Gawad Kalinga Community Development Foundation, Inc. (A non-stock, non-profit organization)

Transcription

1 Gawad Kalinga Community Development Foundation, Inc. (A non-stock, non-profit organization) Financial Statements As at and for the years ended June 30, 2014 and 2013

2 Independent Auditor s Report To the Board of Trustees of Gawad Kalinga Community Development Foundation, Inc. (A non-stock, non-profit organization) Cheng Building, No. 212 Haig Street Barangay Daang-Bakal, Mandaluyong City Report on the Financial Statements We have audited the accompanying financial statements of Gawad Kalinga Community Development Foundation, Inc., which comprise the statements of assets, liabilities and fund balances as at June 30, 2014 and 2013, and the related statements of support, donations and expenses, statements of total comprehensive income, statements of changes in fund balances and statements of cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Philippine Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

3 Independent Auditor s Report To the Board of Trustees of Gawad Kalinga Community Development Foundation, Inc. (A non-stock, non-profit organization) Page 2 Opinion In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Gawad Kalinga Community Development Foundation, Inc. as at June 30, 2014 and 2013, and its support, donations and expenses and its cash flows for the years then ended in accordance with Philippine Financial Reporting Standards. Report on Bureau of Internal Revenue Requirements Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information on taxes and licenses in Note 19 to the financial statements is presented for purposes of filing with the Bureau of Internal Revenue and is not a required part of the basic financial statements. Such supplementary information is the responsibility of management and has been subjected to the auditing procedures applied in our audits of the basic financial statements. In our opinion, the supplementary information is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Isla Lipana & Co. Geraldine Hammond-Apostol Partner CPA Cert. No P.T.R. No ; issued on January 6, 2015 at Makati City SEC A.N. (individual) as general auditors 0108-AR-3, Category A; effective until January 29, 2016 SEC A.N. (firm) as general auditors 0009-FR-3; effective until August 15, 2015 T.I.N BIR A.N ; issued on April 4, 2013; effective until April 3, 2016 BOA/PRC Reg. No. 0142, effective until December 31, 2016 Makati City October 7,2015

4 Statement Required by Section 8-A, Revenue Regulations No. V-1 To the Board of Trustees of Gawad Kalinga Community Development Foundation, Inc. (A non-stock, non-profit organization) Cheng Building, No. 212 Haig Street Barangay Daang-Bakal, Mandaluyong City None of the partners of the firm has any financial interest in Gawad Kalinga Community Development Foundation, Inc. or any family relationships with its founder, executive directors or members of the Board of Trustees. The supplementary information required by the Bureau of Internal Revenue is presented in Note 20 to the financial statements. Isla Lipana & Co. Geraldine Hammond-Apostol Partner CPA Cert. No P.T.R. No ; issued on January 6, 2015 at Makati City SEC A.N. (individual) as general auditors 0108-AR-3, Category A; effective until January 29, 2016 SEC A.N. (firm) as general auditors 0009-FR-3; effective until August 15, 2015 T.I.N BIR A.N ; issued on April 4, 2013; effective until April 3, 2016 BOA/PRC Reg. No. 0142, effective until December 31, 2016 Makati City October 7, 2015

5 Statements Required by Rule 68, Part I Section 4, Securities Regulation Code (SRC), As Amended on October 20, 2011 To the Board of Trustees of Gawad Kalinga Community Development Foundation, Inc. (A non-stock, non-profit organization) Cheng Building, No. 212 Haig Street Barangay Daang-Bakal, Mandaluyong City We have audited the financial statements of Gawad Kalinga Community Development Foundation, Inc. as at and for the year ended June 30, 2014, on which we have rendered the attached report dated October 7, The supplementary information shown in the Schedule of Receipts and Disbursements, and Schedule of All Standards and Interpretations under Philippine Financial Reporting Standards effective as at June 30, 2014, as additional components required by Part I, Section 4 of Rule 68 of the SRC, is presented for purposes of filing with the Securities and Exchange Commission (SEC) and is not a required part of the basic financial statements. Such supplementary information is the responsibility of management and has been subjected to the auditing procedures applied in the audit of the basic financial statements. In our opinion, the supplementary information has been prepared in accordance with Part I, Section 4 of Rule 68 of the SRC. Isla Lipana & Co. Geraldine Hammond-Apostol Partner CPA Cert. No P.T.R. No ; issued on January 6, 2015 at Makati City SEC A.N. (individual) as general auditors 0108-AR-3, Category A; effective until January 29, 2016 SEC A.N. (firm) as general auditors 0009-FR-3; effective until August 15, 2015 T.I.N BIR A.N ; issued on April 4, 2013; effective until April 3, 2016 BOA/PRC Reg. No. 0142, effective until December 31, 2016 Makati City October 7, 2015

