The Securities and Exchange Commission has granted the request Philex Mining Corp. for exemption from the application of Philippine Accounting Standards (PAS) 39, particularly the provision for recognition of market-to-market gain or loss on derivatives.
The Commission said the company has complied with the foregoing procedural requirements based on the submitted documents.
In a letter dated March 22, Philex appealed to the Commission to provide it with relief from Securities Regulation Code Rule 68.1, Section 2,which provides sanctions to companies that will fail to follow the country’s general accounting principles.
Under the SRC Rule, the audited financial statements of companies are covered by such rule "with an auditor’s opinion that is other than unqualified because of departure(s) from the generally accepted accounting principles in the Philippines shall be deemed not filed and shall give rise to the imposition of appropriate sanctions on the company."
The appeal was intertwined with the request filed dated March 9, asking for the company’s exemption from the application of PAS 39.
"The application of PAS 39 will make the financial statements of the company present a misleading picture of its financial condition, and in some cases will even give the opposite impression," Philex argued.
The company pointed out that the accounting rule "may be generally applicable for most other businesses," but in case of mining companies, "it could result in discouraging the company from entering into hedging transactions."
Under PAS 39, such hedging transactions are classified as "cash flow hedges," the outstanding contracts of which are to be "marked to market" based on the hedge’s fair value at time of reporting. (CML)
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