PFRS 1- FIRST-TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS

The Objective: Ensure that the first PFRS financial Statements, including the interim reports covered thereon
contain high Quality Information that is transparent to users, Comparable, makes way for accounting in
accordance with PFRS and can be prepared with cost efficiency.
First- time adoption - Entity that, for the first time, makes an explicit and unreserved statement that its
general purpose financial statements comply with IFRS. First time adopter may be those:
 Who in the preceding years prepared financial statement for internal management use. If it is made
available for external parties like creditors or investors then it is considered to be on IFRS, and IFRS
does not apply.
 An entity can also be a first-time adopter if, in the preceding year, its financial statements: Asserted
compliance with some but not all IFRSs, or included only a reconciliation of selected figures from
previous GAAP to IFRS.
An entity that applied IFRS in a previous reporting period, but whose most recent previous annual financial
statements did not contain an explicit and unreserved statement of compliance with IFRSs can choose to:
apply the requirements of IFRS 1 and retrospectively apply IFRS in accordance with IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors, as if it never stopped applying IFRS.
Recognition and Measurement - PFRS requires an entity to prepare and present an opening PFRS Statement
of financial position at the date of the transition to PFRS.
Accounting Policies: An entity selects its accounting policies based on the latest version of PFRS at the current
reporting period. Then it is applied to all FS. PFRS 1 prohibits the application of non-uniform accounting
policies or earlier versions of PFRS to the comparative periods as these undermine comparability.
Disclosures in the financial statements of a first-time adopter
IFRS 1 requires disclosures that explain how the transition from previous GAAP to IFRS affected the entity's
reported financial position, financial performance and cash flows. This includes: (1) reconciliations of equity
reported under previous GAAP to equity under IFRS both (a) at the date of transition to IFRSs and (b) the end
of the last annual period reported under the previous GAAP. (2) Reconciliations of total comprehensive
income for the last annual period reported under the previous GAAP to total comprehensive income under
IFRSs for the same period. 3. explanation of material adjustments that were made, in adopting IFRSs for the
first time, to the statement of financial position, statement of comprehensive income and statement of cash
flows (the latter if presented under previous GAAP). (4) If errors in previous GAAP financial statements were
discovered in the course of transition to IFRSs, those must be separately disclosed. (5) If the entity recognized
or reversed any impairment losses in preparing its opening IFRS statement of financial position, these must be
disclosed. (6) Appropriate explanations if the entity has elected to apply any of the specific recognition and
measurement exemptions permitted under IFRS 1 – for instance, if it used fair values as deemed cost.

Disclosures in interim financial reports- If an entity is going to adopt IFRSs for the first time in its annual
financial statements for the year ended 31 December 2014, certain disclosure are required in its interim
financial statements prior to the 31 December 2014 statements, but only if those interim financial statements
purport to comply with IAS 34 Interim Financial Reporting. Explanatory information and a reconciliation are
required in the interim report that immediately precedes the first set of IFRS annual financial statements. The
information includes reconciliations between IFRS and previous GAAP.
Exemption to the requirements of PFRS 1
PFRS 1 grants certain exemptions from compliance of Retrospective application requirement when the cost of
the compliance exceeds the expected benefits. PFRS 1 prohibits Retrospective application in cases where
retrospective application requires management judgement about past conditions after the outcome of a
particular transaction is already known.

