CONTENTS 33 PEOPLE BEHIND CARD, Inc. ACCOMPLISHMENTS 28 26 24 20 18 16 12 10 08 06 05 04 30 BOARD COMMITTEE INSTITUTIONAL PARTNERSHIP AREAS OFCOVERAGE BOARD OFTRUSTEES MANAGEMENT COMMITTEE 2020 INNUMBERS THIS ISOUR2020 EXECUTIVE DIRECTOR'S REPORT CENTER STORY UGNAYAN AT KWENTUHAN MESSAGE FROMCHAIRPERSON THE VISION ANDMISSION ABOUT THECOVER AUDITED FINANCIALSTATEMENTS ABOUTABOUT THE THE COVER COVER Our cover embraces the technology- VISION driven initiatives of CARD MRI and addresses the challenges of the CARD, Inc. (A Microfinance NGO) is a pandemic by utilizing key digital strategies to banking in the comforts world-class leader in microfinance and of one’s home. community-based social development undertakings that improves the quality The cover features Lorna Atienza, 62 years old, a former president of CARD of life of socially-and-economically MBA, as she holds one of the most challenged women and families towards important tools the CARD banking nation building. group has devised for a hassle- free mobile banking experience, konek2CARD. The cover entails that there is no limitation as to who uses the mobile banking application, which can be integrated to the lives of the For the last 35 years, CARD MRI clients we serve for easier, faster, has been supporting marginalized and more efficient transactions. Be women and their families through they young or old, anyone can freely microfinance services and social use konek2CARD as the application development initiatives. As a new fulfills the goal of CARD MRI to era approaches and a New Normal financially include those in the hem mission begins, we continue our mission to of the society. Meanwhile, the icons eradicate poverty armed with optimal that emanate from the mobile device CARD, Inc. (A Microfinance NGO) is committed to: resources that will help us achieve our symbolize the digital communities • ultimate goal. This 2020, we chose that we have built to bridge the gaps • Empower socially-and-economically challenged a new path paved with innovations in communication and encourage a women and families through continuous access to that had proven to be effective in our collaborative approach between the financial, microinsurance, educational, livelihood, journey to digitalization. mutually reinforcing institutions. health and other capacity-building services that eventually transform them into responsible citizens for their community and the environment; • Enable the women members to gain control and ownership of financial and social development institutions; and • Partner with appropriate agencies, private institutions, and people and community organizations to facilitate achievement of mutual LORNA aTIENZA goals. Client
4 CARD, Inc. Annual Report 2020 Vision and Mission 5 I am very thankful that we were institution, CARD, Inc. witnessed OVERCOMING HARDSHIPS still able to continue our work firsthand CARD MRI’s core values Message from the Chairperson throughout the year. Despite not in full display during this period. meeting the initial targets we set From the founding chairman to for 2020, I am still very proud to our staff, all exhibited the essential clients and communities, who know that our operations and virtues we hold dearly in their were undoubtedly more affected outreach were not severely tasks and responsibilities. Guided by the pandemic. Many of them hindered during this period. by these core values, CARD, lost their sources of income - Careful adjustments allowed Inc. shall remain resolute in our their jobs, businesses, and other us to work within the standard mission of social development opportunities – and so it was truly minimum health protocols, and and poverty eradication. We such an uncertain time. We at digital initiatives that were quickly will continue to do our part in CARD, Inc. recognized this and integrated to our operations made providing our microfinance and quickly organized ourselves in our tasks more efficient, so we development services to more order for us to adapt and continue could accommodate and help underserved Filipino families to serve our clients as soon as more clients. This pandemic during these times of hardship, possible. certainly gave CARD, Inc. a clear and we will make sure that once reminder how advantageous we overcome this pandemic, we Since day one of the pandemic, digital solutions are in our line of will be there for them ready with a Dr. dolores m. torres CARD, Inc. together with our work, and we in turn will make helping hand. founding chairman - Dr. Jaime sure that our push towards digital Chairman Aristotle B. Alip, and my fellow transformation will accelerate senior advisers, had kept even further. Of course, all of ourselves abreast of the situation this was achieved thanks to the vividly remember when the before us and conducted daily awe-inspiring dedication of our lockdown was announced in meetings where we could staff throughout the country who March 2020. All of us at the carefully plan approaches that chose to continue to serve the Center for Agriculture and Rural we could hastily take even when families and communities they Development (CARD), Inc. restrictions were in place. With are acquainted with. I am forever I the help of the Microfinance grateful to their commitment to (A Microfinance NGO) [CARD, Council of the Philippines and our CARD MRI’s collective mission of Inc. for brevity] were caught off- Guided by these guard by the pandemic, some of fellow microfinance institutions uplifting the lives of our Nanays core values, CARD, us even wondered if any worst- (MFIs) we were able to lobby and and their families, and towards Inc. shall remain case scenarios could happen in be allowed to resume operations our eventual goal of eradicating resolute in our the following days. The biggest as part of the essential services poverty in the Philippines. mission of social challenge CARD, Inc. faced sector by May. This was a development during this time was the pause major obstacle CARD, Inc. had We at CARD, Inc. gained a lot and poverty of our operations for over two overcome, and we have already of valuable insights during this eradication. months throughout the strict devised strategies that would allow pandemic. Rest assured that we lockdown. At that time, we were us to safely operate and provide will apply what we have learned worried not only for our institution our services to immediately adapt this 2020 in all of our strategies but most importantly for our to the situation. for the succeeding years. As an
6 CARD, Inc. Annual Report 2020 Message from the Chairperson 7 Ugnayan at Kwentuhan Dr. Dolores M. Torres MRI’s dedication to its core achieve their dreams and to ignite Senior Management Adviser mission of eradicating poverty in the fire that is already burning in the Philippines. them.
Finally, to boost the morale of One important thing we learned hen the COVID-19 with our members strengthened. both our staff and clients, we took from the year that passed is pandemic hit the Through Ugnayan at Kwentuhan, the opportunity to gather them that stories and conversations, Philippines, it was quite we kept our connection with our in a series of four online training however intangible they may an unforeseen force clients strong through having sessions that let us reminisce the seem, are an important foundation to be reckoned with. It phone conversations with our history of CARD MRI together with in our relationship with our clients. W our members’ and staff’s journey By 2021, we hope to gather more shut down industries and put management and staff. This way, everything on halt. For CARD we reassured our clients that with the mutually reinforcing stories of hope from our clients MRI, this meant we had to take the pillars of CARD MRI remain institutions. As the Enhanced and staff as we continue our a short pause to regroup and re- indestructible. We constantly Community Quarantine lifted, journey towards recovery. strategize. We decided that above assure them that we will continue our members and staff gathered all else, our staff and clients health helping them through our just like they do during a Center Meeting, followed the minimum and safety is our top priority. programs. We let the warmth that emanates from our presence health standards, and listened to However, the fire that is ablaze our Institutional Heads as they in our hearts as we work to give blanket them through wary days and sleepless nights. recount the story of how CARD our clients a better way of life will came to be. never be extinguished. Whatever plight comes our way, even as Because CARD MRI’s strength is in the lives we have changed, During the online training dire as the COVID-19 pandemic, session, which was attended by The stories and our stories shall continue to we have also come up with a way to encourage our members approximately 500 participants conversations, prosper and be a source of hope per session, we have shared to anyone who hears it. This is amid these challenging times however intangible by sharings with them stories of both laughter and tears because where Ugnayan at Kwentuhan of the stories we have heard and they may seem, comes to life. hope these challenging times by are an important sharing with them stories of hope imparted to the community we have built. We are also grateful foundation in our Ugnayan at Kwentuhan is a through Ang Kwento ng Center Ko, which chronicles the lives of our for our institutional heads for relationship with project that bridged the distance their consistent support of the we had with our members during nanays, as we and their centers. our clients. We have heard stories from 142 community through Ugnayan at the pandemic. It allowed us to stay Kwentuhan 2020. We remain connected with them by means Centers from Luzon, Visayas, and Mindanao whose lives changed forward-looking as CARD of constant communication. It is supports its members and staff to where our ugnayan or relationship for the better because of CARD
8 CARD, Inc. Annual Report 2020 Ugnayan at Kwentuhan 9 The Future is Clear in also finished his studies. These stories of Malinawon 2 are living proof that CARD, Malinawon 2 Josefa, Jona, and Edelna are Inc. will continue to serve some of the different faces the underserved population of the women of Malinawon because they deserve more. 2 who have the same stories One thing is certain, CARD, all of them and their families of hope and perseverance. Inc. was with them yesterday, are secured with insurance They proved that anything is is with them today, and will be policies. They are also getting possible as long as they put with them tomorrow, for the more loans to continuously their heart into it. They are future is clear with CARD, Inc. It was September 16, 2009 invest in their small businesses very thankful that CARD, Inc. when Malinawon 2 Center for it to better progress and is on their side especially in was officially established prosper. planning the future of their in Lupon, Davao Oriental. family through education. Center Chief Josefa Ofre has Just like Josefa, Juvy Villarino beenwith CARD, Inc. for 11 was also able to send her On the other hand, Nanay years now and through her and daughter to school and finish her Elizabeth Basa’s story might her co-members' hard work degree in Bachelor of Science be a bit different, but true hope and perseverance, she was in Electrical Engineering while would rise from the ashes of able to open the Malinawon 2 managing to expand her small her and her family’s downfall. Center. When this happened, fruit stand business. They were caught off guard in everything changed for the a devastating situation when better. The same went for Jona her husband passed away. Gonzales and Edelna Tahop. The pain was unbearable, but Josefa and the whole Jona is a proud seamstress CARD, Inc. was there to be Malinawon 2 could never thank and CARD, Inc. member. She with them. She was grateful CARD, Inc. and the whole shared that CARD, Inc. assisted to the institution, because she CARD MRI community enough her and her family along the way and her family are secured by for everything they did and are until her daughter finished her being members of CARD, Inc. continuously doing for them. degree on Bachelor of Science For her, their claim could not Through CARD, Inc.’s products in Elementary Education. bring her husband’s life back, and services, they were able Edelna, on one hand, is also but it surely helped them get to send their children to school very grateful to CARD, Inc. for by for their future. and eventually finish their she can provide tuition fee and studies. All of them are also now allowances to her son who has informed on the importance of insurance and made sure that
10 CARD, Inc. Annual Report 2020 Center Story 11 and uplift the underserved – adjustments, CARD, Inc.’s TECHNOLOGY- especially during these uncertain modified and improved times - became the fuel in our operations allowed us to continue EMPOWERED EXPANSION campaign to expand the reach implementing our various IN FACING THE NEW of our services throughout the programs and services for our Philippines. clients and communities. NORMAL Executive Director’s Report For the year 2020, CARD, Inc. was Through our Quick SME Loan able to establish a total of 36 new (QSL) and Special Agri Loan for us to continue supporting units in different areas, with eight Program, a total 2,393 clients our clients and communities, units in Luzon, 10 units in Visayas, from 19 selected CARD, Inc. particularly now during these and 18 units in Mindanao. A total units have also been assisted. precarious times. of 1,235 units are now present Under these programs, a total across the different provinces loan portfolio amounting to In spite of the formidable and municipalities in the country. PhP124,670,250 and capital build- circumstances, CARD, Inc. is CARD, Inc. also made sure that up amounting to PhP24,081,482 proud to report that we were able those units that are ready to were accumulated. Aside from to serve almost 2 Million active be transitioned to our banking this, we have also expanded clients this year, with more than institutions were not hindered. This our Development Services for jocelyn d. dequito 1.29 Million of them having active year, 33 CARD, Inc. units were Hardcore Poor (DSHP) program, Executive Director loans. Additionally, we were able successfully transitioned to CARD with a total of 423,852 clients to disburse loans amounting to Bank, CARD MRI Rizal Bank, served with a percentage rating of PhP18,828,288,763 and have and CARD SME Bank. Likewise, 21.64% from the total of our clients. loans outstanding amounting we also remained focused on CARD, Inc. also made sure to y now, we all know how to PhP8,801,876,101. Although establishing our presence in maintain the implementation of our the year 2020 presented a these numbers did not meet our far flung communities in island CARD Sulit Padala Remittance daunting challenge not only initial targets, we are still contented municipalities and barangays. A Services in selected areas of to the Center for Agriculture to see that our operations and cumulative total of 145 units are coverage so that our clients can Band Rural Development services were not drastically continuously serving in islands send and receive remittances (CARD), Inc. (A Microfinance affected by the situation we are and distant areas of Mindoro, with ease. This year, a total NGO) [CARD, Inc. for brevity], all facing right now. Bearing this in Polillo, Catanduanes, Palawan, of 195 remittance outlets were but to all of us in the Philippines mind, we will use this outcome as Romblon, Batanes, Leyte, Samar, established, with 8,613 number because of the COVID-19 a lesson for us to learn from for our Cebu, Bohol, Capiz, Tawi-Tawi, of pay in and pay out remittance pandemic. Nonetheless, we succeeding plans and strategies Iloilo, Panay and Masbate. These transactions amounting to at CARD, Inc. are still thankful, while we operate throughout this units have assisted a total of PhP101,275,254 Furthermore, despite the lockdown which stalled pandemic. 165,378 families and have a loan the rollout implementation of our our work for nearly two and a half portfolio of PhP781,527,428. Paglambo Project – a Shari’a- months, because our operations An Unceasing Growth inspired Financial Assistance and strategies were able to adapt Our burning dedication to serve An Unwavering Commitment Program – continued to operate in and adjust accordingly in order With careful planning and 33 units in the provinces of Basilan,
12 CARD, Inc. Annual Report 2020 Executive Director’s Report 13 Sulu, Tawi-Tawi, Maguindanao, internet. with this, the implementation of the Braving the New Status Quo Cotabato, Lanao Del Sur, and ADCs in these pilot sites allowed us In line with CARD MRI’s Zamboanga Del Sur. So far, the During this time, CARD, Inc. to collect a total of PhP10,564,714 push towards our new 10-20- project has a total of 25,640 also focused on digital initiatives from 26,993 clients during the 80 strategic direction, we at clients with loan outstanding that would allow us to continue period. The implementation of CARD, Inc. aim to do our part in amounting to PhP99,001,355.00 our operations as smooth and CMFS throughout our area offices contributing to this grand objective. and capital build-up amounting to efficient as possible. One of our will be a massive boon to our field First and foremost, we aim to reach PhP44,475,084.00 major accomplishments this year operations, and thus this particular out and uplift more underserved was the pilot implementation of initiative will continue to be a part households and communities still With Intrepid Innovation our Core Microfinance System of our major projects until its in need of basic microfinance and Our time during the early days of (CMFS) in two units in our Laguna eventual completion. Meanwhile, community development services. the pandemic, especially when 2 area. Through the CMFS, our the pilot implementation of our Our expansion throughout the travel and contact restrictions field staff will be able to do their Chatbot for loan applications Philippines also remains a major were heavily implemented operations and tasks through also continued this year, with a priority, and we hope by this throughout country, encouraged digitally-augmented means, as total of 136 loan applications with time we will able to continue us to prioritize our key services well as integrate Alternative loan amounting to PhP876,000 this despite the lockdowns and and strategize new approaches in Delivery Channels (ADCs) such has been approved and released restrictions still in place. We also order for us to reactively adapt to as Mobile Collection, Client On- through the chatbot platform. For aim to recuperate any losses the situation presented before us, boarding and Loan Origination this year, CARD, Inc. also rolled we incurred, and become a and address the immediate needs System in their services. In line out our Computerized Accounting financially self-sufficient institution. of our clients and staff across the System in a total of 211 areas Lastly, the importance of digital country. The first initiative we took including our Head Office. This transformation was surely was the provision of a calamity system, which is connected to our emphasized to us during the loan for our clients. This loan was Loans Monitoring System, was early days of the pandemic, and designed to have a 2-week grace officially approved by the Bureau thus we will strive to hasten and period and low interest, and is of Internal Revenue last November. accomplish this major initiative. intended for our clients who were Moreover, CARD, Inc. has also gravely affected by the pandemic. improved its internet connectivity Being the pioneer among the Another loan we provided was We will continue to be by setting up Peplink SD-Wan institutions of CARD MRI, CARD, our gadget loan which our clients the standard bearer Balance Core One – in 49 units Inc. will continue to be the standard can avail for themselves in order of its trademark offices. This solution combines bearer of its trademark approach for them to engage in online approach to social multiple connections to provide to social development and poverty businesses and transactions or for faster internet connectivity in our eradication. We will do our best, development and their children’s distance learning. area offices that are located in especially now when the Filipino We foresaw that this loan will be poverty eradication. remote islands. In the subsequent people need us the most. United particularly helpful to our clients years, CARD, Inc. will endeavor with the other institutions and our since the current quarantine to further apply digital solutions communities, CARD, Inc. is ready restrictions encouraged most such as these in order for us to to face the new normal, and eager communications and transactions efficiently serve more families to see the day we finally overcome to be done digitally or through the and communities, and do our this pandemic with our heads held part in eradicating poverty in the up high, together. Philippines.
