Framework for the Preparation of Financial Statements

 The framework sets out the concept that underlie the preparation and presentation of
financial statements for external users.

The following concepts will be of help in gaining deeper understanding of the Framework:

1. The framework serves as a general guideline in the preparation and presentation of financial
statements in the absence of specific standard.
2. The framework is not a Philippine Financial Reporting Standards.
3. The framework does not define standards for any particular measurement or disclosure issue.
4. Nothing in the framework overrides any specific Philippine Financial Reporting Standards.
5. In case of conflicts between the framework and PFRS, the conditions and requirements for
measurement and disclosures set by PFRS will prevail over those of the framework.

Purpose of the Framework

Generally, the objectives of the framework is to facilitate the consistent and logical formulation
of PFRSs. It would also provide a basis for the use of judgement in resolving accounting issues.

In specific terms, the framework aims to:

1. Assist the FRSC in developing future PFRS and reviewing existing Philippine accounting
standards;
2. Assists preparers of financial statements in applying PFRS and dealing with topics not yet
covered by any PFRS;
3. Assists auditors in forming an opinion as to whether financial statements conform with PFRS;
4. Assists users of financial statements in interpreting the information contained in financial
statements; and
5. Provide those who are interested in the work of FRSC with information about its approach in the
formulation of PFRS.

Scope of the Framework

1. Objectives of financial statements;
2. Qualitative characteristics that determine the usefulness of information in financial statements;
3. Definition, recognition and measurement of the elements from which financial statements are
constructed; and
4. Concepts of capital and capita maintenance.
Figure 1.2. Scope of the Framework
Qualitative
Characterisitcs

Objectives Recognition
Scope of
the
Framework Disclosure
Measurement

Concepts of
Capital

In applying the framework relative to the presentation and preparation of financial statements, the
following essential points should be remembered:
1. The framework is concerned with general-purpose financial statements including consolidated
financial statements. Such financial statements are prepared and presented at least annually
and are directed toward the common information needs of a wide range of users.

The financial statements are understood to be a general-purpose financial statements that are
intended to meet the needs of users who are not in a position to demand reports tailored to
meet their particular information needs.

2. Special purpose financial reports are outside the scope of the framework like prospectuses and
computations prepared for taxation purposes.

3. The framework applies to the financial statements of all commercial, industrial and business
reporting entities, whether in the public or the private sectors.

A reporting entity is an entity for which there are users who rely on the financial statements as
their major source of financial information about the entity.