6 Gawad Kalinga Community Development Foundation, Inc. (A non-stock, non-profit organization) Statements of Assets, Liabilities and Fund Balances June 30, 2014 and 2013 (All amounts in Philippine Peso) A S S E T S Notes Current assets Cash and cash equivalents 5 364,435, ,050,757 Advances to GK programs, net 6 336,643, ,774,612 Prepayments ,000 - Other receivables 7 497,904 6,157,010 Total current assets 701,816, ,982,379 Non-current assets Property and equipment, net 8 317,907, ,429,523 Intangible assets, net 9 23,723,636 31,540,603 Prepayments 3,640,000 - Advances to related parties 11 1,579,597 - Total non-current assets 346,850, ,970,126 Total assets 1,048,667, ,952,505 LIABILITIES AND FUND BALANCES Current liabilities Accrued expenses and other current liabilities 10 19,891,581 8,691,018 Deferred grant 12 2,960,000 7,807,857 Due to related parties 11 1,575,035 - Total current liabilities 24,426,616 16,498,875 Non-current liability Retirement benefit obligation 14 8,350,094 5,622,263 Total liabilities 32,776,710 22,121,138 Fund balances Designated fund 996,502, ,711,355 General fund 19,388,336 (12,879,988) Total fund balances 1,015,890, ,831,367 Total liabilities and fund balances 1,048,667, ,952,505 The notes on pages 1 to 30 are integral part of these financial statements.

7 Gawad Kalinga Community Development Foundation, Inc. (A non-stock, non-profit organization) Statements of Support and Donations, and Expenses For the years ended June 30, 2014 and 2013 (All amounts in Philippine Peso) Notes Designated fund: Program support and donations ,410, ,325,405 Program expenses 13 (324,619,921) (194,680,598) Excess of support and donations over expenses 400,790, ,644,807 General fund: Support and donations Donations to administration 12 99,961,474 58,429,939 General and administrative expenses Staff costs 15 (36,103,679) (46,784,373) Depreciation and amortization 8, 9 (9,565,548) (9,173,437) Local area administrative costs (5,245,442) (2,554,574) Travel and transportation (3,990,189) (6,104,587) Communication, light and water (2,473,175) (2,970,035) Rent 17 (1,092,000) (1,092,000) Professional fees (1,021,664) (994,609) Meetings, planning, and trainings (459,355) (1,020,346) Printing and supplies (432,519) (660,712) Event expenses (375,000) (282,100) Repairs and maintenance 17 (218,637) (180,856) Marketing and promotion (74,725) - Taxes and licenses (13,934) (122,147) Others (1,617,829) (402,753) Total general and administrative expenses (62,683,696) (72,342,529) Other income (expense) Foreign exchange gains, net 18 1,237, ,729 Interest income 5 674, ,958 Loss on write-off of long outstanding receivables 7 (5,410,946) - Gain on write-off of long outstanding liability 10-6,183,427 Total other income (expense) (3,498,713) 6,903,114 Excess (Deficiency) of support and donations over expenses 33,779,065 (7,009,476) Total excess of support and donations over expenses 434,569,870 94,635,331 The notes on pages 1 to 30 are integral part of these financial statements.

8 Gawad Kalinga Community Development Foundation, Inc. (A non-stock, non-profit organization) Statements of Total Comprehensive Income For the years ended June 30, 2014 and 2013 (All amounts in Philippine Peso) Note Excess of support and donations over expenses 434,569,870 94,635,331 Other comprehensive income Item that will not be subsequently reclassified to excess of support and donations over expenses Remeasurement (loss) gain on retirement benefit obligation 14 (1,510,741) 1,404,751 Total comprehensive income for the year 433,059,129 96,040,082 The notes on pages 1 to 30 are integral part of these financial statements.