14 CARD, Inc. Annual Report 2020 Executive Director’s Report 15 Note: Some of the photos are taken before the COVID-19 pandemic
16 CARD, Inc. Annual Report 2020 This is our 2020 17 18 CARD, Inc. Annual Report 2020 2020 in Numbers 19 Management Committee JOCELYN D. DEQUITO DR. Roderick G. Belen Executive Director Deputy Director for MaHP vicente P. briones, jr. ATTY. Anatalia F. Buenaventura Deputy Executive Director Director for Corporate Legal
Lyneth L. Derequito Jean Pauline B. Landicho Senior Director for Support Group Director for RM/Partnership/IG
Marilyn M. Manila Maricel L. Lim Director for Center for Creative Ideas Deputy Director for DCC
Glenda h. atabay Billie Jean C. Consignado Senior Operations Director Deputy Director for Audit alvin m. villamena Evelyn Teodora M. Narvaez Senior Operations Director Research Director larry jun b. barcoma lorelie c. alvero Senior Operations Director Senior Program Manager
Samuel p. tumbado FloriFe T. Reynido Operations Director for Risk Operations Director Management David A. Burgos josef m. leron Operations Director Director for Compliance Louie P. Silvestre lousel e. cortes Operations Director Director for Finance and Admin Alexis N. Garcia Marie Sharon D. Roxas Operations Director Director for Treasury
20 CARD, Inc. Annual Report 2020 Management Committee 21 Management Committee
Joevill T. Tardio Jonathan D. Pondevida Judith D. Yeban Operations Director Regional Director Regional Director
Welland D. Sales Gina M. Reyes FreDdie B. Cuevas Operations Director Regional Director Regional Director
Jeffrey R. Rilles Ritchel R. Dacillo Raymond P. Quilit Operations Director Regional Director Regional Director
Alejandro F. Ilagan Jinky F. Mendoza Biegear L. Taguiam Operations Director Regional Director Regional Director
Gilnora A. Bahia Windel B. Dejuras Iranio M. Rivera, Jr. Operations Director Regional Director Regional Director
Luzviminda A. Dalisay Isidro M. Guevarra Judy S. Aban Sr. Regional Director Regional Director Regional Director
Marina A. Sepillo Rannel D. Aranda Mariano B. Blasco Regional Director Regional Director Regional Director
Jowie M. Guevarra Jessica C. Solosa Don-don A. Mercado Regional Director Regional Director Regional Director
Juvy S. Ocate Arlo Von A. Subrean Regional Director Regional Director
Ricky J. Reyes Sandy S. Bulalacao Regional Director Regional Director
22 CARD, Inc. Annual Report 2020 Management Committee 23 board of trustees
Dr. Jaime aristotle b. alip Chairman Emeritus/ Founder
DR. dolores m. torres Chairman
flordeliza l. sarmiento Vice-Chairperson/President
Lorenza dt. bañez maria elena m. ruiz Trustee Trustee/ Corporate Treasurer
Efren c. cosico Elma b. valenzuela Trustee/ Auditor Trustee
atty. arnel paciano casanova jocelyn d. dequito Trustee Trustee/ Corporate Secretary
john sevilla julius adrian r. alip Trustee Trustee
ma. luisa cadaing aristeo a. dequito Trustee Trustee
carmelita c. dapanas epifanio maniebo Trustee/Client Ex-Officio Member
primitiva lina baretto beatriz dela cruz Ex-Officio Member/ Client Ex-Officio Member/ Client
24 CARD, Inc. Annual Report 2020 Board of Trustees 25 HEAD OFFICE San Pablo City, Laguna LUZON REGIONAL OFFICES • Luzon 1 (Ilocos) • Visayas 8a (Negros Occidental) • Luzon 2 (Mountain Province, • Visayas 8b (Negros Occidental) La Union, Benguet) • Visayas 9 (Iloilo, Capiz) • Luzon 3 (Ilocos Sur, Abra) • Visayas 10 (Aklan, Antique) • Luzon 4 (Cagayan, Batanes) • Visayas 11 (Samar, Leyte) • Luzon 5 (Isabela, Ifugao, Quirino) MINDANAO REGIONAL OFFICES • Luzon 6 (Nueva Vizcaya) • Luzon 7 (Pangasinan) • Mindanao 1 (Davao del Sur, Davo • Luzon 8 (Pangasinan/ Tarlac, del Norte, Davao Occidental) Zambales, Bataan) • Mindanao 2 (Davao Oriental, • Luzon 9 (Pampanga, Agusan del Sur) Bulacan) • Mindanao 3 (Agusan del Norte, • Luzon 10 (Camanava, Rizal) Agusan del Sur, Surigao del Sur) • Luzon 11 (NCR) • Mindanao 4 (Agusan del Norte, • Luzon 12 (Cavite, Laguna, Siargao, Dinagat, Surigao del Norte) Batangas) • Mindanao 5 (Agusan del Norte, • Luzon 13 (Quezon) Compostela Valley, Davao del Norte) • Luzon 14 (Camarines Sur, • Mindanao 6 (Sargen, South Camarines Norte, Albay) Cotabato) • Luzon 15 (Catanduanes, • Mindanao 7 (Bukidnon, Davao del Albay, Masbate) Sur) • Luzon 16 (Palawan) • Mindanao 8 (ARMM, Sultan • Luzon 17 (Coron, Cuyo) Kudarat, South Cotabato, Shari'a) • Luzon 18 (Oriental and • Mindanao 9 (Maguindanao, North Occidental Mindoro) Cotabato) • Luzon 19 (Romblon) • Mindanao 10 (Maguindanao, Cotabato) VISAYAS REGIONAL OFFICES • Mindanao 11 (Misamis Oriental, Lanao) • Visayas 1 (Leyte, Biliran) • Mindanao 12 (Lanao del Norte, • Visayas 2 (Samar) Lanao del Sur, Zamboanga del Sur) • Visayas 3 (Eastern Leyte) • Mindanao 13 (Misamis Occidental, • Visayas 4 (Cebu North) Zamboanga del Norte) • Visayas 5 (Cebu South) • Mindanao 14 (Zamboanga • Visayas 6a (Bohol) Sibugay, Zamboanga del Norte, • Visayas 6b (Bohol) Zamboanga del Sur) • Visayas 7 (Negros Oriental, • Mindanao 15 (Basulta) Siquijor)
26 CARD, Inc. Annual Report 2020 Areas of Coverage 27 Institutional Partnership • MCPI AND SEDP- SIMBAG SA • Repetek PAG ASENSO, INC. • RESTART ME, INC/ • METROBANK SOLUTION SPACE PH • 8Layer Technologies, Inc. • Coreware Technologies Inc. • METROPOLITAN BANK & • RIMANSI ORGANIZATION • Aboitiz Foundation Inc. • Culion Foundation TRUST COMPANY FOR ASIA & THE PACIFIC, • Agricultural Credit Policy • Depatment of Trade and • MICROFINANCE COUNCIL INC. Council Industry (DTI) OF THE PHILIPPINES, INC. • RMN Palawan • Anchor • Development Academy of the • MICROVENTURES INC./ • SAIDI • ARDCI NGO GROUP, INC. Philippines HAPINOY • SAN JULIAN MULTI- • ASA PHILIPPINES • District Supervisor/ DepEd • NANGALISAN MULTI- PURPOSE COOPERATIVE • ASIAN ACTUARIES INC. • Division/ DepEd PURPOSE COOPERATIVE • SIPSIPIN MULTI PURPOSE • Asian Development Bank • DOST Region 4A • NWTF COOPERATIVE • Asian Institute of Management • EastWest • OIKO CREDIT FOUNDATION • Social Security Systam • ASKI • ECPay INC. • STEAG STATE POWER INC. • Automated Technologies Inc. • Edge Davao • PADRE BURGOS MULTI • TARBC • Ayannah • EMMANUEL ALCANTARA & PURPOSE COOPERATIVE • TIMGAS • BAGNOS MULTI-PURPOSE ASSOCIATES LAW OFFICE • PAGINUPDANAY • Total Information Management COOPERATIVE • ERDB • Palawan Pawnshop Corporation • BANGKO KABAYAN INC. • Freelance • PAREF Southridge School • TRAVEL SPECIALIST • Bangko Sentral ng Pilipinas • Giant Technology • PayMaya VENTURES • BDO • GRAINS • Philippine Information Agency- • TSKI • BINHI • Journal Visayas Mimaropa • UCPB • BPI • Jump Solutions, Inc. • PHILIPPINE RED CROSS- • UMARBEMPCO • Bukidnon Integrated Network of • KCCDFI SAN PABLO CHAPTER • UNITED NATION Home Industries (BINHI), Inc. • Keystone Solutions, Inc. • PIA Dumaguete POPULATION FUN United • Cagayan-Kalinga Energy Press • LANDBANK OF THE • PIA -Lucena Nation Population Fund Corps / KBP Cagayan Chapter PHILIPPINES • PNA Calabarzon (UNFPA) • CAUNAYAN MULTI-PURPOSE • LIBERCON MULTI PURPOSE • PNB • UP College of Public Affairs COOPERATIVE COOPERATIVE • PWARC • UPLB • Cebuana Lhuillier • LIFEBANK INC • Radiowealth Finance • USWAG • CMDI Pasay • LIS/ Division DepEd Corporation. • VISION FUND • COMMISION ON HIGHER • LOS ARCOS MULTI- • Radius Telecoms INTERNATIONAL (VFI) EDUCATION IV-A PURPOSE COOPERATIVE • Ramon Magsaysay Award • WS FAMILY FOUNDATION , • COMMUNITY ECONOMIC • M Lhuillier Foundation INC. VENTURE, INC. (CEVI) • MCPI • RBT-MBA • ZAPFAM Inc.
28 CARD, Inc. Annual Report 2020 Institutional Partnership 29 directly to the Audit Committee. Although it is the responsibility of the management to design and implement an effective internal control system, the Audit Committee has the role of overseeing the control procedures. This committee reviews the proposed budget carefully and, in some cases, may make budget suggestions to the staff before the budget is considered by the full board.
CORPORATE GOVERNANCE COMMITTEE Committee Chairperson Atty. Arnel Paciano D. Casonova - Trustee board Committee Members Ma. Luisa P. Cadaing - Trustee committee Flordeliza L. Sarmiento - Trustee Jocelyn D. Dequito - Trustee Lyneth L. Derequito - Trustee AUDIT COMMITTEE Committee Chairperson Efren Cosico - Trustee The Corporate Governance Committee is created to assist the Committee Members Board in fulfilling its corporate governance responsibilities. It shall Ma. Luisa P. Cadaing - Trustee review and evaluate the qualification of all persons nominated to Flordeliza L. Sarmiento - Trustee the Board, as well as those nominated to other positions requiring Jocelyn D. Dequito - Trustee appointment by the Board of Trustees. It advises, reviews, and Lyneth L. Derequito - Trustee approves management strategic plans, decisions, and actions in Billie Jean C. Consignado - Trustee effectively managing the institution.
The Committee also serves the role as Nominating and The Audit Committee is a very important committee as it Assessment Committee to implement and monitor issues empowers the Board to fulfill its risk assessment responsibilities. pertaining to the selection, recommendation to the board, Moreover, this committee provides oversight for safeguarding the nomination, interview, and election activities. As a nominating and institution’s financial resources and is formed to implement and assessment committee, it includes selection and appointment support the oversight function of the Board, specifically in areas of the Executive Director and other key/higher positions in the related to internal controls, risk management, financial reporting, institution. and audit activities. Both internal and external auditors report
30 CARD, Inc. Annual Report 2020 Board Committee 31 FINANCE AND RISK MANAGEMENT COMMITTEE Committee Chairperson Ma. Elena M. Ruiz - Trustee
Committee Members Flordeliza L. Sarmiento - Trustee Jocelyn D. Dequito - Trustee Vicente P. Briones, Jr. - Officer Josef M. Leron - Officer Samuel P. Tumbado - Secretary Primitiva Lina P. Barreto - Client/Adviser
The Finance and Risk Management Committee is responsible for the continuing review of the financial affairs and development and oversight of the organization’s risk management program. It shall oversee the system of limits to discretionary authority that the Board delegates to the management to ensure that the system remains effective, that the limits are observed and that immediate corrective actions are taken whenever limits are reached.
32 CARD, Inc. Annual Report 2020 Audited Financial Statements 33 SyCip Gorres Velayo & Co. Tel: (632) 8891 0307 BOA/PRC Reg. No. 0001, 6760 Ayala Avenue Fax: (632) 8819 0872 October 4, 2018, valid until August 24, 2021 1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-5 (Group A), Philippines November 6, 2018, valid until November 5, 2021
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INDEPENDENT AUDITOR’S REPORT Auditor’s Responsibilities for the Audit of the Financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that The Board of Trustees includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an Center for Agriculture and Rural Development (CARD), Inc. audit conducted in accordance with PSAs will always detect a material misstatement when it exists. (A Microfinance NGO) Misstatements can arise from fraud or error and are considered material if, individually or in the 20 M.L. Quezon Street aggregate, they could reasonably be expected to influence the economic decisions of users taken on the City Subdivision, San Pablo City, Laguna basis of these financial statements.
As part of an audit in accordance with PSAs, we exercise professional judgment and maintain Report on the Audit of the Parent Company Financial Statements professional skepticism throughout the audit. We also:
Opinion Identify and assess the risks of material misstatement of the financial statements, whether due to fraud We have audited the financial statements of Center for Agriculture and Rural Development (CARD), Inc. or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that (A Microfinance NGO) (“the Organization”), which comprise the statements of assets, liabilities and fund is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material balance as at December 31, 2020 and 2019, and the statements of revenue over expenses, statements of misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve comprehensive income, statements of changes in fund balance and statements of cash flows for the years collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. then ended, and notes to the financial statements, including a summary of significant accounting policies. Obtain an understanding of internal control relevant to the audit in order to design audit procedures In our opinion, the accompanying financial statements present fairly, in all material respects, the financial that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the position of the Organization as at December 31, 2020 and 2019, and their financial performance and their effectiveness of the Organization’s internal control. cash flows for the years then ended in accordance with Philippine Financial Reporting Standards (PFRSs). Evaluate the appropriateness of accounting policies used and the reasonableness of accounting Basis for Opinion estimates and related disclosures made by management.
We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Our Conclude on the appropriateness of management’s use of the going concern basis of accounting and, responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit based on the audit evidence obtained, whether a material uncertainty exists related to events or of the Financial statements section of our report. We are independent of the Organization in accordance conditions that may cast significant doubt on the Organization’s ability to continue as a going with the Code of Ethics for Professional Accountants in the Philippines (Code of Ethics) together with the concern. If we conclude that a material uncertainty exists, we are required to draw attention in our ethical requirements that are relevant to our audit of the financial statements in the Philippines, and we auditor’s report to the related disclosures in the financial statements or, if such disclosures are have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a the date of our auditor’s report. However, future events or conditions may cause the Organization to basis for our opinion. cease to continue as a going concern.
Responsibilities of Management and Those Charged with Governance for the Financial statements Evaluate the 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 Management is responsible for the preparation and fair presentation of the financial statements in manner that achieves fair presentation. accordance with PFRSs, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or We communicate with those charged with governance regarding, among other matters, the planned scope error. and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. In preparing the financial statements, management is responsible for assessing the Organization’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Organization or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Organization’s financial reporting process. *SGVFSM007913* *SGVFSM007913*
A member firm of Ernst & Young Global Limited A member firm of Ernst & Young Global Limited
34 CARD, Inc. Annual Report 2020 Audited Financial Statements 35 CENTER FOR AGRICULTURE AND RURAL DEVELOPMENT (CARD), INC. (A Microfinance NGO) STATEMENTS OF ASSETS, LIABILITIES AND FUND BALANCE
- 3 - December 31 Report on the Supplementary Information Required Under Revenue Regulations 15-2010 and 2020 2019 Bangko Sentral ng Pilipinas (BSP) Circular No. 1075 ASSETS Cash and Cash Equivalents (Notes 6 and 27) P=1,402,623,968 P=1,701,907,789 Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken Short-term Investments (Notes 7 and 27) 410,852,742 412,305,035 as a whole. The supplementary information required under Revenue Regulations 15-2010 in Note 32 and Receivables BSP Circular No. 1075 in Note 33 to the financial statements is presented for purposes of filing with the Receivables from members (Note 8) 8,594,065,126 7,998,798,110 Bureau of Internal Revenue and is not a required part of the basic financial statements. Such information Due from affiliates (Notes 9 and 27) 49,402,429 13,244,888 is the responsibility of the management of Center for Agriculture and Rural Development (CARD), Inc Other receivables (Note 10) 289,044,161 207,159,950 (A Microfinance NGO). The information has been subjected to the auditing procedures applied in our audit of the basic financial statements. In our opinion, the information is fairly stated, in all material Financial Assets at FVOCI (Notes 11 and 27) 45,095,237 13,823,147 respects, in relation to the basic financial statements taken as a whole. Investments in Subsidiaries and Associates (Note 12) 2,405,095,174 2,295,763,052 Property and Equipment (Note 13) 203,581,392 163,927,160 Investment Properties (Note 14) 34,461,581 36,802,658 SYCIP GORRES VELAYO & CO. Retirement Asset (Note 21) 452,482,660 373,169,624 Other Assets (Note 15) 104,274,935 163,163,107 P=13,990,979,405 P=13,380,064,520
Miguel U. Ballelos, Jr. LIABILITIES AND FUND BALANCE Partner LIABILITIES CPA Certificate No. 109950 Due to Members (Note 17) P=4,549,352,883 P=4,424,437,820 SEC Accreditation No. 1566-AR-1 (Group A), Borrowings (Note 18) 1,734,176,000 1,197,962,000 April 3, 2019, valid until April 2, 2022 Accounts Payable and Other Liabilities (Note 19) 430,053,075 593,350,935 Tax Identification No. 241-031-088 BIR Accreditation No. 08-001998-114-2019, 6,713,581,958 6,215,750,755 January 28, 2019, valid until January 27, 2022 FUND BALANCE ATTRIBUTABLE PTR No. 8534220, January 4, 2021, Makati City TO PARENT COMPANY Fund Balance April 29, 2021 General fund 6,934,650,658 6,914,680,918 Restricted fund (Note 28) 114,814,163 107,935,520 Reserves Remeasurement gain on retirement plan (Note 21) 212,452,427 143,019,667 Equity in other comprehensive income (loss) of associates (Note 12) (594,653) (7,277,502) Unrealized gain on financial assets at FVOCI (Note 11) 16,074,852 5,955,162 7,277,397,447 7,164,313,765 P=13,990,979,405 P=13,380,064,520
See accompanying Notes to Financial Statements.
*SGVFSM007913* *SGVFSM007913* A member firm of Ernst & Young Global Limited
36 CARD, Inc. Annual Report 2020 Audited Financial Statements 37 CENTER FOR AGRICULTURE AND CENTER FOR AGRICULTURE AND RURAL DEVELOPMENT (CARD), INC. RURAL DEVELOPMENT (CARD), INC. (A Microfinance NGO) (A Microfinance NGO) STATEMENTS OF REVENUE OVER EXPENSES STATEMENTS OF COMPREHENSIVE INCOME
Years Ended December 31 Years Ended December 31 2020 2019 2020 2019
REVENUE AND OTHER INCOME EXCESS OF REVENUE OVER EXPENSES P=26,848,383 P=982,011,611 Administrative fee (Note 8) P=2,743,735,135 P=4,410,150,088 Items that do not recycle to profit of loss Grants (Note 24) 4,546,080 42,762,443 in subsequent periods: Other income (Note 25) 230,992,897 70,190,143 Change in remeasurement gain 2,979,274,112 4,523,102,674 (loss) of retirement plan (Note 21) 69,432,760 1,144,808 Unrealized gain on financial assets at FVOCI (Note 11) 10,119,690 5,150,258 COSTS AND EXPENSES Items that may be recycled to profit of loss Project related expenses (Notes 22 and 27) 2,926,425,766 3,866,023,759 in subsequent periods: Grants and donations (Note 27) 10,927,359 13,050,000 Change in equity in other comprehensive income/ Health program 6,586,771 16,282,778 (loss) of associates and subsidiaries (Note 21) 6,682,849 (15,205,956) Research program 2,956,346 5,664,117 86,235,299 (8,910,890) Scholarship program 9,228 18,515,928 Other administrative expenses (Note 25) 39,497,566 107,072,649 TOTAL COMPREHENSIVE INCOME FOR THE YEAR P=113,083,682 P=973,100,721 2,986,403,036 4,026,609,231 See accompanying Notes to Financial Statements. EXCESS OF REVENUE OVER EXPENSES BEFORE SHARE IN NET INCOME OF ASSOCIATES AND SUBSIDIARIES (7,128,924) 496,493,443
SHARE IN NET INCOME OF ASSOCIATES AND SUBSIDIARIES (Note 12) 97,789,736 597,830,549
EXCESS OF REVENUE OVER EXPENSES BEFORE INCOME TAX 90,660,812 1,094,323,992
PROVISION FOR INCOME TAX (Note 23) 63,812,429 112,312,381
EXCESS OF REVENUE OVER EXPENSES P=26,848,383 P=982,011,611
See accompanying Notes to Financial Statements.