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PFRS 2 SHARE-BASED PAYMENT - requires an entity to recognize share-based payment transactions (such as
granted shares, share options or share appreciation rights) in its financial statements, including transactions
with employees or other parties to be settled in cash, other assets or equity instruments of the entity. PFRS 2
applies to all entities including subsidiaries using their parent’s or fellow subsidiary’s equity instruments as
consideration for goods and services, and to all share-based payment arrangements except the following: (a)
Transactions with owners (including employees who are also shareholders) acting in their capacity as owners.
(b) Business combinations (c) Issuance of shares as settlement of forward contracts, futures, and other
derivative instruments.
Share-based payment transactions - is a transaction in which entity requires goods or services and pays for
them by issuing its own equity instruments or cash based on the value of its own equity instruments. A share-
based payment transactions can be: (A) Equity-settled share-based payment transaction – one in which the
entity receives good or services and pays for them by issuing its shares of stocks or share options. (B) Cash-
settled share-based payment transaction – one in which the entity receives goods or services and incurs an obligation to
pay cash at an amount that is based on the fair value of its own equity instruments; or Choice between equity-settled
and cash-settled – one in which the entity receives goods or services and either the entity or the counterparty
is given a choice of settlement in the form of equity instruments or cash based on the fair value of equity
instruments.
Recognition - Goods or services acquired in share-based payment transactions are recognized when the goods
are received or as the services are received. Goods or services received do not qualify as assets are
recognized as expenses. The entity recognizes: a corresponding increase in equity if the goods or services are
received in an equity-settled share-based payment transaction, or a liability if the goods or services are
acquired in a cash-settled share-based payment transaction.
Equity instrument granted is “the right (conditional or unconditional) to an equity instrument of the entity
conferred by the entity on another party under a share-based payment arrangement.” Fair value is measured
at the measurement date. For transactions with non-employees, the measuement date is the date when the
entity receives the good and services. For transactions with employees and others providing similar services,
the measurement date is the grant date.
Share-based Compensating plans- is an arrangement whereby, in exchange for services, an employee is
compensated in the form of (or based on) the entity’s equity instrument. The benefits of a share-based
compensation to the employer may include a possible reduction in employee turnover because employees will
have to remain in the entity’s employ during the service period in order to exercise the equity instrument
granted.
Employee Share option plan – an option plan is a “contract that gives the holder the right, but not the
obligation, to subscribe to the entity’s shares at a fixed or determinable price for a specified period of time”.
The measurement is Fair value of equity instruments granted at a grant date and intrinsic value.
Cash settled share based payment transactions- The goods or services received, and liability, are measured at
the fair value of the liability. At the end of the period and even on the settlement date, the liability is
remeasured in profit or loss. The most common form of a cash-settled share-based payment transaction is
share appreciation rights (SARs) granted to an employee.
Choice between equity-settled and cash-settled- A share-based payment transaction that can be settled
either through equity instrument or cash is accounted for depending on which party is given the right of
choice of settlement: The counterparty has the right of choice of settlement; or The entity has the right of
choice of settlement. Transactions with non -employees, the equity component is computed as the
difference between the fair value of goods or services received and the fair value of each debt component at
the date the goods or services are received. While the transactions to employees and others providing similar
services, the entity measures the fair value of the compound instrument.
On settlement date, the liability component is remeasured to fair value. If the entity settles the transaction in
the form of Equity instruments – the liability is transferred directly to equity as consideration for the issuance
of the shares. While the other is through cash – the cash payment is applied as settlement of the liability. The
previously recognized equity component remains within equity, regardless of the settlement option chosen.
The entity has the right to choose - If the entity has the right to choose settlement between cash (or other
assets) or equity instruments, the entity has not granted a compound instrument. Accordingly, the entity
accounts for the transaction as either equity-settled or cash-settled share-based payment transaction,
depending on whether the entity has a present obligation to pay cash.
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PFRS 3- BUSINESS COMBINATION
The objective of PFRS 3 is to enhance the relevance, reliability, and comparability of an acquirer’s financial
reporting by establishing the recognition and measurement principles and disclosure requirements for a
business combination.
A Business combination is a “transaction or other event in which an acquirer obtains control of one or more
businesses.” Transactions referred to as ‘true mergers’ or ‘mergers of equals’ are also business combinations
under PFRS 3. The essential elements in the definition of a business combination is control and business.
Control is when an investor controls an investee when the investor has the power to direct the investee’s
relevant activities. Control is presumed to exist when an investor holds more than 50% interest in the voting
rights while Business is an “integrated set of activities and assets that is capable of being conducted and
managed for the purpose of providing goods or services to customers, generating investment income.
Business combinations are accounted for using the ACQUISITION METHOD. This method requires the
following: Identifying the acquirer, determining the acquisition date; and recognizing and measuring
GOODWILL. This requires recognizing and measuring the following: consideration transferred, non-controlling
interest in the acquire, previously held equity interest in the acquire, identifiable assets acquired and liabilities
assumed on the business combination.
Identifying the acquirer- The acquirer is the entity that obtains control of the acquiree. The acquiree is the
business that the acquirer obtains control of in a business combination. Determining the acquisition date -The
acquisition date is the date on which the acquirer obtains control of the acquiree. This is normally the closing
date (i.e. the date on which the acquirer legally transfers the consideration, acquires the assets and assumes
the liabilities of the acquiree). Consideration transferred in a business combination is measured at fair value,
which the sum of the acquisition-date fair values of the assets transferred by the acquirer, the liabilities
incurred by the acquirer to former owners of the acquiree and the equity interests issued by the acquirer.
Acquisition-related costs are costs that the acquirer incurs to effect a business combination. Examples are:
Finder’s fees, Professional fees, such as advisory, legal, accounting, valuation and consulting fees. General
administrative costs, including the costs, including the costs of maintaining an internal acquisitions
department. Costs of registering and issuing debt and equity securities. Acquisition-related costs are expense,
except cost of issuing equity and debt instruments. Acquisition-related costs do not affect the measurement
of goodwill.
Non-controlling interest (NCI) is the “equity in a subsidiary not attributable, directly or indirectly, to a parent.”
Non-controlling interest is also called “minority interest.” The Previously held equity in interest in the
acquiree pertains to any interest held by the acquirer before the business combination. This affects the
computation of goodwill only in business combinations achieved in stages.
Net identifiable assets acquired- Recognition principle: On acquisition date, the acquirer recognizes the
identifiable assets acquired, the liabilities assumed and any NCI in the acquiree separately from goodwill.
Unidentifiable assets are not recognized. Identifiable assets acquired and liabilities assumed are classified at
the acquisition date in accordance with other PFRSs that are to be applied subsequently. Identifiable assets
acquired and liabilities are measured at their acquisition-date fair values. Separate valuation allowances are
not recognized at the acquisition date because the effects of uncertainty about future cash flows are included
in the fair value measurement. All acquired assets are recognized regardless of whether the acquirer intends
to use them.
Disclosures- An acquirer is required to disclose information that enables users of its financial statements to
evaluate the nature and financial effect of a business combination that occurs either during the current
reporting period or after the end of the period but before the financial statements are authorized for issue.
These are: Name and description of the acquire, Acquisition date, Percentage of voting equity interest
acquired, Primary reason for the business combination, Description of how the acquirer obtained control of
the acquire, Description of the factors that make up the goodwill recognized, Qualitative description of the
factors that make up the goodwill recognized, such as expected synergies from combining operations,
intangible assets that do not qualify for separate recognition. Acquisition-date fair value of the total
consideration transferred and the acquisition-date fair value of each major class of consideration.
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IFRS 4- INSURANCE CONTRACTS
It applies with limited exceptions, to all insurance contracts (including reinsurance contracts) that an entity
issues and to reinsurance contracts that it holds. In light of the international accounting standard board’s
comprehensive project on insurance contracts, the standard provides a temporary exemption from the
requirements of some other PFRS, including the requirement to consider PAS 8 accounting policies, changes in
accounting estimates and errors when selecting accounting policies for insurance contracts.
Insurance contract is a “contract under which one party (the insurer) accepts significant insurance risk from
another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future
event (the insured event) adversely affects the policyholder”.
Accounting policies- the PFRS exempts an insurer temporarily (until completion of Phase II of the Insurance
Project) from some requirements of other PFRS, including the requirement to consider PAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors in selecting accounting policies for insurance contracts.
However, the standard: prohibits provisions for possible claims under contracts that are not in existence at the
reporting date (such as catastrophe and equalization provisions), requires a test for the adequacy of
recognized insurance liabilities and an impairment test for reinsurance assets, requires an insurer to keep
insurance liabilities in its balance sheet until they are discharged or cancelled, or expire, and prohibits
offsetting insurance liabilities against related reinsurance assets and income or expense from reinsurance
contracts against the expense or income from the related insurance contract.
Changes in accounting policies- PFRS 4 permits an insurer to change its accounting policies for insurance
contracts only if, as a result, its financial statements presents information that is more relevant and no less
reliable, or more reliable and no less relevant. In particular, an insurer cannot introduce any of the following
practices, although it may continue using accounting policies that involve them: measuring insurance liabilities
on an undiscounted basis, measuring contractual rights to future investments management fees at an amount
that exceeds their fair value as implied by a comparison with current market based fees for similar services,
using non-uniform accounting policies for the insurance liabilities of subsidiaries.
Remeasuring insurance liabilities- the PFRS permits the introduction of an accounting policy that involves
remeasuring designated insurance liabilities consistently in each period to reflect current market interest rates
9and, if the insurer so elects, other current estimates and assumptions). Without this permission, an insurer
would have been required to apply the change in accounting policies consistently to all similar liabilities.
Prudence- an insurer need not to change its accounting policies for insurance contracts to eliminate excessive
prudence.
Future investment margins- there is rebuttable presumption that an insurers financial statements will become
less relevant and reliable if it introduces an accounting policy that reflects future investment margins in the
measurement of insurance contracts.
Asset Classifications- when an insurer changes its accounting policies for insurance liabilities, it may reclassify
some or all financial assets as at fair value through profit or loss.
Disclosures- this standard requires disclosure of: information that help users understand the amounts in the
insurers financial statement that arise from insurance contracts, information that help users to evaluate the
nature and extent of risks arising from insurance contracts, information about insurance risk (both before and
after risk mitigation by reinsurance), including information about the sensitivity to insurance risk,
concentrations of insurance risk, and actual claims compared with previous estimates. Other disclosures
include the information about credit risk, liquidity risk and market risk that PFRS 7 would require if the
insurance contracts were within the scope of PFRS 7, information about exposures to market risk arising from
embedded derivatives contained in a host insurance contract if the insurer is not required to, and does not,
measure the embedded derivatives at fair value.

