LONNI CORPORATION

WAREHOUSE NO. 7 TACLOBAN-BAYBAY S. ROAD COGON SAN JOAQUIN PALO, LEYTE

NOTES TO FINANCIAL STATEMENTS

As of and for the year ended December 31, 2020
In Philippine Peso

1. GENERAL INFORMATION

LONNI CORPORATION was registered with the Securities and Exchange Commission on June 20,
2019. The company was established to operate under the line of business of “Wholesale Trading of
Goods and Merchandise.”

The registered address of the Company is at Warehouse No. 7 Tacloban- Baybay S. Road Cogon San
Joaquin Palo, Leyte, Philippines.

The company adopts a calendar year accounting and tax period ending December 31. The financial
statements of the company were approved and authorized by the board.

The accompanying Financial Statements of the Company for the year ended December 31, 2020 were
reviewed by and authorized for issuance by the Board of Directors on this 12th Day April, 2021.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company adopted relevant accounting policies and is likewise to adopt other principal accounting
policies that are relevant in the preparation of financial statements. These policies are to be
consistently applied to all the reporting period unless otherwise stated.

Basis of Preparation

The financial statements of the Company are prepared using the accrual basis of accounting on a fair
value measurement, presented in Philippine pesos, which is its functional currency.

The accompanying financial statements are to be prepared on a going concern basis, which
contemplate the realization of assets and settlement of liabilities in the normal course of business.

Statement of Compliance

The accompanying financial statements have been prepared in accordance with the framework on
Philippine Financial Reporting Standards (PFRS) for Small Entities which Section 2 thereof has the
following concepts and pervasive principles.

Objective of financial statements of an entity applying this Framework.

The objective of financial statements of the Company in applying this Framework provide information
about the financial position, performance and cash flows of the entity that is useful for economic
decision-making by a broad range of users who are not able to demand reports tailored to meet their
information needs.
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 Financial position

The statement of financial position of the Company is the relationship of its assets, liabilities, and equity
as of a specific date. These are defined as follows: a) an asset is a resource controlled by the entity
because of past events and from which future economic benefits are expected to flow to the Company;
b) a liability is a present obligation of the Company arising from past events, the settlement of which is
expected to result in an outflow from the Company of resources embodying economic benefits; and c)
equity is the residual interest in the assets of the Company after deducting all its liabilities.

Financial Performance

The statement of financial performance is the relationship of the income and expenses of a Company
during a reporting period. Income and expenses are defined as follows: a) income is increases in
economic benefits during the reporting period in the form of inflows or enhancements of assets or
decreases of liabilities that result in increases in equity, other than those relating to contributions from
equity investors; and b) expenses are decreases in economic benefits during the reporting period in the
form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity,
other than those relating to distributions to equity investors.

Cash flows

The statement of cash flow information shows how the Company generates and uses cash and cash
equivalents. Company need cash to conduct their operations, to pay their obligations, to make
investments in income-producing assets, and to provide returns to their investors. Information about the
performance of the Company shows the income, expenses, and profit or loss of the Company on an
accrual basis. However, the actual inflows and outflows of cash from the Company’s operations
generally differ - often significantly - from its income and expenses on an accrual basis. Moreover,
reporting performance on an accrual basis gives no insight into the cash used by the Company in its
investing activities or the cash generated by the entity through its financing activities.

Cash flows are classified as cash flows from operating, investing, and financing activities. Classification
by activity provides information on how those activities affect the financial position of the Company
(including its liquidity and solvency) and the amount of its cash and cash equivalents.

Recognition of assets, liabilities, income, and expenses

An item shall be recognized (i.e., incorporated in the financial statements) if it meets the definition of an
asset, liability, income, or expense and satisfies the following criteria: a) it is probable (i.e., more likely
than not) that any future economic benefit associated with the item will flow to or from the Company;
and b) the item has a cost or value that can be measured reliably.

Accrual basis

The Company prepared its financial statements, except for cash flow information, using the accrual
basis of accounting. On the accrual basis, items are recognized as assets, liabilities, equity, income, or
expenses when they satisfy the definitions and recognition criteria for those items.
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 Related Party Disclosures

Related party relationship exists when one party has the ability to control, directly or indirectly through
one more intermediary, the other party or exercise significant influence over the other party in making
financial and operating decisions. This includes (3) individuals owning directly or indirectly through one
or more intermediaries’ control or are controlled by an interest in the voting power of the Company that
gives them significant influence over the Company and close member of the family of any individual.

The key management personnel of the Company and post-employment benefit plans for the benefit of
Company’s employees, if any, are also considered to be related parties.

The Company’s related parties include the Company’s Key Management. The compensation of the key
management personnel of the Company pertains to the usual monthly salaries and government
mandated bonuses, there are no other special benefits paid to management personnel.

3. MANAGEMENT’S SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES

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

Judgments

The preparation of the Company’s financial statements in conformity with Financial Reporting
Framework about the Philippine Financial Reporting Standards requires management to make
estimates and assumptions that affect the amounts reported in the Company’s financial statements and
accompanying notes. The estimates and assumptions used in the Company’s financial statements are
based upon management’s evaluation of relevant facts and circumstances as of the date of the
financial statements. Actual results could differ from such estimates, 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.

