ACCOUNTING

AND COST
ALLOCATION
MANUAL
 ACCOUNTING AND COST ALLOCATION MANUAL

FOR ELECTRIC COOPERATIVES

TABLE OF CONTENTS
Page

INTRODUCTION 1-4

1. Objectives of the ACAM

2. Scope & Contents of the Manual
3. Administration ofthe Manual
4. Procedures on Amendment of the Manual
5. Effectivity
6. Implementation and Compliance

DEFINITION OF TERMS 5-20

Chapter I - BASIC ACCOUNTING AND REPORTING PRINCIPLES 21-26

1. ECs Adoption of Basic Accounting Principles

2. Reporting Principles

Chapter II -CHART OF ACCOUNTS AND ACCOUNT DESCRIPTION 27-103

1. Purpose and Scope

2. Account Coding
3. Chart of Accounts with Account Codes
Detailed Chart of Accounts-- refer to Appendix "A"
4. Account Description- Assets
5. Account Description- Liabilities
6. Account Description- Equity
7. Account Description- Revenues
8. Account Description- Expenses

ACAM forECs
Chapter Ill - APPLICATION OF ACCOUNTING CONCEPTS 104-145

1. Assets
Property, Plant and Equipment
Cash Receipts and Disbursements
Consumer Accounts Receivables
2. Liabilities
Consumers' Deposits
Advances from Customers
Loans Payable
3. Members' Equity
4. Revenuesand Expenses

Chapter IV- ALLOCATION METHODS 146-154

1. Overview of Allocation
2. Principles of Allocation
3. Allocation Factors
Accounts with Allocation Factors- refer to Appendix "B"

Chapter V -INTER-SEGMENTAL TRANSACTIONS 155-159

AND TRANSFER PRICING PRINCIPLES

Chapter VI- FINANCIAL REPORTS 160-163

APPENDICES
1. Appendix "A"- Chart of Accounts 9 pages
2. Appendix "B"- Allocation Factors 9 pages
3. Appendix "C"- Accounting Separation Statements 15 pages

ACAM for ECs ·-·-····-·-·····(

ACCOUNTING
AND COST
ALLOCATION
MANUAL

INTRODUCTION
 Section 36 of the Republic Act 9136, otherwise known as the Electric Power Industry
Act (the EPIRA) and Rule 10 of the Implementing Rules and Regulations issued
pursuant to that act (the IRR) mandate electric power industry players to structurally and
functionally unbundle their business activities into generation, transmission, distribution,
and supply. The same rules further direct the unbundling of said activities into regulated
and unregulated sectors following specifically the guidelines set by the Energy Regulatory
Commission (ERC) under Resolution No.26 Series 2006 which is known as the Business
Separation Guidelines, As Amended (BSG).

The guidelines intend to implement the requirements of Section 26 of the EPIRA and
Rule 7, Section S(c) of the IRR that separate audited accounts shall be maintained for
each business conducted by the Distribution Utility. In addition, each business
undertaking shall not subsidize nor hamper its distribution assets in any way to support
other business activities, and that the cost of regulated services and activities are
allocated on a fair and reasonable basis to reflect the efficient costs of each business
segment.

1. OBJECTIVES OF THE ACCOUNTING COST ALLOCATION MANUAL

This Accounting and Cost Allocation Manual (ACAM) is prepared to provide full and
proper documentation of the accounting policies and principles to be used by each
Electric Cooperative registered either under the National Electrification Administration
(NEA) or under the Cooperative Development Authority (CDA), in preparing the
Accounting Separation Statements in accordance to the guidelines set by the Energy
Regulatory Commission (ERC), including:

1.1 Allocation methodologies used to allocate costs and revenues to and between
segments;
1.2 Interpretation of the Philippine Financial Reporting Standards (PFRS) and
Philippine Accounting Standards (PAS) as applicable to the industry;
1.3 Depreciation policies and methodologies for each class of assets;

ACAM for ECs Page2

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 1.4 Transfer pricing policies used for transactions between business segments or
between a business segment and another activity undertaken by the EC,
consistent with the inter-segmental transactions and transfer pricing principles
applicable to the industry;
1.5 Procedures to be adopted for whatever changes that shall be made in the ACAM
in accordance to the guidelines set by the ERC;
1.6 Guidance to accounting areas with differences in accounting treatment for rate-
regulated industry as necessary.

2. SCOPE AND CONTENTS OF THE MANUAL

This manual covers the accounting process involving documentation, recording,

classification, interpretation and analysis of financial reports. It is divided into six (6)
parts as follows:
I. Basic Accounting and Reporting Principles
II. Chart of Accounts
Ill. Application of Accounting Concepts
IV. Allocation Methods
V. Inter-segmental Transactions and Transfer Pricing Policies
VI. Financial Reports & Appendices

3. ADMINISTRATION OF THE MANUAL

The General Manager will be responsible for the administration of the manual and will
ensure that (1) policies and implementing guidelines listed in this manual are
implemented and followed by appropriate officials and personnel; (2) adequate copies
are printed and distributed to enable users to know the details of the accounting and
financial reporting system; and (3) any revision and amendment to this manual shall be
properly authorized, documented and included in all copies of this manual.

ACAM for ECs Page 3

4. PROCEDURES ON AMENDMENTS OF THE MANUAL

All revisions to any part of this manual will be submitted to the General Manager for
evaluation and endorsement to the Board of Directors for approval. Upon approval,
he/ she will prepare a corresponding memorandum effecting the proposed change and
will see to it that all holders of the manual are furnished with copies of the
amendment/s.

5. EFFECTIVITY

This Accounting and Cost Allocation Manual will take effect upon approval by the
Energy Regulatory Commission.

6. IMPLEMENTATION AND COMPLIANCE

The following are guidelines to be observed in the implementation and monitoring of

policies and compliance with procedures as prescribed in the manual:

1. All personnel of the Accounting Department/Division and of other

sections/ offices involved in accounting functions will adhere strictly to the
policies and procedures.

2. Department heads and supervisors will impart to the staff knowledge of this
manual and periodically test compliance thereto.

3. Employee performance in accordance with prescribed systems, policies and

procedures will be considered in the periodic merit rating and salary increases
of personnel concerned.

4. Random testing for compliance to said policies and procedures shall be

included in the scope of annual operations/ financial audit or consultancies.

ACAM for ECs Page 4

 ACCOUNTING
AND COST
ALLOCATION
MANUAL

DEFINITION OF
TERMS

ACAM for ECs PageS

'(
This .'vfanual has adopted the definitions and description of the Generation and Distribution
Activities including the relevant business segments for the Electric Cooperatives based on
Article IV of the BSUP (as Amended):

1. Generation Activity

The Generation Business Segments are described below.

