1. OVERVIEW OF ACCOUNTING
   1. DEFINITION OF ACCOUNTING
      1. ACCOUNTING STANDARDS COUNCIL (ASC)
         1. Accounting is a service activity• Its function is to provide quantitative information, primarily financial in nature, about economic entities intended to be useful in making economic decision
      2. COMMITTEE ON ACCOUNTING TERMINOLOGY OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (CAT of AICPA)
         1. Accounting is the art of recording, classifying and summarizing transaction and events at least of a financial character and interpreting the results thereof
      3. AMERICAN ACCOUNTING ASSOCIATION (AAA)
         1. Accounting is the process of identifying, measuring and communicating economic information to permit informed judgment and decision by users of the information
            1. Identitfying (Analytical Component) - Recognition of accountable events
            2. Measuring (Technical Component) - Assigning "peso amounts" to the economic transactions and events
            3. Communicating (Formal Component) - Accounting process of preparing and distributing Financial Statements or accounting reports to potential users of accounting information
   2. BRANCHES OF ACCOUNTING
      1. FINANCIAL ACCOUNTING
         1. Preparation of F/S
      2. AUDITING
         1. Examination of F/S
      3. MANAGEMENT ACCOUNTING OR MAS
         1. Advisory Services, Management Consultancy
      4. GOVERNMENT ACCOUNTING
         1. Accounting for Public Funds of the National Government
      5. TAX ACCOUNTING
         1. Preparation of Tax returns and rendering of Tax advice
      6. FIDUCIARY ACCOUNTING
         1. Accounting for entrustred resources or funds
      7. SOCIAL RESPONSIBILITY ACCOUNTING
         1. Reporting on programs and projects for the welfare of the community
      8. ENVIRONMENT ACCOUNTING
         1. Focuses on programs, activities and projects that are focuesed on care for Mother Earth
      9. PRICE-LEVEL ACCOUNTING
         1. Accounting for hyper-inflationary economics
   3. USES OF ACCOUNTING INFORMATION
      1. GENERAL PURPOSE ACCOUNTING INFORMATION
         1. Designed to meet the common needs of most statement users
         2. Information is provided under financial accounting
         3. Governed by GAAP represented by PFRS
      2. SPECIFIC PURPOSE ACCOUNTING INFORMATION
         1. Designed to meet the specific-needs of particular statement users
         2. Provided by: managerial accounting, tax basis accounting
   4. CHARACTERISTICS AND LIMITATIONS OF ACCOUNTING
      1. HISTORICAL IN NATURE
      2. GENERAL PURPOSE INFORMATION
      3. MAKES USE OF FACTS AND ESTIMATES
      4. DIFFERENT MEASUREMENT BASIS
      5. PRICE-LEVEL CHANGES NOT REFLECTED
      6. CENTERED ON QUANTIFIABLE INFORMATION
      7. ACCRUAL
      8. SUMMARIZATION
      9. TECHNICAL TERMINOLOGY
      10. AUDIENCE
   5. EMERGING FOCUS OF FINANCIAL REPORTING
      1. SUSTAINABILITY REPORTING
         1. Purpose, Profit, Planet - Going Conern Assumption
            1. Five Principles
            2. Conservation of the ecosystem or environment
            3. Conservation of biodiversity in the planet
            4. Sustainable Development of the society
            5. Conservation of human resources
            6. Population control and management
   6. CHALLENGES TO FINANCIAL REPORTING
      1. EXPECTATION GAP
         1. Difference between what the public thinks the accountant is doing and what the accountant thinks they do
      2. ETHICS (AN ALL-TIME CHALLENGE)
         1. Earnings manipulation
      3. POLITICAL ENVIRONMENT
         1. If politics play too big of a role in developing accounting standards this might result in financial reporting standards that are not truly generally accepted
      4. NON-FINANCIAL MEASUREMENT
         1. Employee morale, advantageous location
      5. TIMELINESS
      6. FORWARD-LOOKING INFORMATION
   7. ACCOUNTING VS. AUDITTING AND BOOKKEEPING
      1. ACCOUNTING
         1. Accounting embraces auditing
         2. Accounting is constructive in nature
         3. Accounting ceases when F/S are already prepared
         4. Accounting is conceptual and is concerned with the “WHY”, reason, or justification for any action adopted
      2. AUDITING
         1. Auditing is one of the areas of accounting specialization
         2. Auditing is analytical, the work of an auditor begins when the work of an accountant ends
      3. BOOKKEEPING
         1. Bookkeeping is procedural and largely concerned with development and maintenance of accounting records
            1. Bookkeeping is procedural element of accounting as arithmetic is procedural element of mathematics
         2. “HOW” of accounting
   8. FINANCIAL ACCOUNTING VS. MANAGEMENT ACCOUNTING
      1. FINANCIAL ACCOUNTING
         1. Basically, concerned with income determination and asset valuation
         2. Prepares statements in accordance with GAAP
         3. Prepares general purpose statements that can be used by external and internal users
         4. Emphasizes objective data
         5. Historical in nature
         6. For external and internal users (primarily external users)
         7. Emphasizes reporting to creditors and investors
      2. MANAGEMENT ACCOUNTING
         1. Basically, concerned with decision-making
         2. Prepares Statement in accordance with management needs
