PFRS For SMEs - Baseline 2013

IFRS/ PFRS for SMEs
IFRS Baseline 2013
FOR I NTERNAL USE O NLY

IFRS Baseline 2013 IFRS/PFRS for SMEs 1
Agenda
Background and overview
Scope and definition
Maintenance
Considerations prior to adopting the
IFRS for SMEs
SEC Guidelines
Topics by section
References
SME
No public accountability
General purpose financial

statements
Individual jurisdictions decide who is permitted or required to use the IFRS for
SMEs
FOR INTERNAL USE ONLY. 2013 Manabat Sanagustin & Co., CPAs, a Philippine partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative ("KPMG International"), a Swiss entity. All rights reserved..
Public accountability
Debt or equity traded in

public market (or in process
of issuing)
or
Holds assets in fiduciary

capacity as primary
business(es)
An entity with public accountability cannot claim compliance with the IFRS for
SMEs (even if jurisdiction permits its use)
Example publicly accountable or not
An entitys only business is earning interest on money that it

lends to its clients. The entity obtains all of its funds direct from
its two owner-managers both of whom are billionaires (i.e. the
entity does not take deposits from customers).
Question:
Is the entity publicly accountable or not?
FOR FOR INTERNAL USE ONLY. 2013 Manabat Sanagustin & Co., CPAs, a Philippine partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Example not publicly accountable

The entity is not publicly accountable.
Its instruments are not traded in a public market and it does not hold assets in a
fiduciary capacity for a broad group of outsiders. The business of lending money to
the general public does not itself give rise to public accountability. Note: Banks
typically have public accountability because of their deposit-taking activities rather
than their lending activities. The entity in this example does not take deposits from a
broad group of outsidersit holds assets only for its two owner-managers.
Source:
Module 1 Small and Medium-sized Entities

IASC Foundation: Training Material for the IFRS for SMEs (version 2010-1)
Maintenance
Maintenance:
Thorough implementation review after two years
Thereafter, omnibus exposure draft approximately every three years
Second half of 2013 The IASB deliberates amendments to proposals
in the exposure draft and agrees final revisions to IFRS for SMEs.
Second half of 2013 or first half of 2014 The IASB publishes final
revisions to the IFRS for SMEs.
Target date in 2015 Effective date of revisions
Until the IFRS for SMEs is amended any changes made to full IFRSs
will not apply to the IFRS for SMEs
Considerations prior to adopting the IFRS for

SMEs
Local financial reporting requirements
Users and comparability to other entities
Business impacts
Long-term goals
Group reporting
Cost
Covered Corporations (as SMEs)

Covered corporations (as SMEs):
Have total assets of between P3 million and P350 million or total
liabilities of between P3 million and P250 million (If the entity is a
parent company, the said amounts shall be based on the
consolidated figures.);
Are not required to file financial statements under part II of the SRC
Rule 68, as amended;
Are not in the process of filing their financial statements for the
purpose of issuing any class of instruments in a public market;
Are not holders of secondary licenses issued by a regulatory
agency.
Exemptions from mandatory adoption of

PFRS for SMEs
SMEs shall use PFRS for SMEs as adopted by SEC. However,
the following SMEs shall be exempt from the mandatory
adoption of PFRS for SMEs and may instead apply, at their
option, the PFRS:
An SME which is a subsidiary of a parent company reporting under

the PFRS;
An SME which is a subsidiary of a foreign parent company which
will be moving towards IFRS pursuant to the foreign countrys
published convergence plan;
An SME which is a subsidiary of a foreign parent company and has
been applying the standards for a non-publicly accountable entity
for local reporting purposes. It is considering moving to PFRS
instead of the PFRS for SMEs in order to align its policies with the
expected move to full IFRS by its foreign parent company pursuant
to its countrys published convergence plan;

PFRS for SMEs (continued)
An SME, either as a significant joint venture or associate, is
a part of a group that is reporting under the PFRS;
An SME which is a branch office or regional operating

headquarter of a foreign company reporting under the IFRS;
An SME which has a subsidiary that is mandated to report

under the PFRS;
An SME which has a short term projection that show that it

will breach the quantitative thresholds set in the criteria for an
SME. The breach is expected to be significant and continuing
due to its long-term effect on the companys asset or liability
size;
An SME which has a concrete plan to conduct an initial

public offering within the next two years;

