Professional Documents
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AUDITED FINANCIAL STATEMENTS
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STATEMENT OF IIIANAGEMENT'S RESPONSIBILIry
FOR FINANCIAL STATEMENTS
The management of Agata Processing, lnc. is responsible for the preparation and fair
presentation ofthe flnancial statements including the schedules attached therein, for the
year(s) ended Decembet 3l,2017 and 2016, in accordance with the prescribed financial
reporting framework indjcated therein, and for such internal control as management
determines is necessary to enable the preparation of financial statements that are free
from material misstatement. whether due to fraud of enor.
The Board of Directors is rcsponsible for overseeing thc Company's flnancial reporting
process.
The Board of Directors reviews and approves the financial statements including the
schedules attached therein, and submits the same to the stockholders or members.
lsla Lipana & Co. (a PwC member firm), the independent auditor, appointed by the
slockholders has audited the financiai statements of the company in accordance with
Phi ndards on Auditing, and in its report to the stockholders or members, has
opinion on the fairness of presentation upon completion of such audit.
[i)/,,i
U rre urer & Controller
Ou," Opillio,r
the financial
In our ooinion. the iccompanying financial stalements present fairty. in all material respecls.
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as ai December 3 r' zorT
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and 20r6 and irs financial
Finaocial Reportins
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Standards (PFRS).
opinion.
Independence
Accountants in
wF in.lenendent ofthe Companv in accoralance with the Code of Ethics for Prcfessional
're *itt' the ethical requirements thar are relevanr our audit or
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;;: ;;1il;;;.'ii;;;iit,i.'il'#ir'* bave tulniled our otler ethical responsihiliries in
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accorilance with these requirements aDd the Code ofEthics'
& Co., 29th Fl@r, PhilanliJe Tou/er, 8767 Paseo de Roxds, 1226 Makoti Cit!, PhiliPPincs
IsLa Lipana
T: +63 (2) 84s 2728, F: +6s (2) 845 2806, www.pwc.con/ph
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ln our oDinion, the accompanying financiat statements present fafuly, in all material respects, the financial
Dositron of Aqata Processing, inc](th.
-company ) as ai December 3r. 2o,7 aDd 20ro. and il5 financial
performance-ard its cash fl;ws tor lhe years then ended in accordance with PhilippiDe FinaDcial ReportjoS
Standards (PFRS).
we conducted our auaiits in accordance wittr Phitippine standards on Auditing (PSA). our lesponsibilities
unaler those standards are further described in the Auditor's Responsibilities fol' the Audit of the Financial
Statements section of our report.
we are indeoenclent of the company ln accordance witl tle code ofEthics fol Plofessional Accountants in
rt e itrifippiies fCode ot Ethics): lo'erher with the elhical req!irements $at are releranr
in our audit of
il,e financirl staie-ents in the Philippines, and we have fulfilled our other eihlcaJ"res,onsibilities in
accordance with these requirements and the Code of Elhics. . I -- r ";l '--
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Isla Lipana & Co., 29th PLoor, PhilamliJe TaweL 8767 Paseo .1e Roxas, 1226 Mdkati Cit!, PhiLippines
T: +63 (2) 845 2728, F: +63 (2) 845 2806, M-pwc.coD/ph
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twc Isla Lipana & Co.
Independent AuditoCs Repoft
Tothe Board of Directors and Shareholders of
Atata ProcessiDg,Inc.
Page 2
Responsibilities of Management o:nil Those Charged uith Gotetnance Jor the Find'ncia.l
Statements
Management is responsible for the preparation and fair presentation ofthe nnancial statements in
accorJance with PFRS, and for sucli internal contrcl as management determines is necessary to enable the
preparatron offinancial statements that are ftee from matenal misstatement, whether due to fraud or
In prepariDg the financial statements, manaSement js responsible for assessint the Company's ability to
conti.ure asi goi.rg concem, disclosiDs, as applicable, matters relatedto Soing coDcem and using tle
going concern basis ofaccountin8 ur ess manaSement eitler intends to liquidate the Company or to cease
operalions. ur has no realistic allernalive but to do so
Those charged with govemance are rcsponsible for overseeing the Company's financial reporting process.
As discusseal in Note t to the financial statements, the Companyhas incurredlosses ofP6,94o,4o3 for the
year ended December 31,2ot7 (2ot6 - P7,9gg,o54) which resulted in a deficit ofP189,319,804
"(2o16
- P182,s79,4o1) and capital defciency ofP19,783,664 (2o16 - P12,843,261). Tlese conditions
indicate existince of a material uncertainty which may cast significant doubt about tle Company's ability
to continue as a going concern. The realizability of its assets as well as the Company's abilityto setde its
liabilities is depe;dent upon its ability to Senerate rcvenue in thefuture, the outcome ofwhich cannot
presently be determined. Management's plan regarding this matteris disclosed in Note l andwe have
performid sufiicient procedure,to validate the plan. The finarcial statements do notinclude any
;djustments that may result fiom the outcome of tlis uncertainty. our opi[ion is not qualified in respect
ofthis matter.
Those charged with governance are responsible foroverseeing tle Companfs financial reporting process
As part ofan audit in accordance witl PSA we exercise professionaljudgment and maintail professional
skepticism throughout the audit. We also:
. Identify and assess the dsks ofmaterial misstatement ofthe financial statements, whether due to
fiaud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and apprcpriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resultin8 from fraud is higherthan for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the overide ofintemal
control,
. Obtair an understanding ofintemal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company's intemal control.
. Evaluate the appropriateness ofaccourting policies used and the reasoDableDess ofaccountinB
estimates and related disclosures made by management.
. Conclude on the appropriateness of management's use ofthe going concern basis of accouDting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Companys ability to continue as a 8oin8 concern.
IIwe conclude that a material uncertainty exists, we are required to draw attention in our auditor's
report to the related disclosures in the financial statements or, ifsuch disclosures are inadequate, to
modiry our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor's reporl. However, future events or conditions may cause the Company to cease to continue as
a going concern.
. Evaluate the overall presentation, structure and coDtent ofthe financial statements, includin8 the
disclosures, and whether tle fltrancial statements represent the underlying transactions and events in
a manner that achieves faL presentation.
We communicate wittr those chaBed with govemance reSardint, among other matters, the planned scope
and timi[g ofthe audit and significant audit findings, inc)uding any significant deficiencies in internal
control that we identifu du ng our audit.
I
pwc Isla Lipana & Co.
As part of an audit in accordaDce with PSA we exercise professionaljudgment and maintain professional
skepticism throughout the audit. we also:
. ldenti$ and assess the risks of material misstatement ofthe 6nancia] statements, whether due to
fraud or error, design and perform audit procedures responsive to tlose rsks, and obtain audit
evidence that is sufficient aEd appropriate to provide a basis for our opidotr. The fisk of not detecting
a material misstatement resulting from fraud is hiSher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, orthe override ofintemal
control.
. Obtain an understanding ofintemal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose ofer?ressing an opinion on the
effectiveness ofthe Company's intemal control.
. Evaluate the approp ateness ofaccounting policies used and the reasonableness ofaccounting
estimates and related disclosures made by management.
. CoDclude on the appropdateness of management's use ofthe going concern basis ofaccounting aDd,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that mav cast significant doubt on the Company's ability to contrue as a going concern.
If we conclude that a material ulcertainty exists, we are required to draw attention in our auditor's
report to the related disclosures in the financial statements or, ifsuch disclosures are inadequate, to
madiry our opinion. our conclusions are based on the audit evidence obtained up to tle date of our
auditor's report. However, futurc events or conditions may cause the Company to cease to continue as
a going concem.
. Evaluate tle overall presentation, structurc and content olthe financial statements, itrcluding the
disclosures, and whether the financial statements representthe underlying traDsactions and events in
a manner that achieves fair presentation.
we communicate wittr ttrose charged with govemance regarding, among other matters, the planned scope
and timing ofthe audit and sigEificant audit 6ndings, includinS any significant*Sciencies in internal
control that we identi07 during ouraudit. bfif'
I
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lndependent Auditols Report
To the Board of Directors andShareholders of
Agata Processing,Inc.
PaEe 4
Our audrts were conducted for the puryose offorming an opinion on the basic financial statements taken
as a whole. The supplementary information in Note 12 to the finalcial statements is presented for
purposes of6ling witl the Bureau of lntemal R€venue and is not a required part of the basic financial
statements. Such supplementary information is the respo6ibility of managemeDt and has been subiected
to the auditing procedures applied in our audits ofthe basic financial statements. In ouropinion, the
supplementary information is fairly stated in all material respects in relationto the basic financial
statements taken as a whole.
Che M. Javier
Partne
CPACert. No.68556
P.T.R. No. ooo77o3; issued on January 10, 2018 at Makati City
SECA.N. (individual) as general auditors oo55-AR-4, CateSory A; effective until May 1,2019
SECA.N. (firm) as general auditorc ooog-FR-4; Category A; effective until July 15,2018
T.I.N. 112-o7r-216
BIRA.N. o8-ooo745-9-2016; issued on February 9,2016: effective until February 8,2019
BOA/PRC Reg. No. or42, effective until September 30,2o2o
Makati City
April26,201B
I
wc Isla Lipana & Co.
Makati City
April26,2018 ,tr I .-;t)
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wc Isla Lipana & Co.
Statement Required by Rule 68, Part I, Section 3F(i)
Securities Regulation Code (SRC)
ASIhCllkd on October 2o. 20l I
We have audited the financial statements ofAgata Processing,Inc. (the "Company') as at and for the year
ended December 31,2or7, on which we have rendered t}e attached report da[edipnl26, zorg.
In compliance with SRC RuIe 68 andbased on the certification received from the Company's corporate
secretary, the Company has three (3) shareholders owning one hundred (roo) or more-shires eaih as at
December 3r, 2017.
Cherrrlin M. Ja\ier
Makati City
April26,2018
None ofthe partners ofthe firm has any financial interest in Agata Processing, lnc. or any family relationships
witlits president, manager, or principal shareholder.
The supplementary information or taxes andlicenses is presented in Note 12 tottre finatrcial statements.