9 Gawad Kalinga Community Development Foundation, Inc. (A non-stock, non-profit organization) Statements of Changes in Fund Balances For the years ended June 30, 2014 and 2013 (All amounts in Philippine Peso) Designated fund (Note 1) General fund (Note 1) Total fund balances Balances at June 30, ,132,097 (21,340,812) 486,791,285 Comprehensive income Excess of support and donations over expenses for the year 101,644,807 (7,009,476) 94,635,331 Other comprehensive income Remeasurement gain on retirement benefit obligation - 1,404,751 1,404,751 Transfer of program savings (Note 1) (14,065,549) 14,065,549 - Total comprehensive income for the year 87,579,258 8,460,824 96,040,082 Balances at June 30, ,711,355 (12,879,988) 582,831,367 Comprehensive income Excess of support and donations over expenses for the year 400,790,805 33,779, ,569,870 Other comprehensive income Remeasurement loss on retirement benefit obligation - (1,510,741) (1,510,741) Total comprehensive income for the year 400,790,805 32,268, ,059,129 Balances at June 30, ,502,160 19,388,336 1,015,890,496 The notes on pages 1 to 30 are integral part of these financial statements.

10 Gawad Kalinga Community Development Foundation, Inc. (A non-stock, non-profit organization) Statements of Cash Flows For the years ended June 30, 2014 and 2013 (All amounts in Philippine Peso) Notes Cash flows from operating activities Excess of support and donations over expenses 434,569,870 94,635,331 Adjustments for: Loss on write-off of long outstanding receivables 6, 7 33,613,457 - Depreciation and amortization 8, 9 11,137,548 10,745,437 Retirement benefit expense 14 1,217,090 1,395,625 Loss on write-off of property and equipment 8 340,827 - Fair value of donated assets 8 (189,658,263) - Interest income 5 (674,286) (528,958) Unrealized foreign exchange gains 18 (588,286) (190,729) Operating income before changes in working capital 289,957, ,056,706 Changes in: Advances to GK programs (86,071,770) (68,241,244) Prepayments (3,880,000) - Other receivables 248,160 7,330,452 Deferred grant (4,847,857) - Accrued expenses and other current liabilities 11,200,563 (3,595,870) Due to related parties 1,575,035 - Net cash generated from operations 208,182,088 41,550,044 Interest received 5 674, ,958 Retirement benefits paid 14 - (524,049) Net cash provided by operating activities 208,856,374 41,554,953 Cash flows from investing activities Acquisition of property and equipment 8 (5,943,658) (3,134,961) Advances made to related parties 11 (1,579,597) - Acquisition of computer software 9 (537,077) - Net cash used in investing activities (8,060,332) (3,134,961) Net increase in cash and cash equivalents 200,796,042 38,419,992 Cash and cash equivalents at July 1 163,050, ,440,036 Effects of exchange rate changes in cash and cash equivalents , ,729 Cash and cash equivalents at June ,435, ,050,757 The notes on pages 1 to 30 are integral part of these financial statements.

11 Gawad Kalinga Community Development Foundation, Inc. (A non-stock, non-profit organization) Notes to Financial Statements As at and for the years ended June 30, 2014 and 2013 (All amounts are shown in Philippine Peso unless otherwise stated) Note 1 - General information Gawad Kalinga Community Development Foundation, Inc. (the Foundation ) was organized and registered with the Securities and Exchange Commission (SEC) as a non-stock, non-profit organization on July 28, 2003 primarily to advance and uphold an integrated, holistic and sustainable community development program, especially in the depressed areas, addressing shelter, livelihood, education and health issues in the spirit of nation building, to strengthen the development and improvement of human and spiritual formation of couples and their children especially the underprivileged, disadvantaged and marginalized sectors of society, and to foster cooperation with others in the pursuit and realization of the objectives for which the Foundation has been established. On October 3, 2010, the Board of Trustees approved the change in the Foundation s accounting period from December 31 to June 30. The Foundation has completed the statutory requirements for filling with the SEC and the latter has approved the change in accounting period on April 5, The Foundation has likewise filed for the change in accounting period with the Bureau of Internal Revenue (BIR), which was approved by the latter on July 28, The programs of the Foundation are usually done in partnership with corporate entities, local government units, government agencies, schools and universities and international donors. These partnerships can take the form of land donations, monetary contributions, materials and volunteer work and are either coursed through the Foundation, their affiliates here and abroad, or directly to the project sites. The financial statements account only for all cash and non-cash donations and other financial supports made directly to the Foundation. The annual deficiency of support and donations over expenses has resulted in a cumulative deficit in the Foundation s undesignated/general fund balance. While the Foundation is expected not to make profit, it is nevertheless the Foundation s policy that its operations must be supported fully by funds from its undesignated/general support and donations. In line with this policy, the Foundation instituted plans and programs to raise resources and reduce costs to address the annual deficiency and to resolve the accumulated deficit. On resource generation, the Foundation focused on activities that will increase funds for administrative purposes. The Foundation also reviewed its policies on pricing and cost allocation on designated program funds. On cost reduction, the Foundation implemented a major reorganization in December 2012 resulting in a decreased number of paid full time employees from 125 to 92 and paid volunteer workers from 66 to 43 as at December 31, These measures have resulted in the ability of the Foundation to fully meet and support its operations from undesignated donations in In 2013, the Board of Trustees approved the application from designated to undesignated/general fund balance of the P14 million program savings from completed and fully liquidated projects as at 2009 and earlier.

