Corporate Information

First Philippine Holdings Corporation (the Parent Company) was incorporated and registered
with the Philippine Securities and Exchange Commission (SEC) on June 30, 1961. On June 29,
2007, the Philippine SEC approved the extension of the Companys corporate life for another 50
years from June 30, 2011. The Parent Companys principal activity is to hold investments in
subsidiaries and associates. The subsidiaries and associates of the Parent Company are engaged
in, but not limited to, power generation and power distribution, pipeline services, real estate
development, manufacturing, construction, securities transfer services and financing.

The Parent Company is 45.92% and 46.01%-owned by Lopez Holdings Corporation (Lopez
Holdings), a publicly-listed Philippine-based entity, as at December 31, 2014 and 2013,
respectively. Majority of Lopez Holdings is owned by Lopez, Inc., a Philippine entity and the
ultimate Parent Company.

The common shares of the Parent Company were listed beginning May 3, 1963 and have
since been traded on the Philippine Stock Exchange (PSE). The Parent Company is considered a
public company under Section 17.2 of the Securities Regulation Code.

The registered office address of the Parent Company is 6th Floor, Benpres Building,
Exchange Road corner Meralco Avenue, Pasig City.

The parent company financial statements as at and for the years ended December 31, 2014
and 2013 were reviewed and recommended for approval by the Audit Committee on April 6,
2014. On April 8, 2015, the Board of Directors (BOD) approved and authorized the parent
company financial statements for issuance.

Summary of Significant Accounting Policies

Basis of Preparation
The parent company financial statements have been prepared in compliance
with Philippine Financial Reporting Standards (PFRS).

The parent company financial statements have been prepared on a historical

cost basis, except for financial assets at fair value through profit or loss (FVPL) and
quoted investments in equity securities that have been measured at fair value.

The parent company financial statements are presented in Philippine peso,

which is the Parent Companys functional currency. All values are rounded to the
nearest million pesos, except when otherwise indicated.

The Parent Company also prepares and issues consolidated financial statements
in compliance with PFRS and for the same period as the parent company financial
statements. These are filed with and may be obtained from the Philippine SEC and
PSE.

Changes in Accounting Policies and Disclosures

The accounting policies are consistent with those of the previous financial year,
except for the adoption of the following new and amended accounting standards.
The Parent Company applied for the first time, certain standards and amendments,
which are effective for annual periods, beginning on or after January 1, 2014. However,
they did not have significant impact on the Parent Companys financial statements
unless otherwise described below.
Investment Entities (Amendments to PFRS 10, Consolidated Financial Statements,
PFRS 12, Disclosure of Interests in Other Entities, and PAS 27, Separate Financial
Statements) These amendments provide an exception to the consolidation
requirement for entities that meet the definition of an investment entity under PFRS 10.
The exception to consolidation requires investment entities to account for subsidiaries
at fair value through profit or loss. The amendments must be applied retrospectively,
subject to certain transition relief.
PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and
Financial Liabilities (Amendments) These amendments clarify the meaning of
currently has a legally enforceable right to set-off and the criteria for nonsimultaneous settlement mechanisms of clearing houses to qualify for offsetting and
are applied retrospectively.
PAS 39, Financial Instruments: Recognition and Measurement - Novation of
Derivatives and Continuation of Hedge Accounting (Amendments) These
amendments provide relief from discontinuing hedge accounting when novation of a
derivative designated as a hedging instrument meets certain criteria and retrospective
application is required.

PAS 36, Impairment of Assets - Recoverable Amount Disclosures for Non-Financial

Assets (Amendments) These amendments remove the unintended consequences of
PFRS 13, Fair Value Measurement, on the disclosures required under PAS 36. In
addition, these amendments require disclosure of the recoverable amounts for assets
or cash-generating units (CGUs) for which impairment loss has been recognized or
reversed during the period.
Philippine Interpretation IFRIC 21, Levies (IFRIC 21) IFRIC 21 clarifies that an
entity recognizes a liability for a levy when the activity that triggers payment, as
identified by the relevant legislation, occurs. For a levy that is triggered upon
reaching a minimum threshold, the interpretation clarifies that no liability should be
anticipated before the specified minimum threshold is reached. Retrospective
application is required for IFRIC 21.
Annual Improvements to PFRSs (2010-2012 cycle) In the 2010 2012 annual
improvements cycle, seven amendments to six standards were issued, which included
an amendment to PFRS 13. The amendment to PFRS 13 is effective immediately and
it clarifies those short-term receivables and payables with no stated interest rates can
be measured at invoice amounts when the effect of discounting is immaterial.
Annual Improvements to PFRSs (2011-2013 cycle) In the 2011 2013 annual
improvements cycle, four amendments to four standards were issued, which included
an amendment to PFRS 1, First-time Adoption of Philippine Financial Reporting
Standards First-time Adoption of PFRS. The amendment to PFRS 1 is effective
immediately. It clarifies that an entity may choose to apply either a current standard
or a new standard that is not yet mandatory, but permits early application, provided
either standard is applied consistently throughout the periods presented in the
entitys first PFRS financial statements.

Companys financial statements are listed below. The Parent Company intends to
adopt these standards when they become effective. Except as otherwise indicated,
the Parent Company does not expect the adoption of these new and amended
standards and interpretations to have significant impact on its financial statements.
PFRS 9, Financial Instruments Classification and Measurement (2010 version)
PFRS 9 (2010 version) reflects the first phase on the replacement of PAS 39,
Financial Instruments: Recognition and Measurement, and applies to the
classification and measurement of financial assets and liabilities as defined in PAS
39. PFRS 9 requires all financial assets to be measured at fair value at initial
recognition. A debt financial asset may, if the fair value option (FVO) is not invoked,
be subsequently measured at amortized cost if it is held within a business model
that has the objective to hold the assets to collect the contractual cash flows and its
contractual terms give rise, on specified dates, to cash flows that are solely
payments of principal and interest on the principal outstanding. All other debt
instruments are subsequently measured at FVPL. All equity financial assets are
measured at fair value either through other comprehensive income or profit or loss.
Equity financial assets held for trading must be measured FVPL. For FVO liabilities,
the amount of change in the fair value of a liability that is attributable to changes in
credit risk must be presented in other comprehensive income. The remainder of the
change in fair value is presented in profit or loss, unless presentation of the fair
value change in respect of the liabilitys credit risk in other comprehensive income
would create or enlarge an accounting mismatch in profit or loss. All other PAS 39
classification and measurement requirements for financial liabilities have been
carried forward into PFRS 9, including the embedded derivative separation rules and
the criteria for using the FVO. The adoption of the first phase of PFRS 9 will have an
effect on the classification and measurement of the Companys financial assets,
but will potentially have no impact on the classification and measurement of
financial liabilities.

PFRS 9 (2010 version) is effective for annual periods beginning on or after

January 1, 2015. This mandatory adoption date was moved to January 1, 2018
when the final version of
PFRS 9 was adopted by the FRSC. Such adoption, however, is still for approval
by the Board of Accountancy (BOA).
Philippine Interpretation IFRIC 15, Agreements for the Construction of Real
Estate This interpretation covers accounting for revenue and associated
expenses by entities that undertake the construction of real estate directly or
through subcontractors. The interpretation requires that revenue on
construction of real estate be recognized only upon completion,
except when such contract qualifies as construction contract to be accounted
for under
PAS 11, Construction Contracts, or involves rendering of services in which case
revenue is recognized based on stage of completion. Contracts involving
provision of services with the construction materials and where the risks and
reward of ownership are transferred to the buyer on a continuous basis will
also be accounted for based on stage of completion. The SEC and the FRSC
have deferred the effectivity of this interpretation until the final Revenue
standard is issued by the International Accounting Standards Board and an
evaluation of the requirements of the final Revenue standard against the
practices of the Philippine real estate industry is completed.

