Accountant's primary task: supply FS

Chapter 1-CFAS Essence of Accounting: decision-usefulness

I. Accounting
a. ASC (Accounting Standards Council) The Accountancy Profession
a.1 Service Activity Republic Act No. 9298/ PH Accountancy Act
a.2 Quantitative Information of 2004
b. AICPA (American Institute of Certified -regulates the practice of accountancy in the
Public Accountant) Philippines
b.1 Art of recording, classifying,
summarizing, & Communicating “How to be an Accountant?”
1. BSA
One-Quantitative 2. CPALE by BOA
Two-Financial in nature *BOA- is the body authorized by law to
Three-useful in decision-making promulgate rules and regulations affecting the
practice of the accountancy profession in the
*AAA definition stood up (quantitative PH
information useful in economic decision) *Computer-based examination is offered 2x a
a. Identifying analytical To recognize or not/ the year (May and October)
business activities (1)
external or (2) internal Limitation of the practice of public
b. Measuring technical Common financial accountancy
denominator (Peso)
Measurement basis: Single practitioners and partnerships for the
1.Historical Cost
practice of public accountancy shall be
2.Current Value/ FV,
value in use, fulfillment registered CPA in the PH.
value/ current cost
c.Communica-ting
Certificate of accreditation shall be issued to
formal Preparing and
distribution, WHY: CPA in public practice only upon showing in
Accounting as Universal accordance w/ rules & regulations
Language promulgated by BOA and approved by PRC
(Recording>>Classifying that such registrant has acquired a minimum of
>>Summarizing>> 3 years of meaningful experience in any
Communicating)
practice including taxation.
Accounting is an information system that *SEC shall not register any corporation
measures business activities, processes organized for the practice of public
information into reports and communicates accountancy.
the reports to decision makers.
Accreditation to practice public accountancy
Accounting as an information system Requirement: Registration to (1) BOA (2) PRC
Key Product: set of Financial Statements
FS: tells us about "how" well an entity is CPA generally practice their profession in 3
performing in terms of profit or loss and where main areas:
it stands in financial terms 1. Public Accounting
Composed of: individual practitioners, small
Overall objective of accounting accounting firms, and large multinational
Overall objective: provide quantitative organizations that render independent and
financial information expert financial services and public.
 a. Auditing/external auditing -primary service
which is to examine FS by independent CPA for
the purpose of expressing opinion as to
fairness
*BIR requires audited FS to accompany the
filing of annual income tax return
*bank
b. Taxation
-includes preparation of annual income tax
returns and determination of tax consequences
of certain proposed business endeavors.
Effective and efficient: Tax laws and
regulations and updated to the changes in
taxation law and court cases concerned with
interpreting taxation law.
c. Management advisory services
-has no precise coverage but is used generally to
refer to services to clients on matters of
accounting, finance, business policies,
organization procedures, product costs,
distribution and many other phases of business
conduct and operations.
It includes:
a. advice on installation of computer system
b. Quality control
c. Installation and modification of accounting
system
d. Budgeting
e. Forward planning and forecasting
f. Design and modification of retirement plans
g. Advice on mergers and consolidations
2. Private Accounting
-employment in business entities as: accounting
staff, chief accountant, internal auditor, and
controller.
Controller-highest accounting officer
Objective-to assist management in planning and
controlling the entity’s operations.
Includes- maintaining the records producing the
financial reports, budgets, and controlling and
allocating the resources.
+determination of the various taxes the entity
needed to pay.
3. Government Accounting
-encompasses the process of analyzing,
classifying, summarizing and communicating
all the transactions involving the receipt and
disposition of the government funds and
property and interpreting the results thereof.
Focus: Custody and administrative of public
funds
Branches of the government:
a. BIR
b. COA
c. DBM
d. SEC
e. BSP
Continuing professional development (CPD)
Republic Act No. 10912
-the law mandating and strengthening the
continuing professional development program for
all regulated professions, including the accountancy
profession.
-all CPA’s shall abide with the requirements, rules
and regulations RA No. 10912
-CPD pertains to inculcation and acquisition of
advanced knowledge, skill, proficiency, and ethical
and moral values
-CPD raises and enhances the technical skill and
competence of a CPA.
CPD Credit Units
-refers to credit hours required for the renewal of
CPA license and accreditation of CPA to practice
the profession of 3 years.
-All CPA regardless or area or sector of practice
shall be required to comply with 120 CPD credit
units. For accreditation
-15 CPD credit units for renewal
-mandatory
Exemption from CPD
Permanently exempted: 65 years old
*only applied to the renewal of CPA license and not
for the purpose of accreditation to practice the
profession.
 -it is an accounting
standard setting body
created by the PRC
upon
recommendation of
the BOA to assist the
BOA in carrying out
its powers and
functions provided by
RA No. 9298
Main function: to
establish and improve
accounting standards
that will be generally
accepted in the PH.
Accounting
Standards
promulgated by the
FRSC constitute the
“highest hierarchy” of
GAAP in the PH.
Approved statements of FRSC>> PAS>>PFRS.

