TABLE OF CONTENTS

2 28
BURGER KING
CHAIRMAN’S MESSAGE GREAT PRODUCTS, DELIVERY CHANNEL
DRIVE HIGH SAME-STORE SALES GROWTH

6 30
HIGHLANDS COFFEE
CHIEF EXECUTIVE OFFICER’S MESSAGE OUTSTANDING GROWTH MARKS 20TH YEAR OF
VIETNAM’S #1 COFFEE CHAIN

12 32
JOLLIBEE PHILIPPINES PHO24®
GREAT TASTING PRODUCTS, INNOVATIONS
BREAKTHROUGH SALES GROWTH INSPIRES HIGHER AMBITIONS
DRIVE STELLAR PERFORMANCE

14 34
JOLLIBEE INTERNATIONAL SMASHBURGER
GROWING CUSTOMER BASE, NEW STORES
BIG CHANGES CAN SPARK TURNAROUND
DRIVE INTERNATIONAL EXPANSION

16 36
GREENWICH THE COFFEE BEAN & TEA LEAF®
PRODUCT IMPROVEMENT, DELIVERY CHANNEL
LARGEST ACQUISITION MAKES JFC A MAJOR COFFEE PLAYER
RE-IGNITE AWESOME POWER

18 38
CHOWKING JOLLIBEE GROUP FOUNDATION
ACHIEVES SALES MILESTONE WITH
MARKS 15 YEARS OF UPLIFTING FILIPINO COMMUNITIES
STORE EXPANSION, DELIVERY CHANNEL

20 40
YONGHE KING BOARD OF DIRECTORS AND
BUILDING INNOVATIVE STORES,
ATTRACTING YOUNGER CUSTOMERS CORPORATE MANAGEMENT TEAM

22 41
RED RIBBON
MAKING SWEET MOMENTS FOR 40 YEARS, AUDITED CONSOLIDATED FINANCIAL STATEMENTS
SETTING THE STAGE FOR A STRONGER FUTURE

24 114
HONG ZHUANG YUAN
CREATING A MODERN IMAGE INTO INVESTORS INFORMATION
TRADITIONAL ZHUANG YUAN CULTURE

26 MANG INASAL
OPENS 600TH STORE AS SALES AND PROFIT SURGE

2019 Annual Report 1

 CHAIRMAN’S
MESSAGE

“In each crisis,

JFC not only survived but
grew stronger afterwards.”

TONY TAN CAKTIONG

Chairman of the Board

2 Jollibee Foods Corporation

JFC: RESILIENT IN CRISIS, ADAPTIVE FOR STRONG RECOVERY

I am reporting to you the highlights of Jollibee Foods Corporation’s we would make it through the tough times. But we survived. I had this
performance in 2019. I would like first, though to say something about belief that we should give our customers more than they expected. I
our present situation with the COVID 19 pandemic and what I think was thinking that we should not be greedy in our daily lives or business;
about what it means to our business. we just needed to strike the right balance by sharing the benefits with
whomever we were dealing with.
The current crisis is quite significant: it affects every country in the world
and practically every industry and business. The economic engines of True enough, our customers kept coming back to our stores and bought
the world suddenly slowed down, many even suspended in the past our Yum Burgers and Chicken Joy! The company still made some profit,
three months because of COVID 19. There was nothing like it before which was 70% higher than in previous year. By 1985, our sales were
in our lifetime. It is natural for us−investors, management, employees, higher than in 1983 by 207%, profit by 138% and our number of stores
franchisees, suppliers, and other business partners and stakeholders to had increased from 13 in 1983 to 28 by the end of 1985.
be afraid about the present and our future.
The rest as they say is history. JFC kept growing profitably, acquiring
But I would like to ask you, for a while to step back and look at the big brands in the process both here in the Philippines and abroad. There
picture and a longer frame of time. were several other crises since then, such as the EDSA revolution in
1986, the Asian Financial Crisis in 1997, the World Recession caused by
In 1983 and 1984, we experienced a serious political crisis in the the September 11, 2001 terror attack in New York City and the World
Philippines, followed by a big foreign exchange and economic crisis. Financial Crisis of 2008, which was followed by a global recession. In
The Philippine peso devalued by as much as 60% versus the US dollar, each crisis, JFC not only survived but grew stronger afterwards.
foreign currencies became quite difficult to obtain as foreign and even
local investors brought their money out of the Philippines. Interest rate Today, we are again facing an economic crisis triggered by a health crisis.
went up to 31% as inflation rate reached 49%. In 1983, Philippine gross The negative impact of the pandemic on our business is quite significant
domestic product grew by only 1.9%, and then declined by 7% in 1984. as it is on practically all other businesses. And it is quite different from
Many companies were struggling to survive, and some went out of other crises that we faced before. But if we take the right but tough
business. actions, we will recover once again, strongly as before.

At that time, Jollibee Foods Corporation was only five years old and We are actually in a much better position now to survive and prosper than
had 13 stores and only one brand−Jollibee. We were very small at that in 1983 and 84 and in subsequent crises. We have more brands now, a
time. In order to survive, we aggressively reduced our costs, and also total of 15. We have close to 6,000 stores. We are far more diversified−
increased some of our prices even though people didn’t have money with 30% of our business coming from overseas. We have presence in 34
at that time. It was very tough! I remember counting our cash to see if countries. We have much larger and stronger financial resources. Most

2019 Annual Report 3

 importantly, we have a much stronger management team, organization
and business partners. We should, therefore, face the current crisis with
resolve to take the right actions and with confidence that not only we will
survive this, but emerge stronger out of it!
“These are times of great change Let me now discuss the highlight in 2019 on building solid foundations
for our long-term growth.
but let me assure you
In 2019 Jollibee Foods Corporation made significant investments to
that some things in JFC drive and support its long- term growth. Our company successfully
completed the acquisition of The Coffee Bean and Tea Leaf® (CBTL)

have not changed. on September 24, 2019. Based in Los Angeles, California in the United
States, this acquisition is the largest in JFC’s history with an acquisition
price of US$329 million covering more than 1,100 stores. It is also the
Our mission remains the same: most multinational with presence in 26 countries. In the fourth quarter
of 2019, CBTL contributed 11% to JFC’s consolidated system wide sales
to serve great tasting food and increased international business’ contribution to 33% of worldwide
system sales. The acquisition increased JFC’s total store count to 5,971
worldwide. CBTL is now JFC’s second largest business after the Jollibee
bringing the joy of eating brand. Combined with Highlands Coffee based in Vietnam, JFC can now
become an important player in the large, fast growing and profitable
to everyone! Our vision is still− coffee business market.

to be one of the top 5 restaurant While we continued to build drivers for our long-term growth, JFC
also continued to help create value for the communities where we do
business through the programs of the Jollibee Group Foundation. The
companies in the world!” Farmers Entrepreneurship Program or FEP enabled smallholder farmers
to supply farm products to large companies like JFC. Since the program’s
launch in 2008, the number of participating farmer cooperatives grew
from one to seventeen. Since 2009, at least 7,000 metric tons of

4 Jollibee Foods Corporation

vegetables have been delivered to JFC, with farmers earning more than withstand and weather this storm and that we will emerge even stronger
Php300.0 million in sales. The members of these farmer cooperatives out of these challenges. We had demonstrated this strength in previous
have been enjoying increasing income and standards of living due to crises. We will once again demonstrate this strength in this crisis.
the Farmer Entrepreneurship Program.
I would like to thank our management, employees, franchisees, suppliers
The Busog, Lusog, Talino (BLT) School Feeding Program continued to and other business partners for their commitment and contribution to
support the Department of Education’s school-based feeding program our company in the past year. I would like to thank my fellow Directors
through the BLT School Feeding kitchens. These kitchens are where for their continued strong support and guidance. I would also like to
meals are prepared following JFC’s nutrition, food safety, and quality extend my gratitude to our customers and our loyal shareholders for
standards for hundreds of pupils per day. In 2019, 34 BLT Kitchens their confidence and continued support. The crisis and setbacks we are
served over 28,000 pupils in 305 schools nationwide. facing, however significant are temporary. We shall create sustained
long-term value for all our stakeholders.
Access, Curriculum, and Employability (ACE) Scholarship Program,
another program of the Jollibee Group Foundation has provided These are times of great change but let me assure you that some things
educational assistance to more than 2,200 underprivileged Filipino in JFC have not changed. Our mission remains the same: “to serve great
youth so that they can access gainful employment and build productive tasting food bringing the joy of eating to everyone!” Our vision is still−
lives for themselves and their families. Among them are 500 scholars “to be one of the top 5 restaurant companies in the world!”
under Don Bosco’s Technical Mechanical and Agriculture-related courses
who graduation in 2019. The pilot run of the Quick Service Restaurant
Operations curriculum in partnership with the Anihan Technical School
was successfully completed with all 27 female scholars graduating.

JGF’s FoodAid program meanwhile supported more than 64,000 TONY TAN CAKTIONG
people with food assistance. They were those who suffered from natural
calamities like the earthquakes that occurred in the island of Mindanao
Chairman of the Board
in Southern Philippines.

2019 was a very challenging year for JFC. It has turned out that the
challenges that have arisen in 2020 are even far greater! Nevertheless, I
am very confident that our business and our organization will continue to

2019 Annual Report 5

CHIEF
EXECUTIVE
OFFICER’S
MESSAGE
“We have a clear vision and
we stay focused on our mission—
to serve great tasting food,
bringing the joy of eating
to everyone!”

ERNESTO TANMANTIONG
Chief Executive Officer

6 Jollibee Foods Corporation

WE WILL EMERGE STRONGER OUT OF THIS CRISIS

I will report on the performance of Jollibee Foods Corporation in 2019 In terms of profit, the business environment proved to be more difficult
to be followed by an update on the condition of our business so far this than what we anticipated. Consolidated operating profit declined by
year, given the very significant impact of the COVID 19 pandemic to JFC. 29.8% to Php6.5 billion, caused by short-term challenges in specific
businesses, mainly Red Ribbon in the Philippines and Smashburger in
In 2019, we took further significant steps in our acquisition-based the United States. Red Ribbon was adversely affected by product supply
growth. As reported by our Chairman, in September, we announced shortage as it transferred its main production to a new commissary in
the completion of the acquisition of The Coffee Bean and Tea Leaf ® April 2019. Smashburger, on the other hand, introduced major changes
(CBTL). This company is a wholly-owned subsidiary of Super Magnificent while creating short term disruption in sales and profit are expected to
Coffee Company, based in Singapore and 80% owned by JFC through eventually drive sustainable sales growth and strengthen the brand. It
its wholly owned subsidiary Jollibee Worldwide Pte. Ltd. (JWPL), also also rebuilt and strengthened its leadership team to accelerate sales and
based in Singapore. At the end of 2019, CBTL’s total revenues were profit growth. By the fourth quarter of 2019, we saw a gradual recovery
USD302.1 million. It had 1,173 outlets in 27 countries, of which 286 are in Smashburger’s sales performance as same-store sale growth was
in the US, South Korea 291, Philippines 156, Indonesia 83 and the rest in down to single-digit negative from double-digit negatives in the first
various parts of Asia and the Middle East. CBTL added 19.9% to JFC’s three quarters of the year.
store network growth for 2019.
Consolidated net income attributable to equity holders of the Parent
JFC’s consolidated revenues increased by 11.5% in 2019 compared to Company of Php6.4 billion in 2019 was 21.7% lower than the Php8.2
2018. System-wide sales grew by 14.9%. Global same-store sales grew billion generated in 2018. The net income for 2019 and 2018 already
by 2.8% while restaurant expansion contributed 13.1%, partly offset by include the impact of Philippine Financial Reporting Standard (PFRS)
the negative impact of changes in currency exchange rates. 16, Leases, which essentially translates leased spaces into assets in the
form of right-of-use, but not owned.
Same-store sales growth of the domestic business grew by 3.3% driven
by the continued growth in volume of customer visits in the stores JFC’s total assets increased by 24.4% to Php187.3 billion in 2019
compared to a year ago and strong growth in other channels for all compared to 2018 total assets primarily due to an increase in intangible
brands. Foreign business grew by 27.3%, with CBTL accounting for assets from the acquisition of CBTL and an increase in right-of-use assets
14.7%. New stores grew by 29.9% and same-store sales growth at 1.2%. mainly from CBTL. The increase was offset by a decrease in right-of-use
This was partly offset by the -3.8% impact of currency exchanges rates. assets due to closure of underperforming Smashburger stores.
North America business grew by 59.3%, including CBTL; Europe, Middle
East and Asia business by 17.3% and the China business by -3.8%.

2019 Annual Report 7

 In 2019, JFC spent Php10.0 billion in capital expenditures for new stores
and the renovation of existing stores and supply chain facilities. That
was 5.5% higher than the level of investment for 2018. JFC opened
273 stores in the Philippines and 224 new stores abroad, ending 2019
with 5,971 stores. This was 32.1% higher compared to 4,521 stores at the
end of 2018, with CBTL adding 26.0% to the growth. Organically, JFC
grew by 6.1%. Some highlights from 2019 include the opening of the
first Jollibee store in Guam in April and the first Panda Express franchise
store in the Philippines in December, which generated sales above
expectations. Zenith Foods Corporation, a wholly-owned subsidiary of
JFC also started the operations of its new commissary in Canlubang,
Laguna that supplies the products of Red Ribbon stores to major parts
of Luzon Island.
“I have always believed in our
In 2019, JFC declared cash dividends of Php2.58 per share, representing
JFC family’s resiliency and a payout of 43.8%. This payout was 4.0% higher than what was declared
in 2018.

perseverance that have seen us That concludes my report for 2019, let me now give you an update on
the current situation of our business.
through many obstacles before.”
In the first quarter of 2020, the system-wide sales of JFC, a measure
of all sales to consumers, both from company-owned, and franchised
stores increased by only 1.6% to Php55.2 billion compared to the same
quarter last year. Revenues decreased by 2.3% to Php39.4 billion due
to the temporary closure of a high number of stores in the Philippines
and markets abroad. JFC incurred significant losses in the first quarter of
2020 amounting to Php1.7 billion.

8 Jollibee Foods Corporation

System wide sales included the consolidation of CBTL. Excluding the drive-thru even as we continue to open new stores in prime locations.
impact of the consolidation of CBTL that took effect on September 24, The changes will be global in scope including our acquired businesses
2019, system wide sales declined by 10.0%. in the United States where we will pursue aggressive store and overhead
rationalization in North America.
In January, before the outbreak of COVID-19, JFC’s global system
wide sales, which included CBTL increased significantly by 24.9%. In JFC has also reduced its planned capital expenditures for 2020 from
February, system wide sales growth slowed down to 15.7% and in March, Php14.2 billion to Php5.2 billion. Operating costs are also significantly
to negative 32.5% when lock downs and other forms of restrictions were being reduced at all levels and in all regions in the world. JFC, however,
imposed in China, the Philippines, the United States and other countries. will continue to open new stores on a very selective basis for the balance
By the end of March, 2020, about 50% of our stores worldwide were of the year.
closed temporarily.
As the communities where we do business suffered due to the lockdowns
As our Chief Financial Officer, Mr. Ysmael V. Baysa stated in our first which started in mid-March, we responded by providing aid to people
quarter disclosure: “JFC’s financial performance in 2020 will not be a most affected by the COVID-19 in the country.
good one. It will incur even higher losses in the 2nd quarter when the
full impact of the lock downs on the business will be felt. We expect the JFC, through its social responsibility arm, the Jollibee Group Foundation
business to start recovering in the 3rd and 4th quarters, but we assume donated Php220 million worth of food from our brands. Php100 million
that the recovery will be slow”. was used to provide meals for 1.3 million health and checkpoint front
liners throughout the country. Php120 million was used to provide 2.5
As our Chairman stated in his message, the negative impact of the million food packs to more than 500 thousand indigent families and to
pandemic on our business is quite significant as it is on practically all make food donations to 27 community kitchens serving front liners and
other businesses. It is also quite different from other crises that we faced other communities. This was done in coordination with various public
before. But if we take the right but tough actions, we will recover once and private institutions to distribute food aid to lower-income sectors of
again, strongly. the society. JFC was giving similar assistance to hospitals and health care
institutions in China and the United States where we operate.
In May, we disclosed that we will spend Php7 billion for the rationalization
of our non-performing stores, store network, supply chain facilities and We also allocated an emergency response fund amounting to Php1.0
management and support group structure. This will include building billion to provide our employees and our partners in the Philippines
drivers of revenue growth for the future including strengthening our with the needed financial support to help them cope with the Enhanced
other channels such as food delivery to homes and offices, take-out and Community Quarantine.

2019 Annual Report 9

 The JFC Group of Companies has been following all the regulations
and guidelines imposed by government authorities and health care
institutions in all countries where we do business to ensure the safety of
all our workers, customers, and other stakeholders. Our employees at
support services and main offices in most countries worked from home
while many restaurant outlets and some commissaries were temporarily
closed.

While the pandemic adversely impacted JFC’s revenues and profit, we

strengthened our balance sheet. At the end of the first quarter, JFC was in
a net cash position with a total cash balance of Php26.5 billion compared
“While the pandemic to Php20.9 billion at the end of 2019. Total bank debts amounted to
Php25.6 billion, 71% of which is long term, significantly lower than at

adversely impacted the end of 2019 of Php44.8 billion. Total equity attributable to the Parent
Company stood at Php81.2 billion compared to Php52.6 billion at the
end of 2019.
JFC’s revenues and profit,
In January this year, we issued our first US dollar-denominated guaranteed
we strengthened senior perpetual capital securities amounting to US$600.0 million with a
coupon rate of 3.9%. This was the lowest coupon for a perpetual bond
issued so far in the Philippines, the largest amount in a debut issuance for
our balance sheet.” a perpetual bond in the Philippines and one of the first perpetual bond
issuances by any Asian restaurant company. The transaction marked the
first time that JFC tapped the debt capital market and the capital market
since our IPO in 1993. We used most of the proceeds from this bond
issuance to fully pay the US$400.0 million short term loan we obtained
to finance the acquisition of CBTL. This perpetual bond is accounted for
as equity.

10 Jollibee Foods Corporation

As part of JFC’s effort to continue serving all our stakeholders even in In closing, I would like to thank our management, employees, franchisees,
the middle of a crisis, JFC declared a cash dividend of Php0.62 per share suppliers and other business partners worldwide who work hard every
representing 50% of the cash dividend declared at about the same time day to ensure that we stay true to our mission even in these trying times.
last year. We paid out this dividend from JFC’s cash reserves on May 22, I also thank our Board of Directors for their unwavering guidance and
2020. support. And to our customers and shareholders, who are the center
of everything we do, we sincerely appreciate the trust you continue to
I am also happy to share that in June, JFC successfully priced a US$300.0 place in us.
million 5.5-year and a US$300.0 million 10-year Reg S only dual tranche
US dollar-denominated guaranteed senior notes offering, with a coupon
rate of 4.125% and 4.750%, respectively and payable semi-annually.
This offering represented JFC’s second international capital markets
transaction, following the successful issuance of our US$600.0 million
ERNESTO TANMANTIONG
senior perpetual capital securities in January 2020. The notes were Chief Executive Officer
issued by JWPL.

Yes, the COVID-19 pandemic has significantly disrupted our business
and our lives, but JFC is adapting very quickly and decisively as I have
reported to you. I am confident as ever about the bright future of our
company. Recovery is already starting to take place in the United States
of America, China and other countries where the lockdown restrictions
are slowly easing. I have always believed in our JFC family’s resiliency
and perseverance that have seen us through many obstacles before. We
have a clear vision and we stay focused on our mission–“to serve great
tasting food, bringing the joy of eating to everyone!” This is our pledge
to our customers and the communities that surround us. We will emerge
as a stronger business and organization out of this crisis!

2019 Annual Report 11

HOME OF THE WORLD-FAMOUS
CHICKENJOY

STORES
IN THE PHILIPPINES

MARKET

IN CHICKEN SEGMENT

12 Jollibee Foods Corporation

 JOLLIBEE PHILIPPINES
Great Tasting Products, Innovations
Drive Stellar Performance
Jollibee rose to greater heights in 2019 with a stellar business performance To reinforce Jollibee as the brand most loved by kids, a new campaign
driven by superior-tasting products supported by highly-effective marketing was launched with the “I Love You, Jollibee” TVC starring the first-ever
campaigns and operational excellence, a strong focus on innovations, and Jolly Kids ambassador, Scarlett Snow Belo.
its ever-aggressive store network expansion. Jollibee Philippines ended
the year with a systemwide sales growth of 10.7% and a total of 1,195 stores Jollibee also continues to be recognized as a thought leader in content
locally. Overseas, 39 new stores were opened, bringing its international store marketing with new highly engaging videos in its Jollibee Studios
network to 266 by year-end. YouTube Channel, including the multi-awarded #KwentongJollibee,
Jolliserye Petsa de Peligro, and One True Pair series.
Jollibee’s best-selling Chickenjoy successfully maintained its market
dominance by reinforcing its taste superiority. It has also remained to be an Together with the Department of Tourism, Jollibee championed Filipino
enabler of family bonding through relentless 365 days of advertising that pride and showcased the unique flavors of Filipino cuisine through
included its “Para sa Pamilya, only the best” campaign featuring the Muhlach the “Eats, More Fun in the Philippines” campaign. The video featured
celebrity-family. Still the market leaders in the Spaghetti and Beef Burger renowned food experts Chef JP Anglo, Filipino-American Chef Jordan
categories, both Jolly Spaghetti and Yumburger launched campaigns that Andino, and top YouTuber Mikey Bustos.
continued to harp on taste superiority, with the “Pinakamasarap na, pinaka-
affordable pa” (“Most delicious and most affordable”) and “Beefy Langhap- The Level-Up Joy stores were also launched, featuring innovations like
Sarap” (“Beefy delicious aroma”), respectively. the Self-Order Kiosks, Food Conveyor System, built-in wireless charging
pads, e-delivery bikes, and the first-ever dual-lane Drive Thru in the
The year 2019 proved to be very exciting with the introduction of new products country to complement our modern store design concept and signature
that delivered incremental sales: Jollibee Bacon Cheesy Yumburger, Crispy Alagang Jollibee customer service.
Spice Fries, Cookies ‘n Cream Sundae, Cheesy Bacon Pie, Cheesy Corned
Beef Pie, Ube Twirl, and the Jollibee Buko Pie, which turned out to be a huge Jollibee also recognized a new batch of outstanding families under the 9th
hit and was sold out in just six weeks. Jollibee Family Values Awards; and spread cheer to people in calamity-
stricken areas in Kidapawan through Maaga ang Pasko in partnership
Jollibee also aggressively grew its channels business through the Grab Food with the Jollibee Group Foundation.
partnership and the relaunch of the new Jollibee Delivery Website.
As a new decade is ushered in, our customers can expect Jollibee’s
Exciting novelty items were also released to heighten brand love among fans continued commitment to growth, excellence, and in spreading leveled
and collectors. These include the Jollibee University Athletics Association of up joy to them wherever they may be in the world.
the Philippines dolls and new versions of the Jollibee Funko Pop!—Jollibee in
Barong and the two-pack featuring Jollibee and Hetty.

2019 Annual Report 13

HOME OF THE WORLD-FAMOUS
CHICKENJOY

NEW MARKETS
ENTERED PER YEAR

STORES
IN 16 COUNTRIES

14 Jollibee Foods Corporation

 JOLLIBEE INTERNATIONAL
Growing Customer Base, New Stores
Drive International Expansion
Jollibee International saw another year of stellar growth, marked by its broad Taste superiority and the consistent quality of its bestsellers are the
appeal and recruitment of local customers, accelerated store expansion, and biggest drivers of Jollibee’s growth and broadening appeal among
continued commitment to excellence in food, service, and cleanliness. locals in the EMEA region. In Vietnam where it is the third largest QSR,
the brand grew with a remarkable double-digit same-store sales growth
North America vs last year, driven by Chickenjoy and its local jewel, Chili Chicken. The
brand also continues to be the leading QSR in Brunei, with a recent
Jollibee North America had its best-performing year yet, with double-digit independent product test showing Chickenjoy as the best tasting fried
systemwide sales growth and record-breaking same-store sales in 2019. chicken in the country. In Singapore and Hong Kong, the brand is seeing
a higher number of locals visiting the stores, further proving Jollibee’s
The brand’s strategies were anchored on focusing on its bestsellers, especially broadening appeal.
the world-famous Chickenjoy; a heightened commitment to quality; and store
network expansion. In Europe, Jollibee’s first batch of stores in Milan and London sustained
strong sales performance after their blockbuster openings, with
Chickenjoy’s 365-day campaign strategy continued to show success, resulting customers all over Europe continuing to flock to these stores. Its menu,
in its highest share of the business in the brand’s history. This was ably led by the best-selling Chickenjoy, continues to get rave reviews from
supported by the stores’ commitment to quality and execution. its fans and first-time customers. Transactions grew further through the
help of new delivery partners that enabled Jollibee to reach more of the
Jollibee North America moved closer to its five-year network expansion plan mainstream market. Certainly, a huge potential presents itself for further
of growing to 250 stores in the region by 2023. It opened 9 new restaurants, expansion, with multiple openings in the pipeline for United Kingdom,
including its first in the state of Arizona, USA, and its firsts in the provinces Italy, and Spain.
of Alberta and Saskatchewan in Canada. The openings drew overnight
campouts, demonstrating the brand’s broad appeal. The Middle East business achieved competitive sales growth and
improvement in profitability despite economic challenges. This was made
These efforts culminated in multiple industry recognitions for Jollibee possible by a strong focus on marketing fundamentals and commitment
North America, including Corporation of the Year by the Asian Business to operational excellence. In 2019, Jollibee successfully gained more
Association. non-Filipino customers through the fast-growing Spicy Chickenjoy.
Development of the delivery channel also played a role in delivering
Europe, Middle East, and Asia (ex-Philippines) growth for the business.

Jollibee continues to solidify its appeal to a broader consumer base in the With the Jollibee brand successfully growing around the world in 2019, it
Europe, Middle East, and Asia (EMEA) region. In 2019, it opened milestone is poised to become a major pillar in achieving JFC’s vision of becoming
stores in Malaysia and Guam. among the top 5 restaurant companies in the world.

2019 Annual Report 15

THE BEST-TASTING
HAWAIIAN OVERLOAD PIZZA

STORES
IN THE PHILIPPINES

OVER

DOUBLE-SIZE PIZZAS
SOLD IN A YEAR

16 Jollibee Foods Corporation

 GREENWICH
Product Improvement, Delivery Channel
Re-Ignite Awesome Power
The #1 pizza and pasta brand in the Philippines closed 2019 with its most Greenwich also posted a steady growth in all channels from dine-in,
phenomenal performance in recent years. Propelled by its strategic themes take-out, and delivery. On top of the full rollout of its delivery website,
that focus on engaging teams, generating sales and fostering brand love— the brand also focused on partnering with food aggregators, resulting
Greenwich remarkably ignited its awesome amid a volatile 2019 environment. in full-year growth of almost 30% in delivery. Take-out communications
were intensified, buoying up exclusive product offers that lead to the
Greenwich upheld taste superiority through continuous quality improvement channel growing by over 10%. The brand also recovered its average daily
and gold standard consistency: the strictest measure of food quality in transaction count back to 2016 altitudes. There really is no stopping for
JFC. The brand introduced an improved crust that is consistently delicious, Greenwich—posting more than 5% same-store sales growth in 2019, with
always hot, and freshly baked, placing it in a better position to secure brand the highest same-store sales growth in December since 2015 at over 10%.
dominance in the pizza landscape.
Because every “barkada” reigns supreme, Greenwich heavily invested on
The brand’s entertainingly candid and youthfully hip vibe became more clear- building a powerhouse of ready talents. The Greenwich Barkada Campus
cut, as seen through exciting communications launched for all-time bestsellers was built to ensure that talent competency is at its peak. This state-of-the-
Hawaiian Overload, Lasagna Supreme, and All-in Overload, while propping art training facility, designed to foster continuous learning and ideation,
up its formidable complements. The brand also safeguarded its superiority in is the curation of all training programs for all Greenwich employees.
terms of value for money across Pizza, Pasta, and Meals product categories. Indeed, 2019 was yet another banner year for Greenwich, recording the
These collaborative efforts helped record more than 7% systemwide sales greatest number of highly engaged kabarkadas.
growth for Greenwich in 2019.
All these exceptional determination and results in 2019 boosted
The brand vigorously addressed concerns of operations and franchisees head Greenwich up to the number 6 Branded Eat-Out spot. From thrusting taste
on to be able to build and operate the most profitable pizzeria stores to date. superiority, upholding value for money, to nurturing team involvement,
By year end, Greenwich became mighty guardians of margins to cultivate a Greenwich will continue to power up its awesome brand, offerings, and
stronger, more profitable store network. campaigns for the years to come.

2019 Annual Report 17

 #1 CHINESE
QUICK SERVICE RESTAURANT
IN THE PHILIPPINES

STORES
WORLDWIDE

OVER

PLATES OF LAURIAT
SOLD

18 Jollibee Foods Corporation

 CHOWKING
Achieves Sales Milestone with
Store Expansion, Delivery Channel
The year 2019 was a strong year for Chowking Philippines, having sustained its The Company’s Sucat and Highlands Commissary received the widely
commitment to serve hot, fresh, and delicious Chinese food to every Filipino. recognized Food Safety System Certification (FSSC 22000) from SGS. In
addition, Chowking also set up its first-ever production capability in Cebu
The brand crossed the Php25 billion sales level for the first time in its history, to manufacture goods for distribution within Visayas and Mindanao.
driven by its lineup of enjoyable and affordable product offerings. Its best-
selling Pork Chao Fan was highlighted throughout the year across tri-media All these efforts were fueled by a high performing, engaged team, with
channels and was able to reach double-digit growth. Chinese Style Fried an employee engagement score at the 79th percentile in the 2019 Gallup
Chicken was also re-launched at a more affordable Php79 price point, and survey, which is comparable to best-in-class companies in the world.
saw an increase in sales.
As Chowking enters its 35th year anniversary in 2020, it is poised to
New products were also introduced to the brand’s menu, namely: Sweet reach even greater heights with great-tasting food, a highly energized
‘n Sour Chicken, a delightful twist to the chicken rice meal, and the new & and engaged team, solid operational capability, comfortable and clean
improved Pearl Milk Tea. stores, and fast-growing channels.

In line with the brand’s commitment to deliver excellent-tasting food in all Chowking International
stores, Chowking was able to improve quality and consistency of products
such as Pork Chao Fan, Chinese Style Fried Chicken, Sweet ‘n Sour Pork and The year 2019 was a breakthrough year for Chowking USA as it continued
Fish, and Halo-Halo. to gain ground in the competitive US QSR industry.

Chowking also significantly expanded its store network to 617 stores in 2019. The brand ended the year with systemwide sales of US$23 million, driven
It also expanded its channels by launching the Chowking Delivery website by strong same-store sales growth of 9.3%, its highest in the past three
and other efforts for drive-through and delivery, resulting in a high double- years.
digit delivery sales growth and a record-breaking Php1 billion delivery sales
in 2019. In the Middle East, Chowking continued to “wow” customers with a
network of 33 stores across five countries. The business focused on
Chowking also introduced new ways for customers to better enjoy their dining extending its customer base to other nationalities while maintaining a
experience in the stores. One such example is its new pay & serve system, strong foothold among Overseas Filipino Workers (OFW). The brand also
which reduces the customers’ waiting time for orders to be completed. The partnered with delivery aggregators to serve a bigger market and make
brand also installed its first self-order kiosk, which features a tap-to-order ordering more convenient for consumers.
system. Cashless payments were also started in select stores and will soon be
rolled out in more stores.

2019 Annual Report 19

#1 CHINESE QUICK SERVICE RESTAURANT
IN THE CHINA BRAND POWER INDEX

1 CUP OF YONGHE KING

SOYMILK SOLD EVERY

STORES
IN CHINA

20 Jollibee Foods Corporation

 YONGHE KING
Building Innovative Stores,
Attracting Younger Customers
For Yonghe King, 2019 was a year of breakthroughs and operational Capitalizing on the faster-paced and younger-generation-oriented trend
excellence. Throughout the year, Yonghe King focused on ensuring delicious in 2019, Yonghe King used the Alipay’s and WeChat’s mobile payment
taste and exceptional customer experience, and on continuing to head for the functions to make payment transactions easier and more convenient. The
goal of “Being the Number 1 Chinese QSR.” brand also partnered with online third-party delivery platforms, such as
Meituan and Eleme, which allowed it to triple its delivery business within
The brand experienced three consecutive years of positive sales growth, with two years. Yonghe King was one of the restaurant brands with the highest
annual turnover exceeding RMB2 billion. Profit hit a record breaking RMB90 repurchase rate on these delivery platforms, ranking seventh place in total
million, an increase of 17% compared to the previous year. delivery orders of Chinese food and the first place in average daily sales.

Yonghe King’s top three flagship products continued to win the palates of Yonghe King also continued to use social media platforms, such as
consumers and were the main drivers of its sales growth. During the year, the WeChat and Weibo, to directly communicate with Chinese consumers
brand sold more than 61 million sets of Soya Milk, more than 24 million sets and get real-time feedback on its products and services.
of Minced Pork Rice, and almost 9 million sets of Crisp Tender Chicken Thigh
with Minced Pork Rice. By the end of 2019, Yonghe King’s customer loyalty program, which
was launched in October 2019, had more than 1.9 million members that
Yonghe King also accelerated its store expansion—opening 43 new branches, contributed to sales by close to RMB80 million. The loyalty program also
including 25 company-owned stores and 18 franchised stores—ending the brought a lot of new followers for the brand’s WeChat account which has
year with 339 branches. reached 2 million fans.

To improve customer experience, Yonghe King invested in intelligent In 2019, Yonghe King won “China Food Health 7-star Prize”—one of the
systems and store renovation. The brand launched new ordering methods, top food safety prizes in China—for the eighth consecutive year. It also
including in-store self-ordering service and food delivery service via takeout bagged the “315 Consumer Satisfaction Brand” for the eighth consecutive
platforms. year and was named “100 Top Restaurants in China“ by China Cuisine
Association for the ninth consecutive year. In addition, the brand also won
Meanwhile, Yonghe King continued to open more innovative stores which other major awards, including “2019 Top 10 Catering Brands in China”
helped the brand build a more diversified and younger brand image. In 2019, and “2019 Top 100 Catering Brands in China,” which is the first Red Eagle
it collaborated with a world-renowned animation company for its Kung Fu Award in Chinese Catering Industry.
Panda-themed stores. The brand now has six Kung Fu Panda-themed stores in
Shanghai, Beijing, and Shenzhen which are all widely appreciated especially Yonghe King will continue to strive for excellence and reach new heights,
by younger customers. bringing satisfaction and joy to more customers.

2019 Annual Report 21

 PHILIPPINES’ BEST-TASTING
CHOCOLATE CAKES

BLACK FOREST CAKE

IN THE PHILIPPINES

STORES
IN THE PHILIPPINES AND
UNITED STATES

22 Jollibee Foods Corporation

 RED RIBBON
Making Sweet Moments for 40 Years,
Setting the Stage for a Stronger Future
In 2019, Red Ribbon Philippines marked its 40th year of making sweet year, opening 53 new stores in excess of its target for 2019, growing its
moments and special celebrations for Filipino families. Since its first store bestsellers faster than the total menu, accelerating growth of its delivery
opening in Timog, Quezon City, Metro Manila, the brand has grown into a business, and enhancing store customer experience.
strong network of 500 stores nationwide, more than doubling its size in just
five years. This remarkable growth momentum has provided the impetus To top these achievements off, despite a very challenging year, Red
for its parent company, Jollibee Foods Corporation (JFC), to invest on the Ribbon saw an increase in its employee engagement results, one of the
brand’s future growth. highest in the JFC group.

The year opened with exciting and highly relevant campaigns focused Red Ribbon’s strong brand and business fundamentals—guided by its
on driving value with Red Ribbon Savers and owning kids’ birthdays with vision of becoming the most loved bakeshop brand and the market
Rainbow Dedication Cake featuring social media darling, Scarlet Snow Belo. leader—makes the brand well poised for long-term, sustainable success
These facilitated the strong results of the first quarter, aided by the successful for the next 40 years.
Valentine Black Forest campaign headlined by critically acclaimed actor
Paulo Avelino. Top pastry products Butter Mamon and Cheesy Ensaimada Red Ribbon USA
continued their very strong growth enhanced by the Pasalubong Packs push.
The 40th year celebration saw the return of past favorites, Rocky Road Cake For Red Ribbon USA, 2019 was a banner year, ending the year with 33
and Taisan, which were well-received by the market, further strengthening bakeshops, with new bakeshops opened in the states of California and
affinity among the brand’s loyal customers. Nevada. Its systemwide sales growth was 7.2%, and a rolling base growth
of 6.5%, its highest in the last 4 years.
With its aim of continually increasing customer satisfaction across relevant
store channels, Red Ribbon had majority of its stores converted to the Staying true to its mission of popularizing Filipino flavor-inspired bakery
new store layout and design in 2019, allowing for better in-store customer products, the brand beefed up its menu and launched several new
experience. Furthermore, its strategy of offering more convenience saw its products, such as the Mango Mousse cake, the Caramel Bar, and its
delivery business grow by high double-digit on the account of expanded biggest blockbuster launch in 2019, the Yema Caramel Cake.
partnership with food delivery aggregators. Red Ribbon also collaborated
with Delivery, Channels, and Customer Loyalty corporate team to lead the Another highlight was the brand’s increased accessibility with its Order
way for JFC in the area of Chat Commerce as it launched JFC’s very first and Ship channel, which now covers 48 states, providing customers the
Messenger-based chatbot ordering service. opportunity to enjoy Red Ribbon pastries anywhere in the US.

Last April 2019, JFC started sourcing for Red Ribbon Philippines from the All these efforts were supported by attractive retail merchandising, a
newly opened Canlubang Baking Facility—a modern, world-class commissary redesigned menu board, a refreshed website look and the launch of the
situated at Carmelray Industrial Park in Canlubang, Laguna. The five-hectare new packaging design for pastries.
commissary will significantly increase the production capacity for Red Ribbon,
and ensure the highest safety and quality standards for its products. Amidst the growing consumer expectations and strong competitive
landscape, Red Ribbon has maintained its relevance as a brand to the
Despite the challenges in the initial operations of the new baking facility, Filipino-American community. And with its unique and differentiated
Red Ribbon showed resilience—in close collaboration with the JFC Supply cakes and pastries, and increased accessibility, Red Ribbon is well on its
Chain team—and managed to exceed its systemwide sales performance last way to be among the top bakeshops in the USA.

2019 Annual Report 23

BEIJING’S MOST RECOGNIZED
CONGEE BRAND

OVER

BOWLS OF CONGEE
SOLD

OF PORRIDGE
TO CHOOSE FROM

24 Jollibee Foods Corporation

 HONG ZHUANG YUAN
Creating a Modern Image into
Traditional Zhuang Yuan Culture
In 2019, Hong Zhuang Yuan ushered in opportunities, which paved the way By the end of 2019, the brand already had 42 restaurants, including 4 new
for the growth of its delivery performance—the main driving force of the branches.
brand.
In May 2019, Hong Zhuang Yuan started to open its new-image restaurants
Hong Zhuang Yuan continued to gain market recognition through the creation featuring brand new interiors, product modeling, and an upgraded logo,
of flagship and core products, including three kinds of porridge, two kinds of all of which feature modern elements infused into the traditional Chinese
staple food, and four kinds of hot dishes. At the same time, seasonal product Zhuangyuan culture. Hong Zhuang Yuan improved all restaurant signs
innovations done throughout the year brought in more customers. This, in within two months to establish the brand’s new image in the market.
turn, increased the brand’s popularity in Beijing, China.
The brand also strengthened the concept of “display kitchen,” which
Hong Zhuang Yuan also launched a customer loyalty program across highlighted its high standard requirements in terms of taste, quality,
its restaurants to further improve consumer experience and to better health, and safety.
understand consumer trends so it can be more responsive to the demands
of its consumers. In 2020, Hong Zhuang Yuan will continue to bring satisfaction and the joy
of eating to more customers by focusing on taste and customer service.

2019 Annual Report 25

 #1 GRILLED CHICKEN
IN THE PHILIPPINES

OVER

PIECES OF CHICKEN
SOLD

STORES
IN THE PHILIPPINES

26 Jollibee Foods Corporation

 MANG INASAL
Opens 600th Store as Sales and Profit Surge

Mang Inasal capped 2019 with a 16.2% sales growth from the previous year, Internally, Mang Inasal further strengthened the organization founded
and a 30% increase in its net operating income of PHP 1.46 billion from the on the fundamentals, with elements in place to support sustainable
Php1.13 billion in 2018. The collective grit of its employees and franchise growth. The business further built its competencies and developed the
business partners enabled Mang Inasal to overcome the challenges brought appropriate culture. The first-ever Gold Standard Olympics was held to
about by hyperinflation and the African Swine Fever. engage grillmen across the entire Mang Inasal network. Also, MI launched
the culture-building campaign dubbed “Tatak Mang Inasal,” anchored on
The year 2019 also marked the opening of Mang Inasal’s 600th store in Tambo, building great teams and developing able leaders.
Lipa City, Batangas. Its network expansion was marked by the opening of 75
new stores and renovation of 54 stores. Of its entire network, 97% remained On its fourth year of recognizing local modern-day heroes through the
franchised as of end 2019. Gawad PiliPinoy Awards, Mang Inasal proclaimed Session Groceries’
founder Iloisa Romaraog-Diga as its 2019 winner. After being made
Its best sellers Chicken Inasal and Pinoy Halo-Halo continued to strengthen aware of the plight of Benguet farmers who were forced to disposed
their market positions, even as Mang Inasal excited customers with the of their harvests due to oversupply, Diga decided to extend the online
relaunch of its improved Palabok and new Molo. These two products were Session Groceries platform to act as an alternative distribution channel
given strong operational support that emphasized taste superiority and for the farmers. The online video announcing her win bagged an Araw
consistency. Values Award from the Ad Foundation and an Anvil Award from the Public
Relations Society of the Philippines.
Meanwhile the cascade of “Serbisyong Solb,” which sought to build the
service culture across the brand, paved the way for Mang Inasal’s signature Mang Inasal ushered in 2020 with an even stronger resolve to outdo
branded customer experience. itself as it delivers on its brand promise of providing the best-tasting,
high-quality, value-for-money food, and a dining experience where its
Mang Inasal continued to push for excellence in executing its restaurant customers relish the joy of eating.
operating systems according to Food, Service, Cleanliness, and Condition
principles. This resulted in 82% FSC Rating with 99 Gold stores.

2019 Annual Report 27

FLAME GRILLING
IN THE PHILIPPINES
FOR MORE THAN 20 YEARS

OVER

WHOPPERS SOLD
PER YEAR

STORES
IN THE PHILIPPINES

28 Jollibee Foods Corporation

 BURGER KING
Great Products, Delivery Channel
Drive High Same-Store Sales Growth
The year 2019 was a milestone year for Burger King as it achieved same- Burger King’s penetration in the Chicken Sandwich category tripled with
store sales growth of 9%, its highest in the last three years. This success was the launch of the X-tra Long Chicken Jr. in September 2019, closing the
driven by effective above-the-line campaigns that fueled the record-breaking gap with the 2nd biggest Chicken Sandwich player.
performances of its best-sellers: 4-Cheese Whopper (37.5% same-store sales
growth), X-tra Long Chicken (22.8% same-store sales growth), and Whopper These brand wins, however, would not have been possible if not for the
(13.1% same-store sales growth). service excellence our stores demonstrated. This year, Burger King went
on to achieve Quality, Service, and Cleanliness (QSC) certification for
By forging partnerships with delivery platforms GrabFood and Foodpanda, 100% of its stores for the third consecutive year, resulting to an improved
Burger King widened its reach to cater to an increasing demand for Burger King Net Promoter Score of 71.2%.
favorites, resulting in a +147.5% same-store sales growth for Total Delivery.
Burger King ended the year with a bang. It sustained a double-digit same-
Keeping value at the heart of its customer attraction strategy, Burger King store growth month-on-month for almost the entire second semester. It
made Whopper Jr. even more affordable. It also launched its junior version of also delivered a positive Net Operating Income (NOI) of 86M—double its
the X-tra Long Chicken at only Php59. NOI from the previous year.

2019 Annual Report 29

 VIETNAM’S #1
COFFEE CHAIN

OPENED EVERY WEEK

STORES

30 Jollibee Foods Corporation

 HIGHLANDS COFFEE
Outstanding Growth Marks 20th Year of
Vietnam’s #1 Coffee Chain
As the brand celebrated its 20th year in 2019, Highlands Coffee strengthened Highlands Coffee successfully conducted community-driven programs
its lead in the café chain category in Vietnam with strong +35% revenue growth, such as blood donation campaigns with more than 500 blood units
+9% share of occasions, +17% achievement in share of spending. donated to Blood banks and hospitals, Love Spring to the countryside
where a thousand Tet gift sets were given to the poor, and a classroom
Highlands Coffee’s bestsellers paved the way for its strong growth in 2019, renovation for an orphanage. A fundraising event, Sports Day for Charity,
supported by a series of strong flagship campaigns that were rolled out was also held to help raise funds for cancer support. Lastly, two hair
throughout the year for Phin Sua Da (Vietnamese Iced Coffee with Condensed libraries were built for the Cho Ray Hospital and The National Children’s
Milk), Freeze Tra Xanh (Ice-blended Green Tea Freeze), and Tra Sen Vang Hospital to support women and children breast cancer patients. Highlands
(Golden Lotus Tea). The year also saw the launch of “The Unity of Pride in Coffee strongly demonstrated a multi-dimensional commitment to social
Vietland”—a series of concerts in the three biggest cities in Vietnam, and the responsibility as one of the top brands in Vietnam.
biggest campaign ever in Highlands Coffee’s history.
Highlands Coffee’s achievements fulfill the brand’s ambition of continuing
The café network now has over 350 stores—93 of which are new—across more to dominate the local market, while setting the stage to enter new
than 27 provinces in Vietnam. The retail-based nationwide system stood out international markets soon. The best has indeed yet to come for Vietnam’s
in a rather competitive market, with its expertise and experience in driving its #1 Coffee Chain.
growth targets.

2019 Annual Report 31

VIETNAM’S #1
PHO CHAIN BRAND

OVER

BOWLS OF PHO
SOLD PER YEAR

INGREDIENTS
IN EVERY BOWL

32 Jollibee Foods Corporation

 PHO24®
Breakthrough Sales Growth Inspires Higher Ambitions

PHO24® posted its best performance yet in the past five years. A refreshed The brand also opened four new stores in strategic locations, making
design and service model that was implemented starting 2018 have produced PHO24® more accessible to new guests thus, increasing its customer
strong results. This translated to a 32% growth in same-store transaction base. These new stores feature a fresh and modern design intended to
counts and 24% growth in overall store sales. excite guests and make them want to come back. As Vietnam is quickly
modernizing, the new pay-and-serve model also delivered on speed and
Efforts focused on driving trial and improving the customer base further convenience, to meet the increased demands of its customers.
strengthened the brand and its overall position in the market. PHO24®
launched its first brand campaign, communicating its everyday affordability In the Philippines, the first PHO24® store in Double Dragon Plaza, Manila,
and PHOTAI24® flagship product quality. The brand also introduced Pho saw significant growth in transaction count since its opening in August
Day on the 24th of every month as an iconic, branded day to celebrate and 2018.
give back to guests. As a result, first-time customers represented 15% of the
brand’s total store guests. In addition, a third-party survey showed that Brand These successes show a positive outlook for PHO24® as it pursues its
Preference improved to 6.9 points vs. 2018. ambition to become the world’s #1 Pho Chain.

2019 Annual Report 33

 EVERY BITE
A BETTER BURGER

OVER

CLASSIC SMASH
CHEESEBURGERS SOLD

RESTAURANTS
WORLDWIDE

34 Jollibee Foods Corporation

 SMASHBURGER
Big Changes Can Spark Turnaround

This year, Jollibee Foods Corporation completed its first year of controlling service ratings. Smashburger restaurants increased Guest Experience
ownership of Smashburger. Under its new leadership, Smashburger quickly Index (GEI) rating from 83.5 in 2018 to 87.1 in 2019—contributing to the
implemented an unprecedented number of foundational and growth sales improvements realized through the end of 2019. Employee morale
initiatives to stem the revenue trend under previous ownership and to restore also ticked up with turnover reaching new lows. Gains made in operational
the brand to relevance. excellence will help build Smashburger’s reputation as the brand moves
to the future.
The first fundamental improvement was a major menu refresh designed to
deliver a best-in-class “better burger” taste experience. To deliver on the long-term growth plan, Smashburger implemented
an organizational build-up plan in 2019—adding key leaders in the areas
In May 2019, a new, simplified menu was rolled out with the goal of improving of operations, training, development, real estate, human relations, and
operational execution, as well as customer ease-of-ordering. Several product marketing. Operations was restructured under the leadership of the
improvements were also made to enhance the taste of food. These included Head of Operations, who will be responsible for corporate and franchise
the return to Certified Angus Beef, thick-cut applewood smoked bacon, fresh- restaurants to continuously improve operational performance and
cut red onions, and thicker-cut American cheese. employee retention.

