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8/3/2019 SME Ppi_fs1210&09 Prob-silv
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Probe Productions, Inc.
Financial StatementsDecember 31, 2010 and 2009
and
Independent Auditors Report
SyCip Gorres Velayo & Co.
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1 5 1 5 5 3
SEC Registration Number
P R O B E P R O D U C T I O N S , I N C .
(Companys Full Name)
1 3 M a t i p i d S t r e e t , S i k a t u n a V i l l a
g e , Q u e z o n C i t y
(Business Address: No. Street City/Town/Province)
Cecilia L. Lazaro 922-9273(Contact Person) (Company Telephone Number)
1 2 3 1 A A F S
Month Day (Form Type) Month Day(Fiscal Year) (Annual Meeting)
(Secondary License Type, If Applicable)
Dept. Requiring this Doc. Amended Articles Number/Section
Total Amount of Borrowings
Total No. of Stockholders Domestic Foreign
To be accomplished by SEC Personnel concerned
File Number LCU
Document ID Cashier
S T A M P S
Remarks: Please use BLACK ink for scanning purposes.
*SGVMC115430*
COVER SHEET
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INDEPENDENT AUDITORS REPORT
The Board of Directors
Probe Productions, Inc.
13 Matipid Street, Sikatuna Village
Quezon City
Report on the Financial Statements
We have audited the accompanying financial statements of Probe Productions, Inc., which comprise
the balance sheets as at December 31, 2010 and 2009, and the statements of income, statements of
changes in equity and statements of cash flows for the years then ended, and a summary of significant
accounting policies and other explanatory information.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with Philippine Financial Reporting Standards for Small and Medium-sized Entities and
for such internal control as management determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with Philippine Standards on Auditing. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditors judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal control relevant to the entitys
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entitys internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
*SGVMC115430*
SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines
Phone: (632) 891 0307Fax: (632) 819 0872www.sgv.com.ph
BOA/PRC Reg. No. 0001
SEC Accreditatio n No. 0012 -FR-2
A member firm of Ernst & Young Global Limited
8/3/2019 SME Ppi_fs1210&09 Prob-silv
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- 2 -
Opinion
In our opinion, the financial statements present fairly, in all material respects,the financial position ofProbe Productions Inc. as at December 31, 2010 and 2009, and its financial performance and its cash
flows for the years then ended in accordance with Philippine Financial Reporting Standards for Small
and Medium-sized Entities.
Report on the Supplementary Information Required Under Revenue Regulations 15-2010
Our audits were conducted for the purpose of forming an opinion on the basic financial statements
taken as a whole. The supplementary information on taxes, duties and licenses in Note 18 to thefinancial statements is presented for the purpose of filing with the Bureau of Internal Revenue and is
not a required part of the basic financial statements. Such information is the responsibility of the
management of Probe Productions Inc. The information has been subjected to the auditing procedures
applied in our audit of the basic financial statements. In our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
SYCIP GORRES VELAYO & CO.
Michael C. Sabado
Partner
CPA Certificate No. 89336
SEC Accreditation No. 0664-A
Tax Identification No. 160-302-965
BIR Accreditation No. 08-001998-73-2009,
June 1, 2009, Valid until May 31, 2012
PTR No. 2641561, January 3, 2011, Makati City
March 14, 2011
*SGVMC115430*
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INDEPENDENT AUDITORS REPORT
The Board of Directors
Probe Productions, Inc.
Report on the Financial Statements
We have audited the accompanying financial statements of Probe Productions, Inc., which comprisethe balance sheets as at December 31, 2010 and 2009, and the statements of income, statements of
changes in equity and statements of cash flows for the years then ended, and a summary of significant
accounting policies and other explanatory information.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with Philippine Financial Reporting Standards for Small and Medium-sized Entities and
for such internal control as management determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with Philippine Standards on Auditing. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditors judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entitys
preparation and fair presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entitys internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
*SGVMC115430*
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Opinion
In our opinion, the financial statements present fairly, in all material respects,the financial position ofProbe Productions Inc. as at December 31, 2010 and 2009, and its financial performance and its cash
flows for the years then ended in accordance with Philippine Financial Reporting Standards for Small
and Medium-sized Entities.