Effective January 1, 2015

PAS 19, Employee Benefits Defined Benefit Plans: Employee Contributions
(Amendments)
PAS 19 requires an entity to consider contributions from employees or third parties
when accounting for defined benefit plans. Where the contributions are linked to
service, they should be attributed to periods of service as a negative benefit. These
amendments clarify that, if the amount of the contributions is independent of the
number of years of service, an entity is permitted to recognize such contributions as a
reduction in the service cost in the period in which the service is rendered, instead of
allocating the contributions to the periods of service.

Annual Improvements to PFRSs (2010-2012 cycle). The Annual Improvements to

PFRSs (2010- 2012 cycle) are effective for annual periods beginning on or after January
1, 2015 and are not expected to have a material impact on the Parent Company. They
include:
PFRS 2, Share-based Payment Definition of Vesting Condition This improvement is
applied prospectively and clarifies various issues relating to the definitions of
performance and service conditions which are vesting conditions, including:
A performance condition must contain a service condition
A performance target must be met while the counterparty is rendering service
A performance target may relate to the operations or activities of an entity, or to
those of another entity in the same group
A performance condition may be a market or non-market condition
If the counterparty, regardless of the reason, ceases to provide service during the
vesting period, the service condition is not satisfied.

PFRS 3, Business Combinations Accounting for Contingent Consideration in a

Business Combination The amendment is applied prospectively for business
combinations for which the acquisition date is on or after July 1, 2014. It clarifies
that a contingent consideration that is not classified as equity is subsequently
measured at fair value through profit or loss whether or not it falls within the scope
of PAS 39, Financial Instruments: Recognition and Measurement. The Company
shall consider this amendment for future business combinations.
PFRS 8, Operating Segments Aggregation of Operating Segments and
Reconciliation of the Total of the Reportable Segments Assets to the Entitys
Assets The amendments are applied retrospectively and clarify that:
An entity must disclose the judgments made by management in applying the
aggregation criteria in the standard, including a brief description of operating
segments that have been aggregated and the economic characteristics (e.g., sales
and gross margins) used to assess whether the segments are similar.
The reconciliation of segment assets to total assets is only required to be disclosed
if the reconciliation is reported to the chief operating decision maker, similar to the
required disclosure for segment liabilities.
PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets
Revaluation Method
Proportionate Restatement of Accumulated Depreciation and Amortization The
amendment is applied retrospectively and clarifies in PAS 16 and PAS 38 that the
asset may be revalued by reference to the observable data on either the gross or
the net carrying amount. In addition, the accumulated depreciation or amortization
is the difference between the gross and carrying amounts of the asset.

PAS 24, Related Party Disclosures Key Management Personnel The

amendment is
applied retrospectively and clarifies that a management entity, which is an entity
that provides key management personnel services, is a related party subject to
the related party disclosures. In addition, an entity that uses a management
entity is required to disclose the expenses incurred for management services.

Annual Improvements to PFRSs (2011-2013 cycle). The Annual Improvements

to PFRSs (2011- 2013 cycle) are effective for annual periods beginning on or after
January 1, 2015 and are not expected to have a material impact on the Parent
Company. They include:
PFRS 3, Business Combinations Scope Exceptions for Joint Arrangements The
amendment is applied prospectively and clarifies the following regarding the
scope exceptions within PFRS 3:
Joint arrangements, not just joint ventures, are outside the scope of PFRS 3.
This scope exception applies only to the accounting in the financial statements of
the joint arrangement itself.
PFRS 13, Fair Value Measurement Portfolio Exception The amendment is
applied prospectively and clarifies that the portfolio exception in PFRS 13 can be
applied not only to financial assets and financial liabilities, but also to other
contracts within the scope of PAS 39, Financial Instruments: Recognition and
Measurement.

PAS 40, Investment Property The amendment is applied prospectively and clarifies
that PFRS 3, Business Combinations Scope Exceptions for Joint Arrangements, and not
the description of ancillary services in PAS 40, is used to determine if the transaction is
the purchase of an asset or business combination. The description of ancillary services in
PAS 40 only differentiates between investment property and owner-occupied property
(i.e., property, plant and equipment).

Effective January 1, 2016

PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets Clarification of
Acceptable Methods of Depreciation and Amortization (Amendments) The amendments
clarify the principle in PAS 16 and PAS 38 that revenue reflects a pattern of economic
benefits that are generated from operating a business (of which the asset is part) rather
than the economic benefits that are consumed through use of the asset. As a result, a
revenue-based method cannot be used to depreciate property, plant and equipment and
may only be used in very limited circumstances to amortize intangible assets.
PAS 16, Property, Plant and Equipment, and PAS 41, Agriculture Bearer Plants
(Amendments) The amendments change the accounting requirements for biological
assets that meet the definition of bearer plants. Under the amendments, biological
assets that meet the definition of bearer plants will no longer be within the scope of PAS
41, Agriculture.
Instead, PAS 16 will apply. After initial recognition, bearer plants will be measured under
PAS 16 at accumulated cost (before maturity) and using either the cost model or
revaluation model (after maturity). The amendments also require that produce that
grows on bearer plants will remain in the scope of PAS 41 measured at fair value less
costs to sell. For government grants related to bearer plants, PAS 20, Accounting for
Government Grants and Disclosure of Government Assistance, will apply.

PAS 27, Separate Financial Statements Equity Method in Separate

Financial Statements
(Amendments) The amendments will allow entities to use the equity
method to account for investments in subsidiaries, joint ventures and
associates in their separate financial statements. Entities already applying
PFRS and electing to change to the equity method in its separate financial
statements will have to apply that change retrospectively. For first-time
adopters of PFRS electing to use the equity method in its separate
financial statements, they will be required to apply this method from the
date of transition to PFRS.
PFRS 10, Consolidated Financial Statements and PAS 28, Investments
in Associates and Joint Ventures Sale or Contribution of Assets between
an Investor and its Associate or Joint Venture These amendments
address an acknowledged inconsistency between the requirements in
PFRS 10 and those in PAS 28 (2011) in dealing with the sale or
contribution of assets between an investor and its associate or joint
venture. The amendments require that a full gain or loss is recognized
when a transaction involves a business (whether it is housed in a
subsidiary or not). A partial gain or loss is recognized when a transaction
involves assets that do not constitute a business, even if these assets are
housed in a subsidiary.

PFRS 11, Joint Arrangements Accounting for Acquisitions of Interests in

Joint Operations (Amendments) The amendments to PFRS 11 require that a
joint operator accounting for the acquisition of an interest in a joint operation, in
which the activity of the joint operation constitutes a business must apply the
relevant PFRS 3, Business Combinations principles for business combinations
accounting. The amendments also clarify that a previously held interest in a
joint operation is not remeasured on the acquisition of an additional interest in
the
same joint operation while joint control is retained. In addition, a scope
exclusion has been added to PFRS 11 to specify that the amendments do not
apply when the parties sharing joint control, including the reporting entity, are
under common control of the same ultimate controlling party.

