FINANCIAL ACCOUNTING AND REPORTING 3.1.

3 Accounting for petty cash fund

1.0 Development of Financial Reporting Framework, 3.2 Other Financial Assets (initial recognition, basis for
Standard-Setting Bodies and Regulation of the classification, subsequent
Accountancy Profession measurement, reclassification, and presentation in the
1.1 History, Development and Functions of the Standard- financial statements)
Setting Bodies 3.2.1 Financial assets at fair value through profit or loss
1.1.1 IASB 3.2.2 Financial assets at fair value through other
1.1.2 IFRIC and SIC comprehensive income
1.1.3 FRSC 3.2.3 Financial assets at amortized cost
1.1.4 PIC 3.2.3.1 Trade and other receivables
1.2 Regulation and Environment of the Accounting 3.2.3.1.1 Valuation using allowance for doubtful accounts
Profession in the Philippines 3.2.3.1.2 Transfer of receivables (pledging, assignment, and
1.2.1 The Professional Regulatory Board of Accountancy factoring)
1.2.2 The accredited professional organization of 3.2.3.2 Other financial assets at amortized cost (including
professional accountants in the Philippines investment in bonds)
1.2.3 Sectors of the practice of accountancy profession and 3.2.4 Investment in associates and joint venture
the accreditation requirements 4.0 Non-financial Assets
2.0 Conceptual Framework, Accounting Process and 4.1 Inventories
Presentation of Financial Statements 4.1.1 Nature
2.1 The Conceptual Framework for Financial Reporting 4.1.2 Capitalizable cost at initial recognition
2.1.1 Objective and status of the Conceptual Framework 4.1.3 Inventory cost flow assumptions
2.1.2 Qualitative Characteristics of Useful Financial 4.1.4 Subsequent measurement at lower of cost or
Information estimated selling price less cost to complete and sell
2.1.3 Definition of, recognition and derecognition criteria 4.1.5 Estimation procedures – gross profit and retail
and measurement bases for the elements of the financial inventory method
statements 4.2 Property, plant, and equipment
2.1.4 Concepts of capital and capital maintenance 4.2.1 Nature
2.2 The Accounting Process 4.2.2 Capitalizable cost at initial recognition
2.2.1 The steps in the accounting process 4.2.3 Borrowing costs
2.2.2 The use of the special journals, general journal, 4.2.4 Subsequent expenditures
subsidiary ledgers, and general ledgers 4.2.5 Subsequent measurement
2.2.3 Completing the accounting cycle, including use of 4.2.5.1 Cost method
worksheet, adjusting entries, closing entries, and reversing 4.2.5.1.1 Depreciation
entries 4.2.5.1.2 Depreciation methods
2.3 Presentation of the Financial Statements 4.2.5.1.3 Changes in useful life and depreciation methods
2.3.1 General features 4.2.5.2 Revaluation
2.3.2 Statement of Financial Position 4.2.6 Impairment
2.3.2.1 Definition of elements 4.2.7 Retirement and disposals
2.3.2.2 Classified Statement of Financial Position 4.3 Investment property
2.3.3 Statement of Comprehensive Income 4.3.1 Nature
2.3.3.1 Nature of expense 4.3.2 Capitalizable cost at initial recognition
2.3.3.2 Function of expense 4.3.3 Measurement subsequent to initial recognition
2.3.3.3 Components of profit from continuing operations 4.3.3.1 Cost method
2.3.3.4 Components of discontinued operations 4.3.3.2 Fair value method
2.3.4 Statement of Changes in Equity 4.3.4 Derecognition and reclassification
2.3.5 Statement of Cash Flows 4.4 Intangible assets
2.3.5.1 Sections of the statement of cash flows 4.4.1 Nature
2.3.5.2 Preparing cash flows from operations: direct and 4.4.2 Capitalizable cost at initial recognition
indirect methods 4.4.3 Subsequent expenditures
2.3.6 Notes to the Financial Statements 4.4.4 Subsequent measurements
2.3.7 Computation and Disclosures of Earnings Per Share 4.4.4.1 Finite lives assets - amortization