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PFRS 5: NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
Assets classified as non-current in accordance with PAS 1 are classified as current assets only if they meet the
criteria to be classified as held for sale under PFRS 5. PFRS 5 prescribe the accounting for assets held for sale,
including disposal group, and the presentation and disclosure of discontinued operations. Noncurrent assets
within the scope of PFRS 5: property, plant and equipment, Investment property measured under the cost
model, Investment in associate, subsidiary, or joint venture, Intangible assets.
Noncurrent asset (or disposal groups) must be classified as held for sale or held for distribution to owner if its
carrying amount will be recovered principally through a sale transaction rather than through continuing use. A
noncurrent assets or disposal group as held for sale (and consequently, presented as current asset in the
statement of financial position) if the both of the following conditions are met: The noncurrent asset or
disposal group is available for immediate sale in in its present condition subject only to terms that are usual
and customary; and The sale is highly probable.
An assets or disposal group that is not sold within 1 year from the date of its classification as held for sale is
reclassified back to its previous classification. However, the assets or disposal group is continued to be
classified as held for sale if the following conditions are met: The delay is caused be events beyond the entity’s
control; and there is sufficient evidence that the entity remains committed on selling the assets.
A Discontinued operation occurs when two things happen: A company eliminates (or will eliminate) the results
of operations and cash flows of a component of an entity from its ongoing operations; and there is no
significant continuing involvement in that component after its disposal. Discontinued Operations occur at that
earlier of the date the component is actually disposed of and the date the criteria for classification as held for
sale or met.
A Discontinued operation is a component of entity that either has been disposed of or is classified as held
for sale, and represents a major line of business or geographical area of operations; Is part of a single
coordinate plan to dispose of a separate major line of business or geographical area of operations; or Is a
subsidiary acquired exclusively with view to resale.
Presentation of this Discontinued Operations - The results of this continued operations are presented in the
statement of profit or loss and other comprehensive income as a single amount.
Gains or losses on disposal of discontinued operations - If the actual disposal of a discontinued operation
occurs in the same period that the component is classified as “held for sale," the gain or loss on disposal of
discontinued operations is the actual gain or loss on the disposal.
If the actual disposal of a discontinued operation occurs in a subsequent period after the component is
classified as held for sale," the entity recognizes an estimated loss on disposal in the period that the
component is classified as discontinued operation. However, any gain on sale is not recognized until the
component is actually disposed of.
Gains or losses on disposal of discontinued operations, including estimated losses, are presented as part of
the single amount representing the post-tax results of discontinued operation.
Gains or losses on held for sale assets that do not meet the criteria for presentation as discontinued
operations are presented as part of continuing operations
Held for sale assets are presented in the statement of financial position as current assets. The assets and
liabilities of a disposal group are presented separately. Offsetting is prohibited.

Disclosure in the statements of comprehensive income- the sum of the post-tax profit or loss of the
discontinued operation and the post-tax gain or loss recognized on the measurement to fair value less cost to
sell or fair value adjustments on the disposal of the asset is presented as a single amount on the face of the
statement of comprehensive income. If the entity presents profit or loss in a separate statement, a section
identified as relating to discontinued operations is presented in that separate statement.
Cash flow disclosure information-adjustments made in the current period to amounts disclosed as a
discontinued in prior periods must be separately disclosed.
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PFRS 6 Exploration for and Evaluation of Mineral Resources
Introduction- PFRS 6 applies to expenditures incurred after the entity has obtained legal rights to explore in a
specific area (it is illegal to explore for mineral resources without obtaining first an authorization from the
government) but before the existence of mineral reserves is in fact established and the technical feasibility and
commercial viability of extracting mineral resources are demonstrable. Expenditures incurred after technical
feasibility and commercial viability are demonstrable are called development costs.
PFRS 6 permits entities to develop their own results in relevant and reliable information based entirely on
management’s judgement and need to consider the hierarchy of standards in PAS 8.
An entity may recognized exploration and evaluation as expense or assets depending on its chosen accounting
policy. Exploration and Evaluation assets are initially measured at cost. The initial measurement also includes
the present value of any decommissioning and restoration costs for which the entity has incurred an obligation
as a consequence of having undertaken the exploration and evaluation activities.
Expenditures related to the development of mineral resources are not recognized as exploration and evaluation
assets. Exploration and Evaluation assets are subsequently measured using either the cost model or the
revaluation model.
An entity may change its accounting policy for exploration and evaluation expenditures if the change results in
more relevant and no less reliable and no less relevant, information. The entity judges relevance and reliability
using the criteria in PAS 8.
Classification and Reclassification of exploration and evaluation asset- Classification is treated as a separate
class of assets. Tangible (e.g. vehicles and drilling rigs), Intangible (e.g. drilling rights)
Reclassification-when the technical feasibility and commercial viability of extracting a mineral resource are
demonstrable, the exploration and evaluation assets are reclassified in accordance with other relevant
Standards.
Exploration and evaluation are assessed for impairment when indication exist that their carrying amount
exceeds recoverable amount.
Disclosures
IFRS 6 has an overriding disclosure requirement to include information in the financial statements that
identifies and explains the amounts that have been recognized as exploration and evaluation assets. Such
information should include the entity’s accounting policy for the recognition and measurement of exploration
and evaluation assets.
An entity is also required to identify the amount of assets, liabilities, income and expense arising from the
exploration and evaluation of mineral resources. In relation to the statement of cash flows the amount of
operating and investing cash flows arising from the exploration and evaluation of mineral resources should be
disclosed.

