C O V E R S H E E T - Cebu Holdings

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C O V E R S H E E Tfor

AUDITED FINANCIAL STATEMENTS

SEC Registration Number

1 5 7 9 1 2

C O M P A N Y N A M E

C E B U H O L D I N G S , I N C . A N D S U B S I D

I A R I E S

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

2 0 t h F l o o r , A y a l a C e n t e r C e b u

T o w e r , B o h o l S t r e e t , C e b u B u s –

i n e s s P a r k , C e b u C i t y

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

A A F S C R M D N / A

C O M P A N Y I N F O R M A T I O N

Company’s Email Address Company’s Telephone Number Mobile Number

www.cebuholdings.com (032) 888-3700 N/A

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

4,433 April 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

Ma. Luisa D. Chiong [email protected]

N/A N/A

CONTACT PERSON’s ADDRESS

31/F Ayala Tower I & Exchange Plaza, Makati CityNOTE 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 withinthirty (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 Commissionand/or non-receipt of Notice of Deficiencies. Further, non-receipt of Notice of Deficiencies shall not excuse the corporation from liability for its deficiencies.

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INDEPENDENT AUDITOR’S REPORT

The Stockholders and Board of DirectorsCebu Holdings, Inc. and Subsidiaries20th Floor, Ayala Center Cebu Tower, Bohol StreetCebu Business Park, Cebu City

Opinion

We have audited the consolidated financial statements of Cebu Holdings, Inc. (the “Parent Company”)and its subsidiaries (collectively referred to as the “Group”), which comprise the consolidated statementsof financial position as at December 31, 2018 and 2017, and the consolidated statements of income,consolidated statements of comprehensive income, consolidated statements of changes in equity andconsolidated statements of cash flows for each of the three years in the period endedDecember 31, 2018, and notes to the consolidated financial statements, including a summary ofsignificant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,the consolidated financial position of the Group as at December 31, 2018 and 2017, and theirconsolidated financial performance and their cash flows for each of the three years in the period endedDecember 31, 2018 in accordance with Philippine Financial Reporting Standards (PFRSs).

Basis for Opinion

We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Ourresponsibilities under those standards are further described in the Auditor’s Responsibilities for the Auditof the Consolidated Financial Statements section of our report. We are independent of the Group inaccordance with the Code of Ethics for Professional Accountants in the Philippines (Code of Ethics)together with the ethical requirements that are relevant to our audit of the consolidated financialstatements in the Philippines, and we have fulfilled our other ethical responsibilities in accordance withthese requirements and the Code of Ethics. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in ouraudit of the consolidated financial statements of the current period. These matters were addressed in thecontext of our audit of the consolidated financial statements as a whole, and in forming our opinionthereon, and we do not provide a separate opinion on these matters. For the matter below, ourdescription of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of theConsolidated Financial Statements section of our report, including in relation to these matters.Accordingly, our audits included the performance of procedures designed to respond to our assessmentof the risks of material misstatement of the consolidated financial statements. The results of our auditprocedures, including the procedures performed to address the matter below, provide the basis for ouraudit opinion on the accompanying consolidated financial statements.

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph

BOA/PRC Reg. No. 0001, October 4, 2018, valid until August 24, 2021SEC Accreditation No. 0012-FR-5 (Group A), November 6, 2018, valid until November 5, 2021

A member firm of Ernst & Young Global Limited

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Provisions and Contingencies

As disclosed in Note 33 to the consolidated financial statements, the Group is currently involved in a legalproceeding. This matter is significant to our audit because the recognition and measurement of provisionrelated to this legal proceeding require significant judgment by management.

Audit response

We discussed the status of the legal proceeding with the management and the Group’s external legalcounsel for the status of the legal proceeding and obtained opinion of their external legal counsel. Wereviewed management’s assessment on the possible outcome of the legal proceeding and the need torecognize any provision based on the status of the case and considering relevant local rules andregulations.

Adoption of PFRS 15, Revenue from Contracts with Customers

Effective January 1, 2018, the Group adopted the new revenue recognition standard, PFRS 15, Revenuefrom Contracts with Customers, under modified retrospective approach. The adoption of PFRS 15resulted in changes in the Group’s revenue process, policies and procedures and revenue recognitionaccounting policy. The following matters are significant to our audit because these involve application ofsignificant judgment and estimation: (1) identification of the contract for sale of real estate property thatwould meet the requirements of PFRS 15; (2) assessment of the probability that the entity will collect theconsideration from the buyer; (3) determination of the transaction price; (4) application of the output/inputmethod as the measure of progress in determining real estate revenue; (5) determination of the actualcosts incurred as cost of sales; and (6) recognition of cost to obtain a contract.

The Group identifies the contract that meets all the criteria required under PFRS 15 for a valid revenuecontract. In the absence of a signed contract to sell, the Group identifies alternative documentation thatare enforceable and that contains each party’s rights regarding the real estate property to be transferred,the payment terms and the contract’s commercial substance.

In evaluating whether collectability of the amount of consideration is probable, the Group considers thesignificance of the buyer’s initial payments in relation to the total contract price (or buyer’s equity).Collectability is also assessed by considering factors such as past history with the buyer, age and pricingof the property. Management regularly evaluates the historical sales cancellations and back-outs if itwould still support its current threshold of buyers’ equity before commencing revenue recognition.

In determining the transaction price, the Group considers the selling price of the real estate property andother fees and charges collected from the buyers that are not held on behalf of other parties.

In measuring the progress of its performance obligation over time, the Group uses the output method.This method measures progress based on physical proportion of work done on the real estate projectwhich requires technical determination by the Group’s specialists (project engineers).

In determining the actual costs incurred to be recognized as cost of sales, the Group estimates costsincurred on materials, labor and overhead which have not yet been billed by the contractor.

The Group identifies sales commission after contract inception as the cost of obtaining the contract. Forcontracts which qualified for revenue recognition, the Group capitalizes the total sales commission due tosales agent as cost to obtain contract and recognizes the related commission payable. The Group usespercentage of completion method in amortizing sales commission consistent with the Group’s revenuerecognition policy.


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Provisions and Contingencies

As disclosed in Note 33 to the consolidated financial statements, the Group is currently involved in a legalproceeding. This matter is significant to our audit because the recognition and measurement of provisionrelated to this legal proceeding require significant judgment by management.

Audit response

We discussed the status of the legal proceeding with the management and the Group’s external legalcounsel for the status of the legal proceeding and obtained opinion of their external legal counsel. Wereviewed management’s assessment on the possible outcome of the legal proceeding and the need torecognize any provision based on the status of the case and considering relevant local rules andregulations.

Adoption of PFRS 15, Revenue from Contracts with Customers

Effective January 1, 2018, the Group adopted the new revenue recognition standard, PFRS 15, Revenuefrom Contracts with Customers, under modified retrospective approach. The adoption of PFRS 15resulted in changes in the Group’s revenue process, policies and procedures and revenue recognitionaccounting policy. The following matters are significant to our audit because these involve application ofsignificant judgment and estimation: (1) identification of the contract for sale of real estate property thatwould meet the requirements of PFRS 15; (2) assessment of the probability that the entity will collect theconsideration from the buyer; (3) determination of the transaction price; (4) application of the output/inputmethod as the measure of progress in determining real estate revenue; (5) determination of the actualcosts incurred as cost of sales; and (6) recognition of cost to obtain a contract.

The Group identifies the contract that meets all the criteria required under PFRS 15 for a valid revenuecontract. In the absence of a signed contract to sell, the Group identifies alternative documentation thatare enforceable and that contains each party’s rights regarding the real estate property to be transferred,the payment terms and the contract’s commercial substance.

In evaluating whether collectability of the amount of consideration is probable, the Group considers thesignificance of the buyer’s initial payments in relation to the total contract price (or buyer’s equity).Collectability is also assessed by considering factors such as past history with the buyer, age and pricingof the property. Management regularly evaluates the historical sales cancellations and back-outs if itwould still support its current threshold of buyers’ equity before commencing revenue recognition.

In determining the transaction price, the Group considers the selling price of the real estate property andother fees and charges collected from the buyers that are not held on behalf of other parties.

In measuring the progress of its performance obligation over time, the Group uses the output method.This method measures progress based on physical proportion of work done on the real estate projectwhich requires technical determination by the Group’s specialists (project engineers).

In determining the actual costs incurred to be recognized as cost of sales, the Group estimates costsincurred on materials, labor and overhead which have not yet been billed by the contractor.

The Group identifies sales commission after contract inception as the cost of obtaining the contract. Forcontracts which qualified for revenue recognition, the Group capitalizes the total sales commission due tosales agent as cost to obtain contract and recognizes the related commission payable. The Group usespercentage of completion method in amortizing sales commission consistent with the Group’s revenuerecognition policy.


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The disclosures related to the adoption of PFRS 15, including available practical expedients applied bythe Group, are included in Note 2 to the consolidated financial statements.

Audit Response

We obtained an understanding of the Group’s revenue recognition process, including the process ofimplementing the new revenue recognition standard. We reviewed the PFRS 15 assessment andaccounting policies prepared by management, including revenue streams identification and scoping, andcontract analysis.

For the identification of the alternative documentation for sale of real estate property (in the absence of asigned contract to sell) that would meet the requirements of PFRS 15, our audit procedures include,among others, involvement of our internal specialist in reviewing the Group’s legal basis regarding theenforceability of the alternative documentation against previous court decisions, buyers’ behavior andindustry practices.

For the buyers’ equity, we evaluated management’s basis of the buyer’s equity by comparing this to thehistorical analysis of sales collections from buyers with accumulated payments above the collectionthreshold. We traced the analysis to supporting documents.

For the determination of the transaction price, we obtained an understanding of the nature of other feescharged to the buyers. For selected contracts, we agreed the amounts excluded from the transactionprice against the expected amounts required to be remitted to the government based on existing tax rulesand regulations (e.g., documentary stamp taxes, transfer taxes and real property taxes).

For the application of the output method, in determining real estate revenue, we obtained anunderstanding of the Group’s processes for determining the POC, and performed tests of the relevantcontrols. We obtained the certified POC reports prepared by the project engineers and assessed theircompetence and objectivity by reference to their qualifications, experience and reporting responsibilities.For selected projects, we conducted ocular inspections, made relevant inquiries and obtained thesupporting details of POC reports showing the completion of the major activities of the projectconstruction.

For the cost of sales, we obtained an understanding of the Group’s cost accumulation process andperformed tests of the relevant controls. For selected projects, we traced costs accumulated, includingthose incurred but not yet billed costs, to supporting documents.

For the recognition of cost to obtain a contract, we obtained an understanding of the sales commissionprocess. For selected contracts, we agreed the basis for calculating the sales commission capitalizedand portion recognized in profit or loss, particularly (a) the percentage of commission due againstcontracts with sales agents, (b) the total commissionable amount (e.g., net contract price) against therelated contract to sell, and, (c) the POC against the POC used in recognizing the related revenue fromreal estate sales.

We evaluated the disclosures made in the consolidated financial statements on the adoption of PFRS 15.

Other Information

Management is responsible for the other information. The other information comprises the informationincluded in the SEC Form 20-IS (Definitive Information Statement), SEC Form 17-A and Annual Reportfor the year ended December 31, 2018, but does not include the consolidated financial statements andour auditor’s report thereon. The SEC Form 20-IS (Definitive Information Statement), SEC Form 17-A


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and Annual Report for the year ended December 31, 2018 are expected to be made available to us afterthe date of this auditor’s report.

Our opinion on the consolidated financial statements does not cover the other information and we will notexpress any form of assurance conclusion thereon.

In connection with our audits of the consolidated financial statements, our responsibility is to read theother information identified above when it becomes available and, in doing so, consider whether the otherinformation is materially inconsistent with the consolidated financial statements or our knowledgeobtained in the audits, or otherwise appears to be materially misstated.

Responsibilities of Management and Those Charged with Governance for the ConsolidatedFinancial Statements

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

In preparing the consolidated financial statements, management is responsible for assessing the Group’sability to continue as a going concern, disclosing, as applicable, matters related to going concern andusing the going concern basis of accounting unless management either intends to liquidate the Group orto cease operations, or has no realistic alternative but to do so.

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

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

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

As part of an audit in accordance with PSAs, we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also:

∂ Identify and assess the risks of material misstatement of the consolidated financial statements,whether due to fraud or error, design and perform audit procedures responsive to those risks, andobtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk ofnot 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 ofinternal control.

∂ Obtain an understanding of internal control relevant to the audit in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Group’s internal control.

∂ Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by management.


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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 orconditions that may cast significant doubt on the Group’s ability to continue as a going concern. If weconclude that a material uncertainty exists, we are required to draw attention in our auditor’s report tothe related disclosures in the consolidated 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 ofour auditor’s report. However, future events or conditions may cause the Group to cease to continueas a going concern.

∂ Evaluate the overall presentation, structure and content of the consolidated financial statements,including the disclosures, and whether the consolidated financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.

∂ Obtain sufficient appropriate audit evidence regarding the financial information of the entities orbusiness activities within the Group to express an opinion on the consolidated financial statements.We are responsible for the direction, supervision and performance of the group audit. We remainsolely responsible for our audit opinion.

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

We also provide those charged with governance with a statement that we have complied with relevantethical requirements regarding independence, and to communicate with them all relationships and othermatters that may reasonably be thought to bear on our independence, and where applicable, relatedsafeguards.

From the matters communicated with those charged with governance, we determine those matters thatwere of most significance in the audit of the consolidated financial statements of the current period andare therefore the key audit matters. We describe these matters in our auditor’s report unless law orregulation precludes public disclosure about the matter or when, in extremely rare circumstances, wedetermine that a matter should not be communicated in our report because the adverse consequences ofdoing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Dolmar C. Montañez.

SYCIP GORRES VELAYO & CO.

Dolmar C. MontañezPartnerCPA Certificate No. 112004SEC Accreditation No. 1561-AR-1 (Group A), January 31, 2019 valid until January 30, 2022Tax Identification No. 925-713-249BIR Accreditation No. 08-001998-119-2019, January 28, 2019, valid until January 27, 2022PTR No. 7332588, January 3, 2019, Makati City

February 26, 2019


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CEBU HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF FINANCIAL POSITION(Amounts in Thousands)

December 312018 2017

ASSETSCurrent AssetsCash and cash equivalents (Notes 5 and 27) P=224,523 P=176,788Short-term investments (Note 6) 25,244 2,543Financial assets at fair value through profit or loss (Notes 7, 22 and 27) 10,379 10,129Receivables (Notes 8, 20, 22 and 27) 2,086,232 1,880,140Contract assets (Notes 15 and 27) 205,087 −Inventories (Note 9) 812,292 751,084Other current assets (Note 10) 234,287 531,752

Total Current Assets 3,598,044 3,352,436Noncurrent AssetsReceivables - net of current portion (Notes 8 and 27) 224,968 496,958Contract assets - net of current portion (Notes 15 and 27) 137,845 −Financial assets at fair value through other comprehensive income (OCI)

(Notes 2 and 11) 342,650 −Available-for-sale investments (Note 11) − 304,333Property and equipment (Note 12) 280,648 289,795Investments in associates and a joint venture (Note 13) 1,487,335 2,567,710Investment properties (Note 14) 19,186,946 13,517,337Deferred tax assets - net (Note 25) 25,488 4,557Other noncurrent assets (Notes 16 and 27) 1,057,904 55,034

Total Noncurrent Assets 22,743,784 17,235,724P=26,341,828 P=20,588,160

LIABILITIES AND EQUITYCurrent LiabilitiesAccounts and other payables (Notes 17, 20, 27 and 28) P=8,418,721 P=4,705,560Contract liabilities (Note 15) 65,541 −Current portion of long-term debt (Notes 18 and 27) 59,956 59,942Income tax payable 13,417 50,381Deposits and other current liabilities (Notes 19 and 27) 897,661 820,956

Total Current Liabilities 9,455,296 5,636,839

Noncurrent LiabilitiesLong-term debt - net of current portion (Notes 18 and 27) 6,341,019 6,393,634Pension liabilities (Note 24) 32,703 32,269Deferred tax liabilities - net (Note 25) 275,753 261,306Deposits and other noncurrent liabilities (Notes 19 and 27) 177,608 316,479

Total Noncurrent Liabilities 6,827,083 7,003,688Total Liabilities 16,282,379 12,640,527

Equity (Note 28)Equity attributable to equity holders of Cebu Holdings, Inc. Capital stock 2,916,845 1,920,074

Treasury shares (760,088) −Additional paid-in capital 856,684 856,684Retained earnings 4,809,452 4,250,293Equity reserves 264,560 (9,474)Remeasurement loss on defined benefit plan (Note 24) (27,404) (28,444)Net unrealized gain on equity instruments at FVOCI 2,361 −

8,062,410 6,989,133Non-controlling interests (Note 4) 1,997,039 958,500

Total Equity 10,059,449 7,947,633P=26,341,828 P=20,588,160

See accompanying Notes to Consolidated Financial Statements.

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CEBU HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(Amounts in Thousands, except Earnings Per Share Figures)

Years Ended December 312018 2017 2016

REVENUEReal estate (Notes 14, 21 and 30) P=3,112,558 2,621,733 2,278,689Equity in net earnings of associates and a joint venture

(Note 13) 106,039 14,713 161,310Interest income (Notes 5, 6, 8 and 22) 67,047 41,533 35,915Other income (Note 22) 436,196 414,255 238,559

3,721,840 3,092,234 2,714,473

COSTS AND EXPENSESReal estate (Note 23) 1,875,263 1,437,580 1,295,847Interest expense (Note 18) 336,332 345,214 247,716General and administrative expenses (Note 23) 199,051 212,083 199,021Other charges (Note 23) 68,435 22,916 64,886

2,479,081 2,017,793 1,807,470

INCOME BEFORE INCOME TAX 1,242,759 1,074,441 907,003

PROVISION FOR (BENEFIT FROM) INCOME TAX(Note 25)

Current 274,643 251,143 132,071Deferred (1,914) 10,294 43,161

272,729 261,437 175,232

NET INCOME P=970,030 P=813,004 P=731,771

Net Income Attributable to:Equity holders of Cebu Holdings, Inc. P=857,111 P=753,447 P=679,663Non-controlling interests (Note 4) 112,919 59,557 52,108

P=970,030 P=813,004 P=731,771

Basic/Diluted Earnings Per Share (Note 26) P=0.44 P=0.39 P=0.35


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CEBU HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Amounts in Thousands)


Net income P=970,030 P=813,004 P=731,771

Other comprehensive incomeOther comprehensive income not to be reclassified to

profit or loss in subsequent years: Unrealized gain on financial asset through OCI 38,877 − − Remeasurement gain (loss) on defined benefit plan

(Note 24) 1,485 (5,993) 19,095 Tax effect relating to components of other

comprehensive gain (loss) (445) 1,798 (5,729)Total other comprehensive income (loss) 39,917 (4,195) 13,366Total comprehensive income P=1,009,947 P=808,809 P=745,137

Total comprehensive income attributable to: Equity holders of Cebu Holdings, Inc. P=897,028 P=749,252 P=693,029 Non-controlling interests 112,919 59,557 52,108

P=1,009,947 P=808,809 P=745,137

See accompanying Notes to Consolidated Financial Statements..

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CEBU HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(Amounts in Thousands)

Attributable to ParentUnrealized Remeasurement Total Equity

Additional Gain on Gain (Loss) on Attributable to Non-Paid-in Treasury Equity Financial Asset Defined Benefit Equity Holders controlling

Capital Stock Capital Shares Reserve Retained Earnings (Note 28) at Fair Value Obligation of Parent Interest(Note 28) (Note 28) (Note 2) (Note 2) Appropriated Unappropriated Total through OCI (Note 24) Company (Note 4) Total

For the Year Ended December 31, 2018Balance as of January 1, 2018 P=1,920,074 P=856,684 − (P=9,474) P=1,300,000 P=2,950,293 P=4,250,293 P=− (P=28,444) P=6,989,133 P=958,500 P=7,947,633PFRS 9 transition adjustment (Note 2) − − − − − 25,561 25,561 (36,516) − (10,955) − (10,955)January 1, 2018 as restated 1,920,074 856,684 − (9,474) 1,300,000 2,975,854 4,275,854 (36,516) (28,444) 6,978,178 958,500 7,936,678Comprehensive income:

Net Income − − − − − 857,111 857,111 − − 857,111 112,919 970,030Other comprehensive income − − − − − − − 38,877 1,040 39,917 − 39,917

Total Comprehensive income − − − − − 857,111 857,111 38,877 1,040 897,028 112,919 1,009,947Additional shares issued 996,771 − − − − − − − − 996,771 − 996,771Treasury shares − − (760,088) − − − − − − (760,088) − (760,088)CBDI non-controlling interests − − − − − − − − − − 1,495,012 1,495,012Effect of merger with a subsidiary − − − 274,034 − − − − − 274,034 (569,392) (295,358)Dividends declared (Note 28) − − − − − (323,513) (323,513) − − (323,513) − (323,513)Balance as of December 31, 2018 P=2,916,845 P=856,684 (P=760,088) P=264,560 P=1,300,000 P=3,509,452 P=4,809,452 P=2,361 (P=27,404) P=8,062,410 P=1,997,039 P=10,059,449

For the Year Ended December 31, 2017Balance as of January 1, 2017 P=1,920,074 P=856,684 P=− (P=9,474) P=1,300,000 P=2,484,856 P=3,784,856 P=− (P=24,249) P=6,527,891 P=898,943 P=7,426,834Comprehensive income

Net Income − − − − − 753,447 753,447 − − 753,447 59,557 813,004Other comprehensive income − − − − − − − − (4,195) (4,195) − (4,195)

Total Comprehensive income − − − − − 753,447 753,447 − (4,195) 749,252 59,557 808,809Dividends declared (Note 28) − − − − − (288,010) (288,010) − − (288,010) − (288,010)

Balance as of December 31, 2017 P=1,920,074 P=856,684 P=− (P=9,474) P=1,300,000 P=2,950,293 P=4,250,293 P=− (P=28,444) P=6,989,133 P=958,500 P=7,947,633

For the Year Ended December 31, 2016Balance as of January 1, 2016 P=1,920,074 P=856,684 P=− (P=9,474) P=1,300,000 P=2,035,602 P=3,335,602 P=− (P=37,615) P=6,065,271 P=846,835 P=6,912,106Comprehensive income:

Net Income − − − − − 679,663 679,663 − − 679,663 52,108 731,771Other comprehensive income − − − − − − − − 13,366 13,366 − 13,366

Total Comprehensive income: − − − − − 679,663 679,663 − 13,366 693,029 52,108 745,137Dividends declared (Note 28) − − − − − (230,409) (230,409) − − (230,409) − (230,409)

Balance as of December 31, 2016 P=1,920,074 P=856,684 P=− (P=9,474) P=1,300,000 P=2,484,856 P=3,784,856 P=− (P=24,249) P=6,527,891 P=898,943 P=7,426,834See accompanying Notes to Consolidated Financial Statements.

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CEBU HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in Thousands)


CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax P=1,242,759 P=1,074,441 P=907,003Adjustments for: Depreciation and amortization (Notes 12, 14 and 23) 549,685 495,610 402,070 Interest expense (Note 18) 336,332 345,214 247,716 Equity in net earnings of associates and a joint

venture (Note 13) (106,039) (14,713) (161,310) Interest income (Note 22) (67,047) (41,533) (35,915)

Pension expense (contribution) - net(Notes 23 and 24) 1,920 (5,923) (4,738)

Unrealized foreign exchange gain (579) (105) (68)Unrealized loss (gain) on financial assets at fair

value through profit or loss (250) (93) 438Loss on disposal of property and equipment − − 13

Operating income before working capital changes 1,956,781 1,852,898 1,355,209Decrease (increase) in: Receivables (327,925) (76,749) 1,146,215

Contract assets (342,932) − − Inventories 232,894 (12,992) (5,664)

Financial assets at fair value through profitor loss 562 11,872 51,219

Other current assets (62,030) 93,338 37,528Increase (decrease) in: Accounts and other payables 4,791,386 738,530 (899,799)

Contract liabilities 65,541 − − Deposits and other liabilities (64,324) (256,981) 135,476Net cash generated from operations 6,249,953 2,349,916 1,820,184Interest paid (310,453) (386,099) (285,480)Interest received 33,497 12,955 24,214Income taxes paid (311,607) (179,987) (183,131)Net cash provided by operating activities 5,661,390 1,796,785 1,375,787

CASH FLOWS FROM INVESTING ACTIVITIESAdditions to: Investment properties (Notes 14 and 32) (4,179,762) (560,035) (109,435) Property and equipment (Notes 12 and 32) (25,813) (15,764) (26,455) Short-term investment (22,701) (3,015) −

Associates and a joint venture (Note 13) − (698,303) (325,000)Land and improvements (Notes 15 and 32) − (56,027) (325,964)

Decrease (increase) in other noncurrent assets (1,003,176) (39,487) 27,893Proceeds from sale/redemption of:

Property and equipment − − 300Short-term investments − − 45,318Investment properties − − 3,558

Net cash used in investing activities (5,231,452) (1,372,631) (709,785)

(Forward)

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CASH FLOWS FROM FINANCING ACTIVITIESPayments:

Dividends paid (P=321,782) (P=288,010) (P=242,329)Long-term debt (61,000) (459,000) (470,875)Purchased land − (351,569) (351,569)

Availments of long-term debt − 756,200 378,100Net cash used in financing activities (382,782) (342,379) (686,673)

EFFECT OF EXCHANGE RATE CHANGES ON CASHAND CASH EQUIVALENTS 579 105 68

NET INCREASE (DECREASE) IN CASH AND CASHEQUIVALENTS 47,735 81,880 (20,603)

CASH AND CASH EQUIVALENTS AT BEGINNING OFYEAR (Note 5) 176,788 94,908 115,511

CASH AND CASH EQUIVALENTS AT END OF YEAR(Note 5) P=224,523 P=176,788 P=94,908


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CEBU HOLDINGS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Group Information and Legal Merger

Cebu Holdings, Inc. (the Parent Company) is domiciled and was incorporated on December 9, 1988in the Republic of the Philippines. The Parent Company is a 70.43%-owned subsidiary of AyalaLand, Inc. (ALI), a publicly listed company. ALI is a subsidiary of Ayala Corporation (AC), a publiclylisted company which is 47.04%-owned by Mermac, Inc. and the rest by public.

The Parent Company registered office address is at 20th Floor, Ayala Center Cebu Tower, BoholStreet, Cebu Business Park, Cebu City. The Parent Company is engaged in real estatedevelopment, sale of subdivided land, residential and office condominium units, sports club shares,and lease of commercial spaces.

The Parent Company’s shares of stock are publicly traded in the Philippine Stock Exchange (PSE).

Details on the Parent Company’s subsidiaries are as follows:

∂ Cebu Leisure Company, Inc. (CLCI), a wholly owned subsidiary, is engaged in subleasing ofcommercial spaces, food courts and entertainment facilities. The registered office address ofCLCI is at Admin Office, Level 4, Ayala Center Cebu, Cebu Business Park, Cebu City.

∂ CBP Theatre Management Company, Inc. (CBP Theatre), a wholly owned subsidiary, is engagedin all aspects of the theatrical and cinematographic entertainment business, including theatremanagement and other related undertakings. CBP Theatre has not yet started its operations asof December 31, 2018.

∂ Prior to the legal merger in 2018, Cebu Property Ventures and Development Corporation(CPVDC), a partially-owned subsidiary, is engaged in real estate development and sale ofsubdivision land and residential units. The shares of stocks of CPVDC are also traded in the PSEbefore the merger. The registered office address of CPVDC is at 20th Floor, Ayala Center CebuTower, Bohol Street, Cebu Business Park, Cebu City. On November 6, 2018, Securities andExchange Commission (SEC) approved the merger between CPVDC and the Parent Company.

∂ Asian I-Office Properties, Inc. (AiO), a wholly owned subsidiary, is engaged in all aspects of realestate development and in leasing of corporate spaces. The registered office address of AiO isat 20th Floor, Ayala Center Cebu Tower, Bohol Street, Cebu Business Park, Cebu City.

∂ Taft Punta Engaño Property Inc. (TPEPI), a partially-owned subsidiary, is engaged in real estatedevelopment of mixed-use commercial and residential district within a 12-hectare property inLapu-Lapu City. The registered office address of TPEPI is at Vicsal Bldg., cor. C.D. Seno & W.O.Seno Sts., San Miguel Extension, Barangay Guizo, North Reclamation Area, Mandaue City.

∂ Central Block Developers, Inc. (CBDI), a partially-owned subsidiary, is engaged in all aspects ofreal estate development and in leasing of corporate spaces. The project of CBDI is called CentralBloc and is located at the core of Cebu IT Park. The development includes two BPO towers, anAyala branded hotel, and a 5-storey mall. The Company’s registered address and principal placeof business is at 28th Floor, Tower One and Exchange Plaza, Ayala Triangle, Ayala Avenue,Makati City.

The consolidated financial statements of Cebu Holdings Inc. and its subsidiaries (the Group) as ofDecember 31, 2018 and 2017 and for each of the three years ended December 31, 2018 wereendorsed for approval by the Audit and Risk Committee on February 12, 2019 and were approvedand authorized for issue by the Board of Directors (BOD) on February 26, 2019.

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Legal MergerOn February 26, 2018, the Parent Company and its subsidiary, CPVDC, entered into a plan mergerwith the Parent Company as the surviving entity.

On November 6, 2018, SEC has approved the merger and issued the Certificate of Filing of theArticles and Plan of Merger of CHI and CPVDC (Plan of Merger).

Under the Plan of Merger, the Parent Company will issue 996,771,000 outstanding shares, with P=1par value to CPVDC’s shareholders including the Parent Company from its unissued shares througha share swap with a swap ratio of 1.06.

The merger resulted in a streamlined operations within the Group and the transactions are conductedin a more efficient manner.

The carrying amount of the identifiable assets and liabilities of CPVDC follow:

As of November 6, 2018(In Thousands)

ASSETSCurrent AssetsCash and cash equivalents P=18,584Short-term investments 2,582Financial assets at fair value through

profit or loss 1,117Receivables 573,369Other current assets 20,259

Total Current Assets 615,911Noncurrent AssetsNoncurrent portion of receivables 144,045Investment in a subsidiary, an associate and a joint venture 1,689,420Investment properties 838,755Property and equipment 1,438Other noncurrent assets 4,469

Total Noncurrent Assets 2,678,127P=3,294,038

LIABILITIESCurrent LiabilitiesAccounts and other payables P=1,439,977Income tax payable 1,383

Total Current Liabilities 1,441,360Noncurrent LiabilitiesDeposits and other noncurrent liabilities 24,197Deferred tax liabilities - net 78,485

Total Noncurrent Liabilities 102,682Total Liabilities P=1,544,042

Total Identifiable Net Assets at Book Value P=1,749,996

Retained earnings P=809,647

The Parent Company previously owned 717,064,047 shares of CPVDC. This was replaced by760,087,890 new shares of the Parent Company that is currently classified as treasury shares. Theremaining 236,683,110 shares was issued to other CPVDC shareholders or minority shareholders.

The excess of the net assets of CPVDC over the investment and additional issuance of shares of theParent Company amounting to P=274.0 million was charged to “Equity reserves” account.