In October, the menu was further improved with larger burgers and buns, a Smashburger started to get the word out, attracting new users, as
70% larger and better crispy chicken sandwich, and the return of a new and well as improving engagement among fans of the brand. The brand
improved turkey burger. implemented a digital-first approach to marketing, finding new ways to
constantly stay in front of the younger target audience and drive more
Customer response to these taste improvements was immediate and consumers through the customer journey. This approach helped deliver
significantly positive. The Smashburger innovation team also developed and the biggest day ever for the business in terms of sales growth behind the
tested several new products set for launch in 2020. Smashburger 12th Anniversary celebration in August. It also contributed
to five consecutive months of sales trend improvements to finish the year,
From a new restaurant development standpoint, Smashburger implemented setting up a strong 2020.
a new real estate strategy, created a restaurant-of-the-future design, and
decisively rebalanced the current site portfolio while identifying high profile With the expertise, systems, and processes of the Jollibee Group team—
new restaurant locations. combined with the passion, experience, and creativity of the local
Smashburger team—the brand is foreseen to “Smash it!” in 2020 and
The year 2019 also saw the implementation of the proven Jollibee Group beyond.
operations and training process, which significantly improved consumer

2019 Annual Report 35

KNOWN FOR ITS
ORIGINAL ICE BLENDED COFFEE
AND TEA DRINKS

OVER

OF COFFEE AND TEA

STORES
WORLDWIDE

36 Jollibee Foods Corporation

 THE COFFEE BEAN & TEA LEAF®
Largest Acquisition Makes JFC a Major Coffee Player

The Coffee Bean and Tea Leaf® (CBTL) is the newest member in the growing Singapore National Day and International Coffee Day giving consumers
JFC group of companies. CBTL is an American coffee chain founded in 1963, reasons to visit the stores. These promotions were communicated mainly
based in Los Angeles, California and is widely credited for driving high quality over cost effective media such as Facebook and Instagram as the 79% of
and innovation to the coffee and tea industry. At the end of 2019, CBTL the population are active social media users.
operated 1,173 stores across 27 countries.
CBTL Philippine Franchise added 20 stores in 2019 and ended the year
CBTL uses only individually hand-roasted coffee beans and hand-blended with 156 stores. Same-store sales growth for November and December
teas from farms in Central and South America, Africa and Asia. It started the grew double-digit driven by the combination of “Double Stamp Campaign”
frozen coffee drink craze with the invention of the The Original Ice Blended® on the Giving Journal program, as well as the “Mondays Made Better
drink and is also the first global coffee and tea retailer to offer cold brew tea. Promotion”. CBTL South Korea opened 17 stores and ended 2019 with 291
stores. CBTL Malaysia expanded the coverage of Grab delivery platform to
CBTL is always seeking new ways to connect with guests and invite new 62 stores contributing incremental revenue of RM 5 million in 2019.
customers to join its community. In 2019, CBTL in the United States teamed
up with Postmates as its exclusive on-demand delivery partner, giving CBTL’s CBTL has an unwavering commitment to social responsibility. Both in the
customers a convenient way to enjoy their favorite hand-crafted specialty US and abroad, CBTL has developed a broad range of programs—from
coffee and teas. preserving the environment to improving education to supporting First
Responders domestically with their Heroes At Heart fund raising initiatives—
CBTL continues to excite customers by regularly offering new products that aim to give back to the workers and their communities. Caring Cup
in all its coffee shops worldwide. In the US, CBTL kicked off its new winter initiatives, which form part of CBTL’s corporate social responsibility
beverages and healthy protein-packed bites and announced the return of its program are planted and nurtured domestically in communities served
Classic Flat White. In April, CBTL added a new selection of spring beverages: by the company, as well as internationally in communities from which its
Irish Cream Latte, Midnight Mocha, Cold Brew Latte and Mango Cold Brew products originate. In the Philippines, Caring Cup’s Rebuild Dreams in
Tea. CBTL also introduced a new retail tea product available, the Osmanthus Marawi raised PHP 5.4 million while SolarEnergie raised PHP 2.1. million.
Oolong.
As CBTL starts this new chapter with JFC, it will continue its philosophy of
In Singapore, a series of tactical promotions was pushed throughout the delivering the best handcrafted products and taking pride in the journey
year. Breakfast value sets were launched to drive footfall during the quietest from seed to cup. A perfect complement to the JFC Group’s mission to
day part; beverage promotions tied to special occasions like Labour Day, serve great tasting food, bringing the joy of eating to everyone.

2019 Annual Report 37

 CELEBRATING 15 YEARS OF
UPLIFTING COMMUNITIES

SINCE 2009,
FARMERS HAVE DELIVERED
MORE THAN 7,000 METRIC TONS
OF VARIOUS VEGETABLES

OVER 3,000 FARMERS

HAVE BEEN TRAINED

38 Jollibee Foods Corporation

 Jollibee Group Foundation
Marks 15 Years of Uplifting Filipino Communities

As Jollibee Group Foundation starts a new chapter, it continues to enable in school canteens, and as training centers for mothers, senior high school
more families across the country to put food on their table through programs students, and new BLT partners.
in agriculture, education, and disaster response.
Access, Curriculum, and Employability (ACE) Scholarship Program
Farmer Entrepreneurship Program (FEP)
ACE has provided educational assistance to more than 2,200
Through FEP, smallholder farmers are organized and trained to grow their underprivileged Filipino youth so they can access gainful employment
own agro-enterprises and supply institutional markets such as JFC. Since the and attain better lives for themselves and their families. Among them are
program’s launch in 2008, the number of participating farmer cooperatives 500 scholars under Don Bosco’s Technical Mechanical and Agriculture-
grew from one to seventeen. Since 2009, at least 7,000 metric tons of related courses who graduated in 2019.
vegetables have been delivered to JFC, with farmers earning more than Php
300 million in sales. The pilot run of the Quick Service Restaurant Operations (QSRO)
curriculum in partnership with the Anihan Technical School was
A range of capacity building interventions were also provided to local successfully completed with all 27 female scholars graduating. This
implementing partners that enabled FEP to train hundreds of farmers curriculum envisions to facilitate the development of competency-based
delivering to JFC. This included agro-entrepreneurship (AE) for LGUs and training for QSRO personnel in the country. It covers technical and life
NGO extension workers, online and on-site AE coaching with farmer leaders, skills courses, and on-the-job training that are aligned with the needs of
Good Agricultural Practices (GAP), and Financial Management. the food service industry. Of this inaugural batch, all were absorbed for
employment by industry partners, including JFC restaurants. The training
Busog, Lusog, Talino (BLT) School Feeding Program of a new batch of 68 new scholars has also begun.

In support of the Department of Education’s School-Based Feeding Program, Jollibee Group FoodAID
the Foundation continued to establish BLT School Feeding Kitchens. These
Kitchens centralize meal preparation for a cluster of schools and enable safe This program systematizes JFC’s disaster response efforts to better
and efficient large-scale feeding. In 2019, over 28,000 pupils in 305 schools address community needs in the fastest time possible. In coordination
were served by 34 BLT Kitchens nationwide. Partnerships with various local with various partners, more than 64,000 individuals were provided with
government units were fostered to replicate the BLT Kitchen model to more food assistance in 2019, including those affected by the earthquakes in
localities, which will hopefully serve more undernourished pupils in the future. Mindanao, Philippines. Among the assistance provided were congee mix
packs that were prepositioned to provide communities with immediate
Aside from being a place to cook nutritious meals for the school feeding access to warm meals during calamities.
program, BLT Kitchens have also served as facilities for preparing food served

2019 Annual Report 39

40
AUDITED CONSOLIDATED FINANCIAL STATEMENTS

42
Selected Financial Data

43
Statement of Management’s Responsibility for Financial Statements

44
Independent Auditor’s Report

48
Consolidated Statements of Financial Position

49
Consolidated Statements of Comprehensive Income

50
Consolidated Statements of Changes in Equity

51
Consolidated Statements of Cash Flows

53
Notes to Audited Consolidated Financial Statements

2019 Annual Report 41 Jollibee Foods Corporation

SELECTED FINANCIAL DATA
(in ₱’000, except Number of Stores, Personnel, Ratios, Per Share Data and Outstanding Shares)

FOR THE YEAR 2017 2018 2019

Consolidated System Wide Sales 171,760,987 212,185,435 243,792,179
Revenues 133,583,071 161,167,782 179,626,188
Net Income 6,493,019 7,641,586 6,422,916
Net Income (Attributable to Equity Holders of the Parent) 6,939,577 8,212,608 6,432,434
Payroll and Benefits 18,462,524 23,616,010 28,015,224
Personnel 35,443 44,307 45,006
Number of Stores
Jollibee* 1,260 1,378 1,461
Greenwich 272 285 284
Chowking* 571 620 665
Red Ribbon* 458 499 535
Yonghe King 309 320 339
Hong Zhuang Yuan 43 44 42
Mang Inasal 495 552 611
Burger King 93 101 105
Dunkin’ Donuts 15 13 8
Highlands Coffee 244 317 401
PHO24 29 35 39
HardRock Café 8 8 6
Smashburger — 349 301
Coffee Bean and Tea Leaf — — 1,173
Panda Express — — 1
* Domestic and International

AT YEAR-END
Total Assets 115,619,404 150,512,878 187,276,006
Total Property & Equipment 20,869,738 26,672,549 32,592,122
Total Equity 41,790,280 48,996,097 52,281,877
Current Ratio 1.20 1.07 0.67
Debt Ratio 0.65 0.68 0.72

PER SHARE DATA

Basic Earnings Per Share 6.423 7.555 5.887
Diluted Earnings Per Share 6.340 7.443 5.820
Cash Dividend 2.18 2.48 2.58
Book Value 38.51 45.00 47.80

SHARE INFORMATION
Outstanding Shares (net of Treasury Shares) 1,085,208,235 1,088,766,417 1,093,701,118

2019 Annual Report 42 Jollibee Foods Corporation

STATEMENT OF MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS

The management of JOLLIBEE FOODS CORPORATION AND SUBSIDIARIES (the JFC REPUBLIC OF THE PHILIPPINES )
Group) is responsible for the preparation and fair presentation of the consolidated financial CITY OF PASIG ) S.S
statements including the schedules attached therein, for the years ended December 31,
2019, 2018 and 2017, in accordance with the prescribed financial reporting framework Before me, a notary public in and for the city named above, personally appeared the
indicated therein, and for such internal control as management determines is necessary to following:
enable the preparation of the consolidated financial statements that are free from material
misstatement, whether due to fraud or error. Name Competent Evidence of Identity
In preparing the consolidated financial statements, management is responsible for Tony Tan Caktiong SSS Number: 03-3229034-2
assessing the JFC Group’s ability to continue as a going concern, disclosing, as applicable Ernesto Tanmantiong SSS Number: 03-6292699-0
matters related to going concern and using the going concern basis of accounting unless
Ysmael V. Baysa SSS Number: 03-4228219-1
management either intends to liquidate the JFC Group or to cease operations, or has no
realistic alternative but to do so. Marilou N. Sibayan SSS Number: 03-9964176-9

The Board of Directors is responsible for overseeing the JFC Group’s financial reporting Who are personally known to me and to me known to be the same person who
process. presented the foregoing instrument and signed the instrument in my presence, and
who took on oath before me as to such instrument.
The Board of Directors reviews and approves the consolidated financial statements
including the schedules attached therein, and submits the same to the stockholders. Witness my hand and seal this

SyCip Gorres Velayo & Co., the independent auditor appointed by the stockholders for the Doc No. 114
years ended December 31, 2019, 2018 and 2017, has audited the consolidated financial Page No. 24
statements of the JFC Group in accordance with Philippine Standards on Auditing, and Book No. 4
in its report to the stockholders, has expressed its opinion on the fairness of presentation Series of 2020
upon completion of such audit.

Signed under oath by the following:

TONY TAN CAKTIONG ERNESTO TANMANTIONG

Chairman of the Board President and Chief Executive Officer

YSMAEL V. BAYSA MARILOU N. SIBAYAN

Chief Financial Officer Vice President and Comptroller - Worldwide

2019 Annual Report 43 Jollibee Foods Corporation

INDEPENDENT AUDITOR’S REPORT

The Stockholders and the Board of Directors We have fulfilled the responsibilities described in the Auditor’s Responsibilities for
Jollibee Foods Corporation the Audit of the Consolidated Financial Statements section of our report, including
Doing business under the name and style of Jollibee in relation to these matters. Accordingly, our audit included the performance
(formerly Jollibee Foods Corporation) and Subsidiaries of procedures designed to respond to our assessment of the risks of material
misstatement of the consolidated financial statements. The results of our audit
procedures, including the procedures performed to address the matters below,
Opinion provide the basis for our audit opinion on the accompanying consolidated financial
statements.
We have audited the consolidated financial statements of Jollibee Foods Corporation Doing
business under the name and style of Jollibee (formerly Jollibee Foods Corporation) (the Accounting for Business Combination – Acquisition of the Coffee Bean & Tea Leaf
Parent Company) and its subsidiaries (the JFC Group), which comprise the consolidated (CBTL)
statements of financial position as at December 31, 2019 and 2018, and the consolidated
statements of comprehensive income, consolidated statements of changes in equity and On September 24, 2019, the JFC Group, through its 80%-owned subsidiary, Super
consolidated statements of cash flows for each of the three years in the period ended Magnificent Coffee Company Hungary Kft., acquired 100% interest over The Coffee
December 31, 2019, and notes to the consolidated financial statements, including a Bean & Tea Leaf (CBTL). The JFC Group recognized gain on bargain purchase of
summary of significant accounting policies. ₱3,150.8 million and trademark of ₱18,484.7 million based on the provisional
purchase price allocation performed. We considered the accounting for this
In our opinion, the accompanying consolidated financial statements present fairly, in all acquisition to be a key audit matter because it required a significant amount of
material respects, the financial position of the JFC Group as at December 31, 2019 and management judgment and estimation in identifying the underlying acquired assets
2018, and its consolidated financial performance and its consolidated cash flows for each and liabilities and in determining their fair values, specifically the acquired property
of the three years in the period ended December 31, 2019 in accordance with Philippine and equipment and trademark.
Financial Reporting Standards (PFRSs).
The disclosures in relation to the acquisition of CBTL are included in Notes 4 and 11
Basis for Opinion to the consolidated financial statements.

We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Audit Response
Our responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Consolidated Financial Statements section of our We reviewed the unit purchase agreement covering the acquisition and the
report. We are independent of the JFC Group in accordance with the Code of Ethics for consideration paid and the provisional purchase price allocation. We evaluated the
Professional Accountants in the Philippines (Code of Ethics) together with the ethical competence, capabilities and objectivity of the external appraiser who prepared the
requirements that are relevant to our audit of the consolidated financial statements in the appraisal report for the property and equipment and the external valuation specialist
Philippines, and we have fulfilled our other ethical responsibilities in accordance with who valued the trademark by considering their qualifications, relevant experience
these requirements and the Code of Ethics. We believe that the audit evidence we have and reporting responsibilities. We involved our internal specialist in the review of
obtained is sufficient and appropriate to provide a basis for our opinion. the methodologies and assumptions used in arriving at the fair values of the property
and equipment and trademark. We compared the key assumptions used such as the
Key Audit Matters cost indices and trends, and adjustment factors by reference to relevant market data
for the valuation of property and equipment. We also compared the key assumptions
Key audit matters are those matters that, in our professional judgment, were of most used in the valuation of trademark such as revenue growth rate, long-term growth
significance in our audit of the consolidated financial statements of the current period. rate and royalty rate by reference to existing contractual terms, historical trends and
These matters were addressed in the context of our audit of the consolidated financial relevant external information. We tested the parameters used in determining the
statements as a whole, and in forming our opinion thereon, and we do not provide a discount rate against market data. We reviewed the presentation and disclosures in
separate opinion on these matters. For each matter below, our description of how our the consolidated financial statements.
audit addressed the matter is provided in that context.

2019 Annual Report 44 Jollibee Foods Corporation

Recoverability of Goodwill and Trademarks with Indefinite Life Refer to Notes 4 and 17 for the disclosures about provisions and Note 30 for the
disclosures about contingencies of the JFC Group.
Under Philippine Accounting Standard (PAS) 36, Impairment of Assets, the JFC Group is
required to perform an annual impairment test on the amount of goodwill and trademarks Audit Response
with indefinite life. As at December 31, 2019, the JFC Group’s goodwill and trademarks
with indefinite life amounted to ₱14,497.2 million and ₱35,048.0 million, respectively, We involved our internal specialist in evaluating management’s assessment on
attributable to cash generating units (CGUs) mainly from JFC Group’s acquisitions whether any provisions for contingencies should be recognized, and the estimation of
in the Philippines, the People’s Republic of China, Vietnam and the United States of such amount. We also discussed with management the status of the litigations, claims
America which is considered significant to the consolidated financial statements. In and disputes. In addition, we read correspondences with the relevant government
addition, management’s assessment process requires significant judgment and is based agencies, obtained replies from third party legal counsels, and any relevant laws and
on assumptions, specifically discount rate which is applied to the cash flows, net sales rulings on similar matters. We evaluated the position of the JFC Group by considering
forecasts, long-term revenue growth rate, and earnings before interest, taxes, depreciation the relevant laws, rulings and jurisprudence.
and amortization (EBITDA).
Recoverability of Deferred Income Tax Assets
Refer to Notes 4 and 14 to the consolidated financial statements for the details on
trademarks and goodwill and the assumptions used in the forecasts. The Parent Company and certain subsidiaries (foreign and local) have recognized
deferred tax assets amounting to ₱15,424.0 million as at December 31, 2019. Of that
Audit Response amount, around 9.9% relates to net operating loss carryover and excess minimum
corporate income tax over regular corporate income tax. Management estimated the
We involved our internal specialist in evaluating the methodologies and the assumptions recoverability of these deferred tax assets based on the forecasted taxable income
used in determining the recoverable amounts of the CGUs for goodwill and the trademarks taking into account the period in which the deductible temporary differences can
with indefinite life. These assumptions include the discount rate, net sales forecasts, long- be claimed in the Philippines, the People’s Republic of China and the United States
term revenue growth rate and EBITDA. We compared the key assumptions used, such as of America. The analysis of the recoverability of deferred tax assets is significant
forecasted long-term revenue growth rate, forecasted net sales and EBITDA against the to our audit because the assessment process is complex and judgmental, and is
historical data of the CGUs and inquired from management and operations personnel based on assumptions that are affected by expected future performance as well as
about the plans to support the forecast. management’s plans and strategies of the relevant taxable entities, including the
Parent Company and certain subsidiaries.
Furthermore, we tested the parameters used in the determination of discount rate against
market data. We reviewed the weighted average cost of capital (WACC) used in the Refer to Note 24 to the consolidated financial statements for the details of the deferred
impairment test by comparing it with the WACC of comparable companies where the tax assets and Note 4 for the discussion of management’s judgments and estimates.
CGUs operate. We also reviewed the JFC Group’s disclosures about those assumptions to
which the outcome of the impairment test is most sensitive, specifically those that have the Audit Response
most significant effect on the determination of the recoverable amount of goodwill and
trademarks with indefinite life. We obtained an understanding of the Parent Company and its subsidiaries’
deferred income tax calculation process and, together with our internal
Provisions and Contingencies specialist, the applicable tax rules and regulations. We reviewed management’s
assessment on the availability of future taxable income in reference to financial
The JFC Group is involved in litigations, claims and disputes which are normal to its business. forecasts and tax strategies. We evaluated management’s forecast by comparing
This matter is significant to our audit because the estimation of the potential liability forecasts of future taxable income against approved budgets, historical
resulting from these litigations, claims and disputes requires significant management performance of the relevant entities like past revenue growth rates and with
judgment. The inherent uncertainty over the outcome of these matters is brought about relevant external market information such as inflation. We also reviewed the
by the differences in the interpretation and application of laws and rulings. timing of the reversal of future taxable and deductible temporary differences.

2019 Annual Report 45 Jollibee Foods Corporation

Adoption of PFRS 16, Leases Other Information

Effective January 1, 2019, the JFC Group adopted Philippine Financial Reporting Standard Management is responsible for the other information. The other information
(PFRS) 16, Leases, under the full retrospective approach which resulted in significant comprises the information included in the SEC Form 20-IS (Definitive Information
changes in the JFC Group’s accounting policy for leases. The JFC Group’s adoption of Statement), SEC Form 17-A and Annual Report for the year ended December 31,
PFRS 16 is significant to our audit because the Group has high volume of lease agreements; 2019, but does not include the consolidated financial statements and our auditor’s
the recorded amounts are material to the consolidated financial statements; and adoption report thereon. The SEC Form 20-IS (Definitive Information Statement), SEC Form
involves application of significant judgment and estimation in determining the lease term, 17-A and Annual Report for the year ended December 31, 2019 are expected to be
including evaluating whether the JFC Group is reasonably certain to exercise options to made available to us after the date of this auditor’s report.
extend or terminate the lease, and in determining the incremental borrowing rate. This
resulted in the recognition of right of use assets and lease liability amounting to ₱25,324.4 Our opinion on the consolidated financial statements does not cover the other
million and ₱28,682.9 million, respectively, as of January 1, 2018, and the recognition information and we will not express any form of assurance conclusion thereon.
of depreciation expense and interest expense of ₱7,164.8 million and ₱1,824.3 million,
respectively, for the year ended December 31, 2019. In connection with our audits of the consolidated financial statements, our
responsibility is to read the other information identified above when it becomes
The disclosures related to the adoption of PFRS 16 are included in Note 2 to the available and, in doing so, consider whether the other information is materially
consolidated financial statements. inconsistent with the consolidated financial statements or our knowledge obtained in
the audits, or otherwise appears to be materially misstated.
Audit Response
Responsibilities of Management and Those Charged with Governance for the
We obtained an understanding of the JFC Group’s process in implementing the new Consolidated Financial Statements
standard on leases, including the determination of the population of the lease contracts
covered by PFRS 16, the application of the short-term and low value assets exemption, Management is responsible for the preparation and fair presentation of the
the selection of the transition approach and any election of available practical expedients. consolidated financial statements in accordance with PFRSs, and for such internal
control as management determines is necessary to enable the preparation of
We tested the population of lease agreements by comparing the number of locations per consolidated financial statements that are free from material
operations report against lease contract database. misstatement, whether due to fraud or error.

On a test basis, we inspected lease agreements (i.e., lease agreements existing prior to In preparing the consolidated financial statements, management is responsible
the adoption of PFRS 16 and new lease agreements), identified their contractual terms for assessing the JFC Group’s ability to continue as a going concern, disclosing, as
and conditions, and traced these contractual terms and conditions to the lease calculation applicable, matters related to going concern and using the going concern basis of
prepared by management, which covers the calculation of financial impact of PFRS 16, accounting unless management either intends to liquidate the JFC Group or to cease
including the transition adjustments. operations, or has no realistic alternative but to do so.

For selected lease contracts with renewal and/or termination option, we reviewed Those charged with governance are responsible for overseeing the JFC Group’s
the management’s assessment of whether it is reasonably certain that the JFC Group will financial reporting process.
exercise the option to renew or not exercise the option to terminate.

We tested the parameters used in the determination of the incremental borrowing

rate by reference to market data. We test computed the lease calculation prepared by
management on a sample basis, including the transition adjustments. We reviewed the
disclosures related to the transition adjustments based on the requirements of PFRS 16
and PAS 8, Accounting Policies, Changes in Accounting Estimates and Errors.

2019 Annual Report 46 Jollibee Foods Corporation

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements • Obtain sufficient appropriate audit evidence regarding the financial information
of the entities or business activities within the JFC Group to express an opinion
Our objectives are to obtain reasonable assurance about whether the consolidated on the consolidated financial statements. We are responsible for the direction,
financial statements as a whole are free from material misstatement, whether due to supervision and performance of the audit. We remain solely responsible for our
fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable audit opinion.
assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with PSAs will always detect a material misstatement when it exists. We communicate with those charged with governance regarding, among other
Misstatements can arise from fraud or error and are considered material if, individually matters, the planned scope and timing of the audit and significant audit findings,
or in the aggregate, they could reasonably be expected to influence the economic including any significant deficiencies in internal control that we identify during our
decisions of users taken on the basis of these consolidated financial statements. audit.

As part of an audit in accordance with PSAs, we exercise professional judgment and We also provide those charged with governance with a statement that we have
maintain professional skepticism throughout the audit. We also: complied with relevant ethical requirements regarding independence, and to
communicate with them all relationships and other matters that may reasonably be
• Identify and assess the risks of material misstatement of the consolidated thought to bear on our independence, and where applicable, related safeguards.
financial statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is sufficient From the matters communicated with those charged with governance, we determine
and appropriate to provide a basis for our opinion. The risk of not detecting those matters that were of most significance in the audit of the consolidated financial
a material misstatement resulting from fraud is higher than for one resulting statements of the current period and are therefore the key audit matters. We describe
from error, as fraud may involve collusion, forgery, intentional omissions, these matters in our auditor’s report unless law or regulation precludes public
misrepresentations, or the override of internal control. disclosure about the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report because the adverse
• Obtain an understanding of internal control relevant to the audit in order to consequences of doing so would reasonably be expected to outweigh the public
design audit procedures that are appropriate in the circumstances, but not for interest benefits of such communication.
the purpose of expressing an opinion on the effectiveness of the JFC Group’s
internal control. The engagement partner on the audit resulting in this independent auditor’s report
is Mariecris N. Barbaso.
• Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.
SYCIP GORRES VELAYO & CO.
• Conclude on the appropriateness of management’s use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant doubt
on the JFC Group’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s Mariecris N. Barbaso
report to the related disclosures in the consolidated financial statements or, if Partner
such disclosures are inadequate, to modify our opinion. Our conclusions are CPA Certificate No. 97101
based on the audit evidence obtained up to the date of our auditor’s report. SEC Accreditation No. 1513-AR-1 (Group A),
However, future events or conditions may cause the JFC Group to cease to November 16, 2018, valid until November 15, 2021
continue as a going concern. Tax Identification No. 202-065-716
BIR Accreditation No. 08-001998-108-2018,
• Evaluate the overall presentation, structure and content of the consolidated February 14, 2018, valid until February 13, 2021
financial statements, including the disclosures, and whether the consolidated PTR No. 8116727, January 2, 2020, Makati City
financial statements represent the underlying transactions and events in a manner
that achieves fair presentation. April 13, 2020

2019 Annual Report 47 Jollibee Foods Corporation

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Amounts in Thousand Pesos)

December 31, 2018 January 1, 2018 December 31, 2018 January 1, 2018
December 31, 2019 December 31, 2019
(As restated - Note 2) (As restated - Note 2) (As restated - Note 2) (As restated - Note 2)
ASSETS Equity Attributable to Equity Holders of the
Current Assets Parent Company (Note 31)
Cash and cash equivalents (Notes 6, 31 and 32) ₱20,892,021 ₱23,285,915 ₱21,107,474 Capital stock - net of subscription receivable (Note 19) ₱1,092,971 ₱1,088,036 ₱1,084,478
Short-term investments (Notes 6, 31 and 32) 2,130,000 883,200 1,413,400 Additional paid-in capital (Note 19) 8,797,360 8,638,438 7,520,383
Receivables and contract assets (Notes 7, 31 and 32) 5,906,289 4,862,744 3,941,073 Other reserve (Note 11) 1,877,400 – –
Inventories (Note 8) 9,966,084 8,812,174 6,835,514 Cumulative translation adjustments of foreign subsidiaries and
Other current assets (Note 9) 6,725,008 4,694,389 3,858,219 interests in joint ventures and associates (Note 11) 832,080 587,399 338,725
Total Current Assets 45,619,402 42,538,422 37,155,680 Remeasurement loss on net defined benefit plan - net of tax
Noncurrent Assets (Note 25) (965,391) (307,995) (461,769)
Financial assets at fair value through profit or loss Unrealized gain on change in fair value of available-for-sale
(Notes 10, 31 and 32) 38,202 39,842 – financial assets (Note 10) — – 6,758
Available-for-sale financial assets – – 29,862 Comprehensive income (loss) on derivative liability (Note 18) (58,241) 82,852 11,949
Interests in and advances to joint ventures, co-venturers Excess of cost over the carrying value of non-controlling
and associates (Note 11) 6,832,102 3,512,230 7,492,771 interests acquired (Notes 11 and 19) (1,804,766) (1,804,766) (2,152,161)
Property, plant and equipment (Note 12) 32,592,122 26,672,549 20,869,738 Retained earnings (Note 19):
Right-of-use assets (Notes 2 and 29) 42,907,418 36,564,242 25,324,378 Appropriated for future expansion 20,000,000 20,000,000 18,200,000
Investment properties (Note 13) 572,722 848,974 848,974 Unappropriated 23,009,145 19,391,656 15,664,077
Trademarks, goodwill and other intangible assets (Note 14) 50,208,119 31,541,825 15,730,239 52,780,558 47,675,620 40,212,440
Operating lease receivables (Notes 29, 31 and 32) 98,749 64,304 157,775 Less cost of common stock held in treasury (Note 19) 180,511 180,511 180,511
Finance lease receivables (Notes 2, 29 and 31) 161,934 184,800 204,698 52,600,047 47,495,109 40,031,929
Derivative asset (Notes 18, 31 and 32) – 82,852 11,949
Deferred tax assets - net (Note 24) 4,449,262 4,711,794 4,282,822 Non-controlling Interests (Note 11) (318,170) 1,500,988 1,758,351
Other noncurrent assets (Notes 15, 31 and 32) 3,795,974 3,751,044 3,510,518 Total Equity 52,281,877 48,996,097 41,790,280
Total Noncurrent Assets 141,656,604 107,974,456 78,463,724 ₱187,276,006 ₱150,512,878 ₱115,619,404
₱187,276,006 ₱150,512,878 ₱115,619,404
See accompanying Notes to Consolidated Financial Statements.
LIABILITIES AND EQUITY
Current Liabilities
Trade payables and other current liabilities and contract
liabilities (Notes 16, 31 and 32) ₱34,652,065 ₱28,716,769 ₱25,254,613
Income tax payable 391,914 263,473 223,773
Short-term debt (Note 18) 22,180,320 – –
Current portion of:
Lease liabilities (Notes 2, 29, 31 and 32) 7,036,754 5,743,062 4,238,194
Long-term debt (Notes 18, 31 and 32) 3,415,975 4,892,102 1,216,219
Liability for acquisition of a business
(Notes 11, 31 and 32) 2,800 11,238 –
Total Current Liabilities 67,679,828 39,626,644 30,932,799
Noncurrent Liabilities
Noncurrent portion of:
Lease liabilities (Notes 2, 29, 31 and 32) 40,270,650 34,887,727 24,444,724
Long-term debt (Notes 18, 31 and 32) 19,179,748 21,372,251 14,901,052
Liability for acquisition of a business
(Notes 11, 31 and 32) – 2,907 –
Pension liability (Note 25) 2,221,320 1,320,646 1,489,546
Derivative liability (Notes 11, 18, 31 and 32) 58,241 – 51,042
Provisions (Note 17) 825,109 825,109 825,109
Deferred tax liabilities - net (Note 24) 4,759,233 3,481,497 1,184,852
Total Noncurrent Liabilities 67,314,301 61,890,137 42,896,325
Total Liabilities ₱134,994,129 ₱101,516,781 ₱73,829,124

2019 Annual Report 48 Jollibee Foods Corporation

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in Thousand Pesos, Except Per Share Data)

Years Ended December 31

2018 2017
2019
(As Restated - Note 2) (As Restated - Note 2)
REVENUES
Gross sales ₱170,291,063 ₱153,068,666 ₱126,229,530
Sales discount (3,381,699) (2,867,840) (1,565,982)
Net sales 166,909,364 150,200,826 124,663,548
Royalty, set-up fees and others (Note 20) 9,715,716 8,443,464 6,882,988
176,625,080 158,644,290 131,546,536
PFRS 15 impact on system-wide advertising fees 3,001,108 2,523,492 2,036,535
179,626,188 161,167,782 133,583,071
DIRECT COSTS (Note 21) 150,257,881 132,420,585 108,563,894
GROSS PROFIT 29,368,307 28,747,197 25,019,177
EXPENSES
General and administrative expenses - net (Note 22) 18,884,582 15,460,619 13,929,375
Advertising and promotions 3,982,583 4,027,609 3,342,911
22,867,165 19,488,228 17,272,286
INTEREST INCOME (EXPENSE) (Note 23)
Interest income 400,657 424,419 269,433
Interest expense (3,187,298) (2,617,463) (1,793,377)
(2,786,641) (2,193,044) (1,523,944)
EQUITY IN NET EARNINGS (LOSSES) OF JOINT VENTURES AND ASSOCIATES - Net (Note 11) 23,384 (86,750) (282,645)
OTHER INCOME (Note 23) 5,745,671 3,342,528 2,135,647
INCOME BEFORE INCOME TAX 9,483,556 10,321,703 8,075,949
PROVISION FOR INCOME TAX (Note 24)
Current 3,255,664 2,822,092 2,310,630
Deferred (195,024) (141,975) (727,700)
3,060,640 2,680,117 1,582,930
NET INCOME 6,422,916 7,641,586 6,493,019
OTHER COMPREHENSIVE INCOME (LOSS)
Other comprehensive income (loss) to be reclassified to profit
or loss in subsequent periods:
Translation adjustments of foreign subsidiaries 428,818 666,867 96,185
Translation adjustments of foreign joint ventures and associates (Note 11) (131,893) (382,259) 269,119
Comprehensive income on derivative liability (Note 18) (141,093) 70,903 45,479
Net unrealized gain on change in fair value of available-for-sale financial assets - net of tax — — 2,467
155,832 355,511 413,250
Other comprehensive income (loss) not to be reclassified to profit or loss in subsequent periods:
Remeasurement gain (loss) on pension - net of tax (Note 25) (657,396) 153,774 147,032
(501,564) 509,285 560,282
TOTAL COMPREHENSIVE INCOME ₱5,921,352 ₱8,150,871 ₱7,053,301
Net Income Attributable to:
Equity holders of the Parent Company (Note 28) ₱6,432,434 ₱8,212,608 ₱6,939,577
Non-controlling interests (9,518) (571,022) (446,558)
₱6,422,916 ₱7,641,586 ₱6,493,019
Total Comprehensive Income Attributable to:
Equity holders of the Parent Company ₱5,878,626 ₱8,685,959 ₱7,494,091
Non-controlling interests 42,726 (535,088) (440,790)
₱5,921,352 ₱8,150,871 ₱7,053,301
Earnings Per Share for Net Income Attributable to Equity Holders of the Parent Company (Note 28)
Basic ₱5.887 ₱7.555 ₱6.423
Diluted 5.820 7.443 6.340

See accompanying Notes to Consolidated Financial Statements.

2019 Annual Report 49 Jollibee Foods Corporation

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017
(Amounts in Thousand Pesos)

Equity Attributable to Equity Holders of the Parent Company (Note 31)

Cumulative
Translation Unrealized Gain Excess of Cost
Adjustments of on Change in Over the
Foreign Remeasurement Fair Value of Carrying
Capital Stock Subsidiaries Gain (Loss) Available- Comprehensive Value of
Retained Earnings (Note 19)
- Net of and Interests in on Net Defined for-Sale (AFS) Income (Loss) Non-controlling Cost of Common
Subscription Additional Other Joint Ventures Benefit Plan Financial on Derivative Interests Appropriated Stock Held in Non-controlling
Receivable Paid-in Capital Reserve and Associates - Net of tax Assets Liability Acquired for Future Treasury Interests
(Note 19) (Note 19) (Note 11) (Note 11) (Note 25) (Note 10) (Note 18) (Notes 11 and 19) Expansion Unappropriated (Note 19) Total (Note 11) Total Equity
Balance at January 1, 2018, As previously reported ₱1,088,036 ₱8,638,438 ₱— ₱589,501 (₱307,995) ₱— ₱82,852 (₱1,804,766) ₱20,000,000 ₱20,257,995 (₱180,511) ₱48,363,550 ₱1,554,601 ₱49,918,151
Effect of adoption of PFRS 16, Leases (Note 2) — — — (2,102) — — — — — (866,339) — (868,441) (53,613) (922,054)
Balance at January 1, 2019, As restated 1,088,036 8,638,438 — 587,399 (307,995) — 82,852 (1,804,766) 20,000,000 19,391,656 (180,511) 47,495,109 1,500,988 48,996,097
Net income (loss) — — — — — — — — — 6,432,434 — 6,432,434 (9,518) 6,422,916
Other comprehensive income (loss) — — — 244,681 (657,396) — (141,093) — — — — (553,808) 52,244 (501,564)
Total comprehensive income (loss) — — — 244,681 (657,396) — (141,093) — — 6,432,434 — 5,878,626 42,726 5,921,352
Movements in other equity accounts:
Issuances of and subscriptions to capital stock 4,935 580,526 — — — — — — — — — 585,461 — 585,461
Cost of stock options granted - net of tax (Note 26) — (421,604) — — — — — — — — — (421,604) — (421,604)
Cash dividends (Note 19) — — — — — — — — — (2,814,945) — (2,814,945) — (2,814,945)
Cash dividend received by non-controlling interests — — — — — — — — — — — — (14,912) (14,912)
Arising from incorporation of a subsidiary (Note 11) — — 1,877,400 — — — — — — — — 1,877,400 (1,877,400) —
Additional investment during the year (Note 11) — — — — — — — — — — — — 30,428 30,428
4,935 158,922 1,877,400 — — — — — — (2,814,945) — (773,688) (1,861,884) (2,635,572)
Balances at December 31, 2019 ₱1,092,971 P8,797,360 ₱1,877,400 ₱832,080 (₱965,391) ₱— (₱58,241) (₱1,804,766) ₱20,000,000 ₱23,009,145 (₱180,511) ₱52,600,047 (₱318,170) ₱52,281,877
Balance at January 1, 2018, As previously reported ₱1,084,478 ₱7,520,383 ₱— ₱340,368 (₱461,769) ₱6,758 ₱11,949 (₱2,152,161) ₱18,200,000 ₱16,413,140 (₱180,511) ₱40,782,635 ₱1,799,344 ₱42,581,979
Effect of adoption of PFRS 16, Leases (Note 2) — — — (1,643) — — — — — (749,063) — (750,706) (40,993) (791,699)
Transfer of net unrealized gain on AFS financial assets previously
presented as other comprehensive income (Note 10) — — — — — (6,758) — — — 6,758 — — — —
Balance at January 1, 2018, As restated 1,084,478 7,520,383 — 338,725 (461,769) — 11,949 (2,152,161) 18,200,000 15,670,835 (180,511) 40,031,929 1,758,351 41,790,280
Net income (loss), As previously reported — — — — — — — — — 8,329,884 — 8,329,884 (558,549) 7,771,335
Effect of adoption of new accounting standards (Note 2) — — — — — — — — — (117,276) — (117,276) (12,473) (129,749)
Net income (loss), As restated — — — — — — — — — 8,212,608 — 8,212,608 (571,022) 7,641,586
Other comprehensive income — — — 248,674 153,774 — 70,903 — — — — 473,351 35,934 509,285
Total comprehensive income (loss) — — — 248,674 153,774 — 70,903 — — 8,212,608 — 8,685,959 (535,088) 8,150,871
Movements in other equity accounts:
Issuances of and subscriptions to capital stock 3,558 471,979 — — — — — — — — — 475,537 — 475,537
Cost of stock options granted - net of tax (Note 26) — 646,076 — — — — — — — — — 646,076 — 646,076
Cash dividends (Note 19) — — — — — — — — — (2,691,787) — (2,691,787) — (2,691,787)
Appropriation during the year (Note 19) — — — — — — — — 20,000,000 (20,000,000) — — — —
Reversal of appropriated retained earnings —
during the year (Note 19) — — — — — — — — (18,200,000) 18,200,000 — — —
Acquisition of minority interests (Note 11) — — — — — — — 347,395 — — — 347,395 266,308 613,703
Arising from incorporation of a subsidiary (Note 11) — — — — — — — — — — — — 11,417 11,417
3,558 1,118,055 — — — — — 347,395 1,800,000 (4,491,787) — (1,222,779) 277,725 (945,054)
Balances at December 31, 2018 ₱1,088,036 ₱8,638,438 ₱— ₱587,399 (₱307,995) ₱— ₱82,852 (₱1,804,766) ₱20,000,000 ₱19,391,656 (₱180,511) ₱47,495,109 ₱1,500,988 ₱48,996,097
Balance at January 1, 2017, As previously reported ₱1,074,123 ₱5,660,085 ₱— (P20,811) (₱608,801) ₱4,291 (₱33,530) (₱2,152,161) ₱18,200,000 ₱11,659,531 (₱180,511) ₱33,602,216 ₱679,188 ₱34,281,404
Effect of adoption of PFRS 16, Leases — — — — — — — — — (579,520) — (579,520) (31,066) (610,586)
Balance at January 1, 2017, As adjusted 1,074,123 5,660,085 — (20,811) (608,801) 4,291 (33,530) (2,152,161) 18,200,000 11,080,011 (180,511) 33,022,696 648,122 33,670,818
Net income (loss), As previously reported — — — — — — — — — 7,109,120 — 7,109,120 (436,538) 6,672,582
Effect of adoption of new accounting standards (Note 2) — — — — — — — — — (169,543) — (169,543) (10,020) (179,563)
Net income (loss), As restated — — — — — — — — — 6,939,577 — 6,939,577 (446,558) 6,493,019
Other comprehensive income — — — 359,536 147,032 2,467 45,479 — — — — 554,514 5,768 560,282
Total comprehensive income (loss) — — — 359,536 147,032 2,467 45,479 — — 6,939,577 — 7,494,091 (440,790) 7,053,301
Movements in other equity accounts:
Issuances of and subscriptions to capital stock 10,355 850,770 — — — — — — — — — 861,125 — 861,125
Cost of stock options granted - net of tax (Note 26) — 1,009,528 — — — — — — — — — 1,009,528 — 1,009,528
Cash dividends (Note 19) — — — — — — — — — (2,355,511) — (2,355,511) — (2,355,511)
Acquisition of minority interests (Note 11) — — — — — — — — — — — — 1,536,441 1,536,441
Arising from incorporation of a subsidiary (Note 11) — — — — — — — — — — — — 14,578 14,578
10,355 1,860,298 — — — — — — — (2,355,511) — (484,858) 1,551,019 1,066,161
Balances at December 31, 2017 ₱1,084,478 ₱7,520,383 ₱— ₱338,725 (₱461,769) ₱6,758 ₱11,949 (₱2,152,161) ₱18,200,000 ₱15,664,077 (₱180,511) ₱40,031,929 ₱1,758,351 ₱41,790,280

2019 Annual Report 50 Jollibee Foods Corporation

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousand Pesos)

Years Ended December 31

2018 2017
2019 (As restated - Note 2) (As restated - Note 2)
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax ₱9,483,556 ₱10,321,703 ₱8,075,949
Adjustments for:
Depreciation and amortization (Notes 12, 14, 15, 21, 22 and 29) 13,473,246 11,885,752 8,928,224
Interest expense (Note 23) 3,187,298 2,617,463 1,793,377
Gain from acquisition of a business and re-measurement of the previously held interest (Notes 11 and 23) (3,150,776) (754,804) (1,328,733)
Interest income (Note 23) (400,657) (424,419) (269,433)
Impairment losses on:
Property, plant and equipment (Notes 12 and 22) 399,212 — 431,939
Receivables (Notes 7 and 22) 25,342 10,188 143,772
Inventories (Notes 8 and 22) 16,670 8,278 7,443
Other assets — — 122,759
Pre-termination of leases (Note 23) (400,367) (193,230) (52,778)
Net unrealized foreign exchange loss (gain) 265,042 (5,007) (6,913)
Stock options expense (Notes 22 and 26) 262,875 311,964 227,483
Loss (gain) on retirements and disposals of:
Property, plant and equipment and intangible assets (Notes 12, 14 and 22) (278,318) 45,540 174,510
Investment properties (Notes 13 and 22) — — (231,036)
Reversals of provision for impairment on:
Receivables (Notes 7 and 22) (91,402) (23,675) (20,705)
Property, plant and equipment (Notes 12 and 22) (29,179) (408,184) (2,111)
Inventories (Notes 8 and 22) (26,465) (6,148) (53,819)
Equity in net losses (earnings) of joint ventures and an associate (Note 11) (23,384) 86,750 282,645
Loss on movement in derivative liability (Notes 11 and 23) — 49,791 129,371
Accretion of debt issue cost (Note 18) 19,551 14,945 3,274
Movement in pension liability (Note 25) (9,595) 39,705 37,840
Provisions (Notes 17 and 23) — — 794,609
Loss on divestment of subsidiaries and interest in joint venture (Notes 11 and 23) — — 116,207
Income before working capital changes 22,722,649 23,576,612 19,303,874
Decreases (increases) in:
Receivables (639,261) (740,070) (532,690)
Inventories 18,425 (1,919,312) (715,127)
Other current assets (1,886,442) (509,335) (199,821)
Increases in trade payables and other current liabilities 2,437,491 2,485,785 2,060,592
Net cash generated from operations 22,652,862 22,893,680 19,916,828
Income taxes paid (3,127,223) (2,782,392) (2,396,189)
Interest received 369,400 361,394 225,314
Net cash provided by operating activities 19,895,039 20,472,682 17,745,953
(Forward)

2019 Annual Report 51 Jollibee Foods Corporation

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousand Pesos)

Years Ended December 31

2018 2017
2019 (As restated - Note 2) (As restated - Note 2)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Property, plant and equipment (Note 12) (₱10,041,912) (₱9,520,681) (₱8,904,796)
Interest in joint ventures (Note 11) (2,174,784) (1,410,885) (531,147)
Intangible assets (Note 14) — (111,216) (69,634)
Minority interests (Note 11) — (528,800) —
Available-for-sale financial assets (Note 10) — — (450)
Cash (paid) received from acquisition of business - net of cash received (paid) (Note 11) (16,941,556) (3,798,118) 105,251
Proceeds from disposals of:
Property, plant and equipment (Note 12) 1,802,465 932,283 362,288
Investment properties (Note 13) — — 365,490
Decreases (increases) in:
Short term-investments (1,246,800) 530,200 (687,398)
Other noncurrent assets 858,390 (102,327) (482,215)
Interests in and advances to joint ventures, co-venturers and associates — — 337,960
Advances to a joint venture (Note 11) (1,236,720) — (1,059,786)
Dividends received from non-controlling interests (Note 11) 95,661 34,637 20,037
Net cash used in investing activities (28,885,256) (13,974,907) (10,544,400)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from:
Short-term debt (Note 18) 22,180,320 — —
Long-term debt (Note 18) 1,485,526 11,126,459 5,517,281
Issuances of and subscriptions to capital stock (Note 19) 585,461 475,537 861,125
Payments of:
Long-term debt (Note 18) (4,900,541) (5,524,746) (1,607,623)
Cash dividends (Note 19) (2,807,766) (2,667,060) (2,347,164)
Lease liabilities (Note 29) (8,419,749) (6,979,019) (4,902,325)
Interest paid (1,434,897) (731,670) (360,856)
Contributions from non-controlling interests 30,428 11,417 14,578
Net cash provided by (used in) financing activities (Note 33) 6,718,782 (4,289,082) (2,824,984)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,271,435) 2,208,693 4,376,569

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (122,459) (30,252) (2,441)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 23,285,915 21,107,474 16,733,346

CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 6) ₱20,892,021 ₱23,285,915 ₱21,107,474

2019 Annual Report 52 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Corporate Information • PFRS 16, Leases

Jollibee Foods Corporation Doing business under the name and style of Jollibee (formerly Jollibee PFRS 16 supersedes PAS 17, Leases, Philippine Interpretation International Financial
Foods Corporation) (the Parent Company) was incorporated in the Philippines and registered with the Reporting Interpretations Committee (IFRIC) 4, Determining whether an Arrangement contains
Philippine Securities and Exchange Commission (SEC) on January 11, 1978. The Parent Company and a Lease, Standard Interpretation Committee (SIC)-15, Operating Leases-Incentives, and SIC-
its subsidiaries (collectively referred to as “the JFC Group”) and affiliates are involved primarily in the 27, Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard
development, operations and franchising of quick service restaurants (QSRs) under the trade names sets out the principles for the recognition, measurement, presentation and disclosure of leases
“Jollibee”, “Chowking”, “Greenwich”, “Red Ribbon”, “Yong He King”, “Hong Zhuang Yuan”, “Mang Inasal”, and requires lessees to account for all leases under a single on-balance sheet model similar to
“Burger King”, “Highlands Coffee”, “Pho24”, “Hard Rock Cafe”, “Dunkin’ Donuts”, “Smashburger”, “Tim Ho the accounting for finance leases under PAS 17, Leases. The standard includes two recognition
Wan”, “Tortas Frontera”, “The Coffee Bean & Tea Leaf” and “Panda Express”. The other activities of the JFC exemptions for lessees – leases of ‘low-value’ assets (e.g., personal computers) and short-term
Group include manufacturing and property leasing in support of the QSR systems and other business leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease,
activities (see Notes 2 and 5). The corporate life of the Parent Company is fifty (50) years from the date a lessee will recognize a liability to make lease payments (i.e., the lease liability) and an asset
of incorporation or until 2028. representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset).
Lessees will be required to separately recognize the interest expense on the lease liability and the
On June 29, 2018, the stockholders and Board of Directors (BOD) of the Parent Company approved the depreciation expense on the right-of-use asset.
change of the Parent Company’s name Jollibee Foods Corporation to Jollibee Foods Corporation Doing
business under the name and style of Jollibee in compliance with the regulatory requirements. The SEC Lessees will be also required to remeasure the lease liability upon the occurrence of certain events
approved the amendment of the Parent Company’s articles of incorporation on October 12, 2018. (e.g., a change in the lease term, a change in future lease payments resulting from a change in an
index or rate used to determine those payments). The lessee will generally recognize the amount
The common shares of the Parent Company are listed and traded in the Philippine Stock Exchange (PSE) of the remeasurement of the lease liability as an adjustment to the right-of-use asset.
beginning July 14, 1993.
Lessor accounting under PFRS 16 is substantially unchanged from today’s accounting under PAS
The registered office address of the Parent Company is 10/F Jollibee Plaza Building, 10 F. Ortigas Jr. 17. Lessors will continue to classify all leases using the same classification principle as in PAS 17
Ave., Ortigas Center, Pasig City. and distinguish between two types of leases: operating and finance leases.

The consolidated financial statements as at December 31, 2019 and 2018 and for each of the three years PFRS 16 also requires lessees and lessors to make more extensive disclosures than under PAS 17.
ended December 31, 2019 were reviewed and recommended for approval by the Audit Committee as
well as approved and authorized for issuance by the BOD on April 13, 2020. A lessee can choose to apply the standard using either a full retrospective or a modified
retrospective approach. The standard’s transition provisions permit certain reliefs.