The amendments apply to both the acquisition of the initial interest in a

joint operation and the acquisition of any additional interests in the same joint
operation.
PFRS 14, Regulatory Deferral Accounts PFRS 14 is an optional standard that
allows an entity, whose activities are subject to rate-regulation, to continue
applying most of its existing accounting policies for regulatory deferral account
balances upon its first-time adoption of PFRS. Entities that adopt PFRS 14 must
present the regulatory deferral accounts as separate line items on the
statement of financial position and present movements in these account
balances as separate line items in the statement of profit or loss and other
comprehensive income. The standard requires disclosures on the nature of, and
risks associated with, the entitys rate-regulation and the effects of that rateregulation on its financial statement.

Annual Improvements to PFRSs (2012-2014 cycle). The Annual

Improvements to PFRSs (2012- 2014 cycle) are effective for annual
periods beginning on or after January 1, 2016 and are not expected to
have a material impact on the Parent Company. They include:
PFRS 5, Non-current Assets Held for Sale and Discontinued Operations
Changes in Methods of Disposal The amendment is applied
prospectively and clarifies that changing from a disposal through sale to
a disposal through distribution to owners and vice-versa should not be
considered to be a new plan of disposal, rather it is a continuation of the
original plan. There is, therefore, no interruption of the application of
the requirements in PFRS 5. The amendment also clarifies that changing
the disposal method does not change the date of classification.

PFRS 7 requires an
entity to provide disclosures for any continuing involvement in a
transferred asset that is derecognized in its entirety. The amendment
clarifies that a servicing contract that includes a fee can constitute
continuing involvement in a financial asset. An entity must assess the
nature of the fee and arrangement against the guidance in PFRS 7 in
order to assess whether the disclosures are required. The amendment is
to be applied such that the assessment of which servicing contracts
constitute continuing involvement will need to be done retrospectively.
However, comparative disclosures are not required to be provided for any
period beginning before the annual period in which the entity first applies
the amendments.
PFRS 7 - Applicability of the Amendments to PFRS 7 to Condensed
Interim Financial Statements This amendment is applied retrospectively
and clarifies that the disclosures on offsetting of financial assets and
financial liabilities are not required in the condensed interim financial
report unless they provide a significant update to the information reported
in the most recent annual report.
PAS 19, Employee Benefits Regional Market Issue Regarding
Discount Rate This amendment is applied prospectively and clarifies
that market depth of high quality corporate bonds is assessed based on
the currency in which the obligation is denominated, rather than the
country where the obligation is located. When there is no deep market for
high quality corporate bonds in that currency, government bond rates
must be used.

Financial Report The amendment is applied retrospectively and clarifies that

the required interim disclosures must either be in the interim financial statements or
incorporated by cross- reference between the interim financial statements and
wherever they are included within the greater interim financial report (e.g., in the
management commentary or risk report).

Effective January 1, 2018

PFRS 9, Financial Instruments Hedge Accounting and amendments to PFRS 9,
PFRS 7, Financial Instruments: Disclosures, and PAS 39, Financial Instruments
Recognition and Measurement (2013 version) PFRS 9 (2013 version) already
includes the third phase of the project to replace PAS 39 which pertains to hedge
accounting. This version of PFRS 9 replaces the rules-based hedge accounting model
of PAS 39 with a more principles-based approach. Changes include replacing the
rules-based hedge effectiveness test with an objectives-based test that focuses on the
economic relationship between the hedged item and the hedging instrument, and the
effect of credit risk on that economic relationship; allowing risk components to be
designated as the hedged item, not only for financial items but also for non-financial
items, provided that the risk component is separately identifiable and reliably
measurable; and allowing the time value of an option, the forward element of a
forward contract and any foreign currency basis spread to be excluded from the
designation of a derivative instrument as the hedging instrument and accounted for
as costs of hedging.
PFRS 9 also requires more extensive disclosures for hedge accounting.

PFRS 9 (2013 version) has no mandatory effective date. The mandatory effective
date of January 1, 2018 was eventually set when the final version of PFRS 9 was
adopted by the FRSC. The adoption of the final version of PFRS 9, however, is still for
approval by Board of Accountancy.

The adoption of PFRS 9 will have an effect on the classification and

measurement of the Parent Companys financial assets but will have no impact on
the classification and measurement of the Parent Companys financial liabilities.
The adoption will also have an effect on the Parent Companys application of hedge
accounting. The Parent Company is currently assessing the impact of adopting this
standard.
PFRS 9, Financial Instruments (2014 or final version) In July 2014, the final
version of PFRS 9 was issued. PFRS 9 reflects all phases of the financial
instruments project and replaces PAS 39, Financial Instruments: Recognition and
Measurement, and all previous versions of PFRS 9. The standard introduces new
requirements for classification and measurement, impairment, and hedge
accounting. PFRS 9 is effective for annual periods beginning on or after January 1,
2018, with early application permitted. Retrospective application is required, but
comparative information is not compulsory. Early application of previous versions
of PFRS 9 is permitted if the date of initial application is before February 1, 2015.

The adoption of PFRS 9 will have an effect on the classification and

measurement of the Parent Companys financial assets and impairment
methodology for financial assets, but will have no impact on the classification and
measurement of the Parent Companys financial liabilities. The adoption will also
have an effect on the Parent Companys application of hedge accounting. The
Parent Company is currently assessing the impact of adopting this standard.

IFRS 15, Revenue from Contracts with Customers IFRS 15 was issued in May
2014 and establishes a new five-step model that will apply to revenue arising from
contracts with customers. Under IFRS 15 revenue is recognized 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. The principles in IFRS 15 provide a more
structured approach to measuring and recognizing revenue. The new revenue
standard is applicable to all entities and will supersede all current revenue recognition
requirements under IFRS. Either a full or modified retrospective application is
required for annual periods beginning on or after 1 January 2017 with early adoption
permitted. The Parent Company is currently assessing the impact of
IFRS 15 and plans to adopt the new standard on the required effective date
once adopted locally.
Current versus non-current classification
The Company presents assets and liabilities in the consolidated statement of financial
position based on current/non-current classification. An asset as current when it is:
Expected to be realized or intended to be sold or consumed in the normal
operating cycle
Held primarily for the purpose of trading
Expected to be realized within twelve months after the reporting period, or
Cash or cash equivalent unless restricted from being exchanged or used to settle
a liability for
at least twelve months after the reporting date

All other assets are classified as non-current. A liability is current

when it is:
Expected to be settled in the normal operating cycle
Held primarily for the purpose of trading
Due to be settled within twelve months after the reporting date, or
There is no unconditional right to defer the settlement of the liability for at least

The Company classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.
Cash and Cash Equivalents
Cash includes cash on hand and in banks. Cash equivalents are short-term,
highly liquid investments that are readily convertible with remaining maturities of
three months or less and that are subject to an insignificant risk of change in value.
Short-term Investments
Short-term investments are short-term, highly liquid investments that are
convertible to known amounts of cash with original maturities of more than three
months but less than one year from dates of acquisition.

Financial Assets
Initial Recognition and Measurement. Financial assets within the scope of PAS
39, Financial Instruments: Recognition and Measurement, are classified as financial
assets at FVPL, loans and receivables, held-to-maturity (HTM) investments, availablefor-sale (AFS) financial assets or as derivatives designated as hedging instruments in
an effective hedge, as appropriate. The Parent Company determines the
classification of its financial assets at initial recognition.
All financial assets are recognized initially at fair value plus transaction costs,
except for financial instruments measured at FVPL.
Purchases or sales of financial assets that require delivery of assets within a time
frame established by regulation or convention in the market place (regular way
trades) are recognized on the trade date, i.e, the date the Parent Company commits
to purchase or sell the asset.

