ACYFAR PORTFOLIO

Reflection Paper Presented to the

Accountancy Department

In Partial Fulfilment

of the Course Requirement

In ACYFAR 1

Lorenzo Joven Ross C

12122904
 One of the most notable and distinct characteristics of an accountant is being organized. It
is mainly because of the detailed and meticulous approach and method they use to work such as
journalizing, posting, creating the financial statements, and calculating appropriate values which
is a very tedious task since it needs a whole lot of details in order to do it properly. Hence, if an
accountant is not organized, the work will be more difficult and complicated since the details and
information are scattered. It would be hard to discern what to do if there is no proper organization
of ideas. It is maybe one of the reasons why the members of International Accounting Standards
Board (IASB) continuously formulates a lot of accounting standards and policies to keep the flow
of the work efficiently and convenientlyfor all accountants around the world.

According to International Financial Reporting Standards (IFRS) Foundation, it is their

mission to develop Standards that bring transparency, accountability, and efficiency to financial
markets around the world. It is a great tool to ensure comparability and good organization of
financial information so that the making of financial statements and other notes associated with it
would be easier and less complicated. It is why as early as today, as students, being organized by
adhering to Standards is very important so that it would just be natural, like already part of one’s
lifestyle. Through various activities and worksheets, professors continuously train students to
become Standard-dependent future accountants because it would be a firm and great foundation
when they go outside the university and started working in different firms. It is will surely
produce competitive and high-caliber accountants because the skills by the help of different
accounting Standards are being honed.

Now, we are going to analyze and review the 2021 Financial Statements of Basic Energy
Corporation (BEC) to check and evaluate whether the accountants who created it are able to
follow the different accounting Standards and policies established by IFRS Foundation. BEC is
considered as a Large/Publicly Accountable Entity because they have met any of the criteria
according to Financial Reporting Framework which is the criteria of having total assets of more
than P350 Million. It is the reasons why their financial statements are available in the Philippine
Stock Exchange (PSE) Edge website since it is classified as a publicly listed corporation.
Moreover, they follow the full Philippine Financial Reporting Standards (PFRS) and are required
to file the financial statements under Part II of SRC Rule
68. Upon checking BEC’s financial statements, they have followed all the Standards issued by
IASB and the explanation are as follows:

Basic Energy Corporation that is based in Makati City starts the reporting period every
1st of January and ends it every 31st of December of each year which means they follow the
calendar year approach of reporting wherein as mentioned by Kenton (2019), “A
calendar year with respect to accounting periods indicates an entity begins aggregating
accounting records on the first day of January and subsequently stops the accumulation of data
on the last day of December.” They consistently use the calendar year to report BEC’s financial
statements. It shows a thorough consistency on their end. The primary activity of BEC is all
about energy such as development, exploration, acquisition, operation, and maintenance. It
means that they have a lot of transactions to record every year because they have a diverse
classification of business activities.

Since Basic Energy Corporation works a lot of activities, it may be the reason why they also
have numerous subsidiaries (the Group). The financial statements evaluated are all consolidated
and includes a consolidated summary of significant accounting policies. It is done so that the
purpose of the financial statements could be fulfilled to those interested parties who would like to
look on the company’s performance over the past year. It is used to gauge whether it is good to
invest in the company and apparently, BEC was able to present their consolidated financial
statements effectively by adhering to the Standards. Interested parties can see and assess the
financial statements without any worries because it is appropriately presented as according to the
Conceptual Framework for Financial Reporting.

Conceptual Framework is like the Philippine constitution and the Standards formulated
are like the Philippine Laws. The Conceptual Framework acts as the backbone of the Standards
but it not higher compared to Standards in terms of hierarchy – Standards always prevail. It just
serves as a tool to assist IASB to develop Standards accordingly and with a straight and coherent
objective and purpose. Again, it does not override the Standards yet underpins IASB’s decisions in
setting Standards and it could be revised from time to time, but such revisions will not
automatically lead to changes to the Standards.
 In terms of objective of financial reporting, Basic Energy Corporation was able to provide
useful information to users by adhering to all the fundamental and enhancing characteristics of
financial statements. The consolidated Statements of Financial Position (SFP), consolidated
Statements of Income and Statements of Comprehensive Income , consolidated Statement of
Changes in Equity, and consolidated Statements of Cash Flows including the notes associated
with it and the summary of significant accounting policies are all relevant, and shows a faithful
representation.

