UNIVERSITY OF SAINT LOUIS

Tuguegarao City

SCHOOL OF ACCOUNTANCY, BUSINESS and HOSPITALITY

First Semester
Academic Year 2021-2022

ONLINE LEARNING MODULE

ACCT 1013- Conceptual Framework and Accounting Standards

Lesson 2: Standard Setting Body

REMINDERS:

 Lessons will be uploaded every Monday, and submission will be every Friday of the week.
 Comply with all requirements (written outputs, projects/performance tasks examinations and the like.)
 Turn in learning tasks on time to avoid backlogs.
 For this week, the following shall be your guide for the different lessons and tasks that you need to
accomplish. Be patient, read them carefully before proceeding to the tasks expected of you.

Date Topics Activities or Tasks

August 23 A. Standard setting process in the Read Lessons from books and handouts
August 24 International Setting Online discussion
August 25 B. Standard setting process in the Accomplish the drills and exercises
Philippines
August 27 Submission of Assessments
Participate in the scheduled Quiz
Learning 1. Discuss the process of development of standards and the organizations involved
Outcomes: in its promulgation.

2. Elaborate the standard setting process in the international and Philippine setting.

LEARNING CONTENT

For the start of our lesson this week, we are going to look into one of the important
organization in the standard setting process – the IFRS Foundation. According to their website, this
is a brief description of their organization.

The IFRS Foundation is a not-for-profit, public interest organization established to develop a

single set of high-quality, understandable, enforceable and globally accepted accounting
standards—IFRS Standards—and to promote and facilitate adoption of the standards. IFRS
Standards are set by the IFRS Foundation’s standard-setting body, the International Accounting
Standards Board.

Accounting standards are a set of principles companies follow when they prepare and publish
their financial statements, providing a standardised way of describing the company’s financial

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performance. Publicly accountable companies (those listed on public stock exchanges) and financial
institutions are legally required to publish their financial reports in accordance with agreed accounting
standards.

MISSION STATEMENT OF THE IFRS FOUNDATION

Our mission is to develop IFRS Standards that bring transparency, accountability and efficiency to
financial markets around the world. Our work serves the public interest by fostering trust, growth and
long-term financial stability in the global economy.

 IFRS Standards bring transparency by enhancing the international comparability and quality of
financial information, enabling investors and other market participants to make informed economic
decisions.
 IFRS Standards strengthen accountability by reducing the information gap between the providers of
capital and the people to whom they have entrusted their money. Our Standards provide information
needed to hold management to account. As a source of globally comparable information, IFRS
Standards are also of vital importance to regulators around the world.
 IFRS Standards contribute to economic efficiency by helping investors to identify opportunities and
risks across the world, thus improving capital allocation. Use of a single, trusted accounting language
lowers the cost of capital and reduces international reporting costs for businesses.

IFRS Standards are currently required in more than 140 jurisdictions and permitted in many more.

The IFRS Foundation's three-tier structure

The IFRS Foundation has a three-tier governance structure, based on an independent standard-
setting Board of experts (International Accounting Standards Board), governed and overseen by
Trustees from around the world (IFRS Foundation Trustees) who in turn are accountable to a
monitoring board of public authorities (IFRS Foundation Monitoring Board).

The IFRS Advisory Council provides advice and counsel to the Trustees and the Board, whilst the
Board also consults extensively with a range of other standing advisory bodies and consultative
groups.

THE CONSULTATIVE BODIES OF THE IFRS FOUNDATION

Developing accounting standards for the global economy is a collaborative exercise founded on
transparency, full and fair consultation, and accountability.

The Due Process Handbook of the IFRS Foundation —the blueprint for the standard-setting
process, which ensures that IFRS Standards are developed free from undue influence—requires
that the Board consider the perspectives of those affected by IFRS Standards globally. To enable
us to consult widely, we work closely with a wide network of advisory committees and bodies,
representing the many different stakeholder groups that have an interest in and are affected by
financial reporting. These groups and bodies are important channels for us to gather input on our

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work; the groups enable us to efficiently consult with interested parties from a range of backgrounds
and geographical regions.

Advisory bodies

Accounting Standards Advisory Forum (ASAF)

 Consists of national standard-setters and regional standard –setting bodies that contributes to the
development of globally accepted and high-quality accounting standards

IFRS Advisory Council (Advisory Council)

 formal advisory body to the Trustees of the IFRS Foundation and the International Accounting
Standards Board (Board). It consists of a wide range of representatives, comprising individuals and
organisations with an interest in international financial reporting.

