EDC PR 2016 (FS section)

In 2015, the functional currency of EBWPC, a subsidiary, has been determined to be Philippine
Peso. In 2016, after the finalization of its financing scheme, EBWPC has determined that the
currency that mainly influences its operating expenses and financing activities is the US Dollar.
In accordance with PAS 21, such change in functional currency was accounted for prospectively.
Balances as of January 1, 2016 were translated using the exchange rate at the date of change and
the resulting translated amounts for nonmonetary items are treated as their historical cost. The
change in functional currency resulted in an exchange difference amounting to ₱417.4 million
which was presented as part of the cumulative translation adjustment in the consolidated statement
of financial position.
Had EBWPC retained its functional currency of Philippine Peso in 2016, the 2016 consolidated
net income would have been lower by ₱588.8 million, consolidated cumulative translation
adjustment would have been lower by ₱328.9 million, and basic and diluted earnings per share
would have been lower by ₱0.03 per share for the year ended December 31, 2016.
Foreign Currency-Denominated Transactions
Transactions in foreign currencies are initially recorded at the functional currency rate at the date
of the transaction. Monetary assets and monetary liabilities denominated in foreign currencies are
translated using the functional currency rate of exchange as at financial reporting date. All
differences are taken to the profit or loss as part of “Foreign exchange losses” account.
Nonmonetary items that are measured at historical cost in a foreign currency are translated using
the exchange rate as at the date of the transactions. Nonmonetary items measured at fair value in a
foreign currency are translated using the exchange rates at the date when the fair value is
determined.
Cash and Cash Equivalents
Cash and cash equivalents in the consolidated statement of financial position comprise cash on
hand and in banks and short-term deposits with original maturities of three months or less from
dates of acquisition and that are subject to insignificant risk of changes in value.
Parts and Supplies Inventories
Inventories are valued at the lower of cost and net realizable value. Cost includes the invoice
amount, net of trade and cash discounts. Cost is calculated using the moving average method.
Net realizable value represents the current replacement cost.
Prepaid Expenses
Prepayments are expenses paid in advance and recorded as asset before these are utilized. This
account comprises prepaid expenses, creditable withholding tax, tax credit certificates and
advances to contractors. The prepaid expenses are apportioned over the period covered by the
payment and charged to the appropriate accounts in the profit or loss when incurred; creditable
withholding tax are deducted from income tax payable on the same year the revenue was
recognized; and the advances to contractors are reclassified to the proper asset or expense account
and deducted from the contractor’s billings as specified on the provision of the contract.
Prepayments that are expected to be realized for a period of no more than 12 months after the
financial reporting period are classified as current asset; otherwise, these are classified as other
noncurrent asset.
Property, Plant and Equipment
Property, plant and equipment, except land, is stated at cost less accumulated depreciation,
amortization and impairment in value, if any. Such cost includes the cost of replacing part of the
property, plant and equipment and the borrowing costs for long-term construction projects if the
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I Energy Development Corporation Performance Report 2016