Professional Documents
Culture Documents
1 0 0 7 0 0
SEC Registration Number
G R A C E C O R P O R A T I O N
1 2 N I N O Y A Q U I N O A V E N U E , P A R A N A Q U E
C I T Y , P H I L I P I N E S
1 2 3 1 A A F S 0 4 2 7
Month Day (Form Type) Month Day
(Fiscal Year) (Annual Meeting)
SEC
Dept. Requiring this Doc. Amended Articles Number/Section
Document ID Cashier
STAMPS
Remarks: Please use BLACK ink for scanning purposes.
GRACE CORPORATION
STATEMENTS OF FINANCIAL POSITION
December 31
2004 2003
ASSETS
Current Assets
Cash and cash equivalents P,= 14,232,169.00 P,= 1,100,000.00
Financial Assets 2,545,000.00 1,150,000.00
Short-Term Investments 6,500,000.00 -
Trade and Other Receivables - net 12,574,457.07 13,750,000.00
Merchandise Inventory 3,940,279.37 900,000.00
Prepayments 400,000.00 500,000.00
Total Current Assets 40,191,905.44 17,400,000.00
Noncurrent Assets
Property and equipment - net 76,484,679.97 61,180,000.00
Intangible assets - 1,000,000.00
Total Noncurrent Assets 76,484,679.97 62,180,000.00
P,= P,= 79,580,000.00
116,676,585.41
Current Liabilities
Trade and Other Payables 20,710,051.98 1,450,500.00
Notes Payable 15,206,500.00 21,000,000.00
Total Current Liabilities 35,916,551.98 22,450,500.00
Equity
Ordinary Share Capital 70,000,000.00 45,000,000.00
Subscribed Ordinary Share Capital 5,000,000.00 -
Subscription Receivable- Ordinary Share Capital 2,625,000.00 -
Premium in Excess of Par 5,250,000.00 3,500,000.00
Retained earnings 2,871,401.69 8,629,500.00
Total Equity 80,760,033.43 57,129,500.00
P,= P,= 79,580,000.00
116,676,585.41
REVENUE
P,= P,= 53,439,000.00
Net Sales 110,710,751.07
110,710,751.07 53,439,000.00
OTHER INCOME
Interest income 97,209.86 110,000.00
Others - net 1,632,504.00 -
1,729,713.86 110,000.00
RETAINED EARNINGS
Grace Corporation (Company) was incorporated with the Philippine Securities and Exchange
Commission (SEC) on May 2, 2002. The Company was organized primarily to engage in,
operate, conduct, carry on and maintain the business of importing, exporting, buying, selling,
handling, and otherwise dealing in, all kinds of office, school and printing supplies of all
kinds of office machinery and equipment as well as general commission business on the said
products.
The Company’s registered office address is at 12 Ninoy Aquino Avenue, Paranaque City,
Philippines.
The consolidated financial statements as at December 30, 2004 and 2003 were approved and
authorized for issuance by the Board of Directors on March 31, 2005.
Statement of Compliance
The financial statements of the Company have been prepared in accordance with the
Philippine Financial Reporting Standards (PFRS).
The preparation of the financial statements in accordance with PFRS requires management to
make judgments, estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. The estimates and assumptions used in the
accompanying financial statements are based upon management’s evaluation of relevant facts
and circumstances as of the date of the financial statements. Actual results could differ from
such estimates.
Cash and cash equivalents are measured at fair value. The carrying amount approximates the
fair value due to short period of maturity. Cash includes cash on hand and in banks. Cash
equivalents are short-term, highly liquid investments that are readily convertible to known
amounts of cash with original maturities of three (3) months or less from dates of placement
and that are subject to an insignificant risk of changes in value.
2.3 Receivables
Trade and other receivables are stated at the nominal value as reduced by appropriate
allowances for estimated irrecoverable accounts. Trade receivables which are based on
normal credit terms and do not bear interest, are recognized and carried at original invoice
amount. The carrying amount of receivables approximates fair value due to the short period
of maturity of these investments. Where the credit period given extends beyond the normal
credit terms, receivables are measured using the effective interest rate (EIR) method. An
amortization table shall be shown as basis for accounts affected by the associated long-term
receivables.
At the end of each reporting period, the carrying amounts of the receivables are reviewed to
determine whether there is any objective evidence that the amounts are not recoverable. A
provision for impairment loss is made when there is objective evidence that amounts due will
not be collected in its total amount. Significant financial difficulties of the debtor, probability
that the debtor will enter bankruptcy or financial reorganization, and default or delinquency
in payments are considered indicators that the trade receivable is impaired. The amount of the
provision of impairment loss is the difference between the asset’s carrying amount and the
present value of estimated future cash flows, discounted at the original effective interest rate.
