Manila Electric Company or MERALCO. holds a congressional franchise under Republic Act or RA No. 9209 effectual June 28. 2003. RA No. 9209 grants MERALCO a 25-year franchise valid through June 28. 2028 to build. operate. and keep the electric distribution system in the metropoliss and municipalities. and barangays in the states of Batangas. Laguna. Pampanga. and Quezon. On October 20. 2008. the Energy Regulatory Commission or ERC. granted MERALCO a amalgamate Certificate of Public Convenience and Necessity for the operation of electric service within its franchise coverage. effectual until the terminal of MERALCO’s congressional franchise. MERALCO is the largest power distribution public-service corporation or DU. in the Philippines. The power section. chiefly power distribution. consists of operations of MERALCO and its subordinate. Clark Electric Distribution Corporation or CEDC. CEDC is registered with Clark Development Corporation or CDC. under RA No. 9400. Bases Conversion Development Act of 1992. as a Clark Special Economic Zone or CSEZ. endeavor. chiefly engaged in having. operating. and keeping a power distribution system within CSEZ. Individually. MERALCO organized a subordinate for its re-entry into power coevals through its wholly-owned subordinate. MERALCO PowerGen Corporation or MGEN. and another unit for its entry into retail electricity supply or RES. The MERALCO local RES. otherwise known as MPower. is a concern unit within MERALCO.
Through several other subordinates. its other concern sections provide technology. building and consulting services. measure aggregation services. energy direction services and information systems and engineering services. MERALCO’s investing in common equity portions of Rockwell Land Corporation or Rockwell Land. was declared as belongings dividends on February 27. 2012 to shareholders of record as at March 23. 2012. On April 25. 2012. the Securities and Exchange Commission or SEC. approved the belongings dividends on May 11. 2012. The inside informations of declaration are Note 6 – Discontinued Operations. MERALCO and its subordinates are jointly referred to as MERALCO Group. MERALCO is owned by three major stockholder groups and the populace. As at December 31. 2012. Beacon Electric plus Holdings. Inc. or Beacon Electric. owns 48. 30 % of the common portions. Beacon Electric jointly owned by Metro Pacific Investments Corporation or Metro Pacific and PLDT Communications and Energy Ventures. Inc. . or PCEV. both of which are domestic corporations and are affiliates of First Pacific Company Limited. a Hong Kong-based investing and direction company. San Miguel Corporation or SMC. together with its subordinates. San Miguel Purefoods Company Inc. and San Miguel Global Power Holdings. owns 32. 83 % of the outstanding portions of MERALCO. First Philippine Holdings Corporation or First Holdings. and First Philippine Utilities Corporation. jointly ain 3. 94 % . The balance of MERALCO’s common portions is held by the populace. The common portion of MERALCO are listed on and traded in the Philippine Stock Exchange or PSE. with security symbol MER. The registered office reference of MERALCO is Lopez Building. Ortigas Avenue. Pasig City. Philippines. The attach toing amalgamate fiscal statements as at December 31. 2012 and 2011 and for each of the three old ages in the period ended December 31. 2012. were reviewed and recommended for blessing to the Board of Directors or BOD by the Audit and Risk Management Committee on February 20. 2013. On February 25. 2013. these consolidated fiscal statements were approved and authorized for issue by the BOD. 2. Rate Regulations
As DUs. MERALCO and CEDC are capable to the rate-making ordinances and regulative policies of the ERC. Billings of MERALCO and CEDC to clients are itemized or “unbundled” into a figure of measure constituents that reflect the assorted activities and costs incurred in supplying electric service. The accommodation to each measure constituent Is governed by mechanisms promulgated and enforced by the ERC. chiefly: [ I ] the “Rules Regulating the Automatic Cost Adjustment and True-up Mechanisms and Corresponding Confirmation Process for Distribution Utilities. ” which govern the recovery of pass-through costs. including over-or under-recoveries of the measure constituents. viz. . ( a ) coevals charge. ( B ) transmittal charge. ( degree Celsius ) system loss or SL. charge. ( vitamin D ) line of life subsidy. and ( vitamin E ) local franchise revenue enhancement or LFT. and concern revenue enhancement ; and [ two ] the “Rules for the Setting of Distribution Wheeling Rates or RDWR. ” as modified by ERC Resolution NO. 20. Seriess of 2008. which govern the finding of MERALCO’s distribution. supply. and metering charges.
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The rate-setting mechanism of CEDC is similarly in conformity with the ERC ordinances. The followers is a treatment of affairs related to rate-setting of MERALCO and CEDC.
Rate Application
CEDC Rate Unbundling
On August 19. 2011. CEDC received an ERC Order to implement certain alterations of its agenda of rates effectual on its August 2010 charge rhythm. after the ERC approved CEDC’s unbundling application pursuant to Section 36 of RA No. 9136. Electric Power Industry Reform Act of 2001 or EPIRA.
Thereafter. on June 12. 2012. CEDC received an Order from the ERC ( docketed on May 28. 2012 ) directing CEDC to return to its clients the sum of P804. 587 ( difference between its so bing rates and the rates approved by the ERC ) at a rate equivalent to P0. 0067 per kilowatt hr or kWh. for a period of five ( 5 ) months or until the said sum shall hold been to the full refunded. The refund procedure was completed by CEDC in October 2012.
Performance-Based Regulations or PBR
MERALCO
MERALCO was among the Group A entrants to the PBR. together with Dagupan Electric Corporation and Cagayan Electric Power and Light Company. Inc.
Rate-setting under PBR is governed by the RDWR. The PBR strategy sets duties based on the regulated plus base of the DUs. and the needed operating and capital outgos one time every regulative period or RP. to run into operational public presentation and service degree demands responsive to the demands adequate. dependable and choice power. efficient service. and growing of all client categories in the franchise country as approved by the ERC. The PBR besides employs a mechanism that penalizes or honor a DU depending on its web and service public presentation.
As portion of the PBR. MERALCO implements payouts to clients for cases when its public presentation is beyond the guaranteed service degrees or GSL. See
Note 23 – Trade Payables and Other Current Liabilities.
Rate fillings and scenes are done on a RP footing. One ( 1 ) RP consists of four ( 4 ) Regulatory Old ages or RYs. An RY for MERALCO begins on July 1 and terminals on June 30 of the undermentioned twelvemonth. As at December 31. 2012. MERALCO is runing in the first half of the 2nd RY of the 3rd RP. The 3rd RP is from July 1. 2011 to June 30. 2015.
Maximal Average Monetary value or MAP for RY 2008 and RY 2009
On January 11 and April 1. 2008. MERALCO filed separate applications for the blessing of its proposed interlingual rendition of the MAP for RY 2008 and RY 2009. severally. into the different rate agendas for its assorted client sections. A part of the distribution charge under-recoveries as a consequence of the delayed execution of the PBR was incorporated in the proposed MAP for RY 2009.
