Globe Telecom, Inc.

and Subsidiaries
Consolidated Financial Statements
December 31, 2016 and 2015
and
Years Ended December 31, 2016, 2015 and 2014

and

Independent Auditor’s Report

GLOBE TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 31
Notes 2016 2015
(In Thousand Pesos)
ASSETS
Current Assets
Cash and cash equivalents 16.5, 28.10, 30 ₱8,632,852 ₱11,814,379
Receivables – net 4, 16.5, 28.2.2 26,944,645 21,935,775
Inventories and supplies – net 5 4,579,954 4,489,182
Derivative assets 28.10 68,311 600,939
Prepayments and other current assets 6 12,796,892 8,232,428
53,022,654 47,072,703
Noncurrent Assets
Property and equipment – net 4, 7, 16 142,251,981 129,039,522
Intangible assets and goodwill – net 8 14,833,220 13,056,925
Investments 10 34,181,452 1,498,565
Deferred income tax assets – net 24 2,622,703 1,324,081
Derivative assets 28.10 755,137 481,342
Other noncurrent assets 11, 28.10 2,195,963 3,206,613
196,840,456 148,607,048
Total Assets ₱249,863,110 ₱195,679,751

LIABILITIES AND EQUITY

Current Liabilities
Accounts payable and accrued expenses 12, 16, 28.10 ₱59,137,686 ₱49,827,302
Notes payable 14 4,500,000 -
Current portion of long-term debt 14, 28.10 5,830,319 7,973,594
Unearned revenues 4 5,090,421 4,938,233
Income tax payable 24 1,105,931 1,519,639
Provisions 13 6,631,612 1,160,118
Derivative liabilities 28.10 105,928 111,278
82,401,897 65,530,164
Noncurrent Liabilities
Long-term debt – net of current portion 14, 28.10 95,398,272 64,255,264
Deferred income tax – net 24 1,916,923 2,211
Other long-term liabilities 15, 18.2, 28.10 6,669,716 6,494,330
103,984,911 70,751,805
Total Liabilities 186,386,808 136,281,969
Equity
Paid-up capital 17 44,505,703 44,486,976
Cost of share-based payments 18.1 584,586 338,008
Other reserves 17.6 (1,072,925) (1,211,513)
Retained earnings 17.5 19,422,402 15,778,557
Equity attributable to equity holders of the Parent 63,439,766 59,392,028
Non-controlling interest 36,536 5,754
Total Equity 63,476,302 59,397,782
Total Liabilities and Equity ₱249,863,110 ₱195,679,751
See accompanying Notes to Consolidated Financial Statements.

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GLOBE TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Years Ended December 31

Notes 2016 2015 2014
(In Thousand Pesos, Except Per Share Figures)
REVENUES
Service revenues 16, 29 ₱119,989,546 ₱113,679,226 ₱99,024,604
Nonservice revenues 29 6,193,657 6,289,968 4,211,109
126,183,203 119,969,194 103,235,713
INCOME
Interest income 19, 29 151,589 518,537 682,998
Gain on disposal of property and equipment – net 29 101,232 57,642 101,159
Other income – net 20, 29 983,186 2,130,853 470,647
1,236,007 2,707,032 1,254,804
COSTS AND EXPENSES
General, selling and administrative expenses 21 51,872,596 48,766,962 41,382,877
Depreciation and amortization 7, 8, 29 23,848,646 21,132,698 18,123,524
Cost of sales 5, 29 11,914,114 13,665,203 10,661,344
Interconnect costs 29 9,623,127 9,007,919 8,429,934
Financing costs 14, 22, 25, 29 4,096,826 3,372,924 2,565,706
Impairment losses and others 23, 29 3,271,301 3,109,520 3,720,169
Equity in net losses of associates and joint ventures 10, 29 855,198 153,512 224,257
105,481,808 99,208,738 85,107,811
INCOME BEFORE INCOME TAX 21,937,402 23,467,488 19,382,706
PROVISIONS FOR INCOME TAX
Current 24 5,556,965 6,203,825 5,879,878
Deferred 24 491,938 779,213 130,636
6,048,903 6,983,038 6,010,514
NET INCOME 15,888,499 16,484,450 13,372,192
OTHER COMPREHENSIVE INCOME (LOSS) 17
Item that will not be reclassified into profit or loss in
subsequent periods:
Remeasurement gains (losses) on defined benefit plan – net 197,508 (266,172) (278,551)
Items that will be reclassified into profit or loss in
subsequent periods:
Transactions on cash flow hedges – net (95,565) 923 5,407
Changes in fair value of available-for-sale
investment in equity securities 13,440 24,267 20,392
Exchange differences arising from translations of
foreign investments 23,205 7,322 14,474
Other Comprehensive Income (Loss), net of tax 138,588 (233,660) (238,278)
TOTAL COMPREHENSIVE INCOME ₱16,027,087 ₱16,250,790 ₱13,133,914
(Forward)

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 For the Years Ended December 31
Notes 2016 2015 2014
(In Thousand Pesos, Except Per Share Figures)
Total net income attributable to:
Equity holders of the Parent ₱15,878,415 ₱16,496,644 ₱13,376,381
Non-controlling interest 10,084 (12,194) (4,189)
15,888,499 16,484,450 13,372,192
Total comprehensive income attributable to:
Equity holders of the Parent 16,017,003 16,262,984 13,138,103
Non-controlling interest 10,084 (12,194) (4,189)
₱16,027,087 ₱16,250,790 ₱13,133,914
Earnings Per Share
Basic 27 ₱115.45 ₱120.11 ₱98.64

Diluted 27 ₱115.27 ₱119.92 ₱98.41

Cash dividends declared per common share 17 ₱88.00 ₱83.00 ₱75.00

See accompanying Notes to Consolidated Financial Statements.

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GLOBE TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Year Ended December 31, 2016

Attributable to Equity Holders of the Parent
Cost of
Additional Share- Other
Capital Paid-in Based Reserves Retained Non-controlling
Notes Stock Capital Payments (Note17) Earnings Subtotal Interest Total
(In Thousand Pesos)
As of January 1, 2016 ₱8,429,713 ₱36,057,263 ₱338,008 (₱1,211,513) ₱15,778,557 ₱59,392,028 ₱5,754 ₱59,397,782
Total comprehensive income for
the year - - - 138,588 15,878,415 16,017,003 10,084 16,027,087
Dividends on: 17.3
Common Stock - - - - (11,682,483) (11,682,483) - (11,682,483)
Preferred Stock - voting - - - - (32,027) (32,027) - (32,027)
Preferred Stock - non-voting - - - - (520,060) (520,060) - (520,060)
Cost of share-based payments 18.1 - - 260,269 - - 260,269 - 260,269
Exercise of stock options 17.2 791 17,936 (13,691) - - 5,036 - 5,036
Non-controlling interest arising from
business combination - - - - - - 20,698 20,698
As of December 31, 2016 ₱8,430,504 ₱36,075,199 ₱584,586 (₱1,072,925) ₱19,422,402 ₱63,439,766 ₱36,536 ₱63,476,302

(Forward)


   For the Year Ended December 31, 2015
    Attributable to Equity Holders of the Parent
Additional Cost of Other
Capital Paid-in Share-Based Reserves Retained Non-controlling
  Notes Stock Capital Payments (Note17) Earnings Subtotal Interest Total
    (In Thousand Pesos)
As of January 1, 2015 ₱8,429,229 ₱36,049,013 ₱189,433 (₱977,853) ₱10,852,478 ₱54,542,300 (₱4,634) ₱54,537,666
Total comprehensive income for
the year - - - (233,660) 16,496,644 16,262,984 (12,194) 16,250,790
Dividends on: 17.3
Common Stock - - - - (11,017,355) (11,017,355) - (11,017,355)
Preferred Stock – voting - - - - (33,150) (33,150) - (33,150)
Preferred Stock – non-voting - - - - (520,060) (520,060) - (520,060)
Cost of share-based payments 18.1 - - 153,994 - - 153,994 - 153,994
Exercise of stock options 17.2 484 8,196 (5,419) - - 3,261 - 3,261
Equity transaction costs on non-voting preferred
stock - 54 - - - 54 - 54
Non-controlling interest arising from
subscription - - - - - - 10 10
Non-controlling interest arising from business
combination - - - - - - 22,572 22,572

As of December 31, 2015 ₱8,429,713 ₱36,057,263 ₱338,008 (₱1,211,513) ₱15,778,557 ₱59,392,028 ₱5,754 ₱59,397,782

    For the Year Ended December 31, 2014

    Attributable to Equity Holders of the Parent
Additional Cost of Other
Capital Paid-in Share-Based Reserves Retained Non-controlling
  Notes Stock Capital Payments (Note 17) Earnings Subtotal Interest Total
    (In Thousand Pesos)
As of January 1, 2014 ₱7,422,360 ₱26,980,036 ₱261,144 (₱739,575) ₱7,715,286 ₱41,639,251 ₱- ₱41,639,251
Total comprehensive income
for the year - - - (238,278) 13,376,381 13,138,103 (4,189) 13,133,914
Dividends on: 17.3
Common stock - - - - (9,952,702) (9,952,702) - (9,952,702)
Preferred stock – voting - - - - (26,457) (26,457) - (26,457)
Preferred stock – non-voting - - - - (260,030) (260,030) - (260,030)
Cost of share-based payments 18.1 - - 31,841 - - 31,841 - 31,841
Issuance of non-voting preferred stock 1,000,000 9,000,000 - - - 10,000,000 - 10,000,000
Equity transaction costs on non-voting preferred
stock - (61,429) - - - (61,429) - (61,429)
Non-controlling interest arising from a business
combination - - - - - - (445) (445)
Exercise of stock options 17.2 6,869 130,406 (103,552) - - 33,723 - 33,723

As of December 31, 2014 ₱8,429,229 ₱36,049,013 ₱189,433 (₱977,853) ₱10,852,478 ₱54,542,300 (₱4,634) ₱54,537,666
See accompanying Notes to Consolidated Financial Statements.

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GLOBE TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31

Notes 2016 2015 2014
CASH FLOWS FROM OPERATING ACTIVITIES (In Thousand Pesos)
Income before income tax ₱21,937,402 ₱23,467,488 ₱19,382,706
Adjustments for:
Depreciation and amortization 7, 8 23,848,646 21,132,698 18,123,524
Interest expense – net 22 3,408,899 2,774,078 2,326,171
Provisions and impairment losses 23 2,934,310 2,693,569 3,035,235
Equity in net losses of associates and joint ventures 10 855,198 153,512 224,257
Foreign exchange losses (gains) – net 22 525,024 457,295 (884)
Pension expense 18.2 594,557 543,248 417,653
Provisions for inventory obsolescence 23 341,759 384,143 437,511
Cost of share-based payments 18.1 260,269 153,994 31,841
Loss (gain) on derivative instruments 20, 22 116,960 (31,008) (103,560)
Provisions for (reversals of) claims and assessments 23 79,937 (40,943) 137,185
Loss (gain) on previously held equity interest 9.2 30,186 (431,115) -
Loss on disposal of associate/AFS investments 16,054 - -
Interest income 19 (151,589) (518,537) (682,998)
Gain on disposal of property and equipment (101,232) (57,642) (101,159)
Losses (recoveries) on impairment of property
and equipment and intangible assets 23 (84,705) 72,751 110,238
Gain on disposal of controlling interest in subsidiary 20 - (449,148) -
Gain on fair value of retained interest 20 - (745,831) -
Operating income before working capital changes 54,611,675 49,558,552 43,337,720
Changes in operating assets and liabilities:
Decrease (Increase) in:
Receivables (8,210,048) (5,714,476) (6,275,244)
Inventories and supplies (410,495) (1,532,769) (79,039)
Prepayments and other current assets (4,786,592) 1,371,743 201,119
Other noncurrent assets 754,355 (825,851) (275,508)
Increase (Decrease) in:
Accounts payable and accrued expenses 478,914 (716,472) 4,047,846
Other long-term liabilities 449,880 (172,643) 215,490
Unearned revenues 152,189 40,085 356,504
Cash generated from operations 43,039,878 42,008,169 41,528,888
Income tax paid (5,577,281) (6,055,966) (5,073,730)
Net cash flows from operating activities 37,462,597 35,952,203 36,455,158
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to:
Property and equipment 7 (36,609,815) (31,955,788) (21,120,217)
Investment in joint ventures 10 (21,562,555) (332,500) (548,000)
Intangible assets 8 (135,273) (174,698) (114,913)
Proceeds from loans receivable 180,000 - 532,027
Proceeds from sale of property and equipment 170,116 141,759 197,773
Interest received 155,672 134,340 786,531
Dividends received 115,257 22,000 -
Proceeds from disposal of an investment in associate 16,120
Net cash inflow (outflow) from acquisition of subsidiaries,
net cash acquired 9 13,671 (1,318,689) (12,251)
Net cash inflow (outflow) from sale of controlling interest in
subsidiary 10.2 (4,780) 923,491 -
Proceeds from return of investments 10 - - 62,944
Net cash flows used in investing activities (57,661,587) (32,560,085) (20,216,106)
(Forward)

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GLOBE TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31

Notes 2016 2015 2014
(In Thousand Pesos)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings: 14
Long-term ₱36,500,000 ₱12,110,050 ₱7,000,000
Short-term 21,600,000 - 1,700,112
Repayments of borrowings: 14
Long-term (7,993,304) (6,181,143) (6,025,143)
Short-term (17,100,000) - (6,917,068)
Payments of dividends to stockholders: 17.3
Common (11,682,483) (11,017,356) (9,952,702)
Preferred (552,087) (553,210) (26,457)
Issuance of non-voting preferred stock 17.1 - - 9,938,571
Exercise of stock options 5,036 3,261 33,723
Interest paid (3,812,532) (2,767,879) (2,693,173)
Net cash provided by (used in) financing activities 16,964,630 (8,406,277) (6,942,137)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (3,234,360) (5,014,159) 9,296,915
NET FOREIGN EXCHANGE DIFFERENCE ON
CASH AND CASH EQUIVALENTS 52,833 71,630 39,258
CASH AND CASH EQUIVALENTS
AT THE BEGINNING OF YEAR 11,814,379 16,756,908 7,420,735
CASH AND CASH EQUIVALENTS AT THE END OF 16, 28.10,
YEAR 30 ₱8,632,852 ₱11,814,379 ₱16,756,908
See accompanying Notes to Consolidated Financial Statements.

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 -8-

GLOBE TELECOM, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 Corporate Information
Globe Telecom, Inc. (hereafter referred to as “Globe Telecom”) is a stock corporation
organized under the laws of the Philippines on January 16, 1935, and enfranchised under
Republic Act (RA) No. 7229 and its related laws to render any and all types of domestic and
international telecommunications services. Globe Telecom is one of the leading providers of
digital wireless communications services in the Philippines under the Globe Postpaid and
Prepaid, and Touch Mobile (TM) using a fully digital network. It also offers domestic and
international long distance communication services or carrier services. Globe Telecom’s
head office is located at The Globe Tower, 32nd Street corner 7th Avenue, Bonifacio Global
City, Taguig, Metropolitan Manila, Philippines. Globe Telecom is listed in the Philippine
Stock Exchange (PSE) and has been included in the PSE composite index since September
17, 2001. Major stockholders of Globe Telecom include Ayala Corporation (AC), Singapore
Telecom International Pte Ltd. (Singtel) and Asiacom Philippines, Inc. None of these
companies exercise control over Globe Telecom.

Innove Communications, Inc. (Innove)

Globe Telecom owns 100% of Innove, a stock corporation organized under the laws of the
Philippines and enfranchised under RA No. 7372 and its related laws to render any and all
types of domestic and international telecommunications services. Innove holds a license to
provide digital wireless communication services in the Philippines. Innove also offers a
broad range of broadband internet and wireline voice and data communication services, as
well as domestic and international long distance communication services or carrier services.
Innove also has a license to establish, install, operate and maintain a nationwide local
exchange carrier (LEC) service, particularly integrated local telephone service with public
payphone facilities and public calling stations, and to render and provide international and
domestic carrier and leased line services. On November 2, 2015, Innove and Techzone
Philippines incorporated TechGlobal Data Center, Inc. (TechGlobal), a joint venture company
formed for the purpose of operating and managing all kinds of data centers, and providing
information technology-enabled, knowledge-based and computer-enabled support services.
Innove and Techzone hold ownership interest of 49% and 51%, respectively. As of
December 31, 2016, TechGlobal has not started commercial operations.

G-Xchange, Inc. (GXI)

Globe Telecom owns 100% of GXI, a stock corporation organized under the laws of the
Philippines and formed for the purpose of developing, designing, administering, managing
and operating software applications and systems, including systems designed for the
operations of bill payment and money remittance, payment facilities through various
telecommunications systems operated by telecommunications carriers in the Philippines and
throughout the world and to supply software and hardware facilities for such purposes. GXI
is registered with the Bangko Sentral ng Pilipinas (BSP) as a remittance agent and electronic
money issuer. GXI handles the mobile payment and remittance service using Globe
Telecom’s network as transport channel under the GCash brand. The service, which is
integrated into the cellular services of Globe Telecom, enables easy and convenient
person-to-person fund transfers via short messaging services (SMS) and allows Globe
Telecom subscribers to easily and conveniently put cash into and get cash out of the GCash
system.

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 -9-

GTI Business Holdings, Inc. (GTI)

Globe Telecom owns 100% of GTI. GTI was incorporated and registered under the laws of
the Philippines, on November 25, 2008, as a holding company. In July 2009, GTI
incorporated its wholly owned subsidiary, GTI Corporation (GTIC), a company organized
under the General Corporation Law of the United States of America, State of Delaware, for
the purpose of engaging in any lawful act or activity for which corporations may be organized
under the Delaware General Corporation Law. GTIC started commercial operations on April
1, 2011. In December 2011, GTI incorporated another wholly owned subsidiary, Globe
Telecom HK Limited (GTHK), a limited company organized under the Companies Ordinance
(Chapter 32 of the Laws of Hong Kong). GTHK started commercial operations on August 1,
2012. On May 10, 2013, GTI incorporated its wholly owned subsidiary, Globetel European
Limited (GTEU) and the latter’s wholly owned subsidiary, UK Globetel Limited (UKGT).
GTEU was incorporated to act as holding company for the operating companies of Globe
Telecom, which proposed to establish operations in Europe, marketing and selling mobile
telecommunications services, to Filipino individuals and businesses located in the United
Kingdom, Spain and Italy. These entities are private limited companies under the Companies
Act of 2006, wherein the registered addresses are in England and Wales. GTEU started
commercial operations on the same date of incorporation while UKGT’s commercial
operations commenced on July 22, 2013.
On July 22, 2013 and October 4, 2013, respectively, GTEU incorporated additional two
European wholly owned subsidiaries which are Globe Mobilé Italy S.r.l. (GMI), a limited
liability company, with registered address in Milan, Italy and Globetel Internacional European
España, S.L. (GIEE), with registered address in Barcelona, Spain. GMI and GIEE
commenced commercial operations on November 24, 2013 and August 7, 2014, respectively.
GMI and GIEE were organized to operate similar to UKGT. On June 2, 2016, the Board of
Directors of GTEU has decided to cease the operations of UKGT, GMI and GIEE effective
July 31, 2016. As of reporting date, completion of regulatory requirements is still in process.
On November 12, 2014, GTI incorporated Globetel Singapore Pte. Ltd. (GTSG), a wholly
owned subsidiary, to provide international cable services that will help strengthen
connectivity between Singapore and the Philippines, and for the purpose of offering full range
of international data services in Singapore.

Kickstart Ventures, Inc. (Kickstart or KVI)

On March 28, 2012, Globe Telecom incorporated Kickstart, a stock corporation organized
under the laws of the Philippines and formed for the purpose of investing in individual,
corporate, or start-up businesses, and to do research, technology development and
commercializing of new business ventures. Kickstart started commercial operations on
March 29, 2012. In February 2014, Kickstart acquired 40% equity interest in Flipside
Publishing Services, Inc. (FPSI) which was accounted for as a subsidiary and consolidated
based on Kickstart’s assessment of relevant facts and circumstances starting February 2014.
In January 2015, FPSI is engaged primarily to acquire publishing rights, produce, publish,
market, and sell printed and electronic books (e-books) and other electronic documents and
content for international and domestic sales. In July 2016, FPSI has ceased operations. As of
reporting date, completion of regulatory requirements is still in process.

Asticom Technology, Inc. (Asticom)

On June 3, 2014, Globe Telecom signed an agreement with Azalea Technology, Inc. and
SCS Computer Systems, Pte. Ltd. acquiring 100% ownership stake in Asticom. Asticom is
engaged in trading, marketing, installing and servicing of computer equipment, peripherals,
manpower, software and other data processing devices. It was consolidated starting
June 2014.

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 -10-

Yondu, Inc. (Yondu)

Globe Telecom previously owned 100% of Yondu, Inc. Yondu is engaged in the development
and creation of wireless products and services accessible through mobile devices or other
forms of communication devices. It also provides internet and mobile value added services,
information technology and technical services including software development and related
services. Yondu is registered with the Department of Transportation and Communication
(DOTC) as a content provider. On September 15, 2015, Globe Telecom sold its controlling
interest in Yondu for a total consideration of ₱670 million and has ceased to consolidate the
latter’s net assets and liabilities as of that date in its consolidated financial statements.
Following this transaction and Yondu’s issuance of additional shares to a third party, Globe
Telecom’s ownership in Yondu was reduced from 100% to 49% and Globe Telecom started
to account for such investment using the equity method on September 15, 2015, as disclosed
in Note 10.1. 

Globe Capital Venture Holdings Inc. (GCVHI)

Globe Telecom owns 100% of GCVHI. GCVHI was incorporated on June 29, 2015. On
July 8 and October 13, 2015, GCVHI incorporated its wholly owned subsidiaries, Globe
Fintech Innovations, Inc. (GFI) and Adspark Holdings, Inc. (AHI), respectively (collectively
referred here as “GCVHI Group”). GCVHI, GFI and AHI were incorporated to act as holding
companies for Globe Telecom’s non-core businesses. GCVHI was consolidated starting
July 2015. On December 28, 2015, AHI incorporated its wholly-owned subsidiary, Adspark
Inc. (AI), to operate as an advertising company. On January 29, 2016, AI. acquired 70% of
the shares of Socialytics Inc. (Socialytics), a social media marketing firm founded in 2013.
On August 5, 2016, GFI incorporated its wholly-owned subsidiary, Fuse Lending, Inc. (Fuse),
to operate as a lending company.
On September 1, 2015, Yondu and GCVHI entered into a Deed of Assignment to assign the
former’s 50% interest in Global Telehealth, Inc. (“GTHI”) to GCVHI for a total consideration
of ₱15 million (Note 10.1).

Bayan Telecommunication Inc. (BTI)

On July 2, 2015, the National Telecommunications Commission (NTC) approved the
conversion of BTI Tranche A convertible portion of the debt to equity, and resulted to Globe
Telecom’s gaining a controlling interest in BTI with increased ownership from 38% to at least
54% of BTI’s outstanding shares. On July 20, 2015, Globe Telecom acquired additional
voting shares of BTI, which increased its controlling interest to approximately 99% in
exchange for cash amounting to ₱1,829.84 million, as disclosed in Note 9.3. BTI was a
subsidiary of Bayan Telecommunications Holdings Corporation (BTHC), a holding company
also incorporated in the Philippines. BTHC was 52.48% owned by Lopez Holdings
Corporation (Lopez Holdings) and 29.52% owned by Lopez Inc. BTI is a facilities-based
provider of data services and fixed-line telecommunications. BTI was consolidated starting
July 2015.
BTI’s subsidiaries are: Radio Communications of the Philippines, Inc. (RCPI), Telecoms
Infrastructure Corp. of the Philippines (Telicphil), Sky Internet, Incorporated (Sky Internet),
GlobeTel Japan (formerly BTI Global Communications Japan, Inc.), BTI Global
Communications Ltd. (BTI - UK), and NDTN Land, Inc. (NLI), (herein collectively referred
to as “BTI Group”). On April 8, 2016, RCPI sold its 100% interest in Alarmnet to a third
party amounting to ₱0.5 million. A Deed of Assignment was executed on March 31, 2016,
assigning the receivables of RCPI from Alarmnet to the buyer amounting to ₱42.31 million.
In July 2016, BTI - UK has ceased operations. As of reporting date, completion of regulatory
requirements is still in process.

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TaoDharma Inc. (Tao)

In March 2013, Globe Telecom entered into a Shareholders’ Agreement with four other
entities to incorporate Tao. Globe Telecom subscribed to 25% preferred shares of Tao
amounting to ₱55.00 million which has been fully paid up as of August 2013. Tao was
established to operate and maintain retail stores in strategic locations within the Philippines
that will sell telecommunications or internet-related services, and devices, gadgets and
accessories. On November 4, 2016, the Board of Directors (BOD) of Globe Telecom
approved the increase in stake in Tao from 25% to 67% resulting to Globe Telecom’s gaining
a controlling interest in Tao in exchange for a total consideration of ₱207.34 million.
The transaction was accounted for as an acquisition of a subsidiary.

2 Summary of Significant Accounting Policies

2.1 Basis of Preparation

The accompanying consolidated financial statements of Globe Telecom, Inc. and its
subsidiaries, collectively referred to as the “Globe Group”, have been prepared under the
historical cost convention method, except for derivative financial instruments and
available-for-sale (AFS) investments that are measured at fair value, certain financial
instruments carried at amortized cost, inventories which are carried at net realizable value,
and accrued pension, which is measured as the excess of the present value of the defined
benefit obligation over the fair value of the plan assets.
The consolidated financial statements of the Globe Group are presented in Philippine Peso
(₱), which is Globe Telecom’s functional currency, and rounded to the nearest thousands,
except when otherwise indicated.
On February 7, 2017, the BOD approved and authorized the release of the consolidated
financial statements of Globe Telecom, Inc. and its subsidiaries as of December 31, 2016
and 2015 and for each of the three years in the period ended December 31, 2016, 2015 and
2014.

2.2 Statement of Compliance

The consolidated financial statements of the Globe Group have been prepared in accordance
with Philippine Financial Reporting Standards (PFRS), which includes all applicable PFRS,
Philippine Accounting Standards (PAS), and Interpretations issued by the International
Financial Reporting Interpretations Committee (IFRIC), Philippine Interpretations
Committee (PIC), and Standing Interpretations Committee (SIC) as approved by the
Financial Reporting Standards Council (FRSC) and the Board of Accountancy, and adopted
by the Securities and Exchange Commission (SEC).

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2.3 Basis of Consolidation

The accompanying consolidated financial statements include the accounts of Globe Telecom
and the following subsidiaries:

Percentage of Ownership
Name of Subsidiary Place of Incorporation Principal Activity 2016 2015
Innove Philippines Wireline voice and data communication 100% 100%
services
GXI Philippines Mobile payment, money remittance 100% 100%
services and electronic money issuer
GTI Philippines Investment and holding company 100% 100%
GTIC United States Wireless and data communication services 100% 100%
GTHK Hong Kong Marketing and selling of products and 100% 100%
services under distributorship
agreement
GTSG Singapore Wireless and data communication services 100% 100%
GTEU United Kingdom Investment and holding company 100% 100%
UKGT** United Kingdom Wireless and data communication services 100% 100%
GMI** Italy Wireless and data communication services 100% 100%
GIEE** Spain Wireless and data communication services 100% 100%
KVI Philippines Investment, research, technology 100% 100%
development and commercializing for
business ventures
FPSI** Philippines E-book solutions 40% 40%
Asticom Philippines Support and shared services provider 100% 100%
GCVHI Philippines Investment and Holding Company 100% 100%
GFI Philippines Holding Company 100% 100%
Fuse Philippines Lending Company 100% -
AHI Philippines Holding Company 100% 100%
AI Philippines Advertising Company 100% 100%
Socialytics Philippines Social media marketing firm 70% -
BTI Philippines Telecommunication services 99% 99%
RCPI Philippines Telecommunication services 91% 91%
Alarmnet* Philippines Sale, maintenance and installation of - 100%
intruder and other alarm equipment
Telicphil Philippines Design, planning, technical administration, 58% 58%
and maintenance
Sky Internet Philippines Communication and information 100% 100%
networking services.
GlobeTel Japan Japan Call center and telemarketing services, 100% 100%
international private leased circuits
and internet services
BTI – UK** United Kingdom Prepaid international phone services 100% 100%
NLI Philippines Acquire and lease land for the use and 65% 65%
. benefit of NLI’s shareholders
Tao*** Philippines Premium dealership 67% 25%

*Deconsolidated in 2016.
**Ceased operations in 2016.
*** Accounted for as Investment in Associate in 2015 (refer to Note 9.2)

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The assets, liabilities, income and expense of subsidiaries are consolidated from the date on
which control is transferred to the Parent Company and ceases to be consolidated from the
date on which control is transferred out of Parent Company.
Control is achieved when the Parent Company is exposed, or has rights, to variable returns
from its involvement with the investee and has the ability to affect those returns through its
power over the investee. Specifically, the Parent Company controls an investee if and only if
the Parent Company has: (a) power over the investee (i.e., existing rights that give it the
current ability to direct the relevant activities of the investee); (b) exposure, or rights,
to variable returns from its involvement with the investee; and (c) the ability to use its power
over the investee to affect its returns.
When the Parent Company has less than a majority of the voting or similar rights of an
investee, the Parent Company considers all relevant facts and circumstances in assessing
whether it has power over an investee, including: (a) the contractual arrangement with the
other vote holders of the investee; (b) rights arising from other contractual arrangements; and
(c) the Parent Company’s voting rights and potential voting rights.
The Globe Group re-assesses whether or not it controls an investee if facts and circumstances
indicate that there are changes to one or more of the three elements of control. 
Non-controlling interests pertain to the equity in a subsidiary not attributable, directly or
indirectly to the Globe Group. Non-controlling interests represent the portion of profit or loss
and net assets in subsidiaries not wholly-owned and are presented in the consolidated
statements of comprehensive income, consolidated statements of changes in equity and
consolidated statements of financial position, separately from the equity attributable to the
Parent. 
Profit or loss and each component of other comprehensive income (OCI) are attributed to the
equity holders of the Parent of the Globe Group and to the non-controlling interests, even if
this results in the non-controlling interests having deficit balance.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for
as an equity transaction. The carrying amounts of the Globe Group’s interests and the non-
controlling interests are adjusted to reflect the changes in their relative interest in the
subsidiaries. Any difference between the amount by which the non-controlling interest are
adjusted and the fair value of the consideration paid or received is recognized directly in
equity and attributed to the equity holders of the Parent. 
If the Globe Group loses control over a subsidiary, it derecognizes the related assets
(including goodwill), liabilities, non-controlling interest and other components of equity
while any resulting gain or loss is recognized in profit or loss. Any investment retained is
recognized at fair value. 
The financial statements of the subsidiaries are prepared for the same reporting year as Globe
Telecom as well as accounting policies for like transactions and other events in similar
circumstances. When necessary, adjustments are made to the financial statements of the
subsidiaries to bring their accounting policies in line with the Globe Group’s accounting
policies. On February 2, 2015, SEC approved the change in accounting period of Asticom
from fiscal year, April 1 - March 31, to calendar year, January 1 - December 31, and approved
by BIR on January 15, 2016. All significant intercompany balances and transactions,
including intercompany profits and losses, were eliminated in full during consolidation in
accordance with the accounting policy on consolidation.

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2.4 Adoption of New Standards, Amendments to Standards and Interpretations

The accounting policies adopted in the preparation of the consolidated financial statements
are consistent with those followed in the preparation of the Globe Group’s consolidated
financial statements as of and for the year ended December 31, 2015, except for the adoption
of following new standards and amendment to standards and interpretations effective on
January 1, 2016.
The nature and impact of each new standard and amendment is described below:

 Amendments to PAS 16: Property, Plant and Equipment

These amendments clarify that a depreciation method that is based on revenue generated by
an activity that includes the use of an asset is not appropriate. This is because such methods
reflects a pattern of generation of economic benefits that arise from the operation of the
business of which an asset is part, rather than the pattern of consumption of an asset’s
expected future economic benefits. The amendments did not have an impact on the Globe
Group’s consolidated financial statements as the Globe Group depreciation methods are not
based on revenue.

 Amendments to PAS 38: Intangible Assets

These amendments introduce a rebuttable presumption that a revenue-based amortization
method for intangible assets is inappropriate for the same reasons as in PAS 16. However, the
International Accounting Standards Board (IASB) states that there are limited circumstances
when the presumption can be overcome:
• the intangible asset is expressed as a measure of revenue (the predominant limiting factor
inherent in an intangible asset is the achievement of a revenue threshold); and
• it can be demonstrated that revenue and the consumption of economic benefits of the
intangible asset are highly correlated (the consumption of the intangible asset is directly
linked to the revenue generated from using the asset).
The amendments have no impact on the Globe Group’s consolidated financial statements.

 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 do not have a material impact to Globe Group. The
annual improvements address the following issues:

 Amendments to PFRS 7: Financial Instruments: Disclosures

The amendments provide additional guidance to clarify whether a servicing contract is
continuing involvement in a transferred asset for the purpose of determining the
disclosures required and clarification on the applicability of the amendments to PFRS 7
on offsetting disclosures to consolidated financial statements.

 Amendment to PAS 19: Employee Benefits

The amendment clarifies that the high quality corporate bonds used in estimating the
discount rate for post-employment benefits should be denominated in the same currency as
the benefits to be paid (thus, the depth of the market for high quality corporate bonds
should be assessed at currency level).

 Amendment to PAS 34: Interim Financial Reporting

The amendment clarifies the meaning of ‘elsewhere in the interim report’ and requires a
cross-reference.

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 Amendments to PAS 1: Presentation of Financial Statements

The amendments clarify that (i) information should not be obscured by aggregating or by
providing immaterial information, (ii) materiality considerations apply to the all parts of the
financial statements, and (iii) even when a standard requires a specific disclosure, materiality
considerations do apply.
The amendments also introduced a clarification that the list of line items to be presented in
the Statement of Financial Position can be disaggregated and aggregated as relevant and
additional guidance on subtotals in these statements, and that an entity's share of OCI of
equity-accounted associates and joint ventures should be presented in aggregate as single line
items based on whether or not it will subsequently be reclassified to profit or loss.
The amendments add additional examples of possible ways of ordering the notes to clarify
that understandability and comparability should be considered when determining the order of
the notes and to demonstrate that the notes need not be presented in the order so far listed in
paragraph 114 of PAS 1. The amendment also removed guidance and examples with regard to
the identification of significant accounting policies that were perceived as being potentially
unhelpful.
The amendments have no impact on the Globe Group’s consolidated financial statements.

 PIC Q&A No. 2016-02 - Accounting treatment of club shares

This interpretation provides guidance on the accounting of club shares held by an entity that
does not give its holders control, joint control or significant influence over the club.
This interpretation does not have any significant impact to the Globe Group.
Several other new standards and amendments apply for the first time in 2016. However, they
do not significantly impact the consolidated financial statements of the Globe Group.

2.5 Future Adoption of New Standards and Amendments to Standards

The Globe Group will adopt the following new standards and amendment to standards
enumerated below when these become effective. Except as otherwise indicated, the Globe
Group does not expect the adoption of these new standards and amendment to standards to
have significant impact on the consolidated financial statements.

 PFRS 9, Financial Instruments (2014)

This standard consists of the following three phases:

Phase 1: Classification and measurement of financial assets and financial liabilities

With respect to the classification and measurement under this standard, all recognized
financial assets that are currently within the scope of PAS 39 will be subsequently measured
at either amortized cost or fair value. Specifically:
• A debt instrument that (i) is held within a business model whose objective is to collect the
contractual cash flows and (ii) has contractual cash flows that are solely payments of
principal and interest on the principal amount outstanding must be measured at amortized
cost (net of any write done for impairment), unless the asset is designated at fair value
through profit or loss (FVTPL) under the fair value option.
• A debt instrument that (i) is held within a business model whose objective is achieved both
by collecting contractual cash flows and selling financial assets and (ii) has contractual
terms that give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding, must be measured at FVTOCI, unless the
asset is designated at FVTPL under the fair value option.
• All other debt instruments must be measured at FVTPL.

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• All equity investments are to be measured in the statement of financial position at fair
value, with gains and losses recognized in profit or loss except that if an equity investment
is not held for trading, an irrevocable election can be made at initial recognition to measure
the investment at FVTOCI, with dividend income recognized in profit or loss.
This standard also contains requirements for the classification and measurement of financial
liabilities and derecognition requirements. One major change from PAS 39 relates to the
presentation of changes in the fair value of a financial liability designated as at FVTPL attributable to
changes in the credit risk for the liability. Under this standard, such changes are presented in other
comprehensive income, unless the presentation of the effect of the change in the liability credit risk
in other comprehensive income would create or enlarge an accounting mismatch in profit or loss.
Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified
to profit or loss. Under PAS 39, the entire amount of the change in the fair value of the financial
liability designated as FVTPL is presented in profit or loss.

Phase 2: Impairment methodology

The impairment model under this standard reflects expected credit losses, as opposed to
incurred credit losses under PAS 39. Under the impairment approach of this standard, it is no
longer necessary for a credit event to have occurred before credit losses are recognized.
Instead, an entity always accounts for expected credit losses and changes in those expected
credit losses. The amount of expected credit losses should be updated at each reporting date to
reflect changes in credit risk since initial recognition.

Phase 3: Hedge accounting

The general hedge accounting requirements for this standard retain the three types of hedge
accounting mechanism in PAS 39. However, greater flexibility has been introduce to the
types of transactions eligible for hedge accounting, specifically broadening the types of
instruments that qualify as hedging instruments and the types of risk components of
non-financial items that are eligible for hedge accounting. In addition, the effectiveness test
has been overhauled and replaced with the principle of economic relationships. Retrospective
assessment of hedge effectiveness is no longer required. Far more disclosure requirements
about an entity’s risk management activities have been introduced.
The standard is effective for annual reporting periods beginning on or after January 1, 2018.
Earlier application is permitted.
The adoption of PFRS 9 will have an effect on the classification and measurement of the
Globe Group’s financial assets but will have no impact on the classification and measurement
of the Globe Group’s financial liabilities. The adoption will also have an effect on the Globe
Group’s application of hedge accounting. The Globe Group is currently assessing the impact
of adopting this standard.

 PFRS 16 - Leases
This standard specifies how a PFRS reporter will recognize, measure, present and disclose
leases. It provides a single lessee accounting model, requiring lessees to recognize assets and
liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a
low value. Lessors continue to classify leases as operating or finance, with PFRS 16’s
approach to lessor accounting substantially unchanged from its predecessor, PAS 17.
The standard is effective for annual reporting periods beginning on or after
January 1, 2019. Earlier application is not permitted, until IFRS 15, Revenue from Contracts
with Customers, is adopted.
The management is still evaluating the impact of PFRS 16 on the Globe Group’s consolidated
financial liabilities as of the reporting period.

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 Amendment to PAS 7 - Disclosure Initiative

The amendment clarifies that entities shall provide disclosures that enable users of financial
statements to evaluate changes in liabilities arising from financing activities.
The amendment is effective for annual reporting periods beginning on or after
January 1, 2017. Earlier application is permitted.
The management is still evaluating the impact of PAS 7 on the Globe Group’s consolidated
financial liabilities as of the reporting period.

 Amendments to PAS 12 - Recognition of Deferred Tax Assets for Unrealized Losses

The amendments clarify the following aspects:
• Unrealized losses on debt instruments measured at fair value and measured at cost for tax
purposes give rise to a deductible temporary difference regardless of whether the debt
instrument's holder expects to recover the carrying amount of the debt instrument by sale
or by use.
• The carrying amount of an asset does not limit the estimation of probable future taxable
profits.
• Estimates for future taxable profits exclude tax deductions resulting from the reversal of
deductible temporary differences.
• An entity assesses a deferred tax asset in combination with other deferred tax assets.
Where tax law restricts the utilization of tax losses, an entity would assess a deferred tax
asset in combination with other deferred tax assets of the same type.
The amendments are effective for annual reporting periods beginning on or after
January 1, 2017. Earlier application is permitted.
The management is still evaluating the impact of PAS 12 on the Globe Group’s consolidated
financial assets and liabilities as of the reporting period.

New Accounting Standards Effective After the Reporting Period Ended

December 31, 2016 - Adopted by FRSC but pending publication in the Official Gazette
by the Board of Accountancy.

The Globe Group will adopt the following once became effective.

 Amendments to PFRS 2 - Classification and Measurement of Share-based Payment

Transactions
The amendments to PFRS 2 include:
a. Accounting for cash-settled share-based payment transactions that contain a performance
condition. The amendment added guidance that introduces accounting requirements for
cash-settled share-based payments that follows the same approach as used for
equity-settled share-based payments.
b. Classification of share-based payment transactions with net settlement features.
The amendment has introduced an exception into PFRS 2 so that a share-based payment
where the entity settles the share-based payment arrangement net is classified as
equity-settled in its entirety provided the share-based payment would have been classified
as equity-settled had it not included the net settlement feature.

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c. Accounting for modifications of share-based payment transactions from cash-settled to

equity-settled. The amendment has introduced the following clarifications:
• On modifications, the original liability recognized in respect of the cash-settled
share-based payment is derecognized and the equity-settled share-based payment is
recognized at the modification date fair value to the extent services have been rendered
up to the modification date.
• Any difference between the carrying amount of the liability as at the modification date
and the amount recognized in equity at the same date would be recognized in profit
and loss immediately.
The amendments are effective for annual periods beginning on or after January 1, 2018 with
earlier application permitted.
The management is still evaluating the impact of PFRS 2 on the Globe Group’s consolidated
financial assets and liabilities as of the reporting period.

 Amendments to PFRS 4 - Applying PFRS 9 ‘Financial Instruments’ with PFRS 4

‘Insurance Contracts’
The amendments provide two options for entities that issue insurance contracts within the
scope of PFRS 4:
• an option that permits entities to reclassify, from profit or loss to other comprehensive
income, some of the income or expenses arising from designated financial assets; this is
the so-called overlay approach; and
• an optional temporary exemption from applying PFRS 9 for entities whose predominant
activity is issuing contracts within the scope of PFRS 4; this is the so-called deferral
approach.
The application of both approaches is optional and an entity is permitted to stop applying
them before the new insurance contracts standard is applied.
An entity applies the deferral approach for annual periods beginning on or after
January 1, 2018.
The management is still evaluating the impact of PFRS 4 on the Globe Group’s consolidated
financial statements as of the reporting period.

 Annual Improvements to PFRSs 2014-2016 Cycle

The annual improvements address the following issues:
 Amendments to PFRS 1 - First-time Adoption of International Financial Reporting
Standards
The amendments include the deletion of short-term exemptions stated in the appendix of
PFRS 1, because they have now served their intended purpose. The amendments are
effective for annual periods beginning on or after January 1, 2018 with earlier application
permitted.
The amendments have no impact on the Globe Group’s consolidated financial statements.

