The accounting system of Philippines is strongly influenced by US and, more recently, by international practices. The governing legislative and institutional framework is comprehensive—the components of a developed and robust framework are readily identifiable. In common with the US model, these arrangements reflect a mixture of government intervention and self-regulation.
Accounting Standards & Norms in Philippines
Legislative and Institutional Framework
The four key legislative planks are the Revised Accountancy Law 1975, the Corporation Code, the Revised Securities Act 2000, and the National Internal Revenue Code 1999.The Revised Accountancy Law 1975 (Presidential Decree No. 692) replaced the Accountancy Act 1967. As with the earlier law, it governs the standardization of accounting education, stipulates the examination process for Certified Public Accountants (CPA) registration and regulates the practice of accountancy. It remains in place today. The Revised Accountancy Law 1975 prescribes the control and regulation over the registration of (CPA) as well as accountancy practices in general. The Professional Regulation Commission (PRC), through the Board of Accountancy (BOA), administers the provisions of this law. The PRC, through the Philippines Institute of Certified Public Accountants (PICPA), exercises regulatory duties relating to technical matters and work quality. However, the BOA must approve standards issued by the Profession before they are implemented.
The Corporation Code, which is enforced by the Securities and Exchange Commission (SEC), governs the creation and operations of limited liability corporations. Unless companies are classified as closed corporations—those with 20 or fewer shareholders—they are obliged to abide by all the reporting and other requirements of a limited liability corporation. Among other things, they must submit audited financial statements to the SEC and the Bureau of Internal Revenue (BIR). However, companies in special industries, such as banks, insurance companies, and public utilities, fall under the control of the Bangko Sentralng Pilipinas (BSP), the Insurance Commission, the Board of Transportation, or other governmental organizations.
Companies listed on the Philippines Stock Exchange must submit financial statements to the SEC in accordance with the Revised Securities Act 2000. The Act also makes the SEC responsible for overseeing financial reporting requirements. In this respect, SEC rules and guidelines specify the form and contents of financial statements. The National Internal Revenue Code 1999 requires all corporations, partnerships and persons that file income tax returns to prepare and submit financial statements. It also requires that tax agents, including CPAs, be accredited by the BIR.
Financial statements for business organizations must be prepared using the accrual accounting basis. This requirement is specified in Statement of Financial Accounting Standard (SFAS) 1.
Accounting Information Systems
Accounting information systems range from complex enterprise resource planning systems to paper-based manual systems. As might be expected, given the strength of the national software industry, a variety of low range to midrange Philippines-developed software packages are used for budgeting and accounting.