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(ACCCOB2) Reflection Paper 4

Universal Robina Corporation's trade and other payables amounted to P13.5M in 2018 and P13.4M in 2019, consisting of trade payables, accrued expenses, deposits, and other liabilities. URC's long-term debt totaled P31.4B in 2019 and P30.3B in 2018, consisting primarily of loans which it was able to service within debt covenant ratios. URC manages its capital structure to maintain healthy ratios and maximize shareholder value while complying with dividend payment policies.

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Courtney Tulio
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709 views5 pages

(ACCCOB2) Reflection Paper 4

Universal Robina Corporation's trade and other payables amounted to P13.5M in 2018 and P13.4M in 2019, consisting of trade payables, accrued expenses, deposits, and other liabilities. URC's long-term debt totaled P31.4B in 2019 and P30.3B in 2018, consisting primarily of loans which it was able to service within debt covenant ratios. URC manages its capital structure to maintain healthy ratios and maximize shareholder value while complying with dividend payment policies.

Uploaded by

Courtney Tulio
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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ACCCOB2 PORTFOLIO

Reflection paper presented to the Accountancy Department

In partial fulfillment of the course requirement in ACCCOB2 AY 2020-2021

Submitted by:

Panda, Ainon Jarya A.

Tulio, Courtney Love

K-32
CHAPTER IX. TRADE AND OTHER PAYABLES

The trade (and other) payables note of Universal Robina Corporation which
amounted to P13.5M in 2018 and P13.4M in 2019 can be seen under their accounts payable
and other accrued liabilities account.

This account consists of the following:


● Trade payables (Note 34)
● Accrued expenses
● Customers’ deposits
● Derivative liabilities
● Advances from stockholders
● VAT payable
● Due to related parties
● Withholding taxes payable
● Others

The account recorded a total of P22.7M in 2018 and P21.2M in 2019 as seen in the
corporation’s financial statements. By definition, trade and other payables arise from
purchases of inventories which include raw and indirect materials and supplies from URC’s
suppliers for manufacturing and miscellaneous purposes. According to their consolidated
financial statements, the URC group decided to record a provision related to downsizing
farm operations and consolidation of plant operations which led to restructuring their
operations as they wanted to focus on the growing animal nutrition and health business
and maximize the value-added chain concentrating on the processed meat business.
Through this, the company was able to improve long-term cost efficiencies in both their
farm and plant operations; which can be one of the factors that led to a decrease in their
total accounts payable and other accrued liabilities from 2018 to 2019.
CHAPTER X. LONG-TERM LIABILITIES

It is noted in URC’s financial statements that they have complied with all of its debt
covenants as of December 31, 2019, and December 31, 2018. For every long-term loan, they
were required to maintain a consolidated debt to equity ratio of not greater than 2.5 to 1.0.
The net long-term debt amount of Universal Robina Corporation consisting of their URC
Australia and New Zealand FinCo Loan amounted to P31.4 Billion and P30.3 Billion in 2019
and 2019, respectively. These long-term loans did not have any collateral but guaranteed by
URC’s parent company.

Below is the breakdown of the long-term debt account of URC:

As stated above, URC was able to comply with its debt covenant of maintaining a
debt to equity ratio of not greater than 2.5. The general consensus of a good ratio is that it
should not be above 2.0, however since URC is heavier in fixed assets as they are a
manufacturing company, they may have higher ratios than 2.0; making this the exception.
Given this, URC can generate more growth through utilizing their long-term debt in
expanding funds, acquisition, and capital (whenever the market has low-interest rates).
Additionally, the firm’s other non-current liabilities include net pension liabilities and
miscellaneous liabilities. Based on the financial report, miscellaneous includes asset
retirement obligation and other noncurrent liabilities whereas asset retirement obligation
arises from obligations to restore the leased manufacturing sites, warehouses, and offices of
CSPL at the end of the respective lease terms. These provisions are calculated as the present
value of the estimated expenditures required to remove any leasehold improvements and
costs are currently capitalized as part of the cost of the plant and equipment and are
amortized over the shorter of the lease term and the useful life of assets. Universal Robina
Corporation’s other noncurrent liabilities increased from P287M (2018) to P1.0B (2019)--
coming to a presumption that the company invested in warehouse/site improvement
and/or restoration in the year 2019 to maintain smooth business operations.

CHAPTER XI. SHARE CAPITAL

Universal Robina Corporation’s capital management has the primary objective of


ensuring that they maintain healthy capital ratios in order to support their operations and
maximize investor/shareholder’s value. The computation of URC’S debt-to-capital ratio in
2018 and 2019 is as follows:

*URC has a policy to not exceed a ratio of 2:1. Total equity is considered as capital.

Retained Earnings

A portion of the Group’s retained earnings corresponding to the undistributed net


earnings of the subsidiaries and joint ventures amounting to P59.6 billion and P53.2 billion
as of December 31, 2019 and 2018, respectively, is not available for dividend declaration.
This, however, becomes available for dividend declaration upon dividend distribution by
the investees.

Dividends

There were no dividend declarations present for 2018 and 2019. Still in accordance
to the report, URC intends to maintain an annual cash dividend payment ratio of 50% of
their consolidated net income from the preceding fiscal year subject to the requirements of
the laws which may restrict dividend payments. URC’s board of directors may still modify
the dividend payment ratio.
Treasury Shares

The Parent Company has outstanding treasury shares of 26.0 million shares (P679.5
million) as of December 31, 2019 and 2018, restricting the Parent Company from declaring
an equivalent amount from unappropriated retained earnings as dividends.

With the limited data of capital shares given in the financial report of URC, it is still
noteworthy that the business manages its capital structure and makes adjustments to the
financial ratios in accordance with any changes in economic conditions and the risk factors
of its business activities. To be able to adjust capital structure, the business may adjust the
amount of dividend payment to shareholders, return capital structure, or issue capital
securities. It was also made clear that the Group monitors its use of capital structure using a
debt-to-capital ratio which is gross debt divided by total capital. The Group includes within
gross debt all interest-bearing loans and borrowings, while capital represents total equity.

Reference: URC ANNUAL FINANCIAL REPORT VERSION 2

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