After various deadline extensions due to the implementation of quarantine measures under COVID-19, corporations in the Philippines are now starting to file their Audited Financial Statements and General Information Sheets with the Securities and Exchange Commission (SEC).
Since the SEC released these updated procedures, however, the SEC Main Office has issued further advisory Notices. In certain areas in the Philippines, such as Cebu, the filings deadlines have been extended further as some areas went back under Enhanced Community Quarantine.
Here’s what companies in the Philippines should know about filing the AFS in the coming weeks.
- 1 Background
- 2 SEC Memorandum Circular No. 18 Series of 2020
- 3 Who must file the AFS?
- 4 Companies Not Covered by SEC MC No. 18, Series of 2020
- 5 Filing Deadlines for the AFS
- 6 BIR Stamping
- 7 General Requirements for the AFS
- 8 CloudCfo – Online Accounting & Bookkeeping Services in Metro Manila and the Philippines
In early 2020, prior to COVID-19, the SEC released SEC Memorandum Circular No. 2 Series of 2020. This SEC Memorandum outlined the procedures for the filing of two key annual reports to the SEC:
- The Audited Financial Statement, commonly known as the AFS;
- The General Information Sheet, commonly known as the GIS.
We outlined the primary elements of SEC Memorandum Circular No. 2 Series of 2020 in a previous article.
Since then, much has changed. In light of COVID-19, the BIR extended the filing deadlines for various tax returns and payments, including the filing of the Annual Income Tax Return, or AITR, and the AFS. As a result of this and to ensure protection for its frontline staff, the SEC also delayed the filing deadlines for the AFS.
The SEC has recently issued updated procedures for filing the AFS. The relevant procedures are now included in SEC Memorandum Circular No. 18 Series of 2020 (dated 25 May 2020).
SEC Memorandum Circular No. 18 Series of 2020
SEC MC No. 18, Series of 2020 provides that all corporations, including branch offices, representative offices, regional headquarters and regional operating headquarters of foreign corporations, shall file their Annual Financial Statements and General Information Sheet through the SEC Express Nationwide Submission (SENS) to any courier of their choice and/or Philippine Postal Office.
The AFS can be filed through email prior to the submission of the hard copy (as mentioned above). However, once the Community Quarantine is lifted, companies can directly file the hard copy reports through SENS (courier/Philpost).
Who must file the AFS?
The General Financial Reporting Requirements, included in the Revised Securities Regulation Code, or SRC, Rule 68, states the monetary thresholds for companies that have to file an AFS, as follows:
- Stock corporations with total assets or total liabilities of Six Hundred Thousand Pesos (Php 600,000.00) or more
- Non-stock corporations with total assets or total liabilities of Six Hundred Thousand Pesos (Php 600,000.00) or more
- Branch offices/representative offices of stock foreign corporations with assigned capital in the equivalent amount of One Million Pesos (Php 1,000,000.00) or more
- Branch offices/representative offices of non-stock foreign corporations with total assets in the equivalent amount of One Million Pesos (Php 1,000,000.00) or more
- Regional operating headquarters of foreign corporations with total revenues in the equivalent amount of One Million Pesos (Php 1,000,000.00) or more
Financial statements of branch offices of foreign corporations licensed by the SEC to do business in the Philippines are also required to comply with Rule 68, unless the SEC says otherwise.
Finally, companies that do not meet any of the thresholds stated above can submit their AFS, along with a notarized Treasurer’s Certification only – instead of an Auditor’s Report.
Companies Not Covered by SEC MC No. 18, Series of 2020
The submission and filing number-coded deadline dates referenced in SEC MC No. 18, Series of 2020 (see section below) do not apply to:
- Publicly listed companies;
- Issuers of registered securities under the supervision of the Market and Securities Regulation Department;
- Investment Companies, Issuers of Proprietary and Non-proprietary Shares/Timeshares, and Public Companies.
Filing Deadlines for the AFS
SEC MC No. 18, Series of 2020 covers the filing of the AFS by corporations that have a fiscal year ending on November 30, 2019 or December 31, 2019. Companies with different fiscal years are required to file their AFS in accordance with the filing deadlines stated in SEC Memorandum Circular No. 5 and SEC Memorandum Circular No. 17, series of 2020.
So, companies with fiscal years ending on either the 30 November 2019 or 31 December 2019 are required to file their AFS in accordance with the last numerical digit in their SEC registration numbers or licence numbers, as follows:
No. 1 and 2 – July 1, 2, 3, 6, 7, 8, 9, 10
No. 3 and 4 – July 13, 14, 15, 16, 17
No. 5 and 6 – July 20, 21, 22, 23, 24
No. 7 and 8 – July 27, 28, 29, 30
No. 9 and 0 – August 3, 4, 5, 6, 7
NOTE: Before filing, companies should first consult the SEC Website to understand if their relevant SEC Extension Office is still open and accepting hard-copy filings or if there have been any changes to filing deadlines. For example, work in the Tarlac and Baguio SEC Extension Offices have been suspended temporarily. Further, the deadline for filing with the Cebu Extension Office (CEO) has been moved to August 7, 2020, due to the re-introduction of the enhanced community quarantine in Cebu City – companies in this jurisdiction are therefore not required to follow the above number coding scheme.
So, wherever your business is based in the Philippines, during these uncertain times, make sure to constantly check the filing procedures, requirements and deadlines at your local SEC offices! The SEC Website issues continuous updates, advisories and Notices.
Remember! Before filing the AFS, it must first be stamped as “received” by the BIR, or its authorized banks (unless the BIR allows an alternative proof of submission, such as bank slips). In short – the AFS has to be filed with the BIR before it is filed with the SEC.
General Requirements for the AFS
SEC MC No. 18, Series of 2020 provides that the basic components of the AFS as prescribed under SRC Rule 68 (as amended) must be adhered to by companies when filing.
Failure to comply with any of the formal requirements under Rule 68 could result in the imposition of penalties by the SEC. For example, companies must comply with the prescribed qualifications for independent auditors. Further, the AFS must not contain any material deficiencies or misstatements.
Remember also! The acceptance and receipt by the SEC of the AFS does not mean that all requirements have been complied with. Upon later review, the SEC can still impose penalties for contraventions.
CloudCfo – Online Accounting & Bookkeeping Services in Metro Manila and the Philippines
CloudCfo is an online accounting, bookkeeping, compliance and finance service provider for companies in the Philippines.
Through the use of cloud accounting and online accounting solutions, at CloudCfo, we ensure the highest levels of service, professionalism and transparency across all of our services.