Information 4.4.4.2 Indefinite lives assets
2.3.7.1 Basic EPS 4.4.5 Impairment
2.3.7.2 Diluted EPS 4.4.6 Derecognition
3.0 Cash and other Financial Assets 4.5 Biological assets
3.1 Cash 4.5.1 Nature, distinction from bearer plants and agricultural
3.1.1 Nature and composition of cash produce
3.1.2 Preparing the bank reconciliation 4.5.2 Capitalizable cost at initial recognition
4.5.3 Subsequent measurement 8.3.4 Financial statement presentation and disclosure
4.6 Non-current assets held for sale (or disposal group) 8.4 Employee benefits
4.6.1 Nature – criteria for this classification 8.4.1 Nature and classification
4.6.2 Capitalizable cost at initial recognition 8.4.2 Recognition and measurement of employee benefit
4.6.3 Measurement subsequent to initial recognition costs under defined benefit plan and defined contribution
4.6.4 Reclassification plan
4.6.5 Derecognition 8.4.3 Presentation and disclosures
4.7 Prepaid expenses and other assets 8.5 Interim Reporting
5.0 Financial Liabilities 8.5.1 Purpose and components of interim financial reports
5.1 Classification of financial liabilities 8.5.2 Recognition of income, expenses, assets, and liabilities
5.2 Initial recognition for interim reporting
5.3 Debt issue cost 8.6 Operating segments
5.4 Measurement using effective interest method 8.6.1 Identifying operating segments
5.5 Troubled debt restructuring 8.6.2 Reporting segment information
6.0 Non-financial liabilities, provisions, and contingencies 9.0 Other Reporting Frameworks
6.1 Liabilities arising from customer loyalty programs 9.1 Applicability and salient differences from PFRS of the
6.2 Warranties and product guarantees following reporting frameworks
6.3 Unearned revenues arising from contracts, gift 9.1.1 PFRS for SMEs
certificates, and subscriptions 9.1.2 PFRS for Small Entities
6.4 Other provisions and contingencies 9.1.3 Reporting for microenterprises
7.0 Shareholders’ Equity ADVANCED FINANCIAL ACCOUNTING AND REPORTING
7.1 Share capital transactions 1.0 Partnership Accounting
7.1.1 Initial issuance, stock issuance cost 1.1 Nature, scope, and objectives
7.1.2 Treasury share transactions 1.1.1 Differentiate from single proprietorship and
7.1.3 Retirement, conversion corporation accounting
7.2 Retained earnings 1.1.2 Concepts, principles, rules, practices, and procedures
7.2.1 Correction of prior period errors and change in 1.2 Formation
accounting policies 1.2.1 Initial capital contribution
7.2.2 Dividends 1.3 Operation/Dissolution/changes in ownership interest
7.2.3 Quasi reorganization and recapitalization 1.3.1 Admission of a new partner
7.3 Cumulative other comprehensive income 1.3.1.1 By purchase of interest
7.4 Computation of book value per share 1.3.1.2 By investment
8.0 Other Topics 1.3.2 Withdrawal, retirement, or death of a partner
8.1 Share-based payment transactions 1.3.3 Incorporation of a partnership
8.1.1 Equity-settled 1.4 Liquidation of partnership
8.1.2 Cash-settled 1.4.1 Lump – sum method
8.1.3 Equity-settled with cash alternative 1.4.2 Installment method
8.2 Leases 2.0 Corporate Liquidation
8.2.1 Books of Lessee 2.1 Statement of Affairs
8.2.1.1 Initial recognition of right-of-use asset and lease 2.2 Statement of Deficiency
liability 2.3 Statement of Realization and Liquidation
8.2.1.2 Subsequent measurement of right-of-use asset and 2.4 Determination of the order of priority of claimants of
lease liability (including changes in estimates) company assets subject to liquidation
8.2.1.3 Financial statement presentation of right-of-use 3.0 Joint Arrangements (PFRS 11)
asset and lease liability 3.1 Joint Operations
8.2.1.4 Exemption to recognition and measurement 3.1.1 Nature and scope
