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Revised SRC Rule 68 Summary
Revised SRC Rule 68 Summary
Regulation Code
Rule 68
d) To incorporate in the rule the best corporate governance practices that are
directly related to the preparation and audit of financial statements.
Objectives of the Revisions to SRC Rule 68
c) To address the noted gap on the quality and integrity of financial reports of
entities that solicit donations or contributions from the public;
e) To change the current rule that allows the accreditation of the firm only if
the category is Group C;
c) To align the age requirement in the Rule for financial statements with what
is being adopted by ASEAN countries, in preparation to the expected
capital market integration;
Objectives of the Revisions to SRC Rule 68
Part II. Additional Requirements for Part II. Additional Requirements for
Issuers of Securities to the Public Issuers of Securities to the Public
Annexes
Part I – General Financial Reporting Requirements
1. Application and Definition of Terms
Section SRC Rule 68 - 2011 Version Revised SRC Rule 68
d) Inconsistency of accounting
policies with the applicable
financial reporting
framework.
Part I – General Financial Reporting Requirements
1. Application and Definition of Terms
Section SRC Rule 68 - 2011 Version Revised SRC Rule 68
Definition of Terms Used Fraud means an intentional act Fraud means an intentional act
in this Rule by one or more individuals by one or more individuals
among management, among management,
employees, or third parties that employees, TCWG, or third
results in a misrepresentation parties involving the use of
of FS which reduces or deception to obtain an unjust or
increases the consolidated total illegal advantage that results in
assets, total liabilities or income a misrepresentation of FS
of the company by 5%. which reduces or increases the
related accounts by 10% or
more. For issuers of securities
to the public and public
companies as identified under
Section 3 (B) (i) (a) (1 to 3) of
Part I of this Rule, the test to be
used shall be 5%.
Part I – General Financial Reporting Requirements
1. Application and Definition of Terms
Section SRC Rule 68 - 2011 Version Revised SRC Rule 68
f) Misrepresentation in, or
intentional omission from,
the FS of events,
transactions or other
significant information;
g) Collusion
h) Forgery; or
Definition of Terms Used b) The corporation’s and its b) The subsidiary's total assets,
in this Rule other subsidiaries' revenues or net income (loss)
proportionate share of the (after intragroup eliminations)
total assets (after inter- exceed 20% of the total
company eliminations) of the consolidated assets,
subsidiary exceeds 10% of revenues, or net income
the total consolidated assets (loss) as of the most recently
as of the end of the most completed fiscal year.
recently completed fiscal
year; or
Financial Reporting
Framework Large and/or Public Interest Large and/or Public Interest
Entities Entities
a) For purposes of this Rule,
large or publicly a) For purposes of this Rule,
accountable entities are large entities are those
those that meet any of the with total assets of more
following criteria: than P350 Million or total
liabilities of more than P250
Million; or
1. Total assets of more than
P350 Million or total
liabilities of more than
P250 Million; or
Part I – General Financial Reporting Requirements
2. General Guides to FS Preparation
Section SRC Rule 68 - 2011 Version Revised SRC Rule 68
Financial Reporting
Framework Large and/or Public Interest Large and/or Public Interest
The financial statements Entities Entities
that shall be prepared
and filed by entities 2. Are required to file financial b) For purposes of this Rule,
statements under Part II of public entities are those that
covered by this Rule
SRC Rule 68; or meet any of the following
shall be in accordance criteria:
with the financial 1. Are holders of secondary
3. Are in the process of filing
reporting framework as their FS for the purpose of licenses issued by
prescribed under this issuing any class of regulatory agencies; or
Section. instruments in a public 2. Are required to file financial
market; or statements under Part II of
SRC Rule 68; or
4. Are holders of secondary 3. Are in the process of filing
licenses issued by their FS for the purpose of
regulatory agencies. issuing any class of
instruments in a public
market; or
Part I – General Financial Reporting Requirements
2. General Guides to FS Preparation
Section Revised SRC Rule 68
Financial Reporting
Framework Public Interest Entities
4. Such other corporations that the Commission may consider
in the future as imbued with public interest regardless of the
lack of a requirement to obtain a secondary license from the
Commission and may fall under the following criteria:
Financial Reporting
Framework Large and/or Public Interest Large and/or Public Interest
Entities Entities
Financial Reporting
Framework Small and Medium-sized Medium-sized Entities
Entities (SMEs) (SMEs)
SMEs are those that meet all Essentially the same but with
of the following criteria: distinction between Small and
Medium-sized Entities
1. Total assets of between
P3M to P350M or total Medium-sized Entities - Total
liabilities of between P3M to assets of more than P100M to
P250M. If the entity is a P350 M or total liabilities of
parent company, the said more than P100M to P250 M.
amounts shall be based on
the consolidated figures; Small Entities - Total assets
of between P3M to P100 M or
total liabilities between P3M to
P100 M.
