Far notes to remember:
*After a standard was approved, it is continually being reviewed for any necessary modification. The
task of reviewing the standard to see if modification is necessary is given to the FRSC.
*The primary users of GPFS are external users. There is no requirement that the GPFS are prepared by
CPAs. Financial accounting is an information system designed to provide information primarily to
external users.
*Republic Act No. 9298 is the law regulating the practice of accountancy in the Philippines. This law is
known as the "Philippine Accountancy Act of 2004".
*In providing information to users, an entity preparing financial statements should apply the costbenefit principle or consideration.
*All the financial statements are interrelated to one another.
*The information in financial statements is summarized and classified to help meet users' needs.
*The information in financial statements is expressed in units of money. Changes in purchasing power is
ignored under the monetary assumption.
*Subscription of the entity's own equity instrument is an event other than transfer.
*PIC members are appointed by FRSC since the creator of the former is the latter.
*To qualify as "generally accepted," an accounting principle must receive substantial authoritative
support.
*IFRIC consider issuing an Interpretation on the following: one. Newly identified financial reporting
issues not specifically addressed in IFRSs. 2. Issues where unsatisfactory or conflicting interpretations
have developed, or seem likely to develop.
*General purpose financial statements are those statements that cater to the common needs of a wide
range of external users.
*The practice of accountancy in the Philippines is regulated under R.A. 9298.
*PFRS sets guidelines on how to deal with the external reports of a company. It should be in accordance
with GAAP.
*Charities and religious organizations are outside the scope of PFRS since they are non-profit oriented
entities.
*PFRSs are principle-based rather than rule based.
*Bold and plain type paragraphs in a standard are with equal authority. Plain type indicates the
supporting principles of the standard.
*FRSC was created by BOA under the supervision of PRC. Its main function is to establish generally
accepted accounting standards in the Philippines. Its Chairman and members of the FRSC are appointed
by PRC upon recommendation of BOA.
*External events other than transfers are changes in economic resources by actions of other entities
that do not involve transfers of enterprise resources and obligations.
*Casualty are sudden, substantial, unanticipated reductions in enterprise resources not caused by other
entities.
*The accounting process of assigning numbers, commonly in monetary terms, to the economic
transactions and events is referred to as measuring.
*The following bodies is responsible for reviewing accounting issues that are likely to receive divergent
or unacceptable treatment in the absence of authoritative guidance, with a view to reaching consensus
as to the appropriate accounting treatment: INTERNATIONAL SETTING: International Financial Reporting
Interpretations Committee (IFRIC). LOCAL SETTING: Philippine Interpretations Committee (PIC).
*PFRSs are developed through a due process that involves accountants and various interested parties
and individuals.
*Qualitative information is found not only on the notes to the financial statements but also in the other
parts of the financial statements.
*Accounting is considered an art because the results can be interpreted later on.
*Accounting is considered a science because it is supported by an organized body of knowledge.
*Not all quantitative information is financial in nature.
*The accounting process of assigning peso amounts or numbers to relevant objects and events is known
as measurement.
*Government accounting encompasses the process of analyzing, classifying, summarizing and
communicating all transactions involving the receipt and disposition of government funds and property
and interpreting the results thereof.
*The basic purpose of accounting is to provide quantitative financial information about economic
activities intended to be useful in making economic decisions.
*Interpretations of PFRSs are intended to give authoritative guidance on issues that are likely to receive
divergent or unacceptable treatment, in the absence of such guidance.
*Standards approved by FRSC include paragraphs in bold type and plain type, which have equal
authority.
*Residual equity theory assumes common shareholders to be the real owners of a business. To common
shareholders, preferred stock is a liability rather than part of equity. After subtracting preferred shares,
only common shares remain as the residual equity.
*Accounting concepts generally needs to adapt to changing environment. This is one of the reasons why
standards are changed or amended.
*The main purpose of IASB is to develop a single set of high quality IFRS. Their vision is to have a uniform
accounting standard across the globe.
* due process of standard setting.
STEP 1: Consideration of pronouncements of the IASB.
STEP 2: Formation of a task force, when deemed necessary, to give advice to FRSC.
STEP 3: 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.
