Acctg 3120 - Chapter 14

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General Purpose Financial Statements

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Are those intended to meet the needs of users who are not in a position to demand reports tailored to meet their particular information needs.

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Management (Head of the Entity with the Head of Finance/Accounting)

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The responsibility over financial statements rests with the entity's?

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Statement of Management Responsibility for Financial Statements

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This shall be attached to the financial statements as a cover letter

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Fair Presentation

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It means the faithful representation of the effects of transactions and other events in accordance with the definitions and recognition criteria for assets, liabilities, revenue, and expenses in the PPSAS.

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Explicit and Unreserved statement of such compliance in the notes

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An entity whose financial statements comply with the PPSAS shall make an?

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True

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Financial statements shall not be described as complying with the PPSAS unless they comply with ALL the requirements of PPSAS. (T/F)

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are not

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Inappropriate accounting policies (are or are not) rectified either by disclosure of the accounting policies used,or by notes or explanatory material

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True

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The entity may depart from the requirement from PPAS if relevant regulatory framework allows, or otherwise does not prohibit such departure. (T/F)

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Going Concern Basis

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The financial statements shall be prepared on what basis? unless there is an intention to discontinue the entity operation or there is no realistic alternative but to do so.

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False

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The presentation and classification of itens in the financiak statements shall not be retained from one period to the next. (T/F)

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False

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Each material class of similar items shall not be presented separately in the financial statements. (T/F)

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Immaterial

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Items of a dissmilar nature or function shall be presented separately unless they are?

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Face of the Financial Statements or in the Notes.

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If a line item is not material, it is aggregated with other items either on the?

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False

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A specific disclosure requirement in a PPSAS need to be satisfied if the information is not material (T/F)

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Shall not

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Assets, Liabilities, Revenue, and Expenses (shall or shall not) be offset unless required by a PPSAS or when offsetting reflects the substance of the transaction or other event.

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True

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Comparative information shall be disclosed with respect to the previous period for all amounts reported in the financial statements. (T/F)

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1. Name of the reporting entity

2. Whether the FS cover the individual entity or a group of entity

3. The reporting date or the period covered by the FS

4. Name of Fund Cluster

5. The reporting currency

6. The level of rounding-off of accounts

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What information shall be displayed prominently and repeatedly?

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Annually

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Financial statements shall be presented at least?

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Statement of Financial Position

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It shows the entity's financial condition as at a certain date. It presented in comparative, condesed and detailed formats.

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Condensed Statement of Financial Position

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It presents only the surface line items. The breakdowns and other relevant information are disclosed in the Notes.

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Detailed Statement of Financial Position

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This presents all the asset, liabilility and equity accounts in the Revised Chart of Accounts.

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Annual Financial Statements

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Both the condesed and detailed statement of financial position form part of the entity's what?

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Current and Noncurrent assets and liabilities

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The statement of financial position shall show distinctions between?

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1. Expected to be realized or held for sale/consumption in the entity's NORMAL OPERATING CYCLE.

2. Held primarily for trading.

3. Expected to be realized within 12 months after the reporting date.

4. It is cash/cash equivalent unless restricted from being used to settle a liability for at least 12 months after reporting date.

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It is a current assets if it is?

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1. Expected to be settled in the entity's normal operating cycle.

2. Held primarily for trading.

3. Due to be settled within 12 months after the reporting date.

4. The entity does not have an unconditional right to defer settelement of the liability for at least 12 months after the reporting date.

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It is a Current Liability if it is?

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Statement of Financial Performance

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This shows the revenue, expenses and surplus or deficit for the period. It is presented in comparative, condensed, and detailed formats.

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1. Correction of prior period errors.

2. Effecr of changes in accounting policies

3. Gains or losses on remeasuring available-for-sale financial assets.

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Generally, revenue and expenses are recognized in surplus or deficits, except for the following which are recognized directly in equity:

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True

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The nature and amount of material items of revenue and expense are disclosed separately. (T/F)

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Function or Nature (whichever is more relevant)

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Expenses may be presented according to their?

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True

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If expenses are classified by function, additional disclosures shall be made on the nature of expenses. (T/F)

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Statement of Changes in Net Assets/Equity

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This shows the increase or decrease in the entity's net assets during the period resulting from

a. Surplus or Deficity for the period

b. Items of revenue and expense that are recognized directly in equity

c. Effects of changes in ACCTG policies and correction of errors

d.The balance of accumulated surplues and deficits at the beginning of the period and at the reporting date, and the changes during the period.

