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ALBARAKA EGGS CORPORATION

NOTES TO FINANCIAL STATEMENTS

1 General Information

ALBARAKA EGGS CORPORATION (referred to as the company) is a stock corporation that


was registered with Securities and Exchange Commission No. CS201715631 on 16th day of May
2017.

The primary purpose of the Company is to engaged in the business of trade and venture of
commercial poultry farming and livestock raising in the pursuit thereof, to develop, manage, own,
lease and operate animal farm and in general, to undertake and carry all kinds of studies,
experiments, cultivation, and trading in all kinds of livestock products and by-products.

The place where the principal office of the company is located at Barangay Banjo West, Tanauan
City, Batangas

The financial statements of the Company for the year ended December 31, 2017 was authorized
for issue by the Board of Directors on April 15,2018. The Board of Directors is still empowered
to make amendments even after the date issue.

2 Summary of Significant Accounting Policies

The financial statements prepared by ALBARAKA EGGS CORPORATION(the “Company”) in


accordance with the ‘PFRS for Small and Medium-sized Entities’ issued by the Financial
Reporting Standards Council (FRSC) and the Securities and Exchange Commission (SEC). The
principal accounting policies applied in the preparation of these consolidated financial statements
are set out below.

2.1 Basis of Preparation

The financial statements of ALBARAKA EGGS CORPORATION(the “Company”) have


been prepared in accordance with the ‘Philippine Financial Reporting Standards for Small and
Medium-Sized Entities’ (PFRS for SMEs).

They have been prepared under the historical cost convention, as modified by the revaluation
of investment property, biological assets and derivative financial instruments at fair value.

The financial statements are presented in Philippines peso, which is the Company’s functional
currency.

2.1 Going Concern

The accompanying financial statements have been prepared on a going concern basis, which
contemplate the realization of assets and settlement of liabilities in the normal course of business.

2.2 Statement of Compliance

The accompanying financial statements of the Company which were prepared for submission to the
Securities and Exchange Commission (SEC) and the Bureau of Internal Revenue (BIR) have been
prepared in compliance with the accounting principles generally accepted in the Philippines as set forth
in Philippine Financial Reporting Standards for Small and Medium sized Entities (PFRS for SMEs).

Philippine Financial Reporting Standards for Small and Medium sized Entities (PFRS for SMEs) have
been developed and published by the International Accounting Standards Board (IASB) intended to
apply to the general purpose financial statements of, and other financial reporting by SMEs became

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effective for accounting periods beginning January 1, 2010 with an early adoption. The following
sections of the said standards were consistently adopted by the Company beginning January 1, 2011:

Section 3 - Financial Statement Presentation


Section 4 - Statement of Financial Position
Statement of Comprehensive Income and Income
Section 5 - Statement
Section 6 - Statement of Changes in Equity and Statement of
Comprehensive Income and Retained Earnings
Section 7 - Statement of Cash Flows
Section 8 - Notes to Financial Statements
Section 10 - Accounting Policies, Estimates and Errors
Section 11 - Basic Financial Instruments
Section 12 - Other Financial Instrument Issues
Section 13 - Inventories
Section 17 - Property, Plant, and Equipment
Section 21 - Provisions and Contingencies
Section 22 - Liabilities and Equity
Section 23 - Revenue
Section 27 - Impairment of Assets
Section 28 - Employee Benefits
Section 29 - Income Tax
Section 32 - Events after the End of the Reporting Period
Section 33 - Related Party Disclosures

2.3 Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, demand deposits and other short-term highly liquid
investments with original maturities of three months or less. Bank overdrafts are shown in borrowings
in current liabilities on the statement of financial position.

2.4 Trade Receivables

Trade receivables are recognized initially at transaction price. They are subsequently measured at
amortized cost using the effective interest method, less provision for impairment. A provision for
impairment of trade receivables is established when there is objective evidence that the company will
not able to collect all amounts due according to the original terms of receivables.

2.5 Inventories

Inventories are stated at the lower of cost and estimated selling price less cost to complete and sell.
Cost is determined using the first-in, first-out (FIFO) method. The cost of construction materials
comprises purchased costs, other direct cost. At each reporting date, inventories are assessed for
impairment. If inventory is impaired, the carrying amount is reduced to its selling price less cost to
complete and sell; impairment loss is recognized immediately in profit or loss.

2.6 Property, Plant and Equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and any
accumulated impairment losses. Historical cost includes expenditure that is directly attributable to
bringing the asset to the location and condition necessary for it to be capable of operating in the manner
intended by management.

The company adds to the carrying amount of an item of property, plant and equipment the cost of
replacing parts 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 the replaced part is derecognised.

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All other repairs and maintenance are charged to profit or loss during the period in which they are
incurred.

