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WHAT AWAITS IN THE ACCOUNTANCY
PROFESSION
(DOMESTIC AND GLOBAL)
PROJECT IN MASTERY CLASS
SUBMITTED BY:
Clarice I. Guintibano
SUBMITTED TO:
Dr. Armando Baares, CPA
TABLE OF CONTENTS
SANTA ISABEL COLLEGE

210 TAFT AVENUE, MANILA
www.santaisabel.edu.ph
DOMESTIC SETTING
GOVERNMENT REGULATORY AGENCIES
AND THEIR FUNCTIONS 5-7
LIST OF ARTICLES ABOUT THE TOPIC WHAT AWAITS IN THE
ACCOUNTANCY PROFESSION
NEW ACCOUNTANCY TRACKS FORTHCOMING...7-9
PRC BOA ISSUES NEW RULES REQUIRING
THE SUBMISSION OF CERTIFICATE ON
THE COMPILATION SERVICES FOR THE
PREPARATION OF FINANCIAL STATEMENTS AND
NOTES THERETO9-10
BOA RESOLUTION PASSED REQUIRING CPA FS PREPARERS TO SUBMIT
CERTIFICATE10-12
AUDITING THE AUDITORS.........................................................................12-16
ASEAN INTEGRATION16-18
FILIPINO ACCOUNTANTS GEAR TOWARD ASEAN INTEGRATION..18-24
ADOPTION OF THE PFRS/PAS....24-26
BSP, SEC, IC AND BOA SIMPLIFY ACCEDITATION PROCESS FOR EXTERNAL
AUDITORS26-28
RAISING THE BAR OF CONTROL STANDARDS OF INTERNAL CONTROL AND
AUDIT28-29
CHANGES IN THE CPA BOARD EXAMINATION BY CHED AND BOA..29-33
PICPA AND BOA MEETS THE BIR COMMISSIONER.34-35
ASEAN REGULATORS DISCUSS MRA IMPLEMENTATION35-36
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FORTHCOMING
CHANGES
IN
THE
CONTINUING
PROFESSIONAL
DEVELOPMENT OF CPAS...37-39
ALL PARTNERS AND CPA STAFF OF AUDIT FIRMS NEED TO BE
ACCREDITED39-73
GLOBAL SETTING
INTERNATIONAL ACCOUNTANCY BODIES
LIST OF ARTICLES ABOUT THE TOPIC WHAT AWAITS IN THE
ACCOUNTANCY PROFESSION
A GLOBAL PERSPECTIVE ON THE ACCOUNTANCY PROFESSION.74-78
PERSPECTIVES OF THE ACCOUNTANCY PROFESSION OVER THE NEXT
DECADE A SCENARIO ANALYSIS78-87
TRENDS THAT WILL SHAPE THE CPA PROFESSION IN 2016...88-91
WHERE WILL THE ACCOUNTANCY PROFESSION BE IN 25 YEARS?....92-103
CHANGES
IN
ACCOUNTING
POLICIES
AND
IN
ACCOUNTING
ESTIMATES (AGENDA PAPER 26)103-114

REVENUE
RECOGNITION:
EFFECTIVELY
MANAGING
ACCOUNTING
CHANGE.114-116
BUSINESS ACCOUNTING: NEW GLOBAL STANDARDS IMPACT BUSINESS
PLANS, LOCATION DECISIONS.116-122
EFFECTS OF THE ACCOUNTING CHANGES DOMESTICALLY AND

GLOBALLY IN REGARDS TO ECONOMICS, POLITICAL, ETHICS AND
SOCIAL RESPONSIBILITY
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ECONOMIC
CONSEQUENCES
AND
THE
POLITICAL
NATURE
OF
ACCOUNTING STANDARD SETTING..122-131
REFERENCES132-134
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DOMESTIC SETTING
In this section, the following accountancy profession updates (what awaits
in the accountancy profession) will be presented based on the articles,
news and updates from accounting regulatory bodies in the Philippine
setting. This research is in consideration of the following factors: Economic
effects, political, ethic, and social responsibility with respective government
regulatory agencies.
FIRST
LETS
ENUMERATE
THE
GOVERNMENT
REGULATORY
AGENCIES THAT REGULATES THE ACCOUNTANCY PROFESSION IN

THE PHILIPPINES:
Securities and Exchange Commission
The Securities and Exchange Commission
(Filipino: Komisyon sa mga Panagot at Palitan,
commonly known as SEC) is the agency of the
Government of the Philippines responsible for
regulating
the
securities
industry
in
the
Philippines. In addition to its regulatory functions, the SEC also

maintains the country's company register.
Bangko Sentral ng Pilipinas

The Bangko Sentral ng Pilipinas (English: Central
Bank of the Philippines; commonly abbreviated as
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BSP in both Filipino and English) is the central bank of the

Philippines. It was established on July 3, 1993,
ursuant to the provision of Republic Act 7653 or the New Central
Bank Act of 1993.
Bureau of Internal Revenue
The Bureau of Internal Revenue (Filipino:
Kawanihan ng Rentas Internas, or BIR) is an
agency of Department of Finance. BIR collects
more than half of the total revenues of the government. Cesar Dulay
is the current Commissioner of BIR.
Board of Accountancy
Agency responsible for regulating and supervising the practice of
professional individuals according to knowledge base and practice
PICPA
The Philippine Institute of Certified Public
Accountants (PICPA) is the national professional
accountancy body of Philippines
Department of Finance
The Philippines' Department of Finance (DOF)
(Filipino: Kagawaran ng Pananalapi) is the
executive
department
of
the
Philippine
Government that formulates revenue policies

that will ensure funding of critical government
programs to promote welfare among people and
accelerate economic growth and stability.
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THESE
ARE
THE
LIST
OF
ARTICLES
UPDATES
IN
THE
ACCOUNTANCY PROFESSION FOR YEAR 2016 (DOMESTIC):

NEW ACCOUNTANCY TRACKS FORTHCOMING
by BOA Secretariat on Aug 24th, 2016
GAME-breaking changes are forthcoming in the area of accountancy
education and the licensure examination process. These new accountancy
tracks for the accountancy profession are among the revisions of the
accountancy law that the Board of Accountancy (BOA) will be submitting
soon to Congress for its legislation.
The new tracks start with the taking of any of the four accounting programs
in college. The accounting courses that will be available by school year
2018-2019 include BS Accountancy, BS Management Accounting, BS
Internal Auditing and BS Accounting Information System. The Commission
of Higher Education (Ched), in coordination with the BOA, will be issuing
before year-end the necessary Ched memorandum order to provide the
details of these accountancy programs. These programs will provide
different options for the accounting student to pursue depending on his or
her interest.
In addition to these forthcoming changes in the accountancy education,
there will also be a reformatting of the professional licensure examination
process. The licensure examination of the future will include two levels of
tests. The graduates of the four accounting programs will have to take the
first-level Certified Accountant (CA) examination. This examination consists
of five core accounting subjects, to include financial accounting reporting,
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advanced financial accounting reporting, management advisory services,

taxation and regulatory framework for business transactions. The
examinees will have to pass this CA examination to work or practice
accountancy. The passers of the CA examination will be authorized to work
as accountants in the government, public practice and private sector,
except to sign auditors certifications and to teach as accounting educators.
Those who want to pursue the aforementioned exempted accountancy
work will have to pass the second-level Certified Public Accountant (CPA)
or Certified Professional Accountant (CPA) examination, depending on their
educational specialization or attainment. There will be a CPA examination
for each of the four accountancy courses or specialization. There will be a
CPA examination dwelling for each of the accountancy specialization of
auditing, management accounting and accountancy information system.
The CPA examination can be taken optionally after three years of
meaningful work experience. Once the examinees have passed the CPA
exam, they can now be signatories of the external audit certification,
while passers of the Certified Professional or Public Accountant exams can
qualify as accounting teachers.
The new licensure examination consisting of both the CA and CPA
examinations are expected to start by year 2023.
The changes being made are intended to address the demands
and requirements of industry and the accountancy profession of having
accounting professionals. There is now the need foraccountants to have
specialized skills and a more practical experience and mind-set.
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These changes will also provide more focused options for those desiring to
pursue accountancy education and careers. Unlike the present situation
where there is only one option of taking the BS Accountancy course as the
first step in being an accountant, the academic and licensure track of the
future will present more options to cater to the interest and competence of
the future accountant.
With these changes in place, our future accounting professionals will be
more qualified and prepared to meet the growing demands of the local and
global community.
PRC BOA ISSUES NEW RULES REQUIRING THE SUBMISSION
OF CERTIFICATE ON THE COMPILATION SERVICES FOR THE
PREPARATION
OF
FINANCIAL
STATEMENTS
AND
NOTES
THERETO
The Board of Accountancy (BoA) has signed Resolution No. 03 of 2016
dated 19 January 2016 requiring the submission of a Certificate by the
responsible Certified Public Accountant on the Compilation Services for
the preparation of the financial statements and notes to the financial
statements (the Resolution). This Resolution is effective for financial
statements pertaining to year 2015.
The Resolution reiterates the responsibilities of clients and external
auditors in the preparation of the financial statements and notes to the
financial statements promulgated by the Code of Ethics for Certified Public
Accountants.
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Based on the Resolution, the preparation and presentation of financial

information of an organization is a practice of accountancy in commerce
and industry, and therefore prepared by a CPA who is either employed by
an organization, or contracted by an organization but not the same CPA
rendering attest services to such organization.
Such CPA who prepares the financial statements and notes to financial
statements should be accredited by BoA after submitting the necessary
application requirements prescribed by existing rules and regulations. The
deadline for application with the BoA is on 29 February 2016.
The certificate is required to be attached to annual financial statements
with gross sales or revenues exceeding P10 million pesos for a particular
accounting year and to be submitted to the regulatory offices. For other
issuers of financial statements, such certificate is not required to be
attached to annual financial statements; however, the rules prescribed in
all other sections of the said Resolution should be applied.
Penalties and sanctions for violation of the provisions in the Resolution
shall be imposed.
BOA RESOLUTION PASSED REQUIRING CPA FS PREPARERS TO
SUBMIT CERTIFICATE
by Orlando Calundan on Jan 21st, 2016
Two (2) months ago, we wrote an article on Rules on Financial Statement
Preparation now for Comments which was still for comments. Now, the
Board of Accountancy has finally passed Board Resolution No. 3, Series of
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2016, Requiring the Submission of Certificate by the Responsible CPAs on

the Compilation Services for the Preparation of Financial Statements and
Notes Thereto.
This is a game changer as we all know that there are so many companies
employing accountants to prepare their financial statements who are not
Certified Public Accountants (CPAs), and moreover, not accredited with the
BOA.
The resolution provides, among others:
1.
Requirement of the attachment to the annual financial statement (FS)

of a Certificate on the compilation services for the preparation of FS and
notes to the FS.
2.
The Certificate shall be prepared only for issuers which/who have

gross sales or revenues exceeding ten million pesos (P10,000,000) for a
particular accounting year.
3.
The preparation of the FS and disclosure notes is a practice of

accountancy in commerce and industry and shall be done only by
Certified Public Accountants (CPAs).
4.
The reiteration of the rule that CPAs in public practice are prohibited
from preparing or assisting in the preparation of FS and disclosure note
of their clients which engaged them to render attest services for the
same documents.
5.
The CPAs in public practice who violate this prohibition rule shall be
subject to stern sanctions by the Board of Accountancy.
6.
The CPAs rendering the compilation services for the preparation of

the FS and signing the Certificate shall first beaccredited with the
Professional Regulatory Board of Accountancy after submitting the
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necessary application and complying with the Continuing Professional

Development (CPD) requirements.
7.
These CPAs should apply for accreditation not later than February
29, 2016 and comply with the CPDrequirements not later than June 30,
2016 after signing an affidavit of undertaking to that effect.
8.
The rules shall apply for the FS pertaining to year 2015.
This Resolution shall take effect after fifteen (15) days following its
publication in the Official Gazetteor in any major daily newspaper of
general circulation in the Philippines.
The
question
is
If
the
Practitioner
or
Employee
is
already accredited with BOA for Public Practice, is there a need to

secure separate accreditation for Commerce and Industry in order to
perform the compilation? BOA said NO. There is no need to secure
separate accreditation.
As it currently stands, BOA is giving all companies with revenue reaching
P10 million to have the CPA preparers of their FS to accredit only until
February 29, 2015. A very short period which will, again, expected to cause
uproar especially from the Small and Medium Companies and Small and
Medium Practices.
AUDITING THE AUDITORS
By BOA Secretariat on Feb 25th, 2016
In the recent years, auditing the auditors has become a global development
in the accountancy profession amid news of inappropriate financial
reporting or accounting scandals happening around the world. A number of
national professional regulators have responded accordingly to these
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inauspicious events in the accountancy profession and have set up a

regulatory body to oversee the conduct of an audit of companies by the
auditors [hereinafter, interchangeably referred to as external auditors or
Certified
Public Accountants (CPA)
practitioners]
in
their
respective
countries.
In the United States, for example, the Public Company Accounting
Oversight Board (PCAOB) was established by the US Securities and
Exchange Commission (SEC) to oversee theaudits of public companies in
order to protect investors and the public interest by promoting informative,
accurate and independent audit reports.
The PCAOB required that auditors of US public companies be subjected to
external and independent oversight in the performance of theiraudits of
public companies. Similar regulatory bodies have also been in operation in
other Asean countries, including Singapore, through its Accounting and
Corporate Regulatory Authority, and Malaysias Audit Oversight Board.
In our jurisdiction, our Professional Regulatory Board of Accountancy
(BOA), being the designated government regulatory body that supervises
the accountancy profession, has similarly responded through the adoption
of an external audit Quality Assurance Review (QAR) Program to meet its
duties imposed by the Philippine accountancy law, particularly in the
conduct of oversight into the quality of audit of financial statements (FS).
Accordingly, the Professional Regulation Commission (PRC), upon the
recommendation of the BOA, approved a resolution in 2009, entitled
Adoption of the Rules and Regulations [RR] for the Implementation by the
BOA of the QAR Program. This RR was subsequently revised in 2010.
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However, it is not at all easy for the BOA to implement the provisions of
such RR. It had to stop the implementation of the QAR Program following
the filing of an injunction suit by the Association of Small Accounting
Professionals in the Philippines. The suit was filed in December 2010 and
its resolution has been very slow, until the assumption into office of the
current BOA Chairman Joel Tan-Torres who has been closely working with
the CPA practitioners to resolve relevant issues and for the eventual
implementation of the QAR Program. Very recently, after conducting a
series of consultative meetings and dialogue with the plaintiff and other
stakeholders, the RR earlier mentioned was further revised and, in
December 2015, the BOA passed a resolution endorsing for approval by
the PRC the adoption of the Revised RR for the Conduct by the BOA of
Oversight into the Quality of Audits of FS and Operations of CPA
Practitioners. I am hopeful that the PRC will approve such endorsement
soon that would help pave the way for the final resolution of the injunction
suit. It is also worthy to note that the BOA has included the implementation
of the QAR Program as part of its Six-Point Strategic Plan for the
accountancy profession.
At any rate, while the BOA has adopted a QAR Program, it has yet to be
implemented.
On the part of the Philippine SEC, it currently performs regular evaluation
of audited FS of companies, mostly those that are listed in the stock
exchange and other companies or entities falling under what it calls as
public interest entities. In addition, as part of its accreditation process of
external auditors, it also reviews the audited FS of the selected clients of
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the external auditors who are applying for the first time or renewing their
SEC accreditation. Both reviews aim to ascertain the compliance of the
reporting companies with their financial reporting requirements. Needless
to say, appropriate sanctions will be imposed on both the reporting
company and its external auditors if significant or material financial
reporting lapses are found. It is also worth mentioning that the SEC has
been working on the revision of its Rules on Financial Statements
Reporting that include, among others, the implementation of its own QAR
System of External Auditors accredited by the commission.
Thus, while the SEC mainly regulates companies registered with the
commission, it may also review the quality of audit of the external auditors
of these registered companies once such revision to the rules is approved
for implementation, and to which I am also hopeful that it will be approved
soon.
The eventual implementation of the BOA of its QAR Program and the final
approval of the SEC of the revisions to its current rules to incorporate its
own QAR System would be good for the accountancy profession and its
stakeholders.
However,
while
the
implementation
and
approval
for
QAR
Program/System are pending, there is no local regulatory body that

currently audits the auditors in this country. Thus, external auditors are not
currently being audited for the quality of their work. Such situation may be
good or bad, or should I say, may pose both challenges and/or
opportunities to the stakeholders of the accountancy profession, including,
among others, our regulators; the companies being audited or the auditees;
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and the CPA practitioners, whether big firms or small or medium

practitioners.
These changes are in line with the objective of the Six-Point Expanding
Horizons Strategic Plan (EH Strategic Plan) of elevating the Filipino
accountant and the accountancy profession to a level that exceeds global
standards.
The measures under the EH Strategic Plan are:
Institute quality and governance measures.
Effectively regulate the profession.
Enhance image and reputation of the accounting professional.
Enhance stakeholders involvement and cooperation.
Institute structural changes.
Provide communication and assistance mechanisms.

