Securitiesw

Exchange
commission
l ‘ u k ‘ i f ‘ fi i fi l l

REVISED SECURITIES REGULATION CODE (SRC) RULE 68

Table of Contents

PART I. GENERAL FINANCIAL REPORTING REQUIREMENTS

I . 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

Ii] Large and/or Public interest Entities

(ii) Medium-Sized Entities

(iii) Small Entities

(iv) Micro Entities I0

B. Responsibility for Financial Statements IO
C. Form, Order and Terminology I3
D. Presentation for Receipt of the Audited Financial Statements I4
3. QUALIFICATIONS AND REPORTS OF INDEPENDENT AUDITORS
A. Audit of Financial Statements by independent Auditors I5
B. Additional Requirements for Independent Auditors of SEC-Regulated
Entities and Other Entities IS
(i) Accreditation Categories I5
(ii) Scope and Limitation of Accreditation I7
(iii) Accreditation Requirements for Individual Independent Auditors
or Signing Partners 18
(iv) Accreditation Requirements for Auditing Firms 2I

Published:
Manila Bulletin, October 3, 2019
Manila Standard, October 3, 2019
.

(v) Other Qualification Requirements 22

(vi) Mutual Recognition Policy 22
(vii) Operational Requirements 23
(viii) Reportorial Requirements 24
(ix) Rotation of External Auditors 25
(x) Other Obligations of Accredited External Auditors 26
C. Independence of Auditors 26
°

D. Engagement of Independent Auditors 26

E. Audit Reports of Independent Auditors 27
F. Supplemental Written Statement of Auditor 28
4. COMPARATIVE FINANCIAL STATEMENTS 28
5. OTHER DOCUMENTS TO BE FILED WITH THE FINANCIAL STATEMENTS 29

PART II. ADDITIONAL REQUIREMENTS FOR ISSUERS OF SECURITIES TO THE PUBLIC

I . APPLICATION 32
REGISTRATION OF SECURITIES PURSUANT TO THE ASEAN CAPITAL MARKET
INTEGRATION 32
°

AUDITOR'S OPINION ON FINANCIAL STATEMENTS 33

RESPONSIBILITY FOR FINANCIAL STATEMENTS 33
PERIODIC PRESENTATION 33
A. Registration Statements 33
B. Annual Reports 35
C. Information Statements 36
APPLICABILITY WITH OTHER REPORTS 36
ADDITIONAL DISCLOSURE REQUIREMENTS 36
INTERIM FINANCIAL STATEMENTS 37
.

PRO FORMA FINANCIAL INFORMATION

A. Applicability 38
B. Prescribed Presentation 4O
IO. CONSOLIDATED FINANCIAL STATEMENTS 45
°
PART III. PENALTIES AND OTHER GENERAL IMPLEMENTING PROVISIONS
I . PENALTIES 46
2 . TEST OF MATERIALITY 47

3. RE-ISSUANCE OF FINANCIAL STATEMENTS 5O

4 . REPEALING CLAUSE 50

5 . EFFECTIVITY AND TRANSITION SI

ANNEXES
ANNEX 68-A Quality of Audit Work of Applicants for Accreditation and
Accredited Independent Auditors 53
ANNEX 68-B Supplemental Written Statement of Auditor 57
ANNEX 68—C Schedules for Non-Stock, Non-Profit Organizations 58
ANNEX 68-D Reconciliation of Retained Earnings Available for Dividend
Declaration 65
ANNEX 68—E Schedule of Financial Soundness Indicators 66
ANNEX 68—F Schedule for Financing Companies 67
ANNEX 68—G Schedule for Mutual Funds 68

ANNEX 68—H Schedule for Investment Houses 69

ANNEX 68—I Schedule for Listed Companies with a Recent Offering of
Securities to the Public 70
ANNEX 68-J Schedules 71
ANNEX 68—K Additional Disclosures in the Notes to Financial Statements 75
REVISED SECURITIES REGULATION CODE (SRC) RULE 68

This Rule is part of The Implementing Rules and Regulations (lRR) of The Securities
Regulation Code (SRC), the latest revision of which was approved by the Commission
en banc on 19 August 2019.

PART I

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:

0) Stock corporations with total assets or Total liabilities of

Six Hundred Thousand Pesos (P600000) 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 prescribed;

bl Non-stock corporations with total assets or total liabilities of

Six Hundred Thousand Pesos (P600000) or more as
prescribed under the Revised Corporation Code and any
of its 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 Million Pesos (Pi Million) or more;

0') Branch offices/representative offices of non-stock foreign

corporations with total assets in the equivalent amount of
One Million Pesos (Pl Million) or more; and

Regional operating headquarters of foreign corporations

with total revenues in the equivalent amount of One
Million Pesos (Pi Million) or more.

(“i 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.
(iii) 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 3i 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 Si
December, Their annual financial sTaTemenTs shall be due wiThin
one hundred TwenTy ( i 20) days afTer The end of Their fiscal year.

(iv) AddiTional requiremenTs for financial sTaTemenTs of corporaTions

covered under SecTion i7.2 of The SRC are seT forTh under ParT ll of
This Rule.

Definition of Terms Used in This Rule

(ii 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.

(ii) 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 SE5).

The Commission shall have The auThoriTy, subjecT To prior

consulTaTion wiTh concerned 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
PFRSs ThaT complies wiTh The regulaTory reporTorial requiremenTs of
The concerned regulaTory agency such as The Bangko SenTral ng
Pilipinas (BSP) or The Insurance Commission (IC) may be allowed by
The Commission.

(iii) EnTiTy, when used in This Rule, refers To a juridical person or a

corporaTion regisTered under The Revised Corporafion Code.
IN) Error means an unintentional mistake in the financial statements
which reduces or increases the related accounts by ten per cent
(l0%) or more. For issuers of securities to the public and public
companies as identified underSection 3 (B) (i) (a) ( l ) , (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;
(c) Unintentional misapplication of accounting principles and
accounting policies; or
(d) Inconsistency of accounting policies with the applicable
financial reporting framework.

Fraud means an intentional act by one or more individuals

among management, employees, those charged with
governance, 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 (I 0%) or more. For
issuers of securities to the public and public companies as
identified under Section 3 (B) (i) (a) ( I ) , (2) and (3) of Partl of this
Rule, the test to be used shall be five per cent (5%). It 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, transactions or other
significant information;
(g) Collusion;
(h) Forgery; or
(i) Override of internal controls.

MI Gross Negligence means wanton or reckless disregard of the duty

of due care in complying with Philippine Standards on Auditing
(PSA).

(vii) 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 securities.

(viii) Key Audit Partners pertain to the engagement partner (or in most
cases, the signing partner), the engagement quality control

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reviewer and other audit partners, if any, on the engagement
team who make key decisions orjudgments on significant matters
with respect to the audit of the financialstatements 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.

liX) Material Information, for purposes of this Rule, means information

whose omission or misstatement could influence the economic
decisions of its users.

(X) 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

subsidiaries 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 othersubsidiaries 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 incurred 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.
(Xi) SEC Oversight Assurance Review (SOAR) Inspection Program
refers to an on-site review of the quality control policies and
procedures of the accredited quditing 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
time to time. The Commission, however, is not precluded from
subjecting the independent auditors of other companies for
inspection as the circumstances would warrant.

(xii) Related accounts pertain 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.

G) 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) or 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:

(l) Are holders of secondary licenses issued by'

regulatory agencies; or

(2) Are required to file financial statements under Part

II of SRC Rule 68; or

(3) Are in the process of filing their financial statements

forthe 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 to obtain a
secondary license from the Commission and may
fall under the following criteria:

(i) Those grantees of legislative franchises;

(ii) Those engaged in nationalized or partly

nationalized activities;
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(iii) Those grantees or recipients of public
funds; and

(iv) Those regulated by other government

agencies other than the BSP or lC.

Subsequent issuances shall be made by the Commission to

specifically identify corporations which it may consider as
imbued with public interest.

(Cl 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 entities upOn consideration of the
pronouncements or interpretations of any of the bodies
listed in Section T (B) (ii) above.

ldl in the presentation of their PFRSs financial statements, all

banks licensed by the BSP shall use as reference the
account names/titles in the uniform chart of accounts per
BSP’s financial reporting package. A reconciliation
schedule shall be attached 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.

(ii) Medium-Sized Entities

lo) Medium—sized entities are those that meet all of the

following criteria:

(1) Total assets of more than One Hundred Million Pesos

(PlOO Million) to Three Hundred Fifty Million Pesos
(P350 Million) or total liabilities ‘of more than One
Hundred Million Pesos (Pl 00 Million) to Two Hundred
Fifty Million 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 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.
(bl 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 a 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 PFRSs;

(6) A n SME which has a short—term projection that

shows that it will breach the quantitative thresholds
set in the criteria for an SME. The breach is expected
to be significant and continuing due to its 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.

(Cl An SME availing itself of any of the above-mentioned

grounds for exemption shall provide a discussion in its
Notes to Financial Statements of the facts supporting its
adoption of the full PFRSs instead of the PFRS for SMEs.

(0') 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
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enTiTy shall TransiTion To The applicable financial reporTing
framework in The nexT accounting period. If The evenf is
noT considered “significanT and conTinuing", The enTiTy
can conTinue To use The some financial reporTing
framework iT currenl uses.

(e) The deferminaTion of whaT is “significanT and confinuing"

shall be based on managemenT's judgmenT Taking info
consideraTion relevanT aualiTaTive and auanTiTaTive
facTors. As a general rule, TwenTy per cenT (20%) ‘or more
of The consolidaTed ToTal asseTs or ToTal liabiliTies would be
considered significanT.

(iii) Small EnTiTies

(0) Small enTiTies are Those ThaT meeT all of The following
criTeria:

(i) ToTal asseTs of beTween Three Million Pesos

(P3 Million) To One Hundred Million Pesos
(Pi 00 Million) or ToTal liabiliTies beTween Three Million
Pesos (P3 Million) To One Hundred Million Pesos
(Pl 00 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 ll 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

regulafory agencies.

lb) Small enTiTies shall use as 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:

(l) A small enTiTy which is a subsidiary of a parenT

company reporTing under The full PFRSs or PFRS for
SMEs;
(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) A small enTiTy, eiTher as a significanTjoinT venTure or

associaTe, is parT of a group ThaT is reporTing under
The full PFRSs or PFRS for SMEs;

(4) A small enTiTy which is a branch office or regional

operaTing headquarfer of a foreign company
reporTing under The full IFRSs or IFRS for SMEs;

(5) A small enTiTy which has 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 enTiTy 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 PFRS forSEs.

(C) A small enTiTy availing of any of The above-menTioned

grounds for exempTion shall provide a discussion in HS NoTes
To Financial STaTemenTs of The facTs supporTing iTs adopTion
of The full PFRSs or PFRS for SMEs insTead of The PFRS for SB.

(d) If a small enTiTy ThaT uses The PFRS for SEs 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
enTiTy shall TransiTion To The applicable financial reporTing
framework in The nexT accounfing period. if The evenT is
noT considered “significanT and conTinuing", The enTiTy can
conTinue To use The some financial reporTing framework iT
currenTIy uses.

(e) The deferminafion 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
flgnmcanf
(iv) Micro Entities

(0) Micro enTiTies are Those ThaT meeT all of The following
criTeria:

(l) ToTal asseTs and liabiliTies are below Three Million

Pesos (P3 Million);

(2) Are noT required To file financial sTaTemenTs under

ParT ll of SRC Rule 68;

(3) Are mi 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.

lb) Micro enTiTies have The opTion To use as 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 Managemenf’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.

(Cl If an enTiTy uses a basis of accounTing oTher Than The PFRS

for SEs in The preparaTion of HS 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 liabiliTies 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 Time To Time prescribe oTher criTeria for each of
The above-sTaTed financial reporTing framework.

Responsibiliiy for Financial STaTemenTs

ii) The financial sTaTemenTs filed wiTh The Commission are primarily The
responsibiliTy of The managemenT of The reporTing company, and
accordingly, The fairness of The represenTaTions made Therein is an
impliciT and inTegral parT of The managemenT’s responsibiliTy. The
Board of DirecTors, in discharging iTs responsibiliTies, reviews and
approves The financial sTaTemenTs before These are submiTTed To
The sTockholders.

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(ii) The SMR for Financial Sfafemenfs fhaf shall be affached fo The
financial sfafemenfs shall read as follows:

STATEMENT OF MANAGEMENT’S RESPONSIBILITY

FOR FINANCIAL STATEMENTS

The managemenf of (name of reporfing company) is

responsible for fhe preparation and fair presenfa’rion of fhe
financial sfafemenfs including fhe schedules affached fherein,
for The yearls) ended (dafe), in accordance wifh fhe prescribed
financial reporting framework indicafed fherein, and for such
infernal confrol as managemenf defermines is necessary To
enable fhe preparafion of financial sfafemenfs fhaf are free
from maferial missfafemen’r, whe’rher due fo fraud or error.

In preparing The financial sfa’remenfs, managemenf is

responsible for assessing The Company’s abilify fo confinue as a
going concern, disclosing, as applicable, maffers relafed fo
going concern and using The going concern basis of
accounling unless managemenf eifher infends fo liquidafe The
Company or To cease operafions, or has no realisfic alfernafive
buf To do so. ‘

The Board of Direcfors (Trusfees) is responsible for overseeing The

Company’s financial reporfing process.

The Board of Direcfors (Trusfees) reviews and approves The

financial sfafemenfs including fhe schedules affached fherein
and submi’rs fhe same To fhe sfockholders or members.

(Name of audifing firm), The independenf audifor appoinfed by

fhe sfockholders, has audifed fhe financial sfafemenfs of The
company in accordance wifh Philippine Sfandards on Audifing,
and in ifs reporf fo fhe sfockholders or members, has expressed
ifs opinion on The fairness of presenfafion upon complefion of
such audif.

Signafure
Prinfed Name of The Chairman of The Board

Signafure .__
Prinfed Name of Chief Execufive Officer

Signafure
Prinfed Name of Chief Financial Officer

Signed fhis __ day of

(iii) The SMR shall cover The comparafive financial sfafemenfs and
shall indicafe fherein such periods.
(W) The SMR shall be attached to the consolidated financial
statements, if applicable, and to the stand—alone financial
statements of the company.

(V) The Chairman of the Board, Chief Executive Officer and Chief
Finance Officer shall all sign the SMR as prescribed by this Rule. It
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.

M) In case of branch offices, representative offices or regional

operating headquarters of foreign corporations, the SMR shall be
signed by its local manager who is in charge of its operations within
the Philippines. The third and fourth paragraph of the SMR may be
deleted since the Philippine branch does not have any local Board
of Directors or Trustees.

