(Reportorial Requirements)

April 20, 2007 SEC-OGC OPINION NO. 04-07 ( Reportorial Requirements ) Alba Romeo and Co. Tax and Legal Division 7th Floor Multinational Bancorporation Centre 6805 Ayala Avenue Makati City, Philippines Dear Sir : This refers to your letter dated January 12, 2007 requesting clarification on Sections 2 to 4 of SEC Memorandum Circular No. 15, Series of 2006 which pertain to certain reportorial requirements applicable to a branch office of a foreign corporation. Having reviewed your request, the Commission is of the opinion that a statement of Gross Philippine Billing, by itself, is insufficient to enable the Commission to assess the operation and condition of a foreign corporation's branch office in the Philippines. Section 141 of the Corporation Code requires all corporations to file audited financial statements of their assets and liabilities with the Commission covering the preceding fiscal year and such other requirements as the Commission may require. Meanwhile, Section 68 of the Securities Regulation Code empowers the Commission to prescribe, among others, the methods to be followed in the preparation of accounts, appraisal or valuation of assets and liabilities of an issuer of securities. This involves submission of the complete components of such financial statements. Section 126 of the Corporation Code requires a branch office of a foreign corporation to deposit with the Commission securities with market value of at least P100,000.00 and an additional security deposit of 2% of the amount in excess of P5,000,000. The computation of this security deposit is based on the gross income of the branch within the Philippines. Furthermore, the computation of penalties for failure to comply with reportorial requirements is based on the Accumulated Income of a branch office. From the foregoing it is clear that the filing with the SEC of an annual statement of Gross Philippine Billings of a branch office of a foreign corporation is insufficient compliance with the Commission's statutory requirements for a financial statement, considering that in the course of a fiscal year a foreign corporation's branch office may well have other sources of income besides the gross billings for its services. It is therefore necessary that the branch office of the airline company which you referred to in your letter submit to the Commission its balance sheet and profit and loss statement or at least prepare a report on its assets and liabilities in the Philippines similar to Segment Reporting under Philippine Accounting Standard (PAS) No. 14. For quick reference of the requirements of PAS No. 14 we refer you to the attached summary of disclosures. CacEIS Please be guided accordingly. Very truly yours, (SGD.) VERNETTE G. UMALI-PACO General Counsel APPENDIX C Summary of Required Disclosure The appendix accompanies, but is not part of, IAS 14. Its purpose is to summarise the disclosures required by paragraphs 49-83 for each of the three possible primary segment reporting formats. [xx] refers to paragraph xx in the Standard. PRIMARY FORMAT IS PRIMARY FORMAT IS PRIMARY FORMAT IS BUSINESS SEGMENTS GEOGRAPHICAL GEOGRAPHICAL SEGMENTS BY SEGMENTS BY LOCATION OF ASSETS LOCATION OF CUSTOMERS Required Primary Required Primary Required Primary Disclosures: Disclosures: Disclosures: Revenue from external Revenue from external Revenue from external customers by business customers by location of customers by location of segment [51] assets [51] customers [51] Revenue from transactions Revenue from transactions Revenue from transactions with other segments by with other segments by with other segments by business segment [51] location of assets [51] location of customers [51] Segment result by business Segment result by location Segment result by location segment [52] of assets [52] of customers [52] Carrying amount of segment Carrying amount of segment Carrying amount of segment assets by business segment assets by location of assets assets by location of [55] [55] customers [55] Segment liabilities by Segment liabilities by Segment liabilities by business segment [56] location of assets [56] location of customers [56] Cost to acquire property, Cost to acquire property, Cost to acquire property, plant, equipment, and plant, equipment, and plant, equipment, and intangibles by business intangibles by location of intangibles by location of segment [57] assets [57] customers [57] Depreciation and Depreciation and Depreciation and amortisation expense by amortisation expense by amortisation expense by business segment [58] location of assets [58] location of customers [58] Non-cash expenses other Non-cash expenses other Non-cash expenses other than depreciation and than depreciation and than depreciation and amortisation by business amortisation by location of amortisation by location of segment [61] assets [61] customers [61] Share of profit or loss of Share of profit or loss of Share of profit or loss of [64] and investment in [64] and investment in [64] and investment in [66] equity method [66] equity method [66] equity method associates or joint ventures associates or joint ventures associates or joint ventures by business segment (if by location of assets (if by location of customers (if substantially all within a substantially all within a substantially all within a single business segment) single segment) single segment) Reconciliation of revenue, Reconciliation of revenue, Reconciliation of revenue, result, assets, and liabilities result, assets, and liabilities result, assets, and liabilities by business segment [67] [67] [67] Revenue from external Revenue from external Revenue from external customers by location of customers by business customers by business customers [69] segment [70] segment [70] Carrying amount of segment Carrying amount of segment Carrying amount of segment assets by location of assets assets by business segment assets by business segment [69] [70] [70] Cost to acquire property, Cost to acquire property, Cost to acquire property, plant, equipment, and plant, equipment, and plant, equipment, and intangibles by location of intangibles by business intangibles by business assets [69] segment [70] segment [70] - Revenue from external - customers by geographical customers if different from location of assets [71] - - Carrying amount of segment assets by location of assets if different from location of customers [72] - - Cost to acquire property, plant, equipment, and intangibles by location of assets if different from location of customers [72] Revenue for any business or Revenue for any business or Revenue for any business or geographical segment whose geographical segment whose geographical segment whose external revenue is more external revenue is more external revenue is more than 10 per cent of entity than 10 per cent of entity than 10 per cent of entity revenue but that is not a revenue but that is not a revenue but that is not a reportable segment because reportable segment because reportable segment because a majority of its revenue is a majority of its revenue is a majority of its revenue is from internal transfers [74] from internal transfers [74] from internal transfers [74] Basis of pricing inter- Basis of pricing inter- Basis of pricing inter- segment transfers and any segment transfers and any segment transfers and any change therein (75) change therein [75] change therein [75] Changes in segment Changes in segment Changes in segment accounting policies [76] accounting policies [76] accounting policies [76] Types of products and Types of products and Types of products and services in each business services in each business services in each business segment [81] segment [81] segment [81] Composition of each Composition of each Composition of each geographical segment [81] geographical segment [81] geographical segment [81]