Welcome to ACT14:

Conceptual Framework and

Accounting Standards (CFAS)
Online Class Etiquette
Let me introduce myself.

I am Sir Edward Isip.

Course Syllabus
Course code: ACT14
Course title:
Conceptual Framework and Accounting Standards
Course Description
This course introduces the following:
• nature, functions, scope and limitations of the broad field of accounting theory
• comprehensive understanding of the theoretical accounting framework
• objectives of financial statements, accounting conventions, and generally accepted accounting
principles,
• standard setting process for accounting practice, national as well as international principles
relating to the preparation and presentation of financial statements
• the conditions under which they may be appropriately applied
• their impact or effect on the financial statements; and
• the criticisms commonly leveled against them.
Textbook
Conceptual Framework and
Accounting Standards
2021 Edition

Zeus Vernon B. Millan

Course Evaluation and Grading System
Attendance 10% Grade Equivalent Grade Equivalent
Class Participation 20% 99 – 100 1.00 81 – 83 2.50
Quiz 30% 96 – 98 1.25 77 – 80 2.75
Examination 40% 93 – 95 1.50 75 – 76 3.00
Total 100% 90 – 92 1.75 70 – 74 4.00 (Failed)
87 – 89 2.00 0 – 69 5.00 (Failed)
84 – 86 2.25

Cumulative Grading System

(30%-70% Rule)
Cumulative Cumulative Cumulative
Prelim Midterm Midterm Pre-finals Pre-finals Finals Finals
Attendance 9 10 (30% x 93) 10 (30% x 91.46) 10
Class Participation 18 20 +(70% x 90.80) 20 +(70% x 80.50) 10
Quiz 30 25.20 91.46 or 1.75 22.50 83.79 or 2.50 27.9 ?
Examination 36 35.60 28 36
Total 93 90.80 80.50 83.9
Overview of Accounting

Learning Objectives
• Define accounting and state its basic purpose.
• Explain the basic concepts applied in accounting.
• State the branches of accounting and the sectors in the practice
of accountancy.
• Explain the importance of a uniform set of financial reporting
standards.
What is Accounting for you?
Definition of Accounting
Accounting Standards Council
Committee on Accounting
Terminology of the American
Institute of Certified Public
Accountants (AICPA)
American Accounting Association
Accounting is a service activity. Its function is to provide
quantitative information, primarily financial in nature,
about economic entities, that is intended to be useful in
making economic decisions.
Accounting is the art of recording, classifying and
summarizing in a significant manner and in terms of
money, transactions and events which are in part at least
of a financial character and interpreting the results
thereof.
Accounting is the process of identifying, measuring, and
communicating economic information to permit
informed judgment and decision by users of the
information.
Based on those definitions, what are common to them?

It embodied three important activities in the accounting

process.
 Three important activities
IDENTIFYING MEASURING COMMUNICATING
Analyze transactions Monetary amounts Useful accounting
Measurement Bases information
Accountable Non-accountable a. Fair value “Financial Statements”
events events b. Historical costs “Accounting Reports”
c. Present value
d. Realizable value Communication process
Recognition Disclosure e. Current Cost 1. Recording/Bookkeeping
f. Inflation adjusted 2. Classifying
Sources of Accountable Events cost 3. Summarizing
External Events Internal Events Valuation by 4. Interpretation

a. Reciprocal a. Production Opinion Fact

b. Non reciprocal b. Casualty Estimates Supported by
c. Other external document
events
Basic Purpose of Accounting
Provide information useful in making economic
decisions.

