LOYOLA HOUSE – JESUIT COMMUNITY, INC.

NOTES TO FINANCIAL STATEMENTS

May 31, 2019 and 2018

NOTE 1 – CORPORATE INFORMATION

LOYOLA HOUSE – JESUIT COMMUNITY, INC. (The Community) was registered with the
Securities and Exchange Commission on October 19, 2006 as a religious non-government organization.

As provided for in its by-laws, no part of the income from which the organization may obtain as an
incident to its operation shall be distributed as dividends to its members, trustees or officers subject to
the provisions of the Corporation Code on Dissolution. Any profit obtained by the Community as a
result of its operation, whether necessary or proper shall be used for the furtherance of the purposes of
the organization as follows:

a) To perform apostolic service for Xavier University as a group of Jesuit priests and brothers;
and

b) To establish a legal personality so it can enter into transactions involving the public and private
institutions.

The Community’s registered office address and principal place of business is at Corrales St., Cagayan
de Oro, Misamis Oriental.

Under section 30 (E) of the National Internal Revenue Code, the Community is exempt from income
tax on donations received and other income in connection with its related activities. It is, however,
subject to income tax on income earned of whatever kind and character from any of its properties, real
and personal, or from any of its activities conducted for profit, regardless of the disposition made of
such income.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation
The financial statements of the Community have been prepared in accordance with the Philippine
Financial Reporting Standards for Small and Medium-sized Entities (PFRSs for SMEs).

The financial statements are presented in Philippine pesos, the Community’s functional currency and all
values represents absolute amounts, except when otherwise indicated.

The more significant accounting policies are as follows:

Cash and Cash Equivalents

Cash and cash equivalents comprise of cash on hand, deposits with banks, other short-term highly
liquid investments and time deposits with banks that can be pre-terminated anytime. These are held for
the purpose of meeting short-term cash commitments rather than for investment or other purposes.

5
Strictly for Internal Use of Management Only
Trade and Other Receivables
Trade and other receivables are recognized initially at the transaction price. They are subsequently
measured at amortized cost using the effective interest method. A provision for impairment of trade and
other receivables is established when there is objective evidence that the Community will not be able to
collect all amounts due according to the original terms of the receivables. Trade and other receivables
are non-interest bearing.

Property and Equipment

Property and equipment are stated at historical cost less accumulated depreciation and any accumulated
impairment losses. Historical cost includes the purchase price and other expenditure that is directly
attributable to bringing the asset to the location and condition necessary for it to be capable of operating
in the manner intended by management.

The Community adds to the carrying amount of an item of property and equipment the cost of replacing
parts of such an item when that cost is incurred and if the replacement part is expected to provide
incremental future benefits to the Community. The carrying amount of the replaced part is
derecognized. All other repairs and maintenance are charged to profit or loss during the period in which
they are incurred.

The estimated useful lives range as follows:

Range
Buildings and improvements 20 years
Transportation equipment 5 years
Furniture, fixture and equipment 3-5 years

The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted
prospectively if appropriate, if there is an indication of a significant change since the last reporting date.

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

The carrying amount of an item of property and equipment shall be derecognized on disposal or when
no future economic benefits are expected from its use or disposal. When assets are derecognized, their
cost, accumulated depreciation and amortization and accumulated impairment losses are eliminated
from the accounts. Gains and losses on disposals are determined by comparing the proceeds with the
carrying amount and are recognized in the statement of activities.

Impairment of Non-financial Assets

Assets that are subject to depreciation or amortization are assessed at each reporting date to determine
whether there is any indication that the assets are impaired. Where there is any indication that an asset
may be impaired, the carrying value of the asset (or cash-generating unit to which the asset has been
allocated) is tested for impairment. An impairment loss is recognized for the amount by which the
asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an
asset’s (or CGU’s) fair value less costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
flows (CGUs). Non-financial assets that suffered impairment are reviewed for possible reversal of the
impairment at each reporting date.

Trade and Other Payables

Trade and other payables are recognized initially at the transaction price and subsequently measured at
amortized cost using the effective interest method. Trade and other payables are on normal credit terms
and do not bear interest.

6
Strictly for Internal Use of Management Only
Related Party Transactions
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other
party or exercise significant influence over the other party in making the financial and operating
decisions. Parties are also considered to be related if they are subject to common control or common
significant influence. Related parties can be individual or corporate entity. Key management personnel
are also considered as related parties.

Revenue and Expense Recognition

The Community recognizes revenue when the amount of revenue can be reliably measured; it is
probable that future economic benefits will flow to the Community; and specific criteria have been met
for each of the Community’s activity, as described below:

 Donations and gifts are recognized in the period in which they have been received and are
valued at fair market value at the time the donations are received. Donations and gifts are
intended for use in the activities/projects of the Community.

 Interest is recognized as the interest accrues, taking into account the effective yield of the
asset.

Expenses are recognized in the statements of activities upon utilization of the goods and services or at
any date they are incurred.

Foreign Currency Transactions

Foreign currency transactions are recorded in Philippines Peso on the exchange rate prevailing at the
date of the transaction. Foreign exchange gains or losses arising from the settlement and restatement of
cash denominated on foreign currencies at exchange rate different from those at which these are
recorded are credited or charged to operations.

Donations
Donations received are valued at fair market value at the time donations are received.

Employee Benefits
Employee benefits are all forms of consideration given by the Community in exchange for service
rendered by the employees. The Community’s employee benefits include the following:

Short-term employee benefits

Short-term employee benefits are granted to employees like salaries and wages and social security,
Home Development Mutual Fund (HDMF), Private Education Retirement Annuity Association
(PERAA) and Philhealth contributions, short-term compensated absences, and bonuses payable within
twelve months after the end of the period in which the employees render the related service.

