Review of Chart of Accounts – Philippines

Review of Chart of Accounts – Philippines Questions and Suggested Answers 1. In China GAAP, the bonds or stocks purchased are categorized as “Held-for-trading” or “Available for sale” or “Long term investment”, based on the purpose of purchase. Does Philippine GAAP have similar categorization? Philippine client want to separate the marketable securities to current or non-current, it means short or long term, right? Answer: The Philippine Financial Reporting Standards (PFRS) [based from International Financial Reporting Standards (IFRS)] classifies “Investment in Bonds” and “Investments in Stocks” as financial assets.

For this purpose, investments in bonds or stocks are classified as: ? Trading securities (debt or equity securities) o o ? ? “Financial assets at fair value through profit or loss” by requirement “Financial assets at fair value through profit or loss” by designation Available-for-sale securities (debt or equity securities) Held-to-maturity securities (debt securities only) These investments are classified as either current (short-tem) or noncurrent (long-term) assets. The account name “Long-term investment” is not among the financial assets classification in PFRS.

Current investments are investments that are by their very nature are readily realizable and are intended to be held for not more than one year. Debt Trading securities Available-forsale v v Equity v v Current v Noncurrent Current or Noncurrent v – Maybe classified as current or noncurrent depending on whether they are intended to be held within one year or for more than one year v Held-tomaturity v 2 For instance, trading securities are normally classified as current assets because these investments are expected to be realized within twelve (12) of the balance sheet date.

Noncurrent financial assets are investments other than current investments. This residual definition means that the noncurrent investments are intended to be held for more than one year or are not expected to be realized within twelve months after the end of the reporting period. Trading Securities or Held-for-trading Securities The first category of financial assets under PAS 39 is called “financial assets at fair value through profit or loss”. This category includes two types of financial assets, they are: A. Financial assets that are held for trading or popularly known as “trading securities