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Learning Activity Sheet No. 2

Topic : THE ACCOUNTANCY PROFESSION

Learning Objectives: After reading this Learning Activity Sheet, YOU

MUST be able to:
1. Describe the practice of the accountancy profession in the
Philippines.
2. Understand the Continuing Professional Development in the field of
accounting.
3. Know the meaning of generally accepted accounting principles.
4. Identify the standard-setting body in the Philippines.
5. Describe the creation of the International Accounting Standards
Board.
6. Know the meaning of IFRS.

The Accountancy Profession

Republic Act No. 9298 is the law regulating the practice of accountancy
in the Philippines. This law is known as the “Philippine Accountancy Act of 2004.”

Accountancy has developed as a profession attaining a status equivalent

to that of law and medicine.

In the Philippines, in order to qualify to practice the accountancy

profession, a person must finish a degree in Bachelor of Science in Accountancy
and pass a very difficult government examination by the Board of Accountancy.

The Board of Accountancy is responsible for preparing and grading the

Philippine CPA examination.

This computer-based examination is offered twice a year, one in May and

another one in October, in authorized testing centers in the country.

Limitation of the Practice of Public Accountancy

Single practitioners and partnerships for the practice of public

accountancy shall be registered certified public accountants in the Philippines.

A certificate of accreditation shall be issued to certified public accountants

in public practice only upon showing in accordance with rules and regulations
promulgated by the Board of Accountancy (BoA) and approved by the
Professional Regulation Commission (PRC) that such registrant has acquired a

PREPARED BY: MR. RODEL E. CAHILIG, MSA | Updated: September, 2022

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minimum of three years of meaningful experience in any of the areas of public
practice including taxation.

The Securities and Exchange Commission shall not register any

corporation organized for the practice of public accountancy.

Accreditation to Practice Public Accountancy

Certified public accountants, firms, and partnerships of certified public

accountants, including partners and staff members thereof, are required to
register with the Board of Accountancy and Professional Regulation Commission
for the practice of public accountancy.

The Professional Regulation Commission upon favorable recommendation

of the Board of Accountancy shall issue the Certificate of Registration to practice
public accountancy which shall be valid for 3 years and renewable every 3
years upon payment of required fees.

Certified Public Accountants generally practice their profession in four (4)

main areas, namely:

1. Public Accounting (Public Practice)

2. Private Accounting (Commerce and Industry)
3. Government Accounting (Government)
4. Academe / Education

Public Accounting

The field of public accounting or public accountancy is composed of

individual practitioners, small accounting firms and large multinational
organizations that render independent and expert financial services to the
public.

Public accountants usually offer three (3) kinds of services, namely

auditing, taxation and management advisory services.

Auditing

Auditing or external auditing is the examination of financial

statements by an independent certified public accountant for the purpose
of expressing an opinion as to the fairness with which the financial
statements are prepared. This is the attest function of independent CPAs.

Taxation

Taxation service includes the preparation of annual income tax

returns, monthly or quarterly tax returns, and determination of tax
consequences of certain proposed business endeavors.

PREPARED BY: MR. RODEL E. CAHILIG, MSA | Updated: September, 2022

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Management Advisory Services

The term management advisory services have no precise coverage

but are used generally to refer to services to clients on matters of
accounting, finance, business policies, organization procedures, product
costs, distribution and many other phases of business conduct and
operations.

Specifically, management advisory services include:

1. Advice on the installation of computer system

2. Quality control
3. Installation and modification of accounting system
4. Budgeting
5. Forward planning and forecasting
6. Design and modification of retirement plans
7. Advice on mergers and consolidations

Private Accounting

Many Certified Public Accountants are employed in business entities in

various capacities as accounting staff, chief accountant, internal auditor and
controller.

The major objective of the private accountant is to assist management in

planning and controlling the entity’s operations.

Private accounting includes maintaining the records, producing the

financial reports, preparing the budgets and controlling and allocating the
resources of the entity.

The private accountant has also the responsibility for the determination of
the various taxes the entity is obliged to pay.

Government Accounting

Government accounting 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.

The focus of government accounting is the custody and administration of

public funds.

