Covering Form and Content of Financial Statements Required to be Filed by Corporations Whose Shares of Stock are Sold or Offered for Sale to the Public

June 11, 1973 COVERING FORM AND CONTENT OF FINANCIAL STATEMENTS REQUIRED TO BE FILED BY CORPORATIONS WHOSE SHARES OF STOCK ARE SOLD OR OFFERED FOR SALE TO THE PUBLIC ARTICLE 1 Application of Regulation and Definition of Terms RULE 1-1. Application of Regulation (a) This regulation (together with subsequent official pronouncements, interpretation and rulings on accounting and reporting matters, which may be issued by the Securities and Exchange Commission from time to time) states the requirements applicable to the form and content of financial statements and other periodic information required to be filed by corporation whose shares of stock are sold or offered for sale to the public. (b) Unless otherwise specified, the term "financial statements", when used in this regulation, shall include a balance sheet, a statement of income and retained earnings, and a statement of changes in financial position, and where applicable a statement of cost of goods manufactured and sold, together with all notes to the statements and related schedules. prcd (c) The term "other periodic information", when used in this regulation, shall include information on significant transactions or events required to be filed with the Securities and Exchange Commission, other than those regularly shown in the financial statements. (d) When used in this regulation, the term "Commission" shall mean the Securities and Exchange Commission of the Philippines. RULE 1-2. Definition of Terms Used in this Regulation Unless the context otherwise requires, the following terms shall have the respective meanings when used in this regulation. Affiliate . An "Affiliate" is a person that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified, through 'the ownership of voting shares, by contract or otherwise. Auditor's report . The term "auditor's report" or "audit report", when used in regard to financial statements means a document in which an independent certified public accountant indicates the scope of the audit which he has made and sets forth his opinion regarding the financial statements taken as a whole, or an assertion to the effect that an overall opinion cannot be expressed. When an overall opinion cannot be expressed, the reasons therefor shall be stated. Audit ( or examination ). The term "audit" or ("examination"), when used in regard to financial statements means an examination of the statement by an independent certified public accountant in accordance with generally accepted auditing standards for the purpose of expressing an opinion thereon. Auditor ( or independent auditor ). The term "auditor" or "independent auditor" means an independent certified public accountant who performs an examination of financial statements for the purpose of expressing an opinion on them. Issuer of securities . The term "issuer of securities" (or simply "issuer") shall mean a corporation whose shares of stock are sold or offered for sale to twenty (20) or more persons. Control . The term "control" (or "controlled by") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting shares, by contract, or otherwise. Any corporation 30 percent of whose outstanding voting shares is owned by another corporation shall be presumed to be a controlled corporation. Majority-owned subsidiary . The term "majority-owned subsidiary" means a subsidiary more than 50 percent of whose outstanding voting shares is owned by its parent and/or parent's other majority-owned subsidiaries. Material . The term "material", when used to qualify a requirement for the furnishing of information as to any subject, limits the information required to those matters about which an average prudent investor ought reasonably to be informed. Parent . A "parent" of a specified person is an affiliate controlling such person directly, or indirectly, through one or more intermediaries. Person . The term "person" includes a corporation or an unincorporated organization. Public . The term "public" means 20 or more natural or juridical persons. Subsidiary . A "subsidiary" of a specified person is an affiliate controlled by such person directly, or indirectly, through one or more intermediaries. Voting shares . The term "voting shares" means the sum of all rights, other than as affected by events of default, to vote for election of directors. ARTICLE 2 General Guides to Financial Statements Preparation RULE 2-1. Responsibility for Financial Statements . The financial statements filed with the Commission are primarily the representations of the issuers. Accordingly, the fairness of the representations made through financial statements is an implicit and integral part of the issuer's responsibility. The independent certified public accountant's responsibility for the financial statements required to be filed with the Commission includes not only the expression of his opinion on such statements which he has examined, but also verification of the facts therein stated. RULE 2-2. Comparative Statements . (a) The financial statements to be filed with the Commission shall be presented in comparative form, i.e., information shall be furnished showing balances for the current period as well as for the prior period. LexLib (b) An explanation through a note or otherwise, shall be made explaining the reasons for filing a single-period statement. (c) When comparative statements are presented, the auditor's report need not extend to the prior-period's financial statements. If the financial statements of the prior period were not audited, the auditor should disclose the fact in his report by adding statement to that effect in a separate paragraph after the opinion paragraph. An alternative is to include the work "Unaudited" in the columnar heading for the prior-period statements. If the financial statements were examined by another independent certified public accountant, the auditor for the current year may indicate the fact after the opinion paragraph of his report. (d) The presentation of comparative figures need not be applied to schedules required to be filed under these rules. (e) If the auditor has significant exceptions or reservations as to the statement of the preceding year, he should make appropriate, disclosure in this report. RULE 2-3. Alternative Form Order and Terminology . (a) Financial statements may be presented in such form and order and may use such generally accepted terminology, as will best indicate their significance and character in the light of the regulations applicable thereto. (b) Centavos may be omitted in all money amounts required to be shown in financial statements. Such money amounts may be expressed in whole pesos, provided that, an indication is made to that effect immediately beneath the caption of the statements or at the top of the money columns. The individual amounts shown need not be adjusted to the nearest peso, if in a note it is stated that the items listed do not add to the totals shown because of the dropping of amounts less than P1.00, as appropriate. (c) Negative amounts shall be shown in brackets or parenthesis or otherwise so indicated. RULE 2-4. Items Not Material . If the amount which would otherwise be required to be shown with respect to any item or caption is not material, it need not be separately set forth. In some cases, however, the significance of an item may be independent of the amount involved. Such items, because of their special nature and origin, generally must be set forth separately in the statements required to be filed. For example, the following items shall be separately presented in the financial statements required to be filed even though the amounts involved are relatively small: 1. Amount due to and from officers and directors other than in the ordinary course of business. 2. Amounts of various types of surplus. 3. Important reserve accounts. 4. Liability for income and other important taxes. 5. Income from dividends and interest on investments, in the case of companies with large investments in subsidiaries, or in the securities of unaffiliated companies. 