THE Legian II NIA-Road Complex Consumers Cooperative

Blk. 2 Lots 5& 7 Legian Imus II Subd.,NIA Road Complex

Carsadang Bago I, Imus City, Cavite 4103

NOTES TO FINANCIAL STATEMENTS

As at and for the Years Ended December 31, 2019 and 2018

NOTE 1- Cooperative Information

1.1 Overview

THE Legian II NIA Road Complex Consumers Cooperative is a incorporated as a stock

cooperative. It was registered with the Cooperative Development Authority (CDA) on May
23, 2017, with Registration No. 9520-1040000000037981 and likewise registered with the
Bureau of Internal Revenue under TIN 706-950-971-000. The type of this cooperative is
Consumer Cooperative and the purposes for which this Cooperative is organized to assist its
members in developing self-reliance, to be able to carry out its objectives of building a net
worth of self-sustaining livelihood activities to be sold in cooperative and to help the
community in building a spirit of free enterprise through cooperative.

The registered principal office address is located at Block 2 Lot 5 & 7 Legian Imus II
Carsadang Bago I, Imus City Cavite 4103.

The accompanying financial statements for the year ended December 31, 2019 were
approved and authorized for issue by the Board of Directors on March 25, 2020. The Board
of Directors is empowered to make revisions even after the date of issue.

1.2 Distribution of net surplus

As provided for in its By-Laws, the cooperatives net surplus is defined and distributed in the
following manner:
 An amount of the general reserve fund, which shall be at least 10% of the net
surplus;
 An amount for the cooperative education and training fund, which shall not be
more than ten percent centum (10%) of the net surplus;
 An optional fund may not exceed seven percentum (7%);
 Community development fund at least three per centum (3%) of the net surplus;
and
 The remaining net surplus shall be made available to the members in the form of
interest on share capital and patronage refund computed in accordance with RA No. 9520.

Accordingly, the net surplus in 2019 and 2018 were distributed as follows:

2019 % 2018 %
Interest on share capital and patronage fund
10,006.92 21% 3,356.63 21%
payable
General reserve fund 23,825.99 50% 7,991.96 50%
Optional Fund 3,335.64 7% 1,118.87 7%
Cooperative education and training fund 4,765.20 10% 1,598.39 10%
1,
Community development fund 3% 479.52 3%
430
Undivided Surplus 4,288.68 9% 1,438.55 9%
100 15,983.9 100
47,651.98
% 2 %

AUDITED FINANCIAL STATEMENT| NOTES TO FINANCIAL STATEMENT: PG 1

1.3 Tax Exemption

As a Cooperative is entitled to the following tax exemption and incentives provided for
under Article 60 of RA 9520, as implemented by Section 7 of the Joint Rules and Regulations
Implementing Articles 60, 61 and 144 of RA 9520
 Income Tax on Income from CDA –registered operations;
 Value-Added Tax (VAT) on CDA-registered sales or transactions;
 Other Percentage tax (OPT);
 Donor’s tax on donations to duly accredited charitable, research and educational
institution and reinvestment to socio-economic projects within the area of
operation of the cooperative;
 Excise tax for which it is directly liable;
 Documentary stamp tax: Provided , however, that the other party of the taxable
document/transaction who is not exempt shall be the one directly liable for the
tax;
 Payment of annual registration fee of P500;
 All taxes on transactions with insurance companies and banks, including but not
limited to 20% final tax on interest deposits and 7.5% final tax on interest income
derived from depository bank under the expanded foreign currency deposit system.

NOTE 2- Summary of Significant Accounting Policies

2.1 Basis of Preparation

The principal accounting policies applied in the preparation of these financial statements
are set out below and in succeeding pages. These policies have been consistently applied to
the years presented, unless otherwise stated.

2.2 Statement of Compliance

The accompanying financial statements have been prepared in accordance with Philippine
Financial Reporting Framework for Cooperatives (PFRFC).

The CDA adopted and prescribed the use of PFRFC through the issuance of MC No. 2015-06
on September 26, 2015. PFRFC was developed from the Philippine Financial Reporting
Standard for Small and Medium-sized Entities (PFRS for SMEs). Modifications were made on
several provisions of the standards taking into considerations cooperative laws, rules,
regulations and principles. In conformity with PFRFC, a revised Standard Chart of Accounts
(SCA) for cooperatives was prescribed by the CDA upon issuance of MC No.2016-06 on
October 18, 2016, pursuant to Section 3 of the RA No. 6939, to be used by cooperatives in
the preparation of financial statements.

Basis of measurement and presentation

The financial statements have been prepared on historical cost basis. All values are
rounded to the nearest Philippine Peso (P), except when otherwise indicated.

