3. Preparation and Presentation of Financial Statement

Question 1

Philippine Accounting Standards (PAS 1) became effective in the Philippines for annual periods beginning on or after ______

Answer 1

January 01, 2005

Question 2

True or False:

PAS 1 Shall be applied to all general – purpose financial statements
prepared and presented in accordance with the PFRS

Answer 2

True

Question 3

True or False:

The Objectives of PAS 1:

(1) to prescribe the basis for proper presentation of specific - purpose financial statements

(2) to ensure comparability both with the entity’s financial statements of previous periods and with the financial statements of other entities.

(3) to set out overall requirements for the presentation of financial statements, guidelines for their structures, and minimum requirements for their content.

Answer 3

(1) False ; general purpose financial statements
(2) True
(3) True

Question 4

Objectives of PAS 1

Answer 4

(1) Proper Presentation
(2) Comparability
(3) Structure and Minimum Requirements

Question 5

True or False:

PAS 1 shall be applied by:

(1) Entities that prepare and present general – purpose financial statements in accordance with the Philippine Financial Reporting Standards; and

(2) Entities whether or not they need to prepare consolidated financial statements or separate financial statements.

Answer 5

(1) False ; International Financial Reporting Standards

(2) True

Question 6

True or False

Scope of PAS 1

(1) General purpose financial statements does apply to special purpose financial statements

(2) General purpose financial statements does not apply to the structure and content of condensed interim financial statements prepared in accordance with PAS 34, Interim Financial Reporting.

(3) General purpose financial statements deal with recognition, measurement, and disclosure of specific transactions and other events. Those concerns are dealt with in other standards and interpretations.

(4) General purpose financial statements use terminology that is suitable for profit - oriented entities, including public sector business entities.

(5) In the event with not-for-profit activities in the private sector, public sector, or government seek to apply PAS 1, they may need to amend the descriptions used for particular line items in the financial statements for the financial statement themselves.

Answer 6

(1) False ; does not apply to special purpose financial statements
(2) True
(3) False ; does not deal
(4) True
(5) True

Question 7

are structure representation of the
financial position, financial performance, and cash flows of an entity. It also includes the notes which contains additional information.

Answer 7

Financial Statements

Question 8

Basic objective of Financial Statements:

Answer 8

• communication
• providing information about the following
  a.) Financial position
  b.) Financial performance
  c.) Cash flows
  d.) Management stewardship of resources

Question 9

Complete Set of Financial Statements:

Answer 9

(1) Statement of Financial Position
(2) Statement of Financial Performance
(3) Statement of Changes in Equity
(4) Statement of Cash Flows
(5) Notes to Financial Statements (comprising summary of significant accounting policies and other explanatory notes)

Question 10

Basic Features of Fair Presentation

Answer 10

• Faithful representation of effects of transaction, other event and conditions
• Application of the PFRS
• Statement of Compliance

Question 11

True or False:

Indicators of compliance with Fair Presentation

(1) An entity applies all applicable Financial Reporting Standards

(2) An entity selects and applies accounting policies in accordance with PAS 1, Presentation of Financial Statements.

(3) An entity presents information, including accounting policies, in a manner that provides relevant, reliable, comparable, and understandable information.

(4) An entity provides additional disclosures when compliance with the specific requirements in PFRS is sufficient.

Answer 11

(1) True
(2) False ; PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors
(3) True
(4) False ; insufficient

Question 12

True or False:

Departure from compliance with PFRS:

(1) Entities can depart from that requirement if the relevant regulatory framework does not prohibit such departure; or

(2) If the relevant regulatory framework prohibits departures; departure from compliance with PFRS should reduce the misleading aspects of compliance

Answer 12

(1) true
(2) true

Question 13

True or False:

If the Framework does not prohibit departure:
The entity shall disclose:

(1) That management has concluded that the financial statements present fairly the entity’s financial position, financial performance, and cash flows;

(2) That it has complied with applicable Standards and Interpretations, except that it has departed from a particular requirement to achieve a fair presentation;

(3) That the title of the standard or interpretation which the entity has departed, the nature of the departure, including the treatment that the standard or interpretation will require, the reason why that treatment will be misleading in
the circumstances that it will conflict with the objective of financial statements
set out in the Framework, and the treatment adopted; and

(4) That for each period presented, financial impact of the departure from each item in the financial statements will have been reported in complying with the requirement.

