1. Mutual Recognition Agreement: The Challenges and Opportunities for CPAs 2015 Accountancy Week Celebration Philippine Institute of Certified Public Accountants Estelita C. Aguirre Resource Speaker July 15, 2015

2.  Objectives of ASEAN and AFA  History of ASEAN Integration  MRA Framework  Basic Features of Implementing MRA  Accounting/Auditing Practices in ASEAN Countries  Facts and Figures  Challenges Presentation Outline

3. Association of Southeast Asian Nations (ASEAN)

4. To transform ASEAN into a stable, prosperous and highly competitive region with  Equitable economic development  Reduced poverty and socio-economic disparities Objectives of ASEAN

5. ASEAN Federation of Accountants (AFA)

6.  To provide an umbrella organisation for ASEAN accountants for the further advancement of the status of the profession in the region.  To establish a medium for closer relations, regional cooperation, and assistance among ASEAN accountants AFA Objectives

7. History of ASEAN Integration  9th ASEAN Summit in Bali Indonesia (2003): The declaration of Bali Concord II taking the ASEAN integration to a higher plane by 2020  12 th ASEAN Summit in Cebu (2006) : Accelerated the establishment of integration from 2020 to 2015

8. Roadmap for the ASEAN Community 14 th ASEAN Summit Chan-Am ( 2009 March 1) Declaration on the Roadmap for the ASEAN Community (2009-2015) was signed, including  ASEAN Political-Security Community Blueprint  ASEAN Economic Community Blueprint  ASEAN Socio-Cultural Community Blueprint

9. ASEAN AGREEMENT Roadmap for an ASEAN Community (2009-2015) One vision. One identity. One Community.

10. 1. With a single market and production base 2. A highly competitive economic region 3. A region of equitable development 4. A region fully integrated into the global economy Key Characteristic of AEC

11.  Free flow of goods  Free flow of services  Free flow of skilled labor  Free flow of investment  Freer flow of capital  Harmonized rules and regulations Core Vision of AEC

12. . Free Flow of Professional Services via MRA.

13. ASEAN MRA is a multilateral arrangement among ASEAN countries or bilateral arrangement between two ASEAN countries to enable professionals registered in its signatory countries to be equally recognized in another signatory country ASEAN MRA

14. ASEAN MRAs for Professionals Engineering ServicesDec 2005 Nursing ServicesDec 2006 ArchitectureNov 2007 Medicine Feb 2009 Dentistry Feb 2009 Tourism ServicesNov 2012 Accountancy ServicesNov 2014

15. MRA Framework on Accountancy Signed in Chan-Am Thailand  Education  Licenses  Demonstration of Competency  Experience  Compliance with IFAC Standards and Guidelines Feb 26, 2009

16. Education The AMS agree that a PPA of an AMS who seeks recognition in another AMS should have met the educational requirements in effect in the Country of Origin. Such individual's educational credentials may be accepted as having satisfied the educational requirements of the Host Country's NAB and/or PRA.

17. Licenses Where licenses are required from governmental or regulatory bodies other than the NAB and/or PRA of each AMS, the AMS shall, subject to their Domestic Regulations, use their best endeavours to facilitate the PPA of the other AMS to obtain the necessary approval.

18. Competencies The AMS recognizes the need to require the PPA seeking recognition to demonstrate competencies to assure that the PPA has satisfactory knowledge of the Domestic Regulations of the Host Country.

19. Experience A PPA seeking recognition shall meet the experience requirements specified by the Host Country.

20. IFAC Standards and Guidelines The professional competencies and qualifications threshold for the practice of accountancy in ASEAN Member States shall be established, maintained and upheld according to the IFAC standards taking into consideration the Domestic Regulations of each ASEAN Member State.

21. Building Blocks of SMOs (Statements of Membership Obligations)

22. Implementing MRA on Accountancy Services Signed in Bali Indonesia by Brunei, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Singapore, Thailand, Vietnam and Philippines November 2015.