1.1 Generation of Electricity and Provision of Ancillary Services Business Segment

This segment compnses the generation of electricity (ie. the production of electricity,
including the use of a co- generation facility and embedded generators) and the provision of
Ancillary Services (using generation assets).
The assets included in the Business Segment are all facilities and assets (including support
plant) used for the generation of electricity or the provision of Ancillary Services.

The liabilities included in this Business Segment are all the liabilities incurred directly, or a
relevant share of the shared liabilities that are incurred to provide the services or undertake
the operational activities.

Revenues include all revenues derived from the sale of electricity or the provision of
Ancillary Services, as well as revenues derived from the sale of related facilities, plants or
assets.

Costs include all operating and maintenance costs of assets associated with the generation of
electricity or the provision of Ancillary Services and the corresponding depreciation of the
assets.

1.2 Supply Services

This segment comprises the sale of electricity by a generating EC, licensed as RES, to end-
users in the contestable market. It includes the:

ACAM for ECs Page 6

 1.2.1 Billing, collection and the provision of customer services to such end-users in
their capacity as electricity consumers or to such other customer in their capacity as
purchasers of electricity.

1.2.2 Energy trading (including the purchase of electricity and hedging activities)
undertaken in connection with the sale of electricity to end-users who are included in
the contestable market or to other customers who are not end-users; and

1.2.3 Sale of electricity to end-users who are included in the contestable market or
to other customers who are not end-users.

Supply servtces, may also comprise the provision, installation, commtsstonmg,

testing, repair, maintenance and reading of meters that are used to measure the
delivery of electricity to end users who are included in the contestable market or to
other customers who are not end-users (whether such services are provided to those
end -users or to other customer or to any other person.)

The assets included in this Business Segment are all the assets used directly, or a
relevant share of the shared assets which are used to provide the supply services.
The liabilities included in this Business Segment are all the liabilities incurred directly
or a relevant share of the shared liabilities which are incurred to provide the services
or undertake the operational activities for supply services.
Revenues include all revenues associated with providing the services or undertaking
the operational activities for supply services.
Costs include all costs associated with the provision of the supply services including
the relevant share of the operating and maintenance costs and the depreciation costs
of the assets used to provide the services or undertake the operational activities.

2. Distribution Activity
This manual adopts the seven (7) distribution business segments. These segments are
further dassitled into regulated and non-regulated Business Segments. Below is the
description of each business segments:

ACAM for ECs Page 7

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Regulated Business Segments:

2.1 Distribution Services

This segment has the following distribution services:

2.1.1 Conveyance of electricity through a Distribution System and the

control and monitoring of electricity as it is conveyed through the
Distribution System (including any services that support such conveyance,
control or monitoring or the safe operation of the Distribution System).

2.1.2 Provision of Ancillary Services (if any) that are provided using assets
which form part a Distribution System (an example of such Ancillary
Services is services provided by a series reactor or a static var compensator);

2.1.3 Planning, maintenance, augmentation and operation of the

Distribution System.

2.1.4 Provision, installation , commissioning ,testing, repair, maintenance

and reading of \V'ESM- related meters that are not used to measure the
delivery of electricity to end-users or other customers; and

2.1.5 Billing , collection and the provision of customer services that are
directly related to the delivery of electricity to end-users or to that relate to
the connection of such persons to a Distribution System (whether such
services are provided to those end-users or to Suppliers or to any other
person).

The assets included in this Business Segment are all the facilities and assets used to
provide the distribution services of this particular business segment.

ACAM for ECs Page 8

 The liabilities included in this Business Segment are all the liabilities incurred directly
or a relevant share of the shared liabilities which are incurred to provide the services
or undertake the operational activities of this particular business segment.
Revenues include all revenues derived from the provision of the distribution services,
including revenues derived from the sale of related facilities, plants or assets.
Costs include all costs associated with management, maintenance and operation of
Distribution System facilities and other assets in order to provide the distribution
services of this particular business segment.

2.2 Distribution Connection Services

This segment has the following distribution connection services:

2.2.1 Provision of capability at each Connection Point to a Distribution

System to deliver electricity or to take electricity from the Connection Point
and the conveyance of electricity:

2.2.1.1 from the facilities of persons which are directly connected

to the Distribution System

2.2.1.2 from the Connection Point to the facilities of persons which

are directly connected to the Distribution System;

2.2.2 Planning, installation, maintenance, augmentation, testing and

operation of Distribution Connection Assets; and

2.2.3 Provision of other services that support any of the above services.

The assets included in the Business Segment are all the facilities and assets used to
provide the distribution connection services of this particular business segment.

ACAM for ECs Page 9

 The liabilities included in this Business Segment are all the liabilities incurred directly
or a relevant share of the shared liabilities incurred to provide the Services or
undertake the activities of this particular business segment.

Revenues include all revenues associated with providing the distribution connection
services, including the corresponding depreciation of the Distribution Connection
Assets.

2.3 Regulated Retail Services Business Segment

This segment comprises the provision of regulated retail services, namely; services
pertaining to the sale of electricity to end-users who are included in the Captive
Market, and includes:

2.3.1 Billing, collection and the provision of customer services to such end-
users in their capacity as electricity consumers;

2.3.2 Energy trading (including the purchase of electricity and hedging

activities) undertaken in connection with the sale of electricity to end-users
who are included in the Captive .Yiarket; and

2.3.3 Sale of electricity to end-users who are included on the Captive

Market.

Regulated retail servtces also compnse the provision, installation, commissioning,

testing, repair, maintenance and reading of meters that are used to measure the
delivery of electricity to end-users who are included on the Captive Market.
The assets included in this Business Segment are all the assets used directly, or a
relevant share of the shared assets used to provide the regulated retail services.
The liabilities included in this Business Segment are all the liabilities directly incurred
or a relevant share of the shared liabilities incurred to provide the serv1ces or
undertake the operational activities of this particular business segment.

ACAMforECs Page 10
 Revenues include all revenues associated with providing the regulated retail services.
Costs include all costs associated with the provision of the regulated retail services,
including the relevant share of the operating and maintenance costs and the
depreciation costs of the assets used to provide the services or undertake the
operational activities of this particular business segment.

2.4 Last Resort Supply

This segment comprises the provision of Supplier of Last Resort (SOLR) services
provided by a Distribution Utility namely; services pertaining to the sale of electricity
to SOLR Customers, including billing, collection and the provision of basic customer
sen'1Ce.