Subsequent Measurement. The subsequent measurement of financial

assets depends on their classification as described below:
Financial Assets at FVPL. Financial assets at FVPL include financial
assets held for trading and financial assets designated upon initial recognition
as at FVPL. Financial assets are classified as held for trading if they are
acquired for the purpose of selling or repurchasing in the near term.
Derivatives, including separated embedded derivatives, are also classified
under this category unless they are designated as effective hedging
instruments.
Financial assets at FVPL are carried in the parent company statement of
financial position at fair value with changes in fair value recognized as fair
value gain or loss on investment held for trading in the parent company
statement of income.
Financial assets designated upon initial recognition at FVPL are designated
at their initial recognition date and only if the criteria under PAS 39.
The Parent Companys investment in shares of stock of CSR (PLC) is classified
as a financial asset at FVPL.
The Parent Company evaluates its financial assets held for trading, other
than derivative, to determine whether the intention to sell them in the near
term is appropriate. When in rare circumstances the Parent Company is
unable to trade these financial assets due to inactive markets and
managements intention to sell them in the foreseeable future significantly
changes, the Parent Company may elect to reclassify these financial assets.

The reclassification to loans and receivables, AFS or held to maturity depends on the
nature of the asset. This evaluation does not affect any financial assets designated at FVPL
using fair value option at designation. These instruments cannot be reclassified after initial
recognition.
Loans and Receivables. Loans and receivables are nonderivative financial assets with fixed or
determinable payments that are not quoted in an active market. After initial measurement,
such financial assets are subsequently measured at amortized cost using the effective interest
rate (EIR) method, less impairment. Amortized cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that are an integral part of the EIR. The
EIR amortization is included in finance income in the parent company statement of income.
The losses arising from impairment are recognized in the parent company statement of
income as impairment loss.

This category includes cash and cash equivalents, short-term investments, dividends
receivable, due from related parties, nontrade receivables, interest receivables and advances
to officers and employees.
Held-to-Maturity (HTM) Investments. Non-derivative financial assets with fixed and
determinable payments and fixed maturities are classified as HTM investments when the
Parent Company has positive intention and ability to hold them to maturity. After initial
measurement, HTM investments are measured at amortized cost using the EIR, less
impairment. Amortized cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is
included in finance income in the parent company statement of income. The losses arising
from impairment are recognized in the parent company statement of income as impairment
loss.

The Parent Company does not have HTM investments as at December 31, 2014 and 2013.

AFS Investments. AFS investments include equity investments and debt

securities. Equity investments classified as AFS are those that are neither
classified as held for trading nor designated at FVPL. Debt securities in this
category are those that are intended to be held for an indefinite period of time and
that may be sold in response to needs for liquidity or in response to changes in the
market conditions.

After initial measurement, AFS investments are subsequently measured at fair

value with unrealized gains or losses recognized as other comprehensive income in
the Unrealized fair value gain or loss on investment in equity securities account
in the parent company statement of financial position until the investment is
derecognized, or until the investment is determined to be impaired, at which time
the cumulative gain or loss is recognized in the parent company statement of
income. Interest earned while holding AFS investments is reported as finance
income using the EIR method.

AFS investments also include unquoted equity investments, which are carried
at cost, less any accumulated impairment in value. The fair value of these
instruments is not reasonably determinable due to the unpredictable nature of
future cash flows and the lack of other suitable methods for arriving at a fair value.

The Parent Company evaluates whether the ability and intention to sell its AFS
investments in the near term is still appropriate. When, in rare circumstances, the
Parent Company is unable to trade these investments due to inactive markets and
managements intention to do so significantly changes in the foreseeable future,

The Parent Company may elect to reclassifythese investments. Reclassification

to loans and receivables is permitted when the investments meet the definition of
loans and receivables and the Parent Company has the intent and ability to hold
these assets for the foreseeable future or until maturity.
Reclassification to the HTM category is permitted only when the Parent Company has
the ability and intention to hold the investments accordingly.
For a financial asset reclassified from AFS category, the fair value carrying
amount at the date of reclassification becomes its new amortized cost and any
previous gain or loss on the asset that has been recognized in equity is amortized to
profit or loss over the remaining life of the investment using the EIR. Any difference
between the new amortized cost and the maturity amount is also amortized over the
remaining life of the asset using the EIR. If the asset is subsequently determined to
be impaired, then the amount recorded in equity is reclassified to the parent
company statement of income.
The Parent Companys investment in equity securities are classified as AFS
investments.
Derecognition. A financial asset (or, where applicable, a part of a
financial asset or part of a group of similar financial assets) is derecognized when:
a.) the rights to receive cash flows from the asset have expired;
b.) the Parent Company has transferred its right to receive cash flows from the
asset or has assumed an obligation to pay the received cash flows in full without
material delay to a third party under a pass- through arrangement; and either the
Parent Company (a) has transferred substantially all the risks and rewards of the
asset, or (b) has neither transferred nor retained substantially all the risks and
rewards of the asset, but has transferred control of the asset.

When the Parent Company has transferred its rights to receive cash flows from
an asset or has entered into a pass-through arrangement, it evaluates if and to
what extent it has retained the risks and rewards of ownership. When it has
neither transferred nor retained substantially all the risks and rewards of the asset
nor transferred control of the asset, the asset is recognized to the extent of the
Parent Companys continuing involvement in the asset. In that case, the Parent
Company also recognizes an associated liability. The transferred asset and the
associated liability are measured on a basis that reflects the rights and obligations
that the Parent Company has retained.
Continuing involvement that takes the form of a guarantee over the
transferred assets is measured at the lower of the original carrying amount of the
asset and the maximum amount of consideration that the Parent Company could
be required to repay.

Impairment of Financial Assets. The Parent Company assesses, at each

financial reporting date, whether there is any objective evidence that a financial
asset or group of financial assets is impaired. A financial asset or a group of
financial assets is deemed to be impaired if, and only if, there is objective evidence
of impairment as a result of one or more events that has occurred after the initial
recognition of the asset (an incurred loss event) and that loss event has an
impact on the estimated future cash flows of the financial asset or the group of
financial assets that can be reliably estimated. Evidence of impairment may
include indications that the debtors or a group of debtors is experiencing significant
financial difficulty, default or delinquency in interest or principal payments, the
probability that they will enter bankruptcy or other financial reorganization and
where observable data indicate that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic conditions

Financial Assets Carried at Amortized Cost. For financial

assets carried at amortized cost, the
Parent Company first assesses whether objective evidence of
impairment exists individually for financial assets that are individually
significant, or collectively for financial assets that are not individually
significant. If the Parent Company determines that no objective
evidence of impairment exists for an individually assessed financial
asset, whether significant or not, it includes the asset in a group of
financial assets with similar credit risk characteristics and collectively
assesses them for impairment. Assets 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.