Economic entities
Business Entities Non-for-Profit Entities

Economic Activities
Types of information provided by accounting
Quantitative Qualitative Financial
Expressed in numbers Expressed in descriptive Expressed in monetary
form (words) terms (money)

Inventory Count Company Background Total Assets

Total Sales in Units Accounting Policies Total Liabilities
No. of Equipment Depreciation Total Equity
Method Net Income
Types of reporting based on the uses of financial information
General Purpose
Financial Reporting
Designed to meet the common
needs of users of financial
statements
Governed by GAAP represented
by PFRS
Financial Accounting
Special Purpose
Financial Reporting
Designed to meet the specific
needs of a specific users.
Governed by management
discretion or other regulations
other than PFRS
Managerial Accounting
Tax Accounting
 Accounting
Language of
Science Arts Information System
Business
Body of knowledge Creative Skills Input data (economic Communicate the
that has a (imagination and transactions, process it economic status of
systematic insight) and turned them into an an entity.
processes information (financial
Critical thinking and statements
Judgment (analyze
and evaluate)
 Basic Accounting Concepts
1. Double-entry system 14. Entity theory
2. Going concern 15. Proprietary theory
3. Separate entity 16. Residual equity theory
4. Stable monetary unit 17. Fund theory
5. Time Period 18. Realization
6. Materiality concept 19. Prudence (Conservatism)
7. Cost-benefit 20. Matching concept
8. Accrual Basis of accounting 21. Systematic and rational allocation
9. Historical cost concept 22. Immediate recognition
10. Concept of Articulation
11. Full disclosure principle
12. Consistency concept
13. Matching
 Common Branches of Accounting
1. Financial accounting 8. Estate accounting
2. Managerial accounting 9. Social and environmental
3. Cost accounting accounting
4. Auditing 10.Institutional accounting
5. Tax Accounting 11.Accounting systems
6. Government accounting 12.Accounting research
7. Fiduciary accounting
The Accountancy Profession
ACT NO. 3105
AN ACT REGULATING THE PRACTICE OF PUBLIC ACCOUNTING; CREATING A BOARD OF
ACCOUNTANCY; PROVIDING FOR EXAMINATION, FOR THE GRANTING OF CERTIFICATES AND
THE REGISTRATION OF CERTIFIED PUBLIC ACCOUNTANTS; FOR THE SUSPENSION OR
REVOCATION OF CERTIFICATES AND FOR OTHER PURPOSES

• Approved by the Sixth Legislative on March 17, 1923.

• Board of Accountancy – President and two (2) Members
• 43 registered CPA in the Philippines by the end of 1923.
INCREASING COMPLEXITY OF PROFESSIONAL REGULATION AND
DEVELOPMENT IN THE PRACTICE OF THE PROFESSION

FROM ACT NO. 3105 TO REPUBLIC ACT NO. 5166

THE ACCOUNTANCY ACT OF 1967

• BOARD OF ACCOUNTANCY – Chairman and Five (5) Members

• RECOGNITION OF THE PHILIPPINE INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANT (PICPA)
FROM REPUBLIC ACT NO. 5166 TO PRESIDENTAL DEGREE NO. 692
THE REVISED ACCOUNTANCY LAW OF 1975

• BOARD OF ACCOUNTANCY – Chairman and Six (6) Members

• ACCREDITATION OF THE PHILIPPINE INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANT (PICPA)

Accomplishment of PICPA to make Filipino CPAs at par with foreign CPA

• Issuance of Code of Professional Ethics in 1978
• Issuance of guidelines in 1987 for the mandatory continuing professional education (CPE)
program for CPAs
• The integration of the accounting profession completed in 1987
• The biennial oath taking of new CPAs
• Standards setting for the profession through membership in the Accounting Standards Council
and the Auditing Standards Practices Council
• Declaration of the Accountancy Week
THE TWO STANDARD-SETTING BODIES
1. Accounting Standards Council
2. Auditing Standards Practices Council

Accounting Standards Council (ASC)

• To establish generally accepted accounting principles (GAAP) in the Philippines.
• Standards issued were referred as Statement of Financial Accounting Standards (SFAS)
• Issued SFAS is based on US GAAP issued by Financial Accounting Standards Board.
FROM PRESIDENTAL DEGREE NO. 692 TO REPUBLIC ACT NO. 9298
THE PHILIPPINE ACCOUNTANCY ACT OF 2004

REPUBLIC ACT NO. 9298

THE PHILIPPINE ACCOUNTANCY ACT OF 2004
Remains the effective law that regulates the practice of accountancy.