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 Amendments to PFRS 12 - Disclosure of Interests in Other Entities

The amendments clarify the scope of the standard by specifying that the disclosure
requirements in the standard, except for those disclosures needed in the summarized
financial for subsidiaries, joint ventures and associates, apply to an entity’s interests that
are classified as held for sale, as held for distribution or as discontinued operations in
accordance with PFRS 5 Non-current Assets Held for Sale and Discontinued Operations.
The amendments are effective for annual periods beginning on or after January 1, 2017
with earlier application permitted.
The management is still evaluating the impact of PFRS 12 on the Globe Group’s
consolidated financial statements as of the reporting period.

 Amendments to PAS 28 - Investments in Associates and Joint Ventures

The amendments clarify that the election to measure at fair value through profit or loss an
investment in an associate or a joint venture that is held by an entity that is a venture
capital organization, or other qualifying entity, is available for each investment in an
associate or joint venture on an investment-by-investment basis, upon initial recognition.
The amendments are effective for annual periods beginning on or after January 1, 2018
with earlier application permitted.
The management is still evaluating the impact of PAS 28 on the Globe Group’s
consolidated financial statements as of the reporting period.

 Amendments to PAS 40 Investment Property - Transfers of Investment Property

The amendments in Transfers of Investment Property (Amendments to IAS 40) are:
• Stating that an entity shall transfer a property to, or from, investment property when, and
only when, there is evidence of a change in use. A change of use occurs if property meets,
or ceases to meet, the definition of investment property. A change in management’s
intentions for the use of a property by itself does not constitute evidence of a change in
use.
• The list of evidence in paragraph 57(a) - (d) was designated as non-exhaustive list of
examples instead of the previous exhaustive list
The amendments are effective for periods beginning on or after January 1, 2018. Earlier
application is permitted.
The management is still evaluating the impact of PAS 40 on the Globe Group’s consolidated
financial statements as of the reporting period.

 Philippine Interpretations IFRIC 22 Foreign Currency Transactions and Advance

Consideration
The Interpretation covers foreign currency transactions when an entity recognizes a
non-monetary asset or non-monetary liability arising from the payment or receipt of advance
consideration before the entity recognizes the related asset, expense or income. It does not
apply when an entity measures the related asset, expense or income on initial recognition at
the fair value of the consideration received or payed at a date other than the date of initial
recognition of the non-monetary asset or non-monetary liability.
The Interpretation is effective for periods beginning on or after January 1, 2018. Earlier
application is permitted.
The management is still evaluating the impact of IFRIC 22 on the Globe Group’s
consolidated financial statements as of the reporting period.

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 PFRS 15 - Revenue from Contracts with Customers

The standard combines, enhances, and replaces specific guidance on recognizing revenue
with a single standards. An entity will recognize revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services.
It defines a new five-step model to recognize revenue from customer contracts.
• Identify the contract(s) with a customer
• Identify the performance obligations in the contract
• Determine the transaction price
• Allocate the transaction price to the performance obligations in the contract
• Recognize revenue when (or as) the entity satisfies a performance obligation.

Application of this guidance will depend on the facts and circumstances present in a contract
with a customer and will require the exercise of judgment.
The standard is mandatory for annual reporting periods beginning on or after January 1, 2018.
Earlier application is permitted.
The management is still evaluating the impact of PFRS 15 on the Globe Group’s current
revenue recognition.

 PIC Q&A No. 2016-04 - Application of PFRS 15 "Revenue from Contracts with
Customers" on Sale of Residential Properties under Pre-completion Contracts
This interpretation applies to the accounting for revenue from the sale of a residential
property unit under pre-completion stage (i.e., construction is on-going or has not yet
commenced) by a real estate developer that enters into a Contract to Sell (CTS) with a buyer,
and the developer has determined that the contract is within the scope of PFRS 15 by
satisfying all the criteria in paragraph 9 of PFRS 15.
This interpretation does not deal with the accounting for other aspects of real estate sales such
as variable considerations, financing components, commissions and other contract costs,
timing of sales of completed properties, etc.
The management is still evaluating the impact of the new accounting standard on the Globe
Group’s current revenue recognition.

2.6 Significant Accounting Policies

2.6.1 Revenue Recognition

The Globe Group provides mobile and wireline voice, data communication and
broadband internet services which are provided both under postpaid and prepaid
arrangements.
The Globe Group assesses its revenue arrangements against specific criteria in order to
determine if it is acting as principal or agent (see Note 3.1.4).
Revenue is recognized when the delivery of the products or services has occurred and
collectability is reasonably assured.

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Revenue is stated at amounts invoiced and accrued to customers, taking into

consideration the bill cycle cut-off (for postpaid subscribers), the amount charged
against preloaded airtime value (for prepaid subscribers), switch-monitored traffic
(for carriers and content providers) and excludes value-added tax (VAT) and overseas
communication tax. Inbound and outbound traffic charges, net of discounts, are
accrued based on actual volume of traffic monitored by Globe Group’s network and in
the traffic settlement system.

[Link] Service Revenue

[Link].1 Subscribers
Revenues from subscribers principally consist of: (1) fixed monthly service fees for
postpaid wireless, wireline voice, broadband internet, data subscribers and wireless
prepaid and postpaid subscription fees for promotional offers; (2) subscription to
promotional offers, usage of airtime and toll fees for local, domestic and
international long distance calls in excess of consumable fixed monthly service fees
and subscription fees for the promotional offer over the validity period and, less
(a) bonus airtime and free short messaging services (SMS) on Subscribers’
Identification Module (SIM), and (b) prepaid reload discounts, (3) revenues from
value-added services (VAS) such as SMS in excess of consumable fixed monthly
service fees (for postpaid) and free SMS allocations (for prepaid), multimedia
messaging services (MMS), content and infotext services, net of payout to content
providers; (4) mobile data services, (5) inbound revenues from other carriers which
terminate their calls to the Globe Group’s network less discounts; (6) revenues
from international roaming services for Voice, SMS and Data on top of the
subscription promo offers, net of payout to roaming partners; (7) usage of
broadband and internet services in excess of fixed monthly service fees; and
(8) one-time service connection fees (for wireline voice and data subscribers).
Postpaid service arrangements include fixed monthly service fees, which are
recognized over the subscription period on a pro-rata basis. Monthly service fees
billed in advance are initially deferred and recognized as revenues during the period
when earned. Telecommunications services provided to postpaid subscribers are
billed throughout the month according to the bill cycles of subscribers. As a result
of bill cycle cut-off, monthly service revenues earned but not yet billed at the end
of the month are accrued.
Proceeds from over-the-air reloading channels and the sale of prepaid cards are
deferred and shown as “Unearned revenues” in the consolidated statements of
financial position. Revenue is recognized upon actual usage of airtime value net of
free prepaid cards proportionately allocated across all services. Revenue on
subscription based services are recorded over the validity period. Unused load
value is recognized as revenue upon expiration based on the load denomination.
The Globe Group offers loyalty programs which allow its subscribers to
accumulate points when they purchase services from the Globe Group. The points
can then be redeemed for free services, discounts, subject to a minimum number of
points being obtained. The consideration received or receivable is allocated
between the sale of services and award credits. The portion of the consideration
allocated to the award credits is accounted for as unearned revenues. This will be
recognized as revenue upon the award redemption or upon expiration.

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 -22-

[Link].2 Traffic
Inbound revenues refer to traffic originating from other telecommunications
providers terminating to the Globe Group’s network, while outbound charges
represent traffic sent out or using agreed termination rates and/or revenue sharing
with other foreign and local carriers. Adjustments are made to the accrued amount
for discrepancies between the traffic volume per Globe Group’s records and per
records of the other carriers as these are determined and/or mutually agreed upon
by the parties. Outstanding inbound revenues are shown as traffic settlements
receivable under the “Receivables” account, while unpaid outbound charges are
shown as traffic settlements payable under the “Accounts payable and accrued
expenses” account in the consolidated statements of financial position unless a
legal right of offset exists in which case the net amount is shown either under
“Receivables” or “Accounts payable and accrued expenses” account.

[Link].3 GCash
Service revenues of GXI consist of SMS revenue arising from GCash transactions
passing through the telecom networks of Globe Telecom. Service revenue also
includes transaction fees and discounts earned from arrangements with partners and
from remittances made through GCash partners using the Globe Group’s facilities.
The Globe Group earns service revenue from one-time connection fee received from
new partners. Depending on the arrangement with partners and when the fee is
nonconsumable, outright service revenue is recognized upon cash receipt.

[Link].4 Fuse Revenue

Service revenues of Fuse Lending, Inc., consist of effective interest income from
loans. Interest income per borrower is calculated by multiplying the outstanding
loan amount by the number of days it is outstanding by the end of the month and
by the daily interest rate of their loan. Service revenue also includes penalties and
processing fee income.

[Link] Nonservice Revenues

Proceeds from sale of handsets, nomadic broadband sticks, modems, other mobile
devices & accessories, SIM packs, call cards and others are recognized as revenue
upon delivery of the items and the related cost or net realizable value are presented as
“Cost of sales” in the consolidated statements of comprehensive income.

[Link] Others
Interest income other than from lendings is recognized as it accrues using the
effective interest rate method.
Lease income from operating lease is recognized on a straight-line basis over the
lease term.
Dividend income is recognized when the Globe Group’s right to receive payment is
established.

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 -23-

2.6.2 Subscriber Acquisition and Retention Costs

The related costs incurred in connection with the acquisition of wireless and wireline
voice subscribers are charged against current operations, while the related acquisition
costs of data communication and broadband internet subscribers are capitalized.
Subscriber acquisition costs primarily include commissions, handset, phonekit, modems,
mobile internet kit subsidies, device subsidies and selling expenses. Subsidies represent
the difference between the cost of handsets, nomadic broadband sticks, modems, other
mobile devices and accessories, SIM packs, call cards and others (included in the “Cost of
sales” and “Impairment losses and others” account), and the price offered to the
subscribers (included in the “Nonservice revenues” account). The data communication
and broadband internet costs represent the acquisition cost of modems (included in the
“Property and Equipment” account) which are depreciated over a period of two years or
contract term whichever is shorter (included in the “depreciation and amortization”
account). Retention costs for existing postpaid subscribers are in the form of free
handsets, devices and bill credits. Retention costs are charged against current operations
and included under the “General, selling and administrative expenses” account in the
consolidated statement of comprehensive income upon delivery or when there is a
contractual obligation to deliver. Bill credits are deducted from service revenues upon
application against qualifying subscriber bills.

2.6.3 Cash and Cash Equivalents

Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash with original
maturities of three months or less from date of placement and that are subject to an
insignificant risk of change in value.

2.6.4 Financial Instruments

[Link] General

[Link].1 Initial Recognition and Measurement

Financial instruments are recognized in the Globe Group’s consolidated
statements of financial position when the Globe Group becomes a party to the
contractual provisions of the instrument. Purchases or sales of financial assets
that require delivery of assets within the time frame established by regulation or
convention in the marketplace are recognized (regular way trades) on the trade
date, i.e., the date that the Globe Group commits to purchase or sell the asset.
Financial instruments are recognized initially at fair value. Except for financial
instruments at fair value through profit or loss (FVPL), the initial measurement of
financial assets includes directly attributable transaction costs.
The Globe Group classifies its financial assets into the following categories:
financial assets at FVPL, held-to-maturity (HTM) investments, AFS investments,
and loans and receivables. The Globe Group classifies its financial liabilities into
financial liabilities at FVPL and other financial liabilities. The classification
depends on the purpose for which the investments were acquired and whether
they are quoted in an active market. Management determines the classification of
its investments at initial recognition and, where allowed and appropriate,
re-evaluates such designation every reporting date.

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 -24-

[Link].2 Financial Assets or Financial Liabilities at FVPL

This category consists of financial assets or financial liabilities that are held for
trading or designated by management as FVPL on initial recognition. Financial
assets or financial liabilities are classified as held for sale if they are acquired
for the purpose of selling or repurchasing in the near term. Derivatives,
including separated embedded derivatives, are also classified as held for
trading, unless they are designated as effective hedging instruments as defined
by PAS 39.
Financial assets or financial liabilities at FVPL are recorded in the consolidated
statements of financial position at fair value, with changes in fair value being
recorded in the consolidated profit or loss. Interest earned or incurred on the
financial asset or liability is recorded as “Interest income or expense”,
respectively, while dividend income is recorded when the right to receive
payment has been established. Both are recorded in the consolidated profit or
loss.
Financial assets or financial liabilities are classified in this category as
designated by management on initial recognition when any of the following
criteria are met:
 the designation eliminates or significantly reduces the inconsistent treatment
that would otherwise arise from measuring the assets or liabilities or
recognizing gains or losses on a different basis; or
 the assets and liabilities are part of a group of financial assets, financial
liabilities or both which are managed and their performance are evaluated on
a fair value basis, in accordance with a documented risk management or
investment strategy; and information about the grouping is provided
internally on that basis; or
 the financial instrument contains an embedded derivative, unless the
embedded derivative does not significantly modify the cash flows or it is
clear, with little or no analysis, that it would not be separately recorded.
The Globe Group evaluates its financial assets held for trading, other than
derivatives, to determine whether the intention to sell them in the near term is
still appropriate. When in rare circumstances the Globe Group is unable to
trade these financial assets due to inactive markets and management’s intention
to sell them in the foreseeable future significantly changes, the Globe Group
may elect to reclassify these financial assets. The reclassification to loans and
receivables, AFS or HTM depends on the nature of the asset. This evaluation
does not affect any financial assets designated at FVPL using the fair value
option at designation because these instruments cannot be reclassified after
initial recognition.
Derivatives embedded in host contracts are accounted for as separate
derivatives and recorded at fair value if their economic characteristics and risks
are not closely related to those of the host contracts and the host contracts are
not held for trading or designated at fair value though profit or loss. These
embedded derivatives are measured at fair value with changes in fair value
recognized in the consolidated profit or loss. Reassessment only occurs if there
is a change in the terms of the contract that significantly modifies the cash
flows that would otherwise be required.

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 -25-

[Link].3 HTM Investments

HTM investments are quoted non-derivative financial assets with fixed or
determinable payments and fixed maturities for which the Globe Group’s
management has the positive intention and ability to hold to maturity. Where the
Globe Group sells other than an insignificant amount of HTM investments, the
entire category would be tainted and reclassified as AFS investments. After initial
measurement, HTM investments are subsequently measured at amortized cost
using the effective interest rate method, less any impairment losses. Amortized
cost is calculated by taking into account any discount or premium on acquisition
and fees that are an integral part of the effective interest rate. Gains and losses are
recognized in the consolidated profit or loss when the HTM investments are
derecognized or impaired, as well as through the amortization process.
The amortization is included in “Interest income” in the consolidated statement of
comprehensive income. The effects of restatement of foreign
currency-denominated HTM investments are recognized in the consolidated
statements of comprehensive income.
There are no outstanding HTM investments as of December 31, 2016 and 2015.

[Link].4 Loans and Receivables

Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They are not
entered into with the intention of immediate or short-term resale and are not
classified as financial assets held for trading, designated as AFS investments or
designated at FVPL.
This accounting policy relates to the consolidated statement of financial position
caption “Receivables”, which arise primarily from subscriber and traffic revenues
and other types of receivables, which arise primarily from unquoted debt
securities, and other nontrade receivables included under “Prepayments and other
current assets” and loans receivables included under “Other noncurrent assets”.
Receivables are recognized initially at fair value. After initial measurement,
receivables are subsequently measured at amortized cost using the effective
interest rate method, less any allowance for impairment losses. Amortized cost is
calculated by taking into account any discount or premium on the issue and fees
that are an integral part of the effective interest rate.
The effective interest method is a method of calculating the amortized cost of a
debt instrument and of allocating interest income over the relevant period. The
effective interest rate is the rate that exactly discounts estimated future cash
receipts through the expected life of the debt instrument or, when appropriate,
a shorter period, to the net carrying amount on initial recognition.
Penalties, termination fees and surcharges on past due accounts of postpaid
subscribers are recognized as revenues upon collection. The losses arising from
impairment of receivables are recognized in the “Impairment losses and others”
account in the consolidated statement of comprehensive income. The level of
allowance for impairment losses is evaluated by management on the basis of
factors that affect the collectability of accounts (see accounting policy on [Link]
Impairment of Financial Assets).
Other nontrade receivables and loans receivable are recognized initially at fair
value, which normally pertains to the consideration paid. Similar to receivables,
subsequent to initial recognition, other nontrade receivables and loans receivables
are measured at amortized cost using the effective interest rate method, less any
allowance for impairment losses.

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 -26-

[Link].5 AFS Investments

AFS investments are those investments which are designated as such or do not
qualify to be classified or designated as at FVPL, HTM investments or loans and
receivables. They are purchased and held indefinitely, and may be sold in response
to liquidity requirements or changes in market conditions. They include equity
investments.
After initial measurement, AFS investments are subsequently measured at fair
value. Interest earned on holding AFS investments are reported as interest income
using the effective interest rate. The unrealized gains and losses arising from the
fair value changes of AFS investments are included in other comprehensive
income and are reported as “Other reserves” (net of tax where applicable) in the
equity section of the consolidated statement of financial position. When the
investment is disposed of, the cumulative gains or losses previously recognized in
equity is recognized in the consolidated profit or loss.
When the fair value of AFS investments cannot be measured reliably because of
lack of reliable estimates of future cash flows and discount rates necessary to
calculate the fair value of unquoted equity instruments, these investments are
carried at cost, less any allowance for impairment losses. Dividends earned on
holding AFS investments are recognized in the consolidated profit or loss when
the right to receive payment has been established.
The losses arising from impairment of such investments are recognized as
“Impairment losses and others” in the consolidated statements of comprehensive
income.

[Link].6 Other Financial Liabilities

Issued financial instruments or their components, which are not designated at FVPL
are classified as other financial liabilities where the substance of the contractual
arrangement results in the Globe Group having an obligation either to deliver cash or
another financial asset to the holder, or to satisfy the obligation other than by the
exchange of a fixed amount of cash or another financial asset for a fixed number of
own equity shares. The components of issued financial instruments that contain both
liability and equity elements are accounted for separately, with the equity component
being assigned the residual amount after deducting from the instrument as a whole
the amount separately determined as the fair value of the liability component on the
date of issue. After initial measurement, other financial liabilities are subsequently
measured at amortized cost using the effective interest rate method. Amortized cost
is calculated by taking into account any discount or premium on the issue and fees
that are an integral part of the effective interest rate.
Any effects of restatement of foreign currency-denominated liabilities are recognized
in the consolidated profit or loss.
This accounting policy applies primarily to the Globe Group’s debt, accounts payable
and other obligations that meet the above definition (other than liabilities covered by
other accounting standards, such as income tax payable).

[Link].7 Derivative Instruments

[Link].7.1 General
The Globe Group enters into short-term deliverable and nondeliverable
currency forward contracts to manage its currency exchange exposure related
to short-term foreign currency-denominated monetary assets and liabilities
and foreign currency linked revenues.

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 -27-

The Globe Group also enters into long-term currency and interest rate swap
contracts to manage its foreign currency and interest rate exposures arising
from its long-term loan. Such swap contracts are sometimes entered into in
combination with options.

[Link].7.2 Recognition and Measurement

Derivative financial instruments are initially recognized at fair value on the
date on which a derivative contract is entered into and are subsequently
remeasured at fair value. Derivatives are carried as financial assets when the
fair value is positive and as financial liabilities when the fair value is
negative. The method of recognizing the resulting gain or loss depends on
whether the derivative is designated as a hedge of an identified risk and
qualifies for hedge accounting treatment. The objective of hedge accounting
is to match the impact of the hedged item and the hedging instrument in the
consolidated profit or loss. To qualify for hedge accounting, the hedging
relationship must comply with strict requirements such as the designation of
the derivative as a hedge of an identified risk exposure, hedge
documentation, probability of occurrence of the forecasted transaction in a
cash flow hedge, assessment (both prospective and retrospective bases) and
measurement of hedge effectiveness, and reliability of the measurement
bases of the derivative instruments.
Upon inception of the hedge, the Globe Group documents the relationship
between the hedging instrument and the hedged item, its risk management
objective and strategy for undertaking various hedge transactions, and the
details of the hedging instrument and the hedged item. The Globe Group
also documents its hedge effectiveness assessment methodology, both at the
hedge inception and on an ongoing basis, as to whether the derivatives that
are used in hedging transactions are highly effective in offsetting changes in
fair values or cash flows of hedged items.
Hedge effectiveness is likewise measured, with any ineffectiveness being
reported immediately in the consolidated profit or loss.

[Link].7.3 Types of Hedges

The Globe Group designates derivatives which qualify as accounting
hedges as either: (a) a hedge of the fair value of a recognized fixed rate
asset, liability or unrecognized firm commitment (fair value hedge); or (b) a
hedge of the cash flow variability of recognized floating rate asset and
liability or forecasted sales transaction (cash flow hedge).

Fair Value Hedges

Fair value hedges are hedges of the exposure to variability in the fair value of
recognized assets, liabilities or unrecognized firm commitments. The gain or
loss on a derivative instrument designated and qualifying as a fair value
hedge, as well as the offsetting loss or gain on the hedged item attributable to
the hedged risk, are recognized in the consolidated profit or loss in the same
accounting period. Hedge effectiveness is determined based on the hedge
ratio of the fair value changes of the hedging instrument and the underlying
hedged item. When the hedge ceases to be highly effective, hedge
accounting is discontinued.
As of December 31, 2016 and 2015, there were no derivatives designated and
accounted for as fair value hedges.

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Cash Flow Hedges

The Globe Group designates as cash flow hedges the following derivatives:
(a) cross currency swaps as cash flow hedge of foreign exchange and
interest rate risk of United States Dollar (USD) loans (b) principal only
swaps as cash flow hedge of foreign exchange risk of USD loans (c)
interest rate swaps as cash flow hedge of the interest rate risk of a floating
rate obligation, and (d) certain foreign exchange forward contracts as cash
flow hedge of expected USD revenues.
A cash flow hedge is a hedge of the exposure to variability in future cash
flows related to a recognized asset, liability or a forecasted sales
transaction. Changes in the fair value of a hedging instrument that qualifies
as a highly effective cash flow hedge are recognized in “Other reserves,”
which is a component of equity. Any hedge ineffectiveness is immediately
recognized in the consolidated profit or loss.
If the hedged cash flow results in the recognition of a nonfinancial asset or
liability, gains and losses previously recognized directly in equity are
transferred from equity and included in the initial measurement of the cost
or carrying value of the asset or liability. Otherwise, for all other cash flow
hedges, gains and losses initially recognized in equity are transferred from
equity to consolidated profit or loss in the same period or periods during
which the hedged forecasted transaction or recognized asset or liability
affect earnings.
Hedge accounting is discontinued prospectively when the hedge ceases to
be highly effective. When hedge accounting is discontinued, the
cumulative gains or losses on the hedging instrument that has been
recognized in OCI is retained in “Other reserves” until the hedged
transaction impacts consolidated profit or loss. When the forecasted
transaction is no longer expected to occur, any net cumulative gains or
losses previously recognized in “Other reserves” is immediately recycled in
the consolidated profit or loss.
For cash flow hedges of USD revenues, the effective portion of the hedge
transaction coming from the fair value changes of the currency forwards are
subsequently recycled from equity to consolidated profit or loss and is
presented as part of the US dollar-based revenues upon consummation of
the transaction or when the hedge become ineffective.

[Link].7.4 Other Derivative Instruments Not Accounted for as Accounting

Hedges
Certain freestanding derivative instruments that provide economic hedges
under the Globe Group’s policies either do not qualify for hedge accounting
or are not designated as accounting hedges. Changes in the fair values of
derivative instruments not designated as hedges are recognized immediately
in the consolidated profit or loss. For bifurcated embedded derivatives in
financial and nonfinancial contracts that are not designated or do not qualify
as hedges, changes in the fair values of such transactions are recognized in
the consolidated profit or loss.

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 -29-

[Link].7.5 Offsetting
Financial assets and financial liabilities are offset and the net amount is
reported in the consolidated statements 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. This is not generally the case with master
netting agreements; thus, the related assets and liabilities are presented gross
in the consolidated statements of financial position.

[Link] Impairment of Financial Assets

The Globe Group assesses at end of the reporting date whether a financial asset or
group of financial assets is impaired.

[Link].1 Assets Carried at Amortized Cost

If there is objective evidence that an impairment loss on financial assets carried at
amortized cost (e.g., receivables) has been incurred, the amount of the loss is
measured as the difference between the asset’s carrying amount and the present value
of estimated future cash flows discounted at the asset’s original effective interest rate.
Time value is generally not considered when the effect of discounting is not material.
The carrying amount of the asset is reduced through the use of an allowance account.
The amount of the loss is to be recognized in the consolidated profit or loss.
The Globe Group first assesses whether objective evidence of impairment exists
individually for financial assets that are individually significant, and individually or
collectively for financial assets that are not individually significant. If it is
determined that no objective evidence of impairment exists for an individually
assessed financial asset, whether significant or not, the asset is included in a group of
financial assets with similar credit risk characteristics and that group of financial
assets is collectively assessed 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, in a subsequent period, the amount of the impairment loss decreases and the
decrease can be related objectively to an event occurring after the impairment was
recognized, the previously recognized impairment loss is reversed. Any subsequent
reversal of an impairment loss is recognized in the consolidated profit or loss to the
extent that the carrying value of the asset does not exceed what should have been its
amortized cost at the reversal date.
With respect to receivables, the Globe Group performs a regular review of the risk
profile of accounts, designed to identify accounts with objective evidence of
impairment and provide the appropriate allowance for impairment losses. The
review is accomplished using a combination of specific and collective assessment
approaches, with the impairment losses being determined for each risk grouping
identified by the Globe Group.

[Link].1.1 Subscribers
Management regularly reviews its portfolio and assesses if there are accounts
requiring specific provisioning based on objective evidence of high default
probability. Observable data indicating high impairment probability could be
deterioration in payment status, declaration of bankruptcy or national/local
economic indicators that might affect payment capacity of accounts.

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 -30-

Full allowance for impairment losses, net of average recoveries, is provided

for receivables from permanently disconnected wireless, wireline and
broadband subscribers. Permanent disconnections are made after a series of
collection steps following nonpayment by postpaid subscribers. Such
permanent disconnections generally occur within a predetermined period
from due date.
Impairment losses are applied to active wireless, wireline and broadband
accounts specifically identified to be doubtful of collection where there is
information on financial incapacity after considering the other contractual
obligations between Globe Group and the subscriber. Allowance is applied
regardless of age bucket of identified accounts.
Application of impairment losses to receivables, net of receivables with
applied specific loss, is also determined based on the results of net flow to
permanent disconnection methodology.
For wireless, net flow tables are derived from account-level monitoring of
subscriber accounts between different age brackets depending on the defined
permanent disconnection timeline, from current to 210 days past due and up.
The net flow to permanent disconnection methodology relies on the historical
data of net flow tables to establish a percentage (“net flow rate”) of
subscriber receivables that are current or in any state of delinquency as of
reporting date that will eventually result to permanent disconnection. The
allowance for impairment losses is then computed based on the outstanding
balances of the receivables at the end of reporting date and the net flow rates
determined for the current and each delinquency bucket. Full allowance net
of recoveries is provided for receivables from permanently disconnected
accounts.
For wireline voice and broadband subscribers, the allowance for impairment
loss is also determined based on the results of net flow rate to permanent
disconnection computed from account-level monitoring of accounts from
current to 180 days past due and up age bucket. Except for permanently
disconnected and specific active accounts that are assessed to be fully
provided, net of recoveries, the allowance for impairment loss is then
computed based on the outstanding balances of the receivables at the end of
the reporting date and the corresponding impairment rates computed.

[Link].1.2 Traffic
As per PAS 39, impairment provision is recognized in the light of actual
losses incurred by the Globe Group as a result of one or more events that
occurred after the initial recognition of the asset (a “loss event”) and that loss
event (or events) has an impact on the estimated future cash flows of the
financial asset or group of assets that can be reliably estimated.
For traffic receivables, impairment losses are provided on specific or per
carrier basis observing objective evidence of impairment. Objective evidence
of impairment includes the following: a) financial difficulty of interconnect
carriers; b) default or delinquency; c) high probability of bankruptcy or
financial re-organization; and d) historical pattern of collections that amounts
due will not be collected. For receivable balances that appear doubtful of
collection, allowance is provided after review of the status of settlement with
each carrier and roaming partner, taking into consideration normal payment
cycles, recovery experience and credit history of the counterparties.

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 -31-

[Link].1.3 Other receivables

Other receivables from dealers, credit card companies and other parties are
provided with allowance for impairment losses if specifically identified to be
doubtful of collection regardless of the age of the account.

[Link].2 AFS Investments Carried at Cost

If there is objective evidence that an impairment loss has been incurred on an
unquoted equity instrument that is not carried at fair value because its fair value
cannot be reliably measured, or on a derivative asset that is linked to and must be
settled by delivery of such unquoted equity instrument, the amount of the loss is
measured as the difference between the asset’s carrying amount and the present value
of estimated future cash flows discounted at the current market rate of return for a
similar financial asset. The carrying amount of the asset is reduced through the use of
an allowance account.

[Link].3 AFS Investments Carried at Fair Value

If an AFS investment carried at fair value is impaired, an amount comprising the
difference between its cost (net of any principal repayment and amortization) and its
current fair value, less any impairment loss previously recognized in the consolidated
profit or loss, is transferred from equity to profit or loss. Reversals of impairment
losses in respect of equity instruments classified as AFS are not recognized in the
consolidated profit or loss. Reversals of impairment losses on debt instruments are
made through profit or loss if the increase in fair value of the instrument can be
objectively related to an event occurring after the impairment loss was recognized in
the consolidated profit or loss.

[Link] Derecognition of Financial Instruments

[Link].1 Financial Asset

A financial asset (or, where applicable a part of a financial asset or part of a
group of financial assets) is derecognized where:
 the rights to receive cash flows from the asset have expired;
 the Globe Group retains the right to receive cash flows from the asset, but
has assumed an obligation to pay them in full without material delay to a
third party under a “pass-through” arrangement; or
 the Globe Group has transferred its rights to receive cash flows from the
asset and either (a) has transferred substantially all the risks and rewards of
ownership or (b) has neither transferred nor retained the risk and rewards of
the asset but has transferred the control of the asset.
Where the Globe Group has transferred its rights to receive cash flows from an
asset and 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 Globe Group’s continuing involvement in the asset. Continuing
involvement that takes the form of a guarantee over the transferred asset, which
is measured at the lower of the original carrying amount of the asset and the
maximum amount of consideration that the Globe Group could be required to
pay.

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 -32-

[Link].2 Financial Liability

A financial liability is derecognized when the obligation under the liability is
discharged or cancelled or has expired. 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 consolidated profit or loss.

2.6.5 Fair Value Measurement

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 Globe Group.
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 non-financial asset takes into account a market
participant’s 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 Globe Group 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 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 the purpose of fair value disclosures, the Globe Group 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.

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 -33-

2.6.6 Inventories and Supplies

Inventories and supplies are initially measured at cost and subsequently, stated at the
lower of cost and net realizable value (NRV). NRV for handsets, modems, devices and
accessories is the selling price in the ordinary course of business less direct costs to sell,
while NRV for SIM packs, call cards, spare parts and supplies consists of the related
replacement costs. In determining the NRV, the Company considers any adjustment
necessary for obsolescence, which is generally provided at 80% for non-moving items
after a certain period. Cost is determined using the moving average method.
When inventories and supplies are sold, the carrying amount of those inventories is
recognized as an expense in the period in which the related revenue is recognized.

2.6.7 Prepayments
Prepayments, included under “Other current assets” account in the consolidated statement
of financial position, are expenses paid in advance and recorded as asset before they are
utilized. 
This account comprises of advance payment to suppliers and contractors, prepaid rentals
and insurance premiums and other prepaid items and creditable withholding taxes.
Prepaid rentals and insurance premiums and other prepaid items are apportioned over the
period covered by the payment and charged to the appropriate accounts in profit or loss
when incurred.
Prepayments that are expected to be realized for no more than 12 months after the balance
sheet date are classified as current assets; otherwise, these are classified as other
noncurrent assets. 

2.6.8 Value Added Tax (VAT)

Input VAT is recognized when the Globe Group purchases goods or services from a VAT
registered supplier or vendor. This account is offset against any output VAT previously
recognized. Input VAT on capital goods exceeding ₱1 million and input VAT from
purchases of goods and services which remain unpaid at each reporting date are
recognized as “Deferred input VAT” presented under Prepayments and Other Current
Assets (Note 6).

2.6.9 Property and Equipment

Property and equipment, except land, are carried at cost less accumulated depreciation,
amortization and impairment losses. Land is stated at cost.
The initial cost of an item of property and equipment includes its purchase price and
any cost attributable to bringing the property and equipment to its intended location and
working condition. Cost also includes: (a) interest and other financing charges on
borrowed funds specifically used to finance the acquisition of property and equipment
to the extent incurred during the period of installation and construction; and (b) asset
retirement obligations (ARO) specifically on property and equipment
installed/constructed on leased properties.
Expenditures incurred after the property and equipment have been put into operation,
such as repairs and maintenance, are normally charged to income in the period when 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
property and equipment.

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 -34-

Subsequent costs are capitalized as part of property and equipment only when it is
probable that future economic benefits associated with the item will flow to the Globe
Group and the cost of the item can be measured reliably.
Assets under construction (AUC) are carried at cost and transferred to the related property
and equipment account when the construction or installation and the related activities
necessary to prepare the property and equipment for their intended use are complete, and
the property and equipment are ready for service.
Depreciation and amortization of property and equipment commences once the property
and equipment are available for use and computed using the straight-line method over the
estimated useful lives (EUL) of the property and equipment.
Leasehold improvements are amortized over the shorter of their EUL or the
corresponding lease terms.
The EUL of property and equipment are reviewed annually based on expected asset
utilization of expected future technological developments and market behavior.
When property and equipment is retired or otherwise disposed of, the cost and the related
accumulated depreciation, amortization and impairment losses are removed from the
accounts. Any resulting gain or loss is credited to or charged against current operations.

2.6.10 ARO
The Globe Group is contractually required under various contracts to restore leased
property to its original condition and to bear the cost of dismantling and deinstallation at the
end of the contract period. The Globe Group recognizes the present value of these
obligations and capitalizes these costs as part of the carrying value of the related property
and equipment accounts, and are depreciated on a straight-line basis over the useful life of
the related property and equipment or the contract period, whichever is shorter.
The amount of ARO is recognized at present value and the related accretion is recognized
as interest expense.

2.6.11 Intangible Assets

Intangible assets consist of: (1) telecommunications equipment software licenses, corporate
application software and licenses and other VAS software applications that are not integral to
the hardware or equipment; (2) exclusive dealership right in Tao; (3) intangible assets
identified to exist during the acquisition of BTI for its customer contracts, franchise, spectrum
and goodwill; (4) goodwill arising from acquisition of Socialytics and (5) goodwill arising
from acquisition of Tao. Costs directly associated with the development of identifiable
software that generate expected future benefits to the Globe Group are recognized as
intangible assets. All other costs of developing and maintaining software programs are
recognized as expense when incurred.
Intangible assets are initially measured at cost. Subsequently, intangible assets are measured
at cost less accumulated amortization and any impairment losses. The EUL of intangible
assets with finite lives are assessed at the individual asset level. Intangible assets with finite
lives are amortized on a straight-line basis over their useful lives. The periods and method of
amortization for intangible assets with finite useful lives are reviewed annually or more
frequently when an indicator of impairment exists.
Intangible assets are derecognized on disposal, or when no future economic benefits are
expected from use or disposal. A gain or loss arising from derecognition of an intangible asset
is measured as the difference between the net disposal proceeds and the carrying amount of
the asset and is recognized in the consolidated statements of comprehensive income when the
asset is derecognized.

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 -35-

2.6.12 Business Combinations and Goodwill

Business combinations are accounted for using the purchase method. The cost of an
acquisition is measured as the aggregate of the consideration transferred, measured at
acquisition date fair value and the amount of any non-controlling interest in the acquiree.
For each business combination, the Globe Group elects whether it measures the
non-controlling interest in the acquiree either at fair value or at the proportionate share of
the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and
included in administrative expenses in the consolidated profit or loss.
When the Globe Group acquires a business, it assesses the financial assets and financial
liabilities assumed for appropriate classification and designation in accordance with the
contractual terms, economic circumstances and pertinent conditions as at the acquisition
date. This includes the separation of embedded derivatives in host contracts by the
acquiree.
If the business combination is achieved in stages, any previously held equity interest is
remeasured at its acquisition date fair value and any resulting gain or loss is recognized in
profit or loss. It is then considered in the determination of goodwill. Any contingent
consideration to be transferred by the acquirer will be recognized at fair value at the
acquisition date. Subsequent changes to the fair value of the contingent consideration that
is deemed to be an asset or liability will be recognized in accordance with PAS 39 either
in profit or loss or as a change to OCI. If the contingent consideration is classified as
equity, it will not be remeasured. Subsequent settlement is accounted for within equity. In
instances where the contingent consideration does not fall within the scope of PAS 39, it
is measured in accordance with the appropriate PFRS.
Goodwill is initially measured at cost, being the excess of the aggregate of the
consideration transferred and the amount recognized for non-controlling interest over the
net identifiable assets acquired and liabilities assumed. If this consideration is lower than
the fair value of the net assets of the subsidiary acquired, the difference is recognized in
the consolidated profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment
losses. For the purpose of impairment testing, goodwill acquired in a business
combination is, from the acquisition date, allocated to each of the Globe Group’s
cash-generating units (CGUs) that are expected to benefit from the combination,
irrespective of whether other assets or liabilities of the acquiree are assigned to those
units.
Where goodwill forms part of a CGU and part of the operation within that unit is disposed
of, the goodwill associated with the operation disposed of is included in the carrying
amount of the operation when determining the gain or loss on disposal of the operation.
Goodwill disposed of in this circumstance is measured based on the relative values of the
operation disposed of and the portion of the CGU retained.
The Globe Group and acquiree may have a relationship that existed before they
contemplated the business combination, referred to here as a ‘pre-existing relationship’.
A pre-existing relationship between the acquirer and acquiree may be contractual or
non-contractual.

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 -36-

If the business combination in effect settles a pre-existing relationship, the acquirer

recognizes a gain or loss, measured as follows:
(a) for a pre-existing non-contractual relationship (such as a lawsuit), fair value.
(b) for a pre-existing contractual relationship, the lesser of (i) and (ii):
(i) the amount by which the contract is favourable or unfavourable from the
perspective of the acquirer when compared with terms for current market transactions
for the same or similar items. (An unfavourable contract is a contract that is
unfavourable in terms of current market terms. It is not necessarily an onerous
contract in which the unavoidable costs of meeting the obligations under the contract
exceed the economic benefits expected to be received under it.)
(ii) the amount of any stated settlement provisions in the contract available to the
counterparty to whom the contract is unfavourable.
If (ii) is less than (i), the difference is included as part of the business combination
accounting. The amount of gain or loss recognized may depend in part on whether the
acquirer had previously recognized a related asset or liability, and the reported gain or
loss therefore may differ from the amount calculated by applying the above
requirements.

2.6.13 Investments in Associate and Joint Venture

An associate is an entity over which the Globe Group has significant influence.
Significant influence is the power to participate in the financial and operating policy
decisions of the investee, but is not control or joint control over those policies.
A joint venture (JV) is a type of joint arrangement whereby the parties that have joint
control of the arrangement have rights to the net assets of the joint venture. Joint control
is the contractually agreed sharing of control of an arrangement, which exists only when
decisions about the relevant activities require unanimous consent of the parties sharing
control.
The considerations made in determining significant influence or joint control are similar
to those necessary to determine control over subsidiaries.
Investments in associate or JV are measured initially at cost. Subsequent to initial
recognition, Globe Group’s investments in its associate and JV are accounted for using
the equity method. Under the equity method, the investments in an associate and JV are
carried in the consolidated statements of financial position at cost plus post-acquisition
changes in the Globe Group’s share in net assets of the associate and JV, less any
allowance for impairment losses. The profit or loss includes Globe Group’s share in the
results of operations of its associate or JV. Any change in OCI of those investees is
presented as part of the Globe Group’s OCI. In addition, where there has been a change
recognized directly in the equity of the associate or JV, the Globe Group recognizes its
share of any changes and discloses this, when applicable, in OCI.
When the share of losses recognized under the equity method has reduced the investment
to zero, the Globe Group shall discontinue recognizing its share of further losses and
apply it to other interests that, in substance, form part of Globe Group’s net investment in
the associate or JV. If the associate or JV subsequently reports profits, the Globe Group
will resume recognizing its share of those profits only after its share of the profits equal
the share in losses not recognized.
The financial statements of the associate or joint venture are prepared for the same
reporting period as the Globe Group.

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 -37-

Upon loss of significant influence over the associate or joint control over the joint
venture, the Globe Group measures and recognizes any retained investment at its fair
value. Any difference between the carrying amount of the associate or joint venture upon
loss of significant influence or joint control and the fair value of the retained investment
and proceeds from disposal is recognized in the consolidated profit or loss.

2.6.14 Related Party Transactions

A related party transaction is a transfer of resources, services or obligations between the
Parent Company and a related party, regardless of whether a price is charged. Parties are
considered related if one party has control, joint control, or significant influence over the
other party in making financial and operating decisions. An entity that is a post-
employment benefit plan for the employees of the Globe Group and the key management
personnel of the Globe Group are also considered to be related parties.

2.6.15 Impairment of Nonfinancial Assets

For nonfinancial assets, excluding goodwill, an assessment is made at the end of the
reporting date to determine whether there is any indication that an asset may be impaired,
or whether there is any indication that an impairment loss previously recognized for an
asset in prior periods may no longer exist or may have decreased. If any such indication
exists and when the carrying value of an asset exceeds its estimated recoverable amount,
the asset or CGU to which the asset belongs is written down to its recoverable amount.
The recoverable amount of an asset is the higher of its fair value less cost to sell and value
in use. Recoverable amounts are estimated for individual assets or investments or, if it is
not possible, for the CGU to which the asset belongs. For impairment loss on specific
assets or investments, the recoverable amount represents the fair value less cost to sell.
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.
An impairment loss is recognized only if the carrying amount of an asset exceeds its
recoverable amount. An impairment loss is charged against operations in the year in
which it arises. A previously recognized impairment loss is reversed only if there has
been a change in estimate used to determine the recoverable amount of an asset, however,
not to an amount higher than the carrying amount that would have been determined
(net of any accumulated depreciation and amortization for property and equipment and
intangible assets) had no impairment loss been recognized for the asset in prior years.
A reversal of an impairment loss is credited to current operations.
After application of the equity method, the Globe Group determines whether it is
necessary to recognize an impairment loss on its investment in its associate or joint
venture. At each reporting date, the Globe Group determines whether there is objective
evidence that the investment in the associate or joint venture is impaired. If there is such
evidence, the Globe Group calculates the amount of impairment as the difference between
the recoverable amount of the associate or joint venture and its carrying value, and then
recognizes the loss as “Equity in net losses of associates and joint ventures” account in
the consolidated profit or loss.
For assessing impairment of goodwill, a test for impairment is performed annually and
when circumstances indicate that the carrying value may be impaired. Impairment is
determined for goodwill by assessing the recoverable amount of each CGU (or group of
CGUs) to which the goodwill relates. Where the recoverable amount of the CGU is less
than their carrying amount, an impairment loss is recognized. Impairment losses relating
to goodwill cannot be reversed in future periods.

