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Financial Assets and Liabilities | 12 Months Ended
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Dec. 31, 2023
Disclosure Of Financial Assets And Liabilities [Abstract] |
Financial Assets and Liabilities | 27. Financial Assets and Liabilities We have various financial assets such as trade and non-trade receivables, cash and short-term deposits. Our principal financial liabilities, other than derivatives, comprise of bank loans, lease liabilities, trade and non-trade payables. The main purpose of these financial liabilities is to finance our operations. We also enter into derivative transactions, primarily principal only-currency swap agreements, interest rate swaps and forward foreign exchange contracts and options to manage the currency and interest rate risks arising from our operations and sources of financing. Our accounting policies in relation to derivatives are set out in Note 2 – Summary of Material Accounting Policies – Financial Instruments. The following table sets forth our consolidated financial assets and financial liabilities as at December 31, 2023 and 2022:
|  | Financial instruments at amortized cost |  |  | Financial instruments at FVPL |  |  | Total financial instruments |
|  | (in million pesos) |
Assets as at December 31, 2023 |  |  |  |  |  |  |  |  |
Noncurrent: |  |  |  |  |  |  |  |  |
Financial assets at fair value through profit or loss |  |  | — |  |  |  | 578 |  |  |  | 578 |
Debt instruments at amortized cost – net of current portion |  |  | 395 |  |  |  | — |  |  |  | 395 |
Derivative financial assets – net of current portion |  |  | — |  |  |  | 96 |  |  |  | 96 |
Other financial assets – net of current portion |  |  | 3,481 |  | (1) |  | — |  |  |  | 3,481 |
Current: |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  | 16,177 |  |  |  | — |  |  |  | 16,177 |
Short-term investments |  |  | 122 |  |  |  | 269 |  | (2) |  | 391 |
Trade and other receivables |  |  | 26,086 |  |  |  | — |  |  |  | 26,086 |
Current portion of debt instruments at amortized cost |  |  | 200 |  |  |  | — |  |  |  | 200 |
Current portion of other financial assets |  |  | 320 |  | (1) |  | — |  | (3) |  | 320 |
Total assets |  |  | 46,781 |  |  |  | 943 |  |  |  | 47,724 |
Liabilities as at December 31, 2023 |  |  |  |  |  |  |  |  |
Noncurrent: |  |  |  |  |  |  |  |  |
Interest-bearing financial liabilities – net of current portion |  |  | 243,152 |  |  |  | — |  |  |  | 243,152 |
Lease liabilities – net of current portion |  |  | 41,625 |  |  |  | — |  |  |  | 41,625 |
Derivative financial liabilities – net of current portion |  |  | — |  |  |  | 12 |  |  |  | 12 |
Customers' deposits |  |  | 2,238 |  |  |  | — |  |  |  | 2,238 |
Deferred credits and other noncurrent liabilities |  |  | 229 |  |  |  | — |  |  |  | 229 |
Current: |  |  |  |  |  |  |  |  |
Accounts payable |  |  | 77,050 |  |  |  | — |  |  |  | 77,050 |
Accrued expenses and other current liabilities |  |  | 71,756 |  |  |  | — |  |  |  | 71,756 |
Current portion of interest-bearing financial liabilities |  |  | 11,646 |  |  |  | — |  |  |  | 11,646 |
Current portion of lease liabilities |  |  | 5,921 |  |  |  | — |  |  |  | 5,921 |
Dividends payable |  |  | 1,912 |  |  |  | — |  |  |  | 1,912 |
Current portion of derivative financial liabilities |  |  | — |  |  |  | 1,021 |  |  |  | 1,021 |
Liabilities associated with assets classified as held-for-sale |  |  | 1,779 |  |  |  | — |  |  |  | 1,779 |
Total liabilities |  |  | 457,308 |  |  |  | 1,033 |  |  |  | 458,341 |
Net liabilities |  |  | (410,527 | ) |  |  | (90 | ) |  |  | (410,617 | )
(1) Includes refundable deposits and notes receivables. (2) Includes investments in the funds of Credit Suisse and Julius Baer. In 2021, PLDT withdrew US$6.6 million from the Supply Chain Finance fund of Credit Suisse and impaired the remaining fund value of US$3.4 million. In November 2021, Smart invested US$5.0 million in the Focus Fixed Income Asia Defensive fund of Julius Baer. As at December 31, 2023, the fund’s value amounted to US$4.85 million. (3) Includes RCBC Redemption Trust Account. See Note 19 – Equity – Redemption of Preferred Stock.
|  | Financial instruments at amortized cost |  |  | Financial instruments at FVPL |  |  | Total financial instruments |
|  | (in million pesos) |
Assets as at December 31, 2022 |  |  |  |  |  |  |  |  |
Noncurrent: |  |  |  |  |  |  |  |  |
Financial assets at fair value through profit or loss |  |  | — |  |  |  | 432 |  |  |  | 432 |
Debt instruments at amortized cost – net of current portion |  |  | 596 |  |  |  | — |  |  |  | 596 |
Derivative financial assets – net of current portion |  |  | — |  |  |  | 81 |  |  |  | 81 |
Other financial assets – net of current portion |  |  | 3,489 |  | (1) |  | — |  |  |  | 3,489 |
Current: |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  | 25,211 |  |  |  | — |  |  |  | 25,211 |
Short-term investments |  |  | 129 |  |  |  | 254 |  | (2) |  | 383 |
Trade and other receivables |  |  | 26,255 |  |  |  | — |  |  |  | 26,255 |
Current portion of other financial assets |  |  | 206 |  | (1) |  | — |  | (3) |  | 206 |
Total assets |  |  | 55,886 |  |  |  | 767 |  |  |  | 56,653 |
Liabilities as at December 31, 2022 |  |  |  |  |  |  |  |  |
Noncurrent: |  |  |  |  |  |  |  |  |
Interest-bearing financial liabilities – net of current portion |  |  | 217,288 |  |  |  | — |  |  |  | 217,288 |
Lease liabilities – net of current portion |  |  | 31,958 |  |  |  | — |  |  |  | 31,958 |
Derivative financial liabilities – net of current portion |  |  | — |  |  |  | 190 |  |  |  | 190 |
Customers' deposits |  |  | 2,313 |  |  |  | — |  |  |  | 2,313 |
Deferred credits and other noncurrent liabilities |  |  | 363 |  |  |  | — |  |  |  | 363 |
Current: |  |  |  |  |  |  |  |  |
Accounts payable |  |  | 101,135 |  |  |  | — |  |  |  | 101,135 |
Accrued expenses and other current liabilities |  |  | 74,227 |  |  |  | — |  |  |  | 74,227 |
Current portion of interest-bearing financial liabilities |  |  | 32,292 |  |  |  | — |  |  |  | 32,292 |
Current portion of lease liabilities |  |  | 10,477 |  |  |  | — |  |  |  | 10,477 |
Dividends payable |  |  | 1,821 |  |  |  | — |  |  |  | 1,821 |
Current portion of derivative financial liabilities |  |  | — |  |  |  | 960 |  |  |  | 960 |
Liabilities associated with assets classified as held-for-sale |  |  | 1,738 |  |  |  | — |  |  |  | 1,738 |
Total liabilities |  |  | 473,612 |  |  |  | 1,150 |  |  |  | 474,762 |
Net liabilities |  |  | (417,726 | ) |  |  | (383 | ) |  |  | (418,109 | )
(1) Includes refundable deposits and notes receivables. (2) Includes investments in the funds of Credit Suisse and Julius Baer. PLDT withdrew US$6.6 million from the Supply Chain Finance fund of Credit Suisse in 2021. As at December 31, 2021, the fund’s value is US$3.4 million which was fully impaired as at year-end. In November 2021, Smart invested US$5.0 million in the Focus Fixed Income Asia Defensive fund of Julius Baer. As at December 31, 2022, the fund’s value is US$4.5 million. (3) Includes RCBC Redemption Trust Account. See Note 19 – Equity – Redemption of Preferred Stock. The following table sets forth our consolidated offsetting of financial assets and liabilities recognized as at December 31, 2023 and 2022:
|  | Gross amounts of recognized financial assets and liabilities |  |  | Gross amounts of recognized financial assets and liabilities set-off in the consolidated statements of financial position |  |  | Net amount presented in the consolidated statements of financial position |
|  | (in million pesos) |
December 31, 2023 |  |  |  |  |  |  |  |  |
Current Financial Assets |  |  |  |  |  |  |  |  |
Trade and other receivables |  |  |  |  |  |  |  |  |
Foreign administrations |  |  | 4,606 |  |  |  | 3,480 |  |  |  | 1,126 |
Domestic carriers |  |  | 332 |  |  |  | 145 |  |  |  | 187 |
Total |  |  | 4,938 |  |  |  | 3,625 |  |  |  | 1,313 |
Current Financial Liabilities |  |  |  |  |  |  |  |  |
Accounts payable |  |  |  |  |  |  |  |  |
Suppliers and contractors |  |  | 74,542 |  |  |  | 24 |  |  |  | 74,518 |
Carriers and others |  |  | 4,713 |  |  |  | 2,351 |  |  |  | 2,362 |
Total |  |  | 79,255 |  |  |  | 2,375 |  |  |  | 76,880 |
December 31, 2022 |  |  |  |  |  |  |  |  |
Current Financial Assets |  |  |  |  |  |  |  |  |
Trade and other receivables |  |  |  |  |  |  |  |  |
Foreign administrations |  |  | 5,160 |  |  |  | 4,236 |  |  |  | 924 |
Domestic carriers |  |  | 492 |  |  |  | 197 |  |  |  | 295 |
Total |  |  | 5,652 |  |  |  | 4,433 |  |  |  | 1,219 |
Current Financial Liabilities |  |  |  |  |  |  |  |  |
Accounts payable |  |  |  |  |  |  |  |  |
Suppliers and contractors |  |  | 98,700 |  |  |  | 44 |  |  |  | 98,656 |
Carriers and others |  |  | 4,757 |  |  |  | 2,548 |  |  |  | 2,209 |
Total |  |  | 103,457 |  |  |  | 2,592 |  |  |  | 100,865 |
There are no financial instruments subject to an enforceable master netting arrangement as at December 31, 2023 and 2022. The following table sets forth our consolidated carrying values and estimated fair values of our financial assets and liabilities recognized as at December 31, 2023 and 2022 other than those whose carrying amounts are reasonable approximations of fair values:
|  | Carrying Value |  |  | Fair Value |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
|  | (in million pesos) |
Noncurrent Financial Assets |  |  |  |  |  |  |  |  |  |  |  |
Debt instruments at amortized cost |  |  | 395 |  |  |  | 596 |  |  |  | 387 |  |  |  | 573 |
Other financial assets – net of current portion |  |  | 3,481 |  |  |  | 3,489 |  |  |  | 3,184 |  |  |  | 3,278 |
Total |  |  | 3,876 |  |  |  | 4,085 |  |  |  | 3,571 |  |  |  | 3,851 |
Noncurrent Financial Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Long-term debt – net of current portion |  |  | 243,152 |  |  |  | 217,288 |  |  |  | 232,195 |  |  |  | 201,703 |
Customers' deposits |  |  | 2,238 |  |  |  | 2,313 |  |  |  | 1,425 |  |  |  | 1,449 |
Deferred credits and other noncurrent liabilities |  |  | 229 |  |  |  | 363 |  |  |  | 225 |  |  |  | 307 |
Total |  |  | 245,619 |  |  |  | 219,964 |  |  |  | 233,845 |  |  |  | 203,459 |
Below is the list of our consolidated financial assets and liabilities carried at fair value that are classified using a fair value hierarchy as required for our complete sets of consolidated financial statements as at December 31, 2023 and 2022. This classification provides a reasonable basis to illustrate the nature and extent of risks associated with those financial statements.