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As a result of merger, the Parent Company possessed all the right, privileges and immunities ofCPVDC. All property and receivables due to CPVDC shall be taken and deemed to be transferred toand vested in the Parent Company without further act or deed.

In addition, the Parent Company increased its ownership interest to 55% over CBDI after the mergerand, following the current composition of CBDI’s BOD seats (i.e. 3 out of 5) and its voting rightsbased on its By-Laws, the Parent Company has the control over CBDI and has the power to directrelevant activities as it has the majority of BOD seats which required for an act to be approved.

The Group’s consolidated financial statements after the merger reflected the balances of CBDI’sassets and liabilities at carrying amounts since the event is a common control transaction which isessentially a transfer of the assets and liabilities of CBDI from the consolidated financial statements ofALI to the consolidated financial statements of CHI. Difference between the net assets of CBDI andinvestment in CBDI as of the date of the merger are accounted for as an equity transaction.

The carrying amount of the identifiable assets and liabilities of CBDI follow:

As of November 6, 2018(In Thousands)

ASSETSCurrent AssetsCash P=12,382Receivables 341,651Other current assets 475,530

Total Current Assets 829,563Noncurrent AssetsInvestment properties 4,401,770Deferred tax asset 61Other noncurrent assets 306

Total Noncurrent Assets 4,402,137P=5,231,700

LIABILITIESCurrent LiabilitiesAccounts and other payables P=2,248,966Deposits and other current liabilities 5,055

Total Current Liabilities 2,254,021Noncurrent LiabilitiesDeposits and other noncurrent liabilities 1,321

Total Liabilities P=2,255,342Total Identifiable Net Assets at Book Value P=2,976,358Retained earnings P=588

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2. Basis of Preparation, Statement of Compliance and Summary of Significant AccountingPolicies

Basis of PreparationThe consolidated financial statements of the Group have been prepared using the historical costbasis, except for financial assets at fair value through profit or loss (FVPL) and for financial assets atfair value through other comprehensive income (FVOCI) which have been measured at fair value.The consolidated financial statements are presented in Philippine Peso (P=), which is also thefunctional currency of the Parent Company. All values are rounded to the nearest thousand (P=000)except when otherwise indicated.

Statement of ComplianceThe consolidated financial statements of the Group have been prepared in compliance with PhilippineFinancial Reporting Standards (PFRSs), which include the availment of the relief granted by the SECunder Memorandum Circular Nos. 14-2018 and 3-2019 as discussed in the “Changes in accountingpolicies” section.

Basis of ConsolidationThe consolidated financial statements comprise the financial statements of the Parent Company andthe following subsidiaries as of December 31:

Percentage of ownership2018 2017 2016

CLCI 100 100 100CBP Theatre 100 100 100CPVDC – 76 76AiO 100 76* 76*CBDI 55 – –TPEPI 55 55 55* wholly owned by CPVDC prior to merger

The Parent Company and all its subsidiaries are incorporated and operating in the Philippines.

Specifically, the Group controls an investee, if and only, if the Group has:∂ Power over the investee (i.e. existing rights that give it the current ability to direct the relevant

activities of the investee);∂ Exposure, or rights, to variable returns from its involvement with the investee; and∂ The ability to use its power over the investee to affect its returns.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate thatthere are changes to one or more of the three elements of control. Consolidation of a subsidiarybegins when the Group obtains control over the subsidiary and ceases when the Group loses controlof the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed ofduring the year are included in the consolidated financial statements from the date the Group gainscontrol until the date the Group ceases to control the subsidiary.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Groupobtains control, and continue to be consolidated until the date when such control ceases. Thefinancial statements of the subsidiaries are prepared for the same reporting period as the ParentCompany, using consistent accounting policies.

All intra-group balances and transactions, including income, expenses and dividends relating totransactions between members of the Group, are eliminated in full on consolidation.

Non-controlling interests (NCI) represent the portion of profit or loss and net assets in subsidiaries notwholly owned by the Parent Company and are presented separately in the consolidated statement ofincome, consolidated statement of comprehensive income, consolidated statement of changes in

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equity and within equity in the consolidated statement of financial position, separately from the equityattributable to the Parent Company.

Total comprehensive income within a subsidiary is attributed to the NCI even if that results in a deficitbalance.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as anequity transaction.

If the Group loses control over a subsidiary, it derecognizes the related assets (including goodwill),liabilities, non-controlling interest and other components of equity, while any resultant gain or loss isrecognized in profit or loss. Any investment retained is recognized at fair value.

Changes in Accounting PoliciesThe accounting policies adopted are consistent with those of the previous financial year, except thatthe Group has adopted the following new accounting pronouncements starting January 1, 2018:

∂ Amendments to PFRS 2, Share-based Payment, Classification and Measurement of Share-basedPayment Transactions

The amendments to PFRS 2 address three main areas: the effects of vesting conditions on themeasurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and theaccounting where a modification to the terms and conditions of a share-based paymenttransaction changes its classification from cash-settled to equity-settled. Entities are required toapply the amendments to: (1) share-based payment transactions that are unvested or vested butunexercised as of January 1, 2018, (2) share-based payment transactions granted on or afterJanuary 1, 2018 and to (3) modifications of share-based payments that occurred on or afterJanuary 1, 2018. Retrospective application is permitted if elected for all three amendments and ifit is possible to do so without hindsight.

These amendments do not have any impact on the Group’s consolidated financial statementssince the Group does not have share-based payment transactions.

∂ PFRS 9, Financial Instruments

PFRS 9 Financial Instruments replaces PAS 39 Financial Instruments: Recognition andMeasurement for annual periods beginning on or after January 1, 2018, bringing together allthree aspects of the accounting for financial instruments: classification and measurement;impairment; and hedge accounting.

The Group applied PFRS 9 using modified retrospective approach, and chose not to restatecomparative figures as permitted by the transitional provisions of PFRS 9, thereby resulting in thefollowing impact:

∂ The classification and measurement requirements previously applied in accordance with PAS39 and disclosures requirements in PFRS 7 are retained for the comparative period.Accordingly, the information presented for the comparative period does not reflect therequirements of PFRS 9.

∂ The Group discloses the accounting policies for both the current and the comparativeperiods, one applying PFRS 9 beginning January 1, 2018 and one applying PAS 39 as atDecember 31, 2017.

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∂ The difference between the previous carrying amount and the carrying amount at thebeginning of the annual reporting period that includes the date of initial application isrecognized in the opening retained earnings or other component of equity, as appropriate.

∂ As comparative information is not restated, the Group is not required to provide a thirdstatement of financial information at the beginning of the earliest comparative period inaccordance with Philippine Accounting Standard (PAS) 1, Presentation of FinancialStatements.

As at January 1, 2018, the Group has reviewed and assessed all its existing financial assets.

The assessment of the Group’s business model was also made as at the date of the initialapplication. The assessment of whether contractual cash flows on financial instruments aresolely comprised of principal and interest was made based on the facts and circumstances as atthe initial recognition of the financial instruments.

The table below illustrates the classification and measurement of financial assets and financialliabilities under PFRS 9 and PAS 39. The accounting policies adopted by the Group in itsevaluation of the classification and measurement categories under PFRS 9 are discussed in thesignificant accounting policies section.

(a) Classification and measurement

The measurement category and the reconciliation of carrying amounts of financial assets underPAS 39 and PFRS 9 are as follows:

As at January 1, 2018

PAS 39/PFRS 9 Measurement Category

CarryingAmount underPAS 39 as at

December 31, 2017 Remeasurement

CarryingAmount underPFRS 9 as at

January 1, 2018Loans and receivables under PAS

39/Financial assets at amortized costunder PFRS 9:Cash and cash equivalents P=176,788 P=− P=176,788Short-term investments 2,543 − 2,543Receivables and contract assets:

Receivables and contract assets 813,079 − 813,079Due from related parties 1,487,762 − 1,487,762Other nontrade receivables 76,118 − 76,118

Other current/noncurrent assets:Refundable deposits 23,746 − 23,746

Financial assets at FVPL under PAS 39 andPFRS 9 10,129 − 10,129

Available-for-sale under PAS 9/Financialassets at FVOCI under PFRS 9 304,333 − 304,333

Total P=2,894,498 P=− P=2,894,498

The following are the changes in the classification of the Group’s financial assets:

∂ Cash and cash equivalents, trade receivables, short-term investments and other current andnoncurrent financial assets (i.e., refundable deposits) previously classified as Loans andreceivables are held to collect contractual cash flows and give rise to cash flows representingsolely payments of principal and interest. These are now classified and measured asFinancial assets at amortized cost.

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∂ Equity investments in non-listed companies previously classified as AFS financial assets arenow classified and measured as AFS investments at FVOCI. The Group elected to classifyirrevocably its non-listed equity investments under this category as it intends to hold theseinvestments for the foreseeable future.

As a result of the change in classification of the Group’s non-listed equity investments, theimpairment losses of P=36.5 million recognized in profit or loss in prior periods werereclassified to other comprehensive income as at January 1, 2018 (see Note 11).

As at December 31, 2018

PAS 39/PFRS 9 Measurement Category

CarryingAmount underPAS 39 as at

December 31, 2018 Remeasurement

CarryingAmount underPFRS 9 as at

December 31, 2018Loans and receivables under PAS

39/Financial assets at amortized costunder PFRS 9:Cash and cash equivalents P=224,523 P=− P=224,523Short-term investments 25,244 − 25,244Receivables and contract assets:

Trade receivables and contractassets 691,867 − 691,867Due from related parties 1,410,230 − 1,410,230Other nontrade receivables 553,264 − 553,264

Other current/noncurrent assets:Refundable deposits 29,376 − 29,376

Financial assets at FVPL under PAS 39 andPFRS 9 10,379 − 10,379

AFS financial asset under PAS 39/Equityinstruments at FVOCI under PFRS 9 303,771 38,879 342,650

Total P=3,248,654 P=38,879 P=3,287,533

There were no changes to the classification and measurement of financial liabilities. As atDecember 31, 2018 and 2017, the Group does not hold financial liabilities designated at FVPL.

The Group does not have financial assets and financial liabilities which had previously beendesignated at FVPL to reduce an accounting mismatch in accordance with PAS 39 which hadbeen reclassified to amortized cost or FVOCI upon transition to PFRS 9.

(b) Impairment

The adoption of PFRS 9 has fundamentally changed the Group’s accounting for impairmentlosses for financial assets by replacing PAS 39’s incurred loss approach with a forward-looking expected credit loss (ECL) approach. PFRS 9 requires the Group to record anallowance for impairment losses for loans and other debt financial assets not held at FVPLand contract assets.

For trade receivables and contract assets, the Group has applied the standard’s simplifiedapproach and has calculated ECLs based on lifetime expected credit losses. Therefore, theGroup does not track changes in credit risk, but instead recognizes a loss allowance based onlifetime ECLs at each reporting date. The Group has established a provision matrix that isbased on its historical credit loss experience, adjusted for forward-looking factors specific tothe debtors and the economic environment.

Further, since the implementation of PFRS 9, all financial assets except those measured atFVPL and equity instruments at FVOCI are assessed for at least 12-month ECL and thepopulation of financial assets to which the lifetime ECL applies is larger than the population forwhich there is objective evidence of impairment in accordance with PAS 39.

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For other financial assets such as receivables from related parties and others, ECLs arerecognized in two stages. For credit exposures for which there has not been a significantincrease in credit risk since initial recognition, ECLs are provided for credit losses that resultfrom default events that are possible within the next 12-months (a 12-month ECL). For thosecredit exposures for which there has been a significant increase in credit risk since initialrecognition, a loss allowance is required for credit losses expected over the remaining life ofthe exposure, irrespective of the timing of the default (a lifetime ECL).

For cash and cash equivalents, the Group applies the low credit risk simplification. Theprobability of default and loss given defaults are publicly available and are considered to below credit risk investments. It is the Group’s policy to measure ECL on such instruments on a12-month basis. However, when there has been a significant increase in credit risk sinceorigination, the allowance will be based on a lifetime ECL.

There were no significant changes on the impairment allowances of the Group upon transitionto PFRS 9 on January 1, 2018.

(c) Other adjustments

In addition to the adjustments described above, upon adoption of PFRS 9, other items of theprimary financial statements such as deferred taxes, and retained earnings were adjusted asnecessary.

∂ Amendments to PFRS 4, Applying PFRS 9 Financial Instruments with PFRS 4, InsuranceContracts

The amendments address concerns arising from implementing PFRS 9, the new financialinstruments standard before implementing the new insurance contracts standard. Theamendments introduce two options for entities issuing insurance contracts: a temporaryexemption from applying PFRS 9 and an overlay approach. The temporary exemption is firstapplied for reporting periods beginning on or after January 1, 2018. An entity may elect theoverlay approach when it first applies PFRS 9 and apply that approach retrospectively to financialassets designated on transition to PFRS 9. The entity restates comparative information reflectingthe overlay approach if, and only if, the entity restates comparative information when applyingPFRS 9.

The amendments are not applicable to the Group since none of the entities within the Group haveactivities that are predominantly connected with insurance or issue insurance contracts.

∂ PFRS 15, Revenue from Contracts with Customers

PFRS 15 supersedes PAS 11, Construction Contracts, PAS 18, Revenue, and the relatedInterpretations and it applies, with limited exceptions, to all revenue arising from contracts with itscustomers. PFRS 15 establishes a five-step model to account for revenue arising from contractswith customers and requires that revenue be recognized at an amount that reflects theconsideration. The five-step model is as follows:

∂ Identify the contract with a customer;∂ Identify the performance obligations in the contract;∂ Determine the transaction price;∂ Allocate the transaction price to the performance obligations in the contract; and∂ Recognize revenue as the entity satisfies a performance obligation.

PFRS 15 requires entities to exercise judgement, taking into consideration all of the relevant factsand circumstances when applying each step of the model to contracts with their customers. Thestandard also specifies the accounting for the incremental costs of obtaining a contract and thecosts directly related to fulfilling a contract. In addition, PFRS 15 requires extensive disclosures.

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On February 14, 2018, the Philippines Interpretation Committee (PIC) issued PIC Q&A 2018-12(PIC Q&A) which provides guidance on some implementation issues of PFRS 15 affecting realestate industry. On October 25, 2018, the Philippine Securities and Exchange Commission(SEC) issued SEC Memorandum Circular No. 14 Series of 2018, providing relief to the real estateindustry by deferring the application of the following provisions of the above PIC Q&A for a periodof three (3) years:

a. Exclusion of land and uninstalled materials in the determination of percentage of completion(POC) discussed in PIC Q&A No. 2018-12-E;

b. Accounting for significant financing component discussed in PIC Q&A No. 2018-12-D;c. Accounting to common usage service area (CUSA) Charges discussed in PIC Q&A No.

2018-12-H; andd. Accounting for cancellation of real estate sales discussed in PIC Q&A No. 2018-14.

Except for the CUSA charges discussed under PIC Q&A No. 2018-12-H which applies to leasingtransactions, the above deferral will only be applicable for real estate sales transactions.

Effective January 1, 2021, real estate companies will adopt PIC Q&A No. 2018-12 and PIC Q&ANo. 2018-14 and any subsequent amendments thereof retrospectively or as the SEC will laterprescribe.

The Group availed of the deferral of adoption of the above specific provisions of PIC Q&A. Hadthese provisions been adopted, it would have the following impact in the financial statements:

Availment of the Deferral of the Exclusion of Land and Uninstalled Materials in the Determinationof POCThe exclusion of land and uninstalled materials in the determination of POC would reduce thepercentage of completion of real estate projects resulting in a decrease in the revenue from realestate sales in 2018. This would also result to the land portion of sold to be treated as contractfulfillment asset.

Availment of the Deferral of the Accounting for Significant Financing ComponentThe mismatch between the POC of the real estate projects and right to an amount ofconsideration based on the schedule of payments explicit in the contract to sell would constitute asignificant financing component.

The Group opted to avail of the relief for the deferral of the accounting for the significant financingcomponent in recognizing revenue from its real estate sales upon the date of initial application onJanuary 1, 2018. If the Group had adopted the application guideline of the PIC Q&A No. 2018-12on the significant financing component effective January 1, 2018, the Group’s interest incomewould have been recognized for contract assets and interest expense for contract liabilities usingeffective interest rate method and this would have impacted retained earnings as atJanuary 1, 2018 and the revenue from real estate sales in 2018. Currently, any significantfinancing component arising from the mismatch discussed above is not considered for revenuerecognition purposes.

Availment of the Deferral of the Accounting for Common Usage Service Area (CUSA) ChargesThe Group is acting as a principal for the provision of air-conditioning services, common useservice services and administration and handling services.

The Group opted to avail of the relief for the deferral of the accounting for CUSA charges uponthe date of initial application on January 1, 2018. If the Group had adopted the accounting forCUSA charges, this would have resulted to the gross presentation of the related revenue and therelated expenses and cost. Currently, the related revenue is presented net of costs andexpenses. These would not result to any adjustment in the retained earnings as ofJanuary 1, 2018 and net income.

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Availment of the Deferral of the Accounting for Cancellation of Real Estate SalesUpon sales cancellation, the repossessed inventory would be recorded at fair value plus cost torepossess (or fair value less cost to repossess if this would have been opted). This would haveincreased retained earnings as at January 1, 2018 and gain from repossession in 2018.Currently, the Group records the repossessed inventory at historical cost.

The Group adopted PFRS 15 using the modified retrospective method of adoption with the dateof initial application at January 1, 2018. Under this method, the standard can be applied either toall contracts at the date of initial application or only to contracts that are not completed at thisdate. The Group elected to apply the method to those contracts not completed as atJanuary 1, 2018.

The cumulative effect of initially applying PFRS 15 is recognized at the date of initial applicationas an adjustment to the opening balance of retained earnings. Therefore, the comparativeinformation was not restated and continues to be reported under PAS 11, PAS 18 and relatedInterpretations.

Consolidated Statement of Financial Position

As ofDecember 31,

2017

Increase(Decrease)

due to PFRS 15Adjustments

A restatedJanuary 1, 2018

AssetsReceivables (Note 8) P=2,002,141 (P=176,866) P=1,825,275Contract assets (Note 15) – 176,866 176,866Total Assets P=2,002,141 P=– P=2,002,141

LiabilitiesDeposits and other liabilities (Note 19) P=4,705,560 (P=92,179) P=4,613,381Contract liabilities (Note 15) – 92,179 92,179Total Liabilities P=4,705,560 P=– P=4,705,560

The impact to each financial statement line item of the consolidated statement of income andconsolidated statement of financial position as at and for the year ended December 31, 2018 as aresult of the adoption of PFRS 15 is as follows:

Consolidated Statement of Comprehensive IncomeNo impact in the Group’s comprehensive income as a result of the adoption of PFRS 15.

Consolidated Statement of Financial Position

Amounts prepared under

PFRS 15 Previous PFRSIncrease/

(Decrease)AssetsReceivables (Note 8) P=2,201,476 P=2,544,408 (P=342,932)Contract assets (Note 15) 342,932 – 342,932Total Assets P=2,544,408 P=2,544,408 P=–

LiabilitiesDeposits and other liabilities (Note 19) P=9,061,178 P=9,126,719 (P=65,541)Contract liabilities (Note 15) 65,541 – 65,541Total Liabilities P=9,126,719 P=9,126,719 P=–

The adoption of PFRS 15 did not have a material impact on other comprehensive income or theGroup’s operating, investing and financing cash flows.

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The nature of the adjustments as at January 1, 2018 and the reasons for the significant changesin the consolidated statement of financial position as at December 31, 2018 and the consolidatedstatement of income for the year ended December 31, 2018 are described below:

Amounts billed for work performed/amount billed in advance for construction workPFRS 15 requires to present separately the contract asset (right to consideration in exchange forgoods or services that has transferred), contract liability (obligation to transfer goods or servicesto a customer for which the entity has received consideration) and receivable(right to consideration is unconditional).

In the case of contracts in which the recognized real estate sales determined based on POCexceed the amount billed, the difference is presented as “Contract assets”, separate from“Receivables”, in the consolidated statement of financial position. Whereas, in contracts in whichthe recognized real estate sales determined based on POC are lower than the amount billed, thedifference is presented as “Contract liabilities” under current liabilities in the consolidatedstatement of financial position.

PIC Q&A 2018-11, Classification of Land Held by Real Estate Developer

The Group has adopted PIC Q&A 2018-11 starting January 1, 2018 which requires that landapproved by the BOD of a real estate developer to be held in the ordinary course of business tobe classified as inventory in accordance with PAS 2, Inventories. Otherwise, the land should beclassified as investment property in accordance with PAS 40, Investment Property.

The impact of adoption is applied retrospectively which resulted to the reclassification of land andimprovements from “Land and Improvements” to “Investment Properties” in the consolidatedstatement of financial position. Prior to the adoption of PIC Q&A 2018-11, the classification wasbased on the Group’s timing to start the development of the property (e.g. project launching).

PIC Q&A on Advances to Contractors and PIC Q&A on Land ClassificationThe Group adopted PIC Q&A 2018-11, Classification of Land by Real Estate Developer andPIC Q&A 2018-15, PAS 1- Classification of Advances to Contractors in the Nature ofPrepayments: Current vs. Non-current starting January 1, 2018. The impact of adoption isapplied retrospectively which resulted to the following reclassifications in the consolidatedstatement of financial position:

December 31, 2017

Amounts prepared under

Land held for future use (Note 14) Previous PFRSPIC Q&A2018-11

Increase(Decrease)

Land and Improvement P=2,636,277 P=− (P=2,636,277)Investment Properties − 2,636,277 2,636,277

P=2,636,277 P=2,636,277 P=−

Advances to contractors Previous PFRSPIC Q&A2018-15

Increase(Decrease)

Current P=62,542 P=41,557 (P=20,985)Non-current − 20,985 20,985

P=62,542 P=62,542 P=−

a) Land held for future use, previously presented as non-current asset includes land which theBOD has previously approved to be developed into residential development for sale. Beforethe adoption of PIC Q&A 2018-11, the classification was based on the Group’s timing to startthe development of the property. This was reclassified under inventories in the consolidatedstatement of financial position.

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b) Advances to contractors and suppliers previously presented under current assets,representing prepayments for the construction of investment property was reclassified to non-current asset. Before the adoption of PIC Q&A 2018-15, the classification of the Group isbased the timing of application of these advances against billings and timing of delivery ofgoods and services. This interpretation aims to classify the prepayment based on the actualrealization of such advances based on the determined usage/realization of the asset to whichit is intended for (e.g. inventory, investment property, property plant and equipment).

∂ Amendments to PAS 28, Investments in Associates and Joint Ventures, Measuring an Associateor Joint Venture at Fair Value (Part of Annual Improvements to PFRSs 2014 - 2016 Cycle)

The amendments clarify that an entity that is a venture capital organization, or other qualifyingentity, may elect, at initial recognition on an investment-by-investment basis, to measure itsinvestments in associates and joint ventures at fair value through profit or loss. They also clarifythat if an entity that is not itself an investment entity has an interest in an associate or jointventure that is an investment entity, the entity may, when applying the equity method, elect toretain the fair value measurement applied by that investment entity associate or joint venture tothe investment entity associate’s or joint venture’s interests in subsidiaries. This election is madeseparately for each investment entity associate or joint venture, at the later of the date on which(a) the investment entity associate or joint venture is initially recognized; (b) the associate or jointventure becomes an investment entity; and (c) the investment entity associate or joint venturefirst becomes a parent. Retrospective application is required.

The Group has assessed that the adoption of these amendments does not have any impact inthe 2018 consolidated financial statements.

∂ Amendments to PAS 40, Investment Property, Transfers of Investment Property

The amendments clarify when an entity should transfer property, including property underconstruction or development into, or out of investment property. The amendments state that achange in use occurs when the property meets, or ceases to meet, the definition of investmentproperty and there is evidence of the change in use. A mere change in management’s intentionsfor the use of a property does not provide evidence of a change in use. Retrospective applicationof the amendments is not required and is only permitted if this is possible without the use ofhindsight.

The Group’s current practice is in line with the clarifications issued and does not have any effecton its consolidated financial statements.

Standards and interpretation issued but not yet effectivePronouncements issued but not yet effective are listed below. Unless otherwise indicated, the Groupdoes not expect that the future adoption of the said pronouncements will have a significant impact onits consolidated financial statements. The Group intends to adopt the following pronouncementswhen they become effective.

Effective beginning on or after January 1, 2019

∂ Amendments to PFRS 9, Prepayment Features with Negative Compensation

Under PFRS 9, a debt instrument can be measured at amortized cost or at fair value throughother comprehensive income, provided that the contractual cash flows are “solely payments ofprincipal and interest on the principal amount outstanding” (the SPPI criterion) and the instrumentis held within the appropriate business model for that classification. The amendments to PFRS 9clarify that a financial asset passes the SPPI criterion regardless of the event or circumstancethat causes the early termination of the contract and irrespective of which party pays or receivesreasonable compensation for the early termination of the contract. The amendments should beapplied retrospectively with earlier application permitted.

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These amendments have no impact on the consolidated financial statements of the Group.

∂ PFRS 16, Leases

PFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure ofleases and requires lessees to account for all leases under a single on-statement of financialposition model similar to the accounting for finance leases under PAS 17, Leases. The standardincludes two recognition exemptions for lessees – leases of “low-value” assets (e.g., personalcomputers) and short-term leases (i.e., leases with a lease term of 12 months or less). At thecommencement date of a lease, a lessee will recognize a liability to make lease payments (i.e.,the lease liability) and an asset representing the right to use the underlying asset during the leaseterm (i.e., the right-of-use asset). Lessees will be required to separately recognize the interestexpense on the lease liability and the depreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certainevents (e.g., a change in the lease term, a change in future lease payments resulting from achange in an index or rate used to determine those payments). The lessee will generallyrecognize the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

Lessor accounting under PFRS 16 is substantially unchanged from today’s accounting underPAS 17. Lessors will continue to classify all leases using the same classification principle as inPAS 17 and distinguish between two types of leases: operating and finance leases.

PFRS 16 also requires lessees and lessors to make more extensive disclosures than underPAS 17.

A lessee can choose to apply the standard using either a full retrospective or a modifiedretrospective approach. The standard’s transition provisions permit certain reliefs.

The Group is currently assessing the impact of adopting PFRS 16.

∂ Amendments to PAS 19, Employee Benefits, Plan Amendment, Curtailment or Settlement

The amendments to PAS 19 address the accounting when a plan amendment, curtailment orsettlement occurs during a reporting period. The amendments specify that when a planamendment, curtailment or settlement occurs during the annual reporting period, an entity isrequired to:

∂ Determine current service cost for the remainder of the period after the plan amendment,curtailment or settlement, using the actuarial assumptions used to remeasure the net definedbenefit liability (asset) reflecting the benefits offered under the plan and the plan assets afterthat event.

∂ Determine net interest for the remainder of the period after the plan amendment, curtailmentor settlement using: the net defined benefit liability (asset) reflecting the benefits offeredunder the plan and the plan assets after that event; and the discount rate used to remeasurethat net defined benefit liability (asset).

The amendments also clarify that an entity first determines any past service cost, or a gain or losson settlement, without considering the effect of the asset ceiling. This amount is recognized inprofit or loss. An entity then determines the effect of the asset ceiling after the plan amendment,curtailment or settlement. Any change in that effect, excluding amounts included in the netinterest, is recognized in other comprehensive income.

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The amendments apply to plan amendments, curtailments, or settlements occurring on or afterthe beginning of the first annual reporting period that begins on or after January 1, 2019, withearly application permitted. These amendments will apply only to any future plan amendments,curtailments, or settlements of the Group.

∂ Amendments to PAS 28, Long-term Interests in Associates and Joint Ventures

The amendments clarify that an entity applies PFRS 9 to long-term interests in an associate orjoint venture to which the equity method is not applied but that, in substance, form part of the netinvestment in the associate or joint venture (long-term interests). This clarification is relevantbecause it implies that the expected credit loss model in PFRS 9 applies to such long-terminterests.

The amendments also clarified that, in applying PFRS 9, an entity does not take account of anylosses of the associate or joint venture, or any impairment losses on the net investment,recognized as adjustments to the net investment in the associate or joint venture that arise fromapplying PAS 28, Investments in Associates and Joint Ventures.

The amendments should be applied retrospectively and are effective from January 1, 2019, withearly application permitted. Since the Group does not have such long-term interests in itsassociate and joint venture, the amendments will not have an impact on its consolidated financialstatements.

∂ Philippine Interpretation IFRIC-23, Uncertainty over Income Tax Treatments

The interpretation addresses the accounting for income taxes when tax treatments involveuncertainty that affects the application of PAS 12, Income Taxes, and does not apply to taxes orlevies outside the scope of PAS 12, nor does it specifically include requirements relating tointerest and penalties associated with uncertain tax treatments.

The interpretation specifically addresses the following:

∂ Whether an entity considers uncertain tax treatments separately∂ The assumptions an entity makes about the examination of tax treatments by taxation

authorities∂ How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax

credits and tax rates∂ How an entity considers changes in facts and circumstances

An entity must determine whether to consider each uncertain tax treatment separately or togetherwith one or more other uncertain tax treatments. The approach that better predicts the resolutionof the uncertainty should be followed.

This interpretation is not relevant to the Group because there is no uncertainty involved in the taxtreatments made by management in connection with the calculation of current and deferred taxesas of December 31, 2018 and 2017.

∂ Annual Improvements to PFRSs 2015-2017 Cycle

∂ Amendments to PFRS 3, Business Combinations, and PFRS 11, Joint Arrangements,Previously Held Interest in a Joint Operation

The amendments clarify that, when an entity obtains control of a business that is a jointoperation, it applies the requirements for a business combination achieved in stages,including remeasuring previously held interests in the assets and liabilities of the jointoperation at fair value. In doing so, the acquirer remeasures its entire previously held interestin the joint operation.

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A party that participates in, but does not have joint control of, a joint operation might obtainjoint control of the joint operation in which the activity of the joint operation constitutes abusiness as defined in PFRS 3. The amendments clarify that the previously held interests inthat joint operation are not remeasured.

An entity applies those amendments to business combinations for which the acquisition dateis on or after the beginning of the first annual reporting period beginning on or afterJanuary 1, 2019 and to transactions in which it obtains joint control on or after the beginningof the first annual reporting period beginning on or after January 1, 2019, with earlyapplication permitted. These amendments are currently not applicable to the Group but mayapply to future transactions.

∂ Amendments to PAS 12, Income Tax Consequences of Payments on Financial InstrumentsClassified as Equity

The amendments clarify that the income tax consequences of dividends are linked moredirectly to past transactions or events that generated distributable profits than to distributionsto owners. Therefore, an entity recognizes the income tax consequences of dividends inprofit or loss, other comprehensive income or equity according to where the entity originallyrecognized those past transactions or events.

An entity applies those amendments for annual reporting periods beginning on or afterJanuary 1, 2019, with early application is permitted. These amendments are not relevant tothe Group because dividends declared by the Group do not give rise to tax obligations underthe current tax laws.

∂ Amendments to PAS 23, Borrowing Costs, Borrowing Costs Eligible for CapitalizationThe amendments clarify that an entity treats as part of general borrowings any borrowingoriginally made to develop a qualifying asset when substantially all of the activities necessaryto prepare that asset for its intended use or sale are complete.