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 -38-

2.6.16 Unearned Revenues

Unearned revenues are recognized when proceeds are collected from wireless subscribers
under prepaid arrangements. These also represent advance payments for leased lines,
installation fees and monthly service fees and points expected to be redeemed under its
Loyalty programmes.

2.6.17 Income Tax

[Link] Current Income Tax

Current tax assets and liabilities for the current and prior periods are measured at the
amount expected to be recovered from or paid to the tax authority. The tax rates and
tax laws used to compute the amount are those that are enacted or substantively
enacted as at the end of the reporting date.

[Link] Deferred Income Tax

Deferred income tax is provided using the balance sheet liability method on all
temporary differences, with certain exceptions, at the end of the reporting date
between the tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes.
Deferred income tax liabilities are recognized for all taxable temporary differences,
with certain exceptions. Deferred income tax assets are recognized for all deductible
temporary differences, with certain exceptions, and carryforward benefits of unused
tax credits from excess minimum corporate income tax (MCIT) over regular corporate
income tax (RCIT) and net operating loss carryover (NOLCO) to the extent that it is
probable that taxable income will be available against which the deductible temporary
differences and the carryforward benefits of unused MCIT and NOLCO can be used.
Deferred income tax is not recognized when it arises from the initial recognition of an
asset or liability in a transaction that is not a business combination and, at the time of
transaction, affects neither the accounting income nor taxable income or loss.
Deferred income tax relating to items recognized directly in equity or OCI is included
in the related equity or OCI account and not in profit or loss.
The carrying amounts of deferred income tax assets are reviewed every end of
reporting date and reduced to the extent that it is no longer probable that sufficient
taxable income will be available to allow all or part of the deferred income tax assets
to be utilized.
Deferred income tax assets and liabilities are offset, if a legally enforceable right
exists to set off current income tax assets against current income tax liabilities and the
deferred income taxes relate to the same taxable entity and the same taxation
authority.
Deferred income tax assets and liabilities are measured at the tax rates that are
expected to apply in the year when the assets are realized or the liabilities are settled
based on tax rates (and tax laws) that have been enacted or substantively enacted as at
the end of the reporting date.
Movements in the deferred income tax assets and liabilities arising from changes in
tax rates are charged or credited to income for the period.

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 -39-

2.6.18 Provisions
Provisions are recognized when: (a) the Globe Group has a present obligation (legal or
constructive) as a result of a past event; (b) it is probable (i.e., more likely than not) that
an outflow of resources embodying economic benefits will be required to settle the
obligation; and (c) a reliable estimate can be made of the amount of the obligation.
Provisions are reviewed every end of the reporting period and adjusted to reflect the
current best estimate. 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
current market assessment of the time value of money and, 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 interest expense under “financing costs” in
consolidated statement of comprehensive income.

2.6.19 Share-based Payment Transactions

Certain employees (including directors) of the Globe Group receive remuneration in the
form of share-based payment transactions, whereby employees render services in
exchange for shares or rights over shares (“equity-settled transactions”) (see Note 18.1.1).
The cost of equity-settled transactions with employees and directors is measured by
reference to the fair value at the date at which they are granted. In valuing equity-settled
transactions, vesting conditions, including performance conditions, other than market
conditions (conditions linked to share prices), shall not be taken into account when
estimating the fair value of the shares or share options at the measurement date. Instead,
vesting conditions are taken into account in estimating the number of equity instruments
that will vest.
The cost of equity-settled transactions is recognized in the consolidated profit or loss,
together with a corresponding increase in equity, over the period in which the service
conditions are fulfilled, ending on the date on which the relevant employees become fully
entitled to the award (‘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 number of awards that, in the opinion of the
management of the Globe Group at that date, based on the best available estimate of the
number of equity instruments, will ultimately vest. Costs of exercised awards plus the
corresponding strike amount are reclassified to the capital accounts.
No expense is recognized for awards that do not ultimately vest, except for awards where
vesting is conditional upon a market condition, which are treated as vesting irrespective
of whether or not the market condition is satisfied, provided that all other performance
conditions are satisfied.
Where the terms of an equity-settled award are modified, as a minimum, an expense is
recognized as if the terms had not been modified. In addition, an expense is recognized
for any increase in the value of the transaction as a result of the modification, measured at
the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of
cancellation, and any expense not yet recognized for the award is recognized
immediately. However, if a new award is substituted for the cancelled award, and
designated as a replacement award on the date that it is granted, the cancelled and new
awards are treated as if they were a modification of the original award, as described in the
previous paragraph. The dilutive effect of outstanding options is reflected as additional
share dilution in the computation of earnings per share (EPS) (see Note 27).

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 -40-

2.6.20 Capital Stock

Capital stock is recognized as issued when the stock is paid for or subscribed under a
binding subscription agreement and is measured at par value. The transaction costs
incurred as a necessary part of completing an equity transaction are accounted for as part
of that transaction and are deducted from additional paid-in capital, net of related income
tax benefits.

2.6.21 Additional Paid-in Capital

Additional paid-in capital includes any premium received in excess of par value on the
issuance of capital stock.

2.6.22 Treasury Stock

Treasury stock is recorded at cost and is presented as a deduction from equity. When the
shares are retired, the capital stock account is reduced by its par value and the excess of
cost over par value upon retirement is debited to additional paid-in capital to the extent of
the specific or average additional paid-in capital when the shares were issued and to
retained earnings for the remaining balance.

2.6.23 Other Comprehensive Income

OCI are items of income and expense that are not recognized in the consolidated profit or
loss for the year in accordance with PFRS.

2.6.24 Retained Earnings

Retained earnings represent accumulated profit attributable to equity holders of the Parent
Company after deducting dividends declared. Retained earnings may also include effect
of changes in accounting policy as may be required by the standard’s transitional
provisions.

2.6.25 Pension Cost

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 service cost, net
interest on the net defined benefit liability or asset and 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 the consolidated 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 the consolidated profit or loss.

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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 OCI in the period in which they arise. Remeasurements
are not reclassified to the consolidated profit or loss in subsequent periods.
Plan assets are assets that are held by a long-term employee benefit fund. Plan assets are
not available to the creditors of the Globe Group, nor can they be paid directly to the
Globe Group. Fair value of plan assets is based on market price information. 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.

2.6.26 Borrowing Costs

Borrowing costs are capitalized if these are directly attributable to the acquisition,
construction or production of a qualifying asset. Capitalization of borrowing costs
commences when the activities for the asset’s intended use are in progress and
expenditures and borrowing costs are being incurred. Borrowing costs are capitalized until
the assets are ready for their intended use. These costs are amortized using the straight-
line method over the EUL of the related property and equipment. If the resulting carrying
amount of the asset exceeds its recoverable amount, an impairment loss is recognized.
Borrowing costs include interest charges and other related financing charges incurred in
connection with the borrowing of funds, as well as exchange differences arising from
foreign currency borrowings used to finance these projects to the extent that they are
regarded as an adjustment to interest costs. Premiums on long-term debt are included
under the “Long-term debt” account in the consolidated statement of financial position and
are amortized using the effective interest rate method.
Other borrowing costs are recognized as expense in the period in which these are incurred.

2.6.27 Leases
The determination of whether an arrangement is, or contains a lease, is based on the
substance of the arrangement and requires an assessment of whether the fulfillment of the
arrangement is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the asset. A reassessment is made after inception of the lease only if
one of the following applies:
 there is a change in contractual terms, other than a renewal or extension of the
arrangement;
 a renewal option is exercised or an extension granted, unless that term of the renewal
or extension was initially included in the lease term;
 there is a change in the determination of whether fulfillment is dependent on a
specified asset; or
 there is a substantial change to the asset.
Where a reassessment is made, lease accounting shall commence or cease from the date
when the change in circumstances gave rise to the reassessment for any of the scenarios
above, and at the date of renewal or extension period for the second scenario.

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[Link] Globe Group as Lessee

Finance leases, which transfer to the Globe Group substantially all the risks and
rewards incidental to ownership of the leased item, are capitalized at the inception of
the lease at the fair value of the leased property or, if lower, at the present value of the
minimum lease payments and included in the “Property and equipment” account with
the corresponding liability to the lessor included in the “Other long-term liabilities”
account in the consolidated statements of financial position. Lease payments are
apportioned between the finance charges and reduction of the lease liability so as to
achieve a constant rate of interest on the remaining balance of the liability. Finance
charges are charged directly as “Interest expense” in the consolidated statements of
comprehensive income.
Capitalized leased assets are depreciated over the shorter of the EUL of the assets and
the respective lease terms.
Leases where the lessor retains substantially all the risks and rewards of ownership of
the asset are classified as operating leases. Operating lease payments are recognized as
an expense in the consolidated profit or loss on a straight-line basis over the lease term.

[Link] Globe Group as Lessor

Leases where the Globe Group does not transfer substantially all the risk and rewards of
ownership of the assets are classified as operating leases. Initial direct costs incurred in
negotiating operating leases are added to the carrying amount of the leased asset and
recognized over the lease term on the same basis as the rental income. Contingent rents
are recognized as revenue in the period in which they are earned.

2.6.28 General, Selling and Administrative Expenses

General, selling and administrative expenses, except for rent, are charged against current
operations as incurred.

2.6.29 Foreign Currency Transactions

The functional and presentation currency of the Globe Group is the Philippine Peso, except
for GTIC US and GTHK whose functional currency is the USD; GMI and GIEE whose
functional currency is Euro; GTSG whose functional currency is the Singapore Dollar
(SGD); BTI - UK, GTEU and UKGT whose functional currency is GBP; and BTI - Japan
whose functional currency is JPY. Transactions in foreign currencies are initially recorded
at the functional currency rate prevailing at the date of the transaction. Outstanding
monetary assets and liabilities denominated in foreign currencies are retranslated at the
functional currency rate of exchange at the end of reporting period.
Nonmonetary items that are measured in terms of historical cost in a foreign currency are
translated using the exchange rate as at the date of the initial transaction and are not
subsequently restated. Nonmonetary items measured at fair value in a foreign currency are
translated using the exchange rate at the date when the fair value was determined. All
foreign exchange differences are taken to the consolidated profit or loss, except where it
relates to equity securities where gains or losses are recognized directly in other OCI.
As at the reporting date, the assets and liabilities of GTIC US and GTHK, GTEU, UKGT,
GMI, GIEE, GTSG, BTI - UK, and BTI - Japan are translated into the presentation
currency of the Globe Group at the rate of exchange prevailing at the end of reporting
period and its profit or loss is translated at the monthly weighted average exchange rates
during the year. The exchange differences arising on the translation are taken directly to a
separate component of equity under “Other reserves” account. Upon disposal of GTIC,
GTHK, GTEU, UKGT, GMI, GIEE, GTSG, BTI - UK, and BTI - Japan the cumulative
translation adjustments shall be recognized in the consolidated profit or loss.

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2.6.30 Fair Value of Financial Instruments

When the fair value of financial assets and financial liabilities recorded in the
consolidated statement of financial position cannot be derived from active markets, their
fair value is determined using valuation techniques including the discounted cash flow
model. The inputs to these models are taken from observable markets where possible, but
where this is not feasible, a degree of judgment is required in establishing fair values.
The judgments include considerations of inputs such as liquidity risk, credit risk and
volatility. Changes in assumptions about these factors could affect the reported fair value
of financial instruments.

2.6.31 EPS
Basic EPS is computed by dividing net income attributable to common stock by the
weighted average number of common shares outstanding, after giving retroactive effect
for any stock dividends, stock splits or reverse stock splits during the period.
Diluted EPS is computed by dividing net income attributable to common shareholders by
the weighted average number of common shares outstanding during the period, after
giving retroactive effect for any stock dividends, stock splits or reverse stock splits during
the period, and adjusted for the effect of dilutive options and dilutive convertible
preferred shares. Outstanding stock options will have a dilutive effect under the treasury
stock method only when the average market price of the underlying common share during
the period exceeds the exercise price of the option. If the required dividends to be
declared on convertible preferred shares divided by the number of equivalent common
shares, assuming such shares are converted, would decrease the basic EPS, then such
convertible preferred shares would be deemed dilutive. Where the effect of the assumed
conversion of the preferred shares and the exercise of all outstanding options have anti-
dilutive effect, basic and diluted EPS are stated at the same amount.

2.6.32 Operating Segment

The Globe Group’s major operating business units are the basis upon which the Globe
Group reports its primary segment information. The Globe Group’s business segments
consist of: (1) mobile communication services; and (2) wireline communication services.
The Globe Group generally accounts for intersegment revenues and expenses at agreed
transfer prices.

2.6.33 Contingencies
Contingent liabilities are not recognized in the consolidated financial statements. These
are disclosed unless the possibility of an outflow of resources embodying economic
benefits is remote. Contingent assets are not recognized in the consolidated financial
statements but are disclosed when an inflow of economic benefits is probable.

2.6.34 Events after the Reporting Period

Any post period-end event up to the date of approval of the BOD of the consolidated
financial statements that provides additional information about the Globe Group’s position
at the end of reporting period (adjusting event) is reflected in the consolidated financial
statements. Any post period-end event that is not an adjusting event is disclosed in the
consolidated financial statements when material.

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3 Management’s Significant Accounting Judgments and Use of Estimates and

Assumptions
The preparation of the accompanying consolidated financial statements in conformity with
PFRS requires management to make judgments, estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying notes. The
judgments, estimates and assumptions used in the accompanying consolidated financial
statements are based upon management’s evaluation of relevant facts and circumstances as
of the date of the consolidated financial statements. Actual results could differ from such
judgments, estimates and assumptions.
Judgments, estimates and assumptions are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances.

3.1 Judgments

3.1.1 Leases

[Link] Operating Lease Commitments as Lessor

The Globe Group has entered into lease agreements as a lessor. Critical judgment
was exercised by management to distinguish the lease agreement as either an
operating or finance lease by looking at the transfer or retention of significant risk
and rewards of ownership of the properties covered by the agreements. The Globe
Group has determined that it retains all the significant risks and rewards of ownership
of the properties and so accounts for the agreements as an operating lease
(see Note 25.1.1).

[Link] Operating Lease Commitments as Lessee

The Globe Group has entered into various lease agreements as a lessee where it has
determined that the lessors retain all the significant risks and rewards of ownership of
the properties and, as such, accounts for the agreements as operating lease
(see Note 25.1.1).

[Link] Finance Lease

The Globe Group has entered into finance lease agreements related to hardware
infrastructure and information technology equipment. Management has determined
based on the evaluation of the terms and conditions of the arrangements, that the Globe
Group bear substantially all the risks and rewards incidental to ownership of the said
machineries and equipment and so account for the contracts as finance leases
(see Note 25.1.2).

3.1.2 Financial Assets not Quoted in an Active Market

The Globe Group classifies financial assets by evaluating, among others, whether the
asset is quoted or not in an active market. Included in the evaluation on whether a
financial asset is quoted in an active market is the determination on whether quoted
prices are readily and regularly available, and whether those prices represent actual and
regularly occurring market transactions on an arm’s-length basis.

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3.1.3 Allocation of Goodwill to Cash-Generating Units

The Globe Group allocated the carrying amount of goodwill to cash-generating unit
(CGU) of mobile communications services or wireless segment. The Globe Group
believes that CGUs represent the lowest level within the Globe Group at which the
goodwill is monitored for internal management reporting purposes; and not larger than
an operating segment determined in accordance with PFRS 8.
When a business combination occurs, the fair values of the identifiable assets and liabilities
assumed, including intangible assets, are recognized.
The determination of the fair values of acquired assets and liabilities is based, to a
considerable extent, on management’s judgment and estimates. If the purchase
consideration exceeds the fair value of the net assets acquired then the difference is
recognized as goodwill. If the purchase price consideration is lower than the fair value of
the assets acquired then a gain is recognized in the income statement.
The fair values of the net assets of BTI and net liabilities of Vega Telecom Inc. (VTI) ,
Bow Arken Holdings Company Inc. (BAHC), and Brightshare Holdings Corporation
(BHC) at the time of acquisition amounted to ₱1,145.89 million (see Note 9.3) and
₱9,616.29 million (see Note 10.7), respectively and was estimated using appropriate
valuation methodologies. Valuation methodologies include net present value techniques,
comparison to similar assets for which market observable prices exist and other relevant
valuation models.

3.1.4 Determination of Whether the Globe Group is Acting as a Principal or an Agent

The Globe Group assesses its revenue arrangements against the following criteria to
determine whether it is acting as a principal or an agent:
 whether the Globe Group has primary responsibility for providing the goods and
services;
 whether the Globe Group has inventory risk;

 whether the Globe Group has discretion in establishing prices; and

 whether the Globe Group bears the credit risk.
If the Globe Group has determined it is acting as a principal, the Globe Group recognizes
revenue on a gross basis, with the amount remitted to the other party being accounted for as
part of costs and expenses.
If the Globe Group has determined it is acting as an agent, only the net amount retained is
recognized as revenue.
The Globe Group assessed its revenue arrangements and concluded that it is acting as a
principal in some arrangements and as an agent in other arrangements.

3.1.5 Provisions and Contingencies

Globe Group is currently involved in various legal proceedings. The estimate of the
probable costs for the resolution of these claims has been developed in consultation with
internal and external counsel handling Globe Group’s defense in these matters and is based
upon an analysis of potential results. Globe Group currently does not believe that these
proceedings will have a material adverse effect on the consolidated statements of financial
position and results of operations. It is possible, however, that future results of operations
could be materially affected by changes in the estimates or in the effectiveness of the
strategies relating to these proceedings (see Notes 13 and 26).

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Globe Group is involved in discussions with creditor suppliers of VTI, BAHC and BHC in
relation to the liabilities of the said entities discussed in Note 10.7. Management has
assessed that such action has created a valid expectation from these creditor suppliers that
Globe Group will settle the liabilities or provide funds for the settlement of these liabilities
considering that these entities do not have sufficient funds to date to settle these liabilities
on their own. As such, Globe concluded that it incurred a constructive obligation and met
the requirements for recognizing a provision/liability (see Note 10.7).

3.1.6 Assessment of Investment in Automated Fare Payments Inc. (AFPI) [formerly

Automated Fare Collection Services (AFCS))]
On January 10, 2014, the Department of Transportation and Communication awarded to
AFPI composed of BPI Card Finance Corporation, AC Infrastructure Holdings Corp.,
Smart Communications, Inc., Meralco Financial Services Corporation, Metro Pacific
Investments Corporation and Globe Telecom the rights to design, build and operate the
₱1.72 billion automated fare collection system (see Note 10.2).
Critical judgment was exercised to assess the facts and circumstances indicating the
elements of control or level of influence of Globe Telecom over AFPI. Globe Telecom has
determined that it has significant influence, and no control, over the financial and operating
policy decisions of AFPI. The total capital contribution of ₱590.00 million equivalent to
20% ownership is recognized as investment in an associate and is accounted for using the
equity method.

3.1.7 Assessment of Investment in Yondu

As discussed in Note 10.1, the Globe Group holds a 49% ownership interest in Yondu and
is accounted as an associate.
Critical judgment was exercised to assess the facts and circumstances indicating the
elements of control or level of influence of Globe Telecom over Yondu. Globe Telecom
has determined that it has significant influence, but no control, over the financial and
operating policy decisions of Yondu.

3.1.8 Assessment of Investment in GTHI

The Globe Group holds ownership interest of 50% in GTHI, as disclosed in Note 10.5.
There is no contractual arrangement or any other facts and circumstances that indicate that
the parties to the joint arrangement have rights to the net assets of the joint arrangement.
Accordingly, based on the assessment made by the Management, Globe Group has
classified its joint arrangement as joint venture because of its rights over the net assets of
GTHI.

3.1.9 Assessment of Investment in TechGlobal

The Globe Group holds ownership interest of 49% in TechGlobal, as disclosed in Note
10.6. There is no contractual arrangement or any other facts and circumstances that indicate
that the parties to the joint arrangement have rights to the net assets of the joint
arrangement. Accordingly, based on the assessment made by the Management, Globe
Group has classified its joint arrangement as joint venture because of its rights over the net
assets of TechGlobal.

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3.1.10 Assessment of Investment in VTI, BAHC and BHC

The Globe Group holds ownership interest of 50% in VTI, BAHC and BHC, as disclosed in
Note 10.7. The Globe Group has determined that it has rights only to the net assets of the
joint arrangements based on the structure, legal form, contractual terms and other facts and
circumstances of the arrangement. As such, Globe Telecom classified its joint arrangements
in VTI, BAHC and BHC as a joint venture.

3.2 Estimates

3.2.1 Revenue Recognition

The Globe Group’s revenue recognition policies require management to make use of
estimates and assumptions that may affect the reported amounts of revenues and
receivables.
The Globe Group estimates the fair value of points awarded under its Loyalty programmes,
which are within the scope of Philippine Interpretation IFRIC 13, Customer Loyalty
Programmes, by applying estimation procedures using historical data and trends. The
points expected to be redeemed is estimated based on the remaining points, the run-rate
redemption by the subscribers and the points to peso conversion. As of December 31, 2016
and 2015, the estimated liability for unredeemed points included in “Unearned revenues” in
the consolidated statements of financial position amounted to ₱217.31 million and
₱133.92 million, respectively.

3.2.2 Allowance for Impairment Losses on Receivables

The Globe Group maintains an allowance for impairment losses at a level considered
adequate to provide for potential uncollectible receivables. The Globe Group performs a
regular review of the age and status of these accounts, designed to identify accounts with
objective evidence of impairment and provide the appropriate allowance for impairment
losses. The review is accomplished using a combination of specific and collective
assessment approaches, with the impairment losses being determined for each risk grouping
identified by the Globe Group. The amount and timing of recorded expenses for any period
would differ if the Globe Group made different judgments or utilized different
methodologies. An increase in allowance for impairment losses would increase the
recorded operating expenses and decrease current assets.
Impairment losses on receivables for the years ended December 31, 2016, 2015 and 2014
amounted to ₱2,934.31 million, ₱2,693.57 million and ₱3,035.24 million, respectively
(see Note 23). Receivables, net of allowance for impairment losses, amounted to
₱26,944.65 million and ₱21,935.78 million as of December 31, 2016 and 2015, respectively
(see Note 4).
The carrying value of loans receivable presented under “Prepayments and other current
assets” and “Other noncurrent assets” as of December 31, 2016 and 2015 amounted to
₱946.62 million and ₱1,126.62 million, respectively (see Notes 6 and 11).

3.2.3 Obsolescence and Market Decline

The Globe Group, in determining the NRV, considers any adjustment necessary for
obsolescence which is generally provided at 80% for nonmoving items after a certain
period. The Globe Group adjusts the cost of inventory to the recoverable value at a level
considered adequate to reflect market decline in the value of the recorded inventories. The
Globe Group reviews the classification of the inventories and generally provides
adjustments for recoverable values of new, actively sold and slow-moving inventories by
reference to prevailing values of the same inventories in the market. Provisions are
generally made based on expected recoveries, which is 80% of the cost.

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The amount and timing of recorded expenses for any period would differ if different
judgments were made or different estimates were utilized. An increase in allowance for
obsolescence and market decline would increase recorded cost of sales and impairment
losses, and decrease current assets.
Inventory obsolescence and market decline in 2016, 2015 and 2014 amounted to
₱341.76 million, ₱384.14 million and ₱437.51 million, respectively (see Note 23).
Inventories and supplies, net of allowances, amounted to ₱4,579.95 million and
₱4,489.18 million as of December 31, 2016 and 2015, respectively (see Note 5).
Allowance for inventory losses amounted ₱676.43 million and ₱802.64 million as of
December 31, 2016 and 2015, respectively.

3.2.4 ARO
The Globe Group is legally required under various contracts to restore leased property
to its original condition and to bear the costs of dismantling and deinstallation at the
end of the contract period. These costs are accrued based on an in-house estimate,
which incorporates estimates of asset retirement costs and interest rates. The Globe
Group recognizes the present value of these obligations and capitalizes the present
value of these costs as part of the balance of the related property and equipment
accounts, which are being depreciated and amortized on a straight-line basis over the
EUL of the related asset or the lease term, whichever is shorter.
The present value of dismantling costs is computed based on an average credit-adjusted
risk-free rate of 6.69% and 6.97% for the years ended December 31, 2016 and 2015,
respectively. Assumptions used to compute ARO are reviewed and updated annually.
The amount and timing of recorded expenses for any period would differ if different
judgments were made or different estimates were utilized. An increase in ARO would
increase recorded operating expenses and increase noncurrent liabilities.
As of December 31, 2016 and 2015, ARO amounted to ₱2,239.11 million and
₱2,054.97 million, respectively (see Note 15).

3.2.5 EUL of Property and Equipment, Investment Properties and Intangible Assets
The useful life of each of the Globe Group’s property and equipment, investment
properties and intangible assets with finite useful lives is estimated based on the period
over which the asset is expected to be available for use. Such estimation is based on a
collective assessment of industry practice, internal technical evaluation and experience
with similar assets and expected asset utilization based on future technological
developments and market behavior. It is possible that future results of operations could
be materially affected by changes in these estimates brought about by changes in the
factors mentioned.
A reduction in the EUL of property and equipment and intangible assets would increase
the recorded depreciation and amortization expense and decrease noncurrent assets.

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The EUL of property and equipment are as follows:

Years
Telecommunications equipment:
Tower 20
Switch 7-10
Outside plant, cellsite structures and improvements 10-20
Distribution dropwires and other wireline assets 2-10
Cellular equipment and others 3-10
Buildings 20
Investments in cable systems 5-20
Office equipment 3-7
Transportation equipment 3-5
Leasehold improvements 5 years or lease term,
whichever is shorter

Intangible assets consisting of licenses and application software are amortized over the EUL
of the related hardware or equipment ranging from three (3) to ten (10) years or life of the
telecommunications and office equipment where it is assigned while exclusive dealership
rights are amortized over the life of the dealership agreement (Note 8).

3.2.6 Asset Impairment

[Link] Impairment of Nonfinancial Assets Other Than Goodwill

The Globe Group assesses impairment of assets (property and equipment, intangible
assets and investments in associates and joint ventures) whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be recoverable.
The factors that the Globe Group considers important which could trigger an
impairment review include the following:
 significant underperformance relative to expected historical or projected future
operating results;
 significant changes in the manner of use of the acquired assets or the strategy for
the overall business; and,
 significant negative industry or economic trends.
An impairment loss is recognized whenever the carrying amount of an asset or
investment exceeds its recoverable amount. The recoverable amount is the higher of an
asset’s fair value less cost to sell and value in use. The fair value less cost to sell is the
amount obtainable from the sale of an asset in an arm’s length transaction, while value
in use is the present value of estimated future cash flows expected to arise from the
continuing use of an asset and from its disposal at the end of its useful life.
Recoverable amounts are estimated for individual assets or investments or, if it is not
possible, for the CGU to which the asset belongs.
For impairment loss on specific assets or investments, the recoverable amount
represents the fair value less cost to sell.
In determining the present value of estimated future cash flows expected to be
generated from the continued use of the assets or holding of an investment, the Globe
Group is required to make estimates and assumptions that can materially affect the
consolidated financial statements.
The aggregate carrying value of property and equipment, intangible assets (excluding
goodwill) and investments amounted to ₱189,998.56 million and ₱142,440.98 million
as of December 31, 2016 and 2015, respectively (see Notes 7, 8 and 10).

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[Link] Impairment of Goodwill

The Globe Group’s impairment test for goodwill is based on value in use calculations
that use a discounted cash flow model. The cash flows are derived from the business
plan for the next five years and do not include restructuring activities that the
Globe Group is not yet committed to or significant future investments that will enhance
the asset base of the CGU being tested. The recoverable amount is most sensitive to the
discount rate used for the discounted cash flow model as well as the expected future
cash inflows and the growth rate used for extrapolation purposes. As of
December 31, 2016 and 2015, the carrying value of goodwill amounted to
₱1,268.10 million and ₱1,154.03 million, respectively (see Note 8).
The recoverable amount of the CGU, which exceeds the carrying amount of the related
goodwill by ₱141,649.38 million and ₱5,656.02 million in 2016 and 2015, respectively,
has been determined based on value in use calculations using cash flow projections
from business plans covering a five-year period. The pre-tax discount rate applied to
cash flow projections was 9.24% in 2016 and 14% in 2015 and cash flows beyond the
five-year period are extrapolated using a 2% long-term growth rate in 2016 and 2015.

3.2.7 Deferred Income Tax Assets

The carrying amounts of deferred income tax assets are reviewed at each reporting date and
reduced to the extent that it is no longer probable that sufficient taxable income will be
available to allow all or part of the deferred income tax assets to be utilized (see Note 24).
As of December 31, 2016 the combined net deferred tax assets of Innove, GXI, BTI and
Asticom amounted to ₱2,622.70 million. As of December 31, 2015, the combined net
deferred tax assets of Globe Telecom, Innove, GXI, BTI and Asticom amounted to
₱1,324.08 million (Note 24).
As of December 31, 2016, the combined net deferred income tax liabilities of Globe
Telecom, KVI, and GTI amounted to ₱1,916.92 million. As of December 31, 2015,
the combined net deferred income tax liabilities of KVI, and GTI amounted to
₱2.21 million. (Note 24).

3.2.8 Financial Assets and Financial Liabilities

The Globe Group carries certain financial assets and liabilities at fair value, which requires
extensive use of accounting estimates and judgment. While significant components of fair
value measurement were determined using verifiable objective evidence (i.e., foreign
exchange rates, interest rates), the amount of changes in fair value would differ if the Globe
Group utilized different valuation methodologies. Any changes in fair value of these
financial assets and liabilities would affect the consolidated statement of comprehensive
income and consolidated statement of changes in equity.
Financial assets comprising AFS investments and derivative assets carried at fair values as
of December 31, 2016 and 2015 amounted to ₱1,617.54 million and ₱1,659.86 million,
respectively, and financial liabilities comprising derivative liabilities carried at fair values as
of December 31, 2016 and 2015 amounted to ₱105.93 million and ₱111.28 million
(see Note 28.12).

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3.2.9 Pension and Other Employee Benefits

The cost of defined benefit pension plans as well as the present value of the pension
obligation is determined using actuarial valuations. The actuarial valuation involves
making various assumptions. These include the determination of the discount rates,
future salary increases and mortality rates. Due to the complexity of the valuation,
the underlying assumptions and its long-term nature, defined benefit obligations are
highly sensitive to changes in these assumptions. All assumptions are reviewed at each
reporting date.
In determining the appropriate discount rate, management considers the interest rates of
government bonds that are denominated in the currency in which the benefits will be
paid, with extrapolated maturities corresponding to the expected duration of the defined
benefit obligation.
The mortality rate is based on the 1994 Group Annuity Mortality Table developed by the
Society of Actuaries, which provides separate rates for males and females and is modified
accordingly with estimates of mortality improvements. Future salary increases and
pension increases are based on expected future inflation rates for the specific country.
The net pension liability as of December 31, 2016 and 2015 amounted to
₱3,101.55 million and ₱3,217.78 million, respectively. Further details are provided in
Note 18.2.
The Globe Group also determines the cost of equity-settled transactions using
assumptions on the appropriate pricing model. Significant assumptions for the cost of
share-based payments include, among others, share price, exercise price, option life,
expected dividend and expected volatility rate.
Cost of share-based payments in 2016, 2015 and 2014 amounted to ₱260.27 million,
₱153.99 million and ₱31.84 million, respectively (see Notes 16.6 and 18.1).
The Globe Group also estimates other employee benefit obligations and expenses,
including cost of paid leaves based on historical leave availments of employees, subject
to the Globe Group’s policy. These estimates may vary depending on the future
changes in salaries and actual experiences during the year.
The accrued balance of other employee benefits (included in the “Accounts payable and
accrued expenses” account and in the “Other long-term liabilities” account in the
consolidated statements of financial position) as of December 31, 2016 and 2015
amounted ₱775.80 million and ₱651.57 million, respectively (see Notes 12 and 15).
While the Globe Group believes that the assumptions are reasonable and appropriate,
significant differences between actual experiences and assumptions may materially
affect the cost of employee benefits and related obligations.

3.2.10 Provision for Restructuring Costs

Prior to consolidation, BTI recognized provisions for restructuring costs for the
expected termination benefits, related to the restructuring of BTI’s business. Globe
Telecom and BTI regularly reviews these provisions against the latest restructuring
plans. In determining the value of the provisions, assumptions and estimates are made
in relation to the expected timing of those costs. Provisions recognized on the
consolidated profit and loss from the date of acquisition amounted to ₱59.00 million in
2015 (Note 13).

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4 Receivables - net
This account consists of receivables from:

Notes 2016 2015

(In Thousand Pesos)
Subscribers 16, 28.2.2 ₱31,042,802 ₱27,059,482
Traffic settlements - net 12, 16, 28.2.2 1,931,550 1,727,324
Dealers 28.2.2 1,023,515 1,617,289
Others 28.2.2 1,112, 380 493,937
35,110,247 30,898,032
Less allowance for impairment losses:
Subscribers 28.2.2 7,598,120 8,332,540
Traffic settlements and others 28.2.2 567,482 629,717
8,165,602 8,962,257
₱26,944,645 ₱21,935,775

Receivables are noninterest-bearing and are generally collectible in the short-term.

Subscriber receivables arise from wireless and wireline voice, data communications and
broadband internet services provided under postpaid arrangements. As of December 31,2015,
the account includes acquired receivables and the related allowance for impairment from BTI
related to subscribers amounting to ₱2,056.07 million and ₱1,826.81 million, respectively.
Traffic settlement receivables are presented net of traffic settlement payables from the same
carrier amounting to ₱1,479.58 million and ₱1,817.48 million as of December 31, 2016 and
2015, respectively.
Amounts collected from wireless subscribers under prepaid arrangements are reported under
“Unearned revenues” in the consolidated statements of financial position and recognized as
revenues upon actual usage of airtime value, consumption of prepaid subscription fees or
upon expiration of the unused load value prepaid credit. The unearned revenues from these
subscribers amounted to ₱2,445.02 million and ₱2,615.75 million as of December 31, 2016
and 2015, respectively.
Advance monthly service fees and deferred revenue rewards which are also reported under
“Unearned revenue” account in the consolidated statements of financial position amounted to
₱2,428.09 million and ₱217.31 million as of December 31, 2016 and ₱2,188.56 million and
₱133.92 million as of December 31, 2015, respectively.

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5 Inventories and Supplies - net

This account consists of:

2016 2015
(In Thousand Pesos)
At cost:
Spare parts and supplies ₱7,162 ₱3,161
SIM cards and SIM packs 6,275 6,784
Call cards and others 5,363 12,206
Handsets, devices and accessories - 563
Modem and accessories - 415
18,800 23,129
At NRV:
Handsets, devices and accessories 2,755,093 3,535,249
Modem and accessories 896,816 179,870
Nomadic broadband device 362,037 274,259
Spare parts and supplies 277,387 307,144
SIM cards and SIM packs 264,456 152,020
Call cards and others 5,365 17,511
4,561,154 4,466,053
₱4,579,954 ₱4,489,182

Inventories recognized as expense during the year amounting to ₱12,255.87 million,

₱14,049.35 million and ₱11,098.86 million in 2016, 2015 and 2014, respectively, are included as
part of “Cost of sales” and “Impairment losses and others” accounts (see Note 23) in the
consolidated statements of comprehensive income. An insignificant amount is included under
“General, selling and administrative expenses” as part of “Utilities, supplies and other
administrative expenses” account (see Note 21). Inventories written off in 2016 and 2015
amounted to ₱138.92 million and ₱48.74 million, respectively.
Cost of sales incurred consists of:

2016 2015 2014

(In Thousand Pesos)
Inventories:
Handsets, devices and accessories ₱9,542,528 ₱10,800,718 ₱7,734,702
Nomadic broadband device 1,603,905 2,186,284 2,370,154
SIM cards and SIM packs 632,870 566,100 498,986
Call cards and others 116,892 104,640 48,318
Modems and accessories 14,362 364 414
Spare parts and supplies 3,557 7,001 8,386
Services - 96 384
₱11,914,114 ₱13,665,203 ₱10,661,344

There are no unusual purchase commitments and accrued net losses as of

December 31, 2016.

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6 Prepayments and Other Current Assets

This account consists of:

Notes 2016 2015

(In Thousand Pesos)
Advance payments to suppliers and contractors 25.3 ₱8,215,535 ₱4,522,775
Prepayments 25.1 1,510,837 1,107,577
Creditable withholding tax 797,925 804,519
Current portion of loan receivable from:
Globe Group Retirment Plan (GGRP) 16.3 788,000 -
Bethlehem Holdings, Inc. (BHI) 16.3 158,620 -
Input VAT - net 450,730 65,623
Miscellaneous receivable - net 195,441 345,107
Deferred input VAT 11 142,684 630,573
Dividend receivable 16.4 68,743 244,485
Other current assets 25.1.1 468,377 511,769
₱12,796,892 ₱8,232,428

The “Prepayments” account includes prepaid insurance, rent, maintenance, and licenses fee
among others.
As of December 31, 2016, Innove, GTI and GCVH reported net input VAT amounting to
₱450.73 million, net of output VAT of ₱1,074.23 million. As of December 31, 2015, Globe
Telecom, BTI, Innove, GTI, KVI, GCVH and Asticom reported net input VAT amounting to
₱65.62 million, net of output VAT of ₱1,044.27 million.
Deferred input VAT pertains to various purchases of goods and services which cannot be
claimed yet as credits against output VAT liabilities, pursuant to the existing VAT rules and
regulations. Deferred input VAT can be applied on future output VAT liabilities. Deferred
input VAT due for credits beyond 12 months amounted to ₱260.72 million and
₱464.43 million as of December 31, 2016 and 2015, respectively (see Note 11).
Other current assets include advances to employees amounting to ₱216.34 million and
₱66.54 million as of December 31, 2016 and 2015, respectively. 

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7 Property and Equipment - net

The rollforward analysis of this account follows:
2016

Buildings and
Telecommunication Leasehold Transportation Assets Under
Equipment Improvement Cable System Office Equipment Equipment Land Construction Total
(In Thousand Pesos)
Cost
At January 1 ₱239,521,081 ₱42,809,270 ₱22,677,742 ₱13,660,352 ₱2,698,476 ₱3,145,123 ₱13,631,840 ₱338,143,884
Additions 605,839 37,636 133,354 355,789 386,345 - 37,436,955 38,955,918
Acquired from acquisition of a
subsidiary - 9,124 - 104,566 1,058 - - 114,748
Retirements/disposals (35,888,129) (62,642) (1,131) (748,791) (317,780) (156,822) (125) (37,175,420)
Reclassifications/adjustments 19,331,805 3,620,668 116,604 1,086,218 (672) 60,353 (29,627,422) (5,412,446)
At December 31 223,570,596 46,414,056 22,926,569 14,458,134 2,767,427 3,048,654 21,441,248 334,626,684
Accumulated Depreciation
and Amortization
At January 1 161,671,467 20,616,530 12,666,242 10,415,931 1,863,952 - - 207,234,122
Depreciation and amortization 15,213,437 1,937,047 1,332,832 1,474,311 307,368 - - 20,264,995
Acquired from acquisition of a
subsidiary - 2,817 - 60,625 - - - 63,442
Retirements/disposals (35,885,464) (60,392) (1,131) (736,287) (311,906) - - (36,995,180)
Reclassifications/adjustments (38,649) 42,530 6,612 13,841 (2,546) - - 21,788
At December 31 140,960,791 22,538,532 14,004,555 11,228,421 1,856,868 - - 190,589,167
Impairment Losses
At January 1 1,318,884 23,252 - - 9,860 - 518,244 1,870,240
Additions (Note 23) 6,850 - - - - - 2,566 9,416
Write-off/adjustments (94,120) - - - - - - (94,120)
At December 31 1,231,614 23,252 - - 9,860 - 520,810 1,785,536
Carrying amount at December 31 ₱81,378,191 ₱23,852,272 ₱8,922,014 ₱3,229,713 ₱900,699 ₱3,048,654 ₱20,920,438 ₱142,251,981

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 -56-

2015

Buildings and
Telecommunication Leasehold Transportation Assets Under
Equipment Improvement Cable System Office Equipment Equipment Land Construction Total
(In Thousand Pesos)
Cost
At January 1 ₱213,848,704 ₱38,910,997 ₱19,782,452 ₱10,649,751 ₱2,433,137 ₱1,610,062 ₱15,921,265 ₱303,156,368
Additions 11,347,186 214,584 243,504 111,872 281,936 - 18,021,938 30,221,020
Acquired from acquisition of a
28,756,144 1,418,051 - 1,424,897 137,999 1,535,061 346,891 33,619,043
subsidiary
Retirements/disposals (20,635,610) (61,468) (106,799) (404,814) (247,163) - (7) (21,455,861)
Reclassifications/adjustments 6,204,657 2,327,106 2,758,585 1,878,646 92,567 - (20,658,247) (7,396,686)
At December 31 239,521,081 42,809,270 22,677,742 13,660,352 2,698,476 3,145,123 13,631,840 338,143,884
Accumulated Depreciation
and Amortization
At January 1 147,360,362 17,849,452 9,887,715 8,507,997 1,714,754 - - 185,320,280
Depreciation and amortization 13,805,338 2,022,558 1,255,444 1,384,710 282,782 - - 18,750,832
Acquired from acquisition of a
subsidiary 21,748,508 1,239,572 - 1,361,339 144,291 - - 24,493,710
Retirements/disposals (20,552,078) (40,832) (73,379) (382,682) (234,281) - - (21,283,252)
Reclassifications/adjustments (690,663) (454,220) 1,596,462 (455,433) (43,594) - - (47,448)
At December 31 161,671,467 20,616,530 12,666,242 10,415,931 1,863,952 - - 207,234,122
Impairment Losses
At January 1 151,577 - - - 9,860 - 445,493 606,930
Additions(Note 23) - - - - - - 72,751 72,751
Acquired on acquisition of a subsidiary 1,554,612 23,252 - - - - - 1,577,864
Write-off/adjustments (387,305) - - - - - - (387,305)
At December 31 1,318,884 23,252 - - 9,860 - 518,244 1,870,240
Carrying amount at December 31 ₱76,530,730 ₱22,169,488 ₱10,011,500 ₱3,244,421 ₱824,664 ₱3,145,123 ₱13,113,596 ₱129,039,522

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 -57-

Assets under construction include intangible components of a network system which are
reclassified to depreciable intangible assets only when assets become available for use
(see Note 8).
Investments in cable systems include the cost of the Globe Group’s ownership share in the
capacity of certain cable systems under a joint venture or a consortium or private cable set-up
and indefeasible rights of use (IRUs) of circuits in various cable systems. It also includes the
cost of cable landing station and transmission facilities where the Globe Group is the landing
party.
The costs of fully depreciated property and equipment that are still being used as of
December 31, 2016 and 2015 amounted to ₱64,890.79 million and ₱115,118.04 million,
respectively.
The Globe Group uses its borrowed funds to finance the acquisition of property and equipment
and bring it to its intended location and working condition. Borrowing costs incurred relating
to these acquisitions were included in the cost of property and equipment using 1.45% , 0.46%
and 3.05% capitalization rates in 2016, 2015 and 2014, respectively. The Globe Group’s total
capitalized borrowing costs amounted to ₱532.24 million, ₱147.51 million and
₱647.98 million in 2016, 2015 and 2014, respectively.
The carrying value of the hardware infrastructure and information equipment held under
finance lease included under “Office Equipment” and “Asset under Construction” amounted to
₱432.17 million and nil, respectively, as of December 31, 2016 and ₱584.23 million and
₱18.70 million, respectively, as of December 31, 2015 (see Note 25.1.2). 
As of July 2, 2015, the carrying value of the property and equipment arising from the
acquisition of controlling interest in BTI amounted to ₱6,602.45 million. These include:
Indefeasible Right of Use (IRU) agreements on its network capacity which are accounted for
as a finance lease as the significant risks and rewards of ownership are transferred to the buyer;
and capitalized Asset Retirement Obligation (ARO) to include in the cost of the assets its
future dismantling costs. From the date of acquisition, BTI did not derecognize any assets
related to IRU transactions and utilized ₱25.8 million of its ARO for sites and equipment that
are mostly part of BTS sites declared unusable in 2014 but were actually dismantled in 2015.
Pursuant to the Amended Rehabilitation Plan (ARP) and Master Restructuring Agreement
(MRA), the remaining outstanding restructured debt of BTI to creditors other than Globe
Telecom amounting to USD4.47 million will be secured by a real estate mortgage on
identified real property assets (see Note 14.1). The processing of the real properties to be
mortgaged is still ongoing as of December 31, 2016.

