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2010 Accounting Alert - PFRS For SMEs
2010 Accounting Alert - PFRS For SMEs
page 2
Accounting Alert
Philippine Financial Reporting Standard
for Small and Medium-sized Entities
ISBN 978-971-93586-4-0
Recommended entry:
Punongbayan & Araullo
Accounting Alert
Philippine Financial Reporting Standard for Small and Medium-sized Entities
by Punongbayan & AraulloFirst EditionMakati City
Copyright 2010 by Punongbayan & Araullo
Contents
Pages
A.
Introduction
B.
C.
D.
E.
F.
How does the PFRS for SMEs diverge from the full PFRS?
G.
Topics omitted
Differences in specific areas of recognition and
measurement guidance
Summary of main areas of differences in recognition
and measurement guidance
H.
How does the PFRS for SMEs differ from PAS 101?
18
I.
21
J.
21
K.
23
L.
25
Potential benefits
Challenges of adopting the PFRS for SMEs
Potential areas of impact
28
Appendices
29
November 2010
A.
Introduction
B.
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C.
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D.
E.
As a simplification in comparison to
full PFRS, where the only changes
to equity during the periods for
which financial statements are
presented arise from profit or loss,
payment of dividends, corrections
of prior period errors, and changes
in accounting policy, the entity may
present a single statement of
income and retained earnings in
place of a separate statement of
comprehensive income and a
statement of changes in equity.
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F.
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G.
Numbered by standard
Organized by topic
(e.g., inventories)
Anticipated to be
updated on a threeyearly basis
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Topics omitted
The PFRS for SMEs also omits a
number of topics found in the full
PFRS that are not considered
relevant to the needs of small and
medium-sized entities. Topics
omitted from the PFRS for SMEs
are:
Segment reporting
Interim reporting
Earnings per share
Insurance
Assets held for sale
Differences in specific areas of
recognition and measurement
guidance
The following paragraphs set out
some particular areas of interest,
where the requirements in the PFRS
for SMEs diverge from those of the
full PFRS. The issues listed are by
no means exhaustive, and reference
should be made to the text of the
standard itself for a proper
understanding of all the potential
differences that may arise.
Financial instruments
(Sections 11 and 12)
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In
vestments in associa
tes
Inv
associates
(Section 14)
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In
vestment pr
oper
ty
Inv
proper
operty
(Section 16)
Pr
oper
ty
Proper
operty
ty,, plant and equipment
(Section 17)
Initial measurement
Under full PFRS, PAS 38, Intangible
Assets, allows the recognition of an
intangible asset from development
(or from the development phase of
an internal project) when certain
conditions are complied with.
The PFRS for SMEs, on the other
hand, requires an entity to recognize
an expenditure incurred internally
on an intangible item, including all
expenditures for both research and
development activities, as an
expense when it is incurred, unless
it forms part of the cost of another
asset that meets the recognition
criteria under the PFRS for SMEs.
Business combina
tions and
combinations
good
will (Section 19)
oodwill
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Impairment of goodwill
(Section 27)
In testing for impairment of
goodwill (in cases where there is an
indicator of impairment), the PFRS
for SMEs requires that where
goodwill cannot be allocated to
individual cash-generating units (or
groups of cash-generating units) on
a non-arbitrary basis, then for the
purpose of testing goodwill, a
reporting entity tests impairment by
determining the recoverable amount
of either:
a. the acquired entity in its
entirety, if the goodwill relates
to an acquired entity that has
not been integrated
(integrated means the acquired
business has been restructured
or dissolved into the reporting
entity or other subsidiaries), or
b. the entire group of entities,
excluding any entities that
have not been integrated, if
the goodwill relates to an
entity that has been integrated
This treatment allows goodwill to
be allocated and tested for
impairment at a higher level than
that required by full PFRS under
PAS 36 where goodwill is allocated
to the lowest level within the entity
at which the goodwill is associated
and monitored for internal
management purposes.
Bor
Borrr owing costs (Section 25)
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Summar
Summaryy of main areas of differences in recognition and measurement guidance
The following table summarizes some of the main simplifications made in the PFRS for SMEs, as well as some
examples of options available under full PFRS that are not included in the PFRS for SMEs:
Subject
Full PFRS
Basic financial
instruments
Other financial
instruments issues
Investments in joint
ventures (in consolidated
FS or in FS of investor
that is not a parent)
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Alert:
Subject
Full PFRS
Investment property
Business combinations
and goodwill
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Subject
Borrowing costs
Full PFRS
Borrowing costs directly attributable
to acquisition, construction or
production of a qualifying asset are
capitalized.