Report on the Supplementary Information Required Under Revenue Regulations 15-2010
Our audits were conducted for the purpose of forming an opinion on the basic financial statements
taken as a whole. The supplementary information on taxes, duties and licenses in Note 18 to thefinancial statements is presented for the purpose of filing with the Bureau of Internal Revenue and is
not a required part of the basic financial statements. Such information is the responsibility of the
management of Probe Productions Inc. The information has been subjected to the auditing procedures
applied in our audit of the basic financial statements. In our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
SYCIP GORRES VELAYO & CO.
Michael C. Sabado
Partner
CPA Certificate No. 89336
SEC Accreditation No. 0664-A
Tax Identification No. 160-302-865
BIR Accreditation No. 08-001998-73-2009,
June 1, 2009, Valid until May 31, 2012
PTR No. 2641561, January 3, 2011, Makati City
March 14, 2011
*SGVMC115430*
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INDEPENDENT AUDITORS REPORT
The Board of Directors
Probe Productions, Inc.
13 Matipid Street, Sikatuna Village
Quezon City
We have audited the financial statements of Probe Productions, Inc. for the year ended December 31,2010, on which we have rendered the attached report dated March 14, 2011.
In compliance with Securities Regulation Code Rule No. 68, we are stating that the above Company
has a total number of eight (8) stockholders owning one hundred (100) or more shares each.
SYCIP GORRES VELAYO & CO.
Michael C. SabadoPartner
CPA Certificate No. 89336
SEC Accreditation No. 0664-A
Tax Identification No. 160-302-865
BIR Accreditation No. 08-001998-73-2009,
June 1, 2009, Valid until May 31, 2012
PTR No. 2641561, January 3, 2011, Makati City
March 14, 2011
*SGVMC115430*
SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines
Phone: (632) 891 0307Fax: (632) 819 0872www.sgv.com.ph
BOA/PRC Reg. No. 0001
SEC Accreditatio n No. 0012 -FR-2
A member firm of Ernst & Young Global Limited
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INDEPENDENT AUDITORS REPORT
TO ACCOMPANY INCOME TAX RETURN
The Board of Directors
Probe Productions, Inc.
13 Matipid Street, Sikatuna Village
Quezon City
We have audited the financial statements of Probe Productions, Inc. for the year ended December 31,
2010, on which we have rendered the attached report dated March 14, 2011.
In compliance with Revenue Regulations V-20, we are stating the following:
1. The taxes paid or accrued by the above Company for the year ended December 31, 2010 are
shown in the Schedule of Taxes and Licenses attached to the Annual Income Tax Return.
2. No partner of our Firm is related by consanguinity or affinity to the president, manager or
principal stockholders of the Company.
SYCIP GORRES VELAYO & CO.
Michael C. Sabado
Partner
CPA Certificate No. 89336
SEC Accreditation No. 0664-A
Tax Identification No. 160-302-865
BIR Accreditation No. 08-001998-73-2009,
June 1, 2009, Valid until May 31, 2012
PTR No. 2641561, January 3, 2011, Makati City
March 14, 2011
*SGVMC115430*
SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines
Phone: (632) 891 0307Fax: (632) 819 0872www.sgv.com.ph
BOA/PRC Reg. No. 0001
SEC Accreditatio n No. 0012 -FR-2
A member firm of Ernst & Young Global Limited
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PROBE PRODUCTIONS, INC.
BALANCE SHEETS
December 31
2010 2009
ASSETS
Current Assets
Cash (Note 5) 1,353,706 5,585,080
Short-term investments (Note 6) 6,473,153 7,214,518
Receivables (Note 7) 8,400,512 3,043,490
Total current assets 16,227,371 15,843,088
Noncurrent AssetsProperty and equipment (Note 8) 2,090,153 2,739,608
Deferred tax assets - net (Note 16) 552,690 432,880
Other assets (Note 9) 128,070 133,763
Total noncurrent assets 2,770,913 3,306,251
18,998,284 19,149,339
LIABILITY AND EQUITY
Current Liability
Accounts payable and accrued expenses (Note 10) 1,010,252 1,269,868
Equity
Capital stock 12,225,000 12,225,000
Retained earnings 5,763,032 5,654,471
Total Equity 17,988,032 17,879,471
18,998,284 19,149,339
See accompanying Notes to Financial Statements.
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PROBE PRODUCTIONS, INC.