Chern/lD M. Javicr
I')aftn
CPA Cert. No. 68556
P.T.R. No. ooo77o3; issued on January 10, 2018 at Makati City
SEC A.N. (individual) as general auditors oo55-AR-4, Category A; effective until May r, 2or9
SECA.N. (firm) as general auditors ooog-FR-4; Cate8ory A; effective until July rS,2018
T,LN. rr2-07r-216
BIRA.N. c)8-()()()745-9-2016; issued on February 9, 2016; effective until February 8, 2019
BOA/PRC Reg. No. or42, effective until September 30, 2o2o
Makati City
April26,2018 {i;
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bLa Lipatla & Cu' 29th Floor, phila,nliJe Tow.r, 876Z paseo de Roxas, 1226 Makati
City, phitippiha
T: +63 (2) 845 2728, F: +63 (2) 84s 2806, ww.pwc.cotrlph
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Agata Processing, Inc.
2017 2016
ASSET9
Current assets
Cash in banks 9,535,048 1198,389
Prepayments and other current assets 2.507 428 2 329,'156
Total currenl assets 12 042,076 3.527,545
Non-current assel
Property and equipment, net 55,707,537 60 678,184
Total assets 71 749,613 64,2a5 729
Current liabilities
Accrued expenses and other trabrtiiies 7,292,767 7 353,44A
Due io related parties 8 25,540,690 10,995 730
Total current liabitities 32,833,457 '18,349,170
Non-curent liability
Deposit for future share subscription s8,699,820 58,699,820
Iotal liabilitres 91,533,277 77 048,990
Equity
Share capital 66,666,669 66,666,669
Share premium 102,869,471 142 869,471
Deficit (189,319,804) (182 379,401)
Caprta defcrency
{19 783 664) (12,843 261)
Total liabilities and eqtiity 71,749,613 64,2a5 729
ASSETS
Current aasets
Cash in banks 9,535 048 1,198,389
Prepayments and other current assets 2 507 ,O28 2,329,156
Tolal current assets 12,042.076 3,527.545
Non-current assel
Property and equipmenl, net 59,707,537 60,67E,1E4
Total assets 71,749,613 64,2A5 729
Currcnt liabilities
Accrued expenses and other liabilities 4 7,292,76? 7,353,440
Due to related parties 8 25 540,690 10,995,730
Total cLrrrent liabilities 32,833,457 18,349 170
Non-current liability
Depos( for future share subscription 58,699,820 58,699 820
Tota liabiliUes 91,533,277 77 ,048 990
Equlty
Share capital 66,666,669 66,666 669
Share premium
Deficit
Cap tal deficiency (19,783.664) ,843.261)
Total liabilities and equity 71 7 49,613 ,245 729
The notes on pages 1to r8 are integral part ofthese financial statements.
Agata Processing, Inc.
Expenses
Exploration costs 5,023,779 7,833,974
Net loss tor the year before income tax 6,940,403 7,999 054
Expenses
Exploration cosis 5,O23,779 7,833,974
Dues and subscription '1,003,370 200
Conaacted seNices 477.754
Taxes and licenses 234,003 126,142
.1
Agata Processing, Inc.
2017 2016
Share capital
Authorized - 100,000,000 shares at P1 par value (P100,000,000)
lssued and outstanding - 66,666,669 shares 66,666,669 66,666,669
Share prcmium 102 869,471 102 869 471
Deficit
Beginning of year (182,379,401) (174,380,347)
Total comprehensive loss for the year
Net loss for the year (6,940,403) (7,999,054)
2017 2016
Share capital
Authorized - 100,000,000 shares at P1 par val!e (P'100,000,000)
lssued and oulstanding - 66,666,669 shares 66,666,669 66,666,669
Deficit
Beginning of year (182,379,401) (174,380,347)
Total comprehensive loss for the year
Net loss for the year (6,%0,403) (7,9S9,054)
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Agata ProcessinS, Inc.
Adjustments ior
Depreciation 3 970,647 1,005,756
Nel cash generated from (used rn) operating activiiies I 339 819 (8,91 1)
Adjustments for:
Depreciation 970,647 1,005,756
On September 25, 2012, TVI Pacific, Inc. ("TVI"), TVI Resource Development Pltils., Inc. ("TVI
Resouice"), Mindoro Resources Ltd. ("MRL") and its subsidiary, MRLNickel Philippines,Inc ('MRL
Nickel'), and Minimax Mineral Exploration Corporation (Minimax) siSned the Agata MiningJoint
VeDture ("AMJV") andAgata Processing Joint Vetrture ("APJV") agreemeDts, wherein these entities
aereed to operate exploration and development activities relating to the Agusan, Surigao and Iloilo
P;oiectsofMRL. Thi arrangements Ied to tie establishment ofthe Company. The agreements also
granted T\rl Resou.ce right io eam 6o7o ofthe Company's share after fulillment of condition provided-
6y the agreements. T\.I-Resource's ultimate parentis Pdme Asset ventures, Inc., a company organized
and eYisting in the Philippines.
The Company holds omce atthe 22nd floor, Equitable Bank Toher, 875r Paseo de Roxas St., Salcedo
Vjlage, Iiak;ti City. It has 2 regular employeei as at December 3r, zo17 and 2016 The administrative
supp-ort requirements are being provided by TVI Resource as Part of itsTechnical serviceAgreement
(Note 8).
T'he accompanying financial statements were approved and authorized forissuance by the CompaDy's
Board of Directors (BOD) onApril26,2018.
The accompan)ang financial statements have been prepared assumingthat tle Company will continue
as a going aoncern. The Company has not started commercial operations as it is- still in the pre-
o oerition- staees and has been iniurring losses resulting in a deficit and capital defrciency of
Pi8e,:rs,8o4 and prg,283,664, respectively, as at December 3l, 2017 (2016 - Pr82,379'4ol ard
h2,843,26r, respectively). These conditions raise substantial doubt as to the Company's ability to
cot ii.rul as a going concirn. The realizability ofits assets, as well as the Company sability to setd€ its
liabilities, is dipen-<lent on the Company's abilit, to generate revenue in the future, the outcome of
which cannot presently be determin;d. The financial sta tements do not i nclude a ny adjustments t}lat
may result from the outcome oftlis uncertaiDty.
T\l Resource intends to provide sufficient level offinancial support to the Company to settle its
liabilities and meet its obiigations and responsibilities in order to continue as a going concem while
continuously exploring in Iloilo project.
Note 2 - Pr€pa]ments and oth€r current assets
2A17 2016
lnput va ue added tax 2 183,956 2,167 031
Advances lo employees 206,712 45 765
PreDaid expenses and deposrts 116,360 I 16.!90
2 507 .028 329 156
Outstanding rcceivables from employees represent unsecured and non_interest bearing advances that
is due and denrandable and/or subject to liquidation.
Details and movement ofpropetyand equipment as at and for the years ended December 3l are as
follon:
Furnit!re
Computer Planl and and security Construction
eouioment equipment equipment in progress Tolal
Cosl
lanuary 1 2Q17 441 00',r 4,898,416 14,705 59,182,437 64,536,559
Oonstruction in prc$ess relates to installation oflaboratory and computer equipment for exploration
activities and professional fees paid for the definitive feasibility study of the processing plant.
Depreciation charged to exploration costs in the statement oftotal comprehensive income fot the year
ended December 3r, zorT amountedto P968,712 (2o16 - P981,316) (Note 7).
(2)
Note 4 - Accrued expenses and other liabilities
2017 2016
Third party payables 4,878 939 4 996,334
Accrued expenses 2,287 683 2 306,946
Payable to government agencies 125,371 49,386
Other iabilities 774 774
7,292767 7,353,440
NoteE-Sharecapital
On May 3r, 2013, the SEC apprcved the increase in autiorized share capital from P3o,ooo,ooo divided
into 3o,ooo,ooo shares to Ploo,ooo,ooo divided into loo,ooo,ooo shares. The excess payments over
the par value ofsubscribed shares were credited to share premilrm.
Details ofthe Companys share capital as at December 31,2017and 2016 are as follows:
As part of the amended Agata Mining Option and Joint Venture Agreement ("Joint Venture
Agreement") dated June r8, 2013, TM Resource shall hold 6o% equity interest in the Companythrough
additional contributioDs. The pa),ments for tle issuance of shares will be funded by the deposit for
fu ture share subscription.
Note6-Incom€taxes
Details ofunrecognized deferred tax asset from NOLCO as at December 3r which could be carried
over as a deductible c\pense from tle Company's taxable income forthe nextthree (3) consecutive
years following the year ofsuch loss are as follow:
(s)
Realization of the future t&(benefits rclating to the deferred income tax assets is dependent oD many
factors including the Company's ability to generate taxable income within the net operatiDg loss carry_
over period. Management has considered these factors in reaching its conclusion not to recognize
deferred income tax assets in the financial statements as at December 3l, 2or7 and 2016
The reconciliation ofthe provision for income ta-\ computed at statutory income tax rate to tle actual
income tax for the years ended December 3l in the statement of total comprehensive income follows:
2017 2016
Benefit from income tax at 30% slatutory rate (2.082,121) (2,399,716)
Add (deduct) tax effect of
lnteresl income subject to finaltax 12,984\ t644\
lJnrecoqnized deferred tax assets 2,085,105 2,400,360
Note ? - ExplqrqliaLqqqtg
Exploration costs were incurred for tie Iloilo Project (Note 1). The Company expenses all exploratioD
costs, ifany, as incurred uDtil it detemines that the explomtion property is capable of achieving
commercial production at which time all further pre-production costs are capitalized at cost.
(a)
Note 8 - Relat€d partv transactions
ln the normal course ofbusiness, the Company tansacts ltith companies v/hich are considered rclated
parties under PAS 24, Related Party Disclosures.
The transactions and outstanding balances ofthe Companywith TVI Resource as at and for the years
ended December 31 are as follows:
2411 2A1a
Oulslandi.g Outsland ng Terms and
Transactons payablesTransactions payables conditons
TVI Resource Developmenl Phils., lnc 13,453,000 16,670,100 3,217,100 3,217,100 from (lo) are
Enlities undet common contol
Agata lvining Ventures, lnc 1,091,960 5,455,789 4 363,829 4 363,829
Pan de Azucar Processing, lnc. - '1,S07 301 - 1,907,301
lnc.