6. Major elements in the income statement such as sales, cost of sales, substantial items of other income and income deductions and provision for income taxes. RULE 2-5. Combination of Minor Items . Minor items among the current assets or liabilities arising from the ordinary course of business may be combined under a miscellaneous caption or with closely similar items that are large in amount. Similar combinations are permissible within the other major categories of items customarily appearing in the financial statements, such as deferred charges, prepaid expenses, and property, plant and equipment. Generally, however, condensation in the balance sheet would not be appropriate with respect to an item amounting to more than 10 percent of its immediate category, such as deferred charges, or more than 5 percent of total assets. Where the immediate category is less than 5 percent of total assets all components of the category may be combined under a suitable caption. RULE 2-6. Inapplicable Captions . No caption need be shown in the financial statements as to which the items and conditions are not present. RULE 2-7. Additional Information . The information required by this regulation with respect to financial statements 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. RULE 2-8. Valuation Accounts . Valuation accounts shall be shown separately in the financial statement as deductions from the specific assets to which they apply, or the assets may be presented net of the valuation accounts, provided the amounts of the valuation accounts are disclosed parenthetically or otherwise. LibLex RULE 2-9. Basis of Determining Amounts . If the items presented in the financial statements require a statement as to the basis of determining the amount, the basis shall be stated specifically, e.g., cost, market, lower of cost or market. The term "book value" will not be sufficiently explanatory unless, in a particular instruction, it is stated to be acceptable with respect to a particular item. RULE 2-10. Current Assets . Assets classed with cash as current assets shall be reasonably expected to be realized in cash or sold or consumed within one year, or if the normal operating cycle of the company is longer than one year, generally recognized trade practices may be followed with respect to the inclusion of items under the current account caption. The captions specified under Rules 2-10 and 2-11 are not required for issuers which do not normally distinguish current assets and liabilities from non-current. RULE 2-11. Current Liabilities . Obligations which are payable within one year (or the normal operating cycle of the company, if it exceeds one year) or whose liquidation is reasonably, expected to require the use of existing current assets (see Rule 2-10) or the creation of other current liabilities shall be classed as current liabilities. RULE 2-12. Treasury Stocks . Reacquired shares shall be shown separately at cost (together with an indication of the stock issue and the number of shares) as a deduction from the total of capital stock and other stockholders' equity items. If acquired for the specific purpose of resale to employees or others, a proper disclosure in a note to financial statements is required. RULE 2-13. Summary of Accounting Policies . (a) A description of all significant accounting policies that affect the determination of financial position of the issuer shall be included as an integral part of the financial statements, particularly those accounting principles and methods that involve: 1. a selection from existing acceptable alternatives, 2. principles and methods peculiar to the industry in which the issuer operates, or 3. unusual or innovative applications of generally accepted accounting principles. Examples of disclosures commonly required are accounting policies relating to depreciation methods, amortization of intangibles, inventory pricing, translation of foreign currencies, and recognition of profit on long-term construction-type contracts. (b) Disclosure of accounting policies shall preferably be given in a separate summary preceding the notes to financial statements or as the initial note. Specific references shall be made in the appropriate financial statements to the applicable portion of the summary or note. RULE 2-14. Changes in Accounting Principles and Practices . Any change in accounting principle or practice, or in the method of applying any accounting principle or practice which materially affects comparability of the financial statements with those of prior periods shall be disclosed in a note to the financial statements. The note should indicate the nature of and justification for the change and its effects on income of the period in which the change is made. The justification for the change should explain clearly why the newly-adopted accounting principle is preferable. RULE 2-15. General Notes to Financial Statements . The following information shall be set forth on the face of the appropriate statement or in notes appropriately captioned and referred to in such statement. (a) Principles of consolidation . Refer to Article 5 for requirements for supplemental information in notes to the consolidated financial statements. (b) Principles of translation of items in foreign currencies . When items in foreign currencies are included in the financial statements being presented, there shall be stated a brief description of the principles followed in translating foreign currencies into Philippine currencies or vice versa, and the amount and disposition of the unrealized gain or loss. (c) Assets subject to lien . Assets mortgage , pledged, or otherwise subject to lien shall be stated, and the obligations collateralized briefly identified. (d) Intercompany profits and losses . The amount, and the effect upon any balance sheet item of profits or losses resulting from transactions with affiliated companies and not eliminated shall be stated. If impracticable of accurate determination, give an estimate and explain. (e) Defaults . The circumstances and amounts concerning any default in principal interest, sinking fund or redemption provisions, or any breach of covenant with respect to any indebtedness or credit agreements which exist at the date of the balance sheet being filed, and which has not been subsequently cured, shall be stated. The entire amount of obligations to which the default or breach relates shall be classified as a current liability if said default or breach accelerates the maturity of the obligations and makes it current under the terms of the related indenture or agreement, unless the lender has waived the accelerated due date, or otherwise agreed to a due date more than one year from balance-sheet date. (f) Preferred shares . 1. For convertible shares, the terms of conversion shall be stated briefly. 2. Cumulative dividends (in arrears) per share and in total for each class of shares shall be stated. 3. Aggregate preferences on involuntary liquidation, if other than par shall be disclosed. (g) Pension and retirement plans . A brief statement shall be made of: 1. The essential provisions of the employee pension or retirement plan, if any. 2. The accounting and funding policies related thereto. 3. The estimated cost of the plan for each period for which an income statement is presented. 4. The nature and effect of significant matters affecting comparability of pension costs for the periods for which financial statements are presented. 5. The estimated amount that would be necessary to fund or otherwise provide for the past service cost of the plan as of the date most recently determined, if the plan has not been fully funded or otherwise provided for. 6. Any excess of the actuarially computed value of vested benefits over the total of the pension fund and any balance-sheet accruals, less any pension prepayments or deferred charges, as of the most recent practicable date. (h) Restrictions which limit the availability of retained earnings for dividend purposes . The restrictions shall be described, indicating briefly its source, its pertinent provisions and, where appropriate and determinable, the amount of retained earnings so restricted, or the amount of retained earnings free of such restrictions. (i) Commitments and contingent liabilities . 1. Pertinent facts relative to firm commitments for the following period, if material in amount. shall be disclosed; the acquisition of permanent or long-term investments and property, plant and equipment and the purchase, repurchase, construction or rental of assets under material leases. 2. If the annual rentals or obligations under non-cancellable leases which have not been recorded as assets and liabilities are in excess of one percent of total sales and revenues of the most recent fiscal year, the following information shall be shown: (i) minimum annual rentals for the current year and each of the five succeeding years; (ii) nature and effect of any provisions that would cause the annual rentals to vary from the minimum rentals; (iii) description of the types of property leased, important obligations assumed or guarantees made, and any other significant provisions of such leases. 3. A brief statement as to contingent liabilities not shown in the financial statements shall be made. Guarantees of securities of other issuers shall be briefly described; where only consolidated financial statements are presented, such information shall relate solely to guarantees of companies not included in the consolidation. (j) Bonus, profit-sharing and other similar plans . The essential provisions of any such plans in which only directors, officers or key employees may participate shall be described, and for each of the fiscal periods for which income statements are presented, the aggregate amount provided for all plans by charges to expense shall be stated. (k) Bases of revenue recognition . If sales or revenues are subject to alternative methods of revenue recognition, or if sales are made on a deferred basis (such as installment sales), the basis of taking profits into income shall be included in the summary of accounting policies (see Rule 2-13). (l) Depreciation, depletion, obsolescence and amortization. include in the summary of accounting policies the policy . followed regarding the provision for depreciation, depletion, obsolescence and amortization of physical properties, capitalized leases and intangible assets, including the methods and rates used in computing the annual amounts. (m) Capital stock optioned, sold or offered for sale to directors, officers and key employees . 1. Briefly describe the terms of each option agreement, including (i) the title and the amount of securities subject to option, (ii) the year(s) during which the options were granted, and (iii) the year(s) during which the optionees became, or will become, entitled to exercise the options. 