JFC Consolidated Financial Statements 2018 PDF
JFC Consolidated Financial Statements 2018 PDF
and
Opinion
We have audited the consolidated financial statements of Jollibee Foods Corporation Doing business
under the name and style of Jollibee (formerly Jollibee Foods Corporation) (the Parent Company) and its
subsidiaries (the Jollibee Group), which comprise the consolidated statements of financial position as at
December 31, 2018 and 2017, and the consolidated statements of comprehensive income, consolidated
statements of changes in equity and consolidated statements of cash flows for each of the three years in
the period ended December 31, 2018, and notes to the consolidated financial statements, including a
summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of the Jollibee Group as at December 31, 2018 and 2017, and its consolidated
financial performance and its consolidated cash flows for each of the three years in the period ended
December 31, 2018 in accordance with Philippine Financial Reporting Standards (PFRSs).
We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit
of the Consolidated Financial Statements section of our report. We are independent of the Jollibee Group
in accordance with the Code of Ethics for Professional Accountants in the Philippines (Code of Ethics)
together with the ethical requirements that are relevant to our audit of the consolidated financial
statements in the Philippines, and we have fulfilled our other ethical responsibilities in accordance with
these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements of the current period. These matters were addressed in the
context of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters. For each matter below, our
description of how our audit addressed the matter is provided in that context.
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We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Consolidated Financial Statements section of our report, including in relation to these matters.
Accordingly, our audit included the performance of procedures designed to respond to our assessment of
the risks of material misstatement of the consolidated financial statements. The results of our audit
procedures, including the procedures performed to address the matters below, provide the basis for our
audit opinion on the accompanying consolidated financial statements.
Accounting for Business Combination – Acquisition of SJBF LLC
On April 17, 2018, the Jollibee Group, through its wholly owned subsidiary, Bee Good! Inc., obtained
45% additional interest over SJBF LLC resulting in 85% controlling interest. The Jollibee Group
recognized goodwill of = P5,345.5 million and trademark and favourable leases of P =10,782.4 million based
on the purchase price allocation performed. We considered the accounting for this acquisition to be a key
audit matter because it required significant amount of management judgment and estimation in
identifying the underlying acquired assets and liabilities and in determining their fair values, specifically
the acquired property and equipment, trademark and favourable leases.
The disclosures in relation to the acquisition of SJBF LLC are included in Notes 4 and 11 to the
consolidated financial statements.
Audit Response
We evaluated the competence, capabilities and objectivity of the external appraiser who prepared the
appraisal report for the property and equipment and the external valuation specialist who valued the
trademark and favourable leases by considering their qualifications, relevant experience and reporting
responsibilities. We involved our internal specialist in the review of the methodologies and assumptions
used in arriving at the fair values of the property and equipment, trademark and favourable leases. We
compared the key assumptions used such as the list prices and adjustment factors by reference to relevant
market data for the valuation of property and equipment and favourable leases. We also compared the
key assumptions in the valuation of trademark such as revenue growth rate, long-term growth rate and
royalty rate by reference to existing contractual terms, historical trends and relevant external information.
We tested the parameters used in determining the discount rate against market data. We reviewed the
presentation and disclosures in the consolidated financial statements.
Recoverability of Goodwill and Trademarks with Indefinite Life
Goodwill and trademarks with indefinite life account for 27.2% of the Jollibee Group’s consolidated total
assets as at December 31, 2018. Goodwill relate to several cash generating units (CGUs) mainly from
Jollibee Group’s acquisitions in the Philippines, the People’s Republic of China, Vietnam and the United
States of America. Under Philippine Accounting Standard (PAS) 36, Impairment of Assets, the Jollibee
Group is required to perform an annual impairment test on the amount of goodwill and trademarks with
indefinite life. These annual impairment tests are significant to our audit because the amounts are
material to the consolidated financial statements. In addition, the determination of the recoverable
amount of the CGUs to which the goodwill belongs and the trademarks with indefinite life involves
significant assumptions about the future results of business such as discount rates which are applied to the
cash flow or net sales forecasts, long-term revenue growth rates, and earnings before interest, taxes,
depreciation and amortization (EBITDA).
Refer to Notes 4 and 14 to the consolidated financial statements for the details on trademarks and
goodwill and the assumptions used in the forecasts.
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Audit Response
We involved our internal specialist in evaluating the methodologies and the assumptions used in
determining the recoverable amounts of the CGUs for goodwill and the trademarks with indefinite life.
These assumptions include the discount rates, long-term revenue growth rates and EBITDA. We
compared the forecasted long-term revenue growth rates, forecasted net sales and EBITDA against the
historical data of the CGUs and inquired from management and operations personnel about the plans to
support the forecast.
Furthermore, we tested the parameters used in the determination of discount rate against market data. We
reviewed the weighted average cost of capital (WACC) used in the impairment test by comparing it with
the WACC of comparable companies where the CGUs operate. We also reviewed the Jollibee Group’s
disclosures about those assumptions to which the outcome of the impairment test is most sensitive,
specifically those that have the most significant effect on the determination of the recoverable amount of
goodwill and trademarks with indefinite life.
The Jollibee Group is involved in litigations, claims and disputes which are normal to its business. This
matter is significant to our audit because the estimation of the potential liability resulting from these
litigations, claims and disputes requires significant management judgment. The inherent uncertainty over
the outcome of these matters is brought about by the differences in the interpretation and application of
laws and rulings.
Refer to Notes 4 and 17 for the disclosures about provisions and Note 29 for the disclosures about
contingencies of the Jollibee Group.
Audit Response
We involved our internal specialist in evaluating management’s assessment on whether provisions on the
contingencies should be recognized, and the estimation of such amount. We also discussed the status of
the litigations, claims and disputes with management. In addition, we read correspondences with the
relevant government agencies, obtained replies from third party legal counsels, and any relevant laws and
rulings on similar matters. We evaluated the position of the Jollibee Group by considering the relevant
laws, rulings and jurisprudence.
The Parent Company and certain subsidiaries (foreign and local) have recognized deferred tax assets
amounting to P =4,842.8 million as at December 31, 2018. Of that amount, around 24.0% relates to net
operating loss carryover and excess minimum corporate income tax over regular corporate income tax.
Management estimated the recoverability of these deferred tax assets based on the forecasted taxable
income taking into account the period in which they can be claimed in the Philippines, the People’s
Republic of China and the United States of America. The analysis of the recoverability of deferred tax
assets is significant to our audit because the assessment process requires use of management judgment. It
is also based on assumptions of future revenues and expenses as well as management’s plans and
strategies of the relevant taxable entities, including the Parent Company and certain subsidiaries.
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Refer to Note 24 to the consolidated financial statements for the details of the deferred tax assets and
Note 4 for the discussion of management’s judgments and estimates.
Audit Response
We obtained an understanding of the Parent Company and its subsidiaries’ deferred income tax
calculation process and, together with our internal specialist, the applicable tax rules and regulations. We
reviewed management’s assessment on the availability of future taxable income in reference to financial
forecasts and tax strategies. We evaluated management’s forecast by comparing forecasts of future
taxable income against approved budgets, historical performance of the relevant entities like past growth
rates and with relevant external market information such as inflation. We also reviewed the timing of the
reversal of future taxable and deductible temporary differences.
Effective January 1, 2018, the Jollibee Group adopted the new revenue recognition standard, PFRS 15,
Revenue from Contracts with Customers, using the full retrospective method of adoption. The adoption
of PFRS 15 resulted in significant changes in the Group’s revenue recognition policies, process, and
procedures. The adoption of PFRS 15 is significant to our audit because this involves application of
significant management judgment and estimation in the following areas: (1) assessment whether all
promises in the franchise agreement meet the definition of distinct performance obligations;
(2) determination of the transaction price of the franchise agreement; (3) assessment of the timing of
revenue recognition; and (4) presentation of the Jollibee Group’s share in advertising expense arising
from the franchise agreement.
The disclosures related to the adoption of PFRS 15 are included in Note 2 to the consolidated financial
statements.
Audit Response
We obtained an understanding of the Jollibee Group’s process in implementing the new revenue
recognition standard, including revenue streams identification and scoping. We reviewed the PFRS 15
adoption papers and accounting policies prepared by management. For significant revenue streams, we
obtained sample contracts and reviewed whether the accounting policies considered the five-step model
and cost requirements of PFRS 15.
In relation to franchise fees, we reviewed sample franchise contracts focusing on the identification of the
performance obligations, determination of the transaction price, and the timing of revenue recognition.
We reviewed management’s assessment on whether the activities being performed prior to opening of
franchise store are distinct performance obligations.
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Other Information
Management is responsible for the other information. The other information comprises the information
included in the SEC Form 20-IS (Definitive Information Statement), SEC Form 17-A and Annual Report
for the year ended December 31, 2018, but does not include the consolidated financial statements and our
auditor’s report thereon. The SEC Form 20-IS (Definitive Information Statement), SEC Form 17-A and
Annual Report for the year ended December 31, 2018 are expected to be made available to us after the
date of this auditor’s report.
Our opinion on the consolidated financial statements does not cover the other information and we will not
express any form of assurance conclusion thereon.
In connection with our audits of the consolidated financial statements, our responsibility is to read the
other information identified above when it becomes available and, in doing so, consider whether the other
information is materially inconsistent with the consolidated financial statements or our knowledge
obtained in the audits, or otherwise appears to be materially misstated.
Responsibilities of Management and Those Charged with Governance for the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with PFRSs, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Jollibee
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless management either intends to liquidate the
Jollibee Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Jollibee Group’s financial reporting
process.
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with PSAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these consolidated financial statements.
As part of an audit in accordance with PSAs, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
∂ Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
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not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
∂ Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Jollibee Group’s internal control.
∂ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
∂ Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Jollibee Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause the
Jollibee Group to cease to continue as a going concern.
∂ Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
∂ Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Jollibee Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the audit. We
remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
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The engagement partner on the audit resulting in this independent auditor’s report is
Mariecris N. Barbaso.
Mariecris N. Barbaso
Partner
CPA Certificate No. 97101
SEC Accreditation No. 1513-AR-1 (Group A),
November 16, 2018, valid until November 15, 2021
Tax Identification No. 202-065-716
BIR Accreditation No. 08-001998-108-2018,
February 14, 2018, valid until February 13, 2021
PTR No. 7332526, January 3, 2019, Makati City
April 8, 2019
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JOLLIBEE FOODS CORPORATION
Doing business under the name and style of Jollibee
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Amounts in Thousand Pesos)
December 31
2018 2017
ASSETS
Current Assets
Cash and cash equivalents (Notes 6, 30 and 31) P
= 23,285,915 P
=21,107,474
Short-term investments (Notes 6, 30 and 31) 883,200 1,413,400
Receivables and contract assets (Notes 7, 30 and 31) 4,862,744 3,941,073
Inventories (Note 8) 8,812,174 6,835,514
Other current assets (Notes 9 and 32) 4,894,168 4,031,459
Total Current Assets 42,738,201 37,328,920
Noncurrent Assets
Financial assets at fair value through profit or loss (Notes 10, 30 and 31) 39,842 –
Available-for-sale financial assets (Notes 10, 30 and 31) – 29,862
Interests in and advances to joint ventures, co-venturers and associates (Note 11) 3,512,230 7,492,771
Property, plant and equipment (Note 12) 26,693,991 20,893,814
Investment properties (Note 13) 848,974 848,974
Trademarks, goodwill and other intangible assets (Note 14) 31,830,057 15,730,239
Operating lease receivables (Notes 29, 30 and 31) 31,635 28,035
Derivative asset (Notes 18, 30 and 31) 82,852 11,949
Deferred tax assets - net (Note 24) 4,322,996 3,908,813
Other noncurrent assets (Notes 15, 30, 31 and 32) 3,751,044 3,510,518
Total Noncurrent Assets 71,113,621 52,454,975
P
= 113,851,822 =89,783,895
P
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JOLLIBEE FOODS CORPORATION
Doing business under the name and style of Jollibee
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in Thousand Pesos, Except Per Share Data)
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JOLLIBEE FOODS CORPORATION
Doing business under the name and style of Jollibee
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 and 2016
(Amounts in Thousand Pesos)
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JOLLIBEE FOODS CORPORATION
Doing business under the name and style of Jollibee
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousand Pesos)
(Forward)
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JOLLIBEE FOODS CORPORATION
Doing business under the name and style of Jollibee
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Corporate Information
Jollibee Foods Corporation Doing business under the name and style of Jollibee (formerly
Jollibee Foods Corporation) was incorporated in the Philippines and registered with the Philippine
Securities and Exchange Commission (SEC) on January 11, 1978. The Parent Company and its
subsidiaries (collectively referred to as “the Jollibee Group”) and affiliates are involved primarily in
the development, operations and franchising of quick service restaurants (QSRs) under the trade
names “Jollibee”, “Chowking”, “Greenwich”, “Red Ribbon”, “Yong He King”, “Hong Zhuang
Yuan”, “Mang Inasal”, “Burger King”, “Highlands Coffee”, “Pho24”, “Hard Rock Cafe”, “Dunkin’
Donuts”, “Smashburger”, “Tim Ho Wan” and “Tortas Frontera”. The other activities of the Jollibee
Group include manufacturing and property leasing in support of the quick service restaurant systems
and other business activities (see Notes 2 and 5). The corporate life of the Parent Company is fifty
(50) years from the date of incorporation or until 2028.
The common shares of the Parent Company are listed and traded in the Philippine Stock Exchange
(PSE) beginning July 14, 1993.
The registered office address of the Parent Company is 10/F Jollibee Plaza Building, 10 F. Ortigas Jr.
Ave., Ortigas Center, Pasig City.
The consolidated financial statements as at December 31, 2018 and 2017 and for each of the three
years in the period ended December 31, 2018 were reviewed and recommended for approval by the
Audit Committee as well as approved and authorized for issuance by the Board of Directors (BOD)
on April 8, 2019.
Basis of Preparation
The consolidated financial statements of the Jollibee Group have been prepared on a historical cost
basis, except for financial assets at fair value through profit or loss (FVTPL) and derivative financial
instruments in 2018 and available-for-sale (AFS) investments and derivative financial instruments in
2017, which are measured at fair value. The consolidated financial statements are presented in
Philippine peso, which is the Parent Company’s functional and presentation currency. All values are
rounded to the nearest thousand pesos, except par values, per share amounts, number of shares and
when otherwise indicated.
Statement of Compliance
The accompanying consolidated financial statements have been prepared in compliance with
Philippine Financial Reporting Standards (PFRS).
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The amendments to PFRS 2 address three main areas: the effects of vesting conditions on the
measurement of a cash-settled share-based payment transaction; the classification of a share-
based payment transaction with net settlement features for withholding tax obligations; and the
accounting where a modification to the terms and conditions of a share-based payment
transaction changes its classification from cash-settled to equity-settled. Entities are required to
apply the amendments to: (1) share-based payment transactions that are unvested or vested but
unexercised as at January 1, 2018, (2) share-based payment transactions granted on or after
January 1, 2018 and to (3) modifications of share-based payments that occurred on or after
January 1, 2018. Retrospective application is permitted if elected for all three amendments and if
it is possible to do so without hindsight.
The Jollibee Group’s accounting policy for cash-settled share-based payments is consistent with
the approach clarified in the amendments. In addition, the Jollibee Group has no share-based
payment transaction with net settlement features for withholding tax obligations and had not
made any modifications to the terms and conditions of its share-based payment transaction.
Therefore, these amendments do not have any impact on the Jollibee Group’s consolidated
financial statements.
PFRS 9, replaces Philippine Accounting Standards (PAS) 39, Financial Instruments: Recognition
and Measurement, for annual periods beginning on or January 1, 2018, bringing together all these
aspects of the accounting for financial instruments: classification and measurement; impairment;
and hedge accounting.
The Jollibee Group applied PFRS 9 using modified retrospective approach, with an initial
application date of January 1, 2018. The Jollibee Group has not restated the comparative
information, which continues to be reported under PAS 39. Differences arising from the adoption
of PFRS 9 have been recognized directly in retained earnings and net unrealized gain on AFS
financial assets.
Under PFRS 9, debt instruments are subsequently measured at FVTPL, amortized cost, or fair
value through other comprehensive income (FVOCI). The classification is based on two criteria:
the Jollibee Group’s business model for managing the assets; and whether the instruments’
contractual cash flows represent ‘solely payments of principal and interest’ on the principal
amount outstanding.
The assessment of the Jollibee Group’s business model was made as of the date of initial
application, January 1, 2018, and then applied prospectively to those financial assets that were not
derecognized before January 1, 2018. The assessment of whether contractual cash flows on debt
instruments are solely comprised of principal and interest was made based on the facts and
circumstances as at the initial recognition of the assets.
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The classification and measurement requirements of PFRS 9 did not have a significant impact on
Jollibee Group. The Jollibee Group continued measuring at fair value all financial assets
previously held at fair value under PAS 39. The following are the changes in the classification of
the Jollibee Group’s financial assets:
ƒ Investments in golf and leisure club shares previously classified as AFS financial
assets are now classified and measured as financial assets at FVTPL beginning
January 1, 2018. As a result of the change in classification of Jollibee Group’s
investments in golf and leisure club shares, the net unrealized gain on AFS financial
assets related to those investments that were previously presented under other
comprehensive income (OCI), was reclassified to retained earnings as at January 1,
2018, resulting in a decrease in other components of equity and an increase in retained
earnings of =P6.8 million.
There are no changes in classification and measurement for the Jollibee Group’s financial
liabilities.
In summary, upon adoption of PFRS 9, the Jollibee Group had the following required or elected
reclassifications as at January 1, 2018:
(b) Impairment
The adoption of PFRS 9 has fundamentally changed the Jollibee Group’s accounting for
impairment losses for financial assets by replacing PAS 39’s incurred loss approach with a
forward-looking expected credit loss (ECL) approach. PFRS 9 requires the Jollibee Group to
record ECL for all debt instruments not held at FVTPL and contract assets.
Incurred Loss versus Expected Credit Loss Methodology. The application of ECL significantly
changes the Jollibee Group’s credit loss methodology and models. ECL represents credit losses
that reflect an unbiased and probability-weighted amount which is determined by evaluating a
range of possible outcomes, the time value of money and reasonable and supportable information
about past events, current conditions and forecasts of future economic conditions. The objective
is to record lifetime losses on all financial instruments which have experienced a significant
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increase in credit risk (SICR) since their initial recognition. As a result, ECL allowances are
measured at amounts equal to either (i) 12-month ECL or (ii) lifetime ECL for those financial
instruments which have experienced a SICR since initial recognition (General Approach). The
12-month ECL is the portion of lifetime ECL that results from default events over the expected
life of a financial instrument. In comparison, the previous incurred loss model recognizes
lifetime credit losses only when there is objective evidence of impairment while ECL model
eliminated the threshold or trigger event required under incurred loss model, and lifetime ECL are
recognized earlier.
Staging Assessment
For non-credit-impaired financial instruments:
∂ Stage 1 is comprised of all non-impaired financial instruments which have not experienced a
SICR since initial recognition. The Jollibee Group recognizes a 12-month ECL for Stage 1
financial instruments.
∂ Stage 2 is comprised of all non-impaired financial instruments which have experienced a
SICR since initial recognition. The Jollibee Group recognizes a lifetime ECL for Stage 2
financial instruments.
For credit-impaired financial instruments:
Financial instruments are classified as Stage 3 when there is objective evidence of impairment as
a result of one or more loss events that have occurred after initial recognition with a negative
impact on the estimated future cash flows of a loan or a portfolio of loans. The ECL model
requires a lifetime ECL for impaired financial instruments.
For cash in banks, short-term deposits, short-term investments, and security and other deposits,
the Jollibee Group has applied the General Approach and has calculated ECL based on 12-month
ECL. For receivables and contract assets, and operating lease receivables, the Jollibee Group
applied the simplified approach permitted by PFRS 9, which requires lifetime ECL to be
recognized from initial recognition of the receivables. As at January 1, 2018, the Jollibee Group
assessed that there was no SICR related to its financial assets at amortized cost.
The adoption of ECL approach has no significant impact on the allowance for impairment losses
recognized in the consolidated financial statements.
ƒ Amendments to PFRS 4, Applying PFRS 9 with PFRS 4, Insurance Contracts
The amendments address concerns arising from implementing PFRS 9, the new financial
instruments standard before implementing the new insurance contracts standard.
The amendments introduce two options for entities issuing insurance contracts: a temporary
exemption from applying PFRS 9 and an overlay approach. The temporary exemption is first
applied for reporting periods beginning on or after January 1, 2018. An entity may elect the
overlay approach when it first applies PFRS 9 and apply that approach retrospectively to financial
assets designated on transition to PFRS 9. The entity restates comparative information reflecting
the overlay approach if, and only if, the entity restates comparative information when applying
PFRS 9.
The amendments are not applicable to the Jollibee Group since none of the entities within the
Jollibee Group have activities that are predominantly connected with insurance or issue insurance
contracts.
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2017 2016
(in Millions)
REVENUE FROM CONTRACTS WITH CUSTOMERS
Revenue from contracts with customers =2,036.5
P =1,802.1
P
DIRECT COSTS
Share on system-wide advertising fees 2,036.5 1,802.1
NET INCOME =–
P =–
P
The reason for the above changes in the consolidated statement of comprehensive income for the
years ended December 31, 2017 and 2016 is described below:
ƒ Principal versus Agent Consideration. The Jollibee Group’s agreement with the franchisee
includes the right to charge the franchisee its share in the Jollibee Group’s nationwide
advertising and marketing efforts as well as fees for the Jollibee Group’s administration of
various advertisements, network and media placements. Upon adoption of PFRS 15, the
Jollibee Group determined that it is acting as principal for the nationwide advertising because
it is the Jollibee Group who retains the right to direct the service provider of the
advertisements, network and media placements, and has the discretion on how to price the
advertising fee charges.
Before the adoption of PFRS 15, contract asset is not presented separately from receivables while
contract liabilities are presented as other liabilities. Under PFRS 15, the timing of revenue
recognition, schedule of payment and cash collections results in billed accounts receivable (trade
receivables), accrued receivables (contract assets) and deferred revenue and unearned revenue
from gift certificates (contract liabilities). Upon adoption of PFRS 15, the Jollibee Group
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reclassified “Trade receivables” to “Contract assets” amounting to P =407.4 million and “Other
liabilities” to “Contract liabilities” amounting to =
P2.7 million as at December 31, 2017.
ƒ Amendments to PAS 28, Investments in Associates and Joint Ventures, Measuring an Associate
or Joint Venture at Fair Value (Part of Annual Improvements to PFRSs 2014 - 2016 Cycle)
The amendments clarify that an entity that is a venture capital organization, or other qualifying
entity, may elect, at initial recognition on an investment-by-investment basis, to measure its
investments in associates and joint ventures at fair value through profit or loss. They also clarify
that if an entity that is not itself an investment entity has an interest in an associate or joint
venture that is an investment entity, the entity may, when applying the equity method, elect to
retain the fair value measurement applied by that investment entity associate or joint venture to
the investment entity associate’s or joint venture’s interests in subsidiaries. This election is made
separately for each investment entity associate or joint venture, at the later of the date on which
(a) the investment entity associate or joint venture is initially recognized; (b) the associate or joint
venture becomes an investment entity; and (c) the investment entity associate or joint venture first
becomes a parent. Retrospective application is required. The Jollibee Group elected to retain the
fair value measurement applied by the investment entity joint venture in accounting for its
investment.
ƒ Amendments to PAS 40, Investment Property, Transfers of Investment Property
The amendments clarify when an entity should transfer property, including property under
construction or development into, or out of investment property. The amendments state that a
change in use occurs when the property meets, or ceases to meet, the definition of investment
property and there is evidence of the change in use. A mere change in management’s intentions
for the use of a property does not provide evidence of a change in use. Retrospective application
of the amendments is not required and is only permitted if this is possible without the use of
hindsight.
Since the Jollibee Group’s current practice is in line with the clarifications issued, the Jollibee
Group does not expect any effect on its consolidated financial statements upon adoption of these
amendments.
ƒ Philippine Interpretation International Financial Reporting Interpretations Committee (IFRIC)-22,
Foreign Currency Transactions and Advance Consideration
The interpretation clarifies that, in determining the spot exchange rate to use on initial recognition
of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset
or non-monetary liability relating to advance consideration, the date of the transaction is the date
on which an entity initially recognizes the nonmonetary asset or non-monetary liability arising
from the advance consideration. If there are multiple payments or receipts in advance, then the
entity must determine the date of the transaction for each payment or receipt of advance
consideration. Retrospective application of this interpretation is not required.
Since the Jollibee Group’s current practice is in line with the clarifications issued, the Jollibee
Group does not expect any effect on its consolidated financial statements upon adoption of this
interpretation.
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Under PFRS 9, a debt instrument can be measured at amortized cost or at fair value through other
comprehensive income, provided that the contractual cash flows are ‘solely payments of principal
and interest on the principal amount outstanding’ (the SPPI criterion) and the instrument is held
within the appropriate business model for that classification. The amendments to PFRS 9 clarify
that a financial asset passes the SPPI criterion regardless of the event or circumstance that causes
the early termination of the contract and irrespective of which party pays or receives reasonable
compensation for the early termination of the contract. The amendments should be applied
retrospectively and are effective from January 1, 2019, with earlier application permitted.
The Jollibee Group has assessed that the adoption of these amendments will not have any impact
on the consolidated financial statements.
PFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of
leases and requires lessees to account for all leases under a single on-balance sheet model similar
to the accounting for finance leases under PAS 17, Leases. The standard includes two
recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) and
short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date
of a lease, a lessee will recognize a liability to make lease payments (i.e., the lease liability) and
an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-
use asset). Lessees will be required to separately recognize the interest expense on the lease
liability and the depreciation expense on the right-of-use asset.
Lessees will be also required to remeasure the lease liability upon the occurrence of certain events
(e.g., a change in the lease term, a change in future lease payments resulting from a change in an
index or rate used to determine those payments). The lessee will generally recognize the amount
of the remeasurement of the lease liability as an adjustment to the right-of-use asset.
Lessor accounting under PFRS 16 is substantially unchanged from today’s accounting under
PAS 17. Lessors will continue to classify all leases using the same classification principle as in
PAS 17 and distinguish between two types of leases: operating and finance leases.
PFRS 16 also requires lessees and lessors to make more extensive disclosures than under PAS 17.
A lessee can choose to apply the standard using either a full retrospective or a modified
retrospective approach. The standard’s transition provisions permit certain reliefs.
The Jollibee Group is currently assessing the impact of adopting PFRS 16.
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The amendments to PAS 19 address the accounting when a plan amendment, curtailment or
settlement occurs during a reporting period. The amendments specify that when a plan
amendment, curtailment or settlement occurs during the annual reporting period, an entity is
required to:
ƒ Determine current service cost for the remainder of the period after the plan amendment,
curtailment or settlement, using the actuarial assumptions used to remeasure the net defined
benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after
that event.
ƒ Determine net interest for the remainder of the period after the plan amendment, curtailment
or settlement using: the net defined benefit liability (asset) reflecting the benefits offered
under the plan and the plan assets after that event; and the discount rate used to remeasure
that net defined benefit liability (asset).
The amendments also clarify that an entity first determines any past service cost, or a gain or loss
on settlement, without considering the effect of the asset ceiling. This amount is recognized in
profit or loss. An entity then determines the effect of the asset ceiling after the plan amendment,
curtailment or settlement. Any change in that effect, excluding amounts included in the net
interest, is recognized in other comprehensive income.
The amendments apply to plan amendments, curtailments, or settlements occurring on or after the
beginning of the first annual reporting period that begins on or after January 1, 2019, with early
application permitted. These amendments will apply only to any future plan amendments,
curtailments, or settlements of the Jollibee Group.
The amendments clarify that an entity applies PFRS 9 to long-term interests in an associate or
joint venture to which the equity method is not applied but that, in substance, form part of the net
investment in the associate or joint venture (long-term interests). This clarification is relevant
because it implies that the expected credit loss model in PFRS 9 applies to such long-term
interests.
The amendments also clarified that, in applying PFRS 9, an entity does not take account of any
losses of the associate or joint venture, or any impairment losses on the net investment,
recognized as adjustments to the net investment in the associate or joint venture that arise from
applying PAS 28.
The amendments should be applied retrospectively and are effective from January 1, 2019, with
early application permitted. Since the Jollibee Group does not have such long-term interests in its
associate and joint venture, the amendments will not have an impact on its consolidated financial
statements.
The interpretation addresses the accounting for income taxes when tax treatments involve
uncertainty that affects the application of PAS 12, Income Taxes, and does not apply to taxes or
levies outside the scope of PAS 12, nor does it specifically include requirements relating to
interest and penalties associated with uncertain tax treatments.
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An entity must determine whether to consider each uncertain tax treatment separately or together
with one or more other uncertain tax treatments. The approach that better predicts the resolution
of the uncertainty should be followed. The Jollibee Group is currently assessing the impact of
adopting this interpretation.
The amendments clarify that, when an entity obtains control of a business that is a joint
operation, it applies the requirements for a business combination achieved in stages,
including remeasuring previously held interests in the assets and liabilities of the joint
operation at fair value. In doing so, the acquirer remeasures its entire previously held interest
in the joint operation.
A party that participates in, but does not have joint control of, a joint operation might obtain
joint control of the joint operation in which the activity of the joint operation constitutes a
business as defined in PFRS 3. The amendments clarify that the previously held interests in
that joint operation are not remeasured.
An entity applies those amendments to business combinations for which the acquisition date
is on or after the beginning of the first annual reporting period beginning on or after
January 1, 2019 and to transactions in which it obtains joint control on or after the beginning
of the first annual reporting period beginning on or after January 1, 2019, with early
application permitted. These amendments are currently not applicable to the Jollibee Group
but may apply to future transactions.
ƒ Amendments to PAS 12, Income Tax Consequences of Payments on Financial Instruments
Classified as Equity
The amendments clarify that the income tax consequences of dividends are linked more
directly to past transactions or events that generated distributable profits than to distributions
to owners. Therefore, an entity recognizes the income tax consequences of dividends in
profit or loss, other comprehensive income or equity according to where the entity originally
recognized those past transactions or events.
