ACCCOB2 PORTFOLIO

Reflection Paper #2
presented to the Accountancy
Department

In partial fulfillment
of the course requirement
in ACCCOB2

BERNAL, Mike Joshua S.

Before we start analyzing Jollibee Food Corporations’ financial assets for the year of
2022, let us define investment in equity or debt securities. According to Ben Luthi (2022), debt
security is an “investment asset that involves a debt rather than ownership in a company.” An
example of this would be when a major corporation or a government agency creates or releases
a bond and sells it to investors. Bonds are issued by corporations/government agencies to raise
money for projects or general needs (Luthi, 2022). This bond that was bought can be held on to
as it matures and grows, or the investor can choose to sell it to someone else.

(Page 438 of Jollibee Food Corporations’ Annual Report)

As seen in the image above, it presents the names of the issuing entities and the
association of each use. JP Morgan Chase Bank and Citibank had an accumulative investment in
bond funds of 8,250,991 pesos. While the other issuing entities, such as Tagaytay Highlands,
Midlands, Palms Country Club, and more, made equity investments which is money invested in a
company by purchasing shares of that specific company in the stock market. “The main benefit
from an equity investment is the possibility to increase the value of the principal amount
invested. This comes in the form of capital gains and dividends.” (Black Rock). The total of
Financial Assets, based on the image above, is 50,047,443 million pesos which JFC will use to
continue and further strengthen its operation.

These investments in equity securities consist of investments in listed equity securities,

Inventories

Inventory is what deals with valuing and accounting for changes in inventory assets.
Typically these inventories involve goods in three stages of production: raw goods, in-progress
goods, and finished goods that are ready for sale (Kenton, 2021).

(Note 7, page 497 of Jollibee Food Corporations’ Annual Report)

According to the image above, the food supplied and processed inventories spendings
were 127,151,644 pesos in 2021 and had a major 72.4% increase as seen in the year 2022. On
the other hand, the packaging, store, and other supplies had an increase of 3.7%, starting with
153,456,902 pesos to 159,277,080 pesos in the year 2022. The art net realizing the value of
novelty items decreased as it started with 51,577,513 pesos to 16,042,633 pesos, a 68.8%
decrease. Moreover, the total inventories at lower cost and net: realizing value started at
332,186,059 in 2022 and ended at 394,577,564 pesos in the year 2022, an 18.7% increase.

On page 335 of the annual report, it states that inventories are valued at the lower of
cost and net realizable value. Costs are accounted for as follows. For processed inventories, it
consists of: “standard costing, which is reviewed on a quarterly basis and revised as necessary
to approximate current costs determined using first in, first out (FIFO). Cost includes direct
materials, labor, and a proportion of manufacturing overhead costs based on normal operating
capacity.” While food supplies, packaging, store, and other supplied and novelty items also have
standard costing, which is reviewed on a quarterly basis and revised as necessary to
approximate current costs determined using FIFO.

Plant, property, equipment

PPE or plant, property, and equipment are simply long-term (more than one year)
tangible assets that a company owns. These can include trucks, machinery, factories, and land,
which all allow the corporation to continue operations. However, PPE can actually depreciate
over time which then can be sold for its salvage value (Lee, 2021).
 (Note 11, Pages 504 and 505 of Jollibee Food Corporations’ Annual Report)

As seen in the note above, JFC’s PPE consists of land, buildings, commercial
condominium units & improvements, leasehold improvements, furniture and fixtures,
transportation equipment, and construction in progress. In the year 2021, the balance at the
beginning of the year was 12,836,336,439 pesos, and the balance at the end of the year was
11,922,999,406 pesos, while the balance at the beginning year of 2022 was 11,922,999,406 to
the balance at the end of the year was 15,020,363,887. It can be seen that cost, accumulated
depreciation and amortization, and accumulated impairment losses have increased by a few
million however, the net book value of the year 2021, 3,637,706,250 pesos, increased by 75%,
which led the year 2022 with 6,367,537,903 pesos.

Natural resources (wasting assets)

To begin with, natural resources are the resources from the earth. A few examples are
water, oil, gas, and many more. These resources are frequently referred to as "wasting
resources." This is due to the fact that once they are physically consumed or removed from the
ground, they cannot be replaced. Jollibee Foods Corporation, one of the largest fast-food chains
in the Philippines, is mainly powered by natural resources. In the fast food business, one of the
most important things to have as a natural resource is water because it can be used in multiple
ways, like cleaning, cooking, and many other things. Although water is not a resource that
wastes away, the corporation should still save and make the most out of it. For its food
preparation offerings, Jollibee relies on packaging materials. The company uses cardboard and
paper, and Jollibee is staying away from plastic because it is terrible for the environment. While
many efforts have been made to encourage environmentally friendly packaging, if production
and disposal are not adequately controlled, they could have an adverse effect on natural
resources. The supply chain's vehicles as well as the restaurants' equipment for food
preparation and serving, must be powered by electricity and gasoline. Like every other fast food
restaurant here in the Philippines, Jollibee Foods Corporation needs to make sure that all natural
resources that the company uses is for good use. This involves getting components from
sustainable sources, making optimal use of water and energy, and implementing eco-friendly
procedures to reduce waste production and encourage conservation.

Intangible Assets

The company's Enterprise Resource Planning (ERP) technology, which Jollibee began
utilizing on August 1, 2014, is the main component of intangible assets. The computer software
has a ten (10) year functional life. The Company recorded P5.3 million in 2022 and P18.9 million
in 2021 in losses on the retirement of computer software. The trademarks and inventions that
are part of Jollibee's intangible assets are also depreciated over a five-year lifespan. The net
book value of patents and trademarks as of December 31, 2022, is P7.4 million, down from P9.7
million as of that date. These numbers reflect the respective assets' carrying amounts as shown
in the financial statements of Jollibee Foods Corporation. The value of an asset as shown in the
company's accounting records after taking into account any accrued depreciation, amortization,
impairment, or other adjustments, is referred to as the carrying amount. It is significant to note
that the presented information does not include specifics regarding the assets, any impairment
determinations, or adjustments to carrying values. When impairment indicators are evident,
such as store closures and early lease termination owing to the Covid-19 epidemic, the
corporation undertakes annual impairment studies. In these evaluations, the fair value of the
assets is evaluated, and it is decided whether or not any impairment losses must be recorded.
Making estimates and assumptions that could have a big impact on a company's financial
statements is necessary for determining fair value. Future occurrences could result in more
impairments, which could materially harm the company's financial position and performance.
References

Black Rock. (n.d.). “What are equity investments?”.

Lee, M. (2021, April 30). “What Is the Meaning of Property, Plant, and Equipment (PP&E)?”.
https://www.investopedia.com/ask/answers/06/propertyplantequipment.asp.

Luthi, B. (2022, February 23). “What Are Debt Securities and Are They Good Investments?”.
https://www.experian.com/blogs/ask-experian/what-is-debt-security.

Kenton, W. (202, September 8). “Inventory Accounting: Definition, How It Works, Advantages”.
https://www.investopedia.com/terms/i/inventoryaccounting.asp.

Jollibee Food Corporations Annual Report. (2020).