The assets included in this Business Segment are all the assets directly used or a
relevant share of the shared assets which are used, to provide the SOLR services of
this particular business segment.

The liabilities included in this Business Segment are all the liabilities directly incurred
or a relevant share of the shared liabilities incurred to provide the serv1ces or
undertake the operational activities of this particular business segment.
Revenues include all revenues associated with providing the SOLR services.
Costs include all costs associated with the provision of the SOLR services, including
the relevant share of the operating and maintenance costs and the depreciation costs
of the assets used to provide the services or undertake the activities of this particular
segment.

2.5 Wholesale Aggregation

This segment comprises the Distribution Utility's service of purchasing electricity in

bulk and selling this to other Distribution Utilities. It also comprises the provision
of Wholesale Aggregation services provided by a Distribution Utility namely; services

ACAM for ECs Page 11

 pertaining to the sale of electricity to other Distribution Utilities including billing,
collection and the provision of basic customer service.
The assets included in this Business Segment are all the assets directly used or a
relevant share of the shared assets which are used, to prov;de the Wholesale
Aggregation.

The liabilities included in this Business Segment are all liabilities directly incurred or a
relevant share of the shared liabilities incurred to provide the services or undertake
the operational activities of this particular business segment.

Revenues include all revenues associated with providing the Wholesale Aggregation.
Costs include all costs associated with the provision of the Wholesale Aggregation,
including the relevant share of the operating and maintenance costs and the
depreciation costs of the assets used to provide the services or undertake the
operational activities of this particular segment.

2.6 Non-Regulated Retail Services

This segment comprises the provision of non-regulated retail services provided by a

Distribution Utility namely; services pertaining to the sale of electricity to end-users
who are included in the contestable market or to other customers who are not end-
users and includes:

2.6.1 Billing, collection and the provision of customer services to such end-
users in their capacity as electricity consumers; or to such other customers in
their capacity as purchasers of electricity.

2.6.2 Energy trading (including the purchase of electricity and hedging

activities) undertaken in connection with the sale of electricity to end-users
who are included in the contestable market or to other customers who are
not end-users; and

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 2.6.3 Sale of electricity to end-users who are included in the contestable
market or to other customers who are not end-users.

Non-Regulated retail services also compnse the prov1s1on, installation,

commissioning, testing, repair, maintenance and reading of meters that are used to
measure the delivery of electricity to end-users who are included in the contestable
market or to other customers who are not end-users ( whether such services are
provided to those end-users or other customers, to Suppliers or to any other person).

The assets included in this Business Segment are all the assets directly used or a
relevant share of the shared assets used to provide the non-regulated retail services.
The liabilities included in this Business Segment are all the liabilities directly incurred
or a relevant share of the shared liabilities incurred to provide the services or
undertake the operational activities of this particular segment.

Revenues include all revenues associated with providing the non-regulated retail
servtces.

Costs include all costs associated with the prov1s1on of the non-regulated retail
services including the relevant share of the operating and maintenance costs and the
depreciation costs of the assets used to provide the services or undertake the
operational activities of this particular business segment.

2.7 Related Businesses

This segment comprises the provision of all other services, and the carrying out of all
other activities that utilize distribution assets, facilities, or staff including:

2. 7.1 Electricity related services such as the construction and maintenance

of customer installations; and

ACAM for ECs Page 13

 2.7.2 Non-electricity related services such as telecommunications services.

The assets included in this Business Segment are all the assets used directly or a
relevant share of the shared assets used to provide the services or undertake the
activities of this particular business segment.

The liabilities included in this Business Segment are all the liabilities incurred directly
or a relevant share of the shared liabilities incurred to provide the servtces or
undertake the operational activities of this particular business segment.

Revenues include all revenues generated from the provision of the services or the
undertaking of the activities for this particular business segment.

Costs include all the relevant share of operating and maintenance costs and
depreciation costs apportioned in accordance with the principles set out in this
Manual.

Below are other terms used in this Manual and were defined as follows:

ACCOUNTING SEPARATION A statement described in Section 3.1.3 of the

STATEMENT Business Separation Guidelines (BSG), as amended

ACCOUNTING AND COST Accounting and Cost Allocation Manual prepared

ALLOCATION MANUAL and amended by an Electric Power Industry
(ACAM) participant in accordance with Section 2.2 of the
BSG, as amended

ANCILLARY SERVICES Those services that are necessary to support the

transmission capacity and energy from resources to
loads while maintaining the reliable operation of the
Grid and/ or Distribution Systems in accordance with
good utility practice, the Grid Code and the

ACAM for ECs Page 14

 Distribution Code. Such services include those listed
in clause 3.3.1.2 of the WESM Rules.

ACT Republic Act No. 9136, otherwise known as "Electric

Power Industry Reform Act of 2001"

AUDITOR An auditor registered as a Certified Public Accountant

under the Revised Accountancy Law (Presidential
Decree No. 692) and who possesses the
independence as defined in Part II Section 14 of the
Code of Professional Ethics for Certified Public
Accountants as promulgated by the Board of
Accountancy and approved by the Professional
Regulation Commission (PRC).

BUSINESS SEGMENT A Business Segment as defined in i\t·ticle IV of the

BSG, as amended

CONNECTION ASSETS With respect to the Grid, the components used to

provide Transmission connection services as defined
in Section 4.3.6(a), and with respect to a Distribution
System, the components used to provide distribution
connection services as defined in Section 4.4.6(a) of
the BSG, as amended ..

CONNECTION POINT With respect to the Grid, a point of connection of a

User System or Equipment to the Grid, and with
respect to a Distribution System, a point of
connection of a L;ser System or Equipment to that
Distribution System. For the avoidance of doubt, a
Connection Point includes both a point where
electricity may flow out of the Grid or Distribution

ACAM for ECs Page 15

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 System (as the case may be) and a point where
electricity may flow into the Grid or Distribution
System (as the case may be).

CONSUMERS' REFUND The amount of over recoveries in rates subject for

refund to consumers as per order issued by the
regulator.

COSTS Includes both costs and expenses.

DISTRIBUTION UTIUTY (DU) Refers to any EC, private corporations, government-

owned utility or existing local government unit with
an exclusive franchise to operate a Distribution
System in accordance with its franchise and the Act.

DISTRIBUTION The components of a Distribution System used to

CONNECTION ASSETS provide distribution connection services as defined in
Section 4.4.6(a) of the BSG, as amended

DISTRIBUTION SERVICES The Rules promulgated by the ERC on January 18,

AND OPEN ACCESS RULES 2006 under ERC Res. No. 1 S. 2006 amended by
(DSOAR) ERC Res. No. 2 S. 2010 providing the rules, terms
and conditions pertaining to distribution connection
assets and services, service to the captive and
contestable markets, supplier of last resort, unbundled
distribution wheeling service, and guidelines for
establishing regulated service rates.

