PHILIPPINE POSTAL CORPORATION

NOTES TO FINANCIAL STATEMENTS

1. Agency Profle
By virtue of Republic Act No. 7354, otherwise known as the ostal
!ervices Act of "##$,% the then ostal !ervices &'ce was
converte( into a )overn*ent+owne( an( controlle( corporation
known as the hilippine ostal ,orporation -,..
hilippine ostal ,orporation or hilpost (evelops, pro*otes, an(
operates a nationwi(e postal syste* with a network to any
settle*ents in the hilippines an( aroun( the worl( to sustain the
postal re/uire*ents of the 0ilipinos in the $"
st
century.
At present, it has "4 re)ional o'ces an( operates a total of $,155
post o'ces nationwi(e.
2. Operational Higligt!
0or the past 2ve -5. years, hilpost was on the re( (ue to very
*ini*al increases in revenue an( increasin) cost of operations.
0or the 2nancial year en(in) 3ece*ber 3", $114, hilpost
)enerate( total revenue of 3.35 billion, a (ecrease of 3.7$6
fro* their $117 revenue of 3.4# billion. 7he (ecrease was
substantially brou)ht about by the (ecrease in postal fees.
7he ,orporation8s *a9or source of revenue is posta)e fees which
constitute 5#6 of its total revenue. 7he re*ainin) 3"6 is
(istribute( as follows:
$114 $117
0orei)n ostal Accounts "46 $"6
ostal ;3 76 46
<oney &r(er 0ees "6 $6
hilatelic ;te*s "6 "6
&ther ;nco*e 46 $6
3"6 316
". E#e$ption %ro$ ta#e!& c'!to$! an( tari) ('tie!
7
7he ,orporation is e=e*pt fro* all (irect an( in(irect ta=es,
custo*s (uties, fees, i*ports an( tari> (uties, co*pensatin)
ta=es, wharfa)e fees an( other char)es an( restrictions on the
i*portation of e/uip*ent, *achineries, spare parts, accessories,
an( other *aterials, inclu(in) supplies an( services use( (irectly
in the operations of the ostal !yste*, not obtainable locally on
favorable ter*s.
All obli)ations entere( into by the ,orporation an( any inco*e
(erive( therefro*, inclu(in) those contracte( with private
international bankin) an( 2nancial institutions are e=e*pt fro* all
ta=es on both principal an( interest.
7he ,orporation is also e=e*pt fro* the pay*ent of capital )ains
ta=, local )overn*ent i*posts an( fees after 3ece*ber 3", "##7.
7he ,orporation *ay also o>set the full value of capital
invest*ents not otherwise fun(e( by the National ?overn*ent
a)ainst any inco*e ta= (ue for the sa*e perio(.
*. Ta# S'+!i(y
A ta= subsi(y in the a*ount of $43,5##,1$4 to cover pay*ent for
@alue+a((e( ta= on (o*estic postal services for the year $114 an(
<ini*u* ,orporate ;nco*e 7a= for the years $115 an( $117 was
a)ain release( in the for* of !pecial Allot*ent Release &r(er
-!AR&. No. !+14+1##54 payable to the Bureau of ;nternal Revenue
pursuant to 0iscal ;ncentive Review Boar( -0;RB. Resolution No. "#+
14 an( ,erti2cate of Antitle*ent to !ubsi(y -,A!. No. 1444 (ate(
3ece*ber #, $114 an( 3ece*ber $3, $114, respectively.
@alue+A((e( 7a= -@A7. B $114 ro9ecte( $$7,454,3#3
<ini*u* ,orporate ;nco*e 7a= -<,;7.
$115 Actual 4,##3,3$1
$117 Actual 7,"4$,3"" "5,"34,53"
7otal $43,5##,1$4
7his liability for <ini*u* ,orporate ;nco*e 7a= is not taken up in
the books of accounts. ;t was only booke( up upon receipt of
,erti2cate of Antitle*ent to !ubsi(y an( !pecial Allot*ent Release
&r(er.
