1 INTRODUCTION TO STANDARDS

• International Standard Setting Bodies – Q&A#1

• Development of Accounting Standard – Q&A#2-10
• Philippine Standard Setting Bodies – Q&A#11-14

INTERNATIONAL ACCOUNTING STANDARD SETTING BODIES
1. Who is responsible for the development of international accounting and financial reporting
standard?
Below is the organizational structure of the International Accounting Standard Setting
Body who is mainly responsible for the issuance of International Accounting standards.

IFRS Foundation
It is a not-for-profit international organization responsible for overseeing the work of the
International Accounting Standards Board (IASB), the structure and strategy. It has also a fund-
raising responsibility. The foremost objective of the IFRS Foundation is to develop, in the public
interest, a single set of high quality, understandable, enforceable and globally accepted financial
reporting standards based on clearly articulated principles.

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Monitoring Board
It is a group of capital market authorities and provides formal link between the Trustees
and public authorities in order to enhance the public accountability of the IFRS Foundation.
Specifically, it oversees the IFRS Foundation Trustees, participates in the Trustees nomination
process, and approves appointments to the Trustees.

International Accounting Standards Board (IASB)
In order for the IFRS Foundation to carry its mission as the standard setting body, the IASB
was created. It is the independent standard-setting body of IFRS Foundation responsible for the
development and publication of International Financial Reporting Standards (IFRS) and for
approving interpretations of IFRS as developed by the IFRS Interpretations Committee. It was
formed in 2001 to replace the International Accounting Standards Council.

Normally it has 14 board members, of whom one is appointed as Chair and one as Vice
Chair. IASB members has initial term of five years, with renewal option (only once) of three years
or a maximum of five years.

The constitution requires four members from Asia/Oceania; four from Europe; four from
Americas; one from Africa and one appointed from any area, subject to maintaining overall
geographical balance.

IFRS Interpretations Committee
It is the interpretative body of the International Accounting Standards Board, which
reviews the implementation issues. There are fourteen voting members, appointed by the IFRS
Foundation Trustees for renewable terms of three years.

IFRS Advisory Council
It provides advice and counsel to the Trustees and the Board, whilst the Board also
consults extensively with a range of other standing advisory bodies and consultative groups.

Accounting Standards Advisory Forum (ASAF) –
It provides an advisory forum in which members can constructively contribute towards
the achievement of the IASB’s goal of developing globally accepted high-quality accounting
standards.

DEVELOPMENT OF ACCOUNTING STANDARD
2. Is there a proper guideline followed by IASB and IFRS Interpretation Committee in
developing an accounting standard?
The Due Process Handbook (August 2020) provides the full processes which helps the
IASB and IFRS Interpretation Committee to follow a thorough, transparent and participatory
due process issuances of IFRS standards and interpretations.

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3. What are the three principles followed by the DUE PROCESS in order to carry out the mission
of the IASB?
The due process requirements are built on the following principles: transparency, full and
fair consultation and accountability.

4. What are the mandatory due process steps that must be followed to protect the integrity
of the standard – setting process?
a. Debating any proposals in one or more public meetings
b. Exposing for public comment a draft of any proposed new Standard, proposed
amendment to a Standard or proposed Interpretations – with minimum comment
period.
c. Considering in timely manner those comment letters received on the proposals
d. Considering whether the proposals should be exposed again
e. Reporting to the Advisory Council on the technical program, major projects, project
proposals and work priorities and
f. Ratification of an interpretation by the IASB.

5. What are the basic steps in developing an accounting standard?
STEP 1: Agenda Consultation
The IASB is required to undertake public consultation on its work program every five years
by way of a public Request for Information. The IASB normally allows a minimum of 120 days
to comment on that work program. The primary objective is to seek formal public input on
the strategic direction and balance of the IASB’s work program, including the criteria for
assessing projects that may be added to the IASB’s standards level program. It may also
include a review that could seek views on financial reporting issues that respondents think
should be given priority by the IASB, together with any proposals to withdraw from the IASB’s
work program any projects that have not proceeded as planned and for which the prospects
for progress is limited.

