The Securities and Exchange Commission (SEC) is pushing to exempt more corporations from the mandatory submission of audited financial statements (AFS), a move aimed at reducing compliance costs for micro, small, and medium enterprises (MSMEs).

In a policy paper submitted to the Department of Finance (DOF) on 28 October, the SEC recommended raising the threshold for mandatory audits.

Currently, corporations with total assets or liabilities of at least PHP 600,000 must submit an AFS. The new proposal would raise this threshold to PHP 3 million.

If approved, corporations with total assets or liabilities not exceeding PHP 3 million would instead be allowed to submit annual financial statements certified under oath by their treasurer or chief financial officer.

The new policy, which requires final approval from the DOF, would apply to financial statements for fiscal years ending on or after 31 December 2025.

“We have repeatedly said that MSMEs are the backbone of the Philippine economy,” said SEC Chairperson Francis Lim.

He stated the SEC remains committed to implementing measures that will foster a business environment that is easier to navigate for our budding entrepreneurs.

The proposal aims to ease the financial burden on micro-enterprises, reduce “rubber-stamp audits,” and allow the SEC to reallocate its supervision efforts toward high-risk entities.

Chairperson Lim assured that the move would not “dilute oversight”. He noted that the SEC retains its visitorial powers under the Revised Corporation Code, which allows it to require audits if warranted by public interest.

Featured image by abuuhurera via Freepik.