STATEMENTS OF INCOME
Years Ended December 31
2010 2009
REVENUE
Advertising 13,714,391 20,323,211
Fluctuation gain (loss) in value of short-term investments
(Note 6) 698,634 1,127,370
Interest 461,238 549,584
Gain on sale of property and equipment 374,691 10,114
Dubbing 18,326
Miscellaneous 515 1,358
15,249,469 22,029,963
EXPENSES AND CHARGES
Production costs (Notes 12 and 14) 7,605,437 12,075,469
General and administrative expenses (Notes 13, 14 and 15) 7,178,027 8,608,559
Foreign currency loss 304,340 194,854
15,087,804 20,878,882
INCOME BEFORE INCOME TAX 161,665 1,151,081
PROVISION FOR INCOME TAX (Note 16)
Current 172,914 207,739
Deferred (119,810) (18,222)53,104 189,517
NET INCOME 108,561 961,564
See accompanying Notes to Financial Statements.
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PROBE PRODUCTIONS, INC.
STATEMENTS OF CHANGES IN EQUITY
Years Ended December 31
2010 2009
CAPITALSTOCK- 1 par value
Authorized - 20,000,000 shares
Issued and outstanding - 12,225,000 shares 12,225,000 12,225,000
RETAINED EARNINGS
Balance at beginning of year 5,654,471 4,692,907
Net income 108,561 961,564
Balance at end of year 5,763,032 5,654,471
See accompanying Notes to Financial Statements.
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PROBE PRODUCTIONS, INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31
2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax 161,665 1,151,081
Adjustments for:
Depreciation (Notes 8,12,13 and 14) 718,759 877,948
Foreign exchange loss (Note 6) 258,100 136,099
Gain on sale of property and equipment (374,691) (10,114)
Interest income (461,238) (549,584)
Fluctuation (gain )in value of short-term
investments (Note 6) (698,634) (1,127,370)Operating income (loss) before changes in working capital (396,039) 478,060
Decrease (increase) in:
Receivables (5,357,022) (376,540)
Other assets 5,692 56,701
Decrease in accounts payable and accrued expenses (259,616) (69,163)
Net cash generated from (used for) operations (6,006,985) 89,058
Interest received 95,163 29,308
Income tax paid (150,655) (188,098)
Net cash flows used in operating activities (6,062,477) (69,732)
CASH FLOWS FROM INVESTING ACTIVITIES
Disposal of short-term investments (Note 6) 5,925,716 870,840Proceeds from sale of property and equipment 374,691 10,114
Short-term investments (Note 6) (4,400,000) (2,000,000)
Acquisition of property and equipment (Note 8) (69,304) (934,996)
Net cash flows provided by (used in) investing activities 1,831,103 (2,054,042)
NET DECREASE IN CASH (4,231,374) (2,123,774)
CASH AT BEGINNING OF YEAR 5,585,080 7,708,854
CASH AT END OF YEAR(Note 5) 1,353,706 5,585,080
See accompanying Notes to Financial Statements.
*SGVMC115430*
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PROBE PRODUCTIONS, INC.
NOTES TO FINANCIAL STATEMENTS
1. Corporate Information
Probe Productions, Inc. (the Company) was registered with the Philippine Securities and
Exchange Commission on May 24, 1988 primarily to engage in the operations and activities of
radio and television broadcast stations and production of radio, television and movie programs.
The registered office address of the Company is at 13 Matipid Street, Sikatuna Village, Quezon
City.
In 2010, the Company stopped its operation when its flagship program Probe Profiles ended last
June 30, 2010 which is the main income stream of the Company. It indicates the existence of
material uncertainty which cast doubt that the Company will continue as a going concern.
2. Basis of Preparation
Basis of Preparation
The Companys financial statements have been prepared under the historical cost convention
method and are presented in Philippine Peso (). All amounts are rounded to the nearest peso
unless otherwise indicated.
Statement of Compliance
The accompanying financial statements of the Company have been prepared in compliance with
accounting principles generally accepted in the Philippines (Philippine GAAP), as set forth inPhilippine Financial Reporting Standards for Small and Medium-sized Entities (PFRS for SMEs).
These are the Companys first annual financial statements prepared in compliance with PFRS for
SMEs. The Companys financial statements until December 31, 2009 had been prepared in
accordance with Philippine GAAP for non-publicly accountable entities (NAPAEs).
