CONCEPTUAL

FRAMEWORK
&
ACCOUNTING
STANDARDS
INTRODUCTION TO THE IASB

In March 2001, the International Accounting Standards

Committee (IASC) Foundation was formed as a not-for-profit
corporation incorporated in the state of Delaware, USA. The IASC
Foundation is the parent entity of the International Accounting
Standard Board and independent accounting standard setter based in
London, UK.
FORMATION OF IASB
Established in 2001, the International Accounting Standards Board (IASB) is
an independent private sector body. Its objectives is to achieve convergence in the
accounting principles that are used by businesses and other organizations for
financial reporting around the world.
Effective April 1, 2001, the International Accounting Standards Board assumed
accounting standard setting responsibilities from its predecessor body, the
International Accounting Standards Committee. The International Accounting
Standards Committee was formed in1973 through as agreement made by
professional accountancy bodies from Australia, Canada, France, Germany, Japan,
Mexico, Netherlands, United Kingdom, Ireland, and the United States of America.
International Federation of Accountants

Between 1983 and 2000, there was a membership link between

IASC and the professional accountancy bodies that are members of
the International Federation of Accountants (IFAC). There is no such
membership link between IASB and IFAC.
IASB STRUCTURE

The IASB structure is designed to support those attributes

considered desirable to establish the legitimacy of a standard setting
organization: the representativeness of the decision maing body, the
independence of its members, and technical expertise.
2008-2010 Constitution Review
The IASF Foundation (now known as the IFRS Foundation) finalized the second
phased of the2008-2010 Constitution Review in January 2010. the review began in January
2008 with a view enhance the organization`s governance and was split into two parts.
– Part one focused on the governance and public accountability of the IFRS Foundation
(resulting in particular, in the creation of the Monitoring Board) and on size and
composition of the IASB (the expansion of the IASB from 14 to 16 members (with up
to three part-time) and a specified geographical mix for the IASB). These amendments
were effective on February 1, 2009.
– The second part of the review focused on enhancing public accountability, stakeholder
engagement and operational effectiveness. The main changes to the constitution
involved the streamlining of names in the organization and the creation of the vice-
chairs for review both the trustees and IASB. Changes to the Constitution resulting from
Part Two of the review came into effect on March 1, 2010.
Monitoring Board
The primary purpose of the Monitoring Board is to serve as a mechanism for formal
interaction between capital market authorities and the IFRS Foundation (formerly
the IASCF) – the objective being to facilitate capital market authorities that allow or
require the use of IFRSs in their jurisdictions to discharge their mandates relating to
investor protection, market integrity and capital formation more effectively. The
responsibilities of the Monitoring Board include:
• Participating in the process of appointing trustees and approving the appointment
of trustees according to the guidelines set out in the IFRS constitution; and
• Reviewing and providing advice to the trustees on their fulfillment of the
responsibilities set out in the IFRS constitution. The trustees will make an annual
written report to the Monitoring Board.
Monitoring Board
As at March 1, 2010, the Monitoring Board comprised the relevant Member of
the European Commission, and the chairs of the Financial Services Agency of
Japan, the US Securities and Exchange Commission (IOSCO) and the Technical
Committee IOSCO. The Chair of the Basel Committee on Banking Supervision is a
non-voting observer.
IFRS Foundation
The IFRS Foundation , formerly IASC Foundation, is a independent, not-for
profit private sector organization working in the public interest. Its principal
objectives are:
• To develop a single set of high quality, understandable, enforceable and globally
accepted international financial reporting standards (IFRSs) through its
standard- setting body, the IASB;
• To promote the use and rigorous application of those standards;
• To take account of the financial reporting needs of emerging economies and
small and medium- sized entities (SMEs); and
• To bring about convergence of national accounting standards and IFRSs to high
quality solutions.
IFRS Foundation
The governance and oversight of the activities undertaken by the
IFRS Foundation and its standard-setting body rests with its Trustees,
who are also responsible for safeguarding the independence of the
IASB and ensuring the financing of the organization. The Trustees are
publicly accountable to a Monitoring Board of public authorities.
Composition: 22 individual trustees, one appointed as Chair and up to two
as Vice-Chairs. Trustees are appointed for a three-year term, renewable once.
Regardless of prior service, a trustee may be appointed to serve as Chair or
Vice- Chair for a term of three years, renewable once, provided total years`
service as a trustees does not exceed nine years. The current Chairman is
Michael Prada. The Vice Chairs are Tsuguoki Fujinuma and Robert Glauber.

