LARS ERIC GARFIN

NOTES TO FINANCIAL STATEMENTS

As of and for the period ended December 31, 2019
With Comparative Figure for December 31, 2018

Note 1. THE ENTERPRISE

The business of Lars Eric Garfin was registered with the Bureau of Internal Revenue (BIR) under
Tax Identification Number (TIN) 946-492-271-000 through BIR RDO 063-City of Calapan, Province of
Oriental Mindoro.

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRINCIPLES

2.1 Basis of Financial Statements Preparation

The financial statements of Lars Eric Garfin were prepared on a fair value measurements. All
amounts were presented in Philippine Peso which is the business functional currency.

The accompanying financial statements were prepared on a going concern basis which
contemplates the realization of assets and settlement of liabilities in the normal course of business.

2.2 Statement of Compliance

The accompanying financial statements were prepared in accordance with
Philippine Financial Reporting Standards (PFRS) for SMEs.

2.3 Accounting Policies Adopted

The following accounting standards that have been published by the International Accounting
Standards Board (IASB) and adopted by the FRSC which became effective on or after January 1, 2005
were adopted by the enterprise as follows:

Section:
1. Small and Medium-sized Entities
1.1The IFRS for SMEs is intended for use by small and medium-sized entities (SMEs). This
section described the characteristics of SME's.

2. Concepts and Pervasive Principles

2.1 This section describes the objective of financial statements of small and medium- sized
entities (SMEs) and the qualities that make the information in the financial statements of SMEs
useful. It also sets out the concepts and basic principles underlying the financial statements of
SMEs.

3. Financial Statement Presentation

3.1 This section explains fair presentation of financial statements, what compliance with the
IFRS for SMEs requires, and what a complete set of financial statements is.

4. Statements of Financial Position

4.1 This section sets out the information that is to be presented in a statement of financial
position and how to present it. The statement of financial position (sometimes called the balance
sheet) presents an entity’s assets, liabilities and equity as of a specific date-the end of the
reporting period.

5. Statement of Comprehensive Income and Income Statement

5.1 This section requires an entity to present its total comprehensive income for a period-ie its
financial performance for the period. In one or two financial statements. It sets out the
information that is to be presented in those statements and how to present it.

6. Statement of Changes in Equity and Statement of Income and Retained Earnings

6.1 This section sets out requirements for presenting the changes in an entity’s equality for a
period, either in a statement of changes in equity or if specified conditions are met and an entity
chooses, in a statement of income and retained earnings.

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 7. Statement of Cash Flows
7.1 This section sets out the information that is to be presented in a statement of cash flows and
how to present it. The statement of cash flows provides information about the changes in cash
and cash equivalents of and an entity for a reporting period, showing separately changes from
operating activities, investing activities and financing activities.

8. Notes to Financial Statement

8.1 This section sets out the principles underlying information that is to be presented in the notes
to the financial statements and how to present it. Notes contain information in addition to that
presented in the statement of financial position, statement of comprehensive income, income
statement (if presented), combined statement of income and retained earnings if presented),
statement of changes in equity, and statement of cash flows. Notes provide narrative
descriptions or disaggregation of items presented in those statements and information about
items that do not quality for recognition in those statements. In addition to the requirements of
this section, nearly every other section of this IFRS requires disclosures that are normally
presented in the notes.

9. Accounting Policies, Estimates and Errors

9.1 This section provides guidance for selecting and applying the accounting policies used in
preparing financial statements. It also covers changes in accounting estimates and corrections
of error in prior period financial statement.

10. Events after the End of Reporting Period

10.1 This section defines events after the end of the reporting period and sets out principles for
recognizing, measuring and disclosing those events.

11. Related Party Disclosures

11.1 This section requires an entity to include in its financial statements the disclosures
necessary to draw attention to the possibility that its financial position and profit or loss have
been affected by the existence of related parties and by transactions and outstanding balances
with such parties.

As to Elements of Financial Position

12. Basic Financial Instruments

11.1 Section 11 Basic Financial Instruments and Section 12 Other Financial Instruments Issues
together deal with recognizing, derecognizing, measuring and disclosing financial instruments
(financial assets and financial liabilities). Section 11 applies to basic financial instruments and is
relevant to all entities. Section 12 applies to other, more complex financial and transactions. If an
entity enters into only basic financial instrument transactions then Section 12 is not applicable.
However, even entities with only basic financial instruments shall consider the scope of Section
12 to ensure they are exempt.

13. Inventories
13.1 This section sets out the principles for recognizing and measuring inventories. Inventories
assets:
a. Held for sale in the ordinary course of business;
b. In the Process of production for such sale; or
c. In the form of materials or supplies to be consumed in the production process or in the
rendering of services.

