COVER SHEET

for
AUDITED FINANCIAL STATEMENTS

SEC Registration Number

C N 2 0 1 0 2 9 0 6 1

COMPANY NAME
N E G R E N S E V O L U N T E E R S F O R C H A N G E

F O U N D A T I O N , I N C .

PRINCIPAL OFFICE ( No./Street/Barangay/City/Town/Province)

M - 1 3 H , N E G R O S F I R S T

C Y B E R C E N T R E B U I L D I N G , L A C S O N

S T R E E T , B A C O L O D C I T Y , N E G R O S

O C C I D E N T A L

Form Type Department requiring the report Secondary License Type, If Applicable

A F S I E O N O N E

COMPANY INFORMATION
Company's Email Address Company's Telephone Number/s Mobile Number

[email protected] (034) 434-5568 NONE

No. of Members Annual Meeting (Month/Day) Fiscal Year (Month/Day)

108 JULY/2ND SATURDAY DECEMBER 31

CONTACT PERSON INFORMATION

The designated contact person MUST be an Officer of the Corporation
Name of Contact Person Email Address Telephone Number/s Mobile Number

MILAGROS L. KILAYKO [email protected] (034) 434-5568 NONE

CONTACT PERSON's ADDRESS

54 LIZARES AVE., BACOLOD CITY

NOTE 1: In case of death, resignation or cessation of office of the officer designated as contact person, such incident shall be reported to the Commission within thirty
(30) calendar days from the occurrence thereof with information and complete contact details of the new contact person designated.

'2: All boxes must be properly and completely filled-up. Failure to do so shall cause the delay in updating the corporation's records with the Commission and/or
non-receipt of Notice of Deficiencies. Further, non-receipt of Notice of Deficiences shall not excuse the corporation from liability for its deficiencies.
 NEGRENSE VOLUNTEERS FOR CHANGE FOUNDATION, INC.
(A Non-stock, Not-for-profit Organization)

STATEMENTS OF FINANCIAL POSITION

AS AT DECEMBER 31, 2018 AND 2017

Note 2018 2017

ASSETS
Current Assets
Cash and cash equivalents 5 ₱6,089,344 ₱6,008,958
Project receivables 6 8,382,587 3,688,009
Inventories 7 3,567,890 3,195,662
Total Current Assets 18,039,821 12,892,629

Noncurrent Assets
Property and equipment, net 8 8,383,860 6,665,432
Intangible asset, net 9 16,483 25,083
Other noncurrent assets 10 567,959 345,379
Total Noncurrent Assets 8,968,302 7,035,894
₱27,008,123 ₱19,928,523

LIABILITIES AND EQUITY

Current liability
Accruals and government liabilities 11 ₱3,833,404 ₱417,491

Fund balance 23,174,719 19,511,032

₱27,008,123 ₱19,928,523

See Notes to Financial Statements.

 NEGRENSE VOLUNTEERS FOR CHANGE FOUNDATION, INC.
(A Non-stock, Not-for-profit Organization)

STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2018 AND 2017

Note 2018 2017

REVENUES
Grants and donation 12 ₱32,980,894 ₱27,054,232
Income from livelihood project, net 13 - 2,151,539
Other income 14 29,876 7,749
33,010,770 29,213,520

EXPENSES
Project expenses 15 25,611,262 23,195,688
Administrative expenses 16 3,735,821 2,905,920
29,347,083 26,101,608

EXCESS OF SUPPORT AND DONATIONS OVER EXPENSES ₱3,663,687 ₱3,111,912

See Notes to Financial Statements.

 NEGRENSE VOLUNTEERS FOR CHANGE FOUNDATION, INC.
(A Non-stock, Not-for-profit Organization)

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

Note 2018 2017

CASH FLOWS FROM OPERATING ACTIVITIES

Excess of support and donations over expenses ₱3,663,687 ₱3,111,912
Adjustments for:
Depreciation 8 1,401,173 808,622
Amortization 9 8,600 8,600
Interest income 5 (25,076) (617)
Operating income before working capital changes 5,048,384 3,928,517
Decrease (increase) in:
Project receivables (4,694,578) 454,379
Inventories (372,228) (260,083)
Noncurrent assets (222,580) (101,180)
Increase in other payables 3,415,913 281,286
Net cash flows from operating activities 3,174,911 4,302,919

CASH FLOWS FROM INVESTING ACTIVITIES

Disposal of property and equipment 8 (3,119,601) (3,031,148)
Interest income received 5 25,076 617
Net cash flows used in investing activities (3,094,525) (3,030,531)

NET INCREASE IN CASH AND CASH EQUIVALENTS 80,386 1,272,388

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 6,008,958 4,736,570

CASH AND CASH EQIVALENTS AT END OF YEAR 5 ₱6,089,344 ₱6,008,958

See Notes to Financial Statements.

 NEGRENSE VOLUNTEERS FOR CHANGE FOUNDATION, INC.
(Non-stock, Not-for-profit Organization)
NOTES TO FINANCIAL STATEMENTS

1. Business Information

Negrense Volunteers for Change Foundation, Inc. (hereinafter referred to as the “Foundation”) was
incorporated and registered with the Philippines Securities and Exchange Commission (SEC) on August
20, 2010 as a non-stock, not-for-profit organization under SEC Registration No. CN201029061.