2. Basis of Preparation, Statement of Compliance, Changes in Accounting Policies and Basis of The JFC Group adopted PFRS 16 using the full retrospective method of adoption with the date
Consolidation of initial application of January 1, 2019. The JFC Group elected to use the transition practical
expedient allowing the standard to be applied only to contracts that were previously identified as
Basis of Preparation leases applying PAS 17 and IFRIC 4 at the date of initial application. The JFC Group elected to use
The consolidated financial statements of the JFC Group have been prepared on a historical cost basis, the recognition exemptions for lease contracts that, at the commencement date, have a lease term
except for financial assets at fair value through profit or loss (FVTPL) and derivative financial instruments of 12 months or less and do not contain a purchase option (‘short-term leases’), and lease contracts
in 2019 and 2018 and available-for-sale (AFS) investments and derivative financial instruments in 2017, for which the underlying asset is of low value (‘low-value assets’).
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. All values are rounded to the The effect of adoption of PFRS 16 is as follows:
nearest thousand pesos, except par values, per share amounts, number of shares and when otherwise
indicated. Impact on the consolidated statements of financial position (increase / (decrease)):

Statement of Compliance December 31, December 31, January 1,

The accompanying consolidated financial statements have been prepared in compliance with Philippine 2019 2018 2018
Financial Reporting Standards (PFRSs). Assets
Right-of-use assets (see Note 29) P42,907,418 P36,564,242 P25,324,378
Operating lease receivables (17,990) (16,953) (14,279)
New Standards, Interpretations and Amendments adopted by the JFC Group Finance lease receivables 161,934 184,800 204,698
The accounting policies adopted are consistent with those of the previous financial year, except for the Property, plant and equipment (see Note 12) (17,087) (21,442) (24,076)
adoption of the following new accounting pronouncements starting January 1, 2019. Adoption of these Other intangible assets (see Note 14) (219,449) (288,232) —
pronouncements did not have any significant impact on the consolidated statement of financial position Prepayments (293,022) (150,157) (29,221)
and performance unless otherwise indicated. Deferred tax assets 438,252 388,798 374,009
Total Assets ₱42,960,056 ₱36,661,056 ₱25,835,509

2019 Annual Report 53 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, December 31, January 1, all of the risks and rewards incidental to ownership of the leased asset to the JFC Group; otherwise
2019 2018 2018 it was classified as an operating lease. Finance leases were capitalized at the commencement of

the lease at the inception date fair value of the leased property or, if lower, at the present value of
Liabilities
Operating lease payable (P3,328,811) (P3,016,923) (P2,051,567) the minimum lease payments. Lease payments were apportioned between interest (recognized
Lease liabilities (see Note 29) 47,307,404 40,630,789 28,682,918 as finance costs) and reduction of the lease liability. The JFC Group has no lease commitments
Deferred tax liabilities (41,899) (30,756) (4,143) accounted for as finance lease. In an operating lease, the leased property was not capitalized and
Total Liabilities 43,936,694 37,583,110 26,627,208 the lease payments were recognized as rent expense in profit or loss on a straight-line basis over
Equity the lease term. Any prepaid rent and accrued rent were recognized under “Prepayments” and
Retained earnings (913,347) (866,339) (749,063)
“Operating lease payable” in the consolidated statement of financial position, respectively.
Noncontrolling interests (70,926) (53,613) (40,993)
Cumulative translation adjustments 7,635 (2,102) (1,643)
Total Equity (976,638) (922,054) (791,699) Upon adoption of PFRS 16, the JFC Group applied a single recognition and measurement
Total Liabilities and Equity ₱42,960,056 ₱36,661,056 ₱25,835,509 approach for all leases for which it is the lessee, except for short-term leases and leases of low-
value assets. The JFC Group recognized lease liabilities to make lease payments and right-of-use
Impact on the consolidated statement of comprehensive income (increase / (decrease)): assets representing the right to use the underlying assets. In accordance with the full retrospective
2019 2018 2017 method of adoption, the JFC Group applied PFRS 16 at the date of initial application as if it had
already been effective at the commencement date of existing lease contracts.

Depreciation expense (included in “Store
and manufacturing costs” under “Direct
As at January 1, 2018, December 31, 2018 and December 31, 2019:
costs” account in the consolidated • Right-of-use assets were recognized and presented separately in the consolidated statement
statements of comprehensive income) ₱7,128,477 ₱5,989,858 ₱4,172,539 of financial position. Asset retirement obligations previously recognized and included under
Depreciation expense (included in “General property, plant and equipment were reclassified to right-of-use assets (see Note 12). The
and administrative expenses” in the right of use assets was also adjusted by favourable terms of the lease relative to market terms
consolidated statements of recognized and included under other intangible assets (see Note 14).
comprehensive income) 36,326 31,526 19,421
Amortization of favourable leases (59,446) (43,567) —
• Additional lease liabilities were recognized and presented separately in the consolidated
Depreciation expense of asset retirement obligation (7,634) (1,825) (8,902) statement of financial position.
Rent income (26,338) (31,606) (30,015) • Finance lease receivables relating to sublease arrangement were recognized and presented
Rent expense (included in “Store and manufacturing separately in the consolidated statement of financial position.
costs” and “General and administrative • Prepayments, operating lease receivables relating to sublease arrangement and operating
expenses” in the consolidated statements of lease payable related to previous operating leases were derecognized.
comprehensive income) (8,442,543) (7,450,971) (5,290,310)
Operating profit 1,318,482 1,443,373 1,077,237
• Deferred tax assets increased while deferred tax liabilities decreased because of the
Finance costs 1,824,311 1,728,620 1,387,557 deferred tax impact of the changes in recognized lease related assets and liabilities.
Interest income 8,086 9,034 9,866 • The net effect of these adjustments had been adjusted to retained earnings, non-controlling
Other income 371,514 107,332 36,893 interests and cumulative translation adjustments.
Income tax expense (61,854) (39,132) (83,998)
Profit for the year (₱64,375) (₱129,749) (₱179,563) For the year ended December 31, 2019:
Attributable to:
• Depreciation and amortization increased by ₱7,097.7 million relating to the depreciation
Equity holders of the parent (₱47,008) (₱117,276) (₱169,543) of additional assets recognized (i.e., increase in right-of-use assets, net of decrease in
Non-controlling interests (17,367) (12,473) (10,020) property, plant and equipment and other intangible assets).
• Rent expense decreased by ₱8,442.5 million relating to previous operating leases.
Impact on the consolidated statement of comprehensive income (increase / (decrease)):
• Finance costs increased by ₱1,824.3 million relating to the interest expense on additional
2019 2018 2017 lease liabilities recognized.
• Other income increased by ₱371.5 million due to lease liabilities, net of right-of-use assets,
Net cash flows from operating activities ₱8,419,749 ₱6,979,019 ₱4,902,325 derecognized relating to pre-terminated lease during the year.
Net cash flows from financing activities (8,419,749) (6,979,019) (4,902,325) • Rent income relating to previous operating leases decreased by ₱26.3 million while finance
income increased by ₱8.1 million relating to interest income on additional lease receivables
There is no material impact on other comprehensive income. The basic EPS decreased from recognized.
₱7.663 to ₱7.555 and ₱6.580 to ₱6.423, while diluted EPS decreased from ₱7.550 to ₱7.443 and • Income tax expense decreased by ₱61.9 million relating to the tax effect of these changes
₱6.494 to ₱6.340 for the years ended December 31, 2018 and 2017, respectively. in expenses.
• Cash outflows from operating activities decreased by ₱8,419.7 million and cash outflows
The nature of the effect of adoption of PFRS 16 is as follows: from financing activities increased by the same amount, representing the payments for the
principal portion of recognized lease liabilities.
The JFC Group has various lease commitments, as a lessee, for QSR outlets, warehouses and office
spaces which were accounted for as operating leases under PAS 17. Before the adoption of PFRS
16, the JFC Group classified each of its leases (as lessee) at the inception date as either a finance
lease or an operating lease. A lease was classified as a finance lease if it transferred substantially

2019 Annual Report 54 Jollibee Foods Corporation

• Philippine Interpretation IFRIC-23, Uncertainty over Income Tax Treatments • Determine net interest for the remainder of the period after the plan amendment, curtailment
or settlement using: the net defined benefit liability (asset) reflecting the benefits offered
The interpretation addresses the accounting for income taxes when tax treatments involve under the plan and the plan assets after that event; and the discount rate used to remeasure
uncertainty that affects the application of PAS 12, Income Taxes, and does not apply to taxes or that net defined benefit liability (asset).
levies outside the scope of PAS 12, nor does it specifically include requirements relating to interest
and penalties associated with uncertain tax treatments. The amendments also clarify that an entity first determines any past service cost, or a gain or loss
on settlement, without considering the effect of the asset ceiling. This amount is recognized
The interpretation specifically addresses the following: in profit or loss. An entity then determines the effect of the asset ceiling after the plan amendment,
curtailment or settlement. Any change in that effect, excluding amounts included in the net
• Whether an entity considers uncertain tax treatments separately interest, is recognized in other comprehensive income.
• The assumptions an entity makes about the examination of tax treatments by taxation
authorities The amendments had no significant impact on the consolidated financial statements of the JFC
• How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits Group.
and tax rates
• How an entity considers changes in facts and circumstances • Amendments to PAS 28, Long-term Interests in Associates and Joint Ventures

The entity is required to determine whether to consider each uncertain tax treatment separately or The amendments clarify that an entity applies PFRS 9 to long-term interests in an associate or joint
together with one or more other uncertain tax treatments and use the approach that better predicts the venture to which the equity method is not applied but that, in substance, form part of the net
resolution of the uncertainty. The entity shall assume that the taxation authority will examine amounts investment in the associate or joint venture (long-term interests). This clarification is relevant
that it has a right to examine and have full knowledge of all related information when making those because it implies that the expected credit loss model in PFRS 9 applies to such long-term
examinations. If an entity concludes that it is not probable that the taxation authority will accept an interests.
uncertain tax treatment, it shall reflect the effect of the uncertainty for each uncertain tax treatment using
the method the entity expects to better predict the resolution of the uncertainty. The amendments also clarified that, in applying PFRS 9, an entity does not take account of any
losses of the associate or joint venture, or any impairment losses on the net investment, recognized
Upon adoption of the Interpretation, the JFC Group has assessed whether it has any uncertain tax as adjustments to the net investment in the associate or joint venture that arise from applying PAS
position. The JFC Group applies significant judgement in identifying uncertainties over its income tax 28, Investments in Associates and Joint Ventures.
treatments. The JFC Group determined, based on its tax compliance review/assessment, in consultation
with its external tax counsels, that it is probable that its income tax treatments (including those for the These amendments had no impact on the consolidated financial statements as the JFC Group
subsidiaries) will be accepted by the taxation authorities. Accordingly, the interpretation did not have an does not have long-term interests in its associate and joint venture.
impact on the consolidated financial statements of the JFC Group.
• Annual Improvements to PFRSs 2015-2017 Cycle
• Amendments to PFRS 9, Prepayment Features with Negative Compensation
• Amendments to PFRS 3, Business Combinations, and PFRS 11, Joint Arrangements,
Under PFRS 9, a debt instrument can be measured at amortized cost or at fair value through other Previously Held Interest in a Joint Operation
comprehensive income, provided that the contractual cash flows are ‘solely payments of principal
and interest on the principal amount outstanding’ (the SPPI criterion) and the instrument is held The amendments clarify that, when an entity obtains control of a business that is a joint
within the appropriate business model for that classification. The amendments to operation, it applies the requirements for a business combination achieved in stages,
PFRS 9 clarify that a financial asset passes the SPPI criterion regardless of the event including remeasuring previously held interests in the assets and liabilities of the joint
or circumstance that causes the early termination of the contract and irrespective of operation at fair value. In doing so, the acquirer remeasures its entire previously held interest
which party pays or receives reasonable compensation for the early termination of the contract. in the joint operation.

These amendments had no impact on the consolidated financial statements of the JFC Group. A party that participates in, but does not have joint control of, a joint operation might obtain
joint control of the joint operation in which the activity of the joint operation constitutes a
• Amendments to PAS 19, Employee Benefits, Plan Amendment, Curtailment or Settlement business as defined in PFRS 3. The amendments clarify that the previously held interests in
The amendments to PAS 19 address the accounting when a plan amendment, curtailment or that joint operation are not remeasured.
settlement occurs during a reporting period. The amendments specify that when a plan
amendment, curtailment or settlement occurs during the annual reporting period, an entity is An entity applies those amendments to business combinations for which the acquisition date
required to: is on or after the beginning of the first annual reporting period beginning on or after
January 1, 2019 and to transactions in which it obtains joint control on or after the beginning
• Determine current service cost for the remainder of the period after the plan amendment, of the first annual reporting period beginning on or after January 1, 2019, with early
curtailment or settlement, using the actuarial assumptions used to remeasure the net defined application permitted. These amendments had no impact on the consolidated financial
benefit liability (asset) reflecting the benefits offered under the plan and the plan assets after statements of the JFC Group as there is no transaction where joint control is obtained.
that event

2019 Annual Report 55 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• Amendments to PAS 12, Income Tax Consequences of Payments on Financial Instruments The amendments refine the definition of material in PAS 1 and align the definitions used across
Classified as Equity PFRSs and other pronouncements. They are intended to improve the understanding of the
existing requirements rather than to significantly impact an entity’s materiality judgements.
The amendments clarify that the income tax consequences of dividends are linked more
directly to past transactions or events that generated distributable profits than to distributions An entity applies those amendments prospectively for annual reporting periods beginning on or
to owners. Therefore, an entity recognizes the income tax consequences of dividends in after January 1, 2020, with earlier application permitted
profit or loss, other comprehensive income or equity according to where the entity originally
recognized those past transactions or events. Effective beginning on or after January 1, 2021

An entity applies those amendments for annual reporting periods beginning on or • PFRS 17, Insurance Contracts
after January 1, 2019, with early application is permitted. These amendments had no impact
on the consolidated financial statements of the JFC Group because dividends declared by PFRS 17 is a comprehensive new accounting standard for insurance contracts covering recognition
the Group do not give rise to tax obligations under the current tax laws. and measurement, presentation and disclosure. Once effective, PFRS 17 will replace PFRS 4,
Insurance Contracts. This new standard on insurance contracts applies to all types of insurance
• Amendments to PAS 23, Borrowing Costs, Borrowing Costs Eligible for Capitalization contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the type of entities
that issue them, as well as to certain guarantees and financial instruments with discretionary
The amendments clarify that an entity treats as part of general borrowings any borrowing participation features. A few scope exceptions will apply.
originally made to develop a qualifying asset when substantially all of the activities necessary
to prepare that asset for its intended use or sale are complete. The overall objective of PFRS 17 is to provide an accounting model for insurance contracts that
is more useful and consistent for insurers. In contrast to the requirements in PFRS 4, which are
An entity applies those amendments to borrowing costs incurred on or after the beginning of largely based on grandfathering previous local accounting policies, PFRS 17 provides a
the annual reporting period in which the entity first applies those amendments. An entity comprehensive model for insurance contracts, covering all relevant accounting aspects. The core
applies those amendments for annual reporting periods beginning on or after January 1, of PFRS 17 is the general model, supplemented by:
2019, with early application permitted.
• A specific adaptation for contracts with direct participation features (the variable fee
Since the JFC Group’s current practice is in line with these amendments, they had no impact approach)
on the consolidated financial statements of the JFC Group. • A simplified approach (the premium allocation approach) mainly for short-duration contracts

Future Changes in Accounting Policies PFRS 17 is effective for reporting periods beginning on or after January 1, 2021, with comparative
Pronouncements issued but not yet effective are listed below. Unless otherwise indicated, the JFC Group figures required. Early application is permitted. Adoption of this standard is not expected to have
does not expect that the future adoption of the said pronouncements will have a significant impact on any impact to the JFC Group.
its consolidated financial statements. The JFC Group intends to adopt the following pronouncements
when these become effective. Deferred Effectivity

Effective beginning on or after January 1, 2020 • Amendments to PFRS 10, Consolidated Financial Statements and PAS 28, Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture
• Amendments to PFRS 3, Definition of a Business
The amendments address the conflict between PFRS 10 and PAS 28 in dealing with the loss of
The amendments to PFRS 3 clarify the minimum requirements to be a business, remove the control of a subsidiary that is sold or contributed to an associate or joint venture. The amendments
assessment of a market participant’s ability to replace missing elements, and narrow the definition clarify that a full gain or loss is recognized when a transfer to an associate or joint venture involves
of outputs. The amendments also add guidance to assess whether an acquired process is a business as defined in PFRS 3. Any gain or loss resulting from the sale or contribution of assets
substantive and add illustrative examples. An optional fair value concentration test is introduced that does not constitute a business, however, is recognized only to the extent of unrelated i
which permits a simplified assessment of whether an acquired set of activities and assets is not nvestors’ interests in the associate or joint venture.
a business.
On January 13, 2016, the Financial Reporting Standards Council postponed the original effective
An entity applies those amendments prospectively for annual reporting periods beginning on or date of January 1, 2016 of the said amendments until the International Accounting Standards
after January 1, 2020, with earlier application permitted. Board has completed its broader review of the research project on equity accounting that may
result in the simplification of accounting for such transactions and of other aspects of accounting
These amendments will apply on future business combinations of the JFC Group. for associates and joint ventures.

• Amendments to PAS 1, Presentation of Financial Statements, and PAS 8, Accounting Policies, Basis of Consolidation
Changes in Accounting Estimates and Errors, Definition of Material The consolidated financial statements comprise the financial statements of the Parent Company and
its subsidiaries as at December 31, 2019 and 2018 and for each of the three years in the period ended
December 31, 2019.

2019 Annual Report 56 Jollibee Foods Corporation

Control is achieved when the JFC Group is exposed, or has rights, to variable returns from its A change in ownership interest in a subsidiary that does not result in a loss of control is accounted
involvement with the investee and has the ability to affect those returns through its power over the for as an equity transaction. The carrying amounts of the controlling and non-controlling interests
investee. Specifically, the JFC Group controls an investee if, and only if, the JFC Group has: are adjusted to reflect the changes in the JFC Group’s relative interests in the subsidiary. The
JFC Group recognizes directly in equity any difference between the amount by which the non-
• Power over the investee (i.e., existing rights that give it the current ability to direct the relevant controlling interests are adjusted and the fair value of the consideration paid or received, and
activities of the investee); attribute it to the equity holders of the Parent Company. These include acquisitions of non-
• Exposure, or rights, to variable returns from its involvement with the investee; controlling interests of Greenwich, Yong He King, Mang Inasal, Happy Bee Foods Processing Pte.
• The ability to use its power over the investee to affect its returns. Ltd. and Smashburger. In particular cases where the JFC Group acquires non-controlling interest
in a subsidiary at a consideration in excess of its carrying amount, the excess is charged to the
There is a general presumption that a majority of voting rights results in control. To support this “Excess of cost over the carrying value of non-controlling interests acquired” account under equity.
presumption when the JFC Group has less than a majority of the voting or similar rights of an investee, These changes in the ownership interest in a subsidiary do not result in the recognition of a gain
the JFC Group considers all relevant facts and circumstances in assessing whether it has power over an or loss in profit or loss.
investee, including:
The consolidated financial statements include the accounts of the Parent Company and the
• The contractual arrangement with the other vote holders of the investee. following wholly-owned and majority-owned subsidiaries as at December 31, 2019 and 2018:
• Rights arising from other contractual arrangements.
• The JFC Group’s voting rights and potential voting rights. 2019 2018
Country of Principal Activities Direct Indirect Direct Indirect
The JFC Group re-assesses whether or not it controls an investee if facts and circumstances indicate that Incorporation Food service Ownership Ownership Ownership Ownership

there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins Fresh N’ Famous Foods Inc. (Fresh N’ Famous) - Philippines Holding company 100 — 100 —
when the JFC Group obtains control over the subsidiary and ceases when the JFC Group loses control Chowking Food Corporation USA United States of —
America (USA) 100 — 100
of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during Zenith Foods Corporation (Zenith) Philippines Food service 100 — 100 —
the year are included in the consolidated financial statements from the date the JFC Group gains control Freemont Foods Corporation (Freemont) Philippines Food service 100 — 100 —
RRB Holdings, Inc. (RRBH): Philippines Holding company 100 — 100 —
until the date the JFC Group ceases to control the subsidiary. Red Ribbon Bakeshop, Inc. (RRBI) Philippines Food service — 100 — 100
Red Ribbon Bakeshop, Inc. USA (RRBI USA) USA Food service — 100 — 100
Mang Inasal Philippines Inc. (Mang Inasal) Philippines Food service 100 — 100 —
Profit or loss and each component of OCI are attributed to the equity holders of the Parent Company Grandworth Resources Corporation (Grandworth): Philippines Leasing 100 — 100 —
and to the non-controlling interests, even if this results in the non-controlling interests having a deficit Adgraphix, Inc. (Adgraphix) Philippines Digital printing — 100 — 100
IConnect Multi Media Network, Inc. (IConnect) Philippines Dormant — 60 — 60
balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring JC Properties & Ventures Co. Philippines Dormant — 50 — 50
Honeybee Foods Corporation (HFC): USA Food service 100 — 100 —
their accounting policies in line with the JFC Group’s accounting policies. All intra-group assets and Tokyo Teriyaki Corporation (TTC) USA Food service — 100 — 100
liabilities, equity, income, expenses and cash flows relating to transactions between members of the JFC Honeybee Foods (Canada) Corporation (HFCC) Canada Food service — 100 — 100
Jollibee Worldwide Pte. Ltd. (JWPL): Singapore Holding company 100 — 100 —
Group are eliminated in full on consolidation. Regional Operating Headquarters of JWPL (JWS) Philippines Financial — 100 — 100
accounting,
human resources
The reporting dates of the Parent Company and the associates or joint ventures are identical and the and logistics
latter’s accounting policies conform to those used by the Parent Company for like transactions and services
Golden Plate Pte., Ltd. (GPPL): Singapore Holding company — 100 — 100
events in similar circumstances. - Golden Beeworks Pte. Ltd. Singapore Food service — 60 — 60
- Golden Piatto Pte. Ltd. (m) Singapore Holding company — 75 — 75
• Cibo Felice S.R.L. (k) Italy Food service — 100 — 100
If the JFC Group loses control over a subsidiary, it: - Bee World Spain, Sociedad Limitada (h) Spain Food service — 100 — —
- Hong Yun Hong (Shanghai) Food and People’s Republic Food service — 60 — —
Beverages Management Company. Ltd.(a) of China (PRC)
• Derecognizes the assets (including goodwill) and liabilities of the subsidiary; Golden Cup Pte.Ltd. Singapore Holding company — 60 — 60
- Beijing Golden Coffee Cup Food & PRC Food service — 100 — 100
• Derecognizes the carrying amount of any non-controlling interests; Beverage Management Co., Ltd.
• Derecognizes the cumulative translation differences recorded in equity; Beijing New Hongzhuangyuan Food and Beverage PRC Food service — 100 — 100
Management Co., Ltd. (Hong Zhuang Yuan)
• Recognizes the fair value of the consideration received; Southsea Binaries Ltd. (Southsea) British Virgin Holding company — 100 — 100
• Recognizes the fair value of any investment retained; Island (BVI)
Beijing Yong He King Food and Beverage Co., Ltd. PRC Food service — 100 — 100
• Recognizes any surplus or deficit in profit or loss; and, Shenzhen Yong He King Food and Beverage Co., Ltd. PRC Food service — 100 — 100
• Reclassifies the parent’s share of components previously recognized in other comprehensive Hangzhou Yongtong Food and Beverage Co., Ltd. PRC Food service — 100 — 100
Hangzhou Yong He King Food and Beverage Co., Ltd. PRC Food service — 100 — 100
income to profit or loss or retained earnings, as appropriate, as would be required if the JFC Wuhan Yong He King Food and Beverage Co., Ltd. PRC Food service — 100 — 100
Tianjin Yong He King Food and Beverage Co., Ltd. PRC Food service — 100 — 100
Group had directly disposed of the related assets or liabilities. Happy Bee Foods Processing Pte. Ltd. (HBFPPL) Singapore Holding company — 100 — 100
- Happy Bee Foods Processing (Anhui) Co. Ltd. PRC Food service — 100 — 100
JSF Investments Pte. Ltd. (JSF): Singapore Holding company — 100 — 99
Non-controlling interests represent the interests in the subsidiaries not held by the Parent Company, and - SF Vung Tau Joint Stock Company (l) Vietnam Holding company — 60 — 60
are presented separately in the consolidated statement of comprehensive income and consolidated • Highland Coffee Service Joint-stock Company Vietnam Food service — 100 — 100
• Quantum Corporation Vietnam Food service — 100 — 100
statement of financial position, separately from equity attributable to equity holders of the • Pho Viet Joint Stock Company Vietnam Food service — 100 — 100
Parent Company. • Pho 24 Service Trade Manufacture Vietnam Food service — 100 — 100
Corporation
(Forward)

2019 Annual Report 57 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2019 2018 on current/noncurrent classification.

Country of Principal Activities Direct Indirect Direct Indirect An asset is classified as current when it is:
Incorporation Food service Ownership Ownership Ownership Ownership
• Expected to be realized or intended to be sold or consumed in the normal operating cycle;
- Blue Sky Holdings Limited (l) Hong Kong Holding company — 60 — 60 • Held primarily for the purpose of trading;
• Sino Ocean Limited Hong Kong Food service — 100 — 100
• Blue Sky Holdings (Macau) Limited Macau Food service — 100 — 100 • Expected to be realized within twelve months after the reporting period; or
Jollibee (China) Food & Beverage Management Co.Ltd. PRC Management
company
—

100

—

100 • Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at
Jollibee International (BVI) Ltd. (JIBL): BVI Holding company — 100 — 100 east twelve months after the reporting period.
- Jollibee Vietnam Corporation Ltd. Vietnam Food service — 100 — 100
• Goldstar Food Trade and Service Company
Ltd (GSC) Vietnam Food service — 100 — 100 A liability is classified as current when:
- PT Chowking Indonesia Indonesia Food service — 100 — 100
- PT Jollibee Indonesia Indonesia Dormant — 100 — 100 • It is expected to be settled in the normal operating cycle;
- Jollibee (Hong Kong) Limited and Subsidiaries Hong Kong Dormant — 85 — 85 • It is held primarily for the purpose of trading;
- Belmont Enterprises Ventures Limited (Belmont): BVI Holding company — 100 — 100
• Shanghai Belmont Enterprises Management PRC Business — — — 100 • It is due to be settled within twelve months after the reporting period; or
and Adviser Co., Ltd. (SBEMAC) (b) management • There is no unconditional right to defer the settlement of the liability for at least twelve months
service
• Yong He Holdings Co., Ltd. BVI Holding company — 100 — 100 after the reporting period.
• Centenary Ventures Ltd. BVI Holding company — 100 — 100
Bee Good! Inc. (BGI) USA Holding company — 100 — 100
- SJBF LLC (SJBF)(i) USA Food service — 100 — 40 The JFC Group classifies all other assets and liabilities as noncurrent. Deferred tax assets and liabilities
Bee World UK Limited (UK) (g) UK Holding company — 100 — —
Super Magnificent Coffee Company Pte. Ltd. (SMCC-SG) (f) Singapore Holding company — 80 — —
are classified as noncurrent assets and liabilities.
- Super Magnificent Coffee Company Ireland Limited
(SMCC-IE) (e) Ireland Holding company — 100 — —
- Super Magnificent Coffee Company Hungary Kft. Fair Value Measurement
(SMCC-HU) (d) Hungary Holding company — 100 — — Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
• Java Ventures, LLC (JVL) (g) USA Holding company — 100 — —
• International Coffee & Tea, LLC (ICTL) (c) USA Food service — 100 — — transaction between market participants at the measurement date. The fair value measurement is based
• 6000 Jefferson BH, LLC USA Holding company — 100 — — on the presumption that the transaction to sell the asset or transfer the liability takes place either:
• CBTL Ventures, LLC USA Food service — 100 — —
• CBTL Franchising, LLC USA Franchising — 100 — —

- The Coffee Bean & Tea Leaf (Singapore) Pte., Ltd.

company • In the principal market for the asset or liability; or
(CBTL-SG) (c) Singapore Food service — 100 — — • In the absence of a principal market, in the most advantageous market for the asset or liability.
• The Coffee Bean & Tea Leaf (Malaysia) Sdn. Bhd. Malaysia Food service — 100 — —
• The Coffee Bean & Tea Leaf (Hongkong) Limited Hong Kong Dormant — 100 — —
Chanceux, Inc. Philippines Holding company 100 — 100 — The principal or the most advantageous market must be accessible by the JFC Group.
BKTitans Inc. (BKTitans) Philippines Holding company — 54 — 54
- PFN Holdings Corporation Philippines Holding company — 99 — 99
• PERF Restaurants, Inc. Philippines Food service — 100 — 100 The fair value of an asset or a liability is measured using the assumptions that market participants would
• PERF Trinoma Philippines Food service — 100 — 100
• PERF MOA Philippines Food service — 100 — 100 use when pricing the asset or liability, assuming that market participants act in their economic best interest.
Jollibee Foods Corporation (USA) USA Holding company 100 — 100 —
Donut Magic Phils., Inc. (Donut Magic)(n) Philippines Dormant 100 — 100 —
Ice Cream Copenhagen Phils., Inc. (ICCP)(n) Philippines Dormant 100 — 100 — A fair value measurement of a non-financial asset takes into account a market participant’s ability to
Mary’s Foods Corporation (Mary’s)(n)
QSR Builders, Inc.
Philippines
Philippines
Dormant
Dormant
100
100
—
—
100
100
—
—
generate economic benefits by using the asset in its highest and best use or by selling it to another
market participant that would use the asset in its highest and best use.
(a) On November 18, 2019, the JFC Group, through GPPL incorporated Hong Yun Hong in PRC.
(b) On August 28, 2019, SBEMAC was deregistered with the Shanghai Administration for Industry and Commerce and completely dissolved
and liquidated on December 23, 2019. The fair value for financial instruments traded in active markets at the reporting date is based on their
(c) On September 24, 2019, the JFC Group, through Java Ventures, LLC completed the acquisition of 100% share of International quoted price or binding dealer price quotations, without any deduction for transaction costs. Where
Coffee & Tea, LLC.
(d) On September 11, 2019, Super Magnificent Coffee Company Hungary Kft. was incorporated. the JFC Group has financial assets and financial liabilities with offsetting positions in market risks or
(e) On August 22, 2019, Super Magnificent Coffee Company Ireland Limited was incorporated. counterparty credit risk, it has elected to use the measurement exception to measure the fair value of
(f) On June 28, 2019, the JFC Group, through JWPL incorporated Super Magnificent Coffee Company Pte. Ltd. in Singapore.
(g) On June 4, 2019, Java Ventures, LLC (USA) was incorporated.
its net risk exposure by applying the bid or ask price to the net open position as appropriate. For all
(h) On May 23, 2019, Bee World Spain, Sociedad Limitada was incorporated and registered in the Mercantile Registry of Madrid. other financial instruments not traded in an active market, the fair value is determined by using valuation
(i) On April 17, 2018, the JFC Group, through BGI completed the acquisition of additional 45% share of SJBF, increasing its ownership from techniques deemed to be appropriate in the circumstances. Valuation techniques include the market
40% to 85%. Subsequently, on December 14, 2018, the JFC Group, through BGI acquired the remaining 15% share resulting to
100% share in SJBF. approach (i.e., using prices and other relevant information generated by market transactions involving
(j) On April 16, 2018, Bee World UK Limited (UK) was incorporated. identical or comparable assets, liabilities or a group of assets and liabilities), the income approach
(k) On July 31, 2017, the JFC Group, through Golden Piatto Pte. Ltd. incorporated Cibo Felice in Italy.
(l) On May 10, 2017, the JFC Group, through JSF increased its shareholding in SF Vung Tau Joint Stock Company (SFVT) and Blue Sky
(i.e., discounted cash flow analysis and option pricing models making as much use of available and
Holdings Limited (Blue Sky) to 60%. supportable market data as possible) and the cost approach (i.e., based on the amount required to
(m) On April 12, 2017, the JFC Group, through GPPL, incorporated Golden Piatto Pte. Ltd. to own and operate Jollibee restaurants in Italy. replace the service capacity of an asset).
(n) On June 18, 2004, the stockholders of the JFC Group approved the Plan of Merger of the three (3) dormant companies. The application
is pending approval from the SEC as at December 31, 2019.
The JFC Group uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and
3. Summary of Significant Accounting Policies minimizing the use of unobservable inputs.

Current versus Noncurrent Classification All assets and liabilities for which fair value is measured or disclosed in the consolidated financial
The JFC Group presents assets and liabilities in the consolidated statement of financial position based statements are categorized within the fair value hierarchy, described as follows, based on the lowest-
level input that is significant to the fair value measurement as a whole:

2019 Annual Report 58 Jollibee Foods Corporation

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities plus, in the case of a financial asset not at FVTPL, transaction costs. Trade receivables that do not contain
Level 2 - Valuation techniques for which the lowest-level input that is significant to the fair value a significant financing component or for which the JFC Group has applied the practical expedient are
measurement is directly or indirectly observable measured at the transaction price determined under PFRS 15.
Level 3 - Valuation techniques for which the lowest-level input that is significant to the fair value
measurement is unobservable In order for a financial asset to be classified and measured at amortized cost or FVOCI, it needs to give
rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount
For assets and liabilities that are recognized in the consolidated financial statements on a recurring outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.
basis, the JFC Group determines whether transfers have occurred between levels in the hierarchy
by reassessing categorization (based on the lowest-level input that is significant to the fair value The JFC Group’s business model for managing financial assets refers to how it manages its financial
measurement as a whole) at the end of each reporting period. assets in order to generate cash flows. The business model determines whether cash flows will result
from collecting contractual cash flows, selling the financial assets, or both.
The JFC Group’s management determines the policies and procedures for both recurring fair value
measurement and non-recurring measurement. At each reporting date, the management analyzes the Subsequent Measurement. For purposes of subsequent measurement, financial assets are classified in
movements in the values of assets and liabilities which are required to be remeasured or reassessed as four categories:
per the JFC Group’s accounting policies. For this analysis, the management verifies the major inputs
applied in the latest valuation by agreeing the information in the valuation computation to contracts and • Financial assets at amortized cost (debt instruments)
other relevant documents. • Financial assets at FVOCI with recycling of cumulative gains and losses (debt instruments)
• Financial assets designated at FVOCI with no recycling of cumulative gains and losses upon
For the purpose of fair value disclosures, the JFC Group has determined classes of assets and liabilities derecognition (equity instruments)
based on the nature, characteristics and risks of the asset or liability and the level of the fair value • Financial assets at FVTPL
hierarchy as explained above.
The JFC Group has no financial assets at FVOCI as at December 31, 2019 and 2018.
Cash and Cash Equivalents
Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid investments Financial Assets at Amortized Cost (Debt Instruments). This category is the most relevant to the JFC
that are readily convertible to known amounts of cash with original maturities of three months or less Group. The JFC Group measures financial assets at amortized cost if both of the following conditions
from the date of acquisition and are subject to an insignificant risk of change in value. are met:

Short-term Investments • The financial asset is held within a business model with the objective to hold financial assets in
Short-term investments are deposits with original maturities of more than three months to one year from order to collect contractual cash flows; and
acquisition date. • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial Financial assets at amortized cost are subsequently measured using the effective interest (EIR) method
liability or equity instrument of another entity. and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is
derecognized, modified or impaired.
Date of Recognition. The JFC Group recognizes a financial asset or a financial liability in the consolidated
statement of financial position, when it becomes a party to the contractual provisions of the instrument. The JFC Group’s cash in banks, short-term deposits, short-term investments, receivables (excluding
Purchases or sales of financial assets that require delivery of assets within a time frame established by receivables from government agencies), security and other deposits, operating lease receivables and
regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e., lease receivables are classified under this category as at December 31, 2019 and 2018.
the date that the JFC Group commits to purchase or sell the asset.
Financial Assets at FVTPL. Financial assets at FVTPL include financial assets held for trading, financial
Financial Instruments - Initial Recognition and Subsequent Measurement assets designated upon initial recognition at FVTPL, or financial assets mandatorily required to be
measured at fair value. Financial assets are classified as held for trading if they are acquired for the
Financial Assets purpose of selling or repurchasing in the near term. Derivatives, including separated embedded
derivatives, are also classified as held for trading unless they are designated as effective hedging
Effective beginning January 1, 2018 (Upon Adoption of PFRS 9) instruments. Financial assets with cash flows that are not solely payments of principal and interest are
classified and measured at FVTPL, irrespective of the business model. Notwithstanding the criteria for
Initial Recognition and Measurement. Financial assets are classified, at initial recognition, as subsequently debt instruments to be classified at amortized cost or FVOCI, as described above, debt instruments
measured at amortized cost, FVOCI and FVTPL. may be designated at FVTPL on initial recognition if doing so eliminates, or significantly reduces, an
accounting mismatch.
The classification of financial assets at initial recognition depends on the financial asset’s contractual
cash flow characteristics and the JFC Group’s business model for managing them. With the exception Financial assets at FVTPL are carried in the consolidated statement of financial position at fair value with
of trade receivables that do not contain a significant financing component or for which the JFC Group net changes in fair value recognized in the consolidated statement of comprehensive income.
has applied the practical expedient, the JFC Group initially measures a financial asset at its fair value

2019 Annual Report 59 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The JFC Group elected to classify irrevocably its investments in golf and leisure club shares under this Effective before January 1, 2018 (Prior to Adoption of PFRS 9)
category as at December 31, 2019 and 2018.
Initial Recognition and Measurement. Financial assets are classified, at initial recognition, as financial
Impairment of Financial Assets. The JFC Group recognizes an allowance for ECLs for all debt instruments assets at FVTPL, loans and receivables, held-to-maturity (HTM) investments, AFS financial assets, or as
not held at FVTPL. ECLs are based on the difference between the contractual cash flows due in derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial assets
accordance with the contract and all the cash flows the JFC Group expects to receive discounted at are recognized initially at fair value plus, except for financial assets at FVTPL, transaction costs that are
an approximation of the original EIR. The expected cash flows will include cash flows from the sale of attributable to the acquisition of the financial asset.
collateral held or other credit enhancements that are integral to the contractual terms.
Purchases or sales of financial assets that require delivery of assets within a time frame established by
ECLs are recognized in two stages. For credit exposures for which there has not been a significant regulation or convention in the market place (regular way trades) are recognized on the trade date, i.e.,
increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default the date that the JFC Group commits to purchase or sell the asset.
events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for
which there has been a significant increase in credit risk since initial recognition, a loss allowance is The JFC Group’s financial assets consist of financial assets at FVTPL, loans and receivables, and AFS
required for credit losses expected over the remaining life of the exposure, irrespective of the timing of financial assets as at December 31, 2017. The JFC Group has no financial assets classified under the
the default (a lifetime ECL). HTM investments category as at December 31, 2017.

For receivables and contract assets, and operating lease receivables, the JFC Group applies a simplified Subsequent Measurement
approach in calculating ECLs. Therefore, the JFC Group does not track changes in credit risk, but
instead recognizes a loss allowance based on lifetime ECLs at each reporting date. The JFC Group Financial Assets at FVTPL. Financial assets at FVTPL include financial assets held for trading and financial
has established a provision matrix that is based on its historical credit loss experience, adjusted for assets designated upon initial recognition at FVTPL. Financial assets are classified as held for trading
forward-looking factors specific to the debtors and the economic environment. For security and other if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including
deposits, the JFC Group applies the general approach and calculates ECL based on the 12-month separated embedded derivatives, are also classified as held for trading unless they are designated as
ECLs or lifetime ECLs, depending on whether there has been a significant increase in credit risk on the effective hedging instruments as defined by PAS 39. The JFC Group has not designated any financial
financial instruments since initial recognition. assets at FVTPL. Financial assets at FVTPL are carried in the consolidated statement of financial position
at fair value with net changes in fair value recognized in profit or loss.
For cash in banks, short-term deposits and short-term investments, the JFC Group applies the low
credit risk simplification. The probability of default and loss given defaults are publicly available and Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair
are considered to be low credit risk investments. It is the JFC Group’s policy to measure ECLs on such value if their economic characteristics and risks are not closely related to those of the host contracts and
instruments on a 12-month basis. However, when there has been a significant increase in credit risk the host contracts are not held for trading or designated at FVTPL. These embedded derivatives are
since origination, the allowance will be based on the lifetime ECL. The JFC Group assesses that there measured at fair value with changes in fair value recognized in profit or loss. Reassessment only occurs if
is a significant increase in credit risk of a financial asset when default occurs. The JFC Group uses the there is either a change in the terms of the contract that significantly modifies the cash flows that would
ratings from Moody’s to determine whether the debt instrument has significantly increased in credit risk otherwise be required or a reclassification of a financial asset out of the FVTPL.
and to estimate ECLs.
This category generally applies to the JFC Group’s derivative assets as at December 31, 2017.
The JFC Group considers a financial asset in default when contractual payments are 30 days past due.
However, in certain cases, the JFC Group may also consider a financial asset to be in default when internal Loans and Receivables. This category is the most relevant to the JFC Group. Loans and receivables
or external information indicates that the JFC Group is unlikely to receive the outstanding contractual are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
amounts in full before taking into account any credit enhancements held by the JFC Group. A financial market. After initial measurement, such financial assets are subsequently measured at amortized cost
asset is written off when there is no reasonable expectation of recovering the contractual cash flows. using the effective interest rate method, except for short-term loans and receivables with no stated
interest which are measured at undiscounted amounts less impairment. Amortized cost is calculated by
The JFC Group incorporates forward-looking information into both its assessment of whether the credit taking into account any discount or premium on acquisition and fees or costs that are an integral part
risk of an instrument has increased significantly since its initial recognition and its measurement of of the effective interest rate. The effective interest rate amortization is recognized in profit or loss. The
ECL. To do this, the JFC Group has considered a range of relevant forward-looking macro-economic losses arising from impairment are recognized also in profit or loss.
assumptions for the determination of unbiased general industry adjustments and any related specific
industry adjustments that support the calculation of ECLs. This category includes the JFC Group’s cash in banks, short-term deposits, short-term investments,
receivables, receivable from sale of business, security and other deposits, and operating lease
Based on the JFC Group’s evaluation and assessment and after taking into consideration external actual receivables as at December 31, 2017.
and forecast information, the JFC Group considers two or more economic scenarios and the relative
probabilities of each outcome. External information includes economic data and forecasts published AFS Financial Assets. AFS financial assets include equity investments. Equity investments classified as
by governmental bodies, monetary authorities and selected private-sector and academic institutions. AFS financial assets are those that are neither classified as held for trading nor designated at FVTPL.

The JFC Group has identified and documented key drivers of credit risk and credit losses of each After initial measurement, AFS financial assets are subsequently measured at fair value with unrealized
portfolio of financial instruments and, using an analysis of historical data, has estimated relationships gains or losses recognized in other comprehensive income and credited directly in equity until the
between macro-economic variables and credit risk and credit losses. The Group considers macro- investment is derecognized, at which time, the cumulative gain or loss is recognized in profit or loss,
economic factors such as gross domestic product growth rates and inflation rates in its analysis. or the investment is determined to be impaired, when the cumulative loss is reclassified from equity to
profit or loss. Dividends earned while holding AFS financial assets is recognized in profit or loss.

2019 Annual Report 60 Jollibee Foods Corporation

This category includes investments in golf and leisure club shares as at December 31, 2017. Impairment losses on equity investments are not reversed through profit or loss; increases in their
fair value after impairment are recognized in OCI.
Impairment of Financial Assets. The JFC Group assesses, at each reporting date, whether there is
objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists The determination of what is ‘significant’ or ‘prolonged’ requires judgment. In making this
if one or more events that has occurred since the initial recognition of the asset (an incurred ‘loss event’), judgment, the JFC Group evaluates, among other factors, the duration or extent to which the fair
has an impact on the estimated future cash flows of the financial asset or the group of financial assets value of an investment is less than its cost.
that can be reliably estimated. Evidence of impairment may include indications that the debtors or
a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or Financial Liabilities (Applies before and after January 1, 2018)
principal payments, the probability that they will enter bankruptcy or other financial reorganization and
observable data indicating that there is a measurable decrease in the estimated future cash flows, such Initial Recognition and Measurement. Financial liabilities are classified, at initial recognition, as financial
as changes in arrears or economic conditions that correlate with defaults. liabilities at FVTPL, loans and borrowings, payables or as derivatives designated as hedging instruments
in an effective hedge, as appropriate.
• Financial Assets Carried at Amortized Cost. For financial assets carried at amortized cost, the
JFC Group first assesses whether impairment exists individually for financial assets that are All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings and
individually significant, and individually or collectively for financial assets that are not individually payables, net of directly attributable transaction costs.
significant. If the JFC Group determines that no objective evidence of impairment exists for an
individually assessed financial asset, whether significant or not, it includes the asset in a group The JFC Group’s financial liabilities include loans and borrowings, payables and derivative financial
of financial assets with similar credit risk characteristics and collectively assesses them for liabilities as at December 31, 2019 and 2018.
impairment. Assets that are individually assessed for impairment and for which an impairment loss
is, or continues to be, recognized are not included in a collective assessment of impairment. The Subsequent Measurement
amount of any impairment loss identified is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows (excluding future expected • Financial Liabilities at FVTPL. Financial liabilities at FVTPL include financial liabilities held for trading
credit losses that have not yet been incurred). The present value of the estimated future cash flows and financial liabilities designated upon initial recognition as at FVTPL. Financial liabilities are
is discounted at the financial asset’s original EIR. classified as held for trading if they are incurred for the purpose of repurchasing in the near term.
This category also includes derivative financial instruments entered into by the JFC Group that
The carrying amount of the asset is reduced through the use of an allowance account and the are not designated as hedging instruments in hedge relationships as defined by PAS 39.
loss is recognized in profit or loss. Interest income continues to be accrued on the reduced Separated embedded derivatives are also classified as held for trading unless they are designated
carrying amount using the rate of interest used to discount the future cash flows for the purpose as effective hedging instruments.
of measuring the impairment loss. Loans and receivables, together with the associated allowance,
are written off when there is no realistic prospect of future recovery and all collateral has Gains or losses on liabilities held for trading are recognized in profit or loss.
been realized or has been transferred to the JFC Group. If, in a subsequent year, the amount of the
estimated impairment loss increases or decreases because of an event occurring after the Financial liabilities designated upon initial recognition at FVTPL are designated at the initial date
impairment was recognized, the previously recognized impairment loss is increased or reduced of recognition, and only if the criteria in PAS 39 are satisfied. The JFC Group has not designated
by adjusting the allowance account. If a write-off is later recovered, the recovery is recognized in any financial liability as at FVTPL.
profit and loss to the extent that the carrying value of the asset does not exceed what the amortized
cost would have been had the impairment not been recognized at the date the impairment • Loans and Borrowings, and Other Payables. This is the category most relevant to the JFC Group.
is reversed. After initial recognition, interest-bearing loans and borrowings, and other payables are
subsequently measured at amortized cost using the EIR method. Gains and losses are recognized
• AFS Financial Assets. For AFS financial assets, the JFC Group assesses at each reporting date in profit or loss when the liabilities are derecognized as well as through the EIR
whether there is objective evidence that an investment or a group of investments is impaired. amortization process.

In the case of equity investments classified as AFS financial assets, objective evidence would Amortized cost is calculated by taking into account any discount or premium on acquisition and
include a significant or prolonged decline in the fair value of the investment below its cost. fees or costs, including debt issue costs for the JFC Group’s debts that are an integral part of
‘Significant’ is evaluated against the original cost of the investment and ‘prolonged’ against the the effective interest rate. The effective interest rate amortization is included as interest expense in
period in which the fair value has been below its original cost. When there is evidence of the consolidated statement of comprehensive income.
impairment, the cumulative loss measured as the difference between the acquisition cost and the
current fair value, less any impairment loss on that investment previously recognized in profit or This category includes the JFC Group’s trade payables and other current liabilities (excluding
loss is removed from OCI and recognized in profit or loss. For unquoted equity investments that local and other taxes payable and unearned revenue from gift certificates), long-term debts and
are not carried at fair value because such cannot be reliably measured, or on a derivative asset lease liabilities as at December 31, 2019 and 2018.
that is linked to and must be settled by delivery of such unquoted equity instruments, the amount
of loss is measured as the difference between the assets carrying amount and the present value of • Debt Issue Costs. Debt issue costs are specific incremental costs, other than those paid to the
estimated future cash flows discounted at the current market rate of return for a similar lender, that are directly related to issuing a debt instrument. These are presented in the
financial asset. consolidated statement of financial position as a reduction from the related debt instrument and
are amortized through the EIR amortization process.