PFRS for SMEs (continued)
An SME which has been preparing financial statements
using PFRS and has decided to liquidate;
Such other cases that SEC may consider as valid exceptions

from the mandatory adoption of PFRS for SMEs.
An SME availing of any of the above-mentioned grounds for

exemption shall provide a discussion in its notes to financial
statements of the facts supporting its adoption of the PFRS
instead of PFRS for SMEs.
Breach of floor or ceiling
If an SME that uses the PFRS for SMEs in a current year

breaches the floor or ceiling of the size criteria at the end of that
current year, and the event that caused the change is
considered significant and continuing, the entity shall transition
to the applicable financial reporting framework in the next
accounting period. If the event is not considered significant and
continuing, the entity can continue to use the same financial
reporting framework it currently uses.
The determination of what is significant and continuing shall be

based on managements judgment taking into consideration
relevant qualitative and quantitative factors. As a general rule,
20% or more of the consolidated total assets or total liabilities
would be considered significant.
Module 1 Small and Medium-sized Entities

Source: IASC Foundation: Training Material for the IFRS for SMEs (version 20101)
IFRS for SMESs
is intended to apply to the general

purpose financial statements only
of entities that do not have public
accountability.
FULL IFRSs
are designed to apply to the

general
purpose
financial
statements and other financial
reporting of all profit-oriented
entities.
Concepts and pervasive principles

(Section 2)
Objective of financial statements of SMEs:

To provide information about financial position, performance and
cash flows useful for the economic decision-making of a broad
range of users
Qualitative characteristics of information in financial

statements:
Understandability
Relevance
Reliability
Materiality
Substance over form
Prudence
Completeness
Comparability
Timeliness
Balance between benefit and cost
Financial statement presentation

(Sections 3 to 8)
Set of financial statements prepared in accordance with the

IFRS for SMEs comprises:
Statement of financial position
Statement of comprehensive income (or a separate income
statement and statement of comprehensive income
Statement of changes in equity
Statement of cash flows (using direct or indirect method)
Notes
Explicit and unreserved statement of compliance with the

IFRS for SMEs must be made when, and only when,
financial statements comply with all requirements of the
IFRS for SMEs
Allows a true and fair override when regulatory framework
permits
Financial statement presentation

(Sections 3 to 8)
Combined statement of income and retained earnings:

Only profit or loss, dividends, error correction, change in accounting
policy
Third statement of financial position not required

If expenses presented by function in statement of
comprehensive income, then further disclosure by nature
not required in notes
Module 3 Financial Statement Presentation

IFRS for SMESs
is drafted in simple language and

includes much less guidance on how to
apply the principles. Section 3 deals
only with general presentation issues.
Other issues are set out in Sections 4
6.
an entity that has changes to equity
during the periods for which financial
statements are presented that arise
only from profit or loss, payment of
dividends, corrections of prior period
errors, and changes in accounting
policy may present a single statement
of income and retained earnings in
place
of
the
statement
of
comprehensive income and statement
of changes in equity.
FULL IFRSs
IAS 1 deals with all issues relating to

presentation of financial statements.
presentation simplification is not

available to entities that report in
accordance with full IFRSs.

IFRS for SMESs
does not have an equivalent

requirement of preparing the
third balance sheet.
does not require segment

information to be presented in
financial statements.
FULL IFRSs
management
includes
a
statement of financial position as
at the beginning of the earliest
comparative period when an
entity applies an accounting
policy retrospectively or makes a
retrospective restatement of items
in its financial statements, or
when it reclassifies items in its
entity that prepares its financial
statements in compliance with full
IFRS must prepare segment
information in accordance with
IFRS 8 Operating Segments.

