BIR Ruling No. 447-2019

BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPARTMENTOF FINANCE Quezon City

DEL MONTE PHILIPPINES, INC. Bonifacio Global City, Taguig City JY Campos Centre, 9th Ave. cor. 3oth St. Sec. BIR Ruling No. 250-14 Internal Revenue Code of Regulations No. 2 1997, as amended; Revenue AUG 0 3 2019 T+:. 41"of the National

Attention: Chief Accountant 1

Gentlemen:

Philippines, Inc. ("DMPI" for brevity), for an authority to change its accounting method on inventory costing from "Weighted Average" method to "First-In-First-Out" (FIFO) method effective May 1, 2016. This refers to your letter dated July 29. 2016, requesting on behalf of Del Monte

Background:

of the Philippines and registered with the Securities and Exchange Commission (SEC) under with Taxpayers Identification Number (TIN) Company Registration No. PHILPACK and PHILPAK. It is also registered with Revenue District Office (RDO) No. 122 April 30 As represented, DMPI is a corporation duly organized under the laws of the Republic It is doing business under the name and style of , and adopts Fiscal Year ending

Was also approved for the registration of its additional activity, particularly the Fresh Fruit mainly under the brand names "Del Monte ". registered with the Philippine Economic Zone Authority at the Philippine Packing Agricultural Export Processing Zone as an Ecozone Export Enterprise under Certificate of Registration No. processing project at the Bukidnon Agro-Resource Export Zone in Manolo Fortich, Bukidnon. DMPI is engaged primarily in growing, processing and distribution of food products 1ated December 03. 2007. On October 09.2015, Certificate of Registration No. Todays ", and "S&w". Its cannery operation is

the following reasons: corporation organized under the laws of the Republic of Panama. Its intermediate parent company is Del Monte Pacific Ltd. ("DMPL" for brevity), a company incorporated 'in the and the Philippine Stock Exchange (PSE). It decided to adopt "FIFO" method of accounting in the costing of its raw materials, packaging materials, traded goods, and storeroom supplies for British Virgin Istands. and a listed entity in the Singapore Exchange Securities Trading Limited Moreover, DMPI is a wholly-owned subsidiary of Central American Resources, Inc...a

1. to align its inventory costing method with DMPL and other affiliates; thus, to the accounting practice of DMPL and other affiliates; relieve itself from the burden of converting its financiai report to conform

to provide a valuation of inventory which is more reflective of the current market values; currently, the costs of new and recent inventories are averaged with the older costs of inventories; and

DEL MONTE PHILIPPINES, INC. I

3. to establish a more effective and orderly inventory management system under the "FIFO" method; thus, minimizing losses caused by obsolete and are the ones which should also be sold first. perishabte stocks. This reflects the character and nature of the inventories which are perishable stocks, and hence, the ones which were purchased first

accounting practice in the trade which will most clearly reflect its true income. Henee, this from "weighted average""method to "FIFO" method will certainly conform to the best request. Given the foregoing reasons. DMPI submits that the change of its inventory costing

hereby granted permission to change its accounting method from "weighted average" method to "FiFO" method, pursuant to the provisions of Section 41 of the National Internal Revenue pertinent portion of which provides that: Code of 1997, as amended, in relation to Section 145 of Revenue Regulations (RR) No. 2, In reply, please be informed that on the basis of the above representations, DMPI is

Conimissioner, muy. by rules und regulations, prescribe as conforming as nearly as may be to the best accounting practice in the trade or business and the income of any taxpaver, inventories shall be taken by such taxpayer upon such basis us the Secretary of Finance, upon recommendation of"the as most clearly reflecting the income. Conumissioner, the use of inventories is necessary in order to determine clearly "Section +1. Inventories. - Whenever in the judgment of the

prescribed, by the Commissioner, uses a particular method of valuing its inventory for any tuxable yeur, then such meihod shall be used in all subsequent taxable years unless: (i) with the approval of the Commissioner,, a change to a If a tuxpayer, after having complied with the terms and conditions different method is authorized: or :

(ii) the (ommissioner finds that the nature of the stock on hand subject to upproval by the Secretary of Finance. ' his authority to require a change in inventory method more realized for tax purposes and, therefore, it is necessary to modify the vuluation method for purposes of ascertaining the Provided. however. that the Commissioner shall not exercise ofien than once every three (3) years: Provided, further. That amy chunge in an inventory valuation method must be (e.g.. its scarcity. liquidity, marketability und price movements is such thut inventory gains should be considered income. profits, or loss in a more realistic manner:

financial position of the taxpuyer is, as a general rule, regarded as clearly vear to vear, and greater weight is to be given to consistency than to any purticular method of imventory or busis of valuation, as long as the method or 'busis used is substantially in accord with these regulations, un inventory that cun be used under the best accounting practice in a bulance sheet showing the reflecting his income. reflect the income. li follows, therefore, that inventory rules cannot be uniform uccounting practice in the particular trade or business. In order to clearly reflect income, the inventory practice of a taxpayer should be consistent from Which inventory must conform. - (1) it must conform us nearly as possible to the best accounting practice in the trude or business, and (2) it must clearly but must give effect to trade customs which come within the scope of the best "Section I45. Valuation of Inventories. - The law provides tvo tests to

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DEL MONTE PHILIPPINES, INC Au 1 2819

accounting practice as said "FIFO method will clearly,reflect its income. this Office hereby grants authority to DMPI to change its accounting method of valuing its inventories from "weighted average" method to "FIFO" method effective May i, 2016. Considering that DMPI's change of its accounting method will best conform to its

if upon investigation, it will be disciosed that the facts are different then the ruling shall be considered null and void. This ruling is being issued on the basis of the foregoing facts as represented. However.

Very truiy yours.

Ae,awM a

LK-I-LMAT Commissioner of Internal Revenue CAESAR R. DULAY 935792 C

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