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The Statement of Assets, Liabilities and Networth (SALN) otherwise more popularly known as a Balance Sheet by the accounting and auditing profession is an accounting document adapted by the 1987 Constitution in its provisions on transparency.  In their desire to impede and eventually eradicate the growing tide of corruption in government service, they zeroed in on this single report as the main disclosure requirement from government employees. 

They relied on the annual compliance as a sufficient basis for monitoring and establishing a prima facie evidence on the existence of possible irregularities on the part of the filer.  Used as a benchmark, it sets the stage for a lifestyle audit where the filer’s personal and family circumstances are compared to what his SALN reveals. 

Clearly this was a case of an accounting document which was being adapted with its established norms and procedures as part of the legal system.  Because of the universality of the SALN, the framers did not see a need to specify its own methodology, forms and interpretation for this new disclosure mechanism. They left it to the law givers to protect the spirit and intent of its mandate and to the accounting and auditing professions to protect the integrity of the document from its preparation to interpretation. 

Because its adaptation was going to affect an estimated 500 thousand in government service at that time, it was valued for its simplicity and straightforwardness in indicating whether government functionaries were honest or dishonest, living within their means or not.  You were absolved or convicted on the basis of what you declared under solemn oath as revealed by your year to year filings.  There were enough data, standard methods and best practices to rely on and apply consistently from one case to the other. 

An inquisition was never envisioned as a basic part of the entire process for the idea was to established a prima facie case at the earliest possible time in order to be able to render the most expedient, efficient and economical conclusion one way or the other.  Even if a filer who never bought real estate property or maintained a dollar deposit could be convicted based on his sworn declarations. 

Imagine the cost of the witch hunt in the present CJ Trial.  If this was the norm enshrined in the Constitution, it would bankrupt the government in financing such cases, doing more harm than good in the process.  The current situation is a very bad precedent in more ways than one: 

·         As the highest profile case involving a SALN, prosecutors of eventual cases may be lead to believe that they do not have a case unless the same conditions are present. 

·         If the accused is exonerated of all charges from Article II of the Articles of Impeachment, the general public may perceive the SALN as another toothless and useless exercise rather than see its potency when used in the right way by the right hands. 

It is the lack of appreciation for this impetus which has lead to the current circus to which the CJ Trial has degenerated to.  We are now in very deep water examining systems and procedures of the banks involved to the point where some people think that it is relevant to know micro details on opening safety boxes and bank vaults.  All of this is happening because the prosecution panel has insisted to try to convict on the basis of extraneous material which are only supportive of the SALN. 

It has been said time and again that the document itself is the best evidence.  If this is so then allow the SALN to testify on its own behalf.  This can be done through an expert witness who knows what SALNs are all about, how they should be prepared and how they should be interpreted.  After all, it is an accounting document adapted into the legal system and not vice versa. 

Depending on what the filer submitted, his SALNs will either exonerate or convict him.  From a legal standpoint, only income coming from tax evidenced transactions (TETs) would be admissible sources of increases or decrease of Networth.  Any other source can be presumed spurious unless shown otherwise by the filer.  The burden of proof is on him to show that every aspect of his Networth is legitimate. 

Depending on the amounts to be explained and on the acceptability of the explanation, the legal experts should now determine whether there is enough evidence to convict or whether there would be a need to go to supplemental evidences such as bank accounts, real estate properties, etcetera which unfortunately the prosecution had prioritize without the benefit of the first and more important exercise. 



Two accounting methods of interpreting salns


The mandated filing of SALNs required of certain officials is meant to be the definitive method of monitoring the unwarranted accumulation of Networth by dishonest government functionaries.   The Statement of Assets, Liabilities and Networth more popularly known as the Balance Sheet in accounting and auditing terms follow strict rules which are universally accepted worldwide.

​The simple but immutable equation Assets = Liabilities + Networth is a basic formula that the filer attests to be true for his submission.  Legally, he also warrants the veracity of all the entries thereon.

Currently the impeachment advocates are trying to prove the non-inclusion of probable assets and the inclusion of improbable liabilities instead of focusing on the increases and/or decreases in Networth which in all cases MUST be evidenced by tax payments or tax exemptions.  Their current approach should only be secondary and may even be unnecessary after all.