An entity applies those amendments to borrowing costs incurred on or after the beginning ofthe annual reporting period in which the entity first applies those amendments. An entityapplies those amendments for annual reporting periods beginning on or afterJanuary 1, 2019, with early application permitted.

Since the Group’s current practice is in line with these amendments, the Group does notexpect any effect on its consolidated financial statements upon adoption.


∂ Amendments to PFRS 3, Definition of a Business

The amendments to PFRS 3 clarify the minimum requirements to be a business, remove theassessment of a market participant’s ability to replace missing elements, and narrow thedefinition of outputs. The amendments also add guidance to assess whether an acquiredprocess is substantive and add illustrative examples. An optional fair value concentration test isintroduced which permits a simplified assessment of whether an acquired set of activities andassets is not a business.

An entity applies those amendments prospectively for annual reporting periods beginning on orafter January 1, 2020, with earlier application permitted.

These amendments will apply on future business combinations of the Group.

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∂ Amendments to PAS 1, Presentation of Financial Statements, and PAS 8, Accounting Policies,Changes in Accounting Estimates and Errors, Definition of Material

The amendments refine the definition of material in PAS 1 and align the definitions used acrossPFRSs and other pronouncements. They are intended to improve the understanding of theexisting requirements rather than to significantly impact an entity’s materiality judgements.

An entity applies those amendments prospectively for annual reporting periods beginning on orafter January 1, 2020, with earlier application permitted.


∂ PFRS 17, Insurance Contracts

PFRS 17 is a comprehensive new accounting standard for insurance contracts coveringrecognition and measurement, presentation and disclosure. Once effective, PFRS 17 will replacePFRS 4, Insurance Contracts. This new standard on insurance contracts applies to all types ofinsurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the typeof entities that issue them, as well as to certain guarantees and financial instruments withdiscretionary participation features. A few scope exceptions will apply.

The overall objective of PFRS 17 is to provide an accounting model for insurance contracts that ismore useful and consistent for insurers. In contrast to the requirements in PFRS 4, which arelargely based on grandfathering previous local accounting policies, PFRS 17 provides acomprehensive model for insurance contracts, covering all relevant accounting aspects.The core of PFRS 17 is the general model, supplemented by:

∂ A specific adaptation for contracts with direct participation features(the variable fee approach)

∂ A simplified approach (the premium allocation approach) mainly for short-duration contracts

PFRS 17 is effective for reporting periods beginning on or after January 1, 2021, withcomparative figures required. Early application is permitted.

Deferred effectivity

∂ Amendments to PFRS 10, Consolidated Financial Statements, and PAS 28, Sale or Contributionof Assets between an Investor and its Associate or Joint Venture

The amendments address the conflict between PFRS 10 and PAS 28 in dealing with the loss ofcontrol of a subsidiary that is sold or contributed to an associate or joint venture. Theamendments clarify that a full gain or loss is recognized when a transfer to an associate or jointventure involves a business as defined in PFRS 3. Any gain or loss resulting from the sale orcontribution of assets that does not constitute a business, however, is recognized only to theextent of unrelated investors’ interests in the associate or joint venture.

On January 13, 2016, the Financial Reporting Standards Council deferred the original effectivedate of January 1, 2016 of the said amendments until the International Accounting StandardsBoard (IASB) completes its broader review of the research project on equity accounting that mayresult in the simplification of accounting for such transactions and of other aspects of accountingfor associates and joint ventures.

Current and Noncurrent ClassificationThe Group presents assets and liabilities in the consolidated statement of financial position based oncurrent/noncurrent classification. An asset is current when it is:∂ Expected to be realized or intended to be sold or consumed in the normal operating cycle;∂ Held primarily for the purpose of trading;

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∂ Expected to be realized within twelve months after the reporting period; or,∂ Cash and cash equivalents unless restricted from being exchanged or used to settle a liability for

at least twelve months after the reporting period.

All other assets are classified as noncurrent.

A liability is current when:∂ It is expected to be settled in the normal operating cycle;∂ It is held primarily for the purpose of trading;∂ It is due to be settled within twelve months after the reporting period; or,∂ There is no unconditional right to defer the settlement of the liability for at least twelve months

after the reporting period.

The Group classifies all other liabilities as noncurrent.

Deferred tax assets and liabilities are classified as noncurrent assets and liabilities, respectively.

Fair Value MeasurementThe Group measures financial instruments such as financial assets at FVPL and FVOCI at fair valueand discloses the fair value of its other financial instruments as well as investment properties at eachreporting date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderlytransaction between market participants at the measurement date. The fair value measurement isbased on the presumption that the transaction to sell the asset or transfer the liability takes placeeither:∂ In the principal market for the asset or liability, or∂ In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to the Group.

The fair value of an asset or a liability is measured using the assumptions that market participantswould use when pricing the asset or liability, assuming that market participants act in their economicbest interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability togenerate economic benefits by using the asset in its highest and best use or by selling it to anothermarket participant that would use the asset in its highest and best use.

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

All assets and liabilities for which fair value is measured or disclosed in the consolidated financialstatements are categorized within the fair value hierarchy, described as follows, based on the lowestlevel input that is significant to the fair value measurement as a whole.

∂ Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities∂ Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value

measurement is directly or indirectly observable∂ Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value

measurement is unobservable

For assets and liabilities that are recognized in the consolidated financial statements on a recurringbasis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair valuemeasurement as a whole) at the end of each reporting period.

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The Group’s management determines the policies and procedures for recurring fair valuemeasurement of financial assets at FVPL and FVOCI and investment properties.

External valuers are involved for the valuation of significant assets, such as investment properties.Involvement of external valuers is decided upon annually by management after discussion with andapproval by the Group’s audit committee. Selection criteria include market knowledge, reputation,independence and whether professional standards are maintained. The management decides, afterdiscussions with the Group’s external valuers, which valuation techniques and inputs to use for eachcase.

At each reporting date, the Group analyzes the movements in the values of assets and liabilitieswhich are required to be re-measured or re-assessed as per the Group’s accounting policies.

For this analysis, the Group verifies the major inputs applied in the latest valuation by agreeing theinformation in the valuation computation to contracts and other relevant documents.

The Group, in conjunction with its external valuers, also compares each of the changes in the fairvalue of each asset and liability with relevant external sources to determine whether the change isreasonable.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilitieson the basis of the nature, characteristics and risks of the asset or liability and the level of the fairvalue hierarchy as explained above.

Financial Assets and Financial LiabilitiesA financial instrument is any contract that gives rise to a financial asset of one entity and a financialliability or equity instrument of another entity.

Financial Instruments - initial recognition and subsequent measurement prior to January 1, 2018

Date of recognitionThe Group recognizes a financial asset or a financial liability in the consolidated statement of financialposition when it becomes a party to the contractual provisions of the instrument. Purchases or salesof financial assets that require delivery of assets within the time frame established by regulation orconvention in the marketplace are recognized on the settlement date.

Initial recognitionFinancial assets and financial liabilities are initially recognized at fair value. The initial measurementof all financial assets includes transaction costs except for financial instruments measured at FVPL.

The Group classifies its financial assets within the scope of PAS 39 in the following categories:financial assets at FVPL, loans and receivables, held-to-maturity financial assets, or AFS financialassets. Financial liabilities are classified into financial liabilities at FVPL or other financial liabilities.The classification depends on the purpose for which the financial assets were acquired or financialliabilities were incurred and whether they are quoted in an active market. Management determinesthe classification of its financial instruments at initial recognition and, where allowed and appropriate,re-evaluates such designation at every reporting date.

As of December 31, 2018, the Group’s financial assets are of the nature of loans and receivables,financial assets at FVPL and AFS financial assets.

“Day 1” differenceWhere the transaction price in a non-active market is different to the fair value from other observablecurrent market transactions in the same instrument or based on a valuation technique whosevariables include only data from observable market, the Group recognizes the difference between thetransaction price and fair value (a “Day 1” difference) in the consolidated statement of income under“Interest income” and “Other charges” accounts unless it qualifies for recognition as some other type

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of asset. In cases where variables used are made of data which is not observable, the differencebetween the transaction price and model value is only recognized in the consolidated statement ofincome when the inputs become observable or when the instrument is derecognized. For eachtransaction, the Group determines the appropriate method of recognizing the “Day 1” differenceamount.

Financial assets and financial liabilities at FVPLFinancial assets and financial liabilities at FVPL include financial assets and financial liabilities heldfor trading and financial assets and financial liabilities designated upon initial recognition as at FVPL.

Financial assets and financial liabilities are classified as held for trading if they are acquired for thepurpose of selling and repurchasing in the near term. Derivatives, including separated embeddedderivatives, are also classified as held for trading unless they are designated as effective hedginginstruments or a financial guarantee contract.

Fair value gains or losses on investments held for trading, net of interest income accrued on theseassets, are recognized in the consolidated statement of income under “Other income” or “Othercharges”.

Financial assets may be designated at initial recognition as FVPL if any of the following criteria aremet:∂ the designation eliminates or significantly reduces the inconsistent treatment that would otherwise

arise from measuring the assets or liabilities or recognizing gains or losses on them on a differentbasis; or

∂ the assets are part of a group of financial assets which are managed and their performanceevaluated on a fair value basis, in accordance with a documented risk management orinvestment strategy; or

∂ the financial instrument contains an embedded derivative that would need to be separatelyrecorded.

As of December 31, 2018, the Group holds an investment in Unit Investment Trust Fund (UITF) heldfor trading and classified these as financial assets at FVPL.

Available-for-sale financial assetsAFS financial assets pertain to equity investments that are neither classified as held for trading nordesignated at FVPL.

After initial measurement, AFS financial assets are subsequently measured at fair value withunrealized gains or losses recognized in OCI and credited to unrealized gain (loss) on AFS financialassets account until the investment is derecognized, at which time the cumulative gain or loss isrecognized in other income, or the investment is determined to be impaired, when the cumulative lossis reclassified from unrealized gain (loss) on AFS financial assets account to the consolidatedstatement of comprehensive income. Dividend earned whilst holding AFS financial assets is reportedas dividend income.

The Group evaluates whether the ability and intention to sell its AFS financial assets in the near termis still appropriate. When, in rare circumstances, the Group is unable to trade these financial assetsdue to inactive markets, the Group may elect to reclassify these financial assets if the managementhas the ability and intention to hold the assets for the foreseeable future or until maturity.

Loans and receivablesLoans and receivables are nonderivative financial assets with fixed or determinable payments thatare not quoted in an active market. They are not entered into with the intention of immediate or short-term resale and are not designated as AFS financial assets or financial assets at FVPL.

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After initial measurement, the loans and receivables are subsequently measured at amortized costusing the effective interest method, less allowance for impairment. Amortized cost is calculated bytaking into account any discount or premium on acquisition and fees that are an integral part of theeffective interest rate (EIR). The amortization is included in “Interest income” account in theconsolidated statement of income. The losses arising from impairment of such loans and receivablesare recognized under “General and administrative expenses” account in the consolidated statementof income.

Loans and receivables are included in current assets if maturity is within twelve months from thereporting date. Otherwise, these are classified as noncurrent assets.

As of December 31, 2018, the Group’s loans and receivables include cash and cash equivalents,short-term investments and receivables (except advances to contractors).

Impairment of financial assetsThe Group assesses at each reporting date whether there is objective evidence that a financial assetor group of financial assets is impaired. A financial asset or a group of financial assets is deemed tobe impaired if, and only if, there is objective evidence of impairment as a result of one or more eventsthat has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event(or events) has an impact on the estimated future cash flows of the financial asset or the group offinancial assets that can be reliably estimated. Evidence of impairment may include indications thatthe borrower or a group of borrowers is experiencing significant financial difficulty, default ordelinquency in interest or principal payments, the probability that they will enter bankruptcy or otherfinancial reorganization and where observable data indicate that there is measurable decrease in theestimated future cash flows, such as changes in economic conditions that correlate with defaults.

AFS financial assets. The Group treats AFS financial assets as impaired when there has been asignificant or prolonged decline in fair value below its cost or where other objective evidence ofimpairment exists. The determination of what is “significant” or “prolonged” requires judgment. TheGroup treats “significant” generally as 20% or more and ‘prolonged’ as greater than 12 months forunquoted securities. In addition, the Group evaluates other factors, including normal volatility insecondary price for unquoted equities.

Loans and receivables. For loans and receivables carried at amortized cost, the Group first assesseswhether objective evidence of impairment exists individually for financial assets that are individuallysignificant, or collectively for financial assets that are not individually significant. If the Groupdetermines that no objective evidence of impairment exists for individually assessed financial asset,whether significant or not, it includes the asset in a group of financial assets with similar credit riskcharacteristics and collectively assesses for impairment. Those characteristics are relevant to theestimation of future cash flows for groups of such assets by being indicative of the debtors’ ability topay all amounts due according to the contractual terms of the assets being evaluated. Assets thatare individually assessed for impairment and for which an impairment loss is, or continues to be,recognized are not included in a collective assessment for impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss ismeasured as the difference between the asset’s carrying amount and the present value of theestimated future cash flows (excluding future credit losses that have not been incurred). The carryingamount of the asset is reduced through the use of an allowance account and the amount of loss ischarged to the consolidated statement of income under the “Costs and expenses” account. Interestincome continues to be recognized based on the EIR of the asset. Loans and receivables, togetherwith the associated allowance accounts, are written off when there is no realistic prospect of futurerecovery. If, in a subsequent year, the amount of the estimated impairment loss increases ordecreases because of an event occurring after the impairment was recognized, the previouslyrecognized impairment loss is increased or reduced by adjusting the allowance account. Anysubsequent reversal of an impairment loss is recognized in the consolidated statement of income, tothe extent that the carrying value of the asset does not exceed its amortized cost at the reversal date.

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For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis ofsuch credit risk characteristics as customer type, credit history, past-due status and term.

Future cash flows in a group of financial assets that are collectively evaluated for impairment areestimated on the basis of historical loss experience for assets with credit risk characteristics similar tothose in the group. Historical loss experience is adjusted on the basis of current observable data toreflect the effects of current conditions that did not affect the period on which the historical lossexperience is based and to remove the effects of conditions in the historical period that do not existcurrently.

The methodology and assumptions used for estimating future cash flows are reviewed regularly bythe Group to reduce any differences between loss estimates and actual loss experience.

Other financial liabilitiesOther financial liabilities are financial liabilities not designated as at FVPL where the substance of thecontractual arrangement results in the Group having an obligation either to deliver cash or anotherfinancial asset to the holder, or to satisfy the obligation other than by the exchange of a fixed amountof cash or other financial asset for a fixed number of own equity shares. The components of issuedfinancial instrument that contain both liability and equity element are accounted for separately, withthe equity component being assigned the residual amount after deducting from the instrument as awhole the amount separately determined as fair value of the liability component on the date of issue.

After initial measurement, other financial liabilities are subsequently measured at amortized costusing the effective interest method. Amortized cost is calculated by taking into account any discountor premium on the issue and fees that are an integral part of the EIR. The amortization is included inthe “Other charges” account in the consolidated statement of income.

As of December 31, 2017, the Group’s other financial liabilities include accounts and other payables,long-term debt, deposits and other liabilities, and excluding statutory liabilities and other obligationsthat meet the above definition (other than liabilities covered by other accounting standards such asincome tax payable).

Deposits and other liabilitiesDeposits and other liabilities which include tenants’ deposits are measured initially at fair value. Thedifference between the cash received and the fair value of tenants’ deposits is recognized in “Tenantsdeposits” under “Deposits and other liabilities” in the consolidated statement of financial position andamortized using the straight-line method under the “Real estate revenue” account in the consolidatedstatement of income. After initial recognition, tenants’ deposits are subsequently measured atamortized cost using effective interest method. Accretion of discount is recognized under “Otherfinancing charges” in the consolidated statement of income.

Derecognition of financial assets and financial liabilities

Financial asset. A financial asset (or, where applicable, a part of a group of financial assets) isderecognized when:a. the right to receive cash flows from the assets has expired;b. the Group retains the right to receive cash flows from the asset, but has assumed an obligation to

pay them in full without material delay to a third-party under a “pass-through” arrangement; orc. the Group has transferred its right to receive cash flows from the asset and either: (i) has

transferred substantially all the risks and rewards of the asset; or (ii) has neither transferred norretained the risks and rewards of the asset but has transferred control of the asset.

When the Group has transferred its right to receive cash flows from an asset or has entered into a“pass-through” arrangement, and has neither transferred nor retained substantially all the risks andrewards of the asset nor transferred control of the asset, the asset is recognized to the extent of theGroup’s continuing involvement in the asset. Continuing involvement that takes the form of a

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guarantee over the transferred asset is measured at the lower of the original carrying amount of theasset and the maximum amount of consideration that the Group could be required to repay.

Financial liability. A financial liability is derecognized when the obligation under the liability isdischarged or cancelled or has expired. Where an existing financial liability is replaced by anotherfrom the same lender on substantially different terms, or the terms of an existing liability aresubstantially modified, such an exchange or modification is treated as a derecognition of the originalliability and the recognition of a new liability, and the difference in the respective carrying amounts isrecognized in the consolidated statement of income.

Financial Instruments - initial recognition and subsequent measurement effective January 1, 2018

Financial assets

Initial recognition and measurementFinancial assets are classified, at initial recognition and subsequently measured at amortized cost,FVOCI, and FVPL.

The classification of financial assets at initial recognition depends on the financial asset’s contractualcash flow characteristics and the Group’s business model for managing them. The Group initiallymeasures a financial asset at its fair value plus, in the case of a financial asset not at FVPL,transaction costs. Trade receivables are measured at the transaction price determined underPFRS 15. Refer to the accounting policies in section Revenue from contracts with customers.

In order for a financial asset to be classified and measured at amortized cost or FVOCI, it needs togive rise to cash flows that are SPPI on the principal amount outstanding. This assessment isreferred to as the SPPI test and is performed at an instrument level.

The Group’s business model for managing financial assets refers to how it manages its financialassets in order to generate cash flows. The business model determines whether cash flows willresult from collecting contractual cash flows, selling the financial assets, or both.

Purchases or sales of financial assets that require delivery of assets within a time frame establishedby regulation or convention in the market place (regular way trades) are recognized on the trade date,i.e., the date that the Group commits to purchase or sell the asset.

Subsequent measurementFor purposes of subsequent measurement, financial assets are classified in four categories:∂ Financial assets at amortized cost (debt instruments)∂ Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt

instruments)∂ Financial assets designated at fair value through OCI with no recycling of cumulative gains and

losses upon derecognition (equity instruments)∂ Financial assets at FVPL

Financial assets at amortized cost (debt instruments). A financial asset is measured at amortizedcost if (a) it is held within a business model for which the objective is to hold financial assets in orderto collect contractual cash flows and (b) the contractual terms of the financial asset give rise onspecified dates to cash flows that are solely payments of principal and interest on the principalamount outstanding.

These financial assets are initially recognized at fair value plus directly attributable transaction costsand subsequently measured at amortized cost using the EIR method, less any impairment in value.Amortized cost is calculated by taking into account any discount or premium on acquisition and feesand costs that are an integral part of the EIR. The amortization is included in “Interest income” in thestatement of income and is calculated by applying the EIR to the gross carrying amount of thefinancial asset, except for (a) purchased or originated credit-impaired financial assets and (b) financial

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assets that have subsequently become credit-impaired, where, in both cases, the EIR is applied tothe amortized cost of the financial asset. Losses arising from impairment are recognized in “Provisionfor bad debts” in the statement of income.

For trade receivables and contract assets, these are measured at the transaction price determinedunder PFRS 15. Refer to the accounting policies in Revenue from contracts with customers.

As at December 31, 2018, the Group’s financial assets at amortized cost include cash and cashequivalents, short-terms investments, trade receivables, contract assets, due from related parties,other nontrade receivables and refundable deposits (under “Other current” and “Other noncurrent”assets).

Financial assets designated at FVOCI (equity instruments). Upon initial recognition, the Group canelect to classify irrevocably its equity investments as equity instruments designated at fair valuethrough OCI when they meet the definition of equity under PAS 32, Financial Instruments:Presentation, and are not held for trading. The classification is determined on an instrument-by-instrument basis.

Gains and losses on these financial assets are never recycled to profit or loss. Dividends arerecognized as other income in the statement of profit or loss when the right of payment has beenestablished, except when the Group benefits from such proceeds as a recovery of part of the cost ofthe financial asset, in which case, such gains are recorded in OCI. Equity instruments designated atfair value through OCI are not subject to impairment assessment.

The Group elected to classify irrevocably its investments in unquoted club shares under this category.Financial assets at FVPL. Financial assets at fair value through profit or loss include financial assetsheld for trading, financial assets designated upon initial recognition at fair value through profit or loss,or financial assets mandatorily required to be measured at fair value. Financial assets are classifiedas held for trading if they are acquired for the purpose of selling or repurchasing in the near term.Derivatives, including separated embedded derivatives, are also classified as held for trading unlessthey are designated as effective hedging instruments. Financial assets with cash flows that are notsolely payments of principal and interest are classified and measured at fair value through profit orloss, irrespective of the business model. Notwithstanding the criteria for debt instruments to beclassified at amortized cost or at fair value through OCI, as described above, debt instruments maybe designated at fair value through profit or loss on initial recognition if doing so eliminates, orsignificantly reduces, an accounting mismatch.

Financial assets at fair value through profit or loss are carried in the statement of financial position atfair value with net changes in fair value recognized in the statement of profit or loss.

This category includes derivative instruments and listed equity investments which the Group had notirrevocably elected to classify at fair value through OCI. Dividends on listed equity investments arealso recognized as other income in the statement of profit or loss when the right of payment has beenestablished.

As at December 31, 2018, the Group’s financial assets at FVPL include short-term money marketplacements.

Impairment of Financial Assets

The Group recognizes an allowance for expected credit losses (ECLs) for all debt instruments notheld at fair value through profit or loss. ECLs are based on the difference between the contractualcash flows due in accordance with the contract and all the cash flows that the Group expects toreceive, discounted at an approximation of the original effective interest rate. The expected cashflows will include cash flows from the sale of collateral held or other credit enhancements that areintegral to the contractual terms.

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ECLs are recognized in two stages. For credit exposures for which there has not been a significantincrease in credit risk since initial recognition, ECLs are provided for credit losses that result fromdefault events that are possible within the next 12-months (a 12-month ECL). For those creditexposures for which there has been a significant increase in credit risk since initial recognition, a lossallowance is required for credit losses expected over the remaining life of the exposure, irrespectiveof the timing of the default (a lifetime ECL).

For trade receivables and contract assets, the Group applies a simplified approach in calculatingECLs. Therefore, the Group does not track changes in credit risk, but instead recognizes a lossallowance based on lifetime ECLs at each reporting date. The Group has established a provisionmatrix that is based on its historical credit loss experience, adjusted for forward-looking factorsspecific to the debtors and the economic environment.

For debt instruments at FVOCI, the Group applies the low credit risk simplification. Loss allowancesare recognized based on 12-month ECL for debt instrument that are assessed to have low credit riskat the reporting date. A financial asset is considered to have low credit risk if:

∂ the financial instrument has a low risk of default;∂ the borrower has a strong capacity to meet its contractual cash flow obligations in the near term;

or,∂ adverse changes in economic and business conditions in the longer term may, but will not

necessarily, reduce the ability of the borrower to fulfil its contractual cash flow obligations.

The Group considers a debt instrument to have low credit risk when its credit risk rating is equivalentto the globally understood definition of “investment grade”, or when the exposure is less than 30 dayspast due.

At every reporting date, the Group evaluates whether the debt instrument is considered to have lowcredit risk using all reasonable and supportable information that is available without undue cost oreffort. In making that evaluation, the Group reassesses the internal credit rating of the debtinstrument. In addition, the Group considers that there has been a significant increase in credit riskwhen contractual payments are more than 90 days past due.

At each reporting date, the Group assesses whether there has been a significant increase in creditrisk for financial assets since initial recognition by comparing the risk of default occurring over theexpected life between the reporting date and the date of initial recognition. The Group considersreasonable and supportable information that is relevant and available without undue cost or effort forthis purpose. This includes quantitative and qualitative information and forward-looking analysis.An exposure will migrate through the ECL stages as asset quality deteriorates. If, in a subsequentperiod, asset quality improves and also reverses any previously assessed significant increase incredit risk since origination, then the loss allowance measurement reverts from lifetime ECL to 12-month ECL.

The Group considers a financial asset in default when contractual payments are 90 days past due.However, in certain cases, the Group may also consider a financial asset to be in default wheninternal or external information indicates that the Group is unlikely to receive the outstandingcontractual amounts in full before taking into account any credit enhancements held by the Group.A financial asset is written off when there is no reasonable expectation of recovering the contractualcash flows.

Financial liabilities

Initial recognition and measurementFinancial liabilities are classified, at initial recognition, as financial liabilities at fair value through profitor loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in aneffective hedge, as appropriate.

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

As at December 31, 2018, the Group’s financial liabilities include accounts and other payables, long-term debt, deposits and other liabilities, and excluding statutory liabilities and other obligations thatmeet the above definition (other than liabilities covered by other accounting standards such asincome tax payable).

Subsequent measurementThe measurement of financial liabilities depends on their classification, as described below:

Financial liabilities at FVPL. Financial liabilities at FVPL include financial liabilities held for tradingand financial liabilities designated upon initial recognition as at FVPL.

Financial liabilities are classified as held for trading if they are incurred for the purpose ofrepurchasing in the near term. This category also includes derivative financial instruments enteredinto by the Group that are not designated as hedging instruments in hedge relationships as definedby PFRS 9. Separated embedded derivatives are also classified as held for trading unless they aredesignated as effective hedging instruments.

Gains or losses on liabilities held for trading are recognized in the statement of profit or loss.Financial liabilities designated upon initial recognition at fair value through profit or loss aredesignated at the initial date of recognition, and only if the criteria in PFRS 9 are satisfied.The Group has not designated any financial liability as at FVPL.

Loans and borrowings. This is the category most relevant to the Group. After initial recognition,interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIRmethod. Gains and losses are recognized in profit or loss when the liabilities are derecognized aswell as through the EIR amortization process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and feesor costs that are an integral part of the EIR. The EIR amortization is included as finance costs in thestatement of profit or loss.

This category generally applies to interest-bearing loans and borrowings.

Reclassifications of financial instrumentsThe Group reclassifies its financial assets when, and only when, there is a change in the businessmodel for managing the financial assets.

Reclassifications shall be applied prospectively by the Group and any previously recognized gains,losses or interest shall not be restated. The Group does not reclassify its financial liabilities.

The Group does not reclassify its financial assets when:

∂ A financial asset that was previously a designated and effective hedging instrument in a cash flowhedge or net investment hedge no longer qualifies as such;

∂ A financial asset becomes a designated and effective hedging instrument in a cash flow hedge ornet investment hedge; and,

∂ There is a change in measurement on credit exposures measured at fair value through profit orloss.

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Derecognition of financial instruments

Financial assets. A financial asset (or, where applicable a part of a financial asset or part of a groupof financial assets) is derecognized when:

∂ the contractual rights to the cash flows from the financial asset expire; or,∂ the Group transfers the contractual rights to receive the cash flows of the financial asset in a

transaction in which it either (a) transfers substantially all the risks and rewards of ownership ofthe financial asset, or (b) it neither transfers nor retains substantially all the risks and rewards ofownership of the financial asset and the Group has not retained control.

When the Group has transferred its rights to receive cash flows from an asset or has entered into apass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards ofownership. When it has neither transferred nor retained substantially all of the risks and rewards ofthe asset, nor transferred control of the asset, the Group continues to recognise the transferred assetto the extent of its continuing involvement. In that case, the Group also recognises an associatedliability. The transferred asset and the associated liability are measured on a basis that reflects therights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured atthe lower of the original carrying amount of the asset and the maximum amount of consideration thatthe Group could be required to repay.

Financial liabilities. A financial liability is derecognized when the obligation under the liability isdischarged, cancelled or has expired.

Where an existing financial liability is replaced by another from the same lender on substantiallydifferent terms, or the terms of an existing liability or a part of it are substantially modified, such anexchange or modification is treated as a derecognition of the original financial liability and therecognition of a new financial liability, and the difference in the respective carrying amounts isrecognized in the statement of income. The terms are substantially different if the discounted presentvalue of the cash flows under the new terms, including any fees paid net of any fees received anddiscounted using the original effective interest rate, is at least 10% different from the discountedpresent value of the remaining cash flows of the original financial liability. If an exchange of debtinstruments or modification of terms is accounted for as an extinguishment, any costs or fees incurredare recognized as part of the gain or loss on the extinguishment. If the exchange or modification isnot accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of theliability and are amortized over the remaining term of the modified liability.

Offsetting Financial InstrumentsFinancial assets and financial liabilities are offset and the net amount reported in the consolidatedstatement of financial position if, and only if, there is a currently enforceable legal right to offset therecognized amounts and there is an intention to settle on a net basis, or to realize the asset and settlethe liability simultaneously.

The Group assesses that it has a currently enforceable right to offset if the right is not contingent on afuture event, and is legally enforceable in the normal course of business, event of default, and eventof insolvency or bankruptcy of the Group.

InventoriesProperty acquired or being constructed for sale in the ordinary course of business, rather than to beheld for rental or capital appreciation, is held as inventory and is carried at the lower of cost or netrealizable value (NRV). NRV is the estimated selling price in the ordinary course of business, lessestimated costs to complete and sell.

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Cost includes:∂ Land cost∂ Land improvement cost∂ Amount paid to contractors for construction and development of the properties (i.e. planning and

design costs, cost of site preparation, professional fees, property transfer taxes, constructionoverheads and other related costs)

The cost of inventory recognized in the consolidated statement of income as disposal is determinedwith reference to the specific costs incurred on the property sold and is allocated to saleable areabased on relative size.

Other AssetsOther assets include input value-added tax (VAT), creditable withholding tax (CWT) and prepaidexpenses.

Input VAT represents taxes due or paid on purchases of goods and services subjected to VAT thatthe Group can claim against any future liability to the Bureau of Internal Revenue (BIR) for outputVAT received from sale of goods and services subjected to VAT. The input VAT can also berecovered as tax credit against future income tax liability of the Group upon approval of the BIR. Avaluation allowance is provided for any portion of the input tax that cannot be claimed against outputtax or recovered as tax credit against future income tax liability.

CWT represents the amount withheld by the payee. These are recognized upon collection of therelated sales and are utilized as tax credits against income tax due.

Prepaid expenses are carried at cost less the amortized portion. These typically compriseprepayments for commissions, marketing fees, advertising and promotion, taxes and licenses, rentalsand insurance.

Property and EquipmentProperty and equipment are carried at cost less accumulated depreciation and amortization and anyimpairment in value. The initial cost of property and equipment comprises its construction cost orpurchase price and any directly attributable costs of bringing the asset to its working condition andlocation for its intended use, including borrowing costs.

Expenditures incurred after the fixed assets have been put into operations, such as repairs andmaintenance are normally charged to expenses in the period in which the costs are incurred. Insituations where it can be clearly demonstrated that the expenditures have resulted in an increase inthe future economic benefits expected to be obtained from the use of an item of property andequipment beyond its originally assessed standard of performance, the expenditures are capitalizedas additional cost of the related property and equipment.

