CONCEPTUAL FRAMEWORK

AND ACCOUNTING
STANDARDS

GENEVA C. MANARANG
THE ACCOUNTANCY PROFESSION
TECHNICAL KNOWLEDGE
•To understand the definition of accounting.
•To identify the overall objective of accounting.
•To describe the practice of the accountancy profession in the
Philippines.
•To understand the Continuing Professional Development in the field of
accounting.
•To know the meaning of generally accepted accounting principles.
•To identify the standard-setting body in the Philippines.
•To describe the creation of the International Accounting Standards
Board.
•To know the meaning of IFRS.
THE ACCOUNTANCY PROFESSION
• DEFINITION OF ACCOUNTING

Accounting Standards Council:

Accounting is a service activity.

The accounting function is to provide quantitative information,
primarily financial in nature, about economic entities, that is
intended to be useful in making economic decision.
THE ACCOUNTANCY PROFESSION

• DEFINITION OF ACCOUNTING

American Institute of Certified Public Accountants (Committee

on Accounting Terminology):

Accounting is a the art of recording, classifying and

summarizing in 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.
THE ACCOUNTANCY PROFESSION
• DEFINITION OF ACCOUNTING

American Accounting Association:

Accounting is the process of identifying, measuring and

communicating economic information to permit informed
judgment and decision by users of the information.
THE ACCOUNTANCY PROFESSION
• Important Points:
The following important points made in the definition of accounting
should be noted:

□ One - Accounting is about quantitative information.

□ Two - The information is likely to be financial in nature.
□ Three - The information should be useful in decision making.
THE ACCOUNTANCY PROFESSION
The definition that has stood the test of time is the definition given
by the American Accounting Association. This definition states
that the very purpose of accounting is to provide quantitative
information to be useful in making an economic decision.

□ Identifying as the analytical component.

□ Measuring as the technical component.
□ Communicating as the formal component.
THE ACCOUNTANCY PROFESSION
• IDENTIFYING:
the recognition or nonrecognition of business activities as
“accountable” events

• MEASURING:
the assigning of peso amounts to the accountable economic
transactions and events

• COMMUNICATING:
process of preparing and distributing accounting reports to
potential users of accounting information
THE ACCOUNTANCY PROFESSION
• OBJECTIVE OF ACCOUNTING:
to provide a quantitative financial information about a
business that is useful to users in making economic
decisions

▪ the essence of accounting is decision-usefulness

▪ Accountant’s primary task is to supply financial information so
that the users could make informed judgment and better
decision
THE ACCOUNTANCY PROFESSION
• REPUBLIC ACT NO. 9298
the law regulating the practice of accountancy in the
Philippines
is also known as the “Philippine Accountancy Act of 2004”

• BOARD OF ACCOUNTANCY (BOA)

body authorized by law to promulgate rules and regulations
affecting the practice of accountancy profession in the PH
responsible for preparing and grading the PH CPA
examination
THE ACCOUNTANCY PROFESSION
• LIMITATIONS OF THE PRACTICE OF PUBLIC
ACCOUNTANCY
single practitioners and partnerships for the practice of
public accountancy shall be registered certified public
accountant in the PH
a certificate of accreditation shall be issued to CPAs in
public practice only upon showing in accordance with rules
and regulations promulgated by BOA and approved by the
Phil. Regulation Commission (PRC) (3 years meaningful
experience)
THE ACCOUNTANCY PROFESSION
• CPAs generally practice their profession in three main
areas:

1. Public Accounting
2. Private Accounting
3. Government Accounting
THE ACCOUNTANCY PROFESSION
1. PUBLIC ACCOUNTING

composed of individual practitioners, small accounting firms

and large multinational organizations that render
independent and expert financial services to the public

