Financial Reporting Framework and Bodies

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to Lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What serves as the principal means through which a company communicates its financial information to those outside it?

  • Press releases
  • Financial statements (correct)
  • Management meetings
  • Internal audit reports

Accounting is primarily about qualitative information.

False (B)

What is the process of including the effects of an accountable event in the statement of financial position or the statement of income through a journal entry called?

Recognition

The process of assigning numbers, normally in monetary terms, to economic transactions and events is called ______.

<p>measuring</p> Signup and view all the answers

Match the following concepts with their description:

<p>Accounting = Process of identifying, measuring, and communicating economic information. Financial Accounting = Focuses on recording business transactions and preparing financial reports. Management Accounting = Partnering in management decision-making and devising planning systems. Auditing = Independent examination to ensure the fairness and reliability of financial reports.</p> Signup and view all the answers

Which of the following branches of accounting involves partnering in management decision-making, devising planning, and performance management systems?

<p>Management Accounting (C)</p> Signup and view all the answers

The primary goal of financial reporting is to provide information that is useful to all stakeholders equally.

<p>False (B)</p> Signup and view all the answers

What are the resources that investors and creditors provide to an entity?

<p>Capital</p> Signup and view all the answers

The idea that a company is viewed as separate and distinct from its investors is known as the ______ perspective.

<p>entity</p> Signup and view all the answers

Match the following terms with their correct description:

<p>Relevance = Information that can influence users' decisions. Faithful Representation = Information that is complete, neutral, and free from error. Comparability = Enables users to identify similarities and differences between items. Consistency = Use of the same accounting methods from period to period.</p> Signup and view all the answers

Which of the following elements included in financial reporting ensures that investors can make comparisons across borders?

<p>A single set of high-quality accounting standards (B)</p> Signup and view all the answers

Internal users of accounting information do not have direct access to the company's financial records.

<p>False (B)</p> Signup and view all the answers

What type of accounting is designed specifically to meet the information needs of internal users?

<p>Managerial Accounting</p> Signup and view all the answers

Inactive owners, creditors, and regulatory groups are considered ______ users of accounting information.

<p>external</p> Signup and view all the answers

Match the user with their primary accounting information need:

<p>Potential Creditors = Assess ability to repay loans. Suppliers = Determine if they will receive payment. Government Agencies = Determine compliance with regulations. Employees = Assess the firm's ability to provide remuneration and benefits.</p> Signup and view all the answers

An entity's ability to deliver the required goods and services is primarily evaluated by which group?

<p>Customers (D)</p> Signup and view all the answers

Accounting standards are rigid and never change.

<p>False (B)</p> Signup and view all the answers

What is the main goal of accounting standards?

<p>Ensure relevance of financial information</p> Signup and view all the answers

[Blank] in accounting reports is essential so that profit numbers in different countries for given transactions will be reported similarly, providing credibility to the accounting reports.

<p>Consistency</p> Signup and view all the answers

Match the following organizations with their functions

<p>World Bank = Promotes economic and social progress by helping developing countries International Monetary Fund = ensuring the stability of the international monetary system International Organization of Securities Commission = protect investors, maintain fair, efficient, and transparent markets Organization for Economic Cooperation Development = Promote policies that will improve the economic and social well-being of people around the world.</p> Signup and view all the answers

Which organization replaced the International Accounting Standards Committee (IASC) in 2001?

<p>International Accounting Standards Board (IASB) (B)</p> Signup and view all the answers

The IASB has the legal authority to enforce compliance with its accounting standards globally.

<p>False (B)</p> Signup and view all the answers

Under whose umbrella does the IASB operate?

<p>IFRS Foundation</p> Signup and view all the answers

The ______ assists the IASB through the timely identification, discussion, and resolution of financial reporting issues within the framework of IFRS.

<p>IFRS Interpretations Committee</p> Signup and view all the answers

Match the following bodies within the international standard-setting structure:

<p>IFRS Advisory Council = Provides advice to the IASB on major policies and technical issues. IFRS Interpretations Committee = Assists the IASB in resolving financial reporting issues. IFRS Foundation = Oversees the IASB, IFRS Advisory Council, and IFRS Interpretations Committee. Monitoring Board = Establishes a link between public authorities and accounting standard-setters.</p> Signup and view all the answers

According to the content, which of the following organizations is primarily responsible for creating accounting standards on an international level?