The primary purpose of the Foundation is to bring the level of social awareness of the Negrenses and
effect peaceful reforms thru social transformation, poverty alleviation, and social accountability in
cooperation and collaboration with the government, NGO’s, local communities and other volunteer
groups.

The Foundation also functions to create a social enterprise to manufacture and distribute food
products wherein raw materials are sourced out from farmer beneficiaries, wherein qualified
members from the livelihood communities and organizations partnering with the Foundation are
prioritized in the workforce necessary to operate the enterprise. The profit obtained from the
operations of these enterprises shall be used solely for the furtherance of the purpose for which the
Foundation was organized (As amended on April 3, 2012).

The Foundation is being maintained by members' contributions and funding assistance in the form of
grants, aids and donations from local and international donors. General supervision and control of
the business and the affairs of the Foundation is vested in the Board of Trustees (BOT) who shall be
elected by the members from their own number. As a nonprofit entity, no part of the income which
the Foundation may obtain incident to its operations shall be distributed to its members, trustees or
officers, but shall be used solely to carry out its purposes. At least 70% of the total fund received by
the Foundation shall be used for its projects and purposes and not more than 30% shall be used for
administrative expenses.

On August 19, 2015, the SEC approved the amendment of the Foundation’s principal office at M-13H,
Negros First Cybercentre Building, Lacson Street, Bacolod City, Negros Occidental.

The Foundation qualifies as a tax-exempt Foundation under Section 30 of the Tax Code, as amended,
and such enjoys tax exemption on its net income except for the tax on passive income under Section
27 (D) thereof. As at December 31, 2018, the Foundation is in the process of obtaining the Certificate
of tax exemption from the Bureau of Internal Revenue (BIR).

The Foundation maintains various projects that include, among others, the following major programs
as of December 31, 2018 and 2017:

Mingo Meal Nutrition Program

This is a six (6) - month feeding program for children aged six to thirty (6–30) months in deprived
communities and Peter Project fishing communities. The Foundation manufactures Mingo, a
nutritious, instant powder mix that turns into a rich porridge when mixed with water. It is the staple
item in the Foundation’s Start Right, Live Bright Nutrition Program. This program provides Mingo
daily to children, giving them the nutrients needed for optimal growth and development.

Mingo is also used as emergency food for evacuees and victims of disasters, calamities, and conflict
all over the Philippines. The Foundation also works with other groups to provide Mingo in bulk for
their own relief and emergency efforts.
 2

Project Joseph

Project Joseph helps people with income-generating skills but lacking in specific resources to earn a
more stable and higher living by providing them with the appropriate tools that will give them a step
up in life.

This project helps communities who have skills or trade that can earn them a higher income with the
right resources. These include, among others, carpentry, welding, sewing, cooking and baking,
farming, professional tricycle, motorcycle, or pedicab operation and driving.

The Peter Project

This is a livelihood program whereby the Foundation provides motorized fishing boats to fishermen’s
helpers who have none of their own, and to fishermen whose boats have been destroyed by natural
disasters, particularly Typhoon Haiyan. Sites are carefully screened and beneficiaries monitored to
ensure sustainability and responsible fishing. The initiative is named after St. Peter the Apostle, who
was a fisherman before he was called to be a “fisher of men”.

This project is sustained with funding assistance from private entities such as the ABS CBN Lingkod
Kapamilya Found. Inc., British American Tobacco Ltd., Feed the Hungry, Inc., Toyota Shaw, Inc.,
Union Church of Manila, Metrobank Foundation, Springboard Inc., Ayala Foundation and others.

Education Development Projects

The Foundation addresses several known shortages and gaps in public schools. It partners with
different donors and institutions to build much-needed classrooms and science labs, also monitoring
their maintenance after turnover. This includes:

Classrooms for Change

To address the classroom shortage in the Visayas region, the Foundation has partnered with various
foundations and groups to provide much-needed classrooms to public schools in Negros Occidental
and Negros Oriental, with a focus on preschool and elementary requirements. The Foundation’s
general scope of work includes site identification, coordination with government officials, overseeing
construction, and monitoring the use and maintenance of classrooms after turnover.

The Foundation’s partners include Aklat, Gabay at Aruga tungo sa Pag-angat at Pag-asa (AGAPP)
Foundation, Senator Sergio Osmena III and Angelicum Foundation and Fundacion Familia Barcelona.

Books Build Change

To help address the lack of books in public school libraries, the Foundation volunteers solicit used
books from private school libraries, families and individuals. These are sorted by the volunteers and
distributed to public schools in need.

Artisan Livelihood Project

This is a livelihood program whereby the Foundation partners with artists and trained artisans to
create high-quality, marketable products to supplement their income as well as raise funds for The
Foundation’s projects. The Foundation oversees the design, production, and marketing of mosaic
art, crocheted crafts, fiber and fabric art, and bead work, among other handcrafted products.