The Company applied Section 35, Transition to the PFRS for SMEs, in preparing the financial
statements, with January 1, 2010 as the date of transition. The Company has consistently applied
the accounting policies set forth below to all the years presented, except those relating to the
classification and measurement of financial instruments. An explanation of how the PFRS for
SMEs has affected the reported financial position, financial performance and cash flows of the
Company is provided in the succeeding paragraphs.
The preparation of the Companys financial statements in conformity with PFRS for SMEs
requires the use of certain critical accounting estimates. It also requires management to exercise
its judgment in the process of applying the Companys accounting policies. The areas involving a
high degree of judgment or complexity, or areas where assumptions and estimates are significant
to the financial statements are disclosed in Note 4.
The Preface to PFRS for SMEs provides that the PFRS for SMEs shall be used by entities that
meet the definition of an SME, as set forth in the SEC En Banc Resolution dated August 13, 2009.
*SGVMC115430*
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The SEC defines SMEs for financial reporting purposes as entities that meet all of the following
criteria:
a) Total assets of between 3 million and 350 million or total liabilities of between 3 million and
250 million;
b) Not required to file financial statements under Securities Regulation Code Rule 68.1;
c) Not in the process of filing financial statements for the purpose of issuing any class of
instruments in a public market;
d) Not holders of secondary licenses issued by a regulatory agency, such as banks, investment
houses, finance companies, insurance companies, security brokers/dealers, mutual funds and
pre-need companies; and
e) Not public utilities.
3. Changes in Accounting Policies
The accounting policies adopted are consistent with those of the previous financial year except for
the adoption of PFRS for SMEs starting January 1, 2010. As stated above, these are the
Companys first annual financial statements prepared in compliance with PFRS for SMEs. The
adoption of PFRS for SMEs did not have material impact on the Companys financial statements
except for the following:
Section 28,Employee BenefitsEmployee benefits are all forms of consideration given by an entity in exchange for service
rendered by employees, including directors and management. This section applies to all
employee benefits, except for share-based payment transactions. The Company had nounamortized actuarial gain (loss) in 2009 and 2008, thus, restatement on the Companys
financial statements is not required.
Section 29,Income TaxThis section covers accounting for income tax. It requires an entity to recognize the current
and future tax consequences of transactions and other events that have been recognized in the
financial statements. These recognized tax amounts comprise current tax and deferred tax.
Current tax is tax payable (refundable) in respect of the taxable profit (tax loss) for the current
period or past periods. Deferred tax is tax payable or recoverable in future periods, generally
as a result of the entity recovering or settling its assets and liabilities for their current carrying
amount, and the tax effect of currently unused tax losses and tax credits. The adoption of this
standard resulted to disclosing the valuation allowance that was provided on the Net OperatingLoss Carryover (NOLCO) that is deemed not recoverable in future periods (Note 16).
The Company deemed that there is no enough taxable income in the future from which the
NOLCO may be applied, thus, a full allowance was recognized for NOLCO.
Effect on the Statement of Cash Flows for 2009
There is no material differences between the Companys statement of cash flows prepared under
PFRS from SMEs and statement of cash flows prepared under Philippine GAAP for NPAEs.
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4. Summary of Significant Accounting Policies
Use of Judgments, Estimates and Assumptions
The preparation of the financial statements in conformity with PFRS for SMEs requires
management to make judgments, estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. The estimates and assumptions used in the
accompanying financial statements are based upon managements evaluation of relevant facts and
circumstances as of balance sheet date. Actual results could differ from such estimates.
Revenue and Cost Recognition
Revenue is recognized when it is probable that the economic benefits associated with the
transactions will flow to the Company and the amount of revenue can be measured reliably.
The following specific recognition criteria must also be met before revenue is recognized:
Advertising revenue and production costsAdvertising revenue is recognized when services are rendered and earned and production costs are
recognized when incurred.
Interest incomeInterest income on cash in banks is recognized as it accrues.
Cash
Cash includes cash on hand and in banks. Cash in banks earns interest at the prevailing bank
deposit rates.
Short-term Investments
Short-term investments are made for varying periods depending on the immediate cash
requirements of the Company and earn interest at the respective short-term investment rates.
Short-term investments are recorded in the balance sheet at fair value. Changes in fair value are
recorded under Fluctuation gain (loss) in value of short-term investments account in the
statement of income. Interest earned is recorded in interest income.