STEP 2: Research Program
Main Purpose – is to analyze possible financial reporting problems by collecting evidence
on the nature and extent of the perceived shortcoming and assessing potential ways to
improve financial reporting or to remedy a deficiency.

Main Output – Discussion Paper and Research Paper. It is a comprehensive review of the
issue, possible approaches to address the issue, the preliminary views of its authors or
the IASB and an invitation to comment. The IASB normally allows at least 120 days for
comment on a Discussion Paper, a research paper and a Request for Information. For
other request of information it allows for 60 days for comment.

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STEP 3: Standard Setting Program

If the Board decides to amend standard or issue a new one, the board will review the
discussion paper and published an exposure draft for public consultation. The IASB normally
allows 120 days to comment on Exposure Drafts.

Criteria for New Standards or Major Amendments
• Whether there is a deficiency in the way particular types of transactions or activities
are reported in financial reports.
• The importance of the matter to those who use financial reports
• The types of entities likely to be affected by any proposals, including whether the
matter is more prevalent in some jurisdictions than others
• How pervasive or acute a particular financial reporting issues is likely to be for entities.

STEP 4: Maintenance Program
The process includes consulting on the implementation of a new or amended Standard to
identify any implementation problems that may need to addressed. If issues arise, the IFRS
Interpretations Committee may decide to create an IFRIC Interpretations of the Standards
or recommend a narrow scope amendment. Post Implementation Review (PIR) is also part
of this step.

6. What is the minimum voting requirements for all important IASB decisions?
Publications Minimum Requirements
Request for Information; Research Paper Simple majority in a public meeting attended by at
least 60% of the IASB members.
Discussion Papers Simple majority, by way of ballot
Exposure Draft; Proposed IFRS for SMEs; IFRS; IFRS Super majority, by way of ballot
for SMEs
Practice Guidance Super majority, by way of ballot
Conceptual Framework Super majority, by way of ballot
Draft Interpretations No more than 4 members of the Interpretations
Committee object, by way of ballot.
Interpretation No more than 4 members of the Interpretation
Committee object, by way of ballot.

Ratification by the IASB requires a supermajority,
in a public meeting
Proposed IFRS Taxonomy Update document Super majority, by way of ballot
IFRS Taxonomy Update document Super majority, by way of ballot

7. What is supermajority?
Supermajority requires 8 IASB members (by ballot) in favor of the publication of a
document if it has 13, or fewer appointed members. However, If the IASB has 14 appointed

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members, the requirement for supermajority is 9 members (by ballot). Abstaining is

equivalent to voting against a proposal.

8. What are the mandatory parts of an Accounting Standard?
The mandatory parts of a Standard are:
• The principles and the related application guidance
• The defined terms
• The effective date and transition paragraphs

Each standard is also normally accompanied by additional materials that is not integral
part of the standard:
• A table of contents
• An introduction
• The basis of conclusion
• Dissenting opinions

