REVISED SECURITIES REGULATION CODE (SRC) RULE 68 Table of Contents PART |. GENERAL FINANCIAL REPORTING REQUIREMENTS 1. APPLICATION AND DEFINITION OF TERMS A. Application of this Rule B. Definition of Terms Used in this Rule 2. GENERAL GUIDES TO FINANCIAL STATEMENTS PREPARATION A. Financial Reporting Framework (i) Large and/or Public interest Entities (i), Medium-Sized Entities (ii). Smal Entities (iv) Micro Entities 8. Responsibility for Financial Statements C. Form, Order and Terminology D. Presentation for Receipt of the Audited Financial Statements 3, QUALIFICATIONS AND REPORTS OF INDEPENDENT AUDITORS A. Audit of Financial Statements by Independent Auditors B. Additional Requirements for Independent Auditors of SEC-Reguiated Entities and Other Entities (i) Accreditation Cotegories (i) Scope and Limitation of Accreditation (ii) Accrecitation Requirements for Individual Independent Auditors or Signing Partners {iv} Accreditation Requirements for Auditing Firms Published: Manila Bulletin, October 3, 2019 Manila Standard, October 3, 2019 18 15 7 18 21(v)_ Other Qualification Requirements (vi) Mutual Recognition Policy (vi) Operational Requirements (vii) Reportorial Requirements (ix) Rotation of External Auaitors (x) Other Obligations of Accredited External Auditors Independence of Auditors Engagement of independent Auditors moo Audit Reports of Independent Auditors F. Supplemental Written Statement of Auditor 4, COMPARATIVE FINANCIAL STATEMENTS 5. OTHER DOCUMENTS TO BE FILED WITH THE FINANCIAL STATEMENTS PART Il, ADDITIONAL REQUIREMENTS FOR ISSUERS OF SECURITIES TO THE PUBLIC 1. APPLICATION 2. REGISTRATION OF SECURITIES PURSUANT TO THE ASEAN CAPITAL MARKET INTEGRATION 3. AUDITOR'S OPINION ON FINANCIAL STATEMENTS 4, RESPONSIBILITY FOR FINANCIAL STATEMENTS 5. PERIODIC PRESENTATION A. Registration Statements B. Annual Reports C. Information Statements APPLICABILITY WITH OTHER REPORTS ADDITIONAL DISCLOSURE REQUIREMENTS: INTERIM FINANCIAL STATEMENTS. PRO FORMA FINANCIAL INFORMATION A. Applicability ce B. Prescribed Presentation 10. CONSOLIDATED FINANCIAL STATEMENTS, 22 22 23 24 25 26 26 26 od 28 28 2 32 32 33 33 33 33 35 36 36 36 37 38 40 45PART Ill, PENALTIES AND OTHER GENERAL IMPLEMENTING PROVISIONS. ~ PENALTIES TEST OF MATERIALITY |. REPEALING CLAUSE 2. 3. REISSUANCE OF FINANCIAL STATEMENTS 4, 5. |. EFFECTIVITY AND TRANSITION ‘ANNEXES ANNEX 68-4, ANNEX 68-B ANNEX 68-C ANNEX 68-D ANNEX 68-£ ANNEX 68-F ANNEX 68-G ANNEX 68-H_ ANNEX 68+ ANNEX 68-J ANNEX 68-K Quality of Audit Work of Applicants for Accreditation and Accredited Independent Auditors Supplemental Written Statement of Auditor Schedules for Non-Stock, Non-Profit Organizations Reconciliation of Retained Eamings Available for Dividend Declaration Schedule of Financial Soundness Indicators Schedule for Financing Companies Schedule for Mutual Funds Schedule for Investment Houses Schedule for Listed Companies with a Recent Offering of Securities to the Public Schedules Additional Disclosures in the Notes to Financial Statements 46 47 50 50 51 53 37 65 66 7 “ 70 7 75REVISED SECURITIES REGULATION CODE (SRC) RULE 68 This Rule is part of the Implementing Rules and Regulations (IRR) of the Securities Regulation Code (SRC), the latest revision of which was approved by the Commission en banc on 19 August 2019. PARTI GENERAL FINANCIAL REPORTING REQUIREMENTS, 1. ‘APPLICATION AND DEFINITION OF TERMS A Application of this Rule ( (i This Rule (together with subsequent official pronouncements, interpretations and rulings on accounting and reporting matters, which may be issued by the Securities and Exchange Commission, herein referred to as the Commission, from time to time) states the requirements applicable to the form and content of financial statements required to be filed with the Commission by corporations which meet the threshold, as follows: a) Stock corporations with total assets or total liabilities of Six Hundred Thousand Pesos (P600,000) or more as prescribed under the Revised Corporation Code of the Philippines (Revised Corporation Code) and any of its subsequent revisions or such amount as may be subsequently prescribe b) —_Non-stock corporations with total assets or total liabilities of Six Hundred Thousand Pesos {P600,000) or more as prescribed under the Revised Corporation Code and any of ifs subsequent revisions or such amount as may be subsequently prescribed; ¢) Branch offices/representative offices of stock foreign corporations with assigned capital in the equivalent amount of One Miilion Pesos (P1 Million) or more; d) Branch offices/representative offices of non-stock foreign Corporations with total assets in the equivalent amount of ‘One Million Pesos {P1 Million) or more; and ) Regional operating headquarters of foreign corporations with total revenues in the equivalent amount of One Million Pesos (P1 Million) or more. Financial statements of branch offices of foreign corporations licensed to do business in the Philippines by the Commission shall comply with the requirements of this Rule unless otherwise determined by the Commission as not applicable.