Financial assets and liabilities are offset and the net amount reported in the statement of
financial condition only when there is a legally right to offset the recognized amounts and
there is an intention to settle on a basis, or to realize the assets and settle the liability
simultaneously. Income and expenses are not offset in the statement of operations unless
required or permitted the aforementioned framework.
Use of judgments and estimates

The preparation of financial statements in compliance with the PFRFCrequires the use of
certain critical accounting estimates. The areas where significant judgments and estimates
have been made in preparing the financial statements and their effects are disclosedin
Note 3to the financial statements.

AUDITED FINANCIAL STATEMENT| NOTES TO FINANCIAL STATEMENT: PG 2

2.3 Property, plant and equipment (PPE)

PPE are stated at cost less accumulated depreciation and impairment in value. .

The initial cost of property and equipment comprises its purchase price and any directly
attributable costs of bringing the asset to its working condition and location for its intended
use. Expenditures incurred after the property and equipment have been put into
operations, such as repairs and maintenance and overhaul costs, are normally charged to
operations in the period the costs are incurred. In situations where it can be clearly
demonstrated that the expenditures have resulted in an increase in the future economic
benefits expected to be obtained from the use of an item of property and equipment
beyond its originally assessed standard of performance, the expenditures are capitalized as
additional costs of property and equipment. Cost also includes any asset retirement
obligation and interest on borrowed funds used. When assets are sold or retired, their costs
and accumulated depreciation, amortization and impairment losses, if any, are eliminated
from the accounts and any gain or loss resulting from their disposal is included in the
statement of operations of such period.

Depreciation and amortization are calculated on a straight-line basis over the useful lives of
the assets as follows:

Category Estimated useful life in years

Office, furniture, fixtures, and
equipment 2 to 5
Transportation equipment 5 to 25

The useful life is reviewed periodically to ensure that the useful lives and depreciation
method are consistent with the expected pattern of economic benefits from the use of
PPE.

The carrying values of PPE are reviewed for impairment when events or changes in
circumstances indicate that the carrying value may not be recoverable. If any such
indication exists and where the carrying values exceed the estimated recoverable amount,
the assets are written down to the recoverable amount. The recoverable amount of PPE is
the greater of net selling price or value in use. Impairment loss, if any, are recognized in
profit and loss.

An item of property and equipment is derecognized upon disposal or when no future

economic benefits are expected to arise from the continued use of the asset. Any gain or
loss arising on derecognition of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the item) is included in the statement of
operations in the year the item is derecognized.

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

Computerization cost

Computerization costs include the costs of acquisition or development of computer

programs and other software which is accounted for under cost model. The cost of asset
comprise of the purchase price and any directly attributable costs of bringing the asset to
its working condition an/or its intended use.

Capitalized costs are amortized on a straight-line basis over the estimated useful lives
ranging for 2-3 years as the lives of these tangible assets are considered limited. Cost
associated in maintaining of computer software is expensed as incurred.

AUDITED FINANCIAL STATEMENT| NOTES TO FINANCIAL STATEMENT: PG 3

2.4 Provisions

Provisions are recognized when the Cooperative has a present obligation, either 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 the amount of
the obligation can be estimated reliably. When the Company expects reimbursement of
some or all of the expenditure required to settle a provision, the entity recognizes a
separate asset for the reimbursement only when it is virtually certain that reimbursement
will be received when the obligation is settled.

The amount of the provision recognized is the best estimated of the consideration required
to settle the present obligation at the balance sheet date, taking into account the risks and
uncertainties surrounding the obligation. When a provision is measured using the cash
flows estimated to settle the present obligation, its carrying amount is the present value of
those cash flows.

2.5 Contingencies

Contingent liabilities are not recognized in the financial statements. They are disclosed
unless the possibility of an outflow of resources embodying economic benefits is remote. A
contingent asset is not recognized in the financial statements but disclosed when an inflow
of economic benefits is probable.

2.6 Equity

Share Capital
Share capital is determined using the nominal value of shares that have been issued and
fully paid. Share Capital is presented as equity under PFRFC.
 Common Shares-these refers to those shares with voting rights issued by the
Cooperative to its regular members.
Statutory Funds
Statutory Funds are mandatory funds established/set-up in accordance with Articles 86 and
87 of the Cooperative Code. These include all prior years’ allocation of net surplus, net
interest on share capital, and patronage as presented in the statement of
operations. The composition of reserve funds follows:
 General Reserve fund- amounts set aside annually for the stability of the
Cooperative and to meet net losses in its operations. It is equivalent to at least 10%
of the net surplus.
 Cooperative education and training fund (CETF) - an amount retained by the
cooperative out of the mandatory allocation as stipulated in the by-laws.
 Community development fund (CDF)- This is , at the minimum, 3% of the net
surplus. This is used for projects or activities that will benefit the community
where the cooperative operates. It is equivalent to at least 3% of the net surplus.
2.7 Income recognition
Revenue is recognized to the extent that is probable that the economic benefits will flow
to the Company and the amount of revenue can be reliably measured.