Another way of algebraically stating the same equation previously mentioned is:  Assets – Liabilities = Networth.  The increases or decreases in Assets and/or Liabilities are initially irrelevant for as long as the Assets and Liabilities offset each other.  These increases or decreases should only become a concern when the following two conditions are met:

- The increase or decrease in Assets and/or Liabilities do not offset each other and therefore affect the Networth by increasing and/or decreasing it and
- Such increase or decrease is not justified by the relevant numbers filed in the corresponding ITRs, CARs and other tax evidenced transactions (TETs).

From a year to year basis, the SALNs should only contain TETs for the year in question because each succeeding year’s SALN must be properly derived by following this formula:

SALN (last year) +  TETs (current year) =  SALN (current year)

​When the actual SALNs filed shows higher Networth figures than those derived using the formula above, it will obviously only reflect non-TETs from year to year.  These non-TETs have to be explained though it will be impossible to legally justify them because they are from untaxed sources of income.

In the face of such a discrepancy, a prima facie case of violation may be considered sufficiently established and the presumption of innocence of the filer is lost.  This then shifts to him the burden of proving both the accounting validity and legality of the filed entries in the SALN.

The foregoing is the TET Method for reconstructing what the SALN should be.    Additionally, there is a SALN Method for verifying what the TETs should have been.  It is stated below as follows:

SALN (Current Year)  -  SALN (Last Year)  =  TET (Current Year)

When the actual TETs filed are lower than the TETs derived using this formula, these situations will indicate shortfalls in the filing of TETs or a case of unreported income.  When those filed are higher, these could lead to allowable adjustments in succeeding year.

In the current impeachment case, it would be interesting to do spreadsheet analyses of these.  Unfortunately not all the required numbers have been disclosed to the public yet.  Regardless of the outcome of the suggested studies, a friend of the court should be presented to explain all of these.

Even if there will still be entries pertaining to TETs which may still be supplied, this approach immediately shows that based on the SALNs, gaps exist and these have to be accounted for.  A prima faciecase is immediately established and the burden of proof quickly shifts.

​As the gaps are attempted to be explained, many of the details of the Assets and Liabilities will have to be volunteered by the defense.  This will be the ideal time to question invisible assets and improbable liabilities on top of whatever other dubious circumstances may come out.  The shoe would be clearly on the other foot.



salns demystified


Accountants should not be SALNpusa in any Impeachment Trial

SALN is the acronym of Statement of Assets, Liabilities and Networth or what is more commonly referred to as the Balance Sheet by financial practitioners. Likewise, the Networth is more familiarly called Equity.  Each category can be classified either as short term or long term.

For example short term assets are cash and marketable securities while long term assets are land and buildings.  On the other hand, short term liabilities are debts owned to suppliers while long term liabilities are usually bank loans with terms of more than one year.

For individuals, there are no distinctions between short or long term equity.  However in the case of businesses, dividends already declared may be considered short term equity while subscribed paid up capitals may be viewed as long term equity.

The SALN as a whole is a picture of the financial health of its owner as of a particular date.  This date is normally the end of the calendar year for individuals while business entities may prepare Balance Sheets for any date that they wish.  One’s financial health is a function of the relationships of the Assets, Liabilities and Networth amongst each other and is likewise determined by the internal relationships of the composition of each of these three principal accounts.

Normally the filer’s financial health based on his SALN is expressed in absolute amounts from year to year.  This can further be embellished by a comparison of various ratios from the corresponding dates.  These are known as balance sheet ratios when the proportions are derived from the balance sheet alone, operating ratios when the proportions are derived from the income statement alone and mix ratios when the proportions are derived from both the balance sheet and income statement.

In order to be prepared accurately, SALNs should be prepared from year to year by imposing the financial impact of all of the filer’s current annual activities and transactions on the immediately preceding SALN.  This is precisely the reason why its deadline is on April 30th which is 15 days after the BIR deadline for the filing of Income Tax Returns (ITRs).  Conversely therefore the absolute difference between any two SALNs should reveal all the net activities and transactions with financial impact between the two dates.  This has been the accepted method for reconstructing missing information in financial audits and investigations.