         3. Prepares specific purpose reports for internal users only
         4. Makes use of subjective data as long as it is relevant
         5. Future-oriented
         6. Accumulation and preparation of financial reports to internal users only
         7. Emphasizes developing accounting information for use within the entity
   9. SUMMARY: 1. USER - BASED DISCIPLINE 2. QUANTITATIVE IN NATURE 3. SUBJECT TO INTERPRETATION KEY CONCEPT: 1. FINANCIAL 2. QUALITATIVE AND MORE QUANTITATIVE 3. USEFUL 4. DECISION-ORIENTED
2. THE ACCOUNTANCY PROFESSION
   1. THE ACCOUNTANCY LAW
      1. RA 9298
      2. THE PHILIPPINE ACCOUNTANCY ACT OF 2004
      3. An act regulating the practice of accountancy in the Philippines
   2. THE ACCOUNTANCY FIELDS
      1. PRACTICE IN PUBLIC ACCOUNTANCY
         1. Rendering accounting and auditing services to one or more client or rendering independent professional services to the client on a fee basis
            1. Auditing of Financial Statements
            2. The examination of F/S by independent CPA for the purpose of expressing an opinion as the fairness with which the F/S are prepared
            3. Attest function of CPAs
            4. Taxation
            5. CPAs not infrequently represents the client in the tax investigations
            6. Consultancy services (MAS)
            7. No precise coverage
      2. PRACTICE IN COMMERCE AND INDUSTRY
         1. Also known as “private accounting”
         2. CPAs under this scope of practice are employed by a private company as: • Accounting staff • Chief accountant • Internal auditor • Controller → highest accounting officer
      3. ACADEME OR EDUCATION
         1. Employment in an educational institution
      4. GOVERNMENT
         1. 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
         2. Employed in government and its agencies
      5. LIMITATION OF PRACTICE: 1. Certificate of Accreditation (3 years meaningful experience in any of the areas of public practice including taxation ) 2. No corporation form is allowed to be registered for the practice of public accountancy
3. THE STANDARD SETTING-BODIES
   1. INTERNATIONAL
      1. INTERNATIONAL ACCOUNTING STANDARDS BOARD (IASB)
         1. IASB replaces IASC
         2. Reconstituted in 2001 and part of the IFRS Foundation
         3. Full time (mostly), up to 3 members can be a part-time, but they are expected to spend most of their time on IASB activities
         4. Global Phenomenon → intended to bring about greater transparency and higher degree of comparability in financial reporting
            1. Global Phenomenon → intended to bring about greater transparency and higher degree of comparability in financial reporting “Phenomenon” → is essential to achieve the goal of one uniform and globally accepted reporting standards
         5. Issued: IFRS (International Financial Reporting Standards)
            1. IFRS Standards “Principle-based” less detailed
         6. 14 MEMBERS 4 members each: Asia-Oceania; Europe; America 1 Africa 1 additional member can be appointed from any area, subject to maintaining of overall global geographical balance
         7. Term: 10 years maximum Initial Term 5 years and Second term 3 – 5 years Chairman and Vice Chairman → second term 5 years
         8. Is an independent, private sector body of accounting professionals that issues accounting standards called International Financial Reporting Standards (IFRS)
         9. Objective: achieving uniformity in the accounting principles which are used by business and other organizations for financial reporting around the world
      2. INTERNATIONAL SUSTAINABILITY STANDARDS BOARD (ISSB)
         1. Issues IFRS Sustainability Disclosure Standards
         2. Members: • 14 members, full-time
         3. Term: 10 years maximum Initial Term 5 years and Second term 3 – 5 years Chairman and Vice Chairman → second term 5 years
         4. No Interpretations Committee
      3. IFRS INTERPRETATIONS COMMITEE
         1. Responsible for developing interpretations of IFRS Standards
         2. Members: • 14 members 1.Appointed because of their experience with IFRS Standards 2.They are not paid, but the IFRS Foundation reimburses members of their Out-of-Pocket Cost
         3. Its development (interpretations) follows a similar process to the development of an IFRS Standard
         4. Interpretations → becomes part of IFRS Standards so they have the same weight
   2. LOCAL (PH)
      1. FINANCIAL AND SUSTAINABILITY STANDARDS REPORTING COUNCIL (FSRSC)
         1. Superseded: Accounting Standards Council (ASC) by PICPA (NOV. 1981) through RA 9298
         2. Is the accounting standard setting body created by the PRC upon the recommendation of BOA to assist the BOA in carrying out its power and functions to promulgate accounting standards in the Philippines (under RA 9298)
         3. The FSRSC’s main function: to establish generally accepted accounting principles (GAAP) in the Philippines
         4. FSRSC: 1. Standards issued: Philippine Financial Reporting Standards (PFRS) 2. Adopted: PAS by ASC
         5. TERM: Members and Chairman • 3 years, renewable for another term
            1. Subtopic 1
         6. FSRSC DUE PROCESS OF DEVELOPING ACCOUNTING STANDARDS
