XXXXXXXXXXXXXXXXXXXXXXXXXX

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2019 and 2018

NOTE 1. Corporate Information

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX was incorporated and registered with

the Securities and Exchange Commission (SEC) on March 17, 2011 with SEC
Registration No.XXXXXXXXXXX. The company was established primarily to engage in
the business of entertainment such as live bands, stage shows and event management.

The corporation holds its office at

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX, Metro Manila

The accompanying financial statements for the years December 31, 2019 is authorized
for issue by the Board of Directors on May 29, 2020.

NOTE 2. Basis of Preparation and Statement of Compliance

Basis of Preparation

The financial statements of the company have been prepared on the historical cost
basis and are presented in Philippine peso (Php), which is the company’s functional and
presentation currency.

Statement of Compliance

The financial statements of the company have been prepared in compliance with
Philippine Financial Reporting Standards (PFRS) for Small and Medium sized Entities
(SMEs) issued by the Financial Reporting Standards Council (FRSC), and adopted by
the SEC.

NOTE 3. Summary of Significant Accounting Policies

The principal accounting policies applied in the preparation of the financial statements
are the following, which have been applied consistently to all the years presented,
unless stated otherwise.
Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand and in banks. Cash equivalents are
short-term, highly liquid investments that are readily convertible to known amounts of
cash with original maturities of three months or less from the date of placement and that
are subject to an insignificant risk of change in value. Bank overdrafts, if any, are
shown within borrowings in current liabilities on the statement of financial position.

Trade and Other Receivables

Trade receivables, which are based on normal credit terms and do not bear interest, are
recognized and carried at original invoice amounts. Where credit is extended beyond
normal credit terms, receivables are measured at amortized cost using the effective
interest method. At the end of each reporting period, the carrying amounts of trade and
other receivables are reviewed to determine whether there is any objective evidence
that the amounts are nor recoverable. If so, an impairment loss is recognized
immediately in profit and loss.
If there is objective evidence that an impairment loss is measured as the difference
between the asset’s carrying amount and the present value of estimated future cash
flows (excluding future credit losses that have not been incurred) discounted at the
financial asset’s original effective interest rate (i.e., the effective interest rate computed
at initial recognition). The carrying amount of the asset shall be reduced either directly
or through the use of an allowance account. The amount of the loss shall be recognized
in profit or loss.
Trade receivables are recognized initially at transaction price. They are subsequently
measured at amortized cost using the effective interest method, less provision for
impairment. 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 term of the receivables. The allowance for impairment loss is
the estimated amount of probable losses arising from non-collection based on past
collection experience and management’s review of the current status of the long
outstanding receivables.

Property and Equipment

Property and equipment are stated at historical cost less accumulated depreciation and
any impairment losses. Historical cost includes all expenditure, including administrative
and general overhead expenditure, directly attributable to bringing the asset to a
working condition for its intended use. Cost includes the estimated cost of dismantling
and removing the asset and restoring the site. Expenditures incurred after the property
and equipment have been put into operation such as repairs and maintenance are
normally charged to operations in the period in which the cost are incurred. There are
situations that subsequent expenditures are capitalized only when they are probable
that they will give rise to future economic benefits in excess of the current standard of
performance of the assets, or when they replace a component that are accounted for
separately. When assets are sold, retired or otherwise disposed of, their cost and
related accumulated depreciation and impairment losses are removed from the
accounts, any resulting gain or loss is reflected in profit or loss during the period in
which they are incurred.
The estimated useful life of each asset is reviewed periodically and updated if
expectations differ from various estimates due to physical wear and tear, technical or
commercial obsolescence and legal or other limits on the use of asset. It is possible,
however, that future results of operations could be materially affected by changes in the
amounts and timing of recorded expenses brought about by changes in the factors
mentioned above. A reduction in the estimated useful life of any item of property and
equipment would increase the recorded depreciation expenses and decreases the
carrying value of property and equipment.
An assets’ carrying amount is written down immediately to its recoverable amount if the
assets’ carrying amount is greater than its estimated recoverable amount.
An item of property, plant and equipment is derecognized upon disposal or when future
economic benefits are expected from its use or disposal. Any gain or loss arising from
derecognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in profit or loss in the year
the asset is derecognized.
Impairment of non-financial Assets
Assets that are subject to depreciation or amortization 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 to which the assets 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 (CGU’s). Non-financial assets other than goodwill that suffered
impairment are received for possible reversal of the impairment at each reporting date.
Trade and Other Payables
Trade and other payables are liabilities to pay for goods or services that have been
received or supplied and have been invoiced or formally agreed with the supplier. Trade
payables are not interest bearing and are stated at their nominal value.
Trade and other payables are measured initially at their nominal values and
subsequently recognized at amortized costs less settlement payments.
Accruals are liabilities to pay for goods or services that have been received or supplied
but have not been paid, invoiced or formally agreed with the supplier, including amounts
due to employees. It is necessary to estimate the amount or timing of accruals,
however, the uncertainty is generally much less than for provisions.
Dividends distributions to shareholders are recognized as financial liabilities when the
dividends are approved by the shareholders.
Employee Benefits
Employee benefits are all forms of consideration given by the company in exchanged
for service rendered by the employees. Liabilities and expenses for employee benefits
generally are recognized in the period in which the services are rendered. Liabilities for
employee benefits are recognized on the basis of a legal or constructive obligation.
Salaries, Wages and Bonuses
Wages and salaries are remuneration given to employees for service rendered in
the company and employee salary rate are based on the position and degree of
work they are required to render in the company. Bonuses consist of additional
amounts aside from their salaries given to employees and the 13 th month pay
computed based on the required and applicable computation by the appropriate
Philippine government agencies.