,. Co$pliance -it N.AS
8
7he ,orporation a(opte( the New ?overn*ent ,hart of Accounts
prescribe( by the ,o**ission on Au(it.
/. Signifcant acco'nting policie!
Basis of accounting B 7he 2nancial state*ents have been prepare(
on the basis of historical cost, an( e=cept where state(, (o not
take into account chan)in) prices an( current value of non+current
assets.
Receivables B Receivables are state( at net realiCable values.
Allowance for ba( (ebts are set up followin) the a)in) *etho( for
tra(e receivables an( a*ount of receivable less bene2tsDclai*s for
non+tra(e receivables. Receivables fro* 0orei)n ostal
A(*inistrations are o>set a)ainst the payables to the sa*e
0orei)n ostal A(*inistrations un(er the Eniversal ostal Enion
-EE. rules an( re)ulations. Nevertheless, the recor(in) of
receivables an( payables are separately taken up to show the
transactions that transpire( (urin) the perio(.
Inventories B ;nventories are value( at cost. ,ost is (eter*ine(
usin) the 2rst+in+2rst out *etho(.
Investments B ;nvest*ents are carrie( at cost net of share in prior
years8 earnin)sDlosses of the subsi(iary.
Property and Equipment B roperty an( A/uip*ent are recor(e( at
cost. 0or the lan(, buil(in)s an( *otor vehicles transferre( fro*
the for*er ostal !ervices &'ce, the appraise( values (eter*ine(
by an in(epen(ent appraiser, the Asian Appraisal ,o*pany, in
!epte*ber "##4 was consi(ere( as their (ee*e( cost. 7he
strai)ht line *etho( is use( in co*putin) (epreciation on the
basis of the esti*ate( useful lives of the assets an( the ten
percent -"16. salva)e value prescribe( by the ,&A.
Capital expenditures B 7an)ible assets with a cost of at least ten
thousan( pesos -"1,111.11. when purchase( are recor(e( as
roperty an( A/uip*ent. A=pen(itures incurre( subse/uent to the
ac/uisition of 2=e( assets are capitaliCe( if such e=pen(itures
appreciably e=ten( the life, increase the capacity or i*prove the
e'ciency an( safety of the property.
9
0. CASH
2112 $117
,ash, ,ollectin) &'cers+ Focal ,*&**/&201 5#,7"3,"44
,ash, 3isbursin) &'cers "*&22*&*02 34,74",341
ayroll 0un(
etty ,ash 0un(
*"&*0*&//1
1&1"*&,,2
54,414,#37
",354,1#1
,ash in Bank, Focal ,urrency+ ,urrent
account
,1"&212&/1/ 5$",$"1,##7
,ash in Bank, Focal ,urrency+ !avin)s
account
222&01/&""" $#$,443,1$5
,ash in Bank, Focal ,urrency+ 7i*e
3eposits
3&221&"1, "$,353,5"1
,ash in Bank, 0orei)n ,urrency+ !avin)s
acct
,ash in Bank, 0orei)n ,urrency+ 7i*e
3eposits
2*&212&201
/"&"3/&332
47,557,$71
$$",557,447
1&120&",,&/0
,
",$51,11#,#41
Cash, Disbursing !cers represents revolvin) fun(s that are *ore
than "11,111.11 which are issue( to centersD(epart*ents. 7he
total a*ount of 34,444,47$ inclu(es payroll fun( account of
Re)ion 4 a*ountin) to 3",#45,4"4 an( uni(enti2able a*ount of
3"5,314 of Re)ion "1 sub9ect for a(9ust*ent in $11#.
Payroll "und account is an account use( for cash a(vances for
salaries an( wa)es an( other bene2ts of o'cers an( e*ployees in
accor(ance with ,&A Accountin) ,ircular Fetter No. $117+113
(ate( Ganuary "7, $117.
Petty Cash "und represents revolvin) fun(s that are less than
"11,111.11 which are issue( to other o'ces an( co**ittees.