If there is objective evidence that an impairment loss has been

incurred, the amount of the loss is measured as the difference
between the assets carrying amount and the present value of
estimated future cash flows (excluding future credit losses that have
not been incurred). The present value of the estimated future cash
flows is discounted at the financial assets original EIR. If a loan has a
variable interest rate, the discount rate for measuring any
impairment loss is the current EIR.

account and the amount of the loss shall be recognized in the parent company
statement of income. Finance income continues to be accrued on the reduced
carrying amount and is accrued using the rate of interest used to discount the future
cash flows for the purpose of measuring the impairment loss. Loans together with
associated allowance are written off when there is no realistic prospect of future
recovery and all collateral has been realized or has been transferred to the Parent
Company. If, in a subsequent year, the amount of the estimated impairment loss
increases or decreases because of an event occurring after the impairment was
recognized, the previously recognized impairment loss is increased or reduced by
adjusting the allowance account. If a future write-off is later recovered, the recovery
is recognized in the parent company statement of income.
AFS Investments. For AFS investments, the Parent Company assesses at each
financial reporting date whether there is objective evidence that an investment or a
group of investments is impaired.
In the case of equity investments classified as AFS, objective evidence would
include a significant or prolonged decline in fair value of the investments below its
cost. Significant is evaluated against the original cost of the investment and
prolonged against the period in which the fair value has been below its original
cost. Where there is evidence of impairment, the cumulative loss (measured as the
difference between the acquisition cost and the current fair value, less any
impairment loss on that financial asset previously recognized in the parent company
statement of income) is removed from other comprehensive income and recognized
in the parent company statement of income. Impairment losses on equity
investments are not reversed in the parent company statement of income. Increases
in fair value after impairment are recognized directly in other comprehensive
income.

In the case of unquoted equity instrument carried at cost,

impairment is assessed based on the same criteria as financial
assets carried at amortized cost. The amount of loss is measured as
the difference between the assets carrying amount and the present
value of estimated future cash flows discounted at the current
market rate of return for a similar financial asset.
In the case of investment in debt instruments, impairment is
assessed based on the same criteria as financial assets carried at
amortized cost. However, the amount recorded for impairment is
the cumulative loss measured as the difference between the
amortized cost and
the current fair value, less any impairment loss on that investment
previously recognized in the parent company statement of income.
Future finance income continues to be accrued based on the
reduced carrying amount of the asset, using the rate of interest
used to discount future cash flows for the purpose of measuring
impairment loss. If, in subsequent period, the fair value of a debt
instrument increases and the increase can be objectively related to
an event occurring after the impairment loss was recognized in the
parent company statement of income, the impairment loss is
reversed through the parent company statement of income.

Financia l Liabilities
Initial Recognition and Measurement. Financial liabilities within
the scope of PAS 39 are classified as financial liabilities at FVPL, loans and
borrowings or as derivatives designated as hedging instruments in an
effective hedge, as appropriate. The Parent Company determines the
classification of its financial liabilities at initial recognition.
All financial liabilities are recognized initially at fair value plus, in case
of loans and borrowings, directly attributable transaction costs.
Subsequent Measurement. The subsequent measurement of
financial liabilities depends on their classification as described below.
Financial Liabilities at FVPL. Financial liabilities at FVPL include the
financial liabilities held for trading and financial liabilities designated upon
initial recognition as at FVPL.
Financial liabilities are classified as held for trading if they are acquired
for purposes of selling in the near term. This category includes derivative
financial instruments entered into by the Parent Company that are not
designated as hedging instruments in hedge relationship in PAS 39.
Separated embedded derivatives are also classified as held for trading
unless they are designated as effective hedging instruments.
Gains and losses on liabilities held for trading are recognized in the
parent company statement of income.

Financial liabilities at fair value through profit or loss include financial liabilities
held for trading and financial liabilities designated upon initial recognition as at fair
value through profit or loss. The Parent Company has not designated any liability as
at FVPL.
Loans and Borrowings. After initial recognition, interest bearing loans and
borrowings are subsequently measured at amortized costs using the EIR method.
Gains and losses are recognized in the parent company statement of income when
the liabilities are derecognized as well as through the EIR amortization process.
Amortized costs is calculated by taking into account any discount and premium
on acquisition and fees or costs that are integral part of the EIR. The EIR
amortization is included in finance costs in the parent company statement of
income.
This category includes accounts payable and other current liabilities and long-term
debts.
Derecognition. A financial liability is derecognized when the obligation under
the liability is discharged or cancelled or expires.
Where an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as a derecognition of the
original liability and the recognition of a new liability, and the difference in the
respective carrying amounts is recognized in the parent company statement of
income.

Offsetting of Financial Instruments

Financial assets and financial liabilities are offset and the net amount
reported in the parent company statement of financial position if, and only if,
there is a currently enforceable legal right to offset the recognized amounts
and there is an intention to settle on a net basis, or to realize the asset and
settle the liability simultaneously.
Fair Value Measurement
The Parent Company measures certain financial instruments at fair value
and discloses the fair values of investment properties and financial liabilities
measured at amortized cost.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the
measurement date. The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability takes place either:
In the principal market for the asset or liability, or
In the absence of a principal market, in the most advantageous
market for the asset
or liability.
The principal or the most advantageous market must be accessible to the
Parent Company.The fair value of an asset or a liability is measured using the
assumptions that market participants would use when pricing the asset or
liability, assuming that market participants act in their economic best interest.
A fair value measurement of a nonfinancial asset takes into account a
market participants ability to generate economic benefits by using the asset
in its highest and best use or by selling it to another market participant that
would use the asset in its highest and best use.

The Parent Company uses valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to measure fair value,
maximizing the use of relevant observable inputs and minimizing the use of
unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the
parent company financial statements are categorized within the fair value
hierarchy, described as follows, based on the lowest level input that is significant
to the fair value measurement as a whole:
Level 1: Quoted (unadjusted) market prices in active markets for identical
assets or liabilities
Level 2: Valuation techniques for which the lowest level input that is significant
to the fair value measurement is directly or indirectly observable
Level 3: Valuation techniques for which the lowest level input that is significant
to the fair value measurement is unobservable

For assets and liabilities that are recognized in the Parent Company financial
statements on a recurring basis, the Parent Company determines whether
transfers have occurred between levels in the hierarchy by re-assessing
categorization (based on the lowest level input that is significant to the fair value
measurement as a whole) at the end of each financial reporting date.
For the purpose of fair value disclosures, the Parent Company has determined
classes of assets and liabilities on the basis of the nature, characteristics and risks
of the asset or liability and the level of the fair value hierarchy as explained
above.

Input Value-added Taxes (VAT). Input VAT represents VAT

imposed on the Parent Company by its suppliers and contractors for
the acquisition of goods and services required under Philippine
taxation laws and regulations. Input VAT is stated at its estimated
net realizable value (NRV).
The portion of excess input VAT that will be used to offset the Parent
Companys output VAT is included under the Other current assets
account in the parent company statement of financial position.

Investments in and Deposits to Subsidiaries and Associates

The Parent Companys investments in and deposits to
subsidiaries (entities which the Parent Company controls) and
associates (entities which the Parent Company has significant
influence and are neither subsidiaries nor joint ventures) are carried
in the parent company statement of financial position at cost less any
accumulated impairment in value.

Deposits for future stock subscriptions represent payments made

by the Parent Company to its subsidiaries for future additional
investment.

Property and Equipment

Property and equipment, except land, are carried at cost less
accumulated depreciation and amortization, and any accumulated
impairment in value.

Land is carried at cost less any accumulated impairment in

value.

The initial cost of property and equipment comprises its

purchase price and any directly attributable costs in bringing the
asset to its working condition and location for its intended use.
Cost also includes the cost of replacing part of such property and
equipment if the recognition criteria are met.

