Company: Philippine Savings Bank

Year Covered: For year ended 2019

Account Affected:
 Right of Use of Asset, Lease Liability, Interest Expense and Depreciation Expense

Key Audit Matter:

 Bank’s adoption of PFRS 16 is significant because the Bank has high volume of lease
agreements
 The recorded amounts are material to the financial statements
 Adoption involves application of significant judgment and estimation in determining the
lease term
 Includes evaluating whether the Bank is reasonably certain to exercise options to extend
or terminate the lease and determining the incremental borrowing rate.

Procedures performed by the Auditor:

 Obtained an understanding of the Bank’s process in implementing the new standard
 Tested the completeness of the population of lease agreements by comparing the
number of leases per operational report against the master lease schedule
 Inspected lease agreements from the master lease schedule, identified their contractual
terms and conditions, and traced these contractual terms and conditions to the lease
calculation prepared by management
 Reviewed the management’s assessment of whether it is reasonably certain that the
Bank will exercise the option to renew or not exercise the option to terminate.
 Tested the parameters used in the determination of the incremental borrowing rate by
reference to market data.
 Test computed the lease calculation prepared by management on a sample basis,
including the transition adjustments.
 Reviewed the disclosures related to the transition adjustments based on the
requirements of PFRS 16 and PAS 8, Accounting Policies, Changes in Accounting
Estimates and Errors.

Source: https://www.psbank.com.ph/media/4206/psbank-2019-audited-financial-statements.pdf