(vii) 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 has audited.

(viii) In the audit of the company’s financial statements, management

shall provide the external 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
rules 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 governance.

(ix) Management shall provide unrestricted access to records and

personnel of the entity from whom the auditor deems it necessary
to obtain audit evidence.

(X) 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.
It shall include a disclosure on whether or not the corporation has

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an approval requirement and limits on the amount and extent of
related party transactions.

lxil The Board of Directors or its Audit Committee, if applicable, shall

determine and ensure _ itself of the independence and
competence of the company’s external 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.

(xii) 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.

(xiii) To determine compliance by the company's management with

its 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 (i0) years
reckoned from the day following the deadline in filing the
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 to 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 Electronic
Commerce Act of 2000 [Republic Act (RA) No. 8792] and
its lRR.

C. Form, Order and Terminology

U) This Section shall be applicable to financial statements filed with the

Commission for all corporations covered by this Rule.

(“i Financial statements shall be filed in such form and order and shall
use such generally accepted terminology as will best indicate their

13
significance and character in the light of the provisions applicable
thereto. The information required with respect to any statement
shall be furnished 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.

(iii) 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.

(iv) Negative amounts shall be shown in a manner which clearly

distinguishes the negative attribute. When determining methods of
display, consideration shall 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.

(Vi) 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 BlR allows an
alternative proof of submission 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

(i) Financial statements required to be submitted by corporations shall

be accompanied by an Auditor's Report issued by an independent
auditor and presented in accordance with the requirements of this
Rule. Failure to comply with any of the formal requirements under
this 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.

(ii) 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.

14
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 auditorwho 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.

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:

(a) Group A

(I) 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. 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 (lOO) shares of
a class of its equity securities;

(4) Clearing agency and clearing agency as

depository; and

(5) Stock and securities exchange/s and other Self-

Regulatory Organizations.

15
(b) Group B

(1) Issuers of registered timeshares, proprietary and

non-proprietary membership certificates, and
corporations applying for the registration of such
securities;

(2) Investment houses;

(3) Brokers and dealers of securities;

(4) Investment companies that are not in the process

of registering securities or have no registered
securities yet;

(5) Government securities eligible dealers;

(6) Universal banks registered as underwriters of

securities;

(7) 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 C

(1) Financing companies whose assets in the

preceding year are above Ten Million Pesos
(Pl 0 Million);

(2) Lending companies whose assets in the preceding

year 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‘
and/or fund balance fall below TwenTy-Five Million
Pesos (P25 Million) and One Hundred Million Pesos
(P100 Million), respectively, over The preceding
Three (3) years; and

(5) Such oTher corporaTions ThaT The Commission may

consider as imbued wiTh public inTeresT regardless
of The lack of a requiremenf To obTain a secondary
license from The Commission.

(ii) Scope and llTaTion of AccrediTaTion

(O) The audiTing firms including Their respecTive signing parlners

who shall be engaged by companies under Groups A, B
and C musT be accrediTed by The Commission in
accordance wiTh This Rule.

(b) Sole pracTiTioners may be accrediTed by The Commission

and may be engaged by Group C companies provided
ThaT such audiTors have proven Their capacily and
resources for esTablishing and implemenTing adequaTe
audiT qualiTy confrols in accordance wiTh applicable
sTandards and such ofher rules and regulaTions as The
Commission may prescribe.

Sole pracTiTioners, however, are expecTed To converT from a

Sole ProprieTorship To a ParTnership sTrucTure by
30 June 2022 in order To conTinue being accrediTed by The
Commission.

(C) The Commission shall noT be liable for any IiabiliTy or loss
ThaT may arise from The selecTion and engagemenT of The
said accrediTed independenf audiTor and/or audiTing firm
engaged by a corporaTion for audif.

(d) The accrediTaTion of an independenf audiTor and/or

audiTing firm shall expire or be auTomaTically delisTed afTer
Three (3) years (or such number of years as may laTer be
deTermined by The Commission) from The daTe of approval
of The accrediTaTion, unless an applicaTion for ifs renewal
is filed noT laTer Than ThirTy (30) business days before iTs
expiraTion.

lel The evaluaTion on The financial sTaTemenTs, which are

randomly selecTed using a risk-based approach, of The ‘
applicanT's corporaTe clienTs during The processing of his
applicaTion covers only The companies' compliance wiTh
The applicable financial reporTing framework and such is
made only on The face of The financial sTaTemenTs and
affached schedules and noT iTs supporfing documenTs.
The Commission, however, is noT precluded from obTaining
copies of The audiT work papers To supporT The audiTor’s
responses To The commenTs on The evaluaTed AFS.
l7
(f) The Commission shall subject to SOAR Inspection Program
the accredited auditing firms engaged by companies with
equity or debt securities listed in an Exchange and review
portions of these firms' audit work for the listed companies.
The Commission, however, is not precluded from
subjecting the Independent Auditors of other companies
for inspection as the'circumstances would warrant.

(g) The accreditation of an auditing firm, partner or sale

practitioner shall be effective unless any of the following
occum:

(l) the auditing firm or auditor‘s request forwithdrawal

of accreditation is approved by the Commission;

(2) the accreditation is suspended or revoked by the

Commission, after due notice and hearing, for
failure to comply with the SOAR requirements or for
such other grounds as provided in this Rule; or

(3) the BOA registration and license have expired and

no application for renewal has been filed with the
BOA.

(h) 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.

independent auditors granted with Groups A and B

accreditation are expected to handle audit of entities
belonging to these categories to serve the purposes of
their Groups A or B accreditation. Independent auditors
granted with Group A accreditation and with no audit
clients listed in an Exchange shall be distinguished from
those with audit clients listed in an Exchange.

(iii) Accreditation Requirements for Individual Independent Auditors

or Signing Partners

(a) General Requirements

(1) The applicant shall be registered and licensed with

‘ the BOA;

(2) At the time of application, the applicant shall have

at least five (5) years of experience in external
audit. The audit experience shall have been
acquired as a manager or partner or its equivalent;

l8
(3) The applicant shall have adequate policies and
procedures related to the elements of a system of
quality control provided for under PSA No. 220
(Quality Control for an Audit of Financial
Statements), Philippine Standard on Quality Control
(PSQC) No. 1 (Quality Controls for Firms that Perform
Audits and Reviews of Financial Statements, Other
Assurance and Related Services Engagements),
and their amendments. These shall be reflected in
his Quality Assurance Manual (QAM). The submitted
QAM is subject to the evaluation by the
Commission.

(4) An application for accreditation of an external

auditor shall not be recommended for approval, if
after due notice and hearing, it could be
established that:

(i) The auditor allowed the perpetuation of any

violation of the requirements of the Revised
SRC Rule 68 by issuing a report with
unqualified opinion on the relevant financial
statements despite discovery of the violation
during the audit, or if not discovered, the
same should have been identified if
appropriate audit procedures were
performed; and

(ii) The violation subject of this paragraph shall

pertain to a decision or judgment that has
attained finality.

(b) Specific Requirements

(1) The applicant shall have sufficient knowledge on

the regulatory requirements, operations and
functions of companies under Group A, B or C for
which he is applying for accreditation:

(2) The applicant shall have a total of thirty (30) units of

training and seminars (or such number of units as
may later be determined by the Commission) on
the following topics within the last three (3) years:
ten (10) units on PFRS, ten (i0) units on PSA, and ten
(10) units on laws and regulations being
implemented by the Commission. The said training
should have been approved by the PRC
Continuing Professional Development Council
(CPDC), or organized or approved by the
Commission;

19
l3) The quality of audit work based on the evaluation
of the financial statements of clients shall meet the
prescribed level under Annex 68—A of this Rule;

(4) A t the time of application, the applicant shall have

the following track record:

(i) For Group A applicant, he shall have had a

minimum of five (5) corporate clients with
total assets of at least Fifty Million Pesos
(P50 Million) each, or such amount as may
be prescribed by the Commission;

(ii) For Group B, he shall have had a minimum of

three (3) corporate clients with total assets of
at least Twenty Million Pesos (P20 Million)
each, or such amount as may be prescribed
by the Commission;

(iii) For Group C, he shall have had a minimum

of three (3) corporate clients with total assets
of at least Five Million Pesos (P5 Million) each,
or such amount as may be prescribed by the
Commission.

(c) Application Documents

1. For the initial accreditation, a notarized application

form (SEC Form ExA-OOl) shall be submitted by the
applicant to the Commission, together with the
prescribed supporting documents.

In cases where the applicant previously served as a

manager for the audit of the selected AFS. for
evaluation, the applicant shall also submit a
certification from the signing partner of the
selected AFS that the applicant was part of the
audit engagement team.

The accreditation may be renewed by filing a

notarized renewal application form (SEC Form
ExA—OOl—R) together with the prescribed supporting
documents. In addition to the said documents, the
applicant must show proof that he is engaged or
had been engaged for the audit of a company
under the category that he was previously
accredited for and under which he is applying for
renewal.

In case the applicant renewing his accreditation

was not engaged in the audit of a company under
the category that he was previously accredited,
the applicant should show proof of continuing
20
compliance with all The requirements enumerated
in Section 3(B)(iii)(a) and (b) of Part l of this Rule.

3. Applications for initial or renewal of external

auditors or partners of auditing firms shall b e '
assessed with the appropriate filing fee as
indicated in SEC MC No. 3, Series of 2017 or
subsequent circulars issued by the Commission.

liVl Accreditation Requirements for Auditing Firms

(0) The auditing firm shall be accredited with the BOA;

lb) At the time of application and during the effectivity of its

accreditation, it shall have at least two (2) signing
independent auditors who are accredited under the
same category as the auditing firm is applying for;

(C) it shall have adequate policies and procedures related to

The elements of a system of quality control provided for
under PSA No. 220, PSQC No. l , and their amendments.
These shall be reflected in the QAM of the auditing firm.

The submitted QAM is subject to the evaluation by the

Commission.

For Groups A or B, The highest level of quality assurance

procedures within the auditing firm are required in order to
ensure that matters like proper consultation policies,
concurring reviews and independence monitoring are in
place.

The auditing firm shall submit a certification on The number

of all of its personnel or staff.

The auditing firm shall submit a disclosure under oath

attesting to its independence (SEC MC No.2, Series of
2016).

Application documents

(i) For initial accreditation, a notarized application

form (SEC Form AuF-002) shall be signed by the
managing partner of the auditing firm and shallbe
submitted To the Commission, together with the
supporting documents prescribed in SEC Form
AuF-OO2.

(2) The accreditation may be renewed by filing a

notarized renewal application form
(SEC Form AuF—OO2-R) together with the prescribed
supporting documents. in addition to the said
documents, the firm must show proof that it is
21
engaged or had been engaged for The audiT of a
company under The caTegory ThaT if was previously
accredifed for and under which if is applying for
renewal.

in case The firm renewing iTs accrediTaTion was noT

engaged in The audiT of a company under The
caTegory ThaT The firm was previously accrediTed,
The firm should show proof of conTinuing
compliance wiTh all The requiremenTs enumeraTed
in SecTion 3(B)(iv)(a) To (all of‘ParT l of This Rule.

(3) ApplicaTions for iniTial or renewal accrediTaTion of

audiTing firms shall be assessed wiTh The appropriaTe
filing fee as indicaTed in SEC MC No. 3, Series of 20i 7
or subsequenf circulars issued by The Commission.

t e r Qualificafion Requirements

In addiTion To The above—sTaTed accrediTaTion requiremenTs, The

Commission may prescribe Through subsequenT issuances, oTher
qualificaTion requiremenfs and supporTing documenfs as if may
consider necessary To provide higher assurance on The
compeTence and independence of audiTors accredifed by The
Commission.

Mufual Recognifion Policy

(0) The muTual recogniTion policy, as prescribed in The

Memorandum of AgreemenT beTween and among The
Commission, BOA, ESP and IC and any of HS subsequenT
amendmenTs, covering audiTors of Group C companies is
subjecT To The BSP resTricTion ThaT for banks and Their
subsidiaries and affiliafe banks; quasi—banks; TrusT enTiTies;
non—sTock savings and loan associaTions and Their
subsidiaries and affiliafes engaged in allied acTiviTies; and
oTher financial insTiTuTions which, under special laws, are
subjecT To The BSP’s consolidaTed supervision, only one ( i )
independenf audiTor or audiTing firm shall audiT Their
individual and consolidaTed financial sTaTemenTs.

lb) The exisTing muTual recogniTion policy beTween and

among financial regulaTors is limiTed To compliance by
applicanfs wiTh The basic qualificaTion and documenTary
requiremenTs. Special requiremenfs of each agency musT
sTill be observed by applicanT—exfernal audiTors. This is
wiThouT prejudice, however, To any subsequenf
agreemenT beTween and among The Commission and
oTher financial regulaTors To cenTralize inTo one uniT all of
Their accrediTaTion processes and requiremenTs.

22
(vii) Operational Requirements

All auditing firms and sole practitioners holding a certificate of

accreditation from the Commission shall comply with the
following requirements:

(0) They shall strictly observe the Code of Ethics for

Professional Accountants as adopted by the BOA and
PRC and such other standards as may be adopted by the
Commission.

They shall comply with the following:

(1) Terms of the engagement letter and its undertakings;

(2) The PSA and other issuances of the Auditing and

Assurance Standards Council (AASC) and the
Commission;

(3) Applicable provisions of this Rule and other relevant

regulations and circulars of the Commission; and

(4) Other pertinent laws, rules and regulations.

In case of auditing firms, they shall maintain the number of

partners necessary to comply with the rotation policy of
this Rule.

They shall comply with the reportorial requirements as set

forth under this Rule.

They shall maintain the prescribed quality of audit work

under Annex 68-A of this Rule.

(1‘) They shall implement their respective QAM that is in

accordance with the requirements of existing auditing
standards.

lot They shall retain copies of their working papers, audit

evidences and other audit related records for a period of
ten (i0) years reckoned from the day following the
completion of the audit, or such longer time until the final
closure or judgment of a pending investigation or case
against the client, if any.

They shall inquire with the management as to whether there

is an ongoing investigation or case against the company
and require the client corporation to inform them, in writing,
about an investigation or a case against the company
within ten (10) working days from the date of notice to the
corporation.

23
If The records of The auditing firm are in electronic form, The
same shall be acceptable provided that There is
compliance with The requirements of the Electronic
Commerce Act of 2000 (RA No. 8792) and its lRR.

(h) In relation to an on—going investigation of SEC-registered

entity, accredited independent auditors and auditing
firms shall, upon order of the Commission, present their
working papers, audit evidence and other audit related
records. This is to ensure That The quality of their respective
audits has not been compromised.

