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DEVELOPMENT CENTER FOR FINANCE, INC.

(A Nonstock, Nonprofit Corporation)
UP College of Business Administration, UP Campus
Diliman, Quezon City

REPORT ON EXAMINATION
OF
FINANCIAL STATEMENTS
December 31, 2016 and 2015

VILLARUZ, VILLARUZ & CO., CPAs

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DEVELOPMENT CENTER FOR FINANCE, INC.

(A Nonstock, Nonprofit Corporation)
STATEMENTS OF FINANCIAL POSITION
December 31, 2016 and 2015
(All amounts in Philippine Peso)

ASSETS

Notes 2016 2015

CURRENT ASSETS
Cash on hand and in banks 2, 4 P 698,110 P 943,359
Receivables and advances 2, 5 777,086 1,019,869
Book inventory 2, 6 159,755 101,072
Prepayment and other current assets 2, 7 180,272 189,603

Total Current Assets 1,815,223 2,253,903

NON-CURRENT ASSETS
Available-for-sale investments 2, 8 7,161,354 7,107,260
Held-to-maturity investments 2, 9 7,735,696 6,885,696
Office equipment, net 2, 10 4,660 -

Total Non-current Assets 14,901,710 13,992,956

TOTAL ASSETS P 16,716,933 P 16,246,859

LIABILITIES AND FUND BALANCES

CURRENT LIABILITIES
Accruals and other payables 2, 11 P 959,518 P 876,695
Income tax payable 2, 12 22,158 392
Deferred income - 245,536

Total Liabilities 981,676 1,122,623

FUND BALANCES
Unrestricted operating fund 13 2,815,565 2,331,603
Restricted funds
Operating fund 13 7,000,000 7,000,000
Book fund 13 1,952,704 1,892,156
Centennial professorial chair fund 13 3,966,988 3,900,477

Total Fund Balances 15,735,257 15,124,236

TOTAL LIABILITIES AND FUND BALANCES P 16,716,933 P 16,246,859

(See Notes to Financial Statements)

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DEVELOPMENT CENTER FOR FINANCE, INC.

(A Nonstock, Nonprofit Corporation)
STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 2016 and 2015
(All amounts in Philippine Peso)

2016 2015
Centennial
Professorial Chair
Notes Operating Fund Book Fund Fund Total

REVENUES
Seminar fees 2,13 P 3,235,410 P - P - P 3,235,410 P 3,396,387
Interest income 2, 13, 14 235,793 - 66,511 302,304 300,921
Receipts from research materials 13 - 175,957 - 175,957 147,115
Other receipts 22,382 - - 22,382 19,760

Total Revenues 3,493,585 175,957 66,511 3,736,053 3,864,183

EXPENSES
Seminar 15 2,292,622 - - 2,292,622 2,638,141
Operating 16 674,657 - - 674,657 500,815
Research costs 17 - 115,409 - 115,409 245,242

Total Expenses 2,967,279 115,409 - 3,082,688 3,384,198

PROFIT BEFORE INCOME TAX 526,306 60,548 66,511 653,365 479,985

PROVISION FOR INCOME TAX
Current 12 112,913 - - 112,913 54,790
Deferred 12 (16,475) - - (16,475) 16,475
Total 96,438 - - 96,438 71,265

PROFIT FOR THE YEAR 429,868 60,548 66,511 556,927 408,720

OTHER COMPREHENSIVE INCOME
Fair value adjustment of available-for-sale investments 8 54,094 - - 54,094 35,942

TOTAL COMPREHENSIVE INCOME P 483,962 P 60,548 P 66,511 P 611,021 P 444,662

(See Notes to Financial Statements)

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DEVELOPMENT CENTER FOR FINANCE, INC.

(A Nonstock, Nonprofit Corporation)
STATEMENTS OF CHANGES IN FUND BALANCES
For the years ended December 31, 2016 and 2015
(All amounts in Philippine Peso)

Centennial
Professorial Chair Total Fund
Note Operating Fund Book Fund Fund Balances

Balance at January 1, 2015 P 8,887,271 P 1,990,283 P 3,802,020 P 14,679,574

Profit for the year 408,390 (98,127) 98,457 408,720
Other comprehensive income 8 35,942 - - 35,942
Balance at December 31, 2015 9,331,603 1,892,156 3,900,477 15,124,236
Profit for the year 429,868 60,548 66,511 556,927
Other comprehensive income 54,094 - - 54,094

Balance at December 31, 2016 13 P 9,815,565 P 1,952,704 P 3,966,988 P 15,735,257

(See Notes to Financial Statements)

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DEVELOPMENT CENTER FOR FINANCE, INC.