STEP 4: Consideration of all comments received within the comment period and, when appropriate,
preparing a comment letter to the IASB.
STEP 5: Approval of a standard or an interpretation by a majority of the FRSC members.
*The end product of financial accounting is the preparation of general purpose financial statements
which cater the general information needs of various users.
*Financial accounting’s main concern is the objectivity or reliability of financial information since the
primary users of the reports are external users.
*Time orientation of financial accounting focuses on past or historical information.
*Financial accounting is concerned with income determination and asset valuation through preparation
of income statement and balance sheet, respectively.
*The rule of local standards, laws and regulations shall prevail in the event of conflict between the PFRSs
and the local standards.
*The pronouncements of FRSC are called PFRS, collectively known as:
(a) PFRS – corresponding to IFRS.
(b) PAS – corresponding to IAS.
(c) Philippine Interpretations – corresponding to interpretations issued by IFRIC and SIC of IASC and
interpretations issued by PIC.
*PIC members are appointed by FRSC.
*All sectors of the accountancy profession are represented in FRSC and the council maintains an equal
representation from all accountancy sectors.
*FRSC members render services on a part-time basis and do not receive compensation.
*The accounting objective is neither proper income determination nor proper valuation of assets but
the custody and administration of funds. The objective is directed toward cash flows exemplified by the
formula "cash inflows minus cash outflows equals fund". Government accounting and fiduciary
accounting are examples of the application of this concept.
*FRSC is the successor of ASC. Part of the member of FRSC is a representative from BIR which is not
represented in ASC.
*The current standard setting body internationally is FRSC.
*The main purpose of IASB is to develop a single set of high quality standards with a vision to have a
uniform accounting standards across the globe which reduce possible number of accounting differences.
*External or independent auditor’s primary responsibility is confined in the expression of opinion as to
the fairness of financial statements, in all material respects. This represents the “ATTEST FUNCTION” of
CPAs.
*remember:
I – There are items presented in the financial statements that didn’t come from the entity’s accounting
records.
II – Both financial and managerial accounting are considered as science and art at the same time.
III – Both the decisions of management and external users are geared to the future since we cannot
change what happened in the past.
V – In making economic decisions, both quantitative and qualitative information are considered.
VIII - Financial statements are not only one source of information needed by users to make rational
economic decisions.
*The third step in the due process of standard setting is the issuance, for comment, of an exposure draft
approved by a majority of the FRSC members. The comment period will be at least 60 days, unless a
shorter period (not less than 30 days) is considered appropriate by the FRSC.
*In current practice, since the word accounting is broad, it provides not only quantitative information
but also qualitative information that is useful in making economic decisions.
*BOA shall be composed of a chairman and six members. The vice-chairman is included in the
mentioned number of members.
*Any member of the ASC shall be allowed to be appointed to the FRSC.
*Fiduciary accounting involves handling of accounts managed by a person entrusted with the custody
and management of property of or for the benefit of another person.
*The current standard setting body internationally is FRSC.
*PFRSs are principle-based rather than rule based. The standard allows departure but necessary
disclosures are to be made for such. (This is in relation to the provision of PAS 1).
*PFRSs apply to all profit-oriented entities preparing general purpose financial statements. This is
actually regardless of ownership as long as the entity’s objective is to earn profit.
*No corporation form is allowed to be registered for the practice of public accountancy.
*All firms practicing public accountancy in the Philippines must be first registered, registration requires 3
years of meaningful experience.
*The accounting process of analyzing business activities as to whether or not they will be recognized in
the books is identifying.
*Recognition refers to the incorporation of an item in the financial statements.
*Sociological and psychological matters are outside the scope of accounting. Accounting deals with
matters involving financial impact.
*Based on the definition of financial accounting, accounting provides quantitative information, primarily
financial in nature.
*Vandalism committed by the entity's employees is considered as external event other than transfer.
*Casualty are sudden, substantial, unanticipated reductions in enterprise resources not caused by other
entities.
*Generally accepted accounting principles derive their credibility and authority from general recognition
and acceptance by the accountancy profession and this is the reason why they are GENERALLY
ACCEPTED.
*PFRS are generally accepted principles patterned from economic issues.
*PFRSs apply to all profit-oriented entities preparing general purpose financial statements.