Chapter 1: Development of Financial Reporting Framework PDF

# TABLE OF CONTENTS | Chapter | Topic | Pages | |---|---|---| | 1 | Development of Financial Reporting Framework, Standard-Setting Bodies and Regulation of the Accountancy Profession | 1-12 | | 2 | The Conceptual Framework for Financial Reporting | 13-32 | | 3 | The Accounting Process | 33-50 | | 4...

# TABLE OF CONTENTS | Chapter | Topic | Pages | |---|---|---| | 1 | Development of Financial Reporting Framework, Standard-Setting Bodies and Regulation of the Accountancy Profession | 1-12 | | 2 | The Conceptual Framework for Financial Reporting | 13-32 | | 3 | The Accounting Process | 33-50 | | 4 | Cash and Cash Equivalents | 51-84 | | 5 | Trade and Other Receivables | 85-124 | | 6 | Debt Investments | 125-152 | | 7 | Equity Investments | 153-190 | | 8 | Other Non-Current Financial Assets | 191-202 | | 9 | Inventories | 203-238 | | 10 | Property, Plant and Equipment | 239-286 | | 11 | Investment Property | 287-300 | | 12 | Intangible Assets | 301-330 | | 13 | Wasting Assets | 331-342 | | 14 | Biological Assets | 343-360 | | 15 | Non-Current Assets Held for Sale | 361-372 | | 16 | Financial Liabilities | 373-408 | | 17 | Non-Financial Liabilities, Provisions and Contingencies | 409-438 | | 18 | Shareholders' Equity | 439-472 | | 19 | Share-based Payments | 473-492 | | 20 | Income Taxes | 493-520 | | 21 | Employee Benefits | 521-548 | | 22 | Leases | 549-592 | | 23 | Interim Financial Reporting | 593-604 | | 24 | Operating Segments | 605-618 | | 25 | Cash to Accrual Accounting/Single Entry System | 619-636 | | 26 | Financial Statements | 637-664 | | 27 | Earnings Per Share | 665-688 | | 28 | Events After the Reporting Period | 689-698 | | 29 | Related Party Disclosures | 699-708 | | 30 | PFRS for SMEs, PFRS for Small Entities and Reporting for Microenterprises | 709-719 | | | Bibliography | 720-722 | ## Development of Financial Reporting Framework, Standard-Setting Bodies and Regulation of the Accountancy Profession **Learning Outcomes** After reading this chapter, you should be able to: * know the different regulatory agencies both global and local that are involved in the crafting of IFRS. * obtain understanding about the formulation of International Financial Reporting Standards (IFRS) and its adoption to the Philippines. * understand the regulations of the accountancy profession. * attain proficiency in answering financial accounting theory questions relating to the development of financial reporting framework, standard-setting bodies and regulation of the accountancy profession. ### The International Accounting Standards Board (IASB) * An independent group of experts with an appropriate mix of recent practical experience in setting accounting standards, in preparing, auditing, or using financial reports, and in accounting education. * It was founded on April 1, 2001, as the successor to the International Accounting Standards Committee (IASC). * It is responsible for developing International Financial Reporting Standards (IFRS Standards), previously known as International Accounting Standards (IAS) and promoting the use and application of these standards. * Effective from 1 December 2016, IASB normally has fourteen (14) board members, of whom one (1) is appointed as Chair and one (1) as Vice-Chair. ### The IFRS Foundation * The IFRS Foundation's predecessor body was called the International Accounting Standards Foundation (IASF), which was formed on February 6, 2001 * The IASF changed name to the **International Financial Reporting Standards Foundation (IFRS Foundation)** on 1 July 2010 * It is an independent, not-for-profit organization and the primary objective is to develop, in the public interest, a single set of high-quality, understandable, enforceable and globally accepted International Financial Reporting Standards (IFRS Standards) based upon clearly articulated principles. * IFRS Standards are set by the IFRS Foundation's standard-setting body, the **International Accounting Standards Board (IASB)**. ### The International Financial Reporting Interpretations Committee (IFRIC) * This committee assists the IASB by providing guidance on the application and interpretation of IFRS. * Before December 2001, the **Standing Interpretations Committee (SIC)** was the IASB's interpretative body. * The SIC was reconstituted as IFRIC with the following specified duties: * To interpret the application of International Accounting Standards (IASs) and International Financial Reporting Standards (IFRSs), to provide timely guidance on financial reporting