In April 2009. the ERC approved the execution of MERALCO’s mean distribution rate of P1. 2227 per kWh effectual charge period of May 2009. This rate is inclusive of the under-recoveries for calendar twelvemonth 2007 of { O. 1285 per kWh.
On May 28. 2009. certain electricity consumer groups filed a Request with the Court of Appeals. or CA. oppugning the determination and Order of the ERC on MERALCO’s rate interlingual rendition application for RY 2008 and RY 2009. In the determination dated January 27. 2010. the CA denied the Petition. Consequently. the consumer groups brought the instance to the Supreme Court of the Philippines or SC. Remarks and responses were filed by both parties with a Manifestation filed by MERALCO on January 26. 2011. As at February 25. 2013. the SC has yet to render its determination on this instance.
MAP for RY 2010
In conformity with the ERC’s Guidelines for RY 2010 Rate Reset for First Entrant Distribution Utilities. the MAP for RY 2010 was computed at P1. 4917 per kWh. In a Decision dated December 14. 2009. the ERC approved the said
calculated MAP for RY 2010. Subsequently. nevertheless. on January 26. 2010. MERALCO filed a manifestation with the ERC voluntarily suspending the execution of the ERC’s December 14. 2009 determination on the request. to let the regulator clip to decide issues raised by an intervenor. On March 10. 2010. the ERC resolved the Motion for Reconsideration and approved a new rate agenda confirming that there is no rate deformation and no cross-subsidies. other than the lifeline subsidy. in MERALCO’s rates. Consequently. MERALCO implemented the new rate agenda get downing with its April 2010 charge rhythm.
Certain electricity consumer groups filed a Request for Certiorari with the SC oppugning the determination rendered by the ERC. On July 6. 2011. the SC dismissed the request. Thereafter. on December 14. 2011. a gesture for reconsideration filed by the same intervenors was denied with conclusiveness by the SC.
MAP for RY 2011
On December 6. 2010. the ERC approved MERALCO’s application for MAP for RY 2011 of P1. 6464 per kWh and ordered MERALCO to implement. get downing with its January 2011 charge rhythm. the sanctioned distribution. supply and meeting charges. The 2011 MAP rates were implemented until September 2011.
Third RP Reset Application
On June 18. 2010. MERALCO filed an application for the blessing of its proposed Annual Revenue Requirement or ARR and Performance Incentive Scheme or PIS for the 3rd RP. the Final Determination of which was approved on June 6. 2011. The PIS. which sets the public presentation steps and marks that apply throughout the 3rd RP. was besides approved. A Request for Certiorari of the ERC ; s determination was filed by an intervenor with the CA.
On February 3. 2012. the CA denied such request. This prompted the same intervenor to register a gesture for reconsideration on such Resolution. which gesture was similarly denied by the CA on June 28. 2012. Hence. said intervenor filed a Request for Rview on Certorari of the CA’s declarations
with the SC.
On August 29. 2012. the SC denied such request. The gesture for reconsideration of such Resolution filed by the same intervenor was denied with conclusiveness by the SC on November 26. 212.
MAP for RY 2012
On June 21. 2011. MERALCO filed its application for the blessing of its MAP for RY 2012 and its interlingual rendition into rate duties by client class. On October 6. 2011. the ERC provisionally approved the MAP for RY 2012 or P1. 6012 per kWh and the rate interlingual rendition per client category was reflected get downing with the October 2011 client measures. As at February 25. 2013. hearings for the concluding blessing of the application have been completed and all parties have submitted their several memorandum. The application is pending blessing by the ERC.
MAP for RY 2013
On June 11. 2012. the ERC provisionally approved the MAP for RY 2013 of P1. 6303 per kWh which was reflected get downing with the July 2012 client measures. Hearings on this instance have been completed and MERALCO is expecting the concluding determination of the ERC.
CEDC
CEDC was among the four Group D entrants to the PBR. Similar to MERALCO. it is capable to operational public presentation and service degree demands approved by the ERC. The RP of CEDC began on October 1. 2011 and ends on September 30. 2015.
Reset Application and MAP for RY 2012
In conformity with the ERC ; s PBR rate puting mechanism. CEDC filed a reset application for the blessing of its ARR and PIS with the ERC. CEDC filed its revised application November 3. 2010. which underwent a series of hearings and public audiences in 2011. The ERC issued CEDC’s Final Determination on August 5. 2011. Subsequently. CEDC filed with the ERC its application for RY 2012 Rate Translation into the different client categories.
On April 10. 2012. the ERC approved with alteration. CEDC’s application for the blessing of the interlingual rendition into distribution rates of different client categories for the first RY of the sanctioned ARR under the PBR for the RP October 1. 2011 to September 30. 2015. CEDC implemented the sanctioned distribution. supply and metering charges of P0. 8527 per kWh and the new client sections in its June 20 charge.
MAP for RY 2013
On August 30. 2012. CEDC filed its application for the blessing of its MAP for RY 2013. The ERC. on December 17. 2012. approved a MAP of P0. 8953 per kWh. The revised rates based on the approved MAP 2013 were implemented by CEDC get downing January 2013.
SC Decision on Unbundling Rate Case
On May 30. 2003. the ERC issued an Order O.K.ing MERALCO’s unbundled duties that resulted in a entire addition of P0. 17 per kWh over the May 2003 duty degrees. However. on August 4. 2003. certain client and civil society groups filed a Request for Review of the ERC ; s governing with the CA. On July 22. 2004. the CA set aside the ERC’s opinion on MERALCO’s rate unbundling and remanded the instance to the ERC. Further. the CA opined that the ERC should hold asked the Commission on Audit or COA. to scrutinize the books of MERALCO. The ERC and MERALCO later filed separate gestures inquiring the CA to reconsider its determination. On January 24. 2005. as a consequence of the denial by the CA of the gestures. the ERC and MERALCO elevated the instance to the SC.
In an En Banc determination promulgated on December 6. 2006. the SC set aside and reversed the CA opinion stating that a COA audit was non a requirement in the finding of a utility’s rates. However. while the SC affirmed ERC’s authorization in rate-fixing. the SC directed the ERC to bespeak COA to set about a complete audit of the books. records and histories of MERALCO. On January 15. 2007. in conformity with the directive of the SC. the ERC requested COA to carry on an audit of the books. records and histories of MERALCO utilizing calendar old ages 2004 and 2007 as trial old ages.
The COA audit. which began in September 2008. was completed in August 2009.