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8 Intangible Assets and Goodwill - net

The rollforward analysis of this account follows:

2016

Other Total
Licenses and Exclusive Intangible Intangible
Application Customer Dealership Assets and Assets and
Software Contracts Right Goodwill Goodwill
Cost
At January 1 ₱22,924,678 ₱571,760 ₱141,019 ₱1,644,864 ₱25,282,321
Additions 135,273 - - - 135,273
Acquired from acquisition of a subsidiary - - - 125,457 125,457
Retirements/disposals (68,334) - - - (68,334)
Reclassifications/ adjustments (Note 7) 5,079,043 - 9,305 (11,390) 5,076,958
At December 31 28,070,660 571,760 150,324 1,758,931 30,551,675
Accumulated Amortization
At January 1 12,082,383 71,470 47,001 24,542 12,225,396
Amortization 3,290,936 142,940 96,336 49,083 3,579,295
Retirements/disposals (13) - - - (13)
Reclassifications/adjustments (127,844) - 6,987 34,634 (86,223)
At December 31 15,245,462 214,410 150,324 108,259 15,718,455
Carrying Amount at December 31 ₱12,825,198 ₱357,350 ₱ - ₱1,650,672 ₱14,833,220

2015

Other Total
Licenses and Exclusive Intangible Intangible
Application Customer Dealership Assets and Assets and
Software Contracts Right Goodwill Goodwill
Cost
At January 1 ₱17,170,998 ₱28,381 ₱139,960 ₱327,125 ₱17,666,464
Additions 174,698 - - - 174,698
Acquired from acquisition of a subsidiary 721,731 571,760 - 1,644,864 2,938,355
Retirements/disposals* (2,519,474) (28,381) - (327,125) (2,874,980)
Reclassifications/adjustments (Note 7) 7,376,725 - 1,059 - 7,377,784
At December 31 22,924,678 571,760 141,019 1,644,864 25,282,321
Accumulated Amortization
At January 1 11,940,399 28,381 26,040 - 11,994,820
Amortization 2,264,893 71,470 20,961 24,542 2,381,866
Retirements/disposals (2,516,549) (28,381) - - (2,544,930)
Reclassifications/adjustments 393,640 - - - 393,640
At December 31 12,082,383 71,470 47,001 24,542 12,225,396
Carrying Amount at December 31 ₱10,842,295 ₱500,290 ₱94,018 ₱1,620,322 ₱13,056,925
*Goodwill solely related to Yondu acquisition.

Intangible assets pertain to (1) telecommunications equipment software licenses, corporate

application software and licenses and other VAS software applications that are not integral
to the hardware or equipment; (2) exclusive dealership right in Tao as of
December 31, 2016; (3) intangible assets identified to exist during the acquisition of BTI for
its customer contracts, franchise, spectrum and goodwill (see Note 9.3); (4) goodwill arising
from acquisition of Socialytics (see Note 9.1); and (5) goodwill arising from acquisition of
Tao (see Note 9.2).
Licenses and Application Software with carrying amount of ₱12,825.20 million and
₱10,842.30 million as of December 31, 2016 and 2015, respectively, has average remaining
amortization period of 3.24 years and 3.89 years in 2016 and 2015, respectively.

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Customer contracts with carrying amount of ₱357.35 million and ₱500.29 million as of million
as of December 31, 2016 and 2015, respectively, has average remaining amortization period of
2.50 years and 3.50 years in 2016 and 2015, respectively.
Franchise and spectrum with carrying amount of ₱613.47 million and ₱417.21 million as of
December 31, 2016 and 2015, have average remaining amortization period of 8.50 years and
9 years, respectively.
The EUL of identifiable intangible assets related to BTI acquisition are: (a) four years for
customer contracts; and (b) ten years for both franchise and spectrum. As a result of Globe
Telecom’s sale of its controlling stake in Yondu, the related intangible assets with carrying
amount of ₱2.92 million were derecognized starting September 15, 2015 (see Note 10.1).
The Globe Group conducts its annual impairment test of goodwill as of the end of the third
fiscal quarter of each year. The Globe Group considers the relationship between its market
capitalization and its book value, among other factors, when reviewing for indicators of
impairment.
As of December 31, 2016 and 2015, the carrying value of goodwill amounted to
₱1,268.10 million and ₱1,154.03 million, respectively (see Note [Link]). For impairment
testing purposes, the Globe Group allocated the carrying amount of goodwill to cash-
generating unit (CGU) of mobile communications services or wireless segment. The
recoverable amount of said CGU is determined based on a value in use calculation which
uses cash flow projections based on financial budgets covering a five-year period, and a pre-
tax discount rate of 9.2% and 14% per annum in 2016 and 2015, respectively. Cash flows
beyond the five-year period are extrapolated using a steady growth rate of 2%.
The Globe Group has determined that the recoverable amount calculations are most sensitive
to changes in assumptions on gross margins, discount rates, market share, and growth rates.
No impairment loss on intangible assets was recognized in 2016 and 2015. The management
believes that any reasonably possible change in the key assumptions on which recoverable
amount is based would not cause the aggregate carrying amount to exceed the aggregate
recoverable amount of the CGU.

9 Business Combinations

9.1 Investment in Socialytics

On January 29, 2016, AI acquired 70% of the outstanding shares of Socialytics Inc. for a
total amount of ₱3.01 million. Socialytics is a social media marketing firm founded in 2013.
The transaction was accounted for as an acquisition of a subsidiary.
Globe Group’s acquisition of Socialytics is in line with its strategy to expand its business
operations in the advertising industry.

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The initial accounting for the acquisition of Socialytics has only been provisionally
determined pending the finalization of necessary market valuations and determined based on
management’s best estimate of the likely values. As allowed under the relevant standard, the
Globe Group will recognize any adjustment to those provisional values as an adjustment to
goodwill upon determining the final fair values of identifiable assets and liabilities within
12 months from the acquisition date.

Amount recognized
on acquisition
(In Thousand Pesos)
ASSETS
Current assets ₱4,904
Other noncurrent assets 60
4,964
LIABILITIES
Current Liabilities 1,760
Other long term liabilities 2,325
4,085
Net assets acquired and liabilities assumed ₱879

Purchase consideration transferred ₱3,006

Net assets acquired and liabilities assumed (879)
Non-controlling interest measured at fair value 264
Goodwill arising on acquisition ₱2,391

Net cash outflow from the acquisition is as follows (in thousand pesos):

Total cash paid on acquisition ₱3,006

Cash and cash equivalents acquired from Socialytics (175)
Net cash outflow on acquisition ₱2,831

From the date of acquisition, Socialytics has contributed ₱11.7 million of revenue and loss
before income tax of ₱6.7 million in 2016. If the combination had taken place at the
beginning of the year, revenue from Socialytics would have been ₱12.3 million and income
before tax would have been ₱6.6 million in 2016.

9.2 Investment in Tao

In March 2013, Globe Telecom entered into a Shareholders Agreement with four other
entities to incorporate Tao.
Globe Telecom subscribed to 25% preferred shares of Tao amounting to ₱55.00 million
which has been fully paid up as of August 2013. Tao shall carry on the business of
establishing, operating and maintaining retail stores in strategic locations within the
Philippines that will sell telecommunications or internet-related services, and devices,
gadgets, accessories or embellishments in connection and in accordance with the terms and
conditions of the exclusive dealership agreement executed among all of the entities.

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On November 4, 2016, the BOD of Globe Telecom approved the increase in stake in Tao
from 25% to 67% resulting in Globe Telecom’s gaining controlling interest in Tao by
converting certain advances to equity and purchasing incremental shares or advances from
Tao for a total consideration of ₱207.34 million. The transaction was accounted for as an
acquisition of a subsidiary. Globe Telecom's acquisition of Tao is intended to augment its
existing stores retail network.
The Globe Group elected to measure the non-controlling interest in the acquiree at the
proportionate share of its interest in the acquiree’s net assets acquired and liabilities
assumed.
The initial accounting for the acquisition of Tao has only been provisionally determined
pending the finalization of necessary market valuations and determined based on
management’s best estimate of the likely values. As allowed under the relevant standard, the
Globe Group will recognize any adjustment to those provisional values as an adjustment to
goodwill upon determining the final fair values of identifiable assets and liabilities within
12 months from the acquisition date.
The fair values of the identifiable assets and liabilities of Tao as at the date of acquisition
were:

Amount recognized
on acquisition
(In Thousand Pesos)
ASSETS
Current assets ₱164,135
Property and equipment 51,306
Other noncurrent assets 6,634
222,075
LIABILITIES
Current Liabilities 140,402
Other long term liabilities 17,579
157,981
Total net assets at fair value 64,094
Net assets acquired and liabilities assumed ₱64,094

Purchase consideration transferred ₱207,345

Net assets acquired and liabilities assumed (64,094)
Non-controlling interest measured at fair value 21,182
Share in previously held equity interest (38,976)
Goodwill arising on acquisition ₱125,457

The goodwill comprises the fair value of expected synergies arising from the acquisition and
presented under Goodwill and other intangible assets in the statements of the financial
position, as disclosed in Note 8. None of the goodwill recognized is expected to be
deductible for income tax purposes.

9.3 Investment in BTI

On July 2, 2015, the National Telecommunications Commission (NTC) approved the
conversion of BTI’s Tranche A convertible portion of the debt to equity, and resulted in
Globe Telecom’s gaining a controlling interest in BTI with increased ownership from 38%
to at least 54% of BTI’s outstanding shares.

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On July 20, 2015, Globe Telecom acquired additional voting shares of BTI, which increased
its controlling interest to approximately 99% in exchange for cash amounting to
₱1,829.84 million. The transaction was accounted for as an acquisition of a subsidiary.
Globe Telecom's acquisition of BTI is intended to augment its current wireline data and
voice businesses using BTI's existing platform and its wireless business.
The Globe Group elected to measure the non-controlling interest in the acquiree at the
proportionate share of its interest in the acquiree’s net assets acquired and liabilities
[Link] fair value of the identifiable assets and liabilities of BTI as at the date of
acquisition were:

Amount recognized
on acquisition
(In Thousand Pesos)
ASSETS
Current assets ₱2,638,360
Property and equipment 6,602,451
Other noncurrent assets 894,418
10,135,229
LIABILITIES
Current Liabilities 5,709,226
Long-term debt 4,738,264
Other long term liabilities 452,392
10,899,882
Total net liabilities at fair value (764,653)
Intangible assets arising on acquisition
Customer contracts ₱571,759
Franchise 721,731
Frequency 490,834 1,784,324
Property and equipment appraisal increase 945,018
Deferred tax liabilities (818,803)
Net assets acquired and liabilities assumed ₱1,145,886

Purchase consideration transferred ₱1,829,843

Net assets acquired and liabilities assumed (1,145,886)
Non-controlling interest measured at fair value 16,386
Share in previously held equity interest 439,906
Goodwill arising on acquisition ₱1,140,249

The net assets recognized in the December 31, 2015 consolidated financial statements were
based on a provisional assessment of their fair values. In June 2016, the assessment was
completed. The management performed a review on BTI Group’s accrual balances and has
identified certain items for reversal amounting to ₱22.90 million which were found to be not
existing at acquisition date. As a result, there was an increase in the gain on previously held
equity interest of ₱8.79 million and an increase in the non-controlling interest of
₱0.33 million. There was also a corresponding reduction in goodwill of ₱13.78 million,
resulting in ₱1,140.25 million of total goodwill arising on the acquisition.

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 -63-

The goodwill comprises the fair value of expected synergies arising from the acquisition and
presented under Goodwill and other intangible assets in the statements of the financial
position, as disclosed in Note 8. None of the goodwill recognized is expected to be
deductible for income tax purposes.
For the valuation of identifiable intangible assets, the “multi-period-excess-earnings method”
was used. The respective future excess cash flows were identified and adjusted in order to
eliminate all elements not associated with these assets. Future cash flows were measured on
the basis of the expected sales by deducting variable and sales-related imputed costs for the
use of the contributory assets. Subsequently, the outcome was discounted using the
appropriate discount rate and adding a tax amortization benefit.
The fair value of the properties is based on valuations performed by an independent
appraiser using acceptable valuation techniques within the industry. However, these
techniques make use of inputs which are not based on observable market data. The
application of a different set of assumptions or technique could have a significant effect on
the resulting fair value estimates.
Net cash outflow from the acquisition is as follows (in thousand pesos):

Total purchase consideration ₱1,829,843

Cash and cash equivalents acquired from BTI (511,154)
Net cash outflow on acquisition ₱1,318,689

Acquisition related costs of ₱26.50 million were expensed and are included within “general,
selling and administrative” line item in the consolidated statements of comprehensive income
in 2015.
From the date of acquisition, BTI has contributed ₱3,059.28 million in revenues and income
before tax of ₱31.04 million in 2015. If the combination had taken place at the beginning of
the year, BTI’s contribution to revenue would have been ₱6,056.71 million and income
before tax would have been ₱144.30 million in 2015.

10 Investments
This account consists of the following as of December 31:

2016 2015
(In Thousand Pesos)
Investments at equity ₱34,181,452 ₱1,498,565

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Details of the Globe Group’s investments in joint ventures and associate and the related
percentages of ownership are shown below:

Country of
Incorporation Principal Activities 2016 2015
Associates
Yondu Philippines Mobile content and
application
development services 49% 49%
AFPI Philippines Construction and
establishment of
systems, infrastructure 20% 20%
Joint Ventures
VTI Philippines Telecommunications 50% -
BAHC Philippines Holding Company 50% -
BHC Philippines Holding Company 50% -
GTHI Philippines Health hotline facility 50% 50%
TechGlobal Philippines Installation and
management of data
centers 49% 49%
Bridge Mobile Pte. Ltd. (BMPL) Singapore Mobile technology
infrastructure and
common service 10% 10%
BPI Globe BanKO Inc., A Savings Philippines Micro-finance
Bank (BPI Globe BanKO) enterprises banking
services - 40%

The movement in investments in joint ventures and associates are as follows:

2016 2015
(In Thousand Pesos)
Acquisition Costs
At January 1 ₱1,989,455 ₱648,676
Acquisition during the year 33,559,783 332,500
Disposal during the year (24,011) -
Advances reclassed to investment - 143,573
Fair value adjustment arising from sale of controlling
interest in Yondu - 864,706
At December 31 35,525,227 1,989,455
Accumulated Equity in Net Losses
At January 1 (511,950) (358,438)
Equity in net losses (855,198) (153,512)
At December 31 (1,367,148) (511,950)
Other Comprehensive Income
At January 1 21,060 16,912
Net foreign exchange difference 3,914 2,034
Others (1,601) 2,114
At December 31 23,373 21,060
Carrying Value at December 31 ₱34,181,452 ₱1,498,565

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Investment in Associates

10.1 Investment in Yondu

Globe Telecom previously owned 100% interest in Yondu and consolidated its net assets
in the consolidated statement of financial position as of December 31, 2014.
On September 1, 2015, Yondu and GCVHI entered into a Deed of Assignment to assign the
former’s interest in GTHI to GCVHI for a total consideration of ₱15 million.
On September 15, 2015, Globe Telecom sold its controlling interest in Yondu for a total
consideration of P670 million. On the same date, Yondu issued additional 5,000 common
shares from its unissued authorized capital stock to a third party which further diluted Globe
Telecom’s ownership interest to 49%. Gain on disposal of controlling interest in subsidiary
and gain on fair value of retained interest was recognized in the consolidated statements of
comprehensive income amounting to ₱449.15 million and ₱745.83 million, respectively,
for the year ended December 31, 2015.
The fair value of retained interest in Yondu is based on the most recent market transaction.
Total assets and liabilities of Yondu as of the date of disposal of controlling interest amounted
to ₱740.70 million and ₱728.10 million, respectively, including cash and cash equivalents of
₱75.51 million. The fair value of the Yondu shares held by Globe Telecom amounted to
₱864.71 million as of September 15, 2015.
As of December 31, 2016 and 2015, the carrying value of the investment in Yondu amounted
to ₱928.39 million and ₱886.99 million, respectively.
The following table presents the summarized unaudited financial information of Yondu as of
December 31, 2016 and 2015 and for the years ended December 31, 2016 and 2015.

2016 2015
Statements of Financial Position:
Current assets, including cash and cash equivalents ₱568,563 ₱851,259
Noncurrent assets 39,323 59,716
Current liabilities 283,739 627,757
Equity 372,729 283,218
Statements of Comprehensive Income:
Revenue 744,398 925,719
Cost of sales and services (613,219) (626,879)
Gross income 131,179 298,840
Other expense (8,227) (1,093)
Income before tax 122,952 297,747
Provision for income tax (38,461) (96,227)
Total comprehensive income/Net income for the period ₱84,491 ₱201,520
Globe Group’s share in net income for the period ₱41,401 ₱22,280

The Globe Group has no share of any contingent liabilities of any associates as of
December 31, 2016.

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10.2 Investment in AFPI (formerly AFCS)

On January 30, 2014, following a competitive bidding process, the Department of
Transportation and Communication awarded to AF Consortium, composed of AC
Infrastructure Holdings Corp., BPI Card Finance Corp., Globe Telecom, Inc., Meralco
Financial Services, Inc., Metro Pacific Investments Corp., and Smart Communications, Inc.
the rights to design, build and operate the ₱1.72 billion automated fare collection system. This
is a public-private partnership project intended to upgrade and consolidate the fare collection
systems of the three urban rail transit systems which presently serve Metro Manila.
On February 10, 2014, AF Consortium incorporated AFCS, a special purpose company,
which will assume the rights and obligations of the concessionaire. These rights and
obligations include the construction and establishment of systems, infrastructure including
implementation, test, acceptance and maintenance plans, and operate the urban transit system
for a period of 10 years.
Globe Telecom made an additional capital contribution of ₱160.00 million in February 2015
and ₱130.00 million in February 2016.
On March 11, 2015, AFCS changed its name from Automated Fare Collection Services, Inc.
to AF Payments Inc.
As of December 31, 2016 and 2015, Globe Telecom has invested a total of ₱590.00 million,
and ₱460.00 million, respectively, in the consortium with 20% equivalent equity interest. This
is accounted for as investment in associate with carrying value as of December 31, 2016 and
2015, amounting to ₱370.77 million and ₱371.19 million, respectively.
The following table presents the summarized unaudited financial information of the AFPI as
of December 31, 2016 and 2015 and for the years ended December 31, 2016 and 2015.

2016 2015
(In Thousand Pesos)
Statements of Financial Position:
Current assets, including cash and
cash equivalents ₱786,008 ₱618,119
Noncurrent assets 1,803,749 1,974,411
Current liabilities 367,511 439,410
Equity 1,853,871 1,835,062
Statements of Comprehensive Loss:
Revenue 44,510 23,262
Cost and expenses (688,446) (409,171)
Loss before tax (643,936) (385,909)
Net loss for the year (643,936) (385,909)
Other comprehensive loss (111) (1,575)
Total comprehensive loss (₱644,047) (₱387,484)
Globe Group’s share in net loss for the year (₱128,809) (₱77,497)
Share in stock issuance costs (₱1.61) -

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Investment in Joint Ventures

10.3 Investment in BPI Globe BanKO

On July 17, 2009, Globe Telecom acquired a 40% stake in BPI Globe BanKO for
₱141.33 million, pursuant to a Shareholder Agreement with Bank of the Philippine Islands
(BPI), Ayala Corporation and PS Bank, and a Deed of Absolute Sale with BPI. BPI Globe
BanKO provides financial services to micro-finance institutions and retail clients through
mobile and related technology.
On May 10, 2011, the BOD of Globe Telecom approved the additional investment of
₱100.00 million as share for BPI Globe BanKO’s increase in capitalization to cover its
expansion plan for the next three years. Globe Telecom made the initial capital infusion of
₱79.01 million in 2011 and ₱20.99 million in 2012. Thereafter, Globe infused additional
capital recorded under “Investments and advances” account amounting to ₱248.00 million
and ₱59.00 million in 2014 and 2013, respectively. 
On August 27, 2015, Globe Telecom, AC and BPI Globe BanKO entered into an agreement
to turn over full ownership of BPI Globe BanKO to BPI, one of the majority owners of the
joint venture. On September 20, 2016, Globe Telecom disposed of its 40% interest in Globe
BanKO for a total consideration of ₱16.12 million. The carrying value of investment
amounted to ₱24.01 million as of September 20, 2016, resulting to a loss on disposal of
₱7.89 million.
As of December 31, 2015, the carrying value of the investment and advances amounted to
₱53.16 million representing 40% interest.
The following table presents the summarized unaudited financial information of the BPI
Globe BanKO as of and for the year ended December 31, 2015.

2015
(In Thousand Pesos)
Statement of Financial Position:
Current assets, including cash and cash equivalents ₱402,079
Noncurrent assets 267,985
Current liabilities 537,155
Equity 132,909
Statement of Comprehensive Loss:
Revenue 97,997
Cost and expenses (333,728)
Loss before tax (235,731)
Income tax benefit 11,284
Total comprehensive loss /Net loss for the year (₱224,447)
Globe Group’s share in net loss for the year (₱89,779)

10.4 Investment in BMPL

Globe Telecom and other leading Asia Pacific mobile operators (JV partners) signed an
Agreement in 2004 (JV Agreement) to form a regional mobile alliance, which will operate
through a Singapore-incorporated company, BMPL. The JV company is a commercial vehicle
for the JV partners to build and establish a regional mobile infrastructure and common service
platform and deliver different regional mobile services to their subscribers.

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Globe Group has a ten percent (10%) stake in BMPL. The other joint venture partners each
with equal stake in the alliance include SK Telecom, Co. Ltd., Advanced Info Service Public
Company Limited, Bharti Airtel Limited, Maxis Communications Berhad, Optus Mobile Pty.
Limited, Singapore Telecom Mobile Pte, Ltd., Taiwan Mobile Co. Ltd., PT Telekomunikasi
Selular and CSL Ltd. Under the JV Agreement, each partner shall contribute USD4 million
based on an agreed schedule of contribution. Globe Telecom may be called upon to
contribute on dates to be determined by the JV partners. On November 25, 2014, Globe
Telecom received a return of capital amounting to USD1.40 million.
As of December 31, 2016 and 2015, the carrying value of the investment in BMPL amounted
to ₱39.13 million and ₱29.80 million, respectively.
The following table presents the summarized unaudited financial information of the BMPL as
of December 31, 2016 and 2015 and for the years ended December 31, 2016 and 2015.

2016 2015
(In Thousand Pesos)
Statement of Financial Position:
Current assets, including cash and cash equivalents ₱481,340 ₱357,616
Noncurrent assets 33,430 28,403
Current liabilities 127,015 91,630
Equity 387,755 294,389
Statement of Comprehensive Income:
Revenue 231,510 223,156
Cost and expenses 175,262 155,768
Total comprehensive income/ Net income for the year ₱56,248 ₱67,388
Globe Group’s share in net income for the year ₱5,422 ₱6,550
Cumulative translation difference ₱3,914 ₱4,163

10.5 Investment in GTHI

On October 23, 2014, Yondu and Salud Interactiva (SI) signed a shareholder’s agreement for
the purpose of entering into a joint venture through a Philippine corporation. The Joint
Venture (JV) Company was registered with the Securities and Exchange Commission on
June 3, 2015 under the name GTHI as a stock corporation with 50% foreign equity formed to
establish, operate, manage and provide a health hotline facility, including ancillary
Information Technology services with intent to operate as a domestic market enterprise.
GTHI started commercial operations in July 2015.
On September 1, 2015, Yondu assigned its interest to GCVHI. This is accounted for using the
equity method.
As of December 31, 2016 and 2015 total carrying value of investment in GTHI amounted to
₱21.47 million and ₱34.93 million, respectively.

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The following table presents the summarized unaudited financial information of the GTHI as
of December 31, 2016 and 2015 and for the year ended December 31, 2016 and 2015.

2016 2015
(In Thousand Pesos)
Statement of Financial Position:
Current assets, including cash and cash equivalents ₱60,660 ₱80,415
Noncurrent assets 4,286 6,123
Current liabilities 22,000 16,671
Equity 42,945 69,867
Statement of Comprehensive Loss:
Revenue 26,502 318
Cost and expenses 53,424 30,451
Total comprehensive loss/ Net loss for the year (₱26,922) (₱30,133)
Globe Group’s share in net loss for the year (₱13,461) (₱15,067)

10.6 Investment in TechGlobal

On November 2, 2015, Innove and Techzone Philippines incorporated TechGlobal, a Joint
Venture Company, formed to install, own, operate, maintain and manage all kinds of data
centers and to provide information technology-enabled services and computer-enabled
support services. Innove and Techzone hold ownership interest of 49% and 51%, respectively.
As of December 31, 2016, TechGlobal has not started commercial operations.
The carrying value of the investment amounted to ₱115.32 million and ₱122.50 million as of
December 31, 2016 and 2015, respectively.
The Globe Group has no share of any contingent liabilities of the joint ventures as of
December 31, 2016.
The following table presents the summarized unaudited financial information of the
TechGlobal as of December 31, 2016 and for the period ended December 31, 2016.

2016
(In Thousand Pesos)
Statement of Financial Position:
Current assets, including cash and cash equivalents ₱19,487
Noncurrent assets 256,261
Current liabilities 40,389
Equity 235,359
Statement of Comprehensive Loss:
Cost and expenses 14,641
Total comprehensive loss/ Net loss for the year 14,641
Globe Group’s share in net loss for the year ₱7,174

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10.7 Investment in VTI, BAHC and BHC

On May 30, 2016, Globe Telecom’s Board of Directors, through its Executive Committee,
approved the signing of a Sale and Purchase Agreement (SPA) and other related definitive
agreements for acquisition of 50% equity interest in the telecommunications business of San
Miguel Corporation (SMC), Schutzengel Telecom, Inc. and Grace Patricia W. Vilchez-
Custodio (the “Sellers”; SMC being the major seller) through their respective subsidiaries
namely, VTI, BAHC and BHC, respectively (the Acquirees). The preceeding sentence is
hereinafter referred to as “the Transaction”.
VTI owns an equity stake in Liberty Telecom Holdings, Inc. (LIB), a publicly listed
company in the Philippine Stock Exchange. It also owns, directly and indirectly, equity
stakes in various enfranchised companies, including Bell Telecommunication Philippines,
Inc. (Bell Tel), Eastern Telecom Philippines, Inc. (Eastern Telecom), Express Telecom, Inc.,
and Tori Spectrum Telecom, Inc., among others. The remaining 50% equity stake in VTI,
BAHC and BHC was acquired by Philippine Long Distance Telephone Company (PLDT)
under similar definitive agreements.
Total consideration for the Transaction amounts to ₱52,847.82 million for the purchase of
the equity interest and advances of the Acquirees, which translated to an agreed
consideration of ₱26,423.91 million for Globe Telecom’s 50% equity stakes in the
Acquirees. The SPA also provided for the assumption of total liabilities of ₱17,151.18
million by Globe and PLDT from May 30, 2016 and a price adjustment mechanism based on
the variance in the amount of assumed liabilities from April 30, 2016 to be agreed upon by
Globe, PLDT and the Sellers at the end of the confirmatory due diligence period. As of
December 31, 2016 the negotiated amount was ₱10,782.50 which was already finalized with
the network suppliers. Globe Telecom’s share in the negotiated assumed liabilities
amounting to ₱5,391.25 million and acquisition-related cost amounting to ₱298.53 million
was carried as part of the investment cost. The confirmatory due diligence is still ongoing as
of December 31, 2016. The assumption of liabilities of VTI, BAHC and BHC by Globe
Telecom and PLDT may give rise to claims that may not have been contemplated and agreed
upon during the period set for confirmatory due diligence. The SPA provides for various
indemnity claims expiring between 2 to 5 years from the end of the confirmatory due
diligence period.
The consideration for the equity interest and advances was settled on a deferred basis based
on the following schedule: 50% was paid on May 30, 2016, 25% was paid on
December 1, 2016 and 25% shall be payable on May 30, 2017. As security for the final
payment, an irrevocable standby letter of credit was delivered to the Sellers.
The acquisition provided Globe Telecom an access to certain frequencies assigned to Bell
Tel in the 700 Mhz, 900 Mhz, 1800 Mhz, 2300 Mhz and 2500 Mhz bands through a co-use
arrangement approved by the NTC on May 27, 2016. NTC's approval is subject to the
fulfillment of certain conditions including roll out of telecom infrastructure covering at least
90% of the cities and municipalities in three years to address the growing demand for
broadband infrastructure and internet access.
The memorandum of agreement between Globe and PLDT provides for both parties to pool
resources and share in the profits and losses of the companies on a 50%-50% basis with a
view to being financially self-sufficient and able to operate or borrow funds without recourse
to the parties. Globe has extended advances to Vega group amounting to ₱1,316.08 million
for the period June 1, 2016 to December 31, 2016 which was carried as part of investment
cost.

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Of the various companies within the group, only Eastern Telecom and its subsidiary have
commercial operations generating ₱2,093.60 million, ₱955.70 million and ₱670.50 million
in revenues, EBITDA and net income for the year ended December 31, 2016, respectively.
Globe Telecom has adjusted its share in the net assets of the Acquirees to reflect losses on
fair value of assets and onerous contracts.
On June 21, 2016, Globe Telecom exercised its rights as holder of 50% equity interest of
VTI to cause VTI to propose the conduct of a tender offer on the common shares of LIB held
by minority shareholders as well as the voluntary delisting of LIB. At the completion of the
tender offer and delisting of LIB, VTI’s ownership on LIB is at 99.1%.
As at the date of the Transaction, the fair value of the identifiable assets and liabilities of
VTI, BAHC and BHC which has been provisionally determined pending the finalization of
necessary market valuations and determined based on management’s best estimate of the
likely values are as follows:

2016

Assets ₱8,857,921
Liabilities (18,474,206)
Total net liabilities at fair value (9,616,285)
Intangible assets arising from the acquisition:
Spectrum ₱37,769,443
Trademark 419,401
Customer contracts 660,400 38,849,244
Property and equipment appraisal increase 1,049,964
Deferred tax liabilities (11,969,762)
Non-controlling interest measured at fair value (1,197,681)
₱17,115,480

Purchase consideration transferred ₱26,562,192

Share in identifiable assets and intangible
assets (50%) (8,557,740)
Goodwill arising on the acquisition ₱18,004,452

The Globe Group will recognize any adjustment to those provisional values as an adjustment
to goodwill upon determining the final fair values of identifiable assets and liabilities within
12 months from the acquisition date, as allowed by PFRS 3.
The provisional fair value amount of spectrum, trademark, customer contracts and property
and equipment was determined by an independent appraiser using acceptable valuation
techniques for the industry. However, these techniques make use of inputs which are not
based on observable data. The application of different sets of assumptions or technique could
have a significant effect on the resulting fair value estimates. The fair values of intangible
assets reflect the market participants’ expectations at the acquisition date about the probability
that the expected future economic benefits embodied in the assets will flow to the entity. The
major market participants for the industry are Globe and PLDT.

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Spectrum was valued using the greenfield approach where the Globe Group is deemed to
have started with nothing but the spectrum and licenses, paid for all other assets and incurred
the startup costs and losses during the ramp up period. The relief of royalty approach was
applied for the valuation of trademark using a royalty charge derived from comparable
transactions and applied against projected revenues. Customer contracts were valued using
the multi-period excess earnings method (MEEM) which is the difference between after-tax
operating cash flows attributable to the customer contracts following a certain percentage of
attrition and the required cost of invested capital on contributory assets.
The goodwill comprises the fair value of the expected synergies arising from the acquisition.
For goodwill impairment assessment, the cash generating unit is the mobile communications
segment of Globe Group.
Management has estimated the useful life of the spectrum to be 50 years, after considering the
market forces and technological trends which will determine the economic life of the asset,
over which period the Globe Group can continue generating optimum level of future cash
flows.
The following table presents the summarized unaudited financial information of VTI, BAHC
and BHC as at and for the year ended December 31, 2016.

2016
Statement of Financial Position:
Current assets, including cash and cash equivalents ₱3,334,344
Noncurrent assets 4,418,434
Current liabilities 17,083,846
Deficit (10,543,361)
Statement of Comprehensive Income:
Revenue 2,007,149
Cost of sales and services 991,501
Gross income 1,015,648
Other expense 51,400,797
Loss before tax 50,385,149
Provision for income tax 333,712
Total comprehensive loss/Net loss 50,718,861
Globe Group’s share in net loss from June 1, 2016 to
December 31, 2016 and net of tax amortization of
intangibles assets ₱723,423

As of December 31, 2016, the carrying value of the investment amounted to ₱32,706.36
million.
The Transaction has been the subject of review notice filed by the Philippine Competition
Commission (PCC) against Globe Telecom, PLDT, SMC and VTI on June 7, 2016 where
PCC claimed that the notice was deficient in form and substance and concluded that the
acquisition cannot be claimed to be deemed approved. Globe Telecom has clarified that that
supposed deficiency in form and substance is not a ground to prevent the transaction from
being deemed approved. The petitions of both parties with the Court of Appeals have been
subsequently consolidated and the parties were required to submit their respective memoranda
after which the case shall be deemed submitted for resolution (see Note 26).

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11 Other Noncurrent Assets

This account consists of:

Notes 2016 2015

(In Thousand Pesos)
Miscellaneous deposits - net ₱1,043,479 ₱934,656
AFS investment in equity securities 28.12 794,087 577,580
Deferred input VAT 6 260,720 464,426
Loan receivables from:
GGRP 16.3, 18.2 - 968,000
BHI 16.3 - 158,620
Others 9.2 97,677 103,331
₱2,195,963 ₱3,206,613

12 Accounts Payable and Accrued Expenses

This account consists of:

Notes 2016 2015

(In Thousand Pesos)
Accrued project costs 25.3 ₱21,533,633 ₱20,862,122
Accounts payable 16, 9 20,389,473 13,050,017
Accrued expenses 16
Repairs and maintenance 3,627,299 2,605,407
Services 3,539,472 3,695,142
Lease 2,112,170 1,635,900
General, selling and administrative 1,983,909 1,931,195
Advertising 1,821,800 1,768,127
Manpower 1,179,182 1,945,611
Utilities 1,083,614 1,045,435
Interest 523,439 385,672
Traffic settlements - net 4 846,074 444,211
Dividends payable 17.3 262,355 260,030
Output VAT - net 235,266 198,433
₱59,137,686 ₱49,827,302

General, selling and administrative accrued expenses include travel, professional fees,
supplies, commissions and miscellaneous, which are individually immaterial. 
Traffic settlements payable are presented net of traffic settlements receivable from the same
carrier amounting to ₱947.35 million and ₱1,143.42 million as of December 31, 2016 and
2015, respectively.
As of December 31, 2016, Globe Telecom, GXI, , Asticom and KVI reported output VAT
amounting to ₱235.26 million, net of input VAT of ₱1,074.87 million. As of
December 31, 2015, Globe Telecom, GXI, Innove, Asticom and KVI reported output VAT
amounting to ₱198.43 million, net of input VAT of ₱1,044.75 million.

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13 Provisions
The rollforward analysis of this account follows:

Notes 2016 2015

(In Thousand Pesos)
At beginning of year ₱1,160,118 ₱401,288
Provisions for investments 3.1.5, 10.7 5,391,250 -
Provisions for claims 634,963 257,587
Payments/reversals (554,719) (390,711)
Assumed provisions from a business combination - 891,954
At end of year ₱6,631,612 ₱1,160,118

Provisions relate to various pending unresolved claims over the Globe Group’s businesses
such as provision for taxes, employee benefits, onerous contracts and various labor cases.
Provision for investments pertains to Globe Telecom’s share in the total assumed liabilities
related to the acquired interest in VTI, BAHC and BHC as discussed in Note 10.7. Included
under employee benefits in 2015 is the restructuring cost of BTI amounting to
₱416.86 million which was settled in 2016. The information usually required by PAS 37,
Provisions, Contingent Liabilities and Contingent Assets, is not disclosed as it may prejudice
the outcome of these on-going claims and assessments. As of February 7, 2017, the remaining
pending claims are still being resolved.

14 Notes Payable and Long-term Debt

Notes payable consist of short-term unsecured peso-denominated promissory notes from local
banks.
On March 3, 2016, Globe Telecom signed a ₱1,000 million short-term loan with fixed interest
rate with Security Bank as lender. The proceeds of the loan were used as working capital. The
loan was fully paid in March 2016.
On May 27, 2016 and May 30, 2016, Globe Telecom signed a ₱4,000 million short-term loan
with Metrobank and ₱8,900 million short-term loan with Security Bank, respectively, both with
fixed interest rates. The proceeds of the loans were used to partially finance an investment. The
short-term loan were fully paid in September 2016.
On August 30, 2016, Globe Telecom signed a ₱2,000 million short-term loan with fixed interest
rate with BDO as lender. The proceeds of the loan were used as working capital. The loan was
fully paid in November 2016.
On November 17, 2016, Globe Telecom signed a ₱1,500 million short term loan with Metrobank
as lender. The proceeds of the loan were used as working capital. The short term loan will mature
in February 2017.
On December 14, 2016 and December 19, 2016, Globe telecom signed a ₱1,200 million short
term loan with Mizuho and ₱1,800 million with BDO, respectively, both with fixed interest rates.
The proceeds of the loans were used as working capital. The loans will mature in March 2017.
On December 16, 2016, Globe Telecom signed a ₱1,200 million short term loan with fixed
interest rate with BDO as lender. The proceeds of the loan were used as working capital. The loan
was fully paid in December 2016.
The short-term loans bear interest ranging from 2.40% to 3.25%.

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Long-term debt consists of:

2016 2015
(In Thousand Pesos)
Term Loans:
Peso ₱71,610,561 ₱35,683,362
Dollar 12,715,561 17,560,999
Retail bonds 16,902,469 16,917,473
Corporate notes - 2,067,024
101,228,591 72,228,858
Less current portion (5,830,319) (7,973,594)
₱95,398,272 ₱64,255,264

The maturities of long-term debt at nominal values as of December 31, 2016 follow
(in thousands):

Due in:
2017 ₱5,844,710
2018 8,175,481
2019 16,401,327
2020 10,945,571
2021 and thereafter 60,337,635
₱101,704,724

Unamortized debt issuance costs included in the above long-term debt as of December 31, 2016
and 2015 amounted to ₱476.13 million and ₱305.58 million, respectively.
Total interest expense recognized related to long-term debt, excluding the capitalized interest,
amounted to ₱3,101.95 million, ₱2,504.10 million and ₱2,067.34 million in 2016, 2015 and
2014, respectively (see Notes 7 and 22).
The interest rates and maturities of the above debts are as follows:

Maturities Interest Rates

Term Loans:
Peso 2017-2031 2.06% to 6.00% in 2016
2016-2025 2.02% to 6.00% in 2015

Dollar 2017-2023 1.12% to 5.00% in 2016

2016-2023 1.12% to 5.00% in 2015

Corporate notes 2016 8.43% in 2015

Retail bonds 2017-2023 4.89% to 6.00% in 2016

2017-2023 4.89% to 6.00% in 2015

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14.1 Term Loans and Corporate Notes

Globe Group’s unsecured bank loans and corporate notes, which consist of fixed and
floating rate notes and dollar and peso-denominated bank loans, bear interest at stipulated
and prevailing market rates. Globe Group also has secured debt amounting to
USD4.47 million as of December 31, 2015 arising from its acquisition of BTI (see Note 7).
On March 22, 2013, Globe Telecom signed a USD120 million 7-year term loan with
floating interest rate with Metrobank as lender to finance Globe Telecom’s capital
expenditure.
On December 4, 2013, Globe Telecom signed a ₱7,000 million 7-year term loan credit
facility with fixed interest rate with Land Bank of the Philippines as lender. The proceeds of
the loan were used to partially finance Globe Telecom’s general financing and corporate
requirements for capital expenditures. The total loan amount was drawn in 2014.
On March 9, 2015, Globe Telecom signed a ₱7,000 million 7-year term loan with fixed
interest rate with Philippine National Bank. The proceeds of the loan were used to partially
finance the capital expenditures and general corporate requirements.
On October 1, 2015, Globe Telecom signed a USD45 million 7-year term loan with floating
interest rate and a ₱5,000.00 million 10-year term loan with fixed interest rate with
Metrobank. The proceeds of the loans were used to finance the capital expenditures and/or
reimburse capital expenditures.
On March 14, 2016, Globe Telecom signed a ₱7,000 million 10-year term loan with fixed
interest rate with Land Bank of the Philippines as lender. The proceeds of the loan were used
to partially finance the general financing and corporate requirements for capital expenditures.
On September 2, 2016, Globe Telecom signed a ₱20,000 million term loan with tenors of
12 and 15 years at a fixed interest rate, with Metrobank as lender. The proceeds of the loan
were used to partially finance the acquisition of VTI, BAHC and BHC.
On September 29, 2016, Globe Telecom signed a ₱7,000 million 10-year term loan with fixed
interest rate with Unionbank as lender. The proceeds of the loan were used to partially finance
capital expenditures.
On November 28, 2016, Globe Telecom signed a ₱500 million 15-year term loan with fixed
interest rate with Unionbank as lender. The proceeds of the loan were used to partially finance the
acquisition of VTI, BAHC and BHC.
The loan agreements with banks and other financial institutions provide for certain
restrictions and requirements with respect to, among others, maintenance of financial ratios
and percentage of ownership of specific shareholders, incurrence of additional long-term
indebtedness or guarantees and creation of property encumbrances.
The financial tests under Globe Group’s loan agreements include compliance with the
following ratios:
 Total debt* to equity not exceeding 2.5:1;
 Total debt* to EBITDA not exceeding 3:1;
 Debt service coverage exceeding 1.3 times; and
 Secured debt ratio not exceeding 0.2 times.
*Composed of notes payable, long term debt and net derivative liabilities.
In August 2016, the loan agreements with Non-Bank Financial Institutions were amended
to adjust the debt to equity ratio from 2:1 to 2.5:1. As of December 31, 2016, the Globe
Group is not in breach of any loan covenants.

