COMPANY INC.

NOTES TO FINANCIAL STATEMENTS

As of and for Year Ended December 31, 2022
(With Comparative Figures as of and for the Year Ended December 31, 2021)
(Amounts in Peso)

1. CORPORATE INFORMATION

Company Inc (the Company), a domestic corporation organized under the existing Philippine laws, was
duly registered with the Securities and Exchange Commission (SEC) on _____ and was granted the
right mainly to engage in____________ (From primary purpose per articles of incorporation)

The principal office, which is also the registered office, is _____________ (From GIS)

Status of Operations

The Company incurred a net loss of ____ and ____ in 2022 and 2021, respectively, resulting to a
capital deficiency of ________ and _________ as of December 31, 2022 and 2021, respectively.
These conditions indicate the existence of a material uncertainty which may cast significant doubt about
the Company’s ability to continue as a going concern. The management and stockholders have no plan
to close or discontinue the operations of the Company. They have committed to provide full support to
the Company to sustain its operations and meet its working capital requirements and obligations as
they fall due in order for the Company to continue as a going concern. Also, the Company will continue
to focus on improving its collection strategies especially to those borrowers who are temporarily put on
hold their payment and continue to pursue its market to increase its revenues.

The financial statements do not include any adjustments relating to the recoverability and classification
of recorded asset amounts and the amounts and classification of liabilities that may be necessary
should the Company be unable to continue as a going concern.

2. BASIS OF PREPARATION

The financial statements of the Company have been prepared in accordance with Philippine Financial
Reporting Standards for Small Entities (PFRS for SEs) issued by the Financial Reporting Standards
Council (FRSC) and adopted by SEC, including SEC pronouncements.

The financial statements have been prepared using the measurement bases specified by PFRS for SEs
for each type of asset, liability, income and expense. These financial statements have been prepared
on the historical cost basis, except for the revaluation of certain financial assets. The measurement
bases are more fully described in the accounting policies that follow.

The financial statements are presented in Philippine peso, the Company’s presentation and functional
currency and all values represent absolute amounts except when otherwise indicated. Functional
currency is the currency of the primary economic environment in which an entity operates.

Company Inc. – 2022 Financial Statements

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are set out
below. These policies have been consistently applied to all the years presented, unless otherwise
stated.

Financial Assets and Financial Liabilities

Financial assets and financial liabilities are recognized only when the Company becomes a party to the
contractual provisions of the instrument. These are initially measured at the transaction price (including
transaction costs), unless the arrangement constitutes, in effect, a financing transaction. A financing
transaction may take place if payment is deferred beyond normal business terms or is financed at a
rate of interest that is not a market rate. If the arrangement constitutes a financing transaction, the
Company measures the financial asset or financial liability at the present value of the future payments
discounted at a market rate of interest for a similar debt instrument.

After initial measurement, debt instruments are measured at amortized cost using the effective interest
method. Cash and debt instruments that are classified as current assets or current liabilities are
measured at the undiscounted amount of the cash or other consideration expected to be paid or
received unless the arrangement constitutes, in effect, a financing transaction. If the arrangement
constitutes a financing transaction, the Company shall measure the debt instrument at the present
value of the future payments discounted at a market rate of interest for a similar debt instrument.

Financial liabilities are classified as current liabilities if payment is due to be settled within one year or
less after the end of the reporting period (or in the normal operating cycle of the business, if longer), or
the Company does not have an unconditional right to defer settlement of the liability for at least 12
months after the end of the reporting period. Otherwise, these are presented as non-current liabilities.

At the end of each reporting period, the Company assesses whether there is objective evidence of
impairment of any financial assets that are measured at cost or amortized cost. If there is objective
evidence of impairment, it recognizes an impairment loss in profit or loss immediately.

The Company derecognizes a financial asset when:

a. Contractual rights to the cash flows from the financial asset expire or are settled; or
b. It transfers to another party substantially all of the risks and rewards of ownership of the financial
asset.

On the other hand, the Company derecognizes a financial liability (or a part of a financial liability) only
when it is extinguished.

Financial assets and financial liabilities of the Company include:

a. Cash and cash equivalents;
b. Trade receivables;
c. Trade payables (excluding government remittances);
d. Borrowings; and
e. Advances from related parties

For purposes of cash flows reporting and presentation, cash and cash equivalents comprise accounts
with original maturities of three months or less, including cash. These generally include cash on hand,

Company Inc. – 2022 Financial Statements

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demand deposits and short-term, highly liquid investments readily convertible to known amounts of
cash and which are subject to insignificant risk of changes in value.