On February 17. 2010. the ERC issued its Order directing MERALCO and all intervenors in the caste to subject. within 15 yearss from reception of the order. their several remarks on the COA’s “Report NO. 2009-01 Rate Audit Unbundled Charges. ”
On July 1. 2011. the ERC maintained and affirmed its findings and decisions in its Order dated March 20. 2003. The ERC stated that the COA recommendation to use disallowances under PBR to rate unbundling violates the rule against retroactive rate-making. An intervenor group filed a gesture for reconsideration of the said Order. On September 5. 2011. MERALCO filed its remark to the intervenor’s gesture for reconsideration. On February 4. 2013. the ERC denied the intervenor’s gesture for reconsideration. A request for Review of the ERC’s order was filed by an intervenor group with the CA.
Applications for the Recovery of Generation Costs and SL Charges MERALCO filed separate applications for the full recovery of coevals costs. including value-added revenue enhancement or Vat. incurred for the supply months of August 2006 to May 2007 or entire under-recoveries of P12. 679 million coevals charges and P1. 295 million for Sl charges.
The separate applications for the full recovery of coevals charges have been approved by the ERC in its determinations released on January 18. 2008. September 3. 2008 and August 16. 2010.
As at December 31. 2012. the staying balance of P1. 162 million of such unrecovered coevals costs will be billed in 2013 at the rate of p0. 0314 per kWh until to the full recovered. The sum recoverable within 12 months is included in the “Trade and other receivables” history while the long-run part is included in the “Other noncurrent assets” history.
With regard to the P1. 295 million SL charge under-recoveries. the ERC
ordered MERALCO to register a separate application for the recovery of SL accommodations after the ERC confirms the transmittal rate to be used in the computation of the SL rate in conformity with the SL rate expression of the Automatic Generation Rate Adjustments Guidelines. MERALCO has filed the application recovery of the P1. 295 million SL charge under-recoveries with the ERC. This was included in the Consolidated Application of under/over recoveries in coevals. transmittal. SL and line of life charges filed on March 31. 2011. MERALCO with the ERC. Hearings were completed on October 25. 2011. On December 12. 2011. MERALCO filed for the admittance of its Supplemental Application. An expositive hearing was conducted on February 1. 2012. As at February 25. 2013. MERALCO has already filed its Formal Offer of Evidence or FOE and is expecting the concluding declaration by the ERC.
Inter-Class Cross Subsidies and Lifeline Subsidies
MERALCO filed separate applications to retrieve inter-class cross subsidies ( on November 14. 2007 ) and lifeline subsidies ( on February 19. 2008 ) .
In a determination dated November 16. 2009. the ERC authorized MERALCO to retrieve th inter-class cross subsidy under-recoveries covering the period June 2013 to October 2006 amounting to P1. 049 million and entire lifeline subsidy under-recoveries covering the period June 2003 to December 2007 amounting to P856 million.
In December 2009. MERALCO implemented the determinations of the ERC on the inter- category cross and line of life subsidies. As at December 31. 2012. the entire sum of billed inter-class cross subsidies and line of life subsidies amounted to P963 million and P638 million. severally. The unbilled balance of inter-class cross subsidies is P86 million and is expected to be recovered within 12 months is included in the “Trade and other receivables” history while the long-run part is included in the “Other noncurrent assets” history.
Amalgamate Applications for the Confirmation of Ever/Under-recoveries of Pass-through charges
On August 12. 2009. the ERC issued Resolution No. 16. Seriess of 2009. following the “Rules Regulating the Automatic Cost Adjustment and True-up Mechanisms and Corresponding Confirmation Process for Distribution Utilities. ” These regulations govern the recovery of pass-through costs. including over- or under-recoveries with regard to the undermentioned measure constituents: coevals charge. transmittal charge. SL charge. line of life and interclass rate subsidies. LFT and concern revenue enhancement. On October 18. 2010. the ERC promulgated ERC Resolution No. 21. Seriess of 2010. amending certain expression contained in ERC Resolution No. 16. Seriess of 2009. and puting March 31. 2011 ( covering accommodations from January 2011 to December 2013 ) as the new deadlines for DUs in Luzon to register their several applications. Subsequent filings shall be made every three old ages thenceforth.
On March 31. 2011. MERALCO flied a amalgamate application with the ERC to corroborate its under-or ever-recoveries accumulated from June 2003 to December 2010 in conformity with Resolution No. 16. Seriess 2009. as later amended by Resolution No. 21. Seriess of 2010. Hearings were completed on October 25. 2011. On December 8. 2011. MERALCO filed an Omnibus Motion praying. among other things. for the admittance of the Supplemental Application. In an Order dated December 12. 2011. the ERC granted MERALCO’s Omnibus Motion and admitted its Auxiliary Application. Accordingly. hearings on the Auxiliary Application were conducted where MERALCO presented extra grounds. MERALCO filed its FOE on September 13. 2012. The amalgamate filing includes net coevals charge under-recoveries of P1. 000 million. net transmittal and charge over-recoveries P111 million. net line of life subsidy under-recoveries of P9 million and net SL over-recoveries of P425 million. excepting any applicable carrying charges.
On July 6. 2012. MERALCO filed a amalgamate application with the ERC to corroborate its under- or over-recoveries for the calendar twelvemonth 2011. The amalgamate filing includes ner coevals charge under-recoveries of P1. 826 million. transmittal charge under-recoveries of P253 million. net line of life subsidy under-recoveries of P39 million and SL over-recoveries of P445 million. excepting any applicable carrying charges. As at February 25. 2013. hearings on the application have been terminated and MERALCO has
submitted its FOE on January 25. 2013. The application is pending blessing by the ERC.
Request to Implement a Lower Generation Charge for the February 2010 Supply Month
MERALCO’s coevals cost suddenly increased to P15. 934 million for the supply month of February 2010. This translated to a coevals charge of P6. 76 per kWh to tits clients for the March 2010 charge. The crisp addition in coevals cost was chiefly due to abnormally high monetary values in the Wholesale Electricity Spot Market or WESM. A Request was filed by MERALCO to extenuate the effects of the disconnected addition in coevals cost through a voluntary recess of a part of coevals costs. with the derived function to be recovered over a period. which shall be approved by the ERC. In an Order dated March 10. 2010. the ERC provisionally approved a lower coevals charge of P5. 8417 per kWh stand foring P13. 773 million coevals cost for the capable month. MERALCO was besides provisionally allowed to bear down over a six month period get downing April 2010 the coevals charge at the rate of P0. 07 per kWh. matching to the incremental costs of the condensate fuel used by First Gas Corporation or FGC’s Sta. Rita and FGP Corp. or FGP’s San Lorenzo power workss during the said month. In its determination dated July 25. 2011. the ERC authorized MERALCO to roll up the extra coevals cost for the period January 26. 2010 to February 25. 2010 including transporting charges. The sanctioned recovery was implemented get downing with its September 2011 billin rhythm. The sum was to the full recovered in October 2012.