Merchants of Hope products are sold at the showrooms of the Foundation and the Association of
Negros Producers in Bacolod City, at major bazaars in Metro Manila, and other specialty retail outlets.
 3

2. Basis of Preparation and Statement of Compliance

Statement of Compliance
The financial statements have been prepared in accordance with Philippine Financial Reporting
Standards for Small and Medium-sized Entities (PFRS for SMEs). PFRS for SMEs provides qualifying
entities an option of using a much simplified, PFRS-based accounting framework to prepare their
financial statements.

Basis of Preparation
The financial statements have been prepared on the historical cost basis.

Functional and presentation currency

The accompanying financial statements of the Foundation are presented in Philippine peso (P
=), which
is also the Foundation’s functional and presentation currency, and all values are rounded off to the
nearest peso, unless otherwise indicated.

3. Summary of Significant Accounting Policies

Current versus Noncurrent Classification

The Foundation presents assets and liabilities in the statement of financial position based on
current/noncurrent classification.

An asset is current when it is:

 Expected to be realized or consumed in normal operating cycle;

 Expected to be realized within 12 months after the end of the reporting period; or
 Cash on hand and in banks unless restricted from being exchanged or used to settle a liability
for at least 12 months after the end of the reporting period.

All other assets are classified as noncurrent if they do not fall on the conditions above.

A liability is current when it is:

 Expected to be settled in normal operating cycle;

 Due to be settled within 12 months after the end of the reporting period; or
 There is no unconditional right to defer the settlement of the liability for at least 12 months
after the end of the reporting period.

The Foundation classifies all other liabilities as noncurrent if they do not fall on the conditions above.

Financial Instruments
The Foundation classifies its financial instruments as either basic financial instruments or other
financial instruments. Financial instruments are recognized only when the entity becomes a party to
the contractual provisions of the instrument.

Initial recognition

The Foundation’s basic financial assets and liabilities are measured initially at transaction price
including transaction costs except for those that are measured at fair value through profit or loss.
 4

Basic financial instruments

The Foundation’s basic financial instruments other than investments in non-convertible and non-
puttable preference shares and non-puttable ordinary shares that are publicly traded or fair value
can be measured reliably are subsequently measured at amortized cost less impairment.

The amortized cost of a financial instrument at the end of each reporting period is computed as the
net of the amount at which the financial instrument is measured at initial recognition, minus any
repayments of the principal, plus or minus the cumulative amortization using the effective interest
method of any difference between the amount at initial recognition and the maturity amount, minus,
in the case of a financial asset, any reduction (directly or through the use of an allowance account)
for impairment or uncollectibility.

Effective interest method

The effective interest method is a method of calculating the amortized cost of a financial asset or a
financial liability (or a group of financial assets or financial liabilities) and of allocating the interest
income or interest expense over the relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash payments or receipts through the expected life of the
financial instrument or, when appropriate, a shorter period, to the carrying amount of the financial
asset or financial liability. The effective interest rate is determined on the basis of the carrying
amount of the financial asset or liability at initial recognition.

Under the effective interest method, the amortized cost of a financial asset (liability) is the present
value of future cash receipts (payments) discounted at the effective interest rate; and the interest
expense (income) in a period equals the carrying amount of the financial liability (asset) at the
beginning of a period multiplied by the effective interest rate for the period.

Derecognition of financial assets

The Foundation derecognizes a financial asset only when the contractual rights to the cash flows
from the asset expire or are settled, or when it transfers the financial asset and substantially all the
risks and rewards of ownership of the asset to another entity.

If the Foundation, despite having retained some significant risks and rewards of ownership, has
transferred control of the asset to another party and the other party has the practical ability to sell
the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally
and without needing to impose additional restrictions on the transfer, the Foundation derecognizes
the asset and recognizes separately any rights and obligations retained or created in the transfer.

Any difference between the consideration received and the amounts recognized and derecognized
shall be recognized in profit or loss.

Derecognition of financial liabilities

Financial liabilities are derecognized only when it is extinguished or when the obligation specified in
the contract is discharged, cancelled or expired.

Any difference between the carrying amount of the financial liability extinguished or transferred to
another party and the consideration paid, including any non-cash assets transferred or liabilities
assumed shall be recognized in profit or loss.
 5

Impairment of Financial Assets

At the end of each reporting period, the Foundation assesses whether there is objective evidence of
impairment of any financial assets that are measured at cost or amortized cost. If there is objective
evidence of impairment, the Foundation recognizes an impairment loss in profit or loss immediately.

Objective evidence that a financial asset or group of assets is impaired includes:

 significant financial difficulty of the issuer or obligor;

 a breach of contract, such as a default or delinquency in interest or principal payments;

 the creditor, for economic or legal reasons relating to the debtor’s financial difficulty, granting
to the debtor a concession that the creditor would not otherwise consider;

 it has become probable that the debtor will enter bankruptcy or other financial reorganization;
and

 observable data indicating that there has been a measurable decrease in the estimated future
cash flows from a group of financial assets since the initial recognition of those assets, even
though the decrease cannot yet be identified with the individual financial assets in the group,
such as adverse national or local economic conditions or adverse changes in industry conditions.