|  | 2023 |  |  | 2022 |
|  | Level 1(1) |  |  | Level 2(2) |  |  | Level 3(3) |  |  | Total |  |  | Level 1(1) |  |  | Level 2(2) |  |  | Level 3(3) |  |  | Total |
|  | (in million pesos) |
Noncurrent Financial Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial assets at FVPL |  |  | — |  |  |  | 575 |  |  |  | 3 |  |  |  | 578 |  |  |  | — |  |  |  | 407 |  |  |  | 25 |  |  |  | 432 |
Derivative financial assets – net of current portion |  |  | — |  |  |  | 96 |  |  |  | — |  |  |  | 96 |  |  |  | — |  |  |  | 81 |  |  |  | — |  |  |  | 81 |
Current Financial Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Short-term investments |  |  | — |  |  |  | 269 |  |  |  | — |  |  |  | 269 |  |  |  | — |  |  |  | 254 |  |  |  | — |  |  |  | 254 |
Current portion of derivative financial assets |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | - |
Current portion of other financial assets |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  |  | — |  |  |  | 940 |  |  |  | 3 |  |  |  | 943 |  |  |  | — |  |  |  | 742 |  |  |  | 25 |  |  |  | 767 |
Noncurrent Financial Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative financial liabilities – net of current portion |  |  | — |  |  |  | 12 |  |  |  | — |  |  |  | 12 |  |  |  | — |  |  |  | 190 |  |  |  | — |  |  |  | 190 |
Current Financial Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current portion of derivative financial liabilities |  |  | — |  |  |  | 1,021 |  |  |  | — |  |  |  | 1,021 |  |  |  | — |  |  |  | 960 |  |  |  | — |  |  |  | 960 |
Total |  |  | — |  |  |  | 1,033 |  |  |  | — |  |  |  | 1,033 |  |  |  | — |  |  |  | 1,150 |  |  |  | — |  |  |  | 1,150 |
(1) Fair values determined using observable market inputs that reflect quoted prices in active markets for identical assets or liabilities. (2) Fair values determined using inputs other than quoted market prices that are either directly or indirectly observable for the assets or liabilities. (3) Fair values determined using discounted values of future cash flows for the assets or liabilities. As at December 31, 2023 and 2022, there were no transfers into and out of Level 3 fair value measurements. As at December 31, 2023 and 2022, there were no transfers between Level 1 and Level 2 fair value measurements. The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate such value: Long-term financial assets and liabilities: Fair value is based on the following:
Type |  | Fair Value Assumptions |  | Fair Value Hierarchy
Noncurrent portion of advances and other noncurrent assets |  | Estimated fair value is based on the discounted values of future cash flows using the applicable zero-coupon rates plus counterparties’ credit spread. |  | Level 3
Fixed rate loans: U.S. Dollar notes |  | Quoted market price. |  | Level 1
Investment in debt securities |  | Fair values were determined using quoted prices. For non-quoted securities, fair values were determined using discounted cash flow based on market observable rates. |  | Level 1 Level 2
Other loans in all other currencies |  | Estimated fair value is based on the discounted value of future cash flows using the applicable Commercial Interest Reference Rate and BVAL rates for similar types of loans plus PLDT’s credit spread. |  | Level 3
Variable rate loans |  | The carrying value approximates fair value because of recent and regular repricing based on market conditions. |  | Level 2
Derivative Financial Instruments Forward foreign exchange contracts, foreign currency swaps, foreign currency options and interest rate swaps: The fair values were computed as the present value of estimated future cash flows using market U.S. Dollar and Philippine Peso interest rates as at valuation date. The valuation techniques considered various inputs including the credit quality of counterparties. Due to the short-term nature of the transactions, the fair value of cash and cash equivalents, short-term investments, trade and other receivables, accounts payable, accrued expenses and other current liabilities and dividends payable approximate their carrying values as at the end of the reporting period. Our derivative financial instruments are accounted for as either cash flow hedges or transactions not designated as hedges. Cash flow hedges refer to those transactions that hedge our exposure to variability in cash flows attributable to a particular risk associated with a recognized financial asset or liability and exposures arising from forecast transactions. Changes in the fair value of these instruments representing effective hedges are recognized directly in other comprehensive income until the hedged item is recognized in our consolidated income statements. For transactions that are not designated as hedges, any gains or losses arising from the changes in fair value are recognized directly to income for the period. As at December 31, 2023 and 2022, we have taken into account the counterparties’ credit risks (for derivative assets) and our own non-performance risk (for derivative liabilities) and have included a credit or debit valuation adjustment, as appropriate, by assessing the maximum credit exposure and taking into account market-based inputs which considers the risk of default occurring and corresponding losses once the default event occurs. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships and other financial instruments recognized at fair value. The table below sets out the information about our consolidated derivative financial instruments as at December 31, 2023 and 2022:
|  |  |  |  |  |  |  |  | 2023 |  |  | 2022 |
| Original Notional Amount | Trade Date | Underlying Transaction in U.S. Dollar | Termination Date | Weighted Average Hedge Cost |  | Weighted Average Foreign Exchange Rate |  | Notional Amount |  | Net Mark-to- market Gains (Losses) in Php |  |  | Notional Amount |  | Net Mark-to- market Gains (Losses) in Php |
| (in millions) |  | (in millions) |  |  |  |  |  | (in millions) |
Transactions not designated as hedges: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
PLDT |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Forward foreign exchange contracts | US$396 | Various dates in October to December 2023 | U.S. Dollar Liabilities | Various dates in January to June 2024 |  | — |  | Php 56.557 |  | US$396 |  |  | (448 | ) |  | US$257 |  |  | (353 | )
| US$206 | Various dates in October to December 2023 | U.S. Dollar Liabilities | Various dates in January to June 2024 |  | — |  | Php 56.432 |  |  | — |  |  | — |  |  |  | — |  |  | — |
Forward exchange options capped forward | US$6 | Various dates in October 2021 | U.S. Dollar Liabilities | Various dates in April and May 2022 |  | — |  | Php 50.08 |  |  | — |  |  | — |  |  |  | — |  |  | — |
Foreign exchange options seagull(a) | US$7 | June 10, 2022 | U.S. Dollar Liabilities | January 9, 2023 |  | — |  | Php 52.64 |  |  | — |  |  | — |  |  |  | 7 |  |  | (7 | )
|  |  |  |  |  | — |  | Php 52.96 |  |  | — |  |  | — |  |  |  | — |  |  | — |
|  |  |  |  |  | — |  | Php 54.00 |  |  | — |  |  | — |  |  |  | — |  |  | — |
|  |  |  |  |  |  |  |  |  |  |  | (448 | ) |  |  |  |  | (360 | )
Smart |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Forward foreign exchange contracts | US$449 | Various dates in June 2023 to December 2023 | U.S. Dollar Liabilities | Various dates in January to October 2024 |  | — |  | Php 56.549 |  | US$449 |  |  | (493 | ) |  |  | — |  |  | — |
| US$94 | Various dates in June 2023 to December 2023 | U.S. Dollar Liabilities | Various dates in October 2023 to February 2024 |  | — |  | Php 56.838 |  |  | — |  |  | — |  |  |  | — |  |  | — |
| US$369 | Various dates in July to December 2022 | U.S. Dollar Liabilities | Various dates in January to June 2023 |  | — |  | Php 57.08 |  |  | — |  |  | — |  |  | US$369 |  |  | (481 | )
| US$157 | Various dates in January and February 2023 | U.S. Dollar Liabilitie s | Various dates in February to July 2023 |  | — |  | Php 54.93 |  |  | — |  |  | — |  |  |  | — |  |  | — |
Subsidized forwards(b) | US$52 | Various dates in November 2021 | U.S. Dollar Liabilities | Various dates in April and May 2022 |  | — |  | Php 50.38 Php 51.65 |  |  | — |  |  | — |  |  |  | — |  |  | — |
Foreign exchange options seagull(c) | US$15 | Various dates in June 2023 | U.S. Dollar Liabilities | Various dates in February 2024 |  | — |  | Php 55.94 |  | US$15 |  |  | (1 | ) |  |  | — |  |  | — |
| US$71 | Various dates in June 2022 | U.S. Dollar Liabilities | Various dates in October 2022 to February 2023 |  | — |  | Php 52.82 Php 53.37 Php 54.46 |  |  | — |  |  | — |  |  | US$37 |  |  | (40 | )
|  |  |  |  |  |  |  |  |  |  |  | (494 | ) |  |  |  |  | (521 | )
|  |  |  |  |  |  |  |  |  |  |  | (942 | ) |  |  |  |  | (881 | )
Transactions designated as hedges: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
PLDT |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps(d) | US$150 | April and June 2015 | 200 Term Loan | February 25, 2022 | 2.70% |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |
Long-term currency swaps(e) | US$27 | November 2018 to August 2020 | 200 MUFG Bank, Ltd. | February 25, 2022 | 2.15% |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |
Long-term foreign currency options(f) | US$290 | Various dates in July 2020 and February to March 2021 | 300M Notes 2031 | January 23, 2031 | 1.20% |  | Php 49.61 Php 55.28 |  | US$290 |  |  | (87 | ) |  | US$290 |  |  | (265 | )
|  |  |  |  |  |  |  |  |  |  |  | (87 | ) |  |  |  |  | (265 | )
Smart |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Long-term currency swaps(g) | US$6 | August 2020 | 100 Mizuho | December 7, 2022 | 1.99% |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |
Long-term foreign currency options(h) | US$109 | February to April 2021 | 140 PNB | December 13, 2030 | 1.63% |  | Php 48.00 Php 53.34 |  | US$77 |  |  | 92 |  |  | US$88 |  |  | 77 |
|  |  |  |  |  |  |  |  |  |  |  | 92 |  |  |  |  |  | 77 |
|  |  |  |  |  |  |  |  |  |  |  | 5 |  |  |  |  |  | (188 | )