An entity applies those amendments for annual reporting periods beginning on or after
January 1, 2019, with early application is permitted. These amendments are not expected to
have significant impact to the Jollibee Group.
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ƒ Amendments to PAS 23, Borrowing Costs, Borrowing Costs Eligible for Capitalization
The amendments clarify that an entity treats as part of general borrowings any borrowing
originally made to develop a qualifying asset when substantially all of the activities necessary
to prepare that asset for its intended use or sale are complete.
An entity applies those amendments to borrowing costs incurred on or after the beginning of
the annual reporting period in which the entity first applies those amendments. An entity
applies those amendments for annual reporting periods beginning on or after January 1, 2019,
with early application permitted.
Since the Jollibee Group’s current practice is in line with these amendments, the
Jollibee Group does not expect any effect on its consolidated financial statements upon
adoption.
The amendments to PFRS 3 clarify the minimum requirements to be a business, remove the
assessment of a market participant’s ability to replace missing elements, and narrow the
definition of outputs. The amendments also add guidance to assess whether an acquired process
is substantive and add illustrative examples. An optional fair value concentration test is
introduced which permits a simplified assessment of whether an acquired set of activities and
assets is not a business.
An entity applies those amendments prospectively for annual reporting periods beginning on or
after January 1, 2020, with earlier application permitted.
These amendments will apply on future business combinations of the Jollibee Group.
The amendments refine the definition of material in PAS 1 and align the definitions used across
PFRSs and other pronouncements. They are intended to improve the understanding of the
existing requirements rather than to significantly impact an entity’s materiality judgements.
An entity applies those amendments prospectively for annual reporting periods beginning on or
after January 1, 2020, with earlier application permitted. The Jollibee Group is currently
assessing the impact of these amendments.
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The overall objective of PFRS 17 is to provide an accounting model for insurance contracts that
is more useful and consistent for insurers. In contrast to the requirements in PFRS 4, which are
largely based on grandfathering previous local accounting policies, PFRS 17 provides a
comprehensive model for insurance contracts, covering all relevant accounting aspects. The core
of PFRS 17 is the general model, supplemented by:
ƒ A specific adaptation for contracts with direct participation features (the variable fee
approach)
ƒ A simplified approach (the premium allocation approach) mainly for short-duration contracts
PFRS 17 is effective for reporting periods beginning on or after January 1, 2021, with
comparative figures required. Early application is permitted. Adoption of this standard is not
expected to have any impact to the Jollibee Group.
Deferred Effectivity
ƒ Amendments to PFRS 10 and PAS 28, Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture
The amendments address the conflict between PFRS 10 and PAS 28 in dealing with the loss of
control of a subsidiary that is sold or contributed to an associate or joint venture. The
amendments clarify that a full gain or loss is recognized when a transfer to an associate or joint
venture involves a business as defined in PFRS 3. Any gain or loss resulting from the sale or
contribution of assets that does not constitute a business, however, is recognized only to the
extent of unrelated investors’ interests in the associate or joint venture.
On January 13, 2016, the Financial Reporting Standards Council postponed the original effective
date of January 1, 2016 of the said amendments until the International Accounting Standards
Board has completed its broader review of the research project on equity accounting that may
result in the simplification of accounting for such transactions and of other aspects of accounting
for associates and joint ventures.
Basis of Consolidation
The consolidated financial statements comprise the financial statements of the Parent Company and
its subsidiaries as at December 31, 2018 and for each of the three years in the period ended
December 31, 2018.
Control is achieved when the Jollibee Group is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the
investee. Specifically, the Jollibee Group controls an investee if, and only if, the Jollibee Group has:
ƒ Power over the investee (i.e., existing rights that give it the current ability to direct the relevant
activities of the investee);
ƒ Exposure, or rights, to variable returns from its involvement with the investee;
ƒ The ability to use its power over the investee to affect its returns.
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There is a general presumption that a majority of voting rights results in control. To support this
presumption when the Jollibee Group has less than a majority of the voting or similar rights of an
investee, the Jollibee Group considers all relevant facts and circumstances in assessing whether it has
power over an investee, including:
ƒ The contractual arrangement with the other vote holders of the investee.
ƒ Rights arising from other contractual arrangements.
ƒ The Jollibee Group’s voting rights and potential voting rights.
The Jollibee Group re-assesses whether or not it controls an investee if facts and circumstances
indicate that there are changes to one or more of the three elements of control. Consolidation of a
subsidiary begins when the Jollibee Group obtains control over the subsidiary and ceases when the
Jollibee Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated financial statements from the
date the Jollibee Group gains control until the date the Jollibee Group ceases to control the subsidiary.
Profit or loss and each component of OCI are attributed to the equity holders of the Parent Company
and to the non-controlling interests, even if this results in the non-controlling interests having a deficit
balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring
their accounting policies in line with the Jollibee Group’s accounting policies. All intra-group assets
and liabilities, equity, income, expenses and cash flows relating to transactions between members of
the Jollibee Group are eliminated in full on consolidation.
The reporting dates of the Parent Company and the associates or joint ventures are identical and the
latter’s accounting policies conform to those used by the Parent Company for like transactions and
events in similar circumstances.
Non-controlling interests represent the interests in the subsidiaries not held by the Parent Company,
and are presented separately in the consolidated statement of comprehensive income and consolidated
statement of financial position, separately from equity attributable to equity holders of the
Parent Company.
A change in ownership interest in a subsidiary that does not result in a loss of control is accounted for
as an equity transaction. The carrying amounts of the controlling and non-controlling interests are
adjusted to reflect the changes in the Jollibee Group’s relative interests in the subsidiary. The Jollibee
Group recognizes directly in equity any difference between the amount by which the non-controlling
interests are adjusted and the fair value of the consideration paid or received, and attribute it to the
equity holders of the Parent Company. These include acquisitions of non-controlling interests of
Greenwich, Yong He King, Mang Inasal, Happy Bee Foods Processing Pte. Ltd. and Smashburger.
In particular cases where the Jollibee Group acquires non-controlling interest in a subsidiary at a
*SGVFS034434*
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consideration in excess of its carrying amount, the excess is charged to the “Excess of cost over the
carrying value of non-controlling interests acquired” account under equity. These changes in the
ownership interest in a subsidiary do not result in the recognition of a gain or loss in profit or loss.
The consolidated financial statements include the accounts of the Parent Company and the following
wholly-owned and majority-owned subsidiaries as at December 31, 2018 and 2017:
2018 2017
Country Direct Indirect Direct Indirect
of Incorporation Principal Activities Ownership Ownership Ownership Ownership
Fresh N’ Famous Foods Inc. (Fresh N’ Famous) - Philippines Food service 100 – 100 –
Chowking Food Corporation USA United States of
America
(USA) Holding company – 100 – 100
Zenith Foods Corporation (Zenith) Philippines Food service 100 – 100 –
Freemont Foods Corporation (Freemont) Philippines Food service 100 – 100 –
RRB Holdings, Inc. (RRBH): Philippines Holding company 100 – 100 –
Red Ribbon Bakeshop, Inc. (RRBI) Philippines Food service – 100 – 100
Red Ribbon Bakeshop, Inc. USA (RRBI USA) USA Food service – 100 – 100
Mang Inasal Philippines Inc. (Mang Inasal) Philippines Food service 100 – 100 –
Grandworth Resources Corporation (Grandworth): Philippines Leasing 100 – 100 –
Adgraphix, Inc. (Adgraphix) Philippines Digital printing – 100 – 100
IConnect Multi Media Network, Inc. (IConnect) Philippines Advertising – 60 – 60
JC Properties & Ventures Co. Philippines Dormant – 50 – 50
Honeybee Foods Corporation (HFC): USA Food service 100 – 100 –
Tokyo Teriyaki Corporation (TTC) USA Food service – 100 – 100
Honeybee Foods (Canada) Corporation (HFCC) Canada Food service – 100 – 100
Jollibee Worldwide Pte. Ltd. (JWPL): Singapore Holding company 100 – 100 –
Regional Operating Headquarters of JWPL (JWS) Philippines Financial accounting, human
resources and logistics
services – 100 – 100
Golden Plate Pte., Ltd. (GPPL): Singapore Holding company – 100 – 100
- Golden Beeworks Pte. Ltd. Singapore Food service – 60 – 60
- Golden Piatto Pte. Ltd. (e) Singapore Holding company – 75 – 75
Ÿ Cibo Felice S.R.L. (c) Italy Food service – 100 – 100
Golden Cup Pte.Ltd. Singapore Holding company – 60 – 60
- Beijing Golden Coffee Cup Food & Beverage People’s Republic
Management Co., Ltd. of China
(PRC) Food service – 100 – 100
Beijing New Hongzhuangyuan Food and Beverage
Management Co., Ltd. (Hong Zhuang Yuan) PRC Food service – 100 – 100
Southsea Binaries Ltd. (Southsea) British Virgin Island
(BVI) Holding company – 100 – 100
Beijing Yong He King Food and Beverage Co., Ltd. PRC Food service – 100 – 100
Shenzhen Yong He King Food and Beverage Co., Ltd. PRC Food service – 100 – 100
Hangzhou Yongtong Food and Beverage Co., Ltd. PRC Food service – 100 – 100
Hangzhou Yong He King Food and Beverage Co., Ltd. PRC Food service – 100 – 100
Wuhan Yong He King Food and Beverage Co., Ltd. PRC Food service – 100 – 100
Tianjin Yong He King Food and Beverage Co., Ltd. PRC Food service – 100 – 100
Happy Bee Foods Processing Pte. Ltd. (HBFPPL) Singapore Holding company – 100 – 100
- Happy Bee Foods Processing (Anhui) Co. Ltd. PRC Food service – 100 – 100
JSF Investments Pte. Ltd. (JSF): Singapore Holding company – 99 – 99
- SF Vung Tau Joint Stock Company (d) Vietnam Holding company – 60 – 60
Ÿ Highland Coffee Service Joint-stock Company Vietnam Food service – 100 – 100
Ÿ Quantum Corporation Vietnam Food service – 100 – 100
Pho Viet Joint Stock Company Vietnam Food service – 100 – 100
Pho 24 Service Trade Manufacture Corporation Vietnam Food service – 100 – 100
- Blue Sky Holdings Limited (d) Hong Kong Holding company – 60 – 60
Ÿ Sino Ocean Limited Hong Kong Food service – 100 – 100
Ÿ Blue Sky Holdings (Macau) Limited Macau Food service – 100 – 100
Jollibee (China) Food & Beverage Management Co. Ltd. PRC Management company – 100 – 100
Jollibee International (BVI) Ltd. (JIBL): BVI Holding company – 100 – 100
- Jollibee Vietnam Corporation Ltd. Vietnam Food service – 100 – 100
∂ Goldstar Food Trade and Service Company Ltd (GSC) Vietnam Food service – 100 – 100
- PT Chowking Indonesia Indonesia Food service – 100 – 100
- PT Jollibee Indonesia Indonesia Dormant – 100 – 100
- Jollibee (Hong Kong) Limited and Subsidiaries Hong Kong Dormant – 85 – 85
- Belmont Enterprises Ventures Limited (Belmont): BVI Holding company – 100 – 100
Ÿ Shanghai Belmont Enterprises Management and Adviser Co.,
Ltd. (SBEMAC) PRC Business management service – 100 – 100
Ÿ Yong He Holdings Co., Ltd. BVI Holding company – 100 – 100
Centenary Ventures Ltd. BVI Holding company – 100 – 100
Bee Good! Inc. (BGI) USA Holding company – 100 – 100
- SJBF LLC (SJBF)(a) USA Food service – 100 – 40
Bee World UK Limited (UK) (b) UK Holding company – 100 – –
Chanceux, Inc. Philippines Holding company 100 – 100 –
BKTitans Inc. (BKTitans) Philippines Holding company – 54 – 54
- PFN Holdings Corporation Philippines Holding company – 99 – 99
Ÿ PERF Restaurants, Inc. Philippines Food service – 100 – 100
PERF Trinoma Philippines Food service – 100 – 100
PERF MOA Philippines Food service – 100 – 100
Jollibee Foods Corporation (USA) USA Holding company 100 – 100 –
Donut Magic Phils., Inc. (Donut Magic)(f) Philippines Dormant 100 – 100 –
Ice Cream Copenhagen Phils., Inc. (ICCP) (f) Philippines Dormant 100 – 100 –
Mary’s Foods Corporation (Mary’s)(f) Philippines Dormant 100 – 100 –
QSR Builders, Inc. Philippines Dormant 100 – 100 –
(a) On April 17, 2018, the Jollibee Group, through BGI completed the acquisition of additional 45% share of SJBF, increasing its ownership from 40% to 85%. Subsequently, on December 14, 2018, the Jollibee Group,
through BGI acquired the remaining 15% share resulting to 100% share in SJBF.
(b) On April 16, 2018, Bee World UK Limited (UK) was incorporated.
(c) On July 31, 2017, the Jollibee Group, through Golden Piatto Pte. Ltd. incorporated Cibo Felice in Italy.
(d) On May 10, 2017, the Jollibee Group, through JSF increased its shareholding in SF Vung Tau Joint Stock Company (SFVT) and Blue Sky Holdings Limited (Blue Sky) to 60%.
(e) On April 12, 2017, the Jollibee Group, through GPPL, incorporated Golden Piatto Pte. Ltd. to own and operate Jollibee restaurants in Italy.
(f) On June 18, 2004, the stockholders of the Jollibee Group approved the Plan of Merger of the three (3) dormant companies. The application is pending approval from the SEC as at December 31, 2018.
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The Jollibee Group classifies all other assets and liabilities as noncurrent. Deferred tax assets and
liabilities are classified as noncurrent assets and liabilities.
The principal or the most advantageous market must be accessible by the Jollibee Group.
The fair value of an asset or a liability is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their economic
best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to
generate economic benefits by using the asset in its highest and best use or by selling it to another
market participant that would use the asset in its highest and best use.
The fair value for financial instruments traded in active markets at the reporting date is based on their
quoted price or binding dealer price quotations, without any deduction for transaction costs. Where
the Jollibee Group has financial assets and financial liabilities with offsetting positions in market risks
or counterparty credit risk, it has elected to use the measurement exception to measure the fair value
of its net risk exposure by applying the bid or ask price to the net open position as appropriate. For
all other financial instruments not traded in an active market, the fair value is determined by using
valuation techniques deemed to be appropriate in the circumstances. Valuation techniques include
the market approach (i.e., using prices and other relevant information generated by market
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transactions involving identical or comparable assets, liabilities or a group of assets and liabilities),
the income approach (i.e., discounted cash flow analysis and option pricing models making as much
use of available and supportable market data as possible) and the cost approach (i.e., based on the
amount required to replace the service capacity of an asset).
The Jollibee Group uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximizing the use of relevant observable inputs
and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the consolidated financial
statements are categorized within the fair value hierarchy, described as follows, based on the lowest-
level input that is significant to the fair value measurement as a whole:
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest-level input that is significant to the fair value
measurement is directly or indirectly observable
Level 3 - Valuation techniques for which the lowest-level input that is significant to the fair value
measurement is unobservable
For assets and liabilities that are recognized in the consolidated financial statements on a recurring
basis, the Jollibee Group determines whether transfers have occurred between levels in the hierarchy
by reassessing categorization (based on the lowest-level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
The Jollibee Group’s management determines the policies and procedures for both recurring fair
value measurement and non-recurring measurement. At each reporting date, the management
analyzes the movements in the values of assets and liabilities which are required to be remeasured or
reassessed as per the Jollibee Group’s accounting policies. For this analysis, the management verifies
the major inputs applied in the latest valuation by agreeing the information in the valuation
computation to contracts and other relevant documents.
For the purpose of fair value disclosures, the Jollibee Group has determined classes of assets and
liabilities based on the nature, characteristics and risks of the asset or liability and the level of the fair
value hierarchy as explained above.
Short-term Investments
Short-term investments are deposits with original maturities of more than three months to one year
from acquisition date.
Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity.
Date of Recognition. The Jollibee Group recognizes a financial asset or a financial liability in the
consolidated statement of financial position, when it becomes a party to the contractual provisions of
the instrument. Purchases or sales of financial assets that require delivery of assets within a time
frame established by regulation or convention in the market place (regular way trades) are recognized
on the trade date, i.e., the date that the Jollibee Group commits to purchase or sell the asset.
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Financial Assets
Initial Recognition and Measurement. Financial assets are classified, at initial recognition, as
subsequently measured at amortized cost, FVOCI and FVTPL.
The classification of financial assets at initial recognition depends on the financial asset’s contractual
cash flow characteristics and the Jollibee Group’s business model for managing them. With the
exception of trade receivables that do not contain a significant financing component or for which the
Jollibee Group has applied the practical expedient, the Jollibee Group initially measures a financial
asset at its fair value plus, in the case of a financial asset not at FVTPL, transaction costs. Trade
receivables that do not contain a significant financing component or for which the Jollibee Group has
applied the practical expedient are measured at the transaction price determined under PFRS 15.
In order for a financial asset to be classified and measured at amortized cost or FVOCI, it needs to
give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal
amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument
level.
The Jollibee Group’s business model for managing financial assets refers to how it manages its
financial assets in order to generate cash flows. The business model determines whether cash flows
will result from collecting contractual cash flows, selling the financial assets, or both.
Subsequent Measurement. For purposes of subsequent measurement, financial assets are classified in
four categories:
The Jollibee Group has no financial assets at FVOCI as at December 31, 2018.
Financial Assets at Amortized Cost (Debt Instruments). This category is the most relevant to the
Jollibee Group. The Jollibee Group measures financial assets at amortized cost if both of the
following conditions are met:
ƒ The financial asset is held within a business model with the objective to hold financial assets in
order to collect contractual cash flows; and
ƒ The contractual terms of the financial asset give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding.
Financial assets at amortized cost are subsequently measured using the effective interest (EIR)
method and are subject to impairment. Gains and losses are recognized in profit or loss when the
asset is derecognized, modified or impaired.
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The Jollibee Group’s cash in banks, short-term deposits, short-term investments, receivables
(excluding receivables from government agencies), receivable from sale of business, security and
other deposits and operating lease receivables are classified under this category as at
December 31, 2018.
Financial Assets at FVTPL. Financial assets at FVTPL include financial assets held for trading,
financial assets designated upon initial recognition at FVTPL, or financial assets mandatorily required
to be measured at fair value. Financial assets are classified as held for trading if they are acquired for
the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded
derivatives, are also classified as held for trading unless they are designated as effective hedging
instruments. Financial assets with cash flows that are not solely payments of principal and interest
are classified and measured at FVTPL, irrespective of the business model. Notwithstanding the
criteria for debt instruments to be classified at amortized cost or FVOCI, as described above, debt
instruments may be designated at FVTPL on initial recognition if doing so eliminates, or significantly
reduces, an accounting mismatch.
Financial assets at FVTPL are carried in the consolidated statement of financial position at fair value
with net changes in fair value recognized in the consolidated statement of comprehensive income.
The Jollibee Group elected to classify irrevocably its investments in golf and leisure club shares
under this category as at December 31, 2018.
Impairment of Financial Assets. The Jollibee Group recognizes an allowance for ECLs for all debt
instruments not held at FVTPL. ECLs are based on the difference between the contractual cash flows
due in accordance with the contract and all the cash flows the Jollibee Group expects to receive
discounted at an approximation of the original EIR. The expected cash flows will include cash flows
from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
ECLs are recognized in two stages. For credit exposures for which there has not been a significant
increase in credit risk since initial recognition, ECLs are provided for credit losses that result from
default events that are possible within the next 12-months (a 12-month ECL). For those credit
exposures for which there has been a significant increase in credit risk since initial recognition, a loss
allowance is required for credit losses expected over the remaining life of the exposure, irrespective
of the timing of the default (a lifetime ECL).
For receivables and contract assets, and operating lease receivables, the Jollibee Group applies a
simplified approach in calculating ECLs. Therefore, the Jollibee Group does not track changes in
credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting
date. The Jollibee Group has established a provision matrix that is based on its historical credit loss
experience, adjusted for forward-looking factors specific to the debtors and the economic
environment. For security and other deposits, the Jollibee Group applies the general approach and
calculates ECL based on the 12-month ECLs or lifetime ECLs, depending on whether there has been
a significant increase in credit risk on the financial instruments since initial recognition.
For cash in banks, short-term deposits and short-term investments, the Jollibee Group applies the low
credit risk simplification. The probability of default and loss given defaults are publicly available and
are considered to be low credit risk investments. It is the Jollibee Group’s policy to measure ECLs on
such instruments on a 12-month basis. However, when there has been a significant increase in credit
risk since origination, the allowance will be based on the lifetime ECL. The Jollibee Group assesses
that there is a significant increase in credit risk of a financial asset when default occurs. The Jollibee
Group uses the ratings from Moody’s to determine whether the debt instrument has significantly
increased in credit risk and to estimate ECLs.
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The Jollibee Group considers a financial asset in default when contractual payments are 30 days past
due. However, in certain cases, the Jollibee Group may also consider a financial asset to be in default
when internal or external information indicates that the Jollibee Group is unlikely to receive the
outstanding contractual amounts in full before taking into account any credit enhancements held by
the Jollibee Group. A financial asset is written off when there is no reasonable expectation of
recovering the contractual cash flows.
The Jollibee Group incorporates forward-looking information into both its assessment of whether the
credit risk of an instrument has increased significantly since its initial recognition and its
measurement of ECL. To do this, the Jollibee Group has considered a range of relevant forward-
looking macro-economic assumptions for the determination of unbiased general industry adjustments
and any related specific industry adjustments that support the calculation of ECLs.
Based on the Jollibee Group’s evaluation and assessment and after taking into consideration external
actual and forecast information, the Jollibee Group considers two or more economic scenarios and the
relative probabilities of each outcome. External information includes economic data and forecasts
published by governmental bodies, monetary authorities and selected private-sector and academic
institutions.
The Jollibee Group has identified and documented key drivers of credit risk and credit losses of each
portfolio of financial instruments and, using an analysis of historical data, has estimated relationships
between macro-economic variables and credit risk and credit losses. The Group considers macro-
economic factors such as gross domestic product growth rates and inflation rates in its analysis.
Initial Recognition and Measurement. Financial assets are classified, at initial recognition, as
financial assets at FVTPL, loans and receivables, held-to-maturity (HTM) investments, AFS financial
assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All
financial assets are recognized initially at fair value plus, except for financial assets at FVTPL,
transaction costs that are attributable to the acquisition of the financial asset.
Purchases or sales of financial assets that require delivery of assets within a time frame established by
regulation or convention in the market place (regular way trades) are recognized on the trade date,
i.e., the date that the Jollibee Group commits to purchase or sell the asset.
The Jollibee Group’s financial assets consist of financial assets at FVTPL, loans and receivables, and
AFS financial assets as at December 31, 2017. The Jollibee Group has no financial assets classified
under the HTM investments category as at December 31, 2017.
Subsequent Measurement
Financial Assets at FVTPL. Financial assets at FVTPL include financial assets held for trading and
financial assets designated upon initial recognition at FVTPL. Financial assets are classified as held
for trading if they are acquired for the purpose of selling or repurchasing in the near term.
Derivatives, including separated embedded derivatives, are also classified as held for trading unless
they are designated as effective hedging instruments as defined by PAS 39. The Jollibee Group has
not designated any financial assets at FVTPL. Financial assets at FVTPL are carried in the
consolidated statement of financial position at fair value with net changes in fair value recognized in
profit or loss.
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Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair
value if their economic characteristics and risks are not closely related to those of the host contracts
and the host contracts are not held for trading or designated at FVTPL. These embedded derivatives
are measured at fair value with changes in fair value recognized in profit or loss. Reassessment only
occurs if there is either a change in the terms of the contract that significantly modifies the cash flows
that would otherwise be required or a reclassification of a financial asset out of the FVTPL.
This category generally applies to the Jollibee Group’s derivative assets as at December 31, 2017.
Loans and Receivables. This category is the most relevant to the Jollibee Group. Loans and
receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. After initial measurement, such financial assets are subsequently
measured at amortized cost using the effective interest rate method, except for short-term loans and
receivables with no stated interest which are measured at undiscounted amounts less impairment.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees
or costs that are an integral part of the effective interest rate. The effective interest rate amortization
is recognized in profit or loss. The losses arising from impairment are recognized also in profit or
loss.
This category includes the Jollibee Group’s cash in banks, short-term deposits, short-term
investments, receivables, receivable from sale of business, security and other deposits, and operating
lease receivables as at December 31, 2017.
AFS Financial Assets. AFS financial assets include equity investments. Equity investments
classified as AFS financial assets are those that are neither classified as held for trading nor
designated at FVTPL.
After initial measurement, AFS financial assets are subsequently measured at fair value with
unrealized gains or losses recognized in other comprehensive income and credited directly in equity
until the investment is derecognized, at which time, the cumulative gain or loss is recognized in profit
or loss, or the investment is determined to be impaired, when the cumulative loss is reclassified from
equity to profit or loss. Dividends earned while holding AFS financial assets is recognized in profit
or loss.
This category includes investments in golf and leisure club shares as at December 31, 2017.
Impairment of Financial Assets. The Jollibee Group assesses, at each reporting date, whether there is
objective evidence that a financial asset or a group of financial assets is impaired. An impairment
exists if one or more events that has occurred since the initial recognition of the asset (an incurred
‘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 reorganization 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.
ƒ Financial Assets Carried at Amortized Cost. For financial assets carried at amortized cost, the
Jollibee Group first assesses whether impairment exists individually for financial assets that are
individually significant, and individually or collectively for financial assets that are not
individually significant. If the Jollibee 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
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collectively assesses them for impairment. Assets that are individually assessed for impairment
and for which an impairment loss is, or continues to be, recognized are not included in a
collective assessment of impairment. The amount of any impairment loss identified 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 EIR.
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 using the rate of interest used to discount the future cash flows for the purpose of
measuring the impairment loss. Loans and receivables, together with the associated allowance,
are written off when there is no realistic prospect of future recovery and all collateral has been
realized or has been transferred to the Jollibee 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 recognized, the previously recognized impairment loss is increased or reduced by
adjusting the allowance account. If a write-off is later recovered, the recovery is recognized in
profit and loss to the extent that the carrying value of the asset does not exceed what the
amortized cost would have been had the impairment not been recognized at the date the
impairment is reversed.
ƒ AFS Financial Assets. For AFS financial assets, the Jollibee 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 AFS financial assets, 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 recognized in profit or
loss is removed from OCI and recognized in profit or loss. For unquoted equity investments that
are not carried at fair value because such cannot be reliably measured, or on a derivative asset that
is linked to and must be settled by delivery of such unquoted equity instruments, the amount of
loss is measured as the difference between the assets carrying amount and the present value of
estimated future cash flows discounted at the current market rate of return for a similar financial
asset.
Impairment losses on equity investments are not reversed through profit or loss; increases in their
fair value after impairment are recognized in OCI.
Initial Recognition and Measurement. Financial liabilities are classified, at initial recognition, as
financial liabilities at FVTPL, loans and borrowings, payables or as derivatives designated as hedging
instruments in an effective hedge, as appropriate.
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings
and payables, net of directly attributable transaction costs.
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The Jollibee Group’s financial liabilities include loans and borrowings, payables and derivative
financial liabilities as at December 31, 2018 and 2017.
Subsequent Measurement
ƒ Financial Liabilities at FVTPL. Financial liabilities at FVTPL include financial liabilities held
for trading and financial liabilities designated upon initial recognition as at FVTPL. Financial
liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in
the near term. This category also includes derivative financial instruments entered into by the
Jollibee Group that are not designated as hedging instruments in hedge relationships as defined
by PAS 39. Separated embedded derivatives are also classified as held for trading unless they are
designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognized in profit or loss.
Financial liabilities designated upon initial recognition at FVTPL are designated at the initial date
of recognition, and only if the criteria in PAS 39 are satisfied. The Jollibee Group has not
designated any financial liability as at FVTPL.
ƒ Loans and Borrowings, and Other Payables. This is the category most relevant to the Jollibee
Group. After initial recognition, interest-bearing loans and borrowings, and other payables are
subsequently measured at amortized cost using the EIR method. Gains and losses are recognized
in profit or loss when the liabilities are derecognized as well as through the EIR amortization
process.
Amortized cost is calculated by taking into account any discount or premium on acquisition and
fees or costs, including debt issue costs for the Jollibee Group’s debts that are an integral part of
the effective interest rate. The effective interest rate amortization is included as interest expense
in the consolidated statement of comprehensive income.
This category includes the Jollibee Group’s trade payables and other current liabilities (excluding
local and other taxes payable and unearned revenue from gift certificates), long-term debts and
operating lease payables as at December 31, 2018 and 2017.
ƒ Debt Issue Costs. Debt issue costs are specific incremental costs, other than those paid to the
lender, that are directly related to issuing a debt instrument. These are presented in the
consolidated statement of financial position as a reduction from the related debt instrument and
are amortized through the EIR amortization process.
Derecognition of Financial Assets and Liabilities (Applies to Financial Instruments before and after
January 1, 2018)
Financial Assets. A financial asset (or, where applicable, a part of a financial asset or part of a group
of similar financial assets) is primarily derecognized (i.e., removed from the Jollibee Group’s
consolidated statement of financial position) when:
ƒ The rights to receive cash flows from the asset have expired, or,
ƒ The Jollibee Group has transferred its rights to receive cash flows from the asset or has assumed
an obligation to pay the received cash flows in full without material delay to a third party under a
‘pass-through’ arrangement; and either (a) the Jollibee Group has transferred substantially all the
risks and rewards of the asset, or (b) the Jollibee Group has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred control of the asset.
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When the Jollibee Group has transferred its rights to receive cash flows from an asset or has entered
into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and
rewards of ownership. When it has neither transferred nor retained substantially all of the risks and
rewards of the asset, nor transferred control of the asset, the Jollibee Group continues to recognize the
transferred asset to the extent of its continuing involvement. In that case, the Jollibee Group also
recognized an associated liability. The transferred asset and the associated liability are measured on a
basis that reflects the rights and obligations that the Jollibee Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at
the lower of the original carrying amount of the asset and the maximum amount of consideration that
the Jollibee Group could be required to repay.