(ii) (iv) The submission of financial statements shall be required for all corporations and organizations registered with the Commission as of the fiscal year end including those newly incorporated during the said year. Corporations and organizations with a_ fiscal year end of 31 December must submit their annual financial statements in accordance with the annual schedule of filing of financial statements. For those with a fiscal year end other than 31 December, their annual financial statements shall be due within one hundred twenly (120) days after the end of their fiscal year. Additional requirements for financial statements of corporations covered under Section 17.2 of the SRC are set forth under Part Il of this Rule. Definition of Terms Used in This Rule 0) (i) (i) Unless otherwise used in a different context, the terms used in this Rule shall have the same meanings as defined in the accounting and auditing standards adopted by the Commission as part of this Rule. Financial reporting framework means a set of accounting principles, standards, interpretations and pronouncements that must be adopted in the preparation and submission of the annual financial statements of a particular class of entities, as defined in this Rule by the Commission. This includes, but is not limited to, the Philippine Financial Reporting Standards (PFRSs), the Philippine Financial Reporting Standard for Small and Medium-Sized Entities, (PFRS for SMEs) and the Philippine Financial Reporting Standard for Small Entities (PFRS for SEs). The Commission shall have the authority, subject to prior consultation with concemed parties, to prescribe the most appropriate requirement that shall form part of the applicable financial reporting framework of corporations covered by this Rule. In prescribing the applicable financial reporting framework for a Particular class or sub-class of entities covered by this Rule, the Commission shall. consider the pronouncements and interpretations of the Philippine Financial Reporting Standards Council. However, a financial reporting framework other than the PERSs that complies with the regulatory reportorial requirements of the concemed regulatory agency such as the Bangko Sentral ng Pilipinas (BSP) or the Insurance Commission (IC) may be allowed by the Commission, Entity, when used in this Rule, refers fo a juridical person or a corporation registered under the Revised Corporation Code.(iv) (vy) (vi) (vi) (vii) Error means an unintentional mistake in the financial statements which reduces or increases the related accounis by ten per cent (10%) or more. For issuers of securities to the public and public companies as identified under Section 3 (8) {i) (a) (1). (2) and (3) of Part of this Rule, the test to be used shall be five per cent (5%). It may involve: (a) Mathematical or clerical mistakes in the underlying records and accounting data; (b) Oversight or misinterpretation of facts; (€] Unintentional misapplication of accounting principles and accounting policies; or (4) inconsistency of accounting policies with the applicable financial reporiing framework. Fraud means an intentional act by one or more individuals ‘among management, employees, those charged with govemance, or third parties involving the use of deception to obtain an unjust or illegal advantage that results in a misrepresentation of financial statements, which reduces or increases the related accounts by ten per cent (10%) or more. For issuers of secutities to the public and public companies as identified under Section 3 (8) (i) (a) (1), (2) and (3) of Part | of this, Rule, the test to be used shall be five per cent (5%). may involve: {a} Manipulation, falsification or alteration of accounting records or supporting documentation from which the financial statements are prepared; (b) Misappropriation of assets; [c]__ Suppression or omission of the effects of transactions from records or documents; {d) Recording of transactions without substance; {e) Intentional misapplication of accounting principles relating to amounts, classification, manner of presentation, or disclosure; (f) — Misrepresentation in, or intentional omission from, the financial statements of events, iransactions or other significant information; {9} Collusio (h} Forgery: or (i) Override of intemal controls. Gross Negligence means wanton or reckless disregard of the duty ‘of due care in complying with Philippine Standards on Auditing (PSA). Issuer is any entity authorized by the Commission to offer to sell, sell or promote the sale to the public of its equity, bonds, instruments of indebtedness and other forms of secutities. Key Audit Partners pertain to the engagement partner (or in most cases, the signing partner), the engagement quality control 3(ix) Co) reviewer and other audit partners, if any, on the engagement team who make key decisions or judgments on significant matters with respect to the audit of the financial statements on which the firm will express an opinion. Depending upon the circumstances and the role of the individuals on the audit, “other audit partners” might include, for example, audit partners