Standing consultative groups

Other Advisory boards

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 THE STANDARD SETTING PROCESS

The Standard Setting Process Adopted by the International Accounting Standards Board (IASB)

The IASB follows an International consultation process, the “due process” in developing the
International Financial Reporting Standards which involves interested individuals and
organizations around the world.

The due process comprises the following stages:

1. Setting the agenda

2. Planning the project
3. Developing and publishing discussion paper
4. Developing and publishing the exposure draft
5. Developing and publishing the standard
6. After the standard is issued

SETTING THE AGENDA

In addressing users’ demand for better quality information, the IASB identifies an issue item to its
agenda after considering the following:

1. Relevance to users of the information and the reliability of information that could be provided
2. Existing guidance available
3. The possibility of increasing convergence
4. The quality of IFRS to be developed
5. Resource constraints

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PLANNING THE PROJECT

The IASB raises and discusses potential agenda items with other standard setters and interested
parties, the IFRS advisory council and the IFRS interpretations committee, and staff research. A
working group is then established. When considering whether to add an item to its active agenda
the IASB may determine that it meets the criteria to be included in the annual improvement process.
The IASB assesses the issue against criteria such as

1. Clarifying
2. Correcting
3. Well defined and sufficiently narrow in scope that the consequences of the proposed change have
been considered
4. Completed in a timely basis
5. All criteria must be met to qualify as an item to be included in the annual improvement process

DEVELOPING AND PUBLISHING THE DISCUSSION PAPER

Discussion of a working group is contained in a discussion paper that includes comprehensive

overview of the issue, possible approaches in addressing the issue, the preliminary view of its
authors or the IASB and an invitation to comment for usually 120 days. The issue being discussed
may result from a research project being carried by another standard setter or it may be an active
agenda carried out by the IASB. The decision of all technical issues takes place in public sessions
where question and answers are conducted

DEVELOPING AND PUBLISHING AN EXPOSURE DRAFT

The IASB considers comments received on the discussion papers, results and suggestions
of the working group arising from public educations sessions. An exposure draft is developed and
voted upon. The IASB normally allows a period of 120 days for comment of an exposure draft.
The project team summarizes and analyzes the comments received for the IABS’s deliberation.
The IASB is required to consult the IFRS advisory council and maintains contact with various
groups of constituents. The exposure draft is the IASB’s main vehicle to consult the interested
public.

DEVELOPING AND PUBLISHIING THE STANDARD

The IASB makes revisions on the draft after considering the comments on the exposure draft.
When deemed necessary, a second exposure draft is developed and published, following the same
process described above. Upon reaching conclusion on the issues covered in the exposure draft,
the pre-ballot IFRS is send to selected parties for review; after which, near final draft is posted on
the IASB’s website. Balloting, which is circularizing the near final reporting standard to the IASB’s
members requires individual review and approval of the draft the approved pronouncement is
ACCT 1013 – Conceptual Framework and Accounting Standards | 5
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nor transmitted in any form, in whole or in part, without expressed written permission.
posted to the IASB’s website for an initial period of about ten days, after which, the draft is freely
available online.

AFTER ISSUING THE STANDARD

After issuance of an IFRS, the IASB holds regular meetings with interested parties to address
some unanticipated issues relating to implementation. The IASB may initiate studies in the light of
its review of the application of standard, changes in the financial reporting environment and
regulatory requirements and comments received about the quality of the IFR. Such studies may
result in items being added to the IASB’s agenda.

THE STANDARD SETTING IN THE PHILIPPINES

Before 1981 – the Philippines do not have a formal process for the development of accounting
practices. Accounting principles then were patterned in actual business practices, mostly based on
the accounting practices and principles developed by the United States of America

Late 1981 – the Philippine Institute of Certified Public Accountants, the accredited professional
organization of Certified Public Accountants in the Philippines, organized the Accounting
Standards Council (ASC) that formalized the standard setting process in the country. The main
function of ASC was to establish and improve Generally Accepted Accounting Principles in the
Philippines. The accounting standards developed by the ASC were known as the Statements of
Financial Accounting Standards (SFAS). These standards were based on existing practices,
research and studies undertaken by IFRS Advisory council, the statements of the IASB committee,
and Financial Accounting Standards Board of the United States of America.

