THE ACCOUNTANCY PROFESSION

Conceptual Framework and

Accounting Standards 2024 Edition

Conrado T. Valix
Christian Aris M. Valix
 ACCOUNTING STANDARDS COUNCIL
“Accounting is a service activity. The accounting function
is to provide quantitive information, primarily financial in
nature, about economic entities, that is intended to be
useful in making economic decision.”
 AMERICAN INSTITUTE OF CERTIFIED
PUBLIC ACCOUNTANTS
“Accounting is the art of recording, classifying and
summarizing in a significant manner and in terms of
money, transactions and events which are in part at least of
a financial character and interpreting the results thereof.”
AMERICAN ACCOUNTING ASSOCIATION
“Accounting is the process of identifying, measuring nd
communicating economic information to permit informed
judgment and decision by users of the information.”
 Accounting as an information system
• measures business activities, processes information into
reports and communicates the reports to decision makers
• financial reports - the documents that report financial
information about an entity to decision makers
The definition that has stood the test of time is the definition
given by the American Accounting Association.

The definition states that accounting has a number of

components, namely:

a. Identifying as the analytical component.

b. Measuring as the technical component.
c. Communicating as the formal component.
 IDENTIFYING
• Is the recognition or non recognition of business
activities as “accountable” events. (Not all business activities are
accountable)

• Economic Activities of an entity, referred to as

transactions can be classified into two, namely: External
and Internal Transactions.
 MEASURING
• Is the accounting process of assigning of peso amounts
to the accountable economic transactions and events.

• The measurement basis are historical cost and current

value.
 COMMUNICATING
• Is the process of preparing and distributing accounting
reports to potential users of accounting information.

• The communicating process is the reason why accounting

has been called the “universal language of business”.

• Implicit in the communication process are the recording,

classifying and summarizing aspects of accounting.
 OVERALL OBJECTIVE
• provide quantitative financial information about a business
that is useful to statement users particularly owners and
creditors in making economic decisions
• decision-usefulness
 REPUBLIC ACT NO. 9298
• law regulating the practice of accountancy in the
Philippines
• “Philippine Accountancy Act of 2004”
• developed as a profession attaining a status equivalent to
that of law and medicine
• must finish a degree in Bachelor of Science in
Accountancy and pass a very difficult government
examination given by the Board of Accountancy
 BOARD OF ACCOUNTANCY
• body authorized by law to promulgate rules and
regulations affecting the practice of the accountancy
profession in the Philippines
• responsible for preparing and grading the Philippine CPA
examination
 CPA Examination
• computer-based examination
• offered twice a year - May and October
• in authorized testing centers around the country
 Limitation of the practice of public
accountancy
• registered CPA in the Philippines
• certificate of accreditation - in accordance with rules
and regulations promulgated by the BoA and approved by
Professional Regulation Commission (PRC)
• minimum of three years of meaningful experience in any
of the areas of public practice
• single practitioners and partnerships
 Accreditation to practice public
accountancy
• required to register with BoA and PRC for the practice of
public accountancy
• upon favorable recommendation of the BoA to the PRC,
PRC shall issue the Certificate of Registration to practice
valid for 3 years and renewable every 3 years upon
payment of fees
 PUBLIC ACCOUNTING
• composed of individual practitioners, small accounting
firms and large multinational organizations that render
independent and expert financial services to the public
• Auditing, Taxation, Management Advisory Services
 AUDITING
• traditionally the primary service offered by most public
accounting practitioners
• External auditing - examination of financial statements by
independent CPA for the purpose of expressing an
opinion as to the fairness with which the financial
statements are prepared
– attest function of independent CPAs
 TAXATION
• includes the preparation of annual income tax returns and
determination of tax consequences of certain proposed
business endeavors
• familiar and updated
 MANAGEMENT ADVISORY SERVICES
• services to clients on matters of accounting, finance,
business policies, organization procedures, product costs,
distribution and many other phases
– Advice on installation of computer system
– Quality control
– Budgeting
– Advice on mergers and consolidations
 PRIVATE ACCOUNTING
• includes maintaining the records, producing the financial
reports, preparing the budgets and controlling and
allocating the resources of the entity
• Controller - highest accounting officer in an entity
• Private accountant - assist the management in planning
and controlling the operations
– determination of various taxes the entity is obliged to pay
 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
• custody and administration of public funds
• BIR, CoA, DBM, SEC, BSP
 CONTINUING PROFESSIONAL
DEVELOPMENT (CPD)
• Republic Act No. 10912 - law mandating and strenthening
the CPD program for all regulated professions, including
accountancy profession
• refers to the inculcation and acquisition of advanced
knowledge, skill, proficiency, and ethical and moral values
after the initial registration of the CPA for assimilation into
professional practice and lifelong learning
• raises and enhances the technical skill and competence
of the CPA
 CONTINUING PROFESSIONAL
DEVELOPMENT (CPD)
• All CPA shall abide
• promulgated by the BoA subject to the approval of the
PRC, in coordination with the accredited national
professional organization of CPA or any duly accredited
educational institutions
 CPD credit units
• refer to the CPD credit hours required for the renewal of
CPA license and accreditation of a CPA to practice the
accountancy profession every three years
• All, regardless of area or sector of practice shall be
required to comply with 120 CPD credit units in a
compliance period of three years.
• 2017 - 80 CPD units, 2018 - 100 CPD units, 2019 - 120
CPD units
 CPD credit units
• Excess credit units earned shall not be carried over to the
next three-year period, except credit units earned for
masteral and doctoral degrees
• mandatory
• required for the renewal of CPA license and accreditation
of CPA to practice the accountancy profession
 Exemption from CPD
• permanently exempted upon reaching the age of 65
years old
• applies only to the renewal of CPA license and not for the
purpose of accreditation to practice the accountancy
profession
 Accounting vs. Auditing
Accounting Auditing
Embraces auditing Area of accounting specialization
Constructive in nature Analytical
Ceases when financial statements are Work begins after financial statements
already prepared are prepared

