Since 1977

FAR OCAMPO/OCAMPO
FAR.2901- The Environment of Financial Accounting and Reporting

DISCUSSION QUESTIONS
1. Which statement is incorrect regarding the Professional
Regulatory Board of Accountancy (BOA)?
a. It is under the supervision and administrative
control of the Professional Regulation Commission.
b. It is composed of a chairman and six (6) members
appointed by the President of the Philippines.
c. The Chairman and members of the BOA shall hold
office for a term of three (3) years.
d. No person shall serve in the BOA for more than six
years.
2. A member of BOA must be a duly registered Certified
Public Accountant with at least ten (10) years of work
experience in
a. Public accountancy
b. Commerce and industry
c. Academe
d. Any scope of practice of accountancy
3. The Financial Reporting Standards Council (FRSC) was
created by the BOA to assist the BoA in carrying out its
power and function to
a. Promulgate accounting standards in the
Philippines.
b. Promulgate auditing standards in the Philippines.
c. Ensure that all higher educational instruction and
offering of accountancy comply with the policies,
standards and requirements of the course
prescribed by CHED.
d. Implement the CPE program.
4. Which statement is incorrect regarding the FRSC?
a. Is the successor of the Accounting Standards
Council (ASC), which was created in November
1981 by the Philippine Institute of Certified Public
Accountants (PICPA).
b. The Chairman and members of the FRSC are
appointed by the PRC upon the recommendation of
the BOA in coordination with the accredited
professional organization (APO) of CPAs.
c. Shall be composed of fifteen (15) members with a
chairman.
d. Has the authority to establish the accounting
framework to be used by companies under its
jurisdiction.
LECTURE NOTES:
The FRSC is composed of a chairman and fourteen (14)
representatives from:
• Board of Accountancy (BOA) - 1
• Securities and Exchange Commission (SEC) - 1
• Bangko Sentral ng Pilipinas (BSP) - 1
• Bureau of Internal revenue (BIR) - 1
• Commission on Audit (COA) - 1
• A major organization composed of preparers and users
of financial statements - 1
• Accredited national professional organization (APO) of
CPAS:
Public Practice - 2
Commerce and Industry - 2
Academe or Education - 2
Government - 2
5. The FRSC has a chairman who had been or presently a
senior practitioner in
a. Public accountancy
b. Commerce and industry
c. Academe
d. Any scope of accounting practice
6. Which of the following government agency is not
represented in FRSC?
a. Bangko Sentral ng Pilipinas
b. Commission on Audit
c. Bureau of Internal Revenue
d. Insurance Commission
7. Which of the following is represented in FRSC?
a. Financial Executives Institute of the Philippines
b. Association CPAs in Public Practice
c. Association of CPAs in Commerce and Industry
d. Association of CPAs in Education
8. The AASC has a chairman who had been or presently a
senior practitioner in
a. Public accountancy
b. Commerce and industry
c. Academe
d. Any scope of accounting practice
LECTURE NOTES:
The AASC is composed of a chairman and fourteen (14)
representatives from:
• Board of Accountancy (BOA) - 1
• Securities and Exchange Commission (SEC) - 1
• Bangko Sentral ng Pilipinas (BSP) - 1
• Commission on Audit (COA) - 1
• An association or organization of CPAs in active public
practice of accountancy - 1
• Accredited national professional organization (APO) of
CPAS:
Public Practice – 6 (Note, this is 9 per AASC website)
Commerce and Industry - 1
Academe or Education - 1
Government - 1
9. The following are represented both to the FRSC and
the AASC, except
a. Securities and Exchange Commission
b. Bangko Sentral ng Pilipinas
c. Commission on Audit
d. Bureau of Internal Revenue
10. Which statement is incorrect regarding PFRSs?
a. PFRSs set out recognition, measurement,
presentation and disclosure requirements dealing
with transactions and events that are important in
general purpose financial statements.
b. PFRSs may set out such requirements for
transactions and events that arise mainly in
specific industries.
c. PFRSs are based on the Framework, which
addresses the concepts underlying the information
presented in general purpose financial statements.
d. PFRSs are designed to apply to not-for-profit
activities in the private sector.

