XXX

NOTES TO FINANCIAL STATEMENTS

As of the year ended December 31, 2020

NOTE 1 TAXPAYER INFORMATION

The XXX. is registered with SEC and engage in technical and vocational education based on the
permit to operate duly issued by TESDA (Technical Education Skills Development Authority),
and business address is located in YYY City.

The accompanying financial statements were approved and authorized for issuance by the
taxpayer on April 15, 2021

NOTE 2 Summary of Significant Accounting Policies

The principal accounting policies applied in the preparation of these financial statements are set
out below.

Statement of Compliance
The accompanying financial statements have been prepared in accordance with Philippine
Financial reporting Standards for Small and Medium-sized Entities (PFRS for SMEs)

Basis of Preparation
The accompanying financial statements have been prepared under historical cost conventions.
Historical cost is generally based on the fair value of the consideration given in exchange for
assets. The financial statements are presented in Philippine Peso, which is the company’s
functional and presentation currency and all values are recorded to the nearest peso except when
otherwise indicated. The preparation of financial statements in conformity with PFRS for SMEs
requires the use of certain critical accounting estimates. It also requires management to exercise
its judgment in the process of applying the accounting policies. The areas involving a higher
degree of judgment or complexity, or areas where assumptions and estimates are significant to the
financial statements are disclosed in Note 3.

Changes in Accounting Policies Brought About by the Changes in IFRS for SMEs
The International Accounting Standards Board (IASB) published the amendments to International
Financial Reporting Standards for Small and Medium-sized Entities (IFRS for SMEs). The
amendments are the result of the first comprehensive review of the Standard, which was originally
issued in 2009. The changes affect 21 of the 35 sections of the standard (not counting
consequential amendments) and glossary; however, most of the changes are rather minor. The
amendments are effective for annual periods beginning on or after 1 January 2017 with earlier
application permitted. The Philippine has adopted the IFRS for SMEs Standards as the Philippine
Financial Reporting Standard for SMEs (PFRS for SMEs) without any modifications.

The Company adopted all applicable accounting policies that have been updated. There was no
material financial impact in adopting the revised policies. No other changes to the accounting
policies were identified and the comparative information has accordingly remained unchanged
since the prior reporting period.

The vast majority of the changes concern clarifications to the current text and, hence, will not
constitute changes to the way the Company account for certain transactions and events. A tabular
overview of the sections affected by the amendments is reproduced below (the table does not list
consequential amendments). Three amendments are however of larger impact in the overall
adoption of IFRS for SMEs:

 The standard now allows an option to use the revaluation model for property, plant and
equipment as not allowing this option has been identified as the single biggest
impediment to adoption of the IFRS for SMEs in some jurisdiction in which SMEs
 commonly revalue their property, plant and equipment and/or are required by law to
revalue property, plant and equipment. The changes did not concern the Company since it
recognized its property and equipment at cost.

 The main recognition and measurement requirements for deferred income tax have been
aligned with current requirement in IAS 12 income taxes. The changes did not concern
the Company since it as no differed taxes account.

 The main recognition and measurement requirements for exploration and evaluation
assets have been aligned with IFRS 6 Exploration for and Evaluation of Minerals
Resources to ensure that the IFRS for SMEs provides the same relief as full IFRS for
these activities. The changes did not concern the Company since it is not engaged in
exploration business.

Functional and Presentation Currency

The company’s financial statements are presented in Philippine Peso, the Association’s functional
currency. All information presented in Philippine peso has been rounded off to the nearest peso,
unless otherwise stated.

Cash and Cash Equivalents

Cash comprises cash on hand, deposits held at call with banks and time deposits with banks that
can be pre-terminated anytime and are stated at cost. Cash equivalents comprises short-term,
highly liquid investments that are readily convertible to known amounts of cash with original
maturities of three months or less and are subject to an insignificant risk of changes in value and
are free of any encumbrances. The Company has no cash equivalents at the end of the year.

Trade Receivables
Trade receivables are non-derivative financial assets with fixed or determinable payments that are
not quoted in an active market. They arise when the Company provides money, goods, or services
directly to a debtor with no intention of trading the receivables. Such receivables are recognized
initially at the transaction price and subsequently measured at amortized cost using the effective
interest method, less any impairment losses. A provision for impairment of trade receivables is
established when there is objective evidence that the company will not be able to collect all
amounts due according to the original terms of the receivables.

