Conversion to International Financial Reporting Standards: The RP experience
April 3, 2007 | 12:00am
It is in this context that a proposal was submitted to the SEC for a transitional relief to be extended to the mining industry with respect to the effects of adopting PAS 39.
Given the significant effects of PAS 39 which could potentially undermine the financial condition of certain mining companies and may therefore be inconsistent with the Philippine government’s overall thrust to help this industry, proposal for relief was worth considering.
In November 2006, the SEC approved the proposed transition relief from PAS 39 covering the hedging contracts of mining companies which were entered into prior to January 1, 2005. Under the approved transitional relief, commodity derivative contracts shall be "grandfathered" and exempted from the fair value requirements of PAS 39, if all of the following conditions are met:
(a) entered into and effective prior to January 1, 2005;
(b) with original maturity of more than one year; and
(c) qualified under PAS 39 hedge accounting rules had this been applied at inception of such contracts.
The accounting standards affecting the preneed industry are still under discussion with the SEC. Some accountants believe that education and pension plans are investment contracts where collections from planholders are treated as liabilities and not as income under present practice. The preneed industry is however proposing the status quo on income recognition and reserving for planholder liabilities using discount rates different from what is presently prescribed.Until the issue is resolved, the industry will follow the Preneed Uniform Chart of Accounts as promulgated by the SEC.
The challenge is for the Philippine companies to keep up with the continuing changes in the IFRS and for the regulators to institute processes to ensure compliance across industries.
(Roberto G. Manabat is the Chairman and CEO of Manabat Sanagustin & Co., CPAs, a member firm of KPMG International, a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG international or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. For comments and inquiries, please email [email protected] or [email protected])
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