Financial Liabilities. A financial liability is derecognized when the obligation under the liability is
discharged, cancelled or has expired. When an existing financial liability is replaced by another from
the 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 of a new liability, and the difference in the respective carrying amounts is recognized
in the consolidated statement of comprehensive income.
‘Day 1 Difference’
Where the transaction price in a non-active market is different from the fair value based on other
observable current market transactions in the same instrument or based on a valuation technique
whose variables include only data from observable market, the Jollibee Group recognizes the
difference between the transaction price and fair value (a ‘Day 1 difference’) in the profit or loss
unless it qualifies for recognition as some other type of asset. In cases where unobservable data is
used, the difference between the transaction price and model value is recognized in the profit or loss
only when the inputs become observable or when the instrument is derecognized. For each
transaction, the Jollibee Group determines the appropriate method of recognizing the ‘Day 1
difference’ amount.
Initial Recognition and Subsequent Measurement. The Jollibee Group uses derivative financial
instruments, such as cross currency swaps and interest rate swaps to hedge its foreign currency risks
and interest rate risks, respectively. Such derivative financial instruments are initially recognized at
fair value on the date on which a derivative contract is entered into and are subsequently remeasured
at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial
liabilities when the fair value is negative.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or
loss, except for the effective portion of cash flow hedges, which is recognized in other comprehensive
income and later reclassified to profit or loss when the hedge item affects profit or loss.
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ƒ Fair value hedges when hedging the exposure to changes in the fair value of a recognized asset or
liability or an unrecognized firm commitment
ƒ Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable
to a particular risk associated with a recognized asset or liability or a highly probable forecast
transaction or the foreign currency risk in an unrecognized firm commitment
ƒ Hedges of a net investment in a foreign operation
The Jollibee Group’s interest rate swap is cash flow hedge. The Jollibee Group has no fair value
hedge and hedge of a net investment in a foreign operation as at December 31, 2018 and 2017.
At the inception of a hedge relationship, the Jollibee Group formally designates and documents the
hedge relationship to which it wishes to apply hedge accounting and the risk management objective
and strategy for undertaking the hedge.
Before January 1, 2018, the documentation includes identification of the hedging instrument, the
hedged item or transaction, the nature of the risk being hedged and how the entity will assess the
effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes
in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are
expected to be highly effective in achieving offsetting changes in fair value or cash flows and are
assessed on an ongoing basis to determine that they actually have been highly effective throughout
the financial reporting periods for which they were designated.
Beginning January 1, 2018, the documentation includes identification of the hedging instrument, the
hedged item, the nature of the risk being hedged and how the Jollibee Group will assess whether the
hedging relationship meets the hedge effectiveness requirements (including analysis of sources of
hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for
hedge accounting if it meets all of the following effectiveness requirements:
ƒ There is ‘an economic relationship’ between the hedged item and the hedging instrument
ƒ The effect of credit risk does not ‘dominate the value changes’ that result that economic
relationship
ƒ The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the
hedged item that the Jollibee Group actually hedges and the quantity of the hedging instrument
that the Jollibee Group actually uses to hedge that quantity of hedged item
Hedges that meet the strict criteria for hedge accounting are accounted for, as described below:
Cash Flow Hedges. Cash flow hedges are hedges of the exposure to variability in cash flows that is
attributable to a particular risk associated with a recognized asset, liability or a highly probable
forecast transaction and could affect the consolidated statements of comprehensive income. Changes
in the fair value of a hedging instrument that qualifies as a highly effective cash flow hedge are
recognized as “Comprehensive income (loss) on derivative liability” in the consolidated statement of
comprehensive income, whereas any hedge ineffectiveness is immediately recognized in profit or
loss.
The Jollibee Group has an interest rate swap for its exposure to volatility in interest rates.
Amounts recognized as other comprehensive are transferred to profit or loss when the hedged
transaction affects profit or loss, such as when the hedged income or expense is recognized or when a
forecast sale occurs.
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If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover
(as part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no
longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognized in
other comprehensive income remains separately in equity until the forecast transaction occurs or the
foreign currency firm commitment is met.
Contract Balances
Contract Assets. A contract asset is the right to consideration in exchange for goods or services
transferred to the customer. If the Jollibee Group performs by transferring goods or services to a
customer before the customer pays consideration or before payment is due, a contract asset is
recognized for the earned consideration that is conditional.
Trade Receivables. A receivable represents the Jollibee Group’s right to an amount of consideration
that is unconditional (i.e., only the passage of time is required before payment of the consideration is
due).
Contract Liabilities. A contract liability is the obligation to transfer goods or services to a customer
for which the Jollibee Group has received consideration (or an amount of consideration is due) from
the customer. If a customer pays consideration before the Jollibee Group transfers goods or services
to the customer, a contract liability is recognized when the payment is made or the payment is due
(whichever is earlier). Contract liabilities are recognized as revenue when the Jollibee Group
performs under the contract.
Inventories
Inventories are valued at the lower of cost and net realizable value. Costs are accounted for as
follows:
Net realizable value of processed inventories is the estimated selling price in the ordinary course of
business, less estimated costs of completion and the estimated costs necessary to make the sale.
Net realizable value of food supplies, packaging, store and other supplies is the current replacement
cost. Food and other supplies are held for use in the production of processed inventories.
Net realizable value of novelty items is the estimated selling price in the ordinary course of business,
less the estimated costs necessary to make the sale.
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The initial cost of property, plant and equipment consists of its purchase price, including import
duties and nonrefundable taxes and any other costs directly attributable in bringing the asset to its
working condition and location for its intended use. Cost also includes any related asset retirement
obligation and interest incurred during the construction period on funds borrowed to finance the
construction of the asset. Expenditures incurred after the property, plant and equipment have been
put into operation, such as repairs and maintenance, are normally charged to profit or loss in the year
in which the costs are incurred. In situations where it can be clearly demonstrated that the
expenditures have resulted in an increase in the future economic benefits expected to be obtained
from the use of an item of property, plant and equipment beyond its originally assessed standard of
performance, the expenditures are capitalized as additional costs of property, plant and equipment.
Depreciation and amortization are calculated on a straight-line basis over the following estimated
useful lives of the assets:
The residual values, if any, useful lives and depreciation and amortization method of the assets are
reviewed at the end of each financial period and adjusted prospectively, if appropriate.
Fully depreciated assets are retained in the accounts until they are disposed or retired.
An item of property, plant and equipment is derecognized upon disposal or when no future economic
benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset
(calculated as the difference between the disposal proceeds and the carrying amount of the asset) is
included in profit or loss in the year the asset is derecognized.
Construction in progress represents assets under construction and is stated at cost less any impairment
in value. This includes the cost of construction and other direct costs. Cost also includes interest on
borrowed funds incurred during the construction period. Construction in progress is not depreciated
until such time that the relevant assets are completed and ready for use.
Investment Properties
Investment properties consist of land and buildings and building improvements held by the Jollibee
Group for capital appreciation and rental purposes. Investment properties, except land, are carried at
cost, including transaction costs, less accumulated depreciation and amortization and any impairment
in value. Cost also includes the cost of replacing part of an existing investment property at the time
that cost is incurred if the recognition criteria are met; and excludes the costs of day-to-day servicing
of an investment property. Land is carried at cost less any impairment in value.
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The depreciation of buildings and building improvements are calculated on a straight-line basis over
the estimated useful lives of the assets which are five (5) to twenty (20) years.
The residual values, if any, useful lives and method of depreciation and amortization of the assets are
reviewed at each financial year-end and adjusted prospectively, if appropriate.
Investment property is derecognized when either it has been disposed of or when the investment
property is permanently withdrawn from use and no future economic benefit is expected from its
disposal. Any gains or losses on the retirement or disposal of an investment property are recognized
in profit or loss in the year of retirement or disposal.
Transfers to investment property are made only when there is a change in use, evidenced by ending of
ownership-occupation, or commencement of an operating lease to another party. Transfers from
investment property are made only when there is a change in use, evidenced by commencement of
owner-occupation or commencement of development with a view to sell.
For a transfer from investment property to owner-occupied property, the cost of property for
subsequent accounting is its carrying value at the date of change in use. If the property occupied by
the Jollibee Group as an owner-occupied property becomes an investment property, the Jollibee
Group accounts for such property in accordance with the policy stated under property and equipment
up to the date of change in use.
Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as
part of the cost of asset. Capitalization of borrowing costs commences when the activities to prepare
the asset are in progress and expenditures and borrowing costs are being incurred. Borrowing costs
are capitalized until the assets are substantially ready for their intended use. All other borrowing
costs are expensed as incurred. Borrowing costs consist of interest and other cost that an entity incurs
in connection with the borrowing of funds.
Business Combinations
Business combinations are accounted for using the acquisition method. Applying the acquisition
method requires the (a) determination whether the Jollibee Group will be identified as the acquirer;
(b) determination of the acquisition date; (c) recognition and measurement of the identifiable assets
acquired, liabilities assumed and any non-controlling interest in the acquiree; and (d) recognition and
measurement of goodwill or a gain from a bargain purchase.
When the Jollibee 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 acquisition date.
The cost of an acquisition is measured as the aggregate of the (a) consideration transferred by the
Jollibee Group, measured at acquisition-date fair value, (b) amount of any non-controlling interest in
the acquiree and (c) acquisition-date fair value of the Jollibee Group’s previously held equity interest
in the acquiree in a business combination achieved in stages. Acquisition costs incurred are expensed
and included in “General and administrative expenses” account in the consolidated statement of
comprehensive income.
Initial Measurement of Non-controlling Interest. For each business combination, the Jollibee Group
measures the non-controlling interest in the acquiree using the proportionate share of the acquiree’s
fair value of identifiable net assets.
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Business Combination Achieved in Stages. In a business combination achieved in stages, the Jollibee
Group remeasures its previously held equity interests in the acquiree at its acquisition-date fair value
and recognizes the resulting gain or loss, if any, in profit or loss.
Measurement Period. If the initial accounting for a business combination is incomplete by the end of
the reporting period in which the business combination occurs, the Jollibee Group reports in its
consolidated financial statements provisional amounts for the items for which the accounting is
incomplete. The measurement period ends as soon as the Jollibee Group receives the information it
was seeking about facts and circumstances that existed as at the acquisition date or learns that more
information is not obtainable. The measurement period does not exceed one year from the acquisition
date.
Impairment Testing of Goodwill. For the purpose of impairment testing, goodwill acquired in a
business combination is, from the acquisition date, allocated to each of the Jollibee Group’s
CGU, or groups of CGUs, that are expected to benefit from the synergies of the combination,
irrespective of whether other assets or liabilities of the acquiree are assigned to those units or groups
of units.
ƒ represents the lowest level within the Jollibee Group at which the goodwill is monitored for
internal management purposes; and
ƒ is not larger than an operating segment as defined in PFRS 8, Operating Segments, before
aggregation.
Frequency of Impairment Testing. Irrespective of whether there is any indication of impairment, the
Jollibee Group tests goodwill acquired in a business combination for impairment annually as at
December 31 and more frequently when circumstances indicate that the carrying amount is impaired.
Allocation of Impairment Loss. An impairment loss is recognized for a CGU if the recoverable
amount of the unit or group of units is less than the carrying amount of the unit or group of units. The
impairment loss is allocated to reduce the carrying amount of the assets of the unit or group of units
first to reduce the carrying amount of goodwill allocated to the CGU or group of units and then to the
other assets of the unit or group of units pro rata on the basis of the carrying amount of each asset in
the unit or group of units. In allocating the impairment loss, the Jollibee Group cannot reduce the
carrying amount of an asset below the highest of its fair value less costs of disposal if measurable, its
value in use if determinable and zero.
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Intangible Assets
Intangible assets acquired separately are measured at cost on initial recognition. Following initial
recognition, intangible assets are carried at cost less any accumulated amortization and any
accumulated impairment loss. The useful lives of intangible assets are assessed at the individual asset
level as either finite or indefinite.
Intangible assets with finite lives are amortized over the useful economic life using the straight-line
method and assessed for impairment whenever there is an indication that the intangible assets may be
impaired. At a minimum, the amortization period and the amortization method for an intangible asset
with a finite useful life are reviewed at least at each financial year-end. Changes in the expected
useful life or the expected pattern of consumption of future economic benefits embodied in the asset
are accounted for by changing the amortization period or method, as appropriate, and treated as
changes in accounting estimates.
Intangible assets with indefinite useful lives are tested for impairment annually either individually or
at the CGU level. Such intangible assets are not amortized. The useful life of an intangible asset
with an indefinite life is reviewed annually to determine whether the indefinite life assessment
continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is
made on a prospective basis.
Amortization of computer software, trademarks and other intangible assets are calculated on a
straight-line basis over the following estimated useful lives of the assets:
Gains or losses arising from derecognition of an intangible asset are measured as the difference
between the net disposal proceeds and the carrying amount of the asset, and are recognized in profit
or loss when the asset is derecognized.
For nonfinancial assets, excluding goodwill, 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 and
*SGVFS034434*
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amortization, had no impairment loss been recognized for the asset in prior years. Such reversal is
recognized in profit or loss. 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 its remaining useful life.
Equity
Capital Stock and Additional Paid-in Capital. Capital 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 directly attributable to the
issuance of new shares are shown in equity as a deduction from proceeds, net of tax.
Additional paid-in capital is also credited for the cost of the Jollibee Group’s equity settled share-
based payments to its employees.
Subscription Receivable. Subscription receivable represents the unpaid balance of the subscription
price for subscribed common stock of the Parent Company.
Retained Earnings. Retained earnings represent the Jollibee Group’s accumulated earnings, net of
dividends declared. The balance includes accumulated earnings of subsidiaries, joint ventures and
associates, which are not available for dividend declaration.
Dividends. The Jollibee Group recognizes a liability to make cash distribution to its equity holders
when the distribution is authorized and the distribution is no longer at the discretion of the Jollibee
Group. A corresponding amount is recognized directly in the equity. Dividends for the year that are
approved after the financial reporting date are dealt with as an event after the reporting period.
Other Comprehensive Income. Other comprehensive income comprises items of income and expense
(including reclassification adjustments) that are not recognized in profit or loss. These include
cumulative translation adjustments, gains or losses on derivatives designated as hedging instruments
in an effective hedge, unrealized gains or losses on AFS financial assets, remeasurement gains or
losses on pension and their income tax effects.
Treasury Shares. Acquisitions of treasury shares are recorded at cost. The total cost of treasury
shares is shown in the consolidated statement of financial position as a deduction from the total
equity. Upon re-issuance or resale of the treasury shares, cost of common stock held in treasury
account is credited for the cost of the treasury shares determined using the simple average method.
Gain on sale is credited to additional paid-in capital. Losses are charged against additional paid-in
capital but only to the extent of previous gain from original issuance, sale or retirement for the same
class of stock. Otherwise, losses are charged to retained earnings.
Sale of Goods. Revenue from sale of goods is recognized at the point in time when control is
transferred to the customer, which is normally upon delivery. Sales returns and discounts are
*SGVFS034434*
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deducted from sales to arrive at net sales shown in the consolidated statement of comprehensive
income.
Royalty Fees. Revenue from royalty fees is recognized as the royalty accrues based on certain
percentages of the franchisees’ net sales.
Set-up Fees. Revenue from set-up fees is recognized on a straight-basis over the term of the franchise
agreement and when performance obligations relating to the payment of set-up fees have been
satisfied.
Service Fees. Revenue is recognized in the period in which the service has been rendered.
Management Fees. Revenue is recognized in the period in which the administration services has been
rendered based on a certain percentage of the total costs incurred.
Other Revenues
The following specific recognition criteria must also be met before other revenue is recognized:
Rent Income. Rent income from operating leases is recognized on a straight-line basis over the lease
terms.
Interest Income. Interest income is recognized as the interest accrues, taking into account the
effective yield on the asset.
Other Income. Other income is recognized when there is an incidental economic benefit, other than
the usual business operations, that will flow to the Jollibee Group through an increase in asset or
reduction in liability and that can be measured reliably.
Advertising and promotions expenses include costs incurred for advertising schemes and promotional
activities for new products.
Pension Benefits
The pension liability or asset is the aggregate of the present value of the defined benefit obligation at
the end of the reporting period reduced by the fair value of plan assets (if any), adjusted for any effect
of limiting a net defined benefit asset to the asset ceiling. The asset ceiling is the present value of any
economic benefits available in the form of refunds from the plan or reductions in future contributions
to the plan.
The cost of providing benefits under the defined benefit plans is actuarially determined using the
projected unit credit method.
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Service costs which include current service costs, past service costs and gains or losses on non-
routine settlements are recognized as part of pension expense. Past service costs are recognized when
plan amendment or curtailment occurs. These amounts are calculated periodically by independent
qualified actuaries.
Net interest on the pension liability or asset is the change during the period in the liability or asset that
arises from the passage of time which is determined by applying the discount rate based on
government bonds to the pension liability or asset. Net interest on the pension liability or asset is
recognized under “Direct costs” and “General and administrative expenses” in the consolidated
statement of comprehensive income.
Remeasurements comprising actuarial gains and losses, return on plan liability or assets and any
change in the effect of the asset ceiling (excluding net interest on defined benefit liability) are
recognized immediately in other comprehensive income in the period in which they arise.
Remeasurements are not reclassified to profit or loss in subsequent periods.
Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance
policies. Plan assets are not available to the creditors of the Jollibee Group, nor can they be paid
directly to the Jollibee Group. Fair value of plan assets is based on market price information. When
no market price is available, the fair value of plan assets is estimated by discounting expected future
cash flows using a discount rate that reflects both the risk associated with the plan assets and the
maturity or expected disposal date of those assets (or, if they have no maturity, the expected period
until the settlement of the related obligations). If the fair value of the plan assets is higher than the
present value of the defined benefit obligation, the measurement of the resulting defined benefit asset
is limited to the present value of economic benefits available in the form of refunds from the plan or
reductions in future contributions to the plan.
The Jollibee Group also participates in various government-defined contribution schemes for the
PRC-based and USA-based subsidiaries. Under these schemes, pension benefits of existing and
retired employees are guaranteed by the local pension benefit plan, and each subsidiary has no further
obligations beyond the annual contribution.
Employee Leave Entitlement
Employee entitlements to annual leave are recognized as a liability when they are accrued to the
employees. Jollibee Group recognizes undiscounted liability for leave expected to be settled wholly
before twelve months after the end of the annual reporting period.
Share-based Payments
The Jollibee Group has stock option plans granting its management and employees an option to
purchase a fixed number of shares of stock at a stated price during a specified period (“equity-settled
transactions”).
The cost of the options granted to the Jollibee Group’s management and employees that becomes
vested is recognized in profit or loss over the period in which the performance and/or service
conditions are fulfilled, ending on the date on which the relevant management and employees become
fully entitled to the award (“vesting date”).
The fair value is determined using the Black-Scholes Option Pricing Model. The cumulative expense
recognized for the share-based transactions at each reporting date until the vesting date reflects the
extent to which the vesting period has expired and the Jollibee Group’s best estimate of the number of
equity instruments that will ultimately vest. The charge or credit in profit or loss or the investment
account for a period represents the movement in cumulative expense recognized as of the beginning
and end of that period.
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Where the terms of a share-based award are modified, at a minimum, an expense is recognized as if
the terms had not been modified. In addition, an expense is recognized for any modification, which
increases the total fair value of the share-based payment agreement, or is otherwise beneficial to the
management and employees as measured at the date of modification.
Where a share-based award is cancelled, it is treated as if it had vested on the date of cancellation, and
any expense not yet recognized for the award is recognized immediately. However, if a new award is
substituted for the cancelled award, and designated as a replacement award on the date that it is
granted, the cancelled and new awards are treated as if there were a modification of the original
award.
Leases
The determination of whether an arrangement is, or contains a lease is based on the substance of the
agreement at inception date of 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.
Jollibee Group as Lessee. Leases which do not transfer to the Jollibee Group substantially all the
risks and benefits of ownership of the asset are classified as operating leases. Operating lease
payments are recognized as expense in profit or loss on a straight-line basis over the lease term.
Associated costs, such as maintenance and insurance, are expensed as incurred. Contingent rent is
recognized as expense in the period in which they are incurred.
Jollibee Group as Lessor. Leases which do not transfer to the lessee 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 operating lease receivable and
recognized over the lease term on the same basis as rent income. Rent income from operating leases
is recognized as income in profit or loss on a straight-line basis over the lease term. Contingent rents
are recognized as revenue in the period in which they are earned.
The functional currencies of the Jollibee Group’s foreign operations are US dollar (USD), PRC,
Renminbi (RMB), Indonesia rupiah, Vietnam dong, Singapore dollar, Hong Kong dollar, Canadian
dollar, Macau pataca and Euro. As of the reporting date, the assets and liabilities of foreign
subsidiaries are translated into the presentation currency of the Parent Company at the rate of
exchange ruling at the reporting date while the income and expense accounts are translated at the
weighted average exchange rates for the year. The resulting translation differences are included in
equity under the account “Cumulative translation adjustments of foreign subsidiaries and interests in
joint ventures and associates”. On disposal of a foreign subsidiary, the accumulated exchange
differences are recognized in profit or loss.
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Taxes
Current Tax. Current tax liabilities for the current and prior periods are measured at the amount
expected to be paid to the tax authority. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted at reporting date.
Current income tax relating to items recognized directly in equity is recognized in equity (not in the
profit or loss). Management periodically evaluates positions taken in the tax returns with respect to
situations in which applicable tax regulations are subject to interpretation and establishes provisions
where appropriate.
Deferred Tax. Deferred tax is provided using balance sheet liability method, on all temporary
differences at reporting date between the tax bases of assets and liabilities and their carrying amounts
for financial reporting purposes.
Deferred tax assets are recognized for all deductible temporary differences and carryforward benefits
of unused tax credits from excess of minimum corporate income tax (MCIT) over regular corporate
income tax (RCIT) and net operating loss carryover (NOLCO), to the extent that it is probable that
taxable profit will be available against which the deductible temporary differences and carry forward
benefits of excess of MCIT over RCIT and NOLCO can be utilized, except:
ƒ where the deferred tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the
time of the transaction, affects neither the accounting profit nor taxable profit; and
ƒ in respect of deductible temporary differences associated with investments in subsidiaries and
interest in joint ventures and associates, deferred tax assets are recognized only to the extent that
it is probable that the temporary differences will reverse in the foreseeable future and taxable
profit will be available against which the temporary differences 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 taxable profit will be available to allow all or part of
the deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessed at each
reporting date and are recognized to the extent that it has become probable that future taxable profit
will allow the deferred tax assets to be recovered.
Deferred tax liabilities are recognized for all taxable temporary differences, except:
ƒ where the deferred tax liability arises from the initial recognition of goodwill or of an asset or
liability in a transaction that is not a business combination and, at the time of the transactions,
affects neither the accounting profit nor taxable profit; and
ƒ in respect of taxable temporary differences associated with investments in subsidiaries and
interests in joint ventures and associates, where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary differences will not reverse in
the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year
when the asset is realized or the liability is settled, based on tax rates and tax laws that have been
enacted or substantially enacted at the reporting date.
Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss.
Deferred tax items are recognized in correlation to the underlying transaction either in other
comprehensive income or directly in another equity account.
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Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate
recognition at that date, are recognized subsequently if new information about facts and
circumstances change. The adjustment is either treated as reduction in goodwill, as long as it does
not exceed goodwill, if it was incurred during the measurement period or recognize in profit or loss.
Deferred tax assets and liabilities are offset, if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the
same taxation authority.
Value Added Tax (VAT). Revenue, expenses and assets are recognized net of the amount of VAT, if
applicable.
When VAT from sales of goods and/or services (output VAT) exceeds VAT passed on from
purchases of goods or services (input VAT), the excess is recognized as part of “Trade payables and
other current liabilities” account in the consolidated statement of financial position. When VAT
passed on from purchases of gods or services (input VAT) exceeds VAT from sales of goods and/or
services (output VAT), the excess is recognized as part of “Other current assets” account in the
consolidated statement of financial position.
Earnings per Share (EPS) Attributable to Equity Holders of the Parent Company
Basic EPS is calculated by dividing the net income for the year attributable to the equity holders of
the Parent Company by the weighted average number of common shares outstanding during the year,
after considering the retroactive effect of stock dividend declaration, if any.
Diluted EPS is computed by dividing the net income for the year attributable to the equity holders of
the Parent Company by the weighted average number of common shares outstanding during the
period, adjusted for any potential common shares resulting from the assumed exercise of outstanding
stock options. Outstanding stock options will have dilutive effect under the treasury stock method
only when the average market price of the underlying common share during the period exceeds the
exercise price of the option.
Where the EPS effect of the shares to be issued to management and employees under the stock option
plan would be anti-dilutive, the basic and diluted EPS would be stated at the same amount.
Provisions
Provisions are recognized when the Jollibee Group has a present obligation (legal or constructive) 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 assessment
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 interest
expense.
Contingencies
Contingent liabilities are not recognized in the consolidated financial statements but are disclosed in
the notes to 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 when an inflow of economic benefits is probable.
*SGVFS034434*
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Business Segments
The Jollibee Group is organized and managed separately according to the nature of operations and
geographical locations of businesses. The three major operating businesses of the Jollibee Group are
food service, franchising and leasing while geographical segments are segregated to Philippine
businesses and international businesses. These operating and geographical businesses are the basis
upon which the Jollibee Group reports its primary segment information presented in Note 5.
The preparation of the consolidated financial statements requires management to make judgments,
estimates and assumptions that affect the reported amounts in the consolidated financial statements
and related notes at the end of the reporting period. However, uncertainty about these assumptions
and estimates could result in outcomes that could require a material adjustment to the carrying
amount of the affected asset or liability in the future.
The Jollibee Group believes the following represents a summary of these significant judgments,
estimates and assumptions and the related impact and associated risks on the Jollibee Group’s
consolidated financial statements.
Judgments
In the process of applying the Jollibee Group’s accounting policies, management has made the following
judgments, apart from those involving estimations, which have the most significant effect on the amounts
recognized in the consolidated financial statements.
Functional Currency. Management has determined that the functional and presentation currency of the
Parent Company and its Philippine-based subsidiaries is the Philippine Peso, being the currency of the
primary environment in which the Parent Company and its major subsidiaries operate. The functional
currencies of its foreign operations are determined as the currency in the country where the subsidiary
operates. For consolidation purposes, the foreign subsidiaries’ balances are translated to Philippine Peso
which is the Parent Company’s functional and presentation currency.
Revenue Contracts with Customers - Determining the Timing of Satisfaction of Set-up Fees. The
Jollibee Group undertakes activities prior to store opening (e.g., initial training, site development,
systems set-up, etc.) as indicated in the franchise agreement. The Jollibee Group determines whether
these activities are capable of being distinct (i.e., whether the franchisee can benefit on each of these
activities on a standalone basis) and whether these activities are distinct within the context of the
franchise agreement (i.e., whether these activities can be separated from the franchise license granted
to the franchisee).
The Jollibee Group determined that revenue from set-up fees should be recognized on a straight-basis
over the term of the franchise agreement and when performance obligations relating to the payment
of set-up fees have been satisfied.
*SGVFS034434*
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Principal versus Agent Consideration. The Jollibee Group’s agreement with the franchisee includes
the right to charge the franchisee its share in the Jollibee Group’s nationwide advertising and
marketing efforts as well as fees for the Jollibee Group’s administration of various advertisements,
network and media placements. The Jollibee Group determined that it is acting as principal for the
nationwide advertising because it is the Jollibee Group who retains the right to direct the service
provider of the advertisements, network and media placements, and has the discretion on how to price
the advertising fee charges. The Jollibee Group considers both the legal form and the substance of its
agreement to determine each party’s respective roles in the agreement.
Operating Lease Commitments - Jollibee Group as Lessee. The Jollibee Group has entered into
commercial property leases for its QSRs and offices as a lessee. Management has determined, based
on an evaluation of the terms and condition of the arrangements that all the significant risks and
benefits of ownership of these properties, which the Jollibee Group leases under various lease
arrangements, remain with the lessors. Accordingly, the leases are accounted for as operating leases.
Operating Lease Commitments - Jollibee Group as Lessor. The Jollibee Group has entered into
commercial property leases on its investment property portfolio and various sublease agreements.
Management has determined, based on an evaluation of the terms and conditions of the arrangements,
that the Jollibee Group retains all the significant risks and benefits of ownership of the properties which
are leased out. Accordingly, the leases are accounted for as operating leases.
Assessing Joint Control of an Arrangement and the Type of Arrangement. Joint control is the
contractually agreed sharing of control of an arrangement which exists only when decisions about the
relevant activities require the unanimous consent of the parties sharing control. The Jollibee Group
assessed that it has joint control in all joint arrangements by virtue of a contractual agreement with
other stockholders. The Jollibee Group’s joint ventures have separate legal entities and the
shareholders have right to their net assets (see Note 11).
*SGVFS034434*
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*SGVFS034434*
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impairment loss could have a material adverse impact on the Jollibee Group’s financial position and
performance.
2018 2017
Interests in joint ventures P
=969.8 =5,810.3
P
Interests in associates 869.6 146.9
Advances to co-venturers 1,672.8 1,535.6
Realizability of Deferred Tax Assets. The carrying amounts of deferred tax assets at each reporting date
is reviewed and reduced to the extent that sufficient taxable profits are available to allow all or part of the
deferred tax assets to be utilized. The Jollibee Group’s assessment on the recognition of deferred tax
assets is based on the forecasted taxable income. This forecast is based on future expectations on
revenue and expenses as well as management’s plans and strategies for the relevant entities.
Recoverability of Property, Plant and Equipment and Investment Properties. The Jollibee Group
performs impairment review of property, plant and equipment and investment properties when certain
impairment indicators are present. Determining the fair value of assets, which requires the determination
of future cash flows expected to be generated from the continued use and ultimate disposition of such
assets, requires the Jollibee Group to make estimates and assumptions that can materially affect the
consolidated financial statements. Future events could cause the Jollibee Group to conclude that the
assets are impaired. Any resulting impairment loss could have a material adverse impact on the Jollibee
Group’s financial position and performance.