Cash flows relating to short-term receivables are not discounted if the effect of discounting is
immaterial. The amount of impairment loss shall be recognized in the Statement of
Comprehensive Income. The carrying amount of the asset shall be reduced either directly or
through the use of an allowance account.
Trade and Other receivables from exchange transactions (i.e. Trade Receivables) are
disclosed separately from trade and other receivables from non-exchange transactions (i.e.
Receivable from Employees). Trade and Other Receivables in which the entity gives
approximately equal value are recognised under Trade and Other Receivables from exchange
transactions. Trade and Other Receivables in which the entity gives substantially less than the
fair value or which the entity receives without giving approximate equal value in the
exchange shall be classified under Trade and Other Receivables from Non-Exchange
transactions.
2.4 Inventories
Inventories are stated at the lower of cost and net realizable value. The cost of goods
available for sale includes the cost of purchase less the purchase discounts. Net realizable
value is the estimated selling price in the ordinary course of business, less variable selling
expenses and cost to complete.
The estimates of net realizable value are based on the most reliable evidence available at the
time the estimates are made of the amounts the inventories are expected to be realized.
The amount of any write-down of inventories to net realizable value and all losses of
inventories shall be recognized as an expense in the period the write-down or loss occurs. The
carrying amount of inventories is reduced through the use of an allowance account. The
amount of any reversal of any write-down of inventories, arising from an increase in net
realizable value, shall be recognized as reduction in the amount of inventories recognized
under cost of goods sold in the period in which the reversal occurs.
Inventories are derecognized when they are sold or there are no future benefits to the
company. The carrying amount of those inventories is recognized as an expense, reported as
cost of goods sold in the statements of income, in the period in which the related revenue is
recognized.
2.5 Prepayments
Prepayments or prepaid expenses are expenses paid in advance. The prepayments are
accounted for using the asset method in which the prepayments are recorded as current assets
(or can be classified under non-current assets) depending on the terms. Only the portion of
the expense that has actually expired or used up is matched against the revenue generated
during the accounting period. There is an exception to this rule, as Grace Corporation has a
policy of expensing payments on advertisement immediately, when the period of
advertisement is not stated.
The initial cost of property, plant and equipment consists of its purchase price, including
import duties, taxes and any directly attributable costs of bringing the asset to its working
condition and location for its intended use. Expenditures incurred after the property, plant
and equipment have been put into operation, such as repairs and maintenance, are normally
charged to income in the period in which the costs are incurred. In situations where it can be
clearly demonstrated that the expenditures have resulted in an increase in the future economic
benefits expected to be obtained from the use of an item of property, plant and equipment
beyond its originally assessed standard of performance, the expenditures are capitalized as an
additional cost of property, plant and equipment.
Depreciation and amortization are computed on the straight-line basis over the estimated
useful lives (EUL) of the property, plant and equipment as follow:
Years
Land 0
Transportation equipment 10
Building 20
Furniture and fixtures 5-10
Office equipment 2-3
The assets’ residual value, useful life and depreciation and amortization method are reviewed
periodically to ensure that the period and method of depreciation and amortization are
consistent with the expected pattern of economic benefits of these assets.
An item of property, plant and equipment is derecognized upon disposal or when no future
economic benefits are expected from its use or disposal. Any gain or loss arising on
derecognition of the asset (calculated as the difference between the net disposal proceeds and
the carrying amount of the asset) is included in the statement of comprehensive income in the
year the asset is derecognized.
2.8 Current and Deferred Income Tax
Current tax
Current tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered from or paid to the taxation authority.
Deferred tax
Deferred tax is recognized on differences between carrying amounts of assets and liabilities
in the financial statements and their corresponding tax bases (known as temporary
differences). Deferred tax liabilities are recognized for all temporary differences that are
expected to increase taxable profit in the future. Deferred tax assets are recognized for all
temporary differences that are expected to reduce the taxable profit in the future. Deferred
tax assets are measured at the highest amount that, on the basis of current or estimated future
taxable profit, is more likely than not to be recovered.
The net carrying amount of deferred tax assets is reviewed at each reporting date and is
adjusted to reflect the current assessment of future taxable profits. Any adjustment is
recognized in the statement of comprehensive income.