Geographical balance: six trustees from the Asia/ Oceania region; six from
Europe; six from North America; one from Africa; four from any area subject
to maintaining overall geographical balance.

Backgrounds of Trustees: the IFRSF Constitution requires an appropriate

balance of professional backgrounds, including auditors, preparers, users,
academic, and other officials serving the public interest. Two will normally
be senior partners of prominent international accounting firms.
International Accunting Standards
Board
The International Accounting Standards Board (IASB) in the independent standard-
setting body of the IFRS Foundation. Its members are responsible for the development
and publication of IFRSs, including the IFRS and SMEs and for approving
Interpretations for IFRSs as developed by the IFRS Interpretations Committee
(formerly called the IFRIC). All meetings of the IASB ae held in public and webcast. In
fulfilling its standard-setting duties the IASB follows a thorough, open and transparent
due process of which the publication of consultative documents, such as discussion
papers and exposure drafts, for public comment is an important component. The IASB
engages closely with stakeholders around the world, including investors, analysts,
regulators, business leaders, accounting standard-setters and the accountancy
profession.
IFRS Advisory Council
The IFRS Advisory Council (formerly Standards Advisory Council) has 40
members and provides a forum for organizations and individuals with an interest in
international financial reporting to participate in the standard setting process. The
position of Independent Chairman was created as at July 1, 2015. members are
appointed for a renewable term of three years and have diverse geographic and
functional backgrounds.
The IFRS Advisory Council normally meets with the IASB at least three times
a year for two days each and those meetings are open to the public. The Board id
required to consult the IFRS Advisory Council in advance of any proposed changes
to the Constitution.
The IFRS Interpretations Committee

The IFRS Interpretation Committee (formerly called the IFRIC) is the interpretative
body of the IASB. The interpretations Committee comprises 14 voting members appointed
by the Trustees and drawn from a variety of countries and professional backgrounds.
the mandate of the Interpretations Committee is to review on a timely basis
widespread accounting issues that have arisen within the context of current IFRSs and to
provide authoritative guidance (IFRICs) on those issues. Interpretation Committee
meetings are open to the public and webcast. In developing interpretations, the
interpretations Committee works closely with similar national committees and follow a
transparent, thorough and open due process. The interpretations have the same authority as
accounting standards.
IASB Standard-Setting Process
The IASB follows a rigorous open due process. All meetings of the IASB and of
the IFRS Interpretations Committee (formerly IFRIC) and its formal working groups
are held in public and are usually webcast. Formal due process for projects
normally, but not necessarily, involves the following steps (steps required by the
IFRS Foundation`s Constitution are indicated by an asterisk).
Standards
IASB publishers its Standards in a series of pronouncements
called International Financial Reporting Standards (IFRS). It has also
adopted the body of Standards issued by the Board of the
International Accounting Standards Committee (1973-2001). Those
pronouncements continue to be designated “International
Accounting Standards (IAS)”. The current IASC Standards No. 1 to 41
were prepared and approved by the IASB`s predecessor, the IASC
Board.
What is Accounting Standards?

Accounting standards are authoritative statement of

how particular types of transaction and other events
should be reflected in financial statements. Accordingly,
compliance with accounting standards will normally be
necessary for the fair presentation of financial statements.
Are International Financial Reporting Standards
Mandatory?

A set of financial statement can only be described as complying with IFRSs if

they comply with all existing IFRS s and IFRICs, plus all existing IASC and SICs.
IASB has no authority to require compliance with its accounting standards
because it is not a government institution. Some countries give legal backing to
IFRSs. For example, since January 2005, all listed companies in the European
Union are required to prepare their consolidated financial statement using IFRSs.
Companies and/or securities legislation in many countries requires
management and directors of publicly-traded companies (and, in many cases, all
enterprises) to prepare financial statement in accordance with IFRS that present
fairly (or give a true and fair view of) the financial position of the enterprise at the
of the financial year and the results of its operations and cash flows for the year.
Are International Financial Reporting Standards
Mandatory?