Post-employment
defined benefit plans
Income tax
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H.
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Valuation of inventories
The last-in, first-out (LIFO)
method was allowed as an
alternative valuation for
inventories of NPAEs.
The PFRS for SMEs does not
include the LIFO method as
an alternative inventory
valuation method.
Financial assets The
terminologies, recognition and
measurement principles,
presentation and disclosures
of financial assets allowed for
NPAEs are very different
from those required under the
PFRS for SMEs. Financial
assets of NPAEs were
categorized as either
marketable securities (current)
that were measured at the
lower of cost or market with
the unrealized losses
recognized in profit or loss; or
marketable securities (noncurrent) that were measured at
the lower of cost or market
with the unrealized losses
taken into the equity section
of the balance sheet and other
long-term investments that
were accounted for under the
equity method or the cost
method. Disclosures required
were minimum and not
detailed.
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Alert:
Consolidated financial
statements Minority
interests were presented in the
consolidated financial
statements of an NPAE
between the liability section
and the equity section of the
balance sheet.
Investments in associates
Investments in associates were
required to be accounted for
under the equity method in
consolidated financial
statements of an NPAE.
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I.
c. service concession
arrangements
J.
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Alert:
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K.
e. Presentation and
Disclosure Checklist
summarizes the presentation
and disclosure requirements
throughout the PFRS for
SMEs
d. Illustrative Financial
Statements includes a
complete set of illustrative
financial statements prepared
in accordance with the PFRS
for SMEs to illustrate major
aspects of the standard
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Alert:
L.
The introduction of an
international approach to the
accounting for entities in this sector
should bring credibility to their
financial statements as banks and
other financial institutions take
comfort in the fact that an
internationally recognized set of
standards is being applied by these
smaller entities.
Potential benefits
Potential benefits of adopting the
PFRS for SMEs are many, among
others:
facilitates cross-border
trading
audit efficiencies
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New concepts
Valuation issue
In decision making,
consideration will need to be
given to the effect of adopting
the PFRS for SMEs (changes
in gearing, etc.) on loan
covenants and other
agreements with borrowers.
Where the PFRS for SMEs is to be
adopted, more detailed study,
planning and analysis will need to
be made relating to the transition to
the new standard. For example,
advance planning may be required
to gather the information needed
for prior years that will be presented
as comparatives in the financial
statements and the opening balance
sheet at the start of the earliest
comparative period presented.
Tax
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Alert:
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Appendices
Pages
Appendix A:
30
Appendix B:
32
Appendix C:
38
Appendix D:
40
Appendix E:
44
Appendix F
48
Appendix A
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FRSC Members
Carlos R. Alindada, Chairman
Romeo C. Alba
Eugene Mateo/
Ma. Elenita B. Cabrera
Thaddeus E. Venturanza/
Ma. Gracia Casals-Diaz
Ester F. Ledesma
Alfredo B. Parungao
The Preface to PRFS for SMEs was subsequently amended to allow the early adoption of the PFRS for SMEs by SMEs that are capable, in
terms of systems and resources, to efficiently transition to the new standard for their financial statements as of that earlier date.
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Alert:
Appendix B
Financial R
epor
ting Standards for Non-publicly Accountable Entities
Repor
eporting
Contents
Paragraphs
Introduction
1-5
Objective
Qualifying entities
7-10
11-13
14
Disclosure
15
Effective date
16
Appendix
Financial reporting standards effective as of December 2004
applicable to qualifying entities
Approval of PAS 101 by the ASC
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Introduction
1. The Accounting Standard Council (ASC), in line with
the accounting professions objective to converge
Philippine accounting standards with international
accounting standards, issued a number of new
accounting standards, referred to as Philippine
Financial Reporting Standards (PFRSs) that became
effective in 2005. The adoption of the new accounting
standards was approved by the Securities and Exchange
Commission (SEC), the Board of Accountancy (BOA)
and Professional Regulation Commission (PRC); and
the Bangko Sentral ng Pilipinas (BSP). The PFRSs
were intended at that time to be applicable to all
reporting entities that prepared financial statements
in conformity with generally accepted accounting
principles in the Philippines.
