4/15/24, 3:01 PM Gmail - SEC eFast Initial Acceptance

Corporate Secretary <[email protected]>

SEC eFast Initial Acceptance

[email protected] <[email protected]> Mon, Apr 15, 2024 at 1:34 PM

Greetings!

SEC Registration No: A199813754

Company Name: PUREGOLD PRICE CLUB, INC.
Document Code: AFS

This serves as temporary receipt of your submission.

Subject to verification of form and quality of files of the submitted report.
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Submission Date/Time: Apr 15, 2024 12:24 PM
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1 of 1 4/15/2024 2:59 PM
 C O V E R S H E E T
for
AUDITED FINANCIAL STATEMENTS
SEC Registration Number

A 1 9 9 8 1 3 7 5 4

COMPANY NAME

P U R E G O L D P R I C E C L U B , I N C .

PRINCIPAL OFFICE (No. / Street / Barangay / City / Town / Province)

N o . 9 0 0 R o m u a l d e z S t r e e t

P a c o , M a n i l a

Form Type Department requiring the report Secondary License Type, If Applicable

A A F S

COMPANY INFORMATION
Company's email Address Company's Telephone Number/s Mobile Number

www.puregold.com.ph (02) 548-7110

No. of Stockholders Annual Meeting (Month / Day) Fiscal Year (Month / Day)

2nd Tuesday of May December 31

CONTACT PERSON INFORMATION

The designated contact person MUST be an Officer of the Corporation

Name of Contact Person Email Address Telephone Number/s Mobile Number

Maricel R. Cambe [email protected] (02) 548-7110

CONTACT PERSON's ADDRESS

No. 900 Romualdez, Street, Paco, Manila

Note 1: In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to the
Commission within thirty (30) calendar days from the occurrence thereof with information and complete contact details of the new contact person
designated.
2: All Boxes must be properly and completely filled-up. Failure to do so shall cause the delay in updating the corporation's records with
the Commission and/or non-receipt of Notice of Deficiencies. Further, non-receipt of Notice of Deficiencies shall not excuse the corporation from
liability for its deficiencies.
PUREGOLD PRICE CLUB, INC.
SEPARATE FINANCIAL STATEMENTS
December 31, 2023 and 2022

With Independent Auditors’ Report

 R.G. Manabat & Co.
The KPMG Center, 6/F
6787 Ayala Avenue, Makati City
Philippines 1209
Telephone +63 (2) 8885 7000
Fax +63 (2) 8894 1985
Internet www.home.kpmg/ph
Email [email protected]

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders

Puregold Price Club, Inc.
No. 900 Romualdez Street
Paco, Manila

Report on the Audit of the Separate Financial Statements

Opinion

We have audited the separate financial statements of Puregold Price Club, Inc.
(the “Company”), which comprise the separate statements of financial position as at
December 31, 2023 and 2022, and the separate statements of comprehensive income,
separate statements of changes in equity and separate statements of cash flows for the
years then ended, and notes, comprising a summary of material accounting policies and
other explanatory information.

In our opinion, the accompanying separate financial statements present fairly, in all
material respects, the unconsolidated financial position of the Company as at
December 31, 2023 and 2022, and its unconsolidated financial performance and its
unconsolidated cash flows for the years then ended in accordance with Philippine
Financial Reporting Standards (PFRSs).

Basis for Opinion

We conducted our audits in accordance with Philippine Standards on Auditing (PSAs).

Our responsibilities under those standards are further described in the Auditors’
Responsibilities for the Audit of the Separate Financial Statements section of our report.
We are independent of the Company in accordance with the Code of Ethics for
Professional Accountants in the Philippines (Code of Ethics) together with the ethical
requirements that are relevant to our audits of the separate financial statements in the
Philippines, and we have fulfilled our other ethical responsibilities in accordance with
these requirements and the Code of Ethics. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.

Firm Regulatory Registration & Accreditation:

PRC-BOA Registration No. 0003, valid until September 20, 2026
IC Accreditation No. 0003-IC, Group A, valid for five (5) years covering the audit of 2020 to 2024
financial statements (2019 financial statements are covered by IC Circular Letter (CL) No. 2019-39, Transition clause)
BSP Accreditation No. 0003-BSP, Group A, valid for five (5) years covering the audit of 2020 to 2024
financial statements (2019 financial statements are covered by BSP Monetary Board Resolution No. 2161, Transition clause)

R.G. Manabat & Co., a Philippine partnership and a member firm of the KPMG global organization of independent member firms
affiliated with KPMG International Limited, a private English company limited by guarantee.
Responsibilities of Management and Those Charged with Governance for the Separate
Financial Statements

Management is responsible for the preparation and fair presentation of the separate
financial statements in accordance with PFRSs, and for such internal control as
management determines is necessary to enable the preparation of separate financial
statements that are free from material misstatement, whether due to fraud or error.

In preparing the separate financial statements, management is responsible for

assessing the Company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of
accounting unless management either intends to liquidate the Company or to cease
operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial
reporting process.

Auditors’ Responsibilities for the Audit of the Separate Financial Statements

Our objectives are to obtain reasonable assurance about whether the separate financial
statements as a whole are free from material misstatement, whether due to fraud or
error, and to issue an auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with PSAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these separate financial statements.

As part of an audit in accordance with PSAs, we exercise professional judgment and

maintain professional skepticism throughout the audit. We also:

 Identify and assess the risks of material misstatement of the separate financial
statements, whether due to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.

 Obtain an understanding of internal control relevant to the audit in order to design

audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company’s internal control.

 Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by management.

 Conclude on the appropriateness of management’s use of the going concern basis

of accounting and, based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant doubt on
the Company’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditors’ report to the
related disclosures in the separate financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditors’ report. However, future events or conditions
may cause the Company to cease to continue as a going concern.
 Evaluate the overall presentation, structure and content of the separate financial
statements, including the disclosures, and whether the separate financial statements
represent the underlying transactions and events in a manner that achieves fair
presentation.

We communicate with those charged with governance regarding, among other matters,
the planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied
with relevant ethical requirements regarding independence, and communicate with them
all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.

Report on the Supplementary Information Required Under Revenue Regulations

No. 15-2010 of the Bureau of Internal Revenue

Our audit was conducted for the purpose of forming an opinion on the basic separate
financial statements taken as a whole. The supplementary information in Note 30 to the
separate financial statements is presented for purposes of filing with the Bureau of
Internal Revenue and is not a required part of the basic separate financial statements.
Such information is the responsibility of management. The information has been
subjected to the auditing procedures applied in our audit of the basic separate financial
statements. In our opinion, the information is fairly stated in all material respects in
relation to the basic separate financial statements taken as a whole.

The engagement partner on the audit resulting in this independent auditors’ report is
Dindo Marco M. Dioso.

R.G. MANABAT & CO.

DINDO MARCO M. DIOSO

Partner
CPA License No. 0095177
Tax Identification No. 912-365-765
BIR Accreditation No. 08-001987-030-2022
Issued June 27, 2022; valid until June 27, 2025
PTR No. MKT 10075179
Issued January 2, 2024 at Makati City

April 15, 2024

Makati City, Metro Manila
 R.G. Manabat & Co.
The KPMG Center, 6/F
6787 Ayala Avenue, Makati City
Philippines 1209
Telephone +63 (2) 8885 7000
Fax +63 (2) 8894 1985
Internet www.home.kpmg/ph
Email [email protected]

SUPPLEMENTAL WRITTEN STATEMENT OF AUDITOR

The Board of Directors and Stockholders

Puregold Price Club, Inc.
No. 900 Romualdez Street
Paco, Manila

We have audited the accompanying separate financial statements of Puregold Price

Club, Inc. as at and for the year ended December 31, 2023, on which we have rendered
our report dated April 15, 2024.

In compliance with Revised Securities Regulation Code Rule 68, we are stating that the
Company has thirty-one (31) stockholders owning one hundred (100) or more shares
each.

R.G. MANABAT & CO.

DINDO MARCO M. DIOSO

Partner
CPA License No. 0095177
Tax Identification No. 912-365-765
BIR Accreditation No. 08-001987-030-2022
Issued June 27, 2022; valid until June 27, 2025
PTR No. MKT 10075179
Issued January 2, 2024 at Makati City

April 15, 2024

Makati City, Metro Manila

Firm Regulatory Registration & Accreditation:

PRC-BOA Registration No. 0003, valid until September 20, 2026
IC Accreditation No. 0003-IC, Group A, valid for five (5) years covering the audit of 2020 to 2024
financial statements (2019 financial statements are covered by IC Circular Letter (CL) No. 2019-39, Transition clause)
BSP Accreditation No. 0003-BSP, Group A, valid for five (5) years covering the audit of 2020 to 2024
financial statements (2019 financial statements are covered by BSP Monetary Board Resolution No. 2161, Transition clause)

R.G. Manabat & Co., a Philippine partnership and a member firm of the KPMG global organization of independent member firms
affiliated with KPMG International Limited, a private English company limited by guarantee.
 PUREGOLD PRICE CLUB, INC.
SEPARATE STATEMENTS OF FINANCIAL POSITION

December 31
Note 2023 2022
ASSETS
Current Assets
Cash and cash equivalents 4 P33,922,153,442 P29,547,016,632
Receivables - net 5 4,944,406,006 3,754,774,348
Merchandise inventories 6 17,542,849,819 17,844,674,193
Financial assets at fair value through
profit or loss 7 4,626,139,942 4,299,380,312
Prepaid expenses and other current assets 8 444,446,537 573,029,524
Total Current Assets 61,479,995,746 56,018,875,009
Noncurrent Assets
Property and equipment - net 9 13,731,614,223 12,837,197,722
Right-of-use assets - net 10 20,154,398,848 18,169,309,475
Investment property 11 2,262,840,901 2,262,840,901
Goodwill and other intangibles - net 12 2,938,404,483 2,935,439,269
Investment in subsidiaries 14 17,729,589,720 17,782,952,159
Deferred tax assets - net 26 2,466,466,509 2,105,751,261
Other noncurrent assets 13 2,289,205,843 2,027,081,785
Total Noncurrent Assets 61,572,520,527 58,120,572,572
P123,052,516,273 P114,139,447,581

LIABILITIES AND EQUITY

Current Liabilities
Trade and other payables 15 P17,771,819,732 P14,743,016,438
Income tax payable 273,111,174 322,694,349
Lease liabilities due within one year 20 1,071,128,841 905,910,589
Current portion of long-term loans 17 120,000,000 120,000,000
Due to related parties 24 53,269,546 49,497,532
Other current liabilities 16 626,179,900 594,118,425
Total Current Liabilities 19,915,509,193 16,735,237,333
Noncurrent Liabilities
Noncurrent portion of long-term loans 17 11,441,128,640 11,545,793,200
Lease liabilities due beyond one year 20 26,837,761,346 24,673,689,642
Other noncurrent liabilities 25 2,097,052,979 1,462,071,565
Total Noncurrent Liabilities 40,375,942,965 37,681,554,407
Total Liabilities 60,291,452,158 54,416,791,740
Equity
Capital stock 27 2,904,214,086 2,904,214,086
Additional paid-in capital 27 25,914,616,522 25,914,616,522
Retirement benefits reserve 25 360,022,020 435,301,494
Treasury stock 27 (195,045,992) (195,045,992)
Retained earnings 27 33,777,257,479 30,663,569,731
Total Equity 62,761,064,115 59,722,655,841
P123,052,516,273 P114,139,447,581

See Notes to the Separate Financial Statements.

 PUREGOLD PRICE CLUB, INC.
SEPARATE STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31

Note 2023 2022
NET SALES 18 P133,173,865,815 P123,743,829,686
COST OF SALES 19 112,030,151,147 103,690,482,475
GROSS INCOME 21,143,714,668 20,053,347,211
OTHER REVENUE 18, 21 1,885,956,804 1,750,178,250
TOTAL GROSS INCOME AND OTHER
REVENUE 23,029,671,472 21,803,525,461
OPERATING EXPENSES 22 16,267,467,848 14,482,382,029
INCOME FROM OPERATIONS 6,762,203,624 7,321,143,432
OTHER CHARGES (INCOME) - Net
Interest expense 17, 20 2,470,751,176 2,273,657,611
Interest income 4, 7 (1,233,184,391) (569,452,719)
Others - net 23 (1,552,898,810) (1,250,052,715)
(315,332,025) 454,152,177
INCOME BEFORE INCOME TAX 7,077,535,649 6,866,991,255
PROVISION FOR INCOME TAXES 26
Current 1,505,736,503 1,515,030,814
Deferred (335,622,089) (214,021,670)
1,170,114,414 1,301,009,144
NET INCOME 5,907,421,235 5,565,982,111
OTHER COMPREHENSIVE INCOME
(LOSS)
Item that will not be reclassified
subsequently to profit or loss
Remeasurements of retirement benefits 25 (100,372,632) 397,784,072
Income tax effect 25,093,158 (99,446,018)
(75,279,474) 298,338,054
TOTAL COMPREHENSIVE INCOME P5,832,141,761 P5,864,320,165
Basic and diluted earnings per share 28 P2.05 P1.93

See Notes to the Separate Financial Statements.

 PUREGOLD PRICE CLUB, INC.
SEPARATE STATEMENTS OF CHANGES IN EQUITY

Years Ended December 31

Retirement
Additional Benefits Treasury Retained
Note Capital Stock Paid-in Capital Reserve Stock Earnings Total Equity
Balance at December 31, 2021 P2,904,214,086 P25,914,616,522 P136,963,440 (P98,042,009) P27,574,505,976 P56,432,258,015
Total Comprehensive Income for the Year
Net income for the year - - - - 5,565,982,111 5,565,982,111
Other comprehensive income for the year 25 - - 298,338,054 - - 298,338,054
- - 298,338,054 - 5,565,982,111 5,864,320,165

Transaction with Owners of the Company

Treasury shares - at cost 27 - - - (97,003,983) - (97,003,983)
Cash dividends 27 - - - - (2,476,918,356) (2,476,918,356)
- - - (97,003,983) (2,476,918,356) (2,573,922,339)
Balance at December 31, 2022 P2,904,214,086 P25,914,616,522 P435,301,494 (P195,045,992) P30,663,569,731 P59,722,655,841

Total Comprehensive Income for the Year

Net income for the year P - P - P - P - P5,907,421,235 P5,907,421,235
Other comprehensive loss for the year 25 - - (75,279,474) - - (75,279,474)
- - (75,279,474) - 5,907,421,235 5,832,141,761

Transactions with Owners of the Company

Treasury shares - at cost 27 - - - - - -
Cash dividends 27 - - - - (2,793,733,487) (2,793,733,487)
- - - - (2,793,733,487) (2,793,733,487)
Balance at December 31, 2023 P2,904,214,086 P25,914,616,522 P360,022,020 (P195,045,992) P33,777,257,479 P62,761,064,115

See Notes to the Separate Financial Statements.