(i) Auditing firms with listed company-clients shall allow The

Commission Through its reviewers who hold a written
authority, to conduct an on-site examination in
accordance with the SOAR Inspection Program.

(i) They shall comply with such orders and guidelines as may
be issued by the Commission pursuant to its powers and
authority under existing laws.

Failure To comply with any of the foregoing requirements

shall be a sufficient ground for the imposition of fines, as
indicated in SEC MC No. 13, Series of 2009 or subsequent
circulars issued by the Commission, and/or suspension or
revocation of the accreditation of the auditing firm or
auditor and/or non—renewal thereof.

(viii) Reportorial Requirements

(O) The Audit Committee of entities classified under Groups A,

B and C shall report to the Commission its action on a
report of its independent auditor pertaining to any item
enumerated under item (0) in the next page within five (5)
business days from the date the report is submitted by the
independent auditor. For companies under Group A, The
report shall be in SEC Form i7-C: Current Report that shall
be signed by the Chairman of the Audit Committee. For
companies under Groups B and C, The report shall be in
The form of a letter signed by the Chairman of the Audit
Committee or if there is no such committee, by the
company‘s Chairman of the Board.

(b) In case the Audit Committee fails to submit the report

required above, The independent auditor shall, within thirty
(30) business days from The submission of his findings to the
entity, file a report (SEC Form Au-Rep) to the Commission.

24
(Cl The following findings on The enTiTy shall be disclosed by The
AudiT CommiTTee, or if There is no such commiTTee, by The
company's Chairman of The Board, To The Commission:

(l) Any finding of: (i) violaTion of SRC Rule 68; (ii)
offering of securiTies wiThouT prior regisTroTion wiTh
The Commission under The SRC; or (iii) engaging in
The business of financing or lending wiThouT a
secondary license;

(2) Any maTerial finding involving fraud or error;

(3) Losses or poTenTial losses The aggregaTe of which

amounTs To aT leasT Ten per cenT (10%) of The
consolidafed ToTal asseTs of The company;

(4) Any finding To The effecf ThaT The consolidaTed

asseTs of The company, on a going concern basis,
are no longer adequaTe To cover The ToTal claims of
crediTors; and

(5) MaTerial weaknesses in infernal conTrol which may

lead To financial reporfing problems.

id) The independenT audiTor shall submiT his findings To The

clienT-company’s AudiT CommiTTee or Board of DirecTors,
as applicable. The adverse findings shall be discussed by
The independenT audiTor wiTh The said body in order To
preserve The concerns of The supervisory auThoriTy and
independenT audiTors regarding The confidenTialiTy of The
informaTion.

Tel The independenT audiTor shall documenf managemenT's

explanaTion and/or correcTive acTion Taken regarding his
adverse findings. The same shall be included in The reporT
menTioned under iTem (b) in The previous page.

(1‘) The engagemenT conTracT beTween The company and

The independenT audiTor shall conTain a provision ThaT The
disclosure of informaTion by The independenT audiTor To The
Commission shall noT consTiTuTe a breach of confidenTialiTy
nor shall H be ground for civil, criminal or disciplinary
proceedings againsT The independenT audiTor.

(i RoTaTion of ExTernal AudiTors

The independenT audiTors or in The case of an audiTing firm, key

audiT parTners, as defined under SecTion l (B) (viii) of ParT l of This
Rule, of The aforemenfioned SEC—regulafed enTiTies under Groups
A To C, excepT for non-sTock, non—profiT corporaTions, shall comply
wiTh The provisions on long associaTion of personnel (including
parTner roTaTion) wiTh an audiT clienT as prescribed in The Code of
EThics for Professional AccounTanTs in The Philippines as adopTed
25
by the BOA and PRC and such other standards as may be
adopted by the Commission.

(X) Other Obligations of Accredited External Auditors

In addition to the requirements in the preceding provisions, the

Commission, through subsequent issuances, may prescribe other
obligations of accredited external auditors as it may consider
necessary to improve transparency, audit quality and
independence of external auditors.

Independence of Auditors

The term independent auditor or external auditor refers to an auditor who

fully meets the requirements of independence as provided for in the
Code of Ethics for Professional Accountants in the Philippines and in this
Rule.

Engagement of Independent Auditors

(ii The company through its Board of Directors or Audit Committee,

if applicable, shall conduct due diligence in confirming the
personal identification and professional qualifications of the
independent auditor whose services it will engage.

(ii) Prior to engagement, the company shall require the

independent auditor to present a copy of his/her professional
license from the PRC and the Certificate of Accreditation issued
to him/her by the BOA as sole independent auditor and to the
auditing firm if he is a partner thereof.

(iii) The company shall confirm the authenticity of the BOA

Certificate of Accreditation by checking the latest list of
accredited practitioners issued by the BOA.

(iv) In addition to the above, regulated entities shall observe the

following procedures prior to the engagement of an
independent auditor:

(or) The company shall require the presentation of the

Commission's Certificate of Accreditation issued to the
independent auditor and its auditing firm, if applicable.
The level of accreditation (Groups A to C) indicated in the
said certificate shall be at least equivalent to the
company's classification under this Rule;

(b) The authenticity of the said certificate shall be verified

against the official list of accredited auditors and auditing
firms.

26
(Vl Preliminary meeTings wiTh The managemenT and The exiT
conference shall be aTTended To personally by The independenT
audiTor or by The handling parTner or engagemenT manager, in
case of an audiTing firm.

(Vi) A compleTe documenTaTion of The foregoing requiremenTs shall

be reTained by The company. The independenT audiTor's file wiTh
The company shall include a copy of his/her PRC license, BOA
AccrediTaTion CerTificaTe, Commission’s CerTificaTe of
AccrediTaTion (if applicable), engagemenT conTracT and minuTes
of conference wiTh The audiTors, among oThers.

AudiT ReporTs of lndependenf AudiTors

U) The AudiTor's Reporl shall: (a) be daTed; (b) be signed by The

cerTifying independenT audiTor; (c) idenTify The financial
sTaTemenTs covered by The reporT; (d) sTaTe The signing
accounTanT's License, Tax ldenTificaTion and Professional Tax
ReceipT numbers, and regisTraTion number wiTh The BOA
including iTs expiraTion daTe; (e) sTaTe The compleTe mailing
address of The clienT and The audiTor; and (f) in The case of an
audiTing firm, The cerTifying parTner shall sign his own signaTure
and shall indicaTe ThaT he is signing for The audiTing firm, The name
of which is prinTed in The reporT.

l“) The AudiTor’s ReporT of a company menTioned under

SecTion 3 (B) (i) of ParT l of This Rule shall likewise indicaTe Thesigning
audiTor/parTner’s accrediTaTion number, caTegory and expiraTion
of accrediTaTion. In case of an audiTing firm, The same informaTion
wiTh respecT To The accrediTaTion of The audiTing firm shall be
indicaTed.

(iii) The AudiTor's ReporT shall sTaTe wheTher The audiT was made in
accordance wiTh The PSA.

(iv) The AudiTor’s ReporT shall sTaTe clearly The opinion of The
independenT audiTor on The fairness of presenTaTion in conformiTy
wiTh The prescribed financial reporTing framework for The company.
lT shall discuss The basis of The opinion and shall conTain all
informaTion as required under The applicable PSAs.

Unless exempTed under sub—paragraph (vi) in The nexT page, The

exTernal audiTor of a company which has incurred a capiTal
deficiency, shall provide in The AudiT ReporT a MaTerial UncerTainTy
RelaTed To Going Concern secTion pursuanT To The audiTing
sTandards which includes a reference To The NoTe To Financial
STaTemenTs. Such noTe shall discuss The concreTe plan of The
company To address The capifal deficiency.

27
M) The requirement under sub-paragraph (E) (v) in the previous page
shall not apply to a company that incurred a capital deficiency
due to any of the following reasons:

(i) The company is at pre—operating stage and has incurred

capital deficiency due to higher pre-operating expenses
than its initial capitalization. Projected financial
statements indicate that it will generate net income once
it starts commercial operations;

(2) Significant losses were incurred in prior years but the

company has generated positive results (net income) from
operations over the current period due to developments
in the business or regularization of its operation;

(3) The company has incurred capital deficiency during the

current period only due to a significant adjustment arising
from the adoption of a new financial reporting framework
or occurrence of a non—recurring transaction for the
period; or

(4) Such other cases which the Commission may consider as

valid ground for considering the company as a going
concern.

(vii) Any company covered by any of above exemptions shall provide

in Note 1 of its AFS a discussion on the reason for its capital
deficiency and a concrete plan to address the same.

Supplemental Written Statement of Auditor

III For stock corporations filing under Part I of this Rule (and therefore
not covered by Part II), their independent auditors shall issue a
supplemental written statement as prescribed under Annex 68-B of
this Rule.

To support the above statement, the auditor may undertake the

audit procedures he deems necessary, such as the following:

(a) Obtain a certification from the issuer’s Corporate Secretary

on the number of stockholders and their corresponding
shareholdings;

(b) inspect the Stock and Transfer Book and conduct the tests
needed to validate their entries and balances.

4. COMPARATIVE FINANCIAL STATEMENTS

'A. The financial statements to be filed with the Commission shall be
presented in comparative form. The figures for the most recently ended
fiscal year may be presented at the right portion immediately after the
accounts name, followed by the figures for the last preceding year.

28
Statement of Financial Position

The audited Statements of Financial Position shall be as of the end of each

of the two (2) most recently completed fiscal years.

Statement of Comprehensive Income, Statement of Cash Flows and

Statement of Changes in Equity

If practicable, these statements shall be for each of the two (2) most
recently completed fiscal years or such shorter period as the company
(including predecessors) has been in existence.

An explanation through a note or otherwise shall be made explaining the

reasons for filing a single-period statement, e.g. it is the first (Isl) period of a
new company.

When financial statements are presented on a comparative basis for more

than the periods required, the Auditor's Report need not extend to prior
periods for which the financial statements are not required to be audited.

(i) If the financial statements of the prior year were not audited, such
statements shall be marked prominently as "UNAUDITED." In
addition, the auditor shall disclose this in an “other matter"
paragraph in the Auditor's Report.

(ii) If the financial statements of a prior period have been audited by

another independent certified public accountant whose report is
not presented, the statements shall be marked to disclose
prominently that they are not being reported upon by the current
auditor. If the auditor of the financial statements for such periods
did not give an unqualified opinion on such statements, the auditor
for the current year shall indicate in an “other matter" paragraph
of his report (i) that the financial statements of the prior period were
audited by other auditors, (ii) the date of their report, (iii) the type
of opinion expressed by the predecessor auditor, and (iv) the
substantive reasons it was qualified.

OTHER DOCUMENTS TO BE FILED WITH THE FINANCIAL STATEMENTS

The following documents shall be filed with the annual AFS and in the interim
financial statements, if required herein:

A. Non-Stock and Non-Profit Organizations (NSPO) Including Foundations

The forms as provided in Annex 68-C of this Rule must be accomplished

and submitted with the AFS by non-stock and non—profit organizations
including foundations.

NSPO Form-i, NSPO Form-2 and NSPO Form-3 must be submitted by all
registered non-stock and non—profit organizations. For those with annual
contributions or donations of Five Hundred Thousand Pesos (P500,000) or
more, NSPO Form—4, NSPO Form—5 and NSPO Form-6 must also be
submitted with the AFS.
29
These schedules need not be covered by an Auditor's Report.

Issuers of Securities to the Public, and Stock Corporations with Unrestricted

Retained Earnings in Excess of 100% of Paid-In Capital Stock

A Reconciliation of Retained Earnings Available for Dividend Declaration,

which shall present the prescribed adjustments in the prescribed Form per
Annex 68—D of this Rule, must be presented. This reconciliation must be
covered by an Auditor’s Report.

Regulated Entities Enumerated in Section 3 (B) (i) of Part I of This Rule

A schedule showing financial soundness indicators in two (2) comparative

periods, as follows: (i) current/liquidity ratios; (ii) solvency ratios, debt—to-
equity ratios; (iii) asset—to-equity ratios; (iv) interest rate coverage ratios;
(v) profitability ratios; and (vi) other relevant ratios as the Commission may
consider necessary.

This schedule, in the prescribed Form per Annex 68-E of this Rule, shall be
submitted with the AFS and if applicable, with the company’s interim
financial statements. For listed companies, this schedule should be
covered by an Auditor's Report.

Financing Companies

A schedule showing the following information for two (2) comparative

periods: (i) ratio or percentage of total real estate investments to total
assets; (ii) total receivables to total assets; (iii) total Directors, Officers,
Stockholders and Related Interests (DOSRI) ’s receivables to net worth; and
' (iv) amount of receivables from a single corporation to total receivables.
This schedule, in the prescribed Form per Annex 68-F of this Rule, shall be
submitted with the annual AFS and if applicable, with the company's
interim financial statements. This schedule need not be covered by an
Auditor’s Report.

Mutual Funds

A schedule showing the following information for two (2) comparative

periods: (i) percentage of investment in a single enterprise to net asset
value; (ii) total investment of the fund to the outstanding securities of on
investee company; (iii) total investments in liquid or semi-liquid assets to
total assets; (iv) total operating expenses to net worth; and (v) total
assets to total borrowings, shall be submitted with the annual AFS and if
applicable, with the company’s interim financial statements.

This schedule, in the prescribed Form per Annex 68—6 of this Rule, shall be
submitted with the annual AFS and if applicable, with the company's
interim financial statements. This schedule need not be covered by an
Auditor's Report.

30
Investment Houses

A schedule, in the prescribed Form per Annex 68-H of this Rule, showing
the following information, shall be submitted with the annual AFS and if
applicable, with the company’s interim financial statements:

Details (per issue) of underwriting activities for the year:

(i) Name of the issuer-client;

(ii) Nature of commitment;
(iii) Amount of issue;
(iv) Underwriting and other fees generated; and
(v) Basis of computation for each.

Transactions with DOSRI:

(i) Name of related party:

(ii) Description of transaction;
(iii) Total volume/amount of transaction for the year;
(iv) Terms and conditions, such as maturity date, security, and mode of
payment; and
(v) If secured, carrying amount of asset used as collateral.

This schedule need not be covered by an Auditor’s Report.

Listed Companies and Investment Houses that are Part of a Conglomerate

or Group of Companies

A map showing the relationships between and among the company and
its ultimate parent company, middle parent, subsidiaries or co—subsidian'es,
and associates, wherever located or registered, shall be submitted with
the annual AFS. The map must be covered by an Auditor's Report.

