Example of Financial Statements Prepared Under PFRS for SMEs

Small and Medium-sized Entities (SMEs) are widespread in the Philippines.  According to the DTI-NCR, SMEs comprises of 99.6% (in number) of the Philippine enterprise.  It’s inevitable, therefore, that there are many companies reporting under Philippine Financial Reporting Standards for Small and Medium-sized Entities (PFRS for SMEs). This article will discuss about the important things you need to know about PRFS for SMEs.

About PFRS for SMEs

In accounting parlance, SMEs are those entities that have P3 million to P350 million assets and or P3 million to P250 million liabilities, athough these are not the exclusive criteria.PFRS for SMEs is the accounting standards applicable for entities qualifying as SMEs as defined by the SRC Rule 68, As Amended, unless exempted. 

PFRS for SMEs was adopted by the Securities and Exchange Commission on December 3, 2009.  The PFRS for SMEs is effective for annual periods beginning on or after January 1, 2010, except certain provisions in Section 24, applicable for construction contracts which is effective January 1, 2012.  We want to clarify that the PFRS for SMEs is adopted from the IFRS for SMEs are that there were no difference in the provisions.

Click the links below to download the PFRS for SMEs and the Basis for Conclusion:

Illustrative PFRS for SMEs Financial Statements

Entities qualifying to apply for PFRS for SMEs will get lose without an illustration on how are the provisions applied and what matters are need to disclosed.  Although the PFRS for SMEs in itself already contains almost all the information we need, it is so much inconvenient to go through the thick standard.  That is why we have this IFRS for SMEs Illutrative Financial Statements and Disclosures Checklist.  As the title suggests, the content of this file is an example of a financial statements prepared under PFRS for SMEs and a checklist of all required disclosures.  To get a copy of the illustrative PFRS financial statements and disclosure checklist, click the link below:

You may also want to see other examples, we have seen this Illustrative Corporate Consolidated Financial Statements for PFRS for SMEs courtesy of Isla Lipana & Co, Click Here.

Consideration of Other Local Reporting Requirements

As mentioned earlier, the content of IFRS for SMEs is the same as the PFRS for SMEs, except of course to the matters required to be disclosed or presented by some local regulations.  Therefore, some matters required by the SRC Rule 68, As Amended, including the Financial Reporting Bulletins issued to clarify provisions of SRC Rule 68, As Amended may have to be considered in the preparation of the PFRS for SMEs financial statements.

Some information required by the by the Bureau of Internal Revenue are likewise not considered in the illustrative PFRS for SMEs financial statements, such as the Supplementary Information Required Under RR 19-2011 and 15-2010.

In other words, we have the guidance and example on how to prepare PFRS for SMEs financial statements but we also have to consider the local regulations in assessing the completeness of disclosures.  If you are in doubt, you can always consult your professional accountants and auditors.

Exemption to PFRS for SMEs

  1. It is a subsidiary of a parent company reporting under the full PFRS;
  2. It is a subsidiary of a foreign parent company that will be moving towards IFRS pursuant to the foreign country’s published convergence plan;
  3. It is a subsidiary of a foreign parent company that has been applying the standards for a non-publicly accountable entity for local reporting purposes, and is considering moving to full PFRS instead of the PFRS for SMEs to align its policies with the expected move to full IFRS by its foreign parent company pursuant to its country’s published convergence plan;
  4. It has short-term projections that show that it will breach the quantitative thresholds set in the criteria for an SME, and the breach is expected to be significant and continuing due to its long-term effect on the company’s asset or liability size;
  5. It is part of a group, either as a significant joint venture or an associate, that is reporting under the full PFRS;
  6. It is a branch office of a foreign company reporting under the full IFRS;
  7. It has concrete plans to conduct an initial public offering within the next two years;
  8. It has a subsidiary that is mandated to report under the full PFRS;
  9. It has been preparing financial statements using full PFRS and has decided to liquidated its assets

An SME that avails of the exemption must disclose in the notes to its financial statements the facts that support its adoption of full PFRS instead of the PFRS for SMEs.


The Philippine Financial Reporting Standards Council (FRSC) adopted the following Q&As issued by the IASB:

Q&As are published by the SME Implementation Group (SMEIG), which assists the IASB in supporting the implementation of the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs).

The Q&As are intended to provide non-mandatory and timely guidance on specifi c accounting questions that are being raised with the SME Implementation Group by users implementing the IFRS for SMEs.

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One Response to "Example of Financial Statements Prepared Under PFRS for SMEs"

  1. hi! does this apply also to businesses that are NOT corporations but have assets that are more than P3M, such as businesses that are put up as sole proprietorships?


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