SECURITIES AND EXCHANGE COMMISSION The following document has been received: Receiving: JAYSON ALDAY Receipt Date and Time: March 31, 2023 07:43:08 PM Company Information ‘SEC Registration No.: CN200409459 Company Name: ASA PHILIPPINES FOUNDATION, INC. Industry Classification: 91999 Company Type: Non-stock Corporation Document Information Document ID: 0ST1033120238990996 Document Type: Financial Statement Document Code: FS Period Covered: December 31, 2022 Submission Type: AFS with Amended NSPO 1, 2, 3 and 4, 5, 6 Remarks: None Acceptance of this document is subject to review of forms and contentstry <" MENT 4 wren rast SCM EANE ‘+ Evaluate the appropriateness of accounting policies used ar accounting estimates and related disclosures made by mana ‘Bocangogan nests Pea sth Pine member im of Grant Thorton trataP&A °o GrantThornton ‘+ Conclude on the appropriateness of management's use of the going concern basis of ‘accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Foundation’s. ability to continue as a going concem. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our Conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Foundation to cease to continue as a ‘going concern. * Evaluate tho overall presentation, structure and content of the financial statements, Including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the Planned scope and timing of the audit and significant audit findings, including any significant deficiencies in intemal control that we identify during our audit. Report on Other Legal and Regulatory Requirements (Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole, The supplementary information for the year ended December 31, 2022 required by the Bureau of Internal Revenue as disclosed in Note 20 to the financial statements is presented for purposes of additional analysis and is not a required part of the basic financial statements prepared in accordance with PFRS. Such supplementary information is the responsibility of management. The supplementary information has been Subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. PUNONGBAYAN & ARAULLO ee Yusoph A. Maute Partner (CPA Rog, No. 0140808, Sissitréet Ta PTR No 506098, January 3, 020[ HME PLL ME ARUN SE ‘SEC Group A Accreditation & GUALITY 355UR Al Partner - No, 140308-SEC (until iT pe Firm - No. 0002 (until Dec. 31, 2024) . BIR AN 08.002551-048-2023 (until Jani 24, 2026) ims BONPRC Cert of Reg. No- Op (oa Ag seven 272098 Nes SPACANIO Ponengboyon testo PSH) athe Phipine member fm of Gran Theron trntonelASA PHILIPPINES FOUNDATION, INC. (A MICROFINANCE NGO) (A Nonstock, Nonprofit Organization) STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 2022 AND 2021 (Amounts in Philippine Pesos) Nous 2021 ASSETS ‘CASH, 6 P 4,313,114,731 P_2,608,461,569 LOANS RECEIVABLE - Net 7 35,516,960,258 26,303,712,531 OTHER RECEIVABLES 7 27,573,135 22,316,608 PROPERTY AND EQUIPMENT - Net 8 202,966,700 144913,700 OTHER ASSETS 18 50,792,959 46,508,625 TOTAL ASSETS P__40,111,407,783 —P_29,125,913,033 LIABILITIES AND FUND BALANCE. MICROSAVINGS 9 P 16,451,949,890 P_13,023,198,728 LOANS PAYABLE 10 2,796,551,665 991,304,999 POST-EMPLOYMENT DEFINED BENEFIT OBLIGATION “ 14049,084,700—_1,192,490,000 OTHER LIABILITIES u 1,052,789,669 _1,061,181,360. TOTAL LIABILITIES 21,330,375,924 16,268,175,087 FUND BALANCE 18,781,031,859 TOTAL LIABILITIES AND FUND BALANCEASA PHILIPPINES FOUNDATION, INC. (A MICROFINANCE NGO) (A Nonstock, Nonprofit Organization) ‘STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 (Amounts in Philippine Peeos) Notes 2021 REVENUES: Revenue from microfinancing activities 7B t2a87,758577 Pp 9,925,302,782 Other revenues 2 381.325,773, 212'343,074 12,488,984,350 10,137,665,856 EXPENSES 8 Operting costs 4,754,321,055 4594012334 General and administrative expenses 1,286 449,080 1063,548,103 Client community services 559,337,356 696,572,700 Impairment lots on loans receivable , 361,400,246 6,961,507,737 6,354133,137 EXCESS OF REVENUES OVER EXPENSES 5,527,476,613, 3,783,532,719 OTHER COMPREHENSIVE INCOME, Item that will not be reclassified subsequently to profit or loss ‘Remeasurement of postemployment defined benefit plan “ 398,817, 401,713,300 ‘TOTAL COMPREHENSIVE INCOME, P___5923,293.913 P_ 4.185, See Notes to Financial Statements. ERWINPACINIOASA PHILIPPINES FOUNDATION, INC. (A MICROFINANCE NGO) (A Nonstock, Nonprofit Organization) STATEMENTS OF CHANGES IN FUND BALANCE FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 (Amounts in Philippine Pesos) Notes 2022 2021 CAPITAL CONTRIBUTION 2 P___ 41,360,000 41,360,000 GENERAL FUND Balance at beginning of year 12,299,908,846 8,516,376,127 Excess of revenues over expenses during the year 5,527,476,613 3,783,532,719 Balance at end of year 17,827,385,459 _12,299,908,846 REMEASUREMENT OF POST-EMPLOYMENT DEFINED BENEFIT PLAN Balance at beginning of year 516,469,100 114,755,800 Other comprehensive income “4 395,817,300 401,713,300 Balance at end of year 912,286,400 516,469,100 TOTAL FUND BALANCE, P_18,781,031,859 —P_12,857,737,046 See Notes to Financial Statements. STORER OR INIF ED TORE. | wi ERWIN ACINIO[ASA PHILIPPINES FOUNDATION, INC. (A MICROFINANCE NGO) (A Nonstock, Nonproft Organization) STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021, ‘Amounts in Philippine Pesos) Note ana (CASH FLOWS FROM OPERATING ACTIVITIES ‘Bacess of evenues over expentes P saranen Pp 37eass2719 Adjusment for Impairment lost on loans seceivabe as 361,400,246 Terest expense 13.18 126,498,763, 736008 Depression and smortetion a 56,081,963 67306565 Insert income fom back deposits 6 ¢tmer ase) ( 18288,5) Insert income from employee lane nae 298.716) ( 489,826) Exces of revenses over expenes before wotking cial change 605,584,713 395,025 608 Tocrest in loans receivable ( s3sasasize1y(—— 6057,358,308) Treas in other eecivables « 5.286527) ( 11398502) Tecrens in rental deposits « 4284334) ( ‘7327,868) Toeress in microsaings| 428,781,862 1.408;604.217 Tnerctt in postemployment defined benefit ciation 191,952.758 580533968 Iaceease (decrease) in ores Kaiies (__sag.214 553,658 906 Cath genered from operons 39,107,807 35124127 Intecentreoared 1,902,872 2178481 Cah pid for final eanet « 2122,292) ( 3.57.73 [Net Cash From Opening Activites 75,88,457 smoon (CASH FLOWS FROM AN INVESTING ACTIVITY -Acsuisons of propery and equipment 8 C__angtsages) (__ 4,881,465) (CASH FLOWS FROM FINANCING ACTIVITIES % Proceeds fram loan evalnents 269,480,000 510,000,000 Repayments of loans —Basans.ss4) (665,203,394) Tere pad (__@qe99e) (_ 59,160,422) ‘Net Cash From (Used in) Financing Acsvities _uma,pon.608 (_2143363,756) [NET INCREASE IN CASH 1,704,653,162 114,546,806, (CASH AT BEGINNING OF YEAR __2ams1s69 _2.493,914765 (CASH AT END OF YEAR Pagers, P_ 2,608461,569 ‘Supplemental Information on Noncath Financing Activity = ‘As of December 31,2022 an 2021, the oustanding balance of acrud interest eypense amounting 9 PA. ¢ milion and PO. milion, respectively is presented as par of Osher Other Lnhlies acount i the sutements of nancial pasion (ee Nor 11) RD 5 QUALI"ASA PHILIPPINES