TABLE OF CONTENTS Development ofFinancial Reporting

Framework,Standard-Setting Bodies and

Chapter Topic Pages
Regulation ofthe Accountancy Profession
1 Development of Financial Reporting Framework,
Standard-Setting Bodies and Regulation of the Learning Outcomes
Accountancy Profession 1-12
. 2 The Conceptual Framework for Financial Reporting 13-32 After reading this chapter, you should be able to:
3. The Accounting Process 33-50
4 Cash and Cash Equivalents 51-84 (a) know the different regulatory agencies both global and local that are involved
■ 5. Trade and Other Receivables 85-124 in the crafting ofIFRS;
6 Debt Investments 125-152 (b) obtain understanding about the formulation of International Financial
7 Equity Investments 153-190 Reporting Standards(IFRS)and its adoption to the Philippines;
8 Other Non-Current Financial Assets 191-202 (c) understand the regulations ofthe accountancy profession; and.
9 Inventories ' . 203-238 (d) attain proficiency in answering financial accounting theory questions relating
10 Property,Plant and Equipment 239-286 to the development of financial reporting framework,standard-setting bodies
11 Investment Property 287-300 and regulation ofthe accountancy profession.
12 Intangible Assets 301-330
13 Wasting Assets 331-342 *> The International Accounting Standards Board(lASB)
14 Biological Assets 343-360
15 Non-Current Assets Held for Sale 361-372 > An independent group of experts with an appropriate mix of recent practical
16 Financial Liabilities 373-408 experience in setting accounting standards, in preparing, auditing, or using
17 Non-lFinancial Liabilities, Provisions and Contingencies 409-438 financial reports,and in accounting education. .
18 Shareholders' Equity 439-472
19 Share-based Payments 473-492 >■ It was founded on April 1, 2001, as the successor to the International
20 Income Taxes 493-520 Accounting Standards Committee'(lASC}. ,
21 Employee Benefits 521-548
22 Leases. 549-592 > It is responsible • for developing International - Financial Reporting
23 Interim'Financial Reporting 593-604 Standards (IFRS Standards), .previously known as International Accounting
24 Operating Segments 605-618 Standards (IAS) and promoting the Use and application of these standards.
25 * Cash to Accrual Accounting/Single Entry System 619-63(5
26 . Financial Statements 637-664 >. Effective from 1 December 2016, lASB normally has fourteen (14) board
27 Earnings Per Share 665-688
members, of whom one (1) is appointed as Chair and one (1) as Vice-Chair.
28 Events After the ReportingPeriod 689-698
29. Related Party Disclosures 699-708
> lASB members are appointed for an initial term of five (5) years. Terms are may
be renewable once for a further term of three (3) years, with the possibility of
30 'PFRS for SMEs,PFRS for Small Entities and Reporting for
renewal up to a maximum of five (5) years, in line with procedures developed
Microenterprises 709-719
Bibliography 720-722
by the Ti:ustees for such renewals, however, the terms may not exceed ten (10)
years in total length of service as a member of the Board.
i

> To ensure a broad international diversity,, the constitution requires:

