Leases

12 Months Ended

Dec. 31, 2020

Presentation Of Leases For Lessee [Abstract]

10.

Leases

Group as a Lessee

We have lease contracts for various items of sites, buildings, leased circuits and poles used in our operations. We considered in the lease term the non-cancellable period of the lease together with the periods covered by an option to extend and option to terminate the lease.

Our consolidated estimated useful lives of ROU assets as at December 31, 2020 and 2019 are as follows:

Sites		1 – 30 years
International leased circuits		3 – 7 years
Poles		1 – 10 years
Domestic leased circuits		4 – 10 years
Office buildings		1 – 25 years
Co-located sites		1 – 5 years

Our consolidated rollforward analysis of ROU assets as at December 31, 2020 and 2019 are as follows:

	Sites			International Leased Circuits			Poles			Domestic Leased Circuits			Office Buildings			Co-located Sites			Total
	(in million pesos)
As at December 31, 2019
Costs:
Balances at beginning of the year		8,980			3,779			607			551			298			11			14,226
Additions (Note 29)		3,506			562			100			489			413			2			5,072
Asset retirement obligation		1,679			—			—			—			124			—			1,803
Modifications		319			—			19			174			91			(2	)		601
Termination		(72	)		—			—			—			(20	)		—			(92	)
Balances at end of the year		14,412			4,341			726			1,214			906			11			21,610

Accumulated depreciation and amortization
Balances at beginning of the year		—			—			—			—			—			—			—
Termination		44			—			—			—			14			—			58
Modifications		—			—			—			3			—			1			4
Charges from asset retirement obligation		(1,297	)		—			—			—			(92	)		—			(1,389	)
Depreciation		(2,673	)		(834	)		(340	)		(186	)		(358	)		(2	)		(4,393	)
Balances at end of the year		(3,926	)		(834	)		(340	)		(183	)		(436	)		(1	)		(5,720	)
Net book value as at December 31, 2019		10,486			3,507			386			1,031			470			10			15,890

As at December 31, 2020
Costs:
Balances at beginning of the year		14,412			4,341			726			1,214			906			11			21,610
Additions (Note 29)		3,538			2,600			2,576			39			582			—			9,335
Asset retirement obligation		556			—			—			—			172			—			728
Termination		(158	)		(1,181	)		—			—			(24	)		—			(1,363	)
Modifications		(294	)		(1,472	)		79			41			(52	)		(2	)		(1,700	)
Adjustments		(3	)		—			(11	)		—			—			—			(14	)
Reclassification		(197	)		—			—			—			197			—			—
Balances at end of the year		17,854			4,288			3,370			1,294			1,781			9			28,596

Accumulated depreciation and amortization
Balances at beginning of the year		(3,926	)		(834	)		(340	)		(183	)		(436	)		(1	)		(5,720	)
Termination		113			223			—			—			37			—			373
Adjustments		2			—			(1	)		—			1			—			2
Modifications		3			—			(7	)		—			(4	)		—			(8	)
Depreciation (Note 3)		(2,764	)		(735	)		(620	)		(244	)		(574	)		(3	)		(4,940	)
Reclassification		17			—			—			—			(17	)		—			—
Balances at end of the year		(6,556	)		(1,346	)		(967	)		(427	)		(993	)		(4	)		(10,293	)
Net book value as at December 31, 2020		11,298			2,942			2,403			867			788			5			18,303

The following amounts are recognized in our consolidated income statements for the years ended December 31, 2020 and 2019:

	2020		2019
	(in million pesos)
Depreciation expense of ROU assets (Note 3)		4,940		4,393
Interest expense on lease liabilities (Note 5)		1,125		1,061
Variable lease payments (included in general and administrative expenses) (Note 5)		764		708
Expenses relating to short-term leases (included in general and administrative expenses) (Note 5)		618		378
Expenses relating to leases of low-value assets (included in general and administrative expenses) (Note 5)		2		204
Total amount recognized in consolidated income statements		7,449		6,744

Our consolidated rollforward analysis of lease liabilities as at December 31, 2020 and 2019 are as follows:

	2020			2019
	(in million pesos)
Balances at beginning of the year		16,315			15,233
Additions (Note 29)		11,122			5,065
Accretion on lease liabilities (Note 5)		1,125			1,061
Foreign exchange losses – net		(171	)		(12	)
Termination		(1,188	)		(96	)
Lease modifications		(1,397	)		463
Settlement of obligations		(5,781	)		(5,399	)
Balances at end of the year (Notes 3 and 29)		20,025			16,315
Less current portion of lease liabilities (Note 28)		4,043			3,215
Noncurrent portion of lease liabilities (Note 28)		15,982			13,100

We had total cash outflows for leases of Php5,781 million and Php5,399 million for the years ended December 31, 2020 and 2019, respectively. We also had non-cash additions to ROU assets of Php9,335 million and Php5,072 million, respectively, as at December 31, 2020 and 2019, respectively. We had non-cash additions to lease liabilities of Php11,122 million and Php5,065 million as at December 31, 2020 and 2019, respectively. The future cash outflows relating to leases that have not yet commenced are disclosed in Note 29 – Notes to the Statements of Cash Flows.

We have entered into several lease contracts that include automatic extension and termination options. These options are negotiated by us to provide flexibility in managing the leased-asset portfolio and align with our business needs. However, in some of these lease contracts, we did not impute the renewal period in our assessment of the lease terms of these contracts since said renewal period is not yet reasonably estimable at the time of transition or commencement date of the lease, see Note 3 – Managements Use of Accounting Judgments, Estimates and Assumptions – Determining the lease term of contracts with renewal and termination options – Company as a Lessee.

Group as a Lessor

We have entered into operating leases on our investment property portfolio consisting of certain office buildings and business offices. See Note 14 – Investment Properties. These leases have term of five years. All leases include a clause to enable upward revision of the rental charge on annual basis according to prevailing market conditions. The lessee is also required to provide a residual guarantee on the properties. Rental income recognized by us amounted to Php51 million, Php49 million and Php67 million and nil for the years ended December 31, 2020, 2019 and 2018, respectively.

Future minimum rentals receivable under non-cancellable operating leases as at December 31, 2020 and 2019 are as follows.

	2020		2019
	(in million pesos)
Within one year		48		54
After one year but not more than five years		—		48
More than five years		—		—
		48		102