ATOK-BIG WEDGE CO., INC. 2012 Annual Report

Transcription

CONTENT
3
Letter to Shareholders
4
Company History
8
Forum Energy plc
12
Directors & Executive Officers
19
Disclosures
20
Statement of Management’s Responsibility
23
Auditor’s Report
26
Consolidated Statements of Financial Position
28
Consolidated Statements of Comprehensive Income
30
Consolidated Statements of Changes in Equity
32
Consolidated Statements of Cash Flows
35
Notes to the Consolidated Financial Statements
ATOK-BIG WEDGE CO., INC. 2012 Annual
Report
ATOK-BIG
WEDGE CO., INC. 2012 Annual Report
1
WALTER W. BROWN
President
2
ROBERTO V. ONGPIN
Chairman
ERIC O. RECTO
Vice Chairman
Letter to Shareholders
To our valued shareholders,
2012 has been a very trying year for Atok-Big Wedge Co., Inc. (Atok). As you know, the
Company’s principal asset is its participation in Service Contract 72 (SC72) through its 27.14%
stake in Forum Energy plc (Forum). Whilst the resource study conducted in the first half of
2012 by Weatherford Petroleum Consultants, an independent consulting group, confirmed
the presence of what we expect will be commercially viable resource once drilled, Forum is
unable to proceed with the original plan of drilling two appraisal wells within the first half of
2013 due to the lack of approvals from the concerned government agencies. Because of this,
an extension has been granted up to August 2015.
Forum also holds a 2.27% stake in Galoc and a 66.67% interest in Service Contract 40 (SC40).
A less promising independent report on the properties covering SC40 was released which
forced Forum to write down over 85% of the value of contract. The Galoc field was shut
down during the first quarter of the year due to an upgrade of its facilities but the field is
now back in full production and Forum is looking forward to reaping the benefits of the
additional investment. Drilling of two additional wells has been programmed in Q2/Q3 2013
to add additional oil reserves within the Galoc field.
In the meantime, a seismic reprocessing program is being planned in 2013 to further assess
the prospects of other areas outside the Sampaguita Field within SC72. The program will
concentrate on mapping other prospects and leads outside of the Sampaguita discovery.
Our partners in SC72 continue to explore collaborations with parties to resolve the issues
involving the resource and we remain optimistic that a commercial solution will be found.
Meanwhile, Atok continues its pursuit in assessing other viable mining and oil & gas projects
in the Philippines.
Yours truly,
ROBERTO V. ONGPIN
Chairman
ERIC O. RECTO
Vice Chairman
WALTER W. BROWN
President
3
COMPANY
HISTORY
The Early Years: Mining Success Since 1931
Mining in the Philippines has a rich history dating back a couple of centuries.
Atok-Big Wedge Co., Inc. (Atok) was one of the early players in the Benguet mining
industry, in particular. The Company originated from a merger on January 1, 1948, of Big
Wedge Mining and Atok Gold Mining, both of which were incorporated in the early 1930s.
Their predecessors have enjoyed mining success stories since 1931. These include great
discoveries such as the Keystone Vein, grading over 0.35 oz, the development of coppergold ores in the Broadway Vein System, and the “Gold Vein” discovery in 1952, which
was followed by happy years ahead. So much gold was milled that it has been said that
enough gold bars were produced to build a structure as tall as New York City’s Empire
State Building.
Alongside every mining success story were challenging times. These included World
War II, the 1990 Baguio Earthquake, labor problems, depressed metal prices, and
economic downturns. In June 1996, the Company changed its primary purpose
from mining to general investment. The authorized capital was increased from
PhP 6,000,000.00 to PhP 60,000,000.00. The Company was also renamed Atok-Big Wedge
Co., Inc. and subsequently spun off its mining assets to a wholly-owned subsidiary – Atok
Gold Mining Co., Inc.
4
ATOK-BIG
WEDGEWEDGE
CO., INC.
2012
ReportReport
ATOK-BIG
CO.,
INC.Annual
2012 Annual
Company History
New Beginning, New Opportunities
Atok and Boerstar Corporation (“Boerstar”) entered into a Deed of Subscription on October
21, 2009. Boerstar subscribed to the remaining unissued 20,881,293 Class “A” common shares,
and 13,899,932 Class “B” common shares, or a total of 34,781,225 common shares of Atok, at a
subscription price of PhP 1.00 per share, or an aggregate subscription price of PhP 34,781,225.00.
This subscription triggered the Mandatory Tender Offer Rule of the Securities Regulation
Code. A total of 13,401,059 shares were tendered by a number of Atok’s shareholders during
the tender offer period (October 1 to October 29, 2009), enabling Boerstar to acquire a total
of 48,182,284 shares, representing around 80.30% of the Company’s resulting issued and
outstanding capital stock, consisting of 60,000,000 shares.
The acquisition by Boerstar of a controlling stake in Atok also resulted in a change in leadership.
The management of the Company is now being led by Messrs. Roberto V. Ongpin, Eric O.
Recto, and Walter W. Brown.
Recapitalization and Increase in Authorized Capital to PhP 10 billion
An additional subscription of Boerstar and Progressive Development Corporation (“PDC”) was
approved by Atok’s Board of Directors on December 29, 2009. Boerstar agreed to subscribe to
2,391,036,526 shares at par value and PDC agreed to subscribe to 93,963,474 shares at par value.
In addition, with the approval of the Board of Directors on February 15, 2010, North Kitanglad
Agricultural Co., Inc. (NKACI) agreed to subscribe to 509,000,000 of the previous shares
approved to be subscribed by Boerstar. Boerstar will now subscribe to just 1,882,036,526
shares. Both subscriptions by NKACI and Boerstar will still be at par value.
Also on the same date, the foregoing subscriptions by Boerstar, NKACI, and PDC were ratified
by the shareholders of Atok.
5
Company History
The shares were issued to the respective subscribers after the Securities and Exchange
Commission (SEC) approved Atok’s application to increase its authorized capital stock to
PhP 10,000,000,000.00 divided into 10,000,000,000 shares with a par value of one peso per
share.
The following changes to the Company’s Articles of Incorporation were also approved by the SEC:
a. To change the primary purpose of the Company from a holding company to that of a
company authorized to engage in the business of mining, oil and gas, and the exploration
and development of natural resources;
b. To declassify and increase the Company’s authorized capital stock from PhP 60,000,000.00
divided into 36,000,000 Class “A” common shares and 24,000,000 Class “B” common shares,
with a par value of one peso per share to PhP 10,000,000,000.00 divided into 10,000,000,000
common shares with a par value of one peso per share;
c. To change its principal office address to Alphaland Southgate Tower, 2258 Chino Roces
Avenue corner EDSA, Makati City; and
d. To increase the number of directors from nine to fifteen.
After the increase in authorized capital to PhP 10,000,000,000.00 was approved by the SEC
and the foregoing subscriptions implemented, the shareholding structure of Atok became as
follows:
Shareholder Shares Percentage
Boerstar 1,930,218,810 75.84%
NKACI 509,000,000 20.00%
PDC 99,865,084 3.92%
Others 5,916,106 0.24%
Total 2,545,000,000 100.00%
In June 2010, Atok spun off its transfer agency function to its newly incorporated and majorityowned subsidiary, AB Stock Transfers Corporation (ABSTC). ABSTC’s purpose, among others, is
to establish, operate, and act as a transfer agent and registrar of corporations.
The following amendments to the Company’s By-Laws were also approved by the SEC in July 2010:
• Annual Stockholders’ Meeting to be held on the last Friday of May, or as otherwise set by the Board;
• Chairman of the Board of Directors designated as the Chief Executive Officer of the Company;
• Provision for an Office of the Vice Chairman who will serve as the Chief Executive Officer, in
the absence of the Chairman of the Board;
• The President designated as the Chief Operating Officer
6
Company History
The Philippine Stock Exchange (PSE) also approved in October 2010 an additional listing
application of the Company for a total of 928,744,699 common shares (“Private Placement
Shares”) issued in favor of Boerstar, NKACI and PDC. The common shares of Atok are
traded at the PSE under the ticker symbol “AB”.
In November 2010, the Company filed a complaint for specific performance against Intex
Resources ASA, a company publicly listed in the Kingdom of Norway, for the latter’s failure
to honor its agreement to sell 100% of Intex Resources AS for USD 10,000,000 cash and
300,000,000 new Atok shares. Intex Resources AS owns and controls a nickel mining
project in Mindoro.
In October 2011, Atok acquired Tidemark Holdings Limited (Tidemark), a Hong Kong
company. Tidemark owns 8,646,757 shares of Forum Energy plc (Forum). Tidemark owns
25.92% of Forum. Forum is a Bristish company listed in The Alternative Investment Market
of the London Stock Exchange.
In May 2012, Tidemark acquired 1 million additional Forum shares to increase its stake in
Forum to 27.14%.
In December 2012, Atok complied with the 10% minimum public float requirement of the
SEC and the PSE.
Towards Historical Greatness
Over the past seven decades, Atok has established a strong foundation in the Philippine
mining industry. With a new beginning and changes being implemented, the Company
has its sights set firmly on the future.
To date, Atok has studied 39 mining and oil & gas investments, 17 of which are located
in the Philippines, while the remainder found within the neighboring Indochina region.
Now equipped with substantial funding and management, Atok is set to capitalize on the
thriving natural resources found in the Philippines as well as the larger Asian region and
restore the Company to its historical greatness.
7
FORUM
ENERGY plc
Forum’s principal asset is a 70% interest in Service Contract 72 (SC72). SC72 is an 8,800-square
kilometre (‘Km2’) offshore petroleum license situated west of Palawan Island in the West
Philippine Sea. In 2006, results from a 248 Km2 3D seismic survey over the licence area
indicated a mean volume of 3.4 trillion cubic feet (‘TCF’) gas-in-place (‘GIP’) with significant
upside potential. It is a primary objective of Forum to establish the commerciality of the
hydrocarbons within SC72.
In March 2011, a total of 565 Km2 of 3D seismic data was acquired over the Sampaguita Gas
Field and 2,202 Line-Km of 2D seismic data was acquired to further define additional leads
identified within the SC72 acreage and to possibly upgrade existing leads to prospects. This
work, which satisfied Forum’s obligations with the Philippine Department of Energy under the
first sub-phase of the SC72 contract, was primarily designed to provide a more comprehensive
evaluation of the SC72 property and to identify potential sites for appraisal wells.
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ATOK-BIG
WEDGEWEDGE
CO., INC.
2012
ReportReport
ATOK-BIG
CO.,
INC.Annual
2012 Annual
Forum Energy plc
During the year, Forum was unable to obtain permission to deploy vessels to perform drill
site survey in relation to the planned drilling programme. Recognizing that these matters
were beyond the control of the Company the Philippine Department of Energy has
granted an extension of the contract term to August 2015 for the Company to complete
its second sub-phase work obligations which are expected to cost in excess of US$50
million.
Forum commissioned a third party review of the prospects for Service Contract 40
(“SC40”) which resulted in a write-down of the carrying value of the investment in SC40
by US$25.36 million. Forum will continue to undertake exploration work on this property
and look for opportunities to farm out further segments of the block to replicate the
producing Libertad Gas field model which came into production in 2012.
Operational Highlights for 2012
• SC72 seismic interpretation and resources update completed in April 2012, which
showed an improvement in the resources previously known and supporting the case to
proceed with the drilling programme.
• Granted an extension to August 2015 to complete the second sub-phase obligations
of drilling wells on SC72 .
•
Libertad Gas Field power generation commenced in February 2012.
• Upgrade of the Galoc floating production, storage and offloading vessel completed
on schedule in March 2012.
•
Participation in the Galoc Phase II development approved.
9
Forum Energy plc
Financial and Corporate Highlights for 2012
•
Cash of US$5.76 million at year end (2011: US$2.761 million)
•
Revenues of US$4.5 million in 2012 (2011: US$12.7 million)
•
Gross Profit of US$0.9 million in 2012 (2011: US$5.8 million)
•
Investment in SC40 written down by $25.4 million to $3.25 million.
•
Net Loss of US$26.4 million after exceptional items (2011: profit US$3.4 million)
•
Loans payable at year end $15 million, (2011: $6 million)
ASSET SUMMARY
SC72 (70% interest)
The SC72 license was awarded on 15 February 2010. It covers an area of 8,800 Km2 and contains
the Sampaguita Gas Discovery which has the potential to contain In-Place Contingent Resources
of 2.6 trillion cubic feet (TCF) of gas plus another In-Place Prospective Resources totaling 5.4 TCF
based on a resource assessment performed in 2012 by Weatherford, an independent qualified
competent person. The results of the study were used to define the location of two wells,
to be named Sampaguita-4 and Sampaguita-5, which will further the amount of potentially
recoverable resources. The drilling of wells is part of the work programme of Forum for the
second-sub-phase of SC72, which must be completed by 14 August 2015, having recently
been granted an extension by the Philippine Department of Energy.
10
Forum Energy plc
Galoc (2.27% interest)
Production from the Galoc development reached 1.5 million barrels gross in 2012 and is
expected to produce 2.6 million barrels in 2013. Forum has a 2.27% interest in the field
and received US$2.5 million (US$10.1 million in 2011) after deduction of share of operating
costs from crude sales from the field during the year. A second phase of development
is expected to commence in the second half of 2013 with the drilling of two additional
production wells, which is expected to boost production from the current 4,575 barrels of
oil per day (bopd) to 12,000 bopd. The company secured US2.58 million of financing from
BNP Paribas to fund 60% of the estimated US$4.33 million share of development costs for
this phase of the project.
SC40 (66.67% interest)
SC40 contains the Libertad gas field and the Maya field as well as several prospects and
leads. On 30 January 2009 Forum entered into a Gas Sale & Purchase Agreement (“GSPA”)
with Desco, Inc., for the development of the Libertad gas field for power generation. On
6 February 2012, commercial production at the Libertad Field commenced and as at 31
December 2012 the field has produced around 72.5 million cubic feet of gas. However
these revenues are not material to the Group’s cash flow. Having received a resource
assessment from PGS, an independent competent person, the investment in SC40 was
written down by $25.3 million to $3.25 million.
11
Directors
& Executive
Officers
EXECUTIVE OFFICERS
BOARD OF DIRECTORS
ROBERTO V. ONGPIN
Chairman and Chief Executive Officer
ROBERTO V. ONGPIN
ERIC O. RECTO
Vice Chairman
WALTER W. BROWN
WALTER W. BROWN
President
MARIO J. LOCSIN
MARIO A. ORETA
VICTOR R. KALAW
MICHELLE S. ONGPIN
MARRIANA H. YULO
Treasurer and Chief Financial Officer
DENNIS O. VALDES
RODOLFO MA. A. PONFERRADA
Corporate Secretary and Corporate
Information Officer
GRACIANO P. YUMUL, JR.
JESUSA LORETO ARELLANO-AGUDA
Assistant Corporate Secretary and Corporate
Information Officer
JOVITA D.S. LARRAZABAL
Assistant Corporate Secretary
JOSEPHINE A. MANALO
Corporate Information Officer
12
ERIC O. RECTO
ATOK-BIG
WEDGEWEDGE
CO., INC.
2012
ReportReport
ATOK-BIG
CO.,
INC.Annual
2012 Annual
MARRIANA H. YULO
CRAIG E. EHRLICH
Independent Director
VICTOR C. MACALINCAG
MARGARITO B. TEVES
Directors and executive Officers
ROBERTO V. ONGPIN
Chairman of the Board | Chief Executive Officer
Mr. Ongpin is the Chairman of the following Philippine listed Corporations: ISM Communications
Corporation, PhilWeb Corporation and Alphaland Corporation and is Director of San Miguel
Corporation, Ginebra San Miguel, Inc., PAL Holdings, Inc. and Petron Corporation. Mr. Ongpin
is also a Director of Philippine Airlines, Inc. and Top Frontier Investment Holdings, Inc. He is
also Chairman of Alphaland Balesin Island Club, Inc., The City Club at Alphaland Makati Place,
Inc. and Alphaland Marina Club, Inc. In Hong Kong, he is a Non-Executive Director of ShangriLa Asia Limited and the Deputy Chairman of the South China Morning Post, both listed on
the Hong Kong Stock Exchange. He is also the Chairman of Acentic GmbH (Germany) and a
Non-Executive Director of Forum Energy plc (London). Mr. Ongpin joined SGV & Co. in 1964
and was Chairman and Managing Partner of the firm from 1970 to 1979. He served as the
Minister of Trade and Industry of the Republic of the Philippines from 1979 to 1986. Mr. Ongpin
graduated cum laude in Business Administration from the Ateneo de Manila University, is a
Certified Public Accountant and has an MBA from the Harvard Business School.
