EDC PR 2016 (FS section)

Fair Value Measurement of Financial Instruments
The fair values of financial instruments that are not quoted in active markets are determined using
valuation techniques. Where valuation techniques are used to determine fair values, fair values are
validated and periodically reviewed by qualified independent personnel. All models are reviewed
before they are used, and models are calibrated to ensure that outputs reflect actual data and
comparative market prices. To the extent practicable, models use only observable data; however,
areas such as credit risk (both own and counterparty), volatilities and correlations require
management to make estimates. Changes in assumptions about these factors could affect reported
fair value of financial instruments (see Note 31 for the fair values of financial instruments).
Impairment of Receivables
The Company maintains an allowance for doubtful accounts at a level that management considers
adequate to provide for potential uncollectibility of its trade and other receivables. The Company
evaluates specific balances where management has information that certain amounts may not be
collectible. In these cases, the Company uses judgment, based on available facts and
circumstances, and based on a review of the factors that affect the collectibility of the accounts
including, but not limited to, the age and status of the receivables, collection experience and past
loss experience. The review is made by management on a continuing basis to identify accounts to
be provided with allowance. The specific allowance is re-evaluated and adjusted as additional
information received affects the amount estimated.
In addition to specific allowance against individually significant receivables, the Company also
provides a collective impairment allowance against exposures, which, although not specifically
identified as requiring a specific allowance, have a greater risk of default than when originally
granted. This collective allowance is based on historical default experience.
The aggregate carrying amounts of current and noncurrent trade and other receivables amounted to
₱7,816.9 million and ₱5,378.9 million as of December 31, 2016 and 2015, respectively
(see Notes 7 and 15). The total amount of provision for impairment recognized amounted to
₱19.6 million, ₱35.0 million and ₱6.2 million in 2016, 2015 and 2014, respectively
(see Notes 7, 15 and 22).
Estimating Net Realizable Value of Parts and Supplies Inventories
The Company measures its inventories at net realizable value when such value is lower than cost
due to damage, physical deterioration, obsolescence, changes in price levels or other causes. The
carrying amounts of parts and supplies inventories as of December 31, 2016 and 2015 amounted
to ₱3,480.0 million and ₱3,251.9 million, respectively (see Note 10). Provision for (reversal of)
allowance for inventory obsolescence and disposable parts and supplies amounted to
₱58.4 million, ₱71.0 million and (₱25.3 million) in 2016, 2015 and 2014, respectively
(see Notes 10 and 22).
Estimating Useful Lives of Property, Plant and Equipment, Water Rights and Other Intangible
Assets
The Company estimates the useful lives of property, plant and equipment, water rights and other
intangible assets based on the period over which each asset is expected to be available for use and
on the collective assessment of industry practices, internal evaluation and experience with similar
arrangements.
The estimated useful life is revisited at the end of each financial reporting period and updated if
expectations differ materially from previous estimates.
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I Energy Development Corporation Performance Report 2016