Since all assets are either owned or owed, any change in assets whether up or down should have a corresponding effect on one if not both liabilities and networth.  While assets may be acquired through borrowings, the new liability must be supportable by the financial strength of the debtor before the assets were acquired.  Otherwise it would be a behest loan or a quasi-equity infusion in the case of businesses.

By filing a SALN, what is the filer attesting to?

In filing his SALN broken into Assets, Liabilities and Networth he is saying in a sworn oath that this is what he owns, this is what he owes and finally that this is what he is financially worth after paying off all his debts and all the final taxes on all his sources of income.

What do any two years’ SALNs by the same filer say about him/her?

Amounts higher in the more current year show growth while amounts lower in the more current year show decline. 

Where do increases and decreases in Assets come from?

Increases in Assets come from the net acquisition, donation, inheritance and windfall events like winning the lotto for example.

Decreases in Assets come from the net disposition (sale of assets or payment of expenses), donations and losses (theft, arson or destruction through natural calamities) of assets.

Where do increases and decreases in Liabilities come from?

Increases in Liabilities come from the net creation of borrowings such as loans, purchases on installments and delays in the payment of expenses such as rentals, 13th month pays or interest on outstanding obligations.

Decreases in Liabilities come from the net payment of borrowings for example, more loans paid than made for the same period.

Where do increases and decreases in Networth come from?

Changes in Networth can only legally come from tax evidenced filings (TETs) such as those related to ITRs, CARs, deeds of donation, tax exemption certificates, etc.

What does SALN as a Balance Sheet imply?

Because it is a balance sheet, both sides of the equation Assets = Liabilities + Equity must always be equal or be balanced.  Because of this principle, all transactions are recorded and maintained throughout the years on the basis of its acquisition cost, also known as historical cost.  Thus when a property such as land is bought for Php 1 million, it should be carried in a filer’s SALN at its acquisition cost until it is finally disposed.  Reporting it at any other value like say assessed or market value, will only distort the Networth since all the other data on the SALN are carried at acquisition or historical costs.  It would be akin to introducing apples to oranges in the same equation.

What valuation method should be used in filing the SALN?

What is not an issue for accountants in terms of the type of valuation to be used for reporting purposes has created a great confusion in the market place with regard to Assets.  Everyone has his ‘logical’ choice among the Assessed Value which comes from the Market Value, the Current Fair Market Value and the Historical (Acquisition) Cost.

On the other hand there seems to be no argument as to how Liabilities should be carried in the books as these will be recorded at historical values although they are also repriceable at current exchange rates especially when they are foreign loans.  Accountants especially CPAs who are well versed with the Generally Accepted Accounting Principles (GAAP) will always use the Historical Cost for recording and reporting everything.

The controversy began when the SALN form asked for information on the Assessed and Market values.  While this intention was merely to supplement the mandated reporting of the Historical Cost, it has been conveniently misinterpreted to be a multiple choice among the three values.  This is totally unacceptable from the accounting point of view because it would make the Balance Sheet unbalanced as it would then contain apples and oranges.

This will be the case because the Networth which is a residual of Assets minus Liabilities would now be a mongrel any time the Assets are not valued at Historical Cost.  On the other hand, balancing the SALN by using the same non-historical cost for both the Assets and Liabilities would likewise be taboo because of the Going Concern principle which states that only dying and winding up entities may carry non-historical values as a general rule.

How should activities and transactions be recorded?

The two choices are the Cash basis or the Accrual basis.  The Cash basis centers on the receipt or disbursement of cash as the name implies.  No cash movement, no recording with the opposite also being observed.

The Accrual basis matches expenses with income and requires the creation of a chart of accounts.  Thus even if there is no cash movement yet, the activity or transaction is already recognized as soon as any liability requiring the payment of cash at some future date is already obligated.  The reverse is also true.

There are also two choices from the manner of entering transactions in the books.  These are namely the Single entry and the Double entry system of debits and credits.  The single entry is simply like writing a one liner in a diary.  For example, Bought an iPad today.

The double entry system requires two accounts to be affected:  one by a debit and the other by a credit which must always be of the same amount in order to balance.  It is also a system of checking the accuracy of the recording function.  The Accrual basis using the double entry system is the best and what is internationally acceptable.