Pan de Azucar l\Iinrng Venlures, ' 1,507,500 - 1,507 500
bearing
As mentioned in Note 1, the Companywas established as a result ofjoint veDture agreements among T\a[,
MRL, MRL Nickel and Minimax relating to the Agusan, Surigao and Iloilo Projects on September 25, 2012.
Part ofthe agreement is the Technical Sen'ice Agreementwith TVI Reosurce whercby TVI Reosurce shall
provide accounting and general administrative services to the Company. There was no service fees charged
for the years end€d December 31, 2oU and 2016 due to the status ofCompany's operation.
Transactions with T\al Resource petain to advances in support ofoperational requirement ofthe
Company.
There was no w te-off or provision made durirg the year in relation to related party balances.
The Compan]'s exposures to these rjslc are managed through close monitoring by tle key management
and Board ofDircctors.
(s)
9.1.1 Market nsk
(a) Foreign exchange risk
Foreign exchanSe is the risk to eamings orcapital arisingftom changes in foreign exchange rates.
Fluctuations in erchange rates can have significant effects on the Compan/s reported results. Foreign
exchange risk arises when future commercial transactions and recognized assets and liabilities are
denominated in a curreDcy that is not the Company's functional currency. There is no formal risk
management policy on foreign exchange risk due to absence oftransactions exposing the Company to
such nsks. The Companydoes not activelyenter into forward contractsto mitigate thG risk Asat
D€cember 3r, 2017, the Companls foreign currency denominated monetaryassets and liabilities
consist ofcash in banks denominated in US Dollar amountin8to US$5,062 as at December 31,2017
(2o16 - US$r9,132).
As at December 31,2017, the exchange mtes used fortranslation ofUS Dollar to Philippine Peso was
Pqg.g\(2016 -P49.72). Net foreign exchange gain orloss recognized in profrt orloss for the year
amounted to P6,334 gain (2016 - Pso,860 gain), ofwhich P3,160 loss (2o16 - P5o,860 gain) is unrealized.
(b) P ce risk
The Company is not exposed to significant price risk due to the absence of material security investments
and is not subject to commodity price dsk.
As tle Company has no significant interest bearing frnancial assets and liabilities, the Company's profit
or loss and operating cash flows are substantially independent ofchanges in market interest rates.
Credit risk refers to the dsk ttrat counterparty will default on its contractual obligations resulting in a
financial loss. The Company's credit risk is concentrated to its outstanding deposit as at reporting date.
Cash in bank is maintained with a universal bank, which offers the widest va ety of banking services
amoEg financial institutions and represents top tier institution in terms ofcapitalization as categorized
by tle BanSko Sentral ng Pilipinas.
The maximum exposure to credit risk at the reporting date is the fail value of cash in banks and
carry.rng amount of advances to employees as shown in the statement offinancial position and Note 2,
respectively.
Liquidity risk arises when tie Company will not be able to meet its firlancial obligations as they fall due.
The Compan]'s apprcach lo manaSing liquidity is to ensure that it has suficietrtcash to meet its
obligations when they fall due without incurring unacceptable losses.
As at December 3l, 2oU, total accrued expenses and other liabilities amounting to P7,167,896
(2o16 - P7,304,o54) (excluding amount payable to government agencies) is due within one year.
OutstandinS balance due to a related party is considered due and demandable. The amounts disclosed
in the statement offinancial position reprcsent the contmctual undiscounted cash flows.
(6)
9.2 Capital management
Total capital is calculated as equity in the statements offinancial position. The Company's
as shoh'lt
objectives rvhen managing capital are to safeguard the Company's ability to continue as a Boing
concem, so t}Iat it can contrnue io provide returns for shareholders andbenelits for other stakeholders
and to maintain an optimal capital stflcture to reduce the cost ofcapital. TVI Resource (the "Parent
Company") is responsible for rnanaging capital risk ofthe Company including capital structure,
liquidity and cash flow risks, the Parent Company futher ensures adequate level ofworkinS capital to
sustain daily operations and ultimately safeguard the PareDt Company's ability to contiDue as a going
concem. Management ofthese risks is governed under policies and guidelines provided by tle Parent
Company. If deemed necessary, the Parent Company may remit additional working capital in order to
support its capital requirements.
Due to the short-term nature of the transactions, the carrying values ofeach nnancial asset and liability
including cash in bank, advances to officers and employees, and accmed expenses as at the reporting
date approximate their fair values. The Company does not hold financial instmments traded in active
market which might be affectedby quoted market prices at reponing date. The Company has no
financial assets or liabilities tiat are measured and carried at fair value in tle statements offinancial
position as at December 3r, zorT and:o16.
The preparation ofthe financial statements in accordance with PFRS requires the Companyto make
estimates, assumptions andjud8rnents tiat affect the reported amounts of assets, liabilities, income
and expenses and disclosure ofcontingent assets aDd corti[gent liabilities. Future events may occur
which will cause the assumptions used in ar ving at tle estimates to change. The effects ofany change
in estimates are reflected in the financial statements as they become reasonably determinable.
Estimates, assumptions andjudgments are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable
under the circumstances,
The Company estimates the useful lives ofproperty and equipment based on the pedod over which the
assets are expected to be available for use. The estimated useful lives of property and equipment are
reviewed periodically and are updated ifexpectations differ from previous estimates dueto physical
wear and tear, technical or commercial obsolescence and legal or otler limits on the use ofassets. Itis
possible, holrever, thatthe future results ofoperations could be materially affected by changes in
estimated useful lives of property and equipment.
o)
Management reviewed and assessed that no change in the estimated useful lives ofpropefiy and
equipment is necessarysince the current useful lives are still consistent with the expected pattern of
economic benefits from these assets. The carrying value ofproperty and equipment as at
December3l, 2o17 and 2016 is disclosed in Note 3.
SignificantjudSment is requrred in determininS the provision for income taxes. There are many
tmnsactions and calculahons for which tle ultimate tax determination is uncertain in the ordinary
course ofbusiness.
The Company recognizes liabiliti€s for anticipated tax audit issues based on estimates ofwhether
additional ta-xes lvill be due. where the final tax outcome ofthese matters is differeDt from the
amounts that were initially recorded, such differences will impact the income tax and deferred tax
provisions in the period in which such determination is made.
The Company is in taxloss position due to continuing losses, There were also no defened tax assets
recognized because ofthe Iimited capacity of the Company to utilize the tax benefit within the
foreseeable future. Further, recognition ofdeferred income taxes depends on management's
assessmeDt of the probability ofavailable future taxable income against which the tempomry
differences can be applied.
The Company reviews the carrying amounts ofdeferred income tax assets, ifany, at each reporting date
and reduces tbe amounts to the extent that it is no longer probable that sufficient taxable profit wiII
allow all orpart ofits deferred taxable assets to be utilized. Unrecognized deferred income tax ass€ts
relate to NoLCO as shown in Note 6.
LonS-lived assets are reviewed for impatment rahenever events or changes in circumstances indicate
that the carll ing amount ofan asset may not be recoverable. An impaimeDt loss would be recognized
whenever elidence exists that the carrying value is not recoverable. Long-lived assets consist mainly of
property and equipment.
Management assessed that no impairment charge is necessary as there were no impairment indicators
identified as at December3l,2orT and 2016.
(8)
Note 11 - Summar.v ofsienificant accountine policies
The principal accountinS policies applied in the preparation ofthe financial statemeDts are set out
below. These policies have been consistently applied to all the years presented, unless other$ise
stated.
rr.1 Basisofpreparation
The financial statements ofCompany havebeen prepared ir accordance with Philippine Financial
ReportiDg Standards (PFRS). The term PFRS in general includes all applicable PFRS, Philippine
Accounting Standards (PAS), interpretations ofthe Philippine Interpretations Committee (PIC),
Standing Interpretations Committee (SIC) and International Financial Reporting Interyretations
Committee (IFRIC) which have been approved by the Financial Reporting Standards Council (FRSC)
and adopted by SEC.
The Companl qualified as a small and medium-sized entity (SM E) under tle PhilippiDe Financial
Reporting Standards for Small and Medium-siz€d Entities (PFRS for SMES). However the Compary
opted to continue prepadng its 6nancial statements under full PFRS in line with the accounting
framework of its parent company.
The financial statements have been prepared under the historical cost conventioD.
The preparation of financial statements in conformity witl PFRS requires the use of certain critical
accounting estimates. It also requires management to exercisejudgment in the process ofapplying tle
Company's accounting policies. Areas involvin8 a higherdegree ofjudgment or complexity, or areas
where assumptions and estimates are significant to the financial statements are disclosed in Note 1o.
New and revised standarals, amendments and interpretations to existing standards effecti\e forannual
periods beginning on or afterJanuary t, 2017 are not coffidered applicable and/or relevalt to the
Company's financial statements due to the status of its operations and highly limited balances and
transactions.
Cash in banks are deposits held on call, which are carded at face amount or nominal amount.
r1,3 Financialinstruments
A financial instrument is anycontract that gives rise to a financial asset of one entity and a financial
liability or equitl' ofanother entity. The Company recogn;es a Enancial instrument in the statement of
financialposition, when and only when the Companybecomes a party to the contractual provision of
the instrument.
The Company classifies its financial assets in the following cateSories: at fairvalue through profit or
loss,loans and receivables, held-to-maturity investments and available-for-sale. The classification
depends on the purpose for which the financial assets were acquired. Management determines the
classification of its financial assets at initial reco8nition. As at December 31, 20 l7 and 2o16, the
Company only has financial assets classfi€d as loans and receivables.
(e)
[.ans and receivables are non-derivative financial assets wjth fixed or determinable pa],rnents that are
not quoted in an active market. They are included in cunent assets, except for maturities Breaterthan
twelve ( l2 ) months after the reporting date. These a re classified as non-current assets. The Company's
loans and receivables consist ofcash in bank (Note 11.2) and advances to employees (Note rr.5).
