Professional Documents
Culture Documents
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.
Basis of Preparation
The parent company financial statements have been prepared in compliance
with Philippine Financial Reporting Standards (PFRS).
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.
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.
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).
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.
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.
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
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.
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 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,
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Segment Reporting
For purposes of financial reporting, the Parent Company has only one
reportable segment, which is investment holding.
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.
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.
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.