ALTERRA CAPITAL PARTNERS, INC.
(Formerly: iRipple, Inc.)
STATEMENTS OF FINANCIAL POSITION
December 31, 2016 and 2015
(In Philippine Peso)
NOTES //////2016 /////2015
A S S E T S
Current Assets
Cash 7 148,523,534 4,487,718
Due from a related party 18 3,477,308 -
Financial assets at FVTPL 8 - 24,119,795
Other current assets 11 558,742 449,796
152,559,584 29,057,309
Non-current Asset
Deferred tax assets 29 - 1,335,551
TOTAL ASSETS 152,559,584 30,392,860
LIABILITY AND STOCKHOLDERS' EQUITY
L I A B I L I T I E S
Current Liabilities
Payables 16 1,546,495 1,864,109
Deposit for future stock subscription 20 125,000,000 -
TOTAL LIABILITIES 126,546,495 1,864,109
S T O C K H O L D E R S ' E Q U I T Y
Capital Stock 19 15,569,015 15,569,015
Additional Paid-In Capital 19 13,928,475 13,928,475
Deficit (3,484,401) (968,739)
TOTAL STOCKHOLDERS' EQUITY 26,013,089 28,528,751
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 152,559,584 30,392,860
(See Notes to Financial Statements)
ALTERRA CAPITAL PARTNERS, INC.
(Formerly: iRipple, Inc.)
STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended December 31, 2016, 2015 and 2014
(In Philippine Peso)
NOTES //////////2016 /////2015 ///2014
REVENUES 22 - 11,131,226 78,686,833
COST OF SALES AND SERVICES 23 - 8,816,081 39,619,257
GROSS PROFIT 6 - 2,315,145 39,067,576
OTHER INCOME 24 353,564 881,128 7,863,639
353,564 3,196,273 46,931,215
OPERATING EXPENSES 25 1,533,675 7,984,512 26,852,236
FINANCE COST - - 159,412
FOREIGN EXCHANGE LOSS 6 - 19,863 596,401
PROFIT (LOSS) BEFORE TAX (1,180,111) (4,808,102) 19,323,166
INCOME TAX EXPENSE (BENEFIT) 28 1,335,551 (1,274,487) 6,041,824
PROFIT (LOSS) (2,515,662) (3,533,615) 13,281,342
OTHER COMPREHENSIVE GAIN (LOSS)
ITEM THAT WILL NOT BE RECLASSIFIED
SUBSEQUENTLY TO PROFIT OR LOSS:
REMEASUREMENTS — net of related tax 26 - 558,289 (300,609)
TOTAL COMPREHENSIVE INCOME (LOSS) (2,515,662) (2,975,326) 12,980,733
EARNINGS PER SHARE
Basic Earnings (Loss) per Share 30 (0.040) (0.057) 0.213
(See Notes to Financial Statements)
ALTERRA CAPITAL PARTNERS, INC.
(Formerly: iRipple, Inc.)
STATEMENTS OF CHANGES IN EQUITY
For the Years Ended December 31, 2016, 2015 and 2014
(In Philippine Peso)
Notes Capital Stock
//Additional
//Paid-In Capital
Retained
Earnings
(Deficit)
Remeasurements
− net
Fair Value Gain on
Available-for-sale
Financial Assets //////Total
Balance, January 1, 2014 15,569,015 13,928,475 16,996,381 (257,680) (86,535) 46,149,656
Profit 13,281,342 13,281,342
Cash dividends, as restated 21 (27,712,847) (27,712,847)
Other comprehensive loss 26 (300,609) (300,609)
Reclassification adjustment 86,535 86,535
Balance, January 1, 2015 19 15,569,015 13,928,475 2,564,876 (558,289) - 31,504,077
Loss (3,533,615) (3,533,615)
Other comprehensive income 26 558,289 558,289
Balance, December 31, 2015 15,569,015 13,928,475 (968,739) - - 28,528,751
Loss (2,515,662) (2,515,662)
Balance, December 31, 2016 15,569,015 13,928,475 (3,484,401) - - 26,013,089
(See Notes to Financial Statements)
ALTERRA CAPITAL PARTNERS, INC.
(Formerly: iRipple, Inc.)
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2016, 2015 and 2014
(In Philippine Peso)
NOTES /////////////2016 //////2015 ////2014
CASH FLOWS FROM OPERATING ACTIVITIES
Profit (Loss) before tax (1,180,111) (4,808,102) 19,323,166
Adjustments for:
Finance income 7,8,24 (353,564) (123,564) (176,822)
Depreciation 15,25 - 505,574 3,645,418
Retirement benefit 25 - - 198,796
Finance cost 6 - - 159,412
Reclassification adjustment - - 86,535
Loss on sale of available-for-sale financial asset 25 - - 62,781
Impairment loss 25 - - 6,018
Unrealized foreign exchange loss 6 - - 596,401
Operating cash flows before changes in working capital (1,533,675) (4,426,092) 23,901,705
Decrease (Increase) in operating assets:
Receivables - 6,947,766 (5,668,271)
Inventories - 421,039 (1,730,307)
Other current assets (108,945) (285,671) (2,245,726)
Decrease (Increase) in payables (317,614) (6,200,136) 2,634
Cash generated from (used in) operations (1,960,234) (3,543,094) 14,260,035
Income taxes paid - (3,187,779) (1,999,574)
Net cash from (used in) operating activities (1,960,234) (6,730,873) 12,260,461
CASH FLOWS FROM INVESTING ACTIVITIES
Finance income received 7,8,24 17,458 246,807 14,429
Proceeds from disposal of assets and assumption of liabilities 1 - 26,079,236 -
Finance lease receivable granted 12 - (670,251) (1,925,982)
Proceeds from sale of available-for-sale financial asset - - 4,818,434
Collection of finance lease receivables - - 453,038
Additions to property and equipment - - (1,411,963)
Net cash from investing activities 17,458 25,655,792 1,947,956
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from deposit for future stock subscription 20 125,000,000 - -
Proceeds from redemption of financial assets at FVTPL 8 24,455,900 - -
Advances made to a related party 18 (3,477,308) - -
Availment of finance lease obligations - - 981,372
Finance cost paid - - (15,275)
Payment of finance lease obligations - - (94,023)
Payment of dividends 21 - (26,155,945) (1,556,902)
Acquisition of financial assets at FVTPL 8 - (24,000,000) -
Net cash from (used in) financing activities 145,978,592 (50,155,945) (684,828)
EFFECTS OF FOREIGN EXCHANGE RATE CHANGES ON CASH - - 3,726
NET INCREASE (DECREASE) IN CASH 144,035,816 (31,231,026) 13,527,315
CASH AT BEGINNING OF YEAR 4,487,718 35,718,744 22,191,429
CASH AT END OF YEAR 148,523,534 4,487,718 35,718,744
(See Notes to Financial Statements)
1
ALTERRA CAPITAL PARTNERS, INC.
(Formerly: iRipple, Inc.) NOTES TO FINANCIAL STATEMENTS
December 31, 2016 and 2015
1. CORPORATE INFORMATION
Alterra Capital Partners, Inc. (the “Company”) is a service and trading corporation
incorporated and registered with the Philippine Securities and Exchange Commission
(SEC) on November 21, 2000. The Company’s primary purpose is to engage in the
business of a holding company by buying and holding shares of other companies,
whether common, preferred, treasury, founders or other kinds of shares, either by
subscribing to the unissued shares of the capital stock in public or private offering or
by purchasing the shares of other stockholders by way of assignment in private sale;
to invest in the stock or equity of other companies; to acquire rights in the stock of
other companies by way of sale, pledge, chattel mortgage or assignment; to sell,
dispose, assign, pledge or convey any or all or its shareholdings in other companies in
favor of qualified persons by way of private sale, assignment or other form of private
conveyance, all in accordance with the Corporation Code, the Securities Regulation
Code (SRC) and other applicable laws and regulations; to vote its shareholdings in
other companies and exercise all the rights of a shareholder under the Corporation
Code and applicable laws provided that it will not act as stockbroker or dealer of
securities.
The Company started its commercial operations in January 2002. The Company is
substantially owned by Filipino individuals and the control rests with the members of
the Board.
On August 25, 2009, the Company completed its Initial Public Offering (IPO) of
4,579,122 new ordinary shares (approximately 29.41% of the total outstanding
ordinary shares) at an offer price of P4.37 per share for a total gross proceeds of
P19,987,444, as disclosed in Note 19.
At the special meeting of the Board of Directors (BOD) held on June 22, 2015, the
BOD authorized to reduce the par value of its shares from one peso per share (P1/sh)
to five centavos per share (P0.05/sh), resulting in the increase in the number of its
shares from 20,000,000 shares to 400,000,000 shares, as disclosed in Note 19.
In 2015, the Company entered into various sale and assignment of assets and
assumption of liabilities with Movmento, Inc., a corporation organized and existing
under the laws of the Philippines. The following are the transactions that transpired in
2015:
A. On March 5, 2015, the Company, the “Seller”, entered into a “Deed of sale of
assets with assumption of liabilities” with Movmento, Inc., “Buyer”. The Seller
is the owner of various assets and likewise the obligor for various accounts
payable, accrued expenses and other liabilities incurred in relation to the use of
the said assets. The “Buyer” has offered to acquire the assets and assume its
related liabilities. The Seller accepted the said offer for the consideration and
under the terms and conditions set forth.
2
For and in consideration of the foregoing premises and the covenants contained,
the parties agreed as follows:
a. For and in consideration of the total sum of P21,052,143, purchase price,
broken down into cash in the amount of P30,181,618 and the acceptance
and assumption by the buyer of the assumed liabilities in the total amount
of P9,129,475, receipt of which is acknowledged by the Seller and the
assumption of which liabilities is confirmed by the Buyer, the Seller
absolutely and unconditionally assigns, cedes, conveys and transfers to the
Buyer, and the Buyer purchases, acquires and accepts from the Seller, any
and all of the Seller’s rights, title, interest and obligations of the seller in
and to the assets and assumed liabilities.
The carrying amounts of the assets sold are as follows:
Trade and other receivables:
Trade P 15,407,554
Less: Allowance for doubtful accounts (705,347)
Due from a related party 5,098,769
Accrued revenue 3,072,095
Advances to officers and employees 1,497,181
Reimbursable from clients 947,598
Accrued interest 41,564
Others 802,072 P 26,161,486
Finance lease receivables 2,143,195 2,143,195
Inventories:
Merchandise inventory 1,165,531
Leased asset inventory 252,643 1,418,174
Other current assets:
Prepaid rent 1,552,817
Security deposits 239,328
SSS claims 10,350 1,802,495
Deferred tax assets 987,330 987,330
P 32,512,680 P 32,512,680
The carrying amounts of the liabilities assumed are as follows:
Trade and other payables:
Accounts payable P 1,389,593
Customer's deposit 4,355,543
Accrued expenses 492,478
Interest payable 144,137
Payable to employees 77,493
Other payable 147,185 P 6,606,429
Finance lease obligations 887,349 887,349
Retirement benefit obligation 1,562,495 1,562,495
Deferred tax liability 73,202 73,202
P 9,129,475 P 9,129,475
3
b. The Buyer expressly acknowledges that it is aware of the value, nature,
status and condition of the assets which it hereby accepts “as-is/where-is”.
It is therefore, expressly understood that the Seller makes no representation
or warranty of any kind with respect to the assets.
c. The purchase price stated above is exclusive of the applicable of twelve
percent (12%) value-added tax (VAT), which shall be borne by the Buyer.
d. The Seller represents and warrants unto the Buyer that it is the owner of
the subject property; it has full and legal capacity to execute this deed and
to transfer in full to the Buyer, all of its rights, title and interest in and to
the subject property, and that the subject property is free from any liens
and encumbrances.
B. On March 5, 2015, the Company, “Seller”, entered into a “Deed of absolute sale
of equipment, furniture and fixtures” with Movmento, Inc., “Buyer”.
The Seller is the owner of certain equipment and furniture and fixtures and has
offered to sell the same to the Buyer. The Buyer agreed to purchase the
equipment and furniture and fixtures and clear of all liens and encumbrances
subject to the terms and conditions of the deed.
For and in consideration of the foregoing premises and the covenants contained,
the parties hereby agree as follows:
a. For and in consideration of the amount of P1,537,004 (inclusive of VAT),
receipt and sufficiency of which are acknowledged by the Seller. The Seller
shall sell, assign and transfer to the Buyer all its rights, title and interests in
the equipment and furniture and fixtures free and clear of all liens and
encumbrances.
b. Seller shall cooperate with purchaser in providing necessary information and
on performing promptly any and all acts as may be necessary in order to
effectuate the transfer of the equipment and furniture and fixtures to Buyer.
c. Any VAT, income tax and capital gains tax which may be due on the sale of
the machinery and equipment shall be for the account of the Buyer.
Any documentary stamp tax which may be due on the sale of the
equipment and furniture and fixtures shall be for the account of the Buyer.
The carrying amounts of the equipment and furniture and fixtures sold are
as follows:
Computer P 714,054
Office equipment 280,997
Leasehold improvement 207,911
Furniture and fixtures 169,363
P 1,372,325
C. On March 5, 2015, the Company, “Seller”, entered into a “Deed of sale of
motor vehicles” with Movmento, Inc., “Buyer”, for a total consideration of
P1,184,217. The buyer agreed to purchase the motor vehicles clear of all liens
and encumbrances subject to the terms and conditions of the deed.
4
D. On March 5, 2015, the Company, “Assignor”, entered into a “Deed of
assignment of subscription” with Movmento, Inc., “Assignee”, for a
consideration of P13,488. The Assignor unconditionally and irrevocably assigns,
transfers and conveys, all its rights, interests and obligations in and obligations
in and to its entire subscription consisting of 1,000 shares (“Assigned Shares”),
with par value of one (1) Malaysian Ringgit per share in iRipple Sdn Bhd, a
corporation duly organized and existing under and by virtue of the laws in
Malaysia.
Moreover, the Assignor’s investment with Auto Top-Up Ventures, Inc. (ATVI)
was also assigned with Assignee for a total consideration of P126,000.
