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    AFS (2018)

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    Afs (2018)

    Uploaded by

    Marc Darryl Guevarra

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    © All Rights Reserved
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    COVER SHEET for AUDITED FINANCIAL STATEMENTS sec Resiaen moe ji [9[9[olol2[o[7|4 COMPANY NAME fuppite[cle 1[NJc cal stot sfilafi fale ulalilefe|i |i sJe[r[v[i [ ale] DI I | PRINCIPAL OFFICE (Ns / Sos (ulalile] [2[4[o alaje| [alnla Flilnfalnle +] [rife] [rlolrte (tla[elulife (eaele| I | Deparment equine repon Secondary Lcese Type. Anpicable COMPANY INFORMATION Corwenys Era Aes Genoa eerone Nambe Tek ar No of Sete an Wesing Month/Day) cal oor Wenth/D) 5 [ December 31 ‘CONTACT PERSON INFORMATION “he desirate cain gerson MUST ban fice fhe Crprtin Name of Conte Peron Enal Adress Teleghone Nunes NobieNurber Felipe Z. Roque, Jr. fer@Uniteller.com 636 - 4611 [ ‘CONTACT PERSON’s ADDRESS IHOTE 11 Tr cave odes, resignation 1 cessaton oo oie fcr dosated scarier person, sch nedent sa be reported Be Commission wii {hit (20) elndar days te ocurance thre wih nirmaton and complete covtct dea of he new cone erson designates. 2A Boe mut be propery and compete lp. Fale fo do so shal cause te delay updeting te carporatons records win he Commision andor roeceptofHetce of Desences. Furr, nonveceo of Noe of Deiene sala excuse th corporation fom iby fr scence. ‘UE ‘syCip Gores Velayo & Co, Tat (632) 891 0307 BOAPRC Reg, No. 0001 8700 Ayala Avene Faw (632) 819.0872 October 4, 2018, valid untl August 26, 202 $226 Makati eycorvpn ‘SEC Accreditation No. 012-FR-S (Group A), Building a better Ehiippnes ‘November 8. 2018, valid unti November 8, 2021 ‘working wore a INDEPENDENT AUDITOR'S REPORT ‘The Board of Directors and Stockholders UniTeller Filipino, Inc. Unit 2403, 24/P, Trade and Financial Tower 7 Avenue, BGC, The Fort ‘Taguig City Opinion We have audited the financial statements of UniTeller Filipino, Inc. (the Company) (a wholly-owned subsidiary of UniTeller Financial Services, Inc.), which comprise the statements of financial position as at December 31, 2018 and 2017, and the statements of comprehensive income, statements of changes in ‘equity and statements of cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2018 and 2017, and its financial performance and its cash flows for the years then ended in accordance with Philippine Financial Reporting Standards (PFRSs). Basis of Opinion ‘We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics for Professional Accountants in the Philippines (Code of Ethics) together with the cthical requirements that are relevant to our audit of the financial statements in the Philippines, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics, We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with PERSs, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company's ability to ‘continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concer basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. “Those charged with governance are responsible for overseeing the Company's financial reporting process, ‘OULU Building a better ‘working world -2- Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole ere free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion, Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with PSA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with PSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: ‘* Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion, The risk of not detecting a material ‘misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control ‘© Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. «Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Gur conclusions aré based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern, Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions aiid events ina manner that achieves fair presentation. © We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the aut and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. TTT MATRON NT UNITELLER FILIPINO, INC. (A Wholly-owned Subsidiary of UniTeller Financial Services, Ine.) STATEMENTS OF COMPREHENSIVE INCOME Years Ended December 31 Notes 2018 2017 Revenues Service fee 9 PH0,65,385 ——_—P39,461,988 Commission income 9 3,398,969 6,803,753 Country fee 9 = 3,904,360 44,054,524 30,170,101 ‘Operating expenses Salaries, wages and employee benefits 9 12,545,266 10,558,464 Advertising 5,798,568 3,214,603 Professional fees and outside services 5,778,070 5,163,880 Commission expense 3,398,969 6,803,753 Rent M 2,591,101 1,955,395 Insurance 1,404,423 833,108 Transportation and travel 4,178,877 1,452,133 Depreciation and amortization 1 1,131,520 1,117,044 Communication "729,032 755,286 Retirement expense 2 692,099 681,522 Taxes and licenses 397,404 284.914 Utilities 589,379 567,160 Bank charges 462,626 361,173 Repairs and maintenance 459,645 499,277 Dues and subscription 456,390 350,398 Office supplies 249,910 306,640, 38,062,979 34,904,750 Income from operations 5,991,345 15,265,351 Other expenses (income), net 14 (1,513,401) 5,781,187, Income before income tax 7,504,746 9,484,164 Income tax expense 13 3,270,799 5,620,346 Net income 4233947 3,863,818 Other comprehensive income Items that will not be reclassified subsequently to profit or loss Remeasurement gain on defined benefit liability, net of tax 12 348,782 307,615 ‘Total comprehensive income 4,582,729 4,171,433 ‘See Notes to the Financial Statements UNITELLER FILIPINO, INC. (A Wholly-owned Subsidiary of UniTeller Financial Services, In STATEMENTS OF FINANCIAL POSITION December 31 Notes 2018) 2017) ASSETS Current assets Cash 4,16 101,037,825 72,937,836 Receivables 5,16 29,288,723, 32,880,241 Due from parent company 9, 16 62,169,829 57,834,801 Prepaid expenses and other current assets 6 3,655,936 2,280,816 ‘Total Current Assets 196,119,313 165,933,694 Noncurrent assets Property and equipment, net 1 2,497,514 3,489,750 Deferred tax assets, net 3 3,506,752 3,869,736 Other noncurrent assets 611,16 6,078,152, 2,846,721, Total Noncurrent assets 12,082,418 10,206,207 Total Assets 208,201,731 176,139,901 LIABILITIES AND EQUITY Current liabilities ‘Accounts payable and accrued expenses 8,16 29,427,518 726,141,780 Notes payable - current 16 - 432,421 Due to parent company 9,16 138,797,900 123,482,923 Income tax payable = 1,151,032, Total Current Liabilities 168.225,418 51,208,156 Noncurrent liabilities Retirement liability 2 4,874,265 4,380,426 Due to parent compan) 9,10 10,268,000 = Total Noneurrent Liabilities 14,842,265. 