Inventories

Inventories are stated at the lower of cost or market value. Cost is calculated using the first-in, first-out
(FIFO) method.

At the end of each reporting date, inventories are assessed for impairment. If inventory is impaired, the
carrying amount is reduced to its market value and the impairment loss is recognized immediately in
the profit or loss.

Other Current Assets

Other assets are included in current assets if maturity or benefit is realizable within 12 months from the
statement of financial position date.  Otherwise, these are classified as non-current assets.
These are initially recorded at transaction cost and subsequently measured at cost less impairment
loss, if any.

Investment in Associate

Investments in associates are measured at cost less any accumulated impairment losses. Dividends
and other distributions received from the investment are recognized as income.

Investment Property

Investment property is measured initially at its cost and subsequently at cost less any accumulated
depreciation and any accumulated impairment losses.

Depreciation are calculated on a straight-line basis over the useful lives of the assets. The useful life of
the building is ____ years.

Property and Equipment

Property and equipment is measured initially at its cost and subsequently at cost less any accumulated
depreciation and any accumulated impairment losses.

Depreciation is calculated on a straight-line basis over the useful lives of the assets. The useful life of
each of the property and equipment is estimated based on the period over which the asset is expected
to be available for use. Below are the useful lives of property and equipment:

Useful Life (in years)

Building
Vehicles
Machineries
Furnitures and equipment

An item of property and equipment is derecognized upon disposal or when no future economic benefits
are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of
the asset is included in the profit or loss in the year the item is derecognized.

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Intangible Assets

Intangible asset is measured initially at its cost and subsequently at cost less any accumulated
amortization and any accumulated impairment losses. These costs are amortized over their estimated
useful lives of ______. (Not to exceed 10 years)

Intangible asset is derecognized upon disposal or when no future economic benefits are expected to
arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset is
included in the profit or loss in the year the item is derecognized.

Other Non-current Assets

These are initially recorded at transaction cost and subsequently measured at cost less impairment
loss, if any.

Other Payables

These include ________.

These are recognized initially at the transaction price. If classified as current liabilities, these are
subsequently measured at the undiscounted amount of the cash or other consideration expected to be
paid unless the arrangement constitutes, in effect, a financing transaction. If the arrangement
constitutes a financing transaction, the Company measures the other payables at the present value of
the future payments discounted at a market rate of interest for a similar liability.

These are classified as current liabilities if payment is due to be settled within one year or less after the
end of the reporting period (or in the normal operating cycle of the business, if longer), or the Company
does not have an unconditional right to defer settlement of the liability for at least 12 months after the
end of the reporting period. Otherwise, these are presented as non-current liabilities.

Impairment of Non-financial Assets Other than Inventories

Assets that are subject to depreciation or amortization are assessed at each reporting date to
determine whether there is any indication that the assets are impaired. Where there is any indication
that an asset may be impaired, the carrying value of the asset [or cash-generating unit (CGU) to which
the asset has been allocated] is tested for impairment. An impairment loss is recognized for the amount
by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the
higher of an asset’s (or CGU’s) fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows (CGUs). Non-financial assets that suffered impairment are reviewed for possible
reversal of the impairment at each reporting date.

Provisions and Contingencies

The Company recognizes a provision only when:

a. It has an obligation at the reporting date as a result of a past event;
b. It is probable (i.e., more likely than not) that the Company will be required to transfer economic
benefits in settlement; and
c. The amount of the obligation can be estimated reliably.

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The Company recognizes the provision as a liability in the statement of financial position and as an
expense in the statement of income at the best estimate of the amount required to settle the obligation
at the reporting date. The best estimate is the amount the Company would rationally pay to settle the
obligation at the end of the reporting period or to transfer it to a third party at that time. When the
Company expects reimbursement of some or all of the expenditure required to settle a provision, it
recognizes a separate asset for the reimbursement only when it is virtually certain that reimbursement
will be received when the obligation is settled.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Any
adjustments to the amounts previously recognized shall be recognized in profit or loss.

Contingent liabilities and assets are not recognized because their existence will be confirmed only by
the occurrence or non-occurrence of one or more uncertain future events not wholly within the control
of the Company. Contingent liabilities, if any, are disclosed, unless the possibility of an outflow of
resources embodying economic benefits is remote. Contingent assets are disclosed only when an
inflow of economic benefits is probable.

