CONCEPTUAL FRAMEWORK ACCOUNTING
SYSTEM
DEVELOP OF FINANCIAL REPORTING
FRAMEWORK AND STANDARD-SETTING
BODIES
OBJECTIVE: is to provide financial information
about the reporting’s entity that is useful to
present and potential equity investors, lenders
and other creditors in making decisions about
providing resources to the entity.
Primary Users
- Equity’s Investors
- Lenders
- Creditors
Branches of Accounting
- Financial Accounting (External)
- Management Accounting (Internal)
- Cost Accounting – cost accumulation,
controlling the cost of products and
services.
- Auditing
- Government Accounting
- Tax Accounting
- Accounting Education
THE DEVELOPMENT OF ACCOUNTING
STANDARDS
Accounting Standards
- These are a network of board
guidelines, rules and procedures that
represents generally accepted
accounting principles, which define the
practice of financial reporting at a
particular time.
- Its main purpose is to ensure the
relevance of financial information
provided to the external users
THE NEED FOR INTERNATIONAL ACCOUNTING
STANDARDS
- Accounting reports lack comparability.
- Accounting reports will significantly lose
credibility if a company reports
different profit numbers in different
countries for given transactions.
- -To be consistent (CONSISTENCY)
INTERNATIONAL ACCOUNTING STANDARDS
COMMITTEE
- The following international bodies
publicly urged the adoption of a single
set of global accounting standards:
a.) World Bank
b.) International Monetary Fund
c.) International Organization of
Securities Commission
d.) Organization for Economic
Cooperation Development
- Formed in 1973 to develop global
accounting standards.
- The IASC issued 41 International
Accounting Standards (IASs)
INTERNATIONAL ACCOUNTING STANDARDS
BOARD
- It replaced IASC in 2001
- The main objective is to develop a
single set high-quality, understandable,
and enforceable global accounting
standard to help participants in the
world’s capital markets and other users
make economic decisions.
- it has revised many IASs and has issued
new standards of its own, called
International Financial Reporting
Standards (IFRS).
- IASB has no authority to require
compliance with its accumulating
standards.
- The IASB structure has the following
main features:
a.) The IASC Foundation is an
organization having two main
bodies:
  The Trustee
 The IASB
B.) Standards Advisory Council
C.) International Financial Reporting
Interpretations Committee
- Members of the board are appointed by the
Trustees for a term of five (5) years, renewable
once
- The International Accounting Standards Board
(the Board) shall normally comprise of 14
members
- Up to three members may be part-time
members (the expression ‘part-time’ meaning
that the members concerned commit most of
their time to paid employment by the IFRS
Foundation) and shall meet appropriate
guidelines of independence established by the
Trustees.
THE BOARD SHALL:
A.) Have complete responsibility for all
Board technical matters, including the
preparation and issuing of IFRS
Standards (Other than IFRIC
Interpretations) and Exposure Drafts,
each of which shall include any
dissenting opinions, and the approval
and issuing of IFRIC Interpretations
developed by the Interpretations
Committee.
B.) Publish an Exposure Draft on all
projects and normally publish a
discussion document for the public
comment on major projects in
accordance with procedures approved
by the Trustees.
C.) In exceptional circumstances, and only
after formally requesting and receiving
prior approval from 75% of the
Trustees, reduce, but not dispense with,
the period comment on an Exposure
Draft below that is described as the
minimum in the IFRS Foundation Due
Process Handbook.
D.) Have full discretion in developing and
pursuing its technical agenda, subject to
the following:
- Consulting the Trustees, and the
Advisory Council, and
- Carrying out a public consultation every
five (5) years from the date of the most
recent public agenda consultation.
E.) Have full discretion over project
assignments on technical matters: in
organizing the conduct of its work, the
Board may outsource detailed research
or other work to national standard-
setters or other organizations.
F.) Establish procedures for reviewing
comments made within a reasonable
period on documents published for
comment.
G.) Normally form working groups or other
types of specialist advisory groups to
give advice on major projects.
H.) Consult the Advisory Council on major
projects, agenda decisions, and work
priorities
I.) Normally publish a Basis for conclusions
with a standard or an Exposure Draft
J.) Consider holding public hearings to
discuss propose standards, although
there is no requirement to hold public
hearings for every project.