For individuals though, the Cash basis single entry system is what is widely used by persons who are non-accountants and those who are not assisted by accountants.  Notwithstanding, the cash basis single entry system must be converted into the double entry system with a chart of accounts before a SALN can be prepared and filed.

This may be quite a tall order given the current state of accountancy in the country.  It takes solid grounding on the Theories of Accounts and years of practice in setting up books, of auditing accounting reports and of reconstructive accounting work in order to have the necessary knowledge and skills to go from the Cash basis single entry system to the Accrual double entry system.

Ask any recruitment company or manager with an MBA what the most difficult position to fill up is and the reply will always be a knowledgeable accountant.  This search would even be more difficult if it were for a knowledgeable CPA.  The really good ones are all gainfully employed and highly paid and will never have the time for the 99.99% of the some 1.4 million SALN mandatory filers in government.

To compound things, the current SALN form which is obviously authored by a non-accounting person requires the filer to submit far too many details which already goes beyond the requirements of a proper and accurate balance sheet.  He could not imagine that the barest information alone could be instrumental in getting a conviction.

This current SALN form’s author’s ignorance of the language of accounting notwithstanding his good intentions has led to the present difficulties, confusions and ambiguities which compound the uninitiated while these victimize the government when taken advantage of by cunning hooligans.  Single handedly, this ignorant author may have amended the Constitution and weaken the SALN as a weapon against thieves in government.

The current brouhaha about the CJ’s SALN in fact has led some quarters of non-accountants again to suggest that the current superfluous information should further be ‘enhanced’ by still more data on expenses and other accounts.  This has become tantamount to turning the SALN into a hybrid Balance Sheet cum Expense Report as if the filers are still not sufficiently burdened and confused.

If and when this further chaos happens, we would not only have created a whole industry demanding the services of CPA companies but also destroyed the simplicity and efficacy of the SALN as an ‘anti-corruption document’ in the words of the Senate Presiding Judge.

This would be a great tragedy because the SALN in the hands of a financial expert can do the following:

·         Convict or exonerate on the basis of what was filed.

On the basis of what he filed in the present case, the numerous mistakes can be seen as a deliberate act to mislead because the filer has a MBA from the Ateneo de  Manila University and a Masters of Law from the Harvard University where his specialization was the regulation of corporate and financial institutions.  Aside from being a tax columnist, he worked in the finance sector as a lawyer of the DBP and as SVP and General Counsel of the Commercial Bank Manila.

He also became a senior officer of the Tax and Corporate Counseling Group of the Tax Division of SGV, one of the country’s largest accounting firms where he was featured in their coffee table book as an alumnus who made them proud.  (Will they rescue one of their favorite sons or disown him now ?)

·         Convict or exonerate on the basis of the accounting narrative between two or among three or more SALNs.

On the basis alone of the 9 submitted SALNs, there are not enough tax evidenced transactions (TETs) to support a Php 15.6 million increase in Networth from 2003 (its lowest level) to the Networth in 2010 (its highest level).This may be sufficient to shift the burden of proof to the respondent.

·         Convict or exonerate on the basis of what was not filed.

In spite of the relatively huge balances of Cash on a year to year basis, more and larger bank deposits have been found under the name of the respondent.  This should be enough to be the basis for a lifestyle audit.

Additionally, the beginning balances from the initial SALN filed must be thoroughly investigated.  As stated earlier, even these must be fully supported by TETs.  Care must be taken in order to prevent newly appointed hooligans from setting up fictitious amounts in anticipation of laundering ill gotten wealth in the future.

The foregoing judgments are possible because of what each SALN reveals when it is compared with any prior or subsequent year(s).  As stated earlier, any person filing two SALNs is wittingly or unwittingly also saying that the net difference between the two Networths represents the basis for all the sources of income for which he paid all the final taxes on.

This is so because from an accounting point of view, the only way to arrive at any subsequent SALN is to add all the sources of income for which he paid all the final taxes on.  Thus when someone files any subsequent SALN, he is admitting to the income sources in between.

​To a lawyer it may sound like the biggest non sequitur he has ever heard of.  But it is really not.  First, let us all remember that the SALNs are accounting documents which have been adapted as a legal document and not vice versa.  The law adapting it never specified another methodology for arriving at its contents because there was no need for doing so as there was already a standard convention tested by time and practiced internationally.

