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FAR
FAR.3401 - The Environment of Financial Accounting and Reporting
DISCUSSION QUESTIONS
1. An act regulating the practice of accountancy in the
Philippines, also known as the Philippine Accountancy
Act of 2004, is
a. RA No. 9298 c. RA No. 5166
b. PD No. 692 d. Act No. 3105
Note: Copy of the Philippine Accountancy Act of 2004 can
be downloaded at https://www.prc.gov.ph/accountancy.
2. 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.
3. 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
Note: Refer to the Philippine Accountancy Act of 2004 Sec.
5 to Sec. 12 for more information about the BOA.
4. The Financial and Sustainability Reporting Standards
Council (FSRSC) 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.
5. Which statement is incorrect regarding the FSRSC?
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 FSRSC are
appointed by the PRC upon the recommendation of
the BOA in coordination with the accredited
professional organization (APO) of CPAs.
c. Composed of sixteen (16) members with a
chairman.
d. Has the authority to establish the accounting
framework to be used by companies under its
jurisdiction.
LECTURE NOTES:
Composition of FSRSC (per BOA Reso No. 29 series of
2022)
• Chairman - 1
• Board of Accountancy (BOA) - 1
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OCAMPO/OCAMPO
MAY 2023
• Securities and Exchange Commission (SEC) - 1
• Bangko Sentral ng Pilipinas (BSP) - 1
• Commission on Audit (COA) - 1
• Bureau of Internal revenue (BIR) – 1
• Insurance Commission (IC) - 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
More information about the FSRSC can be found at
https://www.pfrsc.org/.
6. The FSRSC 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
7. Which of the following government agency is not
represented in FSRSC?
a. Bangko Sentral ng Pilipinas
b. Bureau of Internal Revenue
c. Insurance Commission
d. Bureau of Customs
8. Which of the following is represented in FSRSC?
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
9. The Auditing and Assurance Standards Council (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:
Composition of AASC (per BOA Reso No. 22 series of 2020)
• Chairman - 1
• Board of Accountancy (BOA) - 1
• Securities and Exchange Commission (SEC) - 1
• Bangko Sentral ng Pilipinas (BSP) - 1
• Commission on Audit (COA) – 1
• Insurance Commission (IC) - 1
• An association or organization of CPAs in active public
practice of accountancy - 1
• Accredited national professional organization (APO) of
CPAS:
Public Practice – 9
Commerce and Industry - 1
Academe or Education - 1
More information about the AASC can be found at
https://aasc.org.ph/.
FAR.3401
TEAM PRTC
10. Which of the following is not represented both to the
FSRSC and the AASC?
a. Bangko Sentral ng Pilipinas
b. Bureau of Internal Revenue
c. Insurance Commission
d. None of these
11. 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.
12. Standards approved by the FSRSC 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
13. The FSRSC 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 FSRSC:
I. Issuing for comment an exposure draft approved
by a majority of the FSRSC members; comment
period will be at least 60 days, unless a shorter
period (not less than 30 days) is considered
appropriate by the FSRSC.
II. Consideration of pronouncements of the IASB.
III. Formation of a task force, when deemed
necessary, to give advice to the FSRSC.
IV. Approval of a standard or an interpretation by a
majority of the FSRSC 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 FSRSC 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
14. 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 FSRSC has a general policy of exempting
transactions occurring before a specific date from
the requirements of new PFRSs.
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15. 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. The PIC shall have a Chairman who shall be
selected and approved by the PRC from the regular
members of the PIC at the time of selection.
d. Each member shall serve for a three-year term and
may be re-appointed.
LECTURE NOTES:
The PIC Composition
The PIC shall consist of 15 representatives from the
following:
• Accounting firms (Isla Lipana & Co., SGV & Co.,
Punongbayan & Araullo, R. G. Manabat & Co., Navarro
Amper & Co, Roxas Cruz Tagle & Co., Villaruz, Villaruz
& Co., R. S. Bernaldo & Associates, Constantino &
Partners) - 9
• FINEX – 1
• Academe (with a designated alternate) - 1
• BOA - 1
• SEC - 1
• BSP - 1
• IC - 1
More information about the PIC can be found at
https://www.pfrsc.org/government-organization-about-
the-pic.