 PUREGOLD PRICE CLUB, INC.
SEPARATE STATEMENTS OF CASH FLOWS

Years Ended December 31

Note 2023 2022
CASH FLOWS FROM OPERATING
ACTIVITIES
Income before income tax P7,077,535,649 P6,866,991,255
Adjustments for:
Depreciation and amortization 9, 10, 12 2,947,985,045 2,765,761,913
Interest expense 17, 20 2,470,751,176 2,273,657,611
Dividend income 23 (1,493,055,133) (1,239,578,797)
Interest income 4, 7 (1,233,184,391) (569,452,719)
Retirement benefits cost 25 804,986,597 181,500,049
Gain from lease terminations 20 (46,836,234) (4,593,117)
Gain on sale of financial assets 7, 23 (6,524,397) -
Unrealized loss (gain) on financial assets
at fair value through profit or loss 23 (6,405,009) 323,662
Loss from insurance claims 23 - 1,587,440
Operating income before changes in
working capital 10,515,253,303 10,276,197,297
Decrease (increase) in:
Receivables (936,435,709) (710,210,325)
Merchandise inventories 1 369,540,066 (2,488,747,012)
Prepaid expenses and other current
assets (343,239,263) (110,606,618)
Increase in:
Trade and other payables 1,590,661,175 4,853,676,172
Due to related parties 3,772,014 3,629,099
Other current liabilities 32,061,475 275,025,755
Cash generated from operations 11,231,613,061 12,098,964,368
Income taxes paid (1,282,707,213) (1,209,951,615)
Interest received 1,233,184,391 569,452,719
Retirement benefits paid 25 (4,707,909) (3,158,597)
Net cash provided by operating activities 11,177,382,330 11,455,306,875
CASH FLOWS FROM INVESTING
ACTIVITIES
Additions to:
Financial assets at fair value through
profit or loss 7 (313,830,224) (4,268,978,190)
Property and equipment 1,9 (707,185,306) (1,802,776,515)
Investment in subsidiaries 14 53,362,439 (96,972,908)
Intangible assets 12 (28,057,256) (4,235,402)
Other noncurrent assets (262,124,058) (19,388,280)
Dividends received 23 1,239,859,184 672,957,623
Payment of direct costs on leases 10 - (400,000,000)
Cash paid on various assets 1 (613,740,541) -
Proceeds from disposal of:
Property and equipment 9 4,771,768 2,707,372
Financial assets at fair value through
profit or loss - -
Insurance claims 23 - (1,587,440)
Net cash used in investing activities (626,943,994) (5,918,273,740)
Forward
 Years Ended December 31
Note 2023 2022
CASH FLOWS FROM FINANCING
ACTIVITIES
Repayments of lease: 20
Interest expense (P1,905,805,703) (P1,754,973,060)
Principal amount (857,297,535) (807,520,326)
Payments of:
Cash dividends 27 (2,476,918,349) (1,441,543,808)
Interest expense (549,610,033) (503,349,112)
Liability on land purchase (265,669,906) -
Repayments of long-term loans (120,000,000) (120,000,000)
Acquisition of treasury shares 27 - (97,003,983)
Net cash used in financing activities (6,175,301,526) (4,724,390,289)
NET INCREASE IN CASH AND CASH
EQUIVALENTS 4,375,136,810 812,642,846
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 29,547,016,632 28,734,373,786
CASH AND CASH EQUIVALENTS
AT END OF YEAR 4 P33,922,153,442 P29,547,016,632

See Notes to the Separate Financial Statements.

 PUREGOLD PRICE CLUB, INC.
NOTES TO THE SEPARATE FINANCIAL STATEMENTS

1. Reporting Entity

Puregold Price Club, Inc. (the “Company”) was incorporated and registered with the
Philippine Securities and Exchange Commission (“SEC”) on September 8, 1998. Its
shares are listed in the Philippine Stock Exchange (“PSE”) since October 5, 2011.
The Company’s stock symbol is PGOLD. Its immediate and ultimate parent company
is Cosco Capital, Inc. (“Cosco”) which is incorporated in the Philippines. Cosco is
formerly named Alcorn Gold Resources Corporation and is also listed with the PSE
since September 26, 1998.

The Company is principally involved in the business of trading goods such as

consumer products (canned goods, housewares, toiletries, dry goods, food products,
etc.) on a wholesale and retail basis. Its registered office is located at No. 900
Romualdez Street, Paco, Manila.

The Company embarked on an aggressive multi-year push to further expand its

market reach. On June 20, 2023, the Board approved the acquisition of twenty-five
(25) DiviMart supermarkets including its leasehold improvements, furniture, fixtures,
equipment and merchandise inventory and executed an agreement to convert them
into Puregold stores.

As at December 31, 2023, the consideration paid for 25 stores acquired amounted to
P613.7 million was provisionally allocated to the following identifiable assets and
liabilities:

Merchandise Inventory P67,715,692

Property, plant and equipment 326,900,343
Right-of-use assets 1,771,022,290
Lease liabilities (1,551,897,785)
Purchase price P613,740,541

2. Basis of Preparation

The separate financial statements have been prepared in compliance with Philippine
Financial Reporting Standards (PFRSs). PFRSs are based on International Financial
Reporting Standards (IFRSs) issued by the International Accounting Standards
Board (IASB). PFRSs which are issued by the Philippine Financial and Sustainability
Reporting Standards Council (FSRSC), consist of PFRSs, Philippine Accounting
Standards (PAS), and Philippine Interpretations.

The Company also prepares and issues separate financial statements for the same
period as the separate financial statements presented in accordance with PFRSs.
The separate financial statements can be obtained from the Company’s business
address.

The accompanying separate financial statements were authorized for issue by the
Board of Directors on April 4, 2024.
Historical cost is used as the measurement basis unless except for.

Items Measurement Bases

Financial assets at fair value Fair value
through profit or loss
Retirement benefits liability Present value of defined benefit obligation
less fair value of the plan asset

These separate financial statements are presented in Philippine peso (P), unless
otherwise stated.

Functional and Presentation Currency

The separate financial statements are presented in Philippine peso, which is the
Company’s functional currency. All financial information expressed in Philippine peso
has been rounded off to the nearest peso, unless otherwise stated.

Significant Judgments, Estimates and Assumptions

The preparation of separate financial statements requires management to make a
number of estimates and assumptions that affect the reported amounts of assets and
liabilities, revenues and expenses, and the disclosure of contingent assets and
liabilities which, by definition, will seldom equal the actual results. All assumptions,
expectations and forecasts used as a basis for certain estimates within these
financial statements represent good faith assessments of the Company’s current and
future performance for which management believes there is a reasonable basis.
They involve risks, uncertainties and other factors that could cause the Company’s
actual future results, performance and achievements to differ materially from those
forecasted.

Judgments
In the process of applying the Company’s accounting policies, management has
made the following judgments, apart from those involving estimations, which have
the most significant effect on the amounts recognized in the separate financial
statements:

Determining the Term and Discount Rate of Lease Arrangements (Note 20)
Where the Company is the lessee, management is required to make judgments
about whether an arrangement contains a lease, the lease term and the appropriate
discount rate to calculate the present value of the lease payments.

The lease payments are discounted using the interest rate implicit in the lease. If that
rate cannot be readily determined, which is generally the case for leases entered into
by the Company as lessee, management uses the incremental borrowing rate, being
the rate that the Company would have to pay to borrow the funds necessary to
obtain an asset of similar value to the right-of-use asset in a similar economic
environment with similar terms, security and conditions.

To determine the incremental borrowing rate, the Company uses an approach that
starts with a risk-free interest rate adjusted for credit risk for leases held by the
Company and makes adjustments specific to the lease.

In determining the lease term, management considers all facts and circumstances
that create an economic incentive to exercise an extension option, or not exercise a
termination option. Extension options (or periods after termination options) are only
included in the lease term if it is reasonably certain that the lease will be extended
(or not terminated) and, as such, included within lease liabilities.

-2-
For leases of parcel of land, stores, warehouses, and parking spaces, the following
factors are usually the most relevant:

 If any leasehold improvements are expected to have a significant remaining

value, the Company is typically reasonably certain to extend (or not terminate).

 If there are significant penalties to terminate (or not extend), the Company is
typically reasonably certain to extend (or not terminate).

 Otherwise, the Company considers other factors, including historical lease

durations, the costs and business disruption required to replace the leased asset,
enforceability of the option, and business and other developments.

The lease term is reassessed if an option is actually exercised (or not exercised) or
the Company becomes obliged to exercise (or not exercise) it. The assessment of
reasonable certainty is only revised if a significant event or a significant change in
circumstances occurs, which affects this assessment, and is within the lessee’s
control, for example, when significant investment in the store is made which has a
useful life beyond the current lease term.

Leases - Company as a Lessor (Notes 20 and 21)

The Company has entered into various lease agreements as a lessor to sublease
portion of its stores to various lessees. The Company has determined that the lessor
retains all significant risks and rewards of ownership of these properties which are
leased out under operating lease arrangements.

Rent income recognized in profit or loss amounted to P492.2 million in 2023 and
P443.1 million in 2022.

Estimates and Assumptions

The key estimates and assumptions used in the separate financial statements are
based on management’s evaluation of relevant facts and circumstances as at the
reporting date. Actual results could differ from such estimates.

Estimating Allowance for Impairment Losses on Receivables (Note 5)

The Company maintains an allowance for impairment losses on receivables at a
level considered adequate to provide for uncollectible receivables. The level of this
allowance is evaluated by the Company on the basis of factors that affect the
collectability of the accounts. These factors include, but are not limited to, the length
of the Company’s relationship with debtors and, their payment behavior and known
market factors. The Company reviews the age and status of the receivable, and
identifies accounts that are to be provided with allowance on a regular basis. The
amount and timing of recorded expenses for any period would differ if the Company
made different judgment or utilized different estimates. An increase in the Company’s
allowance for impairment losses on receivables would increase the Company’s
recorded operating expenses and decrease current assets.

The carrying amount of receivables amounted to P4.9 billion and P3.8 billion as at
December 31, 2023 and 2022, respectively.

Estimating Net Realizable Value (NRV) of Merchandise Inventories (Note 6)

The Company carries merchandise inventory at NRV whenever the selling price less
costs to sell becomes lower than cost due to damage, physical deterioration,
obsolescence, changes in price levels or other causes. The estimate of the NRV is
reviewed regularly.

-3-
Estimates of NRV are based on the most reliable evidence available at the time the
estimates are made on the amount the inventories are expected to be realized.
These estimates take into consideration fluctuations of prices or costs directly
relating to events occurring after reporting date to the extent that such events confirm
conditions existing at reporting date. The NRV is reviewed periodically to reflect the
accurate valuation in the financial records.

The carrying amount of merchandise inventories as at December 31, 2023 and 2022
amounted to P17.5 billion and P17.8 billion, respectively.

Impairment of Goodwill (Note 12)

The Company determines whether goodwill is impaired at least annually.
This requires the estimation of the recoverable amounts of the goodwill. Estimating
recoverable amounts requires management to make an estimate of the expected
future cash flows from the cash-generating unit to which the goodwill relates and to
choose a suitable discount rate to calculate the present value of those cash flows.

The carrying amount of goodwill totaled P2.8 billion as at December 31, 2023 and
2022.

Impairment of Non-financial Assets other than Goodwill

The Company assesses impairment on non-financial assets, other than inventories
and deferred tax assets, when events or changes in circumstances indicate that the
carrying amount may not be recoverable.

The factors that the Company considers important which could trigger an impairment
review include the following:

 significant underperformance relative to the expected historical or projected

future operating results;

 significant changes in the manner of use of the acquired assets or the strategy
for overall business; and

 significant negative industry or economic trends.

Determining the net recoverable amount of assets requires the estimation of cash
flows expected to be generated from the continued use and ultimate disposition of
such assets. While it is believed that the assumptions used in the estimation of fair
values reflected in the separate financial statements are appropriate and reasonable,
significant changes in these assumptions may materially affect the assessment of
recoverable amount and any resulting impairment loss could have a material adverse
impact on the results of operations.

There are no impairment indicators affecting the Company’s non-financial assets as

at December 31, 2023 and 2022.

As at December 31, 2023 and 2022, the following are the carrying amounts of
nonfinancial assets:

Note 2023 2022

Property and equipment - net 9 P13,731,614,223 P12,837,197,722
Right-of-use assets - net 10 20,154,398,848 18,169,309,475
Investment property 11 2,262,840,901 2,262,840,901
Investment in subsidiaries 14 17,729,589,720 17,782,952,159
Computer software and licenses, and
leasehold rights - net 12 115,454,997 112,489,783

-4-
 Estimating Realizability of Deferred Tax Assets (Note 26)
The Company reviews the carrying amount of deferred tax assets at each reporting
date and reduces deferred tax assets to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the deferred tax assets
to be utilized. The Company also reviews the expected timing and tax rates upon
reversal of the temporary differences and adjusts the impact of deferred tax
accordingly. The Company’s assessment on the recognition of deferred tax assets is
based on the forecasted taxable income of the subsequent reporting periods. This
forecast is based on the Company’s past results and future expectations on
revenues and expenses.

As at December 31, 2023 and 2022, the Company recognized deferred tax assets
amounting to P2.5 billion and P2.1 billion, respectively.

Estimating Retirement Benefits Liability and Cost (Note 25)

The present value of the retirement benefits liability depends on a number of
assumptions that are determined on an actuarial basis. The assumptions used in
determining the net cost (income) for retirement benefits include the discount rate
that should be used to determine the present value of estimated future cash outflows
expected to be required to settle the retirement benefits liability. Other key
assumptions include future salary, mortality and attrition. Additional information is
disclosed in Note 25.

Retirement benefits liability amounted to P1.5 billion and P629.1 million as at

December 31, 2023 and 2022, respectively.

3. Summary of Material Accounting Policies

The Company has consistently applied the accounting policies to all years presented
in these separate financial statements, except for the changes below.

Adoption of Amendments to Standards, and Frameworks

The Company has adopted the following new standards, amendments to standards
and interpretations starting January 1, 2023 and accordingly, changed its accounting
policies. Except as otherwise indicated, the adoption did not have any significant
impact on the Company’s separate financial statements.

 Definition of Accounting Estimates (Amendments to PAS 8 Accounting Policies,

Changes in Accounting Estimates and Errors). To clarify the distinction between
changes in accounting policies and changes in accounting estimates, the
amendments introduce a new definition for accounting estimates, clarifying that
they are monetary amounts in the financial statements that are subject to
measurement uncertainty. The amendments also clarify the relationship between
accounting policies and accounting estimates by specifying that an accounting
estimate is developed to achieve the objective set out by an accounting policy.
Developing an accounting estimate includes both selecting a measurement
technique and choosing the inputs to be used when applying the chosen
measurement technique. The effects of changes in such inputs or measurement
techniques are changes in accounting estimates. The definition of accounting
policies remain unchanged. The amendments also provide examples on the
application of the new definition.

The amendments will apply prospectively to changes in accounting estimates

and changes in accounting policies occurring on or after the beginning of the first
annual reporting period in which the amendments are applied.

-5-
 Disclosure of Accounting Policies (Amendments to PAS 1 Presentation of
Financial Statements and PFRS Practice Statement 2 Making Materiality
Judgements). The amendments are intended to help companies provide useful
accounting policy disclosures. The key amendments to PAS 1 include:

• requiring companies to disclose their material accounting policies rather than

their significant accounting policies;
• clarifying that accounting policies related to immaterial transactions, other
events or conditions are themselves immaterial and as such need not be
disclosed; and
• clarifying that not all accounting policies that relate to material transactions,
other events or conditions are themselves material to a company’s financial
statements.

The amendments to PFRS Practice Statement 2 includes guidance and

additional examples on the application of materiality to accounting policy
disclosures, assisting companies to provide useful, entity-specific accounting
policy information that users need to understand other information in the financial
statements.

The Company reviewed the accounting policies and although the amendments
did not result in any changes to the accounting policies themselves, updates
were made to the accounting policy information disclosed in Note 3 Material
Accounting Policies in certain instances in line with the amendments.

 Deferred Tax related to Assets and Liabilities arising from a Single Transaction
(Amendments to PAS 12 Income Taxes). The amendments clarify that that the
initial recognition exemption does not apply to transactions that give rise to equal
taxable and deductible temporary differences such as leases and
decommissioning obligations.