The preparation and presentation of SALNs therefore carry with it all the inherent properties and peculiar characteristics of the best practices of the accounting and auditing professions.  While there may be ambiguities in the reporting format currently being used, these must obviously be resolved in favor of making the document intelligible to the professionals in the industry.  After all the SALN Law is there not to protect scalawags in government but to facilitate their convictions through the testimony of the documents itself and what they also reveal in between.

No one can say that the pregnancy is irrelevant to the new born baby where the pregnancy is the process of adding all the sources of income on which he paid all the final taxes and the new born baby is the resultant SALN of the succeeding date. 


accounting dollar accounts


Dollars and other foreign currencies held as long term investments are accounted for in Balance Sheets as Assets recorded as historical costs just like all the other Assets should be recorded.  No adjustments have to be made on a year to year basis again just as no adjustments have to be made on the valuation of the other Assets.

​It is only in the books of entities which actively trade in dollars and other foreign currencies as a substantial part of their business where they can be treated as stock and trade subject to the accepted methods of recognizing merchandise inventory.  All other foreign currency holders may retain them at acquisition cost until they are sold at which time the income and its resultant effect of increasing both Cash and Networth can be recognized and supported by the entity’s Income Tax Return.

Because they are part of one’s Assets, they affect Networth and must therefore be reported as part of the SALN unless the Bank Secrecy Act on foreign currency deposits was intentionally created as a haven for unscrupulous government officials to cover their shenanigans rather than as an engine of growth for foreign investments.

In the case of the Chief Justice who by his own admission, has been trading in dollars as a currency since the late sixties, the following things should have happened:

- He should have reported this activity as a business or at the very least as another source of income aside from his salary.

- He should have declared his dollar interest earnings on a year to year so that he could support his year to year growth in Assets and Networth.

​- He should have reported the total acquisition cost of his dollar account in pesos in his first SALN to lay the foundation of the growth of his Assets and Networth from this source in the future.

​While he tried debunking the Ombudsman’s statement that he has around US$ 12 million as of 13 Jan 2012, my own analysis of the AMLC Report shows that he should own up to a minimum of US$ 1.249 million as of the same cutoff date.  Should this be the figure he has to justify, it would mean that he should have started in 1968 with the following amounts under different interest discount factors:


YEARS          INTEREST          TARGET          RATE          BEGINNING          RATE

1/68 to           DISCOUNT         BALANCE        45.1097       BALANCE            3.8965 to 

12/10             FACTOR             US$                to 1 PHP      US$                      1 PHP


a                    b                       c                      d                 e                          f             


43                  2.0%                 1,249,000         56,342,015    533,034               2,076,968

43                  2.5%                 1,249,000         56,342,015    431,952               1,683,101

43                  3.0%                 1,249,000         56,342,015    350,398               1,365,326

43                  3.5%                 1,249,000         56,342,015    284,529               1,108,667

43                  4.0%                 1,249,000         56,342,015    231,275                  901,163

43                  4.5%                 1,249,000         56,342,015    188,175                  733,224

43                  5.0%                 1,249,000         56,342,015    153,257                  597,166         


a          Duration of the investment in years allegedly from 1968 to 2010.

b          Range of possible interest earnings on the dollar as a currentcy.

c          Dollar account balance as of December 2010 arrived at based on the AMLC Report.

            Note that this number is quite far and very different from the Ombudman's figure.

d          The peso equivalent of CJC's dollar account balances.

            Computed at the official BSP exchange rate of Php 45.1097 to 1 US$ average of 2010.

e          The amount of dollars you needed to invest for 43 years to accumulate US$ 1.249 million

            Discounted using years in Column a and Column b.

            Go to http:/tfsfrd.tamu.edu/tdss/Basic/cid.htm

f           The equivalent in pesos of the amount of dollars you needed to invest for 43 years to accumulate

            US$ 1.249 million.

           Computed at the official BSP exchange rate of PHP 3.8965 to 1 US$ average of 1968. 