Auditor - examines the FS to ascertain

whether they are in conformity with
generally accepted accounting
principles
 Accounting vs. Bookkeeping
Accounting Bookkeeping
conceptual procedural - development
and maintenance of
accounting records
“why” “how”
 Accounting vs. Accountancy
Accounting Accountancy
in reference only to a profession of accounting
particular field of practice
accountancy
Financial Acounting vs. Managerial Accounting
Financial Accounting Managerial Accounting

concerned with the recording of business accumulation and preparation of financial

transactions and the eventual preparation of reports for internal users only
FS

focuses on general purpose reports known

as FS intended for internal and external users

area of accounting that emphasizes reporting area of accounting that emphasizes

creditors and investors developing accounting information for use
within an entity
 GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
• on the basis of experience, reason, custom, usage and
practical necessity
• represent the rules, procedures, practice and standards
followed in the preparation and preparation of FS
• like laws that must be followed in financial reporting
 Purpose of accounting standards
• identify proper accounting practices for the preparation
and presentation of financial statements
• common understanding between preparers and users
of financial statements particularly the measurement of
assets and liabilities
• comparability and uniformity in financial statements based
on the same financial information
 Financial Reporting Standards Council
• The development of GAAP is formalized initially through
the creation of the Accounting Standards Council or ASC.
• FRSC now replaces ASC
• accounting standard setting body created by the PRC
upon recommendation of the BoA to assist the BoA in
carrying out its powers and funstions provided under R.A.
Act No. 9298.
• main function is to establish and improve accounting
standards that will be generally accepted in the
Philippines
 FRSC
• accounting standards - “highest hierarchy” of GAAP in the
Philippines
• approved statements are known as Philippine Accounting
Standards or PAS and Philippine Financial Reporting
Standards or PFRS
• composed of 16 members with a Chairman(senior accounting
practitioner) and 15 representatives
• Board of Accountancy (BOA), Securities and Exchange Commission (SEC), Bangko
Sentral ng Pilipinas (BSP), Bureau of Internal Revenue (BIR), Commission on Audit
(COA), Insurance Commission (IC), Financial Executives Institute of the Philippines
(FINEX), 2 Public Practice, 2 Commerce and Industry, 2 Academe, 2 Government
Practice.
 FRSC
• Chairman and memebers - term of 3 years renewable for
another term
 Philippine Interpretations Committee
• formed by the FRSC in August 2006 and has replaced the
Interpretations Committee or IC formed by the ASC in
May 2000
• role is to prepare interpretations of PFRS for approval by
the FRSC and to provide timely guidance on financial
reporting issues not specifically addressed in current
PFRS
• authoritative guidance on issues that are likely to
receive divergent or unacceptable treatment
 Philippine Interpretations Committee
• the counterpart in the UK is the International Financial
Reporting Interpretations Committee or IFRIC
International Accounting Standards Committee
• independent private sector body, with the objective of
achieving uniformity in the accounting principles for
financial reporting around the world
• formed in June 1973
• Objectives
– To formulate and publish in the public interest accounting
standards to be observed in the presentation of financial
statements and to promote their worldwide acceptance and
observance
– To work generally for the improvement and harmonization of
regulations, accounting standards and procedures relating to
the presentation of FS
 International Accounting Standards Board
• it now replaces International Accounting Standards
Committee or IASC
• publishes standards in a series of pronouncements called
International Financial Reporting Standards or IFRS
• pronouncements continue to be designated as
International Accounting Standards or IAS
 Philippine Financial Reporting Standards
• PFRS which correspond to IFRS, numbered as their
counterpart in IFRS
• Philippine Accounting Standards which correspond to
IAS, numbered as their counterpart in IAS
• Philippine Interpretations - Interpretations of the IFRIC
and the Standing Interpretations Committee, and
Interpretations developed by the Philippine Interpretations
Committee