Differences Between PFRS for

SMEs and Full PFRS

INVESTMENTS IN ASSOCIATES
 DEFINITION OF INVESTMENTS IN ASSOCIATES

PFRS for SMEs Full PFRS

An associate is an entity over which the Same as IFRS for SMEs.

investor has significant influence, but [IAS 28.2]
that is neither a subsidiary nor a joint
venture of the investor.
[IFRS for SMEs 14.2]
 SIGNIFICANT INFLUNCE
PFRS for SMEs
Significant influence is the power to
participate in the financial and operating
policy decisions of the associate but is
not control or joint control over those
policies. It is presumed to exist when the
investor holds at least 20% of the
investee’s voting power; it is presumed
not to exist when less than 20% is held.
These presumptions may be rebutted
if there is clear evidence to the
contrary.
[IFRS for SMEs 14.3]
Full PFRS
Similar to IFRS for SMEs; in addition, IFRS gives the
following indicators of significant influence to be
considered
where the investor holds less than 20% of the voting
power of the investee:
• Representation on the board of directors or equivalent
body.
• Participation in policy-making processes.
• Material transactions between the investor and the
investee.
• Interchange of managerial personnel.
• Provision of essential technical information.
The existence and effect of potential voting rights that are
currently
exercisable or convertible are considered when assessing
whether an
entity has significant influence.
[IAS 28.6-26.8]
 MEASUREMENT AFTER INITIAL RECOGNITION
PFRS for SMEs
An investor may account for its
investments 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.
[IFRS for SMEs 14.4]
Full PFRS
Investments in associates are accounted
for using the equity method.
Some exceptions are in place − for
example, when the investment is
classified as held for sale.
[IAS 28.13]
 COST MODEL

PFRS for SMEs Full PFRS

An investor measures its associates at Not permitted except in separate

cost less any accumulated impairment financial statements.
losses. All dividends are recognised in [IAS 28.35]
the income statement.

The cost model is not permitted for an

investment in an associate that has a
published price quotation.
[IFRS for SMEs 14.5-14.7]
 EQUITY METHOD

PFRS for SMEs Full PFRS

An associate is initially recognised at the transaction price
(including transaction costs). The investor, on acquisition
of the investment, accounts for the difference between the
cost of the acquisition and its share of fair value of the net
identifiable assets as goodwill, which is included in the
carrying amount of the investment.
The investor’s share of the associate’s profit or loss and
other comprehensive income are presented in the
statement of comprehensive income. Distributions
received from the associate reduce the carrying amount of
the investment.
In case of losses in excess of the investment, after the
investor’s interest is reduced to zero, additional losses are
provided for to the extent that
the investor has incurred legal or constructive obligations
or has made payments on behalf of the associate.
[IFRS for SMEs 5.5(c)(h), 14.8]
Initial recognition is at cost. Cost is not
defined in IAS 28, ‘Investments in
associates’. In other standards it is
defined as including transaction costs,
except in IFRS 3 (revised), which
requires transaction costs in a business
combination to be expensed.
Entities may therefore choose whether
their accounting policy is to expense
transaction costs or to include them in
the cost of the investment.
[IAS 28.11, 28.23, 28.29-28.30]
 EQUITY METHOD - CONTINUATION
PFRS for SMEs
Goodwill identified under equity
method is treated separately and
amortized.
Under the equity method, the
accounting policies of the associate is
adjusted to that of the investor, unless
it is impracticable to do so.
In applying the equity method, the
same reporting dates must be used,
except if it is impracticable to do so.
Full PFRS
Goodwill is included in the carrying
value of the investment and is not
amortized.
The impracticability exception is not
provided.
The same requirement applies, but
the difference in dates is limited to 3
months and the difference should be
consistent year-on-year.
 FAIR VALUE

PFRS for SMEs Full PFRS

An associate is initially recognised at the Not permitted except in separate
transaction price (excluding transaction financial statements.
costs). Changes in fair value are recognised [IAS 28.35]
in profit or loss.

