Application Deferral of PIC Q&A 2018-H and 2018-14

This accounting alert discusses the application deferral of PIC Q&A 2018-12-H and 2018-14, as approved by the Securities and Exchange Commission (SEC) through Memorandum Circular No. 3, dated February 15, 2019.

Background

The Philippine Interpretations Committee (PIC) issued the following guidance on some implementation issues affecting the real estate industries brought about by the adoption of PFRS 15. 

1.     PIC (Question and Answer) Q&A 2018-12-H, Accounting for Common Usage Service Area Charges

2.     PIC Q&A 2018-14, Accounting for Cancellation of Real Estate Sales

The real estate industry raised implementation issues and requested to defer the implementation of the above pronouncements pending the discussion and resolution by the PIC and Financial Reporting Standards Council of the said issues.  Upon further consultations and discussions with the real estate industry, SEC took note of the significant impact and difficulties faced by the real estate industry in immediately implementing the guidance in PIC Q&A Nos. 2018-12 (H) and 2018-14.

 

Development - Deferral Granted by SEC

The SEC en banc, in its meeting held on February 7, 2019, decided to provide relief to the real estate industry by deferring the application of the provisions of the PIC Q&A Nos. 2018-12 (H) and 2018-14 for a period of three (3) years.

 Effective January 01, 2021, real estate companies will be required to adopt the subject pronouncements and any subsequent amendments thereof retrospectively or as the SEC will later prescribe.

 Note:  A real estate company may opt not to avail of any of the relief provided above and instead comply in full with the requirements of PIC Q&A Nos. 2018-12 (H) and 2018-14.

 

Disclosure Requirements

Real estate companies, which opted for the deferral, shall be required to disclose in the notes to the financial statements:

·       the accounting policies applied;

·       a discussion of the deferral of the subject implementation issues in the PIC Q&A; and,

·       a qualitative discussion of the impact in the financial statements had the concerned application guideline in the PIC Q&A been adopted

 However, should any of the deferral options result into an accounting policy change, such accounting change will have to be accounted for under Philippine Accounting Standards (PAS) 8, Accounting Policies, Changes in Accounting Estimates and Errors, i.e., retrospectively, together with the corresponding required quantitative disclosures.

 

The above relief shall form part of the PFRS for the purpose of preparing and filing general-purpose financial statements with SEC.