ERIC O. RECTO
Vice Chairman
Mr. Recto is the Chairman of the Philippine Bank of Communications; the Vice Chairman of
PhilWeb Corporation, The City Club at Alphaland Makati Place, Inc., Alphaland Balesin Island
Club, Inc., Alphaland Marina Club, Inc. and Alphaland Corporation; the President of Petron
Corporation and ISM Communications Corporation; a Director of Manila Electric Company and
San Miguel Corporation; and a Member of the Board of Supervisors of Acentic GmbH. Prior to
joining the Company, Mr. Recto served for three years as an Undersecretary of the Department
of Finance of the Philippine Government in charge of handling both the International Finance
Group and the Privatization Office. Before his work with the government, he was the CFO of
Alaska Milk Corporation and prior to that, Belle Corporation. Mr. Recto has a degree in Industrial
Engineering from the University of the Philippines as well as an MBA from the Johnson School,
Cornell University.
WALTER W. BROWN
President
Dr. Brown was the former Chairman and Chief Executive Officer of Philex Mining Corporation
from January 2004 to December 2009. Dr. Brown is also Chairman of A Brown Company, Inc.
and Palm Thermal Consolidated Holdings Corporation. He is a Director of Monte Oro Resources
Energy Inc., ISM Communications Corporation and Forum Energy Plc. He received two
undergraduate degrees B.S. Physical Science (1959), B.S. Geology (1960), from the University
of the Philippines, Manila, post graduate degrees from Stanford University, M.S. Economic
Geology (1963), Ph. D in Geology, Major in Geochemistry (1965). He was also a candidate in
Master of Business Economics (1980) from the University of Asia & the Pacific (formerly Center
for Research & Communications).
13
MARIO J. LOCSIN
Director
Mr. Locsin is currently Executive Vice President and Director of ISM Communications
Corporation, Vice Chairman and Director of the Philippine Bank of Communications, Director
of PhilWeb Corporation and Alphaland Corporation. He is also President of Inpilcom, Inc.,
consultant of Acentic Philippines, Inc., as well as Independent Director of Alphaland Balesin
Island Club, Inc. and The City Club at Alphaland Makati Place, Inc. In the past, he served as
the President and COO of Eastern Telecommunications Philippines, Inc., President of Atok-Big
Wedge Co., Inc., President and Director of Alphaland Heavy Equipment Corporation, a Director
of Belle Corporation, APC Group, Southwest Resources, Philippine Long Distance Telephone
Co., and Pilipino Telephone Co., as well as a Director, Executive Vice President, and COO of
Philippine Airlines. Mr. Locsin holds a degree in LIA-Honors Math from De La Salle University
and a degree of Masters in Business Administration from the University of San Francisco.
MARIO A. ORETA
Director
Mr. Oreta is currently the President and Director of Alphaland Corporation, Alphaland
Development, Inc., Alphaland Balesin Island Resort Corporation, Alphaland Makati Place,
Inc., Alphaland Makati Tower, Inc., The City Club at Alphaland Makati Place, Inc., Alphaland
Balesin Island Club, Inc., Alphaland Marina Corporation, Alphaland Marina Club, Inc., Aklan
Boracay Properties, Inc., Alphaland Heavy Equipment Corporation and Alphaland Property
Management Corporation; the Vice Chairman of Alphaland Reclamation Corporation; and Chief
Operating Officer of Jet Eagle International Limited, Inc. He is Chairman of Major Holdings,
Inc., Major Properties, Inc. and Major Homes, Inc. He is a Director of PhilWeb Corporation,
ISM Communications Corporation, Toyota Pasongtamo, Inc. and Toyota Global City. Mr. Oreta
graduated with honors from the Ateneo De Manila University with a degree in Bachelor of
Laws and immediately joined the law firm of Siguion Reyna, Montecillo and Ongsiako. He was
also the founder and managing partner of Tanjuatco Oreta and Factoran Law Offices.
14
DENNIS O. VALDES
Director
Mr. Valdes is the President and Director of PhilWeb Corporation, Treasurer of Alphaland
Corporation, and a Director of ISM Communications Corporation. His previous work experience
includes 10 years with the Inquirer Group of Companies, as a Director of the newspaper, and
also expanding their Internet, printing, and ink-making operations. Prior to that he spent six
years with The NutraSweet Company developing their businesses in Asia. He is a Certified
Public Accountant, graduated magna cum laude in Business Administration and Accountancy
from the University of the Philippines and has an MBA from the Kellogg School of Management,
Northwestern University.
VICTOR R. KALAW
Director
Mr. Kalaw graduated from the Ateneo de Manila University with a Bachelor of Arts degree
major in Economics in 1962, and obtained his Master’s degree in Business Administration
major in Finance from the Wharton Graduate School of the University of Pennsylvania in 1967.
He is a Director of Binibining Pilipinas Charities, Inc. and J. Amado Araneta Foundation. He
also serves as Chairman of the Board of TicketNet, Inc. and Uniprom, Inc., President of Araneta
Center Hotel, Inc., Executive Vice-President – Finance and treasurer of Araneta Center, Inc.
Progressive Development Corporation, and Philippine Pizza, Inc. He is also the President of
Atok Gold Mining Co., Inc.
15
MARRIANA H. YULO
Treasurer | Chief Financial Officer | Director
Ms. Yulo is the Chief Financial Officer of the Company. She is also the Group CFO for PhilWeb
Corporation, ISM Communications Corporation, and Alphaland Corporation. She also serves
as Assistant to the Chairman of the Philippine Bank of Communications. She is a Director
of Alphaland Corporation and Acentic GmbH. She graduated with a degree in Business
Administration, major in Management, at Palawan State University. She also holds an MBA
from the University of St. La Salle and has successfully completed Level I of the Chartered
Financial Analyst Program.
CRAIG EHRLICH
Mr. Ehrlich is the former longtime Chairman of the GSM Association (GSMA), the global trade
association. He is a Board Member of the International Telecommunications Union (ITU), Bharti
Airtel, India’s largest (by market capitalization) telecommunications company, the Chairman of
Carmel Ventures Asia, and the Founding Chairman of Novare Technologies Ltd., a Hong Kong
software development company. He was the former group Managing Director of Sunday
Communications Limited, a Hong Kong mobile operator. In the Philippines, he is the Director
and Vice Chairman of ISM Communications Corporation, and Director of PhilWeb Corporation.
Mr. Ehrlich, a Hong Kong resident since 1987, holds a BA degree from the University of California
in Los Angeles, a Masters degree from Occidental College, and a postgraduate fellowship
with the Coro Foundation. Craig is also a member of UCLA/Peking University Joint Research
Institute Advisory Committee and a founding chairman of the Centre for Global Management
at the UCLA Anderson School.
16
VICTOR C. MACALINCAG
Mr. Macalincag was recently elected as one of the Independent Directors of the Corporation.
He is also an Independent Director of Crown Equities, Inc., Semirara Mining Corporation,
Republic Glass Holdings Corp., and SEM Calcaca Power Corporation. He was the President of
Trade & Investment Development Corporation of the Philippines which is presently known as
PHILEXIM (formerly PhilGuarantee) from 1991 until his resignation in 2001. He was the Deputy
Minister of Finance from 1981 to 1986 and Undersecretary of Finance from 1986 to 1991. He
also held in a concurrent capacity, the position of National Treasurer from 1981 to 1988. He
was also the Chairman of Pilipinas Bank from 1984 to 1988 and the Executive Vice President
of the Land Bank of the Philippines from 1980 to 1981. Mr. Macalincag is a Certified Public
Accountant. He has a Bachelor of Arts in Business Administration from the University of the
East. He also earned a Master of Arts in Economics from the same university. He finished a
fellowship program conducted by the Economic Development Institute of the World Bank,
Washington D.C. U.S.A. in 1971.
MARGARITO B. TEVES
Mr. Teves was elected Director last May 25, 2011. Mr. Teves is currently chairman of Think Tank,
Inc., member of the Board of Advisers of Metro Bank and Trust Company and member of
the Board of Directors of Landbank Countryside Development Foundation. He was formerly
Secretary of the Department of Finance and a member of the House of Representatives
(representing the 3rd District of Negros Oriental). He obtained a Bachelor of Arts from the
Universidad Central de Madrid, a Higher National Diploma in Business Studies from the City of
London College and a Master of Arts in Development Economics from Williams College.
17
Corporate Secretary | Corporate Information Officer | Director
Mr. Ponferrada is the Corporate Secretary and a Corporate Information Officer of the
Company. He is also the Corporate Secretary and a Corporate Information Officer of Philweb
Corporation, ISM Communications Corporation, Alphaland Corporation, and Philippine Bank
of Communications as well as Corporate Secretary of Alphaland Balesin Island Club, Inc., The
City Club at Alphaland Makati Place, Inc. and Alphaland Marina Club, Inc. He is a Member
(representing the private sector) of the Board of Directors of the Social Housing Finance
Corporation. Mr. Ponferrada is a Member of the Philippine Bar.
JOSEPHINE A. MANALO
Corporate Information Officer
Ms. Manalo was appointed Corporate Information Officer on November 18, 2009. Ms. Manalo
is presently connected with PhilWeb Corporation as Executive Assistant to the Chairman. She
is also working in various capacities for Mr. Roberto V. Ongpin’s Group of Companies. She has
a Bachelor of Science in Business Administration degree from St. Theresa’s College, Manila.
JOVITA D.S. LARRAZABAL
Assistant Corporate Secretary
Ms. Larrazabal was elected Assistant Corporate Secretary and Corporate Information Officer
on May 26, 2011. She is also currently the Assistant Corporate Secretary, Corporate Information
Officer, and Legal Counsel of Alphaland Corporation and the Assistant Corporate Secretary
of The City Club at Alphaland Makati Place, Inc., Alphaland Balesin Island Club, Inc., Alphaland
Marina Club, Inc., Atok-Big Wedge Co., Inc. and the Philippine Bank of Communications. Ms.
Larrazabal holds a Juris Doctor degree from the Ateneo De Manila University - Law School
and a Bachelor of Arts degree major in Management Economics from the Ateneo De Manila
University - College of Arts and Sciences. She is a Member of the Philippine Bar.
18
Disclosures
25 April 2012
The Company submitted a required sworn statement to the Exchange in reply to the
letter of the Surveillance Department of the Capital Markets Integrity Corporation (“CMIC”)
dated April 25, 2012 that required Atok-Big Wedge Co., Inc. to submit a written statement
under oath confirming the existence or absence of any undisclosed information that
could have triggered the unusual price movement of the Company’s share being traded
in the Exchange.
31 May 2012
The Company informed the Exchange that Atok-Big Wedge Co., Inc., through its whollyowned subsidiary Tidemark Holdings Limited (Tidemark), acquired one million ordinary
shares from Forum Energy plc (FEP). This brings Tidemark’s total ownership to 9,646,757
ordinary shares of FEP, representing approximately 27.14% of FEP’s outstanding capital.
21 December 2012
The Company informed the Exchange that it has complied with the 10% minimum public
ownership requirement.
ATOK-BIG WEDGE CO., INC. 2012 Annual
Report
ATOK-BIG
WEDGE CO., INC. 2012 Annual Report
19
Statement of Management’s
Responsibility
21
22
Independent
Auditor’s Report
22
PHINMA PHINMA Plaza Plaza 39 Plaza 39 DPrive, laza RDockwell rive, Rockwell Center Center Makati Makati City 1200 City P1hilippines 200 Philippines www.reyestacandong.com www.reyestacandong.com Phone: Phone: +632 9 +82 632 9100 982 9100 Fax Fax : +632 : 9 +82 632 9111 982 9111 BOA/PRC BOA/PRC Accreditation Accreditation No. 4782 No. 4782 12, 2012, 12, valid 2012, until valid December until December 31, 2015 31, 2015 November November SEC Accreditation SEC Accreditation No. 0207-‐F No. 0(207-‐F Group (Group A) A) August 2 A6, ugust 2010, 26, valid 2010, until valid August until 2A5, ugust 2013 2 5, 2013 INDEPENDENT INDEPENDENT AUDITOR’S AUDITOR’S REPORT REPORT The SThe tockholders Stockholders and tahe nd Btoard he Board of Directors of Directors Atok-‐Big Atok-‐Big Wedge Wedge Co., ICnc. o., aInc. nd Saubsidiaries nd Subsidiaries 10th 10th Floor, Floor, Alphaland Alphaland Southgate Southgate Tower Tower 2258 2258 Chino Chino Roces Roces Avenue Avenue corner corner EDSA EDSA Makati Makati City City We have We have audited audited the accompanying the accompanying consolidated consolidated financial financial statements statements of Atok-‐Big of Atok-‐Big Wedge Wedge Co., Co., Inc. Inc. and and Subsidiaries, Subsidiaries, which which comprise comprise the the consolidated consolidated statements statements of financial of financial position position as at as at December December 31, 32012 1, 2012 and and 2011, 2011, and and the the consolidated consolidated statements statements of comprehensive of comprehensive income, income, consolidated consolidated statements statements of changes of changes in equity in equity and and consolidated consolidated statements statements of cash of cash flows flows for the for the years years then then ended ended and and a summary a summary of significant of significant accounting accounting policies policies and and other other explanatory explanatory information. information. Management’s Management’s Responsibility Responsibility for the for Ctonsolidated he Consolidated Financial Financial Statements Statements Management is responsible for the preparation and fair presentation of these consolidated financial Management is responsible for the preparation and fair presentation of these consolidated financial statements statements in accordance in accordance with w
Pith hilippine Philippine Financial Financial Reporting Reporting Standards, Standards, and faor nd such for siuch nternal internal control control as management determines is necessary to enable the preparation of financial statements that are as management determines is necessary to enable the preparation of financial statements that are free free from from material material misstatement, misstatement, whether whether due tdo ue fraud to fraud or error. or error. Auditor’s Auditor’s Responsibility Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our Our responsibility is to express an opinion on these consolidated financial statements based on our audits. audits. We We conducted conducted our our audits audits in accordance in accordance with with Philippine Philippine Standards Standards on Auditing. on Auditing. Those Those standards standards require require that that we comply we comply with with ethical ethical requirements requirements and and plan plan and and perform perform the audit the audit to to obtain obtain reasonable reasonable assurance assurance about about whether whether the consolidated the consolidated financial financial statements statements are free are free from from material material misstatement. misstatement. An audit An audit involves involves performing performing procedures procedures to obtain to obtain audit audit evidence evidence about about the atmounts he amounts and daisclosures nd disclosures in the in the consolidated consolidated financial financial statements. statements. The The procedures procedures selected selected depend depend on the on the auditor’s auditor’s judgment, judgment, including including the the assessment assessment of the of the risks risks of material of material misstatement misstatement of the of the consolidated consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers considers internal internal control control relevant relevant to the to the entity’s entity’s preparation preparation and and fair fair presentation presentation of the of the consolidated consolidated financial financial statements statements in order in order to design to design audit audit procedures procedures that that are appropriate are appropriate in the in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal internal control. control. An audit An audit also also includes includes evaluating evaluating the appropriateness the appropriateness of accounting of accounting policies policies used used and and the reasonableness the reasonableness of accounting of accounting estimates estimates made made by management, by management, as well as well as evaluating as evaluating the the overall overall presentation presentation of the of ctonsolidated he consolidated financial financial statements. statements. We bWe elieve believe that tthat he atudit he audit evidence evidence we hw
ave e hoave btained obtained is sufficient is sufficient and appropriate nd appropriate to provide to provide a basis a basis for ofor ur aoudit ur audit opinion. opinion. 24
The correspondent The correspondent firm of irm of ATOK-BIG WEDGE CO., INC. 2012 Annual Report
Opinion -‐ 2 -‐ -‐ 2 -‐ present fairly, in all material respects, the In our opinion, the consolidated financial statements Inc. and Subsidiaries as at December 31, 2012 consolidated financial position of Atok-‐Big Wedge Co., and 2011, and their financial performance and their cash flows for the years then ended in Opinion with Philippine Financial Reporting Standards. accordance In our oopinion, the consolidated financial statements present fairly, in all material respects, the Emphasis f a Matter consolidated financial position of Atok-‐Big Wedge Co., Inc. and Subsidiaries as at December 31, 2012 statements Without qualifying ur opinion, we dperformance raw attention and to Ntheir ote 1 cash to the flows consolidated and 2011, and otheir financial for the financial years then ended in concerning the wdith elay in one of Ftinancial he drilling programs of the Group’s associate, Forum Energy plc. The accordance Philippine Reporting Standards. ultimate outcome of the uncertainty related to this delay cannot presently be determined. Emphasis of a Matter Other Matter Without qualifying our opinion, we draw attention to Note 1 to the consolidated financial statements The consolidated financial statements of Atok-‐Big Wedge Co., Inc. and Subsidiaries as at and for the concerning the delay in one of the drilling programs of the Group’s associate, Forum Energy plc. The year ended oDecember were related audited by dother auditors whose breport thereon dated ultimate utcome of t31, he u2010 ncertainty to this elay cannot presently e determined. April 14, 2011, expressed an unmodified opinion on those statements. Other Matter The consolidated financial statements of Atok-‐Big Wedge Co., Inc. and Subsidiaries as at and for the REYES TACANDONG & CO. year ended December 31, 2010 were audited by other auditors whose report thereon dated April 14, 2011, expressed an unmodified opinion on those statements. BELINDA B. FERNANDO REYES TACANDONG & CO. Partner CPA Certificate No. 81207 Tax Identification No. 102-‐086-‐538-‐000 SEC Accreditation No. 1022-‐A Group A; Valid until September 8, 2013 BELINDA B. FNERNANDO BOA Accreditation o. 4782; Valid until December 31, 2015 Partner BIR Accreditation No. 08-‐005144-‐4-‐2010; Valid until November 5, 2013 PTR CPA No. C3ertificate 670313 No. 81207 Identification 102-‐086-‐538-‐000 Tax Issued January 2, N2o. 013, Makati City SEC Accreditation No. 1022-‐A Group A; Valid until September 8, 2013 BOA Accreditation No. 4782; Valid until December 31, 2015 March 1, 2013 No. 08-‐005144-‐4-‐2010; Valid until November 5, 2013 BIR A1