FOUNDATION, INC, (A MICROFINANCE NGO) (A Nonstock, Nonprofit Organiration) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2022 AND 2021 (Amounts in Philippine Pesos) GENERAL INFORMATION 1.1 Foundation Information ASA Philippines Foundation, Inc. (A Microfinance NGO) {the Foundation or ASA] ‘was incorporated in the Philippines as a nonstock, nonprofit onganization and registered. with the Philippine Securities and Exchange Commission on July 9, 2004. Its primary purpose is to provide access to economic and financial facilites, social and other developmental opportunities to the disadvantaged sectors including the small, cottage and micro-entrepreneurial poor of the community to fight against poverty, empowering them through self-employment and economic upliftment, so they may live with dignity, and to conduct microfinance operations pursuant to Republic Act (R.A.) No, 8425, Social Reform and Poverty Alisiation Act. ‘The ASA Program provides: (a) Microfinance services 10 qualified poor, low-income women engaged in micro and small scale enterprises; (®) Financial and other forms of assistance to its members in case of sickness, death and calamities and college scholarship for deserving children of membets, as part of social services to the poor, and, (Business development services for the members to improve efficiency and effectiveness in enterprise management. As of December 31, 2022 and 2021, the Foundation has 1,683 branches covering 82 provinces in the Philippines. The Foundation has established foothold in Luzon, ‘Visayas and Mindanao, as it operates 856, 429 and 398 branches therein, respectively. ‘The Foundation’s registered head office address, which is also its principal place of business, is Located at 15th Floor Prestige Tower, F. Ortigas Jr. Street, Ortigas Center, Pasig City, 1.2 Continuing Impact of COVID-19 Pandemic on the Foundation’s Operations ‘The COVID-19 pandemic started to become widespread in the Philippines in easly ‘March 2020 and its impact is still heing felt until the date of the approval of these financial statements. In 2022, the country’s economic status improved because of the reopening of local and international travels and loosening of health and safety protocols and restrictions. Demand and supply of products are slowly returning to pre-pandemic levels,In 2022 and 2021, the Foundation generate positive results on its operations as evident ‘on the continuous increase in revenues and in the net excess of tevenues over expenses luting these reporting periods. ‘The management, however, will continue to have the “Portfolio Recovery Management’ team, which was created at the start of the pandemic, to continuously monitor recovery of accounts that were considered on default, and to provide broad range of receivable management strategies and credit risk assessments. ‘With the instituted improvements, management projects that the Foundation will continue to report positive results of operations and will remain liquid to meet current obligations as they fall due. Accordingly, management has not determined material ‘uncertainty that may cast significant doubt on the Foundation’s ability to continue as a going concem due to the effects of the pandemic. 13° Approval of Financial Statements ‘The financial statements of the Foundation as of and for the year ended December 31, 2022 (including the comparative financial statements as of and for the year ended December 31, 2021) were authorized for issue by the Foundation’s Board of Trustees GOT) on February 27, 2023. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‘The significant accounting policies that have been used in the preparation of these nancial statements are summarized below, ‘These policies have been consistently applied to all years presented, unless otherwise stated. 21 Basis of Preparation of Financial Statements (a) Statement of Compliance wish Philippine Financial Reporting Standards ‘The financial statements of the Foundation have been prepated in accordance with Philippine Financial Reporting Standards (PFRS). PERS are adopted by the Financial Reporting Standards Council (FRSC) from the pronouncements issued by the International Accounting Standards Board, and approved by the Philippine Board of Accountancy. ‘The financial statements have been prepared using the measurement bases specified, by PERS for cach type of asset, ibility, income and expense. The measurement bases are more fully described in the accounting policies that follow. (0) Presentation of Financial Statements ‘The financial statements are presented in accordance with Philippine Accounting, ‘Standard (PAS) 1, Presentation of Financial Statements. ‘The Foundation presents all items of income, expenses, and other comprehensive income ot loss, if any, in a single statement of comprehensive income. ‘The Foundation presents a third statement of Sinancial position as at the beginning of the preceding period when it applies an accounting policy retrospectively, or makes a retrospective restatement or reclassification of items that has a material effect on the information in the statement of financial position at the beginning of the preceding period. ‘The related notes to the third statement of financial position ae not required to be disclosed.(Functional and Presentation Currensy ‘These financial statements ate presented in Philippine pesos, the Foundation’s functional and presentation currency, and all values represent absolute amounts ‘except when otherwise indicated, Ttems included in the financial statements of the Foundation are measured using its functional currency. Functional currency is the primary economic environment in which the Foundation operates. 22 Adoption of Amended Seandards (a) Effective in 2022 that are Relevant tothe Foundation ‘Tae Foundation adopted the following amendments and annual improvements to existing standards, which are mandatorily effective for annual periods beginning on. ‘ot after January 1, 2022: PAS 16 (Amendments): Property, Plant and Equipment — Proceeds Before Intended Use PAS 37 (Amendments) : Provisions, Contingent Liabilities and Contingent Assets — Onerous Contracts — Cost of Fulfilling 2 Contract Annual Improvements to PERS (2018-2020 Cycle) PERS 9 (Amendments) : Financial Instruments ~ Fees in the “10 percent’ Test for Derecognition of Liabilities PERS 16 (Amendments): Leases — Lease Incentives Discussed below and succeeding page are the relevant information about these pronouncements, @ PAS 16 (Amendments), Prperty, Plant and Equipment ~ Proceeds Before Intended Use, The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced ‘while beinging that asset to the location and condition necessary for it to be capable of operating in the manner ineended by management. Instead, an catity recognizes the proceeds from selling such items, and the cost of producing those items, in profit or loss. The application of these amendments had no significant impact on the Foundation’s financial statements as there were no sales of such items produced by property, plant and equipment made before being available for use on or after the beginning of the earliest period presented. @_ PAS 37 (Amendments), Provisions, Contingent Liabilities and Contingent Assets — Onerous Contracts — Cast of Fuliing a Contract. The amendments specify that when assessing whether a contract is onerous of loss-making, an entity needs to include costs that relate directly to a contract to provide goods ot services. Costs that relate directly to a contract include both incremental costs of fulfiling that contract (€.., direct labor and materials) ‘of an allocation of other costs that relate directly to fulfilling contracts (€g. the allocation of the depteciation charge for an item of property, plant and equipment used in falflling the contract).