Securities and Exchange Commission (SEC) General Accountant Roberto Manabat said the more complex accounting standards which are supposed to be effective for December 2005 yearend reporting like those for financial instruments and pensions will be deferred for SMEs.
Manabat said the exemptive relief for SMEs was prompted by the ongoing review by the International Accounting Standards Board (IASB) of standards applicable to non-publicly accountable entities which it intends to apply in 2006 or 2007.
"It would not make sense for SMEs to apply the complex standards in 2005 and yet may reverse them next year when they are not made applicable for them upon the International Accounting Standards Board’s finalization of the standards for SMEs," Manabat said.
The standard will be good for three years unless revoked earlier such as when the IASB finalizes its SME rules soon.
Manabat, a member of the ASC, explained that SMEs are entities that do not have public accountability and do not publish general purpose financial statements for external users. For purposes of the standard, an entity is considered to have public accountability if: it has filed, or it is in the process of filing, its financial statements with a securities commission or other regulatory organization for the purpose of issuing any class of instruments in a public market; it holds assets in a fiduciary capacity for a broad group of outsiders, such as a bank, insurance company, securities broker/dealer, pension fund, mutual fund or investment banking entity; it is a public utility or similar entity that provides an essential public service; or it is economically significant in the Philippines.
The ASC has agreed that an entity is considered economically significant if it exceeds either of the following: total assets of P250 million or total liabilities of P150 million. For this purpose, the total assets and total liabilities are based on the entity’s 2004 financial statements. The council concedes that the criteria for an economically significant entity are arbitrary and will be reviewed when the IASB has issued its final standard on NPAEs or earlier if necessary.
Manabat said entities in the above list must follow all the international standards effective in 2005.