Part I – General Financial Reporting Requirements
2. General Guides to FS Preparation
Section SRC Rule 68 - 2011 Version Revised SRC Rule 68
Financial Reporting
Framework Small and Medium-sized Small and Medium-sized
Entities (SMEs) Entities (SMEs)
Financial Reporting
Framework Small and Medium-sized Small and Medium-sized
Entities (SMEs) Entities (SMEs)
Financial Reporting
Framework
1. An SME which is a Same. Also applicable for SEs.
subsidiary of a parent
company reporting under
the PFRS;
Financial Reporting
Framework
3. An SME which is a Removed.
subsidiary of a foreign
parent company and has
been applying the standards
for a non-publicly
accountable entity for local
reporting purposes. It is
considering moving to
PFRS instead of the PFRS
for SMEs in order to align its
policies with the expected
move to full IFRS by its
foreign parent company
pursuant to its country’s
published convergence
plan;
Part I – General Financial Reporting Requirements
2. General Guides to FS Preparation
Section SRC Rule 68 - 2011 Version Revised SRC Rule 68
Financial Reporting
Framework
4. An SME, either as a Same. Also applicable for SEs.
significant joint venture or
associate, is part of a group
that is reporting under the
PFRS;
Financial Reporting
Framework
6. An SME which has a Same.
subsidiary that is mandated
to report under the PFRS;
Financial Reporting
Framework
8. An SME which has a Same.
concrete plan to conduct an
IPO within the next 2 years;
10. Such other cases that the Same. Also applicable for SEs.
Commission may consider
as valid exceptions from the Note: For purposes of applicability to
mandatory adoption of SEs, replace SME with SEs and
PFRS/IFRS with full PFRS or PFRS for
PFRS for SMEs. SMEs/full IFRS or IFRS for SMEs.
Part I – General Financial Reporting Requirements
2. General Guides to FS Preparation
Section SRC Rule 68 - 2011 Version Revised SRC Rule 68
Financial Reporting
Framework
An SME availing of any of the Same. Also applicable for SEs.
above-mentioned grounds for
exemption shall provide a
discussion in its notes to FS of
the facts supporting its adoption
of the PFRS instead of the
PFRS for SMEs.
Note: For purposes of applicability to
SEs, replace SME with SEs and
PFRS/IFRS with full PFRS or PFRS for
SMEs/full IFRS or IFRS for SMEs.
Part I – General Financial Reporting Requirements
2. General Guides to FS Preparation
Section SRC Rule 68 - 2011 Version Revised SRC Rule 68
Financial Reporting
Framework
Breaches to quantitative If an SME that uses the PFRS Same. Also applicable for SEs.
threshold for SMEs in a current year
breaches the floor or ceiling of
the size criteria at the end of
that current year, and the event
that caused the change is
considered “significant and
continuing”, the entity shall
Note: For purposes of applicability to
transition to the applicable SEs, replace SME with SEs and
financial reporting framework in PFRS/IFRS with full PFRS or PFRS for
the next accounting period. If SMEs/full IFRS or IFRS for SMEs.
the event is not considered
“significant and continuing”, the
entity can continue to use the
same financial reporting
framework it currently uses.
Part I – General Financial Reporting Requirements
2. General Guides to FS Preparation
Section SRC Rule 68 - 2011 Version Revised SRC Rule 68
Financial Reporting
Framework
Breaches to quantitative The determination of what is Same. Also applicable for SEs.
threshold “significant and continuing”
shall be based on
management’s judgment taking
into consideration relevant
qualitative and quantitative
factors. As a general rule, 20%
or more of the consolidated
total assets or total liabilities
would be considered
significant.