4380426 Total Liabi 183,067,683, 155,588,582 Equity Capital stock 10 7,800,000 7,800,000, Reserve for remeasurement of retirement benefit obligation 2 (478,690) (827,472) Retained earnings: 17,812,738 13,578,791 ‘Total equity 25,134,048 20,551,319 Total liabilities and equity, 208,201,731 176,139,901 Tee Notes to the Financial Statements, WOON UNITELLER FILIPINO, INC. (A Wholly-owned Subsidiary of UniTeller STATEMENTS OF CASH FLOWS yancial Services, Inc.) Years Ended December 31 Notes 2018 2007 CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax 7,504,746, 9,484,164 Adjustments for: Provision for losses 4 3.273,095 6,937,347 Depreciation and amortization 7 1)131,520 1117044 Unrealized foreign exchange loss (gain) 1s (711,688) 249,385 Retirement expense 2 692,099 681,522 Interest income 4 (137,848) (103,756) Interest expense 4 16,496 65,819, Operating income before working capital changes 11,768,423 TBA3I,S25 Changes in operating asets and liabilities: Decrease (increase) in Receivables 3,624,518 (23,159,512) ‘Due from parent company (4343,048) 34,529,329 Prepaid expenses and other current assets 24,461) (2.498.610) Increase (decrease) in ‘Accounts payable and accrued expenses 12,643 (4,553,957) Due to parent company 26,460,018 11,719,677 Nei cash flows generated from operations 37,207,093 33,868,452 Interest received 137,848 103,756 Interest paid (16,496) (65819) Income tax paid (6,555,046) (10,481,292) ‘et cash provided by operating activities 30,773,309) 23,425,097 ‘CASH FLOWS FROM INVESTING ACTIVITIES Decrease (increase) in other non-current assets (1,938,369) $67,540 “Acquisitions of property and equipment 7 (571,708) (2,893,751) Proceeds from sale of property and equipment = 486.270 Net cash used in investing activities 2.307.074) (839,940) NET INCREASE (DECREASE) IN CASH 28,266,325 21,585,156 CASH AT BEGINNING OF THE YEAR 72,937,836 51,401,361, Effect of exchange rate changes on cash (166,336) (48,681) 101,037,825, 72,937,836 CASH AT THE END OF THE YEAR ‘See Notes fo the Financial Statements OULD 01 UNITELLER FILIPINO, INC. (A Wholly-owned Subsidiary of UniTeller Financial Services, Inc.) NOTES TO THE FINANCIAL STATEMENTS 1. Corporate Information UniTeller Filipino, Inc. (the “Company”) was registered with the Philippine Securities and Exchange Commission (SEC) on February 15, 1999, with a corporate term of 50 years, to engage in the business of remitting, transferring, or otherwise delivering any kind of foreign currency from abroad into the Philippines either by telegraphic, wire, electronic transfer or any other manner. The Company was also registered with the Bangko Sentral ng Pilipinas (BSP) on January 20, 2005, as a remittance agent, subject to the applicable provisions of law and BSP rules and regulations, as well as, the provisions of the Anti-Money Laundering Act of 2001 (R.A. No. 9160, as amended by R.A. No. 9194) and its implementing rules and regulations. Effective January 18, 2007, UniTeller Financial Services, Inc. (UFSD, the parent company of UniTeller Filipino, Inc., has joined the Banorte group of companies, through its acquisition by Banorte USA Corporation, Banorte USA Corporation, the arm of Grupo Financiero Banorte, was established to develop a greater share of the cross-border financial services market, including transfers to Latin America and the Philippines. ‘The ultimate parent of the Company is Grupo Financiero Banorte. ‘The registered office address of the Company is located at Unit 2403, 24/F, Trade and Finar Tower, 7 Avenue, BGC, The Fort, Taguig City ‘The accompanying financial statements were approved and authorized for issuance by the Board of Directors (BOD) on March 1, 2019. ‘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. 2.1 Basis of preparation The financial statements of the Company have been prepared in accordance with Philippine Financial Reporting Standards (PFRS). The term PFRS in general includes all applicable PFRS, Philippine ‘Accounting Standards (PAS), and interpretations of the Philippine Interpretations Committee (PIC), Standing Interpretations Committee (SIC) and International Financial Reporting Interpretations ‘Committee (IFRIC) which have been approved by the Financial Reporting Standards Couneil (FRSC) and adopted by the SEC. ‘The financial statements have been prepared on the historical cost basis of accounting. The financial statements are presented in Philippine peso (P), which is the Company's functional currency. All financial information presented in Philippine peso has been rounded off to the nearest peso, unless otherwise indicated. ‘The preparation of financial statements in conformity with PFRS requires the use of certain critical accounting estimates, It also requires management to exercise its judgment in the process of applying the Company’s 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 2.2 Changes in accounting policies and disclosure ‘The accounting policies adopted are consistent with those of the previous financial year except for the following new, amendments and improvements to PFRS, PAS and Philippine Interpretation which became effective as of January 1, 2018. These changes in the accounting policies did not have any significant impact on the financial position or performance of the Company: Amendments to PERS 2, Share-based Payment, Classification and Measurement of Share-based Payment Transactions The amendments to PFRS 2 address three main areas: the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; the classification of a share-based ‘payment transaction with net settlement features for withholding tax obligations; and the accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash-settled to equity-settled. Entities are required to apply the amendments to: (1) share-based payment transactions that are unvested or vested but unexercised as of January 1, 2018, (2) share-based payment transactions granted on or after January 1, 2018 and to (3) modifications of share-based payments that occurred on or after January 1, 2018. Retrospective application is permitted if elected for all three amendments and if itis possible to do so without hindsight. PERS 9, Financial Instruments Effective January 1, 2018, PFRS 9 replaces PAS 39, Financial Instruments: Recognition and ‘Measurement. PFRS 9 also supersedes all earlier versions of the standard, thereby bringing together all three aspects of the accounting for financial instruments: classification and measurement, impairment, and hedge accounting. PFRS 9 is required to be applied on a retrospective basis, with certain exceptions. As permitted, the Company did not restate prior period comparative financial statements when the Company adopted the requirements of the new standard. Restatements and differences in the carrying amounts of financial instruments arising from the adoption of PFRS 9 have been recognized in the 2018 opening balances of surplus and other comprehensive income (OCI) as if the Company had always applied PFRS 9. ‘The Company adopted the classification and measurement, impairment and hedge accounting requirements of the standard as follows: Classification and Measurement Financial assets are measured at FVTPL unless these are measured at FVOCI or at amortized cost. ‘The classification and measurement provisions of PFRS 9 require that all debt financial assets that do not meet the “solely payment of principal and interest” (SPI) test, including those that contain embedded derivatives, be classified at initial recognition as financial assets at FVTPL. The intent of the SPPI testis to ensure that debt instruments that contain non-basic lending features, such as conversion options and equity linked pay-outs, are measured as financial assets at FVTPL. AOMORI NH A Subsequent measurement of instruments classified as financial assets at FVTPL under PFRS 9 operates in a similar manner to financial instruments held for trading under PAS 39. For debt financial assets that meet the SPPI test, classification at initial recognition will be determined based on the business model under which these instruments are managed. Debt instruments that are managed on a “hold to collect and for sale” basis will be classified as financial assets at FVOCI for debt. Debt instruments that are managed on a “hold to collect” basis will be classified as financial assets at amortized cost. Subsequent measurement of instruments classified as financial assets at FVOCI and at amortized cost classifications under PFRS 9 operate in a similar manner to AFS financial assets for debt financial assets and loans and receivables, respectively, under existing PAS 39, except for the impairment provisions which are discussed below. For those debt financial assets that would otherwise be classified as financial assets at FVOCI or at amortized cost, an irrevocable designation can