Regular r{ay purchases and sales offinancial assets are recognized on trade-date, the date on which the
Company commits to purchase or sell the asset. Financial assets are initially recognized at fair value
plus transaction costs forall financial assets not carried at fair value through profit or loss.
Loans and receivables are subsequently carried at amortized costusing the effective interest method.
Financial assets are derecognized when the rights to receive cash flows ftom the financial assets have
expired or have been transferred and the Company has transferred substantially all risks and rewards
ofownership.
(c) Impairment
The Company ass€sses at each reporting date whetherthere is objective evidence that a financial asset
or a group offinancial assets is impaired. A Enancialassets or a gmup offinancial assets is impaired
and impairment losses are incured only ifth€re is objective eyidence ofimpairment as a result ofone
or more events that occurred after the initial recognition ofthe asset (a'loss event') and that loss event
(or events) has an impact on t}le estimated future cash flows of tle financial asset or group offinaDcial
assets that can be reliably estimated-
The criteria that the Company uses to determine that there is objective evidence ofan impairment loss
include:
(1o)
The amount ofthe loss is measured as the difference between the asset's carrying amount and the
present valus ofestimated future cash flows (excluding future credit losses that have not been incurred)
discounted at the financial asset's original effective interest rate. The carrying amount ofthe asset is
reduced and the amount ofthe loss is recognized in profit or loss. Ifa loan has a variable interest rate,
the discount rate for measuring any impairment loss is the current effective interest rate determined
under the coDtract. As a practical expedient, the Company may measure impairment on thebasis ofan
instrument's fair value usinS aD observable market price.
Il in a subsequent period, the amount ofthe impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognized (such as an imprcvement in the
debtor's credit rating), tle reversal ofthe previously recognized impairment loss is recognized in profit
orloss. Reversals of preriously recorded impairment provision are based on the result of
management's update assessment, considering the available facts and changes in circumstances,
includingbut not limited to results ofrecent discussjons and arrangements entered ilrto with customers
as to the recoverability of receivables at the end ofthe reporting period. Subsequent recoveries of
amounts pre\iously written-offare credited against operating expenses in profit orloss,
The Company classifies its financial liabitities at initial recognition iD the following categoriesi at fair
valD e through p rofit or loss and other financial liabilities. As at December A t, 2 o 17 and 2 o 16, the
Company only has financial liabilities classified as orherfnancial liabilities.
Issxed financial instruments or their components, which are not designated at fair value through profit
orloss, are classified as other financial liabilities, where the substance ofthe contractual arran[ement
results in ttre Company having an obligation either to deliver cash or another firuncial asset to tie
holder. Other financial liabilities only refer to accrued expenses and other liabilities (excludirg payable
to government agencies) (Note 11.10) and due to related parties (Note 11.14).
Other financial liabilities are initially r€cognized at fair value of the consideration received less directlv
attributable tmnsaction costs. A financialliability is derecognized when tle obligation under the
liability is discharS€d orcancelled, or has expired.
After initial measurement, other6nancial liabilities are subs€quently measured at amortized cost using
the efrective interest rate method. Amortized cost is calculated by taking into account any discount or
premium on the issue and fees tlat are an irtegral part ofthe effective iDterest rate.
Where an existing financial liabiliry is replaced by another from the same lender on substantially
different terms, ur the terms ofan existinB Uability are substantially modified, such an exchange or
modification is treated as a derecognition of tle odginal liability and the recognition of a new liability,
aDd the difTerenle in the respective carrying amounts is recoSnized in pro6t oiloss.
Financial assets aDd liabilities ar€ offset and the net amount rcported in the statemetrts offinancial
position when there is a legally enforceable right to offset the rccognized amounts and there is an
intention to settle on a net basis, or realize the asset and settle the liabilitv simultaneouslv.
(r1)
11,4 Fair value measurement
Fairvalue is the p ce that would be received to sell an assetor paid to transfer a liabilityin an orderly
transaction between market participants at the measurement date.
The fair value of a non-financial asset is measured based on its highest and best use- The asset's
current use is presumed to be its high€st and best use.
The fair value offinancial and non-finarcial liabilities takes into account non-performance risk, which
is the risktlat the entity will not fulfill an obligation.
The Company classifies its fairvalue measurements using a fairvalue hierarchy that rcflects the
significance ofthe inputs used in makingthe measurements. The fair value hierarchy has the following
Ievels:
. quoted prices (unadjusted) in active markets for identical assets or liabiliti€s (Level ,;
. inputs other than quoted p ces inctuded within kvel I that are observable for the asset orliability,
eitler direcdy (that is, as prices) or indirectly (that is, d€rived from prices) (trvel u ); and
. inputs for the asset orliability that are notbased on observabl€ market data (that is, unobservable
inputs) (kvel3).
The appropriate level is d€termined on the basis ofthe lowest level fuput that is significant to the fair
value measurement.
The fair l,?luc offinancial instruments tmded in active markets is based on quoted market prices at tle
reporting date- A market is regarded as active if quoted prices are readily and regularty available liom
an exchange, dealer, broker, industry group, priciDg serwice, or regulatory agency, and thos€ prices
represeDt actual and regularly occurring mark€t tra[sactions on an arm's lengthbasis,
The quoted market price used for financial assets held by the Company is the current bid pice. Note
that under PFRS 13, the use of bid and askiDg prices is still permittedbut not required. Tiese
iastruments are included in kvel 1
The fair value ofassets and liabilities that are not traded in an active market (for example, over-tle-
counter deri\ ar ives) is determined by using valuatron techniques. Thesevaluation techniques
maximize the use ofobservabje market data \4here it is available and relyas little as possi6le on entity
specific estimates. If all significant inputs required to fair value an instnrment are oiservable, the asset
orliability is included in Level2. Ifone or more ofthe significant inputs is notbased on observable
market data, rhe asset or liability is included in kvel S.
The Company uses valuation techniques that are appropriate in the circumstaDces and applies the
technique consistendy. Commonlyused valuation techniques are as follows:
. Market approach -A valuation techniquethat uses prices and other relevaDt information generated
by market transactions itrvolving identical or comparable (i.e. similar) assets, liabilities oia group of
assets and liabilities, such as a business.
. Income approach - Valuation techniques that convert future amounts (e.g., cash flows or income
and expenses) to a single current (i.e., discounted) amount. The fair valui measurement is
determined on the basis of the value indicated by the current market expectations about those future
amouDts.
(12)
. Cost approach - A valuation technique that reflects the amount that \ rould be required cunently to
replace the service capacity ofan asset (often referred to as current replacement cost).
At December 31, 2017and 2016, tle Companydoes not have assets aDd liabilities that are rneasured at
fairvalue.
Prepa).rnents are included in current assets, except when the related goods or services ar€ expected to
be received and rendered more than tlyelve months after the end ofthe reporting period, in;hich case,
these are classified as non-current assets.
Subsequent costs are included iD tle asset's carrying amount or recognized as a sepamte asset, as
appropriate, onlywhen it is probable that future economic benefits a;sociated with the item will flowto
the Company and the cost ofthe item can be measured reliably. All other repairs and maiDtenance are
charSed lo profit or loss during lhe financial period in wbich the) are incurr;d.
The costs ofconstruction-in-progress ar€ accumulated in the accounls until the project is completed
and put in operational use upon wbich lhey are classified to the appropriate pro;eriy accounts and
depreciated accordintly. Construction-in-progress is stated at cosi, which in;ludes;ost of
construction. and other dired.osrs
Depreciation ofproperty and equipment is calculated using the straight-line method to allocatetheir
cost to their residual valu€s over their estimated useful livei of five (s) vears.
The assets'residual values and useful lives are reviewed, and adjusted ifappropriate, at each reporting
date.
(13)
An item of property and equipment is derecognized upon disposal or when no future economic benefits
are_expected from its use or disposal at lrhich time the cost andtheir related accumulated depreciation
and amortization are removed from the accounts. Any gains and losses on disposals are determinedby
comparing proceeds with carrying amount and are recognized in profit orloss.
Wherean impairment loss subsequently reverses, the carrying amount ofthe ass€t or cash generating
unit is increased to the revised estimate ofits recoverable am;unt, but the increase should riot exceed
the carrying amount that would have been determined had not the impai.-enfioss fe"n .ecognirea
fo.
theassetorcashgeneratinBuDitinpnoryears.AreversalofanimpairmenttossisrecognizeJas
rncome rmmed,ately.
The current income ta\ charge is cdcr:lated on the basis ofthe ta.( laws enacteil
or substantively
enacted at the reporting date. Management periodically evaluates positions taken
in iax returns with
respect to situations in whrch appricable tax rcgulation is subject to interpretation and
establishes
pro!,rsrons where appropriate on the basis ofamounts expected to be paid
to the tax authorities.
(ra)
Deferred income tax is provided in full, using the liability method, on temporary difrerences arising
betlveen the tax bases ofassets and liabilities and their carrying amounts in the financial statements.
However, the defened income tax is not accounted for if it arises from initial rccognition ofan asset or
liability in a transaction other than a business combination that at the time ofthe transaction affects
neitler accounting nortaxable profit norloss. Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantively enacted bythe repotint date and are expected to apply
*heD the related deferred income tax asset is realized orthe deferred income taxliability is settled.
Deferred income tax liabilities are recognized for all taxable temporary differences, except to the extent
thattle defered tax liabilityarises from the initial recognition ofgoodwill.
Deferred income tax assets are recognized for all deductible temporary differences, carry-forward of
unused tax losses (net operating loss carryover oTNOLCO) and unused tar( credits [excess minimum
corporate income tax or MCIT) to the extent that it is probable that future taiable profit will be
available against which the temporary differences can be utilized. Deferred income tax liabilities are
recognized in fullforall taxable temporary differences, except to the ex1eflt that the deferred income
taxliability arises from the initial recognition of goodwill.
Deferred income tax assets and liabilities are offset when there is a legally enforceable tht to offset
current income tax assets atainst current income tax liabilities andwhen tle deferred income tax assets
and liabilities reiate to income taxes levied by the same taxation authority on eitherthe taxable entityor
differenttaxable entities where there is an intention to settle the balances on a netbasis.