2. Considering the significant number of small and
medium-sized entities (SMEs) in the Philippines, the
ASC has considered providing a temporary relief to
SMEs in the application of the new standards.
3. The ASC plan was given impetus by the decision of
the International Accounting Standards Board (IASB)
in 2005 to undertake a project to develop accounting
standards suitable for entities that (1) do not have
public accountability and (2) publish general purpose
financial statements for external users (e.g., owners who
are not involved in managing the business, existing and
potential creditors, and credit rating agencies). The
IASB refers to this group of entities as Non-Publicly
Accountable Entities, or NPAEs. The IASB has
decided to use the term non-publicly accountable
entities, rather than small and medium-sized entities
because the latter term has different meanings around
the world.
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Alert:
Objective
6. The objective of this Standard is
to provide temporary relief in the
application of the new PFRSs that
became effective in 2005 to
entities that are covered by this
Standard. The Standard identifies
which entities are covered,
provides an option to these
entities in the application of the
new PFRSs, and specifies the
financial reporting standards
applicable to these entities.
7. This Standard shall be applied in
the general purpose financial
statements prepared and
presented by an entity with no
public accountability. An entity
has public accountability:
a. if it is required to file financial
statements under SEC Rule
68.1, Special Rule on Financial
Statements of Reporting Companies
under Section 17.2 of the Securities
Regulation Code. Under the SEC
rules, these would include:
1. an issuer which has sold a
class of their securities
pursuant to a registration
under Section 12 of the
Code;
2. an issuer with a class of
securities listed for trading
on an Exchange; and
34 Accounting Aler
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Alert:
f. if it is considered by its
primary regulator to have
public accountability.
8. For purposes of paragraph 7(e),
an entity is considered
economically significant if it
exceeds either of the following:
total assets of P250 million or
total liabilities of P150 million.
The total assets and total liabilities
are based on the entitys annual
financial statements and on
consolidated totals, if the entity
presents consolidated financial
statements.
9. The criteria for an economically
significant entity are arbitrary and
will be reviewed when the IASB
has issued its final standard on
NPAEs or earlier if necessary.
10. For purposes of this Standard, an
entity that is a subsidiary of a
parent that is considered to have
public accountability under
paragraph 7 is similarly considered
to have public accountability.
Option A
vailable to Qualif
ying
Available
Qualifying
Entities
11. A qualifying entity under this
Standard is allowed not to apply
in its general purpose financial
statements the new PFRSs that
became effective in 2005.
12. A qualifying entity, however, may
still choose to apply any or all of
the new PFRSs.
13. An entity that has public
accountability, as provided in
paragraphs 7 and 10, is required
to apply the new PFRSs in its
financial statements for 2005,
unless its primary regulator issues
a pronouncement exempting the
entity from applying a new
standard or certain provisions of
a new standard.
Financial R
epor
ting Standards
Repor
eporting
Applicable to Qualif
ying Entities
Qualifying
14. A qualifying entity under this
Standard that chooses to avail of
the option not to apply the new
PFRSs shall apply the applicable
financial reporting standards
effective as of December 2004 in
preparing its general purpose
financial statements. The
Appendix lists these standards.
Effective Date
16. A qualifying entity shall apply this
Standard for annual periods
beginning on or after January 1,
2005. The Standard shall be
effective for 2005 to 2007, unless
revoked earlier.
Disclosure
15. A qualifying entity shall disclose
the basis of preparation of its
financial statements and the
specific accounting policies used.
The effectivity of PAS 101 was extended from 2007; it was withdrawn only in October 2009 when the PFRS for SMEs was adopted by the
FRSC.
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Alert:
Appendix
SFAS 4 (rev)
Inventories
SFAS 8
SFAS 8A
SFAS 10
SFAS 13 (rev)
Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting
Policies
SFAS 18
SFAS 22 (rev)
SFAS 24
SFAS 25
Borrowing Costs
SFAS 26
Construction Contracts
SFAS 28
Revenue
SFAS 10/IAS 10
SFAS 12/IAS 12
Income Taxes
SFAS 16/IAS 16
SFAS 17/IAS 17
Leases
SFAS 20/IAS 20
SFAS 22/IAS 22
Business Combinations
SFAS 24/IAS 24
SFAS 26/IAS 26
SFAS 27/IAS 27
SFAS 28/IAS 28
SFAS 31/IAS 31
SFAS 35/IAS 35
Discontinuing Operations
SFAS 36/IAS 36
Impairment of Assets
SFAS 37/IAS 37
SFAS 38/IAS 38
Intangible Assets
36 Accounting Aler
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Approval of P
AS 101 by the ASC
PAS
The Accounting Standards Council (ASC) has approved
in October 2005 the issuance of Philippine Accounting
Standard (PAS) 101, Financial Reporting Standards for Nonpublicly Accountable Entities.