@ go ‘The amendments apply prospectively to contracts existing at the date when the amendments are first applied. Management assessed that there is no significant impact on the Foundation’s financial statements as a result of the change since none of the existing contracts as of January 1, 2022 would be identified as onerous after applying the amendments. (ii) Annual Improvements to PFRS 2018-2020 Cycle. © PFRS 9 (Amendments), Financial Instruments ~ Fees in the ‘10 percent’ Test for Dereognition of Liabilities. "The amendments clarify the fees that an ‘entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. ‘These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other's behalf. © Ilustrative Examples Accompanying PRS 16, Leases — Least Incentives. ‘The amendments remove potential for confusion regarding lease incentives by deleting from Illustrative Example 13 the reimbursement relating to leasehold improvements as it had not been explained clearly enough as to whether the reimbursement would meet the definition of a lease incentive in accordance with PERS 16. Effective in 2022 that isnot Relevant to the Foundation Among the amendments to PFRS which are mandatorily effective for annual periods beginning on or after January 1, 2022, the following are not relevant to the Foundation’s financial statemen @ — PFRS 3 (Amendments), Business Combinations - Reference to the Conceptual Framework Gi) Annual Improvements to PFRS 2018-2020 Cycle. © PERS 1, First-time Adoption of Philippine Financial Reporting Standards — Subsidiary as a First-time Adopter © PAS 41, Agriculture — Taxation in Fair Value Measurements Eifetve Subsequent to 2022 but not Adopted Early ‘There are pronouncements for annual periods subsequent to 2022, which are adopted by the FRSC. Management will adopt the relevant pronouncements, which is presented below and in the succeeding page, in accordance with their transitional provisions; and, none of these are expected to have significant impact on the Foundation’s financial statements: @ PAS 1 (Amendments), Presentation of Financial Statements — Classification of Liabilities as Currant or Now-eurrent (effective from January 1, 2023)@ PAS 1 and PFRS Practice Statement 2 (Amendments), Presentation of Financial Statements — Disclosure of Accounting Policies (effective from January 1, 2023) Gi) PAS 8 (Amendments), Acounting Estimates — Definition of Accounting Estimates (effective from January 1, 2023) Gv) PAS 12 (Amendments), Income Taxes — Defernd Taxe Related fo Assets and Liabilities Arising from a Single Transaction (effective from January 1, 2023) 23° Current versus Non-current Classification ‘The Foundation presents assets and liabilities in the statement of financial position based | on liquidity while current or non-current classification is presented in Note 19. An asset is current when itis: * Expected to be realized or intended to be sold or consumed in normal operating cycle; Held primarily for the purpose of trading; Expected to be realized within twelve months after the reporting period; or, Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets are classified as non-current. A Liability is current when: Iris expected to be settled in normal operating cycle; Its held primarily for the purpose of trading; Tes due to be settled within 12 months after the reporting period; or, ‘There is no unconditional right to defer the settlement of the liability for at east twelve months after the reporting period. ‘The Foundation classifies all other liabilities as non-current. 24° Financial Instruments Financial assets and financial liabilities are recognized when the entity becomes a party to the contractual provisions of the financial instrument. (@) Financial Assets At initial recognition, the Foundation measures a financial asset at its fair value plus or minus, in the case of a financial asset not at fair value through profit or loss (FVTPL), transaction costs that are incremental or directly attributable to the acquisition or issue of the financial asset, such as fees and commissions. ‘Transaction costs of financial assets carried at FVTPL are expensed outright in profit or loss. Unless specifically indicated to apply to either year, the policies that follow apply to both years.@ -6- Classification, Measurement and Reclassification of Financial Assets ‘The classification and measurement of financial assets is driven by the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. The classification and measurement of financial assets are described as follows Financial assets are measured at amortized cost if both of the following conditions are met: ¢ the asset is held within the Foundation’s business model whose objective is to hold financial assets in order to collect contractual cash flows (“hold to collect”); and, * the contractual terms of the instrument give rise, on specified dates, to cash flows that are solely payment of principal and interest (SPPI) on the principal amount outstanding. All of the Foundation’s financial assets meet these criteria and are measured initially at fair value plus transaction costs. These are subsequently measured. at amortized cost using the effective interest method, less allowance for expected credit losses (ECL) Where the business model is to hold assets to collect contractual cash flows, the Foundation assesses whether the financial instruments’ cash flows represent SPPI. In making this assessment, the Foundation considers whether the contractual cash flows are consistent with a basic lending arrangement, i¢., interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that is consistent with a basic lending arrangement [see Note 3.1(b)) ‘Where the contractual terms introduce exposure to risk of volatility that are inconsistent with a basic lending arrangement, the related financial asset is classified and measured at FVTPL. ‘The Foundation’s financial assets at amortized cost are presented in the statement of financial position as Cash, Loans Receivable, Other Receivables and Rental deposits included as part of Other Assets. Cash includes cash on hand and demand deposits, which generally earn interest at daily bank deposit rates and are subject to insignificant changes in value. If applicable, the Foundation can only reclassify financial assets if the objective of its business model for managing those financial assets changes. Accordingly, the Foundation is required to reclassify financial assets: @) from amortized cost to FVTPL, if the objective of the business model changes so that the amortized cost criteria are no longer met; and, (ji) from FVIPL to amortized cost, if the objective of the business model changes so that the amortized cost criteria start to be met and the characteristic of the instrument's contractual cash flows meet the amortized cost criteria ‘A change in the objective of the Foundation’s business model will take effect only at the beginning of the next reporting period following the change in the business model.