Deferred tax is calculated at tax rates that are expected to apply to the taxable profit (loss) of
the periods in which it expects the deferred tax assets to be realized or the deferred tax
liability to be settled, on the basis of tax rates that have been enacted or substantively enacted
by the end reporting period. A valuation allowance is provided, on the basis of past years and
future expectations, when it is not probable that taxable profits will be available against
which the future income tax deductions can be utilized.
The useful lives of intangible assets are assessed to be either finite or indefinite.
Intangible assets with finite lives are amortized over the useful economic life and assessed for
impairment whenever there is an indication that the intangible asset may be impaired. The
amortization period and amortization method for an intangible asset with a finite useful life is
reviewed at least at each financial year-end. Changes in the expected useful life or the
expected pattern of consumption of future economic benefits embodied in the asset is
accounted for by changing the amortization period or method, as appropriate, and treated as
changes in accounting estimates.
Intangible assets with indefinite useful lives are tested for impairment annually at the cash-
generating unit (CGU) level. Such intangible assets are not amortized. The useful life of an
intangible asset with an indefinite life is reviewed annually to determine whether indefinite
useful life assessment continues to be supportable. If not, the change in the useful life
assessment from indefinite to finite is made on a prospective basis.
As of December 31, 2004 and 2003, the Company has no intangible assets with indefinite
useful lives. Organization Cost is eliminated from the financial statements as these costs are
expensed when incurred.
If an impairment loss subsequently reverses, the carrying amount of the asset (or group of
related assets) is increased to the revised estimate of its recoverable amount (selling price less
costs to complete), but not in excess of the amount that would have been determined had no
impairment loss been recognized for the asset (or group of related assets) in prior years. A
reversal of an impairment loss is recognized immediately in statement of comprehensive
income.
All financial liabilities are recognized initially at fair value and, in the case of loans and
borrowings, net of directly attributable transaction costs.
The Grace Corporation’s trade and other payables include accounts payable, notes payable,
notes payable - officer, SSS Medicare Premium Payable, Withholding Taxes Payable, HDMF
Premiums Payable, Accrued Interest Payable, Property Taxes Payable, Utilities Payable,
Employee and Bonus Payable.
Subsequent Measurement
Trade and other payables are measured at fair value, gains and losses are recognised entirely
in profit or loss (fair value through profit or loss, FVTPL).
Derecognition
A trade and other payable is derecognized when the obligation under the liability is
discharged, cancelled or expires. When an existing payable is replaced by another from the
same lender on substantially different terms, or the terms of the existing liability are
substantially modified, such an exchange or modification is treated as the derecognition of
the original liability and the recognition of a new liability. The difference between the two
carrying amounts are recognized in profit or loss
2.12 Provisions and Contingencies
Provisions are recognized when the Company has a present obligation (legal or constructive)
as a result of a past event, it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation, and a reliable estimate can be made of the
amount of the obligation. Provisions are reviewed at each reporting date and adjusted to
reflect the current best estimate.
Contingent liabilities are not recognized in the financial statements. They are disclosed
unless the possibility of an outflow of resources embodying economic benefits is remote.
Contingent assets are not recognized in the financial statements but disclosed when an inflow
of economic benefits is probable.
Sales revenue
Sales revenue is recognized at the time of delivery of the products and the collectability is
reasonably assured.
Interest income
Interest income on notes receivable is recognized as it accrues. The time of accrual is in
accordance with the terms of the note, thus interest is computed separately for each note.
Grace Corporation has three (3) notes receivables, each having a nominal interest rate of
24%. All three (3) of these notes are collectible currently (within one year). The fair value of
these notes approximates the carrying amount as any differences within the two amounts are
considered immaterial (note: period of collection is within one year).
2004 2003
Cash in banks 14,320,690.00 1,000,000.00
Petty Cash 1,404.00 10,000
Total Cash 14,232,094.00 1,010,000.00
Cash in banks earns interest at the respective bank deposit rates although, during the
course of the audit, there has been no statement of such earned interest. It is in
accordance with the auditor’s professional judgment to recognize amounts when it meets
the threshold of materiality. Cash equivalents, which represent money market placements
are made for varying periods of up to three (3) months, depending on the immediate cash
requirements of the Company. During the course of the audit engagement, the auditors
found no indications of any transactions regarding acquisition or disposal of cash
equivalents (i.e. money market placements).
Trade receivables are noninterest-bearing and are normally settled on a thirty (30) to sixty
(60) day terms. Trade receivables amount to P 12,574,745 as of December 30, 2004 and P
13,750,000 as of December 30, 2003. Receivables are further classified according to the
exchange transactions (trade or non-trade). The classifications are shown above with their
respective amounts.