His eventual admission that he actually has US$ 2.4 million further compounded his problem because the same type of analysis shows that he would have needed much more money in 1968.  The parallel analysis follows:


YEARS          INTEREST          TARGET          RATE          BEGINNING          RATE

1/68 to           DISCOUNT         BALANCE        45.1097       BALANCE            3.8965 to 

12/10             FACTOR             US$                to 1 PHP      US$                      1 PHP


a                    b                       c                      d                 e                          f             


43                  2.0%                 2,400,000         108,263,280   1,024,245            3,990,971

43                  2.5%                 2,400,000         108,263,280      830,013            3,234,146

43                  3.0%                 2,400,000         108,263,280      673,303            2,623,525

43                  3.5%                 2,400,000         108,263,280      546,734            2,130,349

43                  4.0%                 2,400,000         108,263,280      444,403            1,731,616

43                  4.5%                 2,400,000         108,263,280      361,585            1,408,916

43                  5.0%                 2,400,000         108,263,280      294,490            1,147,480         


a          Duration of the investment in years allegedly from 1968 to 2010.

b          Range of possible interest earnings on the dollar as a currentcy.

c          Dollar account balance as of December 2010 arrived at based on the AMLC Report.

            Note that this number is quite far and very different from the Ombudman's figure.

d          The peso equivalent of CJC's dollar account balances.

            Computed at the official BSP exchange rate of Php 45.1097 to 1 US$ average of 2010.

e          The amount of dollars you needed to invest for 43 years to accumulate US$ 1.249 million

            Discounted using years in Column a and Column b.

            Go to http:/tfsfrd.tamu.edu/tdss/Basic/cid.htm

f           The equivalent in pesos of the amount of dollars you needed to invest for 43 years to accumulate

            US$ 1.249 million.

           Computed at the official BSP exchange rate of PHP 3.8965 to 1 US$ average of 1968.




a saln form which co​nvicts


The 1994 SALN form which has been used to convict 3 government employees already has been seen by many as something which can greatly be improved in order to make it a more effective tool against graft and corruption.  Its critics point to the fact that the reporting of Assets is cumbersome since it asks "for Acquisition Cost, Assessed Value, and Current Fair Market Value.  Others note that filers tend to only" submit the Assessed Values since traditionally this is almost always the lowest of the 3 figures.  Many more complain that there are no guidelines for filling up the form to help non-accountants.   

There have been 2 known attempts to change the 1994 SALN form but none of these addressed any of the issues raised above.  The 2004 initiative attempted to establish a baseline and ended up to become a more cumbersome form to fill up, while the 2011 version added requirements for income and expense items making it more than a Balance Sheet which is what a SALN is suppose to be.  

If any SALN is to convict, its first requirement is that it should be capable of being a RED FLAG in and of itself.  Second, it should be easily and quickly processable even manually at the point of filing or electronically at some national collection point.  Finally, it should address the common issues raised against the current form.  

Because the SALN is an accounting document being borrowed by the legal system, this revision should be left to competent accountants primarily who are in the best position to satisfy all the requirements mentioned above.  

This is my attempt at producing a SALN form which will answer all these needs while being user friendly yet lethal since it not only red flags but can also be used to convict its own filer.  My focus will be on accounting related matters which is the heart of this exercise using the original form as my take off point.  

First off the bat, I would remove the columns for Assessed Value and for Current Fair Market Value because they presently only offer ways of watering down the filer's assets and effectively becomes a source of error from an accounting point of view when it is added to other items which are all reported at acquisition costs which has resulted in the past to an apples and oranges situation destroying the exactness of the report.  

Please note that Personal and Other Properties are reported only at Acquisition Costs and so are Liabilities reported on the basis of historical costs which are the equivalent of acquisition costs.  The moment Assessed or Current Market Values are used for Real Properties and these are added to Personal and Other Properties carried at Acquisition Costs, the Total Assets becomes a hybrid figure.  To make matters worse, when the Liabilities booked at Acquisition Costs also are subtracted from this hybrid Total Assets, the Networth becomes a financial mongrel.  

My guess at the original intention for the inclusion of these two villianous items is as an additional info at best to the Acquisition Costs and not as a substitute for it which the uninitiated fall for and the wily intentionally use.  They were meant to be comparative figures and never as stand alones.  Since there are no mechanisms in place now for comparing these different asset figures, it is simpler and more practical to just strike them off rather than to write guidelines about their proper use when no one will use them until the Real Property is finally sold which is the only time comparing the selling price with the Assessed Value and/or Current Fair Market Value may be useful in monitoring possible attempts at under- or over-valuing the sale transaction.  