responsible for significant subsidiaries or divisions, as defined in paragraph (x) below. ‘Material Information, for purposes of this Rule, means information whose omission or misstatement could influence the economic decisions of its users. Significant Subsidiary means a subsidiary, including its subsidiaries, which meets any of the following conditions: (a) The parent company's investments in and advances to its subsidiories. exceed twenty per cent (20%) of the consolidated assets as of the end of the most recently completed fiscal year. The parent company and its subsidiaries’ investments in and ‘advances to the other subsidiaries exceed twenty per cent (20%) of the consolidated assets as of the end of the most recently completed fiscal year; or (b) The subsidiary’s total assets, revenues or net income (loss) (after intragroup eliminations) exceed twenty per cent (20%) of the total consolidated assets, revenues or net income (loss) as of the most recently completed fiscal year. Computational note: For purposes of making the prescribed income test, the following guidance shall be applied: (1] When a loss has been incured either at the consolidated level or at the stand-alone financial statements of the tested subsidiary, but not both, the income or loss of the tested subsidiary shall be excluded from the consolidated income for Purposes of the computation. [2] Where the test involves combined entities, as in the case of determining whether summarized financial data shall be presented, entities reporting losses shall not be aggregated with entities reporting income. The Commission, however, may consider qualitative factors, depending on the circumstances, in identifying a significant subsidiary or division.(i) (xi) SEC Oversight Assurance Review (SOAR) Inspection Program refers to an onsite review of the quality control policies and procedures of the accredited auditing firms auditing companies with equity or debt securities listed in an Exchange and review of portions of the audit work of selected audit engagements from jime to time. The Commission, however, is not precluded from subjecting the independent auditors of other companies for inspection as the circumstances would warrant. Related accounts periain to the classification and aggregation on the face of the financial statements such as current assets, non-current assets, current liabilities, non-current liabilities, equity items, revenues, cost of sales, cost of service, administrative expenses or operating expenses, as the case may be. 2. GENERAL GUIDES TO FINANCIAL STATEMENTS PREPARATION A Financial Reporting Framework The financial statements that shall be prepared and filed by entities covered by this Rule shall be in accordance with the financial reporting framework as prescribed under this Section. o Large and/or Public Interest Entities (a) For purposes of this Rule, large entities are those with total assets of more than Three Hundred Fifty Million Pesos (P350 Million) oF total liabilities of more than Two Hundred Fifty Million Pesos (P250 Million). (b) For purposes of this Rule, public interest entities are those that meet any of the following criteria: (1) Are holders of secondary licenses issued by regulatory agencies; or (2) Are required to file financial statements under Part of SRC Rule 68; or (3) Arein the process of filing their financial statements for the purpose of issuing any class of instruments in a public market; or (4) Such other corporations that the Commission may consider in the future as imbued with public interest regardless of the lack of a requirement fo obtain a secondary license from the Commission and may fall under the following criteria: (i) Those grantees of legislative franchises; (i) Those engaged in nationalized or partly nationalized activities; 5i) {o) (d) Those grantees or recipients of public funds; and (iv) Those regulated by other govemment agencies other than the BSP or IC. Subsequent issuances shall be made by the Commission to specifically identify corporations which it may consider as imbued with public interest. Large and/or public interest entities shall use the PFRSs, as adopted by the Commission, as their financial reporting framework. However, a set of financial reporting framework other than the full PFRSs may be allowed by the Commission for certain sub-class (e.g., banks, insurance companies) of these entilies upon consideration of the pronouncements or interpretations of any of the bodies listed in Section 1 (8) (i) above. In the presentation of their PFRSs financial statements, all banks licensed by the BSP shall use as reference the account names/iitles in the uniform chart of accounts per BSP’s financial reporting package. A reconciliation schedule shall be atfached to the said financial statements showing the difference ‘between the presentation, recognition and measurement differences between the PFRSs and the BSP’s financial reporting framework. This schedule need not be covered by an Auditor's Report Medium-Sized Entities {a) Medium-sized entities are those that meet all of the following criteria: (1] Total assets of more than One Hundred Million Pesos (P100 Million) to Three Hundred Fifty Million Pesos (P350 Milion} or total liabilfies of more than One Hundred Million Pesos {P100 Million) to Two Hundred Fifty Milion Pesos (P250 Million). If the entity is a parent company, the said amounts shall be based on the consolidated figures; (2) Are not required to file financial statements under Part Il of SRC Rule 68; (3) Are not in the process of filing their financial statements for the purpose of issuing any class of instruments in a public market; and (4) Are not holders of secondary licenses issued by regulatory agencies.