offers three kinds of services - AUDITING, TAXATION, and

MANAGEMENT ADVISORY SERVICES
THE ACCOUNTANCY PROFESSION
1. PUBLIC ACCOUNTING
✔ AUDITING
- primary service offered by most public accounting
practitioners
- or external auditing is the examination of FS by
independent CPA for the purpose of expressing an opinion
as to the fairness with which the FS are prepared
- attest function of independent CPAs
THE ACCOUNTANCY PROFESSION
1. PUBLIC ACCOUNTING
✔ TAXATION
- preparation of annual income tax returns and
determination of tax consequences of certain proposed
business endeavors
- the public accountant must be thoroughly familiar with the
tax laws and regulations and updated with the changes in
taxation law and court cases concerned with interpreting
taxation law
THE ACCOUNTANCY PROFESSION
1. PUBLIC ACCOUNTING
✔ MANAGEMENT ADVISORY SERVICES
- services to clients on matters of accounting, finance,
business policies, organization procedures, product costs,
distribution and many other phases of business conduct
and operations
- i.e., advice on installation of computer system, quality
control, budgeting, advice on mergers and consolidations
THE ACCOUNTANCY PROFESSION
2. PRIVATE ACCOUNTING

includes maintaining the records, producing the financial

reports, preparing the budgets and controlling and
allocating the resources of the entity
main objective of the private accountant is to assist the
management in planning and controlling the entity’s
operations
THE ACCOUNTANCY PROFESSION
3. GOVERNMENT ACCOUNTING

encompasses the process of analyzing, classifying,

summarizing, and communicating all transactions involving
the receipt and disposition of government funds and
property and interpreting the results thereof.
main focus is the custody and administration of public funds
BIR, COA, DBM, SEC, BSP
THE ACCOUNTANCY PROFESSION
• CONTINUING PROFESSIONAL DEVELOPMENT (CPD)
▪ R.A. No. 10912 - law mandating and strengthening the
continuing professional development program for all
regulated professions, including accountancy profession
▪ CPD refers to inculcation and acquisition of advanced
knowledge, skill, proficiency, and ethical and moral values
after the initial registration of the CPA for assimilation into
professional practice and lifelong learning
▪ raises and enhances the technical skill and competence
of CPAs
THE ACCOUNTANCY PROFESSION
• CONTINUING PROFESSIONAL DEVELOPMENT (CPD)
▪ CPD credit units - refer to the CPD credit hours required
for the renewal of CPA license and accreditation of a CPA
to practice accountancy profession every three years
▪ BOA Resolution - all CPA regardless of area or sector of
practice shall be required to comply with 120 CPD credit
units in a compliance period of three years
▪ CPD is MANDATORY for CPAs
THE ACCOUNTANCY PROFESSION
• ACCOUNTING VS AUDITING

ACCOUNTING AUDITING
accounting embraces auditing auditing is one of the areas of accounting
specialization
is constructive in nature is analytical
ceases when FS are already prepared begins when the work of the accountant
ends
Auditor examines the FS to ascertain
whether they are in conformity with
GAAP
THE ACCOUNTANCY PROFESSION
• ACCOUNTING VS BOOKKEEPING

ACCOUNTING BOOKKEEPING
conceptual and is concerned with the procedural and largely concerned with
why, reason, or justification for any action development and maintenance of
adopted accounting records

is constructive in nature the “HOW” of accounting

THE ACCOUNTANCY PROFESSION
• FINANCIAL ACCOUNTING VS MANAGERIAL ACCOUNTING

FINANCIAL ACCOUNTING MANAGERIAL ACCOUNTING

concerned with the recording of business accumulation and preparation of financial
transactions and the eventual reports for internal users only
preparation of FS

focuses on general purpose reports emphasizes developing accounting

known as FINANCIAL STATEMENTS information for use within an entity
intended for internal and external users
THE ACCOUNTANCY PROFESSION
• GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(GAAP)