K.) Considering undertaking field tests
L.) Gives reasons if it does not follow any
of the non-mandatory procedures set
out in b, g, i, j, k.
THE IASC FOUNDATION / IFRS FOUNDATION
- There are 22 Trustees (changes adopted
the IASC Foundation as of July 1, 2005)
- Trustees shall normally appointed for a
term of three years, renewable once.
- The Trustees appoint the members of
the IASB, The Standing Interpretations
Committee, and the Standards Advisory
Council.
- IFRS Foundation is the new name,
approved in January 2010, of the IASC
Foundation, the name changed formally
took effect on July 1, 2010.
THE OBJECTIVES OF THE IFRS FOUNDATION
ARE:
A.) To develop, in the public interest, a
single set of high quality,
understandable, enforceable and
globally accepted financial accounting
standards based upon clearly
The Interpretations Committee shall:
articulated principles. These standards
should require high quality, transparent
and comparable information in financial
statements and other financial
reporting to help investors, and other
participants in the world’s capital
markets and other users of financial
information.
B.) To promote the use and rigorous
application of the standards.
C.) In fulfilling the objectives associated
with a and b, to take account of, as
appropriate, the needs of a range of
sizes and types of entities in diverse
economic settings.
D.) To promote and facilitate adoption of
the IFRS Standards, being the standards
and IFRIC Interpretations issued by the
Board, through the convergence of
national accounting standards and IFRS
Standards.
IFRS INTERPRETATIONS COMMITTEE
- Formerly called the International
Financial Reporting Interpretations
Committee (IFRIC).
- It shall comprise 14 voting members,
appointed by the Trustees for
renewable terms of three years
- The Interpretations Committee shall
meet as when required and 10 voting
members present in person or by
telecommunications shall continue
quorum: one or two Board members
shall be designated by the Board and
shall attend meetings as non-voting
observers; other members of the Board
may attend and speak at the meetings
- Approval of draft or final IFRIC
Interpretations shall require that not
more than four voting member vote
against the draft or final interpretation.
- Interpret the application of IFRS
Standards and provide timely guidance
on financial reporting issues not
specially addressed in the Standards, in
the context of the Board’s framework
and undertake other tasks at the
request of the Board;
- In carrying out work under (a) above,
have regard to the board’s objective of
working actively with national standard
setters to bring out convergence of
national accounting standards and IFRS
Standards to high quality solutions;
- Publish, after clearance by the Board,
draft Interpretations for public
comment and consider comments
made within a reasonable period before
finalizing an IFRIC Interpretation; and
- Report to the board and obtain the
approval of eight of its members for
final IFRIC Interpretations if there 13
 members or fewer, or by nine of its
members if there are 14 members.
IFRS ADVISORY COUNCIL (THE ADVISORY
COUNCIL)
- Formerly called the Standards Advisory
Council
- Members shall be appointed by the
Trustees
- The objective of:
a.) Giving advice to the Board on agenda
decisions and priorities in the Board’s
work;
b.) Informing the Board of the views of the
organizations and individuals on the
Advisory Council on major standard-
setting projects and;
c.) Giving other advice to the board of the
Trustees
- The Advisory Council comprise 30
member or more, having a diversity of
geographical and professional
backgrounds, appointed for renewable
terms of three years.
- The Advisory Council shall normally
meet at least two times a year.
Meetings shall be open to the public.
DUE PROCESS OF FINANCIAL REPORTING
The formal due process for the board and the
Interpretations Committee:
a.) Specifies the minimum steps taken to
ensure that their activities have
benefited from a thorough and effective
consultation process;
b.) Identifies the non-mandatory steps to
be considered, the ‘comply or explain’
approach meaning that the non-
mandatory steps in the process were
still recommended, so non-compliance
with them would require an
explanation; and
c.) Identifies other, optional, steps
available to them to help improve the
quality of IFRS Standards and related
documents.
- The International Accounting Standards
and IFRS Interpretations Committee will
the Due Process Handbook (2020) as
their basis.