The Assignor unconditionally and irrevocably assigns, transfers and conveys, all
its rights, interests and obligations in and obligations in and to its investment.
E. On March 6, 2015, the Company “Assignor” entered into an “Assignment of
Application for registration of trademark/tradename” with Movmento, Inc.
“Assignee”. The Assignor owns the trademarks of “Ripple and Logo” and
“Barter” which are registered before the Intellectual Property Office of the
Philippines. The Assignee acquires all the rights, title and interest in and to the
trademarks for the amount of P1 receipt.
The Company entered into several sale and purchase agreements with various entities
in 2015. The following are the material transactions that transpired in 2015:
A. As of March 12, 2015, the Bidder agreed to purchase all the rights, title and
interest of certain majority shareholders of the Company (collectively, the
“Private Shareholder”) representing 89.49% of the Company issued and
outstanding capital stock. The Bidder proposes to acquire, under the same
terms, through a mandatory tender offer (the “Tender Offer”) in accordance with
Section 19 of the SRC and applicable rules and regulations the remaining
10.50% of the Company’s issued and outstanding common stock held by the
public. After the acquisition, a Bidder intends to amend the Articles of
Incorporation of the Company to change its corporate name and to change its
primary purpose to allow it to acquire, hold, encumber or dispose of properties,
real and personal. The Bidder is contemplating investing, through the Company,
in various industries. The Bidder has no plans of causing any class of equity
securities of the Company, which is listed on the PSE to be delisted. The tender
offer is being conducted in order to comply with SRC rule 19 and other
applicable laws and with the intention of retaining the status of the Company as
a PSE listed Company. The bidder has no intention to cause the Company to no
longer be subject to the reporting requirements of SRC Rule 17.
B. At the special meeting of the Board of Directors (BOD) on May 28, 2015, the
following amendments on the Articles of Incorporation (AOI) were unanimously
approved:
a. The name of the Corporation shall be Alterra Capital Partners, Inc.
b. The primary purpose of the Corporation is to engage in the business of a
holding Company by buying and holding shares of other companies, whether
common, preferred, treasury, founders or other kinds of shares, either by
subscribing to the unissued shares of the capital stock in public or private
offering or by purchasing the shares of other stockholders by way of
assignment in private sale; to invest in the stock or equity of other
companies; to acquire rights in the stock of other companies by way of sale,
pledge, chattel mortgage or assignment; to sell, dispose, assign, pledge or
convey any or all or its shareholdings in other companies in favor of qualified
persons by way of private sale, assignment or other form of private
5
conveyance, all in accordance with the Corporation Code, the SRC and other
applicable laws and regulations; to vote its shareholdings in other companies
and exercise all the rights of a shareholder under the Corporation Code and
applicable laws provided that it will not act as stockbroker or dealer of
securities.
c. The principal office of the Corporation is to be established at 2286 Pasong
Tamo Extension, Makati City.
In 2016, the Company entered into several sale and purchase agreements with various
entities and other transactions. The following are the material transactions that
transpired in 2016:
A. On August 12, 2016, a group of Company’s shareholders “Sellers” entered into a
Share Purchase Agreement with Genomics, Inc. and Mr. Hector Thomas A.
Navasero “Buyers” for the sale of Two Hundred Eight Million Six Hundred Thirty
Five Thousand Eight Hundred One (208,635,801) common shares of stock of the
Company representing approximately 67% of the issued outstanding capital stock
of the Company. The sale shall effectively transfer control of the Company to
the Buyers, subject to the completion of a mandatory tender offer pursuant to the
SRC and its implementing rules and regulations and other closing conditions.
On October 11, 2016, the Sellers and Buyers completed the Share Purchase
Agreement and the shares were transferred to the Buyers via special block sale.
B. On September 14, 2016, the Board approved the amendment of the Company’s
amended AOI, as follows:
a. The name of the Corporation shall be Philab Holdings Corp.
b. The secondary purpose of the Corporation to include the power to guarantee
the obligation of any person, firm or entity in which the Corporation may have
lawful interest.
c. Transfer Company’s principal office address to 8th Floor, 1128 38th Avenue,
Fort Bonifacio Global City, Taguig City, Metro Manila.
d. Increase par value from P0.05 per share to P0.25 per share.
e. To include new provision as the Eleventh (11th) Article pertaining to the denial
of pre-emptive rights of the stockholders.
f. Increase authorized capital stock from Twenty Million Pesos (P20,000,000) to
up to Two Billion Pesos (P2,000,000,000).
On October 20, 2016, stockholders representing at least 2/3 of the outstanding
capital stock approved the abovementioned amendments to the Company’s AOI.
On December 12, 2016, the SEC approved the amendments on items b, c, d and
e stated above.
C. On October 20, 2016, during the respective meetings of the Company’s Board of
Directors and shareholders owning/holding at least 2/3 of the outstanding capital
stock, the Company obtained approval to acquire up to 361,390 shares of stock
of Philab Industries, Inc. “Philab” a corporation organized and existing under the
laws of the Philippines, representing approximately 100% of its issued and
outstanding capital stock at the aggregate price of Five Hundred Million Pesos
(P500,000,000).
6
D. On a special meeting of the board of directors on December 15, 2016, it was
resolved and approved by the majority of members of the Board that the
Company shall be authorized to acquire Three Hundred Fifty One Thousand Seven
Hundred Forty (351,740) shares, representing 93.48% of the total outstanding
capital stock of Philab Industries Inc. at the price of P2,445 per share or the
aggregate price of Eight Hundred Sixty Million Pesos (P860,000,000).
The ownership of Philab to the Company is yet to be transferred as of
December 31, 2016.
E. It was also resolved and approved on the special meeting of the board of
directors on December 15, 2016 that the Company to enter into subscription
agreements to issue the increase in capital stock equivalent to 7,937,723,940
shares or P1,984,430,985. Subscribers include some of the selling shareholders
of Philab, as well as non-related or affiliated subscribers.
The increase in the capital stock of the Company is still in process with the SEC.
The Company’s registered office address is located at 8th Floor, 1128 38th Avenue,
Fort Bonifacio Global City, Taguig City, Metro Manila.
2. ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS
The Philippine Financial Reporting Standards Council (FRSC) approved the issuance of
new and revised Philippine Financial Reporting Standards (PFRS). The term “PFRS” in
general includes all applicable PFRS, Philippine Accounting Standards (PAS), and
Interpretations issued by the Philippine Interpretations Committee (PIC), Standing
Interpretations Committee (SIC) and International Financial Reporting Interpretations
Committee (IFRIC) which have been approved by the FRSC and adopted by SEC.
These new and revised PFRS prescribe new accounting recognition, measurement and
disclosure requirements applicable to the Company. When applicable, the adoption of
the new standards was made in accordance with their transitional provisions,
otherwise the adoption is accounted for as change in accounting policy under PAS 8,
Accounting Policies, Changes in Accounting Estimates and Errors.
2.01 New and Revised PFRSs Applied with No Material Effect on the Financial
Statements
The following new and revised PFRSs have been adopted in these financial statements.
The application of these new and revised PFRSs has not had any material impact on
the amounts reported for the current and prior years but may affect the accounting for
future transactions or arrangements.
Amendments to PFRS 10, PFRS 12 and PAS 28, Investment Entities: Applying the
Consolidation Exception
The amendments confirm that the exemption from preparing consolidated financial
statements for an intermediate parent entity is available to a parent entity that is a
subsidiary of an investment entity, even if the investment entity measures all of its
subsidiaries at fair value.
In addition, it clarifies that a subsidiary that provides services related to the
parent's investment activities should not be consolidated if the subsidiary itself is
an investment entity.
7
Moreover, it clarifies that when applying the equity method to an associate or a
joint venture, a non-investment entity investor in an investment entity may retain
the fair value measurement applied by the associate or joint venture to its interests
in subsidiaries.
And, an investment entity measuring all of its subsidiaries at fair value shall
provide the disclosures relating to investment entities as required by PFRS 12.
The amendments are effective for annual periods beginning on or after
January 1, 2016 and must be applied retrospectively. Earlier application is
permitted.
PFRS 11, Joint Arrangements – Accounting for Acquisitions of Interests in Joint
Operations
Amendments in PFRS 11 require an acquirer of an interest in a joint operation in
which the activity constitutes a business to apply the accounting principles and
disclosure requirements in PFRS 3 and other PFRS for business combinations. This
is applicable in initial acquisition and acquisition of initial interest in a joint
operation. This is applicable prospectively to annual periods beginning
January 1, 2016.
PFRS 14, Regulatory Deferral Accounts
PFRS 14 issued on January 30, 2014, provides temporary guidance for first-time
adopters of PFRS on accounting for regulatory deferral account balances.
Regulatory deferral account balances are describe as amounts of expense or
income that would not be recognized as assets or liabilities in accordance with
other Standards, but that qualify to be deferred because the amount is included, or
is expected to be included, by the rate regulator in establishing the price(s) that an
entity can charge to customers for rate-regulated goods or services.
PFRS 14 permits an entity that adopts PFRS to continue to use, in its first and
subsequent PFRS financial statements, its previous generally accepted accounting
principles (GAAP) accounting policies for the recognition, measurement,
impairment and derecognition of regulatory deferral account balances without
specifically considering the requirements of paragraph 11 of PAS 8. PFRS 14
requires entities to present regulatory deferral account balances as separate line
items in the statement of financial position and to present movements in those
account balances as separate line items in the statement of profit or loss and other
comprehensive income. PFRS 14 also requires specific disclosures to identify the
nature of, and risks associated with, the rate regulation that has resulted in the
recognition of regulatory deferral account balances in accordance with this
Standard.
PFRS 14 is effective for a period beginning on or after January 1, 2016. Earlier
application is permitted.
Amendments to PAS 1, Disclosure Initiative
The amendments clarify that information should not be obscured by aggregating or
by providing immaterial information. Materiality considerations shall apply to all
parts of the financial statements even if when a standard requires a specific
disclosure.
8
In addition, the amendments introduce a clarification that the list of line items to be
presented in the statement of financial position and statement of comprehensive
income can be disaggregated and aggregated as relevant. Also, it clarifies that an
entity's share of other comprehensive income (OCI) of equity-accounted associates
and joint ventures should be presented in aggregate as single line items based on
whether or not it will subsequently be reclassified to profit or loss.
Further, the amendments add additional examples of possible ways of ordering the
notes to clarify that understandability and comparability should be considered when
determining the order of the notes. The IASB also removed guidance and examples
with regard to the identification of significant accounting policies that were
perceived as being potentially unhelpful.
PAS 16, Property, Plant and Equipment and PAS 38, Intangible Assets –
Clarification of Acceptable Methods of Depreciation and Amortization
The amendments clarify that revenue-based depreciation is not appropriate for
property, plant and equipment. Revenue-based amortization is allowed only when
the intangible assets are expressed as a measure of revenue or when it can be
demonstrated that revenue and the consumption of economic benefits of the
intangible asset are highly correlated. This is effective prospectively from
January 1, 2016. Earlier application is permitted.
PAS 16, Property, Plant and Equipment and PAS 41, Agriculture – Bearer Plants
The amendments include bearer plants, which are living plants that are used in the
production or supply of agricultural produce over a several periods and has a
remote likelihood of being sold as agricultural produce, to be within the scope of
PAS 16 instead of PAS 41 and consequently be accounted for in the same way as
property, plant and equipment. However, the produce growing on bearer plants
will remain within the scope of PAS 41. The amendments are applicable for
annual periods beginning on or after January 1, 2016. Earlier application is
permitted.
PAS 27, Separate Financial Statements – Equity Method in Separate Financial
Statements
The amendments in PAS 27 permit an entity to account its investments in
subsidiaries, joint ventures and associates using the equity method as described in
PAS 28 in its separate financial statements. The amendments shall be applied for
annual periods beginning January 1, 2016 retrospectively. Earlier application is
permitted.
Improvements to PFRS (2014) – Effective for annual periods beginning on or after
January 1, 2016. Earlier application is permitted.
PFRS 5, Non-current Assets Held for Sale and Discontinued Operations –
The amendments require that an asset reclassified directly from being held sale to
being held for distribution, or directly from being held for distribution to being held
for sale, the requirements for classification, presentation and measurement shall
continue to be applied in accordance with this standard.
9
PFRS 7, Financial Instruments: Disclosure – The amendments clarify that the right
to service a financial asset transferred may be retained for a fee that is included in
the servicing contract. The right to earn a fee for servicing the financial asset is
generally continuing involvement for the purpose of applying the disclosure
requirements. The service contract must be assessed to determine whether there
is a continuing involvement in the financial asset transferred.
Further, the additional disclosure required by amendments to PFRS 7, Disclosure –
Offsetting Financial Assets and Financial Liabilities is not specifically required for all
interim periods. For condensed financial interim financial statements, the
disclosure requirements are required to be given if the financial statements are
prepared in accordance with PAS 34, Interim Financial Reporting when the
inclusion would be required by the standard.
This is effective beginning on or after January 1, 2016, with earlier application
permitted.
PAS 19, Employee Benefits – It clarifies that the high quality corporate bonds used
to estimate the discount rate for post-employment benefit obligations should be
denominated in the same currency as the liability and that the depth of the market
for high quality corporate bonds should be assessed at the currency level.
PAS 34, Interim Financial Reporting – It clarifies that information shall be disclosed
either in the notes to the interim financial statements or elsewhere in the interim
financial report, by incorporating cross-reference from the interim financial
statements to the other part of the interim financial report which is available to
users on the same terms as the interim financial statements and at the same time.
PIC Q&A No. 2015-01, Conforming Changes in PIC Q&As – Cycle 2015
This Q&A No. 2015-01 sets out the amendments to certain PIC Q&As. These
changes are made as a consequence of the issuance of new Philippine Financial
Reporting Standards (PFRS) and amendments to certain existing PFRS that are
effective as of January 1, 2013.
The effective date of the amendments is included in the Q&As affected.
PIC Guidance on Financial Reporting
This guidance is issued to help preparers of financial statements identify and
address some of the common pitfalls and difficult interpretative issues arising from
application of PAS 7, Statement of Cash Flows.