Receivables
Receivables are recognized and carried at billable amounts less any allowance for doubtful
accounts. A provision for doubtful accounts is established when there is objective evidence that
the Company will not be able to collect all amounts due according to the original terms of
receivables. The amount of provision is the difference between the assets carrying amount and
the present value of estimated future cash flows discounted at the effective interest rate. The
provision is recognized in the statement of income.
Property and Equipment
Property and equipment, except for land, are carried at cost less accumulated depreciation andany impairment in value. Land is carried at cost less any impairment in value.
The initial cost of property and equipment comprises its purchase price, including import duties,
taxes and any directly attributable costs of bringing the asset to its working condition and location
for its intended use. Expenditures incurred after the assets have been put into operation, such as
repairs and maintenance, are normally charged against income in the period the costs are incurred.In situations where it can be clearly demonstrated that the expenditures have resulted in an
increase in the future economic benefits expected to be obtained from the use of an item of
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property and equipment beyond its originally assessed standard of performance, the expenditures
are capitalized as an additional cost of property and equipment.
Depreciation is calculated using the straight-line method over the estimated useful lives of the
assets, as follows:
Years
Building 10
Production equipment 2-3
Office furniture, fixtures and equipment 2-3
Transportation equipment 3
The estimated useful lives of the property and equipment are reviewed annually based on factors
that include asset utilization, technological changes, environmental factors and anticipated use ofthe property and equipment to ensure that the method and period of depreciation are consistent
with the expected pattern of economic benefits from items of property and equipment.
Impairment of Assets
The carrying values of property and equipment are reviewed for impairment when events or
changes in circumstances indicate the carrying values may not be recoverable. If any such
indication exists or where the carrying values exceed the estimated recoverable amounts, the
assets or cash-generating units are written down to their recoverable amounts. The recoverable
amount of property and equipment is the greater of net selling price and value in use. For an asset
that does not generate largely independent cash inflows, the recoverable amount is determined for
the cash-generating unit to which the asset belongs. Impairment losses are recognized in the
statement of income.
Retirement Cost
Retirement costs are actuarially determined using the projected unit credit method. This method
reflects services rendered by employees up to the date of valuation and incorporates assumptions
concerning employees projected salaries. Retirement costs include current service cost plus
amortization of past service cost, experience adjustments and changes in actuarial assumptions
over the expected average remaining working lives of the covered employees.
Income Tax
Current taxCurrent tax assets and liabilities for the current and prior period are measured at the amount
expected to be recovered from or paid to the taxation authorities. The tax rates and the tax lawsused to compute the amount are those that are enacted or substantively enacted at the balance
sheet date.
Deferred taxDeferred tax is provided, using the balance sheet liability method, on all temporary differences at
the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred tax liabilities are recognized for all taxable temporary differences, with certain
exceptions. Deferred tax assets are recognized for all deductible temporary differences,
carryforward of unused tax credits from excess of minimum corporate income tax (MCIT) overregular corporate income tax (RCIT) and net operating loss carryover (NOLCO), to the extent that
it is probable that taxable profit will be available against which the deductible temporary
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differences and carryforward of unused tax credits from excess MCIT and NOLCO can be
utilized.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to
the extent that it is no longer probable that sufficient taxable profit will be available to allow all or
part of the deferred tax assets to be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are applicable to the year when
the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted at the balance sheet date.
Equity
Capital stock is measured at par value for all shares issued. Retained earnings represent
accumulated earnings of the Company less dividends declared.
Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a
result of a past event, it is probable that an outflow of resources embodying economic benefits will
be required to settle the obligation and a reliable estimate can be made of the amount of the
obligation.
General and Administrative Expenses
General and administrative expenses constitute costs of administering the business. These are
recognized as expenses when incurred.
Foreign Currency TransactionsThe Companys financial statements are presented in Philippine Peso, which is the functional and
presentation currency. Transactions in foreign currencies are initially recorded at the Philippine
peso currency rate ruling at the date of the transaction. However, monetary assets and liabilities
denominated in foreign currencies are retranslated at the Philippine peso closing rate of exchange
prevailing at the balance sheet date. All differences are taken to profit or loss during the period of
retranslation.