BEC provides relevant and material information since all information presented in the
2021 financial statements is the latest annual financial report of the company and can create a
borderline whether the decisions need to be done or not. BEC’s financial statements are also
Faithfully Represented because it is complete, free from error, neutral, prudent, accurate
measurement of uncertainty, and shows substance over form. Starting from the company
information down to supplementary schedules, it is all complete and consistent when compared
to their previous annual reports. As cited by the auditors of the financial statements, “the
accompanying consolidated financial statements present fairly, in all material respects, the
consolidated financial position of the Group as at December 31, 2021 and 2020, and its
consolidated financial performance and its consolidated cash flows for each of the three years in
the period ended December 31, 2021 in accordance with Philippine Financial Reporting
Standards (PFRSs).”, wherein it certainly shows that the financial statements adhere to all the
fundamental qualitative characteristics and enhancing characteristics of financial statements. The
usage of previous years enhances comparability, verifiability, understandability, and timeliness of
the financial statements. It helps the potential investors to compare and gauge whether it would
be beneficial and advantageous for them to invest in Basic Energy Corporation. It is when the
link between the Conceptual Framework arises. According to International Accounting Standards
(IAS) 1, Paragraph 38A, “An entity shall present, as a minimum, two statements of financial
position, two statements of profit or loss and other comprehensive income, two separate
statements of profit or loss (if presented), two statements of cash flows and two statements of
changes in equity, and related notes.”, wherein it complement’s the Enhancing characteristics of
the financial statements in terms of comparability and comparative information as argued by IAS
1.
 The elements of financial position presented are complete and properly classified such as
the assets and liabilities are separated into current and non-current, as cited on IAS 1, “An entity
shall classify an asset as current when: (a) it expects to realize the asset, or intends to sell or
consume it, in its normal operating cycle; (b) it holds the asset primarily for the purpose of trading;
(c) it expects to realize the asset within twelve months after the reporting period; or (d) the asset
is cash or a cash equivalent (as defined in IAS 7) unless the asset is restricted from being
exchanged or used to settle a liability for at least twelve months after the reporting period. An entity
shall classify all other assets as non-current.” The equity is appropriately computed as well as the
income and expenses. The consolidated financial statements used historical cost basis, except for
quoted financial assets at fair values through other comprehensive income (FVOCI) while
investment properties are measured at fair value. Additionally, the consolidated financial
statements are presented in Philippine Peso as its where the corporation is established. They have
also disclosed that the amounts are rounded off to the nearest Philippine Peso unless otherwise
indicated.
Basic Energy Corporation, as discussed earlier, has consolidated financial statements
because it has a lot of subsidiaries due to its various and diverse business activities, mainly in the
energy sector. It means that the parent company and subsidiaries are considered as a single
reporting entity. The Parent company is the Basic Energy Corporation while its subsidiaries is
collectively referred to as the Group. Six subsidiaries on the Group are being controlled 100% by
BEC which means they have power over the investee, exposure, or rights, to variable returns
from its involvement with the investee, and the ability to use its power over the investee to affect
its returns as argued by the Standards. Furthermore, if one of the requirements are not met the
Parent company only control a percentage of the business wherein as of now, they control
partially two subsidiaries.
Chapter Six of Conceptual Framework is about measurement and also according to
