PrimeOrion Philippines, Inc.

Financial Statements was audited by SyCip Gorres

Velayo & Co. at year ended June 30, 2011. It says that the financial statements have been audited in all material respect. However, based on our judgment and in conformity with the PFRS, we believe that there are some matters that should be given more emphasis such as:

1. Presentation of Property, Plant and Equipment Under PAS 16, paragraph 29. An entity shall disclose either the cost model in paragraph 30 of PAS 16 or the revaluation model in paragraph 31 as its accounting policy and shall apply that policy to an entire class of Property, Plant and Equipment.

Based on Consolidated Statement of Comprehensive Income, they present revaluation increment on Property, Plant and Equipment which amounted to P5, 129. This means same classes of Property, Plant and Equipment (Land and Building) are carried at fair value. But it is clearly stated to the basis of preparation of PrimeOrion Philippine, Inc., the consolidated Financial statement have been prepared on a historical cost basis except for AFS Investment that is carried at fair value.

The consolidated Financial Statement are presented in Phil Peso, which is the Groups Functional and presentation currency and all values are rounded to the nearest thousand (000), except when otherwise indicated. This basically shows that the entity is not consistently following their basis of Preparation regarding the preparation of some classes of Property, Plant and Equipment.

2. Lepanto Ceramics, Inc. pending lawsuit Lepanto Ceramics Inc., the Laguna-based ceramic tile manufacturing unit of publicly listed Prime Orion Philippines Inc., is seeking court-assisted corporate rehabilitation in order to get some relief from its financial distress.

LCI shall make an assessment of their entity to continue as a going concern when preparing their Financial Statement according to IAS 1, paragraph 25. Such assessment shall only be reflected in their company itself but not to PIPO, a parent company. In PIPO, only the treatment for this event shall be recognize.

The outflow of resources is regarded as probable because this event is more likely to happen, meaning the probability that the event will occur is greater than the probability that it will not occur. Thus, the treatment for this event is Contingent Liability. In conformity with IAS 37, paragraph 27 and 28, the following are stated:

An entity shall not recognize a contingent liability. A Contingent Liability is disclosed, as required by paragraph 86, when the possibility of an outflow of resources embodying economic benefits is remote.

Moreover, the Groups conform to the paragraph 27 of IAS 37 but not to paragraph 28, for the reason that the entity does not disclosed its contingent liability. The disclosure of contingent liability according to IAS 37 paragraph 84 to 86 shall include the following:

a. Brief description of the nature of the contingent liability. b. An estimate of its financial effects. c. An indication of the uncertainties that exist. d. Possibility of any reimbursement.

However, the company failed to disclose the above requirements.

Submitted By: Group II BSA 4A

Mirania, Von Harvey Macabalang, Johanifah Gueco, Maricris Basi, Daryl De Guzman, Rose Ann Reyes, Donna