Many Certified Public Accountants are employed in many branches of the

government, more particularly:

1. Bureau of Internal Revenue (BIR)

2. Commission on Audit (COA)
3. Department of Budget and Management (DBM)

PREPARED BY: MR. RODEL E. CAHILIG, MSA | Updated: September, 2022

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4. Securities and Exchange Commission (SEC)
5. Bangko Sentral ng Pilipinas (BSP)

Academe / Education

This shall constitute a person in an educational institution which involves

the teaching of accounting, auditing, management advisory services, finances,
business law, taxation, and other technically related subjects: Provided that
members of the Integrated Bar of the Philippines may be allowed to teach
business law and taxation subjects.

Continuing Professional Development (CPD)

Republic Act No. 10912, otherwise known as the “Continuing Professional

Development (CPD) Act of 2016”, is the law mandating and strengthening the
continuing professional development program for all regulated professions,
including the accountancy profession.

All CPAs shall abide by the requirements, rules, and regulations on

continuing professional development to be promulgated by the Board of
Accountancy, subject to the approval of the Professional Regulatory Commission,
in coordination with the accredited national professional organization of certified
public accounts or any duly accredited educational institutions.

Continuing Professional Development refers to the inculcation and

acquisition of advanced knowledge, skill, proficiency, and ethical and moral
values after the initial registration of the Certified Public Accountant for
assimilation into professional practice and lifelong learning.

CPD Credit Units

The CPD credit units refer to the CPD credit hours required for the
renewal of a CPA license and accreditation of a CPA to practice the
accountancy profession every three years.

Under BoA Resolution No. 254 Series of 2017, the minimum CPD
units in a 3-year Compliance Period is as follows:

Year of Renewal Required Number of CPD Credit Units

January – June 30, 2017 60
July 1 – December 31, 2017 80
2018 100
2019 onwards 120

All Certified Public Accountants regardless of area or sector of

practice shall be required to comply with 120 CPD credit units.

Based on the Professional Regulations Commission Resolution 2019-

1146, only 15 CPD credit units are required for the renewal of a CPA
license.

PREPARED BY: MR. RODEL E. CAHILIG, MSA | Updated: September, 2022

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Note that, excess credit units earned shall not be carried over to the
next three-year period, except for credit units earned for master's and
doctorate degrees.

Exemptions from CPD

A CPA shall be permanently exempted from CPD requirements

upon reaching the age of 65 years for renewal of a CPA license only.

Hence, he/she is still required to earn CPD credit units for the
purpose of accreditation to practice the accountancy profession.

Generally Accepted Accounting Principles (GAAP)

Generally accepted accounting principles represent the rules, procedures,

practices, and standards followed in the preparation and presentation of
financial statements.

Purpose of Accounting Standards

The overall purpose of accounting standards is to identify proper

accounting practices for the preparation and presentation of financial
statements.

Accounting standards create a common understanding between

preparers and users of financial statements particularly the measurement of
assets and liabilities.

A set of high-quality accounting standards is a necessity to ensure

comparability and uniformity in financial statements based on the same financial
information.

There are three (3) standards-setting and interpretation organizations in

the Philippines that recommend the standards, rules and interpretative
pronouncements on accountancy and auditing. These three organizations are:

1. Financial Reporting Standards Council (FRSC)

2. Auditing and Assurance Standards Council (AASC)
3. Philippine Interpretations Committee (PIC)

Financial Reporting Standards Council (FRSC)

In the Philippines, the development of generally accepted accounting

principles is formalized initially through the creation of the Accounting
Standards Council (ASC).

The Financial Reporting Standards Council (FRSC) now replaces the

Accounting Standards Council.

The FRSC is the accounting standard-setting body created by the

Professional Regulation Commission upon recommendation of the Board of

PREPARED BY: MR. RODEL E. CAHILIG, MSA | Updated: September, 2022

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Accountancy to assist the BoA in carrying out its powers and functions provided
under R.A. No. 9298.

The main function is to establish and improve accounting standards that

will be generally accepted in the Philippines.

The accounting standards promulgated by the FRSC constitute the

“highest hierarchy” of generally accepted accounting principles in the
Philippines.

The approved statements of the FRSC are known as the Philippine

Financial Reporting Standards (PFRS) and Philippine Accounting Standards (PAS).

Previously, standards issued by the ASC were designated as Statement of

Financial Accounting Standards (SFAS).

