As a CPA board exam candidate in the Philippines, you will encounter questions about Philippine Financial Reporting Standards (PFRS) extensively in both FAR (Financial Accounting and Reporting) and AFAR (Advanced Financial Accounting and Reporting). Understanding how PFRS relates to IFRS is fundamental to your exam preparation and future career as a Certified Public Accountant.
This comprehensive guide will help you understand what PFRS is, how it differs from IFRS, and what you need to focus on for the CPALE.
What is PFRS?
Philippine Financial Reporting Standards (PFRS) are the accounting standards used in the Philippines for preparing and presenting financial statements. PFRS is essentially the Philippine adoption of the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).
The Financial and Sustainability Reporting Standards Council (FSRSC), formerly known as the Financial Reporting Standards Council (FRSC), is the body responsible for adopting and promulgating accounting standards in the Philippines. The FSRSC was created in 2006 by the Board of Accountancy (BOA) under the Professional Regulation Commission (PRC) as part of the implementing rules and regulations of Republic Act 9298, the Philippine Accountancy Act.
The Three Financial Reporting Frameworks in the Philippines
The Philippines has three distinct financial reporting frameworks:
- Philippine Financial Reporting Standards (PFRS) Accounting Standards - For large entities with public accountability
- PFRS for Small and Medium-Sized Entities (PFRS for SMEs) - For entities without public accountability meeting specific thresholds
- PFRS for Small Entities (PFRS for SEs) - For the smallest business entities
The Relationship Between PFRS and IFRS
Here is the key point that confuses many candidates: PFRS is based on IFRS, and as of October 2022, PFRS is fully converged with IFRS.
The Philippine Institute of Certified Public Accountants (PICPA) confirms that the FSRSC has adopted all standards as issued by the IASB, making PFRS fully converged with IFRS. However, this does not mean they are identical in practice.
How PFRS Adoption Works
The FSRSC monitors the technical activities of the IASB and reviews exposure drafts of proposed standards. When the IASB finalizes new or amended standards, the FSRSC evaluates them for adoption as Philippine Financial Reporting Standards. These adopted standards are then submitted to the BOA and PRC for approval.
The Philippine Interpretations Committee (PIC), formed in August 2006, assists the FSRSC by issuing implementation guidance on PFRSs specific to the Philippine context.
Key Differences Between PFRS and IFRS
While PFRS and IFRS are substantially the same in principle, several practical differences exist that CPA candidates must understand:
1. Timing of Adoption
The Philippines frequently introduces IFRS updates one to two years after they become effective internationally. This timing difference affects:
- Lease accounting (PFRS 16)
- Expected credit loss modeling (PFRS 9)
- Financial instrument classification
- Transition treatments for new standards
2. PFRS 17 (Insurance Contracts) Deferral
One of the most significant local adaptations is the deferral of PFRS 17. While IFRS 17 became effective globally on January 1, 2023, the Philippines has taken a different approach:
- December 2021: FSRSC deferred PFRS 17 from January 1, 2023 to January 1, 2025
- February 2025: FSRSC approved a further deferral to January 1, 2027
- MBAs and HMOs: Effective January 1, 2030
This extended timeline provides the Philippine insurance industry more time to prepare for implementation.
3. Segment Reporting Exemptions
Certain Philippine companies may be exempt from segment reporting requirements under PFRS 8, simplifying compliance for smaller organizations that would otherwise need to provide segment disclosures under full IFRS.
4. Financial Instruments Modifications
Specific amendments have been made for financial instruments and insurance companies, offering alternative standards to address local industry practices and regulatory requirements from the Bangko Sentral ng Pilipinas (BSP) and Insurance Commission.
5. Regulatory Alignment
PFRS is the only framework accepted by the Bureau of Internal Revenue (BIR) for statutory books and the computation of taxable income. The Securities and Exchange Commission (SEC) also requires PFRS for statutory financial statements of registered corporations.
PFRS for SMEs: What You Need to Know
For the CPALE, understanding PFRS for SMEs is equally important, as questions may test your knowledge of the differences between full PFRS and the simplified SME framework.
Quantitative Thresholds
Key Simplifications in PFRS for SMEs
PFRS for SMEs includes the following simplifications compared to full PFRS:
- No Segment Information Required (PAS 8 exemption)
- No Earnings Per Share Disclosure (PAS 33 exemption)
- No Interim Financial Reports (PAS 34 exemption)
- Single Statement Option: SMEs may present a combined statement of income and retained earnings instead of separate comprehensive income and changes in equity statements
- No Additional Statement of Financial Position presentation required
Important Note for Exam Candidates
PFRS for SMEs is adopted from IFRS for SMEs without modifications. This means the Philippine version follows the international SME standard exactly, unlike full PFRS which has some local adaptations.
