GENERAL
REQUIREMENTS
1.
APPLICATION AND DEFINITION OF TERMS
a.
Application of this Rule
chanrobles virtual law library
i.
This Rule (together with subsequent official pronouncements,
interpretations
and rulings on accounting and reporting matters, which may be issued by
the Commission from time to time) states the requirements applicable to
the form and content of financial statements required to be filed with
the Commission by all corporations that file with the Commission
audited
financial statements that are prepared and presented in conformity with
the generally accepted accounting principles in the Philippines, except
those whose paid-up capital is less than P50,000.00.
ii.
Financial statements of branch offices of foreign corporations licensed
to operate in the Philippines by the Commission shall likewise comply
with
the requirements of this Rule.
chanrobles virtual law library
iii.
Additional
requirements for financial statements of corporations covered
under Section 17.2 of the Securities Regulation Code are set forth
under
Rule 68.1.
chanrobles virtual law library
iv.
Unless otherwise specified,
the term financial statements when used in
this Rule, shall include a balance sheet, a statement of income,
statement
of changes in equity, and a statement of cash flows, together with all
notes to the statements, as defined in Statement of Financial
Accounting
Standards No. 1 and related schedules required by the Commission or
other
subsequent amendments thereto.
b.
Definition of Terms Used in this Rule
Unless
the context otherwise requires, the following terms shall have the
respective
meanings when used in this Rule.
i.
Audit, when used in regard to financial statements, means an
examination
of the statements by an independent certified public accountant in
accordance
with generally accepted auditing standards in the Philippines (GAAS)
for
the purpose of expressing an opinion whether the financial statements
are
presented fairly, in all material respects, in accordance with
generally
accepted accounting principles in the Philippines.
ii.
Auditor's report when used in regard to financial statements, means a
document
in which an independent certified public accountant indicates the scope
of the audit which he has made and sets forth a clear written
expression
of his opinion regarding the financial statements taken as a whole, or
an assertion to the effect that an overall opinion cannot be
expressed.
When an overall opinion cannot be expressed, the reason/s therefore
shall
be stated.
iii.
Auditor or independent auditor means an independent certified public
accountant
who performs an audit of financial statements for the purpose of
expressing
an opinion thereon.
chanrobles virtual law library
iv.
Generally accepted accounting principles in the Philippines (GAAP)
means
accounting principles based on pronouncements of recognized bodies
involved
in setting accounting principles. Greatest weight shall be given
to their pronouncements in the order listed below:chanroblesvirtuallawlibrary
A.
Philippine Securities and Exchange Commission.
B.
Accounting Standards Council.
C.
Standards issued by the International Accounting Standards Board.
chanrobles virtual law library
D.
Accounting principles and practices for which there is a long history
of
acceptance and usage.
If
there appears to be a conflict between any of the bodies listed above,
the pronouncements of the first listed body shall be applied.
chanrobles virtual law library
v.
Control, for purposes of preparation of consolidated financial
statements,
is the power to govern the financial and operating policies of an
enterprise
so as to obtain benefits from its activities. Control is presumed to
exist
when the parent owns, directly or indirectly through subsidiaries, more
than one half of the voting power of an enterprise unless, in
exceptional
circumstances, it can be clearly demonstrated that such ownership does
not constitute control. Control also exists even when the parent owns
one
half or less of the voting power of an enterprise when there is:chanroblesvirtuallawlibrary
A.
Power over more than one half of the voting rights by virtue of an
agreement
with other investors;
B.
Power to govern the financial and operating policies of the enterprise
under a statute or an agreement;
C.
Power to appoint or remove the majority of the members of the board of
directors or equivalent governing body; or
chanrobles virtual law library
D.
Power to cast the majority of votes at meetings of the board of
directors
or equivalent governing body.
vi.
Parent is an enterprise that has one or more subsidiaries.
chanrobles virtual law library
vii.
Registrant means an issuer of securities with respect to which a
securities
registration statement or required issuer report has been or is to be
filed.
chanrobles virtual law library
viii.
Related parties exists when one party has the ability to control the
other
party or exercise significant influence over the other party in making
financial and operating decisions.
chanrobles virtual law library
ix.
Significant influence is the participation in the financial and
operating
policy decisions of an enterprise, but not in control of those
policies.
Significant influence may be exercised in one or more of the following
ways:chanroblesvirtuallawlibrary
A.
Representation on the board of directors or equivalent governing body
of
the investee;
B.