principles 3.1.2 Differentiate from business combination
8.2.2 Books of Lessor 3.1.3 Standards principles and methods
8.2.2.1 Direct finance lease 3.2 Joint Venture (equity method)
8.2.2.2 Manufacturer’s or dealer’s lease 3.2.1 Nature and scope
8.2.2.3 Operating lease 3.2.2 Differentiate from business combination
8.2.3 Sale-leaseback 3.2.3 Standards, principles, and methods
8.3 Income Tax 4.0 Revenue Recognition (PFRS 15)
8.3.1 Accounting profit and taxable profit 4.1 Revenue from Contracts with Customers
8.3.2 Book basis and tax basis 4.1.1 Five-Steps Model Framework
8.3.3 Computation and accounting for current income tax 4.1.2 Other Revenue Recognition Issues
and deferred income tax, deferred tax liability (asset) and 4.1.2.1 Right of return
current income tax liability (asset) 4.1.2.2 Principal-agent relationships
4.1.2.3 Non-refundable upfront fees 8.1.3.1 Net Income/ Other Comprehensive Income/ Equity
4.1.2.4 Licensing / Royalties 8.1.3.1.1 Attributable to Equity Holders of Parent/
4.1.2.5 Repurchase arrangements Controlling or Parent’s Interest
4.1.2.6 Gift Cards 8.1.3.1.2 Non-controlling Interest
4.1.2.7 Consignment arrangements 8.1.3.1.3 Consolidated/ Group
4.1.2.8 Bill-and-hold arrangements 8.1.3.2 Retained Earnings/ Common Share / Dividends
4.1.2.9 Long – term Construction Contracts 8.1.3.2.1 Attributable to Equity Holders of Parent /
4.1.2.9.1 Percentage of completion method Controlling or Parent’s Interest/ Consolidated / Group
4.1.2.9.1.1 Input method 9.0 Derivatives and Hedging Accounting (PFRS 9)
4.1.2.9.1.2 Output method 9.1 Accounting for Derivatives
4.1.2.9.2 Contract Asset / Contract Liability 9.1.1 Recognition and Derivatives
4.1.2.10 Franchise Operations – Franchisor’s point of view 9.1.2 Types of Derivatives
4.1.2.10.1 Journal entries and determination of revenue, 9.1.2.1 Forwards and Futures
cost, and gross profit 9.1.2.2 Options
4.1.2.10.1.1 Initial franchise fee 9.2 Hedging Activities: Hedging Foreign Currency Exposures
4.1.2.10.1.2 Continuing franchise fee 9.2.1 Foreign Currency Forward Contracts
4.1.2.11 Accounting for Consignment Sales 9.2.1.1 Hedges that does not requires a Hedge Accounting
4.1.2.11.1 Amount Remitted (undesignated hedges)
4.1.2.11.2 Ending Inventory Valuation 9.2.1.1.1 Exposed Asset (Import) or Liability (Export)
4.1.2.11.3 Determination of Net Income Position
4.1.3 Financial Statement Presentation 9.2.1.1.2 Speculation
5.0 Accounting for Home Office, Branch and Agency 9.2.1.2 Hedges that requires a Hedge Accounting:
Transactions 9.2.1.2.1 Fair value hedge
5.1 Transactions on the books of the home office and the 9.2.1.2.1.1 Hedge of a Firm Commitment (purchase or sale
branch transaction)
5.1.1 General Procedure 9.2.1.2.2 Cash flow hedge
5.1.2 Special Procedure (inter- branch transfer of cash and 9.2.1.2.2.1 Hedge of a Firm Commitment (purchase or sale
merchandise at billed price) transaction)
5.2 Reconciliation of reciprocal accounts 9.2.1.2.2.2 Hedge of a Forecasted Transaction (purchase or
5.3 Preparation of individual and combined financial sale transaction)
statements 9.2.1.2.2.3 Hedge of a net investment in foreign entity
5.4 Accounting for agency transactions 10.0 Translation of Foreign Currency Financial Statements
6.0 Business Combination (PFRS 3) (PAS 21/ PAS 29)
6.1 Nature, scope, and characteristics 10.1 Translation from the Functional Currency into the
6.2 Statutory Merger and Consolidation/Acquisition of Presentation Currency (Closing/Current Rate Method)
assets and liabilities (acquisition method) 10.2 Translation into the Functional Currency
6.2.1 Determination of Consideration Transferred (Remeasurement from a Foreign Currency Financial
6.2.2 Recognition of Acquired Assets and Liabilities Statements to the Functional Currency)