Deferred PPA
On October 14. 2009. the ERC released its findings on MERALCO’s execution of the aggregation of the approved pass-through cost under-recoveries in 2004. ERC directed MERALCO to return P268 million of deferred PPA transmittal line costs related to Quezon Power ( Philippines ) Limited Company or QPPL and deferred accounting accommodations or DAA incurred to clients. along with P184 million in carrying charges. or an equivalent of P0. 0169 per kWh. MERALCO implemented the refund get downing November 2009 until September 2010. However. the ERC has yet to govern on MERALCO ; s deferred
PPA under-recoveries of P106 million. which does non stand for the transmittal line fee. As at February 25. 2013. MERALCO has filed a Gesture for Reconsideration. which is pending determination by the ERC.
Application for Recovery of Local Franchise Taxes or LFT
On March 25. 2011. MERALCO filed with the ERC an application for recovery of LFT paid but non yet billed to clients for the period get downing first one-fourth of 1993 up to the 2nd one-fourth of 2004 for five states. viz. ; Bulacan. Batangas. Cavite. Laguna and Rizal ; and 14 metropoliss. viz. : San Jose Del Monte. Batangas. San Pablo. Tagaytay. Lucena. Mandaluyong. Marikina. Quezon. Caloocan. Pasay. Las pinas. Manila. Pasig and Calamba. The LFT is recognized as a legitimate and sensible DU disbursal in the ERC’s unbundling determination.
In a Decision dated February 27. 2012. the ERC released its Order blessing with alterations MERALCO’s application. The ERC approved recovery of LFT amounting to P1. 571 million plus transporting charges of P730 million. The recovery of LFT and transporting charges were recognized as portion of “Other income” history and “Interest and other fiscal income” history. severally. in the 2012 amalgamate statement of income. As directed by the ERC. the recovery was reflected as a separate point in the MERALCO charge statement to its clients get downing April 2012. As at December 31. 2012. a sum of P393 million LFT and transporting charges have been billed to affected clients.
SC Decision on the P0. 167 per kWh Refund
Following the SC ; s concluding opinion that directed MERALCO to return affected clients P0. 167 per kWh for Billingss made from February 1994 to April 2003. the ERC approved the release of the refund in the four stages. The refund is still on-going. See Note 21 – Customers’ Refund.
3. Footing of Preparation and stamen of Conformity
The accompanying amalgamate fiscal statements have been prepared on a historical cost footing. except for MERALCO’s public-service corporation works and others and
investing belongingss acquired before January 1. 2004. which are carried at deemed cost and for derivative fiscal instruments and available-for-sale. or AFS. fiscal assets. which are measured at just value. Derivatives fiscal instruments are shown as portion of “Other current assets” or “Trade payables and other current liabilities” histories. as applicable. in the amalgamate statement of fiscal place. AFS fiscal assets are included as portion of “Other noncurrent assets” history in the amalgamate statement of fiscal place.
The accompanying amalgamate fiscal statements are presented in Philippine peso. the MERALCO Group’s map and presentation currency. All values are rounded to the nearest million peso. except when otherwise indicated.
Statement of Conformity
The amalgamate fiscal statements of MERALCO and its subordinates have been prepared in conformity with Philippine Financial Reporting Standards or PFRS. PFRS includes statements named PFRS and Philippine Accounting Standards or PAS. including Interpretations issued by the Philippine Financial Reporting Standards Council or PFRSC.
Basic of Consolidation
The amalgamate fiscal statements consist the fiscal statements of MERALCO and its subordinates as at December 31 of each twelvemonth. except for Meralco Industrial Engineering Services Corporation or MIESCOR. whose fiscal coverage day of the month ends on September 30. Adjustments and revelations are made for the effects of important minutess or events that occurred between the day of the month of MIESCOR’s fiscal statements and the day of the month of MERALCO Group’s consolidated fiscal statements.
The SEC and the Bureau of Internal Revenue or BIR approved the alteration in describing period for MIESCOR ( January 2013 ) . Meiscor Logistics. Inc. or MLI ( October 2012 and December 2012. severally ) . from financial twelvemonth stoping September 30 to calendar twelvemonth stoping December 31.
The amalgamate fiscal statements include the fiscal statements of MERALCO and the following straight and indirectly-owned subordinates:
Subordinates are to the full consolidated from the day of the month of acquisition. being the day of the month at which MERALCO obtains command. and go on to be consolidated until the day of the month that such control ceases. Control is the power to regulate the fiscal and runing policies of the entity.
The amalgamate fiscal statements are prepared utilizing unvarying accounting policies for similar minutess and other events with similar fortunes. All intra-group balances. income and disbursals. unfulfilled additions and losingss and dividends ensuing from intra-group minutess are eliminated in full.
Non-controlling involvements represent the part of net income or loss and net assets in CEDC and MIESCOR and its subordinates non held by MERALCO and are presented individually in the amalgamate statement of income. amalgamate statement of comprehensive income and within equity in the amalgamate statement of fiscal place. individually from equity attributable to equity holders of the parent.
Entire comprehensive income within a subordinate is attributed to the non-controlling involvement even if that consequences in a shortage.
A alteration in the ownership involvement of a subordinate. without a alteration of control. is accounted for as an equity dealing.
If the MERALCO Group loses control over a subordinate. it: ( a ) derecognizes the assets ( including good will ) and liabilities of the subordinate ; ( B ) derecognizes the transporting sum of any non-controlling involvement ; ( degree Celsius ) derecognizes the cumulative interlingual rendition accommodations deferred in equity ; ( vitamin D ) _ recognizes the just value of consideration received ; ( vitamin E ) recognizes the just value of any investing retained ; ( degree Fahrenheit ) recognizes any excess or shortage in net income or loss ; and ( g ) reclassifies MERALCO’s portion of constituents antecedently recognized in the amalgamate statement of comprehensive income to the amalgamate statement of income.
4. Significant Accounting Policies. Changes and Improvements Changes in Accounting Policies and Disclosures
The accounting policies adopted in the readying of amalgamate fiscal statements are consistent with those of the old fiscal twelvemonth except for the acceptance of the undermentioned amendments and betterments to bing criterions. which were effectual get downing January 1. 2012. The acceptance of these alterations and betterments did non hold any important consequence on the amalgamate fiscal statements.
