Law Office of A.M. Sison, Jr. & Partners

February 8, 2007 BIR RULING [DA-081-07] Sections 46 & 48; BIR Ruling No. DA-404-2000 Law Office of A.M. Sison, Jr. & Partners Suite 2002-A Security Bank Centre 6776 Ayala Avenue Makati City Attention: Atty. Antonio L. Cardio Gentlemen : This refers to your letter dated October 31, 2006 requesting on behalf of your client, Hanesbrands Philippines, Inc. ("HPI" for brevity) for authority to change its accounting period from fiscal year ended June 30 to calendar year ended December 31, effective year 2006 for purposes of filing its annual income tax return. As represented, HPI was incorporated on January 13, 2006 and filed with the Bureau of Internal Revenue on October 19, 2006 its audited financial statements and income tax return for the fiscal year ended June 30, 2006. It has no commercial operations from date of incorporation up to September 4, 2006 for lack of working capital. However, on July 31, 2006, it received investments in the amount of US$3,000,000.00 or PhP154,860,000.00, which was used to increase its paid-up capital. On September 5, 2006, it bought the Branded Apparel Business of Sara Lee Philippines, Inc. Its parent company, HBI International LLC, considers it necessary to synchronize the accounting period of its subsidiaries worldwide including that of HPI. For its first year of operations, HPI's books of accounts were opened and closed on the following dates: Tax Year Books Opened Books Closed 2006 January 13 June 30 (date of incorporation) In reply, please be informed that your request is hereby granted, provided, you comply with the provisions of Section 46 and 47 of the Tax Code of 1997 which states: "SEC. 46. Change of Accounting Period. If a taxpayer, other than an individual, changes his accounting period from fiscal year to calendar year, from calendar year to fiscal year or from one fiscal year to another, the net income shall, with the approval of the Commissioner, be computed on the basis of such new accounting period, subject to the provisions of Section 47. SEC. 47. Final or Adjustment Returns for a Period of Less than Twelve (12) Months. (A) Returns for Short Period Resulting from Change of Accounting Period. If a taxpayer, other than an individual, with the approval of the Commissioner, changes the basis of computing net income from fiscal year to calendar year, a separate final or adjustment return shall be made for the period between the close of the last fiscal year for which return was made and the following December 31. If the change is from calendar year to fiscal year, a separate final or adjustment return shall be made for the period between the close of the last calendar year for which return was made and the date designated as the close of the fiscal year. If the change is from one fiscal year to another fiscal year, a separate final or adjustment return shall be made for the period between the close of the former fiscal year and the date designated as the close of the new fiscal year. (B) Income Computed on Basis of Short Period. Where a separate final or adjustment return is made under Subsection (A) on account of a change in the accounting period, and all other cases where a separate final or adjustment return is required or permitted by rules and regulations prescribed by the Secretary of Finance, upon recommendation of the Commissioner, to be made for a fractional part of a year, then the income shall be computed on the basis of the period for which separate final of adjustment return is made. EcSCAD In view of the foregoing, HPI should file a separate final or adjustment return for the period corresponding to July 1 to December 31, 2006, which is the period between the close of the fiscal year for which a return was made and the date designated as the close of the calendar year. This will serve as authority for HPI to change its accounting period from fiscal year to calendar year upon compliance with the requirement of filing a short period return. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service