ACC 103_2-4

• Developments in Financial Reporting include Standard issued by other standard-setting bodies such as the USA Financial Accounting Standards Boards (FASB) and the IASB (International Accounting Standards Council Board).
• By 1997, there was a transition from the US GAAP to international accounting standards which was brought by SEC's membership in the International Organization of Securities Commission.
• In November 2004, the Philippine Accounting Standards Council resolved to adopt the PAS which was basically the revised version of the IAS, and the PFRS, which was basically the revised version of the IFRS. The same was implemented effective January 2005.
• By 2006, the ASC became the FRSC, which was created under the implementing rules of the Philippine Accountancy Act of 2004.
• FRSC monitors the technical activities of the IASB and issues invitations to comment on exposure drafts of proposed IFRSs issued by the IASB. If adopted, they are issued as IFRSs.
• The issuances of the International Financial Reporting Interpretations Committee, if adopted, are issued as Philippine Interpretations.
• The FRSC has adopted in their entirety the International Accounting Standards and International Financial Reporting Standards.
• Tax accounting involves the preparation of tax returns and rendering of tax advice, such as determination of tax consequences of certain proposed business endeavours.
• Philippine Financial Reporting Standards (PFRS) are standards and interpretations adopted by the Financial Reporting Standards Council (FRSC).
• The four sectors in the practice of accountancy are: Practice of Public accountancy, Practice in Commerce and Industry, Practice in Education/Academe, and Practice in the Government.
• Government accounting is the accounting for the national government and its instrumentalities, focusing attention on the custody of public funds and the purpose or purposes to which such funds are committed.
• Accounting standards in the Philippines comprise Philippine Financial Reporting Standards (PFRS), Philippine Accounting Standards (PASs), and Interpretations.
• International Financial Reporting Standards are a set of accounting standards that are recognized by at least 120 countries (including the Philippines) and provides a guide on how particular types of transactions and other events should be reported in the financial statements.
• Concept of Articulation - all of the components of a complete set of financial statements are interrelated.
• Proprietary theory - the accounting objective is geared towards the proper valuation of assets.
• Management accounting - focuses on special financial reports geared towards the needs of an entity's management.
• Fund theory - the accounting objective is the custody and administration of funds.
• Auditing - a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria and communicating the results to interested users.
• Full Disclosure Principle - financial statements provide sufficient detail to disclose matters that make a difference to users, yet sufficient condensation to make the information understandable, keeping in mind the costs of preparing and using it.
• Entity theory - the accounting objective is geared towards the proper income determination.
• Residual equity theory - this theory is applicable where there are two classes of shares issued, ordinary and preferred.
• Realization - the process of converting non-cash assets into cash or claims to cash.
• Prudence (conservatism) - the inclusion of a degree of caution in the exercise of the judgments needed in making the estimates required under conditions of uncertainty, such that assets or income are not overstated and liabilities or expenses are not understated.
• Consistency concept - financial statements are prepared on the basis of accounting principles which are followed consistently from one period to the next.
• Matching (Associating cause and effect) - costs are recognized as expenses when the related revenue is recognized.
• Financial accounting/Financial Reporting- focuses on general purpose financial statements.
• Cost accounting- the systematic recording and analysis of the costs of materials, labor, and overhead incident to production.
• Historical cost concept (cost principle) - the value of an asset is to be determined on the basis of acquisition cost.
• The rationale for using the IFRS/PFRS is to ensure consistency in recording, recognizing and measuring financial transactions.
• The PFRS, our version of the IFRS with some minor modifications, and the Philippine Accounting Standards are issued by the PFRS Council (formerly the Accounting Standards Council [ASC]), under the oversight of the BOA.
• These entities are considered to be a company that meets any of the following criteria: total assets of more than PHP 350,000,000 or total liabilities of more than PHP 250,000,000, securities trade in a public market, are in the process of filing their financial statements for the purpose of issuing any class of instruments in a public market, or hold secondary licenses issued by regulatory agencies.
• Micro-sized entities have the option to use either Income tax basis accounting standards effective 31 December 2004 (standards before entities transitioned to PFRS), or the PFRS for SMEs.
• SMEs are permitted to use PFRS for SMEs provided that they do not fall into one of categories of entities listed above.
• Members of the Philippine Interpretations Committee are appointed by the FRSC and include accountants in public practice, academe and regulatory bodies, and users of financial statements.
• Bangko Sentral ng Pilipinas (BSP; the Philippines Central Bank) has required all banks to follow PFRS since 2005.
• The FSRSC formed the Philippine Interpretations Committee in August 2006 to assist the FRSC in establishing and improving the financial reporting standards in the Philippines as part of the implementing rules and regulations of the Republic Act (RA) 9298, Philippine Accountancy Act.
• Factors considered in deciding to move totally to international accounting standards include support of international accounting standards by Philippine organizations, such as the Philippine SEC, Board of Accountancy and PICPA, increasing internalization of business which has heightened interest in a common language for financial reporting, improvement of international accounting standards or removal of free choices of accounting treatments, and increasing recognition by the World Bank, Asian Development Bank and World Trade Organization.
• The role of the Philippine Interpretations Committee is principally to issue implementation guidance on the PFRS.
• Once registered with the BOA as Certified Public Accountants (CPAs), individuals must maintain their accreditation with an accredited national professional accountancy organization, such as the Philippine Institute of Certified Public Accountants (PICPA).
• To be eligible to sit for the examination, applicants must meet the following criteria: be a Filipino citizen, be of good moral character, hold a degree in Bachelor of Science in Accountancy from a recognized institution, and not have been convicted of a criminal offense.