' • four (4) members from the Asia/Oceania region

• four (4) from Europe;
• four (4) from the Americas;
• one from Afiica;
• one appointed from aiiy area, subject to maintaining overall geographical
balance.
Chapter 1
Development of Financial Reporting Framework
The IFRS Foundation
> The IFRS Foundation's predecessor body was called the International
Accounting Standards Foundation (lASF), which was formed on February 6,
2001.
> The JASF changed name to the International Financial Reporting Standards
Foundation (IFRS Foundation) on 1 July 2010.
> It was formed on February 6, 2001. The Foundation changed name to the
International Financial Reporting Standards Foundation (IFRS Foundation) on
1 July 2010.
> It is an independent, not-for-profit organization and the primary objective is to
develop, in the public interest, a single set of high-quality, understandable,
enforceable and globally accepted International Financial Reporting
Standards(IFRS Standards) based upon clearly articulated principles.
> IFRS Standards are set by the IFRS Foundation's standard-setting body, the
International Accounting Standards Board (lASB).
The International Financial Reporting Interpretations Committee(IFRIC)
> This committee assists the lASB by providing guidance on the application and
interpretation of IFRS.
> Before December 2001, the Standing Interpretations Committee (SIC) was the
lASB's interpretative body.
> the SIC was reconstituted as IFRIC with the following specified duties:
• to interpret the application of International Accounting Standards
(lASs) and Internatipnal Financial Reporting Standards (IFRSs), to
provide timely guidance on financial reporting issues not specifically
addressed in lASs and IFRSs, and to undertake other tasks at the
request of the lASB;
• to carry out these duties with regard to the lASB's objective of working
actively with national standard setters to bring about convergence of
national accounting standards;
• publish, after clearance by the lASB, draft Interpretations for public
comment and consider comments made within a reasonable period
before finalizing an Interpretation;
• report to the lASB and obtain its approval for final Interpretations,
> The Interpretations Committee comprises 14 voting members,appointed by the
Trustees of the IFRS Foundation.
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Development of Financial Reporting Framework
The following diagram summarizes the criteria the Interpretations Committee
considers when deciding whether a standard-setting project should be added to
the work plan:
Is matter widespread and expected to have a material
effect?
i Yes Agenda decision
leports decision and often
Is it necessary to change IFRS Standards?
includes explanatory
material'
Can matter tje resolved efficiently and is it sufficiently
narrow in scope?
* The pubficefion of en agende
decision eubieet to e«e Boerd not
objecting to He pubfcefion
1^^ piscussed and approved by the
The Financial Reporting Standards Council(FRSC)
> The Professional Regulation Commission (PRC) established the Financial
Reporting Standards Council (FRSC) under the Implementing Rules and
Regulations of the Philippine Accountancy of Act of 2004 to assist the Board of
Accountancy in carrying out its power and function to promulgate accounting
standards in the Philippines.
> The FRSC is the successor of the Accounting Standards Council (ASC). The ASC
was created in November 1981 by the Philippine Institute of Certified Public
Accountants (PICPA) to establish generally accepted accounting principles in
the Philippines.
•> The FRSC is composed of fifteen (15) members with a Chairman, who had
been or presently a senior accounting practitioner in any of the scope of
accounting practice and fourteen (14) representatives from the following:
Bangko Sentral ng Pilipinas(BSP)
Board of Accountancy(BOA)
Bureau of Internal Revenue(BIR)
Commission on Audit(COA)
Financial Executives Institute of the Philippines(FINEX)
Securities and Exchange Commission (SEC)
Accredited National Professional Organization of CPAs
p Association of CPAs in Public Practice(ACPAPP)
o Association of CPAs in Commerce and Industry(ACPACI)
o Government Association of CPAs (GACPA)
o National Association of CPAs in Education(NACPAE)
The FRSC monitors the technical activities of the lASB and invites comments on
exposure drafts of proposed IFRSs as these are issued by the lASB. V\^en
Chapter 1
pevelopmehtofiFinandal Reporting Framework
finalized, these are adopted as Philippine Financial Reporting Standards
CPFRSs).
> The FRSC similarly monitors issuances ofthe IFRIC ofthe lASB, which it adopts
as Philippine Interpretations-IFRIC. PFRSs and Philippine Interpretations-
IFRIC approved for adoption are submitted to the BOA and PRC for approval.
Philippine Interpretations Committee(PIC)
> The FRSC formed the Philippine Interpretations Committee (PIC) in August
2006 to assist the FRSC in establishing and improving financial reporting
standards in the Philippines.
. > The role ofthe PIC is principally to issue implementation guidance on PFRSs.
> The PIC members are appointed by the FRSC and include accountants in public
practice,the academe and regulatory bodies and users offinancial statements.
> The PIC replaced the Interpretations Committee created by the ASC in 2000.
❖ The Professional Regulatory Board ofAccountancy(PRBOA)
> Composition .
• TheProfessionalRegulatory Board ofAccountancy(PRBOA),under the
- supervision and administrative control of the Professional Regulation
: Commission (F'RC) shall be coniposed of a Chairman and six (6)
members to be appointed by the President ofthe Philippines from a list
of three (3) recommendees for each position and ranked by the
Comniission from a list offive(5)nominees for each position submitted
by the accredited national professional organization of certified public
- accountant . . •
• The Board shall elect a vice-chairman from among each member for a
, terni ofone(1)year.
• The chairman shall preside in all meetings ofthe Board and in the event
bf a vacancy in the office of the chairman, the. vice-chairman shall
, assume such duties and responsibilities until iuch time as a chairman
is appointed..
>, Qualificatioris ' • To prescribe and/or adopt a Code of Ethics for the practice of
• A niember of the Board shall, at the tinie of his/her appointment,
possesses the following qualifications:
' d Must be a natural-born citizen and a resident of the
' V Philippines;
Chapter 1
Development of Financial Reporting Franiework
o Must be a duly registered Certified Public Accountant with at
leastten(10)years ofwork experience in any scope of practice
of accountancy;
o Must be of good moral character and must not have been
convicted of crimes involving moral turpitude;
o Must not have any pecuniary interest, directly or indirectly, in
any school, college, university or institution conferring an
academic degree necessary for admission to the practice of
accountancy or where review classes in preparation for the
licensure examination are being offered or conducted, nor
shall he/she be a member of the faculty or administration
thereof at a time of his/her appointment to the Board.
> Term of Office
•' The Chairman and Members ofthe Board shall hold office for a term of
three(3)years.
• Any vacancy occurring within the term of a member shall be filled up
for the unexpired portion ofthe term only.
• No person who has served two(2)successive complete terms shall be
eligible for reappointment until the lapse of one(1)year.
• Appointment to fill up an expired term is not to be considered as a
'complete term.
1 .
> Powers and Functions ofthe Board
• To prescribe and adoptthe rules and regulations necessary for carrying
out the provisions of Philippine Accountancy Act of 2004(the Act)
To supervise the registration,licensure and practice of accountancy in
the Philippines;
• . To administer oaths
• To issue, suspend, revoke, reinstate the Certificate of Registration for
the practice ofthe accountancy profession
• To adopt an official seal ofthe Board
accountancy
• To monitor the conditions affecting'the practice ofaccountancy
Chapter 1 Chapter 1
Development ofFinancial Reporting Framework Development of Financial Reporting Framework

