Philippine Financial Reporting Framework for Cooperatives

2. Financial Reporting Framework
for Cooperatives
Seminar on Philippine Financial Reporting
Framework for Cooperatives and the Standard
Chart of Accounts for Cooperatives
Lenox Hotel,
Dagupan City
April 21-22, 2016

3. Jekell G Salosagcol
• Licensed public accountant in the Philippines
• Bachelors of Science in Accounting
• Accounting Instructor and CPA Reviewer, Philippines
• Former Auditor for SGV (Arthur Andersen in the
Philippines)
• Philippine Institute of Certified Public Accountants
Resource Speaker
• Cooperative Development Authority Resource
Speaker
• Author of 2 Accounting Books
jgsalosagcol@ortesorocpa.com

4. Section 5. Effectivity
This Memorandum Circular shall take effect fifteen (15) days after its
publication at the Office of the National Administrative Register.
Approved by the Board of Administrators per Resolution No.333, Series of
2014 dated January 22, 2014.
For the Board of Administrators:
(SGD) ORLANDO R. RAVANERA
Chairman
MEMORANDUM CIRCULAR NO. 2015-05
Series of 2015
SUBJECT : PHILIPPINE FINANCIAL REPORTING
FRAMEWORK FOR COOPERATIVES
Pursuant to Section 3 of Republic Act No. 6939 and
Republic Act No. 9520 and its Implementing Rules and
Regulations (IRR) , the Authority hereby adopts and
prescribes the use of this Philippine Financial Reporting
Framework for Cooperatives:

5. Financial Statement Presentation
Fair presentation
Complete set of financial statements
Going Concern
Accrual
Comparatives
Consistency

6. Borrowing Costs
• Borrowing costs are recognized as
expense immediately.
• Borrowing costs incurred in
connection with the construction
of qualifying assets may be
capitalized as part of the cost of
the asset

7. Foreign Exchange
• Transaction is translated into
functional currency at the spot
rate at the date of the
transaction
• Monetary assets and liabilities
are translated using the closing
rate as of the FS date.

8. Employee Benefits
• Employee benefits are recognized as expense
(or part of the cost of assets) when incurred.
• Retirement benefit expense includes:
– Current service costs
– Interest costs
– Amortized past service costs
– Expected return on plan assets
– Actuarial Gains and Losses
• Past Service Costs
– Vested- recognize immediately
– Unvested- to be amortized

9. Biological Assets
• Biological assets are living plants and
animals.
–Initial measurement- Cost
–Subsequent measurement
• Cost less accumulated depreciation
and impairment losses
• Lower of cost and estimated selling
price less cost to sell and cost to
complete

10. Investment Property
• Investment property shall be
accounted for using the cost-
depreciation-impairment
model.

11. Property, plant and equipment
• PPE shall be accounted for
using the Cost Model
• Revaluation of land is
allowed but subject to the
approval of CDA

12. Intangible Assets
• Organizational costs are recognized as
expense immediately
• Research and development costs are
recognized as expense immediately
• All intangible assets shall be amortized

13. Impairment of Assets
• Recognize impairment loss as the
excess of carrying amount and
recoverable amount
• Impairment loss and reversals are
recognized in Statement of
Operations

14. Investment In Associates and
Joint Venture
• Initially recognized at Cost
• Subsequently presented in the Statement
of Financial Position at Cost less
Accumulated Impairment Losses
• Recognize impairment loss when there is
an indication that the investment is
impaired

15. Provisions and Contingencies
• Provision is recognized when
–the entity has a present obligation;
–it is probable that an outflow of
economic resources will be required;
and
–a reliable estimate of the amount of
obligation can be made
• Contingent assets and liabilities are not
recognized

16. Inventories
• Initially recognized at Cost
• Subsequently measured at the lower
of
–Cost and
–Estimated Selling Price less Costs
to Complete and Sell
• Cost is determined using
–Specific Identification
–FIFO

17. Leases
• Operating Lease
–Rental income/expense is recognized
on a straight-line basis over the lease
term.
–Advance rent is recognized as a liability
• Finance Lease
–Rental payments are treated as
installment payments for the
acquisition of asset
–Depreciation and interest expense is
recognized by the lessee

18. Impairment of assets
• An impairment loss is recognized
in P&L whenever the carrying
amount of an asset is greater
than its recoverable amount.

19. Revenue
• Sale of goods- upon delivery
• Sale of services- when services are
performed
• Interest revenue- earned and
collected
• Dividends revenue- when declared

20. Financial instruments
• Debt instruments – at amortized cost
• Short-term debt instruments- undiscounted
amount
• Investments in publicly- traded securities –
at fair value with changes in fair value
recognized in profit and loss
• Investments in non publicly-traded securities
mutual funds, as well as other externally-
managed funds – at cost less impairment

21. Donations and grants
–Donations and grants are treated
as increase in equity
•Donations in the form of PPE
shall be recognized as income
over the life of the asset
•Donations for working capital
purposes shall remain in the
equity

22. Accounting changes
• Accounting estimates- current and
prospective
• Change in accounting policy- current
• Correction of prior-period errors-
current (use Prior Period Adjustment
Account in the Statement of Operations)

23. Statement of Financial Condition
• Cash and cash equivalents
• Trade and other receivables
• Financial assets
• Inventories
• Property, plant and
equipment
• Investment property
• Intangible assets
• Biological assets carried at
cost less accumulated
depreciation
• Investment in associates
• Investment in jointly
controlled entities
• Trade and other payables
• Financial liabilities
• Liabilities/Assets for current
taxes
• Deferred tax liabilities/assets
• Provisions
• Members’ share capital
• Donation and grants
• Statutory funds
• Revaluation surplus

24. Statement of Operations
• Revenue
• Cost of sales/services
• Marketing costs
• Administrative costs
• Finance costs
• Other income and expenses
• Tax expense (if applicable)
• Allocation of distribution of net
surplus among:
–Statutory funds
–Interest on share capital
–Patronage refund

25. Statement of Cash Flows
• Classify changes in cash and cash
equivalents for a period as to operating,
investing or financing activities
• Cash flows must be split into operating,
investing and financing activities.
• Operating activities may be presented using
either the direct or indirect approach.
• Disclose interest on share capital and
patronage refund paid
• Disclose other interest paid and received.

26. Statement of Changes in Equity
Show a reconciliation between the carrying
amount at the beginning and the end of the
period, separately disclosing changes resulting
from:
• Amounts of investments by, and distributions to,
members, showing separately issues of shares ,
and treasury share transactions
• Donations and grants
• Movements in Statutory Funds (includes
allocation of Net Surplus as reconciled with
amounts per Statement of Operations)
• Movements in revaluation surplus

27. STATUTORY FUNDS
• Reserve Fund
– At least 10% of the Net Surplus
– New Cooperatives should allocate 50% of its net
surplus for the first 5 years
• Cooperative Education and Training Fund
– Not more than 10% of the Net Surplus
• Community Development Fund
– Not less than 3% of Net Surplus
• Optional Fund
– Not more than 7% of the Net Surplus

28. Distribution of Surplus and
Movements in Statutory Funds
• Distribution of the Net Surplus to
Statutory funds, Interest on Share Capital
and Patronage Refund must be presented
in the Statement of Operations
• Movements in Statutory Funds should be
presented in the Statement of Changes in
Equity

29. EFFECTIVE DATE
Effective for Financial Statements Period
ending on or after December 31, 2016

32. THANK YOU!!!