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Bermaz Auto Philippines Inc.(formerly Berjaya Auto Philippines Inc.)

Financial StatementsApril 30, 2016, 2015 and 2014and Years Ended April 30, 2016, 2015 and 2014

and

Independent Auditors’ Report

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C O V E R S H E E Tfor

AUDITED FINANCIAL STATEMENTS

SEC Registration Number

C S 2 0 1 2 1 4 7 4 9

C O M P A N Y N A M E

B E R M A Z A U T O P H I L I P P I N E S I N C . (

F O R M E R L Y B E R J A Y A A U T O P H I L I P P I

N E S I N C . )

PRINCIPAL OFFICE ( No. / Street / Barangay / City / Town / Province )

9 T H F L O O R R U F I N O B U I L D I N G , 6 7 8

4 A Y A L A A V E N U E C O R N E R V . A . R U F

I N O S T R E E T , M A K A T I C I T Y , M E T R O

M A N I L A

Form Type Department requiring the report Secondary License Type, If Applicable

A A F S S E C

C O M P A N Y I N F O R M A T I O N

Company’s Email Address Company’s Telephone Number Mobile Number

N/A (+632) 551 8000 N/A

No. of Stockholders Annual Meeting (Month / Day) Fiscal Year (Month / Day)

8 1st Friday of September April 30

CONTACT PERSON INFORMATION

The designated contact person MUST be an Officer of the Corporation

Name of Contact Person Email Address Telephone Number/s Mobile Number

Tan Eng Hwa [email protected] 551-8000 N/A

CONTACT PERSON’s ADDRESS

9th Floor Rufino Building, 6784 Ayala Avenue corner V.A. Rufino Street, Makati City, Metro Manila

NOTE 1 : In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to the Commissionwithin thirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact person designated.

2 : All Boxes must be properly and completely filled-up. Failure to do so shall cause the delay in updating the corporation’s records withthe Commission and/or non-receipt of Notice of Deficiencies. Further, non-receipt of Notice of Deficiencies shall not excuse the corporation from liability for itsdeficiencies.

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INDEPENDENT AUDITORS’ REPORT

The Stockholders and the Board of DirectorsBermaz Auto Philippines Inc.9th Floor Rufino Building6784 Ayala Avenue corner V.A. Rufino StreetMakati City, Metro Manila

Report on the Financial Statements

We have audited the accompanying financial statements of Bermaz Auto Philippines Inc. (formerlyBerjaya Auto Philippines Inc.), which comprise the statements of financial position as atApril 30, 2016, 2015 and 2014, and the statements of comprehensive income, statements of changesin equity and statements of cash flows for each of the three years in the period ended April 30, 2016,and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements inaccordance with Philippine Financial Reporting Standards, and for such internal control asmanagement determines is necessary to enable the preparation of financial statements that are freefrom material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. Weconducted our audits in accordance with Philippine Standards on Auditing. Those standards requirethat we comply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal control relevant to the entity’spreparation and fair presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the entity’s internal control. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates made by the management, as well asevaluating the overall presentation of financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph

BOA/PRC Reg. No. 0001, December 14, 2015, valid until December 31, 2018SEC Accreditation No. 0012-FR-4 (Group A), November 10, 2015, valid until November 9, 2018

A member firm of Ernst & Young Global Limited

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BERMAZ AUTO PHILIPPINES INC.(formerly Berjaya Auto Philippines Inc.)STATEMENTS OF FINANCIAL POSITION

April 302016 2015 2014

ASSETS

Current AssetsCash and cash equivalents (Note 6) P=1,199,830,636 P=812,416,571 P=332,778,294Receivables (Note 7) 59,952,601 45,112,674 25,054,293Inventories (Notes 8 and 16) 923,259,291 392,154,529 360,098,944Other current assets (Note 9) 80,967,227 40,212,622 30,503,058Total Current Assets 2,264,009,755 1,289,896,396 748,434,589

Noncurrent AssetsProperty and equipment (Note 10) 37,394,479 19,265,013 19,134,164Available-for-sale (AFS) financial assets (Note 11) 9,000,000 ‒ ‒Deferred tax assets - net (Note 23) 123,002,603 79,596,631 12,388,783Other noncurrent assets (Note 9) 1,357,024 1,592,769 1,798,139Total Noncurrent Assets 170,754,106 100,454,413 33,321,086

TOTAL ASSETS P=2,434,763,861 P=1,390,350,809 P=781,755,675

LIABILITIES AND EQUITY

Current LiabilitiesTrade and other payables (Note 12) P=967,201,604 P=437,350,026 P=274,177,895Provision for warranty (Note 13) 124,008,129 72,432,436 36,474,284Deferred revenue (Note 15) 118,945,552 72,134,362 32,517,393Income tax payable (Note 23) 88,965,739 89,249,895 11,545,066Total Current Liabilities 1,299,121,024 671,166,719 354,714,638

Noncurrent LiabilityDeferred revenue - net of current portion (Note 15) 150,615,668 105,626,326 56,113,816Total Liabilities 1,449,736,692 776,793,045 410,828,454

Equity (Note 14)Capital stock 209,000,000 209,000,000 209,000,000Appropriated retained earnings 600,000,000 300,000,000 –Unappropriated retained earnings 146,920,135 80,795,257 149,438,844Equity contribution from Bermaz Auto Berhad (Note 4) 29,107,034 23,762,507 12,488,377Total Equity 985,027,169 613,557,764 370,927,221

TOTAL LIABILITIES AND EQUITY P=2,434,763,861 P=1,390,350,809 P=781,755,675

See accompanying Notes to Financial Statements.

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BERMAZ AUTO PHILIPPINES INC.(formerly Berjaya Auto Philippines Inc.)STATEMENTS OF COMPREHENSIVE INCOME

Years Ended April 302016 2015 2014

REVENUE (Note 15) P=4,821,414,342 P=3,500,821,852 P=2,403,540,229

COST OF SALES (Notes 15 and 16) 3,641,792,786 2,555,242,493 1,850,071,882

GROSS PROFIT 1,179,621,556 945,579,359 553,468,347

SELLING AND MARKETING EXPENSES (Note 17) (393,620,293) (477,532,141) (265,722,034)

ADMINISTRATIVE AND OTHER OPERATING EXPENSES (Note 18) (278,706,383) (145,177,127) (121,953,854)

FINANCE COSTS (Note 20) (7,247,199) (5,369,396) (12,561,901)

OTHER INCOME - net (Note 19) 24,674,272 18,203,703 10,891,996

INCOME BEFORE INCOME TAX 524,721,953 335,704,398 164,122,554

PROVISION FOR INCOME TAX (Note 23) 158,597,075 104,347,985 53,631,616

NET INCOME/TOTAL COMPREHENSIVEINCOME (Note 2) P=366,124,878 P=231,356,413 P=110,490,938

BASIC/DILUTED EARNINGS PER SHARE(Notes 4 and 25) P=0.55 P=0.35 P=0.17


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BERMAZ AUTO PHILIPPINES INC.(formerly Berjaya Auto Philippines Inc.)STATEMENTS OF CHANGES IN EQUITY

For the Year Ended April 30, 2016Retained Earnings

Common Stock(Note 14)

Unappropriated (Note 14)

Appropriated(Note 14)

Equity Contribution fromBermaz Auto Berhad

(Notes 4 and 14) TotalBalances as at May 1, 2015 P=209,000,000 P=80,795,257 P=300,000,000 P=23,762,507 P=613,557,764Net income for the year ‒ 366,124,878 ‒ ‒ 366,124,878Employee share option scheme ‒ ‒ ‒ 5,344,527 5,344,527

209,000,000 446,920,135 300,000,000 29,107,034 985,027,169Appropriation for capital expenditures ‒ (300,000,000) 300,000,000 ‒ ‒Balances as at April 30, 2016 P=209,000,000 P=146,920,135 P=600,000,000 P=29,107,034 P=985,027,169


Common Stock Unappropriated AppropriatedEquity Contribution from

Bermaz Auto Berhad TotalBalances as at May 1, 2014 P=209,000,000 P=149,438,844 P=‒ P=12,488,377 P=370,927,221Net income for the year ‒ 231,356,413 ‒ ‒ 231,356,413Employee share option scheme ‒ ‒ ‒ 11,274,130 11,274,130

209,000,000 380,795,257 ‒ 23,762,507 613,557,764Appropriation for capital expenditures ‒ (300,000,000) 300,000,000 ‒ ‒Balances as at April 30, 2015 P=209,000,000 P=80,795,257 P=300,000,000 P=23,762,507 P=613,557,764


Common Stock Unappropriated AppropriatedEquity Contribution from

Bermaz Auto Berhad TotalBalances as at May 1, 2013 P=209,000,000 P=38,947,906 P=‒ P=‒ P=247,947,906Net income for the year ‒ 110,490,938 ‒ ‒ 110,490,938Employee share option scheme ‒ ‒ ‒ 12,488,377 12,488,377Balances as at April 30, 2014 P=209,000,000 P=149,438,844 P=‒ P=12,488,377 P=370,927,221


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BERMAZ AUTO PHILIPPINES INC.(formerly Berjaya Auto Philippines Inc.)STATEMENTS OF CASH FLOWS

Years Ended April 302016 2015 2014

CASH FLOWS FROM OPERATINGACTIVITIES

Income before income tax P=524,721,953 P=335,704,398 P=164,122,554Adjustments for:

Revenue items relating to preventive maintenanceserviceDeferral during the period (Note 15) 166,129,708 122,316,271 70,481,591Claims during the period (Note 15) (34,520,598) (13,325,187) (1,569,124)Expiration during the period (Note 15) (39,808,578) (19,861,605) (8,389,754)

Provision for warranty (Notes 13 and 16) 81,868,935 54,113,517 34,864,836Depreciation and amortization (Notes 10 and 18) 8,121,633 7,357,579 5,148,260Employee share option scheme contribution 5,344,527 11,274,130 12,488,377Inventory obsolescence (Notes 8 and 18) 3,508,168 1,711,163 13,543,818Unrealized foreign exchange (gain) loss (2,299,928) 1,144,708 9,544,144Gain on disposal of property and equipment

(Note 19) (2,027,331) ‒ ‒Expired warranty costs (Note 13) (8,902,172) (3,688,974) (8,394,169)

Operating income before working capital changes 702,136,317 496,746,000 291,840,533Changes in working capital:

Decrease (increase) in:Receivables (14,839,927) (20,058,381) 11,567,200Inventories (600,827,436) (60,213,410) (312,738,130)Other current assets (40,754,605) (9,709,564) (29,847,720)

Increase (decrease) in:Trade and other payables 573,496,414 189,618,793 84,834,336Provision for warranty (21,391,069) (14,466,391) (1,034,523)

Net cash generated from operations 597,819,694 581,917,047 44,621,696Income taxes paid (202,287,203) (93,851,004) (65,347,772)Net cash provided by (used in) operating activities 395,532,491 488,066,043 (20,726,076)CASH FLOWS FROM INVESTING ACTIVITIESIncrease (decrease) in other noncurrent assets 235,744 205,370 (320,000)Acquisition of AFS financial assets (Note 11) (9,000,000) ‒ ‒Acquisitions of property and equipment (Note 10) (7,408,651) (7,488,428) (10,224,127)Proceeds from sale of property and equipment 5,754,553 ‒ ‒Net cash used in investing activities (10,418,354) (7,283,058) (10,544,127)EFFECT OF FOREIGN EXCHANGE RATE

CHANGES ON CASH AND CASHEQUIVALENTS 2,299,928 (1,144,708) (9,544,144)

NET INCREASE (DECREASE) IN CASH ANDCASH EQUIVALENTS 387,414,065 479,638,277 (40,814,347)

CASH AND CASH EQUIVALENTS ATBEGINNING OF YEAR (Note 6) 812,416,571 332,778,294 373,592,641

CASH AND CASH EQUIVALENTS ATEND OF THE YEAR (Note 6) P=1,199,830,636 P=812,416,571 P=332,778,294

NONCASH ACTIVITYTransfer of vehicles under inventories to transportation

equipment under property and equipment(Notes 8 and 10) P=22,569,670 P=‒ P=‒


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BERMAZ AUTO PHILIPPINES INC.(formerly Berjaya Auto Philippines Inc.)NOTES TO FINANCIAL STATEMENTS

1. Corporate Information

Bermaz Auto Philippines Inc. (formerly Berjaya Auto Philippines Inc.) (the Company) is adomestic corporation incorporated and registered with the Securities and Exchange Commission(SEC) on August 10, 2012. The Company is engaged in purchasing, acquiring, owning, selling,transferring, encumbering, and generally dealing in all types of new automobiles, trucks, and othermotor vehicles and any parts or accessories used in connection therewith, and is engaged inpurchasing, acquiring, owning, selling, and generally dealing in all types of supplies used by alltypes of motor vehicles.

