After the release of the Securities Regulation Code (SRC) Rule 68, as Amended (2011), the Office of the General Accountant of the SEC issued Financial Reporting Bulletin Nos. 1 to 5 to assist corporations and their accountants/auditors in complying with their financial reporting obligations, and to ensure consistency of implementation. Download SEC Financial Reporting Bulletins 1 to 5 here.
Content of these Financial Reporting Bulletin dated February 16, 2012 are as follows:
- Bulletin 001: Additional components of financial statements
- Bulletin 002: Emphasis of Matter paragraph for companies with capital deficiency – Part I, 3.B(iv)
- Bulletin 003: Disclosures of receivables/payables with related parties eliminated during consolidation (Annex 68-D)
- Bulletin 004: Companies not covered Under SRC Rule 68
- Bulletin 005: Companies with no operation but are covered under SRC Rule 68
Detailed discussions are set forth below:
Bulletin 001: Additional components of financial statements
- The additional components that are submitted with the company’s financial statements, forming part thereof, should necessarily be covered by the Statement of Management’s Responsibility (SMR). Thus, the first paragraph of the SMR must partly read “The management of (name of reporting company) is responsible for the preparation and fair presentation of the financial statements for the year (s) ended (date), including the additional components attached therein x x x.”
- The following additional components, if applicable to the company, should be covered by a legal matter paragraph in the Auditor’s Report or a separate report of auditor on each component:
- Schedule of receipts and disbursements of non-stock and non-profit organizations (Part 1, 4A);
- Reconciliation of Retained Earnings Available for Dividend Declaration (Part 1, 4C);
- Tabular schedule of standards and interpretations as of reporting date (for large and/or publicly-accountable entities);
- Supplementary schedules required by Annex 68-E (for issuers of securities to the public);
- A map of the conglomerate or group of companies within which the reporting entity belongs (Part 1, 4H) (for listed companies and investment houses);
Bulletin 002: Emphasis of Matter paragraph for companies with capital deficiency – Part I, 3.B(iv)
Request for Additional Ground for Exemption
- If, other than those specific exemptions provided under subpar. (viii) items (a) to (c) of Part I, par. 3.B(iv), the auditor believes that the audit report on a company with capital deficiency does not warrant an emphasis matter paragraph, a confirmation must be obtained from the Commission through the submission of a position paper.
- A determination will be made by the Commission whether the circumstance/s described in the position paper will qualify under item (d) of the exemption list [i.e., such other cases which the Commission may consider as valid ground for considering the company as a going concern].
- For those availing of the exemption based on items (a) to (c) or pursuant to an additional exemption granted by the Commission, the notes to the financial statements should include a disclosure of the basis for the exemption.
Wordings of the Emphasis of Matter paragraph
The external auditor of a company which has incurred a capital deficiency, shall provide in the audit report an emphasis paragraph indicating the following information:
- The fact that the company has incurred a capital deficiency that raises an issue on its going concern status;
- A brief discussion of a concrete plan of the company to address the capital deficiency and reference to the note to financial statements that provides a complete disclosure of the said plan;
- A statement that the auditor conducted sufficient audit procedures to verify the validity of the aforementioned plan.
Under PSA 570, external auditors are required to perform additional procedures when materiality uncertainty exists as to the ability of the company to continue as a going concern. Thus, in lieu of the statement under item (c) above, the following provisions consistent with PSA 570 provisions, may be indicated: that the auditor performed audit procedures to evaluate management’s plans for such future actions as to likelihood to improve the situation and as to feasibility under the circumstances.
Bulletin 003: Disclosures of receivables/payables with related parties eliminated during consolidation (Annex 68-D)
Information required under par. (1)(A)(ii) and (1)(F)(ii) on receivables/payables with related parties that are eliminated during consolidation, may be incorporated in the applicable schedules under Annex 68-E of Part II.
The subject information need not be comparative. It shall cover only to those transactions eliminated at the reporting entity’s level.