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14.2 Retail Bonds

On June 1, 2012, Globe Telecom issued ₱10,000.00 million fixed rate bonds. The amount
comprises ₱4,500.00 million and ₱5,500.00 million fixed rate bonds due in 2017 and 2019,
with interest rate of 5.75% and 6.00%, respectively. The net proceeds of the issue were used
to partially finance the Globe Telecom’s capital expenditure requirements in 2012.
The five-year and seven-year retail bonds may be redeemed in whole, but not in part only,
starting two years before maturity date and on the anniversary thereafter at a price equal to
101.00% and 100.50%, respectively, of the principal amount of the bonds and all accrued
interest to the date of the redemption.
On July 17, 2013, the Globe Telecom issued ₱7,000.00 million fixed rate bond. The amount
comprises ₱4,000.00 million and ₱3,000.00 million bonds due in 2020 and 2023, with interest
rate of 4.8875% and 5.2792%, respectively. The net proceeds of the issue were used to
partially finance the Globe Telecom’s capital expenditure requirements in 2013.
The seven-year and ten-year retail bonds may be redeemed in whole, but not in part only,
starting two years for the seven-year bonds and three years for the ten-year bonds before the
maturity date and on the anniversary thereafter at a price ranging from 101.0% to 100.5% and
102.0% to 100.5%, respectively, of the principal amount of the bonds and all accrued interest
depending on the year of redemption.
The prepayment feature is assessed as clearly and closely related to the host debt instrument,
and hence need not be separately accounted for at FVPL.
In August 2016, the Bond Trust Indentures were amended to adjust the maximum
debt-to-equity ratio from 2:1 to 2.5:1. As of December 31, 2016, the Globe Group is not in
breach of any bond covenants.

15 Other Long-term Liabilities

This account consists of:

Notes 2016 2015

(In Thousand Pesos)
Accrued pension 16.3, 18.2 ₱3,101,552 ₱3,217,784
ARO 3.2.4, 7 2,239,107 2,054,970
Accrued lease obligations and others 25.1.2 1,329,057 1,221,576
₱6,669,716 ₱6,494,330

The rollforward analysis of the Globe Group’s ARO follows:

Notes 2016 2015

(In Thousand Pesos)
At beginning of year ₱2,054, 970 ₱1,868,006
Accretion expense during the year 22 167,742 152,829
Capitalized to property and equipment
during the year 30 23,210 39,269
Assumed ARO from a business combination - 39,158
Reversals (7,535) (3,865)
Adjustments due to changes in estimates 3.2.4 720 (40,427)
At end of year ₱2,239,107 ₱2,054,970

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16 Related Party Transactions

Parties are considered to be related to Globe Group if they have the ability, directly or
indirectly, to control the Globe Group or exercise significant influence over the Globe Group
in making financial and operating decisions, or vice versa, or where the Globe Group and the
party are subject to common control or common significant influence. Related parties may be
individuals (being members of key management personnel, significant shareholders and/or
their close family members) or entities and include entities which are under the significant
influence of related parties of the Globe Group where those parties are individuals, and
post-employment benefit plan which are for the benefit of employees of the Globe Group or
of any entity that is a related party of the Globe Group.
The Globe Group, in their regular conduct of business, enter into transactions with their
major stockholders, AC and Singtel, associates, joint ventures and certain related parties.

16.1 Entities with Joint Control over Globe Group - AC and Singtel
 Globe Telecom has interconnection agreements with Singtel. The related net traffic
settlements receivable (included in “Receivables” account in the consolidated statements
of financial position) and the interconnection revenues earned (included in “Service
revenues” account in the consolidated statements of comprehensive income) are as
follows:

2016 2015 2014

(In Thousand Pesos)
Traffic settlements receivable - net ₱70,141 ₱22,824 ₱79,191
Interconnection revenues 755,514 725,635 784,965
Interconnection costs 85,148 50,346 112,976

 Globe Telecom and Singtel have a technical assistance agreement whereby Singtel will
provide consultancy and advisory services, including those with respect to the
construction and operation of Globe Telecom’s networks and communication services,
equipment procurement and personnel services. In addition, Globe Telecom has software
development, supply, license and support arrangements, lease of cable facilities,
maintenance and restoration costs and other transactions with Singtel.
 The details of fees (included in repairs and maintenance under the “General, selling and
administrative expenses” account in the consolidated statements of comprehensive
income) incurred under these agreements are as follows:

2016 2015 2014

(In Thousand Pesos)
Maintenance and restoration costs and
other transactions ₱126,148 ₱57,551 ₱63,695
Technical assistance fee 89,400 67,907 160,534
Software development, supply, license
and support 28,342 7,069 19,642

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The outstanding balances due to Singtel (included in the “Accounts payable and accrued
expenses” account in the consolidated statements of financial position) arising from these
transactions are as follows:

2016 2015 2014

(In Thousand Pesos)
Technical assistance fee ₱63,510 ₱57,967 ₱135,877
Maintenance and restoration costs and
other transactions 22,695 8,985 10,882
Software development, supply, license
and support 17,974 - -

 Globe Telecom, Innove and BTI earn subscriber revenues from AC. The outstanding
subscribers receivable from AC (included in “Receivables” account in the consolidated
statements of financial position) and the amount earned as service revenue (included in the
“Service revenues” account in the consolidated statements of comprehensive income) are
as follows:

2016 2015 2014

(In Thousand Pesos)
Subscriber receivables ₱11,463 ₱12,215 ₱9,662
Service revenues 24,112 19,338 18,990

 Globe Telecom reimburses AC for certain operating expenses. The net outstanding
liabilities to (included in “Accounts payable and accrued expenses” account in the
consolidated statements of financial position) and the amount of expenses incurred
(included in the “General, selling and administrative expenses” account in the
consolidated statements of comprehensive income) are as follows:

2016 2015 2014

(In Thousand Pesos)
General, selling and administrative expenses ₱95,717 ₱48,743 ₱37,135
Accounts payable and accrued expenses 24,653 50 755

16.2 Joint Ventures in which the Globe Group is a venturer (see Note 10)
 Globe Telecom has preferred roaming service contract with BMPL. Under this contract,
Globe Telecom will pay BMPL for services rendered by the latter which include, among
others, coordination and facilitation of preferred roaming arrangement among JV partners,
and procurement and maintenance of telecommunications equipment necessary for
delivery of seamless roaming experience to customers. Globe Telecom also earns or
incurs commission from BMPL for regional top-up service provided by the JV partners.
The net outstanding liabilities to BMPL related to these transactions amounted to
₱92.86 million and ₱3.11 million as of December 31, 2016 and 2015, respectively.
Balances related to these transactions (included in “General, selling and administrative
expenses” account in the consolidated statements of comprehensive income) amounted to
₱19.42 million, ₱18.68 million and ₱23.76 million, for the years ended
December 31, 2016, 2015 and 2014, respectively.
 In October 2009, the Globe Group entered into an agreement with BPI Globe BanKO for
the pursuit of services that will expand the usage of GCash technology. As a result, the
Globe Group recognized revenue amounting to ₱7.46 million, ₱8.96 million and
₱6.13 million in 2016, 2015 and 2014, respectively. The related receivables amounted to
₱16.30 million and ₱7.47 million as of December 31, 2016 and 2015, respectively.

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16.3 Transactions with the Globe Group Retirement Plan (GGRP) (see Note 11)
 In 2007, Globe Telecom, Innove and GXI pooled its plan assets for single administration
by the GGRP, which was created for the management of the retirement fund. The
decisions of the GGRP are made through collective decision of the Board of Trustees.
The plan is funded by contributions as recommended by the independent actuary on the
basis of reasonable actuarial assumptions. These assumptions and the funded status of the
pension plan are disclosed in Note 18.2.
The funded status for the pension plan of Globe Group as of December 31, 2016 and 2015
amounted to ₱3,101.55 million and ₱3,217.78 million, respectively (see Notes 15 and
18.2).
The fair value of plan assets by each class held by the retirement fund, on a pooled basis is
disclosed in Note 18.2.
 As of December 31, 2016 and 2015, the pension plan assets of the retirement plan include
shares of stock of Globe Telecom with total fair value of ₱32.18 million and
₱31.20 million, and shares of stock of other related parties with total fair value of
₱107.23 million and ₱144.07 million, respectively. Gains arising from these investments
amounted to ₱7.55 million, ₱11.75 million and ₱12.91 million in 2016, 2015 and 2014,
respectively.
 In 2008, the Globe Group granted a short-term loan to the GGRP amounting to
₱800.00 million with interest at 6.20%. Upon maturity in 2009, the loan was rolled over
until September 2014 with interest at 7.75%. Further, in 2009, the Globe Group granted
an additional loan to the retirement fund amounting to ₱168.00 million which bears
interest at 7.75% and is due also in September 2014.
On September 16, 2014, the maturity of the outstanding balance of loan receivable from
GGRP amounting to ₱968.00 million was extended to September 11, 2017 and the
interest rate was reduced to 5% per annum effective on September 11, 2014. Interest
income amounted to ₱44.33 million, ₱49.07 million and ₱68.02 million in 2016, 2015
and 2014, respectively (see Note 19).
The retirement plan utilized the loan to fund its investments in BHI, a domestic
corporation organized to invest in media ventures. BHI has controlling interest in
Altimax Broadcasting Co., Inc. (Altimax) and Broadcast Enterprises and Affiliated
Media Inc. (BEAM), respectively.
As of December 31, 2016 and 2015, the outstanding balance of loan receivable from
GGRP presented in the “Prepayment and other current assets” of consolidated statements
of financial position amounted to ₱788.00 million (see Note 6) and ₱968.00 million
presented in the “Other Noncurrent Assets” (see Note 11), respectively.
 On August 13 and December 21, 2009, the Globe Group granted five-year loans
amounting to ₱250.00 million and ₱45.00 million, respectively, to BHI at 8.275%
interest. The ₱250.00 million loan is covered by a pledge agreement whereby in the
event of default, the Globe Group shall be entitled to offset whatever amount is due to
BHI from any unpaid fees to BEAM from the Globe Group. The ₱45.00 million loan is
fully secured by a chattel mortgage agreement dated December 21, 2009 between Globe
Group and BEAM. Interest income amounted to ₱8.06 million, ₱8.04 million and
₱11.30 million in 2016, 2015 and 2014, respectively (see Note 19).
On August 13, 2014, the maturity of the outstanding balance of loan receivable from BHI
amounting to ₱158.62 million was extended to August 13, 2017 and the interest rate was
reduced to 5% per annum effective August 14, 2014 (see Note 6).

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 On February 1, 2009, the Globe Group entered into a memorandum of agreement (MOA)
with BEAM for the latter to render mobile television broadcast service to Globe
subscribers using the mobile TV service. As a result, the Globe Group recognized an
expense (included in “Professional and other contracted services”) amounting to
₱190.00 million, ₱190.00 million and ₱155.00 million in 2016, 2015 and 2014,
respectively. Effective January 1, 2015, BEAM charged an increased service fee rate to
Globe Group as a result of an amendment to the MOA.
 On October 1, 2009, the Globe Group entered into a MOA with Altimax for the Globe
Group’s co-use of specific frequencies of Altimax’s for the rollout of broadband wireless
access to the Globe Group’s subscribers. As a result, the Globe Group recognized an
expense (included in “General, selling and administrative expenses” account in the
consolidated statements of comprehensive income) amounting to ₱32.49 million,
₱24.85 million and ₱40.88 million in 2016, 2015 and 2014, respectively.

16.4 Transactions with Yondu

As a result of Globe Telecom’s sale of its controlling stake in Yondu, transactions are
recognized in the consolidated statements of financial position starting September 16, 2015.
The Globe Group has a VAS sharing agreement with Yondu. Under the agreement,
Yondu is entitled to a 30% share on revenue for providing mobile contents to Globe and
TM subscribers. The Globe Group’s payout to Yondu on mobile content transactions in
2016 and 2015 amounted to ₱264.30 million and ₱78.85 million, respectively.
Yondu also provides various enterprise solutions-based services to the Globe Group for
network, platform and applications development under its Business Process Outsourcing
Unit (BPO) and mobile content. The Globe Group’s related expenses in 2016 and 2015
amounted to ₱240.21 million and ₱39.32 million, out of which ₱102.32 million and
₱1.42 million were capitalized under “Asset Under Construction”, respectively.
The outstanding balances of receivable and payables resulting from transactions with
Yondu in 2016 and 2015 amounted to nil and ₱345.71 million and ₱74.23 million and
₱373.54 million, respectively. Dividends receivable amounting to ₱68.74 million and
₱244.49 million was recognized in the consolidated statements financial position as of
December 31, 2016 and 2015, respectively (see Note 6).

16.5 Transactions with other related parties

Globe Telecom has money market placements and bank balances, and subscriber
receivables (included in “Cash and cash equivalents” and “Receivables” accounts in the
consolidated statements of financial position, respectively) and earns service revenues
(included in the “Service revenues” account in the consolidated statements of
comprehensive income) from its other related parties namely, Ayala Land, Inc., Ayala
Property Management Corporation, Bank of the Philippine Islands, Manila Water
Company, Inc., Integrated Microelectronics, Inc., Stream Global Services, Inc., HRMall,
Inc., Honda Cars Philippines, Inc., Isuzu Automotive Dealership, Inc., Iconic Dealership,
Inc., Accendo Commercial Corporation, Affinity Express Philippines, Inc., Alveo Land
Corporation, Asian I-Office Properties, Inc., Avida Land Corp., Avida Sales Corporation,
Ayala Hotels, Inc., Ayala Plans, Inc., Ayala Systems Technology, Inc., Cebu Holdings,
Inc., Makati Development Corporation, [Link], Inc., North Triangle Depot
Commercial Corporation, Psi Technologies, Inc., Roxas Land Corporation., Serendra, Inc.,
Station Square East Commercial Corporation, Ten Knots Development, KHI ALI Manila,
Inc., Lagoon Development Corporation, Subic Bay Town Center, Inc., Ayala Aviation
Corporation, Laguna AAA Water Corp., Liveit Solutions, Inc., Liveit Investments, Ltd.,
Integreon, Inc., Arvo Commercial Corporation, Amaia Land Corporation., Michigan
Power, Philippine Intergrated Energy Solutions, Inc., Southcrest Hotel Ventures, Inc.,
Bonifacio Hotel Ventures, Inc. and Westview Commercial Ventures Corporation.

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The balances with other related parties are recorded under the following accounts as of
December 31:

Notes 2016 2015

(In Thousand Pesos)
Consolidated statements of financial
position:
Cash and cash equivalents 30 ₱1,468,905 ₱1,621,045
Subscriber receivables (included in
“Receivables” account) 4 192,795 204,226
Property and equipment 7 425,029 59,417
Accounts payable and accrued
expenses 12 35,314 23,527

Notes 2016 2015 2014

(In Thousand Pesos)
Consolidated statements of
comprehensive income:
Service revenues 29 ₱601,097 ₱509,715 ₱479,923
General, selling and administrative
expenses 21 260,312 208,351 171,873

The balances under “General, selling and administrative expenses” and “Property and
equipment” accounts consist of expenses incurred on rent, utilities, customer contact
services, other miscellaneous services and purchase of vehicles, respectively.
These related parties are either controlled or significantly influenced by AC.

16.6 Transactions with key management personnel of the Globe Group

The Globe Group’s compensation of key management personnel by benefit type are as
follows:

Notes 2016 2015

(In Thousand Pesos)
Short-term employee benefits 21 ₱205,000 ₱185,000
Share-based payments 18.1 81,360 31,282
Post-employment benefits 18.2 14,600 52,960
₱300,960 ₱269,242

There are no agreements between the Globe Group and any of its directors and key
officers providing for benefits upon termination of employment, except for such benefits
to which they may be entitled under the Globe Group’s retirement plans.
The Globe Group has no non-interest bearing short-term loans to its key management
personnel in 2016 and 2015.

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The summary of balances arising from related party transactions for the relevant financial year follows (in thousands):

2016
Amount Outstanding Balance

Property Cash and Amounts

and Cash Owed by Amounts Owed
Revenue and Costs and Equipment Equivalents Related to Related
other income Expenses (Note 7) (Note 30) Parties Parties Terms Conditions
Entities with joint control
over the Company
Singtel ₱755,514 ₱329,038 ₱ - ₱ - ₱70,141 ₱104,179 Interest-free, settlement in cash Unsecured, no impairment
AC 24,112 95,717 - - 11,463 24,653 Interest-free, Unsecured, no impairment
settlement in cash
Jointly controlled entities
BPI Globe BanKO 7,456 - - - 16,300 - Interest-free, settlement in cash Unsecured, no impairment
BMPL - 19,420 - - - 92,860 Interest-free, settlement in cash Unsecured, no impairment

Associate
Yondu - 504,505 102,321 - 68,740 345,713 Interest-free, settlement in cash Unsecured, no impairment

Other related parties

GGRP 44,334 - - - 788,000 - 3 years, 5%, settlement in cash Unsecured, no impairment

BHI 8,063 - - - 158,620 - 3 years, 5%, settlement in cash The ₱250.00 million is covered by a
pledge agreement while the ₱45.00
million is fully secured by chattel
mortgage agreement.
BEAM - 190,000 - - - - Interest-free, settlement in cash -
Altimax - 32,490 - - - - Interest-free, settlement in cash -
Key management personnel - 300,960 - - - - Unsecured, no impairment
Others 601,097 260,312 425,029 1,468,905 192,795 35,314 Interest-free excluding cash and Unsecured, no impairment
cash equivalents, settlement in
cash

₱1,440,576 ₱1,732,442 ₱527,350 ₱1,468,905 ₱1,306,059 ₱ 602,719

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2015
Amount Outstanding Balance

Cash and
Property and Cash Amounts Owed
Revenue and Costs and Equipment Equivalents by Related Amounts Owed
other income Expenses (Note 7) (Note 30) Parties to Related Parties Terms Conditions
Entities with joint control
over the Company
Singtel ₱725,635 ₱182,873 ₱ - ₱ - ₱22,824 ₱66,952 Interest-free, settlement in cash Unsecured, no impairment
AC 19,338 48,743 - - 12,215 50 Interest-free, Unsecured, no impairment
settlement in cash
Jointly controlled entities
BPI Globe BanKO 8,965 - - - 7,468 - Interest-free, settlement in cash Unsecured, no impairment
BMPL - 18,681 - - - 3,113 Interest-free, settlement in cash Unsecured, no impairment

Associate
Yondu - 118,170 1,420 - 318,711 373,538 Interest-free, settlement in cash Unsecured, no impairment
Other related parties
GGRP 49,071 - - - 968,000 - 3 years, 5%, settlement in cash Unsecured, no impairment
BHI 8,041 - - - 158,620 - 3 years, 5%, settlement in cash The ₱250.00 million is covered by a
pledge agreement while the ₱45.00
million is fully secured by chattel
mortgage agreement.
BEAM - 190,000 - - - - Interest-free, settlement in cash -
Altimax - 24,847 - - - - Interest-free, settlement in cash -
Key management personnel - 269,242 - - - - Unsecured, no impairment
Others 509,715 208,351 59,417 1,621,045 204,226 23,527 Interest-free excluding cash and Unsecured, no impairment
cash equivalents, settlement in cash

₱1,320,765 ₱1,060,907 ₱60,837 ₱1,621,045 ₱1,692,064 ₱467,180

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17 Equity and Other Comprehensive Income

Globe Telecom’s authorized capital stock consists of:

2016 2015
Shares Amount Shares Amount
(In Thousand Pesos and Number of Shares)
Voting preferred stock - ₱5 per share 160,000 ₱800,000 160,000 ₱800,000
Non-voting preferred stock - ₱50 per share 40,000 2,000,000 40,000 2,000,000
Common stock - ₱50 per share 148,934 7,446,719 148,934 7,446,719

Globe Telecom’s issued, subscribed and fully paid capital stock consists of:

2016 2015
Shares Amount Shares Amount
(In Thousand Pesos and Number of Shares)
Voting preferred stock 158,515 ₱792,575 158,515 ₱792,575
Non-voting preferred stock 20,000 1,000,000 20,000 1,000,000
Common stock 132,759 6,637,929 132,743 6,637,138
Total capital stock ₱8,430,504 ₱8,429,713

Below is the summary of the Globe Telecom’s track record of registration of securities:

Number of shares Issue/offer

registered price Date of approval
(In Thousands, Except for Issue/Offer price)
Voting preferred stock 158,515 ₱5.00 June 2001
Non-voting preferred stock 20,000 500.00 August 11, 2014
Common stock* 30,000 0.50 August 11, 1975
*Initial number of registered shares only

17.1 Preferred Stock

Non-Voting Preferred Stock

On February 10, 2014, Globe Telecom’s BOD approved the amendment of Articles of
Incorporation (AOI) to reclassify 31 million of unissued common shares with par value of
₱50 per share and 90 million of unissued voting preferred shares with par value of ₱5 per
share into a new class of 40 million non-voting preferred shares with par value of ₱50 per
share.
On April 8, 2014, the stockholders approved the issuance, offer and listing of up to
20 million non-voting preferred shares, with an issue volume of up to ₱10 billion.
The preferred shares shall be redeemable, non-convertible, non-voting, cumulative and
may be issued in series.
On June 5, 2014, the SEC approved the amendment of AOI to implement the foregoing
reclassification of shares.
On August 8, 2014, the SEC approved the offer of non-voting preferred perpetual shares and
on August 15, 2014, the 20 million non-voting preferred shares were fully subscribed and
issued. Subsequently, the shares were listed at the Philippines Stock Exchange (PSE) on
August 22, 2014.

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The proceeds from the preferred shares issuance were used to partially finance capital
expenditures.
Non-voting preferred stock has the following features:
a) Issued at ₱50 par;
b) Dividend rate to be determined by the BOD at the time of issue;
c) Redemption - at Globe Telecom‘s option at such times and price(s) as may be
determined by the BOD at the time of issue, which price may not be less than the par
value thereof plus accrued dividends;
d) Eligibility of investors - Any person, partnership, association or corporation regardless
of nationality wherein at least 60% of the outstanding capital stock shall be owned by
Filipino
e) No voting rights;
f) Cumulative and non-participating;
g) No pre-emptive rights over any sale or issuance of any share in Globe Telecom’s capital
stock; and
h) Stocks shall rank ahead of the common shares and equally with the voting preferred
stocks in the event of liquidation.

Voting Preferred Stock

Voting preferred stock has the following features:
(a) Issued at ₱5 par;
(b) Dividend rate to be determined by the BOD at the time of issue;
(c) One preferred share is convertible to one common share starting at the end of the 10th
year of the issue date at a price to be determined by Globe Telecom’s BOD at the time of
issue which shall not be less than the market price of the common share less the par value
of the preferred share;
(d) Call option - Exercisable any time by Globe Telecom starting at the end of the 5th year
from issue date at a price to be determined by the BOD at the time of issue;
(e) Eligibility of investors - Only Filipino citizens or corporations or partnerships wherein
60% of the voting stock or voting power is owned by Filipino;
(f) With voting rights;
(g) Cumulative and non-participating;
(h) Preference as to dividends and in the event of liquidation; and
(i) No preemptive right to any share issue of Globe Telecom, and subject to yield protection
in case of change in tax laws.
The dividends for preferred stocks are declared upon the sole discretion of the Globe
Telecom’s BOD.

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17.2 Common Stock

The rollforward of outstanding common shares follows:

2016 2015
Shares Amount Shares Amount
(In Thousand Pesos and Number of Shares)
At beginning of year 132,743 ₱6,637,138 132,733 ₱6,636,654
Exercise of stock options 16 791 10 484
At end of year 132,759 ₱6,637,929 132,743 ₱6,637,138

Fully paid common stock, which have a par value of ₱50, carry one vote per share and carry a
right to dividends.

17.3 Cash Dividends

Information on the Globe Telecom’s BOD declaration of cash dividends follows:

Date
Per Share Amount Record Payment
(In Thousand Pesos, Except Per Share Figures)
Dividends on Voting Preferred stock:
November 11, 2014 ₱0.17 ₱26,457 November 25, 2014 December 11, 2014
November 6, 2015 0.21 33,150 November 24, 2015 December 4, 2015
November 4, 2016 0.20 32,027 November 18, 2016 December 2, 2016

Dividends on Non-voting Preferred

stock:
December 12, 2014 13.00 260,030 January 26, 2015 February 22, 2015
May 12, 2015 13.00 260,030 August 10, 2015 August 22, 2015
December 11, 2015 13.00 260,030 January 26, 2016 February 22, 2016
May 4, 2016 13.00 260,030 August 10, 2016 August 22, 2016
December 7, 2016 13.00 260,030 January 27, 2017 February 22, 2017

Dividends on Common stock:

February 10, 2014 37.50 4,975,351 February 26, 2014 March 20, 2014
August 5, 2014 18.75 2,488,624 August 19, 2014 September 4, 2014
November 11, 2014 18.75 2,488,727 November 25, 2014 December 11, 2014
February 4, 2015 20.75 2,754,224 February 18, 2015 March 4, 2015
May 12, 2015 20.75 2,754,346 May 26, 2015 June 11, 2015
August 3, 2015 20.75 2,754,373 August 17, 2015 September 2, 2015
November 6, 2015 20.75 2,754,412 November 24, 2015 December 4, 2015
February 5, 2016 22.00 2,920,444 February 22, 2016 March 4, 2016
May 4, 2016 22.00 2,920,661 March 19, 2016 June 3, 2016
August 2, 2016 22.00 2,920,689 August 16, 2016 September 1, 2016
November 4, 2016 22.00 2,920,689 November 18, 2016 December 2, 2016

As of December 31, 2016 and 2015, unpaid cash dividends declared related to non-voting
preferred stock amounted to ₱260.03 million.

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17.4 Common Stock Dividend

The dividend policy of Globe Telecom as approved by the BOD is to declare cash dividends to
its common stockholders on a regular basis as may be determined by the BOD. On
November 8, 2011, the BOD approved the current dividend policy of Globe Telecom to
distribute cash dividends at the rate of 75% to 90% of prior year's core net income.
On August 6, 2013, the BOD further approved the change in distribution from semi-annual
dividend payments to quarterly dividend distributions. However, on December 10, 2013,
the BOD approved to defer the implementation of the quarterly dividend payout to the second
semester of 2014.
The dividend distribution policy is reviewed annually and subsequently each quarter of the
year, taking into account Globe Telecom's operating results, cash flows, debt covenants,
capital expenditure levels and liquidity.

17.5 Retained Earnings Available for Dividend Declaration

The total unrestricted retained earnings available for dividend declaration amounted to
₱8,593.28 million as of December 31, 2016. This amount excludes the undistributed net
earnings of consolidated subsidiaries, accumulated equity in net earnings of joint ventures
accounted for under the equity method, and unrealized gains recognized on asset and liability
currency translations and unrealized gains on fair value adjustments. The Globe Group is also
subject to loan covenants that restrict its ability to pay dividends (see Note 14).

17.6 Other Comprehensive Income

Other Reserves

2016

Exchange
differences arising
from translations Remeasurement
Cash flow of foreign losses on defined
hedges AFS investments benefit plan Total

As of January 1 ₱41,357 ₱102,434 ₱15,776 (₱1,371,080) (₱1,211,513)

Fair value changes (457,499) 13,440 - - (444,059)
Remeasurement gain on defined
benefit plan - - - 279,966 279,966
Transferred to profit or loss 320,977 - - - 320,977
Income tax effect
to or transferred from equity 40,957 - - (82,458) (41,501)
Exchange differences - - 23,205 - 23,205

As of December 31 (₱54,208) ₱115,874 ₱38,981 (₱1,173,572) (₱1,072,925)

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2015

Exchange
differences arising
from translations Remeasurement
Cash flow of foreign losses on defined
hedges AFS investments benefit plan Total
(In Thousand Pesos)
As of January 1 ₱40,434 ₱78,167 ₱8,454 (₱1,104,908) (₱977,853)
Fair value changes 299,772 24,267 - - 324,039
Remeasurement losses on defined
benefit plan - - - (379,091) (379,091)
Transferred to profit or loss (298,453) - - - (298,453)
Income tax effect
to or transferred from equity (396) - - 112,919 112,523
Exchange differences - - 7,322 - 7,322

As of December 31 ₱41,357 ₱102,434 ₱15,776 (₱1,371,080) (₱1,211,513)

2014

Exchange
differences arising
from translations Remeasurement
Cash flow of foreign losses on defined
hedges AFS investments benefit plan Total
(In Thousand Pesos)
As of January 1 ₱35,027 ₱57,775 (₱6,020) (₱826,357) (₱739,575)
Fair value changes (207,522) 20,392 - - (187,130)
Remeasurement losses on defined
benefit plan - - - (397,930) (397,930)
Transferred to profit or loss 215,246 - - - 215,246
Income tax effect to or transferred
from equity (2,317) - - 119,379 117,062
Exchange differences - - 14,474 - 14,474

As of December 31 ₱40,434 ₱78,167 ₱8,454 (₱1,104,908) (₱977,853)

18 Employee Benefits

18.1 Stock Plans

The Globe Group has Executive Stock Option Plan (ESOP) and Long-Term Incentive Plan
(LTIP). The number of shares allocated under these plans shall not exceed the aggregate
equivalent of 6% of the authorized capital stock. 

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18.1.1 Executive Stock Option Plan

The following are the stock option grants to key executives and senior management
personnel of the Globe Group under the ESOP from 2004 to 2016:
Number Fair Value
of Options/ of Each Fair Value
Date of Grant Grants Exercise Price Exercise Dates Option/Grants Measurement

July 1, 2004 803,800 840.75 per share 50% of options exercisable from July 1, 357.94 Black-Scholes
2006 to June 30, 2014; the remaining 50% option pricing
from July 1, 2007 to June 30, 2014 model
March 24, 749,500 854.75 per share 50% of the options become exercisable 292.12 Trinomial option
2006 from March 24, 2008 to March 23, 2016; pricing model
the remaining 50% become exercisable
from March 24, 2009 to March 23, 2016
May 17, 2007 604,000 1,270.50 per share 50% of the options become exercisable 375.89 Trinomial option
from May 17, 2009 to May 16, 2017, the pricing model
remaining 50% become exercisable from
May 17, 2010 to May 16, 2017
August 1, 635,750 1,064.00 per share 50% of the options become exercisable 305.03 Trinomial option
2008 from August 1, 2010 to July 31, 2018, the pricing model
remaining 50% become exercisable from
August 1, 2011 to July 31, 2018
October 1, 298,950 993.75 per share 50% of the options become exercisable 346.79 Trinomial option
2009 from October 1, 2011 to September 30, pricing model
2019, the remaining 50% become
exercisable from October 1, 2012 to
September 30, 2019

The exercise price is based on the average quoted market price for the last 20 trading
days preceding the approval date of the stock option grant.
A summary of the Globe Group’s ESOP activity and related information follows:

2016 2015
Weighted Weighted
Number of Average Number of Average
Shares Exercise Price Shares Exercise Price
(In Thousand Number of Shares Except per Share Figures)
Outstanding, at beginning of year 251 ₱1,084.20 267 ₱1,068.56
Exercised (25) 945.49 (16) 1,111.62
Expired/forfeited (21) 854.75 - -
Outstanding and exercisable, at end of year 205 ₱1,157.45 251 ₱1,084.20

The average share prices at dates of exercise of the stock options in 2016, 2015 and 2014
amounted to ₱1,072.23, ₱2,211.92 and ₱1,697.34, respectively.
As of December 31, 2016 and 2015, the weighted average remaining contractual life of
options outstanding is 1.17 years and 2.87 years, respectively.
The following assumptions were used to determine the fair value of the stock options at
effective grant dates:

October 1, August 1, May 17, March 24, July 1,

2009 2008 2007 2006 2004
Share price ₱995.00 ₱1,130.00 ₱1,340.00 ₱895.00 ₱835.00
Exercise price ₱993.75 ₱1,064.00 ₱1270.5 ₱854.75 ₱840.75
Expected volatility 48.49% 31.73% 38.14% 26.97% 39.50%
Option life 10 years 10 years 10 years 10 years 10 years
Expected dividends 6.43% 6.64% 4.93% 4.47% 4.31%
Risk-free interest rate 8.08% 9.62% 7.04% 8.3684% 12.91%

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The expected volatility measured at the standard deviation of expected share price returns
was based on analysis of share prices for the past 365 days.

18.1.2 Long-Term Incentive Plan

In November 2014, the Globe Group obtained approval from the Board to implement a
Long-Term Incentive Plan (LTIP) also called a Performance Share Plan (PSP) covering
key executives and senior management. Under the PSP, the grantees are awarded a
specific number of shares at the start of the performance period which vest over a
specified performance period and contingent upon the achievement of specified long-
term goals.
The following are the stock grants to key executives and senior management personnel of
the Globe Group under the LTIP: 

Number Fair Value Fair Value

Date of Grant of Grants Settlement Dates of Each Grants Measurement
January 1, 2014 106,293 100% after 3 years subject to attainment of plan ₱1,630.35 Market
targets and subject to stock ownership price
requirements
January 1, 2015 114,392 100% after 3 years subject to attainment of plan 1,738.30 Market
targets and subject to stock ownership price
requirements
January 1, 2016 107,365 100% after 3 years subject to attainment of plan 1,904.95 Market
targets and subject to stock ownership price
requirements

The fair value is based on the average quoted market price for the last 20 trading days
preceding the approval date of the stock option grant.
Cost of share-based payments in 2016, 2015 and 2014 amounted to ₱260.27 million,
₱153.99 million and ₱31.84 million, respectively (See Note 16.6).

18.2 Pension Plan

The Globe Group has a funded, noncontributory, defined benefit pension plans covering
substantially all of its regular employees. The benefits are based on years of service and
compensation on the last year of employment.
The Plan which covers Globe Telecom, Innove and GXI employees is managed and
administered by a Board of Trustees (BOT) whose members are unanimously appointed by
the Globe Group acting through its BOD, while the BTI Plan is managed and administered by
a different retirement committee (BTRC). The BOT and BTRC are authorized to appoint one
or more fund managers to hold, invest and reinvest the assets of the Plans and execute an
Investment Agreement with the said fund managers. The Plans are held and invested by the
fund managers, in accordance with the guidelines set by the BOT and BTRC.
Under the existing regulatory framework, Republic Act 7641 mandates that a retiring
qualified private sector employee shall be entitled to receive retirement benefits under any
collective bargaining agreement and other agreements, provided that an employee's retirement
benefits under said agreements shall not be less than those provided under the same law. In
the absence of a retirement plan or agreement providing for retirement benefits of employees
in the entity, a qualified private sector employee may retire and shall be paid the retirement
pay by the company in accordance with the minimum retirement pay set out in RA 7641.

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The components of pension expense (included in staff costs under “General, selling and
administrative expenses” account) in the consolidated statements of comprehensive income
are as follows:

2016 2015 2014

(In Thousand Pesos)
Current service cost ₱594,557 ₱543,248 ₱417,653

The accrued pension is as follows:

2016 2015
(In Thousand Pesos)
Present value of benefit obligation ₱6,415,840 ₱6,481,297
Fair value of plan assets (3,314,288) (3,263,513)
Liabilities recognized in the consolidated statements of
financial position ₱3,101,552 ₱3,217,784

The following tables present the changes in the present value of defined benefit obligation and
fair value of plan assets:

Present value of defined benefit obligation

2016 2015
(In Thousand Pesos)
Balance at beginning of year ₱6,481,297 ₱5,236,037
Current service cost 594,557 543,248
Interest cost 275,103 247,376
Benefits paid (401,688) (84,284)
Remeasurements in other comprehensive income:
Changes in demographic assumptions (669,742) 14,390
Experience adjustments 137,453 329,424
Acquired on acquisition of a subsidiary - 726,121
Derecognized upon sale of controlling interest in Yondu - (12,279)
Past service cost - (518,736)
Transfer of employees (1,140) -
Balance at end of year ₱6,415,840 ₱6,481,297

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Fair value of plan assets

2016 2015
(In Thousand Pesos)
Balance at beginning of year ₱3,263,513 ₱2,914,842
Return on plan assets (excluding amount included in net
interest) (196,969) (25,889)
Contributions 353,668 217,484
Interest Income on plan assets 145,220 136,079
Benefits paid (138,238) (84,284)
Settlements (115,358) (98,288)
Transfer payments 2,452 -
Acquired on acquisition of a subsidiary - 209,793
Actuarial losses - (1,223)
Derecognized upon sale of controlling interest in Yondu - (5,001)
Balance at end of year ₱3,314,288 ₱3,263,513
Actual return (loss) on plan assets (₱51,749) ₱108,966

The recommended contribution for the Globe Group retirement fund for the year 2017
amounted to ₱640.41 million. This amount is based on the Globe Group’s actuarial valuation
report as of December 31, 2016.
As of December 31, 2016 and 2015, the allocation of the fair value of the plan assets of the
Globe Group follows:

2016 2015
(In Thousand Pesos)
Cash and cash equivalents ₱257,189 ₱211,003
Loans receivables 788,000 969,321
Investment in fixed income securities:
Government 898,503 886,907
Corporate 239,955 341,576
Loans - 5,038
Others 139,200 55,931
Investment in equity shares:
Quoted
Holding firm 244,346 250,004
Industrial 175,622 142,527
Property 129,777 153,471
Financials 76,851 118,725
Mining and oil 45,327 11,821
Others 107,597 63,382
Unquoted 999,921 1,022,002
Liabilities (788,000) (968,195)
₱3,314,288 ₱3,263,513

All equity and debt instruments held, except for investment in preferred shares of HALO
Group, debt securities issued by private corporations and long-term negotiable certificates of
deposit, have quoted prices in active market. The remaining plan assets do not have quoted
market prices in active market.

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Loans and receivables consist of interest and dividend receivables, receivable on securities
sold to brokers and loan granted by the plan to BHI.
Liabilities pertain to interest and trust fee payables, accrued professional fees and loan
granted to the plan by Globe Telecom.
The assumptions used to determine pension benefits for the Globe Group are as follows:

2016 2015
Discount rate 5.75% 3.16%-4.50%
Salary rate increase 5.00% 4.50%-5.00%

The assumptions regarding future mortality rates which are based on the 1994 Group
Annuity Mortality Table developed by the Society of Actuaries, which provides separate rate
for males and females.
In 2016 and 2015, the Globe Group applied a single weighted average discount rate that
reflects the estimated timing and amount of benefit payments.
The sensitivity analysis below has been determined based on reasonably possible changes of
each significant assumption on the defined benefit obligation as of December 31, 2016 and
2015, assuming all other assumptions were held constant (in thousand pesos):

December 31, 2016

Impact on
Increase defined benefit
(decrease) in obligation Increase
basis points (decrease)

Discount rates +.50% (₱396,231)

-.50% 435,997
Future salary increases +.50% 436,639
-.50% (400,720)
Rate of return +10% -
-10% -

December 31, 2015

Impact on
Increase defined benefit
(decrease) in obligation Increase
basis points (decrease)

Discount rates +.50% (₱410,410)

-.50% 453,299
Future salary increases +1% 941,362
-1% (787,204)
Rate of return +10% (1,243)
-10% 1,243

There were no changes from the previous period in the methods and assumptions used in
preparing sensitivity analysis. 

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The objective of the plan’s portfolio is capital preservation by earning higher than regular
deposit rates over a long period given a small degree of risk on principal and interest. Asset
purchases and sales are determined by the plan’s investment managers, who have been given
discretionary authority to manage the distribution of assets to achieve the plan’s investment
objectives. The compliance with target asset allocations and composition of the investment
portfolio is monitored by the BOT on a regular basis.
The defined benefit retirement plan is funded by the participating companies, namely Globe
Telecom, Innove, BTI and GXI. The plan contributions are based on the actuarial present
value of accumulated plan benefits and fair value of plan assets are determined using an
independent actuarial valuation.
The average duration of the defined benefit obligation at the end of the reporting period is
17.69 years in 2016 and 2015.
Shown below is the maturity analysis of the undiscounted benefit payments as of
December 31, 2016 and 2015:

2016 2015
(In Thousand Pesos)
Within 1 year ₱233,339 ₱345,994
More than 1 year to 5 years 1,412,345 1,314,685
More than 5 years 3,012,954 2,630,750
₱4,658,638 ₱4,291,429

19 Interest Income
Interest income is earned from the following sources:

Notes 2016 2015 2014

(In Thousand Pesos)

Short-term placements 30 ₱88,946 ₱181,787 ₱91,044

Cash in banks 30 8,900 8,891 7,964
Loans receivable:
GGRP 16.3 44,334 49,071 68,015
BHI 16.3 8,063 8,041 11,304
TechGlobal 242 - -
BTI 11 - 269,945 504,671
Others 1,104 802 -
₱151,589 ₱518,537 ₱682,998

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 -96-

20 Other Income - net

This account consists of:

Notes 2016 2015 2014

(In Thousand Pesos)
Gain on derivative instruments 28 ₱469,884 ₱19,691 ₱70,829
Lease income 25.4, 25.1.1 83,609 173,695 172,499
Loss on disposal of investment in
associate (7,891) - -
(Loss) Gain on previously held equity
interest 9.3 (30,186) 431,115 -
Foreign exchange gain – net 22, [Link] - - 884
Gain on fair value of retained interest 10.1 - 745,831 -
Gain on disposal of controlling interest
in subsidiary 10.1 - 449,148 -
Others 467,770 311,373 226,435
₱983,186 ₱2,130,853 ₱470,647

The “Others” account includes insurance claims and other items that are individually
immaterial.

