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Accounting & Auditing News

Amendments to SRC Rule 68
SEC Financial Reporting Requirements On December 1, 2011, the Securities and Exchange Commission has posted on its website the amendments to Securities and Regulation Code (SRC) Rule 68 and 68.1. The SRC Rule 68 prescribes the general form and content of financial statements of entities required to file to the SEC while the SRC Rule 68.1 provides the additional financial reporting requirements for listed and public entities. These two separate rules have been consolidated and were labeled as Parts I and II of the amended SRC Rule. Some of the new and clarified requirements provided by the amended rule are as follows: It contains guidelines on selecting the applicable financial reporting framework for reporting entities (Part I.2.A); It made minor revisions on the Statement of Managements Responsibility (SMR) to align it with the wordings of PSA 700 (Redrafted) Forming an Opinion and Reporting on Financial Statements (Part I.2.B.ii); It clarified that the SMR of a stock corporation is required to be signed by the entitys Chairman of the Board, Chief Executive Officer and Chief Finance Officer, unless provided in the Companys by -laws, that persons holding equivalent position as that of the aforementioned signatories shall sign the Statement (Part I.2.B.iii); It mandates that a reporting entity shall neither allow nor require its independent auditor to prepare its financial statements and/or any of its supporting documents. (Part I.2.B.viii); It requires an independent auditor of an entity incurring a capital deficiency to provide an emphasis of matter paragraph on its independent auditors report indicating the fact that the company has incurred a capital deficiency and that it raises an issue on its going concern status, a brief discussion of a concrete plan of the company to address the capital deficiency and reference to the note to financial statements that provides a complete disclosure of the said plan and a statement that the auditor conducted sufficient audit procedures to verify the validity of the aforementioned plan (Part I.3.iv.v); and It provides additional documents that should be filed along with the audited financial statements for certain entities such as: non-stock and non-profit organizations, foundations, financing companies, Mutual funds, investment houses, and other entities with secondary licenses (Part I.4).

Part II of the amended SRC Rule 68 prescribes the additional requirements for issuers of securities to the public. The amended SRC Rule shall become effective for audited financial statements covering periods ending December 31, 2011 and onwards and for interim financial statements starting the first quarter of 2012 and thereafter. You may refer to the attached file for the full text of the amended SRC Rule 68.

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Wilfredo A. Baltazar Audit Partner wbaltazar@deloitte.com +63 2 581 9011 Fritzy Rosalyn A. Sales Technical Research Assistant Manager frasales@deloitte.com +63 2 581 9078

Chan Paul T. Nicolas Technical Research Manager ctnicolas@deloitte.com +63 2 581 9069

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