Participation in policy making processes;
chanrobles virtual law library
C.
Material intercompany transactions;
chanrobles virtual law library
D.
Interchange of managerial personnel; or
chanrobles virtual law library
E.
Dependence on technical information.
chanrobles virtual law library
Significant
influence may be gained by share ownership, statute or agreement.
x.
Significant subsidiary means a subsidiary, including its subsidiaries,
which meets any of the following conditions:chanroblesvirtuallawlibrary
A.
The corporation’s and its other subsidiaries’
investments in and advances
to the subsidiary exceed ten percent (10%) of the total assets of the
corporation
and its subsidiaries consolidated as of the end of the most recently
completed
fiscal year (for a proposed business combination to be accounted for as
a pooling of interests, this condition is also met when the number of
common
shares exchanged or to be exchanged by the corporation exceeds ten
percent
(10%) of its total common shares outstanding at the date the
combination
is initiated); or
chanrobles virtual law library
B.
The corporation’s and its other
subsidiaries' proportionate share of the
total assets (after inter company eliminations) of the subsidiary
exceeds
ten percent (10%) of the total assets of the corporation and its
subsidiaries
consolidated as of the end of the most recently completed fiscal year;
or
chanrobles virtual law library
C.
The corporation’s and its other
subsidiaries’ equity in the income from
continuing operations before income taxes, extraordinary items and
cumulative
effect of a change in accounting principle of the subsidiary exceeds
ten
percent (10%) of such income of the corporation and its subsidiaries
consolidated
for the most recently completed fiscal year.
Computational
note: For purposes of making the prescribed income test the
following
guidance shall be applied:chanroblesvirtuallawlibrary
1.
When a loss has been incurred by either the parent and its subsidiaries
consolidated or the tested subsidiary, but not both, the equity in the
income or loss of the tested subsidiary shall be excluded from the
income
of the corporation and its subsidiaries consolidated for purposes of
the
computation.
2.
If income of the corporation and its subsidiaries consolidated for the
most recent fiscal year is at least 10 percent lower than the average
of
the income for the last five (5) fiscal years, such average income
shall
be substituted for purposes of the computation. Any loss years
shall
be omitted for purposes of computing average income.
3.
Where the test involves combined entities, as in the case of
determining
whether summarized financial data shall be presented, entities
reporting
losses shall not be aggregated with entities reporting income.
|
xi.
Subsidiary is an enterprise that is controlled by another enterprise
(known
as the parent)
xii.
Summarized financial information referred to in this Rule shall mean
the
presentation of summarized financial information as to the assets,
liabilities
and results of operations of the entity for which the information is
required.
Summarized financial information shall include the following
disclosures:chanroblesvirtuallawlibrary
A.
Current assets, noncurrent assets, current liabilities, noncurrent
liabilities,
and when applicable, redeemable preferred stocks and minority interests
(for specialized industries in which classified balance sheets are
normally
not presented, information shall be provided as to the nature and
amount
of the major components of assets and liabilities);
B.
Net sales or gross revenues, gross profit (or, alternatively, costs and
expenses applicable to net sales or gross revenues), income or loss
from
continuing operations before extraordinary items and when the
alternative
treatment under ASC SFAS 13 (revised 2000) is followed, the, cumulative
effect of a change in accounting principle, and net income or loss (for
specialized industries, other information may be substituted for sales
and related costs and expenses if necessary for a more meaningful
presentation).
xiii.
Voting shares mean the sum of all rights, other than as affected by
events
of default, to vote for election of directors.
chanrobles virtual law library
2.
GENERAL GUIDES TO FINANCIAL STATEMENTS PREPARATION
a.
