ASC Gives Temporary Relief to Non-publicly Accountable Entities on Application of New Standards
The Accounting Standards Council (ASC) approved the issuance of Philippine Accounting Standard (PAS 101), Financial Reporting Standards for Non-publicly Accountable Entities. The Standard is intended to give temporary relief to non-publicly accountable entities or NPAEs in the application of new Philippine Accounting Standards (PAS) and Philippine Financial Reporting Standards (PFRS) that became effective in 2005.
When initially issued, the new PAS and PFRS were intended to be applicable to all reporting entities required to file financial statements in accordance with Philippine GAAP. Due to the significant number of small and medium-sized entities (SMEs) in the Philippines and the IASB decision in 2005 to undertake a project to develop accounting standards suitable for entities that do not have public accountability, the ASC has decided to give relief to these companies.
The Standard gives an entity that qualifies as an NPAE the option not to apply the new PAS and PFRS that became effective in 2005 in their 2005 financial statements and to apply instead the accounting standards that were effective as of December 31, 2004. The new PAS and PFRS include, among others, the PAS on the effects of foreign exchange, employee benefits, and financial instruments and the PFRS on business combinations, share based payments and assets held for disposal. An NPAE, however, may still choose to apply some or all of the new PAS and PFRS.
For purposes of the Standard, an NPAE is an entity other than the following entities which are considered to have public accountability:
- an entity required to file financial statements under SEC Rule 68.1 (i.e., listed entity, issuer that sell SEC-registered securities, issuer with assets of at least P50 million and with 200 or more stockholders each holding at least 100 shares of a class of its equity securities);
- an entity in the process of filing its financial statements for the purpose of issuing any class of instruments in a public market;
- an entity that holds assets in a fiduciary capacity for a broad group of outsiders (e.g., a bank, an investment house, a finance company, an insurance company, a securities broker/dealer, a mutual fund and a pre-need company);
- an entity that is a public utility or similar entity that provides an essential public service; or
- an entity that is economically significant [i.e., an entity with (consolidated) total assets of more than P250 million or (consolidated) total liabilities of more than P150 million]; or
- an entity that is considered by its primary regulator to have public accountability.
If an entity presents consolidated financial statements, consolidated total assets or consolidated total liabilities are used in determining whether it is economically significant. For purposes of the Standard, an entity that is a subsidiary of a parent that is considered to have public accountability is similarly considered to have public accountability.
The Standard is effective for annual periods beginning on or after January 1, 2005. The Standard shall be effective for 2005 to 2007, unless revoked earlier.
The Standard has been forwarded to the Board of Accountancy and Professional Regulation Commission for approval.
Copies of the Standard will soon be available at PICPA.