9. What are the different accounting standards adopted in the Philippines?
The PFRS collectively include all of the following accounting standards:
• Philippine Financial Reporting Standards (PFRS) which corresponds to International
Financial Reporting Standards. The PFRS are numbered the same way as the IFRS. (16
PFRS)
• Philippine Accounting Standards which corresponds to International Accounting
Standards. The PAS are numbered the same way as the IAS. (25 IAS)
• Philippine Interpretations which correspond to Interpretations of the IFRIC (15 IFRIC)
and the Standing Interpretations Committee (SIC) (5 SIC), and Interpretations
developed by the Philippine Interpretations Committee.
International Financial Reporting Standards (IFRS) – as of 2020
IFRS 1 – First- Time Adoption of International Financial IFRS 10 – Consolidated Financial Statements
Reporting Standards
IFRS 2 – Share – Based Payment IFRS 11 – Joint Arrangements
IFRS 3 – Business Combinations IFRS 12 – Disclosure of Interests in Other Entities
IFRS 5 – Non-current Assets held for Sale and Discontinued IFRS 13 – Fair Value Measurement
Operations
IFRS 6 – Exploration for and Evaluation of Mineral IFRS 14 – Regulatory Deferral Accounts
Resources
IFRS 7 – Financial Instruments: Disclosures IFRS 15 – Revenue from Contracts with Customers
IFRS 8 – Operating Segments IFRS 16 – Leases
IFRS 9 – Financial Instruments IFRS 17 – Insurance Contracts
International Accounting Standard (IAS) – as of 2020
IAS 1 – Presentation of Financial Statements IAS 27 – Separate Financial Statements
IAS 2 – Inventories IAS 28 – Investment in Associates and Joint Ventures
IAS 7 – Statement of Cash Flows IAS 29 – Financial Reporting in Hyperinflationary
Economies
IAS 8 – Accounting Policies, Changes in Accounting IAS 32 – Financial Instruments: Presentation
Estimates and Errors
IAS 10 – Events after Reporting Period IAS 33 – Earnings per Share

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IAS 12 – Income Taxes IAS 34 – Interim Financial Reporting

IAS 16 – Property, Plant and Equipment IAS 36 – Impairment of Assets
IAS 19 – Employee Benefits IAS 37 – Provisions, Contingent Liabilities and
Contingent Assets
IAS 20 – Accounting for Government Grants and Disclosure IAS 38 – Intangible Assets
of Government Assistance
IAS 21 – The Effects of Changes in Foreign Exchange Rates IAS 39 – Financial Instruments: Recognition and
Measurements
IAS 23 – Borrowing Costs IAS 40 – Investment Property
IAS 24 – Related Party Disclosures IAS 41 - Agriculture
IAS 26 – Accounting and Reporting by Retirement Benefit Plans

10. Why do we have two different accounting standards, namely IFRS and IAS?
The IAS (International Accounting Standards) were published by the International
Accounting Standards Committee (IASC) between 1973 and 2001. In 2001, the organization
was restructured to become the International Accounting Standards Board (IASB), it was
agreed to adopt the set of standards that were issued by IASC, but any standards to be
published after that would follow a series known as the International Financial Reporting
Standards (IFRS).

The principles of the IFRS takes precedence if there’s a contradiction with those of the
IAS, thus resulting for some of the IAS principles being dropped. For example, IAS 3 is
Consolidated Financial Statement but this is no longer part of the current accounting
standards because it is superseded or replaced by IAS 27 and IAS 28.

PHILIPPINE ACCOUNTING STANDARD SETTING BODIES
11. Is there a law governing the Accountancy Practice in the Philippines?
Yes. The law governing the practice of Accountancy in the Philippines is the Philippine
Accountancy Act of 2004 – RA9298. The PRC – BOA is tasked to adopt the rules and
regulations necessary to carry out the provisions of the law.

12. What is the setup of the accounting governing bodies in the Philippines?
In July 2005, the Philippines adopted the Philippine Financial Reporting Standards which
are fully converged with the International Financial Reporting Standards. Below are the key
players of the accounting profession in the country.

Philippine Regulatory Commission – Board of Accountancy (PRC – BOA)
The two important functions of the PRC are:
• Conducts and administer licensure examinations to aspiring professionals and
• Regulates and supervises the practice of the profession. The Board of Accountancy is a
leg of PRC that regulates the accountancy profession.

Financial Reporting Standards Council (FRSC)
The successor of the Accounting Standards Council (ASC) whose main function is to
establish GAAP in the Philippines. FRSC was established by the Board of Accountancy (BOA)

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in 2006 under the Implementing Rules and Regulations of the Philippine Accountancy Act of
2004 – RA 9298.

