4. Notes to Financial Statements

Question 1

Contain information in addition to the presented in the financial statements.

It provides narrative descriptions or disaggregation of item in those statements and information about items that do not qualify for recognition in those statements.

Answer 1

Notes to Financial Statements

Question 2

Purpose of Notes to Financial Statements

Answer 2

• To present information about the basis of preparation of FS and the specific accounting policies used.
• To disclose the information required by the PFRS that is not presented in the FS.
• To provide additional information that is not presented in the FS, but is relevant to an understanding of any of them.

Question 3

Structure of Notes to Financial Statement

Answer 3

(1) Statement of Compliance with PFRS
(2) Summary of significant accounting policies applied
(3) Supporting information for each line item presented in the FS
(4) Other disclosures - including contingent liabilities, unrecognized contractual commitments, and non-financial disclosures like entity’s financial risk management objectives and policies.

Question 4

An entity whose financial statements comply with PFRS shall make an explicit and unreserved statement of such compliance in the notes.

Answer 4

Statement of Compliance with PFRS

Question 5

True or False:

Management considers whether disclosure will assist users in understanding how transaction, other events, and conditions are reflected in the reported financial performance and financial position.

Answer 5

True

Question 6

True or False:

Disclosure of particular accounting policies is useful to users when those policies are selected from alternatives allowed in the Standard and Framework.

Answer 6

False ; Standards and Interpretations

Question 7

The summary of significant accounting policies shall disclose:

Answer 7

a.) measurement basis used in preparation of FS
b.) other accounting policies used

Question 8

True or False:

An entity shall disclose in the summary of significant accounting policies the judgments apart from those involving estimations that management has made in the process applying the entity’s accounting policies.

Answer 8

True

Question 8

True or False:

An accounting policy may not be significant because of the nature of the entity’s operation even if amounts for current and prior periods are not material. It is also appropriate to disclose each significant accounting policy that is not specifically required by the PFRS.

Answer 8

False ; may be significant

Question 9

True or False:

Accounting policies have been consistently applied to all the years presented, unless otherwise stated.

Answer 9

True

Question 10

True or False:

The accompanying financial statements have been prepared on a current cost basis, except for available-for-sale financial assets which have been measured at fair value.

Answer 10

False ; prepared on a historical cost basis

Question 11

True or False

The financial statements are presented in Philippine peso, the functional and presentation currency of the Company.

Answer 11

True

Question 12

True or False:

The financial statements must be prepared in compliance with Philippine Financial Reporting Standards (PFRS). The Company also prepares and issues financial statements presented in accordance with PFRS.

Answer 12

True

Question 13

True or False:

The accounting policies adopted are not consistent with those of the previous financial year except for the following amended PFRS and PAS and PIC.

Answer 13

False ; are consistent

Question 14

An entity shall disclose in the notes:

Answer 14

a.) amount of dividends proposed or declared before the financial statements were authorized for issue

b.) amount of any cumulative preference dividends not recognized.

Question 15

Entity shall disclose the following if not disclosed elsewhere:

Answer 15

a.) domicile and legal form of the entity (address of the registered office and principal place of business.)

b.) Nature of operation and principal activities

c.) Name of the ultimate parent of the group

Question 16

An entity shall disclose in the notes information about the key assumptions concerning the future, that may have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year.

Answer 16

Sources of Estimation Uncertainty

Question 17

True or False:

Sources of Estimation Uncertainty

With respect to assets and liabilities, the note shall include details of:

a.) nature
b.) carrying amount as of the date of statements of financial performance

Answer 17

a.) true
b) false ; statement of financial position