be made at initial recognition to instead measure the debt instrument as financial asset at FVTPL under the fair value option (FVO) if doing so eliminates or significantly reduces an accounting mismatch. All equity financial assets are required to be classified at initial recognition as at FVTPL unless an irrevocable designation is made to classify the instrament as financial asset at FVOCI for equities. Unlike AFS for equity securities under PAS 39, the FVOCI for equities category results in all realized and unrealized gains and losses being recognized in OCI with no recycling to profit and loss. Only dividends will continue to be recognized in profit and loss. The classification and measurement requirements of PFRS 9 did not have a significant impact on the Company. PFRS 9 has not resulted in changes in the carrying amount of the Company's finan instruments due to changes in measurement categories. The Company continued measuring at fair value all financial assets previously held at fair value under PAS 39. All financial assets that were Classified as loans and receivables and measured at amortized cost continue to be The classification and measurement of financial liabilities remain essentially unchanged from the current PAS 39 requirements, except that changes in fair value of FVO liabilities attributable to changes in own credit risk are to be presented in OCI, rather than profit and loss. Impairment ‘The new impairment guidance sets out an expected credit loss (ECL) model applicable to all debt instrument financial assets classified as amortized cost and FVOCI. In addition, the ECL model applies to loan commitments and financial guarantees that are not measured at FVTPL. Incurred loss versus Expected Credit Loss Methodology ‘The application of ECL significantly changed the Company's credit loss methodology and models. ECL allowances represent credit losses that reflect an unbiased and probability-weighted amount which is determined by evaluating a range of possible outcomes, the time value of money and reasonable and supportable information about past events, current conditions and forecasts of future economic conditions. ECL allowances are measured at amounts equal to either: (i) 12-month ECL; or (ii) lifetime ECL for those financial instruments which have experienced a significant increase in credit risk (SICR) since initial recognition or when there is objective evidence of impairment. This compares to the present incurred loss model that incorporates a single best estimate, the time value of money and information about past events and current conditions and which recognizes lifetime credit losses when there is objective evidence of impairment and also allowances for incurred but not identified credit losses QUIN Measurement of ECL ECLs are generally measured based on the risk of default over one of two different time horizons, depending on whether there has been SICR since initial recognition. ECL calculations are based on the following components: ‘© Probability-of-default (PD)— an estimate of the likelihood that a borrower will default o obligations over the next 12 months for Stage | or over the remaining life of the credit exposure for Stages 2 and 3, ‘© Exposure-at-default (EAD) — an estimate of the exposure at a future/default date taking into account expected changes in the exposure after the reporting date, including repayments of principal and interest, expected drawdown on committed facilities and acerued interest from missed payments. © Loss-given-default (LGD) ~ represents the estimate amount the Company can lose when a borrower defaults. It is based on the difference between the contractual cash flow due and those that the Company would expect to receive, including from any collateral © Discount rate — represents the rate to be used to discount an expected loss to a present value at the reporting date using the original effective interest rate determined at initial recognition. Forward-looking information shall be considered in estimating/determining the 12-month and lifetime PD, EAD and LGD depending on the credit exposure, PERS 4, Insurance Contracts, Applying PFRS 9, Financial Instruments, with PERS 4 ‘The amendments address concems arising from implementing PFRS 9, the new financial instruments standard before implementing the new insurance contracts standard. The amendments introduce two ‘options for entities issuing insurance contracts: a temporary exemption from applying PFRS 9 and an ‘overlay approach. The temporary exemption is first applied for reporting periods beginning on or after January 1, 2018. An entity may elect the overlay approach when it first applies PFRS 9 and apply that approach retrospectively to financial assets designated on transition to PPRS 9. The entity restates comparative information reflecting the overlay approach if, and only if, the entity restates comparative information when applying PFRS 9. PERS 15, Revenue from Contracts with Customers PERS 15 supersedes PAS 11, Construction Contracts, IAS 18, Revenue and related Interpretations and it applies, with limited exceptions, to all revenue arising from contracts with its customers, PERS 15 establishes a five-step model to account for revenue arising from contracts with customers and requires that revenue be recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. PPRS 15 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract Amendments to PAS 28, Investment in Associates and Joint Ventures, Measuring an Associate or Joint Venture at Fair Value (Part of Annual Improvements to PFRSs 2014 - 2016 Cycle) ‘The amendments clarify that an entity that is a venture capital organization, or other qualifying e may elect, at initial recognition on an invest ment-by-investment basis, to measure its investments in associates and joint ventures at fair value through profit or loss. They also clarify that if an entity that is not itself an investment entity has an interest in an associate or joint venture that is an investment entity, the entity may, when applying the equity method, elect to retain the fair value measurement applied by that investment entity associate or joint venture to the investment entity associate's or joint venture’s interests in subsidiaries. This election is made separately for each investment entity associate or joint venture, at the later of the date on which (a) the investment entity associate or joint venture is initially recognized; (b) the associate or joint venture becomes an investment entity: and (c) the investment entity associate or joint venture first becomes a parent. Retrospective application is required ‘Amendments to PAS 40, Investment Property, Transfers of Investment Property ‘The amendments clarify when an entity should transfer property, including property under construction or development into, or out of investment property. The amendments state that a change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. A mere change in management’s intentions for the use of a property does not provide evidence of a change in use. Retrospective application of the amendments is not required and is only permitted if this is possible without the use of hindsight. Since the Company's current practice is in line with the clarifications issued, the Company does not expect any effect on its financial statements upon adoption of these amendments. Philippine Interpretation IFRIC-22, Foreign Currency Transactions and Advance Consideration ‘The interpretation clarifies that, in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which an entity initially recognizes the nonmonetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine the date of the transaction for each payment or receipt of advance consideration. Retrospective application of this interpretation is not required. 