​The second major improvement I would make is to require the filer to fill in his Assets, Liabilities and Networth for the duration of his government service or the previous 5 years whichever is shorter creating a 4 year trend available for scrutiny every year for every filer in the country.  These are the year to year abuses that we want to stop on its tracks as early as possible.


ASSETS

Real Properties

Personal and Others

     Total this filing                    2011

     Total 1 year before            2010 (when applicable)

     Total 2 years before          2009 (when applicable)

     Total 3 years before          2008 (when applicable)

     Total 4 years before          2007 (when applicable)


LIABILITIES

     Total this filing                    2011

     Total 1 year before            2010 (when applicable)

     Total 2 years  before         2009 (when applicable)

     Total 3 years before          2008 (when applicable)

     Total 4 years before          2007 (when applicable)


NETWORTH

     Total this filing                    2011

     Total 1 year before            2010 (when applicable)

     Total 2 years before          2009 (when applicable)

     Total 3 years before          2008 (when applicable)

     Total 4 years before          2007 (when applicable)



The basic reason for this additional information is to create any RED FLAG situation when the filer's Networth increased from any previous year without a corresponding increase in liabilities.  This would indicate alleged earnings that should be fully supported by Taxed Evidence Transactions such as ITRs, CARs, Donee Tax, etc.  In these cases, the filer may directly attach the necessary documents to immediately erase any suspicion of the possibility of any ill gotten wealth.  Note that increases in Networth accompanied by increases in Assets completely offset by Liabilities may not necessarily be suspicious when the old Networth justify the borrowings.                              

The direct attachment of copies of Taxed Evidence Transactions when warranted is my third major improvement.  

For the vast majority of our SALN filers, increases in Networth that are not accompanied by increases in the liabilities will largely come from their earnings.  These increases will be justifiable limits when they fall within the difference between their taxable income and the income taxes actually paid as shown in their recently filed ITRs.  In order to facilitate this comparison therefore, the attachment of a copy of the ITRs just filed is my 4th major improvement.  

Please note that the data requirements for the 2nd, 3rd and 4th major improvements are all readily available to the SALN filer.  This is unlike the discarded data on Assessed Value which the majority uses after researching the number from the Assessor's Office.  

​Again for the vast majority of the SALN filers, the best and simplest way of arriving at this year's Networth is as follows:


Taxable Income                         From 2011 ITR

- Total Income Taxes                 Both withheld and to be paid

= Increase in Networth               For the current year

+ SALN Networth                       From 2010 SALN

= 2011 Networth                         For 2011 SALN filing


When fix salaried earners sell Assets other than land which appreciates in value, they normally incur a loss which should translate as a reduction in Networth.  This may sound counterintuitive to a non-accountant but because they are not allowed to depreciate assets, their acquisition costs may invariably be higher than their selling price unless in an economic super-inflation.  This lot will become poorer in Assets and Networth the more assets they sell.  Imagine the following:


Purchase of 2nd Hand car                         400,000          2005

Sale of this car                                         200,000          2011

Reduction in Assets and Networth            (200,000)         2011


For the privileged few of SALN filers who make money from sources other than their salaries, the best formula is as follows:


Taxable Income                             From 2011 ITR

- Total Income Taxes                     Both withheld and to be paid

= Partial Increase                          For the current year

+ Other Sources                            Taxed Evidenced Transactions

= Increase in Networth                    For the current year

+ SALN Networth                           From 2010 SALN

= 2011 Networth                             For 2011 SALN filing



Assuming for the sake of an example that the 'Other Sources' referred to above is from the sale of real property, this figure should be arrived at in the following manner:


Selling Price                              Assumed to be the current fair market value in the accounting sense     

​- Acquisition Cost                      Even if it was carried as Assessed Value or Current Fair Market Value

= Gross Profit                            Difference between Selling Price and Acquisition Cost

- Sale Related Expenses            Commission, capital gain taxes, documentary stamps, other selling expenses

= Other Sources                        This is the figure to be included above


In both examples above, the current Networth increase should find its way as an offsetting increase in 

Assets.