21 General, Selling and Administrative Expenses

This account consists of:

Notes 2016 2015 2014

(In Thousand Pesos)
Staff costs 16.6, 18 ₱10,109,899 ₱9,761,471 ₱8,665,757
Professional and other contracted
services 16 9,804,632 8,878,085 6,653,441
Selling, advertising and promotions 9,306,788 9,594,482 8,000,982
Rent 15, 25.1.1 5,902,414 4,932,388 4,116,372
Repairs and maintenance 16 5,728,124 4,796,403 4,099,986
Utilities, supplies and other
administrative expenses 5 5,000,691 4,785,452 4,481,830
Courier, delivery and miscellaneous
expenses 1,806,120 1,777,053 1,486,356
Insurance and security services 1,689,252 1,598,290 1,439,942
Taxes and licenses 1,590,234 1,958,281 1,787,694
Others 934,442 685,057 650,517
₱51,872,596 ₱48,766,962 ₱41,382,877

The “Others” account includes various other items that are individually immaterial.

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22 Financing Costs
This account consists of:

Notes 2016 2015 2014

(In Thousand Pesos)
Interest expense - net* 7, 14 ₱3,408,899 ₱2,774,078 ₱2,326,171
Foreign exchange loss - net 20, [Link] 525,024 457,295 -
Swap and other financing costs 28.4 162,903 141,551 239,535
₱4,096,826 ₱3,372,924 ₱2,565,706
*This account is net of the amount capitalized borrowing costs (see Note 7).

In 2016, 2015 and 2014, gain on derivative instruments amounting to ₱469.88 million,
₱19.69 million and ₱70.83 million, respectively, and net foreign exchange gain amounting to
₱0.88 million in 2014, were presented as part of the “Other income” account in the
consolidated statements of comprehensive income (see Note 20).
Interest expense - net is incurred on the following:

Notes 2016 2015 2014

(In Thousand Pesos)
Long-term debt 14 ₱3,001,792 ₱2,396,605 ₱1,958,594
Accretion expense 15 167,742 161,686 171,493
Net interest cost on defined benefit
obligation 129,883 99,226 70,752
Amortization of debt issuance cost 14 100,161 107,490 108,746
Others 9,321 9,071 16,586
₱3,408,899 ₱2,774,078 ₱2,326,171

23 Impairment Losses and Others

This account consists of:

Notes 2016 2015 2014

(In Thousand Pesos)
Losses on impairment of:
Receivables 3.2.2, 4, 6, ₱2,934,310 ₱2,693,569 ₱3,035,235
28.2.2
Property and equipment 7 9,416 72,751 110,238
Provisions for (reversal of):
Inventory obsolescence
and market decline 3.2.3, 5 341,759 384,143 437,511
Other probable losses (14,184) (40,943) 137,185
₱3,271,301 ₱3,109,520 ₱3,720,169

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24 Income Tax
The significant components of the deferred income tax assets and liabilities of the Globe
Group represent the deferred income tax effects of the following:

2016
Movements
Acquired from Other
a business Profit or Comprehensive
2016 2015 combination Loss Income Net
Deferred tax assets
Allowance for impairment
losses on receivables ₱2,503,807 ₱2,642,588 ₱ - (₱138,781) ₱ - (₱138,781)
Unearned revenues and
advances already subjected to
income tax 1,127,762 791,532 - 336,230 - 336,230
Accrued pension 979,943 1,090,748 - (28,347) (82,458) (110,805)
Unrealized foreign exchange
losses 642,829 335,669 - 307,160 - 307,160
ARO 622,390 565,582 - 56,808 - 56,808
Accrued manpower cost 462,183 680,545 - (218,362) - (218,362)
NOLCO 394,763 13,759 - 381,004 - 381,004
Inventory obsolescence and
market decline 202,429 239,745 - (37,316) - (37,316)
Accrued rent expense under
PAS 17 162,920 141,135 - 21,785 - 21,785
Accumulated impairment
losses on property and
equipment 144,564 187,589 - (43,025) - (43,025)
Provision for claims and
assessment 112,735 96,047 - 16,688 - 16,688
Cost of share-based payments 31,014 79,787 - (48,773) - (48,773)
Unrealized loss on derivative
transactions 10,402 - - 10,402 - 10,402
MCIT - - - 93,555 - 93,555
Others 251,649 89,838 12,000 149,811 - 161,811
7,649,390 6,954,564 12,000 858,839 (82,458) 788,381
Deferred tax liabilities
Excess of accumulated
depreciation and
amortization of Globe
Telecom and Innove
equipment for (a) tax
reporting over (b) financial
reporting (5,654,854) (4,707,930) - (946,924) - (946,924)
Undepreciated capitalized
borrowing costs already
claimed as deduction for tax
reporting (1,041,492) (888,619) - (152,873) - (152,873)
Unrealized gain on derivative
transaction (225,658) (13,911) - (252,704) 40,957 (211,747)
Unrealized foreign exchange
gain (15,776) (4,967) - (10,809) - (10,809)
Unamortized discount on
noninterest bearing liability (3,034) (831) - (2,203) - (2,203)
Others (2,796) (16,436) - 14,736 (1,096) 13,640
(6,943,610) (5,632,694) - (1,350,777) 39,861 (1,310,916)
Deferred tax income (expense) ₱12,000 (₱491,938) (₱42,597) (₱522,535)

Net deferred tax assets ₱705,780 ₱1,321,870

(a)
Sum-of-the-years digit method
(b)
Straight-line method

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 -99-

2015
Movements
Acquired from a Other
business Profit or Comprehensive
2015 2014 combination Loss Income Net
Deferred tax assets
Allowance for impairment
losses on receivables ₱2,642,588 ₱1,725,002 ₱652,087 ₱265,499 ₱ - ₱917,586
Accrued pension 1,090,748 826,097 250,813 (99,081) 112,919 264,651
Unearned revenues and
advances already subjected to
income tax 791,532 864,049 - (72,517) - (72,517)
Accrued manpower cost 680,545 709,141 31,291 (59,887) - (28,596)
ARO 565,582 519,885 16,589 29,108 - 45,697
Unrealized foreign exchange
losses 335,669 69,067 - 266,602 - 266,602
Inventory obsolescence and
market decline 239,745 183,384 10,899 45,462 - 56,361
Accumulated impairment
losses on property and
equipment 187,589 179,121 - 8,468 - 8,468
Accrued rent expense under
PAS 17 141,135 122,248 11,642 7,245 - 18,887
Provision for claims and
assessment 96,047 64,858 - 31,189 - 31,189
Cost of share-based payments 79,787 71,115 - 8,672 - 8,672
NOLCO 13,759 561 - 13,198 - 13,198
Unrealized loss on derivative
transactions - - 2,434 (2,434) - -
Allowance for doubtful
accounts for long-
outstanding net advances - 58,532 - (58,532) - (58,532)
Others 89,838 43,958 3,953 41,927 - 45,880
6,954,564 5,437,018 979,708 424,919 112,919 1,517,546
Deferred tax liabilities
Excess of accumulated
depreciation and
amortization of Globe
Telecom and Innove
equipment for (a) tax
reporting over (b) financial
reporting (4,707,930) (2,004,385) (818,803) (1,884,742) - (2,703,545)
Undepreciated capitalized
borrowing costs already
claimed as deduction for tax
reporting (888,619) (1,513,860) - 625,241 - 625,241
Unrealized gain on derivative
transaction (13,911) (6,970) - (6,545) (396) (6,941)
Unrealized foreign exchange
gain (4,967) (2,217) (71,772) 69,022 - (2,750)
Unamortized discount on
noninterest bearing liability (831) (5,583) - 4,752 - 4,752
Others (16,436) (104) (4,472) (11,860) - (16,332)
(5,632,694) (3,533,119) (895,047) (1,204,132) (396) (2,099,575)

Deferred tax income (expense) ₱84,661 (₱779,213) ₱112,523 (₱582,029)

Net deferred tax assets ₱1,321,870 ₱1,903,899

(a) Sum-of-the-years digit method
(b) Straight-line method

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Net deferred tax assets and liabilities presented in the consolidated statements of financial
position on a net basis by entity are as follows:

2016 2015
(In Thousand Pesos)
Net deferred tax assets* ₱2,622,703 ₱1,324,081
Net deferred tax liabilities (Globe, GTI and KVI) 1,916,923 2,211
*2016 consist of Innove, GXI, BTI and Asticom
*2015 consist of Globe Telecom, Innove, GXI, BTI and Asticom

The composition of deferred income tax assets follows:

2016 2015
(In Thousand Pesos)
Deferred income tax recognized in profit or loss ₱491,938 ₱751,989
Deferred income tax recognized in OCI 213,842 569,881
₱705,780 ₱1,321,870

The reconciliation of the provision for income tax at statutory tax rate and the actual current
and deferred provision for income tax follows:

2016 2015 2014

(In Thousand Pesos)
Provision at statutory income tax rate ₱6,581,221 ₱7,040,246 ₱5,814,812
Add (deduct) tax effects of:
Equity in net losses of associates and
joint ventures 256,559 46,054 67,277
Deferred tax on unexercised stock
options and basis differences on
deductible and reported stock
compensation expense 42,209 (14,393) 3,252
Recognition of deferred income tax
asset (902,205) - -
Income subjected to lower tax rates (13,331) (166,108) (64,633)
Others 84,450 77,239 189,806
Actual provision for income tax ₱6,048,903 ₱6,983,038 ₱6,010,514

The current provision for income tax includes the following:

2016 2015 2014

(In Thousand Pesos)
RCIT or MCIT whichever is higher ₱5,494,883 ₱6,067,224 ₱5,830,006
Final tax 62,082 136,601 49,872
₱5,556,965 ₱6,203,825 ₱5,879,878

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 -101-

Deferred tax assets of BTI on the following deductible temporary differences were not
recognized since Management believes that it will not be utilized for future taxable income.

2016 2015
(In Thousand Pesos)
Deferred tax assets on:
Allowance for impairment in investment ₱1,269,283 ₱1,269,283
Difference in NBV of property and equipment for
tax and accounting 1,236,752 1,195,082
Provision for probable loss 877,577 424,175
Allowance for impairment losses on receivables 382,342 211,113
NOLCO - 2,711,506
Carryforward benefits of MCIT - 93,554
Others - 11,566
₱3,765,954 ₱5,916,279

In 2016, NOLCO amounting to ₱1,133.36 million was recognized and applied against taxable
income and the carryforward benefit of MCIT amounting to ₱93.55 million was recognized
and applied against income tax payable.
MCIT application to RCIT payable as follows:

Period of Availment
Recognition Period Amount Applied Expired Balance
in thousands
2014 2015 - 2017 ₱43,394 ₱43,394 ₱- ₱-
2015 2016 - 2018 50,160 50,160 - -
₱93,554 ₱93,554 ₱- ₱-

The corporate tax rate is 30% in 2016, 2015 and 2014.

Globe Telecom is entitled to certain tax and nontax incentives and have availed of incentives
for tax and duty-free importation of capital equipment for the services under its franchise.

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 -102-

25 Agreements and Commitments

25.1 Lease Commitments

25.1.1 Operating lease commitments

a) Globe Group as lessee

The Globe Group leases certain premises for some of its telecommunication facilities
and equipment and for most of its business centers and network sites. The operating
lease agreements are for periods ranging from one (1) to ten (10) years from the date
of the contracts and are renewable under certain terms and conditions. The agreements
generally require certain amounts of deposit and advance rentals, which are shown as
part of the “Prepayment and other current assets” and “Other noncurrent assets”
accounts in the consolidated statements of financial position (see Notes 6 and 11).
The Globe Group also has short-term renewable leases on transmission cables and
equipment. The Globe Group’s rentals incurred on these various leases
(included in the “General, selling and administrative expenses” account in the
consolidated statements of comprehensive income) amounted to ₱5,902.41 million,
₱4,932.39 million and ₱4,116.37 million, respectively, in 2016, 2015 and 2014,
respectively (See Note 21).
The future minimum lease payments under these operating leases are as follows:

2016 2015
(In Thousand Pesos)
Not later than one year ₱ 4,061,049 ₱3,355,546
After one year but not more than five years 14,560,820 11,247,041
After five years 3,600,295 5,272,419
₱22,222,164 ₱19,875,006

b) Globe Group as lessor

Globe Group has certain lease agreements with C2C Pte. Ltd. (C2C) on equipment (see
Note 25.4). Total lease income amounted to ₱83.61 million, ₱173.70 million and
₱172.50 million in 2016, 2015 and 2014, respectively (included in “Other income”
account in the consolidated statements of comprehensive income) (see Note 20).
The future minimum lease receivables under these operating leases as of
December 31, 2016 and 2015 amounted to nil and ₱39.92 million, respectively.

25.1.2 Finance lease commitments

a) Globe Group as lessee

Globe Telecom entered into an agreement with a vendor, for the upgrade of its billing
and customer management system. The agreement covers the supply of hardware,
application systems and software and software licenses including installation, as well
as a managed services agreement that covers a seven (7) year period.
The agreement includes a lease component for hardware infrastructure and
information equipment valued at ₱893.28 million. Total lease payments as
of December 31, 2016 and 2015, which is equivalent to one year advance lease,
amounted to ₱606.64 million and ₱474.41 million, respectively. The managed
service engagement has terms of renewal and purchase options, among others.

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 -103-

Future minimum lease payments under finance leases with the present value of the
net minimum lease payments are as follows:

2016 2015
(In Thousand Pesos)
Minimum Present Value Minimum Present Value
Payments of Payments Payments of Payments
Within one year ₱158,741 ₱154,464 ₱154,906 ₱148,124
After one year but not more
than five years 128,100 126,943 264,164 259,534
More than five years - - - -
Total minimum lease
payments 286,841 281,407 419,070 407,658
Less amounts representing
finance charges (5,434) - (11,412) -
Present value of minimum
lease payments ₱281,407 ₱281,407 ₱407,658 ₱407,658

In addition, total payments to service providers based on the seven-year agreement

for the maintenance of servers, which includes application development and
maintenance, service design, managed network services, office automation or
end-user computing, service desk services and business supports systems amounted to
₱1,677.14 million and ₱1,101.10 million as of December 31, 2016 and 2015,
respectively.

25.2 Agreements and Commitments with Other Carriers

Globe Telecom, Innove and BTI have existing international telecommunications service
agreements with various foreign administrations and interconnection agreements with local
telecommunications companies for their various services. Globe Telecom also has
international roaming agreements with other foreign operators, which allow its subscribers
access to foreign networks. The agreements provide for sharing of toll revenues derived
from the mutual use of telecommunication networks.

25.3 Arrangements and Commitments with Suppliers

The Globe Group has entered into agreements with various suppliers for the development or
construction, delivery and installation of property and equipment. Under the terms of these
agreements, advance payments and downpayments are made to suppliers upon submission of
required documentation. While the development or construction is in progress, project costs
are accrued based on the project status. Billings are based on the progress of the development
or construction and advance payments are being applied proportionately to the milestone
billings. When development or construction and installation are completed and the property
and equipment is ready for service, the value of unbilled but delivered goods or services from
the related purchase orders is accrued.

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 -104-

The accrued project costs as of December 31, 2016 and 2015 included in the “Accounts
payable and accrued expenses” account in the consolidated statements of financial position
amounted to ₱21,533.63 million and ₱20,862.12 million, respectively (see Note 12). As of
December 31, 2016 and 2015, the consolidated expected future billings on the unaccrued
portion of purchase orders issued amounted to ₱50,094.61 million and ₱44,786.69 million,
respectively. The settlement of these liabilities is dependent on the payment terms and project
milestones agreed with the suppliers and contractors. As of December 31, 2016 and 2015,
the unapplied advances made to suppliers and contractors relating to purchase orders issued
amounted to ₱8,215.54 million and ₱4,522.78 million, respectively (see Note 6).

25.4 Agreements with C2C/Pacnet

In 2001, Globe Telecom signed a cable equipment supply agreement with C2C as the
supplier. In March 2002, Globe Telecom as a lessor entered into an equipment lease
agreement for the said equipment with GB21 Hong Kong Limited (GB21).
Subsequently, GB21, in consideration of C2C’s agreement to assume all payment obligations
pursuant to the lease agreement, assigned all its rights, obligations and interest in the
equipment lease agreement to C2C. As a result of the said assignment of payables by GB21
to C2C, the Globe Telecom’s liability arising from the cable equipment supply agreement
with C2C was effectively converted into a noninterest bearing long-term obligation accounted
for a net present value under PAS 39 starting 2005.
In January 2003, the Globe Telecom received advance lease payments from C2C for its use of
a portion of the Globe Telecom’s cable landing station facilities. Based on the amortization
schedule, the Globe Telecom recognized lease income amounting to ₱33.38 million,
₱6.39 million, and ₱12.26 million in 2016, 2015 and 2014, respectively.
On November 17, 2009, Globe Telecom and Pacnet Cable Ltd. (Pacnet), formerly C2C,
signed a memorandum of agreement (MOA) to terminate and unwind their Landing Party
Agreement dated August 15, 2000 (LPA). The MOA further requires Globe Telecom, being
duly licensed and authorized by the NTC to land the C2C Cable Network in the Philippines
and operate the C2C Cable Landing Station (CLS) in Nasugbu, Batangas, Philippines, to
transfer to Pacnet’s designated qualified partner, the license of the C2C CLS, the CLS,
a portion of the property on which the CLS is situated, certain equipment and associated
facilities thereof.
In return, Pacnet will compensate Globe Telecom in cash and by way of C2C cable capacities
deliverable upon completion of certain closing conditions. The MOA also provided for
novation of abovementioned equipment supply and lease agreements and reciprocal options
for Globe Telecom to purchase future capacities from Pacnet and Pacnet to purchase backhaul
and ducts from Globe Telecom at agreed prices.

25.5 Construction Maintenance Agreement for South-East Asia Japan Cable System (SJC)
In April 2011, the global consortium of telecommunication companies formed to build and
operate the South-East Asia Japan Cable (SJC) system officially started the construction of
the project that will link Brunei, China Mainland, Hong Kong, Philippines, Japan, and
Singapore with options to extend to Thailand. The SJC consortium is composed of the Globe
Group and nine other international carriers. Globe Telecom’s investment for this project
amounts to USD63.91 million and total expenditures incurred was at 100% as of
December 31, 2014.

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 -105-

25.6 Network Sharing Arrangement with ABS-CBN Convergence Inc.

On May 27, 2013, Globe Telecom, Innove and ABS-CBN Convergence Inc. (ABS-C) entered
into a network sharing arrangement in order to provide capacity and coverage for new mobile
telephony, data and value-added services to be offered by ABS-C nationwide to its
subscribers using shared network and interconnect assets of the parties.
This arrangement will enable Globe Telecom, Innove and ABS-C to improve public service
by enhancing utility, capacity, inter-operability and quality of mobile and local exchange
telephone and data services to the public and allow ABS-C to modernize its existing service
and expand to a retail base on top of its existing subscriber base.
On May 31, 2013, NTC approved the network sharing agreement and co-use of the number
blocks assigned to Globe Telecom.

25.7 Southeast Asia - United States (SEA - US) Project

Globe Telecom has joined a consortium of seven international telecommunication companies
for the construction of a new submarine cable system directly connecting Southeast Asia and
the United States. Other members of the consortium include PT Telekomunikasi Indonesia
International (Telin), Telkom USA, RAM Telecom International (RTI), Hawaiian Telcom,
and Teleguam Holdings (GTA). The 15,000-kilometer cable system would link Manado in
Indonesia, Davao in the Philippines, Piti in Guam, Oahu in Hawaii, and Los Angeles in
California, providing superior latency delivering additional 20 terabits per second (Tbps),
utilizing 100 gigabits per second (Gbps) transmission equipment. Globe Telecom and GTIC
US is spending more than USD80.00 million for the SEA-US undersea cable system targeted
to be completed by end of 2017.
On March 17, 2015, Globe Telecom provided a written guaranty to NEC Corporation (NEC)
pursuant to the supply contract of the cable system between GTIC US and NEC. Globe
Telecom unconditionally guarantees the full and punctual performance by GTIC US of its
payment obligations up to an aggregate amount of USD46.23 million, less any payments
made in accordance with the terms and conditions of the contract. A default by GTIC US to
pay any guaranteed obligation under the contract is a condition that will render the guaranty
exercisable. Total payments amounted to USD26.51 million for the period ended
December 31, 2016.

25.8 Facilities-based Operations License granted to GTSG

On November 25, 2014, GTSG applied for a facilities-based operations license (FBO) with
Infocommunications Development Authority in Singapore (IDA) which was subsequently
granted on January 7, 2015. Under this license, GTSG was required to provide IDA with the
performance bond for the aggregate amount of USD75,400 to secure its obligation to fulfill
the three performance milestones of installation of equipment required to support Southeast
Asia Japan cable system and activation of its capacity between Singapore, Philippines and
Hongkong. GTSG has fulfilled the first two milestones. On April 28, 2015, IDA returned the
two bank guarantees pertaining to the first two milestones totaling to USD.05 million. As of
December 31, 2015, the third performance milestone has been completed and the remaining
USD.03 million bond has been returned to GTSG last August 8, 2016.

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 -106-

25.9 Services-based Operator License granted to Globe Telecom HK Limited (GTHK)

On March 17, 2015, Globe Telecom HK Limited (GTHK) applied for a services-based
operator license (SBO) with the Office of the Communications Authority in Hong Kong
(OFCA) which was subsequently approved on May 7, 2015. GTHK is licensed to provide a
public telecommunications service and establish and maintain a telecommunications system.

25.10 Agreements with HOOQ Digital Pte. Ltd. (HOOQ)

On February 25, 2015, Globe Telecom entered into a 3 year service and content distribution
contract with HOOQ. Under the agreement, HOOQ will provide content to Globe Telecom,
in the form of video, movies or other form of content, which Globe Telecom may sell to its
subscribers. The service may be provided either on transaction or subscription basis. Globe
Telecom shall pay a service fee for every active subscriber in each month, or a maximum net
subscriber guarantee of ₱2.08 billion.
Globe Telecom also undertakes to provide advertising and promotions support at a minimum
amount of $3 million. For this purpose, HOOQ granted Globe Telecom a non-exclusive and
royalty free right to use the HOOQ trade mark.

25.11 License agreements with Walt Disney Company (Southeast Asia) Pte. Limited
(“Disney”)
On July 1, 2015, Globe Telecom and Disney entered into several license agreements for a
period of five (5) years. Under the agreements, Globe Telecom is granted the right to market,
reproduce and distribute Disney’s products to the public through its distribution channels.
In consideration, Globe Telecom agreed to pay royalty based on its net revenues,
with minimum commitment guarantee amounting to USD48.41 million including a
guaranteed non-returnable, non-refundable advance on a quarterly basis amounting to
USD0.17 million.
As of December 31, 2016, the total amount accrued under “general, selling and
administrative” line item in the consolidated statement of comprehensive income amounted to
USD1.06 million.

25.12 Agreements with Huawei International, Pte. Ltd.

In 2014, Globe Telecom and Innove engaged Huawei for a period of ten (10) years to perform
the design, engineering, manufacture, assembly and delivery of certain equipment and all its
ancillary equipment and related software and documentation, and to provide services,
including subsequent training and technical support, in an end-to-end full-turn key outcome
based technical solution. Globe Telecom is spending a total of ₱1,911.46 million for the
services and USD92.32 million for the equipment.

25.13 Agreements with Spotify AB (Spotify)

On March 13, 2014, Globe Telecom entered into a 2 year service agreement with Spotify to
provide ad-free desktop, portable music streaming and conditional download service. During
the term, Globe Telecom shall spend USD2.25 million worth of advertising budget and at
least USD400,000 in purchasing in-client advertising inventory from Spotify. For each month
of the term, Globe Telecom shall pay an amount equal to the monthly fees which includes
hard bundle fee, soft bundle fee and standalone subscription fee. In addition, Globe Telecom
commits to pay a total minimum guarantee of USD1.75 million which shall be recouped
against the actual fees paid and payable for the service subscriptions. Total payments net of
revenue share amounted to ₱366.65 million and ₱231.66 million in 2016 and 2015,
respectively.

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 -107-

26 Contingencies
a. On October 10, 2011, the NTC issued Memorandum Circular No. 02-10-2011 titled
Interconnection Charge for Short Messaging Service requiring all public telecommunication
entities to reduce their interconnection charge to each other from ₱0.35 to ₱0.15 per text,
which Globe Telecom complied as early as November 2011. On December 11, 2011,
the NTC One Stop Public Assistance Center (OSPAC) filed a complaint against Globe
Telecom, Smart and Digitel alleging violation of the said MC No. 02-10-2011 and asking
for the reduction of SMS off-net retail price from P1.00 to P0.80 per text. Globe Telecom
filed its response maintaining the position that the reduction of the SMS interconnection
charges does not automatically translate to a reduction in the SMS retail charge per text.
On November 20, 2012, the NTC rendered a decision directing Globe Telecom to:
1. Reduce its regular SMS retail rate from P1.00 to not more than ₱0.80; 
2. Refund/reimburse its subscribers the excess charge of ₱0.20; and
3. Pay a fine of ₱200.00 per day from December 1, 2011 until date of compliance. 
On May 7, 2014, NTC denied the Motion for Reconsideration (MR) filed by Globe
Telecom last December 5, 2012 in relation to the November 20, 2012 decision. Globe
Telecom’s assessment is that Globe Telecom is in compliance with the NTC Memorandum
Circular No. 02-10-2011. On June 9, 2014, Globe Telecom filed petition for review of the
NTC decision and resolution with the Court of Appeals (CA).
The CA granted the petition in a resolution dated September 3, 2014 by issuing a 60-day
temporary restraining order on the implementation of Memorandum Circular 02-10-2011
by the NTC. On October 15, 2014, Globe Telecom posted a surety bond to compensate for
possible damages as directed by the CA.
On June 27, 2016, the CA rendered a decision reversing the NTC’s abovementioned
decision and resolution requiring telecommunications companies to cut their SMS rates and
return the excess amount paid by subscribers. The CA said that the NTC order was baseless
as there is no showing that the reduction in the SMS rate is mandated under MC
No. 02-10-2011; there is no showing, either that the present P1.00 per text rate is
unreasonable and unjust, as this was not mandated under the memorandum. Moreover,
under the NTC’s own MC No. 02-05-2008, SMS is a value added service (VAS) whose
rates are deregulated.
Thereafter, the NTC and the intervenors filed their respective motions for
reconsideration dated July 26, 2016 and September 14, 2016, which motions remain
pending with the appellate court.
Globe Telecom believes that it did not violate NTC MC No. 02-10-2011 when it did not
reduce its SMS retail rate from ₱1.00 to ₱0.80 per text, and hence, would not be obligated
to refund its subscribers. However, if it is ultimately decided by the Supreme Court (in case
an appeal is taken thereto by the NTC from the adverse resolution of the CA) that Globe
Telecom is not compliant with said circular, Globe may be contingently liable to refund to
its subscribers the ₱0.20 difference (between ₱1.00 and ₱0.80 per text) reckoned from
November 20, 2012 until said decision by the SC becomes final and executory.
Management does not have an estimate of the potential claims currently.

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 -108-

b. On May 22, 2006, Innove received a copy of the Complaint of Subic Telecom Company
(Subictel), Inc., a subsidiary of PLDT, seeking an injunction to stop the Subic Bay
Metropolitan Authority (SBMA) and Innove from taking any actions to implement the
Certificate of Public Convenience and Necessity (CPCN) granted by SBMA to Innove.
Subictel claimed that the grant of a CPCN allowing Innove to offer certain
telecommunications services within the Subic Bay Freeport Zone would violate the Joint
Venture Agreement (JVA) between PLDT and SBMA.
The Supreme Court ordered the reinstatement of the case and has forwarded it to the NTC
Olongapo for trial.
On July 13, 2016, the Regional Trial Court (RTC) in Olongapo rendered its decision
dismissing Subictel’s complaint, as nothing in the JVA cited by Subictel supports its claim of
exclusivity. Moreover, the Constitution clearly provides that no franchise or authorization
for the operation of a public utility shall be exclusive in character.
Subictel did not move for a reconsideration of the RTC’s decision.
On October 19, 2016, Innove received a copy of Subictel’s Petition for Review to the
Supreme Court dated September 13, 2016 assailing the trial court’s decision. Innove awaits
the High Court’s action on said petition.
c. (1) PLDT and its affiliate, Bonifacio Communications Corporation (BCC) and Innove and
Globe Telecom are in litigation over the right of Innove to render services and build
telecommunications infrastructure in the Bonifacio Global City (BGC). In the case filed by
Innove before the NTC against BCC, PLDT and the Fort Bonifacio Development
Corporation (FBDC), the NTC has issued a Cease and Desist Order preventing BCC from
performing further acts to interfere with Innove’s installations in the BGC.
On January 21, 2011, BCC and PLDT filed with the CA a Petition for Certiorari and
Prohibition against the NTC, et al. seeking to annul the Order of the NTC dated
October 28, 2008 directing BCC, PLDT and FBDC to comply with the provisions of
NTC MC 05-05-02 and to cease and desist from performing further acts that will prevent
Innove from implementing and providing telecommunications services in the
Fort Bonifacio Global City pursuant to the authorization granted by the NTC.
On April 25, 2011, Innove Communications, filed its comment on the Petition.
On August 16, 2011, the CA ruled that the petition against Innove and the NTC lacked
merit, holding that neither BCC nor PLDT could claim the exclusive right to install
telecommunications infrastructure and providing telecommunications services within the
BGC. Thus, the CA denied the petition and dismissed the case. PLDT and BCC filed
their motions for reconsideration thereto, which the CA denied.
On July 6, 2012, PLDT and BCC assailed the CA’s rulings via a petition for review on
certiorari with the Supreme Court. Innove and Globe filed their comment on said petition
on January 14, 2013, to which said petitioners filed their reply on May 21, 2013.
The case remains pending with the Supreme Court.

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 -109-

(2) In a case filed by PLDT against the NTC in Branch 96 of the RTC of Quezon City (QC),
where PLDT sought to obtain an injunction to prevent the NTC from hearing the case filed
by Innove, the RTC denied the prayer for a preliminary injunction and the case has been set
for further hearings. PLDT has filed a Motion for Reconsideration and Globe Telecom has
intervened in this case. In a resolution dated October 28, 2008, the RTC QC denied BCC‘s
motion for the issuance of a temporary restraining order (TRO) on the ground that the NTC
has primary administrative jurisdiction over the case. On October 14, 2013, the RTC
issued an order dismissing the case. On November 12, 2013, PLDT elevated the case to
the CA. On July 25, 2016, the CA granted PLDT’s petition, holding that the trial court
had jurisdiction, since the issues raised by PLDT were supposedly purely legal in
character. On August 17, 2016, the NTC through the Office of the Solicitor General
(OSG) moved for a reconsideration of the CA’s decision. The motion is pending to date.
(3) In a case filed by BCC against FBDC, Globe Telecom, and Innove before the Regional
Trial Court of Pasig, which case sought to enjoin Innove from making any further
installations in the BGC and claimed damages from all the parties for the breach of the
exclusivity of BCC in the area, the court did not issue a TRO and has instead scheduled
several hearings on the case. The defendants filed their respective motions to dismiss the
complaint on the grounds of forum shopping and lack of jurisdiction, among others. On
March 30, 2012, the RTC of Pasig, as prayed for, dismissed the complaint on the aforesaid
grounds.
The motion for reconsideration filed by BCC on July 20, 2012 remains pending with the trial
court.
(4) On November 11, 2008, BCC filed a criminal complaint against the officers of Innove,
FBDC and Innove contractor Avecs Corporation for malicious mischief and theft arising out
of Innove’s disconnection of BCC‘s duct at the Net Square buildings. The accused officers
filed their counter affidavits. On October 26, 2016, the Office of the City Prosecutor
dismissed the criminal complaint for lack of merit, holding that: First, NTC M. C. No. 05-05-
2002 declared Bonifacio Global City a free zone, an IT-Hub Area so as to maintain a viable,
efficient, reliable and universal telecommunications infrastructure. Any service provider is
welcome to operate and interconnect with others. Second, BCC's claimed exclusivity is not
absolute, as even BCC had agreed to sell to FBDC one duct bank for lease to other carriers
including Innove. Third, the alleged destruction of BCC's property was not fuelled by hate,
revenge or mere pleasure of destruction but the unfortunate and unintended result of Innove's
installation of telecommunications infrastructure in the building. Fourth, intent to gain was
not manifest, it being improbable that a large telecommunications company would steal
unused duct bank runs. And, fifth, the situation proscribed in P. D. No. 401 is the pilferage of
telecommunications services through illegal connection of telephone lines or stealing of
telephone meters, neither of which was committed in this case."
d. On July 23, 2009, the NTC issued NTC Memorandum Circular (MC) No. 05-07-2009
(Guidelines on Unit of Billing of Mobile Voice Service). The MC provides that the
maximum unit of billing for the CMTS whether postpaid or prepaid shall be six (6) seconds
per pulse. The rate for the first two (2) pulses, or equivalent if lower period per pulse is used,
may be higher than the succeeding pulses to recover the cost of the call set-up. Subscribers
may still opt to be billed on a one (1) minute per pulse basis or to subscribe to unlimited
service offerings or any service offerings if they actively and knowingly enroll in the
scheme.

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 -110-

On December 28, 2010, the Court of Appeals (CA) rendered its decision declaring null and
void and reversing the decisions of the NTC in the rates applications cases for having been
issued in violation of Globe Telecom and the other carriers’ constitutional and statutory right
to due process. However, while the decision is in Globe Telecom’s favor, there is a provision
in the decision that NTC did not violate the right of petitioners to due process when it
declared via circular that the per pulse billing scheme shall be the default.
Last January 21, 2011, Globe Telecom and two other telecom carriers, filed their
respective Motions for Partial Reconsideration (MR) on the pronouncement that “the Per
Pulse Billing Scheme shall be the default”.   The petitioners and the NTC filed their
respective Motion for Reconsideration, which were all denied by the CA on
January 19, 2012.
On March 12, 2012, Globe and Innove elevated to the Supreme Court the questioned
portions of the Decision and Resolution of the CA dated December 28, 2010 and its
Resolution dated January 19, 2012. The other service providers, as well as the NTC,
filed their own petitions for review. The adverse parties have filed their comments on
each other’s petitions, as well as their replies to each other’s comments. The case is now
submitted for resolution.
e. In a letter filed by Philippine Competition Commission (PCC) dated June 7, 2016
addressed to Globe Telecom, PLDT, SMC and VTI regarding the Joint Notice filed by
Globe Telecom, PLDT and SMC on May 30, 2016 disclosing the acquisition by Globe
Telecom and PLDT of the entire issued and outstanding shares of VTI, the PCC claims
that the Notice was deficient in form and substance and concludes that the acquisition
cannot be claimed to be deemed approved.
On June 10, 2016, Globe Telecom formally responded to the letter reiterating that the
Notice, which sets forth the salient terms and conditions of the transaction, was filed
pursuant to and in accordance with Memorandum Circular No. l6-002 (MC No. l6-002)
issued by the PCC. MC No. 16-002 provides that before the implementing rules and
regulations for Republic Act No. 10667 (the Philippine Competition Act of 2015)
come into full force and effect, upon filing with the PCC of a notice in which the
salient terms and conditions of an acquisition are set forth, the transaction is deemed
approved by the PCC and as such, it may no longer be challenged. Further, Globe
Telecom clarified in its letter that the supposed deficiency in form and substance of the
Notice is not a ground to prevent the transaction from being deemed approved. The
only exception to the rule that a transaction is deemed approved is when a notice
contains false material information. In this regard, Globe Telecom stated that the
Notice does not contain any false information.
On June 17, 2016, Globe Telecom received a copy of the second letter issued by PCC
stating that notwithstanding the position of Globe Telecom, it was ruling that the
transaction was still subject for review.

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 -111-

On July 12, 2016, Globe Telecom asked the CA to stop the government's anti-trust
body from reviewing the acquisition of SMC's telecommunications business. Globe
Telecom maintains the position that the deal was approved after Globe Telecom
notified the PCC of the transaction and that the anti-trust body violated its own rules
by insisting on a review. On the same day, Globe Telecom filed a Petition for
Mandamus, Certiorari and Prohibition against the PCC. On July 25, 2016, the CA,
through its 6th Division issued a resolution denying Globe Telecom’s application for
temporary restraining order (TRO) and injunction against PCC’s review of the
transaction. In the same resolution, however, the CA required the PCC to comment on
Globe Telecom's petition for certiorari and mandamus within 10 days from receipt
thereof. The PCC filed said comment on August 8, 2016. In said comment, the PCC
prayed that the ₱70 billion deal between PLDT-Globe Telecom and San Miguel be
declared void for PLDT and Globe Telecom’s alleged failure to comply with the
requirements of the Philippine Competition Act of 2015. The PCC also prayed that the
CA direct Globe Telecom to: cease and desist from further implementing its co-
acquisition of the San Miguel telecommunications assets; undo all acts consummated
pursuant to said acquisition; and pay the appropriate administrative penalties that may
be imposed by the PCC under the Philippine Competition Act for the illegal
consummation of the subject acquisition. The case remains pending with the CA.
Meanwhile, PLDT filed a similar petition with the CA, which was raffled off to its
12th Division. On August 26, 2016, PLDT secured a TRO from said court. Thereafter,
Globe Telecom’s petition was consolidated with that of PLDT, before the
12th Division. The consolidation effectively extended the benefit of PLDT’s TRO to
Globe Telecom. The parties were required to submit their respective Memoranda, after
which, the case shall be deemed submitted for resolution.
The Globe Group is contingently liable for various claims arising in the ordinary conduct of
business and certain tax assessments which are either pending decision by the courts or are
being contested, the outcome of which are not presently determinable. In the opinion of
management and legal counsel, the possibility of outflow of economic resources to settle the
contingent liability is remote.

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 -112-

27 Earnings Per Share

The Globe Group’s earnings per share amounts were computed as follows:

2016 2015 2014

(In Thousand Pesos and Number of Shares
Except per Share Figures)
Net income attributable to common shareholders ₱15,878,415 ₱16,496,644 ₱13,376,381
Less dividends on preferred shares:
Non-voting preferred shares (520,060) (520,060) (260,030)
Convertible voting preferred shares (32,027) (33,150) (26,457)
Net income attributable to common shareholders for
basic earnings per share (a) 15,326,328 15,943,434 13,089,894
Add dividends on convertible voting preferred shares 32,027 33,150 26,457
Net income attributable to common shareholders for
diluted earnings per share (b)  15,358,355 15,976,584 13,116,351
Common shares outstanding, beginning 132,743 132,733 132,596
Weighted average number of exercised shares for
stock options 13 6 107
Weighted average number of shares for basic
earnings per share (c) 132,756 132,739 132,703
Dilutive shares arising from:
Convertible preferred shares 399 358 467
Stock options 88 128 117
Adjusted weighted average number of common
shares for diluted earnings per share (d) 133,243 133,225 133,287
Basic earnings per share (a/c) ₱115.45 ₱120.11 ₱98.64
Diluted earnings per share (b/d) ₱115.27 ₱119.92 ₱98.41

28 Capital and Risk Management and Financial Instruments

28.1 General
The Globe Group adopts an expanded corporate governance approach in managing its
business risks. An Enterprise Risk Management Policy was developed to systematically view
the risks and to provide a better understanding of the different risks that could threaten the
achievement of the Globe Group’s mission, vision, strategies, and goals, and to provide
emphasis on how management and employees play a vital role in achieving the Globe
Group’s mission of transforming and enriching lives through communications.
The policies are not intended to eliminate risk but to manage it in such a way that
opportunities to create value for the stakeholders are achieved. Globe Group risk management
takes place in the context of the normal business processes such as strategic planning,
business planning, operational and support processes.
The application of these policies is the responsibility of the BOD through the Chief Executive
Officer. The Chief Financial Officer and concurrent Chief Risk Officer champion and oversee
the entire risk management function. Risk owners have been identified for each risk and they
are responsible for coordinating and continuously improving risk strategies, processes and
measures on an enterprise-wide basis in accordance with established business objectives.

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 -113-

The risks are managed through the delegation of management and financial authority and
individual accountability as documented in employment contracts, consultancy contracts,
letters of authority, letters of appointment, performance planning and evaluation forms, key
result areas, terms of reference and other policies that provide guidelines for managing
specific risks arising from the Globe Group’s business operations and environment.
The Globe Group continues to monitor and manage its financial risk exposures according to
its BOD approved policies.
The succeeding discussion focuses on Globe Group’s capital and financial risk management.

28.2 Capital and Financial Risk Management Objectives and Policies

Capital represents equity attributable to equity holders of the Parent.
The primary objective of the Globe Group’s capital management is to ensure that it maintains
a strong credit rating and healthy capital ratios in order to support its business and maximize
shareholder value.
The Globe Group monitors its use of capital using leverage ratios, such as debt to total
capitalization and makes adjustments to it in light of changes in economic conditions and its
financial position. The ratio of debt to total capitalization for the years ended
December 31, 2016 and 2015 was at 63% and 55% respectively.
The Globe Group is not subject to regulatory imposed capital requirements.
The main purpose of the Globe Group’s financial risk management is to fund its operations
and capital expenditures. The main risks arising from the use of financial instruments are
market risk, credit risk and liquidity risk. The Globe Group also enters into derivative
transactions, the purpose of which is to manage the currency and interest rate risk arising
from its financial instruments.
Globe Telecom’s BOD reviews and approves the policies for managing each of these risks.
The Globe Group monitors market price risk arising from all financial instruments and
regularly reports financial management activities and the results of these activities to the
BOD.
The Globe Group’s risk management policies are summarized below:

28.2.1 Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument
will fluctuate because of changes in market prices. Globe Group is mainly exposed to two
types of market risk: interest rate risk and currency risk.
Financial instruments affected by market risk include loans and borrowings, AFS
investments, and derivative financial instruments.
The sensitivity analyses in the following sections relate to the position as of
December 31, 2016 and 2015. The analyses exclude the impact of movements in market
variables on the carrying value of pension, provisions and on the non-financial assets and
liabilities of foreign operations.

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 -114-

The following assumptions have been made in calculating the sensitivity analyses:
 The statement of financial position sensitivity relates to derivatives.
 The sensitivity of the relevant income statement item is the effect of the assumed
changes in respective market risks. This is based on the financial assets and financial
liabilities held as of December 31, 2016 and 2015 including the effect of hedge
accounting.
 The sensitivity of equity is calculated by considering the effect of any associated cash
flow hedges for the effects of the assumed changes in the underlying.