• • To conduct an oversight into the quality of audits of financial

statements though a review of the quality control measures instituted • To encourage cordial relations among accountants.
byauditors
• To protect the Certificate of Certified Public Accountant granted by the
• To investigate violations ofthe Act Republic ofthe Philippines.

• To issue a cease or desist order to any person,associations, partnership > The following are the four sectors ofthe accountancy profession:
or corporation engaged in violation ofany provision ofthe Act
Commerce and Industiy
• To punish for contempt ofthe Board Public Practice
Government
• To prepare the syllabi for the licensure examination subjects, Education / Academe
administer the conduct of the Licensure Exam for CPAs (LECPA) and
administer,correct and release the result ofthe licensure examinations > The following are the four geographical groupings:

• To ensure the coordination with the Commission of the Higher Luzon

Education(CHED)or other authorized government offices Visayas
Mindanao
• To exercise such other powers as may be provided by law. National Capital Region

The Philippine Institute ofCertified Public Accountants(PICPA) Accreditation to Practice Public Accountancy

Se^on 30 of RA 9298 states that all registered certified public accountants > Certified public accountants, firms arid partnerships of certified public
accountants, engaged in the practice of public accountancy,including partners
A ^ appear in the roster ofcertified public accountants shall be united and staff members thereof, shall register with the Commission and the Board,
^^ir membership in a one only registered and
such registration to be renewed every tiiree(3)years.
rernned public
ceroned national professional
accountants, which organization of registered
shall be registered and licensed
with the Securities
Securiti and
xc ange ommission as a nonprofit comoration
corporation and recognized by the Board, > Single practitioners and partnerships for the practice of public accountancy
subject to the approval by the Commission shall be registered certified public accountants in the Philippines:

> The members in the said integrated and accredited national professional
organization shall receive benefits and privileges appurtenant thereto upon
pajdnent ofa required fees and dues membership in the integrated organization
shall not be a bar to membership in any other association of certified public
accountants.
> A certificate of accreditation shall be issued to certified public accountants in
public practice only upon showing, in accordance with rules and regulations
promulgated by the Board and approved by the Commission, that such
registrant has acquired a minimum ofthree(3)years rrieaningful experience in
any ofthe areas of public.practice including taxation.

