ED: Disclosure Guidelines on Retirement Benefit Funds

The Securities and Exchange Commission has issued an Exposure Draft (ED) on disclosure guidelines on retirement benefit funds which is open for public comment until November 14, 2012.  What does the ED require?


The ED enumerated the minimum disclosure requirements under PAS 24, Related Party Disclosures, and prescribes additional disclosure requirements, which are described by the Commission as “information that would provide an understanding on the transactions of a retirement fund with an entity whose employees are the beneficiaries thereof”.  What are these disclosures?

Minimum disclosure required by PAS 24:

(a)  The amount of the transactions;
(b)  The amount of outstanding balances, their terms and conditions including whether they are secured, and the nature of consideration to be provided in settlement, and details of any guarantees given or received;
(c)  Provisions for doubtful debts related to the amount of outstanding balances; and
(d)  The expense recognized during the period in respect of bad or doubtful debts due from related parties.

However, the ED specifies new disclosures in addition to those that are minimum required by PAS 24.

Additional disclosures proposed under the ED:

In addition to disclosure requirements that are already required under PAS 24 and PAS 19, Employee Benefits (e.g., structure of the fund, amount and size of the fund, description of the assets and investments of the fund and volume and outstanding balances of transactions of the fund with the entity whose employees are beneficiaries of the plan, including the terms and conditions thereof), Sections IV.5 and IV.6 of the ED has additional requirements.

Sections IV.5 and IV.6 of the ED require disclosures of the following in two comparative periods:

(a)    For significant transactions between the retirement fund and entity, a discussion of the nature of relationship of the person who approved it with the directors and officers of the related entity, or with the related entity

(b)   If the fund has investments in securities (debt or equity) of the related entity:

  1. The amount of investment in each type of securities of the related party, including  any limitations or restrictions provided in the plan;
  2. In case of equity investments, the nature of the relationship of the person(s) who exercises the voting rights over the shares held by the fund, with the directors or officers of the related entity, or with the entity; and
  3. The amounts of gains or losses of the fund arising from its investment in the securities of the related entity.

This disclosure guidelines shall be applicable to annual financial statements for the period ending December 31, 2012 and onwards, if approved, and non-compliance with the requirements constitute a material deficiency and shall subject the entity to penalties under the existing Scale of Fines.

As this is still and ED open for public comment, entities can submit their duly signed written comments to the Office of the General Accountant, 7th Floor, SEC Building, EDSA, Greenhills, Mandaluyong City.  Corporations are encouraged as once this ED is approved, it is effective for financial statements ending December 31, 2012 and that it will take time to gather the comparative disclosure required.

To read the ED on Disclosure Guidelines on Retirement Benefit Funds, click here.

Disclaimer: Opinions expressed in this article are that of the author and information provided are for general conceptual guidance for public information and are not substitute for expert advice. Contact support@philcpa.org for more information and if you want to avail professional services. Find us on Facebook!

Orlando Calundan is a CPA who has exposures in FS audit of entities in various industries such as real estate, food/restaurants, manufacturing, service organizations and BPOs, automotive, holding/investment companies and more. He also has exposure on internal audit engagements.

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