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2.02 New and Revised PFRSs in Issue but Not Yet Effective
The Group will adopt the following standards and interpretations enumerated below
when they become effective. Except as otherwise indicated, the Group does not
expect the adoption of these new and amended PFRS, to have significant impact on
the financial statements.
2.02.01 Standard Adopted by FRSC and Approved by the Board of Accountancy
(BOA)
PFRS 9, Financial Instruments (2014)
PFRS 9, amended on July 24, 2014, made limited amendments to the
requirements for classification and measurement of financial assets and
requirements for impairment.
The amendments introduce a ‘fair value through other comprehensive income’
measurement category for particular simple debt instruments. Also it introduced
impairment requirements relating to the accounting for an entity’s expected credit
losses on its financial assets and commitments to extend credit. These
requirements eliminate the threshold that was in PAS 39 for the recognition of
credit losses. Under the impairment approach in PFRS 9 it is no longer necessary
for a credit event to have occurred before credit losses are recognized. Instead, an
entity always accounts for expected credit losses, and changes in those expected
credit losses. The amount of expected credit losses is updated at each reporting
date to reflect changes in credit risk since initial recognition and, consequently,
more timely information is provided about expected credit losses.
PFRS 9 supersedes PFRS 9 (2009), PFRS 9 (2010) and PFRS 9 (2013) and is
effective retrospectively for annual periods beginning on or after January 1, 2018,
with earlier application permitted.
PFRS 10, Consolidated Financial Statements and PAS 28, Investments in
Associates and Joint Ventures – Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture
The amendments clarify the treatment of the sale or contribution of assets
between an investor and its associate and joint venture. This requires an investor
in its financial statements to recognize in full the gains and losses arising from the
sale or contribution of assets that constitute a business while recognize partial
gains and losses if the assets do not constitute a business (i.e. up to the extent
only of unrelated investor share).
On January 13, 2016, the FRSC decided to postpone the original effective date of
January 1, 2016 of the said amendments until the IASB has completed its broader
review of the research project on equity accounting that may result in the
simplification of accounting for such transactions and of other aspects of
accounting for associates and joint ventures.
PFRS 16, Leases
Introduces a single lessee accounting model and requires a lessee to recognize
assets and liabilities for all leases with a term of more than 12 months, unless the
underlying asset is of low value. A lessee is required to recognize a right-of-use
asset representing its right to use the underlying leased asset and a lease liability
representing its obligation to make lease payments.
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On the other hand, it substantially carries forward the lessor accounting
requirements in PAS 17. Accordingly, a lessor continues to classify its leases as
operating leases or finance leases, and to account for those two types of leases
differently.
Effective for annual periods beginning on or after January 1, 2019, however,
earlier application is not permitted until the FRSC has adopted the new revenue
recognition standard.
IFRIC 15, Agreements for the Construction of Real Estate
The Interpretation addresses how entities should determine whether an agreement
for the construction of real estate is within the scope of PAS 11, Construction
Contracts, or PAS 18, Revenue, and when revenue from the construction of real
estate should be recognized. The requirements have not affected the accounting
for the Company’s construction activities.
Effectivity of this interpretation has been deferred until the final Revenue standard
is issued by International Accounting Standards Board (IASB), and an evaluation of
the requirements of the final Revenue standard against the practices of the
Philippine real estate industry is completed.
Amendments to PAS 7, Disclosure Initiative
The amendments require an entity to provide disclosures that enable users of
financial statements to evaluate changes in liabilities arising from financing
activities, including both changes arising from cash flows and non-cash charges.
Effective for annual periods beginning on or after January 1, 2017 and shall be
applied prospectively, with earlier application permitted.
Amendments to PAS 12, Recognition of Deferred Tax Assets for Unrealized Losses
The amendments clarify that unrealized losses on debt instruments measured at
fair value in the financial statements but at cost for tax purposes can give rise to
deductible temporary differences.
In addition, these clarify that the carrying amount of an asset does not limit the
estimation of probable future taxable profits and that when comparing deductible
temporary differences with future taxable profits, the future taxable profits
excludes tax deductions resulting from the reversal of those deductible temporary
differences.
Effective for annual periods beginning on or after January 1, 2017 and shall be
applied retrospectively, with earlier application permitted.
2.02.02 Standard Adopted by FRSC but pending for Approval of the BOA
Amendments to PFRS 2, Classification and Measurement of Share-based Payment
Transactions
The amendments clarify the accounting for the effects of vesting conditions on the
measurement of a cash-settled share-based payment transaction; the classification
of a share-based payment transaction with net settlement features for withholding
tax obligations; and modification to the terms and conditions of share-based
payment transactions that will result to change in classification from cash-settled
to equity-settled.
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The amendments are effective for annual periods beginning on or after
January 1, 2018. Retrospective application is permitted if elected for all of the
aforementioned amendments and other criteria are met.
PIC Q&A No. 2016-02, PAS 32 and PAS 38 – Accounting Treatment of Club
Shares Held by an Entity
A proprietary club share entitles the shareholder to a residual interest in the net
assets upon liquidation which justifies that such instrument is an equity instrument
and thereby qualifies as a financial asset to be accounted for under PAS 39,
Financial Instruments: Recognition and Measurement.
A non-proprietary club share, though an equity instrument in its legal form, is not
an equity instrument in the context of PAS 32. Furthermore, it does not entitle the
holder to a contractual right to receive cash or another financial asset from the
issuing corporation. The holder of the share, in substance, only paid for the
privilege to enjoy the club facilities and services but not for ownership of the club.
In such case, the holder must account for the share as an intangible asset under
PAS 38.
3. BASIS FOR THE PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS
3.01 Statement of Compliance
The financial statements have been prepared in conformity with PFRS and are under
the historical cost convention, except for certain financial instruments that are carried
either at amortized cost or at fair value and inventories carried at lower of cost or net
realizable value.
3.02 Functional and Presentation Currency
Items included in the financial statements of the Company are measured using
Philippine Peso (P), the currency of the primary economic environment in which the
Company operates (the “functional currency”).
The Company chose to present its financial statements using its functional currency.
4. SIGNIFICANT ACCOUNTING POLICIES
Principal accounting and financial reporting policies applied by the Company in the
preparation of its financial statements are enumerated below and are consistently
applied to all the years presented, unless otherwise stated.
4.01 Segment Information
An operating segment is a component of the Company: (a) that engages in business
activities from which it may earn revenues and incur expenses, including revenues and
expenses relating to transactions with other components of the Company; (b) whose
operating results are regularly reviewed by the Company’s chief operating decision
maker to make decisions about resources to be allocated to the segment and assess its
performance; and (c) for which discrete financial information is available.
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The Company reports separately, information about an operating segment that meets
any of the following quantitative thresholds: (a) Its reported revenue, including both
sales to external customers and inter-segment sales or transfers, is ten percent (10%)
or more of the combined revenue, internal and external, of all operating segments,
provided that; (b) The absolute amount of its reported profit or loss is 10% or more of
the greater, in absolute amount, of the combined reported profit of all operating
segments that did not report a loss and the combined reported loss of all operating
segments that reported a loss; and (c) Its assets are ten percent (10%) or more of the
combined assets of all operating segments.
Operating segments that do not meet any of the quantitative thresholds may be
considered reportable, and separately disclosed, if Management believes that
information about the segment would be useful to users of the financial statements.
In prior periods, the Company was organized into three (3) business segments:
Third Party Transactions, Retail Solutions and Special Projects. For Management
purposes, these divisions were the basis on which the Company reports its primary
segment information.
As of December 31, 2016, the Company does not have any existing operating
segments.
4.02 Financial Assets
Financial assets are initially measured at fair value, plus transaction costs, except for
those financial assets classified as at fair value through profit or loss, which are initially
measured at fair value.
Financial assets that are subsequently measured at amortized cost and where the
purchase or sale are under a contract whose terms require delivery of such within the
timeframe established by the market concerned, are initially recognized on the trade
date.
Financial assets are classified into the following specified categories: financial assets
‘at fair value through profit or loss’ (FVTPL), ‘held-to-maturity’ (HTM) investments,
‘available-for-sale’ (AFS) financial assets and ‘loans and receivables’.
The classification depends on the nature and purpose of the financial assets and is
determined at the time of initial recognition.
The Company’s financial assets include cash, due from a related party and financial
assets at FVTPL.
4.02.01 Effective Interest Method
The effective interest method is a method of calculating the amortized cost of a debt
instrument and of allocating finance income over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash receipts including
all fees on points paid or received that form an integral part of the effective interest
rate, transaction costs and other premiums or discounts, through the expected life of
the debt instrument, or, where appropriate, a shorter period to the net carrying amount
on initial recognition.
Income is recognized on an effective interest basis for debt instruments other than
those financial assets classified as FVTPL.
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4.02.02 Amortized Cost
Amortized cost is computed using the effective interest rate method less any
allowance for impairment and principal repayment or reduction. The calculation takes
into account any premium or discount on acquisition and includes transaction costs
and fees that are an integral part of effective interest rate.
4.02.03 Cash
Cash include cash on hand and cash in banks. Cash in banks include cash deposits
held at call with bank that are subject to insignificant risk of change in value.
This shall be measured at the undiscounted amount of the cash or other consideration
expected to be paid or received.
4.02.04 Financial Assets at FVTPL
Unit investment trust fund (UITF) refers to an investment in an investment company
(known as Unit Investment Trust) that offers a fixed portfolio, generally of stocks and
bonds, as redeemable units to investors for a specific period of time. It is designed to
provide capital appreciation and/or dividend income. The Company measures the
investment initially and at each reporting period at fair value with changes in fair value
recognized in profit or loss. Fair value is determined based on described in Note 4.02.
If a reliable measure of fair value is no longer available, the asset’s carrying amount at
the last date the asset was reliably measurable becomes its new cost. Subsequently,
the Company measures the asset at this cost amount less impairment until a reliable
measure of fair value becomes available.
4.02.05 Loans and Receivables
Trade receivables, loans and other receivables Accounts that have fixed or
determinable payments that are not quoted in an active market are classified as loans
and receivables. Loans and receivables are measured at amortized cost using the
effective interest method, less any impairment. Finance income is recognized by
applying the effective interest rate, except for short-term receivables when the
recognition of interest would be immaterial.
4.02.06 Impairment of Financial Assets
Financial assets, other than those at FVTPL are assessed for indicators of impairment
at the end of each reporting period. Financial assets are impaired where there is
objective evidence that, as a result of one or more events that occurred after the initial
recognition of the financial asset, the estimated future cash flows of the investment
have been affected.
Objective evidence of impairment could include:
significant financial difficulty of the issuer or counterparty; or
default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial
re-organisation; or
the lender, for economic or legal reasons relating to the borrower’s financial
difficulty, grants the borrower a concession that the lender would not otherwise
consider; or
the disappearance of an active market for that financial asset because of financial
difficulties; or
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observable data indicating that there is a measurable decrease in the estimated
future cash flows from a group of financial assets since the initial recognition of
those assets, although the decrease cannot yet be identified with the individual
financial assets in the group, including (i) adverse changes in the payment status
of borrowers in the group (e.g. an increased number of delayed payments or an
increased number of credit card borrowers who have reached their credit limit
and are paying the minimum monthly amount); or (ii) national or local economic
conditions that correlate with defaults on the assets in the group (e.g. an increase
in the unemployment rate in the geographical area of the borrowers, a decrease in
property prices for mortgages in the relevant area, a decrease in oil prices for loan
assets to oil producers, or adverse changes in industry conditions that affect the
borrowers in the group).
Other factors may also be evidence of impairment, including significant changes with
an adverse effect that have taken place in the technological, market, economic or legal
environment in which the issuer operates.
For certain categories of financial asset, such as trade receivables, assets that are
assessed not to be impaired individually are, in addition, assessed for impairment on a
collective basis. Objective evidence of impairment for a portfolio of receivables could
include the Company’s past experience of collecting payments, an increase in the
number of delayed payments in the portfolio past the average credit period of
thirty (30) days, as well as observable changes in national or local economic conditions
that correlate with default on receivables.
For financial assets carried at amortized cost, the amount of the impairment is the
difference between the asset’s carrying amount and the present value of estimated
future cash flows, discounted at the financial asset’s original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly
for all financial assets with the exception of trade receivables, where the carrying
amount is reduced through the use of an allowance account. When a trade receivable
is considered uncollectible, it is written off against the allowance account. Subsequent
recoveries of amounts previously written off are credited against the allowance
account. Changes in the carrying amount of the allowance account are recognized in
profit or loss.
For financial assets carried at cost, the amount of the impairment loss is measured as
the difference between the carrying amount of the financial asset and the present
value of estimated future cash flows discounted at the current market rate of return for
a similar financial asset. Such impairment losses shall not be reversed.
4.02.07 Derecognition of Financial Assets
The Company derecognizes a financial asset only when the contractual rights to the
cash flows from the asset expire, or when it transfers the financial asset and
substantially all the risks and rewards of ownership of the asset to another entity.
If the Company neither transfers nor retains substantially all the risks and rewards of
ownership and continues to control the transferred asset, the Company recognizes its
retained interest in the asset and an associated liability for amounts it may have to
pay. If the Company retains substantially all the risks and rewards of ownership of a
transferred financial asset, the Company continues to recognize the financial asset and
also recognizes a collateralized borrowing for the proceeds received.
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4.03 Other Current Assets
Other current assets represent expenses not yet incurred but already paid in cash.
These are initially recorded as assets and measured at the amount of cash paid.
Subsequently, these are charged to profit or loss as they are consumed in operations
or expire with the passage of time.
Other current assets are classified in the statements of financial position as current
assets when the expenses related to these assets are expected to be incurred within
one year or the Company’s normal operating cycle whichever is longer. Otherwise,
other current assets are classified as non-current assets.