23. Basic Features of the Implementing MRA (1)Limited flow of accountancy services. MRA excludes external audit and other services that require domestic licensing (2)Creation of Monitoring Councils (3)Creation of ACPACC (4) Recognition of ASEAN Chartered Professional Accountants (ACPA) (5) Setting up of an ACPAR (6) Acceptance of a Recognized Foreign Professional Accountant (RFPA) by the host country

24. 1 st Basic Feature of MRA Limited flow of accountancy services: MRA Article 3 excludes external audit and other services that require domestic licensing.

25. Article 3 Scope 3.1This Arrangement shall cover the provision of accountancy services covered under Central Product Classification (hereinafter referred to as “CPC”) 862 of the Provisional CPC of the United Nations, except for signing off of the independent auditor’s report and other accountancy services that requires domestic licensing in ASEAN Member States.

26. Article 3 Scope 3.2Notwithstanding paragraph 1, cross-border movement of Professional Accountants providing external auditing services and other accountancy-related services that requires domestic licensing in ASEAN Member States may continue to be facilitated through bilateral and/ or multilateral MRAs between or among the Member States.

27. 2 nd Basic Feature of MRA Creation of a Monitoring Council (MC) in each Member State

28. Monitoring Committee (MC)  Participating AMS must establish a national MC  MC members are national stakeholders relevant to the MRA  Functions include developing and maintaining ACPA application assessment process, and authorised to certify the qualification and experience of individual professional accountants

29. 3 rd Basic Features of MRA Creation of ASEAN Chartered Professional Accountants Coordinating Committee (ACPACC)

30. ACPACC  At least one appointed representative from each MC will compose the ACPACC  Functions include authority to confer ACPA title and promoting the acceptance of ACPA.  Report progress of work to ASEAN Coordinating Committee on Services (CCS)

31. 4 th Basic Feature MRA Recognition of ASEAN Chartered Professional Accountants (ACPAs)

32. ACPA ASEAN Chartered Professional Accountant (ACPA) refers to a natural person who is a national of an ASEAN Member State and is assessed by the NAB and/or PRA of any participating ASEAN Member States as being technically, morally, and legally qualified to undertake professional accountancy practice.

33. Qualifications of an ACPA Accredited accountancy degree/professional accountancy examination program NAB/PRA certification no record of serious violation on technical, professional or ethical standards for accountancy practice Comply with Continuing Professional Development (CPD) policy of the CO Valid professional registration certificate in the Country of Origin (CO) by NAB/PRA 3 years or more of relevant post qualifying practical experience within a 5 year period

34. 5 th Basic Features of MRA Setting up of an ASEAN Chartered Professional Accountants Register (ACPAR)

35. ACPAR The ASEAN Chartered Professional Accountant Register is where all ACPA are emplaced upon acceptance of the application by the ACPACC and payment of the necessary fees.

36. 6 th Basic Features of MRA (6) Acceptance of a Recognized Foreign Professional Accountant (RFPA) by the host country through NAB/PRB

37. NAB and/or PRA

38. Country of Origin

39. Host Country

40. RFPA A Registered Foreign Professional Accountant (RFPA) refers to an ACPA who has successfully applied to and is authorized by the NAB and/or PRA of a Host Country to work, not in independent practice, but in collaboration with one or more Professional Accountant of the Host Country.

41. Process to Become an ACPA & RFPA MC assesses the professional accountant in accordance with NAB/PRB rules and submit to ACPACC Successful candidates to pay ACPA subscription fees to be listed on the ACPAR ACPACC receives and evaluates application if applicant has complied fully with the requirements ACPA submits application to NAB/ PRA (host country) to become an RFPA..... NAB/PRA approves application after assessment of ACPA to be permitted to work as RFPA

42. Responsibility of NAB and/or PRA  Consider application and authorize ACPA to apply as Registered Foreign Professional Accountants (RFPA)  Monitor and assess the professional practice of the RFPA

43. Accounting and Auditing Practices AFA and World Bank Findings Source: World Bank and AFA Report on Current Status of the Accounting and Auditing Profession in ASEAN Countries Sept 2014 Practices in the ASEAN

44. 1. Recognition of Foreign Certifications 2. Accounting Education 3. Professional Examination 4. Relevant Practical experience 5. CPD Units 6. Independence and Ethics 7. Accounting Standard Setting 8. Financial Reporting Standards 9. Auditing Standard Setting 10. Quality Assurance and Oversight Current Status of Profession