On August 19, 2016, the Board of Directors of the Company amended its articles of incorporationto change the name Berjaya Auto Philippines Inc. to Bermaz Auto Philippines Inc. OnSeptember 1, 2016, the Securities and Exchange Commission approved the amendment.

The Company is owned by Bermaz Motor International, Ltd., Berjaya Philippines Inc. and variousshareholders sharing 60.39%, 25.48% and 14.13%, respectively, of its outstanding capital stock.The Company’s ultimate parent company is Bermaz Auto Berhad which is domiciled in Malaysia.

On August 19, 2016, the Board of Directors approved the amendment of the principal office of theCompany. The Company’s amended registered office address and principal place of business is atthe 9th Floor Rufino Building, 6784 Ayala Avenue corner V.A. Rufino Street, Makati City, MetroManila.

2. Basis of Preparation

Basis of PreparationThe accompanying financial statements have been prepared using the historical cost basis and arepresented in Philippine Peso (P=), the Company’s functional currency. All amounts are rounded tothe nearest peso unit except as otherwise indicated. There are no items of other comprehensiveincome (OCI) for the years ended April 30, 2016, 2015 and 2014.

This is a special purpose financial statements that is intended for filing to the Securities andExchange Commission.

Statement of ComplianceThe accompanying financial statements have been prepared in accordance with PhilippineFinancial Reporting Standards (PFRS).

3. Changes in Accounting Policies and Disclosures

The accounting policies adopted are consistent with those of the previous financial year, except forthe adoption of new and amended PFRS and Philippine Interpretations which became effectivebeginning May 1, 2015. Except as otherwise indicated, the adoption of amended PFRS andPhilippine Interpretations did not have any impact on the financial statements of the Company.

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· PAS 19, Employee Benefits - Defined Benefit Plans: Employee Contributions (Amendments)PAS 19 requires an entity to consider contributions from employees or third parties whenaccounting for defined benefit plans. Where the contributions are linked to service, theyshould be attributed to periods of service as a negative benefit. These amendments clarifythat, if the amount of the contributions is independent of the number of years of service, anentity is permitted to recognize such contributions as a reduction in the service cost in theperiod in which the service is rendered, instead of allocating the contributions to the periods ofservice. The amendment had no impact on the Company’s financial statements.

Annual Improvements to PFRSs (2010-2012 cycle)The Annual Improvements to PFRSs (2010-2012 cycle) are effective for annual periods beginningon or after May 1, 2015 and did not have a material impact on the Company.

· PFRS 2, Share-based Payment - Definition of Vesting ConditionThis improvement is applied prospectively and clarifies various issues relating to thedefinitions of performance and service conditions which are vesting conditions, including:

• A performance condition must contain a service condition;• A performance target must be met while the counterparty is rendering service;• A performance target may relate to the operations or activities of an entity, or to those of

another entity in the same group;• A performance condition may be a market or non-market condition; and• If the counterparty, regardless of the reason, ceases to provide service during the vesting

period, the service condition is not satisfied.

· PFRS 3, Business Combinations - Accounting for Contingent Consideration in a BusinessCombinationThe amendment is applied prospectively for business combinations for which the acquisitiondate is on or after July 1, 2014. It clarifies that a contingent consideration that is not classifiedas equity is subsequently measured at fair value through profit or loss whether or not it fallswithin the scope of PAS 39, Financial Instruments: Recognition and Measurement(or PFRS 9, Financial Instruments, if early adopted).

· PFRS 8, Operating Segments - Aggregation of Operating Segments and Reconciliation of theTotal of the Reportable Segments’ Assets to the Entity’s AssetsThe amendments are applied retrospectively and clarify that:

• An entity must disclose the judgments made by management in applying the aggregationcriteria in the standard, including a brief description of operating segments that have beenaggregated and the economic characteristics (e.g., sales and gross margins) used to assesswhether the segments are ‘similar’.

• The reconciliation of segment assets to total assets is only required to be disclosed if thereconciliation is reported to the chief operating decision maker, similar to the requireddisclosure for segment liabilities.

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· PAS 16, Property, Plant and Equipment - Revaluation Method - Proportionate Restatement ofAccumulated DepreciationThe amendment is applied retrospectively and clarifies in PAS 16 and PAS 38 that the assetmay be revalued by reference to the observable data on either the gross or the net carryingamount. In addition, the accumulated depreciation or amortization is the difference betweenthe gross and carrying amounts of the asset.

· PAS 24, Related Party Disclosures - Key Management PersonnelThe amendment is applied retrospectively and clarifies that a management entity, which is anentity that provides key management personnel services, is a related party subject to therelated party disclosures. In addition, an entity that uses a management entity is required todisclose the expenses incurred for management services.

Annual Improvements to PFRSs (2011-2013 cycle)The Annual Improvements to PFRSs (2010-2012 cycle) are effective for annual periods beginningon or after May 1, 2015 and did not have a material impact on the Company.

· PFRS 3, Business Combinations - Scope Exceptions for Joint ArrangementsThe amendment is applied prospectively and clarifies the following regarding the scopeexceptions within PFRS 3:

• Joint arrangements, not just joint ventures, are outside the scope of PFRS 3.• This scope exception applies only to the accounting in the financial statements of the joint

arrangement itself.

· PFRS 13, Fair Value Measurement - Portfolio ExceptionThe amendment is applied prospectively and clarifies that the portfolio exception in PFRS 13can be applied not only to financial assets and financial liabilities, but also to other contractswithin the scope of PAS 39.

· PAS 40, Investment PropertyThe amendment is applied prospectively and clarifies that PFRS 3, and not the description ofancillary services in PAS 40, is used to determine if the transaction is the purchase of an assetor business combination. The description of ancillary services in PAS 40 only differentiatesbetween investment property and owner-occupied property (i.e., property, plant andequipment).

There are new PFRS and PAS amendments, annual improvements and interpretations to existingstandards that are effective for periods subsequent to April 30, 2016 and these will be adopted ontheir effectivity dates in accordance with the transition provisions. Except as otherwise stated,these amendments and improvements to PFRS and new standards are not expected to have anysignificant impact on the Company’s financial statements.

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Standards Issued but not yet Effective

· Philippine Interpretation IFRIC 15, Agreements for the Construction of Real EstateThis interpretation covers accounting for revenue and associated expenses by entities thatundertake the construction of real estate directly or through subcontractors. The interpretationrequires that revenue on construction of real estate be recognized only upon completion,except when such contract qualifies as construction contract to be accounted for underPAS 11 or involves rendering of services in which case revenue is recognized based on stageof completion. Contracts involving provision of services with the construction materials andwhere the risks and reward of ownership are transferred to the buyer on a continuous basiswill also be accounted for based on stage of completion. The Securities and ExchangeCommission and the Financial Reporting Standards Council have deferred the effectivity ofthis interpretation until the final Revenue standard is issued by the International AccountingStandards Board (IASB) and an evaluation of the requirements of the final Revenue standardagainst the practices of the Philippine real estate industry is completed.

· PFRS 10, Consolidated Financial Statements, and PAS 28, Investments in Associates andJoint Ventures - Sale or Contribution of Assets between an Investor and its Associate or JointVentureThese amendments address an acknowledged inconsistency between the requirements inPFRS 10 and those in PAS 28 in dealing with the sale or contribution of assets between aninvestor and its associate or joint venture. The amendments require that a full gain or loss isrecognized when a transaction involves a business (whether it is housed in a subsidiary ornot). A partial gain or loss is recognized when a transaction involves assets that do notconstitute a business, even if these assets are housed in a subsidiary. These amendments areeffective from annual periods beginning on or after January 1, 2016.

Effective May 1, 2016

· PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets - Clarification ofAcceptable Methods of Depreciation and Amortization (Amendments)The amendments clarify the principle in PAS 16 and PAS 38 that revenue reflects a pattern ofeconomic benefits that are generated from operating a business (of which the asset is part)rather than the economic benefits that are consumed through use of the asset. As a result, arevenue-based method cannot be used to depreciate property, plant and equipment and mayonly be used in very limited circumstances to amortize intangible assets. The amendments areeffective prospectively for annual periods beginning on or after January 1, 2016, with earlyadoption permitted.

· PAS 16, Property, Plant and Equipment, and PAS 41, Agriculture - Bearer Plants(Amendments)The amendments change the accounting requirements for biological assets that meet thedefinition of bearer plants. Under the amendments, biological assets that meet the definitionof bearer plants will no longer be within the scope of PAS 41. Instead, PAS 16 will apply.After initial recognition, bearer plants will be measured under PAS 16 at accumulated cost(before maturity) and using either the cost model or revaluation model (after maturity). Theamendments also require that produce that grows on bearer plants will remain in the scope ofPAS 41 measured at fair value less costs to sell. For government grants related to bearerplants, PAS 20, Accounting for Government Grants and Disclosure of Government Assistance,will apply. The amendments are retrospectively effective for annual periods beginning on orafter January 1, 2016, with early adoption permitted.

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· PAS 27, Separate Financial Statements - Equity Method in Separate Financial Statements(Amendments)The amendments will allow entities to use the equity method to account for investments insubsidiaries, joint ventures and associates in their separate financial statements. Entitiesalready applying PFRS and electing to change to the equity method in its separate financialstatements will have to apply that change retrospectively. For first-time adopters of PFRSelecting to use the equity method in its separate financial statements, they will be required toapply this method from the date of transition to PFRS.

· PFRS 11, Joint Arrangements - Accounting for Acquisitions of Interests in Joint Operations(Amendments)The amendments to PFRS 11 require that a joint operator accounting for the acquisition of aninterest in a joint operation, in which the activity of the joint operation constitutes a businessmust apply the relevant PFRS 3 principles for business combinations accounting. Theamendments also clarify that a previously held interest in a joint operation is not remeasuredon the acquisition of an additional interest in the same joint operation while joint control isretained. In addition, scope exclusion has been added to PFRS 11 to specify that theamendments do not apply when the parties sharing joint control, including the reporting entity,are under common control of the same ultimate controlling party.

The amendments apply to both the acquisition of the initial interest in a joint operation and theacquisition of any additional interests in the same joint operation and are prospectivelyeffective for annual periods beginning on or after January 1, 2016, with early adoptionpermitted.

· PFRS 14, Regulatory Deferral AccountsPFRS 14 is an optional standard that allows an entity, whose activities are subject to rate-regulation, to continue applying most of its existing accounting policies for regulatory deferralaccount balances upon its first-time adoption of PFRS. Entities that adopt PFRS 14 mustpresent the regulatory deferral accounts as separate line items on the statement of financialposition and present movements in these account balances as separate line items in thestatement of profit or loss and other comprehensive income. The standard requires disclosureson the nature of, and risks associated with, the entity’s rate-regulation and the effects of thatrate-regulation on its financial statements. PFRS 14 is effective for annual periods beginningon or after January 1, 2016. Since the Company is an existing PFRS preparer, this standardwould not apply.