2019 Annual Report 61 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Derecognition of Financial Assets and Liabilities (Applies to Financial Instruments before and after risks, respectively. Such derivative financial instruments are initially recognized at fair value on the date
January 1, 2018) on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives
are carried as financial assets when the fair value is positive and as financial liabilities when the fair value
Financial Assets. A financial asset (or, where applicable, a part of a financial asset or part of a group is negative.
of similar financial assets) is primarily derecognized (i.e., removed from the JFC Group’s consolidated
statement of financial position) when: Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss,
except for the effective portion of cash flow hedges, which is recognized in other comprehensive income
• The rights to receive cash flows from the asset have expired, or, and later reclassified to profit or loss when the hedge item affects profit or loss.
• The JFC Group has transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a third party under a For the purpose of hedge accounting, hedges are classified as:
‘pass-through’ arrangement; and either (a) the JFC Group has transferred substantially all the risks
and rewards of the asset, or (b) the JFC Group has neither transferred nor retained substantially all • Fair value hedges when hedging the exposure to changes in the fair value of a recognized asset or
the risks and rewards of the asset, but has transferred control of the asset. liability or an unrecognized firm commitment
• Cash flow hedges when hedging the exposure to variability in cash flows that is either attributable
When the JFC Group has transferred its rights to receive cash flows from an asset or has entered into to a particular risk associated with a recognized asset or liability or a highly probable forecast
a pass-through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of transaction or the foreign currency risk in an unrecognized firm commitment
ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the • Hedges of a net investment in a foreign operation
asset, nor transferred control of the asset, the JFC Group continues to recognize the transferred asset
to the extent of its continuing involvement. In that case, the JFC Group also recognized an associated The JFC Group’s interest rate swap is cash flow hedge. The JFC Group has no fair value hedge and
liability. The transferred asset and the associated liability are measured on a basis that reflects the rights hedge of a net investment in a foreign operation as at December 31, 2019 and 2018.
and obligations that the JFC Group has retained.
At the inception of a hedge relationship, the JFC Group formally designates and documents the hedge
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the relationship to which it wishes to apply hedge accounting and the risk management objective and
lower of the original carrying amount of the asset and the maximum amount of consideration that the strategy for undertaking the hedge.
JFC Group could be required to repay.
Before January 1, 2018, the documentation includes identification of the hedging instrument, the
Financial Liabilities. A financial liability is derecognized when the obligation under the liability is hedged item or transaction, the nature of the risk being hedged and how the entity will assess the
discharged, cancelled or has expired. When an existing financial liability is replaced by another from effectiveness of changes in the hedging instrument’s fair value in offsetting the exposure to changes in
the same lender on substantially different terms, or the terms of an existing liability are substantially the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected
modified, such an exchange or modification is treated as a derecognition of the original liability and the to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on
recognition of a new liability, and the difference in the respective carrying amounts is recognized in the an ongoing basis to determine that they actually have been highly effective throughout the financial
consolidated statement of comprehensive income. reporting years for which they were designated.

‘Day 1 Difference’ Beginning January 1, 2018, the documentation includes identification of the hedging instrument, the
Where the transaction price in a non-active market is different from the fair value based on other hedged item, the nature of the risk being hedged and how the JFC Group will assess whether the
observable current market transactions in the same instrument or based on a valuation technique hedging relationship meets the hedge effectiveness requirements (including analysis of sources of
whose variables include only data from observable market, the JFC Group recognizes the difference hedge ineffectiveness and how the hedge ratio is determined). A hedging relationship qualifies for
between the transaction price and fair value (a ‘Day 1 difference’) in the profit or loss unless it qualifies hedge accounting if it meets all of the following effectiveness requirements:
for recognition as some other type of asset. In cases where unobservable data is used, the difference
between the transaction price and model value is recognized in the profit or loss only when the inputs • There is ‘an economic relationship’ between the hedged item and the hedging instrument
become observable or when the instrument is derecognized. For each transaction, the JFC Group • The effect of credit risk does not ‘dominate the value changes’ that result that economic relationship
determines the appropriate method of recognizing the ‘Day 1 difference’ amount. • The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the
hedged item that the JFC Group actually hedges and the quantity of the hedging instrument that
Offsetting of Financial Instruments the JFC Group actually uses to hedge that quantity of hedged item
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated
statement of financial position if there is a currently enforceable legal right to offset the recognized Hedges that meet the strict criteria for hedge accounting are accounted for, as described below:
amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities
simultaneously. The JFC Group assesses that it has a currently enforceable right of offset if the right is Cash Flow Hedges. Cash flow hedges are hedges of the exposure to variability in cash flows that is
not contingent on a future event, and is legally enforceable in the normal course of business, event of attributable to a particular risk associated with a recognized asset, liability or a highly probable forecast
default, and event of insolvency or bankruptcy of the JFC Group and all of the counterparties. transaction and could affect the consolidated statements of comprehensive income. Changes in the
fair value of a hedging instrument that qualifies as a highly effective cash flow hedge are recognized as
Derivative Financial Instruments and Hedge Accounting “Comprehensive income (loss) on derivative liability” in the consolidated statement of comprehensive
Initial Recognition and Subsequent Measurement. The JFC Group uses derivative financial instruments, income, whereas any hedge ineffectiveness is immediately recognized in profit or loss.
such as cross currency swaps and interest rate swaps to hedge its foreign currency risks and interest rate

2019 Annual Report 62 Jollibee Foods Corporation

The JFC Group has an interest rate swap for its exposure to volatility in interest rates. Other Current Assets
Other current assets include prepaid expenses which are paid in advance and recorded as asset
Amounts recognized as other comprehensive are transferred to profit or loss when the hedged before these are utilized, deposits which pertain to advance payments to suppliers to be applied for
transaction affects profit or loss, such as when the hedged income or expense is recognized or when a future purchases, and creditable withholding taxes, which will be applied in the following year against
forecast sale occurs. corporate income tax or be claimed for refund with the Bureau of Internal Revenue. Prepaid expenses
are amortized over time and recognized as expense as the benefit is derived from the asset.
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover (as
part of the hedging strategy), or if its designation as a hedge is revoked, or when the hedge no longer Interests in and Advances to Joint Ventures, Co-venturers and Associates
meets the criteria for hedge accounting, any cumulative gain or loss previously recognized in other An associate is an entity over which the JFC Group has significant influence. Significant influence is the
comprehensive income remains separately in equity until the forecast transaction occurs or the foreign power to participate in the financial and operating policy decisions of the investee, but is not in control
currency firm commitment is met. or joint control over those policies.

Contract Balances A joint venture is a type of joint arrangement whereby the parties that have joint control of the
arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed
Contract Assets. These pertain to unbilled service revenues. A contract asset is the right to consideration sharing of control of an arrangement, which exists only when decisions about the relevant activities
in exchange for goods or services transferred to the customer. If the JFC Group performs by transferring require unanimous consent of the parties sharing control.
goods or services to a customer before the customer pays consideration or before payment is due, a
contract asset is recognized for the earned consideration that is conditional. The JFC Group’s investments in its associates and joint ventures are accounted for using the equity
method based on the percentage share of ownership and capitalization. Interests in joint ventures are
Trade Receivables. A receivable represents the JFC Group’s right to an amount of consideration that is accounted for under the equity method from the date the joint control is obtained.
unconditional (i.e., only the passage of time is required before payment of the consideration is due).
Under the equity method, the JFC Group’s investments in joint ventures and associates are carried in
Contract Liabilities. A contract liability is the obligation to transfer goods or services to a customer the consolidated statement of financial position at cost plus the JFC Group’s share in post-acquisition
for which the JFC Group has received consideration (or an amount of consideration is due) from the changes in the net assets of associates or joint ventures, less any impairment in value. Goodwill relating
customer. If a customer pays consideration before the JFC Group transfers goods or services to the to the joint ventures or associates is included in the carrying amount of the investment and is not
customer, a contract liability is recognized when the payment is made or the payment is due (whichever is amortized. The consolidated statement of comprehensive income includes the JFC Group’s share in the
earlier). Contract liabilities are recognized as revenue when the JFC Group performs under the contract. financial performance of the associates or joint ventures. The JFC Group’s share in profit or loss of the
associates is shown on the face of the consolidated statement of comprehensive income as “Equity in
Inventories net losses of joint ventures and associates - net”, which is the profit or loss attributable to equity holders
Inventories are valued at the lower of cost and net realizable value. Costs are accounted for as follows: of the joint ventures and associates.

When the JFC Group’s share of losses in the joint ventures or associates equals or exceeds its interest,
Processed inventories - Standard costing, which is reviewed on a quarterly including any other unsecured receivables, the JFC Group does not recognize further losses, unless it
basis and revised as necessary to approximate current has incurred obligations or made payments on behalf of the associates or joint ventures. Where there
costs determined using first in, first out (FIFO). has been a change recognized directly in the equity of the associate or joint venture, the JFC Group
Cost includes direct materials, labor and a proportion recognizes its share in any changes and discloses this, when applicable, in the consolidated statement
of manufacturing overhead costs based on normal of changes in equity.
operating capacity.
Unrealized gains arising from transactions with the associates or joint ventures are eliminated to the
Food supplies, packaging, - Standard costing which is reviewed on a quarterly basis and extent of the JFC Group’s interests in the associates or joint ventures against the related investments.
store and other revised as necessary to approximate current costs determined Unrealized losses are eliminated similarly but only to the extent that there is no evidence of impairment
supplies, and novelty using FIFO. in the asset transferred.
items
The JFC Group ceases to use the equity method of accounting on the date from which it no longer has
Net realizable value of processed inventories is the estimated selling price in the ordinary course of joint control in the joint ventures, no longer has significant influence over the associates, or when the
business, less estimated costs of completion and the estimated costs necessary to make the sale. interest becomes held for sale.

Net realizable value of food supplies, packaging, store and other supplies is the current replacement Upon loss of significant influence over the associate or joint control over the joint ventures, the JFC Group
cost. Food and other supplies are held for use in the production of processed inventories. measures and recognizes its remaining investment at its fair value. Any difference between the carrying
amount of the former associate or former jointly controlled entities upon loss of significant influence or
Net realizable value of novelty items is the estimated selling price in the ordinary course of business, less joint control, and the fair value of the remaining investment and proceeds from disposal is recognized in
the estimated costs necessary to make the sale. profit or loss. When the remaining interest in the former jointly controlled entity constitutes significant
influence, it is accounted for as interest in an associate.

2019 Annual Report 63 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property, Plant and Equipment The residual values, if any, useful lives and method of depreciation and amortization of the assets are
Property, plant and equipment, except land and construction in progress, are stated at cost less reviewed at each financial year-end and adjusted prospectively, if appropriate.
accumulated depreciation and amortization and any accumulated impairment in value. Such cost
includes the cost of replacing part of property, plant and equipment at the time that cost is incurred, if Investment property is derecognized when either it has been disposed of or when the investment
the recognition criteria are met, and excludes the costs of day-to-day servicing. Land is stated at cost property is permanently withdrawn from use and no future economic benefit is expected from its
less any impairment in value. disposal. Any gains or losses on the retirement or disposal of an investment property are recognized in
profit or loss in the year of retirement or disposal.
The initial cost of property, plant and equipment consists of its purchase price, including import duties
and nonrefundable taxes and any other costs directly attributable in bringing the asset to its working Transfers to investment property are made only when there is a change in use, evidenced by ending
condition and location for its intended use. Cost also includes any related asset retirement obligation of ownership-occupation, or commencement of an operating lease to another party. Transfers from
and interest incurred during the construction year on funds borrowed to finance the construction of the investment property are made only when there is a change in use, evidenced by commencement of
asset. Expenditures incurred after the property, plant and equipment have been put into operation, owner-occupation or commencement of development with a view to sell.
such as repairs and maintenance, are normally charged to profit or loss in the year in which the costs are
incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an For a transfer from investment property to owner-occupied property, the cost of property for subsequent
increase in the future economic benefits expected to be obtained from the use of an item of property, accounting is its carrying value at the date of change in use. If the property occupied by the JFC Group
plant and equipment beyond its originally assessed standard of performance, the expenditures are as an owner-occupied property becomes an investment property, the JFC Group accounts for such
capitalized as additional costs of property, plant and equipment. property in accordance with the policy stated under property and equipment up to the date of change
in use.
Depreciation and amortization are calculated on a straight-line basis over the following estimated useful
lives of the assets: Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that
Land improvements 5 years necessarily takes a substantial year of time to get ready for its intended use or sale are capitalized as
Plant,buildings, commercial condominium units and 5 - 40 years part of the cost of asset. Capitalization of borrowing costs commences when the activities to prepare
improvements the asset are in progress and expenditures and borrowing costs are being incurred. Borrowing costs
Leasehold rights and improvements 2 - 10 years or term of the lease, are capitalized until the assets are substantially ready for their intended use. All other borrowing costs
whichever is shorter are expensed as incurred. Borrowing costs consist of interest and other cost that an entity incurs in
Office, store and food processing equipment 2 - 15 years connection with the borrowing of funds.
Furniture and fixtures 3 - 5 years
Transportation equipment 3 - 5 years Business Combinations
Business combinations are accounted for using the acquisition method. Applying the acquisition
The residual values, if any, useful lives and depreciation and amortization method of the assets are
method requires the (a) determination whether the JFC Group will be identified as the acquirer; (b)
reviewed at the end of each financial year and adjusted prospectively, if appropriate.
determination of the acquisition date; (c) recognition and measurement of the identifiable assets
acquired, liabilities assumed and any non-controlling interest in the acquiree; and (d) recognition and
Fully depreciated assets are retained in the accounts until they are disposed or retired.
measurement of goodwill or a gain from a bargain purchase.
An item of property, plant and equipment is derecognized upon disposal or when no future economic
When the JFC Group acquires a business, it assesses the financial assets and liabilities assumed for
benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset
appropriate classification and designation in accordance with the contractual terms, economic
(calculated as the difference between the disposal proceeds and the carrying amount of the asset) is
circumstances and pertinent conditions as at acquisition date.
included in profit or loss in the year the asset is derecognized.
The cost of an acquisition is measured as the aggregate of the (a) consideration transferred by the JFC
Construction in progress represents assets under construction and is stated at cost less any impairment
Group, measured at acquisition-date fair value, (b) amount of any non-controlling interest in the acquiree
in value. This includes the cost of construction and other direct costs. Cost also includes interest on
and (c) acquisition-date fair value of the JFC Group’s previously held equity interest in the acquiree
borrowed funds incurred during the construction year. Construction in progress is not depreciated until
in a business combination achieved in stages. Acquisition costs incurred are expensed and included
such time that the relevant assets are completed and ready for use.
in “General and administrative expenses” account in the consolidated statement of comprehensive
income.
Investment Properties
Investment properties consist of land and buildings and building improvements held by the JFC Group
Initial Measurement of Non-controlling Interest. For each business combination, the JFC Group measures
for capital appreciation and rental purposes. Investment properties, except land, are carried at cost,
the non-controlling interest in the acquiree using the proportionate share of the acquiree’s fair value of
including transaction costs, less accumulated depreciation and amortization and any impairment in
identifiable net assets.
value. Cost also includes the cost of replacing part of an existing investment property at the time that
cost is incurred if the recognition criteria are met; and excludes the costs of day-to-day servicing of an
Business Combination Achieved in Stages. In a business combination achieved in stages, the JFC Group
investment property. Land is carried at cost less any impairment in value.
remeasures its previously held equity interests in the acquiree at its acquisition-date fair value and
recognizes the resulting gain or loss, if any, in profit or loss.
The depreciation of buildings and building improvements are calculated on a straight-line basis over the
estimated useful lives of the assets which are five (5) to twenty (20) years.

2019 Annual Report 64 Jollibee Foods Corporation

Measurement Period. If the initial accounting for a business combination is incomplete by the end of the Intangible assets with indefinite useful lives are tested for impairment annually either individually or
reporting period in which the business combination occurs, the JFC Group reports in its consolidated at the CGU level. Such intangible assets are not amortized. The useful life of an intangible asset with
financial statements provisional amounts for the items for which the accounting is incomplete. The an indefinite life is reviewed annually to determine whether the indefinite life assessment continues to
measurement period ends as soon as the JFC Group receives the information it was seeking about be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a
facts and circumstances that existed as at the acquisition date or learns that more information is not prospective basis.
obtainable. The measurement period does not exceed one year from the acquisition date.
Amortization of computer software, trademarks and other intangible assets are calculated on a straight-
Initial Measurement of Goodwill or Gain on a Bargain Purchase. Goodwill is initially measured by the line basis over the following estimated useful lives of the assets:
JFC Group at cost being the excess of the total consideration transferred over the net identifiable assets
acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of Computer software 10 years
the subsidiary acquired, the difference is recognized in profit or loss as gain on a bargain purchase. Trademarks 5 years
Before recognizing a gain on a bargain purchase, the JFC Group determines whether it has correctly Other intangible assets 5 years
identified all of the assets acquired and all of the liabilities assumed and recognize any additional assets Gains or losses arising from derecognition of an intangible asset are measured as the difference
or liabilities that are identified in that review. between the net disposal proceeds and the carrying amount of the asset, and are recognized in profit or
loss when the asset is derecognized.
Subsequent Measurement of Goodwill. Following initial recognition, goodwill is measured at cost less
any accumulated impairment losses. Impairment of Nonfinancial Assets
The carrying values of interests in and advances to joint ventures, co-venturers and associates, property,
Impairment Testing of Goodwill. For the purpose of impairment testing, goodwill acquired in a business plant and equipment, right-of-use assets, investment properties, trademarks, goodwill and other
combination is, from the acquisition date, allocated to each of the JFC Group’s CGU, or groups of CGUs, intangible assets are reviewed for impairment when events or changes in circumstances indicate that
that are expected to benefit from the synergies of the combination, irrespective of whether other assets the carrying value may not be recoverable. If any such indication exists, and if the carrying value exceeds
or liabilities of the acquiree are assigned to those units or groups of units. the estimated recoverable amount, the assets or CGU are written down to their recoverable amounts.
The recoverable amount of the asset is the greater of fair value less costs to sell or value in use. The fair
Each unit or group of units to which the goodwill is allocated: value less costs to sell is the amount obtainable from the sale of an asset in an arm’s-length transaction
between knowledgeable, willing parties, less costs of disposal. In assessing value in use, the estimated
• represents the lowest level within the JFC Group at which the goodwill is monitored for internal future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
management purposes; and market assessments of the time value of money and the risks specific to the asset. For an asset that does
• is not larger than an operating segment as defined in PFRS 8, Operating Segments, before not generate largely independent cash inflows, the recoverable amount is determined for the CGU to
aggregation. which the asset belongs. Impairment losses are recognized in profit or loss in those expense categories
consistent with the function of the impaired asset.
Frequency of Impairment Testing. Irrespective of whether there is any indication of impairment, the JFC
Group tests goodwill acquired in a business combination for impairment annually as at December 31 For nonfinancial assets, excluding goodwill, an assessment is made at each reporting date as to whether
and more frequently when circumstances indicate that the carrying amount is impaired. there is any indication that previously recognized impairment losses may no longer exist or may have
decreased. If such indication exists, the recoverable amount is estimated. A previously recognized
Allocation of Impairment Loss. An impairment loss is recognized for a CGU if the recoverable amount of impairment loss is reversed only if there has been a change in the estimates used to determine the
the unit or group of units is less than the carrying amount of the unit or group of units. The impairment asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying
loss is allocated to reduce the carrying amount of the assets of the unit or group of units first to reduce the amount of the asset is increased to its recoverable amount. That increased amount cannot exceed
carrying amount of goodwill allocated to the CGU or group of units and then to the other assets of the unit the carrying amount that would have been determined, net of depreciation and amortization, had no
or group of units pro rata on the basis of the carrying amount of each asset in the unit or group of units. impairment loss been recognized for the asset in prior years. Such reversal is recognized in profit or loss.
In allocating the impairment loss, the JFC Group cannot reduce the carrying amount of an asset below After such a reversal, the depreciation charge is adjusted in future years to allocate the asset’s revised
the highest of its fair value less costs of disposal if measurable, its value in use if determinable and zero. carrying amount, less any residual value on a systematic basis over its remaining useful life.

Intangible Assets Equity

Intangible assets acquired separately are measured at cost on initial recognition. Following initial
recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated Capital Stock and Additional Paid-in Capital. Capital stock is measured at par value for all shares issued.
impairment loss. The useful lives of intangible assets are assessed at the individual asset level as either Proceeds and/or fair value of considerations received in excess of par value, if any, are recognized as
finite or indefinite. additional paid-in capital. Incremental costs incurred directly attributable to the issuance of new shares
are shown in equity as a deduction from proceeds, net of tax.
Intangible assets with finite lives are amortized over the useful economic life using the straight-line
method and assessed for impairment whenever there is an indication that the intangible assets may be Additional paid-in capital is also credited for the cost of the JFC Group’s equity settled share-based
impaired. At a minimum, the amortization period and the amortization method for an intangible asset payments to its employees.
with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful
life or the expected pattern of consumption of future economic benefits embodied in the asset are Subscription Receivable. Subscription receivable represents the unpaid balance of the subscription
accounted for by changing the amortization period or method, as appropriate, and treated as changes price for subscribed common stock of the Parent Company.
in accounting estimates.

2019 Annual Report 65 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Retained Earnings. Retained earnings represent the JFC Group’s accumulated earnings, net of dividends Interest Income. Interest income is recognized as the interest accrues, taking into account the effective
declared. The balance includes accumulated earnings of subsidiaries, joint ventures and associates, yield on the asset.
which are not available for dividend declaration.
Other Income. Other income is recognized when there is an incidental economic benefit, other than the
Dividends. The JFC Group recognizes a liability to make cash distribution to its equity holders when usual business operations, that will flow to the JFC Group through an increase in asset or reduction in
the distribution is authorized and the distribution is no longer at the discretion of the JFC Group. A liability and that can be measured reliably.
corresponding amount is recognized directly in the equity. Dividends for the year that are approved
after the financial reporting date are dealt with as an event after the reporting period. Cost and Expenses
Cost and expenses are decreases in economic benefits during the reporting period in the form of
Other Comprehensive Income. Other comprehensive income comprises items of income and expense outflows or decrease of assets or incurrence of liabilities that result in decreases in equity, other than
(including reclassification adjustments) that are not recognized in profit or loss. These include cumulative those relating to distributions to equity participants. Cost and expenses are recognized as incurred.
translation adjustments, gains or losses on derivatives designated as hedging instruments in an effective
hedge, unrealized gains or losses on financial assets at FVOCI, remeasurement gains or losses on Advertising and promotions expenses include costs incurred for advertising schemes and promotional
pension and their income tax effects. activities for new products.

Treasury Shares. Acquisitions of treasury shares are recorded at cost. The total cost of treasury shares Pension Benefits
is shown in the consolidated statement of financial position as a deduction from the total equity. Upon The pension liability or asset is the aggregate of the present value of the defined benefit obligation at
re-issuance or resale of the treasury shares, cost of common stock held in treasury account is credited for the end of the reporting period reduced by the fair value of plan assets (if any), adjusted for any effect
the cost of the treasury shares determined using the simple average method. Gain on sale is credited of limiting a net defined benefit asset to the asset ceiling. The asset ceiling is the present value of any
to additional paid-in capital. Losses are charged against additional paid-in capital but only to the extent economic benefits available in the form of refunds from the plan or reductions in future contributions
of previous gain from original issuance, sale or retirement for the same class of stock. Otherwise, losses to the plan.
are charged to retained earnings.
The cost of providing benefits under the defined benefit plans is actuarially determined using the
Revenue from Contracts with Customers projected unit credit method.
Revenue from contracts with customers is recognized when control of the goods or services are
transferred to the customer at an amount that reflects the consideration to which the JFC Group Pension expense comprises the following:
expects to be entitled in exchange for those goods or services. The JFC Group assesses its revenue • Service cost
arrangements against specific criteria to determine if it is acting as a principal or as an agent. The JFC • Net interest on the net defined benefit liability or asset
Group has concluded that it is acting as principal in majority of its revenue arrangements. The following
specific recognition criteria must also be met before revenue is recognized: Service costs which include current service costs, past service costs and gains or losses on non-routine
settlements are recognized as part of pension expense. Past service costs are recognized when plan
Sale of Goods. Revenue from sale of goods is recognized at the point in time when control is transferred amendment or curtailment occurs. These amounts are calculated periodically by independent qualified
to the customer, which is normally upon delivery. Sales returns and discounts are deducted from sales actuaries.
to arrive at net sales shown in the consolidated statement of comprehensive income.
Net interest on the pension liability or asset is the change during the period in the liability or asset that
Royalty Fees. Revenue from royalty fees is recognized as the royalty accrues based on certain percentages arises from the passage of time which is determined by applying the discount rate based on government
of the franchisees’ net sales. bonds to the pension liability or asset. Net interest on the pension liability or asset is recognized
under “Direct costs” and “General and administrative expenses” in the consolidated statement of
Set-up Fees. Revenue from set-up fees is recognized on a straight-basis over the term of the franchise comprehensive income.
agreement and when performance obligations relating to the payment of set-up fees have been satisfied.
Remeasurements comprising actuarial gains and losses, return on plan liability or assets and any change
System-wide Advertising Fees. Revenues consisting of reimbursements of network advertising and in the effect of the asset ceiling (excluding net interest on defined benefit liability) are recognized
promotional costs from franchisees are recognized upon performance of service. immediately in other comprehensive income in the period in which they arise. Remeasurements are not
reclassified to profit or loss in subsequent periods.
Service Fees. Revenue is recognized in the period in which the service has been rendered.
Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance
Management Fees. Revenue is recognized in the period in which the administration services has been policies. Plan assets are not available to the creditors of the JFC Group, nor can they be paid directly to
rendered based on a certain percentage of the total costs incurred. the JFC Group. Fair value of plan assets is based on market price information. When no market price
is available, the fair value of plan assets is estimated by discounting expected future cash flows using
Other Revenues a discount rate that reflects both the risk associated with the plan assets and the maturity or expected
The following specific recognition criteria must also be met before other revenue is recognized: disposal date of those assets (or, if they have no maturity, the expected period until the settlement of the
related obligations). If the fair value of the plan assets is higher than the present value of the defined
Rent Income. Rent income from short-term leases and leases of low-value asset is recognized on a benefit obligation, the measurement of the resulting defined benefit asset is limited to the present value
straight-line basis over the lease terms. of economic benefits available in the form of refunds from the plan or reductions in future contributions
to the plan.

2019 Annual Report 66 Jollibee Foods Corporation

The JFC Group also participates in various government-defined contribution schemes for the PRC-based includes an estimate of costs to be incurred by the lessee in dismantling and removing the
and USA-based subsidiaries. Under these schemes, pension benefits of existing and retired employees underlying asset to the condition required by the terms and conditions of the lease, unless
are guaranteed by the local pension benefit plan, and each subsidiary has no further obligations beyond those costs are incurred to produce inventories. Unless the JFC Group is reasonably certain to
the annual contribution. obtain ownership of the leased asset at the end of the lease term, the recognized right-of-use
assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the
Employee Leave Entitlement lease term. Right-of-use assets are subject to impairment.
Employee entitlements to annual leave are recognized as a liability when they are accrued to the
employees. JFC Group recognizes undiscounted liability for leave expected to be settled wholly before • Lease Liabilities. At the commencement date of the lease, the JFC Group recognizes lease
twelve months after the end of the annual reporting period. liabilities measured at the present value of lease payments to be made over the lease term. The
lease payments include fixed payments (including in-substance fixed payments) less any lease
Share-based Payments incentives receivable, variable lease payments that depend on an index or a rate, and amounts
The JFC Group has stock option plans granting its management and employees an option to purchase a expected to be paid under residual value guarantees. The variable lease payments that do not
fixed number of shares of stock at a stated price during a specified period (“equity-settled transactions”). depend on an index or a rate are recognized as expense in the period on which the event or
condition that triggers the payment occurs.
The cost of the options granted to the JFC Group’s management and employees that becomes vested
is recognized in profit or loss over the period in which the performance and/or service conditions are In calculating the present value of lease payments, the JFC Group uses the incremental borrowing
fulfilled, ending on the date on which the relevant management and employees become fully entitled rate (IBR) at the lease commencement date if the interest rate implicit in the lease is not readily
to the award (“vesting date”). determinable. In determining the IBR, the JFC Group uses risk-free rate plus credit spread where
the credit spread is based on the credit risk of the lessee. After the commencement date, the
The fair value is determined using the Black-Scholes Option Pricing Model. The cumulative expense amount of lease liabilities is increased to reflect the accretion of interest and reduced for the
recognized for the share-based transactions at each reporting date until the vesting date reflects the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there
extent to which the vesting period has expired and the JFC Group’s best estimate of the number of is a modification, a change in the lease term, a change in the in-substance fixed lease payments or
equity instruments that will ultimately vest. The charge or credit in profit or loss or the investment a change in the assessment to purchase the underlying asset.
account for a period represents the movement in cumulative expense recognized as of the beginning
and end of that period. The JFC Group’s lease liabilities are included in interest-bearing loans and borrowings.

No expense is recognized for awards that do not ultimately vest. • Short-term Leases and Leases of Low-value Assets. The JFC Group applies the short-term
lease recognition exemption to its short-term leases of QSR outlets. It also applies the lease
Where the terms of a share-based award are modified, at a minimum, an expense is recognized as if of low-value assets recognition exemption to leases of that are considered of low value (i.e., below
the terms had not been modified. In addition, an expense is recognized for any modification, which USD5,000 or approximately ₱250,000). Lease payments on short-term leases and leases of low-
increases the total fair value of the share-based payment agreement, or is otherwise beneficial to the value assets are recognized as expense on a straight-line basis over the lease term.
management and employees as measured at the date of modification.
• Subleases of Underlying Asset. The JFC Group continues to account for the original lease (the
Where a share-based award is cancelled, it is treated as if it had vested on the date of cancellation, and head lease) as a lessee and accounts for the sublease as the lessor (intermediate lessor).
any expense not yet recognized for the award is recognized immediately. However, if a new award
is substituted for the cancelled award, and designated as a replacement award on the date that it is JFC Group as Lessor. Leases in which the JFC Group does not transfer to the lessee substantially
granted, the cancelled and new awards are treated as if there were a modification of the original award. all the risks and benefits incidental to ownership an asset are classified as operating leases. Initial
direct costs incurred in negotiating an operating lease are added to the carrying amount of
Leases the operating lease receivable and recognized over the lease term on the same basis as rent
The JFC Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the income. Rent income from operating leases is accounted for on a straight-line basis over the lease
contract conveys the right to control the use of an identified asset for a period of time in exchange for term and is recognized as income in profit or loss. Contingent rents are recognized as revenue in
consideration. the period in which they are earned.

JFC Group as Lessee. The JFC Group applies a single recognition and measurement approach for all JFC Group as an Intermediate Lessor. Sublease is classified at the inception date as a finance lease
leases, except for short-term leases and leases of low-value assets. The JFC Group recognizes lease or an operating lease. Subleases in which the JFC Group determined that the lease term constitute
liabilities to make lease payments and right-of-use assets representing the right to use the underlying a major part of the economic life of the underlying asset and at the inception date, the present
assets. value of the minimum lease payments amounts to substantially all of the fair value of the underlying
asset are classified as finance lease.
• Right-of-Use Assets. The JFC Group recognizes right-of-use assets at the commencement date
of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are If the sublease is classified as finance lease, JFC Group as an intermediate lessor:
measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any
remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of • derecognizes the right-of-use asset relating to the head lease that it transfers to the sublessee and
lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the recognizes the net investment in the sublease;
commencement date less any lease incentives received. The cost of right-of-use assets also • recognizes any difference between the right-of-use asset and the net investment in the sublease in
profit or loss; and

2019 Annual Report 67 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• retains the lease liability relating to the head lease in its consolidated statement of financial • where the deferred tax asset relating to the deductible temporary difference arises from the initial
position, which represents the lease payments owed to the head lessor. recognition of an asset or liability in a transaction that is not a business combination and, at the
time of the transaction, affects neither the accounting profit nor taxable profit; and
During the term of the sublease, JFC Group recognizes both finance income on the sublease and
interest expense on the head lease. • in respect of deductible temporary differences associated with investments in subsidiaries and
interest in joint ventures and associates, deferred tax assets are recognized only to the extent that
If the sublease is classified as an operating lease, JFC Group retains the lease liability and the right-of- it is probable that the temporary differences will reverse in the foreseeable future and taxable
use asset relating to the head lease in its consolidated statement of financial position. During the term profit will be available against which the temporary differences can be utilized.
of the sublease, JFC Group recognizes a depreciation charge for the right-of-use asset and interest on
the lease liability and recognizes rent income from the sublease. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to allow all or part of the
Foreign Currency Transactions and Translations deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessed at each reporting
The consolidated financial statements are presented in Philippine Peso, which is the Parent Company’s date and are recognized to the extent that it has become probable that future taxable profit will allow the
functional and presentation currency. Each entity in the JFC Group determines its own functional deferred tax assets to be recovered.
currency and items included in the financial statements of each entity are measured using that functional
currency. The functional currency of subsidiaries domiciled and operating in the Philippines are also Deferred tax liabilities are recognized for all taxable temporary differences, except:
determined to be the Philippine Peso. Where the functional currency is the Philippine Peso, transactions in
foreign currencies are recorded in Philippine Peso using the exchange rate at the date of the transaction. • where the deferred tax liability arises from the initial recognition of goodwill or of an asset or
Monetary assets and liabilities denominated in foreign currencies are restated using the closing rate of liability in a transaction that is not a business combination and, at the time of the transactions,
exchange at reporting date. All differences are recognized in profit or loss. Nonmonetary items that are affects neither the accounting profit nor taxable profit; and
measured in terms of historical cost in a foreign currency are translated using the exchange rates as at
the dates of the initial transactions. • in respect of taxable temporary differences associated with investments in subsidiaries and
interests in joint ventures and associates, where the timing of the reversal of the temporary
The functional currencies of the JFC Group’s foreign operations are US dollar (USD), PRC Renminbi differences can be controlled and it is probable that the temporary differences will not reverse in
(RMB), Indonesia rupiah, Vietnam dong, Singapore dollar, Hong Kong dollar, Canadian dollar, Macau the foreseeable future.
pataca, Euro and Malaysian ringgit. As of the reporting date, the assets and liabilities of foreign
subsidiaries are translated into the presentation currency of the Parent Company at the rate of exchange Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year
ruling at the reporting date while the income and expense accounts are translated at the weighted when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted
average exchange rates for the year. The resulting translation differences are included in equity under or substantially enacted at the reporting date.
the account “Cumulative translation adjustments of foreign subsidiaries and interests in joint ventures
and associates”. On disposal of a foreign subsidiary, the accumulated exchange differences are Deferred tax relating to items recognized outside profit or loss is recognized outside profit or
recognized in profit or loss. loss. Deferred tax items are recognized in correlation to the underlying transaction either in other
comprehensive income or directly in another equity account.
Taxes
Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate
Current Tax. Current tax liabilities for the current and prior periods are measured at the amount expected recognition at that date, are recognized subsequently if new information about facts and circumstances
to be paid to the tax authority. The tax rates and tax laws used to compute the amount are those that are change. The adjustment is either treated as reduction in goodwill, as long as it does not exceed goodwill,
enacted or substantively enacted at reporting date. if it was incurred during the measurement year or recognize in profit or loss.

Current income tax relating to items recognized directly in equity is recognized in equity (not in the Deferred tax assets and liabilities are offset, if a legally enforceable right exists to set off current tax
profit or loss). Management periodically evaluates positions taken in the tax returns with respect to assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same
situations in which applicable tax regulations are subject to interpretation and establishes provisions taxation authority.
where appropriate.
Value Added Tax (VAT). Revenue, expenses and assets are recognized net of the amount of VAT, if
Deferred Tax. Deferred tax is provided using balance sheet liability method, on all temporary differences applicable.
at reporting date between the tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes. When VAT from sales of goods and/or services (output VAT) exceeds VAT passed on from purchases
of goods or services (input VAT), the excess is recognized as part of “Trade payables and other current
Deferred tax assets are recognized for all deductible temporary differences and carryforward benefits liabilities” account in the consolidated statement of financial position. When VAT passed on from
of unused tax credits from excess of minimum corporate income tax (MCIT) over regular corporate purchases of gods or services (input VAT) exceeds VAT from sales of goods and/or services (output
income tax (RCIT) and net operating loss carryover (NOLCO), to the extent that it is probable that taxable VAT), the excess is recognized as part of “Other current assets” account in the consolidated statement
profit will be available against which the deductible temporary differences and carry forward benefits of of financial position.
excess of MCIT over RCIT and NOLCO can be utilized, except:

2019 Annual Report 68 Jollibee Foods Corporation

 Earnings per Share (EPS) Attributable to Equity Holders of the Parent Company Judgments
Basic EPS is calculated by dividing the net income for the year attributable to the equity holders of the In the process of applying the JFC Group’s accounting policies, management has made the following
Parent Company by the weighted average number of common shares outstanding during the year, after judgments, apart from those involving estimations, which have the most significant effect on the amounts
considering the retroactive effect of stock dividend declaration, if any. recognized in the consolidated financial statements.

Diluted EPS is computed by dividing the net income for the year attributable to the equity holders of the Functional Currency. Management has determined that the functional and presentation currency of the
Parent Company by the weighted average number of common shares outstanding during the period, Parent Company and its Philippine-based subsidiaries is the Philippine Peso, being the currency of the
adjusted for any potential common shares resulting from the assumed exercise of outstanding stock primary environment in which the Parent Company and its major subsidiaries operate. The functional
options. Outstanding stock options will have dilutive effect under the treasury stock method only when currencies of its foreign operations are determined as the currency in the country where the subsidiary
the average market price of the underlying common share during the period exceeds the exercise price operates. For consolidation purposes, the foreign subsidiaries’ balances are translated to Philippine
of the option. Peso which is the Parent Company’s functional and presentation currency.

Where the EPS effect of the shares to be issued to management and employees under the stock option Revenue Contracts with Customers - Determining the Timing of Satisfaction of Set-up Fees. The JFC
plan would be anti-dilutive, the basic and diluted EPS would be stated at the same amount. Group undertakes activities prior to store opening (e.g., initial training, site development, systems set-
up, etc.) as indicated in the franchise agreement. The JFC Group determines whether these activities
Provisions are capable of being distinct (i.e., whether the franchisee can benefit on each of these activities on a
Provisions are recognized when the JFC Group has a present obligation (legal or constructive) as a result standalone basis) and whether these activities are distinct within the context of the franchise agreement
of a past event, it is probable that an outflow of resources embodying economic benefits will be required (i.e., whether these activities can be separated from the franchise license granted to the franchisee).
to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect
of the time value of money is material, provisions are determined by discounting the expected future The JFC Group determined that revenue from set-up fees should be recognized on a straight-line basis
cash flows at a pre-tax rate that reflects current market assessment over the term of the franchise agreement and when performance obligations relating to the payment of
of the time value of money and, where appropriate, the risks specific to the liability. Where discounting set-up fees have been satisfied.
is used, the increase in the provision due to the passage of time is recognized as interest expense.
Principal versus Agent Consideration. The JFC Group’s agreement with the franchisee includes the right
Contingencies to charge the franchisee its share in the JFC Group’s nationwide advertising and marketing efforts as well
Contingent liabilities are not recognized in the consolidated financial statements but are disclosed in as fees for the JFC Group’s administration of various advertisements, network and media placements.
the notes to financial statements unless the possibility of an outflow of resources embodying economic The JFC Group determined that it is acting as principal for the nationwide advertising because it is
benefits is remote. Contingent assets are not recognized in the consolidated financial statements but the JFC Group who retains the right to direct the service provider of the advertisements, network and
are disclosed when an inflow of economic benefits is probable. media placements, and has the discretion on how to price the advertising fee charges. The JFC Group
considers both the legal form and the substance of its agreement to determine each party’s respective
Business Segments roles in the agreement.
The JFC Group is organized and managed separately according to the nature of operations and
geographical locations of businesses. The three major operating businesses of the JFC Group are food Determining the Lease Term of Contracts with Renewal Options - JFC Group as Lessee. The JFC Group
service, franchising and leasing while geographical segments are segregated to Philippine businesses determines the lease term as the non-cancellable term of the lease, together with any periods covered
and international businesses. These operating and geographical businesses are the basis upon which by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an
the JFC Group reports its primary segment information presented in Note 5. option to terminate the lease, if it is reasonably certain not to be exercised.

Events after the Reporting Period The JFC Group has the option, under some of its leases to lease the assets for additional terms of 5 to
Post year-end events that provide additional information about the JFC Group’s financial position at 15 years. The JFC Group applies judgement in evaluating whether it is reasonably certain to exercise
reporting date (adjusting events) are reflected in the JFC Group’s consolidated financial statements. the option to renew. That is, it considers all relevant factors that create an economic incentive for it
Post year-end events that are not adjusting events are disclosed in the notes to consolidated financial to exercise the renewal. After the commencement date, the JFC Group reassesses the lease term if
statements when material. there is a significant event or change in circumstances that is within its control and affects its ability to
exercise (or not to exercise) the option to renew (e.g., a change in business strategy). The JFC Group
included the renewal period as part of the lease term for leases of QSR outlets and warehouses due
4. Significant Accounting Judgments, Estimates and Assumptions to the significance of these assets to its operations. These leases have a short non-cancellable period
(i.e., 5 to 10 years) and there will be a significant negative effect on operations if a replacement is not
The preparation of the consolidated financial statements requires management to make judgments, readily available.
estimates and assumptions that affect the reported amounts in the consolidated financial statements
and related notes at the end of the reporting period. However, uncertainty about these assumptions Property Lease Classification - JFC Group as Lessor. The JFC Group has entered into commercial
and estimates could result in outcomes that could require a material adjustment to the carrying amount property leases on its investment property portfolio. Management has determined, based on an
of the affected asset or liability in the future. evaluation of the terms and conditions of the arrangements, such that the lease term not constituting a
major part of the economic life of the commercial property and the present value of the minimum lease
The JFC Group believes the following represents a summary of these significant judgments, estimates payments not amounting to substantially all the fair value of the commercial property, that it retains
and assumptions and the related impact and associated risks on the JFC Group’s consolidated financial substantially all the risks and rewards incidental to ownership of these properties and accounts for the
statements. contracts as operating leases.

2019 Annual Report 69 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Rent income amounted to ₱58.5 million, ₱25.0 million and ₱27.2 million in 2019, 2018 and 2017 trademarks were valued using the relief-from-royalty method wherein the fair value of trademarks is
respectively (see Notes 13, 20 and 29). based on cost savings from owning the trademarks. Significant assumptions and estimates used include
comparable royalty rates, long-term growth rates, discount rates based on available market data and
Sublease Arrangements Classification - JFC Group as an Intermediate Lessor. JFC Group has entered revenue growth rate forecasts. The property and equipment were valued using the replacement cost.
into arrangements to sublease its leased assets. Management has determined, based on an evaluation Adjustments were made to replacement cost to reflect depreciation. The valuation of favourable leases
of the terms and conditions of the sublease arrangements, such that the lease term constitutes a major was based on market values using income approach.
part of the economic life of the leased assets even if title is not transferred, and at the inception date, the
present value of the minimum lease payments amounts to substantially all the fair value of the leased Recoverability of Trademarks, Goodwill and Other Intangible Assets. The JFC Group determines
assets and accounts for the arrangements as finance lease. whether trademarks, goodwill and other intangible assets with indefinite useful life is impaired at least
on an annual basis or more frequently if events or changes in circumstances indicate that the carrying
Interest income amounted to ₱8.1 million, ₱9.0 million and ₱9.9 million in 2019, 2018 and 2017, value may be impaired. This requires an estimation of the value in use of the CGU to which the goodwill
respectively (see Notes 23 and 29). is allocated. Estimating the value in use requires the JFC Group to make an estimate of the expected
long-term growth rates and earnings before interest, taxes, depreciation and amortization (EBITDA) from
Assessing Joint Control of an Arrangement and the Type of Arrangement. Joint control is the the CGU and also consider market data in determining discount rate in order to calculate the present
contractually agreed sharing of control of an arrangement which exists only when decisions about value of those cash flows.
the relevant activities require the unanimous consent of the parties sharing control. The JFC Group
assessed that it has joint control in all joint arrangements by virtue of a contractual agreement with other Management has determined that trademarks, goodwill and other intangible assets are not impaired.
stockholders. The JFC Group’s joint ventures have separate legal entities and the shareholders have The carrying amount of trademarks, goodwill and other intangible assets amounted to ₱50,208.1 million
right to their net assets (see Note 11). and ₱31,541.8 million as at December 31, 2019 and 2018, respectively (see Note 14).

Material Partly-Owned Subsidiaries. The consolidated financial statements include additional information Recoverability of Interests in and Advances to Joint Ventures, Co-venturers and Associates. The JFC
about subsidiaries that have non-controlling interests that are material to the JFC Group (see Note 11). Group performs impairment test of its interests in and advances to joint ventures, co-venturers and
Management determined material partly-owned subsidiaries as those with balance of non-controlling associates when there are facts and circumstances indicating that their carrying amounts exceed their
interest greater than 5% of total non-controlling interests and those subsidiaries with activities that are recoverable amounts. Determining the recoverable amount of assets, which requires the determination
important to the JFC Group as at end of the period. of future cash flows expected to be generated from the continued operations of joint ventures and
associates, requires the JFC Group to make significant assumptions that can materially affect the
Material Joint Ventures and Associates. The consolidated financial statements include additional consolidated financial statements. These assumptions include long-term growth rates, EBITDA and
information about joint ventures and associates that are material to the JFC Group (see Note 11). discount rate. Future events could cause the JFC Group to conclude that the assets are impaired. Any
Management determined material joint ventures and associates as those joint ventures and associates resulting impairment loss could have a material adverse impact on the JFC Group’s financial position
where the JFC Group’s carrying amount of investment is greater than 5% of the total interests in joint and performance.
ventures and investments in associates as at end of the period.
Reversal of impairment loss on interest in an associate was recognized in 2018 amounting to ₱16.7
Estimates and Assumptions million (see Notes 11 and 23).
The key estimates and assumptions concerning the future and other key sources of estimation uncertainty
at reporting date that has a significant risk of causing a material adjustment to the carrying amounts The carrying amounts of interests in and advances to joint ventures, co-venturers and associates as at
of assets and liabilities within the next financial year are discussed below. The JFC Group based its December 31 are as follows (see Note 11):
assumptions and estimates on parameters available when the consolidated financial statements were
2019 2018
prepared. Existing circumstances and assumptions about future developments, however, may change
Interests in joint ventures ₱3,102,559 ₱969,791
due to changes on market circumstances arising beyond the control of the JFC Group. Such changes
Interests in associates 824,405 869,578
are reflected in the assumptions when they occur.
Advances to co-venturers 2,905,138 1,672,861
Determination of Provisional Purchase Price Allocation. On September 24, 2019, the JFC Group, through Realizability of Deferred Tax Assets. The carrying amounts of deferred tax assets at each reporting date
SMCC-HU, acquired CBTL for the total consideration of ₱17,163.0 million (see Note 11). In identifying is reviewed and reduced to the extent that sufficient taxable profits are available to allow all or part of the
the assets acquired and liabilities assumed, management has determined that part of the assets being deferred tax assets to be utilized. The JFC Group’s assessment on the recognition of deferred tax assets
acquired pertains to the trademark, favourable leases and other intangibles of CBTL amounting to is based on the forecasted taxable income. This forecast is based on future expectations on revenue and
₱18,703.6 million (see Note 14). expenses as well as management’s plans and strategies for the relevant entities.

In April 2018, the JFC Group, through BGI, increased its ownership interest in SJBF from 40% to 85% The carrying amount of the recognized deferred tax assets amounted to ₱15,424.0 million and ₱14,641.1
ownership interest for a total consideration of ₱11,284.9 million (see Note 11). In identifying the assets million as at December 31, 2019 and 2018, respectively. Unrecognized deferred tax assets amounted
acquired and liabilities assumed, management has determined that part of the assets being acquired to ₱820.5 million and ₱443.2 million as at December 31, 2019 and 2018, respectively (see Note 24).
pertains to the trademark of Smashburger amounting to ₱10,414.0 million (see Note 14).
Recoverability of Property, Plant and Equipment, Right-of-use Assets and Investment Properties. The JFC
Management has measured the trademarks and favourable leases, and the property and equipment Group performs impairment review of right-of-use assets, property, plant and equipment and investment
that were acquired using the appraisal reports that were prepared by an independent appraiser. The properties when certain impairment indicators are present. Determining the fair value of assets, which

2019 Annual Report 70 Jollibee Foods Corporation

requires the determination of future cash flows expected to be generated from the continued use and Net Realizable Value of Inventories. The JFC Group writes down inventories to net realizable value,
ultimate disposition of such assets, requires the JFC Group to make estimates and assumptions that through the use of an allowance account, whenever the net realizable value of inventories becomes
can materially affect the consolidated financial statements. Future events could cause the JFC Group lower than the cost due to damage, physical deterioration, obsolescence, changes in price levels or
to conclude that the assets are impaired. Any resulting impairment loss could have a material adverse other causes.
impact on the JFC Group’s financial position and performance.
The estimates of net realizable value are based on the most reliable evidence available at the time the
Provision for impairment loss amounted to ₱399.2 million, nil and ₱431.9 million in 2019, 2018 and estimates are made of the amounts the inventories are expected to be realized. These estimates take
2017, respectively. Reversal of previously recognized impairment loss amounted to ₱29.2 million, into consideration fluctuations of prices or costs directly relating to events occurring after reporting date
₱408.2 million and ₱2.1 million in 2019, 2018 and 2017, respectively (see Notes 12 and 22). to the extent that such events confirm conditions existing at reporting date. The allowance account is
reviewed on a regular basis to reflect the accurate valuation in the financial records.
The aggregate carrying values of property, plant and equipment, right-of-use assets and investment
properties as at December 31 are as follows: The JFC Group assessed that the net realizable value for some inventories is lower than cost, hence, it
recognized provision for inventory obsolescence amounting to ₱16.7 million, ₱8.3 million and ₱7.4
2019 2018 million in 2019, 2018 and 2017, respectively (see Note 22). Reversal of previously recognized provisions
Property, plant and equipment (see Note 12) ₱32,592,122 ₱26,672,549 amounting to ₱26.5 million, ₱6.1 million and ₱53.8 million were recognized in 2019, 2018 and 2017,
Right-of-use assets (see Note 29) 42,907,418 36,564,242 respectively (see Note 22). The carrying amount of inventories amounted to ₱9,966.1 million and
Investment properties (see Note 13) 572,722 848,974 ₱8,812.2 million as at December 31, 2019 and 2018, respectively (see Note 8).
Impairment of Receivables and Contract Assets (Upon Adoption of PFRS 9). The JFC Group uses a
provision matrix to calculate ECLs for its receivables and contract assets. The provision rates are based Present Value of Defined Benefit Obligation. The pension expense as well as the present value of the
on days past due. defined benefit obligation are determined using actuarial valuations. The actuarial valuation involves
making various assumptions. These include the determination of the discount rates and the future salary
The provision matrix is initially based on the JFC Group’s historical observed default rates. The JFC Group increases. Due to the complexity of the valuation, the underlying assumptions and its long-term nature,
calibrates the matrix to adjust the historical credit loss experience with forward-looking information. At defined benefit obligations are highly sensitive to changes in these assumptions. All assumptions are
every reporting date, the historical observed default rates are updated and changes in the forward- reviewed at each reporting date.
looking estimates are analyzed.
In determining the appropriate discount rate, management considers the interest rates of government
The assessment of the correlation between historical observed default rates, forward-looking information, bonds that are denominated in the currency in which the benefits will be paid, with extrapolated
and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and maturities corresponding to the expected duration of the defined benefit obligation.
of forecast economic conditions. The JFC Group’s historical credit loss experience and forecast of
economic conditions may also not be representative of customers’ actual default in the future. Future salary increases are based on budgetary salary increases.

