NOTES-PART 1

Accounting policies

Basis for preparation

The consolidated financial statements are prepared under the historical cost basis. The
consolidated financial statements are presented in Philippine Peso (Peso), which is the
company’s functional currency and all amounts are rounded to the nearest peso except when
otherwise indicated.

The consolidated financial statements are prepared in compliance with Philippine Financial
Reporting Standards.

Change in Accounting Policies

 Voluntary Change in Accounting Policies

In 2018, the subsequent measurement of land was change from revaluation method to
cost method since the Group believes that the use of cost method provides a more
reliable and more relevant information about the Group’s financial position since there is
no current intention to sell the parcels of land as they are being used as store locations.
The voluntary change in accounting policy is accounted for by retrospective application.
The change in accounting policy was also made to align with the accounting policy of the
ultimate parent company.

LAND
Fair Value Derecognized Deferred Tax At Cost
revaluation Liability
increment (net of
deferred tax
liability)
P 66, 323, P 18, 519, 295 P 7, 936, 840 P 39, 866, 865
000

As a result, the Group derecognized the revaluation increment amounting to P 18, 519,
295, net of deferred tax liability of P 7, 936, 840, in the consolidated balance sheet as at
 December 31, 2017. The carrying amount of land is P 39, 866, 865, as at December 31,
2017
 Other changes in Accounting Policies
The Group has adopted the following new accounting pronouncements starting January
1, 2018:
 Amendments to PFRS 2, Share-based Payment, Classification and
Measurement of Share-based Payments Transactions
 Amendments to PFRS 4, Applying PFRS 9 Financial Instruments with PFRS 4,
Insurance Contracts
 PFRS 9, Financial Instruments
 PFRS 15, Revenue from Contracts with Customers
 Amendments to PAS 28, Investment in Associates and Joint Ventures,
Measuring an Associate of Joint Venture at Fair value (Part of Annual
Improvements to PFRSs 2014-2016 Cycle)
 Amendments to PAS 40, Investment Property, Transfers of Investment Property
 Philippine Interpretations International Reporting Interpretations Committee
(IFRIC)-22, Foreign Currency Transactions and Advance Consideration
 Amendments to PFRS 9, Prepayment Features with Negative Compensation
 PFRS 16, Leases
 Amendments to PAS 19, Employee Benefits, Plan Amendment, Curtailment or
Settlement
 Amendments to PAS 28, Long-term Interests in Associates and Joint Ventures
 Philippine Interpretation IFRIC-23, Uncertainty over Income Tax Treatments
 Annual improvements to PFRSs 2015-2017 Cycle
 Amendments to PFRS 3, Definition of a Business
 Amendments to PAS 1, Presentation of Financial Statements, and PAS 8,
Accounting Policies, Changes in Accounting Estimates and Errors, definition of
Material
 PFRS 17, Insurance Costs

The adoption of the abovementioned pronouncements did not have any significant impact in the
Group’s financial position or performance unless otherwise indicated.

Changes in estimates
The judgments, estimates and assumptions used in the consolidated financial statements are
based upon management’s evaluation of relevant facts and circumstances as at balance sheet
date. Future events may occur that will result the judgments, estimates and assumptions to
change.

The Group has applied the following judgments, apart from those involving estimations, which
have most significant effect on amounts recognized in the consolidated financial statement:

 Presentation of Marketing Support and Other Amounts Arising from Trading

Terms Agreements and Conformes (Upon adoption of PFRS 15)
Marketing support and other amounts arising from trading agreements and
conformes that do not qualify as distinct performance obligation are presented as
deduction to coset of merchandise sales beginning January 1, 2018.

 Right to Access – Performance Obligation Satisfied Over Time (Upon adaptation

of PFRS 15)
The revenue from granting franchise license is recognized throughout the term of
the franchise agreement.

 Whether activities perform prior to franchise store opening are distinct

performance obligations (Upon adoption of PFRS 15)
Initial franchise fees are deferred and recognized as revenue over the term of
franchise agreement.