For leases and decommissioning liabilities, the associated deferred tax assets
and liabilities will be recognized from the beginning of the earliest comparative
period presented, with any cumulative effect recognized as an adjustment to
retained earnings or other appropriate component of equity at that date. For all
other transactions, the amendments apply to transactions that occur after the
beginning of the earliest period presented.

 International Tax Reform - Pillar Two Model Rules (Amendments to IAS 12

Income Taxes). The amendments provide a temporary mandatory exception
from accounting for deferred tax that arises from legislation implementing the
Pillar Two model rules published by the Organisation for Economic Co-operation
and Development, including tax law that implements qualified domestic minimum
top-up taxes described in those rules. Under the relief, a company:

• discloses that it has applied the exception to recognizing and disclosing

information about deferred tax assets and liabilities related to Pillar Two
income taxes;
• discloses separately its current tax expense (income) related to Pillar Two
income taxes; and
• in periods in which Pillar Two legislation is enacted or substantively enacted
but not yet in effect, discloses known or reasonably estimable information
that helps users of financial statements understand the entity's exposure to
Pillar Two income taxes arising from that legislation.

-6-
Standards Issued but Not Yet Adopted
A number of new standards and amendments to standards are effective for annual
periods beginning after January 1, 2023. However, the Company has not early
adopted the following new or amended standards in preparing these separate
financial statements. Unless otherwise stated, none of these are expected to have a
significant impact on the Company’s separate financial statements.

Effective January 1, 2024

 Lease Liability in a Sale and Leaseback (Amendments to PFRS 16 Leases). The

amendments confirm the following:

On initial recognition, the seller-lessee includes variable lease payments when it

measures a lease liability arising from a sale-and-leaseback transaction.

• After initial recognition, the seller-lessee applies the general requirements for
subsequent accounting of the lease liability such that it recognizes no gain or
loss relating to the right of use it retains.

A seller-lessee may adopt different approaches that satisfy the new requirements
on subsequent measurement. For example, the seller-lessee could determine
the lease payments to be deducted from the lease liability as expected lease
payments or as equal periodic payments over the lease term, with the difference
between those payments and amounts actually paid recognized in profit or loss.

The amendments are effective for annual reporting periods beginning on or after
January 1, 2024, with earlier application permitted. Under PAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors, a seller-lessee will need
to apply the amendments retrospectively to sale-and-leaseback transactions
entered into or after the date of initial application of PFRS 16.

 Classification of Liabilities as Current or Noncurrent - 2020 amendments and

Non-Current Liabilities with Covenants - 2022 amendments (Amendments to
PAS 1, Presentation of Financial Statements). To promote consistency in
application and clarify the requirements on determining whether a liability is
current or noncurrent, the amendments:

• removed the requirement for a right to defer settlement of a liability for at

least twelve months after the reporting period to be unconditional and instead
requires that the right must have substance and exist at the end of the
reporting period;
• clarified that only covenants with which a company must comply on or before
the reporting date affect the classification of a liability as current or non-
current and covenants with which the entity must comply after the reporting
date do not affect a liability’s classification at that date;
• provided additional disclosure requirements for non-current liabilities subject
to conditions within twelve months after the reporting period to enable the
assessment of the risk that the liability could become repayable within twelve
months; and
• clarified that settlement of a liability includes transferring an entity’s own
equity instruments to the counterparty, but conversion options that are
classified as equity do not affect classification of the liability as current or
noncurrent.

-7-
 The amendments will apply retrospectively for annual reporting periods
beginning on or after January 1, 2024, with earlier application permitted. Entities
that have early applied the 2020 amendments may retain application until the
2022 amendments are applied. Entities that will early apply the 2020
amendments after issue of the 2022 amendments must apply both amendments
at the same time.

 Supplier Finance Arrangements (Amendments to IAS 7 Statement of Cash Flows

and IFRS 7 Financial Instruments: Disclosures). The amendments introduce new
disclosures about a company’s supplier finance arrangements that would enable
users of financial statements to assess the effects of those arrangements on the
entity’s liabilities and cash flows, and the company’s exposure to liquidity risk.
Under the amendments, a company discloses in aggregate for its supplier
finance arrangements:

• the terms and conditions of the arrangements;

• beginning and ending carrying amounts and associated line items of the
financial liabilities that are part of a supplier finance arrangement,
distinguishing those for which suppliers were already paid, and range of
payment due dates including those for comparable trade payables not part of
a supplier finance arrangement; and
• the type and effect of non-cash changes in the carrying amounts.

The amendments also add supplier finance arrangements as an example to the

existing disclosure requirements on factors a company might consider when
providing specific quantitative liquidity risk disclosures about its financial
liabilities.

The amendments are effective for annual reporting periods beginning on or after
January 1, 2024, with early application permitted. However, a company is not
required to disclose comparative information for any prior reporting periods,
information on carrying amounts for which suppliers already received payment
and range of payment due dates as at the beginning of the annual reporting
period the company first applies the amendments, and information for any interim
period within the annual reporting period in which the company first applies those
amendments.

Business Combinations
The Company accounts for business combinations using the acquisition method
when control is transferred to the Company. The consideration transferred in the
acquisition is generally measured at fair value, as are the identifiable net assets
acquired and the liabilities assumed. Transaction costs are expensed as incurred.

Statement of Cash Flows

The Company has chosen to prepare the separate statement of cash flows using the
indirect method, which presents cash flows from operating activities as the income
from operations adjusted for non-cash transactions, deferrals or accruals of past or
future operating cash receipts or payments, and items of income or expense
associated with investing or financing cash flows. Interest paid on loans is presented
as a financing activity. The Company has chosen to present dividends paid to its
stockholders as a financing activity cash flow. In the cash flow statement, the
Company has classified the principal portion of lease payments, as well as the
interest portion, within financing activities. Lease payments are split between interest
and principal portions in the cash flow statement. Lease payments for short-term
leases, lease payments for leases of low-value assets and variable lease payments
not included in the measurement of the lease liability are classified as cash flows
from operating activities. The Company has classified cash flows from operating
leases as operating activities.

-8-
Financial Instruments
Financial Assets
Financial assets are recognized when the Company becomes a party to the
contractual provisions of a financial instrument. Financial assets are derecognized
when the rights to receive cash flows from the financial assets expire, or if the
Company transfers the financial asset to another party and does not retain control or
substantially all risks and rewards of the asset. Purchases and sales of financial
assets in the normal course of business are accounted for at settlement date
(i.e., the date that the asset is delivered to or by the Company). At initial recognition,
the Company measures its financial assets at its fair value plus, in the case of a
financial asset not at fair value through profit or loss, transaction costs that are
directly attributable to the acquisition or issue of the financial asset.

Financial instruments are recognized initially at fair value of the consideration given
(in case of an asset) or received (in case of a liability). The initial measurement of
financial instruments, except for those designated as fair value through profit or loss
(FVTPL), includes transaction costs.

After initial recognition, the Company classifies its financial assets as subsequently
measured at either i) amortized cost, ii) fair value through other comprehensive
(FVOCI) income or iii) FVTPL on the basis of both:

 The Company’s business model for managing the financial assets

 The contractual cash flow characteristics of the financial asset

Subsequent to initial recognition, financial assets are measured as described below.

At each balance sheet date, the Company assesses whether there is objective
evidence that a financial asset or a group of financial assets is impaired and
recognizes a loss allowance for expected credit losses for financial assets measured
at either amortized costs or at fair value through other comprehensive income. If, at
the reporting date, the credit risk on a financial instrument has not increased
significantly since initial recognition, the Company measures the loss allowance for
that financial instrument at an amount equal to 12 months of expected credit losses.
If, at the reporting date, the credit risk on a financial instrument has increased
significantly since initial recognition, the Company measures the loss allowance for
the financial instrument at an amount equal to the lifetime expected credit losses.
The Company always measures the loss allowance at an amount equal to lifetime
expected credit losses for receivables.

A financial asset is credit impaired when one or more events that have a detrimental
impact on the estimated future cash flows of the financial asset have occurred.

When determining whether the risk of default on a financial instrument has increased
significantly since initial recognition, the Company considers reasonable and
supportable information that is relevant and available without undue cost or effort.
This includes both quantitative and qualitative information and analysis, based on the
Company's historical experience, credit assessment and including forward-looking
information.

The information analyzed by the Company includes the following, among others:

 actual and expected significant changes in the political, regulatory and

technological environment of the debtor or in its business activities.

 payment record - this includes overdue status as well as a range of variables

about payment ratios.

-9-
 existing and forecast changes in the business, financial and economic
conditions.

The Company considers a financial asset to be in default when:

 the debtor is unlikely to pay its credit obligation to the Company in full, without
recourse by the Company to actions such as realizing security (if any is held); or

 the debtor is past due more than 90 days on any material credit obligation to the
Company.

Inputs into the assessment of whether a financial instrument is in default and their
significance may vary over time to reflect changes in circumstances.

Receivables are written off (either partially or in full) when there is no realistic
prospect of recovery. This is generally the case when the Company determines that
the borrower does not have assets or sources of income that could generate
sufficient cash flows to repay the amounts subject to the write-off. However, the
financial assets that are written off could still be subject to enforcement activities in
order to comply with the Company's procedures for recovery of amounts due.

Financial Assets at Amortized Cost

Financial assets are measured at amortized cost if both i) the financial asset is held
within a business model whose objective is to hold financial assets in order to collect
contractual cash flows; and ii) the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding.

A financial asset measured at amortized cost is initially recognized at fair value plus
transaction cost directly attributable to the asset. After initial recognition, the carrying
amount of the financial asset measured at amortized cost is determined using the
effective interest method, less any impairment losses.

Financial assets at amortized cost are classified as current assets when the
Company expects to realize the asset within 12 months from reporting date.
Otherwise, these are classified as noncurrent assets.

Cash and cash equivalents, receivables and security deposits are included in this
category.

Financial Assets at FVTPL

When any of the above-mentioned conditions for classification of financial assets are
not met, a financial asset is classified as at FVTPL and measured at fair value with
changes in fair value recognized in profit or loss.

A financial asset measured at FVTPL is recognized initially at fair value and its
transaction cost is recognized in profit or loss when incurred. A gain or loss on a
financial asset measured at fair value through profit or loss is recognized in the
separate statement of income for the reporting period in which it arises.

The Company may, at initial recognition, irrevocably designate a financial asset as

measured at FVTPL if doing so eliminates or significantly reduces a measurement or
recognition inconsistency that would otherwise arise from measuring assets or
liabilities or recognizing the gains and losses on them on different bases.

- 10 -
Debt financial assets that do not meet the amortized cost criteria, or that meet the
criteria but the Company has chosen to designate as at FVTPL at initial recognition,
are measured at fair value through profit or loss.

Equity investments and are classified as at FVTPL, unless the Company designates
an investment that is not held for trading as at FVOCI at initial recognition.

As of December 31, 2023, and 2022, the Company has not designated any debt
instrument that meets the amortized cost criteria as at FVTPL.

Financial assets at FVTPL are carried at fair value and gains and losses on these
instruments are recognized as “Unrealized valuation loss on financial assets at
FVTPL” in the separate statement of comprehensive income. Interest earned on
these investments is reported in the separate statement of comprehensive income
under ‘Interest income’ while dividend income is reported in the separate statement
of comprehensive income under “Others” when the right of payment has been
established. Quoted market prices, when available, are used to determine the fair
value of these financial instruments. If quoted market prices are not available, their
fair values are estimated based on market observable inputs.

The Company’s investments in government securities and equity securities are

included under this category (see Note 7).

Financial Liabilities
Financial liabilities are recognized when the Company becomes a party to the
contractual provisions of a financial instrument. Financial liabilities are derecognized
when the Company’s obligations specified in the contract expire or are discharged or
cancelled.

All financial liabilities are recognized initially at fair value and, in the case of loans
and borrowings, net of directly attributable transaction costs.

The Company classifies all financial liabilities as subsequently measured at

amortized cost, except for:

(a) financial liabilities designated by the Company at initial recognition as at fair

value through profit or loss, when doing so results in more relevant information.

(b) financial liabilities that arise when a transfer of a financial asset does not qualify
for derecognition or when the continuing involvement approach applies.

(c) contingent consideration recognized by the Company in a business combination

which shall subsequently be measured at fair value with changes recognized in
profit or loss.

(d) financial guarantee contracts and commitments to provide a loan at a below-

market interest rate which are initially measured at fair value and subsequently at
the higher of amortized amount and amount of loss allowance.

Any difference between the proceeds and redemption value is recognized in the
income statement over the period of the loans and short-term borrowings using the
effective interest method.

Financial liabilities are classified as current liabilities unless the Company has an
unconditional right to defer settlement of the liability for at least 12 months after the
balance sheet date.

- 11 -
Trade and other payables, long-term loans, lease liabilities, due to related parties
and deposits from tenants are generally included in this category.

Offsetting Financial Instruments

Financial assets and liabilities are offset and the net amount is reported in the
separate statements of financial position if, and only if, there is a currently
enforceable right to offset the recognized amounts and there is 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, and the related assets and
liabilities are presented gross in the separate statements of financial position.

Fair Value Measurements

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 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 most advantageous market for the asset or liability. The principal or
most advantageous market must be accessible to the Company.

The fair value of an asset or 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.

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

All assets and liabilities for which fair value is measured or disclosed in the separate
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 prices (unadjusted) in active markets for identical assets or

liabilities;

 Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly; and

 Level 3: inputs for the asset or liability that are not based on observable market
data.

For assets and liabilities that are recognized in the separate financial statements on
a recurring basis, the Company determines whether transfers have occurred
between Levels in the hierarchy by re-assessing the categorization at the end of
each reporting period.

Cash and Cash Equivalents

Cash includes cash in banks, cash on hand and cash equivalents. Cash equivalents
are short-term, highly liquid investments that are readily convertible to known
amounts of cash with original maturities of three (3) months or less from dates of
placement and are subject to an insignificant risk of change in value.

- 12 -
Merchandise Inventories
Merchandise inventories are stated at the lower of cost and NRV. The cost of
inventories is determined using the moving average method and comprise of
purchase price, including duties, transport and handling costs, and other incidental
expenses incurred in bringing the merchandise inventories to their present location
and condition.

NRV of merchandise inventory is the estimated selling price in the ordinary course of
business, less the estimated costs necessary to make the sale.

Investment in Subsidiaries
The Company’s investment in subsidiaries are accounted for under the cost method
as provided for under PAS 27, Separate Financial Statements. The investments are
carried in the separate statements of financial position at cost less any impairment in
value. The Company recognizes dividend from a subsidiary in its separate
statements of comprehensive income when its right to receive the dividend is
established.

A subsidiary is an entity controlled by the Company. The Company controls an entity

when it is exposed to, or has rights to, variable returns from its involvement with the
entity and has the ability to affect those returns through its power over the entity. The
Company 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.

Property and Equipment

Property and equipment, excluding land and construction in progress, are carried at
cost less accumulated depreciation and impairment losses, if any. Such cost
includes the cost of replacing part of the property and equipment at the time that cost
is incurred, if the recognition criteria are met, and excludes the costs of day-to-day
servicing. Land is carried at cost. Construction in progress represents structures
under construction and is stated at cost. This includes the costs of construction and
other direct costs. Construction in progress is not depreciated until such time that the
relevant assets are ready for use.

The initial cost of property and equipment comprises its purchase price and any
directly attributable costs in bringing the asset to its working condition and location
for its intended use. Expenditures incurred after the asset has been put into
operation, such as repairs, maintenance and overhaul costs, are normally
recognized as an expense in the period the costs are incurred. Major repairs are
capitalized as part of property and equipment only when it is probable that future
economic benefits associated with the items will flow to the Company and the cost of
the items can be measured reliably.