ASEAN INTEGRATION
For the past several years the accountancy profession in the Philippines
has been preparing for ASEAN integration which officially starts in 2015.
The ASEAN integration is a cooperative movement within the ASEAN
community composed of Indonesia, Malaysia, Thailand, Singapore,
Vietnam, Cambodia, Laos, Brunei and the Philippines.
The cooperative movement consists of three (3) pillars: economic, sociocultural, and political. The development has largely been on the economic
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side with the advancement of a regional economy characterized by the free

flow of goods and services. This would mean lowering or removing trade
barriers among the ASEAN countries.
The Philippine accounting profession has signed the region's Mutual
Recognition Agreement (MRA) which lays down the foundation for the
practice of accountancy between and among member countries. The MRA
will allow cross-border accountancy practice through compliance with
certain standards, rules and regulations and considering the host country's
professional requirements.
Essentially, a certified public accountant (CPA) or chartered accountant
(CA) can practice in a host country in ASEAN by complying with the latter's
professional requirements. In the Philippines, the ASEAN CPA or CA will
have to possess the necessary educational background and pass the
licensure examinations conducted by the Board of Accountancy (BoA).
The BoA is the government body under the Professional Regulations
Commission that regulates and oversees the practice of accountancy in the
Philippines. In the Philippine setting, the accounting profession has the
Philippine Institute of Certified Public Accountants (PICPA) as the
accredited accounting professional organization for ASEAN.
The accounting profession is composed of four (4) sectors: public,
government, education, and commerce and industry. Each sector is under
the umbrella of a professional organization, i.e., Association of CPA's in
Public Practice (ACPAPP), Government Associations of CPAs (GACPA),
National Association of CPAs in Education (NACPAE), and Association of
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CPAs in Commerce and Industry (ACPACI). However, all newly registered

CPAs are accredited members of the mother organization, PICPA.
The ASEAN Integration also provides for the accreditation of CPAs or CAs
who wish to practice in other countries in the region. Based on an agreed
structure of equivalencies which is presently being finalized among
member-countries, a CPA or CA can be accredited as an ASEAN
professional provided he registers his qualifications with a central qualifying
and coordinating body in ASEAN. This professional will then be able to
practice his profession in the ASEAN country of his choice within the
category wherein he is qualified.
The ASEAN integration is expected to broaden the employment of
accounting expertise among the member countries and hasten the
economic development in the region. This will also give rise to heightened
competition among practicing professionals and encouragement of
strategic alliances among accounting firms in the region.
FILIPINO ACCOUNTANTS GEAR TOWARD ASEAN INTEGRATION
BY THE MANILA TIMES ON JUNE 24, 2014
FILIPINO certified public accountants (CPAs) are gearing toward the
impending integration of the Philippines into the Asean Economic
Community (AEC) that is likely to take place two years from now.
Donnies Alas, president of the Accreditation of Certified Public Accountants
in Public Practice (ACPAPP) on Tuesday said Filipino accountants should
prepare for the Asean integration by undergoing quality review in order to
meet international standards.
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With the impending Asean integration, the preparation of our Filipino

certified public accountants is much-needed at this point in time, he told
The Manila Times during the ACPAPPs 6th general membership assembly
in Makati City.
He cited a past study by the Asian Development Bank (ADB), which
showed that the quality of practice among Filipino CPAs is below par.
Because of this, Alas said the ADB also commissioned a study on how to
raise the standards of practice of Filipino CPAs.
In 2005, government regulator Securities and Exchange Commission
(SEC) adopted the International Financial Reporting Standards (IFRSs),
which is being strictly implemented by 85 countries.
The adoption of IFRSs shows that the quality of our work and our
presentation of financial reporting will be in accordance with international
standards, Alas said.
He noted that Filipino CPAs should stay strong and competitive amid the
many challenges, including the imposition of various policies by
government regulators such as the SEC and the Bureau of Internal
Revenue.
Because of these changes, many are facing problems, he said.
To address this, the ACPAPP has been conducting regular seminars and
training to help their members upgrade their skills to meet international
standards.
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One of the key elements in the Asean integration blueprint is the freer flow
of skilled labor through mutual recognition agreements, initially on seven
professions, namely medical, dental, nursing, accountancy, engineering
and architectural services and surveying.
Alas expressed confidence that Filipino CPAs would benefit from the
impending Asean integration.
With the integration, CPAs can practice in other Asean-member countries,
but they should meet international standards. That is why we are upgrading
our practice, he said. Filipino CPAs, he added, have the benefit of good
training and communication skills.
We have a big advantage because we speak English, we are a good
communicator and the training is good (as well). After training, some of our
CPAs work abroad, he said.
He also dismissed fears that with the Asean integration, more CPAs will be
encouraged to work in other countries, resulting in a brain drain for the
Philippines.
We are producing 8,000 CPAs a year, and they need an employment here.
So, we will not be experiencing possible shortage of CPAs, he said.
El L. Tan-Torres is the Chairman of the Board of Accountancy of the
Professional Regulatory Commission. He was appointed to this position by
the President of the Philippines on May 2014.
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The Filipino Certified Public Accountants (CPAs) are ready for the ASEAN
integration, so declared Joel Tan-Torres, Board of Accountancy (BoA)
chairperson.
Speaking during the 70th Philippine Institute of Public Accountants (PICPA)
annual convention in Puerto Princesa City in Palawan in November, TanTorres said the country has over 170,000 registered CPAs since 1923.
We have the numbers and our accounting professionals have been in
place for decades, he said.
He said BoA has been doing everything so that the CPAs are ready to face
the challenges of ASEAN integration.
Explaining BoA efforts to prepare CPAs in the regional integration, TanTorres likened the Board as the executive, legislative and judiciary rolled
into one because it can regulate, it can licensed, it can make the rules, and
it can punish every CPA.
In 2009, the ASEAN Mutual Recognition Arrangement Framework on
Accountancy was signed by representatives of the 10 member states in
Cha-am, Thailand.
Five years later, in 2014,
the Implementing Mutual Recognition
Arrangement (MRA) Framework on Accountancy was signed by all ASEAN

Member States.
It was expected that by December 2015, ASEAN member states shall have
abide by and implement the ASEAN Economic Community (AEC), a
competitive market comprising of over 600 million people in Indonesia,
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Philippines, Malaysia, Singapore, Thailand, Brunei Darussalam, Cambodia,

Lao Peoples Democratic Republic, Myanmar, and Vietnam.
It was formed to facilitate regional economic and financial integration and
cooperation and aims to establish a single market and production base, a
highly competitive economic region, a region of equitable economic
development, a region fully integrated to engage into the global economy.
ASEAN as an economic bloc was positioned to transform the region toward
free movement of goods and services.
Speaking during the 34th Association of CPAs in Mindanao (ACPAMIN) and
the 24th PICPA Joint Mindanao Regional Conference was held in
Balanghai Hotel and Convention Center in Butuan City from October 8 to
10, 2015, Tan-Torres stressed the importance of MRA to Filipino CPAs.
It is imperative that all Filipino CPAs are aware and knowledgeable of the
MRA since this will result in opportunities as well as threats on the CPAs of
all sectors, Tan-Torres said.
All of us should cooperate and coordinate to ensure that our profession will
benefit from these developments, he told CPAs even as he admitted that
only about 10 percent of the CPAs fully understood the ASEAN MRA.
He reiterated the same statement during the PICPA annual convention in
Palawan.
Tan-Torres said it was important that the CPAs understood the ASEAN
integration because it provides and advances the networking of information
among the 10 ASEAN countries.
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Certified Public Accountant Jose E. Villacorta, in his article published in the

December 19, 2015 issue of The Mindanao Cross, said PICPA, a
recognized and accredited national professional organization of CPAs, and
as member of the prestigious International Federation of Accountants
(IFAC), ranks no. 1 in the ASEAN region in terms of compliance to
Statement of Membership Obligations (SMOs). Malaysia ranks no. 2, and
Singapore ranks no. 3.
Villacorta said SMOs have served as a framework for credible and highquality professional organization focused on serving the public interest by
supporting the adoption and implementation of international standards for
the accountancy profession and establishing quality assurance and
investigation and discipline system.
He pointed out taht SMOs are recognized as the international benchmarks
for professional accountancy organizations.
Apparently, competence in English language is our key advantage. With
the appropriate and preparation of quality education, skills, qualification and
work experience, these will enable our accountants to meet new and
additional career opportunities and development, said Villacorta.
Opportunities are extremely great, but effective and a long-term
engagement
depend
fundamentally
on
establishing
cultural
understanding that would lead to mutual respect with our fellow ASEAN
Member States, he added.
In the same article, Villacorta urged government agencies and education
sector to considerably promote and support for and spread of information
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about Mutual Recognition Agreement (MRA) in the field of ASEAN

accounting profession, e.g. rules, privileges, and provisions.
Our educational institutions should develop programs to be compatible for
stepping into AEC such as curriculum with emphasis on International
Financial Reporting Standard, Transparency and Corporate Governance,
Culture Sensitivity, and lessen language barriers by including familiarity
with Bahasa as an elective subject, he said.
Bahasa is a language used in Indonesia and Malaysia, two powerhouse
ASEAN member countries.
ADOPTION OF THE PFRS/PAS
The Bangko Sentral ng Pilipinas (BSP) pronounced its adoption of the
PFRS/PAS effective the annual financial statements beginning 1 January
2005 in its Memorandum to All Banks and Other BSP Supervised Financial
Institutions dated 11 January 2005. The adoption of the new set of
standards is aimed at promoting fairness, transparency and accuracy in
financial reporting.
The BSP in its Circular No. 494 dated 20 September 2005, emphasized
that as a general rule, financial institutions shall comply in all respect with
the provisions of PFRS/PAS in preparing both their audited financial
statements and the financial statements for prudential reporting.
Deviations between local and international accounting standards only apply
to the preparation of prudential reports to the BSP and these are, as
follows:
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Separate financial statements

In preparing separate/solo financial statements, investments in
subsidiaries and associates are accounted for using the equity
method instead of at cost or in accordance with PAS 39.
Consolidated financial statements
Under PAS 27, all bank subsidiaries, regardless of type, are
consolidated on a line-by-line basis.
For prudential reporting purposes,
however,
financial
allied
subsidiaries, except insurance companies, are consolidated with the

financial statements of the parent bank on a line-by-line basis. Nonfinancial allied subsidiaries and insurance subsidiaries, on the other
hand, are accounted for using the equity method.
Provisioning requirement
In preparing general purpose financial statements/audited financial
statements, banks adopt the provisions of PFRS/PAS in booking
provisions for credit losses.
For prudential reporting purposes, however, banks are required to
meet the BSP-recommended provisioning requirement which is the
higher of the (a) BSP recommended valuation reserves and (b)
PFRS/PAS impairment provisioning. Compliance with the BSP
recommended provisioning requirement is evaluated on an aggregate
basis.
Deemed cost of real and other properties acquired in settlement
of loans (ROPA)
In computing the deemed cost of ROPA, banks are required to value
the property at initial recognition based on the carrying amount of the
asset given up in the exchange; i.e., carrying amount of the loan,
instead of the fair value of the real and other property acquired.
25 | P a g e

The accounting treatment for prudential reporting aims to ensure that

the financial statements provide a suitable basis for measuring
banking risks and banking ratios.
BSP, SEC, IC AND BOA SIMPLIFY ACCEDITATION PROCESS FOR
EXTERNAL AUDITORS
The Bangko Sentral ng Pilipinas (BSP), Securities and Exchange

Commission (SEC), Insurance Commission (IC) and the Professional
Regulatory Board of Accountancy (BOA) signed a Memorandum of
Agreement (MOA) on 12 August 2009 simplifying the accreditation process
for external auditors. The MOA is part of the continuing efforts of the
regulators to promote adherence to quality control standards in auditing for
the ultimate purpose of enhancing quality and transparency in financial
reporting.
The MOA generally provides a framework for harmonizing the different
accreditation process of the regulatory agencies by streamlining their
documentary requirements and procedures for accreditation. Moreover, it
strengthens the cooperative stance of regulators as it sets forth the
guidelines for coordination and information exchange.
The BSP, SEC and IC have until 31 December 2009 to issue their revised
rules on the accreditation of external auditors to pave the way for the
implementation of the provisions of the MOA. The changes that will be
introduced by the regulators will lead to the rationalization of the
documentary and qualification requirements as said agencies will no longer
26 | P a g e

ask for those that are already required by BOA. The BSP, SEC and IC will
also prescribe a common set of minimum requirements, which will only be
supplemented by other conditions that are pertinent for those auditing their
respective regulated entities. Moreover, they will also observe a mutual
recognition policy on auditors that they have individually accredited for
certain pre-agreed types of institutions.
The MOA simplifying the accreditation process for external auditors was
developed under the auspices of the Financial Sector Forum (FSF), which
is a voluntary interagency body created to provide an institutionalized
framework for coordinating the supervision and regulation of the financial
system.
The BSP, SEC, IC and the Philippine Deposit Insurance
Corporation are the members of the FSF.

RAISING THE BAR OF CONTROL STANDARDS OF INTERNAL
CONTROL AND AUDIT
The BSP approved the revised guidelines on internal control and internal
audit raising the bar of control standards for BSP supervised financial
institutions (FIs). The guidelines complement other BSP initiatives to further
strengthen the quality of governance in the industry and align existing
regulations with international standards and best practices.
The guidelines feature the fundamental elements of internal control namely,
management
oversight
and
control
culture;
risk
recognition
and
assessment; control activities; information and communications; and

monitoring activities and correcting deficiencies. These effectively broaden
the regulatory expectations on internal control from previously being limited
27 | P a g e

only to the implementation of basic internal control activities to promoting

shared accountability of the board and personnel at all levels in the control
process. The MB recognizes though, that there is no one size fits all
internal control framework. As such, consistent with the principle of
proportionality, FIs are expected to adopt internal control frameworks that
are suited to their size, risk profile and complexity of operations.
The guidelines also cover the BSPs expectations on the internal audit
function, highlighting its role in assessing and complementing operational
management, risk management, compliance and other control functions.
FIs are generally allowed to outsource the internal audit function to have
access to certain areas of expertise or address resource constraints
provided that the scope of audit will not include areas that are covered by
existing statutes on deposit secrecy. The guidelines, however, clarified that
arrangements where FIs that are part of group structures will opt to
establish an internal audit function centrally in the parent bank will not fall
under the outsourcing framework provided under existing regulations.
Finally, the qualifications of the head of the internal audit function were
expanded so as to consider professionals from disciplines outside of the
accountancy profession. Certified Public Accountants (CPAs) or Certified
Internal Auditors (CIAs) are required for the head of the internal audit
function of a universal/commercial bank. On the other hand, the head of the
internal audit function of thrift, rural, and cooperative banks may be a
graduate of any accounting, business, finance, or economics course but
should have the technical proficiency on the conduct of internal audit.
Regardless of academic background, heads of the internal audit function of
28 | P a g e

all supervised FIs should meet the prescribed number of years of

experience. (Circular No. 871 dated 5 March 2015)
CHANGES IN THE CPA BOARD EXAMINATION BY CHED AND BOA
The winners in the accountancy profession in 2015 can be likened to Miss
Universe Pia Alonzo Wurtzbach who was able to accomplish an
outstanding milestone when she bested the rest of the universe in winning
her crown. As written in last weeks column, there are a lot of Miss/es
Universe or Mister/s Universe winners in the accountancy sector who have
done much extraordinary achievements in the profession in 2015.
In the accountancy profession, major structural changes were either
initiated or completed during 2015. The Certified Public Accountant (CPA)
board examination syllabi and Subjects were overhauled to make these
more relevant and to meet the global standards. The major change here
involved the shift to meet the requirements of an outcome-based education;
the new focus on effective communication; the reduction in the number of
board examination subjects from seven to six; and the introduction of a
new subject called Regulatory Framework for Business Transactions.
These changes will take effect on the May 2016 CPA board examination.
The Bachelor of Science in Accountancy (BSA) was also the subject of a
major review and recommendation for revision.
The Commission on
Higher Education (CHED) and the Board of Accountancy (BOA) undertook

a review of the existing BSA, which was introduced way back in 2007.
Finding the need to address the requirements of the current time, industry
and profession, important recommendations were formulated. The CHED
29 | P a g e

and BOA reported the need to have four tracks in the accountancy
education. These four are the existing BSA leading to the qualification for
the taking of the CPA board examinations; and three new programs that
include the BS Management Accounting, BS in Accounting Information
Systems and BS in Internal Audit. The new accounting academic programs
are expected to be in place by School Year 2018.
A lot of efforts were extended on these major breakthrough events. In all of
these activities, there are again a sizable number of Mister/s and Miss/es
Universe of the accountancy profession doing their share and sharing in
the achievements.
Other structural reforms where discussions have started in 2015 are the
strengthening of the small and medium practices (SMPs); the upward
adjustment of the audit threshold; and amendment of the Accountancy Law
of 2004.
With the local and global developments, the SMPs have to strengthen their
organization and practices for them to remain competitive and meet the
growing demands of the market and the regulators. Thus, SMPs may need
to consider consolidation or merger of practices to cope better in the
business environment. The BOA has been discussing how to help the
SMPs in this regard.
The audit threshold in the Tax Code prescribes that enterprises with sales
exceeding P600,000 in a year are required to have and independent CPA
perform audit work on their business. The BOA has formulated a solution
that will address this impractical and unreasonable audit threshold
30 | P a g e

presently in place. It has started discussions with the other regulators,

including Securities and Exchange Commission (SEC) and the Bureau of
Internal Revenue (BIR), on how this system can be rationalized to benefit
all stakeholders, including the small and medium enterprises, as well as the
regulators.
Finally, Republic Act 9892, or the Accountancy Law, which defines the
practice and regulation of accountancy in the Philippines, is in dire need of
revisions. This law was passed way back in 2004, and the developments
in the past years have made it imperative to amend the accountancy law.
The BOA has been receiving and compiling suggestions from the various
stakeholders on the provisions, which can be incorporated in a bill that can
be submitted to the next Congress for their consideration. This discussion
will go full blast in 2016 to come up with proposals on the amendments that
can be submitted to the next Congress.
The accomplishments achieved to date in the profession can be attributed
to a great extent to the effective communication and interaction between
the BOA and all its constituents and stakeholders. This interaction has
been facilitated by the information and communication system that was put
in place by the BOA for the accountancy sector. This includes the creation
of the BOA web site (boa.com.ph), Facebook account (Professional
Regulatory Board of Accountancy), twitter account (PRC BOA), e-mail
account (boa.secretariat@gmail.com) and a notification alert or release on
BOA updates that is sent on a regular basis by e-mail to the concerned
parties.
31 | P a g e