STAGES
1.) Setting the Agenda
2.) Panning the Project
3.) Developing and publishing the
discussion paper
4.) Developing and publishing the exposure
draft
5.) Developing and publishing the standard
6.) Post Implementation Review
STANDARD SETTING BODIES IN THE
PHILIPPINES
ACCOUNTING STANDARD COUNCIL (ASC)
- The original accounting standard setting
body in the Philippines was the
Accounting Standards Council (ASC)
created by the Philippines Institute of
Certified Public Accountant (PICPA) on
November 18, 1981
- Prior to 2001, The Philippine accounting
standards were based on accounting
standards promulgated by the Financial
Accounting Standards Board (FASB) of
USA.
- The ASC was composed of eight (8)
members – four (4) from PICPA
including the designated Chairman; and
one (1) each from SEC, Bangko Sentral
ng Pilipinas (BSP) or Central Bank (CB),
PRC and Financial Executives of the
Philippines (FINEX).
- In 1997, the ASC decided to move
totally to International Accounting
Standards.
- The Philippine transition to IAS was
made on staggered basis, effective
2001.
- The ASC considered the following
factors in deciding to move to
International Accounting Standards:
A.) Support of IAS by Philippine
Organizations
B.) Increase internalization of the
business
C.) Improvement of IAS
D.) Increase the recognition of IASB
Standards
- The ASC approved the re-issuance as
Philippine Accounting Standards (PASs)
of previously issued Statements of
Financial Accounting Standards (SFASs)
and Statements of Financial Accounting
Standards/Internal Accounting
Standards (IASs) that were based on
IASs
- The standards are issued for the
following reasons:
1.) To update these for consequential
amendments arising from adopted
new International Financial
Reporting Standards (IFRSs) and
Revised IASs which resulted from
the Improvements Project of the
International Accounting Standards
Board (IASB) and for editorial
amendments made to all existing
IASs, and;
2.) To maintain consistency of format
and designation of Standards issued
by the ASC.
- Philippine Accounting Standards (PASs)
correspond to the adopted
International Accounting Standard
(IASs)
- Philippine Financial Reporting Standards
(PFRS) correspond to the adopted
International Financial Reporting
Standards (IFRSs).
- The Securities and Exchange
Commission (SEC) as indicated in SEC
Memorandum Circular #19, Series of
2004, dated Dec. 22, 2004 requires the
adoption of the IAS, PAS and IFRS in the
audited financial statements.
FINANCIAL REPORTING STANDARDS COUNCIL
(FRSC)
- When created per Section 9(A) of the
Rules and Regulations Implementing
Republic Act No. 9298 otherwise known
as the Philippine Accountancy Act of
2004, the Financial Reporting Standards
Council (FSRC) shall be new accounting
standard setting body.
- It shall be comprised of 15 members
including the Chairman.
- The FSRC due process of developing the
accounting standards include the
following steps:
1.) Consideration of pronouncement of
IASB
2.) Formation of the Task Force, When
necessary
3.) Issuance of Exposure Draft duly
approved by the majority vote of
the FSRC members
4.) Consideration of comments
(comment period is at least 60 days,
may be shortened to not less than
30 days)
5.) Approval of the majority of the
FSRC Members
6.) Publication in the official gazette or
a newspaper of general circulation.
PHILIPPINE INTERPRETATION COMMITTEE
(PIC)
- The FRSC formed the Philippine
Interpretation Committee (PIC) in
August 2006
- The objectives of PIC are:
1.) Principally, to issue implementation
guidance on Philippine Accounting
Standards (PASs), Philippine
Financial Reporting Standards
 (PFRS) and related interpretations
(collectively referred to as PFRS)
adopted by the Financial Reporting
Standards Council (FSRC) from
accounting pronouncements issued
by the International Accounting
Standards Board (IASB)
2.) To comment on exposure drafts of
proposed PFRS and other
documents that may be issued for
comment by the FRSC
3.) To comment on exposure drafts of
proposed accounting standards or
proposed regulations with
accounting relevance that may be
issued by government agencies,
such as the Securities and Exchange
Commission, Bangko Sentral ng
Pilipinas and Insurance
Commission.