(A Nonstock, Nonprofit Corporation)
STATEMENTS OF CASH FLOWS
For the years ended December 31, 2016 and 2015
(All amounts in Philippine Peso)

Notes 2016 2015

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before income tax P 653,365 P 479,985
Adjustments for:
Amortization of advance royalty payment 7 8,580 195,125
Depreciation 10 2,330 -
Interest income 14 (302,304) (300,921)
Operating income before working capital changes 361,971 374,189
Decrease (Increases) in:
Receivables and advances 242,783 (48,924)
Book inventory (58,683) (1,945)
Prepayment and other current assets (48,877) (61,156)
Increase (Decrease) in:
Accruals and other payables 82,824 220,838
Deferred income (245,536) 245,536
Cash provided by operations 334,482 728,538
Interest received 14 302,304 300,921
Income tax paid (25,045) -

Net cash provided by operating activities 611,741 1,029,459

CASH FLOWS FROM INVESTING ACTIVITIES

Redemption of held-to-maturity investments - 2,400,000
Purchase of equipment 10 (6,990) -
Purchase of available-for-sale investments - (1,010,768)
Purchase of held-to-maturity investments (850,000) (2,585,696)

Net cash used in investing activities (856,990) (1,196,464)

NET DECREASE IN CASH ON HAND AND IN BANKS (245,249) (167,005)

CASH ON HAND AND IN BANKS, January 1 4 943,359 1,110,364

CASH ON HAND AND IN BANKS, December 31 4 P 698,110 P 943,359

(See Notes to Financial Statements)

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DEVELOPMENT CENTER FOR FINANCE, INC.

(A Nonstock, Nonprofit Corporation)
NOTES TO FINANCIAL STATEMENTS
As at and for the years ended December 31, 2016 and 2015
(All amounts in Philippine Peso)

__________________________________________________________________________________

NOTE 1 - GENERAL INFORMATION

Development Center for Finance, Inc. (A Nonstock, Nonprofit Corporation), (the Organization), was
incorporated and registered with the Securities and Exchange Commission (SEC) on October 12, 1992 per
SEC Registration Number AN092-005110 primarily to pursue activities that promote or enhance the
development of the financial markets of the Philippines, financial management expertise, and professional
development in the field of financial management. For this purpose, the Organization shall engage in
activities that will include, but not be limited to, the conduct of basis and policy research, publication of
research outputs, training and development of curricular recommendations and an accreditation system for
the profession. No part of the excess of revenues over expenditures inures to the benefit of any officer,
member or private individual.

The Organization has one (1) employee as at December 31, 2016 and 2015.

The Organization’s registered office address and principal place of business is UP College of Business
Administration, UP Campus, Diliman, Quezon City.

The financial statements have been approved and authorized for issuance on __________ by
___________________, ____________, on behalf of the Board of Trustees.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are set out
below.

2.1 Basis of preparation

The Philippine Financial Reporting Standards for Small and Medium-sized Entities (PFRS for SMEs) was
adopted on October 13, 2009 by the Philippine Financial Reporting Standards Council (FRSC) from the
International Financial Reporting Standards (IFRS) for Small and Medium-sized Entities issued by the
International Accounting Standards Board (IASB). On December 3, 2009, the SEC adopted the PFRS for
SMEs as part of its rules and regulations.

The preparation of financial statements in conformity with the PFRS for SMEs requires the use of certain
critical accounting estimates. It also requires management to exercise judgment in the process of applying
the Organization’s accounting policies. Areas involving higher degree of judgment or complexity, or
areas where assumptions and estimations are significant to the financial statements are disclosed in Note
3.

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2.2 Amendments to existing standards that are not yet effective but are relevant to the Organization’s
operations

These are amendments to PFRS for SMEs that are effective for periods beginning January 1, 2017 and are
relevant to the Organization’s operations, however, the adoption is not expected to have an impact on the
financial statements:

• Section 1 Small and Medium-sized Entities - The amendment adds clarification with regard to
publicly accountable entities and the use of the PFRS for SMEs in the parent's separate financial
statements.

• Section 2 Concepts and Pervasive Principles - The amendment adds clarifying guidance on the
undue cost or effort exemption that is used in several sections of the PFRS for SMEs.

• Section 4 Statements of Financial Position - The amendment requires investment property

measured at cost less accumulated depreciation and impairment to be presented separately on the
face of the statements of financial position. The amendment also removed the requirement to
disclose comparative information for the reconciliation of the opening and closing number of
shares outstanding.

• Section 5 Statement of Comprehensive Income and Income Statement - The amendment clarifies
that the single amount presented for discontinued operations includes any impairment of the
discontinued operation measured in accordance with Section 27. It also adds a requirement that
entities shall group items presented in other comprehensive income on the basis of whether they
are potentially reclassifiable to profit or loss.

• Section 6 Statement of Changes in Equity and Statement of Income and Retained Earnings - The
amendment clarifies the information to be presented in the statements of changes in equity.

• Section 11 Basic Financial Instruments - The amendment includes several clarifications and
'undue cost or effort' exemption regarding the requirement to measure investments in equity
instruments at fair value.

• Section 17 Property, Plant and Equipment - The amendment includes alignment with changes
made to PAS 16 Property, Plant and Equipment on classification of spare parts, stand-by and
servicing equipment, and exemption regarding the use of cost of the replacement. It also adds an
option to use the revaluation model for property, plant and equipment.

• Section 22 Liabilities and Equity - The amendments provide some guidance, exemptions as well
as alignment with full PFRS regarding PAS 32 Financial Instruments: Presentation. It also adds
the conclusions of IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments to
provide guidance on debt for equity swaps when the financial liability is renegotiated and the
debtor extinguishes the liability by issuing equity instruments.