Depreciation and amortization commences once the property and equipment are available for theirintended use and are computed on a straight-line basis over the estimated useful lives as follows:

YearsBuildings and improvements 40Furniture, fixtures and equipment 3−10Transportation equipment 3−5

The useful lives and depreciation and amortization methods are reviewed periodically to ensure thatthe period and method of depreciation and amortization are consistent with the expected pattern ofeconomic benefits from items of property and equipment.

When property and equipment are retired or otherwise disposed of, the cost of the relatedaccumulated depreciation and amortization, and accumulated provision for impairment losses, if any,

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are removed from the accounts and any resulting gain or loss is credited or charged against currentoperations.

Fully depreciated property and equipment are retained in the accounts while still in use although nofurther depreciation is credited or charged to current operations.

Intangible AssetsThe Group’s development rights included under “Other noncurrent assets” pertain to the unsold costof development rights purchased by the Group allocated based on the revised gross floor area of astructure in a particular lot.

These are measured on initial recognition at cost. After initial recognition, these are carried at costless any accumulated impairment losses. The development rights are capitalized as additional costof the structure once the development commences.

Investments in Associates and a Joint VentureAn associate is an entity in which the Group has significant influence and which is neither asubsidiary nor a joint venture. Significant influence is the power to participate in the financial andoperating policy decisions of the investee, but is not control or joint control over those policies.

A joint venture is a type of joint arrangement whereby the parties that have joint control of thearrangement have rights to the net assets of the joint venture. Joint control is the contractuallyagreed sharing of control of an arrangement, which exists only when decisions about the relevantactivities require unanimous consent of the parties sharing control.

The considerations made in determining significant influence or joint control are similar to thosenecessary to determine control over subsidiaries.

The Group’s investments in associates and a joint venture is accounted for using the equity method.

Under the equity method, the investment in an associate or a joint venture is initially recognized atcost. The carrying amount of the investment is adjusted to recognize changes in the Group’s share ofnet assets of the associate or joint venture since the acquisition date.

Goodwill relating to the associate or joint venture is included in the carrying amount of the investmentand is not tested for impairment individually.

The consolidated statement of comprehensive income reflects the Group’s share of the results ofoperations of the associate or joint venture. Any change in OCI of those investees is presented aspart of the Group’s OCI. In addition, when there has been a change recognized directly in the equityof the associate or joint venture, the Group recognizes its share of any changes, when applicable, inthe consolidated statement of changes in equity. Unrealized gains and losses resulting fromtransactions between the Group and the associate or joint venture are eliminated to the extent of theinterest in the associate or joint venture.

The aggregate of the Group’s share of profit or loss of an associate and a joint venture is shown onthe face of the consolidated statement of income and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate or joint venture.

The financial statements of the associate or joint venture are prepared for the same reporting periodas the Group. When necessary, adjustments are made to bring the accounting policies in line withthose of the Group.

After application of the equity method, the Group determines whether it is necessary to recognize animpairment loss on its investment in an associate or joint venture. At each reporting date, the Groupdetermines whether there is objective evidence that the investment in associates and a joint ventureis impaired. If there is such evidence, the Group calculates the amount of impairment as the

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difference between the recoverable amount of the associate and its carrying value, then recognizesthe loss as “Equity in net earnings of associates and a joint venture” in the consolidated statement ofcomprehensive income.

Upon loss of significant influence over the associate or joint control over the joint venture, the Groupmeasures and recognizes any retained investment at its fair value. Any difference between thecarrying amount of the associate or joint venture upon loss of significant influence or joint control andthe fair value of the retained investment and proceeds from disposal is recognized in the consolidatedstatement of income.

Investment PropertiesInvestment properties consist of completed properties and properties under construction or re-development that are held to earn rentals and for capital appreciation or both and are not occupied bythe companies in the Group. The Group uses the cost model in measuring investment propertiessince this represents the historical value of the properties subsequent to initial recognition.Investment properties, except for land, are carried at cost less accumulated depreciation andamortization and any impairment in value. Land is carried at cost less any impairment in value. Theinitial cost of investment properties consists of any directly attributable costs of bringing theinvestment properties to their intended location and working condition, including borrowing costs.

Investment properties are depreciated using the straight-line method over their estimated useful livesas follows:

YearsLand and improvements Up to 25Buildings and improvements Up to 40

Expenditure incurred after the investment property has been put in operation, such as repairs andmaintenance costs, are normally charged against income in the period in which the costs areincurred.

Construction in progress is stated at cost. This includes cost of construction and other direct costs.Construction in progress is not depreciated until such time that the relevant assets are available fortheir intended use.

Investment properties are derecognized when either they have been disposed of or when they arepermanently withdrawn from use and no future economic benefit is expected from its disposal. Anygains or losses on the retirement or disposal of an investment property are recognized in theconsolidated statement of income in the year of retirement or disposal.

Transfers are made to investment properties when, and only when, there is a change in use,evidenced by ending of owner-occupation and commencement of an operating lease to another party.Transfers are made from investment properties when, and only when, there is a change in use,evidenced by commencement of owner-occupation or commencement of development with a view tosale. Transfers between investment properties, owner-occupied properties and inventories do notchange the carrying amount of the property transferred and they do not change the cost of thatproperty for measurement or disclosure purposes.

Impairment of Nonfinancial AssetsThe Group assesses at each reporting date whether there is an indication that an asset may beimpaired. If any such indication exists, or when annual impairment testing for an asset is required,the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount isthe higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use, andis determined for an individual asset, unless the asset does not generate cash inflows that are largelyindependent of those from other assets or groups of assets. Where the carrying amount of an assetexceeds its recoverable amount, the asset is considered impaired and is written down to itsrecoverable amount. In assessing value in use, the estimated future cash flows are discounted to

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their present value using a pre-tax discount rate that reflects current market assessments of the timevalue of money and the risks specific to the asset. In determining fair value less costs of disposal,recent market transactions are taken into account, if available. If no such transactions can beidentified, an appropriate valuation model is used. Impairment losses of continuing operations arerecognized in the consolidated statement of income in those expense categories consistent with thefunction of the impaired asset.

An assessment is made at each reporting date as to whether there is any indication that previouslyrecognized impairment losses may no longer exist or may have decreased. If such indication exists,the recoverable amount is estimated. A previously recognized impairment loss is reversed only ifthere has been a change in the estimates used to determine the asset’s recoverable amount sincethe last impairment loss was recognized. If that is the case, the carrying amount of the asset isincreased to its recoverable amount. That increased amount cannot exceed the carrying amount thatwould have been determined, net of depreciation and amortization, had no impairment loss beenrecognized for the asset in prior years.

Such reversal is recognized in the consolidated statement of income unless the asset is carried atrevalued amount, in which case, the reversal is treated as a revaluation increase. After suchreversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carryingamount, less any residual value, on a systematic basis over its remaining useful life.

For investments in associates and a joint venture, after application of the equity method, the Groupdetermines whether it is necessary to recognize any additional impairment loss with respect to theGroup’s net investment in the investee companies. The Group determines at each reporting datewhether there is any objective evidence that the investment in associates or joint venture is impaired.If this is the case, the Group calculates the amount of impairment as being the difference between therecoverable amount of the investee companies and the carrying value, and recognizes the amount inthe consolidated statement of income.

Equity

Capital stock and additional paid-in capitalCapital stock is measured at par value for all shares issued. When the shares are sold at a premium,the difference between the proceeds and the par value is credited to “Additional paid-in capital”account. Direct costs incurred related to equity issuance are chargeable to “Additional paid-in capital”account. If additional paid-in capital is not sufficient, the excess is charged against retained earnings.When the Group issues more than one class of stock, a separate account is maintained for eachclass of stock and the number of shares issued.

Retained earningsRetained earnings represent net accumulated earnings (losses) of the Group less dividends declaredand any adjustments arising from the application of new accounting standards or policies appliedretrospectively. The individual accumulated earnings of the subsidiaries are available for dividendsonly after declared by their respective BOD.

Unappropriated retained earningsUnappropriated retained earnings represent the portion of retained earnings that is free and can bedeclared as dividends to stockholders.

Appropriated retained earningsAppropriated retained earnings represent the portion of retained earnings which has been restrictedand therefore is not available for dividend declaration.

Dividend distributionsDividends on common shares are recognized as a liability and deducted from equity when approvedby the BOD of the Group. Dividends for the year that are approved after the reporting date are dealtwith as a non-adjusting event after the reporting date.

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Equity reservesEquity reserves pertain to the difference between the consideration transferred and the equityacquired in a common control business combination.

Revenue from Contract with Customers

Revenue Recognition prior to January 1, 2018Revenue is recognized to the extent that it is probable that the economic benefits will flow to theGroup and the revenue can be measured reliably, regardless of when the payment is being made.Revenue is measured at the fair value of the consideration received or receivable, taking into accountcontractually defined terms of payment and excluding taxes or duties. The Group assesses itsrevenue arrangements against specific criteria in order to determine if it is acting as a principal or anagent. In arrangements where the Group is acting as a principal to its customers, revenue isrecognized on a gross basis.

The following specific recognition criteria must also be met before revenue is recognized:

Rental incomeRental income from noncancellable and cancellable leases is recognized in the consolidatedstatement of income on a straight-line basis over the lease term or based on a certain percentage ofthe gross revenue of the tenants, as provided for under the terms of the lease contract.

Contingent rents are recognized as revenue in the period in which they are earned.

Real estate salesFor real estate sales, the Group assesses whether it is probable that the economic benefits will flowto the Group when the sales prices are collectible. Collectability of the sales price is demonstrated bythe buyer’s commitment to pay, which in turn is supported by substantial initial and continuinginvestments that give the buyer a stake in the property sufficient that the risk of loss through defaultmotivates the buyer to honor its obligation to the seller. Collectability is also assessed by consideringfactors such as the credit standing of the buyer, age and location of the property.

Revenue from sales of completed real estate projects is accounted for using the full accrual method.In accordance with PIC No. Q&A 2006-01, the percentage-of-completion method is used to recognizeincome from sales of projects where the Group has material obligations under the sales contract tocomplete the project after the property is sold, the equitable interest has been transferred to thebuyer, construction is beyond preliminary stage (i.e., engineering, design work, construction contractsexecution, site clearance and preparation, excavation and the building foundation are finished), andthe costs incurred or to be incurred can be measured reliably. Under this method, revenue isrecognized as the related obligations are fulfilled, measured principally on the basis of the estimatedcompletion of a physical proportion of the contract work.

Any excess of collections over the recognized receivables are included in the “Deposits and othercurrent liabilities” account in the consolidated statement of financial position.

If any of the criteria under the full accrual or percentage-of-completion method is not met, the depositmethod is applied until all the conditions for recording a sale are met. Pending recognition of sale,cash received from buyers are presented under the “Deposits and other current liabilities” account inthe consolidated statement of financial position.

Cost of real estate sales is recognized consistent with the revenue recognition method applied. Costof residential and commercial lots and units sold before the completion of the development isdetermined on the basis of the acquisition cost of the land plus its full development costs, whichinclude estimated costs for future development works, as determined by the Group’s in-housetechnical staff.

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Revenue Recognition effective January 1, 2018

Revenue from contract with customersRevenue from contracts with customers is recognized when control of the goods or services aretransferred to the customer at an amount that reflects the consideration to which the Group expects tobe entitled in exchange for those goods or services. The Group has generally concluded that it is theprincipal in its revenue arrangements, except for the provisioning of water and electricity in its mallretail spaces and office leasing activities, wherein it is acting as agent.

The disclosures of significant accounting judgements, estimates and assumptions relating to revenuefrom contracts with customers are provided in Note 3.

Real estate salesThe Group derives its real estate revenue from sale of lots, house and lot and condominium units.Revenue from the sale of these real estate projects under pre-completion stage are recognized overtime during the construction period (or percentage of completion) since based on the terms andconditions of its contract with the buyers, the Group’s performance does not create an asset with analternative use and the Group has an enforceable right to payment for performance completed todate.

In measuring the progress of its performance obligation over time, the Group uses output method.The Group recognizes revenue on the basis of direct measurements of the value to customers of thegoods or services transferred to date, relative to the remaining goods or services promised under thecontract. Progress is measured using survey of performance completed to date. This is based onthe monthly project accomplishment report prepared by the third party surveyor as approved by theconstruction manager which integrates the surveys of performance to date of the constructionactivities for both sub-contracted and those that are fulfilled by the developer itself.

Estimated development costs of the real estate project include costs of land, land development,building costs, professional fees, depreciation of equipment directly used in the construction,payments for permits and licenses. Revisions in estimated development costs brought about byincreases in projected costs in excess of the original budgeted amounts, form part of total projectcosts on a prospective basis.

Any excess of progress of work over the right to an amount of consideration that is unconditional,recognized as installment contract receivables, under trade receivables, is included in the “contractasset” account in the statement of financial position.

Any excess of collections over the total of recognized installment contract receivables is included inthe “contract liabilities” account in the statement of financial position.

Rental incomeRental income from noncancellable and cancellable leases is recognized in the consolidatedstatement of income on a straight-line basis over the lease term or based on a certain percentage ofthe gross revenue of the tenants, as provided for under the terms of the lease contract.

Contingent rents are recognized as revenue in the period in which they are earned.

Cost recognitionThe Group recognizes costs relating to satisfied performance obligations as these are incurred takinginto consideration the contract fulfillment assets such as land and connection fees. These includecosts of land, land development costs, building costs, professional fees, depreciation, permits andlicenses and capitalized borrowing costs. These costs are allocated to the saleable area, with theportion allocable to the sold area being recognized as costs of sales while the portion allocable to theunsold area being recognized as part of real estate inventories.

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In addition, the Group recognizes as an asset only costs that give rise to resources that will be usedin satisfying performance obligations in the future and that are expected to be recovered.

Contract Balances

ReceivablesA receivable represents the Group’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).

Contract assetsA contract asset is the right to consideration in exchange for goods or services transferred to thecustomer. If the Group performs by transferring goods or services to a customer before the customerpays consideration or before payment is due, a contract asset is recognized for the earnedconsideration that is conditional.

Contract liabilitiesA contract liability is the obligation to transfer goods or services to a customer for which the Grouphas received consideration or an amount of consideration is due from the customer. If a customerpays consideration before the Group transfers goods or services to the customer, a contract liability isrecognized when the payment is made or the payment is due, whichever is earlier. Contract liabilitiesare recognized as revenue when the Group performs under the contract.

The contract liabilities also include payments received by the Group from the customers for whichrevenue recognition has not yet commenced.

Costs to obtain contractThe incremental costs of obtaining a contract with a customer are recognized as an asset if the Groupexpects to recover them. The Group has determined that commissions paid to brokers and marketingagents on the sale of pre-completed real estate units are deferred when recovery is reasonablyexpected and are charged to expense in the period in which the related revenue is recognized asearned. Commission expense is included in the “Real estate costs and expenses” account in theconsolidated statement of income.

Costs incurred prior to obtaining contract with customer are not capitalized but are expensed asincurred.

Theater incomeTheater income is recognized when earned.

Insurance claimInsurance claim is recognized when the realization of income is virtually certain.

Interest incomeInterest income is recognized as it accrues using the effective interest method.

Other incomeRecoveries are recognized as they accrue.

Net gain or loss from the sale of development rights is recognized when risk and reward aretransferred to the buyer.

Others are recognized when earned.

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Borrowing CostsBorrowing costs directly attributable to the acquisition or construction of an asset that necessarilytakes a substantial period of time to get ready for its intended use or sale are capitalized as part ofthe cost of the respective assets (included in “Investment properties” account in the consolidatedstatement of financial position). All other borrowing costs are expensed in the period in which theyoccur. Borrowing costs consist of interest and other costs that an entity incurs in connection with theborrowing of funds.

The interest capitalized is calculated using the Group’s weighted average cost of borrowings afteradjusting for borrowings associated with specific developments. Where borrowings are associatedwith specific developments, the amounts capitalized is the gross interest incurred on thoseborrowings less any investment income arising on their temporary investment. Interest is capitalizedfrom the commencement of the development work until the date of practical completion. Thecapitalization of borrowing costs is suspended if there are prolonged periods when developmentactivity is interrupted. If the carrying amount of the asset exceeds its recoverable amount, animpairment loss is recorded.

The borrowing costs capitalized as part of “Investment properties” are depreciated using straight-linemethod over the estimated useful life of the assets.

LeasesThe determination of whether an arrangement is, or contains, a lease is based on the substance ofthe arrangement at inception date whether the fulfillment of the arrangement is dependent on the useof a specific asset or assets or the arrangement conveys a right to use the asset, even if that right isnot explicitly specified in an arrangement. A reassessment is made after inception of the lease only ifone of the following applies:

(a) There is a change in contractual terms, other than a renewal or extension of the arrangement;(b) A renewal option is exercised or extension granted, unless the term of the renewal or extension

was initially included in the lease term;(c) There is a change in the determination of whether fulfillment is dependent on a specified asset; or(d) There is substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when thechange in circumstances gave rise to the reassessment for scenarios (a), (c), or (d) and at the date ofrenewal or extension period for scenario (b).

Group as lessorLeases where the Group retains substantially all the risk and benefits of ownership of the assets areclassified as operating leases. Lease payments received are recognized as an income in theconsolidated statement of income on a straight-line basis over the lease term.

Initial direct costs incurred in negotiating operating leases are added to the carrying amount of theleased asset and recognized over the lease term on the same basis as the rental income. Contingentrents are recognized as revenue in the period in which they are earned.

Group as lesseeLeases where the lessor retains substantially all the risks and benefits of ownership of the asset areclassified as operating leases. Fixed lease payments are recognized as an expense in theconsolidated statement of income on a straight-line basis, while the variable rent is recognized as anexpense based on terms of the lease contract.

Pension CostThe Group maintains a defined contribution (DC) plan that covers all regular full-time employees.Under its DC plan, the Group pays fixed contributions based on the employees’ monthly salaries.The Group, however, is covered under Republic Act (RA) No. 7641, The Philippine Retirement Law,which provides for its qualified employees a defined benefit (DB) minimum guarantee. The DB

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minimum guarantee is equivalent to a certain percentage of the monthly salary payable to anemployee at normal retirement age with the required credited years of service based on theprovisions of RA No. 7641.

In accordance with PIC Q&A No. 2013-03, the obligation for post-employment benefits of an entitythat provides a DC plan as its only post-employment benefit plan, is not limited to the amount itagrees to contribute to the fund, if any. In this case, therefore, the Group’s retirement plan shall beaccounted for as a defined benefit plan. Accordingly, the Group accounts for its retirement obligationunder the higher of the DB obligation relating to the minimum guarantee and the obligation arisingfrom the DC plan.

The DC liability is measured at the fair value of the DC assets upon which the DC benefits depend,with an adjustment for margin on asset returns, if any, where this is reflected in the DC benefits.

For the DB minimum guarantee plan, the liability is determined based on the present value of theexcess of the projected DB obligation over the projected DC obligation at the end of the reportingperiod. The DB obligation is calculated annually by a qualified independent actuary using theprojected unit credit method.

Pension costs comprise:∂ Service cost;∂ Net interest on the net defined benefit liability or asset; and,∂ Remeasurements of net defined benefit liability or asset.

Service costs which include current service costs, past service costs and gains or losses on non-routine settlements are recognized as expense in the consolidated statement of income. Past servicecosts are recognized when plan amendment or curtailment occurs. These amounts are calculatedperiodically by independent qualified actuaries.

Net interest on the net defined benefit liability or asset is the change during the period in the netdefined benefit liability or asset that arises from the passage of time which is determined by applyingthe discount rate based on government bonds to the net defined benefit liability or asset. Net intereston the net defined benefit liability or asset is recognized as an expense or income in the consolidatedstatement of income.

Remeasurements comprising actuarial gains and losses, return on plan assets and any change in theeffect of the asset ceiling (excluding net interest on defined benefit liability) are recognizedimmediately in other comprehensive income in the period in which they arise. Remeasurements arenot reclassified to profit or loss in subsequent periods.

The liability recognized in the consolidated statement of financial position in respect of defined benefitpension plans is the present value of the defined benefit obligation at the reporting date less fair valueof the plan assets. The present value of the defined benefit obligation is determined by using risk-free interest rates of long-term government bonds that have terms to maturity approximating theterms of the related pension liabilities or applying a single weighted average discount rate that reflectsthe estimated timing and amount of benefit payments.

Income TaxCurrent taxCurrent tax assets and liabilities for the current and prior periods are measured at the amountexpected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used tocompute the amount are those that are enacted or substantively enacted at the reporting date.

Deferred taxDeferred tax is provided, using the liability method, on temporary differences at the reporting datebetween the tax bases of assets and liabilities and its carrying amounts for financial reportingpurposes.

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Deferred tax liabilities are recognized for all taxable temporary differences with certain exceptions.Deferred tax assets are recognized for all deductible temporary differences with certain exceptions,and carryforward benefits of unused tax credits from excess of minimum corporate income tax (MCIT)over the regular corporate income tax (RCIT) and unused net operating loss carryover (NOLCO), tothe extent that it is probable that taxable income will be available against which the deductibletemporary differences and carryforward benefits of unused MCIT and NOLCO can be utilized.

Deferred tax liabilities are not provided on nontaxable temporary differences associated withinvestments in associates and a joint venture.

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

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to theperiod when the asset is realized or the liability is settled, based on tax rates and tax laws that havebeen enacted or substantively enacted as of reporting date. Movements in the deferred income taxassets and liabilities arising from changes in tax rates are charged against or credited to income forthe period.

Deferred tax relating to items recognized outside profit or loss is recognized in OCI. Deferred taxitems are recognized in correlation to the underlying transaction either in OCI or directly in equity.Deferred tax assets and liabilities are offset, if a legally enforceable right exists to set off current taxassets against current tax liabilities and the deferred taxes relate to the same taxable entity and thesame taxation authority.

Foreign-Currency-Denominated TransactionsThe consolidated financial statements are presented in Philippine Peso, which is the ParentCompany’s functional currency. Each entity in the Group determines its own functional currency anditems included in the financial statements of each entity are measured using that functional currency.Transactions in foreign currencies are initially recorded using the exchange rate at the date of thetransactions. Monetary assets and liabilities denominated in foreign currencies are restated using theclosing exchange rate prevailing at reporting dates. Exchange gains or losses arising from foreignexchange transactions are credited to or charged against operations for the year.

Earnings Per Share (EPS)Basic EPS is computed by dividing net income for the year attributable to common stockholders ofthe Parent Company by the weighted average number of common shares issued and outstandingduring the year adjusted for any subsequent stock dividends declared. Diluted EPS is computed bydividing net income for the year attributable to common stockholders of the Parent Company by theweighted average number of common shares issued and outstanding during the year after givingeffect to assumed conversion of potential common shares, if any.

Segment ReportingThe Group’s operating businesses are organized and managed separately according to the nature ofthe products and services provided, with each segment representing a strategic business unit thatoffers different products and serves different markets. Financial information on business segments ispresented in Note 29 of the consolidated financial statements.

ProvisionsProvisions are recognized when the Group has a present obligation (legal or constructive) as a resultof a past event, it is probable that an outflow of resources embodying economic benefits will berequired to settle the obligation and a reliable estimate can be made of the amount of the obligation.Where the Group expects some or all of the provision to be reimbursed, the reimbursement isrecognized as a separate asset but only when the reimbursement is virtually certain. The expense

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relating to a provision is presented in the consolidated statement of income, net of anyreimbursement. Provisions are reviewed at each reporting date and adjusted to reflect the currentbest estimates.

ContingenciesContingent liabilities are not recognized in the consolidated financial statements. These are disclosedunless the possibility of an outflow of resources embodying economic benefits is remote. Contingentassets are not recognized in the consolidated financial statements but disclosed when an inflow ofeconomic benefits is probable.

Events after the Reporting DatePost year-end events up to the date of the consolidated financial statements were authorized forissue that provide additional information about the Group’s position at the reporting date (adjustingevents) are reflected in the consolidated financial statements. Post year-end events that are notadjusting events are disclosed in the notes to the consolidated financial statements when material.

3. Significant Accounting Judgments, Estimates and Assumptions

The preparation of the consolidated financial statements of the Group in conformity with PFRSsrequires management to make judgments and estimates that affect the amounts reported in theconsolidated financial statements and accompanying notes. The judgments and estimates used inthe consolidated financial statements are based upon management’s evaluation of relevant facts andcircumstances as of the date of the consolidated financial statements. Actual results could differ fromsuch estimates.

Management believes the following represent a summary of these significant judgments, estimatesand assumptions:

JudgmentsIn the process of applying the Group’s accounting policies, management has made the followingjudgments, apart from those involving estimations, which have the most significant effect on theamounts recognized in the consolidated financial statements:

Distinction between investment properties and inventoriesThe Group determines whether a property is classified as investment property or inventory as follows:∂ Investment properties comprises land and buildings (principally offices, commercial and retail

property) which are not occupied substantially for use by, or in the operations of the Group, norfor sale in the ordinary course of business, but are held primarily to earn rental income and capitalappreciation.

∂ Inventory comprises property that is held for sale in the ordinary course of business. Principally,this is a residential or industrial property that the Group develops and intends to sell before or oncompletion of construction.

In making this judgment, the Group considers whether the property will be sold in the normaloperating cycle (Inventories) or whether it will be retained as part of the Group’s leasing activities orfor future development or sale which are yet to be finalized by the Group (Investment properties).

Evaluating impairment of nonfinancial assetsThe Group reviews its investment properties and investments in associates and a joint venture forimpairment of value. This includes considering certain indications of impairment such as significantchanges in asset usage, obsolescence or physical damage of an asset, significant underperformancerelative to expected historical or projected future operating results of the investees and significantnegative industry or economic trends.

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As of December 31, 2018 and 2017, the Group assessed that there are no indicators of impairment,thus, the Group did not recognize any impairment loss on its nonfinancial assets (see Notes 13and 14).

Assessment of joint control of an arrangement and the type of arrangementJoint control is the contractually agreed sharing of control of an arrangement, which exists only whendecisions about the relevant activities require the unanimous consent of the parties sharing control.Management assessed that the Group has joint control over Cebu District Property Enterprise, Inc.(CDPEI) by virtue of a contractual agreement with other shareholders.

The Group applies judgment when assessing whether a joint arrangement is a joint operation or ajoint venture.

In making this judgment, the Group determines the type of joint arrangement in which it is involved byconsidering its rights and obligations arising from the arrangement. The Group assesses its rightsand obligations by considering the structure and legal form of the arrangement, the terms agreed bythe parties in the contractual arrangement and, when relevant, other facts and circumstances.Management assessed that CDPEI is a joint venture arrangement as it is a separate legal entity andits stockholders have rights to its net assets.

Real estate revenue recognition

Existence of a contractThe Group’s primary document for a contract with a customer is a signed contract to sell. It hasdetermined however, that in cases wherein contract to sell are not signed by both parties, thecombination of its other signed documentation such as reservation agreement, official receipts,quotation sheets and other documents contain all the criteria to qualify as contract with the customerunder PFRS 15.

In addition, part of the assessment process of the Group before revenue recognition is to assess theprobability that the Group will collect the consideration to which it will be entitled in exchange for thereal estate property that will be transferred to the customer. In evaluating whether collectability of anamount of consideration is probable, an entity considers the significance of the customer’s initialpayments in relation to the total contract price. Collectability is also assessed by considering factorssuch as past history customer, age and pricing of the property. Management regularly evaluates thehistorical cancellations and back-outs if it would still support its current threshold of customers’ equitybefore commencing revenue recognition.

Revenue recognition method and measure of progressThe Group concluded that revenue for real estate sales is to be recognized over time because (a)the Group’s performance does not create an asset with an alternative use and; (b) the Group has anenforceable right for performance completed to date. The promised property is specifically identifiedin the contract and the contractual restriction on the Group’s ability to direct the promised propertyfor another use is substantive. This is because the property promised to the customer is notinterchangeable with other properties without breaching the contract and without incurring significantcosts that otherwise would not have been incurred in relation to that contract. In addition, under thecurrent legal framework, the customer is contractually obliged to make payments to the developer upto the performance completed to date.

The Group has determined that output method is used in measuring the progress of the performanceobligation faithfully depicts the Group’s performance in transferring control of real estate developmentto the customers.

Identifying performance obligationThe Group has various contracts to sell covering (a) serviced lot; (b) condominium unit. The Groupconcluded that there is one performance obligation in each of these contracts because, for servicedlot, the developer integrates the plots it sells with the associated infrastructure to be able to transfer

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the serviced land promised in the contract. For the contract covering condominium unit, thedeveloper has the obligation to deliver the house or condominium unit duly constructed in a specificlot and fully integrated into the serviced land in accordance with the approved plan. Included also inthis performance obligation is the Group’s service is to transfer the title of the real estate unit to thecustomer.

Collectability of the sales priceRevenue and cost recognition on real estate sales and selecting an appropriate revenue recognitionmethod for a particular real estate sale transaction requires certain judgment based on, amongothers:

∂ Buyer’s commitment on the sale which may be ascertained through the significance of the buyer’sinitial investment; and

∂ Stage of completion of the project.

The Group has set a certain percentage (%) of collection over the total selling price in determiningbuyer’s commitment on the sale. It is when the buyer’s investment is considered adequate to meetthe probability criteria that economic benefits will flow to the Group.

Provisions and contingenciesThe Group is involved in a legal proceeding and contingently liable for various claims. The estimateof the probable costs for the resolution of these legal proceeding and claims has been developed inconsultation with the legal counsels and based upon an analysis of potential results. The Groupcurrently does not believe these proceedings will have a material adverse effect on the Group’sfinancial position (see Note 33).

Estimates and AssumptionsThe key assumptions concerning the future and other key sources of estimation and uncertainty atthe reporting date, that have a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities are as follows:

Estimating the NRV of inventoriesInventories are valued at the lower of cost or NRV. To determine the NRV, the Group is required tomake an estimate of the inventories’ estimated selling price in the ordinary course of business, costsof completion and costs necessary to make a sale. NRV for completed real estate inventories isassessed with reference to market conditions and prices existing at the reporting date and isdetermined by the Group in light of recent market transactions. NRV, in respect of real estateinventories under construction, is assessed with reference to market prices at the reporting date forsimilar completed property, less estimated costs to complete construction and less estimated costs tosell. In the event that NRV is lower than the cost, the decline is recognized as an expense. Theamount and timing of recorded expenses for any period would differ if different judgments were madeor different estimates were utilized.

No provision for inventory obsolescence was recognized in 2018 and 2017. The Group’s inventoriescarried at cost are disclosed in Note 9.

Fair value of financial instrumentsPFRS requires certain financial assets and liabilities to be carried at fair value or have the fair valuesdisclosed in the notes, which requires the use of extensive accounting estimates and judgments.

While significant components of fair value measurement were determined using verifiable objectiveevidence (i.e., foreign exchange rates and interest rates), the amount of changes in fair value woulddiffer if the Group utilized a different valuation methodology. Any changes in fair value of thesefinancial assets and liabilities would affect directly the consolidated statement of income andconsolidated statement of changes in equity.

Certain financial assets and liabilities of the Group were initially recorded at its fair value by using thediscounted cash flow methodology. See Note 27 for the related balances.