The aggregate carrying values of property, plant and equipment and investment properties as at
December 31 are as follows:
2018 2017
Property, plant and equipment (see Note 12) P
=26,694.0 =20,893.8
P
Investment properties (see Note 13) 849.0 849.0
Impairment of Receivables (Upon Adoption of PFRS 9). The Jollibee Group uses a provision matrix
to calculate ECLs for its receivables. The provision rates are based on days past due.
*SGVFS034434*
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The provision matrix is initially based on the Jollibee Group’s historical observed default rates. The
Jollibee Group calibrates the matrix to adjust the historical credit loss experience with forward-
looking information. At every reporting date, the historical observed default rates are updated and
changes in the forward-looking estimates are analyzed.
The assessment of the correlation between historical observed default rates, forward-looking
information, and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in
circumstances and of forecast economic conditions. The Jollibee Group’s historical credit loss
experience and forecast of economic conditions may also not be representative of customers’ actual
default in the future.
Impairment of Receivables (Prior to Adoption of PFRS 9). The Jollibee Group maintains an allowance
for impairment losses at a level considered adequate to provide for potential uncollectible receivables.
The level of allowance is evaluated on the basis of factors that affect the collectability of the accounts.
These factors include, but are not limited to, the length of the Jollibee Group’s relationship with the
customers and counterparties, average age of accounts and collection experience. The Jollibee Group
performs a regular review of the age and status of these accounts, designed to identify accounts with
objective evidence of impairment and provide the appropriate allowance for impairment losses. The
review is done quarterly and annually using a combination of specific and collective assessments. The
amount and timing of recorded expenses for any period would differ if the Jollibee Group made different
judgments or utilized different methodologies. An increase in allowance account would increase general
and administrative expenses and decrease current assets.
Provision for impairment loss on receivables in 2017 and 2016 amounted to P =143.8 million and
=
P91.4 million, respectively, resulting from specific and collective assessments (see Note 22).
Reversal of previously recognized provisions amounting to P =20.7 million and =
P3.2 million were
recognized in 2017 and 2016, respectively (see Note 22). The carrying amount of receivables and
contract assets amounted to P=3,941.1 million as at December 31, 2017 (see Note 7).
Net Realizable Value of Inventories. The Jollibee Group writes down inventories to net realizable
value, through the use of an allowance account, whenever the net realizable value of inventories
becomes lower than the cost due to damage, physical deterioration, obsolescence, changes in price
levels or other causes.
The estimates of net realizable value are based on the most reliable evidence available at the time the
estimates are made of the amounts the inventories are expected to be realized. These estimates take
into consideration fluctuations of prices or costs directly relating to events occurring after reporting
date to the extent that such events confirm conditions existing at reporting date. The allowance
account is reviewed on a regular basis to reflect the accurate valuation in the financial records.
The Jollibee Group assessed that the net realizable value for some inventories is lower than cost,
hence, it recognized provision for inventory obsolescence amounting to P=8.3 million, P=7.4 million
and =
P78.6 million in 2018, 2017 and 2016, respectively (see Note 22). Reversal of previously
recognized provisions amounting to P =6.1 million, P
=53.8 million and =
P18.1 million were recognized in
2018, 2017 and 2016, respectively (see Note 22). The carrying amount of inventories amounted to
=8,812.2 million and =
P P6,835.5 million as at December 31, 2018 and 2017, respectively (see Note 8).
*SGVFS034434*
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Present Value of Defined Benefit Obligation. The pension expense as well as the present value of the
defined benefit obligation are determined using actuarial valuations. The actuarial valuation involves
making various assumptions. These include the determination of the discount rates and the future salary
increases. Due to the complexity of the valuation, the underlying assumptions and its long-term nature,
defined benefit obligations are highly sensitive to changes in these assumptions. All assumptions are
reviewed at each reporting date.
In determining the appropriate discount rate, management considers the interest rates of government
bonds that are denominated in the currency in which the benefits will be paid, with extrapolated
maturities corresponding to the expected duration of the defined benefit obligation.
Future salary increases are based on budgetary salary increases.
The carrying amount of pension liability amounted to P
=1,320.6 million and P
=1,489.5 million as at
December 31, 2018 and 2017, respectively (see Note 25).
Share-based Payments. The Parent Company measures the cost of its equity-settled transactions with
management and employees by reference to the fair value of the equity instruments at the grant date.
Estimating fair value for share-based payment transactions requires determining the most appropriate
valuation model, which is dependent on the terms and conditions of the grant. The estimate also requires
determining the most appropriate inputs to the valuation model including the expected life of the share
option, volatility and dividend yield and making assumptions about these inputs. The fair value of the
share option is being determined using the Black-Scholes Option Pricing Model. The expected life of the
stock options is based on the expected exercise behavior of the stock option holders and is not necessarily
indicative of the exercise patterns that may occur. The volatility is based on the average historical price
volatility which may be different from the expected volatility of the shares of the Parent Company.
Total expense arising from share-based payment recognized by the Jollibee Group amounted to
=
P312.0 million, =
P227.5 million and =
P241.3 million in 2018, 2017 and 2016, respectively
(see Notes 19, 22 and 26).
Estimation of Useful Lives of Property, Plant and Equipment, Investment Properties and Intangible
Assets with Definite Useful Lives. The Jollibee Group estimates the useful lives of property, plant and
equipment, investment properties and intangible assets with definite useful lives based on the period
over which the property, plant and equipment, investment properties and intangible assets are
expected to be available for use and on the collective assessment of the industry practice, internal
technical evaluation and experience with similar assets. The estimated useful lives of property, plant
and equipment, investment properties and intangible assets are reviewed periodically and updated if
expectations differ from previous estimates due to physical wear and tear, technical or commercial
obsolescence and legal or other limits in the use of the said assets. However, it is possible that future
financial performance could be materially affected by changes in the estimates brought about by
changes in the factors mentioned above. The amount and timing of recording the depreciation and
amortization for any period would be affected by changes in these factors and circumstances. A
reduction in the estimated useful lives of property, plant and equipment, investment properties and
intangible assets would increase the recorded depreciation and amortization and decrease noncurrent
assets.
There was no change in the estimated useful lives of property, plant and equipment, investment
properties and intangible assets in 2018 and 2017.
Derivative on Put / Call Rights on SJBF LLC. The Jollibee Group has a derivative arising from
put / call rights on the controlling interest in SJBF LLC.
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The derivative from put / call rights derive value from the fair value of SJBF LLC’s equity, which
considers forecasted cash flows from its operations and its cost of capital, and the price to exercise
such put / call rights, which consider SJBF LLC’s EBITDA near transaction date and exit multiples
based on SJBF LLC’s achievement of sales targets. Such derivative is valued using discounted cash
flows model, which also takes into account assumptions on the volatility of the fair value of SJBF
LLC’s equity and discount rate to arrive at present value, among others. Changes in the assumptions
mentioned above can result to change in the amount recognized as derivative and may result to either
a derivative asset or liability as recognized in the consolidated statements of financial position.
Fair Value of Financial Assets and Liabilities. When the fair values of financial assets and financial
liabilities recorded or disclosed in the consolidated statement of financial position cannot be
measured based on quoted prices in active markets, their fair value is measured using valuation
techniques, including the discounted cash flow model. The inputs to these models are taken from
observable markets where possible, but when this is not feasible, a degree of judgment is required in
establishing fair values. Judgments include considerations of inputs such as liquidity risk, credit risk
and volatility. Changes in assumptions about these factors could affect the reported fair value of
financial instruments.
The fair value of financial assets and liabilities are discussed in Note 31.
Provisions and Contingencies. The Jollibee Group is involved in litigations, claims and disputes
which are normal to its business. The estimate of the probable costs for the resolution of these claims
has been developed in consultation with the Jollibee Group’s legal counsels and based upon an
analysis of potential results (see Note 17). The inherent uncertainty over the outcome of these
matters is brought about by the differences in the interpretation and application of laws and rulings.
Management believes that the ultimate liability, if any, with respect to the litigations, claims and
disputes will not materially affect the financial position and performance of the Jollibee Group.
5. Segment Information
For management purposes, the Jollibee Group is organized into segments based on the nature of the
products and services offered and geographical locations. The Executive Management Committee
monitors the operating results of its segments separately for resource allocation and performance
assessment. Segment results are evaluated based on operating profit or loss and is measured
consistently with operating profit or loss in the consolidated financial statements.
Business Segments
The Jollibee Group’s operating businesses are organized and managed separately according to the
nature of the products and services provided, with each segment representing a strategic business unit
that offers different products and serves different markets.
ƒ The food service segment is involved in the operations of QSRs and the manufacture of food
products to be sold to Jollibee Group-owned and franchised QSR outlets.
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ƒ The franchising segment is involved in the franchising of the Jollibee Group’s QSR store
concepts.
ƒ The leasing segment leases store sites mainly to the Jollibee Group’s independent franchisees.
The following tables present certain information on revenues, expenses, assets and liabilities and
other segment information of the different business segments as at and for the years ended
December 31, 2018, 2017 and 2016:
2018
Food Service Franchising Leasing Eliminations Consolidated
Revenues from external customers P
= 150,498,395 P
= 10,114,292 P
= 586,701 P
=– P= 161,199,388
Inter-segment revenues 43,571,728 3,225,369 8,824,495 (55,621,592) –
Segment revenues 194,070,123 13,339,661 9,411,196 (55,621,592) 161,199,388
Segment expenses (194,697,929) (5,748,861) (8,978,135) 55,621,592 (153,803,333)
Reversal of impairment losses on receivables,
inventories and property, plant and equipment -
net of provisions 419,541 – – – 419,541
Equity in net losses of joint ventures and
associates – net (86,750) – – – (86,750)
Other segment income 3,232,084 – 3,112 – 3,235,196
Segment result P
= 2,937,069 P
= 7,590,800 P
= 436,173 P
=– 10,964,042
2018
Food Service Franchising Leasing Eliminations Consolidated
Assets and Liabilities
Segment assets P
= 109,159,626 P
=– P
= 369,200 P
=– P
= 109,528,826
Deferred tax assets - net 4,322,996 – – – 4,322,996
Consolidated assets P
= 113,482,622 P
=– P
= 369,200 P
=– P
= 113,851,822
Segment liabilities P
= 33,828,169 P
=– P
= 65,423 P
=– P
= 33,893,592
Deferred tax liabilities - net 3,512,253 – – – 3,512,253
Long-term debt - including current portion 26,264,353 – – – 26,264,353
Income tax payable 260,421 – 3,052 – 263,473
Consolidated liabilities P
= 63,865,196 P
=– P
= 68,475 P
=– P
= 63,933,671
2017
Food Service Franchising Leasing Eliminations Consolidated
Revenues from external customers =124,972,802
P =8,075,199
P =565,085
P =– =
P P133,613,086
Inter-segment revenues 38,836,601 2,928,473 8,205,610 (49,970,684) –
Segment revenues 163,809,403 11,003,672 8,770,695 (49,970,684) 133,613,086
Segment expenses (162,923,487) (4,965,008) (8,396,342) 49,970,684 (126,314,153)
Impairment losses on receivables, inventories
and property, plant and equipment and other
assets - net of reversals (629,278) – – – (629,278)
Equity in net losses of joint ventures and associates - net (282,645) – – – (282,645)
Other segment income 2,072,932 – 25,821 – 2,098,753
Segment result =2,046,925
P =6,038,664
P =400,174
P =–
P 8,485,763
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2017
Food Service Franchising Leasing Eliminations Consolidated
2016
Food Service Franchising Leasing Eliminations Consolidated
Revenues from external customers =108,263,045
P =7,070,993
P =279,504
P =– =
P P115,613,542
Inter-segment revenues 33,576,257 1,757,050 5,386,826 (40,720,133) –
Segment revenues 141,839,302 8,828,043 5,666,330 (40,720,133) 115,613,542
Segment expenses (140,568,751) (3,559,122) (5,551,305) 40,720,133 (108,959,045)
Impairment losses on receivables, inventories and
property, plant and equipment - net of reversals (189,450) – – – (189,450)
Equity in net losses of joint ventures and associates - net (337,145) – – – (337,145)
Other segment income 1,576,667 – 6,256 – 1,582,923
Segment result P
=2,320,623 P
=5,268,921 P
=121,281 =
P– 7,710,825
2016
Food Service Franchising Leasing Eliminations Consolidated
Other Segment Information
Capital expenditures =6,717,839
P P–
= =–
P P–
= =6,717,839
P
Depreciation and amortization 3,990,980 – 4,888 – 3,995,868
Geographical Segments
The Jollibee Group’s geographical segments are based on the location of the assets producing
revenues in the Philippines and in other locations which includes PRC, USA, Canada, Vietnam, UAE,
Hongkong, Macau, Brunei, Saudi Arabia, Singapore, Malaysia, Oman, Kuwait, Qatar, Italy and UK.
Sales to external customers disclosed in the geographical segments are based on the geographical
location of the customers.
Majority of the Jollibee Group’s revenues were generated from the Philippines, which is the Parent
Company’s country of domicile.
The Jollibee Group does not have a single external customer which revenue amounts to 10% or more
of the Jollibee Group’s revenues.
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The following tables present segment revenues, segment assets and capital expenditures of the
Jollibee Group’s geographical segments:
2018
Philippines International Eliminations Consolidated
Segment revenues P
=120,303,894 P =41,621,421 (P
=725,927) P
=161,199,388
Segment assets 60,422,654 49,106,172 – 109,528,826
Capital expenditures 7,121,815 2,510,082 – 9,631,897
2017
Philippines International Eliminations Consolidated
Segment revenues =105,193,712
P =28,937,959
P (P
=518,585) P
=133,613,086
Segment assets 47,459,418 38,415,664 – 85,875,082
Capital expenditures 7,382,960 1,591,470 – 8,974,430
2016
Philippines International Eliminations Consolidated
Segment revenues =92,427,367
P =23,594,721
P (P
=408,546) P
=115,613,542
Capital expenditures 5,493,783 1,224,056 – 6,717,839
2018
Revenue Source Food Service Franchising Total
Sale of goods P
=150,200,826 P
=– P
=150,200,826
Royalty fees – 7,043,891 7,043,891
Set-up fees – 546,909 546,909
System-wide advertising fees – 2,523,492 2,523,492
Other revenues 297,569 – 297,569
Total revenue from contracts with customers P
=150,498,395 P
=10,114,292 P
=160,612,687
Timing of recognition:
Goods transferred at a point in time P
=160,065,778
Services transferred over time 546,909
P
=160,612,687
2017
Revenue Source Food Service Franchising Total
Sale of goods =124,663,548
P =
P– =124,663,548
P
Royalty fees – 5,614,447 5,614,447
Set-up fees – 424,217 424,217
System-wide advertising fees – 2,036,535 2,036,535
Other revenues 309,254 – 309,254
Total revenue from contracts with customers =124,972,802
P =8,075,199
P =133,048,001
P
Timing of recognition:
Goods transferred at a point in time =132,623,784
P
Services transferred over time 424,217
=133,048,001
P
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2016
Revenue Source Food Service Franchising Total
Sale of goods =107,924,454
P =–
P =107,924,454
P
Royalty fees – 4,959,567 4,959,567
Set-up fees – 309,354 309,354
System-wide advertising fees – 1,802,072 1,802,072
Other revenues 338,591 – 338,591
Total revenue from contracts with customers =108,263,045
P =7,070,993
P =115,334,038
P
Timing of recognition:
Goods transferred at a point in time =115,024,684
P
Services transferred over time 309,354
=115,334,038
P
2018 2017
Cash on hand P
=480,889 =344,976
P
Cash in banks 12,097,440 15,120,958
Short-term deposits 10,707,586 5,641,540
P
=23,285,915 =21,107,474
P
Cash in banks earn interest at the respective savings or special demand deposit rates. Short-term
deposits are made for varying periods of up to three months depending on the immediate cash
requirements of the Jollibee Group, and earn interest at the respective short-term deposit rates.
Short-term Investments
The Jollibee Group also has short-term investments amounting to P
=883.2 million and
=1,413.4 million as at December 31, 2018 and 2017, respectively. These pertain to deposits with
P
maturities of more than three months but less than a year.
Interest income earned from cash and cash equivalents and short-term investments amounted to
=313.3 million, P
P =149.3 million and =
P136.7 million in 2018, 2017 and 2016, respectively
(see Note 23).
2018 2017
Trade P
=4,680,553 =4,077,531
P
Less allowance for impairment loss 676,906 690,119
4,003,647 3,387,412
Advances to employees 167,352 144,791
Current portion of employee car plan receivables
(see Note 15) 91,172 88,971
(Forward)
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2018 2017
Interest receivable P
=19,314 P11,911
=
Others 173,887 160,538
4,455,372 3,793,623
Contract assets 407,372 147,450
P
=4,862,744 =3,941,073
P
2018 2017
Balance at beginning of year P
=690,119 =579,792
P
Reversals (see Note 22) (23,675) (20,705)
Provisions (see Note 22) 10,188 143,772
Write-offs (1,201) (12,797)
Translation adjustments 1,475 57
Balance at end of year P
=676,906 =690,119
P
The provisions in 2018 were based on the Jollibee Group’s ECL. The provisions in 2017 resulted
from specific and collective impairment assessments on trade receivables performed by the Jollibee
Group.
8. Inventories
2018 2017
At cost:
Food supplies and processed inventories P
=8,289,323 =6,377,956
P
Packaging, store and other supplies 406,186 434,999
8,695,509 6,812,955
At net realizable value -
Novelty items 116,665 22,559
Total inventories at lower of cost and net
realizable value P
=8,812,174 =6,835,514
P
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The movements in the allowance for inventory obsolescence for novelty items as at December 31 are
as follows:
2018 2017
Balance at beginning of year P
=32,565 =78,647
P
Provisions (see Note 22) 8,278 7,443
Reversals (see Note 22) (6,148) (53,819)
Translation adjustments (1) 294
Balance at end of year P
=34,694 =32,565
P
2018 2017
Prepaid expenses:
Taxes P
=1,963,937 =
P1,499,728
Rent 567,599 526,809
Insurance and others 490,748 211,505
Supplies 78,604 111,378
Current portion of security and other deposits
(see Note 15) 239,096 187,904
Deposits to suppliers and other third parties 1,554,184 1,417,735
Receivable from sale of business (see Note 11) – 76,400
P
=4,894,168 =4,031,459
P
ƒ Prepaid taxes mainly represent creditable withholding taxes that can be applied in the following
year against the corporate income tax due or can be claimed as tax refund from the BIR. This
also includes prepaid real property taxes which are expected to be utilized within the next twelve
months.
ƒ Prepaid rent pertains to the rent of store and office spaces that are paid in advance. Supplies
consist of various office and administrative supplies. Prepaid rent, insurance and others are
normally utilized within the next financial year.
ƒ Deposits to suppliers and other third parties are generally applied to purchase of inventories and
availment of services within the next financial year.
ƒ Receivable from sale of business pertains to the current portion of receivables from Guangxi
Zong Kai Food Beverage Investment Company Limited (GZK) as a result of the Jollibee Group’s
divestment in SPW in 2016 (see Note 11).
*SGVFS034434*
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This account consists of investment in shares of stocks of Manila Polo Club, Tagaytay Highlands and
other golf and leisure clubs.
Due to the adoption of PFRS 9, the Jollibee Group classified its investments in golf and leisure club
shares as financial assets at FVTPL as at January 1, 2018.
Cost
Balance at beginning of year =21,462
P
Additions 450
Balance at end of year 21,912
Cumulative Unrealized Gain on AFS Financial Assets
Balance at beginning of year 4,750
Unrealized gain due to change in fair value 3,200
Balance at end of year 7,950
=29,862
P
The fair value of financial assets at FVTPL/AFS financial assets have been determined directly by
reference to quoted prices in active market or inputs other than quoted prices that are directly or
indirectly observable (see Note 31).
A. Business Combinations
SJBF. On October 8, 2015, the Jollibee Group, through JWPL, incorporated BGI in the state of
Delaware, USA.
On October 13, 2015, BGI entered into an agreement with Smashburger Master LLC (Master) to
acquire 40% of the outstanding equity interest of SJBF, the parent company of the entities comprising
the Smashburger business, a fast-casual better burger restaurant business based in the United States.
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The consideration for BGI’s 40% stake in SJBF amounted to USD99.5 million (P =4,629.5 million).
Thereafter, a post-closing adjustment of USD0.8 million (P =36.6 million) to the purchase price at the
closing date was recognized based on a pre-agreed mechanism with Master. The Jollibee Group
settled with Master USD99.5 million (P =4,629.5 million) and USD0.8 million (P =36.6 million) in
December 2015 and January 2016, respectively. In addition, acquisition-related costs consisting of
professional fees for the Jollibee Group’s financial, tax, accounting and legal advisors for the
transaction amounted to P =221.8 million.
In February 2016, September 2016 and November 2016, BGI made additional investments to SJBF
amounting to USD4.0 million (P
=189.0 million), USD4.6 million (P
=221.4 million) and
USD8.0 million (P
=397.8 million), respectively.
The agreement between BGI and Master dated October 27, 2015 provides for a mechanism wherein
Master can sell or BGI can purchase up to an additional 35% equity interest in SJBF (First Put/Call
Right) between January 1, 2018 and January 1, 2021, and up to an additional 25% equity interest
from the closing date or after expiration of the First Put/Call Right and five years thereafter
(Second Put/Call Right). The purchase price of the remaining 60% will be based on the achievement
of certain financial performance targets agreed between BGI and Master.
On February 25, 2017, BGI and Master have amended their original agreement to enable BGI to
purchase more shares in SJBF. With the amendment, BGI shall be entitled to purchase from Master
an additional 45% of SJBF shares between the years 2018 and 2021, and to acquire the balance of
15% between 2019 at the earliest and 2026 at the latest.
On March 24, 2017 and September 7, 2017, BGI made additional investments to SJBF amounting to
USD8.0 million (P=402.6 million) and USD2.5 million (P =128.5 million), respectively. The additional
investments did not change BGI’s equity interest in SJBF.
On March 8, 2018, BGI executed the Purchase Agreement with Master for the acquisition of an
additional 45% share of SJBF pursuant to the exercise by Master of its First Put Option for
USD100.0 million (P=5,207.0 million). This increased BGI’s ownership in SJBF from 40% to 85%.
On April 17, 2018, closing conditions, including required government approvals, have been obtained
as provided under the Purchase Agreement. The Jollibee Group, through BGI, paid Master in cash
amounting to USD100.0 million (P =5,207.0 million). With the completion of the acquisition, the
Jollibee Group included Smashburger in its financial consolidation starting April 17, 2018
(the “acquisition date”).
As a result of the first and second Put/Call Rights in the agreement between BGI and Master, the
Jollibee Group allocated = P75.0 million of the purchase price to a derivative asset in 2015,
representing the fair value of the First and Second Put/Call Rights on transaction date. The Jollibee
Group recognized a derivative liability amounting to nil and P =51.0 million as at December 31, 2018
and 2017, respectively, to the Put/Call Rights. The marked-to-market loss amounted to
=
P49.8 million and = P129.3 million in 2018 and 2017, respectively (see Note 23).
*SGVFS034434*
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The details of Jollibee Group’s interest in SJBF as at December 31, 2018 and 2017 are as follows:
2018 2017
Interest in a joint venture - cost:
Balance at beginning of year P
=6,151,981 =5,620,834
P
Additions during the year – 531,147
Balance at transfer date/year 6,151,981 6,151,981
Cumulative equity in net losses:
Balance at beginning of year (691,926) (361,911)
Equity in net loss during the year (36,085) (330,015)
Balance at transfer date/year (728,011) (691,926)
5,423,970 5,460,055
Transferred to investment in a subsidiary (5,423,970) –
P
=– =5,460,055
P
The fair value of the identifiable assets acquired and liabilities assumed as at the date of the
acquisition were as follows:
The Jollibee Group’s investment in SJBF was previously accounted for as investment in a joint
venture. In accordance with PFRS 3, with the Jollibee Group’s acquisition of control over SJBF in
2018, the fair value of the previously held interest amounted to P
=6,178.8 million and the resulting
gain from the re-measurement of the 40% previously held interest amounted to P =754.8 million
(see Note 23).
The fair value of trade receivables approximates the carrying amount of receivables acquired
amounting to P=154.4 million and it is expected that the full contractual amounts can be collected.
*SGVFS034434*
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The non-controlling interest was recognized as a proportion of the fair value of the net assets
acquired. The fair value of the non-controlling interest in SJBF has been estimated by applying the
following valuation methodology and significant inputs:
ƒ Relief-from-Royalty method for trademark using a royalty rate of 4.12% and terminal value,
calculated based on long-term sustainable growth rate for the industry of 2% and estimated
discount rate of 11%
ƒ Income approach for favourable leases using a market rent growth of 2.5% and
a discount rate of 7.5%
ƒ Cost method for other intangible assets
ƒ Replacement cost method for property, plant and equipment
The Jollibee Group’s acquisition of additional shares in SJBF will allow the Jollibee Group to have a
more significant business in the USA by increasing the sales contribution from that country to the
Jollibee Group’s worldwide system-wide sales.
Summarized financial information of SJBF based on its financial statements and reconciliation with
the carrying amount of the investment in the consolidated financial statements for the year ended
December 31, 2017 are set out below:
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The amounts of the income and expense accounts for the period ended April 16, 2018 and for the year
ended December 31, 2017 include the following:
2017
Net assets =712,027
P
Proportion of the Jollibee Group’s ownership 40%
284,811
Goodwill 4,837,671
Cumulative translation adjustments 337,573
=5,460,055
P
SJBF has outstanding liabilities for the purchase of non-controlling interest in a joint venture and
acquisition of franchise markets amounting to USD0.3 million (P =14.1 million) as at December 31,
2018. The last installment is expected to be settled in 2020.
On December 14, 2018, the Jollibee Group, through BGI, acquired the remaining 15% stake in SJBF
for a total cash consideration of USD10.0 million (P
=528.8 million). The acquisition resulted to SJBF
becoming a wholly owned subsidiary of BGI.
The difference of the carrying value of the minority interest over the acquisition cost at the date of
acquisition, amounting to =
P347.4 million, was recognized under the “Excess of cost over the carrying
value of non-controlling interests acquired”, a separate component of “Equity Attributable to Equity
Holders of the Parent Company” in the consolidated statements of financial position (see Note 19).
On December 21, 2018, upon signing of the Restructuring Agreement, the loan of BGI to SJBF
amounting to USD80.0 million (P
=4,206.4 million) was converted to additional equity.
SuperFoods Group. On January 20, 2012, upon fulfillment of certain legal and regulatory
requirements in Vietnam, the Jollibee Group, through JWPL, acquired effective ownership of 50%
share in the business of the SuperFoods Group (includes SF Vung Tau Joint Stock Company (SFVT),
Highlands Coffee Service JSC, Quantum Corp., Pho24 Corp., Blue Sky Holdings Limited Hongkong
(Blue Sky), Sino Ocean Asia Limited Hongkong and Blue Sky Holdings Limited Macau) through
*SGVFS034434*
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formation of joint ventures. This consists of a 49% share in SFVT in Vietnam and a 60% share in
Blue Sky in Hongkong (the SuperFoods Group Holding Companies). The formation of joint ventures
is an implementation of the Framework Agreement made on May 20, 2011 between the Jollibee
Group, through JSF, a 99% subsidiary of JWPL, and its co-venturers, Viet Thai International Joint
Stock Company (VTIJS) and Viet Thai International Company Limited (VTI) (collectively, VTI
Group). The SuperFoods Group operates the chain of Highlands Coffee shops, Pho 24 restaurants
and Hard Rock Cafe stores, whose market is mostly in Vietnam, Hong Kong and Macau. The
Framework Agreement provided for the Jollibee Group to contribute a total of USD25.0 million
(P
=1,079.6 million) to gain 50% effective ownership in the joint ventures. Loans and deposits were
made to the SuperFoods Group and the co-venturers prior to the formation of the joint ventures in
2012.
Pursuant to the Framework Agreement, the preliminary consideration for the 50% share in
SuperFoods Group amounted to a cash payment of USD25.0 million (P =1,079.6 million) in 2011.
On October 22, 2015, JSF contributed additional investment in SuperFoods Group amounting to
USD0.7 million (P
=34.1 million).
The Supplemental Agreement further provides that JWPL shall be required to pay the co-venturers an
additional amount in 2016 based upon achieving a positive amount determined in accordance with a
formula contained in the agreement (earn-out formula). No additional consideration was recognized
as at January 20, 2012, date of acquisition, and as at December 31, 2012 to 2016.
In accordance with the Framework Agreement, the Jollibee Group, through JSF, extended loans to
SurperFoods Group. First and Second Supplements to the Loan Agreement were executed that
basically extended the loan due dates.
On November 18, 2016, the Jollibee Group, through JSF, entered into an agreement with its co-
venturers, VTIJS, to make SuperFoods Group a public company by listing in the Vietnam Stock
Exchange with an Initial Public Offering (IPO) on or before July 2019. As part of the agreement, the
ownership of the SuperFoods Group will be adjusted with the Jollibee Group, owning 60% of the
joint venture and VTI owning 40%. With this agreement, the following loan structures were
amended, as documented in the Third and Fourth Supplements to the Loan Agreement signed on
December 29, 2016 and March 28, 2017, respectively.
ƒ Advances to SFVT. On April 30, 2013, an additional loan was extended to the co-venturers in the
SuperFoods Group amounting to USD1.0 million (P =41.2 million) payable in February 2014 but
was extended to September 30, 2017. The loan bears interest of 5% per annum. With the
extension to September 30, 2017, the sum of principal and the accumulated interest as at
April 2015, were subjected to 4.99% interest per annum. The loan was agreed to be used for
general corporate purposes. Total interest from this loan recognized as interest income amounted
to USD0.003 million (P=0.1 million) and USD0.06 million (P =2.8 million) for the period ended
May 10, 2017 and year ended December 31, 2016, respectively.
On August 22, 2013, an additional loan was extended to the co-venturers in the SuperFoods
Group amounting to USD1.0 million (P =44.1 million) payable in August 2014 but was extended to
September 30, 2017. As at August 21, 2014, the principal was subject to 5% interest per annum.
