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Income and Expenses | 12 Months Ended
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Dec. 31, 2019
Analysis Of Income And Expense [Abstract] |
Income and Expenses |
5. | Income and Expenses
Revenue from Contracts with Customers Disaggregation of Revenue We derived our revenue from the transfer of goods and services over time and at a point in time in the following major product lines. This is consistent with the revenue information that is disclosed for each reportable segments under IFRS 8, Operating Segments. See Note 4 – Operating Segment Information. Set out is the disaggregation of PLDT Group’s revenue from contracts with customers for the years ended December 31, 2019 and 2018:
Revenue Streams |  | Wireless |  |  | Fixed Line |  |  | Others |  |  | Inter- segment Transactions |  |  | Consolidated |
|  | (in million pesos) |
December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Type of good or service |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Service revenue |  |  | 90,661 |  |  |  | 87,819 |  |  |  | — |  |  |  | (17,125 | ) |  |  | 161,355 |
Non-service revenue |  |  | 6,245 |  |  |  | 1,587 |  |  |  | — |  |  |  | — |  |  |  | 7,832 |
Total revenue from contracts with customers |  |  | 96,906 |  |  |  | 89,406 |  |  |  | — |  |  |  | (17,125 | ) |  |  | 169,187 |
Timing of revenue recognition |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Transferred over time |  |  | 90,661 |  |  |  | 87,819 |  |  |  | — |  |  |  | (17,125 | ) |  |  | 161,355 |
Transferred at a point time |  |  | 6,245 |  |  |  | 1,587 |  |  |  | — |  |  |  | — |  |  |  | 7,832 |
Total revenue from contracts with customers |  |  | 96,906 |  |  |  | 89,406 |  |  |  | — |  |  |  | (17,125 | ) |  |  | 169,187 |
December 31, 2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Type of good or service |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Service revenue |  |  | 83,001 |  |  |  | 81,648 |  |  |  | 1,094 |  |  |  | (13,374 | ) |  |  | 152,369 |
Non-service revenue |  |  | 6,928 |  |  |  | 3,574 |  |  |  | 44 |  |  |  | (1 | ) |  |  | 10,545 |
Total revenue from contracts with customers |  |  | 89,929 |  |  |  | 85,222 |  |  |  | 1,138 |  |  |  | (13,375 | ) |  |  | 162,914 |
Timing of revenue recognition |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Transferred over time |  |  | 83,001 |  |  |  | 81,648 |  |  |  | 1,094 |  |  |  | (13,374 | ) |  |  | 152,369 |
Transferred at a point time |  |  | 6,928 |  |  |  | 3,574 |  |  |  | 44 |  |  |  | (1 | ) |  |  | 10,545 |
Total revenue from contracts with customers |  |  | 89,929 |  |  |  | 85,222 |  |  |  | 1,138 |  |  |  | (13,375 | ) |  |  | 162,914 |
Contract Balances Contract balances as at December 31, 2019 and 2018 consists of the following:
|  | 2019 |  |  | 2018 |
|  | (in million pesos) |
Trade and other receivables (Note 17) |  |  | 39,340 |  |  |  | 40,559 |
Contract assets |  |  | 2,817 |  |  |  | 3,399 |
Contract liabilities and unearned revenues (Notes 22 and 24) |  |  | 8,483 |  |  |  | 7,182 |
The decrease in trade and other receivables of Php1,219 million as at December 31, 2019 was primarily due to decline in wireless postpaid subscriber base. The decrease of Php582 million in contract assets as at December 31, 2019 is the result of fewer postpaid new connections during the year. The increase of Php1,301 million in contract liabilities and unearned revenues as at December 31, 2019 is due to lower realized revenues. Set out below is the movement in the allowance for expected credit losses of contracts assets for the years ended December 31, 2019 and 2018.
