Report of Independent Auditors
10. FINANCIAL ASSETS
10.1 Financial Assets at FVTPL
The types of investments classified under Financial Assets at FVTPL as of May 31 are shown below.
2021 2020 2019
Equity securities P 898,992,320 P 431,633,214 P 445,378,506
UITF 706,515,461 456,883,944 392,036,006
P 1,605,507,781 P 888,517,158 P 837,414,512
The breakdown of Financial Assets at FVTPL as to currency denomination is as follows:
2021 2020 2019
Local P 958,144,678 P 499,767,405 P 447,066,961 Foreign 647,363,103 388,749,753 390,347,551
P 1,605,507,781 P 888,517,158 P 837,414,512
An analysis of the movements in the carrying amounts of the Group’s investments is presented below:
2021 2020 2019
Balance at beginning of year P 888,517,158 P 837,414,512 P 1,036,396,859 Additions 3,737,884,125 1,267,039,964 1,690,108,239 Disposals ( 3,088,266,602) ( 1,130,883,011) ( 1,925,191,984 ) Fair value gains – net 85,961,962 ( 77,384,209) 38,473,202 Foreign currency losses – net ( 18,588,862) ( 7,670,098) ( 2,371,804 ) Balance at end of year P 1,605,507,781 P 888,517,158 P 837,414,512
Investment income or losses from FVTPL financial assets, which includes dividend income, gain or loss on disposal and realized fair value gains or losses, totaling
P113.7 million, P94.7 million and P13.6 million for the years ended May 31, 2021, 2020 and 2019, respectively, has been reinvested as part of additions to financial assets at FVTPL and is presented separately as Other investment income from financial assets at FVTPL under Finance Income in 2021 and 2019 and Other investment loss on financial assets at FVTPL under Finance Cost in 2020 in the consolidated statement of profit or loss (see Note 20).
The related outstanding interest is presented as part of Accrued interest under the Trade and Other Receivables account in the consolidated statements of financial position (see Note 9).
10.2 Financial Assets at FVOCI
As of May 31, the Group’s financial assets at FVOCI are classified in the consolidated statements of financial position as follows:
2021 2020 2019
Current P 231,920,855 P 329,290,221 P 277,750,721 Non-current 1,179,709,098 387,166,693 428,946,151
P 1,411,629,953 P 716,456,914 P 706,696,872
The types of investments classified under Financial Assets at FVOCI as of May 31 are shown below.
2021 2020 2019
Debt securities:
Government P 994,863,274 P 285,289,832 P 242,080,283
Corporate 244,877,152 256,715,678 295,514,702
1,239,740,426 542,005,510 537,594,985
Equity securities:
Corporate shares 170,389,527 170,819,604 166,271,887 Golf club shares 1,500,000 3,631,800 2,830,000
UITF - - -
171,889,527 174,451,404 169,101,887
P 1,411,629,953 P 716,456,914 P 706,696,872
Government securities bear annual interest rates ranging from 1.1% to 12.1% in 2021, 2.9% to 12.1% in 2020 and 3.4% to 12.1% in 2019. Corporate bonds bear interest rates ranging from 2.1% to 5.5% in 2021, 3.2% to 5.5% in 2020, and 3.3% to 7.0% in 2019.
These securities were not used as collaterals for any borrowings of the Group.
The breakdown of quoted financial assets at FVOCI as to currency denomination is as follows:
2021 2020 2019
Local P 1,363,039,103 P 644,093,972 P 593,416,086
Foreign 48,590,850 72,362,942 113,280,786
P 1,411,629,953 P 716,456,914 P 706,696,872
In 2019, certain financial assets at FVOCI were reclassified as part of Investment Securities at Amortized Cost (see Note 10.3).
Analyses of the movements in the carrying amounts of the Group’s financial assets at FVOCI are presented below.