Note 6- Inventories
2004 2003
At net realizable value
Finished goods 3,940,279.37 900,000.00
Inventories are recognized at the lower of cost or net-realizable value (estimated selling price
less estimated costs to sell or costs to complete). The inventory account on December 31,
2004 shows an audited balance of P 4,080,120.54 which is already adjusted down to its net
realizable value. A writedown of P 318,383.21 is recorded appropriately. The net realizable
value of inventory at December 31 is net of 12% VAT.
200
2004
3
680,00
PLDT 0
PLDT - Stock Exchange 136,000
San Miguel 800,000
Philex Mining 910,000
Omico 19,000
Balance at end of year 2,545,000 1,150,000
Cost
Disposals
At December
31
Accumulated
Depreciation
Disposals
At December
31
Net Book
Value 16,500,000.00 50,066,596.64 2,984,500.00 5,400,000.00 1,533,583.33 76,484,679.9
Intangible asset pertains organization cost, which is not in accordance with PAS 38,
Intangible Assets. Details of this account as of December 31, 2004 and 2003 follow:
2004 2003
Accumulated amortization - -
2004 2003
Accounts Payable, Notes payable, accrued expenses and other current liabilities are
obligations for goods and services that have been acquired in the ordinary course of the
business from suppliers. These are classified as current liabilities if payment is due within
one year or less. If not, they are presented as non-current liabilities.
Accrued expenses consist of accruals for commissions, withholding taxes and other
government payables.
a. Capital Stock
The Company’s capital stock consists of:
2004 2003
Authorized P100 Par Value 100,000,000 100,000,000
Grace Corporation’s authorized share was registered with SEC on April 30, 2002 totalling to
One hundred million pesos (P100, 000,000.00), Philippine currency and divided into One
million (1,000,000) shares with a par value of One hundred pesos (P100.00). There is only
one class of share capital, which is Ordinary share capital and no issuance of transfer of
shares of the corporation which would reduce the stock ownership of the Filipino citizen to
less than the percentage of outstanding share capital required by law to be owned by Filipino
citizens, shall be allowed or permitted to be recorded in the books of the corporation. Fifty
thousand shares were subscribed, half still unpaid and Two hundred and fifty thousand shares
were subscribed and issued during 2004. A total of Seven Hundred Thousand (700,000)
shares were issued and no shares are held in treasury as of December 31, 2004.
2004 2003
5,250,000 3,000,000
Any excess of the subscription and issuance price of shares from par value are accounted in
Premium in Excess of Par Value - Ordinary Share Capital.
2004 2003
Gross Sales
112,623,178.57 54,539,000.00
Less: Sales Discounts
870,952.50 300,000.00
Sales Returns and
Allowance 1,041,475.00 800,000.00
Sales for the year ended December 31, 2004 amount to P112,623,178.57, while sales
discounts and sales returns and allowances amount to 870,952.50 and P1,041,475.00,
respectively. Net Sales to be reflected on the Statement of Comprehensive Income for the
year ended December 31, 2004 amount to an audited balance of P110,710,751.07. Amount is
inclusive of unrecorded sales for the month of December, 2004 (see Sales Invoices).
2004 2003
Cost of inventory sold 56,997,534.38 34,785,500.00
Inventory Shrinkage
Allowance for Inventory Write-Down
The inventory shrinkage and inventory write-down is added to the cost of inventory sold to
arrive at the total cost of goods sold. The amount of any write-down of inventories to net
realizable value and all losses of inventories shall be recognized as an expense in the period
the write-down or loss occurs. Since there is no write-down and inventory shrinkage, total
cost of goods sold amounts to P56,121,868.29.
2004 2003
Salaries Expense 26,837,221.29 700,000
Supplies Expense 1,412,012 108,000
Taxes and Licenses 980,000 900,000
SSS Medicare Premium Expense 1,415,220 270,500
HDMF Premium Expense 1,143,200 100,000
Gasoline Expense 1,146,000 100,000
Light, Water and Telephone 1,370,700 210,000
Depreciation Expense (Note ) 4,034,403.36 -
Amortization of Organization Cost - -
Bad Debts Expense 144,750.68 280,000
Representation Expense 120,000 132,000
Advertising Expense 850,520 318,000
Insurance Expense 550,000 200,000
Miscellaneous Expense 397,938 70,000
Income Tax Expense 4,159,249.45 -
9,688,500.00
Miscellaneous expenses pertain to bank charges, security and janitorial services, information
technology support and maintenance, repairs and maintenance and insurance, and
transportation expenses.
The accompanying financial statements of the Company were approved and authorized for
issue by the President on March 31, 2005.