Annual Improvements to PFRSs (2012-2014 cycle)The Annual Improvements to PFRSs (2012-2014 cycle) are effective for annual periods beginningon or after May 1, 2016 and are not expected to have a material impact on the Company.

· PFRS 5, Noncurrent Assets Held for Sale and Discontinued Operations - Changes in Methodsof DisposalThe amendment is applied prospectively and clarifies that changing from a disposal throughsale to a disposal through distribution to owners and vice-versa should not be considered to bea new plan of disposal, rather it is a continuation of the original plan. There is, therefore, nointerruption of the application of the requirements in PFRS 5. The amendment also clarifiesthat changing the disposal method does not change the date of classification.

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· PFRS 7, Financial Instruments: Disclosures - Servicing ContractsPFRS 7 requires an entity to provide disclosures for any continuing involvement in atransferred asset that is derecognized in its entirety. The amendment clarifies that a servicingcontract that includes a fee can constitute continuing involvement in a financial asset. Anentity must assess the nature of the fee and arrangement against the guidance in PFRS 7 inorder to assess whether the disclosures are required. The amendment is to be applied such thatthe assessment of which servicing contracts constitute continuing involvement will need to bedone retrospectively. However, comparative disclosures are not required to be provided forany period beginning before the annual period in which the entity first applies theamendments.

· PFRS 7, Applicability of the Amendments to PFRS 7 to Condensed Interim FinancialStatementsThis amendment is applied retrospectively and clarifies that the disclosures on offsetting offinancial assets and financial liabilities are not required in the condensed interim financialreport unless they provide a significant update to the information reported in the most recentannual report.

· PAS 19, Employee Benefits - regional market issue regarding discount rateThis amendment is applied prospectively and clarifies that market depth of high qualitycorporate bonds is assessed based on the currency in which the obligation is denominated,rather than the country where the obligation is located. When there is no deep market for highquality corporate bonds in that currency, government bond rates must be used.

· PAS 34, Interim Financial Reporting - disclosure of information ‘elsewhere in the interimfinancial report’The amendment is applied retrospectively and clarifies that the required interim disclosuresmust either be in the interim financial statements or incorporated by cross-reference betweenthe interim financial statements and wherever they are included within the greater interimfinancial report (e.g., in the management commentary or risk report).


· PFRS 9, Financial Instruments (2014 or final version)In July 2014, the final version of PFRS 9, Financial Instruments, was issued. PFRS 9 reflectsall phases of the financial instruments project and replaces PAS 39, Financial Instruments:Recognition and Measurement, and all previous versions of PFRS 9. The standard introducesnew requirements for classification and measurement, impairment, and hedge accounting.PFRS 9 is effective for annual periods beginning on or after January 1, 2018, with earlyapplication permitted. Retrospective application is required, but comparative information isnot compulsory. Early application of previous versions of PFRS 9 is permitted if the date ofinitial application is before February 1, 2015.

The adoption of PFRS 9 will have an effect on the classification and measurement of theCompany’s financial assets and impairment methodology for financial assets, but will have noimpact on the classification and measurement of the Company’s financial liabilities. Therequirements on hedge accounting will not have any impact on the Company’s financialstatements.

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The following new standard issued by the IASB has not yet been adopted by the FRSC

IFRS 15, Revenue from Contracts with CustomersIFRS 15 was issued in May 2014 and establishes a new five-step model that will apply torevenue arising from contracts with customers. Under IFRS 15 revenue is recognized at anamount that reflects the consideration to which an entity expects to be entitled in exchange fortransferring goods or services to a customer. The principles in IFRS 15 provide a morestructured approach to measuring and recognizing revenue. The new revenue standard isapplicable to all entities and will supersede all current revenue recognition requirements underIFRS. Either a full or modified retrospective application is required for annual periodsbeginning on or after January 1, 2018 with early adoption permitted. The Company iscurrently assessing the impact of IFRS 15 and plans to adopt the new standard on the requiredeffective date once adopted locally.


IFRS 16, LeasesOn January 13, 2016, the International Accounting Standards Board (IASB) issued its newstandard, IFRS 16, Leases, which replaces International Accounting Standards (IAS) 17, thecurrent leases standard, and the related Interpretations.

Under the new standard, lessees will no longer classify their leases as either operating orfinance leases in accordance with IAS 17. Rather, lessees will apply the single-asset model.Under this model, lessees will recognize the assets and related liabilities for most leases intheir balance sheets, and subsequently, will depreciate the lease assets and recognize intereston the lease liabilities in their profit or loss. Leases with a term of twelve (12) months or lessor for which the underlying asset is of low value are exempted from these requirements.

The accounting by lessors is substantially unchanged as the new standard carries forward theprinciples of lessor accounting under IAS 17. Lessors, however, will be required to disclosemore information in their financial statements, particularly on the risk exposure to residualvalue.

The new standard is effective for annual periods beginning on or after January 1, 2019. TheCompany is currently assessing the impact of the IFRS 16 and plans to adopt the new standardon the required effective date once adopted locally.

4. Summary Significant Accounting Policies

Current and Noncurrent RecognitionThe Company presents assets and liabilities in the statement of financial position based on currentand noncurrent classification. An asset is current when it is:

· Expected to be realized or intended to be sold or consumed in the normal operating cycle;· Held primarily for the purpose of trading;· Expected to be realized within twelve months after the reporting period; or· Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for

at least twelve months after the reporting period

All other assets are classified as noncurrent.

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A liability is current when:

· It is expected to be settled in normal operating cycle;· It is held primarily for the purpose of trading;· It is due to be settled within twelve months after the reporting period; or· There is no unconditional right to defer the settlement of the liability for at least twelve (12)

months after the reporting period

The Company classifies all other liabilities as noncurrent. The provision for warranty previouslyclassified as noncurrent as of April 30, 2016, 2015 and 2014 have been classified as current toconform to the October 31, 2016 presentation. As this is a reclassification only, the total liabilitiesdid not change.

Cash and Cash EquivalentsCash includes cash in banks and cash on hand. Cash in banks earns interest at the prevailing bankdeposit rates. Cash equivalents are short-term, highly liquid investments that are readilyconvertible to known amounts of cash with original maturities of three (3) months or less fromdates of placement and are subject to an insignificant risk of change in value.

Financial InstrumentsDate of recognitionThe Company recognizes a financial asset or a financial liability in the statement of financialposition when it becomes a party to the contractual provisions of the instrument. Purchases orsales of financial assets that require delivery of assets within the time frame established byregulation or convention in the marketplace are recognized on the trade date, which is the datewhen the Company commits to purchase or sell assets.

Initial recognitionAll financial instruments are initially recognized at fair value. Except for financial instruments atfair value through profit or loss (FVPL), the initial measurement of financial assets and financialliabilities includes transaction costs. The Company classifies its financial assets within the scopeof PAS 39 in the following categories: financial assets at FVPL, held-to-maturity (HTM) financialassets, available-for-sale (AFS) financial assets, and loans and receivables. The Companyclassifies its financial liabilities into financial liabilities at FVPL and other financial liabilities.The classification depends on the purpose for which the investments were acquired or liabilitiesincurred and whether they are quoted in an active market. The management determines theclassification of its investments at initial recognition and, where allowed and appropriate,re-evaluates such designation at every reporting date.

Financial instruments are classified as liability or equity in accordance with the substance of thecontractual arrangement. Interest, dividends, gains and losses relating to a financial instrument ora component that is a financial liability, are reported as expense or income. Distributions toholders of financial instruments classified as equity are charged directly to OCI, net of any relatedincome tax benefits.

As of April 30, 2016, 2015 and 2014, the Company’s financial instruments are of the nature ofloans and receivables, AFS financial assets and other financial liabilities.

Where the transaction price in a non-active market is different to the fair value from otherobservable current market transactions in the same instrument or based on a valuation techniquewhose variables include only data from observable market, the Company recognizes the difference

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between the transaction price and fair value (a ‘Day 1’ difference) in the statement ofcomprehensive income under ‘Finance Costs’ accounts unless it qualifies for recognition as someother type of asset or liability. In cases where inputs to the valuation technique are not observable,the difference between the transaction price and model value is only recognized in the statement ofcomprehensive income when the inputs become observable or when the instrument isderecognized. For each transaction, the Company determines the appropriate method ofrecognizing the ‘Day 1’ difference amount.

Loans and receivablesLoans and receivables are nonderivative financial assets with fixed or determinable payments andfixed maturities that are not quoted in an active market. These are not entered into with theintention of immediate or short-term resale and are not classified as financial assets at FVPL orAFS financial assets.

Receivables are recognized initially at fair value which normally pertains to the billable amount.After initial measurement, the loans and receivables are subsequently measured at amortized costusing the effective interest rate (EIR) method, less allowance for impairment losses. Amortizedcost is calculated by taking into account any discount or premium on acquisition and fees that arean integral part of the EIR. The amortization, if any, is included in the statement ofcomprehensive income. The losses arising from impairment of such loans and receivables arerecognized in statement of comprehensive income.

This accounting policy applies primarily to the Company’s receivables from trade, officers andemployees, others and rental deposit.

AFS financial assetsAFS financial assets are those investments which are designated as such or do not qualify to beclassified as designated as at FVPL, HTM investments or loans and receivables. These arepurchased and held indefinitely, and may be sold in response to liquidity requirements or changesin market conditions. These include equity investments, money market papers and other debtinstruments.

After initial measurement, AFS financial assets are measured at fair value. The unrealized gainsand losses arising from the fair valuation of AFS financial assets are excluded from reportedearnings and are reported in other comprehensive income. When the investment is disposed of,the cumulative gain or loss previously recognized in equity is recognized in “Other income”account in the statement of comprehensive income. Where the Company holds more than oneinvestment in the same security, these are deemed to be disposed of on a first-in first-out basis.Interests earned on holding AFS debt investments are reported as interest income using the EIR.Dividends earned on holding AFS equity investments are recognized in the statement ofcomprehensive income as “Other income” account when the right to receive payment has beenestablished. The losses arising from impairment of such investments are recognized as“Provisions on Impairment Losses” under administrative and other operating expenses in thestatement of comprehensive income.

Investments in unquoted equity securities are carried at cost net of impairment losses, if any. TheCompany’s AFS financial assets pertain to unquoted equity securities included under “Available-for-sale (AFS) financial assets” account in the statement of financial position.

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Other financial liabilitiesOther financial liabilities pertain to issued financial instruments that are not classified ordesignated as financial liabilities at FVPL and contain contractual obligations to deliver cash oranother financial asset to the holder or to settle the obligation other than the exchange of a fixedamount of cash or another financial asset for a fixed number of own equity shares.

Other financial liabilities are initially recognized at the fair value of the consideration received lessdirectly attributable transaction costs. After initial recognition, other financial liabilities aresubsequently measured at amortized cost using the EIR method. Amortized cost is calculated bytaking into account any discount or premium on the issue and fees that are an integral part of theEIR.

Gains and losses are recognized in statement of comprehensive income when the liabilities arederecognized, as well as through the amortization process.

This accounting policy applies primarily to the Company’s trade and other payables.

Impairment of Financial AssetsThe Company assesses, at each reporting date, whether there is objective evidence that a financialasset or a group of financial assets is impaired. A financial asset or a group of financial assets isdeemed to be impaired if, and only if, there is objective evidence of impairment as a result of oneor more events that have occurred after the initial recognition of the asset (an incurred ‘lossevent’) and that loss event (or events) has an impact on the estimated future cash flows of thefinancial asset or the group of financial assets that can be reliably estimated. Evidence ofimpairment may include indications that the debtors or a group of debtors is experiencingsignificant financial difficulty, default or delinquency in interest or principal payments, theprobability that they will enter bankruptcy or other financial reorganization and where observabledata indicate that there is measurable decrease in the estimated future cash flows, such as changesin economic conditions that correlate with defaults.