Feedback on the various initiatives and issues confronting the profession

are also obtained from the three Sectoral Surveys and the CPA Career
Tracking Survey that can be accessed and accomplished online by the
respondents. To date, thousands of respondents have taken the survey,
which continue to be available for responding in the BOA web site.
The BOA has developed an information-technology (IT) system that will
help in the tracking of documents that the regulator handles in the course of
its regular work and special projects. This IT system is also geared to
process the much information that the BOA receives and requires to come
out with inputs to aid the BOA in its decision-making and workmanagement functions.
To assist the BOA in its varied activities, many volunteers have joined the
Expanding Horizons bandwagon to contribute their ideas and efforts in the
many activities and events in the profession. A special project team has
been organized with the composition coming from the volunteers and the
interns of BOA. Plans for the creation of a technical and secretariat office
have been done and submitted to the concerned government office for its
consideration.
It is also noteworthy to know that in 2015 a total of 7,630 CPAs joined the
growing roster of professionals.
These new CPAs passed the three
licensure examinations given by the BOA last year. Feedback from the
industry and profession indicates that even this number of new CPAs is
inadequate to meet the large market demand for accountants here and
abroad.
32 | P a g e

Despite the limited resources of the BOA, a lot of milestones have been
achieved. Thanks to the contribution of the many unnamed and selfless
individuals and organizations, the projects and activities under the
Expanding Horizons initiative of the BOA on behalf of the accountancy
profession have been planted and have borne fruits already.
These
Mister/s and Miss/es Universe of the accountancy profession are truly

deserving of the gratitude and appreciation of the entire profession
PICPA AND BOA MEETS THE BIR COMMISSIONER

The Tax and Legislative Committee of PICPA, headed by Chairperson
Cecille Patricio paid a courtesy visit to BIR Commissioner Caesar Dulay
last August 7, 2016 in the BIR National Office. BOA Chairman Joel TanTorres, also a member of the Committee, also met Commissioner Dulay to
discuss existing and possible areas of cooperation with the two offices.
They discussed the following items:
1. Circularization that the effectivity of the submission of Certificate of
Compilation Services in the Preparation of Financial Statements
prescribed in BoA Resolution 3-2016 has been extended to December
31, 2016
2. Discussion on the Joint IRR on Revision of Audit Threshold pending
with the BIR Legal Service
3. Enhancement of the Accreditation of CPAs covered by RR 15-99,1106 4-10, and 14-10.
33 | P a g e

4. Providing of Continuing Professional Education by BIR accredited

CPE providers pursuant of RR 4-2010
5. Referral to BoA of erring CPAs related to tax evasion/assessment
cases
6. Posting of list of accredited CPAs in public practice and commerce
and industry
7. Organization of the Tax Academy
8. Pursuing the Performance Governance System
9. Systems or performance audit of the assessment system by the
Commission on Audit
10. Recruitment of CPAs by the BIR
ASEAN REGULATORS DISCUSS MRA IMPLEMENTATION
Representatives from the ten ASEAN countries gathered together from
October 2 to 2, 2015 in Suntec Convention Center in Singapore to discuss
the implementation details of the Mutual Recognition Arrangement (MRA)
for Accountancy Services. The MRA was signed last November 2014 and
provides for the mobility of the accountants of the ASEAN region.
The Philippines was represented in the Accountancy Workshop by BoA
Chairman Joel Tan-Torres and Estelita Aguirre and Corazon Pangcog as
the representatives of PICPA.
34 | P a g e

The Accountancy Workshop was organized ASEAN and Aus Aid. The
facilitators fo the workshop were Patrick Corrigan, Gertt Karreman, and
Mahalah Groves of ACCA.
The Board of Accountancy will soon launch an awareness campaign on the
ASEAN Mutual Recognition Arrangement (MRA) on Accountancy Services.
This would be part of the ASEAN AWARENESS FOR ACCOUNTANTS
series or the 3A series.
The ASEAN MRA was signed last November 2014 by all ASEAN member
states. It will be a matter of time when the MRA will be implemented and
will affect our entire accountancy profession, BoA Chairman Joel TanTorres said.
We have been attending meetings of the ASEAN
accountancy regulators and a road map has already been formulated that
will soon result in the enhanced mobility of ASEAN accountants within the
region
n, Chairman Tan-Torres added.
In order that all stakeholders in the accountancy profession are made

aware of these important developments in the MRA, the BoA will be posting
information materials on the MRA in its Face Book (FB) and website.
Furthermore, flyers and brochures on the MRA will be published and
disseminated. The Continuing Professional Development seminars and
modules will offer topics on the MRA.
We need to be prepared and ready to meet the opportunities that the MRA
will bring. At the same time, we should all be ready to face the competition
from the other ASEAN countries that will result in challenges to our
accountants, Chairman Tan-Torres said.
35 | P a g e

FORTHCOMING CHANGES IN THE CONTINUING PROFESSIONAL

DEVELOPMENT OF CPAS
The Board of Accountancy (BoA) is taking quality really seriously. From the
revision of the syllabus for the Certified Public Accountant (CPA) licensure
examination, implementing stricter and new rules on accreditation, new
rules in the preparation of the financial statements, among others, and now,
the Continuing Professional Development (CPD). The BoA will soon be
instituting changes and improvements in the CPD for CPAs.
The changes and improvements include the following:

1. The gradual increase in the number of CPD units required to be
completed for the three year period from 60 units to 80 units for the
period ended December 2016, to 100 units for the period ended
December 2017 and 120 units for the period ended December 2018.
2. Shift from the CPD learning categories of Thematic to Competence
areas, to make it consistent with International Education Standards,
with
the
Competence
areas
to
becategorized into
Technical
Competence, Professional Skills and Professional Values, Ethics and

Attitudes
3. Clearer rules on the securing of CPD credits for self-directed and
non-verifieable learning activities
4. Encouraging the provision of more on-line CPD courses
36 | P a g e

5. Encouraging more CPD service providers from the academe and

government sectors
6. Start of the use of monitors or proctors in CPD seminars who will be
responsible for monitoring the attendance and presence of the CPD
participants
7. Requirement for the giving of a short quiz by the CPD resource
person to all attendees at the end of the CPD session and the
passing of said quiz by attendees as a requisite for earning the CPD
units
8. More streamlined monitoring of the CPD units by means of the
IT Tracking System of the BoA
Rules are becoming stricter. This makes it even harder to comply,
especially for those in the Small and Medium Practices (SMPs). While we
see the reason why should these be implemented, its becoming costly and
burdensome and likely to kill SMPs. While some of the changes are
beneficial, increase in the required CPD units from the current 60 to up to
120 by 2018, in particular, is very significant and burdensome to most
SMPs.
If this continues, the changes that the BoA is instituting will soon make it
impossible for a sole practitioner to continue practicing because of all of
these requirements. The Philippines has a lot of competent and highly
capable CPAs but instead of encouraging these people to practice, they are
discouraged due to the tremendous and costly requirements and choose to
be regular employees. What remains are those big firms with clients who
37 | P a g e

are able and willing to pay and those small practitioners who endures small
fees from numerous small clients.
Others think that this move of BoA is unknowingly killing the small practices
and the small and medium-sized businesses. With the increased cost
of compliance, SMPs are likely to charge small business with a higher fee,
added to the already complicated and burdensome tax requirements, which
may not be afford by the small clients. SMPs, on the other hand, might loss
existing clients and lose business when these small clients started looking
for cheaper services.
Looking at the bright side of it, quality is upheld and BoA will be able to
regulate the practice of the profession properly resulting in greater public
trust and confidence.
ALL PARTNERS AND CPA STAFF OF AUDIT FIRMS NEED TO BE
ACCREDITED
Section 31 of RA 9298 provides that individual CPAs, firms and
partnerships of CPAs involved in the practice of public accountancy,
including partners and staff members thereof, shal register with the
Commission and Board, such registration to renewed every three years,
xxxx.
Accordingly, to put into place this unimplemented requirement of law, BoA
Resolution 295-2015 was issued.
Pursuant to this Resolution, all partners and the CPA staff of all audit
partnerships and firms will have to file their application to as CPAs in public
38 | P a g e

practice not later than June 30, 2016. Upon completion of the prescribed
documents, they will each be given Certificates of Accreditation with unique
numbers that will be linked to the audit partnership or firm that they are
connected. They are also given until June 30, 2016 to complete their CPD
requirements. For those with lacking CPD units at time of this accreditation,
they will have to accomplish and submit a prescribed affidavit of
undertaking with their application form.
Those who file early before June 30, 2016 will be able to get their
Certificate of Accreditation earlier than the rest who may defer their filing
their applications near the June 30 deadline. Therefore, we encourage our
affected CPAs to file as soon as possible so that they will not be affected by
the last minute rush and hassle. Of course, all the affected CPAs should
also ensure that they are able to complete their CPD units of 60 units within
three years from date of filing of the application, said Chairman Joel TanTorres.
There will be a Question and Answer (Q&A) list that will be issued to
address the implementation issues and questions. The Q & A that will be
issued will clarify such issues as the procedure that those leaving,
resigning or retiring from the audit partnership or firm that they are initially
connected with at time of application will have to notify the PRC/BoA of this
matter within a month of their separation. They also will have to notify the
PRC/BoA of their new status or involvement within a month thereafter.
39 | P a g e

There is no need for a new application but merely a notification will suffice,
said Chairman Tan-Torres.
A new BACC form will be used for the application for this affected CPAs.
ACCOUNTING STANDARDS UPDATESEFFECTIVE DATES
FINAL DOCUMENT
DATE
EFFECTIVE DATES
ISSUED
Accounting Standards Updates
Update
2016-15 August
Effective
Statement
Cash 2016
entities for fiscal years beginning
230):
after December 15, 2017, and
Classification of Certain
interim periods within those fiscal
Cash
and
years. For all other entities, the
Payments(a
amendments are effective for
Flows
of
(Topic
Receipts
Cash
consensus
of
the
fiscal
for
years
public
business
beginning
after
Emerging Issues Task
December 15, 2018, and interim
Force)
periods
within
fiscal
years
beginning after December 15,

2019.
Early
adoption
is
permitted, including adoption in

an interim period. If an entity
early adopts the amendments in
an
interim
period,
any
adjustments should be reflected

as of the beginning of the fiscal
40 | P a g e

year that includes that interim

period. An entity that elects early
adoption must adopt all of the
Update
2016-14Not- August
amendments in the same period.

Effective for annual financial
for-Profit Entities (Topic 2016
statements issued for fiscal years
958):
of
Financial Statements of
2017, and for interim periods
Not-for-Profit
within fiscal years beginning after
Presentation
Entities
December 15, 2018. Application

to interim financial statements is
permitted but not required in the
initial year of application. Early
application of the amendments is
permitted.
The
amendments
should be initially adopted only

for an annual fiscal period or for
the first interim period within the
fiscal year of adoption.
2016-13 June 2016 For public business entities that
Update
Financial Instruments
are
Credit
Exchange
Losses
(Topic
U.S.
Securities
Commission
and
(SEC)
326): Measurement of
filers, the amendments in this
Credit
on
Update are effective for fiscal
Instruments
years beginning after December
Financial
Losses
15,
2019,
including
interim
41 | P a g e

periods within those fiscal years.

For all other public business
entities, the amendments in this
Update are effective for fiscal
15,
2020,
including
interim

For all other entities, including
not-for-profit
entities
and
employee benefit plans within the

scope of Topics 960 through 965
on
plan
accounting,
the
amendments in this Update are

effective
for
fiscal
years

2020, and interim periods within
fiscal
years
beginning
after
December 15, 2021. All entities

may adopt the amendments in
this Update earlier as of the fiscal
15,
Update
Revenue
2016-12 May 2016

from
2018,
including
interim

The amendments in this Update
affect the guidance in Accounting
42 | P a g e

Contracts
with
Standards
Update
2014-
Customers (Topic 606):
09, Revenue from Contracts with
Narrow-Scope
Customers (Topic 606), which is
Improvements
Practical
and
not yet effective. The effective
Expedients
date and transition requirements

for
the
amendments
in
this
Update are the same as the

effective
date
and
transition
requirements for Topic 606 (and

any other Topic amended by
Update
2014-09).
Standards
Accounting
Update
2015-
14,Revenue from Contracts with

Customers (Topic 606): Deferral
of the Effective Date, defers the
effective date of Update 2014-09
Update
2016-10 April 2016
by one year.
Revenue
from
Contracts
with
Standards
Update
2014-
Identifying Performance
Obligations
Licensing
and

for
the
amendments
in
this

43 | P a g e

effective
date
and
transition
requirements in Topic 606 (and

any other Topic amended by
Update
2014-09).
Standards
Accounting
Update
2015-
14,Revenue from Contracts with

Customers (Topic 606): Deferral
of the Effective Date, defers the
effective date of Update 2014-09
Update
2016-09 March
CompensationStock
Compensation
2016
by one year.
For public business entities, the
(Topic
annual periods beginning after
718): Improvements to
Employee Share-Based
periods
Payment
periods. For all other entities, the
Accounting
within
those
annual

periods within annual periods
2018. Early adoption is permitted
for any entity in any interim or
annual period. If an entity early
adopts the amendments in an
interim period, any adjustments
44 | P a g e

should be reflected as of the

beginning of the fiscal year that
includes that interim period. An
entity that elects early adoption
must
Update
2016-08 March
adopt
all
of
the
amendments in the same period.

Revenue
from 2016
Contracts
with
Standards
Update
2014-
Principal versus Agent
Considerations
(Reporting
Gross
Revenue
versus
Net)
for
the
amendments
in
this

effective
date
and
transition
requirements of Update 2014-09.

Accounting
No.
Standards
2015-14,Revenue
Update
from
Contracts with Customers (Topic

606): Deferral of the Effective
Date, defers the effective date of
Update
2016-07 March
InvestmentsEquity
Method
and
Joint
2016
Update 2014-09 by one year.

Effective for all entities for fiscal
years, and interim periods within
those
fiscal
years,
beginning
45 | P a g e

Ventures (Topic 323):
after December 15, 2016. The
Simplifying
the
amendments should be applied
Transition to the Equity
prospectively upon their effective
Method of Accounting
date to increases in the level of
[Download]
ownership interest or degree of

influence
that
result
in
the
adoption of the equity method.

Update
2016-06 March
Derivatives
Hedging
and 2016
(Topic
815):
Earlier application is permitted.

financial statements issued for
Contingent Put and Call
fiscal
Options
in
Debt
Instruments (a
consensus
years
beginning
after

of
the
For entities other than public
business
entities,
the
Force)

fiscal
years
beginning
after

periods
within
fiscal
years

2018.
Early
adoption
is
permitted,
including adoption in an interim

46 | P a g e

period. If an entity early adopts

the amendments in an interim
period, any adjustments should
be reflected as of the beginning
of the fiscal year that includes
Update
2016-05 March
Derivatives
Hedging
Effect
and 2016
(Topic
of
815):
that interim period.