ASC Members
Carlos R. Alindada, Chairman
Romeo C. Alba
Nestor A. Espenilla Jr./ Ma. Dolores B. Yuvienco
Roberto G. Manabat
Eugene T. Mateo
Alfredo Parungao
Maximo C. Roque
Violeta V. Vicente
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Appendix C
REPUBLIC OF THE PHILIPPINES
Department of Trade and Industry
SECURITIES AND EXCHANGE COMMISSION
SEC Building, EDSA, Greenhills, Mandaluyong City
NOTICE
Notice is hereby given that the Commission En Banc in its meeting of 03 December 2009 resolved to adopt the
Philippine Financial Reporting Standards for Small and Medium Entities (PFRS for SMEs) as part of its rules and
regulations. The PFRS for SMEs were adopted on 13 October 2009 by the Philippine Financial Reporting Standards
Council form the International Financial Reporting Standards (IFRS) for Small and Medium Entities by the International
Accounting Standards Board.
In this PFRS for SMEs, many of the principles in full Philippine Financial Reporting Standards (PFRS) for
recognizing and measuring assets, liabilities, income and expenses have been simplified, topics that are not relevant to
small and medium entities (SMEs) have been omitted, and the required disclosures have been significantly reduced.
As the PFRS for SMEs is a stand-alone standard, it includes a section on concepts and pervasive principles that
underlie the financial statements of SMEs. These concepts address various issues including the objective of financial
statements for SMEs, the qualitatitve characteristics of information contained in those financial statements, and
general recognition and measurement principles.
A complete set of financial statements of an entity reporting under the PFRS for SMEs is similar to that provided
for by full PFRS. It requires the following documents:
1. A statement of financial position;
2. Either a single statement of comprehensive income, or a separate income statement and a separate statement
of comprehensive income;
3. A statement of changes in equity;
4. A statement of cash flows;
5. Notes including a summary of significant accounting policies.
Comparative information in respect of the previous comparable period must be included, although an opening
statement of financial position is not needed in the instances described by PAS 1, Presentation of Financial Statements.
The PFRS for SMEs includes a set of illustrative financial statements and a presentation and disclosure checklist to
assist entities in the preparation of their financial statements.
PFRS for SMEs has transition rules that apply equally to all entities on first-time adoption of the standards. The
transition rules are based on the requirements of PFRS 1, First-time Adoption of International Financial Reporting Standards
but, in certain cases, the standard has been designed to make the transition rules simpler to apply.
38 Accounting Aler
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Alert:
FE B. BARIN
Chairperson
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Alert:
Appendix D
Section No
No..
Title
Description
Financial Statement
Presentation
Statement of Comprehensive
Income and Income Statement
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Section No
No..
Title
Description
10
11
12
13
Inventories
14
Investments in Associates
15
16
Investment Property
17
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Section No
No..
Title
Description
18
19
20
Leases
21
22
23
Revenue
24
Government Grants
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Section No
No..
Title
Description
25
Borrowing Costs
26
Share-based Payment
27
Impairment of Assets
28
Employee Benefits
29
Income Tax
30
31
Hyperinflation
32
33
34
Specialized Activities
35
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Alert:
Appendix E
REPUBLIC OF THE PHILIPPINES
Department of Trade and Industry
SECURITIES AND EXCHANGE COMMISSION
SEC Building, EDSA, Greenhills, Mandaluyong City
NOTICE
The Commission En Banc, in its meeting of 04 February 2010, resolved to adopt the following Implementation
Guidelines to address certain issues on the adoption of the Philippine Financial Reporting Standards (PFRS)
for Small and Medium Entities (SMEs):
1. Transition from full PFRS to PFRS for SMEs
Some entities are currently using full PFRS either because they (a) opted to although they qualify as NonPublicly Accountable Entities (NPAE), or (b) are required to use full PFRS as they do not qualify as NPAE
under PAS 101. These entities may now qualify as SMEs under the definitions in PFRS for SMEs and the 13
August 2009 SEC En Banc Resolution (the SEC Resolution).