OBJECTICES
• Standardization and regulation of accounting education
• Examination for registration of Certified Public Accountants
• Supervision, control, and regulation of the practice of accountancy in the Philippines
 REPUBLIC ACT NO. 9298

Four Scope of Practice

1. PRACTICE OF PUBLIC ACCOUNTANCY
• Acting as partner or as a staff member in an accounting or auditing firm
• An individual skilled in the knowledge, science and practice of accounting, and as a qualified
person to render professional services as a CPA to more than one client on a fee basis for the
following services:
a. Audit or Verification Engagement
b. Preparation, Signing or Certification Engagement
c. Design, Installation, Review or Revision of Accounting System and Control
d. Preparation and/or Review of Income Tax Returns
e. Represent Clients before government agencies on tax and other matter related to
accounting
f. Professional assistance in matters relating to accounting procedures and the recording
and presentation of financial facts.
 REPUBLIC ACT NO. 9298

Four Scope of Practice

2. PRACTICE IN COMMERCE AND INDUSTRY
• A person involve in the decision making requiring professional knowledge in the science of
accounting, as well as the accounting concepts of finance and taxation as required by his
employment in a private sector.
• A person represents his employer before government agencies on tax and other matters
related to accounting.
• When employment or position requires that the holder thereof must be a CPA.
 REPUBLIC ACT NO. 9298

Four Scope of Practice

3. PRACTICE IN EDUCATION/ACADEME
• A person involve in the teaching of accounting, auditing, management advisory services,
accounting aspect of finance, business law, taxation, and other technically related subjects.
• Position of Dean or Department Chairman that supervise the BSA program must be occupied
only by CPA.

4. PRACTICE IN THE GOVERNMENT

• A person who is appointed to a position in an accounting professional group in government
or in a government-owned and/or controlled corporation (GOCC), including those performing
proprietary functions, where decision making requires professional knowledge in the science
of accounting, or
• Where a civil service eligibility as a CPA is a prerequisite.
 REPUBLIC ACT NO. 9298
PROFESSIONAL REGULATORY BOARD OF ACCOUNTANCY
Composition
• Chairman and Six (6) Members
• Four sectors in the practice of accountancy shall as much as possible be equally represented.
Qualifications of Members
• Must be a natural born citizen and a resident of the Philippines
• A duly registered CPA with at least ten (10) years of work experience in any scope of practice of
accountancy.
• Good moral character and must not have convicted of crimes involving moral turpitude
• Must not have any pecuniary interest, directly or indirectly, in any school conferring an academic
degree necessary for admission to the practice of accountancy or where review classes in
preparation for licensure examination are being offered or conducted, nor he/she be a member of
faculty or administration at the time of appointment to the Board.
• Must not be a Director or Officer of the APO at the time of his appointment.
Term of Office
• Three (3) years. No person who has served two successive complete terms as chairman or member
shall be eligible for reappointment until lapse of one year.
• No person shall serve as Board for more than 12 years.
 REPUBLIC ACT NO. 9298

ACCOUNTING AND AUDITING STANDARD SETTING COUNCIL

1. FINANCIAL REPORTING STANDARDS COUNCIL (FRSC)
2. AUDITING AND ASSURANCE STANDARDS COUNCIL (AASC)
AUDITING AND ASSURANCE STANDARDS COUNCIL (AASC)
This will be discuss in detailed in your Auditing Subject.

FINANCIAL REPORTING STANDARDS COUNCIL (FRSC)

• The official accounting standard setting body replacing the ASC.
• New Issued standards are called Philippine Financial Reporting Standards (PFRS) and while
all previously issued standards are called Philippine Accounting Standards (PAS)
• Standards are based on International Financial Reporting Standards (IFRS) and
International Accounting Standards (IAS) issued by International Accounting Standards
Board (IASB)
Philippine Interpretations Committee
• Created by FRSC to prepare interpretations of PFRS and to provide guidance on financial
reporting not specifically addressed in current PFRS.
• To give authoritative guidance on issues that the standards do not provide specific guidelines.
 REPUBLIC ACT NO. 9298