Short term Benefits

The company recognizes a liability net of amount already paid and an expense
for services rendered by employees during the accounting period. Short term
benefits given by the company to its employees include salaries and wages,
social security contributions, short term compensated absences, bonus and other
non-monetary benefits.

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 benefit when it is demonstrably committed to either (A) terminating
 the employment of current employees according to a detailed formal plan without
possibility of withdrawal; 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 balance sheet date are discounted to present value.

Long Term Benefits

The company has no retirement plans but employees will be entitled to the
retirement benefits as provided for by RA 7641 which is equivalent to 22.5 days
of salaries for every year of service.

Projected unit credit method is at the option of the company.

Share Capital
Capital stock is recognized when the stock is paid for or subscribed under a binding
subscription agreement and is measured at par value.
Ordinary shares are classified as equity.
Equity instrument are measured at the fair value of the cash or other resources received
or receivable.
Incremental costs directly attributable to the issue of new shares or options are shown
in equity as a deduction from proceeds. The excess of proceeds from issuance of
shares over par value of shares are credited to share premium. If payment is deferred
and the time value of the money is material, the initial measurement is on a present
value system.
Where the company purchases its own shares (treasury shares), the consideration paid
including any directly attributable incremental costs is deducted from equity until the
shares are cancelled, reissued or disposed of. Where such shares are subsequently
sold or reissued, any consideration received, net of any direct attributable incremental
transaction costs and the related income tax effects, is included in equity.
Cumulative Earnings
Cumulative earnings include all current and prior period results as disclosed in the
statement of income.
Earnings per Share
Basic earnings per share is calculated by dividing the profit for the year attributable to
the common shareholders of the company by the weighted average number of common
shares outstanding during the year, after considering the retroactive effect of stock
dividend, if any.
Revenue
Revenue is recognized to the extent that it is probable that the economic benefits will
flow to the Company and the revenue can be reliably measured. Revenue is measured
at the fair value of the consideration received, excluding discounts, rebates and sales
taxes.
Revenue on sales of goods is recognized when the goods are delivered and title has
passed.
Dividend Income, included under “Other income” in the statement of income and
retained earnings, is recognized when the right to receive payment is established.
Revenue comprises the fair value of the consideration received or receivable for the
sale of goods in the ordinary course of the activities. Revenue is shown net of
sales/value added tax, returns, rebates and discounts. It is recognized when persuasive
evidence exists, usually in the form of an executed sales agreement, that the significant
risks and rewards of ownership has been transferred to the buyer, recovery of the
consideration is probable, the associated costs and possible return of goods can be
estimated reliably, there is no continuing management involvement with the goods, and
the amount of the revenue can be measured reliably. If it is probable that discounts will
be granted and the amount can be measured reliably, then the discount is recognized
as a reduction of revenue as the sales are recognized.
Income Taxes
Current tax assets and liabilities for the current and prior periods are measured at the
amount expected to be recovered from or paid to the taxation authority.
Current and Deferred Income Taxes
The tax expense for the period comprises current and deferred tax. Tax is recognized 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 arising the tax bases of
assets and liabilities and their carrying amounts in the financial statements and on
unused tax losses or tax credits in the company.
Deferred income tax is determined using tax rates and laws that have been enacted or
substantively enacted by the reporting date.
Dividends Distribution
Dividend distribution to the company shareholders is recognized as liability in the
company’s financial statements in the period in which the dividends are approved by the
company’s shareholders.