PRC BOA

SEC, BIR, BSP, ACCOUNTANCY PUBLICLY

IC, COA, CDA, LISTED
ERC, PROFESSION COMPANIES

PICPA

ACPACI
ACCOUNTANCY FRSC, AASC,PIC,
STUDENTS, JPIA IAS

NACPAE ACPAPP

CHED, RQAT,
SCHOOLS, GACPA
COLLEGES AND
UNIVERSITIES FINEX, MAP,
OFFERING PAMA
ACCOUNTANCY
, CPD
PROVIDERS INTERNATIONA
L ACCOUNTING
FIRMS, IFAC,
CAPA,AFA

Illustration on the relationships of the different governing bodies, accounting groups, professions and other
interested parties under the Philippine setting.

Furthermore, FRSC monitors the technical activities of the IASB and invites comments on
exposure drafts of proposed IFRS’s and when it is finalized it will be adopted as PFRS. The FRSC
also monitors the issuances of IFRIC which adopts it as Philippine Interpretations. The adopted
PFRS and Philippine Interpretations will be submitted for approval to the BOA and PRC.

It is composed of fifteen Members. The Chairman should had been or is presently a senior
accounting practitioner and 14 representatives are coming from: BOA (1); SEC (1); BSP (1); BIR
(1); COA (1); FINEX (1); PICPA -Public Practice (2); PICPA - Commerce and Industry(2); PICPA -
Academe (2) and PICPA - Government (2). The chairman and the members shall have a three year
term renewable for another term.

Philippine Interpretations Committee (PIC)
PIC was formed by the FRSC in August 2006 to assist the FRSC in establishing and
improving the financial reporting standards of the Philippines.

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Main objectives:
• Principally, to issue implementation guidance on PAS, PFRS and related interpretations
adopted by the FRSC from accounting pronouncements issued by IASB
• To comment on exposure draft of proposed PFRS and other documents that may be
issued for comment by the FRSC.
• To comment on exposure draft of proposed accounting standards or proposed
regulations with accounting relevance that may be issued by government agencies, such
as the SEC, BSP and Insurance Commission

There are fifteen Representatives: Nine Accounting Firms; FINEX (1); Academe (1); SEC
(1); BSP (1); Insurance Commission (1); BOA (1). Each member shall serve for 3 years and may be
re-appointed subject to the approval of PIC members and FRSC.

Auditing and Assurance Standards Council (AASC)
The AASC was created by PRC upon recommendation of the BOA to assist the BOA in
establishing and promulgating auditing standards in the Philippines.

The AASC is mandated to make the International Standards and Practice Statements
issued by the International Auditing and Assurance Standards Board (IAASB) the applicable
standards and practice statements in the Philippines. Furthermore, to facilitate its
implementation and making the International Standards and Practice Statements in Philippine
specific and described as “Philippine Standards and Practice Statements.

Each auditing standards adopted and its interpretations will be submitted to the PRC
through BOA for approval after which the pronouncement will be published to the Official
Gazette.

AASC shall have 15 regular members: Chairman (1); BOA (1); SEC (1): BSP(1); COA (1);
ACPAPP (1); PICPA – Public Practice – (6); PICPA- Commerce and Industry (1); PICPA – Education
– (1); PICPA – Government (1).

Philippine Institute of Certified Public Accountants (PICPA)
PICPA is the only accredited national organization of CPAs in the Philippines. Its primary
function is to establish programs for the benefit and welfare of the CPAs, for the advancement
of the profession and the attainment of other professional ends.

The PICPA recognizes the four sectors by which a CPA may be practicing:
• Public Practice (ACPAPP – Association of Certified Public Accountants in Public Practice)
• Commerce and Industry (ACPACI – Association of Certified Public Accountants in
Commerce and Industry)
• Education/Academe (nACPAE – National Association of Certified Public Accountants in
Education).

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• Government (GACPA – Government Association of Certified Public Accountants).

Council for Accreditation and Quality Control of Practicing CPAs
• Security and Exchange Commission (SEC) - Accredits practitioners who audit publicly
listed companies, companies with at least P50million worth of assets and companies
with secondary licenses.
• Bangko Sentral ng Pilipinas (BSP) - Accredits practitioners who audit banks and other
financial institutions.
• Insurance Commission (IC) - Accredits practitioners who audit insurance companies
• Board of Accountancy (BOA) - Accredit CPAs in public practice with basic requirements.

