Gaisano-led retailer Metro Retail Stores Group Inc. (MRSGI) posted P776 million in net profit last year, down by 19.7 percent, due to new accounting rules that hiked expense booking on leasing activities.
Since the start of this year, the company adopted the new accounting standard on leases under Philippine Financial Reporting Standards (PFRS)16, under which a right-of-use asset is recognized and amortized over the lease term while interest expense is incurred on the lease liability. This new accounting framework aims to provide a basis to assess the effect of leasing activities on the entity’s balance sheet, income statement and cash flows.
Excluding the impact of PFRS 16, MRSGI’s net income would have increased by 18 percent.
MRSGI’s non-core income increased by P218.7 million last year, mainly due to additional insurance recoveries, offset by the net impact of PFRS 16, which amounted to P363.7 million after tax for the full year of 2019.
The retailer’s operating income grew by 21.5 percent to P1.06 billion, driven mainly by the 11.3-percent increase in sales to P36.8 billion and slower growth in operating expenses at 9.3 percent. Excluding the impact of PFRS, operating income would have increased by 13.7 percent.