PROPOSED FINANCIAL

REPORTING STANDARDS FOR

COOPERATIVES

RATIONALE
SOLICIT FROM PRACTIONERS

COMMENTS AND
RECOMMENDATIONS TO GUIDE THE
REGULATORY AGENCY IN THE
FORMULATION OF REGULATIONS TO
GOVERN THE APPLICATION OF PFRS
TO COOPERATIVE ENTITIES

BACKGROUND
ARTICLE 81 OF R.A. 6938 REQUIRED
ALL COOPERATIVES BE SUBJECT TO
AN ANNUAL AUDIT BY AN
INDEPENDENT AUDITOR
CERTIFIED PUBLIC ACCOUNTANTS
ARE REQUIRED TO CONDUCT AUDIT
USING STANDARDS REQUIRED BY
THE PROFESSION

STANDARDS TAKE INTO

CONSIDERATION LAWS OR
REGULATIONS THAT MAY MODIFY
SOME ASPECTS OF THE AUDIT, SUCH
AS WHAT FINANCIAL REPORTING
FRAMEWORK SHOULD BE USED AS A
BASIS FOR CONDUCTING AN AUDIT

IN THE ABSENCE OF SPECIFIC LAWS OR

REGULATION, AN AUDITOR WILL FOLLOW
PHILIPPINE FINANCIAL REPORTING
STANDARDS (PFRS), AS CALLED FOR BY
THE PROFESSION
SPECIAL FACTORS PREVAIL AND
TRANSACTIONS ARE UNDERTAKEN IN THE
COOPERATIVE SECTOR WHICH CANNOT
BE ACCOUNTED FOR NOR PRESENTED
SATISFACTORILY WITHIN THE STRUCTURE
OF PFRS

NEED
WITHOUT CLEAR REGULATION
FROM VARIOUS GOVERNMENT
AGENCIES RESPONSIBLE FOR
REGULATING DIFFERENT
REPORTING ENTITIES, THE AUDITOR
HAS NO CHOICE BUT TO ISSUE AN
OPINION ON THE FAIRNESS OF
PRESENTATION IN ACCORDANCE
WITH PFRS

BSP AND SEC HAVE ISSUED REGULATION

REGARDING THE APPLICABILITY OF PFRS
AND JUSTIFIED EXCEPTIONS FROM PFRS
FOR ENTITIES UNDER THEIR
JURISDICTION
A SIMILAR, UNEQUIVOCAL REGULATION IS
NEEDED FROM THE CDA, OTHERWISE, THE
OPINION ISSUED ON FINANCIAL
STATEMENTS OF COOPERATIVES WOULD
BE QUALIFIED, AT BEST

INITIATIVES UNDERTAKEN
DEVELOPMENT OF STANDARD
CHART OF ACCOUNTS FOR ALL
TYPES OF COOPERATIVES
COORDINATION WITH THE PICPA
NATIONAL COOPERATIVE
DEVELOPMENT COMMITTEE FOR THE
CONDUCT OF VARIOUS
CONSULTATIVE CONFERENCES

ISSUES
NATURE OF COOPERATIVES AS
BUSINESS ENTITY
? HAVE PUBLIC ACCOUNTABILITY

? SMALL AND MEDIUM ENTERPRISE

POSSIBLE AREAS OF
CONSIDERATION
FIDUCIARY INTEREST (IN THE CASE
OF CREDIT COOPERATIVES)
NUMBER OF MEMBERS
AMOUNT OF CAPITAL
AMOUNT OF ASSETS
EXTERNAL USERS OF FINANCIAL
REPORTS

AS DEFINED:
AN ENTITY HAS PUBLIC

ACCOUNTABILITY WHEN:
- IT HAS ISSUED DEBT OR EQUITY
SECURITIES IN A PUBLIC MARKET;
OR
- IT HOLDS ASSETS IN A FIDUCIARY
CAPACITY FOR A BROAD GROUP OF
OUTSIDERS (e.g. banks, insurance
companies, brokers/dealers, mutual
fund)

