Securities Regulation

Code (SRC) Rule 68

Securities and Exchange Commission
The Philippine Securities and Exchange Commission (SEC) is
the regulatory agency charged with the supervision of the
corporate sector. Its function expands to the following:

• Regulation and registration of securities

• Development and regulation of the corporate and
capital market toward good corporate governance,
protection of investors, widest participation of
ownership and decentralization of wealth
What’s in SRC Rule 68?
This Rule (together with other official pronouncements,
interpretations and rulings on accounting and reporting
matters) states the requirements applicable to the form and
content of financial statements required to be filed with the
SEC meeting the threshold:
What’s in SRC Rule 68?
a. Stock & non-stock corporations with total assets and
liabilities of P 600,000 or more
b. Branch offices/representative offices of stock & non-stock
foreign corporations with assigned capital of P 1,000,000
or more
c. Regional operating headquarters of foreign corporations
with total revenues of P 1,000,000 or more.
The Reporting Entities under SRC Rule
68
Under SRC Rule 68, the following are the classifications of the
reporting entities:
a) large and/or publicly accountable entities
b) medium-sized entities;
c) small entities; and
d) micro entities
The Reporting Entities under SRC Rule
68
Large and/or publicly-accountable entities are those
that meet any of the following criteria:
a) total assets of more than P350 million or total
liabilities of more than P250 million;
b) are required to file financial statements under Part II
of SRC Rule 68;
c) are in the process of filing their financial statements
for the purpose of issuing any class of instruments in
public market;
d) are holders of secondary licenses issued by regulatory
agencies.
The Reporting Entities under SRC Rule
68
Medium-sized entities are those that meet all the following
criteria:
a) total assets of more than P100 million to P350 million
or
b) liabilities of more than P100 million to P250 million
(for a parent reporting entity, the amounts are
consolidated figures);
c) are not required to file financial statements under Part
Il of Rule 68;
The Reporting Entities under SRC Rule
68
Medium-sized entities are those that meet all the following
criteria:
d) are not in the process of fling their financial
statement for the purpose of issuing any class of
instrument in the public market; and
e) are not holders of secondary licenses issued by
regulatory agencies.
The Reporting Entities under SRC Rule
68
Small entities are those that meet all the following
criteria.,
a) total assets of between P3 million and P100 million or
liabilities of between P3 million and P100 million (for
a parent reporting entity, the amounts are based on
consolidated figures);
b) are not required to file financial statements under
Part Il of Rule 68;
The Reporting Entities under SRC Rule
68
Small entities are those that meet all the following
criteria.,
c) are not in the process of filing their financial
statements for the purpose of issuing any class of
instruments in the public market; and
d) are not holders of secondary licenses issued by
regulatory agencies.
The Reporting Entities under SRC Rule
68
Micro entities are those that meet all the following
criteria:
a) total assets and total liabilities of less than P3 million;
b) are not required to file financial statements under
Part lI of Rule 68;
c) are not in the process of filing their financial
statements for the purpose of issuing any class of
instruments in a public market; and
d) are not holders of secondary licenses issued by
regulatory agencies
Applicability of Philippine Financial
Reporting Frameworks
There are 4 financial reporting frameworks widely used in
practice. The use of these frameworks will vary depending on
the classification of the reporting entity.
a)Large and or publicly accountable entities shall prepare
their financial statements using the full PRFS/IFRS.
b)Medium-sized entities shall use the PFRS/IFRS for SMEs as
their framework.
Applicability of Philippine Financial
Reporting Frameworks
The following medium-sized entities may choose to prepare
their financial statements using either the full PFRS/IFRS or
PRFS/IFRS for SMEs (Sec Memorandum Circular No. 5, s.
2018):
a) a subsidiary of a parent reporting under the full
PFRS/IFRS
b) a subsidiary of a foreign parent that will move
towards the full PFRS/IFRS
c) a significant joint venture or associate that is part of a
group that is reporting under Full PFRS/IFRS;
Applicability of Philippine Financial
Reporting Frameworks
d) branch office or regional operating headquarter of a
foreign company reporting under Full PFRS/IFRS;
e) An SME which has subsidiary that is mandated to
report under Full PFRS/IFRS;
f) an entity that has a short-term projection that it will
breach the quantitative threshold set in the criteria for
a medium-sized entity, provided that the event that
caused the change in classification is considered
"significant and continuing";
Applicability of Philippine Financial
Reporting Frameworks
g) an entity that has a concrete plan to conduct an
initial public offering within the next two years;
h) an entity that has been preparing financial
statement under Full PFRS/IFRS and decided to
liquidate; and
i) and other entities that the SEC may consider as
valid exceptions from mandatory adoption of PFRS for
SMEs.
Applicability of Philippine Financial
Reporting Frameworks
Reporting entities classified as small entities that meet
criteria shall use the PFRS for Small Entities as adopted by
the Securities and Exchange Commission.

Small entities that have operations or investments in another

country with a different functional currency shall apply
instead the PFRS/IFRS for SMEs or the Full IFRS/PFRS.
Applicability of Philippine Financial
Reporting Frameworks
However, small entities falling under any of the following,
may at their option apply the PFRS/IFRS for SMEs or Full
PFRS/IFRS, instead of PFRS for Small Entities (SEC
Memorandum Circular No. 5, s. 2018):
a) a subsidiary of a parent reporting under Full PFRS/IFRS
or PFRS/IFRS for SMEs;
b) a subsidiary of a foreign parent that will move towards
Full IFRS or IFRS for SMEs;
c) a significant joint venture or associate that is part of a
group that
d) is reporting under full PFRS/IFRS or PFRS/IFRS for
SMEs;
Applicability of Philippine Financial
Reporting Frameworks
However, small entities falling under any of the following,
may at their option apply the PPRS/IRRS for SMEs or Full
PFRS/IFRS, instead of PFRS for Small Entities (SEC
Memorandum Circular No. 5, s. 2018):
e) a branch office or regional operating headquarter of a
foreign company reporting under Full PFRS/IFRS PFRS/IFRS for SMEs;
f) an entity that has a short-term projection that it will breach
the quantitative threshold set in the criteria for a small entity,
provided that the event that caused the change in
classification is considered significant and “continuing”;
Applicability of Philippine Financial
Reporting Frameworks
However, small entities falling under any of the following,
may at their option apply the PPRS/IRRS for SMEs or Full
PFRS/IFRS, instead of PFRS for Small Entities (SEC
Memorandum Circular No. 5, s. 2018):
g) an entity that has a concrete plan to conduct an initial public
offering within the next two years;
h) an entity that has been preparing financial statement under
Full PFRS or PFRS for SMEs and has decided to liquidate; and
i) and other entities that the SEC may consider as valid
exceptions from mandatory adoption of PFRS for Small Entities.
Applicability of Philippine Financial
Reporting Frameworks
Micro entities have the option of adopting either the PFRS for
Small Entities or the income tax basis. The following, at a
minimum,
shall consist the micro entities' financial statements:
a) Statement of Management's Responsibility,
b) Auditor's Report,
c) Statement of Financial Position,
d) Statement of Income; and
e) Notes to Financial Statements
All these components must cover two-year comparative
periods.