16. Which of the following is represented in PIC?
a. Bureau of Internal Revenue
b. Commission on Audit
c. Insurance Commission
d. None of these
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 FSRSC for approval
before issuance to the public as final guidance.
d. Implementation guidance released by the PIC and
approved by the FSRSC 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
FAR.3401
TEAM PRTC
19. Which statement is incorrect regarding the IFRS
Foundation?
a. It is a not-for-profit, public interest organization
established to develop a single set of high-quality,
understandable, enforceable and globally accepted
accounting and sustainability disclosure
standards—IFRS Standards—and to promote and
facilitate adoption of the standards.
b. Its mission is to develop IFRS Standards that bring
transparency, accountability and efficiency to
financial markets around the world.
c. It has a three-tier governance structure, based on
two independent standard-setting boards of
experts, governed and overseen by Trustees from
around the world who in turn are accountable to a
monitoring board of public authorities.
d. None, all the statements are correct.
Note: More information about the IFRS Foundation can be
found at https://www.ifrs.org/about-us/who-we-are/.
20. 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.
21. Use of a single, trusted accounting language
a. Lowers the cost of capital.
b. Reduces international reporting costs for
businesses.
c. Both a and b.
d. Neither a nor b.
22. Which statement is incorrect regarding the
International Accounting Standards Board (IASB)?
a. Normally has 14 members, of whom one is
appointed as Chair and up to two members as
Vice-Chair.
b. Most of the members are full-time, so that they
commit all of their time to paid employment as an
IASB member.
c. Members of the IASB shall be appointed initially for
a term of five years, may be renewed for a further
term of three years (with the possibility of renewal
up to a maximum of five years). The term of an
individual member of the IASB may not exceed 10
years in total.
d. Majority of the members are should come from
Europe.
23. The IASB due process comprises six stages, with the
Trustees of the IFRS Foundation having the
opportunity to ensure compliance at various points
throughout. Arrange in proper order the IASB’s due
process.
I. Procedures after a Standard is issued
II. Planning the project
III. Setting the agenda
IV. Developing and publishing the Standard
V. Developing and publishing the Discussion Paper,
including public consultation
VI. Developing and publishing the Exposure Draft,
including public consultation
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a. III, II, V, VI, IV and I
b. III, II, VI, V, IV and I
c. II, III, V, VI, IV and I
d. II, III, VI, V and I
24. Which statement is incorrect regarding the IFRS
Interpretations Committee (IC) and its Interpretations?
a. The IFRS IC is responsible for developing
Interpretations of IFRSs.
b. If the IFRS IC decides that an IFRS is not clear and
that it should provide an interpretation of the
requirements it either develops an Interpretation
or, in consultation with the IASB, develops a
narrow scope amendment to the IFRS.
c. The IFRS IC publishes an agenda decision to
explain why a standard-setting project has not
been added to the work plan to address a question
submitted.
d. The IFRS IC members are appointed by the IASB.
25. Which statement is incorrect regarding the
International Sustainability Standards Board (ISSB)?
a. Created by the IFRS Foundation to help meet the
demand of international investors with global
investment portfolios for high quality, transparent,
reliable and comparable reporting by companies on
climate and other environmental, social and
governance (ESG) matters.
b. The ISSB sets IFRS Sustainability Disclosure
Standards.
c. The Sustainability Disclosure Standards will require
disclosure of information about the sustainability-
related risks and opportunities that affect the
company’s future cashflows and business model
and, thus, its enterprise value—matters that affect
future financial statements.
d. The ISSB is intended to replace the IASB.
26. Which of these statements regarding the IFRS and
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
27. Which of the following formalized the FASB and IASB’s
commitment to convergence of U.S. GAAP and IFRS?
a. The Norwalk Agreement
b. The Bologna Accord
c. The Mutual Recognition Agreement
d. The Treaty of Paris
28. Which statement is correct regarding the Philippine
Institute of Certified Public Accountants (PICPA)?
a. The PICPA is the accounting standard setting body
in the Philippines.
b. PICPA is a registered stock corporation with
Geographical divisions, regions and chapters all
over the country.
c. Geographical Areas, Regions and Chapters have
juridical personality separate and distinct from
each other or from the national office.
d. Each region, sector and chapter has its own
respective governing council.
Note: More information about the PICPA can be found at
https://picpa.com.ph/.
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FAR.3401