Loans and receivablesFor loans and receivables carried at amortized cost, the Company first assesses whether objectiveevidence of impairment exists individually for financial assets that are individually significant, orcollectively for financial assets that are not individually significant.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss ismeasured as the difference between the assets’ carrying amount and the present value of theestimated future cash flows (excluding future credit losses that have not been incurred). Thecarrying amount of the asset is reduced through the use of an allowance account and the amount ofloss is charged to the statement of comprehensive income. Interest income continues to berecognized based on the original EIR of the asset.

If the Company determines that no objective evidence of impairment exists for individuallyassessed financial asset, whether significant or not, it includes the asset in a group of financialassets with similar credit risk characteristics and collectively assesses for impairment. Thosecharacteristics are relevant to the estimation of future cash flows for groups of such assets bybeing indicative of the debtors’ ability to pay all amounts due according to the contractual terms ofthe assets being evaluated. Assets that are individually assessed for impairment and for which animpairment loss is, or continues to be, recognized are not included in the collective assessment forimpairment.

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For the purpose of a collective evaluation of impairment, financial assets are grouped on the basisof such credit risk characteristics as past due status and term. Future cash flows in a group offinancial assets that are collectively evaluated for impairment are estimated on the basis ofhistorical loss experience for assets with credit risk characteristics similar to those in the group.Historical loss experience is adjusted on the basis of current observable data to reflect the effectsof current conditions that did not affect the period on which the historical loss experience is basedand to remove the effects of conditions in the historical period that do not exist currently. Themethodology and assumptions used for estimating future cash flows are reviewed regularly by theCompany to reduce any differences between loss estimates and actual loss experience.

Loans and receivables, together with the associated allowance accounts, are written off when thereis no realistic prospect of future recovery. If, in a subsequent year, the amount of the estimatedimpairment loss decreases because of an event occurring after the impairment was recognized, thepreviously recognized impairment loss is reversed. Any subsequent reversal of an impairmentloss is recognized in statement of comprehensive income, to the extent that the carrying value ofthe asset does not exceed its amortized cost at the reversal date.

Derecognition of Financial InstrumentsFinancial assetA financial asset (or, where applicable a part of a financial asset or part of a group of similarfinancial assets) is derecognized when:

· the right to receive cash flows from the asset have expired;· the Company retains the right to receive cash flows from the asset but has assumed an

obligation to pay them in full without material delay to a third party under a “pass-througharrangement”; or

· the Company has transferred its right to receive cash flows from the asset and either (a) hastransferred substantially all the risks and rewards of the asset, or (b) has neither transferrednor retained the risk and rewards of the asset but has transferred the control over the asset.

Where the Company has transferred its right to receive cash flows from an asset or has enteredinto a pass-through arrangement and has neither transferred nor retained substantially all the risksand rewards of the asset nor transferred control of the asset, the asset is recognized to the extent ofthe Company’s continuing involvement in the asset. Continuing involvement that takes the formof a guarantee over the transferred asset is measured at the lower of the original carrying amountof the asset and the maximum amount of consideration that the Company could be required torepay.

Financial liabilityA financial liability is derecognized when the obligation under the liability is discharged,cancelled or has expired. Where an existing financial liability is replaced by another from thesame lender on substantially different terms, or the terms of an existing liability are substantiallymodified, such an exchange or modification is treated as a derecognition of the original liabilityand the recognition of a new liability, and the difference in the respective carrying amounts isrecognized in the statement of comprehensive income.

Offsetting Financial InstrumentsFinancial assets and financial liabilities are offset and the net amount reported in the statement offinancial position, if and only if, there is a currently enforceable legal right to offset the recognizedamounts and there is an intention to settle on a net basis, or to realize the asset and settle theliability simultaneously. The Company assesses that it has a currently enforceable right to offset ifthe right is not contingent on a future event, and is legally enforceable in the normal course of

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business, event of default, and event of insolvency or bankruptcy of the Company and all of thecounterparties.

Classification of Financial Instruments Between Debt and EquityA financial instrument is classified as debt, if it provides for a contractual obligation to:

· deliver cash or another financial asset to another entity; or· exchange financial assets or financial liabilities with another entity under conditions that are

potentially unfavorable to the Company; or· satisfy the obligation other than by the exchange of a fixed amount of cash or another financial

asset for a fixed number of own equity shares.

If the Company does not have an unconditional right to avoid delivering cash or another financialasset to settle its contractual obligation, the obligation meets the definition of a financial liability.

The components of issued financial instruments that contain both liability and equity elements areaccounted for separately, with the equity component being assigned the residual amount, afterdeducting from the instrument as a whole the amount separately determined as the fair value of theliability component on the date of issue.

InventoriesInventories are stated at the lower of cost or net realizable value (NRV). Cost for vehicles aredetermined on a specific identification basis and cost for spare parts and accessories are on aweighted average basis.

NRV represents the estimated selling price in the ordinary course of business less the estimatedcosts necessary to make the sale.

An impairment in inventory is charged to the profit or loss for the year.

Prepaid ExpensesPrepaid expenses are carried at cost less the amortized portion. These typically compriseprepayments of health insurance, rentals and business taxes and licenses.

Value-Added Tax (VAT)The input value-added tax pertains to the 12% indirect tax paid by the Company in the course ofthe trade or business on local purchase of goods or services.

Output VAT pertains to the 12% tax due on the local sale of goods or services by the Company.If at the end of any taxable month, the output VAT exceeds the input VAT, the outstandingbalance is included under “Accounts and Other Payables” account. If the input VAT exceeds theoutput VAT, the excess shall be carried over to the succeeding months and included under “OtherCurrent Assets” account.

Other AssetsOther assets pertain to resources controlled by the Company as a result of past events and fromwhich future economic benefits are expected to flow to the Company. Other assets expected to beconsumed or realized within twelve months from reporting period are classified under "Othercurrent assets". Other assets not within the definition of other current assets are classified as"Other noncurrent assets".

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Property and EquipmentProperty and equipment are carried at cost less accumulated depreciation, amortization and anyimpairment in value. The initial cost of property and equipment comprises its purchase price andany directly attributable costs of bringing the asset to its working condition and location for itsintended use.

Major repairs are capitalized as part of property and equipment only when it is probable that futureeconomic benefits associated with the item will flow to the Company and the cost of the items canbe measured reliably. All other repairs and maintenance are charged against current operations asincurred.Depreciation and amortization of property and equipment commences once they are available foruse and is computed on a straight-line basis over the estimated useful life of property andequipment of five (5) years.

Leasehold improvements are amortized on a straight line basis over the term of the lease or theestimated useful life of the asset, whichever is shorter.

The depreciation and amortization method and useful life are reviewed at least annually to ensurethat the method and period of depreciation and amortization are consistent with the expectedpattern of economic benefits from items of property and equipment.

When property and equipment are retired or otherwise disposed of, the cost of the relatedaccumulated depreciation and accumulated provision for impairment losses, if any, are removedfrom the accounts and any resulting gain or loss is credited to or charged against currentoperations.

Fully depreciated and amortized property and equipment are retained in the accounts until they areno longer in use. No further depreciation and amortization is charged against current operations.

Impairment of Nonfinancial AssetsThe carrying values of assets (i.e., property and equipment and other assets) are reviewed forimpairment when events or changes in circumstances indicate that the carrying values may not berecoverable. If any such indication exists and where the carrying values exceed the estimatedrecoverable amounts, the assets or cash-generating units are written down to their recoverableamounts. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fairvalue less costs to sell and its value in use. Where the carrying amount of an asset exceeds itsrecoverable amount, the asset is considered impaired and is written down to its recoverableamount. In assessing value in use, the estimated future cash flows are discounted to their presentvalue using a pre-tax discount rate that reflects current market assessments of the time value ofmoney and the risks specific to the asset. In determining fair value less costs to sell, anappropriate valuation model is used. These calculations are corroborated by valuation multiples orother available fair value indicators.

An impairment loss is charged to operations in the year in which it arises, unless the asset iscarried at a revalued amount, in which case the impairment loss is charged to the revaluationincrement of the said asset.

An assessment is made at each reporting date as to whether there is an indication that previouslyrecognized impairment losses may no longer exist or may have decreased. If such indicationexists, the recoverable amount is estimated. A previously recognized impairment loss is reversedonly if there has been a change in the estimates used to determine the asset’s recoverable amountsince the last impairment loss was recognized. If that is the case, the carrying amount of the asset

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is increased to its recoverable amount. That increased amount cannot exceed the carrying amountthat would have been determined, net of depreciation and amortization, had no impairment lossbeen recognized for the asset in prior years. Such reversal is recognized in profit or loss unless theasset is carried at revalued amount, in which case the reversal is treated as revaluation increase.After such reversal, the depreciation and amortization charge is adjusted in future periods toallocate the asset’s revised carrying amount, less any residual value, on a systematic basis over itsremaining useful life.

EquityCapital stock is measured at par value for all shares issued and outstanding. The Companyconsiders the underlying substance and economic reality of its own equity instrument and notmerely its legal form in determining its proper classification.

Retained earnings represent accumulated earnings of the Company. It may also include effect ofchanges in accounting policy as may be required by the standard’s transitional provisions.

Equity contribution from Bermaz Auto Berhad, ultimate Parent Company, represents the employershare option scheme granted to certain employees of the Group. It is made up of the cumulativevalue of services received from employees recorded over the vesting period commencing from thegrant date of the share options and is reduced by the expiry, forfeiture or exercise of the shareoptions (Note 14).

Revenue RecognitionRevenue is recognized to the extent that it is probable that the economic benefits will flow to theCompany and the amount of revenue can be measured reliably. Regardless of when the paymentis being made, revenue is measured at fair value of the consideration received or receivable, takinginto account contractually defined terms of payment and excluding taxes or duties. The Companyassesses its revenue recognition arrangements against specific criteria in order to determine if it isacting as principal or agent. The Company has concluded that it is acting as principal in all itsrevenue arrangements. The following specific recognition criteria must also be met beforerevenue is recognized:

SalesRevenue from sale of vehicles and related parts and accessories is recognized when the significantrisks and rewards of ownership of the goods have passed to the buyer and the amount of revenuecan be measured reliably.

Deferred revenueDeferred revenue represents a part of the sale proceeds received from customers which relates tofree service maintenance in which the service has not been rendered by the dealers. When therelated service is rendered and claimed by the dealers, the related revenue is recognized and takenout from the deferred revenue account and reported as revenue under preventive maintenanceservice (PMS). Unused or unutilized PMS are reversed to profit and loss upon expiration.

As disclosed in Note 15, the amount of proceeds recognized as deferred revenue is based on theactual number of vehicles sold, past industry experience and estimated cost required to performthe maintenance service during the period by the dealers.

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Delivery incomeDelivery income is recognized when delivery of inventories from warehouse to dealers takesplace.

Interest incomeInterest income is recognized as it accrues using effective interest method, i.e., the rate that exactlydiscounts estimated future cash receipts through the expected life of the financial instrument to thenet carrying amount of the financial asset.

Costs and Expenses RecognitionCosts and expenses encompass losses as well as those expenses that arise in the course of theordinary activities of the Company. The following specific recognition criteria must also be metbefore costs and expenses are recognized:

Cost of salesCost of sales includes the purchase price and capitalizable purchase costs such as taxes, duties andother costs incurred in bringing the vehicles, spare parts and accessories to the intended locationand condition. Such costs are recognized when the related sales have been recognized.

Selling expenses and marketing expensesSelling and marketing expenses constitute costs of advertisements, promotions and other costs thatare necessary to promote the product.

Administrative and other operating expensesAdministrative and other operating expenses constitute costs of administering the business such assalaries and wages, support service fees and others. These are recognized as expenses whenincurred.

Income TaxCurrent taxCurrent tax assets and liabilities for the current and prior periods are measured at the amountexpected to be recovered from or paid to the taxation authorities. The tax rates and tax laws usedto compute the amount are those that are enacted or substantively enacted by the reporting date.