Share Capital

Ordinary shares are classified as equity.

Equity instruments are measured at the fair value of the cash or other resources received or receivable,
net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of
money is material, the initial measurement is on a present value basis.

The costs of acquiring Company’s own shares are shown as a deduction from equity attributable to the
Company’s equity holders until the shares are cancelled or reissued. When such shares are
subsequently sold or reissued, any consideration received, net of directly attributable incremental
transaction costs and the related income tax effects is included in equity attributable to the Company’s
equity holders.

Deposit for Future Stock Subscriptions

This represents funds received from shareholders to be applied as payment for future issuance of
capital stock. It is recognized as equity if all of the following set forth by the SEC are present as of
the end of the reporting period:
a. There is a lack or insufficiency of authorized unissued shares of stock to cover the deposit;
b. The Company’s BOD and stockholders have approved an increase in capital stock to cover the
shares corresponding to the amount of the deposit; and
c. An application for the approval of the increase in capital stock has been presented for filling or
filed with the SEC.
If any or all of the foregoing elements are not present, the transaction is recognized as a liability.

Revenue and Cost Recognition

Revenue is recognized when it is probable that the economic benefits associated with the transaction
will flow to the Company and the amount of the revenue can be measured reliably. It is measured at the
fair value of the consideration received or receivable. The fair value of the consideration received or
receivable is after deducting the amount of any trade discounts, prompt settlement discounts and

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volume rebates allowed by the Company. The fair value also takes into account the time value of
money.

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

a. Sale of Goods
 The Company has transferred to the buyer the significant risks and rewards of ownership of the
goods; and
 It retains neither continuing managerial involvement to the degree usually associated with
ownership nor effective control over the goods sold.

For a straightforward sale of goods for cash or on credit, revenue is generally recognized on the
date when the goods are delivered to the customer.

b. Rendering of Service
 When the outcome of a transaction involving the rendering of services can be estimated
reliably, the Company recognizes revenue associated with the transaction by reference to the
stage of completion of the transaction at the end of the reporting period.
 When services are performed by an indeterminate number of acts over a specified period of
time, the Company recognizes revenue on a straight-line basis over the specified period unless
there is evidence that some other method better represents the stage of completion. When a
specific act is much more significant than any other act, the Company postpones recognition of
revenue until the significant act is executed; and
 When the outcome of the transaction involving the rendering of services cannot be estimated
reliably, the Company recognizes revenue only to the extent of the expenses recognized that
are recoverable.

c. Interest Income – is recognized as the interest accrues taking into account the effective yield on the
asset.

Cost and operating expenses are recognized in the statement of income when decrease in future
economic benefits related to the decrease in an asset or an increase in liability has arisen and can be
measured reliably. These are recognized in the period they are incurred and measured at the amount
paid or payable.

Construction Contract (applicable only if into construction business)

Contract revenue and contract costs are recognized as revenue and expenses respectively by
reference to the stage of completion of contract activity at the reporting date where the outcome of the
contract can be reliably determined. Reliable estimation of the outcome requires reliable estimates of
the stage of completion, future costs and collectability of billings.

The Company uses the “percentage of completion method” to determine the appropriate amount to
recognize in a given period. The stage of completion is measured by reference to the contract costs
incurred up to the reporting date as a percentage of total estimated costs for each contract. Costs
incurred until the reporting date in connection with future activity on a contract are excluded from
contract costs in determining the stage of completion. Costs that relate to future activity on the
transaction or contract are presented as inventories, pre-payments or other assets, depending on their
nature and if it is probable that the costs will be recovered.

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When the outcome of a construction contract cannot be estimated reliably, contract revenue is
recognized only to the extent of contract costs incurred that are likely to be recoverable. The Company
recognizes contracts costs as an expense as incurred.

Variations in contract work, claims and incentive payments are included in contract revenue to the
extent that may have been agreed with the customer and are capable of being reliably measured.

The Company presents as an asset the gross amount due from customers for contract work for all
contracts in progress for which costs incurred plus recognized profits (less recognized losses) exceed
progress billings. Progress billings not yet paid by customers and retention are included within “trade
and other receivables”.

The Company presents as a liability the gross amount due to customers for contract work for all
contracts in progress for which progress billings exceed costs incurred plus recognized profits (less
recognized losses).