Derivative
fiscal
years
beginning
after
Contract Novations on
Existing
Hedge
Accounting
For
Relationships (a
consensus
of
the
all
other
entities,
the
fiscal
years
beginning
Force)
[Download]
periods
within
fiscal
after
years

2018.
Early
adoption
is
permitted,
including adoption in an interim

Update
Liabilities
2016-04 March
2016
period.
Effective
for
entities,
certain
public
business
not-for-profit
47 | P a g e

Extinguishments
Liabilities
of
entities, and certain employee
(Subtopic
benefit
plans
for
financial
405-20): Recognition of
Breakage
for
Certain
Prepaid
Stored-Value
Products (a consensus
those fiscal years. For all other
of the Emerging Issues
entities, effective for financial
Task
Force)
[Download]

fiscal
years
December
15,
beginning
2019.
after
Earlier
application is permitted, including

Update
2016-03 March
IntangiblesGoodwill
2016
adoption in an interim period.

The amendments are effective
immediately.
and Other (Topic 350),

Business Combinations
(Topic
805),
Consolidation
810),
(Topic
Derivatives
and
Hedging
(Topic
815):
Effective
Date
and
Transition
Guidance(a
consensus
of
the
Private
Company
48 | P a g e

Council)
[Download]
Update
2016-02 February
Leases (Topic 842)

Section
Effective
2016
for
fiscal
years

2018, including interim periods
within those fiscal years, for any
Leases:
Amendments
of the following:
to
the FASB
1.
A public business entity
Accounting
2.
A not-for-profit entity that
Standards
has issued, or is a conduit bond
Codification
obligor for, securities that are
Section
traded, listed, or quoted on an
Conforming
exchange or an over-the-counter
Amendments
market
Related to Leases:
Amendments
the
An employee benefit plan
to
that files financial statements
FASB
with the U.S. Securities and
Accounting
Exchange Commission (SEC).
Standards
Codification
3.
For
Section
Basis
Conclusions
other
entities,
the

C
effective
for
fiscal
years
Background
Information
all
and
for

fiscal
years
December
beginning
15,
after
2020.
49 | P a g e

Early
application
of
the
amendments in this Update is

Update
2016-01 January
permitted for all entities.

Financial Instruments 2016
Overall (Subtopic 825-
effective
10):
and
of
and
within those fiscal years. For all
Liabilities
other entities including not-for-
Recognition
Measurement
Financial
Financial
Assets
profit
for
fiscal
entities
and
years
employee
benefit plans within the scope of

Topics 960 through 965 on plan
accounting, the amendments in
this Update are effective for fiscal
15, 2018, and interim periods
December 15, 2019. All entities
that are not public business
entities
may
amendments
in
adopt
this
the
Update
earlier as of the fiscal years

50 | P a g e

within
those
fiscal
years.
Early application of the following

permitted for all entities upon
issuance of this Update as of the
beginning of the fiscal year of
adoption:
1.
An entity should present

separately
in
comprehensive
other
income
the
portion of the total change in the

fair value of a liability resulting
from a change in the instrumentspecific credit risk if the entity
has elected to measure the
liability
at
fair
value
in
accordance with the fair value

option for financial instruments.
2.
Entities that are not public

business entities are not required
to apply the fair value of financial
instruments disclosure guidance
in the General Subsection of
Section 825-10-50.
51 | P a g e

Except for the early application

guidance discussed above, early
adoption of the amendments in
this Update is not permitted.
2015-17 November For public business entities, the
Update
Income
740):
Taxes
Balance
Classification
Deferred
(Topic 2015
Sheet
effective for financial statements
of
Taxes
issued
for
annual
periods

those annual periods. For all
other entities, the amendments in
this Update are effective for
2018.
Earlier application is permitted
for all entities as of the beginning
of an interim or annual reporting
Update
period.
2015-16 Septembe For public business entities, the
Business Combinations r 2015

52 | P a g e

(Topic 805): Simplifying
fiscal
the
December 15, 2015, including
Accounting
for
years
beginning
after
Measurement-Period
Adjustments
years. The amendments should

be
applied
prospectively
adjustments
to
to
provisional
amounts that occur after the

effective date of this Update with
earlier application permitted for
financial statements that have
not
For
been
all
other
issued.
entities,
the

fiscal
years
beginning
after

periods
within
fiscal
years

2017. The amendments should
be
applied
adjustments
prospectively
to
to
provisional
amounts that occur after the

effective date of this Update with
earlier application permitted for
financial statements that have
not yet been made available for
53 | P a g e

Update
2015-14 August
issuance.
Revenue
from 2015
defer the effective date of Update
Contracts
with
2014-09 for all entities by one
year. Public business entities,
Deferral of the Effective
certain not-for-profit entities, and
Date
certain employee benefit plans

should apply the guidance in
Update
2014-09
to
annual
reporting periods beginning after

December 15, 2017, including
interim reporting periods within
that
reporting
period.
Earlier
application is permitted only as of

annual
reporting
periods

2016, including interim reporting
periods
within
that
reporting
period.
All other entities should apply the
guidance in Update 2014-09 to
annual
reporting
periods

2018,
and
interim
reporting
periods within annual reporting

54 | P a g e

periods
beginning
after
December 15, 2019. All other

entities may apply the guidance
in Update 2014-09 earlier as of
an
annual
reporting
period

2016, including interim reporting
periods
within
that
reporting
period. All other entities also may

apply the guidance in Update
2014-09 earlier as of an annual
reporting period beginning after
reporting periods within annual
reporting periods beginning one
year after the annual reporting
period in which the entity first
applies the guidance in Update
Update
2015-13 August
Derivatives
Hedging
and 2015
(Topic
2014-09.
Effective upon
issuance
and
should be applied prospectively.
815):
Therefore, an entity will have the
the
ability to designate on or after the
Normal Purchases and
date of issuance any qualifying
Normal
contracts as normal purchases or
Application
of
Sales
Exception
to
Scope
Certain
normal sales.
55 | P a g e

Electricity
within
Contracts
Nodal
Markets (a
Energy
consensus
of the FASB Emerging

Issues
Task
Force)
Update
2015-12Plan July 2015
Accounting:
The amendments in all three
Defined
parts of this Update are effective
Benefit Pension Plans
for fiscal years beginning after
(Topic
Defined
December
Pension
application
960),
Contribution
Plans
(Topic
Health
and
Benefit
Plans
965):
(Part
I)
962),
An
15,
is
entity
apply
the
Welfare
amendments in Parts I and II
(Topic
retrospectively for all financial
Fully
statements
presented.
An
Investment
Contracts,
amendments
(Part II) Plan Investment
prospectively.
Measurement
Earlier
permitted.
should
Benefit-Responsive
Disclosures,
2015.
(Part
entity
should
apply
the
on
Part
III
III)
Date
Practical
Expedient(consensuses
Issues
Update
Task
Force)
2015-11 July 2015
Inventory (Topic 330):
For
public
effective
business
for
fiscal
entities,
years
56 | P a g e

Simplifying
Measurement
the
of
Inventory
within those fiscal years. For all

other entities, effective for fiscal
December
amendments
15,
in
2017.
this
The
Update
should be applied prospectively

with earlier application permitted
as of the beginning of an interim
Update
Technical
and
or annual reporting period.

2015-10 June 2015 Transition guidance varies based
Corrections
Improvements
on
the
amendments
in
this
Update. The amendments in this

Update that require transition
guidance are effective for all
entities for fiscal years, and
years, beginning after December
15,
2015.
Early
adoption
is
permitted, including adoption in

an
interim
period.
All
other
amendments will be effective

upon
the
issuance
of
this
57 | P a g e

Update
2015-09 May 2015
Financial
Services
Update.
For public
effective
business
entities,
annual
periods
for
Insurance (Topic 944):
Disclosures
about
Short-Duration
Contracts
December
15,
2016.
For all other entities, effective for

Update
2015-07Fair May 2015
2017.
Effective
Value
Measurement
entities for fiscal years beginning
820):
for
Investments in Certain
Entities That Calculate
Net Asset
effective
(Topic
Disclosures
Share
Value per
(or
Its
for
public
for
business
fiscal
years
Equivalent) (a
consensus of the FASB
those fiscal years. A reporting
entity
Force)
amendments retrospectively to
should
apply
the
58 | P a g e

all
periods
presented.
The
retrospective approach requires

that an investment for which fair
value is measured using the net
asset value per share practical
expedient be removed from the
fair value hierarchy in all periods
presented in an entitys financial
statements. Earlier application is
Update
2015-06 April 2015
Earnings
Per
permitted.
Effective
for
fiscal
years
Share
(Topic 260): Effects on
Historical Earnings per
those
Unit of Master Limited
application
Partnership Dropdown
amendments
Transactions (a
should be applied retrospectively
for
presented.
fiscal
all
is
years.
Earlier
permitted.
in
financial
this
The
Update
statements
Force)
Update
2015-05 April 2015
Effective
for
annual
periods,
IntangiblesGoodwill
including interim periods within
and
OtherInternal-
those annual periods, beginning
Use Software (Subtopic
after December 15, 2015. For all
350-40):
other entities, the amendments
Customers
59 | P a g e

Accounting
for
Paid
in
Fees
Cloud
will
be
effective
periods
for
annual
beginning
after
Computing
Arrangement
periods
in
annual
periods

2016. Early adoption is permitted
Update
2015-04 April 2015
for all entities.

Effective for
public
business
Compensation
entities for financial statements
Retirement
Benefits
issued for fiscal years beginning
(Topic
Practical
715):
Expedient
for
the
Measurement Date of
an Employers Defined
Benefit Obligation and
Plan
Assets

interim periods within fiscal years
2017.
Earlier
application
is
Update No. 2015-03 April 2015
permitted.
InterestImputation of
Interest (Subtopic 835-
30):
the
Debt
Simplifying
Presentation
of
60 | P a g e

Issuance
Costs

years.
For
all
other
entities,
the

interim periods within fiscal years
2016.
Early
adoption
of
the
amendments in this Update is

permitted for financial statements
that have not been previously
Update
2015-02 February
Consolidation
(Topic 2015
issued.
Effective
for
public
business
entities for fiscal years, and for
810): Amendments to
the
Analysis
Consolidation
15, 2015. For all other entities,

the amendments in this Update
are effective for fiscal years
2016, and for interim periods
61 | P a g e


December
15,
2017.
Early
adoption is permitted, including

adoption in an interim period. If
an
entity
early
amendments
in
adopts
an
the
interim
period, any adjustments should

be reflected as of the beginning
of the fiscal year that includes
that
interim
period.
A reporting entity may apply the

amendments
in
this
Update
using a modified retrospective

approach
by
recording
cumulative-effect adjustment to
equity as of the beginning of the
fiscal
year
of
adoption.
reporting entity also may apply

Update No. 2015-01 January
the amendments retrospectively.

Effective for fiscal years, and
Income
Statement 2015
Extraordinary
Unusual
and
Items
15, 2015. A reporting entity may
(Subtopic
225-20):
apply
the
amendments
Simplifying
Income
prospectively. A reporting entity

62 | P a g e

Statement Presentation
also may apply the amendments
by
retrospectively to all prior periods
Eliminating
the
Concept
of
Extraordinary
Items
presented
in
the
financial
statements. Early adoption is

permitted
provided
that
the
guidance is applied from the

beginning of the fiscal year of
adoption. The effective date is
the
same
for
both
public
business entities and all other

entities.
Update No. 2014-16 November Effective
Derivatives
Hedging
and 2014
(Topic
for
public
business
entities for fiscal years, and
815):
Whether
the Host Contract in a
15, 2015. For all other entities,
Hybrid
the amendments in this Update
Determining
Financial
Instrument
in
are effective for fiscal years
the Form of a Share Is
More Akin to Debt or to
2015,
Equity (a consensus of
the
2016. Early adoption, including
FASB
Issues
Issued
Emerging
Task
[Download]
Force)
and
interim
periods
adoption in an interim period, is

permitted.
If
an
entity
early
adopts the amendments in an

interim period, any adjustments
63 | P a g e

shall be reflected as of the

beginning of the fiscal year that
Update No. 2014-15 August
includes that interim period.

For all entities, the new
Presentation
requirements are effective for
of 2014
Financial Statements
annual
Going
Concern
(Subtopic
205-40):
of
Disclosure
periods
Uncertainties about an
2016.
Entitys
permitted.
Ability
to
ending
Early
after
application
is
Continue as a Going
Concern
[Download]
Update No. 2014-14 August
ReceivablesTroubled
new standards are effective for
2014
Debt Restructurings by
annual
periods,
Creditors
(Subtopic
periods
within
Classification
periods,
310-40):
of Certain GovernmentGuaranteed
Loans
December
and
interim
those
annual
beginning
after
15,
2014.
Mortgage
upon
For all other entities, the new
Foreclosure (a
standards are effective for annual
periods ending after December
Force)

64 | P a g e

[Download]
2015.
Earlier
adoption
under
certain
is
permitted
circumstances.
Subject to certain considerations,

an entity will apply the new
standards either prospectively or
by using a modified retrospective
approach.
Update No. 2014-12 June 2014 Effective for annual periods and
CompensationStock
interim
Compensation
annual periods, beginning after
718):
(Topic
Accounting
periods
within
those
for
December 15, 2015. An entity
Share-Based Payments
may apply the standards (1)
When the Terms of an
prospectively to all share-based
Award Provide That a
payment awards that are granted
Performance
or modified on or after the
Could
after
Service
Target
Be
Achieved
effective
date,
or
the
Requisite
retrospectively to all awards with
Period (a
performance
targets
that
(2)
are
outstanding as of the beginning
of the earliest annual period
Force)
presented
in
the
financial
statements and to all new or

modified
awards
thereafter.
65 | P a g e

Earlier application is permitted.

Update No. 2014-11 June 2014 For public business entities, the
Transfers and Servicing
accounting
(Topic
disclosure
860):
changes
for
and
certain
Repurchase-to-Maturity
transactions accounted for as a
Transactions,
sale are effective for the first
Repurchase
period
Financings,
Disclosures
and
(interim
or
annual)

2014. Earlier application for a
public
business
entity
is
prohibited. The disclosure for

transactions accounted for as
secured borrowings is required
for
annual
periods
beginning
after December 15, 2014, and for

interim periods after March 15,
2015.
For
all
other
entities,
the
accounting changes and both

new disclosures are effective for
December 15, 2014 and interim
periods
after
December
15,
2015. These entities may elect

early application and apply the
66 | P a g e

requirements for interim periods

2014.
For all entities, the disclosures
are not required to be presented
for comparative periods before
Update No. 2014-09 May 2014
the effective date.

For a public entity, effective for
Revenue
from
annual
Contracts
with
Customers (Topic 606)
reporting
periods
within that reporting period. Early

Section
application is not permitted. A
and
public entity is an entity that is
Amendments That
any one of the following: (1) a
Create
Revenue
public business entity, (2) a not-
from
Contracts
for-profit entity that has issued,
with
Customers
or is a conduit bond obligor for,
Summary
(Topic
606)
and
securities that are traded, listed,
Other Assets and
or quoted on an exchange or an
Deferred Costs
over-the-counter market, (3) an
Contracts
employee benefit plan that files
with
Customers
or furnishes financial statements
(Subtopic 340-40)
to
Section
the
SEC.
B
67 | P a g e

For all other entities (nonpublic
Conforming
Amendments
to
entities),
effective
for
annual
Other Topics and
reporting periods beginning after
Subtopics in the
Codification
and
Status Tables
Section
Background
Information
Basis
and
for
Conclusions
2018. A nonpublic entity may

elect to apply this guidance
earlier, however, only as of the
following: (1) an annual reporting
period beginning after December
15,
2016,
periods
period
including
within
that
interim
reporting
(public entity effective
date), (2) an annual reporting

period beginning after December
within annual periods beginning
after December 15, 2017, (3) an
annual
reporting
period

within that reporting period.

Effective in the first quarter of
Presentation
of
2015 for public companies with
Statements
calendar year ends. For most
Financial
68 | P a g e

(Topic
and
nonpublic entities, it is effective
and
for annual financial statements
Equipment (Topic 360):
with years that begin on or after
Reporting Discontinued
December 15, 2014.
Property,
205)
Plant,
Operations
and
Disclosures
of
Disposals
of
Components
of
an
Entity
[Download]
Update No. 2013-12 December There is no actual effective date
Definition of a Public 2013
for
the
amendment
in
this
Business
EntityAn
Update. However, the term public
Addition to the Master
business entity will be used in
Glossary
the 2014 Accounting Standards

Updates on,Intangibles-Goodwill
and
Other
Accounting
for
andDerivatives
(Topic
(Topic
815):
350):
Goodwill,
and
Hedging
Accounting
for
Certain Receive-Variable, PayFixed
Interest
Simplified
Rate
Hedge
Swaps-
Accounting
Approach, which are the first

Updates
that
will
use
the
term public business entity.