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PFRS 7 Financial Instruments: Disclosures
Introduction- It requires disclosure of information about the significance of financial instruments to an entity,
and the nature and extent of risks arising from those financial instruments, both in qualitative and quantitative
terms. Specific disclosures are required in relation to transferred financial assets and a number of other matters.
The standard was published in August 2005 and is effective from 1 January 2007.
It requires certain disclosures to be presented by category of instrument based on the IAS 39 measurement
categories. Certain other disclosures are required by class of financial instrument. For those disclosures an entity
must group its financial instruments into classes of similar instruments as appropriate to the nature of the
information presented.
The objectives are to enable the users of financial statements of an entity to realize the significance of the
financial instruments and the nature and extend of risks arising from such instruments and how such risks are
managed. The principles in this IFRS compliment the IAS 32 & 39.This IFRS is applicable by all entities to all types
Financial Instruments.
The two main categories of disclosures required by IFRS 7 are:
■ The significance of financial instruments for the entity’s financial position and performance.
■ information about the nature and extent of risks arising from financial instruments to which the entity
is exposed during the period and at the end of the reporting period, and how the entity manages those
risks. The qualitative disclosures describe management’s objectives, policies and processes for managing
those risks. The quantitative disclosures provide information about the extent to which the entity is
exposed to risk, based on information provided internally to the entity’s key management personnel.
Together, these disclosures provide an overview of the entity’s use of financial instruments and the
exposures to risks they create.
If an entity designates a financial asset to be measured at FVPL, it shall disclose the financial assets exposure to
credit risks and the change in fair value attributable to changes in credit risks.
If an entity designates a financial liability to be measured at FVPL, it shall disclose the change in fair value that
is attributable to credit risk.
If an entity elected to measure investments in equity securities at FVOCI, it shall disclose those investments, the
reason for the election, any dividends recognized during the period, and any transfers of cumulative gain or loss
within equity.
If an entity reclassified financial assets, it shall disclose the date of reclassification, an explanation of the change
in business model, and the amount between categories.
If an entity has offset financial assets and financial liabilities, shall disclose the gross amount of those assets and
liabilities, the amount that were set off, the net amount presented in the statement of financial position.
An entity shall disclose the carrying amounts of financial asset pledged as collateral for liabilities, including the
terms and condition of the pledge.
The carrying amount of financial asset that is mandatorily measured at FVOCI is not reduced by a loss allowance.
However, the loss allowance is disclosed on the notes.
The entity shall disclose any defaults and breaches relating to loans payable, including the carrying amount of
those loans payable, the principal, interest, sinking fund or redemption terms.
PFRS 7 requires the disclosure of the following risks: Credit risk, Liquidity risk, Market risk and other price risk.
The quantitative disclosures provide information about the extent to which the entity is exposed to risk, based
on information provided internally to the entity's key management personnel. These disclosures include:
summary quantitative data about exposure to each risk at the reporting date, disclosures about credit risk,
liquidity risk, and market risk and how these risks are managed as further described below and concentrations
of risk.
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PFRS 8 Operating Segments
Introduction- The business environment is constantly changing – the needs of need of consumers change,
business regulations change, the demand for products and services, and consequently the supply thereof, may
decline or end. Entities need to adapt to these changes in order to stay in business.
The required disclosures under PFRS 8 aim to help users of financial statements. It aims for better understand
the entity’s performance, better assess the entity’s prospects for future net cash flows and make more
informed judgments about the entity as a whole.
This standard applies to both individual (separate) financial statements and consolidated financial statements,
whose debt or equity instruments are traded in a public market; or that files, or is in the process of filing, its
financial statements with a securities commission or other regulatory organization for the purpose of trading its
instruments on a public market.
PFRS 8 adopts management approach to identify reportable segments. Under this approach, operating
segments are identified on the basis of internal reports that are regularly reviewed by the entity’s chief
operating decision maker in order to allocate resources to the segment and assess its performance.
A reportable Operating segment is one which management uses in making decisions about operating matters
or results from the aggregation of two or more segments and qualifies under any of the quantitative threshold.
The quantitative threshold are: At least 10% of total revenues (external and internal). At least 10% of the higher
of total profits of segments with profits and total losses of segments with losses. At least 10% of total assets
(inclusive of intersegments receivables).
The total external revenues of reportable segments should be at least 75% of the total external revenue. If the
75% limit is not met, additional segments are included as reportable segments, even if they do not meet the
quantitative threshold, until the 75% limit is met.
Disclosures for major consumer are required if revenues from a single external customer amount to 10% or
more of the entity’s external revenues.
Operating segments that are not reportable are combined and disclosed in an “all other segments” category.
Interest revenue and interest expense are reported separately for each reportable segment unless the
segment’s revenue is primarily from interest and internal decision-making is based on net interest revenue. In
such case, the entity may report the segment’s interest revenue net of interest expense and disclose that fact.
Disclosures- Once the segment has been identified as reportable, the entity must disclose the following
information: General information are Factors used to identify reportable operating segments; Judgements used
in applying the aggregation criteria; and Types of products and services generating revenues.
Information about profit or loss, assets and liabilities
Measurement of these amounts shall be on the same basis as reported to chief operating decision maker; On
top of the total amounts of profit or loss, assets and liabilities, the entity shall present the information about
specified revenues and expenses (revenues from external customers, internal revenues, depreciation and
others);
Entity should provide the explanation of the measurement basis, including the explanation of nature of
differences between the amounts reported per segments and total entity's amounts.
Reconciliations
the entity should reconcile total amount per operating segments with total amount reported in the entity's
financial statements for: Revenues; Profit or loss; Assets; Liabilities; and other material information.
Entity-wide information: Information about products and services; Information about geographical areas,
namely: Revenues from external customers (in the country of domicile and in foreign countries; certain non-
current assets (in the country of domicile and in foreign countries; and Information about major customers.

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PFRS 9 Financial Instruments
Introduction
PFRS 9 applies to all financial instruments except those that are dealt with under other standards, such
as interests in subsidiaries, associates and joint ventures (PAS 28), those arising from employee benefit plans
(PAS 9) leases and share based payment transactions (PFRS 2), those that are required to be classified equity
instruments (PAS 32), and those arising from contracts with customers that are specifically accounted for
under PFRS 15 Revenue from contracts with Customers).
 Financial assets are classified on the basis of both;
a) The entity’s business model for managing the financial assets.
b) The contractual cash flow characteristics of the financial asset.
 The classifications of financial asset are;
a) Fair Value through Profit/Loss
b) Fair Value through Other Comprehensive Income (election)
c) Fair Value through Other Comprehensive Income (mandatory)
d) Amortized cost
 A financial asset is classified as;
a) Amortized cost if it is held under a “hold to collect” business model and qualifies under the
“SPPI” test.
b) FVOCI (mandatory) if it is held under a “hold to collect and sell’ business model and qualifies
under the “SPPI” test.
c) FVPL for all other financial assets.
 Exceptions;
1. Option to designate financial assets to be measured at FVPL if doing so significantly reduces or
eliminates “accounting mismatch”.
2. Election to measure investment in equity securities that are not held for trading at FVOCI.

 Reclassification date is the first day of the first reporting period following the change in business
model.
 Only debt type financial assets can be reclassified. Equity instruments cannot be reclassified,
 The impairment requirements of PFRS 9 apply only to financial assets measured at amortized cost of
FVOCI (mandatory), i.e., debt type financial asset only.
 Financial liabilities are generally classified to be subsequently measured at amortized cost.
 Reclassification of financial liabilities is prohibited.

Disclosures
PFRS 9 amends some of the requirements of PFRS 7 financial instruments: Disclosures including adding
disclosures about investments in equity instruments designates as at FVTOCI, disclosures on credit risk
management and impairment.

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PFRS 10 Consolidated Financial Statements
PFRS 10 prescribes the principles for the preparation and presentation of consolidated financial statements.
 Consolidated Financial Statements- “the financial statements of a group in which the assets,
liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are
presented as those of as single economic entity.”
 Group- “a parent and its subsidiaries.”
 Parent- “an entity that controls one or more entities.”
 Subsidiary- “an entity that is controlled by another entity.”
 A parent entity is required to consolidate its subsidiaries except when;
a. The parent is also a subsidiary and its owners do not object to non-presentation of
consolidated financial statements.
b. The parent is not publicly listed or in the process of enlisting.
c. The parent’s parent produces consolidated PFRS Financial Statements.
 The basis for consolidation is control. Consolidation begins when control is obtained and ceases
when control is lost.
 Control has the following elements;
a. Power
b. Exposure, or rights to variable returns
c. Ability to affect returns
 Consolidated Financial statements are prepared using uniform accounting policies.
 NCI in the subsidiary’s net assets is presented within equity but separate from the equity of the
owners of the parent.
Measurement- income and expenses (based on the amounts of the assets and liabilities recognized at the
acquisition date). Investment in subsidiary (either at cost, in accordance with PFRS 9, or using equity method.
Preparing the consolidated FS- consolidated at date of acquisition and consolidation subsequent to date of
acquisition.
Consolidation involves; eliminating the investment in subsidiary account, measuring the subsidiary’s assets and
liabilities at their acquisition date fair values, recognizing goodwill, replacing the subsidiary’s pre-combination
equity accounts with NCI in net assets and adding, line by line, similar items of assets and liabilities of the
parent and subsidiary.
 Profit or loss and comprehensive income are attributed to the;
a. Owners of the parent
b. NCI
Consolidation Process
Step 1. Eliminate the “Investment in Subsidiary” account. This requires:
 Measuring the identifiable assets acquired and liabilities assumed in the business combination
at their acquisition-date fair values
 Recognizing the goodwill from the business combination
 Eliminating the subsidiary’s pre-combination equity accounts and replacing them with the non-
controlling interest
 Step 2. Add, line by line, similar items of assets and liabilities of the combining constituents. The
subsidiary’s assets and liabilities are included in the consolidated financial statements at 100% of
their amounts irrespective of the interest acquired by the parent.