|  |  |  |  |  |  |  |  |  |  |  | (937 | ) |  |  |  |  | (1,069 | )
(a) If the Philippine Peso to U.S. dollar spot exchange rate on fixing date settles between Php 52.96 to Php 54.00, PLDT will purchase the U.S. Dollar for Php 52.96. However, if on maturity, the exchange rate settles above Php 54.00, PLDT will purchase the U.S. Dollar for Php52.96 plus the excess above Php 54.00, and if the exchange rate is lower than Php 52.96, PLDT will purchase the U.S. Dollar at the prevailing Philippine peso to U.S. Dollar spot exchange rate, subject to a floor of Php 52.64. (b) If the Philippine Peso to U.S. Dollar spot exchange rate on fixing date settles above Php 51.65, Smart will purchase the U.S. Dollar for Php50.38 plus the excess above Php 51.65, and if the exchange rate is at or lower than Php 51.65, Smart will purchase the U.S. Dollar at Php 50.38. (c) If the Philippine Peso to U.S. Dollar spot exchange rate on fixing date settles between Php 55.85 to Php 56.87, Smart will purchase the U.S. Dollar for Php 55.85. However, if on maturity, the exchange rate settles above Php 56.87, Smart will purchase the U.S. Dollar for Php55.85 plus the excess above Php 56.87, and if the exchange rate is lower than Php 55.85, Smart will purchase the U.S. Dollar at the prevailing Philippine Peso to U.S. Dollar spot exchange rate, subject to a floor of Php 55.17. (d) PLDT’s interest rate swap agreements, which matured on February 25, 2022, were designated as cash flow hedges, wherein the effective portion of the movements in fair value is recognized in our consolidated statements of other comprehensive income, while any ineffective portion is recognized immediately in our consolidated income statements. There were no ineffective portion in the fair value recognized in our consolidated income statements for the years ended December 31, 2021. (e) PLDT’s long-term principal only-currency swap agreements, which matured on February 25, 2022, were designated as cash flow hedges, wherein effective portion of the movements in the fair value is recognized in our consolidated statements of other comprehensive income, while any ineffective portion is recognized immediately in our consolidated income statements. The amounts recognized as other comprehensive income are transferred to profit or loss when the hedged loan is revalued for changes in the foreign exchange rate. The hedge cost portion of the movements in the fair value amounting Php 0.5 million was recognized in our consolidated income statements for the year ended December 31, 2021. (f) PLDT’s long-term foreign currency option agreements outstanding as at December 31, 2023 and 2022 were designated as cash flow hedges, wherein the effective portion of the movements in fair value is recognized in our consolidated statements of other comprehensive income, while any ineffective portion is recognized immediately in our consolidated income statements. Settlement of the foreign currency option agreements will depend on the spot exchange rate on the fixing date. If the Philippine peso to U.S. dollar spot exchange rate on fixing date is between Php 49.61 and Php 55.28, PLDT will purchase the U.S. dollar at Php 49.61. However, if on fixing date, the exchange rate is beyond Php 55.28, PLDT will purchase the U.S. dollar at the prevailing Philippine peso to U.S. dollar spot exchange rate minus a subsidy of Php 5.67, and if the exchange rate is lower than Php 49.61, PLDT will purchase the U.S. dollar at the prevailing Philippine peso to U.S. dollar spot exchange rate. The mark-to-market losses amounting to Php 119 million and Php 190 million were recognized in our consolidated statement of other comprehensive income as at December 31, 2023 and 2022, respectively. Hedge cost accrual on the long-term foreign currency option agreements amounting to Php 32 million and Php 75 million was recognized as at December 31, 2023 and 2022, respectively. The intrinsic value of the long-term foreign currency options recognized as other comprehensive income are transferred to profit or loss when the hedged loan is revalued for changes in the foreign exchange rate. The hedge cost portion of the movements in the fair value amounting to Php 39 million, Php 4 million and Php 89 million were recognized in our consolidated income statements for the years ended December 31, 2023, 2022 and 2021, respectively. (g) Smart’s long-term principal only-currency swap agreements, which matured on December 7, 2022, were designated as cash flow hedges, wherein the effective portion of the movements in fair value is recognized in our consolidated statements of other comprehensive income, while any ineffective portion is recognized immediately in our consolidated income statements. The amounts recognized as other comprehensive income are transferred to profit or loss when the hedged loan is revalued for changes in the foreign exchange rate. The hedge cost portions of the movements in the fair value amounting to Php 309 thousand was recognized in our consolidated income statements for the year ended December 31, 2021. (h) Smart’s long-term foreign currency option agreements outstanding as at December 31, 2023 and 2022 were designated as cash flow hedges, wherein the effective portion of the movements in fair value is recognized in our consolidated statements of other comprehensive income, while any ineffective portion is recognized immediately in our consolidated income statements. Settlement of the foreign currency option agreements will depend on the spot exchange rate on the fixing date. If the Philippine Peso to U.S. Dollar spot exchange rate on fixing date is between Php 48.00 and Php 53.34, Smart will purchase the U.S. Dollar at Php 48.00. However, if on fixing date the exchange rate is beyond Php 53.34, Smart will purchase the U.S. Dollar at the prevailing Philippine Peso to U.S. Dollar spot exchange rate minus a subsidy of Php 5.34, and if the exchange rate is lower than Php 48.00, Smart will purchase the U.S. Dollar at the prevailing Philippine Peso to U.S. Dollar spot exchange rate. The mark-to-market gains amounting to Php 96 million and Php 81 million were recognized in our consolidated statement of other comprehensive income as at December 31, 2023 and 2022, respectively. Hedge cost accrual on the long-term foreign currency option agreements amounting to Php 3 million each was recognized as at December 31, 2023 and 2022. The intrinsic value of the long-term foreign currency options recognized as other comprehensive income are transferred to profit or loss when the hedged loan is revalued for changes in the foreign exchange rate. The hedge cost portion of the movements in the fair value amounting to Php 12 million and Php 5 million were recognized in our consolidated income statements for the years ended December 31, 2023 and 2022, respectively. Our derivative financial instruments as at December 31, 2023 and 2022 are presented in the statements of financial position as follows:
|  | 2023 |  |  | 2022 |
|  | (in million pesos) |
Noncurrent assets |  |  | 96 |  |  |  | 81 |
Noncurrent liabilities (Note 28) |  |  | (12 | ) |  |  | (190 | )
Current liabilities (Note 28) |  |  | (1,021 | ) |  |  | (960 | )
Net liabilities |  |  | (937 | ) |  |  | (1,069 | )
Movements of our consolidated mark-to-market gains (losses) for the years ended December 31, 2023 and 2022 are summarized as follows:
|  | 2023 |  |  | 2022 |
|  | (in million pesos) |
Net mark-to-market losses at beginning of the year |  |  | (1,069 | ) |  |  | (74 | )
Gains on derivative financial instruments (Note 4) |  |  | 1,436 |  |  |  | 2,572 |
Settlements and interest expense |  |  | 607 |  |  |  | 1,135 |
Effective portion recognized in the profit or loss for the cash flow hedges |  |  | (66 | ) |  |  | (77 | )
Net fair value losses on cash flow hedges charged to other comprehensive income |  |  | (1,674 | ) |  |  | (3,228 | )
Others |  |  | (171 | ) |  |  | (1,397 | )
Net mark-to-market losses at end of the year |  |  | (937 | ) |  |  | (1,069 | )
Our consolidated analysis of gains on derivative financial instruments for the years ended December 31, 2023, 2022 and 2021 are as follows:
|  | 2023 |  |  | 2022 |  |  | 2021 |
|  |  |  | (in million pesos) |  |
Gains (losses) on derivative financial instruments (Note 4) |  |  | 1,436 |  |  |  | 2,572 |  |  |  | 1,651 |
Hedge costs |  |  | (238 | ) |  |  | (250 | ) |  |  | (251 | )
Net gains (losses) on derivative financial instruments (Notes 4 and 5) |  |  | 1,198 |  |  |  | 2,322 |  |  |  | 1,400 |
Financial Risk Management Objectives and Policies The main risks arising from our financial instruments are liquidity risk, foreign currency exchange risk, interest rate risk and credit risk. The importance of managing those risks has significantly increased in light of the considerable change and volatility in both the Philippine and international financial markets. Our Board of Directors reviews and approves policies for managing each of these risks, which are summarized below. We also monitor the market price risk arising from all financial instruments. Liquidity Risk Our exposure to liquidity risk refers to the risk that our financial requirements, working capital requirements and planned capital expenditures will not be met. We manage our liquidity profile to be able to finance our operations and capital expenditures, service our maturing debts and meet our other financial obligations. To cover our financing requirements, we use internally generated funds and proceeds from debt and equity issues and sales of certain assets. As part of our liquidity risk management program, we regularly evaluate our projected and actual cash flows, including our loan maturity profiles, and continuously assess conditions in the financial markets for opportunities to pursue fund-raising initiatives. These activities may include bank loans, export credit agency-guaranteed facilities, debt capital and equity market issues. Any excess funds are primarily invested in short-term and principal-protected bank products that provide flexibility of withdrawing the funds anytime. We also allocate a portion of our cash in longer tenor investments such as fixed income securities issued or guaranteed by the Republic of the Philippines, and Philippine banks and corporates and managed funds. We regularly evaluate available financial products and monitor market conditions for opportunities to enhance yields at acceptable risk levels. Our investments are also subject to certain restrictions contained in our debt covenants. Our funding arrangements are designed to keep an appropriate balance between equity and debt and to provide financing flexibility while enhancing our businesses. Our cash position remains sufficient to support our planned capital expenditure requirements and service our debt and financing obligations; however, we may be required to finance a portion of our future capital expenditures from external financing sources. We have cash and cash equivalents, and short-term investments amounting to Php 16,177 million and Php 391 million, respectively, as at December 31, 2023, which we can use to meet our short-term liquidity needs. See Note 15 – Cash and Cash Equivalents. The following table summarizes the maturity profile of our financial assets based on our consolidated undiscounted claims outstanding as at December 31, 2023 and 2022:
|  | Total |  |  | Less than 1 year |  |  | 1-3 years |  |  | 3-5 years |  |  | More than 5 years |
|  | (in million pesos) |
December 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial instruments at amortized cost: |  |  | 54,271 |  |  |  | 50,127 |  |  |  | 3,530 |  |  |  | 412 |  |  |  | 202 |
Debt instruments at amortized cost |  |  | 595 |  |  |  | 200 |  |  |  | 45 |  |  |  | 340 |  |  |  | 10 |
Other financial assets |  |  | 4,069 |  |  |  | 320 |  |  |  | 3,485 |  |  |  | 72 |  |  |  | 192 |
Temporary cash investments |  |  | 6,184 |  |  |  | 6,184 |  |  |  | — |  |  |  | — |  |  |  | — |
Short-term investments |  |  | 122 |  |  |  | 122 |  |  |  | — |  |  |  | — |  |  |  | — |
Retail subscribers |  |  | 19,894 |  |  |  | 19,894 |  |  |  | — |  |  |  | — |  |  |  | — |
Corporate subscribers |  |  | 15,934 |  |  |  | 15,934 |  |  |  | — |  |  |  | — |  |  |  | — |
Foreign administrations |  |  | 1,250 |  |  |  | 1,250 |  |  |  | — |  |  |  | — |  |  |  | — |
Domestic carriers |  |  | 188 |  |  |  | 188 |  |  |  | — |  |  |  | — |  |  |  | — |
Dealers, agents and others |  |  | 6,035 |  |  |  | 6,035 |  |  |  | — |  |  |  | — |  |  |  | — |
Financial instruments at FVPL: |  |  | 1,021 |  |  |  | 443 |  |  |  | — |  |  |  | — |  |  |  | 578 |
Financial assets at fair value through profit or loss |  |  | 578 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 578 |
Short-term investments |  |  | 443 |  |  |  | 443 |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  |  | 55,292 |  |  |  | 50,570 |  |  |  | 3,530 |  |  |  | 412 |  |  |  | 780 |
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial instruments at amortized cost: |  |  | 53,604 |  |  |  | 48,929 |  |  |  | 3,740 |  |  |  | 852 |  |  |  | 83 |
Debt instruments at amortized cost |  |  | 596 |  |  |  | — |  |  |  | 225 |  |  |  | 361 |  |  |  | 10 |
Other financial assets |  |  | 4,285 |  |  |  | 206 |  |  |  | 3,515 |  |  |  | 491 |  |  |  | 73 |
Temporary cash investments |  |  | 8,678 |  |  |  | 8,678 |  |  |  | — |  |  |  | — |  |  |  | — |
Short-term investments |  |  | 129 |  |  |  | 129 |  |  |  | — |  |  |  | — |  |  |  | — |
Retail subscribers |  |  | 17,216 |  |  |  | 17,216 |  |  |  | — |  |  |  | — |  |  |  | — |
Corporate subscribers |  |  | 15,151 |  |  |  | 15,151 |  |  |  | — |  |  |  | — |  |  |  | — |
Foreign administrations |  |  | 1,058 |  |  |  | 1,058 |  |  |  | — |  |  |  | — |  |  |  | — |
Domestic carriers |  |  | 296 |  |  |  | 296 |  |  |  | — |  |  |  | — |  |  |  | — |
Dealers, agents and others |  |  | 6,195 |  |  |  | 6,195 |  |  |  | — |  |  |  | — |  |  |  | — |
Financial instruments at FVPL: |  |  | 860 |  |  |  | 428 |  |  |  | — |  |  |  | — |  |  |  | 432 |
Financial assets at fair value through profit or loss |  |  | 432 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 432 |
Short-term investments |  |  | 428 |  |  |  | 428 |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  |  | 54,464 |  |  |  | 49,357 |  |  |  | 3,740 |  |  |  | 852 |  |  |  | 515 |
The following table summarizes the maturity profile of our financial liabilities based on our consolidated contractual undiscounted obligations outstanding as at December 31, 2023 and 2022:
|  | Payments Due by Period |
|  | Total |  |  | Less than 1 year |  |  | 1-3 years |  |  | 3-5 years |  |  | More than 5 years |
|  | (in million pesos) |
December 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt(1): |  |  | 341,848 |  |  |  | 7,430 |  |  |  | 77,131 |  |  |  | 65,342 |  |  |  | 191,945 |
Principal |  |  | 256,927 |  |  |  | 7,250 |  |  |  | 43,292 |  |  |  | 47,648 |  |  |  | 158,737 |
Interest |  |  | 84,921 |  |  |  | 180 |  |  |  | 33,839 |  |  |  | 17,694 |  |  |  | 33,208 |
Lease obligations |  |  | 151,905 |  |  |  | 36,287 |  |  |  | 49,856 |  |  |  | 36,924 |  |  |  | 28,838 |
Various trade and other obligations: |  |  | 151,062 |  |  |  | 148,560 |  |  |  | 427 |  |  |  | 28 |  |  |  | 2,047 |
Suppliers and contractors |  |  | 74,716 |  |  |  | 74,518 |  |  |  | 194 |  |  |  | 4 |  |  |  | — |
Utilities and related expenses |  |  | 61,079 |  |  |  | 61,044 |  |  |  | 35 |  |  |  | — |  |  |  | — |
Carriers and others |  |  | 2,362 |  |  |  | 2,362 |  |  |  | — |  |  |  | — |  |  |  | — |
Employee benefits |  |  | 5,510 |  |  |  | 5,510 |  |  |  | — |  |  |  | — |  |  |  | — |
Customer deposits |  |  | 2,238 |  |  |  | — |  |  |  | 167 |  |  |  | 24 |  |  |  | 2,047 |
Dividends |  |  | 1,912 |  |  |  | 1,912 |  |  |  | — |  |  |  | — |  |  |  | — |
Others |  |  | 3,245 |  |  |  | 3,214 |  |  |  | 31 |  |  |  | — |  |  |  | — |
Total contractual obligations |  |  | 644,815 |  |  |  | 192,277 |  |  |  | 127,414 |  |  |  | 102,294 |  |  |  | 222,830 |
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt(1): |  |  | 320,907 |  |  |  | 30,001 |  |  |  | 65,159 |  |  |  | 55,632 |  |  |  | 170,115 |
Principal |  |  | 251,859 |  |  |  | 29,203 |  |  |  | 37,885 |  |  |  | 41,593 |  |  |  | 143,178 |
Interest |  |  | 69,048 |  |  |  | 798 |  |  |  | 27,274 |  |  |  | 14,039 |  |  |  | 26,937 |
Lease obligations |  |  | 62,216 |  |  |  | 14,658 |  |  |  | 13,504 |  |  |  | 10,591 |  |  |  | 23,463 |
Various trade and other obligations: |  |  | 178,246 |  |  |  | 175,566 |  |  |  | 610 |  |  |  | 38 |  |  |  | 2,032 |
Suppliers and contractors |  |  | 98,972 |  |  |  | 98,656 |  |  |  | 307 |  |  |  | 9 |  |  |  | — |
Utilities and related expenses |  |  | 63,613 |  |  |  | 63,609 |  |  |  | 4 |  |  |  | — |  |  |  | — |
Carriers and others |  |  | 2,209 |  |  |  | 2,209 |  |  |  | — |  |  |  | — |  |  |  | — |
Customers’ deposits |  |  | 2,313 |  |  |  | — |  |  |  | 252 |  |  |  | 29 |  |  |  | 2,032 |
Employee benefits |  |  | 6,615 |  |  |  | 6,615 |  |  |  | — |  |  |  | — |  |  |  | — |
Dividends |  |  | 1,821 |  |  |  | 1,821 |  |  |  | — |  |  |  | — |  |  |  | — |
Others |  |  | 2,703 |  |  |  | 2,656 |  |  |  | 47 |  |  |  | — |  |  |  | — |
Total contractual obligations |  |  | 561,369 |  |  |  | 220,225 |  |  |  | 79,273 |  |  |  | 66,261 |  |  |  | 195,610 |
(1) Consists of long-term and short-term debts, including current portion, gross of unamortized debt discount/premium and debt issuance costs. Debt See Note 20 – Interest-bearing Financial Liabilities – Long-term Debt for a detailed discussion of our debt. Our consolidated future minimum lease commitments payable with non-cancellable leases as at December 31, 2023 and 2022 are as follows:
|  | 2023 |  |  | 2022 |
|  | (in million pesos) |
Within one year |  |  | 36,287 |  |  |  | 14,658 |
After one year but not more than five years |  |  | 86,780 |  |  |  | 24,095 |
More than five years |  |  | 28,838 |  |  |  | 23,463 |
Total |  |  | 151,905 |  |  |  | 62,216 |
Various Trade and Other Obligations PLDT Group has various obligations to suppliers for the acquisition of network equipment, contractors for services rendered on various projects, foreign administrations and domestic carriers for the access charges, shareholders for unpaid dividends distributions, employees for benefits and other related obligations, and various business and operational related agreements. Total obligations under these various agreements amounted to approximately Php 151,062 million and Php 178,246 million as at December 31, 2023 and 2022, respectively. See Note 22 – Accounts Payable and Note 23 – Accrued Expenses and Other Current Liabilities. Commercial Commitments Major Network Vendors Since the last quarter of 2022, we have engaged in discussions with the major network vendors regarding the status of the PLDT Group's capital expenditure commitments and related outstanding balances. These discussions resulted in a number of Settlement and Mutual Release Agreements, or SMRAs, signed between us and the vendors, taking into consideration our program priorities and current business requirements. The significant commitment in respect of major network vendors amounted to about Php 33,000 million, net of advances, as a result of the signing of the SMRAs in March 2023. As at December 31, 2023, such commitment was reduced to Php 13,700 million, net of advances and deliveries. Moreover, new purchase orders issued in 2023 to the same major network vendors amounted to Php 13,600 million, net of advances and deliveries. Other Capital Expenditure Vendors Commitments related to non-major capital expenditure vendors amounted to Php 29,500 million, of which Php 16,000 million represent the commitments for 2022 and prior years, net of advances and deliveries as of December 31, 2023. We have no outstanding commercial commitments, in the form of letters of credit, as at December 31, 2023 and 2022. Collateral There are no pledges as collaterals