<p>International Accounting Standards Board (IASB) (A)</p> Signup and view all the answers

The IASB's due process for developing standards includes mandatory field testing in both developed and emerging markets.

<p>False (B)</p> Signup and view all the answers

What is the minimum number of votes required to issue a new IFRS?

<p>Nine</p> Signup and view all the answers

The IASB issues three major types of pronouncements: International Financial Reporting Standards, Conceptual Framework for Financial Reporting, and International Financial Reporting ______

<p>interpretations</p> Signup and view all the answers

Match the IASB's pronouncements with their description:

<p>IFRS = Codified standards that must be followed. Framework = Guidance for resolving problems consistently. Interpretations = Cover newly identified issues not in IFRS.</p> Signup and view all the answers

What year did the Philippine Institute of Certified Public Accountants (PICPA) create the Accounting Standards Council (ASC)?

<p>1981 (C)</p> Signup and view all the answers

The Financial Reporting Standards Council (FRSC) replaced the Auditing Standards and Practices council (ASPC).

<p>False (B)</p> Signup and view all the answers

What body is authorized by law to promulgate rules and regulations affecting the practice of accountancy in the Philippines?

<p>Board of Accountancy</p> Signup and view all the answers

The statements and interpretations issued by the Council represented generally accepted accounting principles in the Philippines. Accounting principles become generally accepted if they have substantial authoritative support from the relevant parties interested in the financial statements-the preparers and users, auditors and ______ agencies.

<p>regulatory</p> Signup and view all the answers

Match the Philippine accounting standard-setting organization with its primary function:

<p>FRSC = Issue Philippine Financial Reporting Standards (PFRSs). PIC = Issue implementation guidance on PFRSs. BOA = Promulgate rules and regulations affecting accountancy.</p> Signup and view all the answers

What is the first step in developing standards by the FRSC, according to the content?

<p>Consideration of pronouncements by IASB (B)</p> Signup and view all the answers

The PIC issues IFRS Standards.

<p>False (B)</p> Signup and view all the answers

The ASC was created by?

<p>PICPA</p> Signup and view all the answers

In September 2022, FRSC was renamed the Financial and ______ Reporting Standards Council as approved by BOA.

<p>Sustainability</p> Signup and view all the answers

Match the key date with the event regarding the evolution of Philippine Accounting Standards

<p>1997 = Transition to IAS began. December 22, 2004 = SEC issued MC 19 requiring adoption of IAS and IFRS. 2006 = FRSC established, replacing ASC. September 2022 = FSRSC renamed FSRSC.</p> Signup and view all the answers

Flashcards

What is Accounting?

Identifying, measuring, and communicating economic information for informed judgments.

Accounting as a Service

A service activity providing quantitative, financial information for economic decisions.

Accounting as an Art

Recording, classifying, and summarizing financial transactions and events.

Components of Accounting

Includes identifying, measuring, and communicating accountable events.

Signup and view all the flashcards

Identifying in Accounting

Analyzing transactions to determine if they should be recognized.

Signup and view all the flashcards

Recognition in Accounting

Including accountable events in financial statements via journal entries.

Signup and view all the flashcards

Accountable Event

An event with an effect on assets, liabilities, or capital.

Signup and view all the flashcards

External Events

Transactions involving an entity and another external party.

Signup and view all the flashcards

Exchange (External Event)

Sale, purchase, payment of liabilities, or receipt of notes receivable.

Signup and view all the flashcards

Non-reciprocal Transfers

Donations, gifts, payment of taxes, theft, or distribution to owners.

Signup and view all the flashcards

Internal Events

Events involving the entity only, without external parties.

Signup and view all the flashcards

Production (Internal Event)

Conversion of raw materials into finished products

Signup and view all the flashcards

Casualty (Internal Event)

Sudden, unanticipated loss from fire, flood, earthquake.

Signup and view all the flashcards

Measuring (Accounting)

Assigning monetary values to economic transactions and events.

Signup and view all the flashcards

Valuation by Fact

Stating share capital at par value or land at acquisition cost.

