I.

Introduction

Globe Telecom, Inc. is predominantly involved in information technology (IT) and the
telecommunications industry, providing wireless and fixed-line communication services under
the networks of Globe Prepaid, Globe Postpaid, and Touch Mobile (TM). The entity has been
known through its upscale strategies and technological advances locally and internationally; thus,
it has provided 86.8 million subscribers and is supported by over 8,200 employees and over a
million retailers, distributors, and business partners nationwide. As a leading digital platform in
the Philippines, Globe Telecom Inc. continues to serve the technological needs of its consumers
and businesses across various products and services that include mobile broadband, data
connectivity, and the Internet.

On its 2021 annual report, the company experienced yet another challenging year as it
started with COVID-19 nearly disrupting every aspect of businesses and people's lives. By the
end of the year, with greater public safety and improved health awareness, public mobility
significantly improved the employment rate and increased consumer and business spending.
Telecommunication became an essential service to the people as grew aggressively as businesses
pivoted to the digital space this year.

The shareholders of Globe Telecom Inc. appointed the accounting firm of Isla Lipana &
Co. (IL) as its independent auditor in pursuit of preserving its proper reporting processes and the
integrity of its financial statements. This paper aims to critically review and evaluate the
accuracy of the disclosures and presentation of reports in line with the topics discussed in
ACYFAR 2, particularly Debt Investments, Inventories, Property, Plant and Equipment (PPE),
Borrowing Costs, Government Grants, Depreciation, Revaluation and Impairment, and Wasting
Assets and Depletion.

I. Debt Investments

Under IFRS 9, Financial Instruments guide financial assets and liabilities' recognition,
measurement, and derecognition. Globe Telecom Incorporation initially recognizes debt
investments and financial assets at their fair value. Directly attributable or transaction costs are
capitalized for assets measured at amortized cost or fair value through other comprehensive
income. They adopted the effective interest method to measure its financial assets at amortized
cost. Financial instruments, including investments in equity and debt securities, loans and
receivables, and derivatives, are subject to impairment if their carrying value exceeds their
recoverable amount, which is the present value of estimated future cash flows.
Debt Investments are, essentially, an entity owning another company's liabilities,
commonly through the form of bonds. Debt investments have fixed payments, usually with
interest included. When comparing debt investments with equity investments, debt investments
tend to be less risky despite offering a lower return on investment.

In its Consolidated Statements of Total Comprehensive Income, the company discloses

its value of P 378,610 for fair value through other comprehensive income under the category
Item that will not be reclassified into profit or loss in subsequent periods. In addition, debt
instruments recognize fair value changes among fair value through profit or loss and fair value
through other comprehensive income. Among the required disclosures for PFRS 9 is the
impairment of financial assets, Globe Telecom Inc.

II. Inventories

It's important to note that under PAS 2 Inventories, the lower cost and net realizable
value (LCNRV) method should be applied to measure inventories. This means the inventories
should be recorded at their cost or net realizable value, whichever is lower.

Globe Telecom Inc.'s use of the moving average method in determining its inventory
value is a commonly used inventory costing method. The company's assessment of its costs
quarterly and revision when necessary is also in line with PAS 2, which requires entities to
review their inventories regularly and adjust the carrying value if necessary to reflect any
changes in cost or net realizable value. In addition, the company's determination of the NRV of
novelty items as the difference between the approximated selling price and the predicted costs
necessary to close a deal is also consistent with the requirements of PAS 2. Overall, the use of
specific methods and processes by Globe Telecom Inc. in treating inventories and their
adherence to the provisions of PAS 2 ensures that the company's inventories are appropriately
accounted for and presented in its financial statements.

Globe Telecom Incorporation's carrying amount of its inventories was ₱4,045,049 in

2021, which is disclosed in its Consolidated Statements of Financial Position. As such, Note 9
Inventories and Supplies-net shows the breakdown of this account, which consists of multiple
accounts. The entity recognizes in 2021 accounts of: "Handsets, devices, and accessories"
amounting to P1,756,056, "Broadband Devices" amounting to P 562,109, "Modem and
accessories" amounting to P 438, 391, "SIM cards and SIM packs" amounting to P 136,070, and
"Call cards and others" amounting to P 50,388.

The financial worth of inventories may decline due to damage, obsolescence, fluctuations
in price, or physical deterioration. This discloses in Note 9, amounting to P 502,627 under the
account name "Inventory obsolescence In comparison." it has been included in the computations
for Note 27 Impairment and other losses. As such, the cost of inventories sold has been reported
under the notes to financial statements amounting to P 18,072,557.