13. What is CPD?
CPD is Continuing Professional Development which refers to the inculcation of advanced
knowledge, skills and ethical values in a post-licensure specialization or an inter or
multidisciplinary field of study, for assimilation into professional practice, self-directed
research and/or lifelong learning.

14. How many CPD units required for the accounting profession?
The required CPD units for all CPAs, regardless of area/sector of practice is 120 units
within a compliance period of 3 years. The required minimum units to be earned is 20 units
from each of the two immediately preceding years.

Furthermore, a minimum of 40 units from the 120 units must be earned from the three
thematic areas: (a) Technical competence – minimum of 30 units; (b)Professional Skills –
minimum of 5 units; (c) Professional values, ethics and attitudes – minimum of 5 units.

The remaining 80 units of the 120 units are flexible CPD units, which are CPD learning
activities that may be earned by spending training or seminar hours beyond the minimum
competence areas.

SUMMARY KEY POINTS
• The International Accounting Standards Board (IASB) is responsible for the development
and publication of International Reporting Standards and approving interpretations of
IFRS.
• Due Process Handbook (August 2020) provide guidelines to IASB and IFRS in the
development of an accounting standard.
• There are four steps in developing a standard (1) Agenda consultation (2) Research
program (3) Standard Setting Bodies and (4) Maintenance Program
• The principles and the related application guidance, the defined terms and the effective
date and transition paragraphs are the only mandatory parts of a standard.
• The Philippine Accounting Standards includes the Philippine Financial Reporting Standards
(PFRS), Philippine Accounting Standards (PAS) and Philippine Interpretations

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• RA9298 is the law governing the accountancy practice in the Philippines and the PRC –
BOA is tasked to carry out the provision of the law.
• Financial Reporting Standards Council (FRSC) is the local counterpart of IASB whose main
function is to establish the generally accepted accounting principles (GAAP) in the
Philippines. It is composed of 15 members.
• PICPA is the only accredited national organization of CPAs in the Philippines. There are
four sectors in which a CPA can practice his profession: Public Practice, Commerce and
Industry, Education and Government.
• A CPA is required to have earned 120 units of Continuing Professional Development (CPD)
to advanced his knowledge, skills and ethical values.






Exercise 1-1 Identification.
Read the statement carefully and identify the proper term, principle or accounting standard
setting bodies.

1. It is the interpretative body of the international accounting standard board and reviews
the implementation issues.
2. If the IASB has 13 or fewer members appointed, this is the number of IASB members
constitute as supermajority.
3. This are accounting standards issued by International Accounting Standards Committee.
4. They are the one who conducts and administer licensure examinations to aspiring
professionals.
5. They are the one who accredits practitioners who audit publicly listed companies.
6. They are the one who assist the Board of Accountancy in establishing and promulgating
auditing standards in the Philippines.
7. It is the only accredited national organization of CPAs in the Philippines.
8. They are responsible for overseeing the work of the International Accounting Standards
Board.
9. This is a document that is issued by the Board but prepared by technical staff.
10. It is the law governing the practice of Accountancy in the Philippines.

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Exercise 1-2 Multiple Choice. Choose the best answer

1. Under the Philippine Accountancy Act of 2004 or RA 9298, The Professional Regulatory
Board of Accountancy shall be composed of
a. Chairman and six members to be appointed by the President of the Philippines
b. Chairman, Vice chairman and six members to be appointed by the President of
the Philippines
c. Chairman and six members to be appointed by PICPA
d. Chairman and six members to be appointed by PRC.