Signup and view all the flashcards

Valuation by Opinion

Using estimates for depreciation, provisions, and uncollectibles.

Signup and view all the flashcards

Communicating (Accounting)

Transforming economic data into useful accounting information

Signup and view all the flashcards

Recording

Systematically committing accountable events to writing.

Signup and view all the flashcards

Classifying

Grouping similar items into classes through postings.

Signup and view all the flashcards

Summarizing

Condensing transactions into financial statements and reports.

Signup and view all the flashcards

Interpreting

Computation of finanical statment rations.

Signup and view all the flashcards

Accounting Purpose

To provide useful information for economic decisions.

Signup and view all the flashcards

Financial Accounting

Recording business transactions and preparing financial reports.

Signup and view all the flashcards

Management Accounting

Partnering in decision-making and devising performance management systems.

Signup and view all the flashcards

Cost Accounting

Collection, allocation, and control of production costs.

Signup and view all the flashcards

Auditing

Independent examination to ensure financial report reliability.

Signup and view all the flashcards

Government Accounting

Concerned with government funds.

Signup and view all the flashcards

Financial Reporting

Financial statements and other financial information.

Signup and view all the flashcards

Financial Reporting Aim

Provide information useful to equity investors, lenders, and creditors.

Signup and view all the flashcards

Equity Investors/Creditors

Users with critical information needs from financial statements.

Signup and view all the flashcards

Entity Perspective

Company is separate from its investors.

Signup and view all the flashcards

Decision Usefulness

Information helps investors assess future cash inflows.

Signup and view all the flashcards

High-Quality Standards

Standards with global acceptance.

Signup and view all the flashcards

Accounting - Internal Users

Owners and management are the users.

Signup and view all the flashcards

Accounting - External Users

Creditors and potential investors are the users.

Signup and view all the flashcards

Accounting Standards

Guidelines representing GAAP.

Signup and view all the flashcards

Global Accounting Standards

Comparability in financial statements is important.

Signup and view all the flashcards

International Accounting

Standards setting body formed in 1973.

Signup and view all the flashcards

IASB Objectives

Develop quality global standards.

Signup and view all the flashcards

IFRS Foundation

Oversees IASB.

Signup and view all the flashcards

Study Notes

  • The semester runs from February 17 to June 29, 2025
  • The second semester is for the academic year 2024-2025
  • The midterm examination will be held April 21-27, 2025
  • The final exam will be held June 23-29, 2025

Key Course Topics

  • Development of Financial Reporting Framework and Standard-Setting Bodies
  • Conceptual Framework for Financial Reporting (2018)
  • Presentation of Financial Statements (IAS 1 and IAS 7)
  • Events after the End of the Reporting Period (IAS 10)
  • Interim Reporting (IAS 34)
  • Segment Reporting (IFRS 8)
  • Related Party Disclosures (IAS 24)
  • Cash to Accrual Basis and Single-Entry System

Development of Financial Reporting Framework and Standard-Setting Bodies

  • Accounting involves identifying, measuring, and communicating to allow informed decisions
  • Accounting provides quantitative, financial information to help in economic decisions
  • Accounting records, classifies, and summarizes financial events while interpreting results
  • Accounting deals with quantitative and financial information to be useful in decision-making
  • Key components are identifying accountable events, measuring them in monetary terms and communicating this information

Identifying Accountable Events

  • The analytical component of the accounting definition involves determining which events to recognize
  • Recognition involves including the effects of accountable events in financial statements, such as through journal entries
  • Accountable events affect assets, liabilities, or capital
    • Economic activity and measurement of economic obligations are the focus
    • Accountable or quantifiable events have an effect on assets, liabilities, or capital

Types of Economic Events

  • External events occur between an entity and another external party
    • Exchange involves sales, purchases, and payments
    • Non-reciprocal transfers include donations, gifts, and taxes
    • Other external events include changes in fair value, price levels, or technology
  • Internal events don't involve an external party and only involve the entity
    • Production is converting raw materials to finished products
    • Casualty refers to sudden, unanticipated losses from fire, flood, or earthquake