In addition to the provisions in this Rule and those that will be
subsequently
issued or announced by the Commission, financial statements to be filed
with the Commission shall be in accordance with the following
Statements
of Financial Accounting Standards (SFAS)/International Accounting
Standards
(IAS) and related Interpretations adopted by the Commission and the
Accounting
Standards Council (ASC):chanroblesvirtuallawlibrary
Effective
2002
-
|
-
|
Framework
for the Preparation and Presentation of Financial Statements
|
SFAS
1
|
IAS
01
|
Presentation
of Financial Statements (revised 2000)
|
SFAS
4
|
IAS
02
|
Inventories
(revised 2000)
|
SFAS
7
|
-
|
Contingencies
and Subsequent Events
|
SFAS
8
|
-
|
Accounting
for Effects of Changes in Foreign Exchange Rates
|
SFAS
9
|
-
|
Summary
of Generally Accepted Accounting Principles on Intangible Assets
|
SFAS
10
|
-
|
Summary
of Generally Accepted Accounting Principles on Investments
|
SFAS
13
|
IAS
08
|
Net
Income or Loss for the Period, Fundamental Errors and
Changes
in Accounting Policies
|
SFAS
18
|
-
|
Summary
of Generally Accepted Accounting Principles on Stockholders’ Equity
|
SFAS
19
|
-
|
Summary
of Generally Accepted Accounting Principles on Banking Industry
|
SFAS
19A
|
-
|
Accounting
for Investments in Debt and Marketable Securities of Banks (an
amendment
of SFAS 19)
|
SFAS
20
|
-
|
Accounting
for Business Combinations
|
SFAS
22
|
IAS
07
|
Cash
Flows Statements (revised 2000)
|
SFAS
23
|
-
|
Accounting
for Income Taxes
|
SFAS
24
|
-
|
Retirement
Benefit Costs
|
SFAS
25
|
IAS
23
|
Borrowing
Costs
|
SFAS
26
|
IAS
11
|
Construction
Contracts
|
SFAS
27
|
-
|
Accounting
and Reporting for the Non-life Insurance Industry
|
SFAS
28
|
IAS
18
|
Revenue
|
SFAS
29
|
IAS
33
|
Earnings
Per Share
|
SFAS
30
|
IAS
34
|
Interim
Financial Reporting
|
SFAS
31
|
IAS
14
|
Segment
Reporting
|
Based
on new format
SFAS
16
|
IAS
16
|
Property,
Plant and Equipment
|
SFAS
24
|
IAS
24
|
Related
Party Disclosures
|
SFAS
27
|
IAS
27
|
Consolidated
Financial Statements and Accounting for Investments in Subsidiaries
|
SFAS
28
|
IAS
28
|
Accounting
for Investments in Associates
|
SFAS
31
|
IAS
31
|
Financial
Reporting of Interests in Joint Ventures
|
SFAS
35
|
IAS
35
|
Discontinuing
Operations
|
SFAS
36
|
IAS
36
|
Impairment
of Assets
|
i.
SFAS Nos. 16, 24, 27, 28, 31, 35 and 36 above shall be effective for
the
period beginning January 1, 2002.
ii.
SFAS Nos. 29 (Earnings per share), 30 (Interim Financial
Reporting)
and 31 (Segment Reporting) shall only be applicable to companies
covered
by SRC Rule 68.1.
chanrobles virtual law library
iii.
The following SFAS have been approved by the ASC and are effective
beginning
January 1, 2003. The Commission encourages earlier application of these
standards.
chanrobles virtual law library
SFAS
8A
|
-
|
Deferral
of Foreign Exchange Differences
|
SFAS
10
|
IAS
10
|
Events
After the Balance Sheet Date
|
SFAS
20
|
IAS
20
|
Accounting
for Government Grants and Disclosures for Government Assistance
|
SFAS
22
|
IAS
22
|
Business
Combinations
|
SFAS
37
|
IAS
37
|
Provisions,
Contingent Liabilities and Contingent Assets
|
SFAS
38
|
IAS
38
|
Intangible
Assets
|
b.
Responsibility for Financial Statements
i.
The financial statements filed with the Commission are primarily the
responsibility
of the management of the reporting company and accordingly, the
fairness
of the representations made therein is an implicit and integral part of
the management’s responsibility. The Board of Directors, in discharging
its responsibilities, reviews and approves the financial statements
before
these are submitted to the stockholders.
chanrobles virtual law library
ii. To
carry out the intent and
attain the wisdom of this concept, management
of all corporations covered by this Rule are required to acknowledge
their
responsibility over their financial statements. For this purpose,
the financial statements filed with the Commission, other than
companies
covered by Rule 68.1, shall be accompanied by a statement of
management's
responsibility as follows:chanroblesvirtuallawlibrary
STATEMENT
OF MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The
management of (name of reporting company) is responsible for all
information
and representations contained in the financial statements for the year
(s) ended (date). The financial statements have been prepared in
conformity with generally accepted accounting principles and reflect
amounts
that are based on the best estimates and informed judgment of
management
with an appropriate consideration to materiality.
In
this regard, management maintains a system of accounting and reporting
which provides for the necessary internal controls to ensure that
transactions
are properly authorized and recorded, assets are safeguarded against
unauthorized
use or disposition and liabilities are recognized.