4.04 Investments in an Associate
An associate is an entity over which Company has significant influence and that is
neither a subsidiary nor an interest in a joint venture. Significant influence is the
power to participate in the financial and operating policy decisions of the investee but
is not control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in these financial
statements using the equity method of accounting, except when the investment is
classified as held for sale, in which case it is accounted for in accordance with
PFRS 5, Non-current Assets Held for Sale and Discontinued Operations. Under the
equity method, an investment in an associate is initially recognized in the statement of
financial position at cost and adjusted thereafter to recognize the Company’s share of
the profit or loss and other comprehensive income of the associate. When the
Company’s share of losses in an associate exceeds the Company’s interest in that
associate (which includes any long-term interests that, in substance, form part of the
Company’s net investment in the associate), the Company discontinues recognizing its
share of further losses. Additional losses are recognized only to the extent that the
Company has incurred legal or constructive obligations or made payments on behalf of
the associate.
Any excess of the cost of acquisition over the Company’s share of the net fair value of
the identifiable assets, liabilities and contingent liabilities of the associate recognized at
the date of acquisition is recognized as goodwill. The goodwill is included within the
carrying amount of the investment and is assessed for impairment as part of that
investment. Any excess of the Company’s share of the net fair value of the
identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after
reassessment, is recognized immediately in profit or loss.
The Company accounts the investment under the cost method. The Company
recognizes as income the dividends received that are distributed from net accumulated
earnings of the investee since the date of acquisition by the investor. Dividends
received that are in excess of the earnings subsequent to the date of acquisition are
not income and therefore considered as return or reduction of investment.
The requirements of PAS 39, Financial Instruments: Recognition and Measurement are
applied to determine whether it is necessary to recognize any impairment loss with
respect to the Company’s investment in an associate. When necessary, the entire
carrying amount of the investment (including goodwill) is tested for impairment in
accordance with PAS 36, Impairment of Assets, as a single asset by comparing its
recoverable amount (higher of value in use and fair value less costs to sell) with its
carrying amount. Any impairment loss recognized forms part of the carrying amount
of the investment. Any reversal of that impairment loss is recognized in accordance
with PAS 36 to the extent that the recoverable amount of the investment
subsequently increases.
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In 2016, the Company does not have any existing investment in an associate.
4.05 Investments in a Subsidiary
A subsidiary is an entity including an unincorporated entity such as a partnership that
is controlled by another entity known as parent. Control is the power to govern the
financial and operating policies of an entity so as to obtain benefits from its activities.
Investments in a subsidiary are accounted under the cost method. Under the cost
method, the Company recognizes as income the dividends received that are distributed
from net accumulated earnings of the investee since the date of acquisition by the
investor. Dividends received that are in excess of the earnings subsequent to the date
of acquisition are not income and therefore considered as return of or reduction in
investment.
If the Company loses control of a subsidiary, the Company recognizes any investment
retained in the former subsidiary at its fair value at the date when control is lost or
recognizes any resulting difference as a gain or loss in profit or loss attributable to the
Company. Changes in a Company’s ownership interest in a subsidiary that do not
result in a loss of control are accounted for as equity transactions.
In 2016, the Company does not have any existing investment in a subsidiary.
4.06 Inventories
Inventories are stated at the lower of cost or net realizable value. Costs are
determined using the specific identification method. Net realizable value represents
the estimated selling price for inventories less all estimated costs of completion and
costs necessary to make the sale.
When the net realizable value of the inventories is lower than the cost, the Company
provides for an allowance for the decline in the value of the inventory and recognizes
the write-down as an expense in the statements of comprehensive income.
The amount of any reversal of any write-down of inventories, arising from an increase
in net realizable value, is recognized as a reduction in the amount of inventories
recognized as an expense in the period in which the reversal occurs.
When inventories are sold, the carrying amount of those inventories is recognized as
an expense in the period in which the related revenue is recognized.
In 2016, the Company does not have any existing inventories.
4.07 Property and Equipment
Property and equipment are initially measured at cost. The cost of an asset consists
of its purchase price and costs directly attributable to bringing the asset to its working
condition for its intended use. Subsequent to initial recognition property and
equipment are carried at cost less accumulated depreciation and accumulated
impairment losses.
Subsequent expenditures relating to an item of property and equipment that have
already been recognized are added to the carrying amount of the asset when it is
probable that future economic benefits, in excess of the originally assessed standard of
performance of the existing asset, will flow to the Company. All other subsequent
expenditures are recognized as expenses in the period in which those are incurred.
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Depreciation is computed on the straight-line method based on the estimated useful
lives of the assets as follows:
Vehicles 5 years
Office equipment 2 to 3 years
Furniture and fixtures 2 years
Leasehold improvements are depreciated over the shorter between the improvements’
useful life of two (2) years or the lease term.
The assets’ residual values, useful lives and depreciation methods are reviewed, and
adjusted prospectively if appropriate, if there is an indication of significant change
since the last reporting date.
An item of property and equipment is derecognized on disposal, or when no future
economic benefits are expected from use or disposal. Gains or losses arising from
derecognition of a property and equipment are measured as the difference between the
net disposal proceeds and the carrying amount of the asset and are recognized in profit
or loss.
In 2016, the Company does not have any existing property and equipment.
4.08 Impairment of Assets
At each reporting date, the Company assesses whether there is any indication that any
assets other than inventories, deferred tax assets and financial assets that are within
the scope of PAS 39, Financial Instruments: Recognition and Measurement, may have
suffered an impairment loss. If any such indication exists, the recoverable amount of
the asset is estimated in order to determine the extent of the impairment loss, if any.
Where it is not possible to estimate the recoverable amount of an individual asset, the
Company estimates the recoverable amount of the cash-generating unit to which the
asset belongs. When a reasonable and consistent basis of allocation can be identified,
assets are also allocated to individual cash-generating units, or otherwise they are
allocated to the smallest group of cash-generating units for which a reasonable and
consistent allocation basis can be identified.
Recoverable amount is the higher of fair value less costs to sell and value in use.
In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for which the estimates of
future cash flows have not been adjusted.
If the recoverable amount of an asset or cash-generating unit is estimated to be less
than its carrying amount, the carrying amount of the asset or cash-generating unit is
reduced to its recoverable amount. An impairment loss is recognized as an expense.
When an impairment loss subsequently reverses, the carrying amount of the asset or
cash-generating unit is increased to the revised estimate of its recoverable amount, but
the increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognized for the asset or
cash-generating unit in prior years. A reversal of an impairment loss is recognized as
an income.
4.09 Borrowing Costs
All borrowing costs are recognized in profit or loss in the period in which they are
incurred.
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4.10 Financial Liabilities and Equity Instruments
4.10.01 Classification as Debt or Equity
Debt and equity instruments are classified as either financial liabilities or as equity in
accordance with the substance of the contractual arrangement.
4.10.02 Financial Liabilities
Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other
financial liabilities’.
The Company’s financial liability pertains to payables (except payable to government
agencies) and deposit for future stock subscription.
4.10.03 Other Financial Liabilities
Other financial liabilities, including borrowings, are initially measured at fair value
inclusive of directly attributable transaction costs.
Other financial liabilities are subsequently measured at amortized cost using the
effective interest method, with finance cost recognized on an effective yield basis.
The effective interest method is a method of calculating the amortized cost of a
financial liability and of allocating finance cost over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash payments through
the expected life of the financial liability, or, where appropriate, a shorter period to the
net carrying amount on initial recognition.
4.10.04 Derecognition of Financial Liabilities
The Company derecognizes financial liabilities when, and only when, the Company’s
obligations are discharged, cancelled or expired. The difference between the carrying
amount of the financial liability derecognized and the consideration paid and payable is
recognized in profit or loss.
4.10.05 Equity Instruments
An equity instrument is any contract that evidences a residual interest in the assets of
an entity after deducting all of its liabilities. Equity instruments issued by the Company
are recognized at the proceeds received, net of direct issue costs.
Ordinary shares are classified as equity. Incremental costs directly attributable to the
issuance of new shares are shown in equity as a deduction from the proceeds, net of
tax.
4.10.06 Deposit for Future Stock Subscription
Deposit for future stock subscription is defined as a subscription agreement which,
among other things, states that the Company is not contractually obliged to return the
consideration received and that the Company is obliged to deliver fixed number of own
shares of stock for a fixed amount of cash or property paid or to be paid by the
contracting party.
Deposit for future stock subscription is classified as equity if all the conditions required
for such recognition have been met as of the end of the reporting period otherwise, if
not, classified as liability.
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Deposit for future stock subscription is classified as equity when all of the following
conditions are met as of the end of the reporting date:
the unissued authorized capital stock of the entity is insufficient to cover the
amount of shares indicated in the contract; and
There is Board of Directors’ approval on the proposed increase in authorized
capital stock (for which a deposit was received by the corporation); and
There is stockholders’ approval of said proposed increase; and
The application for the approval of the proposed increase has been filed with
the Commission.
4.11 Offsetting of Financial Instruments
Financial assets and liabilities are offset and the net amount is reported in the
statements of financial position if, and only if, there is a currently enforceable legal
right to offset the recognized amounts and there is an intention to settle on a net
basis, or to realize the assets and settle the liabilities simultaneously.
4.12 Employee Benefits
4.12.01 Short-term Benefits
The Company recognizes a liability net of amounts already paid and an expense for
services rendered by employees during the accounting period. Short-term benefits
given by the Company to its employees include salaries and wages, social security
contributions, short-term compensated absences, incentives and bonuses, and
non-monetary benefits.
4.12.02 Post-employment Benefits
The Company had an unfunded, non-contributory defined benefit retirement plan.
This benefit defines an amount of pension benefit that an employee will receive on
retirement, usually dependent on one or more factors such as age, years of service and
compensation.
The cost of providing benefits is determined using the Projected Unit Credit Method
which reflects services rendered by employees to the date of valuation and
incorporates assumptions concerning employees’ projected salaries. Post-employment
expenses include current service cost, past service cost, and net interest on defined
benefit asset/liability. Remeasurements which include cumulative actuarial gains and
losses, return on plan assets, and changes in the effects of asset ceiling are recognized
directly in other comprehensive income and is also presented under equity in the
statement of financial position.
Actuarial gains and losses arising from experience adjustments and changes in
actuarial assumptions are charged or credited to equity in other comprehensive income
in the period in which they arise.
Past-service costs are recognized immediately in profit or loss.
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The liability recognized in the statements of financial position in respect of defined
benefit pension plans is the present value of the defined benefit obligation at the end
of the reporting period less the fair value of plan assets. The defined benefit obligation
is calculated by an independent actuary using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the
estimated future cash outflows using interest rates of government securities, equity
securities and other securities that are denominated in the currency in which the
benefits will be paid, and that have terms to maturity approximating to the terms of
the related pension obligation.
4.13 Provisions
Provisions are recognized when the Company has a present obligation, whether legal or
constructive, as a result of a past event, it is probable that the Company will be
required to settle the obligation, and a reliable estimate can be made of the amount of
the obligation.
The amount recognized as a provision is the best estimate of the consideration required
to settle the present obligation at the end of the reporting period, taking into account
the risks and uncertainties surrounding the obligation. Where a provision is measured
using the cash flows estimated to settle the present obligation, its carrying amount is
the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected
to be recovered from a third party, a receivable is recognized as an asset if it is
virtually certain that reimbursement will be received and the amount of the receivable
can be measured reliably.
Provisions are reviewed at each reporting date and adjusted to reflect the current best
estimate.
4.14 Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will
flow to the Company and the revenue can be measured reliably. Revenue is measured
at the fair value of the consideration received or receivable and represents amounts
receivable for goods and services provided in the normal course of business.
4.14.01 Sale of Goods
Revenue from the sale of goods is recognized when all the following conditions are
satisfied:
the Company has transferred to the buyer the significant risks and rewards of
ownership of the goods;
the Company retains neither continuing managerial involvement to the degree
usually associated with ownership nor effective control over the goods sold;
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the transaction will flow
to the Company; and
the costs incurred or to be incurred in respect of the transaction can be measured
reliably.
Revenue from sale of goods encompasses sale of hardware and point-of-sale (POS)
software.
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4.14.02 Rendering of Services
Revenue from a contract to provide services is recognized by reference to the stage of
completion of the contract. Revenue from rendering of services is recognized when all
the following conditions are satisfied:
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the transaction will flow
to the Company;
the stage of completion of the transaction can be measured reliably; and
the costs incurred for the transaction and the costs to complete the transaction
can be measured reliably.
Revenue from rendering of services encompasses sale of licenses, implementation and
the maintenance fees of Barter™ MMS, and sale of customized POS software for a
specified customer.
4.14.03 Finance Income
Finance income is recognized when it is probable that the economic benefits will flow
to the Company and the amount of revenue can be measured reliably. Finance income
is accrued on a time proportion basis, by reference to the principal outstanding and at
the effective interest rate applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset to that asset’s net
carrying amount on initial recognition.
4.15 Expense Recognition
Expense encompasses losses as well as those expenses that arise in the course of the
ordinary activities of the Company.
The Company recognizes expenses in the statements of comprehensive income when a
decrease in future economic benefits related to a decrease in an asset or an increase of
a liability has arisen that can be measured reliably.
4.16 Leases
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other leases are
classified as operating leases.
4.16.01 The Company as a Lessee
Assets held under finance leases are initially recognized as assets of the Company at
their fair value at the inception of the lease or, if lower, at the present value of the
minimum lease payments. The corresponding liability to the lessor is included in the
statements of financial position as a finance lease obligation.
Lease payments are apportioned between finance expenses and reduction of the lease
obligation so as to achieve a constant rate of interest on the remaining balance of the
liability. Finance expenses are recognized immediately in profit or loss.
Operating lease payments are recognized as an expense on a straight-line basis over
the lease term, except where another systematic basis is more representative of the
time pattern in which economic benefits from the leased asset are consumed.
23
In the event that lease incentives are received to enter into operating leases, such
incentives are recognized as a liability. The aggregate benefit of incentives is
recognized as a reduction of rental expense on a straight-line basis, except where
another systematic basis is more representative of the time pattern in which economic
benefits from the leased asset are consumed.
4.17 Related Parties and Related Party Transactions
A related party is a person or entity that is related to the Company that is preparing its
financial statements. A person or a close member of that person’s family is related to
Company if that person has control or joint control over the Company, has significant
influence over the Company, or is a member of the key management personnel of the
Company or of a parent of the Company.