• Section 27 Impairment of Assets - It includes clarification that Section 27 does not apply to assets
arising from construction contracts.

• Section 29 Income Tax - The amendments include alignment of key principles with PAS 12
Income Tax as regards recognition and measurement of deferred tax and provide 'undue cost or
effort' exemption regarding requirement to offset income tax assets and liabilities.

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2.3 Basic financial instruments

A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability
or equity instruments of another entity. The Organization shall recognize a financial asset or financial
liability only when the entity becomes a party to the contractual provisions of the instrument which
includes:

(a) cash,
(b) a debt instrument,
(c) a commitment to receive a loan, and
(d) an investment in non-convertible preference shares and non-puttable ordinary shares or
preference shares.

2.3.1 Initial measurement

When a financial asset or financial liability is recognized initially, the Organization shall measure it at the
transaction price (including transaction costs except in the initial measurement of financial assets and
liabilities that are measured at fair value through profit or loss) unless the arrangement constitutes, in
effect, a financing transaction. A financing transaction may take place in connection with the sale of
goods or services, for example, if payment is deferred beyond normal business terms or is financed at a
rate of interest that is not a market rate. If the arrangement constitutes a financing transaction, the
Organization shall measure the financial asset or financial liability at the present value of the future
payments discounted at a market rate of interest for a similar debt instrument.

2.3.2 Subsequent measurement

At the end of each reporting period, the Organization shall measure financial instruments without any
deductions for transaction costs the entity may incur on sale or other disposal at amortized cost using the
effective interest method, except for commitments to receive a loan that meet the conditions of a basic
financial instrument, will be measured at cost less impairment. Investments in non-convertible and non-
puttable preference shares and non-puttable ordinary shares that are publicly traded or whose fair value
can otherwise be measured reliably will be measured at fair value with changes in fair value recognized
in profit or loss less impairment.

2.3.3 Impairment of financial instruments

At the end of each reporting period, the Organization shall assess whether there is objective evidence of
impairment of any financial assets that are measured at cost or amortized cost. If there is objective
evidence of impairment, the Organization shall recognize an impairment loss in profit or loss
immediately. For an instrument measured at amortized cost, the impairment loss is the difference between
the asset’s carrying amount and the present value of estimated cash flows discounted at the asset’s
original effective interest rate. For an instrument measured at cost less impairment, the impairment loss is
the difference between the asset’s carrying amount and the best estimate (which will necessarily be an
approximation) of the amount (which might be zero) that the Organization would receive for the asset if it
were to be sold at the reporting date.

There are no impairment losses recognized for the years ended December 31, 2016 and 2015.

2.3.4 Reversal of an impairment of financial instruments

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

2.3.5 Derecognition of financial assets and financial liabilities

Financial assets

The Organization shall derecognize a financial asset only when:

(a) the contractual rights to the cash flows from the financial asset shall expire or are settled, or
(b) the Organization transfers to another party substantially all of the risks and rewards of
ownership of the financial asset, or
(c) the Organization, despite having retained some significant risks and rewards of ownership,
has transferred control of the asset to another party and the other party has the practical
ability to sell the asset in its entirety to an unrelated third party and is able to exercise that
ability unilaterally and without needing to impose additional restrictions on the transfer. In
this case, the Organization shall:

(i) derecognize the asset, and

(ii) recognize separately any rights and obligations retained or created in the transfer.

The carrying amount of the transferred asset shall be allocated between the rights or obligations retained
and those transferred on the basis of their relative fair values at the transfer date. Newly created rights and
obligations shall be measured at their fair values at that date. Any difference between the consideration
received and the amounts recognized and derecognized in accordance with this paragraph shall be
recognized in profit or loss in the period of the transfer.

Financial liabilities

The Organization shall derecognize a financial liability (or a part of a financial liability) only when it is
extinguished, e.g., when the obligation specified in the contract is discharged, cancelled or has expired.

2.4 Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statements of
financial position if, and only if, there is a currently enforceable legal right to offset the recognized
amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability
simultaneously. This is not generally the case with master netting agreements, wherein, the related assets
and liabilities are presented at gross in the statements of financial position.

2.5 Cash on hand and in banks

Cash, which includes deposits held at call with banks and carried in the statements of financial position at
face value, are unrestricted and immediately available for use in the current operations.

2.6 Receivables and advances

This pertains to the Organization’s receivables and advances.

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Receivables are recognized initially at fair value and subsequently measured at amortized cost using the
effective interest method, less allowance and provision for impairment.

A provision for impairment of other receivables is established when there is objective evidence that the
Organization will not be able to collect all amounts due according to the original terms of the receivables.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or
financial reorganization and default or delinquency in payments are considered indicators that the
receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount
and the present value of estimated future cash flows, discounted at the original effective interest rate.
Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.
The carrying amount of the asset is reduced through the use of an allowance account and the amount of
the loss is recognized in the statement of comprehensive income.

When receivables are uncollectible, it is written-off against the allowance account. Subsequent recoveries
of amounts previously written-off are recognized as income in the statement of comprehensive income.

2.7 Book inventory

Book inventory is stated at the lower of cost and estimated selling price less cost to complete and sell.
Cost is determined using the first-in first-out method.