However, with the extension to September 30, 2017, the sum of principal and the accumulated
interest starting August 22, 2014 were subjected to 4.99% interest per annum. Total interest from
this loan recognized as interest income amounted to USD0.003 million (P =0.1 million) and
USD0.06 million (P =2.8 million) for the period ended May 10, 2017 and year ended December 31,
2016, respectively.
*SGVFS034434*
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The loans granted on April 30, 2013 and August 22, 2013, including accrued interests as at
May 10, 2017, were converted to additional equity on SFVT upon the completion of the
Settlement Transaction Documents and the approval of certain legal and regulatory requirements
in Vietnam on May 10, 2017 as provided in the Third Supplement to the Loan Agreement signed
on December 29, 2016.
ƒ Advances to Blue Sky. On June 10, 2011, a loan was extended to Blue Sky, the Hong Kong-based
holding company, amounting to USD5.0 million (P =216.0 million) payable in June 2014. As at
June 2014, the principal was subject to 5% interest per annum. However, with the extension of
the due date to September 30, 2017, the sum of principal and the accumulated interest as at June
2014 were subjected to 4.99% interest per annum. Total interest from this loan recognized as
interest income amounted to USD0.01 million (P =0.7 million) and USD0.3 million (P=15.4 million)
for the period ended May 10, 2017 and year ended December 31, 2016, respectively.
On May 7, 2012, an additional loan was extended to Blue Sky amounting to USD2.5 million
(P
=105.9 million) payable in May 2014. As at May 9, 2014, the principal was subject to 5%
interest per annum. However, with the extension of the due date to September 30, 2017, the sum
of principal and the accumulated interest starting May 10, 2014 were subjected to 4.99% interest
per annum. Total interest from this loan recognized as interest income amounted to
USD0.01 million (P =0.3 million) and USD0.1 million (P=7.4 million) for the period ended May 10,
2017 and year ended December 31, 2016, respectively.
With the Third Supplement to the Loan Agreement signed on December 29, 2016 and upon the
completion of the Settlement Transaction Documents, the loans to Blue Sky including accrued
interests as at May 10, 2017 were converted into equity except for the balance of USD2.9 million
(P
=157.7 million). The carrying value of the remaining loan of Blue Sky to the Parent Company is
eliminated in the consolidation process as at December 31, 2018 and 2017.
The conversion of the loans and related accrued interests into equity is part of the agreement
entered into by the Jollibee Group with VTI Group in adjusting the ownership in the SuperFoods
Group.
On May 10, 2017, a key step in the plan to list SuperFoods Group as a public company in the
Vietnam Stock Exchange was completed by adjusting the ownership interest in the SuperFoods
Group to 60% Jollibee Group and 40% VTI Group from its previous 50-50 ownership share. As
a result, Jollibee Group obtained control over SuperFoods Group and started consolidating these
companies as at acquisition date.
To help fund the SuperFoods Group’s expansion plans, the Jollibee Group will henceforth take
the lead in the former’s capital raising activities and will work with various financial institutions
in Vietnam and other parts of Asia in this undertaking.
*SGVFS034434*
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The analysis of the Jollibee Group’s interests in the SuperFoods Group as at December 31, 2017 are
as follows:
The fair value of the identifiable assets acquired and liabilities assumed as at the date of the
acquisition were as follows:
The Jollibee Group’s investment in SuperFoods Group was previously accounted for as investment
in a joint venture. In accordance with PFRS 3, with the Jollibee Group’s acquisition of control
over SuperFoods Group in 2017, the fair value of the previously held interest amounted to
=
P2,099.7 million and the resulting gain from the re-measurement of the 50% previously held interest
amounted to = P1,328.7 million (see Note 23). A total of =
P2,712.7 million loan to SuperFoods Group
was also converted to equity which was included in the consideration transferred.
The non-controlling interest was recognized as a proportion of the fair value of the net assets
acquired.
*SGVFS034434*
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The goodwill of P
=2,507.8 million is attributable to synergies and other benefits from the acquisition
of SuperFoods Group.
From the acquisition date, SuperFoods Group contributed =P67.3 million net income to the Jollibee
Group. If the business combination had taken place at the beginning of 2017, contribution to
consolidated revenues and net income for 2017 would have been = P3,715.0 million and
P
=100.9 million, respectively.
The amounts of the income and expense accounts of SuperFoods Group for the period ended
May 10, 2017 and December 31, 2016 include the following:
Bee World UK Limited (Bee World). On April 16, 2018 the Jollibee Group, through its wholly owned
subsidiary, JWPL, incorporated Bee World UK Limited in UK. As at December 31, 2018, no capital
investment has been made other than the investment to incorporate the new entity. The first store
started its commercial operations on October 20, 2018.
Golden Piatto Pte. Ltd. (Golden Piatto). On March 31, 2017, the Jollibee Group, through its wholly
owned subsidiary, GPPL, entered into an agreement with Blackbird Holdings Pte. Ltd. (Blackbird) to
own and operate Cibo Felice S. R. L. (Cibo Felice), the first Jollibee store in Italy. The first store
started its commercial operations on March 18, 2018.
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Golden Piatto incorporated on April 12, 2017, is 75% owned by GPPL and 25% owned by Blackbird.
GPPL and Blackbird have committed to invest up to EUR1 million (P =60.2 million) to Golden Piatto,
of which EUR0.8 million (P=48.2 million) will be contributed by GPPL in proportion to its ownership
in the business. As at December 31, 2018, capital contribution of GPPL to Golden Piatto amounted
to USD1.5 million (P=77.0 million).
Country of incorporation
and operation 2018 2017 2016
GCPL Singapore 40% 40% 40%
SuperFoods Group Vietnam 40% 40% −
The summarized financial information of GCPL and SuperFoods Group in 2018 and 2017 are
provided below. These information are based on amounts before intercompany elimination.
GCPL
2018 2017 2016
Revenues P
=276,325 =318,082
P =100,920
P
Net loss (472,122) (674,982) (324,509)
Other comprehensive income 95,338 8,109 8,269
Total comprehensive loss (376,784) (666,873) (316,240)
Total comprehensive loss attributable
to non-controlling interests (150,714) (266,749) (126,496)
SuperFoods Group
2018 2017 2016
Revenues P
=4,756,001 =2,486,779
P =–
P
Net income (loss) (18,571) 78,129 –
Other comprehensive income (loss) 3,398 (3,877) –
Total comprehensive income (loss) (15,173) 74,252 –
Total comprehensive income (loss)
attributable to non-controlling
interests (6,069) 29,701 –
GCPL
2018 2017
Current assets P
=1,532,013 =1,513,179
P
Noncurrent assets 271,262 373,698
Current liabilities 1,002,821 709,617
Total equity 800,454 1,177,260
Equity attributable to non-controlling
interests 320,182 470,904
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SuperFoods Group
2018 2017
Current assets P
=640,186 =601,786
P
Noncurrent assets 1,941,206 1,688,852
Current liabilities 1,053,309 781,993
Noncurrent liabilities 597,851 563,239
Total equity 930,232 945,406
Equity attributable to non-controlling
interests 372,093 378,162
GCPL
2018 2017 2016
Net cash provided by (used in)
operating activities (P
=58,718) (P
=430,134) =31,950
P
Net cash provided by (used in)
investing activities 89,220 57,512 (237,729)
Net cash provided by financing activities – – 1,789,020
Net increase (decrease) in cash and
cash equivalents 30,502 (372,622) 1,583,241
SuperFoods Group
2018 2017 2016
Net cash provided by (used in)
operating activities P
=310,283 (P
=827,535) =–
P
Net cash used in investing activities (335,086) (408,572) –
Net cash provided by financing activities 51,678 1,572,770 –
Net increase in cash and cash equivalents 26,875 336,663 –
In 2016, the following non-controlling interest were derecognized either by acquisition of the
minority interest or by divestment of interest as set out below:
Mang Inasal. On April 22, 2016, the Parent Company acquired the remaining 30% minority stake in
Mang Inasal for the purchase price of P
=2,000.0 million in a cash transaction. The acquisition resulted
to Mang Inasal becoming a wholly owned subsidiary of the Parent Company.
The difference between the acquisition cost and the carrying value of the minority interest at the date
of the acquisition, amounting to =
P1,217.6 million, was recognized under the “Excess of cost over the
carrying value of non-controlling interests acquired” (see Note 19).
HBFPPL. On February 23, 2016, JWPL entered into an agreement with Hua Xia Harvest Holdings
Pte. Ltd. (Hua Xia) to acquire Hua Xia’s 30% equity shareholding in its subsidiary, HBFPPL. Under
the terms of the agreement, Hua Xia shall sell and convey to JWPL its 30% equity interests in
HBFPPL while HBF-Anhui shall sell and convey to Hua Xia’s nominee entity the assets and
contracts related to the third-party supply business.
The acquisition by JWPL was completed on November 21, 2016 with the approval of the China
government on the transfer of assets related to the third-party supply business. This resulted to a loss
on transfer of assets amounting to =
P8.2 million which is recognized in the statement of
comprehensive income (see Note 23). The transfer of the 30% equity was approved and registered in
Singapore on November 22, 2016. With the transfer, JWPL now owns 100% of HBFPPL.
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The purchase price was USD10.3 million (P =514.9 million). The difference between the acquisition
cost and the carrying value of the minority interest at the date of the acquisition amounting to
=391.8 million was recognized under the “Excess of cost over the carrying value of non-controlling
P
interests acquired” (see Note 19).
San Pin Wang. See Part E of this note for the discussion on the divestment of San Pin Wang.
2018 2017
Interests in joint ventures:
Titan Dining LP P
=742,206 =–
P
Golden Bee Foods Restaurant LLC 227,585 198,767
C-Joy Poultry Meats Production, Inc. – 151,458
SJBF LLC – 5,460,055
969,791 5,810,280
Interests in associates:
Tortas Frontera 668,679 –
Entrek (B) SDN BHD 191,744 137,237
C-Joy Poultry Realty, Inc. 9,155 9,664
869,578 146,901
Advances to VTI Group 1,672,861 1,535,590
P
=3,512,230 =7,492,771
P
Titan Dining LP (Titan). On May 23, 2018, the Jollibee Group, through JWPL, invested
SGD18.0 million (P =706.9 million) in Titan Dining LP., a private equity fund that has executed
(through a wholly-owned subsidiary) a binding agreement for the acquisition of 100% of the Asia
Pacific master franchise holder of the “Tim Ho Wan” brand, Tim Ho Wan Pte. Ltd. and its affiliate
Dim Sum Pte. Ltd., which owns and operates Tim Ho Wan stores in Singapore. The investment
provides an opportunity for the Jollibee Group to have a significant interest in the Tim Ho Wan
franchise in the long-term.
On August 29, 2018, JWPL made an additional investment to Titan amounting to SGD0.9 million
(P
=35.3 million). JWPL shall invest up to SGD45.0 million or 45% of the total maximum fund of
SGD100.0 million in Titan.
As at December 31, 2018, Titan’s total assets and total liabilities amounted to =
P1,581.2 million and
=
P14.8 million. The assets of Titan include cash and cash equivalents amounting to = P27.7 million as at
December 31, 2018.
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Golden Bee Foods Restaurants LLC (Golden Bee). On February 25, 2014, the Jollibee Group,
through GPPL, signed a joint agreement with Golden Crown Foods LLC (GCFL) to establish a joint
venture entity to own and operate the Jollibee brand in the United Arab Emirates.
The joint venture entity, incorporated as Golden Bee on January 28, 2015, is 49% owned by GPPL
and 51% owned by GCFL. GPPL and GCFL will share joint control and management of Golden
Bee.
The details of the Jollibee Group’s interest in the Golden Bee joint venture as at December 31, 2018
and 2017 are as follows:
2018 2017
Interest in a joint venture - cost P
=33,926 =33,926
P
Cumulative equity in net earnings:
Balance at beginning of year 164,841 66,237
Equity in net earnings during the year 63,455 118,641
Dividends received during the year (34,637) (20,037)
Balance at end of year 193,659 164,841
P
=227,585 =198,767
P
Summarized financial information of Golden Bee based on its financial statements and reconciliation
with the carrying amount of the investment in the consolidated financial statements as at
December 31 are set out below:
2018 2017
Current assets P
=523,053 =371,611
P
Noncurrent assets 346,422 258,303
Total assets P
=869,475 =629,914
P
Current liabilities P
=383,523 =224,935
P
2018 2017
Cash and cash equivalents P
=193,920 =142,980
P
The amounts of the income and expense accounts include the following:
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2018 2017
Net assets P
=485,952 =404,979
P
Proportion of the Jollibee Group’s ownership 49% 49%
238,116 198,440
Cumulative translation adjustments (10,531) 327
P
=227,585 =198,767
P
C-Joy Poultry Meats Production, Inc. (C-Joy Poultry). On May 24, 2016, the Parent Company
entered into an agreement with Cargill Philippines, Inc., a wholly owned subsidiary of Cargill, Inc.
(Cargill), to establish a joint venture entity to build and operate a poultry processing plant in Sto.
Tomas, Batangas, Philippines. Cargill will oversee the setting up, management and operations of this
facility.
C-Joy Poultry, the joint venture entity formerly incorporated as Cargill Joy Poultry Meats Production,
Inc., is 70% owned by Cargill and 30% owned by the Parent Company. This entity is estimated to
create 1,000 new full-time jobs and develop new opportunities in the farming community in Batangas
and nearby provinces as local poultry farmers are contracted to grow chicken to supply the
requirements of the processing plant. The poultry processing plant started its commercial operations
on December 5, 2017.
The details of Jollibee Group’s interest in C-Joy Poultry as at December 31, 2018 and 2017 are as
follows:
2018 2017
Interest in a joint venture - cost P
=233,406 =233,406
P
Cumulative equity in net losses:
Balance at beginning of year (81,948) (3,925)
Equity in net loss during the year (151,458) (78,023)
Balance at end of year (233,406) (81,948)
P
=− =151,458
P
The Jollibee Group’s equity share in net losses amounting to P =527.1 million in 2018 exceeded the
carrying value of its interest in C-Joy Poultry amounting to =
P151.5 million as at December 31, 2017.
Consequently, the Jollibee Group’s unrecognized equity share in net losses amounted to
=375.6 million in 2018.
P
Summarized financial information of the C-Joy Poultry based on its financial statements and
reconciliation with the carrying amount of the investment in the consolidated financial statements are
set out below:
2018 2017
Current assets P
=1,523,852 P992,531
=
Noncurrent assets 1,843,050 1,600,832
Total Assets P
=3,366,902 =2,593,363
P
Current liabilities P
=4,591,583 =2,060,619
P
Noncurrent liabilities 27,430 27,884
Total liabilities P
=4,619,013 =2,088,503
P
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2018 2017
Cash and cash equivalents P
=192,876 =83,406
P
Current financial liabilities (excluding trade
payables and other current liabilities and
provisions) 399,134 375,116
Noncurrent financial liabilities (excluding
provisions) 26,635 27,884
The amounts of the income and expense accounts include the following:
2018 2017
Net assets (liabilities) (P
=1,252,111) =504,860
P
Proportion of the Jollibee Group’s ownership 30% 30%
(P
=375,633) =151,458
P
SJBF LLC (SJBF). See Part A of this note for the discussion on the Interest and Advances to SJBF.
Interest in Associates
Tortas Frontera LLC (Tortas). On September 7, 2018, the Jollibee Group, through Jollibee Foods
Corporation (USA), entered into a business venture with award-winning Chef Rick Bayless to build a
Mexican fast-casual restaurant business in the USA.
This partnership was formalized through an investment by Jollibee Group of USD12.6 million
(P
=668.7 million) in Tortas, which owns the Tortas Frontera business founded by Chef Bayless, in
consideration for 47% of the fully-diluted membership interests therein. The remaining 53%
membership interests in Tortas shall be held by Chef Ricky Bayless and other shareholders. The
transaction is subject to the fulfillment of agreed closing conditions.
On December 21, 2018, upon fulfillment of the closing conditions, Jollibee Foods Corporation (USA)
paid Chef Bayless in cash.
The carrying value of investment in Tortas amounted to =P668.7 million as at December 31, 2018 with
equity in net earnings amounting to P
=0.5 million in 2018.
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Summarized financial information of Tortas based on its financial statements and reconciliation with
the carrying amount of the investment in the consolidated financial statements as at December 31,
2018 are set out below:
The amounts of the income and expense accounts for the year ended December 31, 2018 include the
following:
Revenues =48,213
P
Net income 34,717
Total comprehensive income 34,717
Entrek (B) SDN BHD (Entrek). The Jollibee Group, through JIBL, has 1/3 or 33.3% ownership in
Entrek, a company that operates Jollibee stores in Brunei.
The details of the Jollibee Group’s interest in Entrek as at December 31, 2018 and 2017 are as
follows:
2018 2017
Interest in an associate - cost P
=16,660 =16,660
P
Cumulative equity in net earnings:
Balance at beginning of year 120,577 95,567
Equity in net earnings during the year 37,847 25,010
Reversal of impairment loss (see Note 23) 16,660 −
Balance at end of year 175,084 120,577
P
=191,744 =137,237
P
Summarized financial information of Entrek based on its financial statements and reconciliation with
the carrying amount of the investment in the consolidated financial statements as at December 31 are
set out below:
2018 2017
Current assets P
=743,134 =631,739
P
Noncurrent assets 270,932 199,488
Total assets P
=1,014,066 =831,227
P
Current liabilities P
=385,870 =330,429
P
Noncurrent liabilities 5,594 5,427
Total liabilities P
=391,464 =335,856
P
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The amounts of the income and expense accounts include the following:
2018 2017
Net assets P
=622,602 =495,371
P
Proportion of the Jollibee Group’s ownership 33.33% 33.33%
207,534 165,124
Impairment loss recognized in 2011 − (16,660)
Cumulative translation adjustments (15,790) (11,227)
P
=191,744 =137,237
P
C-Joy Poultry Realty, Inc. (C-Joy Realty). On May 24, 2016, the Parent Company entered into an
agreement with Cargill Philippines to establish C-Joy Realty, which leases the land where the C-Joy
Poultry plant is located.
The details of the Jollibee Group’s interest in C-Joy Realty as at December 31, 2018 and 2017 are as
follows:
2018 2017
Interest in an associate - cost P
=10,586 =10,586
P
Cumulative equity in net losses:
Balance at beginning of year (922) (602)
Equity in net loss during the year (509) (320)
Balance at end of year (1,431) (922)
P
=9,155 =9,664
P
Summarized financial information of C-Joy Realty based on its financial statements and
reconciliation with the carrying amount of the investment in the consolidated financial statements are
set out below:
2018 2017
Current assets P
=2,597 =6,035
P
Noncurrent assets 62,152 62,152
Total assets P
=64,749 =68,187
P
2018 2017
Current liabilities P
=1,025 =689
P
Noncurrent liabilities 33,209 35,285
Total liabilities P
=34,234 =35,974
P
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2018 2017
Cash and cash equivalents P
=1,380 =5,746
P
Current financial liabilities (excluding trade
payables and other current liabilities and
provisions) 164 185
Noncurrent financial liabilities 33,209 35,285
The amounts of the income and expense accounts include the following:
2018 2017
Net assets P
=30,515 =32,213
P
Proportion of the Jollibee Group’s
ownership 30% 30%
P
=9,155 =9,664
P
Advances to Co-venturers
Advances to VTI Group. The details of the Jollibee Group’s advances to VTI Group as at
December 31, 2018 and 2017 are as follows:
2018 2017
Balance at beginning of year P
=1,535,590 =2,652,748
P
Accrual of interest 55,523 38,952
Converted to equity during the year – (2,253,870)
Additions during the year – 1,059,786
Translation adjustments and others 81,748 37,974
Balance at end of year P
=1,672,861 =1,535,590
P
Loan to VTI Group amounting to USD35.0 million (P =1,523.9 million), extended on June 9, 2011, is
payable in December 2016. In accordance with the Fourth Supplement to the Loan Agreement signed
on March 28, 2017, the due date of the loan was further extended to May 31, 2017. This loan is
secured by a mortgage by the VTI Group of all their shares in SuperFoods Group.
The loan bears interest of 5% per annum payable in lump sum on the due date. The loan was agreed
to be used for general corporate purposes. Total interest from this loan, recognized as interest
income, amounted to USD0.6 million (P =31.6 million), USD1.8 million (P =88.5 million) and
USD1.8 million (P =88.2 million) for the period ended May 10, 2017 and years ended December 31,
2016 and 2015, respectively.
The Third Supplement to the Loan Agreement signed on December 29, 2016 provides the assignment
of the USD35.0 million (P
=1,735.3 million) loan receivable including accrued interests as at
December 31, 2016 from JSF to JWPL. With the completion of the Settlement Transaction
Documents and upon the approval of certain legal and regulatory requirements in Vietnam on
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May 10, 2017, the loan, including interests as at the same day, was contributed as additional capital to
the SuperFoods Group.
On December 14, 2016, a loan of USD9.0 million (P =447.5 million) was extended to the VTI Group
with an interest rate of 3.5% per annum. The loan was agreed to be used for SuperFoods Group’s
capital needs. The loan is part of the total agreed loan of USD30.0 million payable in eight (8) years
from the first utilization date. On June 2, 2017, the additional loan of USD21.0 million
(P
=1,060.0 million) was granted to the VTI Group. The loan is secured by pledged shares in SFVT
and Blue Sky which will be released in proportion to the amount of the principal paid. Total interest
from this loan recognized as interest income, amounted to USD1.1 million (P =55.4 million),
USD0.8 million (P =37.6 million) and USD0.01 million (P =0.8 million) for the years ended
December 31, 2018, 2017 and 2016.
E. Divestments
San Pin Wang. On March 9, 2012, the Jollibee Group, through JWPL, completed its acquisition of
55% equity interest of Guangxi San Pin Wang Food and Beverage Management Company Limited
(San Pin Wang) which operates the San Pin Wang beef noodle business in South China. The other
45% of San Pin Wang is held by GZK.
On December 30, 2016, JWPL divested its shareholdings in San Pin Wang making GZK the 100%
registered owner of San Pin Wang. This resulted to a gain on sale of =
P158.9 million which is
recognized in the statement of comprehensive income in 2016 (see Note 23). The divestment is part
of the Jollibee Group’s intention to focus on building its Yonghe King business, its largest business in
China.
The consideration for the 55% stake of JWPL of about RMB90.0 million (P
=644.5 million) is
collectible in five tranches, as follows:
The first tranche was collected on December 31, 2016. The second and third tranches were collected
in January 2017 and the fourth tranche on October 27, 2017. As at December 31, 2017, the fifth
tranche is shown as part of “Other current assets” in the consolidated statements of financial position
amounting to RMB10.0 million (P =76.4 million) (see Note 9). This was collected on October 25, 2018.
ChowFun. On March 31, 2011, the Jollibee Group, through its wholly-owned subsidiary, JWPL,
acquired from Aspen Partners, LLC 2,400 shares of ChowFun Holdings, LLC (Chowfun) for
USD3.4 million (P
=139.6 million), bringing its equity share to ChowFun to 80.55%. ChowFun is the
developer and owner of Jinja Bar and Bistro in New Mexico, USA.
On December 31, 2016, the Jollibee Group divested its shareholdings in ChowFun for a consideration
of USD1.6 million (P =79.6 million). The divestment was completed on December 23, 2016.
ChowFun paid JWPL to redeem JWPL’s 2,900 Class A Membership Units, equivalent to 80.55%
equity shares. This resulted to a loss on sale of P
=84.0 million which is recognized in the statement of
comprehensive income in 2016 (see Note 23). The divestment is part of Jollibee Group’s intention to
concentrate its resources in building its larger businesses.
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F. Cessation of Operations
WJ Investments Limited (WJ). On August 22, 2012, the Jollibee Group, through JWPL and GPPL,
entered into an agreement with Hoppime Ltd., a subsidiary of Wowprime Corporation of Taiwan
(Wowprime) and some key executives of Wowprime, to establish a joint venture entity to own and
operate the 12 Hotpot brand in the People’s Republic of China, Hong Kong and Macau. The “12
Hotpot” restaurant is known in Taiwan for its low-priced hotpot dishes.
The joint venture entity, incorporated as WJ Investments Limited (WJ), is 48%-owned by the Jollibee
Group and 48%-owned by Wowprime’s subsidiary and executives. The remaining 4% is owned by
certain individuals with experience in the retail sector in China. Through their subsidiaries, Jollibee
and Wowprime have joint control and management of WJ.
On October 31, 2017, WJ ceased the operations of the 16 stores of the 12 Hotpot brand in the
People’s Republic of China to focus in building the Jollibee Group’s larger and fast-growing business
in China and other parts of the world. With this, WJ will be dissolved and liquidated. The Jollibee
Group recognized a loss of =P116.2 million in the consolidated statement of comprehensive income in
2017 (see Note 23).
The details of Jollibee Group’s interest in WJ as at December 31, 2017 are as follows:
Summarized financial information of WJ based on its financial statements and reconciliation with the
carrying amount of the investment in the consolidated financial statements as at December 31, 2017
are set out below:
The amounts of assets and liabilities above included cash and cash equivalents amounted to
=235.0 million as at December 31, 2017.
P
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The amounts of the income and expense accounts include the following:
Revenues =328,479
P
Depreciation and amortization 30,380
Interest income - net 357
Net loss (73,796)
Total comprehensive loss (73,796)
2017
Plant,
Buildings,
Commercial Office, Store
Land and Condominium Leasehold and Food Furniture
Land Units and Rights and Processing and Transportation Construction
Improvements Improvements Improvements Equipment Fixtures Equipment in Progress Total
Cost
Balance at beginning of year =673,250
P =2,743,294
P =17,177,082
P =15,529,426
P =1,230,895
P =611,648
P =902,457
P =38,868,052
P
Additions – 125,603 1,378,159 1,357,891 120,455 62,795 5,859,893 8,904,796
Acquisition of a business (see Note 11) – 345,548 18,615 447,010 – 54 35,100 846,327
Retirements and disposals – (32,056) (855,947) (645,084) (52,011) (6,276) (266,498) (1,857,872)
Reclassifications – 146,073 2,497,428 1,383,419 141,582 2,008 (4,170,510) –
Translation adjustments 264 17,065 246,509 104,869 865 2,037 10,411 382,020
Balance at end of year 673,514 3,345,527 20,461,846 18,177,531 1,441,786 672,266 2,370,853 47,143,323
(Forward)
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2017
Plant,
Buildings,
Commercial Office, Store
Land and Condominium Leasehold and Food Furniture
Land Units and Rights and Processing and Transportation Construction
Improvements Improvements Improvements Equipment Fixtures Equipment in Progress Total
Accumulated Depreciation and
Amortization
Balance at beginning of year =7,564
P =1,246,145
P =9,737,843
P =9,978,599
P =802,982
P =396,621
P =–
P =22,169,754
P
Depreciation and amortization
(see (see Notes 21 and 22) – 192,164 1,938,143 2,236,415 220,570 73,631 – 4,660,923
Retirements and disposals – (32,047) (628,037) (583,365) (40,843) (6,177) – (1,290,469)
Reclassifications – – 5,686 (263) (5,423) – – –
Translation adjustments – 2,951 192,511 67,931 1,597 1,618 – 266,608
Balance at end of year 7,564 1,409,213 11,246,146 11,699,317 978,883 465,693 – 25,806,816
Accumulated Impairment Losses
Balance at beginning of year – – – 42,731 – – – 42,731
Additions (see Note 22) – – – 431,939 – – – 431,939
Write-offs – – – (30,605) – – – (30,605)
Reversals (see Note 22) – – – (2,111) – – – (2,111)
Translation adjustments – – – 739 – – – 739
Balance at end of year – – – 442,693 – – – 442,693
Net Book Value =665,950
P =1,936,314
P =9,215,700
P =6,035,521
P =462,903
P =206,573
P =2,370,853
P =20,893,814
P
Construction in progress account mainly pertains to costs incurred for ongoing construction of
properties, including soon-to-open stores and commissaries. The borrowing cost that has been
capitalized for the construction of commissaries amounted to P=19.6 million and nil as at
December 31, 2018 and 2017, respectively.
The Jollibee Group performed impairment assessments of fixed assets considering that there are
observable indications that the assets’ values have significantly declined resulting to recognition of
provision for impairment amounting to = P431.9 million in 2017 (see Note 22).
In 2018, management reassessed the recoverable amount of the Jollibee Group’s office, store and
food processing equipment and recognized reversal of provision amounting to P =408.2 million
(see Note 22). Consequently, allowance for impairment loss on office, store and food processing
equipment amounted to =P34.6 million and =
P442.7 million as at December 31, 2018 and 2017,
respectively.
No property, plant and equipment as at December 31, 2018 and 2017 have been pledged as security
or collateral.
2018
Buildings
and Building
Land Improvements Total
Cost
Balance at beginning and end of year =848,974
P =179,377
P =1,028,351
P
Accumulated Depreciation and
Amortization
Balance at beginning and end of year – 179,377 179,377
Net Book Value =848,974
P P
=– =848,974
P
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2017
Buildings
and Building
Land Improvements Total
Cost
Balance at beginning of year P983,428
= =182,901
P =1,166,329
P
Retirements and disposals (134,454) (3,524) (137,978)
Balance at end of year 848,974 179,377 1,028,351
Accumulated Depreciation and
Amortization
Balance at beginning of year – 182,901 182,901
Retirements and disposals – (3,524) (3,524)
Balance at end of year – 179,377 179,377
Net Book Value =848,974
P =–
P =848,974
P
The Jollibee Group’s investment properties have an aggregate fair value of P =1,747.3 million as at
December 31, 2017 as determined by independent appraisers who holds a recognized and relevant
professional qualification. Management does not expect a significant change in the aggregate fair
value of the Jollibee Group’s investment properties in 2018. The fair value represents the amount at
which the assets and liabilities can be exchanged in an orderly transaction between market
participants to sell the asset or transfer the liability at the measurement date under current market
conditions in accordance with International Valuation Standards.