with respect to our financial liabilities as at December 31, 2023 and 2022. Foreign Currency Exchange Risk Foreign currency exchange risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The revaluation of our foreign currency-denominated financial assets and liabilities as a result of the appreciation or depreciation of the Philippine Peso is recognized as foreign exchange gains or losses as at the end of the reporting period. The extent of foreign exchange gains or losses is largely dependent on the amount of foreign currency denominated financial assets and liabilities. While a certain percentage of our revenues are either linked to or denominated in U.S. Dollars, a substantial portion of our capital expenditures, a portion of our indebtedness and related interest expense and a portion of our operating expenses are denominated in foreign currencies, mostly in U.S. Dollars. As such, a strengthening or weakening of the Philippine Peso against the U.S. Dollar will decrease or increase in Philippine Peso terms both the principal amount of our foreign currency-denominated debts and the related interest expense, our foreign currency-denominated capital expenditures and operating expenses as well as our U.S. Dollar-linked and U.S. Dollar-denominated revenues. In addition, many of our financial ratios and other financial tests are affected by the movements in the Philippine Peso to U.S. Dollar exchange rate. To manage our foreign exchange risks and to stabilize our cash flows in order to improve investment and cash flow planning, we enter into forward foreign exchange contracts, currency swap contracts, currency option contracts and other hedging products aimed at reducing and/or managing the adverse impact of changes in foreign exchange rates on our operating results and cash flows. Further details of the risk management strategy are recognized in our hedge designation documentation. We use forward foreign exchange purchase contracts, currency swap contracts and currency option contracts to manage the foreign currency risks associated with our foreign currency-denominated financial liabilities. We accounted for these instruments as either cash flow hedges, wherein changes in the fair value are recognized in our consolidated other comprehensive income until the hedged transaction affects our consolidated income statements or transactions not designated as hedges, wherein changes in the fair value are recognized directly as income or expense for the year. The impact of the hedging instruments on our consolidated statements of financial position as at December 31, 2023 and 2022 are as follows:
|  | Notional Amount |  |  | Carrying Amount |  |  | Line item in our Consolidated Statements
|  | (U.S. Dollar) |  |  | (Php) |  |  | of Financial Position
|  | (in million pesos) |  |  |
December 31, 2023 |  |  |  |  |  |  |  |
Long-term foreign currency options |  |  | 367 |  |  |  | 96 |  |  | Derivative financial assets – net of current portion
|  |  | — |  |  |  | (12 | ) |  | Derivative financial liabilities – net of current portion
|  |  | 367 |  |  |  | 84 |  |  |
December 31, 2022 |  |  |  |  |  |  |  |
Long-term foreign currency options |  |  | 378 |  |  |  | 81 |  |  | Derivative financial assets – net of current portion
|  |  | — |  |  |  | (190 | ) |  | Derivative financial liabilities – net of current portion
|  |  | 378 |  |  |  | (109 | ) |  |
The impact of the hedged items on our consolidated statements of financial position as at December 31, 2023 and 2022 are as follows:
|  | 2023 |  |  | 2022 |
|  | Cash flow hedge reserve |  |  | Cost of hedging reserve |  |  | Cash flow hedge reserve |  |  | Cost of hedging reserve |
| (in million pesos) |
PLDT: |  |  |  |  |  |  |  |  |  |  |  |
US$300M Notes 2031 |  |  | (4,546 | ) |  |  | 75 |  |  |  | (3,288 | ) |  |  | 75 |
|  |  | (4,546 | ) |  |  | 75 |  |  |  | (3,288 | ) |  |  | 75 |
Smart: |  |  |  |  |  |  |  |  |  |  |  |
US$140M PNB |  |  | (1,599 | ) |  |  | 3 |  |  |  | (1,182 | ) |  |  | 3 |
|  |  | (1,599 | ) |  |  | 3 |  |  |  | (1,182 | ) |  |  | 3 |
The effect of the cash flow hedge on our consolidated statements of financial position as at December 31, 2023 and 2022 are as follows:
|  | Total hedging loss recognized in OCI |  |  | Line item in our Consolidated Statements of Financial Position
|  | (in million pesos) |  |  |
December 31, 2023 |  |  |  |  |
Long-term foreign currency options |  |  | (6,145 | ) |  | Other comprehensive loss
|  |  | (6,145 | ) |  |
December 31, 2022 |  |  |  |  |
Long-term foreign currency options |  |  | (4,470 | ) |  | Other comprehensive loss
|  |  | (4,470 | ) |  |
The following table shows our consolidated foreign currency-denominated monetary financial assets and liabilities and their Philippine Peso equivalents as at December 31, 2023 and 2022:
|  | 2023 |  |  | 2022 |
|  | U.S. Dollar |  |  | Php(1) |  |  | U.S. Dollar |  |  | Php(2) |
|  | (in millions) |
Noncurrent Financial Assets |  |  |  |  |  |  |  |  |  |  |  |
Derivative financial assets – net of current portion |  |  | 2 |  |  |  | 96 |  |  |  | 1 |  |  |  | 81 |
Other financial assets – net of current portion |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1 |
Total noncurrent financial assets |  |  | 2 |  |  |  | 96 |  |  |  | 1 |  |  |  | 82 |
Current Financial Assets |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  | 76 |  |  |  | 4,232 |  |  |  | 287 |  |  |  | 16,002 |
Short-term investments |  |  | 5 |  |  |  | 269 |  |  |  | 5 |  |  |  | 254 |
Trade and other receivables – net |  |  | 115 |  |  |  | 6,411 |  |  |  | 132 |  |  |  | 7,385 |
Current portion of other financial assets |  |  | — |  |  |  | 12 |  |  |  | — |  |  |  | 12 |
Total current financial assets |  |  | 196 |  |  |  | 10,924 |  |  |  | 424 |  |  |  | 23,653 |
Total Financial Assets |  |  | 198 |  |  |  | 11,020 |  |  |  | 425 |  |  |  | 23,735 |
Noncurrent Financial Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing financial liabilities – net of current portion |  |  | 681 |  |  |  | 37,719 |  |  |  | 719 |  |  |  | 40,153 |
Derivative financial liabilities – net of current portion |  |  | — |  |  |  | 12 |  |  |  | 3 |  |  |  | 190 |
Other noncurrent liabilities |  |  | — |  |  |  | 27 |  |  |  | — |  |  |  | 27 |
Total noncurrent financial liabilities |  |  | 681 |  |  |  | 37,758 |  |  |  | 722 |  |  |  | 40,370 |
Current Financial Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  |  | 1,314 |  |  |  | 72,797 |  |  |  | 1,339 |  |  |  | 74,720 |
Accrued expenses and other current liabilities |  |  | 207 |  |  |  | 11,481 |  |  |  | 218 |  |  |  | 12,184 |
Current portion of interest-bearing financial liabilities |  |  | 39 |  |  |  | 2,149 |  |  |  | 39 |  |  |  | 2,165 |
Current portion of derivative financial liabilities |  |  | 18 |  |  |  | 1,021 |  |  |  | 17 |  |  |  | 960 |
Total current financial liabilities |  |  | 1,578 |  |  |  | 87,448 |  |  |  | 1,613 |  |  |  | 90,029 |
Total Financial Liabilities |  |  | 2,259 |  |  |  | 125,206 |  |  |  | 2,335 |  |  |  | 130,399 |
(1) The exchange rate used to convert the U.S. Dollar amounts into Philippine Peso was Php 55.42 to US$1.00, the Philippine Peso-U.S. Dollar exchange rate as quoted through the Bankers Association of the Philippines, or BAP, as at December 31, 2023. (2) The exchange rate used to convert the U.S. Dollar amounts into Philippine Peso was Php 55.82 to US$1.00, the Philippine Peso-U.S. Dollar exchange rate as quoted through the BAP as at December 31, 2022. As at March 21, 2024, the Philippine Peso-U.S. Dollar exchange rate was Php 56.03 to US$1.00. Using this exchange rate, our consolidated net foreign currency-denominated financial liabilities would have increased in Philippine Peso terms by Php 1,247 million as at December 31, 2023. Approximately 15% and 17% of our total consolidated debts (net of consolidated debt discount) was denominated in U.S. Dollars as at December 31, 2023 and 2022, respectively. Our consolidated foreign currency-denominated debt decreased to Php 39,479 million as at December 31, 2023 from Php 41,894 million as at December 31, 2022. See Note 20 – Interest-bearing Financial Liabilities. The aggregate notional amount of our consolidated outstanding long-term principal only-currency swap contracts, long-term foreign currency options and short-term forwards allocated for debt were US$485 million and US$441 million as at December 31, 2023 and 2022, respectively. Consequently, the unhedged portion of our consolidated debt amounts were approximately 5% (or 5%, net of consolidated U.S. Dollar cash balances allocated for debt) as at December 31, 2023 and 7% (or 5%, net of consolidated U.S. Dollar cash balances allocated for debt) as at December 31, 2022. Approximately 8%, 10% and 9% of our consolidated revenues were denominated in U.S. Dollars and/or were linked to U.S. Dollars for the years ended December 31, 2023, 2022 and 2021, respectively. Approximately 6%, 5% and 7% of our consolidated expenses were denominated in U.S. Dollars and/or linked to the U.S. Dollar for the years ended December 31, 2023, 2022 and 2021, respectively. In this respect, the higher weighted average exchange rate of the Philippine Peso against the U.S. Dollar increased our revenues and expenses, and consequently, affects our cash flow from operations in Philippine Peso terms. In view of the anticipated continued decline in dollar-denominated/dollar-linked revenues, which provide a natural hedge against our foreign currency exposure, we are progressively refinancing our dollar-denominated debts in Philippine Pesos. The Philippine Peso depreciated by 0.72% against the U.S. Dollar to Php 55.42 to US$1.00 as at December 31, 2023 from Php 55.82 to US$1.00 as at December 31, 2022. As a result of our consolidated foreign exchange movements, as well as the amount of our consolidated outstanding net foreign currency financial assets and liabilities, we recognized net consolidated foreign exchange gains of Php 1,153 million for the year ended December 31, 2023 