*SGVFSM007913* *SGVFSM007913*
38 CARD, Inc. Annual Report 2020 Audited Financial Statements 39 CENTER FOR AGRICULTURE AND – – RURAL DEVELOPMENT (CARD), INC. Total (A Microfinance NGO) STATEMENTS OF CASH FLOWS 973,100,721 113,083,682 7,164,313,765 6,191,213,044 7,164,313,765 P = P = P=7,277,397,447 P = – – Years Ended December 31 2020 2019 Other Income 804,904 *SGVFSM007913* (Note 11) (Note P = 5,955,162 5,150,258 5,955,162 10,119,690 P = P =
P=16,074,852 CASH FLOWS FROM OPERATING ACTIVITIES Excess of revenue over expenses before income tax P=90,660,812 P=1,094,323,992 Comprehensive Adjustments for: Financial Assets at Assets Financial Unrealized gain on gain Unrealized Fair Value through Fair Value Administrative fee (2,743,735,135) (4,410,150,088) ) ) ) ) 2 – – 6 2 Interest expense (Notes 8, 19 and 22) 131,057,677 136,195,366 Provision for (reversal of) credit and impairment losses (Note 16) 104,110,851 13,765,685 ote 12 Other 277,50
(N Equity in net earnings of associates and subsidiary (Note 12) (97,789,736) (597,830,549) Equity in Equity 6,682,849 7, 7,928,454 7,277,50 P = P = P = (P=594,653) Depreciation, and amortization (Notes 13 and 14) 33,936,101
(15,205,95 48,365,119 ( ( Subsidiaries Interest income (Note 25) (34,931,942) (55,925,947) Associates and Associates Comprehensive Reserves Income Income (Loss) of Pension expense, net of contribution (Note 21) 26,115,584 4,905,107 Dividend income (Note 25) (1,896,768) (816,000) ) – – Unrealized foreign exchange loss (gain) (1,823,996) (463,119) 859 Gain on sale of property and equipment (Notes 14 and 26) (247,125) (817,212) ote 21 Changes in operating assets and liabilities: Gain on Gain (N 3,019,667 1,144,808
69,432,760 Decrease (increase) in amounts of: 14 141,874, 143,019,667 P = P = P=212,452,427 P = Receivables (762,449,556) 150,741,861
Remeasurement Other assets (5,058,881) Retirement Plan Retirement 61,427,252 Short term investments 1,452,293 14,240,503 Increase in amounts of: – – Accounts payable and accrued (201,732,522) (119,281,142) Due to members 124,915,063 55,492,352 935,520 , 7 6,878,643 6,887,086 Net cash flows used in operations (3,256,502,129) (3,686,741,971)
10 101,048,434 107,935,520 Admin fee collected 2,678,105,464 4,438,021,527 P = P = P = P=114,814,163 Interest paid (130,011,951) (130,037,807) Restricted Fund Restricted Income taxes paid (43,710,202) (78,746,650) Interest received 36,261,009 55,940,473 8 1 8 1 Contributions to the retirement plan (35,995,860) (33,659,799)
Fund Balance Fund Net cash flows provided by (used in) operating activities (751,853,669) 564,775,773 (6,878,643) (6,887,086) 26,848,383
982,011,6 CASH FLOWS FROM INVESTING ACTIVITIES 6,914,680,91 5,939,556,393 6,914,680,91 General Fund General P = P = P=6,934,650,658 P = Proceeds from disposal of: Property and equipment (Note 13) 247,125 817,212 Acquisitions of: Investment in associates and subsidiaries (Note 12) (311,464,256) (102,806,230) Property and equipment (Note 13) (32,111,074) (81,512,378) Financial assets at FVOCI (19,725,000) – Intangible asset (3,622,862) –
) Investment properties (Note 14) – (472,220) Dividends received (Notes 11 and 12) 309,487,017 305,718,471
ote 28 ote Deposit for future stock subscription – (95,850,040) Net cash flows provided by (used in) investing activities (57,189,050) 25,894,815 income for the year the for income 20 (Forward) CENTER FOR AGRICULTURE AND RURAL DEVELOPMENT (CARD), INC. NGO) (A Microfinance STATEMENTS OF CHANGES IN FUND BALANCE 1, 20 at January Balance (N year the during Appropriations year the for income (loss) comprehensive Total 1, 2019 January at Balance 28) (Note year the during Appropriations (loss) comprehensive Total 2019 31, at December Balance Statements. to Financial Notes accompanying See Balance at December 31, 2020 31, at December Balance *SGVFSM007913*
40 CARD, Inc. Annual Report 2020 Audited Financial Statements 41 - 2 - CENTER FOR AGRICULTURE AND RURAL DEVELOPMENT (CARD), INC. (A Microfinance NGO) Years Ended December 31 2020 2019 NOTES TO FINANCIAL STATEMENTS
CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings P=2,145,000,000 P=1,388,603,000 Settlement of borrowings (1,605,250,000) (1,678,388,667) 1. Corporate Information Payment of principal portion of finance lease liabilities (29,991,102) (19,297,982) Net cash flows provided by (used in) financing activities 509,758,898 (309,083,649) Center for Agriculture and Rural Development (CARD), Inc., (A Microfinance NGO) (“the Organization”), a nonstock, nonprofit organization, was incorporated in the Philippines on NET INCREASE (DECREASE) IN CASH AND CASH October 14, 1986. It was registered with the Philippine Securities and Exchange Commission (SEC) EQUIVALENTS (299,283,821) 281,586,939 on March 6, 1987 primarily to undertake, directly finance and assist research and development work and/or economic evaluation for the development and improvement of the quality of life of people in CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,701,907,789 1,420,320,850 underdeveloped and depressed areas. CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 6) P=1,402,623,968 P=1,701,907,789 On August 2, 2016, the Organization was deemed an accredited Microfinance NGO by the Microfinance NGO Regulatory Council (the Council) after having been certified by the SEC to have See accompanying Notes to Financial Statements. no derogatory information. In accordance with Republic Act (RA) No. 10693, otherwise known as the Microfinance NGOs Act, the Organization shall be entitled to avail of the two percent (2%) gross receipts tax on its income from microfinance operations (Note 23).
On August 16, 2016, the implementing rules and regulations (IRR) of Republic Act (RA) No. 10693 or otherwise known as the Microfinance NGOs Act was approved and implemented. The IRR of RA 10693 requires Microfinance NGOs to be established as non-stock, non-profit corporation with a capital contribution of at least One Million pesos and include the word “Microfinance” in the corporate and trade name of the Microfinance NGO seeking accreditation.
On September 17, 2016, the Board of Trustees (BOT) unanimously approved to amend the First Article of the Organization’s Articles of Incorporation (AOI) to change the corporate name of the Organization from Center for Agriculture and Rural Development (CARD), Inc. to CENTER FOR AGRICULTURE AND RURAL DEVELOPMENT (CARD), Inc. (A Microfinance NGO). Further, in 2017, the Organization filed for the amendment of such AOI and By-Laws to the SEC.
The registered office of the Organization is located at 20 M. L. Quezon Street, City Subdivision, San Pablo City, Laguna. As at December 31, 2020 and 2019, the Organization has 1,235 and 1,396 units, respectively.
2. Summary of Significant Accounting Policies
Basis of Preparation The financial statements have been prepared under the historical cost basis, except for financial assets and financial liabilities at Fair Value through Profit or Loss (FVTPL) and financial assets at Fair Value through Other Comprehensive Income (FVOCI). The financial statements are presented in Philippine Peso (P=), the Organization’s functional and presentation currency. All amounts are rounded off to the nearest peso, unless otherwise indicated.
Statement of Compliance The financial statements of the Organization have been prepared in compliance with Philippine Financial Reporting Standards (PFRS).
*SGVFSM007913* *SGVFSM007913*
42 CARD, Inc. Annual Report 2020 Audited Financial Statements 43 - 2 - - 3 -
These financial statements are the separate financial statements of the Organization for management’s Financial instruments are offset and the net amount reported in the statement of assets, liabilities and use and for filing with the Bureau of Internal Revenue (BIR). These financial statements account for fund balance only when there is a legally enforceable right to offset the recognized amounts and there the Organization’s investments in a subsidiary and associate under the equity method as provided for is an intention to settle on a net basis, or to realize the assets and settle liabilities simultaneously. The under Philippine Accounting Standard (PAS) 27, Separate Financial Statements (Note 12). Organization assessed that it has currently enforceable right to set off if the right is not contingent on a future event, and is legally enforceable in the normal course of business, event of default, and event The Organization prepares and issues consolidated financial statements as at and for the same period of insolvency or bankruptcy of the Organization and all the other counterparties. ended as these separate financial statements. Such consolidated financial statements provide information about the economic activities of the Organization and its subsidiaries and associates and Income and expense are not offset in the statement of revenue over expenses unless required or may be obtained from the Organization’s registered office address. permitted by any accounting standard or interpretation, and as specifically disclosed in the accounting policies of the Organization. The table below lists the Organization’s investments in a subsidiary and associate, their corresponding principal place of business/country of incorporation, as well as the Organization’s New Standards, Interpretations and Amendments proportion of the ownership interest held in these entities: The accounting policies adopted are consistent with those of the previous financial year, except for the adoption of new standards effective as at January 1, 2020. The Group has not early adopted any Percentages of Ownership standard, interpretation or amendment that has been issued but is not yet effective. Country of December 31 Incorporation 2020 2019 Unless otherwise indicated, adoption of these new standards did not have an impact on the Subsidiaries consolidated financial statements of the Organization. CARD Myanmar Company Limited (CMCL) Myanmar 99.7% 99.7% Responsible Investments for Solidarity and Amendments to PFRS 3, Business Combinations, Definition of a Business Empowerment (RISE) Financing Company, The amendments to PFRS 3 clarifies that to be considered a business, an integrated set of Inc. Philippines 61.9% 61.9% activities and assets must include, at a minimum, an input and a substantive process that together Associates significantly contribute to the ability to create output. Furthermore, it clarifies that a business can CARD MRI Property Holdings (CMPH), Inc. Philippines 35.1% 40.0% exist without including all of the inputs and processes needed to create outputs. These CARD MRI Hijos Tours, Inc. Philippines 40.0% 40.0% amendments may impact future periods should the Organization enter into any business CARD MRI Insurance Agency (CAMIA), Inc. Philippines 36.6% 36.6% combinations. CARD SME Bank, Inc. (CARD SME Bank) Philippines 36.3% 34.8% CARD Bank, Inc. (CARD Bank) Philippines 31.1% 31.1% Amendments to PFRS 7, Financial Instruments: Disclosures and PFRS 9, Financial Instruments, CARD MRI Information Technology (CMIT), Interest Rate Benchmark Reform Inc. Philippines 27.2% 30.0% The amendments to PFRS 9 provide a number of reliefs, which apply to all hedging relationships CARD MRI Publishing House, Inc. Philippines 30.0% 30.0% that are directly affected by the interest rate benchmark reform. A hedging relationship is CARD MRI Astro Laboratories (CMA), Inc. Philippines 29.0% 25.0% affected if the reform gives rise to uncertainties about the timing and or amount of benchmark- CARD MRI Rizal Bank, Inc. (CMRBI) Philippines 22.0% 22.0% based cash flows of the hedged item or the hedging instrument. CARD Leasing and Finance Corporation (CLFC) Philippines 19.0% 19.0% Amendments to PAS 1, Presentation of Financial Statements, and PAS 8, Accounting Policies, CARD MRI Holdings, Inc. (CMHI) Philippines 14.0% 14.0% Changes in Accounting Estimates and Errors, Definition of Material Microfinance Information Data Sharing The amendments provide a new definition of material that states “information is material if (MIDAS), Inc. Philippines 10.7% 10.7% omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial Presentation of Financial Statements statements, which provide financial information about a specific reporting entity.” The Organization presents the statement of assets, liabilities and fund balance broadly in order of liquidity. An analysis regarding recovery (asset) or settlement (liability) within twelve (12) months The amendments clarify that materiality will depend on the nature or magnitude of information, after the reporting date (current) and more than 12 months after the reporting date (noncurrent) is either individually or in combination with other information, in the context of the financial presented in Note 20. statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users.
Conceptual Framework for Financial Reporting issued on March 29, 2018 The Conceptual Framework is not a standard, and none of the concepts contained therein override the concepts or requirements in any standard. The purpose of the Conceptual Framework is to assist the standard-setters in developing standards, to help preparers develop consistent accounting policies where there is no applicable standard in place and to assist all parties to understand and interpret the standards. *SGVFSM007913* *SGVFSM007913*
44 CARD, Inc. Annual Report 2020 Audited Financial Statements 45 - 4 - - 5 -
The revised Conceptual Framework includes new concepts, provides updated definitions and The principal or the most advantageous market must be accessible by the Organization. The fair recognition criteria for assets and liabilities and clarifies some important concepts. value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best Amendments to PFRS 16, Coronavirus Disease 2019 (COVID-19)-related Rent Concessions interest. The amendments provide relief to lessees from applying the PFRS 16 requirement on lease modifications to rent concessions arising as a direct consequence of the COVID-19 pandemic. A A fair value measurement of a non-financial asset takes into account a market participant's ability to lessee may elect not to assess whether a rent concession from a lessor is a lease modification if it generate economic benefits by using the asset in its highest and best use or by selling it to another meets all of the following criteria: market participant that would use the asset in its highest and best use.
. The rent concession is a direct consequence of COVID-19; The Organization uses valuation techniques that are appropriate in the circumstances and for which . The change in lease payments results in a revised lease consideration that is substantially the sufficient data are available to measure fair value, maximizing the use of relevant observable inputs same as, or less than, the lease consideration immediately preceding the change; and minimizing the use of unobservable inputs. . Any reduction in lease payments affects only payments originally due on or before June 30, 2021; and All assets and liabilities for which fair value is measured or disclosed in the financial statements are . There is no substantive change to other terms and conditions of the lease. categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: A lessee that applies this practical expedient will account for any change in lease payments resulting from the COVID-19 related rent concession in the same way it would account for a Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities change that is not a lease modification, i.e., as a variable lease payment. Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable The amendments are effective for annual reporting periods beginning on or after June 1, 2020. Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value Early adoption is permitted. measurement is unobservable.
Summary of Significant Accounting Policies For assets and liabilities that are recognized in the financial statements on a recurring basis, the Organization determines whether transfers have occurred between levels in the hierarchy by re- Foreign Currency Translations - Transactions and Balances assessing categorization (based on the lowest level input that is significant to the fair value Transactions in foreign currencies are initially recorded at the functional currency rate of exchange measurement as a whole) at the end of each reporting period. ruling at the date of the transaction. For the purpose of fair value disclosures, the Organization has determined classes of assets and Foreign currency-denominated monetary assets and liabilities are translated in Philippine peso based liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of on the Bankers Association of the Philippines (BAP) closing rate prevailing at the statement of the fair value hierarchy as explained above. financial position date and foreign currency-denominated income and expenses, at the prevailing Cash and Cash Equivalents exchange rates as at the date of transaction. Exchange differences arising from reporting foreign Cash and cash equivalents consist of petty cash fund, cash on hand and demand, savings and time currency monetary items at rates different from those at which they were previously recorded, as well deposits in banks that are highly liquid and readily convertible to known amounts of cash with as foreign exchange gains or losses arising from foreign currency transactions are credited to or original maturities of three months or less from dates of placements and which are subject to charged against the statement of income in the year on which the rates changed. insignificant risk of changes in value.
Nonmonetary items that are measured in terms of historical cost in a foreign currency are translated Financial Instruments – Initial Recognition and Subsequent Measurement using the exchange rates as at the dates of the initial transactions. Nonmonetary items measured at Date of recognition fair value in a foreign currency are translated using the exchange rates at the date when the fair value Financial instruments within the scope of PFRS 9 are recognized in the statement of financial position was determined. when the Organization becomes a party to the contractual provisions of the instrument. Purchases or sales of financial assets that require delivery of assets within the time frame established by regulation Fair Value Measurement or convention in the marketplace are recognized using the trade date accounting, i.e., the date that the Fair value is the estimated price that would be received to sell an asset or paid to transfer a liability in Organization commits to purchase or sell the asset. an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability Initial recognition and measurement of financial assets takes place either: Financial instruments are classified, at initial recognition, as either at amortized cost, FVOCI and FVTPL. The classification of financial instruments at initial recognition depends in their contractual in the principal market for the asset or liability; or terms and the business model for managing the instruments. Financial instruments except in the case in the absence of a principal market, in the most advantageous market for the asset or liability. of financial assets and financial liabilities recorded at FVTPL, are initially measured at fair value plus transaction costs. Receivables are measured at the transaction price.
*SGVFSM007913* *SGVFSM007913*
46 CARD, Inc. Annual Report 2020 Audited Financial Statements 47 - 6 - - 7 -
As of December 31, 2020 and 2019, the Organization has no financial instruments at FVTPL. These financial assets are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income. When the asset is disposed of, the In order for a financial asset to be classified and measured at amortized cost or FVOCI, it needs to cumulative gains or losses previously recognized are not reclassified to profit or loss, but is give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal reclassified directly to ‘Fund Balance’ account. Any dividends earned on holding these equity amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument instruments are recognized in profit or loss under ‘Dividend income’ account. level. Financial liabilities at amortized cost The Organization’s business model for managing financial assets refers to how it manages its Issued financial instruments or their components, which are not designated at FVPL, are classified as financial assets in order to generate cash flows. The business model determines whether cash flows liabilities under ‘Due to members,’ ‘Borrowings,’ and ‘Accounts payable and other liabilities,’ where will result from collecting contractual cash flows, selling the financial assets, or both. the substance of the contractual arrangement results in the Organization having an obligation either to deliver cash or another financial asset to the holder, or to satisfy the obligation other than by the ‘Day 1’ difference exchange of a fixed amount of cash or another financial asset. The components of issued financial Where the transaction price in a non-active market is different from the fair value from other instruments that contain both liability and equity elements are accounted for separately, with the observable current market transactions in the same instrument or based on a valuation technique equity component being assigned the residual amount after deducting from the instrument as a whole whose variables include only data from observable market, the Organization recognizes the difference the amount separately determined as the fair value of the liability component on the date of issue. between the transaction price and fair value (a ‘Day 1’ difference) in the statement of revenue over expenses unless it qualifies for recognition as some other type of asset. In cases where fair value is After initial measurement, financial liabilities not qualified and not designated as FVTPL are determined using data which is not observable, the difference between the transaction price and subsequently measured at amortized cost using the effective interest method. Amortized cost is model value is only recognized in the statement of revenue over expenses when the inputs become calculated by taking into account any discount or premium on the issue and fees that are an integral observable or when the instrument is derecognized. For each transaction, the Organization part of the EIR. determines the appropriate method of recognizing the ‘Day 1’ difference amount Derecognition of Financial Instruments Subsequent measurement Financial assets For purposes of subsequent measurement, financial assets are classified in four categories: A financial asset (or, where applicable a part of a financial asset or part of a group of financial assets) is derecognized when: Financial assets at amortized cost (debt instruments), Financial assets at FVOCI with recycling of cumulative gains and losses (debt instruments), the rights to receive cash flows from the asset have expired; or Financial assets designated at FVOCI with no recycling of cumulative gains and losses upon the Organization retains the right to receive cash flows from the asset, but has assumed an derecognition (equity instruments), and obligation to pay them in full without material delay to a third party under a “pass-through” Financial assets at fair value through profit or loss. arrangement; or the Organization has transferred its rights to receive cash flows from the asset and either (a) has Financial assets at amortized cost transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor Debt financial assets are measured at amortized cost of both of the following conditions are met: retained the risks and rewards of the asset but has transferred the control over the asset. The asset is held within the Organization’s business model whose objective is to hold assets in order to collect contractual cash flows; and Where the Organization has transferred its rights to receive cash flows from an asset or has entered The contractual terms of the instrument give rise on specified dates to cash flows that are solely into a "pass-through" arrangement, and has neither transferred nor retained substantially all the risks payments of principal and interest on the principal amount outstanding. and rewards of the asset nor transferred control over the asset, the asset is recognized to the extent of the Organization’s continuing involvement in the asset. Continuing involvement that takes the form Debt financial assets meeting these criteria are measured initially at fair value plus transaction costs. of a guarantee over the transferred asset is measured at the lower of original carrying amount of the They are subsequently measured at amortized cost using effective interest method less any asset and the maximum amount of consideration that the Organization could be required to repay. impairment in value, with the interest calculated recognized as ‘Interest income’ in the statement of revenues and expenses. Financial liabilities A financial liability is derecognized when the obligation under the liability is discharged or cancelled As of December 31, 2020 and 2019, the Organization’s financial assets measured at amortized cost or has expired. Where an existing financial liability is replaced by another from the same lender on include ‘Cash and cash equivalents’, ‘Short-term investments’, ‘Receivables’ and other loans and substantially different terms, or the terms of an existing liability are substantially modified, such an security deposits under ‘Other Assets’. exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in the statement of Financial Assets at FVOCI revenue over expenses. Upon initial recognition, the Organization can elect to classify irrevocably its equity investments as equity instruments designated at FVOCI when they meet the definition of equity under PAS 32, This accounting policy relates to the balance sheet captions ‘Due to Members’, ‘Borrowings’ and Financial Instruments: Presentation and are not held for trading. The classification is determined on financial liabilities presented under ‘Accrued interest and other expenses’ and ‘Other liabilities’. an instrument-by-instrument basis. *SGVFSM007913* *SGVFSM007913*
48 CARD, Inc. Annual Report 2020 Audited Financial Statements 49 - 8 - - 9 -
Write-off Depreciation is computed using the straight-line method over the estimated useful lives (EUL) of the Financial assets are written off either partially or in their entirety when the Organization no longer respective assets. The EULs of the depreciable assets are as follows: expects collections or recoveries within a foreseeable future. If the amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the allowance that Building 5 to 25 years is then applied against the gross carrying amount. Any subsequent recoveries are credited to credit Transportation equipment 3 to 5 years loss expense. Furniture and equipment 3 to 5 years Leasehold improvements 3 years or the terms of the related lease, Investment in Associates whichever is shorter Associate is an entity over which the Organization has significant influence, generally accompanying Right-of-use Asset 1.5 to 5 years a shareholding of between 20.00% and 50.00% of the voting rights. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control The EULs and the depreciation method are reviewed periodically to ensure that the period and the or the joint control over those policies. In the financial statements, investments in associates are method of depreciation are consistent with the expected pattern of economic benefits from items of accounted for under equity method of accounting. property and equipment. Under the equity method, an investment in associate is carried in the statements of assets, liabilities The carrying values of the property and equipment are reviewed for impairment when events or and fund balance at cost plus post-acquisition changes in the Organization’s share in the net assets of changes in circumstances indicate the carrying value may not be recoverable. If any such indication the associate. The Organization’s share in an associate’s post-acquisition earnings is recognized in exists and where the carrying values exceed the estimated recoverable amount, an impairment loss is the statement of revenue over expenses, and its share of post-acquisition movements in the associate’s recognized in the statement of revenue over expenses. OCI is recognized directly in OCI. Distributions received from an associate reduce the carrying amount of the investment. When the Organization’s share of losses in an associate equals or exceeds Investment Properties its interest in the associate, including any other unsecured receivables, the Organization does not Investment properties are properties (land and/or buildings) held to earn rentals or for capital recognize further losses, unless it has incurred obligations or made payments on behalf of the appreciation (or both). Investment properties are measured initially at cost, including transaction associate. Revenues and expenses resulting from transactions between the Organization and an costs. Subsequent to initial recognition, investment properties are stated at cost less accumulated associate are eliminated to the extent of the interest in the associate. depreciation and amortization and any impairment in value.