Deferred taxDeferred tax is provided using the liability method, on all temporary differences, with certainexceptions, at the reporting date between the tax bases of assets and liabilities and their carryingamounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, with certainexceptions. Deferred tax assets are recognized for all deductible temporary differences,carryforward benefit of unused tax credits from excess of minimum corporate income tax (MCIT)over the regular corporate income tax (RCIT) and unused net operating loss carryover (NOLCO),to the extent that it is probable that future taxable income will be available against which thedeductible temporary differences and carryforward benefits of unused tax credits from MCIT andNOLCO can be utilized.

Deferred tax, however, is not recognized when it arises from the initial recognition of an asset orliability in a transaction that is not a business combination and, at the time of the transaction,affects neither the accounting income nor taxable income.

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The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to theextent that it is no longer probable that sufficient future taxable income will be available to allowall or part of the deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessedat each reporting date and are recognized to the extent that it has become probable that futuretaxable income will allow all or part of the deferred tax assets to be recovered.Deferred tax assets and deferred tax liabilities are measured at the tax rate that is expected to applyin the period when the asset is realized or the liability is settled, based on tax rates and tax lawsthat have been enacted or substantively enacted as at the reporting date. Deferred tax relating toitems recognized outside profit or loss does not affect the statement of comprehensive income.These deferred tax items are recognized in correlation to the underlying transactions either in othercomprehensive income or directly in equity.

LeasesThe determination of whether an arrangement is, or contains a lease is based on the substance ofthe arrangement at inception date whether the fulfillment of the arrangement is dependent on theuse of a specific asset or the arrangement conveys a right to use the asset, even if that right is notexplicitly specified in an agreement.

A reassessment is made after inception of the lease only if one of the following applies:

(a) There is a change in contractual terms, other than a renewal or extension of the arrangement;(b) A renewal option is exercised or extension granted, unless the term of the renewal or

extension was initially included in the lease term;(c) There is a change in the determination of whether fulfillment is dependent on a specified

asset; or(d) There is a substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when thechange in circumstances gave rise to the reassessment for scenarios (a), (c) or (d) and at the date ofrenewal or extension period for scenario (b).

Operating lease - Company as a LesseeLeases where the lessor retains substantially all the risks and benefits of the ownership of the assetare classified as operating leases. Operating lease payments are recognized as expense in thestatement of comprehensive income based on the terms of the lease contract. This is recognizedusing the straight-line method.

Foreign Currency-denominated Transactions and TranslationsTransactions denominated in foreign currencies are recorded in Philippine Peso based on theexchange rates prevailing at the date of transactions. Monetary assets and liabilities denominatedin foreign currencies are restated using the closing exchange rates prevailing at reporting date.Foreign exchange differences between rate at transaction date and rate at settlement date orreporting date of foreign currency-denominated monetary assets or liabilities are credited to orcharged against current operations.

Basic and Diluted Earnings Per Share (EPS)Basic EPS is computed by dividing net income for the year attributable to common stockholdersby the weighted average number of common shares issued and outstanding during the yearadjusted for any subsequent stock dividends declared. Diluted EPS is computed by dividing netincome for the year by the weighted average number of common shares issued and outstandingduring the year after giving effect to assumed conversion of potential common shares. The

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calculation of diluted EPS does not assume conversion, exercise, or other issue of potentialcommon shares that would have an antidilutive effect on earnings per share.

As of April 30, 2016, 2015 and 2014, the Company has no potential dilutive common shares(Note 25).

Segment ReportingThe Company has only one significant operating segment which is related to sale of automobilesand spare parts. The items presented in the financial statements corresponding to assets andliabilities represent the entire segment assets and liabilities. This is being monitored and strategicdecisions are made on the basis of operating results.

The Company’s operations are presently concentrated in the Philippines and it has no geographicalsegment classification.

ProvisionsProvisions are recognized when the Company has: (a) a present obligation (legal or constructive)as a result of a past event; (b) it is probable that an outflow of resources embodying economicbenefits will be required to settle the obligation; and (c) a reliable estimate can be made of theamount of the obligation.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects current market assessments of the time value of money and, where theCompany expects a provision to be reimbursed, the reimbursement is recognized only when thereimbursement is virtually certain. If the effect of the time value of money is material, provisionsare determined by discounting the expected future cash flows at a pre-tax rate that reflects currentmarket assessments of the time value of money and, where appropriate, the risks specific to theliability. When discounting is used, the increase in the provision due to the passage of time isrecognized as a finance cost. Provisions are reviewed at each reporting date and adjusted to reflectthe current best estimate (Note 13). Changes in the provisions are recognized in the profit or loss.

Provision for warrantyProvision for warranty is recognized for expected warranty claims on units sold. The set-up isbased on the number of units sold at the end of the period. Outstanding warranty coverage of soldunits extends to three years from the date of sale. The Company calculates the warranty cost perunit and model based on estimated level of repairs and returns. Changes are recognized in theprofit or loss.

ContingenciesContingent liabilities are not recognized in the financial statements. These are only disclosedunless the possibility of the outflow of resources embodying economic benefits is remote.Contingent assets are not recognized in the financial statements but disclosed when an inflow ofeconomic benefit is probable.

Events After the Reporting PeriodPost year-end events that provide additional information about the Company’s position at thereporting date (adjusting events) are reflected in the financial statements. Post year-end eventsthat are non-adjusting events are disclosed in the notes to financial statements when material.

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5. Significant Accounting Judgments, Estimates and Assumptions

The preparation of the financial statements in compliance with PFRS requires the Company tomake estimates and assumptions that affect the amounts reported in the financial statements andaccompanying notes. The estimates and assumptions used in the financial statements are basedupon management’s evaluation of relevant facts and circumstances as at the date of the financialstatements. Actual results could differ from such estimates.

Judgments and estimates are continually evaluated and are based on historical experience andother factors, including expectations of future events that are believed to be reasonable under thecircumstances.

JudgmentsIn the process of applying the Company’s accounting policies, management has made thejudgments below, apart from those involving estimations that have significant effect on theamounts recognized in the financial statements:

Classification of financial instrumentsThe Company exercises judgment in classifying a financial instrument, or its component parts, onthe initial recognition as a financial asset, a financial liability or an equity instrument inaccordance with the substance of the contractual arrangement and the definitions of a financialasset, a financial liability or an equity instrument. The substance of the financial instrument,rather than its legal form, governs its classification in the statement of financial position.

In addition, the Company classifies financial assets by evaluating, among others, whether the assetis quoted or not in an active market. Included in the evaluation on whether a financial asset isquoted in an active market is the determination of whether quoted prices are readily and regularlyavailable, and whether those prices represent actual and regularly occurring market transactions onan arm’s length basis.

Operating lease commitments - Company as lesseeThe Company leases the office premises it occupies. It has determined that the risks and rewardsof ownership of the premises have not been transferred to the Company. These leases areaccounted for as operating leases. In determining whether a lease contract is cancellable or not,the Company considers among others, the significance of the penalty, including the economicconsequence to the Company.

Determination of functional currencyThe Company, based on the relevant economic substance of the underlying circumstances, hasdetermined its functional currency to be the Philippine Peso. It is the currency of the primaryeconomic environment in which the Company primarily operates.

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Estimates and AssumptionsThe key assumptions concerning the future and other key sources of estimation uncertainty at thereporting date, that have a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities within the next financial year are discussed below.

Estimating allowance for impairment lossesThe Company maintains allowance for impairment losses based on the results of the individualand collective assessment under PAS 39. Under the individual assessment, the Company isrequired to obtain the present value of estimated cash flows using the receivable’s originaleffective interest rate. Impairment loss is determined as the difference between the receivable’scarrying balance and the computed present value. The collective assessment would require theCompany to group its receivables based on the credit risk characteristics (past-due status and term)of the counterparties. Impairment loss is then determined based on historical loss experience ofthe receivables grouped per credit risk profile. Historical loss experience is adjusted on the basisof current observable data to reflect the effects of current conditions that did not affect the periodon which the historical loss experience is based and to remove the effects of conditions in thehistorical period that do not exist currently. The methodology and assumptions used for theindividual and collective assessments are based on management’s judgment and estimate.Therefore, the amount and timing of recorded expense for any period would differ depending onthe judgments and estimates made for the year.

The carrying values of the Company’s receivables amounted to P=59.95 million, P=45.11 millionand P=25.05 million as of April 30, 2016, 2015 and 2014, respectively (Note 7). No allowance fordoubtful accounts has been provided in receivables since there are no doubtful accounts. Sales areprimarily on a cash basis.

Impairment of AFS investmentsThe Company determines that AFS investments are impaired when there has been a significant orprolonged decline in the fair value below cost. This determination of what is significant orprolonged requires judgment. The Company treats ‘significant’ generally as 20% or more of theoriginal cost of investment, and ‘prolonged’ as greater than six months for quoted equitysecurities. In addition, the Company evaluates other factors, including normal volatility in shareprice of similar equity securities.

In addition, in the case of unquoted securities, impairment may be appropriate when there isevidence of deterioration in the financial health of the investee, dismal industry and sectorperformance, adverse changes in technology and negative operational and financing cash flows.

The carrying value of AFS financial assets amounted to P=9.00 million as of April 30, 2016(Note 11).

Estimating NRV of inventoriesThe Company’s estimate of the NRV of inventories is based on evidence available at the time theestimates are made of the amount that these inventories are expected to be realized. Theseestimates consider the fluctuations of price or cost directly relating to events occurring after theend of the reporting period to the extent that such events confirm conditions existing at financialreporting date.

The Company’s inventories amounted to P=923.26 million, P=392.15 million and P=360.10 million asof April 30, 2016, 2015 and 2014, respectively (Note 8). Allowance for inventory lossesamounted to P=18.76 million, P=15.25 million and P=13.54 million as of April 30, 2016, 2015 and2014, respectively (Note 8).

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Estimating the useful lives of property and equipmentThe Company determines the estimated useful lives of property and equipment based on theperiod over which the assets are expected to be available for use. The estimated useful lives ofproperty and equipment are reviewed annually, considering factors such as asset utilization,internal technical evaluation, technological changes, and anticipated use of the property andequipment. It is possible that future results of operation could be materially affected by changes inthese estimates. A reduction in the estimated useful lives of property and equipment wouldincrease recorded depreciation and decrease noncurrent assets

The carrying values of the Company’s property and equipment amounted to P=37.39 million,P=19.27 million and P=19.13 million as of April 30, 2016, 2015 and 2014, respectively (Note 10).

Estimating impairment of nonfinancial assetsThe Company assesses impairment of nonfinancial assets (i.e., property and equipment, and otherassets) whenever events or changes in circumstances indicate that the carrying amount of an assetmay not be recoverable. The Company considers important factors which could trigger animpairment review such as the significant underperformance relative to expected historical orprojected future operating results and significant changes in the manner of use of the acquiredassets or the strategy for overall business.

An impairment loss is recognized whenever the carrying amount of an asset exceeds itsrecoverable amount. The recoverable amount is the higher of the fair value less cost to sell andvalue in use. The value in use is the present value of estimated future cash flows expected to arisefrom the continuing use of an asset and from its disposal at the end of its useful life. Indetermining fair value less costs to sell, recent market transactions are taken into account. If nosuch transactions can be identified, an appropriate valuation model is used. These calculations arecorroborated by valuation multiples, quoted share prices for publicly traded companies or otheravailable fair value indicators. Recoverable amounts are estimated for individual assets or, if it isnot possible, for the cash-generating unit to which the asset belongs.

In determining the present value of estimated future cash flows expected to be generated from thecontinued use of the assets, the Company is required to make estimates and assumptions. As ofApril 30, 2016, 2015 and 2014, the management has determined that there are no indications thatthe nonfinancial assets may be impaired.

