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Financial Reporting Standards Council (FRSC) Creation and Function • Established by the Board of Accountancy (BOA) in 2006 under the Implementing Rules and Regulations of the Philippine Accountancy of Act of 2004 to assist the Board in carrying out its power and function to promulgate accounting standards in the Philippines. •

The FRSC's main function is to establish generally accepted accounting principles in the Philippines. In achieving this objective, the FRSC considers Standards issued by the IASB.

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The FRSC is the successor of the Accounting Standards Council (ASC), which was created in November 1981 by the Philippine Institute of Certified Public Accountants (PICPA) to establish generally accepted accounting principles in the Philippines.

The FRSC Composition The FRSC is composed of a chairman, who had been or presently a senior accounting practitioner in any scope of accounting practice, and 14 representatives from: • Board of Accountancy - 1 • Securities and Exchange Commission - 1 • Bangko Sentral ng Pilipinas - 1 • Bureau of Internal revenue - 1 • Commission on Audit - 1 • A major organization of preparers and users of financial statements (currently, FINEX) • Accredited national professional organization (APO) of CPAS (currently, PICPA): Public Practice - 2 Commerce and Industry - 2 Academe or Education - 2 Government - 2

Appointment and Term of office The Chairman and members of the FRSC are appointed by the PRC upon the recommendation of the BOA in coordination with the APO. All members of the Financial Reporting Standards Council (FRSC) including the chairman shall have a term of 3 years and is renewable for another term.

Consideration of IFRSs issued by IASB The FRSC monitors the technical activities of the IASB and issues Invitations to Comment on exposure drafts of proposed IFRSs as these are issued by the IASB. When finalized, these are issued as Philippine Financial Reporting Standards (PFRSs). The FRSC similarly monitors issuances of the international Financial Reporting Interpretations Committee (IFRIC) of the IASB, which it adopts as Philippine Interpretations.

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The FRSC issues news releases to announce the issuance of final Standards and Interpretations, exposure drafts and other matters which are posted in the Philippine Accounting Standards section of the PICPA website (www.picpa.com.ph). FRSC pronouncements The FRSC issues its Standards in a series of pronouncements called Philippine Financial Reporting Standards (PFRSs). These consist of (a) Philippine Financial Reporting Standards (PFRSs) [these correspond to International Financial Reporting Standards (IFRSs)]; (b) Philippine Accounting Standards (PASs) [these correspond to International Accounting Standards (lASs)]; and (c) Philippine Interpretations [these correspond to Interpretations of the International Financial Reporting Interpretations Committee (IFRIC) of the IASB and the Standing Interpretations Committee (SIC) of the IASC; these also include Interpretations developed by the PIC. Interpretations of PFRSs are intended to give authoritative guidance on issues that are likely to receive divergent or unacceptable treatment, in the absence of such guidance.

Philippine Interpretations Committee The FRSC formed the Philippine Interpretations Committee (PIC) in August 2006 to assist the FRSC in establishing and improving financial reporting standards in the Philippines. The role of the PIC is principally to issue implementation guidance on PFRSs. The PIC members were appointed by the FRSC and include accountants in public practice, the academe and regulatory bodies and users of financial statements. The PIC replaced the Interpretations Committee created by the ASC in 2000. Preface to Standards

Philippine

Financial

Reporting

The Preface to Philippine Financial Reporting Standards sets out the objectives and due process of the FRSC and explains the scope, authority and timing of application of PFRSs.

The PFRSs • PFRSs set out recognition, measurement, presentation and disclosure requirements dealing with transactions and events that are important in general purpose financial statements. • They may also set out such requirements for transactions and events that arise mainly in specific industries. • PFRSs are based on the Framework, which addresses the concepts underlying the information presented in general purpose financial statements. • The objective of the Framework is to facilitate the consistent and logical formulation of PFRSs and it provides a basis for the use of judgment in resolving accounting issues.

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Scope of the PFRSs • PFRSs are designed to apply to the general purpose financial statements and other financial reporting of all profit-oriented entities. Profitoriented entities include those engaged in commercial, industrial, financial and similar activities, whether organized in corporate or in other forms. They include organizations such as mutual insurance companies and other mutual cooperative entities that provide dividends or other economic benefits directly and proportionately to their owners, members or participants. Although PFRSs are not designed to apply to not-for-profit activities in the private sector, public sector or government, entities with such activities may find them appropriate. •

(d)

(e)

Timing of Application of PFRS • PFRSs apply from a date specified in the document. New or revised PFRSs set out transitional provisions to be applied on their initial application. •

The FRSC has no general policy of exempting transactions occurring before a specific date from the requirements of new PFRSs. When financial statements are used to monitor compliance with contracts and agreements, a new PFRSs may have consequences that were not foreseen when the contract or agreement was finalized. For example, covenants contained in banking and loan agreements may impose limits on measures shown in a borrower's financial statements. The FRSC believes the fact that financial reporting requirements evolve and change over time is well understood and would be known to the parties when they entered into the agreement. It is up to the parties to determine whether the agreement should be insulated from the effects of a future PFRS, or, if not, the manner in which it might be renegotiated to reflect changes in reporting rather than changes in the underlying financial condition.

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Exposure drafts are issued for comment and the proposals are subject to revision. Until the effective date of a PFRS, the requirements of any PFRS that would be affected by proposals in an exposure draft remain in force.

PFRSs apply to all general purpose financial statements. Such financial statements are directed towards the common information needs of a wide range of users, for example, shareholders, creditors, employees and the public, at large. The objective of financial statements is to provide information about the financial position, performance and cash flows of an entity that is useful to those users in making economic decisions.