An entity is related to the Company if any of the following conditions applies:
The entity and the Company are members of the same group (which means that
each parent, subsidiary and fellow subsidiary is related to the others).
One entity is an associate or joint venture of the other entity (or an associate or
joint venture of a member of a group of which the other entity is a member); or
Both entities are joint ventures of the same third party.
One entity is a joint venture of a third entity and the other entity is an associate of
the third entity.
The entity is a post-employment benefit plan for the benefit of employees of either
the Company or an entity related to the Company. If the Company is itself such a
plan, the sponsoring employers are also related to the Company.
The entity is controlled or jointly controlled by a person identified above.
A person identified above has significant influence over the entity or is a member
of the key management personnel of the entity (or of a parent of the entity).
Management entity providing key management personnel services to a reporting
entity.
Close members of the family of a person are those family members, who may be
expected to influence, or be influenced by, that person in their dealings with the
Company and include that person’s children and spouse or domestic partner; children
of that person’s spouse or domestic partner; and dependants of that person or that
person’s spouse or domestic partner.
A related party transaction is a transfer of resources, services or obligations between
related parties, regardless of whether a price is charged.
4.18 Taxation
Income tax expense represents the sum of current and deferred taxes.
4.18.01 Current Tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs
from profit as reported in the statements of comprehensive income because of items of
income or expense that are taxable or deductible in other years and items that are
never taxable or deductible. The Company’s liability for current tax is calculated using
tax rates that have been enacted or substantively enacted by the end of the reporting
period.
24
4.18.02 Deferred Tax
Deferred tax is recognized on temporary differences between the carrying amounts of
assets and liabilities in the financial statements and the corresponding tax bases used
in the computation of taxable profit. Deferred tax liabilities are generally recognized for
all taxable temporary differences. Deferred tax assets are generally recognized for all
deductible temporary differences, carry forward of unused tax credits from excess
Minimum Corporate Income Tax (MCIT) over Regular Corporate Income Tax (RCIT) and
unused Net Operating Loss Carryover (NOLCO), to the extent that it is probable that
taxable profits will be available against which those deductible temporary differences
and carry forward of unused MCIT and unused NOLCO can be utilized. Deferred
income tax, however, is not recognized when it arises from the initial recognition of an
asset or liability in a transaction that is not a business combination and, at the time of
the transaction that affects neither the accounting profit nor taxable profit or loss.
Deferred tax liabilities are recognized for taxable temporary differences. Deferred tax
assets arising from deductible temporary differences are only recognized to the extent
that it is probable that there will be sufficient taxable profits against which to utilize
the benefits of the temporary differences and they are expected to reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting
period and reduced to the extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to
apply in the period in which the liability is settled or the asset realized, based on tax
rates and tax laws that have been enacted or substantively enacted by the end of the
reporting period. The measurement of deferred tax liabilities and assets reflects the
tax consequences that would follow from the manner in which the Company expects,
at the end of the reporting period, to recover or settle the carrying amount of its assets
and liabilities.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to
set off current tax assets against current tax liabilities and when they relate to income
taxes levied by the same taxation authority and the Company intends to settle its
current tax assets and liabilities on a net basis.
4.18.03 Current and Deferred Tax for the Period
Current and deferred tax are recognized as an expense or income in profit or loss,
except when they relate to items that are recognized outside profit or loss, whether in
other comprehensive income or directly in equity, in which case the tax is also
recognized outside profit or loss.
4.19 Earnings Per Share
The Company computes its basic earnings per share by dividing net income or loss
attributable to ordinary equity holders of the Company by the weighted average
number of ordinary shares outstanding during the period.
25
4.20 Events after the Reporting Period
The Company identifies subsequent events as events that occurred after the reporting
date but before the date when the financial statements were authorized for issue. Any
subsequent events that provide additional information about the Company’s position at
the reporting date, adjusting events, are reflected in the financial statements, while
subsequent events that do not require adjustments, non-adjusting events, are disclosed
in the notes to financial statements when material.
5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTIES
In the application of the Company’s accounting policies, which are disclosed in Note 4,
Management is required to make judgments, estimates and assumptions about the
carrying amounts of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on historical experience
and other factors that are considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which the estimate is
revised if the revision affects only that period or in the period of the revision and future
periods if the revision affects both current and future periods.
5.01 Critical Judgments in Applying Accounting Policy
The following are the critical judgment, apart from those involving estimations that
Management has made in the process of applying the entity’s accounting policies and
that have the most significant effect on the amounts recognized in financial
statements.
5.01.01 Assessment of Control
The Company determines whether an entity qualifies as a subsidiary when it has
control over an entity. The Company controls an entity when it has the three (3)
elements of control, as disclosed in Note 4. In making its judgments, the Company
considers all facts and circumstances when assessing control over an investee.
A reassessment of control is conducted when there are changes to one (1) or more of
the three (3) elements of control. Any changes from at least one (1) of the elements
would result to lose or gain of control over an entity.
In 2014, the Company having 100% ownership and voting interest in IRipple Sdn Bhd
assessed that it has control over its subsidiary since it has power over the subsidiary,
exposure or rights to variable returns from its involvement and ability to use its power
to affect the component of its returns.
In 2015, the above investment was assigned to Movmento, Inc., as disclosed in
Note 1.
26
In 2012, the Company has a 51% voting rights over Auto Top-up Ventures, Inc.
(ATVI). In 2014 and 2013, the Company transferred, assigned and conveyed
absolutely and irrevocably, free from all liens and encumbrances portion of its
investment in ATVI representing 2% and 24%, respectively, of the latter’s shares
issued. This transaction resulted to a loss of control and decrease of voting interest
from 51% in 2012 to 49% in 2013 and ultimately 25% in 2014. As a result of the
said transfer and loss of Company’s control, ATVI became an associate. In 2014 and
2013, the Company assessed that it does not have a control over ATVI but rather it
has significant influence since it has only the power to participate in the financial and
operating policy decisions over the investee.
In 2015, the Company assigns its remaining investment in ATVI to Movmento, Inc., as
disclosed in Note 1.
In 2016, the Company does not have any investment in a subsidiary nor an associate.
5.01.02 Aggregation of Operating Segments
In accordance with the provisions of PFRS 8, Operating Segments, the Company’s
reporting segment is based on the management approach with regard to the segment
identification, under which information regularly provided to the chief operating
decision maker for decision-making purposes is considered as decisive. The segments
are also evaluated under the management approach.
The Company reports its segment based on the types of goods supplied and services
provided by the Company’s operating divisions. However, the information reported to
the Company’s Chief operating decision maker for the purposes of resource allocation
and assessment of segment performance is more specifically focused on the types of
products and services delivered or provided. In the previous year, the Company has
three (3) reportable segments: Retail Solutions, Third Party Transactions and Special
Projects. The accounting policies of the reportable segments are the same as the
Company’s accounting policies.
As of December 31, 2016 and 2015, the Company does not have any operating
segments.
5.01.03 Classification of Lease
The Company determines whether a lease qualifies as a finance lease. In making its
judgments, the Company considers whether the risk and reward of the leased property
will be transferred to the lessee. A lease is classified as a finance lease if it transfers
substantially all the risks and rewards incidental to ownership. A lease is classified as
an operating lease if it does not transfer substantially all the risks and rewards
incidental to ownership. Whether a lease is a finance lease or an operating lease
depends on the substance of the transaction rather than the form of the contract.
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5.02 Key Sources of Estimation Uncertainties
The following are the key assumptions concerning the future, and other key sources of
estimation uncertainties at the end of the reporting periods that have a significant risk
of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year.
5.02.01 Reviewing Residual Values, Useful Lives and Depreciation Method of Property
and Equipment
The residual values, useful lives and depreciation method of the Company’s property
and equipment are reviewed at least annually, and adjusted prospectively if
appropriate, if there is an indication of a significant change in, how an asset is used;
significant unexpected wear and tear; technological advancement; and changes in
market prices since the most recent annual reporting date. The useful lives of the
Company’s assets are estimated based on the period over which the assets are
expected to be available for use. In determining the useful life of an asset, the
Company considers the expected usage, expected physical wear and tear, technical or
commercial obsolescence arising from changes or improvements in production, or from
a change in the market demand for the product or service output and legal or other
limits on the use of the Company’s assets. In addition, the estimation of the useful
lives is based on Company’s collective assessment of industry practice, internal
technical evaluation and experience with similar assets. It is possible, however, that
future results of operations could be materially affected by changes in estimates
brought about by changes in factors mentioned above. The amounts and timing of
recorded expenses for any period would be affected by changes in these factors and
circumstances. A reduction in the estimated useful lives of property and equipment
would increase the recognized operating expenses and decrease non-current assets.
The Company uses a depreciation method that reflects the pattern in which it expects
to consume the asset’s future economic benefits. If there is an indication that there
has been a significant change in the pattern used by which the Company expects to
consume an asset’s future economic benefits, the Company shall review its present
depreciation method and, if current expectations differ, it shall change the depreciation
method to reflect the new pattern.
In 2015, the Company’s property and equipment was sold, as disclosed in Note 1.
As of December 31, 2016 and 2015, the Company does not have any property and
equipment.
5.02.02 Estimating Inventories at Net Realizable Values
Net realizable values of inventories are assessed regularly based on the prevailing
selling prices of inventories less estimated costs to sell. The Company recognizes
expense and provides allowance for decline in value of inventories whenever net
realizable value of inventories becomes lower than cost due to damage, physical
deterioration, obsolescence, changes on price levels or other causes. Inventory items
identified to be obsolete and unusable is written off and charged against allowance
account. Increase in the net realizable values will increase the carrying amount
through reduction of allowance for decline but only to the extent of original acquisition
cost.
In 2015, the Company’s inventories were sold, as disclosed in Note 1.
As of December 31, 2016 and 2015, the Company does not have any inventory.
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5.02.03 Asset Impairment
The Company performs an impairment review when certain impairment indicators are
present. Determining the fair value of property and equipment, investment in an
associate and investment in a subsidiary, which require the determination of future
cash flows expected to be generated from the continued use and ultimate disposition
of such assets, requires the Company to make estimates and assumptions that can
materially affect the financial statements.
The preparation of the estimated future cash flows involves significant judgment and
estimations. While the Company believes that its assumptions are appropriate and
reasonable, significant changes in the assumptions may materially affect the
assessment of recoverable values and may lead to future additional impairment charges
under PFRS.
In 2015, the Company sold its property and equipment and assigned its investment in
an associate and investment in a subsidiary, as disclosed in Note 1.
As of December 31, 2016 and 2015, the Company does not have any property and
equipment, investment in an associate and investment in a subsidiary.
5.02.04 Deferred Tax Assets
The Company reviews the carrying amounts at each reporting period and reduces
deferred tax assets to the extent that it is no longer probable that sufficient taxable
profit will be available to allow all or part of the deferred tax assets to be utilized prior
to expiration.
As of December 31, 2016, Management believes that it is not probable that future
taxable profits will be available to allow all or part of its deferred tax assets to be
utilized prior to expiration. As a result, the Company derecognized deferred tax assets
from NOLCO and excess MCIT amounting to P1,274,487 and P61,064, respectively,
as disclosed in Note 29. Moreover, DTA from NOLCO amounting to P454,175 was
not recognized as disclosed in Note 28.
5.02.05 Estimating Allowances for Doubtful Accounts
The Company estimates the allowance for doubtful accounts related to its receivables
based on assessment of specific accounts where the Company has information that
certain customers are unable to meet their financial obligations. In these cases
judgment used was based on the best available facts and circumstances including but
not limited to, the length of relationship with the customer and the customer’s current
credit status based on third party credit reports and known market factors. The
Company used judgment to record specific reserves for customers against amounts
due to reduce the expected collectible amounts. These specific reserves are re-
evaluated and adjusted as additional information received impacts the amounts
estimated.
The amounts and timing of recorded expenses for any period would differ if different
judgments were made or different estimates were utilized. An increase in the
allowance for doubtful accounts would increase the recognized operating expenses
and decrease current assets.
In 2015, the Company sold its receivables, as disclosed in Note 1.
Management believes that the collectability of due from a related party is certain,
hence, the Company did not recognize provisions for impairment losses. As of
December 31, 2016 and 2015, the carrying amounts of due from a related party
amounted to P6,002,866 and nil as disclosed in Notes 18.
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5.02.06 Post-employment Benefits
The determination of the retirement obligation and cost and other retirement benefits is
dependent on the selection of certain assumptions used by actuaries in calculating
such amounts. Those assumptions include among others, discount rates, mortality of
plan members and rates of compensation increase. In accordance with PFRS, actual
results that differ from the assumptions and the effects of changes in actuarial
assumptions are recognized directly as remeasurements in other comprehensive
income. While the Company believes that the assumptions are reasonable and
appropriate, significant differences in the actual experience or significant changes in
the assumptions may materially affect the pension and other retirement obligations.
In 2015, the retirement benefit obligation of the Company was transferred and
assumed by a certain entity, as disclosed in Note 1.
As of December 31, 2016 and 2015, the Company does not have any retirement
benefit obligation.
5.02.07 Contingencies
In 2016, the Company received Letter of Authority (LOA-43A-2014-00000572) from
the Bureau of Internal Revenue (BIR) for the period covered January 1, 2013 to
December 31, 2013. The LOA pertains to the assessed deficiency on tax declaration
and payment for income tax, value-added tax (VAT), expanded withholding tax and
compromise penalty for non-submission of various schedule, returns and books of
accounts.
Based on the contract of sale and assignment of assets and assumption of liabilities
entered by the Company in 2015, assessments arising before the date of the contract
will be paid by the previous shareholders.
As of December 31, 2016, Management believes that the outcome of this assessment
is not yet certain and the recognition of expense is not yet virtually certain; hence, no
liability was recognized. A letter of protest through a request for reinvestigation for
the final assessment notice was filed to the BIR as disclosed in Note 34.