() (d) Medium-sized entities shall use as their financial reporting framework the PFRS for SMEs as adopted by the ‘Commission. However, the following medium-sized entities shall be exempt from the mandatory adoption of the PFRS for SMEs and may instead apply, at their option, the full PFRSs: (1) An SME which is a subsidiary of a parent company reporting under the full PFRSs; (2) An SME which is a subsidiary of a foreign parent company which will be moving towards International Financial Reporting Standards {IFRSs) pursuant to the foreign country’s published convergence plan; (3) An SME, either as a significant joint venture or associate, which is part of a group that is reporting under the full PFRSs; (4) An SME which is @ branch office or regional operating headquarter of a foreign company reporting under the full IFRSs; (5) An SME which has a subsidiary that is mandated to report under the full PFR (6) An SME which has @ short-term projection that shows that if will breach the quantitative thresholds set in the criteria for an SME. The breachis expected to be significant and continuing due to ifs long-term effect on the company’s asset or liability size; (7) An SME which has a concrete plan to conduct an initial public offering within the next two (2) years; (8) An SME which has been preparing financial statements using full PFRSs and has decided to liquidate; (9) Such other cases that the Commission may consider as valid exceptions from the mandatory adoption of PFRS for SMEs. An SME availing itself of any of the above-mentioned grounds for exemption shall provide a discussion in its Notes fo Financial Statements of the facts supporting its adoption of the full PFRSs instead of the PFRS for SMEs. IF an SME that uses the PFRS for SMEs in a current year breaches the floor or ceiling of the size criteria at the end of that current year, and the event that caused the change is considered “significant and continuing”, the 7‘Small (a) {b) entity shall transition to the applicable financial reporting framework in the next accounting period. If the event is not considered “significant and continuing", the entity can continue to use the same financial reporting framework it curently uses. The determination of what is “significant and continuing” shall be based on management's judgment taking into consideration relevant qualitative and quantitative factors. As a general rule, twenty per cent (20%) or more of the consolidated total assets or total liabilities would be considered significant. Enti ‘Small entities are those that meet all of the following criteria: (1) Total assets of between Three Million Pesos (P3. Million) to One Hundred Milion Pesos (P100 Milion) or total liabilities between Three Milion Pesos (P3 Milion) to One Hundred Milion Pesos (P100 Million). |f the entily is a parent company, the said amounts shall be based on the consolidated figures; (2) Are not required to file financial statements under Part Il of SRC Rule 68; (3) Are not in the process of filing their financial statements for the purpose of issuing any class of instruments in a public market; and (4) Are not holders of secondary licenses issued by regulatory agencies. ‘Small entities shall use os their financial reporting framework the PFRS for SEs as adopted by the Commission. However, entities who have operations or investments that are based ‘or conducted in a different country with different functional currency shall not apply this Framework and should instead apply the full PFRSs or PFRS for SMEs. The following small entities shall also be exempt from the mandatory adoption of the PFRS for SEs and may instead ‘apply, as appropriate, the full PFRSs or PFRS for SMEs: (1) A small entity which is a subsidiary of a parent company reporting under the full PFRSs or PFRS for ‘SMES;() (e) (2) A small entity which is a subsidiary of a foreign parent company which will be moving towards IFRSs or IFRS for Small and Medium-sized Entities {IFRS for SMEs) pursuant to the foreign country's published convergence plan; (3) Asmall entity, either as a significant joint venture or associate, is part of a group that is reporting under the full PFRSs or PFRS for SMEs; (4) Assmall entity which is a branch office or regional operating headquarter of a foreign company reporting under the full IFRSs or IFRS for SMEs; (5) Asmallentity which hos a short-term projection that shows that it will breach the quantitative thresholds set in the criteria for a small entity. The