Borrowing Costs

These are interest and other costs that the Company incurs in connection with the borrowing of funds.
Borrowing costs include interest expense calculated using the effective interest method. It is recognized
as an expense in profit or loss in the period in which they are incurred.

Short-term Benefits

The Company recognizes a liability net of amounts already paid and an expense for services rendered
by employees during the accounting period. This is measured at undiscounted amount of short-term
employee benefits expected to be paid in exchange for that service. Short-term benefits given by the
Company to its employees include compensation, social security contributions, short-term
compensated absences, bonuses and other non-monetary benefits.

Long-term benefits

The Company is not covered by Republic Act No. 7641, otherwise known as “The Philippine Retirement
Pay Law” because it has less than 10 employees.

The Company’s retirement benefit obligation is measured using the accrual approach based on the
minimum retirement benefits required under Republic Act No. 7641, otherwise known as “The
Philippine Retirement Pay Law”. Accrual approach is applied by calculating the expected liability as at
reporting date using the current salary of the entitled employees and the employees’ years of service,
without consideration of future changes in salary rates and service periods.

The Company recognizes the retirement liability at the accrued amount of the retirement benefits at the
reporting date less the fair value of plan assets (if any) at the reporting date out of which the obligations
are to be settled directly.

Income Taxes

The Company accounts its income taxes using the “taxes payable method”.

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 Under the taxes payable method, a current tax liability for tax payable on taxable profit for the current
and past periods is recognized and at undiscounted amount. If the amount paid for the current and past
periods exceeds the amount payable for those periods, the Company recognizes the excess as a
current tax asset. The tax rates and tax laws used to compute the amount of current tax liability (asset)
are those that are enacted or substantively enacted by the statement of financial position date.

Leases

As lessee, the Company recognizes all lease payments as expense in profit or loss in the period in
which they are incurred.

As lessor, the Company recognizes all lease receipts as income in profit or loss in the period in which
they are earned.

Related Party Relationships and Transactions

Related party relationships exist when one party has the ability to control, directly or indirectly through
one or more intermediaries, the other party or exercise significant influence over the other party in
making financial and operating decisions. This includes:
a. Individual owning, directly or indirectly through one or more intermediaries, control, or are controlled
by, or under common control with, the Company;
b. Associates;
c. Individuals owning, directly or indirectly, an interest in the voting power of the Company that gives
them significant influence over the Company and close members of the family of any such
individual; and
d. Management entity that provides key management personnel services to the reporting entity, either
directly or through a group entity.

In considering each possible related party relationship, attention is directed to the substance of the
relationship and not merely the legal form.

Events After the End of the Reporting Period

Post year-end events that provide additional information about the Company’s position at financial
reporting date (adjusting events) are reflected in the financial statements. Post year-end events that are
not adjusting events are disclosed in the notes to the financial statements, when material.

4. CASH AND CASH EQUIVALENTS

This account consists of:

2022 2021
Cash on hand
Cash in bank
Cash equivalents

Cash in bank represents current account in a reputable local bank. Current account deposits earn
interest at the respective bank deposit. Cash and cash equivalents held by the Company are available
for use (state if with restriction).

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5. TRADE AND OTHER RECEIVABLES

This account consists of:

2022 2021
Trade receivables-net
Amounts due from customers for
contract work
Retentions
Due from related parties (Note ___)
Receivables arising from accrued
income
Prepayments
Others

Trade receivables are collectible within __ to ___ days.

There is no impairment loss recognized or reversed in the profit or loss (2021: Nil).

A reconciliation of the allowance for impairment at the beginning and end of 2022 and 2021 is shown
below.

2022 2021
Beginning
Impairment losses during the year
Write-off
Ending

6. INVENTORIES

This account consists of:

2022 2021
Held for sale
Work in process
Raw materials
Costs capitalized in relation to
construction contracts

The cost of inventories recognized as expense amounted to ____ (2021: ___).

The company recognized an impairment loss in held for sale, work in process and raw materials of ___
(2021: ___), ______ (2021: ___), ______ (2021: ___), respectively.

There are no inventories pledged as security for liabilities (2021: Nil). There is no impairment loss
recognized or reversed in the profit or loss (2021: Nil).

