Chapter 6

Time Period
Assumption
GAAP, IFPRS, and PFRS
TIME PERIOD
ASSUMPTION

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Time Period Assumption
◂ Also known as the periodicity assumption. The
accounting guideline that allows the accountant
to divide up the complex, ongoing activities of a
business into periods of a year, quarter, month,
week, etc.

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Time Period Assumption
◂ Users of the accounting information of a
company need periodic reports to enable them
to make economic decisions. An owner or
stockholder needs reports consistently to decide
if he or she will still keep his ownership interest
in the company. A supplier needs reports
consistently to decide if it is still beneficial to
transact with the company. This is where the
time period assumption comes into play.

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Time Period Assumption
◂ For an annual accounting period, it may follow
a calendar or fiscal year.
◂ It is the accounting period a company follows
for tax purposes.

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 The users of financial statements need
current and reliable information to
“ evaluate financial performance and
position of the companies to
make important decisions and take
appropriate actions. The time period
assumption enables companies to
divide their economic activities into
short time periods.
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GAAP
GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES

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GAAP
◂ The Generally Accepted Accounting Principles
(GAAP) consists of accounting principles, rules,
and guidelines that companies follow to achieve
consistency and comparability in their financial
statements. Companies that apply GAAP help
not only external users but also the
management as well.

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GAAP
◂ It will be easier for the external users to
examine if the company is doing well currently
or in a relation to its past performance.
◂ It helps the management in understanding
trends persistent in the company.
Management can also compare past and
current performance to check the strong and
weak points of company operations.

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 GAAP
◂ The GAAP is developed by the accounting
professionals to guide preparers of financial
statements in recording and reporting financial
information regarding a business enterprise,
hence aiding in the effective execution of the
accounting procedure and in communicating
the financial condition of the business.

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 GAAP is meant to ensure a minimum level

“ of consistency in a company's financial

statements, which makes it easier for
investors to analyze and extract useful
information. GAAP also facilitates the
cross-comparison of financial information
across different companies.

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IFRS
INTERNATIONAL FINANCIAL
REPORTING STANDARDS

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 IFRPS
◂ The International Financial Reporting Standards (IFRS) are
pronouncements issued by the International Accounting
Standards Board (IASB) that intend to enhance the
comparability of the financial statements of all companies
around the world.
◂ The IFRS provides a way for users of accounting information to
easily understand the results of operations of companies all
round the globe.

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 IFRPS
◂ The IFRS is a set of accounting standards that are recognized
by at least 120 countries (including the Philippines) and
provides a guide on how particular types of transactions and
other events should be reported in financial statements.

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IFRPS
The following factors are considered in the decision to adapt
the IFRS
◂ Philippine organizations’ support of international accounting
standards
◂ Increasing internalization of business which greatly calss for a
common language for financial reporting
◂ Improvement of international accounting standards or removal of
free choices of accounting treatments
◂ International accounting standards being recognized by the
World Bank, Asian Development Bank, and World Trade
Organization
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PFRS
PHILIPPINE FINANCIAL
REPORTING STANDARDS

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 PFRS
◂ The Philippine Financial Reporting Standards
(PFRS)/Philippine Accounting Standards (PAS)
are the new set of Generally Accepted
Accounting Principles (GAAP) issued by the
Accounting Standards Council (ASC) to govern
the preparation of financial statements. These
standards are patterned after the revised
International Financial Reporting Standards
(IFRS) and International Accounting Standards
(IAS) issued by the International Accounting
Standards Board (IASB).
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 PFRS
◂ The PFRS, our version of the IFRS with some minor
modifications, and the Philippine Accounting Standards are
issued by the PFRS Council (formerly the Accounting
Standards Council [ASC]). Hence, the PFRS and the PAS are
our current set of Generally Accepted Accounting Principles.
GAAPs vary “from country to country due to differences in
the legal system, levels of inflations, culture, degrees of
sophistication and use of capital markets, and political and
economic ties with other countries.” Entities registered with
the Securities and Exchange Commission (SEC) are required
to apply PFRS as their financial reporting framework.

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 PFRS
The Philippine Financial Reporting Standards Council (FRSC) issues
standards to be used in the Philippines in the form of Philippine
Financial Reporting Standards (PFRS).
The PFRS include all of the following
◂ Philippine Financial Reporting Standards (PFRS) which corresponds
to International Financial Reporting Standards (IFRS)
◂ Philippine Accounting Standards (PAS) which correspands to
International Accounting Standards (IAS)
◂ Interpretations of accounting standards issued by the Philippine
Interpretations Committee in accordance with interpretations of the
International Financial Reporting Committee (IFRIC) and the
Standing Interpretations Committee

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