Department of Accountancy Introduction to Standards AC 1101 Conceptual Frameworks and Accounting Standards Joemel D. Dakay, CPA For the exclusive use of the University of San Carlos - Department of Accountancy. Unauthorized use, distribution, reproduction, etc. is strictly prohibited. International Accounting Standard Setting Bodies Who is responsible for the development of the international financial reporting standards (IFRS)? Structure of IFRS Foundation Monitoring Board Appoints Approve and oversee trustees Reports to Advises IFRS Foundation 22 trustees Appoint, oversee, raise funds IASB IFRS Interpretations Committee 14 members Issue interpretations on the application of IFRS and develop other minor amendments Maximum 16 members Set technical agenda; approve standards, exposure drafts, and interpretations Accounting Standard Advisory Forum (ASAF) IFRS Advisory Council Approximately 40 members Advise on agenda and priorities Working Groups For major agenda projects Provide standard setter input into technical projects International Standard Setting Bodies IFRS Foundation It is a not-for-profit international organization responsible for overseeing the work of the IASB, the structure and strategy. Monitoring Board It is a group of capital market authorities that provides formal link between the Trustees and public authorities in order to enhance the public accountability of the IFRs Foundation. IASB It is the independent standardsetting body of the IFRS Foundation responsible for the development and publication of the International Financial Reporting Standards (IFRS) and for approving interpretations of IFRS as developed by the IFRS Interpretations Committee. IFRS Interpretations Committee It is the interpretative body of IASB, which reviews the implementation issues. IFRS Advisory Council It provides advice and counsel to the Trustees and the Board, which the Board also consults extensively with a range of other standing advisory bodies and consultative groups. Accounting Standards Advisory Forum (ASAF) It provides an advisory forum in which members can constructively contribute towards the achievement of the IASB's goal of developing globally accepted high-quality accounting standards. Development of the Accounting Standard Is there a proper guideline followed by the IASB and IFRS Interpretations Committee? Development of the Accounting Standard The Due Process Handbook (August 2020) provides the full processes which helps the IASB and IFRS Interpretations Committee to follow a thorough, transparent, and participatory due process issuances of IFRS standards and interpretations. Development of the Accounting Standard What are the three steps followed by the DUE PROCESS in order to carry out the mission of the IASB? Due Process Principles Transparency Full and Fair Consultation Accountability Development of the Accounting Standard What are the mandatory due process steps that must be followed to protect the integrity of the standard - setting process? Mandatory Due Process Steps Debating any proposals in one or more public meetings Exposing for public comment a draft of any proposed new Standard, proposed amendment to a Standard or proposed Interpretations - with minimum comment period Mandatory Due Process Steps Considering the timely manner for those comment letters received on the proposals Considering whether the proposals should be exposed again Mandatory Due Process Steps Reporting to the Advisory Council on the technical program, major projects, project proposals, and work priorities Ratification of an interpretation by the IASB Development of the Accounting Standard What are the basic steps in developing an accounting standard? Basic Steps in Developing Accounting Standards Step 1. Agenda Consultation The IASB is required to undertake public consultation on its work program every five years by way of a public Request for Information. The IASB normally allows a minimum of 120 days to comment on that work program. The primary objective is to seek formal public input on the strategic direction and balance of the IASB's work program, including the criteria for assessing projects that may be added to the IASB's standards level program. Step 2. Research Program Main Purpose - is to analyze possible financial reporting problems by collecting evidence on the nature and extent of the perceived shortcoming and assessing potential ways to improve financial reporting or to remedy a deficiency. Main Output - Discussion Paper and Research Paper. It is a comprehensive review of the issue, possible approaches to address the issue, the preliminary views of its authors or the IASB, and an invitation to comment. The IASB normally allows 120 days for the comment on a Discussion Paper, a research paper, and a Request for Information; and 60 days to comment for other request of information. Basic Steps in Developing Accounting Standards Step 3. Standard Setting Program If the Board decides to amend the standard or issue a new one, the board will review the discussion paper and publish an exposure draft for public consultation The IASB normally allows 120 days to comment on Exposure Drafts. Criteria for New Standards or Major Amendments: Whether there is a deficiency in the way particular types of transactions or activities are reported in