2. Which statement is correct regarding the Financial Reporting Standards Council?
a. Established by PICPA in 2006 under the Implementing Rules and Regulations of
the Philippine Accountancy Act of 2004.
b. The main function is to establish generally accepted auditing standards in the
Philippines.
c. The chairman and the 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 which was
created in November 1981 by the Philippine Institute of Certified Public
Accountants (PICPA)

3. The FRSC was created by the Board of Accountancy to assist the BOA in carrying out its
power and function to
a. Promulgate accounting standards in the Philippines
b. Promulgate auditing standards in the Philippines
c. Ensure that all higher educational instruction and offering accountancy comply
with the policies, standards and requirements of the course prescribe by CHED
d. Implement the CPE program.

4. Which of the following is correct regarding 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 should be CPAs
d. FRSC members serve for a term of three years renewable for another term

5. Financial Reporting Standards Council has
a. 14 members with a Chairman c. 16 members with a Chairman
b. 15 members with a Chairman d. 8 members with a Chairman

6. The chairman of the FRSC should have been or presently a senior practitioner in
a. Public accountancy c. Academe
b. Commerce and Industry d. Any scope of accounting practice

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7. Which of the following government agency is not represented in FRSC?

a. Bangko Sentral in Pilipinas c. Bureau of Internal Revenue
b. Securities and Exchange Commission d. Commission of Higher Education

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

9. The purpose of IASB is to
a. Issue enforceable standards which regulate the financial accounting and
reporting of multinational corporations
b. Develop a uniform currency in which the financial transactions of companies
through out the world would be measured.
c. Develop a single set of high-quality IFRS
d. Arbitrate accounting disputes between auditors and international companies.

10. The IASB standard setting structure includes all of the following except:
a. Financial Reporting Interpretations Committee
b. Standards Advisory Council
c. Standards Comparison Committee
d. Trustees

11. In “due process” system used by the IASB in the evolution of a typical IASB Standard.
The chronological order of the following documents are released is as follows:
I – Exposure Draft
II – IASB Standard
III – Discussion Paper
a. I, II and III b. I,III and II c. II, III, I d. III,I,II

12. 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

13. Which of these statements regarding the IFRS and US GAAP is correct?
a. IFRS is considered to be “principled based” and less detailed than US GAAP
b. Both US GAAP and IFRS are considered to be “rules based”, but US GAAP tends to
be more complex
c. US GAAP is considered to be “rules-base” and less detailed than IFRS.
d. US GAAP is considered to be “principled based and more detailed than IFRS.

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14. Which of the following statements describes the effects of adopting high-quality
accounting standards?
a. Elimination of earnings management
b. Higher abnormal returns
c. Less volatility of accounting numbers
d. The adoption of high-quality accounting standards by countries with weak
regulatory environments will enable them to strengthen their capital markets.

15. Which of the following statements reflects one of the benefits of adoption of IFRS by
different countries?
a. Earnings management is eliminated
b. Cost of capital is lower for firms
c. There are no economic consequences when firms switch to IFRS from existing
GAAP
d. Volatility of earnings calculated using IFRS is zero

16. Which is not part of the accounting standard setting process in the Philippines?
a. Publication in the official Gazette or in newspaper of general circulation of the
proposed draft.
b. Approval of the final PFRS by the PRC
c. Exposure of the proposed draft for comments and suggestions to PICPA members,
FINEX members and other interested parties
d. Preparation of draft of proposed PFRS by a Task Force organized by the Chairman

17. Which statement is correct regarding the timing of application of PFRS?
a. PFRSs apply six months from a date of publication in the Official Gazette or in
newspaper of general circulation.
b. New or revised PFRSs set out transitional provisions to be applied on their initial
application.
c. Both a and b
d. Neither A nor B

18. Which of the following is a characteristic of the FRSC?
a. Majority of the FRSC members should come from CPA firms
b. All FRSC members must be CPAs
c. FRSC members are required to render service to the Council on a full time basis
d. All four sectors of the accountancy profession are represented in the FRSC
e. None of the above

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19. The FRSC issues its Standards in a series of pronouncements called PFRSs. These consists
of
a. PFRS b. PAS c. Philippine Interpretations d. All of these

20. What are the accounting principles commonly known as
a. Standards
b. Methods
c. Rules
d. Regulations

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