Defened income tax assets and liabilities are derecoSnized when tle relevant temporaty differences
are realized/settled or rccoverability is no longer probable. The Company reasses;es at each
reporting date the need to recognize a previously unrecognized deferred income tax asset.
Accrued expenses are rccoSnized in the period in which tie related money, goods or services are
received orwhen a legally enforceable claim against the Company is established. These are classified as
culre]lt liabilities if pa)'Elent is due within one (1) year orless. Ifnot, they are presented as non-current
liabilities.
Where there are a number of similar obligations, tie likelihood that an oudlow will be required in
settlemeDtis determined by considering the class ofobligatioDs as a whole. A provision recotnizeal
even ifthe likelihood ofan outflow witi respect to any one item included in thi same class of -
obligations may be small.
Provisions are measured at the present value ofthe expenditures expected to be required to settle the
obligation using a pre-tax rate that reflects cument market assessme;b of the time value of money and
the risks specific to the obligation. fie increase in the proyision due to passage of time is recognized as
interest expense.
(15)
Contingent liabilities are not recognized in the financial statements. These are disclosed unless the
possibility of an outflow of resources ernbodying economic benefits is remote. A contingent asset is not
recognized in the financial statements but disclosed when an inflow ofeconomic benefits is probable.
Prcvisions are derecognized when the obligation is paid, cancelled, or has expired.
11.12 Equity
tt.t2r Share capitol and sharc prcmium
Common shares are classified as share capital under equity. Share premium is recognized for tle
excess of-proceeds of subscriptions over the parvalue ofthe shares issued. Incremental costs directly
attributable to the issuance of new shares or options are shown in equity as a deduction from the
proceeds, net oftax.
Additional c,apital received from potential shareholders forwhich no share capital is issued is recordeil
as deposits.for future share subscription. These are classified as parl ofequityifand oily ifall ofthe
rorrowng elements are present:
. The unissued authorized shar€ capital of the Company is insufficie t to cover the amount of shares
indicated in the contract;
. There is a Board of Directors' approval on the proposed increase in authorized share capital (for
which a deposit was received by the corporatio;);'
. There is shareholders' approval ofsaid proposed increase; and
. The application for the approval ofthe proposed increase has been 6led with the SEC.
11.13.1 Re\enue
The Compan) recognizes rcvenue when the amount ofrevenue can be reliably measureal, it is possible
that future economic benefits witl flowinto the enljty ahd specific criteria haie been met. Interest
incom_e, which is presented net of6nal withholding tax, is recognized on a time-proportion
basis using
lhe effective tntprest method. Other income is recognized whei earned
costs and expenses.are charged to operatiois when incurred. Interest expense is recognizeal on a time-
proportron basls uslng the ellective iDterest method.
(16)
11,14 Related party r€lationships and transactions
Related party relationships exist when one partyhas the ability to control, direcdy, or indirectly
through one or more intermediaries, the other party or exercise significant influence over the other
paty in making financial and operating decisions. Such relationships also exist betv/een and/or amont
entities which are under common control with the reporting enterprise, orbetween, and/or among the-
reporting enterpris€ and its key management pe$onnel, directors, or its shareholde$. ln considering
each possible related party relationship, attention is directed to ttre substance ofthe relationship, anJ
not merely the legal form.
Items includ€d in tle financial statements of the Company are measured using the currency of the
p mary economic environment in which the entity opiraies (the.functionat cirrency,). The financial
statements are presented in Philippine peso, which is the Company,s functional and presentation
Foreigr currency transactions are translated into philippine peso usingthe exchange rates prevailiDg at
the dates of tle transactions or valuation where items iie remeasured.-Foreign exclange gains and -
losses resulting from the settlement of such transactions and from the translition at ye_ar-"end exchange
rates ofmonetary assets and tiabilities denominated in foreign currencies are recognized in profit or _
loss.
11.16 Contingencies
contingent liabilities are olt recognized in the financial statements. They are alisclosed unless the
possl ty ot dn o u trro\ of resou rce" em bodyi ng econom ic benefits is remote. con ti nge n! assets a re
br rr
not-rccognized in the financial statements but disclosed when an iDflowofeconomic b"enefit is
probable.. Contingent assets are assessed continually to ensure Lhat developments
are ippropriately
rellected in lhe financial stalements. IfithasbecomevirtuallycerlainDataninflowoieconomic
benefits will aris€, the asset and the related income are recognized in the financial staiements.
The.following information required by Reven ue Regulatjon (RR) No. ts_2oro is presenteal for purposes
of filing with the BI R and is not a required pan of tie basic financialstirements.'
( r7)
12.2 Input VAT
InputVAT for the year end€d December 3r,2017 is as follows
12.3 Importations/excisetax
The Company had no importations for the year nor transactions subject to excise tax.
The Company has nol received any final assessment notices from tie BIR.
Further, ther! are no
oursLandlng tztx cases under prelimiDarv invesligation, litigation and/or for prosecution
in courts or
bodies oulsidp ofthe BIR at becember
3r. zor7.
(18)
COVER SHEET
for
AUDITED FINANCIAL STATEMENTS
Name
A A T A P R o c E s S I N G I N c
Offiee
2 2 N D F L o o R B D o E o U I T A B L E B A N K
T o W E R I 7 5 I P A S E o D E R o x A S
M A K A T I c I T
Form Type Depadmsnt requiring the repod Secondary Licenss Type, iI applicable
A F s c R M D
COMPANY INFORMATION
Companv's TehDhone llumber/s Mobils Number
Fis6lYear
t{0. of Stockholders
1',l
Floor Equitable PCI Bank Tower 8751 Paseo de Roxas Makati City
the occunence hereof wih info.maton and complete contacl dehils ol he new conbct person des(lnated
STATEMENT OF MANAGEMENT'S RESPONSIBILITY
FOR FINANCIAL STATEMENTS
The management ofAgata Processing, lnc. is responsible for the preparation and fair
presentation of the financial statements including the schedules attached therein, for the
year(s) ended December 31 , 2018 and 201 7, in accordance with the prescribed financial
reporting framework indicated therein, and for such internal control as management
determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud of error.
The Board of Directors is responsible for overseeing the Company's financial reporting
process.
The Board of Directors reviews and approves the financial statements including the
schedules attached therein, and submits the same to the stockholders or members.
lsla Lipana & Co. (a PwC member firm), the independent auditor, appointed by the
stockholders, has audited the financial statements of the company in accordance with
Philippine Standards on Auditing, and in its report to the stockholders or members, has
expressed its opinion on the fairness of presentation upon completion of such audit.
/'\,
((Erma
A-
ASatos
v Treasuter & Controller
lsla L,psna & Co. isth6 Philippino memb6rlim of lh€ PwC network- PwC r6f6rs to the phitippino memberJirm, and may nelwork. Each m6mbor
ftn is a separata logal entliy. Pl6as6 s€€ www.pwc.com/structuro lor further dotaits.
I
we Isla Lipana & Co.
Independent Auditor's Report
To the Board of Directors and Shareholders of
Agata Processing, Inc.
Page z
Responsibilities of Management ond Those Charged uith Gouernance Jor the Financioi
Statements
Management is responsible for the preparation and fair presentation of tIe financial statements in
accordance with PFRS, and for such internal control as management determines is necessary to enable the
preparation offinancial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, management is responsible for assessing the Company's ability to
continue as a going concern, disclosing, as applieable, matters related to going concern and using the
going concern basis of accounting unless management either intends to liquidate the Company or to cease
operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing tlte Company's financial reporting process.
As part ofan audit in accordance with PSA, we exercise professional judgment and maintain professional
skepticism throughout t}re audit. We also:
Identifu and assess the risks of material misstatement ofthe financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
. Obtain an understanding ofinternal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Companfs internal control.
r Evaluate the appropriateness ofaccounting policies used and the reasonableness ofaccounting
estimates and related disclosures made by management.
-a\tl
,*")
W *.
I
we Isla Lipana & Co.
Independent Auditor's Report
To the Board of Directors and Shareholders of
Agata Processing, Inc.
Page 3
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken
as a whole. The supplementary information in Note 12 to the financial statements is presented for
purposes offiling with the Bureau oflnternal Revenue and is not a required part of the basic financial
statements. Such supplementary information is the responsibility of management and has been subjected
to the auditing procedures applied in our audits of the basic financial statements. In our opinion, the
supplementary information is fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
CherrVlin M. Javier
Partner
CPA Cert. No. 68556
P.T.R. No, oooT7o3; issued on January 8, 2019 at Makati City
SEC A.N. (individual) as general auditors ooSS-AR-4, Category A; effective until May 1, 2019
SEC A.N. (firm) as general auditors ooog-FR-S, Category A; effectiye until June 20, 2021
T.I.N. 112-o71-216
BIR A.N. o8-ooo745-oo9-2o18; issued on December ro, zorS; effective until December g, zozr
BOA/PRC Reg. No. or4z, effective until September 30, 2o2o
Makati City
April 15, 2019
$\t
tq-
I
wc Isla Lipana & Co.
None of the partners of the Firm has any financial interest in Agata Processing, Inc. or any family
relationshipi with its president, manager, or principal shareholder.
The supplementary information on taxes and licenses is presented in Note 12 to the financial statements.
Cher&flin M. Javier
Makati City
April $, 2019
.$\\
-
f$tr ..
'IslaLipana&Co.,2gthFloor,PhilamlifeTower,8T6TPaseodeRoxa,1226Makati
T: +63 (2) 845 2728, F: +63 (2) 845 2806, www.pwc.com,/ph
lsls Lipana A Co- is th6 Philippina membtr tim ol th6 PwC notwork. PwC Gt6E to tho Philippino momb6r firm. 6nd
r.f6r to the PwC network. Each m6mb€r
tm d a $paral6 loqal 6tnily. A6s6 s www.pwc.com/structur.lor turlh6rdstails.
Agata Processing, Inc.