Listed Companies that Recently Offered Securities to the Public (Either as

Inltlal or Additional Offering)

A schedule, in the prescribed Form per Annex 68-l of this Rule, showing the
following amounts, shall be submitted with the annual AFS and if
applicable, with the company's interim financial statements up to such
period when all the proceeds from the offering have been utilized:

a) Gross and net proceeds as disclosed in the final prospectus;

b) Actual gross and net proceeds;
c) Each expenditure item where the proceeds were used; and
d) Balance of the proceeds as of end of reporting period.

This schedule need not be covered by an Auditor’s Report.

Such other schedules or components that the Commlsslon may require

through subsequent pronouncements. .

3i
PART II

ADDITIONAL REQUIREMENTS FOR ISSUERS OF SECURITIES TO THE PUBLIC

‘I. APPLICATION

In addition to the requirements set forth under Part | of this Rule, this Part II
(togetherwith subsequent official pronouncements, interpretations and rulings on
accounting and reporting matters, which may be issued by the Commission from
time to time) provides for the special requirements on the financial statements
required to be filed with the Commission by corporations which filed registration
statements under Section 12 of the SRC or which meet the following criteria with
respect to the requirements to file reports:

A. Issuer which has sold a class of its securities pursuant to a registration

under Section i 2 of the SRC;

B. Issuer with a class of securities listed for trading on an Exchange; and

C. . Issuer with assets of at least Fifty Million Pesos (P50 Million) or such other
amount as the Commission shall prescribe and has Two Hundred (200)
or more holders each holding at least one hundred (iOO) shares of a
class of its equity securities as of the first (15+) day of the issuer’s fiscal year.

REGISTRATION OF SECURITIES PURSUANT TO THE ASEAN CAPITAL MARKET

INTEGRATION

The registration of securities pursuant to the ASEAN Capital Market integration

Framework shall be in accordance with this Rule, subject to the following specific
requirements and such other issuances as the Commission may hereinafter
release:

A. Adoption of the lFRS as the basis of financial statements of foreign

companies that will undergo cross border offerings or listings in the
Philippines.

B. Submission by the foreign issuer's financial statements that are audited by

a foreign audit firm are subject to the following requirements:

(i) 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;

(ii) The foreign audit firm should be affiliated with a local firm that is
accredited by the Commission under Group A category; and

(iii) The SMR, schedules and other attachments required under SRC
Rule 68 should be submitted with the financial statements.

C. 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.

32
AUDITOR'S OPINION ON FINANCIAL STATEMENTS

A. The AFS of companies covered by ParT ll of This Rule wiTh an audiTor’s

opinion oTher Than unqualified because of deviaTion(s) from The
required financial reporTing framework or due To a scope limiTaTion
imposed by The company, shall be considered a violaTion of This Rule.

B. For lisTed banks, a qualified opinion from Their independenT audiTors shall
noT be considered a non-compliance wiTh This Rule if The quolificoTion
perToins To a devioTion from PFRS, when such devioTion has been
approved by The BSP as parT of HS prudenTial reporTing requiremenTs.

C. The company shall, if worronTed, afTer due noTice and hearing, be

subjecT To The applicable penalTies and shall be required To submiT iTs
amended financial sTaTemenTs To address The modificaTion or 'limiTaTion.

RESPONSIBILITY FOR FINANCIAL STATEMENTS

The SMR of companies covered under ParT ll of This Rule shall, in addiTion To The
requiremenTs under SecTion 2 (B) of ParT l of This Rule, be signed under oaTh.

For regisTranTs of securiTies, The SMR shall be aTTached To boTh audiTed annual
financial sTaTemenTs and reviewed inTerim financial sTaTemenTs.

PERIODIC PRESENTATION

The periodic presenTaTion and coverage of financial sTaTemenTs accompanying

The regisTraTion sTaTemenTs (SEC Form l2—l), annual reporTs
(SEC Form l7—A) and managemenT reporTs aTTached To The informaTion
sTaTemenTs (SEC Form 20—lS) shall be made in accordance wiTh The requiremenTs
of This SecTion.

A. RegisTraTion STaTemenTs

(I) ConsolidaTed STaTemenTs of Financial PosiTion

(a) If The regisTranT has been in exisTence for less Than one ( i )
fiscal year, There shall be filed an audiTed STaTemenT of
Financial PosiTion as of a daTe wiThin one hundred eighTy
( l 80) days of The daTe of filing The regisTraTion sTaTemenT.

(b) If a filing on SEC Form 12-1 is made wiThin one hundred

eighTy (T80) days afTer The end of The mosT recenl ended
fiscal year, The filing shall include AudiTed ConsolidaTed
STaTemenTs of Financial PosiTion as of The end of each of
The Two (2) mosT recenTIy ended fiscal years.

(c) If a filing on SEC Form 12-1 is made more Than one hundred
eighTy ( l 80) days buT noT more Than Two hundred sevenTy-
four (274) days afTer The end of The mosT recenTIy ended
fiscal year, The filing shall include AudiTed ConsolidaTed
STaTemenTs of Financial PosiTion as of The end of each of
The Two (2) mosT recenl ended fiscal years and a
33
separaTe inTerim STaTemenT of Financial PosiTion as of The
end of The firsT (15*) fiscal quarTer subsequenT To The mosT
recenT fiscal year end.

(d) If a filing on Form l2—i is made more Than Two hundred

sevenTy—four (274) days aTTer The end of The mosT recenl
ended fiscal year, The filing shall include AudiTed
ConsolidaTed STaTemenTs of Financial PosiTion as of The end
of each of The Two (2) mosT recenl ended fiscal years
and a separaTe lnTerim STaTemenT of Financial PosiTion as
of The end of The second (2nd) fiscal quarTersubsequenT To -
The mosT recenT fiscal year end.

(ii) ConsolidaTed STaTemenTs of Comprehensive lncome

(Ol There shall be filed for The regisTranT and iTs consolidaTed
subsidiaries and iTs predecessors AudiTed STaTemenTs of
Comprehensive lncome in a comparaTive formaT for each
of The Three (3) mosT recenT compleTed fiscal years or such
shorTer period as The regisTranT (including predecessors) has
been in exisTence.

ln addiTion, a STaTemenT of Comprehensive lncome shall be

provided for any inTerim period beTween The laTesT AudiTed
STaTemenT of Financial PosiTion and The daTe of The mosT
recenT lnTerim STaTemenT of Financial PosiTion being filed,
and for The corresponding period of The preceding year.

(iii) ConsolidaTed STaTemenTs of Changes in EquiTy

(0) There shall be filed for The regisTranT and iTs consolidaTed
subsidiaries and iTs predecessors, AudiTed STaTemenTs of
Changes in EquiTy in comparaTive formaT for each of The
Three (3) mosT recenT compleTed fiscal years or such shorTer
period as The regisTranT (including predecessors) has been
in exisTence.

lb) ln addiTion, STaTemenTs of Changes in EquiTy shall be

provided for any inTerim period beTween The laTesT AudiTed
STaTemenT of Financial PosiTion and The daTe of The mosT
recenT inTerim STaTemenT of Financial PosiTion being filed,
and for The corresponding period of The preceding year.

(iv) ConsolidaTed STaTemenTs of Cash Flows

lOl There shall be filed for The regisTranT and iTs consolidaTed
subsidiaries and iTs predecessors, AudiTed STaTemenTs of
Cash Flows in comparaTive formaT for each of The Three (3)
mosT recenT compleTed fiscal years or such shorTer period as
The regisTranT (including predecessors) has been in
exisTence.

34
(b) In addition, a consolidated Statement of Cash Flows shall be
provided for any interim period between the latest Audited
Statement of Financial Position and the date of the most
recent interim Statement of Financial Position being filed,
and for the corresponding period of the preceding year.

The above financial statements shall be audited by an

independent auditor accredited by the Commission under the
category prescribed per Section 3 (B) (i) of Part I of this Rule.

(V) Interim Financial Statements

The interim financial statements mentioned in the preceding

subparagraphs need not be audited. However, in case of an initial
public offering of securities by a company, such interim financial
statements shall be audited by an independent auditor
accredited by the Commission under the prescribed category and
shall be complete in details as in a full fiscal year financial report.
Reviewed Interim Financial Statements may be accepted by the
Commission provided that the registrant submits a written
justification citing its constraints for having the interim financial
statements audited and a certification that there has been no
material event or transactions during the interim period that would
necessitate the conduct of audit procedures.

The review by an independent auditor of the financial statements

shall be in accordance with the applicable standards.

(Vi) Age Requirement for Financial Statements

(a) At the time a registration statement on SEC Form 12-] is to

become effective, the financial information therein shall be
as of a date within one hundred eighty (i80) days from
effective date.

(b) Except as required under sub—paragraph (v) above, the

interim financial statements which are necessary to keep
the registration statement current, need not be audited but
shall comply with the required form and contents under
Philippine Accounting Standards 34 (Interim Financial
Reporting or any of its amendments).

B. Annual Reports (SEC Form 17-A)

ii) There shall be filed consolidated Audited Statements ofFinancial

Position (except if not applicable), in comparative format, as of the
end of each of the two (2) most recently completed fiscal years.

iii) The Statements of Comprehensive Income, Statements of Cash

Flows and Statements of Changes in Equity shall be in comparative
format for the three (3) most recently completed fiscal years or
such shorter period as the company (including predecessors) has
been in existence.
35
C. Information Statements (SEC Form 20-IS)

(i) There shall be filed consolidated Audited Statements of Financial

Position (except if not applicable), in comparative format, as of the
end of each of the two (2) most recently completed fiscal years. If
the meeting date is beyond one hundred thirty—five (I 35) days from
the company's fiscal year end, a separate Interim Unaudited
Statement of Financial Position as of the end of the most recent
quarter with comparative figures as of the end of the preceding
fiscal year shall likewise be filed.

(ii) The Statements of Comprehensive Income, Statements of Cash

Flows and Statements of Changes in Equity shall be in comparative
format for the three (3) most recently completed fiscal years or
such shorter period as the company (including predecessors) has
been in existence. It the meeting date is beyond one hundred
thirty-five (I 35) days from the company’s fiscal year end, separate
interim unaudited statements for the most recent quarter with
comparative figures for period ending of the same quarter of the
preceding year shall likewise be filed.

APPLICABILITY WITH OTHER REPORTS

The schedules provided under Annex 68-J (Schedules) are not required in
management reports to be distributed to shareholders as part of the information
statement.

ADDITIONAL DISCLOSURE REQUIREMENTS

A. Statements of Financial Position

In addition to the disclosures required under the PFRSs and except as

otherwise permitted by the Commission, the various line items and certain
additional disclosures set forth in Annex 68-K if applicable, shall appear on
the face of the Statements of Financial Position or related Notes to the
Financial Statements filed by the persons to whom this Rule pertains.

Statements of Comprehensive Income

In addition to the disclosures required under the PFRSs and except as

otherwise permitted by the Commission, the various line items and certain,
additional disclosures set forth in Annex 68-K, if applicable, shall appear on
the face of the Statements of Comprehensive Income in the financial
statements or related notes filed by the persons to whom this Rule pertains.

General Notes to Financial Statements

In addition to the disclosures required under the PFRSs and except as

otherwise permitted by the Commission, the various line items and certain
additional disclosures set forth in Annex 68-K, if applicable, shall appear on
the face of the financial statements or related notes to the financial
statements filed by the persons to whom this Rule pertains.

36
D. Schedules

Please see Annex 68-J for The required form and confenf.

INTERIM FINANCIAL STATEMENTS

The following addiTional instructions shall be applicable for purposes of preparing

lnferim Financial STaTemenTs:

A. If appropriate, The STaTemenT of Comprehensive Income shall show

earnings per share and dividends declared per share applicable To
common sTock. The basis of The earnings per share compuTaTion shall be
sTaTed Togefher wiTh The number of shares used in The compuTaTion. For
muTuaI funds orinvesTmenT companies, The amounT of NeT AsseT Value per
Share and The basis for iTs compuTaTion shall likewise be disclosed in The
STaTemenT of Financial PosiTion or The NoTes To Financial STaTemenTs.

If, during The mosT recenT inTerim period presenfed, The regisTranT or any of
iTs consolidaTed subsidiaries enTered info a business combinaTion TreaTed
for accounTing purposes as a pooling of inferesTs, The lnferim Financial
STaTemenTs for boTh The currenT year and The preceding year shall reflecf
The combined resulTs of The pooled businesses, as appropriaTe.
Supplemenfal disclosure of The separaTe resulTs of The combined enTiTies
for The periods prior To The combinaTion shall be given, wiTh appropriaTe
explanafions.

Where a maTerial business combinaTion accounTed for as a purchase has

occurred during The currenT fiscal year, pro forma disclosure shall be made
of The resulTs of operaTions for The currenT year up To The daTe of The mosT
recenT inTerim STaTemenT of Financial PosiTion provided (and for The
corresponding period in The preceding year) as Though The companies
had combined af The beginning of The period being reporled on. This pro
forma informaTion shall, as minimum, show revenues, and The cumulafive
effecT of accounTing changes, including such income on a per share
basis, and nef income per share.

In addifion To meeTing The reporTing requiremenTs specified by exisfing

sTandards for accounTing changes, The regisfranf shall sTaTe The daTe of
any maTerial accounTing change and The reasons for making iT.

Any unaudiTed inTerim financial sTaTemenTs furnished shall reflecf all

adjusTmenTs which are, in The opinion of managemenf, necessary for a fair
sTaTemenT of The resulTs for The inTerim periods presenfed. A sTaTemenT To
ThaT effecT shall be included. Such adjusTmenTs shall include, for example,
appropriaTe esTimaTeol provisions for bonus and profif sharing
arrangemenfs normally defermined or seffled of year end. If all such
adjusTmenTs are of a normal recurring naTure, a sTaTemenT To ThaT effecT
shall be made; oTherwise, There shall be furnished informaTion describing
in appropriaTe deTail The naTure and amounT of any adjusTmenTs oTher
Than normal recurring adjusTmenTs enTering info The deferminafion of The
resulTs shown.

37
F. Periods for which interim financial statements are to be provided in
registration forms are stated in Section 5 of Part II of this Rule. For filings on
Form i7—Q: Quarterty Report, financial statements shall be provided in
accordance with the financial reporting framework.

G. Filing of other interim financial information in certain cases — The

Commission may, upon written request of the registrant, and where
consistent with the protection of investors, permit the omission of any of
the interim financial information herein required or the filing in substitution
therefor of appropriate information of comparable character. The
Commission may also by written notice require the filing of other
information in addition to, or in substitution for, the interim information
herein required in any case where such information is necessary or
appropriate for an adequate presentation of the financial condition of
any entity for which interim financial information is required, or whose
financial information is otherwise necessary for the protection of investors.

9. PRO FORMA FINANCIAL INFORMATION

A. Applicability

(i) This Section prescribes the requirements in a report of an issuer or

in a registration statement for the registration of debt and equity
securities.

