04/01/2022

Conceptual Framework
& Accounting Standards
(BATHEOAX)

The Need for Financial Reporting.

Prepared by:
Ms. Grace A. Padiernos, CPA, CMA

PROF. GRACE A. PADIERNOS, CPA, CMA

WARNING
You may not copy, reproduce, distribute,
publish, display, perform, modify, create
derivative works, transmit, or in any way
exploit any such content, nor may you
distribute any part of this content, sell or
offer it for sale, or use such content.

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PROF. GRACE A. PADIERNOS, CPA, CMA

Observe and
Respect the
Republic Act
No. 8293, An
Act
Prescribing
the
Intellectual
Property
Rights Law
(IPR).

THIS MATERIAL IS INTENDED FOR BATHEOAX

ONLY:

Do not share this in any

Do not share this material to public or social media
anyone who is not enrolled in sharing sites or study
this class. resources websites (Example:
SlideShare, Course Hero etc.)

PROF. GRACE A. PADIERNOS, CPA, CMA

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Intellectual Property
Rights of Materials or Resources
Understand that these materials and resources are the property of
the National University - Laguna, copyrighted to the respective
authors of each material or resource. Students shall use these
materials and resources (Example: PowerPoint or PDF files or
recorded videos of lesson, etc.) only for the intended purpose of
learning in this course. To ensure that these materials are not
reproduced, shared, or used outside of the University and for
purposes not consistent with the intent of the course.

PROF. GRACE A. PADIERNOS, CPA, CMA

THE NEED FOR FINANCIAL

REPORTING

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• a standard accounting practice that uses

financial statements to disclose a company's
financial information and performance over
a particular period, usually on an annual or
quarterly basis.
Financial
Reporting • the disclosure of financial results and related
information to management and external
stakeholders (e.g., investors, customers,
regulators) about how a company is
performing over a specific period of time.

PROF. GRACE A. PADIERNOS, CPA, CMA

• Internal users
Users of
• External users
Financial • Direct users
Information • Indirect users

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SW no. 1 –
WATCH VIDEO
https://www.youtube.com/watch?v=YEbpPM07rsY

PROF. GRACE A. PADIERNOS, CPA, CMA

Internal Users • Users of financial information who

have ready access to specific types of
accounting information.
• Active owners of business and the
management – to evaluate the entity’s
performance, make financial and
operational plans and implement
business decisions. – To continue or to
liquidate, to infuse additional
investments, to borrow from creditors
and to change business methods and
strategies.
• Management accounting reports or
special purpose financial reports usually
provides the information needed by
these users.

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External Users • Those who do not have ready access to

readily available information about an
entity.
• Examples: inactive owners, creditors
and lenders, suppliers, potential
investors, taxing authorities, regulatory
bodies, employees and employee
unions, financial analysts, financial
advisers and consultants and the general
public.
• Information needs (profitability,
liquidity, solvency, financial flexibility) by
these users are provided by general
purpose financial reports (financial
accounting).
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Direct users • Users with direct interest.

• Examples: owners, managers,
creditors, suppliers, customers,
employees, taxing authority

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Indirect users • Use accounting information to provide

advice or to protect the interest of the
indirect user.
• Examples: regulatory agencies, labor
unions, financial and legal consultants.

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Branches of Accounting

• Financial Accounting
• Management Accounting
• Cost Accounting
• Tax Accounting
• Government Accounting

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SW no. 1
WATCH VIDEO
https://www.youtube.com/watch?v=qISkyoiGHcI

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Financial Accounting

• The broadest branch of accounting.

• Concerned with recognition, measurement, and communication of
economic resources, economic obligations and changes in economic
resources and economic obligations.
• Information is communicated through complete set of financial
statements.
• Conform to the Generally Accepted Accounting Principles (GAAP).

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Management Accounting

• Serves the information needs of the internal users, specifically the active
owners and managers in making and implementing short-term and long-
range plans for the enterprise.
• Reports are not required to conform with GAAP.

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Cost Accounting

• Concerned with the measurement and recognition of cost of goods

manufactured (CGM) and cost of goods sold (CGS).

Financial Cost Management

accounting accounting accounting

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Tax Accounting

• Concerned with the computation of taxes and preparation of tax returns

submitted to a taxing authority.