ASSETS
Current assets
Cash in banks 10,218,517 9,535,048
Prepayments and other currenl assets 3,140,614 2,507,028
Total current assets 13,359,131 12,042,07 6
Non-current assets
Property and equipment, net 59,240,011 59,707 ,537
Total assets 72,599,142 71,749,613
Current liabilities
Accrued expenses and other liabilities 4 7 ,257 ,088 7,292,767
Due to related parties 8 39,176,223 25,540,690
Total current liabilities 46,433,311 32,833,457
Non-current liabilities
Deposit for future stock subscription 58,699,820 58,699,820
Total liabilities 105,133,131 91,533,277
Equity
Share capital 66,666,669 66,666,669
Share premium 102,869,471 102,869,471
Deflcit (202,070,129') (189,31 9,804)
Capital deficiency (32,533,989) (19,783,664)
Total liabilities and equity 72,599,142 71,749,613
The notes on pages 1to 20 are integral part ofthese financial statements.
t$'
lt
Agata Processing, Inc.
2018 2017
Share Capital
Authorized - 100,000 shares at P'l parvalue (P100,000,000)
lssued and outstanding - 66,666,669 shares 66,666,669 66,666,669
Share Premium 102,869,471 102,869,471
Deficit
Beginning of the year (189,319,804) (182,379,401)
Total comprehensive loss for the year
Net loss for the year (12,750,325_\ (6 940,403)
Other comprehensive income
End of year (202,070,129) (189,319,804)
Total Equity (32,533,989) (19,783,664)
The notes on pages 1to 20 are integral part ofthese financial statements.
tt't$\\
<it:i:Jrni: ;J/$
;'#*'W
Agata ProcessinS' Inc.
The notes on pages 1to 20 are integral part ofthese firrurrciat stut"lqrB\\!
, gl.
/zJYt..rr.r,,
T;*:
Agata Processing, Inc.
1.1 Corporateinforrnation
Agata processing, Inc. (the "Company") was incorporated and registered with the Philippine Securities
aid Exchange C6mmission on OCtobe t 29, 2c12, primarily to carry on the business of exploration,
mining and-production of all kinds ofores, metals and minerals, and the products and by-products
thereof.
On September 25, zorz, T\lI Pacific, Inc. ("T\aI"), TW ResourceDevelopment Phils', Inc' -C'T{ID),
lainaJro n".o".ies t td. (lr.lu) and its subsidiary, MRL Nickel Philippines, Inc. ("MRL Nicke]"), and
Minimax Mineral Exploration corporation (Minimax) signed the Agata_ Mining- Joint venture
(,AMJy) and Agata Processing Joint venture ("APW") agreements, wherein these entities agreed to
operate eiplorati"on and develo-pment activities relating to the Agusan, Surigao and Iloilo Projects of
liru. th. ,"r"ttgements led toihe establishment of the Company. The agreements.also.granted
T"r'IRD right to ;am 60% of the company's share after fulfiIlment of condition provided b_y the
agreemen-ts. TVIRD's ultimate parent is'Prime Asset Ventures, Inc., a company organized and existing
in the Philippines,
The company holds ofEce atthe zznd floor, Equitable Bank Tower, 875r Paseo de Roxas St., Salcedo
Village, lviakati City. It has z regular employeei as at December 31, zor8 and zor7. The administrative
support requirements are being provided by TVIRD as part ofits Technical Service Agreement
(Note 8).
The accompanying financial statements were approved and authorized for issuance by the Company's
Board of Directors on April 15, 2019.
1.2 Statusofoperations
The accompanfng financial statements have been prepared assuming that the Company will continue
as a going 6oncern-. The Company has not started commercial operations as it is s!i]l in the
pre-iperition stages and has been incurring losses resulting in a deficit and capital deficienry of
izor,o1o,rrg urd P32,533,989, respectively, as at December 3r, 2or9 (2oL7 - PLBg,319,8o4 and
prg,Z'8i,OO+, respectiueli). These conditions raise substantial doubt as to the Company's ability to
coniin"" u" a going The Company's ability to settle its liabilities is dependent upon its ability
"onclrr,
to become an 6periting entity and the success of its future exploration and develo-pment activities as
well as other events, the outcome of which cannot presently be determined. The financial statements
do not include any adjustments tlat may result from the outcome ofthis uncertainty.
TYIRD intends to provide sufficient level offinancial support to the Company to settle its liabilities and
meet its obligationi and responsibilities in order to continue as a going concern while continuously
exploring in Iloilo project.
Note 2 - PreDavments and other current assets
2018 2017
lnput value added tax 2,769,955 2,183,956
Advances to employees 257 ,659 1 16,360
Outstanding receivables from employees represent unsecured and non-interest bearing advances that
is due and demandable and/or subject to liquidation.
Details and movement ofproperty and equipment as at and for the years ended December 31 are as
follow:
Furniture and
Computer Plant and security Construction in
Accumulated depreciatlon
January 1 , 2017 439,066 3,404,604 14,705 - 3,858,375
Charges 1,935 968,7'12 - - 970,647
Decembet 31,2017 441,001 4,373,316 '14,705 - 4,829,022
Nel book values as at
December31,2017 525,100 - 59,182337 59,707,537
Construction in progress relates to installation oflaboratory and computer equipment for exploration
activities and professional fees paid for the definitive feasibility study ofthe processing plant.
Depreciation charged to exploration cost in the statement oftotal comprehensive income for the year
ended December 31, 2018 amounted to P519,486 (2c17 - P968,712) (Note Z).
(z)
Note a - Accrued expenses and other liabilities
2018 2017
Third party payables 4,984,416 4,878,939
Accrued expenses 2,228,965 2,287 ,683
Payable to government agencies 42,933 125,371
Other liabilities 774 774
Notes-Sharecapital
On May 31, 2013, the SEC approved the increase in authorized share capital from P3o,ooo,ooo divided
into 3o,ooo,ooo shares to P1oo, ooo,ooo divided into loo,ooo,ooo shares. The excess Payments over
the par value of subscribed shares were credited to share premium.
Details ofthe Company's share capital as at December 31,2018 and 2017 are as follows:
As part ofthe amended Agata Mining Option and Joint Venture Agreement ("Joint Venture
Agreement") dated June r8, zor3, T\rIRD shall hold 6o% equity interest in the ComPany through
additional contributions. The palments for the issuance of shares will be funded by the deposit for
future share subscription.
Details of unrecognized deferred tax asset from NOLCO as at December 31 which could be carried
over as a deductible expense from the Company's taxable income for the next three consecutive
years following the year of such loss are as follow:
G)
Realization of the future tax benefits relating to the deferred income tax assets is dependenton many
factors including the Company's ability to generate taxable income within the net operating loss carry-
over period, Managemenf has considered these factors in reaching its conclusion not to recognize
deferied income tai assets in the financial statements as at December 3r, 2018 and 2017.
The reconciliation ofthe provision for income tax computed at statutory income tax rate to the actual
income tax for the years ended December 31 in the statement oftotal comprehensive income follows:
2018 2017
Benefit from income tax at 30% statutory rate (3,825,098) (2,082,121)
Add (deduct) tax effect of:
lnterest income subject to final tax (36,865) (2,984)
Non{axable income (4,022)
Unrecoqnized deferred tax assets on NOLCO 3,865,985 2,085,105
Exploration costs were incurred for the Agusan Project (Note r). The Company expenses all
exploration costs, ifany, as incurred until it determines that the exploration property is capable of
achieving commercial production at which time all further pre-production costs are capitalized at cost.
In the normal course of its operations, the Company transacts with entities which are considered as
related parties under "PAS 24 (Revised), Related Party Disclosures".
(4)
The table below summarizes the Company's transactions and balances with its related parties as at and
for the years ended:
690
As mentioned in Note 1, the Company was established as a result ofjoint venture agreements among TVI,
MRL, MRL Nickel and Minimax relating to the Agusan, Surigao and Iloilo Projects on September 25, zorz.
Part ofthe agreement is the Technical Service Agreement with TVIRD whereby TVIRD shall provide
accounting and general administrative services to the Company. There was no service fees charged for the
year ended December 3r, 2018 and 2017 due to the status of Company's operation
Transactions with TVIRD pertain to advances in support ofoperational requirement ofthe Company.
There was no write-offor provision made during the years ended December 3r, zor8 and zorT in
relation to related party balances.
The Company's exposures to tiese risks are managed through close monitoring by the key management
and Board of Directors.
Foreign exchange is the risk to earnings or capital arising from changes in foreign exchange rates.
Fluctuations in exchange rates can have significant effects on the Company's reported results. Foreign
exchange risk arises when future commercial transactions and recognized assets and liabilities are
denominated in a currency that is not the Company's functional currency. There is no formal risk
management policy on foreign exchange risk due to absence oftransactions exposing the Company to
such risks. The Company does not actively enter into forward contracts to mitigate tlis risk. As at
December 3r, 2018, t}te Company's foreign currency denominated monetary assets and liabilities
consist ofcash in bank denominated in US Dollar amounting to US$5,o73 as at December 31, 2o18
(zor7 - US$5,o62).
G)
As at December 3r, zor8, the exchange rates used for translation of US Dollar to Philippine Peso was
PSz.S8 (zorZ - P4g.gg).
Net foreign exchange gain for the years ended December 3r is composed of the following:
2018 2017
Urlrealized|oss(gain)
IridIZEu ruDD \gar
(Jr r,l (13,408) 3,160
Realized qain - (9'494)
The Company is not exposed to significant price risk due to the absence of material security investments
and is not subject to commodity price risk.
As the Company has no significant interest bearing financial assets and liabilities, the Company's profit
or loss and operating cash flows are substantially independent ofchanges in market interest rates.
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in a
financial loss. The Company's credit riskis concentrated to its outstanding deposit as at reporting date.
Cash in bank is maintained with a universal bank, which offers the widest variety ofbanking services
among financial institutions and represents top tier institution in terms of capitalization as categorized
by the Bangko Sentral ng Pilipinas.
The maximum exposure to credit risk at the reporting date is the carrying amount ofcash in bank and
advances to employees as shown in the statement offinancial position.
Liquidity risk arises when the Company will not be able to meet its financial obligations as they fall due.
The Company's approach to managing liquidity is to ensure that it has sufiicient cash to meet its
obligations when they fall due without incurring unacceptable losses.
