DISCLOSURES IN THE AUDITED FINANCIAL STATEMENTS OF SM
INVESTMENTS CORPORATION (2021) DURING COVID-19
Basis of Preparation and Statement of Compliance, Page 24
The consolidated financial statements of the Parent Company and its subsidiaries (the
Group) are prepared on a historical cost basis, except for derivative financial instruments
and financial assets at fair value through other comprehensive income (FVOCI) which are
measured at fair value. The consolidated financial statements are presented in Philippine
Peso, which is the Parent Company’s functional and presentation currency under
Philippine Financial Reporting Standards (PFRSs). All values are rounded to the nearest
thousand Peso except when otherwise indicated.
The accompanying consolidated financial statements have been prepared under the
going concern assumption. The Group believes that its businesses would remain relevant
despite challenges posed by the COVID-19 pandemic. Despite the adverse impact of the
COVID-19 pandemic on short-term business results, long-term prospects remain
attractive.
Changes in Accounting Policies and Disclosures, pg. 42
Amendment to PFRS 16, COVID-19-related Rent Concessions beyond June 30, 2021
The amendment provides relief to lessees from applying the PFRS 16 requirement on
lease modifications to rent concessions arising as a direct consequence of the COVID19 pandemic. A lessee may elect not to assess whether a rent concession from a lessor
is a lease modification if it meets all of the following criteria:
•
•
•
•
The rent concession is a direct consequence of COVID-19;
The change in lease payments results in a revised lease consideration that is
substantially the same as, or less than, the lease consideration immediately
preceding the change;
Any reduction in lease payments affects only payments originally due on or before
June 30, 2022; and
There is no substantive change to other terms and conditions of the lease.
A lessee that applies this practical expedient will account for any change in the lease
payments resulting from the COVID-19 related rent concession in the same way it would
account for a change that is not a lease modification, i.e., as a variable lease payment.
The amendment is effective for annual reporting periods beginning on or after April 1,
2021, with earlier application permitted.
The Group adopted the amendments beginning January 1, 2021. For the year ended
December 31, 2021, and 2020, the Group waived rentals and other charges amounting
to ₱17,118.1 million and ₱18,779.9 million, respectively, in addition to deferral of rental
payments. These concessions significantly reduced rental income. These rental waivers
and deferrals are not accounted as a lease modification under PFRS 16 since COVID-19
is a force majeure under the general law.
Throughout the government-imposed community quarantine, the Group waived rentals
and offered deferral of payments to certain tenants.
Significant Accounting Judgments, Estimates and Assumptions - Lease
Modification - as Lessor, Page 46
Throughout the government-imposed community quarantine, the Group waived
rentals and offered deferral of payments to certain tenants. Such rental waivers and
deferrals are not accounted as a lease modification under PFRS 16 since COVID-19 is a
force majeure under the general law.
Investments in Associate Companies and Joint Ventures, Page 57
The Group regularly tests for impairment of its investments comparing the
expected cash flows against the carrying values. In 2020, the Group recognized P1.0
billion of impairment loss due to the adverse impact of COVID-19 on certain investments.
In 2019, the impairment loss recognized in profit and loss amounted to P4.0 billion.
Note 15. Investment Properties, Page 62
As at December 31, 2021, the fair value of substantially all investment properties
amounting to P1,980.0 billion was determined by accredited independent appraisers with
appropriate qualifications and experience in the valuation of similar properties in the
relevant locations. The fair value represents the price that would be received to sell the
investment properties in an orderly transaction between market participants at the
measurement date. Management also believes that the carrying values of additions to
investment properties subsequent to the most recent valuation date would approximate
their fair values. In conducting the appraisal, the independent appraisers mainly used the
Market Approach and Income Approach. The Income Approach is based on the premise
that the value of a property is directly related to the income it generates. The significant
assumptions used in the valuation are discount rates and capitalization rates of 8.0% to
9.0% with an average growth of 5.0%.
These investment properties are categorized as Level 3 in the fair value hierarchy
since valuation is based on unobservable inputs.
Management believes that the impact of COVID-19 on the fair value measurement
of investment properties is short-term and temporary.
The Group has no restriction on the realizability of its investment properties.