2.8 Prepayment and other current assets

Prepayment includes advance payment for royalties. This represents expenses not yet incurred but already
paid in cash. Prepayment is initially recorded as assets and measured at the amount of cash paid.
Subsequently, this is charged to income as this is consumed in operations or expires with the passage of
time.

Other current assets pertain to the Organization’s deferred input Value Added Tax (VAT) which are stated
at fair value less any impairment loss.

2.9 Available-for-sale investments

Available-for-sale investments are those non-derivative financial assets that are designated as available-
for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at
fair value through profit or loss. Certain shares held by the Organization are classified as being available-
for-sale and are stated at fair value. Gains and losses arising from changes in fair value are recognized
directly in other comprehensive income in the statements of comprehensive income, until the investment
is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously
recognized in other comprehensive income is included in profit or loss for the period.

Available-for-sale investments are initially measured at transaction price and subsequently measured at
fair value.

2.10 Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and
fixed maturities and the Organization has the positive intention and ability to hold it to maturity.

After initial measurement, held-to-maturity investments are measured at amortized cost using the
effective interest method. This method uses an effective interest rate that exactly discounts estimated
future cash receipts through the expected life of the financial asset to the net carrying amount of the
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financial asset. Gains and losses are recognized in the statements of comprehensive income when the
investments are derecognized or impaired, as well as through the amortization process. Interest earned or
incurred is recorded as interest income in the statements of comprehensive income. Assets in this category
are included in the current assets except for maturities greater than twelve (12) months after the balance
sheet date, which are classified as non-current assets.

2.11 Property and equipment, net

The cost of an item of property and equipment comprises all of the following:

(a) its purchase price, including legal and brokerage fees, import duties and non-refundable
purchase taxes, after deducting trade discounts and rebates,
(b) any costs directly attributable to bringing the asset to the location and condition necessary for
it to be capable of operating in the manner intended by management. These can include the
costs of site preparation, initial delivery and handling, installation and assembly, and testing
of inventories during that period, and
(c) the initial estimate of the costs of dismantling and removing the item and restoring the site on
which it is located, the obligation for which an entity incurs either when the item is acquired
or as a consequence of having used the item during a particular period for purposes other than
to produce inventories during that period.

Part of some items of property and equipment may require replacement at regular intervals (e.g., the roof
of a building). The Organization shall add to the carrying amount of an item of property and equipment
the cost of replacing part of such an item when that cost is incurred if the replacement part is expected to
provide incremental future benefits to the Organization. The carrying amount of those parts that are
replaced is derecognized. The section also, provides that if the major components of an item of property
and equipment have significantly different patterns of consumption of economic benefits, the
Organization shall allocate the initial cost of the asset to its major components and depreciate each such
component separately over its useful life.

Depreciation is computed using the straight-line method over estimated useful life (EUL) of the related
asset as follows:

Estimated Useful Life (EUL) in Years

Office equipment 5

The Organization shall derecognize an item of property and equipment:

(a) on disposal, or
(b) when no future economic benefits are expected from its use or disposal.

The asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount.

2.12 Impairment of non-financial assets

The Organization shall assess at each reporting date whether there is any indication that an asset may be
impaired. If any such indication exists, the Organization shall estimate the recoverable amount of the
asset. If there is no indication of impairment, it is not necessary to estimate the recoverable amount.

There are no impairment losses recognized for the years ended December 31, 2016 and 2015.
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2.13 Accruals and other payables

Accruals and other payables are recognized in the period in which the money or services are received or
when a legally enforceable claim against the Organization is established or when the corresponding assets
and expenses are recognized/incurred.

Accruals and other payables are initially measured at invoice price which approximate fair values, and
subsequently measured at amortized cost less settlement payments. Accrual and other payables are
derecognized when extinguished.

2.14 Revenue and expense recognition

(i) Seminar fees

Seminar fees are recognized in the period when seminars are held. This account also includes testing and
review classes fees.

(ii) Receipts from research materials

This account pertains to proceeds from the sale of research materials and literature on financial
management and corporate finance. Receipts from research materials are recognized when risks and
rewards of ownership have been passed to the buyers.

(iii) Interest income

Interest income on bank deposits is recognized when earned, net of applicable final tax.

(iv) Other receipts

Other receipts is recognized when there is an incidental economic benefit, other than from the usual
business operations, that will flow to the Organization and that can be measured reliably.

(vi) Expenses

Seminar, operating and research costs are recognized when incurred.

2.15 Employee benefits

Short-term benefits

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

2.16 Taxation

Income tax expense represents the sum of the current tax and deferred tax. The tax currently payable is
based on taxable profit for the year.

Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the
financial statements and their corresponding tax bases (known as temporary differences). Deferred tax
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liabilities are recognized for all temporary differences that are expected to increase taxable profit in the
future. Deferred tax assets are recognized for all temporary differences that are expected to reduce taxable
profit in the future, and any unused tax losses or unused tax credits. Deferred tax assets are measured at
the highest amount that, on the basis of current or estimated future taxable profit, is more likely than not
to be recovered.

