Reflection Paper #1 K44B

ACCCOB2 PORTFOLIO
Reflection Paper presented

to the Accountancy Department
In Partial Fulfillment
of the course requirement
in ACCCOB2
Toribio, Hannah Jane

Timbol, Elijah
K44B
I. Introduction
Manila Electric Company is the largest private electric distribution company in the
industry covering about 30 cities and around 70 municipalities. It has been publicly listed in the
Philippine Stock Exchange on January 8, 1992. The shareholders of MERALCO group has
appointed SGV CO. as its independent auditor in pursuit of proper reporting and assessment of
compliance with the standards. This paper aims to review its 2022 financial reports in relation to
what was discussed in ACCCOB2: Presentation of Financial Statements, Cash and Cash
Equivalents, and Receivables.
II. Presentation of Financial Statements
Accounting standards are set with the objective of ensuring that the consolidated
financial statements are complete, comparable, and consistent to facilitate the accurate
decision-making of investors and creditors with the data presented. Policies, standards, and
concepts are manifested in the International Financial Reporting Standards (IFRS), and the
Conceptual Framework. With this, as a publicly listed company and an entity under the
Philippine Securities and Exchange Commission (SEC), it is the responsibility of Manila Electric
Company to adhere to the Philippine Reporting Standards (PFRS) adopted from IFRS.
Manila Electric Company reported consolidated statements of financial position in 2021

and 2022, consolidated statements of total comprehensive income for the years ended 2020,
2021, and 2022, consolidated statements of changes in equity for the years ended 2020, 2021,
and 2022, and consolidated statements of cash flows for the years ended 2020, 2021, and
2022. Evidently, the company has conformed to the IAS 1 policy, which obliged entities to
incorporate the values of the preceding years for comparative purposes. The entity managed to
consistently showcased its summary of accounting policies and disclosures that is in the notes
to financial statements.
III. Cash and Cash Equivalents

Cash and cash equivalents recognized as part of current assets, are typically shown on
the first line of the statement of financial position. They are highly liquid assets that can be
readily converted into cash without significant risk of loss in value and with a short maturity
period. The value of cash and cash equivalents usually signifies the liquidity of a company’s
financial performance. Cash and cash equivalents are measured at their face value however,
accounts in a foreign currency shall be translated into the Philippine currency (Peso) following
the prevailing rate of exchange for the date reported in the statement presented. With this, it is
evident that this account may evaluate a company’s performance and assess its strategies in
managing its assets.
Manila Electric Company has reported an amount of P 55,832 (in millions) for the year
ended December 31, 2022, which increased by P 825 (in millions) from the previous year, 2021,
of P 55,007 (in millions). The increase resulted in its cash equivalents shown on its notes to
financial statements (Note 12). Cash on hand and in the bank decreased by P 3,690 (in millions)
from 2021 which amounts to P 20,888 (in millions) while its cash equivalents amounted to P
38,634 (in millions) which increased by P 4,515 (in millions) compared to its previous year,
2021, of P 34,119 (in millions). The entity has also mentioned in Note 12 that the interest
income earned on cash in banks amounted to P 765 million during the year 2022 which
increased by P 250 million compared to the previous year. Moreover, in its cash flow statement,
the value of operating activities showed a positive amount of P 25,182 however, the amount in
investing and financing decreased the value by P 24,354 which resultesd on a small amount
increase in cash and cash equivalents compared to the previous year.
IV. Receivables
Receivables refer to the amount of money owed to a company by its customers for its
services and goods sold rendered on credit. Accounts receivable are considered assets in the
entity’s statement of financial position since they constitute the right to receive future
payments. They are classified as current assets if they are to be collected within one year and
long-term assets if the collection period extends beyond twelve (12) months.
MERALCO Group has reported an amount of P 54,683 (in millions) for the year 2022
under Trade and Other Receivables where it increased by P 9,670 (in millions) from the previous
year 2021. To comply with the disclosure principle, the account is discussed under Note 13
“Trade and Other Receivables” of the financial statement. As shown in the note, more than 85%
consists of trade receivables where 80% is attributed to electricity sold to customers, having a
total balance of P 52,472 (in millions), while nontrade receivables have a total of P 6,208 (in
millions) and unbilled receivables amounts to P 3,118 (in millions) during 2022. In comparison
to the previous year, 2021, the trade receivables were amounted to P 44,165 (in millions)
indicating an increase on the current period. There is also a similar effect to its unbilled
receivables that increased by P 471 (in millions) and its nontrade receivables that increased by P
2,083 (in millions) from the previous year.
Allowance for expected credit losses (bad debts) reflects the estimated value on
potential credit losses that an entity expects to incur on its financial assets. This is established
to account for nonpayments of borrowers or customers and to ensure that the financial
statements are accurate and prudent on its assessments of credit risks. The allowance for
expected credit losses reported an amount of P 7,115 (in millions) which increased by P 1,191
(in millions) from 2021. This resulted from the continued extension of disconnection activities
and installment payments from customers due to the economic downturn made by COVID-19.
Furthermore, managing receivables are essential in the management of the company’s cash
flow. Entities must consistently track and monitor their receivables to ensure timely collection of
payments and minimize the risk of bad debts. On that note, a turnover for accounts receivable
measure the company’s ability to collect its receivables from its customers. With a net credit
sales of P 61,797 and a average account receivable of P 77,189.5, the AR turnover amounted to
0.8 which indicates that high proportion of quality customers who pay their debts quickly.
V. Appendix (Financial Statements)

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ACCCOB2 PORTFOLIO

Reflection Paper presented

Toribio, Hannah Jane

II. Presentation of Financial Statements

Manila Electric Company reported consolidated statements of financial position in 2021

III. Cash and Cash Equivalents

V. Appendix (Financial Statements)

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