MOTHER OF PERPETUAL HEL FUNERAL HOMES

Brgy Jovelear, Igbaras, Iloilo

2016
NOTES TO FINANCIAL STATEMENT
As of and for the year ended December 31, 2016

1 GENERAL INFORMATION

JAIME VILLANUEVA is a sole proprietor owned and operated the following

trade name Mother of Perpetual Help Funeral Homes. It is duly registered
with the Bureau of Internal Revenue (BIR) and Department of Trade & Industry
(DTI). The business is engaged in buy and sell casket and funeral services.

The company’s principal and registered address of business is at Brgy.

Jovelear, Igbaras, Iloilo.

2 BASIS OF PREPARATION

Mother of Perpetual Help Funeral Homes adopted significant accounting

policies which are in compliance with the Philippine Financial Reporting
Standards (PFRS). These accounting policies have been applied on a consistent
basis. These accounting policies conform in all material respects with the
International Accounting Standards.

The financial statements have been prepared on a historical cost basis. The
financial statements are presented in Philippine Peso which is the company’s
functional and presentation currency.

Statement of Compliance –The financial statements of the company have

been prepared in compliance with the Philippine Financial Reporting Standard
Council

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation – The financial statements have been prepared on the

historical cost basis in accordance with the applicable Philippine Accounting
Standards.The accompanying financial statements have been prepared in
accordance with Philippine Financial Reporting Standards (PFRS) for Small
and Medium-Sized Entities (SMES). It’s the company’s first financial
statements of operations.

PAS 1 - Presentation of Financial Statements

This standard sets out the overall requirements of financial

statements, including how they should be structured, the minimum
requirements for their content and overriding concepts such as going
concern, the accrual basis of accounting and the current/non-current
distinction. The standard requires a complete set of financial statements to
comprise a statement of financial position, a statement of profit and loss and

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other comprehensive income, a statement of changes in equity and a

statement of cash flows.

The objective of PAS 1 is to prescribe the basis for presentation of

general purpose financial statements, to ensure comparability both with the
entity’s financial statement of previous period and with the financial
statements of other entities. PAS 1 sets out the requirements for the
presentation of statements, guidelines for their structure and minimum
requirements for their content.

PAS 7- Statement of Cash Flow

The standard requires an entity to present a statement of cash flow as

an integral part of the primary financial statements. Cash flows are classified
and presented into operating activities (either using the “direct” method),
investing activities or financing activities, with the latter two categories
generally presented on a gross basis.

The objective of PAS 7 is to require the presentation of information

about the historical charges in cash and cash equivalents of an entity by
means of a statement of cash flows, which classifies cash flows during the
period according to operating, investing and financing activities.

PAS 8- Accounting Policies, Changes in Accounting Estimates and

Errors

This is applied in selecting and applying for changes in estimates and

reflecting corrections of prior period errors. The standard requires
compliance with any specific PFRS applying to a transaction, event or
condition, an provides guidance on developing accounting policies for other
items that result in relevant and reliable information. Changes in accounting
policies and correction of errors are generally retrospectively accounted for,
whereas changes in accounting estimates are generally accounted for on a
prospective basis.

PAS 10 - Events after the Reporting Period

This standard contains requirements for when event after the end o
the reporting period should be adjusted in the financial statements.
Adjusting events are those providing evidence of conditions arising after the
reporting period (the latter being disclosed where material).

PAS 12 - Income Taxes

This standard prescribes the accounting treatment for the deferred

income taxes. This standard requires the use of the balance sheet liability
method in accounting for deferred income taxes. It requires the recognition
of a deferred tax liability and subject to certain conditions a deferred tax
asset for all temporary differences with certain expectations. This standard
provides for the recognition of a deferred tax asset when it is probable the

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 2016 MOTHER OF PERPETUAL HEL FUNERAL HOMES

taxable income will be available against which deferred tax asset can be
used.

PAS 16 - Property, Plant and Equipment

This standard outlines the accounting treatment for most types of

property, plant and equipment. Property, Plant and Equipment is initially
measured at cost, subsequently measured either using a cost or revaluation
model, and depreciated so that its depreciable amount is allocated on a
systematic basis over its useful life.

PAS 36 - Impairment Assets

This standard seeks to ensure that an entity’s assets are not carried
at more than their recoverable amount (i.e. the higher the fair value less
costs of disposal and value in use. With exception of goodwill and certain
intangible assets for which an annual impairment test is required, to
conduct impairment tests where there is an indication of impairment of an
asset, and the test may be conducted for a “cash-generating unit” where an
asset does not generate cash inflows that are largely independent of those
from other assets.

PAS 39 - Financial Instruments: Recognition and Measurement

This standard outlines the requirements for the recognition and

measurement of financial assets. Financial liabilities and some contracts to
buy or sell non-financial items. Financial instruments are initially recognized
when an entity becomes a party to the contractual provisions of the
instrument, and are classified into various categories depending upon the
type of instrument, which then determines the subsequent measurement
the instrument (typically amortized cost or fair value). Special rules apply to
embedded derivatives and hedging instruments.