Provision for impairment loss on receivables and contract assets amounted to ₱25.3 million and ₱10.2 The carrying amount of pension liability amounted to ₱2,221.3 million and ₱1,320.6 million as at
million in 2019 and 2018, respectively (see Note 22). Reversal of previously recognized provision for December 31, 2019 and 2018, respectively (see Note 25).
impairment loss amounted to P91.4 million and P23.7 million in 2019 and 2018, respectively (see Note
22). The carrying amount of receivables and contract assets amounted to ₱5,906.3 million and ₱4,862.7 Share-based Payments. The Parent Company measures the cost of its equity-settled transactions with
million as at December 31, 2019 and 2018, repectively (see Note 7). management and employees by reference to the fair value of the equity instruments at the grant date.
Estimating fair value for share-based payment transactions requires determining the most appropriate
Impairment of Receivables (Prior to Adoption of PFRS 9). The JFC Group maintains an allowance for valuation model, which is dependent on the terms and conditions of the grant. The estimate also
impairment losses at a level considered adequate to provide for potential uncollectible receivables. The requires determining the most appropriate inputs to the valuation model including the expected life
level of allowance is evaluated on the basis of factors that affect the collectability of the accounts. These of the share option, volatility and dividend yield and making assumptions about these inputs. The
factors include, but are not limited to, the length of the JFC Group’s relationship with the customers and fair value of the share option is being determined using the Black-Scholes Option Pricing Model. The
counterparties, average age of accounts and collection experience. The JFC Group performs a regular expected life of the stock options is based on the expected exercise behavior of the stock option holders
review of the age and status of these accounts, designed to identify accounts with objective evidence of and is not necessarily indicative of the exercise patterns that may occur. The volatility is based on the
impairment and provide the appropriate allowance for impairment losses. The review is done quarterly average historical price volatility which may be different from the expected volatility of the shares of the
and annually using a combination of specific and collective assessments. The amount and timing of Parent Company.
recorded expenses for any period would differ if the JFC Group made differentjudgments or utilized
different methodologies. An increase in allowance account would increase general and administrative Total expense arising from share-based payment recognized by the JFC Group amounted to ₱262.9
expenses and decrease current assets. million, ₱312.0 million and ₱227.5 million in 2019, 2018 and 2017, respectively (see Notes 19, 22
and 26).
Provision for impairment loss on receivables in 2017 amounted to ₱143.8 million resulting from specific
and collective assessments (see Note 22). Reversal of previously recognized provisions amounting to
₱20.7 million was recognized in 2017 (see Note 22).

2019 Annual Report 71 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Estimation of Useful Lives of Property, Plant and Equipment, Investment Properties and Intangible Assets consistently with operating profit or loss in the consolidated financial statements.
with Definite Useful Lives. The JFC Group estimates the useful lives of property, plant and equipment, Business Segments
investment properties and intangible assets with definite useful lives based on the year over which The JFC Group’s operating businesses are organized and managed separately according to the nature
the property, plant and equipment, investment properties and intangible assets are expected to be of the products and services provided, with each segment representing a strategic business unit that
available for use and on the collective assessment of the industry practice, internal technical evaluation offers different products and serves different markets.
and experience with similar assets. The estimated useful lives of property, plant and equipment,
investment properties and intangible assets are reviewed periodically and updated if expectations differ • The food service segment is involved in the operations of QSRs and the manufacture of food
from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal products to be sold to JFC Group-owned and franchised QSR outlets.
or other limits in the use of the said assets. However, it is possible that future financial performance • The franchising segment is involved in the franchising of the JFC Group’s QSR store concepts.
could be materially affected by changes in the estimates brought about by changes in the factors • The leasing segment leases store sites mainly to the JFC Group’s independent franchisees.
mentioned above. The amount and timing of recording the depreciation and amortization for any year
would be affected by changes in these factors and circumstances. A reduction in the estimated useful The following tables present certain information on revenues, expenses, assets and liabilities and other
lives of property, plant and equipment, investment properties and intangible assets would increase the segment information of the different business segments as at and for the years ended
recorded depreciation and amortization and decrease noncurrent assets. December 31, 2019, 2018 and 2017:

There was no change in the estimated useful lives of property, plant and equipment, investment 2019
Food Service Franchising Leasing Eliminations Consolidated
properties and intangible assets in 2019 and 2018. Revenues from external customers ₱167,227,077 ₱11,949,859 ₱449,252 ₱— ₱179,626,188
Inter-segment revenues 41,824,266 3,707,162 7,605,038 (53,136,466) —
Segment revenues 209,051,343 15,657,021 8,054,290 (53,136,466) 179,626,188
Leases - Determining the IBR. The JFC Group cannot readily determine the interest rate implicit in the Segment expenses (211,514,043) (6,708,270) (7,745,021) 53,136,466 (172,830,868)
lease, therefore, it uses its IBR to measure lease liabilities. The IBR is the rate of interest that the JFC Impairment losses on receivables, inventories and
property, plant and equipment - net of reversals (294,178) — — — (294,178)
Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary Equity in net earnings of joint ventures and
associates - net 23,384 — — — 23,384
to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR Other segment income 5,744,793 — 878 — 5,745,671
therefore reflects what the JFC Group would have to pay, which requires estimation when no observable Segment result ₱3,011,299 ₱8,948,751 ₱310,147 ₱— 12,270,197
rates are available (such as for subsidiaries that do not enter into financing transactions). The JFC Group Interest income 400,657
estimates the IBR using observable inputs (such as market interest rates) when available and is required Interest expense (3,187,298)
Income before income tax 9,483,556
to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating). Provision for income tax (3,060,640)
Net income ₱6,422,916

Fair Value of Financial Assets and Liabilities. When the fair values of financial assets and financial liabilities
recorded or disclosed in the consolidated statement of financial position cannot be measured based on
quoted prices in active markets, their fair value is measured using valuation techniques, including the 2019
discounted cash flow model. The inputs to these models are taken from observable markets where Food Service Franchising Leasing Eliminations Consolidated
possible, but when this is not feasible, a degree of judgment is required in establishing fair values. Assets and Liabilities
Segment assets ₱182,297,253 ₱— ₱529,491 ₱— ₱182,826,744
Judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in Deferred tax assets - net 4,448,761 — 501 — 4,449,262
Consolidated assets ₱186,746,014 ₱— ₱529,992 ₱— ₱187,276,006
assumptions about these factors could affect the reported fair value of financial instruments.
Segment liabilities ₱107,048,249 ₱– ₱199,010 ₱— ₱107,247,259
Deferred tax liabilities - net 4,759,233 — — — 4,759,233
The fair value of financial assets and liabilities are discussed in Note 32. Long-term debt, including current portion 22,595,723 — — — 22,595,723
Income tax payable 388,442 — 3,472 — 391,914
Consolidated liabilities ₱134,791,647 ₱— ₱202,482 ₱— ₱134,994,129
Provisions and Contingencies. The JFC Group is involved in litigations, claims and disputes which are
normal to its business. The estimate of the probable costs for the resolution of these claims has been Other Segment Information
Capital expenditures ₱10,041,912 ₱— — ₱— ₱10,041,912
developed in consultation with the JFC Group’s legal counsels and based upon an analysis of potential Depreciation and amortization 13,465,854 — ₱7,392 — 13,473,246
results (see Note 17). The inherent uncertainty over the outcome of these matters is brought about by
the differences in the interpretation and application of laws and rulings. Management believes that the
ultimate liability, if any, with respect to the litigations, claims and disputes will not materially affect the
2018 (As Restated - Note 2)
financial position and performance of the JFC Group. Food Service Franchising Leasing Eliminations Consolidated
Revenues from external customers ₱150,498,395 ₱10,114,292 ₱555,095 ₱— ₱161,167,782
Total outstanding provisions amounted to ₱825.1 million as at December 31, 2019 and 2018 (see Notes Inter-segment revenues
Segment revenues
43,571,728
194,070,123
3,225,369
13,339,661
8,824,495
9,379,590
(55,621,592)
(55,621,592)
—
161,167,782
17 and 30). Segment expenses (193,222,950) (5,748,861) (8,978,135) 55,621,592 (152,328,354)
Reversal of impairment losses on receivables, inventories and
property, plant and equipment - net of provisions 419,541 — — — 419,541
Equity in net losses of joint ventures and
associates - net (86,750) — — — (86,750)
5. Segment Information Other segment income 3,339,416 — 3,112 — 3,342,528
Segment result ₱4,519,380 ₱7,590,800 ₱404,567 ₱— 12,514,747

For management purposes, the JFC Group is organized into segments based on the nature of the Interest income 424,419
products and services offered and geographical locations. The Executive Management Committee Interest expense
Income before income tax
(2,617,463)
10,321,703
monitors the operating results of its segments separately for resource allocation and performance Provision for income tax (2,680,117)
Net income ₱7,641,586
assessment. Segment results are evaluated based on operating profit or loss and is measured

2019 Annual Report 72 Jollibee Foods Corporation

 2019
Philippines International Eliminations Consolidated
2018 (As Restated - Note 2) Segment revenues ₱129,913,889 ₱50,551,864 (₱839,565) ₱179,626,188
Food Service Franchising Leasing Eliminations Consolidated Segment assets
Assets and Liabilities
82,147,177 100,679,567 — 182,826,744
Segment assets ₱145,431,884 ₱— ₱369,200 ₱— ₱145,801,084 Capital expenditures 6,449,194 3,592,718 — 10,041,912
Deferred tax assets - net 4,711,794 — — — 4,711,794
Consolidated assets ₱150,143,678 ₱— ₱369,200 ₱— ₱150,512,878
2018 (As Restated - Note 2)
Segment liabilities ₱71,442,035 ₱— ₱65,423 ₱— ₱71,507,458 Philippines International Eliminations Consolidated
Deferred tax liabilities - net 3,481,497 — — — 3,481,497 Segment revenues ₱120,272,288 ₱41,621,421 (₱725,927) ₱161,167,782
Long-term debt, including current portion 26,264,353 — — — 26,264,353 Segment assets 75,431,186 70,369,898 — 145,801,084
Income tax payable 260,421 — 3,052 — 263,473
Capital expenditures 7,121,815 2,508,537 — 9,630,352
Consolidated liabilities ₱101,448,306 ₱— ₱68,475 ₱— ₱101,516,781

Other Segment Information 2017 (As Restated - Note 2)

Capital expenditures ₱9,630,352 ₱— ₱— ₱— ₱9,630,352 Philippines International Eliminations Consolidated
Depreciation and amortization 11,881,172 — 4,580 — 11,885,752 Segment revenues ₱105,163,697 ₱28,937,959 (₱518,585) ₱133,583,071
Capital expenditures 7,382,960 1,591,470 — 8,974,430
—
2017 (As Restated - Note 2)
Revenue from Contracts with Customers
Food Service Franchising Leasing Eliminations Consolidated
Set out below is the disaggregation of the JFC Group’s revenue from contracts with customers:
Revenues from external customers ₱124,972,802 ₱8,075,199 ₱535,070 ₱— ₱133,583,071
Inter-segment revenues 38,836,601 2,928,473 8,205,610 (49,970,684) — 2019
Segment revenues 163,809,403 11,003,672 8,740,680 (49,970,684) 133,583,071 Revenue Source Food Service Franchising Total
Segment expenses (161,816,236) (4,965,008) (8,396,342) 49,970,684 (125,206,902)
Impairment losses on receivables, inventories and
Sale of goods ₱166,909,364 ₱— ₱166,909,364
property, plant and equipment - net of provisions (629,278) — — — (629,278) Royalty fees — 8,477,040 8,477,040
Equity in net losses of joint ventures and Set-up fees — 471,711 471,711
associates - net (282,645) — — — (282,645)
Other segment income 2,109,826 — 25,821 — 2,135,647
System-wide advertising fees — 3,001,108 3,001,108
Segment result ₱3,191,070 ₱6,038,664 ₱370,159 ₱— ₱9,599,893 Other revenues 317,713 — 317,713
Total revenue from contracts with customers ₱167,227,077 ₱11,949,859 ₱179,176,936
Interest income 269,433
Interest expense (1,793,377)
Income before income tax 8,075,949 Timing of recognition:
Provision for income tax (1,582,930) Goods transferred at a point in time ₱167,227,077
Net income 6,493,019
Services transferred over time 11,949,859
Other Segment Information ₱179,176,936
Capital expenditures ₱8,974,430 ₱— ₱— ₱— ₱8,974,430
Depreciation and amortization 8,922,982 — 5,242 — 8,928,224
2018
Revenue Source Food Service Franchising Total
Sale of goods ₱150,200,826 ₱— ₱150,200,826
Royalty fees — 7,043,891 7,043,891
Geographical Segments Set-up fees — 546,909 546,909
The JFC Group’s geographical segments are based on the location of the assets producing revenues System-wide advertising fees — 2,523,492 2,523,492
in the Philippines and in other locations which includes PRC, USA, Canada, Vietnam, UAE, Hongkong, Other revenues 297,569 — 297,569
Total revenue from contracts with customers ₱150,498,395 ₱10,114,292 ₱160,612,687
Macau, Brunei, Saudi Arabia, Singapore, Malaysia, Oman, Kuwait, Qatar, Italy and UK. Sales to external
customers disclosed in the geographical segments are based on the geographical location of the Timing of recognition:
customers. Goods transferred at a point in time ₱150,498,395
Services transferred over time 10,114,292
Majority of the JFC Group’s revenues were generated from the Philippines, which is the Parent Company’s ₱160,612,687
country of domicile.
2017
The JFC Group does not have a single external customer which revenue amounts to 10% or more of the Revenue Source Food Service Franchising Total
Sale of goods ₱124,663,548 ₱— ₱124,663,548
JFC Group’s revenues. Royalty fees — 5,614,447 5,614,447
Set-up fees — 424,217 424,217
The following tables present segment revenues, segment assets and capital expenditures of the JFC System-wide advertising fees — 2,036,535 2,036,535
Group’s geographical segments: Other revenues 309,254 — 309,254
Total revenue from contracts with customers ₱124,972,802 ₱8,075,199 ₱133,048,001

Timing of recognition:
Goods transferred at a point in time ₱124,972,802
Services transferred over time 8,075,199
₱133,048,001

2019 Annual Report 73 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Cash and Cash Equivalents and Short-term Investments The movements in the allowance for impairment loss on trade receivables as at December 31 are as
follows:
Cash and Cash Equivalents
This account consists of: 2019 2018
Balance at beginning of year ₱676,906 ₱690,119
2019 2018 Write-offs (216,968) (1,201)
Cash on hand ₱376,882 ₱480,889 Reversals (see Note 22) (91,402) (23,675)
Cash in banks 13,790,804 12,097,440 Provisions (see Note 22) 25,342 10,188
Short-term deposits 6,724,335 10,707,586 Translation adjustments (1,521) 1,475
₱20,892,021 ₱23,285,915 Balance at end of year ₱392,357 ₱676,906

Cash in banks earn interest at the respective savings or special demand deposit rates. Short-term
deposits are made for varying periods of up to three months depending on the immediate cash
requirements of the JFC Group, and earn interest at the respective short-term deposit rates. 8. Inventories

Short-term Investments This account consists of:
The JFC Group also has short-term investments amounting to ₱2,130.0 million and ₱883.2 million as at
At cost: 2019 2018
December 31, 2019 and 2018, respectively. These pertain to deposits with maturities of more than three
Food supplies and processed inventories ₱9,115,643 ₱8,289,323
months but less than a year.
Packaging, store and other supplies 622,220 406,186
9,737,863 8,695,509
Interest income earned from cash and cash equivalents and short-term investments amounted
At net realizable value - Novelty items 228,221 116,665
to ₱273.0 million, ₱313.3 million and ₱149.3 million in 2019, 2018 and 2017, respectively
Total inventories at lower of cost and net realizable value ₱9,966,084 ₱8,812,174
(see Note 23).
The cost of novelty items carried at net realizable value amounted to ₱249.6 million and ₱151.4 million
as at December 31, 2019 and 2018, respectively. 
7. Receivables and Contract Assets
The movements in the allowance for inventory obsolescence for novelty items as at December 31 are
This account consists of: as follows:
2019 2018 2019 2018
Trade ₱5,348,930 ₱4,680,553 Balance at beginning of year ₱34,694 ₱32,565
Less allowance for impairment loss 392,357 676,906 Reversals (see Note 22) (26,465) (6,148)
4,956,573 4,003,647 Provisions (see Note 22) 16,670 8,278
Advances to employees 175,400 167,352 Write-offs (3,400) —
Current portion of employee car plan receivables Translation adjustments (69) (1)
(see Note 15) ₱83,279 ₱91,172 Balance at end of year ₱21,430 ₱34,694
Interest receivable 8,921 19,314
Others 269,018 173,887
5,493,191 4,455,372
Contract assets 413,098 407,372 9. Other Current Assets
₱5,906,289 ₱4,862,744
This account consists of:
The terms and conditions of the receivables are as follows:
2018
• Trade receivables are noninterest-bearing and are generally settled on a 14-day term. The JFC 2019 (As Restated - Note 2)
Group classified unbilled service revenues as contract assets. Additions in contract assets in 2019 Prepaid expenses:
of ₱413.1 million pertain to the service revenues earned during the year and will be billed in Taxes ₱2,472,580 ₱1,963,937
2020. Contract assets amounting to ₱407.4 million as at December 31, 2018 were billed and Rent (see Note 2) 1,119,030 367,820
collected in 2019. Supplies 147,188 78,604
Insurance and others 696,780 490,748
• Advances to employees, current portion of employee car plan receivables and other receivables Current portion of security and other deposits
are normally collectible within the next financial year. (see Note 15) 239,096 239,096
Deposits to suppliers and other third parties 2,050,334 1,554,184
• Other receivables consist of receivables from the retirement plan, the Social Security System (SSS) ₱6,725,008 ₱4,694,389
and insurance claims.

2019 Annual Report 74 Jollibee Foods Corporation

 Terms and conditions of other current assets are as follows: ordinary shares of SMCC-SG for a total consideration of USD70.0 million (₱3,650.5 million). SMCC-SG
is 80% owned by JWPL and 20% owned by Brewheal. The difference between the value of the ordinary
• Prepaid taxes represent creditable withholding taxes that can be applied in the following year shares purchased and the subscription price amounting to USD36.0 million (₱1,877.4 million) is
against the corporate income tax due or can be claimed as tax refund from the BIR. This also recognized and included in equity under “Other reserve” account in the consolidated statement of
includes prepaid real property taxes which are expected to be utilized within the next financial position.
twelve months.
The agreement between JWPL and Brewheal provides a mechanism wherein JWPL and Brewheal has
• Prepaid rent pertains to short-term leases of store and office spaces that are paid in advance. the option, but not the obligation, to purchase the 20% ordinary shares of SMCC-SG held by Brewheal
Supplies consist of various office and administrative supplies. Prepaid rent, insurance and others and to subscribe for up to 10% of the ordinary shares of SMCC-SG, respectively, upon the occurrence of
are normally utilized within the next financial year. a call option event enumerated in the agreement from the date of acquisition of CBTL up to September
24, 2029.
• Deposits to suppliers and other third parties are generally applied to purchase of inventories and
availment of services within the next financial year. On September 11, 2019, the JFC Group, through SMCC-SG, incorporated Super Magnificent Coffee
Company Hungary Kft. (SMCC-HU), a holding company based in Hungary.

10. Financial Assets at FVTPL On September 24, 2019, SMCC-SG, through its wholly owned subsidiary, SMCC-HU, completed the
100% acquisition of CBTL. The closing of the transactions was effected after the completion of closing
This account consists of investment in shares of stocks of Manila Polo Club, Tagaytay Highlands and conditions, including required government approvals, provided under the executed Unit Purchase
other golf and leisure clubs amounting to ₱38.2 million and ₱39.8 million as at December 31, 2019 Agreement (UPA). 
and 2018, respectively.
Consistent with the terms of the executed UPA, the JFC Group, through SMCC-HU acquired CBTL for
Due to the adoption of PFRS 9, the JFC Group classified its investments in golf and leisure club shares USD350.0 million (₱18,252.5 million) on a debt-free basis. SMCC-HU paid in cash amounting to
amounting to ₱29.9 million as financial assets at FVTPL as at January 1, 2018. As a result of the USD329.1 million (₱17,163.0 million). The balance amounting to USD20.9 million (₱1,089.5 million)
change in classification, the net unrealized gain on AFS financial assets related to those investments that was applied to CBTL’s debt from unearned revenue from gift certificates sold assumed by SMCC-HU at
were previously presented under OCI, was reclassified to retained earnings as at January 1, 2018, acquisition date.
resulting in a decrease in other components of equity and an increase in retained earnings of
₱6.8 million. Transaction costs of USD0.7 million (₱36.6 million) have been expensed and are included in general
and administrative expenses in the consolidated statement of comprehensive income for the year
The movements in financial assets at FVTPL as at December 31 are as follows: ended December 31, 2019.

2019 2018 The JFC Group included CBTL in its financial consolidation starting September 24, 2019 (the “acquisition
Balance at beginning of year ₱39,842 ₱29,862 date”).
Marked-to-market gain on financial assets at FVTPL
(see Note 23) (1,640) 9,980 The fair value of the identifiable assets acquired and liabilities assumed as at the date of the acquisition
Balance at end of year ₱38,202 ₱39,842 were as follows:

The fair value of financial assets at FVTPL has been determined directly by reference to quoted prices in Cash and cash equivalents ₱221,426
active market or inputs other than quoted prices that are directly or indirectly observable (see Note 32). Receivables 361,192
Inventories 1,162,540
Other current assets 144,177
11. Business Combinations, Incorporation of New Subsidiaries, Material Non-controlling Right-of-use assets (see Note 29) 12,150,307
Interests, Interests in and Advances to Joint Ventures, Co-venturers and Associates and Cessation Property, plant and equipment (see Note 12) 3,978,818
of Operations Trademarks, favourable leases and other intangibles (see Note 14) 18,703,635
Other noncurrent assets 350,294
A. Business Combinations Total identifiable assets acquired 37,072,389
Less:
Acquisition of CBTL. On June 4, 2019 and June 28, 2019, JWPL, a wholly owned subsidiary, incorporated Trade payables and other current liabilities 2,227,779
Java Ventures, LLC in the state of Delaware, USA and Super Magnificent Coffee Company Pte. Ltd. Lease liabilities (see Note 29) 12,472,792
(SMCC-SG) in Singapore, respectively. Other noncurrent liabilities 731,091
Deferred tax liabilities 1,326,969
On July 24, 2019, the JFC Group, through its wholly owned subsidiary, JWPL, entered into an agreement Total identifiable liabilities assumed 16,758,631
with Brewheal Pte. Ltd. (Brewheal), a company based in Singapore, to invest USD100.0 million Net identifiable assets acquired ₱20,313,758
(₱5,118.0 million) in SMCC-SG to acquire 100% of The Coffee Bean & Tea Leaf (CBTL), specialty coffee
and tea brand based in Los Angeles, California, USA. Consequently, Brewheal subscribed to 20%

2019 Annual Report 75 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amount of gain on bargain purchase provisionally computed at acquisition date shown as part of Business Combination Achieved in Stages
“Other Income” in the consolidated statements of comprehensive income amounted to ₱3,150.8 million
determined as follows: SJBF. On October 8, 2015, the JFC Group, through JWPL, incorporated BGI in the state of Delaware,
USA.
Cash consideration ₱17,162,982
Less fair value of net identifiable assets acquired 20,313,758 On October 13, 2015, BGI entered into an agreement with Smashburger Master LLC (Master) to acquire
Gain on bargain purchase (see Note 23) ₱3,150,776 40% of the outstanding equity interest of SJBF, the parent company of the entities comprising the
Smashburger business, a fast-casual better burger restaurant business based in the United States.
The net cash outflow from the acquisition is as follows:
The consideration for BGI’s 40% stake in SJBF amounted to USD99.5 million (₱,629.5 million). Thereafter,
Cash paid on acquisition ₱17,162,982 a post-closing adjustment of USD0.8 million (₱36.6 million) to the purchase price at the closing date
Less cash acquired from subsidiary 221,426 was recognized based on a pre-agreed mechanism with Master. The JFC Group settled with Master
₱16,941,556 USD99.5 million (₱4,629.5 million) and USD0.8 million (₱36.6 million) in December 2015 and January
2016, respectively. In addition, acquisition-related costs consisting of professional fees for the JFC
Management has measured the trademarks that were acquired using the valuation report that were Group’s financial, tax, accounting and legal advisors for the transaction amounted to ₱221.8 million.
prepared by an independent valuation specialist. The trademarks were valued using the relief-from-
royalty method wherein the fair value of the trademarks is based on cost savings from owning the In February 2016, September 2016 and November 2016, BGI made additional investments to SJBF
trademarks. Significant assumptions and estimates used include comparable royalty rates, long-term amounting to USD4.0 million (₱189.0 million), USD4.6 million (₱221.4 million) and
growth rates, discount rates based on available market data and revenue growth rate forecasts.   USD8.0 million (₱397.8 million), respectively.

On September 24, 2019, SMCC-HU completed the acquisition of 100% of CBTL from previous The agreement between BGI and Master dated October 27, 2015 provides for a mechanism wherein
shareholders. The previous shareholders had been looking for buyers for the past two years and were Master can sell or BGI can purchase up to an additional 35% equity interest in SJBF (First Put/Call Right)
unable to sell CBTL. Upon notification and after doing due diligence, JFC Group agreed to purchase the between January 1, 2018 and January 1, 2021, and up to an additional 25% equity interest from the
business. The acquisition resulted in a gain on bargain purchase of ₱3,150.8 million. closing date or after expiration of the First Put/Call Right and five years thereafter (Second Put/Call
Right). The purchase price of the remaining 60% will be based on the achievement of certain financial
The net assets recognized in the consolidated financial statements were based on the provisional performance targets agreed between BGI and Master.
assessment of their fair value while the JFC Group sought an independent valuation for the property
and equipment, trademark and other intangible assets owned by CBTL, and any favourable terms of On February 25, 2017, BGI and Master have amended their original agreement to enable BGI to
the lease relative to market terms. The valuation had not been completed by the date the consolidated purchase more shares in SJBF. With the amendment, BGI shall be entitled to purchase from Master an
financial statements were approved for issue by the BOD. additional 45% of SJBF shares between the years 2018 and 2021, and to acquire the balance of 15%
between 2019 at the earliest and 2026 at the latest.
As part of the ownership restructuring, the trademarks of CBTL are required to be valued by an
independent third party. Management determined that the bargain purchase gain was mainly On March 24, 2017 and September 7, 2017, BGI made additional investments to SJBF amounting
attributable to the value of trademarks. The legal structure of CBTL is being redesigned for fast growth to USD8.0 million (₱402.6 million) and USD2.5 million (₱128.5 million), respectively. The additional
both in the United States and Asia, to be driven mainly by franchising. This is in line with JFC Group’s investments did not change BGI’s equity interest in SJBF.
plan to build a truly global business. Management expects CBTL to be accretive to JFC Group’s profit
within a short period of time. The acquisition of the CBTL brand is JFC Group’s largest and most On March 8, 2018, BGI executed the Purchase Agreement with Master for the acquisition of an additional
multinational with business presence in 27 countries. This will bring JFC Group closer to its vision to 45% share of SJBF pursuant to the exercise by Master of its First Put Option for USD100.0 million
be one of the top 5 restaurant companies in the world in terms of market capitalization. Combined (₱5,207.0 million). This increased BGI’s ownership in SJBF from 40% to 85%.
with Highlands Coffee, the business mostly in Vietnam, the CBTL acquisition will enable JFC Group to
become an important player in the large, fast growing, and profitable coffee business. CBTL will be JFC On April 17, 2018, closing conditions, including required government approvals, have been obtained as
Group’s second largest business after Jollibee brand. Management’s priority is to accelerate the growth provided under the Purchase Agreement. The JFC Group, through BGI, paid Master in cash amounting
of the CBTL brand particularly in Asia, by strengthening its brand development, marketing and franchise to USD100.0 million (₱5,207.0 million). With the completion of the acquisition, the JFC Group included
support system. Smashburger in its financial consolidation starting April 17, 2018 (the “acquisition date”).

From the acquisition date, CBTL contributed ₱4,436.8 million of revenues and ₱153.5 million net loss to As a result of the first and second Put/Call Rights in the agreement between BGI and Master, the JFC
the JFC Group. If the business combination had taken place at the beginning of 2019, contribution to Group allocated ₱75.0 million of the purchase price to a derivative asset in 2015, representing the
consolidated revenues and net loss for the year ended December 31, 2019 would have been ₱15,645.1 fair value of the First and Second Put/Call Rights on transaction date. As at December 31, 2018, the
million and ₱1,634.1 million, respectively. derivative liability pertaining to the Put/Call Rights amounted to nil after SJBF becomes a wholly owned
subsidiary of BGI. The marked-to-market loss amounted to ₱49.8 million and ₱129.4 million in 2018
and 2017, respectively (see Note 23).

2019 Annual Report 76 Jollibee Foods Corporation

The details of JFC Group’s interest in SJBF as at December 31, 2018 are as follows: The amount of goodwill recorded at acquisition date amounted to ₱5,345.5 million determined as follows:
Fair value of consideration transferred:
Interest in a joint venture - cost:
Fair value of previously held interest ₱6,178,774
Balance at beginning of year and transfer date ₱6,151,981
Cash consideration 5,207,000
Cumulative equity in net losses:
Derivative liability at acquisition date (100,833)
Balance at beginning of year (691,926)
11,284,941
Equity in net loss during the year (36,085)
Fair value of non-controlling interest’s share in
Balance at transfer date (728,011)
the net identifiable assets acquired 1,142,502
5,423,970
Aggregate amount 12,427,443
Transferred to investment in a subsidiary (5,423,970)
Less fair value of net identifiable assets acquired 7,081,949
₱—
Goodwill (see Note 14) ₱5,345,494
The fair value of the identifiable assets acquired and liabilities assumed as at the date of the acquisition
were as follows: The net cash outflow from the acquisition is as follows:

Cash and cash equivalents ₱1,408,882 Cash paid on acquisition ₱5,207,000

Receivables 154,360 Less cash acquired from subsidiary 1,408,882
Inventories 59,478 ₱3,798,118
Other current assets 321,766
Property, plant and equipment (see Note 12) 2,565,988 The goodwill of ₱5,345.5 million is attributable to synergies and other benefits from the acquisition of
Trademarks and favourable leases (see Note 14) 10,782,418 SJBF.
Other noncurrent assets 68,201
Total identifiable assets acquired 15,361,093 The non-controlling interest was recognized as a proportion of the fair value of the net assets acquired.
Less: The fair value of the non-controlling interest in SJBF has been estimated by applying the following
Short-term debt 84,300 valuation methodology and significant inputs:
Trade payables and other current liabilities 1,092,701
Long-term debt 4,133,311 • Relief-from-Royalty method for trademark using a royalty rate of 4.12% and terminal value,
Other noncurrent liabilities 645,552 calculated based on long-term sustainable growth rate for the industry of 2% and estimated
Deferred tax liabilities 2,323,280 discount rate of 11%;
Total identifiable liabilities assumed 8,279,144 • Income approach for favourable leases using a market rent growth of 2.5% and
Net identifiable assets acquired ₱7,081,949 a discount rate of 7.5%;
• Cost method for other intangible assets; and
Due to the adoption of PFRS 16, at acquisition date, JFC Group recognized right-of-use assets and lease • Replacement cost method for property, plant and equipment.
liabilities amounting to ₱10,102.3 million and P=10,308.4 million, respectively (see Notes 2 and 29).
Prepayments and operating lease payable related to previous operating leases amounting to ₱45.2 The JFC Group’s acquisition of additional shares in SJBF will allow the JFC Group to have a more
million and ₱549.2 million, respectively, were derecognized and the right-of-use assets were adjusted significant business in the USA by increasing the sales contribution from that country to the JFC Group’s
by favourable terms of the lease relative to market terms previously recognized and included under worldwide system-wide sales.
other intangible assets of ₱297.9 million as at acquisition date. The adoption of PFRS 16 has no impact
on the determination of the amount of goodwill. From the acquisition date, SJBF contributed ₱6,497.1 million revenues and ₱886.8 million net loss to
the JFC Group. If the business combination had taken place at the beginning of 2018, contribution to
The JFC Group’s investment in SJBF was previously accounted for as investment in a joint venture. In consolidated revenues and net loss for 2018 would have been ₱9,423.1 million and ₱1,065.9 million,
accordance with PFRS 3, with the JFC Group’s acquisition of control over SJBF in 2018, the fair value respectively.
of the previously held interest amounted to ₱6,178.8 million and the resulting gain from the re-
measurement of the 40% previously held interest amounted to ₱754.8 million (see Note 23). SJBF has outstanding liabilities for the purchase of non-controlling interest in a joint venture and acquisition
of franchise markets amounting to USD0.06 million (₱2.8 million) and USD0.3 million (₱14.1 million) as at
The fair value of trade receivables approximates the carrying amount of receivables acquired amounting December 31, 2019 and 2018, respectively. The last installment is expected to be settled in 2020.
to ₱154.4 million and it is expected that the full contractual amounts can be collected.
On December 14, 2018, the JFC Group, through BGI, acquired the remaining 15% stake in SJBF for a
total cash consideration of USD10.0 million (₱528.8 million). The acquisition resulted to SJBF becoming
a wholly owned subsidiary of BGI.

The difference of the carrying value of the minority interest over the acquisition cost at the date of
acquisition, amounting to ₱347.4 million, was recognized under the “Excess of cost over the carrying
value of non-controlling interests acquired”, a separate component of “Equity Attributable to Equity
Holders of the Parent Company” in the consolidated statements of financial position (see Note 19).

2019 Annual Report 77 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On December 21, 2018, upon signing of the Restructuring Agreement, the loan of BGI to SJBF On August 22, 2013, an additional loan was extended to the co-venturers in the SuperFoods
amounting to USD80.0 million (₱4,206.4 million) was converted to additional equity. Group amounting to USD1.0 million (₱44.1 million) payable in August 2014 but was extended to
September 30, 2017. As at August 21, 2014, the principal was subject to 5% interest per annum.
In 2019, the fair values of the assets acquired, and liabilities assumed were finalized. There were no However, with the extension to September 30, 2017, the sum of principal and the accumulated
changes or adjustments made from that of provisionally recognized in 2018. interest starting August 22, 2014 were subjected to 4.99% interest per annum. Total interest from
this loan recognized as interest income amounted to USD0.003 million (₱0.1 million) for the
SuperFoods Group. On January 20, 2012, upon fulfillment of certain legal and regulatory requirements period ended May 10, 2017.
in Vietnam, the JFC Group, through JWPL, acquired effective ownership of 50% share in the business
of the SuperFoods Group (includes SF Vung Tau Joint Stock Company (SFVT), Highlands Coffee Service The loans granted on April 30, 2013 and August 22, 2013, including accrued interests as at
JSC, Quantum Corp., Pho24 Corp., Blue Sky Holdings Limited Hongkong (Blue Sky), Sino Ocean Asia May 10, 2017, were converted to additional equity on SFVT upon the completion of the Settlement
Limited Hongkong and Blue Sky Holdings Limited Macau) through formation of joint ventures. This Transaction Documents and the approval of certain legal and regulatory requirements in Vietnam
consists of a 49% share in SFVT in Vietnam and a 60% share in Blue Sky in Hongkong (the SuperFoods on May 10, 2017 as provided in the Third Supplement to the Loan Agreement signed on
Group Holding Companies). The formation of joint ventures is an implementation of the Framework December 29, 2016.
Agreement made on May 20, 2011 between the JFC Group, through JSF, a 99% subsidiary of JWPL, and
its co-venturers, Viet Thai International Joint Stock Company (VTIJS) and Viet Thai International Company • Advances to Blue Sky. On June 10, 2011, a loan was extended to Blue Sky, the Hong Kong-based
Limited (VTI) (collectively, VTI Group). The SuperFoods Group operates the chain of Highlands Coffee holding company, amounting to USD5.0 million (₱216.0 million) payable in June 2014. As at
shops, Pho 24 restaurants and Hard Rock Cafe stores, whose market is mostly in Vietnam, Hong Kong June 2014, the principal was subject to 5% interest per annum. However, with the extension of
and Macau. The Framework Agreement provided for the JFC Group to contribute a total of USD25.0 the due date to September 30, 2017, the sum of principal and the accumulated interest as at June
million (₱1,079.6 million) to gain 50% effective ownership in the joint ventures. Loans and deposits were 2014 were subjected to 4.99% interest per annum. Total interest from this loan recognized as
made to the SuperFoods Group and the co-venturers prior to the formation of the joint ventures in 2012. interest income amounted to USD0.01 million (₱0.7 million) for the period ended May 10, 2017.

Pursuant to the Framework Agreement, the preliminary consideration for the 50% share in SuperFoods On May 7, 2012, an additional loan was extended to Blue Sky amounting to USD2.5 million
Group amounted to a cash payment of USD25.0 million (₱1,079.6 million) in 2011. (₱105.9 million) payable in May 2014. As at May 9, 2014, the principal was subject to 5% interest
per annum. However, with the extension of the due date to September 30, 2017, the sum of
On October 22, 2015, JSF contributed additional investment in SuperFoods Group amounting to principal and the accumulated interest starting May 10, 2014 were subjected to 4.99% interest per
USD0.7 million (₱34.1 million). annum. Total interest from this loan recognized as interest income amounted to USD0.01 million
₱0.3 million) for the period ended May 10, 2017.
The Supplemental Agreement further provides that JWPL shall be required to pay the co-venturers an
additional amount in 2016 based upon achieving a positive amount determined in accordance with a With the Third Supplement to the Loan Agreement signed on December 29, 2016 and upon the
formula contained in the agreement (earn-out formula). No additional consideration was recognized as completion of the Settlement Transaction Documents, the loans to Blue Sky including accrued
at January 20, 2012, date of acquisition, and as at December 31, 2012 to 2016. interests as at May 10, 2017 were converted into equity except for the balance of USD2.9 million
(₱157.7 million). The carrying value of the remaining loan of Blue Sky to the Parent Company
In accordance with the Framework Agreement, the JFC Group, through JSF, extended loans to amounting to ₱149.6 million and ₱153.5 million were eliminated in the consolidation process
SurperFoods Group. First and Second Supplements to the Loan Agreement were executed that basically as at December 31, 2019 and 2018, respectively.
extended the loan due dates.
The conversion of the loans and related accrued interests into equity is part of the agreement
On November 18, 2016, the JFC Group, through JSF, entered into an agreement with its co-venturers, entered into by the JFC Group with VTI Group in adjusting the ownership in the
VTIJS, to make SuperFoods Group a public company by listing in the Vietnam Stock Exchange with SuperFoods Group.
an Initial Public Offering (IPO) on or before July 2019. As part of the agreement, the ownership of the
SuperFoods Group will be adjusted with the JFC Group, owning 60% of the joint venture and VTI owning On May 10, 2017, a key step in the plan to list SuperFoods Group as a public company in the Vietnam
40%. With this agreement, the following loan structures were amended, as documented in the Third and Stock Exchange was completed by adjusting the ownership interest in the SuperFoods Group to 60%
Fourth Supplements to the Loan Agreement signed on December 29, 2016 and JFC Group and 40% VTI Group from its previous 50-50 ownership share. As a result, JFC Group obtained
March 28, 2017, respectively. control over SuperFoods Group and started consolidating these companies as at acquisition date.

• Advances to SFVT. On April 30, 2013, an additional loan was extended to the co-venturers in the To help fund the SuperFoods Group’s expansion plans, the JFC Group will henceforth take the lead in
SuperFoods Group amounting to USD1.0 million (₱41.2 million) payable in February 2014 but the former’s capital raising activities and will work with various financial institutions in Vietnam and other
was extended to September 30, 2017. The loan bears interest of 5% per annum. With the parts of Asia in this undertaking.
extension to September 30, 2017, the sum of principal and the accumulated interest as at April
2015, were subjected to 4.99% interest per annum. The loan was agreed to be used for general
corporate purposes. Total interest from this loan recognized as interest income amounted to
USD0.003 million (₱0.1 million) for the period ended May 10, 2017.
 

2019 Annual Report 78 Jollibee Foods Corporation

The fair value of the identifiable assets acquired and liabilities assumed as at the date of the acquisition In 2018, the fair values of the assets acquired, and liabilities assumed were finalized. There were no
were as follows: changes or adjustments made from that of provisionally recognized in 2017.
Cash and cash equivalents ₱105,251 B. Incorporation of New Subsidiaries and Additional Investment to a Subsidiary
Receivables 99,746
Inventories 86,664 Hong Yun Hong (Shanghai) Food and Beverages Management Company Ltd. (Hong Yun Hong).
Other current assets 137,035 On November 13, 2019, the JFC Group through its wholly owned subsidiary, GPPL, entered into an
Property, plant and equipment 846,327 agreement with Dim Sum Pte. Ltd. (DSPL) to develop and operate Tim Ho Wan stores in Shanghai and
Trademarks (see Note 14) 4,145,013 other cities within PRC as may be agreed with the Franchisor.
Other noncurrent assets 223,240
Total identifiable assets acquired 5,643,276 Hong Yun Hong, incorporated on November 18, 2019, is 60% owned by GPPL and 40% owned by DSPL.
Less: GPPL and DSPL have committed to invest up to USD13 million (₱658.3 million) to Hong Yun Hong. As at
Trade payables and other current liabilities 488,645 December 31, 2019, the capital contribution of GPPL amounted to USD0.9 million (₱45.6 million). Hong
Loans and other noncurrent liabilities (see Note 18) 569,523 Yun Hong has not started its commercial operations as at December 31, 2019.
Deferred tax liability 744,006
Total identifiable liabilities assumed 1,802,174 Super Magnificent Coffee Company Hungary Kft (SMCC-HU). On September 11, 2019, the JFC Group,
Net identifiable assets acquired ₱3,841,102 through SMCC-SG, incorporated SMCC-HU, a holding company in Hungary. As at December 31, 2019,
SMCC-HU owns the US Entities of CBTL and the capital contribution of SMCC-SG amounted to USD28.9
The JFC Group’s investment in SuperFoods Group was previously accounted for as investment in a joint million (₱1,508.2 million).
venture. In accordance with PFRS 3, with the JFC Group’s acquisition of control over SuperFoods Group
in 2017, the fair value of the previously held interest amounted to ₱2,099.7 million and the resulting Super Magnificent Coffee Company Ireland Limited (SMCC-IE). On August 22, 2019, the JFC Group,
gain from the re-measurement of the 50% previously held interest amounted to ₱1,328.7 million (see through SMCC-SG, incorporated SMCC-IE in Ireland. As at December 31, 2019, the capital contribution
Note 23). A total of ₱2,712.7 million loan to SuperFoods Group was also converted to equity which was of SMCC-SG amounted to USD307.1 million (₱16,017.1 million). SMCC-IE owns the intellectual property
included in the consideration transferred. and existing contracts of CBTL starting from October 1, 2019.

The non-controlling interest was recognized as a proportion of the fair value of the net assets acquired. Bee World Spain, Sociedad Limitada (Bee World Spain). On May 23, 2019, the JFC Group, through
its wholly owned subsidiary, GPPL, incorporated Bee World Spain. As at December 31, 2019, capital
The amount of goodwill recorded at acquisition date amounted to ₱2,507.8 million determined as follows: contribution of GPPL amounted to USD0.003 million (₱0.2 million). Bee World Spain will own and
Fair value of consideration transferred: operate Jollibee stores in Spain.
Fair value of previously held interest ₱2,099,721
Advances converted to equity: Bee World UK Limited (Bee World UK). On April 16, 2018, the JFC Group, through its wholly owned
Advances to VTI Group (see Part D of this note) 2,253,870 subsidiary, JWPL, incorporated Bee World UK in UK. As at December 31, 2018, no capital investment
Advances to SuperFoods Group 458,871 has been made other than the investment to incorporate the new entity. The first store started its
2,712,741 commercial operations on October 20, 2018.
4,812,462
Fair value of non-controlling interest’s share in the net On September 4, 2019, advances from JWPL amounting to USD1.5 million (₱76.3 million) were
identifiable assets acquired 1,536,441 converted to equity and registered at Companies House in UK. As at December 31, 2019, capital
Aggregate amount 6,348,903 contribution of JWPL to Bee World UK amounted to USD1.5 million (₱76.3 million).
Less fair value of net identifiable assets acquired 3,841,102
Goodwill (see Note 14) ₱2,507,801 Golden Piatto Pte. Ltd. (Golden Piatto). On March 31, 2017, the JFC Group, through its wholly owned
subsidiary, GPPL, entered into an agreement with Blackbird Holdings Pte. Ltd. (Blackbird) to own
The net cash inflow from the acquisition is as follows: and operate Cibo Felice S. R. L. (Cibo Felice), the first Jollibee store in Italy. The first store started its
Cash acquired from subsidiary ₱105,251 commercial operations on March 18, 2018.

The goodwill of ₱2,507.8 million is attributable to synergies and other benefits from the acquisition of Golden Piatto, incorporated on April 12, 2017, is 75% owned by GPPL and 25% owned by Blackbird.
SuperFoods Group. GPPL and Blackbird have committed to invest up to EUR1 million (₱60.2 million) to Golden Piatto, of
which EUR0.8 million (₱48.2 million) will be contributed by GPPL in proportion to its ownership in the
From the acquisition date, SuperFoods Group contributed ₱2,476.7 million of revenues and ₱67.3 business.
million net income to the JFC Group. If the business combination had taken place at the beginning of
2017, contribution to consolidated revenues and net income for 2017 would have been ₱3,715.0 million On January 31, 2018, GPPL and Blackbird made additional investments to Golden Piatto amounting to
and ₱100.9 million, respectively. EUR0.5 million (₱33.5 million) and EUR0.2 million (₱11.2 million), respectively. As at December 31, 2019
and 2018, capital contribution of GPPL to Golden Piatto amounted to EUR1.3 million (₱77.0 million).

2019 Annual Report 79 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

C. Material Non-Controlling Interests

SuperFoods Group
The JFC Group has subsidiaries with material non-controlling interest as provided below. 2019 2018
Current assets ₱838,302 ₱640,186
Proportion of equity interest held by non-controlling interest: Noncurrent assets 4,277,400 1,941,206
Current liabilities 3,269,974 1,053,309
Country of incorporation Noncurrent liabilities 1,298,578 597,851
and operation 2019 2018 2017 Total equity 547,150 930,232
GCPL Singapore 40% 40% 40% Equity attributable to non-controlling
SuperFoods Group Vietnam 40% 40% 40% interests 218,860 372,093
The summarized financial information of GCPL and SuperFoods Group in 2019 and 2018 are provided
Summarized Cash Flow Information for the year ended December 31
below. These information are based on amounts before intercompany elimination.

