On December 15, 2020, the Securities and Exchange Commission (SEC) issued SEC Memorandum Circular No. 34, Series of 2020 (referred to herein after as “the Circular”) which provides reliefs to the real estate industry by deferring for another three years or until 2023 the application of the provisions of the Philippine Interpretations Committee Q&A No. 2018-12 with respect to the accounting for significant financing component and the exclusion of land in the calculation of percentage of completion and IFRIC Agenda Decision on Over Time Transfers of Constructed Goods under Philippine Accounting Standard (PAS) 23, Borrowing Cost. Accordingly, the real estate companies may opt to avail any of the financial reporting reliefs provided by the SEC and prepare their annual financial statements using Philippine Financial Reporting Standard (PFRS), as modified by the application of financial reporting reliefs issued and approved by the SEC in response to the COVID-19 pandemic, for the duration and terms allowed by the SEC.
This Alert has been prepared by the Auditing and Assurance Standards Council (AASC) to provide guidance to external auditors who have been engaged to audit, in accordance with Philippine Standards on Auditing (PSA), the annual financial statements of real estate companies which have been prepared using PFRS, as modified by the application of financial reporting reliefs issued and approved by the SEC. The succeeding sections discuss the impact on the auditor’s report and provide illustrative Opinion paragraph and Emphasis of Matter paragraph as well as illustrative changes to other relevant sections of the auditor’s report.
October 26, 2021