6. SEGMENT INFORMATION
6.01 Products and Services from which Reportable Segments Derive their Revenues
In prior years, segment information reported externally was analyzed on the basis of
the types of goods supplied and services provided by the Company’s operating
divisions. However, information reported to the Company’s chief operating decision
maker for the purposes of resource allocation and assessment of segment performance
is more specifically focused on the types of products and services delivered or
provided. The Company’s reportable segments in the prior years under PFRS 8 are as
follows:
Retail Solutions: Sale of licenses, implementation and the maintenance
fees of Barter™ MMS the Company’s packaged
software solution.
Third Party Transactions: Sale of hardware and (Point of Sale) POS software.
Special Projects: Sale of customized POS Software for a specified
customer and such cannot be sold or offered to other
clients.
30
As of December 31, 2016, the Company does not have any existing operating
segments.
The following are information regarding the Company‘s reportable segments.
6.02 Segment Revenue and Results
The following is an analysis of the Company‘s revenue and results from continuing
operations by reportable segment:
2016
Segment
Revenue
Segment
Cost
Segment
Profit
Retail Solutions P - P - P -
Third Party Transactions - - -
Special Projects - - -
Total P - P - P -
2015
Segment
Revenue
Segment
Cost
Segment
Profit
Retail Solutions P 6,422,842 P 5,153,229 P 1,269,613
Third Party Transactions 3,840,884 2,829,502 1,011,382
Special Projects 867,500 833,350 34,150
Total P 11,131,226 P 8,816,081 P 2,315,145
2014
Segment
Revenue
Segment
Cost
Segment
Profit
Retail Solutions P 45,628,029 P 13,319,838 P 32,308,191
Third Party Transactions 24,039,031 21,588,772 2,450,259
Special Projects 9,019,773 4,710,647 4,309,126
Total P 78,686,833 P 39,619,257 P 39,067,576
The Segments’ profit and the Company’s profit are reconciled as follow:
2016 2015 2014
Retail Solutions P - P 1,269,613 P 32,308,191
Third Party Transactions - 1,011,382 2,450,259
Special Projects - 34,150 4,309,126
Total for continuing operations - 2,315,145 39,067,576
Other income 353,564 881,128 7,863,639
Operating expenses (1,533,675) (7,984,512) (26,852,236)
Finance cost - - (159,412)
Income tax benefit (expense) (1,335,551) 1,274,487 (6,041,824)
Foreign exchange loss - (19,863) (596,401)
Profit (Loss) P (2,515,662) P (3,533,615) P 13,281,342
Revenue reported above represents revenue generated from external customers.
There were no inter-segment sales in 2016, 2015 and 2014.
31
The accounting policies of the reportable segments are the same as the Company‘s
accounting policies disclosed in Note 4. Segment profit represents the profit earned by
each segment without allocation of other income, operating expenses, finance cost,
foreign exchange loss and income tax. This is the measure reported to the chief
operating decision maker for the purpose of resource allocation and assessment of
segment performance.
6.03 Segment Assets and Liabilities
2016 2015 2014
Segment Assets
Retail Solutions P - P 24,387,328 P 60,833,668
Third Party Transactions - 4,100,390 10,228,335
Special Projects - 119,795 7,003,166
Total segment assets - 28,607,513 78,065,169
Unallocated 152,559,584 1,785,347 112,494
Total assets P 152,559,584 P 30,392,860 P 78,177,663
Segment Liabilities
Retail Solutions P - P 1,588,978 P 15,120,244
Third Party Transactions - 267,165 3,365,951
Special Projects - 7,805 473,013
Total segment liabilities - 1,863,948 18,959,208
Unallocated 126,546,495 161 27,714,378
Total liabilities P 126,546,495 P 1,864,109 P 46,673,586
For the purpose of monitoring segment performance and allocating resources between
segments:
All assets are allocated to reportable segments other than deferred tax assets,
advances to officers and employees, SSS claims and tax credits; and
All liabilities are allocated to reportable segments other than accrued expenses,
due to government institutions, retirement benefit obligation, deferred tax liability,
income tax payable, dividends payable and other payables.
In 2016, all assets and liabilities are unallocated, since there are no existing reportable
segments.
32
6.04 Other Segment Information
Details about other segment information are as follows:
2016 2015 2014
Cost of Sales:
Third Party Transactions P - P 2,829,502 P 21,588,772
Cost of Services:
Retail Solutions
Salaries, wages and benefits P - P 3,031,670 P 9,700,573
Barter License Cost - 1,126,630 315,847
Rent - 474,412 726,772
Transportation - 276,865 1,457,736
Meals - 107,026 465,303
Other outsourced services - 44,643 226,761
Communication - 29,395 127,636
Others - 62,588 299,210
Special Projects:
Professional fees - 833,350 4,710,647
P - P 5,986,579 P 18,030,485
6.05 Revenue from Major Products and Services
Listed below are the revenues earned from each major products and services:
2016 2015 2014
Third Party Hardware/ Software
Sales P - P 3,840,884 P 24,039,031
Retail Solutions - 6,422,842 45,628,029
Special Project - 867,500 9,019,773
P - P 11,131,226 P 78,686,833
6.06 Information about Major Customers
Included in revenues arising from retail solutions, special projects and third party
transactions are sales of services and goods, approximately amounting to nil, P1.8M,
and P58.4M in 2016, 2015 and 2014, respectively, which arose from sales to the
Company‘s largest customers. No other single customer contributed ten percent
(10%) or more to the Company's revenue in 2016, 2015 and 2014.
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7. CASH
For the purpose of the statements of cash flows, cash include cash on hand and
cash in banks.
Cash at the end of each reporting period as shown in the statements of cash flows can
be reconciled to the related items in the statements of financial position as follows:
2016 2015
Cash on hand P 10,000 P 10,000
Cash in banks 148,513,534 4,477,718
P 148,523,534 P 4,487,718
Cash in banks include savings accounts with interest rates ranging from 0.25% to
0.56% per annum. Finance income earned from cash in banks amounted to P17,458,
P3,769 and P176,822 in 2016, 2015 and 2014, respectively, as disclosed in Note 24.
8. FINANCIAL ASSETS AT FVTPL
In 2014, the Company purchased 15,643,064 units under the Unit Investment Trust
Fund (UITF) from Metrobank Trust Banking Corporation (MBTC) amounting to
P24,000,000.
This investment is measured at fair value at each reporting period derived from fair
value measurements as disclosed in Note 4.02.
Finance income earned from the investment amounted to P336,106, P119,795 and nil
in 2016, 2015 and 2014, respectively, as disclosed in Note 24.
In 2016, the Company redeemed the outstanding UITF for P24,455,900. As of
December 31, 2016 and 2015, the Company’s financial assets at FVTPL amounted to
nil and P24,119,795, respectively.
9. RECEIVABLES — net
In 2014, the Company recognized impairment loss on receivables amounting to P6,018
as disclosed in Note 25.
In 2015, trade and other receivables net of the related allowance for doubtful accounts
amounting to P26,161,486 were part of the total assets sold, as disclosed in Note 1.
As of December 31, 2016 and 2015, the Company does not have any outstanding
receivables.
10. INVENTORIES
In 2015, inventories amounting to P1,418,174 were part of the total assets sold, as
disclosed in Note 1.
The cost of inventories recognized as expense amounted to nil, P2,829,502 and
P21,588,772 in 2016, 2015 and 2014, respectively, as disclosed in Note 23.
As of December 31, 2016 and 2015, the Company does not have any inventories.
34
11. OTHER CURRENT ASSETS
The details of the Company’s other current assets are shown below:
2016 2015
Excess tax credit P 387,568 P 387,568
Input VAT 171,174 62,228
P 558,742 P 449,796
In 2015, other current assets amounting to P1,802,495 were part of the total assets
sold, as disclosed in Note 1.
12. FINANCE LEASE RECEIVABLES
In 2015, finance lease receivable granted amounted to P670,251. Moreover, in 2015,
finance lease receivables amounting to P2,143,195 were part of the total assets sold,
as disclosed in Note 1.
In 2016 and 2015, finance income from finance lease receivables amounted to nil and
P19,489, respectively, as disclosed in Note 24.
As of December 31, 2016 and 2015, the Company does not have any outstanding
finance lease receivable.
13. INVESTMENT IN AN ASSOCIATE
In 2015, the Company’s investment with ATVI was for a total consideration of
P126,000. The Parent Company unconditionally and irrevocably assigns, transfers and
conveys, all its rights, interests and obligations in its investment, as disclosed in
Note 1.
As of December 31, 2016 and 2015, the Company does not have any investment in
an associate.
14. INVESTMENT IN A SUBSIDIARY
On March 5, 2015, the Company entered into a “Deed of assignment of subscription”
for a consideration of P13,488. The Company unconditionally and irrevocably assigns,
transfers and conveys, all its rights, interests and obligations and to its entire
subscription consisting of 1,000 shares (“Assigned Shares”), with par value of one (1)
Malaysian Ringgit per share in iRipple Sdn Bhd, a corporation duly organized and
existing under and by virtue of the laws in Malaysia, as disclosed in Note 1.
As of December 31, 2016 and 2015, the Company does not have any investment in a
subsidiary.
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15. PROPERTY AND EQUIPMENT — net
On March 5, 2015, the entered into a “Deed of absolute sale of equipment, furniture
and fixtures”, as disclosed in Note 1. The Company is the owner of certain equipment
and furniture and fixtures and has offered to sell the same. The buyer agreed to
purchase the equipment and furniture and fixtures and clear of all liens and
encumbrances subject to the terms and conditions of the deed.
Therefore, for and in consideration of the foregoing premises and the covenants
contained, the parties hereby agree as follows:
a. For and in consideration of the amount of P1,537,004 (inclusive of VAT),
receipt and sufficiency of which are acknowledged by the seller. The seller
shall sell, assign and transfer to the buyer all its rights, title and interests in the
equipment and furniture and fixtures free and clear of all liens and
encumbrances.
b. Seller shall cooperate with purchaser in providing necessary information and on
performing promptly any and all acts as may be necessary in order to
effectuate the transfer of the equipment and furniture and fixtures to buyer.
c. Any VAT, income tax and capital gains tax which may be due on the sale of
the machinery and equipment shall be for the account of the buyer.
Any documentary stamp tax which may be due on the sale of the equipment
and furniture and fixtures shall be for the account of the buyer.
On March 5, 2015, the Company (the “Seller”) entered into a “Deed of sale of motor
vehicles” for a total consideration of P1,184,217, as disclosed in Note 1. The buyer
agreed to purchase the motor vehicles clear of all liens and encumbrances subject to
the terms and conditions of the deed.
The amount of depreciation expense recognized by the Company amounted to nil,
P505,574 and P3,645,418, in 2016, 2015 and 2014, respectively, as disclosed in
Note 25.
As of December 31, 2016 and 2015, the Company does not have any property and
equipment.
16. PAYABLES
The components of payables are as follows:
2016 2015
Accrued expenses P 1,540,544 P 1,861,782
Payable to government agencies 5,951 2,327
P 1,546,495 P 1,864,109
Accrued expenses pertain to accrual of legal, compiling and audit fees incurred.
Payable to government agencies pertain to withholding tax payable and output VAT.
In previous years, the Company recorded over accrual of subcontractor and
professional fee amounting to P5,580,283. In 2014, the Company has written-off the
liability and recognized it as other income, as disclosed in Note 24.
36
In 2015, trade and other payables amounting to P6,606,429 were part of the total
liabilities assumed per “Deed of sale of assets with assumption of liabilities” entered by
the Company, as disclosed in Note 1.
17. FINANCE LEASE OBLIGATIONS
In 2015, finance lease obligations amounting to P887,349 were part of the total
liabilities assumed per “Deed of sale of assets with assumption of liabilities” entered by
the Parent Company, as disclosed in Note 1.
As of December 31, 2016 and 2015, the Company does not have any outstanding
finance lease obligations.
18. RELATED PARTY TRANSACTIONS
Nature of relationship of the Company and its related parties are disclosed below:
Related Party Nature of Relationship
Philab Industries, Inc. Under Common Control
Officers Member of the Key Management Personnel
Balances and transactions between the Company and its related parties are disclosed
below:
18.01 Due from a Related Party
Balance of due from a related party as shown in the statements of financial position is
summarized as follows:
18.01.01 Under Common Control
Transaction with entity under common control is detailed as follows:
December 31, 2016 December 31, 2015
Amount/
Volume
Outstanding
Balance
Amount/
Volume
Outstanding
Balance
Advances P 3,477,308 P 3,477,308 P - P -
The advances pertain to amounts extended by the Company to an entity under
common control mainly for working capital requirements.
The amounts outstanding are non-interest bearing, unsecured, due and receivable on
demand and will be settled in cash. No guarantees have been received. No provisions
have been made for doubtful debts in respect of the amounts owed by related parties.
18.02 Remuneration of Key Management Personnel
The Company did not provide remuneration to its directors and other members of key
management personnel in both years.
37
19. CAPITAL STOCK
The capital stock of the Company is as follows:
2016 2015
Capital stock P 15,569,015 P 15,569,015
Additional paid-in capital 13,928,475 13,928,475
P 29,497,490 P 29,497,490
The capital stock is composed of ordinary shares. Shown below are the details on the
movements of ordinary shares.
2016
Shares Amount
Authorized: P0.25 par value per share 80,000,000 P 20,000,000
Subscribed and outstanding:
P0.25 par value per share 62,276,060 P 15,569,015
2015
Shares Amount
Authorized: P0.05 par value per share 400,000,000 P 20,000,000
Subscribed and outstanding:
P0.05 par value per share 311,380,300 P 15,569,015
At the special meeting of the BOD held on June 22, 2015, the BOD authorized to
reduce the par value of its shares from one peso (P1) par value per share to five
centavos (P0.05) par value per share, resulting in the increase in the number of its
shares from 20,000,000 shares to 400,000,000 shares.
The increase in the capitalization is to enable the Company to have sufficient funding
to engage in its new business as an investment holding Company. Through this
investment vehicle, the BOD envisions to provide companies access to capital markets
and to provide investors with an avenue to gain exposure to such private companies.