^ Founded in 1929,the Philippine Institute of Certified Accountants or PICPA is

the accredited professional organization (APO) of CPAs by the Professional
Regulation Commission (PRC).

> The group set forth the following objectives:

• To promote and maintain high professional and ethical standards

among accountants.

• To advance the science of accounting.

• To develop and improve accountancy education.

 Chapter 1 Chapter 1
Development ofFinancial Reporting Framework Development ofFinancial Reporting Framework

TRUE OR FALSE QUESTIONS 18. The Financial Reporting Standards Council is the body authorized by law to
promulgate rules and regulations affecting the practice of the accountancy
•1. The Philippine Accountancy Act of 2004 repealed Presidential Decree No.692 profession in the Philippines.
also known as The Revised Accountancy Law.
19. The FRSC Chairman and members shall have a term of 3 years renewable for
another term.
2. Under Section 5 of RA 9298,the president of PICPA shall appoint the members
ofthe Professional Regulato;y Board of Acrcountancy.
20. The composition of the FRSC includes two members each from ACPAPP,
ACPACl,GACPA and NACPAE.
3. Accounting theoiy has developed primarily in response to government
regulations.

4. A representative from the Department of Trade and Industry (DTI) is not part
of the Accounting Standards Council (ASC) but was later on included in the
Financial Repoiiing Standards Council(FRSC).
5. pie International Accounting Standards are principles-based rather than rules-

6. The term IAS generally covers IFRS when referred collectively.

7.
Accounting concepts are human-made.
8.
oreanfr^rTwtk Exchange Commission (SEC) can register any corporation
organized for the practice of public accounting.
9.
that^11^^®^^" FRSC isintotheestablish
will be generally accepted and improve accounting standards
Philippines.
10.
the memorandum made between the lASB.and the
standards ■ goalorof
^ w "Tby eliminating achievingdifferences
minimizing comparability in financial
between IFRS and reporting
US GAAP.
11. The approved statements of the FRSC are collectively known as Philippine
Financial Reporting Standards(PFRSs).
-«• M. m . m. ^ ^

12. . FINEX stands for Financial Executives Institute ofthe Philippines,

13. GAAP stands for Generally Accepted Auditing Principles. /
14. The approved statements of the lASC are known as International Accounting
. Standards(IAS).

15. CPAs are licensed by the national government.

16. The PFRSs are numbered the same as their counterpart in IFRSs.

17. The lASB declared that the merits of proposed standards are assessed from a
position of neutrality. *

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Chapter 1 Chapter 1
Development ofFinancial Reporting Framework Development ofFinancial Reporting Framework