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4. Non-controlling Interests

The Group has two subsidiaries with material NCI. Additional information regarding the subsidiariesis as follows:

Accumulated balances Share of NCI in net incomeNCI % 2018 2017 2018 2017 2016

(In Thousands) (In Thousands)CBDI 45% P=1,498,319 P=− P=3,307 P=− P=−TPEPI 45% 498,720 446,881 51,839 925 1,401CPVDC 24% − 511,619 57,773 58,632 50,707

P=1,997,039 P=958,500 P=112,919 P=59,557 P=52,108

The summarized financial information of CBDI and TPEPI is provided below. This information isbased on amounts before intercompany eliminations.

2018 2017CBDI TPEPI CPVDC CPVDC TPEPI

(In Thousands)BeforeMerger (In Thousands)

Statements of financial positionCurrent assets P=47,187 P=747,872 − P=931,899 P=149,438Noncurrent assets 7,066,274 611,037 − 4,823,022 860,309Current liabilities 3,775,653 224,477 − 1,854,893 16,677Noncurrent liabilities 7,621 26,165 − 1,757,032 −

Statements of comprehensiveincome

Revenue P=9,493 P=462,753 P=688,070 P=802,938 P=3,962Net income(loss)/Total

comprehensive income(loss) attributable to:Equity of holders of the

parent company 4,042 63,359 170,257 188,343 1,131Non-controlling interests 3,307 51,839 57,773 58,632 925

Statements of cash flowsCash provided by (used in):

Operating activities P=2,646,068 P=7,080 P=702,495 P=107,410 P=74,277Investing activities (3,956,847) − (609,728) (390,506) (83,839)Financing activities 1,265,122 − (102,795) 299,766 −

Net increase (decrease) in cashand cash equivalents (P=45,657) P=7,080 (P=10,028) P=16,670 (P=9,562)

5. Cash and Cash Equivalents

2018 2017(In Thousands)

Cash on hand and in banks P=169,081 P=144,471Cash equivalents 55,442 32,317

P=224,523 P=176,788

Cash in banks earn interest at the prevailing bank deposit rates. Cash equivalents are short-term,highly liquid investments that are made for varying periods of up to three (3) months depending onthe immediate cash requirements of the Group, and earn interest at the respective short-term rates.

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Total interest income earned from cash and cash equivalents amounted to P=2.0 million, P=1.0 millionand P=0.8 million in 2018, 2017 and 2016, respectively (see Note 22).

6. Short-term Investments

Short-term investments consist of money market placements with maturity date of more than90 days and up to one (1) year and earn at the respective short-term investment rates.

In 2018 and 2017, the Group entered into a short-term investment with BPI to be used for short-termcash requirements. These investments earn an annual interest of 2.96% and 1.25% in 2018 and2017, respectively.

As of December 31, 2018 and 2017, the Group’s short term investments amounted to P=25.2 millionand P=2.5 million, respectively.

Interest income earned from short-term investments amounted to P=0.2 million in 2018 and 2017 andP=0.5 million in 2016 (see Note 22).

7. Financial Assets at Fair Value through Profit or Loss

This account pertains to investments in BPI Short Term Fund (the Fund), a money market unitinvestment trust fund (UITF) which the Group holds for trading and is a portfolio of funds invested andmanaged by professional managers. The Fund aims to generate liquidity and stable income byinvesting in a diversified portfolio of primarily short-term fixed income instruments. This is measuredat fair value with gains or losses arising from changes in fair value recognized in the consolidatedstatements of income under “Other income”.

As of December 31, 2018 and 2017, the Group’s financial assets at FVPL amounted to P=10.4 millionand P=10.1 million, respectively.

Realized and unrealized gains recognized from changes in fair value through profit or loss amountedto P=0.4 million, P=0.2 million and P=0.3 million in 2018, 2017 and 2016, respectively (see Note 22).

8. Receivables


Receivables from related parties (Note 20) P=1,410,230 P=1,487,762Trade: Commercial development (Notes 16 and 22) 130,540 136,819 Corporate business (Note 27) 112,190 69,088 Shopping centers (Note 27) 106,205 113,348 Residential development (Note 27) 29,486 201,354Accrued receivable 411,424 309,297Receivable from insurance 54,634 −Receivables from employees 14,249 16,741Others 72,957 59,372

P=2,341,915 P=2,393,781Less allowance for impairment losses 30,715 16,683

2,311,200 2,377,098Less noncurrent portion 224,968 496,958

P=2,086,232 P=1,880,140

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The nature of trade receivables of the Group are as follows:

∂ Commercial development pertains to receivables arising from the sale of commercial lots anddevelopment rights.

∂ Corporate business pertains to receivables arising from the lease of office buildings and accruedrent receivable.

∂ Shopping center pertains to receivables arising from the lease of retail space and land therein,movie theaters, food courts, entertainment facilities and carparks.

∂ Residential development pertains to receivables arising from the sale of residential lots andcondominium units.

∂ Receivables from insurance pertains to claim from insurer for damage brought about by the firethat occurred in January of 2018. The claim encompasses business interruption and materialdamage.

∂ Other receivables pertain to receivable related to interests.

Terms and conditions of receivables are as follows:

∂ Sales contract receivables, included under residential development, are noninterest-bearing andare collectible in monthly installments over a period of one (1) to two (2) years. Titles to realestate properties are transferred to the buyers once full payment has been made.

∂ Leases of retail space and land therein, included under shopping centers, are noninterest-bearingand are collectible monthly based on the terms of the lease contracts. These are unpaid billedreceivables as of reporting date.

∂ Leases of office spaces, included under corporate business, are noninterest-bearing and arecollectible monthly based on the terms of the lease contracts. These are unpaid billedreceivables as of reporting date.

∂ Receivables from the sale of commercial lots and development rights, included under commercialdevelopment are noninterest-bearing and are collectible in monthly or quarterly installments overa period ranging from two (2) to four (4) years. Titles to real estate properties and developmentrights are not transferred to buyers until full payment has been made.

∂ Receivables from related parties are both interest and noninterest-bearing, and are due forcollection within one year.

∂ Receivables from employees are composed of both interest and noninterest-bearing advancesand are collectible over a period of one year through salary deduction.

∂ Accrued receivable consists of receivables from rental income arising from operating lease oninvestment properties which is accounted for on a straight-line basis over the lease term andaccrual of interest income.

∂ Other receivables are due and demandable.

“Sales contract receivables” under residential development trade receivables has a nominal amountof P=29.5 million and P=201.4 million as of December 31, 2018 and 2017, respectively. “Receivablesfrom the sale of development rights” under commercial development trade receivables were initiallyrecorded at fair value as of December 31, 2018 and 2017. The fair value of the receivables wasobtained by discounting future cash flows using the applicable rates of similar types of instruments.

Movements in the unamortized discount on trade receivables in 2018 and 2017 are as follows:

2018Residential

developmentCommercial

development Total(In Thousands)

At January 1 P=47,498 P=7,420 P=54,918Additions 14,203 − 14,203Accretion (Note 22) (31,795) (1,459) (33,254)At December 31 P=29,906 P=5,961 P=35,867

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2017Residential

developmentCommercial


At January 1 P=50,524 P=− P=50,524Additions 22,597 7,420 30,017Accretion (Note 22) (25,623) − (25,623)At December 31 P=47,498 P=7,420 P=54,918

Allowance for impairmentSet out below is the movement in allowance for expected credit losses of trade receivables (inthousands):

At December 31, 2016 and 2017 P=16,683Provision for the year (Note 23) 14,032At December 31, 2018 P=30,715

The impairment losses above pertain to individually impaired accounts. No impairment lossesresulted from performing collective impairment test.

9. Inventories


Subdivision lots for sale and development P=668,400 P=554,627Condominium units for sale 143,892 196,457

P=812,292 P=751,084

The subdivision lot and condominium units are carried at cost.

A summary of the movements in inventories is set out below:2018

Subdivision lot forsale and

development

Condominiumunits under


At January 1 P=554,627 P=196,457 P=751,084Transfers from investment properties

(Note 14) 294,102 – 294,102Disposals (recognized as cost of real

estate sales) (Note 23) (470,391) (52,565) (522,956)Construction/development costs incurred 290,062 – 290,062At December 31 P=668,400 P=143,892 P=812,292

2017Subdivision lot for

sale anddevelopment

Condominium unitsunder development Total

(In Thousands)At January 1 P=441,764 P=282,087 P=723,851Transfers from investment properties

(Note 14) 72,963 – 72,963Disposals (recognized as cost of real

estate sales) (Note 23) (119,797) (85,630) (205,427)Construction/development costs incurred 159,995 – 159,995Other adjustments (298) – (298)At December 31 P=554,627 P=196,457 P=751,084

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The amount of inventories recognized as cost of real estate sales in the consolidated statements ofincome amounted to P=523.0 million, P=205.4 million and P=179.3 million in 2018, 2017 and 2016,respectively (see Note 23).

There are no inventories as of December 31, 2018 and 2017 that are pledged as securities toliabilities.

10. Other Current Assets


Advances to contractors (Note 20) P=103,948 P=101,016Prepaid expenses 60,719 51,740Input VAT 29,457 344,938CWT 12,152 28,335Cost to obtain a contract (see Note 21) 2,062 −Others 25,949 5,723

P=234,287 P=531,752

Advances to contractors are recouped every progress billing payment depending on the percentageof accomplishment.

Prepaid expenses consist of advance payments for project management fees, business taxes, officesupplies, rentals, advertising and promotions, commissions, energy supply paid to a local utilityprovider and other expenses.

Input VAT is applied against output VAT. The remaining balance is expected to be applied within thenext twelve months. This also includes input VAT deferred pertaining to unpaid services which areincurred and billings which had been received as of date.

CWTs are applied against income tax payable and are expected to be applied within the next twelvemonths.

11. Available-for-sale (AFS) Investments and Financial Assets at Fair Value through OCI

AFS InvestmentsAFS financial assets consist of investments in unquoted club shares of City Sports Club Cebu(CSCC) amounting to P=304.3 million, net of allowance for impairment losses of P=36.5 million as ofDecember 31, 2017.

Financial Assets at Fair Value through OCIOn January 1, 2018, the Group reclassified its AFS investments amounting to P=340.8 million tofinancial assets at fair value through OCI. These investments were irrevocably designated at fairvalue through OCI as the Group intends to hold these investments for the foreseeable future. Therelated provision for impairment losses in the Group’s consolidated statement of financial positionwhich amounted to P=36.5 million and the related deferred tax assets of P=10.9 million were adjusted tothe opening balance of retained earnings and other comprehensive income (see Note 2).

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As of December 31, 2018, the carrying value of the financial assets at fair value through OCI is asfollows:

2018(In Thousands)

Financial assets at fair value through OCI P=303,771Unrealized gain on fair value changes (see Note 27) 38,879

P=342,650

Fair value hierarchy disclosures for the Company’s AFS investments, financial assets at fair valuethrough OCI, and financial assets at FVPL provided in Note 27.

12. Property and Equipment

2018Buildings

andImprovements

Furniture,Fixtures and

EquipmentTransportation

Equipment Total(In Thousands)

CostAt January 1 P=349,851 P=145,141 P=32,631 P=527,623Additions 18,515 3,514 3,784 25,813Retirement − (215) − (215)At December 31 368,366 148,440 36,415 553,221Accumulated DepreciationAt January 1 100,852 114,357 22,619 237,828Depreciation and amortization (Note 23) 15,506 11,917 5,166 32,589Effect of merger − 2,371 − 2,371Retirement − (215) − (215)At December 31 116,358 128,430 27,785 272,573Net Book Value P=252,008 P=20,010 P=8,630 P=280,648

2017Buildings

andImprovements

Furniture,Fixtures and

EquipmentTransportation

Equipment Total(In Thousands)

CostAt January 1 P=121,785 P=138,147 P=30,863 P=290,795Transfers from investment properties (Note 14) 222,691 − − 222,691Additions 5,375 8,330 2,324 16,029Retirement − (1,336) (556) (1,892)At December 31 349,851 145,141 32,631 527,623Accumulated DepreciationAt January 1 91,556 100,943 18,736 211,235Depreciation and amortization (Note 23) 9,296 14,735 4,189 28,220Retirement − (1,042) (306) (1,348)Adjustments − (279) − (279)At December 31 100,852 114,357 22,619 237,828Net Book Value P=248,999 P=30,784 P=10,012 P=289,795

The Group transferred P=222.7 million from investment properties to property and equipment in 2017which pertains to portion of building being used as office space of the Parent Company (see Note 14).Fully depreciated assets that are still in use amounted to P=189.3 million and P=142.7 million as ofDecember 31, 2018 and 2017, respectively. As at December 31, 2018 and 2017, there are noproperty and equipment items that are pledged as security to liabilities.

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13. Investments in Associates and a Joint Venture

The movements in investments in associates and a joint venture accounted for under equity methodfollow:


Cost At January 1 P=2,194,729 P=1,496,426

Additional capital infusion 641,430 698,303Effect of merger - business combination (1,827,232) –At December 31 1,008,927 2,194,729

Accumulated equity in net income At January 1 374,059 359,346 Equity in net income for the year 106,039 14,713

Effect of merger (612) – At December 31 479,486 374,059Accumulated equity in other comprehensive loss At January 1 and December 31 (1,078) (1,078)

P=1,487,335 P=2,567,710

The details of the Group’s investment in associates and a joint venture and the related percentages ofownership are shown below:

Percentages ofOwnership Carrying Amounts

December 31 December 312018 2017 2018 2017

(In Thousands)Associates: Solinea, Inc. (Solinea) 35% 35% P=470,980 P=414,529

Cebu Insular Hotels Company, Inc.(CIHCI) 37 37 259,778 267,068

Central Block Developers, Inc. (CBDI)* – 48 – 1,189,744 Amaia Southern Properties, Inc. (ASPI) 35 35 127,622 129,101 Southportal Properties, Inc. (SPI) 35 35 189,718 124,453Joint Venture: CDPEI 15 14 439,237 442,815

P=1,487,335 P=2,567,710*Direct ownership and indirect ownership of the Parent Company is 25% and 47.9%, as of December 31, 2017.

The significant transactions affecting the Group’s investments in associates and a joint venture are asfollows:

2018Prior to the merger, the Parent Company and CPVDC made additional capital infusion to CBDIamounting to P=395.5 million and P=245.9 million, respectively.

As a result of the legal merger between the Parent Company and CPVDC on November 6, 2018, theParent Company increased its direct and effective ownership to 55% and obtained control over CBDI.

2017CHI and CPVDC made additional capital infusion to CBDI amounting to P=314.0 million andP=384.3 million, respectively, in relation to the latter’s additional equity call to fund its ongoing project.

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However, the Group waived its pre-emptive rights to the additional equity call in favor of ALI, theintermediate parent company, which resulted in a 5% reduction for both the Parent Company andCPVDC’s ownership interest in CBDI as of December 31, 2017.

As of December 31, 2018 and 2017, the statements of financial position of these investments inassociates and a joint venture are as follows:

2018CIHCI Solinea CDPEI

(In Thousands)Current assets P=115,918 P=3,140,083 P=303,877Noncurrent assets 787,787 679,424 4,560,500Total assets P=903,705 P=3,819,507 P=4,864,377Current liabilities P=202,355 P=2,556,223 P=94,644Noncurrent liabilities 208 256,405 1,841,484Equity 701,142 1,006,879 2,928,249Total liabilities and equity P=903,705 P=3,819,507 P=4,864,377

2017CBDI CIHCI Solinea CDPEI

(In Thousands)Current assets P=875,000 P=285,161 P=2,568,093 P=254,760Noncurrent assets 2,310,738 549,043 1,503,223 3,840,363Total assets P=3,185,738 P=834,204 P=4,071,316 P=4,095,123

Current liabilities P=1,116,228 P=97,766 P=3,020,162 P=451,035Noncurrent liabilities 5,751 16,104 205,248 691,983Equity 2,063,759 720,334 845,906 2,952,105Total liabilities and equity P=3,185,738 P=834,204 P=4,071,316 P=4,095,123

The statements of comprehensive income of these investments for the years ended December 31, 2018, 2017 and 2016 are as follows:

CIHCI Solinea CDPEI(In Thousands)

For the year ended December 31, 2018Revenue P=85,237 P=1,303,247 P=2,802Costs and expenses 101,126 1,145,977 26,658Net income (loss) (15,889) 157,270 (23,856)Other comprehensive loss − − −Total comprehensive income (loss) (P=15,889) P=157,270 (P=23,856)

CBDI CIHCI Solinea CDPEIFor the year ended December 31, 2017

Revenue P=4,983 P=568,924 P=2,270,614 P=4,538Costs and expenses 1,287 515,430 2,289,407 26,992Net income (loss) 3,696 53,494 (18,793) (22,454)Other comprehensive loss − − − −Total comprehensive income

(loss) P=3,696 P=53,494 (P=18,793) (P=22,454)

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For the year ended December 31, 2016Revenue P=3,744 P=513,662 P=2,150,599 P=690Costs and expenses 702 500,613 1,816,469 7,155Net income (loss) 3,042 13,049 334,130 (6,465)Other comprehensive loss − − − −Total comprehensive income

(loss) P=3,042 P=13,049 P=334,130 (P=6,465)

The difference between the carrying amount of the Group’s investment in Solinea as of December 31,2018 and 2017 and its share in the total equity of Solinea is attributable to implied goodwill.

The Group’s total equity in net earnings of associates and a joint venture amounted to P=106.0 million,P=14.7 million and P=161.3 million in 2018, 2017 and 2016, respectively.

The aggregate financial information of associates on which the Group has immaterial interests as ofand for the years ended December 31 follows:

2018 2017 2016(In Thousands)

Carrying amount P=296,564 P=232,780 P=250,753Share in net income/total

comprehensive income 63,785 2,802 38,521

14. Investment Properties

2018

LandLand

ImprovementsBuildings andImprovements

Construction-in-Progress Total

(In Thousands)CostAt January 1 P=5,009,305 P=14,385 P=10,821,310 P=753,574 P=16,598,574Additions 5,531 16 1,357,624 2,816,591 4,179,762Transfers to inventories (Note 9) (294,102) − − − (294,102)Reclassification − − 649,107 (649,107) −Effect of merger (Note 1) − − 666,946 1,643,732 2,310,678At December 31 4,720,734 14,401 13,494,987 4,564,790 22,794,912Accumulated DepreciationAt January 1 − 5,155 3,076,082 − 3,081,237Depreciation and amortization

(Note 23) − 243 516,853 − 517,096Effect of merger − 2,430 7,203 − 9,633At December 31 − 7,828 3,600,138 − 3,607,966Net Book Value P=4,720,735 P=6,573 P=9,894,849 P=4,564,789 P=19,186,946

2017 (As Restated)

LandLand

ImprovementsBuildings and

ImprovementsConstruction-in-

Progress Total(In Thousands)

CostAt January 1 P=4,928,555 P=14,059 P=9,506,002 P=1,756,645 P=16,205,261Additions 153,713 326 1,315,308 (780,380) 688,967Transfers to:

Property and equipment(Note 12) − − − (222,691) (222,691)

Inventories (Note 9) (72,963) − − − (72,963)At December 31 5,009,305 14,385 10,821,310 753,574 16,598,574Accumulated DepreciationAt January 1 − 2,343 2,611,562 − 2,613,905Depreciation and amortization

(Note 23) − 2,812 464,578 − 467,390Adjustments − − (58) − (58)At December 31 − 5,155 3,076,082 − 3,081,237Net Book Value P=5,009,305 P=9,230 P=7,745,228 P=753,574 P=13,517,337

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The Group’s investment properties consist of land and building held for commercial leasing to earnrentals.

In 2018, the Group transferred P=294.1 million worth of land from investment properties to inventoriesfor TPEPI’s Mactan Seagrove project (see Note 9).

In 2017, the Group transferred P=222.7 million from investment properties to property and equipment(see Note 12).

PIC Q&A 2018-11 requires that land with undetermined future use will be classified as investmentproperty. The impact of adoption was applied retrospectively resulting in the reclassification of landand improvements to investment properties in the comparative consolidated statement of financialposition amounting to P=2,636.3 million in 2017.

As a result of the merger effective November 6, 2018 (see Note 1), the investment properties of theGroup increased by P=2,310.6 million, attributable to the investment properties of CBDI.

Total rental income from investment properties amounted to P=2,191.2 million, P=2,144.4 million andP=1,849.0 million in 2018, 2017 and 2016, respectively (see Note 21). Total direct operating expensesrelated to investment properties that generated rental income amounted to P=1,507.5 million,P=906.2 million and P=915.5 million in 2018, 2017 and 2016, respectively.

As of December 31, 2018 and 2017, there are no investment properties that are pledged as securityto liabilities.

The aggregate fair value of the Group’s investment properties amounted to P=61,707.5 million andP=38,121.7 million as of December 31, 2018 and 2017, respectively, which is based on the latestappraisal report. The fair values were classified under Level 3 of the fair value hierarchy(see Note 27).

The fair values of the investment properties were determined by independent professionally qualifiedappraisers. The fair values of the land and buildings were arrived at using the sales comparisonapproach and cost approach, respectively.

Sales comparison approach is a comparative approach to value that considers the sales of similar orsubstitute properties and related market data and establishes a value estimate by processes involvingcomparison. Listings and offerings may also be considered.

Cost approach is a comparative approach to the value of property or another asset that considers asa substitute for the purchase of a given property, the possibility of constructing another property thatis a replica of, or equivalent to, the original or one that could furnish equal utility with no undue costresulting from delay. It is based on the reproduction/replacement cost (new) of the subject propertyor asset, less total (accrued) depreciation, plus the value of the land to which an estimate ofentrepreneurial incentive or developer’s profit/loss is commonly added.

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Description of valuation techniques used and key inputs to valuation on land and buildings includedunder investment properties as of December 31, 2018 and 2017 follows:

Property Valuation techniqueSignificantunobservable inputs Range

2018 2017Land Sales comparison

approachPrice per square meter P=14,000−P=235,000 P=13,000−P=250,000

Buildings Cost approach Reproduction cost Current cost of constructing a replica of the existingstructures, employing the same design and similar buildingmaterials. The current cost of an identical new item

Replacement cost Cost of replacing an asset with an equally satisfactorilysubstitute asset. Normally derived from the currentacquisition cost of a similar asset, new or used, or of anequivalent productive capacity or service potential.

The Group has no restrictions on the realizability of its investment properties and no contractualobligations to purchase, construct or develop investment properties or for repairs, maintenance andenhancements.

15. Contract Assets and Liabilities

2018(In Thousands)

Contract assets (Note 2) P=342,932Contract liabilities 65,541

Contract assets are initially recognized for revenue earned from real estate sales computed using thePercentage of Completion method as receipt of consideration is based on the agreed schedule ofpayment with the customers. Upon due dates of the scheduled payments, the amounts recognizedas contract assets are reclassified to trade receivables.

Contract liabilities consist of collections from real estate customers which have not reached the 10%threshold to qualify for revenue recognition and excess of collections over the recognized receivablesbased on percentage of completion.

Amount of revenue recognized from amounts included in contract liabilities at the beginning of theyear amounted to P=92.2 million.

16. Other Noncurrent Assets


Input VAT P=725,296 P=23,927Advances to contractors 272,132 −Development rights 49,157 29,395Prepaid commission 9,954 −Deposits 1,365 1,199Others − 513

P=1,057,904 P=55,034

Input VAT arises from the purchase of goods and services but are expected to be applied againstoutput VAT in future periods. This includes deferred input VAT which arises from the purchase ofcapital goods and is amortized over five (5) years or the assets’ useful life, whichever is lower, and isapplied against output VAT.

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Advances to contractors pertain to advances made for the construction of investment properties.

Development rights pertain to the unsold cost of development rights acquired by the Parent Companyallocated based on the revised gross floor area of a structure in a particular lot.

Prepaid commission pertains to costs to obtain a contract from its leasing operation and amortizedover the lease term.

Deposits include advance payments made by the Group for future land and building developments.

17. Accounts and Other Payables


Payable to related parties (Note 20) P=6,296,754 P=2,406,878Accrued expenses 811,157 722,952Accrued project costs (Note 20) 759,322 695,441Retentions payable 224,164 212,768Taxes payable 211,745 211,949Interest payable 30,266 4,386Dividends payable (Note 28) 1,731 1,751Liability for purchased land (Note 19) – 351,569Others 83,582 97,866

P=8,418,721 P=4,705,560

Accrued expenses consist mainly of utilities, marketing and management fees, professional fees andrepairs and maintenance. These are noninterest-bearing and are normally settled within a year.

Accrued project costs arise from progress billings or unbilled completed work on the development ofresidential and commercial projects.

Retentions payable pertains to the portion of the progress billings of constructions retained by theGroup which will be released after the completion of the contractor’s projects. The retention servesas a security from the contractor in case of defects in the project.

Taxes payable includes amusement taxes, expanded withholding taxes and deferred output VAT onuncollected receivables. These are settled on a monthly basis.

Interest payable pertains to unpaid interest expense on long-term debt as of reporting date.

Other payables are noninterest-bearing and are normally settled within one year.

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18. Long-term Debt


Bonds - due 2021 P=5,000,000 P=5,000,000Bank Loans:

BSP overnight reverse repurchase agreementrate plus 0.25% per annum, inclusive ofgross receipts tax 383,250 404,250

Fixed rate corporate notes with interest rate of4.75% per annum 357,000 378,000

BSP Overnight Reverse repurchase RepurchaseAgreement Rate plus 0.25% per annum,inclusive of gross receipts tax 344,875 363,875

At 0.70% per annum spread over the 90-dayDST-R2 340,000 340,000

6,425,125 6,486,125Less unamortized debt issue cost 24,150 32,549

6,400,975 6,453,576Less current portion 59,956 59,942

P=6,341,019 P=6,393,634

The Group’s long-term debt are all unsecured. Debt issue costs are deferred and amortized usingeffective interest method over the term of the loans.

The rollforward analysis of the unamortized debt issue cost follow:


At January 1 P=32,549 P=36,814Additions – 3,800Amortization (Note 23) (8,399) (8,065)At December 31 P=24,150 P=32,549

a. On June 6, 2014, the Parent Company issued P=5.0 billion fixed rate bonds. These bonds have aterm of 7 years, payable in 2021, with a fixed rate of 5.32% per annum. The proceeds were usedto fund the Group’s projects in the pipeline, including on-going projects within the Cebu BusinessPark and Cebu I.T. Park and land banking initiatives.

b. In March 2017, the Group availed the second drawdown from the P=800.0 million credit facilityamounting to P=420.0 million which will mature in 2023.

The loan bears a floating interest rate based on the average yield for the 91-day treasury bills onPDST-R2 plus a spread of 70 basis points per annum or 95% of the BSP Overnight ReverseRepurchase Agreement rate, inclusive of gross receipts tax, whichever is higher. Starting 2018,the interest rate has been fixed at 4.5%. The related outstanding balance amounted toP=383.2 million and P=404.3 million as of December 31, 2018 and 2017, respectively.

c. In December 2013, the Group obtained a loan with a principal amount of P=420.0 million which aredue in 2021. The loan is subject to a fixed interest rate of 4.75% per annum. This loan was usedto finance the construction of eBloc 3 and eBloc 4 commercial buildings which were completed in2016 included under “Investment properties” (see Note 14).

The related outstanding balance amounted to P=357.0 million and P=378.0 million as ofDecember 31, 2018 and 2017, respectively.

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d. In March 2016, the Group obtained a credit facility amounting to P=800.0 million. In 2016, theGroup made the first drawdown amounting to P=380.0 million which will mature in 2023 and wasused to finance the construction of eBloc 3. The loan bears a floating interest rate based on theaverage yield for the 91-day treasury bills on PDST-R2 plus a spread of 70 basis points perannum or 95% of the BSP Overnight Reverse Repurchase Agreement rate, inclusive of grossreceipts tax, whichever is higher. Starting 2018, the interest rate has been fixed at 4.5%. Therelated outstanding balance amounted to P=344.9 million and P=363.9 million as of December 31,2018 and 2017, respectively.

e. In September 2017, the Group obtained a credit facility amounting to P=375.0 million. In October2017, the Group made the first drawdown amounting to P=340.0 million which is due ininstallments until 2027. Proceeds were used to refinance existing loans and for generalcorporate purposes. The loan is subject to floating interest rate of 90-day PDST-R2 plus 0.70%per annum spread, or a floor rate of equivalent to the average of the BSP Overnight DepositFacility Rate and Term Deposit Facility Rate of the tenor nearest to the interest period. Therelated outstanding balance amounted to P=340.0 million as of December 31, 2018 and 2017.

f. In October 2010, the Group obtained various loans with a total principal amount ofP=680.0 million which are due in 2017. In respect with the fixed rate portion of these loans, fixedinterest is the weighted average yield of the 7-year treasury bonds based on PDST-R2 plus aspread of 50 basis points per annum.

In respect of the floating interest portion, floating interest rate is based on the weighted averageyield for the 91-day treasury bills based on PDST-R2 plus a spread of 65 basis points per annum.Outstanding balance amounted to nil as of December 31, 2018 and 2017. The interest is payableevery quarter.

On October 6, 2017, the Group’s loans with floating interest and fixed rate portion matured andfully paid the said loans amounting to P=408.0 million.

Interest on long-term debt recognized in the consolidated statements of income amounted toP=336.3 million, P=345.2 million and P=247.7 million in 2018, 2017 and 2016, respectively.

For the years ended December 31, 2018 and 2017, the Group has not capitalized any interest fromborrowed funds because all of the Group’s projects funded by these specific borrowings werecompleted in 2016 (see Note 14).

Debt covenantThe loan agreements provide for certain restrictions and requirements with respect to, among others,major disposal of property, pledge of assets, liquidation, merger or consolidation and maintenance ofratio between debt and the tangible net worth not to exceed 3:1. As of December 31, 2018 and 2017,the Group is in compliance with these restrictions and requirements.

19. Deposits and Other Liabilities


Tenants’ deposits P=843,074 P=793,870Customers’ deposits 147,739 258,204Construction bond 84,456 85,361

1,075,269 1,137,435Less noncurrent portion 177,608 316,479

P=897,661 P=820,956

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The rollforward analysis of deferred credits under tenants’ deposits follows:

2018 2017At January 1 P=19,628 P=15,750Additions 11,088 7,629Amortization (Note 23) (7,909) (3,751)At December 31 P=22,807 P=19,628

Tenants’ deposits consist of rental security deposits to be refunded by the Group at the end of thelease contracts. These are initially recorded at fair value, which was obtained by discounting itsfuture cash flows using the applicable rates for similar types of instruments.

Customers’ deposits include customers’ down payments related to real estate sales and excess ofcollections over the recognized receivables based on percentage-of-completion. The Group requiresbuyers of condominium units to pay a minimum percentage of the total selling price before the twoparties enter into a sale transaction. In relation to this, the customers’ deposits represent paymentfrom buyers which have not reached the minimum required percentage. When the level of requiredpayment is reached by the buyer, a sale is recognized and these deposits and down payments areconsidered as payments to the total contract price.

Construction bond pertains to deposits made by tenants as security for the construction and design ofthe leased premises, to be refunded upon completion, which usually takes less than a year.

20. Related Party Transactions

Parties are considered to be related if, among others, one party has the ability directly or indirectly, tocontrol the other party or exercise significant influence over the other party in making financial andoperating decisions. Parties are also considered to be related if they are subject to common controlor the party is an associate or a joint venture.