7. OTHER CURRENT ASSETS

This account consists of:

2022 2021

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 Unused input tax
Prepaid supplies
Prepaid tax (Note ___)
Others (or please specify)

8. INVESTMENT IN ASSOCIATES

Below are the associates of the Company:

Name of the Principal place Country of Percentage of Carrying amount of

associate of business incorporation Ownership investments in associates

9. PROPERTY AND EQUIPMENT

Below is the movement of property and equipment:

Land Buildings Vehicles Furniture Total

and and
machinery equipment
Cost
At January 1, 2022
Additions
Disposals
At December 31, 2022

Accumulated depreciation and

impairment
At January 1, 2022
Annual depreciation
Accumulated depreciation of
assets disposed
Impairment
At December 31, 2022

Carrying amount
At January 1, 2022
At December 31, 2022

Land, buildings and vehicles with carrying amount of ___ (2021: ___) are pledged as securities for
bank borrowings (Note __).

There is no impairment loss recognized or reversed in the profit or loss (2021: Nil). There is no property
and equipment that serves as collateral (2021: Nil). There is no fully depreciated property and
equipment that is still being used. There is no contractual commitment to purchase property and
equipment (2021: Nil).

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10. INVESTMENT PROPERTY

This account consists of:

2022 2021
Beginning carrying amount
Additions
Disposal
Depreciation
Ending carrying amount

Land and buildings with carrying amount of ___ (2021: ___) are pledged as securities for bank
borrowings (Note __).

There is no impairment loss recognized or reversed in the profit or loss (2021: Nil). There is no
investment property that serves as collateral (2021: Nil). There is no contractual commitment to
purchase investment property (2021: Nil).

11. INTANGIBLE ASSETS

This account consists of:

2022 2021
Beginning carrying amount
Additions
Disposal ( ) ( )
Amortization ( ) ( )
Ending carrying amount

The intangible assets are not pledged as securities for any liability.

12. BORROWINGS

This account consists of:

2022 2021
Non-current
Bank borrowings
Other borrowings

Current
Bank borrowings
Other borrowings

Total

Bank borrowings
Bank borrowings mature until year ___ and bear average fixed-rate coupons of ___ annually (2021: __
% annually). The company makes monthly repayments on the bank borrowings. Restrictions imposed
by the lending banks are:

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 For loans payable recognised at the reporting date for which there is a breach of terms or default of
principal, interest, sinking fund, or redemption terms that has not been remedied by the reporting date,
an entity shall disclose the
following:
(a) details of that breach or default.
(b) the carrying amount of the related loans payable at the reporting date.
(c) whether the breach or default was remedied, or the terms of the loans payable were renegotiated,
before the financial statements were authorised for issue.

Total borrowings include secured liabilities of ___ (2021: ___). Bank borrowings are secured by ______
(Note -#PPE).

Interest expense related to borrowings totaled ___ (2021: ).

13. TRADE AND OTHER PAYABLES

This account consists of:

2022 2021
Trade payables
Amounts due to customers for contract work
Advances received for contract work
Amount due to related parties (Note___)
SSS, HMDF, PHIC and withholding taxes
Deferred income
Accrued expenses

Trade payables are due ___ to ___ days.

14. SHARE CAPITAL AND CUMULATIVE EARNINGS

Details of the account are as follow:

Number of Number of Ordinary Total

shares issued shares issued shares (in Peso)
and fully paid but not fully paid (in Peso)
At January 1, 2022
Proceeds from shares
issued
At December 31, 2022

The Company is authorized to issue ___ shares (2021: _____ shares) of common stock at P1 (2021:
__). All issued shares are full paid and have equal rights to vote at general meetings and receive
dividends.

There are no shares in the company held by the company and shares reserved for issue under options
and contracts for the sale of shares (2021: Nil).

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 Increase of Authorized Capital

On ______, the Board of Directors and the vote of the shareholders owning or representing at least
two-thirds of the outstanding capital stock approved the increase of capital stock from P0,000,000
divided into 200,000 shares of the par value of P00 each to P00,000,000 divided into ,000,000 shares
of the par value of P00. The subscription is paid by way of conversion of advances made by
shareholders (or cash). The application for the increase was received by SEC on ______ (or is not yet
submitted to SEC.
Deposit for Future Stock Subscriptions
As of December 31, 2022 and 2021, the Company complied with the requirements to recognize the
deposit for future stock subscription as equity.

Appropriation of Cumulative Earnings

On _______, the Board of Directors re-assessed the need to appropriate Cumulative earnings and
approved the appropriation of ,000,000 cumulative earnings for the _________ (purpose). Target
period to implement the purpose is up to year _______ (required by SEC).