* PFRS 7. Fiscal Instruments: Disclosures – Enhanced Derecognition and Transfer of Financial Assets Disclosure Requirements – The amended criterion requires extra revelation on fiscal assets that have been transferred but non derecognized and an entity’s go oning engagement in the derecognized assets. This revelation is required to enable the user of the fiscal statements to measure the related hazards. * PAS 12. Income Taxes – Deferred Taxes: Recovery of Underlying Assets ( Amended ) – The amendment clarifies that the deferred revenue enhancement on investing belongings measured utilizing the just value theoretical account in PAS 40m Investment Property should be determined sing that its transporting value will be recovered through sale. Deferred revenue enhancement on non-depreciable assets that are measured utilizing the reappraisal theoretical account in PAS 16. Property. Plant and Equipment should besides be measured on a sale footing.
New Accounting Standards and Interpretations to Existing Standards Effective Subsequent to December 31. 2012
The MERALCO Group will follow the following revised criterions and readings enumerated below. which are relevant when these become effectual. Except as otherwise indicated. the MERALCO Group does non anticipate the acceptance of these revised criterions and amendments to PFRS to hold a important impact on the MERALCO Group’s consolidated fiscal statements.
Effective 2013
PFRS 7. Fiscal Instruments: Disclosures – Offseting Financial Assets and
Fiscal Liabilitiess
These amendments require an entity to unwrap information about rights of set-off and related agreements ( such as indirect understandings ) . The new revelations are required for all recognized fiscal instruments that are set off in conformity with PAS 32. Fiscal Instruments: Presentation. These revelations besides apply to recognized fiscal instruments that are capable to an enforceable maestro sacking agreement or ‘similar agreement’ . irrespective of whether they are set-off in conformity with PAS 32. The amendments require entities unwrap. in a tabular format unless another format is more appropriate. the undermentioned minimal quantitative information. These are presented individually for fiscal assets and fiscal liabilities recognized at the terminal of the coverage period:
( a ) The gross sums of those recognized fiscal assets and recognized fiscal liabilities ; ( B ) The sums that are set off in conformity with the standards in PAS 32 when finding the net sums presented in the statement of fiscal place ; ( degree Celsius ) The net sums presented in the statement of fiscal place ; ( vitamin D ) The sums subject to an enforceable maestro sacking agreement or similar understanding that are non otherwise included in ( B ) above including: I. Sums related to recognized fiscal instruments that do non run into some or all of the countervailing standards in PAS 32 ; and ii. Sums related to fiscal collateral ( including hard currency collateral ) ; and ( vitamin E ) The net sum after subtracting the sums in ( vitamin D ) from the sums in © above.
The amendments to PFRS 7 are to be applied restropectively and are effectual for one-year periods get downing on or after January 1. 2013. The amendments affect disclosures merely and have no impact on MERALCO Group’s fiscal place or public presentation.
PFRS 10. Consolidated Fiscal Statements
PFRS 10 replaces the part of PAS 27. Consolidated and Separate Financial Statements. that addresses the accounting for amalgamate fiscal statements. It besides includes the issues raised in Standing Interpretations
Committee or SIC 12. Consolidation – Special Purpose Entities. PFRS 10 establishes a individual control theoretical account that applies to all entities including particular purpose entities. The alterations introduced by PFRS 10 will necessitate direction to exert important judgement to find which entities are controlled. and hence. are required to be consolidated by a parent. compared with the demands that were in PAS 27. The standard becomes effectual for one-year periods get downing on or after January 1. 2013.
A reappraisal of control was performed by MERALCO on all its subordinates and associates in conformity with the commissariats of PFRS 10. Based on the reappraisal made. MERALCO has non determined any alteration in the control in any of its subordinates and associates.
PFRS 11. Joint Agreements
PFRS 11 replaces PAS 31. Interests in Joint Ventures. and SIC 13. Jointly Controlled Entities- Non- Monetary Contributions by Venturers. PFRS 11 removes the option to account for jointly controlled entities that meet the definition of a joint venture must be accounted for utilizing the equity method. The standard becomes effectual for one-year periods get downing on or after January 1. 2013. The application of this new criterion will hold no impact in the amalgamate fiscal statements of the MERALCO Group.
PFRS 12. Disclosure of Interests in other Entities
PFRS 12. includes all the revelations related to amalgamate fiscal statements that were antecedently in PAS 27. every bit good as all the revelations that were antecedently included in PAS 31 and PAS 28. Investings in Associates. These revelations relate to an entity’s involvements in subordinates. joint agreements. associates and structured entities. A figure of new revelations are besides required. The standard becomes effectual for one-year periods get downing on or after January 1. 2013.
The acceptance of PFRS 12 will impact revelations merely and will hold no impact on the MERALCO Group’s fiscal place or public presentation.
PFRS 13. Fair Value Measurement
PFRS 13 establishes a individual beginning of counsel under PFRS for all just value measurings. PFRS 13 does non alter when an entity is required to utilize just value. but instead provides counsel on how to mensurate just value under PFRS when just value is required or permitted. This criterion should be applied prospectively as of the beginning of the one-year period in which it is ab initio applied. Its revelation demands need non be applied in comparative information provided for periods before initial application of PFRS 13. The standard becomes effectual for one-year periods get downing on or after January 1. 2013.
The MERALCO Group does non expect that the acceptance of this criterion will hold any important impact on its fiscal place and public presentation.
PAS 27. Separate Fiscal Statements ( as revised 2011 )
As a effect of the issue of the new PFRS 10 and PFRS 12. what remains of PAS 27 is limited to accounting for subordinates. jointly controlled entities. and associates in the separate fiscal statements. The acceptance of the amended PAS 27 will non hold any important impact on the separate fiscal statements of the entities in the MERALCO Group. The amendment becomes effectual for one-year periods get downing on or after January 1. 2013.
PAS 28. Investings in Associates and Joint Ventures ( As Revised in 2011 ) As a effect of the issue of the new PFRS 11 and PFRS 12. PAS 28 has been renamed PAS 28. Investings in Associated and Joint Ventures. and described the application of the equity method to investings in joint ventures in add-on to associates. The acceptance of the amended PAS 28 will non hold a important impact on the amalgamate fiscal statements of the MERALCO Group. The amendment becomes effectual for one-year periods get downing on or after January 1. 2013.
PAS 1. Presentation of Financial Statements – Presentation of Items of Other Comprehensive Income or OCI
The amendments of PAS 1 alteration the grouping of points presented in OCI. Items that can be reclassified ( or “recycled” ) to gain or loss at a hereafter point
in clip ( for illustration. Upon derecognition or colony ) will be presented individually from points that will ne’er be recycled. The amendments affect presentation merely and have no impact on the MERALCO Group’s fiscal place or public presentation. The amendment becomes effectual for one-year periods get downing on or after July 1. 2012. The amendments will be applied retrospectively and will ensue in the alteration of the presentation of points of OCI.