DISTRIBUTION SYSTEM In respect of a Distribution Utility, the Distribution

System (as defined in the Grid Code) operated by that
Distribution Ctility, together with such Sub-

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v
 transmission Systems as are connected to it and as are
operated only by the Distribution Utility.

ELECTRIC COOPERATIVE (EC) A distribution utility organized pursuant to

Presidential Decree No. 269 as amended, the Act
creating the National Electrification Administration
and declaring as national policy the organization,
promotion and development of electric cooperatives,
or under Republic Act No. 9520 otherwise known as
the Philippine Cooperative Code of 2008, or as
otherwise provided in this Act.

EPIRA Republic Act No. 9136, othet\vise known as the

Electric Power Industry Reform Act.

EQUIPMENT Equipment as defined in the Grid Code.

GENERAL PURPOSE The audited or duly attested annual financial

FINANCIAL STATEMENTS statements of the members of an Electric Cooperative
in accordance 'vith the requirements set by the
regulators

GRID The Grid as defined in the Grid Code, together with

such Sub-transmission Systems as are connected to it
and as are operated by TRANSCO or its Buyer or
Concessionaire.

lAS/PAS International Accounting Standard adopted as

Philippine Accounting Standard

INTER-SEGMENTAL COST A cost that arises from transactions between Business

Segments or between a Business Segment and

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 another activity that is conducted by an Electric
Cooperative.

INTER-SEGMENTAL REVENUE A revenue that arises from transactions

between Business Segments or between a Business
Segment and another activity that is conducted by an
Electric Cooperative.

INTER-SEGMENTAL An Inter-segmental Cost and an Inter-

TRANSACTION segmental Revenue.

IRR The Implementing Rules and Regulations issued

pursuant to the EPIRA

LAST RESORT SUPPLY The supply of electricity that a customer will receive
from a SOLR. This involves the sale of electricity,
billing, collection and provision of basic customer
servtce.

LAST RESORT SUPPLY EVENT Any of the following situations where a contestable
customer is served by the Supplier of Last Resort:

a. The customer's Retail Electricity Supplier (RES)

has ceased to operate;
b. The license of the customer's RES has been
revoked or not renewed by ERC;
c. The arrangements for distribution wheeling service
between the customer's RES and the distribution
utility have been terminated;
d. The customer's RES is no longer permitted to
trade electric energy through the wholesale electricity
spot market (WESM), if WESM member; or

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 e. The customer fails to exercise its option to
choose its supplier of electricity upon the
implementation of retail competition and open
access.

MAGNA CARTA FOR The Rules governing the services to residential

RESIDENTIAL CONSUMERS consumers that was promulgated on June 17, 2004
and amended by ERC Res. No. 28 S. 2010.

MEMBERS' CONTRIBUTION The amounts collected from the consumers

FOR CAP EX (MCC) which is envisioned to fund the EC's capital projects,
including the payment of loans associated with the
expansion, rehabilitation, or upgrading of the existing
EC power system in accordance with the ERC-
approved capital expenditures plan. MCC was
modified as Reinvestment Fund for Sustainable
Capital (RFSC), as per ERC Resolution No. 14, series
of 2011.

POWER SECTOR ASSETS & The Corporation created pursuant to Section 49 of

LIABILITIES MANAGEMENT RA 9136 to manage the orderly sale, disposition, and
CORPORATION (PSALM) privatization of ),)PC generating assets, real estate and
other disposable assets, and IPP contracts.

RETAIL ELECTRICITY Any person or entity licensed by ERC to sell, broker,

SUPPLIER (RES) market or aggregate electricity to end-users.

REINVESTMENT FUND FOR Formerly named as Members' Contribution For

SUSTAINABLE CAPITAL Capital Expenditure (MCC).
EXPENDITURE (RFSC)

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SUPPLIER OF LAST RESORT A regulated entity designated by the ERC
(SOLR) to serve end-users in the contestable market following
a Last Resort Supply Event.

SOLR CUSTOMER An end-user in the contestable market who is served

by the SOLR following a Last Resort Supply Event.

TRANSFER PRICE The cost of that product, service or capital asset as

recorded by the Business Segment that acquires that
product, service or capital from another Business
Segment, or from another business conducted by a
member of the relevant Electric Power Industry
Group.

UNIVERSAL CHARGE
Refers to the charge imposed for the recovery of the
stranded debts, stranded contract cost of NPC, and
stranded contract cost of eligible contracts of DUs,
and other purposes pursuant to Section 34 of RA
9136.

USER SYSTEM User System as defined in the Grid Code.

WHOLESALE AGGREGATION The sale of electricity to distribution utilities, by an

ERC-registered wholesale aggregator. A business
segment of aD U that shall undertake the Distribution
Utilities' service of purchasing electricity in bulk and
selling this to other DUs.

WHOLESALE ELECTRICITY The electricity market established by the Department

SPOT MARKET (WESM) of Energy (DOE) in accordance with the R.A.9136.

ACAM for ECs Page 20

;--
 ACCOUNTING
AND COST
ALLOCATION
MANUAL

CHAPTER I

BASIC ACCOUNTING
AND REPORTING
PRINCIPLES

ACAM for ECs Page 21

!
 1. ECs ADOPTION OF THE BASIC ACCOUNTING PRINCIPLES

The ECs intend to present financial statements with the following frameworks, concepts,
characteristics and assumptions such as understandability, relevance, reliability, comparability,
materiality, consistency, going concern, accrual, etc. This manual shall invoke the provisions as
provided for in IAS 1- Presentation of Financial Statements as deemed applicable under the
regulatory environment set for the distribution utilities (DUs) by the Regulators.

1.1. Understandability

The EC's objective is to provide financial statements that are clear and understandable to the
users. The users are assumed to have a reasonable knowledge of the business activities and
accounting and willingness to study the information with rational diligence. For our
consumers, we shall undertake to disseminate the financial information to the extent of level
where it shall be understood by many. However, if there are essential and complex matters
that are relevant for decision-making it shall still be included to ensure completeness of
information.

1.2. Relevance

The financial report shall be relevant to the decision-making needs of the users, particularly
in evaluating the past, present and even in predicting the future events. The nature and
materiality affects the relevance of the information, so that thresholds and cut-off points are
highly considered in the presentation of financial statements.