15. INCOME TAX

The reconciliation of income tax computed at statutory tax rate based on pretax income to actual
provision for income tax follows:

2022 2021
Income (Loss) before tax
Permanent / Temporary differences:
Non-deductible expense
Income subjected to final tax ( ) ( )
Application of NOLCO ( ) ( )
Others
Taxable income -
Tax rate 25% or 20% 25% or 20%
Income tax expense

On September 30, 2020, the Bureau of Internal Revenue has issued RR No. 25-2020 to implement
Section 4 (bbbb) of Republic Act No. 11494, otherwise known as the “Bayanihan to Recover as One
Act”. This allows qualified businesses or enterprises which incurred net operating loss for taxable
years 2020 and 2021 to carry over the same as a deduction from its gross income for the next five (5)
consecutive taxable years immediately following the year of such loss. As a result, the Company will
benefit from this tax relief.

Expiry dates of NOLCO and unused tax benefit are presented below:

Year incurred Amount of Used Expired Balance Unused tax Valid until
NOLCO benefit
2018 2021
2019 2022
2020 2025
2021 2026
2022 2025

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 Total

On the fourth taxable year, immediately following the year in which it commenced its business
operations, the Company will be subject to the minimum corporate income tax (MCIT) which is 1% of
the Company’s gross income beginning July 01, 2020 until June 30, 2023, as defined under the tax
regulations, and will be paid at the end of the year whenever the regular corporate income tax is lower
than the MCIT. Any MCIT paid can be applied against the regular corporate income tax within the next
three years after the year it was paid.
The Company is subject to MCIT. Below is the computation:

Particulars 2022 2021

Gross profit
Tax rate 1% 1%
MCIT

The Company opted to claim itemized deductions for tax purpose.

Below is the computation of income tax payable (prepaid) :

2022 2021
Current tax on profit for the year or MCIT,
whichever is higher
Less: Prior year excess tax credits
Current year creditable withholding tax
Payments for 1st to 3rd quarter
Payable (Prepaid)

Changes in tax rates

On March 26, 2021, Republic Act No. 11534 or the “Corporate Recovery and Tax Incentives for
Enterprises (CREATE) Act” was signed into law amending certain provisions of the National Internal
Revenue Code of 1997.

The key amendments to the Tax Code under the CREATE Act include, but not limited to, the following:

a. Corporate Income Tax (CIT) rate effective July 1, 2020:

 20% CIT for domestic corporations with net taxable income not exceeding P5,000,000 and with
total assets not exceeding P100 Million (excluding land on which the business entity’s office,
plant and equipment are situated)
 25% CIT for all other domestic and resident foreign corporations.
b. 25% CIT for non-resident foreign corporations effective January 1, 2021.
c. Reduction of minimum corporate income tax rate from 2% to 1% from July 1, 2020 until June 30,
2023.
d. Reduction of CIT for non-profit proprietary educational institutions and hospitals from 10% to 1%
from July 01, 2020 until June 30, 2023.
e. Regular CIT for regional operating headquarters (ROHQ) starting January 1, 2022.
f. Repeal of improperly accumulated earnings tax (IAET).

16. RETIREMENT BENEFIT

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 The Company recognizes retirement benefit for its employees based on the provision of R.A. No. 7641
– Retirement Pay Law, using accrual approach. Pursuant to the provisions, a covered employee who
retires shall be entitled to retirement pay equivalent to at least 22 days or 75% of monthly salary for
every year of service, a fraction of at least six months being considered as one whole year. A covered
employee is one who has reached at least five years of service to the Company and is at least sixty-
years old at the time of retirement.

Changes in the retirement benefit liability are as follo ws:

2022 2021
Beginning balance
Retirement expense (reversal)
Benefits paid ( ) ( )
Ending balance

The Company has no existing plan assets at the end of the year.

There is no retirement liability and expense recognized (2021: Nil). Management believes that there is
no employee who will be qualified for the retirement benefit.

17. LEASES

The company leases its office under non-cancellable operating lease agreement. The lease term is ___
years renewable at the end of the lease period at market rate.

Total lease payments recognized as an expense is ___ (2021: ___).

Significant leasing arrangements include information about contingent rent, renewal or purchase
options and escalation clauses, subleases, and restrictions imposed by lease arrangements.