The net carrying amount of deferred tax assets is reviewed at each reporting date and is adjusted to reflect
the current assessment of future taxable profits. Any adjustments are recognized in profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the taxable profit (tax loss) of the
periods in which it expects the deferred tax asset to be realized or the deferred tax liability to be settled,
on the basis of tax rates that have been enacted or substantively enacted by the end of the reporting
period.

The carrying amount of deferred tax assets are reviewed at each reporting date and a valuation allowance
is set up against deferred tax assets so that the net carrying amount equals the highest amount that is more
likely than not to be recovered based on current or future taxable profit.

2.17 Fund balances

Operating fund

This account covers the ordinary expenses related to the general administration of the Organization which
are funded by seminar fees and interest income from investments. It is credited for the excess of revenues
over expenses and receipts of transfers from other fund entities. It is debited for excess of expenses over
revenues and transfers of funds to other fund entities.

Book fund

This consists of donations and proceeds from the textbook projects of the Organization involving the
development of materials and literature on financial management and corporate finance in the Philippines.
It is credited for the excess of revenues over expenses and receipts of transfers from other fund entities. It
is debited for excess of expenses over revenues and transfers of funds to other fund entities.

Centennial professorial chair fund

This account consists of donations to the University of the Philippines College of Business
Administration to promote the development of business education and financial markets in the
Philippines. It is credited for the excess of revenues over expenses and receipts of transfers from other
fund entities. It is debited for excess of expenses over revenues and transfers of funds to other fund
entities.

2.18 Subsequent events

The Organization identifies subsequent events as events that occur after the reporting date but before the
date when the financial statements are authorized for issue. Any subsequent events that provide additional
information about the Organization’s financial position at the reporting date are reflected in the financial
statements.

Events that are non-adjusting events are disclosed in the notes to the financial statements when material.

There are no subsequent events for adjustment or disclosure as at December 31, 2016 and 2015.
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NOTE 3 - CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The Organization’s financial statements which are prepared in accordance with PFRS for SMEs require
management to make judgments and estimates that affect amounts reported in the financial statements
and related notes. Judgments and estimates are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable
under the circumstances. Actual results may ultimately differ from these estimates.

3.1 Critical management judgments in applying accounting policies

In the process of applying the Organization’s accounting policies, management has made the following
judgments, apart from those involving estimation, which have the most significant effect on the amounts
recognized in the financial statements.

(a) Allowance for doubtful accounts

The Organization assesses whether objective evidence of impairment exists for receivables
that are individually significant and collectively for receivables that are not individually
significant. Allowance for doubtful accounts is maintained at a level considered adequate to
provide for potentially uncollectible receivables.

The Organization has not provided allowance for doubtful accounts for the years ended
December 31, 2016 and 2015 since management believes that all outstanding receivables are
still collectible.

(b) Functional currency

The Board of Trustees considers the Philippine Peso as the currency that most faithfully
represents the economic effect of the underlying transactions, events and conditions. It is the
currency which measures the performance and reports the results of the Organization’s
operations.

(c) Provisions

Provisions for liabilities are recognized when the Organization has a present obligation as a
result of a past event and it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation, and a reliable estimate of the amount can be
made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current
best estimate. Where the effect of time value of money is material, the amount of provision is
the present value of the expenditure expected to be required to settle the obligation.

The Organization has no present obligations as a result of past events that would require
recognition of provision as at December 31, 2016 and 2015.

(d) Contingencies

Contingent liabilities are not recognized in the financial statements. They are disclosed unless
the possibility of an outflow of resources embodying economic benefits is remote.

Contingent assets are not recognized in the financial statements but are disclosed in the notes
to financial statements when an inflow of economic benefits is probable.

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The Organization has no contingent assets and liabilities for disclosure as at December 31,
2016 and 2015.

3.2 Critical accounting estimates and assumptions

(a) Impairment of available-for-sale investments

The determination when an investment is other-than-temporarily impaired requires significant

judgment. In making this judgment, the Organization evaluates, among other factors, the
duration and extent to which the fair value of an investment is less than its cost, and the
financial health of and near-term business outlook for the investee, including factors such as
industry and sector performance, changes in technology and operational and financing cash
flows. Based on the recent evaluation of information and circumstances affecting the
Organization’s available-for-sale financial assets, the management concludes that the assets
are not impaired as at December 31, 2016 and 2015. Future changes in those information and
circumstance might significantly affect the carrying amount of the assets.

As at December 31, 2015 and 2014, the fair value of the Organization’s available-for-sale
investments amounts to P7,161,355 and P7,107,260 (Note 8), respectively.

(b) Estimated useful lives (EUL) of office equipment

The management estimates the useful lives of office equipment based on the period over
which the assets are expected to be available for use. The EUL of office equipment (Note
2.11) are reviewed periodically and are updated if expectations differ from previous estimates
due to physical wear and tear, technical or commercial obsolescence and legal or other limits
on the use of the assets. In addition, the estimation of the useful lives of office equipment is
based on the Organization’s collective assessment of industry practice, internal evaluation
and experience with similar assets. It is possible, however, that the future results of operations
could be materially affected by changes in estimates brought about by changes in factors
mentioned above. The amounts and timing of recorded expenses for any period would be
affected by changes in these circumstances. A reduction in the EUL of office equipment
would increase recorded operating expenses and decrease non-current assets.