paragraph 117 of IAS 1, “an entity shall disclose its significant accounting policies comprising:
(a) the measurement basis (or bases) used in preparing the financial statements;”, wherein Basic
Energy Corporation was able to show it completely and comprehensively on the disclosure of
accounting policies section of their consolidated financial statements. The measurement used by
the reporting entity is fair value measurement wherein financial assets are being measured at
FVOCI while investment
properties, at fair value at each of the reporting period. BEC also follows fair value of hierarchy
wherein it is divided in to three levels which are quoted, observable lowest level input and
unobservable lowest level input that is significant to fair value as level 1, 2, and 3, respectively. It
is significant to show how the reporting entity measure certain financial instruments because it
helps to properly analyze the data presented in a timely and consistent manner which BEC was
able to do so in terms of reporting their financial instruments through the disclosure they have
written on the summary of significant accounting policies.
In terms of recognition and derecognition, Basic Energy Corporation which is the
reporting entity also complied with the appropriate and accurate way of recognizing and
derecognizing items to be presented in their consolidated financial statements. According to the
company’s disclosure, items of property and equipment are derecognized upon disposal or when
no future economic benefits are expected to arise from the continued use of the asset. It
accompanies the Chapter 5 of the Conceptual Framework that suggests the proper way of or
recognizing assets and liabilities faithfully.
The consolidated financial statements of Basic Energy Corporation were able to show true
and correct presentation of financial information and disclosures such as notes and significant
accounting policies. The entire report speaks efficiency and understandability because the data
and information were not scattered. Going back to the introduction earlier, it is important to
classify and organize things to be able to produce a high-quality output and it will make the work
easier. The accountants of BEC were able to show it since the items are correctly classified as
asset, liabilities, and equity. It is also categorized into similar items and dissimilar items. For
example, in the Statement of Financial Position, Assets and Liabilities are classified into two
categories: current and non-current. Through this classification, users of financial statements can
clearly and easily see the current state of affairs of the assets and liabilities and gauge whether it is
fine to invest at BEC. The segregation of similar items and dissimilar items may look simply but it
allows a huge help already because it makes the items organized and structured in a manner that is
easily understandable and straightforward.
One can see the current assets that can be optimized to gain profit and cover the current
liabilities and see whether the company will still have enough resources to cover the expenses and
liabilities of the company for the current period. It will give them a sense of
direction and knowledge to what decision is the best for the company in terms of now. On the
other hand, non-current assets and liabilities shows how the company will allocate its long-term
remaining assets to the long-term debts they have incurred. It will show a portion of the future
status of the company based on the financial ratios appropriate to use on that certain time and to
know specific information related to one’s decision. The way BEC presents their financial
statements down to the disclosures are arranged correctly, thus, the paper itself was able to
communicate well with the users of the financial statements.
After evaluating the distinct features of the consolidated financial statements of Basic
Energy Corporation, it reveals that it adhered and complied to the Standards as mentioned in IAS
1 and other Standards which was established through the Conceptual Framework. Now, we are
going to take an in-depth evaluation of the contents of the Financial Statements in terms of Cash
and Cash Equivalent, Receivables, Equity Investment, Invest in Associate, and Fund & Other
Investments.

