QuestionsQuestions (SEC MEMORANDUM CIRCULAR NO. 1, S. 2006)
It provides guidelines for companies whose functional currency is other than the Philippine peso and who intend to file financial statements expressed in that functional currency for statutory reporting purposes.
The company must determine its functional currency in accordance with PAS 21 (The Effects of Changes in Foreign Exchange Rates).
The company must notify the SEC that it will file financial statements denominated in a currency other than the Philippine peso, and include an assessment supporting its functional currency determination.
The notification must be signed by the company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO).
It must be accompanied by a report from the company’s external auditor indicating his/her assessment that the company’s functional currency determination was made in accordance with PAS 21.
It may choose to present financial statements in Philippine peso instead of (or alongside) its functional currency; however, it must still submit functional-currency FS and Philippine-peso FS.
The company must (a) translate its functional currency financial statements into Philippine pesos in accordance with PAS 21, and (b) submit the notification required under paragraphs (2) and (3) of the Circular.
Within forty-five (45) days after the end of the year in which the company intends to initially present such functional currency FS.
It must file a notice indicating the proposed change and the reasons for the change within thirty (30) days after the end of the year in which the change occurred, signed by the appropriate officers and accompanied by an external auditor’s report as required under paragraph (3).
No. The Circular states that the submission of the notice is without prejudice to any objection the SEC may raise, considering prior representations and PAS 21 principles.
The financial statements become non-compliant with applicable rules and may subject the company to the appropriate sanctions under existing laws.
PAS 21 (The Effects of Changes in Foreign Exchange Rates).
The Circular primarily requires notification and supporting assessment/report; however, SEC may object in the case of functional currency changes, and non-compliance may lead to sanctions.
For first-time filing: notify within 45 days after year-end with CEO/CFO signature and an external auditor report supporting PAS 21 compliance. For change: file within 30 days after year-end a notice with reasons, signed and accompanied by an external auditor report, subject to potential SEC objection.
It takes effect fifteen (15) days after the date of the last publication, after being published in two (2) newspapers of general circulation in the Philippines.
It is the currency of the primary economic environment in which the company operates.