issues not specifically addressed in IASs and IFRSs, and to undertake other tasks at the request of the IASB; * To carry out these duties with regard to the IASB's objective of working actively with national standard setters to bring about convergence of national accounting standards; * Publish, after clearance by the IASB, draft Interpretations for public comment and consider comments made within a reasonable period before finalizing an Interpretation. * Report to the IASB and obtain its approval for final Interpretations. ### The Financial Reporting Standards Council (FRSC) * The **Professional Regulation Commission (PRC)** established the **Financial Reporting Standards Council (FRSC)** under the Implementing Rules and Regulations of the Philippine Accountancy of Act of 2004 to assist the Board of Accountancy in carrying out its power and function to promulgate accounting standards in the Philippines. * The FRSC is the successor of the **Accounting Standards Council (ASC)**. The ASC was created in November 1981 by the Philippine Institute of Certified Public Accountants (PICPA) to establish generally accepted accounting principles in the Philippines. * The FRSC is composed of fifteen (15) members with a Chairman, who had been or presently a senior accounting practitioner in any of the scope of accounting practice and fourteen (14) representatives from the following: * Bangko Sentral ng Pilipinas (BSP) (1) * Board of Accountancy (BOA) (1) * Bureau of Internal Revenue (BIR) (1) * Commission on Audit (COA) (1) * Financial Executives Institute of the Philippines (FINEX) (1) * Securities and Exchange Commission (SEC) (1) * Accredited National Professional Organization of CPAs * Association of CPAs in Public Practice (ACPAPP) (2) * Association of CPAs in Commerce and Industry (ACPACI) (2) * Government Association of CPAS (GACPA) (2) * National Association of CPAs in Education (NACPAE) (2) The FRSC monitors the technical activities of the IASB and invites comments on exposure drafts of proposed IFRSs as these are issued by the IASB. When finalized, these are adopted as Philippine Financial Reporting Standards (PFRSs). * The **FRSC similarly monitors issuances of the IFRIC of the IASB**, which it adopts as Philippine Interpretations-IFRIC. PFRSs and Philippine Interpretations-IFRIC approved for adoption are submitted to the BOA and PRC for approval. ### Philippine Interpretations Committee (PIC) * The FRSC formed the **Philippine Interpretations Committee (PIC)** in August 2006 to assist the FRSC in establishing and improving financial reporting standards in the Philippines. * The role of the PIC is principally to issue implementation guidance on PFRSs. * The PIC members are appointed by the FRSC and include accountants in public practice, the academe and regulatory bodies and users of financial statements. The PIC replaced the Interpretations Committee created by the ASC in 2000. ### The Professional Regulatory Board of Accountancy (PRBOA) **Composition:** * The **Professional Regulatory Board of Accountancy (PRBOA)**, under the supervision and administrative control of the Professional Regulation Commission (PRC) shall be composed of a Chairman and six (6) members to be appointed by the President of the Philippines from a list of three (3) recommendees for each position and ranked by the Commission from a list of five (5) nominees for each position submitted by the accredited national professional organization of certified public accountant. * The Board shall elect a vice-chairman from among each member for a term of one (1) year. * The chairman shall preside in all meetings of the Board and in the event of a vacancy in the office of the chairman, the vice-chairman shall assume such duties and responsibilities until such time as a chairman is appointed. **Qualifications:** * A member of the Board shall, at the time of his/her appointment, possesses the following qualifications: * Must be a natural-born citizen and a resident of the Philippines; * Must be a duly registered Certified Public Accountant with at least ten (10) years of work experience in any scope of practice of accountancy; * Must be of good moral character and must not have been convicted of crimes involving moral turpitude; * Must not have any pecuniary interest, directly or indirectly, in any school, college, university or institution conferring an academic degree necessary for admission to the practice of accountancy or where review classes in preparation for the licensure examination are being offered or conducted, nor shall he/she be