The best evidence of the fair value is a

quoted price in an active market.
If the market is not active, an entity estimates
fair value by using a valuation technique. If
the fair value cannot be measured reliably,
the investor uses the cost model.
[IFRS for SMEs 11.27, 14.9]
 SEPARATE FINANCIAL STATEMENTS
PFRS for SMEs
Where separate financial statements of a
parent are prepared (this is not required),
management adopts a policy of
accounting for all its associates either:
• At cost less impairment, or
• At fair value through profit or loss.
[IFRS for SMEs 9.26]
Full PFRS
Similar to IFRS for SMEs; in addition,
investments are accounted for in
accordance with IFRS 5 when they are
classified as held for sale.
[IAS 27.38]
 CLASSIFICATION AND PRESENTATION

PFRS for SMEs Full PFRS

An investor classifies investments Similar to IFRS for SMEs; however,

in associates as non-current assets. only those associates accounted for
Associates are presented as a line item using the equity method are presented
on the balance sheet. as a line item.
[IFRS for SMEs 4.2(j), 14.11] [IAS 1.54(e), 28.38]
ARREAS COVERED IN IFRS BUT NOT FOR IFRS FOR SME

PFRS for SMEs Full PFRS

• Guidance on significant influence.

• Consequences when an investment
ceases to be an associate.
• Profit and loss from upstream and
downstream transactions.
• Impairment losses.
• Acquisition of an investment in an
associate.
 DISCLOSURE TO NOTES TO FINANCIAL STATEMENTS
PFRS for SMEs
•Its accounting policy
•Carrying amount
•Fair value of investment (if there are
published quotations)
•Dividend income (for cost method)
Full PFRS
•Reasons why an associate is not accounted
for using the equity method
•Summarized financial information of
associates not accounted for using the equity
method
•Share of any discontinued operations of
associates (separately presented)
•Share of changes directly recognized in
associate’s equity
•Share of contingent liabilities incurred
jointly with other investors
•Any contingent liabilities that may arise
because the investor is severally liable for all
or part of the liabilities of the associate.
DISCLOSURE TO NOTES TO FINANCIAL STATEMENTS cont…

PFRS for SMEs Full PFRS

•Reasons why an associate is not accounted
for using the equity method
•Summarized financial information of
associates not accounted for using the
equity method
•Share of any discontinued operations of
associates (separately presented)
•Share of changes directly recognized in
associate’s equity
•Share of contingent liabilities incurred
jointly with other investors
•Any contingent liabilities that may arise
because the investor is severally liable for all
or part of the liabilities of the associate.
INVESTMENTS PROPERTY
 DEFINITION OF INVESTMENT PROPERTY

PFRS for SMEs Full PFRS

Investment property is a property (land Same as IFRS for SMEs. Accounting

or building, or part of a building, or result likely to be the same.
both) held by the owner or by lessee [IAS 40.5]
under a finance lease to earn rentals or
for capital appreciation or both.

A property interest held for use in

the production or supply of goods or
services or for administrative purposes
is not an investment property.
[IFRS for SMEs 16.1]
 INITIAL MEASUREMENTS
PFRS for SMEs
The cost of a purchased investment
property is its purchase price plus
any directly attributable costs such as
professional fees for legal services,
property transfer taxes and other
transaction costs. Borrowing costs are
recognised as an expense.
[IFRS for SMEs 16.5, 25.2]
Full PFRS
Similar to IFRS for SMEs except for
borrowing costs that are directly
attributable to the acquisition,
construction or production of a
qualifying asset are required to be
capitalised as part of the cost of that
asset.
[IAS 40.20-40.24]
 SUBSEQUENT MEASUREMENTS
PFRS for SMEs
Investment property is carried at fair
value if its fair value can be measured
reliably without undue cost or effort.
Otherwise, the cost model is used.
[IFRS for SMEs 16.7-16.8]
Full PFRS
Management may choose as its
accounting policy to carry all its
investments properties at fair value or
at cost. However, when an investment
property is held by a lessee under an
operating lease, the entity follows the
fair value model for all its investment
properties.
[IAS 40.30]
 FAIR VALUE

PFRS for SMEs Full PFRS

Gains and losses arising from changes Same as IFRS for SMEs.
in the fair value of investment property [IAS 40.33-40.55]
are recognised in profit or loss.
[IFRS for SMEs 16.7]
 FAIR VALUE CONTINUATION…..