Remittances from "oreign Postal #dministrations are
cre(ite(D(eposite( to the (ollar account *aintaine( with Banco (e
&ro -B3&. which are converte( an( transferre( to the peso
account fro* ti*e to ti*e when local checks -*oney or(ers. are
prepare( for the recipient.
;nclu(e( in ,ash in Bank, Focal ,urrency+,urrent an( !avin)s
accounts an( 0orei)n ,urrency+!avin)s account, as enu*erate(
above, are 7rust Accounts pertainin) to <oney &r(er 0un(,
5$4,55$,#45, an( Huality !ervice 0un(, $,4$",541.
0orei)n ,urrency accounts are value( at balance sheet (ate at
B! e=chan)e rate of 47.41 for $114 an( 4".51 for $117.
10
2
.
RECEI4A5LES
2112 $117
Accounts Receivable 7ra(e, 3o*estic 2/"&/**&0,, "37,4$4,#54
3ue fro* !ubsi(iaries 1"/&021&30/ "53,"55,$1#
3ue fro* &'cers I A*ployees ,1&2*1&*10 55,#57,415
Accounts Receivable, &thers "&"11&12* 3,3#5,5$#
*,*&310&2"2 35",344,51"
Fess: Allowance for 3oubtful Accounts 31&2,3&"0/ "15,14",4$#
"/"&/,0&2,/ $45,$53,"7$
Accounts Receivable 0orei)n ostal
A(*in.
/21&,*,&/*1 #45,$31,551
3ue fro* National ?overn*ent A)encies 2/&1"1&022 $5,554,#"$
Accounts Receivable, ;<& Accounts 1,&*0,&12/ "14,#5",$34
Receivables, 3isallowancesD,har)es 1"&*1/&*,3 "4,$47,$45
A(vances to &'cers I A*ployees 11&3"2&/3/ 4,517,$#4

1&1,1&1*2&*1
1 ",3#4,454,5"4

#ccounts Receivable $rade, Domestic inclu(es osta)e ,har)e
Account -,A., bulk of which pertain to transactions of the ,
National ,apital Re)ion -N,R.. 7he (ecrease in the Allowance for
3oubtful Accounts was (ue to the a(9ust*ent of N,R8s prior
allowance overstate*ent.
#ccounts Receivable, "oreign Postal #dministrations inclu(es
transactions with hilpost E!A, a franchisee of hilpost which
operates an A=tra 7erritorial &'ce of A=chan)e -A7&A. in New
Gersey since Gune $111 until Guly $115. ;t inclu(es a (isallowe(
refun( of the $11" ter*inal (ues a*ountin) to J",13",#35 an(
(ispute( bulk *ail char)es of J",55#,747.
Due from %ubsidiaries inclu(es or)aniCationalDoperatin) e=penses
incurre( (urin) the subsi(iaries8 corporatiCation which have lon)
been outstan(in) an( still sub9ect for reconciliation.
#dvances to !cers and Employees account inclu(es balances of
cash a(vances )rante( to o'cers an( e*ployees for special an(
ti*e+boun(e( un(ertakin).
3. S6PPLIES
2112 $117
11
hilatelic ;te*s "/&01,&2"1 37,317,"44
osta)e !ta*ps 2/&0,"&"2* 31,15",454
&'ce !upplies ;nventory 1,&//2&0** #,454,434
!pare arts ;nventory /&/"3&210 4,1$7,354
?asoline, &il, an( Fubricants ,&*11&"1, 4,545,$35
hilpost ro(ucts 1&2,1&103 535,445
&thers 2&311&*13 $3,443,$"5
3,&"""&1,3 ""1,3$4,355
11. PREPA7MENTS
2112 $117
3eferre( ,har)es 1&,1"&1/1 $,1#5,555
?uaranty 3eposits 1&1,*&**3 ",$54,$75
repai( ;nsurance *1,&1/3 4#$,#53
A(vances to ,ontractors 210&111 35,"$1
<obiliCation 0ees 122&232 413,4$3
repai( A=penses 0"&*3, $$,111

"&*32&101 4,315,4$5
11. IN4ESTMENTS
21
12

$117
hilippine ostal !avin)s Bank 2/2&31"&*0
,
$54,#"3,475
, rovi(ent 0un( &'ce ,&111&111 5,111,111
&thers 2&*3*&*12 $,431,5#1
20/&*10&23
"
$75,344,155
Investment in PP%B represents pai( in portion of the subscribe( 5
*illion co**on shares with par value of "11, net of share in
inco*eDloss fro* !B8s prior perio(s operation. hilippine ostal
!avin)s Bank is a wholly+owne( subsi(iary of ,, re+establishe(
an( re+opene( by virtue of , Boar( Resolution No. #4+34 (ate(
0ebruary $5, "##4 in ful2ll*ent of the intents an( purposes of R.A.