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11. Standards approved by the FRSC include paragraphs in
bold type and plain type, which have equal authority.
Paragraphs in bold type indicate the main principles.
Any limitation of the scope of a PFRS is made clear in
the standard.
a. True, True c. False, False
b. False, True d. True, False
12. The FRSC employs a "due process" system which
enables interested parties to express their views on
issues under consideration. Arrange in proper order
the due process for projects of FRSC:
I. Issuing for comment an exposure draft approved
by a majority of the FRSC members; comment
period will be at least 60 days, unless a shorter
period (not less than 30 days) is considered
appropriate by the FRSC.
II. Consideration of pronouncements of the IASB.
III. Formation of a task force, when deemed
necessary, to give advice to the FRSC.
IV. Approval of a standard or an interpretation by a
majority of the FRSC members.
V. Consideration of all comments received within the
comment period and, when appropriate,
preparing a comment letter to the IASB.
VI. Submission by the FRSC of the new/amended
PFRS to the Professional Regulation Commission
(PRC) through the BOA for approval.
VII. Approval by BOA/PRC.
VIII. Publication of the new pronouncement.
a. I, II, III, IV, V, VI, VIII and VII
b. II, III, I, V, IV, VI, VII and VIII
c. II, III, V, I, IV, VI, VII and VIII
d. III, II, I, V, IV, VI, VIII and VII
13. Which statement is incorrect regarding the timing of
application of PFRSs?
a. PFRSs apply from a date specified in the
document.
b. New or revised PFRSs set out transitional
provisions to be applied on their initial application.
c. Until the effective date of a PFRS, the
requirements of any PFRS that would be affected
by proposals in an exposure draft remain in force.
d. The FRSC has a general policy of exempting
transactions occurring before a specific date from
the requirements of new PFRSs.
14. Which statement is incorrect regarding the Philippine
Interpretations Committee (PIC)?
a. The principal objective of the PIC is to issue
implementation guidance on PFRSs.
b. The PIC shall deal with accounting issues of
reasonably widespread importance and not issues
of concern only to a single entity or small group of
entities.
c. Compliance with the PIC implementation guidance
is required for the fair presentation of financial
statements in accordance with PFRS.
d. The PIC shall consist of 15 representatives
endorsed by FRSC and approved by the PRC.
LECTURE NOTES:
The PIC Composition
The PIC shall consist of 15 representatives from the
following:
• Accounting firms (SGV & Co.; BDO Roxas Cruz Tagle &
Co.; Navarro Amper & Co.; R. S. Bernaldo & Associates,
Punongbayan & Araullo; R. G. Manabat & Co., Isla
Lipana & Co.; Villaruz, Villaruz & Co., Constantino
Guadalquiver & Co.) - 9
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• FINEX – 1
• Academe (with a designated alternate) - 1
• SEC - 1
• BSP - 1
• Insurance Commission - 1
• BOA - 1
15. Which of the following is represented in PIC?
a. Bureau of Internal Revenue
b. Commission on Audit
c. Insurance Commission
d. None of the above
16. The PIC shall have a Chairman who shall be selected
and approved by the FRSC from
a. SGV & Co.
b. ACPAPP
c. BOA
d. The regular members of the PIC at the time of
selection of the Chairman.
17. Which statement is incorrect regarding the
implementation guidance issued by the PIC?
a. The PIC implementation guidance may be in the
format of Questions and Answers (Q&As).
b. The PIC may consult with experts to obtain
information that can be used to facilitate
understanding of the issues under consideration, to
seek assistance in the preparation of the draft
guidance, or seek comments on proposed PIC
guidance.
c. Implementation guidance approved by the PIC
shall be forwarded to the FRSC for approval before
issuance to the public as final guidance.
d. Implementation guidance released by the PIC and
approved by the FRSC is less authoritative than
the PFRS to which it relates.
18. Since the PIC does not establish new accounting
standards, as a general rule, there is no need to
expose proposed PIC implementation guidance for
comment. However, depending on the complexity of
the issue, the PIC may decide to circulate the draft to
the public for comment, in which case the exposure
period shall be
a. Not more than 30 days.
b. Not less than 30 days.
c. Less than 30 days
d. More than 30 days but not to exceed 59 days
19. The mission of the IASB is to bring transparency,
accountability and efficiency to financial markets
around the world by developing IFRS Standards. How
IFRS standards bring transparency?
a. By enhancing the international comparability and
quality of financial information, enabling investors
and other market participants to make informed
economic decisions.
b. By reducing the information gap between the
providers of capital and the people to whom they
have entrusted their money.
c. By helping investors to identify opportunities and
risks across the world, thus improving capital
allocation.
d. All of the above.
20. Which statement is incorrect regarding the IFRS
Foundation structure?
a. The IFRS Monitoring Board approves and oversees
the trustees of the IFRS Foundation.
b. The IFRS Foundation appoints the members of the
IASB and raises funds.
FAR.2901
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c. The IASB sets technical agenda, approves 25. Which statement is incorrect regarding the IFRS
standards, exposure drafts and interpretations. Interpretations Committee (IC) and its Interpretations?
d. The IFRS Interpretations Committee members are a. The IFRS IC is responsible for developing
appointed by the IASB. Interpretations of IFRSs.
b. If the IFRS IC decides that an IFRS is not clear and
LECTURE NOTES: that it should provide an interpretation of the
requirements it either develops an Interpretation
IFRS Foundation Structure
or, in consultation with the IASB, develops a
narrow scope amendment to the IFRS.
c. The development of an Interpretation follows a
similar process to the development of an IFRS.
d. Interpretations are not part of IFRS and do not
have the same weight as any Standard.

