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Basic Corporate Information

Philippine Seven Corporation (PSC) was incorporated in the Philippines and
registered on November 29, 1982 with the Philippines Securities and Exchange
Commission, SEC Registration No. 0000108476. The registered address of the entity is
7th floor, The Columbia Tower, Ortigas Avenue, Mandaluyong City.
PSC was listed in Philippine Stock Exchange on February 4, 1998 and currently
belongs to the primary listing in the PSE. The companies and its subsidiaries are
primarily engaged in the business of retailing, merchandising, or otherwise dealing in all
king of grocery items, dry goods, food or foodstuffs, beverages, drinks and all kinds of
consumer needs or requirements and in connection therewith, operating or maintaining
warehouses, storages, delivery vehicles and similar or incidental facilities. PSC
operates the largest convenience store network in the Philippines
As of December 31, 2013 and 2012, PSC has the total of 650 and 656
shareholders, respectively. The company, PSC, is controlled by the President Chain
Store (Labuan) Holdings, Ltd., an investment holding company incorporated in
Malaysia, which owns 51.56% of the companys outstanding shares whereas the
remaining % holdings of the shares are widely held. (See table on page 9 under Item 5
Market for Issuers Common Equity and Related Stockholders Matters as segment of
operational and financial information)

Financial Statements
The consolidated financial statements were authorized for issue by the Board of
Directors (BOD) on February 20, 2014.
The accompanying financial statements have been prepared in accordance with
Philippine Financial Reporting Standards (PFRS). The company applied for the first
time, amendments that require restatement of previous financial statements.

These comprise PAS 19, Employee Benefits (Revised 2011) and PAS 1,
Presentation of Financial Statements. Moreover, the application of PFRS 7, Financial
Instruments: Disclosures Offsetting Financial Assets and Financial Liabilities, PFRS
12, Disclosures of Interest in other entities and PFRS 13, Fair Value Measurement
resulted in additional disclosures in the financial statements.
Overall Presentation

The consolidated financial statements are prepared under the historical cost
basis, except for parcels of land, which are carried at revalued amount.

The consolidated financial statements are presented in Philippine Peso (Peso),

which is the Groups functional currency and all amounts are rounded to the
nearest Peso except when otherwise indicated.

The Account titles in the consolidated financial statements had corresponding

disclosures or notes to be seen in the notes of the financial statements


Cash and Cash Equivalents
Cash is measured at face value.
Cash includes cash on hand and the cash in bank encompasses
savings and deposit accounts.
The details comprising the Cash and Cash Equivalents were
disclosed in the notes to consolidated financial statements.

Short-term Investments

Short-term investments pertain to time deposit which has a maturity

date of more than 90 days but less than a year are recognized
initially at fair value.
Transaction costs are included in the initial measurement of all
financial assets and financial liabilities except for financial
instruments measure at fair value through profit or loss.
The classes of receivables of the company were clearly stated.
X The computations of receivables, though defined, which are the
suppliers, employees, store operators, rent, and insurance
receivable were not disclosed apparently.
Inventories are stated at the lower of cost and net realizable value
The cost of inventories is determined using the first-in, first out
method (FIFO).
Prepayments and other Current Assets
The components of the prepayments and other current assets were
declared clearly.
There were supporting computations of prepayments and other
current assets in notes to consolidated financial statements.


Property and Equipment

The gross carrying amount is adjusted in a manner that is consistent
with the revaluation of the carrying amount of the asset because the
entity uses the revaluation method in measuring the property and
The accumulated depreciation is eliminated against the carrying
amount of the asset.
The estimated useful life was indicated in terms of determining the
accumulated depreciation to come up with the carrying amount of
the property and equipment and carry on to revaluation.
Land is carried at revalued amount less any impairment in value.
Revaluation Surplus is recorded in Other Comprehensive Income
and credited to Revaluation Increment on Land Net of Tax
account in Statement of Changes in Equity.









noncancelable lease agreements entered into by the entity.