69 | P a g e

Update No. 2013-09 July 2013
The deferral in this amendment
Fair Value Measurement
is effective upon issuance (July
(Topic 820): Deferral of
8, 2013) for financial statements
the Effective Date of
that have not been issued.
Certain Disclosures for

Nonpublic
Employee
Benefit Plans in Update

No.
2011-04
Effective
Presentation
of
determine liquidation is imminent
Statements
during annual reporting periods
(Topic 205): Liquidation
Basis
2013.
Financial
of
Accounting
for
Early
entities
adoption
that
is
permitted.
Effective prospectively for fiscal
Not-for-Profit
Entities
years beginning after June 15,
Services
2014, and interim and annual
from
periods thereafter. A recipient
an
not-for-profit entity may apply the
consensus
amendments using a modified
(Topic
958):
Received
Personnel
Affiliate (a
of
retrospective
Issues
which all prior periods presented
Task
Force)
approach
under
upon the date of adoption should

be adjusted, but no adjustment
should be made to the beginning
70 | P a g e

balance of net assets of the

earliest period presented. Early
Update No. 2013-05 March
adoption is permitted.
Effective prospectively for fiscal
Foreign
years
Matters
Currency 2013
(Topic
830):
periods
(and
interim
within
reporting
those
years)
Parents Accounting for
the
Cumulative
2013. For nonpublic entities the
Translation Adjustment
upon Derecognition of
effective prospectively for the first
Certain Subsidiaries or
annual period beginning after
Groups
of
Assets
within a Foreign Entity
and annual periods thereafter.
or of an Investment in a
Foreign
Entity (a

Force)
Update No. 2013-04 February
Effective for fiscal years, and
Liabilities (Topic 405): 2013
interim
Obligations
Resulting
from Joint and Several
15, 2013. For nonpublic entities,
Liability Arrangements
the amendments are effective for
for
fiscal
Which
Amount
the
of
Total
the
periods
years
within
ending
those
after

71 | P a g e

Obligation Is Fixed at
periods
the
thereafter.
Reporting
Date(a
and
annual
periods

Force)
GLOBAL SETTING
In this section, the following accountancy profession updates (what awaits
in the accountancy profession) will be presented based on the articles,
news and updates from accounting regulatory bodies in the GLOBAL
setting. This research is in consideration of the following factors: Economic
effects, political, ethic, and social responsibility with respective government
regulatory agencies.
INTERNATIONAL ACCOUNTANCY BODIES

A listing of international professional bodies, organizations and networks for
the accountancy sector
International organizations
Accounting Regulatory Committee (ARC)
EU committee with responsibility for providing an opinion on
Commission proposals to endorse an international accounting
standard.
72 | P a g e

Fdration Internationale des Experts Comptables

Francophones (FIDEF)
Organisation representing accountancy professionals in Frenchspeaking countries.
Hospitality Financial & Technology Professionals
Formerly the International Association of Hospitality Accountants.
International Association of Practising Accountants (IAPA)
Association of independent accountancy and business advisory firms.
International Association of Book-Keepers
Professional body for those providing bookkeeping and related
accounting services to small businesses.
International Federation of Accountants (IFAC)
Global accountancy body representing 163 member organizations in
120 countries to protect the public interest by encouraging high
quality practices by the world's accountants. IFAC published revised
good practice guidance on Establishing and Developing a
Professional Accountancy Body in January 2011 and maintains a
directory of members showing member bodies, associates, affiliates,
regional organisations and groupings.
IFAC has established the following independent international
standard-setting boards:
International Accounting Education Standards Board
(IAESB)
International Auditing and Assurance Standards Board
(IAASB)
International Ethics Standards Board for Accountants
(IESBA)
73 | P a g e

International Public Sector Accounting Standards Board

(IPSASB)
International Valuation Standards Committee (IVSC)
Organization comprised of 50 professional valuation associations
from around the world. The IVSC works closely with IFAC and the
IASB, and has released International Valuation Standards (IVS) since
1985.
Intergovernmental Working Group of Experts on International

Standards of Accounting and Reporting (ISAR)
United Nations group aiming to help developing countries and
economies in transition to implement best practices in corporate
transparency and accounting.
Regional organizations and networks

Africa
Association of Accountancy Bodies of West Africa (ABWA)
Federation of accountancy bodies in the region.
Association for the Advancement of Black Accountants of
Southern Africa (ABASA)
Organization supporting and promoting black men and women in the
accounting profession.
Pan African Federation of Accountants (PAFA)
Organisation representing African professional accountancy bodies.
Asia
74 | P a g e

Asian-Oceanian Standard-Setters Group (AOSSG)

Group of standard-setting bodies formed to share experiences on
IFRS adoption in the region.
Confederation of Asian and Pacific Accountants (CAPA)
Body representing accounting organisations in the Asia-Pacific region
South Asian Federation of Accountants (SAFA)
Alliance of accountancy bodies in the region.
Caribbean
Institute of Chartered Accountants of the Caribbean
Network of accountancy and financial services bodies covering the
Bahamas, Barbados, the Eastern Caribbean, Guyana, Jamaica and
Trinidad and Tobago.
Europe
European Accounting Association
Organisation for academics and researchers in the field of accounting
European Financial Reporting Advisory Group (EFRAG)
A private sector body that assists the European Commission with
technical guidance on accounting issues, particularly the
implementation of IFRS
Fdration des Experts Comptables Europens (FEE)
Representative organisation for the accountancy profession in
Europe
75 | P a g e

Federation of Mediterranean Accountants (FCM)

Body representing professional institutes of accountants in
Mediterranean countries.
Latin America and North America
Interamerican Accounting Association (AIC)
Association drawing together accountants and professional bodies in
the Americas.
Middle East
Gulf Cooperation Council Accounting and Auditing Organization
(GCCAAO)
Organization that aims to represent and develop the accounting and
auditing profession in the region.
International Arab Society of Certified Accountants (IASCA)
Independent organisation representing professionals in Arab League
countries, including Saudi Arabia, Egypt, United Arab Emirates and
Algeria.
Russia and Eurasia
Eurasian Council of Certified Accountants and Auditors
(ECCAA)
Non-profit organisation representing professional bodies in the
Eurasia region.
A GLOBAL PERSPECTIVE ON THE ACCOUNTANCY PROFESSION

April 26, 2016
76 | P a g e

Interview with Samia Msadek, Director, Governance Global Practice, World

Bank
Interview by Henri Fortin, Global Lead for Governance and Financial
Reporting
Henri Fortin: What opportunities are there for the accountancy profession to
support sustainable economic growth globally?
The accounting profession can support development in a number of ways.
Until now, much of the focus has been on the professions role in
supporting growth in the private sector. Through better, more reliable and
transparent financial information, accountants and auditors contribute to the
efficient allocation and management of resources, help companies attract
investment and access credit. In the aggregate, then, they support an
environment of trust that allows businesses to flourish. This is an essential
role; but I would also like to raise other areas in which the profession has
an important role, and how it can be strengthened and expanded.
In the public sphere, the accounting profession supports a public sector
that is more transparent and accountable to its citizens. Effective financial
reporting is critical to governments understanding of their fiscal position
and prospects. It is also crucial for providing legislators, markets, and
citizens with the information they need to make efficient policy decisions,
and to hold governments accountable for their performance.
Further, illicit financial flows (IFF) are a significant threat to global economic
growth. The Global Financial Integrity (GFI) organization reports that, in
2013, the amount of IFF from developing countries was greater than the
77 | P a g e

combined total of foreign direct investment (FDI) and net annual official
development assistance (ODA). GFI also reports that fraudulent invoicing
of trade transactions was the largest component of illicit financial flows.
Responsibility rests with accountants to act in an ethical way to prevent
such practices in organizations.
Last but not least, the profession can contribute significantly to the
achievement of the Sustainable Development Goals (SDGs) that aim to
end poverty, protect the planet and ensure prosperity for all. The ability of
countries and corporations to measure progress, monitor impact and report
on achievements in these areas will be critical.
This is where, in my
opinion, accountants have a key, but easily overlooked, role to play.

Henri Fortin: How does the World Bank support the accounting profession
and the global accounting and auditing reform agenda, and what have
been the results?
The World Bank has been providing support in a number of ways. First, we
have been working with our partner countries to support the adoption of
international standards of financial reporting and auditing (IFRS and ISA).
We now see the widespread adoption of international standards, meaning
that auditors and accountants increasingly speak the same language
worldwide. Global standards promote transparency and enable the easy
comparison of transactions across borders and jurisdictions.
We support international standards not just for the private sector, but for the
public sector as well. In this regard, we have been building capacity on a
global scale for the effective implementation of the International Public
78 | P a g e

Sector Accounting Standards (IPSAS). In both the public and private

sectors,
the
World
Bank
has
been
delivering
targeted
capacity
development to professional accountancy organizations and regulatory

authorities so that they can implement international standards effectively,
thereby reaping the benefits of having a common, global financial
language.
Second, we have been working closely with our partner countries in
developing effective independent audit oversight systems, which play an
important role in fostering public trust in financial reporting. However,
countries face substantial challenges in structuring, funding, staffing, and
operating such systems. The World Bank has already developed a number
of strategic partnerships and is committed to facilitating further engagement
among partner countries, including through technical assistance and peer
exchange, in order to build and enhance sustainable systems of public
oversight for the audit profession.
Finally, we have a growing agenda on state-owned enterprise (SOE)
financial accountability, controls and transparency. SOEs are often very
significant in their respective domestic economies: they are charged with
managing significant state assets and can substantially impact the fiscal
environment. Yet, there is little reliable information about their importance in
todays global markets or about the advantages granted to SOEs by
governments.
Transparency and disclosure are vital in holding SOEs accountable for their
performance. An effective reporting regime requires SOEs to achieve the
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same standard in reporting, control, and audit frameworks as other

significant corporate or public-interest entities. This means that SOEs
should produce financial statements according to high-quality accounting
standards, and increase the effectiveness of nonfinancial reporting.
Furthermore, they should disclose publicly both financial and nonfinancial
information. Therefore, I consider improving the transparency and reliability
of SOE financial information to be one of the most pressing issues on the
global accounting and auditing reform agenda.
Henri Fortin: What do you regard as the main challenges and opportunities
for the profession?
I believe that the main opportunities lie beyond accounting, auditing, and
financial reporting. Of course, this will be the core business of much of the
profession, but we need to look beyond. One example of this is using
integrated reporting (<IR>), which incorporates non-financial as well as
financial data. By communicating all of the factors that can affect a
business over time, an integrated reporting approach will help businesses
and governments demonstrate how they create value over the short,
medium and long term. This can, in turn, ensure that capital
environmental, financial, human, intellectual, and socialis allocated more
efficiently and productively. There may also be opportunities for improved
reporting in the public sector through <IR> and Natural Capital Accounting
(involving the calculation of total stocks and flows of natural resources and
services in physical and/or monetary terms).
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Another opportunity is to move beyond compliance work at the small and

medium-sized enterprise (SME) level by assuming the additional role of
trusted business advisor. This transition will involve accountants being
consulted on a much wider range of financial issues than accounting,
auditing and tax services. Trusted business advisors can help improve a
companys performance and, where possible, enable it to access finance
and grow.
In this regard, it is important to address the skills gap in the profession. At
times, there is a mismatch between the skills that businesses and the
public sector require, and those that accounting professionals are able to
offer. There are various ways that this gap can be reduced, including the
development
of
qualification
frameworks,
strengthening
regional
organizations, and the professionalization of accounting technicians, which

is an approach being taken in New Zealand and South Africa.
Finally, technology is increasingly at the heart of everything we do and
offers enormous potential through the use of intelligent accounting
systems, especially for micro and smaller businesses. The accountancy
profession needs to adapt and embrace modern tools and information
technology. However, buying software can be expensive and a challenge
when it comes to compliance and language. We regard the opportunities
that information technology (IT) offers for education and training as vital.
Therefore, the World Bank has pioneered the development of educational
software to teach International Standards on Auditing (ISA) through
simulated audits, to name just one example.
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Henri Fortin: As a former auditor, you often speak passionately about many
issues relating to the accounting profession and its role. What issues have
been sparking your passion recently?
As a former auditor, woman, and development practitioner, I would say that
I have been thinking quite a bit about gender, its related development
challenges, and how the profession can play a role. More and more across
the world, women are entering the accountancy profession at a higher rate
than men. This offers an opportunity for the profession to play a leadership
role in addressing global gender equality and inclusion.
However, an important area that still needs to be addressed is the gender
pay gap. In countries such as the United Kingdom, where recent research
found that women in accountancy earn 83 percent of the basic salary of
their male colleagues, companies employing more than 250 people will
have to disclose the difference between the salaries of their male and
female employees beginning in 2018. These disclosures will be published
on a public, searchable website. Likewise, the United States government
issued new proposals at the end of January 2016 requiring all companies
with at least 100 employees to disclose salaries disaggregated by gender,
race and ethnicity. I hope that other countries will follow suit to ensure
greater equality in the workplace.
I also consider that the accountancy profession is well placed to support
small and medium-sized practices and SMEs to be more gender inclusive
through greater workplace flexibility and mentoring. By removing the
obstacles that have traditionally restricted women from realizing their full
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potential, the profession can contribute to stronger economic growth in a

sustainable and equitable manner.
Accountancy is nothing but the profession or duties of an accountant. The
duties of an accountant are set by the professional body under which they
work. For Example a cost accountant is governed by the professional body
Institute of Cost Accountant of India. So these bodies set the guidelines
for their accountants.
Each country has its own accounting body. These bodies are registered
with international federation of accountants, which is a global organization
of accountancy profession. It has more than 175 members and associates
in more than 130 countries.
The organization supports the harmonizing of practices of accounting all
over the word. For that reason different boards are established to set
common standards.
International Auditing and Assurance Standards Board (Develops
international Standards on Auditing)
International Ethics Standards Board for Accountants (Develop code
of Ethics for professional accountant)
International Public Sector Accounting Standards Board
International Accounting Education Standards Board (Develops
uniform guidelines for education & training )
International Accounting Standard Board (Issues IFRS)
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The UK and US has the worlds largest accounting professionals, which is

then followed by Brazil and India. In India there are two accounting bodies
the Institute of Chartered Accountants of India (ICAI) and the Institute of
Cost and Works Accountants of India (ICWAI or ICMAI). They have more
than 3 Lac members.
Perspectives of the Accountancy Profession over the Next Decade A

Scenario Analysis
by Klaus Backhaus, University of Mnster, Institute of Business-toBusiness Marketing; Hans-Jrgen Kirsch, University of Mnster, Institute of
Accounting and Auditing; and Christina Rossinelli, University of Mnster,
Institute of Business-to-Business Marketing | February 24, 2015 |
Perspectives of the Accountancy Profession over the Next Decade A
Scenario Analysis
Accountants are faced with many challenges that will affect the profession,
such as changes in national regulatory frameworks or the influence of IT on
auditing. It is crucial that accountants prepare for these developments,
which could dramatically alter the entire profession.
To
address
these
developments
adequately,
the
Institut
der
Wirtschaftsprfer in Deutschland e.V. (IDW, or the Institute of Public

