Opinion Column

Philippine Accounting Standards

By Atty. Dennis B. Funa October 31, 2018

THERE are three standards-setting and interpretation organizations in the Philippines that

recommend the standards, rules and interpretative pronouncements on accountancy and
auditing. These three organizations are: a) the Financial Reporting Standards Council; b) the
Auditing and Assurance Standards Council; and c) the Philippine Interpretations Committee.
These three are mandated under the Accountancy Law and the implementing rules to
recommend to the Board of Accountancy the standards and interpretations, for BOA approval.
As of 2018, the Chairmen of the councils are Roberto G. Manabat for the AASC, David L.
Balangue for the FRSC and Wilson P. Tan for the PIC.

Accounting standards in the Philippines are adopted from the International Financial
Reporting Standards issued by the International Accounting Standards Board (IASB). The IFRS
is a set of accounting standards that are recognized by at least 120 countries (including the
Philippines) and provides a guide on how particular types of transactions and other events
should be reported in nancial statements. The rationale for using the IFRS/Philippine
Financial Reporting Standards (PFRS) is to ensure consistency in recording, recognizing and
measuring nancial transactions, which, if followed properly, will ensure stability and
transparency throughout the nancial reporting process of the company. These standards are
not enforceable as compliance is voluntary.

The PFRS, our version of the IFRS with some minor modi cations, and the Philippine
Accounting Standards are issued by the PFRS Council (formerly the Accounting Standards
Council [ASC]), under the oversight of the BOA. Hence, the PFRS and the PAS are our current
set of Generally Accepted Accounting Principles. GAAPs vary “from country to country due to
di erences in the legal system, levels of in ations, culture, degrees of sophistication and use
of capital markets, and political and economic ties with other countries.” Entities registered
with the Securities and Exchange Commission (SEC) are required to apply PFRS as their
nancial reporting framework.

The PAS corresponds to the adopted International Accounting Standards (IAS), while the PFRS
corresponds to the adopted IFRS. Previously, standards issued by the ASC were designated as
Statement of Financial Accounting Standards.

The PFRSC is a standard-setting body created by the Professional Regulation Commission

upon the recommendation of the BOA under the implementing rules of Republic Act 9298
“Philippine Accountancy Act of 2004”. It has a chairman, and representatives from the BOA,
the SEC, the Bangko Sentral ng Pilipinas, the Bureau of Internal Revenue, the Commission on
Audit, a major organization composed of preparers and users of nancial statements
(currently Finex), and two representatives each from an accredited national professional
organization of certi ed public accountants in public practice, commerce and industry,
academe, and the government. The chairman and members shall have a term of three years
and is renewable for another term.

The FRSC formed the Philippine Interpretations Committee  in August 2006 to assist the FRSC
in establishing and improving nancial reporting standards in the Philippines. It is a mere
committee of the FRSC. The role of the PIC is principally to issue implementation guidance on
PFRS. The PIC members are appointed by the FRSC and include accountants in public practice,
academe and regulatory bodies, and users of nancial statements. The PIC replaced the
Interpretations Committee created by the ASC in 2000.

Development of the Philippine standards

The rst formal recognition of the accounting profession was through the enactment of the
Accountancy Law of 1923. Soon, in 1929, the Philippine Institute of Accountants was formed.
The initial Philippine standards was patterned after the US GAAP. Our standards were
essentially patterned after the standards of the United States Financial Accounting Standards
Board. By 1997, there was a move to transition from the US GAAP to international accounting
standards. This sentiment was brought about by the SEC’s membership in the International
Organization of Securities Commissions, which resolved to adopt international accounting
standards.

In November 2004, the Philippines’s Accounting Standards Council resolved to adopt the PAS,
which was basically the revised version of the IAS, and the PFRS, which was basically the
revised version of the IFRS. It was implemented e ective January 2005. By 2006, the ASC
became the FRSC, which was created under the implementing rules of the Philippine
Accountancy Act of 2004. Today, the FRSC monitors the technical activities of the IASB and
issues invitations to comment on exposure drafts of proposed
IFRSs issued by the IASB. If adopted, they are issued as PFRSs. Similarly, the issuances of the
International Financial Reporting Interpretations Committee, if adopted, are issued as
Philippine Interpretations.

Dennis B. Funa is the current insurance commissioner. Funa was appointed by President
Duterte as the new insurance commissioner in December 2016. E-mail:
dennisfuna@yahoo.com.

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