BM1802

San Miguel Corporation

Basis of Preparation and Summary of Significant Accounting Policies:

An Analysis of its Effects and Importance

A RESEARCH PAPER SUBMITTED TO MR. Dave

AS A PARTIAL FULFILLMENT FOR THE PRELIMINARY PERIOD

FOR THE COURSE CONCEPTUAL FRAMEWORK AND ACCOUNTING STANDARDS

BY:
Jintula
Rabia
Tampoli

06/11/22

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I.INTRODUCTION
a. The Company and its Background
San Miguel Corporation (SMC) began in the Philippines in 1890 as a single brewery.
Since then, the company has evolved from a beverage, food, and packaging company
into a diversified conglomerate with operations in the fuel and oil, energy,
infrastructure, and real estate industries. The Company's product portfolio includes
beer, spirits, non-alcoholic drinks, poultry, animal feeds, flour, fresh and processed
meats, dairy products, coffee, different packaging goods, and a variety of refined
petroleum products. SMC has strategic alliances with worldwide companies.

Kirin Holdings Company, Limited for beer; Hormel Foods International Corporation
for processed meats; Nihon Yamamura Glass Company, Ltd., Fuso Machine & Mold
Mfg. Co. Ltd. and Can-Pack S.A. for packaging items; and Korea Water Resources
Corporation for its electricity operations. Ginebra San Miguel, Inc., San Miguel Food
and Beverage, Inc., SMC Global Power Holdings Corp., SEA Refinery Corporation, San
Miguel Holdings Corp., and San Miguel Properties, Inc. are the Company's
subsidiaries.

San Miguel Corporation, most renowned for its worldwide distributed beer, can only
be defined in superlatives. It is Southeast Asia's oldest and largest brewer. It is also
the largest and one of the most continuously profitable enterprises in the Philippines.
With a 90 percent market share, San Miguel's trademark beer completely controls
the Filipino market. According to an Economist brief from 1988, Filipinos order
"beer" at pubs and restaurants, knowing they will get a San Miguel. However, San
Miguel did not rank first in the region for good beer alone. It also manufactures
agricultural feeds, processed and fresh meats, dairy goods, coconut products, hard
liquor, nonalcoholic drinks, and packaging such as glass containers, corrugated
cartons, aluminum cans, and metal crowns and caps. San Miguel has entirely or
majority-owned companies in various food and beverage industries in the
Philippines, including 90 percent of carbonated beverages, 58 percent of powdered
juice, 56 percent of hard liquor, and more than 80 percent of margarine and butter.

By the early 2000s, beer and other alcoholic drinks accounted for less than one-third

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of San Miguel's yearly revenue. In fact, by 2001, the company had developed during
its more than 110-year history to contribute 3.6 percent of its own country's gross
domestic output and 4.5 percent of government tax revenue.

Despite political turmoil, infrastructural flaws, and hefty taxes, San Miguel has risen
to a dominating position in the Southeast Asian market. Over decades, it rose to
prominence via strong competitive methods and astute long-term planning. After
diversifying into agribusiness, foods, and packaging in the mid-twentieth century, the
corporation controlled its home markets by the early 1980s. San Miguel launched an
aggressive international expansion strategy at the time, which paid off in the mid-to-
late 1990s.

II. Basis of Preparation

The accompanying consolidated financial statements have been produced in conformity with
Philippine Financial Reporting Standards (PFRS). PFRS are based on the International Accounting
Standards Board's International Financial Reporting Standards (IASB). The Philippine Financial
Reporting Standards Council has provided PFRS, Philippine Accounting Standards (PAS), and
Philippine Interpretations (FRSC). In order to prepare these condensed consolidated financial
statements, management must make assumptions and assumptions, which affect the reported
amounts of revenues, expenses, assets, liabilities, and disclosures. If such assumptions and
estimates deviate from actual circumstances in the future, the original assumptions and
estimates will be adjusted as appropriate during the period when the circumstances change.

III. Summary of Significant Accounting Policies

Following the new presentation rules under Philippine Accounting Standard (PAS) No. 34, Interim
Financial Reporting, the Group prepared its interim consolidated financial statements as of and for
the period ended September 30, 2020, as well as comparative financial statements for the same
period in 2019. The Group's interim consolidated financial statements have been prepared in
accordance with Philippine Financial Reporting Standards (PFRS). The interim consolidated
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financial statements were approved and authorized for issue on October 30, 2020, in accordance
with a resolution by the Board of Directors (BOD). The interim consolidated financial statements
are presented in Philippine pesos, and all financial information is rounded off to the nearest
million (000,000), except where otherwise noted. Except for the modifications in accounting
policies described below, the Group's primary accounting policies and procedures used in
compiling the interim consolidated financial statements are the same as those used in the most
recent annual audited consolidated financial statements. The Financial Reporting Standards
Council (FRSC) has authorized the implementation of a number of financial reporting standards.
PFRS includes new and updated standards and interpretation.

Amended Standards and Framework Adopted in 2020

The Group has adopted the following PFRS effective January 1, 2020 and accordingly, changed its
accounting policies in the following areas:

 Amendments to References to the Conceptual Framework in PFRS outlines changes to

PFRS, their related documentation, and PFRS practice statements to reflect the release of
the updated Conceptual Framework for Financial Reporting in 2018. (2018 Conceptual
Framework). The 2018 Conceptual Framework includes: (a) a new chapter on
measurement; (b) guidance on reporting financial performance; (c) improved definitions
of an asset and a liability, as well as guidance supporting these definitions; and (d)
clarifications in critical areas, such as the roles of stewardship, prudence, and
measurement uncertainty in financial reporting.