@ (ii) “7. Exffctive Interest Rate Method and Interest Income Interest income is recognized using the effective interest rate (EIR) method for all financial instrument measured at amortized cost. The EIR is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument or, when appropriate, a shorter period, to the net carrying amount of the financial asset. Interest income from cash in banks is recognized as interest accrues considering the effective yield of the asset. ‘The Foundation calculates interest income by applying the EIR to the gross carrying amount of financial assets other than credit-impaired assets. ‘The effective interest method is a method of calculating the amortized cost of a financial asset or a financial liability and allocating the income over the relevant period. The EIR is the rate that exactly discounts estimated future cash flows through the expected useful life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset of financial liability. The EIR is calculated by considering any discount Of premium on acquisition, fees and cost that are integral par of effective interest rate. Further, the Foundation estimates cash flows by considering all contractual terms of the financial instruments. Once the recorded value of a financial asset or group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognized using the original EIR used to discount the future recoverable cash flows. For financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the EIR to the net carrying amount of the financial assets (after deduction of the loss allowance). If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis. For financial assets that were credit-impaired on initial recognition, interest income is calculated by applying a credit-adjusted EIR to the amortized cost of the asset. The calculation of interest income does not revert to a gross basi, even if the credit risk of the asset improves. Impairment of Financial Assets ‘At the end of the reporting period, the Foundation assesses and recognizes allowance for expected credit losses (ECL) on its financial assets measured at amortized cost. The measurement of ECL involves consideration of broader range of information that is available without undue cost or effort at the reporting date about past events, current conditions, and reasonable an¢ supportable forecasts of future economic conditions (Le,, forward-loo} information) that may affect the collectability of the future cash flows of the financial assets. Measurement of the ECL is determined by a probability-weighted estimate of credit losses over the expected life of the financial instruments evaluated based on a range of possible outcome.® ‘The Foundation recognizes lifetime ECL for loans and other receivables. ‘The ECL on these assets are estimated by applying the simplified approach using a provision matrix developed based on the Foundation’s historical credit loss experience and credit information that are specific to the debtors, adjusted for general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate. These assets are assessed for impairment on a collective basis based on shared credit risk characteristics [see Note 4.1(b)]. ‘The amount of ECL recognized during the reporting periods is presented as Impairment Losses on Loans Receivable in the statement of comprehensive income. Reversal of loss allowance, if any, is recognized under Other Revenues in the statement of comprehensive income. (iy) Dereeagnition of Financial Assets ‘The financial assets (or where applicable, a part of a financial asset or part of 4 group of financial assets) are derecognized when the contractual rights to receive cash flows from the financial instruments expire, or when the financial assets and all substantial risks and rewards of ownership have been transferred to another party. If the Foundation neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Foundation recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Foundation retains substantially all the risks and rewards of ownership of a transferred financial asset, the Foundation continues to recognize the financial asset and recognizes a collateralized borrowing for the proceeds received. Financial Liabilities Financial libilities include microsavings (composed of Capital Build-up [CBU] and Locked in Capital Build-up [LCBU)), loans payable and other liabilities (excluding tax-related liabilities). All interest-related charges incurred on financial liabilities are recognized as expense in profit or loss as part of Operating costs under Expenses section of the statement of comprehensive income. Microsavings and other liabilities are initially recognized at their fair value and subsequently measured at amortized cost using effective interest method for maturities beyond one year, less settlement payments. Loans payables are raised for support of long-term funding of operations. ‘This is recognized at proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to profit or loss on an accrual basis using the EIR method and are added to the casrying amount of the instrament to the extent that they are not settled in the petiod in which they arise. Financial liabilities are derecognized from the statement of financial position only ‘when the obligations are extinguished either through discharge, cancellation or expiration. Financial liabilities are also derecognized when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value. The difference between the carrying amount of the financial liability derecognized and the consideration paid or payable is recognized in profit ot loss.()— Offietting Financial Instruments Financial assets and financial liabilities are offset and the resulting net amount, considered as a single financial asset or financial liability, is reported in the statement of financial position when the Foundation currently has legally enforceable right to set off the recognized amounts and there is an intention to settle om a net basis, or realize the asset and settle the liability simultaneously. ‘The right of set-off must be available at the end of the reporting period, that is, itis not contingent on future event. It must also be enforceable in the normal course of business, in the event of default, and in the event of insolvency or bankruptcy; and, must be legally enforceable for both entity and all counterparties to the financial instruments. 