SWIFT GLOBAL MARKETING CORPORATION

Quezon City

NOTES TO FINANCIAL STATEMENTS

December 31, 2020
(With Comparative Figures for 2019)
(Amounts in Philippine Peso)

1. CORPORATE INFORMATION

Swift Global Marketing Corporation (the “Company”) was incorporated in the

Philippines and registered with the Securities and Exchange Commission (SEC) on
August 20, 2018 with registration number CS201817721. The primary purpose for which
the Company was organized is to participate in private and/or public biddings; engage in,
conduct, and/or carry on the business of buying, and selling, distributing, marketing, at
wholesale and retail, insofar as it may be permitted by law, all kinds of goods,
commodities, wares, and merchandise of every kind and/or description; to enter into all
kinds of contracts for export, import, purchase, acquisition, sale at wholesale or retail, and
other disposition for its own account as principal or in its representative capacity, as
manufacturer representative, for trucks, heavy equipment, special purpose vehicles,
merchandise broker, inventor, commission merchants factor or agents, upon consignment
of all kinds of goods, wares, merchandise or products whether natural or artificial; and
doing of any and all other business and entering into contract incidental or connected
thereto, and perfecting of any and all set things necessary, proper or convenient for and
incidental to that furtherance and/or implementation of the purposes therein mentioned.
Provided the corporation shall not solicit, accept or take investment/placement from the
public, neither shall it issue investment contracts.

The Company’s principal office is located at 1197 EDSA Katipunan, Quezon City, Second
District, NCR, Philippines.

Approval of the Financial Statements

The financial statements of the Company for the year December 31, 2020 (including the
comparatives for the year ended December 31, 2019) were authorized for issue by the
Board of Directors on April 15, 2021.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies applied in the preparation of these financial statements
are summarized below. These policies have been consistently applied to all the years
presented, unless otherwise stated.

Basis of Preparation of Financial Statements

a. Statement of Compliance with Philippine Financial Reporting Standard for Small Entities

The financial statements of the Company have been prepared in accordance with
Philippine Financial Reporting Standard for Small Entities (PFRS for SEs).
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b. Functional and Presentation Currency

These financial statements are presented in Philippine peso rounded to the nearest
whole number, the Company’s functional and presentation currency, and all values
represent absolute amounts except when otherwise indicated.

Financial Instruments

A financial instrument is any contract that gives rise to both a financial asset of one entity
and a financial liability or equity instrument of another entity. A financial instrument is
recognized when the entity becomes party to its contractual provisions. The Company
classifies its financial instruments into the following categories: (a) basic financial
instruments; and (b) complex financial instruments.

The Company’s basic financial instruments consist of cash in bank, trade and other
receivables, trade and other payables, and related party transactions. The Company does
not have any complex financial instruments.

Derecognition of Financial Assets

An entity only derecognizes a financial asset when the contractual rights to the cash flows
from the financial asset expire or are settled, or the entity has transferred to another party
substantially all of the risks and rewards of ownership of the financial asset.

Derecognition of Financial Liabilities

Financial liabilities are derecognized only when these are extinguished - that is, when the
obligation is discharged, cancelled or has expired.

Cash

Cash includes cash on hand and in banks held to meet short-term cash commitment rather
than for investment or other purposes.

Trade and other Receivables

Trade and other receivables are recognized initially at the transaction price. These are
subsequently measured at amortized cost using the effective interest method, less
accumulated allowance for impairment. An allowance for impairment of Trade and other
receivables is established when there is objective evidence that the Company will not be
able to collect all amounts due according to the original terms of the receivables. The
related impairment loss is recognized immediately in profit or loss.

Inventories

Inventories are stated at the lower of cost and estimated selling price less costs to complete
and sell. Cost of inventories includes all costs of purchase, costs of conversion and other
costs incurred to bring the inventories to their present location and condition. Cost is
calculated using the first-in, first-out method.

At each reporting date, inventories are assessed for impairment, i.e., the carrying amount
is not fully recoverable due to damage, obsolescence or declining selling.
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Prepayments

Prepayments include tax credits and other prepaid expenses of the Company.
Prepayments are carried at transaction cost.

Trade and other payables

Trade and other payables are recognized initially at the transaction price and subsequently
measured at amortized cost using the effective interest method.

Trade and other payables are derecognized from the statement of financial position only
when the obligations are extinguished either through discharge, cancellation or expiration.