 Classification of Redeemable Preferred Shares

 Classification of Leases
 Impairment of Receivable

The following are key assumptions and other key sources of estimation concerning future
uncertainty at the balance sheet date that have significant risk causing a material adjustment to
the carrying amounts of the assets and liabilities:

 Impairment of Non-financial Assets other than Goodwill

 Impairment of Goodwill
 Estimation of Retirement Benefits
 Provisions and Contingencies
  Realizability and Deferred Tax Assets
Deferred tax assets are recognized for all temporary deductible differences to the
extent that it is probable that sufficient future taxable assets will be available
against which the deductible temporary difference can be utilized.

NOTES-PART 2

Related party disclosures

Parties that are related has the ability to affect the ability to affect the financial and operating
decisions of the other party through control, significant influence or joint control. The Group
discloses its Related Parties in the notes with the transactions between them. Furthermore, the
outstanding balances of the parties are settled through cash.

The following are the Related Parties of the Group:

a. PFI
A foundation with common key management of the Group, consisting of donations and
noninterest-bearing advances pertaining primarily to salaries, taxes and other operating
expenses initially paid by PSC for PFI
b. Convenience Distribution, Inc and Store Sites Holding, Inc
These are wholly-owned subsidiaries of PSC.
c. Post-employment Benefit Plan
The Group’s defined benefit retirement fund has investments in shares of stocks of PSC
with a cost of P122,417, as at December 31, 2018. In 2017 and 2018, the retirement
benefit fund earned a gain arising from changes in market prices amounting to
P2,525,290 and P3,105,240.
d. Key Management Personnel
Are those persons having authority and responsibility for planning, directing and
controlling the activities of the entity, directly or indirectly, including any director of that
entity. The following are the compensation of key management personnel for 2018:

Short-term employee benefits P 57, 207, 490

Post-employment benefits 5, 018, 292
Total P 62, 225, 782
Operating segments

The Group considers the store operations as its only business segment based on its primary
business activity. The Group used the management approach on determining reportable
segments in which are identified on the basis of internal reports that are significant for external
reporting. The decision on whether the operating segment is reportable or not is based on
management judgment. The considered integral parts are franchise, rental on properties and
commission income. The Group’s identified operating segments operating segments below are
consistent with the segments reported to the BOD, which is the Chief Operating Decision Maker
of the Group.

The products and services from which the store operations derive its revenues which are all
income from external parties are as follow:

 Merchandise sale
 Franchise sales
 Commission income
 Rental income
 Interest income

INTERIM FINANCIAL REPORTING

The Group prepares quarterly report pursuant to Section 17 of the Securities Regulation Code
and SRC Rule 17.2 B requiring to submit such periodical reports for interim fiscal period and
current reports on significant developments of the issuer as the Commission may prescribe as
necessary to keep current information on the operation of the business and financial condition of
the issuer. In which, as stated in 17.1 C, the issuer has assets of at least Fifty million pesos (50,
000, 000) or such other amount as the Commission shall prescribe, and having two hundred
(200) or more holder each holding at least one hundred (100) share of a class of its equity
securities: Provided, however, that the obligation of such issuer to file report shall be terminate
ninety (90) days after notification to the Commission by the issuer that the number of its holders
holding at least one hundred (100) share reduced to less than one hundred (100).
The interim financial statements are presented on a Quarterly basis. The Group presents a
condensed set of Interim Financial Statements which consist of:

 Unaudited Consolidated Balance Sheets as at June 30, 2019 and Audited

Consolidated Balance Sheets as at December 31, 2018
 Unaudited Consolidated Statements of Comprehensive Income for the Three
Months Ended June 30, 2019 and 2018
 Unaudited Consolidated Statements of Comprehensive Income for the Six
Months Ended June 30, 2019 and 2018
 Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the
Six Months Ended June 30, 2019 and 2018
 Unaudited Consolidated Statements of Cash Flow for the Three Months Ended
June 30, 2019 and 2018
 Unaudited Consolidated Statements of Cash Flow for the Six Months Ended
June 30, 2019 and 2018
 Notes to Unaudited Consolidated Financial Statements