12 The Foundation is exempt from the payment of taxes pursuant to Section 30 of the Tax Reform Act of 1997 (Republic Act 8424). On September 2, 2005, the Foundation was accredited as a duly qualifieddonee institution by the Philippine Council for NGO Certification, Inc. (PCNC), a certification body authorized by the government to evaluate non-profit organizations for the tax-exempt status. On July 23, 2007, the Bureau of Internal Revenue issued a certificate of registration to the Foundation as a donee institution. The registration had a validity of five (5) years and it expired on July In November 2014, the Foundation renewed and was granted accreditation by PCNC and the BIR re-issued a certificate of registration to the Foundation as a donee institution valid until November 5, The Foundation is now in process of renewing its accreditation with PCNC and the BIR. As a PCNC-accredited non-for-profit organization, the Foundation is subject, among others, to the 30% limitation of administrative expenses over total expenses at any given taxable year. The Foundation has been in compliant with this requirement since The Foundation s office is currently located at Cheng Building, #212 Haig Street, Barangay Daang - Bakal, Mandaluyong City (Note 17). The Foundation is governed by a Board of Trustees whose members do not receive compensation. The Foundation s financial statements were approved for endorsement to the Board of Trustees by the Board Audit Committee on July 20, 2015, and authorized for issuance by the Board of Trustees on October 7, Note 2 - Summary of significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 2.1 Basis of preparation In 2012, the Foundation s total assets exceeded P350 million. Consequently, it ceased to qualify as a Small and Medium-sized Entity (SME) as defined under Philippine Financial Reporting Standards (PFRS) for SMEs and retrospectively adopted and prepared the financial statements in accordance with the full PFRS. The term PFRS in general includes all applicable PFRS, Philippine Accounting Standards (PAS), and interpretations of the Philippine Interpretations Committee (PIC), Standing Interpretations Committee (SIC), International Financial Reporting Interpretations Committee (IFRIC) which have been approved by the Financial Reporting Standards Council (FRSC) and adopted by the SEC. These financial statements have been prepared under the historical cost convention, unless otherwise stated. The preparation of financial statements in conformity with PFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Foundation s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 4. (2)

13 Changes in accounting policies and disclosures (a) New standards, amendments to existing standards and interpretations adopted The following amendments to existing standards have been adopted by the Foundation effective July 1, 2014: Amendment to PAS 32, Financial instruments: Presentation. This amendment clarifies that the right of set-off must not be contingent on a future event. It must also be legally enforceable for all counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The amendment also considers settlement mechanisms. The amendment did not have a significant effect on the Company s financial statements. Amendment to PAS 36, Impairment of assets, on the recoverable amount disclosures for nonfinancial assets. This amendment removed certain disclosures of the recoverable amount of cash generating units which had been included in PAS 36 by the issue of PFRS 13. The amendment did not have a significant impact on the Company s financial statements. Other standards, amendments to existing standards and interpretations which are effective for the financial year beginning January 1, 2014 are not material to the Foundation. (b) New standards, amendments to existing standards and interpretations not yet adopted A number of new standards and amendments to standards are effective for annual periods beginning after January 1, 2014, and have not been applied in preparing these financial statements. The more relevant ones as detailed below are not expected to have a significant effect on the financial statements of the Foundation: PFRS 9, Financial Instruments, addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of PFRS 9 was issued in July It replaces the guidance in PAS 39 that relates to the classification and measurement of financial instruments. PFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortized cost, fair value through other comprehensive income and fair value through profit and loss. The basis of classification depends on the entity s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in other comprehensive income not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in PAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. PFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the hedged ratio to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under PAS 39. The standard is effective for accounting periods beginning on or after January 1, 2018 with early adoption permitted. The Foundation s initial assessment of the potential impact of PFRS 9 on its financial statements provides that it would not significantly change the classification and measurement of its existing financial assets which are limited to those measured at amortized cost. The Foundation will continue its assessment and finalize the same on the effectivity of the new standard. (3)