The financial statements of the associates are prepared for the same reporting period as the Investment properties are derecognized either when they have been disposed of or when they are Organization. The associates’ accounting policies conform to those used by the Organization for like permanently withdrawn from use and no future economic benefit is expected from their disposal. The transactions and events in similar circumstances. difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period of derecognition. Investment in Subsidiaries A subsidiary is an entity over which the Organization has control. The Organization controls an Depreciation on building and improvements is calculated on a straight-line basis over the EUL of 5 to entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and 25 years from the time of acquisition of the investment properties. has the ability to affect those returns through its power over the entity. Impairment of Nonfinancial Assets In the Organization’s financial statements, investment in subsidiary is accounted for under the equity Property and equipment, investment properties, investments in subsidiaries and associates and right- method of accounting similar to the investment in an associate. of-use assets At each reporting date, the Organization assesses whether there is any indication that its nonfinancial Property and Equipment assets may be impaired. When an indicator of impairment exists or when an annual impairment Land is carried at cost less any impairment in value and depreciable property and equipment, which testing for an asset is required, the Organization makes a formal estimate of recoverable amount. includes building and improvements, furniture and fixtures and office and transportation equipment, is carried at cost less accumulated depreciation and any impairment in value. Recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use (VIU) and is determined for an individual asset, unless the asset does not generate cash inflows that are The initial cost of property and equipment, consists of its purchase price, including import duties, largely independent of those from other assets or groups of assets, in which case the recoverable taxes and any directly attributable costs to bring the asset to its working condition and location for its amount is assessed as part of the cash generating unit to which it belongs. Where the carrying intended use. Expenditures incurred after items of property and equipment have been put into amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written operation, such as repairs and maintenance, are normally charged against operations in the year in down to its recoverable amount. In assessing VIU, the estimated future cash flows are discounted to which the costs are incurred. In situations where it can be clearly demonstrated that the expenditures their present value using a pre-tax discount rate that reflects current market assessments of the time have resulted in an increase in the future economic benefits expected to be obtained from the use of value of money and the risks specific to the asset. An impairment loss is charged to operations in the an item of property and equipment beyond its originally assessed standard of performance, the year in which it arises. expenditures are capitalized as an additional cost of property and equipment. When assets are retired or otherwise disposed of, the cost and the related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in the statement of revenue over expenses. *SGVFSM007913* *SGVFSM007913*
50 CARD, Inc. Annual Report 2020 Audited Financial Statements 51 - 10 - - 11 -
An assessment is made at each reporting date as to whether there is any indication that previously Under PFRS 9, when a financial asset becomes credit-impaired, the Organization calculates interest recognized impairment losses may no longer exist or may have decreased. If such indication exists, income by applying the EIR to the net amortized cost of the financial asset. If the financial asset the recoverable amount is estimated. A previously recognized impairment loss is reversed only if cures and is no longer credit-impaired, the Organization reverts to calculating interest income on a there has been a change in the estimates used to determine the asset’s recoverable amount since the gross basis. last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have Interest income been determined, net of depreciation, had no impairment loss been recognized for the asset in prior Interest income on deposits in banks, short-term investments and other receivables is recognized as years. Such reversal is recognized in the statement of revenue over expenses. After such reversal, the interest accrues using EIR, which is the rate that exactly discounts estimated future cash receipts depreciation expense is adjusted in future years to allocate the asset’s revised carrying amount, less through the expected life of the interest-bearing financial instruments to the net carrying amount of any residual value, on a systematic basis over its remaining life. the financial assets.
Fund Balance Rent income General Rent income arising from operating leases on investment properties is accounted for on a General fund consists of all current and prior period results of operations. The Organization’s straight-line basis over the lease terms. earnings or assets shall not inure to the benefit of any of its trustees, organizers, officers, members or any specific person. Dividend income Dividends are recognized as revenue when the Organization’s right to receive the payment is Restricted established. Restricted fund pertains to the appropriations made by the Organization for future acquisitions and/or improvements of investment properties. Costs and Expenses Costs and expenses encompass losses as well as those expenses that arise in the course of the ordinary Revenue Recognition activities of the Organization. Cost and expense are recognized in the statement of income when it is Revenue is recognized to the extent that it is probable that the economic benefits will flow to the probable that a decrease in future economic benefits related to a decrease in an asset or an increase in Organization and the revenue can be reliably measured regardless of when payment is being made. liability has occurred and the decrease in economic benefits can be measured reliably. Revenue is measured at fair value of the consideration received or receivable, considering contractually defined terms of payment and excluding taxes or duty. The Organization has assessed Retirement Benefits that it is acting as a principal in all its revenue transactions. The Organization operates a defined benefit retirement plan and hybrid retirement plan which require contributions to be made to separately administered funds. The following specific recognition criteria must also be met before revenue is recognized: The net defined benefit asset (liability) is the aggregate of the present value of the defined benefit Revenues within the scope of PFRS 15: obligation at the end of the reporting period reduced by the fair value of plan assets, adjusted for any effect of limiting a net defined benefit asset to the asset ceiling, if any. The asset ceiling is the present Grants value of any economic benefits available in the form of refunds from the plan or reductions in future Grants are recognized when there is a reasonable assurance that the Organization will comply with contributions to the plan. the conditions attaching to it, and that the grant will be received. Grants received for a specific purpose or with condition are initially recognized as a liability shown as ‘Funds held-in-trust’ under The cost of providing benefits under the defined benefit retirement plan is determined using the ‘Accounts payable and other liabilities’ in the statements of assets, liabilities and fund balance, projected unit credit method. otherwise, they are recorded as ‘Grants’ in the statement of revenue over expenses. Retirement costs comprise the following: Revenues outside the scope of PFRS 15: Service cost Net interest on the net defined benefit liability or asset Administrative fees Remeasurements of net defined benefit liability or asset Administrative fees are recognized based on the effective interest method of accounting. Service costs which include current service costs, past service costs and gains or losses on non- The effective interest method is a method of calculating the amortized cost of a financial asset or a routine settlements are recognized as expense in the statement of revenue over expenses. Past service financial liability and allocating the income over the relevant period. The EIR is the rate that exactly costs are recognized when the plan amendment or curtailment occurs. These amounts are calculated discounts estimated future cash flows through the expected useful life of the financial instrument or a periodically by independent qualified actuaries. shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options), includes any fees (such as service fees) or incremental costs that are directly attributable to the instrument and are an integral part of the EIR, but not future credit losses.
*SGVFSM007913* *SGVFSM007913*
52 CARD, Inc. Annual Report 2020 Audited Financial Statements 53 - 12 - - 13 -
Net interest on the net defined benefit asset (liability) is the change during the period in the net The Organization presents the right-of-use assets in ‘Property and equipment’ and subjects it to defined benefit asset (liability) that arises from the passage of time which is determined by applying impairment in line with the Organization’s policy on impairment of nonfinancial assets. the discount rate based on government bonds to the net defined benefit asset (liability). Net interest on the net defined benefit asset (liability) is recognized as income (expense) in the statement of Lease liabilities revenue over expenses. At the commencement date of the lease, the Organization recognizes lease liabilities measured at the present value of lease payments to be made over the lease term discounted using the Remeasurements comprising actuarial gains and losses, return on plan assets and any change in the Organization’s incremental borrowing rate, which is the rate of interest that the Organization effect of the asset ceiling (excluding net interest on defined benefit liability) are recognized would have to pay to borrow over a similar term, and with a similar security, the funds necessary immediately in the statement of assets, liabilities and fund balance with a corresponding debit or to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. credit to ‘Remeasurement gains (losses) on retirement liabilities’ under OCI in the period in which The lease payments include fixed payments, any variable lease payments that depend on an index they arise. Remeasurements are not reclassified to the statement of revenue over expenses in or a rate, and any amounts expected to be paid under residual value guarantees. The lease subsequent periods. payments also include the exercise price of a purchase option reasonably certain to be exercised by the Organization and payments of penalties for terminating the lease, if the lease term reflects Plan assets are assets that are held by a long-term employee benefit fund. Plan assets are not exercising the option to terminate. Variable lease payments that do not depend on an index or a available to the creditors of the Organization, nor can they be paid directly to the Organization. Fair rate are recognized as expenses in the period in which the event or condition that triggers the value of plan assets is based on market price information. When no market price is available, the fair payment occurs. value of plan assets is estimated by discounting expected future cash flows using a discount rate that reflects both the risk associated with the plan assets and the maturity or expected disposal date of After the commencement date of the lease, the Organization measures the lease liabilities by those assets (or, if they have no maturity, the expected period until the settlement of the related increasing the carrying amount to reflect interest on the lease liabilities (recorded in ‘Interest obligations). If the fair value of the plan assets is higher than the present value of the defined benefit expense on bills payable and other borrowings’), reducing the carrying amount to reflect the lease obligation, the measurement of the resulting defined benefit asset is limited to the present value of payments made, and remeasuring the carrying amount to reflect any reassessment or lease economic benefits available in the form of refunds from the plan or reductions in future contributions modifications, or to reflect revised in-substance fixed lease payments. to the plan.
The Organization’s right to be reimbursed of some or all of the expenditure required to settle a Short-term leases and leases of low-value assets defined benefit obligation is recognized as a separate asset at fair value when, and only when, The Organization applies the short-term lease recognition exemption to its leases that have a lease reimbursement is virtually certain. term of 12 months or less from the commencement date and do not contain a purchase option, and the leases of low-value assets recognition exemption to its leases of office space and staff Employee leave entitlement house that are considered of low value (i.e., below 250,000). Lease payments on short-term Employee entitlements to annual leave are recognized as a liability when they are accrued to the leases and leases of low-value assets are recognized as expense under ‘Rental Expense’ on a employees. The undiscounted liability for leave expected to be settled after the end of the annual straight-line basis over the lease term. reporting period is recognized for services rendered by employees up to the end of the reporting period. Organization as a lessor For finance leases where the Organization transfers substantially all the risks and rewards incidental Leases to ownership of the leased item, the Organization recognizes a lease receivable in the statement of The Organization determines at contract inception whether a contract is, or contains, a lease by assets, liabilities and fund balance at an amount equivalent to the net investment (asset cost) in the assessing whether the contract conveys the right to control the use of an identified asset for a period lease. The Organization includes all income resulting from the receivable in ‘Interest income on of time in exchange for consideration. loans and receivables’ in the statement of revenue over expenses.
Organization as a lessee The residual value of leased assets, which approximates the amount of guaranty deposit paid by the lessee at the inception of the lease, is the estimated proceeds from the sale of the leased asset at the The Organization applies a single recognition and measurement approach for all leases, except for end of the lease term. At the end of the lease term, the residual value of the leased asset is generally short-term leases and leases of low-value assets. The Organization recognizes right-of-use assets applied against the guaranty deposit of the lessee when the lessee decides to buy the leased asset. representing the right to use the underlying assets and lease liabilities to make lease payments. In operating leases where the Organization does not transfer substantially all the risks and rewards Right-of-use assets incidental to ownership of an asset, the Organization recognizes rental income on a straight- line basis At the commencement date of the lease (i.e, the date the underlying asset is available for use), the over the lease terms. The Organization adds back the initial direct costs incurred in negotiating and Organization recognizes right-of-use assets measured at cost. The cost of right-of-use assets arranging an operating lease to the carrying amount of the leased asset and recognizes them as rental includes the amount of lease liabilities recognized, initial direct costs incurred, and lease income over the lease term on the same basis. The Organization recognizes contingent rents as payments made at or before the commencement date less any lease incentives received. revenue in the period in which they are earned. Subsequent to initial recognition, the Organization measures the right-of-use assets at cost less any accumulated depreciation and impairment losses and adjusted for any remeasurement of lease liabilities. *SGVFSM007913* *SGVFSM007913*
54 CARD, Inc. Annual Report 2020 Audited Financial Statements 55 - 14 - - 15 -
Income Taxes Effective beginning on or after January 1, 2023 Current tax Current tax assets and current tax liabilities for the current and prior years are measured at the amount Amendments to PAS 1, Classification of Liabilities as Current or Non-current expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to PFRS 17, Insurance Contracts compute the amount are those that are enacted or substantively enacted at the reporting date. Deferred effectivity Provisions Provisions are recognized when the Organization has a present obligation (legal or constructive) as a Amendments to PFRS 10, Consolidated Financial Statements, and PAS 28, Sale or Contribution result of a past event and it is probable that an outflow of resources embodying economic benefits of Assets between an Investor and its Associate or Joint Venture will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Organization expects some or all of a provision to be reimbursed, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. 3. Significant Accounting Judgments and Estimates The expense relating to any provision is presented in the statement of revenue over expenses, net of any reimbursement. If the effect of the time value of money is material, provisions are determined by The preparation of financial statements in accordance with PFRS requires the management to make discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of judgments and estimates that affect the reported amounts of assets, liabilities, revenue and expenses the time value of money and, where appropriate, the risks specific to the liability. Where discounting and disclosure of contingent assets and contingent liabilities. Future events may occur which will is used, the increase in the provision due to passage of time is recognized under ‘Interest expense’ cause the judgments and assumptions used in arriving at the estimates to change. The effects of any under ‘Project related expenses’ in the statement of revenue over expenses. change in estimates are reflected in the financial statements as they become reasonably determinable. Contingent Liabilities and Contingent Assets Judgments and estimates are continually evaluated and are based on historical experience and other Contingent liabilities are not recognized but are disclosed in the financial statements unless the factors, including expectations of future events that are believed to be reasonable under the possibility of an outflow of assets embodying economic benefits is remote. Contingent assets are not circumstances. recognized but are disclosed in the financial statements when an inflow of economic benefits is probable. Judgments Events After the Reporting Date (a) Determination of significant influence over another entity Post-year-end events up to the date of the approval of the BOT of the financial statements that The determination of significant influence over another entity, other than the rebuttable provide additional information about the Organization’s position at the reporting date (adjusting presumption of ownership over twenty percent (20.0%), requires significant judgment. In making events), are reflected in the financial statements. Post-year-end events that are not adjusting events, if judgment, the Organization evaluates existence of the following: any, are disclosed in the notes to the financial statements when material. representation on the Board of Directors (BOD) or equivalent governing body of the investee; participation in policy-making processes, including participation in decisions about dividends New standards and interpretations that have been issued but not yet effective or other distributions; Pronouncements issued but not yet effective are listed below. The Group intends to adopt the material transactions between the entity and its investee; following pronouncements when they become effective. Adoption of these pronouncements is not interchange of managerial personnel; or expected to have a significant impact on the Group’s consolidated financial statements. provision of essential technical information.
Effective beginning on or after January 1, 2021 As at December 31, 2020 and 2019, the Organization determined that it exercises significant influence over the following entities: Amendments to PFRS 9, PFRS 7, PFRS 4 and PFRS 16, Interest Rate Benchmark Reform – Phase 2 Percentages of Ownership Effective beginning on or after January 1, 2022 December 31 2020 2019 Amendments to PFRS 3, Reference to the Conceptual Framework CLFC 19.0% 19.0% Amendments to PAS 16 , Plant and Equipment: Proceeds before Intended Use CMHI 14.0% 14.0% Amendments to PAS 37, Onerous Contracts – Costs of Fulfilling a Contract MIDAS 10.7% 10.7% Annual Improvements to PFRSs 2018-2020 Cycle o Amendments to PFRS 1, First-time Adoption of Philippines Financial Reporting Standards, Although the Organization holds less than 20.0% of the ownership interest and voting rights in Subsidiary as a first-time adopter CLFC, CMHI and MIDAS , the Organization considers that it exercises significant influence o Amendments to PFRS 9, Financial Instruments, Fees in the ’10 per cent’ test for through its representation in CLFC’s, CMHI’s and MIDAS’s BOD. Accordingly, the derecognition of financial liabilities Organization accounted for its investment in CLFC, CMHI and MIDAS as an associate under the o Amendments to PAS 41, Agriculture, Taxation in fair value measurements equity method of accounting.
*SGVFSM007913* *SGVFSM007913*
56 CARD, Inc. Annual Report 2020 Audited Financial Statements 57 - 16 - - 17 -
The investment in an associate of the Organization is disclosed in Note 12 and the related (c) Present value of long term and post-employment benefits applicable accounting policy is disclosed in Note 2. The determination of the Organization’s net plan assets and annual retirement and other long term employment benefits expense is dependent on the selection of certain assumptions used in (b) Financial assets not quoted in an active market calculating such amounts. These assumptions include, among others, discount rates and salary When the fair values of financial instruments recorded in the statement of financial position rates. cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of mathematical models. The inputs to these models are taken In determining the appropriate discount rate, the Organization considers market yields on from observable markets where possible, but where this is not feasible, a degree of judgment is Philippine government bonds with terms consistent with the expected employee benefit payout as required in establishing fair values. These judgments may include considerations of liquidity and of the reporting date and the extrapolated maturities corresponding to expected duration of the model inputs such as correlation and volatility for longer dated derivatives. defined benefit obligation. For the salary projection rate, the Organization considers the inflation rate and expected average future salary increase rate of the employee, while the mortality rate was Estimates based on the 2001 Commissioners Standard Ordinary Table – Generational. While the (a) Impairment of financial assets Organization believes that the assumptions are reasonable and appropriate, significant differences The measurement of impairment losses under PFRS 9 across all categories of financial assets between actual experience and assumptions may materially affect the cost of employee benefits requires judgement, in particular, the estimation of the amount and timing of future cash flows related obligations. and collateral values when determining impairment losses and the assessment of a significant increase in credit risk. The estimates are driven by a number of factors, changes in which can The present value of the retirement obligation and fair value of plan assets are disclosed in result in different levels of allowances. Note 21.