IFRS for SMESs
does not require earnings per

share to be presented in
FULL IFRSs
entity that prepares its financial

statements in compliance with full
IFRS must present earnings per
share in accordance with IAS 33
Earnings per Share.
Note: An entity that chooses to

present segment information or
earnings per share, or both,
must disclose that fact and
describe the basis for preparing
and presenting that information.
Module 4 Statement of Financial Position

IFRS for SMESs
requires presentation of only two

statements of financial position.
FULL IFRSs
when financial statements are

restated retrospectively, full
IFRSs require presentation of
three statements of financial
position.
Module 5 Statement of Comprehensive Income and Income

Statement
Source: IASC Foundation: Training Material for the IFRS for SMEs (version 2010-1)
IFRS for SMESs
has only three items of other

comprehensive income (OCI)
translating the financial statements
of a foreign operation, some
changes in fair values of hedging
instruments and actuarial gains
and losses of defined benefit
plans.
except for specified gains and

losses on hedging instruments
(see Section 12 Other Financial
Instrument Issues) the IFRS for
SMEs does not permit
reclassification.
FULL IFRSs
have
more
items
of
comprehensive
income
(e.g.
cumulative changes in the fair
value of available-for-sale financial
assets
and
gains
on
the
revaluation of property, plant and
equipment and intangible assets).
require reclassification through

profit or loss of some items of OCI
(sometimes
called
recycling)
when they become realized (e.g.
those in respect of available-forsale financial assets and the
translation of foreign operations).

Statement
IFRS for SMESs
does
not
explicitly
require
additional disclosures of expenses
by nature.
FULL IFRSs
if the entity that applies full IFRSs

classifies its expenses by function,
it is also required to disclose
information on the nature of
expenses.

Statement
IFRS for SMESs
does not require separate

presentation in the statement of
financial position of non-current
assets held for sale.
However, paragraph 27.9 of the
IFRS for SMEs identifies plans to
discontinue or restructure the
operation to which an asset
belongs and plans to dispose of
an asset before the previously
expected date as internal sources
of information that indicate that an
asset may be impaired.
FULL IFRSs
IFRS 5 requires a non-current

asset held for sale (including the
non-current
assets
of
a
discontinued operation) to be
carried at the lower of its carrying
amount and fair value less
estimated costs to sell the asset.

Statement
IFRS for SMESs

The existence
of such indicators
compels the entity to perform an
impairment test on the asset (i.e.
compute its recoverable amount)
(see paragraph 27.7). Paragraph
4.14
specifies
disclosure
requirements when, at the reporting
date, an entity has a binding sale
agreement for a major disposal of
assets or a group of assets and
liabilities.
Module 6 Statement of Changes in Equity and Statement of

Income and Retained Earnings
IFRS for SMESs
on disposal of a foreign operation,

there is no requirement to
reclassify through profit or loss any
cumulative exchange differences
that were recognized previously in
other comprehensive income.
FULL IFRSs
under IAS 21, cumulative foreign

exchange differences relating to
such operation are reclassifies to
profit or loss on disposal.
Module 8 Notes to the Financial Statements

IFRS for SMESs

disclosure requirements are substantially
FULL IFRSs
disclosure requirements are extensive.
reduced.
The reasons for the reductions are of four
principal types:
(a) Some disclosures are not included
because they relate to topics covered in
full IFRSs that are omitted from the IFRS
for SMEs.
(b) Some disclosures are not included
because they relate to recognition and
measurement principles in full IFRSs that
have been replaced by simplifications in
the IFRS for SMEs.
(c) Some disclosures are not included
because they relate to options in full
IFRSs that are not included in the IFRS
for SMEs.
(d) Some disclosures are not included on
the basis of users needs or cost-benefit
considerations.
Consolidated financial statements

(Section 9)
A SME that is a parent prepares consolidated financial

statements unless:
Entity is itself a subsidiary and its ultimate or intermediate parent
produces consolidated general purpose financial statements that
comply with full IFRSs or IFRS for SMEs; or
Its only subsidiaries were acquired with intention of selling or
disposing of them within one year
Subsidiaries consolidated using same reporting date as

parent, unless impracticable
Uniform accounting policies
Consolidated financial statements

(Section 9)
When parent loses control of a subsidiary, gain or loss

calculated as difference between:
Proceeds from the disposal; and
Carrying amount at date of disposal
Note: any remaining interest is not remeasured.
Cumulative exchange differences not reclassified to profit or

loss on disposal of a foreign operation
Combined financial statements

(Section 9)
Financial statements for two or more entities controlled by

the same investor
Permitted but not required
If described as complying with the IFRS for SMEs, then

must comply with all requirements of the standard
Accounting policy hierarchy

(Section 10)
When no specific guidance is available in the IFRS for

SMEs, consider in descending order:
Guidance in the IFRS for SMEs on similar and related issues
Definitions, recognition criteria and measurement concepts in
Section 2 Concepts and Pervasive Principles
May consider full IFRSs, but not required to do so