Accounting alternatives • In some cases, PFRSs permit different treatments for given transactions and events. • Usually, one treatment is identified as the 'benchmark treatment' and the other as the 'allowed alternative treatment. • The financial statements of an entity may appropriately be described as being prepared in accordance with PFRSs whether they use the benchmark treatment or the allowed alternative treatment. • The FRSC has reconsidered and will continue to reconsider, those transactions and events for which PFRSs permit a choice of accounting treatment with the objective of reducing the number of those choices.

period (not less than 30 days) is considered appropriate by the FRSC; consideration of all comments received within the comment period and, when appropriate, preparing a comment letter to the IASB; and approval of a standard or an interpretation by a majority of the FRSC members.

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REVIEW QUESTIONS Structure of the PFRSs • Standards approved by the FRSC include paragraphs in bold type and plain type, which have equal authority. • Paragraphs in bold type indicate the main principles. • An individual standard should be read in the context of the objective stated in that standard and the Preface to PFRS. • Any limitation of the scope of a PFRSs is made dear in the standard.

Due Process PFRSs are developed through a due process that involves members of PICPA, financial executives, regulatory authorities, academics and other interested individuals and organizations. Due process for projects normally, but not necessarily involve the following steps: (a) consideration of pronouncements of the 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

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Which statement is correct regarding the Financial Reporting Standards Council (FRSC) a. Established by PICPA in 2006 under the Implementing Rules and Regulations of the Philippine Accountancy of Act of 2004. b. The main function is to establish generally accepted auditing standards in the Philippines. c. The Chairman and members of the FRSC are appointed by the president of the Philippines upon the recommendation of the PRC in coordination with the APO. d. The FRSC is the successor of the Accounting Standards Council (ASC) which was created in November 1981 by the Philippine Institute of Certified Public Accountants (PICPA).

2.

Which of the following is a characteristic of the Financial Reporting Standards Council (FRSC)? a. Any member of the ASC shall be disqualified from being appointed to the FRSC b. FRSC members are required to render service to the Council on a full-time basis. c. FRSC members serve without compensation for a term of three years, which can be renewed for another three-year periods.

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d. 3.

4.

5.

c.

FRSC members should be CPAs.

Financial Reporting Standards Council (FRSC) has a. 14 members with a Chairman b. 15 members with a Chairman c. 16 members with a Chairman d. 8 members with a Chairman The chairman of the FRSC should have been or presently a senior practitioner in a. Public accountancy b. Commerce and industry c. Academe d. Any scope of accounting practice Which of the following government agency is not represented in FRSC? a. Bangko Sentral ng Pilipinas b. Securities and Exchange Commission c. Bureau of Internal Revenue d. Commission on Higher Education

6.

Which of the following is represented in FRSC? a. FINEX b. Bureau of Fisheries c. Insurance Commission d. Commission on Higher Education

7.

Which of the following bodies is responsible for reviewing accounting issues that are likely to receive divergent or unacceptable treatment in the absence of authoritative guidance, with a view to reaching consensus as to appropriate accounting treatment? a. Auditing and Assurance Standards Council (AASC) b. Financial Reporting Standards Council (FRSC) c. Philippine Interpretations Committee (PIC) d. PICPA

8.

The PIC members were appointed by the ____ and include accountants in public practice, the academe and regulatory bodies and users of financial statements a. SEC c. BOA b. PRC d. FRSC

9.

The pronouncements of FRSC provide the highest authoritative pronouncements on accounting principles. The authority of these pronouncements rests upon a. The rules and regulations of the SEC b. Its management and their internal accounting staff c. Their general acceptability d. The integrity of the Council

10. The FRSC issues its Standards in a series of pronouncements called PFRSs. These consist of a. PFRSs c. Philippine Interpretations b. PASs d. All of these 11. Which statement is incorrect regarding Philippine Financial Reporting Standards (PFRSs)? a. PFRSs set out recognition, measurement, presentation and disclosure requirements dealing with transactions and events that are important in general purpose financial statements. b. PFRSs are designed to apply to the general purpose financial statements and other financial reporting of all profit-oriented entities.

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d.

PFRSs are designed to apply to not-for-profit activities in the private sector. All of the above

12. Standards approved by the FRSC include paragraphs in bold type and plain type, which have equal authority. Paragraphs in bold type indicate the main principles. Any limitation of the scope of a PFRS is made clear in the standard. a. b.

True, True False, False False, True False

c. d. True,

13. The FRSC employs a "due process" system which a. Is an efficient system for collecting dues from members. b. Enables interested parties to express their views on issues under consideration. c. Identifies the accounting issues that are the most important. d. Requires that all accountants must receive a copy of financial standards. 14. Arrange in proper order the due process for projects of FRSC: I. 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 II. Consideration of pronouncements of the IASB III. Formation of a task force, when deemed necessary, to give advice to the FRSC IV. Approval of a standard or an interpretation by a majority of the FRSC members V. Consideration of all comments received within the comment period and, when appropriate, preparing a comment letter to the IASB a. b.

I, II, III, IV and V c. II, III, I, V and IV III, II, I, V and IV d. II, III, V, I and IV

15. Which is not part of the accounting standardsetting process in the Philippines? a. Preparation of a draft of proposed Philippine Financial Reporting Standards (PFRS) by a Task Force organized by the Chairman. b. Exposure of the proposed draft for comments and suggestion to PICPA members, FINEX members and other interested parties. c. Approval of the final PFRS by the Profession Regulation Commission. d. Publication in the Official Gazette or in newspaper of general circulation of the proposed draft. 16. Which statement is true about the IASB’s development of IFRSs? a. The IASB gives precedence to the balance sheet over Profit or Loss. b. The IASB gives precedence to fair value accounting over amortized cost. c. Both a and b. d. Neither a nor b.

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