CARD-MRI Development Institute,

Inc.
(A Nonstock, Not-for-Profit Association)

Financial Statements
December 31, 2017 and 2016

and

Independent Auditor’s Report

 SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001,
6760 Ayala Avenue Fax: (632) 819 0872 December 14, 2015, valid until December 31, 2018
1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-4 (Group A),
Philippines November 10, 2015, valid until November 9, 2018

INDEPENDENT AUDITOR’S REPORT

The Board of Trustees

CARD-MRI Development Institute, Inc.
(A Nonstock, Not-for-Profit Association)

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of CARD-MRI Development Institute, Inc. (A Nonstock, Not-
for-Profit Association) (the Association), which comprise the statements of assets, liabilities and fund
balance as at December 31, 2017 and 2016, and the statements of revenue and expenses and changes in
fund balance and statements of cash flows for the years then ended, and notes to the financial statements,
including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial
position of the Association as at December 31, 2017 and 2016, and its financial performance and its cash
flows for the years then ended in accordance with Philippine Financial Reporting Standards for Small and
Medium-sized Entities (PFRS for SMEs).

Basis for Opinion

We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit
of the Financial Statements section of our report. We are independent of the Association in accordance
with the Code of Ethics for Professional Accountants in the Philippines (Code of Ethics) together with the
ethical requirements that are relevant to our audit of the financial statements in the Philippines, and we
have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of
Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in
accordance with PFRS for SMEs, 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.

In preparing the financial statements, management is responsible for assessing the Association’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless management either intends to liquidate the Association or to
cease operations, or has no realistic alternative but to do so.

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A member firm of Ernst & Young Global Limited
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Those charged with governance are responsible for overseeing the Association’s financial reporting
process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with PSAs will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.

As part of an audit in accordance with PSAs, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:

∂ Identify and assess the risks of material misstatement of the financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

∂ Obtain an understanding of internal control relevant to the audit 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 Association’s internal control.

∂ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

∂ Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Association’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Association to cease to continue
as a going concern.

∂ Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.

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Report on the Supplementary Information Required Under Revenue Regulations 15-2010

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken
as a whole. The supplementary information required under Revenue Regulations 15-2010 in Note 21 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 information is the responsibility of the
management of CARD-MRI Development Institute, Inc. (A Nonstock, Not-for-Profit Association). The
information has been subjected to the auditing procedures applied in our audit of the basic financial
statements. In our opinion, the information is fairly stated, in all material respects, in relation to the basic
financial statements taken as a whole.

SYCIP GORRES VELAYO & CO.

Ray Francis C. Balagtas

Partner
CPA Certificate No. 108795
SEC Accreditation No. 1510-A (Group A),
October 1, 2015, valid until September 30, 2018
Tax Identification No. 216-950-288
BIR Accreditation No. 08-001998-107-2018,
February 14, 2018, valid until February 13, 2021
PTR No. 6621226, January 9, 2018, Makati City

April 14, 2018

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A member firm of Ernst & Young Global Limited
CARD-MRI DEVELOPMENT INSTITUTE, INC.
(A Nonstock, Not-for-Profit Association)
STATEMENTS OF ASSETS, LIABILITIES AND FUND BALANCE

December 31
2017 2016

ASSETS

Current Assets
Cash in banks (Notes 4 and 18) P
=116,682,215 =53,199,025
P
Short-term investments (Notes 5 and 18) 91,911,913 59,275,897
Receivables (Notes 6 and 18) 9,881,552 3,538,740
Other current assets (Note 7) 2,650,646 1,067,763
Total Current Assets 221,126,326 117,081,425

Noncurrent Assets
Long-term investment (Notes 8 and 18) 30,000,000 –
Equity investments (Note 9) 4,591,079 4,373,900
Property and equipment (Note 10) 99,410,165 92,661,991
Retirement asset (Note 17) 10,280,397 8,001,384
Software costs (Note 11) 511,699 672,255
Other noncurrent assets (Note 16) 1,974,682 825,663
Total Noncurrent Assets 146,768,022 106,535,193
P
=367,894,348 =223,616,618
P

LIABILITIES AND FUND BALANCE

Current Liabilities
Accounts payable and accrued expenses (Note 12) P
=14,313,915 =8,420,769
P
Lease liability (Note 16) 1,908,598 2,474,740
16,222,513 10,895,509

Noncurrent Liabilities
Accounts payable and accrued expenses (Note 12) 75,084,384 5,661,487
Lease liability (Note 16) 419,551 1,805,047
75,503,935 7,466,534
91,726,448 18,362,043

Fund Balance
General fund 5,000,000 5,000,000
Restricted fund 13,727,724 –
Accumulated excess of revenue over expenses 257,440,176 200,254,575

TOTAL FUND BALANCE 276,167,900 205,254,575

P
=367,894,348 =223,616,618
P

See accompanying Notes to Financial Statements.

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CARD-MRI DEVELOPMENT INSTITUTE, INC.
(A Nonstock, Not-for-Profit Association)
STATEMENTS OF REVENUE AND EXPENSES AND
CHANGES IN FUND BALANCE

Years Ended December 31

2017 2016
REVENUE
Seminars and trainings (Note 18) P
=222,778,414 =173,265,451
P
Tuition fees and other school fees 19,778,761 9,485,973
Donations and contributions (Note 18) 5,000,000 100,000
Interest income (Notes 4, 5 and 18) 2,738,639 1,990,419
Remeasurement gain on retirement plan (Note 17) 2,257,514 6,632,683
Dividend income (Note 9) 1,093,475 262,434
Facilities fee (Note 18) 743,907 866,175
Others 756,054 615,469
255,146,764 193,218,604
EXPENSES
Cost of seminars, trainings and other programs (Note 13) 134,712,068 109,858,623
Senior high school expenses (Note 15) 11,208,076 2,190,141
Tertiary expenses (Note 14) 8,695,482 5,255,502
Administrative:
Staff training and development 8,510,597 2,215,370
Program monitoring and meetings 6,341,151 4,567,691
Compensation and employee benefits (Notes 17 and 18) 4,337,181 3,494,093
Transportation and travel 3,581,852 3,019,242
Management and professional fees 1,734,645 1,782,447
Depreciation expense (Note 10) 928,693 692,790
Supplies and materials 587,812 463,112
Janitorial, messengerial, and security 582,100 365,002
Information technology 465,599 452,101
Taxes and licenses 460,124 766,360
Repairs and maintenance 386,425 118,179
Utilities 376,328 440,405
Insurance 375,532 545,341
Communication and postage 285,317 188,585
Representation 150,496 284,631
Provision for doubtful accounts (Note 6) 30,610 181,706
Miscellaneous 483,351 235,740
29,617,813 19,812,794
184,233,439 137,117,060
EXCESS OF REVENUE OVER EXPENSES 70,913,325 56,101,544
FUND BALANCE AT BEGINNING OF YEAR 205,254,575 149,153,031
FUND BALANCE AT END OF YEAR P
=276,167,900 P
=205,254,575

See accompanying Notes to Financial Statements.