Measurement in Accounting

  • Accounting uses numbers (technical component), usually monetary terms, to represent economic transactions
  • The Philippine peso is the unit for measurement
  • Measurement bases:
    • Historical cost (most common)
    • Fair value
    • Present value
    • Net realizable value
    • Current cost
    • Inflation-adjusted costs
  • Valuation can be by fact, such as valuing ordinary share capital at par or land at acquisition cost.
  • Valuation by opinion uses estimates for items like depreciation

Communication Process

  • Transfers economic data from activity into useful accounting information for users
  • The steps are as follows:
    • Recording: writing down accountable events in the journal
    • Classifying: grouping similar items through postings in the ledger
    • Summarizing: is condensing events into financial statements

Purpose of Accounting

  • To provide information useful in making economic decisions
  • To generate financial statements about economic entities

Branches of Accounting

  • Financial accounting records transactions and prepares reports for financial position
    • It is for both internal and external parties
    • Financial statements include balance sheet, income statement, cash flow statement, and equity changes
  • Management accounting aids internal decisions and financial expertise
  • Cost Accounting deals with production costs
  • Auditing examines reports
  • Government accounting tracks government funds
  • Tax accounting prepares tax returns
  • Accounting education develops the field with reviewers

Financial Reporting

  • Is the communication of financial statements
  • The financial reporting objective is to provide financial information to present and potential equity investors, lenders, and other creditors in decisions about providing the resource to the entitity

Objectives of Financial Reporting

  • Provide useful information at the least cost to a wide variety of users
  • Equity investors and creditors need the most financial information
  • Is designed for the company separate from its investors
  • Decision making should help investors access cash inflows

Elements of Financial Reporting

  • Need to facilitate the allocation of efficient capital
  • Must have high-quality accounting standards
  • Must be consistent in application
  • Must have common auditing standards
  • Must have review and enforcement practices
  • Require market participant training
  • Delivery systems must be common
  • Frameworks of corporate governance must be common

Accounting Information Users

  • Internal users need it for decision-making, performance evaluation, and business strategy implementation
  • External users need it for the enterprise's financial condition, ability to pay loans, and regulation compliance

Development of Accounting Standards

  • Defined as GAAP which are guidelines, rules and procedures
  • International standards ensure comparability, consistency, and a common basis for measuring economic activities

Organizations Involved in Promulgating Standards

  • The IASC was formed in 1973 and issued 41 IAS standards
  • The IASB replaced IASC in 2001, with the two main goals of developing standards and promoting their use

IASB Structure

  • The IFRS Foundation oversees the IASB and supporting committees
  • The IFRS Advisory Council advises IASB
  • The IFRS Interpretations Committee resolves financial reporting issues
  • A monitoring Board establishes link between accounting standard-setters and public authorities

Developing International Reporting Standards(IFRS)

  • Has steps, characteristics, and due process

Steps in Developing International Reporting Standards(IFRS)

  • Topics identification
  • Research
  • Public hearings
  • Exposure draft
  • Response is evaluated and the draft is made if necesssary
  • Standard is issued

Characteristics of IASB

  • Membership
    • Sixteen members from different countries
  • Autonomy
  • Independence
  • Voting
    • Nine out of fourteen votes

Accounting Standards Council

  • Was created November 18, 1981
  • There has been 8 members representing various sectors and fully adopted IAS in 2001

Financial Reporting Standards Council (FRSC)

  • Was established in 2006
  • Has 15 members from the BOA
  • Renamed the FSRSC IN September 2022

Philippine Interpretations Committee (PIC)

  • PIC
  • Formed to issues implementation and guidance of PFRS'

Board of Accountancy (BOA)

  • Composed of a chairman and 6 members
  • Authorized to promulgate rules and regulations in the Philipinnes

Steps to develop Philippine Financial Reporting Standards

  • Review all the announcements from IASB
  • Form a task force to advise the FRSC
  • Issuing an exposure draft for the public
  • Have the IASC comments
  • Approve by FRSC members

Key Dates and Transitions

  • 1981: ASC was created by PICPA
  • 1997: Transition to IAS
  • 2001: Full adoption of IAS
  • December 22, 2004: SEC has issued MC 19
  • 2004: RA 9298 was created
  • 2006: FRSC established
  • August 2006: Form PIC
  • September 2022: Renamed FSRSC

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Quiz Team

Related Documents

More Like This

Use Quizgecko on...
Browser
Open
Browser
Browser