In determining the fair value of the investment properties, the independent appraisers used the market
data approach for land and cost approach for buildings and building improvements. For land, fair
value is based on sales and listings of comparable properties within the vicinity after adjustments for
differences in location, size and shape of the lot, time elements and other factors between the
properties and their comparable properties. For buildings and building improvements, fair value is
based on the current cost to replace the properties in accordance with prevailing market prices for
materials, labor, and contractors’ overhead, profit and fees in the locality after adjustments for
depreciation due to physical deterioration, and functional and economic obsolescence based on
personal inspection of the buildings and building improvements and in comparison to similar
properties. Fair value hierarchy disclosures for investment properties have been provided in Note 31.
Direct operating costs relating to the investment properties which include depreciation and
maintenance expenses totaled to = P12.5 million, =
P28.9 million and =
P15.1 million in 2018, 2017 and
2016, respectively.
In 2017, the Parent Company sold its land located at Sta. Rosa Laguna and Luisita Industrial Park in
Tarlac for a total consideration of =
P365.5 million. Net gain arising from the disposals of these
investment properties amounted to P =231.0 million (see Note 22).
In 2015, the Parent Company entered into an agreement to develop a commercial and office
condominium building (the “Project”) in a parcel of its land in consideration for cash and assigned
units in the Project. The completion of the transaction is conditional upon fifty percent (50%)
completion of the Project, as certified by the general contractor of the Project, and when all of the
assigned units are fully constructed. As at December 31, 2018 and 2017, the Project is still under
development.
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No investment properties as at December 31, 2018 and 2017 have been pledged as security or
collateral for the Jollibee Group’s debts.
2018 2017
Trademarks (Note 11) P
=16,563,269 =6,149,269
P
Goodwill (Note 11) 14,395,717 9,050,223
Computer software, net of accumulated amortization 516,975 512,589
Other intangible assets, net of accumulated
amortization 354,096 18,158
P
=31,830,057 =15,730,239
P
2018 2017
Trademarks:
Smashburger (see Note 11) P
=10,414,000 =–
P
SuperFoods Group (see Note 11):
Highlands Coffee 3,681,912 3,681,912
Pho 24 463,101 463,101
Mang Inasal 2,004,256 2,004,256
16,563,269 6,149,269
Goodwill:
Smashburger (see Note 11) 5,345,494 –
SuperFoods Group (see Note 11) 2,507,801 2,507,801
Hong Zhuang Yuan 2,497,253 2,497,253
Mang Inasal 1,781,267 1,781,267
Red Ribbon Bakeshop:
Philippine operations 737,939 737,939
US operations 434,651 434,651
Yong He King 535,281 535,281
Chowking US operations 383,855 383,855
GSC 166,931 166,931
Burger King 5,245 5,245
14,395,717 9,050,223
Trademarks and goodwill P
=30,958,986 =15,199,492
P
Computer Software
The Jollibee Group’s computer software pertains to the Enterprise Resource Planning (ERP) system
which the Jollibee Group started to use on August 1, 2014.
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The rollforward analysis of the Jollibee Group’s computer software as at December 31 are as follows:
2018 2017
Cost
Balance at beginning of year P
=740,260 =670,762
P
Additions 83,246 69,498
Balance at end of year 823,506 740,260
Accumulated Amortization
Balance at beginning of year 227,671 157,425
Amortizations (see Note 22) 78,860 70,246
Balance at end of year 306,531 227,671
Net Book Value P
=516,975 =512,589
P
2018 2017
Cost
Balance at beginning of year P
=57,119 =56,983
P
Additions 27,970 136
Acquisition of a subsidiary (see Note 11) 368,418 –
Balance at end of year 453,507 57,119
Accumulated Amortization
Balance at beginning of year 38,961 30,256
Amortizations (see Note 22) 60,529 8,705
Balance at end of year 99,490 38,961
Translation adjustment 79 –
Net Book Value P
=354,096 =18,158
P
The calculation of value in use is most sensitive to the following assumptions which vary per
geographical location:
Geographical Pre-tax Long-term Revenue
CGUs Location Discount Rate Growth Rate
Hong Zhuang Yuan PRC 9.4% 6.1%
Mang Inasal Philippines 12.0% 6.8%
Red Ribbon Bakeshop:
Philippine operations Philippines 12.0% 6.8%
US operations USA 9.0% 2.0%
Yong He King PRC 9.4% 6.1%
Chowking US operations USA 9.0% 2.0%
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Key assumptions with respect to the calculation of value in use of the groups of CGUs as at
December 31, 2018 and 2017 used by management in its cash flow projections to undertake
impairment testing of goodwill are as follows:
a) Discount rates - discount rates represent the current market assessment of the risks specific to
each group of CGUs, regarding the time value of money and individual risks of the underlying
assets which have not been incorporated in the cash flow estimates. The discount rate calculation
is based on the specific circumstances of the Jollibee Group’s group of CGUs, derived from
weighted average cost of capital (WACC) of each group of CGUs. The WACC takes into
account both the cost of debt and equity. The cost of equity is calculated using the Capital Asset
Pricing Model (CAPM). The cost of debt is based on the assumed interest-bearing borrowings
each group of CGUs is obliged to service. CGU-specific risk is incorporated by applying
individual alpha and beta factors. The beta factors are evaluated annually based on publicly
available market data.
b) Long-term growth rates - rates are determined in consideration of historical and projected results,
as well as the economic environment where the group of CGUs operates.
c) EBITDA - is based on the most recent value achieved in the year preceding the start of the budget
period, and adjusted for planned efficiency improvement, if any.
Management believes that any reasonably possible change in the key assumptions on which
recoverable amount is based would not cause the carrying amount of the CGUs to exceed its
recoverable amount.
No impairment losses were recognized for trademarks and goodwill for the years ended
December 31, 2018, 2017 and 2016.
2018 2017
Security and other deposits (see Notes 9, 30 and 31) P
=2,474,748 =2,277,091
P
Noncurrent portion of:
Rent and other long-term prepayments 505,797 494,363
Employee car plan receivables
(see Notes 7, 30 and 31) 169,109 186,000
Prepaid market entry fee - net of accumulated
amortization of P
=15.4 million and =P9.9 million
in 2018 and 2017, respectively (see Note 22) 94,315 94,786
(Forward)
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2018 2017
Franchise rights - net of accumulated amortization
of P
=49.4 million and = P37.0 million in 2018 and
2017, respectively (see Note 22) P
=80,903 =68,401
P
Deferred rent expense 78,652 72,338
Deferred compensation 27,367 26,319
Returnable containers and others 38,644 71,910
Tools and other assets 281,509 219,310
P
=3,751,044 =3,510,518
P
ƒ Security and other deposits generally represent deposits for operating leases entered into by the
Jollibee Group as lessee. The security deposits are recoverable from the lessors at the end of the
lease terms, which range from three to twenty years. These are carried at amortized cost. The
discount rates used range from 2.36%-7.51% and 2.44%-5.71% in 2018 and 2017, respectively.
The difference between the fair value at initial recognition and the notional amount of the security
deposits is charged to “Deferred rent expense” account and amortized on straight-line basis over
the lease terms.
ƒ Employee car plan receivables are presented at amortized cost. The difference between the fair
value at initial recognition and the notional amount of the employees’ car plan receivables is
recognized as deferred compensation and is amortized on a straight-line basis over the credit
period.
Accretion of interest on security and other deposits and employee car plan receivables amounted
to =
P46.6 million, P
=33.1 million and =P25.2 million in 2018, 2017 and 2016, respectively
(see Note 23).
ƒ Prepaid market entry fee represents upfront fee paid to the franchisor prior to the operations of
Dunkin’ Donuts restaurants in the PRC. Market entry fee is amortized over twenty (20) years
effective February 2016, start of Dunkin’ Donuts operations.
The rollforward analysis of prepaid market entry fee as at December 31 are as follows:
2018 2017
Market Entry Fee
Balance at beginning and end of year P
=93,870 =93,870
P
Accumulated Amortization
Balance at beginning of year 9,863 4,571
Amortizations (see Note 22) 5,529 5,292
Balance at end of year 15,392 9,863
Translation adjustment 15,837 10,779
P
=94,315 =94,786
P
ƒ Franchise rights pertain to franchise fees paid by PERF entities to Burger King Asia Pacific for
the license to operate Burger King stores in the Philippines. Franchise rights are amortized over
ten (10) years.
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2018 2017
Franchise Rights
Balance at beginning of year P
=105,386 =85,848
P
Additions 24,931 19,538
Balance at end of year 130,317 105,386
Accumulated Amortization
Balance at beginning of year 36,985 34,156
Amortizations (see Note 22) 12,429 2,829
Balance at end of year 49,414 36,985
P
=80,903 =68,401
P
ƒ Tools and other assets represent tools for repairs and maintenance of office and store equipment
which were still unused as at December 31, 2018 and 2017.
16. Trade Payables and Other Current Liabilities and Contract Liabilities
2018 2017
Trade P
=13,094,676 =10,877,674
P
Accruals for:
Salaries, wages and employee benefits 2,127,743 1,864,278
Local taxes 2,005,187 1,939,187
Store operations 1,699,887 1,887,316
Advertising and promotions 1,585,517 1,571,660
Rent 1,156,140 1,053,952
Freight 795,271 388,992
Utilities 484,693 423,596
Repairs and maintenance 393,278 482,739
Operating supplies 255,229 280,753
Interest (Note 18) 239,663 83,117
Professional fees 195,681 212,739
Security 169,245 161,304
Transportation and travel 101,363 49,247
Communication 78,974 78,095
Corporate events 78,932 274,086
Trainings and seminars 29,531 95,045
Insurance 18,267 21,833
Service fees and others 1,241,733 1,345,958
Customers’ deposits 898,248 798,352
Unearned revenue from gift certificates 628,070 171,891
Dividends payable 80,780 56,053
Other current liabilities 1,208,583 1,134,096
28,566,691 25,251,963
Contract liabilities 150,078 2,650
P
=28,716,769 =25,254,613
P
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ƒ Trade payables to suppliers are noninterest-bearing and are normally settled on a 30 to 60-day
term.
ƒ Accrued expenses are noninterest-bearing and are normally settled within the next financial year.
Other accrued liabilities presented under “Service fees and others” consist of charges related to
representations and other miscellaneous expenses.
ƒ Customers’ deposits pertain to security deposits from operating leases with franchisees, which are
refundable at the end of the lease term, deposits for kiddie party packages and deposits from
franchisees for the sale of store assets.
ƒ Other current liabilities consist of staled checks, amounts payable for mascots and various
subscriptions in newspapers given to customers as a complementary to their meals.
ƒ Contract liabilities pertains to deferred revenue and unearned revenue from gift certificates from
international operations.
Movements of contract liabilities arising from deferred revenue and unearned revenue from gift
certificates from international operations are as follows:
2018 2017
Effect of adoption of PFRS 15 P
=2,650 =2,262
P
Additions 36,506 2,650
Acquisition of a subsidiary 113,572 –
Utilized gift certificates (2,650) (2,262)
Balance at end of year P
=150,078 P2,650
=
The amount of contract liabilities arising from deferred revenue and unearned revenue from gift
certificates is expected to be earned within one year.
17. Provisions
These include estimates of legal services, settlement amounts and other costs of claims made against
the Jollibee Group. Other information on the claims is not disclosed as this may prejudice the
Jollibee Group’s position on such claims (see Note 29).
*SGVFS034434*
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2018 2017
Principal P
=26,363,627 =16,149,740
P
Unamortized debt issue cost (99,274) (32,469)
P
=26,264,353 =16,117,271
P
2018 2017
USD-denominated:
Loan 1 P
=4,498,511 =4,881,067
P
Loan 2 – 124,800
Loan 3 1,545,852 1,482,624
Loan 4 412,227 395,367
Loan 5 – 199,680
Loan 6 310,222 294,528
VND-denominated (see Note 11):
Loan 7 79,296 142,293
Loan 8 88,128 122,998
Loan 9 137,088 151,383
Loan 10 260,352 –
Loan 11 41,951 –
PHP-denominated:
Loan 12 1,454,318 1,467,955
Loan 13 799,733 798,933
Loan 14 622,583 871,583
Loan 15 1,593,600 1,592,000
Loan 16 2,091,600 2,089,500
Loan 17 796,800 796,000
Loan 18 597,600 597,000
Loan 19 4,171,875 –
Loan 20 2,979,376 –
Loan 21 2,680,714 –
Loan 22 109,670 109,560
Loan 23 992,857 –
26,264,353 16,117,271
Less current portion - net of debt issue costs
of P
=7.0 million and =P2.4 million in 2018 and
2017, respectively 4,892,102 1,216,219
P
=21,372,251 =14,901,052
P
USD-denominated loans of JWPL. Loan 1 consists of a 10-year unsecured loan acquired from a local
bank on October 21, 2015 amounting to USD110.0 million (P =5,111.7 million) subject to a variable
interest rate based on three-month London Interbank Offered Rate (LIBOR) plus spread of 1.20%
which is payable and is reset on a quarterly basis. The spread applies provided the Republic of the
Philippines’ 5-year credit default swap remains under 1.10%. The principal is payable in quarterly
installments commencing on January 23, 2017 up to October 21, 2025, the maturity date. As at
*SGVFS034434*
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December 31, 2018 and 2017, the carrying value of the loan amounted to P
=4,498.5 million and
=
P4,881.1 million, respectively.
Loan 2 consists of a 5-year unsecured loan acquired on February 25, 2013 amounting to
USD40.0 million (P =1,632.0 million) subject to quarterly interest repricing with one-time option to fix
in the future. The interest rate is based on three-month US Dollar LIBOR plus spread of 1.0%. The
principal is payable in sixteen (16) quarterly installments commencing on May 26, 2014. The loan
was paid in full on February 26, 2018, the maturity date. As at December 31, 2018 and 2017, the
carrying value of the loan amounted to nil and = P124.8 million, respectively.
Under the loan agreements above (Loans 1 and 2), the Parent Company as the guarantor is subject to
certain debt covenants which include among others, maintaining a Debt-to-Equity ratio and Debt-to-
EBITDA ratio of 3.0 or below. As at December 31, 2018 and 2017, the Parent Company is in
compliance with the terms of the loan covenants.
Loan 3 consists of an 8-year unsecured loan acquired on November 29, 2016 amounting to
USD30.0 million (P =1,491.9 million) with an interest rate of 3.0% per annum. The principal is
payable in six (6) yearly installments commencing on November 29, 2017 up to November 29, 2022
amounting to USD0.3 million, and the remaining balance on November 29, 2024, the maturity date.
As at December 31, 2018 and 2017, the carrying value of the loan amounted to P =1,545.9 million and
=
P1,482.6 million, respectively.
The loan agreement provides certain restrictions and requirements to the Parent Company as the
guarantor with respect to maintaining financial ratios, which include maintaining a Debt-to-Equity
ratio of 3.0 or below and Debt Service Coverage ratio of at least 1.3. As at December 31, 2018 and
2017, the Parent Company as the guarantor is in compliance with the terms of its loan covenants.
Loan 4 consists of a 6-year unsecured loan acquired on November 29, 2016 amounting to
USD8.0 million (P =397.8 million) with an interest rate based on interpolated ROP 2021 and ROP 2024
plus spread of 0.5%. The principal is payable in five (5) yearly installments commencing on
November 29, 2017 up to November 29, 2021 amounting to USD0.08 million, and the remaining
balance on November 29, 2022, the maturity date. As at December 31, 2018 and 2017, the carrying
value of the loan amounted to =
P412.2 million and = P395.4 million, respectively.
USD-denominated loans of HBFPPL. Loan 5 consists of a 5-year unsecured loan acquired on May 8,
2013 amounting to USD4.0 million (P =163.3 million) with an interest rate based on three-month USD
LIBOR plus spread of 1.0% subject to repricing every quarter. The loan was paid in full on
May 8, 2018, the maturity date. As at December 31, 2018 and 2017, the carrying value of the loan
amounted to nil and P
=199.7 million, respectively.
Loan 6 consists of a 5-year unsecured loan acquired on April 25, 2014 amounting to USD5.9 million
(P
=257.5 million) with an interest rate of 1.48% subject to repricing every quarter. The principal is
payable on April 24, 2019, the maturity date. As at December 31, 2018 and 2017, the carrying value
of the loan amounted to P
=310.2 million and P =294.5 million, respectively.
Under the loan agreements above (Loans 4 to 6), the Parent Company as the guarantor is subject to
certain restrictions and requirements with respect to maintaining financial ratios, which include Debt-
to-Equity ratio and Debt-to-EBITDA ratio not to exceed 3.0. As at December 31, 2018 and 2017, the
Parent Company as the guarantor is in compliance with the terms of its loan covenants.
*SGVFS034434*
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VND-denominated loans of SuperFoods Group. Loan 7 consists of a 5-year loan acquired from a
local bank in Vietnam on February 19, 2015 amounting to VND118.0 billion (P =250.2 million). The
loan is subject to a variable interest rate based on thirty (30) day Vietnam Interbank Offered Rates
plus spread of 1.5%. The principal is payable in monthly installments commencing on the 13th
month after the first utilization date until February 2020, the maturity date. As at December 31, 2018
and 2017, the carrying value of the loan amounted to = P79.3 million and =
P142.3 million, respectively.
Loan 8 consists of a 5-year loan acquired on December 30, 2015 from a local bank in Vietnam
amounting to VND68.0 billion (P =146.7 million). The loan is subject to a variable interest rate based
on three-month VND COF plus spread of 1.5%. The principal is payable in sixteen (16) quarterly
installments commencing on the 15th month after the first utilization. As at December 31, 2018 and
2017, the carrying value of the loan amounted to P=88.1 million and =
P123.0 million, respectively.
Loan 9 consists of a 5-year loan acquired on April 3, 2017 from a local bank in Vietnam amounting to
VND68.0 billion (P=151.2 million) with variable interest rate based on three-month VND COF plus
spread of 1.5%. The principal is payable in sixteen (16) quarterly installments commencing on the
15th month from the first drawdown date. As at December 31, 2018 and 2017, the carrying value of
the loan amounted to =P137.1 million and =
P151.4 million, respectively.
Loan 10 consists of a 5-year loan acquired from a local bank in Vietnam amounting to VND113.0
billion (P
=262.7 million) available in tranches within eighteen (18) months from February 13, 2018,
the date of loan agreement. The loan is subject to a variable interest rate based on three-month VND
COF plus spread of 1.3%. The principal is payable in fourteen (14) quarterly installments
commencing on the 21st month from the initial drawdown date on March 20, 2018 amounting to
VND7.5 billion (P =17.4 million). As at December 31, 2018, the carrying value of the loan amounted to
=
P260.4 million.
Loan 11 consists of a 5-year loan acquired from a local bank in Vietnam amounting to VND185.0
billion (P
=426.2 million) available in tranches within twenty-four (24) months from November 15,
2018, the date of loan agreement. The loan is subject to a variable interest rate based on the Bank’s
three-month COF plus spread of 1.35%. The principal is payable in twelve (12) quarterly
installments commencing on the 27th month from the initial drawdown date on December 25, 2018
amounting to VND18.2 billion (P =42.0 million). As at December 31, 2018, the carrying value of the
loan amounted to P =42.0 million.
PHP-denominated loans of the Parent Company. On December 9, 2013, the Parent Company
refinanced its =
P1,500.0 million term loan from a local bank due on December 16, 2013 by availing a
term loan of the same amount (Loan 12). The loan is payable over five years and six months from the
date of drawdown with annual principal repayments of = P15.0 million starting on the 30th month from
the date of drawdown and = P1,455.0 million upon maturity. The loan is subject to a variable interest
rate based on three-month Philippine Dealing System Treasury Fixing (PDST-F) rate plus spread of
1.25%, which is payable and is reset on a quarterly basis, and to an interest rate floor based on the
Bangko Sentral ng Pilipinas (BSP) Overnight Reverse Repurchase Agreement Rate. The loan was
drawn on December 16, 2013 and will mature on June 17, 2019. The Parent Company incurred debt
issue costs of P
=7.5 million, representing documentary stamp tax, in relation to this loan in 2013. The
Parent Company has an option to convert the variable interest rate into a fixed interest rate on any
interest payment date based on the PDST-F rate for the remaining term of the loan and the spread of
1.0%. The Parent Company also has an option to prepay the loan in full or in multiples of
P
=10.0 million on any interest payment date.
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Under the loan agreement, the Parent Company is subject to certain debt covenants which include
among others, the maintenance of a required Debt-to-Equity ratio and Debt-to-EBITDA ratio of 3.0
or below. The Parent Company is in compliance with these debt covenants as at December 31, 2018
and 2017.
Loan 13 consists of a 5-year unsecured loan acquired from a local bank on April 21, 2014 amounting
to =
P800.0 million. The loan is subject to a variable interest rate based on three-month PDST-F rate
plus spread of 1.0%, which is payable and is reset on a quarterly basis, and to an interest rate floor
based on the BSP Special Deposit Account (SDA) Rate plus spread of 1.0% or BSP Overnight
Borrowing Rate plus spread of 1.0%. The Parent Company incurred debt issue costs of = P4.0 million,
representing documentary stamp tax, in relation to this loan in 2014. The principal is payable on
April 21, 2019, the date of maturity. The Parent Company has an option to convert the variable
interest rate into a fixed interest rate based on a five-year treasury securities benchmark yield plus
spread of 1.0% on the date the option to convert is exercised, subject to an annual interest rate floor of
4.75%. The Parent Company also has an option to prepay the loan, wholly or partially, without
penalty at any time during the term of the loan subject to certain conditions.
Under the loan agreement, the Parent Company is subject to certain debt covenants which include,
among others, maintaining a Debt-to-Equity ratio of 3.0 or below and Debt-to-Service Coverage ratio
of at least 1.3. The Parent Company is in compliance with these debt covenants as at
December 31, 2018 and 2017.
Loan 14 consists of 5-year unsecured loan acquired from a local bank on April 22, 2016 amounting to
=1,000.0 million. The loan is subject to a variable interest rate based on three-month Philippine
P
Dealing System Treasury - Reference Rate Two (PDST-R2) plus spread of 0.55%, subject to
repricing every quarter, and to an interest rate floor of BSP SDA. Provided, however that on any
Interest Payment Date, in lieu of a floating interest rate, the Parent Company shall have a one-time
option to convert into a fixed-interest rate loan not later than 730 days from drawdown date. The
conversion to fixed interest rate is based on the applicable PDST-R2 rate plus spread of 2% if the
option is exercised from day 1 to day 365 from drawdown date and based on the applicable PDST-R2
rate plus spread of 2.75% if the option is exercised from day 366 to day 730 from drawdown date.
The principal is payable in sixteen (16) quarterly installments commencing on the 15th month from
drawdown date amounting to = P62.5 million. The Parent Company incurred debt issue cost of
=
P5.0 million, representing documentary stamp tax, for this loan. The Parent Company has an option
to prepay the loan in part or in full on any interest payment date.
Under the loan agreement, the Parent Company is subject to certain debt covenants which include
among others, the maintenance of a required Debt-to-Equity ratio and Debt-to-EBITDA ratio of 3.0
and below. The Parent Company is in compliance with these debt covenants as at
December 31, 2018 and 2017.
Loan 15 consists of 5-year unsecured loan acquired from a local bank on December 22, 2017
amounting to = P1,600.0 million. The loan is subject to a variable interest based on the simple average
of the preceding five (5) days of the three-month PDST-R2 plus spread of 0.50%, which is payable
and repriced on a quarterly basis, and to an interest rate floor of 2.70%. Provided, however that on
any interest payment date, but in no case later than 365 days from the initial drawdown date, in lieu of
a floating interest rate, the Parent Company shall have a one-time option to convert into a fixed-
interest rate loan based on the applicable three-month PDST-R2 rate plus spread of 0.60%. The
principal is payable in sixteen (16) quarterly installments commencing on the 15th month from
drawdown date amounting to = P100.0 million. The Parent Company incurred debt issue cost of
=
P8.0 million, representing documentary stamp tax, for this loan. The Parent Company also has an
option to prepay the loan in part or in full on any interest payment date subject to certain conditions.
*SGVFS034434*
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Under the loan agreement, the Parent Company is subject to certain debt covenants which include
among others, the maintenance of a required Debt-to-Equity ratio and Debt-to-EBITDA ratio of 3.0
or below. The Parent Company is in compliance with these debt covenants as at December 31, 2018
and 2017.
Loan 16 consists of 5-year unsecured loan acquired from a local bank on December 22, 2017
amounting to = P2,100.0 million. The loan is subject to a variable interest rate based on the simple
average of the five (5) trading days of the three-month Treasury Securities Benchmark Yield, as
published in the PDST-R2 page of the PDEX preceding and inclusive of the Interest Rate Setting
Date plus spread of 0.50%. The principal is payable on December 22, 2022, the date of maturity with
an option to prepay the loan, wholly or partially, without penalty at any time during the term of the
loan subject to certain conditions. On July 16, 2018, the loan agreement was amended to pay the
principal in sixteen (16) quarterly installments commencing on the end of the 4th quarter from the
drawdown date. The Parent Company incurred debt issue cost of P =10.5 million, representing
documentary stamp tax, for this loan.
Under the loan agreement, the Parent Company is subject to certain debt covenants which include
among others, the maintenance of a required Debt-to-Equity ratio and Debt-to-EBITDA ratio of 3.0
or below and Debt-to-Service Coverage ratio of at least 1.3. The Parent Company is in compliance
with these debt covenants as at December 31, 2018 and 2017.
Loan 17 consists of 5-year unsecured loan acquired from a local bank on December 22, 2017
amounting to = P800.0 million. The loan is subject to a variable interest based on the simple average of
the preceding five (5) days of the three-month PDST-R2 rate plus spread of 0.50%, which is payable
and is reset on a quarterly basis, and to an interest rate floor based on BSP Overnight Deposit Facility
Rate. The principal is payable in sixteen (16) quarterly installments commencing on the 15th month
from drawdown date amounting to P =50.0 million. The Parent Company incurred debt issue cost of
=
P4.0 million, representing documentary stamp tax, for this loan. The Parent Company has an option
to prepay the loan in part or in full on any interest payment date subject to certain conditions.
Under the loan agreement, the Parent Company is subject to certain debt covenants which include
among others, the maintenance of a required Debt-to-Equity ratio and Debt-to-EBITDA ratio of 3.0
or below. The Parent Company is in compliance with these debt covenants as at December 31, 2018
and 2017.
Loan 18 consists of 5-year unsecured loan acquired from a local bank on December 27, 2017
amounting to P =600.0 million. The loan is subject to a variable interest equal to the three-month
PDST-R2 rate plus spread of 0.50%, which is payable and is reset on a quarterly basis, and to an
interest rate floor based on BSP Overnight Deposit Facility Rate plus 0.50%. The principal is payable
in sixteen (16) quarterly installments commencing on the 15th month from drawdown date amounting
to =
P37.5 million. The Parent Company incurred debt issue cost of P =3.0 million, representing
documentary stamp tax, for this loan. The Parent Company has an option to convert the variable
interest rate into a fixed interest rate on any interest payment date but in no case later than 365 days
from the drawdown date. The conversion to fixed interest rate is based on a five year PDST-R2 rate
plus spread of 0.75%. The Parent Company also has an option to prepay the loan in part of in full on
any interest payment date subject to certain conditions.
Under the loan agreement, the Parent Company is subject to certain debt covenants which include
among others, the maintenance of a required Debt-to-Equity ratio and Debt-to-EBITDA ratio of 3.0
or below and Debt-to-Service Coverage ratio of at least 1.3. The Parent Company is in compliance
with these debt covenants as at December 31, 2018 and 2017.
*SGVFS034434*
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Loan 19 consists of 7-year unsecured loan acquired from a local bank on March 27, 2018 amounting
to =
P4,200.0 million. The loan is subject to a variable interest equal to the simple average of the
preceding five (5) days of the three-month PDST-R2 rate plus spread of 0.40% and to an interest rate
floor of 3.0%. The principal is payable in equal quarterly installments commencing on the 27th
month from drawdown date amounting to = P210.0 million. The Parent Company incurred debt issue
cost of P
=31.5 million, representing documentary stamp tax, for this loan. The Parent Company has an
option to convert the variable interest rate into a fixed interest rate but in no case later than 365 days
from the drawdown date. The conversion to fixed interest rate is based on simple average of the
applicable/interpolated “Done” PDST-R2 rates within the preceding five (5) consecutive business
days plus spread of 0.60%. In the event, that there is no “Done” PDST-R2 rates, it shall be
determined by interpolating the “Done” PDST-R2 of other tenors or mutually agreed computation
based on the available bids/interpolation. The Parent Company also has an option to prepay the loan
in part or in full on any interest payment date subject to certain conditions.
Under the loan agreement, the Parent Company is subject to certain debt covenants which include
among others, the maintenance of a required Debt-to-Equity ratio and Debt-to-EBITDA ratio of 3.0
or below. The Parent Company is in compliance with these debt covenants as at December 31, 2018.
Loan 20 consists of 7-year unsecured loan acquired from a local bank on May 11, 2018 amounting to
=
P3,000.0 million. The loan is subject to a variable interest rate equal to simple average of the five (5)
trading days of the three-month Treasury Securities Benchmark Yield, as published in the PDST-R2
page of the PDEX preceding and inclusive of the Interest Rate Setting Date plus spread of 0.50%.
The Parent Company has a one-time option to convert the variable interest rate into a fixed interest
rate until the 4th interest rate setting date subject to certain conditions. The conversion to fixed
interest rate is equal to the interpolated Treasury Securities Benchmark Yield based on the remaining
tenor of the Loan, as published in the PDST-R2 on the interest setting date plus spread of 0.50%. The
principal is payable in twenty (20) quarterly installments commencing on the end of the 8th quarter
from the drawdown date. The Parent Company incurred debt issue cost of = P22.5 million,
representing documentary stamp tax, for this loan.
Under the loan agreement, the Parent Company is subject to certain debt covenants which include
among others, the maintenance of a required Debt-to-Equity ratio and Debt-to-EBITDA ratio of
3.0 or below and Debt-to-Service Coverage ratio of at least 1.3. The Parent Company is in
compliance with these debt covenants as at December 31, 2018.
Loan 21 consists of 7-year unsecured loan acquired from a local bank on August 15, 2018 amounting
to =
P2,700.0 million. The loan is subject to a variable interest rate equal to simple average of the five
(5) trading days of the three-month Treasury Securities Benchmark Yield, as published in the PDST-
R2 page of the PDEX preceding and inclusive of the Interest Rate Setting Date plus spread of 0.50%.