If they qualify and adopt the PFRS for SMEs, they shall be considered as first- time adopter of the PFRS for
SMEs and, therefore, should apply Section 35 (Transition to the PFRS for SMEs). Paragraphs 35.1 and 35.2 of
said section state that:
35.1 This section applies to a first-time adopter of the IFRS for SMEs, regardless of whether its previous accounting
framework was full IFRS or another set of generally accepted accounting principles (GAAP) such as its national accounting
standards, or another framework such as the local income tax basis.
35.2 An entity can be a first time adopter of the IFRS for SMEs only once. x x x
2. Transition of NP
AEs from P
AS 101 to PFRS to SMEs only
NPAEs
PAS
NPAEs that are currently using PAS 101 may qualify as SMEs under the PFRS for SMEs and the SEC
Resolution. If they qualify, they may use the PFRS for SMEs and will be considered as first-time adopter of
the PFRS for SMEs and should apply paragraphs 35.1 and 35.2 thereof (Refer to Item 1 above.)
3. Transition of NP
AEs from P
AS 101 to full PFRS
NPAEs
PAS
NPAEs that currently use PAS 101 may not qualify as SMEs under the PFRS for SMEs and the SEC Resolution
(for example, entities that crossed the ceiling threshold for total assets of P350 million).
NPAEs that currently use PAS 101 but (a) no longer qualify as SMEs under the PFRS for SMEs and the SEC
Resolution, and (b) are not considered micro-business entities (i.e., entities whose total assets or total liabilities
are below the P3 million floor threshold for the size criteria see item 4 below), should use the full PFRS. If
this is the first time that such entities will adopt full PFRS, they should apply PFRS 1, First-time Adoption of
Philippine Financial Reporting Standards.
44 Accounting Aler
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4. Financial R
epor
ting F
ramework of Entities now covered by either the full PFRS or PFRS for SMEs
Repor
eporting
Framework
Micro-business entities have the option to use any of these bases of accounting in the preparation of their
financial statements: (a) full PFRS, (b) PFRS for SMEs, or (c) another acceptable basis of accounting.1
If the entity uses a basis of accounting other than full PFRS and the PFRS for SMEs in the preparation of
its financial statements, its management shall assess the acceptability of such basis of accounting in the
light of the nature of the entity and the objective of the financial statements, or the requirements of the
law or regulators and standard-setter. By way of illustration, tax regulations permit taxpayers to use the
income tax basis of accounting; on the other hand, the SEC allows the use of the cash basis of accounting
by micro-business entities.
5. Date for applying the size criteria and for transitioning to full PFRS or to PFRS for SMEs
The PFRS for SMEs shall be effective for annual periods beginning on or after January 1, 2010, except for the
guidance in applying the requirements of Section 23 (Revenue) in recognizing revenue from agreements for the
construction of real estate, which shall apply to annual periods beginning on or after January 1, 2012.
As indicated in the Preface to the PFRS for SMEs, the amount of total assets and total liabilities shall be based
on the entitys audited financial statements as of December 31, 2009.
Thus, an SME whose accounting period begins on January 1, 2010 shall apply the size criteria based on the
entitys audited total assets or audited total liabilities as of December 31, 2009. An SME whose accounting
period begins on a date other than January 1, 2010 (i.e., it uses a fiscal year, for example, January 31, 2010 to
January 31, 2011) shall apply the size criteria using the entitys audited financial statements for the immediately
preceding fiscal year (i.e., for the fiscal year ending January 31, 2010).
Both the full PFRS and the PFRS for SMEs define what statements/disclosures shall be presented as part of a complete set of financial
statements. These include a statement of financial position, a statement of comprehensive income for the period, a statement of changes in
equity for the period, and a statement of cash flows for the period. In the absence of a similar definition of statements to be presented for
another basis of accounting, the provisions of the full PFRS and PFRS for SMEs may be used as a guide. For example, if the basis of
accounting is prescribed or permitted by a government regulatory agency and is substantially an accrual basis, the financial may include the
same financial statements required under the full PFRS and the PFRS for SMEs. On the other hand, a separate statement of cash flows
ordinarily is not needed when financial statements are prepared on a cash receipts and disbursements basis or an income tax basis that is
essentially a cash basis. These bases already accommodate the equivalent of a cash flow statement presentation. Therefore, such presentations
need not conform with the requirements for a statement of cash flows that would be included in a full PFRS or PFRS for SMEs presentation.