FASB IASB
• Standards issued referred to as Accounting • Standards issued referred to as IFRS or old
Standards Codification or old term is SFAS term is IAS
(US GAAP)
• United States of America (USA) application • International (UK Based) application
• Rule-based • Principle-based

Convergence Project
Designed to eliminate a variety of differences between IFRS and US GAAP.
 REPUBLIC ACT NO. 9298
FINANCIAL REPORTING STANDARDS COUNCIL (FRSC)
Composition: 15 members
1 Chairman – Senior Accounting Practitioner in any scope of accounting practice
14 Representatives
Board of Accountancy (BOA) 1
Securities and Exchange Commission (SEC) 1
Bangko Sentral ng Pilipinas (BSP) 1
Bureau of Internal Revenue (BIR) 1
Financial Executive Institute of the Philippines (FINEX) 1
Commission on Audit (COA) 1
Accredited National Professional Organization of CPAs
Public Practice 2
Commerce and Industry 2
Academe/Education 2
Government 2
Total 14
 REPUBLIC ACT NO. 9298
PRACTICE OF ACCOUNTANCY
• PROHIBITIONS IN THE PRACTICE OF ACCOUNTANCY
No person shall practice accountancy or use the title Certified Public Accountant or use the
abbreviation title “CPA” or display or use any title, sign, card, advertisement, or other device
to indicate such person practices or offers to practice accountancy, or is a certified public
accountant unless such person shall have received from the BOA a Certificate of Registration
and be issued a professional ID card issued by the BOA and PRC.

• LIMITATIONS IN THE PRACTICE OF PUBLIC ACCOUNTANCY

a. It must be duly accredited by the BOA to practice public accountancy with Certificate
of Accreditation renewable every three (3) years.
b. Has acquired three (3) years meaningful experience in any areas of public practice
including taxation.
c. It could be registered as Single Practitioners, General Partnerships, Limited Liability
Partnership (LLP).
d. The SEC shall not register any corporation organized for the practice of public
accountancy.
 REPUBLIC ACT NO. 9298
CONTINUING PROFESSIONAL DEVELOPMENT (CPD)
Republic Act No. 10912
The law mandating and strengthening the continuing professional development program for
all regulated professionals, including the accountancy profession.

• ACCOUNTANCY
The CPD units required for the renewal of license is 15 Units for the Accountancy Profession.

Practice of Public Accountancy

The CPD units required for the accreditation of CPAs in Public Practice is 120 Units.

Exemption from CPD

A CPA shall be permanently exempted from CPD requirements upon reaching the age of 65
years.

However, this exemption applied only to the renewal of CPA license and not for the purpose
of Accreditation in Public Practice.
The Accounting Standards
The Philippine Financial Reporting Standards collectively include all of the following:

1. Philippine Financial Reporting Standards

a. Full PFRS based in IFRS
b. PFRS for Small-Medium sized Entities (SMEs) based on IFRS for SMEs
c. PFRS for Small Entities (SEs) locally produces standard.

2. Philippine Accounting Standards (PAS) based on IAS

3. Philippine Interpretations based on IFRIC

The need for Accounting Standards
• To ensure transparency, reliability, consistency, and comparability of financial statements.

Establishment of Accounting Standards

Democratic process in that a majority of practicing accountants must agree with the standards
before it becomes implemented or simpler term it must be “general acceptable”.

The term “generally acceptable” means that either:

a. The standard has been established by an authoritative accounting setting body
b. The principle has gained general acceptance due to practice over time and has proven to
be most useful.

The development of standards becomes complex and requires an international due process
that involves accountants and other various interested individuals and organization around
the world. This political process incorporates political actions of various interested user
groups as well as professional judgment, logic and research.
Hierarchy of Accounting Standards
1. PFRS
2. In the absence of PFRS that specifically applies to a transaction, the requirements in
PFRSs dealing with similar and related issues
3. The Conceptual Framework
4. Pronouncement of other standard-setting bodies, accounting literature and accepted
industry practices
Activity 1
Submission via Google Forms until 11:59 today

Assignment 1
Submission via Google Forms until August 13,
2021 (Friday) 11:59 PM.