Financial Accounting & Reporting
15.6%of exam
PAS 2 & PAS 16 RulesPFRS 9 & PFRS 16 LeasesPAS 37 & Diluted EPSStandards Hierarchy
Advanced Financial Accounting & Reporting
15.6%of exam
Partnerships & LiquidationPFRS 3 & ConsolidationPFRS 15 & PAS 21Process Costing & GAM
Management Services
15.6%of exam
CVP & Operating LeverageAbsorption vs Variable CostingStandard Costing VariancesCapital Budgeting & DuPont
Auditing
15.6%of exam
Audit Risk & Internal ControlEvidence & Audit SamplingModified Audit OpinionsEthical Threat Categories
Taxation
15.6%of exam
Individual & Corporate Income TaxVAT, EOPT & InvoicingEstate & Donor's TaxesCMEPA & BIR Prescriptive Periods
Regulatory Framework for Business Transactions
22.2%of exam
Obligations & Defective ContractsRevised Corporation Code VotesAMLA, PDIC & BP 22FRIA, Data Privacy & SRC
Quick Facts
- Exam
- Philippine CPALE
- Board
- PRC Board of Accountancy
- Statute
- RA 9298 Accountancy Act
- Questions
- 450 MCQs across 6 subjects
- Schedule
- 18 hours over 3 days
- Pass requirement
- 75% average; every subject ≥65%
- Conditional credit
- ≥75% in majority; remaining-subject rules
- Refresher
- 24 units after two complete failures
PFRS 9 Debt FVOCI vs Equity FVOCI
Debt FVOCI
- SPPI plus collect-and-sell model
- Subject to ECL impairment model
- Recycles cumulative OCI on disposal
Equity FVOCI Election
- Eligible non-trading equity; initial irrevocable election
- No impairment testing in P&L
- Never recycles OCI to P&L
Recycles to P&L vs never recycles
PFRS 9 Financial Asset Classifier
- Debt passes SPPI, hold-to-collect→Measure at Amortised Cost
- Debt passes SPPI, collect-and-sell→Debt FVOCI with recycling
- Debt fails SPPI test→Measure at FVTPL
- Equity held for trading→Measure at FVTPL
- Non-trading equity, OCI elected→FVOCI without P&L recycling
PAS 2, PAS 16 & Standards
- FSRSC Role
- Adopts IFRS as Philippine PFRS
- PAS 8 Hierarchy
- Similar standards first, then Framework
- PAS 2 Inventory
- Lower of cost and NRV
- NRV Recovery
- Reverse up to original write-down
- PAS 16 Revaluation Gain
- Credit OCI, unless reversing loss
PFRS 9, PFRS 16, PAS 37 & 33
- Amortised Cost Debt
- SPPI plus hold-to-collect business modelFair-value designation exceptions still apply
- Equity FVOCI Election
- Irrevocable, no recycling to P&LEligible non-trading equity; initial election
- Short-term lease exemption
- ≤12 months; no purchase optionPFRS 16; election conditions apply
- PAS 37 Provision
- Present obligation, probable, reliable estimate
- PAS 33 Dilution Control
- Continuing operations EPS governs dilution
- Low-value lease exemption
- Assess underlying asset value when new
Downstream vs Upstream Inventory Sale
Downstream (Parent to Sub)
- Seller is the parent entity
- 100% unrealised profit hits parent
- NCI share is unaffected
Upstream (Sub to Parent)
- Seller is the subsidiary entity
- Unrealised profit reduces sub income
- Split adjustment between parent, NCI
Parent-only vs shared with NCI
Partnerships, Liquidation & PFRS 3
- Loss Absorption Capacity
- Net capital interest over loss share
- Statement of Affairs
- Secured, priority, and unsecured claims
- PFRS 3 goodwill
- Consideration plus NCI plus prior interestSubtract identifiable net assets; measurement rules
- Bargain Purchase Gain
- Reassess first, then credit P&L
- Upstream Inventory Sale
- Share unrealised profit with NCI
PFRS 15, PAS 21, Process & GAM
- PFRS 15 Cost-to-Cost
- Exclude abnormal waste from progress
- Foreign-operation translation
- Closing-rate assets/liabilities; differences generally OCIFunctional currency and exceptions matter
- Weighted Average EUP
- Completed plus ending WIP work
- FIFO EUP
- Current period work only
- Regular NCA Receipt
- Dr Cash-MDS, Cr Subsidy NG
Absorption Costing vs Variable Costing
Absorption Costing
- Fixed factory overhead in inventory
- Required for external PFRS reporting
- Higher profit when production > sales
Variable Costing
- Fixed factory overhead expensed immediately
- Used for internal CVP decisions
- Higher profit when sales > production
Same fixed-overhead rate; other differences excluded
CVP, Leverage & Costing
- Break-Even Units
- Fixed costs divided by unit CM
- After-tax target to pretax target
- Divide by one minus tax rateApplicable tax model; rate below one
- Degree of operating leverage