18. RELATED PARTY TRANSACTIONS

The following transactions were carried out with related parties:

Related Parties Transactions Amount Balance as at December 31

2022 2021 2022 2021
Stockholder Sales of goods
Affiliate Sales of property and
other assets
Subsidiary Purchases of goods
Purchases of property
and other assets
Key officer Leases
Cash advances from
related party
Cash advances to
related party

Goods are sold based on the price lists in force and terms that would be available to third parties.

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 The receivables from related parties are due __ months after the date of sales. The receivables are
unsecured and bear no interest. There are no provisions held against receivables from related parties
(2021: __)

The payables to related parties are due __ months after the date of sales. The payables bear no
interest, unsecured and be settled in cash.

Cash advances from related parties are due ____ . These are unsecured, bear no interest and be
settled in cash. (should be current if not definite repayment term)

The total compensation of the Board of Directors and other key management personnel was ___ (2021:
___)

19. COMMITMENTS AND CONTINGENCIES

In the normal course of business, the Company makes various commitments and incurs certain
contingent liabilities that are not given recognition in the accompanying financial statements. The
Company’s management is of the opinion that losses, if any, that may arise from these commitments
and contingencies will not have a material effect on the Company’s financial statements.

20. EVENTS AFTER THE END OF THE REPORTING PERIOD

a. Date of authorization for issue

The financial statements of the Company were authorized for issue by the Board of Directors
(BOD) on ______.The BOD has the power to amend the financial statements after issue.

b. There is no other non-adjusting event after the end of the reporting period.

21. SUPPLEMENTARY INFORMATION REQUIRED BY THE BUREAU OF INTERNAL REVENUE

Presented below is the supplementary information which is required by the Bureau of Internal Revenue
(BIR) under its existing revenue regulations to be disclosed as part of the notes to financial statements.
This supplementary information is not a required disclosure under PFRS for SEs.

Requirements under Revenue Regulations (RR) 15-2010

The information on taxes, duties and license fees paid or accrued during the taxable year required
under RR 15-2010 issued on November 25, 2010 are as follows:

a. The Company is a VAT registered company with VAT output tax declaration _________ . It has
zero-rated and exemptsales totalling __________ pursuant to the provisions of applicable
law/regulations.

OR
The company is a non-VAT registered company engaged in the business of
___________ and paid the amount of P_____________ as percentage tax.

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b. The amount of VAT input tax claimed is _______ .

c. The landed cost of the company’s importations amounted to P____________ for the
year, with paid/accrued amount of P_________ as customs duties and P_________ as tariff
fees.

The Company has no importation during the year.

d. The documentary stamp tax paid/accrued on the following transactions are:

Transaction Amount Documentary Stamp Tax

Loan instruments P P
Shares of stocks

The Company has no transaction that requires payment of documentary stamp tax during the
year.

e. Other taxes and licenses:

2022
Real estate taxes
Mayor’s permit
PTR
BIR annual registration
Percentage taxes
SEC registration

f. The amount of withholding taxes paid/accrued for the year amounted to:

2022
Tax on compensation and benefits
Creditable withholding taxes
Final withholding taxes

The Company has no withholding tax paid / accrued during the year.

g. The company has received a final assessment notice from the Regional Office of __________
covering the taxable year _____ amounting to P_________, inclusive of penalties, for
deficiency income/VAT/Percentage/withholding tax, which has been protested/agreed upon.
(Management may include here their opinion on the probable outcome of their protest, if
protested; or the probable outcome of their application for
installment/compromise/abatement, in case of agreed assessment.)

h. The Company does not have any deficiency tax assessments with the BIR or tax cases
outstanding or pending in courts or bodies outside the BIR in any of the open period.

Requirements under RR 34-2020

Company Inc. – 2022 Financial Statements

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The Company is not covered by the requirements and procedures for related party transactions
provided under this RR.

The following are required to file and submit the Related Party Transactions Form, together with the
Annual Income Tax Return:
a. Large taxpayers;
b. Taxpayers enjoying tax incentives, i.e. Board of Investments (BOI)-registered and economic zone
enterprises, those enjoying Income Tax Holiday or subject to preferential income tax rate;
c. Taxpayers reporting net operating losses for the current taxable year and the immediately
preceding two (2) consecutive taxable years; and
d. A related party, as defined under Section 3 of Revenue Regulations (RR) No. 19- 2020, which has
transactions with (a), (b) or (c).

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