breach is expected to be significant and continuing due to its long-term effect on the Company's asset size; (6) A small enfity which has been preparing financial statements using full PFRSs or PFRS for SMEs and has decided to liquidate; (7) Such other cases that the Commission may consider as valid exceptions from the mandatory adoption of PERS for SEs. A small entity availing of any of the above-mentioned grounds for exemption shall provide a discussion in its Notes fo Financial Statements of the facts supporting its adoption of the full PERSs or PFRS for SMES instead of the PFRS for SES. If a small entity that uses the PFRS for SEs in a current year breaches the fioor or ceiling of the size criteria at the end of that current year, and the event that caused the change is considered “significant and continuing", the entily shall transition to the applicable financial reporting framework in the next accounting period. If the event is not considered “significant and continuing", the entity can continue fo use the same financial reporiing framework it currently uses. The determination of what is “significant and continuing” shall be based on management's judgment taking into consideration relevant qualitative and quantitative factors. As a general rule, twenty per cent (20%) or more of the consolidated total assets would be considered significant.(wv) Micro Entities (a) (b) (c) Micro entities are those that meet all of the following criteria: (1) Total assets and liabilities are below Three Million Pesos (P3 Million); (2) Are not required to file financial statements under Part Ii of SRC Rule 68; (3) Are not in the process of filing their financial statements for the purpose of issuing any class of instruments in a public market; and (4) Are not holders of secondary licenses issued by regulatory agencies. Micro entities have the option to use os their financial reporting framework either the income tax basis or PFRS for SES, provided however, that the financial statements shall at least consist of the Statement of Management's Responsibility (SMR), Auditor's Report, Statement of Financial Position, Statement of Income and Notes to Financial Statements, all of which cover the two [2}-year comparative periods, if applicable. if an entity uses a basis of accounting other than the PFRS for SEs in the preparation of its financial statements, its management shall assess the acceptability of such basis ‘of accounting in the light of the nature of the entity and the objective of the financial statements, or the requirements of the law or regulators. In the event where an entity breaches the prescribed threshold in terms of total assets or total liabilifies and thus it falls within a different classification, the Audited Financial Statements (AFS) of said entity shall be prepared in accordance with the higher framework. The Commission may from lime to time prescribe other criteria for each of the above-stated financial reporiing framework. Responsibility for Financial Statements () The financial statements fled with the Commission are primarily the responsibilty of the management of the reporling company, and accordingly, the fairness of the representations made therein is an implicit and integral part of the management's responsibilty. The Board of Directors, in discharging is responsibiliies, reviews and approves the financial statements before these are submitted fo the stockholders. 10(i) (iy The SMR for Financial Statements that shall be attached to the financial statemenis shall read as follows: ‘STATEMENT OF MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS The management of (name of reporting company) is responsible for the preparation and fair presentation of the financial statements including the schedules attached therein, for the years) ended (date), in accordance with the prescribed financial reporting framework indicated therein, and for such intemal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company's ability fo continue as a going concem, disclosing, as applicable, matters related to going concem and using the going concem basis of ‘accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic altemative but fo do so. The Board of Directors (Trustees) is responsible for overseeing the Company's financial reporting process. The Board of Directors {Trustees} reviews and approves the financial statements including the schedules attached therein and submits the same to the stockholders or members. (Name of auditing firm), the independent auditor appointed by ‘the stockholders, has audited the financial statements of the company in accordance with Philippine Standards on Auditing, and in its report to the stockholders or members, has expressed its opinion on the faimess of presentation upon completion of such audit Signature. - _ Printed Name of the Chairman of the Board Signature Printed Name of Chief Executive Officer. Signature: Printed Name of Chief Financial Officer. Signed this_ day of. The SMR shall cover the comparative financial statements and shall indicate therein such periods.