Provisions and Contingencies

Provisions are recognized when the Company has a present legal or constructive
obligation as a result of past events; it is probable that a transfer of economic benefits will
be required to settle the obligation; and the amount can be reliably estimated.

Provisions are measured at the present value of the amount expected to be required to
settle the obligation using a pre-tax rate that reflects current market assessments of the
time value of money and the risks specific to the obligation. The increase in the provision
due to passage of time is recognized as interest expense.

In those cases where the possible outflow of economic resource as a result of present
obligations is considered improbable or remote, or the amount to be provided for cannot
be measured reliably, no liability is recognized in the financial statements. Similarly,
possible inflows of economic benefits to the Company that do not yet meet the recognition
criteria of an asset are considered contingent assets, hence, are not recognized in the
financial statements. On the other hand, any reimbursement that the Company can be
virtually certain to collect from a third party with respect to the obligation is recognized as
a separate asset not exceeding the amount of the related provision.

Related Party Transactions and Relationship

Related party transactions are transfers of resources, services or obligations between the
Company and its related parties, regardless whether a price is charged.

Parties are considered to be related if one party has the ability to control the other party or
exercise significant influence over the other party in making financial and operating
decisions. These parties include: (a) individuals owning, directly or indirectly through one
or more intermediaries, control or are controlled by, or under common control with the
Company; (b) associates; and, (c) individuals owning, directly or indirectly, an interest in
the voting power of the Company that gives them significant influence over the Company
and close members of the family of any such individual.

In considering each possible related party relationship, attention is directed to the substance
of the relationship and not merely on the legal form.
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Revenue and Expense Recognition

Revenue comprises revenue from sale of goods and rendering of service measured by
reference to the fair value of consideration received or receivable by the Company for
goods sold and services rendered, excluding rebates and trade discounts.

Revenue is recognized to the extent that the revenue can be reliably measured; it is
probable that the economic benefits will flow to the Company; and the costs incurred or to
be incurred can be measured reliably. In addition, the following specific recognition
criteria must also be met before revenue is recognized:

Sale of goods – Revenue is recognized when the risks and rewards of ownership of the
goods have passed to the buyer, i.e., generally when the customer has acknowledged
delivery of goods.

Employee Benefits

Wages, salaries, bonuses and social security contributions are recognized as an expense in
the year in which the associated services are rendered by employees. Short term
accumulating compensated absences such as paid annual leave are recognized when
services are rendered by employees that increase their entitlement to future compensated
absences. Short term non-accumulating compensated absences such as sick leave are
recognized when the absences occur.

Income Taxes

Income tax expense represents the sum of the current tax and deferred tax. The current
tax is based on taxable profit for the year and measured using the tax rates and laws that
have been enacted or substantively enacted by the reporting date.

Deferred tax is recognized on differences between the carrying amounts of assets and
liabilities in the financial statements and their corresponding tax bases (known as
temporary differences). Deferred tax liabilities are recognized for all temporary
differences that are expected to increase taxable profit in the future. Deferred tax assets
are recognized for all temporary differences that are expected to reduce taxable profit in
the future, and any unused tax losses or unused tax credits. Deferred tax assets are
measured at the highest amount that, on the basis of current or estimated future taxable
profit, is more likely than not to be recovered.

The net carrying amount of deferred tax assets is reviewed at each reporting date and is
adjusted to reflect the current assessment of future taxable profits. Any adjustments are
recognized in the profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the taxable profit
(tax loss) of the periods in which it expects the deferred tax asset to be realized or the
deferred tax liability to be settled, on the basis of tax rates that have been enacted or
substantively enacted by the end of the reporting period.

The Company establishes liabilities for probable and estimable assessments by Bureau of
Internal Revenue (BIR) resulting from any known tax exposures. Estimates represent a
reasonable provision for taxes ultimately expected to be paid and may need to be adjusted
over time as more information becomes available.
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Equity

Capital stock represents the nominal value of shares that have been issued.

Capital deficiency represent all current and prior period results of operations as reported
in the Statement of income.

Events after the End of the Reporting Period

The Senate approved on third and final reading Senate Bill 1357 on November 26, 2020,
otherwise known as the Corporate Recovery and Tax Incentives for Enterprises (CREATE)
bill, which seeks to reduce the corporate income tax rate and rationalize the current fiscal
incentives.

On September 2019, the House of Representatives passed their counterpart measure on

third and final reading which was approved by the Senate on November 2020. Bicameral
conference will be held to reconcile disagreeing provisions on the two versions of the bill.

