What Should Annual Financial Statements in the Philippines Include?

Annual financial statements show a Philippine company’s financial position and performance for the year under the accounting rules that apply to it.

What makes up a complete set of financial statements?

A complete set of annual financial statements generally includes a statement of financial position (balance sheet), statement of comprehensive income, statement of changes in equity, statement of cash flows, and notes to the financial statements.

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The notes are especially relevant because they provide the accounting policies and support disclosures behind the reported figures, including material items such as related-party transactions, borrowings, taxation, commitments, contingencies, and significant accounting judgments, where applicable.

Which financial reporting framework applies?

Foreign ownership does not determine which accounting framework a Philippine company uses. The applicable framework depends on the company’s size, public accountability, and other characteristics under Philippine financial reporting rules.

Large and publicly accountable entities generally apply full Philippine Financial Reporting Standards (PFRS). Under the SEC’s classification, this includes entities with total assets above PHP 350 million (US$5.6 million) or total liabilities above PHP 250 million (US$4 million), as well as entities that meet specified public-accountability criteria.

Entities below the full-PFRS thresholds may qualify to use PFRS for Small and Medium-sized Entities (PFRS for SMEs) or the applicable framework for small entities, subject to the eligibility rules and exceptions for each framework.

For a Philippine subsidiary, its relationship with an overseas parent can also affect the appropriate reporting framework. This matters where the parent prepares consolidated financial statements under a particular reporting framework or requires financial information from the subsidiary on the same basis.

When do annual financial statements require an audit?

For 2026 SEC filings, domestic corporations with total assets and total liabilities of PHP 3 million (US$47,800) or less may submit unaudited financial statements, subject to the SEC’s certification requirements. Corporations with total assets or total liabilities exceeding PHP 3 million are generally required to submit annual financial statements audited by an independent certified public accountant.

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Different thresholds apply to foreign corporations operating directly in the Philippines. Branch and representative offices of stock foreign corporations must submit audited annual financial statements when assigned capital reaches PHP 1 million (US$15,900). The SEC’s reporting rules separately provide a PHP 1 million total-assets threshold for branch and representative offices of non-stock foreign corporations.

Where an audit is required, management remains responsible for preparing the financial statements. The independent auditor examines them and issues an opinion on whether they are presented fairly, in all material respects, under the applicable financial reporting framework.

An unmodified audit opinion means the auditor did not identify a material issue requiring the opinion to be modified. A qualified or adverse opinion means the auditor identified an issue affecting the financial statements. A disclaimer of opinion means the auditor could not obtain enough evidence to form an audit opinion.

Companies required to file audited financial statements with the Securities and Exchange Commission (SEC) generally do so within 120 calendar days after the end of the fiscal year. Different filing periods can apply to companies subject to additional SEC reporting requirements.

When Philippine accounts do not match the parent company’s reporting requirements

A Philippine subsidiary can prepare compliant local financial statements and still require adjustments before its results can be consolidated by an overseas parent.

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For example, a Philippine subsidiary may prepare its annual financial statements in Philippine pesos under the applicable Philippine reporting framework. Its U.S. parent may require the figures in U.S. dollars, together with consolidation schedules and adjustments, in accordance with the group’s U.S. GAAP policies. The Philippine financial statements remain the local accounts, while the group reporting package converts the subsidiary’s results into the form required for consolidation.

Timing can also differ. The parent company’s consolidation deadline may require the Philippine subsidiary to provide reporting information before its local audit and statutory filing processes are completed. In that situation, the subsidiary may need to provide preliminary group figures and later reconcile those figures with the finalized Philippine accounts.

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Dezan Shira & Associates can assist foreign investors with preparing annual financial statements and coordinating local and group reporting requirements. Contact Dezan Shira & Associates for support with financial reporting in the Philippines.

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