PFRS 11 Joint Arrangement

- Prescribes the principles for financial reporting by parties to a joint arrangement.

Definition

Joint Arrangement – an arrangement of which two or more parties have joint control.

Essential Element

1. Contractual arrangement – contractual agreement for sharing of joint control over an investee.
 Contract between the parties or minutes of discussion between the parties
 Arrangement is incorporated in the articles or other by-laws of the joint arrangement
2. Joint control – the contractually agreed sharing of control of an arrangement, which exist only
when there is a unanimous consent of the parties sharing control. An investor obtains joint
control over an investee through contractual agreement with fellow investors.

Types of Joint Arrangement

1. Joint operation – parties that have joint control of the arrangement have rights to the assets
and obligations for the liabilities, called joint operators.
 not structured through a separate vehicle
MEASUREMENT: JO’s ALE + JOperation’s ALE
2. Joint venture - parties that have joint control of the arrangement have rights to the net assets
of the arrangement, called joint venturers.
MEASUREMENT: recognizes interest as an investment using equity method under PAS 28
 Initial measurement under Equity Method:
Investement at COST
 Subsequent
Adjusted for the investor’s share in the changes in the equity of the investee including:
 Profit/loss
 Dividend declared
 Results of discontinued operations
 Other comprehensive income
 PRESENTATION: of investment is non-current asset in the statement of financial
position, except when they are classified as held for sale.

NOTE: Assets and liabilities relating to the arrangement are held in a separate vehicle can be either joint
venture or a joint operation
PFRS 12 Disclosure of Interests in Other Entities

- Prescribe the minimum disclosure requirements for an entity’s interests on other entities,
particularly (a) the nature of, and risks associated with, those interests and (b) the effects of
those interests on the entities financial statements.

Applies to entities that have an interest in a(an):

1. Subsidiary
2. Joint arrangement (joint operation and joint venture)
3. Associate
4. Unconsolidated structured entity

Summary of minimum disclosures under PFRS 12

Significant judgment and assumptions

- that an entity has made in determining the ff:

a. existence of control, joint control or significant influence over an investee.
b. the type of joint arrangement when the arrangement has been structured through a
separate vehicle

PFRS 13 Fair Value Measurement

- applies to both initial and subsequent measurement at fair value

Fair Value – not an entity specific measurement, requires the use of assumptions, and presumes that the
entity is a going concern without any intention of liquidating

- Market-to-market accounting

Characteristics that affect the fair value measurement of asset and liability:

1. The condition and location of the asset

2. Restriction, if any, on the sale or use of the asset

Fair value measurement may be applied to (depending on the unit of account of asset or liability):

1. A stand-alone asset or liability

2. A group of assets or liabilities, or group of assets and liabilities

The market (takes place either)

a. In the principal market for the asset and liability; or – market with the greatest volume and level
of activity for the asset or liability
 b. In the most advantageous market

The price

- Is adjusted only for any transport cost

Transport cost – cost that would be incurred to transport an asset from its location to its principal

Transaction cost – cost to sell an asset or transfer a liability in the principal market that are directly
attributable to the disposal of the asset or the transfer of liability

Transaction price – price paid to acquire an asset or price received to assume a liability, called entry
price

Fair value – price that would be received to sell and asset or paid to transfer a liability, called exit price

3 valuation technique

1. Market approach
2. Cost approach – current replacement cost
3. Income approach – discounts future amount

Bid and ask price

1. Bid price – maximum price at which market participants are willing to buy an asset
2. Ask price – minimum price at which market participants are willing to sell an asset

Fair value Hierarchy

Level 1 – quoted prices for identical assets or liabilities in an active market (most reliable)

Level 2 – other than quoted prices either directly or through corroboration with observable data

Level 3 – unobservable inputs (least reliable)

Fair value measurement of non-financial assets

- Entity considers the asset’s highest and best use

PFRS 14 Regulatory Deferral Accounts

- Specifies the financial reporting requirements for regulatory deferral account balances arising
from the sale of goods or services that are subject to rate regulation.
- An optional standard that is available only to first-time adapters.
- Intended to provide first-time adapters a temporary relief from derecognizing rate-regulated
assets and liabilities
- A first-time adapter is allowed, but not required, to apply PFRS 14 in its first PFRS financial
statement if he conducts rate-regulated activities and has recognized regulatory deferral
accounts under with its previous GAAP.
- An entity is allowed to apply PFRS 14 in subsequent periods only if it has applied PFRS14 in its
first PFRS financial statement.
- . First-time adapters are allowed to continue its previous GAAP except for changes in
accounting policy and the presentation of regulatory deferral account.

