PBG ENGINEERING & TECHNICAL SERVICES BACNOTAN, LA UNION NOTES TO FINANCIAL STATEMENTS For the Year Ended December 31, 2015 & 2014 1. BASIS OF PREPARATION AND ACCOUNTING POLICIES BASIS OF PREPARATION The accompanying financial statements had been prepared in accordance with the Philippines Financial Reporting Standard for small and medium-sized Entities issued by the International Accounting Standards Board. They are presented in the currency units of the Philippines. REVENUE RECOGNITION The company recognizes revenue from the sale of services when all the following conditions are satisfied: a. The company has transferred to the client the significant risks and rewards of ownership of the project; b. The company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the project; c. The amount of revenue can be measured reliably; d. It is probable that the economic benefits associated with the transaction will follow to the company; and e. The costs incurred or to be incurred in respect of the transaction can be measured reliably. = ; Thecompony measured revenue atthe far vlue of the considera oo es AILE account the amount of any trade discounts. wip EXPENSES RECOGNITION The recognition of expenses results directly from the recognition and- mie eoa, ofassets and liabilities. The company shall recognize expenses in the statement of comprehensive income when a decrease in future economic benefits related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably. ASSETS RECOGNITION The company shall recognize an asset in the ae is probable thet the future economic benefits will flow to the company and the asset has a cost or value that can be measured reliably. LIABILITIES RECOGNITION BODUMENT 5 woe AR -PDCS cir The company shall recognize a liability in the statement of financtet | pos torhWhea: {a) the company has an obligation at the end of the reporting period as a result of a past event, (b) it is probable that the company will be required to transfer resources embodying economic benefits in settlement, and (c) the settlement ‘amount can be measured reliably.MEASUREMENT OF ASSETS, LIABILITIES, INCOME & EXPENSES Measurement is the process of determining the monetary amounts at which the company measures assets, liabilities, income and expenses in its financial statements. Measurement involves the selection of a basis of measurement. ‘Two common measurement bases are historical cost and fair value: (a) For assets, historical cost is the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire the asset at the time of its acquisition. For liabilities, historical cost is the amount of proceeds of cash or cash equivalents received or the fair value of non-cash assets received in exchange for the obligation at the time the obligation is incurred, or in some circumstances the amounts of cash or cash equivalents expected to be paid to settle the liability in the normal course of business. Amortized historical cost is the historical cost of an asset or liability plus or minus that portion of its historical cost previously recognized as expense or income. (b) Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. ‘The company shall prepare its financial statements, except for cash flow information, using the accrual basis of accounting. On the accrual basis, items are recognized as assets, liabilities, equity, income or expenses ‘when they satisfy the definitions and recognition criteria for those items. PROPERTY, PLANT & EQUIPMENT Property, plant and equipment are tangible assets that: (a) are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes, and (b) are expected to be used during ‘more than one period. The company shall recognize the cost of an item of property, plant and equipment as an asset if, and only if: (a) itis probable that future economic benefits associated with the item will low to the entity, and (b) the cost of the item can be measured reliably. Spare parts and servicing equipment are usually carried as inventory and recognized in profit or loss as consumed. However, major spare parts and stand-by equipment are property, plant and equipment when the entity expects to use them during more than one period. Similarly, if the spare parts and servicing equipment can be used only in connection with an item of property, plant and equipment, they are considered property, plant equipment. ‘The company shall add to the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if the replacement part is expected to provide incremental future benefits to the company. The carrying amount of those parts that are replaced is derecognized. oy j = ge ; The company shall measure an item of property, plant and oi ECE RUNE P i at its cost which is the cash price equivalent at the recognition date. If payment is deferred beyor credit terms, the cost is the present value of all future payments.‘The income and related expenses of incidental operations during construction or development of an item of property, plant and equipment are recognized in profit or loss if those operations are not necessary to. bring the item to its intended location and operating condition. The company shall measure all items of property, plant and equipment after initial recognition at cost less any accumulated depreciation and any accumulated impairment losses. If the major components of an item of property, plant and equipment have significantly different patterns of consumption of economic benefits, the company shall allocate the initial cost of the asset to its major components and depreciate each such component separately over its useful life. Other assets shall be depreciated over their useful lives as a single asset. ‘The depreciation charge for each period shall be recognized in profit or loss. Depreciation of an asset begins when it is available for use. Depreciation of an asset ceases when the asset is derecognized. Depreciation does not cease when the asset becomes idle or is retired from active use unless the asset is fully depreciated. ‘The company uses a straight-line method of depreciation, that reflects the pattern in which it expects to consume the asset’s future economic benefits, based on the estimated useful lives of the assets If there is an indication that there has been a significant change since the last annual reporting date in the pattern by which the company expects to co set's future economic benefits, the company shall review its present depreciation method and, ifig fe the depreciation method to reflect the new pattern, and account the jin accounting estimate to be recognized prospectively. nee 2016 IMPAIRMENT OF ASSETS ae JOCUNENT 2aneEsey If, and only if, the recoverable amount of an asset is less than its carrying amount, the company shall reduce the carrying amount of the asset to its recoverable amount. Such reduction is an impairment loss. ‘At each reporting date, property, plant and equipment are reviewed to determine whether there is any indication that those assets have suffered an impairment loss. If there is an indication of possible impairment, the recoverable amount of any affected asset (or group of related assets) is estimated and compared with its carrying amount. If estimated recoverable amount is lower, the carrying amount is reduced to its recoverable amount, and an impairment loss is recognized immediately in profit or loss. If an impairment loss subsequently reverses, the carrying amount of the asset (or group of related assets) is increased to the revise estimate of its recoverable amount, but not in excess of the amount that would have been determined had no impairment loss been recognized for the asset (group of related assets) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss. With respect to the impairment of financial instrument measured at cost, at the end of each reporting Period, the company shall assess whether there is objective evidence of impairment of financial assets. If there is objective evidence of impairment, the company shall recognize an impairment loss in profit or loss which is the difference between the asset’s carrying amount and the best estimate (which will be an approximation) of the amount that the company would receive for the asset if it were to be sold at the reporting date.