Land is not depreciated. Depreciation on other assets is charged so as to allocate the cost of assets less
their residual value over their estimated useful lives, using the straight-line method. The estimated
useful lives range as follows:

Building and Improvements 10 years


Machinery, Tools and Equipment 5 years
Office Furniture, fixtures and equipment 5 years
Vehicles 5 years

The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted
prospectively if appropriate, if there is an indication of a significant change since the last reporting
date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated recoverable amount

The carrying amount of an item of property and equipment shall be derecognized on disposal or when
no future economic benefits are expected from its use or disposal. When assets are derecognized, their
cost, accumulated depreciation and amortization and accumulated impairment losses are eliminated
from the accounts. Gains and losses on disposals are determined by comparing the proceeds with the
carrying amount and are recognised within ‘other gains/(losses) – net’ in the statement of
comprehensive income.

2.7 Investment Property

Investment property is carried at fair value, derived from current market prices for comparable real
estate determined annually by external valuers. The valuers use observable market, adjusted if
necessary for any difference in the nature, location or condition of the specific asset. Changes in the
fair value are recognized in profit or loss.

2.8 Impairment of non-financial assets other than inventories

Assets that are subject to depreciation or amortization are assessed at each reporting date to determine
whether there is any indication that the assets are impaired. Where there is any indication that the assets
are impaired. Where there is any indication that as asset may be impaired, the carrying value of the
asset (or cash-generating unit to which the asset has been allocated) is tested for impairment. An
impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less cost to sell and
value in use. For the purpose of assessing impairment, assets are grouped at the lower levels for which
there are separately identifiable cash flows. Non-financial assets other than goodwill that suffered
impairment are reviewed for possible reversal of the impairment at each reporting date.

2.9 Borrowing and borrowing costs

Borrowings are recognized initially at the transaction price (that is, the present value of cash payable to
the bank, including transaction costs). Borrowings are subsequently stated at amortized cost. Interest
expense is recognized on the basis of the effective interest method and is included in finance costs.

Borrowings 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 reporting date.

All borrowing cost are expensed as incurred.

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2.10 Trade Payables

Trade payables are recognised initially at the transaction price and subsequently measured at amortised
cost using the effective interest method.

2.11 Related Party Transactions

Related party relationship exists when one party has the ability to control, directly or indirectly through
one or more intermediaries, the other party or exercise significant influence over the other party in
making financial and operating decisions. Such relationship also exists between and/or among entities
which are under common control with the reporting enterprise, or between and/or among the reporting
enterprises and their key management personnel, directors, or its shareholders. In considering each
possible related party relationship, attention is directed to the substance of the relationship, and not
merely the legal form.

2.12 Employee Benefits

Employee benefits are all forms of consideration given by the Company in exchange for service
rendered by employees, including directors and management. The Company recognizes the cost of all
employee benefits to which its employees have become entitled as a result of service rendered to the
Company during the reporting period.

2.13 Share Capital

Ordinary shares are classified as equity.

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.

2.14 Revenue Recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods in the
ordinary course of the company’s activities. Revenue is shown net of sales/value-added tax, returns,
rebates and discounts.

The company recognises revenue when: the amount of revenue can be reliably measured; it is probable
that future economic benefits will flow to the entity; and specific criteria have been met for each of the
company’s activities, as described below.

(a) Revenue – revenue is measured at the fair value of the consideration received or receivable. The
measurement of contract revenue is affected by a variety of uncertainties that depend on the
outcome of future events. The estimates often need to be revised as events occur and uncertainties
are resolved.

(b) Interest income- Interest income is recognised using the effective interest method.

2.15 Current and Deferred Income Tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss,
except that a change attributable to an item of income or expense recognised as other comprehensive
income is also recognised directly in other comprehensive income.

The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or
substantively enacted by the reporting date in the Philippines where the company’s operate and
generate taxable income.

Deferred income tax is recognised on temporary differences (other than temporary differences
associated with unremitted earnings from foreign subsidiaries and associates to the extent that the
investment is essentially permanent in duration, or temporary differences associated with the initial

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recognition of goodwill) arising between the tax bases of assets and liabilities and their carrying
amounts in the financial statements and on unused tax losses or tax credits. Deferred income tax is
determined using tax rates and laws that have been enacted or substantively enacted by the reporting
date.

The carrying amount of deferred tax assets are reviewed at each reporting date and a valuation
allowance is set up against deferred tax assets so that the net carrying amount equals the highest
amount that is more likely than not to be recovered based on current or future taxable profit.

2.16 Leases

Leases in which substantially all the risks and rewards of ownership are retained by the lessor are
classified as operating leases. Payments made under operating leases (net of any incentives received
from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease. The
company leases certain items of property, plant and equipment. Leases of property, plant and
equipment where the company has substantially all the risks and rewards of ownership are classified as
finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value
of the leased property and the present value of the minimum lease payments.

Each lease payment is apportioned between the liability and finance charges using the effective interest
method. Rental obligations, net of finance charges, are included in borrowings in the statement of
financial position. The property, plant and equipment acquired under finance leases is depreciated over
the shorter of the useful life of the asset and the lease term.

2.17 Dividend Distribution

Dividend distribution to the company’s shareholders is recognized as a liability in the company’s


financial statements in the period in which the dividends are approved by the company’s shareholders.