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CARD-MRI DEVELOPMENT INSTITUTE, INC.
(A Nonstock, Not-for-Profit Association)
STATEMENTS OF CASH FLOWS
Years Ended December 31
2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Excess of revenue over expenses P
=70,913,325 =56,101,544
P
Adjustments for:
Depreciation and amortization expense (Notes 10 and 11) 17,103,499 13,700,804
Remeasurement gain on retirement plan (Note 17) (2,257,514) (6,632,683)
Interest income (Notes 4 and 5) (2,738,639) (1,990,419)
Dividend income (Note 18) (1,093,475) (262,434)
Retirement expense (Note 17) 609,717 1,596,816
Interest expense 523,102 1,375,601
Unrealized foreign exchange gain (357,446) (356,744)
Provision for doubtful accounts (Note 6) 30,610 181,706
Loss on disposal of transportation equipment 23,589 –
Share in net income of associates (Note 9) (17,179) –
Operating income before working capital changes 82,739,589 63,714,191
Changes in operating assets and liabilities:
Decrease (increase) in the amounts of:
Receivables (5,929,176) (44,700)
Other current assets (1,786,505) 513,119
Increase (decrease) in the amounts of accounts
payable and accrued expenses 75,316,043 (6,771,249)
Net cash generated from operations 150,339,951 57,411,361
Interest received 2,294,395 2,025,981
Dividends received 1,093,475 262,434
Contributions to retirement fund (Note 17) (631,216) (2,731,124)
Interest paid (523,102) –
Net cash provided by operating activities 152,573,503 56,968,652
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for:
Purchase on short-term investments (32,636,016) (9,751,860)
Placement on long-term investment (30,000,000) –
Acquisitions of property and equipment (Notes 10 and 19) (23,617,486) (32,449,843)
Security deposits (1,149,019) (825,663)
Acquisitions of investments in associates (Note 9) (200,000) –
Acquisitions of software license (Note 11) (43,600) (564,940)
Proceeds from:
Disposal of transportation equipment 150,000 –
Maturity of short-term investments – 2,166,443
Net cash used in investing activities (87,496,121) (41,425,863)
CASH FLOWS FROM FINANCING ACTIVITY
Payments of finance lease (1,951,638) (3,074,436)
NET INCREASE IN CASH IN BANKS 63,125,744 12,468,353
EFFECTS OF EXCHANGE RATE CHANGES
ON CASH IN BANKS 357,446 356,744
CASH IN BANKS AT BEGINNING OF YEAR 53,199,025 40,373,928
CASH IN BANKS AT END OF YEAR P
=116,682,215 =53,199,025
P

See accompanying Notes to Financial Statements.

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CARD-MRI DEVELOPMENT INSTITUTE, INC.
(A Nonstock, Not-for-Profit Association)
NOTES TO FINANCIAL STATEMENTS

1. General Information

CARD-MRI Development Institute, Inc. (the Association), is a nonstock, not-for-profit association

incorporated in the Philippines on April 21, 2005. The Association was organized to provide courses
of study in microfinance development (non-degree technical courses) or other similar courses subject
to the laws of the Philippines.

The Association’s permit to operate as a tertiary education was granted by the Commission on Higher
Education (CHED) on May 28, 2015. It started to operate as a tertiary education institute offering
Bachelor of Science in Entrepreneurship with specialization in Microfinance on July 22, 2015.

The Association started to offer Senior High School Accountancy, Business and Management and
Information and Communication Technology strands in June 2016.

Being a nonstock and not-for-profit educational institution, the Association falls under Section 30 (h)
of the Tax Reform Act of 1997 and as such, income from activities in pursuit of the purpose for
which the Association was organized is exempt from income tax. The Association renewed its
Philippine Council for NGO Certification accreditation on August 4, 2017 and had been granted a
five-year certification for donee institution status.

The Association is a member of Center for Agriculture and Rural Development (CARD) Mutually
Reinforcing Institutions (MRI).

The Association’s principal office is located at Brgy. Tranca, Bay, Laguna.

2. Summary of Significant Accounting Policies

Basis of Preparation
The accompanying financial statements have been prepared on a historical cost basis. The financial
statements are presented in Philippine Peso (P
=), the functional currency of the Association and all
values are rounded to the nearest peso except when otherwise indicated.

Statement of Compliance
The Association’s financial statements have been prepared in accordance with Philippine Financial
Reporting Standards for Small and Medium-sized Entities (PFRS for SMEs).

PFRS for SMEs has been approved for adoption by the Philippine Financial Reporting Standards
Council on October 13, 2009 and by the Securities and Exchange Commission (SEC) on December 3,
2009. PFRS for SMEs is required to be used by entities that meet the definition of an SME, which
include among others, an entity with total assets of between P =3.0 million and =P350.0 million and/or
total liabilities between =
P3.0 million and =P250.0 million. SEC issued SRC Rule 68 which authorized
the entities that breaches the floor ceiling of the size criteria at the end of the current year to continue
to use the same financial reporting framework it currently uses provided that the change is not
considered to be significant. As a general rule, 20% or more of the total assets or total liabilities
would be considered significant.

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As at December 31, 2017, the Association breached the asset limit with an excess in total assets
amounting to =P17.9 million representing 4.9% of the total assets of the Association. As the change is
not significant, the Association assessed to continue the use of PFRS for SMEs.

Change in Accounting Policies and Disclosures

2015 Amendments to the PFRS for SMEs
In August 2016, the SEC resolved to adopt the 2015 Amendments to the PFRS for SMEs as part of its
rules and regulations on financial reporting.

Most of the amendments clarify existing requirements and add supporting guidance to the existing
standard rather than change the underlying requirements. Among the most significant amendments to
the standard are:
• Permitting SMEs to use the revaluation model to measure items of property, plant and equipment
• Aligning the recognition and measurement requirements for deferred income tax with full PFRSs
• Allowing SMEs to use the equity method to account for investments in subsidiaries, associates
and jointly controlled entities in the separate financial statements

The amendments are effective for annual periods beginning on or after January 1, 2017. Earlier
application is permitted.

The adoption of the 2015 Amendments to the PFRS for SMEs did not have a significant impact on
the Company’s financial statements.

Significant Accounting Policies

Current versus Noncurrent Classification

The Association presents assets and liabilities in the statements of assets, liabilities and fund balance
based on current/noncurrent classification.

An asset is current when it is:

∂ Expected to be realized or intended to be sold or consumed in normal operating cycle;

∂ Held primarily for the purpose of trading;
∂ Expected to be realized within twelve months after the reporting period; or
∂ Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at
least twelve months after the reporting period.

All other assets are classified as noncurrent.

A liability is current when it is:

∂ Expected to be settled in normal operating cycle;
∂ Held primarily for the purpose of trading;
∂ Due to be settled within twelve months after the reporting period; or
∂ Not subject to unconditional right to defer the settlement of the liability for at least twelve months
after the reporting period.

All other liabilities are classified as noncurrent.

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Cash in Banks
Cash in banks represent demand, savings and time deposits that earn interest at the respective bank
deposit rates.

Short-term Investments
Short-term investments represent time deposits with tenor of three (3) to twelve (12) months from
date of acquisition to date of maturity.

Long-term Investments
Long-term investments represent time deposits with tenor of more than twelve (12) months from date
of acquisition. The Association’s long-term investment includes time deposit with tenor of five (5)
years.

Financial Instruments - Initial Recognition and Subsequent Measurement

Initial recognition and measurement of financial instruments
All financial instruments are initially recognized at transaction price (including transaction costs
except in the initial measurement of financial instruments at fair value through profit or loss (FVPL).
The Association classifies its financial assets as financial assets at FVPL, debt instruments at
amortized cost and equity instruments at cost less impairment while financial liabilities are classified
as financial liabilities measured at FVPL and financial liabilities at amortized cost. Management
determines the classification of its financial instruments at initial recognition and, where allowed and
appropriate, re-evaluates such designation at every reporting date.