The accountancy profession (through national institutes, international

accounting firms and the International Forum for Accountancy Development) is
committed to promoting and supporting compliance with IFRS by preparers and
auditors of financial information.
In short, where IFRS are the required accounting standards, or an enterprise
chooses to comply with IFRS, the requirements of all IFRS should be regarded as
mandatory.
The Need for International
Accounting Standards
At present, financial reports prepared for owners or shareholders and other user
involve principles and procedures that can vary widely from country to country, and
sometimes even within a country. Accounting reports, therefore, can lack
comparability. From the viewpoint of company management, this is highly
unsatisfactory because:
• it can cause preparation costs for financial reports that are much higher than
necessary- a multinational company may have to prepare different reports on its
operations for use in different countries; and
• businesses will want to have a uniform system for assessing financial
performances in their operations in different countries. They will also want their
external reports to be consistent with internal assessments of performance.
The Need for International
Accounting Standards
The objectives are not achievable if accounting standards vary from country to
country.
Investment analysts and other users of financial reports incur extra costs of
analysis when the reports are prepared according to different standards in different
countries. They may be confused in their interpretation of the reports. Effective
competition among the capital markets of the world may be impaired and
companies may have to bear higher costs of capital markets of the world may be
impaired and companies may have to bear higher costs of capital because of the
difficulties involved in financial analysis. The credibility if a company reports
different profit numbers in different countries forgiven transaction.
The Need for International
Accounting Standards
International Accounting Standards are also for great usefulness for developing
countries or other countries, which do not have a national standard-setting body or
do not have the resources to undertake the full process of preparing accounting
standards. The preparation of accounting standards involves considerable cost and,
quite apart from the advantages of uniformly, it would not be economic for each
country to have a separate process.
The magnitude of cross-border financing transaction, securities trading, and
direct foreign investment is enormous, often in smaller as larger countries. The need
of a single set of rules by which assets, liabilities, and income are recognized and
measured is urgent.
PHILIPPINE ASC MOVES TO IAS
In developing accounting standards that will be generally accepted in the
Philippines, the Accounting Standards Council (ASC), the precursor of the
Financial Reporting and Standard Council (FRSC), considered standards issued by
other standard-setting bodies such as the U.S Financial Accounting Standards
Board (FASB) and the International Accounting standards Committee (now the
IASB). In the past years, the ASC based most of the standards it issued accounting
standards that were based on international accounting standards (i.e., standards on
retirement benefit costs, borrowing costs, construction contract, revenues and
earnings per share). In 1997, the ASC made a decision to move totally to
International Accounting Standards:
PHILIPPINE ASC MOVES TO IAS
• Support of IAS by Philippine Organizations. The Philippine Securities and
Exchange Commission, in its Revised Securities Act (RSA) Rule 48, Rules and
Regulation Covering Form and Content of Financial Statements, Specifically
include IAS in its hierarchy of generally accepted accounting principles.