Depreciation which commences when the assets are available for its intended use
are computed on a straight-line basis over the estimated useful lives of the related
assets as follows:

Number of Years
Buildings 15 - 30
Furniture and fixtures 3 - 20
Office and store equipment 2 - 15
Leasehold improvements 15 - 20 or term of the lease,
whichever is shorter

- 13 -
The remaining estimated useful lives and depreciation methods are periodically
reviewed and adjusted to ensure that they are consistent with the expected pattern of
economic benefits from the items of property and equipment.

An item of property and equipment is derecognized when either it has been disposed
of or when it is permanently withdrawn from use and no future economic benefits are
expected from its use or disposal. Any gain or loss arising on the retirement or
disposal of an item of property and equipment (calculated as the difference between
the net disposal proceeds and the carrying amount of the asset) is included in profit
or loss in the period of retirement or disposal.

Goodwill and Other Intangibles

Goodwill and Impairment of Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the
consideration transferred over the Company’s interest in the net fair value of the
identifiable assets, liabilities and assumed contingent liabilities at the date of
acquisition. It is carried at cost less accumulated impairment losses. Goodwill on
acquisitions of joint ventures and associates is included in the carrying amount of the
investment. For the purposes of impairment testing, goodwill is allocated to each of
the cash-generating units (or groups of cash-generating units) that is expected to
benefit from the synergies of a business combination. Goodwill is allocated to a
cash-generating unit (or group of cash-generating units) representing the lowest level
within Company goodwill is monitored for internal management purposes and is
never larger than an operating segment before aggregation. Cash-generating units to
which goodwill has been allocated are tested for impairment annually, or more
frequently when there is an indication that the cash-generating unit may be impaired.
Goodwill on acquisitions of subsidiaries is assessed for impairment as part of the
investment whenever there is an indication that the investment may be impaired. An
impairment loss is recognized for the amount by which the cash-generating unit’s
carrying amount exceeds its recoverable amount. The recoverable amount is the
higher of a cash-generating unit’s fair value less costs of disposal or its value in use.
An impairment loss is allocated first to reduce the carrying amount of the goodwill
and then to the other assets of the cash generating unit pro rata on the basis of the
carrying amount of each asset. An impairment loss recognized for goodwill is not
reversed in subsequent periods.

Other Intangible Assets

Intangible assets acquired separately are measured on initial recognition at cost. The
cost of intangible assets acquired in a business combination is their fair value at the
date of acquisition. Following initial recognition, intangible assets are carried at cost
less amortization and any impairment losses. Intangible assets with finite lives are
amortized on a straight-line basis over their useful lives of 15 to 20 years for
computer software and licenses and 20 years for leasehold rights and tested for
impairment whenever there is an indication that they may be impaired. The
amortization period and method is reviewed at each financial year-end.

Investment Property
Investment property consists of land held to earn rentals. Investment properties are
initially measured at cost, including transaction costs. Land is stated at cost less any
accumulated impairment in value.

Transfers are made to investment property when, and only when, there is a change
in use, evidenced by ending of owner-occupation or commencement of an operating
lease to another party. Transfers are made from investment property when, and only
when, there is a change in use, evidenced by commencement of owner-occupation
or commencement of development with a view to earn rentals.

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For a transfer from investment property to owner-occupied property, the cost of
property for subsequent accounting is its carrying value at the date of change in use.
If the property occupied by the Company as an owner-occupied property becomes
an investment property, the Company accounts for such property in accordance with
the policy stated under property and equipment up to the date of change in use.

Investment properties are derecognized when either they have been disposed of, or
when investment properties are permanently withdrawn from use and no future
economic benefits is expected from its disposal. Any gains or losses on the
retirement or disposal of investment properties are recognized in profit or loss in the
year of retirement or disposal.

Rent income from investment property is recognized as other revenue on a

straight-line basis over the term of the lease. Lease incentives granted are
recognized as an integral part of the total rental income, over the term of the lease.

Impairment of Non-current Assets Other than Goodwill

The Company assesses whether there is any indication that the property and
equipment, right of use assets, investments in subsidiaries, and intangible assets
with finite lives may be impaired. The Company performs impairment testing where
there are indicators of impairment.

Where the asset does not generate cash flows that are independent from other
assets, the Company estimates the recoverable amount of the cash-generating unit
to which the asset belongs.

The recoverable amount is the higher of fair value less costs of disposal, and value
in use. When the recoverable amount is less than the carrying amount, an
impairment loss is recognized immediately in the Company's profit or loss.

A reversal of an impairment loss is recognized immediately as a credit to the

Company's profit or loss.

Employee Benefits
Short-term Employee Benefits
Short-term employee benefits are expensed as the related service is provided. A
liability is recognized for the amount expected to be paid if the Company has a
present legal or constructive obligation to pay this amount as a result of past service
provided by the employee and the obligation can be estimated reliably.

Retirement Benefits Cost

The Company’s net obligation in respect of the defined benefit plan is calculated by
estimating the amount of the future benefit that employees have earned in the
current and prior periods, discounting that amount and deducting the fair value of any
plan assets.

The calculation of defined benefit obligation is performed on a periodic basis by a

qualified actuary using the projected unit credit method. When the calculation results
in a potential asset for the Company, the recognized asset is limited to the present
value of economic benefits available in the form of any future refunds from the plan
or reductions in future contributions to the plan, if any.

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Remeasurements of the net defined benefit liability, which comprise actuarial gains
and losses, the return on plan assets (excluding interest) and the effect of the asset
ceiling (if any, excluding interest), are recognized immediately in other
comprehensive income. The Company determines the net interest expense (income)
on the net defined benefit liability (asset) for the period by applying the discount rate
used to measure the defined benefit obligation at the beginning of the annual period
to the then net defined benefit liability (asset), taking into account any changes in the
net defined liability (asset) during the period as a result of contributions and benefit
payments. Net interest expense and other expenses related to the defined benefit
plan are recognized in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting
change in benefit that relates to past service or the gain or loss on curtailment is
recognized immediately in profit or loss.

The Company has a non-contributory multi-employer plan which is accounted for as

a defined benefit plan. The Company is not required to pre-fund the future defined
benefits payable under the Retirement Plan before they become due. For this
reason, the amount and timing of contributions to the Retirement Fund to support the
defined benefits are at the Company’s discretion. However, in the event a defined
benefit claim arises and the Retirement Fund is insufficient to pay the claim, the
shortfall will then be due and payable by the Company to the Retirement Fund.

The Company recognizes gains and losses on the settlement of a defined benefit
plan when the settlement occurs.

Equity
Capital Stock
Capital stock is classified as equity. Transaction costs of an equity transaction are
accounted for as a deduction from equity, net of any related income tax benefit.

Equity instruments are measured at the fair value of the cash or other resources
received or receivable, net of the direct costs of issuing the equity instruments. If
payment is deferred and the time value of money is material, the initial measurement
is on a present value basis.

Treasury Stock
Own equity instruments which are reacquired are carried at cost and are deducted
from equity. No gain or loss is recognized in profit or loss on the purchase, sale,
issue or cancellation of the Company’s own equity instruments. When the shares of
stock are retired, the capital stock account is reduced by its par value and the excess
of cost over par value upon retirement is charged to additional paid-in capital to the
extent of the specific or average additional paid-in capital when the shares of stock
were issued and to retained earnings for the remaining balance.

Additional Paid-in Capital

Additional paid-in capital (APIC) is the amount of contribution in excess of par value
which arises from additional capital contributions from the shareholders.

Retained Earnings and Dividend Distribution

Retained earnings include current and prior years’ results, net of transactions with
shareholders and dividends declared, if any.

Dividend distribution to the Company’s shareholders is recognized as a liability, and

deducted from equity in the Company’s separate statements of financial position in the
period in which the dividends are approved and declared by the Company’s BOD.

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Other Comprehensive Income
Other comprehensive income are items of income and expense (including
reclassification adjustments, if any) such as remeasurements of defined benefit plans
that are not recognized in profit or loss as required or permitted by the related
accounting standards.

Business Combinations under Common Control

Business combinations arising from transfer of interest in entities under common
control are accounted for using the pooling of interest method, prospectively from the
acquisition date as allowed under PIC Q&A 2012-01. Under the prospective pooling
of interest method, the assets and liabilities acquired are recognized at the book
values or carrying amounts recognized in the acquiree’s stand-alone financial
statements from the acquisition date. The difference between the book value of net
assets acquired and the consideration paid or equity instruments issued is
recognized in equity, under additional paid-in capital. The profit or loss of the
acquirees are separate from the acquisition date. Comparative periods are not
restated.

Revenue Recognition
The Company identifies each distinct performance obligation to transfer goods
(or bundle of goods) or services. The Company recognizes revenue when (or as) it
satisfies a performance obligation by transferring the control of goods or services to
the customer. The transaction price is the amount of consideration the Company
expects to receive under the arrangement. The Company concluded that it is acting
as principal for all its revenue arrangements below, except for concession fee
income.

 Merchandise Sales - The Company recognizes sale of merchandise at the point

of sale when customer takes possession of goods and tenders payment. At point
of sale, the performance obligation is satisfied because control of the
merchandise transfers to the customer. Revenue is recorded at the point of sale
based on the transaction price on the merchandise tag, net of any applicable
discounts, sales taxes and refunds.

 Concession Fee Income - The Company enters into certain agreements with
concessionaires that offer goods to the Company’s customers. In exchange, the
Company receives payment in the form of commissions based on a specified
percentage of the merchandise sales. The Company serves as agent in these
contracts and recognizes the net amount earned as commissions in the period in
which the event or condition that triggers the payment occurs.

 Membership - The Company charges membership fee to its customers. The fee
allows the customer to shop in the Company’s stores for the duration of the
membership, which is generally 12 months. The company recognizes the fee in
the period in which it occurs.

 Gift Certificates - The Company recognizes revenue from the sale gift certificates
when the gift certificate is redeemed by customer.

 Other Income - The Company recognizes various incidental income in the period
in which the services/goods were rendered/delivered.

Contract Balances
Receivables
A receivable represents the Company’s right to an amount of consideration that is
unconditional (i.e., only the passage of time is required before payment of the
consideration is due).

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The sales activities of the Company do not result in a material amount of
unperformed obligations of the Company and, therefore, no contract assets are
recognized separately from receivables.

Contract Liabilities
A contract liability is the obligation to transfer goods or services to a customer for
which the Company has received consideration (or an amount of consideration is
due) from the customer. If a customer pays consideration before the Company
transfers goods or services to the customer, a contract liability is recognized when
the payment is made or the payment is due (whichever is earlier). Contract liabilities
are recognized as revenue when the Company performs under the contract.

The Company does enter into transactions with customers where contract liabilities
result from consideration being received from the customer prior to the Company
satisfying its performance obligations. These contract liabilities are presented on the
statement of financial position and in the notes as unredeemed gift certificate
liabilities.

Cost and Expense Recognition

The Company’s cost of sales includes the direct costs of sold merchandise, which
includes custom, taxes, duties and inbound shipping costs, inventory shrinkage and
adjustments and reserves for excess, aged and obsolete inventory. Cost of sales
also includes certain distribution center costs.

Vendor Rebates and Allowances

The Company receives various types of cash consideration from vendors, principally
in the form of rebates, based on purchasing or selling certain volumes of product,
time-based rebates or allowances, which may include product placement
allowances or exclusivity arrangements covering a predetermined period of time,
price protection rebates and allowances for retail price reductions on certain
merchandise and salvage allowances for product that is damaged, defective or
becomes out-of-date.

Such vendor rebates and allowances are recognized based on a systematic and
rational allocation of the cash consideration offered to the underlying transaction that
results in progress by the Company’s toward earning the rebates and allowances,
provided the amounts to be earned are probable and reasonably estimable.
Otherwise, rebates and allowances are recognized only when predetermined
milestones are met. The Company recognizes product placement allowances also as
a reduction of cost of sales in the period in which the product placement is
completed. Time-based rebates or allowances are recognized as a reduction of cost
of sales over the performance period on a straight-line basis. All other vendor
rebates and allowances are recognized as a reduction of cost of sales when the
merchandise is sold or otherwise disposed.

Operating Expenses
Operating Expenses constitute costs of administering the business. These are
recognized as expenses as incurred.

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Leases
The Company has applied PFRS 16 using the retrospective approach.

At inception of a contract, the Company assesses whether a contract is, or contains,

a lease. A contract is, or contains, a lease if the contract conveys the right to control
the use of an identified asset for a period of time in exchange for consideration. To
assess whether a contract conveys the right to control the use of an identified asset,
the Company assesses whether:

 the contract involves the use of an identified asset - this may be specified
explicitly or implicitly, and should be physically distinct or represent substantially
all of the capacity of a physical distinct asset. If the supplier has a substantive
substitution right, then the asset is not identified;

 the Company has the right to obtain substantially all of the economic benefits
from use of the asset throughout the period of use; and

 the Company has the right to direct the use of the asset. The Company has the
right when it has the decision-making rights that are most relevant to changing
how and for what purpose the asset is used. In rare cases where the decision
about how and for what purpose the asset is used is predetermined, the
Company has the right to direct the use of the asset if either:

• the Company has the right to operate the asset; or

• the Company designed the asset in a way that predetermines how and for
what purpose it will be used.

At inception or on reassessment of a contract that contains a lease component, the

Company allocates the consideration in the contract to each lease component on the
basis of their relative stand-alone prices. However, for the leases of land and
buildings in which it is a lessee, the Company has elected not to separate non-lease
components and account for the lease and non-lease components as a single
component.

As a Lessee
The Company recognizes a right-of-use asset and a lease liability at the lease
commencement date. The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for any lease payments
made at or before the commencement date, plus any initial direct cost incurred and
an estimate of costs to dismantle and remove or restore the underlying asset or the
site on which it is located, less any incentives received.

The right-of-use assets are subsequently depreciated using the straight-line method
from the commencement date to the earlier of the end of the useful life of the
right-of-use assets or the end of lease term. The estimated useful lives of the
right-of-use assets are determined on the same basis as those of property and
equipment. In addition, the right-of-use asset is periodically reduced by impairment
losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments
that are not paid at the commencement date, discounted using the interest rate
implicit in the lease or, if that rate cannot be readily determined, the Company’s
incremental borrowing rate. Generally, the Company uses its incremental borrowing
rates as the discount rate.

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Lease payments included in the measurement of the lease liability comprise the
following:

 fixed payments, including in-substance fixed payments;

 variable lease payments that depend on an index or a rate, initially measured
using the index or rate as at the commencement date;
 amounts expected to be payable under a residual value guarantee; and
 the exercise price under a purchase option that the Company is reasonably
certain to exercise, lease payments in an optional renewal period if the Company
is reasonably certain to exercise an extension option, and penalties for early
termination of a lease unless the Company is reasonably certain not to terminate
early.

The lease liability is measured at amortized cost using the effective interest method.
It is remeasured when there is a change in future lease payments arising from a
change in an index or rate, if there is a change in the Company’s estimate of the
amount expected to be payable under a residual value guarantee, if the Company
changes its assessment of whether it will exercise a purchase, extension or
termination option or if there is a revised in-substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is

made to the carrying amount of the right-of-use asset or is recorded in profit or loss if
the carrying amount of the right-of-use asset has been reduced to zero.

Variable Lease Payments

Variable lease payments not based on an index or rate are not part of the lease
liability. These include payments linked to a lessee’s performance derived from the
underlying asset. Such payments are recognized in profit or loss in the period in
which the event or condition that triggers those payments occurs.

Short-term Leases and Leases of Low-value Assets

The Company has elected not to recognize right-of-use assets and lease liabilities
for short-term leases of 12 months or less and leases of low-value assets. The
Company recognizes the lease payments associated with these leases as an
expense on a straight-line basis over the lease term.