[Link] Interest Rate Risk

The Globe Group’s exposure to market risk from changes in interest rates relates
primarily to the Globe Group’s long-term debt obligations. Please refer to table
presented under 28.2.3 Liquidity Risk.
Globe Group’s policy is to manage its interest cost using a mix of fixed and variable
rate debt, targeting a ratio of between 31%-62% fixed rate USD debt to total USD
debt, and between 44%-88% fixed rate PHP debt to total PHP debt. To manage this
mix in a cost-efficient manner, Globe Group enters into interest rate swaps, in which
Globe Group agrees to exchange, at specified intervals, the difference between fixed
and variable interest amounts calculated by reference to an agreed-upon notional
principal amount.
After taking into account the effect of currency and interest rate swaps, 48% and 87%
and 55% and 78% of the Globe Group’s USD and PHP borrowings as of
December 31, 2016 and 2015, respectively, are at a fixed rate of interest.
The following tables demonstrate the sensitivity of income before tax to a reasonably
possible change in interest rates after the impact of hedge accounting, with all other
variables held constant.

Effect on income
Increase/ Decrease before income tax Effect on equity
in basis Points Increase (Decrease) Increase (Decrease)
(In Thousand Pesos)
2016
USD +50bps (₱28,275) (₱433)
-50bps 28,275 433
PHP +200bps (12,991) 4,578
-200bps 11,128 (4,423)
2015
USD +50bps (₱31,163) (₱541)
-50bps 31,163 541
PHP +150bps (23,996) 919
-150bps 23,996 (6,351)

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 -115-

[Link] Foreign Exchange Risk

The Globe Group’s foreign exchange risk results primarily from movements of the
PHP against the USD with respect to USD-denominated financial assets,
USD-denominated financial liabilities and certain USD-denominated revenues.
Majority of revenues are generated in PHP, while substantially all of capital
expenditures are in USD. In addition, 12% and 24% of debt as of December 31, 2016
and 2015, respectively, are denominated in USD before taking into account any swap
and hedges.
Information on the Globe Group’s foreign currency-denominated monetary assets and
liabilities and their PHP equivalents are as follows:

2016 2015
US Peso US Peso
Dollar Equivalent Dollar Equivalent
(In Thousand Pesos)
Assets
Cash and cash equivalents $73,640 ₱3,664,977 $83,182 ₱3,919,388
Receivables 90,047 4,481,535 94,308 4,443,617
163,687 8,146,512 177,490 8,363,005
Liabilities
Accounts payable and accrued
expenses 347,053 17,272,500 360,789 16,999,651
Long-term debt 255,055 12,693,809 373,565 17,601,636
602,108 29,966,309 734,354 34,601,287
Net foreign currency -
denominated liabilities $438,421 ₱21,819,797 $556,864 ₱26,238,282

The following tables demonstrate the sensitivity to a reasonably possible change in

the PHP to USD exchange rate, with all other variables held constant, of the Globe
Group’s income before tax (due to changes in the fair value of foreign
currency-denominated assets and liabilities).

Increase/Decrease Effect on income before

in Peso to income tax Effect on equity
US Dollar exchange rate Increase (Decrease) Increase (Decrease)
(In Thousand Pesos)
2016
+.40 (₱147,223) ₱65,173
-.40 147,223 (65,173)
2015
+.40 (₱222,745) ₱98,411
-.40 222,745 (98,411)

The movement in equity arises from changes in the fair values of derivative financial
instruments designated as cash flow hedges.

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 -116-

In addition, the consolidated expected future payments on foreign currency-

denominated purchase orders related to capital projects amounted to
USD1,274.14 million and USD805.26 million as of December 31, 2016 and 2015,
respectively (see Note 25.3). The settlement of these liabilities is dependent on the
achievement of project milestones and payment terms agreed with the suppliers and
contractors. Foreign exchange exposure assuming a +/-40 centavos in 2016 and
+/-40 centavos in 2015 movement in PHP to USD rate on commitments amounted to
₱509.66 million and ₱322.11 million gain or loss, respectively.
The Globe Group’s foreign exchange risk management policy is to maintain a hedged
financial position, after taking into account expected USD flows from operations and
financing transactions. Globe Telecom enters into short-term foreign currency
forwards and long-term foreign currency swap contracts in order to achieve this
target.

28.2.2 Credit Risk

Applications for postpaid service are subjected to standard credit evaluation and
verification procedures. The Credit and Billing Management of the Globe Group
continuously reviews credit policies and processes and implements various credit actions,
depending on assessed risks, to minimize credit exposure. Receivable balances of
postpaid subscribers are being monitored on a regular basis and appropriate credit
treatments are applied at various stages of delinquency. Likewise, net receivable balances
from carriers of traffic are also being monitored and subjected to appropriate actions to
manage credit risk. The maximum credit exposure relates to receivables net of any
allowances provided.
With respect to credit risk arising from other financial assets of the Globe Group, which
comprise cash and cash equivalents, short-term investments, AFS financial investments
and certain derivative instruments, the Globe Group’s exposure to credit risk arises from
the default of the counterparty, with a maximum exposure equal to the carrying amount of
these instruments. The Globe Group’s investments comprise short-term bank deposits and
government securities. Credit risk from these investments is managed on a Globe Group
basis. For its investments with banks, the Globe Group has a counterparty risk
management policy which allocates investment limits based on counterparty credit rating
and credit risk profile.
The Globe Group makes a quarterly assessment of the credit standing of its investment
counterparties, and allocates investment limits based on size, liquidity, profitability, and
asset quality. For investments in government securities, these are denominated in local
currency and are considered to be relatively risk-free. The usage of limits is regularly
monitored. For its derivative counterparties, the Globe Group deals only with
counterparty banks with investment grade ratings and large local banks. Credit ratings of
derivative counterparties are reviewed quarterly.
Following are the Globe Group exposures with its investment counterparties for cash and
cash equivalents as of December 31:

2016 2015 2014

Local bank deposits 52% 51% 60%
Onshore foreign bank 40% 49% 36%
Offshore bank deposit 8% - 4%

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 -117-

The Globe Group has not executed any credit guarantees in favor of other parties. There is also minimal concentration of credit risk within the Globe
Group. Credit exposures from subscribers and carrier partners continue to be managed closely for possible deterioration. When necessary, credit
management measures are proactively implemented and identified collection risks are being provided for accordingly. Outstanding credit exposures
from financial instruments are monitored daily and allowable exposures are reviewed quarterly.
The tables below show the aging analysis of the Globe Group’s receivables as of December 31.

Past Due But Not Impaired  

Neither Past More than Impaired
Due Nor Impaired Less than 30 days 31 to 60 days 61 to 90 days 90 days Financial Assets Total
(In Thousand Pesos)
2016        
Wireless receivables:        
Consumer ₱1,151,907 ₱597,739 ₱591,809 ₱353,190 ₱7,146,334 ₱2,712,548 ₱12,553,527
Key corporate accounts 56,065 100,468 178,867 179,935 2,111,378 439,123 3,065,836
Other corporations and Small and
Medium Enterprises (SME) 236,945 92,940 96,655 59,518 1,291,470 362,720 2,140,248
1,444,917 791,147 867,331 592,643 10,549,182 3,514,391 17,759,611
Wireline receivables:        
Consumer 734,193 319,697 176,490 109,843 1,397,681 3,634,115 6,372,019
Key corporate accounts 320,294 440,932 708,345 613,400 2,863,094 524,815 5,470,880
Other corporations and SME 129,798 94,323 84,918 50,721 172,305 645,175 1,177,240
1,184,285 854,952 969,753 773,964 4,433,080 4,804,105 13,020,139
Other trade receivables 89,031 64,998 54,479 24,335 30,209 - 263,052
Traffic receivables:
Foreign 1,525,630 - - - - 160,245 1,685,875
Local 215,356 7,500 2,314 1,116 1,122 18,267 245,675
1,740,986 7,500 2,314 1,116 1,122 178,512 1,931,550
Other receivables 1,970,288 - - - - 165,607 2,135,895
Total ₱6,429,507 ₱1,718,597 ₱1,893,877 ₱1,392,058 ₱15,013,593 ₱8,662,615 ₱35,110,247

       

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 -118-

Neither Past Past Due But Not Impaired 

Due Nor More than 90 Impaired
Impaired Less than 30 days 31 to 60 days 61 to 90 days  days  Financial Assets  Total 
(In Thousand Pesos) 
2015        
Wireless receivables:        
Consumer ₱1,160,766 ₱1,456,106 ₱934,133 ₱658,013 ₱4,878,851 ₱3,610,773 ₱12,698,642
Key corporate accounts 23,588 80,842 147,701 195,144 1,621,980 288,440 2,357,695
Other corporations and Small and
Medium Enterprises (SME) 117,898 191,710 147,944 100,168 752,580 434,394 1,744,694
1,302,252 1,728,658 1,229,778 953,325 7,253,411 4,333,607 16,801,031
Wireline receivables:        
Consumer 505,739 288,669 93,278 56,076 1,999,625 2,367,788 5,311,175
Key corporate accounts 339,476 408,804 208,351 438,261 2,432,971 462,242 4,290,105
Other corporations and SME 115,974 85,942 45,068 25,183 184,948 150,968 608,083
961,189 783,415 346,697 519,520 4,617,544 2,980,998 10,209,363
Other trade receivables 20,041 15,501 1,360 712 11,474 - 49,088
Traffic receivables:
Foreign 1,181,353 - - - - 149,958 1,331,311
Local 114,305 3,368 1,664 3,890 1,104 271,682 396,013
1,295,658 3,368 1,664 3,890 1,104 421,640 1,727,324
Other receivables 1,864,366 - - - - 246,860 2,111,226
Total ₱5,443,506 ₱2,530,942 ₱1,579,499 ₱1,477,447 ₱11,883,533 ₱7,983,105 ₱30,898,032

Total allowance for impairment losses amounting to ₱8,165.60 million and ₱8,962.26 million includes allowance for impairment losses arising from
specific and collective assessment of ₱350.96 million and ₱647.59 million as of December 31, 2016 and 2015, respectively (see Note 4).

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 -119-

The table below provides information regarding the credit risk exposure of the Globe
Group by classifying assets according to the Globe Group’s credit ratings of receivables
as of December 31. The Globe Group’s credit rating is based on individual borrower
characteristics and their relationship to credit event experiences.

  Neither Past Due Nor Impaired

High Quality Medium Quality Low Quality Total
(In Thousand Pesos)
2016
Wireless receivables:  
Consumer ₱606,012 ₱525,850 ₱20,045 ₱1,151,907
Key corporate accounts 14,887 40,265 913 56,065
Other corporations and SME 125,725 44,314 66,906 236,945
746,624 610,429 87,864 1,444,917
Wireline receivables:
Consumer 515,863 153,988 64,342 734,193
Key corporate accounts 185,876 134,382 36 320,294
Other corporations and SME 75,255 54,147 396 129,798
776,994 342,517 64,774 1,184,285
Total ₱1,523,618 ₱952,946 ₱152,638 ₱2,629,202
2015
Wireless receivables:
Consumer ₱593,565 ₱535,275 ₱31,926 ₱1,160,766
Key corporate accounts 8,025 15,311 252 23,588
Other corporations and SME 60,398 24,096 33,404 117,898
661,988 574,682 65,582 1,302,252
Wireline receivables:
Consumer 344,989 157,840 2,910 505,739
Key corporate accounts 151,494 187,975 7 339,476
Other corporations and SME 49,609 66,166 199 115,974
546,092 411,981 3,116 961,189
Total ₱1,208,080 ₱986,663 ₱68,698 ₱2,263,441

High quality accounts are accounts considered to be high value and have consistently
exhibited good paying habits. Medium quality accounts are active accounts with
propensity of deteriorating to mid-range age buckets. These accounts do not flow through
to permanent disconnection status as they generally respond to credit actions and update
their payments accordingly. Low quality accounts are accounts which have probability of
impairment based on historical trend. These accounts show propensity to default in
payment despite regular follow-up actions and extended payment terms. Impairment
losses are also provided for these accounts based on net flow rate.
Other trade receivables that are neither past due nor impaired are considered to be high
quality since these are transacted with counterparties who consistently pay on time
Traffic receivables that are neither past due nor impaired are considered to be high quality
given the reciprocal nature of the Globe Group’s interconnect and roaming partner
agreements with the carriers and the Globe Group’s historical collection experience.
Other receivables that are neither past due nor impaired are considered high quality
accounts as these are substantially from credit card companies and Globe Group dealers.

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The following is a reconciliation of the changes in the allowance for impairment losses
for receivables as of December 31 (see Notes 4 and 23):

Subscribers
Key Other
Traffic
Corporate Corporations Settlements
Consumer Accounts and SME and Others Non-trade Total
(In Thousand Pesos)
2016
At beginning of the year ₱7,123,653 ₱816,369 ₱392,518 ₱629,717 ₱66,653 ₱9,028,910
Charges for the period 2,349,881 598,137 (18,946) (68,834) 74,072 2,934,310
Reversals/ write-offs/
adjustments (3,343,805) (352,428) 32,741 6,599 (597) (3,657,490)
At end of year ₱6,129,729 ₱1,062,078 ₱406,313 ₱567,482 ₱140,128 ₱8,305,730
2015
At beginning of the year ₱2,742,022 ₱540,525 ₱687,874 ₱219,624 ₱58,414 ₱4,248,459
Charges for the period 2,340,667 182,121 185,742 (14,961) (10,719) 2,682,850
Reversals/ write-offs/
adjustments 2,040,964 93,723 (481,098) 425,054 18,958 2,097, 601
At end of year ₱7,123,653 ₱816,369 ₱392,518 ₱629,717 ₱66,653 ₱9,028,910

28.2.3 Liquidity Risk

The Globe Group seeks to manage its liquidity profile to be able to finance capital
expenditures and service maturing debts. To cover its financing requirements, the Globe
Group intends to use internally generated funds and available long-term and short-term
credit facilities. As of December 31, 2016 and 2015, the Globe Group has available
uncommitted short-term credit facilities of USD80.40 million and ₱13,445 million,
USD79.40 million and ₱12,345 million, respectively. As of December 31, 2016 and 2015,
the Globe Group has available committed short-term credit facilities of ₱1,200 million and
₱3,000 million, respectively.
As of December 31, 2016 and 2015, the Globe Group has ₱4,500 million and
₱2,000 million, respectively, in committed long-term facilities.
As part of its liquidity risk management, the Globe Group regularly evaluates its
projected and actual cash flows. It also continuously assesses conditions in the financial
markets for opportunities to pursue fund raising activities, in case any requirements arise.
Fund raising activities may include bank loans, export credit agency facilities and capital
market issues.
The following tables show comparative information about the Globe Group’s financial
instruments as of December 31 that are exposed to liquidity risk and interest rate risk and
presented by maturity profile including forecasted interest payments for the next five
years from December 31 figures (in thousands).

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Long-term Liabilities
2016
Debt Carrying
2021 and Total Total Issuance Value Fair Value
2017 2018 2019 2020 thereafter (in USD) (in PHP) Costs (in PHP) (in PHP)
Liabilities:
Long-term debt
Fixed Rate
USD notes $441 $557 $574 $635 $1,771 $3,978 ₱ - ₱10,005 ₱187,931 ₱223,866
Interest rate 5.00% 5.00% 6.00% 6.00% 6.00%
Philippine peso ₱5,225,000 ₱760,000 ₱10,995,000 ₱4,762,500 ₱55,292,500 - 77,035,000 411,414 76,623,586 85,113,349
Interest rate 5.15%;4.90%; 5.15%;4.90%; 5.15%;4.90%; 5.15%;4.90%; 5.15%;4.90%;
4.25%;4.75%; 4.25%;4.83%; 4.25%;4.83% 4.25%;4.83%; 4.25%;4.91%;
4.87%;5.45%; 4.87%;5.45%; 4.75%;4.87%; 4.75%;4.87%; 5.06%;4.83%;
4.19%;5.75%; 4.19%;4.85%; 5.45%;4.19% 5.45%;4.19%; 4.75%;4.87%;
4.85% 5.45%;4.19%;
5.28%;6.00%;
Floating rate
USD notes $9,600 $9,600 $9,600 $123,600 $99,600 252,000 - 38,662 12,503,126 12,730,188
Interest rate Libor 6-mo. + 1% Libor 6-mo. + 1% Libor 6-mo. + 1% Libor 6-mo. + Libor 3mo. +
margin;Libor 3mo. margin;Libor 3mo. + margin;Libor 3mo. 1% 1.5%
+ 1.5% 1.5% margin;Libor + 1.5% margin;Libor margin;Libor
margin;Libor 3mo. 3mo. + 0.8% margin margin;Libor 3mo. 3mo. + 1.5% 3mo. + 0.8%
+ 0.8% margin + 0.8% margin margin;Libor margin
3mo. + 0.8%
margin
Philippine peso ₱120,000 ₱6,910,000 ₱4,900,000 - 11,930,000 16,052 11,913,948 11,983,947
Interest rate PDST-R2 3mo. + PDST-R2 3mo. + PDST-R2 3mo. +
0.5%margin; 0.5% margin;PDST- 0.5% margin
PDST-R2 3mo. R2 3mo. + 0.6%
+ 0.6% margin margin

$255,978 ₱88,965,000 ₱476,133 ₱101,228,591 ₱110,051,350

Interest payable*
PHP debt ₱ 4,144,314 ₱3,736,685 ₱3,354,827 ₱3,049,838 ₱14,244,244 $ - ₱28,529,908 ₱ - ₱ - ₱ -

USD debt $5,259 $6,208 $5,486 $3,993 $3,754 $ 24,700 ₱ - $ - $ - $ -

*Used month-end USD LIBOR and Philippine Dealing and Exchange Corporation (PDEX) rates.
* Using ₱49.769 - USD exchange rate as of December 31, 2016.

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 -122-

2015
Carrying
2020 and Total Total Debt Issuance Value Fair Value
2016 2017 2018 2019 thereafter (in USD) (in PHP) Costs (in PHP) (in PHP)
Liabilities:
Long-term debt
Fixed Rate
USD notes $442 $446 $563 $580 $2,434 $4,465 ₱ - ₱11,557 ₱198,825 ₱242,683
Interest rate 5.00% 5.00% 5.00% 6.00% 6.00%
Philippine peso ₱2,397,800 ₱4,930,000 ₱430,000 ₱10,630,000 ₱24,545,000 - 42,932,800 238,408 42,694,392 46,370,633
4.87%;5.45%; 4.87%;5.45%; 4.87%;5.45%;
5.45%;4.19%; 4.19%;5.75%; 4.87%;5.45%; 6.00%;4.85%; 4.89%;5.28%;
Interest rate 4.85%;8.36% 4.85% 4.85%;4.19% 4.19% 6.00%;4.19%
Floating rate
USD notes $117,100 $9,600 $9,600 $9,600 $223,200 369,100 - 29,079 17,362,174 17,594,855
Libor 6-mo. + Libor 6-mo. + 1%
Libor 6-mo. + 1% 1%margin; Libor margin; Libor
margin; Libor 3mo. Libor 6-mo. + 1% Libor 6-mo. + 1% 3mo. + 3mo. + 1.5%
+ .90% margin; margin; Libor 3mo. + margin; Libor 3mo. + 1.5%margin; margin; Libor
Libor 3mo. + 1.5% 1.5% margin; Libor 1.5% margin; Libor Libor 3mo. + 3mo. + 0.8%
Interest rate margin 3mo. + 0.8% margin 3mo. + 0.8% margin 0.8% margin margin
Philippine peso ₱70,000 ₱5,070,000 ₱6,860,000 - - - 12,000,000 26,534 11,973,466 11,973,466
PDST-R2 3mo. +.50%
PDST-R2 3mo. + margin; PDST-R2 PDST-R2 3mo. +
Interest rate .60% margin 3mo. + .60% margin .60% margin

$373,565 ₱54,932,800 ₱305,578 ₱72,228,857 ₱76,181,637

Interest payable*
PHP debt ₱2,669,549 ₱2,369,191 ₱1,934,694 ₱1,571,926 ₱3,189,856 $ - ₱11,735,216 ₱ - ₱ - ₱ -

USD debt $5,437 $4,885 $4,715 $4,575 $6,538 $ 26,150 ₱ - $ - $ - $ -

*Used month-end USD LIBOR and Philippine Dealing and Exchange Corporation (PDEX) rates.
* Using ₱47.118 - USD exchange rate as of December 31, 2015.

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 -123-

The following tables present the maturity profile of the Globe Group’s other liabilities and derivative instruments (undiscounted cash flows including swap
costs payments/receipts except for other long-term liabilities) as of December 31, 2016 and 2015.

2016

Other Financial Liabilities

Less than
On Demand 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years Over 5 years Total
(In Thousand Pesos)

Accounts payable and accrued expenses* ₱861,204 ₱64,930,863 ₱- ₱- ₱- ₱- ₱ - ₱65,792,067

Notes Payable - 4,500,000 - - - - - 4,500,000
Other long-term liabilities - - - - - - 6,944,576 6,944,576

₱861,204 ₱69,430,863 ₱- ₱- ₱- ₱- ₱6,944,576 ₱77,236,643

*Excludes taxes payable which is not a financial instrument.

Derivative Instruments

2017 2018 2019 2020 2021 and beyond

Receive Pay Receive Pay Receive Pay Receive Pay Receive Pay
Projected Swap Coupons:
Interest Rate Swaps-USD ₱ 24,450 ₱ 22,015 ₱ 23,556 ₱ 21,219 ₱ 27,736 ₱ 20,478 ₱16,935 ₱10,068 ₱- ₱ -
Cross Currency Swaps ₱104,977 ₱151,122 ₱104,532 ₱151,122 ₱119,117 ₱151,537 ₱68,875 ₱75,976 ₱- ₱ -
Principal Only Swaps ₱ - ₱ 71,549 ₱ - ₱ 64,425 ₱ - ₱ 57,258 ₱ - ₱34,455 ₱- ₱18,227

2017 2018 2019 2020 2021 and beyond

Receive Pay Receive Pay Receive Pay Receive Pay Receive Pay
Projected Principal Exchanges:
Forward Purchase of USD** $15,000 ₱ 727,170 $ - ₱ - $ - ₱ - $ - ₱ - $ - ₱ -
FX Swap, Buys USD Forward** $70,000 ₱3,496,100 $ - ₱ - $ - ₱ - $ - ₱ - $ - ₱ -
Cross Currency Swaps- PHP ₱ - ₱ - ₱ - ₱ - ₱ - ₱ - ₱ - ₱3,648,800 ₱ - ₱ -
Cross Currency Swaps- USD $ - $ - $ - $ - $ - $ - $85,000 $ - $ - $ -
Principal Only Swaps- PHP ₱ - ₱ 410,241 ₱ - ₱410,241 ₱ - ₱410,241 ₱ - ₱1,795,721 ₱ - ₱706,133
Principal Only Swaps- USD $ 8,700 $ - $8,700 $ - $8,700 $ - $37,700 $ - $15,000 $ -
*Projected principal exchanges represent commitments to purchase USD for payment of USD debts with the same maturities.
**Deliverable and non-deliverable

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 -124-

2015

Other Financial Liabilities

Less than
On Demand 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years Over 5 years Total
(In Thousand Pesos)

Accounts payable and accrued expenses* ₱1,714,558 ₱43,583,112 ₱- ₱- ₱- ₱- ₱ - ₱45,297,670

Other long-term liabilities - - - - - - 1,273,215 1,273,215

₱1,714,558 ₱43,583,112 ₱- ₱- ₱- ₱- ₱1,273,215 ₱46,570,885

*Excludes taxes payable which is not a financial instrument.

Derivative Instruments

2016 2017 2018 2019 2020 and beyond

Receive Pay Receive Pay Receive Pay Receive Pay Receive Pay
Projected Swap Coupons:
Cross Currency Swaps ₱110,300 ₱206,056 ₱90,807 ₱151,122 ₱105,847 ₱151,122 ₱122,010 ₱151,537 ₱64,419 ₱75,976
Principal Only Swaps ₱ - ₱ 34,093 ₱ - ₱ 36,222 ₱ - ₱ 30,185 ₱ - ₱ 24,214 ₱ - ₱36,404

2016 2017 2018 2019 2020 and beyond

Receive Pay Receive Pay Receive Pay Receive Pay Receive Pay
Projected Principal Exchanges:
Cross Currency Swaps- PHP ₱ - ₱4,847,850 ₱ - ₱ - ₱ - ₱ - ₱ - ₱ - ₱ - ₱3,648,800
Cross Currency Swaps- USD $115,000 $ - $ - $ - $ - $ - $ - $ - $85,000 $ -
Principal Only Swaps- PHP ₱ - ₱ - ₱ - ₱353,067 ₱ - ₱353,067 ₱ - ₱353,067 ₱ - ₱1,059,200
Principal Only Swaps- USD $ - $ - $7,500 $ - $7,500 $ - $7,500 $ - $22,500 $ -

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 -125-

28.2.4 Hedging Objectives and Policies

The Globe Group uses a combination of natural hedges and derivative hedging to manage
its foreign exchange exposure. It uses interest rate derivatives to reduce earnings volatility
related to interest rate movements, and principal only swaps to hedge the foreign exchange
risk exposure to principal repayments on USD debt.
It is the Globe Group’s policy to ensure that capabilities exist for active but conservative
management of its foreign exchange and interest rate risks. The Globe Group does not
engage in any speculative derivative transactions. Authorized derivative instruments
include currency forward contracts, currency swap contracts, interest rate swap contracts
and currency option contracts.

28.3 Derivative Financial Instruments

The Globe Group’s freestanding and embedded derivative financial instruments are accounted
for as hedges or transactions not designated as hedges. The table below sets out information
about the Globe Group’s derivative financial instruments and the related fair values as of
December 31:

2016

USD PHP
Notional Notional Derivative Derivative
Amount Amount Assets Liabilities
(In Thousands)
Derivative instruments designated as hedges
Cash flow hedges
Cross currency swaps $85,000 ₱- ₱612,712 ₱31,170
Principal only swaps 78,800 - 123,877 30,621
Interest rate swaps 33,800 - 18,548 -
Derivative instruments not designated
as hedges
Freestanding
Deliverable forwards 70,000 - - 9,463
Nondeliverable forwards 15,000 - 19,364 -
Embedded
Currency forwards* 32,626 - 48,947 34,674
Net ₱823,448 ₱105,928
*The embedded currency forwards are at a net buy position.

2015

USD PHP
Notional Notional Derivative Derivative
Amount Amount Assets Liabilities
(In Thousands)
Derivative instruments designated as hedges
Cash flow hedges
Cross currency swaps $200,000 ₱- ₱1,045,239 ₱53,013
Principal only swaps 45,000 - 25,592 29,877
Derivative instruments not designated
as hedges
Embedded
Currency forwards* 21,811 - 11,450 28,388
Net ₱1,082,281 ₱111,278
*The embedded currency forwards are at a net buy position.

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 -126-

The table below also sets out information about the maturities of Globe Group’s derivative instruments as of December 31 that were entered into to
manage interest and foreign exchange risks related to the long-term debt (in thousands).

2016
>1-<2 >2-<3 >3-<4 >4-<5 >5-<6 >6-<7
<1 Year Years Years Years Years Years Years Total
Derivatives
Interest Rate Swaps
Floating-Fixed
Notional PHP ₱ - ₱ - ₱ - ₱ - ₱ - ₱ - ₱- ₱ -
Notional USD $ 1,200 $ 1,200 $ 1,200 $ 30,200 $ - $ - $- $33,800
Cross Currency Swaps
Floating-Fixed
Notional PHP ₱ - ₱ - ₱ - ₱3,648,800 ₱ - ₱ - ₱- ₱3,648,800
Notional USD $ - $ - $ - $ 85,000 $ - $ - $- $85,000
Pay-fixed rate 4.12%4.28%
Receive-floating rate USD LIBOR +1.0%
Principal Only Swaps
Fixed-Fixed
Notional PHP ₱410,241 ₱410,241 ₱410,241 ₱1,795,721 ₱353,067 ₱353,067 ₱- ₱3,732,578
Notional USD $ 8,700 $ 8,700 $ 8,700 $ 37,700 $ 7,500 $ 7,500 $- $78,800
Pay-fixed rate 1.585%-2.3%

2015
>1-<2 >2-<3 >3-<4 >4-<5 >5-<6 >6-<7
<1 Year Years Years Years Years Years Years Total
Derivatives
Cross Currency Swaps
Floating-Fixed
Notional PHP ₱4,847,850 ₱ - ₱ - ₱ - ₱3,648,800 ₱ - ₱ - ₱8,496,650
Notional USD $ 115,000 $ - $ - $ - $ 85,000 $ - $ - $200,000
Pay-fixed rate 2.48%-4.28%
Receive-floating rate USD LIBOR + 1.0% or 0.90%
Principal Only Swaps
Fixed-Fixed
Notional PHP ₱ - ₱353,067 ₱353,067 ₱353,067 ₱ 353,067 ₱353,067 ₱353,067 ₱2,118,402
Notional USD $ - $ 7,500 $ 7,500 $ 7,500 $ 7,500 $ 7,500 $ 7,500 $45,000
Pay-fixed rate 1.585%-1.835%

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 -127-

The Globe Group’s other financial instruments that are exposed to interest rate risk are cash
and cash equivalents. These mature in less than a year and are subject to market interest rate
fluctuations.
The Globe Group’s other financial instruments which are non-interest bearing and therefore
not subject to interest rate risk are trade and other receivables, accounts payable and accrued
expenses and long-term liabilities. Loans receivable are also not subject to interest rate risk
due to fixed interest rates.
The subsequent sections will discuss the Globe Group’s derivative financial instruments
according to the type of financial risk being managed and the details of derivative financial
instruments that are categorized into those accounted for as hedges and those that are not
designated as hedges.

28.4 Derivative Instruments Accounted for as Hedges

The following sections discuss in detail the derivative instruments accounted for as cash flow
hedges.

 Currency Swaps and Cross Currency Swaps

The Globe Group entered into cross currency swap and principal only swaps contracts to
hedge the foreign exchange and interest rate risk on dollar loans with maturities until
April 2020 and October 2022, respectively. The cross currency swaps have a notional
amount of USD85.00 million and USD200.00 million as of December 31, 2016 and 2015,
respectively. Principal only swaps have a notional amount of USD78.80 million and
USD45.00 million as of December 31, 2016 and 2015, respectively. The fair values of the
currency swaps as of December 31, 2016 and 2015 amounted to net asset of
₱674.80 million and ₱987.94 million, of which ₱67.19 million and ₱41.36 million
(net of tax) is reported in the equity section of the consolidated statements of financial
position.

 Interest Rate Swaps

As of December 31, 2016, the Globe Group has USD33.80 million in notional amount of
USD interest rate swap that have been designated as cash flow hedge of interest rate risk
from USD loans. The interest rate swap effectively fixed the benchmark rate of the
hedged USD loan at 1.336% over the duration of the agreement, which involves semi-
annual payment intervals up to April 2020.
As of December 31, 2016, the fair value of the outstanding swap amounted to
₱18.55 million gains, of which ₱12.98 million (net of tax), is reported as “Other reserves”
in the equity section of the consolidated statements of financial position (see Note 17.6).
Accumulated swap cost for the years ended December 31, 2016, 2015 and 2014 amounted
to ₱.40 million, nil and ₱43.64 million, respectively (see Note 22).

 Deliverable and Nondeliverable Forwards

The Globe Group has no outstanding deliverable and nondeliverable forwards as of
December 31, 2016 and December 31, 2015.
Hedging gains/losses on derivatives intended to manage foreign currency fluctuations on
dollar based revenues for the years ended December 31, 2016, 2015 and 2014 amounted
to nil, ₱32.06 million loss and, ₱4.74 million gain, respectively. These hedging
gains/losses are reflected under “Service revenues” in the consolidated statements of
comprehensive income.

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 -128-

28.5 Other Derivative Instruments Not Designated as Hedges

The Globe Group enters into certain derivatives as economic hedges of certain underlying
exposures. Such derivatives, which include embedded and freestanding currency forwards,
embedded call options, and certain currency and interest rate swaps with option
combination or structured provisions, are not designated as accounting hedges. The gains
or losses on these instruments are accounted for directly in profit or loss in the consolidated
statements of comprehensive income. This section consists of freestanding derivatives and
embedded derivatives found in both financial and nonfinancial contracts.

28.6 Freestanding Derivatives

Freestanding derivatives that are not designated as hedges consist of currency forwards and
interest rate swaps entered into by the Globe Group. Fair value changes on these instruments
are accounted for directly in profit or loss in the consolidated statements of comprehensive
income.

 Interest Rate Swaps

The Globe Group also has an outstanding PHP interest rate swap contract which swaps a
floating peso loan into fixed rate of 4.92% and involves quarterly payment intervals until
September 2015.
As of December 31, 2016 and 2015, the Globe Group has no outstanding interest rate
swap contract not designated as hedges.

 Deliverable and Non-deliverable Forwards

As of December 31, 2016 and 2015, the Globe Group has USD85.00 million and nil
deliverable and non-deliverable currency forward contracts not designated as hedges,
respectively.

28.7 Embedded Derivatives and Other Financial Instruments

The Globe Group has instituted a process to identify any derivatives embedded in its
financial or nonfinancial contracts. Based on PAS 39, the Globe Group assesses whether
these derivatives are required to be bifurcated or are exempted based on the qualifications
provided by the said standard. The Globe Group’s embedded derivatives include
embedded currency derivatives noted in non-financial contracts.

 Embedded Currency Forwards

As of December 31, 2016 and 2015, the total outstanding notional amount of currency
forwards embedded in nonfinancial contracts amounted to USD32.63 million and
USD21.81 million, respectively. The nonfinancial contracts consist mainly of foreign
currency-denominated maintenance and lease agreements and unbilled leased lines
receivables denominated in foreign currency with domestic counterparties. The net fair
value of the embedded currency forwards as of December 31, 2016 and 2015 amounted
to ₱14.27 million gain and ₱16.94 million loss, respectively.

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 -129-

28.8 Fair Value Changes on Derivatives

The net movements in fair value changes of all derivative instruments are as follows:

2016 2015
(In Thousand Pesos)
At beginning of year ₱971,003 ₱493,734
Acquired on acquisition of a subsidiary - (8,114)
Net changes in fair value of derivatives:
Designated as cash flow hedges 98,308 314,303
Not designated as cash flow hedges 59,155 (13,847)
1,128,466 786,076
Less fair value of settled instruments 410,946 (184,927)
At end of period ₱717,520 ₱971,003

28.9 Hedge Effectiveness Results

As of December 31, 2016 and 2015, the effective fair value changes on the Globe Group’s
cash flow hedges that were deferred in equity amounted to ₱54.21 million and ₱41.36 million
gains, net of tax, respectively. Total ineffectiveness for the years ended December 31, 2016
and 2015 is immaterial.
The distinction of the results of hedge accounting into “Effective” or “Ineffective” represent
designations based on PAS 39 and are not necessarily reflective of the economic effectiveness
of the instruments.

28.10 Categories of Financial Assets and Financial Liabilities

The table below presents the carrying value of the Globe Group’s financial instruments by
category as of December 31:

2016 2015
(In Thousand Pesos)
Financial Assets
Financial assets at FVPL:
Derivative assets designated as cash flow hedges ₱755,137 ₱1,070,831
Derivative assets not designated as hedges 68,311 11,450
AFS investment in equity securities (Note 11) 794,087 577,580
Loans and receivables - net* 36,029,700 35,452,665
₱37,647,235 ₱37,112,526
Financial Liabilities
Financial liabilities at FVPL:
Derivative liabilities designated as cash flow hedges ₱61,792 ₱82,890
Derivative liabilities not designated as hedges 44,136 28,388
Financial liabilities at amortized cost** 171,535,994 118,799,743
₱171,641,922 ₱118,911,021
*This consists of cash and cash equivalents, short-term investments and long-term investments, receivables, other nontrade
receivables and loans receivables.
**This consists of accounts payable, accrued expenses, accrued project cost, traffic settlement-net, dividends payable, notes
payable, long-term debt (including current portion) and other long-term liabilities (including current portion).

As of December 31, 2016 and 2015, the Globe Group has no investments in foreign securities.

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 -130-

28.11 Offsetting Financial Assets and Financial Liabilities

The Globe Group has derivative financial instruments that have offsetting arrangements. Upon
adoption of the amendment to PFRS 7, the Globe Group has determined that there is no impact
on financial position or on profit or loss, but resulted to additional disclosures about such
offsetting arrangements. Accordingly, these additional disclosures are set forth below.

Reported
amounts in Amounts offset Amounts
the under master offset by
consolidated netting financial
Amounts statements of arrangements collateral
Gross offset under financial or other similar received or Net
amounts PAS 32 position contracts pledged exposure
(In Thousand Pesos)
December 31, 2016
Derivative assets ₱823,448 ₱ - ₱823,448 (₱99,747) ₱- ₱723,701
Derivative liabilities 105,928 105,928 (99,747) 6,181
Traffic settlements
receivable 3,337,030 (1,479,576) 1,857,454 - - 1,857,454
Traffic settlements
payable 1,795,114 (947,354) 847,760 - - 847,760
December 31, 2015
Derivative assets ₱1,082,281 ₱ - ₱1,082,281 (₱82,890) ₱- ₱999,391
Derivative liabilities 111,278 - 111,278 (82,890) - 28,388
Traffic settlements
receivable 3,544,807 (1,817,483) 1,727,324 - - 1,727,324
Traffic settlements
payable 1,587,634 (1,143,423) 444,211 - - 444,211

The Globe Group makes use of master netting agreements with counterparties with whom a
significant volume of transactions are undertaken. Such arrangements provide for single net
settlement of all financial instruments covered by the agreements in the event of default on any
one contract. Master netting arrangements do not normally result in an offset of balance sheet
assets and liabilities unless certain conditions for offsetting under PAS 32 apply.
Although master netting arrangements may significantly reduce credit risk, it should be noted
that:
a) Credit risk is eliminated only to the extent that amounts due to the same counterparty will
be settled after the assets are realized; and
b) The extent to which overall credit risk is reduced may change substantially within a short
period because the exposure is affected by each transaction subject to the arrangement and
fluctuations in market factors.

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28.12 Fair Values of Financial Assets and Financial Liabilities

The table below presents a comparison of carrying amounts and estimated fair values of all the
Globe Group’s financial instruments as of December 31:

2016 2015
Carrying Fair Carrying Fair
Value Value Value Value
(In Thousand Pesos)
Financial Assets
Derivative assets ₱823,448 ₱823,448 ₱1,082,281 ₱1,082,281
AFS investment in equity securities (Note 11) 794,087 794,087 577,580 577,580
₱1,617,535 ₱1,617,535 ₱1,659,861 ₱1,659,861
Financial Liabilities
Derivative liabilities ₱105,928 ₱105,928 ₱111,278 ₱111,278
Long-term debt (including current portion) 101,228,592 103,963,908 72,228,858 76,181,637
₱101,334,520 ₱104,069,836 ₱72,340,136 ₱76,292,915

The following discussions are methods and assumptions used to estimate the fair value of
each class of financial instrument for which it is practicable to estimate such value.

28.12.1 Non-Derivative Financial Instrument

The fair values of cash and cash equivalents, subscriber receivables, traffic settlements
receivable, current portion of loan receivable, miscellaneous receivables, accrued interest
receivables, accounts payable, accrued expenses and notes payable are approximately
equal to their carrying amounts considering the short-term maturities of these financial
instruments.
The fair value of AFS investments are based on quoted and unquoted prices. Unquoted
AFS equity securities are carried at cost, subject to impairment.
The fair value of loans receivables approximates carrying value after calculations.
For variable rate financial instruments that reprice every three months, the carrying value
approximates the fair value because of recent and regular repricing based on current
market rates. For variable rate financial instruments that reprice every six months, the
fair value is determined by discounting the principal amount plus the next interest
payment using the prevailing market rate for the period up to the next repricing date. The
discount rates used range from 1.01% to 1.71% for USD floating loans.
For noninterest bearing obligations, the fair value is estimated as the present value of all
future cash flows discounted using the prevailing market rate of interest for a similar
instrument.

28.12.2 Derivative Instrument

The fair value of freestanding and embedded forward exchange contracts is calculated by
using the interest rate parity concept.
The fair values of interest rate swaps and cross currency swap transactions are determined
using valuation techniques with inputs and assumptions that are based on market observable
data and conditions and reflect appropriate risk adjustments that market participants would
make for credit and liquidity risks existing at the end each of reporting period. The fair
value of interest rate swap transactions is the net present value of the estimated future cash
flows. The fair values of currency and cross currency swap transactions are determined
based on changes in the term structure of interest rates of each currency and the spot rate.

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The fair values were tested to determine the impact of credit valuation adjustments.
However, the impact is immaterial given that the Globe Group deals its derivatives with
large foreign and local banks with very minimal risk of default.
Embedded currency options are valued using the simple option pricing model of third
party provider.

28.12.3 Fair Value Hierarchy

The following tables provide the fair value measurement hierarchy of the Globe Group’s
assets and liabilities:

Fair value measurement using

Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
(Level 1) (Level 2) (Level 3) Total
2016
Assets measured at fair value: (In Thousand Pesos)
Derivative assets:
Cross currency swaps ₱ - ₱612,712 ₱- ₱612,712
Interest rate swaps - 18,548 18,548
Principal only swaps - 123,877 - 123,877
Embedded currency forwards - 48,947 - 48,947
Nondeliverable forwards - 19,364 - 19,364
AFS investment in equity securities 228,200 565,887 - 794,087
Liabilities measured at fair value:
Derivative liabilities:
Cross currency swaps - 31,170 - 31,170
Principal only swaps - 30,621 - 30,621
Embedded Currency forwards - 34,674 - 34,674
Deliverable forwards - 9,463 - 9,463
Long-term debt (including current portion) - 103,963,908 - 103,963,908
2015
Assets measured at fair value:
Derivative assets:
Cross currency swaps ₱ - ₱1,045,239 ₱- ₱1,045,239
Principal only swaps - 25,592 - 25,592
Embedded currency forwards - 11,450 - 11,450
AFS investment in equity securities 203,736 373,844 - 577,580
Liabilities measured at fair value:
Derivative liabilities:
Cross currency swaps - 53,013 - 53,013
Principal only swaps - 29,877 - 29,877
Embedded Currency forwards - 28,388 - 28,388
Long-term debt (including current portion) - 76,181,637 - 76,181,637

There were no transfers from Level 1 and Level 2 fair value measurements for the years
ended December 31, 2016 and 2015. The Globe Group has no financial instruments classified
under Level 3.

29 Operating Segment Information

The Globe Group’s reportable segments consist of: (1) mobile communications services; and
(2) wireline communication services; which the Globe Group operates and manages as
strategic business units and organize by products and services. The Globe Group presents its
various operating segments based on segment net income.