14 No other new standards, amendments to existing standards and interpretations that are effective beginning or after January 1, 2014 are expected to have a material impact on the Foundation s financial statements. 2.2 Funds The accounts of the Foundation are maintained to reflect the resources for various activities which observe the limitations and restrictions placed on the use of resources. On overall, the fund balances of the Foundation are reported in the following two fund groups: (a) General or undesignated fund represents the resources available for the Foundation s operations and administration functions. (b) Designated fund represents the resources which carry restrictions and are to be used only for purposes specified by their donors and be utilized for the main programs of the Foundation. Excess funds from fully completed and liquidated projects are transferred from designated fund to general or undesignated fund subject to approval of the Board of Trustees. The relevant accounting policies for classification, recognition and measurement of funds received are presented in Note Cash and cash equivalents Cash and cash equivalents include deposits held at call with banks and other short-term highly liquid investments with original maturities of three (3) months or less from the date of acquisition. These are carried in the statement of assets, liabilities and fund balances at face amount or at nominal amounts and earns interest at the respective bank deposit rates. The relevant accounting policies for classification, recognition, measurement and impairment of cash and cash equivalents are presented in Note Advances to GK programs Advances to GK programs pertain to unutilized and unliquidated advances as at reporting date. These are initially recognized and subsequently measured at the amount of cash or consideration given out to GK programs, less provision for impairment, if any. A provision for impairment of advances to GK programs is established when there is objective evidence that the Foundation will not be able to receive the liquidation reports for all amounts allocated for each project. When a project is discontinued caused by any administrative, legal or other factors, these are indicators that the related advances are impaired. The amount of the provision is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognized within general and administrative expenses in the statement of support and donations and expenses. When advances remain unliquidated despite the completion of specified project and after the Foundation has exerted all administrative remedies, it is written-off against the allowance account for advances. Subsequent recoveries of amounts previously written-off are credited against general and administrative expenses in the statement of support and donations and expenses. Reversals of previously recorded impairment provision are credited to other income in the statement of support and donations and expenses based on the result of management s update assessment, considering the (4)

15 available facts and changes in circumstances, including but not limited to results of recent discussions and arrangements entered into with GK programs as to the recoverability of receivables at the end of the reporting period. Other relevant accounting policies on advances are presented in Note Financial instruments A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. The Foundation recognizes a financial instrument in the statement of assets, liabilities and fund balances when, and only when, the Foundation becomes a party to the contractual provisions of the instrument Classification The Foundation classifies its financial assets and liabilities according to the categories described below. The classification depends on the purpose for which the financial assets and liabilities were acquired. Management determines the classification of its financial assets and liabilities at initial recognition. (a) Financial asset The Foundation classifies its financial assets in the following categories: (i) financial assets at fair value through profit or loss; (ii) loans and receivables; (iii) held-to-maturity investments; and (iv) availablefor-sale investments. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. The Foundation s financial assets as at June 30, 2014 and 2013 are limited to loans and receivables. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and where management has no intention of trading. These are included in current assets, except for maturities greater than 12 months after the reporting date, in which case, these are classified as non-current assets. The Foundation s loans and receivables comprise cash and cash equivalents (Note 5) and other receivables (Note 7) in the statement of assets, liabilities and fund balances. (b) Financial liabilities The Foundation classifies its financial liabilities in the following categories: (i) financial liabilities at fair value through profit or loss (including financial liabilities held for trading and those that designated at fair value); and (ii) other financial liabilities at amortized cost. Other financial liabilities at amortized cost pertain to issued financial instruments that are not classified or designated at fair value through profit or loss and contain contract obligations to deliver cash or another financial asset to the holder or to settle the obligation other than the exchange of a fixed amount of cash. As at June 30, 2014 and 2013, the Foundation s financial liabilities under this category include accrued expenses and other current liabilities (except unconfirmed deposits, unallocated donations and payable to government agencies) (Note 10) and due to related parties (Note 11) in the statement of assets, liabilities and fund balances. (5)

