BAGUE, EMMA YSABEL U. COMPARISON BETWEEN MR.

OBLEA
FULL PFRS AND PFRS FOR SMEs

Definition
The IASB concluded that, regardless of size, entities whose securities are traded in a public market
should follow full PFRS and not PFRS for SMEs.

Qualities of General Features

The PFRS for SMEs and full PFRS share the same provisions on the definition, recognition, and
measurement of the elements of financial statements.
The only significant difference is the measurement of the elements of financial statements.
Under PFRS for SMEs, the measurement bases are two only, namely historical cost and fair value.
However, under Conceptual Framework for Financial Reporting, the measurement bases are historical
cost, current cost, realizable value and present value. Full PFRS and PFRS for SMEs have the same
provisions on the general features in the preparation of financial statements.
Under the Conceptual Framework for Financial Reporting the fundamental qualitative characteristics of
useful financial information are:
a. Relevance

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b. Faithful representation

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To be relevant, financial information must have both predictive values and confirmatory value.
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To be a perfectly faithful representation, a depiction should possess the characteristics of completeness,

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neutrality and free from error.
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Materiality is a subcharacteristic of relevance.
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The Conceptual Framework also mentions the enhancing qualitative characteristic that would increase
the usefulness of financial information, namely:
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a. Understandability
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b. b. Comparability
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c. Verifiability
d. Timeliness
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Statement of Financial Position

The components of financial statements of an SME are similar to those provided by full PFRS.
However, a single statement of income and retained earnings is not permitted under full PFRS. A
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statement of changes in equity is always required.

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In addition, under full PFRS, the third statement of financial position as at the beginning of earliest
comparative period shall be prepared:
a. When an entity applies an accounting policy retrospectively.
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b. When an entity makes a retrospective restatement.

c. When an entity reclassifies items in its financial statements.
The third statement of financial position is not required under PFRS for SMEs.
Full PFRS and PFRS for SMEs require practically the same line items to be presented on the face of the
statement of financial position. However, the following items are required to be presented under full
PFRS but not under PFRS for SMEs:
a. Total of assets classified as held for sale.
b. Total of liabilities included in disposal group classified as held for sale.
Moreover, full PFRS requires presentation of investments in associates but not investment in joint
ventures.

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 BAGUE, EMMA YSABEL U. COMPARISON BETWEEN MR. OBLEA
FULL PFRS AND PFRS FOR SMEs

PFRS for SMEs requires presentation of both investments in associates and investments in joint ventures.
Full PFRS and PFRS for SMEs have the same provision on the current and noncurrent separate
presentation, and the definition of current assets, noncurrent assets, current liabilities and noncurrent
liabilities.

Comprehensive Income Cash Flow

Under full PFRS, the components of other comprehensive income include the following:
a. Gain or loss from translation of the financial statements of a foreign operation.
b. “Remeasurements,” including actuarial gain or loss on projected benefit obligation.
c. Unrealized gain or loss from derivative contracts designated as cash flow hedge.
d. Unrealized gain or loss on equity investment measured at fair value through other
comprehensive income.
e. Unrealized gain or loss on debt investment measured at fair value through other comprehensive
income.
f. Revaluation surplus during the year.
g. The change in fair value attributable to credit risk of a financial liability designated at fair value
through profit or loss.

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The PFRS for SMEs and full PFRS share the same provisions on the presentation of total comprehensive

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income.

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Notes to Financial Statements, Related parties, Events After Reporting Period
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The PFRS for SMEs and full PFRS are the same in the matter of presenting the notes to financial
statements.
The PFRS for SMEs and full PFRS share the same principles with respect to related party disclosures.
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The PFRS for SMEs and full PFRS share the same provisions for accounting and reporting events after the
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end of reporting period.

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Accounting Changes
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PFRS for SMEs and full PFRS have the same provisions and requirements with respect to the following:
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a. Selection of accounting policies

b. Consistency of accounting policies
c. Changes in accounting policies
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d. Changes in accounting estimates

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e. Correction of prior period error

Inventories and Revenue

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The PFRS for SMEs and full PFRS have practically the same provisions related to definition, measurement,
costs of purchase, cost of conversion, other cost and cost formulas for inventories.

Basic Financial Instruments

Both the PFRS for SMEs and full PFRS have the same definitions of a financial instrument, financial asset
and financial liability.

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 BAGUE, EMMA YSABEL U. COMPARISON BETWEEN MR. OBLEA
FULL PFRS AND PFRS FOR SMEs

Associate
The significant difference between the PFRS for SMEs and full PFRS lies in the measurement of the
investment in associate.

