This publication provides an illustrative set of consolidated financial statements, prepared in accordance with Philippine Financial Reporting Standards (PFRS), for a fictional manufacturing, wholesale and retail publicly-listed company, Moonwalk Corporation.
Moonwalk Corporation is an existing preparer of PFRS consolidated financial statements. The PFRS, Philippine Accounting Standards (PAS), and interpretations of the Philippine Interpretations Committee (PIC), Standing Interpretations Committee (SIC) and International Financial Reporting Interpretations Committee (IFRIC) considered in preparing these illustrative corporate consolidated financial statements are those issued by Financial Reporting Standards Council (FRSC) up to October 31, 2013 which are effective for annual periods beginning on or after January 1, 2013. These illustrative financial statements do not therefore reflect the effect of the standards that may be issued after October 31, 2013.
Significant changes from the 2012 Illustrative Financial Statements have been highlighted in pink throughout the document, while minor changes are highlighted in yellow.
Significant changes are as follows:
Updated Note 2 for the changes in accounting policies. Note only the standards, amendments and interpretations that have a significant impact on the fictional company have been disclosed.
This is consistent with PwC's view that "disclosures [of standards, amendments and interpretations] are not necessary in respect of standards and interpretations that are clearly not applicable to the entity (for example industry-specific standards) or that are not expected to have a material effect on the entity. Instead, disclosure should be given in respect of the developments that are, or could be, significant to the entity. Management will need to apply judgement in determining whether a standard is expected to have a material effect. The assessment of materiality should consider the impact both on previous transactions and financial position and on reasonably foreseeable future transactions. For pronouncements where there is an option that could have an impact on the entity, the management expectation on whether the entity will use the option should be disclosed."
Updated presentation and disclosures to reflect the impact of the adoption of the new standards and amendments to existing standards which are effective January 1, 2013, as follows:
Included in Appendix IV an illustrative Schedule of Philippine Financial Reporting Standards effective as at December 31, 2013.
Please note that these illustrative financial statements do not include the forthcoming requirements to be issued by the Philippine Interpretations Committee on defined contribution plans and the Philippine Securities and Exchange Commission on the Revised SRC Rule 68.
|Standards, amendments or interpretations||Effective date|
|PFRS 10, Consolidated Financial Statements||1/1/2013|
|PFRS 11, Joint Arrangements||1/1/2013|
|PFRS 12, Disclosure of Interests in Other Entities||1/1/2013|
|PFRS 13, Fair Value Measurement||1/1/2013|
|PAS 19 (Revised), Employee Benefits||1/1/2013|
|PAS 27 (Revised) , Separate Financial Statements||1/1/2013|
|PAS 28 (Revised), Investments in Associates and Joint Ventures||1/1/2013|
|Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine||1/1/2013|
|Amendments to PFRS 1: Government Loans||1/1/2013|
|Amendments to PFRS 7 and PAS 32: Disclosures - Offsetting Financial Assets and Financial Liabilities||1/1/2013|
|Amendments to PFRS 10: Transition Guidance||1/1/2013|
|Amendments to PFRS 11: Transition Guidance||1/1/2013|
|Amendments to PFRS 12: Transition Guidance||1/1/2013|
|Amendments to PAS 1: Presentation of Items of Other Comprehensive Income||7/1/2012|
PAS 8, par. 30 states that when an entity has not applied a new Standard or Interpretation that has been issued but is not yet effective, the entity shall disclose this fact and known or reasonably estimable information relevant to assessing the possible impact of the application of the new Standard or Interpretation on the entity's financial statements in the period of initial application.
In complying with paragraph 30, an entity considers disclosing, at the minimum, the title of the new Standard or Interpretation; the nature of the impending change or changes in accounting policy; the date by which application of the Standard or Interpretation is required; the date in which it plans to apply the Standard or Interpretation initially; and either (1) a discussion of the impact the initial application of the Standard or Interpretation on the entity's financial statements; or (2) if that impact is not known or reasonably estimable, a statement to that effect.
However, as discussed above, it is PwC's view that disclosure should only be given in respect of the developments that are, or could be, significant to the entity. Disclosure is not necessary for standards, amendments or interpretations that are clearly not applicable to the entity (for example industry-specific standards) or that are not expected to have a material effect on the entity.
The independent auditor's report shall use a single format for signing all reports regardless of recipient. Thus, reports filed with the SEC/BIR and CLIENT'S COPY for printing of annual reports (for listed companies and secondary licensees) and all reports on financial statements released for clients, including those for PwC offices and other parties shall bear the revised standard opinion signature.
There are no changes on the format of the independent auditor's report. However, the form and content of the second section of the auditor's report will vary depending on the nature of the auditor's other reporting responsibilities. For example, in the Philippines, the SEC requires a separate auditor's opinion on supplementary schedules to be submitted by certain issuers (such as public or listed companies) in addition to the financial statements. A sample wording of an unqualified opinion in connection with the submission of SEC supplementary schedules is as follows:
"Our audit was conducted for the purpose of forming an opinion on the basic financial statements as a whole. The supplementary information shown in Schedules A, B, C, D, E, F, G, and H is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole."
In using the Illustrative Financial Statements for existing PFRS users, below are some guidance:
Full compliance with PFRS
For purposes of the preparation of the Illustrative Financial Statements, the terms PFRS was used as the financial reporting framework. Please see No. 2 for guidance applicable to other Frameworks.
Financial Reporting Framework Other than PFRS
An entity is required by paragraph 1.103(a) of PAS 1, Presentation of Financial Statements,to disclose in the notes to financial statements information about the basis of preparation of the financial statements.
Entities that have complied in full with Philippine Financial Reporting Standards (PFRSs) refer to PFRSs as the basis of preparation of the financial statements.
Certain entities, however, have been permitted to defer the application of PFRSs in part or in full, such as entities which are required to comply with PFRS but were allowed by the primary regulator not to apply a specified PFRS(s) or certain provisions of a PFRS (ie, Pre-need companies and Mining Companies) or PFRS for SMEs.
Certain commentaries are provided in footnotes throughout the Illustrative Financial Statements, which may not necessarily be related to Moonwalk Corporation Group. These commentaries provide additional information, warnings, clarifications, and in certain cases, sample disclosures as in the case of revalued property.
Section 2 - Appendices
Users could refer to these appendices for other sample disclosures. These consist of a listing of the standards applicable to Moonwalk Corporation Group, alternative presentation methods, policies and disclosures for areas not relevant to Moonwalk Corporation Group, critical accounting estimates and judgments not relevant to Moonwalk Corporation Group, and selected standards and amendments to standards published but not yet effective.