No reference made to considering the pronouncements of
other standard-setters
Financial instruments
(Sections 11 and 12)
Accounting policy choice for all financial instruments to
apply either:
Financial instruments sections of IFRS for SMEs (Section
11 and 12); or
IAS 39 plus disclosure requirements of IFRS for SMEs
Financial instruments dealt with in two sections:
Section 11 basic financial instruments
Section 12 other financial instruments
Two classification categories:
Amortized cost
Fair value through profit or loss
Basic financial instruments

(Section 11)
Examples normally within scope of Section 11:
Cash
Demand and fixed-term deposits
Debt instruments such as accounts, notes and loans
receivable and payable
Bonds and similar debt instruments
Investments in non-convertible preference shares
Investments in non-puttable ordinary or preference shares
Commitments to receive a loan that cannot be settled net in
cash
Basic financial instruments

(Section 11)
Initial measurement
Transaction price (except financing transactions)
Transaction costs included (except for financial instruments
at FVTPL)
Subsequent measurement
Amortised cost using effective interest rate. Exceptions:
Investments in non-convertible preference shares and non-puttable
ordinary or preference shares are measured at FVTPL if can be
determined reliably; otherwise cost less impairment
Commitments to receive loans measured at cost less impairment
Section 11 Basic Financial Instruments

Main Differences
Section 11 IFRS for SMEs
Classification of financial
instruments
Amortized cost
Full IFRS
FVTPL
Initial recognition
Transaction price (plus

transaction cost if not FVTPL)
Classification of financial assets

FVTPL
HTM
Loans and receivables

FVTOCI
Initial recognition
Fair value (plus transaction cost

if not FVTPL)
Section 11 Basic Financial Instruments

Main Differences
Section 11 IFRS for SMEs
Derecognition
Simpler derecognition principles
applied to financial asset (all or
nothing with recognition of
retained or newly created rights
or obligations in certain cases)
Disclosures
Significance disclosures of
IFRS 7 is retained but risk
disclosures are not explicitly
included
Full IFRS
Derecognition
Complex derecognition
principles applied to part of a
financial asset or a financial
asset
Disclosures
Extensive disclosures required

by IFRS 7
Other financial instruments

(Section 12)
Examples normally within the scope of Section 12:
Options, rights, warrants, futures, forwards
Interest rate swaps that can be settled net in cash or by
exchanging another financial instrument
Qualifying hedging instruments
Asset-backed securities
Commitments to give a loan
Commitments to receive a loan that can be settled net in
cash
Other financial instruments

(Section 12)
Measurement
Fair value through profit or loss
Limited exceptions
Contracts to buy or sell a non-financial item
Not accounted for as financial instruments unless:
Contain risks not typical of contracts to buy or sell that item
Can be settled net in cash or another financial instrument, or by
exchanging financial instruments, unless entered into and held for
receipt or delivery of the non-financial item in accordance with
entitys expected purchase, sale or usage requirements
Other financial instruments hedge accounting

Hedge accounting permitted only for the following risks:
Interest rate risk
Debt instrument at amortised cost
Firm commitment or highly probable transaction
Currency risk
Net investment in a foreign operation
Commodity price risk:
Commodity held

Items allowed to be designated as hedging instruments:
Interest rate swaps
Foreign currency swaps
Foreign currency forward exchange contracts
Commodity forward exchange contracts

Conditions to be met with regard to hedging instrument:
Involves parties external to reporting entity
Notional amount equals designated amount of hedged item
Specified maturity date no later than: maturity date of
hedged item; expected settlement date of commodity
purchase or sale commitment; or occurrence of the highly
probable forecast transaction hedged
No prepayment, early termination or extension features
Module 14 Investments in Associates