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Government Accounting

• 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.

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Auditing

• Refers to an independent examination of the financial statements

conducted by a CPA for the purpose of rendering an opinion as to the
fairness of the presentation of the financial statements.

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• Creation of International Accounting Standards

Committee (IASC) in 1973 – Development of a set of
uniform global accounting standards known as
International Accounting Standards (IAS).
FINANCIAL • The IASC was reconstituted in 2001 as International
Accounting Standards Board (IASB) under the
REPORTING umbrella of the International Financial Reporting
Standards (IFRS) Foundation.
AND THE • IFRS Foundation – a not-for-profit, public interest
organization established to develop a single high-
STANDARD quality, understandable, enforceable and globally
accepted accounting standards called the IFRS, and to
SETTING promote and facilitate adoption of the standards.
• IAS even if improved or revised by the IASB are
PROCESS known as IAS while standards that originated from the
works of the IASB are called IFRS.
• IASC  IAS (1973)
• IASB  IFRS (2001)

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• IFRS include the following

FINANCIAL – Specific IFRS;
REPORTING – Interpretations made by the International
Financial Reporting Interpretations Committee
AND THE (IFRIC), the body that interprets the works of
STANDARD the IASB;
– IAS; and
SETTING – Interpretations made by the Standing
PROCESS Interpretations Committee (SIC), the body that
interpreted the works of the IASC.

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Organization International International

Accounting Accounting

FINANCIAL Standards
Committee (IASC)
Standards Board
(IASB)

REPORTING Standards International

Accounting
International
Financial Reporting

AND THE Who interprets the

Standards (IAS)
Standing
Standards (IFRS)
International

STANDARD standards? Interpretations

Committee (SIC)
Financial Reporting
Interpretations

SETTING Content of standards  IAS

Committee (IFRIC)
 IFRS

PROCESS  Interpretations by  Interpretations of

SIC IFRIC
 IAS
 Interpretations by
SIC

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FINANCIAL
REPORTING
AND THE Explore: https://www.ifrs.org/issued-
STANDARD standards/list-of-standards/

SETTING
PROCESS

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FINANCIAL • Under the present time, the IASB still issues

REPORTING new standards and major amendments to the
existing IFRSs.
AND THE
• Mission Statement of IFRS: To communicate
STANDARD financial information that achieves
SETTING TRANSPARENCY, ACCOUNTABILITY &
EFFICIENCY.
PROCESS

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• TRANSPARENCY: By enhancing the

international comparability and quality of
FINANCIAL financial information, enabling investors and
market participants to make informed
REPORTING economic decisions.
AND THE • ACCOUNTABILITY: By reducing information
STANDARD gap between the investors and the people to
whom they have entrusted their investments
SETTING (the management of the entity).
PROCESS • EFFICIENCY: By helping investors identify
opportunities and risks, thus improving capital
allocation.

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• Financial reporting practices are dynamic,

being influenced by the complicated
FINANCIAL transactions that result innovative business
REPORTING practices that evolve from changes in
economic, political, and even cultural
AND THE environment.
STANDARD • In essence, the financial reporting standards
shall continuously be reviewed, amended, and
SETTING revised, when necessary, for the purpose of
PROCESS faithfully communicating in the most relevant
manner the results of economic transactions
of reporting entities.

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• One of the primary functions of the IFRS

Foundation is to govern and oversee the activities
of its standard-setting body which is the IASB.
The Standard • Due process in the development of financial
Setting reporting standards:
Process 1) Setting the agenda;
2) Planning the project;
Adopted by 3) Developing and publishing the discussion
the IASB paper;
4) Developing and publishing the exposure draft;
5) Developing and publishing the standard; and
6) Issuance of the standard.

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• The IASB identifies an issue item to its

Setting the agenda after considering the relevance of the
agenda information to the users and the reliability of
the information that could be provided.

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• The IASB decides whether to conduct the

project alone or jointly with another standard-
Planning the setter.
project • A working group is established, which may
include members of staff from other
accounting standard setters.