2. Indicate the following: (i) the number of shares under option at the balance-sheet date. (ii) The number of shares with respect to which options became exercisable during each period presented. (iii) The number of shares with respect to which options were exercised during the period. (iv) The option price and fair value of the shares, per share and in total, at the respective dates the options were (1) granted, (2) became exercisable, and (3) were exercised during the period. (v) The number of optioned shares available, at the beginning and at the close of the latest period for which financial statements are presented. 3. Describe briefly the terms of each other arrangement covering shares sold or offered for sale only to directors, officers and key employees, including the number of shares, and the offered price and the fair value thereof per share and in total, at the dates of sale or offer to sell, as appropriate. prcd 4. Summarize and tabulate, as appropriate, the required information with respect to all option plans as a group and other plans for shares sold or offered for sale as a group. (n) Warrants or rights outstanding . The following information with respect to warrants or rights outstanding at the date of the related balance-sheet shall be set forth. 1. Title of issue of securities called for by warrants or rights. 2. Aggregate amount of securities called for by warrants or rights outstanding. 3. Date from which warrants or rights are exercisable and expiration date. 4. Price at which warrant or right is exercisable. (o) Subsequent events . Indicate any significant events or transactions having a material effect on financial statements which occur after balance-sheet date but before the date of the auditor's report, as follows: 1. One type of subsequent event that needs consideration for financial statement purposes is that which provides additional evidence with respect to conditions that existed at the date of the balance sheet and affects the estimates inherent in the process of preparing financial statements. This type of event should be recognized by adjusting the financial statements for any changes in estimates resulting from the use of the additional evidence provided by the subsequent event. Example of this type of event is the settlement of litigation for an amount different from the liability recorded in the accounts if the event that gave rise to the litigation had taken place prior to the balance-sheet date. Subsequent events affecting the realization of assets such as receivables and inventories or the settlement of estimated liabilities ordinarily will require adjustment of the financial statements because such events typically represent a culmination of conditions that existed over a relatively long period of time. 2. Another type of subsequent event is that which provides evidence with respect to conditions that did not exist at the date of the balance sheet being reported on but arose subsequent to that date. This type of event should not result in adjustment of the financial statements; however, some of these events may be of such a nature that disclosure of them is necessary so as not to make the financial statements misleading. Examples are loss of property or inventories due to fire or flood, sale of a capital issue, purchase of a business, settlement of litigation when the event giving rise to the claim arose after the balance sheet date, or material changes in the quoted market prices of securities. (p) Earnings per share . 1. Earnings per share or net loss per share of common stock shall be shown on the face of the income statement. 2. Earnings per share amounts shall be presented for (i) income before extraordinary items and extraordinary items, if any, and (ii) net income. 3. Earnings per common share shall ordinarily be computed by dividing net income (less provision for cumulative preferred dividends for the period, or for dividends declared during the period or non-cumulative preferred shares) by the weighted average number of shares outstanding during the period. Minor increases or decreases in the number of common shares outstanding during the period may be disregarded and the computation based on the number of shares outstanding at the end of the period. Disclosure should be made of the basis of computation if effect was given to dividends during the period on cumulative preferred stocks or dividends declared during the period on non-cumulative preferred stocks. 4. Changes in the number of shares outstanding due to stock dividends or stock splits, including those occurring after the close of the period but before issuance of the financial report, shall be reflected retroactively as of the beginning of the period. Disclosure shall be made of the basis of computation if effect was given to stock disclosure or stock split after the close of the period. Recomputation of earnings per share for the prior year shall be made when the number of shares outstanding for the current year has changed because of stock dividends or stock splits. ARTICLE 3 Qualifications and Reports of Independent Auditors RULE 3-1. Examination of Financial Statements by Independent Auditors . The Commission will not accept financial statements required to be filed unless such financial statements are accompanied by an audit report issued by an independent auditor. RULE 3-2. Qualifications of Independent Auditors . (a) The Commission will not recognize any person as an independent auditor who is not in good standing and entitled to practice as such under the laws governing the practice of public accounting in the Philippines. (b) The term "independent auditor" as used in the foregoing paragraphs, is an auditor who possesses the independence as defined in Article IV Section 7 of the Rules and Regulations of the Board of Accountancy promulgated by authority of Republic Act No. 5166, which is quoted below: "SECTION 7. Independence . "He shall not express an opinion on financial statements of an enterprise with respect to which he is not independent. "Independence is essentially a state of mind. It is a manifestation of the professional integrity of the individual. Before expressing his opinion on financial statements, the certified public accountant has the responsibility of evaluating whether, under the circumstances, his opinion will be considered independent and unbiased by one who has knowledge of all the facts. For instance, a certified public accountant shall not be considered independent with respect to any enterprise if: "a. During the period of his professional engagement or at the time of expressing his opinion, he had acquired or was committed to acquire any direct financial interest or material indirect financial interest in the enterprise provided that if he already holds such direct financial interest he shall dispose of the same within a period of two years from date of such engagement or the date of approval of these rules and regulations, whichever is earlier; or "b. He was connected with the enterprise as a promoter, underwriter voting trustee, director, officer or employee during the period of his professional engagement, at the time of expressing his opinion or during the period covered by the financial statements. The word 'director' is not intended to apply to one in such a capacity for a charitable, religious, civic or other similar type of non-profit organization when the duties performed are clear that the Certified Public Accountant can still express an independent opinion on the financial statements. A firm of Certified Public Accountants, one of the members or employees of which is actually keeping or supervising the keeping of the books of accounts of a certain client, cannot audit the said books of accounts of the latter. "The foregoing are examples of circumstances under which a CPA will not be considered independent, and are not intended to be inclusive." (c) In determining whether an auditor may in fact be not independent with respect to a particular issuer, the Commission will give appropriate consideration to all relevant circumstances, including evidence bearing on all relationships between the auditor and that issuer or any affiliate thereof. RULE 3-3. Reports of Independent Certified Public Accountants . (a) The auditor's report (1) shall be dated; (2) shall be manually signed; (3) shall identify the financial statements covered by the report; (4) shall state the certifying accountant's PTR number; (5) shall state the complete mailing address of the client and the auditor; and (6) shall clearly indicate the name of the certifying partner, where the certification is made under a firm name. (b) The auditor's report shall state whether the examination was made in accordance with generally accepted auditing standards and shall designate any auditing procedures deemed necessary by the auditor under the circumstances of the particular case, which have been omitted, and the reasons for their omission. This rule, however, shall not be construed to imply authority for the omission of any procedure which independent auditors would ordinarily employ in the course of an audit made for the purpose of expressing the opinion required by the following paragraph. (c) The auditor's report shall state clearly whether the financial statements covered by his report are presented in accordance with generally accepted accounting principles and practices; and shall state the consistency of the application of such accounting principles; or as to any changes in such principles which have a material effect on the financial statements. (d) Any matters to which the independent certified public accountant takes exception shall be clearly identified, the exception thereto specifically and clearly