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Auditors in Germany) initiated a research project. In the project, we ran a

complex scenario analysis to identify those factors that have a key
influence on the developments.
Scenario analysis has, in comparison to forecast techniques, the
advantage that it is not concerned with predicting one probable future but
considers multiple different possible futures by integrating quantitative as
well as qualitative factors that cannot be forecast by numbers (e.g., IT
innovations, regulations) and also takes into account unexpected events.
Thus, scenario analysis can be characterized as a structured process for
the systematic development and description of complex future situations.
Our methodological scenario approach involved three steps. First, to
identify the influencing factors, we held a series of workshops with national
and international experts (accountants, auditors, IT experts, clients,
politicians, journalists, etc.). We evaluated the strength of the input impact
of one factor on another for the whole set of influencing factors, with
extensive by the expert panel. Based on this broad data base, we analyzed
in-depth the interaction effects between the factors to determine the most
relevant factors (the key factors).
As the second step, future projections were developed for each of the key
factors. Finally, all projections were combined into possible scenarios. This
resulted in a large number of scenarios. To reduce this number, a selection
process was necessary. We applied two methods of multivariate analysis,
namely Multi-Dimensional Scaling and clustering algorithms. The final
result was eight consistent scenarios.
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The outcome of our research indicates several possible future worlds

based on alternative development paths of the key factors. We
demonstrate that the diverse scenarios generate various opportunities and
risks for different stakeholders. On this basis, it is possible to develop
strategic options for the different players in the accountancy profession that
either 1) are applicable in any situation (robust strategies) or 2) are
customized to individual scenarios (focused strategies).
Our project has involved representatives from the entire accountancy
profession as well as other stakeholders. It took approximately 24 months
to complete the complex scenario process and almost one year to translate
the scenario results into strategic options. These strategic options refer to
the most challenging areas for the future, such as the balance between
audit and consulting, IT, or the qualifications of personnel.
We feel very honored that the results of our research project were awarded
the Academic Prize during the World Congress of Accountants in Rome,
which was held in November 2014 under the theme Vision 2020: Learning
from the Past, Building the Future.
TRENDS THAT WILL SHAPE THE CPA PROFESSION IN 2016
Startups, mergers, and Big Data will all impact CPAs this year.
By Usha Sankar
January 25, 2016
How ready are CPAs to help their clients navigate the uncharted waters of
2016? Macroeconomic trends such as increasing globalization, the slowing
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of the Chinese economy, and growth in small and online businesses here in
the U.S. are changing the business landscape. Here are some of the top
economic trends to be mindful of in 2016, and ways they will affect CPAs.
The bifurcated economy. According to Ted Zoller, Ph.D., a professor of
strategy
and
entrepreneurship
and
director
of
the
Center
for
Entrepreneurial Studies at UNC-Chapel Hill, were moving toward a

bimodal economy. Increased merger-and-acquisitions activity means
large companies are getting bigger, while smaller ones are being forced
into narrower niche segments. Recent data backs up Zollers claims: As of
May 31, 2015, M&A activity in the U.S. was worth $875 billion, representing
a 9% increase over the same period in 2014. Meanwhile, the percentage of
micro businessesbusinesses with fewer than 10 employeeshas
also grown 3.6% over 2014.
In the near future, Zoller predicts, there will be much more acquisition
activity, fueled by cash-rich companies, R&D activity, a desire for a larger
market share, and complementary products or services, among others.
According to PwC, 54% of CEOs in the U.S. were eyeing an acquisition in
2015. That translates to more business for CPAs, who will be needed to do
due diligence on acquisition targets, advise venture capitalists, and help
determine equity structure and get companies publicly listed.
Further growth of startups. With the U.S. economy in an economic
recovery, people are becoming less risk-averse. This should result in the
founding of more startups, said Geeta Shah, a professor of economics at
Wake Tech Community College in North Carolina. CPAs should prepare to
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do more work with small and midsize businesses. Theyll need good
communication and analytical skills, as they will be required to interpret
companies financial data for stakeholders such as vendors, customers,
and financial institutions.
As startup culture grows in influence, CPAs will need to become more
nimble, said Anoop Mehta, CPA, CGMA, vice president and CFO at
Science Systems and Applications Inc. and a member of the AICPA
Business & Industry Executive Committee. After all, startups are
characterized by change: Most startup founders aim to scale their
companies up, sell them off, and move on to the next opportunity. CPAs will
also need to wear more hats, Mehta said, since, for small businesses, the
CPA is the proxy CFO.
Mehta also believes that CPAs and other professionals will need to have
more niche knowledge as the economy bifurcates. You will see a lot more
specialization as domain-specific expertise becomes a significant factor in
the growing startup culture of corporate America, he said.
Growth of the informal sector. CPAs will also have a greater role to play
in the informal sector, which encompasses forms of work that do not fall
under tight regulatory control, such as freelance work such as writing and
graphic design, gig-based jobs such as Uber driver or Airbnb owner, or
day labor. This sector will likely expand as it is driven by Millennials, who
now make up one-third of the population. The informal sector, which is now
more about entrepreneurship than survival, typically falls through the
cracks of the tax regulatory environment. However, that is about to change
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and the country could soon see a tightening of the tax regime, Shah said,
meaning CPAs may be needed to perform more tax work for people
working in this sectorand the companies that employ them.
Rapid change. Todays businesses are operating in a fast-changing and
globally integrated environment, and one where risks are as much about
missed opportunities as about unforeseen events.
To increase their relevance in this climate, CPAs must act as strategic
thinkers for businesses, Mehta said. Instead of looking at the past to
understand the present, CPAs will need to act as fortunetellers whose
role is to anticipate, he said.
Companies are also going to place more emphasis on efficiency. Theyre
increasingly going to be asking such questions as Are we utilizing labor
most efficiently?and they are going to be looking to CPAs for the
answer.
One way CPAs can be more strategic is by engaging with Big Data. The
explosion of data means there is a lot of information available that can be
translated into valuable business insightsand who better to do so than a
numerically literate professional such as a CPA?
According to Zoller, the tools of forensic accounting will allow CPAs to mine
data to examine how enterprises interact with one another and how
consumers make purchasing decisions. Such insights can help CPAs
become valuable strategic advisers in an era of rapid change.
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WHERE WILL THE ACCOUNTANCY PROFESSION BE IN 25 YEARS?

17/08/2013 by GAA Accounting
By David Devlin
Prognostication of the following kind will almost certainly in 25 years time
prove to have been wrong, but as we celebrate Chartered Accountants
Irelands centenary, why not try to look into the future?
If the recent past is any guide, parts of the accounting professions
activities will increasingly be subject to close regulatory scrutiny. Several
trends are visible, closely linked to concepts of the public interest and
social responsibility. Two examples are audit and tax.
Trends in Audit Reporting
On the audit side, different regulatory approaches are increasingly common
between the audit of public interest entities and those where there is not
such a direct public interest. One way of looking forward is to consider the
audit report and how it may develop. Reporting requirements are likely to
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influence the skills required of auditors and in turn their professional

training and qualification.
For a long time all audit reports on historical financial statements have
been of a so called binary nature, like an on-off switch, with in essence
only a pass or fail conclusion. Reports are largely formal and predictable
in format and content and are devoid of colour. There are good reasons for
this state of affairs but it is about to change, dramatically.
Investors, politicians and regulators simply want more from auditors of
important enterprises. They understand that auditors know far more about
the businesses audited than published audit reports show. They do not
want any more big, nasty surprises arising from fraud, going concern
issues or other causes. They are not prepared to wait for the profession to
move gradually when the public interest seems to demand more radical
steps.
So the audit report needs to change whats in the pipeline?
EU Proposes Radical Changes
First the European Commission drove the process with some radical
questions in its consultation on statutory audit. The legislation subsequently
proposed, which is currently under debate, would require auditors for
example to:
Identify key areas of risk of misstatement in the annual financial
statements;
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Provide the auditors assessment of the entitys ability to meet its

obligations in the foreseeable future and continue as a going concern;
Assess the entitys internal control system, including significant internal
control deficiencies identified;
Explain to what extent the statutory audit was designed to detect
irregularities, including fraud and indicate and explain any violation of
accounting rules or violation of laws or articles of incorporation and other
matters that are significant for the governance of the entity;
There is also a highly detailed report to the audit committee or equivalent.
Other Initiatives UK
Not to be outdone, the Public Company Accounting Oversight Board
(PCAOB) and the International Accounting and Assurance Standards Board
(IAASB) have their own ideas, as does the UK Financial Reporting Council
which is the first to issue its new auditor reporting standard. The UK
standard is linked to its requirements on the Directors Report and the Audit
Committee Report. Figure 1 sets out an overview.
As we can see, this approach will give a great deal more insight into how
the audit was carried out. It raises lots of difficult issues of course but will
certainly be a move away from a narrow, formal and largely standard form
of report. Crucially, it should enhance the relevance of the profession. A
good example of how it might look in practice is in the recent Vodafone
Annual Report for 2012.
IAASB
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The new IAASB exposure draft is likely to focus on providing insights into
key audit matters, that is those that in the auditors professional judgment
were of most significance in the audit of the financial statements. Thus we
could expect this to include:
Areas identified as significant risks or higher risks of material misstatement
or involving significant auditor judgment;
Areas in which the auditor encountered significant difficulty in performing
the audit, including obtaining sufficient appropriate audit evidence;
Circumstances requiring significant amendment to the planned approach,
including as a result of a significant deficiency in internal control.
The description of each key audit matter is expected to include an
explanation of why this is considered to be key and, to the extent
necessary, its effect on the audit and, where applicable, a cross reference
to the financial statements. Other significant proposals relate to conclusions
on going concern both on the appropriateness of managements use of
the going concern basis of accounting, and on material uncertainties.
Will these changes last 25 years?
All of this amounts to a small revolution in auditing. But will it be enough?
Will such a model of auditing last largely unchanged for 25 years?
My answer is probably not. Having discovered a more visible role for audit,
the demand for still more insight may well grow and this will require deeper
knowledge and more specialist skills of the auditors.
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In my view, possible areas for greater auditor involvement are:

More qualitative insights, say about enterprise risk and the potential for
fraud;
More auditor commentary on the information produced by management,
not just in annual reports, but also through earnings releases and websites
and in respect of so-called non-GAAP measures.
What do these ideas imply for auditors?
For example, to say anything useful about enterprise risk management
would require an analysis of the soundness of the companys IT systems
and infrastructure, as well as of its corporate governance. Similarly, a more
searching approach to detecting fraud will need to draw on the latest IT
tools and data analytics.
Audit teams
Thinking about possibilities like this also raises questions about the type
and shape of audit teams. The traditional pyramid model of trainees,
qualified and more senior accountants, supplemented by industry, tax and
IT specialists, all reporting to an audit partner is certainly open to challenge.
Rather, should audit develop in the way postulated, then the need will be
for a wider range of specialised and experienced experts, including people
with deep industry knowledge. At the least, the traditional pyramid will
flatten. Lets hope that chartered accountants will continue to pull it all
together and con-tinue to lead audits. That wont happen, though, without a
lot of forward thinking and follow through to keep audit relevant.
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Corporate Reporting
Whether or not we find these ideas appealing, corporate reporting is
changing. The European Commission, for example, has recently introduced
draft legislation on the transparency of social and environmental
information. Larger companies will be obliged to disclose information on
their policies, risks and results as regards environmental matters, social
and employee related aspects, respect for human rights, anti-corruption
and bribery issues and diversity on boards.
Meanwhile, the International Integrated Reporting Council has recently
published a consultation on its draft framework for integrated reporting.
This is intended to create the foundation for a new reporting model which
will enable businesses to provide concise communication of how they
create value over time.
The objectives of Integrated Reporting are to:
achieve a more cohesive and efficient approach to reporting;
inform capital allocation decisions;
enhance accountability and steward-ship;
Support integrated thinking and long, medium and short term business
strategy, environmental, social and governance matters and financial
performance.
Obviously Integrated Reporting is not going to be adopted overnight but
there is no doubting the momentum behind the initiative which is already
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being piloted in several large companies and has been promoted around
the world in a very effective fashion.
What will be the role of chartered accountants?
From the point of view of our profession, accountants in business and
public practice can expect to play a role in making such information
available, significant, measurable, comparable and reliable. Independent
assurance will certainly be needed over at least some of this.
It is obvious that initiatives such as these will also call for a wider range of
skills than the traditional accountancy qualification provides and therefore
will need to draw on a range of specialists for the integrated reporting to be
provided by companies. Again, auditors and accountants in business can
hope to coordinate and lead these sort of initiatives, providing we have an
open minded, forward looking frame of mind and take the appropriate
initiatives in good time to equip us to avail of these new opportunities and
responsibilities.
Specialisms
If accountants need to work with other specialists, even depend on them, to
fulfil their role in the future, what questions might this raise for the
profession? What might it mean to be a chartered accountant?
Clearly, the notion that some years training as a general auditor and
passing professional exams provides a viable qualification of enduring
relevance for life no longer applies. The examinations develop and change
and so does the training, although this can sometimes be quite narrowly
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specialised these days. We have requirements for continuing professional

education. Is all this enough for the next 25 years? I wonder.
Do we need to think about also providing specialist qualifications, perhaps
after becoming a chartered accountant? Might it be wise to go even further
and open the profession or say establish specialised faculties within it
to experienced people who did not start their careers as accountants but
would find our structures and values relevant and valuable to them? To
illustrate, expertise in assessment of IT systems or in aspects of social
responsibility reporting could be quite close to the role of accountants and
benefit from being branded as associated with the chartered accountants
profession. I ask these rather uncomfortable questions because we should
not take only a narrow view of our future.
Current unease about corporate tax
Apart from corporate reporting and auditing in respect of public interest
entities mentioned earlier, which other trends might I pick out to comment
on here?
A topical example is the question of corporate tax. For over fifty years
Ireland has promoted inward investment through the use of advantageous
corporate tax arrangements, originally in the form of export sales relief.
These days the headline policy is the corporation tax rate of 12.5%. We
should all be aware that Ireland is far from unique in having such a policy,
since nearly all governments use tax breaks to attract investment and
employment. The UK is a notable recent example but there are many
others.
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Despite using corporate tax as a competitive tool to attract investment,

governments have become very concerned recently with the apparent
difficulty of taxing corporate profits in a way which corresponds to societal
notions of fairness. While there is undoubtedly much questionable rhetoric
around the issue, the fact remains that the recent G8 Summit gave priority
to the issue. Partly this is also driven by governments re-examining tax
policy as a way to generate public revenues. While there is no clear and
universal consensus regarding the distinction between illegitimate tax
avoidance and legitimate tax planning, there are still perceptions that
governments are foregoing significant tax revenues because of tax
loopholes. This in turn means that governments are increasingly
scrutinising tax arrangements and anti-avoidance laws. The OECD has
published a report on the whole issue with a basic conclusion that the
present international tax model is not particularly appropriate for much of
the modern economy where intellectual property rights and internet based
transactions are of far greater significance than in traditional methods of
business.
Implications for accountants
What is the relevance of these trends in corporate taxation to the
accounting profession over the next 25 years? In my view, while it is
currently a hot topic, it is unlikely to disappear because reform of the
international tax system does seem to be necessary to some degree. This
would clearly not be an easy or short term task. In the meantime,
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corporations will need to manage tax not just from an efficiency and
compliance point of view but also from a reputational point of view. This is
likely to involve members of the accountancy profession who are in
business as well as those in practice. Given Irelands longstanding policy of
low corporate taxes, this probably will have particular significance for Irish
practitioners.
These trends also point up the importance of tax practitioners who are
chartered accountants emphasising publicly their role in helping clients to
manage their tax affairs competently in compliance with the requirements
of tax legislation and also reputationally. This will probably be seen as part
of the public interest and social responsibility of members of our profession.
Deregulation of SMEs
Most members of our profession in business and practice mainly work with
enterprises which are not directly classified as public interest entities. While
some of the trends mentioned above are of course relevant to how smaller
business should be conducted, in fact there are separate and difficult
challenges arising from the outlook of legislators towards SMEs particularly.
In Europe there is an unrelenting drive as a political headline at least to
deregulate and cut red tape which would otherwise apply to SMEs. This
may seem counter intuitive to those of us who are aware of the volume of
new legislation regularly produced by Brussels, but in fact every
Commissioner has a score card to demonstrate the extent to which they
have eased regulatory burdens for SMEs. So with any given EU legislative
initiative there is always a desire to demonstrate that while tighter
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regulation of larger companies enterprises may be required, there is also a

corresponding relief for SMEs.
Audit is no exception to this trend and the present audit reform proposals
favour further exemption of the smallest SMEs from any audit requirement
and a simplified audit for quite large, medium sized enterprises up to
assets of 20 million, for example.
Services for SMEs
We may expect this trend to continue so that, in line with our professions
policy, audit requirements are applied only to those entities for which it has
particular value. Increasingly, audit of SMEs will arise, not from statutory
requirements, but for reassurance of owners, even of management, and
also to reassure outside investors, creditors such as banks or customers. In
these circumstances there are clearly opportunities for practitioners serving
the SME market to develop specialist skills, in particular industries or types
of service offerings, to complement or replace audit work. One angle which
strikes me from my time as President of FEE, is the role that some of the
practitioners I met around Europe were increasingly playing by offering
foreign European family companies which were beginning to invest and do
business across borders, a specialised service dealing primarily with
incoming businesses of that kind. That is an example of the imaginative
thinking. Equally most SMEs must increasingly expect to do business by
means of the internet and again that will bring questions about systems
assurance, anti-fraud and security controls and reassurance of suppliers
and customers.
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Thus, chartered accountants serving SMEs will find a capacity to innovate

essential to success, a contrast to our previous reliance on the statutory
audit requirement which may in the past have tended to stifle the need to
think hard about new services.
An interesting future
I have tried to touch on some of the trends I foresee over the next twenty
five years. Certainly, it is not possible to foresee a stable future or one
which consists only of gradual and comfortable evolution from today to
tomorrow. The years ahead seem likely to me to require sharp reactions,
forward thinking and a significant investment from year to year in training,
new skills, new resources and new colleagues with differing expertise.
Above all, our role should emphasise innovation, strong ethical values, the
public interest and social responsibility which are the keystones for the
future to success for our profession.
David Devlin, FCA is Leader Europe for Public Policy & Regulatory Affairs
for PwC and a past President of FEE, the European Federation of
Accountants. Mr Devlin was a member of IFACs International Ethics
Standards Board for Accountants.
This article was originally published in the August 2013 issue of
Accountancy Ireland.
CHANGES IN ACCOUNTING POLICIES AND IN ACCOUNTING

ESTIMATES (AGENDA PAPER 26)
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In April 2016, the Board discussed possible amendments to IAS

8 Accounting Policies, Changes in Accounting Estimates and Errors, in
particular, the definitions of accounting policies and of a change in
accounting estimates (Agenda Paper 25A).
At its September 2016 meeting, the Board discussed:
wording changes in the amendments (Agenda Paper 26A);
transition (Agenda Paper 26B); and
the due process undertaken for the amendments (Agenda paper
26C).
Agenda Paper 26AChanges to wording
The Board tentatively decided to change the draft amendments discussed
in April 2016 to:
remove the threshold for changes in estimation techniques and in
valuation
techniques.
That
threshold,
inserted
in
the
draft
amendments in April 2016, would have permitted such changes only

if the resulting measurement would be equally or more representative
of the amount being estimated;
add practices to the amended definition of accounting policies; and
add guidance about changes in the cost formulas that paragraphs
2527 of IAS 2 Inventories specify an entity should use in
determining the cost of interchangeable inventories.
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Eleven of the 12 Board members agreed with each of these decisions.