ccreditation Makati Metro Manila PTR NC
o. ity, 3670313 Issued January 2, 2013, Makati City March 11, 2013 Makati City, Metro Manila ATOK-BIG WEDGE CO., INC. 2012 Annual Report
25
CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
ATOK-‐BIG WEDGE CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION Note ASSETS December 31 2012 2011 Current Assets Cash and cash equivalents Receivables Receivables from related parties Input value added taxes and other current assets Total Current Assets 6 7 14 8 P
=191,077,964 417,541 2,109,636 4,282,823 197,887,964 P
=334,047,916 679,355 309,803 3,333,731 338,370,805 Noncurrent Assets Investment in an associate Available-‐for-‐sale (AFS) investment Property and equipment Deferred tax assets Other noncurrent assets Total Noncurrent Assets 9 10 12 16 19 420,802,300 999,950 3,614,309 – 1,523,907 426,940,466 669,613,945 999,950 6,682,127 79,604 2,178,596 679,554,222 P
=624,828,430 P
=1,017,925,027 LIABILITIES AND EQUITY P
=647,549 789,288 29,203 292,238 1,758,278 P
=3,382,942 1,392,439 – 302,739 5,078,120 Current Liabilities Accounts payable and accrued expenses Payable to related parties Income tax payable Other current liabilities Total Current Liabilities 13 14 Equity Capital stock Deficit Other comprehensive income (loss) Total Equity 18 1,060,000,000 (388,806,870) (48,122,978) 623,070,152 P
=624,828,430 1,060,000,000 (48,953,865) 1,800,772 1,012,846,907 P
=1,017,925,027 See accompanying Notes to Consolidated Financial Statements. ATOK-BIG WEDGE CO., INC. 2012 Annual Report
27
Comprehensive Income
ATOK-‐BIG WEDGE CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 (With Comparative Figures for 2010) GENERAL AND ADMINISTRATIVE EXPENSES Note 15 2011 2010 P
=49,492,852 P
=35,523,239 P
=68,868,330 OTHER INCOME (EXPENSES) Share in the net results of operations of an associate Interest income Service fees Reversal of accrued rent Rent income Impairment loss Gain on disposal of Atok Gold Others 9 6 14 14 11 5 (302,402,895) 8,493,854 1,389,380 1,056,632 871,633 (38,379) – 532,465 (290,097,310) 4,168,305 29,717,720 1,074,050 – 195,986 (2,673,373) 9,270,726 482,893 42,236,307 – 26,848,166 – – – – – 671,146 27,519,312 INCOME (LOSS) BEFORE INCOME TAX (339,590,162) 6,713,068 (41,349,018) INCOME TAX BENEFIT (EXPENSE) Current Deferred 2012 16 NET INCOME (LOSS) OTHER COMPREHENSIVE INCOME (LOSS) Foreign exchange differences on translation of the financial statements of Tidemark Holdings Ltd. 9 TOTAL COMPREHENSIVE INCOME (LOSS) BASIC AND DILUTED EARNINGS (LOSS) PER SHARE 17 (183,239) (79,604) (262,843) (339,853,005) – (34,503) (34,503) 6,678,565 – (549,569) (549,569) (41,898,587) (49,923,750) 1,800,772 – (P
=389,776,755) P
=8,479,337 (P
=0.1335) P
=0.0026 (P
=41,898,587) (P
=0.0275) See accompanying Notes to Consolidated Financial Statements. ATOK-BIG WEDGE CO., INC. 2012 Annual Report
29
Changes in Equity
26
ATOK-‐BIG WEDGE CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 (With Comparative Figures for 2010) CAPITAL STOCK -‐ P
=1 par value Balance at beginning of year Issuance Balance at end of year Note 18 2012 2011 2010 P
=1,060,000,000 P
=1,060,000,000 P
=60,000,000 – – 1,000,000,000 1,060,000,000 1,060,000,000 1,060,000,000 DEFICIT Balance at beginning of year Net income (loss) Balance at end of year (48,953,865) (339,853,005) (388,806,870) OTHER COMPREHENSIVE INCOME (LOSS) Balance at beginning of year Foreign exchange differences on translation of the financial statements of Tidemark Holdings Ltd. Balance at end of year 1,800,772 (49,923,750) (48,122,978) (55,632,430) 6,678,565 (48,953,865) (13,733,843) (41,898,587) (55,632,430) – – 1,800,772 1,800,772 – – P
=623,070,152 P
=1,012,846,907 P
=1,004,367,570 See accompanying Notes to Consolidated Financial Statements. ATOK-BIG WEDGE CO., INC. 2012 Annual Report
31
Cash Flows
26
ATOK-‐BIG ATOK-‐BIG ATOK-‐BIG WW
EDGE W
EDGE EDGE CC
O., O., CO., INC. INC. INC. AA
ND A
ND ND SUBSIDIARIES SUBSIDIARIES SUBSIDIARIES ATOK-‐BIG ATOK-‐BIG W
WEDGE EDGE O., O., IINC. NC. AAND ND SSF UBSIDIARIES UBSIDIARIES CONSOLIDATED CONSOLIDATED CONSOLIDATED STATEMENTS STATEMENTS SCC
TATEMENTS O
O
F O
F C
C
ASH ASH CASH FLOWS FLOWS FLOWS FOR FOR FOR T
HE T
HE T
HE Y
EARS Y
EARS Y
EARS E
NDED E
NDED E
NDED D
D
ECEMBER ECEMBER D
ECEMBER 3
1, 3
1, 3
2
1, 012 2
012 2
012 A
ND A
ND A
ND 2
011 2011 2011 CONSOLIDATED CONSOLIDATED S
S
TATEMENTS TATEMENTS O
O
F F C
C
ASH ASH F
F
LOWS LOWS ATOK-‐BIG WEDGE CO., INC. AND SUBSIDIARIES (With (With Comparative CEomparative omparative Figures Figures Figures f1, or for 010) 2012 010) 2010) FOR FOR TTHE HE YY(With EARS EARS ECNDED NDED DDECEMBER ECEMBER 3f3or AAND 22011 011 CONSOLIDATED STATEMENTS O1, F 2C2012 ASH FND LOWS (With (With CComparative omparative FFigures igures ffor or 22010) 010) FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 (With Comparative Figures for 2010) 2012 2012 2012 2011 2011 2011 2010 2010 2010 Note Note Note 2012 2012 2011 2011 2010 2010 Note Note CASH CASH CASH FLOWS FLOWS FLOWS FROM FROM FROM OO
PERATING PERATING OPERATING 2012 2011 2010 Note CASH CASH F
F
LOWS LOWS F
F
ROM ROM O
O
PERATING PERATING ACTIVITIES ACTIVITIES ACTIVITIES (P
ACTIVITIES ACTIVITIES (P
=
(P
339,590,162) =
(P
339,590,162) =
339,590,162) P
=
6,713,068 P
=
6,713,068 P
=
6,713,068 =
(P
41,349,018) =
(P
41,349,018) =
41,349,018) Income Income Income (
loss) (
loss) (
loss) b
efore b
efore b
efore i
ncome i
ncome i
ncome t
ax t
ax t
ax CASH FLOWS FROM OPERATING (P
==339,590,162) 339,590,162) 6,713,068 (P
(P
==41,349,018) 41,349,018) Income Income ((loss) loss) efore efore income income ttax ax P=P=6,713,068 Adjustments Adjustments Adjustments for: for: fbbor: (P
ACTIVITIES Adjustments Adjustments f
f
or: or: Share Income Share Share in in t(loss) he in the tnhe et n
et n
r
et esults r
esults r
esults o
f o
o
f o
perations o
f perations o
perations (P
=339,590,162) P
=6,713,068 (P
=41,349,018) before income tax of Share Share i
n i
n t
t
he he n
n
et et r
r
esults esults o
o
f f o
o
perations perations 302,402,895 302,402,895 302,402,895 (4,168,305) (4,168,305) (4,168,305) – of aof n an aassociate n associate associate 9 9 – – Adjustments for: 9 of aan n aassociate ssociate 302,402,895 302,402,895 (4,168,305) (4,168,305) – – of 9 9 (8,493,854) (8,493,854) (8,493,854) (29,717,720) (29,717,720) (29,717,720) (26,848,166) (26,848,166) (26,848,166) Interest Interest income income 6 6 6 Interest Share in tincome he net results of operations (8,493,854) (8,493,854) (29,717,720) (29,717,720) (26,848,166) (26,848,166) Interest Interest income income 6 6 2,178,892 2,178,892 2,178,892 (4,168,305) 2,143,611 2,143,611 2,143,611 1,684,718 1,684,718 1,684,718 Depreciation Depreciation Depreciation and and aand mortization amortization amortization 12 12 of an associate 9 12 302,402,895 – 2,178,892 2,178,892 2,143,611 2,143,611 1,684,718 1,684,718 Depreciation Depreciation aand nd aamortization mortization 12 12 (1,056,632) (1,056,632) (1,056,632) (29,717,720) – – – (26,848,166) – – – (8,493,854) Reversal Reversal of oiancome f occrued af ccrued accrued rent rent rent 14 14 Reversal Interest 6 14 (1,056,632) (1,056,632) – – – – Reversal Reversal oof f aaccrued ccrued rrent ent 14 14 2,178,892 2,143,611 Impairment Depreciation nd amortization 12 38,379 38,379 38,379 2,673,373 2,673,373 2,673,373 1,684,718 – – – Impairment Impairment loss loss laoss 11 11 11 38,379 38,379 2,673,373 2,673,373 – – Impairment Impairment loss loss 11 11 (1,056,632) – – – – Loss Reversal rent 1,263 1,263 1,263 – – – Loss Loss on on soale n sale soale of f oapf ccrued oroperty pf roperty property and and aend quipment equipment equipment 14 1,263 1,263 – – – – Loss Loss oon n ssale ale oof f pproperty roperty aand nd eequipment quipment 38,379 2,673,373 – – – – Gain Impairment loss 11 – – – (9,270,726) (9,270,726) (9,270,726) Gain Gain o
n o
n d
o
isposal n d
isposal d
isposal o
f o
A
f o
tok A
f tok A
tok G
old G
old G
old 5 5 5 – – (9,270,726) (9,270,726) – – Gain Gain oon n ddisposal isposal oof f AAtok tok GGold old 5 5 1,263 – – Loss o
n s
ale o
f p
roperty a
nd e
quipment Operating Operating Operating loss loss before bbefore b
efore ww
orking orking working orking capital ccapital capital apital Operating Operating lloss loss oss before efore ww
orking capital – (9,270,726) – changes Gain on disposal of Atok Gold changes changes (44,519,219) (44,519,219) (44,519,219) (31,626,699) (31,626,699) (31,626,699) (66,512,466) (66,512,466) (66,512,466) (66,512,466) 5 changes changes (44,519,219) (44,519,219) (31,626,699) (31,626,699) (66,512,466) Operating l
oss b
efore w
orking c
apital Decrease Decrease Decrease (increase) (increase) increase) in: in: n: Decrease Decrease (((increase) increase) in: iin: changes (44,519,219) (31,626,699) (66,512,466) (1,458) (1,458) (1,458) 644,604 644,604 644,604 (1,570,293) (1,570,293) (1,570,293) Receivables Receivables Receivables (1,458) (1,458) 644,604 644,604 (1,570,293) (1,570,293) Receivables Receivables – Decrease (increase) in: – – – – (12,114) (12,114) (12,114) 88,007 88,007 88,007 Inventories Inventories (12,114) (12,114) 88,007 88,007 Inventories Inventories Inventories (1,458) 644,604 (1,570,293) Receivables (1,799,833) (1,799,833) (1,799,833) (100,894) (100,894) (100,894) Receivables Receivables from from rom related related elated parties pparties arties (1,799,833) (1,799,833) (100,894) (100,894) – – – – – Receivables Receivables Receivables fffrom rom rrrelated elated pparties arties – (12,114) 88,007 Input Inventories Input Input v
alue v
alue v
alue a
dded a
dded a
dded t
axes t
axes t
axes a
nd a
nd a
o
nd ther o
ther o
ther Input Input vvalue alue added taxes axes aand nd oother ther (1,799,833) (100,894) – current Receivables from related parties (953,838) (953,838) (953,838) (1,193,485) (1,193,485) (1,193,485) (2,195,562) (2,195,562) (2,195,562) (2,195,562) current current assets assets ssets (953,838) (953,838) (1,193,485) (1,193,485) (2,195,562) current current aassets Input value added taxes and other Increase Increase Increase (decrease) (decrease) decrease) in: in: n: Increase Increase (((decrease) decrease) in: in: (953,838) (1,193,485) (2,195,562) current assets (1,678,761) (1,678,761) (1,678,761) 4,325,740 4,325,740 4,325,740 934,198 934,198 934,198 (1,678,761) (1,678,761) 4,325,740 4,325,740 934,198 934,198 Accounts Accounts payable pp
ayable payable ayable and aand and nd ccrued aaccrued ccrued expenses eeexpenses expenses xpenses Accounts Accounts Accounts and aaccrued ccrued xpenses Increase (decrease) in: (603,151) (603,151) 1,508,209 1,508,209 10,801,589 Payable Payable Payable o rrelated pparties arties (603,151) (603,151) (603,151) 1,508,209 1,508,209 1,508,209 10,801,589 10,801,589 10,801,589 10,801,589 Payable Payable to to rttelated o related elated parties pparties arties (1,678,761) 4,325,740 934,198 Accounts payable and accrued expenses (10,501) (10,501) (2,400,882) (2,400,882) 4,400,493 4,400,493 Other Other Other cccurrent urrent liabilities liabilities (10,501) (10,501) (10,501) (2,400,882) (2,400,882) (2,400,882) 10,801,589 4,400,493 4,400,493 4,400,493 Other Other current current urrent liabilities liabilities iabilities (603,151) 1,508,209 Payable to related parties (49,566,761) (49,566,761) (28,855,521) (28,855,521) (54,054,034) (54,054,034) Net Net cccash ash uuused in operations operations perations (49,566,761) (49,566,761) (49,566,761) (28,855,521) (28,855,521) (28,855,521) (54,054,034) (54,054,034) (54,054,034) Net Net c
ash c
ash ash u
sed u
sed sed i
n i
n o
i
perations n o
perations (10,501) (2,400,882) 4,400,493 Other current liabilities 8,723,493 8,723,493 29,420,521 29,420,521 26,848,166 26,848,166 Interest Interest rrreceived eceived 8,723,493 8,723,493 8,723,493 29,420,521 29,420,521 29,420,521 26,848,166 26,848,166 26,848,166 Interest Interest Interest r
eceived r
eceived eceived (49,566,761) (28,855,521) (54,054,034) Net cash used in operations (154,036) (154,036) – – – – – – Income Income ttp
tax ax pppaid aid (154,036) (154,036) (154,036) – Income Income Income t
ax t
ax ax aid p
aid aid 8,723,493 29,420,521 26,848,166 – – – Interest received Net Net c
c
ash ash p
p
rovided rovided b
b
y y (
(
used used i
n) i
n) o
o
perating perating Net Net Net cash cash cash provided ptax rovided provided by (bused (y used (used in) in) oin) perating operating operating (154,036) – – Income paid by activities activities (40,997,304) (40,997,304) 565,000 565,000 (27,205,868) activities activities activities (40,997,304) (40,997,304) (40,997,304) 565,000 565,000 565,000 (27,205,868) (27,205,868) (27,205,868) (27,205,868) Net cash provided by (used in) operating activities (40,997,304) 565,000 (27,205,868) CASH CASH FFFLOWS LOWS FFFROM ROM INVESTING IINVESTING CASH CASH CASH FLOWS FLOWS LOWS FROM FROM ROM INVESTING INVESTING NVESTING ACTIVITIES ACTIVITIES ACTIVITIES ACTIVITIES ACTIVITIES CASH FLOWS FROM INVESTING Decrease Decrease ((increase) increase) in: in: Decrease Decrease Decrease (increase) (increase) (increase) in: in: in: ACTIVITIES (103,515,000) (103,515,000) (663,644,868) (663,644,868) – – Investment Investment in in aan n aassociate ssociate 9 9 (103,515,000) (103,515,000) (663,644,868) (663,644,868) – (663,644,868) – – Investment Investment Investment in in ain n an aassociate n associate ssociate 9 9 Decrease (increase) ian: 9 (103,515,000) 654,689 654,689 (176,498) (176,498) (2,002,098) (2,002,098) Other Other nnoncurrent oncurrent aassets ssets (103,515,000) – Other Investment in an ssociate 654,689 654,689 654,689 (663,644,868) (176,498) (176,498) (176,498) (2,002,098) (2,002,098) (2,002,098) Other Other noncurrent noncurrent noncurrent assets assets assets 9 – – (1,237,991) (1,237,991) (9,114,886) (9,114,886) Deferred Deferred m
mining ining eexploration xploration ccosts osts 11 11 654,689 (176,498) Deferred Other nmoncurrent ssets costs 11 – – – (1,237,991) (1,237,991) (1,237,991) (2,002,098) (9,114,886) (9,114,886) (9,114,886) Deferred Deferred m
ining m
ining ining exploration exploration eaxploration costs costs 11 11 – – (999,950) (999,950) – – AFS AFS investment investment (1,237,991) (9,114,886) AFS Deferred mining exploration costs – – – (999,950) (999,950) (999,950) – AFS AFS investment investment investment 11 – – – Proceeds Proceeds ffrom rom ddisposal isposal oof: f: – (999,950) – Proceeds AFS finvestment Proceeds Proceeds rom f
rom f
rom d
isposal d
isposal d
isposal o
f: o
f: o
f: 978,377 978,377 75,274 75,274 – – Property Property aand nd eequipment quipment 12 12 Proceeds fnd rom dquipment isposal of: 12 978,377 978,377 978,377 75,274 75,274 75,274 Property Property Property a
a
nd a
e
nd quipment e
e
quipment 12 12 – – 11,958,084 11,958,084 – – – – – Atok Atok GGold old 5 5 978,377 75,274 – Property a
nd e
quipment 12 – – – 11,958,084 11,958,084 11,958,084 (8,738,110) – – – Atok Acquisitions Atok Atok Gold Gold Gold oof f pproperty 5 12 5 (90,714) (90,714) (1,904,739) (1,904,739) (8,738,110) Acquisitions roperty aand nd eequipment quipment 12 5 – 11,958,084 – Atok G
old 5 (90,714) (90,714) (90,714) (655,930,688) (1,904,739) (1,904,739) (1,904,739) (19,855,094) (8,738,110) (8,738,110) (8,738,110) Acquisitions Acquisitions Acquisitions f sed opf oroperty pf piroperty and and aaend quipment ectivities quipment equipment 12 12 (101,972,648) (101,972,648) (655,930,688) (19,855,094) Net Net ccash ash uoused in iroperty n nvesting investing activities 12 (90,714) (655,930,688) (1,904,739) (8,738,110) Acquisitions oin f investing roperty nd equipment (101,972,648) (101,972,648) (655,930,688) (655,930,688) (19,855,094) (19,855,094) (19,855,094) Net Net Net cash cash cash used used used in ipn investing investing aactivities activities activities 12 (101,972,648) (101,972,648) (655,930,688) (19,855,094) Net cash used in investing activities (Forward) (Forward) (Forward) (Forward) (Forward) (Forward) ATOK-BIG WEDGE CO., INC. 2012 Annual Report
33
-‐ 2 -‐ Note CASH FLOWS FROM FINANCING ACTIVITIES Issuance of and subscription to capital stock 2011 2010 P
=– 18 P
=– P
=1,000,000,000 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (142,969,952) (655,365,688) 952,939,038 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 334,047,916 989,413,604 36,474,566 CASH AND CASH EQUIVALENTS AT END OF YEAR P
=191,077,964 P
=334,047,916 P
=989,413,604 See accompanying Notes to Consolidated Financial Statements. 34
2012 ATOK-BIG WEDGE CO., INC. 2012 Annual Report
Notes to the Consolidated
Financial Statements
30
26
ATOK-‐BIG WEDGE CO., INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Corporate Matters Corporate Information Atok-‐Big Wedge Co., Inc. (the Parent Company) was incorporated and registered with the Philippine Securities and Exchange Commission (SEC) on September 3, 1931 as a holding company with business in general investments. The Parent Company’s corporate life was extended to another 50 years from September 25, 1981. On May 25, 2010, the SEC approved the change in the Parent Company’s primary purpose from a holding company to a company authorized to engage in the business of exploration and development of mining, oil, gas and other natural resources. Its secondary purpose includes holding and transferring shares of stock and other securities of any corporation, among others. The Parent Company is 69.75% and 75.84% owned by Boerstar Corporation as at December 31, 2012 and 2011, respectively. The Parent Company initially listed its shares in the Philippine Stock Exchange (PSE) on January 8, 1948. As at December 31, 2012, 953,963,474 of the Parent Company’s shares are listed in the PSE. The Parent Company’s registered address is 10th Floor, Alphaland Southgate Tower, 2258 Chino Roces Avenue corner EDSA, Makati City. Business Operations In June 2011, the Parent Company sold to Progressive Development Corporation (PDC) its 99.99% interest in Atok Gold Mining Co., Inc. (Atok Gold). As a result, the assets and liabilities of Atok Gold were deconsolidated from the time of its disposal (see Note 5). In October 2011, the Parent Company acquired 100% interest in Tidemark Holdings Limited (Tidemark), a holding company based in Hong Kong from Major Holdings Corporation for P
=663.8 million. In May 2012, an additional investment was made to Tidemark amounting to P