(c) Impairment of office equipment

The management performs an impairment review when certain impairment indicators are
present. Purchase accounting requires extensive use of accounting estimates and judgment to
allocate the purchase price to the fair market values of the assets and liabilities purchased.

Determining the fair value of office equipment, which require the determination of future
cash flows expected to be generated from the continued use and ultimate disposition of such
assets, requires the Organization to make estimates and assumptions that can materially affect
the financial statements. Any resulting impairment loss could have a material adverse impact
on the financial condition and results of operations.

The preparation of the estimated future cash flows involves significant judgment and
estimations. While the management believes that its assumptions are appropriate and
reasonable, significant changes in the assumptions may materially affect the assessment of
recoverable values and may lead to future additional impairment charges under PFRS for
SMEs.

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The carrying value of office equipment amounts to P4,660 (Note 10) for the year ended
December 31, 2016.

Based on the physical inspection of the fixed assets, the management has assessed that there
is no impairment loss recognized for the years ended December 31, 2016 and 2015.

(d) Income Taxes

Significant judgment is required in determining the provision of income taxes. There are
many transactions and calculations for which the ultimate tax determination is uncertain. The
Organization recognizes liabilities for anticipated tax audit issues on estimates of whether
additional taxes will be due. Where the final tax outcome of these matters is different from
the amounts that were initially recorded, such differences will impact the current and
deferred income tax assets and liabilities in the period in which such determination is made.

The Organization recognized deferred tax assets on all temporary differences amounting to
P16,475 (Note 12) for the year ended December 31, 2015.

(e) Valuation allowance of deferred tax assets

The Organization has recognized a valuation allowance of deferred tax assets on the basis of
the past years and future expectations, management considers it not probable that taxable
profits will be available against which the future income tax deductions can be utilized.

The Organization has provided a 100% valuation allowance of deferred tax assets as at
December 31, 2015 amounting to P16,475 (Note 12).

NOTE 4 - CASH ON HAND AND IN BANKS

This account consists of:

2016 2015
Cash in banks P 693,110 P 938,359
Petty cash fund 5,000 5,000
P 698,110 P 943,359

Cash in banks generally earn interest at prevailing bank deposit rates. Total interest income on bank
deposits for the years ended December 31, 2016 and 2015 amounts to P3,307 and P5,092 (Note 14),
respectively.

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NOTE 5 - RECEIVABLES AND ADVANCES

This account consists of:

2016 2015
Advances to suppliers P 559,603 P -
Accounts receivables 137,250 912,715
Interest receivables 80,233 78,089
Accrued interest - 29,065
P 777,086 P 1,019,869

Accounts receivables refer to the unremitted sales for research material from UP College of Business
Administration Cooperative.

Interest receivables pertain to accrued interest income from held-to-maturity investments.

NOTE 6 - BOOK INVENTORY

This refers to books under the Textbook Project, wherein the Organization stands as the project manager.
The Organization has the responsibility in printing, identification of outlets, promotion, collection of
proceeds from sale of textbooks and other related functions.

Movement of the account is as follows:

2016 2015
Beginning balance P 101,072 P 99,127
Publication of research materials 163,036 52,062
Cost of research (104,353) (50,117)
Ending balance P 159,755 P 101,072

NOTE 7 - PREPAYMENT AND OTHER CURRENT ASSETS

This account consists of:

2016 2015
Advance royalties P 174,872 P 183,452
Deferred input VAT 5,400 6,151
P 180,272 P 189,603

Advance royalties pertains to payments made to individuals for their contribution to books published by
the Organization. Amortization of these royalty payments charged to research costs under book fund
amounts to P8,580 and P195,125 for the years ended December 31, 2016 and 2015, respectively.

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NOTE 8 - AVAILABLE-FOR-SALE INVESTMENTS

This account consists of:

2016 2015
Cost
Balance at January 1 P 6,856,768 P 5,846,000
Additions during the year - 1,010,768
Balance at December 31 6,856,768 6,856,768

Fair Value Adjustment

Unrealized gain, January 1 250,492 214,550
Adjustments during the year 54,094 35,942
Unrealized gain, December 31 304,586 250,492
Carrying amount, December 31 P 7,161,354 P 7,107,260

This account pertains to investment trust funds in Banco de Oro, Bank of the Philippine Islands,
Metropolitan Bank and Trust Corporation and investment in stocks of Philippine Long Distance
Telephone Company, Meralco and Rockwell Land.

NOTE 9 - HELD-TO-MATURITY INVESTMENTS

This account consists of:

2016 2015
Investment in corporate bonds - non-current 7,735,696 6,885,696

The Organization’s held-to-maturity investments have coupon rates ranging from 4.223% to 6.944% and
maturity terms ranging from five (5) to ten (10) years.

Interest income earned from the held-to-maturity investments amounts to P298,997 and P295,829 (Note
14) for the years ended December 31, 2016 and 2015, respectively.

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NOTE 10 - OFFICE EQUIPMENT, NET

This account consists of:

2016 2015
Cost
Balance at January 1 P 378,096 P 378,096
Additions 6,990 -
Balance at December 31 385,086 378,096
Accumulated depreciation
Balance at January 1 378,096 378,096
Depreciation 2,330 -
Balance at December 31 380,426 378,096

Carrying value P 4,660 P -

The above office equipment has not been used as collateral for any loan.