The ASC was composed of eight members, representing the following organizations; PICPA,
Securities and Exchange Commission, Bangko Sentral ng Pilipinas, Board of Accountancy and
Financial Executives of the Philippines

1997 – 2000 – the Philippine transition to the IAS and IFRs was gradually made, the ASC
developed Accounting standards already based in the International Accounting Standards

2001 – the ASC adopted most of the standards developed by IASC

2005 – the ASC adopted in full the International Accounting Standards

2006 - The Board of Accountancy regulates the practice of accountancy in the Philippines,
established the Financial Reporting Standards Council (FRSC) to replace and take over the
functions of ASC. The FRSC should be composed of a chairman and 14 members representing the
following organizations: Board of Accountancy, SEC, BSP, BIR, COA, Financial Executives of the
Philippines and accredited PICPA members. The FRSC formed the Philippine Interpretations
Committee (PIC) to provide the council assistance in establishing and improving Financial Reporting
Standards in the Philippines. The PIC issues implementation guidelines on PFRS.

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The PFRS consists of:

1. PFRS adopted from the IFRS

2. PAS adopted from the IAS
3. Philippine Interpretations which are adopted from IFRIC and the SIC and the interpretations of the
PIC

The PFRS set out the recognition, measurement, presentation and disclosure requirements
dealing with transactions and events that are important in general purpose financial transactions.
They may also set out such requirements for transaction and events that arise mainly in specific
industries. The PFRSs are developed through a due process that involves members of PICPA,
financial executives, regulatory authorities, members of the academe and other interested
individuals. Due process normally but not necessarily involves the following steps:

1. Consideration of the pronouncement of IASB

2. Formation of a task force, when deemed necessary, to give advice to the FRSC
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
4. Consideration of all comments received within the comment period and when appropriate, preparing
a comment letter to the IASB
5. Approval of a standard or an interpretation by a majority of the FRSC members

To this date, the FRSC is continuously monitoring the revisions of and the amendments to the IFRSs to
ensure that improvements in the IFRSs are being made effective in the Philippines. Other that the FRSC,
the Board of Accountancy monitors the implementation of the PFRS.

REFERENCES:

Textbook:
Empleo, P. and Robles, N. (2019). The Philippine Financial Reporting Reporting (Conceptual Framework and
Accounting Standards). Mandaluyong City: Millennium Books, Inc.
Millan, Z. (2020). Conceptual Framework & Accounting Standards. 4F Pelizloy Centrum, Lower Session
Road, Baguio City. Bandolin Enterprise Publishing and Printing.

References:
1. Cabrera, E, et al. (2018). Conceptual Framework and Accounting Standards. Manila: GIC
Enterprises
2. Valix, C, et al. (2019). Conceptual framework and accounting standards. Manila: GIC Enterprises
& Co., Inc.
3. Ballada, W. (2019). Basic Financial Accounting and Reporting. Manila: DomDane Publishers.
4. Cabrera, E.(2017) Fundamentals of Accounting Volume I, GIC Enterprises & Co., Inc., Manila
5. Financial Reporting Standard Council (2017). Philippine Financial Reporting Standards. PICPA
6. Valencia, E. and Roxas, G. (2017), Basic Accounting. Baguio City: Valencia Educational Supply
7. Valix, C. and Peralta, J. (2018). Financial Accounting Volume I. GIC Enterprises & Co., Inc., Manila

Electronic Resource:
1. Introduction to accounting, https://courses.lumenlearning.com/sac-finaccounting/chapter/chapter-
1/
ACCT 1013 – Conceptual Framework and Accounting Standards | 7
This document is a property of University of Saint Louis Tuguegarao. It must not be reproduced
nor transmitted in any form, in whole or in part, without expressed written permission.
 2. Accounting Basic https://www.accountingcoach.com/accounting-basics/explanation
3. Basic Accounting. https://www.bizfilings.com/toolkit/research-topics/finance/basic-accounting/the-
accounting-system-and-accounting-basics
4. Basic accounting and bookkeeping lessons, http://www.moneyinstructor.com/accounting.asp
5. Financial Accounting. https://www.accountingcoach.com/financial-accounting/explanation
6. Accounting Tutorials for Beginners. https://www.guru99.com/accounting.html
7. International Financial Reporting Standards. www.ifrs.org
8. International Accounting Standards. www.iasplus.com/en/standards/ias

ASSESSMENTS:

PARTICIPATION (for recitation purposes)

DRILLS/ ACTIVITIES/ APPLICATION

EVALUATION (Quiz)

ASSIGNMENT

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nor transmitted in any form, in whole or in part, without expressed written permission.