Deanna Jane A. Avila

BEST JUICY KINGDOM FOOD INC. Notes to Financial Statements As of and for the year ended December 31, 2018 1. GENERAL INFORMATION BEST JUICY KINGDOM FOOD INC. is registered in the Philippines to engage in the restaurant business. The Company’s registered principal office and business is located at Unit RO1 Roof Deck Argo II 4740 Salamanca corner Edugue streets, Poblacion, Makai City. The financial statements of the company have been approved and authorized for issuance by the owner on April 10, 2019. The owner is empowered to make revisions even after the date of issue. The company is also registered with the Bureau of Internal Revenue (BIR) under the Tax Identification Number-. Registered activities and tax type include registration, income tax, value added tax, and withholding tax. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated. 2.1 Basis of Preparation (a) Statement of compliance with Philippine Financial Reporting Standard for Small and Medium-sized Entities The financial statements of the company have been prepared under a historical cost convention. Items included in the financial statements are measured using the currency of the primary economic environment I which the company operates. The financial statements are presented in Philippine pesos, which is the company’s functional and presentation currency. All amounts are rounded to the nearest Philippine peso, except when otherwise indicated. The preparation of financial statements in conformity with the PFRS for SMEs requires the use of critical accounting estimates. It also requires management to exercise its judgment in the process of applying the company’s accounting policies. Areas involving a higher degree of judgment or complexity, or areas where assumptions and estimations are significant to the financial statements are disclosed in Notes 3. The accompanying financial statements have been prepared on a going concern basis, which contemplate the realization of assets and settlement of liabilities in the normal course of business. (b) Functional and Presentation Currency (c) These financial statements are presented in Philippine pesos, the company’s functional and presentation currency, and all values represent absolute amounts except when otherwise indicated. Items included in the financial statements of the company are measured using its functional currency. Functional currency is the currency of the primary economic environment in which the company operates. 2.2 Statement of Compliance The accompanying financial statements have been prepared in accordance with Philippine Financial Reporting Standards (PFRS) for Small and Medium-sized entities (SME’s) issued by the International Accounting Standards Board (IASB) as approved by the Financial Reporting Standard Council (FRSC) 2.3 Financial Assets Financial Assets consist of cash and trade receivables. Financial Assets are recognized when the company becomes a party to the contractual provisions of the instrument. 2.4 Cash and Cash Equivalents Cash is measured at the face value. Cash includes cash in banks and petty cash fund, demand deposits and other short term highly-liquid investments held to meet shortterm cash commitments rather than for investment or other purposes. 2.5 Trade Receivables Trade receivables are measured initially at invoice price and subsequently measured at amortized cost using effective interest method less provision for impairment. Provision is made when there is objective evidence that the company will not be able to collect the debts. Bad debts are written off when identified. The allowance for impairment loss is the estimated amount of probable losses arising from noncollection experience and management’s review of the current status of the longoutstanding receivables 2.6 Inventories Inventories are assets that are held for sale in the ordinary course of business. Inventories are measured at lower of cost and estimated selling price less costs to sell. The cost of inventories shall comprise all costs of purchase and other costs incurred bringing in the inventories to their present location and condition. The company recognizes impairment on inventories whenever the estimated selling price less cost to sell of inventories become lower cost due to damage, physical deterioration, obsolescence, changes in price levels or other causes. The impairment is reviewed on a monthly basis to reflect the accurate valuation in the financial records. The company uses the first-in-first-out (FIFO) method in costing its inventory. 2.7 Other Current Assets Other current assets include creditable taxes. This is measured initially at transaction cost and subsequently measured at cost less impairment loss, if any. 2.8 Property and Equipment Property and Equipment are measured initially at its cost. Property and equipment, after initial recognition are stated at cost less any accumulated depreciation and any accumulated impairment losses. The initial cost of property and equipment comprises its purchase price and any cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Those can include the cost of initial delivery and handling, installation and assembly, and testing of functionality. The company adds to the carrying amount of the property and equipment the cost of replacing parts of such an item when that cost is incurred if the replacement part is expected to provide incremental future benefits to the company. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to profit and loss during the period in which they are incurred. The cost of an item of property and equipment also comprises the initial estimate of the cost of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during the period. Depreciation is charged so as to allocate the cost of assets less their residual value over the estimated useful lives of the assets, using the straight-line method. The useful lives of the depreciable assets shall be as follows: Building 20 years Equipment Furniture and Fixtures - 5-10 years If there is an indication that there has been a significant change since the last annual reporting date in the pattern by which an entity expects to consume an asset’s future economic benefits, the entity shall review its present depreciation method to reflect the new pattern. The entity shall account for the change as a change in an accounting estimate. An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of an item of property and equipment is recognized in profit or loss when the item is derecognized (unless Section 20 Leases requires otherwise on a sale and leaseback) such gain is not recognized as revenue. When assets are retired or otherwise disposed of, the cost and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to current operations. Gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset. 2.9 Financial Liabilities Financial liabilities consist of trade receivables. Financial liabilities are recognized when the company becomes a party to the contractual provisions of the instrument. 2.10 Trade Payables Trade Payables are liabilities to pay for goods or services that have been received or supplied and have been invoiced or formally agreed with the supplier. 2.11 Other Current Liabilities Other current liabilities include statutory obligations as of the period such as withholding tax payables, VAT payables and SSS, PHIC, and HDMF payable. 