- Contribution margin divided by EBITNonzero EBIT; consistent linear CVP
- Costing profit reconciliation
- Inventory change times fixed overhead rateSame rates; other differences excluded
- Sunk Cost
- Historical cost, irrelevant to decisions
- DOL and margin of safety
- Reciprocals under consistent linear CVP
Variances, Capital Budgeting & Ratios
- Materials price-variance price gap
- Actual price minus standard priceMultiply by applicable actual quantity
- Labour efficiency-variance hours gap
- Actual hours minus standard hours allowedMultiply by standard rate; actual output
- EOQ Formula
- Square root of 2DS over H
- Net present value
- Discounted inflows minus discounted outflows
- DuPont ROE
- Net margin, turnover, equity multiplier
COSO Five Internal Control Components
CRIME: environment, risk, information, monitoring, control activities
C: Control environmentR: Risk assessmentI: Information & communicationM: MonitoringE: Existing control activities (mnemonic)
PSA Modified Audit Opinion Picker
- Material misstatement, not pervasive→Qualified opinion(Except-for wording)
- Material and pervasive misstatement→Adverse opinion
- Material evidence limit, not pervasive→Qualified opinion(Possible effects)
- Potentially material, pervasive evidence limitation→Disclaimer of opinion
- Most significant communicated audit matters→Consider applicable PSA 701 KAM reporting(Never replaces a modified opinion)
PSA Risk, Control & Evidence
- PSA 200 Assurance
- High reasonable assurance, never absolute
- Detection Risk
- Inversely related to assessed RMMFor fixed acceptable audit risk
- COSO Five Components
- Environment, risk, info, activities, monitoring
- Independent external evidence
- Often stronger; assess authenticity and context
- PSA 701 KAM
- Never substitutes for modified opinion
Five Code of Ethics Threats
FASSI: Familiarity, Advocacy, Self-interest, Self-review, Intimidation threats
F: Familiarity threatA: Advocacy threatS: Self-interest threatS: Self-review threatI: Intimidation threat
Audit Opinions, Sampling & Ethics
- Qualified Opinion
- Material but non-pervasive issue
- Adverse Opinion
- Material and pervasive misstatement
- Disclaimer of Opinion
- Missing evidence; potentially material pervasive effects
- Incorrect Acceptance
- Sampling risk threatening audit effectiveness
- Five Ethical Threats
- Self-interest, self-review, advocacy, familiarity, intimidation
Zero-Rated VAT vs VAT-Exempt Sale
Zero-Rated Sale
- Taxable transaction at 0% output
- Credits and refunds require statutory conditions
- Counts toward VAT registration threshold
VAT-Exempt Sale
- Not subject to output VAT
- No input VAT credit allowed
- Attributable input VAT becomes cost
Input credit right vs none
Philippine Tax Rate & Period Picker
- Eligible pure-business taxpayer elects 8%→Apply statutory base and threshold(Mixed-income deduction differs)
- Testing small domestic-corporation 20% rate→Check both income and asset ceilings(Specified land excluded; incentives separately governed)
- Regular assessment, timely return→3-year BIR assessment window(Section 203)
- Willfully false, fraudulent, or unfiled return→Assess applicable ten-year discovery rule(Section 222; evidence and exceptions matter)
- Services input VAT after EOPT→Require valid VAT invoice
Individual & Corporate Income Tax
- 8% income-tax election
- Eligible non-VAT business; threshold rules apply
- Mixed-income 8% base
- No additional PHP 250,000 deduction
- Regular corporate income tax
- Generally 25%; special statutory rates differ
- Small domestic-corporation 20% rate
- Both taxable-income and asset tests apply
- Current MCIT rate
- 2% statutory gross incomeCompare with applicable regular income tax
- 20% taxable-income ceiling (PHP)
- 5 million; qualifying domestic corporation
- 20% asset ceiling (PHP)
- 100 million; qualifying land excluded
- MCIT starting year
- Fourth taxable year after commencement year
- 8% ceiling (PHP)
- 3 million; include non-operating income
- Pure-business 8% base
- Eligible excess above PHP 250,000
NIRC Sec 203 vs Sec 222 Assessment
Sec 203 Ordinary Rule
- 3 years from deadline or filing
- Applies to regular honest returns
- Whichever date comes later governs
Sec 222 Extraordinary Rule
- 10 years from discovery date
- Willful falsity; innocent errors alone insufficient