Expenditures incurred after the property and equipment have

been put into operation, such as repairs and maintenance costs,
are normally recognized in the parent company statement of
income in the period in which the costs are incurred. In situations
where it can be clearly demonstrated that the expenditures have
resulted in an increase in the future economic benefits expected
to be obtained from the use of an item of property and equipment
beyond its originally assessed standard of performance, the
expenditures are capitalized as additional costs of the asset.

Leasehold improvements are amortized over their estimated useful life

or the term of the lease, whichever is shorter.

An item of property and equipment is derecognized upon disposal or

when no future economic benefits are expected from its use or disposal.
Any gain or loss arising on derecognition of the asset (calculated as the
difference between the net disposal proceeds and the carrying amount of
the asset) is included in the parent company statement of income in the
year the asset is derecognized.

The assets residual values, useful lives and depreciation and amortization
methods are reviewed at each financial year-end and adjusted
prospectively, if appropriate.

Investment Properties
Investment properties consist of property (land or a building or part of
a buildingor both) held to earn rentals or for capital appreciation or both,
rather than for:
use in the production or supply of goods or services or for administrative
purposes; or
sale in the ordinary course of business.

These assets, except for land, are stated at cost, including transaction
costs, less accumulated depreciation and any accumulated impairment in
value. Land is carried at cost (initial purchase price and other cost directly
attributable to such property) less any accumulated impairment in value.

Depreciation is computed using the straight-line method over the estimated

useful lives of 5 to 20 years. The investment properties residual values, useful
lives and depreciation methods are reviewed at each financial year-end and
adjusted prospectively, if appropriate.

Investment properties are derecognized when either they have been disposed
of or when the investment properties are permanently withdrawn from use and no
future economic benefit is expected from its disposal. The difference between the
net disposal proceeds and the carrying amount of the asset is recognized in the
parent company statement of income in the period of derecognition.

Transfers are made to and from investment property when, and only when,
there is a change in use. Transfers into and from investment property do not
change the carrying amount of the property being transferred.

Other Noncurrent Assets

Creditable Withholding Taxes (CWT). CWT represents the amount withheld by
the Parent Companys customers in relation to its rental income. These are
recognized upon collection of the related billings and are utilized as tax credits
against income tax due as allowed by the Philippine taxation laws and
regulations. CWT is stated at their estimated NRV. CWT is recognized under the
Other noncurrent assets account in the parent company statement of financial
position.

Investments in and Deposits to Subsidiaries and Associates,

Property and Equipment, Investment Properties and Other
Noncurrent Assets. The Parent Company assesses at each financial
reporting date whether there is an indication that an asset may be
impaired. If any such indication
exists, or when annual
impairment testing for an asset is required, the Parent Company
makes an estimate of the assets recoverable amount. An assets
estimated recoverable amount is the higher of an assets or CGUs
fair value less costs to sell and its value in use and is determined
for an individual asset, unless the asset does not generate cash
inflows that are largely independent of those from other assets or
group of assets. When the carrying amount of an asset or CGU
exceeds its recoverable amount, the asset is considered impaired
and is written down to its recoverable amount. In assessing value
in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks
specific to the asset. In determining fair value less costs to sell,
recent market transactions are taken into account, if available. If
no such transactions can be identified, an appropriate valuation
model is used. These calculations are corroborated by valuation
multiples, quoted share prices for publicly traded subsidiaries or
other available fair value indicators.

An assessment is made at each financial reporting date as to whether

there is any indication that previously recognized impairment losses may no
longer exist or may have decreased. If such indication exists, the Parent
Company estimates the assets or CGUs recoverable amount. A previously
recognized impairment loss is reversed only if there has been a change in
the assumptions used to determine the assets recoverable amount since
the last impairment loss was recognized. The reversal is limited so that the
carrying amount of the asset does not exceed its recoverable amount, nor
exceed the carrying amount that would have been determined, net of
depreciation and amortization, had no impairment loss been recognized for
the asset in prior years. Such reversal is recognized in the parent company
statement of income.

Employee Benefits
Retirement Benefits. The Parent Company has a funded,
noncontributory defined benefit pension plan covering all of its regular
employees, administered by a Board of Trustees
The net defined benefit liability or asset is the aggregate of the present
value of the defined benefit obligation at the end of the reporting period
reduced by the fair value of plan assets (if any), adjusted for any effect of
limiting a net defined benefit asset to the asset ceiling. The asset ceiling is
the present value of any economic benefits available in the form of refunds
from the plan or reductions in future contributions to the plan.

The cost of providing benefits under the defined benefit plans is

actuarially determined using the projected unit credit method.

Defined benefit costs comprise the following:

Service cost
Net interest on the net defined benefit liability or asset
Remeasurements of net defined benefit liability or asset

Service costs which include current service costs, past service costs
and gains or losses on non- routine settlements are recognized as
expense in profit or loss. Past service costs are recognized when plan
amendment or curtailment occurs. These amounts are calculated
periodically by independent qualified actuaries.
Net interest on the net defined benefit liability or asset is the change
during the period in the net defined benefit liability or asset that arises
from the passage of time which is determined by applying the discount
rate based on government bonds to the net defined benefit liability or
asset. Net interest on the net defined benefit liability or asset is
recognized as expense or income in profit or loss.
Remeasurements comprising actuarial gains and losses, return on
plan assets and any change in the effect of the asset ceiling (excluding
net interest on defined benefit liability) are recognized immediately in
other comprehensive income in the period in which they arise.
Remeasurements are not reclassified to profit or loss in subsequent
periods. These are closed to retained earnings.

fund or qualifying insurance policies. Plan assets are not available to the
creditors of the Parent Company, nor can they be paid directly to the Parent
Company. Fair value of plan assets is based on market price information.
When no market price is available, the fair value of plan assets is
estimated by discounting expected future cash flows using a discount rate
that reflects both the risk associated with the plan assets and the maturity
or expected disposal date of those assets (or, if they have no maturity, the
expected period until the settlement of the related obligations). If the fair
value of the plan assets is higher than the present value of the defined
benefit obligation, the measurement of the resulting defined benefit asset is
limited to the present value of economic benefits available in the form of
refunds from the plan or reductions in future contributions to the plan.
Share-based Payment Transactions. The Parent Company has a
stock purchase plan for its employees and retirees to purchase fixed
number of shares of stock at a stated price. When the grants vest, the
capital stock transactions are recorded at the fair value of the options on
grant date. The terms of the plan include, among others, two to four-year
holding periods of the purchased shares and authorized cancellation of the
purchase prior to full payment of the purchase price.
The cost of equity-settled transactions with employees is measured by
reference to the fair value at the date on which they are granted. The fair
value is determined using the Black Scholes Option Pricing Model. In
valuing equity-settled transactions, no account is taken for any performance
conditions.

The cost of equity-settled transactions is recognized, together

with a corresponding increase in equity, over the period in which
the performance and/or service conditions are fulfilled, ending on
the date on which the relevant employees become fully entitled to
the award (the vesting date).
The cumulative expense recognized for equity-settled
transactions at each reporting date until the vesting date reflects
the extent to which the vesting period has expired and the Parent
Companys best estimate of the number of equity instruments that
will ultimately vest. The charge or credit in the parent company
statement of income for a period represents the movement in
cumulative expense recognized as the beginning and end of that
period and is recognized as personnel expense.