The Organization’s ECL calculations are outputs of complex model with a number of underlying assumptions regarding the choice of variable inputs and their interdependencies. Elements of the 4. Fair Values of Measurement ECL models that are considered accounting judgements and estimates include: Internal credit grading model, which assigns PDs to the individual grades The methods and assumptions used by the Organization in estimating fair values of assets and Criteria for assessing if there has been a significant increase in credit risk and so allowances liabilities for which fair value is disclosed are as follows: for financial assets should be measured on a lifetime CL basis and the qualitative assessment The segmentation of financial assets when their ECL is assessed on a collective basis Cash and cash equivalents, short-term investments, receivables from members, due from affiliates, Development of ECL models, including various formulas and the choice of inputs current portion of security deposits, other loans, due to members and accounts payable and other Determination of associations between macroeconomic scenarios and, economic inputs, such liabilities as unemployment levels and collateral values, and the effect on PDs, EADs and LGDs These accounts approximate their carrying amounts in view of relatively short-term maturities of Selection of forward-looking macroeconomic scenarios and their probability weightings, to these instruments. derive the economic inputs into the ECL models Investment properties The ECL models and all ECL-related policies are approved by the Risk Management Committee Fair values of the Organization’s investment properties have been determined based on valuations and the Board of Trustees. The Risk Management Unit in collaboration with the Data Collection made by independent appraisers on the basis of recent sales of similar properties in the same areas as Center calculates the ECL for all credit risk exposures. The total ECL that will be booked by the the investment properties and taking into account the economic conditions prevailing at the time the Finance and Accounting Division is approved by both the Director for Finance and Accounting valuations were made. and the Director of Risk Management Unit. Unquoted equity investments (b) Present value of lease liabilities Fair values are estimated using capital asset pricing model to compute for the fair value under Level 3 The Organization cannot readily determine the interest rate implicit in the lease, therefore, it uses fair value hierarchy using weighted average cost of capital rate (WACC) of 9.29% and 8.63% for its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest 2020 and 2019, respectively. These assets are not material to the Organization’s portfolio of financial that the Organization would have to pay to borrow over a similar term, and with a similar assets. security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The Organization estimates the IBR using observable inputs (by The Organization uses a hierarchy for determining and disclosing the fair value of its assets and reference to average bank lending rates) liabilities. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest The carrying amount of lease liabilities as of December 31, 2020 and 2019 is disclosed in level input that is significant to the fair value measurement as a whole: Note 26. Level 1: Quoted (unadjusted prices) in active markets for identical assets and liabilities; Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly;
*SGVFSM007913* *SGVFSM007913*
58 CARD, Inc. Annual Report 2020 Audited Financial Statements 59 - 18 - - 19 -
Level 3: Techniques which use inputs which have a significant effect on the recorded fair value with AC and Internal Audit (IA) functions. IA undertakes both regular audit examination and ad hoc that are not based on observable market data. reviews of risk management controls and procedures, the results of which are reported to the AC.
Fair Value Hierarchy Credit Risk The following table summarizes the carrying amounts and the fair values by level of the fair value Credit risk is the risk of financial loss to the Organization if the counterparty to a financial instrument hierarchy of the Organization’s long-term financial instruments and non-financial assets as at fails to meet its contractual obligations. December 31, 2020 and 2019, for which fair values are disclosed, are financial instrument at fair value. Management of credit risk The Organization manages credit risk by providing field personnel with thorough trainings for 2020 2019 Carrying Value Level 3 Carrying Value Level 3 effective and efficient service delivery to mitigate such risk. A codified signing authority is in place Assets for which fair values are disclosed: for every level of receivables processing and approval. Receivables are guaranteed by co- Financial assets borrower/guarantor from family member. All past due/impaired accounts are reported on a monthly Financial assets at FVOCI P=45,048,656 P=45,048,656 P=13,869,728 P=13,869,728 Nonfinancial assets basis. Consistent monitoring for these accounts is established by competent and diligent personnel to Investment properties 34,461,581 51,535,419 36,802,658 66,207,849 maximize recovery. Writing off bad debt accounts are approved by the BOT through its Executive Financial liabilities Director. Borrowings 1,734,176,000 1,714,558,508 1,197,962,000 1,173,408,624
There are no transfers between fair value levels in 2020 and 2019. Intensive management monitoring of the program and regular internal audit examination are being conducted. Identified existing and potential irregularities are being discussed and processed during The following table summarizes the valuation techniques, inputs and assumptions used and the the monthly AC meeting. Consequently, a summary of AC reports is being presented to the regular significant unobservable inputs valuation for investment property held by the Organization: quarterly meeting of the BOT.
Valuation technique Significant unobservable inputs Maximum exposure to credit risk Land Market approach Size, location, shape and time element The maximum credit exposure of the Organization’s financial instruments is equal to their carrying value except for receivable from members. The market data approach is a comparable method wherein the value of the property is based on sales and listings of comparable property by reducing reasonable comparative sales and listings to a An analysis of the maximum exposure to credit risk of the Organization as at December 31, 2020 and common denominator. This is done by adjusting the differences between the subject property and 2019 are as follows (in millions): those actual sales and listings regarded as comparable. The properties used as basis of comparison are situated within the immediate vicinity of the subject property. Comparison would be premised on Financial effect the factors of location, size and shape of the lot, and time element. of collateral Maximum Fair value or credit credit exposure of collateral enhancement Net exposure 2020 5. Financial Risk Management Objectives and Policies Receivable from members P=8,600 P=2,635 P=2,635 P=5,965
In the course of the business cycle, the Organization has exposure to the following risks from its use 2019 of financial instruments: Receivable from members P=7,939 P=2,673 P=2,673 P=5,266
Credit risk Credit enhancement for receivables from members pertains to contribution of members for capital Liquidity risk build-up purposes equivalent to 10.0% or 20.0% of the loaned amount of the member, depending on Market risk type of loan concerning the Organization.
In line with the Organization’s mission of “Providing continued access to integrated microfinance The Organization has no financial instruments with right of set-off in accordance with PAS 32 as at and social development services to an expanding membership base by organizing and empowering December 31, 2020 and 2019. There are also no financial instruments that are subject to an women and their families”, the risk management framework of the Organization involves identifying enforceable master netting arrangements of similar agreements which require disclosure in the and assessing risks, designing strategies and implementing policies to mitigate risks, and conducting financial statements. evaluation for adjustments needed to minimize risks. Concentration of credit risk The BOT through the Audit Committee (AC) of the Organization is responsible for monitoring the Concentrations arise when a number of counterparties are engaged in similar business activities, or Organization’s implementation of risk management policies and procedures and for reviewing the activities in the same geographic region, or have similar economic features that would cause their adequacy of risk management framework in relation to the risks faced by the Organization. The AC ability to meet contractual obligations to be similarly affected by changes in economic, political or prepares monthly reporting to BOT on the results of reviews of actual implementation of risk other conditions. The Organization’s financial instruments are concentrated to rural borrowers. management policies. The Risk Management Unit of the Organization is strengthened in conjunction
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60 CARD, Inc. Annual Report 2020 Audited Financial Statements 61 - 20 - - 21 -
Credit quality per class of financial assets As at December 31, 2020 and 2019, the Organization’s receivables that are past due for more than 90 The credit quality of financial assets is monitored and managed based on the credit standing and days are considered impaired. history. Aging analysis of past due but not impaired High grade represents bank deposits, receivables or advances which have a high probability of The following tables show the total aggregate amount of receivables that are contractually past due collection. The counterparty has the apparent ability to satisfy its obligation and the securities on the but not considered as impaired per delinquency bucket as at December 31, 2020 and 2019 receivables are readily enforceable. These also include deposits with reputable institutions from (in thousands): where the deposits may be withdrawn and recovered with certainty. Less than Standard grade represents deposits, receivables or advances where collections are probable due to the 2020 30 Days 31 to 60 Days 61 to 90 Days Total reputation and the financial ability of the counterparty to pay. Project assistance receivables P=30,763 P=27,929 P=20,369 P=79,061 Members assistance receivables 5,801 2,463 1,023 9,287 Other receivables 41,491 18,323 17,012 76,826 Further, the financial assets are also grouped according to stage whose description is explained as P=78,055 P=48,715 P=38,404 P=165,174 follows: 2019 Project assistance receivables P=3,274 P=6,838 P=6,646 P=16,758 Stage 1 - those that are considered current and up to 90 days past due, and based on change in rating, Members assistance receivables 570 1,143 1,164 2,877 delinquencies and payment history, do not demonstrate significant increase in credit risk. Other receivables 14,584 9,406 3,385 27,375 P=18,428 P=17,387 P=11,195 P=47,010 Stage 2 - those that, based on change in rating, delinquencies and payment history, demonstrate significant increase in credit risk, and/or are considered more than 90 days past due but does not Liquidity Risk demonstrate objective evidence of impairment as of reporting date. Liquidity risk is the risk arising from potential inability to meet obligations when they become due at Stage 3 - those that are considered in default or demonstrate objective evidence of impairment as of a reasonable cost and timely manner. The Organization manages liquidity risk by assessing the gap reporting date. for additional funding and determining the best source and cost of funds on a monthly basis. To ensure sufficient liquidity, the Organization set aside funds to pay currently maturing obligations. The tables below show the credit quality per class of receivables (gross of allowance for credit losses) These funds are placed in short-term investments and deposited in banks by the Organization. as at December 31, 2020 and 2019 (in thousands): Monitoring of daily cash position is being done to guide the management in making sure that sufficient liquidity is maintained. The Treasury Executive Committee was also established to 2020 2019 regularly review liquidity position of the Organization monthly. ECL Staging Stage 1 Stage 3 Stage 1 Stage 3 Non-default Defaulted Total Non-default Defaulted Total Analysis of financial assets and financial liabilities by remaining maturities Neither past due nor impaired The tables below summarize the maturity profile of the financial assets and financial liabilities of the High grade P= − P= − P= − P=− P=− P=− Standard grade 8,572,163 − 8,572,163 8,122,665 − 8,122,665 Organization based on contractual undiscounted cash flows (in thousands): Past due but not impaired − 165,173 165,173 − 47,010 47,010 Past due and impaired − 425,052 425,052 − 193,140 193,140 Gross carrying amount P=8,572,163 P=590,225 P=9,162,388 P=8,122,665 P=240,150 P=8,362,815 Due within 3 to Beyond On demand 1 month 1 to 3 months 12 months 1 year Total 2020 2020 Financial Assets Neither past due nor impaired Cash and cash equivalents P=388,687 P=669,794 P=297,230 P=46,913 P= – P=1,402,624 Past due Past due and Short term investments – 68,227 252,394 90,232 410,853 High Grade Standard grade but not impaired impaired Total Receivables 9,412 1,298,095 1,811,210 7,242,742 8,163 10,369,622 Cash in banks P=1,402,624 P= – P= – P= – P=1,402,624 Total Financial Assets 398,099 2,036,116 2,360,834 7,379,887 8,163 12,183,099 Short-term investments 410,853 – – – 410,853 Other assets – 19,346 – – 19,346 Financial Liabilities P=1,813,477 P=19,346 P= – P= – P=1,832,823 Due to members 4,549,353 – – – – 4,549,353 Accounts payable and accrued expenses – 31,008 25,325 92,078 146,768 295,179 2019 Borrowings 48,020 3,750 102,000 1,580,406 – 1,734,176 Neither past due nor impaired Total Financial Liabilities 4,597,373 34,758 127,325 1,672,484 146,768 6,578,708 Past due Past due and Net Undiscounted Cash Flows (P=4,199,274) P=2,001,358 P=2,233,509 P=5,707,403 (P=138,605) P=5,604,391 High Grade Standard grade but not impaired impaired Total Cash in banks P=1,701,908 P= – P= – P= – P=1,701,908 Short-term investments 412,305 – – – 412,305 Other assets – 25,187 – – 25,187 P=2,114,213 P=25,187 P= – P= – P=2,139,400
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62 CARD, Inc. Annual Report 2020 Audited Financial Statements 63 - 22 - - 23 -
The following table demonstrates the sensitivity to a reasonably possible change in the Philippine Due within 3 to Beyond On demand 1 month 1 to 3 months 12 months 1 year Total peso exchange rate, with all other variables held constant, of the Organization’s excess of revenue 2019 over expenses. There is no impact on the Organization’s equity other than those already affecting the Financial Assets excess of revenue over expenses. Cash and cash equivalents P=683,499 P=893,790 P=82,858 P=41,761 P=– P=1,701,908 Short term investments – 66,761 288,311 57,233 – 412,305 Receivables 13,286 384,684 2,284,690 6,421,342 5,752 9,109,754 Change in Effect on excess Other assets 223 622 2,280 10,136 11,926 25,187 currency of revenue Total Financial Assets 697,008 1,345,857 2,658,139 6,530,472 17,678 111,249,154 Financial Liabilities Currency rate in % over expenses Due to members 4,424,438 – – – – 4,424,438 2020 Accounts payable and accrued expenses – 45,927 85,593 174,313 254,416 560,249 USD +5.0 (195,883) Borrowings 50,740 51,000 327,000 754,000 15,222 1,197,962 –5.0 195,883 Total Financial Liabilities 4,475,178 96,927 412,593 928,313 269,638 6,182,649 Euro +5.0 476,471 Net Undiscounted Cash Flows (P=3,778,170) P=1,248,930 P=2,245,546 P=5,602,159 (P=251,960) P=5,066,505 –5.0 (476,471)
Market Risk Change in Effect on excess Market risk is the risk of loss of future earnings, fair values or future cash flows of a financial currency of revenue instrument as a result of changes in its price, in turn caused by changes in interest rates, foreign Currency rate in % over expenses currency exchange rates, equity prices and other market factors. 2019 USD +5.0 1,546,857 Interest rate risk –5.0 (1,546,857) Interest rate risk is the risk that future cash flows from a financial instrument will fluctuate because of Euro +5.0 297,401 changes in market interest rates. –5.0 (297,401)
As of December 31, 2020 and 2019, the Organization has no financial assets and liabilities subject to Equity price risk repricing. As such, the Organization is not exposed to interest rate risk. The Organization has no equity instruments that are publicly-traded, thus, it has no exposure to changes in equity prices. Foreign currency risk Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. 6. Cash and Cash Equivalents
The Organization’s principal transactions are carried out in Philippine peso and its exposure to This account consists of: foreign currency risk arises primarily with respect to the Organization’s cash in banks, short-term investments and borrowings which are denominated in US dollar ($) and Euro (€). 2020 2019 Cash on hand P=188,590 P=296,236 The following table shows the foreign currency-denominated accounts of the Organization as at Cash in banks (Note 27) 1,402,435,378 1,701,611,553 December 31, 2020 and 2019: P=1,402,623,968 P=1,701,907,789 2020 2019 in $ in € in $ in € Cash in banks consist of demand, savings and time deposit accounts. Peso time deposit placements, Cash in banks and cash equivalents 629,891 162,341 1,218,998 105,555 with a term of less than three months, bear interest from 0.88% to 4.0% and 3.1% to 6.8% in 2020 Other receivables 529,863 – 629,863 – and 2019, respectively. In addition, the Organization has dollar and euro accounts amounting to Other assets 99,550 – 99,550 – P=31.0 million ($0.65 million) and =9.5P million (€0.2 million) as of December 31, 2020, respectively, Borrowings (1,340,888) (1,338,696) – and P=61.9 million ($1.2 million) and P=5.9 million (€0.1 million) as of December 31, 2019, Net Exposure (81,584) 162,341 609,715 105,555 respectively.
In translating foreign currency-denominated accounts to Philippine peso amounts, the exchange rates The Organization’s peso demand and savings deposits earn annual interest ranging from 0.05% to used were P=48.02 to $1.0 and P=58.7 to €1.0 and P=50.7 to $1.0 and P=56.4 to €1.0 in 2020 and 2019, 1.5%in both 2020 and 2019, respectively. respectively. Interest income under ‘Other income’ earned by the Organization from cash in banks amounted to P=20.9 million and =31.8P million in 2020 and 2019, respectively (Note 25).
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64 CARD, Inc. Annual Report 2020 Audited Financial Statements 65 - 24 - - 25 -
7. Short-term Investments Modification of Loans and Receivables On March 25, 2020, Republic Act No. 11469, otherwise known as the Bayanihan to Heal as One Act Short-term investments represent time deposits with maturities of more than three months but (“Bayanihan 1 Act”) was enacted. Bayanihan 1 Act provides that all covered institutions shall less than one year. As at December 31, 2020 and 2019, the short-term investments amounted to implement a 30-day grace period for all loans with principal and/or interest and lease amortization P=410.9 million and P=412.3 million, respectively (Note 27). falling due within the enhanced community quarantine (ECQ) period without incurring interest on interest, penalties, fees and other charges. Subsequently, on September 11, 2020, Republic Act No. Short-term investments earn annual interest ranging from 0.88% to 4.0 and from 3.0% to 7.0% in 11494, otherwise known as the Bayanihan to Recover as One Act (“Bayanihan 2 Act”), was enacted. 2020 and 2019, respectively. Interest income under ‘Other income’ from short-term investments amounted to =11.5P million and =23.0P million in 2020 and 2019 (Note 25). Under Bayanihan 2 Act, a one-time 60-day grace period is granted for the payment of all existing, current and outstanding loans falling due, or any part thereof, on or before December 31, 2020, without incurring interest on interests, penalties, fees, or other charges and thereby extending the 8. Receivables from Members maturity of the said loans. Furthermore, a minimum 30-day grace period shall also be granted by covered institutions to all payments due within the period of community quarantine on rent and This account consists of: utility-related expenditures without incurring penalties, interest and other charges. The total modification losses resulting from Bayanihan 1 Act and Bayanihan 2 Act recognized in the 2020 2019 statement of revenues over expenses under “Project related expenses” amounted to P=185.8 million. Project assistance receivable P=6,179,144,315 P=6,596,709,678 The net impact of the loan modification after accretion of the modified loans is a net loss of Members assistance receivable 2,622,731,788 1,524,338,350 P=6.1 million. The accretion, recorded as “Interest” under “Other income”, amounted to 8,801,876,103 8,121,048,028 P=179.7 million. Allowance for credit losses (Note 16) (201,706,093) (122,249,918) Unamortized discount on loan modification (6,104,884) – P=8,594,065,126 P=7,998,798,110 9. Due from Affiliates
Receivables from members are partially secured by contributions from members recorded as ‘Due to This account consists of: members’ amounting to =4.5P billion and P=4.4 billion as at December 31, 2020 and 2019, respectively (Note 17). 2020 2019 CARD Employee Multi-Purpose Cooperative Project assistance receivable and member assistance receivable earn annual effective administrative (EMPC), Inc. P=27,114,741 P=72,553 fee of 45.8% to 33.4% in 2020 and 2019, respectively. CARD Mutual Benefit Association (MBA), Inc. 20,135,274 4,064,212 CARD Leasing and Finance Corporation (CLFC) 957,128 43,268 As of December 31, 2020 and 2019, administrative fee earned from receivable from members are as CARD MRI Development Institute (CMD) Inc. 550,155 305,387 follows: CARD MRI Insurance Agency (CAMIA), Inc. 214,853 458 CARD MRI Microfinance, Inc. (CMMI) 177,825 173,892 2020 2019 BotiCARD Inc. (BCI) 146,185 2,550 Project assistance receivable P=2,100,745,186 P=3,638,887,171 CARD Pioneer Microinsurance Inc. (CPMI) 89,579 – Members assistance receivable 591,566,329 705,110,053 Mga Likha ni Inay, Inc. (MLNI) 11,482 – Service fees 51,423,620 66,152,864 CARD Bank, Inc. (CARD Bank) 3,067 3,536,370 Administrative fee P=2,743,735,135 P=4,410,150,088 CARD MRI Astro Laboratories, Inc. (CMA) 1,708 – CARD MRI Rizal Bank, Inc. (CMRBI) 432 55,497 Receivables from members include past due receivables amounting to =425.5P million and =136.8P CARD MRI Property Management (CMPH), Inc. – 4,852,956 million as of December 31, 2020 and 2019, respectively. CARD SME Bank, Inc. (CARD SME Bank) – 84,132 CARD MRI Information Technology (CMIT), Inc. – 49,813 As of December 31, 2020 and 2019, project assistance receivables with carrying value of CARD Business Development Service Foundation P=2.4 billion and =1.5P billion, respectively, were used as collateral for interest-bearing borrowings (BDSF), Inc. – 3,140 (Note 18). CARD MRI Hijos Tours, Inc. – 660 CARD MRI Publishing House, Inc. – – Total P=49,402,429 P=13,244,888
*SGVFSM007913* *SGVFSM007913* 66 CARD, Inc. Annual Report 2020 Audited Financial Statements 67 - 26 - - 27 -
The Organization, CMPH, CARD MBA, CARD Bank, CMDI, CMMI, CARD SME Bank, CMRBI, 11. Financial Assets at FVOCI CARD EMPC, CMIT, CLFC, CARD BDSF, BotiCARD, CARD Hijos Tours, CAMIA, CARD Publishing House, CPMI, MLNI and CMA are all members of CARD Mutually Reinforcing This account consists of: Institutions (MRI) Group. 2020 2019 Due from CARD MBA pertains to the Organization’s claims due to occurrence of insured events. Non-listed equity investments Due from CARD MRI Property Holdings Inc. pertains to the Organization’s monthly amortization CARD Bank Inc. P=22,780,400 P=2,618,000 collectible from the sale of properties (Note 27). BotiCARD Inc. 5,249,985 5,249,985 AppendPay Corporation 990,000 – Due from CMPH, CMDI, CMMI, CARD SME Bank, CMRBI, CARD EMPC, CMIT, CLFC, CARD 29,020,385 7,867,985 BDSF, BotiCARD, CARD Hijos Tours, CAMIA, CARD Publishing House, CPMI, MLNI and CMA Unrealized gain on fair value 16,074,852 5,955,162 mainly consist of the affiliates’ share in expenses paid for by the Organization (Note 27). Due from P=45,095,237 P=13,823,147 CARD Bank consists of share in expenses paid for by the Organization and dividend receivable. Due from CARD Employee Multi-Purpose Cooperative (EMPC), Inc. represents loan provided for During the year, additional investment with AppendPay Corporation was made which composed of additional funding payable within one (1) year with 6% interest rate. 9,900 shares at =100P per share. AppendPay Corporation was engaged in digital financial services which helps to provide ease of doing business and convenience to the poor population in the microfinance and social enterprise sector. 10. Other Receivables Dividend income from financial assets at FVOCI amounted to P=1.9 million in 2020 and =0.8P million This account consists of: in 2019, respectively.
