Philippine Financial Reporting Standards Quiz

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Questions and Answers

Which of the following is TRUE about Philippine Financial Reporting Standards (PFRSs)?

They are mandatory for all entities, regardless of size or industry.

They are accompanied by guidance to assist entities in their application. (correct)

They are developed by each individual entity.

They are not considered generally acceptable reporting standards.

They are only applicable to specific transactions or events.

Which of the following is NOT an example of an internal event?

Production of farm products

Changes in fair values and price levels (correct)

Conversion of raw materials into finished products

Loss from fire

What is the primary difference between an external event involving a transfer and an external event other than a transfer?

External events involving transfers are always positive while external events other than transfers are always negative.

External events involving transfers are recorded on the balance sheet while external events other than transfers are recorded on the income statement.

External events involving transfers involve movement of economic resources or obligations between parties, while external events other than transfers do not. (correct)

External events involving transfers are related to financial transactions while external events other than transfers involve physical changes.

Which of the following measurement bases is NOT typically used in accounting?

Market value (A) Signup and view all the answers

Which of the following is an example of a valuation by opinion?

The amount of accounts receivable that is deemed uncollectible (C) Signup and view all the answers

What is the primary reason why financial statements are said to be a mixture of fact and opinion?

Financial statements often include estimates and assumptions, which are based on opinion. (A) Signup and view all the answers

Which of the following is an INTERNAL event that involves changes in the economic resources or obligations of an entity?

A company's inventory is damaged due to improper handling by its own employees. (E) Signup and view all the answers

Which of the following scenarios involves 'valuation by fact' in accounting?

Determining the amount of bad debt expense based on historical collection patterns. (B) Signup and view all the answers

Which of the following is NOT an example of an external event other than a transfer?

A company's customers decide to pay their invoices earlier than expected. (B) Signup and view all the answers

When making judgments related to accounting policies, what is the order of precedence for sources of guidance, as per the provided content?

PFRSs dealing with similar and related issues, Conceptual Framework, Pronouncements of other standard-setting bodies, Accounting literature and accepted industry practices (A) Signup and view all the answers

Which of the following entities is NOT directly involved in the setting of accounting standards in the Philippines?

Bureau of Internal Revenue (BIR) (D) Signup and view all the answers

What is the primary role of the Philippine Interpretations Committee (PIC)?

Reviewing and approving interpretations of IFRIC for adoption in the Philippines (D) Signup and view all the answers

Which of the following is a key difference between the Philippine Accountancy Act of 2004 (RA 9298) and the National Internal Revenue Code?

RA 9298 created the FRSC, while the Internal Revenue Code is not directly related to accounting standard setting. (A) Signup and view all the answers

What organization represents preparers and users of financial statements on the FRSC?

A major organization composed of preparers and users of financial statements (A) Signup and view all the answers

Which of the following is NOT a member of the FRSC?

A representative from the Philippine Interpretations Committee (PIC) (C) Signup and view all the answers

How many members are on the Board of Accountancy (BOA) in the Philippines?

7 (C) Signup and view all the answers

Which of the following entities is responsible for regulating corporations and capital markets in the Philippines?

Securities and Exchange Commission (SEC) (C) Signup and view all the answers

What is the primary reason for the Philippines' transition to IFRSs in 2005?

To harmonize accounting practices with internationally recognized standards. (D) Signup and view all the answers

Which organization promotes the worldwide accountancy profession and sets standards for high-quality services?

International Federation of Accountants (IFAC) (A) Signup and view all the answers

What is the primary reason for the significant difference in Daimler-Benz's profit reporting under US GAAP and German GAAP?

Different accounting practices employed by the two countries. (B) Signup and view all the answers

Which of the following statements is NOT true about the International Federation of Accountants (IFAC)?

IFAC is a regulatory body that enforces accounting standards for its members. (B) Signup and view all the answers

What does the acronym "IOSCO" stand for?

International Organization of Securities Commissions (A) Signup and view all the answers

What is the primary purpose of the International Organization of Securities Commissions (IOSCO)?

To promote cooperation and coordination among securities regulators globally. (B) Signup and view all the answers

Which of the following is a potential consequence of inconsistent financial reporting across nations?

Difficulty in comparing and evaluating financial performance of companies operating globally. (A) Signup and view all the answers

Prior to the adoption of IFRSs, what accounting standards were primarily used in the Philippines?

Generally Accepted Accounting Principles (GAAP) issued by the Federal Accounting Standards Board (FASB) (A) Signup and view all the answers

Which of the following is NOT a step in the problem-solving process as outlined in the text?

Analyzing assumptions (B) Signup and view all the answers

What is the primary purpose of accounting as an information system?

To produce financial statements for decision-makers (B) Signup and view all the answers

Why can accounting be considered the 'language of business'?

It allows for the communication of financial information. (A) Signup and view all the answers

Which of the following statements best describes the role of creative thinking in accounting?

Finding new relationships among data to solve problems. (A) Signup and view all the answers

Which of the following is an example of how critical thinking is applied in accounting?

