What is 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).

Why was IFRS/PFRS 16 developed?

On 13 January 2016, the International Accounting Standards Board (IASB) finished its long-standing project on
lease accounting and published IFRS 16, Leases, which replaces the current guidance in IAS 17.

Many leases are off balance sheet, thereby making it diffi cult for users to get an
accurate picture of an entitys lease assets and liabilities.
To compare companies that lease assets with those that buy assets.
To estimate the amount of off balance sheet obligations.
Better facilitate capital allocation by enabling better credit and investment
decision-making by both investors and companies.
Applying previous lease accounting requirements, most leasing transactions
were not reported on a companys balance sheet; so these assets and
liabilities were not recognized.
What is a Lease?
IFRS 16 defines a lease as a contract that conveys to the customer (lessee)
the right to use an asset for a period of time in exchange for consideration.