PAS 19. Employee Benefits ( Amendments )
Amendments to PAS 19 scope from cardinal alterations such as taking the corridor mechanism and the construct of expected returns on program assets to simple elucidations and paraphrasing. The revised criterion besides requires new revelations such as. among others. a sensitiveness analysis for each important actuarial premise. information on asset-liability matching schemes. continuance of the defined benefit duty. and disaggregation of program assets by nature and hazard. The amendments become effectual for one-year periods get downing on or after January 1. 2013. Once effectual. the MERALCO Group shall use the amendments retrospectively to the earliest period presented. The MERALCO Group reviewed its bing employee benefits and determined that the amended criterion will hold a important impact on its accounting for retirement benefits. The MERALCO Group obtained the services of an external statistician to calculate the impact on the concoslidated fiscal statements upon acceptance of the criterion. The effects are detailed below:
| As at| As at| As at|
| December 31. | December 31. | January 1. |
| 2012| 2011| 2011|
Amalgamate statements of financial| ( In Millions ) | |
position| | | |
Increase ( lessening ) in: | | | |
Internet defined benefit liability| ( P565 ) | P2. 356| P3. 072| Deferred revenue enhancement assets| ( 170 ) | 707 | 922 |
Other comprehensive income| 262 | ( 1. 682 ) | ( 2. 151 ) | Retained earnings| 135 | 33 | -|
| For the old ages ended December 31|
| 2012| 2011|
| ( In Millions ) |
Amalgamate statements of financial| |
Increase ( lessening ) in: | | |
Net benefit cost| ( P145 ) | ( P47 ) |
Provision for income tax| 43 | 14 |
Net income for the twelvemonth attributable to: | | |
Equity holders of the Parent| 102 | 33 |
Non-controlling interests| -| -|
Filipino Interpretation IFRIC 29. Depriving Costss in the Production Phase of a Surface Mine
This reading applies to blow remotion ( depriving ) costs incurred in surface excavation activity. during the production stage of the mine. The reading addresses the accounting for the benefit from the denudation activity. The reading is effectual for one-year periods get downing on or after January 1. 2013. This new reading in non relevant to the MERALCO Group.
Effective 2014
PAS 32. Fiscal Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities
The amendments clear up the significance of “currently has a lawfully enforceable right to set-off “ and besides clear up the application of the PAS 32 countervailing standards to colony systems ( such as cardinal glade house systems ) which apply gross colony mechanisms that are non coincident. The amendments affect presentation merely and have no impact on the MERALCO Group’s fiscal place or public presentation. The amendments to PAS 32 are to be applied retrospectively for one-year periods get downing on or after January 1. 2014.
Effective 2015
PFRS 9. Fiscal Instruments: Categorization and Measurement
PFRS 9. as issued. reflects the first stage on the replacing of PAS 39 and applies to the categorization and measuring of fiscal assets and liabilities as defined in PAS 39. Fiscal Instruments: Recognition and Measurement. Work on damage of fiscal instruments and hedge accounting is still ongoing. with a position to replacing PAS 39 in its wholly. PFRS 9 requires all fiscal assets to be measured at just value at initial acknowledgment. A debt fiscal plus may. if the just value option or FVO is non invoked. be later measured at amortized cost if it is held within a concern theoretical account that has the aim to keep the assets to roll up the contractual hard currency flows and its contractual footings give rise. on specified day of the months. to hard currency flows that are solely payments of chief and involvement on the chief outstanding. All other debt instruments are later measured at just value through net income or loss. Equity fiscal assets are measured at just value either through other OCI or net income or loss. All equity fiscal assets held for trading must be measured at just value through net income or loss. For FVO liabilities the sum of alteration in the just value of liability that is attributable to alterations in recognition hazard must be presented in OCI. The balance of the alteration in just value is presented in net income or loss. unless presentation of the just value alteration is presented in net income or loss. unless presentation of the just value alteration in regard of the liability’s recognition hazard in OCI would make or enlarge an accounting mismatch in net income or loss. All other PAS 39 categorization and measuring demands for fiscal liabilities have been carried frontward into PFRS 9. including the embedded derivative separation regulations and the standards for utilizing the FVO. MERALCVO Group conducted an rating of the early acceptance of PFRS 9 and has assessed that the first stage of PFRS 9 will hold an consequence on the categorization and measuring of fiscal assets. The MERALCO Group will quantify the consequence on the amalgamate fiscal statements in concurrence with the other stages. when issued. to show a comprehensive image. PFRS 9 is effectual for one-year periods get downing on or after January 1. 2015.
Deferred Effectivity
Filipino Interpretation IFRIC 15. Agreements for the Construction of Real Estate
This reading covers accounting for gross and associated disbursals by entities that undertake the building of existent estate straight or through subcontractors. The reading requires that gross on building of existent estate be recognized merely upon completion. except when such contract qualifies as building contract to be accounted for under PAS 11 or involves rendering of services in which instance gross is recognized based on phase of completion. Contracts ownership are transferred to the purchaser on a uninterrupted footing will besides be accounted for based on phase of completion. The Filipino SEC and the FRSC have deferred the effectiveness of this reading until the concluding gross criterion is issued by the International Accounting Standards Board an rating of the demands of the concluding Revenue criterion against the patterns of the Filipino existent estate industry is completed.
Annual Improvements to PFRS ( 2009-2011 rhythm )
The Annual Improvements to PFRS ( 2009-2011 rhythm ) contain non-urgent but necessary amendments to PFRS. The amendments are effectual for one-year periods get downing on or after January 1. 2013 and to be applied retrospectively. Earlier application is permitted.
PFRS I. First-time Adoption of PFRS – Borrowing Costss
The amendment clarifies that. upon acceptance of PFRS. an entity that capitalized adoption costs in conformity with its old by and large accepted accounting rules. may transport frontward. without any accommodation. the sum antecedently capitalized in its opening statement of fiscal place at the day of the month passage. Subsequent to the acceptance of PFRS. adoption costs are recognized in conformity with PAS 23. Borrowing Costss. The amendment does non use to the MERALCO Group as it is non a first-time
adoptive parent of PFRS.
PAS 1. Presentation of Financial Statements – Clarification of the demands for comparative information
The amendment clarifies the demands for comparative information that are disclosed voluntarily and those that are compulsory due to retrospective application of an accounting policy. or retrospective restatement or reclassification or points in the fiscal statements. An entity must include comparative information in the related noted to the fiscal statements when it voluntarily provides comparative information beyond the lower limit needed comparative period. The extra comparative period does non necessitate incorporate a complete set of fiscal statements. On the other manus. back uping notes for the 3rd balance sheet ( compulsory when there is a retrospective application of an accounting policy. or retrospective restatement or reclassification of points in the fiscal statements ) are non required. The amendments affect disclosures merely and have no impact on the MERALCO Group’s fiscal place or public presentation.