The
Board of Directors reviews the financial statements before such
statements
are approved and submitted to the stockholders of the company.
(name
of auditing firm), the independent auditors and appointed by the
stockholders,
has examined the financial statements of the company in accordance with
generally accepted auditing standards and has expressed its opinion on
the fairness of presentation upon completion of such examination, in
its
report to stockholders.
Signature______________________
chanrobles virtual law library
Name
of the Chairman of the Board ___________________
chanrobles virtual law library
Signature
______________________
chanrobles virtual law library
Name
of Chief Executive Officer ______________________
Signature
______________________
Name
of Chief Financial Officer ______________________
iii.
In case of branch offices of foreign corporations, the above Statement
shall be signed by its local manager who is in charge of its operations
within the Philippines. The third paragraph of the Statement may be
deleted
since the Philippine Branch does not have any local Board of Directors
or stockholders.
iv.
The independent certified public accountant's responsibility for the
financial
statements required to be filed with the Commission is confined to the
expression of his opinion on such statements which he has examined.
c.
Form, Order and Terminology
i.
This section shall be applicable to financial statements filed with the
Commission for all corporations covered by this Rule.
ii.
Financial statements shall be filed in such form and order, and shall
use
such generally accepted terminology as will best indicate their
significance
and character in the light of the provisions applicable thereto.
The information required with respect to any statement shall be
furnished
as a minimum requirement to which shall be added such further material
information as is necessary to make the required statements, in the
light
of the circumstances under which they are made, not misleading.
Financial
statements filed with the Commission shall be prepared in accordance
with
generally accepted accounting principles in the Philippines [See
definition
in paragraph 1(b)(v)].
chanrobles virtual law library
iii.
All money amounts required to be shown in financial statements may be
expressed
in whole pesos or multiples thereof, as appropriate: provided, that
when
stated in other than whole pesos, an indication to that effect is
inserted
immediately beneath the caption of the statement or schedule, at the
top
of the money columns, or at an appropriate point in narrative material.
chanrobles virtual law library
iv. Negative
amounts shall be shown
in a manner which clearly distinguish the
negative attribute. When determining methods of display,
consideration
shall be given to the limitations of reproduction and microfilming
processes.
v.
The chronological arrangement of data may be with the most recent date
to the right or to the left. However, the ordering used must be
consistent
in all financial statements, tabular data and footnote data in the
document.
d.
Inapplicable Captions and Omission of Unrequired or Inapplicable
Financial
Statements
i.
No caption shall be shown in any financial statement as to which the
items
and conditions are not present.
ii.
Financial statements not required or inapplicable because the required
matter is not present need not be filed.
iii.
The reasons for the omission of any required financial statements shall
be indicated.
3.
QUALIFICATIONS AND REPORTS OF INDEPENDENT AUDITORS
a.
Examination of Financial Statements by Independent Auditors
The
Commission will not accept financial statements required to be audited
unless such financial statements are accompanied by an auditor's report
issued by an independent auditor.
chanrobles virtual law library
b.
Qualifications of Independent Auditors
i.
The Commission will not recognize any person as an independent auditor
who is not duly registered with the Board of Accountancy
(BOA)/Professional
Regulation Commission (PRC) in accordance with the rules and
regulations
of said professional regulatory bodies. Those who are not in good
standing
and entitled to practice as such under the laws governing the practice
of public accounting in the Philippines shall not likewise be
recognized
by the Commission.
ii.
For external auditors of public companies or those companies enumerated
under Section 17.2 of the Securities Regulation Code, they must have
been
accredited by the Securities and Exchange Commission in accordance with
SEC Circular No. 05 (Series of 2002). The said Circular shall
take
effect beginning January 1, 2003 and will cover audited financial
statements
for the year ending June 30, 2003 and thereafter.
iii.
The term independent auditor as used in the foregoing paragraph is an
auditor
who possesses the independence as defined by the Board of Accountancy
and
approved by the Professional Regulation Commission.
c.
Reports of Independent Auditors
i.
Technical Requirements - The auditor's report shall: (A) be
dated;
(B) be manually signed; (C) identify the financial statements covered
by
the report; (D) state the signing accountant's License, Tax
Identification
and PTR numbers, and registration number with BOA/PRC; (E) state
the complete mailing address of the client and the auditor; (F) clearly
indicate the name of the signing partner, where the audit report is
made
under a firm name.