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Statement of Cash Flows

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This shows the sources and utilizations of cash and cash equivalents during the peiod according to Operating, Investing, and Financing Activities

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1. Surplus or Deficity for the period2. Items of revenue and expense that are recognized directly in equity3. Effects of changes in ACCTG policies and correction of errors4.The balance of accumulated surplues and deficits at the beginning of the period and at the reporting date, and the changes during the period.

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How net assets/equity increase or decrease in the reporting period?

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Operating Activities

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These are primatily dericed from the principal cash-generating activities of the entity. Normally include cash flows on items of revenue and expenses

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Operating Activities

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Receipt of NCA and reversion of unused NCA is an example of what activity?

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Investing Activities

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This involves the acquistion and disposal of non-current assets and other investments.

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Investing Activities

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Example of what?

Acquisition and disposal of PPE, investment property, intangible assets and other noncurrent assets.

.

.

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Investing Activities

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Acquisition and disposal of investment securities and derivatives is example of whar activity?

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Investing Activities

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Collection and provision of long term-loans is an example of what activity?

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Operating Activities

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Receipt or provision of assistance and subsidy to other entities is an example of what activity?

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Operating Activities

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Collection of income and receivables is an example of what activity?

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Operating Activities

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Payments of expenses, cash advances, and payables are examples of what activity?

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Operating Activities

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Inter or intra-entity transfer of funds is an example of what activity?

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Financing Activities

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These are activities that affecr the entity's equity capital and borrowings.

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Financing Activities

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Issuing of notes, loans, and vonds payable, and their repayments are example of what activity?

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Financing Activities

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Finance lease payments pertaining to the reduction of the outstanding finance lease liability is an example of what activity?

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Cash flow Information

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This information provides a basis for assessing an entity's ability to generare cash and cash equivakenrs and its utilization of funds.

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exclude

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Cash flows (include or exclude) movements between cash and cash equivalents.

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Direct Method

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Cash flows from operating activities are presented using what?

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Direct Method

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Under this method, majot classes of gross cash receipts and gross cash payments are presented

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Indirect Method

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This method is available to business entities and is not allowed for government entitities.

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1. From the accounting records of an entity

2. By adjusting relevant accounts for changes during the period.

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Information about major classes of gross cash receipts and gross cash payments may be obtained either?

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Notes to Financoal Statements

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A reconciliation of the accrual basis surplus or deficit with the net cash flow from operating activities shall be provided in the?

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False (Major dapat)

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Cash flow from investing and financing activities are also presented according to minor classes of gross cash receipts and gross cash payments. (T/F)

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True

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Cash flows may be reported on a net basis. (T/F)

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Spot exchange rate at the date of the cash flow

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Cash flows denominated in a foreign currency are translated using the?

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False

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Exchange diffrerences are not reconciliation of the cash and cash equivalents but cash flows at the beginning and end of the period. (T/F)

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True

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Exhange difference are reported in the statement of cash flows separately from the operating, investing, and financing activities (T/F)

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True

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Any significant amount of cash and cash equivalents held that is not available for the entity's use shall be disclosed in the notes. (T/F)

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Statement of comparison of budget and actual amounts

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This shows the differences (variances) between budgeted amounts and actual results for a given reporting period. It enhances the transparency of financial reporting of the government.

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Budget Information

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It consists of data on appropriations, allotments, obligations, revenues, and other receipts, and disbursements. (based on budget registries)

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Original Budget

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This is the initially approved budget for the period, usually the GAA

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True

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The original budget may include residual appropriated amounrs automatically carried over from prior years by law. (T/F)

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Final Budget

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This is the original budget adjusted for all reserves, carry-over amounts, realignments, transfers, allocations and other authorized legislative, or similar authority changes applicable to the period.

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Actual amounts on a comparable basis

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These represent the actual disbbursements made during the period.

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Cash basis

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Actual amounts on a comparable basis to the budgeted amounts are on what basis?

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False (may not always)

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Actual amounts on a comparable basis is always equal to the amounts presented in the other financial statements. (T/F)

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Basis Differences

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It is a difference that occur when the approved budget is prepared on a basis other than the accounting basis.

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Timing Differences

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It is a difference that occur when the budget period differs from the reporting period reflected in the financial statements.

