Guidelines on Filing Functional Currency FS

The Circular is intended to guide companies whose functional currency is other than the Philippine peso and that file financial statements expressed in that functional currency.
The Circular uses PAS 21, The Effects of Changes in Foreign Exchange Rates as the governing standard for determining functional currency treatment.

The company’s determination of its functional currency must be made in accordance with PAS 21.
The applicable functional currency rule is tied to PAS 21 principles governing the currency of the primary economic environment in which the company operates.

A company that files for the first time financial statements denominated in a currency other than Philippine peso for statutory reporting purposes must notify the SEC that it will file such financial statements.
The first-time notification must include an assessment supporting the determination of its functional currency.
The notification must follow an illustrative form for notification included as Annex “A” (illustrative notification).

The notification for first-time filing must be signed by the company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO).
The notification must be accompanied by a report from the company’s external auditor.
The external auditor’s report must indicate an assessment that the company’s functional currency determination was made in accordance with PAS 21.
The external auditor report follows an illustrative form in Annex “B” (illustrative report).

A company whose functional currency is other than the Philippine peso may choose to present financial statements expressed in Philippine peso.
If the company chooses Philippine peso presentation, it must submit financial statements expressed in both its functional currency and Philippine peso.
The company must translate its functional currency financial statements into Philippine pesos in accordance with PAS 21.
The company must also submit the same type of notification required for first-time functional currency filing and auditor certification, consistent with paragraphs (2) and (3).

For first-time initial presentation of functional currency financial statements, the notification must be filed within forty-five (45) days after the end of the year in which the company intends to initially present a functional currency financial statement.
For a change in functional currency, the company 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.
The notice of a functional currency change must be signed and must be accompanied by an external auditor report in the manner described in paragraph (3).

Submission of the notice of proposed functional currency change is without prejudice to any objection the SEC may raise.
In raising objections, the SEC must take into account the company’s previous representations and the principles under PAS 21.

The SEC Circular must be published in two (2) newspapers of general circulation in the Philippines.
The effective date is fifteen (15) days after the date of the last publication.

Failure to comply with the Circular’s Guidelines renders the company’s financial statements non-compliant with the applicable rules.
Non-compliance subjects the company to the appropriate sanctions provided for in the existing laws.