Liabilities

and
Shareholder
s Equity

LIABILITIES
Maria Nicole Real

Liability
is defined as present obligation of an
entity arising from past events, the
settlement of which is expected to
result in an outflow from the entity of
resources embodying economic
benefits.

The essential
characteristics of a liability
are:
The liability is the present obligation
of a particular entity.
The liability arises from past
transaction or event.
The settlement of the liability
requires an outflow of resources
embodying economic benefits.

 Liabilities are also classified as current

and noncurrent.
According to PAS 1, paragraph 69, an
entity shall classify a liability as current
when:
1. The entity expects to settle the
liability in its normal operating cycle.
2. The entity holds the liability primarily
for the purpose of trading.

3.

The liability is due to be settled

within 12 months after the reporting
period; or
4. The entity does not have an
unconditional right to defer
settlement of the liability for at least
12 months after the reporting
period.

PRESENTATION OF CURRENT
LIABILITIES
Karen Yvonne Bilon

 PAS 1,paragraph 54, provides that as

a minimum, the face of the
statement of financial position shall
provide shall include the following
line items foe current liabilities:
a. Trade and other payables
b. Current provisions
c. Short-term borrowing
d. Current portion of long-term debt
e. Current tax liability

 The term "trade and other payables" is

the line item for accounts payable,
notes payable, accrued interest on
notes payable, dividends payable and
accrued expenses.
No objection can be raised if the trade
accounts and notes payable are
separately presented.

NONCURRENT LIABILITIES
The term "noncurrent liabilities" is also a
residual definition. PAS 1, paragraph 69,
provides that all liabilities not classified as
current are classified as noncurrent.

Examples of noncurrent liabilities are:

a. Noncurrent portion of long-term debt
b. Finance lease liability
c. Deferred tax liability
d. Long-term obligations to company
officers
e. Long term deferred revenue

Definition of equity
Zharmaine Urbanozo

Equity
It is the residual interest in the assets of
the enterprise after deducting all its
liabilities.
Generally speaking, the definition of equity
can be represented with the accounting
equation:

Equity = Assets - Liabilities

 Equity may pertain to any of the following

depending on the form of business organization:

However, the term EQUITY may simply be used for

all business entities.
Under PAS 1, paragraph 7, the holders of
instruments classified as equity are simply known
as owners.

Shareholders equity
It is the residual interest of owners in the net
assets of a corporation measured by the excess
of assets over liabilities.
It represents the net value of a company, or
the amount that would be returned to
shareholders if all the company's assets were
liquidated and all its debts repaid.
Shareholders Equity = Total Assets Total
Liabilities

Shareholders Equity = Share Capital

+ Retained Earnings Treasury
Shares

 Generally, the elements constituting shareholders

equity with their equivalent IAS term are:

Notes to Financial Statements

Raniella Sarmiento

Notes to Financial Statements

Provide narrative description or
disaggregation of items presented in the
financial statements and information
about items that do not qualify for
recognition.
Used to report information that does not fit
into the body of the financial statements
in order to enhance the understandability
of the financial statements.

Notes to Financial Statements

Its purpose is to provide the
necessary disclosures required by
Philippine Financial Reporting
Standards.

Forms of Statement of
Financial Position
1. Report Form
This form sets forth the three major
sections in a downward sequence of
assets, liabilities and equity.
2. Account Form
The assets are shown on the left side
and the liabilities and equity on the right
side of the statement of financial
position.

Report
Form

Account Form

LINE ITEMS IN STATEMENT

OF FINANCIAL POSITION
Franchesca Navarro
Caryl Louise Soliman

LINE ITEM
Line item basically refers to such
piece of information which has its
own weight and should be presented
on a separate line on any document.

PAS 1, paragraph 54, states that as

a maximum, the face of the
statement of financial position shall
include the following line items :
1.
2.
3.
4.
5.
6.

Cash and Cash Equivalents

Financial Assets (other than 1,3,6)
Trade and other receivables
Inventories
Property, plant, equipment
Investment in associates accounted for by the
equity method
7. Intangible assets
8. Investment property
9. Biological assets

10.Total of assets classified as held for sale

and assets included in disposal group
classified as held for sale
11.Trade and other payables
12.Current tax liability
13.Deferred tax asset and deferred tax liability
14.Provisions
15.Financial Liabilities (other than 11 and 14)
16.Liabilities included in disposal group
classified as held for sale
17.Noncontrolling interest
18.Share capital and reserves

 In the Philippines, the common practice is

to present current assets before noncurrent
assets, current liabilities before noncurrent
liabilities, and equity after liabilities. Other
formats may be equally appropriate
provided the distinction is clear. This is
accordance with paragraph 7 of the
preface to PAS 1.

 PAS 1, paragraph 57, provides that the

standard does not prescribe the order or
format in which items are to be presented
in the statement of financial position.
Note that the format of the statement of
financial position as illustrated in the
appendix to IAS 1 presents noncurrent
assets before current assets, equity before
liabilities, and noncurrent liabilities before
current liabilities. This may be the practice
in other jurisdiction, like the United
Kingdom.