=103.5 million for the acquisition of additional 1 million shares of Forum Energy plc (FEP) bringing Tidemark’s total ownership in FEP from 25.92% in 2011 to 27.14% in 2012. FEP’s shares are listed and traded at the London Stock Exchange (LSE)’s Alternative Investment Market. FEP encountered a delay in one of its drilling programs. It has submitted all the requirements for the issuance of required permits for the drilling program. However, the permit has not yet been issued by the relevant Government body. The latest resource assessment supported the case to proceed with the drilling and FEP has been granted an extension up to August 2015 to complete its obligations under the service contract. FEP expects to proceed with its commitment as soon as it is able to obtain the necessary authorization from the Government. The ultimate outcome of this uncertainty, however, cannot presently be determined. The Parent Company’s subsidiaries are as follows: Subsidiary Tidemark Place of Incorporation Hong Kong AB Stock Transfers Corporation (ABST) Philippines 36
Nature of Business Holding, Exploration and Development Stock Transfer Agency ATOK-BIG WEDGE CO., INC. 2012 Annual Report
Percentage of Ownership 2012 2011 100.00% 100.00% 99.99% 99.99% (Tidemark), a holding company based in Hong Kong from Major Holdings Corporation for P
=P
=663.8 663.8 million. million. In In May May 2012, 2012, an an additional additional investment investment was was made made to to Tidemark Tidemark amounting amounting to to P
=663.8 million. In May for 2012, an additional of investment was made Tidemark amounting to plc plc (FEP) P
=P
=103.5 103.5 million million for the the acquisition acquisition of additional additional 1 1 million million to shares shares of of Forum Forum Energy Energy (FEP) P
=103.5 million for the acquisition of additional 1 from shares Forum Energy (FEP) bringing bringing TTidemark’s idemark’s total total oownership wnership in in FFEP EP fmillion rom 225.92% 5.92% in in 2of 2011 011 to to 227.14% 7.14% in in 2plc 2012. 012. F FEP’s EP’s shares shares bringing Tare idemark’s tnd otal ownership FEP from 25.92% in 2011 to A
2A7.14% in 2I012. FEP’s sM
hares are listed listed aand traded traded aat t the the Lin ondon London SStock tock EExchange xchange (LSE)’s (LSE)’s lternative lternative nvestment Investment Market. arket. are listed and traded at the London Stock Exchange (LSE)’s Alternative Investment Market. FEP eencountered ncountered aa d delay elay in in oone ne oof f its its ddrilling rilling pprograms. rograms. It It hhas as submitted submitted aall ll the the requirements requirements for for FEP FEP encountered a delay in one of its drilling programs. It has submitted all the requirements for the issuance of required permits for the drilling program. However, the permit has not yet been the issuance of required permits for the drilling program. However, the permit has not yet been the issuance of required permits for the drilling program. However, the permit has not yet been issued bby y the the relevant relevant GGovernment overnment bbody. ody. T The he latest latest resource resource aassessment ssessment supported supported the the case case to to issued issued by proceed with the drilling and FEP has been granted an extension up to August 2015 to complete tproceed with the drilling and FEP has been granted an extension up to August 2015 to complete he relevant Government body. The latest resource assessment supported the case to proceed with the drilling and FEP has been granted an extension up to August 2015 to complete its obligations under the service contract. FEP expects to proceed with its commitment as soon its obligations under the service contract. FEP expects to proceed with its commitment as soon its obligations under the service contract. FEP expects to proceed with its commitment as soon as it is able to obtain the necessary authorization from the Government. The ultimate outcome as it is able to obtain the necessary authorization from the Government. The ultimate outcome as it is able to obtain the necessary authorization from the Government. The ultimate outcome of this this uuncertainty, ncertainty, hhowever, owever, cannot cannot ppresently resently bbe e ddetermined. etermined. of of this uncertainty, however, cannot presently be determined. The PParent arent CCompany’s ompany’s subsidiaries subsidiaries aare re aas s follows: follows: The The P arent Company’s subsidiaries are as follows: Percentage Percentage oof f Place Place oof f Percentage oOwnership f Ownership Ownership Place of Incorporation Subsidiary Subsidiary Incorporation Nature Nature oof f BBusiness usiness 2012 2012 2011 2011 Subsidiary Tidemark Incorporation Nature BHolding, usiness Exploration 2011 Tidemark Hong Hong KKong ong of Holding, Exploration 2012 and DDevelopment evelopment 100.00% 100.00% 100.00% 100.00% Tidemark Hong Kong Holding, Eand xploration AB AB Stock Stock Transfers Transfers CCorporation orporation and Development 100.00% 100.00% (ABST) (ABST) Philippines Philippines Stock Stock Transfer Transfer AAgency gency 99.99% 99.99% 99.99% 99.99% AB Stock Transfers Corporation (ABST) Philippines Stock Transfer 99.99% 99.99% -‐ 2 A-‐ gency The Parent Company and subsidiaries are collectively referred herein as “the Group.” Approval and Authorization for Issue of Consolidated Financial Statements The consolidated financial statements were approved and authorized for issue by the Executive Committee of the Board of Directors (BOD) on March 11, 2013. Statement of Compliance and Basis of Preparation The accompanying consolidated financial statements of the Group have been prepared on a historical cost basis. The financial statements are presented in Philippine peso (Philippine peso), which is the Group’s functional currency. All amounts are rounded to the nearest Philippine peso except when otherwise indicated. Moreover, the consolidated financial statements have been prepared in compliance with Philippine Financial Reporting Standards (PFRS) issued by the Financial Reporting Standards Council (FRSC) and adopted by the SEC. PFRS includes PFRS, Philippine Accounting Standards (PAS) and Philippine Interpretations from the International Financial Reporting Interpretations Committee (IFRIC). 2. Summary of Changes in PFRS Adoption of New and Revised PFRS The Group adopted new and revised PFRS effective January 1, 2012. These are summarized below: •
PFRS 7 Financial Instruments: Disclosures -‐ Enhanced Derecognition and Transfer of Financial Assets Disclosure Requirements – The amended standard requires additional disclosure on financial assets that have been transferred but not derecognised and an entity’s continuing involvement in the derecognised assets. This disclosure is required to enable the user of the financial statements to evaluate the any remaining risks on the transferred assets. •
PAS 12 Income Taxes -‐ Deferred Taxes: Recovery of Underlying Assets (Amended) – The amendment clarifies that the deferred tax on investment property measured using the fair value model in PAS 40 should be determined considering that the carrying value of the ATOK-BIG WEDGE CO., INC. 2012 Annual Report
investment property will be recovered through a sale transaction. Deferred tax on non-‐
37
Council (FRSC) and adopted by the SEC. PFRS includes PFRS, Philippine Accounting Standards (PAS) and Philippine Interpretations from the International Financial Reporting Interpretations Committee (IFRIC). 2. Summary of Changes in PFRS Adoption of New and Revised PFRS The Group adopted new and revised PFRS effective January 1, 2012. These are summarized below: •
PFRS 7 Financial Instruments: Disclosures -‐ Enhanced Derecognition and Transfer of Financial Assets Disclosure Requirements – The amended standard requires additional disclosure on financial assets that have been transferred but not derecognised and an entity’s continuing involvement in the derecognised assets. This disclosure is required to enable the user of the financial statements to evaluate the any remaining risks on the transferred assets. PAS 12 Income Taxes -‐ Deferred Taxes: Recovery of Underlying Assets (Amended) – The amendment clarifies that the deferred tax on investment property measured using the fair value model in PAS 40 should be determined considering that the carrying value of the investment property will be recovered through a sale transaction. Deferred tax on non-‐
depreciable assets measured using the revaluation model in PAS 16 should also be measured -‐ 3 -‐ by determining the recoverability of the non-‐depreciable assets in a sale transaction. These new and revised PFRS have no significant impact on the amounts and disclosures in the consolidated financial statements of the Group. •
New and Revised PFRS Not Yet Adopted Relevant new and revised PFRS which are not yet effective for the year ended December 31, 2012 and have not been applied in preparing the consolidated financial statements are summarized below. Effective for annual periods beginning on or after July 1, 2012: •
PAS 1 Financial Statement Presentation, Presentation of Items of Other Comprehensive Income – The amendment changed the presentation of items in Other Comprehensive Income (OCI). Items that could be reclassified to profit or loss at a future point in time should be presented separately from items that cannot be reclassified. Effective for annual periods beginning on or after January 1, 2013: 38
•
PAS 19 Employee Benefits (Amendment) – There were numerous changes ranging from the fundamental such as removing the corridor mechanism in the recognition of actuarial gains or losses and the concept of expected returns on plan assets to simple clarifications and re-‐
wording. •
PAS 27 Separate Financial Statements (as revised in 2011) – As a consequence of the new PFRS 10 and PFRS 12, PAS 27 is now limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial statements. •
PAS 28 Investments in Associates and Joint Ventures (as revised in 2011) – This standard prescribes the application of the equity method to investments in joint ventures and associates. •
PFRS 7 Financial Instruments Disclosures -‐ Offsetting Financial Assets and Financial Liabilities (Amendments) – The amendment requires entities to disclose information that will enable users to evaluate the effect or potential effect of netting arrangements on an entity’s financial position. The new disclosure is required for all recognized financial instruments that are subject to an enforceable master netting arrangement or similar agreement. ATOK-BIG WEDGE CO., INC. 2012 Annual Report
•
PAS 1 Financial Statement Presentation, Presentation of Items of Other Comprehensive Income – The amendment changed the presentation of items in Other Comprehensive Income (OCI). Items that could be reclassified to profit or loss at a future point in time should be presented separately from items that cannot be reclassified. Effective for annual periods beginning on or after January 1, 2013: •
PAS 19 Employee Benefits (Amendment) – There were numerous changes ranging from the fundamental such as removing the corridor mechanism in the recognition of actuarial gains or losses and the concept of expected returns on plan assets to simple clarifications and re-‐
wording. •
PAS 27 Separate Financial Statements (as revised in 2011) – As a consequence of the new PFRS 10 and PFRS 12, PAS 27 is now limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial statements. •
PAS 28 Investments in Associates and Joint Ventures (as revised in 2011) – This standard prescribes the application of the equity method to investments in joint ventures and associates. •
PFRS 7 Financial Instruments Disclosures -‐ Offsetting Financial Assets and Financial Liabilities (Amendments) – The amendment requires entities to disclose information that will enable users to evaluate the effect or potential effect of netting arrangements on an entity’s financial position. The new disclosure is required for all recognized financial instruments that are subject to an enforceable master netting arrangement or similar agreement. •
PFRS 10 Consolidated Financial Statements – The standard replaces the portion of PAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements and SIC-‐12 Consolidation -‐ Special Purpose Entities. It establishes a single control model that applies to all entities including special purpose entities. Management will have to exercise significant judgment to determine which entities are controlled, and are required to be consolidated by a parent company. •
PFRS 12 Disclosure of Interests with Other Entities – The standard includes all of the disclosures that were previously in PAS 27 related to consolidated financial statements, as well as all of the disclosure requirements that were previously included in PAS 31 and PAS 28. These disclosures relate to an entity’s interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required. •
Amendments to PFRS 10, PFRS 11 and PFRS 12 : Transition Guidance – The amendments provide additional transition relief in PFRS 10 Consolidated Financial Statements, PFRS 11 Joint Arrangements and PFRS 12 Disclosure of Interests in Other Entities, limiting the ATOK-BIG WEDGE CO., INC. 2012 Annual Report
39
-‐ 4 -‐ requirement to provide adjusted comparative information to only the preceding comparative period. Furthermore, for disclosures related to unconsolidated structured entities, the amendments will remove the requirement to present comparative information for periods before PFRS 12 is first applied. •
PFRS 13 Fair Value Measurement – The standard establishes a single source of guidance under PFRS for all fair value measurements. It does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under PFRS when fair value is required or permitted. •
IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine – This interpretation applies to waste removal costs that are incurred in surface mining activity during the production phase of the mine (“production stripping costs”) and provides guidance on the recognition of production stripping costs as an asset and measurement of the stripping activity asset. •
Improvements to PFRS The omnibus amendments to PFRS issued in May 2012, which are effective for annual periods beginning on or after January 1, 2013, were issued primarily to clarify accounting and disclosure requirements to assure consistency in the application of the following standards. -
PFRS 1 First-‐time Adoption of International Financial Reporting Standards PAS 1 Presentation of Financial Statements PAS 16 Property Plant and Equipment PAS 32 Financial Instrument : Presentation PAS 34 Interim Financial Reporting Effective for annual periods beginning on or after January 1, 2014: •
Amendments to PFRS 10, PFRS 12 and PAS 27: Investment Entities – The amendments provide an exception from the requirements of consolidation to investment entities and instead require these entities to present their investments in subsidiaries as a net investment that is measured at fair value. Investment entity refers to an entity whose business purpose is to invest funds solely for returns from capital appreciation, investment income or both. •
Amendments to PAS 32: Offsetting Financial Assets and Financial Liabilities – The amendments address inconsistencies in current practice when applying the offsetting criteria in PAS 32 Financial Instruments: Presentation. The amendments clarify (a) the meaning of ‘currently has a legally enforceable right of set-‐off’; and (2) that some gross settlement systems may be considered equivalent to net settlement. Effective for annual periods beginning on or after January 1, 2015: •
PFRS 9 Financial Instruments: Classification and Measurement – This standard is the first phase in replacing PAS 39 and applies to classification and measurement of financial assets as defined in PAS 39. Under prevailing circumstances, the adoption of the foregoing new and revised PFRS, is not expected to have any material effect on the consolidated financial statements. 40
-‐ 5 -‐ 3. Summary of Significant Accounting Policies The accounting policies set out below have been applied consistently by the Group to all years presented in the consolidated financial statements. Basis of Consolidation Subsidiaries – Subsidiaries are entities controlled by the Parent Company. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. Subsidiaries are consolidated from the date control is transferred to the Parent Company and cease to be consolidated from the date control is transferred out of the Parent Company. The consolidated financial statements include the accounts of the Parent Company and its subsidiaries. In assessing control, the existence and effect of potential voting rights that are currently exercisable or convertible are considered. Subsidiaries are consolidated from the date of acquisition or incorporation, being the date on which the Group obtains control, and continue to be consolidated until the date such control ceases. Transactions Eliminated on Consolidation – All intragroup balances, transactions, income and expenses and unrealized gains and losses are eliminated in full. Accounting Policies of Subsidiaries – The financial statements of subsidiaries are prepared for the same reporting year and using uniform accounting policies as that of the Parent Company. Functional and Presentation Currency – The consolidated financial statements are presented in Peso, which is the Parent Company’s functional and presentation currency. Each entity in the Group determines its own functional currency, which is the currency that best reflects the economic substance of the underlying transactions, events and conditions relevant to that entity, and items included in the financial statements of each entity are measured using that functional currency. When there is a change in those underlying transactions, events and conditions, the entity accounts for such change in accordance with the Group’s policy on change in functional currency. At the reporting date the assets and liabilities of Tidemark, a subsidiary whose functional currency is in US Dollar are translated into the presentation currency of the Parent Company using the foreign exchange closing rate at the reporting date, components of equity using historical exchange rate and, their statements of comprehensive income are translated at the foreign exchange weighted average daily exchange rates for the year. The exchange differences arising from translation are taken directly to a separate component of equity under the “Other Comprehensive Income” account. Upon disposal of the foreign entity, the cumulative translation adjustment shall be recognized in the consolidated statements of comprehensive income. Business Combination and Goodwill Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-‐controlling interest in the acquiree. For each business combination, the Group elects whether to measure the non-‐controlling interest in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-‐related costs are expensed as incurred and included in administrative expenses. ATOK-BIG WEDGE CO., INC. 2012 Annual Report
41