As at December 31, 2018, total accrued expenses and other liabilities amounting to P7,274,r's
(2ot7 - P7,167s96) (excluding amount payable to government agencies) is due within one year,
Outstanding balance due to related parties are considered due and demandable. The amounts
disclosed in the statement offinancial position represent the contractual undiscounted cash flows.
(6)
9.2 Capital management
Total capital is calculated as equity as shown in the statements of financial position. The Company's
objectivis when managing capital are to safeguard the Company's ability to continue as a going-
concern, so that it canionli.ro. to provide reiurns for shareholders and benefits for other stakeholders
and to maintain an optimal capitafstructure to reduce the cost of capital. TMRD is responsible for
managing capital risk ofthe Company including capital structure, liquidity and cash flow risks, the
parenl C6mpany further ensuresidequate level of working capital to sustain daily operations and
ultimately sifeguard the Company's ab ity to continue as a going concern. Management of these risks
is governed under policies and guidelines provided by the Parent Company. If deemed necessary,
T\IIRD may remit additional working capital in order to support its capital requirements.
Due to the short-term nature ofthe transactions, the carrying values of each financial asset and liability
including cash in bank, advances to employees, and accrued expenses and other liabilities as at the
reporting date approximate their fair values. The Company does not hold financial instruments traded
in active market which might be affected by quoted market prices at reporting date. The Company has
no financial assets or liabilities that are measured and carried at fair value.
The preparation ofthe financial statements in accordance with PFRS requires the Company to make
judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, income
and expenses and disclosure ofcontingent assets and contingent liabilities. Future events may occut
which will cause the assumptions used in arriving at the estimates to change. The effects ofany change
in estimates are reflected in the financial statements as they become reasonably determinable.
Estimates, assumptions andjudgments are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable
under the circumstances.
The Company estimates the useful lives ofproperty and equipment based on the period over which the
assets are expected to be available for use. The estimated useful lives of property and equipment are
reviewed periodica\ and are updated ifexpectations differ from previous estimates due to physical
wear and tear, technical or commercial obsolescence and legal or other limits on the use of assets. It is
possible, however, that the future results of operations could be materially affected by changes in
estimated useful lives ofproperty and equipment.
0)
Management reviewed and assessed that no change in the estimated useful lives of property and
equipirent is necessary since the current useful lives are still consistent with the expected pattern of
ec'on'omic benefits from these assets. The carrying value of property and equipment as at December 3r,
2018 and 2017 is disclosed in Note 3.
Significantjudgment is required in determining the provision for income taxes. There are many
trinsactioni and calculations for which the ultimate tax determination is uncertain in the ordinary
course ofbusiness,
The Company recognizes liabilities for anticipated tax audit issues based on estimates ofwhether
additional taxes will be due . Where the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will irnpact the income tax and deferred tax
provisions in the period in which such determination is made. Further, recognition of deferred income
iaxes depends on management's assessment ofthe probability of available future taxable income
against which the temporary differences can be applied.
The Company reviews the carrying amounts ofdeferred income tax assets at each reporting date and
reduces the amounts to the extent that it is no longer probable that sufficient taxable profit will allow
all or part of its deferred taxable assets to be utilized. Unrecognized deferred income tax assets relate
to NOLCO as shown in Note 6.
There was also no deferred tax assets recognized because ofthe limited capacity of the Company to
utilize the tax benefit within the foreseeable future.
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized
whenever evidence exists that the carrying value is not recoverable. Long-lived assets consist mainly of
property and equipment.
Management assessed that no impairment charge is necessary as there were no impairment indicators
identified as at December 3r, 2018 and 2o17.
(8)
Note rr - Summary of sienificant accountins policies
The principal accounting policies applied in the preparation ofthe financial statements are set out
betow. thise policies have been consistently applied to all the years presented, unless otherwise
stated.
11,1 Basisofpreparation
These financial statements are prepared in accordance with Philippine Financial Reporting Standards
(PFRS). The term PFRS in general includes all applicable PFRS, Philippine Accounting Standards
(PAS), interpretations ofthe Philippine Interpretations Committee (PIC), Standing Interpretations
Committee (SIC) and International Financial Reporting Interpretations Committee (IFRIC) which have
been approved by the Financial Reporting Standards Council (FRSC) and adopted by the SEC.
The financial statements have been prepared under the historical cost convention.
The Company availed ofthe exemption from the mandatory adoption of PFRS for Small and Medium -
sized Entities (SMEs) under t}re amended Securities Regulation Code (SRC) since it is a subsidiary of
an entity that is reporting under Philippine Financial Reporting Standards (PFRS).
The preparation of financial statements in conformity with PFRS requires the use ofcertain critical
accounting estimates. The areas involving a higher degree ofjudgment or complexity, or areas where
assumptions and estimates are significant to the financial statements are disclosed in Note ro.
(a) New standards, and amendments and interpretations to existing standards adopted
There are a number of new standards, amendments to standards and interpretations to existing
standards that are effective for the financial year beginning on January r, zor8, but have not been
considered applicable and/or relevant to the Company's financial statements due to the status of its
operations and highly limited balances and transactions except the one below:
The Company has applied PFRS 9 for the first time for their annual reporting period commencing
January 1, 2o18:
r PFRS 9, 'Financial instruments' (effective January r, zor8), deals with the classification,
measurement, and impairment offinancial instruments, as well as hedge accounting. PFRS 9
replaces the multiple classification and measurement models for financial assets in PAS 39 with a
single model that has three classification categories: amortized cost, fair value through other
comprehensive income, and fair value through profit or loss. Classification under PFRS 9 is driven
by the entity's business model for managing the financial assets and whether the contractual
characteristics ofthe financial assets represent solely pal,rnents of principal and interest.
Investments in equity instruments are required to be measured at fair value through profit or loss
with the irrevocable option at inception to present changes in fair value in other comprehensive
income.
The classification and measurement offinancial liabilities under PFRS 9 remains the same as in
PAS 39 except where an entity has chosen to measure a financial liability at fair value through
profit or loss. For such liabilities, changes in fair value related to changes in own credit risk are
presented separately in other comprehensive income.
(s)
Accordingly, the Company assessed that the new standard has no effect on the measurement of its
financial iisets. In additi,on, there is no impact on the Company's accounting for financial
liabilities, as t}re new requirements only affect the accounting for financial liabilities designated at
fair value through profit or loss and the Company does not have any such liabilities. The
impairment rules of PFRS 9 introduced an expected credit losses model that replaces the incurred
losi impairment model used in PAS 39. Such new impairment model generally results in earlier
recognition of losses compared to PAS 39. The adoption of PFRS 9, effective January 1, 2018,
resulted in changes in the Company's accounting policies for classification and impairment of
financial assets. Details of the specific PFRS 9 accounting policies applied in the current period (as
well as the previous PAS 39 accounting policies applied in the comparative period) are described in
more detail in Note rr.3.
(b) New standards, amendments and interpretations to existing standards not yet adopted
Cash
Cash includes cash on hand and deposits held on call with banks, which are carried at face amount or
nominal amount.
1r.g Financialinstruments
A financial instrument is any contract that gives rise to a financial asset ofone entity and a financial
liability or equity of another entity. The Company recognizes a financial instrument in the statements
offinancial position, when, and only when, it becomes a party to the contractual provisions ofthe
instrument.
Financial assets
(a) Classilcation
From January r, zor8, the Company classifies its financial assets in the following measurement
categories: fair value through profit or loss (FVPL), fair value through other comprehensive income
(FVOCI) and amortized cost. The Company only holds financial assets under the category of amortized
cost as at December 31, 2018.
Assets that are held for collection of contractual cash flows where those cash flows represent solely
payments ofprincipal and interest are measured at amortized cost. Interest income from these
financial assets is included in finance income using the effective interest rate method.
Any gain or loss arising on derecognition is recognized directly in profit or loss and presented in other
gains/losses together with foreign exchange gains and losses. Impairment losses are presented as
separate line item in the statement oftotal comprehensive income.
(ro)
The classification depends on the entity's business model for managing the financial assets_and tJre
contractual terms ofihe cash flows. The Company's financial assets measured at amortized cost consist
only of cash in bank (Note 11.2) and adva[ces to employees (Notes 11.5).
The measurement at initial recognition did not change on adoption ofPFRS 9'
Regular way purchases and sales of {inancial assets are recognized on trade-date, the date on which the
Company commits to purchase or sell the asset.
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly
attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at
F\aPL are expensed through profit or loss in tie statement oftotal comprehensive income.
(ii) Subsequentmeasurement
Financial assets measured at amortized cost are subsequently carried at amortized cost using the
effective interest method, less provision for impairment.
(c) Impairment
From January r, zo18, for due from related parties, the Company applies the simplified approach
permitted by PFRS 9, which requires expected lifetime losses to be recognized from initial recognition
o{the receivables. As significant portion ofthe Company's receivables are amounts due from its related
parties, which based on historical experience has no significant increase in credit risk, the Company has
no expected credit losses as at December 3r, zor8.
(d) Derecognition
Financial assets are derecognized when the rights to receive cash flows from assets have expired or
have been transferred and the Company has transferred substantially all the risks and rewards of
ownership.
Financial liabilities
(a) Classification
The classification and measurement offinancial liabilities under PFRS 9 remains the same as in PAS 39
except where an entity has chosen to measure a financial liability at fair value through profit or loss.
For such liabilities, changes in fair value related to changes in own credit risk are presented separately
in other comprehensive income. The Company does not have any financial liabilities at fair value
through profit or loss as at December 3r, 2018.
The Company classifies its financial liabilities in the following categories: financial liabilities at fair
value through profit or loss (including financial liabilities held for trading and those that designated at
Jair value); and other financial liabilities. The Company's financial liabilities are limited to other
financial liabilities at amortized cost,
(rr)
Financial liabilities at amortized cost pertains to issued financial instruments that are not classified as
at fair value through profit or loss and contain contract obligations to deliver cash or another financial
asset to the holder or to settle the obligation other than the exchange of a fixed amount of cash. These
are included in cunent liabilities, except for maturities greater t}tan twelve (rz) months after the
reporting period which are classified as non-current liabilities.