PAS 32- Financial Instruments: Disclosure and Presentation

Defines a financial instrument at any contract that gives rise to both

financial assets of one entity and a financial liability of equity instrument or
another entity.

A financial asset is any asset that is:

a. Cash
b. A contractual right to receive cash or another financial asset from
another entity.
c. A contractual right to exchange financial instruments with another
entity under conditions that are potentially favourable. An example
is an option to purchase shares of another entity at less than
market

PAS 39- Loans and Receivables

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 2016 MOTHER OF PERPETUAL HEL FUNERAL HOMES

Defines Loans and Receivables as non-derivative financial assets with

fixed or determinable payments that or not quoted in an active market. PAS
39, paragraph 46 provides that loans and receivables shall be measured at
amortized cost using the effective interest method.

A financial liability is any liability that is contractual obligation:

a. To deliver cash or other financial asset to another entity

b. To exchange financial instruments with another entity under
conditions that are potentially unfavourable.

Financial Risks Management and Objective Policy

The entity’s principal financial instruments comprise cash and

cash equivalents. The main purpose of these financial instruments is to
finance the entity’s operations.

a. Credit Risk – this is the risk that one party to a financial instrument will
cause a financial loss to the other party by failing to discharge an
obligation. The entity trades only with recognized, credit worthy third
parties. It is the entity’s policy that all customers who wish to trade on
credit terms are subject to credit verification procedures. In addition,
receivable balances are monitored on an ongoing basis with result that
the entity’s exposure to bad debts is not significant.

b. Liquidity Risk – this is the risk that an entity will encounter difficulty
meeting obligations associated with a financial liability. The company
minimizes the exposure to liquidity risk by ensuring the availability of
liquid assets to meet short term funding and regulatory requirements.
The entity regularly evaluates its projected and actual cash flow
information.

c. Market Risk – this is a risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market places.

Cash and Cash Equivalents – 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
months or less from thedate of acquisition and are subject to an
insignificant risk of change in value.

Trade and Other Receivables – Most sales are made on the basis of normal credit
terms, and the receivables do not bear interest. Where credit is extended
beyond normal credit terms receivables are measured at amortized cost
using the effective interest method. At the end of each reporting period that
carrying amounts of trade and other receivables are revised to determine

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 2016 MOTHER OF PERPETUAL HEL FUNERAL HOMES

whether there is any objective evidence that the amounts are not
recoverable. If so, an impairment loss is recognized immediately in profit and
loss.

Property and Equipment – Property and equipment, except for land,are carried at
cost less accumulated depreciation and amortization and any accumulated
impairment in values. Such cost includes the cost of replacing part of
property, plant and equipment at the time that cost is incurred, if the
recognition criteria are met, and excludes the costs of day-to-day servicing.
Land is stated at cost less impairment in value, if any.

The initial cost of property and equipment comprises its purchase

price, including import duties and taxes and any other cost directly
attributable in bringing the asset to its working condition and location for its
intended use. Expenditures incurred after the property and equipment have
been put into operations, such as repairs and maintenance and overhaul
costs, are normally charged to operation in the period 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 beyond its originally assessed
standard of performance, the expenditures are capitalized as additional costs
of property, plant and equipment. Costs also include any asset retirement
obligation and interest on borrowed funds used. When assets are sold or
retired, their costs and accumulated depreciation, amortization and
important losses, if any, are eliminated from the account and any gain or
loss resulting from their disposal is included in the statement of
comprehensive income of such period.

The residual values, if any, useful lives and depreciation and

amortization method of the assets are reviewed and adjusted, if
appropriated, at each financial period.

The carrying values of property, plant and equipment are reviewed for
impairment when events or changes in circumstances indicate that the
carrying value may not be recoverable. Fully depreciated assets are retained
in the accounts until they are no longer in use and no further depreciation is
credited or charged to profit or loss.

At each reporting date, property, plant and equipment are reviewed to

determine whether there is any indication that the assets have suffered an
impairment loss. If there is an indication of possible impairment, the
recoverable amount of any affected asset (or group of related assets) is
estimated and compared with its carrying amount. If estimated recoverable
amount is lower, the carrying amount is reduced to its estimated recoverable
amount, and an impairment loss is recognized immediately in profit and
loss.

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 but no excess of the amount that would have been
determined had no impairment loss been recognized for the asset (or group

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of related assets) in prior years, an impairment loss is recognized

immediately in profit and loss.

Depreciation is computed using the straight-line method over the

estimated useful life of the asset. The useful lives are reviewed periodically
to ensure that the period and method of depreciation are consistent with the
expected pattern of economic benefits from items of property and equipment.

Estimated Life
Property, Plant & Equipment
No. of years
Funeral Cars 20
Service Cars 15
Furniture & Fixtures 10
Office Equipment 10
Working Shed 10

(Schedule of Depreciation on separate sheet)

Other Assets –other assets are miscellaneous assets that cannot be classified as
current asset, fixed asset, or intangible assets. Examples of this account
include deferred tax assets, bond issue costs, advances to officers, prepaid
pension costs, and long-term prepayments.