2021 2020 2019
Balance at beginning of year P 716,456,914 P 706,696,872 P 800,667,386 Additions 978,136,132 239,304,955 2,741,291,123 Disposals ( 299,828,786 ) ( 257,527,621 ) ( 2,842,111,934 ) Fair value gains – net 22,861,582 31,831,992 3,957,638 Unrealized foreign exchange
gains (losses) – net ( 5,995,889 ) ( 3,849,284) 2,892,659 Balance at end of year P 1,411,629,953 P 716,456,914 P 706,696,872 Investment income from Financial assets at FVOCI, which includes dividend income, gain or loss on disposal, and realized fair value gains or losses, totaling P42.0 million, P38.5 million, and P35.2 million for the years ended May 31, 2021, 2020 and 2019, respectively, have been reinvested as part of additions to financial assets at FVOCI and are presented separately as Interest income from financial assets at FVOCI and as Other investment income from financial assets at FVOCI under Finance Income in the
consolidated statements of profit or loss (see Note 20.1). The related outstanding interest is presented as part of Accrued interest under the Trade and Other Receivables account in the consolidated statements of financial position (see Note 9).
The total fair value gains and losses from equity securities amounted to P5.6 million, P0.9 million and (P15.5 million) for the years ended May 31, 2021, 2020 and 2019 respectively, which are presented as an item that will not be reclassified subsequently to profit or loss, in the consolidated statements of comprehensive income. Total fair value losses amounting to P6.7 million and P1.8 million in 2021 and 2020, and total fair value gains amounting to P14.8 million in 2019, from debt securities are presented as an item that will be reclassified to profit or loss in the consolidated statements of comprehensive income.
10.3 Investment Securities at Amortized Cost
As of May 31, 2021, 2020 and 2019, the Group’s investment securities at amortized cost are classified in the consolidated statements of financial position as follows:
2021 2020 2019
Current P 83,206,231 P 227,576,146 P 263,808,437
Non-current 501,560,477 303,042,121 523,684,713
P 584,766,708 P 530,618,267 P 787,493,150
These investments are composed of investment in government and corporate bonds denominated in Philippine pesos and US dollars which bear fixed interest rates ranging from 2.0% to 7.8% per annum. These debt securities have maturities ranging from one to 10 years.
The breakdown of investment securities at amortized cost as to currency denomination is as follows:
2021 2020 2019
Local P 512,818,415 P 425,995,015 P 491,159,855
Foreign 72,094,555 105,152,008 296,837,889
584,912,970 531,147,023 787,997,744
Allowance for ECL ( 146,262) ( 528,756) ( 504,594)
P 584,766,708 P 530,618,267 P 787,493,150
Portion of the investments were foreign currency denominated bonds which all matured in 2020 but prior to maturity were previously subject to cross-currency swap agreement.
As of May 31, 2019, these investments had carrying and fair values of P185.6 million.
The underlying derivative of these cross-currency swaps had fair value amounting to P36.7 million and is presented as Derivative Liability in the 2019 consolidated statements of financial position.
An analysis of the movements in the carrying amount of the Group’s investment securities at amortized cost for the years ended May 31, 2021, 2020, and 2019 is presented below.
2021 2020 2019 Balance at beginning
of year P 531,147,023 P 787,997,744 P 765,942,441
Additions 306,662,439 41,769,449 130,119,203
Maturities ( 248,095,439) ( 287,357,470) ( 102,167,384 ) Amortization of
premium (discount) – net 824,913 ( 3,271,655) ( 3,460,815 ) Unrealized foreign currency
losses – net ( 5,625,966) ( 7,991,045) ( 2,435,701 )
584,912,970 531,147,023 787,997,744
Expected credit losses ( 146,262) ( 528,756) ( 504,594 ) Balance at end of year P 584,766,708 P 530,618,267 P 787,493,150
A reconciliation of the allowance for impairment loss on investment securities at amortized cost at the beginning and end of May 31, 2021 is presented below:
2021 2020 2019
Balance at beginning of year P 528,756 P 504,594 P 454,456 Reversal of allowance ( 476,173) - -
Impairment loss during the year 93,679 24,162 50,138
Balance at end of year P 146,262 P 528,756 P 504,494 Net amortization of discount during the years ended May 31, 2021, 2020 and 2019, amounting to P0.1 million, P0.5 million and P3.3 million, respectively, is offset against Interest income from investment securities at amortized cost (see Note 20.1).