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

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

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:
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

Financial Statement Presentation

Fair presentation
Complete set of financial statements
Going Concern
Accrual
Comparatives
Consistency

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

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.

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

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

Investment Property
Investment property shall be
accounted for using the costdepreciation-impairment
model.

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

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

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

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

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

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

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

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

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

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 externallymanaged funds at cost less impairment

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

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

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

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

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.

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

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

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

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

THANK YOU!!!