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Section 1 - MC – No-2015-06 PFRF

Section 2 – Statement of Policy
It is hereby declared a policy of this Authority to
promote the principle of transparency and
accountability in the Financial Reporting of
cooperatives to protect the interest and welfare of their
members and other stakeholders

It was developed from the Philippine Financial

Reporting Standards (PFRS) for Small and Medium-
Sized Enterprise (SMES).
The objective of financial
statements of a cooperative is to
provide information about the financial
condition, performance and cash flows
of the cooperative that is useful for
economic decision-making.
1 – comprehensible
presentation of Financial Statement
2. Relevance – Quality of relevance ; helping the
decision maker evaluate past, present or
future events
3. Materiality – information is material, therefore
has relevance (misstatement and its
4. Reliability – the information provided in the
financial statement must be reliable. Free
from material error and bias.
5. Prudence - inclusion of the degree of caution
in the exercise of the judgments needed in making
the estimates required under the conditions of
uncertainty, such that assets or income are not
overstated and liabilities or expenses are not
understated. It does not permit bias
6. Comparability – comparative performance of
financial statements must be observe to identify
trends in financial condition and performance.
7. Substance over form – substance is much given
an emphasis rather than its form to enhance
reliability of financial statements
Recognition is the process of incorporating in the
financial statements an item that meets the definition
of an asset, liability, income or expense and satisfies
the ff criteria:
1. It is probable that any future economic benefit
associated with the item will flow
2. 2.The item has a cost or value that can be measured
Measurement is the process of determining the
monetary amounts at which a cooperative measures assets,
liabilities, income and expenses in its financial statements.
(2) Two common measurement bases are historical cost and
fair value:
Section 8 Accrual basis
Financial Statement shall prepare using accrual basis of
accounting. Allowance for probable losses on receivables
shall be the bases on the past due amount using portfolio at
risk for purposes of prudence in financial reporting
Section 12 - A cooperative shall not offset assets and
liabilities, or income and expenses unless required or
permitted by this framework.
Accounting Policies - are the specific principles, bases,
conventions, rules and practices applied by a cooperative in
preparing and presenting financial statements.


-are held for use in the production or supply of goods or
service, for rental to others, or to administrative purposes
--are expected to be used during more than one period

RECOGNITION of Property Plant & Equipment

The cooperative shall recognize the cost of an item of
property, plant & equipment as an asset if and only if:
It is probable that future economic benefits associated with
the item will flow to the cooperative and
The cost of the item can be measured reliably
The cost of an item of PPE comprises all of the ff:
Purchase price, including legal and brokerage fees, import
duties and non-refundable taxes
Any costs directly attributable to bringing the assets to the
location and condition , cost of site preparation, initial
delivery and handling, installation and assembly and
testing of functionality.
Initial estimate of the costs of dismantling and removing
the item and restoring the site on which is located, the
obligation for which a cooperative incurs
Interest and other financing cost of funds borrowed
intended for the construction or development of an asset
Costs of opening a new facility
Costs of introducing a new product or service
( including costs of advertising and promotional
Costs of conducting business in a new location or with
a new class of customer (including costs of staff
Administration and other general overhead costs
A cooperative shall allocate the depreciable
amount of an asset on a systematic basis over its
useful life

Depreciation of an asset begins when it is

available for use, ex when it is in the location
and condition necessary for it to be capable of
operating in the manner intended by mgt.

Depreciation does not cease when the asset

becomes idle or is retired from active use unless
the asset is fully depreciated.
1. Expected usage of the asset. Usage is assessed by
reference to the asset’s expected capacity or physical
2. Expected physical wear and tear, which depends on
operational factors such as the number of shifts for the
asset is to be used and the repair and maintenance
3. Technical or commercial obsolescence arising from
changes or improvements in production
4. Legal or similar limit on the use of the asset, such as
the expiry dates of related leases
Net Surplus shall be determined as follows:

1. In accordance with the cooperative by-law;

2. Every cooperative shall determine its net surplus at
the close of every fiscal year and at such other
times as maybe prescribed by the by-laws;
3. Shall not be construed as profit but as an excess of
payments made by the members for loans borrowed or
the goods and services availed by them from the coop
Reserve Fund – shall be used for stability of the cooperative
and to meet net operating losses in its operation. Direct
charging of uncollectible, write-offs or inventory losses is
Education and Training Fund – shall be used for the
training, development and other similar cooperative
activities geared towards the growth of the cooperative
Community Development Fund – shall be used for projects
or activities that will benefit the community where the
cooperative operated.
Optional Fund – shall be used for acquisition of land
and/or building, machinery and equipment, replacement
fund for PPE, members’ benefits, and other necessary
A cooperative shall recognize a provision only when:
1. The cooperative has an obligation at the reporting
date as a result of a past event.
2. It is probable (i.e more likely more than not) that
the cooperative will be required to transfer
economic benefits n settlement; and
3. The amount of obligation can estimated reliably

CONTINGENT LIABILITY – a possible but uncertain

obligation or a present obligation that is not
recognized because it is not probable and
EQUITY – is the residual interest in the assets of a
cooperative after deducting all its liabilities. It includes
investment by the members of the cooperatives plus
additions to those investments, minus reductions to
members’ investments as a result of payment to
withdrawing members.
EQUITY – is the residual interest in the assets of a
cooperative after deducting all its liabilities. It includes
investment by the members of the cooperatives plus
additions to those investments, minus reductions to
members’ investments as a result of payment to
withdrawing members.
DONATIONS & GRANTS – donations and grants is
assistance by another entity in the form of a transfer of
resources to a cooperative in return for past or future
compliance with specified conditions relating to the
operating activities of the cooperative.


cooperative shall recognize donations and grants in
equity when the assets are receive. Donations and
grants shall be measured at the fair value of the asset
- are interest and other costs that a cooperative incurs
in connection with the borrowing of funds
Borrowings costs includes:
1. Interest expense calculated using either the straight
line on the effective interest method.

2. Finance charges in respect of finance leases

3. Exchange difference arising from foreign currency

borrowings to the extent that they are regarded as an
adjustments to interest costs
Recognition of Borrowing Costs
1. A coop shall recognize costs as an expense in the
period they are incurred.
2. Borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying
asset are those borrowings costs that would have been
avoided if the outlays on the qualifying asset had not
been made.
3. Can be capitalized as part of the cost of the asset
when it is probable that will result in future economic
benefits to the cooperative and the costs can be
measured reliably.