PRESENTATION

Statement of Financial Position

Separated line items

1. Regulatory deferral account debit balances

2. Regulatory deferral account credit balances

Statement of Profit or Loss and Other Comprehensive Income

Separate line items

1. In OCI for the net movement of regulatory deferral account balances that will be and will not be
reclassifies to p/l
2. In p/l for the remaining net movement of regulatory deferral account balances

PFRS 14 is a standard for regulatory deferral accounts that are subject to rate regulation as
a result of selling goods and services which is only available to first-time adopters and that
existing PFRS users are prohibited to do so. This standard is intended to provide a
temporary relief from derecognizing rate-regulated asset and liabilities that has been
recognized by first-time adapter in its previous GAAP and once they applied PFRS 14 in their
first financial statement, they are allowed to apply it subsequently. PFRS 14 is presented in
statement of financial position as separate line items —the total (1) regulatory deferral
account debit balance; and (2) regulatory deferral account credit balance. PFRS 14 also
prescribed specific exception, exemption, and additional requirements related to its
 interaction with other standards which includes PAS 10, PAS 12, PAS 33, PAS 36, PFRS 3,
PFRS 5, PFRS 10, and PFRS 12.

PFRS 15 Revenue from Contracts with Customers

- Provides the principles in reporting the nature, amount, timing and uncertainty of
revenue and cash flows arising from an entity’s contracts with customers.

Revenue – income arising in the course of an entity’s ordinary activities.

Income – encompasses both revenue and gains.

- Increases in economic benefits during accounting period in the form of inflows or

enhancements of asset or decreases of liabilities that result in increase in equity.

Revenue recognition

Step 1: identify the contract with the customer

NOTE: Any consideration received from a contract is recognized as a liability and recognized as
revenue only when either:

a. The entity has no remaining obligation to transfer goods or services to the customer
and all, or substantially all, of the consideration has been received and is non-
refundable; or
b. The contract as been terminated and the consideration received non-refundable

Step 2: identify the performance obligation in the contract

Each promise to transfer the following is a performance obligation to be accounted for

separately:

a. A distinct good or service; or

b. A series of distinct goods or services that are substantially the same and have the same
pattern of transfers to the customer

A promised goods or service is distinct if:

a. A customer can benefit from the good or services either o its own or together with
other resources that are readily available to the customer; and
b. The promise to transfer the good or service is separately identifiable from other
promises in the contract.
Step 3: determine the transaction price – TS the amount of consideration to which an entity expects to
be entitled in exchange for transferring promised goods or services to a customer, excluding amounts
collected on behalf of a third party.

- May include fixed or variable amount, or both

Step 4: allocate the transaction price to the performance obligations in the contract

Step 5: recognize revenue when (or as) the entity satisfies a performance obligation

Contract inception whether the performance obligation will be satisfied

a. Over time – measuring the progress and uses single method in measuring the progress
Appropriate methods of measuring progress:
1. Output method – base on direct measurements
2. Input method – base on efforts or inputs, and revenue may be recognized on a
straight-line basis
b. At a point in time

Contract cost

1. Incremental costs of obtaining a contract – recognized as asset if they are expected to

be recovered, they are expensed when incurred if the expected amortization period of
the asset is one year or less.
2. Cost to fulfill a contract
PFRS 17 Insurance Contract

- Applies to the accounting for insurance and reinsurance contracts, including investment
contracts with discretionary participation features, by an insurer.

Essential Elements

1. Transfer of significant risk

2. Payment from the insured
3. Indemnification against loss
Other than cash:
a. By replacing the insured property; or
b. By providing services, such as medical, repair, or other services

Insurance risk – transferred from the policyholder of a contract to the issuer

- Include only pure risk (results only to loss)

Types of insurance contract

1. Direct insurance contract

2. Reinsurance contract (insurance of an insurance)

Initial measurement of group of insurance contract

1. The fulfillment cash flows, and – weighted estimate of PV of the future cash outflows
minus PV of the future cash inflows that will arise as the entity fulfills insurance
contracts, including a risk adjustment for non-financial risk
2. The contractual service margin – unearned profit in a group of insurance contracts that
the entity recognizes as it provides services in the future.

Subsequent measurement

Onerous contract – if the fulfillment cash flows at initial recognition is a net outflow.

Measurement model

1. General measurement model

2. Premium allocation approach

Investment contract with discretionary participation features

 - Financial instrument that gives an investor a contractual right to receive additional
payment

Modification of insurance contract

- The original contract is derecognized and the modified contract is recognized as a new
contract if the contract meets any of the ff conditions:

Derecognition

An insurance contract is derecognized when:

a. It is extinguished, when the obligation in the insurance contract expired or is discharged

pr cancelled; or
b. The contract s modified and the modification meets any of the conditions for
derecognition.

Presentation

Statement of Financial Position

Carrying amount of the ff are presented separately:

1. Insurance contract issued that are assets;

2. Insurance contract issued that are liabilities;
3. Reinsurance contracts held that are assets; and
4. Reinsurance contracts held that are liabilities.

Statement of financial performance

The amount recognized in the statement of p/l and oci are disaggregated into the ff:

1. Insurance service result, comprising insurance revenue and insurance service expenses;
and
2. Insurance finance income or expenses