2.3. Financial instruments Policies applicable beginning January 1, 2018 Initial Recognition and Classification of Financial Instruments Financial assets are measured at FVTPL unless these are measured at FVOCI or at amortized cost Financial liabilities are classified as either financial liabilities at FVTPL or financial liabilities at amortized cost. The classification of financial assets depends on the contractual terms and the business model for managing the financial assets. Subsequent to initial recognition, the Company may reclassify its financial assets only when there is a change in its business model for managing these financial assets. Reclassification of financial liabilities is not allowed. ‘The Company determines its business mode! at the level that best reflects how it manages groups of financial assets to achieve its business objective. The Company's business model is not assessed on an instrument-by-instrument basis, but at a higher level of aggregated portfolios. As a second step of its classification process, the Company assesses the contractual terms of financial assets to identify whether they pass the contractual cash flows test (SPPI test) Investment securities at FVOCI Investment securities at FVOCI include debt and equity securities. After initial measurement, investment securities at FVOCI are subsequently measured at fair value, The unrealized gains and losses arising from the fair valuation of investment securities at FVOCI are excluded, net of tax as applicable, from the reported earnings and are included in the statement of comprehensive income as *Change in net unrealized loss on investment securities at FVOCT’ Debt securities at FVOCI are those that meet both of the following conditions: (i) the asset is held Within a business model whose objective is to hold the financial assets in order to both collect contractual cash flows and sell financial assets; and (ii) the contractual terms of the financial asset give rise on specified dates to cash flows that are SPPI on the outstanding principal amount. The effective yield component of debt securities at FVOCI, as well as the impact of restatement on foreign currency-denominated debt securities at FVOCI, is reported in the statement of income. Interest earned on holding debt securities at debt securities at FVOCI are reported as ‘Interest income’ using the effective interest rate (EIR) method, When the debt securities at FVOCI are dlisposed of, the cumulative gain or loss previously recognized in the statement of comprehensive income is recognized as ‘Trading and securities gain (loss) - net’ in the statement of income, The ECL arising from impairment of such investments are recognized in OCI with a corresponding charge for credit losses” in the statement of income. Equity securities designated at FVOCI are those that the Company made an irrevocable election to present in OCI the subsequent changes in fair value. Dividends eared on holding equity securities at FVOCI are recognized in the statement of income as ‘Dividends’ when the right of the payment has been established, except when the Company benefits from such proceeds as a recovery of part of the cost of the instrument, in which case, such gains are recorded in OCI. Gains and losses on disposal of these equity securities are never recycled to profit or loss, but the cumulative gain or loss previously recognized in the statement of comprehensive income is reclassified to ‘Surplus’ or any other appropriate equity account upon disposal. Equity securities at FVOCI are not subject to impairment assessment. ‘The Company had no investment securities at FVOCI as at December 31, 2018. Financial assets at amortized cost Financial assets at amortized cost are debt financial assets that meet both of the following conditions: (i) these are held within a business mode! whose objective is to hold the financial assets in order to collect contractual cash flows; and (ji) the contractual terms give rise on specified dates to cash flows that are SPPI on the outstanding principal amount. This accounting policy mainly relates to the statement of financial position captions ‘Cash’, ‘Receivables’, ‘Due from parent company’ and refundable deposits under ‘Prepaid expenses and other current assets’, which arise primarily from service revenues and other types of receivables. ‘After initial measurement, financial assets at amortized cost are subsequently measured at amortized ‘cost using the EIR method, less impairment in value. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the EIR, The amortization is included in “Interest income’ in the statement of income. Gains and losses are recognized in statement of income when these investments are derecognized or impaired, as well as through the amortization process. The ECL are recognized in the statement of income under “Provision for eredit losses’. The effects of revaluation on foreign currency-denominated debt financial assets are recognized in the statement of income Policies applicable prior to January 1, 2018 Financial Assets - Classification and presentation ‘The Company classifies its financial assets in the following categories: (a) cash and cash equivalents (b) loans and receivables, (c) held-to-maturity financial assets, (d) financial assets at fair value through profit or loss, and (¢) available-for-sale financial assets. ‘The classification depends on the SOULE purpose for which the financial assets were acquired, Management determines the classification of its financial assets at initial recognition. The Company did not hold financial assets under category (c), (d) and (e) during and at the end of each reporting period Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These are included in current assets, except for those with maturities greater than 12 months after the reporting date which are included as part of non-current assets ‘The Company’s loans and receivables consist mainly of cash (Note 2.7), receivables including due from parent company (Note 2.8) and refundable deposits (Note 2.12). Recognition and measurement Loans and receivables are initially recognized and measured at fair value plus transaction costs and are subsequently carried at amortized cost using the effective interest rate method. Derecognition Loans and receivables are derecognized when the rights to receive cash flows have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Financial liabilities - Classification and presentation The Company classifies its financial liabilities as: (i) financial liabilities at fair value through profit or Joss, and (ii) financial liabilities measured at amortized cost. Financial liabilities under category (i) comprise of two sub-categories: financial liabilities classified as held for trading and financial liabilities designated by the Company as at fair value through profit or loss upon initial recognition. Management determines the classification of its financial liabilities at initial recognition. ‘The Company did not classify any of its financial liabilities at fair value through profit or loss. Financial liabilities at amortized cost Financial liabilities at amortized cost are contractual obligations which are either to deliver eash or another financial asset to another entity or to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the Company. They are included in current liabilities, except for maturities greater than 12 months after the reporting period which are classified as non-current liabilities. ‘The Company’s financial liabilities at amortized cost consist of accounts payable, notes payable, due to paying agents, accrued expenses (Note 2.13) and due to parent company (Note 2.14). Recognition and measurement ‘The Company recognizes a financial liability in the statement of financial position when, and only when, the Company becomes a party to the contractual provision of the instrument. Other liabilities at amortized cost are initially measured at fair value plus transaction costs. Subsequently, these are measured at amortized cost using the effective interest rate method. Interest expense on financial liabilities is recognized at gross amount in profit or loss. HAVA Derecognition Other liabilities at amortized cost are derecognized when it is extinguished, that is, when the obligation specified in a contract is discharged or cancelled, or when the obligation expires. 