-‐ 6 -‐ When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IAS 39 Financial Instruments: Recognition and Measurement, is measured at fair value with changes in fair value recognised either in either profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-‐controlling interest over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the gain is recognised in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-‐generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill has been allocated to a cash-‐generating unit and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-‐generating unit retained. Financial Instruments Date of Recognition. The Group recognizes a financial asset or a financial liability in the consolidated statements of financial position when it becomes a party to the contractual provisions of the instrument. Regular way purchases or sales of financial assets, that require delivery within the timeframe established by regulation and convention in the market place are recognized on settlement date. Initial Recognition. Financial instruments are recognized initially at fair value of the consideration given (in case of an asset) or received (in case of a liability). The initial measurement of financial instruments, except for those designated at fair value through profit and loss (FVPL), includes transaction costs. Financial assets within the scope of PAS 39, are classified as either financial assets at fair value through profit or loss (FVPL), held to maturity (HTM) investments, loans and receivables, and available for sale (AFS) financial assets, as appropriate. Financial liabilities are classified as FVPL or as other financial liabilities. 42
-‐ 7 -‐ As at December 31, 2012 and 2011, the Group does not have financial assets and liabilities at FVPL and HTM investments. There were no reclassifications within the categories of financial assets and financial liabilities in 2012 and 2011. AFS Financial Assets. AFS financial assets are non-‐derivative financial assets that are designated as AFS or are not classified in any of the other categories. The Group designates financial instruments as AFS if they are purchased and held indefinitely and may be sold in response to liquidity requirements or changes in market conditions. After initial recognition, AFS financial assets are measured at fair value. Changes in fair value, other than impairment losses and foreign currency differences on AFS financial asset (which are recognized in profit or loss), are recognized as other comprehensive income and accumulated balance is lodged under “Reserve for fair value changes on AFS investments” within equity. The losses arising from the impairment of such investments are recognized in profit or loss. When the investment is disposed of, the cumulative gain or loss previously recognized in other comprehensive income is transferred to profit or loss. When the fair value of AFS investments cannot be measured reliably because of lack of reliable estimates of unobserved inputs such as in the case of unquoted equity instruments, these securities are allowed to be carried at cost less allowance for impairment, if any. This category includes AFS financial assets classified as investment in unlisted securities of the Group. Loans and Receivables. Loans and receivables are non-‐derivative financial assets with fixed or determinable payments and maturities that are not quoted in an active market. Subsequent to initial measurement, loans and receivables are carried at cost or amortized cost using the effective interest method, less any impairment in value. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees that are integral part of the effective interest rate. Gains or losses are recognized in profit or loss when loans and receivables are derecognized or impaired, as well as through the amortization process. Included in this category are cash and cash equivalents, receivables, receivables from related parties and refundable deposits. Cash equivalents are short-‐term, highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less and are subject to an insignificant risk of change in value. Other Financial Liabilities. This category pertains to financial liabilities that are not designated or classified as at FVPL. After initial measurement, other financial liabilities are carried at amortized cost using the effective interest method. Amortized cost is calculated by taking into account any premium or discount and any directly attributable transaction costs that are considered an integral part of the effective interest rate of the liability. Included in this category are the accounts payable and accrued expenses (excluding statutory liabilities), payable to related parties and other current liabilities. ATOK-BIG WEDGE CO., INC. 2012 Annual Report
43
-‐ 8 -‐ Impairment of Financial Assets A financial asset or a group of financial assets is deemed to be impaired if there is objective evidence of impairment as a result of one or more events that has occurred since the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on 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 debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Financial assets carried at amortised cost. For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognized in profit or loss. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a write-‐off is later recovered, reversal of an impairment loss is recognized in profit or loss. Available for sale financial investments. For available-‐for-‐sale financial investments, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired. In the case of equity investments classified as available-‐for-‐
sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. ‘Significant’ is evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its original cost. When there is evidence of impairment, the cumulative loss -‐ measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in profit or loss and is removed from other comprehensive income and recognised in profit or loss. Impairment losses on equity investments are not reversed through profit or loss; increases in their fair value after impairment are recognised directly in other comprehensive income. 44
-‐ 9 -‐ Derecognition o
of f FFinancial inancial A
Assets ssets aand nd LLiabilities iabilities Derecognition Derecognition of Financial Assets and Liabilities Financial Assets. Assets. A A financial financial asset asset (or, (or, where where applicable, applicable, a a part part of of a a financial financial asset asset or or part part of of a a Financial group o
f s
imilar f
inancial a
ssets) i
s d
erecognized w
hen: Financial Assets. A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when: group of similar financial assets) is derecognized when: the rright ight tto o rreceive eceive ccash ash fflows lows ffrom rom tthe he aasset sset h
have expired; •• the as expired; • the right to receive cash flows from the asset have expired; the Group Group retains retains the the right right to to receive receive cash cash flows flows from from the the asset, asset, but but has has assumed assumed an an •• the obligation to pay them in full without material delay to a third party under a “pass-‐through” • obligation to pay them in full without material delay to a third party under a “pass-‐through” the Group retains the right to receive cash flows from the asset, but has assumed an arrangement; or r obligation to pay them in full without material delay to a third party under a “pass-‐through” arrangement; o
arrangement; or •• the the Group Group has has transferred transferred its its right right to to receive receive cash cash flows flows from from the the asset asset and and either: either: (a) (a) h
has as transferred substantially all the risks and rewards of the asset, or (b) h
as neither transferred • transferred substantially all the risks and rewards of the asset, or (b) the Group has transferred its right to receive cash flows from the asset and either: (a) has has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control transferred substantially all the risks and rewards of the asset, or (b) h
as neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of he aasset. sset. nor retained substantially all the risks and rewards of the asset, but has transferred control of tthe of the asset. When the Group Group has has transferred transferred its its right right to to receive receive cash cash flows flows from from an an asset asset and and has has neither neither When the transferred nor retained retained substantially all to the receive risks and and rewards of the the nor has transferred When the Group has transferred its right cash rewards flows from an asset and neither transferred nor substantially all the risks of nor transferred control of the asset, the asset is recognized to the extent of the Group’s continuing involvement transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Group’s continuing involvement in the the asset. asset. Continuing Continuing involvement involvement that that takes takes the the form form of of a a guarantee guarantee over over the the transferred transferred control of the asset, the asset is recognized to the extent of the Group’s continuing involvement in asset is measured at the lower of the original carrying amount of the asset and the maximum in the asset. Continuing involvement that takes the form of a guarantee over the asset is measured at the lower of the original carrying amount of the asset and the transferred maximum amount of f cconsideration onsideration hat he of Group roup ould b
be e equired o p
pay. ay. of the asset and the maximum asset is measured at the tthat lower the original carrying amount amount o
tthe G
ccould rrequired tto amount of consideration that the Group could be required to pay. Financial Liabilities. A A financial financial liability liability is is derecognized derecognized when when the the obligation obligation is is discharged discharged or or Financial Liabilities. cancelled Liabilities. or has has expired. expired. When liability an existing existing financial liability liability is the replaced by another another from the the Financial A financial is derecognized when is obligation is discharged or cancelled or When an financial replaced by from same l
ender o
n s
ubstantially d
ifferent t
erms, o
r t
he t
erms o
f a
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xisting l
iability a
re s
ubstantially cancelled or ohas expired. When an existing liability replaced by another from the same lender n substantially different terms, ofinancial r the terms of an is existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition recognition of of a a new new liability, liability, and and the the difference difference in in the the respective respective carrying carrying amounts amounts is is modified, such an exchange or modification is treated as a derecognition of the original liability and the recognized n p
profit rofit o
oof r lloss. oss. and the recognition a new liability, and the difference in the respective carrying amounts is recognized iin r recognized in profit or loss. Offsetting FFinancial inancial IInstruments nstruments Offsetting Financial assets assets and financial liabilities liabilities are are offset offset and and the the net net amount amount is is reported reported in in the the Offsetting Financial Instruments Financial and financial consolidated s
tatements o
f f
inancial p
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f, a
nd o
nly i
f, t
here i
s a
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urrently e
nforceable legal Financial assets and financial liabilities are if, offset and if, the net is ereported in legal the consolidated statements of financial position and only there is aamount currently nforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or to consolidated s
tatements o
f f
inancial p
osition i
f, a
nd o
nly i
f, t
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s a
c
urrently e
nforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize t
he a
sset a
nd s
ettle t
he l
iability s
imultaneously. T
his i
s n
ot g
enerally t
he c
ase w
ith m
aster right to the offset the recognized and there is an settle on net wbasis, to realize asset and settle the amounts liability simultaneously. Tintention his is not gto enerally the a case ith mor aster netting a
greements, a
nd t
he r
elated a
ssets a
nd l
iabilities a
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resented g
ross i
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onsolidated realize t
he a
sset a
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ettle t
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iability s
imultaneously. T
his i
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enerally t
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ase w
ith m
aster netting agreements, and the related assets and liabilities are presented gross in the consolidated statements of f ffinancial inancial position. osition. netting agreements, and the related assets and liabilities are presented gross in the consolidated statements o
p
statements of financial position. Other C
Current urrent A
Assets ssets Other Other urrent aaAssets ssets aare urrent ssets re eexpenses xpenses p
paid aid iin n aadvance dvance aand nd rrecorded ecorded aas s aasset sset b
before efore tthey hey aare re u
utilized. tilized. Other C
ccurrent This aaccount ccount ncludes he effxpenses ollowing: Other current assets attre paid in advance and recorded as asset before they are utilized. This iincludes he ollowing: This account includes the following: Input ax iis s rrecognized ecognized w
when hen aan n eentity ntity iin n tthe he G
Group roup p
purchases urchases ggoods oods o
or r sservices ervices ffrom rom Input TTax. ax. IInput nput ttax a Value Added Tax (VAT) -‐ registered supplier or vendor. This account is offset, on a per entity Input Tax. Input tax is recognized when an entity in the Group purchases goods or services from a Value Added Tax (VAT) -‐ registered supplier or vendor. This account is offset, on a per entity basis, gainst aany ny o
output utput ttax ax p
previously reviously rrecognized. ecognized. a Value Added Tax (VAT) -‐ registered supplier or vendor. This account is offset, on a per entity basis, aagainst basis, against any output tax previously recognized. Creditable Withholding Tax. Creditable withholding tax is deducted from income tax payable on Creditable Withholding Tax. Creditable withholding tax is deducted from income tax payable on the ssame ame yyear ear tthe he rrevenue evenue w
was as rrecognized. ecognized. C
Creditable reditable w
withholding ithholding ttaxes axes iin n eexcess xcess o
of f iincome ncome ttax ax Creditable Withholding Tax. Creditable withholding tax is deducted from income tax payable on the -‐ 1
0 -‐
payable re arried orward w
o he ucceeding ear. withholding taxes in excess of income tax the same year the rffevenue as recognized. Creditable payable aare ccarried orward tto tthe ssucceeding yyear. payable are carried forward to the succeeding year. Prepaid Expenses. Expenses. Prepaid Prepaid expenses expenses are are apportioned apportioned over the Prepaid over the period period covered covered by by the the payment payment and charged to the aPrepaid ppropriate account in apportioned profit or loss over when incurred. Prepaid Expenses. expenses are the period covered by the payment Prepayments that are expected to be realized for no more than 12 months after the reporting period are classified as current assets. Otherwise, these are classified as noncurrent assets. ATOK-BIG WEDGE CO., INC. 2012 Annual Report
45
and charged to the appropriate account in profit or loss when incurred. Prepayments that are expected to be realized for no more than 12 months after the reporting period are classified as current assets. Otherwise, these are classified as noncurrent assets. Investment in an Associate Investment in an associate in which the Group exercises significant influence and which is neither a subsidiary nor a joint venture of the Group is accounted for under equity method of accounting. Under the equity method, the cost of investment in an associate is carried in the consolidated statements of financial position at cost plus post acquisition changes in the Group’s share of net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the investment and is not amortized or separately tested for impairment. The consolidated statements of comprehensive income reflect the share of the result of operations of the associate. Where there has been a change recognized directly in the equity of the associate, the Group recognizes its share of any changes and discloses this, when applicable, in the consolidated statements of changes in equity. The reporting dates of the associate and the Parent Company are identical and the associate’s accounting policies conform to those used by the Group for like transactions and events in similar circumstances. Property and Equipment Property and equipment are carried at cost less accumulated depreciation, amortization and impairment losses, if any. Initially, an item of property and equipment is measured at its cost, which comprises its purchase price and any directly attributable costs of bringing the asset to its working condition. Subsequent expenditures are added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance, will flow to the Group. The costs of day-‐to-‐day servicing of an asset are recognized in profit or loss in the period in which they are incurred. Depreciation is computed using the straight-‐line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the estimated useful life of the improvements or the term of the lease whichever is shorter. Estimated useful lives are as follows: Number of Years Exploration equipment 3 Leasehold improvements 5 Furniture and fixtures 4 Office equipment 3 Transportation equipment 5 The useful lives and depreciation and amortization method are reviewed at each reporting date to ensure that they are consistent with the expected pattern of economic benefits from items of property and equipment. 46