The gross carrying amount of fully depreciated office equipment still used in operations amounts to
P378,096 for the years ended December 31, 2016 and 2015.

NOTE 11 - ACCRUALS AND OTHER PAYABLES

This account consists of:

2016 2015
Accounts payables P 662,581 P 480,875
Accrued expenses 262,169 268,554
Withholding tax - expanded 26,748 1,551
Withholding tax - compensation 6,193 2,632
Philhealth payable 1,100 1,225
Pag-ibig payable 400 -
SSS Payable 327 -
VAT payable - 121,858
P 959,518 P 876,695

Accounts payables pertain to the unpaid representation and transportation allowance to executives and
unpaid bonuses granted to seminar lecturers.

Accrued expenses pertain to accrual of royalties, salaries, bonuses and professional fees.

Dues to government include payables for withholding tax and SSS, Philhealth and Pag-ibig contributions
of the Organization’s employee.

The Organization believes that the carrying amounts of accruals and other payables approximate fair
values because of their short-term nature.

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NOTE 12 - INCOME TAX

The Organization’s income taxes for the years ended December 31, 2016 and 2015 are computed as
follows:

2016 2015
Profit before income tax P 653,366 P 479,985
Permanent differences:
Interest income subject to final tax (302,304) (300,921)
Penalties and surcharges - 10,000
Disallowed representation expense 20,405 -
Unclaimed CWT 4,911 -
Balance 376,378 189,064
Application of NOLCO - 2014 - (6,430)
Taxable income 376,378 182,634
Income tax rate 30% 30%
Income tax payable P 112,913 P 54,790

The Organization is subject to Minimum Corporate Income Tax for the years ended December 31, 2016
and 2015 computed as follows:

2016 2015
Seminar fees P 3,235,410 P 3,396,387
Receipts from research materials 175,957 147,115
Other receipts 22,382 19,760
Taxable income 3,433,749 3,563,262
MCIT rate 2% 2%
Income tax due P 68,675 P 71,265

The Organization’s income tax payable as at December 31, 2016 and 2015 is computed as follows:

2016 2015
Normal Income P 112,913 P 54,790
MCIT 68,675 71,265
Higher 112,913 71,265
Deduct:
Quarterly payments (24,652) (10,314)
Creditable withholding tax for the year (49,628) (60,559)
Provision for DTA on excess MCIT for 2015 (16,475) -
Tax still due and payable P 22,158 P 392

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Below is the movement in the deferred tax asset for the years ended December 31, 2016 and 2015:

2016 2015
Deferred tax asset
Beginning balance P 106,594 P 90,119
Transactions for the year:
Provision for DTA on excess MCIT for 2015 - 16,475
Reversal of provision for DTA on excess MCIT for 2015 (16,475) -
Balance at the end of the year 90,119 106,594

Valuation allowance of deferred tax asset

Beginning balance (106,594) (90,119)
Transactions for the year:
Provision for DTA on excess MCIT for 2015 - (16,475)
Reversal of provision for DTA on excess MCIT for 2015 16,475 -
Balance at the end of the year (90,119) (106,594)
Carrying value of deferred tax asset at the end of the year P - P -

Since the Organization’s management believes that there is absence of virtual certainty that the deferred
tax assets on the year 2015 excess on MCIT can be realized, a valuation allowance equivalent to 100% of
the deferred tax assets amounting to P16,475 are recognized for the year ended December 31, 2015.

The component of Company’s provision for income tax expense is as follows:

2016 2015
Income tax expense - current P 142,913 P 54,790
Income tax expense - deferred (16,475) 16,475
Income tax expense P 126,438 P 71,265

NOTE 13 - FUND BALANCES

Operating fund

This account consists of:

2016 2015
Restricted fund P 7,000,000 P 7,000,000
Unrestricted fund 3,117,230 2,331,603
P 10,117,230 P 9,331,603

In the Organization’s 21st Annual Membership Meeting held on May 27, 2013, the members decided to
restrict Seven Million Pesos (P7,000,000) from operating fund to build on with the objective that in the
future the earnings of the restricted fund will be able to sustain the administrative expenses of the
Organization.

Unrestricted operating fund which covers the ordinary expenses related to the general administration of
the Organization is funded by seminar fees and interest income from investments.

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Seminar fees amount to P3,235,410 and P3,396,387 for the years ended December 31, 2016 and 2015,
respectively.

Interest income on bank deposits and held-to-maturity investments apportioned to this fund amounts to
P235,793 and P202,464 for the years ended December 31, 2016 and 2015, respectively.

Other income amount to P22,382 and P19,760 for the years ended December 31, 2016 and 2015,
respectively.

Book fund - Restricted

This account pertains to donations for and income from the textbook projects of the Organization. The
balance of this fund is restricted for the development of materials and literature on financial management
and corporate finance in the Philippines. The balance of book fund amounts to P1,952,705 and
P1,892,156 as at December 31, 2015 and 2016, respectively.