IFRS for SMESs
permits an entity to account for

investments in associates in its
primary financial statements using
three different modelsthe
equity method, the cost model
and the fair value model. The
chosen model is applied to all
investments in associates.
under the equity method, requires
that implicit goodwill be
systematically amortized
throughout its expected useful life
(see paragraph 14.8(c)).
FULL IFRSs
require investments in associates

to be accounted for using the
equity method in an investors
primary financial statements.
does not allow the amortization of

goodwill (see IAS 28, paragraph
23(a)).
Module 15 Investments in Joint Ventures

IFRS for SMESs
permits an entity to choose to

account for investments in jointly
controlled entities in its primary
financial statements using one of
three different modelsthe
equity method, the cost model
and the fair value model. The
chosen model is applied to all its
investments in jointly controlled
entities.
under the equity method, requires
that implicit goodwill be
systematically amortized
throughout its expected useful life
(see paragraphs 15.13 and
14.8(c)).
FULL IFRSs
require investments in jointly

controlled entities to be accounted
for using the equity method in an
investors primary financial
statements or proportionate
consolidation (an accounting policy
choice).
does not allow the amortization of

goodwill (see IAS 28, paragraph
23(a)).
Investment property
(Section 16)
Measurement:
Fair value through profit or loss, if fair value can be
determined reliably without undue cost or effort on an

ongoing basis
Otherwise accounted for as PPE (see slide 50)
Mixed-use property
Separated between investment property and PPE

If fair value of investment property cannot be determined
reliably without undue cost or effort, account for entire
property as PPE
Investment property
(Section 16)
Property held by a lessee under an operating lease

May be classified as investment property if:
Otherwise would meet definition of investment property; and
Its fair value can be measured without undue cost or effort on an
ongoing basis
Classification alternative available on a property-byproperty basis
Property, plant and equipment

(Section 17)
Measurement after initial recognition

Cost less accumulated depreciation and impairment losses
Component accounting applies
Revaluation model not permitted
Review useful lives, residual values and depreciation
methods only when indication they have changed
Intangible assets other than goodwill

(Section 18)
Measurement after initial recognition

Cost less accumulated amortization and impairment losses
Revaluation model not permitted
Amortized over useful life; if unable to reliably estimate,
presumed to be 10 years
Test for impairment only when there is an indication of
impairment
Review useful lives, residual values and amortization
methods only when indication they have changed
Useful lives
All intangible assets are considered to have finite useful
lives
Intangible assets other than goodwill

(Section 18)
Research and development expenditure

Expense as incurred
Capitalization of development expenditure not permitted
Acquired as part of a business combination
Not recognized separately from goodwill if its fair value
cannot be measured reliably:
Not separable from goodwill
No history / evidence of exchange transactions, and estimates
depend on immeasurable variables
Business combinations and goodwill

(Section 19)
Recognition and measurement requirements largely

consistent with IFRS 3 (2004) rather than IFRS 3 (2008):
Definition of a business combination
Treatment of transaction costs, contingent consideration, contingent
liabilities
Calculation of goodwill and non-controlling interest
Scope consistent with IFRS 3 (2008):

Business combinations achieved by contract alone and business
combinations between mutual entities not excluded from scope
Business combinations and goodwill

(Section 19)
Goodwill
Calculation of goodwill consistent with IFRS 3 (2004)
Considered to have a finite useful life
Subsequent measurement consistent with intangible
assets, i.e., cost less accumulated amortization and
impairment losses
Amortized over useful life; if unable to reliably estimate,

presumed to be 10 years
Tested for impairment only when indication
Equity
(Section 22)
Shares issued before consideration received:

Increase equity with corresponding receivable debited to
equity
Consideration received before shares issued:

Credit equity if no obligation to repay
Shares subscribed for but no consideration received:
No increase in equity
Bonus shares and share splits:
No increase in equity
Distributions of non-cash assets:
No exemptions from fair value model
Government grants
(Section 24)
Measurement
Fair value of the assets received
Recognition
If no specified performance conditions recognize in
income when proceeds receivable
If specified performance conditions recognize in income
when conditions met
Recognize as liability before recognition criteria satisfied
Share-based payment
(Section 26)
Recognition and measurement like full IFRSs, except:

If the entity or counterparty has choice of cash or equity
instruments, then treat as cash-settled unless:
Entity has past practice of settling by issuing equity instruments; or
Option has no commercial substance
SMEs parent grants SBP award to employees of SME:
SME permitted to recognise and measure a SBP expense (and
related capital contribution) based on reasonable allocation of
expense recognised for group
Employee benefits
(Section 28)
Defined benefit schemes

Accounting policy choice for actuarial gains or losses:
Profit or loss; or
Other comprehensive income
Calculation of obligation:
If necessary information can be obtained without undue cost or effort,
use projected unit credit method consistent with IAS 19
If necessary information cannot be obtained without undue cost or
effort, a simplified approach is applied
Employee benefits
(Section 28)
Actuarial valuations:
Not required annually
Roll-forward procedures
Introduction, change, curtailment, settlement
Any gain or loss recognized in profit or loss in current period
Group plans
Permitted to recognize charge based on reasonable
allocation of group charge (if parent presents consolidated
financial statements under full IFRSs or IFRS for SMEs)
Employee benefits
(Section 28)
Short-term versus long-term benefits

Short-term: Wholly due within 12 months of end of period in
which employee renders service
Long-term: Not wholly due within 12 months of end of

period in which employee renders service
Module 28 Employee Benefits

IFRS for SMESs

entity is required to recognize past service
costs as an expense in measuring profit or
loss of the period of the change (i.e.
immediately).
for cost-benefit reasons, provides for some

measurement simplifications that retain the
basic IAS 19 principles but reduce the need
for SMEs to engage external specialists.
Accordingly, if information based on the
projected unit credit method is not available
and cannot be obtained without undue cost
or effort, SMEs must apply an approach that
is based on IAS 19 but does not consider
future salary progression, future service or
possible mortality during an employees
period of service. This approach still takes
into account life expectancy of employees
after retirement age. The resulting defined
benefit pension obligation reflects both
vested and unvested benefits.
FULL IFRSs
requires an entity to recognize unvested past
service cost as an expense on a straight-line

basis over the average period until the
benefits become vested.
requires that a defined benefit obligation
should always be measured using the
projected unit credit actuarial method.

IFRS for SMESs
clarifies that comprehensive

valuations would not normally be
necessary annually. In the interim
periods, the valuations would be
rolled forward for aggregate
adjustments for employee
composition and salaries, but
without changing the turnover or
mortality assumptions.
FULL IFRSs
comprehensive actuarial valuation

on an annual basis is not required
but entities have to make sure
amounts recognized in financial
statements do not differ materially
from amounts that would be
determined at end of reporting
period.

IFRS for SMESs
requires the simplest of the

methods permitted by IAS 19 (i.e.
immediate recognition of actuarial
gains and losses when they
occur).
does not specify that an entity that
elects to recognize actuarial gains
and losses in other comprehensive
income must also recognize any
adjustments arising from the asset
recognition limits in other
comprehensive income.
FULL IFRSs
permit an entity to choose between

various methods of recognizing
actuarial gains and losses.
require an entity that elects to

recognize actuarial gains and
losses in other comprehensive
income also to recognize in other
comprehensive income any
adjustments arising from the asset
recognition limits for plan
surpluses set out in paragraph
58(b) of IAS 19.

IFRS for SMESs
describes actuarial assumptions

as estimates about demographic
variables (such as employee
turnover and mortality) and
financial variables (such as future
increases in salaries and medical
costs) that influence the cost of the
benefit.
disclosure requirements for
defined benefit plans in Section 28
are less detailed than those
specified in IAS 19.
FULL IFRSs
define actuarial gains and losses

and specify their composition. In
the context of measuring the
present value of an entitys defined
benefit obligation.
disclosure requirements of IAS 19

are more extensive.
Income tax
(Section 29)
Current and deferred tax
Current Tax
Recognition
An entity shall recognize a tax liability for tax payable
on taxable profit
for the current and past periods.