Cash and Cash Equivalent

Cash is the most common financial asset known by a lot of people either in or out of the
company. Whenever cash is presented the usual connotation of the people is it is what we usually
refer to as money. However, upon learning and discussing cash and cash equivalent on
ACYFAR1, the understanding of cash deepens and its more than just the money itself. There are
certain qualifications for the asset to be considered as cash, these are: a financial asset, can be
used as a medium of exchange and provide basis for accounting measurement, must be readily
available on the current period and is not restricted for use in the payment of current obligations,
and lastly, must be acceptable for deposit at face value by a bank or other financial institutions.
Knowing all these requirements, we can now check whether Basic Energy Corporation is able to
list down all the cash and cash equivalents properly on their Statement of Financial Position.
According to BEC’s SFP, the Cash and Cash Equivalents (C & CE) item is listed on the
current assets section and its just a one liner. BEC was able to follow through the Standards since
they did not separate or listed down the components of C & CE which is not required – simply
Cash and Cash Equivalents. It is because the components of C & CE are enumerated down in
the notes, in terms of BEC’s SFP it is under Note 6. On the previous period of
reporting (2020, the total C & CE of BEC amounted to Php 42,093,952 while on the latest
reporting period (2021), it increased to a total of Php 106,866,340. There are only two
components that make up the C & CE of BEC, Cash on hand and in banks and Cash equivalents
which are Php 67,059,173 and Php 39,807,167 respectively for the year 2019. According to the
notes presented, cash in banks and cash equivalents earn interest depending on the bank’s deposit
rates. The listed cash equivalents are all accurate since they have disclosed that its all short-term
investments of up to three months which is the usual length requirement to be considered a cash
equivalent. However, they should have specified the days not the months because it is strictly 90
days, thus, should be counted in days and not months.
Petty Cash Fund (PCF) is also nowhere to be found in Basic Energy Corporation’s
consolidated financial statements. PCF is a small amount of cash to make up for small
expenditures of the company. Maybe because the company is just too big that is why they do not
have any PCF anymore. However, there is still a possibility of small expenses although BEC is
already considered as large publicly listed corporation. They could allot a very tiny portion of
their Cash to be a PCF so it would be more appropriate and organized. The breakdown of the
Cash and Cash Equivalents still seems lacking, like it could be more elaborated. As a big
corporation who performs energy-related business transactions, it is interesting why they do not
have money order, bank drafts, cashier’s check, and such, its missing on the notes to SFP.
In terms of cash valuation, BEC was able to properly value all the money by adhering to
the valuation presented by accounting standards wherein cash should be valued at face value.
However, it is hard to discern whether they have value foreign currency at closing exchange rate
on the date of December 31, 2021 because it was not shown in the notes. Since BEC follows a
calendar year method, they should have valued the foreign currency on the closing exchange rate
of December 31, 2021.
Cash in hand and in banks should also be separated to be able to classify each entity
because it is important to minimize the cash on hand. Apparently, since it was combined in the
notes to SFP, it is difficult to discern whether cash on hand is still fine to stay still or should it be
deposited in the bank already because a part of management and control of cash suggest to
minimize cash on hand due to cash is the most significant resources of a company
and is also susceptible and vulnerable to corruption, stealing, and appropriation, especially that
BEC is a huge corporation that serves the people with energy. It is important to take extra
caution when dealing with a huge sum of money to avoid corruption that is very rampant to the
Philippine setting nowadays. Nonetheless, Cash and Cash Equivalent are properly represented
however the only comment is BEC should have broke down and elaborated what makes up their
cash and cash equivalents on their notes to SFP to specify the classification of each, for easier
discernment of certain issues about cash control.

Receivables
Receivables is considered to be the hardest topic on ACYFAR 1. Along with its
measurement, classification, and valuation, it was really hard. Unlike Cash, which is measured at
face value, receivables have a lot of requirements to fulfill such as present value, amortization, and
financing to be able to come up with the correct value.
Just like Cash, the Receivables are listed down in the consolidated SFP of BEC and are
compared between the previous reporting period (2020) and the latest reporting period (2021). It
is classified as either current receivables which is mostly accounts receivables and trade
receivables or non-current receivables which constitutes of long-term receivables that are
subjected to allowance for doubtful accounts due to the principle of matching principle and
conservatism. The 2020receivables amounted to Php 130,142,483 while the latest receivables as
of 2021amounted to Php 35,135,155. There was a sudden decrease of receivables from the
previous years to the latest year.
In the Note 7, which is the notes to receivables, it was explained thoroughly what
happened on the receivables. The total amount of Receivables for the year has decreased which
was scrupulously presented in the notes. The receivables were disclosed properly and completely
compared to cash. Although advances to employees increased by more than 50% on 2021, it did
not affect much the overall total of receivables because the significant one is the receivable itself.
There was an abrupt decline of receivables because short-term, noninterest-bearing receivables
from related and third parties are generally settled on a 90- day term.
On the other hand, it still follows the same computation for allowance for impairment
losses wherein last 2020 it amounted to Php 2,142,006 and apparently it is also the same on
the latest date with an equivalent of Php 2, 142,006. The write-off and reversal were shown,
disclosed, and computed in the notes to Receivables. It was complete and disclosed properly
which brings a good and well-presented SFP that abides by the Standards and policies. BEC
presented the Receivables under SFP in accordance with Paragraph 54 of IAS 1.