(ii) In addition to the AFS of business acquired, the pro forma

financial information shall be submitted with the report orwith the
registration statement if any of the following transactions occurs
after the date of the most recent Statement of Financial Position
or during the interim period:

(a) Significant business combination accounted for as a

purchase has occurred (for purposes of this Rule, the term
"purchase" encompasses the purchase of an interest in a
business accounted for by applying the acquisition
method);

(b) Consummation of a significant business combination that

has occurred or is probable;

(c) Securities being registered by the registrant are to be

offered to the security holders of a significant business to be
acquired or the proceeds from the offered securities will be
applied directly or indirectly to the purchase of a specific
significant business;

(d) The disposition of a significant portion of a business either by

sale, abandonment or distribution to shareholders by means
of a spin—off, split—up or split-off has occurred or is probable
and such disposition is not fully reflected in the financial
statements of the registrant included in the filing;

38
(e) Acquisition of one or more real esTaTe operaTions or
properTies which in The aggregaTe is significanT, or when
There is an acquisiTion or proposal To acquire one ( i ) or more
operaTion or properTies which in The aggregafe is significanT;

(f) The regisTranT previously was a parT of anoTher enTiTy and

such presenTaTion is necessary To reflecT operaTions and
financial posiTion of The regisTranT as an auTonomous enTiTy;
or

(g) ConsummaTion of oTher evenTs or TransacTions has occurred

or is probable for which disclosure of pro forma financial
informaTion would be maTerial To invesTors.

(iii) A business combinaTion or disposiTion of a business shall be

considered significanT if:

(a) A comparison of The mosT recenT annual financial

sTaTemenTs of The business acquired or To be acquired and
The regisTranT's mosT recenT annual consolidaTed financial
sTaTemenTs filed aT or prior To The daTe of acquisiTion
indicaTes ThaT The business would be a significanT subsidiary
pursuanT To The definiTion specified in SecTion i (B) (x) of ParT
l of This Rule.

(b) The business To be disposed of meeTs The definiTion of a

significanT subsidiary in SecTion l (B) (X) of ParT | of This Rule.

(M The requiremenT under paragraph (Allii) in The previous page

shall noT apply in Those circumsTances when, for purposes of a
more meaningful presenTaTion, a TransacTion consummaTed
afTer The balance-sheeT daTe is reflecTed in The hisTorical financial
sTaTemenTs.

(V) When consummaTion of more Than one ( i ) TransacTion has

occurred or is probable during a fiscal year, The TesTs of significance
in (iii) above shall be applied To The cumulaTive effecT of Those
TransacTions. If The cumulaTive effecT of The TransacTions is
significanT, proforma financial informaTion shall be presenTed.

(Vi) For purposes of This Rule, The Term business shall be evaluaTed in
lighT of The facTs and circumsTances involved and wheTher There
is sufficienT conTinuiTy of The acquired enTiTy‘s operaTions prior To
and afTer The TransacTions so ThaT disclosure of prior financial
informaTion is maTerial To an undersTanding of fuTure operaTions.
A presumpTion exisTs ThaT a separaTe enTiTy, a subsidiary, or a
division is a business. However, a lesser componenT of an enTiTy
may also consTiTuTe a business.

(vii) This Rule does noT apply To TransacTions beTween a parenT

company and HS wholly-owned subsidiary.

39
Prescribed Presentation

0) Objective

Pro forma financial information shall provide investors with

information about the continuing impact of a particular
transaction by showing how it might have affected historical
financial statements if the transaction had been consummated at
an earlier time. Such statements shall assist investors in analyzing
the future prospects of the registrant because they illustrate the
possible scope of the change In the registrant's historical financial
position and results of operations caused by the transaction.

(ii) Form and Content

(0) Pro forma financial information shall consist of a pro forma

Condensed Statements of Financial Position, pro forma
Condensed Statements of Income, Statements of Cash
Flows, Statements of Changes in Equity and accompanying
explanatory notes. In certain circumstances (i.e., where a
limited number of pro forma adjustments are required and
those adjustments are easily understood), a narrative
description of the proforma effects of the transactions may
be furnished in lieu of the statements described herein.

lb) The pro forma financial information shall be accompanied

by an introductory paragraph which briefly sets forth a
description of (i) the transaction, (ii) the entities involved,
and (iii) the periods for which the pro forma information is
presented. In addition, an explanation of what the pro
forma presentation shows shall be set forth.

IO) The pro forma condensed financial information need only

include major captions (i.e., the numbered captions)
prescribed by the applicable paragraphs of this Rule. Where
any major Statement of Financial Position caption is less
than ten per cent (I0%) of total assets, the caption may be
combined with others. When any major Income Statement
caption is less than fifteen per cent (15%) of average net
income of the registrant for the most recent three (3) fiscal
years, the caption may be combined with others. In
calculating average net income, a loss year shall be
excluded unless losses were incurred in each of the most
recent three (3) years, in which case the average loss shall
be used for purposes of this test. Notwithstanding these
tests, "minimal" amounts need not be shown separately.

(0') Pro forma statements shall ordinarily be in columnar form

showing condensed historical statements, pro forma
adjustments, and the proforma results.

40
l9) The pro forma condensed Statements of Comprehensive
Income shall disclose income (loss) from continuing
operations before nonrecurring charges or credits directly
attributable to the transaction. Material nonrecurring
charges or credits and related tax effects which result
directly from the transaction and which will be included in
the income of the registrant within the twelve (12) months
succeeding the transaction shall be disclosed separately. It
shall be clearly indicated that such charges or credits were
not considered in the pro forma condensed Statements of
Comprehensive Income. If the transaction for which pro
forma financial information is presented relates to the
disposition of a business, the pro forma results shall give
effect to the disposition and be presented under an
appropriate caption.

(1‘) Pro forma adjustments related to the proforma condensed

Statements of Comprehensive Income shall be computed
assuming the transaction was consummated at the
beginning of the fiscal year presented and shall include
adjustments which give effect to events that are (i) directly
attributable to the transaction, (ii) expected to have a
continuing impact on the registrant, and (iii) factually
supportable. Pro forma adjustments to the pro forma
Condensed Statements of Financial Position shall be
computed assuming the transaction was consummated at
the end of the most recent period for which a Statement of
Financial Position is required by Section 5 of Part ll of this Rule
and shall include adjustments which give effect to events
that are directly attributable to the transaction and factually
supportable regardless of whether they have a continuing
impact or are nonrecurring. All adjustments shall be
referenced to notes which clearly explain the assumptions
involved.

(9) Historical primary and fully diluted per share data based on
continuing operations (or net income if the registrant does
not report either discontinued operations, or the cumulative
effect of accounting changes) for the registrant, and
primary and fully diluted pro forma per share data based on
continuing operations before nonrecurring charges or
credits directly attributable to the transaction shall be
presented on the face of the pro forma condensed
Statements of Comprehensive Income together with the
number of shares used to compute the per share data. For
transactions involving the issuance of securities, the number
of shares used in the calculation of the proforma per share .
data shall be based on the weighted average number of
shares outstanding during the period adjusted to give effect
to shares subsequently issued or assumed to be issued had
the particular transaction or event taken place at the
beginning of the period presented. If a convertible security
is being issued in the transaction, consideration shall be
41
given To The possible diluTion of The pro forma per share
daTa.

lhl If The TransacTion is sTrucTured in such a manner ThaT

significanl differenT resulTs may occur, addiTional proforma
presenTaTions shall be made ThaT show range of possible
resuITs.

* InsTrucTions*

( i) The hisToricaI STaTemenTs of Income used in The pro

forma financial InformaTion shall noT reporT
operaTions of a segmenT ThaT has been
disconTinued, or The cumuIaTive effecTs of
accounTing changes. If The hisforical STaTemenTs
of Income include such iTems, only The porTion of
The STaTemenTs of Comprehensive Income
Through 'lncome from ConTinuing OperaTions" (or
The appropriaTe modificaTion Thereof) shall be
used in preparing pro forma resuITs.

(2) For a purchase TransacTion, pro forma adjusTmenTs

for The STaTemenTs of Comprehensive Income shall
include depreciafion and oTher adjusTmenTs
based on The allocaTed purchase price of neT
asseTs acquired. In some TransacTions, such as in
financial insTiTuTion acauisiTions, The purchase
adjusTmenTs may include significanT discounTs of
The hisToricaI cosT of The acquired asseTs To Their fair
value 07‘ The acquisiTion daTe. When such
adjusTmenTs will resuIT in a significanT effecT on
earnings (losses) in periods immediaTely
subsequenT To The acquisiTion which will be
progressively eIiminaTed over a reIaTive shorT
period, The effecf of The purchase adjusTmenTs on
The reporTed resuITs of operaTions for each of The
nexT five (5) years shall be disclosed in a noTe.

(3) For a disposiTion TransacTion, The pro forma

financial informaTion shall begin wiTh The hisToricaI
financial sTaTemenTs of The exisTing enTiTy and show
The deIeTion of The business To be divesTed along
wiTh The proforma adjusTmenTs necessary To arrive
aT The remainder of The exisTing enTiTy. For
example, pro forma adjusTmenTs would include
adjusTmenTs of inTeresT expense arising from
revised debT sTrucTures and expenses which will be
or have been incurred on behalf of The business To
be divesTed such as adverTising cosTs, execuTive
salaries and oTher cosTs.

42
l4) For entities which were previously a component of
another entity, pro forma adjustments shall include.
adjustments similar in nature to those referred to in
Instruction 3 in the previous page. Adjustments
may also be necessary when charges for
corporate overhead, interest, or income taxes
have been allocated to the entity on a basis other
than one deemed reasonable by management.

l5) Adjustments to reflect the acquisition of real estate

operations or properties for the pro forma
Statements of Comprehensive income shall
include a depreciation charge based on the new
accounting basis for the assets, interest financing
on any additional or refinanced debt, and other
appropriate adjustments that can be factually
supported. See also Instruction 4 above.

(6) When consummation of more than one ( i )

transaction has occurred or is probable during a
fiscal year, the pro forma financial information
may be presented on a combined basis;
however, in some circumstances (e.g.
depending upon the combination of probable
and consummated transactions, and the nature
of the filing) it may be more useful to present the
pro forma financial information on a
disaggregated basis even though some or all of
the transactions would not meet the tests of
significance individually. For combination
presentations, a note shall explain the various
transactions and disclose the maximum
variances in the pro forma financial information
which would occur for any of the possible
combinations. If the pro forma financial
information is presented in a proxy or information
statement for purposes of obtaining shareholder
approval of one of the transactions, the effects
of that transaction shall be clearly set forth.

(7) The tax effect, if any, of pro forma adjustments

normally shall be calculated at the statutory rate
in effect during the periods for which pro forma
condensed Statements of Comprehensive
Income is presented and shall be reflected as a
separate pro forma adjustment.

****

43
(iii) Periods To be Presented

IO) A pro formq Condensed STdTemenT of Findnciol PosiTion OS

of The end of The mosT recenT period for which 0
ConsolidoTed STdTemenTs of Financial PosiTion of The
regisTra is required shall be filed unless The TronsocTion is
already reflecTed in such STdTemenTs of Financial PosiTion.

lb) Pro formq Condensed STdTemenTs of Income shall be filed

for only The mosT recenT Tiscol yedr end for The period from
The mosT recenT fiscol yedr end To The mosT recenT inTerim
qe for which 0 STdTemenTs of Financial PosiTion is
required. A pro formd condensed STdTemenTs of
Comprehensive Income may be filed for The corresponding
inTerim period of The preceding fiscal year. A pro formd
condensed STdTemenTs of Comprehensive Income shdll noT
be filed when The hisToricql STdTemenT of Comprehensive
Income reflecTs The TrdnsocTion for The enTire period.

For 0 business combindTion occounTed for as d pooling of

inTeresTs, The pro formq STdTemenTs of Comprehensive
Income (which is in effecT q resToTemenT of The hisToriCdl
STdTemenT of Comprehensive Income 03 if The combinoTion
hdd been consumded) shdll be filed for all periods for
which 0 hisToric STdTemenT of Comprehensive Income of
The regisTrdnT is required.

(0') Pro formd Condensed STdTemenTs of Income shall be

presenTed using The regisTra’s fiscql year end. If The mosT
recenT fiscol yeor end of any oTher enTiTy involved in The
Trqnscion differs from The regisTronT's mosT recenT fiscal
year end by more Then nineTy—Three (93) days, The oTher
enTiTy‘s STdTemenTs of Comprehensive Income shdll be
broughT up To wiThin nineTy-Three (93) doys of The regisTronT's
mosT recenT fiscol year end, if prcicobIe. This upqing
she” be accomplished by adding subsequenT inTerim period
resulTs To The mosT recenT Tiscql yeor—end infordion dnd
deducTing The compdrqble preceding year inTerim period
resulTs. Disclosure shdll be mode of The periods combined
and of The soles and revenues and income for any periods
T t were excluded from or included more Then once in The
condensed pro formo STdTemenTs of Comprehensive
Income.

(e) Whenever unusuol evenTs enTer inTo The deTermindTion of

The resulTs shown for The mosT recenl compIeTed fiscol
yedr, The effecT of such unusuol evenTs shdll be disclosed
and considerdTion shall be given To presenTing CI pro formd
condensed STdTemenTs of Comprehensive Income for The
mosT recenT Twelve (l2)—monTh period in dddiTion To Those
required in sub—pdrdgrdph (d) above if The mosT recenT
Twelve (12)—monTh period is more represenToTive of normal
opeqions.
44
(f) Pro forma information shall be prepared primarily by
applying pro forma adjustments to historical financial
information. Pro forma adjustments shall be based on
management's assumptions and shall recognize all
significant effects directly attributable to the transaction
(or event).

(g) Pro forma financial information shall be labeled as such to

distinguish it from historical financial information. This
presentation shall describe the transaction (or event) that
is reflected in the pro forma financial information, the
source of the historical financial information on which it is
based, the significant assumptions used in developing the
pro forma adjustments, and any significant uncertainties
about those assumptions. The presentation also shall
indicate that the pro forma financial information shall be
read in conjunction with related historical financial
information and that the pro forma financial information is
not necessarily indicative of the results (such as financial
position and results of operations, as applicable) that
would have been attained had the transaction (or event)
actually taken place earlier.

(iv) Report 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. The said auditor shall comply with the
requirements under Philippine Standard on Assurance
Engagements No. 3420 (Assurance Engagements to Report on
the Compilation of Pro Forma Financial information included in
the Prospectus).