For an instrument measured at amortized cost, the impairment loss is the difference between the
asset’s carrying amount and the present value of estimated cash flows discounted at the asset’s
original effective interest rate. If such a financial instrument has a variable interest rate, the
discount rate for measuring any impairment loss is the current effective interest rate determined
under the contract.

For an instrument measured at cost less impairment, the impairment loss is the difference between
the asset’s carrying amount and the best estimate of the amount that the Foundation would receive
for the asset if it were to be sold at the reporting date.

If, in a subsequent period, the amount of an impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the Foundation
reverses the previously recognized impairment loss either directly or adjusting the allowance
account. The reversal shall not result in a carrying amount of the financial asset (net of allowance
account) that exceeds what the carrying amount would have been had the impairment not previously
recognized. The Foundation shall recognize the amount of reversal in profit or loss immediately.

Cash and cash equivalents. Cash and cash equivalents are measured at face value. Cash and cash
equivalents include cash on hand, cash in banks and short-term placements. Cash in banks earn
interest at the respective bank deposit rates. Short-term placements are highly-liquid investments
that are readily convertible to cash with original maturities of 3 months or less and that are subject
to an insignificant risk of change in value. For the purpose of reporting cash flows, cash and cash
equivalents are not restricted and available for use in current operations.

Project receivables. Project receivables are initially measured at transaction price and subsequently
measured at amortized cost less provision for impairment, if any. Impairment is considered when
there is objective evidence that the Foundation will not be able to collect the all amounts due
according to the original terms of the receivables.

The allowance for impairment loss is the estimated amount of probable losses arising from non-
collection based on past collection experience and management’s review of the current status of the
long-outstanding receivables.
 6

Security deposit. Security deposit are initially and subsequently carried at cost. This is made in
relation to the lease entered into by the Foundation.

Accruals. Accruals are recognized initially at the transaction price and subsequently measured at
amortized cost less subsequent payments.

Accruals are liabilities to pay for goods or services that have been received or supplied but have not
been paid, invoiced or formally agreed with the supplier, including amounts if any to employees.

Inventories
Inventories are stated at the lower of cost and selling price less costs to complete and sell. Cost is
determined using the moving average method. At each financial reporting date, inventories are
assessed for impairment. If the inventory is impaired, the carrying amount is reduced to its selling
price less costs to complete and sell; the impairment loss is recognized immediately in profit or loss.
Prepayments
Prepayments represent expenses not yet incurred but already paid in cash. Prepayments are initially
recorded as assets and measured at the amount of cash paid. Subsequently, these are charged to
income as they are consumed in the operation or expire with passage of time. Prepayments are
classified in the statement of financial position as current asset when the cost of goods or services
related with the prepayments is expected to be incurred within twelve (12) months after the balance
sheet date.

Property and Equipment

Property and equipment are stated at historical cost less accumulated depreciation and any
impairment in value except for land. Land, if any, is stated at cost less impairment in value.

The initial cost of property and equipment comprises its purchase price, including taxes and any
directly attributable costs of bringing the asset to its working condition and location for its intended
use.

Expenditures incurred after the property and equipment have been put into operation, such as
repairs and maintenance and overhaul costs, are normally charged to operations in the period the
cost are incurred. In situations where it can be clearly demonstrated that the expenditures have
resulted in an increase in the future economic benefits expected to be obtained from the use of an
item of property and equipment beyond its originally assessed standard of performance, the
expenditures are capitalized as an additional cost of property and equipment.

Land is not depreciated. Depreciation is charged so as to allocate the cost of depreciable assets over
their estimated useful lives, using the straight-line method. The estimated useful lives range as
follows:
Property classification Number of Years
Factory equipment 5 - 10 years
Office equipment, furniture and fixtures 5 years
Leasehold improvement 5 years
Showroom equipment, furniture and fixtures 5 years
Vehicle 7 years

Leasehold improvements are amortized over the improvements’ useful life of five (5) years or lease
term, whichever is shorter.

The assets’ useful lives and depreciation method are reviewed, and adjusted prospectively if
appropriate, if there is an indication of a significant change since the last reporting date.
 7

An item of property and equipment is derecognized upon disposal or when no future economic
benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal proceeds and the carrying amount of the
asset) is included in the profit or loss in the year the asset is derecognized.

Intangible Asset
Intangible asset is capitalized and is measured at cost less any accumulated amortization and
accumulated impairment losses, if any.

Amortization of the intangible asset is computed on a straight-line basis over the expected usage of
the asset by the Foundation which is 5 years. The carrying value of the intangible asset is reviewed
for impairment when events or changes in circumstances indicate that the carrying value may not be
recoverable.

Other noncurrent assets represent creditable withholding taxes and are initially and subsequently
measured as cost.

Impairment of Non-financial Assets

Non-financial assets are assessed at each reporting date to determine whether there is any indication
that the assets are impaired. Where there is any indication that an asset may be impaired, the
carrying value of the asset (or cash generating unit (CGU) to which the asset has been allocated) is
tested for impairment. 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 (or
CGU’s) fair value less costs to sell and value in use. Impairment losses, if any, are recognized in the
profit or loss. For the purposes of assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash flows (CGU’s).

