Question & AnswerQ&A (SEC MEMORANDUM CIRCULAR NO. 1, S. 2006)
The primary purpose of SEC Memorandum Circular No. 1, S. 2006 is to provide guidelines for companies whose functional currency is other than the Philippine peso and which file their financial statements expressed in that functional currency.
A company's functional currency is determined in accordance with PAS 21, The Effects of Changes in Foreign Exchange Rates.
The company must notify the Commission that it will file such financial statements and submit an assessment supporting the determination of its functional currency, signed by the CEO and CFO, and accompanied by a report from the external auditor confirming compliance with PAS 21.
The notification must be signed by the company's chief executive officer (CEO) and chief financial officer (CFO).
The notification should be accompanied by a report from the company's external auditor indicating that the company's determination of its functional currency was made in accordance with PAS 21.
Such a company shall submit financial statements expressed both in its functional currency and in Philippine peso, with the Philippine peso financial statements translated according to PAS 21. They must also submit the notification and external auditor's report as required for initial filing.
The notification must be filed within forty-five (45) days after the end of the year in which the company initially presents a functional currency financial statement.
The company must file a notice indicating the proposed change and the reasons within thirty (30) days after the end of the year in which the change occurred, signed by the CEO and CFO and accompanied by an external auditor's report.
Yes, the submission of the notice for change is without prejudice to any objection the Commission may raise based on previous representations and PAS 21 principles.
Failure to comply shall render the company's financial statements non-compliant with applicable rules and subject the company to appropriate sanctions under existing laws.