2020 2019 As of December 31, 2020 and 2019, management assessed that these investments are not impaired. Accrued administrative fee receivable (Note 8) P=188,322,824 P=122,693,153 Receivable from: Officers and employees 73,046,389 46,269,214 12. Investments in Subsidiaries and Associates Others 34,746,836 43,643,942 Other microfinance institutions 14,133,908 13,423,505 This account consists of the following investments: Accrued interest receivable (Note 6) 1,163,623 2,492,690 311,413,580 228,522,504 2020 2019 Allowance for credit losses (Note 16) (22,369,419) (21,362,554) Acquisition cost P=289,044,161 P=207,159,950 Subsidiaries: CMCL –99.7% owned in 2020 and 2019 P=40,678,594 P=35,406,594 Receivables from other microfinance institutions are short-term financing with fixed interest rate of RISE – 61.9% owned in 2020 and 2019 23,984,258 23,984,258 12.0%, which are granted to microfinance organizations and cooperatives operating in hard-to-reach 64,662,852 59,390,852 areas to improve the life of the poor communities. Normal term of these receivables is six months to Associates: one year. CARD SME Bank – 36.3% and 34.8% owned in 2020 and 2019 327,018,589 310,147,601 Others include billings made to international partners for technical assistance provided and shared CARD Bank – 31.1% owned in expenses paid by the Organization on behalf of these entities. 2020 and 2019 348,814,086 125,235,988 CMPMI –35.1 and 40.0% owned in 2020 and Interest income which is included in ‘Other income’ from the interest-bearing receivables amounted 2019 130,000,000 130,000,300 to =0.1P million and =0.7P million in 2020 and 2019, respectively (Note 25). CMRBI – 22.0% owned in 2020 and 2019 131,278,125 90,578,125 CMIT – 27.2% and 30.0% owned in 2020 and 2019 84,934,700 59,999,600 CLFC –19.0% owned in 2020 and 2019 19,000,000 19,000,100 CAMIA – 36.6% owned in 2020 and 2019 18,315,000 18,315,000 CMHI –14.0% owned in 2020 and 2019 17,500,000 17,500,000 CMA – 29.0% and 25.0% owned in 2020 and 2019 8,699,950 7,499,950 MIDAS – 10.7% owned in 2020 and 2019 799,999 799,999
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68 CARD, Inc. Annual Report 2020 Audited Financial Statements 69 - 28 - - 29 -
2020 2019 CMPH was established primarily to engage in the business of a holding company and to invest and CARD Hijos Tours – 40.0% owned in 2020 and acquire real property in accordance with the Corporation Code of the Philippines. 2019 P=799,985 P=799,985 CARD Publishing House – 30.0% owned in CMHI was registered with the SEC on January 29, 2016 primarily to acquire and hold investment 2020 and 2019 150,000 150,000 shares of stocks, any bonds, debentures and securities, or obligations, created, negotiated or issued by 1,087,310,434 780,026,648 any foreign or domestic corporation, association or other entity and to provide business support to its Accumulated equity in net earnings: subsidiaries, affiliates and other related companies to continuously enhance service, compliance and Balance at beginning of year 1,463,623,054 1,174,175,564 productivity and core practices. Share in net income of associates and subsidiaries for the year 97,789,736 597,830,549 CAMIA primarily engages in the business of selling life and nonlife insurance products and other Dividends received (307,696,249) (308,383,059) related services. 1,253,716,541 1,463,623,054 Accumulated equity in other comprehensive CLFC was incorporated to extend credit facilities to consumer and industrial, commercial or income: agricultural enterprises by direct lending, or by discounting or factoring commercial papers or account Balance at beginning of year (7,277,502) 7,928,454 receivables or by buying and selling contracts without quasi-banking activities. Share in comprehensive income/(loss) of associates and subsidiaries for the year 6,682,849 (15,205,956) CARD MRI Hijos Tours Inc. was registered with the SEC on July 11, 2017 primarily to provide a (594,653) (7,277,502) heritage tour program for local, inbound and outbound tours and to create a venue for inclusive P=2,405,095,174 P=2,295,763,052 tourism where CARD clients and their families will be involved.
In 2018, the Organization purchased additional 150,100 shares from CMCL amounting to CARD MRI Publishing House Inc. was established primarily to provide a development newspaper P=7.9 million that increased ownership interest in CMCL to 99.7%. and other publications to CARD MRI stakeholders and the public and to communicate microfinance and community development programs to the CARD MRI, the public and the community. In 2012, the Organization has investment in RISE amounting to =13.7P million which represents 32.6% ownership. At that time, this investment was accounted for in accordance with PAS 28, CMA was established on August 6, 2019 engaged in the manufacturing of drugs, cosmetics and other Investment in Associates and Joint Ventures. On May 14, 2013, the Organization and Ad Jesum similar goods. Development Foundation (AJDF), Inc. executed a dation of payment, wherein AJDF transferred 3,430 common shares of RISE to the Organization. The transfer led to 61.9% ownership interest of MIDAS is the credit bureau for microfinance institutions (MFIs) in the Philippines. It is the data the Organization on RISE, thus the change in the Organization’s economic interest in RISE from sharing system that allows MFIs to submit reports, send inquiries, and retrieve results on the borrower significant influence to control, which was accounted for in accordance with PFRS 3, Business information. Combination. Except for CARD SME Bank, CAMIA, CMIT, CMRBI, CMA, and MIDAS, the principal place of CARD SME Bank, Inc. is a thrift bank which offers working capital financing to businesses engaged business of associates is in M. L. Quezon Street, City Subdivision, San Pablo City, Laguna. CARD in agricultural services, industry and housing and provides diversified financial and allied services for SME Bank, CAMIA and CMIT’s principal place of business is located at 120 M. Paulino Street cor. its chosen market and constituents especially for small and medium enterprises, microfinance and Burgos Street, San Pablo City, Laguna. CMRBI’s principal place of business is at P. Guevarra St., individuals. As at December 31, 2020 and 2019, the CARD SME Bank has existing thirty-six (36) cor. Aguirre St., Brgy. Poblacion 2, Sta. Cruz, Laguna. CMA’s principal office is located at Unit and thirty-three (33) branches, respectively. 2007-2008 Jollibee Plaza F. Ortigas lr. Road, Ortigas Center, Pasig City. MIDAS’s principal office is located at 3F TSKI Corporate Office, National Highway, Brgy. Mali-ao, Palvia, Iloilo. CARD Bank, a microfinance-oriented rural bank, is currently engaged in extending microcredit and rural credit to small farmers and tenants and to deserving rural industries or enterprises. CARD Bank The breakdown of dividends from associates is shown below: offers a wide range of products and services such as deposit products, loans, and treasury that cater mainly to the consumer market. 2020 2019 CARD Bank P=233,207,154 P=172,892,526 CMRBI was established primarily to engage in the business of rural banking as defined and CARD SME Bank 21,185,475 53,376,442 authorized under RA No. 3779, as amended, such as granting loans to small farmers and to deserving CAMIA 20,146,500 9,157,500 rural enterprises, as well as receiving deposits in accordance with the regulations promulgated by the CMIT 14,935,167 8,160,010 Monetary Board. CMRBI 13,200,000 55,440,000 CLFC 4,750,000 9,310,000 CMIT was established primarily to provide CARD MRI’s major information technology services. As CMPHI 150,893 – a major service offered to its sister institutions, integrated solutions for microfinance and micro- MIDAS 121,060 46,581 insurance has become the area of specialization of CMIT. Total P=307,696,249 P=308,383,059
*SGVFSM007913* *SGVFSM007913* 70 CARD, Inc. Annual Report 2020 Audited Financial Statements 71 - 31 - – – – – 13. Property and Equipment 17,821 621,867 353,626 601,525 601,525 MIDAS MIDAS 620,972 620,972 2,169,948 1,331,378 8,169,059 1,031,161 4,425,461 3,804,488 P = P=10,804,789 The composition of and movements in this account follow: – – Building and Transportation Furniture and Right-of-use House 80,135
CARD Land Improvements Equipment Equipment Asset Total House 68,476 CARD 692,314 765,516 765,516 312,263 870,229 339,769 800,212 800,212 5,577,678 4,441,551 2020 3,244,554 5,022,410 3,713,327 Publishing P=3,814,808 Publishing *SGVFSM007913* P = Cost Balance at beginning of year P=79,888,321 P=98,305,016 P=42,749,412 P=119,348,438 P=41,646,128 P=381,937,315 –
– Additions 8,587,713 198,900 23,324,461 53,667,266 85,778,340 (222) (222)
Tours Disposals – – (1,368,974) (148,889) – (1,517,863) 10,133 Tours 15,867 316,117 583,712 (917,727) (917,727) 332,948 554,189
2,265,299 3,132,304 Balance at end of year 79,888,321 106,892,729 41,579,338 142,524,010 95,313,394 466,197,792 2,980,728 2,936,814 2,694,789 P=2,104,007 P = Accumulated Depreciation CARD Hijos CARD HijosCARD and Amortization
– Balance at beginning of year – 63,235,439 40,710,865 95,339,805 18,724,046 218,010,155 Depreciation and 99,183 CMHI CMHI 91,167 201,564 145,642 amortization – 2,073,477 551,920 13,185,360 30,213,285 46,024,042 129,568 104,244 306,254 177,226 4,897,589 8,616,205 3,718,616 69,149,001 5,791,722 3,705,350 3,882,576 P=4,052,851 35,514,634
P = Disposals – – (1,368,974) (48,823) – (1,417,797) Balance at end of year – 65,308,916 39,893,811 108,476,342 48,937,331 262,616,400
– Net Book Value P=79,888,321 P=41,583,813 P=1,685,527 P=34,047,668 P=46,376,063 P=203,581,392 – MI 257,056 257,056 CMPMI CMP Building and Transportation Furniture and Right-of-use 46,902,314 25,712,449 1,488,406 1,488,406 29,153,723 28,438,882 46,418,675 45,433,490 51,048,473 31,281,400 29,574,512 372,428,302 P=46,755,713 349,813,541 P = Land Improvements Equipment Equipment Asset Total 2019 Cost Balance at beginning of year P=44,139,116 P=74,376,645 P=43,452,989 P=100,588,362 P=– P=262,557,112 CLFC CLFC 262,441 Effect of adoption of (252,221) 30,680,314 30,942,754 73,102,630 72,850,409 239,551,728 145,066,934 237,545,974 184,393,168 141,401,112 PFRS 16 – – – – 37,113,376 37,113,376 161,527,250 321,503,635 207,176,399 101,509,842 241,731,934 137,082,866 P = Balance at beginning of year
– as restated 44,139,116 74,376,645 43,452,989 100,588,362 37,113,376 299,670,488 Additions 35,749,205 23,928,371 2,179,304 19,655,498 4,532,752 86,045,130 December 31, 2020 December 31, 2019 31, December
CMRBI Disposals – – (2,882,881) (895,422) – (3,778,303) CMRBI 5,674,357 (1,119,648) (6,794,006)
979,242,575 971,210,237 Balance at end of year 79,888,321 98,305,016 42,749,412 119,348,438 41,646,128 381,937,315 (11,368,945) 455,399,269 382,674,046 371,305,101
4,733,311,834 3,114,520,259 1,056,224,675 1,572,192,514 1,024,757,790 Accumulated Depreciation P = - 30
– and Amortization – – – Balance at beginning of year – 61,387,555 43,445,818 86,989,640 – 191,823,013 CMA CMA 44,922 Depreciation and 244,635 5,460,709 2,085,177,879 5,460,709 4,717,381 5,310,965 6,644,055 5,275,495,991 6,644,055 8,030,091 8,030,091
2,065,644 1,382,558 amortization – 1,847,884 147,927 9,245,587 18,724,046 29,965,444 (1,155,537) (1,155,537) 15,410,607 P=22,844,697 P=4,314,759,933 P=177,805,097 P=4,314,759,933 P=22,844,697 P = Disposals – – (2,882,880) (895,422) – (3,778,302) Balance at end of year – 63,235,439 40,710,865 95,339,805 18,724,046 218,010,155 – – Net Book Value P=79,888,321 P=35,069,577 P=2,038,547 P=24,008,633 P=22,922,082 P=163,927,160 5,194 CAMIA CAMIA 78,590,130 93,977,471 36,938,062 21,448,496 38,704,877 19,848,155 (18,856,722) 75,246,189 50,850,569 35,782,885 38,960,079 57,289,020 57,294,214 P=29,536,006 The Organization granted CMDI the usufruct over certain properties consisting of land and 119,074,137 P = improvements amounting to =3.7P million for use as CMDI’s office and training center (Note 27). – CMIT CMIT Depreciation on property and equipment and investment properties is recorded under the following 867,015 2,642,941 80,716,327 91,113,414 93,756,355 1,730,692 45,379,982 78,824,195 79,691,210 182,174,422 287,461,706 162,375,796
237,829,430 163,660,492 103,472,617 286,466,794 expense accounts in the statement of revenue over expenses, which also include the depreciation on P=297,479,414 P = investment properties:
2020 2019 41,970,407 24,450,989 362,294,544 140,657,095 181,970,407 546,811,349 CARD Bank CARD Project related expenses (Note 22) P=44,293,438 P=28,705,923 1,857,323,938 5,860,701,508 4,482,146,875 1,378,554,632 1,403,005,621 16,212,647,990 13,218,268,667 P = Health program 322,201 212,852 Research program 24,796 – CARD CARD
2,853,502 Other expenses (Note 25) 3,724,684 5,017,326 78,548,092 18,853,502 21,314,399 SME BankSME CARD Bank SME Bank 365,609,937 2,117,643,786 365,609,937 (13,062,748) 505,195,937 355,816,044 342,753,305 6,934,281,560 13,424,289,783 6,934,281,560 3,787,037,846 1,462,052,063 3,646,380,751 1,394,833,796 P=33,936,101
7,342,002,330 5,208,462,817 1,156,878,691 2,370,502,389 1,868,423,429 P=48,365,119 P=8,191,551,433 P=15,952,321,645 P=8,191,551,433 P = income fund balance fund balance over expenses income (loss) income (loss) over expenses comprehensive income (loss) comprehensive income (loss) The following tables present the summarized financial information of associates as at and for the years ended December 31, 2019: 2020 ended December and for the years as at and of associates financial information the summarized tables present The following Statement of liabilities and assets, Current assets Noncurrent assets Current liabilities Noncurrent liabilities Gross Expenses Net income Other Total comprehensive income Statement of liabilities and assets, Current assets Noncurrent assets Current liabilities Noncurrent liabilities Statement of revenue Gross income Expenses Net income Statement of comprehensive Other Total comprehensive income Statement of comprehensive Statement of revenue *SGVFSM007913*
72 CARD, Inc. Annual Report 2020 Audited Financial Statements 73 - 32 - - 33 -
Gain on disposal of property and equipment of the Organization resulted to =0.2P million and 15. Other Assets =0.8P million in 2020 and 2019, respectively, which is included under ‘Other income’ in the statement of revenue over expenses (Note 25). This account consists of:
As at December 31, 2020 and 2019, the cost of fully depreciated assets still in use by the 2020 2019 Organization amounted to =169.3P million and =152.9P million, respectively. Financial assets Security deposit P=14,065,849 P=19,262,307 Others 5,280,391 5,925,117 14. Investment Properties 19,346,240 25,187,424 Nonfinancial assets The composition of and movements in this account follow: Prepaid Expenses 43,732,487 42,125,643 Supplies on hand 37,187,706 – 2020 Intangible assets 3,622,862 – Building and Deposit for stock subscription 385,640 95,850,040 Land Improvements Total 84,928,695 137,975,683 Cost P=104,274,935 P=163,163,107 Balance at beginning of the year P=28,442,566 P=66,801,632 P=95,244,198 Additions – – – Others included in financial assets represent loans lent by the Organization to Meada Rabong PLC to Balance at end of year P=28,442,566 P=66,801,632 P=95,244,198 assist the latter in providing financial services to micro-entrepreneurs in Cambodia and receivables Accumulated Depreciation from KFarm and Unihealth Security deposit includes security deposits on unit office rentals and Balance at beginning of year – 52,810,220 52,810,220 motorcycle and computers leased from CLFC. Depreciation and amortization – 2,341,077 2,341,077 Balance at end of year – 55,151,297 55,151,297 Nonfinancial assets represent deposit for stock subscription to CARD Bank, Inc. Prepaid expenses Allowance for impairment losses (Note 16) (5,631,320) – (5,631,320) includes advances to office rental, suppliers and contractors. Supplies on hand includes accountable Net Book Value P=22,811,246 P=11,650,335 P=34,461,581 forms, toners and cleaning materials issued to unit offices which are not yet consumed. Intangible assets are portion of payment made for the Core Microfinance System (CMFS) project not yet fully 2019 implemented and on pilot stage. Building and Land Improvements Total Cost 16. Allowance for Credit and Impairment Losses Balance at beginning of the year P=28,442,566 P=66,329,412 P=94,771,978 Additions – 472,220 472,220 The movements in the allowance for credit and impairment losses follow: Balance at end of year P=28,442,566 P=66,801,632 P=95,244,198 Accumulated Depreciation 2020 Balance at beginning of year – 48,839,563 48,839,563 Receivables from Members (Note 8) Project Member Other Investment Depreciation and amortization – 3,970,657 3,970,657 Assistance Assistance Receivables Properties Other Assets Balance at end of year – 52,810,220 52,810,220 Receivable Receivable Total (Note 10) (Note 14) (Note 15) Total Balance at beginning P=98,600,709 P=23,649,209 P=122,249,918 P=21,362,554 P=5,631,319 P= – P=149,243,791 Allowance for impairment losses (Note 16) (5,631,320) – (5,631,320) Provision for credit losses Net Book Value P=22,811,246 P=13,991,412 P=36,802,658 and impairment losses 90,523,688 12,580,298 103,103,986 1,006,865 – – 104,110,851 Accounts written-off (21,193,487) (2,454,324) (23,647,811) (23,647,811) The Organization leased properties to CARD Bank, CARD MBA, CARD BDSF, CARD SME Bank, Balance at end of year P=167,930,910 P=33,775,183 P=201,706,093 P=22,369,419 P=5,631,319 P= – P=229,706,831
CMDI, CLFC, BotiCARD and MLNI. Rent income from investment properties included in ‘Other 2019 income’ in the statements of revenue over expenses totaled to =6.9P million both in 2020 and 2019, Receivables from Members (Note 8) Project Member Other Investment respectively (Note 25). Direct operating expenses on investment properties that generated rental Assistance Assistance Receivables Properties Other Assets income in 2020 and 2019 included under ‘Depreciation and amortization’, ‘Taxes and licenses’ and Receivable Receivable Total (Note 10) (Note 14) (Note 15) Total ‘Insurance expense’ amounted to P=4.7 and =4.4P million in 2020 and 2019, respectively. Balance at beginning P=97,128,303 P=28,998,846 P=126,127,149 P=16,131,694 P=5,022,589 P=504,864 P=147,786,296 Provision for credit losses and impairment losses 12,354,834 (3,923,876) 8,430,958 5,230,860 608,731 (504,864) 13,765,685 Depreciation on investment properties amounting to =2.3P million and =4.0P million for 2020 and 2019, Accounts written-off (10,882,428) (1,425,761) (12,308,189) – – – (12,308,189) Balance at end of year P=98,600,709 P=23,649,209 P=122,249,918 P=21,362,554 P=5,631,320 P=– P=149,243,792 respectively, is included under ‘Other expenses’ in the ‘Other administrative expenses’ in the statements of revenue over expenses (Note 25).