Taxes Payable – includes statutory obligation as of the end of the period such as
VAT payable and Income Tax Payable.

Trade Payable – amount or obligation billed to a company by its suppliers for

goods and services consumed by the company in the ordinary course of the
business. Trade payables are recognized initially and subsequently
measured at the transaction price and based normal credit terms and do not
bear interest.

Accounts Payable-Non Trade – amounts or obligations of the company due for

payment to an entity other than its normal supplier which are not attached
or related directly to the company’s primary operations.

Mortgage Payable – is the liability of a property owner to pay a loan that is secured
by property.

Interest –is recognized as the interest accrues, taking into account the effective
yield on the related asset. Interest earned/incurred on loans and discounts
are recorded using the accrual method of accounting.

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Revenues –revenues are recognized to the extent that it is probable that the
economic benefits associated with the transactions will flow to the entity and
the amount of the Revenue can be measured reliably regardless of when the
payment is being made. Revenue is measured at the fair value of the
consideration received or receivable, taking into account contractually
defined terms of payment and excluding taxes or duty. The company
assesses its revenue arrangements against specific criteria in order to
determine if it is acting as principal or agent. The company has concluded
that it is acting as a principal in all of its revenue arrangements.

Cost and Expense Recognition – costs and expenses are recognized in the
statement of income when there is a decrease in future economic benefits
related to a decrease in an asset or an income liability arises that can be
measured reliably. Expenses are recognized in the statement of
comprehensive income on the basis of a direct association between the costs
incurred and the earnings of specific items of income on the basis of
systematic and rational procedure when the economic benefits are expected
to arise over several accounting periods and the association with income can
only be determined or immediately when an expenditure produces no future
economic benefits or when and to the extent that future economic benefits
do not qualify, or cease to qualify, for recognition in the statement of
financial position as an asset.

Costs and expenses decreases in economic benefits during the

accounting period in the form of outflows or decrease of assets or incurrence
of liabilities that result in decrease in fund balance. Costs and expenses are
recognized in the statement of revenues and expenses in the year these are
incurred.

Leases – Leases are classified as operating leases. Rental payables under operating
leases are charge to profit or loss in a straight-line basis over the term of the
relevant lease.

Borrowing Costs – All other borrowing costs are recognized as expense in the
statement of income when incurred.

Current Income Tax – Current income tax assets and liabilities for the current
period are measured at the amount expected to be recovered from or paid to
the taxation. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted at reporting date.

Deferred Tax – provided using the liability method or temporary differences

between the tax bases of assets and liabilities and their carrying amounts for
the financial reporting purpose at the reporting date. Deferred tax liabilities
are recognized for all taxable temporary differences, except when the
deferred tax liability arises from the initial recognition of goodwill or asset
liability in a transaction that is not a business combination and at the time

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of the transaction, affects neither the accounting income nor taxable income
or loss.

The carrying amount of the deferred tax asset is reviewed at each

reporting date and reduced to the extent that it is no longer probable that
sufficient taxable income will be available to allow all or part of the deferred
tax assets to be utilized. Unrecognized deferred tax assets are reassessed at
each reporting date and are recognized to the extent that it has become
probable that the future taxable income will allow the deferred tax assets to
be recovered.

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
obligation and a reliable estimate can be made of the amount of the
obligation, when the expects company some or all of the provision to be
reimbursed, for example, under an insurance contract, the reimbursement is
recognized as a separate asset, but only when the receipt of the
reimbursement is virtually certain. The expense relating to any provision is
presented in profit or loss net of any reimbursement.

Employee Benefits

Short-Term Benefits – the company recognized a liability net of amounts

already paid and an expense for services rendered by employees during the
accounting period. Short-term benefit given by the Company to its employees
includes salaries and wages, Social Security Contribution, Philhealth and
Pag-ibig.

Long Term Benefits – the company has not yet provided long term- benefits
to its employees mandated by law.

Contingencies – contingent liabilities are not recognized in the financial statement.

They are disclosed in the notes to the financial statements unless the
possibility of an outflow of resources embodying the economic benefits is
remote. Contingent assets are not recognized in the financial statements but
are disclosed in the notes to financial statements when an inflow of
economic benefits is probable

Events after the end of Reporting Period – any post year events that provides
additional information about the corporation’s position at the end of the
reporting period (adjusting event) is reflected in the financial statements.
Post year events that are not adjusting events, if any, are disclosed when
material to the consolidated financial statements.

The Use of Estimates and Judgment – the preparation of the financial statement
requires management to make estimate and assumptions that affect the
application of accounting policies and the reported amounts of assets,

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liabilities, income and expenses. The estimates and associated assumptions

are based on historical experience and various other factors that are believed
to be reasonable under the circumstances, the result of which form the
basis of making the judgements about carrying values of assets and
liabilities that are not readily apparent from other sources.

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