Globe Telecom Inc. was transparent about its methods, procedures, and accounting
policies it adopted to measure the net realizable value and obsolescence of its asset account.
Moreover, the company complied with the specifications of PAS 2 Inventories, given that it
accounted for the carrying value in designations appropriated and the total carrying amount of
inventories to the entity, the value of inventories recognized as expense during the period, as
well as the amount of any write-down of inventories recognized as an expense in the period.

III. Property, Plant, and Equipment

Property, plant, and equipment (PPE) refer to tangible assets used to produce goods for
administrative purposes or rental purposes, excluding land and buildings. These are considered
noncurrent assets because they are used over an extended time, typically beyond one year or
accounting period. Most PPE items are reported on the balance sheet at their carrying amount,
which is the asset's cost less accumulated depreciation and impairment loss.

The initial Cost of PPE typically includes the cost or purchase price of the asset, import duties,
non-refundable government taxes, and any other costs directly attributable to bringing the asset
to its intended use. These costs are capitalized and added to the asset's cost when they are
traceable to the asset's acquisition or construction. In addition to the initial cost, any asset
retirement obligation (ARO) related to the asset and interest incurred during the construction
period are also considered part of the asset's cost and are capitalized. However, the land is
generally reported at cost less any impairment loss since it has an indefinite useful life and is not
subject to depreciation.

The management of Globe Telecom Inc. adopted the cost model based on the method that
downward adjustments or impairment losses are accounted for in the valuation of the accounts
exhibited in its financial statements. Presented on its Consolidated Statements of Financial
Position, under Noncurrent Assets, the line item "Property, plant and equipment-net" amounted
to ₱270,747,147 in 2021 and ₱190,292,393 in 2020, signifying an increase of ₱80,454,754. It
should be noted that no property, plant, and equipment for the years ended December 31, 2021,
and 2020 have been pledged as collateral or security. Accordingly, the company periodically
reviews the impairment of its nonfinancial assets, particularly property, plant and equipment, and
right-of-use assets. This is automatically recorded when impairment indicators such as store
closures, pre-termination of lease agreements, and temporary shutdowns are prevalent. In light of
this, the management disclosed the impairment losses obtained from property, plant, and
equipment at ₱1,185,512,000 in 2020, significantly increasing from ₱399,212,000 in 2019. The
heightened restrictions may cause this rise due to the pandemic and the subsequent stoppage of
business activities.

Since property, plant, and equipment may increase future economic benefits or their
value may decline over the years, the Globe Group calculates depreciation and amortization
using a straight-line basis. This is subject to the assets' estimated useful lives, which are reviewed
regularly and updated if new estimates are anticipated due to physical wear and tear,
obsolescence, and limitations in the handling of the assets. The accounts' estimated useful lives
vary from purchase to purchase; still, these estimates are collectively assessed and consistent
with the production and operations of a company. Globe Telecom Inc. has estimated the useful
life of Telecommunications equipment: Tower for 20 years, Switch for 7-10 years, Outside plant,
cell site structures, and improvements to be 10-20 years, Distribution Drop Wires and wire assets
for 2-10 years, cellular equipment for 3-10 years. They also estimated the valuable lives of
Buildings for 20-25 years, Cable systems for 5-20 years, Office equipment for 3-7 years, and
Transportation equipment for 3-5 years.

Under PAS 16, changes in the residual value of an asset, depreciation and amortization
procedures, and useful lives are evaluated annually and adjusted if necessary. This ensures that
an asset's carrying amount reflects its actual economic value. For assets under construction,
depreciation is only applied once they are ready for use and available for their intended purpose.
This is because an asset can only generate economic benefits once completed and ready for use.
Fully depreciated assets continue to be presented in the financial statements until they are retired,
sold, or disposed of. This is to provide stakeholders with a complete and accurate picture of the
entity's assets and historical Costs.

Under the Notes to Financial Statements, the entity had disclosed P 1,014.19 million of
impairment loss on telecommunications equipment due to the damage done by Super Typhoon
Odette. Note 11 Property, Plant, and Equipment- net showed that the company has established a
roll-forward analysis on its items under the PPE account. On the same note, the account's
itemization is displayed as its components' net book value is calculated by subtracting
accumulated depreciation, amortization, and impairment losses from their individual cost.
Telecommunications Equipment holds the most significant value with ₱149,091,209, which can
be attributed to the company's main operations to improve its business. The "Assets under
construction" amounted to ₱63,252,782, and "Building, Land, and Leasehold Improvements"
totaled ₱46,855,941. These values are reasonable and anticipated given the nature of the
operations of Globe Telecom Inc as a telecommunications service provider.
 As mentioned above, the entity has conformed to the requirements of PAS 16 and
disclosed relevant information in its consolidated financial statements. It affirmed the basis for
measuring the carrying amounts of its items under property, plant, and equipment. The
depreciation method adopted, the calculation of impairment losses, and estimating the assets'
useful lives were accurately presented.