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PFRS 11 JOINT ARRANGEMENT
Joint Arrangements - Is an arrangement of which two or more parties have joint control. There are two
essential elements of the definition of joint arrangements. These are Ccontractual arrangement and joint
control.
Contractual arrangement- The existence of contractual agreement for sharing of joint control over an investee
distinguishes interest in joint arrangements from other investments, such as investments in equity securities
measured at fair value (PFRS9), investment in associate (PAS 28), and investment in subsidiary (PFRS 3 and 10).
PFRS 11 is not applicable in the absence of such agreement.
Joint control- Joint control is the contractually agreed sharing of control of an arrangement, which exist only
when decisions about the relevant activities require the unanimous consent of the parties sharing control.
Types of Joint Arrangement- An entity is require to determine the type of joint arrangement in which it's
involve: joint operation is a joint arrangement whereby the parties that have joint control of the arrangement
have rights to the assets and obligation for the liabilities, relating to the arrangement. Joint venture is a joint
arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of
the arrangement.
Joint operations -A joint operator recognizes its own assets, liabilities, income and expenses plus its share in
the point operations assets, liabilities, income and expenses. These items are accounted for under other PFRSs
applicable to the particular assets, liabilities, income and expenses.
Interest in joint operation whose activity constitutes a business - When an entity acquires an interest in a
joint operation whose activity constitutes a business. It shall account for its share as a business combination.
“A business is an integrated set of activities and assets that is capable of being conducted and managed for
the purpose of providing a return in the form of dividends, lower costs or other economic benefits directly to
investors or other owners, members or participants”. Accordingly, the entity shall apply the following
principles of business combination: (a) Measure identifiable assets and liabilities at fair value (other than
items for which exceptions are given in PFRS 3 and other PFRSs). (b) Recognize acquisition-related cost as
expenses when they are incurred, (except cost to issue debt or equity securities which are recognized in
accordance with PAS 32 and PFRS 9, respectively. (c) Recognize deferred tax assets and deferred tax liabilities that
arise from the initial recognition of assets or liabilities, (except for deferred tax liabilities that arise from the initial
recognition of goodwill). (d) Recognize goodwill as the excess as the excess of the consideration transferred over
the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed; and (e) Test
for impairment a cash-generating unit to which goodwill has been allocated at least annually, and whenever
there is an indication that the unit may be impaired.

Joint ventures- An entity first applies PFRS 11 to determine the type of arrangement in which it’s involved. If
the entity determines that it has an interest in a joint venture, the entity recognizes that interest as an
investment and account for it using the equity method under PAS 28 Investment in associates and joint
ventures, unless the entity is exempted from applying the equity method as specified in that standard. Under
the equity method, the investment is initially recognized at cost and subsequently adjusted for the investor’s
share in the changes in the equity of the investee. Such share includes the investor’s share in the investee’s (1)
profit or loss, (2) dividends declared, (3) results of discontinued operations, and (4) other comprehensive
income.
Presentation in statement of Financial Position- Investment accounted for under the equity method (i.e.,
investment in associate or joint venture) are presented as non- current assets in the statement of financial
position, except when they are classified as held for sale for the accordance with PFRS 5.
Participation to a joint arrangement with no joint control- Participant to a joint operation- A party that
participates in, but does not have joint control of, a joint operation shall account for its interest in the
arrangement. It is similarly with the procedures applicable to a joint operator if that party has a rights to the
assets, and obligations for the liabilities, relating to the joint operation. Also in accordance with the PFRS
applicable to that interest if that party has no rights to the assets, and obligations for the liabilities, relating to
the joint operation. Participant to a Joint venture- A party that participate in, but does not have joint control
of, a joint venture shall account for its interest in the arrangement in accordance with PFRS 9, unless it has
significant influence over the joint venture, in which case it shall apply PAS 28.
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PFRS 12 DISCLOSURE OF INTEREST IN OTHER ENTITIES
The objective of PFRS 12 is to prescribe the minimum disclosure requirements for an entity’s interests in other
entities, particularly (a) the nature of, and risks associated with, those interest and (b) the effects of those
interests on the entity’s financial statements. An entity considers the level of detail and emphasis placed on
the disclosure requirements necessary to meet the objective of PFRS 12 and provides additional information
whenever the minimum disclosures are insufficient to meet the objective.
Interest in other entity- refers to involvement that exposes an entity to variability of returns from the
performance of another entity. It includes the means by which an entity obtains control, joint control, or
significant influence over another entity.
PFRS 12 applies to entities that have an interest in: subsidiary, joint arrangements, associate, or
unconsolidated structured entity.
Disclosures:
Significant judgements and assumptions- PFRS 12 requires disclosure of information about significant
judgements and assumptions that an entity has made in determining the existence of control, joint control or
significant influence over an investee. And also the type of determining the joint arrangement when the
arrangement has been structured through separate vehicle.
Investment entity status- PFRS 12 requires the disclosure for an investment entity: significant judgements and
assumptions that an entity has made in determining whether the entity is an investment entity. Changes in
the entity’s status as an investment entity. An entity that becomes an investment entity discloses the total fair
value as of the date of change of status, of the subsidiaries that cease to be consolidated and the total gain or
loss and the line item in which that gain or loss is recognized, if not presented separately.
Interest in subsidiaries- PFRS 12 requires for the disclosure of an entity’s interest on subsidiary such as: the
composition of the group, the nature and extent of significant restrictions on the entity’s ability to access
assets and settle liabilities of the group, the effects of changes in ownership interest that do not result in a loss
of control and result in a loss of control, if a subsidiary uses a different reporting period, the entity discloses
that fact and the reason thereof.
Interest in joint arrangements and associates- PFRS 12 requires the following disclosures for an entity’s
interest in a joint arrangement or associate that is material: (a) name of the joint arrangement or associate, its
principal place of business and country of incorporation. (b) Nature of the entity’s relationship with the joint
arrangement or associate. (c) Ownership interest, participating share, or voting rights held by the entity. (d)
Measurement of the investment. (e) If the equity method is used, the entity shall disclose the fair value of the
investment, if there is quoted market price for the investment. (f) Dividends received from the joint venture or
associate. (g) Summarized the financial information about the joint venture or associate. (h) For a material
joint venture, the entity discloses the amounts of cash and cash equivalent, current and noncurrent financial
liabilities, depreciation and amortization, interest income and interest expense and income tax benefit. (i) The
entity discloses the following in aggregate separately for all investments in joint ventures and associates that
are not individually material.
Interest in unconsolidated structural entities- a structured entity is an entity that has been designed so that
voting or similar rights are not the dominant factor in deciding who controls the entity. PFRS 12 requires an
entity to disclose the entity’s interest in an unconsolidated structured entity: (a) qualitative and quantitative
information about the interest in an unconsolidated structured entity, including the nature, purpose, size and
activities of the structured entity and how the structured entity is financed. (b) Summary in a tabular form
unless other format is appropriate. (c) If during the reporting period the entity has, without having a
contractual obligation to do so, provided financial or other support to an unconsolidated structured entity, the
entity discloses: the type and amount of support provided, including situations in which the entity assisted the
structured entity in obtaining financial support and reasons for providing support. (d) Any current intentions
to provide financial or other support to an unconsolidated structured entity, including intentions to assist the
structured entity in obtaining financial support.