The Company's accrued expenses and other liabilities (excluding payable to government agencies)
(Note rr.ro) and due to related parties (Notes rr.r4) are classified under other financial liabilities at
amortized cost.
Financial liabilities not carried at fair value through profit or loss are initially recognized at fair value
plus transaction costs. Financial liabilities are derecognized when extinguished, i.e., when the
obligation is discharged or is cancelled, expires, or paid.
(c) Measurement
Other financial liabilities are carried at amortized cost using the effective interest method.
(d) Offsetting
Financial assets and liabilities are offset and the net amount reported in the statement offinancial
position when there is a legally enforceable right to offset the recognized amounts and there is an
intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally
enforceable right must not be contingent on future events and must be enforceable in the normal
course ofbusiness and in the event of default, insolvency or bankruptcy of the company or the
counterparty. As at December 3t, zorS and zor7, there were no offsetting offinancial assets and
liabiiities arrangements.
Th-e Company has applied PFRS 9 retrospectively, but has elected not to restate comparative
information. As a result, the comparative information provided continues to be accounted for in
accordance with the Company's previous accounting policy.
Financial assets
(a) Classification
The Company classifies its financial assets in the following categories: at fair value through profit or
loss, loans and receivables, held-to-maturity investments ind available-for-sale. The claJsification
depends on the purpose for which the financial assets were acquired. Management determines the
classification ofits financial assets at initial recognition. As at December 3r, zor8 and zor7, the
Company only has financial assets classified as loans and receivables.
loans and receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. They are included in current assets, except for maturities greater than
rz monihs afler the reporting date. These are classified as non-current aisets. The Compiny's loans
and receivables consist of cash in banks and advances to employees.
(rz)
(b) Initial recognition, subsequent measurement and derecognition
Regular way purchases and sales of financial assets are recognized on trade-date, the date on which the
Company commits to purchase or sell the asset. Financial assets are initially recognized at fair value
plus transaction costs for all financial assets not carried at fair value through profit or loss.
Loans and receivables are subsequently carried at amortized cost using the effective interest method.
Financial assets are derecognized when the rights to receive cash flows from the financial assets have
expired or have been transferred and the Company has transferred substantially all risks and rewards
of ownership.
(c) Impairment
The Company assesses at each reporting date whether there is objective evidence that a financial asset
or a group of financial assets in impaired. A financial assets or a group of financial assets is impaired
and impairment losses are incurred only if there is objective evidence of impairment as a result of one
or more events that occurred after the initial recognition ofthe asset (a'loss event') and that loss event
(or events) has an impact on the estimated future cash flows ofthe financial asset or group offinancial
assets that can be reliably estimated. The amount of the loss is measured as the difference between the
asset's carrying amount and the present value of estimated future cash flows (excluding future credit
losses that have not been incurred) discounted at the financial asset's original effective interest rate.
Impairment loss is recognized in profit or loss and the carrying amount ofthe asset is reduced through
the use of an allowance.
The criteria that the Company uses to determine that there is objective evidence ofan impairment loss
include:
The amount ofthe loss is measured as the difference between the asset's carrying amount and the
present value of estimated future cash flows (excluding future credit losses that have not been incurred)
discounted at the financial asset's original effective interest rate. The asset's carrying amount is reduced
and the amount ofthe loss is recognized in profit or loss,
If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current
effective interest rate determined under the contract. As a practicalixpedient, the Company may
rneasure impairment on the basis ofan instrument's fair value using an observable market price.
(rs)
If, in a su.bsequent period. the amo-rrnt of the impairment loss decreases
and the decrease can be related
objectively to an event occurring after the impaiiment *u.i""ognir"a
t.r"t
debtor's credit rating), the reveriar of the pr#ousry re."grir"i"i-p"i.-uri
,. un i111p.o.,r"1n"ri in trr"
i"..^i. i"i"e.ir"di" p-nt
or loss.
Financial liabilities
(a) Classification
0q)
The.company classifies its fair varue.measurements using a fair varue
hierarchy that reflects the
.,s:gnificance of the inputs used in making the -"asu.eme'nir. rr,. iri. #.;..lh;;;;il;?tto*irrg
"ul*
o quoted prices (unadjusted) in active markets for identical assets
or liabilities (Level r);
o inputs other-than quoted prices included within Level r that are observable
foi the asset or liability,
either directly (that is, as prices) or indirectly (that is, a"rir.a frorn p.i..JG";i;;;;j' ^
' inputs for the asset or liability that are not based on observable
mari"t ari" itrr"i ii'urol"".uur.
inputs) (Level 3).
The fair value of assets and liabilities tlat are not traded in
an active market (for example, over-the-
counter derivatives) is determined by using valuation te.t
niqr".. fnese ualuation tectiriou".' '
maximize the use of observable marlet aaii wtreie li
specific estimates. If all significan_t-inputs required toluir
ii;;;ii;;r. il'*ry
,. iiiii" ,.'p"..it[T, .",r.,
uriu. un instrument are o6."*rit.,'tt . u..",
or liability is included in Gver z. rfone or ,nor. oit'r,"
.isoifiJa'nt inputs is not based on observabre
market data, the asset or liability is included in feveii. --**
Gs)
AtrD€cember 31, 2018 and 2017, the company
does not have assets and liabilities that
are measured at
r1.S Receivables
The assets' residual values and useful rives are reviewed, and
adjusted ifappropriate, at each reporting
(r6)
11.8 Impairment of non-financial assets
Assets that have a definite usefirl life that.are.subject to depreciation
and amo$ization are reviewed for
impairment whenever events or changes rn .i.cu-siar..lilai.^t"
tt rt tt," ,1nouni mav not ue
recoverable. An impairment loss is reiognized for the amouniby w-riiJ
t["".rrying
;;;'"I.:";.s,il,
exceeds its recoverable "-d*, t.
amount. The rec6verable a-ornti. tt i igl,". orun r"."tt r"lr'""ri,l i..J.".t.
For rhe purposesof assessing imf"i.-"ni." u.."t ure grouped at the rowesr
::lt.:19^rl:l'
tor lse.
wnlcn there are seDaratelv identifiable cash flows (cash-generating uniG). non-nnun.iut
revels
than goodwill that suffered impairment are reviewed ior poisibie reversal other
of the impairment ".iets
at each
reporting period.
Deferred income tax assets and liab ities are offset when there is a regally enforceabre riqht
to offset
cur.rent income tax assets against current income tax liabilities and wf,en the def;;J i-n;;J
and liabilities relate to income taxes levied by the same taxation authority on elther
t-r*].."t.
t[eiaxabiu o.
different taxable entities where there is an intention to settle the balancei on a net basis.- ".tity
Tire company reassesses at each reporting date the need to recognize a previousry unrecognized
deferred income ta;r asset-
(tz)
Deferred income tax assets and liabilities are derecognized when the relevant temporary differences are
realized/settled or recoverability is no longer probable.
1r,11 Provisionsandcontingencies
Provisions are recognized when the Company has a present legal or constructive obligation as a result
ofpast events;_it.is more likely than not that an outflow of resources will be required io settle the
obligation; and the amount has been reliably estimated. provisions are not recognized for future
operating losses. Provisions include those for legal disputes and assessments an-d commissions.
Where there are a number of similar obligations, the likelihood that an outflow will be required in
settlementjs determined by considering the class ofobligations as a whole. A provision ii recoenized
even if the likelihood ofan outllow with respect to any one item included in the same class of "
obligations may be small.
P.rovisions are measured at the presenl value ofthe expenditures expected to be required to settle the
obligation using a pre-tax rate that reflects current maiket assessments ofthe time value of money and
the risks specific to the obligation. The increase in the provision due to passage of time is .".ognir"d as
interest expense.
Contingent liabilities are not recognized in the financial statements. These are disclosed unless the
possibility of an outflow of resources embodying economic benefits is remote. A contingent assei ls not
recognized in the financial statements but disclosed when an inflow ofeconomic benefiis is probable.
Provisions are derecognized when the obligation is paid, cancelled, or has expired.
11.12 Equity
rr.rz.r Share capital and share premium
common shares are classified as share capital under equity. share premium is recognized for the
exce_ss of-proceeds of subscriptions over the par value of tlie shares issued. Incremeital costs 6irectly
attributable to the issuance of new shares or options are shown in equity as a deduction from the
proceeds, net of tax.
Retained earnings/deficit includes current and prior years' results of operation, net oftransactions with
shareholders and dividends declared, if any. Relained earnings/deficif may also include the of
"feci
changes in accounting policy as may be required by the releva-ni standard'jtransitional provisions.
Approprjat€d retained earnings are not available for dividend distribution unless the purpose ofthe
appropriation has been served.
(r8)
11.18 Income and expense recogrrition
11.13.1 Interest and other income
Interest income on bank deposits, which is represented net offinal withholding tax, is recognized on a
time-proportion basis using the effective interest metlod.
Other income including foreign exchange translations are recognized when earned or realized.
Costs and expenses are charged to operations when incurred. Interest expense is recognized on a time-
proportion basis using the effective interest method.
Items included in the financial statements ofthe Company are measured using the currency ofthe
primary economic environment in which the entity operates (the 'functional currency'). The financial
statements are presented in Philippine Peso, which is the Company's functional and presentation
currency.
Foreign currency transactions are translated into Philippine Peso using the exchange rates prevailing at
the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and -
losses resulting from the settlement of such transactions and from the translation at year-end exchange
rates of monetary assets and liabilities denominated in foreign currencies are recognized in profit or
Ioss.
(rg)
(BIR)
Note 12 - suprrlementar-v infonnation reouired bv tlhe Bufeau of Internal Revenue
The following information required by Revenue Regulation (RR) No. 15-2o1o is presented for purposes
of filing withlhe BIR and is not a required part ofthe basic financial statements.
,.2,3 Importations
The Company had no importations for the year nor transactions subject to excise tax.
The Company has not received any final assessment notices from the BIR. Further, there are no
outstanding tax cases under preliminary investigation, litigation and/or for prosecution in courts or
bodies outside ofthe BIR at December 3r, zor8.
(zo)