Evaluating the effectiveness of different accounting methods. (B) Signup and view all the answers

What is the relationship between accounting concepts, accounting assumptions, and accounting theory?

Accounting theory is a framework that encompasses concepts and assumptions. (A) Signup and view all the answers

Which of the following is a key difference between creative thinking and critical thinking in accounting?

Creative thinking is primarily about finding new solutions, while critical thinking involves evaluating their effectiveness. (A) Signup and view all the answers

What is the primary source of most accounting concepts?

The Conceptual Framework and Philippine Financial Reporting Standards (PFRSs). (C) Signup and view all the answers

What is the primary purpose of general purpose financial statements?

To provide information to external users such as investors and creditors (D) Signup and view all the answers

Which of the following is NOT a component of a financial report?

Internal memos discussing strategic planning (C) Signup and view all the answers

What is the primary difference between financial accounting and financial reporting?

Financial accounting is a broader term encompassing financial reporting and other financial reporting. (D) Signup and view all the answers

What is the purpose of "other financial reporting"?

To provide additional information that assists in interpreting the financial statements or making economic decisions (B) Signup and view all the answers

What is the main purpose of the Statement of Cash Flows?

To show the company's sources and uses of cash during a period of time (B) Signup and view all the answers

Which financial statement shows the financial position of a company at a specific point in time?

Statement of financial position (A) Signup and view all the answers

What is the primary goal of financial reporting?

To provide information useful for decision-making (A) Signup and view all the answers

What is the connection between financial statements and financial reporting?

Financial reporting is a broader term which encompasses financial statements and 'other financial reporting' (C) Signup and view all the answers

Study Notes

Page 1:

Reporting standards under PAS 8, initial measurement, and subsequent measurement are detailed.
PFRS 7 disclosures on financial instruments, significance, and risk are outlined.
PFRS 8 operating segments, core principle, reportable segments, management approach, aggregation criteria, and quantitative thresholds are discussed.
PFRS 9 financial instruments, initial recognition, classification of financial assets, business model, contractual cash flow characteristics, measurement of financial assets, reclassification, impairment, derecognition, classification of liabilities, measurement of liabilities, and summary are covered.
PFRS 10 consolidated financial statements, control, power, exposure or rights to variable returns, accounting requirements, non-controlling interests, and preparing consolidated financial statements are examined.

Page 2:

PFRS 11 joint arrangements, joint arrangements, types of joint arrangements, joint operations, joint ventures, presentation, and summary are discussed.
PFRS 12 disclosure of interests in other entities, summary of minimum disclosures, PFRS 13 fair value measurement, fair value, requirements, valuation techniques, fair value hierarchy, fair value measurement of non-financial assets, and summary are detailed.
PFRS 14 regulatory deferral accounts, scope, and summary are covered.
PFRS 15 revenue from contracts with customers, revenue recognition, steps, and summary are included.

Page 3:

PFRS 16 leases, identifying a lease, lease term, accounting for leases by lessee, recognition exemptions, separating components, presentation, disclosure, accounting for leases by lessor, indicators of a finance lease, inception and commencement of lease, finance lease, operating lease, lease of land and building, subleases, presentation, disclosure, sale and leaseback transactions, and summary are covered.
PFRS 17 insurance contracts, recognition, initial measurement, fulfillment cash flows, contractual service margin, subsequent measurement, onerous contracts, premium allocation approach, reinsurance contracts held, investment contracts, modification, derecognition, presentation, summary, and reference are detailed.

Page 4:

Learning objectives, defining accounting, stating its basic purpose, explaining basic concepts, stating the branches of accounting, and explaining the importance of uniform financial reporting standards are included.
Three important activities in defining accounting are provided - Identifying, Measuring, and Communicating.
Identifying is analyzed as the process of analyzing events and transactions.
Recognition is explained as the process of including accountable events in financial statements.

Page 5:

The types of external events (exchange, non-reciprocal transfer, and external events other than transfers) and their examples are explained.
Types of internal events, including production and casualty events, are described.

Page 6:

Measuring in accounting using monetary terms, various bases including historical cost, fair value, present value, and realizable values are examined
Estimating is essential in providing relevant information on financial statements.
Valuation is classified based on fact or opinion.

Page 7:

Communicating involves transforming economic data into useful accounting information.
Aspects of communicating process in accounting - recording, classifying, summarizing, and interpreting are addressed.

Page 8:

The basic purpose of accounting is to provide useful information for economic decisions.
Different sources of economic decisions besides financial statements include current events, industry publications, internet resources, and professional advice.
Economic entity is defined as a combination of persons and property capable of using or controlling economic resources to achieve objectives (Not-for-profit and Business entities types).
Production, exchange, consumption, income distribution, saving, and investment are among economic activities affecting economic resources.

Page 9:

Types of information provided by accounting (quantitative and qualitative)
General purpose accounting information, meeting common users' needs, is provided.
Special-purpose accounting information catered to other user types are addressed
Sources of information from external sources in financial statements are discussed

Page 10:

Accounting concepts (postulates) provide the foundation for the accounting process.
Accounting theory is the logical reasoning for evaluating and guiding accounting practices.
Examples accounting concepts are: double-entry accounting system and going concern assumption.