Agenda Paper 26BTransition
The Board tentatively decided to require prospective application of the
proposed amendments. Thus, the proposed amendments would apply to
all and only those changes in accounting policies and accounting estimates
that occur on or after the beginning of the first annual reporting period when
the amendments become effective.
All 12 Board members agreed with this decision.
Agenda Paper 26CDue process
All 12 Board members confirmed they are satisfied that the Board has
completed the necessary due process for the project. Therefore, the Board
instructed the staff to begin the balloting process for issuing an Exposure
Draft of amendments to IAS 8. No Board members indicated they would
dissent from the decision to issue an Exposure Draft.
All 12 Board members also decided that the comment period for the
Exposure Draft should be no less than 120 days.
Next Steps
The Board expects to publish the Exposure Draft in the first quarter of
2017.
IFRIC Update (Agenda Paper 12)
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The Board received an update from the July 2016 meeting of the IFRS
Interpretations Committee (the Interpretations Committee). Details of this
meeting were published in the IFRIC Update, available here.
Long-term interests in an associate or joint venturedue process

document (Agenda Paper 12A)
The Board considered proposals for a draft IFRIC Interpretation (draft
Interpretation) developed by the Interpretations Committee to address a
question on whether an entity applies IFRS 9 Financial Instruments, in
addition to IAS 28 Investments in Associates and Joint Ventures, to longterm interests in an associate or joint venture (long-term interests are those
interests that, in substance, form part of the net investment in the associate
or joint venture, but to which the equity method is not applied). The draft
Interpretation would have clarified the scope of IFRS 9 and specified how
the requirements in IFRS 9 and IAS 28 apply to long-term interests.
The
Board
agreed
with
the
Interpretation
Committees
technical
conclusions, but expressed concern that the draft Interpretation would have
strayed into the application of the equity method in IAS 28, in addition to
specifying that long-term interests were within the scope of IFRS 9.
Accordingly, 10 of 12 Board members objected to the release of the draft
Interpretation. The Board instructed the staff to explore whether there is a
more effective way of clarifying which Standards apply to long-term
interests.
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Next steps
The Board will discuss long-term interests at a future meeting.
Conceptual Framework (Agenda Paper 10)

On
22
September
2016,
the
Board
discussed
the Conceptual
Framework project. In particular, the Board discussed concepts from the

May 2015 Exposure Draft Conceptual Framework for Financial Reporting
(the Exposure Draft) relating to the reporting entity, presentation and
disclosure, asymmetry in treating gains and losses and equity. Further, an
Education Session on measurement was held on 20 September 2016.
Agenda Paper 10BThe reporting entity
In the light of the comments received on the Exposure Drafts description of
the reporting entity and its boundary, the Board tentatively decided to
confirm:
1. the proposed description of a reporting entity as an entity that
chooses or is required to prepare general purpose financial
statements. All 12 Board members agreed with this decision.
2. the proposed concepts on the boundary of the reporting entity. The
Board directed the staff to clarify in drafting how the proposed
concepts place appropriate limitations on what may constitute a
reporting entity in situations when the entity is not a legal entity. Ten
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Board members agreed with this decision and two Board members
disagreed.
3. the proposed concepts underlying the notions of direct and indirect
control, but not to use those specific terms in the Conceptual
Framework. All 12 Board members agreed with this decision.
4. the proposed concepts related to the usefulness of information
provided in consolidated and unconsolidated financial statements, but
to improve the description of those concepts in the Conceptual
Framework. Eleven Board members agreed with this decision and
one Board member disagreed.
The Board also tentatively decided not to include in the Conceptual
Framework the statement in paragraph 3.25 of the Exposure Draft that an
entity that presents unconsolidated financial statements discloses how a
user may obtain the entitys consolidated statements. Ten Board members
agreed with this decision and two Board members disagreed.
Further, the Board tentatively decided to confirm, consistent with the
Exposure Draft,
1. the proposed going concern assumption; and
2. the proposed statement that financial statements are prepared from
the perspective of the entity as a whole.
All 12 Board members agreed with these decisions.
Agenda Paper 10CPresentation and disclosure
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In the light of the comments received on the proposed concepts for

presentation and disclosure, the Board tentatively decided to:
1. confirm that the objective of the financial statements is to provide
information about an entitys assets, liabilities, equity, income and
expenses that is useful to users of financial statements in assessing
the prospects for future net cash inflows to the entity and in assessing
managements stewardship of the entitys resources. All 12 Board
members agreed with this decision.
2. describe the objective of the financial statements as a whole, rather
than describing objectives of the financial statements components.
3. describe the scope of the financial statements by reference to their
objective. All 12 Board members agreed with this decision.
4. identify no primary financial statements and refrain from discussing
the relationship between those statements and the notes. All 12
Board members agreed with this decision.
5. refer only to the statement of financial position and the statement(s)
of financial performance in theConceptual Framework, and refrain
from making any explicit references to the statement of cash flows
and the statement of changes in equity. Seven Board members
agreed with this decision and five Board members disagreed.
6. make no distinction between the terms present and disclose in
the Conceptual Framework. Ten Board members agreed with this
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decision, one Board member disagreed and one Board member was
absent.
Agenda Paper 10DAsymmetry in treating gains and losses
The
Board
tentatively
decided
that
the
main
body
of
the
revised Conceptual Framework should acknowledge that, in some cases,

income may need to be treated differently from expenses and assets
differently from liabilities. The Board directed the staff to develop the
wording for such an acknowledgement for discussion at a future Board
meeting. Seven Board members agreed with this decision and five Board
members disagreed.
Agenda Paper 10EDefinition of equity and supporting discussion
In the light of the comments received on the definition of equity, the Board
tentatively confirmed the proposals in the Exposure Draft to:
1. maintain the binary distinction between liabilities and equity;
2. define equity as the residual interest in the assets of the entity after
deducting all its liabilities;
3. include the discussion proposed in paragraphs 4.444.47 of the
Exposure Draft to support that definition; and
4. include the discussion proposed in paragraphs 6.786.80 of the
Exposure Draft about the measurement of equity.
Eleven Board members agreed with these decisions and one Board
member disagreed.
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Agenda Paper 10GIMeasurement

On 20 September the Board held an Education Session on the concepts
described in the staffs proposed redraft of factors to consider when
selecting a measurement basis. No tentative decisions were made.
Next steps
At the October 2016 Board meeting, the Board will discuss:
1. executory contracts;
2. derecognition;
3. liabilities;
4. asymmetry in treating gains and losses;
5. unit of account; and
6. materiality.
The Board will also discuss drafting suggestions for the acknowledgement
of an asymmetric treatment of gains (or assets) and losses (or liabilities).
Further, the Board will discuss the Updating References to the Conceptual
Framework Exposure Draft.
Financial Instruments with Characteristics of Equity (Agenda Paper 5)
The Board met on 20 September 2016 to discuss the Financial Instruments
with Characteristics of Equity research project.
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The Board discussed the presentation of derivatives on own equity that

are classified as liabilities, as well as disclosures of financial liabilities and
equity. The Board focused on its developing Gamma approach to
classification and presentation.
The Board was also given a summary of discussions to date (Agenda
Paper 5A was provided for information only).
Agenda Paper 5BSeparate presentation: Derivatives on own
equity classified as liabilities
The Board discussed approaches to applying the separate presentation
requirements to derivatives on own equity that are neither completely
independent nor solely dependent on the residual amount (eg the value of
the entitys share price). Such derivatives would be classified as liabilities
under the Gamma approach.
The Board tentatively decided that the Discussion Paper should include a
preliminary view that, if they meet particular criteria, entities should apply
the separate presentation requirements to the total income and expenses
arising from such derivatives. It will also analyse an alternative approach
applying the separate presentation requirements only to the portion of
income and expenses that depends on the residual amount.
Eight out of 12 Board members agreed with this decision.
Subject to drafting suggestions, the Board tentatively decided that
application of the separate presentation requirements should be limited to
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specific types of derivatives with foreign currency exposure, and only under
certain circumstances.
Nine out of 12 Board members agreed with this decision.
The Board tentatively decided that income and expenses arising from
financial instruments that meet the separate presentation requirements,
including derivatives on own equity, should be presented under other
comprehensive income.
Nine out of 12 Board members agreed with this decision.
The Board tentatively decided that the Discussion Paper should include its
decisions to date regarding the classification and presentation of
derivatives on own equity under the Gamma approach.
Agenda Paper 5CDisclosure
The Board discussed the inclusion of disclosures about financial
instruments with characteristics of equity in the notes to the financial
statements. It tentatively decided to include a discussion of the following
potential disclosures in the forthcoming Discussion Paper:
a. the priority of claims on liquidation;
b. the potential dilution of ordinary shares; and
c. additional supporting information about the presentation and
classification requirements of the Gamma approach.
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Next steps
At a future meeting the Board will discuss:
classification of instruments meeting the existing puttables exception;
accounting for conditional alternative settlement outcomes; and
recognition, derecognition and reclassification of equity instruments.
2015 Agenda Consultation (Agenda Paper 24)

Feedback Statement topics and suggested responses (Agenda Paper
24)
The Board discussed draft material for inclusion in a Feedback Statement
on the 2015 Agenda Consultation.
All 12 Board members present tentatively decided that:
a. the staff had correctly identified the key messages for inclusion in the
Feedback Statement; and
b. the proposed structure of the Feedback Statement was appropriate.
Next steps
The Board expects to approve the Feedback Statement in October 2016,
following consideration by the Trustees of the IFRS Foundation.
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REVENUE RECOGNITION: EFFECTIVELY MANAGING ACCOUNTING

CHANGE
Companies that generate revenue and apply US GAAP or IFRS are
currently adapting to a new five-step model to recognize revenue from
customer contracts. The change resulted from newly converged standards
released by the FASB and IASB in 2014, which replace nearly all existing
US GAAP and IFRS guidance. Significant management judgment on
accounting for revenue recognition will now be required, and the changes
will have pervasive impacts on people, policies, processes and systems.
The new revenue recognition standard takes effect for most companies in
2018, but the time to act is now. For companies choosing the retrospective
option for adopting the new standard, the transition period has already
begun. Companies are finding that circumstances such as tiered pricing,
marketing offers (including volume discounts), contract modifications and a
host of other potential contract terms are creating issues that require
careful
consideration
under
the
new
standards.
Steps to performing an impact assessment
Implementing a phased approach

PwC suggests applying a phased approach to this transformational change
(see
diagram).
Youll
need
to
consider
program
management,
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organizational change management, potential systems modification and/or

implementation, and accounting oversight. PwC can advise and assist with
the entire conversion process, and we have developed a suite of project
enabling tools to help facilitate that process.
BUSINESS
ACCOUNTING:
NEW
GLOBAL
STANDARDS
IMPACT BUSINESS PLANS, LOCATION DECISIONS

Richard J. Maturi
Experts believe that adopting uniform global accounting standards will
positively impact companies' business plans, including location decisions.
Nov 08
In August 2008, the Securities and Exchange Commission (SEC) sent a
shot across the bow of United States companies with its intention to move
forward on a proposal to require thousands of U.S. firms to change from
United States generally accepted accounting standards (GAAP), as
maintained by the Financial Accounting Standards Board, to global
accounting
rules
represented
by
International
Financial
Reporting
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Standards (IFRS), as issued by the International Accounting Standards

Board in London. The largest 20 companies in their respective industries by
market capitalization may voluntarily adopt the international rules even
sooner. The SEC's action highlights the trend toward worldwide acceptance
of IFRS as the gold standard in financial reporting.
The move is intended to keep U.S. companies on an even playing field
with their global competitors. The SEC plan anticipates large companies
adopting the global accounting standards by 2014, followed by mid-size
companies by 2015 and smaller firms by 2016. This action follows last fall's
SEC move allowing foreign firms to file their financial statements with the
SEC using IFRS rather than GAAP. After a period of public comment, the
SEC will vote in 2011 on whether or not to require all U.S. firms to change
to global accounting standards.
Overall, the IFRS is more principles-based, requiring more judgment than
the rules-based GAAP. In this era of global competition, the global
accounting standards are enjoying rapid acceptance worldwide. Currently,
more than 100 companies and the European Union have already adopted
the international standards, plan to adopt them soon or allow the use of
IFRS. The goal of a single accounting standard makes good sense to many
experts, as long as it is applied equally and enforced the same way in
different participating countries.
The convergence of accounting systems bodes well for removing barriers

to capital flows between countries using IFRS and the United States. Many
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U.S. companies view the move to global accounting standards as critical in

helping to cut compliance costs and staying globally competitive. For U.S.
companies already operating overseas, the SEC plan removes the onerous
and expensive requirement to maintain two sets of books. A uniform set of
accounting standards may also make it more attractive for foreign firms to
initiate or expand operations in the United States. In addition, many U.S.
investors in foreign companies will benefit from a uniform set of accounting
standards that make evaluating competing investments in different
countries more transparent and comparable.
Transitional Issues
The path is set, yet only a few large U.S. companies have the experience
with IFRS and proper financial staffing to make the transition smoothly. It
will take most businesses years to gear up for the conversion to global
accounting standards
"We will be the last to the party; every other major industrial and many
developing countries will be there before the United States," says Bruce
Pounder, president of Leveraged Logic in Asheville, North Carolina, and
author of the soon-to-be-published The Convergence Guidebook. "In the
next couple of years, Japan, Canada, India, and other countries will have
significant capital markets to complete with the United States. U.S.
companies will have to convert in order to maintain their access to capital
markets." Pounder advises companies to learn all they can about the
impact of U.S. GAAP changes and how those changes will impact their
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operations. He also points out that the IFRS will also continue to change
over time and companies must remain on top of the issues.
"Don't try to fight the changes; that's short-sighted," says Jason Hancock,
president of Sowilo Consulting in Arlington, Virginia. "American companies
will be more competitive in the long run. Of course, there will be growing
pains. Adopting the international accounting standards will require time and
a massive effort for many U.S. firms." He believes U.S. companies will
essentially have to keep two sets of books, then start phasing out GAAPbased systems, and make plans now so they have more time to make the
transition to IFRS. "Companies need to plan ahead and not try to run a
marathon at a sprint pace," he says.
Jean Houston Shore, a management consultant with the Business
Resource Group in Roswell, Georgia, sees larger issues: "Companies need
to avoid the trap of thinking that the change to global accounting standards
is only an accounting issue. Nothing could be farther from the truth. It is a
business issue with far-reaching impact on how you will run and manage
your business." According to Shore, the conversion to a single set of
accounting standards will reduce the regulatory and legal burden of setting
up facilities in many foreign countries. Location decisions will be made on
the economics of the location and not the accounting differences and
reporting difficulties. Likewise, changes in how inventories, plant and
equipment, and property are valued will impact where locations are located.
Finally, leases of lands plus buildings can be treated as separate elements
under IFRS, which allows for more flexibility in financing options.
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The First Steps