*SGVFSM007913* *SGVFSM007913*
74 CARD, Inc. Annual Report 2020 Audited Financial Statements 75 - 34 - - 35 -
Summary of provisions for credit and impairment losses follows: ECL Staging Stage 1 Stage 3 Total 2020 2019 Other movements without Receivable from members P=103,103,986 P=8,430,958 provision impact Other receivables 1,006,865 5,230,860 Write-offs and other movements P=– (P=12,308,189)) (P=12,308,189)) Investment properties – 608,731 Total movements without Other assets – (504,864) provision impact – (12,308,189)) (12,308,189) Total P=104,110,851 P=13,765,685 Loss allowance at December 31, 2019 P=8,381,976 P=113,867,942 P=122,249,918
At the current level of allowance for impairment and credit losses, management believes that the The corresponding movement of the gross carrying amount of the receivables from members, Organization has sufficient allowance to cover any losses that may be incurred from the including accrued administrative fee receivable, are shown below: non-collection or non-realization of its loans and receivables and other risk assets. ECL Staging The tables below illustrate the movements of the allowance for impairment and credit losses during Stage 1 Stage 3 Total the year (effect of movements in ECL due to transfers between stages are shown in the total column): Gross carrying amount at January 1, 2020 P=8,106,850,813 P=136,890,368 P=8,234,741,181 ECL Staging Movements with provision impact Stage 1 Stage 3 Total Transfers: Loss allowance at January 1, 2020, P=8,381,976 P=113,867,942 P=122,249,918 Transfer from Stage 1 to Stage 3 (426,443,521) (426,443,521) – Movements with P&L impact Transfer from Stage 3 to Stage 1 8,375,432,580 8,375,432,580 – Transfers: New financial assets originated or Transfer from Stage 1 to Stage 3 (198,426,405) 198,426,405 – purchased 338,844,135 – 338,844,135 Transfer from Stage 3 to Stage 1 3,279,688 (3,279,688) – Movements in outstanding balances 357,148,570 8,348,821,992 8,705,790,562 New financial assets originated or Financial assets derecognized during purchased 158,966,571 – 158,966,571 the period (8,375,432,580) (87,599,386) (8,463,031,966) Changes in PDs/LGDs/EADs 28,295,514 (126,897,621) (98,602,107) Write-offs and other movements – (23,647,811) (23,647,811) Financial assets derecognized during Gross carrying amount at the period 3,279,688 39,459,834 42,739,522 December 31, 2020 P=8,376,399,997 P=425,476,104 P=8,801,876,101 Total net P&L charge during the period (4,604,944) 107,708,930 103,103,986 ECL Staging Other movements without Stage 1 Stage 3 Total P&L impact Gross carrying amount at P=8,364,606,723 P=76,857,159 P=8,441,463,882 Write-offs and other movements – (23,647,811) (23,647,811) January 1, 2019 Total movements without Movements with provision impact P&L impact – (23,647,811) (23,647,811) Transfers: Loss allowance at December 31, 2020 P=3,777,032 P=197,929,061 P=201,706,093 Transfer from Stage 1 to Stage 3 (100,684,190)) 100,684,190 – Transfer from Stage 3 to Stage 1 234,306 (234,306)) – ECL Staging New financial assets originated or 8,171,256,677 – 8,171,256,677 Stage 1 Stage 3 Total purchased Loss allowance at January 1, 2019, P=75,186,797 P=50,940,352 P=126,127,149 Movements in outstanding balances 6,239,130) 1,012,491 7,251,621 Movements with provision impact Financial assets derecognized during (8,334,801,833)) (29,120,977)) (8,363,922,810)) Transfers: the period Transfer from Stage 1 to Stage 3 (59,837,969)) 59,837,969 – Write-offs and other movements – (12,308,189)) (12,308,189)) Transfer from Stage 3 to Stage 1 168,914 (168,914) – Gross carrying amount at New financial assets originated or December 31, 2019 P=8,106,850,813 P=136,890,368 P=8,243,741,181 purchased 67,624,200 – 67,624,200 Changes in PDs/LGDs/EADs (271,321) 35,187,697 34,916376 Financial assets derecognized during the period (74,488,645)) (19,620,973) (94,109,618) 17. Due to Members Total net provision charged during the period (66,804,821) 75,235,779 8,430,958 Due to members represents the aggregate contribution of members for capital build-up purposes which then serve as partial security for repayable project assistance receivable granted to them (Forward) (Note 8). Due to members is built up through weekly members’ contribution of at least =50.00P per week.
*SGVFSM007913* *SGVFSM007913*
76 CARD, Inc. Annual Report 2020 Audited Financial Statements 77 - 36 - - 37 -
Administrative fee expenses related to ‘Due to Members’ under ‘Interest expense’ in ‘Project related 2020 2019 expenses’ amounted to =81.1P million and P=85.4 million in 2020 and 2019, respectively (Note 22). Accrued expenses P=39,570,914 P=165,842,084 Accrued interest 7,799,067 6,760,225 Due to affiliates (Note 27) 4,259,457 5,207,343 18. Borrowings 391,237,816 539,584,590 Nonfinancial liabilities This account consists of borrowings from financing institutions bearing annual interest rates ranging Withholding taxes payable 3,030,483 1,650,728 from 0.0% to 5.0% and 0.0% to 6.0% in 2020 and 2019, respectively, and are payable in annual, Income tax payable 20,102,227 34,817,424 lump-sum and quarterly installments until 2021. Financing obtained from creditors are used to fund Others 15,682,549 17,298,193 the Organization’s project assistance receivable. 38,815,259 53,766,345 P=430,053,075 P=593,350,935 The amendments to PFRS 7 require the Organization to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under Accrued expenses include accruals for vacation leave, client trainings and development, unenforceable master meeting arrangements. As of December 31, 2020 and 2019, the borrowings’ transportation, supplies and materials and other expenses. Accruals for vacation leave of the financial collateral has fair values of P=2.4 billion and P=1.5 billion which comes from project Organization amounted to =35.2P million and =110.1P million in 2020 and 2019, respectively. assistance receivable (Note 8). These arrangements do not meet PAS 32 offsetting criteria. CARD Community Scholarship Program pertains to accruals of educational support to the The Organization has available credit lines with various financial institutions amounting to =3.8P Organization's members' children. billion and P=2.8 billion as at December 31, 2020 and 2019, respectively. Funds held-in-trust represents grants that are alloted for a specific purpose which will be returned to the donor if the specific purpose is not complied with. In 2020 and 2019, interest in borrowings amounting to =42.2P million and =49.2P million, respectively, is presented under ‘Interest expense’ in statement of revenue over expenses (Note 22). Accounts payable includes claims of resigned staffs on their basic pay and billings from suppliers and contractors. Debt Covenants The Agreement covering the borrowings provide for restrictions and requirements which include the Other nonfinancial liability refers to statutory obligations (e.g., SSS, Philhealth and Pag-ibig) and following negative and financial covenants, among others: VAT payable. PAR >30 days (including the restructured loans) should never exceed 3%; Operational self-sufficiency ratio should never be lower than 100% at all times; Debt to Equity (D/E) ratio should not be higher than 4 to 1; and 20. Maturity Analysis of Assets and Liabilities Formulate and implement an action plan to address the findings and recommendations contained in the Planet Rating Report in relation to practices of the Client Protection Principles. The table below shows an analysis of the assets and liabilities analyzed according to whether they are expected to be recovered or settled within one year and beyond one year from reporting date (in As of December 31, 2020 and 2019, the Organization is compliant with the above mentioned debt thousands). covenants. 2020 2019 Within Beyond Within Beyond One Year One Year Total One Year One Year Total 19. Accounts Payable and Other Liabilities Financial Assets Cash and cash equivalents P=1,402,624 P= – P=1,402,624 P=1,701,908 P=– P=1,701,908 Short-term investments 410,853 – 410,853 412,305 – 412,305 This account consists of: Receivables 9,156,047 6,645 9,162,692 8,357,461 5,355 8,362,816 Financial Assets at FVOCI – 45,095 45,095 13,823 13,823 2020 2019 Other assets 80,920 19,732 100,652 13,260 11,927 25,187 Nonfinancial Assets Financial liabilities Investment in subsidiary and associates – 2,405,095 2,405,095 – 2,295,763 2,295,763 Accounts payable P=127,866,441 P=96,683,476 Property and equipment – 466,198 466,198 – 381,937 381,937 CARD Community Scholarship Program 66,523,310 136,225,248 Investment properties – 95,244 95,244 – 95,244 95,244 Retirement asset – 452,483 452,483 – 373,170 373,170 Funds held in trust 50,411,087 53,649,866 Other assets – 3,623 3,623 137,976 – 137,976 Subscription payable (Note 27) 48,065,100 52,245,169 11,050,444 3,494,115 14,544,559 P=10,622,910 P=3,177,219 13,800,129 Lease liability (Note 26) 46,742,440 22,971,179 (Forward) (Forward)
*SGVFSM007913* *SGVFSM007913*
78 CARD, Inc. Annual Report 2020 Audited Financial Statements 79 - 38 - 871,449,947 373,169,624 913,497,969 2020 2019 452,482,660 December 31 (385,044,608) (113,235,715) Within Beyond Within Beyond – – – (314,250,995) One Year One Year Total One Year One Year Total – (146,764,314) Allowance for impairment and credit losses (P=229,707) (P=149,244) 33,659,799 33,659,799 35,995,860 35,995,860 by employer Unamortized discount on loan Contribution by employer December 31 modification (6,105) – Contribution Accumulated depreciation (317,768) (270,820) l Total Assets P=13,990,979 P=13,380,065 *SGVFSM007913* Subtota Subtotal 1,144,808 69,432,760 (32,260,141) (15,935,249) (27,255,340) 155,335,691 112,623,349 Financial Liabilities (121,930,742) Accounts payable, accrued expenses and P=335,041 P=95,012 P=430,053 P=285,624 P=253,961 P=539,585 – – – P = other liabilities P= – Due to members 4,549,353 – 4,549,353 4,424,438 – 4,424,438 the effect the the effectthe of limiting of limiting Changes in Borrowings 1,686,156 48,020 1,734,176 1,182,740 15,222 1,197,962 net defined Changes in net defined (27,255,340) (27,255,340) asset ceiling asset 155,335,691 155,335,691 asset ceiling asset benefit to the Nonfinancial Liabilities benefit to the Accounts payable and accrued expenses – – – 53,766 – 53,766 – – – P = Total Liabilities P=6,570,550 P=143,032 P=6,713,582 P=5,946,568 P=269,183 P=6,215,751 P= – changes changes financial Actuarial financial Actuarial changes in changes changes in 23,464,100 23,464,100 (93,827,744) (93,827,744) arising from arising assumptions assumptions arising from – – 21. Retirement Plan – P = P= – changes changes Actuarial Actuarial changes in changes changes in 89,159,249 The Organization, CARD Bank, CARD MBA, CARD SME Bank, CAMIA, CARD BDSF, CMIT, 89,159,249 (28,102,998) (28,102,998) arising from arising assumptions demographic assumptions arising from Remeasurementsin comprehensive other income demographic
BotiCARD, CMDI, MLNI, RBI, CLFC, RISE and EMPC maintain a funded and formal income comprehensive other in Remeasurements – – – noncontributory defined benefit retirement plan - the CARD MRI Multi-Employer Retirement Plan – 2020 2019
(MERP) - covering all of their regular employees and CARD Group Employees’ Retirement Plan amount amount Return on (excluding plan assets Return on (excluding included in included plan assets net interest) included in (32,260,141) (32,260,141) (15,935,249) (Hybrid Plan) applicable to employees hired on or after July 1, 2016. MERP is valued using the (15,935,249) net interest) projected unit cost method and is financed solely by the Organization and its related parties. – – – – – P = P = P= – MERP and the Hybrid Plan are compliant with the requirements of RA No. 7641 (Retirement Law). 17,623,392
MERP provides lump sum benefits equivalent to up to 120% of final salary for every year of credited - 39 (P=17,623,392) Transfer from Transfer (to) plan assets (to) plan assets service, a fraction of at least six (6) months being considered as one whole year, upon retirement, Transfer from – – – P = death, total and permanent disability, or voluntary separation after completion of at least one year of P= – service with the participating companies. 8,929,105 (8,929,105) 10,478,169 (10,478,169) Benefits paid Benefits The Hybrid Plan provides a retirement benefit equal to 100% of the member’s employer accumulated value (the Organization’s contributions of 8% plan salary to Fund A plus credited earnings) and expense* 100% of the member’s employee accumulated value (member’s own contributions up to 10% of plan expense* Benefits paid (4,905,107) (6,273,259) 63,781,972 48,539,908 (49,485,595) (19,201,484) (68,382,233) (26,115,584) Net pension salary to Fund B plus credited earnings), if any. Provided that in no case shall 100% of the employer Net pension accumulated value in Fund A be less than 100% of plan salary for every year of credited service. (6,273,259) 63,781,972 27,324,292 48,539,908 Total retirement expense in 2020 and 2019 related to Hybrid Plan amounted to P=26.1 million and 20,935,178 Net interest Net (17,256,196) (19,201,484) (21,331,471) Net interest over expenses over P=4.9 million, respectively. over expenses – – – P = P= – cost The latest actuarial valuation report covers reporting period as of December 31, 2020. cost Net benefit cost in the statement of revenue (32,229,399) (32,229,399) (47,050,762) (47,050,762) Net benefit cost in the statement the of revenue in cost Net benefit Current service Current service Current January 1 January January 1 January 816,746,486 343,270,124 (224,106,440) (249,369,922) (385,044,608) (113,235,715) P = P = P=871,449,947 P=373,169,624 benefit obligation asset (liability) benefit obligation asset (liability) Changes in the net defined benefit asset (liability) of the Organization for 2020 and 2019 are as follow: and 2019 are for 2020 Organization (liability) of the asset defined benefit the Changes in net Fair value of plan assets Present value of defined *Includedwages and in ‘Salaries, employee benefits’ under ‘Project related and expenses’ expenses’ ‘Other in the statement of revenue over expenses Fair value of assets plan Present value of defined ceiling asset of Effects Net defined benefit *Includedwages and in ‘Salaries, employee benefits’ under ‘Project related and expenses’ expenses’ ‘Other in the statement of revenue over expenses Effectsof asset ceiling *SGVFSM007913* benefit defined Net
80 CARD, Inc. Annual Report 2020 Audited Financial Statements 81 - 40 - - 41 -
The maximum economic benefit available is a combination of expected refunds from the plan and 22. Project Related Expenses reductions in future contributions. The fair value of plan assets by each class as at the end of the reporting period are as follow: This account consists of:
2020 2019 2020 2019 Cash and cash equivalents P=422,766,860 P=296,815,852 Salaries, wages and employee benefits (Note 27) P=1,473,353,601 P=1,933,498,864 Investments: Transportation and travel 317,404,229 569,164,059 Debt securities 388,967,435 483,480,431 Rental expenses (Note 26) 188,187,466 213,798,326 Mutual funds 4,476,140 4,357,250 Provision for loan modification 185,825,740 – Real estate 76,368,430 – Interest expense (Notes 17 and 18) 124,952,793 136,195,366 Receivables – 71,807,476 Provision for credit and impairment losses (Note 16) 104,110,851 13,156,954 Others 20,919,104 14,988,938 Supplies and materials 93,617,250 186,403,961 Fair value of plan assets P=913,497,969 P=871,449,947 Janitorial, messengerial and security 77,185,641 95,356,994 Information technology (Note 27) 68,380,232 75,375,053 All plan assets do not have quoted prices in the active market except government bonds. Cash and Others 57,130,687 67,806,830 cash equivalents are with reputable financial institutions and related parties and are deemed to be Taxes and licenses 54,693,570 198,729,247 standard grade, while mutual funds, receivables and other assets are unrated. Depreciation and amortization (Note 13) 44,293,438 28,705,923 Staff training and development (Note 27) 43,317,283 171,449,494 The plan assets have diverse investments and do not have any concentration risk. Utilities 35,375,628 42,771,835 Program monitoring and evaluation 31,453,396 54,503,668 MERP performs an Asset-Liability Matching Study (ALM) annually. The overall investment policy Communication and postage 17,971,000 16,349,203 and strategy of the Organization’s defined benefit plans is guided by the objective of achieving an Repairs and maintenance 7,809,233 10,531,955 investment return which, together with contributions, ensures that there will be sufficient assets to pay Seminars and meetings 5,631,114 9,635,454 pension benefits as they fall due while also mitigating the various risk of the plans. Client training and development 169,097 42,228,255 Insurance expense 1,445,207 362,318 The latest actuarial valuation study of the retirement plan covers December 31, 2020. The principal Reversal of scholarship expenses (5,881,690) – assumptions used in determining pension for the defined benefit plan are shown below: P=2,926,425,766 P=3,866,023,759 2020 2019 Other expenses include representation, periodicals and magazines, membership and dues, supervision Discount rate 4.0% 5.5% and examination, management and other professional fees, advertising and publicity and Future salary increases 3.0% 5.0% miscellaneous expenses. The average duration of the defined benefit retirement liability at the end of the reporting period is 14.0 years for the Organization. 23. Income and Other Taxes The sensitivity analysis below has been determined based on reasonably possible changes of each significant assumption on the defined benefit obligation as at the end of the reporting period, On November 3, 2015, RA No. 10693 otherwise known as “An Act Strengthening Nongovernment assuming if all other assumptions were held constant: Organizations (NGOs) Engaged in Microfinance Operations for the Poor” (the “Microfinance NGOs Act” or the “Act”) was approved and signed by the President of the Republic of the Philippines. The 2020 2019 law was enacted by virtue of the policy of the State to pursue a program of poverty eradication Increase of 1.0% Decrease of 1.0% Increase of 1.0% Decrease of 1.0% wherein poor Filipino families shall be encouraged to undertake entrepreneurial activities to meet Discount rate (P=48,477,255) P=39,439,857 (P=59,187,779) P=48,343,639 their minimum basic needs. The law shall apply to all NGOs with the primary purpose of Salary rate 48,497,962 (40,150,743) 58,903,488 (48,990,296) implementing a microenterprise development strategy and providing microfinance programs, products and services for the poor. These shall be referred to as “Microfinance NGOs”. Shown below are the 10-year maturity analyses of the undiscounted benefit payments of the Organization:
2020 2019 Less than 1 year P=17,051,691 P=20,442,769 More than 1 year to 5 years 87,810,665 103,613,041 More than 5 years to 10 years 140,843,553 185,001,945
The Organization plans to contribute =38.4P million to the defined benefit retirement plan in 2021. *SGVFSM007913* *SGVFSM007913*
82 CARD, Inc. Annual Report 2020 Audited Financial Statements 83 - 42 - - 43 -
Under RA No.10693, a duly registered and accredited Microfinance NGO shall pay a two percent The Organization realized the following grants/donations in 2020 and 2019: (2.00%) tax based on its gross receipts from microfinance operations in lieu of all national taxes. Provided, that preferential tax treatment shall be accorded only to NGOs whose primary purpose is 2020 2019 microfinance and only on their microfinance operations catering to the poor and low-income Aboitiz Foundation P=2,689,435 P=10,059,160 individuals in alignment with the main goal of this Act to alleviate poverty. The non-microfinance Zero Dropout Educational Program 808,491 748,985 activities of Microfinance NGOs shall be subject to all applicable regular taxes. Radiowealth Financing Company – 30,000,000 Canadian Cooperative Association – 1,954,298 In August 16, 2016, the Implementing Rules and Regulations (the IRR) of the Microfinance NGOs Others 1,048,154 – Act was signed. The IRR provides for a transitional accreditation that upon effectivity of the Act, P=4,546,080 P=42,762,443 Microfinance NGOs which are certified by the SEC to have no derogatory information shall be deemed accredited for one (1) year, unless earlier revoked by the Council for good cause after review. Donations from Aboitiz Foundation represent funds to establish new branches, subject to the The Organization obtained its certification from the SEC on August 2, 2016. condition that such shall be used solely as funding source for the microfinance loans to be granted to qualified applicants of the new branches. Beginning September 2016, the Organization adopted the new law and paid income taxes based on the 2.00% of all its gross receipts from microfinance operations. Total gross receipts from Grants for the Zero Dropout Educational Program represent funds received from various donors for microfinance operations for 2020 and 2019 amounted to P=2,743.7 million and =4,410.1P million, the educational loan fund component of such program. The educational loan fund serves as a respectively, while the related income tax expense based on the 2% preferential rate for the period revolving fund that grants loans to CARD MRI member and non-member borrowers for the purpose ended 2020 and 2019 amounted to =54.9P million and =88.2P million, respectively. of enabling them to enroll their children in elementary school and for these children to complete their elementary education. The provision for income tax consists of: Grant fund receipts from Radiowealth Financing Company represent loans to the Organization 2020 2019 amounting to P=30.0 million availed in 2014 at zero percent interest rate, payable after five years upon Current income tax P=57,327,138 P=100,874,086 release thereof. Upon maturity in 2019, the loan was converted into a grant to the Organization. Final tax 6,485,291 11,438,295 P=63,812,429 P=112,312,381 Grants from the Canadian Cooperative Association represent funds for the implementation of “Project Bagong Araw Philippines: Rebuilding through Microinsurance and Women’s Enterprise in the The reconciliation between the statutory income tax and the effective income tax of the Organization Philippines.” This project commenced in March 2016 and was successfully completed in March follows: 2019.
