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    MAHUSAY LAW211 MODULE 3-Outlines Notes

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    Jeth Mahusay

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    MAHUSAY LAW211 MODULE 3-Outlines Notes

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    Jeth Mahusay
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    © All Rights Reserved
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    Download as docx, pdf, or txt
    8 views7 pages

    MAHUSAY LAW211 MODULE 3-Outlines Notes

    Uploaded by

    Jeth Mahusay

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    You are on page 1of 7

    Name: Jeth A.

    Mahusay Date: November 2020

    Instructor: Atty. Reeld Holly Rosas Course/Year: BSA- 3

    Subject: Business Laws and Regulations

    GENERAL FINANCIAL REPORTING REQUIREMENTS

    Companies that meet the following threshold are required to file financial
    statements in

    SEC:

     Stock corporations with total assets or total liabilities of P600,000


    or more.
     Non-stock corporations with total assets or total liabilities
    of P600,000 or more 
     The Revised SRC Rule 68 distinguished large entity from publicly-
    accountable entity.
     Small and medium-sized entity is also separated into medium-
    sized and small entity.
       
    Large and/or Publicly-Accountable Entities

    A set of financial reporting framework other than the full PFRSs may be
    allowed by the Commission for certain sub-class of these entities upon
    consideration of the pronouncements or interpretations of any of the
    regulatory bodies.

        Medium-sized, Small and Micro Entities

     Are not required to file the financial statements under Part II of SRC


    Rule 68;
     Are not in the process of filing their financial statements for the
    purpose of issuing any class of instruments in a public market; and
     Are not holders of secondary licenses issued by regulatory agencies.

     
    Responsibility for Financial Statements

     The Statement of Management’s Responsibility (SMR) for Financial


    Statements shall be attached to the financial statements.

     The SMR shall cover the comparative financial statements and shall
    indicate therein such periods.
     It shall be attached to the consolidated financial statements and
    stand-alone financial statements.
     The SMR of companies covered under Part II of this Rule shall, in
    addition to the requirements, be signed under oath. The Chairman of
    the Board, Chief Executive Officer and Chief Financial Officer shall all
    sign the SMR. For registrants of securities, the SMR shall be attached
    to both audited annual financial statements and reviewed interim
    financial statement.

    Accreditation Categories 

    Commission under the appropriate category:

     Issuers of registered securities which have sold a class of securities


    pursuant to a registration under Section 12 of the SRC except those
    issuers of registered timeshares, proprietary and non- proprietary
    membership certificates which are covered in Group B. 
      
     Issuers with a class of securities listed for trading in an Exchange;
     Public companies or those which have total assets of at least Fifty
    Million Pesos (P50 Million) or such other amount as the Commission
    shall prescribe, and having two hundred (200) or more holders each
    holding at least one hundred (100) shares of a class of its equity
    securities.
     Issuers of registered timeshares, proprietary and non-proprietary
    membership certificates, and corporations applying for the registration
    of such securities
     Investment houses;
     Brokers and dealers of securities;
       
     Investment companies that are not in the process of registering
    securities or have no registered securities yet
      
     Government securities eligible dealers;
          
     Universal banks registered as underwriters of securities;
       
     Investment company advisers;
     Special purpose corporations registered under the Securitization Act of
    2004 and its implementing rules; and
     Such other corporations which may be required by law to be
    supervised by the Commission.
    Scope and Limitation of Accreditation

     Accreditation under Group A shall be considered a general


    accreditation which shall allow the independent auditor to also audit
    companies under Groups B and C.
     Independent auditors with Group B accreditation can likewise audit
    companies under Group C. Only accredited partners, with
    accreditation under the appropriate group category, are allowed to
    certify financial statements of the firm’s clients with secondary
    licenses.

     Reportorial Requirements

    Additional disclosure on the findings on the entity is required. It must be


    disclosed by the Audit Committee, or if there is no such committee, by the
    company’s Chairman of the Board to the Commission:

     Any finding of:


    a. Violation of SRC Rule 68:
    b. Offering of securities without prior registration with the
    Commission under the SRC
    c. Engaging in the business of financing or lending without a
    secondary license.
       
     Any material finding involving fraud or error;
        
     Losses or potential losses the aggregate of which amounts to at
    least ten percent of the consolidated total assets of the company;
      
     Any finding to the effect that the consolidated assets of the
    company, on a going concern basis, are no longer adequate to cover
    the total claims of creditors; and
     Material weaknesses in internal control which may lead to financial
    reporting problems.