financial reports The importance of the matter to those who use financial reports The types of entities likely to be affected by any proposals, including whether the matter is more prevalent in some jurisdiction than others How pervasive or acute a particular financial reporting issues is likely to be for entities Basic Steps in Developing Accounting Standards Step 4. Maintenance Program The process includes consulting on the implementation of a new or amended Standard to identify any implementation problems that may need to be addressed. If issues arise, the IFRS Interpretations Committee may decide to create an IFRIC Interpretations of the Standards or recommend a narrow scope amendment. Post Implementation Review (PIR) is also part of this step. Development of the Accounting Standard What is the minimum voting requirements for all important IASB decisions? MINIMUM REQUIREMENTS Publications Request for Information; Research Paper Simple majority in a public meeting attended by at least 60% of the IASB members Discussion Paper Simple majority, by way of ballot Exposure Draft; Proposed IFRS for SMEs; IFRS; IFRS for SMEs Super majority, by way of ballot Practice Guidance Super majority, by way of ballot MINIMUM REQUIREMENTS Publications Conceptual Framework Super majority, by way of ballot Draft Interpretations No more than 4 members of the Interpretations Committee object, by way of ballot Interpretations No more than 4 members of the Interpretations Committee object, by way of ballot Ratification by the IASB requires a supermajority, in a public meeting MINIMUM REQUIREMENTS Publications Proposed IFRS Taxonomy Update document Super majority, by way of ballot IFRS Taxonomy Update document Super majority, by way of ballot Development of the Accounting Standard What is supermajority? Development of the Accounting Standard Supermajority requires 8 IASB members (by ballot) in favor of the publication of a document if it has 13, or fewer appointed members. However, if the IASB has 14 appointed members, the requirement for supermajority is 9 members (by ballot). Abstaining is equivalent to voting against a proposal. Development of the Accounting Standard What are the mandatory parts of an Accounting Standard? Mandatory Parts of an Accounting Standard The principles and the related application guidance The defined terms The effective date and transition paragraphs Additional Materials A table of contents An Introduction The basis of conclusion Dissenting Opinions Development of the Accounting Standard What are the different standards adopted in the Philippines? Philippine Financial Reporting Standards (PFRS) The PFRS collectively include all of the following accounting standards: Philippine Financial Reporting Standards (PFRS) which corresponds to international Financial Reporting Standards (IFRS). The PFRS are numbered the same way as the IFRS (16 IFRS). Philippine Accounting Standards (PAS) which corresponds to International Accounting Standards (IAS). The PAS is numbered the same way as the IAS (25 IAS). Philippine Interpretations which correspond to interpretations of the IFRIC (15 IFRIC) and the Standing Interpretations Committee (SIC) (5 SIC), and Interpretations developed by the PIC. Development of the Accounting Standard Why do we have two different standards, namely IFRS and IAS? accounting Accounting Standards The IAS were published by the International Accounting Standards Committee (IASC) between 1973 and 2001. In 2001, the organization was restructured to become the IASB, it was agreed to adopt the set of standards that were issued by the IASC, but any standards to be published after that would follow a series known as the IFRS. Accounting Standards The principles of the IFRS takes precedence if there's contradiction with those of the IAS, thus resulting for some of the IAS principles being dropped. For example, IAS 3 is Consolidated Financial Statement but this is no longer part of the current accounting standards because it is superseded or replaced by IAS 27 and IAS 28. Philippine Accounting Standard Setting Bodies Is there a law governing the Accountancy Practice in the Philippines? RA 9298 Yes. The law governing the practice of Accountancy in the Philippines is the Philippine Accountancy Act 2004 (RA 9298). The PRC-BOA is tasked to adopt the rules and regulations necessary to carryout the provisions of the law. Philippine Accounting Standard Setting Bodies What is the setup of the accounting governing bodies in the Philippines? PFRS In July 2005, the Philippines adopted the Philippine Financial Reporting Standards which are fully converged with the International Reporting Standards. Professional Regulatory Board of Accountancy (PRC-BOA) The two important functions of the PRC are: Conducts and administers licensure examination to aspiring professionals and Regulates and supervises the practice of the profession. The Board of Accountancy is a leg of PRC that regulates the accountancy profession. Financial and Sustainability Reporting Standards Council (FSRSC) The successor of the Accounting Standards Council (ASC) whose main function is to establish GAAP in the Philippines. FSRSC was established by the Board of Accountancy (BOA) in 2006 under the Implementing Rules and Regulations of the Philippine Accountancy Act of 2004 (RA 9298). PRC BOA SEC, BIR, BSP, IC, COA, CDA, ERC Accountancy Profession PICPA Publiclylisted Companies ACPACI Accountancy Students, JPIA ACPAPP nACPAE FSRSC, AASC, PIC, IAS GACPA CHED, RQAT, Schools, Colleges and Universities offering Accountancy, CPA Providers International Accounting Firms, IFAC, CAPA, AFA FINEX, MAP, PAMA Financial and Sustainability Reporting Standards Council (FSRSC) Furthermore, FSRSC monitors the technical activities of the IASB and invites comments on exposure drafts of the proposed IFRS and when it is finalized it will be adopted as PFRS. The FSRSC also monitors the issuances of the IFRIC which adopts it as Philippine Interpretations. The adopted PFRs and Philippine Interpretations will be submitted to the BOA and PRC. Financial and Sustainability Reporting Standards Council 16 members 1 Chairman and 15 Representaives 15 Representatives are coming from: BOA SEC BSP BIR COA FINEX -1 -1 -1 -1 -1 -1 IC -1 PICPA -Public Practice -2 PICPA - Commerce and Industry - 2 PICPA - Academe -2 PICPA - Government -2 The chairman and the members shall have a 3-year term renewable for another term. Philippine Interpretations Committee (PIC) PIC was formed by the FSRSC in August 2006 to assist the FSRSC in establishing and improving the financial reporting standards of the Philippines. Philippine Interpretations Committee (PIC) Main objectives: Principally, to issue implementation guidance on PAS, PFRS and related interpretations adopted by the FSRSC from accounting pronouncements issued by the IASB. To comment on exposure draft of proposed PFRS and other documents that may be issued for comment by the FSRSC. To comment on exposure draft of proposed accounting standards or proposed regulations with accounting relevance that may be issued by government agencies, such as SEC, BSP and IC. Philippine Interpretations Committee 15 members 9 Accounting Firms and 6 Other Representatives 6 Other Representatives are coming from: FINEX Academe SEC - 1 - 1 - 1 BSP Insurance Commission BOA - 1 - 1 - 1 Each member shall serve for 3 years and may be re-appointed subject to the approval of PIC members and FSRSC. Auditing and Assurance Standards Council (AASC) The AASC was created by PRC upon the recommendation of the BOA to assist the BOA in establishing and promulgating auditing standards in the Philippines. The AASC is mandated to make the International Standards and Practice Statements issued by the International Auditing and Assurance Standards Board (IAASB) the applicable standards and practice statements in the Philippines. Auditing and Assurance Standards Council (AASC) Furthermore, to facilitate its implementation and making the International Standards and Practice Statements in Philippine specific as “Philippine Standards and Practice Statements”. Each auditing standards adopted and its interpretations will be submitted to the PRC through BOA for approval after which the pronouncement will be published to the Official Gazette. Auditing and Assurance Standards Council 15 members 1 Chairman and 14 Representatives 14 Representatives are coming from: BOA SEC BSP COA -1 -1 - 1 -1 ACPAPP -1 PICPA - Public Practice -6 PICPA - Commerce and Industry - 1 PICPA - Education -1 PICPA - Government -1 Philippine Institute of Certified Public Accountants (PICPA) PICPA is the only accredited national organization of CPAs in the Philippines. Its primary function is to establish programs for the benefit and welfare of the CPAs, for the advancement of the profession and the attainment of other professional ends. PICPA It recognizes the four sectors by which a CPA may be practicing: ACPAPP ACPACI nACPAE GACPA Council Accreditation and Quality Control of Practicing CPAs Securities and Exchange Commission (SEC) Bangko Sentral ng Pilipinas (BSP) Insurance Commission (IC) Board of Accountancy (BOA) Continuing Professional Development What is CPD? CPD CPD is the Continuing Professional Development which refers to the inculcation of advanced knowledge, skills, and ethical values in a post-licensure specialization or an inter or multidisciplinary field of study, for assimilation into professional practice, self-directed research and/or life-long learner. Continuing Professional Development How many CPD units accounting profession? are required for the CPD UNITS The required CPD units for all CPAs, regardless of area/sector of practice is 120 units within a compliance period of 3 years. The required minimum units to be earned is 20 units from each of the two preceding years.” CPD UNITS Furthermore, a minimum of 40 units from the 120 units must be earned from the three thematic areas: a. Technical competence -minimum of 30 units b. Professional skills -minimum of 5 units c. Professional values, ethics, and attitudes -minimum of 5 units CPD UNITS The remaining 80 units of the 120 units are flexible CPD units, which are CPD learning activities that may be earned by spending training or seminar hours beyond the minimum competence areas. Reference: Amaya, R., Argawanon, C., Degollacion, M. III, and Lleve, A. (2022). Conceptual Framework and Accounting Standards Q&A 2022. Chronicle Publishing Co. Ltd. For the exclusive use of the University of San Carlos - Department of Accountancy. Unauthorized use, distribution, reproduction, etc. is strictly prohibited.