Part I – General Financial Reporting Requirements
2. General Guides to FS Preparation
Section SRC Rule 68 - 2011 Version Revised SRC Rule 68
Financial Reporting
Framework Micro Entities Micro Entities
The financial statements
that shall be prepared Micro entities have the option to Micro entities have the option to
and filed by entities use as their financial reporting use as their financial reporting
covered by this Rule framework either the income framework either the income
shall be in accordance tax basis, accounting standards tax basis or PFRS for SEs,
with the financial in effect as of December 31, provided however, that the FS
reporting framework as 2004 or PFRS for SMEs, shall at least consist of
prescribed under this provided however, that the FS the SMR, Auditor’s Report,
Section. shall at least consist of Statement of Financial Position,
the SMR, Auditor’s Report, Statement of Income and Notes
Statement of Financial Position, to FS, all of which cover the 2-
Statement of Income and Notes year comparative periods, if
to FS, all of which cover the 2- applicable.
year comparative periods, if
applicable.
Part I – General Financial Reporting Requirements
2. General Guides to FS Preparation
Section SRC Rule 68 - 2011 Version Revised SRC Rule 68
Financial Reporting
Framework Micro Entities Micro Entities
The Commission may from time to time prescribe other criteria for
each of the above-stated financial reporting framework.
Part I – General Financial Reporting Requirements
2. General Guides to FS Preparation
Section Revised SRC Rule 68
Audit of Financial
Statements by Group A Group A
Independent Auditors
The following entities 1. Issuers of registered 1. Issuers of registered
shall have independent securities which have sold a securities which have sold a
auditors accredited by class of securities pursuant to class of securities pursuant to
the Commission under a registration under Section a registration under Section
the appropriate 12 of the SRC except those 12 of the SRC except those
category: issuers of registered issuers of registered
timeshares, proprietary and timeshares, proprietary and
non-proprietary membership non-proprietary membership
certificates which are covered certificates which are covered
in Group B; in Group B. This category
shall also cover corporations
applying for the registration of
their securities.
Part I – General Financial Reporting Requirements
3. Qualifications and Reports of Independent Auditors
Section SRC Rule 68 - 2011 Version Revised SRC Rule 68
Audit of Financial
Statements by Group A Group A
Independent Auditors
The following entities 2. Issuers with a class of Same.
shall have independent securities listed for trading in
auditors accredited by an Exchange;
the Commission under
the appropriate 3. Public companies or those Same.
category: which have total assets of at
least P50M or such other 4. Clearing agency and clearing
amount as the Commission agency as depository;
shall prescribe, and having
200 or more holders each 5. Stock and securities
holding at least 100 shares of exchange/s and other SROs.
a class of its equity securities.
Part I – General Financial Reporting Requirements
3. Qualifications and Reports of Independent Auditors
Section SRC Rule 68 - 2011 Version Revised SRC Rule 68
Audit of Financial
Statements by Group B Group B
Independent Auditors
The following entities 1. Issuers of registered 1. Issuers of registered
shall have independent timeshares, proprietary and timeshares, proprietary and
auditors accredited by non-proprietary membership non-proprietary membership
the Commission under certificates; certificates; and corporation
the appropriate applying for the registration of
category: such securities;
Audit of Financial
Statements by Group B Group B
Independent Auditors
The following entities 4. Investment companies; 4. Investment companies that
shall have independent are not in the process of
auditors accredited by registering securities or have
the Commission under no registered securities yet;
the appropriate
category: 5. Government Securities 5. Government Securities
Eligible Dealers (GSEDs); Eligible Dealers (GSEDs);
6. Universal Banks Registered 6. Universal Banks Registered
as Underwriters of Securities; as Underwriters of Securities;
7. Investment Company 7. Investment Company
Advisers; Advisers;
8. Clearing Agency and Clearing 8. Transferred to Group A
Agency as Depository;
Part I – General Financial Reporting Requirements
3. Qualifications and Reports of Independent Auditors
Section SRC Rule 68 - 2011 Version Revised SRC Rule 68
Audit of Financial
Statements by Group B Group B
Independent Auditors
The following entities 9. Stock and Securities 9. Transferred to Group A
shall have independent Exchange/s;
auditors accredited by 10. Removed.
the Commission under 10. Special Purpose Vehicles
registered under the Special
the appropriate 11. Special Purpose Corporations
Purpose Vehicle Act of 2002
category: registered under the
and its implementing rules;
Securitization Act of 2004 and
11. Special Purpose Corporations its implementing rules;
registered under the 12. Such other corporations
Securitization Act of 2004 and which may be required by law
its implementing rules; to be supervised by the
12. Such other corporations Commission.
which may be required by law
to be supervised by the
Commission.