25 Other Assets ‘Other assets, which are generally non-financial assets, pertain to other resources controlled by the Foundation as a result of past eveats, They ate recognized in the financial statements when itis probable that the furare economic benefits will flow to the Foundation and the asset has 2 cost of value that can be measured reliably. These are ‘subsequently charged to profit or loss as utilized or reclassified to anothet asset account, if applicable. ‘An 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. 26 Property and Equipment Property and equipment are initially stated at cost and subsequently measured at cost less accumulated depreciation and amortization and any impairment in value. The cost of an set comptises its purchase price and directly attributable costs of bringing the asset to ‘working condition for its intended use. Expenditures for additions, major improvements ‘and renewals are capitalized while expenditures for repairs and maintenance are charged to expense as incurred. ‘Depreciation is computed on the straight-line basis over the estimated usefial lives of the assets as follows: Building 15 years Egnipment and vehicles S years Furniture and fixtures Byeats Office improvements are amortized ovet the estimated uscful life of the improvements of five years, or the term of the lease, whichever is shorter. ‘The Foundation’s property and equipment are subject to impairment testing whenever vents ot changes in circumstances indicate that the carrying amount may not be secoverable, Impairment loss for property and equipment is recognized for the amount by whieh the asset’s carrying amount exceeds its recoverable amounts which is the higher of its fair vvalue less costs to sell and its value in use. In determining value in use, management estimates the expected future cash flows from such asset and determines the suitable interest rate in order to calculate the present value of those cash flows.-10- ‘The data used for impairment testing procedures are directly linked to the Foundation’s latest approved budget, adjusted as necessary to exclude the effects of asset enhancements. Discount factors determined reflect management's assessment of respective risk profiles, such as market and asset-specific tisk factors. Property and equipment are subsequently reassessed for indications that an impairment Joss previously recognized may no longer exist. An impairment loss is reversed if the recoverable amount of the property and equipment exceeds its carrying amount. ‘The residual values, estimated useful lives, and depreciation and amortization method of Property and equipment ate reviewed and adjusted if appropriate, at the end of each. ‘reporting period. An item of propery and equipment, including the related accumulated depreciation and. amortization and any impairment losses, is derecognized upon disposal or when no farure economic benefits are expected to atise fom the continued use of the asset. Any gain ot loss atising on derecognition of the asset (calculated as the difference between the net disposal procceds and the carrying amount of the item) is included in profit ot loss in ‘the year the item is derecognized. 27 Provisions and Contingencies Provisions ate recognized when present obligations will probably lead to an outflow of economic resources and they can be estimated reliably even if the timing or amount of the outflow may stil be uncertain. A present obligation arises from the presence of a legal or constructive obligation that has resulted from past events. Provisions ate measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the end of the reporting period, including the risks and uncertainties associated with the present obligation, ‘Where there aze a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. ‘When time value of money is matesial, long-term provisions are discounted to their present values using a pre-tax rate that reflects market assessments and the risks specific to the obligation, The increase in the provision due to passage of time is recognized as interest expense. Provisions are reviewed at the end of each reporting period and adjusted to reflect the curtent best estimate. In those cases, where the possible outflow of economic resource as a xesult of present obligations is considered improbable or remote, or the amount to be provided for cannot bbe measured reliably, no lability is recognized in the financial statements. Similarly, possible inflows of economic benefits to the Foundation that do not yet meet the recognition criteria of an asset ate considered contingent assets, hence, are not recognized in the financial statements. On the other hand, any reimbursement that the Foundation can be virtually certain to collect from a thied party with respect to the obligation is recognized as a separate asset not exceeding the amount of the related provision.+a 28 Revenue and Expense Recognition "The Foundation recognizes revenue from microfinancing activitis in the statement of comprehensive income for the interest eared on all instruments measured at amortized cost using the effective interest method. Uneamned revenue from microfinancing activitics is recognized during the month of disbursement and subsequently carned as revenue based on the effective interest method of accounting, as the loan is fully collected from the members, In addition, the Foundation also eams income from membership contributions ‘which is used by the Foundation to cover administrative fees and supplies cost. These contributions are received in the form of cash by the Foundation’s members. Revenue is recognized immediately upon receipt of the contribution while the related expenses are reposted when incurred. ‘The Foundation’s members are also entitled to receive rebates based on a certain. percentage not exceeding 15% provided that the membets settle their accounts on time. Likewise, a CBU account with a balance of P500 or more is entitled to 7% rebates, subject ro changes based! on prevailing economic conditions. ‘These rebates are settled ‘together upon withdrawal of CBU savings by the customers, Relative to these rebates’ arrangement, the amount of revenues is also immediately adjusted as of the end of the reporting periods. Costs and expenses are recognized in profit or loss upon utilization of the goods and/or services or at the date they are incurred. Any finance costs are reported in profit or loss ‘on an accrual basis. 