Small and Medium Enterprise an exchange market, and entities with

assets of at least P50,000,000 and have

A Small and Medium Enterprise (SME) is defined as an 200 or more holders each holding at least
entity that: 100 shares of a class of equity securities.
• Does not have public accountability; and
c) That is not in the process of filing
• Publishes general-purpose financial statements financial statements for the purpose of
for external users. issuing any class of instruments in a
public market.
Public accountability is further defined as an entity that:

• Has debt or equity instruments traded in
a public market (or it is in the process of
issuing such instruments); or
• Holds assets in a fiduciary capacity for
a broad group of outsiders as one of its
primary businesses.
d) That is not a holder of secondary license
issued by a regulatory agency such as
bank (all types of banks), an investment
house, a finance company, an insurance
company, securities broker or dealer, a
mutual fund and pre-need company.

Small and Medium Enterprises under Philippine e) That is not a public utility.
Jurisdiction
The Philippine Securities and Exchange Commission
defines SME as an entity:

a) With total assets between P3,000,000

and P350,000,000 or with total
liabilities between P3,000,000 and
P250,000,000.

b) That is not required to file financial

statements under SEC Rule 68.1. The
SRC Rule 68.1 pertains to “listed entities”
or entities whose securities are traded in
 3) It is a subsidiary of a foreign parent
that has been applying the standards for
Micro-Business Entities a nonpublicly accountable entity for local
reporting purposes, and is considering
Micro-business entities are entities whose total assets moving to full PFRS instead of the PFRS
or total liabilities are below the P3,000,000 floor for SMEs in order to align its policies with
threshold. the expected move to full IFRS by its
foreign parent pursuant to the foreign
Micro-business entities have the option to use any country’s published convergence plan.
of the following bases of accounting in the
preparation of financial statements:
4) It has short-term projections that show it
will breach the quantitative thresholds set
a) Full PFRS
in the criteria for an SME, and the breach
b) PFRS for SMEs is expected to be significant and
c) Another acceptable basis of accounting continuing due to its long-term effect on
the entity’s asset or liability size.

Exemptions from PFRS for SMEs 5) It is a part of a group, either as

significant joint venture or an associate,
The Philippine SEC in its meeting on October 7, that is reporting under full PFRS.
2010 resolved to exempt from the mandatory
adoption of the PFRS for SMEs small and 6) It is a branch office of a foreign entity
medium-sized entity that meets any of the
reporting under full PFRS.
following criteria:
7) It has concrete plans to conduct an initial
1) It is a subsidiary of a parent reporting under
public operating within the next two
full PFRS.
years.
2) It is a subsidiary of a foreign parent
8) It has a subsidiary that is mandated to report
that will be moving toward fill IFRS
under full PFRS.
pursuant to the foreign country’s
published convergence plan.
9) It has been preparing financial
statements using full PFRS and has
decided to liquidate its assets.