The deposits are recognized at cost and can be refunded or applied
to future billings.
Deferred Income Tax Assets
The carrying amount of deferred income tax assets is reviewed at
each balance sheet date and reduced to the extent that it is no
longer probable that sufficient that future taxable profits will be
available to allow all or part of the deferred income tax assets to be
Unrecognized deferred tax assets are reassessed at each balance
sheet date and are recognized to the extent that it has become
probable that sufficient future taxable profits will allow the deferred
income tax assets to be recovered.
Goodwill and other Non-current Assets

Intangible Assets acquired separately are measured on initial

recognition at cost. Subsequently, intangible assets are carried at







impairment loss, if any.

Bank Loans

Bank loans represent unsecured Peso-denominated short-term

borrowings from various local banks payable in lump-sum and the
proceeds of these loans were used for the operations.
The carrying value approximates fair value because of recent and
monthly repricing of related interest based on market conditions.

Bank Loans should not be the first line item under current liabilities.
It should be the next to Accounts Payable and Accrued Expenses.

Accounts Payable and Accrued Expenses

The accounts were properly disclosed to notes to consolidated

financial statements.
X Accounts Payable and Accrued Expenses is improper, it should
be Trade and other Payables.
X It must be the first line item under current liabilities and then
followed by Bank Loans account.
Income Tax Payable
Income Tax Payable was correctly calculated and properly
presented in the Consolidated Statement of Financial Position.

Other current liabilities

These pertain to non-trade accounts payable, output VAT, retention
payable, withholding taxes, employee related liabilities, royalty,
current portion of deferred revenue on finance lease and exclusivity
contract, and others.
These were properly disclosed on notes to consolidated financial

Deposits Payable
Deposits Payable was clearly disclosed on the notes to
consolidated financial statements.
Net Retirement Obligation
The net retirement obligation comprises service costs which is
composed of current service cost, past service cost, and gain or
losses on non-routine settlements; net interest on the net defined
liability which recognized as expense or income in profit or loss;
and remeasurements of net defined liability which encompassed
the actuarial gain or losses, return on plan assets and any change
in the effect of the asset ceiling (excluding net interest on defined








comprehensive income.

Cumulative Redeemable Preference Share








corresponding dividends on these shares that are charged as

interest expense in profit or loss are based on recent Treasury

bill rates repriced annually at year-end.


The entity used some elements constituting shareholders equity

under Philippine terms like Common stock, Additional paid-in
capital, and Treasury stock which is equivalent terms of
International Accounting Standards (IAS) of Ordinary share
capital, Share premium, and Treasury Shares respectively. On
the other hand, the used of account titles remained consistent to
the notes to consolidated financial statements.


Revenue Recognition
Merchandise Sales

Revenue from merchandise sales is recognized when the

significant risks and rewards of ownership of the goods have
passed to the buyer.
It is measured at the fair value of the consideration received,
excluding discounts, returns, rebates, and sales taxes.
Franchise fee is recognized upon execution of the franchise
agreement and performance of initial services required under
the franchise agreement.
It is recognized in the period earned.
It is recognized when services is rendered. In case of marketing
support funds, revenue is recognized upon start of promotional
activity for the suppliers.
It is accounted for on a straight-line basis over the lease term.
It is recognized upon the sale of the consigned goods.

It is recognized as it accrues based on the effective interest


Other Income
It is recognized when thereare incidental economic benefits,
other than the usual business operations, that will flow to the
company and can be measured realiably.

Expense Recognition
Cost of Merchandise Sold
It is recognized in profit or loss at the point of sale
It is recognized in profit or loss upon utilization of the services or
when they are incurred.
Communication, Light and Water is the major contributor of
incurring expenses under selling and general and adminstrative


Cash Flows from Operating Activities

Net cash flow from operating activities in 2013 has increased to approximate
amount of P1.8 billion, higher compared to 2012. It emphasized that the improvement in
operating cash flow can be attributed to the growth in net income and working capital
contribution resulting from higher level of current liabilities

Cash Flows from Investing Activities

Net cash utilized in investing activities rose to almost P1.3 billion for the year
2013. It is because major cash outlay went to new store constructions and renovations
and acquisition of new equipment to support new product lines.

Cash Flows from Financing Activities

Net Cash flow from financing activities arrived at P26.5 million representing the
net availments of bank loans in the amount of P82.2 million, payment of cash dividend
totaling to P39.9 million, and interest paid amounting to P15.8 million.