The carrying values of the Company’s nonfinancial assets as of April 30, 2016, 2015 and 2014follow:

2016 2015 2014Other assets (Note 9) P=82,324,251 P=41,805,391 P=32,301,197Property and equipment (Note 10) 37,394,479 19,265,013 19,134,164

P=119,718,730 P=61,070,404 P=51,435,361

Estimating provision for warrantyThe Company gives warranty and undertakes to repair or replace parts that fail to performsatisfactorily on new vehicles sold.

A provision is made for expected warranty claims on vehicles sold during the period, based onestimated level of repairs of similar type of vehicles, historical experience and replacement costs.Assumptions used to calculate the provision for warranties were based on sales levels and current

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information available about repairs during warranty periods for similar type of vehicles sold.Movements in this account are disclosed in Note 13.

The Company believes that its provisions are adequate based on available information. However,given the uncertainty concerning the amount and timing of the actual claims, additional costs maybe incurred which may exceed amounts provided.

Estimating preventive maintenance service (PMS)The Company provides free periodic or preventive maintenance services on new vehicles sold forthree (3) years from year of sale.

The PMS is recognized for expected periodic or preventive maintenance service claims onvehicles sold during the period based on estimated level of services of similar type of vehicles andhistorical experience. Assumptions used to calculate the PMS were based on sales levels andcurrent information available about services during PMS periods for similar type of vehicles sold.Movements in this account are disclosed in Note 15.

Recognizing deferred tax assetsThe Company reviews the carrying amounts of deferred taxes at each reporting date and reducesdeferred tax assets to the extent that is no longer probable that sufficient taxable profit will beavailable to allow all or part of the deferred tax assets to be utilized. Significant managementestimate is required to determine the amount of deferred tax asset that can be recognized, basedupon the likely timing and level of future taxable income together with future tax planningstrategies.

As of April 30, 2016, 2015 and 2014, the Company recognized deferred tax assets amountingP=123.00 million, P=79.60 million and P=12.39 million, respectively (Note 23).

ContingenciesContingent liabilities are not recognized in the Company’s financial statements. These aredisclosed unless the possibility of an outflow of resources embodying economic benefits isremote. Contingent assets are not recognized in the Company’s financial statements but disclosedwhen an inflow of economic benefits is probable.

6. Cash and Cash Equivalents

This account consists of:

2016 2015 2014Cash on hand P=40,000 P=20,000 P=20,000Cash in banks 698,069,252 44,674,447 62,344,733Cash equivalents 501,721,384 767,722,124 270,413,561

P=1,199,830,636 P=812,416,571 P=332,778,294

Cash in banks earns interest at prevailing bank deposit rates.

Cash equivalents are short-term, highly liquid investments that are available depending on theimmediate cash requirements of the Company and earn annual interests at 1.75% to 2.50%, 0.38%to 1.85% and 0.25% to 1.13% for peso investments in 2016, 2015 and 2014, respectively. Dollar

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investments earn annual interests at 0.75% to 1.50%, 0.75 to 1.50% and 0.50% to 0.75% in 2016,2015 and 2014, respectively.

Interest income earned from cash in banks and cash equivalents amounted to P=8.15 million,P=4.92 million and P=1.50 million in 2016, 2015 and 2014, respectively (Note 19).

7. Receivables


2016 2015 2014Trade P=33,373,048 P=20,463,007 P=8,504,284Advances 25,681,268 24,309,588 16,503,114Receivables from officers and

employees 606,548 268,446 46,895Others 291,737 71,633 −

P=59,952,601 P=45,112,674 P=25,054,293

Trade receivables arise from the sales of parts which are non-interest bearing and are generally onthirty (30) day terms.

Advances pertain to advance payment to local suppliers for purchases of spare parts and propertyand equipment and to Bureau of Customs for import-related costs.

Receivables from officers and employees pertain to short-term and non-interest bearing employeepersonal loans. These also include advances for immediate cash needs for fieldwork and otherrelated office needs. Personal loans are collected through salary deductions and advances areliquidated.

There is no allowance for doubtful accounts as of April 30, 2016, 2015 and 2014.

There are no receivables as of April 30, 2016, 2015 and 2014 that are pledged as securities to theCompany’s liabilities.

8. Inventories


2016 2015 2014Vehicles at cost P=847,823,484 P=338,137,147 P=315,637,726Spare parts and accessories, at NRV

(Note 18) 75,435,807 54,017,382 44,461,218P=923,259,291 P=392,154,529 P=360,098,944

The cost of inventories recognized under “Cost of Sales” in the statements of comprehensiveincome amounted to P=3,568.61 million, P=2,504.64 million and P=1,835.40 million for the yearsended April 30, 2016, 2015 and 2014, respectively (Note 16).

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In 2016, the Company transferred vehicles from its inventories amounting P=22.57 million to“Transportation Equipment” under “Property and Equipment” (Note 10). These vehicles are usedas demo cars.

As of April 30, 2016, 2015 and 2014, the cost of spare parts and accessories amounted toP=94.20 million, P=69.27 million and P=58.01 million, respectively.

The Company has provided allowance for inventory obsolescence. Movements in allowance forinventory obsolescence on spare parts and accessories follow:

2016 2015 2014Balance at the beginning P=15,254,981 P=13,543,818 P=–Inventory obsolescence (Note 18) 3,508,168 1,711,163 13,543,818Balance at the end P=18,763,149 P=15,254,981 P=13,543,818

There are no inventories as of April 30, 2016, 2015 and 2014 that are pledged as securities to theCompany’s liabilities.

9. Other Assets

The Company’s other assets as of April 30, 2016, 2015 and 2014, separated into current andnoncurrent portion are as follows:

Other current assets

2016 2015 2014Input VAT P=71,502,868 P=33,657,113 P=28,848,175Prepaid expenses 8,182,403 5,797,376 959,546Rental deposits 1,281,956 758,133 695,337

P=80,967,227 P=40,212,622 P=30,503,058

Input VAT pertains to the current period value added tax in relation to the purchases of theCompany which was included in the VAT forms filed with the Bureau of Internal Revenue anddeferred input tax on purchase of properties or services which can be claimed upon payment orobtaining of official receipts.

The Company’s output VAT is included in taxes payable which forms part of the trade and otherpayables account.

Prepaid expenses pertain to health insurance and business taxes and licenses.

Prepaid expenses pertain to the health insurance and business taxes and licenses.

Other noncurrent assets

2016 2015 2014Rental deposits P=957,874 P=957,874 P=927,500Input VAT - net of current portion 399,150 634,895 870,639

P=1,357,024 P=1,592,769 P=1,798,139

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Rental deposits arise from the Company’s office lease agreement (Note 21).

The noncurrent portion of the input VAT arising from purchases of furnitures and fixtures whichis recoverable in future periods beyond one (1) year.

10. Property and Equipment

The rollforward analysis of this account follows:

2016Furniture

and FixturesTransportation

EquipmentOffice

EquipmentLeasehold

Improvements TotalCostAt beginning of year P=5,613,786 P=6,266,017 P=12,218,799 P=8,828,655 P=32,927,257Acquisitions 6,638,709 ‒ 769,942 ‒ 7,408,651Transfer from inventory ‒ 22,569,670 ‒ ‒ 22,569,670Disposal ‒ (6,498,507) ‒ ‒ (6,498,507)At end of year 12,252,495 22,337,180 12,988,741 8,828,655 56,407,071Accumulated DepreciationAt beginning of year 2,107,611 2,844,510 5,030,485 3,679,638 13,662,244Depreciation and amortization (Note 18) 1,496,272 3,098,428 2,237,190 1,289,743 8,121,633Disposal ‒ (2,771,285) ‒ ‒ (2,771,285)At end of year 3,603,883 3,171,653 7,267,675 4,969,381 19,012,592Net Book Value P=8,648,612 P=19,165,527 P=5,721,066 P=3,859,274 P=37,394,479

2015Furniture


EquipmentOffice

EquipmentLeasehold

Improvements TotalCostAt beginning of year P=4,505,854 P=6,266,017 P=10,550,820 P=4,116,138 P=25,438,829Acquisitions 1,107,932 − 1,667,979 4,712,517 7,488,428At end of year 5,613,786 6,266,017 12,218,799 8,828,655 32,927,257Accumulated DepreciationAt beginning of year 900,378 1,592,907 2,507,737 1,303,643 6,304,665Depreciation and amortization (Note 18) 1,207,233 1,251,603 2,522,748 2,375,995 7,357,579At end of year 2,107,611 2,844,510 5,030,485 3,679,638 13,662,244Net Book Value P=3,506,175 P=3,421,507 P=7,188,314 P=5,149,017 P=19,265,013

2014Furniture


EquipmentOffice

EquipmentLeasehold

Improvements TotalCostAt beginning of period P=2,446,337 P=5,399,349 P=7,369,016 P=− P=15,214,702Acquisitions 2,059,517 866,668 3,181,804 4,116,138 10,224,127At end of period 4,505,854 6,266,017 10,550,820 4,116,138 25,438,829Accumulated DepreciationAt beginning of period 114,680 419,423 622,302 − 1,156,405Depreciation and amortization (Note 18) 785,698 1,173,484 1,885,435 1,303,643 5,148,260At end of period 900,378 1,592,907 2,507,737 1,303,643 6,304,665Net Book Value P=3,605,476 P=4,673,110 P=8,043,083 P=2,812,495 P=19,134,164

Depreciation and amortization expense charged to operations amounted to P=8.12 million,P=7.36 million and P=5.15 million in 2016, 2015 and 2014, respectively (Note 18).

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As of April 30, 2016, 2015 and 2014, fully depreciated assets that are still in use amounted toP=3.75 million, P=3.75 million and P=0.18 million, respectively.

The cost of transportation equipment amounting P=22.57 million was transferred from “Vehicles”under “Inventories” to “Transportation Equipment” under “Property and Equipment” (Note 8).

There are no property and equipment items that are pledged as security for payment of liabilitiesas of April 30, 2016, 2015 and 2014.

11. Available-for-sale Financial Assets

On April 26, 2016, the Company acquired shares of stock of Ssangyong Berjaya MotorPhilippines, Inc. (SBMP) amounting P=9.00 million. SBMP is a distributor and importer ofSsangyong vehicles since April 2016.

The unquoted shares of stock are recognized at cost.

12. Trade and Other Payables


2016 2015 2014Accrued expenses

Marketing and promotions P=386,449,002 P=309,540,734 P=71,500,000Royalties (Note 15) 214,516,102 26,639,273 92,826,536Support services (Note 22) 33,992,560 ‒ ‒Others 22,307,846 26,935,443 46,661,454

Trade payables 211,609,313 27,526,993 24,911,277Taxes payable 98,173,484 46,582,400 38,193,391Others 153,297 125,183 85,237

P=967,201,604 P=437,350,026 P=274,177,895

Other accrued expenses pertain to professional fees, freight charges, brokerage fees and otherexpenses related to the importation of inventory items.

Taxes payable pertain to withholding, fringe benefit and output VAT.

Trade payables refer to services and billings from suppliers for purchase of vehicles and spareparts which are non-interest bearing and with normal term of thirty (30) days.

For the terms and conditions on related party transactions, refer to Note 22.

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13. Provision for Warranty

The rollforward analysis of this account follows (Note 4):

2016 2015 2014Balance at the beginning P=72,432,436 P=36,474,284 P=11,038,140Provision (Note 16) 81,868,935 54,113,517 34,864,836Claims (21,391,070) (14,466,391) (1,034,523)Expired portion (Note 16) (8,902,172) (3,688,974) (8,394,169)Balance at the end P=124,008,129 P=72,432,436 P=36,474,284

The noncurrent portion of provision for warranty amounting P=72.08 million, P=43.65 million andP=18.91 million as of April 30, 2016, 2015 and 2014 have been reclassified to current to conformwith October 31, 2016 presentation. Management believes that presentation is more appropriate.The reclassification did not affect other accounts in the financial statements while total liabilitiesdid not change.

