2014 Financial Statement

EDC 2014 Performance Report
management’s judgment of probability of extension. Amortizations of both the prepaid lease and
prepaid rights of way during the construction period shall be capitalized to “Construction in
Progress” and expensed after the Construction in Progress becomes available for use.
Estimates and Assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at
financial reporting date that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below:
Estimation of Fair Value of Identifiable Net Assets of an Acquiree in a Business Combination
In accounting for business combinations, the purchase consideration is allocated to the identifiable
assets, liabilities and contingent liabilities (identifiable net assets) on the basis of fair value at the
date of acquisition. The determination of fair values requires estimates of economic conditions
and other factors.
Fair Values 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).
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 are
₱6,920.2 million and ₱3,625.4 million as of December 31, 2014 and 2013, respectively
(Notes 8 and 15). The total amount of impairment losses recognized amounted to ₱6.2 million,
₱23.8 million and ₱40.4 million in 2014, 2013 and 2012, respectively. (see Notes 8, 15 and 22).
Impairment of AFS Investments
The Company classifies certain financial assets as AFS investments and recognizes movements in
their fair value in equity. When the fair value declines, management makes assumptions about the
decline in value to determine whether it is an impairment that should be recognized in the
consolidated statement of income.
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