Chapter 1 Flashcards
generate general purpose financial statements that provide info, about economic entities, that is used as basis for the formulation of economic decisions
Purpose of Accounting Process
communication of financial statements and other financial info
Financial Reporting
purpose of financial reporting
To provide useful financial info to stakeholders
active owners and managers
Internal Users
users that have ready access to specific types of accounting information
Internal Users
users other than the management of the entity
External Users
users that do not have ready access to financial reports and rely heavily on negotiations and regulations
External Users
primary users of financial reporting are the external users
True
product of financial accounting
Financial Statements
general-purpose reports provided to external users
Financial Statements
assess the ability to pay loans and the interest attached to it
Present and potential creditors
whether the cost of goods and services will be paid when due
Suppliers of goods and services
continuation of the enterprise as a major customer
Suppliers of goods and services
concerned with the financial status of the enterprise
Employees
they check the ability to provide remuneration, retirement benefits and employment opportunities of companies
Employees
they are concerned in the continuance of an enterprise
Customers
concerned if they have long-term involvement with are their supplier
Customers
concerned with the interest of public investors and other parties dealing with it
Government Regulation
they check if it complied with the prescribed rules and regulations, taxation policies and collection
Government Regulation
they set basis for national income and similar statistics
Government Regulation
concerned with the trends and range of business entities’ economic activities
Public
users with direct interest in the financial information
Direct Users
tool to protect their own interest in the enterprise
Direct Users
they provide advice and protect the interest of a direct user
Indirect Users
they protect investors and public
Regulatory Agency
they protect employees
Labor Unions
they protect customers, lenders and suppliers
Financial and Legal Consultant
unit of measure used in communication accounting information
Monetary Unit
a unit that has a personality diff from the personality of its owners, members and employees
Reporting Entity/ Accounting Entity
concept that separates the personality of the enterprise from that of its owners and other stakeholder
Accounting Entity Concept/ Business Entity Concept
capable of controlling its own economic resources and incurring economic obligations
Accounting Entity
Branches of Accounting
Financial, Management, Cost, Tax, Government
broadest branch of accounting that is concerned with the needs of external users
Financial Accounting
common info needs of external users
Profitability, Liquidity and Stability
Financial accounting should conform to the accounting standards
True
2 main purpose of accounting standard
Relevance and Reliability
it serves to the needs of internal users (short-term and long-term plans and routine and major economic decisions)
Management Accounting
information is not structured and does not necessarily need to conform to accounting standards
Management Accounting
measurement and recognition of cost of services provided/products manufactured
Cost Accounting
deals with the computation of taxes and preparation of tax returns submitted to a taxing authority
Tax Accounting
receipt and disposition of government funds and property
Government Accounting
system adapted by government units and some government agencies
Government Accounting
one phase of accounting which is the recording phase
Bookkeeping
other phases of accounting
classifying, summarizing, communicating and interpreting
independent examination of financial statement by a CPA
Auditing
it is developed internally and is the representation of the company’s management
Financial Statements
1973; it developed a set of uniform global accounting standards
Internal Accounting Standards Committee (IASB)
incomparability is not an issue
International Accounting Standard (IAS)
2001; it is under the umbrella of IFRS Foundation
International Accounting Standards Board (IASB)
not for profit, public interest organization
International Financial Reporting Standards (IFRS)
develop a single set of high-quality, understandable, enforceable and globally accepted accounting standards
IFRS
standards that originated from the works of the IAS Committee and later improved/revised by the IASB
IAS
standards that originated from the works of the IASB
IFRS
IFRS include the following _____
ISIS
I of ISIS
Interpretation of IFRIC
IFRIC
International Financial Reporting Interpretations Committee
S of ISIS
Specific IFRS
second I of ISIS
International Accounting Standards
second S of ISIS
SIC
SIC
Standing Interpretations Committee
Overall objective of IASB
TAE
TAE
Transparency, Accountability and Efficiency
Overall objective of IASB
to communicate financial info that achieves TAE to financial markets around the world
enhancing the international comparability and quality of information
Transparency
reducing info gap between the investors and people
Accountability
another major sector of users of financial information
Regulators
helping investors identify opportunities and risks and improves capital allocation
Efficiency
Primary function of the IFRS Foundation
govern and oversee the activities of its standard-setting body (IASB)
IASB due process
APDESI
APDESI
Agenda, Planning the project, Discussion Paper, Exposure Draft, Standard, Issuance
may effectivity date and may date of issuance (ahead/equal to that of the ED)
Issuance
issue item that tackles about the relevance and reliability of the info
Agenda
members of staff from other accounting standard-setters; maybe jointly or alone
Working Group
it is not mandatory; comprehensive overview of the issue; tackles possible approaches in addressing the issue
Discussion Paper
preliminary views of its author/IASB and an invitation to comment
Discussion Paper
carried by another standard-setter; it only requires the simple majority vote of the IASB members
Research Project
carried out by the IASB
Active Agenda
main vehicle to consult the interested public
Exposure Draft
a proposed standard/proposed amendment to a standard
Exposure Draft
the comment period of the exposure draft
120 Days
the number of days for the IFRIC interpretations in the exposure draft
60 Days
if necessary a second draft may be written
True
sent to selected parties for review
Pre-ballot IFRS
posted on IASB’s website (limited access = 10 days; after then its freely available online)
Near Final Draft
circularizing the near final reporting standard to the IASB members
Balloting
it requires individual final review and approval of the draft
Balloting
IFRS are principle-based rather than procedure-based
True
organized to interpret specific issues when the standards do not include specific authoritative guidance
IFRIC
IFRIC consists of how many members
14 voting members
the year when BoA was formed and start of formal accounting in the Philippines
1923
IFRIC members should act independently and does not represent any org or associations
True
accredited professional org of CPA in the Philippines
Philippine Institute of CPA (PICPA)
formalized the standard setting process in the Phil
Accounting Standard Council (ASC)
year when ASC when formed
November 18, 1981
accounting standard developed by ASC
Statements of Financial Accounting Standards (SFAS)
they established and improved GAAP in the Phil
ASC
how many members does FRSC have?
15 members (1 chairman and 14 members)
how many members does ASC have?
8 members
body that regulates the practice of accountancy in the Philippines
Board of Accountancy (BoA)
Implementing Rules and Regulations of the Phil Accountancy Act
R.A. 9298
provide the council assistance in establishing and improving financial reporting standards in the Phil
Philippine Interpretations Committee (PIC)
when was PIC formed?
November 2006
they replace and take over the functions of ASC
Financial Reporting Standard Council (FRSC)
when was FRSC formed?
2006
PIC guidelines on PFRS
SPaPi
S of SPaPi
Specific PFRS adopted from IFRS
Pa of SPaPi
Philippine Accounting Standard adopted from IAS
Pi of SPaPi
Philippine Interpretations (IFRIC and SIC), interpretations of PIC
PFRS due process
CFICAP
consideration of pronouncement of IASB, formation of task force, issue exposure draft, consideration of comment letter to IASB, approval by a majority (at least 51% of FRSC), publish the standard to Official Gazette/newspaper of general circulation
CFICAP
commentary period of exposure drafts in PFRS due process
60 days but not less then 30 days