Contingencies
Contingent liabilities are not recognized in the financial statements. They are disclosed unless the
possibility of an outflow of resources embodying economic benefits is remote. Contingent assets
are not recognized in the financial statements but are disclosed when an inflow of economic
benefits is probable.
Subsequent Events
Post year-end events that provide additional information about the Companys position at the
balance sheet date (adjusting events) are reflected in the financial statements. Post year-end
events that are not adjusting events are disclosed in the notes to the financial statements when
material.
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5. Cash
This account consists of:
2010 2009
Cash on hand 73,411 103,411
Cash in banks 1,280,295 5,481,669
1,353,706 5,585,080
Cash in banks earns interest at the prevailing deposit rates.
6. Short-term Investments
Short-term investments consist of money market placements with maturities of more than three (3)
months up to one (1) year and earn interest at the prevailing short-term investments rates ranging
from 0.02% to 7.88% in 2010 and 0.02% to 7.88% in 2009. The investment was disposed in 2010.
2010 2009
Beginning balance 5,165,261 4,593,452
Disposal (5,925,716) (870,840)
Interest income earned 319,921 451,378
Fluctuation gain 698,634 1,127,370
Foreign exchange loss (258,100) (136,099)
Ending balance 5,165,261
In 2010, the Company has a total time deposit account with a local commercial bank amounting
6,400,000 with interest rate of 4.19% per annum. For the year ended December 31, 2010, interest
income earned amounted to 73,153.
7. Receivables
This account consists of:
2010 2009
Due from DLL, Inc. 5,925,716 Creditable withholding tax 1,357,417 1,249,560
Due from Unlimited Productions, Inc.
(UPI) (Note 11) 1,032,456 346,020
Trade accounts receivable 84,923 1,434,300
Advances to employees 13,610
8,400,512 3,043,490
Due from DLL is noninterest bearing and are generally collectible in the short-term.
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8. Property and Equipment
The rollforward analysis of this account follows:
2010
Land Building
Production
Equipment
Office
Furniture,
Fixtures and
Equipment
Transportation
Equipment Total
Cost
At January 1, 2010 1,802,250 3,542,367 12,551,045 1,696,581 2,926,365 22,518,608
Additions 50,499 18,805 69,304Retirements/Disposal (1,481,316) (128,161) (1,310,909) (2,920,386)
At December 31, 2010 1,802,250 3,542,367 11,120,228 1,587,225 1,615,456 19,667,526
Accumulated Depreciation
At January 1, 2010 3,542,367 11,637,793 1,672,476 2,926,364 19,779,000
Depreciation (Note 14) 692,465 26,293 1 718,759
Retirements/Disposal (1,481,316) (128,161) (1,310,909) (2,920,386)
At December 31, 2010 3,542,367 10,848,942 1,570,608 1,615,456 17,577,373
Net Book Value as at
December 31, 2010 1,802,250 271,286 16,617 2,090,153
2009
Land Building
Production
Equipment
Office
Furniture,Fixtures and
Equipment
Transportation
Equipment Total
CostAt January 1, 2009 1,802,250 3,542,367 20,009,014 1,666,734 2,926,365 29,946,730
Additions 905,149 29,847 934,996
Retirements/Disposal (8,363,118) (8,363,118)
At December 31, 2009 1,802,250 3,542,367 12,551,045 1,696,581 2,926,365 22,518,608
Accumulated DepreciationAt January 1, 2009 3,542,367 19,168,691 1,626,748 2,926,364 27,264,170Depreciation (Note 14) 832,220 45,728 877,948
Retirements/Disposal (8,363,118) (8,363,118)
At December 31, 2009 3,542,367 11,637,793 1,672,476 2,926,364 19,779,000
Net Book Value as at
December 31, 2009 1,802,250 913,252 24,105 1 2,739,608
In the ordinary course of business, the Company acquires property and equipment either through
purchase or in exchange for services. For assets acquired on account, the full contract price is
recorded and the related liability is recognized.
Depreciation charged against current operations amounted to 718,759 and 877,948 in 2010 and
2009, respectively (Notes 12, 13 and 14).
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9. Other Assets
This account consists of:
2010 2009
Prepaid value-added tax (VAT) 53,811 53,811
Investment in preferred shares 21,000 21,000
Receivable from a travel agency 5,000 10,694
Rental deposits 8,000 8,000
Others 40,259 40,258
128,070 133,763
The prepaid VAT represents the amount of VAT remitted prior to the collection of the related
billings.