The Bicameral Conference Committee only approved the reconciled version of the
CREATE on February 4, 2021 and now only needs the signature of the President for it to
become a law. Finally, on March 26, 2021 CREATE was signed by the President with nine
vetoed provisions.

The following are the key changes to the Philippine tax law pursuant to the CREATE Act
which have an impact on the Company:

• Effective July 1, 2020, regular corporate income tax (RCIT) rate is reduced from
30% to 25% for domestic and resident foreign corporations. For domestic
corporations with net taxable income not exceeding Php5 million and with total
assets not exceeding Php100 million (excluding land on which the business
entity’s office, plant and equipment are situated) during the taxable year, the
RCIT rate is reduced to 20%.

• Minimum corporate income tax (MCIT) rate reduced from 2% to 1% of gross

income effective July 1, 2020 to June 30, 2023.

In this regard, the enactment of the CREATE shows significant effect on the financial
statements in the year 2020.

3. SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES

The Company’s financial statements prepared in accordance with PFRS for SEs requires
management to make judgments and estimates that affect amounts reported in the
financial statements and related notes. Judgments and estimates are continually evaluated
and are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under circumstances. Actual results may
ultimately differ for these estimates.

In the process of applying the Company’s accounting policies, management has made the
following judgments, apart from those involving estimation, which have the most
significant effect on the amounts recognized in the financial statements. Judgment is
exercised by management to distinguish between provisions and contingencies are
discussed in Note 2.

4. CASH
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The Company’s cash pertains to cash in bank which amounted to P224,653 and P60,268 in
2020 and 2019, respectively.

Cash in banks generally earn interest at rates based on daily bank deposit rates in 2020 the
interest income amounted to P17.

5. TRADE AND OTHER RECEIVABLES

The Company’s trade and other receivables in 2020 are broken down as follows:

Trade P 4,779,464
Advances 35,032
Others 969

P 4,815,465

Advances pertain to budget request of employees used for the daily operations. This
account is subject to liquidation.

6. INVENTORIES

The Company’s inventories pertain to machineries for sale which amounted to P3,498,310
in 2020. This items form part of Cost of sales presented in Note 9.

7. PREPAYMENTS

This consists of the following:

Input value-added tax (VAT) P 400,677

Creditable withholding tax 82,589

P 483,266

8. TRADE AND OTHER PAYABLES

The Company’s trade and other payables are broken down as follows:

2020 2019

Trade P 7,188,980 P -
SSS, Philhealth and HDMF contributions 18,588 14,031
Others 103,593 -

P 7,311,161 P 14,031

Others pertain to expenses incurred by the employees during the daily operations which
are submitted for liquidation but were not reimbursed as of the end of the year.
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9. COST OF SALES

This consists of the following:

Beginning inventory P -
Purchases 10,426,309
Cost of goods available for sale 10,426,309
Ending inventory (see Note 6) 3,498,310

P 6,927,999

10. OTHER OPERATING EXPENSES

The Company’s other operating expenses are as follows:

2020 2019

Salaries and allowances P 819,937 P 187,692

SSS, Philhealth and HDMF contributions 78,999 23,828
Taxes and licenses 48,708 96,591
Transportation and travel 36,405 -
Office supplies 30,982 -
Representation and entertainment 18,508 -
Fines and penalties 5,125 32,469
Professional fees 5,000 -
Insurance 2,271 -
Repairs and maintenance 179 -
Miscellaneous 107,740 -

P 1,153,854 P 340,580

These accounts are presented in the Statement of income as follows:

2020 2019

Administrative P 952,599 P 211,520

Selling 32,561 -
General 168,694 129,060

P 1,153,854 P 340,580

11. TAXES

The Company recognized deferred tax asset on the NOLCO amounted to P39,692. The
details of the Company’s NOLCO and its availment period is presented below:

Year Valid
Incurred Amount Applied Expired Unapplied Until

2019 P 313,404 P 181,096 - 132,308 2022

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On the fourth taxable year, immediately following the year in which it commenced its
business operations, the Company will be subjected to the minimum corporate income tax
(MCIT) which is 1% of the Company’s gross income, as defined under the tax regulations
and the CREATE Act, and will be paid at the end of the year whenever the regular
corporate income tax is lower than the MCIT. Any MCIT paid can be applied against the
regular corporate income tax within the next three years after the year it was paid.

In 2020, the Company claims itemized deduction for tax purposes.

