ZOODAOZA REZCA

NOTES TO FINANCIAL STATEMENTS

1. General Information

Zoodaoza Rezca herein referred to as “the Company” was established in Cagayan de Oro City with
Business Permit No. 2018-01000.

The Company is engaged in food production and food service for immediate consumption
specifically serving the famous Mexican food known as taco.

The company started operating on June 14, 2018 in Lunch Central located at 2nd floor of RJJS
Building II, Pabayo St., Cagayan de Oro City, Misamis Oriental.

2. Basis of Preparation and Accounting Policies

Basis of Preparation
The accompanying financial statements have been prepared on a historical basis and are presented
in Philippine Peso (P
=), the Company’s functional currency. All values are rounded to the nearest
Philippine Peso, unless otherwise indicated.

Statement of Compliance
These financial statements have been prepared in accordance with Philippine Financial Reporting
Standard for Small and Medium-sized Entities (PFRS for SMEs) issued by the International
Accounting Standards Board and adopted by the Philippine Financial Reporting Standards Council
on October 13, 2009. In accordance with authoritative guidelines, the Company qualifies for
adopting PFRS for SMEs under the following criteria:

(a) Its total assets and total liabilities do not exceed the quantitative high threshold of = P
350 million and = P 250 million, each for total assets and total liabilities, respectively.
(b) It is not required to file financial statements under SRC Rule 68.1;
(c) It is not in the process of filing financial statements for the purpose of issuing any class
of instruments in a public market;
(d) It is not a holder of secondary licenses issued by any regulatory agency, and
(e) It is not a public utility entity.

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

Cash
Cash includes cash on hand and cash in bank.

Property and Equipment

Items of property and equipment are measured at cost less accumulated depreciation and any
accumulated losses.

Depreciation is charged so as to allocate the cost of assets less their residual values over their
estimated useful lives, using straight–line method.

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 Capital
This pertains to the monetary and non-monetary investments of the owner and earnings retained
all throughout the Company’s operations.

Drawings, if any, are deducted against the owner’s capital.

Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
Company and the revenue can be reliably measured. Revenue is measured at the fair value of the
consideration received.

Cost and Expenses

Costs and expenses are decreases in economic benefits during the accounting period in the form
of outflows or decrease of assets or incurrence of liabilities that result in decreases of equity. Costs
and expenses are recognized when incurred.

Events after the End of the Reporting Date

Events after the end of the reporting date that provide additional information about the Company’s
financial position at the end of the reporting date (adjusting events) are reflected in the financial
statements.

3. Significant Accounting Judgment, Estimates and Assumptions

The preparation of the Company’s financial statements requires management to make judgments,
estimates and assumptions that affect the reported amounts of income, expenses, assets and
liabilities, and the accompanying disclosures. Uncertainty about these assumptions and estimates
could result in outcomes that require a material adjustment to the carrying amount of assets or
liabilities in future periods.

Judgment
The judgment made by management in the process of applying the Company’s accounting policies,
apart from those involving estimation, that have the most significant effect on the amounts
recognized in the financial statements is discussed below:

Determining Functional Currency. Based on the economic substance of the underlying

circumstances relevant to the Company, the functional currency of the Company has been
determined to be the Philippine Peso, the currency that mainly influences the underlying
transactions, events and conditions relevant to the Company.

Estimates and Assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the
balance sheet date that have a significant risk of causing material adjustments to the carrying
amounts of assets and liabilities within the next financial years are discussed below:

Estimating Useful Lives of Property and Equipment. The Company estimates the useful lives of
property and equipment based on the economic lives of property and equipment. The estimated
useful lives of property and equipment are reviewed periodically and updated if expectations differ
materially from previous estimates due to physical wear and tear, technical or commercial
obsolescence and legal or other limits on the use of the property and equipment. However, it is
possible that future results or operations could be materially affected by changes in the estimates
brought about by changes in factors mentioned above.

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 A reduction in the estimated useful lives of the property and equipment would increase the
recorded depreciation expense and decrease the related asset accounts. The amounts and timing
of recording of expenses for any period would be affected by changes in these factors and
circumstances.

As at February 28, 2019, the carrying value of property and equipment amounted to
=
P 1,250 (see Note 5).

Estimating Impairment of Nonfinancial Assets. PFRS for SME requires that assessments for
impairment should be done at each reporting date whether there is an indication that the other
current assets and property and equipment may be impaired. Determining the value in use of the
aforementioned nonfinancial 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
Company to make estimates and assumptions that can materially affect the Company’s financial
statements. Future events could cause the Company to conclude that the said nonfinancial assets
are impaired. Any resulting impairment loss could have a material adverse impact on the Company’s
financial position and results of operations. The preparation of the estimated future cash flows
involves significant accounting judgments and estimates. While the Company believes that the
assumptions are appropriate and reasonable, significant changes in the assumptions may materially
affect the assessment of recoverable values and may lead to future impairment charges.

As at February 28, 2019, based on the assessment of the Company, there is no indication of
impairment of the Company’s nonfinancial assets. The carrying value of the Company’s nonfinancial
assets amounted to =P 1,250 (see Note 5).

4. Cash

This account pertains to the following:

As of February 28, 2019

Cash on hand =
P 6,895
Cash in bank 100
=
P 6,995

Cash in bank does not earn interest.

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5. Property and Equipment

This account pertains to the following:

Equipment
Cost
June 14, =
P 2,000
Additions -
February 28, 2,000

Accumulated depreciation
June 14, -
Additions 750
February 28, 750

Net =
P 1,250

Total charges to this account represent cost of equipment used in the Company’s daily operation.
The cost comprises the fair value of the equipment at inception of the Company.

Depreciation expense amounted to =

P 750 for the nine months ended February 28, 2019.

6. Owner’s Equity

This account pertains to the following:

As of February 28, 2019

Initial cash investment =
P 15,085
Equipment 2,000
17,085
Net Loss (8,840)
=
P 8,245

The Company estimated that the fair value of the equipment invested at inception amounts to
=
P 2,000.

7. Cost and Expenses

For the nine months ended

February 28, 2019
Rent expense =
P 11,000
Pre-operating expense 3,485
Marketing expense 1,529
Depreciation expense (Note 5) 750
Miscellaneous expense 4,442
=
P 20,456

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 Pre-operating expenses
Pre-operating expenses are start-up costs incurred by the Company to carry out their business.
This includes permits and other processing fees to acquire the license to operate a business.

Rent expense
Rent expense pertains to the space rental where the Company occupies and operates.

Marketing expense
Marketing expense pertains to the costs incurred for the promotion and advertisement of the
Company’s product.

Miscellaneous expense
Miscellaneous expense pertains to supplies used, transportation and other expenses incurred in
the Company’s day to day operation.

8. Events after the End of the Reporting Date

There were no events after the end of the reporting date that would require disclosures or
adjustments on the financial statements of the Company.