Other Income

All other income items are recognized when earned and collected.

2.8 Interest expense

Interest incurred on borrowings is recognized in the statement of operations when incurred.

AUDITED FINANCIAL STATEMENT| NOTES TO FINANCIAL STATEMENT: PG 4

2.9 Cost and expense recognition

Cost and expenses are recognized in the statement of operations: (a) when a decrease in
future benefits related to a decrease in an asset or an increase in liability has risen that can
be measured reliably; (b) on the basis of a direct association between the costs incurred
and the earning of specific items in the income;(c) on the basis of systematic and rational
allocation procedures when economic benefits are expected to arise over several
accounting periods and the association with income can only be broadly or indirectly
determined; or (d) immediately when an expenditure produces no future economic benefits
or when, and to extent that, future economic benefits do not qualify; or cease to qualify,
for recognition in the statement of financial condition as an asset. Operating expenses are
costs attributable to the general administrative activities of the cooperative.

2.10 Events after the reporting period

Post year-end events up to the auditors’ report that provide additional information about
the cooperative condition at the end of the reporting period (adjusting events) are
reflected in the financial statements. Post year-end events that are not adjusting events
are disclosed in the notes to financial statements when material.

NOTE 3- CRITICAL ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the financial statements in compliance with PFRFC requires

management to make judgments, estimates, and assumptions that affect the amounts
reported in the financial statements and accompanying notes. The judgments, estimates
and assumptions are based on management’s evaluation of related facts and circumstances
as of the date of the financial statements when they become reasonably determinable.

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

3.1 Judgments

Going concern

PFRFC requires the management to make assessment of the cooperative ability to continue
as going concern. The cooperative is a going concern unless the management either intends
to liquidate the entity or to cease operations, or has no realistic alternatives to do so. In
assessing whether the going concern assumption is appropriate, the management takes into
account all available information about the future, which at least , but not limited to,
twelve months from the operating date. Management has made assessment on the
cooperative ability to continue going concern and is satisfied that the cooperative has the
resources to continue its business operations for the foreseeable future. Moreover, the
management is not aware of any material uncertainties that may cast significant doubt that
the cooperatives’ ability to continue as going concern. Therefore, the financial statements
continue to be prepared on the going concern basis.

Functional and presentation currency

These financial statements are presented in Philippine Peso(P) the functional and
presentation currency, all values represent absolute amounts except otherwise indicated.

NOTE 4- CASH AND CASH EQUIVALENTS

This account consists of:

AUDITED FINANCIAL STATEMENT| NOTES TO FINANCIAL STATEMENT: PG 5
        2019 2018
3,55
Cash on Hand 10,011 4
Checks & Other Cash 10,00
Items - 0
59,832 zz 5,00
Cash in Bank 0
1,00
Petty Cash Fund 1,000 0
19,55
Total       70,843 4

Cash in Bank

This refers to money deposited with banks in the form of checking accounts.

NOTE 5- RECEIVABLES

This account consists of:

  2019 2018

-
Account Receivables -
Accounts Receivables- Past
-
Due -

-Total - -

These are usually due within 30 to 90 days and do not bear any interest.
The management considers that the carrying amount of receivable approximates its fair value.

NOTE 6- INVENTORIES

This account consists

of:
        2019 2018

Merchandise Inventory 350,917 278,146

350,91
Ending Inventories       7 278,146

AUDITED FINANCIAL STATEMENT| NOTES TO FINANCIAL STATEMENT: PG 6

The carrying value of the inventory approximates its net realizable value, no impairment
loss is provided.

No inventories were pledge as collateral for the liabilities as of December 31, 2018.

NOTE 7- PROPERTY, PLANT, AND EQUIPMENT (PPE)- NET

Balance Accumulat
, Additio ed Balanc
 2019   Total
Beginnin ns Depreciatio e, End
g n

Furniture, Fixtures & Equipment

4,900 4,900 4,892 8
(FFE)
Machineries, Tools, 100,15
76,159 24,000 44,241 31,918
Equipments 9
449,00
Transportation Equipment 449,000 73,337 375,663
0
Total Property, Plant and 554,05
530,059 24,000 122,469 407,590
Equipment 9

Balance Accumulat
, Additio ed Balanc
 2018   Total
Beginnin ns Depreciatio e, End
g n

Furniture, Fixtures & Equipment

1,358 1,358 1,250 108
(FFE)
Machineries, Tools,
44,941 1,000 45,941 14,923 31,018
Equipments
411,58
Transportation Equipment 411,583 17,960 393,623
3
Total Property, Plant and 458,88
457,882 1,000 34,133 424,750
Equipment 2

Management believes that there is no indication of Impairment in the value of the property
and equipment as of financial period.