stated, and to the extent practicable, that effect of each such exception on the related financial statements given. (e) In cases where financial statements are prepared in accordance with accounting practices not generally acceptable or accounting principles for which there are no substantial authoritative support, such financial statements will not be accepted by the Commission, even if there are disclosures contained in the auditor's report or in notes to the statements, provided the matters involved are material. However, in cases where there is a difference of opinion between the Commission and the issuer as to the proposed principles of accounting to be followed, disclosure will be accepted in lieu of correction of the financial statements themselves but only if the points involved are such that there is substantial authoritative support for the practices followed by the issuer and the position of the Commission has not previously been expressed in rules, regulations and other official releases of the Commission. RULE 3-4. Examination by Foreign Accountant . The Commission will not recognize audit reports of any foreign accountant who is not duly registered and in good standing as such under the laws of his country or place of his principal office, and such reports shall be duly authenticated as required under existing laws. RULE 3-5. Examination of Financial Statements by More than One Accountant . If, with respect to the examination of financial statements of any person the principal accountant relies on an examination made by another independent certified public accountant of certain accounts of such persons the audit report of such other accountant shall be filed; provided, however, that the audit report of such other accountant need not be filed. (a) If no reference is made directly or indirectly to such other accountant's examination in the principal accountant's audit report, or (b) If, having referred to such other accountant's examination, the principal accountant states in his audit report that he assumes responsibility for such other accountant's examination in the same manner as if it had been made by him. ARTICLE 4 Commercial and Industrial Companies RULE 4-1. Application of Article 4 . This article shall be applicable to financial statements filed for all issuers of securities engaged in commercial and industrial activities; except: (a) companies in the promotional, exploratory or development stage to which other appropriate rules shall be promulgated; (b) banks, insurance companies, and public utilities, as to which copies of their financial statements, as submitted to the appropriate offices, shall be furnished the Commission. RULE 4-2. Balance Sheet . The balance sheet filed by issuers of securities to whom this article is applicable shall comply with the following provisions: ASSETS Current Assets (see Rule 2-10) 1. Cash on hand and in banks . (a) This item should include only cash on hand and demand deposits in banks at the close of business on the balance sheet date. Time deposits or other short-term investments of cash shown as part of the cash account should be disclosed either on the face of the balance sheet (by such captions as "cash and short-term investments" or "cash, including deposits of P000,000"), or in the notes to financial statements. (b) Cash restricted to use for other than current operations, designated for expenditures in the acquisition or construction of non-current assets (for instance, fixed assets), or segregated for the liquidation of long-term debt should be excluded from current assets. (c) Segregate funds subject to withdrawal or usage restrictions. Consider whether non-current classification is required. 2. Marketable securities . (a) This account should include only those securities which are readily marketable and which represent temporary investments of excess funds available for current operations. b) Marketable securities may be included among current assets of commercial and industrial firms even though there is no present intention of disposing of them within one year from the balance-sheet date. Investments in securities, even if marketable, if held for purposes of control or for some continuing business advantage and therefore not part of the company's working capital are not considered temporary investments. (c) Securities of affiliates shall not be included here. (d) The basis on which marketable securities are carried in the balance sheet shall be clearly indicated. Marketable securities of commercial and industrial companies are generally carried at cost, with a parenthetical notation of the amount of securities at market quotations. If the total cost exceeds the total amount at market quotations by a material amount, an allowance for the indicated shrinkage should be provided. (e) Securities pledged should be disclosed as to amount, either parenthetically or by footnote. 3. Accounts and notes receivable . (a) State separately accounts receivables from (1) customers (trade); (2) parents and subsidiaries; (3) other affiliates and companies less than 50 per cent owned; and (4) directors, officers, and principal stockholders. (b) Receivables from a parent, subsidiary, affiliate or others designated under a(2) and a(3) above shall not be considered current unless the same arise out of the ordinary course of business. (c) Installment receivables maturing beyond one year from the balance sheet date are includible as part of current assets, if the normal operating cycle of the business extends beyond one year because of long credit terms. The portion due after one year may be disclosed parenthetically or by footnote. In this case, state in a note to the financial statements or parenthetically after the account caption the amount maturing after one year and the amounts maturing after the end of each year. (d) Receivable pledged or assigned as collateral should be disclosed as to amount, either parenthetically or in a footnote. Proper disclosure should be made of any contingent liability in connection with the sale of receivables to a finance company under repurchase agreements or otherwise. (e) Past due receivables which have been restructured shall be reported as non-current assets. (f) Segregate notes from accounts receivables, if notes receivable exceed 10 per cent of the aggregate amount of receivables. 4. Allowance for doubtful accounts and notes receivable . (a) The allowance for doubtful receivables should be deducted from the related asset, the asset being shown on the balance sheet either (1) gross, less the allowance; or (2) net, with the amount of the allowance indicated in parenthetical notation. (b) Accounts and notes receivables known to be uncollectible shall be excluded from the assets as well as from the allowance accounts. 5. Unearned finance charges . Unearned discounts, finance charges and interest included in receivables shall be shown separately and deducted from the applicable receivable caption. 6. Inventories . (a) State separately under this caption, or in a note to the financial statements the principal categories of inventories such as (1) finished goods; (2) work process; (3) raw materials and supplies. (b) The basis on which inventories are stated should be shown; for instance, at lower of cost or market, or at cost which is not in excess of market. Indicate the method of determining cost (e.g., average cost, first-in, first-out, etc.). (c) Disclose in the financial statements or related notes the amount of inventories pledged on indebtedness. (d) Disclose declines subsequent to balance sheet date in market prices of inventory not protected by firm sales contract. (e) Goods in transit and any prepayments on purchases of substantial amount may be shown as a separate caption after inventories. 7. Prepaid expenses . (a) This item includes short-term prepayments of current operating expenditures, such as prepayments of insurance premium, taxes, interest and rent; stationery and supplies; travelling advances to employees; and prepaid advertising. (b) Any material items of prepaid expenses should be stated separately. 8. Other current assets . State separately any amounts in excess of five per cent of total current assets. The remaining items may be shown in one amount. 9. Total current assets . Designate the total amount of current assets as "total current assets." INVESTMENTS 10. Investments in securities . (a) Show separately under this caption investments in unconsolidated subsidiaries and in affiliates. State the basis of determining the carrying values of these investments. (b) Where a company adopts the equity method of accounting, it shall, in addition to the financial statements prepared under the equity method, submit financial statements reflecting the parent company's operations prepared pursuant to these rules. 11. Advances to unconsolidated subsidiaries and affiliates . Show separately under this caption non-current advances to unconsolidated subsidiaries and of affiliates. 12. Other security investments . State the basis of determining the amount shown in the balance sheet and state, parenthetically or otherwise, the estimated market value. 13. Other Investments . State separately by class of investments any items in excess of five per cent of total assets. 