Government Liabilities
Government liabilities are recognized initially at their transaction price and subsequently measured
at amortized cost less subsequent payments.

Fund
Members’ contribution
Members’ contributions represent the capital contributed by the members which form part of the
Foundation’s fund balance.

Fund balance
Fund balance represents member’s contributions and the cumulative excess of receipts over expenses
of current and prior period operations as disclosed in the statement of operations and statements of
changes in member’s equity including prior period adjustments, effect of changes in accounting
policies and other capital adjustments. When surplus account has a debit balance, it is called
“deficit”, and presented as a deduction from equity.

Revenue
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
Foundation and the income can be reliably measured.

The additional specific recognition criteria for each type of revenue are as follows:

Foreign and local grants. Grants are recognized at their fair value where there is reasonable
assurance that the grant will be received and all attaching conditions will be complied with. When
the grant relates to an expense item, it is recognized as income over the years necessary to match
the grant on a systematic basis to the costs that it is intended to compensate. When the grant relates
to an asset, the fair value is credited to a deferred income account and is released to the statement
of operations over the expected useful life of the relevant asset by equal annual installments.
 8

Donations received. Cash donations are recognized as revenues when these are actually received by
the Foundation while asset donations are credited to a deferred revenue account and are released
to the statement of operations over the expected useful life of the relevant asset by equal annual
installments.

Membership dues. Revenue is recognized upon actual receipt thereof.

Interest income. Revenue is recognized as the interest accrues (taking into account the effective
yield on the asset).

Gain or loss on foreign exchange. Transactions in foreign currencies are recorded in Philippine peso
based on the exchange rates prevailing at the date in which the transaction took place. Foreign
currency denominated assets and liabilities of the Foundation are translated using the prevailing
exchange rate as of balance sheet date. Gains or losses arising from these transactions and translation
are credited or charged to income for the year.

Service income. Revenue is recognized upon substantial performance of the services required.

Cost and Expense Recognition

Expenses are recognized when incurred regardless of when payment is made. Donation expenditures
are recognized in the period the donation is approved, provided this donation is not subject to future
conditions.

General and administrative expenses

General and administrative expenses are costs attributable to administering and overseeing the
overall operating activities of the Foundation.

Operating leases
Foundation as lessee
Leases which do not transfer to the Foundation substantially all the risks and benefits of ownership
of the asset are classified as operating leases. Operating lease payments are recognized as expense
in the profit or loss on a straight-line basis over the lease term. Associated costs, such as maintenance
and insurance, are expensed as incurred.

Employee benefit obligations

Short-term employee benefits
The Foundation recognizes a liability net of amounts already paid and an expense for services
rendered by employees during the accounting period. Short-term benefits given by the Foundation to
its employees include salaries and wages, social security contributions, short-term compensated
absences, bonuses and other non-monetary benefits.

Long-term employee benefits

The Foundation does not have a defined benefit retirement plan. The Foundation will comply with
the retirement procedures set forth in R.A. 7641 in terms of post-employment benefits.

Provisions
Provisions, if any, are recognized when the Foundation has a present obligation (legal or constructive)
as a result of a past event, it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation and a reliable estimate can be made of the amount of the
obligation. The expense relating to any provision is presented in the profit or loss, net of any
reimbursement. Provisions are renewed at each reporting date and adjusted to reflect the current
best estimate.
 9

Contingencies
Contingent liabilities are not recognized in the financial statements. They 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 are disclosed when an inflow of economic benefits is
probable.

Events After the Financial Reporting Date

Post year-end events that provide additional information about the Foundation’s position at the
reporting date (adjusting events) are reflected in the financial statements. Post year-end events that
are not adjusting events are disclosed in the notes to financial statements when material.

4. Significant Accounting Judgments and Estimates

The preparation of the financial statements requires the Foundation to exercise judgments and make
estimates that affect the reported amounts of assets, liabilities, income and expenses and disclosure
of contingent assets and contingent liabilities. The judgments and estimates used in the financial
statements are based upon evaluation of relevant facts and circumstances as of statement of
financial position date. Future events may occur which will cause the judgments and assumptions
used in arriving at the estimates to change. The effects of any change in judgments and estimates
are reflected in the Foundation’s financial statements as they become reasonably determinable.

Judgments and estimates are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the
circumstances.

Estimates and Assumptions

The key assumptions covering the future and other key sources of estimation uncertainty at the
financial reporting date, that have a significant risk of causing a material adjustment to the carrying
amounts of the assets and the liabilities within the next financial year are discussed below.

Net realizable value of inventories. The Foundation reviews the net realizable value of, and demand
for, its inventory on a quarterly basis to provide assurance that recorded inventory is stated at the
lower of cost or net realizable value. Factors that could impact estimated demand and selling prices
include the timing and success of future technological innovations, competitor actions, supplier
prices and economic trends.

Estimated useful lives of property and equipment. The useful lives of property and equipment are
based on the periods over which the assets are expected to be available for use. The estimated useful
lives are reviewed periodically and are updated if expectations differ from previous estimates due
to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use
of the asset.