Summarized Statements of Comprehensive Income for the year ended December 31 GCPL
2019 2018 2017
Net cash used in operating activities (₱87,408) (₱58,718) (₱430,134)
GCPL
Net cash provided by investing activities 71,160 89,220 57,512
2019 2018 2017 Net increase (decrease) in cash and
Revenues ₱140,255 ₱276,325 ₱318,082 cash equivalents (16,248) 30,502 (372,622)
Net loss (212,868) (472,122)
Other comprehensive income (loss) (5,134) 95,338 (674,982)
Total comprehensive loss (218,002) (376,784) 8,109 SuperFoods Group
Total comprehensive loss attributable to (666,873) 2019 2018 2017
non-controlling interests (87,201) (150,714) (266,749) Net cash provided by (used in) operating
activities ₱178,732 ₱310,283 (₱827,535)
Net cash used in investing activities (163,132) (335,086) (408,572)
SuperFoods Group Net cash provided by financing activities 160,051 51,678 1,572,770
2019 2018 2017 Net increase in cash and cash equivalents 175,651 26,875 336,663
Revenues ₱5,733,569 ₱4,756,001 ₱2,486,779
Net income (loss) (312,410) (18,571) 78,129 D. Interests in and Advances to Joint Ventures, Co-venturers and Associates
Other comprehensive income (loss) (14,584) 3,398 (3,877)
Total comprehensive income (loss) (326,994) (15,173) 74,252 2019 2018
Total comprehensive income (loss) Interests in joint ventures:
attributable to non-controlling Titan Dining LP ₱2,804,247 ₱742,206
interests (130,798) (6,069) 29,701 Golden Bee Foods Restaurant LLC 240,553 227,585
JBPX Foods Inc. 57,759 —
Summarized Statements of Financial Position as at December 31 C-Joy Poultry Meats Production, Inc. — —
3,102,559 969,791
GCPL Interests in associates:
2019 2018 Tortas Frontera 678,793 668,679
Current assets ₱1,486,976 ₱1,532,013 Entrek (B) SDN BHD 137,065 191,744
Noncurrent assets 287,379 271,262 C-Joy Poultry Realty, Inc. 8,547 9,155
Current liabilities 1,204,788 1,002,821 824,405 869,578
Total equity 569,567 800,454 Advances to a joint venture and co-venturer:
Equity attributable to non-controlling interests 227,827 320,182 VTI Group 1,664,532 1,672,861
C-Joy Poultry Meats Production, Inc. 1,240,606 —
2,905,138 1,672,861
₱6,832,102 ₱3,512,230

2019 Annual Report 80 Jollibee Foods Corporation

Interests in Joint Ventures The amounts of the income and expense accounts include the following:

Titan Dining LP (Titan). On May 23, 2018, the JFC Group, through JWPL, invested SGD18.0 million 2019 2018
(₱706.9 million) in Titan, a private equity fund that has executed (through a wholly-owned subsidiary) a Net loss ₱77,865 ₱49,400
binding agreement for the acquisition of 100% of the Asia Pacific master franchise holder of the “Tim Ho Total comprehensive loss 77,865 49,400
Wan” brand, Tim Ho Wan Pte. Ltd. and its affiliate Dim Sum Pte. Ltd., which owns and operates Tim Ho
Wan stores in Singapore. 2019 2018
Net assets ₱4,609,369 ₱1,566,363
The investment provides an opportunity for the JFC Group to have a significant interest in the Tim Ho Proportion of the JFC Group’s ownership 60% 45%
Wan franchise in the long-term. 2,765,621 704,863
Cumulative translation adjustments 38,626 37,343
Consistent with the agreement that JWPL shall invest up to SGD45.0 million (₱,687.1 million) or 45% ₱2,804,247 ₱742,206
of the total maximum fund of SGD100.0 million (₱3,749.0 million) in Titan, JWPL made additional
investments to Titan amounting to SGD2.7 million (₱102.7 million) and SGD0.9 million (₱35.3 million) Golden Bee Foods Restaurants LLC (Golden Bee). On February 25, 2014, the JFC Group, through GPPL,
on May 31, 2019 for the third capital call and on August 29, 2018, respectively. signed a joint agreement with Golden Crown Foods LLC (GCFL) to establish a joint venture entity to own
and operate the Jollibee brand in the United Arab Emirates.
On October 2, 2019, the total maximum fund of Titan increased from SGD100.0 million (₱3,749.0
million) to SGD200.0 million (₱7,498.0 million). As such, JWPL, increased its capital commitment to Titan The joint venture entity, incorporated as Golden Bee on January 28, 2015, is 49% owned by GPPL and
from SGD45.0 million (₱1,687.1 million) to SGD120.0 million (₱4,498.8 million) which, when completed, 51% owned by GCFL. GPPL and GCFL will share joint control and management of Golden Bee. GPPL
JWPL’s investment will constitute 60% of the total maximum fund. The increase in the total maximum has invested USD0.8 million (₱33.9 million) in Golden Bee. The first store started commercial operations
fund and additional capital commitment of JWPL are in furtherance of certain strategic projects currently on May 4, 2015.
being undertaken by Titan, consistent with its mandate to invest in the food service sector and grow
strong Asia Pacific food service brands. The details of the JFC Group’s interest in the Golden Bee joint venture as at December 31 are as follows:

On October 28, 2019, JWPL made an additional investment for the 4th capital call amounting to 2019 2018
SGD53.4 million (₱2,006.1 million). Interest in a joint venture - cost ₱33,926 ₱33,926
Cumulative equity in net earnings:
The details of the JFC Group’s interest in Titan as at December 31 are as follows: Balance at beginning of year 193,659 164,841
2019 2018 Equity in net earnings during the year 47,526 63,455
Interest in a joint venture - cost: Dividends received during the year (34,558) (34,637)
Balance at beginning of year ₱742,206 ₱706,906 Balance at end of year 206,627 193,659
Additions during the year 2,108,760 35,300 ₱240,553 ₱227,585
2,850,966 742,206
Equity in net loss during the year (46,719) — Summarized financial information of Golden Bee based on its financial statements and reconciliation
₱2,804,247 ₱742,206 with the carrying amount of the investment in the consolidated financial statements are set out below:

2019 2018
Summarized financial information of Titan based on its financial statements and reconciliation with the Current assets ₱686,984 ₱523,053
carrying amount of the investment in the consolidated financial statements are set out below: Noncurrent assets 294,675 346,422
Total assets ₱981,659 ₱869,475
2019 2018
Current assets ₱2,916,421 ₱28,141
Current liabilities ₱488,174 ₱383,523
Noncurrent assets 1,701,864 1,553,022
Total assets ₱4,618,285 ₱1,581,163 The amounts of assets and liabilities above include:

Current liabilities ₱8,916 ₱14,800 2019 2018

Cash and cash equivalents ₱352,633 ₱193,920
The amounts of assets and liabilities above include:
The amounts of the income and expense accounts include the following:
2019 2018
Cash and cash equivalents ₱2,916,251 ₱27,690 2019 2018 2017
Revenues ₱1,687,621 ₱1,601,623 ₱1,313,210
Depreciation and amortization 90,077 78,438 54,539
Net income 96,991 129,501 242,124
Total comprehensive income 96,991 129,501 242,124

2019 Annual Report 81 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2019 2018 Summarized financial information of the C-Joy Poultry based on its financial statements and reconciliation
Net assets ₱493,485 ₱485,952 with the carrying amount of the investment in the consolidated financial statements are set out below:
Proportion of the JFC Group’s ownership 49% 49%
241,808 238,116 2019 2018
Cumulative translation adjustments (1,255) (10,531) Current assets ₱2,039,066 ₱1,523,852
₱240,553 ₱227,585 Noncurrent assets 2,026,536 1,843,050
Total assets ₱4,065,602 ₱3,366,902
JBPX Foods Inc. (Panda Express). On September 27, 2018, the JFC Group, through the Parent Company,
Current liabilities ₱7,242,810 ₱4,591,583
entered into an agreement with Panda Restaurant Group, Inc. to establish a joint venture entity to own
Noncurrent liabilities 47,207 27,430
and operate Panda Express restaurants in the Philippines.
Total liabilities ₱7,290,017 ₱4,619,013
The joint venture entity, incorporated as JBPX Foods Inc. on July 3, 2019, is 50% owned by the
The amounts of assets and liabilities above include the following:
Parent Company and 50% owned by Panda Restaurant Group, Inc. As at December 31, 2019, capital
contribution of the Parent Company to Panda Express amounted to ₱66.0 million. Panda Express started 2019 2018
commercial operations on December 12, 2019. Cash and cash equivalents ₱1,224,437 ₱192,876
Current financial liabilities (excluding
As at December 31, 2019, Panda Express’s total assets and total liabilities amounted to ₱185.7 million and trade payables and other current liabilities
₱70.2 million, respectively. The assets of Panda Express include cash and cash equivalents amounting to and provisions) 522,880 399,134
₱130.4 million as at December 31, 2019. Noncurrent financial liabilities (excluding
provisions) 53,166 26,635
In 2019, net loss and total comprehensive loss amounted to ₱16.5 million. Share in equity in net loss
amounted to ₱8.3 million for the year ended December 31, 2019. The amounts of the income and expense accounts include the following:

C-Joy Poultry Meats Production, Inc. (C-Joy Poultry). On May 24, 2016, the Parent Company entered into 2019 2018 2017
an agreement with Cargill Philippines, Inc., a wholly owned subsidiary of Cargill, Inc. (Cargill), to establish Revenues ₱4,764,375 ₱4,014,768 ₱1,929,850
a joint venture entity to build and operate a poultry processing plant in Sto. Tomas, Batangas, Philippines. Depreciation and amortization 118,088 109,629 5,510
Cargill will oversee the setting up, management and operations of this facility. Taxes and licenses 93,660 35,788 6,890
Interest income 1,706 593 6,727
C-Joy Poultry, the joint venture entity, formerly incorporated as Cargill Joy Poultry Meats Production, Inc., Interest expense 283,992 101,939 1,091
is 70% owned by Cargill and 30% owned by the Parent Company. C-Joy Poultry is estimated to create Net loss (1,972,303) (1,756,971) (260,076)
1,000 new full-time jobs and develop new opportunities in the farming community in Batangas and Total comprehensive loss (1,978,024) (1,755,682) (260,076)
nearby provinces as local poultry farmers are contracted to grow chicken to supply the requirements
of the processing plant. The poultry processing plant started its commercial operations on December 2019 2018
5, 2017. Net liabilities (₱3,224,415) (₱1,252,111)
Proportion of the JFC Group’s ownership 30% 30%
The details of JFC Group’s interest in C-Joy Poultry as at December 31 are as follows: (₱967,324) (₱375,633)

2019 2018 Interest in Associates

Interest in a joint venture - cost ₱233,406 ₱233,406
Cumulative equity in net losses: Tortas Frontera LLC (Tortas). On September 7, 2018, the JFC Group, through Jollibee Foods Corporation
Balance at beginning of year (233,406) (81,948) (USA), entered into a business venture with award-winning Chef Rick Bayless to build a Mexican fast-
Equity in net loss during the year — (151,458) casual restaurant business in the USA.
Balance at end of year — (233,406)
₱— ₱— This partnership was formalized through an investment by JFC Group of USD12.6 million (₱668.7
million) in Tortas, which owns the Tortas Frontera business founded by Chef Bayless, in consideration
The JFC Group’s equity share in net losses amounting to ₱527.1 million in 2018 exceeded the carrying for 47% of the fully-diluted membership interests therein. The remaining 53% membership interests
value of its interest in C-Joy Poultry amounting to ₱151.5 million as at December 31, 2017. Consequently, in Tortas shall be held by Chef Ricky Bayless and other shareholders. The transaction is subject to the
the JFC Group’s unrecognized equity share in net losses amounted to ₱591.7 million and ₱375.6 million fulfillment of agreed closing conditions.
in 2019 and 2018.
On December 21, 2018, upon fulfillment of the closing conditions, Jollibee Foods Corporation (USA)
paid Chef Bayless in cash.

2019 Annual Report 82 Jollibee Foods Corporation

The details of the JFC Group’s interest in Tortas as at December 31 are as follows: Summarized financial information of Entrek based on its financial statements and reconciliation with the
carrying amount of the investment in the consolidated financial statements are set out below:
2019 2018
Interest in an associate - cost ₱668,679 ₱668,679 2019 2018
Equity in net earnings during the year 10,114 — Current assets ₱538,882 ₱743,134
₱678,793 ₱668,679 Noncurrent assets 314,943 270,932
Total assets ₱853,825 ₱1,014,066
Summarized financial information of Tortas based on its financial statements and reconciliation with the
carrying amount of the investment in the consolidated financial statements are set out below: Current liabilities ₱388,928 ₱385,870
Noncurrent liabilities 13,643 5,594
2019 2018
Total liabilities ₱402,571 ₱391,464
Current assets ₱719,743 ₱548,001

Current liabilities ₱331 ₱4,893 The amounts of the income and expense accounts include the following:
2019 2018 2017
The amounts of assets and liabilities above include:
Revenues ₱973,596 ₱888,909 ₱733,217
2019 2018 Depreciation 66,523 52,429 38,381
Cash and cash equivalents ₱408,756 ₱544,410 Net income 64,009 113,543 75,031
Total comprehensive income 64,009 113,543 75,031
The amounts of the income and expense accounts include the following:
2019 2018 2019 2018
Revenues ₱128,138 ₱48,213 Net assets ₱451,254 ₱622,602
Net income 24,899 34,717 Proportion of the JFC Group’s ownership 33.33% 33.33%
Total comprehensive income 24,899 34,717 150,418 207,534
Cumulative translation adjustments (13,353) (15,790)
2019 2018 ₱137,065 ₱191,744
Net assets ₱719,412 ₱543,108
Proportion of the JFC Group’s ownership 52.22% 52.22% C-Joy Poultry Realty, Inc. (C-Joy Realty). On May 24, 2016, the Parent Company entered into an agreement
375,677 283,611 with Cargill Philippines to establish C-Joy Realty, which leases the land where the C-Joy Poultry plant is
Goodwill 381,532 381,532 located.
Cumulative translation adjustments (78,416) 3,536
₱678,793 ₱668,679 The details of the JFC Group’s interest in C-Joy Realty as at December 31 are as follows:

Entrek (B) SDN BHD (Entrek). The JFC Group, through JIBL, has 1/3 or 33.3% ownership in Entrek, a 2019 2018
Interest in an associate - cost ₱10,586 ₱10,586
company that operates Jollibee stores in Brunei.
Cumulative equity in net losses:
The details of the JFC Group’s interest in Entrek as at December 31 are as follows: Balance at beginning of year (1,431) (922)
Equity in net loss during the year (608) (509)
2019 2018 Balance at end of year (2,039) (1,431)
Interest in an associate - cost ₱16,660 ₱16,660 ₱8,547 ₱9,155
Cumulative equity in net earnings:
Balance at beginning of year 175,084 120,577 Summarized financial information of C-Joy Realty based on its financial statements and reconciliation
Equity in net earnings during the year 21,336 37,847 with the carrying amount of the investment in the consolidated financial statements are set out below:
Dividends received during the year (76,015) —
Reversal of impairment loss (see Note 23) — 16,660 2019 2018
Balance at end of year 120,405 175,084 Current assets ₱715 ₱2,597
₱137,065 ₱191,744 Noncurrent assets 62,152 62,152
Total assets ₱62,867 ₱64,749

Current liabilities ₱3,244 ₱1,025

Noncurrent liabilities 31,133 33,209
Total liabilities ₱34,377 ₱34,234

2019 Annual Report 83 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amounts of assets and liabilities above include the following: On December 14, 2016, a loan of USD9.0 million (₱447.5 million) was extended to the VTI Group with an
interest rate of 3.5% per annum. The loan was agreed to be used for SuperFoods Group’s capital needs.
2019 2018 The loan is part of the total agreed loan of USD30.0 million payable in eight (8) years from the first
Cash and cash equivalents ₱371 ₱1,380 utilization date. On June 2, 2017, the additional loan of USD21.0 million (₱1,060.0 million) was granted
Current financial liabilities (excluding to the VTI Group. The loan is secured by pledged shares in SFVT and Blue Sky which will be released
trade payables and other current liabilities in proportion to the amount of the principal paid. Total interest from this loan, recognized as interest
and provisions) 1,067 164 income, amounted to USD1.1 million (₱53.5 million), USD1.1 million (₱55.5 million) and USD0.8 million
Noncurrent financial liabilities 31,133 33,209 (₱37.6 million) for the years ended December 31, 2019, 2018 and 2017, respectively (see Note 23).

The amounts of the income and expense accounts include the following: Advances to a Joint Venture
2019 2018 2017
Advances to C-Joy Poultry. On May 30, 2019, loans totaling to ₱615.0 million were extended by the
Revenues ₱2,400 ₱2,400 ₱1,400
Parent Company to C-Joy Poultry payable on May 29, 2020. The loans were subject to interest rate based
Taxes and licenses 208 281 60
on PHP BVAL Reference Rates for the 6-month tenor (6-month BVAL) plus spread of 0.50%.
Interest expense 2,465 2,177 1,414
Net loss (2,027) (1,699) (1,067)
On June 28, 2019, additional loan was extended amounting to ₱315.0 million due on June 26, 2020.
Total comprehensive loss (2,027) (1,699) (1,067)
The loan was subject to interest rate based on 6-month BVAL plus spread of 0.50%.
2019 2018
On December 20, 2019, additional loan amounting to ₱306.7 million was extended subject to interest
Net assets ₱28,490 ₱30,515
rate based on 6-month BVAL plus spread of 0.50%. Total interest from the loans recognized as interest
Proportion of the JFC Group’s ownership 30% 30%
income amounted to ₱32.5 million in 2019 (see Note 23). As at December 31, 2019, the carrying value
₱8,547 ₱9,155
of the loans amounted to ₱1,240.6 million.

Advances to Co-venturers E. Cessation of Operations

Advances to VTI Group. The details of the JFC Group’s advances to VTI Group as at December 31 are WJ Investments Limited (WJ). On August 22, 2012, the JFC Group, through JWPL and GPPL, entered
as follows: into an agreement with Hoppime Ltd., a subsidiary of Wowprime Corporation of Taiwan (Wowprime)
2019 2018 and some key executives of Wowprime, to establish a joint venture entity to own and operate the 12
Balance at beginning of year ₱1,672,861 ₱1,535,590 Hotpot brand in the People’s Republic of China, Hong Kong and Macau. The “12 Hotpot” restaurant is
Accrual of interest (see Note 23) 53,531 55,523 known in Taiwan for its low-priced hotpot dishes.
Translation adjustments and others (61,860) 81,748
Balance at end of year ₱1,664,532 ₱1,672,861 The joint venture entity, incorporated as WJ Investments Limited (WJ), is 48%-owned by the JFC Group
and 48%-owned by Wowprime’s subsidiary and executives. The remaining 4% is owned by certain
individuals with experience in the retail sector in China. Through their subsidiaries, JFC Group and
Loan to VTI Group amounting to USD35.0 million (₱1,523.9 million), extended on June 9, 2011, is
Wowprime have joint control and management of WJ.
payable in December 2016. In accordance with the Fourth Supplement to the Loan Agreement signed
on March 28, 2017, the due date of the loan was further extended to May 31, 2017. This loan is secured
On October 31, 2017, WJ ceased the operations of the 16 stores of the 12 Hotpot brand in the People’s
by a mortgage by the VTI Group of all their shares in SuperFoods Group.
Republic of China to focus in building the JFC Group’s larger and fast-growing business in China and
other parts of the world. With this, WJ will be dissolved and liquidated. The JFC Group recognized a
The loan bears interest of 5% per annum payable in lump sum on the due date. The loan was agreed
loss of ₱116.2 million in the consolidated statement of comprehensive income in 2017 (see Note 23).
to be used for general corporate purposes. Total interest from this loan, recognized as interest income,
amounted to USD0.6 million (₱31.6 million) for the period ended May 10, 2017.
On August 13, 2019, WJ completed the dissolution of 12 Hotpot in the People’s Republic of China.
The Third Supplement to the Loan Agreement signed on December 29, 2016 provides the assignment
of the USD35.0 million (₱1,735.3 million) loan receivable including accrued interests as at December 31,
2016 from JSF to JWPL. With the completion of the Settlement Transaction Documents and upon the
approval of certain legal and regulatory requirements in Vietnam on May 10, 2017, the loan, including
interests as at the same day, was contributed as additional capital to the SuperFoods Group.

2019 Annual Report 84 Jollibee Foods Corporation

12. Property, Plant and Equipment
The rollforward analysis of property, plant and equipment are as follows:

2019

Plant,
Buildings,
Commercial Office, Store
Land and Condominium Leasehold and Food Furniture
Land Units and Rights and Processing and Transportation Construction
Improvements Improvements Improvements Equipment Fixtures Equipment in Progress Total
Cost
Balance at beginning of year,
As previously reported ₱677,030 ₱4,078,145 ₱22,691,183 ₱21,602,616 ₱2,325,794 ₱710,293 ₱5,306,609 ₱57,391,670
Effect of adoption of PFRS 16
(see Note 2) — — (69,952) — — — — (69,952)
Balance at beginning of year,
As restated 677,030 4,078,145 22,621,231 ₱21,602,616 ₱2,325,794 ₱710,293 ₱5,306,609 ₱57,321,718
Additions — 640,300 1,185,444 1,579,326 115,295 45,300 6,476,247 10,041,912
Acquisition of a business (see Note 11) 380,174 — 1,806,996 1,155,572 466,519 3,592 165,965 3,978,818
Retirements and disposals (250,800) (90,805) (2,127,825) (2,090,377) (211,873) (152,675) (142,040) (5,066,395)
Reclassifications (see Note 13) 276,252 2,951,849 2,887,927 3,900,906 439,723 22,283 (8,075,874) 2,403,066
Translation adjustments (12,897) (70,722) (512,392) (276,227) (66,802) (2,634) (21,824) (963,498)
Balance at end of year 1,069,759 7,508,767 25,861,381 25,871,816 3,068,656 626,159 3,709,083 67,715,621
Accumulated Depreciation
and Amortization
Balance at beginning of year,
As previously reported 7,564 1,887,219 12,790,556 14,143,755 1,301,456 532,563 — 30,663,113
Effect of adoption of PFRS 16
(see Note 2) — — (48,510) — — — — (48,510)
Balance at beginning of year,
As restated 7,564 1,887,219 12,742,046 14,143,755 1,301,456 532,563 — 30,614,603
Depreciation and amortization
(see Notes 21 and 22) — 216,525 2,129,239 3,364,544 389,518 79,910 — 6,179,736
Retirements and disposals — (86,482) (1,531,475) (1,681,962) (120,274) (142,745) — (3,562,938)
Reclassifications — 194,900 899,878 651,475 380,172 389 — 2,126,814
Translation adjustments — (25,021) (350,490) (211,507) (49,125) (2,420) — (638,563)
Balance at end of year 7,564 2,187,141 13,889,198 16,266,305 1,901,747 467,697 — 34,719,652
Accumulated Impairment Losses
Balance at beginning of year — — — 34,566 — — — 34,566
Additions (see Note 22) — — — 399,212 — — — 399,212
Reversals (see Note 22) — — — (29,179) — — — (29,179)
Translation adjustments — — — (752) — — — (752)
Balance at end of year — — — 403,847 — — — 403,847
Net Book Value ₱1,062,195 ₱5,321,626 ₱11,972,183 ₱9,201,664 ₱1,166,909 ₱158,462 ₱3,709,083 ₱32,592,122

2019 Annual Report 85 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2018 (As Restated)

Plant,
Buildings,
Commercial Office, Store
Land and Condominium Leasehold and Food Furniture
Land Units and Rights and Processing and Transportation Construction
Improvements Improvements Improvements Equipment Fixtures Equipment in Progress Total
Cost
Balance at beginning of year,
As previously reported ₱673,514 ₱3,345,527 ₱20,461,846 ₱18,177,531 ₱1,441,786 ₱672,266 ₱2,370,853 ₱47,143,323
Effect of adoption of PFRS 16
(see Note 2) — — (68,407) — — — — (68,407)
Balance at beginning of year,
As restated 673,514 3,345,527 20,393,439 18,177,531 1,441,786 672,266 2,370,853 47,074,916
Additions — 402,275 1,085,299 1,314,825 138,374 51,950 6,527,958 9,520,681
Acquisition of a business (see Note 11) — — 625,204 1,250,499 677,733 676 11,876 2,565,988
Retirements and disposals — (15,538) (1,367,825) (946,935) (66,916) (17,557) (197,580) (2,612,351)
Reclassifications — 335,133 1,768,001 1,708,279 118,208 2,171 (3,411,359) 520,433
Translation adjustments 3,516 10,748 117,113 98,417 16,609 787 4,861 252,051
Balance at end of year, As restated 677,030 4,078,145 22,621,231 21,602,616 2,325,794 710,293 5,306,609 57,321,718
Accumulated Depreciation
and Amortization
Balance at beginning of year,
As previously reported 7,564 1,409,213 11,246,146 11,699,317 978,883 465,693 — 25,806,816
Effect of adoption of PFRS 16
(see Note 2) — — (44,331) — — — — (44,331)
Balance at beginning of year,
As restated 7,564 1,409,213 11,201,815 11,699,317 978,883 465,693 — 25,762,485
Depreciation and amortization
(see Notes 2, 21 and 22) — 291,598 2,132,629 2,882,908 362,787 80,666 — 5,750,588
Retirements and disposals — (11,619) (857,636) (696,510) (52,035) (16,728) — (1,634,528)
Reclassifications — 189,732 154,058 174,575 (272) 2,340 — 520,433
Translation adjustments — 8,295 111,180 83,465 12,093 592 — 215,625
Balance at end of year, As restated 7,564 1,887,219 12,742,046 14,143,755 1,301,456 532,563 — 30,614,603
Accumulated Impairment Losses
Balance at beginning of year — — — 442,693 — — — 442,693
Reversals (see Note 22) — — — (408,184) — — — (408,184)
Translation adjustments — — — 57 — — — 57
Balance at end of year — — — 34,566 — — — 34,566
Net Book Value, As restated ₱669,466 ₱2,190,926 ₱9,879,185 ₱7,424,295 ₱1,024,338 ₱177,730 ₱5,306,609 ₱26,672,549

2019 Annual Report 86 Jollibee Foods Corporation

 Construction in progress account mainly pertains to costs incurred for ongoing construction of properties, 2018
including soon-to-open stores and commissaries. The borrowing cost that has been capitalized for the Buildings
construction of commissaries amounted to ₱89.7 million and ₱19.6 million as at December 31, 2019 and Building
and 2018, respectively. Land Improvements Total
Cost
On December 9, 2019, RRB Holdings Inc., a wholly owned subsidiary, entered into a memorandum of Balance at beginning of year ₱848,974 ₱179,377 ₱1,028,351
agreement with Robinsons Land Corporation, Double Dragon Properties Corp. and Hotel of Asia, Inc. for Accumulated Depreciation and
the sale of a parcel of land for ₱1,033.2 million with carrying amount of ₱250.8 million. Amortization
Balance at beginning and end of year — 179,377 179,377
Gain on retirements and disposals of property, plant and equipment amounted to ₱299.0 million in Net Book Value ₱848,974 ₱— ₱848,974
2019 and loss on retirements and disposals of property, plant and equipment amounted to ₱45.5
million and ₱174.5 million in 2018 and 2017, respectively (see Note 22). In 2019, the land, with a cost of ₱276.3 million, was transferred at cost to property, plant and equipment
due to change in use, evidenced by commencement of owner-occupation (see Note 12).
On December 24, 2019, the Parent Company purchased condominium units in Jollibee Tower for a total
cost of ₱1,055.0 million in relation to the contract to sell they entered with Double Dragon. The JFC Group’s investment properties have an aggregate fair value of ₱1,747.3 million as at December
31, 2017 as determined by independent appraisers who holds a recognized and relevant professional
The JFC Group performed impairment assessments of fixed assets considering that there are observable qualification. Management does not expect a significant change in the aggregate fair value of the JFC
indications that the assets’ values have significantly declined resulting to recognition of provision for Group’s investment properties in 2019 and 2018. The fair value represents the amount at which the
impairment amounting to ₱399.2 million, nil and ₱431.9 million in 2019, 2018 and 2017, respectively assets and liabilities can be exchanged in an orderly transaction between market participants to sell the
(see Note 22). asset or transfer the liability at the measurement date under current market conditions in accordance
with International Valuation Standards.
Management reassessed the recoverable amount of the JFC Group’s office, store and food processing
equipment and recognized reversal of provision amounting to ₱29.2 million, ₱408.2 million and ₱2.1 In determining the fair value of the investment properties, the independent appraisers used the market
million in 2019, 2018 and 2017, respectively (see Note 22). Consequently, allowance for impairment loss data approach for land and cost approach for buildings and building improvements. For land, fair
on office, store and food processing equipment amounted to ₱403.8 million, ₱34.6 million and ₱442.7 value is based on sales and listings of comparable properties within the vicinity after adjustments for
million as at December 31, 2019, 2018 and 2017, respectively. differences in location, size and shape of the lot, time elements and other factors between the properties
and their comparable properties. For buildings and building improvements, fair value is based on
No property, plant and equipment as at December 31, 2019 and 2018 have been pledged as security the current cost to replace the properties in accordance with prevailing market prices for materials,
or collateral. labor, and contractors’ overhead, profit and fees in the locality after adjustments for depreciation due
to physical deterioration, and functional and economic obsolescence based on personal inspection of
the buildings and building improvements and in comparison to similar properties. Fair value hierarchy
13. Investment Properties disclosures for investment properties have been provided in Note 32.
The rollforward analysis of this account as at December 31, 2019 and 2018 follows:
Rent income derived from income-generating properties amounted to ₱28.8 million,₱25.0 million and
2019
₱27.2 million in 2019, 2018 and 2017, respectively (see Notes 20 and 29).
Buildings
and Building Direct operating costs relating to the investment properties which include maintenance expenses
Land Improvements Total totaled to ₱15.0 million, ₱12.5 million and ₱28.9 million in 2019, 2018 and 2017, respectively.
Cost
Balance at beginning of year ₱848,974 ₱179,377 ₱1,028,351 In 2017, the Parent Company sold its land located at Sta. Rosa Laguna and Luisita Industrial Park in Tarlac
Reclassification to property, plant and for a total consideration of ₱365.5 million. Net gain arising from the disposals of these investment
equipment (see Note 12) (276,252) — (276,252)
properties amounted to ₱231.0 million (see Note 22).
Balance at end of year 572,722 179,377 752,099
Accumulated Depreciation and
In 2015, the Parent Company entered into an agreement to develop a commercial and office
Amortization
condominium building (the “Project”) in a parcel of its land in consideration for cash and assigned units
Balance at beginning and end of year — 179,377 179,377
in the Project. The completion of the transaction is conditional upon fifty percent (50%) completion of
Net Book Value ₱572,722 ₱— ₱572,722
the Project, as certified by the general contractor of the Project, and when all of the assigned units are
fully constructed. As at December 31, 2019 and 2018, the Project is still under development.

No investment properties as at December 31, 2019 and 2018 have been pledged as security or collateral
for the JFC Group’s debts.

2019 Annual Report 87 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. Trademarks, Goodwill and Other Intangible Assets The rollforward analysis of the JFC Group’s computer software as at December 31 are as follows:
This account consists of: 2019 2018
2018 Cost
(As restated - Balance at beginning of year ₱823,506 ₱740,260
2019 Note 2) Additions — 83,246
Trademarks (see Note 11) ₱35,047,990 ₱16,563,269 Acquisition of a business (see Note 11) 169,652 —
Goodwill (see Note 11) 14,497,162 14,395,717 Write-off (see Note 22) (20,690) —
Computer software, net of accumulated Balance at end of year 972,468 823,506
amortiza-tion 570,685 516,975 Accumulated Amortization
Other intangible assets, net of accumulated Balance at beginning of year 306,531 227,671
amor-tization 92,282 65,864 Amortizations (see Note 22) 90,504 78,860
₱50,208,119 ₱31,541,825 Balance at end of year 397,035 306,531
Translation adjustment (4,748) —
Trademarks and Goodwill Net Book Value ₱570,685 ₱516,975
Trademarks and goodwill acquired through business combinations are attributable to the following
group of CGUs as at December 31:
Other Intangible Assets
The JFC Group’s other intangible assets include other trademarks and patents, liquor licenses and
2019 2018 customer list amortized over a useful life of five years.
Trademarks:
CBTL (see Note 11) ₱18,484,721 ₱— The rollforward analysis of other intangible assets as at December 31 are as follows:
Smashburger (see Note 11) 10,414,000 10,414,000
SuperFoods Group (see Note 11):
2018
Highlands Coffee 3,681,912 3,681,912
(As restated -
Pho 24 463,101 463,101
2019 Note 2)
Mang Inasal 2,004,256 2,004,256
Cost
Total 35,047,990 16,563,269
Balance at end of year, As previously reported ₱453,507 ₱57,119
Goodwill:
Effect of adoption of PFRS 16 (see Note 2) (331,799) —
Smashburger (see Note 11) 5,198,690 5,345,494
Balance at beginning of year, As restated 121,708 57,119
SuperFoods Group (see Note 11) 2,464,156 2,507,801
Additions — 27,970
Hong Zhuang Yuan 2,718,848 2,497,253
Acquisition of a subsidiary (see Note 11) 49,262 368,418
Mang Inasal 1,781,267 1,781,267
Effect of adoption of PFRS 16 (see Note 2) — (331,799)
Red Ribbon Bakeshop:
Balance at end of year, As restated 170,970 121,708
Philippine operations 737,939 737,939
Accumulated Amortization
US operations 400,632 434,651
Balance at end of year, As previously reported 99,490 38,961
Yong He King 575,701 535,281
Effect of adoption of PFRS 16 (see Note 2) (43,567) —
Chowking US operations 448,614 383,855
Balance at beginning of year, As restated 55,923 38,961
GSC 166,070 166,931
Amortization (see Note 22) 19,132 60,529
Burger King 5,245 5,245
Effect of adoption of PFRS 16 (see Notes 2 and 22) — (43,567)
14,497,162 14,395,717
Balance at end of year, As restated 75,055 55,923
Trademarks and goodwill ₱49,545,152 ₱30,958,986
Translation adjustment (3,633) 79
Net Book Value ₱92,282 ₱65,864
Computer Software
The JFC Group’s computer software pertains to the Enterprise Resource Planning (ERP) system which the
JFC Group started to use on August 1, 2014 and cloud-based hosting arrangements and implementation Impairment Testing of Trademarks and Goodwill
costs of CBTL. Goodwill acquired through business combinations have been allocated to ten (10) groups of CGUs,
which are subsidiaries of the Parent Company, owned directly or indirectly. The recoverable amounts
of the groups of CGUs have been determined based on value in use calculations using cash flow
projections from financial budgets approved by the BOD covering a five-year period. Furthermore,
the trademarks of Smashburger, SuperFoods Group and Mang Inasal are allocated to the CGU of
Smashburger, SuperFoods Group and Mang Inasal, respectively.

2019 Annual Report 88 Jollibee Foods Corporation

The calculation of value in use is most sensitive to the following assumptions which vary per geographical 15. Other Noncurrent Assets
location:
This account consists of:
Long-term 2018
Geographical Pre-tax Revenue (As restated -
CGUs Location Discount Rate Growth Rate 2019 Note 2)
Hong Zhuang Yuan PRC 10.0% 5.7% Security and other deposits (see Notes 9, 31 and 32) ₱2,971,739 ₱2,474,748
Mang Inasal Philippines 10.0% 6.5% Noncurrent portion of:
Red Ribbon Bakeshop: Rent and other long-term prepayments 136,046 505,797
Philippine operations Philippines 10.1% 6.5% Employee car plan receivables
US operations USA 7.5% 2.0% (see Notes 7, 31 and 32) 133,434 169,109
Yong He King PRC 8.7% 5.7% Prepaid market entry fee - net of accumulated
Chowking US operations USA 9.3% 2.0% amortization of ₱20.8 million and
Burger King Philippines 11.0% 6.5% ₱15.4 million in 2019 and 2018,
GSC Vietnam 11.9% 6.5% respectively (see Note 22) 85,518 94,315
SuperFoods Group Vietnam 11.2% 6.5% Franchise rights - net of accumulated
Smashburger USA 7.6% 2.0% amortization of ₱63.0 million and
₱49.4 million in 2019 and 2018,
respectively (see Note 22) 80,125 80,903
Key assumptions with respect to the calculation of value in use of the groups of CGUs as at December
Deferred rent expense 77,003 78,652
31, 2019 and 2018 used by management in its cash flow projections to undertake impairment testing of
Deferred compensation 24,776 27,367
goodwill are as follows:
Returnable containers and others 20,482 38,644
Tools and other assets 266,851 281,509
a) Discount rates - discount rates represent the current market assessment of the risks specific to
each group of CGUs, regarding the time value of money and individual risks of the underlying ₱3,795,974 ₱3,751,044
assets which have not been incorporated in the cash flow estimates. The discount rate calculation
is based on the specific circumstances of the JFC Group’s group of CGUs, derived from weighted
Terms and conditions of other noncurrent assets are as follows:
average cost of capital (WACC) of each group of CGUs. The WACC takes into account both the
cost of debt and equity. The cost of equity is calculated using the Capital Asset Pricing Model
• Security and other deposits generally represent deposits for leases entered into by the JFC Group
(CAPM). The cost of debt is based on the assumed interest-bearing borrowings each group of
as lessee. The security deposits are recoverable from the lessors at the end of the lease terms,
CGUs is obliged to service. CGU-specific risk is incorporated by applying individual alpha and
which range from three to twenty years. These are carried at amortized cost. The discount rates
beta factors. The beta factors are evaluated annually based on publicly available market data.
used range from 2.91%-21.57% and 2.36%-21.57% in 2019 and 2018, respectively. The difference
between the fair value at initial recognition and the notional amount of the security deposits is
b) Long-term growth rates - rates are determined in consideration of historical and projected results,
charged to “Deferred rent expense” account and amortized on straight-line basis over the
as well as the economic environment where the group of CGUs operate.
lease terms.
c) EBITDA - is based on the most recent value achieved in the year preceding the start of the budget
• Employee car plan receivables are presented at amortized cost. The difference between the fair
period, and adjusted for planned efficiency improvement, if any.
value at initial recognition and the notional amount of the employee car plan receivables is
recognized as “Deferred compensation” and is amortized on a straight-line basis over the
Management believes that any reasonably possible change in the key assumptions on which recoverable
credit period.
amount is based would not cause the carrying amount of the CGUs to exceed its recoverable amount.
Accretion of interest on security and other deposits and employee car plan receivables amounted
No impairment losses were recognized for trademarks and goodwill for the years ended December 31,
to ₱33.6 million, ₱46.6 million and ₱33.1 million in 2019, 2018 and 2017, respectively
2019, 2018 and 2017.
(see Note 23).

• Prepaid market entry fee represents upfront fee paid to the franchisor prior to the operations of
Dunkin’ Donuts restaurants in the PRC. Market entry fee is amortized over twenty (20) years
effective February 2016, start of Dunkin’ Donuts operations.

2019 Annual Report 89 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The rollforward analysis of prepaid market entry fee as at December 31 are as follows: 2019 2018
Accruals for:
2019 2018 Professional fees 299,894 195,681
Market Entry Fee Interest (see Note 18) 167,272 239,663
Balance at beginning and end of year ₱93,870 ₱93,870 Security 162,061 169,245
Accumulated Amortization Transportation and travel 100,284 101,363
Balance at beginning of year 15,392 9,863 Communication 90,226 78,974
Amortizations (see Note 22) 5,438 5,529 Insurance 79,263 18,267
Balance at end of year 20,830 15,392 Trainings and seminars 28,805 29,531
Translation adjustment 12,478 15,837 Service fees and others 1,580,258 1,320,665
₱85,518 ₱94,315 Customers’ deposits 1,036,909 898,248
Unearned revenue from gift certificates 1,370,466 628,070
• Franchise rights pertain to franchise fees paid by PERF entities to Burger King Asia Pacific for the Dividends payable 87,959 80,780
license to operate Burger King stores in the Philippines. Franchise rights are amortized over ten Other current liabilities 1,624,841 1,208,583
(10) years. 33,643,992 28,566,691
Contract liabilities 1,008,073 150,078
The rollforward analysis of franchise rights as at December 31 are as follows: ₱34,652,065 ₱28,716,769
2019 2018
Franchise Rights The terms and conditions of the above liabilities are as follows:
Balance at beginning of year ₱130,317 ₱105,386
Additions 12,855 24,931 • Trade payables to suppliers are noninterest-bearing and are normally settled on a 30 to
Balance at end of year 143,172 130,317 60-day term.
Accumulated Amortization
Balance at beginning of year 49,414 36,985 • Accrued expenses are noninterest-bearing and are normally settled within the next financial year.
Amortizations (see Note 22) 13,633 12,429 Other accrued liabilities presented under “Service fees and others” consist of asset retirement
Balance at end of year 63,047 49,414 obligation and other miscellaneous expenses.
₱80,125 ₱80,903
• Customers’ deposits pertain to security deposits from operating leases with franchisees, which
are refundable at the end of the lease term, deposits for kiddie party packages and deposits from
• Tools and other assets represent tools for repairs and maintenance of office and store equipment
franchisees for the sale of store assets.
which were still unused as at December 31, 2019 and 2018.
Accretion of interest on customer’s deposits amounted to ₱0.5 million, ₱0.6 million and
₱13.2 million in 2019, 2018 and 2017, respectively (see Note 23).
16. Trade Payables and Other Current Liabilities and Contract Liabilities
This account consists of: • Other current liabilities consist of staled checks, amounts payable for mascots and various
subscriptions in newspapers given to customers as a complementary to their meals.
2019 2018
Trade ₱14,576,452 ₱13,094,676
• Contract liabilities pertain to deferred revenues and unearned revenues from gift certificates from
Accruals for:
international operations.
Salaries, wages and employee benefits 2,774,588 2,127,743
Store operations 2,220,719 1,699,887
Movements of contract liabilities arising from deferred revenues and unearned revenues from gift
Local taxes 2,580,103 2,005,187
certificates from international operations are as follows:
Advertising and promotions 1,646,581 1,585,517
Rent 1,259,282 1,156,140
Freight 753,050 795,271 2019 2018
Utilities 569,001 484,693 Balance at beginning of year ₱150,078 ₱2,650
Repairs and maintenance 334,262 393,278 Additions 728,527 36,506
Operating supplies 301,716 255,229 Acquisition of a subsidiary (see Note 11) 803,150 113,572
(Forward) Utilized gift certificates (646,179) (2,650)
Translation adjustments (27,503) —
Balance at end of year ₱1,008,073 ₱150,078

The amount of contract liabilities arising from deferred revenues and unearned revenues from gift
certificates from international operation is expected to be earned within one year.

2019 Annual Report 90 Jollibee Foods Corporation

 Loan 4 consists of a short-term loan availed on September 20, 2019 from a foreign bank amounting
17. Provisions
to USD50.0 million (₱2,679.5 million) subject to a variable interest rate based on LIBOR plus spread of
The JFC Group has outstanding provisions amounting to ₱825.1 million as at December 31, 2019 and 0.90% which is payable and is reset on a quarterly basis. The principal is payable on September 7, 2020,
2018, consisting mainly of provisions for asserted claims which are normal to its business. In 2017, JFC the maturity date. As at December 31, 2019, the carrying value of the loan amounted to USD50.0 million
Group recognized provision amounting to ₱794.6 million (see Note 23). (₱2,532.0 million). The loan is guaranteed by the Parent Company.

These include estimates of legal services, settlement amounts and other costs of claims made against Loan 5 consists of a short-term loan availed on September 13, 2019 from a foreign bank amounting
the JFC Group. Other information on the claims is not disclosed as this may prejudice the JFC Group’s to USD120.0 million (₱6,430.8 million) subject to a variable interest rate based on three-month LIBOR
position on such claims (see Note 30). plus spread of 0.50% which is payable and is reset on a quarterly basis. The principal is payable on
September 7, 2020, the maturity date. As at December 31, 2019, the carrying value of the loan amounted
to USD120.0 million (₱6,076.8 million). The loan is guaranteed by the Parent Company.
18. Short and Long-term Debts
The short-term debts of JWPL (Loans 1 to 5) have been prepaid on February 3 and 6, 2020 from the
Short-term Debt proceeds of the issuance of guaranteed Senior Perpetual Capital Securities (see Note 34).
Short-term debt consists of USD-denominated bank loans as at December 31, 2019. Details as follows:
Loans of SJBF. Loan 6 consists of a short-term uncommitted line of credit agreement signed on March
22, 2019 with a local bank up to an aggregate amount of USD20.0 million (₱1,046.4 million) until April
Availment Date Maturity Date Interest Rate Condition Amount 1, 2020. The loan is subject to variable interest rate based on three-month LIBOR plus spread of 0.95%
Loan 1 September 23, 2019 September 23, 2020 LIBOR plus spread; Unsecured ₱2,532,000 which is payable monthly and subject to quarterly repricing. The initial drawdown was availed on April
quarterly
Loan 2 September 20, 2019 September 20, 2020 LIBOR plus spread; Unsecured 4,557,600
5, 2019 amounting to USD5.0 million (₱260.5 million). Subsequently, 2nd , 3rd and 4th drawdowns
quarterly amounting to USD5.0 million (₱262.2 million), USD5.0 million (₱257.9 million) and USD5.0 million
Loan 3 September 20, 2019 September 20, 2020 LIBOR plus spread; Unsecured 4,557,600 (₱255.2 million) were availed on May 14, 2019, June 21, 2019 and July 19, 2019, respectively. The loan
quarterly will mature on March 23, 2020. As at December 31, 2019, the carrying value of the loan amounted to
Loan 4 September 20, 2019 September 7, 2020 LIBOR plus spread; Unsecured 2,532,000 USD20.0 million (₱1,012.8 million).
quarterly
Loan 5 September 13, 2019 September 7, 2020 LIBOR plus spread; Unsecured 6,076,800
quarterly Loan 7. On August 14, 2019, Smashburger Finance LLC signed a short-term uncommitted line of credit
Loan 6 March 22, 2019 March 23, 2020 LIBOR plus spread; Unsecured 1,012,800 agreement with a local bank up to an aggregate amount of USD20.0 million (₱1,045.6 million) until
quarterly August 14, 2020. The loan is subject to variable interest rate based on three-month LIBOR plus spread of
Loan 7 August 14, 2019- August 14, 2020 LIBOR plus spread; Unsecured 911,520 0.95% which is payable monthly and subject to quarterly repricing. The initial drawdown was availed on
December 30, 2019 quarterly August 22, 2019 amounting to USD5.0 million (₱261.3 million). Subsequently, 2nd and 3rd drawdowns
₱22,180,320 amounting to USD10.0 million (₱507.3 million) and USD3.0 million (₱151.9 million) were availed on
November 12, 2019 and December 30, 2019, respectively. The loan will mature on August 14, 2020.
Loans of JWPL. Loan 1 consists of a short-term loan availed on September 23, 2019 from a local bank As at December 31, 2019, the carrying value of the loan amounted to USD18.0 million (₱911.5 million).
amounting to USD50.0 million (₱2,679.5 million) subject to a variable interest rate based on London
Interbank Offered Rate (LIBOR) plus spread of 0.55% which is payable and is reset on a quarterly basis. Interest expense recognized on short-term debt amounted to ₱189.9 million in 2019 (see Note 23).
The principal is payable on September 23, 2020, the maturity date. As at December 31, 2019, the
carrying value of the loan amounted to USD50.0 million (₱2,532.0 million). The loan is guaranteed by
Long-term Debt
the Parent Company.
The long-term debt consists of the following:
Loan 2 consists of a short-term loan availed on September 20, 2019 from a local bank amounting to
USD90.0 million (₱4,823.1 million) subject to a variable interest rate based on three-month LIBOR plus 2019 2018
spread of 0.62% which is payable and is reset on a quarterly basis. The principal is payable on September Principal ₱22,682,946 ₱26,363,627
20, 2020, the maturity date. As at December 31, 2019, the carrying value of the loan amounted to Unamortized debt issue cost (87,223) (99,274)
USD90.0 million (₱4,557.6 million). The loan is guaranteed by the Parent Company. ₱22,595,723 ₱26,264,353

Loan 3 consists of a short-term loan availed on September 20, 2019 from a local bank amounting to
USD90.0 million (₱4,823.1 million) subject to a variable interest rate based on LIBOR plus spread of
0.55% which is payable and is reset on a quarterly basis. The principal is payable on September 20,
2020, the maturity date. As at December 31, 2019, the carrying value of the loan amounted to USD90.0
million (₱4,557.6 million). The loan is guaranteed by the Parent Company.

