Speakers Jesse Rey L. Meneses Mr. Jesse Rey L. Meneses assists clients in the areas of internal control and compliance. Meneses once served as a volunteer in the review of the financial statements submitted to SEC during the early years of the adoption of the IFRS. He is a member of the Government Association of Internal Auditors.
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Like the bigger businesses, these smaller entities are mandatory as well to submit financial reports to the tax authorities and other applicable government agencies like the Securities and Exchange Commission SEC.
However, the struggle of complying with the required financial reporting standard has been there for quiet long, causing these smaller businesses to just ignore the requirements rather than comply due the complex nature of the available financial reporting frameworks. To recognize the significant contributions of these business players, the standard setting bodies in the Philippines developed a more simplified and more tailored standards to meet the financial reporting needs of small entities, these standards promote easier application of accounting concepts to specific business transactions.
Based on SEC Memorandum Circular , an entity is considered a small entity if, and only if, it satisfies ALL of the following criteria: It has total assets or total liabilities between Php3,, to Php,, If the entity is a parent company, the said figures shall be based on the consolidated amount; and, It does not have public accountability.
Not having public accountability simply means that the shares of the business is not traded in any stock exchange, and it is not in the process of offering its shares to the public through an initial public offering. It must also not have any secondary licenses from SEC.
Given the following criteria, it would apply mostly on closely held family corporations, partnerships and sole proprietor businesses provided they are within the range of the total assets or liabilities as provided above. However, any of the conditions listed below will exempt an entity from using the PFRS for Small Entities: A small entity has a different functional currency i.
Please note that all entities availing of the exemption mentioned above shall disclose in the notes to financial statements its adoption of a different reporting standard. In addition, entities mandated to use PFRS for Small Entities but opted to use a different accounting standard must explain in its notes the reason for departure from the standard.
Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion.
2019 Comprehensive Review of the IFRS for SMEs Standard
The IFRS for SMEs Standard
Philippine Financial Reporting Standards (PFRS) for SMEs
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