NOTE 8- OTHER NON-CURRENT ASSETS

This consists of:

2019 2018
Computerization Cost, Net 13,500 14,250
AUDITED FINANCIAL STATEMENT| NOTES TO FINANCIAL STATEMENT: PG 7
 Other Funds and Deposits 39,677 21,000
Miscellaneous Asset 1,884 -
Rental Security Deposit 27,000
Total Other Non-Current Assets   82,061 35,250

NOTE 9 - OTHER NON-CURRENT LIABILITIES

This consists of:

2019 2018
Interest on Share Capital 2,35
Payable 7,005 0
3,00 1,00
Patronage Refund Payable 2 7
Other Current Liabilities 16,000
Total Other Current 26,0 3,3
Liabilities 07 57

NOTE 10- NON-CURRENT LIABILITES

2019 2,018
440,90
  Loans Payable 0 440,900

NOTE 11- SHARE CAPITAL

This consists of:

2019 2018
Authorized Share Capital -Common 500,000 500,000
Par Value Per Share 100 100
Subscribed Capital 350,000 350,000
Paid-up Share Capital-Common 378,708 290,918

NOTE 12- STATUTORY FUNDS

2019 2018
Reserved Fund 39,667 15,851
Coop. Education & Training 2,905 2,620
AUDITED FINANCIAL STATEMENT| NOTES TO FINANCIAL STATEMENT: PG 8
 Fund
Community Dev't Fund 144 939
3,99
Optional Fund 1 655
46,718 21,086

NOTE 13- REVENUE FROM CONSUMERS

2019 2018
281,91
Net Sales 5 164,523
118,4
Less: Cost of Goods Sold 04 56,097
Income from Consumers 163,55
Operations 1 162,436

NOTE 14- OTHER INCOME

2019 2018
2,10
Membership Fee 0 1,750
Miscellaneous
Income 104,260 128,643
Total Other Income 106,360 131,193

NOTE 15- GENERAL AND ADMINISTRATIVE EXPENSES

2019 2018
Rentals 103,000 94,500
Depreciation 41,160 43,133
Salaries and Wages 46,715 30,251
Power, Light and Water 2,568 14,627
Repairs and Maintenance 475 4,020
Miscellaneous Expense 1,292 3,071
Insurance 2,123 -

Communication - 2,618
AUDITED FINANCIAL STATEMENT| NOTES TO FINANCIAL STATEMENT: PG 9
 General Assembly
Expenses - 2,100
Travel/Transportation 4,088 2,016

Members' Benefit Expenses - 1,534

Office Supplies 8,431 1,158
Employees Benefits 8,045 843

Trainings/Seminars - 725
Taxes, Fees,Charges 2,000 494

Gas, Oil & Lubricants - 400

Meetings and Conferences 2,321 378
Total Administrative Cost 222,219 201,868

Miscellaneous Expense
This refers to other nominal expenses that do not meet any other accounts.

NOTE 13- CAPITAL MANAGEMENT OBJECTIVES AND POLICIES

13.1 In accordance and as required by CDA

The capitalization of cooperatives is governed by the provisions of RA 9520 and the

regulations which shall be issued by the CDA. The primary objective of the cooperative
capital management is to ensure that it maintains a strong financial position to support its
operation and all other activities undertaken by the cooperative for the benefits of its
member-cooperatives.

Capital sources

As provided in RA 9520, cooperatives may derive their capital from any or all of the
following sources:

 Member’s share capital contribution;

 Loans and borrowings including deposits;
 Revolving capital build-up which consist of deferred payment of patronage refund
or interest on share capital;
 Subsidies, grants, legacies, aids, donation and other assistance from any local or
foreign institution, public or private;
 Retentions from proceeds of services acquired/goods procured by members; and
 Other sources of funds as may be authorized by law.

Revolving capital

To strengthen the capital structure of the cooperative, the General Assembly may authorize
BOD to raise a revolving capital by deferring the payment of patronage refunds and interest
on share capital, or other such schemes as legally adopted. To implement this provision, the
BOD shall issue a Revolving Capital Certificate with serial number, name, rate of interest,
date of retirement and such other privileges or restrictions as may be deemed just and
equitable.

Capital build-up

AUDITED FINANCIAL STATEMENT| NOTES TO FINANCIAL STATEMENT: PG 10

It is required under Article 75of RA 9520 that the bylaws of every cooperative shall provide
for a reasonable and realistic member capital build-up program to allow the continuing
growth of members’ investment in the cooperative as their economic conditions continue to
improve.

NOTE 13- EVENT AFTER THE REPORTING PERIOD

The financial statement in 2019 and 2018 were approved for the final release by the
BOD in its meeting held on January 12 ,2020.

AUDITED FINANCIAL STATEMENT| NOTES TO FINANCIAL STATEMENT: PG 11