represents the rules, procedures, practice and standards

followed in the preparation of financial statements

these are like “laws” that must be followed in financial

reporting
THE ACCOUNTANCY PROFESSION
• PURPOSE OF ACCOUNTING STANDARDS
overall purpose of accounting standards is to identify proper
accounting practices for the preparation and presentation of
financial statements
creates common understanding between preparers and
users of financial statements particularly the measurement of
assets and liabilities
to ensure comparability and uniformity in financial statements
based on the same financial information
THE ACCOUNTANCY PROFESSION
• FINANCIAL REPORTING STANDARDS COUNCIL (FRSC)
replaces the Accounting Standards Council
accounting standard setting body created by the Professional
Regulation Commission (PRC) upon recommendation of the
Board of Accountancy to assist the BOA in carrying out its
powers and functions provided under R.A. Act No. 9298
its main function is to establish and improve accounting
standards that will be generally accepted in the Philippines
THE ACCOUNTANCY PROFESSION
• FINANCIAL REPORTING STANDARDS COUNCIL (FRSC)
accounting standards promulgated by the FRSC constitute
the “highest heirarchy” of generally accepted accounting
principles in the Philippines
the approved statements of the FRSC are known as:
❑ Philippine Accounting Standards (PAS)
❑ Philippine Financial Reporting Standards (PFRS)
THE ACCOUNTANCY PROFESSION
• COMPOSITION OF FRSC
15 members with a Chairman who had been or is presently a
senior accounting practitioner and 14 representatives from
the following:
Board of Accountancy 1 Accredited national professional organization of CPAs:
Securities and Exchange Commission 1 Public Practice 1
Bangko Sentral ng Pilipinas 1 Commerce and Industry 1
Bureau of Internal Revenue 1 Academe or Education 1
Commission on Audit 1 Government 1
Major organization of preparers and users
of FS - Financial Executives Institute of the TOTAL: 14
Phillipines of FINEX 1
THE ACCOUNTANCY PROFESSION
• COMPOSITION OF FRSC
The Chairman and members of FRSC shall have a term of 3
years renewable for another term.
THE ACCOUNTANCY PROFESSION
• PHILIPPINE INTERPRETATIONS COMMITTEE (PIC)
formed by the FRSC in August 2006
replaced the Interpretations Committee (IC - formed by
Accounting Standards Council in May 2000)
its role is to prepare interpretations of PFRS for approval by
the FRSC and to provide timely guidance on financial
reporting issues not specifically addressed in current FRSC
to give authoritative guidance on issues that are likely to
receive divergent or unacceptable treatment because the
standards don’t provide specific and clearcut rules/guidelines
THE ACCOUNTANCY PROFESSION
• INTERNATIONAL ACCOUNTING STANDARDS COMMITEE
(IASC)
independent private sector body
objective is to achieve uniformity in the accounting principles
which are used by business and other organizations for
financial reporting around the world
formed in June 1973
headquartered in London, UK
THE ACCOUNTANCY PROFESSION
• OBJECTIVES OF IASC
1. To formulate and publish in the public interest accounting
standards to be observed in the presentation of FS and to
promote their worldwide acceptance and observance.
2. To work generally for the improvement and harmonization of
regulations, accounting standards and procedures relating
to the presentation of FS
THE ACCOUNTANCY PROFESSION
• INTERNATIONAL ACCOUNTING STANDARDS BOARD
(IASB)
replaces IASC
publishes standards in a series of pronouncements called
International Financial Reporting Standards (IFRS)
they adopted the body of standards issued by the IASC
THE ACCOUNTANCY PROFESSION
• MOVE TOWARDS IFRS
in the past years, most PH standards issued are based on
American accounting standards
FRSC has adopted in their entirety all International
Accounting Standards and International Financial Reporting
Standards
the move toward IFRS is essential to achieve the goal one
uniform and globally accepted financial reporting
standards
THE ACCOUNTANCY PROFESSION
• MOVE TOWARDS IFRS
Philippines is fully compliant with IFRS effective January
2005, a process which we started back in 1997 in moving
from USA GAAP to IFRS
a. Support of intl accounting standards by Philippine organizations, such as
Philippine SEC, BOA and PICPA
b. Increasing internalization of business which has heightened interest in a
common language for financial reporting
c. Improvement of intl accounting standards or removal of free choices of
accounting treatments
d. Increasing recognition of intl accounting standards by the World Bank,
Asian Development Bank, and World Trade Organization
THE ACCOUNTANCY PROFESSION
• PHILIPPINE FINANCIAL REPORTING STANDARDS
(PFRS)
FRSC issues standards in a series of pronouncements called
the “Phil. Financial Reporting Standards (PFRS)”
Collectively include the following:
a. PFRS which corresponds to IFRS
b. PAS which corresponds to IAS
c. Philippine Interpretations which corresponds to Interpretations of
IFRIC and the Standing Interpretations Commitee, and
Interpretations developed by the Phil. Interpretations Commitee
 END OF DISCUSSION

QUESTIONS?
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The Accountancy Profession (ACCTG 103)
The Accountancy Profession (ACCTG 103)
The Accountancy Profession (ACCTG 103)