Part I – General Financial Reporting Requirements
3. Qualifications and Reports of Independent Auditors
Section SRC Rule 68 - 2011 Version Revised SRC Rule 68
Audit of Financial
Statements by Group C Group C
Independent Auditors
The following entities 1. Financing Companies; 1. Financing Companies whose
shall have independent 2. Lending Companies; assets in the preceding year
auditors accredited by 3. Transfer Agents. are above P10M;
the Commission under
the appropriate 2. Lending companies whose
category: assets in the preceding year
are above P5 Million;
3. Transfer agents;
Part I – General Financial Reporting Requirements
3. Qualifications and Reports of Independent Auditors
Section Revised SRC Rule 68
Rotation of External
Auditors The independent auditors or in The independent auditors or in
the case of an audit firm, the the case of an audit firm, key
signing partner, of the audit partners, of the
aforementioned regulated aforementioned regulated
entities shall be rotated entities under Groups A to C,
after every 5 years of except for non-stock non-profit
engagement. A two-year corporations, shall be rotated
cooling off period shall be In accordance with the 2018
observed in the re-engagement IESBA Code of Ethics.
of the same signing
partner or individual auditor.
Part I – General Financial Reporting Requirements
3. Qualifications and Reports of Independent Auditors
Section SRC Rule 68 - 2011 Version Revised SRC Rule 68
Audit Reports of
Independent Auditors v. Unless exempted under v. Unless exempted under
Capital deficiency sub-paragraph (viii) below, sub-paragraph (vi) below,
the external auditor of a the external auditor of a
company which has company which has
incurred a capital incurred a capital
deficiency, shall provide in deficiency, shall provide in
the audit report an the Audit Report a Material
emphasis paragraph Uncertainty Related to
indicating the following Going Concern section
information: pursuant to the auditing
standards which includes a
a) The fact that the reference to the Note to FS.
company has incurred Such note shall discuss the
a capital deficiency concrete plan of the
that raises an issue on company to address the
its going concern capital deficiency.
status;
Part I – General Financial Reporting Requirements
3. Qualifications and Reports of Independent Auditors
Section SRC Rule 68 - 2011 Version Revised SRC Rule 68
Audit Reports of
Independent Auditors b) A brief discussion of a
Capital deficiency concrete plan of the
company to address
the capital deficiency
and reference to the
note to FS that
provides a complete
disclosure of the said
plan;
Audit Reports of
Independent Auditors vi. In case the company fails Removed.
Capital deficiency to present to the external
auditor a concrete plan or
sufficient supporting
documents to address the
capital deficiency, the
auditor shall provide an
emphasis paragraph
indicating that the company
is no longer a going
concern and should use
liquidation basis in the
preparation of its FS.
Part I – General Financial Reporting Requirements
3. Qualifications and Reports of Independent Auditors
Section SRC Rule 68 - 2011 Version Revised SRC Rule 68
Audit Reports of
Independent Auditors vii. The independent auditor Removed.
Capital deficiency shall likewise consider
other instances, e.g., loss
of major market/customers
or ban of major product,
which would raise an issue
on going concern status of
the company and that, shall
require an emphasis
paragraph in his report as
required under sub-
paragraph (v) above.
Part I – General Financial Reporting Requirements
3. Qualifications and Reports of Independent Auditors
Section SRC Rule 68 - 2011 Version Revised SRC Rule 68
Audit Reports of
Independent Auditors viii. The requirement under sub-paragraph (v) above shall not apply to a
Capital deficiency company that incurred a capital deficiency due to any of the following
reasons:
Audit Reports of
Independent Auditors c) An entity has incurred capital deficiency during the current
Capital deficiency period only due to a significant adjustment arising from the
adoption of new financial reporting framework or occurrence of
non-recurring transaction for the period;
Audit Reports of
Independent Auditors
Supplemental Written iii. To support the above ii. To support the above
Statement statement, the auditor may statement, the auditor may
undertake the audit undertake the audit
procedures he deems procedures he deems
necessary, such as the necessary, such as the
following: following:
Audit Reports of
Independent Auditors
Supplemental Written b) Inspect the Stock and b) Inspect the Stock and
Statement Transfer Book and Transfer Book and
conduct the tests conduct the tests
needed to validate their needed to validate their
entries and balances. entries and balances.
