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Globe 2012 annual report
financial report
2. Summary of Significant Accounting and Financial Reporting Policies
2.1 Basis of Financial Statement Preparation
The accompanying consolidated financial statements of Globe Telecom, Inc. and Subsidiaries, collectively
referred to as the “Globe Group”, have been prepared under the historical cost convention method, except for
derivative financial instruments and available-for-sale (AFS) investments that are measured at fair value.
The consolidated financial statements of the Globe Group are presented in Philippine Peso (P=), Globe
Telecom’s functional currency, and rounded to the nearest thousands, except when otherwise indicated.
On February 5, 2013, the Board of Directors (BOD) approved and authorized the release of the consolidated
financial statements of Globe Telecom, Inc. and Subsidiaries as of and for the years ended December 31, 2012,
2011 and 2010.
2.2 Statement of Compliance
The consolidated financial statements of the Globe Group have been prepared in compliance with Philippine
Financial Reporting Standards (PFRS).
2.3 Basis of Consolidation
The accompanying consolidated financial statements include the accounts of Globe Telecom and its
subsidiaries as of and for the years ended December 31, 2012, 2011 and 2010. The subsidiaries are as follows:
Name of Subsidiary Place of Incorporation Principal Activity
Percentage of
Ownership
Innove Philippines Wireless and wireline voice and data
communication services 100%
GXI Philippines Software development for telecommunications
applications and money remittance services 100%
EGG Group
EGGC Philippines Mobile content and application development
services 100%
EHL Hong Kong Mobile content and application development
services 100%
GTI Philippines Investment and holding company 100%
GTIC United States Wireless and data communication services 100%
GTIC HK Hong Kong Exclusive distributorship of Globe Telecom
products in the international market (except
the United States) 100%
Kickstart Philippines Investment, research, technology development
and commercializing for business ventures 100%
Subsidiaries are consolidated from the date on which control is transferred to the Globe Group and cease to be
consolidated from the date on which control is transferred out of the Globe Group. The financial statements of
the subsidiaries are prepared for the same reporting year as Globe Telecom using uniform accounting policies
for like transactions and other events in similar circumstances. All significant intercompany balances and
transactions, including intercompany profits and losses, were eliminated during consolidation in accordance with
the accounting policy on consolidation.
2.4 Change in the Presentation of Outbound Revenues
Beginning January 1, 2012, the Globe Group voluntarily changed the presentation of its outbound revenues to
gross amounts before interconnect costs billed to the Globe Group in order to align its presentation with the
predominant global practice in the telecommunications industry. With this presentation, interconnect costs are
presented in a separate line item in the statement of comprehensive income. In prior years, outbound revenues
were presented net of the share of other carriers.
The change was accounted for retrospectively, and accordingly, the Globe Group restated its comparative
statements of comprehensive income. The change has no impact on consolidated net income, earnings per
share, cash flows and statements of financial position. The table below shows the affected line items in our
financial information for the year ended December 31, 2011 and 2010:
As restated
December 31, 2011 December 31, 2010
As previously
presented Change As restated
(In Thousand Pesos)
As previously
presented
Change
Revenues P=77,764,964 P=67,811,301 P=9,953,663 P=72,742,090 P=62,554,689 P=10,187,401
Expenses 68,612,584 58,658,921 9,953,663 62,805,207 52,617,806 10,187,401
2.5 Changes in Accounting Policies
The accounting policies adopted are consistent with those of the previous financial year, except for the following
new and amended Philippine Accounting Standards (PAS) and PFRS effective as of January 1, 2012. Except
as otherwise indicated, the adoption of the new and amended Standards and Interpretations, did not have a
significant impact on the consolidated financial statements.
PAS 12, Income Taxes, Deferred Tax: Recovery of Underlying Assets
This Amendment to PAS 12 is effective for annual periods beginning on or after January 1, 2012. The
Amendment clarifies the determination of deferred tax on investment property measured at fair value. The
amendment introduces a rebuttable presumption that deferred tax on investment property measured using
the fair value model in PAS 40, Investment Property, should be determined on the basis that its carrying
amount will be recovered through sale. Furthermore, it introduces the requirement that deferred tax on nondepreciable
assets that are measured using the revaluation model in PAS 16, Property, Plant and
Equipment, always be measured on a sale basis of the asset. The Globe Group accounts for its property
and equipment and investment properties at cost, thus, the Amendment does not have an effect to the
Globe Group.
PFRS 7, Financial Instruments: Disclosures – Enhanced Derecognition Disclosure Requirements
The Amendments to PFRS 7 are effective for annual periods beginning on or after July 1, 2011. The
amendments require additional disclosure about financial assets that have been transferred but not
derecognized to enable the user of the entity’s financial statements to understand the relationship with
those assets that have not been derecognized and their associated liabilities. In addition, the amendments
require disclosures about continuing involvement in derecognized assets to enable the user to evaluate the
nature of, and risks associated with, the entity’s continuing involvement in those derecognized assets.
2.6 Future Changes in Accounting Policies
The Globe Group will adopt the following new and amended standards enumerated below when these become
effective. Except as otherwise indicated, the Globe Group does not expect the adoption of these new and
amended PAS and PFRS to have significant impact on the consolidated financial statements.
Effective January 1, 2013
Amendments to PAS 1, Financial Statement Presentation, Presentation of Items of Other Comprehensive
Income
The Amendment changed the grouping of items presented in other comprehensive income. Items that
could be reclassified (or ‘recycled’) to profit or loss at a future point in time (for example, upon
derecognition or settlement) would be presented separately from items that will never be reclassified.
PFRS 7, Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities
The Amendments to PFRS 7 are to be retrospectively applied for annual periods beginning on or after
January 1, 2013. These Amendments require an entity to disclose information about rights of set-off and
related arrangements (such as collateral agreements). The new disclosures are required for all recognized
financial instruments that are set off in accordance with PAS 32, Financial Instruments: Presentation.
These disclosures also apply to recognized financial instruments that are subject to an enforceable master
netting arrangement or ‘similar agreement’, irrespective of whether they are set-off in accordance with
PAS 32. The amendments require entities to disclose, in a tabular format unless another format is more
appropriate, certain minimum quantitative information.
PFRS 10, Consolidated Financial Statements
PFRS 10 replaces the portion of PAS 27, Consolidated and Separate Financial Statements, that addresses
the accounting for consolidated financial statements. It also includes the issues raised in SIC 12,
Consolidation - Special Purpose Entities.
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