"Companies need to gain an overview from 50,000 feet of the major
differences on how inventory, leases, plant and equipment, and acquisitions
will be treated under IFRS," advises Ken Nielsen Goldman, partner and
SEC practice director with New Jersey-based J.H. Cohn. "Next, they need
to close in on company-specific items which are going to be impacted by
the conversion. For example, how will the firm be affected by the
conversion from last-in-first-out inventory valuation, which is not allowable
under IFRS? Finally, management needs to rank the risk assessments and
develop a plan to meet the conversion target date several years out with
the least financial impact on operations."
Steve Hobbs, managing director of New York-based Protiviti, suggests that
companies learn lessons from Sarbanes-Oxley (the financial disclosure and
reporting legislation passed in 2002 in the wake of the Enron collapse) and
be proactive. "They need to assess the impact on process systems used to
capture data and its impact on people," he says. "Sure, the accountants will
have to be trained to learn how to capture and report the right information.
Equally important, senior management and board of directors members will
need to be briefed on how to interpret the new data." Hobbs points out that
management needs to take a close look at the different rules for leases and
gains on sales/leasebacks, which could dramatically impact their financial
reporting under IFRS. Under IFRS, there will be more leases on the
balance sheet and gains from sales/leasebacks will be recognized
immediately instead of being spread out over several reporting periods.
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These reporting differences will impact how businesses approach leases

and sales/leaseback decisions, based on their own particular situation.
Experts advise companies to establish a task force to help get ready for the
conversion. Make sure everyone involved understands the IFRS rules and
how they will affect your operations. Your management information system
will need to be adjusted to allow you to capture pertinent information critical
to effective decision-making. Global accounting standards will also affect
how operations are financed. Renegotiate debt covenants that may require
that financial reporting meet GAAP standards.
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WHAT ARE THE EFFECTS OF THE ACCOUNTING CHANGES

DOMESTICALLY AND GLOBALLY IN REGARDS TO ECONOMICS,
POLITICAL, ETHICS AND SOCIAL RESPONSIBILITY?
ECONOMIC CONSEQUENCES AND THE POLITICAL NATURE OF
ACCOUNTING STANDARD SETTING
January 6, 2010 by David Albrecht
It is said frequently by politicians, SEC and other regulators, journalists and
special interests that the accounting standard setting process should and
must be insulated from politics. As I explain in this essay, this runs counter
to everything we understand about accounting theory. For decades it has
been taught in every graduate accounting program in the country that
accounting standards have economic consequences. As a result, I contend
it is natural and predictable that competing economic interest attempt a
political solution to proposed accounting standards.
This is an important issue at this time, because they are proposing major
changes in the accounting regulatory landscape that run counter to this
conventional wisdom of the financial reporting and capital market world.
Recently, current (Mary L. Schapiro) and past (Roderick M. Hills, Harvey L.
Pitt, and David S. Ruder) chairmen of the Securities and Exchange
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Commission (SEC) and the current Chairmen of the FASB (Robert Herz)
and the IASB (David Tweedie) have been publicly remarking that the
accounting standard setting process should and must be insulated from the
lobbying of special interest groups and the meddling of government
institutions.
Their concern is understandable, because it has become known that
various accounting enacted standards (i.e., fair value rules, changing lease
rules) have economic consequences that produce adverse effects for
certain identifiable corporate interests, and these parties dont like it.
These affected parties only have three opportunities to lobby their
positions. They can lobby the FASB (or IASB) during the due process
stage before accounting standards are adopted, hoping to get the rule they
want. After implementation of a new rule, they can lobby their auditors for
favorable treatment when they consider how to account for transactions. If
these two fail to produce favorable results, the affected corporations have
one final alternative.
They can continue to complain and seek the
assistance of politicians to get the accounting rule changed. Of course, the

FASB and the IASB wish to maintain their rule making franchise, and so
they try to protect their rules and their responsibilities.
The defense of the SEC/FASB/IASB position (insulate accounting standard
setting from politics) is based on a number of premises, such as, (1)
accounting standards are designed to benefit all users and interests, (2)
there is a best accounting rule for every occasion, (3) accounting standards
are economically neutral, and (4) selecting accounting standards because
of their economic impact is the devils work.
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A famous Journal of Accountancy article, The Politicization of Accounting,

by the late University of Pennsylvania professor David Solomons (1978) is
sometimes cited in defense. As reported by FASB Chairman Robert Herz,
Professor Solomons argued for the information neutrality of accounting
standards. Herz quotes Solomons as saying,
If it ever became accepted that accounting might be used to achieve other
than purely measurement ends, faith in it would be destroyed just as faith in
speedometers would be destroyed once it were realized that they were
subject to falsification for the purpose of influencing driving habits.
Well guess what?
The speedometers of cars in the U.S. are altered
systematically. They are rigged to read at least three mph faster than a car
is actually traveling. If American drivers intend to drive faster than the
speed limit, and most do, then the federal government can bring about
increased compliance if speedometers are rigged to overstate a cars
current speed.
Its not just speedometers.
The SEC/FASB/IASB chairmen are wrong
about a lot of things! What follows are the basics of accounting theory as
understood by the typical accounting professor.
There is no such thing as universal accounting truth. Accounting standards
do not equally benefit all affected parties. Accounting standards all have
economic consequences.
To these three I add a caveat:
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It is the responsibility of a countrys government to serve as an appeal court

of last resort and adjudicate between economic interests in the selection of
accounting standards.
There is no such thing as universal accounting truth. Accounting rules
spring from the reason of human beings. The rules and principles that
guide todays capital markets are recent inventions. The most cherished
accounting axiomassets equal liabilities plus owners equityhas been
around less than six hundred years. Before that there was simply no need
for it, therefore it wasnt yet invented.
Accounting rules dont come
anywhere close to the permanence and universality of natural laws.

Moreover, when new accounting standards are considered there are
always alternatives. Eventually one alternative is selected by majority vote
of the board members of the standard setting organization, because it
seems reasonable for them to do so. Other theorists acting in good faith
may still have justifiable reasons for promoting an unchosen alternate
accounting rule.
There is no right or wrong in an absolute accounting
sense. The best that a proposed accounting rule can hope for is that it
seems better than the alternatives, and this desirability will be durable.
Here are some accounting standard setting alternatives that at one time
have been the law of the land.
Research and development expenditures were once capitalizable, but now
must be expensed as incurred.
Lease obligations can be treated as operating leases or capital leases (or
both at the same time as per IFRS). A current proposal calls for all to be
123 | P a g e

treated as capital leases. Some economic interests would prefer operating

lease treatment.
Measurement for the income statement was once the main priority, now it is
the balance sheet.
Accrual of a contingent liability must be probable or likely to happen (US
GAAPfrequently interpreted by accountants as 90% probability), or more
likely than not (IFRSinterpreted by accountants as a hair above a 50%
probability).
I think this first point is the most difficult for regulators and professional
accountants to come to grips with.
In accounting standard policy
discussions, participants frequently revert to a default position of searching

for the one best accounting standard. They just dont understand that it is
impossible for one to exist.
Accounting standards do not equally benefit all affected parties. Accounting
rules that govern the formation of corporate financial statements all have
economic consequences. It has always been this way. Every rule puts
some interest group at an advantage over another.
From the start,
investors have clamored for more disclosure than the executives running
corporations have wanted to supply. This tension is natural. Metaphorically
speaking, investors want an open window into the corporation, corporate
executives want a closed door. It is up to standard setters to draw the line
in such a place so as to serve as an effective compromise between them.
Capital market regulators in the U.S. learned this one the hard way.
Traveling back in time to when the AICPA was in charge of accounting
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standard setting, historians conclude that early efforts by the Committee on

Accounting Procedures and the Accounting Principles Board were focused
on providing accounting standards with alternatives. These standards were
problematic to investors because (1) companies used the flexibility to
obfuscate their financial condition, and (2) investors had a difficult time in
figuring out what was going on. Some companies, if they werent outright
fudging the numbers, were switching accounting rules back and forth to get
acceptable numbers and were firing the audit firm so as to shop for a
favorable audit opinion to authenticate reported numbers.
As the SEC
prioritized the needs of investors over those of companies, the eventual

solution was to charge the newly formed FASB with the task of reducing
alternatives and choices in accounting standards. As alternatives were
eliminated, rules in the U.S. became one size fits all.
One of the most troubling arguments I hear from regulators and accounting
firms is that when accounting standards are designed to advantage
reporting companies, then investors will naturally benefit.
It just doesnt
work that way. In a zero-sum game, both parties cant be simultaneous

winners.
All accounting standards have economic consequences. If an accounting
standard has no economic consequences, then the standard is not needed.
There are several ways to justify this statement about economic
consequences, and there are many examples in support.
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First, financial statements are intended to provide information to investors

for making investment decisions.
The decisions that result from using
financial statements are themselves economic consequences.

Second, all human communication is persuasive. There is no such thing as
an unbiased fact.
This is supported by a recent Hollywood release,
Vantage Point, in which an event is observed by seven individuals. Each

has a different vantage point. Because each of the seven as a different
perspective, each telling of the observed event differs. All are different, and
all can be correct.
Similarly, there is no such thing as neutrality and
objectivity in either accounting measurements or accounting standards.

Third, there are many instances where corporate executives have failed to
comply with accounting standards because they did not desire to report
bad numbers (financial results that fail to reach a target). These executives
certainly believed that numbers disclosed in accounting statements have
economic consequences, and they were willing to go to great lengths to
reach their targets. And, they still believe this way. Sometimes this means
structuring business events for the timing of revenue or expense
recognition.
Sometimes executives manage their earnings using
accounting tricks. Of course, there are negative consequences to being

perceived or caught managing earnings. Sometimes executives attempt to
influence the composition of accounting standards. By using the system to
change the accounting rules, they can set the stage for reporting good
numbers (or at least more desirable numbers). The actions that corporate
executives take are themselves economic consequences of accounting
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standards. The current fair value issue is a good and current example of
this.
Can participants think they are working toward the best accounting
standard? Sure. They always say so, whether or not they actually mean it.
If they mean it, they dont realize that they are only advocating their selfinterest.
If it is agreed that accounting standards have economic consequences, I
believe the next point follows very directly. It is obvious, as we say in
academe.
It is the responsibility of a countrys government to adjudicate between
competing economic interests in the selection of accounting standards.
This is what government does. For example, governments are good at
levying and collecting taxes, which has been going on since the beginning
of human history. And what is tax but one group being forced to transfer its
money to another group.
In the U.S., the federal government is the
ultimate economic arbiter.
Serving presidential administrations appoint
cabinet secretaries and agency heads (for example President Obama

appointed Geithner, Romer and Schapiro, and reappointed Bernanke), and
together they determine the policy that guides economic and regulatory
policies that remain in effect until changed (either because an
administration changes its own policies, or a new administration is elected).
How does a government decide between competing interests? By politics:
negotiation and compromise, posturing and popularity.
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We have not always realized the political nature of standard setting in the
U.S. However, since the formation of the FASB every potential accounting
standard has had to go through a political process:
discussion
memorandum, then exposure draft. And the SEC always has the ability to
override (which it has upon occasion).
Not only does the federal government have the authority to determine
accounting standards (the Securities and Exchange Act of 1934 affirms it),
but it has the responsibility to do so. This is because accounting standard
setting is an integral part of the economic regulatory system of the U.S.
And maintaining a stable and sound economy is a basic underpinning of
national security.
Because of its primal importance, there is no other
organization in the U.S. that could possibly do it.

So, what are some of the ramifications of this lesson in accounting theory.
First, I dont think that there are Republican issues or Democrat issues.
When competing economic interests appeal to politicians for support, there
is probably chance as to which political party supports a particular
economic interest. Remember, two party politics as we have in the U.S., is
confrontational politics. The first party to an issue will choose whom to
support. The second party will necessarily pick an opposing side.
Second, when standard setters climb into the political arena and ask that
accounting standards be insulated from politics, they actually mean that
accounting standards should be insulated from other peoples politics,
because the speaking standards setters like their own politics just fine.
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Third, although wishing for a politics free environment for accounting

standard setting sounds like it should be a good idea, it probably isnt any
more possible than Democrats and Republicans getting together to start
churning out non-partisan legislation that puts the country first.
Fourth, the Obama administration has proposed shifting responsibility for
accounting standard setting to a foreign institution, completely out of the
control of the U.S. government. This means that the U.S. government is
delegating a key aspect of financial/economic regulation to a foreign body.
And this foreign institution does not have promoting the American national
interest as its guiding mission. It means also that the U.S. government is
rejecting its obligation to engage in politics in adjudicating between
competing economic interests. Isnt that what were paying government
officials for?
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REFERENCES
WEBLIOGRAPHY
http://www.pwc.com/ph/en/accounting-buzz/news/accounting-buzz-012016.html
http://philcpa.org/2016/08/new-accountancy-tracks-forthcoming/
http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1218220137102
http://villacortaaccounting.com/index.php/2016/01/07/filipino-cpas-areprepared-for-asean-integration-boa-chair/
http://philcpa.org/2016/01/miss-and-mister-universe-of-the-accountancyprofession-part-2/
http://www.bsp.gov.ph/publications/media.asp?id=2134
http://www.bsp.gov.ph/publications/media.asp?id=3670
http://economia.icaew.com/opinion/october-2014/top-three-challengesfacing-accountants-today
http://philcpa.org/2016/01/miss-and-mister-universe-of-the-accountancyprofession-part-2/
http://boa.com.ph/asean-mutual-recognition-arrangement/
http://philcpa.org/2016/08/new-accountancy-tracks-forthcoming/
http://philcpa.org/2016/01/forthcoming-changes-in-the-continuingprofessional-development-of-cpas/
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http://philcpa.org/2016/02/all-partners-and-cpa-staff-of-audit-firms-need-tobe-accredited/
http://www.worldbank.org/en/news/opinion/2016/04/26/a-globalperspective-on-the-accountancy-profession
http://www.caquery.com/accountancy-profession/
http://www.journalofaccountancy.com/newsletters/2016/jan/2016-trendsaccounting-profession.html
http://www.gaaaccounting.com/where-will-the-accountancy-profession-bein-25-years/
https://s3.amazonaws.com/ifrswebcontent/2016/IASB/September/IASBSeptember-Update.html#1
http://www.pwc.com/us/en/audit-assurance-services/accountingadvisory/revenue-recognition.html
ARTICLES
NEW ACCOUNTANCY TRACKS FORTHCOMING
by BOA Secretariat on Aug 24th, 2016
BOA RESOLUTION PASSED REQUIRING CPA FS PREPARERS TO
SUBMIT CERTIFICATE
by Orlando Calundan on Jan 21st, 2016
AUDITING THE AUDITORS
By BOA Secretariat on Feb 25th, 2016
A GLOBAL PERSPECTIVE ON THE ACCOUNTANCY PROFESSION
APRIL 26, 2016
131 | P a g e

Interview with Samia Msadek, Director, Governance Global Practice, World

Bank
TRENDS THAT WILL SHAPE THE CPA PROFESSION IN 2016
Startups, mergers, and Big Data will all impact CPAs this year.
By Usha Sankar
January 25, 2016
WHERE WILL THE ACCOUNTANCY PROFESSION BE IN 25 YEARS?
17/08/2013 by GAA Accounting
By David Devlin
BUSINESS
ACCOUNTING:
NEW
GLOBAL
STANDARDS
IMPACT BUSINESS PLANS, LOCATION DECISIONS

Richard J. Maturi
ECONOMIC CONSEQUENCES AND THE POLITICAL NATURE OF
ACCOUNTING STANDARD SETTING
January 6, 2010 by David Albrecht
132 | P a g e

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WHAT AWAITS IN THE ACCOUNTANCY

PROJECT IN MASTERY CLASS

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ESTIMATES (AGENDA PAPER 26)103-114

EFFECTS OF THE ACCOUNTING CHANGES DOMESTICALLY AND

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ACCOUNTING STANDARD SETTING..122-131

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AGENCIES THAT REGULATES THE ACCOUNTANCY PROFESSION IN

Philippines. In addition to its regulatory functions, the SEC also

Bangko Sentral ng Pilipinas

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BSP in both Filipino and English) is the central bank of the

Government that formulates revenue policies

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ACCOUNTANCY PROFESSION FOR YEAR 2016 (DOMESTIC):

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advanced financial accounting reporting, management advisory services,

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Based on the Resolution, the preparation and presentation of financial

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2016, Requiring the Submission of Certificate by the Responsible CPAs on

Requirement of the attachment to the annual financial statement (FS)

The Certificate shall be prepared only for issuers which/who have

The preparation of the FS and disclosure notes is a practice of

The CPAs rendering the compilation services for the preparation of

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necessary application and complying with the Continuing Professional

The rules shall apply for the FS pertaining to year 2015.

already accredited with BOA for Public Practice, is there a need to

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inauspicious events in the accountancy profession and have set up a

Public Accountants (CPA)

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Program/System are pending, there is no local regulatory body that

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and the CPA practitioners, whether big firms or small or medium

Institute quality and governance measures.

Effectively regulate the profession.

Enhance image and reputation of the accounting professional.

Enhance stakeholders involvement and cooperation.

Institute structural changes.

Provide communication and assistance mechanisms.

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side with the advancement of a regional economy characterized by the free

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CPAs in Commerce and Industry (ACPACI). However, all newly registered

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With the impending Asean integration, the preparation of our Filipino

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the Implementing Mutual Recognition

Arrangement (MRA) Framework on Accountancy was signed by all ASEAN

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Philippines, Malaysia, Singapore, Thailand, Brunei Darussalam, Cambodia,

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Certified Public Accountant Jose E. Villacorta, in his article published in the

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about Mutual Recognition Agreement (MRA) in the field of ASEAN

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