1.3. Reliability

The ECs shall undertake to present reliable information that are free from material errors
and biases and can be depended upon by users to represent faithfully that which it either
purports to represent or could reasonably be expected to re-present. To ensure reliability,
ECs shall consider the following:

ACAM for ECs Page 22

 13.1 Faithful representation in identifying transactions and other events to be measured
shall be presented faithfully to correspond to where the transactions and events are
intended to.

1.3.2 Substance over form which would mean that transactions shall be presented m
accordance to their substance and economic reality and not merely in their legal form.

1.3.3 Neutrality shall be observed and that information shall be neutral and free from biases.

1.3.4 Prudence shall be exercised in the preparation of the fmancial statement where a certain
degree of caution in the exercise of judgment needed in making estimates shall be
required under condition of uncertainties.

1.3.5 Completeness shall be observed within the bounds of materiality and cost.

1.3.6 Conservatism is exercised when the management chooses the least effect in the equity
from two alternative courses of actions in relation to the recording of the transactions in
the books of accounts.

1.4. Comparability

Financial statements of the EC shall be able to be compared through time, in order to

identify trends in its financial position and performance. Hence, the measurement and
display of the financial effect of like transactions and other events shall be carried with
consistency.

1.5. Consistency

The ECs shall apply this principle in accounting that entails the uniform application of
accounting methods from period to period.

ACAM for ECs

 Furthermore, the EC shall likewise follow the constraints on relevant and reliable
information by observing the following:

1.5.1. Timeliness in preparing financial reports so as not to lose its relevance to the
user.

1.5.2. Cost-benefit constraint is the balance between benefit and cost that shall be
observed so that the information derived should not exceed the cost of
providing it. In other words, the benefit that shall be derived from spending the
cost must be considered.

1.5.3. Balance between qualitative characteristics shall be aimed to meet the

objective of the financial statements.

1.5.4. Materiality otherwise known as the doctrine of convenience shall be considered

when the item for recording is significant enough to affect the evaluation,
decision and fair presentation of the financial statements. The materiality of an
item depends on the sound judgement, professional expertise and common sense
of the accountant, based on nature, size, and cost of the item.

1.6. Going Concern

Going concern is an accounting assumption that the EC shall continue to operate its
business in the power industry indefinitely unless there is evidence to the contrary.

1. 7. Accrual

Accrual is an accounting assumption which means that income is recognized in the

period earned regardless of the time actually received by the EC and expense ts
recognized in the period incurred regardless of the time paid by the EC.

ACAM for ECs Page 24

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 At all times, the EC shall present true and fair view of financial position, performance and
changes in the financial position of the EC.

2. REPORTING PRINCIPLES

2.1 Asset Recognition

An asset is recognized in the balance sheet when it is probable that the future economic
benefits will flow to the business operations and the asset has a cost or value that can be
measured reliably.

2.2 Uability Recognition

A liability is recognized in the balance sheet when it is probable that an outflow of

resources embodying economic benefits will be required for the settlement of a present
obligation and the amount of the obligation can be measured reliably.

2.3 Income Recognition

Income is recognized when it is probable that an increase in future economic benefits

related to an increase in an asset or a decrease in a liability has arisen and that the
increase in economic benefits can be measured reliably.

2.4 Expense Recognition

An expense is recognized when it is possible that a decrease in economic benefit related

to decrease in an asset or an increase in a liability has occurred and that the decrease in
economic benefits can be measured reliably.

ACAM for ECs Page 25

 The EC shall uphold the matching principle with simultaneous or combined recognition
of revenues and expenses that result directly from the same transactions and events.

2.4.1 Cause and Effect Association

This principle presumes direct association of the expense with specific items of
income, thus expense is only recognized when the corresponding revenue is
likewise recognized.

2.4.2 Systematic and Rational Allocation

Under this principle, some costs are recorded as expense by simply allocating
them over the periods benefited, e.g. depreciation if utility plant and equipment.

2.4.3 Immediate Recognition

Under this principle, the cost incurred is an outright expense due to uncertainty
of future economic benefits or difficulty of reliably associating certain costs with
future revenues, e.g. losses from asset disposal.

ACAM for ECs Page 26

 ACCOUNTING
AND COST
ALLOCATION
MANUAL

CHAPTER II

CHART OF
ACCOUNTS AND
ACCOUNT
DESCRIPTION

ACAM for ECs Page 27

y
 1. PURPOSE AND SCOPE

The chart of accounts establishes the general ledger and subsidiary ledger accounts to
be used by the EC. It has incorporated the requirements under the Electric Power
Industry Reform Act ("Republic Act 9136" or the "EPIRA") following the Business
Separation Guidelines (BSG), as amended.

2. ACCOUNT CODING

The EC shall follow the account code as presented below. The coding scheme 1s
illustrated as follows:
DX- XXX- XXX- XX - XXX

Business Activity
Business Segment
Account Classification
l
Account Type
Major Account
General Ledger Account
Subsidiary Account
Auxiliary Account

2.1. Position One- Business Activities

This pertains to the account classification representing the two (2) business
activities (e.g. Distribution and Generation) and the related business segments
under each business activity. This shall be coded in alpha-numeric character.
The first character stands for the business activity that the EC is possibly
engaged in. This ACAM has considered the business segments of the two
activities considering the diversity of the 119 ECs who shall be using this
ACAM.

ACAM forECs
Page2~
 • G - Generation Activity
Business Segments:
1 -Electricity Generation and Provision for Ancillary Services
2 - Supply Service

• D - Distribution Activity
Business Segments:
1 - Distribution Services
2 -Distribution Connection Services
3 - Regulated Retail Services
4 - Last Resort Supply Service
5 -Wholesale Aggregation
6- Non-Regulated Retail Services
7 - Related Businesses

The second character, a number, represents the business segment engaged in

by the EC, as described above. All amounts not directly allocated shall be
recorded under the code 8, which shall be allocated using the allocation
factors discussed in Chapter IV of this :vfanual.

2.2. Position Two -Account Classification

Position two contains three (3) digits representing the account classification.
The first digit stands for the account group as to assets, liabilities, capital,
income and expenses. The last two digits are used to designate the major
accounts which will start at ten (1 0) and shall likewise follow at an interval of
ten (10). The different account types are as follows:
CODE ACCOUNT TYPE
1 Assets
2 Liabilities
3 Members' Equity and Margins
4 Revenues
5 Cost and Expenses

ACAM for ECs Page 29

 The next two (2) digits shall be for the major accounts grouped for Assets,
Liabilities, Equity, Revenues and Expenses, coded at an interval of ten (10) , e.g
Non-Cumnt Assets - 110, Cumnt Assets - 120, Cumnt Liabilities - 210 and Non-
Cumnt Liabilities -220. The said code shall be for (1) Asset and (10) for Non-
Current Assets.