3 Information about key sources of estimation uncertainty and judgements

3.1 Judgements

The preparation of the Company’s financial statements in conformity with Financial Reporting Framework
(in reference to the Generally Accepted Accounting Principles of the Philippines) requires management to
make estimates and assumptions that affect the amounts reported in the Company’s financial statements and
accompanying notes. The estimates and assumptions used in the Company’s financial statements are based
upon management’s evaluation of relevant facts and circumstances as of the date of the Company’s
financial statements. Actual results could differ from such estimates, judgments and estimates are
continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.

3.2 Estimates

In the application of the Company’s accounting policies, management is required to make judgements,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that period
or in the period of the revision and future periods if the revision affects both current and future periods.

The following represents a summary of the significant estimates and judgments and related impact and
associated risks in the Company’s financial statements.

 Allowance for Doubtful Accounts

The Company assesses whether objective evidence of impairment exist for receivables and due

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from related parties that are individually significant and collectively for receivables that are not
individually significant. Allowance for doubtful accounts is maintained at a level considered
adequate to provide for potentially uncollectible receivables.

 Impairment of Inventory

The Company recognizes impairment on inventories whenever net realizable value of inventories
become lower than cost due to damage, physical deterioration, obsolescence, changes in price
levels or other causes. The impairment is reviewed on a monthly basis to reflect the accurate
valuation in the financial record.

 Estimated Useful Lives of Property and equipment

The Company estimates the useful lives of property and equipment based on the period over which
the property and equipment are expected to be available for use. The estimated useful lives of the
property and equipment are reviewed periodically and are updated if expectations differ from
previous estimates due to physical wear and tear, technical or commercial obsolescence and legal
or other limits on the use of the property and equipment. In addition, the estimation of the useful
lives of property and equipment is based on the collective assessment of industry practice, internal
technical evaluation and experience with similar assets. It is possible; however, that future
financial performance could be materially affected by changes in the estimates brought about by
changes in factors mentioned above. The amounts and timing of recorded expenses for any period
would be affected by changes in these factors and circumstances.

A reduction in the estimated useful lives of the property and equipment would increase the
recorded expenses and decrease the non-current assets.

Depreciation is computed on a straight-line method over the estimated useful lives of the assets as
follows:

Vehicle 5-10 years


Leasehold improvements 3-5 years
Delivery Equipment 5-10 years
Furniture and fixtures 3- 5 years

The foregoing estimated useful lives and depreciation method are reviewed from time to time to ensure
that these are consistent with the expected economic benefits of the property and equipment.

4 Cash and Cash Equivalents

Cash and cash equivalents include the following components as of December 31:

2017
Cash on hands and in banks 250,000.00
250,000.00

Cash in banks generally earn interest at rates based on a daily bank deposit rates. There are no
cash equivalents as of the end of the period.

5 Share Capital

Ordinary Share
At May 16, 2017 250,000.00
Proceeds from Share Issued
At December 31, 2017 250,000.00

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6 Supplementary Information Required by the BIR under RR No. 15-2010

In compliance with the requirements set forth by RR No. 15-2010 hereunder are the information
on taxes duties and license fees paid or accrued during the taxable year.

1. The company is a Non VAT-registered company.

7 Income Tax

7.1 Income Tax Expense/Income Tax Payable

The component on Income Tax Expense as reported statement of income.

2017
Current Tax
Current Tax on Profit for the year -
Adjustment in respect to prior year -
Total Current Tax -
Deferred Tax -
Income Tax Expense -

A reconciliation of tax on income before income tax computed at applicable statutory tax rates to
tax expense reported in the statement of income are as follows:

2017
Profit before Income Tax 0
Income Subject to Final Tax
Limitation on Interest Expense 33% of Income Subject to FT
Taxable Income 0
Current Tax Rate
Income Tax Due – RCIT -
Quarterly Income Tax Payment
Withholding Tax per BIR Form No. 2307 -
Income Tax Payable -

7.2 Optional Standard Deductions

Effective July 2008, Republic Act (RA) 9504 was approved giving corporate tax payer an
option to claim itemized deduction or optional standard deduction (OSD) equivalent to 40%
of gross income. Once the option to use OSD, it shall be irrevocable for the taxable year for
which the option was made.

In 2017 the company continue claiming itemized standard deductions

7.3 Change in Applicable Tax Rate

Effective January 1, 2009, in accordance with Republic Act (RA) 9337, RCIT was reduced
from 35% to 30% and non-allowable deductions for interest expense from 42% to 33% of
interest income subjected to final tax.

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8 Commitments/Contingencies

There were no significant commitments and contingencies involving the Company as of Balance
Sheet date.

9 Related Party Transactions

There were no related party transaction made by the Company for the years ending December 31,
2017

10 Events after the End of Reporting Date

There were no events after balance sheet date that would require a disclosure or adjustment on the
financial statements of the Company

11 Capital Management, Objectives, Policies and Procedures

The Company’s capital management objectives are to ensure the Company’s ability to continue as
a going concern and to provide an adequate return to shareholders by pricing products and
services commensurate with the level of risk.

The Company monitor capital on the basis of the carrying amount of equity as presented on the
face of the balance sheets. Capital for the reporting periods under review is summarized as
follows:

2017
Total Liabilities 0
Total Equity 250,000.00
Debt-to-Equity Ratio 0

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