Amendments to References to the Conceptual Framework in PFRS outlines changes to

PFRS, their related documentation, and PFRS practice statements to reflect the release of
the updated Conceptual Framework for Financial Reporting in 2018. (2018 Conceptual
Framework). The 2018 Conceptual Framework includes: (a) a new chapter on
measurement; (b) guidance on reporting financial performance; (c) improved definitions
of an asset and a liability, as well as guidance supporting these definitions; and (d)
clarifications in critical areas, such as the roles of stewardship, prudence, and
measurement uncertainty in financial reporting.

 A Business Definition (Amendments to PFRS 3, Business Combinations). The modifications

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focused on narrowing and clarifying the definition of a company. The changes also make it
easier to determine whether an acquired set of activities and assets is a group of assets
rather than a business.

 Material Specification (Amendments to PAS 1, Presentation of Financial Statements and

PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors). The modifications
tighten the definition of what constitutes material.

According to the amended definition of what is considered material, such information is

material if omitting, misstating, or obscuring it could reasonably be expected to influence
the decisions that the primary users of general-purpose financial statements make based
on those financial statements, which provide financial information about a specific
reporting entity. The amendments clarify the definition of what is considered material and
its application by: (a) raising the threshold at which information becomes material by
replacing the term 'could influence' with 'could reasonably be expected to influence'; and
(b) replacing the term 'could reasonably be expected to influence' with 'could reasonably
be expected to influence'. (b) including the concept of "obscuring information" in the
definition alongside the concepts of "omitting" and "misstating" information; (c) clarifying
that the users to whom the definition refers are the primary users of general-purpose
financial statements referred to in the Conceptual Framework; (d) clarifying the
explanatory paragraphs accompanying the definition; and (e) aligning the wording of the
definition of what is considered material across PFRS and other publications. The
amendments are intended to assist entities in making better materiality judgments
without significantly altering existing requirements.

 Reform of Interest Rate Benchmarks (Amendments to PFRS 9, Financial Instruments, PAS

39, and Financial Instruments: Recognition and Measurement and PFRS 7, Financial
Instruments: Disclosures). The amendments provide temporary exceptions to all hedging
relationships directly affected by interest rate benchmark reform - market-wide reform of
an interest rate benchmark, including the replacement of an interest rate benchmark with
an alternative benchmark rate, such as that resulting from the Financial Stability Board's
July 2014 report 'Reforming Major Interest Rate Benchmarks.'

 Corona Virus Disease-2019 (COVID-19) Related Rent Concessions (Amendment to PFRS 16,
Leases). The amendment adds an optional practical expedient that streamlines how
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alessee accounts for rent reductions resulting directly from COVID-19. Lessees who use
the practical expedient are not obliged to determine whether eligible rent concessions
constitute lease modifications and must account for them in line with other applicable
instructions. The accounting that results will be determined by the specifics of the rent
concession. The practical expedient will apply only if the reduced consideration is
essentially the same as or less than the original consideration; the lease payment decrease
pertains to installments due on or before June 30, 2021; and no other substantive
modifications to the lease conditions have been made.

IV. Conclusion

Since then, the Company has evolved from a beverage, food, and packaging company into a
diversified conglomerate with operations in the fuel and oil, energy, infrastructure, and real estate
industries.

Beer, spirits, non-alcoholic drinks, poultry, animal feeds, flour; fresh and processed meats, dairy
products, coffee; different packaging items, and a variety of refined petroleum products comprise
the Company's product portfolio.

Ginebra San Miguel, Inc., San Miguel Food and Beverage, Inc., SMC Global Power Holdings Corp.,
SEA Refinery Corporation, San Miguel Holdings Corp., and San Miguel Properties, Inc. are all
subsidiaries of the company. San Miguel has entirely or majority-owned companies in numerous
food and beverage industries in the Philippines, including 90 percent of carbonated beverages, 58
percent of powdered juice, and 56 percent of hard liquor and more than 80 percent of margarine
and butter.

The interim consolidated financial statements of the Group have been prepared incompliance with
Philippine Financial Reporting Standards (PFRS).The interim consolidated financial statements
were approved and authorized for issue in accordance with a resolution by the Board of Directors
(BOD) on October 30, 2020.The interim consolidated financial statements are presented in
Philippine peso and all financial information is rounded off to the nearest million (000,000), except
when otherwise indicated.

The principal accounting policies and methods adopted in preparing the interim consolidated
financial statements of the Group are the same as those followed in the most recent annual
audited consolidated financial statements, except for the changes in accounting policies as
explained below.
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As part of PFRS, the Financial Reporting Standards Council (FRSC) authorized the implementation
of a number of new and updated standards and interpretations. Amendments to References to
the Conceptual Framework in PFRS outlines changes to PFRS, their related papers, and PFRS
practice statements to reflect the publication of the updated Conceptual Framework for Financial
Reporting in 2018. (2018 Conceptual Framework). Some standards, their accompanying
documents and PFRS practice statements contain references to, or quotations from, the
International Accounting Standards Committee (IASC).

Framework for the Preparation and Presentation of Financial Statements adopted by the IASB in
2001 or the Conceptual.

Framework for Financial Reporting issued in 2010.The amendments update some of those
references and quotations so that they refer to the2018 Conceptual Framework, and makes other
amendments to clarify which version of the Conceptual Framework is referred to in particular
documents.

V. References
https://edge.pse.com.ph/companyInformation/form.do?cmpy_id=154
http://www.fundinguniverse.com/company-histories/san-miguel-corporation-history/
https://edge.pse.com.ph/companyPage/financial_reports_view.do?cmpy_id=154
https://www.pds.com.ph/wp-content/uploads/2020/11/Disclosure-No.-3446-2020-Quarterly-
Report-for-Period-Ended-September-30-2020-SEC-Form-17-Q.pdf

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