The FRSC was established by the Board of Accountancy (BOA) in 2006 under the Implementing Rules and Regulations of the Philippine Accountancy of Act of 2004 to assist the Board in carrying out its power and function to promulgate accounting standards in the Philippines. The FRSC’s main function is to establish generally accepted accounting principles in the Philippines.
The FRSC is the successor of the Accounting Standards Council (ASC). The ASC was created in November 1981 by the Philippine Institute of Certified Public Accountants (PICPA) to establish generally accepted accounting principles in the Philippines. The FRSC carries on the decision made by the ASC to converge Philippine accounting standards with international accounting standards issued by the International Accounting Standards Board (IASB).
The FRSC consists of a Chairman and members who are appointed by the BOA and include representatives from the Board of Accountancy (BOA), Securities and Exchange Commission (SEC), Bangko Sentral ng Pilipinas (BSP), Financial Executives Institute of the Philippines (FINEX), Commission on Audit (COA) and Philippine Institute of Certified Public Accountants (PICPA). The FRSC has full discretion in developing and pursuing the technical agenda for setting accounting standards in the Philippines. Financial support is received principally from the PICPA Foundation.
The FRSC monitors the technical activities of the IASB and invites comments on exposure drafts of proposed IFRSs as these are issued by the IASB. When finalized, these are adopted as Philippine Financial Reporting Standards (PFRSs). The FRSC similarly monitors issuances of the International Financial Reporting Interpretations Committee (IFRIC) of the IASB, which it adopts as Philippine Interpretations–IFRIC. PFRSs and Philippine Interpretations–IFRIC approved for adoption are submitted to the BOA and PRC for approval.
The FRSC formed the Philippine Interpretations Committee (PIC) in August 2006 to assist the FRSC in establishing and improving financial reporting standards in the Philippines. The role of the PIC is principally to issue implementation guidance on PFRSs. The PIC members are appointed by the FRSC and include accountants in public practice, the academe and regulatory bodies and users of financial statements. The PIC replaced the Interpretations Committee created by the ASC in 2000.
A. Publicly Accountable Entities
The FRSC has adopted most IFRSs, in some cases with modifications, and in some cases the most recent amendments to IFRSs have not been adopted. These standards are known as Philippine Financial Reporting Standards (PFRSs) and Philippine Accounting Standards (PASs). Philippine standards apply to all entities with public accountability. That includes:
- entities whose securities are listed in a public market or are in process of listing;
- all financial institutions including banks, insurance companies, security brokers, pension funds, mutual funds, and investment banking entities;
- public utilities; and
- other economically significant entities, defined as total assets in 2004 of at least 250 million pesos (US$5 million) or liabilities of at least 150 million (US$3 million).
- Reduced segment reporting disclosures
- Exemption from applying tainting rule for a specific set of financial instruments
- Commodity derivative contracts of mining companies as of 1 January 2005 'grandfathered'
- Insurance companies allowed to use another comprehensive set of accounting principles (also described as Philippine Financial Reporting Standards)
- For banks, losses from sale of non-performing assets allowed to be amortised over a period of time
- Some additional changes to IASB's pension, foreign exchange, and leases Standards
B. Small and Medium-sized Entities
The IFRS for SMEs was adopted in the Philippines effective 1 January 2010. It is known as the Philippine Financial Reporting Standard for SMEs (PFRS for SMEs). The Philippine Securities and Exchange Commission, in its En Banc Resolution dated August 13, 2009, adopted a definition of 'small and medium-sized entities' that includes a size criterion. An entity is an SME if:
- The entity has total assets of between P3 million and P350 million or total liabilities of between P3 million and P250 million;
- It is not required to file financial statements under SRC Rule 68.1;
- It is not in the process of filing its financial statements for the purpose of issuing any class of instruments in a public market;
- It is not a holder of a secondary license issued by a regulatory agency, such as a bank (all types of banks), an investment house, a finance company, an insurance company, a securities broker/dealer, a mutual fund and a pre-need company; and
- It is not a public utility.
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