The Association has no financial instruments at FVPL as at December 31, 2017.

Financial assets that are debt instruments measured at amortized cost and financial liabilities
measured at amortized cost
These are debt instruments, such as receivables or payables, which satisfy all of the following
conditions:

(a) Return to the holder is a fixed amount; a fixed rate of return over the life of the instrument; a
variable return that, throughout the life of the instrument, is equal to a single referenced quoted or
observable interest rate; or some combination of such fixed rate and variable rates, provided that
both the fixed and variable rates are positive.
(b) There is no contractual provision that could, by its terms, result in the holder losing the principal
amount or any interest attributable to the current period or prior periods.
(c) Contractual provisions that permit the issuer (the debtor) to prepay a debt instrument or permit the
holder (the creditor) to put it back to the issuer before maturity are not contingent on future events.
(d) There are no conditional returns or repayment provisions except for the variable rate of return
described in (a) and prepayment provisions described in (c).

Debt instruments that meet the conditions above are measured at amortized cost using the effective
interest method. For financial assets that are debt instruments measured at amortized cost, impairment
is assessed at every reporting period.

Classified under financial assets that are debt instruments measured at amortized cost are the
Association’s ‘Due from students’, ‘Due from trainees and participants’, and ‘Due from related parties’
included ‘Receivables’ account in the statement of financial position.

Classified under financial liabilities measured at amortized cost are the Company’s ‘Accrued expenses’
and ‘Accounts payable’ accounts in the statement of financial position.

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Equity instruments at cost

These are non-derivative financial assets which are designated as such or do not qualify to be classified
as investment in associates. These are purchased and held indefinitely and may be sold in response to
liquidity requirements or changes in market conditions.

Financial assets at cost assets comprised of unquoted equity investments where the Association’s
ownership interest is less than 20.0%. These are initially recognized at cost, being the fair value of the
investment at the time of acquisition or purchase and including acquisition charges associated with the
investment. Such investments are carried at cost due to the unpredictable nature of future cash flows
and the lack of other suitable methods for arriving at a reliable fair value.

Dividends earned on holding equity instruments at cost, if any, are recognized in the statement of
revenue and expenses as ‘Dividend income’ when the right of the payment has been established. The
losses arising from impairment of such investments are recognized in the statement of revenue and
expenses.

Derecognition of Financial Assets and Liabilities

Financial assets
A financial asset (or, where applicable a part of a financial asset or part of a group of financial assets)
is derecognized when:
• the rights to receive cash flows from the asset have expired;
• the Association retains the right to receive cash flows from the asset, but has assumed an obligation
to pay them in full without material delay to a third party under a ‘pass-through’ arrangement; or
the Association has transferred its rights to receive cash flows from the asset and either (a) has
transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor
retained the risk and rewards of the asset but has transferred the control over the asset.

Where the Association has transferred its rights to receive cash flows from an asset or has entered into
a pass-through arrangement, and has neither transferred nor retained substantially all the risks and
rewards of the asset nor transferred control over the asset, the asset is recognized to the extent of the
Association’s continuing involvement in the asset. Continuing involvement that takes the form of a
guarantee over the transferred asset is measured at the lower of original carrying amount of the asset
and the maximum amount of consideration that the Association could be required to pay.

Financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged, cancelled or
has expired. When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as a derecognition of the original liability and the recognition of a
new liability, and the difference in the respective carrying amounts is recognized in the statement of
comprehensive income.

Impairment of Financial Assets

The Association assesses at each reporting date whether there is objective evidence that a financial
asset or group of financial assets is impaired. A financial asset or a group of financial assets is deemed
to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events
that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event
(or events) has an impact on the estimated future cash flows of the financial asset or the group of
financial assets that can be reliably estimated. Evidence of impairment may include indications that
the borrower or a group of borrowers 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 measurable decrease in the

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estimated future cash flows, such as changes in arrears or economic conditions that correlate with
defaults.

Investments in Associates
An associate is an entity over which the Association has a significant influence. Significant influence
is the power to participate in the financial and operating policy decisions of the investee, but is not
control or joint control over those policies. The Association’s investment in associates is accounted
for using the equity method.

Under the equity method, investment in an associate is initially recognized at cost. The carrying
amount of the investment is adjusted to recognize changes in the Association’s share of net assets of
the associate since the acquisition date. Distributions received from an associate reduce the carrying
amount of the investment. Goodwill relating to the associate is included in the carrying amount of the
investment and is not tested for impairment separately.

The statement of income reflects the Association’s share of the results of operations of the associate.
Any change in OCI of the associate is presented as part of the Association’s OCI. In addition, when
there has been a change recognized directly in the equity of the associate, the Bank recognizes its
share of any changes, when applicable, in the statement of changes in equity. Unrealized gains and
losses resulting from transactions between the Association and associate are eliminated to the extent
of the interest in the associate.

The financial statements of the associate are prepared for the same reporting period as the
Association. The associate’s accounting policies conform to those used by the Association for like
transactions and events in similar circumstances.

Upon loss of significant influence over the associate, the Association measures and recognizes any
retained investment at its fair value. Any difference between the carrying amount of the associate
upon loss of significant influence and the fair value of the retained investment and proceeds from
disposal is recognized in statement of income.

Property and Equipment

Land is carried at cost less any impairment in value while depreciable property and equipment, such
as land improvement, training facilities, office furniture, fixtures, and equipment and library books,
transportation equipment, and leasehold improvement, are stated at cost less accumulated
depreciation, and any impairment in value.
Such cost includes the cost of replacing part of the property and equipment when that cost is incurred
and if the recognition criteria are met, but excluding repairs and maintenance cost.

For property and equipment being constructed by an external contractor, costs are capitalized based
on the percentage of completion of the project.
Depreciation and amortization commences once the property and equipment are available for use and
is computed using the straight-line method over the estimated useful lives (EUL) of the respective
assets, except for leasehold improvements which are amortized over the shorter of the EUL of the
improvements or the terms of the related leases. The EUL of the depreciable assets are as follows:
Land improvement 3 years
Training facilities 3 to 10 years
Office furniture, fixtures, equipment and library books and 3 to 5 years
transportation equipment
Leasehold improvement 3 years or term of the lease,
whichever is shorter

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The EUL, residual value, and the depreciation and amortization method are reviewed periodically to
ensure that the period and the method of depreciation and amortization are consistent with the
expected pattern of economic benefits from items of property and equipment.

Fully depreciated assets are retained in the accounts until they are no longer in use and no further
depreciation is credited against profit or loss.

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

Software Costs
Software costs include costs incurred in obtaining license for the software purchased and used by the
Association. The amortization of software costs is on a straight-line basis over a period of five (5)
years and is recorded under ‘Depreciation and amortization expense’ account.

Impairment of Nonfinancial Assets

The Association assesses the impairment of its property and equipment and software cost, whenever
events or changes in circumstances indicate that the carrying amount of the asset may not be
recoverable. The factors that the Association considers important which could trigger an impairment
review include the following:
∂ significant changes in the manner of use of the assets; and
∂ significant negative industry or economic trends.