Composition of FRSC
 15 members w/ a chairman (senior)
Generally Accepted Accounting principles  14 consists of the ff:
GAAP-these accounting rules, procedures and 1. BOA
practices came to be known as generally accepted 2. SEC
accounting principles or simply GAAP. 3. BSP
-the principles have developed on the basis of 4. BIR
experience, reason, custom, usage, and practical 5. COA
necessity. 6. Major organization of preparers
and users of FS-FINEX
Purposes of Accounting Standards 7. Public practice 2
Purpose: identify proper accounting practices for 8. Commerce and Industry 2
the preparation and presentation of financial 9. Academe 2
statements 10. Government 2
Philippine Interpretations Committee PIC
Accounting standards create a common Interpretation Committee PIC
understanding between prepares and users of FS May 2000 August 2006
particularly the measurement of assets and
liabilities. PIC role: to prepare interpretations of PFRS for
approval by the FRSC and to provide timely
A set of high-quality accounting standards is a guidance on financial reporting. It is in order to give
necessity to ensure comparability and uniformity authoritative guidance on issues that are likely to
in FS based on the same financial information. receive divergent or unacceptable treatment bc the
standards does not provide specific and and clearcut
Financial reporting standards Council rules and guidelines.
Philippines: GAAP is formalized initially through
the creation of ASC Counterpart: PIC in UK is IFRIC replaced by SIC
FRSC: now replaces the ASC
International accounting standards committee or other standard setting bodies such as USA financial
IASC Accounting Standards Board (FASB) and IASB are
“Dati” considered.
Objective- to achieve uniformity in the accounting
principles which are used by business and other In the past years, most Philippine standards issued
organizations for financial reporting around the are based on American accounting standards.
world.
At present, FRSC has adopted in their entirely all
Formed: June 1973 through agreement made by IAS and IFRS
professional accountancy bodies from:
1. Australia To move forward IFRS is essential to achieve to
2. Canada goal of one uniform and globally accepted financial
3. France reporting standards.
4. Germany
5. Japan The PH is fully compliant with IFRS effective Jan.
6. Mexico 2005, a process which was started back in 1997 in
7. Netherlands moving from USA GAAP to IFRS.
8. UK
9. Ireland The ff are the factors considered in deciding to
10. USA move totally to International accounting standards:
a. Support of international accounting standards by
Headquarter: London, United Kingdom PH organizations such as SEC, BOA, and PICPA
b. Increasing internalization of business which has
Objectives of IASC heightened interest in a common language for
a. To formulate and publish in the public interest financial reporting
accounting standards to be observed and to promote c. Improvement of international accounting
their worldwide acceptance and observance standards or removal of free choices of accounting
b. To work generally for the improvement and treatments
harmonization of regulations, accounting standards, d. Increasing recognition of international accounting
and procedures relating to the presentation of FS. standards by the World Bank, Asian Development
Bank and WTO
International Accounting Standards Board IASB
“ngunyan/current”
Replaces: IASC/ International Accounting
Standards Committee
-it publishes standards in a series of
pronouncements called IFRS or International
Financial Reporting Standard.
-IASB has adopted the body of standards issued by
IASC
-pronouncements of IASC continue to be designated
as “IAS”
IASB standard-setting process includes in the
correct order of:
1. Research
2. Discussion Paper
3. Exposure draft
4. Accounting Standard

Move toward IFRS

In developing accounting standards that will be
generally accepted in the PH, standards issued by
 Philippine Financial Reporting Standards
The financial reporting standards council issues
standards in a series of pronouncements called
“Philippine Financial Reporting Standards” or
PFRS.

The Philippine Financial Reporting standards

collectively include all of the following:

a. Philippine Financial Reporting Standards which

correspond to International Financial Reporting
Standards (IFRS)

The PFRS = IFRS

b. PAS which correspond to IAS

The PAS = IAS

c. Philippine Interpretations which correspond to

Interpretations of the IFRIC and the standing
Interpretations Committee, and Interpretations
developed by the PIC.

CONCEPTUAL FRAMEWORK
-sets out the concepts that
Questions:
1. Hierarchy
2. Explain “measuring” as a component of
accounting?
3. What are the measurement bases used in
accounting?
4. Why is accounting called as a “Universal
language of business”
5. Explain accounting as an information system
6.