Fully depreciated assets are retained in the accounts until they are no longer in use and no further charge for depreciation is made in respect of those assets. When an asset is disposed of, or is permanently withdrawn from use and no future economic benefits are expected from its disposal, the cost and accumulated depreciation and amortization and impairment are removed from the accounts and any resulting gain or loss arising from the retirement or disposal is recognized in profit or loss. Deferred Mining Exploration Costs Expenditures for mine exploration work prior to and subsequent to drilling are deferred as incurred. These shall be written-‐off if the results of the exploration work are determined to be not commercially viable. If the results are commercially viable, the deferred expenditures and the subsequent development cost shall be capitalized and amortized from the start of commercial operations. Impairment of Nonfinancial Assets Nonfinancial assets consisting of property and equipment, investment in an associate, deferred mining exploration costs and other noncurrent assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If any such indication exists and where the carrying amount of an asset exceeds its recoverable amount, the asset or cash-‐generating unit is written down to its recoverable amount. The estimated recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-‐tax discount rate that reflects current market assessments of time value of money and the risks specific to the asset. 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 profit or loss. An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over remaining useful life. Related Party Transactions Related party relationships exist when one party has the ability to control, directly or indirectly through one or more intermediaries, the other party or exercise significant influence over the other party in making financial and operating decisions. Such relationships also exist between and/ or among entities which are under common control with the reporting enterprise, or between and/ or among the reporting enterprises and their key management personnel, directors, or its stockholders. Related parties may be individuals or corporate entities. ATOK-BIG WEDGE CO., INC. 2012 Annual Report
47
Revenue Recognition Revenue is recognized to the extent that the economic benefits will flow to the Group and the amount of the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts and rebates. The following specific recognition criteria must also be met before revenue is recognized. Service Income. Service income is recognized when the related service has been rendered. Interest Income. Interest income is recognized as the interest accrues taking into account the effective yield of the asset. Cost and Expense Recognition Costs and expenses are recognized when incurred and are reported in the consolidated statements of comprehensive income in the periods to which they relate. Leases The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date, whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. A reassessment is made after inception of the lease only if one of the following applies: a. there is a change in contractual terms, other than a renewal or extension of the arrangement; b. a renewal option is exercised or extension granted, unless the term of the renewal or extension was initially included in the lease term; c. there is a change in the determination of whether fulfillment is dependent on a specified asset; or d. there is a substantial change to the asset. Where reassessment is made, lease accounting shall commence or cease from the date when the change in circumstances gave rise to the reassessment for scenarios (a), (c) or (d) and at the date of renewal or extension period for scenario (b). Group as a Lessee. Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases. Operating lease payments are recognized in profit or loss on a straight-‐line basis over the lease term. Group as a Lessor. Leases where the Group retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned. Foreign Currency Transactions. Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are 48
-‐ 13 -‐ translated at the functional currency spot rates of exchange at the reporting date. Differences arising on settlement or translation of monetary items are recognised in profit or loss with the exception of monetary items that are designated as part of the hedge of the Group’s net investment of a foreign operation. These are recognised in other comprehensive income until the net investment is disposed of, at which time, the cumulative amount is reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income. Non-‐monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-‐monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Gain or loss arising on translation of non-‐monetary items measured at fair value is treated in line with the recognition of gain or loss on change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in other comprehensive income or profit or loss are also recognised in other comprehensive income or profit or loss, respectively). Income Taxes Income tax for the year comprises current and deferred tax. Income tax is recognized in the Group’s profit or loss except to the extent that it relates to items recognized directly in equity. Current income tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date. Deferred tax is provided, on all temporary differences at the reporting 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. Deferred tax assets are recognized for all deductible temporary differences, and carry forward benefits of the excess of minimum corporate income tax (MCIT) over the regular corporate income tax and net operating loss carryover (NOLCO), to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences, excess MCIT and NOLCO can be utilized. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient future 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 expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) in effect at the reporting date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to offset current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same tax authorities. Capital Stock Common stock is measured at par value for all shares issued. Proceeds and/or fair value of considerations received in excess of par value, if any, are recognized as additional paid-‐in capital. Incremental costs incurred that are directly attributable to the issuance of new shares are recognized in equity as deduction from proceeds, net of tax. Unpaid subscriptions are recognized as a reduction of subscribed common shares. ATOK-BIG WEDGE CO., INC. 2012 Annual Report
49
Retained Earnings/Deficit Retained earnings/deficit represents the accumulated net income or losses, net of any dividend declaration. Basic and Diluted Earnings/Loss Per Share (EPS) Basic EPS is computed by dividing the net income or loss for the period attributable to equity holders of the Group by the weighted average number of issued and outstanding and subscribed common shares during the period, with retroactive adjustment for any stock dividends declared. Diluted EPS is computed in the same manner, adjusted for the effects of convertible securities. Provisions and Contingencies Provisions are recognized when the Group has a present legal or constructive obligation 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. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-‐tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as an interest expense. Contingent liabilities are not recognized in the consolidated financial statements but are disclosed in the notes to consolidated financial statements unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not recognized in the consolidated financial statements but are disclosed in the notes to consolidated financial statements when an inflow of economic benefits is probable. Events After the Reporting Date Post year-‐end events that provide additional information about the Group’s position at the reporting date (adjusting event) is reflected in the consolidated financial statements. Any event after the reporting date that is not an adjusting event is disclosed in the notes to consolidated financial statements when material. Segment Reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. As at December 31, 2012 and 2011, the Group’s operating segments consist of its mining, exploration and development and stock transfer agency activities. 4. Significant Accounting Judgments, Estimates and Assumptions The preparation of consolidated financial statements in accordance with PFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are 50
-‐ 15 -‐ believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. Judgments are made by management on the development, selection and disclosure of the Group’s critical accounting policies and estimates and the application of these policies and estimates. In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amount recognized in the consolidated financial statements are as follows: Judgments Functional Currency. Management uses judgment in assessing the functional currency of the Parent Company and its subsidiaries. Each entity in the Group determines its own functional currency, which is the currency that best reflects the economic substance of the underlying events and circumstances relevant to that entity. Legal Contingencies. The estimate of the probable costs for the resolution of possible claims have been developed in consultation with outside counsel handling the Group’s defense in these matters and is based upon an analysis of potential results. There are no on-‐going litigations filed against the Parent Company and its subsidiaries that would have a material adverse impact on the Group’s financial condition and results of operations. Operating Lease Commitments Group as Lessee. The Group has entered into commercial property leases related to its office spaces. Based on contractual provisions, the Group has determined that the significant risks and benefits of ownership of the asset are retained by the lessor. Accordingly, the leases are accounted as operating leases. Group as Lessor. The Group has entered into sublease agreement on its commercial property leases. The Group has determined that it retains all the significant risks and benefits of ownership of these properties. Accordingly, these leases are accounted for as operating leases. Estimates and Assumptions Useful Lives of Property and Equipment. The Group estimates the useful lives of its property and equipment based on the period over which the assets are expected to be available for use. The estimated useful lives of property and equipment are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the property and equipment. In addition, estimation of the useful lives of property and equipment is based on collective assessment of internal technical evaluation and experience with similar assets. It is possible, however, that future results of operations could be materially affected by changes in estimates ATOK-BIG WEDGE CO., INC. 2012 Annual Report
51
-‐ 16 -‐ brought about by changes in factors mentioned above. The amount and timing of recorded depreciation expense for any period would be affected by changes in these factors and circumstances. As at December 31, 2012 and 2011, the carrying value of property and equipment amounted to P
=3.6 million and P
=6.7 million, respectively (see Note 12). Impairment of Nonfinancial Assets. The Group assesses the impairment of its investment in an associate, property and equipment and deferred mining exploration cost whenever events or changes in circumstances indicate that the carrying amount of the assets or group of assets may not be recoverable. Factors that the Group considered in deciding when to perform impairment review of investment in an associate and properties and equipment include the following among others: •
A significant decline in market value of asset is more than would be expected from the passage of time or normal use. •
A significant adverse change in how the asset is being used or in its physical condition. •
A significant change in the technological, legal or economic environment in which the business operates. •
A current-‐period loss combined with a history of losses or a projection of continuing losses associated with the asset. •
A realization that the asset will be disposed of significantly before the end of its estimated useful life. Factors that the Group considered in deciding when to perform impairment review of deferred mining exploration cost includes the following among others: 52
•
The period for which the Group has the right to explore the specific areas has expired or will expire in the near future, and is not expected to be renewed. •
Substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned. •
Exploration for the evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area. •
Sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of explored mineral resource is unlikely to be recovered in full from successful development or by sale. •
Significant under-‐performance of a business or product line in relation to expectations. •
Significant negative industry or economic trends. •
Significant changes or planned changes in the use of the assets. ATOK-BIG WEDGE CO., INC. 2012 Annual Report
-‐ 17 -‐ As at December 31, 2012, management assessed that there are no impairment indicators relating to the Group’s property and equipment. As at December 31, 2012, the fair value of the Group’s investment in FEP exceeds its carrying value. The Group recognized impairment loss on deferred mining exploration cost amounting to nil in 2012 and P
=2.6 million in 2011 (see Note 11). The carrying values of investment in an associate and property and equipment are disclosed in Notes 9 and 12 to consolidated financial statements. Realizability of Deferred Tax Assets. The Group reviews the carrying amounts of deferred tax assets at each reporting date and reduces the amounts 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. The Group reviews its projected performance in assessing the sufficiency of future taxable income. The Group has unrecognized deferred tax assets as at December 31, 2012 and 2011 amounting to P
=33.4 million and P
=28.0 million, respectively (see Note 16). 5. Business Combination and Disposal of a Subsidiary Business Combination In October 2011, the Parent Company acquired from Major Holdings Corporation (MHC) its 100.00% interest in Tidemark for P
=663.8 million. Tidemark owns 25.92% of FEP at the date of acquisition. The fair values of the identifiable net assets of Tidemark as at the date of acquisition are as follows: Cash Investment in an associate Net assets Subsumed goodwill arising from the acquisition Total consideration satisfied by cash Fair Values Carrying Values P
=169,098 P
=169,098 289,325,937 655,800,000 289,495,035 374,318,665 P
=663,813,700 P
=655,969,098 The cost of the business combination amounted to P
=663,813,700 which consisted of the cash purchase price and transaction costs. The subsumed goodwill, based on the initial accounting for this business combination, was recognized as part of the “Investment in an Associate” account since the Parent Company’s acquisition of Tidemark was intended as an acquisition of a subsidiary, rather than the underlying assets and liabilities of an associate. Tidemark contributed to the Group a net loss of P
=302.4 million in 2012 and net income of P
=4.2 million from the date of acquisition in 2011 (see Note 9). Had the acquisition been completed at the beginning of 2011, Tidemark would have contributed P
=38.8 million to the profit or loss of the Group in 2011. ATOK-BIG WEDGE CO., INC. 2012 Annual Report
53
Disposal of a Subsidiary In June 2011, the Parent Company sold to PDC its full interest in Atok Gold for P
=12.8 million. The disposal of Atok Gold resulted in a gain of P
=9.3 million and its related deconsolidation from the Group’s consolidated financial statements. 6. Cash and Cash Equivalents This account consists of: Cash on hand and in banks Cash equivalents 2012 P
=3,371,809 187,706,155 P
=191,077,964 2011 P
=5,420,129 328,627,787 P
=334,047,916 The Group’s cash in banks earn interest at the prevailing bank deposit rates. Interest income earned on cash in banks and cash equivalents amounted to P
=8.5 million, P
=29.7 million, and P
=26.8 million in 2012, 2011, and 2010, respectively. 7. Receivables This account consists of: Advances to officers and employees Accounts receivable Interest receivable Advances to supplier Others Less allowance for impairment losses 2012 P
=246,617 131,799 67,560 33,633 13,115 492,724 75,183 P
=417,541 2011 P
=192,628 175,120 297,199 33,633 22,325 720,905 41,550 P
=679,355 Accounts receivable is noninterest-‐bearing and is normally settled within 30 days from date of billing. The movements in the allowance for impairment losses are as follows: Balance at beginning of year Provision for the year Reversal Balance at end of year 54
2012 P
=41,550 33,633 – P
=75,183 2011 P
=8,080 41,550 (8,080) P
=41,550 8. Input VAT and Other Current Assets This account consists of: Input VAT -‐ net Money market placement Creditable withholding taxes (CWTs) -‐ net Prepaid expenses 2012 P
=3,922,290 288,344 58,788 13,401 P
=4,282,823 2011 P
=3,174,024 – 73,672 86,035 P
=3,333,731 Impairment loss on CWTs amounts to P
=4,746 and P
=17,883 in 2012 and 2011, respectively (see Note 15). 9. Investment in an Associate This account pertains to Tidemark’s investment in the shares of FEP. Movements in this account are as follows: As at October 1, 2011 Share in the net results of operations of an associate for three months Translation adjustment As at December 31, 2011 Additional investment Share in the net results of operations of an associate during the year Translation adjustment As at December 31, 2012 P
=663,644,868 4,168,305 1,800,772 669,613,945 103,515,000 (302,402,895) (49,923,750) P
=420,802,300 In 2012, the Group acquired additional 1 million shares of FEP for P
=103.5 million bringing its total ownership in FEP from 25.92% in 2011 to 27.14% in 2012. Following are the summarized financial information of FEP as at and for the years ended December 31, 2012 and 2011: 2012 2011 (In Million) Current assets Noncurrent assets Current liabilities Noncurrent Liabilities Equity Net income (loss) P
=335.8 1,443.6 702.2 171.6 905.6 (1,116.1) P
=205.2 2,483.2 173.8 435.3 2,079.3 151.6 ATOK-BIG WEDGE CO., INC. 2012 Annual Report
55
As discussed in Note 1, FEP encountered a delay in one of its drilling programs. It has submitted all the requirements for the issuance of required permits for the drilling program. However, the permit has not yet been issued by the relevant Government body. Management’s assessment of the status is also discussed in Note 1. As at December 31, 2012, the fair value of the investment in shares of stock of FEP amounting to P
=543.8 million exceeded its carrying value of P
=420.8 million by P
=123 million. As at March 11, 2013, however, the fair value of the investment in shares of stock of FEP declined to P
=328.3 million. 10. AFS Investment This account pertains to the Group’s investment in unquoted shares of stock which are carried at cost amounting to P
=999,950 as at December 31, 2012 and 2011, because fair value bases (i.e., quoted market process) are neither readily available nor is there an alternative basis of deriving a reliable valuation as at balance sheet date. 11. Deferred Mining Exploration Cost The realizability of deferred mining exploration cost is dependent upon the success of future exploration and development activities in proving the mining property’s viability to produce minerals in commercial quantities, the outcome of which cannot be determined at this stage of the Group’s operations. In 2011, deferred mining exploration cost of P
=2.6 million was fully written down upon management’s determination that the related projects were unsuccessful. 56
57
12.