(iv) vy) (vi) (vil) (vill (x) &) The SMR shall be attached to the consolidated financial statements, if applicable, and to the stand-alone financial statements of the company. The Chairman of the Board, Chief Executive Officer and Chief Finance Officer shall all sign the SMR as prescribed by this Rule. If provided in the company's by-laws, persons holding equivalent Positions as that of the aforementioned signatories shall sign the statement. Failure of any of the prescribed signatories to sign the SMR constitutes a material deficiency in the financial statements. In case of branch offices, representative offices or regional operating headquarters of foreign corporations, the SMR shall be signed by its local manager who isin charge of its operations within the Philippines. The third and fourth paragraph of the SMR may be deleted since the Philippine branch doesnot have any local Board of Directors or Trustees. The independent auditor's responsibility for the financial statements required to be filed with the Commission is confined to the ‘expression of his opinion on such statements which he hos audited, In the audit of the company’s financial statements, management shall provide the extemal auditor with the following documents: (a) Complete set of financial statements as prescribed under the applicable financial reporting framework of the entity, and if applicable, schedules and reconciliation forming Part of the financial statements required under the existing ules of the Commission; {b) All information, such as records and documentation, and other matters that are relevant to the preparation and presentation of the financial statements. These include schedules, computations, projections, reconciliations, reports, analyses and other financial information; and {c] Any additional information that the auditor may request from management and when appropriate, from those tasked to perform govemance. Management shall provide unrestricted access fo records and personnel of the entity from whom the auditor deems it necessary to obtain audit evidence. All publicly-listed companies, as recommended under the SEC Code of Corporate Governance, shall establish a system that captures relevant information on related party transactions. The financial statements shall contain all information on such transactions as required under the financial reporting framework and under such guidelines as may be issued by the Commission. I shall include a disclosure on whether or not the corporation has 12(x) (xi) (xiil) an approval requirement and limits on the amount and extent of related party transactions. The Board of Directors or its Audit Committee, if applicable, shall determine and ensure itself of the independence and competence of the company's extemal auditor. For entities which are covered under the SEC Code of Corporate Governance, the scope, expenses of the audit, audit fees and non-audit services of the external auditor shall be approved by the Board of Directors or its Audit Committee, if applicable. The company shall neither allow nor require its independent auditor to prepare its financial statements and/or any of its supporting documents. The independent auditor's duty is to conduct an independent audit of the company’s financial statements and supporting documents pursuant to the prescribed auditing standards. To determine compliance by the company's management with ifs representations in the SMR, this Section and other relevant provisions of this Rule, the Commission may examine the company’s books, records, systems and controls pursuant to the guidelines set by the Commission. For this purpose, the following requirements shall be observed: (a) All corporations covered by this Rule shall retain copies of all the records and documents supporting the preparation of their financial statements, regardless of the form in which they are stored, within a period of ten (10) years reckoned from the day following the deadline in filing tne financial statements, or such longer time until the final closure or judgment of a pending investigation or case against the corporation, if any. (b) The corporation shall inform its external auditor in writing about an investigation or a case involving its financial records and documents, within ten (10) working days from the date of the notice fo the corporation. (c)__ If the records of the corporation are in electronic form, the same shall be acceptable provided that there is compliance with the requirements of the Hectronic Commerce Act of 2000 [Republic Act (R.A.) No. 8792] and ifs IRR. €. Form, Order and Terminology @ (i) This Section shalll be applicable to financial statements filed with the ‘Commission for all corporations covered by this Rule. Financial statements shall be filed in such form and order and shall use such generally accepted terminology as will best indicate their 13(ii) (iv) i) (vi) significance and character in the light of the provisions applicable thereto. The information required with respect to any statement shall be fumished as a minimum requirement to which shall be added such further material information