14. An allowance for decline in value of investments should be set up when there is a substantial or presumably permanent decline in value of investments. Details of any liens or pledge should be disclosed. PROPERTY 15. Property, plant and equipment . (a) Classify separately in the balance sheet or in a note to financial statements, each major class of tangible fixed assets such as land, buildings, machinery and equipment, or furniture and fixtures, and disclose the name of the appraiser and the basis of valuation; e.g., cost or appraisal values. (b) Exclude from this caption, if material in amount, any property which has been abandoned but not physically retired or facilities still owned but no longer adopted for use in the business. Such idle or abandoned facilities should normally be shown under 'Other Assets'. (c) Leasehold improvements are included under this caption if material and if the terms of the lease extend over a long period of time; otherwise, show the amount among deferred charges or 'other assets'. (d) Any important commitments and well-defined programs for additions to property, plant and equipment should be disclosed either parenthetically or in a note to the financial statements. (e) Construction work in progress, if significant in amount, may be stated separately, if included with completed projects, the amount may be stated parenthetically or in a note to the financial statements. (f) Significant deposits on purchase of equipment and funds set aside for the construction of property, plant and equipment may be shown under this caption. 16. Accumulated depreciation . Show accumulated depreciation, depletion and amortization as a deduction from the group of assets to which they relate, or as a deduction from the total of property, plant and equipment. INTANGIBLE ASSETS 17. Intangible assets . State separately each major class of intangible assets, such as goodwill, franchises, patents or trademarks and the basis of determining their respective amounts. LexLib 18. Accumulated amortization of intangible assets . Disclose the accumulated amortization of intangible assets and the amortization policy. OTHER ASSETS 19. Other assets . (a) include under this caption any other item not properly classifiable in any one of the preceding asset captions. Examples are deferred charges like pre-operating expenses, research and development expenses and deferred debt expense, as well as certain non-current assets such as certain receivables from officers and employees. (b) State separately each major class of deferred charge and the policy for deferral and amortization. (c) State separately any item which is in excess of 5 per cent of total assets. CURRENT LIABILITIES (see Rule 2-11) 20. Accounts and notes payable . (a) State separately amounts payable to (1) trade creditors; (2) banks and finance companies; (3) parent company, subsidiaries, and affiliates; (4) directors, officers, employees and principal stockholders of the company or its affiliates (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). (b) If the aggregate amount of notes payable exceeds 10 per cent of the aggregate amount of payables, the foregoing information should be set forth separately for accounts payable and notes payable. (c) Show secured liabilities separately from unsecured liabilities, with an indication of the fact that they are secured and a disclosure of the assets pledged against such liabilities. (d) The following items, although falling due within the period mentioned in Rule 2-11 are not considered as current liabilities: (1) A contractual obligation falling due but expected to be refunded (make a full disclosure of the non-current treatment and the reason for such treatment). (2) Debts to be paid out of funds not classified as current assets. (c) Disclose any current liability guaranteed by others. Accrued liabilities . (a) Disclose income taxes estimated to be currently payable. (b) Show separately significant accruals for payrolls, taxes other than income taxes, interest, and any other material items. 21. Other current liabilities . State separately: (a) Dividends declared and not paid at balance sheet date. (b) Portion of long-term debt due within one year. (c) Any other current liability in excess of 5 per cent of total current liabilities. 22. Designate the total of current liabilities as "total current liabilities." LONG-TERM DEBT 23. Bonds, mortgages and similar debt . State separately each issue or type of obligation and disclose: (a) title of the long-term debt whether bonds, mortgages, notes or others; (b) interest rates, amounts or number of periodic installments, and maturity dates; (c) the nature and amount or extent of assets pledged against the debt; (d) restrictive covenants, such as those affecting dividends, retained earnings, or working capital maintenance requirements; (e) any default in principal payments, interest, or in other requirements of the loan agreement; (f) convertibility into capital stock, if applicable, and the basis thereon; and (g) sinking fund requirements, if any. State any significant change in the authorized or issued amount of bonds, mortgages and similar debt since the date of the latest balance sheet filed with the Commission. 24. Unamortized debt discount and premium . The amounts applicable to debt issues shall be deducted from or added to the face amounts of the issues. 25. Indebtedness to affiliates . Include under this caption non-current indebtedness to affiliates. 26. Other long-term debt . Include other long-term debt not shown under captions 23 to 25 above. Indicate the extent that the debt is collateralized. Disclose information required under caption 23. OTHER LIABILITIES AND DEFERRED CREDITS 27. Other liabilities . State separately any item not properly classifiable in any one of the preceding liability captions. 28. Deferred credits . State separately: (a) material items on deferred income; (b) deferred income taxes; and (c) others. The current portion of deferred income taxes should be included under current liabilities. RESERVES 29. Reserves . (a) The term "reserve" is often used to designate estimates of probable or admitted liabilities of uncertain amount, or estimates of a liability or loss which is not certain to occur. Examples are estimated liabilities for employee benefits, lawsuits, claims, additional taxes, or product warranties. Use of the term "reserve" to designate these items should preferably be minimized, substituting, wherever applicable and practicable, captions more descriptive of the nature of the accounts, such as "allowance for claims from customers," or "estimated liabilities for employee benefits." (b) The above-mentioned items are ordinarily provided for by charges to income. Reserves for the following purposes should not enter into the determination of net income, but should be created from appropriations of retained earnings and shown as part of stockholders' equity: (1) For general undetermined contingencies; or (2) For any indefinite possible future losses; or (3) For the purpose of reducing inventories other than to a basis which is in accordance with generally accepted accounting principles; or (4) Without regard to any specific loss reasonably related to the operations of the current period; or (5) In amounts not determined on the basis of any reasonable estimates of costs or losses. cdlex (c) Actual liabilities of determined or precisely determinable amounts should not be classified or indicated as "reserve". MINORITY INTERESTS 30. Minority interests in consolidated subsidiaries . State separately the amount representing the equity of minority interests in the majority-owned subsidiaries included in the consolidation. STOCKHOLDERS' EQUITY 31. Capital stock . (a) State for each class of shares the title of issue; the par or stated value., dividend and liquidation preferences; the number of shares authorized, issued and outstanding; the number of shares reserved for issuance, if any; if convertible, the basis of conversion; and any other essential features. (b) Show the amount, if any, of capital stock subscribed but unissued, and show the deduction of subscriptions receivable therefrom. Disclose subscriptions receivable if there is a definite call date and the subscriptions are currently collectible. (c) All authorized classes of stock, whether or not any shares of the class are outstanding, should be indicated. (d) For preferred stock, the following items should be disclosed in addition: nature of the preference; dividend rate; whether cumulative or non-cumulative; any dividends in arrears; redemption price; redemption date; and any restrictive provisions as to payment of dividends or other actions of the company. Show here, or in a note, the changes in each class of capital shares including treasury shares, for each period. 32. Other stockholders' equity . (a) State in separate captions: (1) additional paid-in capital; (2) other additional capital; (3) revaluation increment in property, if applicable; and (4) retained earnings, showing separately appropriated and unappropriated (see Rule 4-3). A summary of each of the above-mentioned accounts setting forth the following information should be given for each period for which an income statement is being filed; balance at beginning of period; net income or loss from income statement; other additions or deductions (stating separately any material amounts and indicating clearly the nature of the transactions out of which the items arose); dividends (stating for each class of shares, the amount per share and in the aggregate; and indicating whether cash, stock, or other type of dividends). 33. Treasury stock . (a) Show treasury stock as a deduction from the total of capital stock and other stockholders' equity accounts. (b) Shares re-acquired by virtue of a stockholder's exercise of the right of conversion shall be considered treasury shares and treated as provided in the preceding paragraph. (c) Disclose the acquisition cost of treasury stock and the number of shares held. 34. Total of liabilities, reserves and stockholders' equity should be indicated. RULE 4-3. Statement(s) of Income and Retained Earnings . 