Sustainability Reporting Standards: PFRS S1 and S2
A recent development that may appear in future CPALE examinations is the adoption of sustainability disclosure standards:
- PFRS S1: General requirements for disclosure of sustainability-related financial information
- PFRS S2: Climate-related disclosures
These standards are based on the IFRS Foundation's International Sustainability Standards Board (ISSB) standards. The implementation timeline for SEC-regulated companies is:
CPALE Exam Relevance: What to Focus On
Financial Accounting and Reporting (FAR)
FAR topics heavily test PFRS knowledge in these areas:
- Conceptual Framework: Basic accounting concepts, principles, and qualitative characteristics
- Financial Statements: Structure, presentation, and components under PAS 1
- Assets: Recognition and measurement under various PFRS/PAS standards
- Liabilities: Provisions and contingencies under PAS 37
- Equity: Share capital and reserves
- Revenue Recognition: PFRS 15 principles and application
- Leases: PFRS 16 requirements
- Financial Instruments: PFRS 9 classification and measurement
Advanced Financial Accounting and Reporting (AFAR)
AFAR builds on FAR with more complex topics:
- Business Combinations: PFRS 3 requirements for mergers and acquisitions
- Consolidated Financial Statements: PFRS 10 principles
- Investments in Associates: PAS 28 equity method
- Joint Arrangements: PFRS 11 classification and accounting
- Fair Value Measurement: PFRS 13 hierarchy and techniques
- Foreign Currency Transactions: PAS 21 translation methods
Study Tips for PFRS Success in the CPALE
1. Focus on Current Standards
Always study using the latest PFRS/IFRS updates. The FSRSC website (pfsrsc.org) provides the most current information on adopted standards and their effective dates.
2. Understand the Conceptual Framework
Many CPALE questions test your understanding of underlying principles rather than rote memorization. Master the conceptual framework first, then build your knowledge of specific standards.
3. Know the Differences Between Frameworks
Be prepared to answer questions comparing:
- Full PFRS vs. PFRS for SMEs
- PFRS vs. Philippine tax requirements
- Recognition vs. measurement vs. disclosure requirements
4. Practice with Real Scenarios
The CPALE increasingly tests practical application. Work through case studies and problem sets that require applying PFRS to realistic business situations.
5. Track Recent Amendments
Pay attention to standards with recent amendments or deferrals, such as:
- PFRS 17 Insurance Contracts (deferred to 2027)
- PFRS S1 and S2 Sustainability Standards (new for 2026)
- Any amendments issued within the past two years
6. Allocate Sufficient Study Time
FAR and AFAR are considered the most challenging CPALE subjects. Allocate more study time to these subjects as they serve as foundations for understanding other areas.
Key Takeaways
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PFRS is the Philippine adoption of IFRS, fully converged as of October 2022 but with some timing differences and local adaptations.
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The FSRSC (formerly FRSC) is responsible for adopting and promulgating accounting standards in the Philippines, with the PIC providing implementation guidance.
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Three frameworks exist: Full PFRS, PFRS for SMEs, and PFRS for SEs, each with different requirements based on entity size and public accountability.
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Timing differences are the most practical difference between PFRS and IFRS, with the Philippines typically adopting new standards one to two years after international effective dates.
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For the CPALE, focus on understanding principles over memorization, know the differences between frameworks, and stay current with recent amendments.
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Sources
- IFRS Foundation - Use of IFRS Standards by Jurisdiction: Philippines
- Financial and Sustainability Reporting Standards Council (FSRSC)
- FSRSC - Our Standards
- FSRSC - About the FSRSC
- Grant Thornton Philippines - Navigating Changes to PFRS 2025
- Grant Thornton Philippines - Deferral of PFRS 17
- ASEAN Briefing - PFRS or IFRS for Consolidation in the Philippines
- Deloitte IAS Plus - Financial Reporting Framework in the Philippines
- IFAC - Philippines Member Country Profile
- 1Taker - CPA Board Exam in the Philippines Guide
- Studocu - FAR Syllabus for Philippine CPA Licensure Exam
Last updated: January 2026. Standards information verified against official FSRSC publications.