may be appropriate when the
entity has diverse operations.

Example:

XYZ Group Corporation

Statement of Financial Position as at December 31, 2025

Assets:

Current Assets:

 Cash and Cash Equivalents — ₱12,000,000

 Trade and Other Receivables — ₱8,000,000

 Inventories — ₱5,500,000
Non-Current Assets:

 Property, Plant, and Equipment — ₱45,000,000

 Intangible Assets — ₱3,000,000

Assets Presented by Liquidity Order (for Financial Operations):

 Investment Securities — ₱15,000,000

 Loans and Advances — ₱25,000,000

Liabilities:

Current Liabilities:

 Trade and Other Payables — ₱9,500,000

 Current Portion of Long-Term Loans — ₱4,000,000

Non-Current Liabilities:

 Long-Term Loans — ₱20,000,000

 Deferred Tax Liabilities — ₱6,500,000

Liabilities Presented by Liquidity Order (for Financial Operations):

 Customer Deposits — ₱30,000,000

 Financial Liabilities at Fair Value — ₱8,500,000

Equity:

 Share Capital — ₱50,000,000

 Retained Earnings — ₱15,000,000

But whichever methos is used PAS 1 requires the disclosure of items that are expected to be recovered
or settled:

a. Withing 12 months and

b. Beyond 12 months after the reposting period.

A classified presentation highlights an entity’s working capital and facilitates the computation of liquidity
and solvency ratios.

 Working Capital = Current Assets – Current Liabilities

All assets and liabilities are classified as noncurrent.
The operating cycle of an entity is the time between the acquisition of assets for
processing and their realization in cash or cash equivalents. When the entity’s normal operating
cycle is not clearly identifiable, it is assumed to be 12 months. (PAS1.68)
Assets and liabilities that are realized or settled as part of the entity’s normal operating
cycle (e.g. trade recievables, inventory, trade payables and some accruals for employee and
other operating cost) are presented as current, even if they are expected to be realized or settled
beyond 12 months after the reporting period.
Assets and Liabilities that do not form part of the entity’s normal operating cycle (e.g.
non operating assets and liabilities) are presented as current only when they are expected to be
realized or settled within 12 months after the reporting period.
Deferred tax assets and liabilities are always presented as noncurrent items in a
classified statement of financial position regardless of their expected dates and reversal.

Activity 1:
XYZ Trading company provided the following balances as of December 31, 2024

Assets:
Cash P250,000
Trade Receivables 200,000
Inventory 300,000
Land 550,000
 Equipment 400,000
Accumulated depreciation 100,000
Prepaid Expenses 50,000
Liabilities:
Trade Payable 250,000
Loan Payable(due in 3 years) 400,000
Accrued Expense 50,000
Equity:
Issued Share Ca pital 500,000
Retained Earnings (as of January 1, 2024) 250,000
Net Income for the year 2024 200,000

 Prepare the Statement of Financial Position for December 31, 2024

Solution:
1. Compute the Net Book Value of Equipment
Net Equipment = P400,000 – 100,000 = P300,000

2. Calculate Total Assets

Total Assets = 250,000 + 200,000 + 300,000 + 550,000 + 300,000 + 50,000
= P1,650,000

3. Calculate Total Liabilities

Total Liabilities = P250,000 + 400,000 + 50,000 = 700,000

4. Calculate Total Equity

Retained Earnings as of Dec 31, 2024 = P250,000 + 200,000 = 450,000
Total Equity = P500,000 + 450,000 = P950,000

STATEMENT OF FINANCIAL POSITION (AS OF DECEMBER 31, 2024)

Assets:
Cash P250,000
Trade Receivables 200,000
Inventory 300,000
Prepaid Expenses 50,000
Land 550,000
Equipment (Net) 300,000
Total Assets P1,650,000

Liabilities
 Trade Payables P250,000
Accrued Expenses 50,000
Loan Payable 400,000
Total Liabilities P700,000

Equity
Issued Share Capital P500,000
Retained Earnings 450,000
Total Equity P950,000

REFINANCING

Refinancing – is the process of replacing an existing debt or loan with a new one, typically under-
different terms. It often involves negotiating for a lower interest rate, longer repayment period,
or better loan conditions to improve the borrower's financial situation.

