The Environment of Financial Accounting and Reporting

The environment of
Financial Accounting and

Reporting
The Need to develop STANDARDS
 It helps accountants to meet the information demands of use by providing

guidelines and limits for financial reporting.
 Also, it improves the comparability of financial reports among different
companies.
Development and Sources of
Financial Reporting Standards
 International Accounting Standards Board, 2001 (formerly known as

International Accounting Standards Committee in 1973) – it was developed
to harmonize accounting standards among all nationals. Moreover, its
objective is to raise the quality and consistency of financial reporting and
to have a platform of high quality and improved standards.
 International Financial Reporting Standards (IFRS) and International
Accounting Standards (IAS)
Accounting Standard Setting in PH

Accounting
PICPA, 1981 Standards
Council (ASC)
Approved statement
In 2004, ASC was replaced by Financial - To formalize the
was called,
accounting standard-
Reporting Standards Council (FRSC) – “Statement of
setting function in the
Financial Accounting
created by the PRC upon Philippines.
Standards (SFAS)”
recommendation of the Board of
Accountancy.
SOURCES OF ACCOUNTING
STANDARDS
 A. International Accounting Standards Board (IASB) - produce the

International Financial Reporting Standards (IFRS) and International
Accounting Standards (IAS).
DIFFFERENCE?????
Issued before 2001 are Issued since 2001, are

called International called International
Accounting Standards TIMING Financial Reporting
(IAS) Standards (IFRS)
 B. Financial Reporting Standards Council (FRSC) - formerly the Accounting
Standards Council. Its objective was to assist the Board of Accountancy in
carrying out its powers and functions provided for in Article II, Section 9 of
Philippine Accountancy Act of 2004 (R.A 9298). In the same year,
Philippine Accounting Standard and Philippine Financial Reporting
Standards was issued.
 FRSC is composed of fifteen (15) members with a Chairman.
(a) Board of Accountancy 1
(b) Security and Exchange Commission 1
(c ) Bangko Sentral ng Pilipinas 1
(d) Bureau of Internal Revenue 1
(e) A major organization composed of prepares and users if FS 1
(f) Commission on Audit 1
(g) Accredited National Professional Organization of CPAS
- Public Practice 2
- Commerce or Industry 2
-Academe or Education 2
-Government 2
14
OTHER ORGANIZATION INFLUENCING FINANCIAL
AND REPORTING ACCOUNTING STANDARDS
A. Securities and Exchange Commission

They has the legal authority to prescribe accounting principles and
practices for usually all companies issuing publicly traded securities.
B. Philippine Institute of Certified Public Accountants
It is the forefront in the standard setting activities in the country.
C. Other Professional Associations
Financial Executives Institute (FINEX) and Institute of Management
Accountants (IMA)
D. Bureau of Internal Revenue
It administers the provisions of the Internal Revenue Code.
FINANCIAL REPORTING FRAMEWORK
 It is a set of accounting principles, standards, interpretations and

pronouncements that must be adopted in the preparation and submission
of the annual financial statements of a particular class of entities.
MAJOR CHALLENGES IN FINANCIAL
REPORTING ENVIRONMENT
A. IFRS/PFRS in a Political Environment

B. The Exception Gap
C. Financial Reporting Issues
1. Non-financial measurements
2. Forward-looking information
3. Soft Assets
4. Timeliness
D. The constraints on Useful Financial Reporting
1. Cost-Benefit Balancing
2. Balancing between Qualitative Characteristics
3. True and Fair View Presentation
Ethics in Accounting Environment
Ethics is a term refers to a code or moral system that provides criteria for
evaluating right and wrong.
The Code of Ethics promulgated by the Board of Accountancy provides
guidelines for practicing accountants.
The Role of External Auditors
 An External Auditor, a CPA is an INDEPENDENT professional who conducts

the audit in accordance with the Standards on Auditing.
 It makes no claim to the accuracy of the audited financial statement he
has audited, what he tries to achieve is reasonable assurance that there
are no material misstatements in those financial statements.
 Audit report contains the Audit Opinion as to the company’s compliance
to the IFRS/PFRS.

The Environment of Financial Accounting and Reporting

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The Environment of Financial Accounting and Reporting

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The environment of

Financial Accounting and

 It helps accountants to meet the information demands of use by providing

 International Accounting Standards Board, 2001 (formerly known as

 A. International Accounting Standards Board (IASB) - produce the

Issued before 2001 are Issued since 2001, are

A. Securities and Exchange Commission

 It is a set of accounting principles, standards, interpretations and

A. IFRS/PFRS in a Political Environment

 An External Auditor, a CPA is an INDEPENDENT professional who conducts

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