No expense is recognized for awards that do not ultimately vest.

Employee Leave Entitlement. Employee entitlements to

annual leave are recognized as a liability when they are accrued to
the employees. The undiscounted liability for leave expected to be
settled wholly before twelve months after the end of the annual
reporting period is recognized for services rendered by employees
up to the end of the reporting period

Common and Preferred Stocks and Capital in Excess of Par Value

The Parent Company has issued capital stock that is classified as equity.
Incremental costs directly attributable to the issue of new capital stock are
shown as a deduction, net of tax, from the proceeds. Capital in excess of par
value represents the excess of the net proceeds over the stated par value of
shares.

Treasury Stock
Shares of the Parent Company that are acquired by the Parent Company
are recorded at cost and deducted from equity in the parent company
statement of financial position. No gain or loss is recognized in the parent
company statement of income on the purchase, sale, re-issue or cancellation
of treasury shares. Any difference between the carrying amount and the
consideration, if re-issued, is recognized in capital in excess of par value.

Retained Earnings
The amount included in retained earnings includes profit attributable to
the Parent Companys stockholders and reduced by dividends. Dividends are
recognized as a liability and deducted from retained earnings when they are
declared. Dividends for the year that are approved after the reporting date
are dealt with as an event after the financial reporting date. Retained
earnings may also include effect of changes in accounting policy as may be
required by the standards transitional provisions .

Revenue Recognition
Revenue is recognized to the extent that it is probable that the
economic benefits will flow to the Parent Company and the amount of the
revenue can be measured reliably, regardless of when the payment is
being made. Revenue is measured at the fair value of the consideration
received or receivable, taking into account contractually defined terms of
payment. The Parent Company assesses its revenue arrangements
against specific criteria in order to determine if it is acting as principal or
agent. The Parent Company has concluded that it is acting as a principal
in all of its revenue arrangements. The following specific recognition
criteria must also be met before revenue is recognized:
Dividend Income. Revenue is recognized when the Parent
Companys right to receive the payment is established.

Finance Income. Finance income is recognized using the EIR, which

is the rate that exactly discounts estimated future cash receipts through
the expected life of the financial instrument or a shorter period, where
appropriate, to the net carrying amount of the financial asset.

Rental Income. Rental income is recognized on a straight-line basis

over the lease term.

Management Fees. Revenue is recognized as services are

rendered. Commission Income. Revenue is recognized as services are
rendered. Other Income. Revenue is recognized when earned.

Costs and Expenses

Costs and expenses are decreases in economic benefits
during the accounting period in the form of outflows or
decrease of assets or incurrence of liabilities that result in
decreases in equity, other than those relating to distributions
to equity participants. Costs and expenses are generally
recognized when the services are used or the expenses arise.
Income Taxes
Current Income Tax. Current income tax assets and
liabilities for the current period are measured at the amount
expected to be recovered from or paid to the taxation
authority. The tax rates and tax laws used to compute the
amount are those that are enacted or substantively enacted
as at the financial reporting date.

Deferred Tax. Deferred tax is provided using the liability

method on temporary differences between the tax bases of
assets and liabilities and their carrying amounts for financial
reporting purposes at the financial reporting date.

Deferred tax assets are recognized for all deductible temporary

differences, carry-forward of unused tax credits from excess minimum
corporate income tax (MCIT) and net operating loss carryover (NOLCO), to
the extent that it is probable that taxable profit will be available against
which the deductible temporary differences, and the carry-forward of MCIT
and NOLCO can be utilized except:
where the deferred tax asset relating to the deductible temporary
difference arises from the initial recognition of an asset or liability in a
transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting income nor taxable income or
loss; and
in respect of deductible temporary differences associated with
investments in subsidiaries and associates, deferred tax assets are
recognized only to the extent that it is probable that the temporary
differences will reverse in the foreseeable future and taxable income will be
available against which the temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each financial

reporting date and reduced to the extent that it is no longer probable that
sufficient future taxable profit will be available to allow all or part of the
deferred tax asset to be utilized. Unrecognized deferred tax assets are
reassessed at each financial reporting date and are recognized to the extent
that it has become probable that sufficient future taxable income will allow
the deferred tax asset to be recovered.

Deferred tax liabilities are recognized for all taxable temporary

differences, except:
where the deferred tax liability arises from the initial recognition of
goodwill or of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with
investments in subsidiaries and associates where the timing of the
reversal of the temporary differences can be controlled and it is
probable that the temporary differences will not reverse in the
foreseeable future.

Deferred income tax assets and liabilities are measured at the tax
rates that are expected to apply to the year when the asset is realized
or the liability is settled, based on tax rates (and tax laws) that have
been enacted or substantively enacted as at the financial reporting
date.

Deferred tax assets and deferred tax liabilities are offset, if a legally
enforceable right exists to set off current tax assets against current tax
liabilities and the deferred taxes relate to the same taxable entity and
the same taxation authority.

Leases
The determination whether an arrangement is, or contains, a
lease is based on the substance of the arrangement at inception
date, whether the fulfillment of the arrangement is dependent on
the use of a specific asset or assets or the arrangement conveys a
right to use the asset, even if that right is not explicitly specified in
an arrangement.

Parent Company as Lessee. Leases where the Parent

Company does not acquire substantially all the risks and benefits of
ownership of the asset are classified as operating leases. Operating
lease payments are recognized as expense in the parent company
statement of income on a straight-line basis over the lease term.

Parent Company as Lessor. Leases where the Parent

Company does not transfer substantially all the risk and benefits of
ownership of the asset are classified as operating lease. Initial
direct cost incurred in negotiating an operating lease are added to
the carrying amount of the leased asset and recognized over the
lease term on the same bases as rental income. Contingent rents
are recognized as revenue in the period in which they are earned.

Foreign Currency Transactions

The Parent Companys financial statements are presented in Philippine
peso, which is the Parent Companys functional and presentation currency.
Transactions in foreign currencies are initially recorded using the exchange
rate at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated at the functional currency
spot rate of exchange ruling at financial reporting date. All exchange
differences are taken to the parent company statement of income.
Nonmonetary items that are measured in terms of historical cost in a
foreign currency are translated using the exchange rates as at the dates of
initial transactions.
Nonmonetary items measured at fair value in a foreign currency are
translated using the exchange rates at the date when the fair value was
determined.

Segment Reporting
For purposes of financial reporting, the Parent Company has only one
reportable segment, which is investment holding.

For management purposes, the Parent Company is organized and

managed under a single business segment which is the basis upon which
the Parent Company reports its segment information. The Parent
Companys investment holding segment is principally the management of
investments in subsidiaries and associates.

The Parent Companys performance is not measured as a

standalone entity but on a consolidated basis and evaluated based on
segment income which is measured consistently with the consolidated
statement of income.

The Parent Companys operating businesses are organized and

managed separately according to the nature of the products and
services, with each segment representing a strategic business unit that
offers different products and serves different markets. The Parent
Company conducts majority of its business activities in the following
areas power generation, real estate development, manufacturing and
others (investment holdings, construction and securities transfer
services).

Provisions and Contingencies

Provisions are recognized when the Parent Company has a present
obligation (legal or constructive) as a result of a past event, it is
probable that an outflow of resources embodying economic benefits will
be required to settle the obligation and a reliable estimate can be made
oF
the amount of the obligation. Where the Parent Company expects a
provision to be reimbursed, the reimbursement is recognized as a
separate asset but only when the receipt of the reimbursement is
virtually certain. The expense relating to any provision is presented in
the parent company statement of income net of any reimbursement.