P
=140,372 – (38,393) 101,979 -‐ 248,740 1 -‐ 41,458 (18,750) 71,448 P
=30,531 P
=4,388,354 – – 4,388,354 1,633,887 877,671 – 2,511,558 P
=1,876,796 P
=1,572,630 – (305,838) 1,266,792 740,362 373,370 (190,041) 923,691 P
=343,101 Cost Balance at beginning of year Acquisitions Disposal Balance at end of year Accumulated Depreciation and Amortization Balance at beginning of year Depreciation and amortization Disposal Balance at end of year Carrying amount 155,230 6,476 (161,706) – P
=– Land P
=156,398 – (156,398) – – – – – P
=– 56,166 2,231 (58,397) – P
=– Machinery and Equipment P
=485,508 – (485,508) – 2011 229,120 40,536 (220,916) 48,740 P
=91,632 734,205 899,682 – 1,633,887 P
=2,754,467 645,100 401,733 (306,471) 740,362 P
=832,268 Furniture and Fixtures P
=1,988,900 21,700 (437,970) 1,572,630 P
=2,945,905 – (1,280,357) 1,665,548 576,987 482,484 (576,161) 483,310 P
=1,182,238 330,283 392,915 (67,350) 655,848 P
=634,842 176,949 400,038 – 576,987 P
=2,368,918 2,327,053 2,143,611 (814,840) 3,655,824 P
=6,682,127 Total P
=11,657,077 1,904,739 (3,223,865) 10,337,951 Furniture and Office Transportation Fixtures Equipment Equipment Transportation Equipment Total P
=1,988,900 P
=1,245,757 P
=1,333,795 21,700 187,558 1,612,110 P
=2,945,905 P
=10,337,951 (437,970) – (142,625) 90,714 – (1,280,357) 1,290,690 (1,822,597) 1,572,630 2,945,905 1,665,548 8,606,068 576,987 3,655,824 176,949 645,100 330,283 482,484 2,178,892 400,038 401,733 392,915 (576,161) (842,957) (306,471) (67,350) – 483,310 4,991,759 576,987 740,362 655,848 =832,268 1,182,238 P
=3,614,309 P
=P
P
=634,842 P
=2,368,918 P
=1,290,690 90,714 (198,009) 1,183,395 655,848 403,909 (58,005) 1,001,752 P
=181,643 Office Transportation Equipment Equipment P
=1,245,757 P
=1,333,795 187,558 1,612,110 (142,625) – 1,290,690 2,945,905 Machinery 2012 and Exploration Leasehold Equipment Equipment Improvements Furniture and Fixtures Office Equipment P
=485,508 P
=1,856,577 P
=4,370,496 – 65,513 P
17,858 P
=1,572,630 =1,290,690 – 90,714 – (485,508) (1,781,718) (305,838) (198,009) – 140,372 4,388,354 1,266,792 1,183,395 655,848 56,166 740,362 229,120 734,205 403,909 2,231 373,370 40,536 899,682 (190,041) (220,916) (58,005) – (58,397) – 923,691 48,740 1,001,752 1,633,887 =– 343,101 P
=181,643 P
=P
=91,632 P
P
=2,754,467 Exploration Leasehold Equipment Improvements P
=1,856,577 P
=4,370,496 65,513 17,858 (1,781,718) – 140,372 4,388,354 Buildings and Structure Exploration Land Leasehold Equipment Improvements P
=156,398 P
=219,646 – P
=140,372 – P
=4,388,354 – (156,398) (219,646) – (38,393) – – – 101,979 4,388,354 48,740 – 1,633,887 155,230 41,458 – 877,671 6,476 (18,750) – (161,706) – 71,448 – 2,511,558 – P
=30,531 P
P
=1,876,796 =– P
=– Buildings and Structure P
=219,646 – (219,646) – Cost Balance at beginning of year Cost Balance at beginning of yAcquisitions ear Acquisitions Disposal Disposal Balance at end of year Balance at end of year Accumulated Depreciation Accumulated Depreciation and and A
amortization mortization Balance at beginning of yBalance ear at beginning of year Depreciation and amortization Depreciation and amortization Disposal Disposal Balance at end of year Balance at end of year Carrying amount Carrying amount as follows: The movements and balances of this account as at and for the years ended December 31, 2012 and 2011 are 2011 Cost Balance at beginning of year Acquisitions Disposal Balance at end of year Accumulated Depreciation and amortization Balance at beginning of year Depreciation and amortization Disposal Balance at end of year Carrying amount Property and Equipment P
=
-‐ 22 -‐ 13. Accounts Payable and Accrued Expenses This account consists of: Trade payables Accruals: Employee short-‐term benefits Rent Utilities and other office expenses Others Note 2012 P
=93,333 2011 P
=730,413 14, 19 399,029 81,852 77,672 1,511,530 – 73,335 P
=647,549 932,112 131,215 P
=3,382,942 Trade payables are noninterest-‐bearing and are normally settled on 30-‐day term. Accrued expenses and other payables are settled throughout the year. 14. Related Party Transactions Significant transactions with related parties include the following: a. The Parent Company has a lease agreement with Alphaland Development Inc. (ADI), for its office and parking space occupancy for five years commencing on January 1, 2010. On August 13, 2012, the Parent Company and ADI mutually agreed to decrease the covered leased area of the Parent Company’s premises resulting in the reversal of excess accrued rent expense amounting to P
=1.1 million. The Parent Company also has existing subleasing agreements with ABST and other related parties. Rent income earned from other related parties amounted to P
=0.9 million, P
=0.2 million, and nil in 2012, 2011, and 2010, respectively. The Parent Company is also being billed by ADI for the utility expenses it incurs and allocates the same to its sublessees. b. The Parent Company entered into a Cost Sharing Agreement with PhilWeb Corporation (Philweb) for its share in rental and salaries of its key management personnel. Details of shared costs charged to the Parent Company in 2012 and 2011 follows: 2012 2011 Salaries and allowances P
=4,776,511 P
=3,256,592 Rental 1,516,436 1,377,849 Others 67,016 – P
=6,359,963 P
=4,634,441 58
c. Noninterest-‐bearing advances to and from related parties which are due and demandable. c. Noninterest-‐bearing advances to and from related parties which are due and demandable. The following table summarizes the Group’s transactions with related parties (entities with The following table summarizes the Group’s transactions with related parties (entities with common directors) and the related outstanding balances as at December 31, 2012 and 2011: common directors) and the related outstanding balances as at December 31, 2012 and 2011: Nature of Transaction Nature of Transaction Allocated expenses Allocated expenses Lease of office space Lease of office space Working capital Working capital Sub-‐lease of office space Sub-‐lease of office space Advances Advances Transaction Amount Receivable (Payable) Transaction Amount Receivable (Payable) 2012 2011 2012 2011 2012 2011 2012 2011 P
=6,359,963 P
=4,634,441 (P
=607,198) P
=– P
=6,359,963 P
=4,634,441 (P
=607,198) P
=– 3,241,409 4,083,795 (75,138) (1,276,669) 3,241,409 4,083,795 (75,138) (1,276,669) 1,047,553 190,450 1,238,003 190,450 1,047,553 190,450 1,238,003 190,450 871,633 195,986 871,633 119,353 871,633 195,986 871,633 119,353 (115,770) 8,818 115,770 (106,952) (115,770) 8,818 115,770 (106,952) d. In 2012, Boerstar Corporation sold a portion of its shareholdings in the Parent Company to d. In 2012, Boerstar Corporation sold a portion of its shareholdings in the Parent Company to other entities to enable the Parent Company to comply with the minimum public float other entities to enable the Parent Company to comply with the minimum public float requirement of the PSE. Upon approval of the BOD, the Parent Company agreed to shoulder requirement of the PSE. Upon approval of the BOD, the Parent Company agreed to shoulder the transaction costs amounting to P
=27.3 million for the transfer of ownership of the shares the transaction costs amounting to P
=27.3 million for the transfer of ownership of the shares to other parties. to other parties. 15. General and Administrative Expenses 15. General and Administrative Expenses This account consists of: This account consists of: Note Note Transaction costs 14 Transaction costs 14 Allocated expenses 14 Allocated expenses 14 Rent 19 Rent 19 Depreciation and amortization 12 Depreciation and amortization 12 PSE listing fee PSE listing fee Salaries and wages Salaries and wages Professional fees Professional fees Utilities, dues and subscriptions Utilities, dues and subscriptions Representation Representation Mining exploration cost Mining exploration cost Transportation and travel Transportation and travel Supplies Supplies Postage, telephone and telegram Postage, telephone and telegram Taxes and licenses Taxes and licenses Others Others 2012 2011 2012 2011 P
=27,304,502 P
=– P
=27,304,502 P
=– 6,359,963 4,634,441 6,359,963 4,634,441 3,454,184 4,111,796 3,454,184 4,111,796 2,178,892 2,143,611 2,178,892 2,143,611 2,000,000 2,000,000 2,000,000 2,000,000 1,940,866 6,991,012 1,940,866 6,991,012 1,863,938 3,262,429 1,863,938 3,262,429 1,201,751 1,296,129 1,201,751 1,296,129 641,564 1,666,304 641,564 1,666,304 515,975 3,491,504 515,975 3,491,504 438,174 568,332 438,174 568,332 392,646 872,361 392,646 872,361 355,154 1,394,839 355,154 1,394,839 223,093 229,745 223,093 229,745 622,150 2,860,736 622,150 2,860,736 P
=49,492,852 P
=35,523,239 P
=49,492,852 P
=35,523,239 ATOK-BIG WEDGE CO., INC. 2012 Annual Report
2010 2010 P
=– P
=– – – 3,965,431 3,965,431 1,684,718 1,684,718 1,546,396 1,546,396 12,320,594 12,320,594 1,867,892 1,867,892 574,638 574,638 3,143,264 3,143,264 6,120,976 6,120,976 – – 826,843 826,843 1,451,025 1,451,025 33,158,779 33,158,779 2,207,774 2,207,774 68,868,330 68,868,330 59
16. Income Taxes The reconciliation of provision for (benefit from) income tax computed at statutory income tax rate to the actual income tax expense shown in the consolidated statements of comprehensive income follows: Income tax expense computed at statutory income tax rate Add (deduct) tax effects of: Share in net results of operation of an associate Nondeductible expense Changes in unrecognized deferred tax assets Interest income subjected to final tax Expired NOLCO Gain on disposal of Atok Gold Others Income tax expense at effective tax rate 2012 (P
=101,877,049) 2011 P
=2,013,920 90,720,869 8,383,820 (1,250,492) 499,891 5,344,288 (2,548,156) 230,435 – 8,636 P
=262,843 10,159,628 (8,915,316) – (2,781,218) 308,090 P
=34,503 2010 (P
=12,404,705) – 94,418 20,914,306 (8,054,450) – – – P
=549,569 The components of the Group’s deferred tax assets which were recognized by ABST as at December 31, 2011 pertain to the following: NOLCO Others 2011 P
=74,239 5,365 P
=79,604 The following deferred tax assets remain unrecognized by the Parent Company as management believes that it is not probable that future taxable profit will be available against which these deferred tax assets will be utilized. NOLCO MCIT Impairment of: Deferred mining exploration cost Doubtful accounts Accrued rent expense 60
2012 P
=32,528,264 29,203 784,182 22,555 24,556 P
=33,388,760 2011 P
=26,895,994 – 784,182 12,465 351,831 P
=28,044,472 2010 P
=247,463 P=– P
=247,463 P
=– 2013 17.at Basic and Diluted Earnings (Loss) that Per Share As December 31, 2012, NOLCO can be claimed as deduction from future taxable profit during the stated validity are as follows: Basic and diluted earnings (loss) per share are computed as follows: Outstanding Incurred Expired/Applied Remaining 2012 2011 2010 Year INet ncurred Amount Amount Amount Balance Valid Until Income(Loss) (a) (P
=339,853,005) P
=6,678,565 (P
=41,898,587) Parent Company 2012 Weighted average number of shares P
=– (b) P
=19,542,351 P
=
– P
=
19,542,351 2017 2,545,000,000 2,545,000,000 1,523,767,123 2011 Basic and diluted earnings 30,925,349 – – 30,925,349 2016 (loss) per share 2010 57,959,847 – – 57,959,847 2015 (a/b) (P
=0.1335) P
=0.0026 (P
=0.0275) 2009 768,116 – 768,116 – 2012 P
=89,653,312 P
=19,542,351 P
=– P
=108,427,547 18. Capital Stock ABST 2010 P
=247,463 P
=– P
=247,463 P
=– 2013 In May 2010, the SEC approved the Parent Company’s application to increase its authorized capital stock from P
=60 million divided into 36 million Class A common shares and 24 million Class B common shares, all with par value of P
=1 per share to P
=10 billion divided into 10 billion common 17. Basic shares and Dwiluted arnings Share ith a pEar value of (Loss) P
=1 per Pser hare. Basic The and iluted earnings loss) Cpompany’s er share acapital re computed as follows: mdovements in the P(arent stock accounts are as follows: Common stock -‐ P
=1 par value Net Income(Loss) (a) Authorized Issued Shares Amount 2012 (P
=339,853,005) 10,000,000,000 P
=10,000,000,000 953,963,474 953,963,474 Shares Amount 2010 2011 P
=6,678,565 =10,000,000,000 (P
=41,898,587) 10,000,000,000 P
953,963,474 953,963,474 Weighted average number of shares (b) 2,545,000,000 2,545,000,000 Subscribed 1,591,036,526 P
=1,591,036,526 1,591,036,526 Basic Less: and Sdubscription iluted earnings (loss) per share receivable 1,485,000,000 (a/b) =0.1335) P
=0.0026 (P
106,036,526 18. Capital Stock P
=1,060,000,000 1,523,767,123 P
=1,591,036,526 1,485,000,000 (P
=0.0275) 106,036,526 P
=1,060,000,000 In May 2010, the SEC approved the Parent Company’s application to increase its authorized capital stock from P
=60 million divided into 36 million Class A common shares and 24 million Class B common shares, all with par value of P
=1 per share to P
=10 billion divided into 10 billion common shares with a par value of P
=1 per share. The movements in the Parent Company’s capital stock accounts are as follows: Common stock -‐ P
=1 par value Authorized Issued Subscribed Less: Subscription receivable Shares Amount 10,000,000,000 P
=10,000,000,000 953,963,474 953,963,474 1,591,036,526 P
=1,591,036,526 1,485,000,000 106,036,526 P
=1,060,000,000 Shares Amount 10,000,000,000 P
=10,000,000,000 953,963,474 953,963,474 1,591,036,526 P
=1,591,036,526 1,485,000,000 106,036,526 P
=1,060,000,000 ATOK-BIG WEDGE CO., INC. 2012 Annual Report
61
19. Operating Leases The Parent Company is a party to a lease agreement covering its office and parking spaces for a period of five years, renewable upon mutual consent of both parties. Under the terms of the covering lease agreements, the Parent Company is required to pay certain amounts of advance rentals and guarantee deposits, which are included as part of “Other noncurrent assets” in the consolidated statements of financial position, amounting to P
=0.5 million and P
=0.9 million as at December 31, 2012 and 2011, respectively. Also included in this account are security deposits totaling P
=1.1 million and P
=1.2 million as at December 31, 2012 and 2011, respectively, which will become refundable to the Parent Company at the end of the contract. Rent expense on leased properties that qualified as operating lease amounted to P
=3.5 million in 2012, P
=4.1 million in 2011 and P
=4.0 million in 2010. Future minimum operating lease payments are as follows: Less than one year Between one and five years 2012 P
=2,121,850 2,270,380 P
=4,392,230 2011 P
=4,065,153 9,003,907 P
=13,069,060 20. Financial Risk Management and Capital Management The Group has exposure to the following risks from its use of financial instruments: •
•
•
Credit Risk Liquidity Risk Market Risk The main purpose of the Group’s dealings in financial instruments is to fund its operations and capital expenditures. The Group’s risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. All risks faced by the Group are incorporated in the annual operating budget. Mitigating strategies and procedures are also devised to address the risks that inevitably occur so as not to affect the Group's operations and detriment forecasted results. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. 62
The BOD reviews and institutes policies for managing each of the risks and these are summarized below. Credit Risk Credit risk represents the risk of loss the Group would incur if credit customers and counterparties fail to perform their contractual obligations. The Group's credit risk arises principally from the Group's cash in banks and cash equivalents, receivables, receivables from related parties and refundable deposits. The Group’s exposure to credit risk arises from the default of counterparties, with maximum exposure equal to the carrying values of the financial assets as follows: Cash and cash equivalents * Receivables Receivables from related parties Refundable deposits 2012 P
=191,053,238 417,541 2,109,636 1,062,047 P
=194,642,462 2011 P
=334,027,916 679,355 309,803 1,238,866 P
