BUSINESS FOCUS; First Time Adoption of Philippine Financial Reporting Standards
Byline: WILFREDO A. BALTAZAR
The development of international accounting standards can be traced back to the early 70s, but never have they reached greater importance than today, as the world moves closer towards international convergence.
Pertinent statements issued by the Board of the International Accounting Standards Committee (IASC) between 1973 and 2001 are designated International Accounting Standards (IAS).
The International Accounting Standards Board (IASB), formerly IASC, announced in April 2001 that its accounting standards would be designated International Financial Reporting Standards (IFRS). Also in April 2001, the IASB announced that it would adopt all of the International Accounting Standards issued by the IASC.
On June 6, 2002, the European Council of Ministers made an important move when it approved and issued a requirement that all European Union companies listed on a regulated market should prepare their financial statements in accordance with International Financial Reporting Standards for accounting periods beginning on or after 1 January 1, 2005.
According to Sir David Tweedie, Chairman of the International Accounting Standards Board, The effective functioning of capital markets is essential to economic well-being. A sound financial reporting infrastructure must be built on four pillars: (1) accounting standards that are consistent, comprehensive, and based on clear principles to enable financial reports to reflect underlying economic reality; (2) effective corporate governance practices, including a requirement for strong internal controls, that implement the accounting standards; (3) auditing practices that give confidence to the outside world that an entity is faithfully reflecting its economic performance and financial position; and (4) an enforcement or oversight mechanism that ensures that the principles as laid out by the accounting and auditing standards are followed.
As the worlds capital markets integrate, the logic of a single set of accounting standards is evident. A single set of international standards will enhance comparability of financial information and should make the allocation of capital across borders more efficient. The development and acceptance of international standards should also reduce compliance costs for corporations and improve consistency in audit quality.
In 1997, the Accounting Standards Council (ASC), the accounting standards-setting body in the Philippines, formally decided to harmonize Philippine accounting standards with international accounting standards. In November 2004, the ASC approved the issuance of new and revised accounting standards which are based on revised IASs and new IFRSs issued by the IASB. The new and revised accounting standards were subsequently approved by the Securities and Exchange Commission (SEC), the Board of Accountancy (BOA), Professional Regulation Commission (PRC) and Bangko Sentral ng Pilipinas (BSP). …