Others account consists of cash performance bonds and deposit.
10. Accounts Payable and Accrued Expenses
This account consists of:
2010 2009
Accounts payable (Note 8) 736,290 674,690
Accrued expenses 180,206 112,000
Output VAT 93,756 386,085
Withholding taxes payable 95,714
Other payables 1,379
1,010,252 1,269,868
Output VAT is presented net of input VAT. As of December 31, 2010 and 2009, input VAT
amounted to 10,644 and 20,232, respectively.
11. Related Party Transactions
Transactions between related parties are based on terms similar to those offered to non-relatedparties. Parties are related if one party has the ability, directly or indirectly, to control the other
party or exercise significant influence over the other party in making financial and operating
decisions and the parties are subject to common control or common significant influence. Related
parties may be individuals or corporate entities.
Related party transactions consist mainly of noninterest-bearing cash advances to UPI for working
capital requirements amounting 1,032,456 and 346,020 as of December 31, 2010 and 2009,
respectively (Note 7).
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12. Production Costs
This account consists of:
2010 2009
Talent fees 3,496,024 4,044,224
Salaries and wages 2,136,420 4,490,757
Depreciation (Notes 8 and 14) 692,464 832,220
Fuel and oil 389,103 640,676
Transportation and travel 333,420 698,273
Meal expenses 179,103 287,841
Post production 145,341 282,845
Rental of production facilities 98,105 95,790
Supplies 96,907 478,885Repairs and maintenance 38,550 112,847
Outside services 111,111
7,605,437 12,075,469
13. General and Administrative Expenses
This account consists of:
2010 2009
Retirement cost (Note 15) 2,529,579 1,049,251
Communication, light and water 1,117,178 1,843,000
Outside services 960,729 1,053,064
Salaries and wages 861,806 1,848,936
Employee benefits 533,943 998,328
Taxes and licenses (Note 18) 278,381 317,790
Insurance 270,919 240,582
General administration 231,815 124,518
Supplies 137,067 304,913
Entertainment, amusement and recreation (Note 16) 96,899 348,166
Repairs and maintenance 69,831 292,234
Depreciation (Notes 8 and 14) 26,295 45,728
Advertising and promotions 10,272 57,306Courier, postage stamps and telegram 693 22,479
Trainings and seminars 2,240
Miscellaneous 52,620 60,024
7,178,027 8,608,559
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14. Depreciation
Depreciation is distributed as follows:
2010 2009
Production costs (Note 12) 692,464 832,220
General and administrative expenses (Note 13) 26,295 45,728
718,759 877,948
15. Retirement Plan
The Company has a funded, noncontributory, defined benefit pension plan covering substantially
all of its regular employees. The benefits are based on years of service and compensation on thelast year of employment. Past service costs are amortized over the expected average future service
years of plan members estimated to be 20.3 years in 2010 and 2009. Total retirement cost
amounted to 2,529,579 and 1,049,251 in 2010 and 2009, respectively (Note 13). In 2010, the
Company paid separation pay amounting 2,363,579 to its retired employees.
Based on the actuarial valuation report as of September 30, 2008, computed using the projected
unit credit method, the actuarial accrued liability amounted to 7,452,358. The principal actuarial
assumptions used to determine pension benefits included investment yield rate of 5% and salary
increase rate of 10% per annum. The Companys annual contribution to the retirement plan
consists of a payment covering the current service cost for the year plus payments toward funding
the actuarial accrued liability.
16. Income Tax
Provision for income tax consists of:
2010 2009
Current:
Final 22,259 19,641
MCIT 150,655 188,098
Deferred (119,810) (18,222)
53,104 189,517
Provision for income tax pertains to final tax and MCIT.
Income taxes include corporate income tax, as discussed below, and final taxes paid at the rate of
20.0%, which is a final withholding tax on gross interest income from debt instruments and other
deposit substitutes.
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Effective November 1, 2005, Republic Act (RA) No. 9337, an act amending the National Internal
Revenue Code (NIRC of 1997), provides that the RCIT rate shall be 35.0% until January 1, 2009.
Starting January 1, 2009 the RCIT rate shall be 30.0%. Interest allowed as a deductible expense is
reduced by an amount equivalent to 42.0% of interest income subjected to final tax starting
November 1, 2005 until December 31, 2008. Starting January 1, 2009, interest allowed as
deductible expense shall be reduced by 33%.