            1. STEPS: 1.Consideration of the pronouncements of the IASB, IFRS IC 2.Formation of task force when necessary (advice) 3.Issuance of exposure drafts, duly approved by the majority votes of the FSRSC members 4.Consideration of comments (comment period is at least 60 days, may be shortened but not less than 30 days) and give comment letter to IASB 5.Approval by majority of the FSRSC’s members 6.Publication in the official gazette or newspaper of general circulation
         7. Financial support is received principally from the PICPA foundation
            1. PHILIPPINE INSTITUTE OF CERTIFIED ACCOUNTANTS (PICPA)
            2. Founded in November 1929
            3. Is the APO of CPAs by the PRC
            4. Non-stock, non-profit organization, registered in SEC
            5. They do not have juridical personality separate and distinct from each other or from the national office
      2. PHILIPPINE INTERPRETATIONS COMMITTEE (PIC)
         1. Formed by: FSRSC to assist them in establishing and improving the Financial Reporting Standards in PH
         2. Primary purpose: to issue implementation guidance on PFRSs and PASs
         3. Established to develop authoritative interpretations (guidance) of existing PAS AND PFRS and provide guidance on financial reporting issues not specifically addressed in PAS and PFRS or guidance on issues that are likely to receive divergent or unacceptable treatment because the standards do not provide specific and clear-cut rules and regulations
         4. PIC ORGANIZATION STRUCTURE
4. PHILIPPINE FINANCIAL REPORTING STANDARDS (PFRS)
   1. PHILIPPINE FINANCIAL REPORTING STANDARDS (PFRS)
      1. Set out the recognition, measurement, presentation and disclosure requirements of transactions and events that are important in general purpose financial statements
      2. Are guiding principles rather than law → PFRS are principle-based
      3. Applies to all profit-oriented entities (regardless of the form of ownership) preparing general purpose financial statements
   2. PHILIPPINE ACCOUNTING STANDARDS (PAS)
      1. Issued by ASC
      2. Adopted by FSRSC
   3. PHILIPPINE INTERPRETATIONS
      1. implementation guidance on PFRSs and PASs
      2. A PIC Interpretations becomes part of PFRS once they are approved by FSRSC 1. Same authority with PFRS 2. GR: Same due process with PFRS except for: Exposure for comment → since PIC does not establish new accounting standard, there is no need to expose PIC implementation guidance for comment
         1. Exemption to the exception: Depending on the complexity of the issue, PIC may decide to circulate the draft for public comment: Exposure period: not more than 30 days
5. Classification of Events:
   1. 1. External Events
      1. Transfers
         1. Exchanges (two-way)
            1. Giving and Receiving
         2. Non-reciprocal transfers (one-way)
            1. Either giving or receiving
            2. Donation or gift
            3. Theft
            4. Payment of taxes
            5. Fines
      2. Other than Transfers
         1. Changes an entity's economic resources or obligations caused by external event but does not involve transfer of resources or obligation Ex: Vandalism, Obsolescence and Changes in price levels or FMV
   2. 2. Internal Events
      1. Production
      2. Casualty
6. Implicit in the communicating process
   1. Recording - journalizing
   2. Classifying - posting in the ledger
   3. Summarizing - preparation of F.S or other accounting reports
7. BOARD OF ACCOUNTANCY (PR-BOA)
   1. Body authorized by law to promulgate rules and regulations affecting the practice of profession (accountancy) in the Philippines
   2. Responsible for preparing and grading the Philippine CPA examination
   3. Under Supervision and Administrative control of Professional Regulatory Commission (PRC)
   4. 7 members with a Chairman
      1. Approved by: President of the Philippines 1. From: List of 3 nominees of each position by PRC 2. From: List of 5 nominees in each position by APO (PICPA) to PRC not later than 60 days
      2. Chairman: Senior Practitioner of any scope of practice
      3. BOA shall elect a vice-chiarman from among its members for a term of 1 year only
      4. Term: 1. 2 maximum consecutive term 1 year interval before re-appointment 2. No member shall serve for more than 12 years 3. 1 term = 3 years 4. If no replacement → in hold over capacity 5. Any vacancy occurring within the term of a member shall be filled up for the unexpired portion only. Appointment of fill up an unexpired term is not to be construed as a complete term
8. International Accounting Standards Committee (IASC)
   1. Formed in June 1973 through an agreement to develop a single set of global accounting standards
   2. Part-time is allowed
   3. Issued: International Accounting Standards (IAS) → Adopted by IASB with full force and effect unless the IASB amends or replaces it
9. IASB DUE PROCESS
   1. IASB DUE PROCESS FOR IFRS AND IFRS IC DUE PROCESS • Setting the Agenda (3 – 5 years) • Planning the Project • Developing and Publishing the Discussion Paper, Including Public Consultation • Developing and Publishing Exposure Draft, including consultation • Post-Standard Publishing procedures (procedures after the standard is issued) 1. Final Standard Approval: IASB → 13 members or less → Approval: 8 members IASB → 14 members or less → Approval: 9 members
   2. ISSB due process is the same or based on IASB due process but not necessarily Identical • Any difference should have a clear reason as to its difference