The Philippine Supreme Court (SC) upheld the P2 million penalty imposed on Abacus Coal Exploration and Development Corporation (Abacus Coal) for failing to disclose the accurate value of its assets in its Audited Financial Statements (AFS).

In a press statement released on Monday, March 9, 2026, the SC said the Securities and Exchange Commission (SEC) imposed the P2 million penalty after determining that Abacus Coal omitted important information from its AFS.

The SC cited the decision written by Associate Justice Maria Filomena D. Singh of the Third Division that denied Abacus Coal’s petition questioning the SEC's ruling.

According to the SC, iun 2008, Abacus Coal increased its capital stock from PHP 20 million to P300 million after acquiring coal mining rights from Abacus Consolidated Resources and Holdings, Inc. worth PHP 2.7 billion.

However, the SEC noted that Abacus Coal's 2008 and 2009 AFS did not reflect these assets on its Balance sheet and showed them only in the Notes to the AFS.

The SEC stated that when Abacus Coal was asked to explain, the company claimed the omission resulted from a supposed conflict between accounting standards and the pending SEC approval of its capital increase.

The SEC rejected this explanation, stating that the omission caused Abacus Coal to understate its total assets and violate SEC Memorandum Circular (MC) No. 08-09. 

The SEC countered that the information was readily available because the capital increase was approved in December 2008 before the AFS were issued.

The Court of Appeals sided with the SEC, stating that Abacus Coal's disclosures in the Notes alone were insufficient to provide a complete picture of the company’s financial condition.

The SC upheld the Court of Appeals' decision, stating that Abacus Coal violated Rule 68 of the Securities Regulation Code (SRC), which requires corporations to include all intangible assets, capital, and reserves in their balance sheets.

Rule 68 states that an information is considered material if omitting or misstating it could influence a user’s economic decisions based on the financial statements, the SC explained.

Failure to disclose these items leads to "material deficiencies and misstatements, which are subject to fines under SEC MC No. 08-09," the SC said.

The high court also emphasized that leaving out material information weakens the reliability of financial reports.

In the case of Abacus Coal, the SC noted that the understatement of assets was significant.

The SC reasoned that the revised AFS the company later submitted "did not cure the deficiencies, as it continued to omit the appraised value of the mining rights amounting to PHP 2.7 billion."

The SC affirmed the SEC’s computation of the penalty under SEC MC No. 08-09, which imposes a fine equivalent to 1/10 of 1 percent of the appraised value of the omitted amount, capped at P1 million per year of misstatement.

-Paraluman News