The Board of Accountancy supports IAS by its implementation of GATS with

respect to accountancy services. The accounting profession is one of the first
services to be liberalized under GATS and there appears to be no alternative but to
support International Accounting Standards.
PHILIPPINE ASC MOVES TO IAS
• Increasing internationalization of business. The increase in globalization of
business and in cross border financing has heightened interest in a common
language for financial reporting. More and more Philippine companies are now
seeking capital abroad and go to countries other than the U.S., such as Hong
Kong, Singapore and Europe, where International Accounting standards have
increasing acceptability.
• Improvement of IAS. The IASC (now the IASB) completed comparability and
improvement project, which was aimed at the removal of free choices of
accounting treatments permitted in certain of the International Accounting
Standards. The IASC (now the IASB) also reviewed and revised many of he
standards for developments that had taken place since the standards were first
issued.
PHILIPPINE ASC MOVES TO IAS
• Increasing recognition of IASB standards. International financial institutions,
such as the World Bank and Asian Development Bank prefer that borrowers use
International Accounting Standards. The World trade Organization (WTO), the
premier entity for trade and investment liberalization, issued a statement of
support for IASC initiatives to harmonize accountancy standards. The
International Organization of Securities Commissions (IOSCO) has agreed to
consider use of International Accounting Standards in cross border capital
raising and listing purposes in all global markets if IASC (now the IASC) can
complete certain core and other standards.
DEVELOPMENTS IN
THE PHILIPPINE
ACCOUNTING
STANDARDS
ASC Approves Re-Issuance as OASs
of Previously Issued SFASs
The accounting Standards Council (ASC), the precursor of the Financial
Reporting Standards Council, approved the re-issuance as Philippine Accounting
Standards/ International Accounting Standard that were based on IASs. The
Standards are re-issued for the following reasons:
• To update these for consequential amendments arising from adopted new
Internationa Financial Reporting Standard and revised IASs which resulted
from the Improvements Projects of the International Accounting Syandards
Board and for editorial amendments made to all existing IASs and;
• To maintain consistency of format and designation of Standards issued by the
ASC.
ASC Approves Issuance of New
Revised Accounting Standards
Accounting standards issued by the ASC were re-named to correspond better
with the issuances of the IASB. Philippine Accounting Standards correspond to the
adopted International Accounting Standards. Philippines Financial Reporting
Standards correspond to the adopted International Financial Reporting Standards.
SFAs and SFASs/IASs not superseded by revised IASs and new IFRSs will be re-
issued as PASs. Previously, Standards issued by the ASC were designated as
SFASs.
The Securities and Exchange Commission as indicated in SEC Memorandum
Circular #19, Series of 2004 dated December 22, 2004 requires the adoption of the
IAS, PAS and IFRS in the audited financial statement.
SEC Adopts PFRS for SMEs

On December 3, 2009, the Securities and Exchange Commission En Banc

resolved to adopt the Philippine Financial Reporting Standards for Small and
Medium Entities (PFRS for SMEs) as part of its rules and regulations. This PFRS
was adopted on October 13, 2009, by the Philippine Financial Reporting Standards
Council from the IFRS for SMEs issued by the IASB.
 The revised Conceptual Framework includes some new Conceptual Framework
includes some new concepts, provides updated definitions and recognition criteria
for assets and liabilities and clarifies some important concepts. The new Framework
has an introduction, eight chapters and a glossary. The eight chapters are as follows:

• Chapter 1- The Objectives of Financial Reporting

• Chapter 2- Qualitative Characteristics of Useful Financial Information
• Chapter 3- Financial Statements and The Reporting Entity*
• Chapter 4- The Elements of Financial Statements*
• Chapter 5- Recognition and Statements*
• Chapter 6- Measurements*
• Chapter 7- Presentation and Disclosure*
• Chapter 8- Concepts of Capital and Capital Maintenance
*These chapters are new or have been revised substantially.
Status and Purpose of the Conceptual
Framework
The Conceptual Framework for Financial Reporting describes the objectives
of, and the concepts for, general purpose financial reporting. The purpose is to:

a) Assist the International Accounting Standards Board to develop IFRS

Standards that are based on consistent concepts;
b) Assist prepares to develop consistent accounting policies when no Standard
applies to a particular transaction or other event or when a Standard allows a
choice of accounting policy; and
c) Assist all parties to understand and interpret the Standards.
Status and Purpose of the Conceptual
Framework
The Conceptual Framework is not a Standards. Nothing in the Conceptual
Framework overrides any standards or any requirements in a Standard.
To meet the objectives of general purpose financial reporting, the Board may
sometimes specify requirements that depart from aspects of the Conceptual
Framework. If the Board does so, it will explain the departure in the basis for
Conclusions on that Standards
The Conceptual Framework may be revised from time to time on the basis of
the Board`s experience of working with it. Revisions of the Conceptual Framework
will not automatically lead to changes to the Standards.
The Conceptual Framework provides the foundation for
Standards that:

a) Contributes to transparency by enhancing the international comparability and

quality of financial information, enabling investors and other market
participants to make informed economic decisions.
b) Strengthen accountability by reducing the information gap between the
providers of capital and the people to whom they have entrusted their money.
Standards based on the Conceptual Framework provide information needed to
hold management to account. As a source of globally comparable information,
those Standards are also of vital importance to regulators around the world.
c) Contribute to economic efficiency by helping investors to identify
opportunities and risks across the world, thus improving capital allocation. For
businesses, the use of a single, trusted accounting language derived from
Standard based on the Conceptual Framework lowers the cost of capital
reduces international reporting costs.
THANK
YOU