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PFRS 13 FAIR VALUE MEASUREMENT
PFRS 13 applies to the fair value measurement, and related disclosures, of an asset, liability or equity when
other PFRS require measurement at fair value or fair value less cost to sell.
The disclosure requirements of PFRS 13 do not apply to plan assets measured at fair value in accordance with
PAS 19 and PAS 26, and assets for which recoverable amount is fair value less cost of disposal in accordance
with PAS 36. PFRS 13 applies to both initial and subsequent measurements at fair value.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
Fair value is measured based on the market price in the principal market (if one exist) or in the most
advantageous market (in the absence of a principal market).
The market price used in measuring fair value is adjusted for any transport cost, but not for transaction costs.
The hierarchy of fair value inputs includes:
(a) Level 1 inputs- quoted prices in active market, for identical assets or liabilities that the entity can access at
the measurement date.
(b) Level 2 inputs- are inputs other than quoted market price included within the level 1 that are observable
for the asset or liability, either directly or indirectly.
(c) Level 3 inputs- unobservable inputs for the assets or liability. Unobservable inputs are used to measure fair
value to the extent that relevant observable inputs are not available, thereby allowing for situations in which
there is little, if any, market activity for the asset or liability at the measurement date.
Measurement of fair value
A fair value measurement requires an entity to determine all of the following: the particular asset or liability
that is the subject of the measurement (consistently with its unit of account). For a non-financial asset, the
valuation premise that is appropriate for the measurement (consistently with its highest and best use). The
principal or most advantageous market for the asset or liability. The valuation technique(s) appropriate for
the measurement, considering the availability of data with which to develop inputs that represent the
assumptions that market participants would use when pricing the asset or liability and the level of the fair
value hierarchy within which the inputs are categorized.
Identification of classes- where disclosures are required to be provided for each class of assets or liability, an
entity determines appropriate classes on the basis of the nature, characteristics and risks of the asset or
liability, and the level of the fair value hierarchy within which the fair value measurement is categorized.
Determining the appropriate classes of assets and liabilities for which disclosures about fair value
measurements should be provided requires judgement.
Disclosure
IFRS 13 requires an entity to disclose information that helps the users of its financial statements assess both of
the following: for assets and liabilities that are measured at fair value on a recurring basis in the statement of
financial position after initial recognition, the valuation techniques and inputs used to develop those
measurements. For fair value measurements using significant unobservable inputs (level 3), the effect of the
measurements on profit or loss or other comprehensive income for the period. The fair value measurement at
the end of the reporting period. For non-recurring fair value measurements, the reasons for the
measurement. If the highest and best use of a no-financial asset differs from its current use, an entity shall
disclose that fact and why the non-financial asset is being used in a manner that differs from the its highest
and best use.

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PFRS 14 REGULATORY OF DEFERRAL ACCOUNTS
PFRS 14 specifies the financial reporting requirements for regulatory deferral account balances arising from
the sale of goods or services that are subject to rate regulation.
Scope- PFRS 14 is an optional standard that is available only to first time adopters. Existing PFRS users are
prohibited from using PFRS 14. This is intended to provide first-time adopters temporary relief from
derecognizing rate- regulated assets and liabilities that the first time adopter has recognized under its
previous GAAP pending IASB’s final decision on rate-regulated activities. A first-time adopter is allowed, but it
is not required, to apply PFRS 14 in its first PFRS financial statements if the first time adoption conducts rate-
regulated activities and has recognized regulatory deferral accounts under with its previous GAAP. An entity is
allowed to apply to PFRS 14 in subsequently periods only if it has applied PFRS 14 in its first PFRS financial
statements.
Summary of Principles under PFRS 14
Continuation of existing accounting policy- a first-time adopter continues to apply its previous GAAP to the
recognition, measurement, impairment and derecognition of regulatory deferral account balances, except for
changes in accounting policies and the presentation of regulatory deferral accounts.
Changes in accounting policy- an entity may change its accounting policy if the change results in more
relevant and no less reliable, or more reliable and no less relevant, information. An entity shall use the criteria
in PAS 8 when judging relevance and reliability.
Interaction with other standards- PFRS 14 prescribes specific exception, exemption or additional
requirements related to the interaction of PFRS 14 with other PFRSs. These are briefly summarized below: (a)
PAS 10 events after the reporting period is applied when determining whether estimates and assumptions
relating to regulatory deferral account balances need to be adjusted for events after reporting period. (b) PAS
12 income taxes is applied when recognizing deferred tax assets and liabilities and income tax expense
resulting from these activities a presented separately either within the regulatory deferral account balances
and as separate line item alongside the regulatory deferral account balances. (c) PAS 33 earnings per share is
applied when presenting EPS information. However, an entity applying PFRS 14 is required to present an
additional basic and diluted EPS that excludes the effects of the net movements in regulatory deferral account
balances. (d) PAS 36 impairment of assets is applied to the impairment testing of regulatory account balances
that are included in CGUs. (e) PFRS 3 business combination is applies to business combinations. If an entity
that uses PFRS 14 acquires another business, it shall apply its accounting policy for regulatory deferral account
balances, which could result to the recognition of the acquiree’s regulatory deferral account balances even if
the acquire had not recognized those balances. (f) The measurement and presentation requirements of PFRS 5
noncurrent assets held for sale and discontinued operations do not apply when regulatory deferral account
balances are included in a disposal group or discontinued operations. (g) PFRS 10 Consolidated financial
statements and PAS 28 investments in associates and joint ventures require the use of uniform accounting
policies when consolidating subsidiaries and when applying equity method, respectively. (h) if the entity had
recognized regulatory deferral account balances in respect of its subsidiary, associate or joint venture, it shall
make separate disclosure requirements of PFRS 12.
Disclosures
PFRS sets out disclosure objectives to allow users to assess: the nature of, and risks associated with, the rate
regulation that establishes the price the entity can charge customers for the goods or services it provides-
including information about the entity’s rate-regulated activities and the rate-setting process, the identity of
the rate regulators, and the impacts of risks and uncertainties on the recovery or reversal of regulatory
deferral account balances.
The effects of rate regulation on the entity’s financial statements- including the basis on which regulatory
deferral account balances are recognized, how they are assessed for recovery, a reconciliation of the carrying
amount at the beginning and end of the reporting period, discount rates applicable, income tax impacts and
details of balances that are no longer considered recoverable or reversible.
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PFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS
Objectives- PFRS 15 sets the principles to apply when reporting about the nature, the amount, the timing,
and the uncertainty of revenue and cash flows from a contract with a customer.
Recognition of revenues- the main aim of PFRS 15 is to recognized revenue in a way that shows the transfer of
goods/services promised to customers in an amount reflecting the expected consideration in return for those
goods or services. To make it systematic, PFRS 15 requires application of 5 step model for revenue
recognition.
Step 1: identifying the contract with the customer- a contract is an agreement between two parties that
creates enforceable rights and obligations. The PFRS is need to apply to the contracts that have the following
attributes: (a) parties to the contract has approved it and are committed to perform. (b) Each party’s rights to
the goods/services transferred identified. (c) The payment terms are identified. (d) The contract has a
commercial substance, and. (e) it is probable that an entity will collect the consideration.
Step 2: identify the performance obligations in the contract- performance obligation is any good or service
that contract promises to transfer to the customer.
Step 3: determine the transaction price- the transaction price is the amount of consideration that an entity
expects to be entitled in exchange for transferring promised goods or services to a customer, excluding
amounts collected on behalf of the third parties.
Step 4: allocate the transaction price to the performance obligations- once there is identified contract
performance obligations and determined the transaction price, it needs to split the transaction price and
allocate it to the individual performance obligations. The general rule is to do it based on their relative stand-
alone selling prices, but there are 2 exceptions when allocating in a different way: when allocating discounts
and when allocating considerations with variable amounts.
Step 5: recognized revenue when or as the entity satisfies a performance obligation- a performance
obligation is satisfied (and revenue is recognized) when a promised good or service is transferred to a
customer. This happens when control is passed.
Contract cost
1. Cost to obtain a contract- those that are incremental costs to obtain a contract. In other words, these
costs would not have been incurred without an effort to obtain a contract. These cost are not
expensed but they are recognized as an asset if they are expected to be recovered.
2. Cost to fulfill a contract- if these costs are within the scope of PAS 2, PAS 16, PAS 38, then it should
treat them in line with the appropriate standard. If not, then it should capitalize them only if certain
criteria are met.
Implementation of PFRS 15- the application of PFRS 15 is mandatorily for all periods starting on January 1
2018 or later. As the requirements of PFRS 15 are very extensive and demanding. PFRS 15 permits 2 methods
of adoption:
1. Full retrospective adoption- under this approach, needs to apply PFRS 15 fully to all prior reporting
periods, with some exceptions.
2. Modified retrospective adoption- under this approach, comparative figures remain as they were
reported under the previous standards and recognized the cumulative effect of PFRS 155 adoption as
one-off adjustment to the opening equity at the initial application date.