IV. Borrowing Costs

The Globe Group defined the terms and specifications of borrowing costs in agreement
with the stipulations provided in PAS 23 Borrowing Costs. It stated that borrowing costs are
capitalized if they are directly attributable to the qualifying asset. Capitalization commences
when the activities for the asset's intended use are in progress, and expenditures are being
incurred. Generally, borrowing costs are other costs and interests linked to borrowing and
appropriating funds. The effective interest method is employed to compute the related interest
expense.

The Globe Group capitalized uses its borrowed funds for self-constructed properties and
equipment, whereas the borrowing costs were included in the Property, Plant, and Equipment
computation. Borrowing costs coincide with assets that commonly consume a significant amount
of time to prepare for their intended purpose or sale, qualifying assets. These may include
investment properties, inventories, facilities, manufacturing plants, and intangible assets. Under
Note 11 Property, Plant and Equipment-net, the entity has reported which amounted to
₱1,640.44 million using a capitalization rate of 4.12% for the year ended December 31, 2021.

In agreement with the standard, entities ought to present both the amount of capitalized
borrowing costs and the capitalization rate applicable to determine the value of borrowing costs
qualified to be capitalized. Accordingly, the management needed to disclose its borrowing costs
in full compliance with the conditions of PAS 23 Borrowing Costs.

V. Government Grants
 As defined in PAS 20 Accounting for Government Grants and Disclosure of Government
Assistance, government grants are provided by the administration to support business activities
through the transfer of resources with conditions concerning the operations of the entity. The
attached conditions may vary for each company, as grants may be given as a reward for past
compliance or in exchange for future obligations. Moreover, entities may receive condonation,
financial assistance, or non-monetary donations that are not in the form of loans or guarantees.
Subsequently, grants are expected to be used as a fund for projects that would benefit the
community and generate revenue to increase economic activity. These are eventually reported on
a systemic basis in profit or loss while the entity simultaneously recognizes the expense related
to the conditions over the periods. However, although grants do not carry costs, repayment of the
grant may be enforced when the entity fails to fulfill its obligations in return for receiving the
assistance.

Furthermore, the standard highlights government assistance, an initiative for qualifying

entities under specific criteria to be provided with economic benefits. Generally, aid and grants
are given to small businesses that lack funding. The consolidated financial statements of Globe
Telecom Incorporation did not recognize any form of government grant or government
assistance as of December 31, 2021. On that account, no records are reflected in the Globe
Group's financial statements, and the provisions of PAS 20 should have been taken into account
in accomplishing its report.

VI. Depreciation

As mentioned in the discussion of the Globe Group's Property, Plant, and Equipment
above, the summary of accounting policies of the entity stated that the straight-line method is
employed to calculate the depreciation of the asset. Under PAS 16 (Philippine Accounting
Standards 16), Property, Plant, and Equipment, the depreciable cost of assets is allocated
systematically over their useful lives. The useful life of an asset refers to the period over which it
is expected to be used by the entity.
 In addition, entities should consider the potential impact of any changes to the estimated
useful lives of their assets. This can vary for each asset and depends on its expected usage, wear
and tear, and technological obsolescence. If the estimated useful life is reduced, this may result
in increased depreciation expenses and a decrease in the carrying value of the assets. On the
other hand, if the estimated useful life is extended, this may result in decreased depreciation
expenses and an increase in the carrying value of the assets. It is important to properly consider
the impact of these changes on the entity's financial statements and to disclose any significant
changes to stakeholders.

The company's telecommunication equipment, plant, buildings, outside plants, cell site
structures and improvement, cable systems, cellular equipment, office equipment, and
transportation equipment are depreciated, and their amortization is concurrently recorded. These
assets are subject to wear and tear, technical obsolescence, commercial obsolescence, and legal
limitations; hence, the depreciation methods apply. With that being said, on its consolidated
financial statements, the entity reports the depreciation of its assets along with their amortization
using the one line item entitled "Depreciation and amortization." With this, the company
disclosed depreciation expenses included in Note 25 Depreciation and Amortization totaling
₱41,932,112. This consists of the depreciation and amortization of Investment Properties,
Intangible Assets, Right of Use Assets, and Property and equipment.