26. The perceived benefits associated with convergence to

the international accounting standards include
a. For companies, reduced costs of capital and the
ease of using one consistent reporting standard
from subsidiaries in many different countries.
b. For investors, better information for decision-
making, leading to broader investment
opportunities.
c. For national regulatory bodies, better information
for market participants in disclosure based-system.
d. All of these.

27. Which of these statements regarding the IFRS and

21. Which of the following provides a formal vehicle for
participation by organizations and individuals with an
interest in international financial reporting?
a. IFRS Monitoring Board
b. IFRS Foundation
c. IFRS Interpretations Committee
d. IFRS Advisory Council
28. The Norwalk Agreement
22. Which statement is incorrect regarding the IASB?
a. Normally has 14 board members, of whom one is
appointed as Chair and one as Vice-Chair.
b. The main qualifications for the members of the
board are professional competence and recent
relevant professional experience.
c. Most of the members are full-time, so that they
commit all of their time to paid employment as an
IASB member.
d. Majority of the members are normally from
Europe.
U.S. GAAP is correct?
a. U.S. GAAP is considered to be "principles-based"
and more detailed than IFRS.
b. U.S. GAAP is considered to be "rules-based" and
less detailed than IFRS.
c. Both U.S. GAAP and IFRS are considered to be
"rules-based", but U.S. GAAP tends to be more
complex.
d. IFRS is considered to be "principles-based" and
less detailed than U.S. GAAP
a. Sets forth fundamental objectives and concepts
used in developing future standards of financial
reporting.
b. Formalized the FASB and IASB’s commitment to
convergence of U.S. GAAP and international
standards.
c. Facilitates cross-border cooperation, reduces global
systemic risk, protects investors, and ensures fair
and efficient markets.
d. All of the choices are correct regarding the Norwalk
Agreement.