Terms and Conditions of Transactions with Related PartiesExcept as otherwise indicated, the outstanding accounts with related parties shall be settled in cash.The transactions are made at terms and prices agreed upon by the parties.

There have been no guarantees provided or received for any related party receivables or payablesand are generally unsecured. Furthermore, these accounts are noninterest-bearing except forintercompany loans.

The following tables provide the total amount of transactions that have been entered into with relatedparties for the relevant financial year:

Amounts owed byrelated parties

Amounts owed torelated parties

2018 2017 2018 2017(In Thousands)

Subsidiaries of ALI P=904,234 P=884,719 P=5,491,224 P=1,383,870Associates:

Solinea 251,406 251,367 − −SPI 178,092 267,082 − −CBDI − 52,044 − −

Parent Company - ALI 36,762 30,946 805,530 1,023,008Joint venture - CDPEI 1,951 1,604 − −Others 37,785 − − −

P=1,410,230 P=1,487,762 P=6,296,754 P=2,406,878

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Revenue Costs/Expenses2018 2017 2016 2018 2017 2016

(In Thousands) (In Thousands)Subsidiaries of ALI P=52,956 P=26,570 P=8,876 P=443,326 P=184,665 P=30,755Parent Company - ALI 3,077 14,945 5,635 346,317 69,989 168,636

P=56,033 P=41,515 P=14,511 P=789,643 P=254,654 P=199,391

Receivables from/payables to Solinea, Avida and Alveo pertain mostly to advances for andreimbursements of operating expenses, development costs and land acquisitions. Other related partyreceivables and payables pertain to advances and reimbursements arising from the Group’s ordinarycourse of business.

These are generally trade-related, unsecured with no impairment, noninterest-bearing and payablewithin one year. The loans from DPSI, MDC and Serendra, Inc. bear interest ranging from 2.3% to2.5% and are due and demandable as of December 31, 2018 and 2017.

The nature and amounts of material transactions with related parties as of December 31, 2018 and2017 are as follows:

∂ Advances from subsidiaries of ALI in 2018 include advances from CBDI as a result of the mergeramounting to P=3.7 billion.

∂ In December 2015, the Group sold land to ALC amounting to P=633.6 million which is payable ininstallment basis for twenty (20) years starting 2015. The related receivable is interest-bearing.

∂ Included under the accrued project costs in “Accounts and other payables” are construction costspayable to MDC amounting to P=759.3 million and P=342.9 million as of December 31, 2018 and2017, respectively. Advances to MDC, which are included under advances to contractors in“Accounts receivable” (see Note 8) amounted to P=2.2 million and P=47.0 million as ofDecember 31, 2018 and 2017, respectively.

∂ Expenses to ALI pertain to management fees, professional fees and systems costs.ƒ Management and service fees charged by ALI amounted to P=132.6 million, P=162.3 million

and P=125.0 million in 2018, 2017 and 2016, respectively.ƒ Professional fees charged by ALI amounted to P=20.7 million in 2016.ƒ Systems costs which were included in the Group’s manpower costs amounted to

P=19.0 million, P=15.9 million and P=27.6 million in 2018, 2017 and 2016, respectively.

∂ As of December 31, 2018 and 2017, the Group has entered into transactions with BPI, anaffiliate, consisting of cash and cash equivalents, financial assets at FVPL, fair value of planassets and long-term debt with carrying amounts as follows:


Cash and cash equivalents (Note 5) P=155,744 P=145,908Financial assets at FVPL (Note 7) 10,379 10,129Long-term debt (Note 18) 1,420,273 1,480,215Fair value of plan assets (Note 24) 39,054 37,104

∂ In December 2017, the Parent Company purchased commercial units with a floor area of11,478.52 sq. m. from SPI’s The Alcoves project amounting to P=125.9 million, which isnoninterest-bearing and subsequently paid in 2018.

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Compensation of key management personnel by benefit type follows:

2018 2017 2016(In Thousands)

Short-term employee benefits P=14,165 P=18,740 P=24,073Post-employment pension and

other benefits 1,273 817 924P=15,438 P=19,557 P=24,997

21. Revenues

Rental and Theater Income/Real Estate

2018 2017 2016(In Thousands)

Rental income (Notes 14 and 30) P=2,191,231 P=2,144,414 P=1,848,997Revenue from contracts with

customers 800,852 – –Theater income 120,475 129,607 132,082Real estate sales – 347,712 297,610

P=3,112,558 P=2,621,733 P=2,278,689

The Group derives revenue from the transfer of goods and services over time and at a point in time, indifferent product types. The Group’s source of revenue from contracts with customers are solely fromsale of lot only.

Performance ObligationInformation about the Group’s performance obligations are summarized below:

Real estate salesThe Group derives its real estate revenue from sale of condominium units, house and lot, anddeveloped lots. In accordance with Philippines Interpretation Committee Q&A 2016-04, the Grouprecognizes revenue from the sale of these residential properties under pre-completed contract overthe course of the construction of the real estate project.

Payment commences upon signing of the contract to sell and the consideration is payable ininstallment for a period ranging from two (2) to five (5) years.

After the delivery of the completed real estate unit, the Group provides one-year warranty to repairminor defects on the delivered real estate unit. This is assessed by the Group as a quality assurancewarranty and not treated as a separate performance obligation.

The transaction price allocated to the remaining performance obligations (unsatisfied or partiallysatisfied) as at December 31 are, as follows:

2018(In Thousands)

Within one year P=184,055More than one year –

P=184,055

The remaining performance obligations expected to be recognized within one year relate to thecontinuous development of the Group’s real estate projects. The Group’s land developments areestimated to be completed within one year from start of development works.

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Costs to Obtain a ContractThe balances below pertain to the cost to obtain contracts included in the other current assets(see Note 10):

2018(In Thousands)

Balance at the beginning of the year P=4,948Additions 21,026Amortization (23,912)

P=2,062

22. Interest and Other Income

Interest income consists of:

2018 2017 2016(In Thousands)

Interest income derived from:Accretion of receivables (Note 8) P=33,254 P=25,623 P=10,482Intercompany loans 28,876 10,734 22,903

Cash and cash equivalents (Note 5) 2,020 1,047 841 Short-term investments (Note 6) 236 200 472

Others 2,661 3,929 1,217P=67,047 P=41,533 P=35,915

Accretion of receivables includes interest accretion from the sale of land and condominium units.

Others includes interest earned from intercompany and employee loans and interest and penaltycharges on real estate sales.

Other income consists of:

2018 2017 2016(In Thousands)

Recoveries - net P=221,969 P=206,193 P=175,379Gain on sale of development rights

(Notes 8 and 16) 151,495 168,195 −Insurance claim 27,503 – −Service income 13,823 18,847 5,082Beverage 2,841 5,825 4,112Realized and unrealized gain on financial

assets at FVPL (Note 7) 444 244 316Others 18,121 14,951 53,670

P=436,196 P=414,255 P=238,559

Recoveries pertain to the excess collection from sewer, light and power and water charges from itsrental operations. These are recognized when earned.

Gain on sale of development rights pertains to the net gain earned by the Parent Company fromselling the development rights, which represents a portion of the gross floor area of a structure in aparticular lot that is allowed to be developed by the buyers in the future (see Notes 8 and 16).

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Insurance claim pertains to claim against insurer for damage brought about by the fire that occurredin 2018. The claim encompasses business interruption and material damage (see Note 8).

Service income pertains to the various management fees charged by the Group to various parties.

In 2016, others include annexation and service fees wherein, on July 31, 2015, a third party owning aland adjacent to Cebu IT Park, paid for annexation fee amounting to P=29.5 million to gain an accesson roads and IT Park Association membership. The land was subsequently sold to another thirdparty on August 26, 2016 which requires service fee to the Group amounting to P=27.1 million forprocessing of titles as well as application with Philippine Economic Zone Authority (PEZA) andHousing and Land Use Regulatory Board.

23. Costs and Expenses

Real estate, rental and theater expenses consist of:

2018 2017 2016(In Thousands)

Cost of real estate sales (Note 9) P=522,956 P=205,427 P=179,335Depreciation and amortization

(Note 14) 517,096 467,390 382,172Marketing and management fees

(Note 20) 272,801 230,838 199,567Producers’ film share 67,501 72,830 74,051Manpower cost (Note 20) 32,125 23,020 22,838Rental 1,798 1,956 2,540Direct operating expenses: Security and janitorial 163,693 137,063 101,935 Repairs and maintenance 119,192 109,037 100,160 Taxes and licenses 106,922 81,510 79,208 Commission 24,705 54,445 17,579 Dues and fees 8,855 12,172 11,320 Insurance 6,268 8,321 6,188 Professional fees 4,599 6,487 6,689 Transportation and travel 232 647 588 Representation 146 177 399 Light and water − 14,649 86,454 Others 26,374 11,611 24,824

P=1,875,263 P=1,437,580 P=1,295,847

General and administrative expenses consist of:

2018 2017 2016(In Thousands)

Manpower cost (Notes 20 and 24) P=91,647 P=105,576 P=120,623Depreciation and amortization

(Note 12) 32,589 28,220 19,898Provision for impairment loss

(Note 8) 14,032 − −Professional fees 10,010 10,330 7,956Stockholders' meeting 7,188 13,399 11,171Repairs and maintenance 7,170 9,850 6,542Utilities 5,159 4,028 3,568

(Forward)

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2018 2017 2016(In Thousands)

Transportation and travel P=4,834 P=5,363 P=5,072Postal and communication 3,935 4,190 3,625Trainings 3,364 4,336 3,336Supplies 2,738 2,805 2,844Security and janitorial 2,556 3,101 2,899Advertising 2,510 2,615 2,601Representation 1,211 3,165 1,561Dues and fees 1,106 4,121 1,082Taxes and licenses 635 746 892Insurance 590 726 510Rental 24 436 2,487Others 7,753 9,076 2,354

P=199,051 P=212,083 P=199,021

Other charges consist of:

2018 2017 2016(In Thousands)

Financing charges and otherexpenses P=52,127 P=11,100 P=50,746

Amortization of discount onlong-term debt (Note 18) 8,399 8,065 8,546

Amortization of deferred credits(Note 19) 7,909 3,751 5,594

P=68,435 P=22,916 P=64,886

24. Pension Plan

As discussed in Note 2, the Group maintains a DC plan which is accounted for as a defined benefit(DB) plan with minimum guarantee due to the requirements of RA No. 7641, The Retirement PayLaw, covering all regular and permanent employees. The retirement plan is intended to provide forbenefit payments to employees equivalent to the higher of the retirement fund credit or 150% of plansalary for every year of credited services. Benefits are paid in lump sum payable immediately.

The plan assets are being managed by BPI. The asset allocation of the plan is set and reviewed fromtime to time by the Plan Trustees taking into account the membership profile, the liquidityrequirements of the Plan and the risk appetite of the Plan sponsor.

The Group contributes to the fund based on the provision of the DC Plan. The Group updates theactuarial valuation every year by hiring the services of a third party professional qualified actuary.The latest actuarial valuation report was as of reporting date.

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Changes in net defined liability in 2018 and 2017 are as follows:

2018Net benefit cost in consolidated statements

of comprehensive income Remeasurement in other comprehensive income

January 1,2018

Currentservice cost

Pastservice cost Net interest Subtotal

Benefitspaid from

plan assets

Benefits paiddirectly bythe Group

Curtailmentand

SettlementReturn on

plan assets

Actuarialchanges

arising from changes

in financialassumptions

Experienceadjustments Subtotal

December 31,2018

Present value of defined benefitobligation P=69,373 P=4,306 P=– P=3,468 P=7,774 (P=1,817) P=– P=– P=– (P=547) (P=3,026) (P=3,573) P=71,757

Fair value of plan assets (37,104) – – (1,855) (1,855) P=1,817 (4,000) – 2,088 – – 2,088 (39,054)Net defined benefit liability (asset) P=32,269 P=4,306 P=– P=1,613 P=5,919 P=– (P=4,000) P=– P=2,088 (P=547) (P=3,026) (P=1,485) P=32,703

2017Net benefit cost in consolidated statements

of comprehensive income Remeasurement in other comprehensive income

January 1,2017

Currentservice cost

Pastservice cost Net interest Subtotal

Benefitspaid from

plan assets

Benefits paiddirectly bythe Group

Curtailmentand

SettlementReturn on

plan assets

Actuarialchanges

arising from changes

in financialassumptions

Experienceadjustments Subtotal

December 31, 2017

Present value of defined benefitobligation P=78,698 P=5,176 P=− P=3,627 P=8,803 (P=6,263) (P=93) (P=15,915) P=− P=1,632 P=2,511 P=4,143 P=69,373

Fair value of plan assets (46,499) − − (2,507) (2,507) 6,263 (4,000) 7,789 1,850 − − 1,850 (37,104)Net defined benefit liability (asset) P=32,199 P=5,176 P=− P=1,120 P=6,296 P=− (P=4,093) (P=8,126) P=1,850 P=1,632 P=2,511 P=5,993 P=32,269

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The Group’s fund is in the form of a trust fund being maintained by BPI Asset Management. Theprimary objective of the Retirement Fund is to achieve the highest total rate of return possible,consistent with a prudent level of risk. The investment strategy articulated in the asset allocationpolicy has been developed in the context of long-term capital market expectations, as well as multi-year projections of actuarial liabilities. Accordingly, the investment objectives and strategiesemphasize a long-term outlook, and interim performance fluctuations will be viewed with thecorresponding perspective.

The Group expects to contribute P=14.1 million to its retirement fund in 2019.

The major categories of the Group’s plan asset follows:

2018 2017Government securities 86.48% 93.95%Unit investments trust fund 8.36 5.20Cash and cash equivalents 5.16 0.85Mutual fund 0.00 0.00

100.00% 100.00%

All debt instrument held have quoted prices in an active market.

The cost of defined benefit pension plans and other post-employment medical benefits as well as thepresent value of the pension obligation are determined using actuarial valuations. The actuarialvaluation involves making various assumptions. The principal assumptions used in determiningpension and post-employment medical benefit obligations for the defined benefit plans are shownbelow:

2018 2017 2016Discount rate 7.94% 5.00% 5.25%Salary increase rate 7.00 5.00 5.00

The sensitivity analysis below has been determined based on reasonable possible changes of eachsignificant assumption on the defined benefit obligation as of the end of the reporting period,assuming all other assumptions were held constant, as of December 31:

Effect on DBO2018 2017

Discount rate 1.0% increase (0.13%) (8.92%)Discount rate 1.0% decrease 0.79% 10.23%Rate of salary increase 1.0% increase 0.75% 10.23%Rate of salary increase 1.0% decrease (0.13%) (9.00%)

The weighted average duration of the defined benefit obligation at the end of the reporting period is17 years and 11 years as of December 31, 2018 and 2017, respectively.

The following table shows the maturity profile of the Group’s defined benefit obligation based onundiscounted benefit payments:


Within 1 year P=6,882 P=1,844More than 1 year to 5 years 10,150 23,032More than 5 years to 10 years 37,057 25,933More than 10 years 396,650 −

P=450,739 P=50,809

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25. Income Taxes

The provision for current income tax represents 30% RCIT, 2% MCIT and 5% rate on gross incometax (GIT) amounting to P=274.6 million, P=251.1 million and P=132.1 million in 2018, 2017 and 2016,respectively.

Reconciliation between the statutory income tax rate and the effective income tax rate follows:

2018 2017 2016Statutory income tax rate 30.00% 30.00% 30.00%Tax effects of: Income subjected to lower income tax rates (6.87) (6.22) (13.27) Equity in net earnings of associates and a joint venture (2.57) (0.41) (7.28) Interest income and capital gains taxed at lower rates (0.02) (0.02) (0.03)

Expired NOLCO and MCIT 1.18 0.97 3.54Unrecognized deferred income tax assets on MCIT

and NOLCO 0.61 − −Unrecognized deferred income tax assets on

allowance for impairment losses 0.30 − − Others (0.69) 0.01 6.36Effective income tax rate 21.94% 24.33% 19.32%

The components of net deferred tax assets as of December 31 are as follows:


Deferred tax assets on: Difference between tax and book basis of

accounting for real estate transactions P=26,180 P=− Accrued expenses 1,457 − Allowance for impairment losses 642 642 Unamortized discount on customers’ deposits 60 1,763 Unapplied NOLCO − 21,668 Advance rent − 13,530 Unamortized discount on intercompany payable − 5,873 MCIT − 3,543 Others − 3,065

28,339 50,084Deferred tax liabilities on: Unamortized capitalized interest 2,791 17,079 Accrued rental income 60 20,685 Difference between tax and book basis of

accounting for real estate transactions − 2,322 Others − 5,441

2,851 45,527P=25,488 P=4,557

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The components of net deferred tax liabilities as of December 31 are as follows:


Deferred tax assets on: Accrued expenses P=24,805 P=33,755 Advance rent 15,817 667 Allowance for impairment losses on receivables

and other losses 8,573 16,095 Unapplied NOLCO 7,680 − Retirement benefits 4,525 3,737 Unamortized discount on sale of land 4,416 6,599 Unamortized discount on customers’ deposits 1,922 32 MCIT 1,247 − Unrealized foreign exchange loss 717 717 Others 7,844 786

77,546 62,388

Deferred tax liabilities on: Unamortized capitalized interest 102,781 90,024 Unrealized gross profit on lot sale 96,523 114,907 Difference between tax and book basis of

accounting for real estate transactions 53,574 58,665 Accrued rental income 38,503 − Others 61,918 60,098

353,299 323,694P=275,753 P=261,306

The Group’s adoption of PFRS 9 resulted to a change in the financial asset previously classified asAFS financial asset to FVOCI. Previous impairment losses amounting to P=36.5 million and therelated deferred tax asset of P=10.9 million was derecognized and reclassified to other comprehensiveincome and retained earnings, respectively, as at January 1, 2018 (see Note 2).

As of December 31, 2018, deferred tax assets arising from NOLCO, MCIT and allowance forimpairment losses amounting to P=6.9 million, P=4.8 million, and P=3.7 million, respectively, and as ofDecember 31, 2017, deferred tax assets arising from NOLCO and MCIT amounting to P=0.6 millionand P=2.3 million, respectively, have not been recognized since management believes that nosufficient taxable income will be available in the year these are expected to be reversed, settled orrealized.

The Group has deductible temporary differences, NOLCO and MCIT, that are available for offsetagainst future income tax liabilities for which deferred tax assets have not been recognized. Thesedeductible temporary differences, NOLCO and MCIT, as of December 31, 2018 and 2017 follow:

NOLCO

YearIncurred

ExpiryDate

At December 31,2017 Additions Applied Expired

At December 31,2018

2018 2021 P=– P=22,927,266 P=– P=– P=22,927,2662017 2020 25,599,407 – – – 25,599,4072015 2018 48,495,209 – (8,616,352) (39,878,857) –

P=74,094,616 P=22,927,266 (P=8,616,352) (P=39,878,857) P=48,526,673

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MCIT

YearIncurred

ExpiryDate

At December 31,2017 Additions Applied Expired

At December 31,2018

2018 2021 P=– P=2,492,990 P=– P=– P=2,492,9902017 2020 1,324,094 – – – 1,324,0942016 2019 2,192,808 – – – 2,192,8082015 2018 194,886 – – (194,886) –

P=3,711,788 P=2,492,990 P=– (P=194,886) P=6,009,892

Tax Reform for Acceleration and Inclusion Act (TRAIN) LawR.A. No. 10963 or TRAIN was signed into law on December 19, 2017 and took effectJanuary 1, 2018, making the new tax law enacted as of the reporting date. Although the TRAINchanges the existing tax laws and includes several provisions that have generally affect businesseson a prospective basis, management assessed that the same did not have any significant impact onthe financial statement balances as of the reporting date.

26. Basic/Diluted Earnings Per Share

The following table presents information necessary to compute EPS:

2018 2017 2016(In Thousands, except EPS)

a. Net income attributable to the equityholders of the Parent Company P=857,111 P=753,447 P=679,663

b. Weighted average numberof outstanding shares 1,959,521 1,920,074 1,920,074

c. Basic/Diluted Earnings per share(a/b) P=0.44 P=0.39 P=0.35

There were no potential dilutive shares in 2018, 2017 and 2016.

27. Financial Information and Financial Instruments

Fair Value InformationThe carrying amount of cash and cash equivalents, short-term investments, financial assets at FVPL,receivables (except trade residential development and certain receivables from related parties),accounts and other payables (excluding statutory liabilities) and deposits and other liabilities (excepttenants’ deposits) are approximately equal to their fair value due to the short-term nature of thetransaction.

The methods and assumptions used by the Group in estimating the fair value of the financialinstruments are as follows:

∂ Cash and cash equivalents and short-term investments: The fair value of cash and cashequivalents and short-term investment approximate the carrying amounts at initial recognition dueto the short-term maturities of these instruments.

∂ Financial assets at FVPL: The fair value estimates are based on net assets value of the reportingdate.

∂ Receivables: The fair value of receivables due within one year approximates its carryingamounts. Noncurrent portion of receivables are discounted using the applicable discount ratesfor similar types of instruments. The discount rates used ranged from 3.7% to 5.0% as ofDecember 31, 2018 and 2017.

∂ AFS financial assets: The fair value of AFS financial assets is determined based on the availablequoted price in the market.

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∂ Accounts and other payables: The fair values of accounts and other payables approximate thecarrying amounts due to the short-term nature of these transactions.

∂ Long-term debt and deposits and other liabilities: Current portion of long-term debt and depositsand other liabilities approximates its fair value due to its short-term maturity. The fair value offixed rate instruments are estimated using the discounted cash flow methodology using theGroup’s current incremental borrowing rates for similar borrowings with maturities consistent withthose remaining for the liability being value. The discount rates used ranged from 1.8% to 5.5%as of December 31, 2018 and 2017.

The following tables set forth the carrying values and estimated fair values of the Group’s financialassets and liabilities carried at fair values and those which fair value are disclosed:

December 31, 2018 December 31, 2017Carrying

Value Fair ValueCarrying

Value Fair Value(In Thousands)

Loans and ReceivablesTrade residential development P=29,486 P=110,448 P=201,354 P=289,793Receivable from related parties 1,410,230 1,410,230 1,487,762 590,904Other Financial LiabilitiesLong-term debt P=6,400,975 P=6,060,596 P=6,486,125 P=6,453,576Tenants’ deposits under

deposits and otherliabilities 843,074 843,074 820,956 790,726

Fair Value HierarchyThe Group uses the following hierarchy for determining and disclosing the fair value of the financialinstruments by valuation technique:

Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilitiesLevel 2: inputs other than quoted prices included within Level 1 that are observable for assets or

liabilities, either directly or indirectlyLevel 3: inputs for the asset or liability that are not based on observable market data

The quantitative disclosures on fair value measurement hierarchy for financial instruments as ofDecember 31 follow:

2018Fair value measurements using

Date of valuationCarrying

Values Total

Quotedprices in

activemarkets for

identicalassets

(Level 1)

Significantoffer

observableinputs

(Level 2)

Significantunobservable

inputs(Level 3)

Assets measured at fairvalue

Financial assets at FVOCI December 31, 2018 P=342,650 P=342,650 P=342,650 P=– P=–FVPL December 31, 2018 10,379 10,379 – 10,379 –Assets for which fair

values are disclosedTrade residential

development December 31, 2018 29,486 110,448 – – 110,448Receivable from related

parties December 31, 2018 1,410,230 1,410,230 – – 1,410,230Investment properties December 31, 2018 19,186,946 61,707,470 – – 61,707,470Liabilities for which fair

values are disclosedLong-term debt December 31, 2018 6,400,975 6,060,596 – – 6,060,596Tenants’ deposits under

deposits and otherliabilities December 31, 2018 843,074 843,074 – – 843,074

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2017Fair value measurements using

Date of valuationCarrying

Values Total

Quotedprices in

activemarkets for

identicalassets

(Level 1)

Significantoffer

observableinputs

(Level 2)

Significantunobservable

inputs(Level 3)

Assets measured at fairvalue

AFS December 31, 2017 P=304,333 P=304,333 P=− P=– P=304,333FVPL December 31, 2017 10,129 10,129 – 10,129 –Assets for which fair

values are disclosedTrade residential

development December 31, 2017 201,354 289,793 – – 289,793Receivable from related

parties December 31, 2017 1,487,762 590,904 – – 590,904Investment properties December 31, 2017 10,881,060 38,121,748 − − 38,121,748Liabilities for which fair

values are disclosedLong-term debt December 31, 2017 6,486,125 6,453,576 – – 6,453,576Tenants’ deposits under

deposits and otherliabilities December 31, 2017 820,956 790,726 – – 790,726

The Group categorized the fair value of long-term debt and deposits and other noncurrent liabilitiesunder Level 3 as of December 31, 2018 and 2017. The fair value of these financial instruments wasdetermined by discounting future cash flows using the applicable rates of similar types of instrumentsplus a certain spread. This spread is the unobservable input and the effect of changes to this is thatthe higher the spread, the lower the fair value.

For land, significant increases (decreases) in the price per square meter, in isolation, would result in asignificantly higher (lower) fair value of the properties.

For buildings, significant increases (decreases) in the replacement and reproduction costs, inisolation, would result in a significantly higher (lower) fair value of the properties.

The Group categorized the fair value of AFS financial assets under Level 2 as of December 31, 2018.The fair value of these instruments was determined based on quoted selling price for identical assets.

Financial Risk Management Objectives and PoliciesThe Group’s principal financial instruments comprise cash and cash equivalents, financial assets atFVPL, AFS financial assets and long-term debt.

The main purpose of the Group’s financial instruments is to fund its operations, capital expendituresand finance the projects. The Group has various other financial assets and liabilities such as tradereceivables and trade payables, which arise directly from its operations.

Exposure to credit risk, liquidity risk and market risk (i.e., foreign currency risk and interest rate risk)arises in the normal course of the Group’s business activities. The main objectives of the Group’sfinancial risk management are as follows:∂ to identify and monitor such risks on an ongoing basis;∂ to minimize and mitigate such risks; and∂ to provide a degree of certainty about costs.

The Group’s financing and treasury function operates as a centralized service for managing financialrisks and activities as well as providing optimum investment yield and cost-efficient funding for theGroup. The Group’s BOD reviews and approves policies for managing each of these risks.

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Credit riskCredit risk is the risk that one party to a financial instrument will cause a financial loss for the otherparty by failing to discharge an obligation. The Group’s credit risks are primarily attributable tofinancial assets such as cash and cash equivalents, financial assets and FVPL and receivables.

To manage credit risk, the Group maintains defined credit policies and monitors its exposure to creditrisks on a continuous basis.

In respect of receivable from the sale of properties, credit risk is managed primarily through creditreviews and an analysis of receivables on a continuous basis. The Group also undertakessupplemental credit review procedures for certain installment payment structures. The Group’sstringent customer requirements and policies in place contribute to lower customer default than itscompetitors. Customer payments are facilitated through various collection modes including the use ofpostdated checks and auto-debit arrangements. Exposure to bad debts is not significant as title toreal estate properties are not transferred to the buyers until full payment has been made and therequirement for remedial procedures is minimal given the profile of buyers.

Credit risk arising from rental income from leasing properties is primarily managed through a tenantselection process. Prospective tenants are evaluated on the basis of payment track record and othercredit information. In accordance with the provisions of the lease contracts, the lessees are requiredto deposit with the Group security deposits and advance rentals which helps reduce the Group’scredit risk exposure in case of defaults by the tenants. For existing tenants, the Group has put inplace a monitoring and follow-up system. Receivables are aged and analyzed on a continuous basisto minimize credit risk associated with these receivables. Regular meetings with tenants are alsoundertaken to provide opportunities for counseling and further assessment of paying capacity.

Other financial assets are comprised of cash and cash equivalents excluding cash on hand, short-term investments, financial assets at FVPL and AFS financial assets. The Group adheres to fixedlimits and guidelines in its dealings with counterparty banks and its investment in financialinstruments. Bank limits are established on the basis of an internal rating system that principallycovers the areas of liquidity, capital adequacy and financial stability. The rating system likewisemakes use of available international credit ratings. Given the high credit standing of its accreditedcounterparty banks, management does not expect any of these financial institutions to fail in meetingtheir obligations. Nevertheless, the Group closely monitors developments over counterparty banksand adjusts its exposure accordingly while adhering to pre-set limits.

As for the receivables from related parties, receivable from employees and other receivables, themaximum exposure to credit risk from these financial assets arise from the default of the counterpartywith a maximum exposure equal to their carrying amounts.

The Group writes-off a financial asset, in whole or in part, when the asset is considered uncollectible,it has exhausted all practical recovery efforts and has concluded that it has no reasonableexpectations of recovering the financial asset in its entirety or a portion thereof. The Group writes offan account when all of the following conditions are met:

ƒ the asset is in past due for over 90 days, or is already an item-for-forfeitƒ contract restructuring is no longer possible

The Group may also write-off financial assets that are still subject to enforcement activity. The Grouphas not written off outstanding loans and receivables that are still subject to enforcement activity as ofDecember 31, 2018 and 2017.

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An analysis of the maximum exposure to credit risk from the Group’s trade receivables and the fairvalues of the related collaterals are shown below:

December 31, 2018

Maximumexposure to

credit riskFair value of

collaterals Net Exposure

Financialeffect

of collateralor credit

enhancement(In Thousands)

Trade receivables: Residential development P=29,486 P=110,448 P=– P=29,486

Commercial development 130,540 – 130,540 – Shopping centers 106,205 740,553 – 106,205 Corporate business 112,190 238,946 – 112,190

P=378,421 P=1,089,947 P=130,540 P=247,881

December 31, 2017

Maximumexposure to

credit riskFair value of

collateralsNet

Exposure

Financialeffect

of collateralor credit

enhancement(In Thousands)

Trade receivables: Residential development P=201,354 P=289,793 P=− P=201,354 Shopping centers 136,819 − 136,819 − Corporate business 113,348 774,242 − 113,348 Commercial development 69,088 179,583 − 69,088

P=520,609 P=1,243,618 P=136,819 P=383,790

Applicable for the year ended December 31, 2018

The following are the details of the Group’s assessment of credit quality and the related ECLs as atDecember 31, 2018:

General approachƒ Cash and cash equivalents and short-term investments - As of December 31, 2018, the ECL

relating to the cash and cash equivalents and short-term investments of the Group is minimal asthese are considered with low credit risk.

ƒ Receivables from related parties, commercial development and other receivables - The Group didnot recognize any allowance relating to receivable from related parties, commercial developmentand other receivables in prior years. No ECL is recognized since there were no history of defaultpayments. This assessment is undertaken each financial year through examining the financialposition of the related parties and the markets in which the related parties operate.

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Simplified approachƒ Trade receivables (i.e., residential, corporate business, shopping centers, lease receivables,

accrued receivables) and contract assets - The Group applied the simplified approach underPFRS 9, using a ‘provision matrix’. As of December 31, 2018, the allowance for impairmentlosses pertain only to individually impaired accounts. No impairment losses resulted fromperforming collective impairment test, due to the expected recoveries from security deposits (i.e.,stipulated as 3 to 6 months’ worth of rental), advance payments/rentals and future collections ofproperties upon foreclosure which help reduce the Group’s credit risk exposure in case ofdefaults by the customers.