The
auditor’s report of a company covered by Rule 68.1 shall likewise
indicate
the signing partner’s accreditation number with the Securities Exchange
Commission for audited financial statements covering fiscal year ending
June 30, 2003 and thereafter.
ii.
Representations as to the Audit - The auditor's report shall state
whether
the examination was made in accordance with GAAS and shall designate
any
auditing procedure deemed necessary by the auditor under the
circumstances
of the particular case, which have been omitted, and the reasons for
their
omission. This rule, however, shall not be construed to imply
authority
for the omission of any procedure which independent auditors would
ordinarily
employ in the course of an audit made for the purpose of expressing the
opinion required by paragraph (iii) below.
iii.
Opinion to be Expressed - The auditor's report shall state clearly the
opinion of the independent auditor on the fairness of presentation in
conformity
with GAAP of the financial statements.
chanrobles virtual law library
iv.
Exceptions - Any matter to which the independent certified public
accountant
takes exception shall be clearly identified, the exception thereto
specifically
and clearly stated and to the extent practicable, the effect of each
such
exception on the related financial statements given. In cases
when
financial statements filed with the Commission pursuant to its rules
and
regulations are prepared in accordance with accounting principles for
which
there is no substantial authoritative support, such financial
statements
will be presumed to be misleading or inaccurate despite disclosures
contained
in the report of the accountant or in footnotes to the financial
statements
provided the matters involved are material.
In
cases where there is a difference of opinion between the Commission and
the corporation as to the proper principles of accounting to be
followed,
disclosure will be accepted in lieu of correction of the financial
statements
themselves only if the points involved are such that there is
substantial
authoritative support for the practices followed by the corporation and
the position of the Commission has not previously been expressed in
rules,
regulations or other official pronouncements of the Commission.
v.
Special report at time of first filing by accountant -
chanrobles virtual law library
All
financial statements to be submitted by a corporation to the Securities
and Exchange Commission which are required to be certified by an
independent
Certified Public Accountant, shall in addition to the report of the
certifying
CPA, be accompanied by a Statement of Representation, which shall
indicate
the following:chanroblesvirtuallawlibrary
“TO
THE SECURITIES AND EXCHANGE COMMISSION:chanroblesvirtuallawlibrary
In
connection with my examination of the financial statements of
client-corporations,
which are to be submitted to the Commission, I hereby represent the
following:chanroblesvirtuallawlibrary
1.
That said financial statements are presented in conformity with
generally
accepted accounting principles in the Philippines in all cases where I
shall express an unqualified opinion; Except that in case of any
departure
from such principles, I shall indicate the nature of the departure, the
effects thereof, and the reasons why compliance with the principles
would
result in a misleading statement, if such is a fact;
2.
That I shall fully meet the requirements of independence as provided
under
the Code of Professional Ethics for CPAs;
3.
That in the conduct of the audit, I shall comply with the generally
accepted
auditing standards promulgated by the Board of Accountancy; in case of
any departure from such standards or any limitation in the scope of my
examination, I shall indicate the nature of the departure and the
extent
of the limitation, the reasons therefore and the effects thereof on the
expression of my opinion or which may necessitate the negation of the
expression
of an opinion; and
4.
That relative to the expression of my opinion on the said financial
statements,
I shall not commit any acts discreditable to the profession as provided
under Code of Professional Ethics for CPAs.
chanrobles virtual law library
As
a CPA engaged in public practice, I make these representations in my
individual
capacity and as a partner in the accounting firm of _______________.
Signature
Printed
Name
CPA
Cert. No.
PTR
No.
TIN
Date:chanroblesvirtuallawlibrary
d.
Examination of Financial Statements by More Than One Accountant
If,
with respect to the examination of the financial statements, part of
the
examination is made by an independent Certified Public Accountant other
than the principal accountant and the principal accountant elects not
to
place reliance on the work of the other accountant, the separate report
of the other accountant shall be filed. However, notwithstanding
the provisions of this Paragraph, reports of other accountants which
may
otherwise be required in filings need not be presented in annual
reports
to security holders.
4.
FRAMEWORK FOR THE PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS
a.
This section shall be applicable to general-purpose financial
statements
prepared and presented in accordance with GAAP and which are filed by
corporations
covered by this Rule. It summarizes the framework for the
preparation
and presentation of financial statements of commercial, industrial and
business reporting enterprises. However, some enterprises may be
covered
by industry-specific reporting format.
chanrobles virtual law library
b.