Page 11:

Accounting assumptions (postulates) which comprise the fundamental concepts and principles are detailed.
The Double-entry system and the Going concern assumption are important concepts explained.
The measurement basis involving costs and values is appropriate for going concern.

Page 12:

Accrual basis of accounting, recognizing events when they occur (not when cash is received or paid), is explained.
Historical cost concept, though not always maintained, is based on acquisition cost.
Articulation concept explaining interconnectedness of financial statements (worksheet) is examined.

Page 13:

Full disclosure principle, reflecting judgmental trade-offs, and sufficient detail in disclosures are outlined.
Consistency concept in consistently applying accounting principles across periods is discussed.
Matching concept in that costs are recognized as expenses when related revenue is recognized is discussed.
Entity theory emphasizing proper income determination through revenue and cost matching.

Page 14:

Proprietary theory focuses on asset valuation.
Residual equity theory applies when multiple share classes exist.
Fund theory centers on the custody and management of funds, particularly applicable for government accounting and trust accounts.

Page 15:

Realization is the process converting non-cash assets into cash or cash-related assets.
Prudence principle advises caution in making estimates to avoid overstatement of assets/income and understatement of liabilities/expenses.

Page 16:

Expense Recognition Principles are presented.
Matching and Systematic and rational allocation principles in accounting concepts are covered.
Descriptions and analysis of internal and external events are presented.
Implications for the financial statements and the preparation processes are given.

Page 17:

Common branches of accounting (Financial accounting and Financial reporting) are discussed.
Financial accounting is detailed.
Financial statements and financial reports are compared.

Page 18:

Financial reporting as the process of presenting financial information for external users (investors, lenders, and creditors).
Objectives of financial reporting (primary and secondary).
Structure of financial statements are shown which include financial position, profit or loss and other comprehensive income, changes in equity, cash flows, notes, and statements related to financial position.

Page 19:

Accounting systems, their design, and processes are examined.
Accounting research as the analysis of economic events, their impacts, relationship, and broader implications.

Page 20:

Bookkeeping as the process of recording transactions to prepare trial balances (without interpretation) is described.
Accountancy is detailed as the profession or practice of accounting in public and private practice contexts.
Four sectors of accountancy practice mentioned are public practice, commerce and industry, academe and government.

Page 21:

Accounting practice in different sectors of government, commerce and industry, academe and education are discussed.
The Philippine Financial Reporting Standards (PFRSs) are presented as the generally accepted accounting principles in the Philippines.

Page 22:

The need for reporting standards are presented and how to use and consider the reporting standards are detailed.
Hierarchy of reporting standards in making accounting policy selection with descending order is presented.

Page 23:

Financial Reporting Standards Council (FRSC) as the official accounting standard setting body in the Philippines is explained.
Other relevant organizations. (Board of Accountancy, Securities and Exchange Commission, Bangko Sentral ng Pilipinas, Bureau of Internal Revenue).

Page 24:

International Accounting Standards Board (IASB) and International Financial Reporting Standards (IFRSs) are covered in this page.

Page 25:

Due process in developing IFRSs is discussed.
International Due Process in accounting practices in detail and steps are explained.

Page 26:

Other relevant international organizations are presented which consist of the International Financial Reporting Interpretations Committee (IFRIC) and the IFRS Advisory Council.

Page 27:

The International Organization of Securities Commissions (IOSCO) and its role.
Movement towards IFRSs and how it affects financial reporting are detailed.

Page 28:

The future of IFRSs is examined.
Norwalk Agreement and its importance is explained.
Changes in reporting standards are outlined.

Page 29:

Summary. Accounting involves identifying, measuring, communicating economic decisions.

Page 30:

Summary of important accounting concepts, practices, and standards.

Page 31:

Problem 1: True or False
Problem 2: Multiple Choice

Page 32:

Problem 3: Multiple Choice.

Page 33:

Problem 4: For Classroom Discussion on Events.

Page 34:

Problem 3: Multiple Choice, continues focusing on standards and practices.

Page 35:

Problem 5: Multiple Choice covering various accounting concepts.

Page 36:

Problem 6: Multiple Choice continuing on various accounting concepts including:
Business entity, Time Period, Cost-benefit concepts
Accounting practice sectors (including public, private practice) is described.

Page 37:

Problem 4: For Classroom Discussion
Valuation by fact or opinion is considered in relation to depreciation
Measurement bases (including historical cost, current cost, and present value)

Page 38:

Common branches of accounting
Four sectors in practice of accountancy (public, commerce, industry, academe and government)
Accounting standards (including Philippine Financial Reporting Standards)

Page 39:

Questions on the Philippine Financial reporting standards

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Description

Test your knowledge of the Philippine Financial Reporting Standards (PFRSs) with this quiz. Dive into concepts regarding internal and external events, measurement bases, and the nature of financial statements. See how well you understand the nuances of accounting principles and practices in the Philippines.