Subsequent Events
Post year-end, adjusting events that provide additional information about the company’s
position at the reporting date are reflected in the company’s financial statements. Post
year-end, non-adjusting events are disclosed in the notes to the company’s financial
statements when material.

Input Taxes
Input tax represents the value-added tax (VAT) paid to suppliers that can be claimed as
credit against the entities’ output tax liabilities.

Note 4. Management’s Significant Accounting Judgment and Estimates

The preparation of the financial statement in accordance with PFRS for SME’s required
the use of certain accounting estimates. It also requires management to make
judgment, estimates and assumptions that affects amounts reported in the financial
statements and related notes. The estimates and assumptions used in the financial
statements are based upon management’s evaluation of relevant facts and
circumstances as of the date of the company’s financial statements. Future events may
occur which will cause the assumptions used in arriving at the estimates to change. The
effects of any change in estimated are reflected in the financial statements as they
become reasonably determinable.
Judgments
The preparation of the company’s financial statements in conformity with financial
Reporting Framework reference to the Generally Accepted Accounting Principles of the
Philippines requires management to make estimates and assumptions that affects the
amounts reported in the company’s financial statements and accompanying notes. The
estimates and assumptions used in the company’s financial statements are based upon
management’s evaluation of relevant facts and circumstances as of the date of the
company’s financial statements. Actual results could differ from such estimates
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 the circumstances.

Estimates
In the application of the company’s accounting policies, management is required to
make judgments, estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other factors that are
considered to be relevant. Actual result may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on-going basis.
Revisions to accounting estimates are recognized in the period in which the estimate is
revised if the revision affects only that period or in the period of the revision and future
periods if the revisions affects both current and future periods.
The following represents a summary of the significant estimates and judgments and
related impact and associated risks in the company’s financial statements.
Estimating Property, Plant and Equipment’s Useful lives
The useful lives of property, plant and equipment are estimated based on the period
over which the assets are expected to be available for use. The estimated useful lives of
property, plant and equipment are reviewed periodically and are updated if expectations
differ from previous estimates due to physical wear and tear, technical or commercial
obsolescence and legal or other limits on the use of the company assets. In addition,
the estimation of the useful lives of property, plant and equipment is based on
company’s 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 affected by changes in estimates brought about 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, plant and equipment would increase the recognized
operating expenses and decrease non-current assets. The company uses the straight
line method of depreciation.
Asset Impairment
The company is required to perform an impairment review when certain impairment
indicators are present. Purchase accounting requires extensive use of accounting
estimates and judgment to allocate the purchase price to the fair market values of the
assets and liabilities purchased.
Determining the fair value o property, plant and equipment, investments and intangible
assets, which require the determination of future cash flows expected to be generated
from the continued use and ultimate disposition of such assets, requires the company to
make estimates and assumptions that can materially affect the financial statements.
Future events could cause the company to conclude that property, plant and equipment,
investments and intangible assets associated with an acquired business is impaired.
Any resulting impairment loss could have a material adverse impact on the financial
condition and results of operations.
The preparation of the estimated future cash flows involves significant judgment and
estimations. While the company believes that its assumptions are appropriate and
reasonable, significant changes in the assumptions may materially affect the
assessment of recoverable values and may lead to future additional impairment
charges.
The company has adopted the fair value approach in determining the carrying value of
its investment properties. While the company has opted to rely on independent
appraisers to determine the fair value of its investment properties such fair value was
determined based on recent prices of similar properties, with adjustments to reflect any
changes in economic conditions since the date of the transactions that occurred at
those prices. The amounts and timing of recorded changes in fair value for any period
would differ if the company made different judgments and estimates or utilized different
basis for determining fair value.
Deferred Tax Assets
The company reviews the carrying amount at each balance sheet date and reduces
deferred tax assets to the extent that it is no longer probable that sufficient taxable profit
will be available to allow all or part of the deferred tax assets to be utilized. However,
there is no assurance that the company will generate sufficient taxable profit to allow all
or part of its deferred tax assets to be utilized.

Financial Assets and Liabilities

The company carries some of its financial assets and liabilities at fair value, which
requires extensive use of accounting estimates and judgment. In addition, certain
liabilities acquired through debt exchange and restructuring are required to be carried at
fair value at the time of the debt exchange and restructuring. While significant
components of fair value measurement were determined using verifiable objective
evidence, i.e., foreign exchange rates, interest rates, volatility rates, the amount of
changes in fair value would differ if the company utilized different valuation
methodology. Any changes in fair value of these financial assets and liabilities would
affect directly the profit or loss and equity.
Revenue Recognition
The company’s revenue recognition policies require the use of estimates and
assumptions that may affect the reported amounts of revenues and receivables.
Differences between the amounts initially recognized and actual settlements are taken
 up in the accounts upon reconciliation. However, there is no assurance that such use of
estimates may not result to material adjustments in future periods.