2020 2019 25. Other Income and Other Administrative Expenses Statutory income tax P=27,198,245 P=327,980,231 Income tax effects of: Other income consists of: Income subject to preferential tax of 2% (768,245,838) (1,234,842,024) Expenses from tax exempt activities 893,102,233 1,205,351,843 2020 2019 Nontaxable income (29,336,921) (180,935,566) Interest on loan modification (Note 8) P=179,720,856 P=– Income subject to final tax (58,905,290) (5,242,103) Interest (Notes 6, 7 and 27) 32,426,450 54,785,329 P=63,812,429 P=112,312,381 Rent (Notes 14 and 27) 6,878,643 6,887,086 Other finance related services 2,505,492 2,250,111 Dividend income (Notes 11 and 27) 1,896,768 816,000 Miscellaneous 7,564,688 5,451,617 24. Grants P=230,992,897 P=70,190,143 Grants consist of donations received from various donors in which the Organization may freely use the amount for its mandated activities. The Organization recognized the grants in profit or loss on a Other finance related services income pertains to the gain on sale of property and equipment, cash systematic basis over the periods in which the entity recognizes expenses for the related costs for overages and recoveries of receivables previously written-off. which the grants are intended to compensate. Miscellaneous income includes technical assistance fees from international partners, interest income from convertible loan, leasing income and other small value-income that are not recurring.
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84 CARD, Inc. Annual Report 2020 Audited Financial Statements 85 - 44 - - 45 -
Other administrative expenses consist of: As of December 31, 2020, the carrying amount of ‘lease liabilities’ in the Organization is as follow:
2020 2019 Balance at beginning of year P=22,971,179 Salaries, wages and employee benefits (Note 21) P=15,204,610 P=21,342,699 Additions 52,061,295 Program monitoring and evaluation 5,243,068 26,701,582 Interest expense 1,701,068 Depreciation and amortization (Notes 13 and 14) 3,724,684 5,017,326 Payments (29,991,102) Transportation and travel 3,220,528 14,406,027 P=46,742,440 Rental expenses 3,199,394 1,913,577 Management and other professional fees 2,283,320 5,939,824 Shown below is the maturity analysis of the undiscounted lease payments: Miscellaneous (Note 13) 2,943,282 10,563,679 Supplies and materials 1,548,481 1,566,193 2020 Seminars and meetings 833,746 13,676,017 Within one year P=100,490,283 Staff training and development 511,717 3,436,470 After one year but within two years 13,644,397 Taxes and licenses 438,894 1,897,130 P=114,134,680 Representation (Note 23) 345,842 612,125 P=39,497,566 P=107,072,649 As a Lessor The Organization’s operating lease contracts generally have terms of three to five years. Operating Miscellaneous expense includes client training and development, communication and postage, lease income included as ‘Rent’ under ‘Other income’ in 2020 and 2019 amounted to P=6.9 million insurance, repairs and maintenance, periodicals and magazines, advertising and publicity, information (Note 25). technology, utilities, and miscellaneous. The future aggregate minimum rentals receivable under operating lease of the Organization are as 26. Lease Contracts follow: As a Lessee The Organization leases the premises occupied by its unit offices, as well as staff houses of its 2020 2019 employees. The lease contracts are for periods ranging from three (3) months to twenty-four (24) Within one year P=6,878,643 P=6,934,883 months and are renewable upon mutual agreement between the Organization and the lessors. In 2020 After one year but within five years P=19,969,852 P=18,540,860 and 2019, total ‘Rental expense’ under ‘Project related expenses’ amounted to P=188.2 million and P=213.8 million, respectively (Note 22). 27. Related Party Transactions The Organization recognized rent expense amounting to P=191.4 million and P=215.7 million in 2020 and 2019, respectively. Rent expense in 2020 pertains to expenses from short-term leases and leases Parties are considered to be related if one party has the ability, directly or indirectly, to control the of low-value assets. other party or exercise significant influence over the other party in making financial and operating decisions. The Organization’s related parties include: In 2020 and 2019, the Organization recognized interest income arising from amortization of security deposit amounted to P=0.1 million and P=0.4, respectively (Note 25). key management personnel, close family members of key management personnel and entities which are controlled, significantly influenced by or for which significant voting power is held by As of December 31, 2020, and 2019, the Organization has no contingent rent payable. key management personnel or their close family members; post-employment benefit plans for the benefit of the Management’s employees; and The following are the amounts recognized in the Organization’s statement of revenue over expenses: other related parties within the CARD MRI Group 2020 Depreciation expense of ROU assets included in property and The Organization has several business relationships with related parties. Transactions with such equipment P=30,213,285 parties are made in the ordinary course of business and on substantially same terms, including interest Interest expense on lease liabilities 1,701,068 and collateral, as those prevailing at the time for comparable transactions with other parties. These Lease payments relating to short-term leases and leases with low value transactions also did not involve more than the normal risk of collectability or present other assets 191,386,860 unfavorable conditions. Total amount recognized in statement of income P=223,301,213 Remunerations of Key Management Personnel Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Organization, directly or indirectly. The Organization considers the members of the senior management to constitute key management personnel for purposes of PAS 24, Related Party Disclosures. *SGVFSM007913* *SGVFSM007913*
86 CARD, Inc. Annual Report 2020 Audited Financial Statements 87 - 46 - - 47 -
The compensation of key management personnel included under ‘Project related expenses’ and Others ‘Other administrative expenses’ in the statements of revenue over expenses are as follows: Other related party transactions of the Organization are as follows:
Parent Company 2020 2019 Nature, Terms and Conditions Statement of Assets, Liabilities 2020 2019 and Fund Balance Short-term employee benefits P=36,484,534 P=44,289,000 Associates: Short-term investments 122,143,433 118,642,293 These are time deposits with maturities of more than Post-employment benefits 27,192,325 59,762,763 three months but less than one year with annual interest P=63,676,859 P=104,051,763 ranging from 0.63% to 4%. Financial Assets at FVOCI 45,095,237 13,823,147 This pertains to investment in preferred shares of CARD Bank and in common shares of Other related party transactions BotiCARD Inc. and AppendPay Corporation (Note 11) Investment in associates 2,343,158,789 2,242,672,435 This refers to investment in common shares of Transactions between the Organization and its key management personnel meet the definition of associates (Note 12). related party transactions. Transactions between the Organization and its associates and other related Dividends received 307,696,249 308,383,059 Share of dividend from investment in associates (Note 12). parties within the CARD MRI also qualify as related party transactions. Subscription payable 48,065,100 52,245,169 Represents payable for the shares of stock (Note 19). Statement of Comprehensive Income Cash and cash equivalents, accounts payable and accounts receivable Associates: Cash and cash equivalents, accounts payable and accounts receivable held by the Organization for Interest income 11,159,590 9,934,053 These are interest earned by savings, time deposit and short-term investment accounts of the Organization. key management personnel, associates, and other related party as at December 31, 2020 and 2019 Dividend income 1,896,768 816,000 This pertains to dividends earned from common and follow: preferred shares financial assets at FVOCI of the December 31, 2020 Organization Outstanding Rent income 5,716,148 5,428,337 These are income earned from premises rented out by Category Amount/Volume Balance Nature, Terms and Conditions the Parent Company to other CARD MRI institutions Organization Associates: Information technology 68,380,232 77,266,733 This pertains to the CMIT’s rendered services in Cash and cash equivalents These are savings, checking and time deposit relation to system maintenance agreement (Note 22). Deposits 2,449,937,056 624,020,101 accounts with annual interest rates ranging from Other related parties: Withdrawals (2,339,831,107) 0.3% to 3.5%. Rent income 1,162,495 866,600 These are income earned from premises rented out by Due to affiliates The amount represents the share of expenses still the Parent Company to other CARDMRI institutions Billings 22,188,237 88,800 payable to the associates (Note 25). Payments (22,099,437) (Note 19). Seminars and training 35,969,624 1,855,190 These are trainings and development costs for the Due from affiliates The amount represents the associates’ share of members and employees conducted by CMDI. Related Billings 36,220,678 1,177,187 expenses (Note 9). seminars and training expenses incurred are shown as Collections (35,043,500) part of ‘Staff training and development’ and ‘Client Other related parties: training and development’ in the statement of revenue Due to affiliates The amount represents share of expenses still over expenses. Billings 110,655,223 4,259,457 payable to the affiliates (Note 19). Grants and donations – 15,000,000 These are grants and donations provided for by the Payments (106,395,766) Parent Company as assistance for the operations of Due from affiliates The amount represents the affiliates’ other CARD MRI institutions. Billings 103,194,559 48,225,242 share of expenses still payable to the Organization Collections (54,969,317) (Note 9). Other related party transactions include:
December 31, 2019 Outstanding a. The Organization entered into a usufruct agreement with CMDI. The grant of the usufruct was Category Amount/Volume Balance Nature, Terms and Conditions made by the Organization without consideration and for the purpose of assisting CMDI in its Associates: objective of pursuing the development of microfinance in the country. The usufruct shall be for a Cash and cash equivalents 492,948,842 These are savings, checking and time deposit Deposits 2,671,213,831 accounts with annual interest rates ranging from period of ten years from July 1, 2005 to June 30, 2015, unless sooner terminated as provided in Withdrawals (2,622,985,730) 0.3% to 3.5%. the usufruct agreement. The agreement was extended for additional six years which will end on Due to affiliates 1,809,805 The amount represents the share of expenses still Billings 8,443,708 payable to the associates April 30, 2024. The usufruct is subject to certain terms and conditions as agreed by the Payments (14,453,753) (Note 19). Organization and CMDI. Due from affiliates 8,623,153 The amount represents the associates’ share of Billings 22,674,717 expenses (Note 9). Collections (24,195,162) b. The fund assets of the Organization are maintained by CARD MRI MERP and CARD Group Other related parties: Employees’ Retirement Plan (Note 21). Due to affiliates 3,397,538 The amount represents share of expenses still Billings 41,906,131 payable to the affiliates (Note 19). Payments (43,680,060) Due from affiliates 4,621,734 The amount represents the affiliates’ Billings 5,401,870 share of expenses still payable to the Organization Collections (2,690,010) (Note 9).
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88 CARD, Inc. Annual Report 2020 Audited Financial Statements 89 - 48 - - 49 -
28. Appropriation of Fund Balance 30. Approval for the Release of the Financial Statements
On June 20, 2009, the Organization’s BOT approved the appropriation of =50.0P million for future The accompanying financial statements of the Organization were reviewed and approved for release acquisitions and/or improvements of investment properties. All subsequent receipts generated from by the Organization’s BOT on April 29, 2021. these investment properties are also treated as additional appropriated fund in the succeeding years.
On December 31, 2020 and 2019, receipts of rental income amounting to P=6.9 million and 31. Subsequent Events =6.8P million, respectively (Note 25), are appropriated, bringing the total appropriation to P=114.8 million and P=107.9 million as at December 31, 2020 and 2019, respectively. CREATE Law President Rodrigo Duterte signed into law on March 26, 2021 the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act to attract more investments and maintain fiscal prudence 29. Supplementary Information for Cash Flow Analysis and stability in the Philippines. Republic Act (RA) 11534 or the CREATE Act introduces reforms to the corporate income tax and incentives systems. It took effect 15 days after its complete publication The following table shows the reconciliation analysis of liabilities arising from financing activities for in the Official Gazette or in a newspaper of general circulation or April 11, 2021. the period ended December 31, 2020 and 2019: The following are the key changes to the Philippine tax law pursuant to the CREATE Act which have 2020 an impact on the Organization. Total liabilities Borrowings Lease liabilities from financing (Note 18) (Notes 26) activities Effective July 1, 2020, regular corporate income tax (RCIT) rate is reduced from 30% to 25% for Beginning balances as at January 1, domestic and resident foreign corporations. For domestic corporations with net taxable income 2020, as reported P=1,197,962,000 P=22,971,179 P=1,220,933,179 not exceeding Php5 million and with total assets not exceeding Php100 million (excluding land Cash flows on which the business entity’s office, plant and equipment are situated) during the taxable year, Proceeds 2,145,000,000 – 2,145,000,000 the RCIT rate is reduced to 20%. Settlements (1,605,250,000) (29,991,102) (1,635,241,102) Non-cash items Minimum corporate income tax (MCIT) rate reduced from 2% to 1% of gross income effective Net foreign exchange gain on borrowings (3,536,000) – (3,536,000) July 1, 2020 to June 30, 2023. New lease contracts entered during the year – 52,061,295 52,061,295 As clarified by the Philippine Financial Reporting Standards Council in its Philippine Interpretations Amortization on interest expenses of Committee Q&A No. 2020-07, the CREATE Act was not considered substantively enacted as of lease liabilities – 1,701,068 1,701,068 Ending balances as of December 31, 2020 even though some of the provisions have retroactive effect to July 1, 2020. The December 31, 2020 P=1,734,176,000 P=46,742,440 P=1,780,918,440 passage of the CREATE Act into law on March 26, 2011 is considered as a non-adjusting subsequent event. Accordingly, current and deferred taxes as of and for the year ended December 31, 2020 2019 continued to be computed and measured using the applicable income tax rates as of Total liabilities December 31, 2020 (i.e., 30% RCIT / 2% MCIT) for financial reporting purposes. Borrowings Lease liabilities from financing (Note 18) (Notes 26) activities Applying the provisions of the CREATE Act, the Organization would have been subjected to lower Beginning balances as at January 1, 2019, as reported P=1,483,748,767 P=– P=1,483,748,767 regular corporate income tax rate of 25% and MCIT rate of 1% effective July 1, 2020. Based on Adoption of PFRS 16 – 36,228,853 36,228,853 revenue regulations No. 5-2021 dated April 8, 2021 issued by the BIR, the prorated CIT rate of the Beginning balances as of January 1, Company is 27.50%. This will result in a reduction in provision for current income tax for the year 2019, as restated 1,483,748,767 36,228,853 1,519,977,620 ended December 31, 2020 of =0.20P million. The reduced amounts will be reflected in the Company’s Cash flows 2020 annual income tax return. However, for financial reporting purposes, the changes will only be Proceeds 1,388,603,000 – 1,388,603,000 Settlements (1,678,388,667) (19,297,982) (1,697,686,649) recognized in the 2021 financial statements. Non-cash items Net foreign exchange loss on borrowings 3,998,900 – 3,998,900 Continuing COVID-19 pandemic New lease contracts entered during the Because of the Coronavirus Disease 2019 (COVID-19) pandemic, the Organization is exposed to a year – 4,481,751 4,481,751 number of trends and uncertainties which can affect its financial performance. This include levels of Amortization on interest expenses of lease liabilities – 1,558,557 1,558,557 general economic activity and its effect on the disposal income of households in the Philippines. Ending balances as of December 31, 2019 P=1,197,962,000 P=22,971,179 P=1,220,933,179 Various levels of community quarantine throughout the country have caused disruptions to businesses and economic activities, and its impact on the businesses continue to evolve. The Organization’s noncash activity pertains to additions to ROU assets amounting to P=52.1 million The scale and duration of these developments continue to be uncertain as of the report date. the as of December 31, 2020. Organization observed declines in its revenues. However, it is not possible to estimate the possible impact of the pandemic’s near-term and long-term effects. *SGVFSM007913* *SGVFSM007913*
90 CARD, Inc. Annual Report 2020 Audited Financial Statements 91 - 50 - - 51 -
The Organization has incurred and will continue to incur costs as it continues to mitigate the adverse A. Total volume/value of remittance transactions effects of the pandemic on its operations. The pandemic could have a material impact on the Organization’s financial results for the rest of 2021 and even periods thereafter. Considering the No. of Amount in Amount in evolving nature of the pandemic, the Organization will continue to monitor the situation. Type of Transactions Transactions USD PHP A. International inward (Payout) remittance transactions – – P=– 32. Supplementary Information Required Under Revenue Regulations 15-2010 B. International outward (Send Out) remittance transactions – – – On November 25, 2010, the BIR issued RR No. 15-2010 to amend certain provisions of RR 21-2002 C. Domestic inward (Payout) remittance which provides that starting 2010, the notes to the financial statements shall include information on transactions 5,482 – 56,604,674 taxes and licenses paid or accrued during the year. D. Domestic outward (Send Out) remittance transactions 3,310 – 44,670,080 The components of ‘Taxes and licenses’ included in ‘Project related expense’ and ‘Other E. Foreign currencies bought – administrative expense’ in the statement of revenue over expenses follow: – – F. Foreign currencies sold – – – Business permits and licenses P=31,193,689 G. International inward (Payout) Documentary stamp tax 3,398,992 remittance facilitated through VC – – – Real property tax 502,025 H. International outward (Send Out) Community tax certificate 196,264 remittance facilitated through VC – – – Others 20,280,388 I. Exchange of VC to Philippine P=55,571,358 peso/other currency – – – J. Exchange of Philippine peso/other Withholding taxes in 2020 are categorized into: currency to VC – – –
Paid Accrued B. Basic quantitative indicator of financial performance Compensation and benefits P=2,126,606 P=– Final income taxes - interest on CBU 16,219,833 1,343,937 The following basic ratios measure the financial performance of the Organization: Expanded withholding tax - rent expense 17,324,916 1,039,167 Expanded withholding tax - others 5,088,962 849,832 2020 2019 Final income taxes – – Return on average equity 0.37% 14.7% Expanded withholding tax - professional fee 401,408 30,907 Return on average assets 0.20% 7.5% P=41,161,725 P=3,263,843
Other taxes represent Value Added Tax (VAT) for PFRS 16 finance lease liability, taxes on loans and capital gains tax
Tax Assessments and Cases
As at December 31, 2020, the Organization has no outstanding tax assessment notice from the BIR or cases in court or bodies outside the BIR.
33. Supplementary Information Required Under BSP Circular 1075
Presented below is the supplementary information required by BSP under Appendix N-19-c of BSP Circular No. 1075 to be disclosed as part of the notes to financial statements. This supplementary information is not a required disclosure under PFRS.
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92 CARD, Inc. Annual Report 2020 Audited Financial Statements 93