HY CELLSHOP

Notes to Financial Statements

For the Year ended December 31, 2018
(Amounts in Philippine Pesos)

1. GENERAL INFORMATION

HY CELLSHOP is a sole proprietorship form of business owned by Criselle Saavedra engaged in buying and selling
cellphones and accessories. The company starts its operation and registered with the Bureau of Internal Revenue on
September 24, 2018.

The Company’s registered and principal place of business is located at Rizal Street, Ormoc City, Leyte.

2. BASIS OF PREPARATION AND ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are set out below. These
policies have been consistently applied to all the years presented unless otherwise stated.

Statement of Compliance

The financial statements of the Company have been prepared in accordance with the Philippine Financial Reporting
Standards for Small and Medium-Sized Entities (PFRS for SME’s) issued by the International Accounting Standards
Board.

Presentation of Financial Statements

The financial statements are presented in accordance with Section 3 of PFRS for SME’s, Presentation of Financial
Statements. The Company presents all income and expenses in a single statement of comprehensive income. Two
comparative periods are presented for the statement of financial position when the Company applies an accounting
policy retrospectively, makes a retrospective restatement of items in its financial statements, or reclassifies items in
the financial statement.

Functional and Presentation Currency

The financial statements are presented in Philippine pesos, the Company’s functional presentation currency, and all
values represent absolute amounts except otherwise stated.

Financial Assets

The financial assets of the Company are presented as Cash in the statement of financial position.

Cash is defined as cash on hand.

Derecognition of financial assets occurs when the rights to receive cash flows from the financial instruments expire
or are transferred and substantially all of the risks and rewards of ownership have been transferred.

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Property, Plant and Equipment

Land is measured at fair value while building and improvements are measured at fair value less depreciation. As land
has no finite useful life, this is not depreciated. All other property, plant and equipment are stated at cost less
accumulated depreciation and any impairment in value.

The initial cost of a property, plant and equipment covers its purchase price and any cost directly attributable to
bringing the asset to the location and condition necessary for it to be capable of operating in a manner intended by
management. Expenditures for additions, major improvements and renewals are capitalized while expenditures for
repairs and maintenance are charged to expense as incurred. When assets are sold, retired or otherwise disposed of,
their cost and related accumulated depreciation and impairment losses are removed from the accounts and any
resulting gain or loss is reflected in income for the period.

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

Store Furniture 5 years

Store Equipment 5 years

The residual values and estimated useful lives of property, plant and equipment are reviewed, and adjusted if
appropriate, at the end of each reporting period.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset is included
in profit or loss in the year the item is derecognized.

Financial Liabilities

Financial liabilities include other liabilities which are measured at amortized cost using the effective interest rate
method.

Financial liabilities are recognized when the Company becomes a party to the contractual terms of the instrument. All
interest-related charges are recognized as an expense in profit or loss. These are derecognized from the statement of
financial position only when the obligations are extinguished either through discharge, cancellation or expiration.

Provisions

Provisions are recognized when present obligations will probably lead to an outflow of economic resources and they
can be estimated reliably even if the timing or amount of the outflow may still be uncertain. A present obligation
arises from the presence of a legal or constructive commitment that has resulted from past events.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most
reliable evidence available at the end of the reporting period, including the risks and uncertainties associated with the
present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in
settlement is determined by considering the class of obligations as a whole. When time value of money is material,
long-term provisions are discounted to their present values using a pretax rate that reflects market assessments and the
risks specific to the obligation. Provisions are reviewed at the end of each reporting period and adjusted to reflect the
current best estimate.

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In those cases where the possible outflow of economic resource as a result of present obligation is considered
improbable or remote, or the amount to be provided for cannot be measured reliably, no liability is recognized in the
financial statements. Similarly, possible inflows of economic benefits to the Company that do not yet meet the
recognition criteria of an asset are considered contingent assets, hence, are not recognized in the financial statements.
On the other hand, any reimbursement that the Company can be virtually certain to collect from a third party with
respect to the obligation is recognized as a separate asset not exceeding the amount of the related provision.

Revenue and Expense Recognition

Revenue comprises the sale of goods measured by reference to the fair value of consideration received by the Company
for good sold, excluding value-added tax (VAT).

Revenue is recognized to the extent that the revenue can be reliably measured; it is probable that the economic benefits
will flow to the Company; and the costs incurred or to be incurred can be measured reliably. In addition, the following
specific recognition criteria must also be met before revenue is recognized:

a. Sale of goods – Revenue is recognized when the risks and rewards of ownership of the goods have passed to
the buyer.

Costs and expenses are recognized in profit or loss upon utilization of goods or services at the date they are incurred.
All finance costs are reported in profit or loss, except capitalized borrowing costs which are included as part of the
cost of the related qualifying asset.

Impairment of Assets

At each reporting date, property, plant and equipment, intangible assets, and investments in associates 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
estimated 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 revised estimate of its recoverable amount (selling price less costs to complete and sell, in the case of
inventories), 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.