The maximum exposure to credit risk, net of allowance for impairment, amounted to P=2.9 billion as atDecember 31, 2018.

2018Stage 1 Stage 2 Stage 3 Lifetime ECL

SimplifiedApproach Total

12-monthECL

LifetimeECL

LifetimeECL

Gross carryingamount

1,931,977 − − P=1,002,237 2,934,214

Loss allowance − − − (30,715) (30,715)Carrying amount P=1,931,977 P=− P=− P=971,522 P=2,903,499

As of December 31, 2018, the aging analysis of receivables presented per class, is as follow:

NeitherPast Past Due but not Impaired

Due norImpaired <30 days

30-60days

60-90days

90-120days >120 days Impaired Total

(In Thousands)Trade receivables:

Residentialdevelopment P=29,486 P=− P=− P=− P=− P=− P=− P=29,486

Shopping centers 73,000 7,662 8,801 3,680 503 679 11,880 106,205Commercial

development 130,540 − − − − − − 130,540 Corporate business 68,051 4,076 8,619 8,003 149 4,457 18,835 112,190Receivable from related

parties 775,050 − 873 279 287 633,741 − 1,410,230Claims receivable 54,634 54,634Receivable from

employees 14,249 − − − − − − 14,249Accrued receivable 303,898 − − − − 107,526 − 411,424Others 26,539 − − − − 46,418 − 72,957

P=1,475,447 P=11,738 P=18,293 P=11,962 P=939 P=792,821 P=30,715 P=2,341,915

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Applicable for the year ended December 31, 2017 and prior years

The table below shows the credit quality by class of the Group’s financial assets (gross of allowancefor impairment losses):

December 31, 2017Neither Past Due nor Impaired

HighGrade

MediumGrade

LowGrade Default Total

(In Thousands)Cash and cash equivalents

(excluding cash on hand) P=176,493 P=− P=− P=− P=176,493Short-term investments 2,543 − − − 2,543Trade receivables: Residential development 201,354 − − − 201,354

Shopping centers 136,819 − − − 136,819Corporate business 64,729 2,243 − 46,376 113,348Commercial development 27,859 − − 41,229 69,088

Receivable from related parties 1,469,300 − − 18,462 1,487,762Receivables from employees 16,741 − − − 16,741Accrued receivable 309,297 − − − 309,297Others 59,372 − − − 59,372AFS financial assets − − 304,333 − 304,333

P=2,464,507 P=2,243 P=304,333 P=106,067 P=2,877,150

Others includes non-trade receivables from sewer and management fees, receivable from SSS andaccrued interest receivable from money market placements.

The credit quality of the financial assets was determined as follows:

ƒ Cash and cash equivalents and financial assets at FVPL - based on the nature of thecounterparty and the Group’s rating procedure. These are held by counterparty banks withminimal risk of bankruptcy and are therefore classified as high grade.

ƒ Receivables - high grade pertains to receivables with no default in payment; medium gradepertains to receivables with up to 3 defaults in payment; and low grade pertains to receivableswith more than 3 defaults in payment.

As of December 31, 2018 and 2017, the Group does not have restructured financial assets.The Group has no significant credit risk concentrations on its receivables. Policies are in place toensure that lease contracts and contracts to sell are made with customers with good credit history.

Given the Group’s diverse base of counterparties, it is not exposed to large concentration of creditrisk. For financial assets recognized on the balance sheet, the gross exposure to credit risk equalstheir carrying amount.

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The maximum exposure to credit risk, net of allowance for impairment, amounted to P=2.9 billion as atDecember 31, 2017.

High grade P=2,464,407Medium grade 2,243Low grade 304,333Default 106,067Gross carrying amount 2,877,050

Loss allowance (16,683)Carrying amount P=2,860,367

As of December 31, 2017, the aging analysis of receivables presented per class, is as follow:

December 31, 2017Neither

Past Past Due but not ImpairedDue nor

Impaired <30 days30-60

days60-90

days90-120

days >120 days Impaired Total(In Thousands)

Trade receivables: Residential

developmentP=201,354 P=− P=− P=− P=− P=− P=− P=201,354

Shopping centers 66,972 5,969 4,744 5,226 7,009 6,745 16,683 113,348 Commercial

development 136,819 − − − − − − 136,819 Corporate business 27,859 − 6,516 14,560 8,221 11,932 − 69,088Receivable from related

parties 1,469,300 − 365 14,269 2,463 1,365 − 1,487,762

Receivable fromemployees 16,741 − − − − − − 16,741

Accrued receivable 309,297 − − − − − − 309,297Others 59,372 − − − − − − 59,372

P=2,287,714 P=5,969 P=11,625 P=34,055 P=17,693 P=20,042 P=16,683 P=2,393,781

Liquidity riskLiquidity risk is the risk that an entity will encounter difficulty in raising funds to meet commitmentsassociated with financial instruments. Liquidity risk may result from either the inability to sell financialassets quickly at their fair values; or the counterparty failing on repayment of a contractual obligation;or inability to generate cash inflows as anticipated.

The Group monitors its cash flow position, debt maturity profile and overall liquidity position inassessing its exposure to liquidity risk. The Group maintains a level of cash and cash equivalentsdeemed sufficient to finance operations and to mitigate the effects of fluctuation in cash flows.Accordingly, its loan maturity profile is regularly reviewed to ensure availability of funding through anadequate amount of credit facilities with financial institutions.

As of December 31, 2018 and 2017, current ratio is 0.38:1 and 0.60:1, respectively, with cash andcash equivalents, short-term investments and financial assets at FVPL of P=260.1 million andP=189.5 million, respectively, accounting for 7.2% and 5.6% of the total current assets, respectively,and resulting in a negative net working capital of P=5,857.3 million and P=2,263.4 million, respectively.

Overall, the Group’s funding arrangements are designed to keep an appropriate balance betweenequity and debt, to give financing flexibility while continuously enhancing the Group’s businesses.

The table below summarizes the maturity profile of the Group’s financial assets, contract assets andfinancial liabilities as of December 31 based on the contractual undiscounted payments.

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December 31, 2018

< 1 year 1 to < 2 years 2 to < 3 years > 3 years TotalFinancial assets: (In Thousands)

Cash and cash equivalents P=224,523 P=− P=− P=− P=224,523Financial assets at fair value

through profit or loss 10,379 − − − 10,379Short-term investments 25,244 − − − 25,244Receivable 2,222,538 119,280 − − 2,341,818

Contract assets 205,087 − 137,845 − 342,932Total financial and contract assets `2,687,771 119,280 137,845 − 2,944,896Financial liabilities:

Accounts and other payables 8,278,514 − − − 8,278,514Long-term debt 79,219 78,000 5,371,999 914,125 6,443,343Interest payable - long-term debt 343,090 322,776 174,319 98,061 938,246Deposits and other liabilities 906,381 99,989 36,995 31,903 1,075,268

Total financial liabilities 9,607,204 500,765 5,583,313 1,044,089 16,735,371Net financial liabilities (P=6,919,433) (P=381,485) (P=5,445,468) (P=1,044,089) (P=13,790,475)

December 31, 2017

< 1 year 1 to < 2 years 2 to < 3 years > 3 years Total

Financial assets:(In Thousands)

Cash and cash equivalents P=176,788 P=− P=− P=− P=176,788Financial assets at fair value

through profit or loss 10,129 − − − 10,129Short-term investments 2,543 − − − 2,543Receivable 1,901,125 113,049 202,434 177,173 2,393,781

Total financial assets 2,090,585 113,049 202,434 177,173 2,583,241Other financial liabilities:

Accounts and other payables 4,493,611 − − − 4,493,611Long-term debt 59,942 59,956 76,963 6,256,715 6,453,576Interest payable - long-term debt 277,624 355,479 330,236 170,644 1,133,983Deposits and other liabilities 820,956 − − 316,479 1,137,435

Total other financial liabilities 5,652,133 415,435 407,199 6,743,838 13,218,605Net financial liabilities (P=3,561,548) (P=302,386) (P=204,765) (P=6,566,665) (P=10,635,364)

Cash and cash equivalents, financial assets at FVPL, accounts receivable and contract assets areused for the Group's liquidity requirements. Please refer to the terms and maturity profile of thesefinancial assets under the maturity profile of the interest-bearing financial assets and liabilitiesdisclosed under interest rate risk section.

Foreign currency riskForeign currency risk is the risk that the fair value or future cash flows of a financial instrument willfluctuate because of changes in foreign exchange rates.

Majority of the Group’s transactions are denominated in Philippine Peso. There are only minimalplacements in foreign currencies and the Group does not have any foreign-currency-denominateddebt. As such, the Group’s foreign currency risk is minimal.

The following table shows the Group’s consolidated foreign-currency-denominated monetary assetsand their Peso equivalents as of December 31:

2018 2017

US DollarPhp

Equivalent US DollarPhp

Equivalent(In Thousands)

Cash and cash equivalents $1,500 P=78,883 $520 P=26,265

In translating the foreign-currency-denominated monetary assets into Peso amounts, the exchangerates used were P=52.58 to US$1.00 and P=50.51 to US$1.00, the Philippine Peso-US Dollar exchangerates as of December 31, 2018 and 2017, respectively.

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The following table demonstrates the sensitivity to a reasonable possible change in the US dollarrate, with all variables held constant, of the Group’s profit before tax (due to changes in the Pesoequivalent of the dollar-denominated cash and cash equivalents and short-term investments). Thereis no other impact on the Group’s equity other than those already affecting the profit or loss.

Increase (Decrease)in exchange rate

Effect on ProfitBefore Tax

(In Thousands)December 31, 2018 P=1.00 P=1,500

(1.00) (1,500)December 31, 2017 1.00 520

(1.00) (520)

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The terms and maturity profile of the interest-bearing financial assets and liabilities, together with its corresponding nominal amounts and carrying values (in thousands)are shown in the following table:

December 31, 2018Interest terms (p.a.) Rate Fixing Period Nominal Amount < 1 year 1 to 5 years Carrying Value

Group Cash and cash equivalents Fixed at the date of investment Various P=224,223 P=224,223 P=− P=224,223 Accounts receivable Fixed at the date of sale Date of Sale 2,341,915 2,197,691 144,224 2,341,915

P=2,566,138 P=2,421,914 P=144,224 P=2,566,138Parent Company Long-term debt Fixed Peso Fixed rate of average 5-year treasury bond +

0.60% spread Maturity date P=5,000,000 P=− P=4,980,702 P=4,980,702 Peso Fixed at 4.5% starting 2018 Maturity date 383,250 20,681 361,060 381,741

Peso Fixed rate corporate notes with interest of 4.75%per annum Maturity date 357,000 20,713 335,649 356,362

Peso Fixed at 4.5% starting 2018 Maturity date 344,875 18,749 324,940 343,689 Floating

Peso Floating rate of average 91-day treasury bill rate +0.70% spread Quarterly 340,000 (187) 338,668 338,481

P=6,425,125 P=59,956 P=6,341,019 P=6,400,975

December 31, 2017Interest terms (p.a.) Rate Fixing Period Nominal Amount < 1 year 1 to 5 years Carrying Value

Group Cash and cash equivalents Fixed at the date of investment Various P=144,176 P=144,176 P=− P=144,176 Accounts receivable Fixed at the date of sale Date of sale 2,393,781 1,901,125 492,656 2,393,781

P=2,537,957 P=2,045,301 P=492,656 P=2,537,957Parent Company Long-term debt Fixed Peso Fixed rate of average 5-year treasury bond5+ 0.60% spread Maturity date P=5,000,000 P=− P= 4,973,361 P=4,973,361

Peso Fixed rate corporate notes with interest of 4.75% per annum Maturity date 378,000 20,708 356,362 377,070 Floating Peso Floating rate of average 91-day treasury bill rate + 0.70% spread Maturity date 404,250 20,672 381,741 402,413

Peso Floating rate of average 91-day treasury bill rate + 0.70% spread Maturity date 363,875 18,742 343,689 362,431Peso Floating rate of average 91-day treasury bill rate + 0.70% spread Maturity date 340,000 (180) 338,481 338,301

P=6,486,125 P=59,942 P=6,393,634 P=6,453,576

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The maturities of long-term debt at nominal values are as follow:


Due in: 2018 P=− P=61,000 2019 61,000 61,000 2020 78,000 78,000 2021 5,372,000 5,372,000 2022 57,000 57,000 2023 585,125 585,125 2024 17,000 17,000 2025 17,000 17,000 2026 17,000 17,000 2027 221,000 221,000

P=6,425,125 P=6,486,125

In September 2017, the Group obtained a credit facility amounting to P=375.0 million. InOctober 2017, the Group made the first drawdown amounting to P=340.0 million which is due ininstallment until 2027. Proceeds were used to refinance existing loans and for general corporatepurposes. The loan is subject to floating interest rate of 90-day PDST-R2 plus 0.70% per annumspread, or a floor rate of equivalent to the average of the BSP Overnight Deposit Facility Rate andTerm Deposit Facility Rate of the tenor nearest to the interest period (see Note 18).

In March 2017, the Group availed the second drawdown from the P=800.0 million credit facilityamounting to P=420.00 million which will mature in 2023. The related outstanding balance amountedto P=383.3 million as of December 31, 2018 (see Note 18).

In March 2016, the Group obtained a credit facility amounting to P=800.0 million. As ofDecember 31, 2018 and 2017, the undrawn amount amounted to P=380.0 million (see Note 18).

In June 2014, the Group acquired a P=5.0 billion bonds to partially finance its capital expenditurerequirements. As of December 31, 2018 and 2017, the Group’s outstanding liability is P=5.0 billion,which is due for payment in 2021 (see Note 18).

Equity price riskFinancial assets at FVPL are acquired at a certain price in the market. Such investment securitiesare subject to price risk due to changes in market values of instruments arising either from factorsspecific to individual instruments or their issuers or factors affecting all instruments traded in themarket. Depending on several factors such as interest rate movements, country’s economicperformance, political stability, domestic inflation rates, these prices change, reflecting how marketparticipants view the developments.

The Group measures the sensitivity of its investment securities based on the average historicalfluctuation of the investment securities’ net asset value per unit (NAVPU). All other variables heldconstant, with a duration of 0.12 year and 0.09 year for 2018 and 2017, respectively, a 1.0% changein NAVPU will increase/decrease net income and equity by P=0.01 million and P=0.01 million for theyears ended December 31, 2018 and 2017, respectively.

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28. Equity

Capital StockThe details of the Parent Company’s common shares as of December 31, 2018 and 2017 follow:

2018 2017Authorized shares 3,000,000,000 3,000,000,000Par value per share P=1.0 P=1.0Shares issued and outstanding 2,156,756,631 1,920,073,623

In November 6, 2018, SEC certified the Plan of Merger between the Parent Company and CPVDC.As a result, the Parent Company issued shares to CPVDC shareholders, including the ParentCompany, from its unissued shares with a share swap ratio of 1.06 resulting to an issuance of a total996,771,000 shares.

Treasury SharesPrior to merger, the Parent Company owns 717,064,047 shares from CPVDC which was thenre-acquired by issuing 760,087,890 shares and classified as treasury shares.

Equity ReservesThe equity reserves resulted from the merger between the Parent Company and CPVDC. Under theaccounting for legal merger, the Group recognized the difference between the net assets acquiredand the total cost of the investments in CPVDC under equity reserve in the consolidated statement ofchanges in equity amounting to P=274.0 million.

Unappropriated retained earningsThe retained earnings available for dividend distribution of the Parent Company amounted toP=1,583.4 million and P=1,868.6 million as of December 31, 2018 and 2017, respectively.

Retained earnings include undistributed net earnings of subsidiaries and associates amountingP=823.0 million and P=1,198.6 million as of December 31, 2018 and 2017, respectively. Theseamounts are not available for dividend declaration until declared by the subsidiaries and affiliates.

On November 22, 2018, the Parent Company’s BOD declared P=0.15 per share cash dividendstotaling to P=323.5 million from unappropriated retained earnings to all its issued and outstandingshares as of record date December 13, 2018, and paid on December 20, 2018.

In December 2017, the Parent Company’s BOD declared P=0.15 per share cash dividends totaling toP=288.0 million from unappropriated retained earnings to all its issued and outstanding shares as ofrecord date December 20, 2017, and paid on December 27, 2017.

On November 17, 2016, the Parent Company’s BOD declared P=0.12 per share cash dividendstotaling to P=230.4 million from unappropriated retained earnings to all its issued and outstandingshares as of record date December 2, 2016, and paid on December 12, 2016.

Appropriated retained earningsOn November 22, 2012, the Parent Company’s BOD approved and authorized the appropriation ofretained earnings amounting to P=1.3 billion which shall be used for land acquisition and futuredevelopment projects.

On August 13, 2018, the Parent Company’s BOD approved the expansion projects within Cebu ITPark and Cebu Business Park with a total project cost of P2.04 billion which are expected to becompleted in 2021.

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Capital ManagementThe primary objective of the Group’s capital management policy is to ensure that debt and equitycapital are mobilized efficiently to support business objectives and maximize shareholder value. TheGroup establishes the appropriate capital structure for each business line that properly reflects itspremier credit rating and allows it the financial flexibility, while providing it sufficient cushion to absorbcyclical industry risks.

The Parent Company is not subject to externally imposed capital requirements. No changes weremade in the objectives, policies and processes from the previous years.

The Group monitors its capital structure using leverage ratios on both a gross and net basis, andmakes adjustments to it in light of economic conditions. Debt consists of long-term debt. Net debtincludes long-term debt less cash and cash equivalents and financial assets at FVPL. The Groupconsiders as capital the equity attributable to equity holders of the Parent Company.

As of December 31, the Group had the following ratios:


Long-term debt P=6,400,975 P=6,453,576Less: Cash and cash equivalents 224,523 176,788 Short-term investments 25,244 2,543 Financial assets at fair value through profit or loss 10,379 10,129Net debt P=6,140,829 P=6,264,116Equity attributable to equity holders of

Cebu Holdings, Inc. P=8,062,410 P=6,989,133Debt to equity 79.39% 92.34%Net debt to equity 76.17% 89.63%

29. Segment Information

The business segments where the Group operates are as follows:

Core business:∂ Commercial development - sale of commercial lots, club shares and development rights∂ Residential development - sale of residential lots and condominium units∂ Shopping centers - development of shopping centers and lease to third parties of retail space and

land therein; operation of movie theaters, food courts, entertainment facilities and carparks inthese shopping centers; management and operation of malls

∂ Corporate business - development and lease of office buildings∂ Others - other investing activities such as investment in joint ventures and sale of non-core assets

No business segments have been aggregated to form the reportable business segments.

Management monitors the operating results of its business units separately for the purpose of makingdecisions about resource allocation and performance assessment. The accounting andmeasurement policies used are consistent with the policies used in preparing general-purposefinancial statements.

Sales, costs and expenses include amounts that are directly attributable to each segment. Items thatare not directly identified are allocated based on the segment’s proportionate share on the totalrevenue.

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Business SegmentsThe following tables regarding business segments present assets and liabilities as of December 31, 2018, 2017 and 2016 revenue and expense information for the three-year year ended December 31, 2018.

2018

CommercialDevelopment

ResidentialDevelopment

ShoppingCenters

CorporateBusiness Others

Eliminationsand

Adjustments Total(In Thousands)

RevenueSales to external customers P=99,672 P=819,256 P=1,466,830 P=758,146 P=– (P=31,346) P=3,112,558Equity in net earnings of associates and a joint venture – – – – – 106,039 106,039Total revenue 99,672 819,256 1,466,830 758,146 – 74,693 3,218,597Operating expenses (6,273) (674,631) (867,030) (557,418) (308) 31,346 (2,074,314)Operating profit (loss) 93,399 144,625 599,800 200,728 (308) 106,039 1,144,283Interest income 9,303 26,551 6,424 10,615 16,648 (2,494) 67,047Other income 151,905 7,179 89,603 169,653 376,465 (358,609) 436,196Interest and other financing charges – – – – (407,261) 2,494 (404,767)Provision for (benefit from) income tax (15,980) (54,175) (172,856) (7,537) (22,181) – (272,729)Net income (loss) P=238,627 P=124,180 P=522,971 P=373,459 P= (36,637) (P=252,570) P=970,030Net income (loss) attributable to:

Equity holders of Cebu Holdings, Inc. P=235,047 P=94,755 P=470,287 P=346,229 (P=36,637) (P=252,570) P=857,111Non-controlling interests 3,580 29,425 52,684 27,230 – – 112,919

P=238,627 P=124,180 P=522,971 P=373,459 (P=36,637) (P=252,570) P=970,030Other InformationSegment assets P=3,312,693 P=2,628,019 P=16,196,161 P=5,794,675 P=9,354 (P=3,111,897) P=24,829,005Investments in associates and a joint venture – – – – 4,078,909 (2,591,574) 1,487,335Deferred tax assets – – – – 25,488 – 25,488Total assets P=3,312,693 P=2,628,019 P=16,196,161 P=5,794,675 P=4,113,751 (P=5,703,471) P=26,341,828Segment liabilities P=309,451 P=7,294,708 P=6,948,522 P=1,432,424 P=1,275,712 (P=1,254,191) P=16,006,626Deferred tax liabilities – – – – 260,386 15,367 275,753Total liabilities P=309,451 P=7,294,708 P=6,948,522 P=1,432,424 P=1,536,098 (P=1,238,824) P=16,282,379Segment additions to property and equipment and

investment propertiesP=411,575 P=1,768 P=2,222,686 P=1,569,546 P=– P=– P=4,205,575

Depreciation and amortization P=487 P=24,949 P=222,347 P=301,902 P=– P=– P=549,685

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2017



ShoppingCenters


Eliminationsand


RevenueSales to external customers P=− P=347,712 P=1,351,061 P=644,398 P=30,219 P=248,343 P=2,621,733Equity in net earnings of associates and a joint venture − − − − 278,938 (264,225) 14,713Total revenue − 347,712 1,351,061 644,398 309,157 (15,882) 2,636,446Operating expenses (20,335) (292,072) (675,914) (499,274) (180,826) 18,758 (1,649,663)Operating profit (loss) (20,335) 55,640 675,147 145,124 128,331 2,876 986,783Interest income 1,945 12,134 5,693 4,105 20,271 (2,615) 41,533Other income 160,679 − 67,200 155,036 41,165 (9,825) 414,255Interest and other financing charges − − − − (368,130) − (368,130)Provision for (benefit from) income tax (43,166) (20,510) (207,446) 1,712 7,973 − (261,437)Net income (loss) P=99,123 P=47,264 P=540,594 P=305,977 (P=170,390) (P=9,564) P=813,004Net income (loss) attributable to: Equity holders of Cebu Holdings, Inc. P=99,123 P=38,488 P=506,725 P=289,823 (P=171,148) (P=9,564) P=753,447

Non-controlling interests − 8,776 33,869 16,154 758 − 59,557P=99,123 P=47,264 P=540,594 P=305,977 (P=170,390) (P=9,564) P=813,004

Other InformationSegment assets P=1,057,939 P=1,097,367 P=9,694,284 P=6,803,056 P=3,327,539 (P=3,932,837) P=18,047,348Investments in associates and a joint venture − − − − 2,567,710 − 2,567,710Deferred tax assets − − − − 4,557 − 4,557Total assets P=1,057,939 P=1,097,367 P=9,694,284 P=6,803,056 P=5,899,806 (P=3,932,837) P=20,619,615Segment liabilities P=842,816 P=181,572 P=2,461,979 P=2,103,550 P=7,265,317 (P=444,558) P=12,410,676Deferred tax liabilities − − − − 245,938 15,368 261,306Total liabilities P=842,816 P=181,572 P=2,461,979 P=2,103,550 P=7,511,255 (P=429,190) P=12,671,982Segment additions to property and equipment and

investment properties P=411,575 P=− P=10,125 P=290,086 P=14,173 P=− P=725,959Depreciation and amortization P=− P=− P=226,653 P=247,068 P=21,889 P=− P=495,610

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2016



ShoppingCenters


Eliminationsand


RevenueSales to external customers P=578 P=296,437 P=1,560,935 P=431,229 P=17,520 (P=28,010) P=2,278,689Equity in net earnings of associates and a joint venture − − − − 388,741 (227,431) 161,310Total revenue 578 296,437 1,560,935 431,229 406,261 (255,441) 2,439,999Operating expenses (10,640) (260,910) (737,742) (491,934) (37,369) 43,727 (1,494,868)Operating profit (loss) (10,062) 35,527 823,193 (60,705) 368,892 (211,714) 945,131Interest income 2,418 2,051 4,181 37,727 407 (10,869) 35,915Other income − 732 54,964 180,201 18,379 (15,717) 238,559Interest expense − − − (31,895) (226,690) 10,869 (247,716)Other charges − − − − (64,886) − (64,886)Provision for (benefit from) income tax 1,060 (6,609) (144,658) 14,433 (39,458) − (175,232)Net income (loss) (P=6,584) P=31,701 P=737,680 P=139,761 P=56,644 (P=227,431) P=731,771Net income (loss) attributable to:

Equity holders of Cebu Holdings, Inc. (P=6,597) P=25,004 P=702,419 P=130,020 P=56,248 (P=227,431) P=679,663Non-controlling interests 13 6,697 35,261 9,741 396 − 52,108

(P=6,584) P=31,701 P=737,680 P=139,761 P=56,644 (P=227,431) P=731,771Other InformationSegment assets P=1,449,883 P=1,690,695 P=7,091,013 P=4,869,829 P=2,550,362 P=90,311 P=17,742,093Investments in associates and a joint venture − − − − 4,291,683 (2,436,989) 1,854,694Deferred tax assets − − − − 18,836 − 18,836Total assets P=1,449,883 P=1,690,695 P=7,091,013 P=4,869,829 P=6,860,881 (P=2,346,678) P=19,615,623Segment liabilities P=285,906 P=73,172 P=2,486,215 P=7,996,516 P=1,223,904 (P=113,089) P=11,952,624Deferred tax liabilities − − − − 249,946 (13,781) 236,165Total liabilities P=285,906 P=73,172 P=2,486,215 P=7,996,516 P=1,473,850 (P=126,870) P=12,188,789Segment additions to property and equipment and

investment properties P=652,572 P=19,474 P=51,089 P=157,138 P=214 P=− P=880,487Depreciation and amortization P=1,713 P=17 P=212,897 P=178,939 P=8,504 P=− P=402,070

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30. Leases

Operating Leases - Group as LessorThe Group enters into lease agreements with third parties covering rentals of commercial and officespaces and land therein: (a) fixed monthly rent, or (b) minimum rent payment or fixed rent pluspercentage of gross sales, whichever is higher. All leases include a clause to enable upward revisionon its rental charge on annual basis based on prevailing market conditions.

Future minimum rentals receivable under noncancellable operating leases of the Group are asfollows:


(In Thousands)Within one year P=860,263 P=599,699After one year but not more than five years 2,199,713 1,746,529More than five years 764,353 997,482

P=3,824,329 P=3,343,710

The total rent income amounted to P=2,191.2 million, P=2,144.4 million and P=1,849.0 million in 2018,2017 and 2016, respectively (see Note 21). Contingent rent recognized in 2018, 2017, and 2016amounted to P=114.4 million, P=111.2 million, P=102.9 million, respectively.

Operating Leases - Group as LesseeThe Group entered into short-term operating lease of parking space for a period of one (1) yearstarting January 1, 2018 to December 31, 2018, renewable every year thereafter under new termsand conditions. The total rent expense amounted to P=1.3 million, P=2.4 million and P=2.5 million in2018, 2017 and 2016, respectively.

31. Philippine Economic Zone Authority (PEZA) Registration

CPVDC was registered with PEZA on April 6, 2000 as an Information Technology (IT) Park developeror operator and was granted approval by PEZA on October 10, 2001. The PEZA registration entitledCPVDC to a four-year tax holiday from the start of approval of registered activities. At the expirationof its four-year tax holiday, CPVDC pays income tax at the special rate of 5% on its gross incomeearned from sources within the PEZA economic zone in lieu of paying all national and local incometaxes.

On December 18, 2007, PEZA approved the registration of AiO, the subsidiary, as an Economic ZoneInformation Technology (IT) Facility Enterprise. As a registered ecozone facilities enterprise, thesubsidiary is entitled to establish, develop, construct, administer, manage and operate a12-storey building and 17-storey building located at Asia Town IT Park, in accordance with the termsand conditions of the Registration Agreement with PEZA. The Group shall pay income tax at thespecial tax rate of 5% on its gross income earned from sources within the PEZA economic zone inlieu of paying all national and local income taxes. Gross income earned refers to gross sales or grossrevenues derived from any business activity, net of returns and allowances, less cost of sales ordirect costs but before any deduction is made for administrative expenses or incidental losses.Income generated from sources outside of the PEZA economic zone shall be subject to regularinternal revenue taxes. It is certified by the Bureau of Internal Revenue under Section 4.106-6 and 4108-6 of Revenue Regulation No. 16-2005 that the enterprise is conducted for purposes of its VATzero-rating transactions with its local suppliers of goods, properties and services.

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32. Supplemental Cash Flow Information

Changes in liabilities arising from financing activities follow:

2018

January 1,2018 Cash Flows

Non-cashchanges

Amortizationof DIC Other

December 31,2018

(In Thousands)Current portion of long-

term debt (Note 18)P=59,942 (P=61,000) P=1,058 P=59,956 59,956

Long-term debt - net ofcurrent portion

6,393,634 − 7,281 60 6,400,975

Interest payable 4,286 (310,453) − 336,432 30,265Dividends payable 1,751 (321,782) − 321,762 1,731Total liabilities from

financing activities P=6,459,613 (P=693,235) P=8,339 P=718,210 P=6,492,927

2017

January 1,2017 Cash Flows

Non-cashchanges

Amortization ofDIC Other

December 31,2017

(In Thousands)Current portion of long-

term debt (Note 18)P=442,279 (P=459,000) P=412 P=76,251 P=59,942

Long-term debt - net ofcurrent portion

5,706,032 756,200 7,653 (76,251) 6,393,634

Interest payable 48,315 (181,373) − 137,344 4,286Dividends payable 1,751 (288,010) − 288,010 1,751Total liabilities from

financing activities P=6,198,377 (172,183) P=8,065 P=425,354 P=6,459,613

The ‘Other’ column includes the effect of reclassification of non-current portion of interest-bearing loansand borrowings and the effect of accrued but not yet paid interest on interest-bearing loans andborrowings. The Group classifies interest paid as cash flows from operating activities.

The noncash investing and financing activities of the Group pertain to:

∂ Transfers from investment properties to inventories amounting to P=294.1 million in 2018; and,∂ Transfers from investment properties to property and equipment and inventories amounting to

P=222.7 million and P=73.0 million, respectively, in 2017.

33. Provisions and Contingencies

The Group is currently involved in a legal proceeding and the outcome of this legal proceeding is notpresently determinable.

In the opinion of management and its legal counsel, the eventual liability under this legal proceeding,if any, will not have a material effect on the Group’s financial position and results of operations. Asallowed by PAS 37, no further disclosures were provided as this might prejudice the Group’s positionon this matter.