as is necessary to make the required statements, in the light of the circumstances under which they are made, not misleading, All money amounts required to be shown in financial statements may be expressed in whole currency units (e.g. Philippine Pesos) or multiples thereof, as appropriate: provided, that when stated in other than whole currency units, an indication to that effect is inserted immediately beneath the caption of the statement or schedule, at the top of the money columns, or at an appropriate point in narrative material, Negative amounts shall be shown in a manner which clearly distinguishes the negative atiribute. When determining methods of display, consideration sholl be given to the limitations of reproduction and scanning or microfilming processes. The chronological arrangement of data may be with the most recent date to the right or to the left. However, the ordering used shall be consistent in all financial statements, tabular data and footnote data in the document. The financial statements, other than the consolidated financial statements, shall be duly received by the Bureau of Internal Revenue (BIR) or its authorized banks, unless the BIR allows an altemative proof of sulomission for its authorized banks (e.g. bank slips) or prohibits acceptance of the financial statements in certain cases (e.g. on-going examination). Presentation for Receipt of the Audited Financial Statements ( ti) Financial statements required fo be submitted by corporations shall be accompanied by an Audilor’s Report issued by an independent uitor and presented in accordance with the requirements of this Rule. Failure to comply with any of the formal requirements under his Rule including the prescribed qualifications for independent auditors shall be considered a sufficient ground for the denial of the receipt of the financial statements or the imposition of applicable Penalties under the Scale of Fines or pertinent Memorandum Circulars (MCs) issued by the Commission. The acceptance and receipt by the Commission of the financial statements shall be without prejudice to the fines that may be imposed for any material deficiency or misstatement that may be found upon evaluation of the specific contents thereof.3. QUALIFICATIONS AND REPORTS OF INDEPENDENT AUDITORS. A. Audit of Financial Statements by Independent Auditors All registered corporations covered by this Rule shall have independent auditors who are duly registered and licensed with the Board of Accountancy (BOA) of the Professional Regulation Commission (PRC) in accordance with the rules and regulations of said professional regulatory bodies. A corporation with financial statements audited by an independent auditor who is not registered and licensed with the BOA shall be subject to appropriate fines and shall be immediately referred to the PRC/BOA for the appropriate penalties. B. Additional Requirements for Independent Auditors of SEC-Regulated Entities and Other Entities {i) Accreditation Categories The accreditation of independent auditors serves as a quality control mechanism or quality assurance review by the Commission on the work of the accredited external auditors. The following entities shall have independent auditors accredited by the Commission under the appropriate category: (o)} Group (1) Issuers of registered securities which have sold a class of securities pursuant fo 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. This category shall also cover corporations applying for the registration of their securities; (2) Issuers with a class of securities listed for trading in an Exchange; (3) 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 class of its equity securities; (4) Clearing agency ond clearing agency as depository; and (5) Stock and securities exchange/s and other Self- Regulatory Organizations.(b) {c) Group B ) (2) (3) (5) (6) (7) Issuers of registered timeshares, proprietary and non-proprietary membership cerlificates, 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; Goverment securities eligible dealers; Universal banks registered as underwriters of securities; Investment company advisers; (8) Special purpose corporations registered under the Securitization Act of 2004 and its implementing rules; and (9) Such other corporations which may be required by law to be supervised by the Commission. Group ¢ (1) Financing companies whose assets in the preceding year are above Ten Million Pesos (P10 Million); (2) Lending companies whose assets in the preceding yeor are above Five Million Pesos (P5 Million); (3) Transfer agents; (4) Non-stock, non-profit corporations including foundations which solicit or receive annual donations or contributions and/or with fund balance amounting to more than Twenty-Five Million Pesos {P25 Million) and One Hundred Million Pesos (P100 Million), respectively, over the preceding three (3) years, or such higher amount that the Commission may set through order or guidelines A non-stock, non-profit corporation that is already scoped in by the above requirement can only be excluded if its annual donations or contributions 16