NATURE AND USERS OF ACCOUNTING 3.

Cost Accounting – concerned with the

INFORMATION measurement and recognition of cost services
provided or products manufactured. More
 Internal Users – active owners and managers use
associated with manufacturing companies.
financial info. for internal decision-making. Users
4. Tax Accounting – concerned with the
have ready access to specific type of financial info.
computation of taxes and preparation of tax
o Active owners & managers – use info to
returns submitted to a taxing authority.
evaluate the entity’s performance, make
5. Government Accounting – covers the process of
financial and operational plans, and
analyzing classifying, summarizing, and
implement business decisions.
communicating all transactions involving the
o Management accounting – branch of
receipt and disposition of government funds and
accounting that is designed to meet the
property
needs of the internal users.
6. Bookkeeping – refers only to one phase of
 External Users – do not have ready access to the accounting, the recording phase.
financial reports. These users include the inactive 7. Auditing – discipline that is related to accounting
owners. Creditors and lenders, suppliers, potential but is distinguishable from it. It refers to an
investors, taxing authorities, regulatory bodies, independent examination of the financial
the general public, etc. statements for the purpose of rendering an
o Financial statements – product of financial opinion as to the fairness of the presentation of
accounting, provides general-purpose report the financial statements. Auditing attests the
to the external users. credibility to the financial statements.
 Direct Users – users with direct interest use
financial info. As a tool to protect their own FINANCIAL REPORTING AND THE STANDARD-
interest in the enterprise. They are the managers, SETTING PROCESS
creditors, suppliers, customers, employees, and
- there was a need to bring into common basis the
taxing authority.
system of measurement and communication of
 Indirect Users – use accounting info to provide
economic activities.
advice to or protect the interest of a direct user.
 International Accounting Standards Committee
These include regulatory agencies, financial and
(IASC) – is the first to recognize this need and was
legal consultants, and labor unions.
organized in 1973-2001. IASC developed a set of
 Reporting Entity – oftentimes called accounting
uniform global accounting standards called
entity may be a business enterprise, a group of
International Accounting Standards (IAS).
entities, and any other unit that doesn’t the
 International Accounting Standards Board (IASB)
personality of its owners, members, and
– was the reconstituted ASC in 2001, is under the
employees. It is capable of controlling its own
umbrella of the International Financial Reporting
economic resources and incurring economic
Standards (IFRS) Foundation.
obligations.
 International Financial Reporting Standards
 Accounting Entity Concept – the concept that
(IFRS) Foundation – is a not-for-profit, public
separates the personality of the enterprise from
interest organization established to develop a
its owners and other stakeholders.
single set of high-quality, understandable,
BRANCHES OF ACCOUNTING enforceable, and globally accepted accounting
standards, called the IFRS Standards, and to
1. Financial Accounting – the broadest branch,
promote and facilitate adoption of the standards.
focusing on the needs of external users. It is
 Standards by IASB are called the International
concerned with the recognition of, measurement
Financial Reporting Standards (IFRS) and it
and communication of economic resources,
includes the ff:
economic obligations, and changes in economic
o Specific International Financial Reporting
resources and economic obligations.
Standards;
2. Management Accounting – serves the info needs
o Interpretations by the International Financial
of internal users. For short-term and long-range
Reporting Interpretations Committee (IFRIC);
plans for the enterprise. Information provided is
o International Accounting Standards
not structured and not necessarily conforming to
the accounting standards.
 o Interpretations made by the Standing o Philippine Interpretations, which are
Interpretations Committee (SIC) adopted from the interpretations of the
IFRIC and the SIC and the interpretations
THE STANDARDS SEETTING PROCESS ADOPTED BY
of the SIC.
IASB
- PFRS set out the recognition, measurement,
- the IFRS Standards are required in more than 140 presentation, and disclosure requirements dealing
countries and permitted in many more. with transactions and events that are important in
- One of the primary functions of the IFRS general purpose financial transactions.
Foundation is to govern and oversee the
activities of its standard-setting body (IASB)
- The IASB follows a due process in the CHAPTER 2 THE CONCEPTUAL FRAMEWORK OF
development of financial reporting standards. Due FINANCIAL REPORTING
process comprises of the ff stages:
Purpose of the Conceptual Framework
o Setting the agenda;
o Planning the project; The purpose of Conceptual Framework is to:
o Developing and publishing the discussion
paper, exposure draft, and the standard;
o And issuance of the standard

THE STANDARD SETTING PROCESS IN THE

PHILIPPINES

- Philippine Institute of Public Accountants

organized the Accounting Standards Council that
formalized the standard setting process in the
country in 1981.
- The Accounting Standards Council (ASC) was
formed on Nov. 18, 1981 to study the accounting
standard-setting process in the Philippines. The
main function of the ASC was to establish and
improve generally accepted accounting principles
in the Philippines.
- ASC composed of 8 members: SEC, PICPA, Bangko
Sentral ng Pilipinas, Board of Accountancy, and
Financial Executives of the Philippines.
- Board of Accountancy the body that regulates the
practice of accountancy in the Philippines.

Financial Reporting Standards Council (FRSC)

- Under the Rules and Regulations of the

Philippine Accountancy Act (Republic Act 9298),
the FRSC shall be composed of 14 members
- Formed the Philippine Interpretations Committee
(PIC) in Nov. 2006 to provide the Council
assistance in establishing and improving financial
reporting standards in the PH.
- PIC issues implementation guidelines on
Philippine Financial Reporting Standards. This
consist of:
o Specific PFRS, which are adopted from
IFRS
o Philippine Accounting Standards (PAS),
which are adopted from IAS