Conceptual Framework and Accounting Standards Study Notes

Public Accounting

  • Renders independent and expert financial services to the public.
  • Services offered (three kinds):
    • Taxation
    • Auditing
    • Management Advisory Services
  • External auditing (definition):
    • External auditing is the examination of financial statements by an independent certified public accountant for the purpose of expressing an opinion as to the fairness with which the financial statements are prepared.
  • Taxation (definition):
    • Taxation includes the tax preparation of annual income tax returns and determination of tax consequences of certain proposed business endeavors.
  • Management Advisory Services (MAS):
    • Generally refer to services to clients on matters of accounting, finance, business policies, organization procedures, product costs, distribution and many other phases of business conduct and operations.
    • Examples listed:
    • Advice on installation of computer system
    • Quality Control
    • Installation and modification of accounting system
    • Budgeting
    • Forward planning and forecasting
    • Design and modification of retirement plans
    • Advice on mergers and consolidations

Perks in Public Accounting Practice

  • Travels
  • Highly respected
  • Gain deeper understanding of accounting concepts, principles and standards
  • Diverse experiences
  • Develop critical analysis of financials
  • Ample advancement opportunities

Private Accounting

  • Many CPAs are employed in business entities in various capacities as:
    • Accounting staff
    • Chief Accountant
    • Internal Auditor
    • Controller
  • Major objective: assist management in planning and controlling the entity's operations.

Private Accounting (Tasks)

  • Includes maintaining the records
  • Producing the financial reports
  • Preparing the budgets
  • Controlling and allocating the resources of the entity
  • Determining the various taxes the entity is obliged to pay

Perks in Private Accounting Practice

  • Work-life balance
  • Less stressful environment
  • Advancement is possible without a CPA license

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.
  • Focus of government accounting: custody and administration of public funds.

Perks in Government Accounting Practice

  • Public service
  • Work-life balance
  • Meaningful work
  • Competitive salaries
  • Job security
  • Advancement opportunities
  • Supportive to professional development

Education / Academe

  • Involves teaching of accounting, auditing, management advisory services, finance, business law, taxation and other technically-related subjects.

Perks in Academe

  • Continuing education
  • Higher earning potential
  • Flexible schedules
  • Teaching and mentoring
  • Research opportunities
  • Job security
  • Personal satisfaction

Activity 5: Career Exploration

  • In pairs, students interview each other:
    • “Which area appeals to you most and why?”
    • “What skills do you think you need to develop for that area?”
  • Volunteer students present to the class (1–2 minutes each)

Requirements to be a Certified Public Accountant

  • Republic Act No. 9298 – Philippine Accountancy Act of 2004
  • Must finish a degree of Bachelor of Science in Accountancy
  • Must pass the government examination given by the Board of Accountancy

CPALE: Definition and Passing Criteria

  • Passing Criteria:
    • General Average: The candidate's weighted average across all subjects must be at least 75%.75\%.
    • Subject-Specific Minimum: No individual subject grade can be lower than 65%.65\%.
  • Definition: CPALE stands for the licensure exam for CPAs in the Philippines

CPALE Subjects

  • Current list:
    1. Financial Accounting and Reporting (FAR)
    2. Advanced Financial Accounting and Reporting (AFAR)
    3. Management Advisory Services (MAS)
    4. Auditing (AUD)
    5. Taxation (TAX)
    6. Regulatory Framework for Business Transactions (RFBT)

CPALE Subjects (effective Oct 2028)

  • Updated list:
    1. Auditing (AUD)
    2. Business Analysis and Reporting (BAR)
    3. Information Systems and Controls (ISC)
    4. Taxation (TAX)
    5. Financial Accounting and Reporting (FAR)
    6. Regulations (REG)

Accounting Standard Setting Bodies and Other Relevant Organizations

  • Overview: Key organizations involved in standard setting and related regulatory roles in the Philippines

Financial and Sustainability Reporting Standards Council (FSRSC)

  • Official accounting standard-setting body in the Philippines

Philippine Interpretation Committee (PIC)

  • Formed by the Accounting Standards Council (ASC), the predecessor of the FRSC
  • Role: review interpretations of the IFRIC for approval and adoption by the FRSC

Board of Accountancy (BOA)

  • Professional regulatory board created under RA 9298
  • Supervises registration, licensure and practice of accountancy in the Philippines

Securities and Exchange Commission (SEC)

  • Regulates corporations, including partnerships
  • Requires corporations and partnerships to file audited financial statements

Bureau of Internal Revenue (BIR)

  • Collects national taxes and administers provisions of the Tax Code

Bangko Sentral ng Pilipinas (BSP)

  • Regulates banks and other entities performing banking functions

Cooperative Development Authority (CDA)

  • Regulates cooperatives
  • CDA influences the selection and application of accounting policies by cooperatives

International Accounting Standards

  • IFRS components:
    • International Financial Reporting Standards (IFRSs)
    • International Accounting Standards (IASs)
    • Interpretations
  • Philippine adaptations:
    • The Philippine Financial Reporting Standards (PFRSs) and Philippine Accounting Standards (PAS) are based on these standards

IFRS Foundation and Global Standards

  • IFRS Foundation is the standard-setting body of the IFRS Foundation with the main objectives of developing and promoting global accounting standards
  • It replaces the International Accounting Standards Committee (IASC) and the International Accounting Standards Board (IASB)

Composition and Basis of Philippines Standards

  • International Financial Reporting Standards (IFRSs) are standards issued by the International Accounting Standards Board (IASB)
  • The Philippines bases its national standards (PFRSs and PAS) on IFRS/IAS interpretations and standards