45. Brunei- CPA Australia, ACCA, CCANZ, ICAEW, ICAI Cambodia- CPA Australia, ACCA, MIA, PICPA, ISCA Indonesia-MIA Laos – recognize foreign certification subject to test MalaysiaACCA/ICAEW/CIMA/ICAScotland/ICAIreland, CAANZ,ICAIndia, CanadaICA,CPA Australia Myanmar - None Philippines - None Singapore- CPA Australia, ACCA, ICAEW w/pathway Thailand -None Vietnam – ACCA forVAA ; CPA Australia for VACPA 1.Recognizes Foreign Certifications

46. Brunei – NA as long as members of ACCA,ICAEW, etc Cambodia –Not clear Indonesia – required Laos – Syllabus to be reviewed to enable certification Malaysia – required Myanmar – required Philippines - required Singapore – required Thailand – required Vietnam – required 2. University Accounting Education

47. Brunei – NA Cambodia –Not clear Indonesia – Yes, IAI and IAPI Laos – Yes, by LICPA and MoF Malaysia – MIA:No Exams for recognised degree; For unrecognised degree – Yes ; for MICPA -Yes Myanmar – Yes Philippines –Yes, by the BOA Singapore – Yes, by ISCA, if no accredited degree Thailand – Yes, by FAP Vietnam – Yes, by the MoF 3. Professional Examination

48. Brunei – 3 years Cambodia –3 years Indonesia – 3 years Laos – 3 years Malaysia - 3 years Myanmar - 2 years Philippines – 3 years for public practice only Singapore – 3 years post/5-yrs pre-post qualification Thailand – 3 years Vietnam – 5 years 4. Relevant Practical Experience

49. Brunei –Per British Commonwealth PAO’s requirements Cambodia - 40 hours per one year Indonesia – 120 hours per 3 years Laos – 120 hours per 3 years Malaysia – 120 hours per 3 years Myanmar – 120 hours per 3 years Philippines –60 hours per 3 years Singapore – 120 hours per 3 years Thailand – 18 hours per 1 year Vietnam – 40 hours per 1 year 5. CPD Units

50. Brunei – IFAC Code of ethics (CoE) Cambodia – KICPAA CoE Indonesia – Various rotation rules/various cooling periods Laos – LICPA CoE based IFAC CoE Malaysia – MIA based on IFAC’s CoE Myanmar - MAC law in line with IFAC’s CoE Philippines – Code of Ethics based on 2010 IFAC’s CoE Singapore – ISCA’s is based on IFAC’s CoE Thailand – Code of Ethics based on 2012 IFAC’s CoE Vietnam – Code of Ethicsbased on IFAC’s CoE 6.a Independence & Ethics

51. Brunei – adopted IFAC Code of Ethics for Banks Cambodia – no mention in CoE; SECC/NBC sets 3 years Indonesia – All audits: Partner - 3 yrs; Audit firm- 6 yrs Laos – Not stated in any legislation Malaysia –Audit partners – 5 years; no firm rotation Myanmar – no information Philippines – Audit partners –5 yrs for listed Cos Singapore – listed Cos/Banks -5yrs/KAPs forPIEs -7 yrs Thailand – Audit partners – 5 yrs for PIEs Vietnam – No information 6.b Rotation

52. Brunei – No information Cambodia – NBC – silent; SECC – 3 years Indonesia – All audits – 1 yr; listed Cos- 3 yrs Laos – Not stated in any legislation Malaysia -Audit partners -2 yrs, bank’s audit partner-5yrs Myanmar – No information Philippines – Audit Partners – 2 yrs Singapore – listed Cos/KAPs for PIEs/other audits – 2 yrs Thailand – Audit Partners for PIEs – 2 yrs Vietnam – No information 6.c Cooling Period

53. Brunei – Brunei D. Accounting Standard Council Cambodia – National Accounting Council Indonesia – IAI Financial Accounting Standards Board Laos – Accounting Dept of the MoF Malaysia – Malaysian Accounting Standards Board Myanmar – MAC Philippines–Phil Financial Reporting Standards Council Singapore –Accounting Standards Council Thailand – Thai Acctg Standards Setting Committee Vietnam – Ministry of Finance 7. Accounting Standard Setting