    Other Documents to be Filed with the Financial Statements

     Non-Stock and Non-Profit Organizations Including Foundations;


      
     Issuers of Securities to the Public and Stock Corporations with
    Unrestricted Retained Earnings in Excess of 100% of Paid-in Capital
    Stock;
      
     Financing Companies;
      
     Mutual Funds;
      
     Investment Houses;
       
     Listed Companies and Investment Houses that are part of a
    Conglomerate or Group of Companies; and
        
     Listed Companies that recently offered securities to the public
    (either as initial or additional offering)

    Additional Requirements for Issuers of Securities to the Public

    Registration of Securities Pursuant to the ASEAN Capital Market

    Specific requirements:
    ✓    
    Adoption of the IFRS as the basis of financial statements of foreign
    companies that will undergo cross border offerings or listings in the
    Philippines.
    ✓    
    Submission by the foreign issuer’s financial statements that are audited by
    a foreign audit firm are subject to the following requirements:

     The foreign audit firm should be accredited or licensed and/or


    recognized in its home jurisdiction as qualified to audit issuers of
    securities to the public.
     The foreign audit firm should be affiliated with a local firm that is
    accredited by the Commission under Group A category.
     The SMR, schedules and other attachments required under SRC Rule
    68 should be submitted with the financial statements.
    ✓   
    Modification of financial statement requirements in cases where the
    subject of a registration statement is asset-backed securities in order to
    align with those in other ASEAN countries.
       
    Interim Financial Statements

     The interim financial statements need not be audited. However, in case of


    an IPO of securities by a company, such interim financial statements shall be
    audited by an independent auditor accredited bythe Commission under the
    prescribed category and shall be complete in details as in a full fiscal year
    financial report.

    Pro-forma Financial Information

     There are no changes in the provisions of pro forma financial


    information except for the Report of Independent Auditor. 
    SRC Rule 68 as amended

    Attestation of Independent Auditor

    The pro forma financial information that shall be submitted with the
    registration statement shall be accompanied by a report of an independent
    auditor accredited by the Commission under Group A category. 

    Consolidated Financial Statements

      The Disclosure about Subsidiaries Not Consolidated and 50 Percent or


    Less Owned Persons section was deleted in the revised SRC Rule.

     Penalties and Other General Implementing Provisions

     Penalties

    Violations of Companies subject to penalty:

     Material misrepresentation in the financial statements;


     Any material misstatement in the financial statements for failure to
    comply with the applicable financial reporting framework.
     Failure to submit any basic component of the financial statements;
     Failure to submit financial statements audited by a qualified
    independent certified public accountant;
     Failure to submit a complete SMR; and
     Failure to comply with any other requirements under Part I or II of this
    Rule.

     Test of Materiality

      Omissions or misstatements of items shall be material if they could


    individually or collectively, influence the economic decisions that users
    make on the basis of the financial statements.  

    Quantitative Test 

    1. Deficiency or Inconsistency
     Failure to submit any component of the financial statements
    prescribed under this Rule shall be considered a material deficiency.
     

     2. Misstatement

    A misstatement of the financial statements may result from a deviation


    from prescribed policy, misrepresentation, fraud or error.

    Qualitative Considerations

     Whether the misstatement or error:

     Affects compliance with debt covenants or other contractual


    requirements.
      
     Relates to the incorrect selection or application of an accounting
    policy that has an immaterial effect on the current period’s financial
    statements but is likely to have a material effect on future periods’
    financial statements.
     Masks a change in earnings or other trends, especially in the context
    of general economic and industry conditions.
     Affects ratios used to evaluate the entity's financial position, results of
    operations or cash flows.
     Affects segment information presented in the financial statements.
     
     Has the effect of increasing management compensation, for example,
    by ensuring that the requirements for the award of bonuses or other
    incentives are satisfied..
     
     Affects compliance with regulatory requirements (including BIR, BSP
    and other government agencies).
      
    Re-issuance of Financial Statements

    Any re-issuance shall be required within forty-five (45) calendar days from
    receipt of the order of the Commission. Such amendment shall comply with
    the re-issuance requirements under applicable auditing standard.
      
    A corporation covered by SRC Rule 68 Part II and re-issuing its AFS shall
    notify all concerned parties, such as its stockholders, creditors and investors
    of such amendment through publication of a notice in a newspaper of
    general circulation indicating the reason for the amendment and the fact
    that the financial statements have been submitted to the Commission.
     
     

     Registration Statements
        
     Consolidated Statements of Comprehensive Income
        
     Consolidated Statements of Changes in Equity
       
     Consolidated Statements of Cash Flows
      
     Age Requirement for Financial Statements

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