- Also covers failure to file
3 years filing vs 10 discovery
VAT, Transfer Tax, CMEPA & Remedies
- General VAT sales threshold
- PHP 3 million; statutory exceptions applyCheck current CPI adjustments and registration
- EOPT VAT Document
- VAT invoice substantiates goods, services
- Resident-decedent estate tax
- 6% net taxable estatePHP 5 million standard deduction
- Donor-tax annual exemption
- PHP 250,000; qualifying statutory exclusions differ
- Resident-individual deposit interest
- Generally 20%; transitional exemptions may applyCMEPA; verify income and taxpayer scope
- CMEPA transitional instruments
- Pre-July-2025 instruments can retain prior treatmentConditions and unchanged terms govern
- Qualifying resident-decedent family home
- Deduction capped at PHP 10 million
- Annual donor-tax computation
- 6% above PHP 250,000 net gifts
Art 1231 Extinguishment of Obligations
PaLoCoCoCoNo: Payment, Loss, Condonation, Confusion, Compensation, Novation
Pa: Payment or performanceLo: Loss of thing dueCo: Condonation or remissionCo: Confusion or mergerCo: CompensationNo: Novation
Voidable vs Void Contracts
Voidable Contract
- Incapacity or vitiated consent
- Valid and binding until annulled
- Can be cured by ratification
Void/Inexistent Contract
- Unlawful object or absolute simulation
- Cannot create enforceable contractual obligation
- Nullity action does not prescribe
Ratification depends on the defect class
RFBT Votes & Statutory Threshold Picker
- Dissolution does not prejudice creditors→Board majority + majority stock(RCC Sec 134)
- Dissolution may prejudice creditors→Board majority + 2/3 stock(RCC Sec 135)
- Delegate by-law amendment power→2/3 outstanding capital stock(Majority revokes)
- Single casino cash transaction→Report amounts above PHP 5 million(AMLA threshold)
- BP 22 notice received→Assess five-banking-day payment opportunity(All statutory elements still required)
Civil Code & Revised Corporation Code
- Art 1231 Extinguishment
- Payment, loss, condonation, confusion, compensation, novation
- Defective Contracts
- Rescissible, voidable, unenforceable, void
- One Person Corporation
- Natural person, trust, or estate
- Stock-corporation by-law amendment
- Board majority plus outstanding-stock majority
- Prejudicial Dissolution
- Board majority plus 2/3 stock
Four Defective Contract Classes
RVUV: Rescissible, Voidable, Unenforceable, Void or inexistent contracts
Rescissible: specified prejudice and statutory remedyVoidable: incapacity or vitiated consentUnenforceable: statutory grounds; ratification possibleVoid: unlawful object; absolute simulation
AMLA, PDIC, BP 22, DPA & FRIA
- Covered-bank cash threshold
- >PHP 500,000 in one banking day
- Covered real-estate developers and brokers
- Cash above PHP 7.5 millionSingle transaction; AMLA scope applies
- PDIC maximum deposit insurance
- PHP 1 million per depositor/bankBank closure from 15 March 2025
- BP 22 Notice Cure
- Pay within 5 banking days
- DPA Core Principles
- Transparency, legitimate purpose, proportionality
Common Traps
Mixed-Income 8% Tax Option Trap
Eligible pure-business base excludes PHP 250,000 ≠ Mixed-income base has no extra deduction
EOPT VAT Substantiation Trap
VAT Invoice substantiates service input ≠ Official Receipt is supplementary only
PDIC Deposit Insurance Trap
PHP 1 million: post-effective-date bank closures ≠ Earlier closures retain applicable earlier limits
PAS 33 Antidilution Control Trap
Continuing operations EPS tests dilution ≠ Bottom-line net income does not
COA Government NCA Entry Trap
NCA receipt credits Subsidy NG ≠ Receiving NCA is not expense
PSA 701 Key Audit Matters Trap
KAM highlights most significant audit matters ≠ KAM never replaces modified opinion
Last Minute
- 1.Pass: average ≥75%, every subject ≥65%
- 2.Six-subject majority requires at least four
- 3.Two complete failures: 24 refresher units
- 4.PAS 2 reversals cannot exceed write-down
- 5.PFRS 9 equity FVOCI never recycles
- 6.Upstream inventory profit affects NCI share
- 7.DOL needs nonzero operating profit
- 8.Independent evidence still needs reliability assessment
- 9.Small-corporation 20% requires both statutory tests
- 10.Resident-estate standard deduction: PHP 5 million
- 11.MCIT year: commencement year plus four
- 12.PDIC limit: per depositor, per bank