and net foreign exchange losses of Php 4,685 million Php 3,890 million for the years ended December 31, 2022 and 2021, respectively. Management conducted a survey among our banks to determine the outlook of the Philippine Peso-U.S. Dollar exchange rate until March 31, 2024. Our outlook is that the Philippine Peso-U.S. Dollar exchange rate may weaken/strengthen by 1.95% as compared to the exchange rate of Php 55.42 to US$1.00 as at December 31, 2023. If the Philippine Peso-U.S. Dollar exchange rate had weakened/strengthened by 1.95% as at December 31, 2023, with all other variables held constant, consolidated profit after tax for the year ended December 31, 2023 and stockholders’ equity as at December 31, 2023 would have been approximately Php 2,341 million and Php 27 million, respectively, lower/higher, mainly as a result of consolidated foreign exchange gains and losses on conversion of U.S. Dollar-denominated net assets/liabilities and mark-to-market valuation of derivative financial instruments. Interest Rate Risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Our exposure to the risk of changes in market interest rates relates primarily to our long-term debt obligations with floating interest rates. Our policy is to manage interest cost through a mix of fixed and variable rate debts. We evaluate the fixed to floating ratio of our loans in line with movements of relevant interest rates in the financial markets. Based on our assessment, new financing will be priced either on a fixed or floating rate basis. We enter into interest rate swap agreements in order to manage our exposure to interest rate fluctuations. Further details of the risk management strategy are recognized in our hedge designation documentation. We make use of hedging instruments and structures solely for reducing or managing financial risk associated with our debt obligations and not for trading purposes. The hedging instruments have no impact on our consolidated statements of financial position as at December 31, 2023 and 2022. The hedged items on our consolidated statements of financial position has no impact as at December 31, 2023 and 2022. The cash flow hedge on our consolidated statements of financial position has no impact as at December 31, 2023 and 2022. The following tables set out the carrying amounts, by maturity, of our financial instruments that are expected to have exposure on interest rate risk as at December 31, 2023 and 2022. Financial instruments that are not subject to interest rate risk were not included in the table. As at December 31, 2023
| In U.S. Dollars |  |  |  |  |  |  |  |  | Fair Value |
| Below 1 year |  | 1-2 years |  | 2-3 years |  | 3-5 years |  | Over 5 years |  | Total |  | In Php |  | Discount/ Debt Issuance Cost In Php |  | Carrying Value In Php |  |  | In U.S. Dollar |  | In Php |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | (in millions) |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt Instruments at Amortized Cost |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Philippine Peso |  | 4 |  |  | — |  |  | — |  |  | 6 |  |  | — |  |  | 10 |  |  | 595 |  |  | — |  |  | 595 |  |  |  | 10 |  |  | 587 |
Interest rate | 2.3750% to 2.9000% |  | 4.2500% to 4.2500% |  | 6.2500% to 6.2500% |  | 4.6250% to 4.8750% |  |  | 6.5000 | % |  | — |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |
Cash in Bank |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Dollar |  | 15 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 15 |  |  | 850 |  |  | — |  |  | 850 |  |  |  | 15 |  |  | 850 |
Interest rate | 0.0500% to 0.5000% |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |
Philippine Peso |  | 128 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 128 |  |  | 7,082 |  |  | — |  |  | 7,082 |  |  |  | 128 |  |  | 7,082 |
Interest rate | 0.0500% to 1.5000% |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |
Temporary Cash Investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Dollar |  | 35 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 35 |  |  | 1,933 |  |  | — |  |  | 1,933 |  |  |  | 35 |  |  | 1,933 |
Interest rate | 4.9000% to 5.1250% |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |
Philippine Peso |  | 77 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 77 |  |  | 4,251 |  |  | — |  |  | 4,251 |  |  |  | 77 |  |  | 4,251 |
Interest rate | 0.2500% to 6.2500% |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |
Short-term Investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Philippine Peso |  | 2 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 2 |  |  | 122 |  |  | — |  |  | 122 |  |  |  | 2 |  |  | 122 |
Interest rate | 0.5000% to 6.1000% |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |
|  | 261 |  |  | — |  |  | — |  |  | 6 |  |  | — |  |  | 267 |  |  | 14,833 |  |  | — |  |  | 14,833 |  |  |  | 267 |  |  | 14,825 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Long-term Debt |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed Rate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Dollar Notes |  | — |  |  | — |  |  | — |  |  | — |  |  | 600 |  |  | 600 |  |  | 33,251 |  |  | 560 |  |  | 32,691 |  |  |  | 466 |  |  | 25,845 |
Interest rate |  | — |  |  | — |  |  | — |  |  | — |  | 2.5000% to 3.4500% |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |
Philippine Peso |  | 72 |  |  | 377 |  |  | 227 |  |  | 564 |  |  | 334 |  |  | 1,574 |  |  | 87,225 |  |  | 748 |  |  | 86,477 |  |  |  | 1,471 |  |  | 81,545 |
Interest rate | 5.1021% to 5.2813% |  | 4.0000% to 5.3500% |  | 4.0000% to 5.3500% |  | 4.0000% to 5.2000% |  | 4.0000% to 5.1560% |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |
Variable Rate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Dollar Loans |  | 25 |  |  | 28 |  |  | 14 |  |  | 42 |  |  | 14 |  |  | 123 |  |  | 6,816 |  |  | 28 |  |  | 6,788 |  |  |  | 123 |  |  | 6,816 |
Interest rate | SOFR + 1.47826% |  | SOFR + 1.31161% |  | SOFR + 1.31161% |  | SOFR + 1.31161% |  | SOFR + 1.31161% |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |
Philippine Peso |  | 33 |  |  | 99 |  |  | 36 |  |  | 254 |  |  | 1,916 |  |  | 2,338 |  |  | 129,635 |  |  | 793 |  |  | 128,842 |  |  |  | 2,339 |  |  | 129,635 |
Interest rate | 0.5000% over PHP BVAL |  | 0.6000% to 1.0000% over PHP BVAL (floor rate 4.5000% to 4.6250%) |  | 0.6000% to 1.0000% over PHP BVAL (floor rate 4.5000% to 4.6250%) |  | 0.6000% to 1.0000% over PHP BVAL (floor rate 4.5000% to 4.6250%) |  | 0.6000% to 0.9000% over PHP BVAL (floor rate 4.5000% to 4.6250%) |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  | — |  |  | — |
Short-term Debt |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Notes Payable |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 130 |  |  | 504 |  |  | 277 |  |  | 860 |  |  | 2,864 |  |  | 4,635 |  |  | 256,927 |  |  | 2,129 |  |  | 254,798 |  |  |  | 4,399 |  |  | 243,841 |
As at December 31, 2022
| In U.S. Dollars |  |  |  |  |  |  |  | Fair Value |
| Below 1 year |  | 1-2 years |  | 2-3 years |  | 3-5 years |  | Over 5 years |  | Total |  | In Php |  | Discount/ Debt Issuance Cost In Php |  | Carrying Value In Php |  | In U.S. Dollar |  | In Php |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | (in millions) |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt Instruments at Amortized Cost |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Philippine Peso |  | — |  |  | 4 |  |  | 1 |  |  | 6 |  |  | — |  |  | 11 |  |  | 596 |  |  | — |  |  | 596 |  |  | 10 |  |  | 573 |
Interest rate |  | — |  | 2.3750% to 2.9000% |  |  | 4.2500 | % | 4.6250% to 6.2500% |  |  | 6.5000 | % |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Cash in Bank |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Dollar |  | 23 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 23 |  |  | 1,264 |  |  | — |  |  | 1,264 |  |  | 23 |  |  | 1,264 |
Interest rate | 0.0500% to 1.0000% |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  |  |  |
Philippine Peso |  | 123 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 123 |  |  | 6,863 |  |  | — |  |  | 6,863 |  |  | 123 |  |  | 6,863 |
Interest rate | 0.0500% to 1.5000% |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Temporary Cash Investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Dollar |  | 127 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 127 |  |  | 7,092 |  |  | — |  |  | 7,092 |  |  | 127 |  |  | 7,092 |
Interest rate | 3.5000% to 4.7500% |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  |  |  |
Philippine Peso |  | 28 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 28 |  |  | 1,586 |  |  | — |  |  | 1,586 |  |  | 28 |  |  | 1,586 |
Interest rate | 2.8000% to 5.0000% |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Short-term Investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Philippine Peso |  | 2 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 2 |  |  | 129 |  |  | — |  |  | 129 |  |  | 2 |  |  | 129 |
Interest rate | 0.5000% to 2.0000% |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |  |  |  |  |
|  | 303 |  |  | 4 |  |  | 1 |  |  | 6 |  |  | — |  |  | 314 |  |  | 17,530 |  |  | — |  |  | 17,530 |  |  | 313 |  |  | 17,507 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Long-term Debt |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed Rate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Dollar Notes |  | — |  |  | — |  |  | — |  |  | — |  |  | 600 |  |  | 600 |  |  | 33,489 |  |  | 597 |  |  | 32,892 |  |  | 435 |  |  | 24,316 |
Interest rate |  | — |  |  | — |  |  | — |  |  | — |  | 2.5000% to 3.4500% |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Philippine Peso |  | 319 |  |  | 124 |  |  | 340 |  |  | 576 |  |  | 540 |  |  | 1,899 |  |  | 106,018 |  |  | 919 |  |  | 105,099 |  |  | 1,744 |  |  | 97,327 |
Interest rate | 3.9500% to 4.0000% |  | 3.9500% to 5.1560% |  | 4.0000% to 5.3500% |  | 4.0000% to 5.3500% |  | 4.0000% to 5.2000% |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Variable Rate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Dollar Loans |  | 25 |  |  | 53 |  |  | 14 |  |  | 28 |  |  | 42 |  |  | 162 |  |  | 9,042 |  |  | 40 |  |  | 9,002 |  |  | 162 |  |  | 9,042 |