The Association recognizes an impairment loss whenever the carrying amount of an asset exceeds its
recoverable amount. Recoverable amounts are estimated for individual asset or, if it is not possible,
for the cash-generating unit to which the asset belongs.

Recoverable amount
The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs
to sell and its value in use. If it is not possible to estimate the recoverable amount of an individual
asset to an asset should be read as references also to an asset’s cash-generating unit.

It is not always necessary to determine both an asset’s fair value less costs to sell and its value in use.
If either of these amounts exceeds the asset’s carrying amount, the asset is not impaired and it is not
necessary to estimate the other amount.

If there is no reason to believe that an asset’s value in use materially exceeds its fair value less costs
to sell, the asset’s fair value less costs to sell may be used as its recoverable amount. This will often
be the case for an asset that is held for disposal.

Reversal of impairment
The Association shall assess at each reporting date whether there is any indication that an impairment
loss recognized in prior periods may no longer exist or may have decreased. If any such indication
exists, the Association shall determine whether all or part of the prior impairment loss should be
reversed. The procedure for making that determination will depend on whether the prior impairment
loss on the asset was based on the recoverable amount of that individual asset, or the recoverable
amount of the cash-generating unit to which the asset belongs.

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Fund Balance
Fund balance consists of the amounts contributed by the members of the Board of Trustees (BOT) of
the Association and all current and prior period results of operations.

Restricted funds
The Association’s BOT has restricted twenty percent of its general fund as follows: two (2.0%) for
scholarships, three (3.0%) for information technology development and fifteen (15.0%) for fixed
asset acquisition for future expansion.

Accumulated excess of revenue over expenses

Accumulated excess of revenue over expenses represents the cumulative balance of periodic net
income or loss.

Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
Association and that the revenue can be reliably measured regardless of when payment is being made.
Revenue is measured at fair value of the consideration received or receivable, taking into account
contractually defined terms of payment and excluding taxes or duty. The Association has assessed that
it is acting as a principal in all of its revenue transactions. The following specific recognition criteria
must also be met before income is recognized:

Seminars and trainings fees

Seminars and trainings fees are recognized when seminars and trainings have been conducted and
completed.

Tuition fees and other school fees

Income from payment of tuition fee and miscellaneous fees which are recognized over the service
period. Tuition fees collected during the year that are applicable in subsequent years are deferred and
shown as unearned tuition fee under ‘Accounts payable and accrued expenses’ in the statement of
assets, liabilities and fund balance.

Interest income
Interest income on deposits in banks is recognized as interest accrues, taking into account the
effective yield of the asset.

Facilities fee
Facilities fee is recognized based on the terms of agreement.

Donations and contributions

Grants are recognized when there is a reasonable assurance that the Association will comply with the
conditions attached to them, and that the grants will be received. Grants received for a specific
purpose or with condition are initially recognized as a liability shown as funds held in trust under
‘Accounts payable and accrued expenses’ in the statement of assets, liabilities and fund balance
otherwise they are recorded as ‘Donations and contributions’ in the statement of revenue and
expenses and changes in fund balance.

Dividend income
Income from equity investments is recognized when the Association’s right to receive is established.

*SGVFS030466*
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Cost and Expense Recognition

Costs and expenses are recognized in statement of revenue and expenses and changes in fund balance
when decrease in future economic benefit related to a decrease in an asset or an increase in a liability
has arisen that can be measured reliably.

Costs and expenses are recognized in statement of revenue and expenses and changes in fund
balance:

∂ On the basis of a direct association between the costs incurred and the earning of specific items of
income;
∂ On the basis of systematic and rational allocation procedures when economic benefits are
expected to arise over several accounting periods and the association can only be broadly or
indirectly determined; or
∂ Immediately when expenditure produces no future economic benefits or when, and to the extent
that, future economic benefits do not qualify or cease to qualify, for recognition in the statement
of assets, liabilities and fund balance as an asset.

Foreign Currency Transactions

Foreign currency-denominated monetary assets and monetary liabilities are translated into Philippine
peso equivalents based on the Philippine Dealing System (PDS) closing rate prevailing at the end of
the year and foreign currency-denominated income and expenses at the PDS weighted average rate
prevailing on transaction date. Foreign exchange gains or losses from foreign currency translations
and revaluation of foreign currency-denominated monetary assets and monetary liabilities are
credited to or charged against current operations.

Leases
The determination of whether an arrangement is, or contains a lease, is based on the substance of the
arrangement and requires an assessment of whether the fulfillment of the arrangement is dependent
on the use of a specific asset or assets and the arrangement conveys a right to use the asset. A
reassessment is made after inception of the lease only if one of the following applies:
a. There is change in contractual terms, other than a renewal or extension of the arrangement;
b. A renewal option is exercised or extension granted, unless that term of the renewal or extension
was initially included in the lease term;
c. There is a change in the determination of whether fulfillment is dependent on a specified asset; or
d. There is substantial change to the asset.

Where a reassessment is made, lease accounting shall commence or cease from the date when the
change in circumstances gave rise to the reassessment for scenarios (a), (c), or (d) above, and at the
date of renewal or extension period for scenario (b).

Association as lessee
Operating Leases
Leases where the lessor retains substantially all the risks and rewards of ownership of the asset are
classified as operating leases. Operating lease payments are recognized as an expense in the
statement of revenue and expenses and changes in fund balance on a straight-line basis over the lease
term.

Finance Leases
The Association recognize its rights of use and obligations under finance leases as assets and
liabilities in its statement of assets, liabilities and fund balance at amounts equal to the fair value of
the leased property or, if lower, the present value of the minimum lease payments, determined at the
inception of the lease.

*SGVFS030466*
 -9-

Payments for finance lease liability are apportioned between interest expense and reduction of
outstanding liability.

Retirement Benefits
The Association operates a defined benefit retirement plan and hybrid retirement plan which require
contribution to be made to a separately administered fund. The net defined benefit liability or asset is
the aggregate of the present value of the defined benefit obligation at the reporting date reduced by
the fair value of plan assets, adjusted for any effect of limiting a net defined benefit asset to the asset
ceiling (if any). The asset ceiling is the present value of any economic benefits available in the form
of refunds from the plan or reductions in future contributions to the plan.

The cost of providing benefits under the defined benefit plan is actuarially determined using the
projected unit credit method.

Defined benefit costs comprise the following:

∂ Service cost
∂ Net interest on the net defined benefit liability or asset
∂ Remeasurements of net defined benefit liability or asset

Service costs which include current service costs, past service costs and gains or losses on
non-routine settlements are recognized as expenses in the statement of income. Past service costs are
recognized when plan amendment or curtailment occurs. These amounts are calculated periodically
by independent qualified actuaries.

Net interest on the net defined benefit liability or asset is the change during the period in the net
defined benefit liability or asset that arises from the passage of time which is determined by applying
the discount rate based on government bonds to the net defined benefit liability or asset. Net interest
on the net defined benefit liability or asset is recognized as expense or income in the statement of
revenue and expenses and changes in fund balance.

Remeasurements comprising actuarial gains and losses, return on plan assets and any change in the
effect of the asset ceiling (excluding net interest on defined benefit liability) are recognized
immediately in the statement of financial position with a corresponding debit or credit to
‘Remeasurement gains (losses) on retirement liabilities’ under profit or loss in the period in which
they arise. Remeasurements are recognized as expense or income in the statement of revenue and
expenses and changes in fund balance.