Revenue Regulations No. 10-2002 defines expenses to be classified as entertainment, amusement
and representation (EAR) expenses and sets a limit for the amount that is deductible for tax
purposes. EAR expenses are limited to 0.5% of net sales for sellers of goods or properties or 1%
of net revenue for sellers of services. For sellers of both goods or properties and services, an
apportionment formula is used in determining the ceiling in such expenses. EAR expenses
(included under General and administrative expenses account in the statements of income)
amounted to 96,899 in 2010 and 348,166 in 2009 (Note 13).
As of December 31, 2010, the Company did not recognize its deferred tax assets on NOLCO
because of its limited capacity to take advantage of their benefits, thus, full valuation allowance
was recognized.
Details of which are as follow:
NOLCO
Year Incurred Amount Expired Balance Expiry Year
2010 74,669 74,669 2013
MCIT
Year Incurred Amount Expired Balance Expiry Year
2008 215,084 215,084 2011
2009 188,098 188,098 2012
2010 150,655 150,655 2013
553,837
The net deferred tax assets as of December 31, 2010 and 2009 relate to the tax effects of the
following:
2010 2009
Deferred tax assets:
Unamortized past service cost 449,093 497,542
Unrealized foreign exchange loss 91,302 58,456
Nondeductible expense 12,295 12,295
552,690 568,293
Less deferred tax liabilities:
Unearned income 135,413
552,690 432,880
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A reconciliation of the Companys statutory income tax rate to effective income tax rate follows:
2010 2009
Statutory income tax rate 30.00% 30.00%
Add (deduct) tax effects of:
Changes in unrecognized deferred tax assets 93.19 (7.68)
Excess of MCIT over RCIT 46.19 (2.98)
Interest income subjected to final tax (6.88) (0.85)
Income subject to other tax rate (129.65) (29.38)
Expired MCIT 12.93
Nondeductible expense 3.33
Expired NOLCO 11.09
Effective income tax rate 32.85% 16.46%
17. Contingencies
The Company has various contingent liabilities arising in the ordinary conduct of business which
are either pending decision by the courts or being contested, the outcomes of which are not
presently determinable. In the opinion of management and its legal counsel, the eventual liability
under these lawsuits or claims, if any, will not have a material or adverse effect on the Companys
financial position and results of operations. No provisions were made during the year.
18. Disclosures Required Under Revenue Regulations 15-2010
The Company reported and/or paid the following taxes in 2010:
Value Added Tax
The Companys sales are subject to output value added tax (VAT) while its importations and
purchases from other VAT-registered individuals or corporations are subject to input VAT. The
VAT rate is 12.0%
a. Net Sales/Receipts and Output VAT declared in the Companys VAT returns filed for the
year.
Net Sales/Receipts Output VAT
Taxable Sales:
Sales of services 13,714,906 1,645,789
Others 374,691 44,963
14,089,597 1,690,752
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b. Input VAT
Balance at January 1, 2010 20,231
Current years domestic purchases/payments for:
Goods for resale/manufacture or further processing
Goods other than for resale or manufacture 44,755
Capital goods subject to amortization 3,440
Capital goods not subject to amortization
Services lodged under cost of goods sold
Services lodged under other accounts 181,772
Claims for tax credit/refund and other adjustments (239,554)
Balance at December 31, 2010 10,644
c. Information on the Companys importation for 2010The Company does not undertake importation activities.
d. Other Taxes and Licenses for 2010
Taxes and licenses, local, and national, include real estate taxes, licenses and permits for 2010:
License and permits fees 260,431
Real estate taxes 4,368
Documentary stamp taxes 360
Others 13,222
278,381
e. Withholding TaxesDetails of withholding taxes in 2010 follow:
Withholding taxes on compensation and benefits 252,827
Expanded withholding taxes 389,896
Final withholding taxes
642,723
f. Tax Assessment and Cases
The Company has no deficiency tax assessments, whether protested or not. The Company has
not been involved in any tax cases under preliminary investigation, litigation and/or
prosecution in courts or bodies outside the BIR.
19. Approval of the Financial Statements
The accompanying financial statements have been approved and authorized for issuance by the
Board of Directors on March 14, 2011.