Provisions are estimated by considering historical claims experience and recognized at theestimated amounts at which the provision could be settled for future and existing claims at balancesheet date. These costs are expected to be incurred over the next three (3) years after the sale ismade. Changes in the provisions could result to additional costs that may be required in futureperiods.

14. Equity

Capital stockDetails of the Company’s capital stock as of April 30, 2016, 2015 and 2014 follow:

Common stock - P=1.00 par valueAuthorized - 220,000,000 shares P=220,000,000Issued and outstanding - 209,000,000 shares 209,000,000

In July 2016, the Company issued, through cash subscription, 11.00 million shares out of theunissued portion of its authorized capital stock at par or an aggregate issue price of P=11.00million.

On August 5, 2016, the Board of Directors (BOD) approved the increase in the authorized capitalstock of the Company from P=220.00 million divided into 220.00 million shares with par value ofP=1.00 per share to P=290.00 million divided into 290.00 million shares with par value of P=1.00 pershare. The SEC approved the increase in the authorized capital stock on August 18, 2016. TheCompany issued, through cash subscription, 67,130,434 shares out of the increase in theauthorized capital stock.

On August 19, 2016, the BOD approved the increase in the authorized capital stock of theCompany from P=290.00 million divided into 290.00 million shares with par value of P=1.00 pershare to P=2.78 billion divided into 2.78 billion shares with par value of P=1.00 per share. The SECapproved the increase in the authorized capital stock on September 1, 2016. The Company issued623.00 million shares out of the 2.78 billion shares. The subscription to the increase in theauthorized capital stock was paid through the declaration of stock dividends and subsequentissuance.

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Retained EarningsAppropriationsThe appropriated retained earnings pertain to the appropriation for the Company’s capitalexpenditures including but not limited to the purchase of additional equipment and inventory forcorporate expansion, improvement of facilities, and repairs of corporate assets, properties andequipment, which are estimated to be concluded within three (3) to four (4) years.

On April 27, 2015, the BOD approved the appropriation of retained earnings amountingP=300.00 million. On April 27, 2016, additional appropriation of P=300.00 million was approved byBOD.

In the aggregate, the appropriated retained earnings as of April 30, 2016 and 2015 amounted toP=600.00 million and P=300.00 million, respectively.

On August 12, 2016, the BOD approved the reversal of P=600.00 million appropriation. Theamount was previously appropriated for the Company’s future capital expenditures and corporateexpansion.

On August 19, 2016, the BOD approved the declaration of stock dividends out of its unrestrictedretained earnings in the amount of P=623.00 million equivalent to 623.00 million shares with a parvalue of P=1.00 per share and distributed pro rata to all stockholders of record. The stock dividendswere applied to the subscription of shares arising from the increase in the authorized capital stockof the Company which was approved by the SEC on September 1, 2016. Accordingly, the stockdividends declared amounting to P=623.00 million have been applied to the subscription arisingfrom the increase in the authorized capital stock.

Equity Contribution from Bermaz Auto BerhadFrom November 18 to December 2, 2013, Bermaz Auto Berhad (parent company of BermazMotor International, Ltd.) granted the first offer of employee share option scheme (ESOS) tocertain officers of the Company.

The ESOS was approved by Bermaz Auto Berhad’s shareholders at its Extraordinary GeneralMeeting held on September 26, 2013. The ESOS is administered by a committee(“ESOS Committee”).

All eligible directors and employees are entitled to a grant of options. The Grantee is an eligibledirector/employee who has accepted the offer of the options. The ESOS is for a period of five (5)years from the effective date. The ESOS Committee shall have the discretion to extend the tenureof the ESOS for another 5 years or such shorter period as it deems fit immediately from the expiryof the first 5 years.

Fair value of share options grantedThe fair value of the share options granted is estimated at the grant date using a binomial optionpricing model, taking into account the terms and conditions upon which the instruments weregranted.

For the years ended April 30, 2016, 2015 and 2014, the movement in the contribution of the shareoptions granted amounted to P=5.34 million, P=11.27 million and P=12.49 million, respectively.These are equity settled.

The Company recognizes the services received from its employees as “Salaries, wages andbenefits” under “Administrative and Other Operating Expenses”.

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The following table lists the inputs to the option pricing model:

At date of grantNovember 25 to December 9, 2014

Dividend yield (%) 3.13 - 3.28Expected volatility (%) 37.23Risk free interest rate (% p.a.) 3.65 - 3.88Expected life of options (Years) 4Weighted average share price (RM) 1.00

The expected life of the options is based on the contractual life of the options. The expectedvolatility reflects the assumption that the historical volatility, over a period similar to the life of theoptions, is indicative of future trends, which may not necessarily be the actual outcome.

15. Revenue

Distributorship agreementOn September 12, 2012, the Company entered into a three-year distributorship agreement withMazda Motor Corporation, the Manufacturer, wherein the Company imports and sells completelybuilt-up vehicles and parts in the Philippines. On June 1, 2015, the Company renewed anotherthree-year distributorship agreement with Mazda Motor Corporation.

In 2016, 2015 and 2014, the Company’s purchases from the Manufacturer amounted toP=4,099.72 million, P=2,536.69 and P=2,131.97 million, respectively (Note 16).

On December 26, 2012, a supplemental agreement is signed to set the distribution right fee (DRF)or royalties in which the Company shall pay the Manufacturer a specified amount of DRF for thewholesale number of all vehicles supplied to the dealers during the period. The supplementalagreement is renewed on June 1, 2015 which accords the three-year distributorship agreementwith the Manufacturer.

In 2016, 2015 and 2014, the Company’s royalties included in “Cost of Sales” as shown in thestatements of comprehensive income amounted to P=665.26 million, P=243.31 million andP=188.85 million, respectively (Note 16).

Accordingly, as of April 30, 2016, 2015 and 2014, the Company’s accrued royalties included in“Accrued expenses” under “Trade and Other Payables” as shown in the statements of financialposition amounted to P=214.52 million, P=26.64 million and P=92.83 million, respectively (Note 12).

Dealership agreementThe Company entered into dealership agreements with several vehicle and parts dealers. In 2016,2015 and 2014, sales of vehicles and parts amounted to P=4,913.21 million, P=3,589.95 million andP=2,464.06 million, respectively.

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RevenueThis account consists of:

2016 2015 2014Vehicle sales P=4,738,804,874 P=3,462,957,588 P=2,360,629,772Deferral during the period (166,129,708) (122,316,271) (70,481,591)Net 4,572,675,166 3,340,641,317 2,290,148,181Spare parts and accessories sales - net 174,410,000 126,993,743 103,428,937Revenue from PMS 74,329,176 33,186,792 9,963,111

P=4,821,414,342 P=3,500,821,852 P=2,403,540,229

In 2016, 2015 and 2014, sales from spare parts and accessories is net of sales return amounting toP=0.46 million, P=0.14 million and P=0.15 million, respectively.

The PMS consists of:

2016 2015 2014Claims P=34,520,598 P=13,325,187 P=1,573,357Expiration 39,808,578 19,861,605 8,389,754Revenue from PMS 74,329,176 33,186,792 9,963,111Deferral during the period (166,129,708) (122,316,271) (70,481,591)Net deferral (P=91,800,532) (P=89,129,479) (P=60,518,480)

The Company provides free preventive maintenance services (PMS). Unearned portion representsunexpired or unutilized free preventive maintenance service that are provided to customers or carbuyers. These are recognized in income when availed by customers and when it expire due tononavailment.

The rollforward analysis of deferred revenue follows:

2016 2015 2014Balance at the beginning P=177,760,688 P=88,631,209 P=28,108,496Deferral during the period 166,129,708 122,316,271 70,481,591Claims (34,520,598) (13,325,187) (1,569,124)Expired portion (39,808,578) (19,861,605) (8,389,754)Balance at the end P=269,561,220 P=177,760,688 P=88,631,209

As of April 30, 2016, 2015 and 2014, the breakdown of outstanding deferred revenue follows:

2016 2015 2014Current P=118,945,552 P=72,134,362 P=32,517,393Noncurrent

Later than 1 year but not laterthan 2 years 95,754,808 65,371,397 32,619,953

Later than 2 years up to 3 years 54,860,860 40,254,929 23,493,863150,615,668 105,626,326 56,113,816

P=269,561,220 P=177,760,688 P=88,631,209

Deferred revenue is reassessed annually based on the actual service claims from the vehiclespreviously sold and any estimated apportioned service maintenance.

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16. Cost of Sales

The rollforward analysis of this account follows:

2016 2015 2014Inventories at the beginning P=392,154,529 P=360,098,944 P=63,527,543Purchases (Note 15) 4,099,719,251 2,536,692,222 2,131,974,765Inventories available for sale 4,491,873,780 2,896,791,166 2,195,502,308Inventories at the end (Note 8) 923,259,291 392,154,529 360,098,944Cost of inventories sold 3,568,614,489 2,504,636,637 1,835,403,364Warranty 73,178,297 50,605,856 14,668,518Cost of sales P=3,641,792,786 P=2,555,242,493 P=1,850,071,882

Royalties included in the cost of sales amounted to P=665.26 million, P=243.31 million andP=188.85 million in 2016, 2015 and 2014, respectively (Note 15).

17. Selling and Marketing Expenses


2016 2015 2014Marketing and promotions P=344,261,320 P=429,513,098 P=237,909,349Parts and accessories 30,581,422 22,304,600 15,340,347Freight and handling 13,926,296 13,792,730 8,158,469Others 4,851,255 11,921,713 4,313,869

P=393,620,293 P=477,532,141 P=265,722,034

18. Administrative and Other Operating Expenses


2016 2015 2014Support services fees (Note 22) P=104,411,025 P=‒ P=‒Salaries, wages and benefits

(Notes 14 and 22) 67,062,508 67,343,194 53,925,465Taxes and licenses 31,881,435 20,095,446 11,177,064Repairs and maintenance 22,625,571 13,726,741 10,211,164Representation 8,733,905 2,858,894 2,827,190Depreciation and amortization

(Note 10) 8,121,633 7,357,579 5,148,260Transportation and travel 6,842,348 3,216,091 3,836,707Professional fees 6,285,938 7,337,884 4,687,097Rental (Note 21) 5,160,044 4,943,932 3,440,347Communications 4,758,189 4,445,273 3,752,364Inventory obsolescence (Note 8) 3,508,168 1,711,163 13,543,818Insurance 3,392,026 3,116,023 2,076,372

(Forward)

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2016 2015 2014Contractual services P=1,564,740 P=1,399,830 P=992,259Supplies 1,125,145 960,702 1,052,308Utilities 943,760 1,043,876 1,049,601Dues and fees 938,566 2,130,134 913,321Miscellaneous 1,351,382 3,490,365 3,320,517

P=278,706,383 P=145,177,127 P=121,953,854

19. Other Income - net


2016 2015 2014Delivery income P=18,388,324 P=13,678,491 P=7,051,700Interest income (Note 6) 8,152,775 4,923,933 1,495,619Gain on disposal of property and

equipment 2,027,331 ‒ ‒Foreign currency exchange gains

(losses) (7,058,259) (1,426,250) 1,407,629Others 3,164,101 1,027,529 937,048

P=24,674,272 P=18,203,703 P=10,891,996

The Company provides transportation and delivery services to car dealers for items acquired inwhich income is recognized.

Others include rebate from oil purchase from supplier, sale of scrap spare parts and accessoriesand sale of warranty booklet.

20. Finance Costs

The Company opened letters of credit and trust receipts with a bank and paid corresponding bankcharges. Finance costs amounted to P=7.25 million, P=5.37 million and P=12.56 million for the yearsended April 30, 2016, 2015 and 2014, respectively.

21. Leases

The Company entered into various leases with third parties covering its office premises andparking lot. These leases range from one (1) to three (3) years. These may be renewed upon themutual agreement of the parties. Rent expense charged to operations amounted to P=5.16 million,P=4.94 million and P=3.44 million in 2016, 2015 and 2014, respectively (Note 18).