The grouped accounts shall be coded consecutively starting from one (1) e.g.
111- Distribution Utility Plant and Equipment, 112- Generation Plant

2.3. Position Three - General Ledger Accounts

This shall pertain to the general accounts of each grouped accounts and it shall
be presented in three (3) digits.

Every general ledger of each grouped account shall start with 101 and numbered
consecutively, e.g./11- 101 Distn"bution Utility Plant and Equipment In Service, 111-
102 Distribution Utility Plant and Equipment Not Yet in Service, etc.

2.4. Position Four- Subsidiary Accounts

This shall be for the subsidiary account and it shall be represented in two (2)
digits, following this sequence, 10, 11, 12 ..... 79.

2.5. Position Five -Auxiliary Account

This shall be for auxiliary accounts and it shall be coded in three (3) digits
following this order, 001,002,003 ...

ACAM for ECs Page 30

'(
 3. CHART OF ACCOUNTS WITH ACCOUNT CODES

Presented below are the major accounts with their corresponding account codes:

MAJOR ACCOUNTS

100-000-00-000 ASSETS
11 0-000-00-000 Non-Current Assets
120-000-00-000 Current Assets

200-000-00-000 LIABILITIES
210-000-00-000 Non-Current Liabilities
220-000-00-000 Current Liabilities

300-000-00-000 MEMBERS' EQUITY AND MARGINS

310-000-00-000 Equity
320-000-00-000 Margins

400-000-00-000 REVENUES

500-000-00-000 EXPENSES

ACAM forECs Page 31

4. ACCOUNT DESCRIPTION- ASSETS

4.1 NON-CURRENT ASSETS

4.1.1 DISTRIBUTION UTIUTY PLANT AND EQUIPMENT

Generally, assets are properties owned by an individual or entity. This Manual

adopted the Philippine Accounting Standard 1 definition of assets as the economic
resources controlled by Electric Cooperatives (ECs) as a result of past transactions
or events and from which future economic benefits may be obtained, following the
three (3) essential characteristics of an asset:

a) They embody a future benefit that involves a capacity, singly or m

combination with other assets to contribute directly or indirectly to
future net cash flow;

b) The entity can control access to the benefit; and

c) The transaction or event giving rise to the entity's right, or control of, the
benefit has already occurred.

4.1.1.1 DISTRIBUTION UTIUTY PLANT AND EQUIPMENT

IN SERVICE

This account contains all the utility assets associated with the distribution
function of the EC. Distribution plant assets that are used to deliver service
within the ECs franchise area to be classified under the distribution business
activity.

ACAM forECs Page 32

{
 4.1.1.1.1 LAND, LAND RIGHTS AND IMPROVEMENTS

This account represents the cost of land (not subject to

depreciation), land rights and land improvements used as
distribution and general plant site of the EC. This includes other
expenditures such as cost of titling, surveying, cost of clearing, cost
of grading, levelling and landfill, cost of subdividing and other costs
of permanent land improvement which are not subject to
depreciation.

4.1.1.1.2 BUILDING

This account represents the cost of the building purchased or

constructed by the EC intended for its business operation.

4.1.1.1.3 STRUCTURES AND IMPROVEMENTS

This account represents the cost of structures and improvements,

which includes fence around the substation, substation's
guardhouse, switch house and other structures and improvements
used in connection with the business operation of the EC.

ACAM forECs Page 33

 4.1.1.1.4 STATION EQUIPMENT

This account represents the cost of substation equipment,

switchyards, transformers, switchgear, protective equipment,
metering, control, communications equipment, Supervisory control
and Data Acquisition equipment (SCADA), including the
installation cost of substation equipment, transformer banks,
protection installation, switchgear, communication systems, etc.,
which are used for the purpose of converting voltage levels or
controlling and directing the flow of electricity through the
distribution network.

The cost of rectifiers, series transformers, and other special station

equipment devoted exclusively to street lighting service shall be
included in Street lights and Signal systems.

4.1.1.1.5 POLES, TOWERS AND FIXTURES

This account represents the cost and the installation cost of poles,
towers, and auxiliary fLxtures used for supporting overhead
distribution conductors and service wires.

4.1.1.1.6 OVERHEAD CONDUCTORS AND DEVICES

This represents the cost and installation cost of overhead

conductors and other overhead devices used for distribution
purposes. The cost of conductors used solely for street lighting or
signal systems shall be included in Street Lights and Signal Systems.

ACAM for ECs Page 34

\
 4.1.1.1.7 UNDERGROUND CONDUITS/RACEWAYS

This account includes the cost and the installation cost of

underground conduit and tunnels used for housing distribution
cables or wires. The cost of underground conduit used solely for
street lighting or signal systems shall be included in Street Lights
and Signal Systems.

4.1.1.1.8 UNDERGROUND CONDUCTORS AND

DEVICES

This shall include the cost and the installation cost of underground
conductors and associated devices used for distribution purposes.
The cost of underground conductors and devices used solely
lighting or signal systems shall be included in Street Lights and
Signal Systems.

4.1.1.1.9 DISTRIBUTION LINE TRANSFORMERS

AND CIRCUIT RECLOSERS

This shall include the cost and the installation cost of overhead and
underground distribution line transformers, pole-type and
underground voltage regulators owned by the utility, for use in
transforming electricity to end-user voltage.

The cost of line transformers including installation cost, used solely

for street lighting or signal systems shall be included in Street
Lights and Signal System.

ACAM forECs Page 35

 4.1.1.1.10 POWER CONDITIONING EQUIPMENT

This account refers to equipment such as capacitors banked for

power factor correction, synchronous condensers, static VAR
compensators, line filters, voltage regulators, generating
equipment, and other power conditioning equipment used to
provide spinning reserve or voltage stability, etc. It shall include
the installation cost of such equipment.

4.1.1.1.11 REGULATED ENTITY PROPERTY ON

CONSUMERS' PREMISES

4.1.1.1.11.1 Installation on Customers' Premises

This account refers to the cost and the installation cost of

equipment on the customer's side of meter when the utility
incurs such cost, and when the utility retains title to and
assumes full responsibility for maintenance and replacement
of such equipment.

4.1.1.1.11.2 Leased Property on Customers' Premises

This shall include the cost of electric motors, transformers,

and other equipment on customers' premises, leased or
loaned to customers, but not including property held for
sale.