Measurement
An entity shall measure a current tax liability (asset) at the amounts it

expects to pay (recover) using the tax rates and laws that have been
enacted or substantively enacted by the reporting date.
Income tax
(Section 29)
Deferred Tax
Recognition
An entity shall recognize a deferred tax liability for all temporary differences
that are expected to increase taxable profit in the future.
An entity shall recognize a deferred tax asset for all temporary differences
that are expected to reduce taxable profit in the future.
An entity shall recognize a deferred tax asset for the carryforward of unused
tax losses and unused tax credits
Income tax
(Section 29)
Deferred Tax
Exceptions from recognition of deferred tax asset or liability
An entity shall not recognize a deferred tax asset or liability for temporary
differences associated with unremitted earnings from foreign subsidiaries,
branches, associates and joint ventures to the extent that the investment is
essentially permanent in duration, unless it is apparent that the temporary
difference will reverse in a forseeable future.
An entity shall not recognize a deferred tax liability for a temporary difference
associated with the initial recognition of goodwill.
Income tax
(Section 29)
Deferred Tax
Measurement
An entity shall measure a deferred tax liability (asset) using the tax rates and
laws that have been enacted or substantively enacted by the reporting date.
The measurement of deferred tax liabilities and deferred tax assets shall
reflect the tax consequences that would follow from the manner in which the
entity expects, at the reporting date to recover or settle the carrying amount
of the related assets and liabilities.
Income tax
(Section 29)
Deferred Tax
Valuation Allowance
An entity shall recognize a valuation allowance against deferred tax assets
so that the net carrying amount equals the highest amount that is more likely
than not to be recovered based on current or future taxable profit.
Offsetting
An entity shall offset current tax assets and current tax liabilities, or offset
deferred tax assets or deferred tax liabilities, only when it has a legally
enforceable right to set off the amounts and it intends either to settle on a
net basis or to realize the asset and settle the liability simultaneously.
Income tax
(Section 29)
Discounting of current or deferred tax assets and liabilities is prohibited.
There is no initial recognition exemption for a deferred tax asset or liability

arising on the initial recognition of an asset or liability in a transaction that is not
a business combination, and at the time of the transaction affects neither
accounting profit or taxable profit.
Related party disclosures (Section 33)

Disclosure requirements and definition of related parties similar to
full IFRSs (including the revisions of IAS 24 Related Party
Disclosures 2009)
Disclosure of key management personnel compensation in

aggregate, not by category of benefit
Exempted from disclosure of relationships and transactions with

the state and other state-controlled entities, except for parentsubsidiary relationship
Specialized industries
(Section 34)
Extractive activities
No specific guidance
Apply relevant sections of IFRS for SMEs
Agriculture
Measure biological assets at cost less accumulated
depreciation and impairment losses if fair value is not
reliably determinable without undue cost or effort
Service concessions
Accounting treatment like that in full IFRSs
Not clear whether same arrangements will be classified as

service concession arrangements under full IFRSs and
IFRS for SMEs
Transition to IFRS for SMEs

(Section 35)
Transitional provisions apply to all first-time adopters of the

IFRS for SMEs (including an entity that previously used full
IFRSs)
An entity can be a first-time adopter of the IFRS for SMEs

only once
Mandatory exemptions:
Derecognition
Accounting estimates
Discontinued operations
Measuring NCI
Voluntary exemptions:
Business combinations
Share-based payments
Fair value as deemed cost
Revaluation as deemed cost

Cumulative translation
differences
IFR
Transition to IFRS for SMEs

(Section 35)
Voluntary exemptions (continued):

Deferred income tax
Service concession
arrangements
Extractive activities
Compound financial
instruments
Arrangements containing a
lease
Decommissioning liabilities
Separate financial statements
Apply transitional provisions to earliest period practicable
IFR
Other differences from full IFRSs
Borrowing costs (25)

Expensed as incurred (capitalization prohibited)
Foreign currency translation (30)
On disposal of a foreign operation cumulative exchange
differences relating to that operation recognized in OCI are
not reclassified to profit or loss
Operating leases (20)
If payments are structured to increase in line with expected
inflation, then timing of recognition of income and
expenditure reflects this
Inventories (13)
Permitted to use most recent purchase price if this

approximates cost
Other differences from full IFRSs
Revenue: construction of real estate (23)

If accounted for as a sale of goods, then revenue
recognized only upon delivery of completed real estate to
the buyer
Impairment of non-financial assets (27)
Test for impairment only when indication of impairment
exists
Topics in full IFRSs excluded from IFRS for SMEs
Earnings per share