16 2.5.2 Recognition and measurement (a) Initial recognition and measurement Regular purchases and sales of financial assets are recognized on trade date - the date on which the Foundation commits to purchase or sell the asset. Financial assets are initially recognized at fair value plus transaction costs. Financial liabilities not carried at fair value through profit or loss are initially recognized at fair value of the consideration received less directly attributable transaction costs. (b) Subsequent measurement Loans and receivables are carried at amortized cost using the effective interest method. Other financial liabilities are likewise subsequently measured at amortized cost Impairment of financial assets The Foundation assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. The Foundation first assesses whether objective evidence of impairment exists. The amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognized within general and administrative expenses in the statement of support and donations and expenses. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor s credit rating), the reversal of the previously recognized within other income (expense) in the statement of support and donations and expenses. Impairment testing of receivables is further described in Note Derecognition Financial assets are derecognized when the rights to receive cash flows from it have expired or have been transferred and the Foundation has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognized when, i.e., when the obligation is discharged, cancelled or has expired. (6)

17 2.5.5 Offsetting of financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of assets, liabilities and fund balances when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty. As at June 30, 2014 and 2013, there are no financial assets and liabilities that were offset. 2.6 Other receivables Other receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. A provision for impairment of other receivables is established when there is objective evidence that the Foundation will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the receivable is impaired. The amount of the provision is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the asset s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognized within general and administrative expenses in the statement of support and donations and expenses. When other receivable remains uncollectible after the Foundation has exerted all legal remedies, it is written-off against the allowance account for receivables. The Foundation first assesses whether objective evidence of impairment exists individually for receivables that are individually significant, and collectively for receivables that are not individually significant. If the Foundation determines that no objective evidence of impairment exists for an individually assessed receivable, whether significant of not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses those for impairment. Receivables that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective assessment of impairment. Subsequent recoveries of amounts previously written-off are credited against expenses in the statement of support, donations and expenses. Reversals of previously recorded impairment provision are credited in the statement of support, donations and expenses based on the result of management s update assessment, considering the available facts and changes in circumstances, including but not limited to results of recent discussions and arrangements entered into with debtors as to the recoverability of receivables at the end of the reporting period. 2.7 Prepayments Prepayments are recognized in the event that payment has been made in advance of obtaining right of access to goods or receipt of services and measured at nominal amounts. Prepayments are derecognized in the statement of assets, liabilities and fund balances either with the passage of time or through use or consumption. Prepayments are carried at cost and are included in current assets, except when the related goods or services are expected to be received and rendered more than twelve months after the end of the reporting period, in which case, these are classified as non-current assets. (7)

18 2.8 Property and equipment Property and equipment are carried at historical cost less accumulated depreciation and impairment losses, if any. Historical cost includes expenditure that is directly attributable to the acquisition of these items, which comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Foundation and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to general and administrative expenses in the statement of support and donations and expenses within expenses during the financial period in which they are incurred. Land is recognized at fair value at the time of donation. Subsequent fair value is determined based on periodic valuation performed by external independent appraiser and used only for disclosure purposes. Land is not depreciated. Land improvements are charged as part of program expenses of specific project in the statement of support and donations and expenses. Depreciation is calculated using the straight-line method to allocate their costs to their residual values over their estimated useful lives, as follows: No. of years Computer and other equipment 3 Transportation equipment 5 Office equipment 5 Office furniture and fixtures 3 Leasehold improvements are amortized over the term of the lease or the estimated useful life of the improvements of 5 years, whichever is shorter. Donated property and equipment which are designated for specific purposes and are to be utilized for main programs of the Foundation are classified under the Designated fund and those that are used for administrative purposes are recorded under the General fund in the statement of support, donations and expenses. Related depreciation charges are also recorded based on their fund classification. The assets residual values and useful lives are reviewed and adjusted, if appropriate, at each reporting date to ensure that the method and period of depreciation are consistent with the expected pattern of economic benefits from items of property and equipment. An asset s carrying amount is written down immediately to its recoverable amount if the asset s carrying amount is greater than the estimated recoverable amount (Note 2.11). The carrying amount of an item of property and equipment is derecognized on disposal or when no future economic benefits are expected from its use or disposal, at which time the related cost, accumulated depreciation and accumulated impairment losses, if any, are eliminated from the statement of assets, liabilities and fund balances. Gains and losses on disposals are determined by comparing proceeds with the carrying amount and are recognized in the statement of support, donations and expenses. Fully depreciated assets are retained in the accounts until they are no longer (8)