FULL PFRS PFRS for SMEs

Under full PFRS, the investor has no accounting Under PFRS for SMEs, all investments in
policy choice. The investments in associates shall associates are accounted for using any one of the
be accounted for using the equity method only. cost model, equity method or the fair value
Moreover, areas covered under full PFRS but not model. In other words, only one accounting
in PFRS for SMEs include the following: policy or one model shall be applied in
a. Guidance on significant influence. accounting for all investments in associate.
b. Consequences when an investment
ceases to be an associate.
c. Profit and loss from upstream and
downstream transactions

Investment Property
FULL PFRS PFRS for SMEs
Full PFRS allows accounting policy choice of Investment property is measured at fair value if

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either fair value model or cost model. If the entity the fair value can be measured reliably without

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follows the cost model, the fair value of the undue cost or effort on an ongoing basis.

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property must be disclosed. However, when an
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investment property is held by a lessee under an for as property, plant and equipment using the

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operating lease, the entity must follows the fair cost-depreciation-impairment model.
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value model for all of the investment properties.
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Property, Plant and Equipment

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FULL PFRS PFRS for SMEs

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Full PFRS provides that an entity shall choose the Under PFRS for SMEs, property, plant and
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cost model or revaluation model as an accounting equipment shall be measured using the cost
policy and shall apply that policy to an entire class model only.
of property, plant and equipment.
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The PFRS for SMEs and full PFRS are the same with respect to other matters related to property, plant
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and equipment, such as depreciation method, useful life, residual value, depreciation of significant
components, impairment and derecognition.
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Government Grant Borrowing Cost

The significant differences between PFRS for SMEs and full PFRS with respect to government grant are as
follows:
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FULL PFRS PFRS for SMEs

Government grant is recognized when there is a A government grant is recognized when the
reasonable assurance that the entity will comply conditions are actually satisfied.
with the specified conditions.
A government grant is recognized as income over PFRS for SMEs does not allow an entity to match
the periods necessary to match the grant with the grant with the expense for which it is
the related cost for which it is intended to intended to compensate or the cost of the asset
compensate. that it is used to finance.
Grant related to asset may be treated either as There is no such option under PFRS for SMEs.
deferred income or a reduction in the carrying Under PFRS for SMEs, the grant is a deferred
amount of the asset. income until the condition are actually satisfied.

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 BAGUE, EMMA YSABEL U. COMPARISON BETWEEN MR. OBLEA
FULL PFRS AND PFRS FOR SMEs

Intangible Assets
The significant differences between PFRS for SMEs and full PFRS are as follows:
FULL PFRS PFRS for SMEs
Research costs are expensed when incurred. All research and development costs are
However, development costs may be capitalized recognized as expenses when incurred.
when specific criteria are met, particularly when
technological feasibility has already been
established.
Intangible assets are measured subsequently Intangible assets are measured subsequently
using either cost model or revaluation model. using either the cost model only.
The useful life of an intangible asset is either The useful life of an intangible asset is considered
finite or infinite. If the useful life cannot be to be finite. As a matter of fact, if the useful life if
estimated reliably, there is no assumption of 10 an intangible asset cannot be estimated reliably,
years. it is assumed to be 10 years.
Intangible assets with a finite useful life are All intangible assets, including goodwill, are
amortized over the useful life and intangible amortized.
assets with intangible assets with indefinite
assets with indefinite useful life are not
amortized but tested for impairment.

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Intangible assets with a finite useful life are Intangible assets are tested for impairment when

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tested for impairment when there is an indication there is an indication that the asset may be

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that the asset may be impaired. Intangible assets
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with indefinite useful life are tested for

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impairment annually and whenever there is an
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indication that the asset may be impaired.
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Impairment of Assets
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Full PFRS and PFRS for SMEs are practically the same with respect to the following:
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a. Recognition and measurement of impairment loss

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b. Definition of fair value less cost of disposal value in use

c. Internal and external indicators of impairment
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d. Reversal of impairment
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The notable difference is as follows:

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FULL PFRS PFRS for SMEs

Assets with a finite useful life are tested for Assets, including goodwill, are tested for
impairment when there is an indication that the impairment when there is an indication that the
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asset may be impaired. asset may be impaired.

However, the following assets are tested for
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impairment annually and when there is an

indication that the asset may be impaired:
a. Goodwill
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b. Intangible assets with an indefinite useful

life on an intangible asset not yet
available for use.

Provisions and Contingencies

There are no significant differences between PFRS for SMEs and full PFRS with respect to provisions and
contingencies. The PFRS for SMEs and full PFRS share the same principles for accounting and reporting
provision and for disclosing contingent liabilities and contingent assets.