The Parent Company has a one-time option to convert the variable interest rate into a fixed interest
rate until the 4th interest rate setting date subject to certain conditions. The conversion to fixed
interest rate is equal to the interpolated Treasury Securities Benchmark Yield based on the remaining
tenor of the Loan, as published in the PDST-R2 on the interest setting date plus spread of 0.50%. The
principal is payable in twenty (20) quarterly installments commencing on the end of the 8th quarter
from the drawdown date. The Parent Company incurred debt issue cost of = P20.3 million,
representing documentary stamp tax, for this loan.
Under the loan agreement, the Parent Company is subject to certain debt covenants which include
among others, the maintenance of a required Debt-to-Equity ratio and Debt-to-EBITDA ratio of 3.0
or below and Debt-to-Service Coverage ratio of at least 1.3. The Parent Company is in compliance
with these debt covenants as at December 31, 2018.
*SGVFS034434*
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The Parent Company’s PHP denominated long-term debt (Loans 12 to 21) amounts to
=17,788.2 million and =
P P8,213.0 million, net of unamortized debt issue cost of =
P91.8 million and
=32.0 million as at December 31, 2018 and 2017, respectively. The current portion amounted to
P
=3,773.0 million and =
P P261.8 million, net of debt issue costs of =
P7.0 million and =
P2.4 million as at
December 31, 2018 and 2017, respectively.
PHP-denominated loan of PERF Restaurants, Inc. (PERF). Loan 22 is a 5-year unsecured loan
acquired from local a bank on December 21, 2016 amounting to P =110.0 million with an interest rate
based on three-month PDST-R2 plus spread of 1.0% with interest rate floor computed at BSP
Overnight Deposit Facility Rate plus spread of 0.5%. The loan is payable on December 21, 2021, the
maturity date. PERF incurred debt issue cost of =P0.6 million, representing documentary stamp tax, in
relation to this loan in 2016. The carrying amount of the loan is =
P109.7 million and =
P109.6 million,
net of unamortized debt issue cost of =
P0.3 million and =
P0.4 million as at December 31, 2018 and
2017, respectively.
The loan is guaranteed by the Parent Company. Consequently, the Parent Company is subject to
certain debt covenants which include, among others, maintaining a Debt-to-Equity ratio of 3.0 or
below and Debt-to-Service Coverage ratio of at least 1.3. The Parent Company is in compliance with
these debt covenants as at December 31, 2018 and 2017, respectively.
PHP-denominated loan of Zenith. Loan 23 is a 7-year unsecured loan acquired from a local bank on
August 24, 2018 amounting to = P1,000.0 million. The loan is subject to a variable interest equal to the
simple average of the preceding five (5) days of the three-month PDST-R2 on the interest setting date
plus spread of 0.48% and to an interest rate floor equal to the BSP Overnight Reverse Repurchase
Rate. Zenith has an option to convert the variable interest rate into a fixed interest rate but in no case
later than 365 days from the drawdown date. The conversion to fixed interest rate is based on simple
average of the applicable/interpolated “Done” PDST-R2 rates within the preceding five (5)
consecutive business days plus spread of 0.60%. Zenith incurred debt issue cost of = P7.5 million,
representing documentary stamp tax, in relation to this loan. The principal is payable in equal
quarterly installments commencing on the 27th month from the drawdown date and every quarter
thereafter until maturity. The carrying amount of the loan is P=992.9 million, net of unamortized debt
issue cost of =
P7.1 million as at December 31, 2018.
The loan is guaranteed by the Parent Company. Consequently, the Parent Company is subject to
certain debt covenants which include, among others, maintaining a Debt-to-Equity ratio and Debt-to-
EBITDA ratio of 3.0 or below. The Parent Company is in compliance with these debt covenants as at
December 31, 2018.
Interest expense recognized on long-term debt including amortization of debt issue cost, amounted to
=888.2 million, P
P =392.6 million and =
P247.0 million in 2018, 2017 and 2016, respectively
(see Note 23).
The future expected principal settlements of the Jollibee Group’s loans follow:
2018 2017
2018 P
=– =1,218,583
P
2019 4,899,151 4,320,923
2020 3,510,235 1,752,102
2021 4,391,793 1,612,649
2022 to 2025 13,562,448 7,245,483
26,363,627 16,149,740
Less debt issue costs (99,274) (32,469)
P
=26,264,353 =16,117,271
P
*SGVFS034434*
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Embedded Derivatives
Certain long-term loans of the Jollibee Group include provisions for an option to convert the variable
interest rate into a fixed interest rate. Certain long-term loans are also subject to an interest rate
floor. In addition, the Jollibee Group’s long-term loans generally provide an option to pre-pay the
loan in full before the maturity date.
The Jollibee Group assessed that the derivatives embedded in the loan contracts need not be
bifurcated since they are clearly and closely related to the economic characteristics and risks of the
host loan contract and do not qualify for separate accounting as at December 31, 2018 and 2017.
The IRS with a notional amount equal to the principal amount of the loan requires the Jollibee Group
to pay fixed interest payments at 3.36% in exchange of variable interest payments at three-month
LIBOR plus spread of 1.20% from the bank throughout the term of the IRS on the notional
amount. The IRS settles quarterly on a net basis.
Unrealized income of =
P70.9 million, =
P45.5 million and =
P2.4 million were recognized in other
comprehensive income in 2018, 2017 and 2016, respectively.
In 2012, PERF converted a loan into a deliverable cross-currency swap transaction to hedge in full the
foreign currency risk and interest rate risk on its floating rate. Under the cross-currency swap, PERF
received at inception PHP notional amount of P =149.2 million and paid USD notional amount of
USD3.4 million based on the PHP/USD spot reference rate of P =43.87. At every interest payment
date, PERF received variable interest based on 3-month US Dollar LIBOR plus spread and paid fix-
interest rate. At maturity date, PERF received USD notional amount of USD3.4 million and paid
PHP notional amount of = P149.2 million. The USD receipts from the cross-currency swap
corresponded to the expected interest fixed principal amount due on the hedged loan. Similar to the
hedged loan, the cross-currency swap was non-amortizing and it matured on December 20, 2016.
Effectively, the cross-currency swap transformed the floating rate USD loan into fixed rate PHP loan.
The foreign exchange revaluation of the hedged loan, amounting to P =10.9 million was recognized in
other comprehensive income in 2016.
*SGVFS034434*
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19. Equity
a. Capital Stock
2018 2017
Authorized - =
P1 par value
1,450,000,000 shares P
=1,450,000 =1,450,000
P
The total number of shareholders of the Parent Company is 3,023 and 3,042 as at
December 31, 2018 and 2017, respectively.
b. Additional Paid-in-Capital
The movements in the Additional paid in-capital pertain to the difference between the exercise
prices of stock options exercised and the par value of Parent Company’s shares. For the years
ended December 31, 2018 and 2017, stock options totaling 3,558,182 shares and 10,354,270
shares, respectively, were exercised (see Note 26). These resulted to an additional paid-in capital
amounting to = P472.0 million and =
P850.8 million in 2018 and 2017, respectively.
The Parent Company recognized deferred tax assets on MSOP and ELTIP, resulting to additional
paid-in capital of =
P334.1 million and =
P782.0 million in 2018 and 2017.
As at December 31, 2018 and 2017, total additional paid-in capital amounted to =
P8,638.4 million
and P
=7,520.4 million, respectively.
c. Treasury Shares
*SGVFS034434*
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The amount of excess of cost over the carrying value of non-controlling interests acquired as at
December 31, 2018 and 2017, recognized as part of “Equity Attributable to Equity Holders of the
Parent Company” section in the consolidated statements of financial position, resulted from the
following acquisitions of non-controlling interests:
2018 2017
20% of Greenwich in 2006 P
=168,257 =168,257
P
15% of Belmont in 2007 375,721 375,721
40% of Adgraphix in 2010 (1,214) (1,214)
30% of Mang Inasal in 2016 1,217,615 1,217,615
30% of HBFPPL in 2016 391,782 391,782
15% of SJBF in 2018 (see Note11) (347,395) –
P
=1,804,766 =2,152,161
P
e. Retained Earnings
The Jollibee Group has a cash dividend policy of declaring one-third of the Jollibee Group’s net
income for the year as cash dividends. It uses best estimate of its net income as basis for
declaring cash dividends. Actual cash dividends per share declared as a percentage of the EPS
are 32.4%, 33.1% and 32.4% in 2018, 2017 and 2016, respectively.
The Parent Company’s retained earnings available for dividend declaration, computed based on
the guidelines provided in SEC Memorandum Circular No. 11, amounted to P =12,538.8 million,
=10,876.0 million and =
P P6,046.3 million as at December 31, 2018, 2017 and 2016, respectively.
The Parent Company’s cash dividend declarations for 2018, 2017 and 2016 follow:
Total Cash
Cash Dividend Dividends
Declaration Date Record Date Payment Date per Share Declared
(In Thousands, except dividend per share)
2018
April 6 April 24 May 9 P1.14
= P1,236,518
=
November 9 November 26 December 10 1.34 1,455,269
=2.48
P =2,691,787
P
2017
April 5 April 21 May 5 =1.00
P P1,077,527
=
November 10 November 27 December 11 1.18 1,277,984
=2.18
P =2,355,511
P
2016
April 6 April 21 May 6 =0.86
P =919,435
P
November 11 November 28 December 12 1.00 1,072,808
=1.86
P =1,992,243
P
An important part of the Jollibee Group’s growth strategy is the acquisition of new businesses in
the Philippines and abroad. Examples were acquisitions of 85% of Yonghe King in 2004 in PRC
(P
=1,200.0 million), 100% of Red Ribbon in 2005 (P =1,700.0 million), the remaining 20% minority
share in Greenwich in 2007 (P =384.0 million), the remaining 15% share of Yonghe King in 2007
(P
=413.7 million), 100% of Hong Zhuang Yuan restaurant chain in PRC in 2008
*SGVFS034434*
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(P
=2,600.0 million), 70% of Mang Inasal in 2010 (P =2,976.2 million), 100% of Chowking US
operations in 2011 (P
=693.3 million), 48% of WJ Investments Limited in 2012 (P =98.0 million),
40% of SJBF LLC, the parent company of the entities comprising the Smashburger business in
US (P
=4,812.8 million), including transaction costs in 2015, the remaining 30% minority share
each in Mang Inasal (P=2,000.0 million) and HBFPPL (P =514.9 million), acquisition of GSC
(P
=8.6 million) in 2016, the acquisition of additional 10% share in SuperFoods Group
(P
=2,712.7 million) in 2017 and acquisition of remaining 60% share in SJBF LLC
(P
=5,735.8 million) in 2018.
The Jollibee Group plans to continue to make substantial acquisitions in the coming years. The
Jollibee Group uses its cash generated from operations to finance these acquisitions and capital
expenditures. These limit the amount of cash dividends that it can declare and pay, making the
level of the retained earnings higher than the paid-up capital stock.
The unappropriated retained earnings of the Parent Company is also restricted to the extent of
cost of common stock held in treasury amounting to =P180.5 million as well as the undistributed
retained earnings of its subsidiaries which amounted to =
P3,063.9 million, P
=3,525.2 million and
=3,664.8 as at December 31, 2018, 2017 and 2016, respectively.
P
In relation with the SRC Rule 68, as Amended (2011), Annex 68-D, below is the summary of the
Parent Company’s track record of registration of securities.
Number of Initial Number of holders of securities as at
Shares issue/offer December 31
registered price Listing Date 2018 2017
Common shares 75,000,000 =9
P July 14, 1993 3,023 3,042
*SGVFS034434*
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The Jollibee Group has existing Royalty and Service Agreements with independent franchisees for
the latter to operate quick service restaurant outlets under the “Jollibee”, “Chowking”, “Greenwich”,
“Red Ribbon”, “Mang Inasal”, “Yong He King”, “Hong Zhuang Yuan”, “Highlands Coffee”,
“Pho 24” and “Smashburger” concepts and trade names. In consideration thereof, the franchisees
agree to pay set-up fees and monthly royalty fees equivalent to a certain percentage of the
franchisees’ net sales.
The Jollibee Group’s franchisees pay service fees for various services, including repairs and
maintenance services, rendered by the Jollibee Group’s personnel.
Other revenues pertain to delivery fees and other miscellaneous revenues earned by the Jollibee
Group.
2017 2016
2018 (As Restated) (As Restated)
Cost of Sales
Cost of inventories P
=74,995,446 =62,725,504
P =54,475,007
P
Personnel costs:
Salaries, wages and other
employee benefits 14,878,078 11,021,803 10,472,700
Pension expense
(see Note 25) 190,272 168,059 171,515
Rent (see Note 29) 12,151,194 9,719,896 8,234,530
Contracted services 8,847,468 7,305,046 4,875,092
Depreciation and amortization
(see Note 12) 5,366,987 4,307,821 3,542,624
Electricity and other utilities 5,247,450 4,587,166 4,022,779
Supplies 3,150,090 2,570,007 2,155,033
Repairs and maintenance 1,578,608 1,218,581 1,327,943
Security and janitorial 983,306 795,773 638,303
Communication 289,677 227,195 190,811
Professional fees 169,531 57,575 34,972
Representation and entertainment 131,853 39,191 33,181
Others 3,391,257 2,914,523 2,640,998
131,371,217 107,658,140 92,815,488
Cost of Services
Advertising expense (see Note 2) 2,523,492 2,036,535 1,802,072
P
=133,894,709 =109,694,675
P =94,617,560
P
*SGVFS034434*
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*SGVFS034434*
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*SGVFS034434*
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In the normal course of business, the Jollibee Group accrues liabilities based on management’s best
estimate of costs incurred, particularly in cases when the Jollibee Group has not yet received final
billings from suppliers and vendors. There are also ongoing negotiations and reconciliations with
suppliers and vendors on certain liabilities recorded. These balances are continuously reviewed by
management and are adjusted based on these reviews, resulting to write-off of certain liabilities as
other income.
The Jollibee Group’s provision for current income tax consists of the following:
RCIT consists of corporate income taxes from the Jollibee Group’s operations in the Philippines, PRC,
USA and Vietnam.
For the years ended December 31, 2018 and 2017, Grandworth and RRBH wholly-owned
subsidiaries, elected to use OSD in computing for their taxable income. In 2018 and 2017, Zenith
elected to use itemized deduction and OSD, respectively, in computing its taxable income. The net
tax benefit (loss) from the availment of OSD amounted to = P4.7 million and (P
=15.3 million) in 2018
and 2017, respectively.
The components of the Jollibee Group’s recognized net deferred tax assets as at December 31 follow:
2018 2017
Deferred tax assets:
MSOP and ELTIP P
=1,312,022 =1,033,184
P
Accrued expenses of USA-based entities 749,663 497,590
Operating lease payables 663,074 566,066
Excess of MCIT over RCIT 614,580 513,072
NOLCO:
Philippine-based entities 311,331 553,035
PRC-based entities 190,154 250,973
USA-based entities 45,976 7,218
Pension liability and other benefits 504,790 551,921
Accumulated impairment loss in value of
receivables, inventories, property, plant and
equipment and other nonfinancial assets 108,432 105,190
Unrealized foreign exchange loss 85,708 62,395
(Forward)
*SGVFS034434*
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2018 2017
Unaccreted discount on security deposits and
employee car plan receivables P
=36,978 =53,992
P
Unamortized past service costs 15,408 9,689
Others 9,634 15,136
4,647,750 4,219,461
Deferred tax liabilities:
Unrealized foreign exchange gain 93,995 57,342
Excess of fair value over book value of identifiable
assets of acquired businesses 80,243 69,281
State income taxes 49,157 82,383
Prepaid rent 36,953 46,768
Unaccreted discount on employee car plan
receivables and security deposits 25,811 23,172
Deferred rent expense 19,316 13,461
Operating lease receivables 18,087 17,049
Unrealized gain on change in fair value of
financial assets at FVTPL/AFS financial assets 1,192 1,192
324,754 310,648
Deferred tax assets – net P
=4,322,996 =3,908,813
P
The components of the Jollibee Group’s recognized net deferred tax liabilities as at December 31
follow:
2018 2017
Deferred tax assets:
Allowance for impairment loss on receivables and
inventories P
=85,494 =85,041
P
Pension liability and other benefits 57,494 40,905
MSOP and ELTIP 27,639 –
Operating lease payables 16,474 7,142
Unamortized past service costs 3,436 –
Unaccreted discount on security deposits and
employee car plan receivables 3,180 1,790
Unrealized foreign exchange loss 1,377 14
Excess of MCIT over RCIT – 18,359
195,094 153,251
Deferred tax liabilities:
Excess of fair value over book value of identifiable
assets of acquired businesses 3,703,679 1,340,894
Unrealized foreign exchange gain 2,028 14
Unaccreted discount on employee car plan
receivables, security and product security
deposits 1,640 1,338
3,707,347 1,342,246
Deferred tax liabilities – net P
=3,512,253 =1,188,995
P
*SGVFS034434*
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The rollforward analysis of the net deferred tax assets and liabilities of the Jollibee Group follows:
2018 2017
Balance at beginning of year P
=2,719,818 =2,078,918
P
Additions - net assets (liabilities) (1,880,459) 685,089
Income tax effect of other remeasurements
of net defined benefit plan (54,831) (59,440)
Translation adjustments 26,215 15,251
P
=810,743 =2,719,818
P
OSD
The availment of the OSD method also affected the recognition of several deferred tax assets and
liabilities. Deferred tax assets and liabilities, for which the related income and expense are not
considered in determining gross income for income tax purposes, are not recognized. This is because
the manner by which the Jollibee Group expects to recover or settle the underlying assets and
liabilities, for which the deferred tax assets and liabilities were initially recognized, would not result
to any future tax consequence under the OSD method. Meanwhile, deferred tax assets and liabilities,
for which the related income and expense are considered in determining gross income for income tax
purposes, are recognized only to the extent of their future tax consequence under OSD method.
Hence, the tax base of these deferred tax assets and liabilities is reduced by the 40% allowable
deduction provided for under the OSD method.
Accordingly, the Jollibee Group’s deferred tax assets and liabilities, which were not recognized due
to the use of the OSD method, are as follows:
2018 2017
Deferred tax assets:
Allowance for impairment losses on receivables
and nonfinancial assets P
=6,429 =30,421
P
Operating lease payables 3,361 13,429
Unaccredited discount on financial
instruments and others 504 458
Pension liability and other benefits – 23,121
Unamortized past service cost – 139
10,294 67,568
Deferred tax liabilities:
Operating lease receivables 4,963 5,437
Others 359 551
5,322 5,988
Deferred tax assets - net P
=4,972 =61,580
P
*SGVFS034434*
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As at December 31, 2018, NOLCO and excess of MCIT over RCIT of the Philippine-based entities
that can be claimed as deductions from taxable income and income tax due, respectively, are as
follows:
Excess of
Carryforward MCIT over
Year Incurred/Paid Benefit up to NOLCO RCIT
2018 December 31, 2021 =
P– =244,814
P
2017 December 31, 2020 – 190,633
2016 December 31, 2019 1,037,769 179,133
2015 December 31, 2018 895,999 161,665
1,933,768 776,245
Utilized during the year (829,757) –
Write-off during the year (66,242) (161,665)
=
P1,037,769 =614,580
P
The PRC enterprise income tax law provides that income tax rates are unified at 25%. As at
December 31, 2018, NOLCO of the PRC-based entities that can be claimed as deductions from
taxable income are as follows:
As at December 31, 2018, NOLCO of the USA-based entities that can be claimed as deductions from
taxable income are as follows:
Deferred Tax
Year Incurred Tax Losses at 21%
2018 =182,732
P =38,374
P
2017 34,370 7,218
Translation adjustments 1,830 384
=218,932
P =45,976
P
*SGVFS034434*
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The following are the movements in deferred tax assets on NOLCO of the Jollibee Group:
The following are the movements in deferred tax assets on Excess of MCIT over RCIT of the Jollibee
Group:
The reconciliation of provision for income tax computed at the statutory income tax rates to provision
for income tax as shown in the consolidated statements of comprehensive income are as follows:
*SGVFS034434*
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Provision for current income tax of foreign entities operating in United States, PRC and Singapore
amounted to =P41.0 million, =P147.4 million and =P1.2 million, respectively, in 2018, =
P55.1 million,
=
P119.3 million and =P2.3 million , respectively, in 2017, and =
P67.6 million, =P99.7 million and
=
P1.3 million , respectively, in 2016.
For Philippine-based entities, Republic Act (RA) No.10963 or the Tax Reform for Acceleration and
Inclusion Act (TRAIN) was signed into law on December 19, 2017 and took effect on January 1,
2018. Although the TRAIN changes existing tax law and includes several provisions that will
generally affect businesses on a prospective basis, the management assessed that the same did not
have any significant impact on the consolidated financial statement balances as of the reporting date.
For US-based entities, Tax Cuts and Jobs Act (the US Tax Reform) was signed into law on
December 22, 2017, making the new law enacted by that date under Philippine Financial Reporting
Standards (PFRSs) and therefore applicable as of the reporting date. The US Tax Reform resulted in
the re-measurement of deferred tax assets and liabilities as a result of the change in the corporate
income tax rate from 35% to 21%. The US-based entities recognized net deferred tax liabilities
amounting to P
=1,650.9 million and net deferred tax assets amounting to P =452.4 million as at
December 31, 2018 and 2017, respectively.
*SGVFS034434*
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Present Value
of Defined
Benefit Fair Value Pension
Obligation of Plan Assets Liability
At January 1, 2018 =3,574,277
P =2,084,731
P =1,489,546
P
Pension expense (see Notes 21
and 22):
Current service cost 290,935 – 290,935
Net interest 211,958 123,693 88,265
Past service cost 15,851 – 15,851
Settlement loss 3,754 – 3,754
522,498 123,693 398,805
Benefits paid (150,925) (150,925) –
Settlement paid (28,400) (28,400) –
Remeasurements in other
comprehensive income:
Return on plan assets (excluding
amount included in net
interest) – (223,899) 223,899
Actuarial changes arising from
changes in financial
assumptions (485,586) – (485,586)
Actuarial changes due to
experience adjustment 68,003 – 68,003
Actuarial changes due to
demographic adjustment (14,921) – (14,921)
(432,504) (223,899) (208,605)
Contributions – 359,100 (359,100)
At December 31, 2018 =3,484,946
P =2,164,300
P =1,320,646
P
Present Value
of Defined
Benefit Fair Value Pension
Obligation of Plan Assets Liability
At January 1, 2017 =3,378,892
P =1,720,714
P =1,658,178
P
Pension expense (see Notes 21
and 22):
Current service cost 279,419 – 279,419
Net interest 176,704 90,072 86,632
Past service cost (3,211) – (3,211)
452,912 90,072 362,840
Benefits paid (103,553) (103,553) –
(Forward)
*SGVFS034434*
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Present Value
of Defined
Benefit Fair Value Pension
Obligation of Plan Assets Liability
Remeasurements in other
comprehensive income:
Return on plan assets (excluding
amount included in net
interest) =–
P =52,498
P (P
=52,498)
Actuarial changes arising from
changes in financial
assumptions (235,902) – (235,902)
Actuarial changes due to
experience adjustment 81,928 – 81,928
(153,974) 52,498 (206,472)
Contributions – 325,000 (325,000)
At December 31, 2017 =3,574,277
P =2,084,731
P =1,489,546
P
The maximum economic benefit available is a combination of expected refunds from the plan and
reductions in future contributions.
The following table presents the carrying amounts, which approximate the estimated fair values, of
the assets of the plan:
2018 2017
Cash and cash equivalents P
=638,046 =487,772
P
Investments in government and corporate debt
securities 1,043,573 1,123,443
Investments in quoted equity securities:
Holding firms 186,312 203,216
Property 110,603 117,714
Banks 105,906 115,258
Food and beverage 51,292 55,978
Electricity, energy, power and water 26,223 24,976
Telecommunications 25,688 32,531
Others 35,772 42,119
Interest and dividends receivable 15,851 15,478
Fund liabilities (Note 27) (74,966) (133,754)
P
=2,164,300 =2,084,731
P
ƒ Investments in government securities which consist of retail treasury bonds that bear interest
ranging from 3.24%-7.38% and have maturities from August 2020 to October 2037 and fixed-rate
treasury notes that bear interest ranging from 2.13%-11.70% and have maturities from June 2019
to October 2037.
ƒ Investments in debt securities consist of long-term corporate bonds in the property sector, which
bear interest ranging from 5.17%-5.35% maturing from March to May 2024.
ƒ Investments in equity securities consist of investments in listed equity securities, including equity
securities of the Parent Company, for certain retirement plans of the Jollibee Group (see Note 27).
*SGVFS034434*
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ƒ Other financial assets held by the retirement plan are primarily accrued interest income on cash
and cash equivalents, debt instruments and other securities.
Pension expense as well as the present value of the pension liability is determined using actuarial
valuations. The actuarial valuation involves making various assumptions. The principal assumptions
used in determining pension expense and liability for the defined benefit plans are shown below:
The sensitivity analysis below has been determined based on reasonably possible changes of each
significant assumption on the present value of the defined benefit obligation as at the end of the
reporting period, assuming all other assumptions were held constant:
Shown below is the maturity analysis of the undiscounted benefit payments as at December 31:
2018 2017
Less than 1 year P
=797,550 P705,649
=
More than 1 year to 5 years 1,078,936 1,000,883
More than 5 years to 10 years 2,408,837 2,328,122
More than 10 years to 15 years 2,880,848 2,533,937
More than 15 years to 20 years 2,956,666 2,638,048
More than 20 years 10,074,315 8,531,203
The Parent Company and certain Philippine-based subsidiaries do not have a formal asset-liability
matching strategy. The overall investment policy and strategy of the retirement plans is based on the
client suitability assessment, as provided by trustee banks, in compliance with the BSP requirements.
Nevertheless, the Parent Company and certain Philippine-based subsidiaries ensure that there will be
sufficient assets to pay the retirement benefits as they fall due while attempting to mitigate the various
risks of the plans.
The plan assets are primarily exposed to financial risks such as liquidity risk and price risk. Liquidity
risk pertains to the plans’ ability to meet obligation to the employees upon retirement. To effectively
manage liquidity risk, the trustee banks maintain assets in cash and short-term deposits. Price risk
pertains mainly to fluctuation in market prices of the retirement funds’ marketable securities. In order
to effectively manage price risk, the trustee banks continuously assess these risks by closely
monitoring the market value of the securities and implementing prudent investment strategies.
The average duration of the defined benefit obligation is 10 years as at December 31, 2018 and 2017.
*SGVFS034434*
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The Plan is divided into two programs, namely, the Management Stock Option Program (MSOP) and
the Executive Long-term Incentive Program (ELTIP). The MSOP provides a yearly stock option
grant program based on company and individual performance while the ELTIP provides stock
ownership as an incentive to reinforce entrepreneurial and long-term ownership behavior of executive
participants.
MSOP. The MSOP is a yearly stock option grant program open to members of the senior
management committee of the Jollibee Group and members of the management committee, key
talents and designated consultants of some of the business units.
Each MSOP cycle refers to the period commencing on the MSOP grant date and ending on the last
day of the MSOP exercise period. Vesting is conditional on the employment of the employee-
participants in the Jollibee Group within the vesting period. The options will vest at the rate of one-
third of the total options granted on each anniversary of the MSOP grant date until the third
anniversary.
The exercise price of the stock options is determined by the Jollibee Group with reference to
prevailing market prices over the three months immediately preceding the date of grant for the 1st up
to the 7th MSOP cycle. Starting with the 8th MSOP cycle, the exercise price of the option is
determined by the Jollibee Group with reference to the market closing price at date of grant.
The options will vest at the rate of one-third of the total options granted from the start of the grant
date on each anniversary date which will start after a year from the grant date. For instance, under the
1st MSOP cycle, the Compensation Committee of the Jollibee Group granted 2,385,000 options to
eligible participants on July 1, 2004. One-third of the options granted, or 795,000 options, vested and
may be exercised starting July 1, 2005. The exercise period for the 1st MSOP cycle was until
June 30, 2012. From July 1, 2005 to July 3, 2017, the Compensation Committee granted series of
MSOP grants under the 2nd to 14th MSOP cycle to eligible participants. Under the most recent grant
(July 9, 2018), the 15th MSOP cycle, the Compensation Committee granted 3,308,050 options.
These options vest similar to the 1st MSOP cycle.
*SGVFS034434*
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The options under MSOP expire eight years after grant date. The 1st, 2nd, 3rd 4th, 5th, 6th and 7th
MSOP cycles expired on June 30, 2012, 2013, 2014, 2015, 2016, 2017 and 2018, respectively.
The movements in the number of stock options outstanding under MSOP and related weighted
average exercise prices (WAEP) for the years ended December 31, 2018, 2017 and 2016 follow:
2018 2017 2016
Number of Number of Number of
Options WAEP Options WAEP Options WAEP
Total options granted at beginning
of year 47,184,794 P
= 102.59 42,986,294 P92.47
= 40,120,794 P82.22
=
Options granted during the year 3,308,050 245.00 4,198,500 206.20 2,865,500 236.00
Total options granted at end of year 50,492,844 P
= 111.92 47,184,794 =102.59
P 42,986,294 =92.47
P
The weighted average share price of the Parent Company common shares is = P278.16, =
P222.86 and
=227.53 in 2018, 2017 and 2016, respectively. The weighted average remaining contractual life for
P
the stock options outstanding as at December 31, 2018, 2017 and 2016 is 4.48 years,
5.21 years and 5.17 years, respectively.
The weighted average fair value of stock options granted in 2018, 2017 and 2016 is = P58.42,
=29.88, and =
P P31.16, respectively. The fair value of share options as at the date of grant is estimated
using the Black-Scholes Option Pricing Model, taking into account, the terms and conditions upon
which the options were granted. The option style used for this plan is the American style because the
option plan allows exercise before the expiry date.
The inputs in the valuation of the options granted on the dates of grant for each MSOP cycle are
shown below:
The expected life of the stock options is based on historical data and current expectations and is not
necessarily indicative of exercise patterns that may occur. The expected volatility reflects the
assumption that the historical volatility over a period similar to the life of the options is indicative of
future trends, which may also not necessarily be the actual outcome.