10. CONSOLIDATED FINANCIAL STATEMENTS

In addition to those required under the applicable financial reporting framework,

the following requirements shall be complied with by companies covered by Part
II of this Rule:

A. A company covered by Part II of this Rule that has a significant foreign

subsidiary or subsidiaries shall submit to the Commission copies of the
financial statements of said subsidiaries.

B. A parent company covered by Part II of this Rule shall submit consolidated

AFS accompanied by its separate AFS that is duly received by the BlR or
its authorized banks, unless the BlR allows an alternative proof of submission
for its authorized banks (e.g., bank slips) or prohibits acceptance of the
financial statements in certain cases (e.g., on—going examination).

45
PART III. PENALTIES AND OTHER GENERAL IMPLEMENTING PROVISIONS

1. PENALTIES

A. All financial sTaTemenTs submiTTed To The Commission by enTiTies covered

by This Rule shall adhere sTricy To The provisions hereof.

B. PenalTies, as may be prescribed by The Commission, shall be imposed on

The erring company due To any of The following violaTions:

(i) MaTerial misrepresenTaTion in The financial sTaTemenTs:

(ii) Any maTerial missTaTemenT in The financial sTaTemenTs for failure To

comply wiTh The applicable financial reporTing framework, such as:

(a) Failure To adopT The prescribed financial reporTing

framework or any accounTing sTandard resuITing in a
maTerial missTaTemenT; and

(b) Failure To disclose required informaTion and oTher

relevanT or maTerial informaTion.

(iii) Failure To submiT any basic componenT of The financial sTaTemenTs;

(iv) Failure To submiT financial sTaTemenTs audiTed by a qualified

independenT cerTified public accounTanT;

(v) Failure To submiT a compIeTe SMR; and

(vi) Failure To comply wiTh any oTher requiremenTs under ParT | or II of

This Rule.

B. The penalTies imposable on an erring company forThe violaTion of This Rule

shall be in addiTion To The fine imposable due To IaTe or incompleTe filing
of oTher parTs of any reporT To which The financial sTaTemenTs are required
To be aTTached.

C. In addiTion To Those provided in ParT l and Annex 68—A of This Rule,

penalTies, as may be prescribed by The Commission, shall be imposed on
The independenT audiTor or audiTing firm, as The case may be, due To any
of The following violaTions:

(i) Failure To submiT any of The reporTs required under This Rule;

(ii) Any maTerial misrepresenTaTion in The following informaTion or

documenTs:

(a) ApplicaTion for accrediTaTion;

(b) CerTificaTions submiTTed wiTh The applicaTion; or
(c) Any of The reporTs required under ParT l of This Rule;

46
(iii) Refusal for no valid reason, upon lawful order of the Commission
to submit requested documents (e.g. audit work papers) in
connection with an ongoing investigation. The independent.
auditor shall, however, be made aware of such investigation.

(iv) Gross negligence in the conduct of the audit or failure to comply

with any of the PSA and such other issuances of the AASC and/or
the Commission;

(v) Issuance of an unqualified opinion which is not supported by full

compliance by the auditee with the applicable financial
reporting framework due to a material deficiency or
misstatement in the financial statements;

(vi) Conduct of an audit despite the lock or eventual loss of

independence as provided for under the Code of Ethics for
Professional Accountant in the Philippines;

(vii) Conduct of any non-audit services for his statutory audit clients, if
he has not undertaken the safeguards to reduce the threat to his
independence;

(viii) Failure to comply with any of the operational requirements for

accredited auditing firms or sole practitioners under Part | of this
Rule; or

(ix) Failure to obtain from the Commission an accreditation

appropriate to the company-client’s category under this Rule
prior to engagement or during the period of audit and signing of
the Auditor’s Report.

2. TEST OF MATERIALITY

A. General Guidelines

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. Materiality depends on
the size and nature of the omission or misstatement judged in the
surrounding circumstances. The size or nature of the item, or a
combination of both, could be the determining factor.

Materiality is determined for the financial statements as a whole.

Therefore, where there is an identified misstatement or error, the
determination as to whether the financial statements are materially
misstated is based on an evaluation of such findings taking the financial
statements as a whole. Such evaluation shall not be driven by the
number or by the size of misstatements or errors alone, but by the overall
impact on the financial statements, taking into account both the
quantitative and qualitative factors.

47
B. For this purpose, the following quantitative test shall be applied by the
Commission:

(l) Deficiency or Inconsistency

(i) Failure to submit any component of the financial

statements prescribed under this Rule shall be considered
a material deficiency.

(ll) A disclosure deficiency or inconsistency in the disclosures

within the financial statements shall be material if the
information involves a transaction, amount or account
that represents ten per cent (10%) or more of the total of
related accounts or transactions. For issuers of securities to
the public and public companies as identified under
Section 3 (B) (i) (a) (l), (2) and (3) of Part l of this Rule, the
test to be used shall be five per cent (5%). Based on the ,
circumstances identified by the Commission, materiality of
the deficiency or inconsistency in relation to the total
assets or total liabilities may be considered.

In resolving the issue of violation, due regard shall be given

to the written explanation of the external auditor as to his
basis in determining materiality and the exercise of
professional judgment in issuing his audit opinion on the
questioned financial statements.

(2) Misstatement

(i) A misstatement of the financial statements may result from

a deviation from prescribed policy, misrepresentation,
fraud or error.

(ii) A misstatement shall be material if it represents ten

per cent (10%) or more of the total of related accounts or
transactions.

For issuers of securities to the public and public companies

as identified under Section 3 (B) (i) (a) (l), (2) and (3) of
Part | of this Rule, a misstatement shall be material if it
represents five per cent (5%) or more of the total of the
related accounts or transactions. Based on the
circumstances identified by the Commission, materiality of
the misstatement in relation to the total assets or total
liabilities may be considered.

(iii) In resolving the issue of violation, due regard shall be given

to the written explanation of the external auditor as to his
basis in determining materiality and the exercise of
professional judgment in issuing his audit opinion on the
questioned financial statements.

48
Qualitative Considerations

In addition to the quantitative considerations identifying material

misstatement or error, qualitative factors shall be considered. These
include whether the misstatement or error:

(i) Affects compliance with debt covenants or other

contractual requirements;

(ii) 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;

(iii) Masks 0 change in earnings or other trends, especially in

the context of general economic and industry conditions;

(M Affects ratios used to evaluate the entity's financial

position, results of operations or cash flows;

(v) Affects segment information presented in the financial

statements (for example, the significance of the matter to
a segment or other portion of the entity's business that has
been identified as playing a significant role in the entity's
operations or profitability);

M) Has the effect of increasing management compensation,

for example, by ensuring that the requirements for the
award of bonuses or other incentives are satisfied;

(vii) Is significant having regard to the auditor's understanding

of known previous communications to users, for example,
in relation to forecast earnings;

(viii) Affects compliance with regulatory requirements

(including BIR, ESP and other government agencies);

(ix) Relates to items involving particular parties (for example,

whether external parties to the transaction are related to
members of the entity‘s management);

(X) Is an omission of information not specifically required by

the applicable financial reporting framework but which,
in the judgment of the auditor, is important to the users'
understanding of the financial position, financial
performance or cash flows of the entity; or

49
(xi) Affects other information that will be communicated in
documents containing the AFS (for example, information '
to be included in a "Management Discussion and
Analysis" or an "Operating and Financial Review") that
may reasonably be expected to influence the economic
decisions of the users of the financial statements. '

3. RE-ISSUANCE OF FINANCIAL STATEMENTS

A. Corporations whose financial statements will be found by the Commission

to be materially deficient, erroneous and/or misstated shall be imposed
with appropriate penalties. Except for banks, the Commission shall make
a determination whether such misstatement or incompleteness is
significantly material that it would necessitate the re—issuance of such
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 standards. The issue on whether or not the financial
statements of a bank and an insurance company should be re-issued shall
be endorsed by the Commission to the ESP and the IC, respectively, for
appropriate action.

For corporations not covered by the above provisions, they may re-issue
their financial statements subject to compliance with the requirements
under existing standards. However, issuers of securities to the public shall
not re-issue their AFS without prior request from and approval by the
Commission, ESP and IC, as applicable.

A corporation covered by SRC Rule 68 Part II and reissuing 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.

An amendment or re—issuance of the financial statements shall not

exonerate the company and the auditors from the penalty that may be
assessed by the Commission against a corporation due to the material
deficiency or misstatement of the original financial statements.

REPEALING CLAUSE ‘

All other rules and regulations, circulars, or memoranda or any part thereof, in
conflict with or contrary to this Rule or any portion hereof, are hereby repealed
or modified accordingly.

50
EFFECTIVITY AND TRANSITION

A. Unless otherwise specified, the Revised SRC Rule 68, shall become
effective for AFS covering periods ending 31 December 2019 and
onwards, and for interim financial statements starting the first quarter of
2020, and thereafter.

The financial statement requirements for registration of securities under

Part ll of this Rule shall be effective starting 1 January 2020 unless an earlier
application for pending registration statements is requested and
approved by the Commission.

Compliance with the Two (2) Partner Requirement

Auditing firms which have less than two (2) partners as of the date of the
effectivity of this Rule shall be given until 30 June 2022 within which to
comply with the new two (2) partner requirement.

Compliance with the Transition from Sole Proprietorship to Partnership

Sole practitioners as of the date of the effectivity of this Rule shall be given
until 30 June 2022 within which to comply with the requirements to convert
to a Partnership structure from Sole Proprietorship in order to continue
being accredited by the Commission.

All other requirements shall be effective for all applicable reports or

activities after fifteen (15) days from the date of publication of this Rule.

Subsequent Amendments

1. Any proposed amendment of any part of this Rule shall be

exposed for comments for a period of sixty (60) days reckoned
from the date of notice of the Commission, unless the immediate
issuance of the guidelines or circular amending a portion of the
Rule is necessary in order to prevent a material misrepresentation,
disclosure deficiency or misstatement in the financial reports of
corporations.

2. Within thirty (30) days from the last day of submission of

comments, a public consultation shall be conducted. The revised
draft guideline or Rule shall be posted in the SEC website after
thirty (30) days from the date of public consultation.

3. After thirty (30) days from posting of the revised draft, the matter
shall be submitted for decision of the Commission en banc.

51
4. A transition clause that shall allow sufficient period of intervals for
applicability to financial reports of the new requirements shall be
provided in the revised guidelines or Rule.

l 9 August 2019, Pasay City Philippines

ANTONIETA F. IBE EPHYRO LUIS B. MATONG

Commissioner Commissioner

f / r / ‘ j

1A5; PAUL D. FRANCISCO ElLVlN l. SliER K. l.EE

Commissioner Commissioner

52
Annex 68-A

QUALITY OF AUDIT WORK OF APPLICANTS FOR ACCREDITATION AND ACCREDITED

INDEPENDENT AUDITORS

l. The laTesT AudiTed Financial STaTemenTs (AFS) of aT leasT TWo (2) clienTs of The
applicanT To be selecTed randomly, using a risk—based approach, by The
Commission from The cerTified lisT of clienTs provided by The applicanT, shall be
submiTTed for review.

In case The applicanT is an EngagemenT QualiTy ConTrol Reviewer (EQCRll, The

Commission shall review The laTesT AFS of aT leasT Two (2) clienTs, where he is The
EQCR To be selecTed randomly from The cerTified lisT of clienTs submiTTed by The
applicanT. lf There are nofed deficiencies in The AFS subjecfed for evaluaTion,
in relaTion To an EQCR's applicaTion, The Commission is noT precluded from
re—evaluaTing The exisTing accrediTaTion of The relaTed signing parTner of The
evaluaTed AFS since he is primarily responsible for The audiT of The financial
sTaTemenTs on which he expressed an opinion.

The Commission shall likewise consider in The evaluafion The findings on The
financial sTaTemenTs of The applicanT's clienTs or The accrediTed audiTors‘
clienTs ThaT were reviewed in relaTion To regulaTory moniforing or processing of
an applicaTion of The company—clienT. ResulTs of The engagemenT level review
under The SOAR InspecTion Program shall likewise be considered.

2. The following insTances are consideraTions for denial of The applicaTion for
accrediTaTion:

(i) Gross negligence in The conducf of The audiT or failure To comply wiTh
any of The PSA and such oTher issuances of The AASC and/or The
Commission;

(ii) Issuance of an unqualified opinion which is noT supporTed by full

compliance by The audiTee wiTh The applicable financial reporTing
framework due To a maTerial deficiency or missTaTemenT in The financial
sTaTemenTs;

(iii) AudiTor's reporT subsTanTially noT in accordance wiTh The prescribed

wordings under PSA and any relaTed subsequenT issuances;

(iv) ConducT of an audiT despiTe The lock or evenTual loss of independence

as provided for under The Code of EThics for Professional AccounTanfs in
The Philippines;

' EngagemenT Qualify ConTrol Reviewer is a parlner, oTher person in The firm, suiTably qualified exTernaI person, or a
Team made up of such individuals, wiTh sufficienT and appropriafe experience and auThoriTy To objecTive/y evaluaTe,
before The reporT is issued, The significanTjudgmenTs The engagemenT Team made and The conclusions They
reached in formulaTing The reporT.
53
(v) ConducT of any non-audiT services for his sTaTuTory audiT clienTs, if he has
noT underTaken The safeguards To reduce The ThreaT To his
independence.

3. Groups A and B ApplicaTions

A. For Group A or B applicaTions, The audiT work of an applicanT shall be

accepTable only if There is no maTerial disclosure deficiency or maTerial
missTaTemenT in The AFS of each of The applicanT's clienTs.

B. In case There is a maTerial deficiency or missTaTemenT in The financial

sTaTemenTs of The company-clienTs or regulaTed enTiTies, The applicanT
shall be recommended only for condiTional Group A or B or C
accrediTaTion, depending on The level of deficiency or miSsTaTemenT.
The condiTional accrediTaTion shall be subjecT To The following
condiTions:

(i) In case of renewal applicaTions and The findings on The clienTs'

AFS include maTerial deficiency or missTaTemenT, The applicanT-
independenT audiTor shall be assessed a penalTy;

(ii) The condiTional accrediTaTion shall be effecTive for a period of

four (4) monThs only from The daTe of granT;

(iii) A copy of The Two (2) clienTs' AFS, To be selecTed randomly using
a risk—based approach, signed by The independenT audiTor
during The said period shall be submiTTed To The Commission aT
leasT l 5 business days before The lapse of The four (4)-monTh
period. The Commission will sTill review The AFS as of The nexT
reporTing period of The same clienT ThaT was originally inspecTed.
This is To check wheTher The findings ThaT were originally noTed
have been addressed or remediaTed accordingly;

(iv) In cases where There are sTiIl maTerial findings noTed in The
submiTTed AFS of The audiTor wiTh condiTional accrediTaTion or
where The findings ThaT were originally noTed have noT been
addressed or remediaTed, This shall be a sufficienT ground for The
downgrading of The applicanT‘s accrediTaTion, denial of The
applicaTion or disqualificaTion from fuTure accrediTaTion,
depending on The magniTude of The findings.