Note 5– CASH AND CASH EQUIVALENTS

This account consists of:

2019 2018
Cash on hand 30,000.00 13,000.00
Cash in Bank 5,900,924.19 3,700,504.71
Total 5,930,924.19 3,713,504.71

Cash in bank earn interest at the respective bank deposit rates.

Note 6 – DEFERRED INCOME TAX

2019 2018

Details of this account:

Gross Revenue 14,051,426.47 14,120,378.21
Costs of Services 9,691,571.43 10,996,368.07
Gross profit 4,359,855.04 3,124,010.14
40% Optional Standards Deduction 1,743,942.02 1,249,604.06
Net Taxable Income 2,615,913.02 1,874,406.08
Tax Due 687,092.17 452,321.83

Payments and credits 4,232,289.82 2,750,126.34

Prior year’s Tax credit 1,850,308.51 1,934,485.31
Total 6,082,548.33 4,684,611.65
Excess Tax Credit Carry Over 5,395,506.16 4,232,289.82

Note 7 – PROPERTY, PLANT & EQUIPMENT, NET

2019 2018

This account consists of:

Transport Equipment 8,000,000.00 8,000,000.00

Sound system & equipment 2,550,235.78 2,336,907.18
 Total 10,550,235.78 10,336,907.18
Accumulated depreciation 2,963,871.35 2,483,599.95
Net realizable value 7,586,364.43 7,853,309.20
Note 8 – TRADE AND OTHER PAYABLES

This account represent the current portion of a mortgage loan attached to the
acquisition of a motor vehicle with a term of three years and monthly
amortization
of P18,222.00. Current portion amounts to P218, 664.00.

Note 9 - LOANS PAYABLE

This represents long term portion of a mortgage loan amounting to P279,116.

Note 10 – SHARE CAPITAL

The authorized share capital is Php 1,000,000 divide into 1,000 shares at PHP
100
par value. All shares are fully paid.

Note 11 – CUMULATIVE (RETAINED) EARNINGS

Cumulative earnings account of the company represents accumulated net income

Or net loss, including period adjustments less the dividends distributions,
Fundamental errors and other capital adjustments.

Retained earnings, beginning 14,799,101.76

Net income 2,615,913.02
Total 17,415,014.78
Dividends 14,000.000.00
Retained earnings – December 31 3,415,014.78

Note 12– REVENUE

This account consists of: income receipts from various service engagements
totaling 14,051,426.47 and 14,120,378.21 for 2019 and 2018 respectively.

Note 13– COST OF SERVICES

2019 2018

This account consists of:

 Sub Contract Services 803,571.43 1,047,368.07
Talent Fees 6,568,000.00 7,493,000.00
Direct Salaries and Labor 2,456,000.00 2,456,000.00
Total 9,691,571.43 10,996,368.07

Note 14 – OPERATING EXPENSES

This account consists of:

2019 2018

Communication, Light & Water 132,021.00 126,520.00

Depreciation expense 480,271.40 466,671.40
Fuel and oil 120,352.00 105,621.00
Insurance 99,480.00 49,740.00
Office supplies 126,320.00 94,191.38
Repair supplies and maintenance 50,820.00 62,012.00
Representation 40,236.00 75,624.00
SSS, Philhealth & HDMF 82,940.00 63,251.00
Taxes and licenses 60,231.00 37,798.28
Toll fees 39,456.00 65,821.00
Transportation and travel 511,814.62 102,354.00
Total 1,743,942.02 1,249,604.06

Note 15 – SUPPLEMENTARY TAX INFORMATION AS REQUIRED UNDER RR N0.

15-2010.

This supplementary information on taxes and licenses is presented for purposes of

filing with the Bureau of Internal Revenue and is not required by the Philippine
Financial Reporting Standards
.

However, in compliance with RR No. 15-2010, we are stating the following:

A. Taxes, Permits and Licenses paid for 2019:

Mayor’s Permit 35,292.05

Annual BIR Registration 500.00
Locational Clearance 2,000.00
Community Tax 589.13
Fire Inspection Fees 540.00
Sanitary Permit 60.00
CENRO 1,000.00
LTO Registration 20,249.82
B. Tax assessment and cases

There are no pending tax assessment and RATE case as of December 31, 2019.