No. 7354. 7he bank shall *obiliCe savin)s, pro*ote
entrepreneurship to wi(en econo*ic opportunities an( to provi(e
the 0ilipino people with a full ran)e of professional bankin) an(
2nancial resources accessible in all areas of the country.
12
Investment in the PPC Provident "und !ce represents the see(
*oney of the fun(. ;t was create( by the , Boar( of 3irectors
on &ctober "4, "##3 to provi(e retire*ent an( other bene2ts to all
its /uali2e( *e*bers.
Investment&thers inclu(es invest*ent in hilpost Feasin) I
0inancin) ,orp. -F0,. reporte( at a no*inal a*ount of one peso.
;t is a wholly+owne( subsi(iary of ,. ;t was create( by virtue of
Boar( Resolution No. #4+"33 (ate( &ctober 5, "##4 an( (uly
re)istere( un(er !A, No. A!&+#5+111""7## (ate( 3ece*ber $#,
"##4. ;t was incorporate( pri*arily to provi(e leasin) an(Dor
2nancin) packa)e to support the over+all postal workers in line
with the i*prove*ent of (elivery of basic services at a>or(able
rate an( easy ter*s. ;n "##4 the corporation stoppe( its leasin)
an( 2nancin) operations an( in $111 the Boar( passe( a
resolution to (issolve sai( corporation. At present its operation is
li*ite( to collection of accounts receivable an( atten(ance to
court hearin)s for its collection cases.
12. PROPERT7 8 E96IPMENT
<ove*ent of the property an( e/uip*ent is as follows:
Fan( 0urniture ;7 Fibrary
an( Fan( 0i=tures
7ransportati
on A/uip*ent Books
;*prove*en
ts Buil(in)s
I
A/uip*ent A/uip*ent an( I Arts 7otal
!oftware
Co!t
Ganuary 1", $114 3"4,#11,#53
","4$,513,#4
$ 371,$43,445 $"",451,5"$ 34,335,473 ",54#,5#1
$,""#,474,55
5
A((itions 444,7$4 ##5,4"# 4",#$5 34,4$" + ",5#5,44#
3isposals + + -35,751. + + + -35,751.
3ece*ber 3", $114 3"4,#11,#53
","4$,#44,55
5 37",$43,"54 $"",#4$,537 34,371,5#4 ",54#,5#1
$,"$",135,71
4
Acc'$'late( :epreciation
Ganuary 1", $114 3,$$5,$55 3##,4"$,#45 345,544,$5# "54,451,751 "5,555,"4$ ",$$#,$14 #$$,454,55#
rovision 35,15" 4",435,54" 3,535,454 #,445,75$ ",334,357 + 55,$45,7"5
3ece*ber 3", $114 3,$5",3"5 44",$44,5$5 351,3$1,""3 "54,5#5,5"$ "7,#4#,51# ",$$#,$14 #74,745,$44

Carrying A$o'nt
:ece$+er "1& 2112
"11&/"3&/*
0 0*1&0*1&1*1 21&32"&1*1 *0&2*/&12, 21&"21&12, "/1&*22
1&1*2&231&*
21
,arryin) A*ount
3ece*ber 3", $117 3"",574,714 74$,5#1,##7 $3,5##,$$5 57,11#,45$ $",541.73" 351,44$
","#7,1"5,##
5
Property and Equipment account inclu(es all e=istin) assets an(
facilities transferre( fro* the (efunct Bureau of osts an(
thereafter the then ostal !ervice &'ce to the hilippine ostal
,orporation -,. pursuant to !ec. #-b. of R.A. 7354. 7hese are
carrie( at appraise( values (eter*ine( by an in(epen(ent
appraiser, the Asian Appraisal ,o*pany, on !epte*ber "5, "##4
13
1". ACCO6NTS PA7A5LE ; INTERNATIONAL ACCO6NTS
7his account refers to 0orei)n ostal Accounts -0As. that are
settle( in accor(ance with Eniversal ostal Enion -EE.