1. Form of statement . The statement of income and the statement of retained earnings are preferably combined to form one statement. When the number of changes in retained earnings during the period or periods covered so warrant, a separate statement of retained earnings should be prepared. 2. The statement(s) of income and retained earnings filed by issuers of securities to whom this article is applicable shall comply with the following provisions, unless otherwise allowed by the Commission. (a) Net Sales (gross sales less discounts, returns, and allowances) and other revenues. Other revenues may include such items as royalties, rents and sales of services. 1. The statement of income should disclose the amount of sales and operating revenues. 2. Proper segregation should be made between revenues from sale of goods and revenues from services. When the sources of sales and/or revenues are derived from diverse business activities, a separate schedule showing the details of each business should be prepared. (b) Cost of sales or cost of goods sold . 1. State separately here or in a note, (a) purchases from unconsolidated subsidiaries and affiliates and (b) purchases from others. 2. Indicate the amount of beginning and ending inventories used in computing cost of sales and state the basis of determining such amounts. (c) Operating expenses or selling and administrative expenses . 1. Show separately material items. 2. Disclose the amount of depreciation. 3. Show separately provision for doubtful accounts. (d) Other income (deductions) . 1. Dividends . State separately, if practicable, the amount of dividends from (a) securities of affiliates and unconsolidated subsidiaries, (b) marketable securities, and (c) other securities. 2. Interest on securities . State separately, if practicable, the amount of interest from (a) securities of affiliates and unconsolidated subsidiaries, (b) marketable securities, and (c) other securities. 3. Gain (loss) on securities . If gain or losses on disposal of securities are shown separately, state gains, net of losses or vice versa and disclose the method followed in determining the cost of securities sold, e.g., "average cost", "first-in, first-out", or "identified certificate." LexLib 4. Interest and amortization of debt discount and expense . State separately (a) interest on long-term debt; (b) amortization of debt discount, expense or premium and (c) other interest. 5. Miscellaneous . State separately any material amounts of miscellaneous other income or deductions, indicating clearly the nature of the transactions out of which the items arose. Miscellaneous other income may be stated net of miscellaneous income deductions, or vice versa, provided that any material amounts are set forth separately. (e) Income before income tax and appropriate items, such as those mentioned below. The amount of income or loss before income tax should be shown. (f) Provision for income tax . Include under this caption only taxes based on income. (g) Income or loss before extraordinary items . Show this caption if there are extraordinary items. (h) Extraordinary items . Extraordinary items constitute material items which (1) are clearly unrelated to, or only incidentally related to the ordinary and typical activities of the entity taking into account the environment in which it operates, and (2) are of a type that would not reasonably be expected to recur in the foreseeable future. (a) Descriptive captions for and the amounts of individual extraordinary events or transactions should appear in the income statement; however; if impracticable to disclose on the face of the statement, their disclosure in the related notes is acceptable, (b) The amount of income tax applicable to extraordinary items should be disclosed either on the face of the income statement or in the related notes. (c) Unusual or non-recurring events that are material but are not classifiable as extra-ordinary items should be reported as components of income or expenses before extraordinary items and, if practicable, with full disclosure of the basic nature of each such event or transaction on the income statement or notes. (i) Cumulative effects of changes in accounting principles . State separately the cumulative effects (up to date of immediately preceding statement filed with the Commission) of applicable changes in accounting principles and disclose the applicable income tax. 1. The cumulative effect of changing to a new accounting principle is the difference between (a) the amount of retained earnings at the beginning of the period of change, and (b) the amount of retained earnings that would have been reported at that date if the new accounting principle had been applied retroactively for all prior periods affected. 2. The amount of cumulative effect should be shown in the income statement between the captions "extra-ordinary items" and "net income". (j) Net income or loss . The amount of net income or loss should be clearly indicated. (k) Retained earnings . 1. Show the balance of retained earnings at beginning of period. Disclose and explain any difference between opening balance of retained earnings and balance previously reported including, in the case of retroactive changes in accounting principles, practices and methods, and prior years' adjustments, the amount of applicable income tax. 2. Prior-period adjustments. These may include (a) Change from an accounting principle that is not generally accepted to one that is generally accepted (b) Changes in the application of certain accounting principles, such as change in the basis of carrying investments in less than 50 per cent owned companies and unconsolidated subsidiaries from cost to equity method. (c) Material correction of an error in financial statements of a prior period discovered subsequent to issuance of the financial statements. (d) Material adjustments related to prior periods which (1) can be specifically identified with and directly related to the business activities of particular prior periods, and (2) are not attributable to economic events occurring subsequent to the date of the financial statements for the prior period, and (3) depend primarily on determination by persons other than management, and (4) were not susceptible of reasonable estimation prior to such determination, usually because of some major uncertainty then existing. Normal, recurring corrections and adjustments inherent in the use of estimates in the accounting process should not be treated as prior-period adjustments. 3. Disclose separately earnings (losses) of majority-owned subsidiary in case consolidated financial statements are submitted. 4. State separately any other additions to or deductions from retained earnings, indicating clearly the nature of the transactions out of which the items arose. For dividends declared during the period, state for each class of shares, the amount of dividends per share and in the aggregate. Segregate dividends by type, and show basis for determining amounts of any non-cash dividends. 5. The balance of retained earnings at the end of the period should agree with the related balance sheet caption. (l) Earnings per share . Indicate per share data on the face of the income statement. RULE 4-4. Statement of Changes in Financial Position . When statements purporting to present both financial position and results of operations are included, a statement of changes in financial position should be presented for the period for which an income statement is presented. The statement of changes in financial position filed by issuers of securities to whom this article is applicable shall comply with the following provisions: (a) The statement should disclose all important aspects of the company's financing and investing activities regardless of whether cash or other elements of working capital are directly affected. For example, acquisition of property by issuance of securities and conversions of long-term debt to common stock should be appropriately shown in the statement. The statement should disclose working capital or funds provided from or used in operations for the period as follows: 1. The first item for presentation in the statement is the income or loss before extraordinary items, if any, adding back (or deducting) items recognized in determining that income or loss which did not use (or provide) working capital during the period. The resulting amount should be appropriately described, such as "working capital provided from (used in) operations for the period, exclusive of extraordinary items." 2. The foregoing should be immediately followed by working capital provided or used by income or loss from extraordinary items, if any, similarly adjusted for items recognized that did not provide or use working capital during the period. 3. The statement should clearly disclose: (a) Outlays for purchase of long-term assets (such as investments, property and intangibles). (b) Proceeds from sale (or working capital or cash provided by sale) of long-term assets not in the normal course of business, less related expenses involving the current use of working capital or cash. (c) Conversion of long-term debt or preferred stock to common stock. (d) Issuance, assumption, redemption and repayment of long-term debt (e) Issuance, redemption or purchase of capital stock for cash or for assets other than cash. (f) Dividends in cash or in kind or other distributions to stockholders except stock dividends and stock splits. 