Question & AnswerQ&A (SEC MEMORANDUM CIRCULAR NO. 3, S. 2011)
The main purpose is to provide guidelines on the implementation of Philippine Financial Reporting Standard 9 (PFRS 9) related to financial instruments' recognition and measurement, including transition and disclosure requirements for its early adoption.
The two versions are PFRS 9 (2009) and PFRS 9 (2010). PFRS 9 (2009) covers financial assets, while PFRS 9 (2010) covers both financial assets and financial liabilities. Entities can adopt either version depending on their reporting period and choice.
PFRS 9 is required to apply to financial statements for annual periods beginning on or after January 1, 2013.
Yes, entities are allowed to adopt PFRS 9 earlier than January 1, 2013. If an entity adopts PFRS 9 (2009) early, it may continue with that version. If it adopts PFRS 9 (2010) early, it must apply it in its entirety.
Covered companies include (a) large corporations with total assets exceeding P350 million and liabilities exceeding P250 million, and publicly accountable entities mandated to adopt PFRS; and (b) small and medium entities that have opted to adopt PFRS despite availing exemption from PFRS for SMEs.
Covered companies are given up to September 30, 2011, to conduct a study on the potential impact of adopting PFRS 9 on their 2011 annual financial statements.
They must disclose that they have not yet decided on early adoption and their interim financial statements do not reflect the impact of PFRS 9 unless applicable under specific conditions. They should also disclose ongoing impact evaluation and briefly discuss accounts that could be affected by early adoption.
The company's interim financial statements as of September 30, 2011, must contain a qualitative and quantitative discussion of the results of its impact evaluation related to early adoption.
They must disclose their decision not to early adopt, that they will conduct another impact evaluation in early 2012 using outstanding balances as of December 31, 2011, and that their decision to early adopt or not for 2012 will be disclosed in interim statements as of March 31, 2012.
The Scale of Fines provided in SEC Memorandum Circular No. 8, Series of 2009, shall be applied to companies that fail to comply with these Guidelines.