conventions, rules an( re)ulation which *ay be either thru the
(irect pay*ent *o(e or the o>settin) *o(e. En(er the o>settin)
*o(e, receivables an( payables are net an( the balances are
either pai( or bille(Dcollecte(. 0As are accounte( for in !3R
-!pecial 3rawin) Ri)hts. an( translate( at closin) !3R rate an(
KE!3 rate to peso e/uivalent at balance sheet (ate.
1*. LOANS PA7A5LE
2112 $117
Banco (e &ro "12&2,/&3*3 355,5"5,317
!B B 3;, 21*&,,,&/3/ $14,355,"5$
!B B 3B 2/&12,&222
3B "4,$55,$#7
,""&,32&,20 5#3,$44,755
7he loan account with the Banco (e &ro ha( an ori)inal principal
of 545 <illion in "##7. 7his was restructure( for seven -7. years
co**encin) on &ctober ", $115 until &ctober ", $1"3.
7he loan payable to !B -taken out fro* 3;,. represents loans
availe( by hilippine Feasin) I 0inancin) ,orporation -F0,. which
was assu*e( by , on Guly $11$ as a )uarantor an( was o>set
a)ainst the payable of , to F0,. &n 3ece*ber "", $115, the
hilippine ostal !avin)s Bank took out the 3;, loan. <onthly
a*ortiCation of , was o>set a)ainst rentals of !B startin)
0ebruary $117.
7he ,orporation availe( a new loan fro* !B un(er NL3M&+
115+14 (ate( Guly 3", $114 as per reco**en(ations of !B of
the back to back ter* loan to take out ,8s obli)ations fro* 3B
a*ountin) to $3,1$5,444.74.
1,. A6THORI<E: CAPITAL STOC=
14
En(er !ection # of R.A. 7354 or the ostal !ervices Act of "##$,
the ,orporation shall have an authoriCe( capital stock of "1
billion (ivi(e( into 45 *illion ,lass A% shares to be subscribe( by
the ?overn*ent an( 55 *illion ,lass B% shares to be subscribe(
by private entities with par value of "11.
1/. OPERATIN. RE4EN6E
2112 $117
ostal 0ees "&1"*&1*"&1
21
3,$"5,514,1"
"
ostal ;3 ,ar(s 0ees 2*2&**"&,10 $11,54",#"#
Rent ;nco*e 23&3,2&/0, 31,#11,3""
!ale of hilatelic ;te*s 21&201&213 $3,513,"73
&ther ;nco*e ""&11,&",1 $3,5"$,444
"&",3&21/&*
*1
3,4#4,415,$5
4
10. OPERATIN. E>PENSES
Per!onal Ser?ice! consist of:
2112 $117
!alaries an( wa)es 1&,/*&22*&*1
2
",445,445,31
#
A((itional co*pensation 21*&2,"&3/2 $"",71$,347
Fife an( retire*ent insurance contributions 131&1*/&23, "#1,43#,45$
Near en( bonus 1"3&1,1&211 "31,53#,7$3
&ther bonuses an( allowances 12/&,01&,22 $14,133,$45
7er*inal leave bene2ts 112&021&1*1 #",514,#"5
ARA 03&**3&,2" 41,5"#,733
,ash )ift /1&312&121 7",3$4,533
,lothin)DEnifor* allowance *3&"22&"01 53,$4",411
&verti*e an( ni)ht pay 21&,2"&1"1 $1,""4,547
hilhealth contributions 12&223&*1* "4,54#,$"5
a)+ibi) contributions 12&020&3"" "7,$73,#1#
Representation allowance 1/&,/1&221 7,755,544
A,, contributions 1"&033&,0" "4,7#$,4"4
7ransportation allowance 2&02"&,2, 7,57",3##