2.4 Impairment of financial assets Policies applicable beginning January 1, 2018 The Company recognises an ECL for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive, discounted at an approximation of the original effective interest rate, The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms, ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those eredit ‘exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). For receivables and contract assets, the Company applies a simplified approach in calculating ECLs. Therefore, the Company does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Company has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. ‘The Company considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Company may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Company. ‘A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows Policies applicable prior to January 1, 2018 The Company assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or ‘more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. For loans and receivables category, the Company first assesses whether there is objective evidence of impairment exists individually for receivables that are individually significant, and collectively for receivables that are not individually significant. If the Company determines that no objective evidence of impairment exists for an individually assessed receivable, whether significant or not, it includes the asset in group of financial assets with similar credit risk characteristics and collectively assesses those for impairment. Receivables that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective assessment of impairment. The amount of the 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 ONO 00 incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognized in profit or Joss within general and ‘administrative expenses. Ifa loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. If, in a subsequent period, the amount of the impairment loss decreases, and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor's credit rating), the reversal of the previously recognized impairment loss recognized in profit or loss. Reversals of previously recorded impairment provision are based on the result of management's update assessment, considering the available facts and changes in circumstances, including but not limited to results of recent discussions and arrangements entered into with customers as to the recoverability of receivables at the end of the reporting period. Subsequent recoveries of amounts previously written-off are credited against general and administrative expenses in profit ot loss. 2.5 Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously, ‘The Company does not have financial assets and liabi netting arrangements and other similar agreements. jes that are covered by enforceable master 2.6 Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liabili transaction between market participants at the measurement date. in an orderly ‘The fair value of a non-financial asset is measured based on its highest and best use. ‘The asset’s current use is presumed to be its highest and best use. ‘The fair value of financial and non-financial liabilities takes into account non-performanee risk, which is the risk that the entity will not fulfil an obligation, ‘The Company classifies its fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: + Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; * Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset of liability, either directly (that is, as prices) or indirectly (that is, derived from prices); ané + Level 3: inputs for the asset or liability that are not based on observable market data (that is, ‘unobservable inputs). ‘The appropriate level is determined on the basis of the lowest level input that is significant to the fair value measurement, “The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The AOOUTINN -10- quoted market price used for financial assets held by the Company is the most representative price within the bid-ask spread. These instruments are included in Level 1. The fair value of assets and liabilities that are not traded in an active market (for example, over-the- counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the asset or liability is included in Level 2. If one or more of the significant inputs is not based on observable market data, the asset or lability is included in Level 3. ‘The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. ay 1" Profi When the transaction price in a non-active market is different from the fair value of other observable current market transactions of the same instrument or based on a valuation technique whose variables include only data from observable market, the Company recognizes the difference between the transaction price and fair value (a ‘Day 1° profit) in profit or loss. In cases where no observable data is used, the difference between the transaction price and model value is only recognized in profit or oss when the inputs become observable or when the instrument is derecognized. For each transaction, the Company determines the appropriate method of recognizing the ‘Day 1” profit amount. As at December 31, 2018 and 2017, the Company has no assets and liabilities measured at 2.7 Cash and cash equivalents For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash ‘on hand and deposits held at call with financial institutions. Cash in banks earns interest at the respective bank deposit rates. This is carried in the statement of financial position at face or at nominal amount. 2.8 Receivables Policies applicable beginning January 1, 2018 Refer to Note 2.3, Policies applicable prior to January 1, 2018 Receivables, including due from related parties, are recognized initially at the transaction price. They are subsequently measured at amortized cost using the effective interest method, less provision for impairment. A provision for impairment 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. ‘Such impairment loss is recognized immediately in the statement of comprehensive income, When a receivable remains uncollectible after the Company has exerted all legal remedies, itis written-off against allowance for impairment of receivables amount. Other than the instance of impairment as noted above, these receivables are derecognized when the rights to the cash flow from this asset have expired or are settled - that is, when collected. AION AT “le 2.9 Prepaid expenses and other current assets Prepaid expenses are recognized in the event that payment has been made in advance of obtaining right of access to goods or receipt of services and measured at nominal amounts, These are derecognized and charged to profit or loss either with the passage of time or through use or consumption. Prepaid expenses are included in current assets, except when the related goods or services are expected to be received and rendered more than twelve months afier the end of the reporting period, in which case, these are classified as non-current assets. Other current assets include input value-added tax (VAT) which is stated at historical cost less provision for impairment, ifany. Provision for unrecoverable input VAT, if any, is maintained by the Company at a level considered adequate to provide for potential unutilized portions of the claims. ‘The Company, on a continuing basis, makes a review of the status of recoverability of its input VAT designed to identify those that may require provision for impairment losses. These are derecognized when refunded, used or offet against output tax or disallowed by the tax authority 2.10. Property and equipment Property and equipment are stated at historical cost less accumulated depreciation and impairment in value, ifany. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, a8 appropriate, only when itis probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably, Major renovations are depreciated ‘over the remaining useful life of the related asset or to the date of the next major renovation, whichever is sooner. Repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. Leasehold improvements are amortized over the estimated useful lives of the improvements, which is the shorter period compared to the term of the lease considering renewal options and management's intention Depreciation on assets is computed using the straight-line method over the asset's estimated useful lives, as follows: In years Transportation equipment 3 Computer equipment 5 Office equipment 5 Furniture and fixtures 3 Leasehold improvements 3 or the lease term, whichever is shorter ‘The assets’ residual values and useful lives are reviewed periodically, and adjusted as appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Fully depreciated assets are retained in the property and equipment account until these are retired. NOTA LA ena Gains and losses on disposals are determined by comparing proceeds with carrying amount and these are included in the statement of comprehensive income within “Other expenses (income), net ‘An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal at which time the cost and their accumulated depreciation are removed from the accounts. 2.11 Impairment of non-financial assets ‘The carrying values of non-financial assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, 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 fair value Tess 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 (cash-generating units). Value in tase requires entities to make estimates of future cash flows to be derived from the particular asst, and discount them using a pre-tax market rate that reflects current assessments of the time value of money and the risks specific to the asset. Impairment losses, if any, are recognized in the statement of comprehensive income within other expenses. Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at teach reporting date. When impairment loss subsequently reverses, the carrying amount of the assets or cash-generating unit is increased to the revised estimate of its recoverable amount, but the increased carrying amount should not exceed the carrying amount that would have been determined had no impairment loss has been recognized for the asset or cash-generating unit in prior years. Reversals of previously recorded impairment provi statement of comprehensive income. sare eredited against provision account in the 2.12 Refundable deposits Refundable deposits (including surety bond) are amounts which are refundable upon expiry of a specified term in a contract, subject to certain conditions such as the lessee's payment of rent as it becomes due. If part or all of a refundable deposit becomes non-refundable, e.g. where no refund will be paid due to damage to the property by the lessee or a loss has been incurred, the right to receive the deposit or part thereof is impaired, and the carrying amount is reduced and the corresponding loss is recognized in the statement of comprehensive income within general and administrative expenses. Also refer to Note 2.3 for the recognition, measurement and derecognition of financial assets, 2.13 Accounts payable and other accrued expenses These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognized initially at their fair value and subsequently measured at amortized cost using the effective interest method. Accounts payable and other accrued expenses denominated in foreign currency are translated to Philippine peso using the exchange rate at the reporting date, Foreign exchange gains or losses are included in “Other expenses (income), net” in the statement of comprehensive income elge ‘Accounts payable and other accrued expenses are derecognized when extinguished, that is, when the ‘obligation specified in a contract is discharged or cancelled or when the obligation expires. 2.14. Related party transactions and relationships Related party relationships exist when one party has the ability to control, directly, or indirectly through one or more intermediaries, the other party or exercises significant influence over the other party in making financial and operating decisions. Such relationships also exist between and/or among entities, which are under common control with the reporting enterprise, or between, and/or among the reporting enterprise and its key management personnel, directors or its shareholders, In considering each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form. 2.15 Provisions Provisions for legal claims are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resourees will be required to Settle the obligation and the amount can be reliably estimated. Provisions are not recognized for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value fof money and the risks specific to the liability. The inerease in the provision due to the passage of time is recognized as interest expense. 2.16 Retirement liability ‘The Company has yet to adopt a formal retirement plan for the benefit of its qualified employees. Under Republic Act (RA) 7641, otherwise known as the Retirement Pay Law, in the absence of a retirement plan or agreement providing for retirement benefits of employees in the private sector, an employee upon reaching the age of 60 years or more, but not beyond 65 years, who has served at least 5 years in a private company, may retire and shall be entitled to retirement pay equivalent to atleast 4 month salary for every year of service, a fraction of at least 6 months being considered as 1 whole year. ‘The Company recognizes retirement benefit provision based on the minimum requirements of RA 7641. The liability recognized in the statement of financial position is the present value of the accumulated retirement benefit obligation at the financial reporting date as calculated annually by an independent actuary using the projected unit credit method. ‘The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation. Where there is no deep market in such bonds, the market rates on government bonds are used, ULNA -14- ‘The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the profit or loss. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income, Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in profit or loss as past service costs. 