6.2.3 Recognition and Measurement of Goodwill and Gain 10.3 Restatement of Financial Statements (Functional
from a Bargain Purchase Currency of a Hyperinflationary Economy)
6.2.4 Journal Entries 11.0 Not-for-Profit Organizations
6.3 Financial Statement Presentation 11.1 Voluntary health and welfare organizations (VHWO)
7.0 Separate Financial Statements (PAS 27) 11.2 Hospitals and other health care organizations
7.1 Accounting for Investment in Subsidiaries, Associates 11.3 Colleges and Universities
and Joint Ventures 11.4 Other not-for-profit organizations such as churches,
7.1.1 At Cost museums, fraternity, association, etc.
7.1.2 Financial Instruments: Recognition and Measurement 12.0 Government Accounting – General Fund
(PAS 39) 12.1 Basic Concepts in Government Accounting
7.1.3 Financial Instruments in accordance with PFRS 9 12.2 Budget Process
7.2 Accounting for dividends and related disclosure 12.3 Government Accounting Manual (GAM)
requirements 12.4 Journal Entries – Books of National Government
8.0 Consolidated Financial Statements (PFRS 10) Agency
8.1 Consolidation procedures 13.0 Cost Accounting
8.1.1 Net income, dividends, amortization, and impairment 13.1 System of Cost Accumulation or Costing System
of goodwill 13.1.1 Comparison between Actual Costing, Normal Costing
8.1.2 With intercompany transactions (Inventories, land, and Standard Costing
and depreciable assets) 13.2 Job-order Costing System
8.1.3 Determination of: 13.2.1 Journal Entries
13.2.2 Preparation of Statement of Goods Manufactured 1.0 Management Accounting
and Sold 1.1 Objectives, role, and scope of management accounting
13.2.3 Accounting for scrap, waste, spoilage, and rework 1.1.1 Basic management functions and concepts
13.2.4 Cost Accumulation Procedures – materials, labor and 1.1.2 Distinction among management accounting, cost
overhead accounting and financial accounting
13.3 Process Costing System 1.1.3 Roles and activities of controller and treasurer
13.3.1 Journal Entries 1.1.4 International certifications in management accounting
13.3.2 Preparation of Cost of Production Report 1.1.5 Global trends in management accounting
13.3.2.1 First-in, first-out method 1.2 Management accounting concepts and techniques for
13.3.2.2 Average method planning & control
13.3.3 Accounting for Lost Units 1.2.1 Cost terms, concepts, and behavior
13.3.3.1 Normal lost units – end of process 1.2.1.1 Nature and classification of costs
13.3.3.2 Abnormal lost units 1.2.1.2 Analysis of cost behavior (variable, fixed, semi-
13.3.4 Cost accumulation procedures – materials, labor and variable/mixed, step-cost)
overhead 1.2.1.3 Splitting mixed cost (high-low, scatter graph, least-
13.4 Backflush Costing System (JIT System) squares regressions)
13.4.1 Journal Entries 1.2.1.4 Cost prediction techniques (correlation, regression
13.4.2 Cost accumulation procedures – materials, labor and analysis and learning curves)
overhead 1.2.2 Cost-volume profit (CVP) analysis
13.5 Activity-Based Costing System (ABC System) 1.2.2.1 Uses, assumptions and limitations of CVP analysis
13.5.1 Allocation of Costs: Traditional Costing versus ABC 1.2.2.2 Factors affecting profit
System 1.2.2.3 Breakeven point in unit sales and peso sales
13.5.2 Determination of Total Product Cost: Traditional 1.2.2.4 Required selling price, unit sales and peso sales to
Costing versus ABC System achieve a target profit
13.5.3 Activity levels (unit-level, batch-level, product-level, 1.2.2.5 Sensitivity analysis (including indifference point in
and facility level), cost pools and activity drivers unit sales and peso sales)
13.5.4 Determination of cost pool rates and application of 1.2.2.6 Use of sales mix in multi-product companies