Segment reporting
Assets held for sale and discontinued operations
Interim reporting
Insurance
Topics with no significant differences from full

IFRSs
Provisions and contingencies (Section 21)

Hyperinflation (Section 31)
Events after the end of the reporting period (Section 32)
References
1. IFRS for SMEs
Standards
Basis for Conclusions
Illustrative Financial Statements
Presentation and Disclosure Checklist
2. SRC Rule 68, as amended

3. The IFRS for SMEs: Considering the alternatives
(KPMG)
4. IFRS for SMEs Educational Session (KPMG)
5. IASC Foundation: Training Material for the IFRS for
SMEs
Full text of the relevant section

Extensive explanations
Self-assessment questions
Case studies
Thank You
FOR INTERNAL USE ONLY

2013 Manabat Sanagustin & Co., CPAs, a Philippine partnership and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved..
The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of
KPMG International Cooperative ("KPMG International").

PFRS For SMEs - Baseline 2013

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IFRS/ PFRS for SMEs

IFRS Baseline 2013

FOR I NTERNAL USE O NLY

Scope and definition

General purpose financial

IFRS Baseline 2013 IFRS/PFRS for SMEs 4

Scope and definition

Debt or equity traded in

Holds assets in fiduciary

IFRS Baseline 2013 IFRS/PFRS for SMEs 5

Example publicly accountable or not

An entitys only business is earning interest on money that it

Is the entity publicly accountable or not?

Cooperative ("KPMG International"), a Swiss entity. All rights reserved..

IFRS Baseline 2013 IFRS/PFRS for SMEs 6

Example not publicly accountable

Module 1 Small and Medium-sized Entities

Cooperative ("KPMG International"), a Swiss entity. All rights reserved..

IFRS Baseline 2013 IFRS/PFRS for SMEs 7

Cooperative ("KPMG International"), a Swiss entity. All rights reserved..

IFRS Baseline 2013 IFRS/PFRS for SMEs 8

Considerations prior to adopting the IFRS for

Cooperative ("KPMG International"), a Swiss entity. All rights reserved..

IFRS Baseline 2013 IFRS/PFRS for SMEs 9

Covered Corporations (as SMEs)

Cooperative ("KPMG International"), a Swiss entity. All rights reserved..

IFRS Baseline 2013 IFRS/PFRS for SMEs 10

Exemptions from mandatory adoption of

An SME which is a subsidiary of a parent company reporting under

Cooperative ("KPMG International"), a Swiss entity. All rights reserved..

IFRS Baseline 2013 IFRS/PFRS for SMEs 11

Exemptions from mandatory adoption of

An SME which is a branch office or regional operating

An SME which has a subsidiary that is mandated to report

An SME which has a short term projection that show that it

An SME which has a concrete plan to conduct an initial

Cooperative ("KPMG International"), a Swiss entity. All rights reserved..

IFRS Baseline 2013 IFRS/PFRS for SMEs 12

Exemptions from mandatory adoption of

Such other cases that SEC may consider as valid exceptions

An SME availing of any of the above-mentioned grounds for

Cooperative ("KPMG International"), a Swiss entity. All rights reserved..

IFRS Baseline 2013 IFRS/PFRS for SMEs 13

Breach of floor or ceiling

If an SME that uses the PFRS for SMEs in a current year

The determination of what is significant and continuing shall be

Cooperative ("KPMG International"), a Swiss entity. All rights reserved..

IFRS Baseline 2013 IFRS/PFRS for SMEs 14

Module 1 Small and Medium-sized Entities

IFRS for SMESs

is intended to apply to the general

are designed to apply to the

IFRS Baseline 2013 IFRS/PFRS for SMEs 20

Concepts and pervasive principles

Objective of financial statements of SMEs:

Qualitative characteristics of information in financial

Cooperative ("KPMG International"), a Swiss entity. All rights reserved..

IFRS Baseline 2013 IFRS/PFRS for SMEs 21

Financial statement presentation

Set of financial statements prepared in accordance with the

Explicit and unreserved statement of compliance with the

Cooperative ("KPMG International"), a Swiss entity. All rights reserved..

IFRS Baseline 2013 IFRS/PFRS for SMEs 22