Underlying Assumptions
(i)
Accrual Basis
In
order to meet their objectives, financial statements are prepared on
the
accrual basis of accounting. Under this basis, the effects of
transactions
and other events are recognized when they occur (and not as cash or its
equivalent is received or paid) and they are recorded in the accounting
records and reported in the financial statements of the periods to
which
they relate. Hence, they provide the type of information about past
transactions
and other events that is most useful to users in making economic
decisions.
(ii)
Going Concern
The
financial statements are normally prepared on the assumption that a
corporation
is a going concern and will continue in operation for the foreseeable
future.
Hence, it is assumed that the corporation has neither the intention nor
the need to liquidate or curtail materially the scale of its
operations;
if such intention exists, the financial statements may have to be
prepared
on a different basis and, if so, the basis used is disclosed.
chanrobles virtual law library
c.
Qualitative Characteristics
The
information provided in the financial statements shall have the
following
qualitative characteristics:chanroblesvirtuallawlibrary
(i)
Understandability. The information provided in financial statements are
readily understandable by users.
(ii)
Relevance. Information must be relevant to the decision-making needs of
users. Information has the quality of relevance when they
influence
the economic decisions of users by helping them evaluate past, present
or future events or confirming, or correcting, their past evaluations.
The predictive and confirmatory roles of information are interrelated.
(iii)
Materiality. Information
is material if its omission or misstatement could
influence the economic decisions of users taken on the basis of the
financial
statements. Materiality depends on the size of the item or error
judged in the particular circumstances of its omission or
misstatement.
Thus, materiality provides a threshold or cut-off point rather than
being
a primary qualitative characteristic which information must have if it
is to be useful.
(iv)
Reliability.
Information has the quality of reliability when it is
free from material error and bias and can be depended upon by users to
represent faithfully that which it either purports to represent or
could
reasonably be expected to represent.
(v)
Faithful
Representation. Information must represent faithfully the transactions
and other events it either purports to represent or could reasonably be
expected to represent.
(vi)
Substance Over Form. The information must be accounted for and
presented
in accordance with their substance and economic reality and not merely
their legal form. The substance of transactions or other events
is
not always consistent with that which is apparent from their legal or
contrived
form.
(vii)
Neutrality. The information contained in financial statements must be
neutral,
that is, free from bias. Financial statements are not neutral if,
by the selection or presentation of information, they influence the
making
of a decision or judgment in order to achieve a predetermined result or
outcome.
(viii.)
Prudence(Conservatism). Prudence/conservatism is the inclusion of a
degree
of caution in the exercise of the judgments needed in making the
estimates
required under conditions of uncertainty, such that assets or income
are
not overstated and liabilities or expenses are not understated.
However,
the exercise of prudence/conservatism does not allow the deliberate
understatement
of assets or income, or the deliberate overstatement of liabilities or
expenses, because the financial statements would not be neutral and,
therefore,
not have the quality of reliability.
(ix)
Completeness. The information in financial statements must be complete
within the bounds of materiality and cost. An omission can cause
information to be false or misleading and thus unreliable and deficient
in terms of its relevance.
(x)
Comparability. Users must be able to compare the financial statements
of
a corporation through time in order to identify trends in its financial
position and performance. Users must also be able to compare the
financial
statements of different corporations in order to evaluate their
relative
financial position, performance and changes in financial
position.
Hence, the measurement and display of the financial effect of like
transactions
and other events must be carried out in a consistent way throughout a
corporation
and over time for that corporation and in a consistent way for
different
corporations.
d.
Basic Financial Statements and Minimum Presentation
(i)
Balance Sheet
As
a minimum, the face of the balance sheet should include the following
line
items:chanroblesvirtuallawlibrary
1)
Cash and Cash Equivalents;
chanrobles virtual law library
2)
Financial Assets (excluding amounts shown under (1),(3), and (6);
chanrobles virtual law library
3)
Trade and Other Receivables;
chanrobles virtual law library
4)
Inventories;
chanrobles virtual law library
5)
Property Plant and Equipment;
chanrobles virtual law library
6)
Investments accounted for using the equity method;
chanrobles virtual law library
7)
Intangible Assets;
chanrobles virtual law library
8)
Trade and other payables;
chanrobles virtual law library
9) Tax Liabilities and
assets as required by SFAS
No. 23, Accounting for Income
Taxes;
10)
Provisions;
chanrobles virtual law library
11)
Non-current interest-bearing liabilities;
chanrobles virtual law library
12)
Minority interest; and
chanrobles virtual law library
13)
Issued capital and reserves.
chanrobles virtual law library
Except
as otherwise required by the Commission, the various line items and
disclosures
set forth for this form of statement shall be in accordance with the
Statements
of Financial Accounting Standards/International Accounting Standards
enumerated
under paragraph (2)(a) of this Rule.