Answer 13

All are True

Question 14

True or False:

If the Framework prohibits departure

The entity shall disclose:

(1) The title of the standard in questions, the nature of the requirement, and the reason why management has concluded that complying
with the requirements is misleading that it conflicts with the objectives of the financial statements; and

(2) The adjustment to each item in the financial statements that management has concluded are necessary to achieve fair presentation.

Answer 14

Both are true

Question 15

When assessing whether complying with a specific
requirement in a standard or an interpretation will be so misleading that it will conflict with the objective of financial statements set out in the Framework, the management consider:

Answer 15

• why the objective of financial statement is not achieved
• how the entity’s circumstances differ from those of other entities that comply with the requirements

Question 16

The management shall make an assessment of an entity’s ability to continue as a going
concern.

Answer 16

Going concern

Question 17

When there is significant doubt upon the entity’s ability to continue as a going concern, those uncertainties shall not be disclosed.

Answer 17

false ; shall be disclosed

Question 18

When financial statements are prepared on a going concern, that fact shall be disclosed along with the basis and reason

Answer 18

false ; when fs are not prepared on a going concern

Question 19

When an entity has a history of profitable operation and ready access to financial resources in times of need, a conclusion that the going – concern basis of accounting is appropriate without detailed analysis.

Answer 19

True

Question 20

In assessing whether the entity is going concern, the management should consider:

Answer 20

• current and expected profitability
• debt repayment schedules
• potential sources of replacement financing

Question 21

Effects of transactions and events are recognized when they occur and not as cash that is received or paid and they are recorded in the accounting records and reported in the financial statements of the periods to which they relate.

Answer 21

Accrual Basis

Question 22

The principle of consistency is abandoned when

Answer 22

1. another presentation or classification will be more appropriate
2. standard or an interpretation requires a change in presentation

Question 23

True or False:

Consistency of Presentation

Conditions for change in presentation

(1) the changed presentation provides information that is reliable and more relevant to users of the financial statements; and

(2) The revised structure is likely to continue, so that comparability is not impaired.

Answer 23

both are true

Question 24

True or False:

(1) Omission or misstatement of items are immaterial if they could influence (individually or collectively) the economic decision of the user.

(2) Materiality depends on the size and nature of the omission or misstatement.

(3) Each material class of dissimilar items shall be presented separately in the financial statements.

(4) If a line item is not individually material, it is aggregated with other items.

(5) An item that is not sufficiently material to warrant separate presentation on the face of the financials statements may be sufficiently material to be presented separately in the note.

(6) The specific disclosure requirement need not be satisfied if the information is material

Answer 24

(1) False ; material
(2) True
(3) False ; similar
(4) True
(5) True
(6) False ; not material

Question 25

Assets, and liabilities, and income and expenses shall not be offset unless required or permitted by the standard.

Answer 25

Offsetting

Question 26

True or False:

Comparative Information

(1) Comparison shall be included for narrative and descriptive information when it is relevant to an
understanding of the current period’s financial statements

(2) Comparative information need not to be disclosed with respect to the previous period for all amounts reported in the financials statements except when a standard or an interpretation permits or requires otherwise.

(3) When the presentation or classification of items in the financial statement is amended, comparative amounts shall be reclassified unless the reclassification is impracticable

Answer 26

(1) True
(2) False ; shall be disclosed
(3) True

Question 27

When comparative amounts are reclassified, disclose

Answer 27

(a) Nature of reclassification
(b) Amount of each items or class
(c) Reason

Question 28

When it is impracticable to reclassify:

Answer 28

(a) The reason for not reclassifying the amounts and;
(b) The nature of the adjustments that would have been made if the amounts had been reclassified

Question 29

True or False:

Reporting period is at least annually

Answer 29

True

Question 30

When the financial statements are prepared for a period longer or shorter than one year, an entity shall disclose:

Answer 30

a. The reason for using the longer or shorter period
b. The fact that comparative amounts for the Financial Statements are not entirely comparable