The carrying value of property and equipment amounted to P

=8,383,860 and P
= 6,665,432 as at
December 31, 2018 and 2017, respectively.
 10

Impairment of nonfinancial assets. The Foundation assesses impairment of nonfinancial assets

whenever events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. The factors that the Foundation considered important which could trigger an
impairment review include among others the following:

 significant underperformance relative to expected historical or projected future operating

results;
 significant changes in the manner of use of the acquired assets or the strategy for overall
business; or
 significant negative industry or economic trends.

Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is
recognized. Recoverable amounts are estimated for individual assets, if it is not possible, for cash
generating unit to which the asset belongs.

Recoverable amount represents the value in use, determined as the present value of estimated future
cash flows expected to be generated from the continued use of the assets. The estimated cash flows
are projected using growth rates based on historical experience and business plans and are
discounted using pretax discount rates that reflect the current assessment of the time value of money
and the risks specific to the asset.

No impairment loss was recognized by the Foundation in 2018 and 2017.

5. Cash and Cash Equivalents

This account consists of:

2018 2017
Cash on hand ₽100,487 ₽131,018
Cash in banks 5,119,106 4,531,691
Short-term placements 869,751 1,346,249
₽6,089,344 ₽6,008,958

Cash on hand consists of undeposited cash donations, petty cash and revolving funds used to pay day-
to-day petty and other necessary expenses of the Foundation. Cash funds are maintained under an
imprest system and are replenished whenever required.

Cash in banks consist of current and savings account in various local banks. Cash in banks deposited
in savings account earn interest at the respective rates set by the depository banks ranging from
0.50% to 1.25%.

Cash in banks include US Dollar-denominated bank deposit amounting to US $55,582 and US $33,427
in 2018 and 2017, respectively. The balance as of December 31, 2018 and 2017 was translated into
Philippine Peso at the prevailing exchange rate which resulted in an unrealized foreign exchange
gain of nil for the years ended December 31, 2018 and 2017, respectively.

Short-term placement pertains to the Foundation’s money market unit investment trust fund (UITF)
in a local bank maturing within three (3) months and increased its value depending on market
movements of the pooled investment. Gain or loss is recognized upon disposal of the investment.

Interest income earned from deposit in banks and short-term placements amounted to P
= 25,076 and
P
=617 for the years ended December 31, 2018 and 2017, respectively (Note 14).
 11

6. Project Receivables

Project receivables pertain to grant commitments not yet received as at December 31, 2018 and
2017, respectively, on the following projects that were already completed.

2018 2017
Peter project ₽257,832 ₽582,788
Nutrition program - Mingo meals 3,232,268 1,961,992
Advances for liquidation 4,892,487 1,143,229
₽8,382,587 ₽3,688,009

The grants on the above projects are noninterest-bearing and are expected to be received in the
subsequent year.

Advances for liquidation represent unliquidated amount of cash advanced for project
implementation.

7. Inventories

This account consists of inventories on the Foundation’s livelihood projects.

Inventories are carried at cost. There are no inventories carried at net realizable value.

The cost of inventories recognized as expense for other project expenses amounted to P
=4,449,744
and P
=1,388,043 for the years ended December 31, 2018 and 2017, respectively.

The Foundation believes that there are no indications of impairment on its inventories as at
December 31, 2018 and 2017.

8. Property and Equipment, Net

The details of the account are as follows:

2018
Office Showroom
equipment, equipment,
Factory furniture & Leasehold furniture &
equipment fixtures improvements fixtures Vehicles Total
Cost
Beginning balances =7,600,351
P =1,051,608
P =120,165
P =279,374
P =808,000
P =9,859,498
P
Additions 2,566,652 153,061 399,888 - - 3,119,601
Ending balances 10,167,003 1,204,669 520,053 279,374 808,000 12,979,099
Accumulated depreciation
Beginning balances 2,315,835 661,198 58,080 158,953 - 3,194,066
Depreciation 979,964 159,371 90,534 55,875 115,429 1,401,173
Ending balances 3,295,799 820,569 148,614 214,828 115,429 4,595,239
Carrying Amount =6,871,204
P =384,100
P =371,439
P =64,546
P =692,571
P =8,383,860
P
 12

2017
Office Showroom
equipment, equipment,
Factory furniture & Leasehold furniture &
equipment fixtures improvements fixtures Vehicles Total
Cost
Beginning balances P
=5,672,329 P
=776,482 P
=120,165 P
=259,374 P
=- P
=6,828,350
Disposal 1,928,022 275,126 - 20,000 808,000 3,031,148
Ending balances 7,600,351 1,051,608 120,165 279,374 808,000 9,859,498
Accumulated depreciation
Beginning balances 1,680,639 566,346 34,047 104,412 - 2,385,444
Depreciation 635,196 94,852 24,033 54,541 - 808,622
Ending balances 2,315,835 661,198 58,080 158,953 - 3,194,066
Carrying Amount P
=5,284,516 P
=390,410 P
=62,085 P
=120,421 P
=808,000 P
=6,665,432

The Foundation believes that there are no indications of impairment on its property and equipment
as at December 31, 2018 and 2017.