Plan assets are assets that are held by a long-term employee benefit fund. Plan assets are not
available to the creditors of the Association, nor can they be paid directly to the Association. Fair
value of plan assets is based on market price information. When no market price is available, the fair
value of plan assets is estimated by discounting expected future cash flows using a discount rate that
reflects both the risk associated with the plan assets and the maturity or expected disposal date of
those assets (or, if they have no maturity, the expected period until the settlement of the related
obligations). If the fair value of the plan assets is higher than the present value of the defined benefit
obligation, the measurement of the resulting defined benefit asset is limited to the present value of
economic benefits available in the form of refunds from the plan or reductions in future contributions
to the plan.

*SGVFS030466*
 - 10 -

Provisions and Contingencies

Provisions are recognized when the Association 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.
When the Association expects some or all of a provision to be reimbursed, the reimbursement is
recognized as a separate asset, but only when the reimbursement is virtually certain. The expense
relating to any provision is presented in the statement of revenue and expenses and changes in fund
balance, net of any reimbursement.

If the effect of the time value of money is material, provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects current market assessments of the time value
of money and, where appropriate, the risks specific to the liability. Where discounting is used, the
increase in the provision due to time value of money is recognized as ‘Interest expense’ in the
statement of revenue and expenses and changes in fund balance.

Contingent liabilities are not recognized in the financial statements but 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 Reporting Period

Post-year-end events up to the date of the approval of the BOT of the financial statements that
provide additional information about the Association’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 the financial statements when material.

3. Significant Accounting Estimates

The preparation of the Association’s financial statements in accordance with PFRS for SMEs requires
the management to make judgments and estimates that affect the reported amounts of assets,
liabilities, fund balance, revenue, expenses and disclosure of contingent assets and contingent
liabilities, if any. Future events may occur which will cause the judgments used in arriving at the
estimates to change. The effects of any change in estimates are reflected in the financial statements
as they become reasonably determinable.

Estimates
(a) Impairment of receivables
The Association assesses its receivables for impairment at each reporting date. In determining
whether a credit loss should be recorded in the statement of revenue and expenses and changes in
fund balance, the Association makes judgments as to whether there is any observable data
indicating that there is a measurable decrease in the estimated future cash flows from its
receivables. This evidence may include observable data indicating that there has been an adverse
change in the payment status of its debtors.

The carrying value of receivables and the related allowance for doubtful accounts are disclosed in
Note 6.

(b) Present value of retirement asset

The determination of the Association’s retirement cost is dependent on certain assumptions used
by the actuary in calculating such amount. Those assumptions are described in Note 15 to the

*SGVFS030466*
 - 11 -

financial statements and include, among others, discount rate, future salary increase and average
remaining working lives of employees. While management believes that the assumptions are
reasonable and appropriate, significant differences in the Association’s actual experience or
significant changes in the assumptions may materially affect the pension and other retirement
obligation.

As at December 31, 2017 and 2016, the carrying values of retirement asset of the Association are
disclosed in Note 17.

4. Cash in Banks

This account consists of:

2017 2016
Demand deposits P
=40,578,151 =27,477,175
P
Savings deposits 30,154,456 17,005,164
Time deposits 45,949,608 8,716,686
P
=116,682,215 =53,199,025
P

Cash in banks represent current and savings accounts which earn interest at an annual rate ranging
from 1.0% to 3.75% and in 2017 and 2016.

Time deposits have original maturities of less than three (3) months with an annual interest rates
ranging from 3.0% to 4.3% and 1.0% to 4.3% in 2017 and 2016, respectively.

Interest income earned on the Association’s cash in banks amounted to P

=0.5 million and
=
P0.9 million in 2017 and 2016, respectively.

5. Short-term Investments

Short-term investments represent time deposits which have maturity of more than three (3) months to
one (1) year and with annual interest rates ranging from 3.0% to 5.0% and 1.0% to 4.3% in 2017 and
2016, respectively.

Interest earned on short-term investments amounted to P

=2.3 million and =
P1.1 million in 2017 and
2016, respectively.

*SGVFS030466*
 - 12 -

6. Receivables

This account consists of:

2017 2016
Receivables from students P
=7,746,867 =2,569,828
P
Receivables from trainees and participants 1,130,857 1,051,423
Receivables from related parties (Note 18) 1,015,899 331,989
Interest receivable 704,724 260,480
Receivable from contractor – 11,205
10,598,347 4,224,925
Less allowance for doubtful accounts 716,795 686,185
P
=9,881,552 =3,538,740
P

Changes in the allowance for doubtful accounts follow:

2017 2016
Balance at beginning of year P
=686,185 =504,479
P
Provision for doubtful accounts 30,610 181,706
Balance at end of year P
=716,795 =686,185
P

Receivables are assessed collectively for impairment purposes.

7. Other Current Assets

This account consists of:

2017 2016
Prepaid subscription P
=2,186,900 =–
P
Supplies inventory (Note 10) 281,677 448,054
Prepaid expenses 182,069 619,709
P
=2,650,646 =1,067,763
P

Prepaid subscription includes the prepayment for the subscription on the increase of capital stock of
CARD MRI Information Technology (CMIT) (see Note 9). Prepaid expenses include prepayments
for insurance and other expenses.

8. Long-term Investment

Long-term investment represent time deposit amounting to P =30.0 million placed under Rizal Bank,
Inc. (RBI) which have maturity of five (5) years with annual interest rate of 5.0% in 2017
(see Note 18).

*SGVFS030466*
 - 13 -

9. Equity investments

Equity investment at cost

This represents the Association’s 4.0% ownership for interest in CARD MRI Information Technology
(CMIT) amounting to P4.4 million as of December 31, 2017 and 2016. This investment is
unimpaired. As of December 31, 2017 and 2016, the Association received dividends from CMIT
amounting to =P1.1 million and =
P0.3 million, respectively.

Investments in Associates
The composition and movements in this account in 2017 follows:

Percentage of
ownership
Acquisition cost
CARD MRI Publishing House Inc. (CMPHI) 20% P
=100,000
CARD MRI Hijos Tours Inc. (CMHTI) 20% 100,000
200,000
Accumulated equity in net income:
Balance beginning of year –
Share in net income 17,179
Balance at end of year 17,179
P
=217,179

The following table illustrates the summarized financial information in the statements of financial
position, statements of comprehensive income of CMPHI and CMHTI (amounts in millions):

CMPHI CMHTI
Assets =859,136
P =784,362
P
Liabilities 306,930 250,597
Net Assets 552,206 533,765
Revenue 659,870 700,050
Net Income 52,171 33,730

*SGVFS030466*
 - 14 -

10. Property and Equipment

The compositions of and movements in this account follow:

2017
Office
Furniture,
Land Training Fixtures, Equipment Transportation Leasehold Construction
Land Improvement Facilities and Library Books Equipment Improvement in Progress Total
Cost
Balance at beginning of year P
= 16,065,119 P
= 6,723,103 P
= 79,389,634 P
= 18,171,195 P
= 4,131,477 P
= 1,949,016 P
= 19,741,329 P
= 146,170,873
Additions 1,607,200 747,496 2,031,408 3,768,084 − − 15,463,298 23,617,486
Disposal − − − − (2,763,979) − − (2,763,979)
Reclassifications (Note 7) − 1,737,606 19,010,658 203,620 − − (20,748,264) 203,620
Balance at end of year 17,672,319 9,208,205 100,431,700 22,142,899 1,367,498 1,949,016 14,456,363 167,228,000
Accumulated Depreciation
Balance at beginning of year − 2,995,923 35,141,602 10,255,185 3,833,891 1,282,281 − 53,508,882
Depreciation − 2,309,335 9,935,040 4,320,733 123,897 210,338 − 16,899,343
Disposal − − − − (2,590,390) − − (2,590,390)
Balance at end of year − 5,305,258 45,076,642 14,575,918 1,367,398 1,492,619 − 67,817,835
Net Book Value P
= 17,672,319 P
= 3,902,947 P
= 55,355,058 P
= 7,566,981 P
= 100 P
= 456,397 P
= 14,456,363 P
= 99,410,165

2016
Office
Furniture,
Land Training Fixtures, Equipment Transportation Leasehold Construction
Land Improvement Facilities and Library Books Equipment Improvement in Progress Total
Cost
Balance at beginning of year =
P15,958,588 P
=3,757,605 =
P56,749,163 =
P14,164,838 P
=4,131,477 P
=1,949,016 =
P16,618,231 =
P113,328,918
Additions 106,531 709,146 1,564,006 4,761,178 − − 26,455,915 33,596,776
Write-off − − − (768,019) − − − (768,019)
Reclassifications (Note 11) − 2,256,352 21,076,465 13,198 − − (23,332,817) 13,198
Balance at end of year 16,065,119 6,723,103 79,389,634 18,171,195 4,131,477 1,949,016 19,741,329 146,170,873
Accumulated Depreciation
Balance at beginning of year − 1,943,297 26,479,103 7,630,242 3,536,306 1,071,843 − 40,660,791
Depreciation − 1,052,626 8,662,499 3,389,003 297,585 210,438 − 13,612,151
Write-off − − − (768,019) − − − (768,019)
Reclassifications (Note 11) − − − 3,959 − − − 3,959
Balance at end of year − 2,995,923 35,141,602 10,255,185 3,833,891 1,282,281 − 53,508,882
Net Book Value =
P16,065,119 P
=3,727,180 =
P44,248,032 P
=7,916,010 =
P297,586 =
P666,735 =
P19,741,329 =
P92,661,991

*SGVFS030466*
 - 15 -

Depreciation expense on property and equipment are presented under the following expense
categories:

2017 2016
Cost of seminars, trainings and other programs
(Note 13) P
=11,661,052 P
=10,950,739
Tertiary (Note 14) 3,346,358 1,921,960
Senior high school (Note 15) 963,240 46,662
Administrative 928,693 692,790
P
=16,899,343 =13,612,151
P

Construction in progress represents costs recognized by the Association on building improvement and
construction of a new building.

As at December 31, 2017 and 2016, the total cost of fully depreciated assets still in use amounted to
P
=17.2 million and =
P19.1 million, respectively.

Reclassifications include transfers from supplies inventory under ‘Other current assets’ to ‘office
furniture, fixture, equipment and library books’.

11. Software Costs

The movements in this account follow:

2017 2016
Cost
Balance at beginning of year P
=839,119 =287,377
P
Additions 43,600 564,940
Reclassifications − (13,198)
Balance at end of year 882,719 839,119
Accumulated Amortization
Balance at beginning of year 166,864 82,170
Amortization 204,156 88,653
Reclassifications − (3,959)
Balance at end of year 371,020 166,864
Net Book Value P
=511,699 =672,255
P

The breakdown of amortization expense on software costs follows:

2017 2016
Cost of seminars, trainings and other programs P
=112,988 =51,206
P
Tertiary (Note 14) 81,968 28,247
Administrative 9,200 9,200
P
=204,156 =88,653
P

*SGVFS030466*
 - 16 -

12. Accounts Payable and Accrued Expenses

This account consists of:

2017 2016
Current
Accrued expenses P
=5,918,788 =5,420,163
P
Accounts payable (Note 18) 3,405,845 928,869
Unearned tuition fee 4,407,765 2,071,737
Withholding tax payable 581,517 −
14,313,915 8,420,769
Non-Current
Funds held in trust (Note 18) 74,462,530 5,460,966
Unearned tuition fee 621,854 200,521
75,084,384 5,661,487
P
=89,398,299 =14,082,256
P

Accrued expenses include accrual for vacation leave credits, cash gifts, 13th month pay, and other
expenses.

Accounts payable include the Association’s payable to its affiliates, contractors and government and
advances from customers.

Funds held in trust include donations received by the Association on behalf of CARD, Inc. for the
Zero Dropout Education Scheme (ZeDrES). Total donations for ZeDrES received by the Association
amounted to =P5.8 million and =
P1.3 million in 2017 and 2016; most of which were distributed to the
borrowers.
The Association also received =
P67.3 million and =
P5.0 million for the BS Scholarship Fund of CARD
Bank, Inc. (CBI) and CARD, Inc. in 2017 and 2016, respectively.

13. Cost of Seminars, Trainings and Other Programs

This account consists of:

2017 2016
Meals of trainees P
=49,122,588 =37,409,669
P
Room accommodation and function hall 28,348,482 22,194,098
Compensation and employee benefits
(Notes 17 and 18) 15,759,311 12,660,696
Depreciation (Note 10) 11,661,052 10,950,739
Transportation and travel 6,118,924 6,658,243
Supplies and materials 7,557,986 5,841,936
Janitorial, messengerial and security 3,834,708 3,114,678
Utilities 2,921,131 2,425,173
Information technology 1,910,047 761,994
Honorarium to resource persons 1,322,782 1,262,612
Repairs and maintenance 1,275,651 1,479,709
Office rental (Note 16) 1,187,309 733,192
Laundry and ironing 775,385 743,878

(Forward)

*SGVFS030466*
 - 17 -

2017 2016
Representation P
=550,790 =779,631
P
Interest expense 523,100 1,375,601
Communication and postage 419,513 363,697
Library books 23,471 163,670
Miscellaneous 1,399,838 939,407
P
=134,712,068 =109,858,623
P

Miscellaneous expenses include periodicals and magazines, insurance expense and other program-
related costs.

14. Tertiary Expenses

This account consists of:

2017 2016
Depreciation (Note 10) P
=3,346,358 = 1,921,960
P
Compensation and employee benefits
(Notes 17 and 18) 1,539,922 757,411
Management and professional fees 740,628 897,027
Transportation and travel 719,339 289,788
Janitorial, messengerial, security 514,453 262,118
Supplies and materials 362,790 366,363
Utilities 343,521 232,086
Repairs and maintenance 148,846 123,764
Information technology 137,198 30,263
Advertising and publicity 123,570 44,420
Representation 82,757 94,140
Amortization (Note 11) 81,968 28,247
Staff training and development and meetings 35,187 11,048
Communication and postage 5,709 7,692
Library books 2,500 −
Miscellaneous 510,736 189,175
P
=8,695,482 =5,255,502
P

15. Senior High School Expenses

This account consists of:

2017 2016
Compensation and employee benefits
(Notes 17 and 18) P
=4,032,557 P
=1,026,721
Staff training and development and meetings 1,433,169 26,620
Transportation and travel 1,228,506 155,988
Supplies and materials 858,948 392,261
Depreciation (Note 10) 963,240 46,662
Janitorial, messengerial, security 602,648 123,894

(Forward)

*SGVFS030466*
 - 18 -

2017 2016
Information technology P
=448,500 =
P
Utilities 399,532 53,965
Repairs and maintenance 308,951 42,931
Management and professional fees 307,726 195,811
Advertising and publicity 198,900 62,811
Representation 158,580 17,317
Communication and postage 55,220 8,014
Library books (Note 9) 13,100 4,343
Miscellaneous 198,499 32,803
P
=11,208,076 =2,190,141
P

16. Lease Contracts

Operating Lease Agreement

The Association has two (2) outstanding lease contract for the lease of one commercial building from
CARD, Inc., with lease term of three (3) years until November 15, 2019, and one commercial
building from CBI, with lease term of five (5) years starting from June 1, 2014 until May 31, 2019.
The lease of properties is renewable upon mutual agreement between the Association and the lessor.