On September 14, 2016, the Board approved the amendment of the Company’s
amended AOI to increase the par value from P0.05 per share to P0.25 per share
resulting in the decrease in the number of its shares from 311,380,300 shares to
62,569,015 shares and to increase authorized capital stock from Twenty Million Pesos
(P20,000,000) to up to Two Billion Pesos (P2,000,000,000). This was approved by
the stockholders representing at least 2/3 of the outstanding capital stock on
October 20, 2016. On December 12, 2016, the SEC approved the amendments
related to the increase in par value from P0.05 per share to P0.25 per share.
However, the increase in the capital stock of the Company is still in process with the
SEC, as disclosed in Note 1.
38
19.01 History of Registration of Securities
On March 31, 2009, the Company filed a registration statement with SEC in
accordance with the SRC for the registration of a total of 15,569,015 ordinary shares.
A pre-effective clearance was issued by the SEC on July 9 and 23, 2009.
On April 7, 2009, the Company filed an application with the Philippine Stock Exchange
(“PSE”) for the listing and trading of a total of 15,569,015 ordinary shares.
The application for listing was approved by the Board of Directors of the PSE on
August 12, 2009. The Company was listed in the Small and Medium Board of the PSE
last September 3, 2009.
On August 25, 2009, the Company completed its IPO of 4,579,122 new ordinary
shares at an offer price of P4.37 per share for a total gross proceeds of P19,987,444.
The funds generated from this offering were invested for further product enhancement
as well as development of related software products. Out of the net proceeds, the
Company used P9,000,000 to finance the research and development cost of its
product and the development of product extensions and P7,550,000 was used for
market and research. The balance of the proceeds amounting to P1,845,597 was
used to finance the general corporate purposes and working capital requirements of the
Company. Direct costs incurred relative to the IPO amounting to P1,479,847 were
charged against the additional paid-in capital of P15,408,322.
As of December 31, 2016 and 2015, the Company has a total number of twenty (20)
and seven (7) stockholders, respectively, holding the above registered securities.
20. DEPOSIT FOR FUTURE STOCK SUBSCRIPTION
On December 16, 2016, the Company received cash as deposit for future stock
subscription from its existing stockholder for an aggregate amount of P125,000,000.
As of December 31, 2016, the Company has submitted its application for capital
increase with the SEC.
The application for the capital increase was subsequently approved by the SEC on
January 20, 2017, as disclosed in Note 34.
21. DIVIDENDS DECLARED
On March 6, 2014, the BOD approved the declaration of cash dividend of P0.10 per
share or for a total amount of P1,556,902 which was paid to stockholders on
March 20, 2014.
On December 11, 2014, the BOD approved the declaration of cash dividend of P1.68
per share or for a total amount of P26,155,945 per record date on January 5, 2015,
and was paid to stockholders on January 21, 2015.
No dividends were declared nor paid in 2016.
39
22. REVENUES
An analysis of the Company’s revenues is as follows:
2016 2015 2014
Sale of goods P - P 3,840,884 P 54,647,802
Rendering of services - 7,290,342 24,039,031
P - P 11,131,226 P 78,686,833
23. COST OF SALES AND SERVICES
The following is an analysis of the Company‘s cost of sales and services:
2016 2015 2014
Salaries, wages, and benefits
(Note 26) P - P 3,031,670 P 9,700,573
Barter license - 1,126,630 315,847
Professional fees - 833,350 4,710,647
Rentals (Note 27) - 474,412 726,772
Transportation and travel - 276,865 1,457,736
Meals - 107,026 465,303
Other outsourced services - 44,643 226,761
Communication - 29,395 127,636
Others - 62,588 299,210
Total cost of services - 5,986,579 18,030,485
Add: Cost of sales - 2,829,502 21,588,772
Total cost of sales and services P - P 8,816,081 P 39,619,257
Details of cost of sales are as follows:
2016 2015 2014
Inventory, January 1 P - P 1,839,213 P 108,905
Purchases - 990,289 23,319,080
Cost of goods available for sale - 2,829,502 23,427,985
Inventory, December 31 - - (1,839,213)
P - P 2,829,502 P 21,588,772
40
24. OTHER INCOME
Components of other income are as follows:
2016 2015 2014
Finance income from FVTPL
(Note 8) P 336,106 P 119,795 P -
Finance income from bank
deposits (Note 7) 17,458 3,769 176,822
Finance income – lease
(Note 12) - 19,489 188,050
Written-off accrued expenses
(Note 16) - - 5,580,283
Rebates - - 706,113
Outside services - - 339,286
Others - 738,075 873,085
P 353,564 P 881,128 P 7,863,639
Others pertain to income derived from short-term occupancy of office space.
41
25. OPERATING EXPENSES
The account is composed of the following expenses:
2016 2015 2014
General and administrative:
Professional fees P 898,300 P 2,438,342 P 3,840,542
Taxes and licenses 371,432 458,996 443,611
PSE listing fee 105,133 161,881 289,431
Office supplies 75,819 51,939 353,485
Deficiency taxes 14,400 643,937 -
Other outside services 9,900 14,800 185,689
Representation and
entertainment 5,357 69,850 1,291,961
Bank charges 952 25,155 3,716
Salaries, wages and benefits
(Note 26) - 1,740,109 6,365,338
Depreciation (Note 15) - 505,574 3,645,418
Rentals (Note 27) - 341,499 1,870,581
Communication - 135,038 1,014,438
Transportation and travel - 128,882 1,772,728
Association dues - 98,775 388,515
Power, light and water - 93,804 596,596
Meals - 86,761 422,287
Repairs and maintenance - 63,233 326,694
Donation - 58,929 69,643
Director’s fee - 22,222 88,889
Insurance - 11,912 188,424
Janitorial services - 11,577 -
Retirement benefit (Note 26) - - 198,796
Trainings - - 29,232
Impairment loss on trade
receivable (Note 9) - - 6,018
Others 52,382 816,137 2,545,144
1,533,675 7,979,352 25,937,176
Selling and marketing:
Advertising and promotions - 5,160 388,692
Commission - - 377,052
- 5,160 765,744
Other operating expenses:
Reclassification adjustment - - 86,535
Loss on sale of AFS Financial
Assets - - 62,781
- - 149,316
P 1,533,675 P 7,984,512 P 26,852,236
Others pertain to freight and courier, storage fee and accommodation expenses.
42
26. EMPLOYEE BENEFITS
Aggregate employee benefits expense comprised of:
2016 2015 2014
Short-term benefits
(Notes 23 and 25) P - P 4,771,779 P 16,065,911
Post-employment benefits (Note 25) - - 198,796
P - P 4,771,779 P 16,264,707
26.01 Short-term Employee Benefits
Short-term employee benefits include salaries and wages, social security contributions,
short-term compensated absences, incentives and bonuses, and non-monetary
benefits.
The Company’s short-term employee benefits consist of the following:
2016 2015 2014
Salaries and allowances P - P 3,031,670 P 13,592,816
Other short-term benefits - 1,740,109 2,473,095
P - P 4,771,779 P 16,065,911
These short-term employee benefits are presented in the statements of comprehensive
income as follows:
2016 2015 2014
Cost of sales and services (Note 23) P - P 3,031,670 P 9,700,573
Operating expenses (Note 25) - 1,740,109 6,365,338
P - P 4,771,779 P 16,065,911
26.02 Retirement Employee Benefits
The Company had a single retirement plan under the regulatory framework of the
Philippines. Under R.A. 7641 the Company is legally obliged to provide a minimum
retirement pay for qualified employees upon retirement. The framework, however,
does not have a minimum funding requirement. The Company’s benefit plan is aligned
with this framework.
The Company has unfunded defined benefit plans for qualifying employees. Under the
plans, the employees are entitled to retirement benefits varying between 85% of final
monthly salary per year of service on attainment of the retirement age of sixty (60).
The payments for the defined benefits are borne by the Company as it falls due.
In 2015, retirement benefit obligation amounting to P1,562,495 formed part of the
total liabilities assumed per “Deed of sale of assets with assumption of liabilities”
entered by the Company, as disclosed in Note 1.
In 2016, the Company does not have employees covered under Under R.A. 7641.
43
Reconciliation of remeasurements recognized in other comprehensive income is as follows:
Change on
Demographic
Assumption
Change on
Financial
Assumption
Experience
Adjustment
Re-
measurements
Deferred
Tax Asset
Remeasurement
Gain (Loss) – net
Deferred Tax Asset
Gain (loss) Balance at
January 1, 2014 P (15,427) P (176,185) P (176,503) P (368,115) P 110,435 P (257,680)
Amount recognized during
the year - (127,274) (302,167) (429,441) 128,832 (300,609)
Gain (loss) Balance at
December 31, 2014 (15,427) (303,459) (478,670) (797,556) 239,267 (558,289)
Amount recognized during
the year 15,427 303,459 478,670 797,556 (239,267) 558,289
Gain (loss) Balance at
December 31, 2015 - - - - - -
Amount recognized during
the year - - - - - -
Gain (loss) Balance at
December 31, 2016 P - P - P - P - P - P -
44
27. OPERATING LEASE AGREEMENTS
27.01 The Company as a Lessee
Operating leases relate to leases of office and parking spaces with lease terms
between one (1) to two (2) years. Operating lease payments represent rentals payable
by the Company for office and parking spaces. Leases are negotiated for an average
term of two (2) years and renewable based on mutual agreement of both parties.
27.01.01 Lease Contract with Solar Resources, Inc.
The Company entered into a Contract of Lease with Solar Resources, Inc. for the lease
of the Parent Company’s office premises located at 2202 C & D East Tower, Philippine
Stock Exchange Centre, Exchange Road, Ortigas Center, Pasig City for three (3) years
commencing on December 31, 2004 to November 30, 2007, renewable upon mutual
agreement of both parties.
On November 9, 2013, the Parent Company renewed its contract with the Solar
Resources, Inc. for another two (2) years commencing on December 1, 2013 to
December 1, 2015 with monthly rental of P75,736 and P79,523 on the first and
second year, respectively. The monthly rental is inclusive of 12% VAT, to be paid on
or before the 15th day of each and every month, plus 5% surcharge per month for
payment of rentals made after the 5th day of the month due. No security deposit paid
for the rental.
27.01.02 Lease Contract with Imaghine, Inc.
On October 3, 2012, the Parent Company entered into a Contract of Lease with
Imaghine, Inc. for the lease of one (1) office space located at Unit E-2305B, East
Tower, Philippine Stock Exchange Centre, Exchange Road, Ortigas Center, Pasig City,
and two (2) parking spaces identified as slot numbers P-531 and P-532, situated at
Basement 5 of the East Tower. The term of the lease shall be for a period of two (2)
years commencing on September 17, 2012 and ending on September 16, 2014 with
monthly rental of P85,360 inclusive of VAT and net of withholding tax, renewable
upon mutual agreement of both parties. The rent expense recognized in 2016 and
2015 pertaining to this lease contract amounted to nil and P267,178, part of the total
rent expense, as disclosed in Note 25. In 2014, the Parent Company renewed its
contract of lease for another term.
The distribution of rent expense is as follows:
2016 2015 2014
Cost of services (Note 23) P - P 474,412 P 726,772
Operating expenses (Note 25) - 341,499 1,870,581
P - P 815,911 P 2,597,353
In 2016, the Company did not renew any lease contract previously entered.
45
28. INCOME TAXES
28.01 Income Tax Recognized in Profit or Loss
Components of income tax expense (benefit) are as follows:
2016 2015 2014
Current tax expense P - P 61,064 P 5,874,645
Deferred tax expense (benefit)
(Note 29) 1,335,551 (1,335,551) 167,179
P 1,335,551 P (1,274,487) P 6,041,824
A numerical reconciliation between tax expense (benefit) and the product of
accounting profit (loss) multiplied by the tax rate in 2016, 2015 and 2014 are as
follows:
2016 2015 2014
Accounting profit (loss) P (1,180,111) P (4,808,102) P 19,323,166
Tax expense (benefit) at 30% (354,033) (1,442,431) 5,796,950
Tax effect of:
Derecognition of DTA on
NOLCO 1,274,487 - -
Non-recognition of DTA on
NOLCO 454,175 - -
Derecognition of DTA on
excess MCIT 61,064 - -
Non-deductible deficiency
taxes 4,320 193,181 -
Unallowable representation
and entertainment 1,607 - 233,179
Finance income subject to
final tax (106,069) (37,069) (53,047)
Unallowable donation - 17,679 -
Finance income – finance
lease - (5,847) (56,415)
Other unallowable
deductions - - 54,480
Reclassification adjustment - - 25,961
Finance cost - - 21,882
Loss on sale of AFS
Financial asset - - 18,834
P 1,335,551 P (1,274,487) P 6,041,824
46
Details of NOLCO are as follows:
Year
Incurred Amount
Applied
Current Year Expired Unapplied
Expiry
Date
2015 P 4,248,289 P - P - P 4,248,289 2018
2016 1,513,957 - - 1,513,957 2019
P 5,762,246 P - P - P 5,762,246
In 2015, the Company incurred MCIT amounting to P61,064 which will expire in
2018.
47
29. DEFERRED TAX ASSETS
The components of the Company’s deferred tax assets and their respective movements are as follows:
At January 1,
2015
Derecognition
due to disposal
Charge to
profit or loss
for the year
At
December 31,
2015
Charge to
profit or loss
for the year
At
December
31, 2016
Tax effects of:
NOLCO P - P - P 1,274,487 P 1,274,487 P (1,274,487) P -
Excess MCIT over RCIT - - 61,064 61,064 - (61,064) -
Unrealized foreign exchange loss 1,117 (1,117) - - - - - -
Accrued retirement 468,749 (468,749) - - - - - -
Accrued rent expense 5,840 (5,840) - - - - - -
Provision for doubtful accounts 211,605 (211,605) - - - - - -
P 687,311 P (687,311) P 1,335,551 P 1,335,551 P (1,335,551) P -
48
30. EARNINGS PER SHARE
The Company’s basic earnings (loss) per share is (P0.040), (P0.057) and P0.213 as of
December 31, 2016, 2015 and 2014, respectively.
