Philippine Financial Reporting Standards (PFRS) for SMEs
Not every Philippine company reports under the full set of accounting standards. Smaller and mid-sized entities use a simplified framework, the PFRS for SMEs. If your company falls inside the thresholds, it shapes how you report, including your retirement obligation.
What it is
The Philippine Financial Reporting Standard for Small and Medium-sized Entities is a simplified version of full PFRS, adopted by the SEC from the international IFRS for SMEs. Many of the recognition and measurement rules for assets, liabilities, income, and expenses are streamlined, and the disclosure requirements are lighter than full PFRS.
Who it covers
Broadly, the framework applies to corporations that meet size thresholds and are not otherwise required to use full PFRS. The commonly cited criteria are:
- Total assets between ₱3 million and ₱350 million, or total liabilities between ₱3 million and ₱250 million.
- Not required to file financial statements under SRC Rule 68.1.
- Not in the process of issuing instruments in a public market.
- Not a holder of a secondary licence (banks, insurance companies, brokers, mutual funds, pre-need companies, and similar).
- Not a public utility.
Entities above these ceilings generally move to full PFRS; very small entities may qualify for the even simpler PFRS for Small Entities. Because the thresholds and rules are periodically updated by the SEC and the FRSC, confirm the current criteria before concluding which framework applies.
What the financial statements include
An SME reporting under this framework prepares a complete set of statements similar in shape to full PFRS:
- a statement of financial position;
- a statement of comprehensive income (single statement, or separate income statement plus comprehensive income);
- a statement of changes in equity and a statement of cash flows;
- notes, including a summary of significant accounting policies;
- comparative information for the prior period.
The retirement angle SMEs miss
- PFRS for SMEs still requires you to recognise and measure your retirement benefit obligation, including the RA 7641 statutory minimum.
- That measurement needs an actuarial valuation, even for a smaller company.
- Being an SME simplifies disclosure, it does not remove the obligation.
Zalamea prepares actuarial valuations for companies of every size, scaled to the reporting framework you use. See our valuation guide or talk to our team.
Frequently asked questions
What is PFRS for SMEs?
It is the Philippine Financial Reporting Standard for Small and Medium-sized Entities, a simplified version of full PFRS adopted by the SEC from the international IFRS for SMEs. It streamlines recognition, measurement, and disclosure for qualifying companies.
Which companies use PFRS for SMEs?
Broadly, corporations with total assets between P3 million and P350 million (or liabilities between P3 million and P250 million) that are not required to use full PFRS, do not hold a secondary licence, are not public utilities, and are not issuing instruments in a public market. Confirm the current SEC thresholds, as they are periodically updated.
Does an SME still need an actuarial valuation for retirement benefits?
Yes. PFRS for SMEs still requires the retirement benefit obligation, including the RA 7641 statutory minimum, to be recognised and measured. That measurement needs an actuarial valuation. The SME framework simplifies disclosure, not the underlying obligation.
Talk to a Zalamea specialist
Tell us about your company and we will outline the right next step, whether that is a valuation, a plan setup, or a benefit review.