Future aggregate minimum lease payments under non-cancellable operating leases follow:

2017 2016
Not later than one year P
=646,503 =855,478
P
Later than one year and not later than five years 339,996 1,912,929
P
=986,499 =2,768,407
P

Lease payments recognized under ‘Office rental’ amounted to P

=1.2 million and =
P0.7 million in 2017
and 2016, respectively (see Note 15).

Finance Lease Agreement

The Association entered into lease agreements with Responsible Investments for Solidarity and
Empowerment (RISE) Financing Company, Inc. covering equipment and furniture and fixtures for a
period of three (3) years with acquisition cost amounting to =
P1.1 million in 2016. The lease
agreements provide implicit interest rates ranging from 1.4% to 1.8% annually.

Future aggregate minimum lease payments are as follows:

2017
Later than
Not later one year
than one and less than
year five years Total
Principal payments P
=1,713,624 P
=130,892 P
=1,844,516
Finance charge 194,974 8,930 203,904
Minimum lease payments P
=1,908,598 P
=139,822 P
=2,048,420

*SGVFS030466*
 - 19 -

2016
Later than
one year
Not later and less than
than one year five years Total
Principal payments =1,957,640
P =1,631,535
P =3,589,175
P
Finance charge 517,100 202,807 719,907
Minimum lease payments =2,474,740
P =1,834,342
P =4,309,082
P

Interest expense recognized on the finance leases amounted to =

P0.5 million and =
P1.4 million in 2017
and 2016, respectively.

Security deposits required by the lease agreements amounting to =

P2.0 million and =
P0.8 million as at
December 31, 2017 and 2016, respectively, are included in the “Other noncurrent assets”.

17. Retirement Benefits

The Association, CBI, CARD Mutual Benefit Association (MBA), Inc., CARD SME Bank, Inc.,
CARD MRI Insurance Agency (CAMIA), Inc., CARD Business Development Service Foundation,
Inc. (BDSFI), Inc., CMIT, CARD Employees Multi-Purpose Cooperative (EMPC),
RISE, BotiCARD Inc., CARD Leasing and Finance Corporation (CLFC), RBI, CARD, Inc. and Mga
Likha ni Inay Inc. (MLNI), maintain a funded and formal noncontributory defined benefit retirement
plan - the CARD MRI Multi-Employer Retirement Plan (MERP) - covering all of their regular
employees and CARD Group Employees’ Retirement Plan (Hybrid Plan) applicable to employees
hired on or after July 1, 2016. MERP and Hybrid Plan comply with the requirements of Republic Act
No. 7641 (Retirement Pay Law).

MERP is valued using the projected unit cost method and is financed solely by the Association and its
related parties. MERP provides lump sum benefits equivalent to up to 120% of final salary for every
year of credited service, a fraction of at least six (6) months being considered as one whole year, upon
retirement, death, total and permanent disability, or voluntary separation after completion of at least
one year of service with the participating companies.

In addition to the Association’s defined benefit retirement plan, the Association also operates defined
contribution plan referred to as “Hybrid Plan” which provides a retirement benefit equal to 100% of
the member’s employer accumulated value (the Association’s contributions of 8% plan salary to Fund
A plus credited earnings) and 100% of the member’s employee accumulated value (member’s own
contributions up to 10% of plan salary to Fund B plus credited earnings), if any, provided that in no
case shall 100% of the employee accumulated value in Fund A be less than 100% of plan salary for
every year of credited service.

The Association has 5 employees which are part of Hybrid Plan as at December 31, 2017.

The date of the latest actuarial valuation report for MERP and Hybrid Plan is December 31, 2017 and
nil, respectively.

*SGVFS030466*
 - 20 -

The amounts recognized in the statement of assets, liabilities and fund b/alance follow:

2017 2016
Present value of defined benefit obligation (P
=14,564,970) (P
=12,655,246)
Fair value of plan assets 28,534,622 22,732,787
Effect of asset ceiling (3,689,255) (2,076,157)
Retirement asset P
=10,280,397 =8,001,384
P

The amounts included in the statements of revenue and expenses and changes in fund balance follow:

2017 2016
Current service cost P
=1,211,390 P1,687,265
=
Interest income on plan assets (1,464,933) (1,044,270)
Interest on the effect of asset ceiling 121,663 753
Interest expense on defined benefit obligation 741,597 953,068
Retirement expense 609,717 1,596,816
Remeasurement gain recognized during the year (2,257,514) (6,632,683)
(P
=1,647,797) (P
=5,035,867)

The movements in the net retirement asset follow:

2017 2016
Balance at beginning of year P
=8,001,384 P234,393
=
Contributions paid 631,216 2,731,124
Retirement income 1,647,797 5,035,867
Balance at end of year P
=10,280,397 =8,001,384
P

The movements in the present value of pension obligation follow:

2017 2016
Balance at beginning of year P
=12,655,246 =18,910,080
P
Actuarial gain (3,944,175) (9,284,500)
Current service cost 1,211,390 1,687,265
Interest cost 741,597 953,068
Benefits paid (20,390) (202,640)
Transfers to the plan 3,921,302 591,973
Balance at end of year P
=14,564,970 =12,655,246
P

The movements in the fair value of plan assets follow:

2017 2016
Balance at beginning of year P
=22,732,787 =19,159,417
P
PVO transfer 3,921,302 591,973
Benefits paid (20,390) (202,640)
Contributions paid by employer 631,216 2,731,124
Interest income 1,464,933 1,044,270
Return on plan assets (195,226) (591,357)
Balance at end of year P
=28,534,622 =22,732,787
P

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Remeasurement gain or loss on retirement plan follows:

2017 2016
Actuarial gain (P
=3,944,175) (P
=9,284,500)
Remeasurement gain on plan assets 1,491,435 2,060,460
Effect of asset ceiling 195,226 591,357
(P
=2,257,514) (P
=6,632,683)

The fair value of plan assets, gross of effect of asset ceiling, by each class as at the reporting date is as
follows:

2017 2016
Cash and cash equivalents P
=11,759,118 P9,443,200
=
Debt instruments – Government bonds 14,487,028 10,675,317
Loan receivables 1,255,523 1,716,325
Other assets 1,032,953 897,945
P
=28,534,622 =22,732,787
P

All plan assets do not have quoted prices in an active market except for government securities. Cash
and cash equivalents are deposited in reputable financial institutions and related parties and are
deemed to be standard grade. Investment in equity securities, loans and other assets are unrated.

