cfas special term

• Conceptual Framework (CF)


  A body of concepts, terms, and assumptions that set out the concepts that underlie the preparation and presentation of financial statements for external users
• Conceptual Framework


  • It is not PAS or PFRS
  • It is significant if there is NO existing standard
  • It serves as a general guideline in the preparation of financial statements in the absence of specific PFRS
  • In case of conflict between CF and PFRS, the conditions and requirements for measurement and disclosure set by PFRS will prevail over CF
• Types of Accounting


  • Financial
  • Management
• Financial Accounting


  The process of developing general-purpose financial statements and reporting general-purpose accounting information to various external users
• Reporting Entity


  An entity for which there are users who rely on the financial statements as their major source of financial information about the entity
• Users of Financial Statements

  • Present and Potential Investors
  • Creditors and Lenders
  • Customers
  • Suppliers
  • Government
  • Employees
  • General Public
  • Management
• Qualitative Characteristics of Useful Financial Information

  • Fundamental: Relevance, Faithful Representation
  • Enhancing: Verifiability, Comparability, Understandability, Timeliness
• Relevance


  Useful information that has confirmatory value, predictive value, and is material
• Faithful Representation


  Information that is complete, neutral, and free from error
• Comparability


  Accounting information is measured and reported in a similar manner, enabling comparison between companies (inter-comparability) and within the company (intra-comparability)
• Verifiability


  Measurement and disclosure are appropriately included and can be replicated by independent persons with the same result
• Timeliness


  Financial information should be available and provided for decision making before it loses its capacity to influence the decision
• Understandability


  Information is presented in a clear manner to be understood by different users, assuming they have some business accounting knowledge
• Elements of Financial Statements

  • Assets
  • Liabilities
  • Equity
  • Income
  • Expenses
  • Comprehensive Income
• Complete Set of Financial Statements based on PFRS

  • Statement of Financial Position
  • Statement of Financial Performance
  • Statement of Changes in Equity
  • Statement of Cash Flows
  • Notes to the Financial Statements
• Financial Statements are issued by the corporate management and NOT by the auditors or government agency
• Financial Statements


  Include information pertaining to a particular subject
• Financial Reports


  Include information on many related topics, including several financial statements
• Hierarchy of Application to Financial Statements


  • Specific Standard - PFRS or PAS
  • Related Standards
  • Conceptual Framework
  • Most Recent Pronouncements of Other Standard-Setting Bodies
  • Other Accounting Literature and Accepted Industry Practices
• The Revised Conceptual Framework was developed in March 2018 by the International Accounting Standards Board (IASB) to ensure uniformity in interpretation across various accounting methodologies
• The FASB focuses mainly on setting standards and rules for accounting firms and individual certified public accountants practicing in the US, while the IASB focuses on international accounting standards
• The PIC assists the FRSC in establishing and improving financial reporting standards in the Philippines, and its role is principally to issue implementation guidance on PFRS
• The BOA approves the renaming of Financial Reporting Standards Council (FRSC) to Financial and Sustainability Reporting Standards Council (FSRSC)
• The rationale for adopting IFRS is the growth in size and importance of multinational companies that affect every country and every government
• US GAAP and IFRS are similar, but are not exactly the same
• Verifiability


  • Verifiable if the measurement and disclosure are appropriately included and if replicated by independent person will give the same result
• Timeliness


  • Financial information should be timely
  • It should be available and provided for decision making before it loses its capacity to influence the decision
• Understandability


  • Information is understandable if it is presented in a clear manner to be understood by different users
  • It is assumed that users have some business accounting knowledge
• Complete set of Financial Statements based on PFRS

  • Statement of Financial Position
  • Statement of Financial Performance
  • Statement of Changes in Equity
  • Statement of Cash Flows
  • Notes to the Financial Statements
• CFAS


  Financial Performance
• PAS 1


  Comprehensive Income
• Comprehensive Income


  Changes in equity of an entity during a period from transactions or other events from nonowner sources (excluding investments and distribution to owners)
• Asset


  A resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity
• Liability


  • A present obligation of the entity arising from past events
  • The settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits
• Equity


  The residual interest in the assets of the entity after deducting all its liabilities
• Income


  • Increases in economic benefits during the accounting period — in the form of:
  • Inflows or enhancements of assets
  • Decreases of liabilities
  • That results in increases in equity, other than those relating to contributions from equity participants
• Expenses


  • Decreases in economic benefits during the accounting period — in the form of:
  • Outflows or depletions of assets
  • Incurrences of liabilities
  • That results in decreases in equity, other than those relating to distributions to equity participants
• Gains and Losses


  Peripheral or incidental transactions of an entity affecting the entity during the period
• Recognition


  The process of capturing for inclusion in the financial statements an item that meets the definition of asset, liability, equity, income and expenses
• Measurement


  The process of determining the monetary amounts at which the elements of financial statements are to be recognized and carried in the financial statements