Finance Secretary Carlos G. Dominguez, III has ordered the government-run pension funds and health insurance agency to adopt the Philippine Financial Reporting Standards 4 (PFRS 4) accounting standard, particularly with regard to estimating their potential liabilities.
The Social Security System, the Government Service Insurance System (GSIS), and Philippine Health Insurance Corp. (PhilHealth) were instructed to estimate their social benefit liabilities in accordance with the standard by Mr. Dominguez, who is also the concurrent Chairman of the Social Security Commission.
In a speech Friday, Mr. Dominguez said social benefit liabilities represent the three institutions’ net legal obligation to pay specific, guaranteed amounts of money or benefits to their policyholders, which include both actual claims and the required reserve for future claims.
“The implementation of this directive will start with the 2020 financial reports of the SSS, the GSIS, and PhilHealth, which will show a combined total liability of P9.94 trillion after full compliance with PFRS 4,” the DoF said in a statement.
PFRS 4 is the current and interim accounting standard imposed on insurance entities in the Philippines. It is based on International Financial Reporting Standards (IFRS).
Under PFRS 4, when an insurance entity receives money from its clients and enters into a contract with them to provide benefits when certain events occur, it must set aside a reserve to cover its liabilities.
In this case, premiums, fees, and contributions that the institutions receive must be reported both as income and liability, the DoF said.
Mr. Dominguez said all three institutions “are still financially sound and can meet their obligations to their respective members.” — Luz Wendy T. Noble