2019 Annual Report 91 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The details of long-term debt follow:

Availment Date Maturity Date Interest Rate Condition 2019 2018

USD-denominated
Subsidiaries
Loan 1 October 21, 2015 October 21, 2025 LIBOR plus spread; quarterly Unsecured ₱3,713,600 ₱4,498,511
Loan 2 November 29, 2016 November 29, 2024 3.0% per annum; Unsecured 1,473,624 1,545,852
annually
Loan 3 November 29, 2016 November 29, 2022 ROP 2121 and ROP 2024 plus Unsecured 392,966 412,227
spread; annually
Loan 4 April 25, 2014 April 25, 2019 1.48%; quarterly Unsecured — 310,222
VND-denominated
Subsidiaries
Loan 5 February 19, 2015 February 20, 2020 VIOR plus spread; monthly Unsecured 10,743 79,296
(see Note 11)
Loan 6 December 30, 2015 December 20, 2020 VND COF plus spread; quarterly Unsecured 37,145 88,128
(see Note 11)
Loan 7 April 3, 2017 April 1, 2022 VND COF plus spread; quarterly Unsecured 92,863 137,088
(see Note 11)
Loan 8 February 13, 2018 March 20, 2023 VND COF plus spread; quarterly Unsecured 229,269 260,352
Loan 9 November 15, 2018- December 24, 2023 Bank’s three-month COF plus Unsecured 404,225 41,951
October 9, 2019 spread; quarterly
Loan 10 November 19 - August 30, 2024 Bank’s three-month COF plus Unsecured 118,511 —
December 30, 2019 spread; quarterly
PHP-denominated
Parent Company
Loan 11 December 16, 2013 June 17, 2019 PDST-F plus spread; quarterly Unsecured — 1,454,318
Loan 12 April 21, 2014 April 22, 2019 PDST-F plus spread; quarterly Unsecured — 799,733
Loan 13 April 22, 2016 April 22, 2021 PDST-R2 plus spread; quarterly Unsecured 373,583 622,583
Loan 14 December 22, 2017 December 22, 2022 PDST-R2 plus spread; quarterly Unsecured 1,195,200 1,593,600
Loan 15 December 22, 2017 December 22, 2022 PDST-R2 plus spread; quarterly Unsecured 1,568,700 2,091,600
Loan 16 December 22, 2017 December 22, 2022 PDST-R2 plus spread; quarterly Unsecured 597,600 796,800
Loan 17 December 27, 2017 December 27, 2022 PDST-R2 plus spread; quarterly Unsecured 448,200 597,600
Loan 18 March 27, 2018 March 27, 2025 PDST R-2 plus spread; quarterly Unsecured 4,176,375 4,171,875
Loan 19 May 11, 2018 May 11, 2025 PDST R-2 plus spread; quarterly Unsecured 2,982,589 2,979,376
Loan 20 August 15, 2018 August 15, 2025 PDST-R2 plus spread; quarterly Unsecured 2,683,607 2,680,714
Subsidiaries
Loan 21 December 21, 2016 December 21, 2021 PDST-R2 plus spread; quarterly Unsecured 109,780 109,670
Loan 22 August 24, 2018 August 24, 2025 PDST-R2 plus spread; quarterly Unsecured 993,929 992,857
Loan 23 May 8, 2019 May 8, 2026 BVAL plus spread Unsecured 993,214 —
22,595,723 26,264,353

Less current portion - net of debt issue costs of ₱17.8 million and ₱7.0 million in 2019 and 2018, respectively 3,415,975 4,892,102
₱19,179,748 ₱21,372,251

LIBOR – London Interbank Offered Rate

VIOR – Vietnam Interbank Offered Rate
BVAL – Bloomberg Valuation Service
PDST-F – Philippine Dealing System Treasury Fixing
PDST-R2 – Philippine Dealing System Treasury - Reference Rate Two

2019 Annual Report 92 Jollibee Foods Corporation

 VND-denominated Loans of SuperFoods Group. On April 3, 2017, SuperFoods Group acquired Loan or partially, without penalty at any time during the term of the loan subject to certain conditions. On July
7 which consists of a 5-year unsecured loan from a local bank in Vietnam amounting to VND68.0 billion 16, 2018, the loan agreement was amended to pay the principal in sixteen (16) quarterly installments
(₱151.2 million) with variable interest rate based on three-month VND COF plus spread of 1.5%. The commencing on the end of the fourth quarter from the drawdown date. The Parent Company incurred
principal is payable in sixteen (16) quarterly installments commencing on the 15th month from the first debt issue cost of ₱10.5 million, representing documentary stamp tax, for this loan.
drawdown date until April 1, 2022, the maturity date. As at December 31, 2019 and 2018, the carrying
value of the loan amounted to VND42.5 billion (₱92.9 million) and VND59.5 billion (₱137.1 million), Loan 16 consists of 5-year unsecured loan acquired from a local bank on December 22, 2017 amounting
respectively. to ₱800.0 million. The loan is subject to a variable interest based on the simple average of the preceding
five (5) days of the three-month PDST-R2 rate plus spread of 0.50%, which is payable and is reset on a
Loan 8 consists of a 5-year unsecured loan acquired from a local bank in Vietnam amounting to VND113.0 quarterly basis, and to an interest rate floor based on BSP Overnight Deposit Facility Rate. The principal
billion (₱262.7 million) available in tranches within eighteen (18) months from February 13, 2018, the is payable in sixteen (16) quarterly installments commencing on the 15th month from drawdown date
date of loan agreement. The loan is subject to a variable interest rate based on three-month VND COF amounting to ₱50.0 million. The Parent Company incurred debt issue cost of ₱4.0 million, representing
plus spread of 1.3%. The principal is payable in fourteen (14) quarterly installments commencing on documentary stamp tax, for this loan. The Parent Company has an option to prepay the loan in part or in
the 21st month from the initial drawdown date on March 20, 2018 amounting to VND7.5 billion (₱17.4 full on any interest payment date subject to certain conditions.
million). The loan will mature on March 20, 2023. As at December 31, 2019 and 2018, the carrying
value of the loan amounted to VND104.9 billion (₱229.3 million) and VND113.0 billion (₱260.4 million), Loan 17 consists of 5-year unsecured loan acquired from a local bank on December 27, 2017 amounting
respectively. to ₱600.0 million. The loan is subject to a variable interest equal to the three-month PDST-R2 rate plus
spread of 0.50%, which is payable and is reset on a quarterly basis, and to an interest rate floor based
Loan 9 consists of a 5-year unsecured loan acquired from a local bank in Vietnam amounting to on BSP Overnight Deposit Facility Rate plus 0.50%. The principal is payable in sixteen (16) quarterly
VND185.0 billion (₱426.2 million) available in tranches within twenty-four (24) months from November installments commencing on the 15th month from drawdown date amounting to ₱37.5 million. The
15, 2018, the date of loan agreement. The loan is subject to a variable interest rate based on the Bank’s Parent Company incurred debt issue cost of ₱3.0 million, representing documentary stamp tax, for this
three-month COF plus spread of 1.35%. The principal is payable in twelve (12) quarterly installments loan. The Parent Company has an option to convert the variable interest rate into a fixed interest rate on
commencing on the 27th month from the initial drawdown date on December 25, 2018 amounting to any interest payment date but in no case later than 365 days from the drawdown date. The conversion
VND18.2 billion (₱42.0 million). Subsequent tranches amounting to a total of VND166.8 billion (₱374.5 to fixed interest rate is based on a five year PDST-R2 rate plus spread of 0.75%. The Parent Company
million) were availed in 2019. The loan will mature on December 24, 2023. As at December 31, 2019 also has an option to prepay the loan in part or in full on any interest payment date subject to certain
and 2018, the carrying value of the loan amounted to VND185.0 billion (₱404.2 million) and VND18.2 conditions.
billion (₱42.0 million), respectively.
Loan 18 consists of 7-year unsecured loan acquired from a local bank on March 27, 2018 amounting to
Loan 10 consists of a 5-year unsecured loan acquired from a local bank in Vietnam amounting to ₱4,200.0 million. The loan is subject to a variable interest equal to the simple average of the preceding
VND160.0 billion (₱349.6 million) available in tranches within twelve (12) months from August 29, five (5) days of the three-month PDST-R2 rate plus spread of 0.40% and to an interest rate floor of 3.0%.
2019, the date of loan agreement. The loan is subject to a variable interest rate based on the Bank’s The principal is payable in equal quarterly installments commencing on the 27th month from drawdown
three-month COF plus spread of 1.35%. The principal is payable in sixteen (16) quarterly installments date amounting to ₱210.0 million. The Parent Company incurred debt issue cost of ₱31.5 million,
commencing on the 16th month from the date of agreement. Initial drawdown amounting to VND4.6 representing documentary stamp tax, for this loan. The Parent Company has an option to convert the
billion (₱10.2 million) was availed on November 19, 2019. Subsequent tranches amounting to a total of variable interest rate into a fixed interest rate but in no case later than 365 days from the drawdown date.
VND49.6 billion (₱108.4 million) were availed in November and December 2019. The loan will mature The conversion to fixed interest rate is based on simple average of the applicable/interpolated “Done”
on August 30, 2024. As at December 31, 2019, the carrying value of the loan amounted to VND54.2 PDST-R2 rates within the preceding five (5) consecutive business days plus spread of 0.60%. In the
million (₱118.5 million). event that there is no “Done” PDST-R2 rates, it shall be determined by interpolating the “Done” PDST-R2
of other tenors or mutually agreed computation based on the available bids/interpolation. The Parent
PHP-denominated Loans of the Parent Company. Loan 14 consists of 5-year unsecured loan acquired Company also has an option to prepay the loan in part or in full on any interest payment date subject to
from a local bank on December 22, 2017 amounting to ₱1,600.0 million. The loan is subject to a variable certain conditions.
interest based on the simple average of the preceding five (5) days of the three-month PDST-R2 plus
spread of 0.50%, which is payable and repriced on a quarterly basis, and to an interest rate floor of Loan 19 consists of 7-year unsecured loan acquired from a local bank on May 11, 2018 amounting to
2.70%. Provided, however that on any interest payment date, but in no case later than 365 days from the ₱3,000.0 million. The loan is subject to a variable interest rate equal to simple average of the five (5)
initial drawdown date, in lieu of a floating interest rate, the Parent Company shall have a one-time option trading days of the three-month Treasury Securities Benchmark Yield, as published in the PDST-R2 page
to convert into a fixed-interest rate loan based on the applicable three-month PDST-R2 rate plus spread of the PDEX preceding and inclusive of the Interest Rate Setting Date plus spread of 0.50%. The Parent
of 0.60%. The principal is payable in sixteen (16) quarterly installments commencing on the 15th month Company has a one-time option to convert the variable interest rate into a fixed interest rate until the
from drawdown date amounting to ₱100.0 million. The Parent Company incurred debt issue cost of fourth interest rate setting date subject to certain conditions. The conversion to fixed interest rate is
₱8.0 million, representing documentary stamp tax, for this loan. The Parent Company also has an option equal to the interpolated Treasury Securities Benchmark Yield based on the remaining tenor of the Loan,
to prepay the loan in part or in full on any interest payment date subject to certain conditions. as published in the PDST-R2 on the interest setting date plus spread of 0.50%. The principal is payable
in twenty (20) quarterly installments commencing on the end of the 8th quarter from the drawdown
Loan 15 consists of 5-year unsecured loan acquired from a local bank on December 22, 2017 amounting date. The Parent Company incurred debt issue cost of ₱22.5 million, representing documentary stamp
to ₱2,100.0 million. The loan is subject to a variable interest rate based on the simple average of the five tax, for this loan.
(5) trading days of the three-month Treasury Securities Benchmark Yield, as published in the PDST-R2
page of the PDEX preceding and inclusive of the Interest Rate Setting Date plus spread of 0.50%. The
principal is payable on December 22, 2022, the date of maturity with an option to prepay the loan, wholly

2019 Annual Report 93 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Loan 20 consists of 7-year unsecured loan acquired from a local bank on August 15, 2018 amounting Interest expense recognized on long-term debt amounted to ₱1,172.6 million, ₱888.2 million and
to ₱2,700.0 million. The loan is subject to a variable interest rate equal to simple average of the five ₱392.6 million in 2019, 2018 and 2017, respectively (see Note 23). Accretion of debt issue costs
(5) trading days of the three-month Treasury Securities Benchmark Yield, as published in the PDST-R2 amounting to ₱19.6 million, ₱14.9 million and ₱3.2 million in 2019, 2018 and 2017, respectively, is
page of the PDEX preceding and inclusive of the Interest Rate Setting Date plus spread of 0.50%. The recognized under “Interest expense” account in the consolidated statements of comprehensive income.
Parent Company has a one-time option to convert the variable interest rate into a fixed interest rate until
the fourth interest rate setting date subject to certain conditions. The conversion to fixed interest rate is The future expected principal settlements of the JFC Group’s loans follow:
equal to the interpolated Treasury Securities Benchmark Yield based on the remaining tenor of the Loan,
as published in the PDST-R2 on the interest setting date plus spread of 0.50%. The principal is payable 2019 2018
in twenty (20) quarterly installments commencing on the end of the 8th quarter from the drawdown 2019 ₱— ₱4,899,151
date. The Parent Company incurred debt issue cost of ₱20.3 million, representing documentary stamp 2020 3,433,754 3,510,235
tax, for this loan. 2021 4,758,007 4,391,793
2022 4,928,959 4,552,194
The Parent Company’s PHP denominated long-term debt (Loans 11 to 20) amounted to ₱14,025.9 2023 to 2026 9,562,226 9,010,254
million and ₱17,788.2 million, net of unamortized debt issue cost of ₱74.1 million and ₱91.8 million as 22,682,946 26,363,627
at December 31, 2019 and 2018, respectively. The current portion amounted to ₱2,573.3 million and Less debt issue costs (87,223) (99,274)
₱3,773.0 million, net of debt issue cost of ₱16.7 million and ₱7.0 million as at December 31, 2019 and ₱22,595,723 ₱26,264,353
2018, respectively.
Embedded Derivatives
PHP-denominated Loan of Zenith. Loan 22 is a 7-year unsecured loan acquired from a local bank on Certain long-term loans of the JFC Group include provisions for an option to convert the variable
August 24, 2018 amounting to ₱1,000.0 million. The loan is subject to a variable interest equal to the interest rate into a fixed interest rate. Certain long-term loans are also subject to an interest rate floor. In
simple average of the preceding five (5) days of the three-month PDST-R2 on the interest setting date addition, the JFC Group’s long-term loans generally provide an option to pre-pay the loan in full before
plus spread of 0.48% and to an interest rate floor equal to the BSP Overnight Reverse Repurchase Rate. the maturity date.
Zenith has an option to convert the variable interest rate into a fixed interest rate but in no case later than
365 days from the drawdown date. The conversion to fixed interest rate is based on simple average of The JFC Group assessed that the derivatives embedded in the loan contracts need not be bifurcated
the applicable/interpolated “Done” PDST-R2 rates within the preceding five (5) consecutive business since they are clearly and closely related to the economic characteristics and risks of the host loan
days plus spread of 0.60%. Zenith incurred debt issue cost of ₱7.5 million, representing documentary contract and do not qualify for separate accounting as at December 31, 2019 and 2018.
stamp tax, in relation to this loan. The principal is payable in equal quarterly installments commencing
on the 27th month from the drawdown date and every quarter thereafter until maturity. The carrying Freestanding Derivatives, Hedges and Hedge Effectiveness Testing
amount of the loan is ₱993.9 million and ₱992.9 million, net of unamortized debt issue cost of ₱6.1 On November 20, 2015, the JFC Group entered into an Interest Rate Swap (IRS) with a bank to convert
million and ₱7.1 million as at December 31, 2019 and 2018, respectively. its exposure in the variable interest rate of Loan 1 to a fixed interest rate. The IRS will terminate and the
loan will mature simultaneously on October 21, 2025. The JFC Group has designated the IRS as a cash
Loan 23 consists of 7-year unsecured loan acquired from a local bank on May 8, 2019 amounting to flow hedge.
₱1,000.0 million. The loan is subject to a variable interest equal to the simple average of the preceding
five (5) banking days PHP BVAL Reference rate for three (3) months tenor plus spread of 0.66% or to an The IRS with a notional amount equal to the principal amount of the loan requires the JFC Group to pay
interest rate floor equal to the BSP Overnight Reverse Repurchase Rate plus spread of 0.50%. Zenith has fixed interest payments at 3.36% in exchange of variable interest payments at three-month LIBOR plus
an option to convert the variable interest rate into a fixed interest within one (1) year from the drawdown spread of 1.20% from the bank throughout the term of the IRS on the notional amount. The IRS settles
date. The conversion to fixed interest rate is based on simple average of the applicable/interpolated quarterly on a net basis.
PHP BVAL Reference rate for the remaining tenor of the loan plus spread of 1.0%. Zenith incurred debt
issue cost of ₱7.5 million, representing documentary stamp tax, in relation to this loan. The principal The fair value of the IRS amounted to ₱58.2 million as at December 31, 2019, presented as derivative
is payable in equal quarterly installments commencing on the 9th quarter from the drawdown date liability, and ₱82.9 million as at December 31, 2018, presented as derivative asset in the consolidated
and every quarter thereafter until maturity. The carrying amount of the loan is ₱993.2 million, net of statements of financial position. The terms of the IRS approximately match the terms of the interest
unamortized debt issue cost of ₱6.8 million, as at December 31, 2019. payments on the loan. Accordingly, there is no hedge ineffectiveness to be recognized in profit or loss.
 
In 2019, Loans 4, 11 and 12 were paid in full at maturity dates. Unrealized loss of ₱141.1 million and unrealized income of ₱70.9 million and ₱45.5 million were
recognized in other comprehensive income in 2019, 2018 and 2017, respectively.
The loans are guaranteed by the Parent Company. Consequently, the Parent Company is subject to
certain debt covenants which include, among others, maintaining a Debt-to-Equity ratio, Debt-to-
EBITDA ratio and Debt-to-Service Coverage Ratio. As at December 31, 2019, the Debt-to-EBITDA ratio
was amended temporarily from 3.0-4.0 or below to 5.0 or below and Debt-to-Service Coverage Ratio
was waived until December 31, 2020. The Parent Company is in compliance with these debt covenants
as at December 31, 2019 and 2018.

2019 Annual Report 94 Jollibee Foods Corporation

19. Equity d. Excess of Cost over the Carrying Value of Non-controlling Interests Acquired
a. Capital Stock
The amount of excess of cost over the carrying value of non-controlling interests acquired as at
The movements in the account are as follows: December 31, 2019 and 2018, recognized as part of “Equity Attributable to Equity Holders of
the Parent Company” section in the consolidated statements of financial position, resulted from
2019 2018 the following acquisitions of non-controlling interests:
Authorized - ₱1 par value
1,450,000,000 shares ₱1,450,000 ₱1,450,000 20% of Greenwich in 2006 ₱168,257
15% of Belmont in 2007 375,721
Issued and subscribed: 40% of Adgraphix in 2010 (1,214)
Balance at beginning of year ₱1,105,214 ₱1,101,656 30% of Mang Inasal in 2016 1,217,615
Issuances during the year 4,935 3,558 30% of HBFPPL in 2016 391,782
Balance at end of year 1,110,149 1,105,214 15% of SJBF in 2018 (see Note11) (347,395)
Subscriptions receivable (17,178) (17,178) ₱1,804,766
₱1,092,971 ₱1,088,036
e. Retained Earnings
The total number of shareholders of the Parent Company is 3,004 and 3,023 as at December 31,
2019 and 2018, respectively. The JFC Group has a cash dividend policy of declaring one-third of the JFC Group’s net income for
the year as cash dividends. It uses best estimate of its net income as basis for declaring cash
b. Additional Paid-in-Capital dividends. Actual cash dividends per share declared as a percentage of the EPS are 43.8%, 32.8%
and 33.9% in 2019, 2018 and 2017, respectively.
The movements in the Additional paid in-capital pertain to the difference between the exercise
prices of stock options exercised and the par value of Parent Company’s shares. For the years The Parent Company’s retained earnings available for dividend declaration, computed based
ended December 31, 2019 and 2018, stock options totaling 4,934,701 shares and 3,558,182 on the guidelines provided in SEC Memorandum Circular No. 11, amounted to ₱14,183.9 million,
shares, respectively, were exercised (see Note 26). These resulted to an additional paid-in capital ₱12,538.8 million and ₱10,876.0 million as at December 31, 2019, 2018 and 2017, respectively.
amounting to ₱580.5 million, ₱472.0 million and ₱850.8 million in 2019, 2018 and 2017,
respectively. The Parent Company’s cash dividend declarations for 2019, 2018 and 2017 follow:

Stock options expense amounting to ₱262.9 million, ₱312.0 million and ₱227.5 million in Cash Total Cash
2019, 2018 and 2017, respectively, were also recognized as part of additional paid-in capital Dividend Dividends
(see Notes 22 and 26). Declaration Date Record Date Payment Date per Share Declared

(In Thousands,
except dividend per share)
The Parent Company recognized deferred tax assets on MSOP and ELTIP, resulting to a decrease
of ₱684.5 million and increase of ₱334.1 million and ₱782.0 million in additional paid-in 2019
capital in 2019, 2018 and 2017, respectively. April 8 April 26 May 9 ₱1.23 ₱1,341,178
November 11 November 26 December 10 1.35 1,473,767
As at December 31, 2019 and 2018, total additional paid-in capital amounted to ₱8,797.4 million ₱2.58 ₱2,814,945
and ₱8,638.4 million, respectively.
2018
c. Treasury Shares April 6 April 24 May 9 ₱1.14 ₱1,236,518
November 9 November 26 December 10 1.34 1,455,269
The cost of common stock of the Parent Company held in treasury of ₱180.5 million consists of ₱2.48 ₱2,691,787
16,447,340 shares as at December 31, 2019 and 2018.
2017
April 5 April 21 May 5 ₱1.00 ₱1,077,527
November 10 November 27 December 11 1.18 1,277,984
₱2.18 ₱2,355,511

2019 Annual Report 95 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

An important part of the JFC Group’s growth strategy is the acquisition of new businesses in the 20. Royalty, Set-up Fees and Others
Philippines and abroad. Examples were acquisitions of 85% of Yonghe King in 2004 in PRC
(₱1,200.0 million), 100% of Red Ribbon in 2005 (₱1,700.0 million), the remaining 20% minority This account consists of:
share in Greenwich in 2006 (₱384.0 million), the remaining 15% share of Yonghe King in 2007 2018 2017
(₱413.7 million), 100% of Hong Zhuang Yuan restaurant chain in PRC in 2008 (₱2,600.0 million), (As restated - (As restated -
70% of Mang Inasal in 2010 (₱2,976.2 million), 100% of Chowking US operations in 2011 (₱693.3 2019 Note 2) Note 2)
million), 40% of SJBF LLC, the parent company of the entities comprising the Smashburger Royalty fees ₱8,477,040 ₱7,043,891 ₱5,614,447
business in US (₱4,812.8 million), including transaction costs in 2015, the remaining 30% minority Set-up fees 471,711 546,909 424,217
share each in Mang Inasal (₱2,000.0 million) and HBFPPL (₱514.9 million), acquisition of GSC Service fees 381,188 489,359 380,149
(₱8.6 million) in 2016, the acquisition of additional 10% share in SuperFoods Group (₱2,712.7 Scrap sales 89,367 109,658 199,077
million) in 2017, acquisition of the remaining 60% share in SJBF LLC (₱5,735.8 million) in 2018 and Rent income
80% of The Coffee Bean & Tea Leaf (₱17,163.0 million) in 2019. (see Notes 13 and 29) 58,493 24,992 27,219
Other revenues 237,917 228,655 237,879
The JFC Group plans to continue to make substantial acquisitions in the coming years. The JFC ₱9,715,716 ₱8,443,464 ₱6,882,988
Group uses its cash generated from operations to finance these acquisitions and capital
expenditures. These limit the amount of cash dividends that it can declare and pay, making the The JFC Group has existing Royalty and Service Agreements with independent franchisees for the latter
level of the retained earnings higher than the paid-up capital stock. to operate quick service restaurant outlets under the “Jollibee”, “Chowking”, “Greenwich”, “Red Ribbon”,
“Mang Inasal”, “Yong He King”, “Hong Zhuang Yuan”, “Highlands Coffee”, “Pho 24”, “Smashburger” and
On November 9, 2018, the BOD approved the following: “The Coffee Bean & Tea Leaf” concepts and trade names. In consideration thereof, the franchisees agree
to pay set-up fees and monthly royalty fees equivalent to a certain percentage of the franchisees’ net
• Release of previously appropriated retained earnings amounting to ₱18,200.0 million as at sales.
September 30, 2018 related to the completed projects in 2013 to 2018; and,
The JFC Group’s franchisees pay service fees for various services, including repairs and maintenance
• Appropriation of retained earnings amounting to ₱20,000.0 million. Details are as follows: services, rendered by the JFC Group’s personnel.
Projects Timeline Amount
Other revenues pertain to delivery fees and other miscellaneous revenues earned by the JFC Group.
Capital Expenditures 2019 - 2024 ₱12,000,000
Acquisition of Businesses 2019 - 2024 8,000,000
₱20,000,000
21. Direct Costs
The unappropriated retained earnings of the Parent Company is also restricted to the extent of cost This account consists of:
of common stock held in treasury amounting to ₱180.5 million as well as the undistributed 2018 2017
retained earnings of its subsidiaries which amounted to ₱1,715.4 million, ₱3,063.9 million and (As restated - (As restated -
₱3,525.2 million as at December 31, 2019, 2018 and 2017, respectively. 2019 Note 2) Note 2)
Cost of Sales
In relation with the Securities Regulation Code, below is the summary of the Parent Company’s Cost of inventories ₱85,405,049 ₱74,995,446 ₱62,725,504
track record of registration of securities. Personnel costs:
Salaries, wages and other employee
Number of Initial Number of holders of securities

benefits (see Note 25) 17,778,095 14,878,078 11,021,803
Shares issue/offer
Pension expense (see Note 25) 189,336 190,272 168,059
registered price Listing Date 2019 2018
Depreciation and amortization
Common shares 75,000,000 ₱9 July 14, 1993 3,004 3,023
(see Notes 2, 12 and 29) 12,876,957 11,343,834 8,467,350
Contracted services 9,942,936 8,847,468 7,305,046
Rent (see Notes 2 and 29) 4,466,414 4,700,223 4,429,587
Electricity and other utilities 5,535,762 5,247,450 4,587,166
Supplies 2,963,236 3,150,090 2,570,007
Repairs and maintenance 2,001,413 1,578,608 1,218,581
Security and janitorial 1,103,819 983,306 795,773
Communication 341,033 289,677 227,195
Professional fees 162,482 169,531 57,575
Representation and entertain-ment 125,518 131,853 39,191
Others 4,364,723 3,391,257 2,914,522
147,256,773 129,897,093 106,527,359
(Forward)

2019 Annual Report 96 Jollibee Foods Corporation

 2018 2017 2018 2017
(As restated - (As restated - (As restated - (As restated -
2019 Note 2) Note 2) 2019 Note 2) Note 2)
Cost of Services Donations 120,576 101,118 93,294
Advertising expense 3,001,108 2,523,492 2,036,535 Supplies 106,830 96,224 89,641
₱150,257,881 ₱132,420,585 ₱108,563,894 Representation and entertainment 94,201 121,306 70,282
Insurance 80,048 41,179 21,182
Others consist mainly of delivery costs and insurance expenses. Electricity and other utilities 71,749 72,095 55,806
Association dues 42,338 69,569 51,994
Security and janitorial 34,054 26,053 24,408
22. General and Administrative Expenses - Net Research and development and others 1,424,369 751,040 688,308
₱18,884,582 ₱15,460,619 ₱13,929,375
This account consists of:
Others pertain to penalties on pre-termination of leases and other miscellaneous expenses.
2018 2017
(As restated - (As restated -
2019 Note 2) Note 2)
Personnel costs: 23. Interest Income (Expense) and Other Income (Expense)
Salaries, wages and other
employee benefits 2018 2017
(see Note 25) ₱9,580,087 ₱8,027,163 ₱6,850,398 (As restated - (As restated -
Stock options expense 2019 Note 2) Note 2)
(see Notes 19 and 26) 262,875 311,964 227,483 Interest income
Pension expense (see Note 25) 204,831 208,533 194,781 Cash and cash equivalents
Taxes and licenses 1,854,426 1,561,687 1,394,412 and short-term investments
Professional fees 1,213,054 1,018,320 825,264 (see Note 6) ₱273,022 ₱313,273 ₱149,298
Transportation and travel 836,518 748,856 577,374 Loans and advances (see Note 11) 85,985 55,523 77,120
Depreciation and amortization Accretion of interest on security
(see Notes 2, 12, 14, 15 and 29) 596,289 541,918 460,874 and other deposits and employee
Contracted services 597,231 565,260 474,622 car plan receivables (see Note 15) 33,564 46,589 33,149
Rent (see Notes 2 and 29) 522,230 586,982 516,717 Accretion of interest lease
Impairment in value of: receivables (see Note 29) 8,086 9,034 9,866
Property, plant and equipment ₱400,657 ₱424,419 ₱269,433
(see Note 12) 399,212 — 431,939
Receivables (see Note 7) 25,342 10,188 143,772
Inventories (see Note 8) 16,670 8,278 7,443 2018 2017
Other assets — — 122,759 (As restated - (As restated -
Repairs and maintenance 323,257 279,891 157,495 2019 Note 2) Note 2)
Training 279,548 151,753 134,448 Interest expense
Corporate events 215,376 234,865 192,187 Accretion of lease liabilities
Membership and subscriptions 222,805 160,414 139,552 (see Notes 2 and 29) (₱1,824,311) (₱1,728,620) (₱1,387,557)
Loss (gain) on retirements and Long-term debt (see Note 18) (1,172,589) (888,216) (392,589)
disposals of: Short-term debt (see Note 18) (189,917) — —
Property, plant and equipment Accretion of customers’ deposits
and other intangible assets (see Note 16) (481) (627) (13,231)
(see Notes 12 and 14) (278,318) 45,540 174,510 (₱3,187,298) (₱2,617,463) (₱1,793,377)
Investment properties
(see Note 13) — — (231,036)
Communication 186,030 158,430 116,101
Reversals of provision for impairment on:
Receivables (see Note 7) (91,402) (23,675) (20,705)
Property, plant and equipment
(see Note 12) (29,179) (408,184) (2,111)
Inventories (see Note 8) (26,465) (6,148) (53,819)
(Forward)

2019 Annual Report 97 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2018 2017 RCIT consists of corporate income taxes from the JFC Group’s operations in the Philippines, PRC, USA
(As restated - (As restated - and Vietnam.
2019 Note 2) Note 2)
Other income (expense) For the years ended December 31, 2019 and 2018, Grandworth and RRBH, wholly-owned subsidiaries,
Gain from acquisition of a business elected to use OSD in computing for their taxable income. The net tax benefit from the availment of
and re-measurement OSD amounted to ₱123.6 million and ₱2.7 million for in 2019 and 2018, respectively.
of previously held interest
(see Note 11) ₱3,150,776 ₱754,804 ₱1,328,733 The components of the JFC Group’s recognized net deferred tax assets as at December 31 follow:
Write-off of liabilities 2,290,538 2,343,295 1,547,166
Bank charges (404,958) (317,791) (165,348)
2018
Pre-termination of lease
(As restated -
agreements (see Note 2) 400,367 193,230 52,778
2019 Note 2)
Rebates and suppliers’ incentives 339,082 194,927 189,452
Deferred tax assets:
Foreign exchange loss - net (268,155) (34,597) (63,535)
Lease liabilities ₱7,055,657 ₱7,766,064
Penalties and charges 65,826 62,467 69,610
NOLCO:
Charges to franchisees 24,556 24,679 18,979
Philippine-based entities 155,759 311,331
Other rentals 6,258 8,662 17,484
PRC-based entities 110,960 190,154
Net unrealized gain (loss) on
USA-based entities 608,903 45,976
financial assets at FVTPL
Pension liability and other benefits 765,184 504,790
(see Note 10) (1,640) 9,980 —
Accrued expenses of USA-based entities 730,686 749,663
Marked-to-market loss on
Excess of MCIT over RCIT 654,418 614,580
derivatives (see Note 11) — (49,791) (129,371)
MSOP and ELTIP 531,568 1,312,022
Reversal of impairment loss on
Unrealized foreign exchange loss 158,461 85,708
interest in an associate
Accumulated impairment loss in value of
(see Note 11) — 16,660 —
receivables, inventories, property, plant and
Provisions (see Note 17) — — (794,609)
equipment and other nonfinancial assets 66,697 108,432
Loss on divestment of subsidiaries
Unaccreted discount on security deposits and
and interest in a joint venture
employee car plan receivables 36,004 36,978
(see Note 11) — — (116,207)
Unamortized past service costs 6,491 15,408
Insurance claims and others 143,021 136,003 180,515
Others 12,053 9,634
₱5,745,671 ₱3,342,528 ₱2,135,647
10,892,841 11,750,740
Deferred tax liabilities:
In the normal course of business, the JFC Group accrues liabilities based on management’s best Right-of-use assets 6,019,510 6,746,460
estimate of costs incurred, particularly in cases when the JFC Group has not yet received final billings Prepaid rent 155,549 4,685
from suppliers and vendors. There are also ongoing negotiations and reconciliations with suppliers and Excess of fair value over book value of
vendors on certain liabilities recorded. These balances are continuously reviewed by management and identifiable assets of acquired businesses 77,282 80,243
are adjusted based on these reviews, resulting to write-off of certain liabilities as other income. Unrealized foreign exchange gain 76,936 93,995
State income taxes 47,343 49,157
Unaccreted discount on employee car plan
24. Income Taxes receivables and security deposits 26,714 25,811
Operating lease receivables 22,576 18,087
The JFC Group’s provision for current income tax consists of the following: Deferred rent expense 15,225 19,316
Unrealized gain on change in fair value of
2019 2018 2017 financial assets at FVTPL 2,444 1,192
Final tax withheld on: 6,443,579 7,038,946
Royalty income ₱1,750,140 ₱1,512,611 ₱1,260,352 Deferred tax assets - net ₱4,449,262 ₱4,711,794
Interest income 30,914 39,153 16,349
RCIT:
With itemized deduction 873,698 511,077 306,010
With Optional Standard
Deduction (OSD) 195,044 473,240 369,839
MCIT 405,868 286,011 336,152
Capital gains — — 21,928
₱3,255,664 ₱2,822,092 ₱2,310,630

2019 Annual Report 98 Jollibee Foods Corporation

The components of the JFC Group’s recognized net deferred tax liabilities as at December 31 follow: OSD
The availment of the OSD method also affected the recognition of several deferred tax assets
2018 and liabilities. Deferred tax assets and liabilities, for which the related income and expense are not
(As restated - considered in determining gross income for income tax purposes, are not recognized. This is because
2019 Note 2) the manner by which the JFC Group expects to recover or settle the underlying assets and liabilities,
Deferred tax assets: for which the deferred tax assets and liabilities were initially recognized, would not result to any future
Lease liabilities ₱4,388,629 ₱2,711,783 tax consequence under the OSD method. Meanwhile, deferred tax assets and liabilities, for which the
Allowance for impairment loss on receivables related income and expense are considered in determining gross income for income tax purposes, are
and inventories 79,590 85,494 recognized only to the extent of their future tax consequence under the OSD method. Hence, the tax
Pension liability and other benefits 56,045 57,494 base of these deferred tax assets and liabilities is reduced by the 40% allowable deduction provided for
MSOP and ELTIP 5,665 27,639 under the OSD method.
Unaccreted discount on security deposits and
employee car plan receivables 837 3,180 Accordingly, the JFC Group’s deferred tax assets and liabilities, which were not recognized due to the
Unamortized past service costs 378 3,436 use of the OSD method, are as follows:
Unrealized foreign exchange loss 32 1,377
4,531,176 2,890,403 2019 2018
Deferred tax liabilities: Deferred tax assets:
Excess of fair value over book value of Lease liabilities ₱19,142 ₱—
identifiable assets of acquired businesses 4,915,996 3,703,679 Allowance for impairment loss on receivables
Right-of-use assets 4,333,105 2,631,289 and nonfinancial assets 4,550 6,429
Finance lease receivables 33,327 33,264 Unaccredited discount on financial
Unaccreted discount on employee car plan instruments and others 434 504
receivables, security and product security 24,126 6,933
deposits 1,049 1,640 Deferred tax liabilities:
Unrealized foreign exchange gain 5 — Operating lease receivables 22,218 4,963
Others 6,927 2,028 Right-of-use assets 15 —
9,290,409 6,371,900 Others 391 359
Deferred tax liabilities - net ₱4,759,233 ₱3,481,497 22,624 5,322
Deferred tax assets - net ₱1,502 ₱1,611
The rollforward analysis of the net deferred tax assets and liabilities of the JFC Group follows:
As at December 31, 2019, NOLCO and excess of MCIT over RCIT of the Philippine-based entities that
2018 can be claimed as deductions from taxable income and income tax due, respectively, are as follows:
(As restated -
2019 Note 2)
Balance at beginning of year, As previously reported ₱810,743 ₱2,719,818 Carryforward Excess of
Effect of adoption of PFRS 16 (see Note 2) 419,554 378,152 Year Incurred/Paid Benefit up to NOLCO MCIT over RCIT
Balance at beginning of year, As restated 1,230,297 3,097,970 2019 December 31, 2022 ₱1,279,864 ₱350,898
Additions: 2018 December 31, 2021 185,873 413,493
Arising from business combination (1,692,575) (1,697,082) 2017 December 31, 2020 218,874 336,872
Income tax effect to profit or loss (195,024) (141,975) 2016 December 31, 2019 1,037,769 179,133
Income tax effect of remeasurements of net 2,722,380 1,280,396
defined benefit plan 252,873 (54,831) Write-off during the year (1,037,769) (179,133)
Translation adjustments 94,458 26,215 ₱1,684,611 ₱1,101,263
Balance at end of year (₱309,971) ₱1,230,297

2019 Annual Report 99 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred tax assets on temporary differences and carryforward benefits of NOLCO and excess of The following are the movements in deferred tax assets on Excess of MCIT over RCIT of the JFC Group:
MCIT over RCIT of the Philippine-based subsidiaries, which were not recognized as it is not probable
that taxable income will be sufficient against which they can be utilized, amounted to ₱349.6 million 2019 2018
and ₱446.8 million, respectively, as at December 31, 2019 and ₱121.4 million and ₱314.9 million, Balance at beginning of year ₱614,580 ₱531,431
respectively, as at December 31, 2018. Additions 218,971 244,814
  Write-offs and expirations (179,133) (161,665)
The PRC enterprise income tax law provides that income tax rates are unified at 25%. As at December ₱654,418 ₱614,580
31, 2019, NOLCO of the PRC-based entities that can be claimed as deductions from taxable income are
as follows: The net change in deferred tax liabilities recognized in equity amounted to ₱252.9 million, (₱54.8
million) and (₱59.4 million) in 2019, 2018 and 2017, respectively.
Carryforward Deferred Tax
Year Incurred Benefit up to Tax Losses at 25% The reconciliation of provision for income tax computed at the statutory income tax rates to provision for
2019 December 31, 2024 ₱53,716 ₱13,429 income tax as shown in the consolidated statements of comprehensive income are as follows:
2018 December 31, 2023 43,346 10,837
2017 December 31, 2022 40,612 10,153 2018 2017
2016 December 31, 2021 212,213 53,053 (As restated - (As restated -
2015 December 31, 2020 237,227 59,307 2019 Note 2) Note 2)
2014 December 31, 2019 227,219 56,805 Provision for income tax at
814,333 203,584 statutory income tax rate ₱2,845,067 ₱3,096,511 ₱2,422,785
Utilized during the year (322,595) (80,649) Income tax effects of:
Translation adjustments (47,898) (11,975) Effect of different tax rate for
₱443,840 ₱110,960 royalty and interest
income (887,556) (772,025) (638,351)
Nontaxable income (483,150) (481,576) (313,827)
As at December 31, 2019, NOLCO of the USA-based entities that can be claimed as deductions from Net movement in
taxable income are as follows: unrecognized DTA 888,650 285,963 (28,325)
Expired/written off NOLCO
Deferred Tax and excess of MCIT over
Year Incurred Tax Losses at 21% RCIT 490,463 163,221 156,321
2019 ₱2,688,684 ₱564,624 Intrinsic value of stock
2018 182,732 38,374 options exercised (261,013) (153,891) (323,503)
2017 36,200 7,602 Nondeductible expenses 95,678 107,152 35,754
2,907,616 610,600 Tax effect of MSOP and
Translation adjustments (8,078) (1,697) ELTIP 108,357 (49,104) (175,401)
₱2,899,539 ₱608,903 Difference between OSD and
itemized deductions (123,565) (2,723) 12,621
NOLCO of USA-based entities has no prescription effective taxable year 2018. Effect of different tax rates
for capital gains tax — (1,497) (47,382)
The following are the movements in deferred tax assets on NOLCO of the JFC Group: Others 387,709 488,086 482,238
₱3,060,640 ₱2,680,117 ₱1,582,930
2019 2018
Balance at beginning of year ₱547,461 ₱811,226 Provision for current income tax of foreign entities operating in the United States, PRC and Singapore
Additions 733,812 50,221 amounted to ₱120.8 million, ₱56.5 million and ₱31.5 million, respectively, in 2019 and ₱41.0 million,
Utilized during the year (80,649) (253,376) ₱147.4 million and ₱1.2 million, respectively, in 2018 and ₱55.1 million, ₱119.3 million and ₱2.3 million,
Write-offs and expirations (311,331) (62,308) respectively, in 2017.
Translation adjustments (13,671) 1,698
₱875,622 ₱547,461 For Philippine-based entities, Republic Act (RA) No.10963 or the Tax Reform for Acceleration and
Inclusion Act (TRAIN) was signed into law on December 19, 2017 and took effect on January 1, 2018.
Although the TRAIN changes existing tax law and includes several provisions that will generally affect
businesses on a prospective basis, the management assessed that the same did not have any significant
impact on the consolidated financial statement balances as of the reporting date.

2019 Annual Report 100 Jollibee Foods Corporation

 For US-based entities, Tax Cuts and Jobs Act (the US Tax Reform) was signed into law on December 22, Present Value
2017, making the new law enacted by that date under Philippine Financial Reporting Standards (PFRSs) of Defined
and therefore applicable as of the reporting date. The US Tax Reform resulted in the re-measurement Benefit Fair Value Pension
of deferred tax assets and liabilities as a result of the change in the corporate income tax rate from 35% Obligation of Plan Assets Liability
to 21%. The US-based entities recognized net deferred tax liabilities amounting to ₱2,375.5 million and Remeasurements in other
₱1,650.9 million as at December 31, 2019 and 2018, respectively. comprehensive income:
Return on plan assets (excluding
amount included in net ₱— ₱126,830 (₱126,830)
25. Pension Liability interest)
Actuarial changes arising from
Defined Benefit Plan changes in financial
The Parent Company and certain Philippine-based subsidiaries have funded, independently- assumptions 444,835 — 444,835
administered, non-contributory defined benefit pension plan covering all permanent employees. The Actuarial changes due to
benefits are based on the employees’ projected salaries and number of years of service. experience adjustment 528,344 — 528,344
Actuarial changes due to
The funds are administered by trustee banks. Subject to the specific instructions provided in writing, demographic adjustment 63,920 — 63,920
the Parent Company and certain Philippine-based subsidiaries direct the trustee banks to hold, invest 1,037,099 126,830 910,269
and reinvest the funds and keep the same invested, in its sole discretion, without distinction between Contributions — 401,554 (401,554)
principal and income in, but not limited to, certain cash and other short-term deposits, investments in Transferred out - net (2,208) — (2,208)
government and corporate debt securities and quoted equity securities. At December 31, 2019 ₱4,734,016 ₱2,512,696 ₱2,221,320

Under the existing regulatory framework, Republic Act No. 7641 requires a provision for retirement Changes in pension liability of the JFC Group in 2018 are as follows:
pay to qualified private sector employees in the absence of any retirement plan in the entity, provided
however that the employees’ retirement benefits under any collective bargaining and other agreements Present Value
shall not be less than those provided under the law. The law does not require minimum funding of the of Defined
plan. Benefit Fair Value Pension
Obligation of Plan Assets Liability
The following tables summarize the components of pension expense, included under “Cost of sales” At January 1, 2018 ₱3,574,277 ₱2,084,731 ₱1,489,546
and “General and administrative expenses” accounts in the consolidated statements of comprehensive Pension expense (see Notes 21
income and pension liability in the consolidated statements of financial position, which are based on and 22):
actuarial valuations. Current service cost 290,935 — 290,935
Net interest 211,958 123,693 88,265
Changes in pension liability of the JFC Group in 2019 are as follows: Past service cost 15,851 — 15,851
Settlement loss 3,754 — 3,754
522,498 123,693 398,805
Present Value
Benefits paid (150,925) (150,925) —
of Defined
Settlement paid (28,400) (28,400) —
Benefit Fair Value Pension
Remeasurements in other
Obligation of Plan Assets Liability
comprehensive income:
At January 1, 2019 ₱3,484,946 ₱2,164,300 ₱1,320,646
Return on plan assets (excluding
Pension expense (see Notes 21
amount included in net
and 22):
interest) — (223,899) 223,899
Current service cost 270,535 — 270,535
Actuarial changes arising from
Net interest 251,452 151,420 100,032
changes in financial
Past service cost — — —
assumptions (485,586) — (485,586)
Settlement loss 23,600 — 23,600
Actuarial changes due to
545,587 151,420 394,167
experience adjustment 68,003 — 68,003
Benefits paid (198,182) (198,182) —
Actuarial changes due to
Settlement paid (133,226) (133,226) —
demographic adjustment (14,921) — (14,921)
(Forward)
(432,504) (223,899) (208,605)
Contributions — 359,100 (359,100)
At December 31, 2018 ₱3,484,946 ₱2,164,300 ₱1,320,646

2019 Annual Report 101 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The maximum economic benefit available is a combination of expected refunds from the plan and The sensitivity analysis below has been determined based on reasonably possible changes of each
reductions in future contributions. significant assumption on the present value of the defined benefit obligation as at the end of the
reporting period, assuming all other assumptions were held constant:
The following table presents the carrying amounts, which approximate the estimated fair values, of the
assets of the plan: Increase Philippine Plan
(Decrease) 2019 2018 2017
2019 2018 Discount rates +0.50% (₱636,924) (₱196,313) (₱142,506)
Cash and cash equivalents ₱44,913 ₱638,046 -0.50% 777,116 111,323 195,703
Investments in government and corporate debt
securities 2,049,972 1,043,573 Future salary increases +0.50% 773,398 112,745 194,789
Investments in quoted equity securities: -0.50% (636,797) (198,792) (143,116)
Holding firms 207,530 186,312
Property 135,221 110,603
Banks 118,411 105,906 Shown below is the maturity analysis of the undiscounted benefit payments as at December 31:
Food and beverage 42,523 51,292
Telecommunications 16,986 25,688 2019 2018
Electricity, energy, power and water 18,383 26,223 Less than 1 year ₱822,626 ₱797,550
Others 46,618 35,772 More than 1 year to 5 years 1,357,711 1,078,936
Interest and dividends receivable 29,029 15,851 More than 5 years to 10 years 2,599,074 2,408,837
Fund liabilities (see Note 27) (196,890) (74,966) More than 10 years to 15 years 3,135,585 2,880,848
₱2,512,696 ₱2,164,300 More than 15 years to 20 years 3,418,491 2,956,666
More than 20 years 11,479,469 10,074,315
The plan assets consist of the following:
The Parent Company and certain Philippine-based subsidiaries do not have a formal asset-liability
• Investments in government securities which consist of retail treasury bonds that bear interest matching strategy. The overall investment policy and strategy of the retirement plans is based on the
ranging from 3.24%-7.38% and have maturities from August 2020 to October 2037 and fixed-rate client suitability assessment, as provided by trustee banks, in compliance with the BSP requirements.
treasury notes that bear interest ranging from 5.75%-8.5% and have maturities from February 2020 Nevertheless, the Parent Company and certain Philippine-based subsidiaries ensure that there will be
to November 2032. sufficient assets to pay the retirement benefits as they fall due while attempting to mitigate the various
risks of the plans.
• Investments in debt securities consist of long-term corporate bonds in the property sector, which
bear interest ranging from 5.13%-6.30% maturing from March 2024 to October 2026. The plan assets are primarily exposed to financial risks such as liquidity risk and price risk. Liquidity risk
pertains to the plans’ ability to meet obligation to the employees upon retirement. To effectively manage
• Investments in equity securities consist of investments in listed equity securities, including equity liquidity risk, the trustee banks maintain assets in cash and short-term deposits. Price risk pertains mainly
securities of the Parent Company, for certain retirement plans of the JFC Group (see Note 27). to fluctuation in market prices of the retirement funds’ marketable securities. In order to effectively
manage price risk, the trustee banks continuously assess these risks by closely monitoring the market
• Other financial assets held by the retirement plan are primarily accrued interest income on cash value of the securities and implementing prudent investment strategies.
and cash equivalents, debt instruments and other securities.
The Parent Company and certain Philippine-based subsidiaries expect to contribute ₱823.0 million to
Pension expense as well as the present value of the pension liability are determined using actuarial the defined benefit pension plans in 2020.
valuations. The actuarial valuation involves making various assumptions. The principal assumptions
used in determining pension expense and liability for the defined benefit plans are shown below: The average duration of the defined benefit obligation is 10 years as at December 31, 2019 and 2018.

Defined Contribution Plan

December 31, December 31, December 31,
The employees of the PRC-domiciled of the JFC Group are members of a state-managed pension
2019 2018 2017
benefit scheme operated by the national government. These subsidiaries are required to contribute
Discount rate 4.9% – 5.5% 7.40% – 7.80% 5.90% – 6.30%
a specified percentage of their payroll costs to the pension benefit scheme to fund the benefits. The
Salary increase rate 6.00% 6.00% 6.00%
only obligation of these subsidiaries with respect to the pension benefit scheme is to make the specified
contributions.

Pension expense under the defined contribution plan amounted to ₱506.7 million, ₱595.5 million and
₱569.8 million in 2019, 2018 and 2017, respectively (see Notes 21 and 22).

2019 Annual Report 102 Jollibee Foods Corporation

 The movements in the number of stock options outstanding under MSOP and related weighted average
26. Stock Options Plan
exercise prices (WAEP) for the years ended December 31, 2019, 2018 and 2017 follow:
Senior Management Stock Option and Incentive Plan
2019 2018 2017
On January 10, 2017 and December 17, 2002, the SEC approved the exemption requested by the JFC
Number of Number of Number of
Group on the registration requirements of 31,500,000 and 101,500,000 options, respectively, underlying Options WAEP Options WAEP Options WAEP
the Parent Company’s common shares to be issued pursuant to the JFC Group’s Senior Management Total options granted at beginning of year 50,492,844 ₱111.92 47,184,794 ₱102.59 42,986,294 ₱92.47
Stock Option and Incentive Plan (the Plan). The Plan covers selected key members of management of Options granted during the year 2,222,300 219.00 3,308,050 245.00 4,198,500 206.20
the JFC Group and designated affiliated entities. Total options granted at end of year 52,715,144 ₱116.43 50,492,844 ₱111.92 47,184,794 ₱102.59

Outstanding at beginning of year 17,613,253 ₱193.07 16,780,550 ₱176.63 15,256,198 ₱159.46

The Plan is divided into two programs, namely, the Management Stock Option Program (MSOP) and the Options granted during the year 2,222,300 219.00 3,308,050 245.00 4,198,500 206.20
Executive Long-term Incentive Program (ELTIP). The MSOP provides a yearly stock option grant program Options exercised during the year (1,696,402) 139.16 (2,234,849) 145.31 (2,672,040) 110.35
based on company and individual performance while the ELTIP provides stock ownership as an incentive Options forfeited during the year (234,003) 270.75 (240,498) 204.03 (2,108) 213.28
to reinforce entrepreneurial and long-term ownership behavior of executive participants. Outstanding at end of year 17,905,148 ₱200.38 17,613,253 ₱193.07 16,780,550 ₱176.63

Exercisable at end of year 12,077,981 ₱188.14 10,612,036 ₱169.70 9,688,683 ₱151.94

MSOP. The MSOP is a yearly stock option grant program open to members of the senior management
committee of the JFC Group and members of the management committee, key talents and designated
consultants of some of the business units. The weighted average share price of the Parent Company’s common shares is ₱264.79, ₱278.16 and
₱222.86 in 2019, 2018 and 2017, respectively. The weighted average remaining contractual life for the
Each MSOP cycle refers to the period commencing on the MSOP grant date and ending on the last day stock options outstanding is 4.62 years, 4.48 years and 5.21 years as at December 31, 2019, 2018 and
of the MSOP exercise period. Vesting is conditional on the employment of the employee-participants in 2017, respectively.
the JFC Group within the vesting period. The options will vest at the rate of one-third of the total options
granted on each anniversary of the MSOP grant date until the third anniversary. The weighted average fair value of stock options granted in 2019, 2018 and 2017 is ₱48.07, ₱58.42 and
₱29.88, respectively. The fair value of share options as at the date of grant is estimated using the Black-
The exercise price of the stock options is determined by the JFC Group with reference to prevailing Scholes Option Pricing Model, taking into account, the terms and conditions upon which the options
market prices over the three months immediately preceding the date of grant for the 1st up to the 7th were granted. The option style used for this plan is the American style because the option plan allows
MSOP cycle. Starting with the 8th MSOP cycle, the exercise price of the option is determined by the JFC exercise before the expiry date.
Group with reference to the market closing price at date of grant.
The inputs in the valuation of the options granted on the dates of grant for each MSOP cycle are shown
The options will vest at the rate of one-third of the total options granted from the start of the grant date below:
on each anniversary date which will start after a year from the grant date. For instance, under the 1st
MSOP cycle, the Compensation Committee of the JFC Group granted 2,385,000 options to eligible Risk-free Expected Stock Price
participants on July 1, 2004. One-third of the options granted, or 795,000 options, vested and may be Dividend Expected Interest Life of on Grant Exercise
MSOP Cycle Year of Grant Yield Volatility Rate the Option Date Price
exercised starting July 1, 2005. The exercise period for the 1st MSOP cycle was until June 30, 2012.
1st 2004 1.72% 36.91% 6.20% 5-7 years ₱24.00 ₱20.00
From July 1, 2005 to September 25, 2019, the Compensation Committee granted series of MSOP grants 2nd 2005 1.72% 36.91% 6.20% 5-7 years 29.00 27.50
under the 2nd to 16th MSOP cycle to eligible participants. Under the most recent grant (September 25, 3rd 2006 1.72% 36.91% 6.20% 5-7 years 35.00 32.32
2019), the 16th MSOP cycle, the Compensation Committee granted 2,222,300 options. These options 4th 2007 1.70% 28.06% 6.41% 3-4 years 52.50 50.77
vest similar to the 1st MSOP cycle. 5th 2008 1.80% 26.79% 8.38% 3-4 years 34.00 39.85
6th 2009 2.00% 30.37% 5.28% 3-4 years 48.00 45.45
7th 2010 2.00% 29.72% 5.25% 3-4 years 70.00 57.77
The options under MSOP expire eight years after grant date. The 1st, 2nd, 3rd 4th, 5th, 6th, 7th and 8th 2011 2.00% 34.53% 4.18% 3-4 years 89.90 89.90
8th MSOP cycles expired on June 30, 2012, 2013, 2014, 2015, 2016, 2017, 2018 and 2019, respectively. 9th 2012 2.00% 28.72% 3.50% 3-4 years 107.90 107.90
10th 2013 2.00% 29.38% 2.68% 3-4 years 145.00 145.00
The JFC Group does not pay cash as a form of settlement. 11th 2014 2.00% 24.87% 2.64% 3-4 years 179.80 179.80
12th 2015 2.00% 18.94% 2.98% 3-4 years 180.00 180.00
13th 2016 2.00% 17.76% 2.63% 3-4 years 236.00 236.00
14th 2017 2.00% 16.70% 3.92% 3-4 years 206.20 206.20
15th 2018 2.00% 28.98% 4.95% 3-4 years 245.00 245.00
16th 2019 2.00% 27.65% 4.18% 3-4 years 219.00 219.00

The expected life of the stock options is based on historical data and current expectations and is not
necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption
that the historical volatility over a period similar to the life of the options is indicative of future trends,
which may also not necessarily be the actual outcome.