54. Brunei – IFRS for PIEs since 2014 Cambodia – CIFRS for listed, insurance since 2012 Indonesia –IFAS based on 2009 IFRS, excl IAS 1,41,15 Laos - IFRS for listed Cos starts 2017 Malaysia –MFRS for listed Cos, banks,insurance Myanmar –MFRS for public Cos, financial institutions Philippines – PFRS large/publicly accountable entities Singapore – SFRS for Cos Thailand – TFRS based on 2013 IFRS for PAEs Vietnam – VAS developed based on IFRS 8.a. IFRS

55. Brunei – Brunei GAAP for Non-PIEs Cambodia – CFRS for SMEs beginning 2010 Indonesia –SAK-ETAP for Non-PIEs Laos – LFRS for SMEs beginning 2017 Malaysia – M’sian Private Entity Reporting Standards Myanmar – MFRS for SMEs adopted Philippines – PFRs for SMEs beginning 2010 Singapore –SFRS for qualifying SMEs Thailand - TFRS for SMEs to start in 2017 Vietnam – IFRS for SMEs not adopted yet 8.b. IFRS for SMEs

56. Brunei – No legally required auditing standards; Cambodia – CISA which is the same as ISA Indonesia –SPAP which is fully consistent with ISA Laos – would promulgate in line with ISA Malaysia- ISA adopted as MASA Myanmar –ISA adopted as MSA Philippines – ISA adopted as PAS Singapore – ISA adopted as SSA Thailand –ISA translated into Thai with no modification Vietnam –VSA closely aligned with ISA 9. Auditing Standard Setting

57. Brunei – PAOC/planned for 2014 Cambodia –QCC of KICPAA/adopted ISQC in 2010 Indonesia- PPJAP of Supreme Audit Board Lao PDR – MoF in-charge of QAR Malaysia –MIA Practice Review Program for Non-PIEs auditors; Audit Oversight Board for PIEs auditors Myanmar - Compliance Review Committee Philippines – BOA; with court injunction deferring QAR Singapore- ACRA for PIEs/ISCA for non-PIEs Thailand – SEC for listed/FAP for non-listed Vietnam – A Dept of MOF implements QAR 10. Oversight /Quality Assurance

58. Are we ready for it?

59. What are the realities? ASEAN today is 10 very different countries at very different stages of development:  High Income economies – Singapore & Brunei  Upper Middle Income economies – Malaysia, Thailand and Indonesia  Lower Middle Income economies – Philippines, Vietnam,Laos and Cambodia  Low Income economy - Myanmar

60. Starting Business in ASEAN 2014

61. Starting Business in ASEAN 2015

62. Doing Business in ASEAN 2014

63. Doing Business in ASEAN 2015

64. Realities in Starting a Business 2014 It takes an average of:.  3 procedures & 2 & 1/2 days - Singapore  3 procedures & 6 days - Malaysia  4 procedures & 17 & 1/2days Thailand  10 procedures & 34 days – Vietnam  15 procedures & 35 days - Philippines  10 procedures & 48 days - Indonesia  6 procedures & 92 days - Laos From the Speech of Dato Timothy Ong June 6, 2014 in AIM Manila

65. Global Competitiveness Market 2014-2015 (144 Economies) Singapore2 Malaysia20 Thailand31 Indonesia34 Philippines52 Vietnam 68 Lao PDR93 Cambodia95 Myanmar134 BruneiData Not Available Source: World Economic Forum

66. Wobbly start. Wobbly still? “In September 2004, Statistically Speaking featured the article, “The ASEAN – Where Do We Stand? Or Wobble?”. It reported that the Philippines was somewhere in the middle among the 10 ASEAN countries for most indicators – “about kulelat among the original ASEAN members (Indonesia, Philippines Thailand, Malaysia, and Singapore but still generally ahead of the Plus Five (Myanmar, Brunei, Lao PDR Cambodia and Vietnam).” The said article promised that, “six years from now, we will find out if we could walk straight or if our feet continued to wobble and our minds had started to boggle.” Borrowed from Dr. Ben Diokno’s ppt presentation