12. RELATED PARTY TRANSACTIONS

Parties are considered to be related if one party has the ability, directly or indirectly, to
control the other party or exercise significant influence over the other party in making
financial and operating decisions. Parties are also considered to be related if they are
subject to common control (i.e., affiliates) or common significant influence. Related parties
may be individuals or corporate entities. Transactions between related parties are based
on terms similar to those offered to nonrelated parties.

The summary of the Company’s significant transactions with its related parties as of the
period is as follows:

2020 2019
Amount of Outstanding Amount of Outstanding
Transactions Balance Transactions Balance

Stockholders
Advances to (P 1,488,183 ) P - P 1,488,183 P 1,488,183

These advances are unsecured, non-interest-bearing and with no specific repayment

terms.

13. COMMITMENTS AND CONTINGENCIES

There are commitments and contingent liabilities that arise in the normal course of the
Company’s operation that are not reflected in the accompanying financial statements.
Management is of the opinion that losses, if any, from these events and conditions will not
have material effects on the Company’s financial statements.

14. CAPITAL

The Company is authorized to issue P30,000,000 divided into 300,000 shares of stocks at
P100 par value. Total amount of subscribed shares as of December 31, 2020 amounts to
P7,500,000, of which the paid up capital amounted to P1,875,000.

As of December 31, 2020, the Company has five stockholders owning 100 or more shares
each of the Company’s common stock.
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15. SUPPLEMENTARY INFORMATION REQUIRED BY THE BUREAU OF INTERNAL
REVENUE

Presented below is the supplementary information which is required by the Bureau of

Internal Revenue (BIR) under its existing revenue regulations to be disclosed as part of the
notes to financial statements. This supplementary information is not a required disclosure
under PFRS for SEs.

Requirements under Revenue Regulations (RR) 15-2010

The information on taxes, duties and license fees paid or accrued during the taxable year
required under RR 15-2010 are as follows:

a. Output Value-added Tax (VAT)

The Company declared output VAT amounting to P991,071 related to taxable income
from sale of goods to the following:

Taxable sales P 3,750,000

Sales to government 4,508,929

P 8,258,929

b. Input VAT

The movements in input VAT in 2020 are summarized below.

Balance at beginning of year P -

Domestic purchase of goods 209,773
Domestic purchase of services 14,022
Importation of goods 1,043,706
VAT withheld on sales to government 225,446
Input VAT closed to expense ( 101,199)
Applied against output VAT ( 991,071)

Balance at end of year P 400,677

c. Tax on Importation

The Company does not have any transactions which are subject to importation taxes.

d. Excise Tax

The Company does not have any transactions which are subject to excise tax.

e. Documentary Stamp Tax

The Company does not have any transactions which are subject to documentary stamp
tax.
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f. Taxes and Licenses

The Company paid the following taxes and licenses during the year.

Business permit P 18,597

Warehouse permit 16,420
LTO accreditation 6,010
Barangay business clearance 2,000
Fire safety inspection fee 1,901
Community tax certificate 1,050
Import permit 1,010
Annual registration 500
Others 1,220

P 48,708

g. Withholding Tax

The Company does not have any transactions which are subject to withholding tax.

h. Deficiency Tax Assessment and Tax Case

The Company does not have any deficiency tax assessment with the BIR or tax case
outstanding or pending in courts or bodies outside the BIR in any of the open years.

Requirements under RR 19-2011

RR 19-2011 requires schedules of taxable revenues and other non-operating income, costs
of sales and services, and itemized deductions, to be disclosed in the notes to financial
statements.

The amounts of taxable revenues and income, and deductible costs and expenses
presented below are based on relevant tax regulations issued by the BIR, hence, may not
be the same as the amounts reflected in the 2020 statement of income.

a)Taxable Sales

The Company’s taxable revenue for the year 2020 amounted to P8,258,929.

b)Deductible Cost of Sales

The Company’ cost of sales for the year 2020 amounted to P6,927,999.

c)Taxable Non-operating and Other Income

The Company’s does not have any taxable non-operating and other income.
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d) Itemized Deductions

The amounts of itemized deductions for the year ended December 31, 2020 are as
follows:

Salaries and allowances P 819,937

Taxes and licenses 48,708
SSS, Philhealth and HDMF contributions 78,999
Transportation and travel 36,405
Office supplies 30,982
Representation and entertainment 18,508
Professional fees 5,000
Insurance 2,271
Bank charges 980
Repairs and maintenance 179
Fines and penalties 125
Miscellaneous 107,740

P 1,149,834