Quiz 1 & 2

International Accounting Standards Board (IASB)

Issues International Financial Reporting Standards (IFRSs).

IASB

The __ was formed to replace the IASC.

IASC

The accounting standards issued by the __ were adopted by the IASB.

Philippine Financial Reporting Standards

• Philippine Accounting Standards

• Philippine Financial Reporting Standards

• Philippine Interpretations Committee Interpretations

Discussion paper, Exposure draft, Accounting standard.

Proper order in the development of an IFRS

International Financial Reporting Standards Interpretation Committee (IFRS IC)

Develops interpretations of existing IAS and IFRS.

Professional Regulation Commission

Established the Philippine accounting standard-setting body.

Financial Reporting Standards Committee (FSRC)

• Replaces the Accounting Standards Council.

• Main function is to establish generally accepted accounting principles in the Philippines.

• Was established to assist the Board of Accountancy in carrying out its power and function in promulgating accounting standards in the Philippines.

Philippine Interpretations Committee (PIC) includes the following:

• Was established by the Financial Reporting Standards Committee.

• The PIC was established to develop authoritative interpretations of existing PAS and PFRS and provide guidance on financial reporting issues not specifically addressed in PAS and PFRS.

• A PIC Interpretation becomes part of PFRS once they are approved by the FRSC.

• IFRIC and SIC are the international counterparts of PIC.

R.A. No. 9298

Regulates the practice of accountancy in the Philippines.

Board of Accountancy

Promulgates rules affecting the practice of accountancy in the Philippines.

Philippine Institute of Certified Public Accountants

The accredited professional organization of CPAs in the Philippines.

Auditing services

Primary service offered by CPAs in public practice.

Commerce and Industry

Profession practiced as a company’s chief accountant.

Academe

This field of practice involves teaching of accounting, auditing, management advisory services, finance, business law, taxation, and other technically related subjects.

Government

Area of the accountancy profession that is heavily focused on the process of analyzing, classifying, summarizing, and communicating transactions involving the receipt and disposition of government funds and property and interpreting the results.

State Government

They license the Certified Public Accountants.

Creditors and investors

They are the ones that financial accounting emphasizes reporting to.

Managerial Accounting

Emphasizes developing accounting information within an entity.

Management

Has the primary responsibility for properly applying GAAP.

Professional judgment of the accountant

The proper application of generally accepted accounting principles is dependent on this.

Conceptual Framework for Financial Reporting

• Describes the concepts for general purpose financial reporting.

• In case of conflict, the requirements of the IFRS prevail over this.

• Nothing in this overrides any specific IFRS.

Conceptual Framework

Define the basic terms and concepts of accounting.

Decision-usefulness

Underlying theme of the Conceptual Framework.

Objective of Financial Reporting

Provides information useful for assessing cash receipts.

“Why” of Accounting

The objective of financial reporting.

Primary users of financial information

1. Investors

2. Lenders and creditors

Fundamental Qualitative Characteristics

These characteristics relate to the content or substance of financial information.

Faithful Representation

Information quality where numbers match reality.

Neutrality

Characteristics of financial information require that information should not favor one party to the detriment of another party.

Enhancing Qualitative Characteristics

Include comparability, verifiability, understandability, timeliness.

Comparability, Verifiability, Understandability, Timeliness

Enhancing Qualitative Characteristics of Useful Information

Cost

One constraint on useful financial reporting that the Conceptual Framework mentioned.

Annually

The financial statement should at least be prepared for __.

Going Concern

Financial statements prepared assuming continued operation.

Reporting Entity

That is required, or chooses, to prepare financial statements.

Unconsolidated Financial Statements

The reporting entity comprises the parent company only.

At a point in time

The elements of financial position describe amounts of resources and claims against resources ___.

Asset

Present economic resources controlled by the entity.

Liability

Settlement expected to result in an outflow of economic benefit.

Equity

Residual interest in assets after deducting liabilities.

Primary distinction between revenue and gain

The nature of the activity that gives rise to the transaction.

Recognition of an Item

If it meets the definition of asset, liability, equity, income, or expense.

Derecognition

• An item no longer meets the definition of an asset or a liability.

• The entity loses control of the asset.

• The entity no longer has a present obligation for the liability.

Measurement bases

Historical Cost and Current Value

Fair Value

The price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.

Historical Cost

The most adopted measurement basis in preparing financial statements.

Income and Expenses

Classified as profit or loss and other comprehensive income.

Current Cost

The measurement basis that the physical capital maintenance concept requires for adoption.

Aggregation

Adding together items with similar characteristics in the same classification.