PAS 16. Property. Plant and Equipment – Classification of serving equipment
The amendment clarifies that trim parts. stand-by equipment and serving equipment should be recognized as belongings. works and equipment when the meet the definition of belongings. works and equipment and should be recognized as stock list if otherwise. The amendment will non hold any important impact on the MERALCO Group’s fiscal place or public presentation.
PAS 16. Property. Plant and Equipment – Classification of functioning equipment
The amendment clarifies that trim parts. stand-by equipment and functioning equipment should be recognized as belongings. works and equipment when the meet the definition of belongings. works and equipment and should be recognized as stock list if otherwise. The amendment will non hold any important impact on the MERALCO Group’s fiscal place or public presentation.
PAS 32. Fiscal Instruments: Presentation – Tax consequence of distribution to Holders of Equity instruments
The amendment clarifies that income revenue enhancements associating to distributions to equity holders and to dealing costs an equity dealing are accounted for in conformity with PAS 12. Income Taxes. The MERALCO Group expects that this amendment will non hold any impact on its fiscal place or public presentation.
PAS 34. Interim Financial Reporting – Interim Financial coverage and section information for entire assets and liabilities
The amendment clarifies that income revenue enhancements associating to distributions to equity holders and to dealing costs of an equity dealing are accounted for in conformity with PAS 12. Income Taxes. The MERALCO Group expects that this amendment will non hold any impact on its fiscal place or public presentation.
Significant Accounting Policies
The chief accounting policies adopted in the readying of the amalgamate fiscal statements are as follows:
Business Combinations and Goodwill
Business combinations are accounted for utilizing the acquisition method. The cost of an acquisition is measured as the sum of the consideration transferred measured at acquisition-date just value and the sum of any non-controlling involvement in the acquiree. For each concern combination. the MERALCO Group elects whether to mensurate the non-controlling involvement in the get at just value or at the proportionate portion of the acquiree’s identifiable net assets. Acquisition-related costs in a concern combination are expensed.
When a concern is acquired. an appraisal is made of the identifiable assets acquired and liabilities assumed for appropriate categorization and appellation in conformity with the contractual footings. economic and other
pertinent conditions as at acquisition day of the month. This includes the separation of embedded derived functions in host contracts by the acquiree.
If the concern combination is achieved in phases. the acquirer’s antecedently held equity involvement in the acquiree is remeasured at just value as at acquisition day of the month and any resulting addition or loss is recognized in net income or loss.
Any contigent consideration to be transferred by the acquirer will be recognized at just value at the acquisition day of the month. Subsequent alterations to the just value of contingent consideration. which is deemed to be an plus or liability will be recognized in conformity with PAS 39. either in net income or loss or other comprehensive income. If the contingent consideration is classified as equity. it shall non be remeasured until it is eventually settled within equity.
Goodwill is ab initio measured at cost being the surplus of the sum of the consideration is classified as equity. it shall non be remeasured until it is eventually settled within equity.
Goodwill is ab initio measured at cost being the surplus of the sum of the consideration transferred. any non-controlling involvement in the get and. in a concern combination achieved in phases. the acquisition-date just value of the antecedently held equity involvement in the get. over the just value of net identifiable assets acquired. If the difference is negative. such difference is recognized as addition in the amalgamate statement of income.
After initial acknowledgment. good will is measured at cost less any accrued damage losingss. For the intent of impairment proving. good will acquired in a concern combination is. from acquisition day of the month. allocated to each of the hard currency bring forthing units that are expected to profit from the combination. irrespective of whether other assets or liabilities of the get are assigned to those units. get downing on the acquisition day of the month.
Where good will forms portion of a cash-generating unit and portion if the operation within that unit is disposed of. the good will associated with the operation disposed of is included in the transporting sum of the operation when finding the addition or loss on disposal of the operation. Goodwill disposed of in such fortunes is measured based on comparative values of the operation disposed and the part of the cash-generating unit retained.
Business combinations affecting entities under common control are accounted for similar to the pooling-of-interest method. The assets and liabilities of the combine entities are reflected at their carrying sums reported in the amalgamate paid and the portion capital of the “acquired” entity is reflected within equity extra paid-in capital. The amalgamate statement of income reflects the consequences uniting entities for the full twelvemonth. irrespective of when the combination takes topographic point. Comparatives are presented as if the entities had ever been combined since the day of the month the entities were under common control.
Utility Plant and Others
Utility works and others. except land. are stated at cost. cyberspace of accumulated depreciation and amortisation and accrued impairment loss. if any. Costss included the cost of replacing portion of such public-service corporation works and other belongingss when such cost is incurred. if the acknowledgment standards are met. All other fix and care costs are recognized as incurred in the amalgamate statement of income. The present value of the expected cost for the decommissioning of the plus after usage is included in the cost of the repective plus if the acknowledgment standards for a proviso are met.
Land is stated at cost less any damage in value.
MERALCO’s public-service corporation works and others are stated at deemed cost. The revalued sum recorded as at January 1. 2004 was adopted as deemed cost as allowed by the transitional commissariats of PFRS 1. The balance of reappraisal increase was closed to retained net incomes. See Note 16- Equity for the related treatment.
Depreciation and amortisation of public-service corporation works and others are computed utilizing the straight-line method ( Except for certain subtransmission and distribution assets. which use straight-line functional group method ) over the undermentioned estimated utile lives: ( TABLE 167 )
An point of public-service corporation works and others is derecognized upon disposal or when no future economic benefits are expected from its usage or disposal. Any addition or loss arising as a consequence of the derecognition of the plus ( calculated as the difference between the net disposal returns and the transporting sum of the plus ) is included in the amalgamate statement of income in the twelvemonth the plus is derecognized.
The asst’s residuary values. utile lives and methods of depreciation and amortisation are reviewed. and adjusted prospectively if appropriate. at each fiscal year-end to guarantee that the residuary values. periods and methods of depreciation and amortisation are consistent with the expected form of economic benefits from points of public-service corporation works and others.
Construction in Advancement
Construction in advancement is stated at cost. which includes cost of building. works and equipment. capitalized adoption costs and other direct costs. Construction in advancement is non depreciated until such clip that the relevant assets are well completed and available for their intended usage.
Borrowing Costss
Borrowing costs are capitalized if they are straight attributable to the acquisition. building or production of a qualifying plus. A qualifying plus is an plus that needfully takes a significant period of clip to acquire ready for its intended usage or sale. Capitalization of borrowing costs commences when the activities necessary prepare the plus for its intended usage or sale have been undertaken and outgos and adoption costs have
been incurred. Borrowing costs are capitalized until the plus is well available for its intended usage.