4. Net changes in each element of working capital should be disclosed either in the statement or in a related tabulation. RULE 4-5. Schedules to be Filed . (a) Except as expressly provided otherwise, the schedules specified below shall be filed for each period for which financial statements are required. Reference to the schedules shall be made in the appropriate caption of the financial statements. (For the form and contents of the schedules, refer to Article 6.) (b) Any of the schedules required may be omitted if the information required by the schedule (including the notes thereto) is shown in the related financial statement or in a note thereto. (c) The independent auditor's report shall include the schedules accompanying financial statements filed. Schedule A . Marketable Securities . Other Security Investments . This schedule shall be filed 1. In support of the caption Marketable Securities in the balance sheet, if the greater of the aggregate cost or the aggregate market value of marketable securities as of the balance-sheet date constitutes 10 per cent or more of total assets. 2. In support of the caption Other Security Investments if the amount at which other security investments is shown in the balance sheet constitutes 10 per cent or more of total assets, and 3. In support of the captions Marketable Securities and Other Security Investments in the balance sheet, if the amount at which other security investments is shown in such balance sheet plus the greater of the aggregate cost or the aggregate market of marketable securities based on market quotations as of the balance sheet date constitutes 15 per cent or more of total assets. Schedule B . Amounts Receivable from Directors, Officers, Employees, and Principal Stockholders ( other than Affiliates ). This schedule shall be filed with respect to each person among the directors, officers, employees, and principal stockholders (other than affiliates) from whom an aggregate indebtedness of more than P10,000.00 or one per cent of total assets, whichever is less, is owed. For the purposes of this schedule, exclude in the determination of the amount of indebtedness all amounts receivable from such persons for purchases subject to usual terms, for ordinary travel and expense advance and for other such items arising in the ordinary course of business. Schedule C . Investments in Securities . This schedule shall be filed in support of the caption Investments in Securities in the balance sheet. This schedule may be omitted if (1) neither the sum of captions Investments in Securities and Advances to Unconsolidated Subsidiaries and Affiliates in the related balance sheet nor the amount of the caption Indebtedness to Affiliates in such balance sheet exceeds five per cent of total assets as shown in the related balance sheet at either the beginning or end of the period or (2) there have been no material changes in the information required to be filed from that last previously reported. Schedule D . Advances to Unconsolidated Subsidiaries and Affiliates . The schedule shall be filed in support of the caption Advances to Unconsolidated Subsidiaries and Affiliates in the balance sheet. This schedule may be omitted if (1) neither the sum of the captions Investments in Securities and Advances to Unconsolidated Subsidiaries and Affiliates in the related balance sheet nor the amount of caption Indebtedness to Affiliates in such balance sheet exceeds five percent of total assets as shown in the related balance sheet at either the beginning or end of the period or (2) there have been no material changes in the information required to be filed from that last previously reported. Schedule E . Property, Plant and Equipment . This schedule shall be filed in support of the caption Property, Plant and Equipment in the balance sheet, provided that this schedule may be omitted if (1) the total shown under this caption does not exceed five per cent of total assets as shown by the related balance sheet at both the beginning and end of the period and (2) neither the additions nor the deductions during the period exceeded five per cent of total assets as shown by the related balance sheet at either the beginning or end of the period. LibLex Schedule F . Accumulated Depreciation . This schedule shall be filed in support of the caption Accumulated Depreciation in the balance sheet. This schedule may be omitted if Schedule E is omitted. Schedule G . Intangible Assets and Other Assets . Part A of this schedule shall be filed in support of the caption Intangible Assets and Part B shall be filed in support of the caption Other Assets in the balance sheet, provided that either part may be omitted if (1) the total shown by the related balance sheet caption does not exceed five per cent of total assets as shown in the related balance sheet at both the beginning and end of the period and (2) neither the additions nor the deductions during the period exceeded five per cent of total assets as shown by the related balance sheet at the beginning or end of the period. Schedule H . Accumulated Amortization of Intangible Assets . This schedule shall be filed in support of the caption Accumulated Amortization of Intangible Assets in the balance sheet. This schedule may be omitted if Schedule G is omitted. Schedule I . Long-Term Debt . This schedule shall be filed in support of the caption Long-Term Debt in the balance sheet. Schedule J . Indebtedness to Affiliates . This schedule shall be filed in support of the caption Indebtedness to Affiliates in the balance sheet. This schedule may be omitted if (1) neither the sum of captions Investments in Securities and Advances to Unconsolidated Subsidiaries and Affiliates in the related balance sheet nor the amount of caption Indebtedness to Affiliates in such balance sheet exceeds five per cent of total assets as shown in the related balance sheet at either the beginning or end of the period, or (2) there have been no changes in the information required to be filed from that last previously reported. Schedule K . 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 L . Reserves . This schedule shall be filed in support of Reserves included in the balance sheet. Schedule M . Capital Stock . This schedule shall be filed in support of caption Capital Stock in the balance sheet. Schedule N . List of Top 20 Stockholders of Accord . RULE 5-1. Application of Article 5 . (a) This article prescribes the rules for the presentation of consolidated financial statements. (b) The issuer of securities shall follow in the consolidated financial statements principles of inclusion or exclusion which will clearly exhibit the financial position and results of operations of the issuer and its subsidiaries; provided, however, that the issuer shall not consolidate: 1. Any subsidiary which is not majority-owned; 2. Any subsidiary whose financial statement are as of a date or for periods different from those of the issuer of securities, unless all the following conditions are met: (a) such difference is not more than three months; (b) the closing date of the subsidiary is expressly indicated; and (c) the necessity for the use of different closing dates is briefly explained; 3. Any subsidiary where it is clear that the investment of the issuer of securities is a temporary one which is intended to be disposed of as soon as circumstances permit; 4. In general any subsidiary whose resources are not available to the parent company. RULE 5-2. Disclosure of Principles of Consolidation . The following information shall be included in the notes to the consolidated financial statements: (a) Brief description of the principles followed in consolidating the separate financial statements, including the principles followed in determining the inclusion or exclusion of subsidiaries in consolidated financial statements. (b) Any change in the companies included or excluded in the consolidated statements for the preceding period filed with the Commission which has a material effect on the financial statements, indicating the names of the companies included and excluded. (c) Any change in the respective fiscal periods of the companies included which have a material effect on the financial statements and the manner of treatment of such changes. RULE 5-3. Investments in Subsidiaries Not Consolidated . As to subsidiaries not consolidated, a statement must be made in a note to the financial statements as to: 1. Basis of valuation or accounting for the investment. 2. The amount and accounting treatment of any difference between (a) the investment of the issuer and its consolidated subsidiaries (as shown in the consolidated balance sheet) in the above-mentioned companies, and (b) their equity in the net assets of these companies as shown in their financial statements. RULE 5-4. Intercompany Accounts and Transactions . The following shall be eliminated in the consolidated financial statements: 1. Intercompany accounts and transactions between companies included in the consolidated financial statements. 2. Unrealized intercompany profits and losses on transactions between companies. 