As a Lessor
When the Company act as a lessor, it determines at lease commencement whether
each lease is a finance lease or an operating lease.

To classify each lease, the Company makes an overall assessment of whether the
lease transfers to the lessee substantially all of the risk and rewards of ownership
incidental to ownership of the underlying asset. If this is the case, then the lease is
finance lease; if not, then it is an operating lease. As part of this assessment, the
Company considers certain indicators such as whether the lease is for the major part
of economic life of the asset.

When the Company is an intermediate lessor, it accounts for its interests in the head
lease and the sub-lease separately. It assesses the lease classification of a
sub-lease with reference to the right-of-use asset arising from the head lease, not
with reference to the underlying asset. If a head lease is a short-term lease to which
the Company applies exemption described above, then it classifies sub-lease as
operating lease.

The Company recognizes lease payments received under operating leases as

income on a straight-line basis over the lease term as part of other income.

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Borrowing Costs
Borrowing costs are recognized as expenses when incurred, except to the extent
capitalized. Borrowing costs are capitalized if they are directly attributable to the
acquisition or construction of a qualifying asset. Capitalization of borrowing costs
commences when the activities to prepare the asset are in progress and
expenditures and borrowing costs are being incurred. Borrowing costs are
capitalized until the assets are substantially ready for their intended use. If the
carrying amount of the asset exceeds its recoverable amount, an impairment loss is
recognized.

Income Taxes
Current tax and deferred tax are recognized in the statements of income except to
the extent that it relates to a business combination, or items recognized directly in
equity or in OCI.

Uncertainties related to taxes that are not income taxes are recognized and
measured in accordance with PAS 37, Provisions, Contingent Liabilities and
Contingent Assets unless they are dealt with specifically in another standard.

Current Tax
Current tax is the expected tax payable or receivable on the taxable income or loss
for the year, using tax rates enacted or substantively enacted at the reporting date,
and any adjustment to tax payable in respect of previous years.

Deferred Tax
Deferred tax is recognized in respect of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts
used for taxation purposes. Deferred tax liabilities are recognized for all taxable
temporary differences, except:

 where the deferred tax liability arises from the initial recognition of goodwill or of
an asset or liability in a transaction that is not a business combination and, at the
time of the transaction, affects neither the accounting profit nor taxable profit or
loss; and

 with respect to taxable temporary differences associated with investments in

subsidiaries, associates and interests in joint ventures, where the timing of the
reversal of the temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences,
carryforward benefits of unused tax credits - Minimum Corporate Income Tax (MCIT)
and unused tax losses - Net Operating Loss Carryover (NOLCO), to the extent that it
is probable that taxable profits will be available against which the deductible
temporary differences, and the carry forward benefits of MCIT and NOLCO can be
utilized, except:

 where the deferred tax asset relating to the deductible temporary difference
arises from the initial recognition of an asset or liability in a transaction that is not
a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and

 with respect to deductible temporary differences associated with investments in

subsidiaries, associates and interests in joint ventures, deferred tax assets are
recognized only to the extent that it is probable that the temporary differences will
reverse in the foreseeable future and taxable profit will be available against
which the temporary differences can be utilized.

- 21 -
The carrying amount of deferred tax assets is reviewed at each reporting date and
reduced to the extent that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be utilized. Unrecognized
deferred tax assets are reassessed at each reporting date and are recognized to the
extent that it has become probable that future taxable profit will allow the deferred tax
asset to be recovered.

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

In determining the amount of current and deferred tax, the Company takes into
account the impact of uncertain tax positions and whether additional taxes and
interest may be due. The Company believes that its accruals for tax liabilities are
adequate for all open tax years based on its assessment of many factors, including
interpretation of tax law and prior experience. This assessment relies on estimates
and assumptions and may involve a series of judgments about future events. New
information may become available that causes the Company to change its judgment
regarding the adequacy of existing tax liabilities; such changes to tax liabilities will
impact tax expense in the period that such a determination is made.

Current tax and deferred tax are recognized in profit or loss except to the extent that
it relates to a business combination, or items recognized directly in equity or in other
comprehensive income.

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

Value-added Tax (VAT)

Revenues, expenses and assets are recognized net of the amount of VAT, except:

 where the tax incurred on a purchase of assets or services is not recoverable

from the taxation authority, in which case the tax is recognized as part of the cost
of acquisition of the asset or as part of the expense item as applicable; and

 receivables and payables that are stated with the amount of tax included.

The net amount of tax recoverable from, or payable to, the taxation authority is
included as part of “Prepaid expenses and other current assets” or “Trade and other
payables” in the separate statements of financial position.

Basic and Diluted Earnings Per Share (EPS)

Basic EPS is computed by dividing net income by the weighted average number of
common shares outstanding during the period, after retroactive adjustment for stock
dividend declared in the current period, if any. Diluted EPS is also computed in the
same manner as the aforementioned, except that, the net income and the number of
common shares outstanding is adjusted for the effects of all potential dilutive debt or
equity instruments.

Related Parties
Parties are considered to be related if one party has the ability, directly or indirectly,
to control the other party or exercise significant influence over the other party in
making financial and operating decisions. Parties are also considered to be related if
they are subject to common control. Related parties may be individuals or corporate
entities.

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 Provisions and Contingencies
A provision is recognized when the Company has a legal or constructive obligation
as a result of a past event; it is probable that an outflow of economic benefits will be
required to settle the obligation; and a reliable estimate can be made on the amount
of the obligation.

Provisions are revisited at each reporting date 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 pretax rate that
reflects the 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.

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

Events After the Reporting Date

Post year-end events that provide additional information about the Company’s
position at the reporting date (adjusting events) are recognized in the separate
financial statements. Post year-end events that are not adjusting events are
disclosed in the notes to the separate financial statements when material.

4. Cash and Cash Equivalents

This account consists of:

Note 2023 2022

Cash on hand P1,052,973,532 P1,370,300,651
Cash in banks 29 11,447,112,009 9,247,903,295
Money market placements 29 21,422,067,901 18,928,812,686
P33,922,153,442 P29,547,016,632

Cash in banks earn annual interest at the respective bank deposit rates.

Money market placements are highly liquid investments that are readily convertible
into cash and are subjected to insignificant risk of changes in value. The maturity
dates of these investments have an average of 30 days with annual interest rates
ranging from 1.6% to 5.7% in 2023 and from 0.2% to 7.0% in 2022.

Interest income earned from cash in banks and money market placements totaled
P1.0 billion in 2023 and P454.3 million in 2022.

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5. Receivables

This account consists of:

Note 2023 2022

Trade receivables 24 P1,797,848,250 P1,395,883,570
Less allowance for impairment losses 7,462,327 7,462,327
1,790,385,923 1,388,421,243
Non-trade receivables 24 1,662,364,960 1,127,893,931
Dividend receivables 14, 23, 24 1,491,655,123 1,238,459,174
29 P4,944,406,006 P3,754,774,348

Trade receivables and have credit terms of 30 days.

Dividend receivables pertain to cash dividends declared by Kareila Management

Corporation from its unrestricted retained earnings on December 11, 2023 and
December 20, 2022 (see Note 14).

6. Merchandise Inventories

This account consists of groceries and other consumer products (canned goods,
housewares, toiletries, dry goods, food products, etc.) held for sale in the ordinary
course of business on wholesale or retail basis.

The Company’s merchandise inventories at cost amounted to P17.5 billion and

P17.8 billion as at December 31, 2023 and 2022, respectively.

Inventory charged to the cost of sales amounted to P112.0 billion in 2023 and
P103.7 billion in 2022 (see Note 19).

7. Financial Assets at Fair Value through Profit or Loss

The movements in these securities are as follows:

Note 2023 2022

Held-for-trading:
Government securities P4,588,450,000 P4,268,095,378
Equity securities 37,689,942 31,284,934
29 P4,626,139,942 P4,299,380,312

The Company recognized a gain on sale of government securities amounting to

P6.5 million and nil in 2023 and 2022, respectively (see Note 23).

Interest income on government securities amounted to P190.4 million in 2023 and

P115.2 million in 2022.

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8. Prepaid Expenses and Other Current Assets

This account consists of:

2023 2022
Deferred input VAT P105,539,132 P172,031,764
Input VAT - 82,172,004
Prepaid expenses:
Insurance 121,706,892 110,870,790
Taxes and licenses 102,600,971 102,717,727
Advertising and promotion 49,045,850 65,622,592
Supplies 23,382,250 8,723,471
Repairs and maintenance 21,902,328 1,778,528
Others 20,269,114 29,112,648
P444,446,537 P573,029,524

Deferred input VAT represents accumulated input taxes for purchases until
December 31, 2021 of capital assets more than P1 million and unpaid services which
can be applied against future output VAT.

Prepaid insurance pertains to the unamortized portion of premiums paid for

insurance coverage on merchandise inventories, property and equipment, etc.

Prepaid taxes and licenses pertain to the unamortized portion of registration fees and
other taxes paid to the Government.

Prepaid advertising and promotion pertain to advance payments for such activities.

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9. Property and Equipment

The movements in this account are as follows:

Furniture Office and Store Leasehold Construction in

Buildings and Fixtures Equipment Improvements Land Progress Total
Cost
Balance at January 1, 2022 P7,013,947,326 P2,503,003,665 P7,171,373,673 P6,873,066,949 P1,256,633,289 P322,874,967 P25,140,899,869
Additions 210,742,148 150,855,811 447,462,165 321,895,221 320,424,960 351,396,210 1,802,776,515
Disposals - (1,774,873) (7,090,902) (14,334,134) - - (23,199,909)
Reclassifications 311,320,043 (1,483,699) (8,786,133) 171,258,399 - (472,308,610) -
Transfer to investment property - - - - (1,141,513,920) - (1,141,513,920)
Balance at December 31, 2022 7,536,009,517 2,650,600,904 7,602,958,803 7,351,886,435 435,544,329 201,962,567 25,778,962,555
Additions 319,111,230 248,177,125 643,123,260 657,301,043 - 329,951,013 2,197,663,671
Disposals (875,000) (2,175,945) (34,620,041) - - (37,670,986)
Reclassifications and adjustments 217,394,627 (504,805) (7,361,018) (239,488,144) - (342,032,361) (371,991,701)
Balance at December 31, 2023 8,071,640,374 2,896,097,279 8,204,101,004 7,769,699,334 435,544,329 189,881,219 27,566,963,539
Accumulated Depreciation and
Amortization
Balance at January 1, 2022 1,964,558,443 1,439,778,261 5,712,931,432 2,589,945,778 - - 11,707,213,914
Depreciation 250,038,744 130,774,543 509,756,875 364,473,294 - - 1,255,043,456
Disposals - (1,759,691) (7,043,802) (11,689,044) - - (20,492,537)
Reclassifications 2,281,456 (1,457,949) (6,014,939) 5,191,432 - - -
Balance at December 31, 2022 2,216,878,643 1,567,335,164 6,209,629,566 2,947,921,460 - - 12,941,764,833
Depreciation 263,724,090 128,275,411 496,024,231 368,200,630 - - 1,256,224,362
Disposals (874,999) (1,903,096) (30,121,124) - - - (32,899,219)
Reclassifications and adjustments - (504,797) (254,382) (328,981,481) - - (329,740,660)
Balance at December 31, 2023 2,479,727,734 1,693,202,682 6,675,278,291 2,987,140,609 - - 13,835,349,316
Carrying Amount
December 31, 2022 P5,319,130,874 P1,083,265,740 P1,393,329,237 P4,403,964,975 P435,544,329 P201,962,567 P12,837,197,722

December 31, 2023 P5,591,912,640 P1,202,894,597 P1,528,822,713 P4,782,558,725 P435,544,329 P189,881,219 P13,731,614,223

- 26 -
 Interest expense on loans payable amounted to P11.1 million and P10.9 million has
been capitalized as part of property and equipment as at December 31, 2023 and
2022, respectively (see Note 17).

The cost of fully depreciated property and equipment that are still being used in the
Company’s operations amounted to P6.3 billion and P5.6 billion as at December 31,
2023 and 2022, respectively.

The unpaid balance for the additions to the cost of property and equipment in 2022
pertains mainly to the accrued fixed assets discussed in Note 25.

10. Right-of-Use Assets

The movements in this account are as follows:

2023 2022
Cost
Balance at January 1 P29,658,383,845 P27,962,017,110
Additions 3,834,278,279 2,170,486,883
Modifications (95,857,244) (167,530,577)
Terminations (114,911,930) (89,464,681)
Derecognition of right-of-use assets (271,685,841) (217,124,890)
Balance at December 31 33,010,207,109 29,658,383,845
Accumulated Depreciation
Balance at January 1 11,489,074,371 10,246,973,703
Depreciation 1,666,668,641 1,486,810,503
Terminations (28,248,910) (27,584,946)
Derecognition of right-of-use assets (271,685,841) (217,124,890)
Balance at December 31 12,855,808,261 11,489,074,370
Carrying Amount at December 31 P20,154,398,848 P18,169,309,475

The right-of-use (“ROU”) assets include parcels of land, stores, warehouses, and
parking spaces.

The ROU additions include the cost of obtaining the rights for certain leases covering
a number of properties amounting to P219.7 million and P400 million during 2023
and 2022, respectively.

The ROU additions in 2023 include payments totaling P219 million for leasehold
rights on Divimart store locations while those for 2022 include payments totaling
P400 million for leasehold rights on several properties in the Central Visayas region
where some of the new stores are situated. These are considered direct costs in
obtaining the lease agreements and included as part of the cost of ROU.

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11. Investment Property

Investment property amounting to P2.3 billion as at December 31, 2023 and 2022
pertains to a parcel of land that is being leased out. Rent income amounted to
P91.9 million in 2023 and P92.3 million in 2022 (see Notes 21 and 24).

As at December 31, 2023, the future minimum lease payments due for less than a
year, one to five years, and more than five years amounted to P19.1 million and
P104.3 million, and P837.8 million, respectively.

The estimated fair value of investment property as at December 31, 2023 and 2022
amounted to P3.2 billion. The fair value hierarchy is level 3.

12. Goodwill and Other Intangibles

This account consists of:

2023 2022
Goodwill P2,822,949,486 P2,822,949,486
Leasehold rights - net 38,041,960 41,317,211
Computer software and licenses - net 77,413,037 71,172,572
P2,938,404,483 P2,935,439,269

Goodwill
Goodwill acquired in business combinations represents the excess of the purchase
price over the fair value of net identifiable assets of acquired subsidiaries which
represent the separate CGUs expected to benefit from that business combination.

The cost of goodwill allocated to the CGUs as at December 31, 2023 and 2022
follows:

Amount
Budgetlane Supermarkets P837,974,199
Gant 742,340,804
Daily Commodities, Inc. and First Lane Super Traders Co., Inc.
(DCI and FLSTCI) 685,904,317
Company E 358,152,015
Black & White (B&W) Supermart 187,203,888
Puregold Junior Supermarket, Inc. (PJSI) 11,374,263
P2,822,949,486

CGUs to which goodwill have been allocated are tested for impairment annually or
more frequently if there are indications that a particular CGU might be impaired.
Cash flow projections used in determining recoverable amounts include the lease
payments in both the explicit forecast period and in terminal value. The recoverable
amounts for the CGUs have been determined based on value in use.