2.17 Equity Capital Stock Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of shares are recognized as a deduction from equity, net of any tax effect. Retained eamings Retained eamings represent the accumulated profit/loss arising from the operations of the Company, less any dividends declared, 2.18 Revenue recognition Prior to January 1, 2018, under PAS 18, Revenue, revenue is recognized to the extent that itis probable that the economic benefits will flow to the Company and the revenue can be reliably ‘measured, regardless of when the payment is being made. Upon adoption of PFRS 15 beginning January 1, 2018, revenue from contracts with customers is recognized upon transfer of services to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those services, Service fee income Service fee income is recognized for a fixed amount that shall be determined as a function of expenses that the Company incurs plus a ten percent (10%) and eight percent (89%) mark-up in 2018 and 2017, respectively. recognized upon reimbursement from UFSI of the commission fees of the paying agents. Country Fee In 2017, country fee is recognized for a fixed amount of P20 for every transaction processed by the ‘Company, ‘The Company assessed that there is no difference in accounting for the service fee income, commission income and country fee under PFRS 15 and PAS 18. Revenue outside the scope of PERS 15 Interest income Interest income is recognized as it accrues using the effective interest method and is presented net of final tax. AOMORUI N00 215+ 2.19 Cost and expense recognition Cost and expenses are recognized when decrease in future economic benefits related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably. Expenses are recognized when they are incurred 2.20 Operating leases ‘A lease is classified as an operating lease if it does not substantially transfer all risks and rewards incidental to ownership. Operating lease payments are recognized as expense in profit or loss on a straight-line basis over the lease term. Associated costs, such as maintenance and insurance are expensed as incurred, 2.21. Foreign currency transactions and translations Functional and presentation currency Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The financial statements are presented in Philippine Peso, which is the Company's functional and presentation curreney. ‘Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognized in profit or loss. Foreign exchange gains and losses are presented in profit or loss within other expenses. 2.22 Current and deferred income tax ‘The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. ‘The current income tax charge is calculated on the basis of the tax laws enacted or substantively, enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Deferred tax assets are recognized only if itis probable that future taxable amounts will be available to utilize those temporary differences and losses. Deferred tax assets are recognized for all deductible temporary differences, carry-forward of unused tax losses (net operating loss carryover or NOLCO) and unused tax credits (excess minimum corporate income tax or MCIT) to the extent that itis probable that future taxable profit will be available against which the temporary differences, unused tax losses and unused tax eredits can be utilized. The Company reassesses at each reporting date the ‘HAV -16- need to recognize a previously unrecognized deferred income tax asset. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. 2.23. Contingencies Contingent are not recognized in the financial statements. They are disclosed in the notes to the financial statements unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not recognized in the financial statements but are disclosed in the notes to the financial statements when an inflow of economic benefits is probable. 2.24 Events after reporting date Post period-end events that provide additional information about the Company's financial position at the end of the reporting date (adjusting events) are reflected in the financial statements. Post period- end events that are not adjusting events are disclosed in the notes to the financial statements when material 2.28 Future Changes in Accounting Policies Pronouncements issued but not yet effective are listed below. The Company intends to adopt the following pronouncements when they become effective. Adoption of these pronouncements is not expected to have a significant impact on the Company's financial statements unless otherwise indicated, Effective beginning on or after January 1, 2019 + Amendments to PERS 9, Prepayment Features with Negative Compensation + PFRS 16, Leases PERS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under PAS 17, Leases. The standard includes two recognition exemptions for lessees ~ leases of "Iow-value” assets (e.g., personal computers) and short-term leases (i.¢., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognize a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.., the right-of- use asset). Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (eg, a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognize the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset ae Lessor accounting under PFRS 16 is substantially unchanged from today’s accounting under PAS 17. Lessors will continue to classify all leases using the same classification principle as in PAS 17 and distinguish between two types of leases: operating and finance leases. PFRS 16 also requires lessees and lessors to make more extensive disclosures than under PAS 17, ‘A lessee can choose to apply the standard using either a full retrospective or a modified retrospective approach. The standard’s transition provisions permit certain reliefs, ‘The Company is currently assessing the impact of adopting PFRS 16. ‘© Amendments to PAS 19, Employee Benefits, Plan Amendment, Curtailment or Settlement ‘© Amendments to PAS 28, Long-term Interests in Associates and Joint Ventures * Philippine Interpretation IFRIC-23, Uncertainty over Income Tax Treatments «Annual Improvements to PFRSs 2015-2017 Cycle + Amendments to PERS 3, Business Combinations, and PFRS 11, Joint Arrangements, Previously Held Interest in a Joint Operation + Amendments to PAS 12, Income Tax Consequences of Payments on Financial Instruments Classified as Equity + Amendments to PAS 23, Borrowing Costs, Borrowing Costs Eligible for Capitalization Effective beginning on or after January 1, 2020 + Amendments to PFRS 3, Definition of a Business «Amendments to PAS 1, Presentation of Financial Statements, and PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, Definition of Material Effective beginning on or after January 1, 2021 * PERS 17, Insurance Contracts Deferred effectivity © Amendments to PFRS 10, Financial Statements, and PAS 28, Sale or Contribution of Assets between an Investor and its Associate or Joint Venture Critical Accounting Estimates, Assumptions and Judgments, Estimates, assumptions and judgments 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. ‘The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates, assumptions and judgments that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: 3.1 Critical accounting estimates and assumptions Retirement benefit obligation (Note 12 The present value of the pension obligation depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate and future salary increases. Any changes in these assumptions will impact the carrying amount of retirement obligations. aio which the benefits will be paid and that have terms to maturit retirement obligation, approximating the terms of the related Other key assumptions for pension obligations are based in part on current market conditions. The possible effects of sensitivities surrounding these actuarial assumptions at reporting date are presented in Note 12. 