29° Leases - Foundation as 2 Lessee For any new contracts entered into, the Foundation considers whether a contract is, or contains, a lease. A lease is defined as a contract, or part of a contract, that conveys the right to use an asset (the underlying asset} for a petiod of time in exchange for consideration. ‘To apply this definition, the Foundation assesses whether the contract meets three key evaluations which are whether: . the contract contains an identified asset, which is either explicitly identified in the contract ot implicitly specified by being identified at the time the asset is made available to the Foundation; ¢ the Foundation has the sight to obtain substantially all of the economic benefits from use of the identified asset throughout the petiod of use, considering its rights within the defined scope of the contract; and, © the Foundation has the sight to direct the use of the identified asset throughout the petiod of usc. The Foundation assesses whether it has the right to ditect ‘how and for what purpose’ the asset is used throughout the period of usc. In 2022 and 2021, the Foundation has elected to account for short-term leases and leases ‘of low-value asscts using the practical expedients. Instead of recognizing a sight-of-use asset and lease liability, the payments in relation to these are recognized as an expense in. profit of loss on a straight-line basis over the lease term.210 Employee Benefits ‘The Foundation provides post-employment benefits to employees through a defined benefit plan, defined contribution plans, and other employee benefits which are recognized as follows: «@ ® Shortsterm Emplayee Benefits Short-term employee benefits include salaties, contributions to government agencies, paid vacation and sick leave, and non-monetary benefits, but not termination benefits, expected to be settied wholly before twelve months after the ‘end of the annual reporting period in which the employees render the related services. These benefits are recognized in profit or loss when the services are rendered. Past-employment Defined Bengft Plan ‘A defined benefit plan is a post-employment plan that defines an amount of post-cmployment benefit that an employce will receive on retirement, usually dependent on one or mote factors such as age, years of service and salary. The egal obligation for any benefits from this kind of post-employment plan remains with the Foundation, even if plan assets for funding the defined benefit plan have been acquired. The Foundation’s defined benefit pension plan covers ail regular full-time employees. The liability recognized in the statement of financial position for a defined benefit plan is the present value of the defined benefit obligation at the end of the reporting petiod. ‘The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. ‘The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows for expected benefit payments using a discount rate derived from the interest rates of a zero coupon government bonds using the reference rates ‘published by Bloomberg using its valuation technology, Bloomberg Valuation (BVAL), that are denominated in the currency in which the benefits will be paid and that have tetms to maturity approximating to the terms of the related post- employment liability. BVAL provides evaluated ptices that are based on matket observations from contributed sources. Remeasurements, comptising of actuarial gains and losses arising ftom experience adjustments and changes in actuatial assumptions are reflected immediately in the statement of financial position with a charge ot cxedit recognized in other comprehensive income in the period in which they arise. Interest expense is calculated by applying the discount sate at the beginning of the period, taking account of any changes in the net defined benefit liability during the period as a sesult of benefit payments. Interest expense is reported under the Operating costs account in the statement of comprehensive income. Past-service costs are recognized immediately in ptofit or loss in the period of a plan amendment of curtailment.-B- (Q — Pastemployment Defined Contribution Plans ‘A defined contribution plan is a post-employment plan under which the Foundation pays fixed contributions into an independent entity (such as the Social Security Systern). The Foundation has no legal or constructive obligations to pay farther contributions after payment of the fixed contribution. The contributions recognized in respect of defined contribution plans are expensed as they fall due. Liabilitics or assets may be recognized if underpayment or prepayment has occurred and are normally of a short-term nature. (4) Termination Benefits ‘Termination benefits are payable when employment is terminated by the Foundation before the normal retirement date, ot whenevet an employee accepts voluntary redundancy in exchange for these benefits. ‘The Foundation recognizes termination benefits at the earlier of when it can no longer withdraw the offer of such benefits and when it recognizes costs for a restructuring that is within the scope of PAS 37 and involves the payment of termination benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of each reporting period are discounted to their present value. Compensated Absences ‘Compensated absences ate recognized for the number of paid leave days (including holiday entitlement) remaining at the end of the reporting period. ‘They ate included in Other Liabilities account in the statement of financial position at the undiscounted amount that the Foundation expeets to pay as a result of the unused entitlement. 21 Fund Balance Capital contribution represent the initial contribution received by the Foundation at the start of its operations. General funds represent all current and prior period results of operations as reported in the profit or loss section of the statement of compschensive income. Consistent with the Foundation’s registered activites, all of these are flowed back into its operations. Remeasurement of post-employment defined benefit plan pertains to the net cumulative actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions used in the detcrmination of the post-employment defined benefit obligation. 212 Related Party Transactions and Relationships ‘Related party transactions are transfers of resources, services or obligations between the ‘Foundation and its zelated parties, regardless whether a price is charged.3. -H4- Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions, ‘These parties include: (a) individuals owning, directly or indirectly through one or more intermediaries, control or are controlled by, or under common control with the Foundation; (b) associates; and, (c) individuals owning, directly or indirectly, an interest in the voting power of the Foundation that gives them significant influence over the Foundation and close members of the family of any such individual, In considering each possible related party relationship, attention is directed to the substance of the relationship and not merely on the legal form. 2.13 Events after the End of the Reporting Period Any post year-end event that provides additional information about the Foundation’s statement of financial position at the end of the reporting period (adjusting event) is reflected in the financial statements. Post year-end events that are not adjusting events, if any, are disclosed when material to the financial statements. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES ‘The preparation of the Foundation’s financial statements in accordance with PFRS requires management to make judgments and estimates that affect the 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 Foundation’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 estimates: (@) Determination of ECL on Financial Assets at Amortized Cost ‘The Foundation uses a provision matrix to calculate ECL for its financial assets at amortized cost. The provision rates are based on days past due for groupings of various customer segments to the extent applicable that have similar loss patterns G.e., by geography, product type, or customer type and rating). The provision ‘matrix is based on the Foundation’s historical observed default rates. The Foundation’s management intends to regularly calibrate (.e., on an annual basis) the ‘matrix to consider the historical credit loss experience with forward-looking, information (ce., forecast economic conditions) Details about the ECL on the Foundation’s financial assets at amortized cost are disclosed in Notes 4.1.® 0 @ <5 Evaluation of Business Model Applied in Managing Financial Instruments ‘The Foundation developed a business model which reflects how it manages its portfolio of financial instruments. ‘The Foundation’s business model need not be assessed at entity level or as a whole but shall be applied at the level of a portfolio of financial instruments (ie., group of financial instruments that are managed ‘together by the Foundation) and not on an instrument-by-instrument basis Ge,, not based on intention or specific characteristics of individual financial instrament). In determining the classification of a financial instrument, the Foundation evaluates in which business model a financial instrament ot a portfolio of financial instruments belong to taking into consideration the objectives of each business ‘model established by the Foundation (e.g., generating accrual income, direct matching to a specific liability) as those relate to the Foundation’s trading strategies. Testing the Cash Flow Characteristics of Financial Assets and Continuing Ealuaton of the Business Model In determining the classification of financial assets, the Foundation assesses whether the contractual terms of the financial assets give rise on specified dates to cash flows that are SPPI on the principal outstanding, with interest representing, time value of money and credit risk associated with the principal amount outstanding. The assessment as to whether the cash flows meet the test is made in the currency in which the financial asset is denominated. Any other contractual term that changes the timing or amount of cash flows (unless itis a variable interest rate that represents time value of money and credit risk) does not meet the amortized cost criteria. In cases where the relationship between the passage of time and the interest rate of the financial instrument may be imperfect, known as ‘modified time value of money, the Foundation assesses the modified time value of ‘money feature to determine whether the financial instrument still meets the SPPI criterion. The objective of the assessment is to determine how different the undiscounted contractual cash flows could be from the undiscounted cash flows that would arise if the time value of money element was not modified (the benchmark cash flows). If the resulting difference is significant, the SPPI criterion is not met. In view of this, the Foundation considers the effect of the ‘modified time value of money element in each reporting period and cumulatively ‘over the life of the financial instrument. If more than an infrequent sale is made out of a portfolio of financial assets carried at amortized cost, an entity should assess whether and how such sales are consistent with the objective of collecting contractual cash flows. Recognition of Provisions and Contingencies Judgment is exercised by management to distinguish between provisions and ‘contingencies, Policies on recognition of provisions and contingencies are discussed in Note 2.7 and relevant disclosures are presented in Note 18.-16- 32 Key Soutces of Estimation Uncertainty The following are the key assumptions conceming the fature, and other key sources of estimation uncertainty at the end of the reporting periods, that havc a significant tisk of ‘causing a material adjustment to the carrying amounts of assets and liabilities within the next reporting petiod: (2) Estimation of Allowance for ECL ‘The measurement of the allowance for ECL on financial assets at amortized cost is ‘an area that requires the use of significant assumptions about the future economic conditions and credit behavior (eg, likelihood of members and other counterparties defaulting and the resulting losses). Explanation of the inputs, assumptions and estimation used in measuring ECL is furthet detailed io Note 4.1. The methodology and assumptions used in estimating ECL allowance are reviewed segulatly by the Foundation to reduce any differences between loss estimates and actual loss expetience. ‘The carrying value of loans and other receivables and rental deposits and the analysis of allowance for impairment on such financial assets are shown in ‘Notes 4.1 and 7, respectively. (0) Estimation of Used Lives of Property and Eqnipment ‘The Foundation estimates the useful lives of propetty and equipment based on the period over which the assets ate expected to be available for use, The estimated ‘useful lives of property and equipment are reviewed periodically and arc updated if expectations differ from previous estimates due to physical weat and teat, technical or commercial obsolescence and legal or other limits on the use of the assets. ‘The carrying amounts of property and equipment ate analyzed in Note 8. Based on sment's assessment as of December 31, 2022 and 2021, there is no change in estimated useful lives of property and equipment during those years. Actual results, however, may vary due to changes in estimates brought about by changes in factors mentioned above. (Determination of Impairment of Non-Financial Assets In assessing impairment, management estimates the recoverable amount of each asset o a cash-gencrating unit based on expected future cash flows and uses an, interest rate to calculate the present value of thove cash flows. Estimation uncertainty relates to assumptions about future operating results and the determination of a suitable discount rate. ‘Though management believes that the assumptions used in the estimation of fair values reflected in the financial statements are appropriate and reasonable, significant changes in these assumptions may materially affect the assessment of recoverable values and any resulting impairment loss could have a material adverse effect on the results of operations. ‘Management has assessed that there are no indications of impairment on the ‘Foundation’s property and equipment and other non-financial assets at the end of each repotting period; hence, no impairment losses are required to be recognized ‘on those assets in any of the seporting periods.4. -17- (4) Valuation of Post-employment Defined Benefit Obligation ‘The determination of the Foundation’s obligation