- 28 -
VIU
Value in use is determined using discounted cash flow projections that generally
cover a period of five years and are based on the financial plans approved by the
Company’s management. The key assumptions for the value-in-use calculations
relate to the weighted average cost of capital (discount rate), sales growth, operating
margin and growth rate (terminal value). Sales growth and operating margin are
based on the Company’s historical experience. Discount rate and terminal growth
rate are based on reliable external information. The discount rates reflect the key
assumptions used in the cash flow projections. The pre-tax discount rates ranged
between 8.5% and 8.7% in 2023 and 10.6% and 11.1% in 2022. The sales growth
rates and operating margins used to estimate future performance are based on past
performance and experience of growth rates and operating margins achievable in the
Company’s markets. The average annual compound sales growth rates applied in
the projected periods ranged between 5.0% and 6.0% for the CGUs. The average
operating margins applied in the projected periods is 6.0% for the CGUs. The
terminal value to extrapolate cash flows beyond the explicit forecast period is 3.6%
for the CGUs.

Key assumptions relating to CGUs to which a significant amount of goodwill or

intangible assets with indefinite useful lives is allocated are as follows:

Pre-tax Growth Rate

Discount Rate (Terminal Value)
2023 2022 2023 2022
Budgetlane Supermarkets 8.7% 11.1% 3.6% 5.4%
Gant 8.6% 11.1% 3.6% 5.4%
DCI and FLSTCI 8.5% 11.1% 3.6% 5.4%

As at December 31, 2023, management assessed that a reasonably possible

change in key assumptions of B&W Supermart would result in the headroom being
reduced to nil if growth rate decreased by 1.2%.

Computer Software and Licenses

The movements in computer software and licenses are as follows:

2023 2022
Cost
Balance at January 1 P307,289,313 P303,094,899
Additions 27,457,256 4,194,414
Balance at December 31 334,746,569 307,289,313
Accumulated Amortization
Balance at January 1 236,116,741 216,097,525
Amortization 21,216,791 20,019,216
Balance at December 31 257,333,532 236,116,741
Carrying Amount P77,413,037 P71,172,572

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 Leasehold Rights
The movement in leasehold rights are follows:

2023 2022
Cost
Balance at January 1 P76,955,005 P76,955,005
Additions 600,000 -
Balance at December 31 77,555,005 76,955,005
Accumulated Amortization
Balance at January 1 35,637,794 31,790,044
Amortization 3,875,251 3,847,750
Balance at December 31 39,513,045 35,637,794
Carrying Amount P38,041,960 P41,317,211

On January 25, 2013, the Company entered into a memorandum of agreement with
various parties that paved the way for the acquisition of five stores previously owned
and operated by the parties. Under the agreement, the parties agreed to sell to the
Company all merchandise inventories, equipment, furniture and fixtures as well as
granting of rights to lease the buildings owned by parties for a period of 20 years. As
a result of the transaction, the Company recognized the excess of the purchase price
over the fair value of tangible assets acquired as leasehold rights, which is amortized
on a straight-line basis over the lease term.

13. Other Noncurrent Assets

This account consists of:

Note 2023 2022

Security deposits 29 P1,815,210,640 P1,601,546,697
Advances to contractors 452,633,103 397,317,446
Accrued rent income 13,482,941 20,338,483
Financial Assets at FVOCI 7,879,159 7,879,159
P2,289,205,843 P2,027,081,785

Security deposits consist of payments for leases that are refundable at the end of the
lease term.

Advances to contractors pertain to downpayments for the construction of new stores.

14. Investment in Subsidiaries

This account is stated at cost and consists of:

Note 2023 2022

Kareila Management Corporation P16,477,734,375 P16,477,734,375
Entenso Equities Incorporated, Inc. 1,198,417,845 1,251,780,284
Purepadala, Inc.* 50,000,000 50,000,000
PPCI Subic Inc. 3,125,000 3,125,000
Melilla Management Corporation 312,500 312,500
27 P17,729,589,720 P17,782,952,159
* Incorporated in 2018 and has not started operations yet.

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 All subsidiaries are wholly owned and incorporated in the Philippines. They are
essentially engaged in the same business as the Parent Company, except for
Entenso Equities Incorporated, Inc. (“Entenso”), Melilla Management Corporation
(“Melilla”) and Purepadala, Inc. (“Purepadala”).

Entenso’s primary purpose is to invest in, purchase, subscribe for, or otherwise

acquire and own, hold, use, develop, sell, assign, transfer, mortgage, pledge,
exchange, or otherwise dispose real and personal property of every kind of
description.

Purepadala’s primary purpose is to engage in business of money remittance or

service as defined in the Bank Sentral ng Pilipinas (“BSP”) Circular No. 942, Series
of 2017.

Melilla’s primary purpose is to act as managers or managing agents of persons,

firms, associations, corporations, partnership and other entities; to provide
management, investment and technical advice for commercial, industrial,
manufacturing and other kinds of enterprises; undertake, carry on, assist or
participate in the promotion, organization, management liquidation or reorganization
of corporations, partnership and other entities, except the management of funds,
securities, portfolio or similar asset and managed entities or corporation without
acting as: broker or dealer in securities, government securities eligible dealer
(GSED), investment adviser of an investment company, closed-end or open-end
investment company, investment house, transfer agent, commodity/ financial futures
exchange/ broker / merchant, financing company.

The BOD of Kareila approved the declaration of P1.2 billion (P58.3 per share) on
December 20, 2022 and P1.5 billion (P70.2 per share) on December 7, 2023 (record
date and payment date of December 31, 2023 and January 18, 2024, respectively).

15. Trade and Other Payables

This account consists of:

Note 2023 2022

Trade 24, 29 P11,331,134,969 P9,150,801,532
Non-trade 24, 29 1,110,953,768 1,086,938,940
Dividends payable 17, 24, 27, 29 2,793,733,487 2,476,918,349
Withholding taxes payable 193,140,240 172,672,497
Accrued expenses: 29
Manpower agency services 1,056,850,698 916,501,539
Fixed assets 11, 25, 29 881,161,832 568,897,009
Utilities 160,726,967 160,106,502
Supplies 111,430,988 115,477,597
Others 132,686,783 94,702,473
P17,771,819,732 P14,743,016,438

The average credit term for purchases of goods from suppliers is 30 days.

Non-trade payables consist of claims arising from billed expenditures in relation to

operations other than purchases of goods.

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16. Other Current Liabilities

This account consists of:

Note 2023 2022

Deposits from tenants 29 P254,602,605 P242,405,585
Deferred income from suppliers 177,766,000 215,824,384
Unredeemed gift certificates 69,680,200 73,082,200
VAT payable 51,614,494 -
Commissions payable 29 71,059,166 62,659,291
Others 29 1,457,435 146,965
P626,179,900 P594,118,425

Deposits represent amounts paid by the store tenants for the lease of store spaces
which are refundable upon termination of the lease.

Deferred income represents cash advances from a supplier for a 5-year strategic
partnership with the Company. This is amortized over the 5-year period.

Unredeemed gift certificates represent members’ claims for issued yet unused gift
certificates. These will be closed to sales account upon redemption and are due and
demandable anytime.

Commissions payable represents commissions and delivery charges payable to Pure

Commerce. During 2022, Entenso Equities Incorporated, Inc. entered to a joint
venture with 917Ventures Inc. The purpose of the joint venture is to establish and
operate an online grocery and e-commerce platform. This platform caters the selling
of the Company’s merchandise inventory and commissions were paid to the joint
venture for the use of the online application.

Contract Liabilities
The Company identified its unredeemed gift certificates as contract liabilities as of
December 31, 2023 and 2022. These represent the Company’s obligation to provide
goods or services to the customers for which the Company has received
consideration from the customers.

Below is the rollforward of contract liabilities for the years ended 2023 and 2022:

2023 2022
Beginning balance P73,082,200 P86,736,700
Receipts 181,990,000 195,482,000
Sales recognized (185,392,000) (209,136,500)
Ending balance P69,680,200 P73,082,200

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17. Loans Payable

This account consists of long-term loans with details as follows:

Note 2023 2022

Unsecured Peso Denominated
Fixed-rate notes 29 P11,640,000,000 P11,760,000,000
Unamortized debt issuance cost (78,871,360) (94,206,800)
11,561,128,640 11,665,793,200
Current portion (120,000,000) (120,000,000)
Noncurrent portion P11,441,128,640 P11,545,793,200

On September 30, 2020, the Company raised P12 billion from the issuance of fixed-
rate corporate notes for its store network expansion. This consists of
P7-billion notes that have a seven-year tenor and P5-billion notes that have a
10-year tenor with interest rate of 4.0% and 4.5%, respectively. The notes are
payable annually at 1.0% of the original amount or P120.0 million and the remainder
payable upon maturity.

The notes are subject to certain affirmative and negative covenants such as those
relating to merger and consolidation, declaration of dividends and maintenance of
financial ratios of at least 1.0x current ratio and not more than 2.5x debt-to-equity
ratio, among others. The Company is compliant with the loan covenants as at
December 31, 2023 and 2022.

The current portion in prior year amounting to P120.0 million was reclassified from
noncurrent to conform to the current year presentation.

The contractual maturities of the long-term loans are discussed in Note 29.

The movements in debt issuance cost are as follows:

2023 2022
Balance at beginning of the year P94,206,800 P109,542,239
Amortizations (15,335,440) (15,335,439)
Balance at end of the year P78,871,360 P94,206,800

Interest expense charged to profit or loss amounted to P565.0 million in 2023 and
P518.7 million in 2022.

Interest expense capitalized as part of property and equipment is discussed in

Note 9.

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 Changes in Liabilities Arising from Financing Activities
The movements and balances of this account are as follows:

Long-Term Dividend Payable Lease Liabilities

Loans Payable (Notes 15 and 27) (Note 20) Total
Balance at January 1, 2023 P11,665,793,200 P2,476,918,349 P25,579,600,231 P39,722,311,780
Changes from financing cash
flows:
Payment of loans (120,000,000) - - (120,000,000)
Amortization of debt issue cost 15,335,440 - - 15,335,440
Cash dividends declared - 2,793,733,487 - 2,793,733,487
Payment of dividends - (2,476,918,349) - (2,476,918,349)
Additions to leases - - 3,415,943,989 3,415,943,989
Lease payments - - (2,763,103,238) (2,763,103,238)
Other lease adjustments - - 1,676,449,205 1,676,449,205
Total Liability-related Changes (104,664,560) 316,815,138 2,329,289,956 2,541,440,534
Balance at December 31, 2023 P11,561,128,640 P2,793,733,487 P27,908,890,187 P42,263,752,314

Long-Term Dividend Payable Lease Liabilities

Loans Payable (Notes 15 and 27) (Note 20) Total
Balance at January 1, 2022 P11,770,457,761 P1,441,543,808 P24,850,637,104 P38,062,638,673
Changes from financing cash
flows:
Payment of loans (120,000,000) - - (120,000,000)
Amortization of debt issue cost 15,335,439 - - 15,335,439
Cash dividends declared - 2,476,918,349 - 2,476,918,349
Payment of dividends - (1,441,543,808) - (1,441,543,808)
Additions to leases - - 1,673,148,734 1,673,148,734
Lease payments - - (2,459,614,777) (2,459,614,777)
Other lease adjustments - - 1,515,429,170 1,515,429,170
Total Liability-related Changes (104,664,561) 1,035,374,541 728,963,127 1,659,673,107

Balance at December 31, 2022 P11,665,793,200 P2,476,918,349 P25,579,600,231 P39,722,311,780

18. Revenue from Contracts with Customers

The Company generates revenue primarily from trading goods such as consumer
products (canned goods, housewares, toiletries, dry goods, food products, etc.) on a
wholesale and retail basis. The revenue from contracts with customers is
disaggregated by revenue streams.

Note 2023 2022

Net sales from stores P133,173,865,815 P123,743,829,686
Concession fee income 21 1,120,049,595 1,082,556,827
Membership fee income 21 94,325,406 75,378,665
Revenue from contract with
customers P134,388,240,816 P124,901,765,178

19. Cost of Sales

This account consists of:

Note 2023 2022

Beginning inventory P17,844,674,193 P15,355,927,181
Add purchases 111,728,326,773 106,179,229,487
Total goods available for sale 129,573,000,966 121,535,156,668
Less ending inventory 17,542,849,819 17,844,674,193
6 P112,030,151,147 P103,690,482,475

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20. Lease Agreements

Lessee
The Company leases parcel of land, stores, warehouses, parking spaces and certain
lands and buildings where some of its stores are situated or constructed. The lease
terms range from 3 years to 40 years, which are generally renewable based on
certain terms and conditions. Rental payments are fixed monthly or per square meter
subject to 1%-10% escalation or percentage of store sales, whichever is higher.
Variable lease payments that depend on sales are recognized in profit or loss in the
period in which the condition that triggers those payments occurs.

Lease liabilities included in the statements of financial position are as follows:

2023 2022
Due within one year P1,071,128,841 P905,910,589
Due beyond one year 26,837,761,346 24,673,689,642
P27,908,890,187 P25,579,600,231

The movements in lease liabilities are as follows:

Note 2023 2022

Balance at January 1 29 P25,579,600,231 P24,850,637,104
Additions 3,415,943,989 1,673,148,734
Accretion of interest expense 1,905,805,703 1,754,973,060
Repayments (2,763,103,238) (2,459,614,777)
Terminations (133,499,254) (72,013,313)
Modifications (95,857,244) (167,530,577)
Balance at December 31 P27,908,890,187 P25,579,600,231

The maturity analysis of the undiscounted lease payments for the years ended
December 31:

2023 2022
Less than one year P3,000,404,749 P2,639,335,797
One to five years 11,835,020,202 10,516,846,937
More than five years 33,672,053,245 31,599,885,537
P48,507,478,196 P44,756,068,271

The following are the amounts recognized in profit or loss:

2023 2022
Rent expense on short-term leases and
low value assets P45,560,752 P38,019,564
Interest accretion on lease liabilities 1,905,805,703 1,754,973,060
Depreciation charge for right-of-use assets 1,666,668,641 1,486,810,503
Gain from lease terminations 46,836,234 4,593,117

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 Lessor
The Company subleases portion of its store space to various lessees including PJSI
(before merger). The lease terms range from 1 year to 10 years, The lease contracts
may be renewed upon mutual agreement by the parties which are generally
renewable based on certain terms and conditions. Rental payments are fixed
monthly or percentage of store sales, whichever is higher. Variable lease payments
that depend on sales are recognized in profit or loss in the period in which the
condition that triggers those payments occurs.

Rent income recognized in profit or loss amounted to P492.2 million in 2023 and
P443.1 million in 2022 (see Note 21).

The scheduled maturities of non-cancellable minimum future rental collections are as

follows:

2023 2022
Less than one year P212,094,379 P221,935,542
One year to five years 266,698,045 285,358,388
More than five years 909,068,749 938,616,677
P1,387,861,173 P1,445,910,607

21. Other Revenue

This account consists of:

Note 2023 2022

Concession fee income 18 P1,120,049,595 P1,082,556,827
Rent income 20 492,214,011 443,139,664
Membership fee income 18 94,325,406 75,378,665
Miscellaneous 179,367,792 149,103,094
P1,885,956,804 P1,750,178,250

Miscellaneous income consists of amounts collected from customers for delivering

their purchases, cashiers’ overages, sale of used packaging materials and others.
The individual transactions are insignificant as to the aggregated amount.