(ii)
Income Statement
As
a minimum, the face of the income statement should include the
following
line items:chanroblesvirtuallawlibrary
1)
Revenue;
chanrobles virtual law library
2)
The results of operating activities;
chanrobles virtual law library
3)
Finance costs;
chanrobles virtual law library
4)
Share of income and losses of associates and joint ventures accounted
for
using the equity method;
chanrobles virtual law library
5)
Tax Expenses;
chanrobles virtual law library
6)
Income or loss from ordinary activities;
7)
Extraordinary items;
8)
Minority interest; and
9)
Net income or loss for the period.
Except
as otherwise required by the Commission, the various line items and
disclosures
set forth for this form of statement shall be in accordance with the
Statements
of Financial Accounting Standards/International Accounting Standards
enumerated
under paragraph (2)(a) of this Rule.
chanrobles virtual law library
(iii.)
Statement of Changes in Equity
chanrobles virtual law library
Except
as otherwise required by the Commission, Statements of Changes in
Equity
shall be prepared in accordance with the generally accepted accounting
principles in the Philippines [See definition in paragraph 1(b)(v) of
Rule
68]. This Annex merely emphasizes some requirements as to
presentation
and disclosures on the Statements of Changes in Equity.
chanrobles virtual law library
(1)
A corporation shall present, as a separate component of its financial
statements,
a statement showing:chanroblesvirtuallawlibrary
chanrobles virtual law library
a.
The net income or loss for the period;
chanrobles virtual law library
b.
Each item of income and expense, gain or loss which, as required by
other
Statements of Financial Accounting Standards, is recognized directly in
equity, and the total of these items; and
chanrobles virtual law library
c.
The cumulative effect of changes in accounting policy dealt with under
the Benchmark treatment, and the correction of fundamental errors under
the required treatment in ASC SFAS No. 13 (revised 2000), Net Income or
Loss for the Period, Fundamental Errors and Changes in Accounting
Policies.
(2)
In addition, a corporation shall present, either within this statement
or in the notes:chanroblesvirtuallawlibrary
d.
Capital transactions with owners and distributions to owners;
e.
The Balance of accumulated income or loss at the beginning of the
period
and at the balance sheet date, and the movements for the period; and
f.
A reconciliation between the carrying amount of each class of capital
stock,
additional paid in capital and each reserve at the beginning and the
end
of the period, separately disclosing each movement.
chanrobles virtual law library
(3)
The requirements above may be met in a number of ways. The
approach
adopted shall follow a columnar format which reconciles between the
opening
and closing balances of each element within shareholders’ equity,
including
items (a) to (f). An alternative is to present a separate
component
of the financial statements which presents only items (a) to (c).
Under this approach, the items described in (d) to (f) are shown in the
notes to the financial statements. Whichever approach is adopted,
a sub-total of the items in (b) to enable users to derive the total
gains
and losses arising from the registrant’s activities during the period,
is required.
(iv)
Cash Flow Statement
Except
as otherwise announced by the Commission, the various line items and
disclosures
set forth for this form of statement shall be in accordance with the
Statements
of Financial Accounting Standards/International Accounting Standards
enumerated
under paragraph (2)(a) of this Rule.
(v)
Notes to Financial Statements
chanrobles virtual law library
(Accounting
Policies and Explanatory Notes)
chanrobles virtual law library
Except
as otherwise announced by the Commission, the various disclosures for
this
part of the financial statement shall be in accordance with the
Statements
of Financial Accounting Standards/International Accounting Standards
enumerated
under paragraph (2)(a) of this Rule.
5.
COMPARATIVE FINANCIAL STATEMENTS
(a)
The financial statements to be filed with the Commission shall be
presented
in comparative form. The figures for the most recently ended
fiscal
year may be presented at the right portion immediately after the
accounts
name, followed by the figures for the last preceding year.
(b)
Balance Sheet
chanrobles virtual law library
The
audited balance sheets shall be as of the end of each of the two most
recent
completed fiscal years.