23. The IASB due process comprises six stages, with the 29. Which statement is correct regarding the Philippine
Trustees of the IFRS Foundation having the Institute of Certified Public Accountants (PICPA)?
opportunity to ensure compliance at various points a. The PICPA is the accounting standard setting body
throughout. Arrange in proper order the IASB’s due in the Philippines.
process. b. PICPA is a registered stock corporation with
I. Procedures after a Standard is issued Geographical divisions, regions and chapters all
II. Planning the project over the country.
III. Setting the agenda c. Geographical Areas, Regions and Chapters have
IV. Developing and publishing the Standard juridical personality separate and distinct from
V. Developing and publishing the Discussion Paper, each other or from the national office.
including public consultation d. Each region, sector and chapter has its own
VI. Developing and publishing the Exposure Draft, respective governing council.
including public consultation
a. III, II, V, VI, IV and I 30. Which of the following is PICPA Geographical Area?
b. III, II, VI, V, IV and I a. Middle East c. Bicol
c. II, III, V, VI, IV and I b. North America d. Metro Manila
d. II, III, VI, V and I
31. Which of the following is not a PICPA Region?
24. What is the central theme of the IASB’s current a. Metro Manila c. Northern Mindanao
agenda? b. Southern Tagalog d. Southern Visayas
a. Global Phenomenon c. Stable Platform
b. Convergence d. Better Communication - now do the DIY drill -

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DO-IT-YOURSELF (DIY) DRILL

1. The Financial Reporting and Standards Council (FRSC) 6. The role of the PIC is principally to issue
a. Is composed of a chairman and six (6) members. implementation guidance on PFRSs.
b. Has the authority to establish the accounting
Interpretations of PFRSs are intended to give
framework to be used by companies under its
authoritative guidance on issues that are likely to
jurisdiction.
receive divergent or unacceptable treatment, in the
c. Is the accredited professional organization of CPAs
absence of such guidance.
by the PRC.
a. True, True c. False, False
d. Establishes generally accepted accounting
b. True, False d. False, True
principles in the Philippines.
7. Which statement is correct regarding Philippine
2. Which statement is correct?
Financial Reporting Standards (PFRSs)?
a. FINEX is the accredited professional organization of
a. PFRSs exclude PIC Q&As.
CPAs by the PRC.
b. PFRSs are designed to apply to not-for-profit
b. The Bangko Sentral ng Pilipinas is not represented
activities in the private sector.
in the AASC.
c. PFRSs apply from a date specified in the
c. The chairman of the FRSC should have been or
document.
presently a senior practitioner in public
d. Standards approved by the FRSC include
accountancy.
paragraphs in bold type and plain type, the latter
d. The Insurance Commission is not represented in
having less authority.
the FRSC.
8. Which statement is correct?
3. The pronouncements of FRSC provide the highest
a. The Bureau of Internal Revenue is represented in
authoritative pronouncements on accounting
the AASC.
principles. The authority of these pronouncements
b. The Insurance Commission is represented in the
rests upon
Philippine Interpretations Committee.
a. The rules and regulations of the SEC
c. The chairman of the FRSC should have been or
b. Its management and their internal accounting staff
presently a senior practitioner in public
c. Their general acceptability
accountancy.
d. The integrity of the Council
d. Bicol is a PICPA Geographical Area.
4. Due process for projects of FRSC normally includes the
9. Which of the following statements is/are true?
following, except
I. The IFRS Interpretations Committee is a forum
a. Consideration of pronouncement of the IASB.
for the IASB to consult with the outside world.
b. Formation of a task force, when deemed
II. The IFRS Foundation produces IFRSs. The IFRS
necessary, to give advice to the FRSC.
Foundation is overseen by the IASB.
c. Issuing for comment an exposure draft approved
III. One of the objectives of the IFRS Foundation is to
by at least eight members of the Council;
bring about convergence of national accounting
comment period will be at least sixty days.
standards and IFRSs.
d. Approval of a standard or an interpretation by all
of the Council members. a. I and II only c. III only
b. I and III only d. None
5. The process of establishing financial accounting
standards 10. Which of the following statements reflects one of the
a. Is a democratic process in that a majority of benefits of adoption of IFRS standards by different
practicing accountants must agree with a standard countries?
before it becomes implemented. a. Earnings management is eliminated.
b. Is a legislative process based on rules promulgated b. Volatility of earnings calculated using IFRS is zero.
by government agencies. c. Cost of capital is lower for firms.
c. Is based solely on economic analysis of the effects d. There are no economic consequences when firms
each standard will have if it is implemented. switch to IFRS from existing GAAP.
d. Is a social process which incorporates political
actions of various interested user groups as well as
professional research and logic. J - end of FAR.2901 - J

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