Borrowing costs include involvement charges and other costs incurred in connexion with the adoption of financess. every bit good as any exchange differences originating from any foreign currency-denominated adoptions used finance the undertakings. to the extent that they regarded as an accommodation to involvement costs.
All other adoption costs are expensed as incurred.
Investing Properties
Investing belongingss. except land. are stated at cost. cyberspace of accumulated depreciation and accrued impairment loss. if any. The transporting sum includes dealing costs and costs of replacing portion of an bing investing belongings at the clip such costs are incurred if the acknowledgment standards are met and excludes the costs of daily service of an investing belongings.
Investing belongingss include belongingss that are being constructed or developed for future usage as investing belongings.
Land classified as investing belongings is carried at cost less any damage in value.
MERALCO ; s investing belongingss acquired before January 1. 2004 are stated at deemed cost. See Note 16 – Equity for the related treatments.
Investing belongingss. except land. are being depreciated on a straight-line footing over the utile life of five to 35 old ages.
Investing belongingss are derecognized either when they have been disposed of or when these are for good withdrawn from usage and no future economic benefit is expected from its disposal. Any addition or loss from the
derecognition of the investing belongingss are recognized in the amalgamate statement of income in the twelvemonth these are fain or retired.
Transportations are made to investing belongings when and merely when there is a alteration in usage. evidenced by stoping of owner-occupation or beginning of an operating rental to another party. If owner-occupied belongings becomes an investing belongings. the MERALCO Group accounts for such belongings in conformity with the policy stated under public-service corporation works and others up to the day of the month of the alteration in usage. Transportation are made from investing belongings when. and merely when. there is a alteration in usage. evidenced by beginning of owner-occupation or beginning of development with a position to sale. Transportations from investing belongings are recorded utilizing the transporting sum of the investing belongings at the day of the month of alteration in usage.
Asset Retirement Duties
Under the footings of certain rental contracts. the MERALCO Group is required to level the installings made in leased sites and reconstruct such sited to their original status at the terminal of the term of the rental contracts. The MERALCO Group recognizes a liability measured at the present values of the estimated costs of these duties and capitalizes such costs as portion of the balance of the related point of public-service corporation works and others and investing belongingss. The sum of plus retirement duties is accreted and such accumulation is recognized as involvement disbursal.
Intangible Assetss
Intangible assets acquired individually are ab initio measured at cost. Following initial acknowledgment. intangible assets are carried at cost less accrued amortisation and any accrued impairment loss. The utile lives of intangible assets are assessed at the single plus degree as holding either finite or indefinite utile lives.
Intangible assets with finite lives are amortized over the utile economic lives of five old ages utilizing the straight-line method and assessed for
damage whenever there is an indicant that the intangible assets may be impaired. At a lower limit. the amortisation period and the amortisation method for an intangible plus with a finite utile life are reviewed at each coverage day of the month. Changes in the expected utile life or the expected ingestion form of future economic benefit embodied in the plus are accounted for by altering the amortisation period or method. as appropriate. and treated as alteration in accounting estimations. The amortisation disbursal of intangible assets with finite lives is recognized in the amalgamate statement of income.
Intangible assets with undefinable utile lives are non amortized. but are assessed for damage yearly either separately or at the cash-generating unit degree. The appraisal of indefinite utile life is done yearly at every coverage day of the month to find whether such indefinite utile life continues to be. Otherwise. the alteration in the utile life appraisal from indefinite to finite is made on prospective footing.
Additions or losingss originating from derecognition of an intangible plus are measured as the difference between the net disposal returns and the transporting sum of the plus. and are recognized in the amalgamate statement of income.
Intangible assets generated within the concern are non capitalized and outgos are charged to gain or loss in the twelvemonth these are incurred.
Investings in Associates
An associated is an entity over which MERALCO has important influence and which is neither a subordinate non a joint venture. Investings in associates are accounted for utilizing the equity method of accounting and are ab initio recognized at cost.
Under the equity method. investing in an associate is carried in the amalgamate statement of fiscal place at cost plus post-acquisition alterations in the MERALCO Group’s portion of net assets of the associate. less any damage in value. Any good will associating to an associate is included
in the transporting sum of the investing and is non amortized nor separately tested for damage. The amalgamate sum of the income reflects the MERALCO Group’s portion of the consequences operations of the associates. Where there has been a alteration recognized straight in the equity of the associate. the MERALCO Group recognizes its portion in any alteration and discloses this. when applicable. in the amalgamate statement of comprehensive income and alterations in equity. Unfulfilled additions and losingss ensuing from minutess between and among the MERALCO Group and the associates are eliminated to the extent of the involvement in those associates.
The portion in net incomes and losingss of associates is shown on the face of the amalgamate statement of income. This is the net income or loss attributable to equity holders of the associate and is therefore net income or loss after revenue enhancement and cyberspace of non0controlling involvement in the subordinates of the associates.
The coverage day of the month of the associates and that of the MERALCO Group are indistinguishable and the associates’ accounting policies conform with those used by the MERALCO Group for like minutess and events in similar fortunes.
After application of the equity method. the MERALCO Group determines whether it is necessary to acknowledge an impairment loss on the investings in associates. At the terminal of each coverage day of the month. the MERALCO Group determines whether there is any nonsubjective grounds that each of the investings in associates is impaired. If this is the instance. the MERALCO Group calculates the sum of damage as the difference between the recoverable sum of the investing in associate and its transporting value and recognizes the sum in the amalgamate statement of income.
Upon loss of important influence over the associate. the MERALCO Group measures and recognizes any staying investing at its just value. Any difference between the transporting sum of the investing in associate upon loss of important influence. and the sum of the just value of the staying investing and returns from disposal. is recognized in the amalgamate statement of income.
Investing in Joint Ventures
The MERALCO Group’s ownership involvements in Indra Philippines. Inc. or Indra Philippines. and Rockwell Business Center. both jointly controlled entities. are accounted for utilizing the equity method of accounting in the amalgamate fiscal statements. The involvements in joint ventures are carried at cost plus post-acquisition alterations in the MERALCO Group’s portion in net assets of the joint ventures. less any damage in value. The MERALCO Group’s portion in the consequences of operation of the joint ventures is recognized in the amalgamate statement of income.
A joint venture is a contractual agreement whereby two or more parties undertaken an economic activity that is capable to joint control. A jointly controlled entity is a joint venture that involves the constitution of a separate entity in which each venturer has an involvement. The fiscal statements of the joint ventures are prepared for the same coverage twelvemonth as that of the MERALCO Group. utilizing consistent accounting policies.
Adjustments are made in the amalgamate fiscal statements to extinguish the MERALCO Group’s portion of unfulfilled additions and losingss on minutess between the MERALCO Group and the jointly controlled entities. The joint venture is carried at equity method until th
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