Part I – General Financial Reporting Requirements
4. Comparative Financial Statements
Section Revised SRC Rule 68
Audit Reports of
Independent Auditors
Statement of Financial D. An explanation through a note or otherwise shall be made
Position explaining the reasons for filing a single-period statement, e.g.
it is the first (1st) period of a new company.
Audit Reports of
Independent Auditors
Statement of Financial ii. If the financial statements of a prior-period have been
Position audited by another independent certified public
accountant whose report is not presented, the statements
shall be marked to disclose prominently that they are not
being reported upon by the current auditor. If the auditor of
the financial statements for such periods did not give an
unqualified opinion on such statements, the auditor for the
current year shall indicate in an “other matter” paragraph
of his report (i) that the financial statements of the prior-
period were audited by other auditors, (ii) the date of their
report, (iii) the type of opinion expressed by the
predecessor auditor, and (iv) the substantive reasons it
was qualified.
Part I – General Financial Reporting Requirements
5. Other Documents to be Filed with the FS
Section Revised SRC Rule 68
Audit Reports of
Independent Auditors
Issuers of securities to A Reconciliation of Retained A Reconciliation of Retained
the public, and stock Earnings Available for Dividend Earnings Available for Dividend
corporations with Declaration which shall present Declaration, which shall present
unrestricted retained the prescribed adjustments as the prescribed adjustments in
earnings in excess of indicated in Annex 68-C of the prescribed Form per Annex
100% of paid-in capital this Rule 68–D of this Rule, must be
stock presented. This reconciliation
must be covered by an Auditor’s
Report.
Part I – General Financial Reporting Requirements
5. Other Documents to be Filed with the FS
Section Revised SRC Rule 68
This schedule, in the prescribed Form per Annex 68-E of this Rule,
shall be submitted with the AFS and if applicable, with the
company’s interim financial statements. For listed companies, this
schedule be covered by an Auditor’s Report.
Part I – General Financial Reporting Requirements
5. Other Documents to be Filed with the FS
Section Revised SRC Rule 68
Audit Reports of A schedule showing the following information for two (2)
Independent Auditors comparative periods:
Financing Companies
i. ratio or percentage of total real estate investments to total
assets;
ii. total receivables to total assets;
iii. total DOSRI’s receivables to net worth; and
iv. amount of receivables from a single corporation to total
receivables.
This schedule, in the prescribed Form per Annex 68-F of this Rule,
shall be submitted with the annual AFS and if applicable, with the
company’s interim financial statements. This schedule need not be
covered by an Auditor’s Report.
Part I – General Financial Reporting Requirements
5. Other Documents to be Filed with the FS
Section Revised SRC Rule 68
Audit Reports of A schedule, in the prescribed Form per Annex 68-H of this Rule
Independent Auditors showing the following information:
Investment Houses
Details (per issue) of underwriting activities for the year:
Audit Reports of
Independent Auditors
Listed Companies and A map showing the relationships between and among the
Investment Houses that company and its ultimate parent company, middle parent,
are Part of a subsidiaries or co-subsidiaries, and associates, wherever located
Conglomerate or or registered. The map must be covered by an Auditor’s Report.
Group of Companies
Part I – General Financial Reporting Requirements
5. Other Documents to be Filed with the FS
Section Revised SRC Rule 68
Audit Reports of
Independent Auditors
Listed Companies that A schedule, in the prescribed Form per Annex 68-I of this Rule,
Recently Offered showing the following amounts, shall be submitted with the annual
Securities to the Public AFS and if applicable, with the company’s interim FS up to such
(Either as Initial or period when all the proceeds from the offering have been utilized.
Additional Offering)
a) Gross and net proceeds as disclosed in the final prospectus;
b) Actual gross and net proceeds;
c) Each expenditure item where the proceeds were used; and
d) Balance of the proceeds as of end of reporting period.
Audit Reports of
Independent Auditors
Others Such other schedules or components that the Commission may
require through subsequent pronouncements.
Responsibility for FS
The SMR of companies covered under Part II of this Rule shall, in
addition to the requirements under Section 2 (B) of Part I of this
Rule, be signed under oath.