Receipts from the sale of research materials amounts to P175,957 and P147,115 for the years ended
December 31, 2016 and 2015, respectively.

Centennial professorial chair fund - Restricted

This account consists of donations from the University of the Philippines College of Business
Administration. The balance of this fund is restricted for the promotion and development of business
education and financial markets in the Philippines. The balance of centennial professorial chair fund
amounts to P3,966,988 and P3,900,477 as at December 31, 2016 and 2015, respectively.

Interest income from held-to-maturity investments apportioned to this fund amounts to P66,511 and
P98,457 for the years ended December 31, 2016 and 2015, respectively.

NOTE 14 - INTEREST INCOME

This account consists of:

Note 2016 2015

Held-to-maturity investments 9 P 298,997 P 295,829
Savings deposits 4 3,307 5,092
P 302,304 P 300,921

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NOTE 15 - SEMINAR EXPENSES

This consists of resources incurred for the execution of seminars held by the Organization. Details of this
account are as follows:

2016 2015
Meals P 720,571 P 629,117
Lecturer's fee 814,000 1,373,250
Honoraria 246,950 311,438
Advertising 153,950 53,780
Bonus 115,200 -
Salaries and wages 99,262 108,127
Printing and office supplies 53,106 28,430
Rent 40,400 49,900
Transportation and travel 39,924 71,673
SSS,PHIC, HDMF contributions 8,259 9,326
Miscellaneous 1,000 3,100
P 2,292,622 P 2,638,141

NOTE 16 - OPERATING EXPENSES

This consists of resources incurred for purposes other than conducting and organizing seminars and
publication of books during the year. Details of this account are as follows:

Note 2016 2015

Honoraria P 316,313 P 206,936
Advertising 95,774 -
Representation 52,759 31,249
Professional fees 45,000 50,000
Printing and office supplies 29,827 44,691
Communication 24,507 23,831
Taxes and licenses 17.5 23,629 22,443
Transportation and travel 7,874 24,472
Donation 5,000 10,000
Depreciation 10 2,330 -
Salaries and wages - 10,800
Penalties - 10,000
Repairs and maintenance - 180
Miscellaneous 71,644 66,213
P 674,657 P 500,815

NOTE 17 - RESEARCH COSTS

This pertains to resources utilized for the publication of books for the Organization’s textbook projects
involving the development of materials and literature on financial management, and corporate finance in

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the Philippines amounting to P115,408 and P245,242 for the years ended December 31, 2016 and 2015,
respectively.

NOTE 18 - SUPPLEMENTARY TAX INFORMATION UNDER REVENUE REGULATION NO.

15-2010

The Philippine Bureau of Internal Revenue (BIR) issued Revenue Regulation (RR) No. 15-2010 which
requires certain tax information to be disclosed in the notes to financial statements. The additional
required disclosures as at and for the year ended December 31, 2016 are described below.

18.1 Value Added Tax (VAT)

The Organization’s VAT payable is computed as follows:

Amount
Subject to 12% VAT
Sale of services P 542,031
Sales to government 2,303,318
Total vatable sales 2,845,349
Multiply by: Tax rate 12%
Total output tax for the year P 341,442

Amount
Input tax
Beginning of the year P -
Current year's purchases/payments for:
Sales to government 144,524
Services lodged under other accounts 18,744
Goods other than for resale or manufacture 16,260
Total vatable purchases 179,528
VAT withheld on sales to government 115,166
Total input tax for the year P 294,694

Amount
Output VAT declared for the year P 341,442
Less: Balance of input tax at the end of the year 294,694
Value Added Tax Payable for the year 46,748
Less: VAT Payments for the current year
1st quarter 12,980
2nd quarter -
3rd quarter 33,768
October and November -
VAT still due and payable P -

18.2 Landed cost, customs duties and tariffs

The Organization has not engaged in any importations which are subject to the determination of actual
landed cost as the basis of computation and payment of customs duties and tariffs.

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18.3 Excise taxes

The Organization has no transactions subject to excise tax.

18.4 Documentary stamp taxes

The Organization does not have transactions subject to documentary stamp taxes.

18.5 Other taxes, local and national

This account consists of taxes and licenses paid as follows:

Amount
Business permit P 21,833
Barangay clearance 500
Annual registration fee 500
Others 796
P 23,629

18.6 Withholding taxes

The Organization’s withholding taxes are as follows:

i. Withholding tax on compensation

Amount
Total withholding tax payable for the year P 12,523
Less: Payments made from January to November 6,330
Withholding tax still due and payable P 6,193

ii. Expanded withholding tax

Amount
Total expanded withholding tax payable for the year P 170,347
Less: Payments made from January - November 143,599
Withholding tax still due and payable P 26,748

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iii. Creditable withholding tax

Amount
Beginning balance P -
Current year's creditable withholding tax 62,236
Total Creditable withholding taxes 62,236
Less:
Creditable withholding tax applied this year 54,539
Creditable withholding tax written-off this year 7,697
Balance at the end of the year P -

18.7 Tax assessment

The Organization has not received any Final Assessment Notice (FAN) from the BIR.

18.8 Tax cases

The Organization has no outstanding cases which are under preliminary investigation and/or prosecution
in courts or bodies outside the BIR.

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