overhead costs 1.2.2.7 Concepts of margin of safety and degree of
13.6 Accounting for Joint and By-Products operating leverage
13.6.1 Methods of allocating joint costs to products 1.2.2.8 Different scenarios using CVP analysis (indifference
13.6.1.1 Market (sales) Value Method point, step fixed, multiple drivers)
13.6.1.1.1 Market value at split-off point approach 1.2.3 Standard costing and variance analysis
13.6.1.1.2 Hypothetical market value approach or 1.2.3.1 Journal entries
Approximated net realizable value approach or Net 1.2.3.2 Direct
realizable value method 1.2.3.2 Direct material variance (quantity, price usage,
13.6.1.1.3 Average units (production output) method purchase price, mix and yield)
13.6.1.1.4 Weighted average method 1.2.3.3 Direct labor variance (efficiency, rate, mix and yield)
13.6.2 Methods of allocating joint costs to by-products 1.2.3.4 Factory overhead variance – two-way method
13.6.2.1 No joint costs allocated to by-products (controllable and volume); three-way method (spending,
13.6.2.2 With joint costs allocated to by-products variable efficiency, and volume); four-way method (variable
13.6.3 Treatment of by-products spending, fixed spending, variable efficiency, and volume)
13.7 Service Cost Allocation 1.2.4 Variable vs. Absorption Costing
13.7.1 Direct method 1.2.4.1 Distinction between product cost and period cost
13.7.2 Step-down method 1.2.4.2 Inventory costs between variable costing and
13.7.3 Reciprocal method absorption costing
14.0 Other Special Topics (Basic Knowledge) 1.2.4.3 Nature and treatment of fixed factory overhead
14.1 Accounting for insurance contracts by insurers (PFRS costs
17) 1.2.4.4 Reconciliation of operating income under variable
14.1.1 Types of Insurance Contracts costing and absorption costing
14.1.2 Changes in Accounting Policies 1.2.5 Financial planning and budgets
14.1.3 Recognition and measurement of insurance and 1.2.5.1 Definition and coverage of the budgeting process
reinsurance contracts 1.2.5.2 Master budget and its components (operating and
14.2 Service Concession Arrangement – Accounting for financial budgets)
Build, Operate & Transfer (PFRIC 12) 1.2.5.3 Types of budgets (static, flexible, zero-based,
14.2.1 Two Types of Service Concession Arrangement continuous)
14.2.1.1 Financial Asset 1.2.5.4 Budget variance analysis (static and flexible)
14.2.1.2 Intangible Asset 1.3 Management accounting concepts and techniques for
MANAGEMENT SERVICES performance measurement
1.3.1 Responsibility accounting and transfer pricing 2.2.2.2 Working capital investment and financing policies
1.3.1.1 Concepts of decentralization, segment reporting, (conservative, aggressive and the hedging/moderate
goal congruence and motivation approach)
1.3.1.2 Controllable and non-controllable costs, direct and 2.2.2.3 Cash and marketable securities management (cash
common costs conversion cycle, optimal cash balance, collection and
1.3.1.3 Type of responsibility centers (cost, revenue, profit, disbursement float, cash management system)
and investment centers) 2.2.2.4 Receivables management (average balance of and
1.3.1.4 Preparation of segmented income statement investment in accounts receivable, incremental analysis and
1.3.1.5 Performance margin (manager vs. segment evaluation of discount, collection, and credit policies)
performance) 2.2.2.5 Inventory management (carrying, ordering and
1.3.1.6 Return on investment (ROI), residual income and stock-out costs, inventory control system including EOQ
economic value added (EVA) model, safety stock, reorder point)
1.3.1.7 Rational and need for transfer price 2.2.2.6 Sources of short-term funds (trade credit, bank
1.3.1.8 Transfer pricing schemes (minimum transfer price, loans, commercial papers, receivable factoring credit lines