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22. Operating Expenses

This account consists of:

Note 2023 2022

Manpower agency services P3,475,794,466 P2,988,650,537
Depreciation and amortization 9, 10, 12 2,947,985,045 2,765,761,913
Communication, light and water 2,396,807,244 2,319,571,332
Salaries and wages 1,901,862,477 1,715,936,575
Security services 997,113,860 919,900,733
Taxes and licenses 805,190,969 709,249,083
Retirement benefits cost 25 804,986,597 181,500,049
Repairs and maintenance 424,778,275 348,310,303
Store and office supplies 397,727,529 386,652,754
Janitorial and messengerial services 223,142,675 198,931,582
Insurance 209,964,503 196,561,357
Credit card charges 208,902,814 230,068,140
Advertising and promotion 202,453,962 195,546,236
SSS/Medicare and HDMF contributions 196,547,178 161,971,247
Other selling expenses 184,479,512 163,668,700
Representation and entertainment 177,114,969 151,454,480
Input VAT allocable to exempt sales 108,871,686 116,948,062
Fuel and oil 90,664,800 105,526,692
Royalty 24 66,586,933 61,871,915
Transportation 50,238,777 41,275,804
Rent 20 45,560,752 38,019,564
Professional fees 32,056,243 23,560,573
Donations 11,608,252 55,763,357
Miscellaneous 307,028,330 405,681,041
P16,267,467,848 P14,482,382,029

23. Other Income

This account consists of:

Note 2023 2022

Dividend income 5, 14 P1,493,055,133 P1,239,578,797
Gain from lease terminations 20 46,836,234 4,593,117
Gain on sale of financial assets 7 6,524,397 -
Unrealized valuation gain (loss) on
financial assets at FVPL 6,405,009 (323,662)
Foreign exchange losses 585,956 8,333,529
Bank charges (507,919) (541,626)
Loss from insurance claims - (1,587,440)
P1,552,898,810 P1,250,052,715

Dividend income pertains mainly to the cash dividend declared by

Kareila Management Corporation amounting to P1.5 billion and P1.2 billion on
December 11, 2023 and December 20, 2022, respectively.

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24. Related Party Transactions

Other than the items disclosed in Notes 7,11, and 14, the Company’s significant transactions and balances with related parties are as follows:
Nontrade,
Nontrade and Dividends Due to
Amount of Trade Dividends Trade Payables, and Related
Category/Transaction Note Year Transactions Receivables Receivables Payables Lease Liabilities Parties Terms Conditions
Parent (COSCO Capital)
Dividends a 2023 P1,368,541,172 P - P - P - P1,368,541,172 P - Due and demandable; Unsecured
2022 1,213,345,782 - - - 1,213,345,782 - non-interest bearing
Subsidiaries
Dividends a 2023 1,505,769,796 - 1,491,655,123 - 14,114,673 - Due and demandable; Unsecured;
2022 1,250,973,214 - 1,238,459,174 - 12,514,040 - non-interest bearing not impaired
Sale of merchandise 2023 1,507,608 534,150 - - - - Due and demandable; Unsecured;
2022 192,000 192,000 - - - - non-interest bearing not impaired
Rent income b 2023 120,187,320 - 49,833,070 - 715,850 - Due and demandable; Unsecured;
2022 92,373,783 - 61,506,059 - - -
Expense reimbursement 2023 43,635,032 16,300 36,568,828 - 270,430,530 - Due and demandable; Unsecured;
2022 39,854,609 141,700 37,996,320 318,524 59,121,393 - non-interest bearing not impaired
Under Common Control
Purchase of wines and 2023 1,608,660,662 - - 280,460,571 - - Due and demandable; Unsecured
liquor 2022 1,825,173,873 - - 267,178,610 - - non-interest bearing
Sale of merchandise 2023 153,615,578 278,974,335 - - - - Due and demandable; Unsecured
2022 7,514,025 53,298,044 - - - - non-interest bearing
Lease d 2023 704,155,763 - 675,925 - 5,710,423,555 - Due and demandable; Unsecured;
2022 626,581,207 - 2,775,453 - 5,733,360,820 - non-interest bearing not impaired
Loans e 2023 2,488,745 - - - 2,488,745 - Due and demandable; Unsecured;
2022 2,486,441 - - - 2,486,441 - non-interest bearing not impaired
Expense reimbursement 2023 332,525,983 - 153,386,534 4,527,400 44,335,319 - Due and demandable; Unsecured;
2022 235,724,125 - 151,828,335 1,257,462 20,878,733 - non-interest bearing not impaired
Stockholder
Royalty expense d 2023 66,586,933 - - - - 53,269,546 Due and demandable; Unsecured
2022 61,871,915 - - - - 49,563,007 non-interest bearing
Expense reimbursement d 2023 - - - - - - Due and demandable; Unsecured
2022 - - - - - - non-interest bearing
Key Management Personnel
Short-term benefits 2023 50,063,679 - - - - -
2022 44,947,303 - - - - -
Total 2023 P279,524,785 P1,732,119,480 P284,987,971 P7,411,049,844 P53,269,546

Total 2022 P53,631,744 P1,492,565,341 P268,754,596 P7,041,707,209 P49,563,007

- 38 -
 a. Dividends
Dividends payable pertains to the share of COSCO Capital from the dividends
declared by the Company. The amount is included in the dividends payable
under the accounts payable and accrued expenses (see Note 15).

Dividends receivable pertains to cash dividend amounting to P1.5 billion and

P1.2 billion declared by Kareila on December 11, 2023 and December 20, 2022
(see Notes 5 and 23).

b. Leases - Company as a Lessor

The Company is leasing out a parcel of land to Kareila Management Corporation,
a subsidiary.

c. Leases - Company as a Lessee

The Company leases certain stores from related parties. Lease terms range from
3 to 40 years, which are generally renewable based on certain terms and
conditions. Rental payments are fixed monthly or per square meter subject to
1%-7% escalation.

d. License Agreement

On August 15, 2011, the Company entered into a license agreement for the use
of trademark and logo. In exchange, the Company pays the owner royalty based
on a percentage of net sales.

e. Loans

In 2022, the Company obtained an unsecured short-term loan from Puregold

Finance amounting to P2.5 million. This is still outstanding as at December 31,
2023.

Amounts owed by and owed to related parties are to be settled in cash.

25. Other Noncurrent Liabilities

This account consists of:

Note 2023 2022

Accrued fixed asset - net of
current 11, 15, 29 P567,279,376 P832,949,282
Retirement benefit liability 1,529,773,603 629,122,283
P2,097,052,979 P1,462,071,565

Accrued Fixed Assets

Accrued fixed assets pertains to the remaining obligations on the purchase of a
parcel of land amounting to P1.1 billion, which is classified as investment property
(see Notes 9 and 11) as at December 31, 2022 and payable until 2027. The current
portion amounting to P277.0 million is included in “Trade and other payables”
account (see Note 15).

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Retirement Benefits
The Company has an unfunded, non-contributory, defined benefit plan covering all of
its permanent employees. Contributions and costs are determined in accordance
with the actuarial studies made for the plan. Annual cost is determined using the
projected unit credit method. The Company’s latest actuarial valuation is as at
December 31, 2023. Valuations are obtained on a periodic basis.

Salient Provisions of the Retirement Plan

Normal Retirement (Minimum Retirement Law, RA 7641)
The plan provides retirement benefits under Republic Act No. 7641 (the Act) upon
compulsory retirement at the age of sixty five (65) or upon optional retirement at age
sixty (60) or more but not more than age sixty five (65) with at least five (5) years in
service. The benefits as required by the Act are equivalent to at least one-half month
(1/2) month salary for every year of service, a fraction of at least six (6) months being
considered as one (1) whole year. The term one-half (1/2) month salary shall mean:
(a) 50% of the pay salary; (b) one-twelfth (1/12) of the thirteenth (13th) month pay;
and (c) one-twelfth (1/12) cash equivalent of not more than five (5) days of service
incentive leaves.

On January 23, 2023, the Parent entity adopted a formal retirement plan with
updates on the compulsory retirement benefit and the voluntary retirement benefit
scheme. The plan provides retirement benefits upon the compulsory retirement at
the age of sixty-five (65) or upon voluntary retirement at age sixty (60) or more but
not more than age sixty-five (65) with at least five (5) years in service. This is a multi-
employer retirement plan, non-contributory, which provides a retirement benefit
ranging from 22.5 days pay up to 45 days pay for every year of service.

The reconciliation of the liability recognized in the separate statements of financial

position as at December 31 is as follows:

2023 2022
Present value of defined benefit obligation P1,560,642,775 P658,624,622
Fair value of plan assets (30,869,172) (29,502,339)
Retirement benefits liability P1,529,773,603 P629,122,283

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The movements in the present value of the defined benefit obligation for the years
ended December 31 are shown below:

2023 2022
Balance at January 1 P629,122,283 P848,564,903
Included in Profit or Loss
Current service cost 166,131,737 137,983,952
Amendment 560,109,184 -
Interest cost 81,139,865 44,624,647
Interest income on plan assets (2,130,069) (1,517,549)
Transfer to (from) plan (264,120) 408,999
804,986,597 181,500,049
Included in Other Comprehensive Income
Remeasurement losses (gains):
Actuarial loss (gain) arising from:
Financial assumptions 315,776,349 (315,678,666)
Experience adjustments (216,166,953) (83,993,637)
Remeasurement loss on plan asset 763,236 1,888,231
100,372,632 (397,784,072)
Included in Profit or Loss
Benefits paid from book reserve (4,707,909) (3,158,597)
Balance at December 31 P1,529,773,603 P629,122,283

The movements in the fair value of plan assets are as follows:

2023 2022
Balance at January 1 P29,502,339 P29,873,021
Interest income 2,130,069 1,517,549
Remeasurement loss (763,236) (1,888,231)
Balance at December 31 P30,869,172 P29,502,339

The movements in cumulative actuarial gains, before income tax effect recognized in
other comprehensive income are as follows:

2023 2022
Beginning balance (P580,401,989) (P182,617,917)
Actuarial losses (gains) for the year 100,372,632 (397,784,072)
Ending balance (P480,029,357) (P580,401,989)

The cumulative actuarial gains (loss), net of income tax effect, amounted to
P360.0 million and P435.3 million as at December 31, 2023 and 2022, which are
presented as retirement benefits reserve in the equity section of the separate
statements of financial position.

The Company’s plan assets as at December 31 consist of the following:

2023 2022
Cash in banks P591,957 P14,751
Debt instruments - government bonds 16,418,120 16,468,206
Trust fees payable (9,813) (846,717)
Other 13,868,908 13,866,099
P30,869,172 P29,502,339

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The following were the principal actuarial assumptions at the reporting date:

2023 2022
Discount rate 6.12% 7.22%
Future salary increases 8.00% 8.00%

Assumptions regarding future mortality have been based on published statistics and
mortality tables.

The weighted average duration of the defined benefit obligation at the end of the
reporting period is 23.2 years in 2023 and 17.6 years in 2022.

Assumptions and Relevant Information

Sensitivity Analysis
Reasonably possible changes at the reporting date to one of the relevant actuarial
assumptions, holding other assumptions constant, would have affected the defined
benefit obligation by the amounts shown below:

2023
Increase Decrease
Discount rate (1% movement) (P410,198,010) P315,474,143
Future salary increase rate (1% movement) 397,894,281 (313,197,792)

2022
Increase Decrease
Discount rate (1% movement) (P128,857,791) P103,606,529
Future salary increase rate (1% movement) 126,515,768 (103,797,515)

It should be noted that the changes assumed to be reasonably possible at the

valuation date are open to subjectivity, and do not consider more complex scenarios
in which changes other than those assumed may be deemed to be more reasonable.

These defined benefit plans expose the Company to actuarial risks, such as
longevity risk, interest rate risk, and market (investment) risk. The Retirement Plan
Trustee has no specific matching strategy between the plan assets and the plan
liabilities.

The 10-year maturity analysis of the benefit payments are as follows:

2023
Carrying Contractual Within Within Within
Amount Cash Flows 1 Year 1 - 5 Years 5 - 10 Years
Defined benefit
obligation P1,560,642,775 P166,953,163 P21,450,961 P20,755,572 P124,746,630

2022
Carrying Contractual Within Within Within
Amount Cash Flows 1 Year 1 - 5 Years 5 - 10 Years
Defined benefit
obligation P658,624,622 P198,517,661 P31,966,296 P47,471,647 P119,079,718

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26. Income Taxes

The reconciliation of the income tax expense computed at the statutory income tax
rate to the actual income tax expense in profit or loss for the years ended
December 31 is as follows:

2023 2022
Income before income tax P7,077,535,649 P6,866,991,255
Income tax expense at the statutory income
tax rate of 25% P1,769,383,912 P1,716,747,814
Income tax effects of:
Dividend income subjected to final tax (373,263,783) (309,894,699)
Interest income subjected to final tax (308,296,098) (142,363,180)
Non-deductible interest expense 77,074,024 35,590,794
Non-deductible expenses 8,873,898 3,414,344
Non-taxable income (2,026,440) (2,485,929)
Gain on sale of investment subject to
final tax (1,631,099) -
P1,170,114,414 P1,301,009,144

The components of the Company’s deferred tax assets (DTA) net of deferred tax
liabilities (DTL) in respect to the following temporary differences are shown below:

2023 2022
Amount DTA (DTL) Amount DTA (DTL)
Items Recognized in Profit or
Loss
Lease liabilities, net of ROU P8,341,723,315 P2,085,430,828 P7,806,369,188 P1,951,592,296
Retirement benefits liability - net 2,009,802,962 502,450,741 1,026,906,355 256,726,589
Allowance for impairment losses
on receivables 7,462,327 1,865,582 7,462,327 1,865,582
Recognition of DTA due to merger 389,731 97,433 389,731 97,433
Accrued rent income (13,482,940) (3,370,735) (20,338,482) (5,084,621)
10,345,895,395 2,586,473,849 8,820,789,119 2,205,197,279
Item recognized in Other
Comprehensive Income
Remeasurements of retirement
benefits (480,029,359) (120,007,340) (397,784,072) (99,446,018)
P9,865,866,036 P2,466,466,509 P8,423,005,047 P2,105,751,261

27. Equity

Capital Stock and Additional Paid-in Capital

The Company’s authorized, issued and outstanding shares as at December 31 are
as follows:

2023 2022
Authorized - 3,000,000,000 shares
(P1 par value)
Issued and outstanding:
Balance at beginning of year P2,904,214,086 P2,904,214,086
Treasury shares (24,076,471) (24,076,471)
Balance at end of year P2,880,137,615 P2,880,137,615

- 43 -
The initial public offering of the Company’s shares with an offer price of P12.50 per
share resulted to the issuance of 500,000,000 common shares in 2011. The
additional paid-in capital net of direct transaction costs amounted to P5.2 billion.

The Company acquired 100% equity interest of Kareila in exchange for the
766,406,250 common shares of the Company’s authorized but unissued capital
stock on May 28, 2012. The fair value of shares as at the acquisition date is
P21.5 per share. The additional paid-in capital net of direct transaction costs
amounted to P15.7 billion.

On January 16, 2019, the Company conducted a P4,693.5 million top up placement
of 104,300,000 common shares at a price of P45.0 per share. The Company
completed the placement upon approval of the BOD. The additional shares were
issued effective March 5, 2019.

Treasury Stock
The Company's treasury as at December 31 are as follows:

2023 2022
Balance at beginning of year P24,076,471 P21,126,471
Additions - 2,950,000
Balance at end of year P24,076,471 P24,076,471

On February 26, 2013, the SEC approved the application for merger of the
Company, PJSI and Gant. As a consideration for the said merger, the Company
issued shares of stocks equivalent to 16,911,162 shares at P26.6 per share. As a
result, 16,911,006 of the total shares issued held by the Company were recognized
as treasury stock.

On December 18, 2014, the BOD approved to buy back the Company’s shares up to
P1.0 billion or approximately 30 million shares within one year from the approval or
until November 4, 2015. The Company bought 1,025,000 shares with acquisition
cost of P37.8 million as treasury stock.

On March 12, 2015, SEC approved the application of the merger of the Company
and Company E. As a consideration for the said merger, the Parent Company issued
shares of stocks equivalent to 2,045,465 shares at par value. Considering that the
ultimate owner of Company E is the Parent Company, the stock shares issued were
recognized as treasury stock.