(V) In cases where There are no maTerial findings noTed in The

submiTTed AFS of The audiTor wiTh condiTional accrediTaTion, The
final approval of The accrediTaTion, which shall be effecTive for
Three (3) years, shall be granTed.

Provided, however, ThaT an applicanT can avail or be granTed

condiTional accrediTaTion on The same level up To Three (3) Times
only. Compliance wiTh CondiTion (iii) shall be sTricy followed.

54
The list of findings on the clients‘ AFS resulting from the foregoing
procedures shall be referred to the operating department of the
Commission which monitors the compliance by the said company-
clients for imposition of appropriate penalties under existing rules.

4. Group C Applications

A n application for accreditation under Group C shall be denied it upon

evaluation, the AFS of company-clients show that there are material
deficiencies or misstatements therein as follows:

(i) Any of the basic components of the financial statements as prescribed

by the applicable financial reporting framework, or any of the following
required documents is not presented:

(a) Supplemental Written Statement of Auditor (for stock

corporations not covered by Part ll of this Rule);
(b) Any of SEC supplementary schedules covered by the Auditor's
Repon.

(ii) The Auditor's Report does not substantially comply with the PSA, SRC
Rule 68 and other relevant regulations;

(iii) The Notes to Financial Statements are substantially incomplete due to

the absence of more than five (5) disclosure items on significant
accoun ts;

(iv) More than three (3) accounting policies on significant accounts, as

defined under paragraph III of SEC MC No. 8, Series of 2009, or any of
its amendments, are not in accordance with the applicable financial
reporting framework, or there are material misstatements involving the
said accounts.

A combination of more than one (1) material finding under items (iii) and (iv)
even it below the limit per each category, would constitute a ground for denial
of the application.

The foregoing requirements for the level of quality of audit work may be
changed by the Commission as circumstances may warrant through
appropriate Issuances.

A. The materiality of a deficiency, misrepresentation or misstatement shall

be determined based on the tests set by the Commission in Part III of this
Rule or any amendments thereto.

As a remedy on the denial of application due to any of the foregoing

deficiencies, the applicant may be granted, upon request, a
conditional accreditation subject to the following conditions:

(i) In case of renewal application for Group C category and the

findings on the clients’ AFS include material deficiency or
misstatement, the applicant—independent auditor shall be

55
assessed a penalty based on Section 12 of MC No. 13, Series of
2009 or subsequent circulars issued by the Commission;

(ii) The conditional accreditation shall be effective for a period of

four (4) months only from the date of grant;

(iii) A copy of the clients' AFS, to be selected randomly using a

risk—based approach, signed during the said period shall be
submitted to the Commission at least 15 business days before the
lapse of the four (4)-month period;

(iv) The final approval of the accreditation, which shall be effective

for three (3) years, shall not be granted unless the said AFS are
compliant with the effective accounting standards and SRC Rule _
68.

(v) In cases where there are still material findings noted in the
submitted AFS of the auditor with conditional accreditation or
where the findings that were originally noted have not been
addressed or remediated, this shall be a sufficient ground for the
downgrading of the applicant’s accreditation, denial of the
application or disqualification from future accreditation,
depending on the magnitude of the findings.

(vi) In cases where there are no material findings noted in the

submitted AFS of the auditor with conditional accreditation, the
final approval of the accreditation, which shall be effective for
three (3) years, shall be granted.

Provided, however, that applicant can only avail or be granted

conditional accreditation on the same level up to three (3) times
only. Compliance with Condition (iii) shall be strictly followed.

C. The list of findings on the clients' AFS resulting from the foregoing
procedures shall be referred to the operating department of the
Commission which monitors the compliance by the said company-
clients for imposition of appropriate penalties under existing rules.

In the event that the application for accreditation is denied due to applicant’s
failure to meet the required audit quality, such applicant can only reapply for
accreditation after six (6) months from said denial for the same category.

Existing accredited external auditors under Group B or C can only apply for
upgrading of accreditation after one (1) year from the grant of their
accreditation.

The Commission is not precluded from re-evaluating an existing accreditation of

. an external auditor, regardless of the validity of its accreditation period, if the
circumstances would warrant further re-evaluation.

56
Annex 68-B

SUPPLEMENTAL WRITTEN STATEMENT OF AUDITOR

To the Stockholders and the Board of Directors

Name of Company
Address

l/We have audited the financial statements of Name of Company for

the year ended , on which l/we have rendered the attached
report dated

In compliance with the Revised Securities Regulation Code Rule 68, I/we are
stating that the said company has a total number of
stockholders owning one hundred (100) or more shares each.

(Name of the Firm, as applicable)

Name and Signature of the Independent Auditor

BOA Accreditation No.
PRC License No.
SEC Accreditation (if any)
PTR No., issue date and place
Date

57,
Annex 68-C

SCHEDULES FOR NON-STOCK, NON-PROFIT ORGANIZATIONS

NSPO Form—1‘

SWORN STATEMENT

We, and
President and Treasurer, respectively, of ,
with address at hereby
depose and state that:

In compliance with the Revised SRC Rule 68, we are stating the following information
that related to the preceding fiscal year to wit:

Documents/ Schedules to the Audited Financial Statements Check it

as of NSPO Forms Applicable
Affidavit of Willingness to be Audited by the Commission NSPO Form-2
N.‘

Schedule of Receipts or Income or Sources of Funds NSPO Form-3

Other Than Contributions and Donations
3. Schedule of Contributions and Donations NSPO Form-4
4. Schedule of Application of Funds NSPO Form-5
5. Certificate of Existence of Program/Activity (COEP)
6. COEP issued by Heads/Officers of private institution or
actual beneficiaries/recipients of the program/activity
shall be allowed in lieu of COEP issued by the
government offices/entities

We hereby certify that this Sworn Statement with duly attached documents/schedules
is executed to attest to the truth of the foregoing and for whatever legal purpose it may serve.

In witness thereof, we have hereunto affixed our signature this day of

, at , Philippines.

President . Treasurer

Subscribed and sworn to before me, a Notary Public for and in

City, on — _ affiants personally, exhibiting their respective competent evidence
of ‘ Identification Card issued of issued on

NOTARY PUBLIC

Doc. No.
Page No.
Book No.
Series of

58
NSPO Form~2

Page i of i

REPUBLIC OF THE PHILIPPINES)

)s.s.

AFFIDAVlT OF WILLINGNESS TO BE AUDITED BY THE COMMISSION

I, , of legal age, Filipino and resident of

, after having been sworn to in
accordance with law hereby depose and state:

I am the Treasurer/Chief Finance Officer of , a non—

stock non-profit organization registered with the Securities and Exchange Commission.

That i, as authorized by the Board of Directors of the corporation, hereby manifest its willingness
to be audited by the Commission upon its Order and Authority for the purpose of determining
compliance of the corporation with existing laws and regulations.

That this affidavit is executed to attest to the truth of the foregoing and for whatever legal
purpose and intent it may serve.

in witness whereof, I hereby sign this affidavit this day of 20— at

Affiant _
(Signature over Printed Name)

SUBSCRIBED AND SWORN to before me this , affiant exhibiting to me his

— _ issued on at as competent
evidence of identity.
~ .

Doc. No. ;
Page No.
Book No. ;
Series of 20 .

59
NSPO Form~3

SCHEDULE OF RECEIPTS OR INCOME OR SOURCES OF FUNDS

OTHER THAN CONTRIBUTIONS AND DONATIONS

Name of Foundation/Organization SEC Registration No.

For the Year Ended

Receipts or Income or Sources of Funds

(d)
Amount
(indicate by
footnote if other
than Philippine
currency, then (e)
(a) ('0) (c) translate in this Date Received/
NO. Description of Income Source column) Period Covered

Others (aggregate of all

IO sources of income which
are individually below
P I 00,000)

(Use separate sheet if necessary)

60
NSPO Form-4

Page I of 2

SCHEDULE OF CONTRIBUTIONS AND DONATIONS (PART I )

Name of Foundation/Organization SEC Registration No.

For the Year Ended

Part I. Contributors/Donor?
(a) (b) (C) (d) (e)
No. Name and Address Nationalfly3 Total Contributions Type of Contribution4
_Cash
I P _Noncash
(Complete Part II it there is
a noncash contribution)
_Cash
2 P _Noncash
(Complete Part II it there is
a noncash contribution)
_Cash
3 P _Noncash
(Complete Part II it there is
a noncash contribution)
_Cash
4 P _Noncash
(Complete Part II it there is
a noncash contribution)
_Cash
5 P _Noncash
(Complete Part II it there is
a noncash contribution)
_Cash
6 P _Noncash
(Complete Part ll if there is
a noncash contributionL
__Cash
7 P _Noncash
(Complete Part I! if there is
a noncash contribution)
_Cash
8 P _Noncash
(Complete Part II it there is
a noncash contribution)
_C as h
9 P __Noncash
{Complete Part II it there is
a noncash contribution)
Others (aggregate of all _Cash
IO contributions which are Individually P __Noncash
below PI 00,000.00) - by nationality (Complete Part II it there is
a noncash contribution)

{Use separate sheet if necessary)

2 A contributor or donor includes individuals, partnerships, corporations, associations, trusts and organizations.
3 For supranational organization, indicate place of principal office or domicile.
4 Contributions or donations reportable on the Schedule are contributions, donations, grants, bequests, devises, and
gifts of money or property, amounting to P1 00,000.00 or more f r o m each contributor or donor.
6]
NSPO Form-4
Page 2 of 2

SCHEDULE OF CONTRIBUTIONS AND DONATIONS (PART II)

Name of Foundation/Organization SEC Registration No.

For the Year Ended

Part ii. Noncash Property

(a)
No. (C)
from (b) Fair Market Value (d)
Part I Description of Noncash Property Given (or Estimate) Date Received

1 P

2 P

3 P

4 P

5 P

6 P

7 F

8 P

9 P

10 P

(Use separate sheet if necessary)

62
NSPO Form-5

SCHEDULE OF APPLICATION OF FUNDS

Name of Foundation/Organization SEC Registration No.

For the Year Ended

(0) (b) (0‘)

Item Description of (c) Project
Number Programs/Projects/Activities status Ottlcer-In-Chdrge
Name of Program/Project/Activity: _ Accomplished Name:
1 _ On-going
_ Planned
Complete Office Address: Complete Address:

Contact Number of Project Office: Contact Number:

Name of Program/Project/Activity: __ Accomplished Name:

2 __ On-going
_ Planned
Complete Office Address: Complete Address:

Contact Number of Project Office: Contact Number:

Name of Program/Project/Activity: _ Accomplished Name:

3 _ On—going
__ Planned
Complete Office Address: Complete Address:

Contact Number of Project Office: Contact Number:

Name of Progrom/Project/Actlvity: _ Accomplished Name:

4 _ On-going
_ Planned
Complete Office Address: Complete Address:

Contact Number of Project Office: Contact Number:

Name of Program/Project/Actlvlty: __ Accomplished Name:

5 _ On-going
_ Planned
Complete Office Address: Complete Address:

Contact Number of Project Office: Contact Number:

(Use separate sheet if necessary)

63
NSPO Form-6

Page i of l

REPUBLIC OF THE PHILIPPINES)

I 5.3.

CERTIFICATION

I, , of legal age, single/married, Filipino ciTizen, wiTh residence

address of ,afTer having
been sworn To in accordance wiTh law, do hereby depose and sTaTe ThaT:

l. I am The duly elecTed Presidenf of IinserT name of The FoundaTionl

a corporaTion duly organized and exisTing under and by virTue of The laws of The Republic
of The Philippines, wiTh principal office address aT

2. The FoundaTion has noT received any funds from any Philippine governmenT agency or
any deparTmenT, bureau or office of The naTional governmenT, or any of HS branches and
insTrumenTaliTies, or any poliTical subdivision or iTs insTrumenTaliTies, as well as any
governmenT—owned or conTrolled corporaTion, including iTs subsidiaries, or oTher self-
governing board or commission of The governmenT, nor received
donaTions/granfs/conTribuTions in The amounf of aT leasf Five Hundred Thousand Pesos
(Php500,000) in one or aggregaTe TransacTions per clonor/granTor/confribufor; and

' 3. To The besT of my knowledge, no acTion or proceeding has been filed or is pending before
any CourT involving an inTra—corporafe dispuTe and/or claim by any person or group
againsT The FoundaTion, iTs duly elecfed TrusTees and/or corporaTe officers.

IN WITNESS WHEREOF, I have hereunTo signed This Cerfificafion This __ day of

aT .

(Name of Presidenf)
PRESIDENT

SUBSCRIBED AND SWORN To before me This , The affianT having exhibiTed To

me his/her as compefenf proof of his/her idenTiTy.

Doc. No. ;
Page No. :
Book No. ;
Series of 20

64
ANNEX 68-D

RECONCILIATION OF RETAINED EARNINGS AVAILABLE FOR DIVIDEND DECLARATION

As of

Name of Company
Address

Unappropriated Retained Earnings, as adjusted to available for dividend

distribution, beginning of the year m

Add: Net Income actually earned/realized during the period

Net income during the period closed to Retained Earnings

Less: Non-actual/unrealized Income net of t a x :

Equity in net income of associate/joint venture
Unrealized foreign exchange gain — (after tax) except those attributable t o
Cash and Cash Equivalents) Unrealized actuarial gain
Fair value adjustment (mark—to—market gains)
Fair value adjustment of investment Property resulting to gain
Adjustment d u e t o deviation from PFRS ~ gain
Other unrealized gains or adjustments to t h e retained earnings
as a result of certain transactions accounted for under the PFRS
Sub—total

Add: Non-actual losses

Depreciation on revaluation increment (after tax)
Adjustment d u e t o deviation from PFRS — loss
Loss o n fair value adjustment of investment property (after tax)
Sub-total

Net Income actually earned during the period

Add (Less):
Dividend declarations during the period
Appropriations of Retained Earnings during t h e period
Reversals of appropriations
Effects of prior period adjustments
Treasury shares
Sub-total
IS

TOTAL RETAINED EARNINGS, END OF THE YEAR AVAILABLE FOR DIVIDEND

Notes:

(1) Figures shall be based on functional currency financial statements of the parent company.

(2) If there are material adjustments in prior years to retained earnings, the said adjustments should
be reflected In this sheet.