market-based transfer price, cost-based transfer price and and revolving credit)
negotiated price) 2.2.2.7 Estimating cost of short-term funds (annual cost of
1.3.2 Balanced scorecard trade credit, effective and nominal annual rate of short-
1.3.2.1 Nature and perspectives of balanced scorecard term funds)
1.3.2.2 Financial and non-financial performance measures 2.2.3 Capital budgeting
(productivity, cycle efficiency and throughput measures) 2.2.3.1 Capital investment decision factors (net investment
1.4 Management Accounting Concepts and Techniques for for decision making, cost of capital, cash, and accrual net
Decision Making returns)
1.4.1 Relevant costing and differential analysis 2.2.3.2 Non-discounted capital budgeting techniques
1.4.1.1 Definition and identification of relevant costs (payback period, accounting rate of return on original and
1.4.1.2 Concept of opportunity costs average investment, bailout payback, and payback
1.4.1.3 Approaches in analyzing alternatives in non-routing reciprocal)
decisions (total and differential) 2.2.3.3 Discounted capital budgeting techniques (net
1.4.1.4 Types of decisions (make or buy, accept, or reject present value, internal rate of return, profitability index,
special order, continue or drop/shutdown, sell or process equivalent annual annuity, fisher rate/NPV point of
further, best product combination, pricing decisions) difference)
1.4.1.5 Probability analysis (expected value concept) 2.2.3.4 Project screening, project ranking and capital
1.4.1.6 Decision tree diagram rationing (independent and mutually exclusive capital
1.4.1.7 Linear programming (graphic method; algebraic investment projects)
method) 2.2.3.5 Sensitivity analysis (effects of changes in project
2.0 Financial Management cash flow, tax rates and other assumptions)
2.1 Objectives and scope of financial management 2.2.4 Risks and leverage
2.1.1 Nature, purpose, and scope of financial management 2.2.4.1 Types of risks (business/operating, financing)
2.1.2 Role of financial managers in investment, operating 2.2.4.2 Measures of risks (coefficient of variation and
and financing decisions standard deviation)
2.2 Financial Management Concepts and Techniques for 2.2.4.3 Degree of operating, financial and total leverage
Planning, Control & Decision Making 2.2.5 Capital structure and long-term financing decision
2.2.1 Financial statement analysis 2.2.5.1 Basic concepts and tools of capital structure
2.2.1.1 Vertical analysis (common-size financial statements) management
2.2.1.2 Horizontal analysis (trend percentages and index 2.2.5.2 Sources of intermediate and long-term financing
analysis) (including hybrid financing)
2.2.1.3 Cash flow analysis (interpretation of cash flows 2.2.5.3 Cost of capital (cost of long-term debt, cost of
including free cash flow concept) preferred shares, cost of equity, weighted average cost of
2.2.1.4 Gross profit variance analysis (price, cost, and capital, marginal cost of capital)
volume factors) 2.2.6 Financial markets
2.2.1.5 Financial ratios (liquidity, solvency, activity, 2.2.6.1 Money markets
profitability, growth, and other ratios; Du Pont model) 2.2.6.1.1 Types of money market instruments
2.2.1.6 Financial forecasting using additional funds needed 2.2.6.2 Capital market
(AFN) 2.2.6.2.1 Fixed income market
2.2.2 Working capital management 2.2.6.2.1.1 Types/examples of fixed income instruments
2.2.2.1 Concepts and significance of working capital 2.2.6.2.1.2 Basic valuation
management 2.2.6.2.2 Stock market
2.2.6.2.2.1 Types/examples of equity instruments
2.2.6.2.2.2 Basic valuation
3.0 Economic concepts essential to obtaining an
understanding of entity’s business and industry