Similarities and Differences of

Full PFRS and PFRS for SMEs

Full PFRS

PFRS for SMEs

Financial
Statements

A statement of changes in equity is

required, presenting a reconciliation of
equity items between the beginning
and end of the period.

Same requirement. However, if the only

changes to the equity during the period
are a result of profit or loss, payment of
dividends, correction of prior-period
errors or changes in accounting policy, a
combined statement of income and
retained earnings can be presented
instead of both a statement of
comprehensive income and a statement
of changes in equity.

Business
Combinations

Transaction costs are excluded under

PFRS 3 (revised).Contingent
consideration is recognized regardless
of the probability of payment.

Transaction costs are included in the

acquisition costs. Contingent
considerations are included as part of
the acquisition cost if it is probable that
the amount will be paid and its
fair value can be measured reliably.

Investments in
Investments in associates are
associates
accounted for using the equity
and joint ventures method. The cost and fair value model
are not permitted except in separate
financial statements. To account for a
jointly controlled entity, either the
proportionate consolidation method or
the equity method are allowed. The
cost and fair value model are
not permitted.

An entity may account of its

investments in
associates or jointly controlled entities
using one of the following:
The cost model (cost less any
accumulated impairment losses).
The equity method.
The fair value through profit or loss
model.

Financial
instruments
derivatives and
hedging

There are two sections dealing with

financial instruments: a section for
simple payables and receivables,
and other basic financial instruments;
and a section for other, more complex
financial instruments. Most of the basic
financial instruments are measured at
amortized cost; the complex instruments
are generally measured at fair value
through profit
or loss.

Financial instruments: Recognition

and measurement, distinguishes four
measurement categories of
financial instruments that is,
financial assets or liabilities at fair
value through profit or loss, held-tomaturity investments, loans and
receivables and available-for-sale
financial assets.

Non-financial
assets and
goodwill

For tangible and intangible assets,

there is an accounting policy choice
between the cost model and the
revaluation model. Goodwill and other
intangibles with indefinite lives are
reviewed for impairment and not
amortized.

The cost model is the only permitted

model. All intangible assets, including
goodwill, are assumed to have finite
lives and are amortized.

Employee
benefits defined
benefit plans

Employee benefits, actuarial gains or

losses can be recognized immediately
or amortized into profit or loss over
the expected remaining working lives
of participating employees.

Requires immediate recognition and

splits the expense into different
components.

The use of an accrued benefit

valuation method (the projected unit
credit method) is required for
calculating defined benefit
obligations.

Income taxes

A deferred tax asset is only recognized

to the extent that it is probable that
there will be sufficient future taxable
profit to enable recovery of the
deferred tax asset.

There is no specific guidance on

uncertain tax positions.

Recognition
of the elements of
the financial

The circumstance-driven approach is

applicable, which means that the use of
an accrued benefit valuation method
(the projected unit credit method) is
required if the information that is
needed to make such a calculation is
already available, or if it can be
obtained without undue cost or effort. If
not, simplifications
are permitted in which future salary
progression, future service or
possible mortality during an employees
period of service are not considered.

A valuation allowance is recognized so

that the net carrying amount of the
deferred tax asset equals the highest
amount that is more likely than not to be
recovered. The net carrying amount of
deferred tax asset is likely to be the
same between full PFRS and PFRS for
SMEs.

In practice, management will record

the liability measured as either
a single best estimate or a weighted
average probability of the possible
outcomes, if the likelihood is greater
than 50%.

Management recognises the effect of the

possible outcomes of a review by the
tax authorities. It should be measured
using the probability-weighted average
amount of all the possible outcomes.
There is no probable recognition
threshold.

Same as PFRS for SMEs. In

addition, regard needs to
be given to the materiality

Recognition is the process of

incorporating in the balance sheet or
income statement an item

statements

considerations.

that meets the definition of an element

and satisfies the following criteria:
It is probable that any future economic
benefit associated with the item will
flow to or from the entity.
The item has a cost or a value that can
be measured reliably.
A failure to recognize an item that
satisfies these criteria is not rectified by
disclosure of accounting policies used
or by notes or explanatory materials.
An item that fails to meet the
recognition criteria may qualify for
recognition at a later date as a result of
subsequent circumstances or events.

Measurement
bases

The measurement bases include

historical cost, current cost, realizable
value and present value. The
measurement basis most commonly
adopted is historical cost. However,
certain items are valued at fair
value (for example, investment
property, biological assets and
certain categories of financial
instrument).

Items are usually accounted for at their

historical cost. However, certain
categories of financial instruments,
investments in associates and joint
ventures, investment property and
agricultural assets are valued at fair
value. All items other than those carried
at fair value through profit or loss are
subject to impairment

Transition
to PFRS for
SMEs/PFRS

The first-time adopter of PFRS

is an entity that presents
its first annual financial
statements that conform to
PFRS.

The first-time adopter of the PFRS for

SMEs is an entity that presents its first
annual financial statements that
conform with the PFRS for SMEs
regardless of whether its previous
accounting framework was full PFRS or
another set of generally accepted
accounting principles.

The mandatory exceptions are

the same as in PFRS for SMEs;
the optional exemptions are
similar but not exactly the
same as a result of differences
between the sections in the
PFRS for SMEs and full PFRS.

First-time adoption requires full

retrospective application of the IFRS for
SMEs effective at the reporting date for
an entitys first IFRS for SMEs financial
statements. There are five mandatory
exceptions, 12 optional exemptions and
one general exemption to the
requirement for retrospective
application.
The entity is not permitted to benefit
more than once from the special first-

time adoption measurement and

restatement exemptions.

Group 3
Javier, Joy Angelique
Blanco, Anne Julia
Marzol, Elaine Grace
Resurreccion, Katrina
Englatera, Karmela
Tito, Chester