9. Intangible Asset, Net

Intangible asset consists of the accounting software integrated by the Foundation in its operations.
The details of the account are as follows:

2018
Cost
Beginning balance =43,000
P
Acquisition -
Ending balance 43,000
Accumulated Amortization
Beginning balance 17,917
Amortization 8,600
Ending balance 26,517
Carrying Amount =16,483
P

2017
Cost
Beginning balance P
=43,000
Acquisition -
Ending balance 43,000
Accumulated Amortization
Beginning balance 9,317
Amortization 8,600
Ending balance 17,917
Carrying Amount P
=25,083

The Foundation believes that there are no indications of impairment on its intangible asset as at
December 31, 2018 and 2017.
 13

10. Other Noncurrent Assets

This account consists of:

2018 2017
Security deposits =107,560
P P
=75,000
Creditable withholding tax 366,329 270,379
Prepaid expenses 94,070 -
=567,959
P P
=345,379

Security deposits represent the amount paid by the Foundation to the lessor for the rented space
which serve as guaranty for the faithful compliance of the Foundation with all the covenants and
conditions of the lease contracts. Security deposits cannot be applied to the unpaid rentals but shall
be kept intact throughout the lease terms. It shall be returned to the Foundation within a reasonable
time only upon the expiration of the contract after the Foundation had completely and satisfactorily
vacated the area.

Creditable withholding tax pertains to taxes withheld against Foundation’s income.

Prepaid expenses represent insurance paid by the Foundation for the food shuttle purchased and
insurance of personnel.

11. Accruals and Government Liabilities

This account consists of:

2018 2017
Accrued expenses =3,787,444
P P
=385,500
Government liabilities 45,960 31,991
=3,833,404
P P
=417,491

Accrued expenses consists of unpaid expenses for goods and services supplied to the Foundation.
These are noninterest-bearing and generally payable within thirty (30) days.

Government liabilities consist of SSS, PHIC and HDMF premiums as well as withholding taxes to be
remitted to the respective government agencies in the subsequent period.

12. Income

This account consists of:

Note 2018 2017
Grants and donations =32,980,894
P P
=27,054,232
Income from livelihood project, net 13 - 2,151,539
Other income 14 29,876 7,749
=33,010,770
P P
=29,213,520

Grants and donations represent receipts from various donors and benefactors intended for the
development of the purpose and activities of the Foundation.
 14

13. Income from Livelihood Project, Net

This account consists of:

2018 2017
Proceeds from livelihood project =-
P P
=4,052,929
Livelihood project expenses - (1,901,390)
=-
P P
=2,151,539

14. Other Income

This account consists of:

Note 2018 2017
Membership dues =4,800
P P
=9,300
Service (loss) income - (2,168)
Interest income 5 25,076 617
=29,876
P P
=7,749

Service income pertains to income received by the Foundation for the services rendered for the sale
of the crafts produced through livelihood projects.

15. Project Expenses

This account consists of:

2018 2017
Peter project P911,658
= P
=12,628,421
Nutrition program - cost of manufacturing Mingo meals 15,622,588 6,485,962
Educational program 2,645,295 3,086,517
Other livelihood projects 6,431,721 994,788
=25,611,262
P P
=23,195,688

Peter project pertains to expenses for the implementation of the project.

Nutrition program – cost of manufacturing mingo meals pertains to materials and services incurred
for the production of the mingo meals.

Educational program pertains to expenses incurred in implementing the education development

projects.

Other livelihood projects pertain to costs incurred for the implementation of Foundation’s other
project activities.
 15

16. Administrative Expenses

This account consists of the following:

Note 2018 2017
Salaries, wages and related expenses 17 =1,720,756
P P
=1,449,514
Travel and transportation 355,187 359,574
Depreciation 8,19 305,780 173,426
Communication and postage 189,587 167,287
Office supplies 152,245 96,630
Management and consultancy fee 141,644 95,000
Website maintenance 140,608 31,337
Professional fees 109,723 119,533
Documentation 92,583 115,989
Light and water 81,127 60,581
Rent 18 75,259 61,723
Taxes, licenses and permits 20 42,359 44,687
Repairs and maintenance 17,820 31,376
Insurance 17,380 9,100
Amortization 9 8,600 8,600
Miscellaneous 285,163 81,563
=3,735,821
P P
=2,905,920

Travel and transportation pertains to meal allowances, lodging, and other incidental expenses
incurred by trustees and staff in attending assemblies and other meetings.

Documentation pertains to expenses in relation to materials and other necessary services in keeping
track of the Foundation’s projects through photographic recording and other similar means.

Communication and postage refers to the expenses incurred for the consumption of incoming and
outgoing call and similar service facilities including wireless internet connections essential for the
Foundation’s operations.

Miscellaneous includes bank charges and other expenses of insignificant amounts.

