Communication Services, Inc.

February 4, 1982 Communication Services, Inc. c/o Ms. Nilda Ramos Rm. 8-11 Hotel Mirador Arcade 1000 San Marcelino St. Manila Madam: This has reference to your letter dated August 31, 1981, inquiring as to whether "retained earnings deficiency balance" is considered as a decrease in assets. While it is true that retained earnings deficiency balance may be treated as decrease in stockholders' equity and not as a decrease in assets, in your case however, such deficit account represents a decrease in the assets , as the same resulted after the corporation's losses was charged to its retained earnings. Under the generally accepted accounting principles and procedures, losses from the business operations represent a diminution of assets. On the basis of the foregoing, the negative balance in the retained earnings account cannot be considered as a reduction in the stockholders' equity but rather a decrease in its assets. Please be advised accordingly. LibLex Very truly yours, (SGD.) ROSARIO N. LOPEZ Associate Commissioner