3. Unrealized intercompany profits and losses between companies, the investment in which is presented in the consolidated statement by the equity method. prcd RULE 5-5. Consolidation of Financial Statements of an Issuer and Its Subsidiaries Engaged in Diverse Financial Activities . (a) If the issuer and its subsidiaries are engaged in one or more types of financial activities, e.g., banking, insurance and finance, consolidated financial statements may be presented unless deemed inappropriate; provided that, when more than one type of financial activity is involved, separate audited financial statements for each significant financial subsidiary or each significant group of financial subsidiaries shall be presented. (b) If the issuer and its subsidiaries are engaged in (1) manufacturing, merchandising, or other non-financial activities as well as in (2) financial activities as described in (a) above, the subsidiaries related to whichever of group (1) or (2) is less significant shall not be consolidated with the operations of the major group; however, the group of lesser significance may be included in the consolidated financial statements if its activities are principally for the benefit of the operations of the major group. RULE 5-6. Submission of Unconsolidated Financial Statements . Where consolidated financial statements are submitted, they should be accompanied by unconsolidated financial statements of the parent company prepared in accordance with these rules. ARTICLE 6 n Form and Content of Schedules RULE 6-1. Application of Article 6. This article prescribes the form and content of the schedules required by Rule 4-5. Schedule A. Marketable Securities Other Security Investments 1 Each issue shall be stated separately, except that reasonable groupings, 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. 2 State the basis of determining the amounts shown in this column. This column shall be totalled to correspond to the respective balance sheet caption or captions. 3 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 Receivables from Directors, Officers, Employees, and Principal Stockholders (other than Affiliates) of Equity Securities of the Person and Its Affiliates 1 Show separately accounts receivable 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. 2 If collection was other than in cash, explain. 3 Give reasons for write off. Schedule C. Investments in Securities 1 Group separately securities of (a) unconsolidated subsidiaries and (b) other affiliates and (c) other companies, the investment in which is accounted for by the equity method. State separately investments in individual affiliates which, when considered with related advances, exceed two per cent of total assets. 2 Disclose the percentage of ownership interest represented by the shares, if material. 3 The total of this column shall correspond to the amount of the related income statement caption. 4 Briefly described each item. Explain if the cost represents other than a cash expenditures. 5 As to any dividends other than in cash, state the basis on which they have been taken up in the accounts, and the justification for such treatment. If any such dividends received from affiliates have been credited in an amount different from that charged to retained earnings by the disbursing company, state the amount of difference and explain. 6 Briefly describe each item and state: (a) cost of securities sold and how determined; (b) amount received (if other than cash, explain); and (c) disposition of resulting profit or loss. 7 The total of this column shall correspond to the related balance sheet caption. Schedule D. Advances to Unconsolidated Subsidiaries and Affiliates 1 The affiliates named shall be grouped as in Schedule C. The information called for shall be shown separately for each affiliate whose investments were shown separately in such related schedule. 2 For each affiliate named in the first column, explain in a note hereto the nature and purpose of any material increase. Schedule E. Property, Plant and Equipment 1 1 Briefly comment on any significant and unusual additions, abandonments, or retirements, or any significant and unusual changes in the general character and location of principal plants and other important units, which may have occurred during the period. 2 Show by major classifications, as indicated in Rule 4-2 (15). If property, plant and equipment abandoned is carried at other than a nominal amount, indicate, if practicable, the amount thereof and state the reasons for such treatment. Insignificant or minor items may be shown under a miscellaneous caption. 3 For each change that represents anything other than acquisition, clearly state the nature of the change and other accounts affected. Describe cost of additions representing other than cash expenditures. 4 Explain, if practicable, changes stated at other than cost. 5 Clearly describe the nature of the changes and the other accounts affected. Schedule F. Accumulated Depreciation 1 If practicable, accumulated depreciation shall be shown to correspond with the classifications of property set forth in the related schedule of property, plant and equipment, separating especially depreciation, depletion, amortization and provision for retirement. Schedule G. Intangible Assets Other Assets 1 1 If in the accounts it is not practicable to separate intangible assets from property, plant and equipment, the information required in this schedule may be included in the schedule for property, plant and equipment. 2 The information required shall be grouped into (a) intangibles shown under the caption Intangible Assets and (b) deferral shown under the caption Other Assets in the related balance sheet. Show by major classifications as indicated in Rule 4-2 (17) and Rule 4-12 (19). 3 For each change that represents anything other than an acquisition, clearly state the nature of the change and the other accounts affected. Describe cost of additions representing other than cash expenditures. 4 If provision for amortization of intangible assets is credited in the books directly to the intangible asset account, the amounts shall be stated with explanations, including the accounts charged. Clearly state the nature of deductions if these represent anything other than regular amortization. Schedule H. Accumulated Amortization of Intangible Assets 1 1 Insofar as amounts for amortization are credited to the intangible asset accounts, such amounts shall be shown in the schedule of Intangible Assets (Schedule G) as there required. 2 If practicable, accumulated amortization shall be shown to correspond with the classification set forth in the related schedule of intangible assets. Schedule I. Long Term Debt 1 Include in this column each type of obligation authorized. 2 This column is to be totalled to correspond to the related balance sheet caption. 3 Include in this column details as to interest rates, amounts or number of periodic installments, and maturity dates. Schedule J. Indebtedness to Affiliates 1 The affiliates named shall be grouped as in Schedule D. The information called for shall be shown separately for any person whose investments were shown separately in such related schedule. 2 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 10 per cent of the related balance at either the beginning or end of the period. Schedule K. Guarantees of Securities of Other Issuers 1 1 Indicate in a note any significant changes since the date of the last balance sheet filed. If this schedule is filed in support of consolidated 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 balance sheet. 2 There need be made only a briefly statement of the nature of the guarantee, such as "Guarantee of principal and interest", " "Guarantee of Interests" or "Guarantee of dividends." If the guarantee is of interest or dividends state the annual aggregate amount of interest or dividends so guaranteed. Schedule L. Reserves 1 List each major type of reserve by descriptive titles. Reserves as to which the additions, deductions, and balances were not individually significant may be grouped in one total amount. Schedule M. Capital Stock 1 1 Indicate in a note any significant changes since the date of the last balance sheet filed. 2 Include in this column each type of issue authorized. 3 Affiliates referred to include affiliates for which separate financial statements are filed and those included in consolidated statements, other than issuer of the particular security. Schedule N. List of Top 20 Stockholders of Record 1 1 Ranking based on ownership of voting shares only. 2 Indicate only membership in the board of directors and positions enumerated in the company's By-Laws. ARTICLE 7 Penalties, Repealing Clause and Effectivity RULE 7-1. Penalties . (a) The non-submission or late submission of financial statements as required in these rules, shall be punished in accordance with the provisions of existing regulations of the Commission. (b) Violation of any provision of these rules shall be penalized by a fine of not exceeding P200.00 and an additional penalty of not exceeding P100.00 per day for every day of default. (c) Whenever appropriate the certifying Certified Public Accountant shall be suspended or barred from practising before the Commission for such period of time as it may deem adequate. RULE 7-2. Repealing Clause . All rules and regulations, circulars or memoranda or any part thereof, in conflict with or contrary to, these rules or any portion hereof, are hereby repealed or modified accordingly. RULE 7-3. Effectivity . (a) These rules shall take effect beginning July 1, 1973. (b) These rules shall be published in a newspaper of general circulation in the Philippines and in the Official Gazette, Manila, Philippines, June 11, 1973. (SGD.) ARCADIO E. YABYABIN Securities and Exchange Commissioner Approved: June 11, 1973 (SGD.) TROADIO T. QUIAZON, JR. Secretary of Trade n Note from the Publisher: Copied verbatim from the official document.