17. Salaries, Wages and Related Expenses

This account consists of the following:

2018 2017
Salaries and wages P
=814,312 P
=603,637
13th month pay 495,251 486,040
SSS, Medicare, Philhealth & Pag-ibig contribution 411,193 359,837
P
=1,720,756 P
=1,449,514

18. Lease Agreements

The Foundation rents space for its office under operating lease agreements which are renewable
under such terms and conditions as may be agreed upon by the parties including escalation rates, if
any. As at December 31, 2018, there is no outstanding lease commitment since the lease commences
January 1 and ends on December 31, renewable annually.
 16

Total rental expense charged to operations amounted to P

=75,259 and P
=61,723 for the years ended
December 31, 2018 and 2017, respectively (Note 16).

19. Depreciation

This account consists of:

2018 2017
Project expense - Nutrition program - Mingo meals
Factory equipment =979,964
P P
=635,196
Vehicles 115,429 -
1,095,393 635,196
Administrative expenses
Office equipment, furniture and fixtures 159,371 94,852
Leasehold improvements 90,534 24,033
Showroom equipment, furniture and fixtures 55,875 54,541
305,780 173,426
=1,401,173
P P
=808,622

20. Taxes, Licenses and Permits

This account consists of:

2018 2017
Permits and licenses =41,859
P P
=44,187
BIR annual registration fees 500 500
=42,359
P P
=44,687

21. Supplementary Information Required by The Bureau of Internal Revenue (BIR)

A. REVENUE REGULATION (RR) 15-2010

On November 25, 2010, the BIR issued RR No. 15-2010 which prescribes additional procedural and/or
documentary requirements in connection with the preparation and submission of financial statements
accompanying the tax returns. Under the said RR, companies are required to disclose, in addition to
the disclosures mandated under PFRS and such other standards and/or conventions that may
heretofore be adopted, in the Notes to Financial Statements, information on taxes, duties and license
fees paid or accrued during the taxable year. In compliance with the requirements set forth by RR
15-2010 hereunder is the information on taxes, duties and licenses fees paid or accrued as of
December 31, 2018.

1. The amount of VAT output tax declared during the year and the account title and amounts
upon which the same is based

The Foundation is a non-stock, not-for-profit organization and is registered as a percentage

taxpayer. As of December 31, 2018, the Foundation has no receipts subjected to percentage tax.
 17

2. Withholding taxes

The amount of withholding taxes paid/accrued for the year amounted to:

a. Withholding taxes on compensation and benefits

P
=9,907
b. Expanded withholding taxes
26,712
3. Taxes and licenses

a. Local
Business permits and licenses P
=41,859

b. National
BIR annual registration 500

4. Periods covered and amounts of deficiency tax assessments, whether protested or not

As at December 31, 2018, the Foundation does not have any assessment notice received from the
BIR.

B. REVENUE REGULATION (RR) NO. 2-2014

RR No. 2-2014 prescribes the new income tax forms to be used for income tax filing and starting with
calendar year 2013. Pursuant to Section 244, in relation to Sections 6(H), 51(A)(1) and 51(A)(2) of
the National Internal Revenue Code of 1997 (Tax Code), as amended, these Regulations are issued
to prescribe the use of revised income tax forms with bar codes, and to reflect the changes in
information required from said forms. This will also enable the said forms to be read by an optical
character reader for ease in scanning.

In the case of corporations using Bureau of Internal Revenue (BIR) Form 1702, the tax payer is now
required to include as part of its notes to the audited financial statements, which will be attached
to the income tax return (ITR), the schedules and information on taxable income and deductions to
be taken.

The information is presented for purposes of filing with the BIR and is not a required part of the
basic financial statements.

a. Sales/Revenues/Receipts/Fees

Sale of services P
= 32,980,894

b. Cost of Services

Direct charges – others P

=25,611,262

c. Other income

Membership dues P
=4,800
Interest income 25,076
P
=29,876
 18

d. Ordinary allowable itemized deductions

Amortization – intangible asset P

=8,600
Communication, light and water 270,714
Depreciation 305,780
Insurance 17,380
Management and consultancy fee 141,644
Miscellaneous 285,163
Office supplies 152,245
Professional fees 109,723
Rental 75,259
Repairs and maintenance – materials/supplies 17,820
Salaries, wages and related expenses 1,720,756
Taxes and licenses 42,359
Transportation and travel 355,187
Documentation 92,583
Website maintenance 140,608
P
=3,735,821

e. Details of taxes and licenses

a. Local
Business permits and licenses P
=41,859

b. National
BIR annual registration 500
 NEGRENSE VOLUNTEERS FOR CHANGE FOUNDATION, INC.
(A Non-stock, Not-for-profit Organization)

STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

Excess of income
Members'
over expenses
Contribution Total
As at January 1, 2018 ₱1,200,000 ₱18,311,032 ₱19,511,032
Excess of income over expenses - 3,663,687 3,663,687
As at December 31, 2018 ₱1,200,000 ₱21,974,719 ₱23,174,719
As at January 1, 2017 ₱1,200,000 ₱15,199,120 ₱16,399,120
Excess of income over expenses - 3,111,912 3,111,912
As at December 31, 2017 ₱1,200,000 ₱18,311,032 ₱19,511,032

See Notes to Financial Statements.