=336,255,940 *Excluding cash on hand Cash in banks and cash equivalents are considered good quality as these pertain to deposits in reputable banks. The table below shows the credit quality of receivables and receivables from related parties and an aging analysis of past due but not impaired accounts as at December 31: 2012 2011 High Grade P
=2,527,177 989,158 Past due but not impaired Standard Substandard Grade Grade P
=– P
=75,183 – 41,550 Total P
=2,602,360 1,030,708 High Grade -‐ accounts with a high degree of certainty in collection, where counterparties have consistently displayed prompt settlement practices, and have little to no instances of defaults or discrepancies in payment; also includes transactions with related parties (i.e., affiliates), where the ultimate parent company can exercise significant control over the operations of the counterparty. Standard Grade -‐ active accounts with minimal to regular instances of payment default due to ordinary or common collection issues, but where the likelihood of collection is still moderate to high as the counterparties are generally responsive to credit actions initiated by the Group. Substandard Grade -‐ accounts with a low probability of collection and can be considered impaired based on historical experience, where counterparties exhibit a recurring tendency to default despite constant reminder and communication, or even extended payment terms. Liquidity Risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall ATOK-BIG WEDGE CO., INC. 2012 Annual Report
63
impaired based on historical experience, where counterparties exhibit a recurring tendency to default despite constant reminder and communication, or even extended payment terms. -‐ 28 -‐ -‐ 28 -‐ Liquidity Risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages risk projected by forecasting flows and due. The Group manages liquidity risk by liquidity forecasting cash projected flows and cash maintaining a maintaining a balance between continuity funding in and flexibility in operations. Treasury balance between continuity of funding and of flexibility operations. Treasury controls and controls and procedures are in place to ensure that sufficient cash is maintained to cover daily operational procedures are in place to ensure that sufficient cash is maintained to cover daily operational and working capital requirements. Management closely monitors the Group’s future and and working capital requirements. Management closely monitors the Group’s future and contingent and sets up reserves required as cash reserves in as accordance necessary with in accordance with contingent obligations and obligations sets up required cash necessary internal requirements. internal requirements. The following are the contractual maturities of financial liabilities, including estimated interest The following are the contractual maturities of financial liabilities, including estimated interest and excluding the impact of netting agreements: payments and epayments xcluding the impact of netting agreements: Carrying Amount Accounts p
ayable a
nd a
ccrued Accounts payable and accrued expenses* expenses* P
=617,437 Payable Payable to related parties to related parties 789,288 Other current liabilities 292,238 Other current liabilities P
=1,698,963 *Net o
f s
tatutory l
iabilities *Net of statutory liabilities December 31, 2012 December 31, 2012 Maturing in Maturing in Maturing in Carrying Less than Maturing in Less than Maturing in more than 3 Amount Months 3 to 3 6 M
Months onths 3 to 66 M
Months onths P
=P
=617,437 535,585 789,288 789,288 292,238 292,238 P
=P
=1,698,963 1,617,111 P
=535,585 P
=– 789,288 – 292,238 – P
=1,617,111 P
=– Maturing in more than 6 Months P
=– P
=81,852 – – – – P
=– P
=81,852 P
=81,852 – – P
=81,852 December 31, 2011 December 31, 2011 Maturing in Maturing in Maturing in Carrying Less than Maturing in Less than Maturing in more than 3 Amount Months 3 to 3 6 M
Months onths 3 to 66 M
Months onths Maturing in more than 6 Months Carrying Amount Accounts p
ayable a
nd a
ccrued Accounts payable and accrued expenses* expenses* P
=3,342,329 Payable Payable to related parties to related parties 1,392,439 Other current liabilities 302,739 Other current liabilities *Net of statutory liabilities *Net of statutory liabilities P
=5,078,120 P
=P
=3,342,329 1,699,584 1,392,439 1,392,439 302,739 40,613 5,078,120 5,037,507
P
=P=3,173,249 P
=P
=1,699,584 1,642,745 1,392,439 – 40,613 262,126 P
=P
3,132,636
=3,173,249 1,904,871 P
=1,642,745 P
=– – – 262,126 – P
=1,904,871 P
=– P
=– – – P
=– Market Risk Market Risk Market risk is the risk changes in such market as foreign Market risk is the risk that changes in that market prices, as prices, foreign such exchange rates, exchange interest rates, interest rates a
nd o
ther m
arket p
rices w
ill a
dversely a
ffect t
he G
roup's i
ncome o
r t
he value of its holdings rates and other market prices will adversely affect the Group's income or the value of its holdings of financial instruments. The objective of market risk is to manage and control of financial instruments. The objective of market risk management is management to manage and control market r
isk e
xposures w
ithin a
cceptable p
arameters, w
hile o
ptimizing t
he r
eturn. market risk exposures within acceptable parameters, while optimizing the return. The Group is subject to transaction and translation exposures resulting from currency exchange The Group is subject to transaction and translation exposures resulting from currency exchange fluctuations. The Group regularly monitors outstanding financial assets and liabilities in foreign fluctuations. The Group regularly monitors outstanding financial assets and liabilities in foreign currencies and m
hem at a level responsive to cturrent he changes in current currencies and m
aintains them at aintains a level rtesponsive to the changes in exchange rates. exchange rates. Fair Values Fair Values The Group’s financial instruments of cash and cash receivables, equivalents, receivables, The Group’s financial instruments comprising of comprising cash and cash equivalents, receivables from refundable related parties refundable deposits, accounts payable and accrued expenses, receivables from related parties deposits, accounts payable and accrued expenses, payable to related parties, and other current liabilities are short-‐term in nature. Their fair values payable to related parties, and other current liabilities are short-‐term in nature. Their fair values approximate their acs arrying values a3s 1, at December 31, 2012 and 2011. approximate their carrying values at December 2012 and 2011. Capital Capital Management Management The primary f the m
Group’s capital to ensure its ability The primary objective of the oGbjective roup’s coapital anagement is m
to anagement ensure its ais bility to continue as at o continue as a going concern and that it maintains ealthy ratios in oirder to support its business. going concern and that it maintains healthy capital rhatios in coapital rder to support ts business. 64
*Net of statutory liabilities P
=5,078,120 P
=3,173,249 P
=1,904,871 P
=– Market Risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and other market prices will adversely affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. The Group is subject to transaction and translation exposures resulting from currency exchange fluctuations. The Group regularly monitors outstanding financial assets and liabilities in foreign currencies and maintains them at a level responsive to the changes in current exchange rates. Fair Values The Group’s financial instruments comprising of cash and cash equivalents, receivables, receivables from related parties refundable deposits, accounts payable and accrued expenses, payable to related parties, and other current liabilities are short-‐term in nature. Their fair values approximate their carrying values as at December 31, 2012 and 2011. Capital Management The primary objective of the Group’s capital management is to ensure its ability to continue as a going concern and that it maintains healthy capital ratios in order to support its business. ATOK-BIG WEDGE CO., INC. 2012 Annual Report
65
The Group monitors capital on the basis of the debt-‐to-‐equity ratio which is calculated as total debt divided by total equity. Total debt comprises of accounts payable and accrued expenses, other current liabilities and payable to related parties. Total equity comprises all components of equity. The debt-‐to-‐equity ratios as at December 31, 2012 and 2011 are as follows: 2012 2011 Total debt P
=5,078,120 P
=1,758,278 Total equity 1,012,846,907 623,070,152 Debt-‐to equity ratio 0.005 0.003 There were no changes in the Group’s approach to capital management during the year. 21. Segment Information A segment is a distinguishable component of the Group that is engaged either in providing types of services (business segment) or in providing the services within a particular economic environment (geographic segment). The table below present financial information on business segments as at and for the years ended December 31, 2012, 2011, and 2010: 2012 Segment Revenues Revenue from external customers Interest income Other income Income from other segments Share in the net results of operations of an associate Depreciation Other general and administrative expense Provision for income tax Segment Operating Profit (Loss) Segment Assets Mining, Exploration and Development P
=– 8,465,043 2,385,899 120,000 Stock Transfer Agency P
=1,389,380 28,811 74,831 180,000 Total P
=1,389,380 8,493,854 2,460,730 240,000 (302,402,895) (291,431,953) (2,149,471) – 1,673,022 (29,421) – – (302,402,895) (289,818,931) (2,178,892) (46,798,465) (29,203) (P
=340,409,092) (853,874) (233,640) P
=556,087 60,000 – P
=– (47,592,339) (262,843) (P
=339,853,005) P
=623,401,086 P
=1,603,019 66
Eliminations P
=– – – (60,000) ATOK-BIG WEDGE CO., INC. 2012 Annual Report
(P
=175,675) P
=624,828,430 2011 2011 Mining, Mining, -‐ 28 -‐ Stock Stock TTransfer ransfer Exploration aand nd Exploration Development Agency Eliminations Development Agency Eliminations Segment R
evenues Segment R
evenues due. The Group manages liquidity risk by forecasting projected cash flows and maintaining a Revenue f
rom e
xternal c
ustomers P
=
– P
=
1,074,050 P
=
– Revenue from external customers P
=– P
=1,074,050 P
=– balance between continuity of funding and flexibility 100,000 in operations. 180,000 Treasury controls and Income (80,000) Income ffrom rom o
other ther ssegments egments 100,000 180,000 (80,000) procedures are Gain in place to ensure that sufficient cash 9,270,726 is maintained to cover daily operational – – Gain o
on n d
disposal isposal o
of f A
Atok tok G
Gold old 9,270,726 – – and working capital requirements. Management closely monitors the Group’s future and – Reversal o
f i
mpairment l
oss 1,949,850 – Reversal of impairment loss 1,949,850 – – Share n
rresults contingent obligations and up oof f required cash reserves as necessary in accordance with Share iin n tthe he net et sets esults 4,168,305 – – operations o
f a
n a
ssociate internal requirements. 4,168,305 – – operations of an associate Interest i
ncome 29,701,181 16,539 – Interest income 29,701,181 16,539 – Other i
ncome 195,986 8,786 – Other income 8,786 The following are the contractual maturities of financial 195,986 liabilities, including estimated interest – 45,386,048 1,279,375 45,386,048 1,279,375 payments and e xcluding the impact of netting agreements: Impairment (2,655,490) (17,883) – Impairment lloss oss (2,655,490) (17,883) – Depreciation (2,115,293) (28,318) – Depreciation (2,115,293) – December 31, 2012 (28,318) General (34,033,746) (1,101,625) (80,000) General aand nd aadministrative dministrative eexpenses xpenses (34,033,746) (1,101,625) (80,000) Maturing in Maturing in Provision – (34,503) – Provision ffor or iincome ncome ttax ax Carrying (34,503) Less than – Maturing in more than – Segment O
perating P
rofit P
==6,581,519 P
==97,046 P
==– Segment O
perating P
rofit P
6,581,519 P
97,046 P
– Amount 3 Months 3 to 6 Months 6 Months Accounts payable and accrued Segment A
Segment Assets ssets expenses* Payable to related parties Other current liabilities P
==1,016,931,148 P
==1,396,027 (P
==402,148) P
1,016,931,148 P
1,396,027 (P
402,148) P
=617,437 P
=535,585 P
=– P
=81,852 789,288 789,288 – – 2010 292,238 292,238 – 2010 – Mining, Mining, P
=1,698,963 P
=1,617,111 P
=– P
=81,852 Exploration Stock Exploration aand nd Stock TTransfer ransfer *Net of statutory liabilities Agency Development Eliminations Agency Development Eliminations Segment Segment R
Revenues evenues December Revenue P
==298,141 ==294,336 P
==– Revenue ffrom rom eexternal xternal ccustomers ustomers P
298,141 31, 2011 P
P
294,336 P
– Maturing in – Maturing in Income 76,801 (76,801) Income ffrom rom o
other ther ssegments egments – 76,801 (76,801) Carrying Less t
han Maturing i
n more t
han Interest 26,844,391 3,775 – Interest iincome ncome 26,844,391 3,775 – Amount 3 Months – 6 Months – Other 1,868 Other iincome ncome – 3 to 6 Months 1,868 – Accounts payable and accrued 27,142,532 376,780 27,142,532 376,780 expenses* Depreciation P
=
3,342,329 P
=
1,699,584 P
=
1,642,745 P
=
– (1,600,595) – – Depreciation (1,600,595) – – Payable to related parties aand 1,392,439 1,392,439 – – General eexpenses (65,891,695) (1,147,826) (76,801) General nd aadministrative dministrative xpenses (65,891,695) (1,147,826) (76,801) Other current liabilities 40,613 262,126 – – Provision (663,676) (114,107) Provision ffor or iincome ncome ttax ax 302,739 (663,676) (114,107) – Segment O
perating P
rofit (P
=
40,859,832) (P
=
885,153) ==– P
3,173,249 P
=
1,904,871 P
=
– P
(
41,013,434)
P
=
5,078,120 Segment Operating Profit (P
=40,859,832) (P
=885,153) P
– *Net of statutory liabilities Segment P
==1,056,763,045 P
==1,655,062 P
==– Segment A
Assets ssets P
1,056,763,045 P
1,655,062 P
– Total Total P
=
1,074,050 P
=1,074,050 200,000 200,000 9,270,726 9,270,726 1,949,850 1,949,850 4,168,305 4,168,305 29,717,720 29,717,720 204,772 204,772 46,585,423 46,585,423 (2,673,373) (2,673,373) (2,143,611) (2,143,611) (35,055,371) (35,055,371) (34,503) (34,503) P
==6,678,565 P
6,678,565 P
==1,017,925,027 P
1,017,925,027 Total Total P
==592,477 P
592,477 – – 26,848,166 26,848,166 1,868 1,868 27,442,511 27,442,511 (1,600,595) (1,600,595) (66,962,720) (66,962,720) (777,783) (777,783) (P
=
41,898,587)) (P
=41,898,587)) P
==1,058,418,107 P
1,058,418,107 Market Risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and other market prices will adversely affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. The Group is subject to transaction and translation exposures resulting from currency exchange fluctuations. The Group regularly monitors outstanding financial assets and liabilities in foreign currencies and maintains them at a level responsive to the changes in current exchange rates. Fair Values The Group’s financial instruments comprising of cash and cash equivalents, receivables, receivables from related parties refundable deposits, accounts payable and accrued expenses, payable to related parties, and other current liabilities are short-‐term in nature. Their fair values approximate their carrying values as at December 31, 2012 and 2011. Capital Management The primary objective of the Group’s capital management is to ensure its ability to continue as a going concern and that it maintains healthy capital ratios in order to support its business. ATOK-BIG WEDGE CO., INC. 2012 Annual Report
67
LEGAL COUNSEL
PONFERRADA ORBE & ALTUBAR
ANGARA ABELLO CONCEPCION REGALA & CRUZ
INDEPENDENT PUBLIC AUDITOR
REYES TACANDONG & CO.
BANKS
BANCO DE ORO UNIBANK
PHILIPPINE BANK OF COMMUNICATIONS
STOCK TRANSFER AGENT
AB STOCK TRANSFERS CORPORATION
ATOK-BIG WEDGE CO., INC. IS LISTED ON THE
PHILIPPINE STOCK EXCHANGE.
TICKER SYMBOL : AB
ATOK-BIG WEDGE CO., INC.
10th Floor, Alphaland Southgate Tower
2258 Chino Roces Avenue corner EDSA
Makati City, Metro Manila, Philippines
T: +632.304.6282
F: +632.310.7100
www.atokbigwedge.com

ATOK-BIG WEDGE CO., INC. 2012 Annual Report

Transcription

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