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PFRS 16 LEASES
PFRS 16 prescribes the accounting and disclosure requirements for leases. The objective is to provide
information that is faithfully represented, necessary for financial statements users to assess the effect of
leases on the financial position, financial performance and cash flows of an entity. PFRS 16 applies to all leases
including subleases.
Identified a lease- “a contract is, or contains, a lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for consideration.” An entity has the right to control the use
of an identified asset if it has both of the following throughout the period of use: the right to obtain
substantially all of the economic benefits from the use of the identified asset and the right to direct the use
of the identified asset.
Identified asset- is essential in the definition of a lease. An asset can be identified by being explicitly stated in
the contract or by being implicitly specified at the time the asset is made available for use by the customer.
Portions of Assets- a portion of an asset is an identified asset if it is physically distinct. If not physically distinct,
the portion is not identified asset, unless it represents substantially all of the capacity of the asset thereby
providing the customer the right to obtain substantially all of the economic benefits from the asset.
Right to obtain economic benefits from use- a customer controls the use of an identified asset if it has the
right to obtain substantially all of the economic benefits from the asset throughout the period of use.
Right to direct use- a customer has the right to direct the use of an identified asset throughout the period of
use if: the customer has the right to direct how and for what purpose the asset is used throughout the period
of use, or the asset’s use is predetermined and the supplier is precluded from changing the predetermined
use.
Protective rights-it includes contractual restrictions designed to protect the supplier’s interest in the asset or
its personnel, or to ensure compliance with laws or regulations.
Accounting for leases by lessee
Recognition - a lessee recognizes a lease liability and a right-of-use asset at the commencement date.
Initial measurement of lease liability- the lease initially measured at the present value of the lease payments
that are not yet paid as at the commencement date.
Discount rate- the lease payments are discounted using the interest rate implicit in the lease. If that rate is not
readily determinable, the lessee’s incremental borrowing rate is used.
Initial measurement of right of use asset- the right-of-use is initially measured at cost.
Subsequent measurement of lease liability- the lease liability is subsequently measured similar to an
amortized cost financial liability.
Subsequent measurement of the right-of-use asset- the right-of-use asset is subsequently measured similar
to a purchased asset. Accordingly, the asset is subsequently measured under the cost model.
Cost model- under the cost model, the right-of-use asset is measured at cost less any accumulated
depreciation and any accumulated impairment losses and adjusted for any remeasurement of the lease
liability.
Depreciation- the lessee depreciates the underlying asset over its useful life if the contract provides for the
transfer of ownership to the lessee by the end of the lease term or there is a reasonable certainty that the
lessee by the end of the lease term, or there is a reasonable certainty that the lessee will exercise a purchase
option.
Lease of multiple assets - for a contract that contains rights to use multiple assets, the right to use each asset
is considered a separate lease component.
Non lease elements- a non-lease element is considered a separate element if it transfers goods or services
to the lessee.
Practical expedient- PFRS 16 allows an entity to elect, by class of underlying asset, not to separate the lease
and non-lease components of a contract and instead account for them as a single lease component.
Presentation
Statement of financial position
Right-of-use assets are presented either separately from other assets, or together with other assets as if they
were owned, with disclosure of the line items that include the right-of-use assets.