Loan Facility – refers to a credit line.

A long-term obligation that is maturing within 12 months after the reporting period is classified as
“current”, even if a refinancing agreement to reschedule payments on long-term basis is
completed after the reporting period and before the financial statements are authorized for
issue.

However, the obligation is classified as “noncurrent” if the entity has the right, at the
end of the reporting period, to roll over the obligation for at least twelve months after the
reporting period under an existing loan facility. Without such right, the entity does not consider
the potential to refinance the obligation and classifies the obligation as current.

Example of No Right to Defer Settlement

 ABC Corporation has a loan of ₱8,000,000 from DEF Bank with a maturity date of December 31,
2025. As of December 31, 2024, ABC Corporation is in negotiations with DEF Bank for
refinancing the loan for an additional 3 years.

However, the bank has not formally approved the refinancing by the reporting date. The existing
agreement contains a provision that allows DEF Bank to demand full repayment immediately
upon the loan's original maturity if refinancing is not finalized.

Even though ABC Corporation expects the refinancing to be approved, there is no formal and
binding refinancing agreement signed as of December 31, 2024.

Analysis:

 Per PAS 1, ABC Corporation does not have an unconditional right to defer settlement for at
least 12 months after the reporting date.
 Since the refinancing agreement was not finalized before the reporting period, the entire
₱8,000,000 must be classified as a current liability instead of a non-current liability.

LIABILITIES PAYABLE ON DEMAND

 Liabilities that are payable upon the demand of the lender are classified as current.
 A long-term obligation may become payable on demand as a result of a breach of a loan
provision. Such an obligation is classified as current even if the lender agreed, after the reporting
period and before the authorization of the financial statements for issue, not to demand the
payment. This is because the entity does not have an unconditional right to defer settlement of
liability for at least 12 months after the reporting period.
 However, the liability is noncurrent if the lender provides the entity by the end of the reporting
period (e.g. on or before December 31) a grace period ending at least 12 months after the
reporting period, within which the entity can rectify the breach and during which the lender
cannot demand immediate repayment.

Sample Problem: Current Asset

The Ledger of ABC [Link] of December 31, 2011 includes the following

Cash 5,000
Trade accounts receivable (net of P5,000 credit
balance in accts) 20,000
Held for trading securities 40,000
Financial Assets designated at FVPL 15,000
Investment in equity securities at FVOCI 35,000
Investment in bonds measured at amortized
cost (due in 3yrs) 30,000
Prepaid Assets 5,000
Deferred tax assets (expected to reverse on
2012) 6,000
Investment in Associate 18,000
Investment Property 23,000
Sinking fund 19,000
PPE 50,000
Goodwill 14,000
Totals 280,000

1. Compute for the total current assets.

Solution:

Cash 5,000
Trade accounts receivable 25,000
Held for trading securities 40,000
Financial Assets designated at FVPL 15,000
Prepaid Assets 5,000
Total Current Assets 90,000

Sample Problem: Current Liabilities

The ledger of ABC [Link] of December 31, 2011 includes the following:

Bank overdraft 5,000

Trade accounts payable (net of P5,000 debit 20,000
balance in accounts
Notes payable (due in 20 semi-annual payments 40,000
of P2,000
Interest payable 15,000
Bonds Payable (due on March 31, 2012) 35,000
Discount on bonds payable (15,000)
Dividends payable 5,000
Share dividends payable 6,000
Deferred tax liability (expected to reverse in 18,000
2012)
Income tax payable 22,000
Contingent liability 50,000
Reserve for contingencies 14,000
Totals 215,000

1. Compute for total current liabilities