For stock corporations with paid-up capital stock of more than P50,000.00, and non-stock corporations with total assets of more than
P500,000.00 and total contributions of more than P100,000.00, the relevant requirements of SRC Rule 68 shall be complied with,
particularly, the submission of a complete set of financial statements (i.e., Balance Sheet, Income Statement, Cash Flow Statement (if cash
basis, non-mandatory), Statement of Changes in Equity/Fund Balance, Notes to Financial Statements), Statement of Managements
Responsibility and Auditors Report.
Accounting Aler
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Alert:
If an SME that uses the PFRS for SMEs in the current year (for example, calendar year 2010) breaches the
floor or ceiling of the size criteria at the end of that current year (i.e., December 31, 2010), and the event that
caused the change is considered significant and continuing, the entity should transition to the applicable
financial reporting framework (i.e., full PFRS if the ceiling threshold is breached, or another acceptable
accounting basis if the floor threshold is breached) in the next accounting period (or calendar year 2011). If
the event is not considered significant and continuing, the entity can continue to use the same financial
reporting framework it currently uses.
The determination of what is significant and continuing shall be based on managements judgment, taking
into consideration relevant qualitative and quantitative factors. As a general rule, 20% or more of total assets
or total liabilities would be considered significant.
6. Date for applying the size criteria if the PFRS for SMEs is adopted early
If an entity opts to apply early the PFRS for SMEs (for example, in calendar year 2009), it shall apply the size
criteria using the entitys audited financial statements for the immediately preceding calendar year (i.e., for the
calendar year ended December 31, 2008).
7. Subsidiaries of a parent company that use full PFRS
There are situations where a parent company that uses full PFRS has subsidiaries that qualify as SMEs under
the PFRS for SMEs and the SEC Resolution.
The subsidiaries that qualify as SMEs under the PFRS for SMEs and the SEC Resolution (such as they are not
listed, have no public accountability, are not holders of secondary licenses from the SEC, etc.), may use the
PFRS for SMEs even if their parent company uses full PFRS. Paragraph 1.6 of Section 1 of the PFRS for
SMEs provides that:
1.6 A subsidiary whose parent uses full IFRS, or that is part of a consolidated group that uses the full IFRS, is not
prohibited from using this IFRS in its own financial statements if that subsidiary by itself does not have public accountability.
If its financial statements are described as conforming to the IFRS for SMEs, it must comply with all the provisions of this
IFRS.
One issue to consider, however, with regard to a subsidiary whose financial statements are consolidated into
group financial statements is the requirement under the PFRS for SMEs and the full PFRS on the use by a
group of uniform accounting policies. If a member of the group uses accounting policies other than those
adopted in the consolidated financial statements for similar transactions and events under the same
circumstances, appropriate adjustments should be made in the financial statements of that entity in the
preparation of the consolidated financial statements.
46 Accounting Aler
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Alert:
8. Required disclosures
If an SMEs first financial statements use the PFRS for SMEs, it shall make the required disclosures, which
include an explanation of the transition to the PFRS for SMEs (under paragraphs 35.13 to 35.15) of Section
35 of the PFRS for SMEs.
If an SME does not opt to make an early application of the PFRS for SMEs, it shall disclose the impact on its
financial statements of the future adoption or application of the PFRS for SMEs.
9. Early adoption of PFRS for SMEs
As earlier stated, PFRS for SMEs shall be effective for periods beginning January 1, 2010. Although the
International Financial Reporting Standards for SMEs and the PFRS for SMEs do not provide for early
adoption, the same may, however, be allowed for SMEs which are capable, in terms of systems and resources,
to efficiently transition to PFRS for SMEs for their financial statements as of 31 December 2009, provided
that such entities discuss in their financial statements the impact of such early adoption.
If an SME is capable and opts to early adopt the PFRS for SMEs, it should be considered a first-time
adopter of the PFRS for SMEs and, therefore, should apply Section 35 (Transition to the PFRS for SMEs).
Issued this 9th day of February, 2010.