FINANCIAL ACCOUNTING THEORY QUESTIONS 8. It is the law regulating the practice of accountancy in the Philippines.
a. Republic Act No.9892
Which ofthe following is not one ofthe sectors ofthe accountancy profession? b. Republic Act No.8929
a. Government
c. Republic Act No.9298
b. Commerce and Industry d. Republic Act No.8929
c. Intemationai Practice
9. Which ofthe following qualifications ofthe members ofthe BOA is correct?
d. Academe
a. Must be a citizen and a resident of the Philippines.
b. Must be a duly registered Certified Public Accountant with at least fifteen
2. Under the IFRS Foundation Constitution, the lASB has complete responsibility
(IS)years of work experience in any scope of practice ofaccountancy
for all technical matters ofthe IFRS Foundation including(Choose the incorrect
c. Must be of good moral character and must not have been convicted of
one)
crimes involving moral turpitude
a. full discretion in developing and pursuing its technical agenda, subject to
d. Must have any pecuniary interest, directly or indirectly, in any school,
certain consultation requirements with the Trustees and the public college, university or institution conferring an academic degree necessary
b. the preparation and issuing of IFRSs (other than Interpretations) and for admission to the practice ofaccountancy.
exposure drafts,following the due process stipulated in the Constitution
c. the approval and issuing of Interpretations developed by the IFRS 10. The process of establishing financial accounting standards
Interpretations Committee. a. is a legislative process based on rules promulgated by government
d. All statements are correct agencies.
b. is based solely on economic analysis ofthe effect each standard will have if
Which ofthe following is not part of Philippine Financial Reporting Standards? it is implemented.
a. Philippine Accounting Standards(PAS) c. is a democratic process in that a majority of practicing accountants must
b. Philippine Financial Reporting Standards(PFRS) agree with a standard before it is implemented.
c. Philippine Standards on Auditing(PSA) d. is a social process which incorporates political actions of various interested
d. Interpretations(PIC) user groups as well as professional research and logic.
The Financial Reporting Standards Council(FRSC)replaced the 11. Which ofthe following was replaced by the lASB in 2001?
a. Accounting Standards Council
a. . International Accounting Standards Committee
b. PFRS Foundation
b. International Financial Reporting Interpretations Committee
c. Philippine Interpretations Committee c. International Accounting Standards Foundation
d. Securities and Exchange Commission d. International Accounting Standards Council
5. It is the Accredited Professional Organization(APO)ofCPAs by the Professional 12. To ensure a broad international diversity,the lASB constitution requires:
Regulation Commission (PRC). a. four(4) members from Africa
a. Association of CPAs in Public Practice(ACPAPP) b. two(2) members from Europe
b. Association of CPAs in Commerce and Industry(ACPACl) c. four(4) members from the Americas
c. Government Association of CPAs(GACPA) d. five(5) members from the Asia/Oceania region
d. Philippine Institute of Certified Public Accountants(PICPA)
13. IFRSs are applicable to which ofthe following entities?
6. The FRSC has 1 member from the following organizations, except
a. Not-for-profit entities
a. Accredited Professional Organization of CPAs
b. Government activities
b. Commission on Audit '
c. Board of Accountancy c. Government business enterprises
d. Bureau of Internal Revenue
d. Public sector non-profit organizations

Which of the following is not directly involved in the accounting standard 14. Under the Philippine Accountancy Act of2004,the PRBOA shall be composed of
setting due process in the Philippines? a. Chairman and six membbrs to be appointed by PRC.
a. Board of Accountancy b. Chairman and six members to be appointed by PICPA.
b. Financial Reporting Standards Council c. Chairman and six members to be appointed by the Philippine President.
c. Bureau of Internal Revenue d. Chairman, Vice Chairman and six members to be appointed by the
d. Professional Regulation Commission Philippine President.

10 11
Chapter 1
Development ofFinancial Reporting Framework

15. The following relates to the evaluation ofa standard

I. Exposure draft is issued for comment
II. Final standard is issued'
III. Discussion paper

Which ofthe following is the correct chronological sequence?

a. I-II-III
b. Il-I-Ill
c. III-li-1
d. I-lIl-II

16. . Which ofthe following is true regarding the term of office ofthe chairman and
members ofthe PRBOA?
a. - No person who has served two successive terms shall be eligible for
reappbintment until the lapse ofone year.
b. vacancy occurring within the term of a member shall be filled up for
c. iJie
Theunei^lred
Chairman portion ofthe term
and mepibers only.shall hold office for a term of three
of BOA
years.
d. All ofthe statements are true.
17. Which ofthe following is not ofone ofthe objectives ofPICPA?
u* To encourage
® ™P^ove
cord!^ accountancy
relations amongeducation
accountants.
c. To promote and maintain high professional and ethical standards among
accountants.
d. To issue the Certificate of Certified Public Accountant granted by the
Republic ofthe Philippines.
18. The PICPA is a nonprofit corporation duly registered with the
a. PRBOA
b. PRC
c. SEC
d. FRSC

19: The following are the four geographical groupings ofthe PICPA,except
a. Luzon
b. Cebu
c. Mindanao
dv Metro Manila
20 vVhich ofthe fpliowing aboutthe IFRS Foundation is incorrect?
a. Itvvas formed On February 6,2001.
b- The IFRS Foundation's, predecessor body was called the International
r Accounting Standards Foundatioh (lASF).
c. The primaiy objective is to. develop globally accepted International
Financial Reportinjg Standards(IFRS Standards).
•, • d: IFRS Standards are set by the IFRS.Foundation's standard-setting body,the

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