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 BAGUE, EMMA YSABEL U. COMPARISON BETWEEN MR. OBLEA
FULL PFRS AND PFRS FOR SMEs

Leases
PFRS for SMEs and full PFRS are practically the same with respect to the accounting and reporting the
leases. The PFRS for SMEs applies to all leases, except the following:
a. Leases in the exploration industry
b. Licensing agreement for such items as motion picture films, video recording, plays, manuscripts,
patents and copyrights
c. Investment property
d. Biological assets
e. Leases that could result in a loss to either party as a result of contractual terms that are
unrelated to changes in the price of leased assets, changes in foreign changes rate or a default
by one of the counterparties
f. Onerous operating leases

Employee Benefits
Full PFRS and PFRS for SMEs share the same principles for the recognition and measurement of the
following:
a. Short-term employee benefits

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b. Defined contribution plans

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c. Other long-term employee benefits

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d. Termination benefits eH w
Full PFRS and PFRS for SMEs also share many of the principles for the recognition and measurement of

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defined benefit plans.
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FULL PFRS PFRS for SMEs

Under both full PFRS and PFRS for SMEs, all past service costs are now registered as expense
immediately regardless of vesting.
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All remeasurements of defined benefit plans, Actuarial gain and loss are:
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including actuarial gain and loss are recognized a. Recognized immediately in profit or loss.
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through other comprehensive income. However, b. Recognized immediately in other

amounts recognized in other comprehensive comprehensive income.
income are not subsequently recycled to profit or The SMEs has an accounting policy choice.
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loss but may be transferred within equity or

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retained earnings.
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The projected unit credit method must be used in The projected unit credit method is used in
measuring the defined benefit liability. measuring the defined benefit liability if the
information that is needed to make such
calculation is already available or can be obtained
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without undue cost or effort.

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Under both PFRS for SMEs and full PFRS, the defined benefit liability is the net total of the following:
a. Present value of benefit obligation at year-end
b. Minus the fair value of plan assets at year-end
Under both PFRS for SMEs and full PFRS, there is no more concept of expected return.
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The interest income on the fair value of plan All changes in the fair value of plan assets are
assets at the beginning of the period is included recognized in profit or loss.
in profit or loss as component of employee
benefit expense. The difference between actual
return on plan assets and the interest income is
recognized as a “remeasurement” through other
comprehensive income.

Income Tax
Full PFRS and PFRS for SMEs share many of the basic principles in accounting for income tax. The
significant differences between full PFRS and PFRS for SMEs are as follows:

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 BAGUE, EMMA YSABEL U. COMPARISON BETWEEN MR. OBLEA
FULL PFRS AND PFRS FOR SMEs

FULL PFRS PFRS for SMEs

The concept of valuation allowance is not A valuation allowance is recognized for a deferred
applicable. Instead, deferred tax asset is only tax asset so that its carrying amount equals the
recognized to the extent that it is probable that highest amount that is more likely than not to be
there will be sufficient future taxable against recovered.
which the deferred tax asset can be used.
Under full PFRS, the same prohibition applies but An SME shall not recognized a deferred tax asset
it is applicable to all investments in subsidiaries, or liability for temporary differences associated
branches, associates and joint ventures, whether with unremitted earnings from foreign
domestic or foreign. investments in subsidiaries, branches, associates
and joint ventures to the extent that the
investments are essentially permanent in
duration.

Equity
The PFRS for SMEs and full PFRS are practically the same with respect to the recording of equity
instruments, treasury shares; compound financial instruments, dividends and other related equity
matters.

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Share-Based Payment

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FULL PFRS
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The share options shall be measured at fair value
PFRS for SMEs
The share options must be measured at fair value

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on the date of grant. However, if the fair value of on the date of grant. The intrinsic value of share
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the share options cannot be measured reliably, option is not mentioned as an alternative.
the intrinsic value of the share options is used.
The intrinsic value is the excess of the market
price of the share over the option price.
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Specialized Activities Hyperinflation

FULL PFRS PFRS for SMEs
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PFRS for SMEs and full PFRS practically have the same principles for the recognition and measurement
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of biological assets and agricultural produce.

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Under full PFRS, an entity must develop its own Under PFRS for SMEs, an exploration expenditure
policy for recognition of an exploration and shall be measured subsequently using the cost
evaluation asset. If an entity’s accounting policy model only.
results in the recognition of an exploration and
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evaluation asset, such asset shall be measured

initially at cost. Like the requirement of PFRS for
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SMEs, the exploration and evaluation asset may

be classified as tangible asset or intangible asset.
Subsequently, exploration and evaluation asset
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shall be measurement using either the cost

model or fair value model.
PFRS for SMEs and full PFRS are the same in all aspects of accounting for an entity whose functional
currency is the currency of hyperinflationary economy.

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