Fon)evityDFoyalty pay ,&20*&,"/ 3,414,#45
Retire*ent bene2ts *&"1*&320 $,544,3""
MaCar( pay 2/"&*/2 45",15"
Monoraria /1/&222 745,411
2&/3,&12,&,1
/
$,574,4"4,5$
5
Maintenance an( Oter Operating E#pen!e! consist of:
15
2112 $117
7ransportation an( (elivery ,*1&2/1&,/1 544,4$",755
3epreciation ,/&22/&01, 57,15$,5##
?asoline, oil an( lubricants ,*&,0/&*22 43,557,511
7ravelin) e=penses ,1&"20&2,* 44,$57,#11
Fi)ht an( water *3&23"&232 4#,$5",541
!upplies an( *aterials **&112&3,1 5$,##5,$55
&thers 112&*,2&22" "15,##7,7$5
31*&322&12* #15,555,345
12. A:@6STMENTS TO THE 5ALANCE SHEET FOR FAIR
PRESENTATION OF FINANCIAL POSITION
,ertain asset an( liability accounts were presente( at a*ounts net
of account balances which accu*ulate( prior to corporatiCation
an( which coul( not be substantiate(. 7he e>ect of such a
presentation on the 3e2cit is to increase it by ","43,$5$,$"5.
osta)e !ta*ps ;nventory, for e=a*ple, reOect the face value
instea( of printin) costP 3ue fro* &'cers an( A*ployees inclu(es
inco*plete or unli/ui(ate( payrollP ReceivablesD3isallowances
inclu(es accountabilitiesDshorta)es of abscon(e( e*ployeesP Fan(
inclu(es booke(+up value of properties without titlesP Accounts
ayable inclu(es e=cess certi2cation on accounts payable or
booke(+up payables without correspon(in) (isburse*ent
vouchers. 7hese accounts are sub9ect to veri2cation an( vali(ation
an( further sub9ect to ,&A approval before these are written o>
fro* the books of accounts. Break(own of these accounts is as
follows:
16
,ash an( ,ash A/uivalents 54","7$,"15
Accounts Receivable 3#",54",3#$
3ue toDfro* Re)ional &'cesD,entral &'ce $,3#",554,444
;nventories ",115,$$",57#
;nvest*ent in !tocks "4#,"41
&ther Assets ","35,$44,$74
repai( A=penses -cre(it balance. 4$5,545
Accounts ayable 4$5,4##,14#
;nter+A)ency ayables "11,""4,451
&ther Fiability Accounts 3,$#4,"4",#74
3eferre( ,re(its 55,3"1,14$
,ontin)ent ,apital $,3$#,7"#
,ertain accounts in 3ece*ber 3", $117 2nancial state*ents were
reclassi2e( to confor* with the 3ece*ber 3", $114 2nancial
state*ents presentation.
13. OTHER MATTERS
". 0ore)one revenues fro* frankin) *ail privile)es are esti*ate(
at $1",$3#,541. 7hese were authoriCe( un(er several
a(*inistrative issuances an( were )iven to several )overn*ent
o'ces such as, &'ce of the resi(ent, !enate, Mouse of
Representatives, !upre*e ,ourt, !enate, the ,o*elec etc.
$. , stoo( as )uarantor to F0, loans as follows:
,re(itor Bank rincip
al
;nteres
t
Balance
AAA !pecial 0un( ;;; + 0B7, $51,7$$ "5",4"5 41$,"37
B3& "4#,5$5 37,"#" $$5,7"5
Allie( Bankin) ,orp. 44,$"4 $3,37" 57,54#
rovi(ent 0un( 3,$4# 44 3,333
447,754 $"$,1$" 5##,775
17