14. Property, Plant and Equipment

14.1 This section applies to accounting property, plant and equipment and investment property
whose fair value cannot be measured reliably without undue cost or effort.

15. Provision and Contingencies

15.1 This Section applies to all provisions, contingent liabilities and contingent assets except
those provisions relating to:
a. Leases, However, this section deals with operating leases that have become onerous.

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 b. Construction contracts.
c. Employee benefit obligation.
d. Income tax.

16. Liabilities and Equity

22.1 This section establishes principles for classifying financial instruments as either liabilities or
equity and addresses accounting for equity instruments issued to individuals or other parties
acting in their capacity as investors in equity instruments.

17. Impairment of Assets

27.1 An impairment loss occurs when the carrying amount of an asset exceeds its recoverable
amount. This section shall be applied in accounting for the impairment of all assets other than
the following, for which other section of this IFRS establish impairment requirements:
a. Deferred tax assets.
b. Assets arising from employee benefits.
c. Financial Assets within the scope of Section 11 Basic Financial Instruments or Section
12 Other Financial Instrument Issues.
d. Investment property measured at fair value.
e. Biological Assets related to agricultural activity measured at fair value less estimated
costs to sell.

18. Employee Benefits

28.1 Employee benefits are all forms of consideration given by an entity in exchange for service
rendered by employee, including directors and management. This section applies to all
employee benefits, except for share-based payment transactions, which are covered by
Section 26 Share-based Payment. Employee benefits covered by this section will be one of
the following four types:
a. Short-term employee benefits, which are employee benefits (other than termination
benefits) that are wholly due within twelve months after the end of the period in which
the employees render the related service.
b. Post-employment benefits, which are employee benefits (other than terminations
benefits) that are payable after the completion of employment.
c. Other long-term employee benefits, which are employee benefits (other than post-
employment benefits and termination benefits) that are not wholly due within twelve
months after the end of the period in which the employees render the related service.
d. Termination benefits, which are employee benefits payable as a result of either:
(i) An entity’s decision to terminate an employee’s employment before the normal
retirement date, or
(ii) An employee’s decision to accept voluntary redundancy in exchange for those
benefits

19. Income Taxes

29.1 For the purpose of this IFRS, income tax includes all domestic and foreign taxes that are
based on taxable profit. Income tax also includes taxes, such as withholding taxes, that are
payable by a subsidiary, associate or joint venture on distributions to the reporting entity.

As to Elements of Statement of Comprehensive Income

20. Revenue
20.1 This section shall be applied in accounting for revenue arising from the following
transactions and events:
a. The sale of goods (whether produced by the entity for the purpose of sale or purchased
for resale).
b. The rendering of services.
c. Construction contracts in which the entity is the contractor.
d. The use by others of entity assets yielding interest, royalties or dividends.

21. Government Grants

21.1 This section specifies the accounting for all government grants. A government grant is
assistance by government in the form of a transfer of resources to an entity in return for past or
future compliance with specified conditions relating to the operating activities of the entity.

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 The adoption of the above standards, amendments and interpretations, upon which the
enterprise has opted to adopt, did not have any significant effect on the enterprise’s financial
statements. These, however, require additional disclosures on the enterprise’s Financial
Statements on the face or in the Notes.

2.4 The significant accounting policies and practices of the enterprise are set forth to
facilitate the understanding of the financial statements:

Cash - includes cash on hand and in bank. Cash in bank is a current account maintained to meet
the daily cash requirement of the business. Cash on hand represents undeposited sale/collection
made after banking hours and sources of petty expenses within the day.

Prepaid Taxes - represents overpayment of Income Taxes in the previous years which can be
credited against future Income Taxes until fully utilized.

Equity/Net Worth - represents the accumulated amount of investments and withdrawals made by
the spouses when the business has started up to the present and the amounts of Income or Losses
generated in the normal course of business operations.

Revenue and Expense Recognition

Revenue - is recognized when earned and it is probable that ownership of the goods will pass to the
buyer and the benefit arising from the transaction or sale can be measured reliably.

Expense - is recognized when incurred and when an asset has been reduced as a result of a
transaction or a liability has increased arising there from.

Cost - is recognized in the statement of income upon sale or utilization of the goods or services or in
the date they are incurred.

Business Permits and Licenses - represent amount paid to local and national government in the
pursuit of business. These amounts include business permits and licenses, Barangay clearance,
Annual Registration Fees and other taxes necessary in the conduct of business.

Income Taxes - Income tax on the profit or loss for the year is composed of current and deferred
income tax. Income tax is recognized in the statements of income, except to the extent that it relates
to items recognized directly in equity, in which case it is recognized in equity.