FE B. BARIN
Chairperson
Accounting Aler
t: PFRS for SMEs 47
Alert:
Appendix F
REPUBLIC OF THE PHILIPPINES
Department of Trade and Industry
SECURITIES AND EXCHANGE COMMISSION
SEC Building, EDSA, Greenhills, Mandaluyong City
NOTICE
The Commission En Banc, in its meeting on 07 October 2010, resolved to exempt from the mandatory adoption of
the Philippine Financial Reporting Standards for Small and Medium Entities (PFRS for SMEs) small or medium
entities (SMEs) that meet any of the following criteria:
1. It is a subsidiary of a parent company reporting under full Philippine Financial Reporting Standards (full
PFRS);
2. It is a subsidiary of a foreign parent company that will be moving towards International Financial Reporting
Standards (IFRS) pursuant to the foreign countrys published convergence plan;
3. It is a subsidiary of a foreign parent company that has been applying the standards for a non-publicly accountable
entity for local reporting purposes, and is considering moving to full PFRS intead of the PFRS for SMEs in
order to align its policies with the expected move to full IFRS by its foreign parent company pursuant to its
countrys published convergence plan;
4. It has short-term projections that show that it will breach the quantitative thresholds set in the criteria for an
SME, and the breach is expected to be significant and continuing due to its long-term effect on the companys
asset or liability size;
5. It is part of a group, either as a significant joint venture or an associate, that is reporting under full PFRS;
6. It is a branch office of a foreign company reporting under full IFRS;
7. It has concrete plans to conduct an initial public offering within the next two (2) years;
8. It has a subsidiary that is mandated to report under full PFRS;
9. It has been preparing financial statements using full PFRS and has decided to liquidate its assets.
An SME that wants to avail of any of the foregoing grounds for exemption shall provide a discussion in its notes to
financial statements of the facts supporting its adoption of full PFRS instead of PFRS for SMEs.
October 11, 2010, Mandaluyong City, Philippines.
48 Accounting Aler
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blank page
Contacts
Our offices
P&As main office is located in the
central business district of Makati
City, with branches in three other
locations in the Philippines. Here is
a list of our offices, together with
the primary contact persons.
Makati
20th Floor, Tower 1, The Enterprise Center
6766 Ayala Avenue, Makati City
T +63 2 886-5511
F +63 2 886-5506
W www.punongbayan-araullo.com
Maria V
ictoria C. Espao
Victoria
Managing Partner & COO
T +63 2 886-5579
E Marivic.Espano@ph.gt.com
Leonardo D. Cuaresma Jr
Jr..
Head, Audit & Assurance
T +63 2 887-9405
E Jun.Cuaresma@ph.gt.com
Lilian S. Linsangan
Head, Advisory Services
T +63 2 887-9403
E Lily.Linsangan@ph.gt.com
Eleanor L. R
oque
Roque
Head, Tax Advisory & Compliance
T +63 2 887-9457
E Lea.Roque@ph.gt.com
Jessie C. Carpio
Head, Finance & Accounting Outsourcing
T +63 2 813-6957
E Jessie.Carpio@ph.gt.com
Cavite
2nd Floor, Unit E
12B Gen. Emilio Aguinaldo Highway
Sampaloc 1, Pala-Pala
Dasmarias, Cavite
Philippines
T +63 46 416-2935; +63 46 416-4884
F +63 46 416-2935; +63 46 416-4884
Nelson J. Dinio
Partner-in-charge
T +63 2 887-9476
F +63 2 886-5506
E Nelson.Dinio@ph.gt.com
Cebu
Unit 603, 6th Floor, Ayala Life - FGU Center
Mindanao Avenue corner Biliran Road
Cebu Business Park, Cebu City 6000
Philippines
T +63 32 231-6090; +63 32 233-0574
F +63 32 231-0693
R amilito L. Naola
Partner-in-charge
T +63 2 887-9497
F +63 2 886-5506
E Ramil.Nanola@ph.gt.com
Wendell D. Ganhinhin
Director, Cebu Branch
T +63 32 231-6090; 233-0577; 234-1540
F +63 32 231-0693
E Wendell.Ganhinhin@ph.gt.com
Davao
Units 46 and 47, 4th Floor
The Landco - PDCP Corporate Centre
J.P. Laurel Avenue, Davao City 8000
Philippines
T +63 82 221-1498 to 99; 221-1500
F +63 82 221-1498
R amilito L. Naola
Partner-in-charge
T +63 2 887-9497
F +63 2 886-5506
E Ramil.Nanola@ph.gt.com
Joy G. P
olitico
Politico
Senior Manager
T +63 82 221-1498 to 99;
+63 82 221-1500
F +63 82 221-1498
E Joy.Politico@ph.gt.com