Interest rate | LIBOR + 1.0500% |  | LIBOR + 1.0500% |  | LIBOR + 1.0500% |  | LIBOR + 1.0500% |  | LIBOR + 1.0500% |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Philippine Peso |  | 34 |  |  | 93 |  |  | 55 |  |  | 141 |  |  | 1,383 |  |  | 1,706 |  |  | 93,310 |  |  | 723 |  |  | 92,587 |  |  | 1,672 |  |  | 93,310 |
Interest rate |  | — |  | 0.5000% to 1.0000% over PHP BVAL (floor rate 4.5000% to 4.6250%) |  | 0.6000% to 1.0000% over PHP BVAL (floor rate 4.5000% to 4.6250%) |  | 0.6000% to 1.0000% over PHP BVAL (floor rate 4.5000% to 4.6250%) |  | 0.6000% to 1.0000% over PHP BVAL (floor rate 4.5000% to 4.6250%) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Short-term Debt |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Notes Payable |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Philippine Peso |  | 179 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 179 |  |  | 10,000 |  |  | — |  |  | 10,000 |  |  | 179 |  |  | 10,000 |
Interest rate | 2.6000 to 5.1600% |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
|  | 557 |  |  | 270 |  |  | 409 |  |  | 745 |  |  | 2,565 |  |  | 4,546 |  |  | 251,859 |  |  | 2,279 |  |  | 249,580 |  |  | 4,192 |  |  | 233,995 |
Fixed rate financial instruments are subject to fair value interest rate risk while floating rate financial instruments are subject to cash flow interest rate risk. Repricing of floating rate financial instruments is mostly done on intervals of three months or up to five years. Interest on fixed rate financial instruments is fixed until maturity of the particular instrument. Approximately 53% and 41% of our consolidated debts (net of consolidated debt discount) were variable rate debts as at December 31, 2023 and 2022, respectively. Our consolidated variable rate debt increased to Php 135,631 million as at December 31, 2023 from Php 101,590 million as at December 31, 2022. Considering the aggregate notional amount of our consolidated outstanding long-term interest rate swap contracts of nil as at December 31, 2023 and 2022, approximately 47% and 59% of our consolidated debts were fixed as at December 31, 2023 and 2022, respectively. Management conducted a survey among our banks to determine the outlook of the U.S. Dollar and Philippine Peso interest rates until March 31, 2024. Our outlook is that the U.S. Dollar and Philippine Peso interest rates may move 5 basis points, or bps, and 25 bps higher/lower, respectively, as compared to levels as at December 31, 2023. If the U.S. Dollar interest rates had been 5 bps higher/lower as compared to market levels as at December 31, 2023, with all other variables held constant, consolidated profit after tax for the year ended December 31, 2023 and stockholders’ equity as at December 31, 2023 would have been approximately Php 4 million and Php 4 million, respectively, lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings and loss/gain on derivative transactions. If the Philippine Peso interest rates had been 25 bps higher/lower as compared to market levels as at December 31, 2023, with all other variables held constant, consolidated profit after tax for the year December 31, 2023 and stockholders’ equity as at December 31, 2023 would have been approximately Php 25 million and Php 14 million, respectively, lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings and loss/gain on derivative transactions. Credit Risk Credit risk is the risk that we will incur a loss arising from our customers, clients or counterparties that fail to discharge their contracted obligations. We manage and control credit risk by setting limits on the amount of risk we are willing to accept for individual counterparties and by monitoring exposures in relation to such limits. We trade only with recognized and creditworthy third parties. It is our policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an on-going basis to reduce our exposure to bad debts. We established a credit quality review process to provide regular identification of changes in the creditworthiness of counterparties. Our credit quality review process allows us to assess the potential loss as a result of the risks to which we are exposed and allow us to take corrective actions. Maximum exposure to credit risk of financial assets not subject to impairment The gross carrying amount of financial assets not subject to impairment also represents our maximum exposure to credit risk as at December 31, 2023 and 2022 are as follows:
|  | 2023 |  |  | 2022 |
|  | (in million pesos) |
Financial assets at fair value through profit or loss |  |  | 578 |  |  |  | 432 |
Derivative financial assets – net of current portion |  |  | 96 |  |  |  | 81 |
Short-term investments |  |  | 269 |  |  |  | 254 |
Total |  |  | 943 |  |  |  | 767 |
Maximum exposure to credit risk of financial assets subject to impairment The table below shows the maximum exposure to credit risk for the components of our consolidated statements of financial position, including derivative financial instruments as at December 31, 2023 and 2022. The maximum exposure is shown gross before both the effect of mitigation through use of master netting and collateral arrangements. The extent to which collateral and other credit enhancements mitigate the maximum exposure to credit risk is described in the footnotes to the table. For financial assets recognized on our consolidated statements of financial position as at December 31, 2023 and 2022, the gross exposure to credit risk equal their carrying amount. For financial guarantees granted, the maximum exposure to credit risk is the maximum amount that we would have to pay if the guarantees are called upon. For loan commitments and other credit related commitments that are irrevocable over the life of the respective facilities, the maximum exposure to credit risk is the full amount of the committed facilities.
|  | December 31, 2023 |
|  | Stage 1 12-Month ECL |  |  | Stage 2 Lifetime ECL |  |  | Stage 3 Lifetime ECL |  |  | Total |
|  | (in million pesos) |
High grade |  |  | 20,424 |  |  |  | 11,070 |  |  |  | — |  |  |  | 31,494 |
Standard grade |  |  | 271 |  |  |  | 3,683 |  |  |  | — |  |  |  | 3,954 |
Substandard grade |  |  | — |  |  |  | 11,333 |  |  |  | — |  |  |  | 11,333 |
Default |  |  | 442 |  |  |  | 4,190 |  |  |  | 13,025 |  |  |  | 17,657 |
Gross carrying amount |  |  | 21,137 |  |  |  | 30,276 |  |  |  | 13,025 |  |  |  | 64,438 |
Less allowance |  |  | 442 |  |  |  | 4,190 |  |  |  | 13,025 |  |  |  | 17,657 |
Carrying amount |  |  | 20,695 |  |  |  | 26,086 |  |  |  | — |  |  |  | 46,781 |
|  | December 31, 2022 |
|  | Stage 1 12-Month ECL |  |  | Stage 2 Lifetime ECL |  |  | Stage 3 Lifetime ECL |  |  | Total |
|  | (in million pesos) |
High grade |  |  | 29,328 |  |  |  | 12,380 |  |  |  | — |  |  |  | 41,708 |
Standard grade |  |  | 303 |  |  |  | 4,445 |  |  |  | — |  |  |  | 4,748 |
Substandard grade |  |  | — |  |  |  | 9,430 |  |  |  | — |  |  |  | 9,430 |
Default |  |  | 764 |  |  |  | 4,236 |  |  |  | 9,425 |  |  |  | 14,425 |
Gross carrying amount |  |  | 30,395 |  |  |  | 30,491 |  |  |  | 9,425 |  |  |  | 70,311 |
Less allowance |  |  | 764 |  |  |  | 4,236 |  |  |  | 9,425 |  |  |  | 14,425 |
Carrying amount |  |  | 29,631 |  |  |  | 26,255 |  |  |  | — |  |  |  | 55,886 |
Maximum exposure to credit risk after collateral held or other credit enhancements Collateral held as security for financial assets depends on the nature of the instrument. Debt investment securities are generally unsecured. Estimates of fair value are based on the value of collateral assessed at the time of borrowing and are regularly updated according to internal lending policies and regulatory guidelines. Generally, collateral is not held over loans and advances to us except for reverse repurchase agreements. Collateral usually is not held against investment securities, and no such collateral was held as at December 31, 2023 and 2022. Our policies regarding obtaining collateral have not significantly changed during the reporting period and there has been no significant change in the overall quality of the collateral held by us during the year. We have not identified significant risk concentrations arising from the nature, type or location of collateral and other credit enhancements held against our credit exposures. An analysis of the maximum exposure to credit risk for the components of our consolidated statements of financial position, including derivative financial instruments as at December 31, 2023 and 2022:
|  | 2023 |
|  | Gross Maximum Exposure |  |  | Collateral and Other Credit Enhancements* |  |  | Net Maximum Exposure |
|  | (in million pesos) |
Financial instruments at amortized cost: |  |  | 46,781 |  |  |  | 521 |  |  |  | 46,260 |
Debt instruments at amortized cost |  |  | 595 |  |  |  | — |  |  |  | 595 |
Other financial assets |  |  | 3,801 |  |  |  | — |  |  |  | 3,801 |
Cash and cash equivalents |  |  | 16,177 |  |  |  | 146 |  |  |  | 16,031 |
Short-term investments |  |  | 122 |  |  |  | — |  |  |  | 122 |
Corporate subscribers |  |  | 9,988 |  |  |  | 338 |  |  |  | 9,650 |
Retail subscribers |  |  | 10,196 |  |  |  | 37 |  |  |  | 10,159 |
Foreign administrations |  |  | 1,126 |  |  |  | — |  |  |  | 1,126 |
Domestic carriers |  |  | 187 |  |  |  | — |  |  |  | 187 |
Dealers, agents and others |  |  | 4,589 |  |  |  | — |  |  |  | 4,589 |
Financial instruments at FVPL: |  |  | 943 |  |  |  | — |  |  |  | 943 |
Financial assets at FVPL |  |  | 578 |  |  |  | — |  |  |  | 578 |
Long-term foreign currency options |  |  | 96 |  |  |  | — |  |  |  | 96 |
Short-term investments |  |  | 269 |  |  |  | — |  |  |  | 269 |
Total |  |  | 47,724 |  |  |  | 521 |  |  |  | 47,203 |
* Includes bank insurance, security deposits and customer deposits. We have no collateral held as at December 31, 2023.