- IT FILES OR IS IN THE PROCESS OF

FILING ITS FINANCIAL STATEMENTS
WITH A SECURITIES COMMISSION OR
OTHER REGULATORY
ORGANIZATION FOR THE PURPOSE
OF ISSUING ANY CLASS OF
INSTRUMENTS IN A PUBLIC MARKET

 AN SME IS DEFINED AS AN ENTITY

THAT:
- DOES NOT HAVE PUBLIC
ACCOUNTABILITY
- PUBLISHES GENERAL PURPOSE
FINANCIAL STATEMENTS FOR
EXTERNAL USERS

 EXTERNAL USERS

> OWNERS WHO ARE NOT INVOLVED IN

MANAGING THE BUSINESS
> EXISTING AND POTENTIAL
CREDITORS
> CREDIT RATING AGENCIES

SIMPLICITY IN SME
REMOVES CHOICES FOR
ACCOUNTING TREATMENT
SIMPLIFIES METHODS FOR
RECOGNITION AND MEASUREMENT

However
COOPERATIVES DEALS AND
INTERACTS WITH OTHER
STAKEHOLDERS WHICH MAY
REQUIRE FULL COMPLIANCE WITH
PFRS

RECOMMENDATION
IT IS THE COOPERATIVE
DEVELOPMENT AUTHORITY CALL TO
ISSUE A BENCHMARK AS TO THOSE
COOPERATIVES WHICH WILL FALL
UNDER SME

PFRS COMPLIANCE FOR

COOPERATIVES

ISSUES
ACCOUNTS PECULIAR TO
COOPERATIVES WITHOUT
APPLICABLE PFRS
* COOPERATIVE DEVELOPMENT
COST
* STATUTORY FUNDS
* INTEREST ON SHARE CAPITAL
* PATRONAGE REFUND
* OTHER FUNDS AND DEPOSIT
* MEMBERS BENEFIT AND OTHER FUND
PAYABLE

DEFERMENT OF PFRS FOR

COOPERATIVES FALLING UNDER
SMEs
PAS 39 LOANS RECEIVABLE (use
of effective interest rate)
PAS 41 AGRICULTURE (fair value
gains)

DEVIATIONS FROM PFRS DUE TO

INDUSTRY PRACTICES
PAS 18 REVENUE (use of modified
accrual)
PAS 20 - DONATION (as capital)
PAS 16 - PROPERTY, PLANT AND
EQUIPMENT (at cost)
PAS 40 - INVESTMENT PROPERTY
PAS 39 - LOAN RECEIVABLE LOAN
LOSS PROVISIONING

ISSUANCE OF CLARIFICATORY
STATEMENT ON:
IFRIC 2 - SHARE CAPITAL AS
EQUITY
CLASSIFICATION OF DEPOSIT ON
SHARE CAPITAL ACCOUT AS EQUITY

SPECIAL DISCLOSURE
REQUIREMENTS
PAS 12 - INCOME TAXES (basis of
exemption citing)
PFRS 8 - SEGMENT REPORTING
(separate books for each
line of business)
PAS 39 LOANS RECEIVABLE
(details of loans, aging
using PAR, etc)

COMPOSITION OF:
1. CASH AND CASH EQUIVALENTS
2. OTHER FUNDS AND DEPOSITS
3. DEPOSIT LIABILITY ACCOUNTS
4. MEMBERSBENEFIT AND OTHER
FUNDS PAYABLE
5. RISK MANAGEMENT POLICY
6. FOR THOSE WITH CREDIT ACTIVITY,
ASSESSMENT OF OPERATING
PERFORMANCE USING COOP-PESOS

WHAT IS NEXT?
FOR CDA:

* To review and update existing circulars to

comply with PFRS
* To align account definition in the SCAs
with PFRS
* To issue circulars on reporting standards
for special factors and transaction
undertaken by cooperatives which are not
covered by PFRS

THANK YOU