a member of the faculty or administration thereof at a time of his/her appointment to the Board. **Term of Office:** * The Chairman and Members of the Board shall hold office for a term of three (3) years. * Any vacancy occurring within the term of a member shall be filled up for the unexpired portion of the term only. * No person who has served two (2) successive complete terms shall be eligible for reappointment until the lapse of one (1) year. * Appointment to fill up an expired term is not to be considered as a complete term. **Powers and Functions of the Board:** * To prescribe and adopt the rules and regulations necessary for carrying out the provisions of Philippine Accountancy Act of 2004 (the Act) * To supervise the registration, licensure and practice of accountancy in the Philippines; * To administer oaths * To issue, suspend, revoke, reinstate the Certificate of Registration for the practice of the accountancy profession * To adopt an official seal of the Board * To prescribe and/or adopt a Code of Ethics for the practice of accountancy * To monitor the conditions affecting the practice of accountancy * To conduct an oversight into the quality of audits of financial statements though a review of the quality control measures instituted by auditors * To investigate violations of the Act * To issue a cease or desist order to any person, associations, partnership or corporation engaged in violation of any provision of the Act * To punish for contempt of the Board * To prepare the syllabi for the licensure examination subjects, administer the conduct of the Licensure Exam for CPAs (LECPA) and administer, correct and release the result of the licensure examinations * To ensure the coordination with the Commission of the Higher Education (CHED) or other authorized government offices * To encourage cordial relations among accountants. * To protect the Certificate of Certified Public Accountant granted by the Republic of the Philippines. * To exercise such other powers as may be provided by law. ### The Philippine Institute of Certified Public Accountants (PICPA) * **Section 30 of RA 9298** states that all registered certified public accountants whose names appear in the roster of certified public accountants shall be united and integrated through their membership in a one only registered and accredited national professional organization of registered and licensed certified public accountants, which shall be registered with the Securities and Exchange Commission as a nonprofit corporation and recognized by the Board, subject to the approval by the Commission * The members in the said integrated and accredited national professional organization shall receive benefits and privileges appurtenant thereto upon payment of a required fees and dues; membership in the integrated organization shall not be a bar to membership in any other association of certified public accountants. * Founded in 1929, the **Philippine Institute of Certified Accountants or PICPA** is the accredited professional organization (APO) of CPAs by the **Professional Regulation Commission (PRC)**. * The group set forth the following objectives: * To promote and maintain high professional and ethical standards among accountants. * To advance the science of accounting. * To develop and improve accountancy education. * To encourage cordial relations among accountants. * To protect the Certificate of Certified Public Accountant granted by the Republic of the Philippines. The following are the four sectors of the accountancy profession: * Commerce and Industry * Public Practice * Government * Education/Academe The following are the four geographical groupings: * Luzon * Visayas * Mindanao * National Capital Region ### Accreditation to Practice Public Accountancy * Certified public accountants, firms and partnerships of certified public accountants, engaged in the practice of public accountancy, including partners and staff members thereof, shall register with the Commission and the Board, such registration to be renewed every three (3) years. * Single practitioners and partnerships for the practice of public accountancy shall be registered certified public accountants in the Philippines: * A certificate of accreditation shall be issued to certified public accountants in public practice only upon showing, in accordance with rules and regulations promulgated by the Board and approved by the Commission, that such registrant has acquired a minimum of three (3) years meaningful experience in any of the areas of public practice including taxation.