In its consolidated statements of cash flows, the adjustment for depreciation and
amortization amounted to ₱41,932,112 in 2021 and ₱35,412,038 in 2020, which demonstrates an
increase of ₱1,073,341,000 for the year ended December 31, 2021. Additionally, the
accumulated depreciation and amortization for all items related to PPE disclosed in Note 11
Property, Plant, and Equipment-net totaled ₱314,539,687 for December 31, 2021. This includes
depreciation and amortization of ₱32,321,056 and loss on retirements and disposals of ₱577,119.

VII. Revaluation and Impairment

Conforming to PAS 36 Impairment of Assets, objective evidence must be present to

signify whether a financial asset is impaired. These include declines in market value, increases in
 interest rates, modifications in the market or economic conditions, and other indicators related to
a debtor, such as experiencing difficulties in settling payments and having a high probability of
entering a state of bankruptcy. Essentially, these indicators are listed in the standard; still, the
professional judgment of the management on the significance of these factors is critical. That
said, Globe Telecom Inc. evaluates whether its financial assets or receivables are impaired after
each reporting period. Moreover, for goodwill, the company adopts a procedure where
impairment is annually tested at the end of every year, and additional evaluations are conducted
when circumstances direct that the asset is impaired.

The standard states that when the asset's carrying amount exceeds its recoverable amount,
no impairment loss is recognized, and the appropriate reversals are reported in profit or loss.
Furthermore, the recoverable amount is estimated if indications indicate that previous
impairment losses have declined or become nonexistent. This is the higher value between fair
value, less selling costs, and value-in-use. The management assesses nonfinancial assets for
impairment at every reporting date. However, for investment properties, property, plant and
equipment, and right-of-use assets, reviews and evaluations are conducted only when measurable
and evident signs of impairment are displayed, such as the termination of lease agreements and
the closure of non-performing stores driven by the adverse impacts of the COVID-19 pandemic.

The Notes to Financial Statements, especially Note 27 Impairment and Other losses,
reported a total amount of P 5,566,939, which includes impairment losses for trade receivables
for P 3,544,995, property and equipment for P 1,155,691, contract assets for 346,967, and other
assets for P 32,461. On the other hand, the reversal of provision for impairment on inventories
amounted to ₱502,627 and ₱15,802 for other probable losses-net.

VIII. Wasting Assets and Depletion

PFRS 6 (Philippine Financial Reporting Standards 6) guides the accounting treatment for
exploring and evaluating mineral resources. Under PFRS 6, exploration and evaluation costs are
capitalized as intangible assets if certain criteria are met, such as the presence of a mineral
resource, the intention to explore and evaluate the resource, and the technical and commercial
feasibility of extracting the resource. These costs are then subject to impairment testing to ensure
they are not carried at a value higher than their recoverable amount. Once the mineral resource is
proven and the decision is made to proceed with extraction, the capitalized exploration and
evaluation costs are reclassified as part of the cost of the mineral property. The cost of the
mineral property is then depleted over the life of the property using either the straight-line or
output method, depending on the nature of the asset and the process that best reflects the
depletion pattern. Wasting assets, such as mineral resources, have a finite life and are expected to
be depleted over time.
Therefore, given that Globe Telecom Inc. does not engage in activities involving the extraction
of natural resources, disclosures on wasting assets and the related accounts were not reflected in
the company's consolidated financial statements as of December 31, 2021.

IX. Conclusion

By analyzing the consolidated financial statements of Globe Telecom Inc., the company
could disclose its finances and affirm its condition as an entity while integrating the established
accounting standards and policies into its processes. It has shown its policies and requirements
regarding compliance with standards relating to Investment Property, Noncurrent held for sale,
Agriculture, Current Liabilities, Long-term liabilities, and Lease Receivables. The company
continues recognizing useful information and evaluating its assets and liabilities properly,
considering that the policies and required disclosures from the given standards are met.

Globe Telecom Inc has appropriately measured its financial statements' corresponding
balances and accounts. Furthermore, numerous accounts have dramatically increased from this
critique paper, likely due to COVID-19. The entity's accurate and timely financial statements
have benefited its stakeholders through employee benefits and excellent customer service. It
takes importance to its corporate governance, which holds significance for the company's
reputation nationwide and internationally.

X. Reference
 Globe Telecom Inc. (2021). 2021 Globe integrated report.

https://www.globe.com.ph/content/dam/globe/brie/AboutUs/sustainability/integrated-

report/Globe-2021-Integrated-Report.pdf