ACAM for ECs Page 36

 4.1.1.1.12 STREET LIGHTS AND SIGNAL SYSTEMS

This shall include the installation cost of equipment used solely for
Public Street and highway lighting, or traffic, fire alarm, police,
and other signal systems.

4.1.1.1.13 SUBMARINE CABLE SYSTEM

This shall include the cost and installation cost of submarine

cables and associated devices used for distribution purposes.

4.1.1.1.14 SERVICE DROP WIRES & EQUIPMENT

This account represents the cost of facilities used to provide the

distribution connection services as referred to in Article IV
Business Segments Section 4.4. 7. This shall include the support
plant, service drop wires and equipment dedicated for the sole use
or benefit of a person or persons who are directly connected to
the Distribution System.

4.1.1.1.15 METERS, METERING INSTRUMENTS &

METERING TRANSFORMERS

This account represents the cost of meters, devices and other

associated equipment, for use in measuring the electricity delivered
to its users, whether actually in service, testing meters or held in
reserve. This shall include the initial installation cost of meters,
devices and other associated equipment.

ACAM for ECs Page 37

 As far as it pertains to distribution assets, this shall include meter
installations for monitoring energy flows at various points in the
system, as well as meters installed to monitor and manage system
losses.

4.1.1.1.16 OFFICE FURNITURE AND EQUIPMENT

This shall include the cost of office furniture and equipment

owned by the EC used for its business operation.

4.1.1.1.17 TRANSPORTATION EQUIPMENT

This account represents the cost of transportation vehicles used

for the business operation of the EC.

4.1.1.1.18 TOOLS, SHOP, SAFETY GADGETS AND

GARAGE/MOTORPOOL EQUIPMENT

This account represents the cost of tools, safety gadgets, garage,

motor pool equipment used in the ECs' business operation. This
shall include linemen's climbers, tools and other safety gadgets and
gears.

4.1.1.1.19 LABORATORY AND TESTING EQUIPMENT

This account represents the cost of laboratory and testing

equipment used for business operation of the EC.

ACAM for ECs Page 38

 4.1.1.1.20 INFORMATION SYSTEMS AND
RELATED EQUIPMENT

This account represents all information system and its related

equipment, used to provide support services to the business
operation of the EC. This shall include desktop and laptop
computers, software, licenses, back-up storage devices, computer
network assets, UPS or similar systems, etc.

4.1.1.1.21 POWER-OPERATED EQUIPMENT

This shall include the cost of power operated equipment used in

the business operation of the ECs. This shall include the tools
and accessories acquired for use with such equipment and the
vehicle on which such equipment is mounted.

4.1.1.1.22 COMMUNICATION EQUIPMENT

This account represents the cost and installation cost of

communication equipment intended for use in the business
operation of the EC.

ACAM forECs Page 39

 4.1.1.1.23 MISCELLANEOUS EQUIPMENT AND
OTHER ASSETS

This account represents the cost of equipment, apparatus, etc., and

installation costs used in utility operations, which is not included
in any other account.

4.1.1.1.24 ELECTRIC PLANT PURCHASED

This account represents the cost of electric plant acquired as an

operating unit or system by purchase, merger, consolidation, and
liquidation or otherwise.

4.1.1.2 DISTRIBUTION UTIUTY PLANT AND EQUIPMENT

NOT YET IN SERVICE

4.1.1.2.1 CONSTRUCTION WORK-IN PROGRESS

This account represents the aggregate sum of the total cost indicated
in the subsidiary/ auxiliary ledger of each project that the EC is
implementing but not yet complete. Accumulated costs associated
with the use of equipment and services provided for by both the
contractors and in-house resources and materials and supplies of
each project is cleared from this account upon turnover of each
project as finally complete and ready for use.

ACAM forECs Page40

 For balance sheet purposes, this account shall include the total of the
balances in sub-accounts Construction Work in Progress - Contract,
Construction Work In Progress - Force Account, and Construction
Work In Progress- Special Equipment.

4.1.1.2.1.1 CONSTRUCTION WORK-IN PROGRESS-

BY CONTRACT

This account represents costs incurred for construction contracts

on specifically designated projects awarded to contractors.

4.1.1.2.1.2 CONSTRUCTION WORK-IN PROGRESS -

BY ADMINISTRATION

This account represents the line construction costs and expenses

incurred for projects undertaken directly by the EC's own
workforce or construction crew.

4.1.1.2.1.3 CONSTRUCTION WORK-IN PROGRESS -

SPECIAL EQUIPMENT

This account represents the purchase cost of special equipment

installed and due for energization. This shall include the cost of
conversion of transformers and other special equipment items to
higher capacity including estimated first installation cost of
converted equipment. It shall also be used to record the costs
incurred necessary to test and prepare the equipment for use by
the EC.

ACAM for ECs Page 41

(
 4.1.1.2.2 DISTRIBUTION UTILITY PLANT AND
EQUIPMENT HELD FOR FUTURE USE

This represents utility plant and equipment owned by the EC

intended to be used in its future business operation.

4.1.1.3 DISTRIBUTION UTILITY PLANT AND EQUIPMENT

- APPRAISAL INCREASE

This represents the difference between the carrying value of the property and
its fair market value, as determined by a recognized and competent appraiser.

4.1.1.4 ACCUMULATED DEPRECIATION -DISTRIBUTION

UTILITY PLANT AND EQUIPMENT IN SERVICE

This account represents accumulated depreciation of properties acquired in

whatever mode by the ECs. Monthly depreciation charges shall be
computed using the straight line method following the prescribed estimated
useful life of the assets. An Accumulated Depreciation general ledger shall
maintained based on the general ledgers set for each asset account, as
appropriate.

ACAM forECs Page42

'(
 4.1.1.5 ACCUMULATED DEPRECIATION - DISTRIBUTION
UTILITY PLANT IN SERVICE HELD FOR FUTURE USE

This account represents accumulated depreciation of properties included in

the account Electric Plant Held for Future Use.

4.1.1.6 ACCUMULATED DEPRECIATION DISTRIBUTION

UTILITY PLANT IN SERVICE- APPRAISAL INCREASE

This account represents accumulated amortization charges applied to

Appraisal Increase. Records showing details of charges shall be maintained
for easy reference.

4.1.2 GENERATION PLANT

This account includes all the assets associated with the EC's power generation
operations.

4.1.2.1. LAND, LAND RIGHTS AND IMPROVEMENT

This account represents the cost of land (not subject to depreciation), land
rights and land improvements used in generating operations of the EC. This
includes other expenditures such as cost of titling, surveying, cost of clearing,
cost of grading, levelling and landfill, cost of subdividing and other costs of
permanent land improvement like fences, water systems, drainage systems,

ACAM forECs Page 43

 sidewalks, pavements, cost of landscaping which are not subject to
depreciation.