|  | 2022 |
|  | Gross Maximum Exposure |  |  | Collateral and Other Credit Enhancements* |  |  | Net Maximum Exposure |
|  | (in million pesos) |
Financial instruments at amortized cost: |  |  | 55,886 |  |  |  | 505 |  |  |  | 55,381 |
Debt instruments at amortized cost |  |  | 596 |  |  |  | — |  |  |  | 596 |
Other financial assets |  |  | 3,695 |  |  |  | — |  |  |  | 3,695 |
Cash and cash equivalents |  |  | 25,211 |  |  |  | 105 |  |  |  | 25,106 |
Short-term investments |  |  | 129 |  |  |  | — |  |  |  | 129 |
Retail subscribers |  |  | 10,327 |  |  |  | 46 |  |  |  | 10,281 |
Corporate subscribers |  |  | 10,052 |  |  |  | 354 |  |  |  | 9,698 |
Foreign administrations |  |  | 924 |  |  |  | — |  |  |  | 924 |
Domestic carriers |  |  | 295 |  |  |  | — |  |  |  | 295 |
Dealers, agents and others |  |  | 4,657 |  |  |  | — |  |  |  | 4,657 |
Financial instruments at FVPL: |  |  | 767 |  |  |  | — |  |  |  | 767 |
Financial assets at FVPL |  |  | 432 |  |  |  | — |  |  |  | 432 |
Long-term foreign currency options |  |  | 81 |  |  |  | — |  |  |  | 81 |
Short-term investments |  |  | 254 |  |  |  | — |  |  |  | 254 |
Total |  |  | 56,653 |  |  |  | 505 |  |  |  | 56,148 |
* Includes bank insurance, security deposits and customer deposits. We have no collateral held as at December 31, 2022. The table below provides information regarding the credit quality by class of our financial assets according to our credit ratings of counterparties as at December 31, 2023 and 2022:
|  |  |  |  | Neither past due nor credit impaired |  |  | Past due but not |  |  |  |
|  | Total |  |  | Class A(1) |  |  | Class B(2) |  |  | credit impaired |  |  | Impaired |
|  | (in million pesos) |
December 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial instruments at amortized cost: |  |  | 64,264 |  |  |  | 31,494 |  |  |  | 3,954 |  |  |  | 11,333 |  |  |  | 17,483 |
Debt instruments at amortized cost |  |  | 595 |  |  |  | 595 |  |  |  | — |  |  |  | — |  |  |  | — |
Other financial assets |  |  | 4,069 |  |  |  | 3,800 |  |  |  | 1 |  |  |  | — |  |  |  | 268 |
Cash and cash equivalents |  |  | 16,177 |  |  |  | 15,907 |  |  |  | 270 |  |  |  | — |  |  |  | — |
Short-term investments |  |  | 122 |  |  |  | 122 |  |  |  | — |  |  |  | — |  |  |  | — |
Retail subscribers |  |  | 19,894 |  |  |  | 8,083 |  |  |  | 266 |  |  |  | 1,847 |  |  |  | 9,698 |
Corporate subscribers |  |  | 15,934 |  |  |  | 2,341 |  |  |  | 1,390 |  |  |  | 6,257 |  |  |  | 5,946 |
Foreign administrations |  |  | 1,250 |  |  |  | 90 |  |  |  | 529 |  |  |  | 507 |  |  |  | 124 |
Domestic carriers |  |  | 188 |  |  |  | 1 |  |  |  | 92 |  |  |  | 94 |  |  |  | 1 |
Dealers, agents and others |  |  | 6,035 |  |  |  | 555 |  |  |  | 1,406 |  |  |  | 2,628 |  |  |  | 1,446 |
Financial instruments at FVPL: |  |  | 1,117 |  |  |  | 701 |  |  |  | 242 |  |  |  | — |  |  |  | 174 |
Financial assets at FVPL |  |  | 578 |  |  |  | 336 |  |  |  | 242 |  |  |  | — |  |  |  | — |
Long-term foreign currency options |  |  | 96 |  |  |  | 96 |  |  |  | — |  |  |  | — |  |  |  | — |
Short-term investments |  |  | 443 |  |  |  | 269 |  |  |  | — |  |  |  | — |  |  |  | 174 |
Total |  |  | 65,381 |  |  |  | 32,195 |  |  |  | 4,196 |  |  |  | 11,333 |  |  |  | 17,657 |
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial instruments at amortized cost: |  |  | 70,137 |  |  |  | 41,708 |  |  |  | 4,748 |  |  |  | 9,430 |  |  |  | 14,251 |
Debt instruments at amortized cost |  |  | 596 |  |  |  | 596 |  |  |  | — |  |  |  | — |  |  |  | — |
Other financial assets |  |  | 4,285 |  |  |  | 3,694 |  |  |  | 1 |  |  |  | — |  |  |  | 590 |
Cash and cash equivalents |  |  | 25,211 |  |  |  | 24,909 |  |  |  | 302 |  |  |  | — |  |  |  | — |
Short-term investments |  |  | 129 |  |  |  | 129 |  |  |  | — |  |  |  | — |  |  |  | — |
Retail subscribers |  |  | 17,216 |  |  |  | 7,782 |  |  |  | 458 |  |  |  | 2,087 |  |  |  | 6,889 |
Corporate subscribers |  |  | 15,151 |  |  |  | 3,959 |  |  |  | 1,543 |  |  |  | 4,550 |  |  |  | 5,099 |
Foreign administrations |  |  | 1,058 |  |  |  | 289 |  |  |  | 210 |  |  |  | 425 |  |  |  | 134 |
Domestic carriers |  |  | 296 |  |  |  | 111 |  |  |  | 30 |  |  |  | 154 |  |  |  | 1 |
Dealers, agents and others |  |  | 6,195 |  |  |  | 239 |  |  |  | 2,204 |  |  |  | 2,214 |  |  |  | 1,538 |
Financial instruments at FVPL: |  |  | 941 |  |  |  | 604 |  |  |  | 163 |  |  |  | — |  |  |  | 174 |
Financial assets at FVPL |  |  | 432 |  |  |  | 269 |  |  |  | 163 |  |  |  | — |  |  |  | — |
Long-term foreign currency options |  |  | 81 |  |  |  | 81 |  |  |  | — |  |  |  | — |  |  |  | — |
Short-term investments |  |  | 428 |  |  |  | 254 |  |  |  | — |  |  |  | — |  |  |  | 174 |
Total |  |  | 71,078 |  |  |  | 42,312 |  |  |  | 4,911 |  |  |  | 9,430 |  |  |  | 14,425 |
(1) This includes low risk and good paying customer accounts with no history of account treatment for a defined period and no overdue accounts as at report date; and deposits or placements to counterparties with good credit rating or bank standing financial review. (2) This includes medium risk and average paying customer accounts with no overdue accounts as at report date, and new customer accounts for which sufficient credit history has not been established; and deposits or placements to counterparties not classified as Class A. The aging analysis of past due but not impaired class of financial assets as at December 31, 2023 and 2022 are as follows:
|  |  |  |  |  |  |  | Past due but not credit impaired |  |  |  |
|  | Total |  |  | Neither past due nor credit impaired |  |  | 1-60 days |  |  | 61-90 days |  |  | Over 91 days |  |  | Impaired |
|  | (in million pesos) |
December 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial instruments at amortized cost: |  |  | 64,264 |  |  |  | 35,448 |  |  |  | 3,505 |  |  |  | 618 |  |  |  | 7,210 |  |  |  | 17,483 |
Debt instruments at amortized cost |  |  | 595 |  |  |  | 595 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Other financial assets |  |  | 4,069 |  |  |  | 3,801 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 268 |
Cash and cash equivalents |  |  | 16,177 |  |  |  | 16,177 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Short-term investments |  |  | 122 |  |  |  | 122 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Retail subscribers |  |  | 19,894 |  |  |  | 8,349 |  |  |  | 1,603 |  |  |  | 223 |  |  |  | 21 |  |  |  | 9,698 |
Corporate subscribers |  |  | 15,934 |  |  |  | 3,731 |  |  |  | 1,500 |  |  |  | 248 |  |  |  | 4,509 |  |  |  | 5,946 |
Foreign administrations |  |  | 1,250 |  |  |  | 619 |  |  |  | 164 |  |  |  | 87 |  |  |  | 256 |  |  |  | 124 |
Domestic carriers |  |  | 188 |  |  |  | 93 |  |  |  | 39 |  |  |  | 20 |  |  |  | 35 |  |  |  | 1 |
Dealers, agents and others |  |  | 6,035 |  |  |  | 1,961 |  |  |  | 199 |  |  |  | 40 |  |  |  | 2,389 |  |  |  | 1,446 |
Financial instruments at FVPL: |  |  | 1,117 |  |  |  | 943 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 174 |
Financial assets at FVPL |  |  | 578 |  |  |  | 578 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Long-term foreign currency options |  |  | 96 |  |  |  | 96 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Short-term investments |  |  | 443 |  |  |  | 269 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 174 |
Total |  |  | 65,381 |  |  |  | 36,391 |  |  |  | 3,505 |  |  |  | 618 |  |  |  | 7,210 |  |  |  | 17,657 |
December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Financial instruments at amortized cost: |  |  | 70,137 |  |  |  | 46,456 |  |  |  | 3,289 |  |  |  | 1,709 |  |  |  | 4,432 |  |  |  | 14,251 |
Debt instruments at amortized cost |  |  | 596 |  |  |  | 596 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Other financial assets |  |  | 4,285 |  |  |  | 3,695 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 590 |
Cash and cash equivalents |  |  | 25,211 |  |  |  | 25,211 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Short-term investments |  |  | 129 |  |  |  | 129 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Retail subscribers |  |  | 17,216 |  |  |  | 8,240 |  |  |  | 1,439 |  |  |  | 372 |  |  |  | 276 |  |  |  | 6,889 |
Corporate subscribers |  |  | 15,151 |  |  |  | 5,502 |  |  |  | 1,615 |  |  |  | 1,214 |  |  |  | 1,721 |  |  |  | 5,099 |
Foreign administrations |  |  | 1,058 |  |  |  | 499 |  |  |  | 37 |  |  |  | 14 |  |  |  | 374 |  |  |  | 134 |
Domestic carriers |  |  | 296 |  |  |  | 141 |  |  |  | 72 |  |  |  | 26 |  |  |  | 56 |  |  |  | 1 |
Dealers, agents and others |  |  | 6,195 |  |  |  | 2,443 |  |  |  | 126 |  |  |  | 83 |  |  |  | 2,005 |  |  |  | 1,538 |
Financial instruments at FVPL: |  |  | 941 |  |  |  | 767 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 174 |
Financial assets at FVPL |  |  | 432 |  |  |  | 432 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Long-term foreign currency options |  |  | 81 |  |  |  | 81 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Short-term investments |  |  | 428 |  |  |  | 254 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 174 |
Total |  |  | 71,078 |  |  |  | 47,223 |  |  |  | 3,289 |  |  |  | 1,709 |  |  |  | 4,432 |  |  |  | 14,425 |
Capital Management Risk We aim to achieve an optimal capital structure in pursuit of our business objectives which include maintaining healthy capital ratios and strong credit ratings and maximizing shareholder value. Our approach to capital management focuses on balancing the allocation of cash and the incurrence of debt as we seek new investment opportunities for new businesses and growth areas. On August 5, 2014, the PLDT Board of Directors approved an amendment to our dividend policy, increasing the dividend payout rate to 75% from 70% of our core EPS as regular dividends. However, in view of our elevated capital expenditures to build-out a robust, superior network to support the continued growth of data traffic, plans to invest in new adjacent businesses that will complement the current business and provide future sources of profits and dividends, and management of our cash and gearing levels, the PLDT Board of Directors approved on August 2, 2016, the amendment of our dividend policy, reducing the regular dividend payout to 60% of core EPS. Starting 2019, we based our dividend payout on telco core income. In declaring dividends, we take into consideration the interest of our shareholders, as well as our working capital, capital expenditures and debt servicing requirements. The retention of earnings may be necessary to meet the funding requirements of our business expansion and development programs. As part of the dividend policy, in the event no investment opportunities arise, we may consider the option of returning additional cash to our shareholders in the form of special dividends or share buybacks. Philippine corporate regulations prescribe, however, that we can only pay out dividends or make capital distribution up to the amount of our unrestricted retained earnings. Some of our debt instruments contain covenants that impose maximum leverage ratios. In addition, our credit ratings from the international credit ratings agencies are based on our ability to remain within certain leverage ratios. No changes were made in our objectives, policies or processes for managing capital during the years ended December 31, 2023, 2022 and 2021.

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