PFRS for SMEs Full PFRS

When the fair value of the IP is no
longer available without undue cost or
effort, the IP becomes PPE. This is a
change in circumstance, hence does not
constitute a change in accounting policy.
An entity may only account for IP at
cost in exceptional cases, where an
entity acquires IP, or when the existing
property first becomes IP after a change
in use, and the fair value of the property
cannot be reliably determined on a
continuing basis
 COST MODEL

PFRS for SMEs Full PFRS

The cost model is consistent with the Similar to IFRS for SMEs; however, full
treatment of property, plant and IFRS refers to IAS 16, ‘Property plant
equipment (PPE). Investment properties and equipment’.
are carried at cost less accumulated [IAS 40.56]
depreciation and any accumulated
impairment losses.
[IFRS for SMEs 16.8
 RESIDUAL VALUE
PFRS for SMEs
The residual value of IP not capable of
being measured reliably without undue
cost or effort, and therefore accounted
for as PPE must be estimated and
considered when depreciating
Re-assessment is only applicable when
there is an indication of changes in
residual value, depreciation method, or
useful life
Full PFRS
The residual value of IP not capable of
being measured reliably without undue
cost or effort, and therefore accounted
for as PPE must be deemed zero
Annual re-assessment of the residual
value, depreciation method, or useful
life of an item of PPE is required.
 MIXED USED

PFRS for SMEs Full PFRS

Mixed-use property should be separated Portions of the property are only

between investment property and PPE, accounted for separately if they can be
except where to do so would entail sold or leased out under finance lease
undue cost or effort separately
 SELF CONSTRUCTED INVESTMENT PROPERTY

PFRS for SMEs Full PFRS

Self-constructed IP to be classified as Building under construction that is

PPE while under construction and IP intended as IP shall be classified as IP
when ready for use
 TRANSFER

PFRS for SMEs Full PFRS

Transfer to or from investment IFRS includes further guidance on the

properties applies when the property situations when a property can be
meets or ceases to meet the definition transferred to or from the investment
of an investment property. property category.
[IFRS for SMEs 16.9] [IAS 40.57]
 BORROWING COST

PFRS for SMEs Full PFRS

Borrowing costs for PPE are expensed Borrowing costs for PPE are capitalized
outright
ARREAS COVERED IN IFRS BUT NOT FOR IFRS FOR SME

PFRS for SMEs Full PFRS

• Extensive guidance on transfers to and

from investment property.
• Disposals.
• Inability to determine fair value
reliably.
 DISCLOSURES TO NOTES TO FINANCIAL STATEMENTS
PFRS for SMEs
•Methods of determining the FV and
significant assumptions applied
•The extent to which the FV was
determined by a qualified independent
valuer
•Existence of restrictions on the
realizability of investment property
•Contractual obligation to purchase,
construct, develop or maintain
investment property
Full PFRS
• Criteria to distinguish between investment
property and owner-occupied property and
inventory
•Methods, significant assumptions to determine
fair value
•Extent to which independent valuer involved and
any adjustments to the valuation obtained
•Rental income
•Direct operating expenses
from investment property generating rental
income
from vacant investment property
•Material contractual obligations, including
repairs, maintenance
•Comparative information for all disclosures
 DISCLOSURES TO NOTES TO FINANCIAL STATEMENTS cont..

PFRS for SMEs Full PFRS

•An entity shall disclose a reconciliation of •Fair value model
the carrying amount of investment property, reconciliation
showing separately: information on property for which fair
Additions value cannot be determined
FV adjustments whether properties held under operating
Transfers leases have been classified as
Others investment property
•Cost model
reconciliation
fair value, or
information on property for which fair
value cannot be determined
End of Presentation
 Revaluation as Deemed Cost

EXEMPTIONS:
♦ An entity may elect to use a previous accounting policy
revaluation of an item of property, plant, and equipment, an
investment property, or an intangible asset at, or before, the
date of transition as its deemed cost at the revaluation date.

INTERPRETATION:
○ The carrying amount of the revaluated asset becomes the
initial measurement amount on the date of transition.
○ If the valuation was done before the date of transition,
adjustments, such as depreciation, may be required.