2.12 Impairment of Financial Assets The company assesses at each reporting period whether there is objective evidence that a financial assets is deemed to be impaired if, and only if there is objective evidence of impairment as a result of one or more evets that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact in the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of the estimated future cash flows (excluding future credit losses that have not been incurred). The carrying amount of asset is reduced through use of an allowance account and the amount of loss is charged to the statement of income. Interest income continues to be recognized based on the original effective interest rate of the asset. Loans, together with the associated allowance accounts, are written off when there is no realistic prospect of future recovery and all collateral has been realized. For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of such credit risk characteristics as industry, past-due status and term. Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. The methodology and assumptions used for estimating future cash flows are reviewed regularly by the company to reduce any differences between loss estimates and actual loss experience. The company first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial asset that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, that asset is included in a group of financial assets with similar credit risk characteristics and that the group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective assessment of impairment. If, in subsequent period, the amount of impairment loss decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized in the statement of income, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal time. 2.13 Leases Leases shall be classified as finance leases whenever the terms of the lease transfer subsequently all the risks and rewards of ownership of the leased assets of the company. All other leases shall be classified as operating leases. Rights to assets held under finance leases shall be recognized as assets of the company at the fair value of the leased property at the inception of the lease. The corresponding liability to the lessor shall be included in the statement of financial position as a finance lease obligation. Lease payments shall be apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of liability. Finance charges shall be recognized and presented as part of Finance Costs in profit or loss. Assets held under finance leases shall be included in property, plant and equipment, and depreciated and assessed for impairment losses in the same way as owned assets. Rental payable or paid under operating leases shall be charged to profit or loss on a straight-line basis over the term of the relevant lease. 2.14 Provisions and Contingencies Provisions are recognized when the company has a present legal or constructive obligation as a result of past events; it is probable that the transfer or economic benefits will be required to settle the obligation; and the amount can be reliably estimated. Provisions are measured at the present value of the amount expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and risk specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense. In those cases where the possible outflow of economic resource as a result of present obligations is considered improbable or remote, or the amount to be provided for cannot be measured reliably, no liability shall be recognized in the financial statements. Similarly, possible inflows of economic benefits to the company that do not yet meet the recognition criteria of an asset shall be considered contingent assets, hence, shall not be recognized in the financial statements. On the other hand, any reimbursement that the company can be virtually certain to collect from a third party with respect to the obligation shall be recognized as a separate asset not exceeding the amount of the related provisions. 3. SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES The company’s presentation of its financial statements prepared in accordance with PFRS requires management to make judgments and estimates that affect amounts reported in the financial statements and related notes. Judgments and estimates shall be continuously evaluated and shall be based on historical experience and other factors, including expectations of future events that are believed to be reasonable under circumstances. Actual results may ultimately differ from these estimates. 3.1 Critical Management Judgment in Applying Accounting Policies: In the process of applying the Company’s accounting policies, management has made effect on the amounts recognized in the financial statements: The company determines whether a property qualifies as investment property. In making its judgment, the company considers whether the property generates cash flows largely independent of the other assets held by entity. Owner-occupied properties generate cash flows that are attributable not only to the property but also to the other assets used in the production or supply process. Some properties comprise a portion that is held to earn rental or for capital appreciation and another portion that is held for use in the production and supply of goods and services or for administrative purposes. If these portions can be sold separately or leased out separately under finance lease, the company accounts for the portions separately. If the portions cannot be sold separately, the property is accounted for as investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. Judgment is applied in determining whether ancillary services are so significant that a property does not qualify as investment property. The company considers each property separately in making its judgment. 3.2 Operating and Finance Leases: The company has entered into various lease agreements. Critical judgment was exercised by management to distinguish each lease agreement as either an operating or finance lease by looking at the transfer or retention of significant risks and rewards of ownership of the properties covered by the agreements. Failure to make the right judgment will result in either overstatement or understatement of assets and liabilities. 4. INVENTORIES Inventories as of December 31, 2018 were all stated at cost, which is lower than their net realizable values. There were no expenses recognized related to impairment of inventories in both years. No impairment was provided at year-end. 5. EQUITY Capital Stock The company has five (5) incorporators who subscribed 500 or more shares each of the company’s capital stock as at year end. 6. SUPPLEMENTAL INFORMATION REQUIRED UNDER REVENUE REGULATION 15-2010 On November 25, 2010, the BIR issued Revenue Regulation (RR) 15 – 2010, which requires certain information on taxes, duties and license fees paid or accrued during the taxable year to be disclosed as part of the notes to financial statements. The supplemental information, which is an addition to the disclose required under PFRS, is presented as follows: 6.1 Deficiency Tax Assessment and Tax Cases The company does not have any deficiency tax assessment or tax cases outstanding or pending in courts in any of the open years. 6.2 Operating and Finance Leases: RR 19-2011 requires schedules of taxable revenues and other non-operating income, costs or sales and services, itemized deductions and other significant tax information, to be disclosed in the notes to financial statements.