On November 22, 2017, SEC approved the application of the merger of the
Company, Goldtempo, DCI, and FLSTCI. As a consideration for the merger, the
Company issued shares of stocks to the owner of the subsidiaries equivalent to
14,551,209 shares at P39.0 per share. Considering that the Company is the ultimate
owner, the shares issued were recognized as treasury stock in the consolidated
financial statements.

In 2021, the Company reacquired 1,145,000 of its shares with acquisition cost of
P41.3 million as treasury stock.

In 2022, the Company reacquired 2,950,000 of its shares with acquisition cost of
P97.0 million as treasury stock.

- 44 -
 Retained Earnings
On December 18, 2020, the Company’s BOD approved the declaration of a regular
dividend of P0.3 per share and special dividend of P0.2 per share on record date of
January 8, 2021 and payment date of January 29, 2021. The total amount of
dividends is P1.3 billion.

On December 18, 2021, the Company’s BOD approved the declaration of a regular
dividend of P0.3 per share and special dividend of P0.3 per share on record date of
January 10, 2022 and payment date of February 1, 2022. The total amount of
dividends is P1.4 billion.

On December 20, 2022, the Company’s BOD approved the declaration of a regular
dividend of P0.86 per share on record date of January 10, 2023 and payment date of
January 20, 2023. The total amount of dividends is P2.5 billion.

On December 11, 2023, the Company’s BOD approved the declaration of a regular
dividend of P0.97 per share on record date of December 27, 2023 and payment date
of January 18, 2024. The total amount of dividends is P2.8 billion.

28. Basic/Diluted EPS

Basic/diluted EPS is computed as follows:

2023 2022
Net income P5,907,421,235 P5,565,982,111
Weighted average number of common shares 2,880,137,615 2,881,087,615
Earnings per share P2.05 P1.93

As at December 31, 2023 and 2022, the Company has no potential dilutive debt or
equity instruments.

29. Financial Risk and Capital Management Objectives and Policies

Objectives and Policies

The Company has significant exposure to the following financial risks primarily from
its use of financial instruments:

 Credit Risk
 Liquidity Risk
 Interest Rate Risk
 Other Market Price Risk

This note presents information about the Company’s exposure to each of the above
risks, the Company’s objectives, policies and processes for measuring and
managing risks, and the Company’s management of capital.

The Company’s principal financial instruments include cash and cash equivalents
and investment in trading securities. These financial instruments are used to fund the
Company’s operations and capital expenditures.

The BOD has overall responsibility for the establishment and oversight of the
Company’s risk management framework. They are responsible for developing and
monitoring the Company’s risk management policies.

- 45 -
The Company’s risk management policies are established to identify and analyze the
risks faced by the Company, to set appropriate risk limits and controls, and to
monitor risks adherence to limits. Risk management policies and systems are
reviewed regularly to reflect changes in market conditions and the Company’s
activities. All risks faced by the Company are incorporated in the annual operating
budget. Mitigating strategies and procedures are also devised to address the risks
that inevitably occur so as not to affect the Company’s operations and detriment
forecasted results. The Company, through its training and management standards
and procedures, aims to develop a disciplined and constructive control environment
in which all employees understand their roles and obligations.

Credit Risk
Credit risk represents the risk of loss the Company would incur if credit customers
and counterparties fail to perform their contractual obligations.

Exposure to credit risk is monitored on an ongoing basis. Credit is not extended

beyond authorized limits. Credit granted is subject to regular review, to ensure it
remains consistent with the customer’s credit worthiness and appropriate to the
anticipated volume of business.

Receivable balances are being monitored on a regular basis to ensure timely

execution of necessary intervention efforts.

Financial information on the Company’s maximum exposure to credit risk without

considering the effects of collaterals and other risk mitigation techniques is presented
below.

Note 2023 2022

Cash in banks and cash equivalents 4 P32,869,179,910 P28,176,715,981
Receivables - net 5 4,944,406,006 3,754,774,348
Financial assets at fair value through
profit or loss 7 4,626,139,942 4,299,380,312
Security deposits 13 1,815,210,640 1,601,546,697
P44,254,936,498 P37,832,417,338

The credit quality of the Company’s financial assets based on its historical
experience is as follows:

As of December 31, 2023

Grade A Grade B Grade C Total
Cash in banks and cash
equivalents P32,869,179,910 P - P - P32,869,179,910
Receivables - net 4,199,019,263 745,386,743 - 4,944,406,006
Financial assets at fair
value through profit or
loss 4,626,139,942 - - 4,626,139,942
Security deposits - 1,815,210,640 - 1,815,210,640
P41,694,339,115 P2,560,597,383 P - P44,254,936,498

- 46 -
 As of December 31, 2022
Grade A Grade B Grade C Total
Cash in banks and cash
equivalents P28,176,715,981 P - P - P28,176,715,981
Receivables - net 2,345,575,984 1,409,198,364 - 3,754,774,348
Financial assets at fair
value through profit or
loss 4,299,380,312 - - 4,299,380,312
Security deposits - 1,601,546,697 - 1,601,546,697
P34,821,672,277 P3,010,745,061 P - P37,832,417,338

The Company has assessed the credit quality of the following financial assets that
are neither past due nor impaired. The Company uses the following criteria to rate
credit quality:

Class Description
High grade Financial assets that have a recognized foreign or local
third-party rating or instruments which carry guaranty/
collateral.
Standard grade Financial assets of companies that have the apparent
ability to satisfy its obligations in full.

a. Cash in bank and cash equivalents were assessed as high grade since these are
deposited in reputable banks with good credit standing, which have a low
probability of insolvency and can be withdrawn anytime. The credit quality of
these financial assets is considered to be high grade.

b. Trade receivables were classified as standard grade, since these pertain to

receivables considered as unsecured from third parties with good paying habits.
Non-trade receivables from suppliers relating to rental, display allowance and
concession and advances to contractors were assessed as high grade since
these are automatically deducted from the outstanding payables to suppliers and
contractors. Advances to employees were assessed as high grade as these are
paid through salary deductions and have a high probability of collections.

c. Financial assets at fair value through profit or loss were assessed as high grade
since these are government securities and placed in entities with good favorable
credit standing.

d. Security deposits were assessed as standard grade since these have a

moderate probability of collection.

The Company applies the simplified approach using provision matrix in providing for
ECL which permits the use of the lifetime expected loss provision for trade and other
receivables. The expected loss rates are based on the Company’s historical
observed default rates. The historical rates are adjusted to reflect current and
forward-looking macroeconomic factors affecting the customer’s ability to settle the
amount outstanding. However, given the short period exposed to credit risk, the
impact of this macroeconomic factor has not been considered significant within the
reporting period.

- 47 -
The aging of receivables at the reporting date are as follows:

2023 2022
Gross Amount Impairment Gross Amount Impairment
Current P4,199,019,263 P - P2,345,575,984 P -
Past due 1-30 days 387,002,910 - 840,726,367 -
Past due 31-60 days 2,276,876 - 142,457,193 -
Past due 61-90 days 363,569,284 7,462,327 433,477,131 7,462,327
P4,951,868,333 P7,462,327 P3,762,236,675 P7,462,327

Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its financial
obligations as they fall due. The Company manages liquidity risk by forecasting
projected cash flows and maintaining balance between continuity of funding and
flexibility in operations. Treasury controls and procedures are in place to ensure that
sufficient cash is maintained to cover daily operational working capital requirements.
Management closely monitors the Company’s future and contingent obligations and
sets up required cash reserves as necessary in accordance with internal
requirements.

The following are the contractual maturities of financial liabilities, including estimated
interest payments and excluding the impact of netting agreements:
As at December 31, 2023
Carrying Contractual 1 Year More than More than
Amount Cash Flow or Less 1 Year - 5 Years 5 Years
Financial Liabilities
Trade and other payables* P17,301,655,690 P17,301,655,690 P17,301,655,690 P - P -
Other current liabilities** 327,119,206 327,119,206 327,119,206 - -
Long-term loans including
current portion*** 11,561,128,640 14,107,817,263 617,377,004 8,524,241,649 4,966,198,610
Lease liabilities 27,908,890,187 48,507,478,196 3,000,404,749 11,835,020,202 33,672,053,245
Accrued fixed assets 844,303,179 1,041,381,120 320,424,960 720,956,160 -
Due to related parties 53,269,546 53,269,546 53,269,546 - -
*Excluding withholding taxes payable and current portion of accrued fixed assets (see Note 25)
**Excluding deferred income, exclusive fund, gift cheques and perks
***Contractual cash flows include future interest payment

As at December 31, 2022

Carrying Contractual 1 Year More than More than
Amount Cash Flow or Less 1 Year - 5 Years 5 Years
Financial Liabilities
Trade and other payables* P14,281,966,242 P14,281,966,242 P14,281,966,242 P - P -
Other current liabilities** 305,211,841 305,211,841 305,211,841 - -
Long-term loans including
current portion*** 11,665,793,200 14,619,020,133 506,389,883 8,874,812,000 5,237,818,250
Lease liabilities 25,579,600,231 44,756,068,271 2,639,335,797 10,516,846,937 31,599,885,537
Accrued fixed assets 1,121,326,981 1,361,806,080 320,424,960 1,041,381,120 -
Due to related parties 49,497,532 49,497,532 49,497,532 - -
*Excluding withholding taxes payable and current portion of accrued fixed assets (see Note 25)
**Excluding deferred income, exclusive fund, gift cheques and perks
***Contractual cash flows include future interest payment

Interest Rate Risk

Interest rate risk is the risk that future cash flows from a financial instrument
(cash flow interest rate risk) or its fair value (fair value interest rate risk) will fluctuate
because of changes in market interest rates. The Company is exposed to interest
rate risk on interest earned on cash deposits in banks and long-term loans. Cash
deposits, money market placements and government securities with variable rates
expose the Company to cash flow interest rate risk. The Company is not exposed to
interest rate risk on long-term loans with fixed rates because they are carried at
amortized cost. The Company’s policy is to obtain the most favorable interest
available without increasing its foreign currency exchange exposure.

- 48 -
The interest rate profile of the Company’s interest-bearing financial instruments is as
follows:

2023 2022
Financial assets:
Cash in banks P11,447,112,009 P9,247,903,295
Money market placements 21,422,067,901 18,928,812,686
Financial assets at fair value through profit
or loss - government securities 4,588,450,000 4,268,095,378
P37,457,629,910 P32,444,811,359

Sensitivity Analysis
A 2% increase in interest rates of cash deposits would have increased equity and net
income by P56.2 million and P48.8 million in 2023 and 2022, respectively.
A 2% decrease in interest rates would have had an equal but opposite effect,
assuming a 10% interest rate and on the basis that all other variables remain
constant.

Other Market Price Risk

The Company’s market price risk arises from its investments in trading securities
carried at fair value. The Company manages its risk arising from changes in market
price by monitoring the changes in the market price of the investments.

Capital Management
The Company’s objectives when managing capital are to increase the value of
shareholders’ investment and maintain steady growth by applying free cash flow to
selective investments. The Company sets strategies with the objective of
establishing a versatile and resourceful financial management and capital structure.

The Company’s President has overall responsibility for monitoring of capital in

proportion to risk. Profiles for capital ratios are set in the light of changes in the
Company’s external environment and the risks underlying the Company’s business
operations and industry.

The Company defines capital as paid-up capital, additional paid-in capital,

remeasurements and retained earnings as shown in the separate statements of
financial position.

There were no changes in the Company’s approach to capital management during

the year.

The Company is not subject to externally imposed requirements.

Fair Values of Financial Assets and Liabilities

The methods and assumptions used by the Company in estimating the fair value of
financial asset and other financial liabilities are:

Cash and Cash Equivalents, Receivables, Trade and Other Payables, Due from
Related Parties, and Other Current Liabilities
The carrying amounts approximate their fair values due to the relatively short-term
maturities of these instruments.

- 49 -
Financial Assets at FVPL
The fair values are based on observable market inputs for government securities and
quoted market prices in an active market for equity securities.

Security Deposits
The carrying amount approximates it fair value as the effect of discounting is not
considered material.

Long-term Loans, Lease Liabilities, and Accrued Fixed Assets

The carrying amounts approximate their fair values because the difference between
the interest rates of these instruments and the prevailing market rates for similar
instruments is not considered significant.

Fair Value Hierarchy

The table below analyses financial instruments carried at fair value, by valuation
method. The different levels have been defined as follows:

 Level 1: quoted prices (unadjusted) in active markets for identical assets or

liabilities.

 Level 2: inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (i.e., as prices) or

 Level 3: inputs for the asset or liability that are not based on observable market
data (unobservable inputs).

As at December 31, 2023 and 2022, the Company’s investment in financial assets at
FVPL for equity securities and government securities were measured based on
Level 1 and 2, respectively.

- 50 -
30. Supplementary Information Required by the Bureau of Internal Revenue (BIR)

In addition to the disclosures mandated under PFRSs, and such other standards
and/or conventions as may be adopted, companies are required by the BIR to
provide in the notes to the separate financial statements, certain supplementary
information for the taxable year. The amounts relating to such information may not
necessarily be the same with those amounts disclosed in the separate financial
statements which were prepared in accordance with PFRSs. The following is the tax
information required for the taxable year ended December 31, 2023:

Based on RR No. 15-2010

A. Value Added Tax (VAT)

1. Output VAT P16,125,776,667

Basis of output VAT:
Vatable sales:
Vatable net sales P120,598,333,328
Exempt sales 11,736,737,567
Sales to government 995,376,069
133,330,446,964
Vatable concessionaire sales 8,001,058,308
Vatable COS - service income 4,013,941,769
Vatable other income:
Rent income 499,069,552
Membership fee income 94,325,406
Miscellaneous income 179,367,792
772,762,750
P146,118,209,791

VAT exempt transactions refer to sale, lease, barter or exchange of goods,

properties and/or services that are exempt from VAT under Sec 4.109 of RR
No. 16-2005.

Zero rated sale of goods refers to the local sale of goods to a person or entity
who was granted indirect tax exemption under special laws or international
agreement provided its applications have been approved by the BIR pursuant to
NIRC with certificate of tax exemption under RA No. 7227 as amended by
RA9400 issued by SBMA, CDC, PPMC, BOI registered, BETP, Philexport
accredited companies.

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 Concession fee income amounting to P1.1 billion is vatable based on the gross
concessionaire sales.

Tax Basis Tax

2. Input VAT
Beginning of the year:
Input tax carried over from
previous year P - P37,130,941
Current year’s domestic
purchases:
a. Goods other than for
resale or manufacture P - P -
b. Goods other than capital
goods 122,871,994,614 14,744,639,354
c. Capital goods subject to
amortization 1,907,945,135 228,953,416
d. Capital goods not subject
to amortization - -
e. Services lodged under
cost of goods sold 8,392,725,969 1,007,127,116
f. Purchases not qualified
for input vat 13,151,544,618 -
g. Importation - -
P146,324,210,336 15,980,719,886
P16,017,850,827

B. Documentary Stamp Tax

Lease contracts P12,869,352

C. Withholding Taxes

Creditable withholding taxes P1,647,448,532

Final withholding taxes 178,482,832
Tax on compensation and benefits 32,041,671
P1,857,973,035

D. All Other Taxes

Other taxes paid during the year recognized under

“Taxes and Licenses” account in Operating
Expense
Permits and licenses P747,106,901
Real property tax 58,084,067
P805,190,968

On September 22, 2023, the Company received Value Added Tax letter of
authority from BIR to examine the Company’s books and records for the tax
period January 1, 2022 to December 31, 2022. The Company paid a total of
P20 million for deficiency tax, interest and penalties on December 14, 2023.

As at December 31, 2023, the Company has no pending tax court cases from the
BIR.

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