The plan assets have diverse investments and do not have any concentration risk other than those in
government bonds which are of low risk.

The overall investment policy and strategy of the Association’s defined benefit plans is guided by the
objective of achieving an investment return which, together with contributions, ensures that there will
be sufficient assets to pay pension benefits as they fall due while also mitigating the various risk of
the plans.

The cost of defined retirement plan as well as the present value of the defined benefit obligation is
determined using actuarial valuations. The actuarial valuation involves making various
assumptions. The principal assumptions used in determining pension for the defined benefit plans are
shown below:

2017 2016
Discount rates
January 1 5.86% 5.04%
December 31 5.77% 5.86%
Future salary increases 5.00% 7.00%

The Association plans to contribute =

P2.7 million to the defined benefit retirement plan in 2018.
As at December 31, 2017, the average duration of defined benefit obligations is 13.0 years.

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18. Related Party Transactions

In the ordinary course of business, the Association transacts with related parties. Related parties
include trustees, members, officers, employees and entities (affiliates) where trustees, members and
officers hold key management positions. Transactions with such parties are made in the ordinary
course of business and on substantially same terms, including interest, as those prevailing at the time
for comparable transactions with other parties. These transactions are made substantially on the same
terms as other individuals and business of comparable risks and are generally settled in cash.

Transactions with retirement plans

Under PFRS, certain post-employment benefit plans are considered as related parties.
CARD-MRI’s MERP is a stand-alone entity assigned in facilitating the contributions to retirement
starting 2005.

Remunerations of Trustees and other Key Management Personnel

Key management personnel are those persons having authority and responsibility for planning,
directing and controlling the activities of the Association, directly or indirectly. The Association
considers the members of the board of trustees and senior management to constitute key management
personnel for purposes of Section 33 of PFRS for SMEs.

The compensation of key management personnel included under ‘Compensation and employee
benefits’ in the statements of revenue and expenses and changes in fund balance are as follows:

2017 2016
Short-term employee benefits P
=2,422,861 =1,723,013
P
Post-employment benefits 1,315,271 805,465
P
=3,738,132 =2,528,478
P

Other related party transactions

Transactions between the Association and its key management personnel meet the definition of
related party transactions. Transactions between the Association and its affiliates within the CARD
MRI, also qualify as related party transactions.

Related party transactions and balances as at and for the years ended December 31, 2017 and 2016
are as follows:

December 31, 2017

Category Amount/ Outstanding Nature, Terms and Conditions
Volume Balance
Other related parties
Cash in bank and short-term P
= 172,978,011 Checking, savings and time deposit accounts with
investments annual interest rate ranging from 1.0% to 4.3%
Deposits P
= 506,707,646
Withdrawals (411,733,177)
Interest income 2,720,226 From savings and time deposit
Long-term investment 30,000,000 Time deposit account in RBI with annual interest rate of
5.0%
Interest income 8,333
Equity investments 4,591,079 Investments in CMIT with 4.08% ownership and
investments in CMPHI and CMHTI with 20.0%
ownership each.
Acquisition of shares 200,000 Investments in CMPHI and CMHTI with 20.0%
ownership each.
Accounts receivable 1,015,899 For training fees, seminars and meetings and share of

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December 31, 2017

Category Amount/ Outstanding Nature, Terms and Conditions
Volume Balance
Billings P
= 265,723,341 expenses
Collections (265,039,431)
Accounts payable P
= 91,519 Share of expenses
Billings 11,554,237
Payments (11,493,466)
Funds held in trust 69,103,044 Funds received by the Association in behalf of CARD,
Receipts 73,100,092 Inc. and CBI for the ZeDres and BS Scholarship
Disbursements (8,925,616) programs and funds received for the BS
Scholarship of CBI and CARD, Inc.
Lease liability 2,328,149 Lease of equipment and furniture and fixture from RISE
Seminars and trainings 222,798,414 Income derived from providing seminars and trainings
to CARD MRI group and the related affiliates
Facilities fee 743,907 Income derived from the use of facilities to CARD MRI
group and external parties for various events
Dividend income 1,093,475 Income derived from the Association’s investment in
equity shares
Donations and contributions 5,000,000 Funds received by the Association for the expenses of
BS Scholarship
Rent expense 1,187,309 The Association leases premises occupied by its
branches. Rent expense is recorded under 'Office
rental' (see Note 16)
Contributions 631,216 Pertains to the funded and formal noncontributory
defined benefit retirement plan of the Bank that is
handled by CARD MERP (see Note 17)

December 31, 2016

Category Amount/ Outstanding Nature, Terms and Conditions
Volume Balance
Other related parties
Cash in bank P
=75,283,316 Checking, savings and time deposit accounts with
annual interest rate ranging from 1.0% to 4.3%
Deposits P
=238,557,895
Withdrawals (220,309,386)
Interest income 1,990,419 From savings and time deposit
Equity investment – 4,373,900 Investments in CMIT with 4.08% ownership.
Accounts receivable 331,989 For training fees, seminars and meetings and share of
expenses
Billings 223,011,923
Collections (225,498,943)
Accounts payable 65,249 Share of expenses
Billings 5,705,159
Payments (5,728,077)
Funds held in trust 4,928,660 Funds received by the Association in behalf of CARD,
Receipts 6,315,600 Inc. and CBI for the ZeDres and BS Scholarship
Disbursements (7,417,356) programs and funds received for the BS Scholarship
of CBI and CARD, Inc.
Lease liability 4,279,787 Lease of equipment and furniture and fixture from RISE
Seminars and trainings 165,482,064 Income derived from providing seminars and trainings
to CARD MRI group and the related affiliates
Facilities fee 866,175 Income derived from the use of facilities to CARD MRI
group and external parties for various events
Dividend income 262,434 Income derived from the Association’s investment in
equity shares
Donations and contributions 100,000 Funds received by the Association for the expenses of
BS Scholarship
Rent expense 810,560 The Association leases premises occupied by its
branches. Rent expense is recorded under 'Office
rental' (see Note 16)
Contributions 2,731,124 Pertains to the funded and formal noncontributory
defined benefit retirement plan of the Bank that is
handled by CARD MERP (see Note 17)

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19. Notes to Statements of Cash Flows

Noncash activities of the Association consist of the following:

2017 2016
Noncash investing activities:
Acquisition of property and equipment through
finance lease P
=– P
=1,146,933

Noncash operating activities:

Remeasurement gain on retirement plan 2,257,514 6,632,683
Reclassification of other asset to property and
equipment 203,622 –

20. Approval of the Release of the Financial Statements

The accompanying financial statements of the Association were authorized for issue by the BOT on
April 14, 2018.

21. Supplementary Information under RR 15-2010

The Association reported and/or paid the following types of taxes in 2017:

Taxes and Licenses

Taxes and licenses in 2017 recorded as ‘Taxes and licenses’ presented under ‘Administrative
expenses’ in the statements of revenue and expenses and changes in fund balance consist of:

Real property tax =345,861

P
Business permits and licenses 92,105
Community tax certificate 7,154
Annual registration 1,500
Others 13,504
=460,124
P

Withholding Taxes

The following withholding taxes are categorized into:

Paid Payable
Withholding tax on compensation =2,485,726
P =256,402
P
Expanded withholding tax 1,275,024 325,115
=3,760,750
P =581,517
P

Tax Contingencies
The Association has no pending tax cases or assessments as at December 31, 2017.

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