and cost of post-employment defined benefit is dependent on the selection of certain assumptions used by an independent actuary in calculating such amounts. Those assumptions include, ‘among others, discount rates and salary rate increase. A significant change in any of these actuarial assumptions may generally affect the recognized expense, other comprehensive income or losses and the carrying amount of the post-employment benefit obligation in the next reporting period ‘The amounts of post-employment benefit obligation and expense and an analysis of the movements in the estimated present value of post-employment benefit obligation, as well as the analysis of the sensitivity of such obligation to the changes in significant assumptions are presented in Note 14.2 RISK MANAGEMENT OBJECTIVES AND POLICIES ‘The Foundation is exposed to certain financial tisks in relation to financial instruments. ‘The Foundation’s financial assets and liabilities by category are summarized in Note 5. The main types of risks are credit risk, interest risk and liquidity risk. ‘The Foundation’s risk management is coordinated with its BOT and focuses on actively securing the Foundation’s short-to-medium term cash flows by minimizing the exposure to financial markets. ‘The Foundation does not engage in the trading of financial assets for speculative purposes, nor does it write options. ‘The most significant financial risks to which the Foundation is exposed to are described below and in the succeeding pages. 41° Credit Risk Credit risk is the risk that a counterparty may fail to discharge an obligation to the Foundation. The Foundation is exposed to this sisk for financial instruments arising from granting loans and advances to its members and its employees, rental deposit to lessors and placing deposits to various local banks. ‘The Foundation continuously monitors default of its members and other counterparties, identified either individually or by group, and incorporates the information into its credit risk controls. The Foundation’s policy is to deal only with creditworthy counterparties. ‘The maximum credit risk exposure of financial assets is the carrying amount of the financial assets as shown in the statements of financial position or in the detailed analysis, provided in the notes to the financial statements, as summarized in the succeeding page.-18- Notes ___2022 _ ___2021_ Cash. 6 PB 4,313,114,731 P 2,608,461,569 Loans receivable — net 7 35,516,960,258 26,303,712,531 Other receivables 7 27,873,135 22,316,608 Rental deposit 18.1 49,088,826 44,804,492 P32,906.736.950 P28,979,295,200 None of the Foundation’s financial assets are secured by collateral or other credit enhancements, except for cash as described below. (@) Cab ‘The credit risk for cash is considered negligible, since the counterparties are reputable banks with high quality external credit ratings. Cash in banks are insured by the Philippine Deposit Insurance Corporation up to a maximum coverage of P500,000 for every depositor per banking institution, (@) Loans and Other Recinables ‘The Foundation’s policy is to perform an assessment at the end of each reporting period, whether a financial instrument's credit risk has increased significantly since initial recognition. The Foundation considers the change in the risk of default occurring over the remaining life of the financial instrument. ‘The Foundation applies simplified approach in measuring ECL which uses lifetime expected loss allowance for all loans receivable. ‘To measure the ECL, loans receivable has been grouped based on shared credit risk characteristics and the days past due (age buckets). The Foundation also concluded that the expected loss rates for loans receivables are a reasonable approximation of the loss rates for the other receivables as it shares the same credit risk characteristics. ‘The expected loss rates are based on the payment and aging profiles over a period of 60 months before December 31, 2022 and 2021, respectively, and the corresponding historical credit losses experienced within such period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors, such as gross domestic product, inflation rate, unemployment rate and consumer price index, which affects the ability of the customers to settle the receivables. ‘On that basis, the loss allowance as of December 31, 2022 and 2021 was determined based on months past due, as follows for loans receivables: Caan ord Smet soi ttn “don” _tt__ Gowcnyoginoe PF serenaous Pp "Bshaigos PF "hOwaTI sana F Manan se oe tlowtce Speman" acos " — naseaz0 sarias ” "Tenants epee 7m. 109.094 once Ghamagunoun PF PSISA7AM “oats 9 “anmesa » ana sree Pretnny aT g18908 mena mazesd " “Zioxer7935‘The ECL on other receivables mainly pertain to personal loans and advances granted to the Foundation’s employees which are collected through salary deduction. Thus, considered to be fully recoverable based on the management's assessment (see Note 7.2) The reconciliation of allowance for impairment on loans receivable at the beginning and end of 2022 and 2021 is presented in Note 7. Refundable deposit With respect to security deposit, management assessed that this financial asset has low probability of default since these relate to reputable counterparties. Moreover, this security deposit can be refunded by the end of the lease term. 42 Interest Rate Risk ‘The Foundation’s policy is to minimize interest rate cash flow risk exposures on long-term financing. As of December 31, 2022 and 2021, the Foundation is exposed to changes in market interest rates through its cash in banks, which are subject to variable interest rates (see Note 6). Loans payable, on the other hand have fixed rates. All other financial instruments have fixed rates. ‘The table below illustrates the sensitivity of the Foundation’s excess of revenues over expenses and fund balance to a reasonably possible change in interest rates of +/- 1.75% and +/- 1.54% for Philippine peso in 2022 and 2021, respectively. These changes are considered to be reasonably possible based on observation of current market conditions. ‘The calculations are based on a change in the average market interest rate for each period, and the financial instruments held at the end of each reporting period that are sensitive to changes in interest rates. All other variables are held constant. a ee +m ms i aa [Excess of revenues over expenses _—_(P75,615,524) P75,615,54 (P 4.018351) P 4018331 apd balance (56,714,643) 56,714,643 (313,748) 3013,748 43° Liquidity Risk ‘The Foundation manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term financial liabilities as well as cash outflows due in a day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on the basis of a rolling 30-day projection. Long-term liquidity needs for a six-month and one-year period are identified monthly. ‘The Foundation maintains cash to meet its liquidity requirements for up to 30-day periods. Funding for long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to consistently maintain an effective collection turn-over.