19 in use and no further depreciation are charged to current operations. Assets that are determined to be non-existent and assets that are no longer in use are immediately written-off and the resulting losses are charged to current operations. 2.9 Intangible assets Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized using straight-line method to allocate the costs over their estimated useful life of ten (10) years from the date the intangible asset is available for use. Amortization ceases when the intangible asset is derecognized Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of a non-financial asset is measured based on its highest and best use. The asset s current use is presumed to be its highest and best use. The fair value of financial and non-financial liabilities takes into account non-performance risk, which is the risk that the Foundation will not fulfill an obligation. The Foundation classifies its fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2); and inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3). The appropriate level is determined on the basis of the lowest level input that is significant to the fair value measurement. The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm s length basis. The quoted market price used for financial assets held by the Partnership is the current bid price. Note that under PFRS 13, the use of bid and asking prices is still permitted but not required. These instruments are included in Level 1. As at June 30, 2014 and 2013, there are no financial and non-financial assets and liabilities at fair value included in Level 3. The fair value of assets and liabilities that are not traded in an active market (for example, over-thecounter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the asset or liability is included in Level 2. If one or more of the significant inputs is not based on observable market data, the asset or liability is included in Level 3. As at June 30, 2014 and 2013, there are no financial and non-financial assets and liabilities at fair value included in Level 3. (9)

20 The Foundation uses valuation techniques that are appropriate in the circumstances and applies the technique consistently. Commonly used valuation techniques are as follows: Market approach - A valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable (i.e., similar) assets, liabilities or a group of assets and liabilities, such as a business Income approach - A valuation technique that converts future amounts (e.g., cash flows or income and expenses) to a single current (i.e., discounted) amount. The fair value measurement is determined on the basis of the value indicated by the current market expectations about those future amounts. Cost approach - A valuation technique that reflects the amount that would be required currently to replace the service capacity of an asset (often referred to as current replacement cost). Specific valuation techniques used to value financial instruments include: Quoted market prices or dealer quotes for similar instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves. The fair value of forward foreign exchange contracts is determined using forward exchange rates at the reporting date, with the resulting value discounted back to present value. Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments Impairment of non-financial assets Non-financial assets that have an indefinite useful life are not subject to depreciation and amortization and are tested annually for impairment. Non-financial assets that have definite useful lives are subject to depreciation and amortization and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use. For purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units or CGUs). Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. Where an impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, but the increased carrying amount should not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or CGU in prior years. A reversal of an impairment loss is recognized as income immediately and credited to other operating income in profit or loss Accrued expenses and other current liabilities Accrued expenses and other current liabilities are recognized in the period in which the related money, goods or services are received or when a legally enforceable claim against the Foundation is established. These are classified as current liabilities if payment is due within one (1) year or less. If not, they are presented as non-current liabilities. These are unsecured, non-interest bearing and are measured at the original invoice amount (as the effect of discounting is immaterial). Derecognition policy is discussed in Note (10)

21 2.13 Provisions and contingencies Provisions are recognized when: (i) the Foundation has a present legal or constructive obligation as a result of past events; (ii) it is more likely than not that an outflow of resources will be required to settle the obligation; and (iii) the amount has been reliably estimated. Provisions are derecognized when the obligation is settled, cancelled or has expired. Provisions are not recognized for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense in the statement of support and donations and expenses. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. Provisions are derecognized when the obligation is paid, cancelled or has expired. Contingent liabilities are not recognized in the financial statements. These are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent assets are not recognized in the financial statements but disclosed when an inflow of economic benefit is probable. If it becomes virtually certain that an inflow of economic benefits will arise, the asset and the related income are recognized in the financial statements Support and donations, and expense recognition Support and donations either monetary or in-kind are initially recognized at the fair value of the consideration received in the ordinary course of the Foundation s activities. Support and donations are recognized to the extent that it is probable that the economic benefits will flow to the Foundation and the amount of support and revenue can be measured reliably. The following specific criteria must also be met before support, donations and expense are recognized: Support and donations Support and donations are recognized in the period received and reported as revenues of the fund for which they are intended. i. Designated support and donations are recognized upon fulfillment of the donor-imposed conditions attached to the support and/or to the extent that expenses are incurred. Designated support for which restrictions and conditions have not yet been met, are deferred in deferred grant account. ii. General or undesignated support and donations are recognized upon receipt of the support, and expenses are reported when incurred. (11)