3.2 Critical judgments in applying the entity’s accounting policies Provision for income tax and deferred tax (Note 13. Significant judgment is required in determining the recorded provision for ineome tax in the statement of comprehensive income. There are many transactions and calculations for which the ultimate tax determination is uncertain in the ordinary course of business. The Company recognizes liabilities for anticipated tax audit issues when it is probable. The liabilities are based on assessment and judgment of whether additional taxes will be due. Where the final tax outcome of these matters is, different from the amounts that were initially recorded, such differences will impact the Company's current income tax and deferred income tax provisions in the period in which such determination is made. Further, the recognition of deferred tax assets depends on management's assessment of the probability of available future taxable income against which the temporary differences can be applied. ‘The Company reviews the carrying amounts of deferred tax assets at the end of each reporting period and reduces the amounts to the extent that itis no longer probable that sufficient taxable profit will allow all or part of its deferred tax assets to be utilized. The Company’s management believes that the deferred tax assets at the end of each reporting period will be realized. The Company has deferred tax assets of P3,506,752 and P3,869,736 as at December 31, 2018 and 2017, respectively, which was assessed by management to be fully recoverable based on projected taxable profits and expected timing of reversal of the temporary differences. The Company's unrecognized deferred tax assets amounted to P3,495,379 and 22,360,476 as of December 31, 2018 and 2017, respectively. Contingencies In accordance with PAS 37, Provisions, Contingent Liabilities and Contingent Assets, the Company determines whether to provide for loss contingencies based on an assessment of whether the risk of loss is remote, reasonably possible or probable. Management's assessment is developed in consultation with the Company’s outside counsels and advisors and is based on an analysis of possible outcomes under various circumstances. Contingency assumptions involve judgments that are inherently subjective and can involve matters that are in litigation, appeal and ongoing negotiations with authorities and third parties which by its nature is unpredictable. Management believes that its assessment of the probability of contingencies is reasonable, but because of the subjectivity involved and the unpredictable nature of the subject matter at issue, management's assessment may prove ultimately to be incorrect, which could materially impact the financial statements in current or future periods. AONUMA Ege Cash Cash as at December 31 consists of: Note 2018 2017 Cash in banks 16 PI01,027,825 P72,927,836 Petty cash fund, 10,000 10,000 101,037,825 P72,937,836 Cash in banks earn interest at the prevailing bank deposit rates. Interest income on cash in banks for the years ended December 31, 2018 and 2017 amounted to 137,848 and P103,756 (Note 14), respectively, and is presented under ‘Other expenses (income), net’ in the statements of comprehensive income. Receivables Receivables mainly pertain to advances made by the Company to paying agents for cash remittances to beneficiaries amounting to P29,255,723 and B32,880,241 as at December 31, 2018 and 2017, respectively. For the years ended December 31, 2018 and 2017, the Company has not provided any allowance for impairment since there has not been a significant change in credit quality and the receivables are considered fully recoverable taking into account the paying agents” historical payment patterns and their financial condition, The Company holds no collateral with respect to receivables. Prepaid Expenses and Other Assets Prepaid expenses and other current assets as at December 31 consist of 2018 2017 Prepaid tax 2,346,721 BE Prepaid insurance 993,856 619,002 Refundable deposits 318,359 338,233 Prepaid rent = 1,323,581 P3,655,936 2,280,816 Other noncurrent assets as at December 31 consist of: 2018 2017 Input VAT, net 14,142,783 2,846,721 Refundable deposits 1,006,915, - Prepaid rent 928,454 P6,078,152 P2,846,72 AONUMA 7. Property and Equipment ‘The movements for each category of property and equipment are as follows: 2018 “Transporation Computer ‘Office Furaiture Leasehold Equipment Equipment Equipment _and Fistures Improvements Toul com Balance a begining of year 2,838,768, P94s26—PISRIGS—PILAG.O4S —PBAOBGT Additions = = = = 139384 Balance fend ofa TERNS Sueosse uN SATS ‘Accumulated Depreciation Balance at begining of year 161867231859 $56,008 aooar 4918924 Depresation and amortation 24837258230 131.02 496489 __ 131.520 Balance lend of T,s64,052 2,689,789 687.050 7367016 080.444 ‘Net Book Value P6773 PTTITS__PDSB.IT6__PS9.296__—P2SA PITT SLL 2017 Transportation Computer ‘Oiiee ——Furnture Leasehold Equipment Equipment __Eguipmest__and Fixtures _Improvernents Toul con Balance a beginning of year «2,838,765 F2,603,765 768,740 PROG PIGII,9S4 7.625.630, Additions = "26508176686 S172 1406085 236098 Disposals - = = = (15377984) (1.577354) Balance arend of year TEU IGS 4 SsORTO 045 961 ToR 1.462.045 8.408.674 ‘Accumulated Depreciation and "amortization Balance at beginning of year 1gmgie—2e7@27—439,983, sis 86 4393.568 ‘Depreciation and amortization basas7 24483 16,028 2125 aRO|BRS L117 044 Disposals = = = = (1091 588) (1,001,584) ‘Balance at end of year Togas 2A S59 356,008 am 260282 4,918,924 Book Value 7920,090 TL —P389,418 79,728 .201,803 P4885, Diet Booke Value 920,990 a9, 71 SANG 70 728 P1201 809 PASO Certain fully-depreciated property and equipment with cost of P3,820,462 and P3,764,467 as at December 31, 2018 and 2017, respectively, are still in use. In 2016, the Company purchased a transportation equipment amounting to Pl ,226,786, to be paid in an installment basis. Payments made in 2018 and 2017 amounted to B432,421 and P532,753, respectively. 8, Accounts Payable and Accrued Expenses Accounts payable and accrued expenses as at December 31 consist of: Note 2018 2017 Financial liabilities: Due to paying agents, 5,495,024 85,229,568 Accounts payable 7,613 - Accrued expenses: Accrued professional fees 1,195,785 736,918 Accrued salaries 887,647 626,763 Other accrued expenses 1,430,073 2,624,990 9,016,142, 9,238,239 (Forward) MOI mate Note 2018 2017 Non-financial liabilities: Provision for losses 14 B19,884,852 —-P16,611,757 Payable to regulatory agencies 447,173 291,784 Deferred rent 79,351 = 20,411,376 16,903,541 ¥29,427,518___P26,141,780 Due to paying agents pertains to advances made by banks for the cash remitted to a beneficiary Provision for losses pertains to an ongoing case wherein the Company has a pending application for compromise. No specific disclosure on such unsettled claim is made because any such specific disclosures would prejudice the Company’s position with the other parties with whom it is in dispute. ‘Such exemption from disclosures is allowed under PAS 37, Provisions, Contingent Liabilities and Contingent Assets, Other accrued expenses pertain to accruals for marketing and utilities. ‘Related Party Transactions In the normal course of business, the Company’s only related party transaetions are with its immediate parent, UFSI. Significant related party transactions for the years ended December 31 are as follows: Related party ‘Terms and Conditions 2018 2017 Serve fee The Company has a serviee agreement with UFSI to provide Immediate parent: administrative, financial, and accounting services in the UFSI nature of those services required by the latte, including the 40,655,385 39,461,988 processing and transfer of information, and representing oF serving as @ commission agent in the Philippines or in a foreign territory, for every kind of industrial or commercial

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