FINANCIAL ACCOUNTING AND

REPORTING PART I
 THE ESSENCE OF FINANCIAL REPORTING IN PROFIT ORIENTED AND NON-PROFIT
ORIENTED ORGANIZATIONS

1. Financial Statements are tools in business-decision making.

2. Management are guided through the financial data.
3. Financial statements are useful to outside parties:
a. Potential investors
b. Banks, lenders and financial institutions
c. Labor unions
d. Government regulators like BIR, SEC, BSP, Insurance Commission etc.
e. Suppliers and other stakeholders
f. General public
4. Financial Statements reflects the whole picture, size and business performance.
 FINANCIAL REPORTING STANDARDS COUNCIL

This was established by the Professional Regulations Commission under the

implementing rules and regulations of Philippine Accountancy Act of 2004 to assist
the Board of Accountancy in carrying out its power and functions to promulgate
accounting standards.

Standards are needed to:

1. Have uniformity in the implementation of financial reporting.

2. Obtain more accurate results of financial statement analysis.
3. Ensure reliability of information as presented by the firms.
4. Have uniform guides for auditors and government regulators.
 CONCEPTUAL FRAMEWORK IN FINANCIAL REPORTING

This can be defined as the system of ideas and objectives that lead to the creation of
consistent set of rules and standards. Specifically in accounting, the rules and
standards set the nature, function and limits of financial accounting and financial
statements.

1. Conceptual framework is based on actual experience of accounting practitioners,

educators and businessmen. They shared their knowledge and experience to
come-up with standards that would be reasonable enough for the business
community.
2. The collated ideas, experience and knowledge were properly evaluated by the
regulating bodies to arrive at standards that should be followed by accounting
practitioners and by the business entities themselves.
3. These standards set limit so that financial reporting will be done on the most
conservative manner thereby avoiding any misstatements.
 CONCEPTUAL FRAMEWORK IN FINANCIAL REPORTING

Users of financial statements and their information needs:

1. Potential investors – they need to know if the company is profitable, sustainable,
growing and stable. If you are an investor, you want your money grow, hence,
investment should be placed in a company that shows all these positive
characteristics.
2. Banks, lenders and financial institutions – the primary consideration for a bank
to lend money is the capacity to pay. This can only be known by conducting
careful analysis of the company’s financial statements.
3. Labor Unions – they need financial statements to determine the company’s
profitability position which can be used for collective bargaining negotiation.
4. Government Regulators – BIR – they need to the accuracy in the payment of
taxes; SEC – they need to know the continuity and stability of the registered
corporations; same is true with BSP, insurance commission etc.