Equity Investment
ACYFAR 1 also tackled about IFRS 9 which is about financial instruments, mainly about
financial assets. The recognition of equity investment is depending on the initial recognition of it,
normally it is recognized through Fair Value through Profit or Loss (FVPL), it is like the default
option. However, upon initial recognition, the reporting entity has the option to recognize it at
Fair Value through Other Comprehensive Income (FVOCI) and once chosen, the decision is
irrevocable as argued by IFRS 9.
Basic Energy Corporation recognized their Financial Assets at FVOCI which means it is
going to be their final decision to recognize financial assets at each end of the reporting period.
As mentioned on the Summary of Significant Accounting Policies of BEC Financial Statements,
“Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date” which means its
already part of their irrevocable decision and upon checking, it is what they also used in the
previous accounting periods. They are consistent and was able to follow the Standards of not
going back to FVPL once FVOCI was chosen.
The notes regarding financial instruments are completely recorded, explained, and
elaborated starting from the date of recognition, initial recognition and measurement, subsequent
measurement, AFS Financial Assets, reclassification prior to adoption of PFRS 9. Financial assets
measured at FVOCI consists of Quoted debt securities and Quoted shares of stock that amounted
to Php 40,080,076 and Php 7,123,036, respectively, as mentioned in the notes, “quoted instruments
are carried at fair market value as at the end of reporting period” which coincides with their
previous disclosure notes.
Basic Energy Corporation also did not forget to show the movement of financial assets at
FVOCI by calculating the market value by January 1 of Php 44,336,517 and the unrealized gain
(loss) of Php 2,866,595, adding it would get a total of Php 47,203,112 as of December
31, 2021. It was well presented in the notes making it easier for the users to grasp what happened
on the financial assets.

Investment in Associate
Equity Investment are classified into four categories depending on the percentage of
equity ownership that the company has acquired over the entity: more than 50%, at least 20% but
no more than 50%, less than 20%, and the investment in joint venture which is discussed on IAS
28. However, BEC’s equity investment is just considered Investment in Associate since it is just
within 20% and 50%. The total Investment in Associate recorded by BEC amounted to Php
198,591,257 and was broke down in the Note 10.
The Group made Investment in Associate for the two companies based in Thailand
wherein the main the business activities are engineering, procurement, and construction services.
It uses equity method as disclosed in the notes and BEC was able to show their accumulated
equity in net earnings and OCI. The overall total for investment in Associate is Php 198,591,257.
They have also openly disclosed that the associates had no contingent liabilities or capital
commitments as of December 31, 2021 and 2020 BEC also disclosed in the notes that the
retained earnings are not ready for distribution to shareholders.

Fund & Other Investments

Apparently, contingent assets are recognized in the consolidated financial statements but
disclosed when an inflow of economic benefits are probable as mentioned in the Summary of
Significant Accounting Policies of BEC’s consolidated financial statements which also accompany
IAS 37 of IFRS. It is disclosed and explained completely on the notes which allows users to
acquire the knowledge regarding other funds and investments. Upon thorough evaluation also,
sinking fund is nowhere to be found in the whole financial statements. However, there are
deferred exploration costs recorded under the non-current assets amounting to Php 6.01 million
as of 2021. There are about 4 projects that resulted to 4 items to be recorded under the deferred
exploration costs: Geothermal SC 8-Mabini, Other Geothermal SCs, Indonesia Oil Project, and
Onshore Mindoro. The full recovery of these deferred exploration costs is dependent upon
determination of technical feasibility and
commercial quantity of an identifiable resource. It is all disclosed completely and elaborated by
BEC on their consolidated financial statements that is readily available.
Reflecting on the overall Basic Energy Corporation’s consolidated financial statements, it
truly presented a user-friendly, high-caliber, and organized financial statements that adhered and
complied with the Standards given by IASB. The accountants of BEC were able to create a
highly competitive FS while following the required procedures, principles, requirements, and
Standards. It is an honor to review and assess the financial statements of BEC since there are a
lot to learn from it.
 REFERENC
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APPENDIX