21 December 2020

SEC EXTENDS ACCOUNTING RELIEF FOR REAL ESTATE INDUSTRY

The Securities and Exchange Commission (SEC) further deferred the application of
certain accounting rules until 2023 to allow the real estate industry more time to assess
implementation issues amid the COVID-19 pandemic.

The Commission on December 15 issued SEC Memorandum Circular No. 34 to defer

the application of Philippine Interpretation Committee Question and Answer (PIC Q&A)
No. 2018-12 with respect to the accounting for significant financing component and
the exclusion of land in the calculation of the percentage of completion.

The real estate industry will likewise have three more years to comply with the
International Financial Reporting Standards (IFRS) Interpretations Committee’s
Agenda Decision on over time transfers of constructed foods under Philippine
Accounting Standards (PAS) 23-Borrowing Cost.

“The real estate industry has suffered from the COVID-19 pandemic as well as other
sectors,” SEC Chairperson Emilio B. Aquino said. “With the deferral of the accounting
rules, the real estate industry will have enough time to further evaluate and resolve the
remaining implementation issues.”

Nevertheless, real estate companies may comply in full with the requirements of PIC
Q&A 2018-12 and IFRIC Agenda Decision beginning January 1, 2021.

Those opting for the deferral will have to disclose in the Notes to the Financial
Statements the accounting policies applied, a discussion of the deferral of the subject
implementation issues, and a qualitative discussion of the impact in the financial
statement had the concerned application guidelines been adopted.

The regulatory reliefs are not considered in accordance with the Philippine Financial
Reporting Standards (PFRS). As such, real estate companies who adopt and record
them for financial reporting purposes must specify in the “Basis of Preparation of the
Financial Statements” section of their financial statements that they were prepared in
accordance with PFRS, as modified by the application of the above financial reporting
reliefs.

The external auditor must also state in the opinion paragraph that the financial
statements were prepared in accordance with the compliance framework described in
the notes to the financial statements.

END

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