Current income tax is the expected tax payable on the taxable income for the year, using tax rates
enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred income tax is provided using the balance sheet liability method providing for temporary
differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amount used for taxation purposes. The amount of deferred income tax provided is based
on the expected manner of realization or settlement of carrying amount of assets and liabilities,
using tax rates enacted at the balance sheet date.

Deferred income tax asset is recognized only to the extent that it is probable that future taxable
profits will be available against which the asset can be utilized. Deferred income tax assets are
reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Subsequent Events
The owner identifies subsequent events as events that occurred after the balance sheet date but
before the date when the financial statements were authorized for issue. Any subsequent events that
provide additional information about the business financial position at the balance sheet date are
reflected in the financial statements.

Events that are not adjusting events are disclosed in the notes to the financial statements when
material.

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 Impairments of Assets
An assessment is made at each balance sheet date of whether there is any indication of impairment
of an asset, or whether there is any indication that an impairment loss previously recognized for an
asset in prior years may no longer exist or may have decreased. If any such indication exists, the
assets recoverable amount is calculated as the higher of the assets value in use or net selling price.

An impairment loss is recognized only if the carrying amount of an asset exceeds its recoverable
amount. An impairment loss is charged loss to operations in the period in which it arises.

Note 3.MANAGEMENT’S SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

Judgments and Estimates

The preparation of the financial statements, in conformity with Financial Reporting Framework
(in reference to the Philippine Financial Reporting Standards), require the spouses to make
estimates and assumptions that affect the amounts reported in the business financial statements
and accompanying notes. The estimates and assumptions used in the financial statements are
based upon the spouses’ evaluation of relevant facts and circumstances as of the date of the
financial statements. Actual results could differ from such estimates and judgments.

Judgments and estimates 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.

Estimated Useful Lives of Assets:

The Owner estimates the useful lives of Property and Equipment based on a period over which
these assets are expected to be available for use. The estimated lives of these assets are
reviewed and updated if expectations differ from previous estimates due to physical wear and
tear and technical or commercial obsolescence.

A reduction in the estimated lives of the Asset would increase the recorded expenses and
decrease the non-current assets.

The estimated useful lives of the fixed assets are as follows:

Note 4. CAPITAL RISK MANAGEMENT

All risks that the business may encounter during the ordinary course of business operation are
borne by the spouses in his individual capacity- market, credit, liquidity and government risks.

Note 5. CASH ON HAND AND IN BANK

Cash are carried in the balance sheet at face value. For the purpose of preparing cash flow statement,
cash is composed of cash on hand and cash in bank. This account refers to the cash balance as of
balance sheet date amounting to Php. 507,207.98

Note 6. ACCOUNTS RECEIVABLE

This account refers to the outstanding receivable amounting to Php. 142,634.73 which remains
uncollected as of December 31, 2019

Note 7. NON-CURRENT ASSETS

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 Details of Property, Plant and Equipment for the period December 31, 2018 are as follows:

DESCRIPTION 2019 2018

Non-Current Assets
Curtains & Accessories 20,000.00 20,000.00
Furniture & Fixture 10,000.00 10,000.00
Embalming Materials 15,000.00 15,000.00
Funeral Car 120,000.00 120,000.00
Chandeliers & Candle Holder 100,000.00 100,000.00
Total 265,000.00 265,000.00

Note 8.COST OF SALES-

This account consists of the following:

Less: Cost of Sales

Merchandise Inventory, Beg. 185,691.00 177,800.00
Add: Purchases 1,210,259.00 344,605.00
Good Available for Sale 1,395,950.00 522,405.00
Less: Merchandise Inventory, End 592,415.00 185,691.00
Cost of Good Sold 803,535.00 336,714.00

Note 9.OPERATING EXPENSES

This account consists of the following:

DESCRIPTION 2019 2018

Less: Operating Expense
Stall Rental - -
Labor & Wages 210,240.00 50,000.00
Fuel & Oil Expenses 80,456.00 7,500.00
Taxes & Licenses 25,610.00 16,400.00
Retainers Fee 34,000.00 7,500.00
Depreciation Expense 17,000.00 17,000.00
Total Operating Expense 367,306.00 98,400.00

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Note 10.INCOMETAX PAYABLE

PROVISION FOR TAX PRESENTED BELOW:

The Income Tax Due (Overpayment) of MRS. VIVENCIA MADRID is computed as follow:

DESCRIPTION 2019
Net Earnings 262,059.00
Exemption 250,000.00
Total 12,059.00

Tax Due 2,411.80

Tax Credit -
Tax Payable 2,411.80

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