PAS 8: Basis of Preparation of Financial Statements - 3

PAS 8

Prescribes the basis of preparation of financial statements

Inter-comparability

Comparability between different entities in a single period

Intra-comparability

Comparability within a single entity but in different periods

Fair presentation

It is faithfully representing, in the financial statements, the effects of transactions and other events in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Conceptual Framework

Relevant regulatory framework

Refers to the accounting principles and other financial reporting requirements prescribed by a government regulatory body

Management

It is responsible for an entity’s financial statements

The preparation and fair presentation of financial statements in accordance with PFRSs

Internal control over financial reporting

Going concern assessment

Oversight over the financial reporting process

Review and approval of financial statements

Management’s responsibility over financial statements:

Statement of Management’s Responsibility for Financial Statements

The responsibilities are expressly stated in a document called? Which it is attached to the financial statements as a cover letter

Chairman of the Board

Chief Executive Officer

Chief Financial Officer

Statement of Management’s Responsibility for Financial Statements document is signed by the entity’s:

Accounting policies

The specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements

PFRS Accounting Standards

Judgement

Hierarchy of reporting standards:

Philippine Financial Reporting Standards

Philippine Accounting Standards

Interpretations

PFRS Accounting Standards comprise:

Required by a PFRS Accounting Standard

Results in reliable and more relevant information

PAS 8 permits a change in accounting policy only if the change:

Conditions that differ in substance from those previous occurring

Conditions that did not occur previously or were immaterial

The following are not changes in accounting policies:

Transitional provision in a PFRS Accounting Standard

Retrospective application, in the absence of a transitional provision

Prospective application, if retrospective application is impracticable

Changes in accounting policies are accounted for using the following order of priority:

Retrospective application

Adjusting the opening balance of each affected component of equity for the earliest prior period presented and other comparative amounts disclosed for each prior period presented as if the new accounting policy had always been applied

Impracticable

It cannot be done after making every reasonable effort to do so

Voluntary change in accounting policy

It is accounted for by retrospective application

Accounting estimates

Monetary amounts in financial statements that are subject to measurement uncertainty

Changes in accounting estimates

It is accounted for by prospective application

Prospective application

Recognizing the effects of the change in profit or loss

Period of change

Period of change and future periods, if both are affected

Effects of the change in profit or loss:

Errors

Include misapplication of accounting policies, mathematical mistakes, oversights or misinterpretations of facts, and fraud

Material errors

Those that cause the financial statements to be misstated

Intentional errors

Also known as fraud

Error of commission

Doing something wrong

Error of omission

Not doing something that should have been done

Current period errors

Prior period errors

The types of errors according to the period of occurrence are as follows:

Current period errors

Errors in the current period that were discovered either during the current period or after the current period but before the financial statements were authorized for issue

Prior period errors

Errors in one or more prior periods that were only discovered either during the current period or after the current period but before the financial statements were authorized for issue

Retrospective Restatement

Restating the comparative amounts for the prior period presented in which the error occurred. Correcting a prior period error as if the error had never occurred