65
Annex 68-E

SCHEDULE OF FINANCIAL SOUNDNESS INDICATORS

Name of Company
As of December 3 1 ,

Ratio Formula Current Year Prior Year

Current ratio

Acid test ratio

Solvency ratios

Debt—to—equity ratio

Asset-to-equity ratio
Interest rate coverage
ratio
Return on equity

Return on assets

Net profit margin

Other ratios

66
Annex 68-F

SCHEDULE FOR FINANCING COMPANIES

Name of Company

For the Period Ended

Ratios/Percentages Current Year Prior Year

1 Total Real Estate Investments to Total
Assets

Total Receivables to Total Assets

Total DOSRI Receivables to Net Worth

Amount of Receivables from a Single

Corporation to Total Receivables

* This Schedule shall be submitted with the annual audited financial statements and if
applicable, with the company’s interim financial statements.

67
Annex 68-G

SCHEDULE FOR MUTUAL FUNDS

Name of Compam

For the Period Ended

Ratios/Percentages Current Year Prior Year

Percentage of Investment in a single
enterprise to Total Net Asset Value
Total Investment of the Fund to the
Outstanding Securities of an lnvestee
Company
Total Investments in Liquid or Semi—liquid
Assets to Total Assets
Total Operating Expenses to Net Worth
Total Assets to Total Borrowings

68
Annex 68-H

SCHEDULE FOR INVESTMENT HOUSES

Name of Company

Schedule of Details (Per Issue) of Underwriting Activities for the Year

For the Period Ended

Underwriting
and Other
Name of Nature of Amount of Fees Basis of
Issuer-Client Commitment Issue Generated Computation

69
Annex 68-l

SCHEDULE FOR LISTED COMPANIES WITH A RECENT OFFERING OF SECURITIES TO THE

PUBLIC

Name of Company

For The Period Ended

1. Gross and nei proceeds as disclosed in The final prospectus

2. Actual gross and net proceeds

3. Each expenditure i’rem where the proceeds were used

4. Balance of The proceeds as of end of reporiing period

7O
Annex 68-J

SCHEDULES

This Annex prescribes The disclosure requiremenTs including The form and conTenT of The
schedules required by SecTion 6 of ParT ll of This Rule.

l. ExcepT as expressly provided oTherwise, The schedules specified below shall be filed
as of The ldTesT STaTemenT of Financial PosiTion daTe.

The independenT audiTor‘s reporT shall cover The schedules accompanying The
financial STaTemenTs filed.

In a regisTraTion sTaTemenT filed on SEC Form l2—l, The Schedules need noT be
included in ParT l - lnformaTion Required in ProspecTus buT may be included in ParT
ll — lnformaTion NoT Required in ProspecTus.

INSTRUCTIONS

Schedule A. Financial AsseTs [e.g., Loans and Receivables, Fair Value Through ProfiT
or Loss (FVPL), Held To MaTuriTy lnvesTmenTs, Available for Sale SecuriTies]

This schedule shall be filed in supporT of The capTion of each class of “Financial
AsseTs” if The greaTer of The aggregaTe cosT or The aggregaTe markeT value of FVPL
as of The end of reporTing period consTiTuTes five per cenT (5%) or more of ToTal
currenT asseTs.

Schedule B. AmounTs Receivable from DirecTors, Officers, Employees, RelaTed

ParTies, and Principal STockholders (OTher Than RelaTed ParTies)

This schedule shall be filed wiTh respecT To each person among The direcTors,
officers, employees, and principal sTockhoIders (oTher Than relaTed parTies) from
whom an aggregaTe indebTedness of more Than One Million Pesos (Pi Million) or
one per cenT (l %) of ToTal asseTs, whichever is less, is owed. For The purposes of This
schedule, exclude in The deTerminaTion of The amounT of indebTedness all dmounTs
receivable from such persons for purchases subjecT To usual Terms, for ordinary
Travel and expense advances and for oTher such iTems arising in The ordinary
course of business.

Schedule C. AmounTs Receivable from RelaTed ParTies which are EliminaTed

during The Consolidation of Financial STaTemenTs

This schedule shall be filed wiTh respecT To each RelaTed ParTy (e.g., subsidiary) The
balances of receivable from which are eliminaTed during The consolidaTion of The
financial sTaTemenTs.

Schedule D. Long-Term DebT - This schedule shall be filed in supporT of The capTion
Long-Term DebT in The STaTemenTs of Financial PosiTion.

7i
Schedule E. Indebtedness to Related Parties — This schedule shall be filed to list The
total of all noncurrent indebtedness to Related Parties included in the Statements
of Financial Position. This schedule may be omitted if:

(i) The Total indebtedness To Related Parties included in such Statements of

Financial Position does not exceed five per cent (5%) of Total assets as
shown in The related Statements of Financial Position at either The
beginning or end of the period; or
(ii) There have been no changes in The information required To be filed from
That last previously reported.

Schedule F. Guarantees of Securities of Other Issuers. - This schedule shall be filed

with respect to any guarantees of securities of other issuing entities by The issuer for
which The statement is filed.

Schedule G. Capital Stock - This schedule shall be filed in support of caption Capital
Stock in The Statements of Financial Position.

FORM AND CONTENTS

Schedule A. Financial Assets

Name of issuing Amount Value based on

Entity and Number of Shares shown in the Market Quotation at
Association of or Principal Statement of End of Reporting
Each issue Amount of Bonds Financial Period Income Received
(ii and Notes Position (ii) (iii) and Accrued

(i) Each issue shall be stated separately, except that reasonable grouping,
without enumeration may be made of (a) securities issued or
guaranteed by the Philippine Government or its agencies and (b)
securities issued by others for which the amounts in The aggregate are
not more than Two per cent of Total assets.
(ii) State The basis of determining The amounts shown in The column. This
column shall be Totaled to correspond To The respective Statements of
Financial Position caption or captions.
(iii) This column may be omitted if all amounts ThaT would be shown are the
same as Those in The immediately preceding column.

Schedule B. Amounts Receivable from Directors, Officers, Employees, Related

Parties and Principal Stockholders (Other than Related Parties)

Deductions
Name and Balance
Designation Balance at Amounts Amounts at End
of Debtor Beginning Collected Written Off Not of
iii of Period Additions (iii (iii) Current Current Period

(i) Show separately accounts receivables and notes receivable. In case

of notes receivable, indicate pertinent information such as The due
date, interest rate, Terms of repayment and collateral, if any.
iii) if collection was other Than in cash, explain.
(iii) Give reasons for write off.

72
Schedule C. Amounts Receivable from Related Parties which are eliminated
during the consolidation of financial statements

Deductions
Balance
Name and Balance at Amounts Amounts at End
Designation Beginning Collected Written Off Not of
of Debtor of Period Additions Ji) Current Current Period

(i) If collection was other than in cash, explain.

(ii) Give reasons for write off.

Schedule D. Long Term Debt

Amount shown under

Caption "Current Portion of Amount shown under
Long-term Debt" in related Caption "Long—Term Debt” in
Title of Issue and Type of Amount Statement of Financial related Statement of
Obligation Authorized by Position Financial Position
(i) lndenture (ii) iii

(i) include in this column each type of obligation authorized.

(ii) This column is to be totaled to correspond to the related Statements of
Financial Position caption.
(iii) Include in this column details as to interest rates, amounts or number of
periodic installments, and maturity dates.

Schedule E. Indebtedness to Related Parties (Long-Term Loans from Related

Companies)

I) Name of related party (i) I Balance at Beginning of Period I Balance at End of Period (ii)

(i) The related parties named shall be grouped as in Schedule C. The

information called for shall be stated separately for any persons whose
investments were shown separately in such related schedule.
(i) For each affiliate named in the first column, explain in a note hereto the
nature and purpose of any material increase during the period that is in
excess of ten per cent (10%) of the related balance at either the
beginning or end of the period.

Schedule F. Guarantees of Securities of Other Issuers

Name of Issuing
Entity of Securities
Guaranteed by Title of Issue of Total Amount Amount Owned
the Company for each Class of Guaranteed and by Person for
which this Securities Outstanding which Statement Nature of Guarantee
Statement is Filed Guaranteed (0 is Filed (ii)

(it indicate in a note any significant changes since the date of the last
Statements of Financial Position filed. If this schedule is filed in support
of Consolidated Financial Statements, there shall be set forth
guarantees by any person included in the consolidation except such
guarantees of securities which are included in the Consolidated
Statements of Financial Position.

73
(ii) There musT be or brief sToTemenT of The ndTure of The guoronTee, such as
“Guoronfee of principol ond inTeresT”, "GuoronTee of lnTeresT”, or
"GuoronTee of dividends". If The guoronfee is of inTeresT, dividends, or
boTh, sTdTe The onnuol oggregoTe omounT of inTeresT or dividends so
guoronfeed.

Schedule G. Capdl STock

Number of Shores
issued and
OuTsTonding of Number of Shores Number of
shown under reloTed Reserved for Shores Held
TiTIe of Number of STdTemenT of OpTions, WorronTs, by ReloTed DirecTors,
issue Shores Findnciol PosiTion Conversion and PorTies Officers and OThers
(i) AuThorized Copfion oTher RighTs (ii) Employees (iii)

ii) include in This column edch Type of issue duThorized.

(“l ReldTed PorTies referred To include persons for which seporoTe finoncidl
sTdTemenTs dre filed and Those included in consolidoTed finoncidl
sTdTemenTs, oTher Than The issuer of The porTiculdr securiTy.
(m) lndicoTe in d noTe dny significonT chonges since The ddTe of The ldsT
SToTemenTs of Findncidl PosiTion filed.

74
ANNEX 68-K J
ADDITIONAL DISCLOSURES IN THE NOTES TO FINANCIAL STATEMENTS

In addition to The requirements under The applicable PFRS, corporations covered by

Part ll of This Rule shall comply with the disclosure requirements of This Annex.

‘I. STATEMENTS OF FINANCIAL POSITION

A registrant shall disclose, either on The face of The Statements of Financial

Position or in The NoTes To The Financial Statements, further sub—classifications
of The line items presented in accordance with This Annex and in a manner
appropriate To The registrant's operations and The nature and function of
amount involved.

A. Trade and Other Receivables

(i) State separately receivable from:

(a) customers (trade);

(b) related parties;
(c) other Than Trade debtors such as loans or advances To officers and
employees;

(ii) Disclose The amount of balances, volume during The period and specific
Terms of The receivables from each related party which are eliminated
during consolidation.

(ii) If significant in amount, other receivables shall be segregated by Type,

otherwise, They may be grouped in one figure captioned as Accounts
Receivables—Others, or other equivalent title.

B. ‘ Inventories. Disclose any unusual purchase commitments and accrued net

losses, if any, on such commitments. Losses which are expected To arise‘from
firm and uncancellable commitments for The future purchase of inventory
iTems shall, if maTerial, be recognized in The accounts and separately
disclosed in The Statement of Comprehensive Income.

C. Other Current Assets. State separately any amounts in excess of five per cent
(5%) of Total current assets. The remaining items may be shown in one
amount.

D. indebtedness of or Advances to Related parties. Show separately under This

caption non-current advances to related parties. Include also the disclosure
on whether or not The corporation has an approval requirement and limits on-
the amount and extent of related party transactions.

E. Other Assets. State separately any item which is in excess of five per cent (5%)
of total non-current assets.

75
F. Trade and Other Payables

(i) The following payables shall be stated separately in the Notes to

Financial Statements:

(a) Trade Payables;

(b) Payables to related parties;
(c) Advances from Directors, officers, employees and principal
stockholders and related parties of the company or its related
parties (exclude from this item amounts for purchases subject to
usual trade terms, for ordinary travel expenses, and for other items
arising in the ordinary course of business).

(ii) Disclose the amount of balances, volume during the period and
specific terms of the payables to each related party which are
eliminated during consolidation.

(iii) Accruals (Show separately significant accruals for payrolls, taxes other
than income taxes, interest, and any other material items);

(iii) The following information shall also be disclosed:

(a) Any current liability guaranteed by others;

(b) Assets pledged against secured liabilities.

Other Current Liabilities. lf material, state separately in amount the following

in the Notes to Financial Statements:

(i) Dividends declared and not paid at end of the reporting period
(ii) Acceptances payable
(iii) Liabilities under trust receipts
(iv) Portion of long-term debt due within one year
(v) Deferred Income
(vi) Any other current liability in excess of 5% of total current liabilities

Other Long-Term Liabilities. State separately, in the Statements of Financial

Position or in a note thereto, any item not properly classified in one of the
preceding liability captions (such as deferred income taxes and other long-
term deferred credits) which is in excess of five per cent (5%) of total long-
term liabilities.

Capital Stock. Provide a summarized discussion of the company's track

record of registration of securities under the Securities Regulation Code
(formerly Revises Securities Act) by indicating the number of shares
registered, issue/offer price, date of approval or date when the registration
statement covering such securities was rendered effective by the
Commission, and the number of holders of such securities as of year-end.

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2. STATEMENT OF COMPREHENSIVE INCOME

A. Revenues

STaTe separately on The face of The STaTemenT of Comprehensive Income

revenues from each of The following:

(i) Revenue from sale of goods;

(ii) Revenue from rendering of services;
(iii) Share of The profiT or loss of associaTes and joinT venfures accounTed
for using The equiTy meThod;
(W) OTher income.

B. CosTs

STaTe separaTely on The face of The STaTemenT of Comprehensive Income

cosTs as follows:

III Cosf of sales;

III) CosT of rendering services;
(iii) Operafing expenses;
(iv) OTher expenses.

C. Finance CosTs

STaTe separaTely in The NoTes To Financial STafemenTs The amounT of inTeresT

expense and amorTizaTion of debf discounT and expenses for each of The
following:

III ShorT—Term promissory noTes;

(ii) Long—Term promissory nofes;
(in) Bonds, morTgages and oTher similar long-Term debT;
(IV) AmorTizaTion of debT discounT, expense or premium;
(V) OTher inferesT.

D. OTher Income

III STaTe separaTely in a noTe To financial sTafemenTs, The iTems and

naTure of each maferial oTher income including a disclosure on
wheTher or noT if is a resuIT of a relaTed parTy TransacTion;
(ii) Gain (loss) on Sale of AsseT — STaTe separaTely gain or loss from sale
of each class of asseT;
(iii) Miscellaneous Income - STaTe separaTely any maTeriaI amounTs of
miscellaneous income indicaTing clearly The naTure of The
TransacTions ouT of which The iTems arose.

E. OTher Expenses. STaTe separaTely expendiTures wiTh maTeriaI amounf or

fhaT which consTiTuTes five per cenT (5%) or more of The Tofal revenue of
The regisfranT.

F. Specific Disclosures on The Face of The STaTemenT or in The NoTes

NeT AsseT Value Per Share, in case of mufual funds or invesTmenT companies

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