Dealing with deals
the preference is to apply the transaction retrospectively to show comparative results in the financial statements, which is acceptable locally.
While the existing PFRS does not have explicit rules for business acquisition or combination amongst related parties, the Philippine Interpretations Committee (PIC) has issued PIC Q&As 201102 and 2012-01 to clarify accounting options for these related party transactions. However, once an accounting option has been selected or applied, a company should follow the same policy for all similar transactions in the future.
Disposal of a business segment
A strategic business decision does not only involve expansion through acquisition. Some businesses would refer to a sale of a business segment as a strategic business move. In cases of divestment, management should be aware that disposal of a business segment or division would disclosures compared to a simple sale of assets.
Assets and liabilities of a disposed the balance sheet presentation, but details of the disposal (e.g. amount of cash or property received in exchange) are required to be disclosed The income statement on the other hand would need to present comparative profit or loss from continuing operations separately from discontinued operations. Further, - the disposed segment should also be presented in the statement of - cial statements.
In that case, while a divestment may happen only in the current year, comparative information would be - porting. Companies should be ready for all the required disclosure infor- mation in cases of segment disposal.
A number of the new and revised accounting rules would require judgment, and an option taken by management now may not only affect the results. Be aware of the changing rules and ensure readiness by involving the right people who would help you maximize value in moments of change and adjustment.
Again, as management think of how they will turn around businesses, they should always consider the accounting and reporting implication of the same. Make sure avoid unexpected costs from litigations or from regulatory penalties. Ma.LoisG.Abadisapartner fromAssurance,Accounting ConsultingServicesandHuman CapitalofIslaLipana&Co./ PwCPhilippines.Emailyour commentsandquestionstomarkets@ph.pwc.com.Thiscontentis forgeneralinformationpurposes only,andshouldnotbeusedas asubstituteforconsultationwith professionaladvisors.