If the effect of the time value of money is material, provisions are

determined by discounting the expected future cash flows at a pre-tax
rate that reflects, where appropriate, the risks specific to the liability.
Where discounting is used, the increase in the provision due to the
passage of time is recognized as finance cost in the parent company
statement of income.

Contingent liabilities are not recognized in the parent company

financial statements but are disclosed in the notes to the parent company
financial statements unless the possibility of an outflow of resources
embodying economic benefits is remote. Contingent assets are not
recognized but are disclosed in the notes to the parent company financial
statements when an inflow of economic benefits is probable.

Events after the Reporting Date

Post year-end events that provide additional information about the
Parent Companys position at the reporting date (adjusting events) are
reflected in the parent company financial statements. Post year-end
events that are not adjusting events are disclosed in the notes to the
parent company financial statements when material.

Significant Accounting Judgments, Estimates and Assumptions

The preparation of the parent company financial statements requires management to

make judgments, estimates and assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the
reporting period. However, uncertainty about these judgments, estimates and assumptions
could result in outcomes that would require a material adjustment to the carrying amount of
the asset or liability affected in future periods.

Judgments
In the process of applying the Parent Companys accounting policies, management has
made the following judgments, which have the most significant effect on the amounts
recognized in the parent company financial statements.

Determination of Functional Currency. The Parent Company has determined that its
functional currency is the Philippine peso and the currency of the primary economic
environment in which the Parent Company operates and the currency that mainly influences
the sources of its revenues and costs.

Operating Lease Commitments - Company as Lessor. The Parent Company has

entered into lease agreements of its office spaces, parking lots and investment properties
portfolio. The Parent Company has determined that it retains all the significant risks and
rewards of ownership of these properties which are leased out on operating leases.

Operating Lease Commitments - Company as Lessee. The Parent Company has

entered into a lease agreement of office space from a related party. The Parent Company
has determined that it has not acquired all the significant risks and rewards of ownership of
the leased property and accordingly, accounts for the lease as an operating lease.

Estimates and Assumptions

The key assumptions concerning the future and other key sources of
estimation uncertainty at the financial reporting date, 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. The Parent Company based its
assumptions and estimates on parameters available when the parent company
financial statements were prepared. Existing circumstances and assumptions
about future development however, may change due to market changes or
circumstances arising beyond the control of the Parent Company. Such changes
are reflected in the assumptions when they occur.

Impairment of Loans and Receivables. The Parent Company maintains

allowances for impairment losses on receivables at a level considered adequate to
provide for potential uncollectible receivables. The level of this allowance is
evaluated by the Parent Company on the basis of factors that affect the
collectibility of the accounts. These factors include, but are not limited to, the
length of the Parent Companys relationship with debtors, their payment behavior
and known market factors. The Parent Company reviews the age and status of
the receivables, and identifies accounts that are to be provided with allowance on
a continuous basis. The Parent Company also evaluates its receivables from a
portfolio perspective, to determine whether there are collective indicators of
incurred loss. The amount and timing of recorded expenses for any period would
differ if the Parent Company made different judgment or utilized different
estimates. An increase in the Parent Companys allowance for impairment losses
on receivables would increase the Parent Companys recorded expenses and
decrease current assets.

Impairment of Investments in Equity Securities. The Parent

Company considers investment in equity securities as impaired when there
has been a significant or prolonged decline in the fair value of such
investments below their cost or where other objective evidence of
impairment exists. The determination of what is significant or
prolonged requires judgment. The Parent Company treats significant
generally as 20% or more and prolonged as greater than
12 months. In addition, the Parent Company evaluates other factors,
including normal volatility in share price for quoted equities and the future
cash flows and the discount factors for unquoted equities.
Estimating Useful Lives of Property and Equipment, and
Investment Properties. The Parent Company estimates the useful lives
of its property and equipment and investment properties based on
collective assessment of the industry practice, internal evaluation and
experience with similar assets. The estimated useful lives of property and
equipment and investment properties are reviewed at each financial
reporting date and updated if expectations differ from previous estimates
due to physical wear and tear, technical or commercial obsolescence and
legal or other limits in the use of the property and equipment and
investment properties. A reduction in the estimated useful lives of the
property and equipment and investment properties would increase
depreciation expense and decrease noncurrent assets.

Impairment of Investments in and Deposits to Subsidiaries and Associates,

Property and Equipment, Investment Properties and Other Noncurrent Assets.
The Parent Companys management conducts an impairment review of its nonfinancial
assets when certain indicators are present. This requires the Parent Companys
management to make estimates and assumptions of the future cash flows expected to be
generated from the continued use and ultimate disposition of such assets and the
appropriate discount rate to determine the recoverable value of the assets.
Future events could cause the Parent Company to conclude that the investments in
and deposits to subsidiaries and associates, property and equipment, investment
properties and other noncurrent assets are impaired. Any resulting impairment loss could
have a material adverse impact on the Parent Companys financial condition and results
of operations.
Calculation of Retirement and Other Employee Benefits Liability. The present
value of the retirement and other employee benefit obligations 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 for retirement benefits include the discount
rate and future salary rate increase. Any changes in these assumptions will impact the
carrying amount of retirement and other employee benefit obligations.

The Parent Company determines the appropriate discount rate at each financial
reporting date. This is the interest rate used to determine the present value of
estimated future cash outflows expected to be required to settle the retirement and other
employee benefit obligations. In determining the appropriate discount rate, the Parent
Company considers the interest rates on government bonds that are denominated in the
currency in which the benefits will be paid, and that have terms to maturity
approximating the terms of the related retirement and other employee benefit
obligations.

Estimation of Share-based Payments. The Parent Company

measures the cost of equity-settled transactions with employees by
reference to the fair value of the equity instruments at the date at which
they are granted. Estimating fair value for share-based payments requires
determining the most appropriate valuation model for a grant of equity
instruments, which is dependent on the terms and conditions of the grant.
This also requires determining the most appropriate inputs to the valuation
model including the share price, the expected life of the option, volatility
and dividend yield and making assumptions about them.

Recognition of Deferred Income Tax Assets. The Parent Companys

assessment on the recognition of deferred income tax assets on deductible
temporary differences is based on the forecasted taxable income of the
following reporting period. This forecast is based on the Parent Companys
past results and future expectations on revenues and expenses.

Fair Value of Financial Instruments. Certain financial assets and

financial liabilities are required to be carried at fair value, which requires the
use of accounting estimates and judgment. While significant components of
fair value measurement are determined using verifiable objective evidence
(i.e., foreign exchange rates, interest rates and volatility rates), the timing
and amount of changes in fair value would differ with the valuation
methodology used. Any change in the fair value of these financial assets
and financial liabilities would directly affect profit and loss and equity.

Legal Contingencies. The Parent Company is involved in various legal

proceedings. The Parent Company has developed estimates of probable costs
for the resolution of possible claims in consultation with the external counsels
handling the Parent Companys defense for various legal proceedings and
regulatory assessments and is based upon an analysis of potential results.

The Parent Company, in consultation with its external legal counsel, does
not believe that these proceedings will have a material adverse effect on the
parent company financial statements.
However, it is possible that future results of operations could be materially
affected by changes in the estimates or the effectiveness of managements
strategies relating to these proceedings.