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The mobile value added data content and application development services coming from
various revenue streams are reported under mobile communication services segment to
conform to the current presentation of internal management reports.
Intersegment transfers or transactions are entered into under the normal commercial terms
and conditions that would also be available to unrelated third parties. Segment revenue,
segment expense and segment result include transfers between business segments. Those
transfers are eliminated in consolidation.
Most of the Globe Group’s revenues are derived from operations within the Philippines, hence, the
Globe Group does not present geographical information required by PFRS 8, Operating Segments.
The Globe Group does not have a single customer that will meet the 10% reporting criteria.
The Globe Group also presents the different product types that are included in the report that
is regularly reviewed by the chief operating decision maker in assessing the operating
segments performance.
Segment assets and liabilities are not measures used by the chief operating decision maker
since the assets and liabilities are managed on a group basis.
The Globe Group’s segment information is as follows (in thousand pesos):

2016
Mobile Wireline
Communications Communications
Services Services Consolidated
(In Thousand Pesos)
REVENUES:
Service revenues:
External customers:
Voice ₱34,065,274 ₱3,779,820 ₱37,845,094
SMS 23,198,924 - 23,198,924
Data 34,611,986 9,873,417 44,485,403
Broadband - 14,460,125 14,460,125
Nonservice revenues:
External customers 5,670,249 523,408 6,193,657
Segment revenues 97,546,433 28,636,770 126,183,203
EBITDA 41,260,570 8,717,826 49,978,396
Depreciation and amortization (10,978,984) (12,869,662) (23,848,646)
EBIT 30,281,586 (4,151,836) 26,129,750

NET INCOME (LOSS) BEFORE TAX2 26,090,530 (4,153,128) 21,937,402

Provision for income tax (5,359,344) (689,559) (6,048,903)

NET INCOME (LOSS) ₱20,731,186 (4,842,687) ₱15,888,499

Other segment information
Intersegment revenues (₱2,573,816) (₱1,511,959) (₱4,085,775)
Subsidy1 (5,476,822) (243,635) (5,720,457)
Interest income2 104,318 45,755 150,073
Interest expense (3,388,476) (20,423) (3,408,899)
Equity in net losses of associates and joint ventures (855,198) - (855,198)
Impairment losses and others (2,420,759) (850,542) (3,271,301)
Capital expenditure 32,317,407 6,762,791 39,080,198
Cost of sales (11,147,071) (767,043) (11,914,114)
Operating expenses (50,641,724) (19,369,426) (70,011,150)
(Forward)

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 -134-

2016
Mobile Wireline
Communications Communications
Services Services Consolidated
(In Thousand Pesos)
Cash Flows
Net cash from (used in):
Operating activities ₱31,140,895 ₱6,321,702 ₱37,462,597
Investing activities (51,644,709) (6,016,878) (57,661,587)
Financing activities 16,988,326 (23,697) 16,964,629
1
Computed as non-service revenues less cost of sales
2
Net of final tax

2015
Mobile Wireline
Communications Communications
Services Services Consolidated
(In Thousand Pesos)
REVENUES:
Service revenues:
External customers:
Voice ₱37,128,125 ₱3,418,142 ₱40,546,267
SMS 26,397,857 - 26,397,857
Data 27,716,723 7,697,774 35,414,497
Broadband - 11,320,605 11,320,605
Nonservice revenues:
External customers 6,002,767 287,201 6,289,968
Segment revenues 97,245,472 22,723,722 119,969,194
EBITDA 39,998,632 5,962,223 45,960,855
Depreciation and amortization (10,344,191) (10,788,507) (21,132,698)
EBIT 29,654,441 (4,826,284) 24,828,157

NET INCOME (LOSS) BEFORE TAX2 28,470,093 (5,002,605) 23,467,488

Provision for income tax (5,721,726) (1,261,312) (6,983,038)
NET INCOME (LOSS) ₱22,748,367 (₱6,263,917) ₱16,484,450
Other segment information
Intersegment revenues (₱1,495,254) (₱753,845) (₱2,249,099)
Subsidy1 (7,300,116) (75,119) (7,375,235)
Interest income2 420,532 92,820 513,352
Interest expense (2,438,341) (335,737) (2,774,078)
Equity in net losses of associates and joint ventures3 (153,512) - (153,512)
Impairment losses and others 2,168,778 940,742 3,109,520
Capital expenditure 24,712,694 5,604,486 30,317,180
Cost of sales (13,302,883) (362,320) (13,665,203)
Operating expenses (44,052,436) (16,444,210) (60,496,646)
Cash Flows
Net cash from (used in):
Operating activities 28,332,095 7,620,108 35,952,203
Investing activities (27,952,500) (4,607,585) (32,560,085)
Financing activities (7,991,180) (415,097) (8,406,277)
1
Computed as non-service revenues less cost of sales
2
Net of final tax
3
Starting June 2016, Globe Group presented equity in net losses as a non-operating income and expense below EBITDA,
previously under other income above EBITDA. This change resulted to retroactive adjustments of 2015 and 2014 reported
figures.

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 -135-
2014
Mobile Wireline
Communications Communications
Services Services Consolidated
(In Thousand Pesos)
REVENUES:
Service revenues:
External customers:
Voice ₱34,683,539 ₱2,789,304 ₱37,472,843
SMS 29,078,791 - 29,078,791
Data 14,306,226 5,480,245 19,786,471
Broadband - 12,686,499 12,686,499
Nonservice revenues:
External customers 2,981,383 1,229,726 4,211,109
Segment revenues 81,049,939 22,185,774 103,235,713
EBITDA3 34,292,472 5,203,166 39,495,638
Depreciation and amortization (9,197,602) (8,925,922) (18,123,524)
EBIT 25,094,870 (3,722,756) 21,372,114
NET INCOME (LOSS) BEFORE TAX2 23,295,190 (3,912,484) 19,382,706
Provision for income tax (4,787,141) (1,223,373) (6,010,514)
NET INCOME (LOSS) ₱18,508,049 (₱5,135,857) ₱13,372,192
Other segment information
Intersegment revenues (₱2,039,736) (₱540,210) (₱2,579,946)
Subsidy1 (6,185,207) (265,028) (6,450,235)
Interest income2 632,611 43,557 676,168
Interest expense (2,192,498) (133,673) (2,326,171)
Equity in net losses of associates and joint ventures3 (224,257) - (224,257)
Impairment losses and others 2,846,665 873,504 3,720,169
Capital expenditure 22,741,742 4,242,016 26,983,758
Cost of sales (9,166,590) (1,494,754) (10,661,344)
Operating expenses (38,346,234) (14,957,874) (53,304,108)
Cash Flows
Net cash from (used in):
Operating activities 30,681,003 5,774,155 36,455,158
Investing activities (15,723,193) (4,492,913) (20,216,106)
Financing activities (6,942,137) - (6,942,137)
1
Computed as non-service revenues less cost of sales
2
Net of final tax
3
Starting June 2016, Globe Group presented equity in net losses as a non-operating income and expense below EBITDA,
previously under other income above EBITDA. This change resulted to retroactive adjustments of 2015 and 2014 reported
figures.

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 -136-

A breakdown of gross revenues to net revenues and a reconciliation of segment revenues to

the total revenues presented in the consolidated statements of comprehensive income are
shown below:

2016 2015 2014

(In Thousand Pesos)
Gross service revenues ₱119,989,546 ₱113,679,226 ₱99,024,604
Interconnection charges (9,623,127) (9,007,919) (8,429,934)
Net service revenues 110,366,419 104,671,307 90,594,670
Nonservice revenues 6,193,657 6,289,968 4,211,109
Segment revenues 116,560,076 110,961,275 94,805,779
Interest income 151,589 518,537 682,998
Other income - net 983,186 2,130,853 470,647
Total revenues ₱117,694,851 ₱113,610,665 ₱95,959,424

The reconciliation of the EBITDA to income before income tax presented in the consolidated
statements of comprehensive income is shown below:

2016 2015 2014

(In Thousand Pesos)
EBITDA ₱49,978,396 ₱45,960,855 ₱39,495,638
Depreciation and amortization (23,848,646) (21,132,698) (18,123,524)
Financing costs (4,096,826) (3,372,924) (2,565,706)
Equity in net losses of associates and joint ventures (855,198) (153,512) (224,257)
Gain on derivative instruments 469,884 - -
Interest income 151,589 518,537 682,998
Gain on disposal of property and equipment - net 101,232 57,642 101,159
Loss/(Gain) on previously held equity interest (30,186) 431,115 -
Gain on fair value of retained interest - 745,831 -
Gain on disposal of controlling interest in
subsidiary - 449,148 -
Other items 67,157 (36,506) 16,398
Income before income tax ₱21,937,402 ₱23,467,488 ₱19,382,706

The reconciliation of core net income after tax (core NIAT) to NIAT is shown below:

2016 2015 2014

(In Thousand Pesos)
Core NIAT ₱16,013,946 ₱15,126,221 ₱14,489,176
Foreign exchange gains (losses)1 (367,517) (320,106) 619
Mark-to-market gains1 328,919 13,784 49,581
Non-recurring items (56,663) 178,304 (30,964)
Gain on previously held equity interest (30,186) 431,115 -
Gain on fair value of retained interest1 - 666,876 -
Gain on disposal of controlling interest in
subsidiary - 388,256 -
Accelerated depreciation1 - - (1,136,220)
NIAT ₱15,888,499 ₱16,484,450 ₱13,372,192
1 Net of taxes

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 -137-

29.1 Mobile Communications Services

This reporting segment is made up of digital cellular telecommunications services that
allow subscribers to make and receive local, domestic long distance and international
long distance calls, international roaming calls and other value added services (VAS) in
any place within the coverage areas.

29.1.1 Mobile communication voice net service revenues include the following:
a) Pro-rated monthly service fees on postpaid plans;
b) Charges for intra-network and outbound calls in excess of the consumable
minutes for various Globe Postpaid plans, including currency exchange rate
adjustments (CERA) net of loyalty discounts credited to subscriber billings;
c) Airtime fees for intra-network and outbound calls recognized upon the earlier of
actual usage of the airtime value or expiration of the unused value of the prepaid
reload denomination (for Globe Prepaid and TM) which occurs between 3 and
120 days after activation depending on the prepaid value reloaded by the
subscriber net of (i) bonus credits and (ii) prepaid reload discounts;
d) Revenues generated from inbound international and national long distance calls
and international roaming calls; and
e) Mobile service revenues of GTI.

29.1.2 Mobile SMS service revenues consist of local and international revenues from
value-added services such as inbound and outbound SMS and MMS, and infotext,
subscription fees on unlimited and bucket prepaid SMS services, net of any payouts to
content providers.

29.1.3 Mobile communication data net service revenues consist of local and
international revenues from value-added services such as mobile internet browsing and
content downloading, mobile commerce services, other add-on VAS and service
revenues of GXI and Yondu, net of payouts to content providers.

29.1.4 Globe Telecom offers its wireless communications services to consumers,

corporate and small and medium enterprise (SME) clients through the following three
(3) brands: Globe Postpaid, Globe Prepaid and Touch Mobile.
The Globe Group also provides its subscribers with mobile payment and remittance
services under the GCash brand.

29.2 Wireline Communications Services

This reporting segment is made up of fixed line telecommunications services which offer
subscribers local, domestic long distance and international long distance voice services
in addition to broadband and a number of VAS in various areas covered by the
Certificate of Public Convenience and Necessity (CPCN) granted by the NTC.

29.2.1 Wireline voice service revenues consist of the following:

a) Monthly service fees including CERA of voice-only subscriptions;
b) Revenues from local, international and national long distance calls made by
postpaid and prepaid wireline subscribers, as well as broadband customers who
have subscribed to data packages bundled with a voice service. Revenues are net
of prepaid call card discounts;

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c) Revenues from inbound local, international and national long distance calls from
other carriers terminating on Globe’s network;
d) Revenues from additional landline features such as caller ID, call waiting, call
forwarding, multi-calling, voice mail, duplex and hotline numbers and other
value-added features;
e) Installation charges and other one-time fees associated with the establishment of
the service; and
f) Revenues from DUO and SUPERDUO (fixed line portion) service consisting of
monthly service fees for postpaid and subscription fees for prepaid.

29.2.2 Wireline data service revenues consist of the following:

a) Monthly service fees from international and domestic leased lines;
b) Other wholesale transport services;
c) Revenues from value-added services; and
d) One-time connection charges associated with the establishment of service.

29.2.3 Broadband service revenues consist of the following:

a) Monthly service fees of wired, fixed wireless and bundled voice and data
subscriptions;
b) Browsing revenues from all postpaid and prepaid wired, fixed wireless in excess
of allocated free browsing minutes and expiration of unused value of prepaid load
credits;
c) Value-added services such as games; and
d) Installation charges and other one-time fees associated with the service.

29.2.4 The Globe Group provides wireline voice communications (local, national and
international long distance), data and broadband and data services to consumers,
corporate and SME clients in the Philippines.

 Consumers - the Globe Group’s postpaid voice service provides basic landline
services including toll-free NDD calls to other Globe landline subscribers for a
fixed monthly fee. For wired broadband, consumers can choose between
broadband services bundled with a voice line, or a broadband data-only service.
The Globe Group offers broadband packages bundled with voice, or broadband
data-only service. For subscribers who require full mobility, Globe Broadband
service come in postpaid and prepaid packages and allow them to access the
internet via LTE, 3G with HSDPA, Enhanced Datarate for GSM Evolution
(EDGE), General Packet Radio Service (GPRS) or WiFi at hotspots located
nationwide.

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 -139-

 Corporate/SME clients - for corporate and SME enterprise clients wireline voice
communication needs, the Globe Group offers postpaid service bundles which
come with a business landline and unlimited dial-up internet access. The Globe
Group also provides a full suite of telephony services from basic direct lines to
Integrated Services Digital Network (ISDN) services, 1-800 numbers,
International Direct Dialing (IDD) and National Direct Dialing (NDD) access as
well as managed voice solutions such as Voice Over Internet Protocol (VOIP)
and managed Internet Protocol (IP) communications. Value-priced, high speed
data services, wholesale and corporate internet access, data center services and
segment-specific solutions customized to the needs of vertical industries.

30 Notes to Consolidated Statements of Cash Flows

The principal noncash transactions are as follows:

Notes 2016 2015 2014

(In Thousand Pesos)
Unpaid investments and advances 10.7 ₱11,997,228 ₱ - ₱ -
Increase in liabilities related to the
acquisition of property and equipment 1,780,201 6,827,342 5,091,154
Unpaid dividends on preferred shares 17.3 260,030 260,030 260,030
Capitalized ARO 15 23,210 39,269 9,495
Reversal of project accruals 12 - (8,748,893) -

The cash and cash equivalents account consists of the following as of December 31:

2016 2015 2014

(In Thousand Pesos)
Cash on hand and in banks ₱1,915,935 ₱5,355,055 ₱6,126,034
Short-term placements 6,716,917 6,459,324 10,630,874
₱8,632,852 ₱11,814,379 ₱16,756,908

Cash in banks earn interest at respective bank deposit rates. Short-term placements represent
short-term money market placements.
The ranges of interest rates of the above placements are as follows:

2016 2015 2014

Placements:
PHP 0.05% to 1.75% 0.25% to 2.25% 0.20% to 1.50%
USD 0.25% to 2.70% 0.02% to 2.00% 0.01% to 1.75%

31 Events After Reporting Period

On February 7, 2017, ownership of GXI was transferred to GFII/Mynt, Globe Telecom’s wholly-
owned subsidiary pursuant to the BOD approval through its Executive Committee made last
February 6, 2017. GXI provides mobile commerce services under GCash brand,
while GFII/Mynt is a holding company for Globe’s financial technology business.
On February 7, 2017, Globe Telecom’s BOD approved the declaration of the first quarterly cash
dividend of ₱22.75 per common share, payable to common stockholders of record as of
February 21, 2017. Total dividends amounting to ₱3.0 billion will be payable on March 8, 2017.

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 -1-

GLOBE TELECOM, INC. AND SUBSIDIARIES

Index to the Consolidated Financial Statements and Supplementary Schedules

Schedule 1 - Schedule of all the effective standards and interpretations as of December 31, 2016

Schedule 2 - Financial soundness indicators

Schedule 3 - Reconciliation of retained earnings available for dividend declaration

Schedule 4 - Map of the relationships of the companies within the Group

Schedule 5 - Schedule of preferred shares offering proceeds

Schedule 6 - Supplementary schedules required by Annex 68-E

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 -2-

GLOBE TELECOM, INC. AND SUBSIDIARIES

Schedule 1
SCHEDULE OF ALL THE EFFECTIVE STANDARDS AND INTERPRETATIONS UNDER
THE PHILIPPINE FINANCIAL REPORTING STANDARDS (PFRS)
DECEMBER 31, 2016
PHILIPPINE FINANCIAL REPORTING Adopted Not Not
STANDARDS AND INTERPRETATIONS Adopted Applicable

Framework for the Preparation and Presentation of

Financial Statements

Conceptual Framework Phase A: Objectives and qualitative
characteristics
PFRSs Practice Statement Management Commentary 
Philippine Financial Reporting Standards
PFRS 1 First-time Adoption of Philippine Financial Reporting

(Revised) Standards
Amendments to PFRS 1 and PAS 27: Cost of an
Investment in a Subsidiary, Jointly Controlled Entity or 
Associate
Amendments to PFRS 1: Additional Exemptions for

First-time Adopters
Amendment to PFRS 1: Limited Exemption from
Comparative PFRS 7 Disclosures for First-time 
Adopters
Amendments to PFRS 1: Severe Hyperinflation and

Removal of Fixed Date for First-time Adopters
Amendments to PFRS 1: Government Loans 
Annual Improvements to PFRSs 2009-2011 Cycle -
Amendments to PFRS 1: First-Time Adoption of 
PFRS
Annual Improvements to PFRSs 2011-2013 Cycle -
Amendments to PFRS 1: First-time Adoption of

International Financial Reporting Standards (Changes to
the Basis for Conclusions only)
PFRS 2 Share-based Payment 
Amendments to PFRS 2: Vesting Conditions and

Cancellations
Amendments to PFRS 2: Group Cash-settled Share-

based Payment Transactions
Annual Improvements to PFRSs 2010-2012 Cycle -
Amendments to PFRS 2:Definition of Vesting 
Condition


 -3-

PHILIPPINE FINANCIAL REPORTING Adopted Not Not

STANDARDS AND INTERPRETATIONS Adopted Applicable

Amendments to PFRS 2: Classification and

 
Measurement of Share-based Payment Transactions*
PFRS 3 Business Combinations 
(Revised) Annual Improvements to PFRSs 2010-2012 Cycle -
Amendments to PFRS 3: Accounting for Contingent 
Consideration)
Annual Improvements to PFRSs 2011-2013 Cycle -
Amendments to PFRS 3: Scope of Exception for 
Joint Ventures
PFRS 4 Insurance Contracts 
Amendments to PAS 39 and PFRS 4: Financial

Guarantee Contracts
PFRS 5 Non-current Assets Held for Sale and Discontinued

Operations
Annual Improvements to PFRSs 2012-2014 Cycle -
Amendments to PFRS 5: Changes in methods of 
disposal
PFRS 6 Exploration for and Evaluation of Mineral Resources 
PFRS 7 Financial Instruments: Disclosures 
Amendments to PAS 39 and PFRS 7:

Reclassification of Financial Assets
Amendments to PAS 39 and PFRS 7:
Reclassification of Financial Assets - Effective Date and 
Transition
Amendments to PFRS 7: Improving Disclosures

about Financial Instruments
Amendments to PFRS 7: Disclosures - Transfers of

Financial Assets
Amendments to PFRS 7: Disclosures – Offsetting

Financial Assets and Financial Liabilities
Amendments to PFRS 7: Mandatory Effective Date

of PFRS 9 and Transition Disclosures
Amendments to PFRS 7: Hedge Accounting

Disclosures
Annual Improvements to PFRSs 2012-2014 Cycle -
Amendments to PFRS 7: Servicing contracts and 
Applicability of the amendments to PFRS 7 to condensed 
interim financial statements


 -4-

PHILIPPINE FINANCIAL REPORTING Adopted Not Not

STANDARDS AND INTERPRETATIONS Adopted Applicable

PFRS 8 Operating Segments 

Annual Improvements to PFRSs 2010-2012 Cycle -
Amendments to PFRS 8: Aggregation of Segments 
and Reconciliation of Segment Assets
PFRS 9 Financial Instruments (2014)* 
PFRS 10 Consolidated Financial Statements 
Amendments to PFRS 10: Consolidated Financial

Statement: Transition Guidance
Amendments to PFRS 10:Transition Guidance and

Investment Entities
Amendments to PFRS 10: Sales or contributions of

assets between an investor and its associate/joint venture*
Amendments to PFRS 10: Investment Entities:

Applying the Consolidation Exception
PFRS 11 Joint Arrangements 
Amendments to PFRS 1: Joint Arrangements:

Transition Guidance
Amendments to PFRS 11: Accounting for

Acquisitions of Interests in Joint Operations
PFRS 12 Disclosure of Interests in Other Entities 
Amendments to PFRS 12: Disclosure of Interests in

Other Entities: Transition Guidance
Amendments to PFRS 12: Transition Guidance and

Investment Entities
Amendments to PFRS 12: Investment Entities:

Applying the Consolidation Exception
PFRS 13 Fair Value Measurement 
Annual Improvements to PFRSs 2010-2012 Cycle -
Amendments to PFRS 13: Fair Value Measurement
(Amendments to the Basis of Conclusions Only, with 
Consequential Amendments to the Bases of Conclusions
of Other Standards)
Annual Improvements to PFRSs 2011-2013 Cycle -

Amendments to PFRS 13: Portfolio Exception
PFRS 14 Regulatory Deferral Accounts


PFRS 16 Leases * 


 -5-

PHILIPPINE FINANCIAL REPORTING Adopted Not Not

STANDARDS AND INTERPRETATIONS Adopted Applicable

Philippine Accounting Standards

PAS 1 Presentation of Financial Statements 
(Revised) Amendment to PAS 1: Capital Disclosures 
Amendments to PAS 32 and PAS 1: Puttable
Financial Instruments and Obligations Arising on 
Liquidation
Amendments to PAS 1: Presentation of Items of

Other Comprehensive Income
Annual Improvements to PFRSs 2009-2011 Cycle -

Amendments to PAS 1: Comparative Information
Amendments to PAS 1: Disclosure Initiative 
PAS 2 Inventories 
PAS 7 Statement of Cash Flows 

Amendments to PAS 7: Disclosure Initiative 

PAS 8 Accounting Policies, Changes in Accounting Estimates


and Errors
PAS 10 Events after the Reporting Period 
PAS 11 Construction Contracts 
PAS 12 Income Taxes 
Amendment to PAS 12: Deferred Tax: Recovery of

Underlying Assets
Amendment to PAS 12: Recognition of Deferred Tax
 
Assets for Unrealized Losses*
PAS 16 Property, Plant and Equipment 
Annual Improvements to PFRSs 2009-2011 Cycle -

Amendments to PAS 16, Servicing Equipment
Annual Improvements to PFRSs 2010-2012 Cycle -
Amendments to PAS 16: Revaluation Method - 
Proportionate Restatement of Accumulated Depreciation
Amendments to PAS 16: Clarification of Acceptable

Methods of Depreciation
Amendments to PAS 16: Agriculture: Bearer Plants 
PAS 17 Leases 

PAS 18 Revenue



 -6-

PHILIPPINE FINANCIAL REPORTING Adopted Not Not

STANDARDS AND INTERPRETATIONS Adopted Applicable

PAS 19 Employee Benefits (2011) 

(Amended) Amendments to PAS 19: Defined Benefit Plans:
Employee Contributions 

Annual Improvements to PFRSs 2012-2014 Cycle -

Amendments to PAS 19: Discount rate: regional 
market issue
PAS 20 Accounting for Government Grants and Disclosure of

Government Assistance
PAS 21 The Effects of Changes in Foreign Exchange Rates 
Amendment to PAS 21: Net Investment in a Foreign

Operation
PAS 23 Borrowing Costs

(Revised)
PAS 24 Related Party Disclosures 
(Revised) Annual Improvements to PFRSs 2010-2012 Cycle -

Amendments to PAS 24: Key Management Personnel
PAS 26 Accounting and Reporting by Retirement Benefit Plans 
PAS 27 Separate Financial Statements

(Amended)
Amendments to PAS 27: Transition Guidance and

Investment Entities
Amendments to PAS 27: Equity Method in Separate

Financial Statements
PAS 28 Investments in Associates and Joint Ventures 
(Amended) Amendments to PAS 28: Sales or contributions of

assets between an investor and its associate/joint venture*
Amendments to PAS 28: Investment Entities:

Applying the Consolidation Exception
PAS 29 Financial Reporting in Hyperinflationary Economies 
PAS 32 Financial Instruments: Disclosure and Presentation 
Amendments to PAS 32 and PAS 1: Puttable
Financial Instruments and Obligations Arising on 
Liquidation
Amendment to PAS 32: Classification of Rights
Issues 


 -7-

PHILIPPINE FINANCIAL REPORTING Adopted Not Not

STANDARDS AND INTERPRETATIONS Adopted Applicable

Annual Improvements to PFRSs 2009-2011 Cycle -

Amendments to PAS 32: Tax Effect of Equity 
Distributions
Amendments to PAS 32: Offsetting Financial Assets

and Financial Liabilities
PAS 33 Earnings per Share 
PAS 34 Interim Financial Reporting 
Annual Improvements to PFRSs 2009-2011 Cycle -
Amendments to PAS 34: Interim Reporting of 
Segment Assets
Annual Improvements to PFRSs 2012-2014 Cycle -
Amendments to PAS 34: Disclosure of information 
'elsewhere in the interim financial report'
PAS 36 Impairment of Assets 
Amendments to PAS 36: Recoverable Amount

Disclosures for Non-Financial Assets
PAS 37 Provisions, Contingent Liabilities and Contingent Assets 
PAS 38 Intangible Assets 
Annual Improvements to PFRSs 2010-2012 Cycle -
Amendments to PAS 38: Revaluation Method -

Proportionate Restatement of Accumulated
Amortization
Amendments to PAS 38: Clarification of Acceptable

Methods of Amortization
PAS 39 Financial Instruments: Recognition and Measurement


Amendments to PAS 39: Transition and Initial

Recognition of Financial Assets and Financial 
Liabilities
Amendments to PAS 39: Cash Flow Hedge

Accounting of Forecast Intragroup Transactions
Amendments to PAS 39: The Fair Value Option 
Amendments to PAS 39 and PFRS 4: Financial

Guarantee Contracts
Amendments to PAS 39 and PFRS 7:
Reclassification of Financial Assets



 -8-

PHILIPPINE FINANCIAL REPORTING Adopted Not Not

STANDARDS AND INTERPRETATIONS Adopted Applicable

Amendments to PAS 39 and PFRS 7:

Reclassification of Financial Assets – Effective Date 
and Transition
Amendments to Philippine Interpretation

IFRIC–9 and PAS 39: Embedded Derivatives
Amendment to PAS 39: Eligible Hedged Items 
Amendment to PAS 39: Novation of Derivatives and
 
Continuation of Hedge Accounting
Amendment to PAS 39: Hedge Accounting

Application
PAS 40 Investment Property 
Annual Improvements to PFRSs 2011-2013 Cycle -
Amendments to PAS 40: Clarifying the
Interrelationship of IFRS 3 and IAS 40 When 
Classifying Property as Investment Property or Owner-
Occupied Property
PAS 41 Agriculture 
Amendments to PAS 41: Agriculture: Bearer Plants 
Philippine Interpretations
IFRIC 1 Changes in Existing Decommissioning, Restoration and

Similar Liabilities
IFRIC 2 Members' Share in Co-operative Entities and Similar

Instruments
IFRIC 4 Determining Whether an Arrangement Contains a Lease 
IFRIC 5 Rights to Interests arising from Decommissioning,

Restoration and Environmental Rehabilitation Funds
IFRIC 6 Liabilities arising from Participating in a Specific

Market - Waste Electrical and Electronic Equipment
IFRIC 7 Applying the Restatement Approach under PAS 29

Financial Reporting in Hyperinflationary Economies
IFRIC 8 Scope of PFRS 2 
IFRIC 9 Reassessment of Embedded Derivatives 
Amendments to Philippine Interpretation

IFRIC–9 and PAS 39: Embedded Derivatives
IFRIC 10 Interim Financial Reporting and Impairment 
IFRIC 11 PFRS 2- Group and Treasury Share Transactions 
IFRIC 12 Service Concession Arrangements 


 -9-

PHILIPPINE FINANCIAL REPORTING Adopted Not Not

STANDARDS AND INTERPRETATIONS Adopted Applicable

IFRIC 13 Customer Loyalty Programmes 

IFRIC 14 The Limit on a Defined Benefit Asset, Minimum

Funding Requirements and their Interaction
Amendments to Philippine Interpretations IFRIC- 14,

Prepayments of a Minimum Funding Requirement
IFRIC 16 Hedges of a Net Investment in a Foreign Operation 
IFRIC 17 Distributions of Non-cash Assets to Owners 
IFRIC 18 Transfers of Assets from Customers 
IFRIC 19 Extinguishing Financial Liabilities with Equity

Instruments
IFRIC 20 Stripping Costs in the Production Phase of a Surface

Mine
IFRIC 21 Levies 
SIC-7 Introduction of the Euro 
SIC-10 Government Assistance - No Specific Relation to

Operating Activities
SIC-15 Operating Leases - Incentives 
SIC-21 Income Taxes- Recovery of Revalued Non-depreciable

Assets
SIC-25 Income Taxes - Changes in the Tax Status of an Entity

or its Shareholders
SIC-27 Evaluating the Substance of Transactions Involving the

Legal Form of a Lease
SIC-29 Service Concession Arrangements: Disclosures 
SIC-31 Revenue - Barter Transactions Involving Advertising

Services
SIC-32 Intangible Assets - Web Site Costs 
PIC Q&A Revenue Recognition for Sales of Property Units Under

No. 2006-01 Pre-Completion Contracts
PIC Q&A Clarification of Criteria for Exemption from Presenting
No. 2006- Consolidated Financial Statements 
02
PIC Q&A Valuation of Bank Real and Other Properties Acquired
No. 2007- (ROPA) 
03
PIC Q&A Rate Used in Discounting Post-employment Benefit

No. 2008-01 Obligations


 -10-

PHILIPPINE FINANCIAL REPORTING Adopted Not Not

STANDARDS AND INTERPRETATIONS Adopted Applicable

PIC Q&A Accounting for Government Loans with Low Interest

No. 2008- Rates under the Amendments to PAS 20 
02
PIC Q&A Financial Statements Prepared on a Basis Other than

No. 2009-01 Going Concern
PIC Q&A Rate Used in Determining the Fair Value of

No. 2010-01 Government Securities in the Philippines
PIC Q&A Basis of Preparation of Financial Statements

No. 2010-02
PIC Q&A Current/non-current Classification of a Callable Term

No. 2010-03 Loan
PIC Q&A Common Control Business Combinations

No. 2011-02
PIC Q&A Accounting for Inter-company Loans

No. 2011-03
PIC Q&A Costs of Public Offering of Shares

No. 2011-04
PIC Q&A Fair Value or Revaluation as Deemed Cost

No. 2011-05
PIC Q&A Acquisition of Investment Properties – Asset Acquisition

No. 2011-06 or Business Combination?
PIC Q&A Application of the Pooling of Interests Method for
No. 2012-01 Business Combinations of Entities under Common 
Control in Consolidated Financial Statements
PIC Q&A Cost of a New Building Constructed on Site of a
No. 2012-02 Previous Building 

PIC Q&A Accounting for Employee Benefits under a Defined

No. 2013-03 Contribution Plan Subject to Requirement of Republic 
(Revised) Act (RA) 7641: The Philippine Retirement Law
PIC Q&A Conforming Changes to PIC Q&As - Cycle 2015
 
No. 2015-01
*These are the new and revised accounting standards and interpretations that are effective for annual period beginning on
or after the reporting period ended December 31, 2016


 -11-

Schedule 2

FINANCIAL SOUNDNESS INDICATORS December 31 December 31

2016 2015
FINANCIAL RATIOS
Debt to EBITDA 2.15 1.51
Debt Service Coverage Ratio 4.18 5.18
Interest Coverage Ratio 12.50 12.24
Debt to Equity (D/E Ratio) – gross 1.67 1.22
Debt to Equity (D/E Ratio) – net 1.53 1.02
Debt to Total Capitalization – book 0.62 0.55
Debt to Total Capitalization – market 0.33 0.22
Total Asset to Equity Ratio 3.94 3.29
Current Ratio 0.64 0.72
Solvency Ratio 0.23 0.29
PROFITABILITY MARGINS  
EBITDA Margins 42% 40%
Net Profit Margin 13% 15%
Return on Equity 26% 29%


 -12-

Schedule 3

RECONCILIATION OF RETAINED EARNINGS AVAILABLE FOR DIVIDEND

DECLARATION AS OF DECEMBER 31, 2016

Items Amount
(In thousands)
Unappropriated Retained Earnings, beginning ₱9,956,986
Accumulated adjustments to Retained Earnings (4,753,497)
Unappropriated Retained Earnings, as adjusted, beginning 5,203,489
Net income during the period closed to Retained Earnings 15,724,251
Less: Non-actual/unrealized income net of tax
Unrealized foreign exchange gain –net (99,892)

Net income actually earned/realized during the period 15,624,359

Add (Less):
Dividend during the period 12,234,570

Unappropriated Retained Earnings, as adjusted, ending ₱8,593,278


 -13-

Schedule 4

MAP OF THE RELATIONSHIP OF THE COMPANIES WITHIN THE GROUP

AS OF DECEMBER 31, 2016


 -14-

Schedule 5

SCHEDULE OF PREFERRED SHARES OFFERING PROCEEDS

AS OF DECEMBER 31, 2016

Preferred Shares Offering Proceeds ₱-

Balance of Proceeds as at December 31, 2016 ₱-


 -15-

SCHEDULE A – FINANCIAL ASSETS

DECEMBER 31, 2016

Number of shares Amount shown Income

Name of Issuing entity and association or principal amount in the balance received and
of each issue of bonds and notes sheet accrued
Amasia CIV T, L.P./Switch (Amasia) 1,094,531 shares ₱132,780,000 ₱-
AVA Online Group, Inc. (AVA) 1,333 shares 5,000,000 -
City Sports Club Cebu 1 share 699,908 -
[Link] 493,182 shares 48,280,000 -
Digital Space Explorer, Inc./Squadzip 56,001 shares 4,000,000 -
Eyeron, Inc. (Eyeron) 1,231,120 shares 4,395,100 -
Growth Solutions Pte. Ltd. 80,000 shares 3,610,960 -
Guestlist Philippines, Inc. (Guestlist) 250,000 shares 951,080 -
Innovantage, Inc. 224 shares 7,500,000 -
Lenddo International (Lenddo) 440,476 shares 44,143,605 -
Life Track Medical Sytems, Inc. 38,193 shares 4,641,841 -
Makati Executive Center 1 share 30,100 -
Manila Golf & Country Club 3 shares 126,000,000 -
Manila Polo Club 6 shares 78,000,000 -
mClinica Pte. Ltd. (mClinica) 5,880 shares 11,220,500 -
Medix Digital Solutions, Inc. (Medix) 120,000 shares 2,040,000 -
Philam Properties Corporation/ Tower
Club, Inc. Club A – 116 500,000 -
Philippine Long Distance Telephone 658,886 shares
Co. 22,439,014 -
Ritmo, Inc. 34,091 shares 2,362,194 -
Telecoms Infrastructure Corp. of the 1,713,549 shares
Philippines 2,970,448 -
Teridion Technologies Ltd. (Teridion) 237,758 shares 92,368,000 -
Thinc Office Corp.(MyLegalWhiz) 5,647 shares 1,230,000 -
Twidl, Inc. 4,527 shares 5,082,000 -
Wattpad 2,485,707 shares 144,599,989 -
ZAP Group, Inc. (ZAP) 75,361 shares 25,782,474 -
Zipmatch 161,770 shares 23,460,000 -
AFS investment in equity securities ₱784,087,215 ₱-


 -16-

SCHEDULE B – Amounts Receivable from Directors, Officers, Employees, Related Parties and principal Stockholders (Other than Related parties)

Balance at the Balance at the end

beginning of period Amounts of period
Name and Designation of debtor (January 1, 2016) Additions collected Current Not-current (December 31, 2016)
Education Loan ₱52,630,561 ₱101481163 ₱97,523,485 ₱56,588,239 ₱- ₱56,588,239
Hospitalization Loan 38,599,533 22,603,575 24,284,987 36,918,121 - 36,918,121
Housing and Renovation Loan 31,340,558 34,308,349 34,461,261 31,187,646 - 31,187,646
Medical and Health Related Loan 10,750,857 1,429,400 1,841,074 10,339,183 - 10,339,183
Trade Receivables 9,109,927 - 9,109,927 - - -
Others 11,664,120 921,500 12,203,877 381,743 - 381,743
Total ₱154,095,556 ₱160,743,987 ₱179,424,611 ₱135,414,932 ₱- ₱135,414,932


 -17-

SCHEDULE C - Trade & Other Receivables Eliminated During Consolidation

Creditor's
Beginning Balance Outstanding Balance Description of
Relationship to
"Other
Creditor the Reporting Co. Account Type Net Movement
Remarks Receivables"
(Subsidiary or
Account
Parent)
(January 1, 2016) (December 31, 2016)

Globe Parent Traffic receivable ₱811,005,163 (₱474,855,432) ₱336,149,731

Trade Receivables 2,509,478,699 (2,509,478,699) -
Other Receivables 12,294,783,403 (5,696,473,184) 6,598,310,219
Dividends Receivable - - 441,392,824
Innove Subsidiary Traffic receivable 415,554,229 (244,005,423) 171,548,806
Trade Receivables 8,972,913 96,996,591 105,969,504
Other Receivables 1,848,211,740 1,617,807,918 3,466,019,658
Co-Subsidiary Trade Receivables 298,844,273 (51,859,970) 246,984,303
Co-Subsidiary Other Receivables 72,299,246 152,798,152 225,097,398
Co-Subsidiary Traffic receivable 19,970,044 6,847,738 26,817,782
GXI Subsidiary Trade Receivables 57,492,160 (964,117) 56,528,043
Other Receivables - 45,110,456 45,110,456
Co-Subsidiary Trade Receivables 26,812,645 (26,788,091) 24,554
Other Receivables - 6,800,000 6,800,000
GTI Subsidiary Other Receivables 155,425,675 (79,659,868) 75,765,807
Co-Subsidiary Other Receivables 30,173,388 77,302,279 107,475,667
Asticom Subsidiary Trade Receivables 155,335,744 (40,380,497) 114,955,247
Co-Subsidiary Trade Receivables 8,431,828 18,486,977 26,918,805
Co-Subsidiary Other Receivables 3,221,816 (3,221,816) -

(Forward)


 -18-

Creditor's
Beginning Balance Outstanding Balance Description of
Relationship to
"Other
Creditor the Reporting Co. Account Type Net Movement
Remarks Receivables"
(Subsidiary or
Account
Parent)
(January 1, 2016) (December 31, 2016)

BTI Subsidiary Other Receivables ₱29,530,362 ₱118,659,493 ₱148,189,855

Traffic receivable 4,661,046 71,191,753 75,852,799
Trade Receivables 45,122,886 45,122,886
Co-Subsidiary Trade Receivables 20,231,292 25,505,130 45,736,422
Traffic receivable 7,896,949 4,068,769 11,965,718
Other Receivables 23,262,041 23,262,041
GCVH Co-Subsidiary Other Receivables 2,332,927 25,744,109 28,077,036
Trade Receivables 191,282 191,282
Subsidiary Trade Receivables 151,204,260 151,204,260
Other Receivables 114,902,401 114,902,401

TOTAL ₱18,780,665,542 (₱6,525,684,864) ₱12,696,373,502

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SCHEDULE D - INTANGIBLE ASSETS - OTHER ASSETS

DECEMBER 31, 2016

Other charges
Beginning balance Additions at Charged to cost Charged to other additions/ Ending balance
Description (Jan. 01, 2016) cost and expenses accounts (deductions) (Dec. 31, 2016)
(In Thousand Pesos)
Licenses and Application Software ₱22,924,678 ₱135,273 (₱15,245,475) ₱5,079,043 (₱68,321) ₱12,825,198
Add:
Customer Contracts 571,760 - (214,410) - - 357,350
Exclusive Dealership Right 141,019 - (150,324) 9,305 - -
Total Intangible Assets 23,637,457 135,273 (15,610,209) 5,088,348 (68,321) 13,182,548
Add: Other Intangible Assets and
Goodwill 1,644,864 125,457 (108,259) (11,390) - 1,650,672
Total Intangible Assets and Goodwill ₱25,282,321 ₱260,730 (₱15,718,468) ₱5,076,958 (₱68,321) ₱14,833,220


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SCHEDULE E – LONG TERM DEBT

DECEMBER 31, 2016

Amount shown under

caption "Current portion of
Long-Term Debt" in related
Title of issue and type of Amount authorized by statement of financial Amount shown under caption "Long-Term Debt" in related
obligation indenture position statement of financial position
Amount Interest rates Maturity dates
Term Loans:
Dollar $294,193,866 ₱ 501,533,059 ₱ 12,189,524,682 1.12% - 5.00% 2018 - 2023
Peso ₱ 72,500,000,000 841,484,807 70,793,579,618 2.06% - 6.00% 2018 – 2031
Retail Bonds ₱ 17,000,000,000 4,487,301,428.71 12,415,167,930 4.89% - 6.00% 2018 - 2023
₱ 5,830,319,295 ₱ 95,398,272,230


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SCHEDULE F – INDEBTEDNESS TO RELATED PARTIES (LONG-TERM LOANS

FROM RELATED COMPANIES
DECEMBER 31, 2016

Name of Related Party  Balances at beginning of  Balance at end of period 

period 

                 
                 
                 
                 
                 
                 
                 


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SCHEDULE G – GUARANTESS OF SECURITIES OF OTHER ISSUERS

DECEMBER 31, 2015

Name of issuing
entity of securities Amount owned
guaranteed by the Title of issue of Total amount by person for
company for each class of guaranteed which this
which this securities and statement is Nature of
statement is filed guaranteed outstanding filed guarantee
          
         
           
           
           
           
           
           
              


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SCHEDULE H - CAPITAL STOCK

DECEMBER 31, 2016

Number of Number of
shares issued shares reserved
and outstanding for options,
Number of as shown under warrants, Number of Directors,
shares related balance conversion and shares held by officers and
Title of issue authorized sheet caption other rights related parties employees Others
Common 148,934,373 132,758,588 8,936,062 103,822,139 161,910 -
Voting preferred stock 160,000,000 158,515,021 - - 5 -
Non-voting preferred stock 40,000,000 20,000,000 - 27,800 47,500 -

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