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Future minimum rentals payable under operating leases are as follows:2016 2015 2014

Within one (1) year P=4,682,646 P=4,256,951 P=3,012,177After one (1) year but not more than

five (5) years 2,699,978 2,454,525 −P=7,382,624 P=6,711,476 P=3,012,177

22. Related Party Transactions

The Company, in the regular conduct of business, has entered into transactions with relatedparties. Parties are considered to be related if, among others, one party has the ability, directly orindirectly, to control the other party in making financial and operating decisions, the parties aresubject to common control or the party is an associate or a joint venture. Except as otherwise,indicated, the outstanding accounts with related parties shall be settled in cash. The transactionsare made at terms and prices agreed upon by the parties.

The key management personnel of the Company include all executive and non-executive directorsand senior management. The compensation and benefits of the Company’s key managementpersonnel amounted to P=28.23 million, P=31.50 million and P=22.13 million in 2016, 2015and 2014, respectively (Note 18). The outstanding liability amounted to P=12.26 million,P=20.44 million and P=14.27 million as of April 30, 2016, 2015 and 2014, respectively, and isrecorded as part of accrued expenses under “Trade and Other Payables” in the statements offinancial position (Note 12).

Also, on May 1, 2015, the Company entered into an agreement with Bermaz Motor Sdn Bhd inwhich the latter will receive support services fees based on the number of cars sold. Theagreement is for a period of one year. In 2016, support services fees amounted to P=104.41 million,and is shown under “Administrative and Other Operating Expenses” in the statements ofcomprehensive income (Note 18). The outstanding liability amounted to P=33.99 million, as ofApril 30, 2016, and is recorded as part of accrued expenses under “Trade and Other Payables” inthe statements of financial position (Note 12).

Terms and conditions of transactions with related partiesThere have been no guarantees provided or received for any related party receivables or payables.These accounts are generally unsecured. Impairment assessment is undertaken each financial yearthrough a review of the financial position of the related party and the market in which the relatedparty operates.

23. Income Tax

Provision for income tax follows:

2016 2015 2014Current P=200,485,756 P=170,587,807 P=54,242,277Final 1,517,291 968,026 289,664Deferred (43,405,972) (67,207,848) (900,325)

P=158,597,075 P=104,347,985 P=53,631,616

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The Company’s provision for current tax represents regular corporate income tax.

The Company’s deferred tax assets - net follow:

2016 2015 2014Deferred revenue P=80,868,366 P=53,328,207 P=5,915,623Provision for warranty 37,195,270 21,691,930 2,410,015Allowance for inventory obsolescence 5,628,945 4,576,494 4,063,145Unrealized foreign exchange gain (689,978) ‒ ‒

P=123,002,603 P=79,596,631 P=12,388,783

The reconciliation of income tax computed at the statutory income tax rate to provision for incometax as shown in the statements of comprehensive income follows:

2016 2015 2014Income tax at statutory tax rate P=157,416,586 P=100,711,319 P=49,236,766Income tax effect for:

ESOS 1,705,939 3,382,239 3,746,513Miscellaneous expense 315,570 761,513 658,710Nondeductible interest expense − − 148,066Interest income already subjected

to final tax (841,020) (507,086) (158,439)P=158,597,075 P=104,347,985 P=53,631,616

24. Financial Instruments

Fair Value InformationThe carrying values of cash, receivables and trade and other payables approximate their fair valuesdue to the relatively short-term nature of these transactions.

Fair Value HierarchyThe Company uses the following hierarchy for determining the fair value of financial instruments:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.Level 2: other techniques for which all inputs which have a significant effect on the recorded

fair value are observable, either directly or indirectly.Level 3: techniques which use inputs which have a significant effect on the recorded fair value

that are not based on observable market data.

As of April 30, 2016, 2015 and 2014, the Company has no financial instruments carried at fairvalue.

Financial Risk Management Objectives and PoliciesThe main purpose of the Company’s financial instruments is to fund its operations and capitalexpenditures. The main risks arising from the Company’s financial instruments are liquidity risk,credit risk and market risk. The Company does not actively engage in the trading of financialassets for speculative purposes nor does it write options.

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Exposures to financial risks arise in the normal course of the Company’s business activities. Themain objectives of the Company’s financial risk management are as follows:· to identify and monitor such risks on an ongoing basis;· to minimize and mitigate such risks; and· to provide a degree of certainty about costs.

The BOD reviews and agrees policies for managing each of the risks which are summarizedbelow:

Liquidity riskLiquidity risk is the risk that an entity will encounter difficulty in raising funds to meetcommitments associated with financial assets and liabilities. Liquidity risk may result from acounterparty failing on repayment of a contractual obligation or inability to generate cash inflowsas anticipated.

The Company's objective is to maintain a balance between continuity of funding and flexibilitythrough the use of stand-by credit facilities. The Company actively manages its operating cashflows and the availability of fund so as to ensure that all funding needs are met. As part of itsoverall prudent liquidity management, the Company maintains sufficient levels of cash to meet itsworking capital requirements.

The maturity of the Company’s financial assets and financial liabilities is less than one year.

Credit riskCredit risk is the risk that one party to a financial instrument will fail to discharge an obligationand cause the other party to incur a financial loss.

The Company adheres to fixed limits and guidelines in its dealings with counterparty banks.Given the high credit standing of its accredited counterparty banks, management does not expectany of these financial institutions to fail in meeting their obligations.

The carrying values of cash in banks and receivables represent the maximum exposure to creditrisk for each component financial assets in the Company’s statements of financial position as ofApril 30, 2016, 2015 and 2014.

The aging analyses of the Company’s cash and cash equivalents and receivables per class follow:

2016Neither Past Due but not Impaired

Past Due nor Less than More thanImpaired 30 days 30 to 90 days 90 days Impaired Total

Cash and cash equivalent(excluding cash on hand) P=1,199,790,636 P=‒ P=‒ P=‒ P=‒ P=1,199,790,636

ReceivablesTrade 33,373,048 – – – – 33,373,048Receivable from officers

and employees 606,548 606,548Others 291,737 – – – – 291,737

P=1,234,061,969 P=– P=– P=– P=– P=1,234,061,969

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Cash and cash equivalent(excluding cash on hand) P=812,396,571 P=‒ P=‒ P=‒ P=‒ P=812,396,571

ReceivablesTrade 20,463,007 – – – – 20,463,007Receivable from officers

and employees 268,446 268,446Others 71,633 – – – – 71,633

P=833,199,657 P=– P=– P=– P=– P=833,199,657



Cash and cash equivalent(excluding cash on hand) P=332,758,294 P=‒ P=‒ P=‒ P=‒ P=332,758,294

ReceivablesTrade P=8,504,284 P=– P=– P=– P=– 8,504,284Receivable from officers

and employees 46,895 46,895Others ‒ – – – – ‒

P=341,309,473 P=– P=– P=– P=– P=341,309,473

The Company’s neither past due nor impaired financial assets are all classified as high-gradebased on the following criteria:

Cash and cash equivalents - based on the nature of the counterparty and the Company’s internalrating system.

Receivables - based on experience and reliability in paying accounts within the Company’s normalcredit terms.

Market riskMarket risk is the risk of loss to future earnings, fair value or future cash flows of a financialinstrument as a result of changes in its price, in turn caused by changes in interest rates, equityprices and other market changes.

Foreign currency exchange riskForeign currency exchange risk is the risk that the fair value of future cash flows of a financialinstrument will fluctuate because of changes in foreign currency exchange rates. The Company’sexposure to the risk of changes in foreign exchange rates relates to the Company’s operatingactivities when revenue or expenses are denominated in a different currency from the Company’sfunctional currency.

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The Company’s exposure to foreign currency risk follows:

US Dollar (US$)

2016 2015 2014Original

CurrencyPeso

EquivalentOriginal

CurrencyPeso

EquivalentOriginal

CurrencyPeso

EquivalentCash and cash

equivalents US$4,156,843 P=194,914,365 US$903,612 P=40,228,787 $664,957 P=29,657,100

In translating the foreign currency-denominated monetary assets into Philippine Peso amounts, theexchange rate used was P=46.89 to US$1.00, P=44.52 to US$1.00 and P=44.60 to US$1.00, thePhilippine Peso to U.S. Dollar exchange rate as at April 30, 2016, 2015 and 2014, respectively.

Japanese Yen (JP¥)

2016 2015 2014Original

CurrencyPeso

EquivalentOriginal

CurrencyPeso

EquivalentOriginal

CurrencyPeso

EquivalentCash and cash

equivalents JP¥376,003 P=162,696 JP¥‒ P=‒ JP¥‒ P=‒Royalties (355,820,068) 153,963,343 (117,419,521) (43,644,836) (60,838,882) 26,335,404Trade payables (300,267,669) (129,925,820) ‒ ‒ ‒ ‒Net asset/(liability) (JP¥655,711,734) P=24,200,219 (JP¥117,419,521) (P=43,644,836) (JP¥60,838,882) P=26,335,404

In translating the foreign currency-denominated monetary assets and liabilities into PhilippinePeso amounts, the exchange rate used was P=0.43 to JP¥1.00, P=0.37 to JP¥1.00 and P=0.43 toJP¥1.00 the Philippine Peso to Japanese Yen exchange rate as at April 30, 2016, 2015and 2014,respectively.

Malaysian Ringgit (RM)

2016 2015 2014Original

CurrencyPeso

EquivalentOriginal

CurrencyPeso

EquivalentOriginal

CurrencyPeso

EquivalentSupport services (RM2,828,000) (P=34,003,587) RM‒ P=‒ RM‒ P=‒

In translating the foreign currency-denominated monetary liabilities into Philippine Peso amounts,the exchange rate used was P=12.02 to RM1.00, the Philippine Peso to Malaysian Ringgit exchangerate as at April 30, 2016.

The table below demonstrates the sensitivity to a reasonably possible change in USD, JPY andRM exchange rates, with all other variables held constant. The impact on the Company’s incomebefore is due to changes in the fair value of monetary assets and liabilities and the Company’sequity. The Company’s exposure to foreign currency changes for all other currencies is notmaterial.

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April 30, 2016

Currency

Increase (decrease) inPhilippine peso/Foreign

exchange ratesEffect on income (loss)

before income taxUSD +1.04% 2,020,407

-1.04% (2,020,407)JPY +2.49% 7,055,382

-2.49% (7,055,382)RM +3.17% 1,078,129

-3.17% (1,078,129)

April 30, 2015

Currency



before income taxUSD +0.65% 259,579

-0.65% (259,579)JPY +1.75% 764,200

-1.75% (764,200)

April 30, 2014

Currency



before income taxUSD +1.48% 437,837

-1.48% (437,837)JPY +1.77% 466,065

-1.77% (466,065)

25. Basic/Diluted Earnings Per Share

The basic earnings per share attributable to equity holders of the Company for the years endedApril 30, 2016, 2015 and 2014 were computed as follows:

2016 2015 2014Net income attributable to equity holders

of the Company P=366,124,878 P=231,356,413 P=110,490,938Weighted average number of shares 662,476,833 662,476,833 662,476,833

P=0.55 P=0.35 P=0.17

The amount of weighted average number of shares includes the effect of the stock dividenddeclared after the reporting period but before the financial statements were authorized for issue,please refer to Note 14.

Basic and diluted earnings per share are the same due to the absence of dilutive potential commonshares.

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26. Segment Information

The Company has only one operating segment which is the automotive business. There is nogeographical segment since its business is located in the Philippines.

The Company’s main revenue is principally from sale of cars and spare parts. It is the distributorof Mazda brand in the country.

Revenue from customers who each contributed 10% or more of the total revenue amounted toP=3.61 billion, P=2.23 billion and P=1.69 billion in 2016, 2015 and 2014, respectively.

27. Approval of Financial Statements

The accompanying financial statements were approved and authorized for issue by the Board ofDirectors on December 5, 2016.

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