16
Disclosure requirements are: depreciation charge on right-of-use asset, interest expense on the lease liability,
expense relating to low-value and short term leases, expense relating to variables lease payments not
included in lease liabilities, income from subleasing, total cash outflow for leases, additions to right-of-use
assets, carrying amount of right-of-use assets by class of underlying asset, additional information on right-of
use assets that are investment property or are revalued under PAS 16.
Accounting for leases by lessor- a lessor classifies each of its leases as either a finance lease or an operating
lease. Finance lease (capital lease) is a lease that transfers substantially all the risks and rewards incidental to
ownership of an underlying asset. Operating lease is a lease that does not transfer substantially all the risks
and rewards incidental to ownership of an underlying asset.
Inception and commencement of lease- inception date is the earlier of (a) the date of the lease agreement
and (b) the date of commitment by the parties to the principal provisions of lease. The commencement date is
the date on which a lessor makes an underlying asset available for use by a lessee.
Finance lease
Initial measurement-a lessor recognizes an asset from a finance lease as a receivable measured at an amount
equal to the net investment in the lease. Under a finance lease, the lessor transfer substantially all the risk and
rewards incidental to ownership over the leased asset to the lessee.
Gross investment in the lease (gross lease receivable) - “the sum of (a) the lease payments receivable by the
lessor under a finance lease, and (b) any unguaranteed residual value accruing to the lessor.
Net investment in the lease (net lease receivable) - the gross investment in the lease discounted at the
interest rate implicit in the lease.
Unearned finance income (unearned interest income) - the difference between the gross investment in the
lease and the net investment in the lease.
Discount Rate- the net investment s measured using the interest rate implicit in the lease.
Subsequent measurement- the net investment in the lease (the lease receivable) is subsequently measured
similar to the amortized cost financial asset.
Operating lease- lessor recognizes lease payments as lease income over the lease term using the straight line
basis, or another more appropriate basis. Lessor continues to depreciate the leased asset.
Disclosure
Finance lease
1. Selling profit or loss
2. Finance income on the net investment in the lease
3. Income relating to variable lease payments not included in the measurement of the net investment in the
lease
4. Qualitative and quantitative explanation of significant changes in net investment in the lease
5. Maturity analysis of lease receivable
Operating lease
1. Lease income, separately disclosing income for variable lease payments that do not depend on an index or
rate
2. As applicable for underlying asset, relevant disclosures in PAS 16 for leases of PPE, disaggregated by class
PAS 36, Impairment of asset, PAS 38 Intangible Asset, PAS 40 Investment Property and PAS 41 Agriculture
3. Maturity analysis of lease payments

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PFRS 17- INSURANCE CONTRACTS
Objective- PFRS 17 Insurance Contracts establishes the principles for the recognition, measurement,
presentation and disclosure of Insurance contracts within the scope of the Standard. The objective of PFRS 17
is to ensure that an entity provides relevant information that faithfully represents those contracts. This
information gives a basis for users of financial statements to assess the effect that insurance contracts have on
the entity's financial position, financial per-for-mance and cash flows.
Scope- An entity shall apply PFRS 17 Insurance Contracts to: Insurance contracts, including reinsurance
contracts, it issues; Reinsurance contracts it holds; and Investment contracts with discretionary participation
features it issues, provided the entity also issues insurance contracts. Some contracts meet the definition of an
insurance contract but have as their primary purpose the provision of services for a fixed fee. Such issued
contracts are in the scope of the standard, unless an entity chooses to apply to them PFRS 15 Revenue from
Contracts with Customers and provided the following conditions are met: (a) the entity does not reflect an
assessment of the risk associated with an individual customer in setting the price of the contract with that
customer; (b) the contract compensates the customer by providing a service, rather than by making cash
payments to the customer; and (c) the insurance risk transferred by the contract arises primarily from the
customer’s use of services rather than from uncertainty over the cost of those services.
The standard provides the criteria to determine when a non-in-sur-ance component is distinct from the host
insurance contract. An entity shall: (a) Apply PFRS 9 Financial Instruments to determine whether there is an
embedded derivative to be separated and, if there is, how to account for such a derivative. (b) Separate from a
host insurance contract an investment component if, and only if, that investment component is distinct. The
entity shall apply PFRS 9 to account for the separated investment component. (c) After performing the above
steps, separate any promises to transfer distinct non-insurance goods or services. Such promises are
accounted under PFRS 15 Revenue from Contracts with Customers.
Level of aggregation- PFRS 17 requires entities to identify portfolios of insurance contracts, which comprises
contracts that are subject to similar risks and managed together. Contracts within a product line would be
expected to have similar risks and hence would be expected to be in the same portfolio if they are managed
together.
Each portfolio of insurance contracts issues shall be divided into a minimum of: A group of contracts that are
onerous at initial recog-ni-tion, if any; a group of contracts that at initial recognition have no significant
possibility of becoming onerous sub-se-quently, if any; and a group of the remaining contracts in the portfolio,
if any. An entity is not permitted to include contracts issued more than one year apart in the same group.
Recognition- An entity shall recognize a group of insurance contracts it issues from the earliest of the
following: (a) the beginning of the coverage period of the group of contracts; (b) the date when the first
payment from a policyholder in the group becomes due; and (c) for a group of onerous contracts, when the
group becomes onerous.
Measurement- On initial recog-ni-tion, an entity shall measure a group of insurance contracts at the total of:
(a) the fulfilment cash flows (“FCF”), which comprise: (i) estimates of future cash flows; (ii) an adjustment to
reflect the time value of money (“TVM”) and the financial risks associated with the future cash flows; and (iii) a
risk adjustment for non-financial risk (b) the contractual service margin (“CSM”). An entity shall include all the
future cash flows within the boundary of each contract in the group. The entity may estimate the future cash
flows at a higher level of aggregation and then allocate the resulting fulfilment cash flows to individual groups
of contracts. The estimates of future cash flows shall be current, explicit, unbiased, and reflect all the
information available to the entity without undue cost and effort about the amount, timing and uncertainty of
those future cash flows. They should reflect the perspective of the entity, provided that the estimates of any
relevant market variables are consistent with observable market prices.
Discount rates- The discount rates applied to the estimate of cash flows shall: (a) reflect the time value of
money (TVM), the characteristics of the cash flows and the liquidity characteristics of the insurance contracts;
(b) be consistent with observable current market prices (if any) of those financial instruments whose cash flow

18
characteristics are consistent with those of the insurance contracts; and (c) exclude the effect of factors that
influence such observable market prices but do not affect the future cash flows of the insurance contracts.
Contractual service margin- The CSM represents the unearned profit of the group of insurance contracts that
the entity will recognize as it provides services in the future. This is measured on initial recognition of a group
of insurance contracts at an amount that, unless the group of contracts is onerous, results in no income or
expenses arising from: (a) the initial recog-ni-tion of an amount for the FCF; (b) the derecognition at that date
of any asset or liability recognized for insurance ac-qui-si-tion cash flows; and (c) any cash flows arising from
the contracts in the group at that date.
Subsequent measurement- On subsequent measurement, the carrying amount of a group of insurance
contracts at the end of each reporting period shall be the sum of: (a) the liability for remaining coverage
com-pris-ing: (i) the FCF related to future services and; (ii) the CSM of the group at that date; (b) the liability
for incurred claims, comprising the FCF related to past service allocated to the group at that date.
Presentation in the statement of financial position
An entity shall present separately in the statement of financial position the carrying amount of groups of: (a)
insurance contracts issued that are assets; (b) insurance contracts issued that are liabilities; (c) reinsurance
contracts held that are assets; and (d) reinsurance contracts held that are liabilities.
Recognition and presentation in the statement(s) of financial performance- An entity shall disaggregate the
amounts recognized in the statement(s) of financial performance into: (a) an insurance service result,
comprising insurance revenue and insurance service expenses; and (b) insurance finance income or expenses.
Disclosures
An entity shall disclose qual-i-ta-tive and quan-ti-ta-tive in-for-ma-tion about: (a) the amounts recognized in its
financial state-ments that arise from insurance contracts; (b) the significant judgements, and changes in those
judgements, made when applying PFRS 17; and (c) the nature and extent of the risks that arise from insurance
contracts.
Effective date
IFRS 17 is effective for annual reporting periods beginning on or after 1 January 2021. Earlier application is
permitted if both IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial In-stru-ments have also
been applied.

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