67. Wobblier after 8 years In 2012, after 8 years, Dr. Romulo A. Virola, the former Secretary-General of the National Statistical Coordination Board wrote: “Statistics show that there are more bad news than good news! Eight years ago, we wrote how wobbly we were compared to our ASEAN neighbors. Sadly, based on the statistics presented, the Philippines appears to be even more wobbly.” Note: 2014 FDI figure for Phil is very encouraging Borrowed from Dr. Ben Diokno’s ppt presentation

68. Foreign Direct Investments Trend

69. Foreign Direct Investment Source: ASEAN Foreign Direct Investment Database as of 26 May, 2015 SingaporeIndonesiaThailandMalaysiaVietnam Philippine 201260,98019,13810,6999,4008,3682,797 201356,13818,44312,99912,2978,9003,859 2014 72,098 22,27611,53810,7149,2006,200 Share53%16.4%8.5%7.9%6.8%4.6%

70. Foreign Direct Investment Source: ASEAN Foreign Direct Investment Database as of 26 May, 2015 Philippines Cambodia MyanmarLaos PDRBrunei 20122,79715571,354294865 20133,8591,2742,621427726 20146,2001,726946913568 Share4.6%1.3%0.7% 0.4%

71. Per Capita GDP Purchasing Power Parity Source: All figures are from IMF 2014 published in April 2015 Country Rank in the WorldRank in ASEANGDP (Per Capita) Indonesia 102 4 $ 10,641 Thailand 82 3 $14,354 Malaysia 51 2 $24,654 Singapore 31 $82,762 Philippines 119 5 $ 6,962 Vietnam 126 6 $ 5,635

72. The Challenges...

73. Challenges for ASEAN  Implementation of MRAs  Harmonization of qualifications of professionals through AQRF  Commitment to achieve the free flow of trade in services by 2015 as outlined in the AEC Blueprint.  Need to enhance its effort on services facilitation and cooperation activities, to complement the liberalization efforts.

74. Challenges for AFA  Providing assistance to ASEAN member bodies on capacity building of accountants through exchange of knowledge and best practices  Coordinate with each member bodies to update the information contained in (1) The AFA’s Easy Guide to Setting up Accountancy Practices in ASEAN Countries; and (2) The 2014 AFA – World Bank Report on Accountancy and Auditing Practices in ASEAN

75.  Accelerating compliance with IFAC SMOs  Providing quality CPD seminars and workshops for accountants  Bringing back the public confidence in the audited financial statements through effective implementation of QAR  Advocacy to push reforms in respective government to improve the ranking in doing business Challenges for AFA Members

76. Challenges for AFA Member-Bodies Compliance with IFAC SMOs (as of Oct 6, 2014) Brunei Darussalam – BICPASep 2012 Cambodia – KICPAANov 2012 Indonesia – IAIMay 2013 Laos – LICPAIn Progress Malaysia – MIA & MICPANov 2012 Myanmar – MICPAIn Progress Philippines – PICPASep 2012 Singapore – ISCAJuly 2012 Thailand – FAPFeb 2013 Vietnam – VAANov 2012

77. Member BodiesRegular ProvisionalJuniorStudent Corporate/Total NodiesMembers Firms BICPA49 9 58 IAI17920 3703 10921732 KICPAA155 20 34 49258 LICPA176 MIA30,994 MICPA595 PICPA22,072 22072 ISCA28069 FAP64635 VAA8,000 TOAL173465 29370334 158177389 Membership of Member Bodies As of October 1,2014

78. Membership of AFA Member Bodies As of October 1, 2014

79.  Harmonizing and streamlining of processes and procedures  Improving of standing in the World Bank Survey in starting and doing business in the country  Improving standing in FDI Confidence Index  For BOA - operationalizing the Monitoring Council and providing guidance in raising the bar for Filipino CPAs to become globally competitive Challenges for Government

80.  Proper implementation of the international accounting standards  Effective implementation of the International Auditing Standards in the conduct of audit  Compliance with CPD, using the PICPA CPD Competency Framework based on IEAS  Production of credible and reliable FSs  Levelling up to become globally competititve Challenges for Accountants

81. ait.ecaguirre@gmail.com End of Presentation