Composition of FRSC

The FRSC shall be composed of sixteen (16) members with a Chairman

who had been or is presently a senior accounting practitioner in any of the scope
of accounting practice, and fifteen (15) representatives from the following:

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 composed of preparers and users of
financial statements – Financial Executives
Institute of the Philippines or FINEX 1
Accredited National Professional Organization of CPAs:
Public Practice 2
Commerce and Industry 2
Academe or Education 2
Government 2
Insurance Commission 1
Total 15

The Chairman and Members of the FRSC shall be through an appointment

made by the Professional Regulation Commission (Commission), upon the
recommendation of the Board, in coordination with the Accredited and
Integrated Professional Organization of CPAs. The FRSC Chairman and Members
shall have a term of three (3) years, renewable for another term.

Update! Professional Regulatory Board of Accountancy issued a

Resolution No. 29 Series of 2022 increasing the membership and designating
new members of the Financial Reporting Standards Council. The Board
unanimously agreed that the membership in the FRSC be increased from
fifteen (15) to sixteen (16) to include a representative for the Insurance
Commission (IC).

PREPARED BY: MR. RODEL E. CAHILIG, MSA | Updated: September, 2022

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Philippine Interpretations Committee (PIC)

The Philippine Interpretations Committee (PIC) was formed by the FRSC

in August 2006 to prepare interpretations of PFRS for approval by the FRSC and
to provide timely guidance on financial reporting issues not specifically
addressed in the current PFRS.

New Old
Philippine Interpretations Committee Interpretations Committee (IC)
(PIC) formed by ASC in May 2000

The counterpart of the PIC in the United Kingdom is the International

Financial Reporting Interpretations Committee (IFRIC) which has already
replaced the Standing Interpretations Committee (SIC).

International Accounting Standards Committee (IASC)

The International Accounting Standards Committee (IASC) is an

independent private sector body, with the objective of achieving uniformity in the
accounting principles which are used by businesses and other organizations for
financial reporting around the world.

It was formed in June 1973 through an agreement made by professional

accountancy bodies from Australia, Canada, France, Germany, Japan, Mexico,
the Netherlands, the United Kingdom and Ireland, and the United States of
America. The IASC is headquartered in London, United Kingdom.

Objectives of IASC

a. To formulate and publish in the public interest accounting standards to

be observed in the presentation of financial statements and to promote
their worldwide acceptance and observance.

b. To work generally for the improvement and harmonization of

regulations, accounting standards and procedures relating to the
presentation of financial statements.

International Accounting Standards Board (IASB)

The International Accounting Standards Board (IASB) now replaces the

IASC.

The IASB publishes standards in a series of pronouncements called

International Financial Reporting Standards (IFRS).

However, the IASB has adopted the body of standards issued by IASC. The
pronouncements of the IASC continue to be designated as International
Accounting Standards (IAS).

The IASB standard-setting process includes in the correct order research,

discussion paper, exposure draft, and accounting standard.

PREPARED BY: MR. RODEL E. CAHILIG, MSA | Updated: September, 2022

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Move towards IFRS

In developing accounting standards that will be generally accepted in the

Philippines, standards issued by other standard-setting bodies such as the USA
Financial Accounting Standards Board (FASB) and the IASB are considered.

The first 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 were
patterned after the US GAAP. Our standards were essentially patterned after the
standards of the United States Financial Accounting Standards Board (FASB).
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 effective January 2005. By 2006, the ASC became the FRSC, which
was created under the implementing rules of the Philippine Accountancy Act of
2004.

The following factors are considered in deciding to move totally to

international accounting standards:

a. Support of international accounting standards by Philippine

organizations, such as the Philippine SEC, Board of Accountancy and
PICPA.

b. Increasing internalization of business which has heightened interest in

a common language for financial reporting.

c. Improvement of international accounting standards or removal of free

choices of accounting treatments.

d. Increasing recognition of international accounting standards by the

World Bank, Asian Development Bank and World Trade Organization.

Philippine Financial Reporting Standards (PFRS)

The Philippine Financial Reporting Standards (PFRS) collectively include

all of the following:

a. Philippine Financial Reporting Standards (PFRS) which correspond to

International Financial Reporting Standards (IFRS).

The PFRS are numbered the same as IFRS.

PREPARED BY: MR. RODEL E. CAHILIG, MSA | Updated: September, 2022

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b. Philippine Accounting Standards (PAS) which correspond to
International Accounting Standards (IAS).

The PAS is numbered the same as IAS.

c. Philippine Interpretations which correspond to Interpretations of the

IFRIC and SIC, and Interpretations developed by the PIC.

PREPARED BY: MR. RODEL E. CAHILIG, MSA | Updated: September, 2022