The earnings and weighted average number of ordinary shares used in the calculation
of basic earnings per share are as follows:
2016 2015 2014
Earnings (loss) used in the
calculation of total basic
earnings per share P (2,515,662) P (3,533,615) P 13,281,342
Weighted average number
of ordinary shares for the
purposes of basic
earnings per share 62,276,060 62,276,060 62,276,060
The weighted average number of ordinary shares for the periods 2016, 2015 and
2014 used for the purposes of basic earnings per share were computed as follows:
Number of
Ordinary Shares
Proportion
to Period
Weighted
Average
Outstanding shares at the
beginning and end of the
period 62,276,060 12/12 62,276,060
The Company does not have any potential dilutive instruments as of
December 31, 2016, 2015 and 2014.
31. FAIR VALUE MEASUREMENTS
31.01 Fair Value of Financial Assets and Liabilities
The carrying amounts and estimated fair values of the Company’s financial assets and
financial liabilities as of December 31, 2016 and 2015 are presented below:
2016 2015
Carrying
Amount Fair Value
Carrying
Amount Fair Value
Financial Assets:
Cash P 148,523,534 P 148,523,534 P 4,487,718 P 4,487,718
Due from a related party 3,477,308 3,477,308 - -
Financial assets at FVTPL - - 24,119,795 24,119,795
P 152,000,842 P 152,000,842 P 28,607,513 P 28,607,513
Financial Liabilities:
Payables P 1,540,544 P 1,540,544 P 1,861,782 P 1,861,782
Deposit for future stock
subscription 125,000,000 125,000,000 - -
P 126,540,544 P 126,540,544 P 28,607,513 P 28,607,513
49
The fair value of Company’s financial assets at FVTPL is derived from quoted prices in
active markets for identical assets.
Due to the short-term nature of Company’s payables (except payable to government
agencies) and deposit for future stock subscription, their carrying amounts
approximate their fair values.
31.02 Fair Value Measurements Recognized in the Statement of Financial Position
The following provides an analysis of financial instruments that are measured
subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the
degree to which the fair value is observable:
Level 1, fair value measurements are those derived from quoted prices
(unadjusted) in active markets for identical assets or liabilities;
Level 2, fair value measurements are those derived from inputs other than quoted
prices included within Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3, fair value measurements are those derived from valuation techniques
that include inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
As of December 31, 2016 and 2015, the fair value of the Company’s financial assets
at FVTPL amounted to nil and P24,119,795, respectively, which are derived from
quoted prices in active markets, Level 1.
There were no transfers between Level 1 and 2 during the period.
31.03 Fair Value Determinations of Assets and Liability
Below is an analysis of assets and liability that are measured at fair value on a
recurring and non-recurring basis subsequent to initial recognition at fair value, grouped
into Levels 1 to 3 based on the degree to which inputs to valuation techniques are
observable:
Level 1, inputs are quoted prices (unadjusted) in active markets for identical
assets or liabilities that can be accessed at the measurement date;
Level 2, inputs are inputs other than quoted prices included within the Level 1
that are observable for the asset or liability, either directly or indirectly; and
Level 3, inputs are unobservable inputs for the asset or liability.
32. FINANCIAL RISK MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES
The Company’s Management function provides services to the business, monitor and
manages the financial risks relating to the operations of the Company through internal
risk reports which analyze exposures by degree and magnitude of risks. These risks
include market risk, interest rate risk, credit risk and liquidity risk.
The Management reports quarterly to the Company’s risk management committee, an
independent body that monitors risks and policies implemented to mitigate risk
exposures.
50
32.01 Market Risk Management
32.01.01 Interest Rate Risk Management
The Company’s exposure to interest rate risk arises from its cash deposits in banks
and financial assets at FVTPL which are subject to variable interest rates. The risk
arising is managed by close monitoring of the Management.
Profits for the year ended December 31, 2016 and 2015 would have been unaffected
since the Company has no borrowings at variable rates and interest rate risk exposure
for its cash in bank and financial assets at FVTPL, which are subject to variable rates,
are very immaterial.
32.02 Credit Risk Management
Credit risk refers to the risk that counterparty will default on its contractual obligations
resulting in financial loss to the Company. The Company has adopted a policy of only
dealing with creditworthy counterparties transacts only with entities that are rated the
equivalent of investment grade and above. It uses other publicly available financial
information and its own trading records to rate its major customers.
The Company’s exposure and the credit ratings of its counterparties are continuously
monitored and the aggregate value of transactions concluded is spread amongst
approved counterparties. Credit exposure is controlled by counterparty limits that are
reviewed and approved by the management annually.
The Company does not have significant credit risk exposure to any single counterparty
or any group of counterparties having similar characteristics. The Company defines
counterparties as having similar characteristics if they are related entities. There was
no concentration of credit risk related to the large customer at any time during the
year. The Company mitigates the risk by looking for new customers, accepting new
engagements from new clients and monitoring collections from largest customers.
The credit risk on liquid funds is limited because the counterparties are banks with high
credit-ratings. The carrying amount of financial assets recognized in the financial
statements, which is net of impairment losses, represents the Company’s maximum
exposure to credit risk, without taking into account collateral or other credit
enhancements held.
2016 2015
Cash on hand P 10,000 P 10,000
Cash in banks 148,513,534 4,477,718
Due from a related party 3,477,308 -
Financial assets at FVTPL - 24,119,795
P 152,000,842 P 28,607,513
The Company does not hold any collateral or other credit enhancements to cover this
credit risk.
51
The table below shows the financial assets of the Company are classified as high
grade in terms of credit quality as neither past due nor impaired:
2016 2015
Cash on hand P 10,000 P 10,000
Cash in banks 148,513,534 4,477,718
Due from a related party 3,477,308 -
Financial assets at FVTPL - 24,119,795
P 152,000,842 P 28,607,513
The credit quality of the financial assets was determined as follows:
Financial assets at FVTPL
High grade – Companies that are consistently profitable, have strong fundamentals
and pays out dividends and interest.
Medium grade – Companies that recently turned profitable and have the potential
of becoming a high grade company. These companies have sound fundamentals.
Low grade – Companies that are not yet profitable, speculative in nature but have
the potential to turn around fundamentally.
32.03 Liquidity Risk Management
Ultimate responsibility for liquidity risk management rests with the Management,
which has established an appropriate liquidity risk management framework for the
management of the Company’s short, medium and long-term funding and liquidity
management requirements. The Company manages liquidity risk by maintaining
adequate reserves, by continuously monitoring forecast and actual cash flows, and by
matching the maturity profiles of financial assets and liabilities.
The following tables detail the Company’s remaining contractual maturity for its non-
derivative financial liabilities with agreed repayment periods. The tables have been
drawn up based on the undiscounted cash flows of financial liabilities based on the
earliest date on which the Company can be required to pay. The tables include both
interest and principal cash flows. To the extent that interest flows are floating rate,
the undiscounted amount is derived from interest rate curves at the end of the
reporting period. The contractual maturity is based on the earliest date on which the
Company may be required to pay.
Weighted
Average Effective
Interest Rate
Within 1
Year
1 – 5
Years Total
December 31, 2016
Payables - P 1,540,544 - P 1,540,544
Deposit for future stock
subscription - 125,000,000 - 125,000,000
P 126,540,544 - P 126,540,544
December 31, 2015
Payables - P 1,861,782 - P 1,861,782
52
The following table details the Company’s expected maturity for its non-derivative
financial assets. The table has been drawn up based on the undiscounted contractual
maturities of the financial assets including interest that will be earned on those assets.
The inclusion of information on non-derivative financial assets is necessary in order to
understand the Company’s liquidity risk management as the liquidity is managed on a
net asset and liability basis.
Weighted Average
Effective Interest Rate
On Demand
Within one (1)
Year
December 31, 2016
Cash on hand n/a P 10,000 P -
Cash in banks 0.25% to 0.56% 148,513,534 -
Due from a related party n/a 3,477,308 -
P 152,000,842 P -
December 31, 2015
Cash on hand n/a P 10,000 P -
Cash in banks 0.25% to 0.56% 4,477,718 -
Financial assets at FVTPL 0.49% - 24,119,795
P 4,487,718 P 24,119,795
The amounts included above for variable interest rate instruments for non-derivative
financial assets is subject to change if changes in variable interest rates differ to those
estimates of interest rates determined at the end of the reporting period.
33. CAPITAL MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES
The Company manages its capital to ensure that the Company will be able to continue
as a going concern while maximizing the return to stakeholders through the
optimization of the debt and equity balance. The Company’s overall strategy remains
unchanged from 2015.
Pursuant to Section 43 of the Corporation Code of the Philippines, stock corporations
are prohibited from retaining surplus plus profits in excess of 100% of their paid in
capital stock, except: 1) when justified by definite corporate expansion projects or
programs approved by the board of directors; or 2) when the corporation is prohibited
under any loan agreement with any financial institution or creditor, whether local or
foreign, from declaring dividends without its/his consent, and such consent has not yet
been secured; or 3) when it can be clearly shown that such retention is necessary
under special circumstances obtaining in the corporation, such as when there is a need
for special reserve for probable contingencies. The Company is in compliance with the
above requirements.
The capital structure of the Company consists of net debt (payables and deposit for
future stock subscription as detailed in Notes 16 and 20 offset by cash balances as
detailed in Note 7) and equity of the Company (comprising capital stock, additional
paid-in capital and deficit, as disclosed in Note 19).
The Company’s board of directors and management reviews the capital structure of
the Company on an annual basis. As part of this review, the committee considers the
cost of capital and the risks associated with each class of capital. The Company has a
target debt to equity ratio of at least 1:1.
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The debt to equity ratio at end of the reporting period is as follows:
2016 2015
Debt P 126,546,495 P 1,864,109
Equity 26,013,089 28,528,751
Debt to equity ratio 4.86:1 0.07:1
Debt is defined as total liabilities, as disclosed in Notes 16 and 20 while equity
includes all capital and reserves of the Company that are managed as capital.
34. EVENTS AFTER THE REPORTING PERIOD
The following material transactions occurred after the reporting period:
A. On January 19, 2017, the Company secured a Four Hundred Million
(P400,000,000) loan from Altus Corporation to be repaid within thirty (30) months
with interest rate of 15% per annum. The purpose of the loan is, among others, to
fund the working capital requirements and additional investments into the
Company’s and its affiliate’s business.
B. On January 20, 2017, SEC approved the following amendments to the Company’s
Articles of Incorporation:
a. The name of the Corporation shall be Philab Holdings Corp.; and
b. Increase authorized capital stock from Twenty Million Pesos (P20,000,000)
to up to Two Billion Pesos (P2,000,000,000).
C. On January 20, 2017, the SEC approved the application of the Company to
change its stock symbol from ALT to DNA. This was reflected on the PSE trading
system February 16, 2017.
D. On February 7, 2017, the previous shareholders of the Company filed a letter of
protest, through a request for reinvestigation, in relation to the final assessment
notice of the BIR for the taxable year 2013. These pertains to assessment on
deficiency on tax declaration and payment for income tax, value-added tax (VAT),
expanded withholding tax and compromise penalty for non-submission of various
schedule, returns and books of accounts.
35. RECLASSIFICATIONS OF COMPARATIVE AMOUNTS
Certain amount in the comparative financial statements and note disclosure has been
reclassified to conform to the current year’s presentation. Details are as follows:
Current Year Classification Previous Year Classification Amount
Financial Assets at FVTPL Cash and cash equivalents
Financial Assets at FVTPL Cash Equivalents P 24,000,000
Financial Assets at FVTPL Receivables
Financial Assets at FVTPL Receivables 119,795
Management believes that the above reclassifications resulted to a better presentation
of accounts and did not have any impact on prior year’s profit or loss.
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36. APPROVAL OF FINANCIAL STATEMENTS
These financial statements were approved and authorized for issuance by the Board of
Directors on April 6, 2017.
37. SUPPLEMENTARY INFORMATION UNDER REVENUE REGULATIONS NO.15–2010
The Bureau of Internal Revenue (BIR) released a new revenue regulation dated
November 25, 2010 amending Revenue Regulations No. 21-2002 setting forth
additional disclosures on Notes to Financial Statements. Below are the disclosures
required by the said regulation:
37.01 Taxes and Licenses Paid or Accrued
The details of the Company’s taxes and licenses fees paid or accrued in 2016 are as
follows:
37.01.01 Output VAT
The Company is VAT-registered with output VAT declaration of nil for the taxable year
based on the amount reflected in the revenue.
37.01.02 Input VAT
An analysis of the Company’s input VAT claimed during the taxable year is as follows:
Balance, January 1 P 62,228
Current year’s domestic purchases/payments for:
Services lodged under other accounts 111,112
Total available input VAT 173,340
Claims for tax credit/refund and other adjustments 2,166
Balance, December 31 P 171,174
37.01.03 Other Taxes and Licenses
An analysis on the Company’s other taxes and licenses and permit fees paid or
accrued during the year is as follows:
Business taxes P 198,362
Permits 162,570
Community tax certificate 10,500
P 371,432
37.01.04 Withholding Taxes
The Company’s withholding tax – expanded paid or accrued during the year amounted
to P30,123 income payments to prime contractors/sub-contractors and amounts paid
to business and bookkeeping agents.
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37.01.05 Deficiency Tax Assessments and Tax Cases
In 2016, the Company received Letter of Authority (LOA-43A-2014-00000572) from
the Bureau of Internal Revenue (BIR) for the period covered January 1, 2013 to
December 31, 2013. The LOA pertains to the assessed deficiency on tax declaration
and payment for income tax, value-added tax (VAT), expanded withholding tax and
compromise penalty for non-submission of various schedule, returns and books of
accounts.
38. SUPPLEMENTARY INFORMATION UNDER REVENUE REGULATIONS NO. 19–2011
Pursuant to Section 244 in relation to Section 6(H) of the National Internal Revenue
Code of 1997 (Tax Code), as amended, these Regulations are prescribed to revise BIR
Form 1702 setting forth the following schedules. Below are the disclosures required
by the said regulation:
38.01 Itemized Deductions
The following is an analysis of the Company‘s itemized deductions for the taxable
year:
Professional fees P 898,300
Taxes and licenses 371,432
PSE listing fee 105,133
Office supplies 75,819
Other outside services 9,900
Bank charges 952
Others 52,382
P 1,513,918