This disclosure requirement is applicable only to issuers of securities to the public, companies listed in an exchange and public companies as provided under Part II of the Rule.
Bulletin 004: Companies not covered Under SRC Rule 68
The financial statements of companies not covered by SRC Rule 68 should be accompanied by a certification under oath by the company’s Treasurer or Chief Finance Officer. Such FS should have at least a Statement of Financial Position (Balance Sheet) or a Statement of Fund Balance, Income Statement (or a Statement of Receipts and Disbursements) and applicable explanatory notes.
Bulletin 005: Companies with no operation but are covered under SRC Rule 68
- If no operation only for one (1) year: a complete set of audited financial statements must be submitted by the company despite its nonoperation
- If no operation for the last two (2) years: The Income Statement need NOT be included in the audited financial statements
Subsequently, on April 3, 2012, the SEC also issued additional Financial Reporting Bulletins 6 to 12.
To download Financial Reporting Bulletins 1 to 12, Click Here.
Read related articles on SEC Financial Reporting Bulletin 6 to 12 (SRC Rule 68) post.
thank you po sa update! big help po ito..
Here’s an update:
Under SEC Memorandum Circular No. 4 , the schedules to be filed with the SEC are required to be covered with sworn statements by the Organization’s President and Treasurer. Therefore, these schedules are no longer required to be covered by an auditors’ report. The requirement under FRB No. 001 (2)(i) that the “Schedule of receipts and disbursements of non-stock nonprofit organizations” should be covered by a legal matter paragraph in the Auditor’s Report or a separate auditor’s report is deemed superseded. FRB No. 001 (2)(i) required that the “Schedule of receipts and disbursements of non-stock nonprofit organizations” be covered by an auditors’ report because this schedule was not required to be covered by a sworn statement of the Organization’s President and Treasurer under SRC Rule 68, Part I, paragraph 4(A). SRC Rule 68, Part I, paragraph 4(A) has been amended by SEC Memorandum Circular No. 4, Series of 2013.
for non-stock non-prog org, kailangan pa rin ba ng legal matter paragraph sa Auditor’s report and a separate schedule of receipts and disbursements when these are already presented in the Income Statement or Statement of Revenues and Expenses which is part of the basic FS?
Yes… I think so… Iba kasi and income statements sa schedule ng receipts and disbursements. Unless cash basis ka, and income statements usually contains non-cash income or expense. That is why you need to an additional component/schedule.
okay thank you po..
kaylangan pa ba ng auditors report saka ng SMR dun sa company na hindi subject sa src rule 68… saka anong date ung ilalagay dun? thanks po sa pagsagot
Basically, those that are not within the scope of SRC Rule 68, as amended, are not required to be audited but at a minimum, should be certified under oath by the treasurer of the corporation. Since they are not required to be audited, SMR is also not required. See this link: http://sec.gov.ph/cmanual/CITIZENS%20MANUAL%20NO.%204.pdf
But, Sir, you need to consider also the requirements of other regulatory bodies such as BIR.
According to the tax code, corporations, companies, partnerships or persons whose gross quarterly sales, earnings, receipts or output exceed One hundred fifty thousand pesos (P150,000) shall have their books of accounts audited and examined yearly by independent Certified Public Accountants and their income tax returns accompanied with a duly accomplished Account Information Form (AIF) which shall contain, among others, information lifted from certified balance sheets, profit and loss statements, schedules listing income-producing properties and the corresponding income therefrom and other relevant statements.
Meaning, even if you are a stock corporation with paid up capital stock of less than P50,000 and is not covered by the SRC Rule 68 as ammended, you have to submit an audited financial statement for BIR purposes, with of course, statement of management responsibility.
May di pa pala ako nasasagot.. yung date.. Ang ilalagay na date ay auditor’s report date. That applies for both the audit report at SMR. Yang date na yan ay kung kelan natapos ng auditor ang audit at kung kelan sila nakapagconclude as to the fairness of the financial statement of the Company. =)