Repairs and maintenance

Repairs and maintenance incurred by the Company have not resulted in an increase in the future
economic benefit of its property and equipment, therefore charged to operations.

Estimates

In the application of the Company’s accounting policies, management is required to make judgments,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are relevant. Actual results may differ from these estimates.
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 The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the period in which the estimate is revised if the revision affects only that
period or in the period of the revision and future periods if the revision affects both current and future
periods.

The following represents a summary of the significant estimates and judgments and related impact and
associated risks in the Company’s financial statements.

Impairment of inventories
The Company recognizes impairment on inventories whenever the net realizable value of inventories
become lower than cost due to damage, physical deterioration, obsolescence, changes in price levels
or other causes. The impairment is reviewed monthly to reflect the accurate valuation in the financial
records.
Estimating useful lives of property and equipment

If there is an indication that there has been a significant change since the last annual reporting date in
the pattern by which the Company expects to consume an asset’s future economic benefits, the
Company shall review its present depreciation method and, if current expectations differ, change the
depreciation method to reflect the new pattern. The Company shall account for the change as a change
in an accounting estimate.

Factors such as a change in how an asset is used, significant unexpected wear and tear, technological
advancement, and changes in market prices may indicate that the residual value or useful life of an
asset has changed since the most recent annual reporting date. If such indicators are present, the
Company shall review its previous estimates and, if current expectations differ, amend the residual
value, depreciation method or useful life. The Company shall account for the change in residual value,
depreciation method or useful life as a change in an accounting estimate.

Depreciation is computed on a straight-line method over the estimated useful lives of the assets.

The carrying values of the property and equipment are at cost less accumulated depreciation.

Revenue recognition

The Company’s revenue recognition policies require the use of estimates and assumptions that may
affect the reported amounts of revenues and receivables. Differences between the amounts initially
recognized and actual settlements are taken up in the accounts upon reconciliation. However, there is
no assurance that such use of estimates may not result to material adjustments in future periods.

Revenue is recognized to the extent that is probable that the economic benefits will flow to the
Company and the amount of revenue can be reliably measured. However, when an uncertainty arises
about the collectability of an amount already included in the revenue, the uncollectible amount, or the
amount in respect of which recovery has ceased to be probable, is recognized as an expense, rather
than as an adjustment of the amount of revenue originally recognized.

The following specific criteria must also be met before revenue is recognized:

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  Special Services. Revenue from special services is recognized when the significant risks and
rewards of ownership of the goods or service have passed to the customers. Costs, distribution,
administrative and finance costs are recognized in the statement of financial performance upon
utilization of the service or in the date they are incurred.

4. CASH
      2020
Cash in Bank ₱ 540,640.00
Total Cash on Hand and in Bank     ₱ 540,640.00
Respective bank deposit rates and current account deposits do not earn interest. The entity reconciles
the books and bank balances regularly as part of its cash monitoring and internal control measures.

5. PROPERTY AND EQUIPMENT

12/31/19 Additional Disposal 12/31/20

Cost
Delivery Equipment 1,300,000.00 1,300,000.00
Office Equipment 101,490.00 101,490.00
Total 1,401,490.00 1,401,490.00
Accumulated
Depreciation
Delivery Equipment 1,530.08 193,469.92 195,000.00
Office Equipment 10,149.00 10,149.00 20,298.00
Total 11,679.08 203,618.92 210,223.50
Carrying Value 1,389,810.92 1,191,266.50

6. Revenues
2020 2019
PRIVATE 9,952,337.91 107,866.07
TOTAL 9,952,337.91 107,866.07

7. SUPPLEMENTAL INFORMATION REQUIRED UNDER RR 15-2010

The Bureau of Internal Revenue (BIR) issued on November 25, 2010 Revenue Regulations (RR) 15-
2010 amending certain provisions of Revenue Regulations No. 21-002, as amended, implementing
Section 6(H) of the tax code of 1997, authorizing the Commissioner of Internal Revenue to prescribe
additional procedural and/ or documentary requirements in connection with the preparation and
submission of financial statements accompanying income tax returns. Under the said RR companies
are required to provide in addition to the disclosures mandated under PFRS, and such other standards
and or conventions as may be adopted in the notes to the financial statements, information on taxes,
duties and licenses fees paid or accrued during the taxable year.

7.1 Taxes and Licenses

Particulars 2020

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Annual Registration 500.00
Mayor’s Business Permit 24,900.00
TOTAL 25,400.00

7.2 Income Taxes

2020
RCIT 111,374.82
MCIT 38,436.68
Income tax Expense (w/chever is higher) 111,374.82
Less: Total Tax Credits/Payments
Tax Paid 1st to 3rd Quarter 66,447.67
Creditable Tax Withheld 1st to 3rd Quarter -
Income Tax Payable 44,927.15

7.3 VAT Payable

2020
VAT Exclusive Sales 9,952,337.91
VAT Output Tax 1,194,280.55
VAT Exclusive Domestic Purchases 19,503,475.83
VAT Input Tax 2,340,417.10
VAT Due (1,146,136.55)

Less: Total Tax Credits/Payments

VAT paid
Creditable Tax Withheld January to November
VAT PAYABLE (1,146,136.55)

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