Abad, Ruwilyn Bacalso, Margilyn Molig, Sallyshene Probable Recognition Criteria for Deferred Tax Asset A.

Recognition of the carry forward tax losses as deferred tax asset

January 21, 2012

The company can recognised the carry forward tax losses as a deferred tax asset if the company is subject to normal income tax. The company should be subject to normal corporate income tax and not to the minimum corporate income tax. If the loss incurred in a taxable year during which the company was except from income tax, it shall not be allowed as a deduction. If the company claims the 40% Optimized Standard Deduction, it shall not simultaneously claim deduction of the carry forward tax losses. The company can recognised the carry forward tax losses if the company presented in the Notes to the Financial Statements the Unused carry forward tax losses showing in detail the taxable year in which the operating loss was sustained or incurred, and any amount thereof claimed as carry forward tax losses deduction within three consecutive years immediately following the year of such loss. B. Recognition of unused tax losses as at December 31, 2010 The unused tax losses that be recognized as of December 31, 2010 are the losses incurred from year 2007 to 2009 because according to the Philippine tax code, carry forward tax losses of the business shall be carried over as a special deduction from gross income for the next three consecutive taxable years immediately following the year of such loss. Accordingly, the carry forward tax losses as at December 31, 2010 will be 433,500 (2007- 30,000; 2008- 163,500; 2009- 188,500; 2010- 91,500) C. Managements projections of companys taxable income and tax payable for the following six years: Dec2011 CU Taxable income/(loss) Tax payable/ (loss) Use of previous losses Year of loss Losses (200,000) (60,000) Dec2012 CU 50,000 15,00 0 Dec2013 CU 100,000 30,00 0 Dec2014 CU 500,000 150,0 00 Dec2015 CU 900,000 270,0 00 Dec2016 CU 1,000,00 0 300,0 00

30,000

15,000 2009 163,500

30,000 2010 133,500

60,000 2011 61,500

expired in current year