(c)
Income Statement, Cash Flow Statement and Statement of Changes in Equity
If
practicable, these statements shall be for each of the two most recent
completed fiscal years or such shorter period as the company (including
predecessors) has been in existence.
(d)
An explanation through a note or otherwise shall be made explaining the
reasons for filing a single-period statement, e.g. it is the first
period
of a new company.
chanrobles virtual law library
(e)
When financial statements are presented on a comparative basis for more
than the periods required, the auditor's report need not extend to
prior
period's for which the financial statements are not required to be
audited.
(i)
If the financial statements of the prior year were not audited, such
statements
should be marked prominently as "UNAUDITED." In addition, the
auditor
should disclose this fact in his report by a statement to that effect
in
a separate paragraph after the opinion paragraph.
chanrobles virtual law library
(ii)
If the financial statements of a prior-period have been examined by
another
independent certified public accountant whose report is not presented,
the statements should be marked to disclose prominently that they are
not
being reported upon by the current auditor. If the auditor of the
financial statements for such periods did not give an unqualified
opinion
on such statements, the auditor for the current year should indicate in
the scope paragraph of his report (I) that the financial statements of
the prior-period were examined by other auditors, (II) the date of
their
report (III) the type of opinion expressed by the predecessor auditor
and
(IV) the substantive reasons it was qualified.
6.
PENALTIES, REPEALING CLAUSE AND EFFECTIVITY
a.
Penalties
chanrobles virtual law library
i.
All Financial Statements submitted to this Commission
shall adhere strictly
to the provisions of these Rules; any financial statements filed which
are not in accordance with these Rules shall be considered NOT FILED at
all.
If
the said incomplete financial statements are submitted with other
report/s,
the said report/s shall likewise be deemed not filed.
chanrobles virtual law library
ii.
Any corporation covered by SRC Rule 68, As Amended,
that violates any of
its provision is subject to administrative sanctions (monetary and/or
non-monetary)
provided under the Securities
Regulation Code (SRC) and its Implementing
Rules and Regulations, for public companies, or the Corporation
Code (CC) and its Implementing Rules and Regulations, for all other
corporations covered by this Rule.
chanrobles virtual law library
iii.
Any officer or director of a company covered by SRC
Rule 68.1 who causes
the disclosure of untrue or misleading information in the financial
statements
or the submission of a materially incomplete financial report of said
entity,
shall after due notice and hearing, be subject to a basic penalty of
One
Hundred Thousand Pesos (P100,000.00) plus a daily fine of Five
Hundred
Pesos (P500.00) until the information is corrected or completed.
The same shall be without prejudice to the filing of appropriate
criminal
charges against the said person.
chanrobles virtual law library
iv.
The penalty under subparagraph (iii) hereof shall likewise be imposed
on
any officer or director of a company covered by SRC Rule 68.1 or any
person
acting under the direction of said officer or director, or acting on
his
own, who fraudulently influences , coerces, manipulates or misleads the
external auditor of such company or any other person(s) on whom such
auditor
relies, for the purpose of rendering the financial statement materially
misleading.
v.
In addition to the monetary penalty imposable under
the SRC or CC and their
Implementing Rules and Regulations and whenever appropriate, the
Certified
Public Accountant who attested to the Financial Statements prepared in
violation of this Rule shall, after due notice and hearing, be
suspended
or barred from practicing before this Commission for such period of
time
as it may deem adequate.
b.
Repealing Clause
chanrobles virtual law library
All
rules and regulations, circulars, or memoranda or any part thereof, in
conflict with or contrary to these Rules or any portion hereof, are
hereby
repealed or modified accordingly.
chanrobles virtual law library
c.
Effectivity
chanrobles virtual law library
Unless
otherwise specified, SRC Rule 68 and the accompanying Rule 68.1, as
amended,
shall become effective for financial statements covering periods
beginning
January 1, 2002 and for interim financial statements starting the first
quarter of 2003, and thereafter.
February
20, 2003, Mandaluyong City, Philippines.
chanrobles virtual law library
(Sgd.)
LILIA
R. BAUTISTA
Chairperson
(Sgd.)
FE
ELOISA C. GLORIA
Commissioner
(Sgd.)
JOSELIA
J. POBLADOR
Commissioner
(Sgd.)
MA.
JUANITA E. CUETO
Commissioner
(Sgd.)
JESUS E. G.
MARTINEZ
Commissioner
|