*SGVFS034434*
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ELTIP. The ELTIP entitlement is given to members of the senior management committee and
designated consultants of the Jollibee Group.
Each ELTIP cycle refers to the period commencing on the ELTIP entitlement date and ending on the
last day of the ELTIP exercise period. Actual grant and vesting is conditional upon achievement of
the Jollibee Group’s medium to long-term goals and individual targets in a given period, and the
employment of the employee-participants in the Jollibee Group within the vesting period. If the goals
are achieved, the options will be granted. For the 3rd ELTIP cycle, a percentage of the options to be
granted are based on the percentage of growth in annual earnings per share such that 100%, 50% or
25% of the options granted when percentage of growth in annual earnings per share are 12% and
above, 10% to less than 12% or 8% to less than 10%, respectively. For the 4th ELTIP cycle, the
percentage of the options to be granted and the targeted percentage of growth in annual earnings per
share have been further revised such that 150%, 100% or 50% of the options granted when
percentage of growth in annual earnings per share are 15% and above, 12% to less than 15% or 10%
to less than 12%, respectively.
The exercise price of the stock options under ELTIP is determined by the Jollibee Group with
reference to prevailing market prices over the three months immediately preceding the date of
entitlement for the first and second ELTIP cycles. Starting with the 3rd ELTIP cycle, the exercise
price of the option is determined by the Jollibee Group with reference to the closing market price as at
the date of entitlement.
The options will vest at the rate of one-third of the total options granted on each anniversary date
which will start after the goals are achieved. For instance, on July 1, 2004, the Compensation
Committee gave an entitlement of 22,750,000 options under the 1st ELTIP cycle to eligible
participants. One-third of the options granted, or 7,583,333 options, vested and were exercised
starting July 1, 2007 until June 30, 2012. On July 1, 2008, October 19, 2012, August 25, 2015 and
January 3, 2018, entitlement to 20,399,999, 24,350,000, 11,470,000 and 9,290,000 options were
given to eligible participants under the 2nd, 3rd, 4th and 5th ELTIP cycles, respectively. The 1st and
2nd ELTIP cycles expired on June 30, 2012 and April 30, 2017, respectively. The stock options
granted under the 3rd, 4th and 5th ELTIP cycles will expire in 2020, 2023 and 2026, respectively.
The movements in the number of stock options outstanding for the 2nd to 4th ELTIP cycles and
related WAEP for the years ended December 31, 2018, 2017 and 2016 follow:
The weighted average remaining contractual life for the stock options outstanding as at 2018, 2017
and 2016 is 2.07 years, 3.59 years and 4.00 years, respectively.
*SGVFS034434*
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The inputs to the model used for the options granted on the dates of grant for each ELTIP cycle are
shown below:
Expected Stock Price
Dividend Expected Risk-free Life of on Grant Exercise
ELTIP Cycle Year of Grant Yield Volatility Interest Rate the Option Date Price
1st 2004 1.72% 36.91% 6.20% 5 years =24.00
P =20.00
P
2nd 2008 1.80% 26.79% 8.38% 3-4 years 34.00 39.85
3rd 2012 2.00% 28.74% 3.60% 3-4 years 105.00 105.00
4th 2015 2.00% 18.94% 2.98% 3-4 years 180.00 180.00
The expected life of the stock options is based on historical data and current expectations and is not
necessarily indicative of exercise patterns that may occur. The expected volatility reflects the
assumption that the historical volatility over a period similar to the life of the options is indicative of
future trends, which may also not necessarily be the actual outcome.
The cost of the stock options expense charged to operations for both MSOP and ELTIP in the
“General and administrative expenses” account amounted to P =312.0 million, P
=227.5 million and
=241.3 million in 2018, 2017 and 2016, respectively (see Notes 19 and 22). Correspondingly, a
P
credit was made to additional paid-in-capital (see Note 19).
The Jollibee Group has transactions with related parties. Enterprises and individuals that directly, or
indirectly through one or more intermediaries, control or are controlled by, or under common control
with the Jollibee Group, including holding companies, subsidiaries and fellow subsidiaries are related
entities of the Jollibee Group. Individuals owning, directly or indirectly, an interest in the voting
power of the Jollibee Group that give them significant influence over the enterprise; key management
personnel, including directors and officers of the Jollibee Group, and close members of the family of
these individuals and companies associated with these individuals also constitute related parties.
*SGVFS034434*
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2018 2017
Number of shares 144,740 163,150
Potential common shares for stock options under the 13th MSOP cycle were not included in the
calculation of the diluted EPS in 2017 because they are antidilutive. Contingently issuable shares for
stock options under the 4th ELTIP cycle have not been included in the calculation of the diluted EPS
in 2017.
*SGVFS034434*
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The Jollibee Group has various operating lease commitments for quick service restaurant outlets
and offices. The noncancellable periods of the leases range from 3 to 20 years, mostly containing
renewal options. Some of the leases contain escalation clauses. The lease contracts on certain
sales outlets provide for the payment of additional rentals based on certain percentages of sales of
the outlets. Contingent rent expense amounted to P =2,425.8 million, =P2,057.8 million and
=1,703.3 million in 2018, 2017 and 2016, respectively (see Notes 21 and 22).
P
The future minimum lease payments for the noncancellable periods of the operating leases
follow:
The Jollibee Group entered into commercial property leases for its investment property units and
various sublease agreements. Noncancellable periods of the leases range from 3 to 20 years,
mostly containing renewal options. Leases generally include a clause to enable upward revision
of the rent charges on an annual basis based on prevailing market conditions.
The future minimum lease payments for the noncancellable periods of the operating leases,
wherein Jollibee Group is the lessor, follow:
*SGVFS034434*
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c. Contingencies
The Jollibee Group is involved in litigations, claims and disputes which are normal to its
business. Management believes that the ultimate liability, if any, with respect to these litigations,
claims and disputes will not materially affect the financial position and financial performance of
the Jollibee Group. Thus, other than the provisions in Note 17, there were no other provisions
made for contingencies.
The Jollibee Group does not provide further information on these provisions and contingencies in
order not to impair the outcome of the litigations, claims and disputes.
The Jollibee Group is exposed to a variety of financial risks from its operating, investing and
financing activities. The Jollibee Group’s risk management policies focus on actively securing the
Jollibee Group’s short-term to medium-term cash flows by minimizing the exposure to financial
markets.
The Jollibee Group’s principal financial instruments comprise of cash and cash equivalents, short-
term investments, receivables and long-term debts. The main purpose of these financial instruments
is to obtain financing for the Jollibee Group’s operations. The Jollibee Group has other financial
assets and liabilities such as receivable from sale of business, security and other deposits, operating
lease receivables and payables and trade payables and other current liabilities (excluding accrual for
local and other taxes, liabilities to government agencies and unearned revenue from gift certificates)
which arise directly from its operations.
The main risks arising from these financial instruments are interest rate risk, foreign currency risk,
credit risk and liquidity risk. The risk management policies reviewed regularly by the Parent
Company’s BOD and management for managing each of these risks are summarized as follows:
The Jollibee Group’s exposure to interest rate risk relates primarily to long-term debts with floating
interest rates. Floating rate financial instruments are subject to cash flow interest rate risk. The
Jollibee Group’s interest rate exposure management policy centers on reducing the Jollibee Group’s
overall interest expense and exposure to changes in the interest rates.
To manage the interest rate risk related to the Jollibee Group’s long-term debts, the Jollibee Group
used a derivative instrument to fix the interest rate over the term of one of its long-term debts
(see Note 18). With the Jollibee Group's Corporate Planning Team, it enters into loan contracts with
variable interest rates and option to fix interest rates which can be availed to manage its loan risks.
There is minimal exposure on the other sources of the Jollibee Group’s interest rate risk. These other
sources are from the Jollibee Group’s cash in banks, short-term deposits and short-term investments.
*SGVFS034434*
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The following tables demonstrate the sensitivity to a reasonably possible change in interest rates, with
all other variables held constant, of the Jollibee Group’s income before income tax as at
December 31, 2018 and 2017. The impact on the Jollibee Group’s income before income tax is due
to changes in the fair value of floating interest rates.
The assumed movement in basis point for interest rate sensitivity analysis is based on the currently
observable market environment.
The Jollibee Group also has transactional foreign currency exposures. Such exposure arises from the
Jollibee Group’s Philippine operations’ cash and cash equivalents and receivables in foreign
currencies.
The following table shows the Jollibee Group’s Philippine operations’ foreign currency-denominated
monetary assets and liabilities and their peso equivalents as at December 31:
2018 2017
PHP PHP
USD RMB Equivalent USD RMB Equivalent
Foreign currency
denominated assets:
Cash and cash equivalents 71,661 − 3,767,938 441 6 22,105
Receivables 9,014 − 473,955 6,841 − 341,590
*SGVFS034434*
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Peso to
USD RMB
December 31, 2018 52.58 7.68
December 31, 2017 49.93 7.64
The following table demonstrates the sensitivity to a reasonably possible change in USD and RMB to
Philippine peso exchange rate, with all other variables held constant, of the Jollibee Group’s income
before income tax (due to changes in the fair value of monetary assets and liabilities) as at
December 31, 2018 and 2017:
2018 2017
Effect on Effect on
Income Effect on Income Effect on
Appreciation (Depreciation) before Income Equity before before Income Equity before
of P
= against Foreign Currency Tax Income Tax Tax Income Tax
USD 1.50 (P
= 113,619) (P
= 113,619) (P
=9,191) (P
=9,191)
(1.50) 113,619 113,619 9,191 9,191
1.00 (75,746) (75,746) (6,127) (6,127)
(1.00) 75,746 75,746 6,127 6,127
Credit Risk
Credit risk is the risk that a customer or counterparty fails to fulfill its contractual obligations to the
Jollibee Group. This includes risk of non-payment by borrowers, failed settlement of transactions and
default on outstanding contracts.
The Jollibee Group has a strict credit policy. Its credit transactions are with franchisees and
customers that have gone through rigorous screening before granting them the franchise. The credit
terms are very short, while deposits and advance payments are also required before rendering the
services or delivering the goods, thus, mitigating the possibility of non-collection. In cases of non-
collection, defaults of the debtors are not tolerated; the exposure is contained the moment a default
occurs and transactions that will further increase the exposure of the Jollibee Group are discontinued.
The Jollibee Group has no significant concentration of credit risk with counterparty. The Jollibee
Group’s franchisee profile is such that no single franchisee accounts for more than 5% of the total
system wide sales of the Jollibee Group.
*SGVFS034434*
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The aging analysis of financial assets as at December 31, 2018 and 2017 are as follows:
2018
Neither Past
Due nor Past Due but not Impaired (Age in Days)
Total Impaired 1-30 31-60 61-120 Over 120 Impaired
Financial Assets at Amortized Cost (In Millions)
Cash and cash equivalents* P
= 22,805.0 P
= 22,805.0 P
=– P
=– P
=– P
=– P
=–
Short-term investments 883.2 883.2 – – – – –
Receivables:
Trade 4,680.6 2,869.9 267.2 107.6 167.4 591.6 676.9
Employee car plan receivables** 260.3 260.3 – – – – –
Advances to employees 167.4 167.4 – – – – –
Other receivables*** 151.6 93.1 0.7 1.7 2.1 54.0 –
Security and other deposits** 2,713.8 2,713.8
Other noncurrent assets -
Operating lease receivables 31.6 31.6 – – – – –
31,693.5 29,824.3 267.9 109.3 169.5 645.6 676.9
Financial Assets at FVTPL 39.8 39.8 – – – – –
P
= 31,733.3 P
= 29,864.1 P
= 267.9 P
= 109.3 P
= 169.5 P
= 645.6 P
= 676.9
2017
Neither Past
Due nor Past Due but not Impaired (Age in Days)
Total Impaired 1-30 31-60 61-120 Over 120 Impaired
Loans and Receivables (In Millions)
Cash and cash equivalents* P
=20,762.5 P
=20,762.5 =
P– =
P– =
P– =
P– =
P–
Short-term investments 1,413.4 1,413.4 – – – – –
Receivables:
Trade 4,077.5 2,380.2 488.8 150.1 134.7 233.6 690.1
Employee car plan receivables** 275.0 275.0 – – – – –
Advances to employees 144.8 144.8 – – – – –
Other receivables*** 145.2 89.2 0.7 1.6 2.0 51.7 –
Security and other deposits** 2,465.0 2,465.0 – – – – –
Other noncurrent assets:
Operating lease receivables 28.0 28.0 – – – – –
Receivable from sale of business 76.4 76.4 – – – – –
29,387.8 27,634.5 489.5 151.7 136.7 285.3 690.1
AFS Financial Assets 29.9 29.9 – – – – –
=29,417.7
P =27,664.4
P =489.5
P =151.7
P =136.7
P =285.3
P =690.1
P
***Excluding cash on hand amounting to = P 480.9 million and P
=345.0 million in 2018 and 2017, respectively.
***Including noncurrent portion of employee car plan receivables and security and other deposits.
***Including interest receivable and excluding receivables from government agencies amounting to = P 41.6 million and =
P 27.2 million in 2018 and 2017,
respectively.
Credit Risk Exposure. The tables below show the maximum exposure to credit risk of the Jollibee
Group as at December 31, 2018 and 2017 without considering the effects of collaterals and other
credit risk mitigation techniques:
2018
Fair Value and
Financial Effect of
Collateral or
Gross Maximum Credit
Exposure Enhancement Net Exposure
(a) (b) (c) = (a) - (b)
(In Millions)
Financial Assets at Amortized Cost
Cash and cash equivalents* P
=22,805.0 P
=31.6 P
=22,773.4**
Short-term investments 883.2 – 883.2
Receivables:
Trade 4,680.6 216.3 4,464.3***
Employee car plan receivables 260.3 – 260.3
Advances to employees 167.4 – 167.4
Other receivables**** 151.6 – 151.6
(Forward)
*SGVFS034434*
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2018
Fair Value and
Financial Effect of
Collateral or
Gross Maximum Credit
Exposure Enhancement Net Exposure
(a) (b) (c) = (a) - (b)
Other noncurrent assets:
Security and other deposits P
=2,713.8 P
=– P
=2,713.8
Operating lease receivables 31.6 – 31.6
Financial assets at FVTPL 39.8 – 39.8
P
=31,733.3 P
=247.9 P
=31,485.4
2017
Fair Value and
Financial Effect of
Gross Maximum Collateral or Credit
Exposure Enhancement Net Exposure
(a) (b) (c) = (a) - (b)
(In Millions)
Loans and Receivables
Cash and cash equivalents* =20,762.5
P =150.1
P =20,612.4**
P
Short-term investments 1,413.4 – 1,413.4
Receivables:
Trade 4,077.5 42.1 4,035.4***
Employee car plan receivables 275.0 – 275.0
Advances to employees 144.8 – 144.8
Other receivables**** 145.2 – 145.2
Security and other deposits 2,465.0 – 2,465.0
Other noncurrent assets -
Operating lease receivables 28.0 – 28.0
Receivable from sale of business
(including current portion) 76.4 – 76.4
AFS financial asset 29.9 – 29.9
=29,417.7
P =192.2
P =29,225.5
P
* Excluding cash on hand amounting to =
P 480.9 million and =
P 345.0 million in 2018 and 2017, respectively.
**** Gross financial assets after taking into account insurance bank deposits for cash and cash equivalents.
**** Gross financial assets after taking into account payables to the same counterparty.
**** Excluding receivables from government agencies amounting to =
P 41.6 million and =
P 27.2 million in 2018 and 2017, respectively.
With respect to credit risk arising from financial assets of the Jollibee Group, the Jollibee Group’s
exposure to credit risk arises from default of the counterparty, with a gross maximum exposure equal
to the carrying amount of these instruments.
Credit Quality (Applicable as at December 31, 2018). The financial assets of the Jollibee Group are
grouped according to stage whose description is explained as follows:
Stage 1 - Those that are considered current and up to 30 days past due, and based on change in rating,
delinquencies and payment history, do not demonstrate significant increase in credit risk.
Stage 2 - Those that, based on change in rating, delinquencies and payment history, demonstrate
significant increase in credit risk, and/or are considered more than 30 days past due but does not
demonstrate objective evidence of impairment as of reporting date.
Stage 3 - Those that are considered in default or demonstrate objective evidence of impairment as of
reporting date.
*SGVFS034434*
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The table below shows determination of ECL stage of the Jollibee Group’s financial assets:
2018
Stage 1 Stage 2 Stage 3
Total 12-month ECL Lifetime ECL Lifetime ECL
Financial Assets at Amortized Cost (in Millions)
Receivables
Trade P
= 4,680.6 P
= 3,137.1 P
= 866.6 P
= 676.9
Employee car plan receivables* 260.3 260.3 – –
Advances to employees 167.4 167.4 – –
Other receivables** 151.6 93.8 57.8 –
Financial Assets at FVTPL 39.8 39.8 – –
P
= 5,299.7 P
= 3,698.4 P
= 924.4 P
= 676.9
*Including noncurrent portion of employee car plan receivables.
**Including interest receivable and excluding receivables from government agencies amounting to =
P 41.6 million in 2018.
Credit Quality (Applicable as at December 31, 2017). The tables below show the credit quality by
class of financial assets that are neither past due nor impaired, based on the Jollibee Group’s credit
rating system as at December 31, 2017.
2017
Neither Past Due nor Impaired Past Due or
Total A B C Impaired
Loans and Receivables (in Millions)
Receivables
Trade P
=4,077.5 P
=962.7 P
=1,298.9 P
=118.6 P
=1,697.3
Employee car plan receivables* 275.0 275.0 – – –
Advances to employees 144.8 144.8 – – –
Other receivables** 145.2 89.2 – – 56.0
Receivable from sale of business 76.4 76.4 – – –
AFS Financial Asset 29.9 29.9 – – –
P
=4,748.8 P
=1,578.0 P
=1,298.9 P
=118.6 P
=1,753.3
*Including noncurrent portion of employee car plan receivables.
**Including interest receivable and excluding receivables from government agencies amounting to =
P 27.2 million in 2017.
The credit quality of financial assets is managed by the Jollibee Group using internal credit ratings, as
shown below:
A - For counterparty that is not expected by the Jollibee Group to default in settling its
obligations, thus, credit risk exposure is minimal. This counterparty normally includes
financial institutions, certain related parties and customers who pay on or before due
date.
B - For counterparty with tolerable delays (normally from 1 to 30 days) in settling its
obligations to the Jollibee Group. The delays may be due to cut-off differences and/or
clarifications on contracts/billings.
C - For counterparty who consistently defaults in settling its obligations, but with continuing
business transactions with the Jollibee Group, and may be or actually referred to legal
and/or subjected to Cash Before Delivery (CBD) scheme. Under this scheme, the
customer’s credit line is suspended and all subsequent orders are paid in cash before
delivery. The CBD status will only be lifted upon full settlement of the receivables and
approval by management. Thereafter, the regular credit term and normal billing and
collection processes will resume.
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Liquidity Risk
The Jollibee Group’s exposure to liquidity risk refers to the risk that its financial liabilities are not
serviced in a timely manner and that its working capital requirements and planned capital
expenditures are not met. To manage this exposure and to ensure sufficient liquidity levels, the
Jollibee Group closely monitors its cash flows to be able to finance its capital expenditures and to pay
its obligations as and when they fall due.
On a weekly basis, the Jollibee Group’s Cash and Banking Team monitors its collections,
expenditures and any excess/deficiency in the working capital requirements, by preparing cash
position reports that present actual and projected cash flows for the subsequent week. Cash outflows
resulting from major expenditures are planned so that money market placements are available in time
with the planned major expenditure. In addition, the Jollibee Group has short-term cash deposits and
has available credit lines with accredited banking institutions, in case there is a sudden deficiency.
The Jollibee Group maintains a level of cash and cash equivalents deemed sufficient to finance the
operations. No changes were made in the objectives, policies or processes of the Jollibee Group
during the years ended December 31, 2018 and 2017.
The Jollibee Group’s financial assets, which have maturity of less than 12 months and are used to
meet its short-term liquidity needs, are cash and cash equivalents, short-term investments and trade
receivables amounting to P =23,285.9 million, P=883.2 million and =
P4,411.0 million, respectively, as at
December 31, 2018 and P =21,107.5 million, P=1,413.4 million and =P3,534.9 million, respectively, as at
December 31, 2017.
The tables below summarize the maturity profile of the Jollibee Group’s other financial liabilities
based on the contractual undiscounted cash flows as at December 31, 2018 and 2017:
2018
Due and Less than Over
Demandable 1 Year 1 to 5 Years 5 Years Total
(in Millions)
Financial Liabilities
Trade payables and other current liabilities* P
= 7,174.5 P
= 18,808.7 P,
= P,
= P
= 25,983.2
Long-term debt (including current portion) 22.5 4,857.9 19,681.5 1,702.5 26,264.4
Operating lease payables (including current
portion) , 408.4 1,930.8 677.7 3,016.9
Liability for acquisition of a business (including
current portion) , 11.2 2.9 , 14.1
Total Financial Liabilities P
= 7,197.0 P
= 24,086.2 P
= 21,615.2 P
= 2,380.2 P
= 55,278.6
2017
Due and Less than Over
Demandable 1 Year 1 to 5 Years 5 Years Total
(in Millions)
Financial Liabilities
Trade payables and other current liabilities* =6,372.5
P =16,698.8
P =,
P =,
P =23,071.3
P
Long-term debt (including current portion) 73.9 1,801.6 12,897.7 1,344.1 16,117.3
Operating lease payables , 277.7 1,313.0 460.9 2,051.6
Total Financial Liabilities P
=6,446.4 P
=18,778.1 P
=14,210.7 P
=1,805.0 P
=41,240.2
*Excluding statutory obligations such as local and other taxes payable, PHIC, SSS, HDMF and NHMFC payables and unearned revenue from gift certificates amounting to
=
P2,733.6 million and =
P 2,183.3 million as at December 31, 2018 and 2017, respectively.
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The primary objective of the Jollibee Group’s capital management is to ensure that it maintains a
strong credit rating and healthy capital ratios in order to support its business and maximize
shareholder value. The Jollibee Group has sufficient capitalization.
The Jollibee Group generates cash flows from operations sufficient to finance its organic growth. It
declares cash dividends representing at least one-third of its consolidated net income, a ratio that
would still leave some additional cash for future expansion. If needed, the Jollibee Group would
borrow money for acquisitions of new businesses.
As at December 31, 2018 and 2017, the Jollibee Group’s debt ratio and net debt ratio are as follows:
Debt Ratio
2018 2017
Total debt (a) P
=63,933,671 =47,201,916
P
Total equity attributable to equity holders
of the Parent Company 48,363,550 40,782,635
Total debt and equity attributable to equity
holders of the Parent Company (b) P
=112,297,221 =87,984,551
P
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at measurement date.
Financial Instruments Whose Carrying Amounts Approximate Fair Value. Management has
determined that the carrying amounts of cash and cash equivalents, short-term investments,
receivables, operating lease receivables, trade payables and other current liabilities and operating
lease payables, based on their notional amounts, reasonably approximate their fair values because of
their short-term nature or due to the immaterial effect of discounting when the present value of future
cash flows from these instruments are calculated.
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Financial Assets at FVTPL/AFS Financial Assets. The fair value of investments in quoted shares of
stock is based on quoted prices. The Jollibee Group does not have the intention to dispose these
financial assets in the near term.
Investment Properties. The fair value of the investment properties are determined by independent
appraisers using the market data and cost approach, which considers the local market conditions, the
extent, character and utility of the property, sales and holding prices of similar parcels of land and the
highest and best use of the investment properties.
Security and Other Deposits, Employee Car Plan Receivables, Long-term Debt and Derivative Asset
or Liability. Management has determined that the estimated fair value of security and other deposits,
noncurrent portion of employee car plan receivables, long-term debt and derivative assets or liability
are based on the discounted value of future cash flows using applicable rates as follows:
2018 2017
Security and other deposits 2.36%,8.20% 2.44%,5.71%
Employee car plan receivables 2.51%,8.23% 2.50%,4.92%
Derivative assets 2.50%,2.83% 2.08%,4.09%
Long-term debt 2.50%,4.07% 2.56%,4.92%
Derivative liability – 0.95%,1.05%
The following tables provide the fair value measurement hierarchy of the Jollibee Group’s recurring
financial assets and liabilities.
Quantitative disclosure fair value measurement hierarchy for assets as at December 31, 2018:
Quantitative fair value measurement hierarchy for assets as at December 31, 2017:
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Quantitative fair value measurement hierarchy for liabilities as at December 31, 2018:
Fair Value Measurement Using
Quoted Prices Significant Significant
in Active Observable Unobservable
Markets Inputs Inputs
Date of Valuation Total (Level 1) (Level 2) (Level 3)
Liabilities disclosed at fair value:
Tenants’ deposit December 31, 2018 P
= 5,907 P,
= P
= 5,907 P,
=
Long-term debt December 31, 2018 16,421,331 , 16,421,331 ,
Quantitative disclosure fair value measurement hierarchy for liabilities as at December 31, 2017:
Fair Value Measurement Using
Quoted Prices Significant Significant
in Active Observable Unobservable
Markets Inputs Inputs
Date of Valuation Total (Level 1) (Level 2) (Level 3)
Liabilities measured at fair value:
Derivative liability - put/call rights December 31, 2017 =51,042
P =,
P =51,042
P =,
P
Liabilities disclosed at fair value:
Product security deposit December 31, 2017 221,973 , 221,973 ,
Tenants' deposit December 31, 2017 8,339 , 8,339 ,
Long-term debt December 31, 2017 15,749,921 , 15,749,921 ,
There were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into
and out of Level 3 fair value measurements during the year.
Description of significant unobservable input to the measurement of the derivative liability – put/call
rights as at December 31, 2017 is as follows:
32. Reclassification
The current portion of security and other deposits and operating lease payables taken up as other
noncurrent assets and noncurrent operating lease payables, respectively, in the 2017 statement of
financial position and supporting note disclosures have been reclassified to other current assets and
current portion of operating lease payables, respectively, to conform with the presentation used in the
statement of financial position in 2018.
The reclassification did not affect the total assets, total liabilities and total equity in the statement of
financial position as at December 31, 2017 and the net income and total comprehensive income in the
statement of comprehensive income in 2017.
The effects of the reclassification in the 2017 statement of financial position are as follows:
As Previously
Account Reported Reclassification As Reclassified
Other current assets =3,843,555
P =187,904
P =4,031,459
P
Other noncurrent assets 3,698,422 (187,904) 3,510,518
Current portion of operating
lease payables – 252,235 252,235
Operating lease payables -
net of current portion 2,051,567 (252,235) 1,799,332
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In 2018 and 2017, movements in the Jollibee Group’s liabilities and equity arising from financing activities follow:
2018
Share in
cumulative
Share in net translation
losses of adjustments of
Granted stock Amortization Non- Non-
Dividends Acquisition of options to Deferred Interest of debt Cumulative controlling controlling
January 1, declared a subsidiary employees and tax assets expense issue cost translation interest interest December 31,
2018 Cash flows (Note 19) (Note 11) subsidiaries (Note 24) (Note 23) (Note 18) adjustments (Note 11) (Note 11) 2018
(in Millions)
Dividends payable (Note 16) P
= 56.0 (P
= 2,667.0) P
= 2,691.8 =
P– =
P– =
P– =
P– =
P– =
P– =
P– =
P– P
= 80.8
Long-term debt (Note 18) 16,117.3 5,601.7 – 4,119.3 – – – 14.9 411.2 – – 26,264.4
Interest payable (Note 16) 83.1 (731.7) – – – – 888.2 – – – – 239.6
Capital stock (Note 19) 1,101.7 3.5 – – – – – – – – – 1,105.2
Additional paid-in capital
(Note 19) 7,520.4 472.0 – – 312.0 334.1 – – – – – 8,638.5
Non-controlling interest
(Note 11) 1,799.3 11.4 – 263.3 – – – – – (555.5) 36.1 1,554.6
Total liabilities and equity
on financing activities P
= 26,677.8 P
= 2,689.9 P
= 2,691.8 P
= 4,382.6 P
= 312.0 P
= 334.1 P
= 888.2 P
= 14.9 P
= 411.2 (P
= 555.5) P
= 36.1 P
= 37,883.1
2017
Share in
Share in Net cumulative
Losses translation
Granted stock Amortization of Non- adjustments of
Dividends options to Deferred Interest of debt Acquisition controlling Non-controlling
January 1, declared employees tax assets expense issue cost Foreign exchange of a subsidiary interest interest December 31,
2017 Cash Flows (Note 19) and Subsidiaries (Note 24) (Note 23) (Note 18) loss (Note 11) (Note 11) (Note 11) 2017
(in Millions)
Dividends payable (Note 16) P
=47.7 (P
= 2,347.2) P
=2,355.5 =
P– =
P– =
P– =
P– =
P– =
P– =
P– =
P– P
=56.0
Long-term debt (Note 18) 12,155.4 3,909.7 – – – – 3.2 49.0 – – – 16,117.3
Interest payable (Note 16) 51.4 (360.9) – – – 392.6 – – – – – 83.1
Capital stock (Note 19) 1,091.3 10.4 – – – – – – – – – 1,101.7
Additional paid-in capital
(Note 19) 5,660.1 850.8 – 227.5 782.0 – – – – – – 7,520.4
Non-controlling interest
(Note 11) 679.2 14.5 – – – – – – 1,536.4 (436.5) 5.7 1,799.3
Total liabilities and equity
on financing activities P
=19,685.1 P
=2,077.3 P
=2,355.5 P
=227.5 P
=782.0 P
=392.6 P
=3.2 P
=49.0 P
=1,536.4 (P
= 436.5) P
=5.7 P
=26,677.8
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Dividend Declaration
On April 8, 2019, the BOD of the Parent Company approved a cash dividend of = P1.23 per share of
common stock to all stockholders of record as at April 26, 2019. Consequently, the cash dividend is
expected to be paid out on May 9, 2019. The cash dividend is 7.9% higher than the =P1.14 cash
dividend per share declared on April 6, 2018.
*SGVFS034434*