2019 Annual Report 103 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ELTIP. The ELTIP entitlement is given to members of the senior management committee and designated The fair value of stock options granted is ₱26.13 in 2015. There were no additional stock option grants
consultants of the JFC Group. under ELTIP in 2019, 2018 and 2017. The fair value of share options as at the date of grant is estimated
using the Black-Scholes Option Pricing Model, taking into account the terms and conditions upon which
Each ELTIP cycle refers to the period commencing on the ELTIP entitlement date and ending on the last the options were granted. The option style used for this plan is the American style because this option
day of the ELTIP exercise period. Actual grant and vesting are conditional upon achievement of the JFC plan allows exercise before the maturity date.
Group’s medium to long-term goals and individual targets in a given period, and the employment of the
employee-participants in the JFC Group within the vesting period. If the goals are achieved, the options The inputs to the model used for the options granted on the dates of grant for each ELTIP cycle are
will be granted. For the 3rd ELTIP cycle, a percentage of the options to be granted are based on the shown below:
percentage of growth in annual earnings per share such that 100%, 50% or 25% of the options granted Risk-free Expected Stock Price
when percentage of growth in annual earnings per share are 12% and above, 10% to less than 12% or Dividend Expected Interest Life of on Grant Exercise
8% to less than 10%, respectively. For the 4th ELTIP cycle, the percentage of the options to be granted ELTIP Cycle Year of Grant Yield Volatility Rate the Option Date Price
and the targeted percentage of growth in annual earnings per share have been further revised such that 1st 2004 1.72% 36.91% 6.20% 5 years ₱24.00 ₱20.00
150%, 100% or 50% of the options granted when percentage of growth in annual earnings per share are 2nd 2008 1.80% 26.79% 8.38% 3-4 years 34.00 39.85
3rd 2012 2.00% 28.74% 3.60% 3-4 years 105.00 105.00
15% and above, 12% to less than 15% or 10% to less than 12%, respectively. 4th 2015 2.00% 18.94% 2.98% 3-4 years 180.00 180.00

The exercise price of the stock options under ELTIP is determined by the JFC Group with reference
to prevailing market prices over the three months immediately preceding the date of entitlement for The expected life of the stock options is based on historical data and current expectations and is not
the first and second ELTIP cycles. Starting with the 3rd ELTIP cycle, the exercise price of the option is necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption
determined by the JFC Group with reference to the closing market price as at the date of entitlement. that the historical volatility over a period similar to the life of the options is indicative of future trends,
which may also not necessarily be the actual outcome.
The options will vest at the rate of one-third of the total options granted on each anniversary date which
will start after the goals are achieved. For instance, on July 1, 2004, the Compensation Committee gave The cost of the stock options expense charged to operations for both MSOP and ELTIP in the “General
an entitlement of 22,750,000 options under the 1st ELTIP cycle to eligible participants. One-third of and administrative expenses” account amounted to ₱262.9 million, ₱312.0 million and ₱227.5 million
the options granted, or 7,583,333 options, vested and were exercised starting July 1, 2007 until June in 2019, 2018 and 2017, respectively (see Notes 19 and 22). Correspondingly, a credit was made to
30, 2012. On July 1, 2008, October 19, 2012, August 25, 2015 and January 3, 2018, entitlement to additional paid-in-capital (see Note 19).
20,399,999, 24,350,000, 11,470,000 and 9,290,000 options were given to eligible participants under the
2nd, 3rd, 4th and 5th ELTIP cycles, respectively. The 1st and 2nd ELTIP cycles expired on June 30, 2012
and April 30, 2017, respectively. The stock options granted under the 3rd and 4th ELTIP cycles will expire 27. Related Party Transactions
in 2020 and 2023, respectively.
The JFC Group has transactions with related parties. Enterprises and individuals that directly, or
The JFC Group does not pay cash as a form of settlement. indirectly through one or more intermediaries, control or are controlled by, or under common control
with the JFC Group, including holding companies, subsidiaries and fellow subsidiaries are related
The movements in the number of stock options outstanding for the 3rd to 4th ELTIP cycles and related entities of the JFC Group. Individuals owning, directly or indirectly, an interest in the voting power of
WAEP for the years ended December 31, 2019, 2018 and 2017 follow: the JFC Group that give them significant influence over the enterprise; key management personnel,
including directors and officers of the JFC Group, and close members of the family of these individuals
2019 2018 2017
and companies associated with these individuals also constitute related parties.
Number of Number of Number of
Options WAEP Options WAEP Options WAEP Compensation of Key Management Personnel of the JFC Group
Total options granted at beginning The aggregate compensation and benefits to key management personnel of the JFC Group in 2019,
and end of year 78,969,999 ₱74.58 78,969,999 ₱74.58 78,969,999 ₱74.58 2018 and 2017 are as follows:
Outstanding at beginning of year 18,630,000 ₱120.55 27,436,666 ₱136.35 35,118,896 ₱122.65
Options exercised during the year (3,238,299) 107.47 (1,323,333) 111.99 (7,682,230) 73.69
2019 2018 2017
Options forfeited during the year (23,333) 180.00 (7,483,333) 180.00 — — Salaries and short-term benefits ₱1,265,771 ₱1,221,283 ₱1,107,515
Outstanding at end of year 15,368,368 ₱123.22 18,630,000 ₱120.55 27,436,666 ₱136.35 Stock options expense
(see Notes 22 and 26) 262,875 311,964 227,483
Exercisable at end of year 13,895,035 ₱117.20 15,683,333 ₱109.38 15,966,666 ₱105.00 Net pension expense 124,114 106,756 65,075
Employee car plan and other
long-term benefits 54,728 58,859 48,948
₱1,707,488 ₱1,698,862 ₱1,449,021
The weighted average remaining contractual life for the stock options outstanding is 1.06 years, 2.07
years and 3.59 years as at December 31, 2019, 2018 and 2017, respectively.

2019 Annual Report 104 Jollibee Foods Corporation

 Transactions with the Retirement Plans
29. Leases
As at December 31, 2019 and 2018, certain retirement funds of the JFC Group include investment in

equity securities of the Parent Company with details as follows:
JFC Group as Lessee
2019 2018 The JFC Group has lease contracts for QSR outlets, warehouses and office spaces. Leases of QSR
Number of shares 151,810 144,740 outlets and warehouse generally have lease terms between three (3) to 20 years. The JFC Group’s
obligations under its leases are secured by the lessor’s title to the leased assets. Generally, the JFC
Market value ₱32,791 ₱42,694 Group is restricted from assigning and subleasing the leased assets. There are several lease contracts
Cost 11,564 9,860 that include extension and termination options and variable lease payments, which are further discussed
Unrealized gain ₱21,227 ₱32,834 below.

The JFC Group also has certain leases of QSR outlets with lease term of 12 months or less. The JFC
The JFC Group’s receivable from the retirement fund amounted to ₱193.6 million and ₱72.8 million as at
Group applies the ‘short-term lease’ recognition exemptions for these leases.
December 31, 2019 and 2018, respectively (see Note 25). The receivable arose from benefit payments
made by the JFC Group for and in behalf of the retirement plans. The receivable is noninterest-bearing.
Set out below are the carrying amounts of right-of-use assets recognized and the movements during
the period:
Terms and Conditions of Transactions with other Related Parties
Transactions with related parties are made at market prices and are normally settled in cash. The
JFC Group has approval process and established limits when entering into material related party QSR Outlets Warehouses Office Space Total
transactions. Other related party transactions between entities under the JFC Group are eliminated in As at January 1, 2018, As restated
the consolidation process. (see Note 2) ₱24,653,160 ₱601,851 ₱69,367 ₱25,324,378
Acquisition of a business (see Note 11) 10,102,337 — — 10,102,337
Additions 7,345,423 162,114 95,110 7,602,647
28. Earnings Per Share Pre-termination (795,650) — — (795,650)
Depreciation expense
Basic and diluted EPS are computed as follows: (see Notes 2, 21 and 22) (5,896,464) (93,393) (31,527) (6,021,384)
Cumulative translation adjustments 346,688 5,226 — 351,914
2018 2017 As at December 31, 2018,
(As restated - (As restated - As restated (see Note 2) 35,755,494 675,798 132,950 36,564,242
2019 Note 2) Note 2) Additions 4,960,468 43,880 22,333 5,026,681
(In Thousand pesos, except for shares data and EPS) Acquisition of a business (see Note 11) 12,147,693 — 2,614 12,150,307
Pre-termination (2,533,032) (4,285) — (2,537,317)
(a) Net income attributable to the equity Depreciation expense
holders of the Parent Company ₱6,432,434 ₱8,212,608 ₱6,939,577 (see Notes 2, 21 and 22) (7,024,659) (103,818) (36,326) (7,164,803)
Cumulative translation adjustments (1,129,112) (2,557) (23) (1,131,692)
(b) Weighted average number of shares - As at December 31, 2019 ₱42,176,852 ₱609,018 ₱121,548 ₱42,907,418
basic 1,092,593,583 1,087,093,411 1,080,488,873
Weighted average number of shares
outstanding under the stock Set out below are the carrying amounts of lease liabilities (included under interest-bearing loans and
options plan 32,334,237 34,865,233 32,366,508 borrowings) and the movements during the period:
Weighted average number of shares 2018
that would have been purchased (As restated -
at fair market value (19,781,303) (18,607,619) (18,180,717) 2019 Note 2)
(c) Adjusted weighted average shares - As at January 1 ₱40,630,789 ₱28,682,918
diluted 1,105,146,517 1,103,351,025 1,094,674,664 Acquisition of a business (see Note 11) 12,472,792 10,308,436
Additions 4,998,947 7,513,119
EPS Pre-termination (2,934,354) (902,982)
Basic (a/b) ₱5.887 ₱7.555 ₱6.423 Accretion of interest (see Note 23) 1,824,311 1,728,620
Diluted (a/c) 5.820 7.443 6.340 Payments (8,419,749) (6,979,019)
Cumulative translation adjustments (1,265,332) 279,697
Potential common shares for stock options under the 15th MSOP cycle were not included in the As at December 31 ₱47,307,404 40,630,789
calculation of the diluted EPS in 2019 because they are antidilutive.
Current ₱7,036,754 ₱5,743,062
Noncurrent 40,270,650 34,887,727

The maturity analysis of lease liabilities are disclosed in Note 31.

2019 Annual Report 105 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following are the amounts recognized in profit or loss: Shown below is the maturity analysis of the undiscounted finance lease receivables:

2019 2018 2017 2019 2018

Depreciation expense of 1 year ₱33,388 ₱30,951
right-of-use assets more than 1 year to 5 years 144,678 168,142
(see Notes 2, 21 and 22) ₱7,164,803 ₱6,021,384 ₱4,191,960 more than 5 years 5,198 15,123
Interest expense on lease liabilities 1,824,311 1,728,620 1,387,557
Rent expense - short-term leases
(see Notes 21 and 22) 2,850,568 2,861,424 2,888,536 30. Contingencies
Rent expense - variable lease
payments (see Notes 21 and 22) 2,138,076 2,425,781 2,057,768 The JFC Group is involved in litigations, claims and disputes which are normal to its business.
₱13,977,758 ₱13,037,209 ₱10,525,821 Management believes that the ultimate liability, if any, with respect to these litigations, claims and
disputes will not materially affect the financial position and financial performance of the JFC Group.
The JFC Group had total cash outflows for leases of ₱13,408.4 million and ₱12,266.2 million in 2019 Thus, other than the provisions in Note 17, there were no other provisions made for contingencies.
and 2018, respectively.
The JFC Group does not provide further information on these provisions and contingencies in order not
JFC Group as Lessor to impair the outcome of the litigations, claims and disputes.
The JFC Group entered into commercial property leases for its investment property units. These leases
have terms of between three (3) and 20 years. Leases generally include a clause to enable upward
revision of the rent charges on an annual basis based on prevailing market conditions. 31. Financial Risk Management Objectives and Policies

Rent income recognized on a straight-line basis amounted to ₱58.5 million, ₱25.0 million and ₱27.2 The JFC Group is exposed to a variety of financial risks from its operating, investing and financing
million in 2019, 2018 and 2017, respectively (see Note 20). The difference of rent income recognized activities. The JFC Group’s risk management policies focus on actively securing the JFC Group’s short-
under the straight-line method and the rent amounts in accordance with the terms of the lease are term to medium-term cash flows by minimizing the exposure to financial markets.
included under “Operating lease receivables” which amounted to ₱98.7 million, ₱64.3 million and
₱157.8 million as at December 31, 2019, 2018 and 2017, respectively. The JFC Group’s principal financial instruments comprise of cash and cash equivalents, short-term
investments, receivables, short-term and long-term debts. The main purpose of these financial
The future minimum lease receivables under noncancellable operating leases as at December 31 are instruments is to obtain financing for the JFC Group’s operations. The JFC Group has other financial
as follows: assets and liabilities such as security and other deposits, finance lease receivables, operating lease
receivables, lease liabilities and trade payables and other current liabilities (excluding accrual for local
2019 2018 2017 and other taxes, liabilities to government agencies and unearned revenue from gift certificates) which
Within one year ₱61,612 ₱63,062 ₱174,333 arise directly from its operations and financial assets at FVTPL.
After one year but not more than
five years 236,607 253,908 500,520 The main risks arising from these financial instruments are interest rate risk, foreign currency risk, credit
More than five years 65,725 33,271 163,067 risk and liquidity risk. The risk management policies reviewed regularly by the Parent Company’s BOD
₱363,944 ₱350,241 ₱837,920 and management for managing each of these risks are summarized as follows:

JFC Group as an Intermediate Lessor Interest Rate Risk

The JFC Group subleases certain parcels of land with lease terms between 5 to 20 years. The lease Interest rate risk arises from the possibility that the fair value or future cash flows of financial instruments
contracts contain renewal options under terms and conditions that are mutually agreed upon by the will fluctuate because of changes in market interest rates.
parties.
The JFC Group’s exposure to interest rate risk relates primarily to short-term and long-term debts with
Set out below are the carrying amounts of finance lease receivables and the movements during the floating interest rates. Floating rate financial instruments are subject to cash flow interest rate risk. The
period: JFC Group’s interest rate exposure management policy centers on reducing the JFC Group’s overall
interest expense and exposure to changes in the interest rates.
2019 2018
At January 1 ₱184,800 ₱204,698
To manage the interest rate risk related to the JFC Group’s long-term debts, the JFC Group used a
Accretion of interest (see Note 23) 8,086 9,034
derivative instrument to fix the interest rate over the term of one of its long-term debts (see Note 18).
Payments (30,952) (28,932)
With the JFC Group’s Corporate Planning Team, it enters into loan contracts with variable interest rates
As at December 31 ₱161,934 ₱184,800
and option to fix interest rates which can be availed to manage its loan risks.

There is minimal exposure on the other sources of the JFC Group’s interest rate risk. These other sources
are from the JFC Group’s cash in banks, short-term deposits and short-term investments.

2019 Annual Report 106 Jollibee Foods Corporation

The following tables demonstrate the sensitivity to a reasonably possible change in interest rates, with Foreign Currency Risk Sensitivity Analysis
all other variables held constant, of the JFC Group’s income before income tax as at December 31, 2019 The JFC Group has recognized in profit or loss, a net foreign exchange loss of ₱268.2 million, ₱34.6
and 2018. The impact on the JFC Group’s income before income tax is due to changes in the fair value million and ₱63.5 million in 2019, 2018 and 2017, respectively (see Note 23), included under “Other
of floating interest rates. income” account. This resulted from the movements of the Philippine peso against the USD as shown
in the following table:
Long-term Debt with Floating Interest Rates
December 31, 2019 50.64
Increase/ Effect in Profit or Loss December 31, 2018 52.58
Decrease Before Income Tax December 31, 2017 49.93
in Basis Points 2019 2018 2017
The following table demonstrates the sensitivity to a reasonably possible change in USD to Philippine
PHP +100 (161,228) (188,907) (80,599)
peso exchange rate, with all other variables held constant, of the JFC Group’s income before income tax
-100 161,228 188,907 80,599
(due to changes in the fair value of monetary assets and liabilities) as at December 31:
USD +100 (55,802) (67,688) (64,245)
-100 55,802 67,688 64,245 2019 2018
Appreciation Effect on Effect on Effect on Effect on
VND +100 (8,928) (6,068) (4,167) (Depreciation) Income Equity Income Equity
-100 8,928 6,068 4,167 of ₱ against before before before before
Foreign Currency Income Tax Income Tax Income Tax Income Tax
USD 1.50 (₱36,096) (₱36,096) (₱113,619) (₱113,619)
The assumed movement in basis point for interest rate sensitivity analysis is based on the currently
(1.50) 36,096 36,096 113,619 113,619
observable market environment.
1.00 (24,065) (24,065) (75,746) (75,746)
(1.00) 24,065 24,065 75,746 75,746
Foreign Currency Risk
The JFC Group’s exposure to foreign currency risk arises from the Parent Company’s investments outside
the Philippines, which are mainly in PRC and USA. The net assets of foreign businesses account for only Credit Risk
5.0% and 6.1% of the consolidated net assets of the JFC Group as at Credit risk is the risk that a customer or counterparty fails to fulfill its contractual obligations to the JFC
December 31, 2019 and 2018, respectively. Group. This includes risk of non-payment by borrowers, failed settlement of transactions and default on
outstanding contracts.
The JFC Group also has transactional foreign currency exposures. Such exposure arises from the JFC
Group’s Philippine operations’ cash and cash equivalents, receivables and trade payables in foreign The JFC Group has a strict credit policy. Its credit transactions are with franchisees and customers that
currencies. have gone through rigorous screening before granting them the franchise. The credit terms are very
short, while deposits and advance payments are also required before rendering the services or delivering
The following table shows the JFC Group’s Philippine operations’ foreign currency-denominated the goods, thus, mitigating the possibility of non-collection. In cases of non-collection, defaults of the
monetary assets and liabilities and their peso equivalents as at December 31: debtors are not tolerated; the exposure is contained the moment a default occurs and transactions that
will further increase the exposure of the JFC Group are discontinued.
2019 2018
The JFC Group has no significant concentration of credit risk with counterparty. The JFC Group’s
PHP PHP
franchisee profile is such that no single franchisee accounts for more than 5% of the total system wide
USD Equivalent USD Equivalent
sales of the JFC Group.
Foreign currency denominated assets:
Cash and cash equivalents 17,022 861,884 71,661 3,767,938
Receivables 11,063 560,160 9,014 473,955
28,085 1,422,044 80,675 4,241,893
Foreign currency denominated
liability -
Accounts payable - trade (4,020) (203,576) (4,929) (259,177)
Foreign currency denominated assets
- net 24,065 1,218,468 75,746 3,982,716

2019 Annual Report 107 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The aging analysis of financial assets as at December 31, 2019 and 2018 are as follows:

2019
Neither Past
Due nor Past Due but not Impaired (Age in Days)
Total Impaired 1-30 31-60 61-120 Over 120 Impaired
Financial Assets at Amortized Cost (In Millions)
Cash and cash equivalents* ₱20,515.1 ₱20,515.1 ₱— ₱— ₱— ₱— ₱—
Short-term investments 2,130.0 2,130.0 — — — — —
Receivables:
Trade 5,348.9 3,753.9 433.6 139.4 124.6 505.0 392.4
Employee car plan receivables** 216.7 216.7 — — — — —
Advances to employees 175.4 175.4 — — — — —
Other receivables*** 215.2 41.0 1.7 2.2 3.2 167.1 —
Operating lease receivables 98.7 98.7 — — — — —
Finance lease receivables 161.9 161.9 — — — — —
Other noncurrent assets -
Security and other deposits** 3,210.8 3,210.8 — — — — —
32,072.7 30,303.5 435.3 141.6 127.8 672.1 392.4
Financial Assets at FVTPL 38.2 38.2 — — — — —
₱32,110.9 ₱30,341.7 ₱435.3 ₱141.6 ₱127.8 ₱672.1 ₱392.4
*Excluding cash on hand amounting to ₱376.9 million.
**Including noncurrent portion of employee car plan receivables and security and other deposits.
***Including interest receivable and excluding receivables from government agencies amounting to ₱62.7 million.

2018 (As restarted)

Neither Past
Due nor Past Due but not Impaired (Age in Days)
Total Impaired 1-30 31-60 61-120 Over 120 Impaired
Financial Assets at Amortized Cost (In Millions)
Cash and cash equivalents* ₱22,805.0 ₱22,805.0 ₱— ₱— ₱— ₱— ₱—
Short-term investments 883.2 883.2 — — — — —
Receivables:
Trade 4,680.6 2,869.9 267.2 107.6 167.4 591.6 676.9
Employee car plan receivables** 260.3 260.3 — — — — —
Advances to employees 167.4 167.4 — — — — —
Other receivables*** 151.6 93.1 0.7 1.7 2.1 54.0 —
Operating lease receivables 64.3 64.3 — — — — —
Finance lease receivables 184.8 184.8 — — — — —
Other noncurrent assets -
Security and other deposits** 2,713.8 2,713.8 — — — — —
31,911.0 30,041.8 267.9 109.3 169.5 645.6 676.9
Financial Assets at FVTPL 39.8 39.8 — — — — —
₱31,950.8 ₱30,081.6 ₱267.9 ₱109.3 ₱169.5 ₱645.6 ₱676.9
*Excluding cash on hand amounting to ₱480.9 million.
**Including noncurrent portion of employee car plan receivables and security and other deposits.
***Including interest receivable and excluding receivables from government agencies amounting to ₱41.6 million.

2019 Annual Report 108 Jollibee Foods Corporation

Credit Risk Exposure. The tables below show the maximum exposure to credit risk of the JFC Group With respect to credit risk arising from financial assets of the JFC Group, the JFC Group’s exposure to
as at December 31, 2019 and 2018 without considering the effects of collaterals and other credit risk credit risk arises from default of the counterparty, with a gross maximum exposure equal to the carrying
mitigation techniques: amount of these instruments.
2019
Fair Value and Credit Quality. The financial assets of the JFC Group are grouped according to stage of which description
Financial Effect of is explained as follows:
Gross Maximum Collateral or Credit
Exposure Enhancement Net Exposure Stage 1 - Those that are considered current and up to 30 days past due, and based on change in
(a) (b) (c) = (a) - (b) rating, delinquencies and payment history, do not demonstrate significant increase in
credit risk.
(In Millions)
Financial Assets at Amortized Cost
Cash and cash equivalents* ₱20,515.1 ₱122.8 ₱20,392.3** Stage 2 - Those that, based on change in rating, delinquencies and payment history, demonstrate
Short-term investments 2,130.0 — 2,130.0 significant increase in credit risk, and/or are considered more than 30 days past due but does
Receivables: not demonstrate objective evidence of impairment as at reporting date.
Trade 5,348.9 564.6 4,784.3***
Employee car plan receivables 216.7 23.4 193.3 Stage 3 - Those that are considered in default or demonstrate objective evidence of impairment as at
Advances to employees 175.4 — 175.4 reporting date.
Other receivables**** 215.2 — 215.2
Operating lease receivables 98.7 — 98.7 The tables below show determination of ECL stage of the JFC Group’s financial assets:
Finance lease receivables 161.9 — 161.9
Other noncurrent assets - 2019
Security and other deposits 3,210.8 30.6 3,180.2 Stage 1 Stage 2 Stage 3
Financial assets at FVTPL 38.2 — 38.2 Total 12-month ECL Lifetime ECL Lifetime ECL
₱32,110.9 ₱741.4 ₱31,369.5 Financial Assets at Amortized Cost (In Millions)
* Excluding cash on hand amounting to ₱376.9 million. Receivables:
** Gross financial assets after taking into account insurance bank deposits for cash and cash equivalents. Trade ₱5,348.9 ₱4,187.5 ₱769.0 ₱392.4
*** Gross financial assets after taking into account payables to the same counterparty.
Employee car plan receivables* 216.7 216.7 — —
**** Including interest receivable and excluding receivables from government agencies amounting to ₱62.7 million.
Advances to employees 175.4 175.4 — —
Other receivables** 215.2 42.7 172.5 —
2018 (As Restated - Note 2) Financial Assets at FVTPL 38.2 38.2 — —
Fair Value and ₱5,994.4 ₱4,660.5 ₱941.5 ₱392.4
Financial Effect of *Including noncurrent portion of employee car plan receivables.
Gross Maximum Collateral or Credit **Including interest receivable and excluding receivables from government agencies amounting to ₱62.7 million.
Exposure Enhancement Net Exposure
(a) (b) (c) = (a) - (b)
(In Millions) 2018
Financial Assets at Amortized Cost
Stage 1 Stage 2 Stage 3
Cash and cash equivalents* ₱22,805.0 ₱31.6 ₱22,773.4**
Total 12-month ECL Lifetime ECL Lifetime ECL
Short-term investments 883.2 — 883.2
Financial Assets at Amortized Cost (In Millions)
Receivables:
Receivables:
Trade 4,680.6 216.3 4,464.3***
Trade ₱4,680.6 ₱3,137.1 ₱866.6 ₱676.9
Employee car plan receivables 260.3 — 260.3
Employee car plan receivables* 260.3 260.3 — —
Advances to employees 167.4 — 167.4
Advances to employees 167.4 167.4 — —
Other receivables**** 151.6 — 151.6
Other receivables** 151.6 93.8 57.8 —
Operating lease receivables 64.3 — 64.3
Financial Assets at FVTPL 39.8 39.8 — —
Finance lease receivables 184.8 — 184.8
₱5,299.7 ₱3,698.4 ₱924.4 ₱676.9
Other noncurrent assets -
Security and other deposits 2,713.8 — 2,713.8 *Including noncurrent portion of employee car plan receivables.
Financial assets at FVTPL 39.8 — 39.8 **Including interest receivable and excluding receivables from government agencies amounting to ₱41.6 million.
₱31,950.8 ₱247.9 ₱31,702.9
* Excluding cash on hand amounting to ₱480.9 million.
** Gross financial assets after taking into account insurance bank deposits for cash and cash equivalents.
*** Gross financial assets after taking into account payables to the same counterparty.
**** Including interest receivable and excluding receivables from government agencies amounting to ₱41.6 million.

2019 Annual Report 109 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Liquidity Risk Equity Price Risk

The JFC Group’s exposure to liquidity risk refers to the risk that its financial liabilities are not serviced in The JFC Group is not exposed to significant equity price risk on its investment in quoted equity securities
a timely manner and that its working capital requirements and planned capital expenditures are not met. consisting of investment in club shares.
To manage this exposure and to ensure sufficient liquidity levels, the JFC Group closely monitors its cash
flows to be able to finance its capital expenditures and to pay its obligations as and when they fall due. Capital Management Policy
Capital includes equity attributable to equity holders of the Parent Company.
On a weekly basis, the JFC Group’s Cash and Banking Team monitors its collections, expenditures and
any excess/deficiency in the working capital requirements, by preparing cash position reports that The primary objective of the JFC Group’s capital management is to ensure that it maintains a strong
present actual and projected cash flows for the subsequent week. Cash outflows resulting from major credit rating and healthy capital ratios in order to support its business and maximize shareholder value.
expenditures are planned so that money market placements are available in time with the planned major The JFC Group has sufficient capitalization.
expenditure. In addition, the JFC Group has short-term cash deposits and has available credit lines with
accredited banking institutions, in case there is a sudden deficiency. The JFC Group maintains a level The JFC Group generates cash flows from operations sufficient to finance its organic growth. It declares
of cash and cash equivalents deemed sufficient to finance the operations. No changes were made in cash dividends representing at least one-third of its consolidated net income, a ratio that would still
the objectives, policies or processes of the JFC Group during the years ended December 31, 2019 and leave some additional cash for future expansion. If needed, the JFC Group would borrow money for
2018. acquisitions of new businesses.

The JFC Group’s financial assets, which have maturity of less than 12 months and are used to meet its As at December 31, 2019 and 2018, the JFC Group’s debt ratio and net debt ratio are as follows:
short-term liquidity needs, are cash and cash equivalents, short-term investments and trade receivables
and contract assets amounting to ₱20,892.0 million, ₱2,130.0 million and ₱5,369.7 million, respectively, Debt Ratio
as at December 31, 2019 and ₱23,285.9 million, ₱883.2 million and ₱4,411.0 million, respectively, as
at December 31, 2018. 2018
(As restated -
The tables below summarize the maturity profile of the JFC Group’s other financial liabilities based on 2019 Note 2)
the contractual undiscounted cash flows as at December 31, 2019 and 2018: Total debt (a) ₱134,994,129 ₱101,516,781
Total equity attributable to equity holders
2019 of the Parent Company 52,780,558 47,675,620
Due and Less than Over Total debt and equity attributable to equity
Demandable 1 Year 1 to 5 Years 5 Years Total
(In Millions) holders of the Parent Company (b) ₱187,774,687 ₱149,192,401
Financial Liabilities
Trade payables and other current liabilities* ₱8,351.2 ₱22,255.9 ₱— ₱— ₱30,607.1
Short term debt — 22,180.3 — — 22,180.3
Debt ratio (a/b) 72% 68%
Long-term debt (including current portion) 47.9 3,367.2 19,081.0 99.6 22,595.7
Liability for acquisition of a business
(including current portion) 2.8 — — — 2.8 Net Debt Ratio
Lease liabilities — 9,139.3 25,015.1 30,110.9 64,265.3
Total Financial Liabilities ₱8,401.9 ₱56,942.7 ₱44,096.1 ₱30,210.5 ₱139,651.2
* Excluding statutory obligations such as local and other taxes payable, PHIC, SSS, HDMF and NHMFC payables and unearned revenue from gift
2018
certificates amounting to ₱4,045.0 million as at December 31, 2019. (As restated -
2019 Note 2)
Total debt ₱134,994,129 ₱101,516,781
2018 (As Restated - Note 2) Less cash and cash equivalents and short-term
Due and Less than Over investments 23,022,021 24,169,115
Demandable 1 Year 1 to 5 Years 5 Years Total
(In Millions) Net debt (a) 111,972,108 77,347,666
Financial Liabilities Total equity attributable to equity holders
Trade payables and other current liabilities* ₱7,174.5 ₱18,808.7 ₱— ₱— ₱25,983.2
Long-term debt (including current portion) 22.5 4,857.9 19,681.5 1,702.5 26,264.4
of the Parent Company 52,780,558 47,675,620
Liability for acquisition of a business Net debt and equity attributable
(including current portion) — 11.2 2.9 — 14.1 to equity holders of the Parent Company (b) ₱164,752,666 ₱125,023,286
Lease liabilities — 8,534.9 25,272.8 26,718.7 60,526.4
Total Financial Liabilities ₱7,197.0 ₱32,212.7 ₱44,957.2 ₱28,421.2 ₱112,788.1
* Excluding statutory obligations such as local and other taxes payable, PHIC, SSS, HDMF and NHMFC payables and unearned revenue from gift Net debt ratio (a/b) 68% 62%
certificates amounting to ₱2,733.6 million as at December 31, 2018.

2019 Annual Report 110 Jollibee Foods Corporation

32. Fair Value of Financial Assets and Liabilities Quantitative fair value measurement hierarchy for assets as at December 31, 2018:
Fair Value Measurement Using
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly Quoted
transaction between market participants at measurement date. Prices in Significant Significant
Active Observable Unobservable
Markets Inputs Inputs
Financial Instruments Which Carrying Amounts Approximate Fair Value. Management has determined Carrying Value Total (Level 1) (Level 2) (Level 3)
that the carrying amounts of cash and cash equivalents, short-term investments, receivables, operating Assets measured at fair value -
Financial assets at FVTPL ₱39,842 ₱39,842 ₱— ₱39,842 ₱—
lease receivables, trade payables and other current liabilities, based on their notional amounts, Derivative asset - interest rate swap 82,852 82,852 — 82,852 —
reasonably approximate their fair values because of their short-term nature or due to the immaterial Assets for which fair values are disclosed:
effect of discounting when the present value of future cash flows from these instruments are calculated. Investment properties:
Land 848,974 2,083,920 — – 2,083,920
Buildings — 954,427 — – 954,427
Financial Assets at FVTPL. The fair value of investments in quoted shares of stock is based on quoted Finance lease receivables 184,800 165,295 — – 165,295
Other noncurrent assets:
prices. The JFC Group does not have the intention to dispose these financial assets in the near term. Security and other deposits 2,713,844 2,506,400 — – 2,506,400
Employee car plan receivables 260,281 251,492 — – 251,492
Investment Properties. The fair value of the investment properties are determined by independent
appraisers using the market data and cost approach, which considers the local market conditions, the
extent, character and utility of the property, sales and holding prices of similar parcels of land and the Quantitative fair value measurement hierarchy for liabilities as at December 31, 2019:
highest and best use of the investment properties.
Fair Value Measurement Using
Quoted
Finance Lease Receivables, Security and Other Deposits, Employee Car Plan Receivables, Long-term Prices in Significant Significant
Debt and Lease Liabilities. Management has determined that the estimated fair value of security and Active Observable Unobservable
other deposits, noncurrent portion of employee car plan receivables, long-term debt and derivative Markets Inputs Inputs
Date of Valuation Total (Level 1) (Level 2) (Level 3)
asset or liability are based on the discounted value of future cash flows using applicable rates as follows: Liabilities measured at fair value -
Derivative liability - interest
rate swap December 31, 2019 ₱58,241 ₱— ₱58,241 ₱—
2019 2018 Liabilities disclosed at fair value:
Finance lease receivables 3.46% –3.98% 6.45%–6.83% Tenants’ deposit December 31, 2019 7,442 — — ₱7,442
Security and other deposits 0.55%–15.43% 2.36%–8.20% Long-term debt December 31, 2019 22,768,094 — — 22,768,094
Employee car plan receivables 2.80%–8.26% 2.51%–8.23%
Long-term debt 1.27%–6.89% 2.50%–4.07%
Lease liabilities 0.64%–22.48% 0.60%–19.30% Quantitative fair value measurement hierarchy for liabilities as at December 31, 2018:
Fair Value Measurement Using
The following tables provide the fair value measurement hierarchy of the JFC Group’s recurring financial Quoted
Prices in Significant Significant
assets and liabilities. Active Observable Unobservable
Markets Inputs Inputs
Quantitative disclosure fair value measurement hierarchy for assets as at December 31, 2019: Date of Valuation Total (Level 1) (Level 2) (Level 3)
Liabilities measured at fair value:
Tenants’ deposit December 31, 2018 ₱5,907 ₱— ₱— ₱5,907
Fair Value Measurement Using
Long-term debt December 31, 2018 16,421,331 — — 16,421,331
Quoted
Prices in Significant Significant
Active Observable Unobservable There were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into and
Markets Inputs Inputs out of Level 3 fair value measurements during the year.
Carrying Value Total (Level 1) (Level 2) (Level 3)
Assets measured at fair value -
Financial assets at FVTPL ₱38,202 ₱38,202 ₱— ₱38,202 ₱—
Assets for which fair values are disclosed:
Investment properties:
Land 572,722 2,083,920 — — 2,083,920
Buildings — 954,427 — — 954,427
Finance lease receivables 161,934 162,947 — — 162,947
Other noncurrent assets:
Security and other deposits 3,210,835 2,338,288 — — 2,338,288
Employee car plan receivables 216,713 194,172 — — 194,171

2019 Annual Report 111 Jollibee Foods Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

33. Notes to the Statements of Cash Flows

In 2019 and 2018, movements in the JFC Group’s liabilities and equity arising from financing activities
follow:
2019

Share in
Share in Net Cumulative
Losses of Translation
Granted Stock Amortization Non- Adjustments of
Acquisition of Dividends Options to Interest Deferred of Debt Cumulative controlling Non-controlling Pre-termination
January 1, a Subsidiary Declared Employees and Expense Tax Assets Issue Cost Translation Interest Interest Additions of Lease December 31,
2019 Cash Flows (Note 11) (Note 19) Subsidiaries (Note 23) (Note 24) (Note 18) Adjustments (Note 11) (Note 11) (Note 29) (Note 29) 2019
(in Millions)
Dividends payable (see Note 16) ₱80.8 (₱2,807.8) ₱— ₱2,814.9 ₱— ₱— ₱— ₱— ₱— ₱— ₱— ₱— ₱— ₱87.9
Short-term debt (see Note 18) — 22,180.3 — — — — — — — — — — — 22,180.3
Long-term debt (see Note 18) 26,264.4 (3,415.0) — — — — — 19.6 (273.3) — — — — 22,595.7
Interest payable (see Note 16) 239.6 (1,434.8) — — — 1,362.5 — — — — — — — 167.3
Lease liabilities (see Note 29) 40,630.8 (8,419.7) 1,824.3 (1,265.3) 17,471.7 (2,934.4) 47,307.4
Capital stock (see Note 19) 1,105.2 4.9 — — — — — — — — — — — 1,110.1
Additional paid-in capital — — 8,797.4
(see Note 19) 8,638.5 580.5 — — 262.9 — (684.5) — — — —
Non-controlling interest (see Note 11) 1,500.9 30.4 (1,877.4) (14.9) — — — — — (9.5) 52.3 — — (318.2)
Total liabilities and equity on financing activities ₱78,460.2 ₱6,718.8 (₱1,877.4) ₱2,800.0 ₱262.9 ₱3,186.8 (₱684.5) ₱19.6 (₱1,538.6) (₱9.5) ₱52.3 ₱17,471.7 (₱2,934.4) ₱101,927.9

2018 (As Restated - Note 2)

Share in
Share in Net Cumulative
Losses of Translation
Granted Stock Amortization Non- Adjustments of
Acquisition of Dividends Options to Interest Deferred of Debt Cumulative controlling Non-controlling Pre-termination
January 1, a Subsidiary Declared Employees and Expense Tax Assets Issue Cost Translation Interest Interest Additions of Lease December 31,
2018 Cash Flows (Note 11) (Note 19) Subsidiaries (Note 23) (Note 24) (Note 18) Adjustments (Note 11) (Note 11) (Note 29) (Note 29) 2018
(in Millions)
Dividends payable (see Note 16) ₱56.0 (₱2,667.0) ₱— ₱2,691.8 ₱— ₱— ₱— ₱— ₱— ₱— ₱— ₱— ₱— ₱80.8
Long-term debt (see Note 18) 16,117.3 5,601.7 4,119.3 — — — — 14.9 411.2 — — — — 26,264.4
Interest payable (see Note 16) 83.1 (731.7) — — — 888.2 — — — — — — — 239.6
Lease liabilities (see Note 29) 28,683.0 (6,979.0) — — — 1,728.6 — — 279.7 — — 17,821.5 (903.0) 40,630.8
Capital stock (see Note 19) 1,101.7 3.5 — — — — — — — — — — — 1,105.2
Additional paid-in capital
(see Note 19) 7,520.4 472.0 — — 312.0 — 334.1 — — — — — — 8,638.5
Non-controlling interest (see Note 11) 1,758.3 11.4 266.3 — — — — — — (571.0) 35.9 — — 1,500.9
Total liabilities and equity on financing activities ₱55,319.8 (₱4,289.1) ₱4,385.6 ₱2,691.8 ₱312.0 ₱2,616.8 ₱334.1 ₱14.9 ₱690.9 (₱571.0) ₱35.9 ₱17,821.6 (₱903.0) ₱78,460.2

2017 (As Restated - Note 2)

Share in
Share in Net Cumulative
Losses of Translation
Granted Stock Amortization Non- Adjustments of
Acquisition of Dividends Options to Interest of Debt Cumulative controlling Non-controlling
January 1, a Subsidiary Declared Employees and Expense Deferred Issue Cost Translation Interest Interest Pre-termination December 31,
2017 Cash Flows (Note 11) (Note 19) Subsidiaries (Note 23) Tax Assets (Note 18) Adjustments (Note 11) (Note 11) Additions of Lease 2017
(in Millions)
Dividends payable ₱47.7 (₱2,347.2) ₱— ₱2,355.5 ₱— ₱— ₱— ₱— ₱— ₱— ₱— ₱— ₱— ₱56.0
Long-term debt 12,155.4 3,909.7 — — — — — 3.2 49.0 — — — — 16,117.3
Interest payable 51.4 (360.9) — — — 392.6 — — — — — — — 83.1
Lease liabilities 23,605.7 (4,902.3) — — 1,387.6 — — 363.9 8,624.6 (396.5) 28,683.0
Capital stock 1,091.3 10.4 — — — — — — — — — — — 1,101.7
Additional paid-in capital 5,660.1 850.8 — — 227.5 — 782.0 — — — — — — 7,520.4
Non-controlling interest 648.1 14.5 1,536.5 — — — — — — (446.6) 5.8 — — 1,758.3
Total liabilities and equity on financing activities ₱43,259.7 (₱2,825.0) ₱1,536.5 ₱2,355.5 ₱227.5 ₱1,780.2 ₱782.0 ₱3.2 ₱412.9 (₱446.6) ₱5.8 ₱8,624.6 (₱396.5) ₱55,319.8

2019 Annual Report 112 Jollibee Foods Corporation

34. Events after the Reporting Period The JFC Group considers the events surrounding the outbreak as non-adjusting subsequent events,
which do not impact its financial position and performance as of and for the year ended December 31,
Dividend Declaration 2019. However, the outbreak could have a material impact on the JFC Group’s 2020 financial results
On April 7, 2020, the BOD of the Parent Company approved a cash dividend of ₱0.62 per share of and even periods thereafter. Considering the evolving nature of this outbreak, the JFC Group cannot
common stock to all stockholders of record as at April 27, 2020. Consequently, the cash dividend determine at this time the impact to its financial position, performance and cash flows. The JFC Group
is expected to be paid out on May 22, 2020. The cash dividend is 50.0% lower than the ₱1.23 cash will continue to monitor the situation.
dividend per share declared on April 8, 2019.
To manage the risks or uncertainties brought about by the outbreak, the JFC Group is implementing the
Issuance of Guaranteed Senior Perpetual Capital Securities following measures, among others:
Guaranteed Senior Perpetual Capital Securities (Securities) was issued by JWPL, a wholly owned
subsidiary, and listed in the Singapore Exchange Securities Trading Limited on January 24, 2020. The • Restaurant Operations – Prioritizing the protection of health and safety of its employees and
Securities offered an initial distribution rate of 3.9%, non-call (5 years) and payable semi-annually. preservation of cash in the business to ensure sustainability and long-term growth and profitability
by temporarily closing losing QSR outlets.
Prepayment of Short-term Debt
On February 3 and February 6, 2020, JWPL prepaid its USD400.0 million (₱20,340.2 million) short-term • Product Supply – To ensure adequate supply, the Philippine business had identified alternative
debt amounting to USD170.0 million (₱8,660.8 million) and USD230.0 million (₱11,679.4 million), sources of supply and has also spread its inventories in different parts of the country in various
respectively, from the proceeds of the issuance of the Guaranteed Senior Perpetual Capital Securities. warehouses and depots. The JFC Group also has commissaries located in different parts of the
country. This dispersion of supply chain facilities, warehouses and QSR outlets reduces the
Impact of COVID-19 Outbreak probability that the pandemic will have significant impact and magnitude, all at the same time, on
The JFC Group operates restaurants in 34 countries, the largest of which in terms of contribution to the different parts of the JFC Group’s business.
system-wide sales, a measure of all sales to consumers- both from company-owned and franchised
stores, are the Philippines, the United States of America including Canada, China and Vietnam. The • Safety and Health of Customers, Employees and Workers and Business Partners – Implementation
impact of COVID-19 to the operations of restaurants varies quite significantly at different countries and of the following: observing social distancing in the stores and buildings; travel restrictions; and
changing on a daily basis. work from home arrangements.

In China, the epicenter of the epidemic and which accounts for 6.1% of JFC Group’s system-wide • Dispersion and Diversification – The nature and structure of the JFC Group’s business have created
sales, the decline in sales was abrupt. All of the 14 QSR outlets of “Yonghe King” brand in and near physical dispersion and diversification into different brands, countries, sites, facilities and locations
Wuhan were temporarily closed down mainly due to the restriction of movement of people imposed which make the business strong against event risks.
by the government in order to contain the virus. At its worst time, in the week of February 10, 2020,
107 “Yonghe King” QSR stores were temporarily closed, representing 31% of its total store network, to • Overall Business – To preserve cash, the JFC Group will delay some capital expenditures in 2020
ensure the safety of its employees and in view of the very low level of customer visits due to restriction to the following year. It will also aggressively cut costs in response to the reduction in revenues
of movement of people. The number of temporarily closed QSR stores had declined to 22 representing due to constraints brought about by the lockdowns.
6% of “Yonghe King” brand’s total store network as of the week of March 30, 2020. Meanwhile, sales in
China have been improving as the number of new infections have been declining.

In the Philippines, in a move to contain the COVID-19 outbreak, on March 13, 2020, the Office of the
President of the Philippines issued a Memorandum directive to impose stringent social distancing
measures in the National Capital Region effective March 15, 2020. On March 16, 2020, Presidential
Proclamation No. 929 was issued, declaring a State of Calamity throughout the Philippines for a period
of six (6) months and imposed an enhanced community quarantine throughout the island of Luzon until
April 12, 2020, unless earlier lifted or extended. These measures have caused disruptions to businesses
and economic activities, and its impact on businesses continue to evolve. About 70% of JFC Group’s
domestic stores have been temporarily closed, resulting to a decline in systemwide sales by about 40%.

In North America, Smashburger has suspended its dine-in services, but continued serving its customers
through on-line delivery and take-out. Philippine brands “Jollibee”, “Chowking” and “Red Ribbon” also
continued to operate with drive-thru and take-out and have started operating its on-line delivery in
April 2020.

In Singapore, the delivery business grew by 256% in the crisis period versus year ago, increasing sales
contribution from 7% to 22%, enabling total same store sales to grow by about 4%.

2019 Annual Report 113 Jollibee Foods Corporation

INVESTOR INFORMATION

COMPANY HEADQUARTERS STOCKHOLDERS’ INQUIRIES

10/F Jollibee Plaza Building Inquiries regarding dividend payments, account status, address changes, stock
No. 10 F. Ortigas Jr. Road certificates and other pertinent matters may be addressed to the Company’s
Ortigas Center, Pasig City, Philippines 1605 registrar and transfer agent:
Telephone: (632) 8634-1111
Facsimile: (632) 8633-9504 Rizal Commercial Banking Corporation
Website: www.jollibee.com.ph Stock Transfer Office
Ground Floor, West Wing
Grepalife Building
221 Senator Gil Puyat Avenue
COMMON STOCK Makati City
Jollibee’s common stock is listed and traded on the Philippine Stock Exchange Telephone: (632) 8892-4156
with the ticker symbol “JFC.” It is one of the companies that comprise the PSE
Composite Index.

SEC FORM 17-A

The financial information in this report, in the opinion of Management,
ANNUAL STOCKHOLDERS’ MEETING substantially conforms with the information required in the “17-A Report”
The Annual Stockholders’ Meeting will be held on July 24, 2020 at 2:00 P.M. The submitted to the Securities and Exchange Commission. Copies of this report
Corporation shall conduct the meeting virtually and the stockholders may attend may be obtained free of charge upon written request to the Office of the
and participate via remote communication and by voting in absentia or by Corporate Secretary
appointing the Chairman of the meeting as their proxy.

2019 Annual Report 114 Jollibee Foods Corporation