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Entity differences

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It is a diffrence that occur when the budget omits program or entities thata re part of the entity for which the finacial statements are prepared.

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True

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The statement of comparison of budget and actual amounts is peculiar to government entities. Business entities are not required to prepare this statement in their external reporting. (T/F)

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Notes to Financial Statements

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It provides information in addition to thise presented in other financial statements

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Events after the reporting date

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Are those events, both favorable and unfavorable, that occur between the reporting date and the date when the financiak statements are authorized for issue.

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Adjusting events

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These are events after the reporting date that provide evidence of conditions that existed at the reporting date.

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Non-adjusting events

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These are events after the reporting date that are indicative of conditions that arose after the reporting date.

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Reporting Date

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This is the date at the end of the calendar year.

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Date of Authorization of financial statements for issue

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This is the date of signing of the Statement of Management's Responsibility for Financial Statements by the Head of Agency and Head of Finance Department

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Non-adjusting events

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These events are disclosed only, if they are material.

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Accounting Policies

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

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1. required by PPSAS

2. results to a reliable and more relevant inormation

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An entity may change an accounting policy if the change is?

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1. Change from one basis of accounting to another basis of accounting

2. Change in the accounting treament, recognition, or mewasurement of a transaction

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Considered changes in accounting policies

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1. Transitional provision

2. Retrospective Application

3. Propespective Application

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Change in accounting policy is accounted for as?

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Retrospective application

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It involves adjusting the opening balance of each affcted account for the earliest period presented as if the new accounting policy had always been applied.

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Changes in Accounting estimates

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This is the result from new imformation or new developments and, accordingly, are not correction of errors.

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Propestive Application

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It involves recognizing the effect of the change in surplus or deficit either in the period of change or period of change and future periods, if the chaqnge affects both.

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Prospective application

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A change in accounting estimate is accounted for by?

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Errors

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It include mathematical mistakes, incorrect application of accounting policies, oversights, or misinterpretations of facts, and fraud.

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False (do not comply)

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Finacial statements comply with the PPSAAS if they contain material errors or immaterial errors made intentionally. (T/F)

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Current period errors

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These are errors committed, and discovered, in the current year which are corrected by correcting entries within the same year.

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Period period errors

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These are errors committed in prior years that are discovered in the current year.

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Retrospective restatement

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Material prior period errors are corrected by?

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Retrospective statement

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It invloves correcting the prior period errors as if they have never occured.

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Prospectively

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If the retrospective restatement is not practiceable, prior peroid errors are corrected how?

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Consolidated Financial Statements

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These are the financial statements of an economic entity presented as those3 of a single entity.

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Controlling Entity

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It is an entity that has one or more controlled entities.

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Controlled entity

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It is an entity, including an unincorporated entity such as a partnership, which is under the control of another entity.

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True

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All controlled entity shall be consolidated, except for one that is held to be sold within 12 months from acquisition. (T/F)

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True

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A controlled entity is not excluded from consolidation simply because its activities are dissimilar to those of the other entities in the group. (T/F)

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Control

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It exists if the entity has both the power to govern the financial and operating policies of another entity and the ability to benefit from the activities of the other entity.

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Separate Financial Statements

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These are presented by a controlling entity, an investor in an associate, or a venturer in a jointly controlled entity, in which the investments are accounbted for on the basis of the direct net assets/equity interest

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1. using the equity method

2. As a financial instrument At fair value

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In the separate financial statements, investments in controlled entities, jointly controlled entities, and associates are accounted for by?

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Interim Financial Statements

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This is prepared by government entities on a quaterly basis using the same accounting policies used in annual reports.

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1. Trial balances

2. Other schedules (regional breakdown of Income and Expenses)

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In addition to the financial statements, government entities are also required to prepare and submit what?

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On or before January 20 of the following year.

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The deadline of Provincial offices and Operating units is ?

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Auditor, Regional Accountant

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Where Provincial offices and operating units will submit reports?

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On or before January 31 of the following year

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When is the deadline of reports for Regional/Branch Offices?

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Regional Auditor, Central Office Chief Accountant

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Where the Regional/Branch Offices submit their reports?

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February 14 of the folowing year

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The deadline of Central/Head/Main Office submission of report is when?

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Regional Auditor, Central Office Chief Accountant

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The monthly report of Central/Head/Main office is submitted to?

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COA Auditor, DBM, COA- Government Accountancy Sector

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The yearend report of Central/Head/Main office is submitted to?