|  | 2019 |  |  | 2018 |
|  | (in million pesos) |
Balances at beginning of the year |  |  | 131 |  |  |  | 114 |
Reclassification |  |  | (61 | ) |  |  | — |
Provisions |  |  | — |  |  |  | 17 |
Balances at end of the year |  |  | 70 |  |  |  | 131 |
Changes in the contract liabilities and unearned revenues accounts for the years ended December 31, 2019 and 2018 are as follows:
|  | 2019 |  |  | 2018 |
|  | (in million pesos) |
Balances at beginning of the year |  |  | 7,182 |  |  |  | 8,541 |
Deferred during the year |  |  | 111,084 |  |  |  | 102,288 |
Recognized as revenue during the year |  |  | (109,783 | ) |  |  | (103,647 | )
Balances at end of the year |  |  | 8,483 |  |  |  | 7,182 |
The contract liabilities and unearned revenues accounts as at December 31, 2019 and 2018 are as follows:
|  | 2019 |  |  | 2018 |
|  | (in million pesos) |
Unearned revenues from prepaid contracts |  |  | 5,454 |  |  |  | 4,059 |
Advance monthly service fees |  |  | 1,777 |  |  |  | 2,386 |
Short-term advances for installation services |  |  | 726 |  |  |  | 558 |
Leased facilities |  |  | 469 |  |  |  | 34 |
Long-term advances from equipment |  |  | 57 |  |  |  | 145 |
Total contract liabilities and unearned revenues |  |  | 8,483 |  |  |  | 7,182 |
Contract liabilities: |  |  |  |  |  |  |  |
Noncurrent (Note 22) |  |  | 13 |  |  |  | 58 |
Current (Note 24) |  |  | 44 |  |  |  | 87 |
Unearned revenues: |  |  |  |  |  |  |  |
Noncurrent (Note 22) |  |  | 591 |  |  |  | 474 |
Current (Note 24) |  |  | 7,835 |  |  |  | 6,563 |
As at December 31, 2019, the noncurrent and current portion of contract liabilities and unearned revenues amounted to Php604 million and Php7,879 million, respectively, while as at December 31, 2018, the noncurrent and current portion of contract liabilities and unearned revenues amounted to Php532 million and Php6,650 million, respectively. Selling, General and Administrative Expenses Selling, general and administrative expenses for the years ended December 31, 2019, 2018 and 2017 consist of the following:
|  | 2019 |  |  | 2018 |  |  | 2017 |
|  | (in million pesos) |
Compensation and employee benefits |  |  | 24,883 |  |  |  | 23,543 |  |  |  | 22,782 |
Repairs and maintenance (Notes 14, 18 and 25) |  |  | 15,337 |  |  |  | 14,331 |  |  |  | 12,744 |
Professional and other contracted services (Note 25) |  |  | 12,078 |  |  |  | 12,809 |  |  |  | 12,168 |
Selling and promotions (Note 25) |  |  | 5,395 |  |  |  | 6,340 |  |  |  | 5,908 |
Taxes and licenses |  |  | 4,570 |  |  |  | 4,974 |  |  |  | 3,970 |
Insurance and security services (Note 25) |  |  | 1,671 |  |  |  | 1,499 |  |  |  | 1,519 |
Rent (Note 25) |  |  | 1,290 |  |  |  | 7,321 |  |  |  | 7,016 |
Communication, training and travel (Note 25) |  |  | 1,203 |  |  |  | 1,069 |  |  |  | 1,166 |
Amortization of intangible assets (Note 15) |  |  | 758 |  |  |  | 892 |  |  |  | 835 |
Other expenses |  |  | 1,045 |  |  |  | 1,138 |  |  |  | 882 |
Total selling, general and administrative expenses |  |  | 68,230 |  |  |  | 73,916 |  |  |  | 68,990 |
Compensation and Employee Benefits Compensation and employee benefits for the years ended December 31, 2019, 2018 and 2017 consist of the following:
|  | 2019 |  |  | 2018 |  |  | 2017 |
|  | (in million pesos) |
Salaries and other employee benefits |  |  | 19,931 |  |  |  | 19,777 |  |  |  | 18,598 |
MRP |  |  | 3,296 |  |  |  | 1,703 |  |  |  | 1,747 |
Pension benefit costs (Note 26) |  |  | 1,018 |  |  |  | 1,855 |  |  |  | 1,610 |
Incentive plan (Note 26) |  |  | 638 |  |  |  | 208 |  |  |  | 827 |
Total compensation and employee benefits |  |  | 24,883 |  |  |  | 23,543 |  |  |  | 22,782 |
Over the past several years, we have been implementing the MRP in line with our continuing efforts to reduce the cost base of our businesses. The decision to implement the MRP was a result of challenges faced by our businesses as significant changes in technology, increasing competition, and shifting market preferences have reshaped the future of our businesses. The MRP is being implemented in compliance with the Labor Code of the Philippines and all other relevant labor laws and regulations in the Philippines. Cost of Sales and Services Cost of sales and services for the years ended December 31, 2019, 2018 and 2017 consist of the following:
|  | 2019 |  |  | 2018 |  |  | 2017 |
|  | (in million pesos) |
Cost of computers, mobile handsets and broadband data modems (Note 18) |  |  | 9,402 |  |  |  | 10,513 |  |  |  | 10,277 |
Cost of services (Note 18) |  |  | 3,680 |  |  |  | 3,429 |  |  |  | 2,572 |
Cost of point-product-sales (Note 18) |  |  | 347 |  |  |  | 485 |  |  |  | 784 |
Total cost of sales and services |  |  | 13,429 |  |  |  | 14,427 |  |  |  | 13,633 |
Asset Impairment Asset impairment for the years ended December 31, 2019, 2018 and 2017 consist of the following:
|  | 2019 |  |  | 2018 |  |  | 2017 |
|  | (in million pesos) |
Trade and other receivables (Note 17) |  |  | 4,071 |  |  |  | 4,192 |  |  |  | 3,438 |
Inventories and supplies (Note 18) |  |  | 471 |  |  |  | 1,528 |  |  |  | 907 |
Contract assets |  |  | 291 |  |  |  | 223 |  |  |  | — |
Property and equipment (Note 9) |  |  | — |  |  |  | 1,958 |  |  |  | 3,913 |
Other assets |  |  | — |  |  |  | 164 |  |  |  | — |
Total asset impairment |  |  | 4,833 |  |  |  | 8,065 |  |  |  | 8,258 |
Other Income (Expenses) – Net Other income (expenses) – net for the years ended December 31, 2019, 2018 and 2017 consist of the following:
|  | 2019 |  |  | 2018 |  |  | 2017 |
|  | (in million pesos) |
Interest income |  |  | 1,745 |  |  |  | 1,943 |  |  |  | 1,412 |
Foreign exchange gains (losses) – net (Note 9) |  |  | 424 |  |  |  | (771 | ) |  |  | (411 | )
Gain on deconsolidation of VIH (Note 11) |  |  | — |  |  |  | 12,054 |  |  |  | — |
Gains (losses) on derivative financial instruments – net (Note 28) |  |  | (284 | ) |  |  | 1,086 |  |  |  | 533 |
Equity share in net earnings (losses) of associates and joint ventures (Note 11) |  |  | (1,535 | ) |  |  | (87 | ) |  |  | 2,906 |
Financing costs – net |  |  | (8,553 | ) |  |  | (7,067 | ) |  |  | (7,370 | )
Others – net (Notes 11, 12 and 14) |  |  | 1,138 |  |  |  | 1,884 |  |  |  | 7,988 |
Total other income (expenses) – net |  |  | (7,065 | ) |  |  | 9,042 |  |  |  | 5,058 |
Interest Income Interest income for the years ended December 31, 2019, 2018 and 2017 consist of the following:
|  | 2019 |  |  | 2018 |  |  | 2017 |
|  | (in million pesos) |
Interest income on cash and cash equivalents (Note 16) |  |  | 1,022 |  |  |  | 957 |  |  |  | 612 |
Interest income arising from revenue contracts with customers |  |  | 430 |  |  |  | 340 |  |  |  | — |
Interest income on financial instruments at FVOCI |  |  | 239 |  |  |  | — |  |  |  | — |
Interest income on financial instruments at amortized cost (Note 13) |  |  | 6 |  |  |  | 6 |  |  |  | 8 |
Interest income – others |  |  | 48 |  |  |  | 640 |  |  |  | 792 |
Total interest income |  |  | 1,745 |  |  |  | 1,943 |  |  |  | 1,412 |
Financing Costs – Net Financing costs – net for the years ended December 31, 2019, 2018 and 2017 consist of the following:
|  | 2019 |  |  | 2018 |  |  | 2017 |
|  | (in million pesos) |
Interest on loans and other related items (Notes 21 and 28) |  |  | 8,730 |  |  |  | 8,307 |  |  |  | 7,830 |
Accretion on lease liabilities (Notes 2 and 10) |  |  | 1,061 |  |  |  | — |  |  |  | — |
Accretion on financial liabilities (Note 21) |  |  | 122 |  |  |  | 145 |  |  |  | 219 |
Financing charges |  |  | 95 |  |  |  | 139 |  |  |  | 137 |
Capitalized interest (Note 9) |  |  | (1,455 | ) |  |  | (1,524 | ) |  |  | (816 | )
Total financing costs – net |  |  | 8,553 |  |  |  | 7,067 |  |  |  | 7,370 |
Adjustments The 2018 and 2017 comparative information were reclassified to reflect the adjustments on transactions between our wholly-owned subsidiaries resulting to a decrease in service revenue and interconnection costs amounting to Php1,838 million in 2018 and Php993 million in 2017. The adjustments had no impact on our consolidated net income, consolidated EBITDA, consolidated EPS and our consolidated statements of financial position as at December 31, 2018 and 2017 and our consolidated statements of cash flows for the years then ended.

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