Merchandise Inventory
Inventories comprises trading goods and consumable and are stated at the lower of cost
(determined on the first-in-first-out basis and net realizable value. Cost comprises the invoiced
value of the inventories and incidental expenses. Net realizable value represents the estimated
selling price less estimated costs necessary to make the sale.

Property and Equipment

Property and equipment is stated at historical cost less accumulated depreciation and any
accumulated impairment losses. Historical cost includes expenditure that is directly attributable to
bringing the asset to the location and condition necessary for it to be capable of operating in the
manner intended by management. The Company adds to the carrying amount of an item of
property and equipment the cost of replacing parts of such an item when that cost is incurred if the
replacement part is expected to provide incremental future benefits to the Company. The carrying
amount of the replaced part is derecognized. All other repairs and maintenance are charged to
profit or loss during the period in which they are incurred.

The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted
prospectively if appropriate, if there is an indication of a significant change since the last reporting
date. An asset’s carrying amount is written down immediately to its recoverable amount if the
asset’s carrying amount is greater than is estimated recoverable amount. Gains and losses on
disposals are determined by comparing the proceeds with the carrying amount and are recognized
within ‘other gains (losses) - net’ in the statement of profit or loss.

Impairment of Non-Financial Assets Other than Merchandise 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 is tested for impairment.
An impairment loss is recognized for the amount by which the assets carrying amount exceeds its
recoverable amount. The recoverable amount is higher of an assets fair value less cost 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. Non-financial assets other than goodwill, if
any, that suffered an impairment are reviewed for possible reversal of the impairment at each
reporting date.

Trade and Other Payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary
course of business from suppliers and do not bear interest. Accounts payable are classified as
current liabilities if payment is due within one year or less (or in the normal operating cycle of the
business if longer). If not, they are presented as non-current liabilities. Trade payables are
recognized initially at fair value and subsequently measured at amortized cost using the effective
interest method.

Borrowing
Borrowings are recognized initially at the transaction price (that is, the present value of cash
payable t the bank, including transaction costs). Borrowings are subsequently stated at amortized
cost. Interest expense is recognized on the basis of the effective interest method and is included in
finance cost. Borrowings are classified as current liabilities unless the company has an
unconditional right to defer settlement of the liability for at least 12 months after the reporting
date.

Revenue and Cost Recognition

Revenue is recognized to the extent that it is probable that economic benefits will flow to the
company and the revenue can be measured reliably. The following specific recognition criteria
must be met before revenue and costs are recognized:

1) Sale of Goods- Revenue is recognized when significant risk and rewards of ownership of
the general merchandise have been passed to the customers. Revenue relating to sale of
general merchandise is recognized net of discounts and returns. Revenue is measured by
reference to the fair value of consideration received or receivable by the company for
goods supplied and services provided, excluding value added tax (VAT) and trade
discounts.

2) Sale of Services- Revenue associated with the rendering of service shall be recognized by
reference to the stage of completion at the end of the reporting period.

3) Other income – income from other sources are recognize at the accrual method

4) Cost and expenses are recognized in the statement of profit or loss: (a) when a decreases
in the future economic benefits related to a decrease in an asset or an increase of liability
has arisen that can be measured reliably; (b) on the basis of a direct association between
the costs incurred and the earning of specific items of income; (c) on the basis of
systematic and rational allocation procedures when economic benefits are expected to
arise over several accounting periods and the association with income can only be broadly
or indirectly determined; or (d) immediately when an expenditure procedure no future
economic benefits or when, and to the extent that, future economic benefits do not
qualify, or cease to qualify, for recognition in the statement of financial position as an
asset.

Operating expenses are costs attributable to the general and administrative activities of the
Company.

Employee Benefits
The Company has no post-employment benefits, which are employee benefits (other than
termination benefits) that are payable after the completion of employment. The Company
employees are provided with the following benefits:

 Retirement Benefit Payable at Retirement Date

 Retirement benefits are provided to Company’s employees computed largely based
on the provision of R.A 7641, an act Amending Article 287 of Presidential Decree
No. 442, as Amended. Otherwise known as the Labor Code of the Philippines, by
providing for Retirement pay to qualified private sector employees in the absence of
any retirement plan in the establishment, which is based in the employees’
compensation and number of years in service. This simple calculation is a measure of
the Company’s obligation called the accumulated benefit obligation method (as
opposed to the projected benefit obligation method). In accordance with PFRS for
SMEs, the company is permitted to make simplifications in measuring its defined
benefit obligation since it is not able, without undue cost or effort, to use the projected
unit credit method to measure its obligation and cost under defined benefits plans.
Under this simplified method, the company ignores estimated future salary increases,
ignores future service of current employees and ignores possible in-service mortality
of current employees between reporting date and date the employees are expected to
retire. The Company feels that the amount derived by this simplified computation
represents the approximation of its liability to all its regular employees. The
Company’s retirement benefit program is defined benefit plan, which is a retirement
plan that defines an amount of retirement benefit that an employee will receive on
retirement usually dependent on one or more factors such as age, years of service and
salary (and largely compliant with the provision of R.A 7641). The legal obligation
for the benefits of the retirement plan remains with the company. The Company’s
defined benefit retirement plan covers all regular personnel. The Company has not yet
accrued any retirement liability at the end of the year as most of its workforce is
considered too young.

 Termination Benefits
Termination benefits are payable when employment is terminated by the Company
before the normal retirement date, or whenever an employee accepts voluntary
redundancy in exchange for these benefits. The Company recognizes Termination
benefits when it is demonstrably committed to either: (a) terminating the employment
of current employees according to a detailed formal plan without possibility of
withdrawals; or (b) providing termination benefits as a result of an offer made to
encourage voluntary redundancy. Benefits falling due more than 12 months after the
reporting date are discounted to present value.

 Compensated Absences
Compensated absences are recognized for the number of paid leave days (including
holiday entitlement) remaining at the reporting date. The amounts recognized are
included in trade and other payables account in the statement of financial condition at
the undiscounted amount that expects to pay as a result of the unused entitlement.

Related Parties
Parties are considered to be related if one party has the ability, directly or indirectly, to control the
other party or exercise significant influence over the other party in making financial and operating
decisions. This is a transaction between the company and the principal owner(s) itself. Parties are
also considered to be related if they are subject to common control or common significant
influence. Related parties may be individuals or corporate entities.
Current and Deferred Income Tax
Current tax assets or liabilities comprises those claims from, or obligation to the bureau of Internal
Revenue (BIR) relating to the current or prior reporting period. These items are calculated
according to the tax rates applicable to the company. All changes to the current assets or liabilities
are recognized as component of tax expense in the statement of profit or loss.

The tax expense for the period comprises current and deferred taxes. Tax is recognizes in profit or
loss, except that a change attributable to an item of income or expense recognized as other
comprehensive income is also recognized directly in other comprehensive income. Deferred
income tax is recognized on temporary differences (other than temporary differences associated
with unremitted earnings from foreign subsidiaries and associates to the extent that the investment
is essentially permanent in duration, or temporary differences associated with the initial
recognition of goodwill) arising between the tax base of assets and liabilities and their carrying
amounts in the consolidated financial statements and on unused tax losses or tax credits in the
group. Deferred income tax is determined using tax rates and laws that have been enacted or
substantively enacted by the reporting date.

The carrying amount of deferred tax assets are reviewed at each reporting date and a valuation
allowance is set up against deferred tax assets so that the net carrying amount equals the highest
amount that is more likely than not to be recovered based on current or future taxable profit.

NOTE 3
Key sources of Estimation Uncertainty and judgments

The entity makes estimates and assumptions concerning the future. The resulting accounting
estimates will, by definition, seldom equal the related actual results. The financial statements
prepared in accordance with PFRS for SMEs require management to make judgments and
estimates that affect amounts reported in the financial statements and related notes. 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 circumstances.
Some of the estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are
disclosed below.

Allowance for Impairment Losses

Allowance for impairment losses is maintained at a level considered adequate to provide for
potentially uncollectible receivables. The level of allowance is based on the aging of the
receivable past collection experience and other factors that may affect collectability. The
allowance is established by charges to income in the form of provision for impairment losses. In
addition, accounts specifically identified to be potential uncollectible are also provided with
adequate allowance.

Estimation of Useful Life of Property and Equipment

The Company estimates the useful lives of the property and equipment based on the period over
which the assets are expected to be available for use. The estimated useful lives of the property
and equipment are reviewed periodically and re updated if expectations differ from previous
estimate due to physical wear and tear, technical or commercial obsolescence and legal or other
limits on the use of the assets. In addition, estimation of the useful lives of property and
equipment is based collective assessment of industry practice, internal technical evaluation and
experience with similar assets. It is possible, however, that future results of operations could be
materially by changes in estimates brought by changes in factors mentioned above. The amounts
and timing of recorded expenses for any period would be affected by changes in these factors and
circumstances. A reduction in the estimated useful lives of property and equipment would
increase recorded operating expenses and decrease non-current assets.