Philippine Financial Reporting Standards (PFRS) for SMEs

Source: BusinessMirror by Miguel R. Camus (01/11/10)

The Securities and Exchange Commission (SEC) has adopted a specific set of financial reporting rules for small-to-medium entities (SMEs), or firms with assets of between P3 million and P350 million.

“Notice is given that the commission en banc, in its meeting, resolved to adopt the Philippine Financial Reporting Standards (PFRS) for SMEs as part of its rules and regulations,” announced the SEC in a notice on its website dated December 11, 2009. These standards

Many of the principles in the full PFRS for recognizing assets, liabilities, income, and expenses have been simplified for SMEs. The complete set of financial statements required of an SME reporting under the PFRS is similar to that provided for by the full PFRS and includes:

• a statement of financial position,
• either a single statement of comprehensive income or separate income statements and a separate statement of comprehensive income,
• a statement of changes in equity, a statement of cash flows,
• notes including a summary of significant accounting policies, and
• comparative information relative to the previous comparable period.

Specific cases may also require an opening position.

The new rules will cover corporations:

• with total assets of between P3 million and P350 million or total liabilities of between P3 million and P250 million;
• that are not required to file financial statements under Securities Regulation Code 68.1;
• that are not in the process of filing financial statements for the purpose of issuing any class of instruments in a public market;
• that are not holders of any secondary licenses issued by a regulatory agency, such as banks, investments houses, finance companies, insurance companies, securities broker/dealers, mutual funds, or pre-need companies; and
• that are not public utilities.

The SEC requires entities meeting the prescribed criteria to apply the PFRS for SMEs for the annual period beginning January 1 of the following year.

The PFRS for SMEs were adopted on October 13, 2009 by the PFRS Council from the International Financial Reporting Standards for small and medium entities issued by the international accounting standards board.