4.1.2.2 STRUCTURES AND IMPROVEMENTS

This account represents the cost in place of structures and improvements

used in connection with generation operation.

4.1.2.3 FUEL HOLDERS, PRODUCERS AND ACCESSORIES

This account includes fuel holders, producers and accessories used m

generation operations.

4.1.2.4 ACCESS ROAD, DAM, SURGE TANKS, HEADRACE,

PENSTOCK,

This account represents the cost of Access Road, Dam, Surge Tanks,
Headrace and Penstock asset is assigned to the generation operations.

4.1.2.5 ACCESSORY ELECTRICAL PLANT

This account includes accessory electrical equipment utilized in generation

operations.

ACAM forECs Page 44

i.
 4.1.2.6 TURBINE, GENERATOR, ETC

This represents the cost of Turbine, Generator, used m generation

operations.

4.1.2.7 STANDBY UNIT GENERATORS

This account represents the cost of Generator set used in generation

operation in case of power failure or for other emergency needs.

4.1.2.8 MISCELLANEOUS GENERATION PLANT AND

EQUIPMENT

This account represents the installed cost of miscellaneous equipment in and

about the power generation plant, devoted to general station use, and not
properly includible in any of the foregoing power generation accounts.

4.1.2.9 GENERATION PLANT -APPRAISAL INCREASE

This represents the difference between the carrying value of the generation
property and its fair market value, as determined by a recognized and
competent appraiser.

ACAM forECs Page 45

 4.1.2.10 ACCUMULATED DEPRECIATION GENERATING
PLANT

This account represents the total depreciation accumulated annually which is

associated to each type of generating plant assets used in the EC's generation
operation.

Subsidiary ledgers shall be maintained to correspond to the general ledgers of

the account group under the generation assets.

4.1.3 RESTRICTED FUND

This account represents deposits and investments, which have been segregated in
special funds for special purposes like membership fees, guaranty for the fulfilment
of obligation, acquisition of assets for future use, etc. The EC shall maintain a
complete record of the specific purposes for which the deposits were made.

Interests earned from restricted funds shall be recorded in accordance to the intent
when it was established and in consonance to regulatory pronouncements and
policies as formulated by the Board.

4.1.3.1 RESTRICTED FUND-MEMBERSHIP

This account represents the cash received for membership fees from
member-consumers and deposited intact with authorized depository bank.
This fee is subject to refund when service is discontinued.

ACAM for ECs Page46 (

 4.1.3.2 RESTRICTED FUND- BILL DEPOSIT

This account represents the cash received for bill deposits from member-
consumers and deposited intact with authorized depository bank. This fee
is subject to refund in accordance to the provisions of the Magna Carta for
Residential Customers and the DSOAR.

4.1.3.3 RESTRICTED FUND -POWER BILL DEPOSIT

This account represents the cash received from member-consumers for

power bill deposit prior to the implementation of the Magna Carta for
Residential Customers and the DSOAR. The fund is deposited intact with
authorized depository bank and is subject to refund as required under
applicable laws.

4.1.3.4 RESTRICTED FUND- METER DEPOSIT

This account represents the cash received from member-consumers for

meter deposit as a requirement in applying for connection. This
requirement was posted based on the EC policy and was implemented
prior to the approval of the Magna Carta for Residential Customers and the
DSOAR. The fund is deposited intact with authorized depository bank
and is subject to refund as required under applicable laws.

ACAM for ECs Page 47

 4.1.3.5 RESTRICTED FUND - GOVERNMENT AND NGO
SUBSIDIES

This account represents the Subsidies received from NEA, DOE, LGUs
and others entities.

4.1.3.6 RESTRICTED FUND -REINVESTMENT

This account represents the fund balance from the 5% reinvestment as

provided for in the rate intended and reserved for the upgrading,
rehabilitation, replacements, additions or expansion of existing plant and
for payment of debt services. This was prior to the approval of the
Members' Contribution for CAPEX (MCC).

4.1.3.7 RESTRICTED FUND-MCC FUND/RFSC

This account represents the fund balance from Members' Contribution for
Capital expenditures (MCC) approved by the ERC under the RSEC-WR.
Same account shall be used after .\1CC was renamed as Reinvestment Fund
for Sustainable Capital Expenditure (RFSC). This can be utilized to fund
the ERC-approved capital projects of the EC, including payment of loan
amortizations associated with the expansion, rehabilitation or upgrading of
the existing electric power system of the EC in accordance with the ERe-
approved capital expenditure plan.

ACAM forECs Page48

y
 4.1.3.8 OTHER RESTRICTED FUND

This account represents the Other Restricted Funds not accounted for in
other restricted funds.

4.1.4 OTHER NON-CURRENT ASSETS

4.1.4.1 INVESTMENT IN ASSOCIATIONS/ORGANIZATIONS

This account represents the cost of investments in capital stocks, securities

and investment with associated organizations. A subsidiary record shall be
maintained for this account in such manner as to show the investment
securities of and advances to each associated organization together with full
particulars regarding any of such investments that were pledged.

4.1.4.2 INVESTMENT

This account represents cost of investments in securities, stocks,

investment and other investments not accounted for in other investment
accounts, except those held in special deposits or funds which shall be
included in the appropriate deposit or fund account and securities held as
temporary cash investments, which shall be accordingly classified as such.
Earned increments in investments payable at maturity or upon demand
shall likewise be included in this account. Such increment shall be
recognized as income in the Interest and Dividend Income account. The

ACAM for ECs Page 49

 records shall be maintained in such manner as to show the amount and
nature of each investment and whether such has been pledged.

4.1.4.3 SECURITY DEPOSITS

This account represents deposits made to a stakeholder as security for

services to be availed of, such as security deposits to any Genco,
TRANSCO, to escrow accounts, and prudential requirement ofWESM.

4.1.4.4 TERM INVESTMENT

This amount represents long-term investments made by the EC in banks

other financial institutions, insurance companies and other legitimate
entities, with maturities beyond one (1) year.

4.1.4.4.1 INVESTMENT IN NON-MARKETABLE EQUITY

SECURITIES*

This account represents mvestment in cooperative federation, or

investments in secondary /tertiary cooperatives' share capital where
the coop is affiliated.

• Accounts marked with an asterisk ("') are applicable to CDA-registered ECs. These are lifted from the
Standard Chart of Accounts (SCA) issued by the CDA under Memo Circular No. 2009-04.

ACAM forECs Page 50