Guidelines on Adoption of PFRS 9 by BSFIs

BSFIs must adopt PFRS fully for prudential reports, with exceptions:
- Consolidated financial statements consolidate financial allied subsidiaries (except insurance) line-by-line;
- Insurance and non-financial allied subsidiaries use the equity method;
- Investments in associates and joint ventures accounted for under PAS 28 (equity method).
Solo/separate financial statements use the equity method for investments in subsidiaries and associates.
BSFIs must maintain adequate and timely allowances for credit losses per Enhanced Standards on Credit Risk Management and related Appendix provisions.

AFS must fully comply with PFRS and be submitted per MORB/MORNBFI regulations.
BSFIs must provide adjusting entries to reconcile prudential reports with AFS balances.

Mandatory adoption date: January 1, 2018.
Board of directors must ensure consistent adoption, assess impact, allocate resources, and approve related policies.
Management is responsible for policy implementation and reporting effectiveness to the board.
BSFIs must follow specific appendices for classification, measurement, and impairment in PFRS 9 implementation.

The Bangko Sentral may apply supervisory tools, directives, sanctions against BSFIs, and relevant personnel for non-compliance with PFRS adoption.
Prudential reports affected by non-adherence are subject to penalties under applicable MORB/MORNBFI provisions.

BSFIs must apply PFRS 9 retrospectively, following PFRS 9 and PAS 8 transition guidance.
Reclassification of financial assets is allowed if previous versions of PFRS 9 were applied and criteria are met.
Compliance with Securities and Exchange Commission’s reporting requirements on PFRS 9 adoption is expected.

Appendices on classification, measurement, and impairment under PFRS 9 are revised and replaced as per the attached guidelines.
Guidelines on investment in credit-linked notes and structured products updated; previous guidelines and memoranda superseded by PFRS 9 accounting provisions.
Consolidation and booking rules for financial statements and investments are updated to reflect PFRS 9 adoption.

Accrual of interest on non-performing loans and credit accommodations is prohibited.

All references to PAS 39 in relevant MORB and MORNBFI provisions are replaced by PFRS 9.

BSFIs will use a mapping matrix for prudential reports pending release of the revised Financial Reporting Package (FRP) starting from the September 2018 reporting period.
Further guidelines on the electronic FRP issuance will be communicated by memo.

The Circular takes effect 15 calendar days after publication in the Official Gazette or a newspaper of general circulation.