Professional Documents
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Ae3 Ae6 Review
Ae3 Ae6 Review
FINANCIAL REPORTING
The objective of general purpose financial reporting is to provide financial information that is
useful to users in making decisions relating to providing resources to the entity.
What would happen the first time the country experienced substantial and persistent
inflation?
When the foreign country offers a balance sheet and income statement for analysis, several
things become immediately evident.
National accounting standards made sense when companies raised money, and investors and
lenders looked for investment opportunities, in their home country.
In 1981, the Philippine Institute of Certified Public Accountants ( PICPA ) created the Accounting
Standards Council ( ASC ) to formalize the accounting standard-setting function in the Philippines.
• Its main function was to establish and improve accounting standards that would be
generally accepted in the Philippines.
• The approved statements of the ASC were called, ”Statement of Financial Accounting
Standards ( SFAS ) which were still principally based on accounting standards issued by
the US-based Financial Accounting Standards Board ( FASB ).
• Between 1997 and 2004, the Philippines started adopting the International Financial
Accounting Committee ( IASC ).
• The IASC was reorganized in 2001 and is now known as the International Accounting
Standards Board ( IASB ).
• The decision to move totally to International Accounting Standards was prompted by the
a. Support of the Philippine Regulatory Agencies such as the Board of Accountancy,
Securities and Exchange Commission, Bangko Sentral ng Pilipinas and the Philippine
Institute of CPAs ( PICPA ).
b. Increasing internationalization of business which heightened the interest in a common
language for financial reporting.
c. Increasing recognition of International Accounting Standards by the World Bank, Asian
Development Bank and World Trade Organization.
• In 2004, the Accounting Standard Council ( ASC ) was replaced by the Financial Reporting
Standards Council ( FRSC ).
• The FRSC is now the accounting standard setting body in the Philippines created by the
Professional Regulation Commission upon the recommendation of the Board of
Accountancy ( BOA ) to assist BOA in carrying out its powers and functions provided under
RA No. 9298, known as the Philippine Accountancy Act of 2004.
OPERATING CAPABILTY
Operating capability refers to the ability of a company to maintain a given physical level of
operations. This level of operations may be indicated by the quantity of goods or services
(e.g., inventory) of a specified quality produced in a given period or by the physical capacity
of the fixed assets (e.g., property, plant, and equipment)
REPORTING ENTITY - an entity that chooses or is required to prepare financial statements and is
not necessarily a legal entity.
Financial statements may be presented in any of the following forms:
1. Consolidated financial statements
2. Unconsolidated financial statements
3. Combined financial statements
ECONOMIC DEVELOPMENT
DEVELOPMENT
- achieving sustained rates of growth of income per capita to enable a nation to expand its
output at a rate faster than the growth rate of its population.
Levels and rates of growth of “real” per capita gross national income (GNI) (monetary growth of
GNI per capita minus the rate of inflation) are then used to measure the overall economic well-
being of a population—how much of real goods and services is available to the average citizen
for consumption and investment.
• Sustenance The Ability to Meet Basic Needs. All people have certain basic needs without
which life would be impossible. These life-sustaining basic human needs include food, shelter,
health, and protection.