SEC revises Financial Reporting Bulletins for 2022: Amendments and Deletions implemented

The Securities and Exchange Commission (SEC) held a meeting deciding that specific Financial Reporting Bulletins (FRBs) needed to be updated because of the changes in the rules regarding financial reporting.

The Securities and Exchange Commission (SEC), thru its Commission en Banc(the ‘Commission’), held a meeting on January 2022, where it was decided that specific Financial Reporting Bulletins (FRBs) needed to be updated because of the changes in the rules and regulations towards the financial reporting currently implemented by the Commission, more specifically, a section within the Revised Securities Regulation Code (SRC) Rule 68 (the ‘Rule’), which was put in practice on October 18, 2019.  

The most significant amendments and deletions on the FRBs are listed below, along with bulletins still being used but have not been altered.  

FRB Amendments:  

Bulletin No: 

Date 

Bulletin Section 

Amendments 

01 

January 6, 2022 

Changes to Rule 68 of Revised Securities Regulation Code (SRC) on other documents and schedules to be filed along with the financial statements.  

Other documents following Part I, Section 5 and the schedules under Annex 68-J of the Rule submitted with the company statements must be covered by the Statement of Management’s Responsibility (SMR). 

 

The amended FRB emphasises documents and schedules, stating that they should be covered by a legal matter paragraph in the Auditor’s Report or placed in an alternate auditor report on each component. However, this should only be practised if it applies to the company.  

02 

January 6, 2022 

Changes to SRC rules on Material Uncertainty Related to Going Concern Section – Part I, Section 3 (E)(vi)  

The amendments state that if, other than the specific extensions given under subpar. (vi), items (1) to (3) of Part I. Section 3(E) of the Rule, and the auditor believes that the audit report on a company with capital deficiency does not warrant an additional section for material uncertainty related to going concern, confirmation needs to be obtained from the Commission by passing through the submission of a position paper.  

 

But for companies that have incurred a capital deficiency, their external auditor must give a Material Uncertainty Related to Going Concern section in the Audit Report, following the guidelines in Part 1. Section 3(E)(v) of the Rule.  

 

The previous version of the FRB required an Emphasis of Matter paragraph for companies with capital deficiency instead of a section of a material uncertainty related to the issue.  

06 

January 6, 2022 

Deposits for Future Subscriptions  

The SEC approved this guideline due to implementing a one-day processing” policy of applications to increase Authorized Capital Stock (ACS). It states that an entity must classify a contact to deliver its equity instruments under equity as a separate account form (ex. Deposit for Stock Subscription) Outstanding Capital Stock if all the elements presented in the FRB are present.  

 

The bulletin also explains that an investment company is no longer mandated to comply with the minimum subscribed and paid-up capital relative to the increase in its authorised capital stock. This makes it so that investment companies can no longer accept deposits for future stock subscriptions starting December 20, 2020.  
 
However, DFFS recognised within the equity in the financial statements are still acceptable given that all the elements mentioned in this Rule are present as of the end of the field reporting period and that the application for an increase in authorised capital stock has been filed with the commission before December 20, 2020 

07 

January 6, 2022 

Statement of Management’s Responsibility (SMR)  

The Regional/Area Headquarters (RHQ) was established in the Philippines with total assets of Six Hundred Thousand (P600,000), or more is covered by Revised SRC Rule 68. Paragraph (vi) of Part I, Section (2)(B) of the Rule will also be applied to RHQ. This makes it that the SMR will be signed by its local manager currently in charge of the operations in the county.  

09 

January 6, 2022 

Micro Entities  

Micro Entities that have previously adopted full PFRSs by SEC’s Notice of Implementation Guidelines on PFRS for SMEs can continue using full PFRS. 

 
Nevertheless, micro-entities may also choose to change their financial reporting framework to one of the options available under the Rule. Such change should be accounted for following PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors
 
The revisions also clarify that micro-entities are not required to disclose their rationale for choosing whichever financial reporting framework is available for them in their notes about the financial statements.  

10 

January 6, 2022 

On entities in the process of filing their financial statements to issue any class of instruments (whatever shares of stock or bonds) in a public market  

This bulletin states that financial statements that are to be filled by entities to issue any class of instruments (be it by shares of stock or bonds) in a public market are required to comply with the provisions of Part of the Revised SRC Rule 68, including the supplementary schedules in Annex 68-J.  
 
The FRB also added a requirement in the form of a schedule within the prescribed Form per Annex 68-E of the Rule, this shows financial soundness indicators in two (2) comparative methods, which are as follows:  

  1. Current/Liquidity Ratios  
  2. Solvency Ratios, debt-to-equity ratios 
  3. Asset-to-equity Ratios 
  4. Interest rate coverage ratios  
  5. Profitability Ratios  
  6. Other relevant ratios as the Commission may consider necessary. 

All these with the requirement that an Auditor’s Report covers the schedule only applies to Listed Companies.  

 

FRB Deletions:  

The bulletins listed below have been removed due to the implementation of the FRBs.  

Bulletin No: 

Date 

Bulletin Section 

Description 

08 

April 3, 2012 

Small and Medium-sized Entities (SMEs) 

This removed bulletin explains that specific types of SMEs can be exempted from the mandatory adoption of the Philippine Financial Reporting Standard (PFRS) for SMEs and will have the option to apply for full PFRS.  

16 

January 24, 2013 

List of Effective Standards and Interpretations (as of December 31, 2012) 

This required large and/or publicly accountable entities to submit with their audited financial statements a schedule, in a table format, showing in the first column a list of all the effective standards and interpretations under the PFRS as the year-end.  

17 

March 7, 2013 

Newly Registered Corporations 

This deleted bulletin once mandated that every corporation, either domestic or foreign, that are lawfully doing business in the Philippines need to submit an annual report of its operations to the SEC, together with a financial statement of its assets and liabilities, certified by any independent certified public accountant in appropriate cases, covering the preceding fiscal year and such other requirements as required by the SEC.  

18 

December 22, 2015  

Age Requirement for Financial Statements 

This previously mandated that for the time a registration statement on SEC Form 12-1 to become effective, the financial information therein shall be as of a date 180 days (about 6 months) from the effective date. The SEC will no longer grant further requests for extension of said period. 

20 

January 26, 2017  

Revised SMR 

This removed bulletin was in line with the adoption of the new and revised auditor reporting standards, it required the standard form of SMR is prescribed under Section 2 (B) of the Revised SRC Rule 68, as mandated.  

Unamended Bulletins 

The bulletins listed below are still being used and have not received any significant changes: 

  • Bulletin No. 003 – Revised SRC Rule 68: Disclosures of receivables/ payables with related parties are mandated to be eliminated during consolidation (Annex 68-J) 
  • Bulletin No. 004 – Includes business establishments not covered under Revised SRC Rule 68 
  • Bulletin No. 005 – Includes businesses that have no operations but is covered under Revised SRC Rule 68 
  • Bulletin No. 011 – Highlights Non-stock and non-profit organizations 
  • Bulletin No. 012 – Contains Annex 68-J – Schedule A. Financial Assets meant for Issuers of Securities to the Public 
  • Bulletin No. 013 – Shows the Presentation of Related Party Disclosures 
  • Bulletin No. 014 – Shows the Presentation Reconciliation of Retained Earnings 
  • Bulletin No. 015 – Presents the Appropriation of Retained Earnings for Business Expansion 
  • Bulletin No. 019 – Expectations for an Effective Audit Function