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INDEPENDENT AUDITOR’S REPORTON THE SUPPLEMENTARY SCHEDULES

The Stockholders and Board of DirectorsCebu Holdings, Inc. and Subsidiaries20th Floor, Ayala Center Cebu Tower, Bohol StreetCebu Business Park, Cebu City

We have audited in accordance with Philippine Standards on Auditing, the consolidated financialstatements of Cebu Holdings, Inc. and its subsidiaries (the Group) as at December 31, 2018 and 2017and for each of the three years in the period ended December 31, 2018, included in this Form 17-A, andhave issued our report thereon dated February 26, 2019. Our audits were made for the purpose offorming an opinion on the basic consolidated financial statements taken as a whole. The schedules listedin the Index to the Consolidated Financial Statements and Supplementary Schedules are theresponsibility of the Group’s management. These schedules are presented for purposes of complyingwith Securities Regulation Code Rule 68, As Amended (2011) and are not part of the basic consolidatedfinancial statements. These schedules have been subjected to the auditing procedures applied in theaudit of the basic consolidated financial statements and, in our opinion, fairly state, in all materialrespects, the financial data required to be set forth therein in relation to the basic consolidated financialstatements taken as a whole.

SYCIP GORRES VELAYO & CO.

Dolmar C. MontañezPartnerCPA Certificate No. 112004SEC Accreditation No. 1561-AR-1 (Group A), January 31, 2019 valid until January 30, 2022Tax Identification No. 925-713-249BIR Accreditation No. 08-001998-119-2019, January 28, 2019, valid until January 27, 2022PTR No. 7332588, January 3, 2019, Makati City

February 26, 2019

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph

BOA/PRC Reg. No. 0001, October 4, 2018, valid until August 24, 2021SEC Accreditation No. 0012-FR-5 (Group A), November 6, 2018, valid until November 5, 2021


INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS ANDSUPPLEMENTARY SCHEDULES

Schedule Contents

A Financial Assets

B Amounts Receivable from Directors, Officers, Employees, Related Parties, andPrincipal Stockholders (Other than Related parties)

C Amounts Receivable from Related Parties which are Eliminated during theConsolidation of Financial Statements

D Intangible Assets - Other Assets

E Long-Term Debt

F Indebtedness to Related Parties

G Guarantees of Securities of Other Issuers

H Capital Stock

I Reconciliation of Retained Earnings Available for Dividend Declaration

J Map Showing the Relationships Between and Among the Companies in the Group, itsUltimate Parent Company and Co-subsidiaries

K Schedule of All Effective Standards and Interpretations Under Philippine FinancialReporting Standards

L Financial Ratios

SCHEDULE A

CEBU HOLDINGS, INC. AND SUBSIDIARIESSUPPLEMENTARY SCHEDULE OF FINANCIAL ASSETSDECEMBER 31, 2018

Name of Issuing entity and association ofeach issue

Number ofshares orprincipal

amount of bondsand notes

Amountshown in the

consolidatedstatement of

financial position

Incomereceived or

accruedCash and Cash Equivalents Bank of the Philippine Islands P=155,744,315 P=155,744,315 P=624,219 Deutsche Bank 8,502,426 8,502,426 − Rizal Commercial Banking Corporation 101,170 101,170 − DBP 4,333,276 4,333,276 −

Security Bank 46,950,336 46,950,336 794,917China Trust (Phils) Commercial Bank 8,491,183 8,491,183 600,480

Short-Term InvestmentsSecurity Bank 16,260,271 16,260,271 61,023China Trust (Phils) Commercial Bank 8,983,712 8,983,712 62,449Bank of the Philippine Islands − − 112,673

Accounts Receivable Trade 378,421,937 378,421,937 33,254,297 Receivable from related parties 1,410,230,084 1,410,230,084 28,875,970 Claims Receivable 54,633,622 54,633,622 − Receivable from employees 14,248,986 14,248,986 402,729 Accrued receivable 411,423,517 411,423,517 − Others 72,956,885 72,956,885 2,257,775Financial Assets at FVPL Bank of the Philippine Islands 10,378,797 10,378,797 444,330

P=2,601,660,517 P=2,601,660,517 P=67,490,862

SCHEDULE B

CEBU HOLDINGS, INC. AND SUBSIDIARIESSUPPLEMENTARY SCHEDULE OF AMOUNTS RECEIVABLE FROM DIRECTORS,OFFICERS, EMPLOYEES, RELATED PARTIES, AND PRINCIPAL STOCKHOLDERS(OTHER THAN RELATED PARTIES)DECEMBER 31, 2018

Name and Designation ofdebtor

Balance atbeginningof period

Additions(Write off)

Amountscollected Current Not Current

Balance atthe end ofthe period

ALAGON, IZABELLE P=202,996 P=− P=86,999 P=86,999 P=28,998 P=115,997ALAJID, ROMULO M 2,974,648 − 253,269 253,269 2,468,110 2,721,379ALICAYA, NOEL F 88,158 100,000 32,351 28,344 127,463 155,807BOHOLST, JUDILYNE L 197,743 − 21,295 73,013 103,435 176,448CALERO, JASMIN R. 159,164 20,000 10,625 10,625 157,914 168,539CLIMACO, MARIE ANNE

KATHERINE 289,995 50,000 50,911 53,125 235,959 289,084DEE, JOSEPH

FRANCISCO A. 55,567 396,429 22,992 40,195 388,809 429,004GO, SUZETTE T 1,331,380 − 170,129 201,542 959,709 1,161,251JAPZON, JEANETTE A 4,078,110 − 86,913 299,642 3,691,555 3,991,197LAYESE, EDWIN F. 134,304 − 134,303 − 1 1MANANQUIL, RAUL S 1,602,052 − 331,117 379,366 891,569 1,270,935QUIJADA, FRAULEIN 177,864 375,000 50,749 92,798 409,317 502,115SIA, JENNIFER 404,929 − 130,270 86,771 187,888 274,659SUAN, JONAS 456,017 − 136,297 98,598 221,122 319,720URBINA, MA. CECILIA T 58,241 80,000 57,630 23,307 57,304 80,611

P=12,211,168 P=1,021,429 P=1,575,850 P=1,727,594 P=9,929,153 P=11,656,747

SCHEDULE C

CEBU HOLDINGS, INC. AND SUBSIDIARIESSUPPLEMENTARY SCHEDULE OF AMOUNTS RECEIVABLE FROM RELATEDPARTIES WHICH ARE ELIMINATED DURING THE CONSOLIDATION OFFINANCIAL STATEMENTSDECEMBER 31, 2018

ReceivableBalance per

CHI Parent

PayableBalance per

CHI SubsidiariesCurrentPortion

AIOPI P=392,651,578 P=392,651,578 P=392,651,578CLCI 56,378,106 56,378,106 56,378,106CBDI 21,349,226 21,349,226 21,349,226TPEPI 190,070 190,070 190,070Total Eliminated Receivables P=470,568,980 P=470,568,980 P=470,568,980

SCHEDULE D

CEBU HOLDINGS, INC. AND SUBSIDIARIESSUPPLEMENTARY SCHEDULE OF INTANGIBLE ASSETS - OTHER ASSETSDECEMBER 31, 2018

Intangible Assets - Other Assets

DescriptionBeginning

BalanceAdditions at

cost

Charged tocost and

expenses

Charged toother

accounts

Otherchangesadditions

(deductions)Ending

BalanceDevelopment

rights(includedunder “Othernoncurrentassets” in theconsolidatedstatements offinancialposition) P=29,395,200 P=60,000,000 (P=40,238,400) P=− P=− P=49,156,800

SCHEDULE E

CEBU HOLDINGS, INC. AND SUBSIDIARIESSUPPLEMENTARY SCHEDULE OF LONG-TERM DEBTDECEMBER 31, 2018

Long-term Debt

Title of Issue and type of obligation

Amountauthorized by

indenture

Amount shownunder caption

"current portionof long-term debt” in

the relatedconsolidatedstatement of

financial position

Amount shownunder the caption

“long-term debt - netof current portion”

in the relatedconsolidatedstatement of

financial positionBank Loan (BPI) P=420,000,000 P= 20,713,128 P=335,648,613Bank Loan (BPI) 380,000,000 18,749,057 324,940,441Bank Loan (BPI) 420,000,000 20,680,755 361,059,832Bank Loan (BPI) 340,000,000 (186,953) 338,668,627Bonds (PDTC) 5,000,000,000 − 4,980,701,818

P=6,560,000,000 P=59,955,987 P=6,341,019,331

SCHEDULE F

CEBU HOLDINGS, INC. AND SUBSIDIARIESSUPPLEMENTARY SCHEDULE OF INDEBTEDNESS TO RELATED PARTIES(LONG-TERM LOANS FROM RELATED COMPANIES)DECEMBER 31, 2018

Indebtedness to related parties (Long-term loans from Related Companies)Name of related party Balance at beginning of period Balance at end of periodBPI P=1,480,215,141 P=1,420,273,500

SCHEDULE G

CEBU HOLDINGS, INC. AND SUBSIDIARIESSUPPLEMENTARY SCHEDULE OF GUARANTEES OF SECURITIES OF OTHERISSUERSDECEMBER 31, 2018

Guarantees of Securities of Other IssuersName of issuingentity of securitiesguaranteed by thecompany for whichthis statement is filed

Title of issue ofeach class of

securitiesguaranteed

Total amountguaranteed and

outstanding

Amount owned byperson for whichstatement is file Nature of guarantee

Not ApplicableThe Group does not have any guarantees of securities of other issuing entities by the issuer for

which the statement is filed.

SCHEDULE H

CEBU HOLDINGS, INC. AND SUBSIDIARIESSUPPLEMENTARY SCHEDULE OF CAPITAL STOCKDECEMBER 31, 2018

Capital Stock

Title of Issue

Number ofshares

authorized

Number ofshares issued

andoutstanding

as shownunder related

balance sheetcaption

Number ofshares

reserved foroptions

warrants,conversion

and otherrights

Number ofshares held

by relatedparties

Directors,officers andemployees Others

Capital Stock 3,000,000,000 2,156,756,631 − 1,519,106,716 165,231 637,649,915

SCHEDULE I

CEBU HOLDINGS, INC. AND SUBSIDIARIESSUPPLEMENTARY SCHEDULE OF RETAINED EARNINGSAVAILABLE FOR DIVIDEND DECLARATIONDECEMBER 31, 2018

Items Amount

Unappropriated Retained Earnings, Beginning P=1,850,417,313

Adjustments:

Accumulated fair value adjustment (M2M gains), net of tax (65,784)Unrealized gain - available-for-sale securities accounted for

under the PFRS 25,562,394Unappropriated Retained Earnings,

as Adjusted, Beginning 1,875,913,923

Net Income Based on the Face of AFS 778,200,900

Less: Non-actual/Unrealized Income Net of TaxUnrealized actuarial gain 154,803Fair value adjustment (M2M gains) 890,059Deferred income tax assets that reduced the amount of

provision for income tax 7,990,224

Add: Non-actual LossesDeferred income tax liabilities that increased the amount of

provision for income tax 21,956,991Net Income Actual/Realized 791,122,805

Less:Dividend declarations during the period 323,513,495Treasury shares 760,087,890

TOTAL RETAINED EARNINGS, END AVAILABLE FORDIVIDEND DECLARATION P=1,583,435,343

SCHEDULE J

CEBU HOLDINGS INC. AND SUBSIDIARIESMAP SHOWING THE RELATIONSHIPS BETWEEN AND AMONG THE COMPANIES IN THE GROUP, ITS ULTIMATE PARENTCOMPANY AND CO-SUBSIDIARIESDECEMBER 31, 2018

Ayala Land, Inc.

Ayala Corporation

MERMAC, Inc.

PDC Nominee Corporation

(Non-Filipino) Public

47.04%

24.5%28.46%

46.77%

Public53.23%

CEBU HOLDINGS INC. AND SUBSIDIARIESMAP SHOWING THE RELATIONSHIPS BETWEEN AND AMONG THE COMPANIES IN THE GROUP, ITS ULTIMATE PARENTCOMPANY AND CO-SUBSIDIARIESDECEMBER 31, 2018

Cebu Holdings, Inc.

Ayala Land, Inc. (70.43%)

PCD Nominee Corp.

(Filipino) (7.67%)

Makati Supermarket

Corp (0.14%)

Province of Cebu

(3.83%)

PCD Nominee Corp

(Non-Filipino) (13.98%)

Public (3.95%)

- 2 -

Soltea Commercial Corp. (60%)

CMPI Holdings, Inc. (60%)

ALI-CII Development Corporation (50%)

ALInet.com, Inc. (100%)

Varejo Corp. (100%)

Ten Knots Phils, Inc. (60%)

Roxas Land Corporation (50%)

Cagayan de Oro Gateway Corp. (70%)

BGWest Properties, Inc. (50%)

Southgateway Development Corp. (100%)

Ayala Land Malls, Inc. (100%)

First Longfield Investments Limited (100%)

Cebu Holdings Inc. (50%)

Ten Knots Development, Corp. (60%)

North Triangle Depot Commercial Corp. (73%)

Ayalaland MetroNorth, Inc. (100%)

Adauge Commercial Corporation (60%) Alabang Commercial Corporation (50%)

Makati Development Corporation (100%)

Ayala Hotels, Inc. (50%)

AyalaLand Hotels and Resorts Corp. (100%)

Lagdigan Land Corp. (60%)

Southportal Properties Inc. (65%)

Aprisa Business Process Solutions, Inc. (100%)

Verde Golf Development Corporation (100%)

Ayala Property Management Corp. (100%)

Ayala Theatres Management, Inc. & S. (100%)

DirectPower Services, Inc. (100%)

Phil. Integrated Energy Solutions, Inc. (100%)

Five Star Cinema, Inc. (100%)

Leisure and Allied Industries Philippines, Inc. (50%)

AyalaLand Club Management, Inc. (100%)

Whiteknight Holdings, Inc. (100%)

AYALA LAND, INC.

ALI Commercial Center Inc. (100%)

Alveo Land Corporation (100%)

Serendra, Inc. (28%)

Amorsedia Development Corporation (100%)

Avida Land Corporation (100%)

Amaia Land Co. (100%)

Ayala Land International Sales, Inc. (100%)

Ayala Land Sales, Inc. (100%)

Buendia Landholdings, Inc. (100%)

Crans Montana Holdings, Inc. (100%)

Crimson Field Enterprises, Inc. (100%)

Ecoholdings Company, Inc. (100%)

NorthBeacon Commercial Corporation (100%)

Red Creek Properties, Inc. (100%)

Regent Time International, Limited (100%)

Asterion Technopod, Incorporated (100%)

Westview Commercial Ventures Corp. (100%)

North Ventures Commercial Corp. (100%)

Hillsford Property Corporation (100%)

Primavera Towncentre, Inc. (100%)

Summerhill E-Office Corporation (100%)

Sunnyfield E-Office Corporation (100%)

Subic Bay Town Centre, Inc. (100%)

Regent Wise Investments Limited (100%)

AyalaLand Commercial REIT, Inc. (100%)

Arvo Commercial Corporation (100%)

BellaVita Land Corporation (100%)

Nuevo Centro, Inc. (55%)

Cavite Commercial Town Center, Inc. (100%)

AyalaLand offices, Inc. (100%)

Laguna Technopark, Inc. (75%)

Vesta Property Holdings, Inc. (70%)

Aurora Properties Incorporated (80%)

Station Square East Commercial Corporation (69%)

Ceci Realty, Inc. (60%)

Accendo Commercial Corp. (67%)

Aviana Development Corporation (50%)

AYALA LAND, INC.

CEBU HOLDINGS, INC.

Asian I- OfficeProperties, Inc.

100.00%

CBP TheatreManagement

Company, Inc.100.00%

Solinea, Inc.35.00%

Cebu InsularHotel,

Company, Inc.37.06%

Cebu LeisureCompany, Inc.

100.00%

Taft PuntaEngaño

Property, Inc.55.00 %

AmaiaSouthern

Properties,Inc.

35.00%

Cebu DistrictProperty

Enterprise Inc.CHI 15.00%

Central BlockDeveloper’s Inc.

CHI 55%

SCHEDULE K

CEBU HOLDINGS, INC. AND SUBSIDIARIESSCHEDULE OF ALL EFFECTIVE STANDARDS AND INTERPRETATIONSUNDER PHILIPPINE FINANCIAL REPORTING STANDARDSDECEMBER 31, 2018

Philippine Securities and Exchange Commission (SEC) issued the amended Securities Regulation CodeRule (SRC) Rule 68 and 68.1 which consolidates the two separate rules and labeled in the amendmentas “Part I” and “Part II”, respectively. It also prescribed the additional schedule requirements for largeentities showing a list of all effective standards and interpretations under Philippine Financial ReportingStandards (PFRS).

Below is the list of all effective PFRS, Philippine Accounting Standards (PAS) and PhilippineInterpretations of the International Financial Reporting Interpretations Committee (IFRIC) as ofDecember 31, 2018:

PHILIPPINE FINANCIAL REPORTING STANDARDS ANDINTERPRETATIONSEffective as of December 31, 2018

Adopted NotAdopted

NotApplicable

Framework for the Preparation and Presentation ofFinancial StatementsConceptual Framework Phase A: Objectives and qualitativecharacteristics

PFRSs Practice Statement Management Commentary

Philippine Financial Reporting Standards

PFRS 1(Revised)

First-time Adoption of Philippine FinancialReporting Standards

Amendments to PFRS 1 and PAS 27: Cost of anInvestment in a Subsidiary, Jointly ControlledEntity or Associate

Amendments to PFRS 1: Additional Exemptionsfor First-time Adopters

Amendment to PFRS 1: Limited Exemption fromComparative PFRS 7 Disclosures for First-timeAdopters

Amendments to PFRS 1: Severe Hyperinflationand Removal of Fixed Date for First-timeAdopters

Amendments to PFRS 1: Government Loans

Amendments to PFRS 1: Borrowing costs

Amendments to PFRS 1: Meaning of ‘EffectivePFRSs Not early adopted

PFRS 2 Share-based Payment

Amendments to PFRS 2: Vesting Conditions andCancellations

Amendments to PFRS 2: Group Cash-settled

- 2 -


Adopted NotAdopted

NotApplicable

Share-based Payment Transactions

Amendments to PFRS 2: Definition of VestingCondition*

Amendments to PFRS 2: Classification andMeasurement of Share-based PaymentTransactions

PFRS 3(Revised)

Business Combinations

Amendment to PFRS 3: Accounting forContingent Consideration in a BusinessCombination*

Amendment to PFRS 3: Scope Exceptions forJoint Arrangements*

PFRS 4 Insurance Contracts

Amendments to PAS 39 and PFRS 4: FinancialGuarantee Contracts

Applying PFRS 9, Financial Instruments withPFRS 4, Insurance Contracts

Amendments to PFRS 4: Applying PFRS 9,Financial Instruments, with PFRS 4, Insurance

PFRS 5 Non-current Assets Held for Sale andDiscontinued Operations

Amendments to PFRS 5: Changes in Methods ofDisposal Not early adopted

PFRS 6 Exploration for and Evaluation of MineralResources

PFRS 7 Financial Instruments: Disclosures

Amendments to PAS 39 and PFRS 7:Reclassification of Financial Assets

Amendments to PAS 39 and PFRS 7:Reclassification of Financial Assets - EffectiveDate and Transition

Amendments to PFRS 7: Improving Disclosuresabout Financial Instruments

Amendments to PFRS 7: Disclosures - Transfersof Financial Assets

Amendments to PFRS 7: Disclosures - OffsettingFinancial Assets and Financial Liabilities

Amendments to PFRS 7: Mandatory EffectiveDate of PFRS 9 and Transition Disclosures

Amendments to PFRS 7: Disclosures - ServicingContracts

Applicability of the Amendments to PFRS 7 to

- 3 -


Adopted NotAdopted

NotApplicable

Condensed Interim Financial Statements

PFRS 8 Operating Segments

Amendments to PFRS 8: Aggregation ofOperating Segments and Reconciliation of theTotal of the Reportable Segments’ Assets to theEntity’s Assets

PFRS 9 Financial Instruments: Classification andMovement (2010 version)

Financial Instruments - Hedge Accounting andamendments to PFRS 9, PFRS 7 and PAS 39(2013 version)

Financial Instruments (2014 or final version)

Amendments to PFRS 9: Mandatory EffectiveDate of PFRS 9 and Transition Disclosures

Amendments to PFRS 9: Prepayment Featureswith Negative Compensation

PFRS 10 Consolidated Financial Statements

Amendments to PFRS 10: Investment Entities

Amendments to PFRS 10: Sale or Contributionof Assets between an Investor and its Associateor Joint Venture

Not early adopted

Amendments to PFRS 10: Investment Entities:Applying the Consolidation Exception

PFRS 11 Joint Arrangements

Amendments to PFRS 11: Accounting forAcquisitions of Interests in Joint Operations

PFRS 12 Disclosure of Interests in Other Entities

Amendments to PFRS 12: Investment Entities

Amendment to PFRS 12: Clarification of theScope of the Standard (Part of AnnualImprovements to PFRSs 2014-2016 Cycle)

PFRS 13 Fair Value Measurement

Amendments to PFRS 13: Short-term receivableand payables

Amendments to PFRS 13: Portfolio Exception

PFRS 14 Regulatory Deferral Accounts

PFRS 15 Revenue from Contracts with Customers

PFRS 16 Leases Not early adopted

- 4 -


Adopted NotAdopted

NotApplicable

Philippine Accounting Standards

PAS 1(Revised)

Presentation of Financial Statements

Amendment to PAS 1: Capital Disclosures

Amendments to PAS 32 and PAS 1: PuttableFinancial Instruments and Obligations Arising onLiquidation

Amendments to PAS 1: Presentation of Items ofOther Comprehensive Income

Amendments to PAS 1: Clarification of therequirements for comparative information

Amendments to PAS 1: Disclosure Initiative

PAS 2 Inventories

PAS 7 Statement of Cash Flows

Disclosure Initiative

PAS 8 Accounting Policies, Changes in AccountingEstimates and Errors

PAS 10 Events after the Reporting Date

PAS 12 Income Taxes

Amendment to PAS 12-Deferred Tax: Recoveryof Underlying Assets

Amendments to PAS 12: Recognition of DeferredTax Assets for Unrealized Losses

PAS 16 Property, Plant and Equipment

Amendment to PAS 16: Classification ofservicing equipment

Amendment to PAS 16: Revaluation Method -Proportionate Restatement of AccumulatedDepreciation

Amendment to PAS 16 and PAS 38: Clarificationof Acceptable Methods of Depreciation andAmortization

Amendment to PAS 16: Bearer Plants

PAS 17 Leases

PAS 19 Employee Benefits

Amendments to PAS 19: Actuarial Gains andLosses, Group Plans and Disclosures

PAS 19(Amended)

Employee Benefits

Amendments to PAS 19: Defined Benefit Plans:Employee Contributions

- 5 -


Adopted NotAdopted

NotApplicable

Amendments to PAS 19: Actuarial Gains andLosses, Group Plans and Disclosures

Amendments to PAS 19: Regional Market Issueregarding Discount Rate

PAS 20 Accounting for Government Grants andDisclosure of Government Assistance

PAS 21 The Effects of Changes in Foreign ExchangeRates

Amendment: Net Investment in a ForeignOperation

PAS 23(Revised)

Borrowing Costs

PAS 24(Revised)

Related Party Disclosures

Amendments to PAS 24: Key ManagementPersonnel

PAS 26 Accounting and Reporting by Retirement BenefitPlans

PAS 27 Consolidated and Separate Financial Statements

PAS 27(Amended)

Separate Financial Statements

Amendments to PAS 27: Investment Entities

Amendments to PAS 27: Equity Method inSeparate Financial Statements

PAS 28 Investment in Associate and Joint Venture

Amendments to PAS 28: Sale or Contribution ofAssets between an Investor and its Associate orJoint Venture

Amendments to PAS 28: Investment Entities:Applying the Consolidation Exception

Amendments to PAS 28: Long-term Interests inAssociates and Joint Ventures Not early adopted

Amendment to PAS 28: Measuring an Associateor Joint Venture at Fair Value (Part of AnnualImprovements to PFRSs 2014-2016 Cycle) Not early adopted

PAS 29 Financial Reporting in HyperinflationaryEconomies

PAS 31 Interests in Joint Ventures

PAS 32 Financial Instruments: Disclosure andPresentation

Amendments to PAS 32 and PAS 1: PuttableFinancial Instruments and Obligations Arising onLiquidation

- 6 -


Adopted NotAdopted

NotApplicable

Amendment to PAS 32: Classification of RightsIssues

Amendments to PAS 32: Offsetting FinancialAssets and Financial Liabilities

PAS 33 Earnings per Share

PAS 34 Interim Financial Reporting

Amendments to PAS 34: Interim financialreporting and segment information for totalassets and liabilities

Amendments to PAS 34: - Disclosure ofinformation ‘elsewhere in the interim financialreport

PAS 36 Impairment of Assets

Amendments to PAS 36: Recoverable AmountDisclosures for Non-Financial Assets

PAS 37 Provisions, Contingent Liabilities and ContingentAssets

PAS 38 Intangible Assets

Amendments to PAS 38: Revaluation Method -Proportionate Restatement of AccumulatedAmortization

Amendments to PAS 16 and PAS 38:Clarification of Acceptable Methods ofDepreciation and Amortization

PAS 40 Investment Property

Amendment to PAS 40: Interrelationship betweenPFRS 3 and PAS 40

Transfer of Investment Property

PAS 40(Amended)

Investment Property

PAS 41 Agriculture

Amendment to PAS 41: Bearer Plants

Philippine Interpretations

IFRIC 1 Changes in Existing Decommissioning,Restoration and Similar Liabilities

IFRIC 2 Members’ Share in Co-operative Entities andSimilar Instruments

IFRIC 4 Determining Whether an Arrangement Containsa Lease

- 7 -


Adopted NotAdopted

NotApplicable

IFRIC 5 Rights to Interests arising fromDecommissioning, Restoration andEnvironmental Rehabilitation Funds

IFRIC 6 Liabilities arising from Participating in a SpecificMarket - Waste Electrical and ElectronicEquipment

IFRIC 7 Applying the Restatement Approach under PAS29 Financial Reporting in HyperinflationaryEconomies

IFRIC 8 Scope of PFRS 2

IFRIC 9 Reassessment of Embedded Derivatives

Amendments to Philippine Interpretation IFRIC–9and PAS 39: Embedded Derivatives

IFRIC 10 Interim Financial Reporting and Impairment

IFRIC 11 PFRS 2 - Group and Treasury ShareTransactions

IFRIC 12 Service Concession Arrangements

IFRIC 13 Customer Loyalty Programmes

IFRIC 14 The Limit on a Defined Benefit Asset, MinimumFunding Requirements and their Interaction

Amendments to Philippine InterpretationsIFRIC - 14, Prepayments of a Minimum FundingRequirement

IFRIC 15 Agreements for the Construction of RealEstate*** Not early adopted

IFRIC 16 Hedges of a Net Investment in a ForeignOperation

IFRIC 17 Distributions of Non-cash Assets to Owners

IFRIC 18 Transfers of Assets from Customers

IFRIC 19 Extinguishing Financial Liabilities with EquityInstruments

IFRIC 20 Stripping Costs in the Production Phase of aSurface Mine

IFRIC 22 Foreign Currency Transactions and AdvanceConsideration

IFRIC 23 Uncertainty over Income Tax Treatments

SIC-7 Introduction of the Euro

SIC-10 Government Assistance - No Specific Relation toOperating Activities

SIC-12 Consolidation - Special Purpose Entities

Amendment to SIC - 12: Scope of SIC 12

- 8 -


Adopted NotAdopted

NotApplicable

SIC-13 Jointly Controlled Entities - Non-MonetaryContributions by Venturers

SIC-15 Operating Leases - Incentives

SIC-25 Income Taxes - Changes in the Tax Status of anEntity or its Shareholders

SIC-27 Evaluating the Substance of TransactionsInvolving the Legal Form of a Lease

SIC-29 Service Concession Arrangements: Disclosures

SIC-31 Revenue - Barter Transactions InvolvingAdvertising Services

SIC-32 Intangible Assets - Web Site Costs * Effectivity has been deferred by the Securities and Exchange Commission.

Standards tagged as “Not Applicable” have been adopted by the Group but have no significant coveredtransactions for the year ended December 31, 2018.

Standards tagged as “Not adopted” are standards issued but not yet effective as of December 31, 2018.The Group will adopt the Standards and Interpretations when these become effective.

SCHEDULE L

CEBU HOLDINGS, INC. AND SUBSIDIARIESSUPPLEMENTARY SCHEDULE OF FINANCIAL RATIOSDecember 31, 2018


CURRENT / LIQUIDITY RATIOSCurrent assets P=3,598,044 P=3,352,436Current liabilities 9,455,296 5,636,839Current Ratios 0.38 0.59

Current assets P=3,598,044 P=3,352,436Less: Receivables 2,086,232 1,880,140

Contract assets 205,087 –Inventories 812,292 751,084Other current assets 234,287 531,752

Quick assets 260,146 189,460Current liabilities 9,455,296 5,636,839Quick Ratios 0.03 0.03


SOLVENCY / DEBT-TO-EQUITY RATIOSCurrent portion of long-term debt P=59,956 P=59,942Long-term debt - net of current portion 6,341,019 6,393,634Debt P=6,400,975 P=6,453,576Equity 10,059,449 7,947,633Less: Non-controlling interests 1,997,039 958,500Equity attributable to parent 8,062,410 6,989,133Add: Unrealized gain - FVPL and foreign exchange 229,905 93,977Less: Unrealized foreign exchange loss – 127,074Equity, Net of Unrealized Gain (Loss) 8,292,315 6,956,036Debt to Equity Ratio 0.77 0.93

Debt P=6,400,975 P=6,453,576Less: Cash and cash equivalents 224,523 176,788

Short-term investments 25,244 2,543Financial assets at fair value through profit or loss 10,379 10,129

Net Debt 6,140,829 6,264,116Equity, Net of Unrealized Gain (Loss) 8,292,315 6,956,036Net Debt to Equity Ratio 0.74 0.90

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ASSET TO EQUITY RATIOSTotal assets P=26,341,828 P=20,588,160Total equity attributable to equity holders of CHI 8,062,410 6,989,133Asset to Equity Ratios 3.27 2.95


INTEREST RATE COVERAGE RATIONET INCOME P=970,030 P=813,004Add:Provision for income tax 272,729 261,437Interest and other financing charges 404,767 368,130

1,647,526 1,442,571Less interest income 67,047 41,533EBIT 1,580,479 1,401,038Depreciation and amortization 549,685 495,610EBITDA 2,130,164 1,896,648Interest and other financing charges 404,767 368,130Interest expense coverage ratio 5.26 5.15


PROFITABILITY RATIOSNet income attributable to parent P=857,111 P=753,447Revenue 3,721,840 3,092,234Net Income Margin 23.03% 24.37%

Net Income P=970,030 P=813,004Total assets CY 26,341,828 20,588,160Total assets PY 20,588,160 19,615,623Average Total Assets 23,464,994 20,101,892Return on Total Assets 4.13% 4.04%

Net Income P=970,030 P=813,004Total equity CY 10,059,449 7,947,633Total equity PY 7,947,633 7,426,834Average Total Equity 9,003,541 7,687,234Return on Equity 10.77% 10.58%

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C O V E R S H E E T - Cebu Holdings