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• The discussion paper includes a comprehensive

overview of the issue, possible approaches in
addressing the issue, the preliminary views of its
Developing authors or the IASB, and an invitation to
comment.
and • The issue being discussed may result from a
research project being carried by another
publishing standard setter or it may be an active agenda
carried out by the IASB.
the • If the issue originates from another another
standard setter, the publication of the discussion
discussion paper requires a simple majority vote of the IASB
members.
paper • The discussion of all technical issues takes place
in public sessions (public meetings, public
hearings and public round tables) where the
questions and answers session are conducted.

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• An exposure draft is a proposed standard or

a proposed amendment to a standard.
• The exposure draft is the IASB’s main vehicle
Developing to consult the interested public.
and • The comment period for major projects is
publishing usually 120 days, and for IFRIC Interpretations
is usually 60 days but may be less in urgent
the exposure cases.
draft • The IASB makes revisions on the draft after
considering the comments on the exposure
draft. When deemed necessary, as second
exposure draft is developed and published.

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• Upon reaching conclusion on the issues

covered in the exposure draft, the pre-ballot
Developing IFRS is sent to selected parties for review after
which, a near final draft is posted on the
and IASB’s website.
publishing • Balloting, which is circularizing the near final
the standard reporting standard to the IASB’s members
requires individual final review and approval
of the draft.

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• The approved pronouncement is posted to

Issuance of the IASB’s limited access website for an initial
the standard period of about ten days, after which the draft
is freely available online.

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The Standard Setting Process in the

Philippines

• Prior to year 1981 – The Philippines did not have a formal process for
the development of accounting practices – Accounting principles were
patterned from what were found in actual business practices, mostly
based on the accounting practices and principles developed by the USA 
US GAAP by Financial Accounting Standards Board (FASB).
• Later part of year 1981 – Philippine Institute of Certified Public
Accountants (PICPA), the accredited professional organization of CPAs in
the Philippines organized the Accounting Standards Council that
formalized the standard setting process in the Philippines.

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The Standard Setting Process in the

Philippines

• Accounting Standards Council (ASC) - Formed on November 18, 1981 to

study the accounting standard-setting process in the Philippines.
• Main function of ASC: to establish and improve the generally accepted
accounting principles (GAAP) in the Philippines.
• Accounting standards developed by the ASC were known as Statements
of Financial Accounting Standards (SFAS) which are based on existing
practices, research, and studies undertaken by the council, available
national and international accounting literatures, statements by the IASC
and the Financial Accounting Standards Board (FASB) of the USA.
• ASC was composed of eight members: PICPA, SEC, BSP, BOA, and
Financial Executive of the Philippines (FINEX).
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The Standard Setting Process in the

Philippines

• Year 1997 – the ASC made a decision to move fully to the International
Accounting Standards (IAS)
• Year 1997 to year 2000 - the ASC developed accounting standards that
were already based on IAS
• Year 2001 - the ASC adopted most of the standards that had been
developed by the IASC
• Year 2005 – full adoption of the IAS in the Philippines

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The Standard Setting Process in the

Philippines

• Board of Accountancy (BOA) – The body that regulates the practice of

Accountancy in the Philippines – Established the Financial Reporting
Standards Council (FRSC) in year 2006 to replace and takeover the
functions of the ASC.
• FRSC - composed of a (1) chairman and 14 members: 1BOA, 1SEC, 1BSP,
1BIR, 1Financial Executives of the Philippines, 1COA and 8 accredited
professional organization of CPAs in the Philippines (PICPA) .

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The Standard Setting Process in the

Philippines

• Philippine Interpretations Committee – Formed by FRSC in November

2006 to provide the Council assistance in establishing and improving
financial reporting standards in the Philippines – Issues implementation
guidelines on the Philippine Financial Reporting Standards (PFRS).
• PFRSs consist of:
a. Specific PFRS which are adopted from the IFRS;
b. PAS, which are adopted from the IAS; and
c. Philippine Interpretations, which are adopted from the interpretations
of the IFRIC and the SIC and the interpretations of the PIC.

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The Standard Setting Process in the

Philippines
• Due process involves the following:
a. Consideration of pronouncement of IASB;
b. Formation of a task force, when deemed necessary, to give advice to
the FRSC;
c. 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;
d. Consideration of all comments received within the comment period
and, when appropriate, preparing a comment letter to IASB; and
e. Approval of a standard or an interpretation by a majority of the FRSC
members. PROF. GRACE A. PADIERNOS, CPA, CMA

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Thank you!!!

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