Employee Benefits

Short-term Benefits

The Company recognizes a liability net of amounts already paid and an expense for services rendered by the employees
during the accounting period. Short-term benefits given by the Company to its employees include salaries and wages,
social security contributions, short-term compensated absences, bonuses and other non-monetary benefits, if any.

Income Taxes

Tax expense recognized in profit or loss comprises the sum of deferred tax and current tax not recognized in other
comprehensive income or directly in equity, if any.

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Current tax assets or liabilities comprise those claims from, or obligations to, fiscal authorities relating to the current
or prior reporting period, that are uncollected or unpaid at the reporting period. They are calculated using the tax rates
and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the year. All changes
to current tax assets or liabilities are recognized as a component of tax expense in profit or loss.

Deferred tax is provided, using the liability method on temporary differences as the end of the reporting period between
the tax base of assets and liabilities and their carrying amounts for financial reporting purposes. Under the liability
method, with certain exceptions, deferred tax liabilities are recognized for all taxable temporary differences and
deferred tax assets are recognized for all deductible temporary differences and the carryforward of unused tax losses
and unused tax credits to the extent that it is probable that taxable profit will be available against which the deferred
income tax assets can be utilized.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent
that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be
utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset
is realized or the liability is settled provided such tax rates have been enacted or substantively enacted at the end of
the reporting period.

Most changes in deferred tax assets or liabilities are recognized as a component of tax expense in profit or loss.
Only changes in deferred tax assets or liabilities that relate to items recognized in other comprehensive income or
directly in equity.

Networth

Networth includes the capital contribution of the owner and all the current and prior period results of operations as
disclosed in the statement of income. This also includes the drawings made by the owner.

3. MANAGEMENT’S SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES

The Company’s financial statements prepared in accordance with PFRS for SME’s require management to make
judgments and estimates that affect the amounts reported in the financial statements and related notes. 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 circumstances. Actual results may ultimately differ from these
estimates.

Critical Management Judgments in Applying Accounting Policies

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

a. Provisions and Contingencies

Judgment is exercised by management to distinguish between provisions and contingencies. Policies on

recognition and disclosure of provision and disclosure of contingencies are discussed in Note 2.

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Key Sources of Estimation Uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the
end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year.

a. Useful Lives of Property, Plant and Equipment

The Company estimates the useful lives of property, plant and equipment based on the period over which the
assets are expected to be available for use. The estimated useful lives of property, plant 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 assets. The carrying amounts
of property, plant and equipment are analyzed in Note 8. Based on management’s assessment as at December 31,
2018, there is no change in the estimated useful lives of property, plant and equipment during the year. Actual
results, however, may vary due to changes in estimates brought about by changes in factors mentioned above.

b. Impairment of Non-financial Assets

The Company’s policy on estimating the impairment of non-financial assets is discussed in Note 2. Though
management believes that the assumptions used in the estimation of fair values reflected in the financial
statements are appropriate and reasonable, significant changes in these assumptions may materially affect the
assessment of recoverable values and any resulting impairment loss could have a material adverse effect on the
results of operations.

No impairment loss is recognized for both 2018 and 2017.

4. CASH

Cash include the following components as of December 31:

2018

Cash on Hand P 10,602

Cash in Bank P 239,040

P 249,642

Cash on hand are the undeposited collection as of the end of the accounting period which will be deposited on the next
banking day.

Cash in bank represents current account in a reputable local bank.

5. INVENTORIES

Inventories as of December 31 amounting to P49,796.48 for 2018 is stated at cost on a First in First out basis.

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6. PROPERTY PLANT AND EQUIPMENT

The Property, plant and equipment consists of store furniture and equipment. The gross carrying amounts and
accumulated depreciation at the end of 2018 is shown below.

2018

Cost or valuation P 12,650

Accumulated depreciation ( 632)

Net carrying amount P 12,018

7. OTHER CURRENT LIABILITIES

This account consists of:

2018

Percentage tax payable P 6,625

P 6,625

This account consists of accrued expenses. These are expenses incurred during the year but are expected to be paid
after the report date.

8. NETWORTH

Summary of the changes of this account is shown below.

2018

Criselle Saavedra Capital, beg P 300,000

Add: Net Income 14,831
314,831
Less: Drawing ( 10,000)

Criselle Saavedra Capital, end P 304,831

9. Cost of Sales

The details of cost of sales are shown below.

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 2018

Merchandise inventory, beginning P -

Add: Purchases 242,614
Total goods available for sale 242,614
Less: Merchandise inventory, end ( 49,796)

P 192,818

10. TAXES

Supplementary Information

In compliance with the requirements set forth by RR 15-2010, hereunder are the information on taxes and license
fees paid or accrued during the taxable year.

a. The Company is a non-VAT registered company engaged in the business of retail trade and paid the amount
of P7,076.07 in 2018 as percentage tax. This is based on the amount reflected in the Sales Account of
P235,869.00 in 2018.

b. The details of taxes and licenses are as follows:

2018
Local
Mayor's permit P 8,525

National
BIR annual registration 500
Percentage Tax 7,076
7,576

P 16,101

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