The rendered services of an employee to the Community during the accounting period is recognized
using the undiscounted amount of short-term employee benefits expected to be paid in exchange for
that services rendered.

Retirement benefits
The Community have adopted the Projected Unit Credit Method as the actuarial cost method of
valuation. Retirement liability is recognized when an employee has provided services in exchange for
employee benefits to be paid in the future; and as expense when the Community consumes the
economic benefits arising from service provided by employee in exchange for employee benefits.

7
Strictly for Internal Use of Management Only
Events after the Reporting Date
Events after the end of reporting period are those events, favorable and unfavorable, that occur between
the end of reporting period and the date when the financial statements are authorized for issue.
Adjusting events are those that provide evidence of conditions that existed at the end of the reporting
period and lead to adjustments of financial statements. Non-adjusting events are those that are
indicative of the conditions that arose after the end of reporting period and do not lead to adjustments
but only to disclosures in the financial statements.

NOTE 3 – INFORMATION ABOUT KEY SOURCES OF ESTIMATION UNCERTAINTY

AND JUDGMENTS

The preparation of the financial statements in accordance with PFRS for SMEs requires the Community
to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and
expenses, and disclosures of contingent assets and contingent liabilities. Future events may occur which
will cause the assumptions used in arriving at the estimates to change. The effects of any change in
estimates are reflected in the financial statements as they become reasonably determinable.

Key sources of estimation uncertainty

The Community makes estimates and assumptions concerning the future. The resulting accounting
estimates will, by definition, seldom equal the related actual results.

The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are disclosed below:

 Impairment losses on receivables and advances

The Community reviews its receivables at each reporting date to assess whether an impairment
loss should be recorded in the statements of activities. In particular, judgment by management
is required in the estimation of the amount and timing of future cash flows when determining
the level of allowance required. Such estimates are based on the assumption about a number of
factors and actual results may differ resulting in the future changes to the allowance.

 Estimation of useful lives of the Community's property and equipment

The Comm unit y estimates the useful lives of property and equipment based on the period
over which these assets are expected to be available for use. The estimated useful lives of these
assets are reviewed periodically and are updated if expectations differ from previous
estimates due to physical wear and tear, technical or commercial obsolescence, and legal or
other limits on the use of the assets. In addition, the estimation of the useful lives of these
assets is based on collective assessment of internal technical evaluation and experience with
similar assets. The amounts and timing of recorded expenses for any period would be affected
by changes in these factors and circumstances.

As of May 31, 2019, and 2018, the aggregate net book value of property and equipment
amounted to P2,835,115 and P2,835,115, respectively (See Note 7).

8
Strictly for Internal Use of Management Only
  Impairment of property and equipment
The Community assesses impairment on assets whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The factors that the
Community considers important whi c h could trigger an impairment review include the
following:

- significant under performance relative to expected historical or projected future

operating results;
- significant changes in the manner of use of the acquired assets or the strategy for overall
business; and
- significant negative industry or economic trends.

No impairment loss was recognized on property and equipment in 2018 and 2017.

NOTE 4 – CASH AND CASH EQUIVALENTS

This account consists of:

2019 2018
Petty cash fund P 120,000 P 120,000
Cash in banks 2,327,051 2,327,051

P 2,447,05 P 2,447,05
1 1
Cash in banks generally earn interest at rates based on daily bank deposit rates.

NOTE 5 – TRADE AND OTHER RECEIVABLES

This account consists of:

Accounts receivable P 2,708,132 P 2,708,132

Advances to priests and employees 237,761 237,761
2,945,893 2,945,893
Allowance for doubtful accounts 169,813 169,813

P 2,776,08 P 2,776,080
0
The reconciliation of allowance for doubtful accounts follows:

Balance, June 1 P 254,720 P 254,720

Write-offs during the year 254,720
(84,907) 254,720
(84,907)

Balance, May 31 P 169,813 P 169,813

All the Community’s receivables have been reviewed for indications of impairment. Certain receivables
were found to be impaired and allowance for doubtful accounts have been provided accordingly. The
impaired receivables are from the cash advances to past employees of the Community.

Trade and other receivables are non-interest bearing.

9
Strictly for Internal Use of Management Only
NOTE 6 – SHORT-TERM INVESTMENT

This account consists of:

2019 2018
Short-term investment P 430,212 P 430,212
Prepayment 8,884 8,884

P 439,09 P 439,09
6 6
Short-term investment pertains to the fair market value of the Community’s investment with PHILAM
Fund, Inc. acquired on August 27, 2015.

Prepayment pertains to overpayment to PERAA for the Community’s premium contributions.

NOTE 7 – PROPERTY AND EQUIPMENT

Property and equipment consists of:

June 1, May 31,

2018 Additions 2019
Cost
6,884,47
Building and improvements P 4 P P
1,396,98
Furniture, fixture and equipment 0
1,100,00
Transportation equipment 0
9,381,45
4

Accumulated depreciation
4,825,95
Building and improvements 7
1,261,21
Furniture, fixture and equipment 5
Transportation equipment 459,167
6,546,33
9

2,835,11 P
Net book value P 5 P

June 1, May 31,

2017 Additions 2018
Cost
6,884,47
Building and improvements P 4 P - P 6,884,474
1,285,99
Furniture, fixture and equipment 8 110,982 1,396,980
Transportation equipment 650,000 450,000 1,100,000
8,820,47
2 560,982 9,381,454

10
Strictly for Internal Use of Management Only
Accumulated depreciation
4,432,16
Building and improvements 1 393,796 4,825,957
1,209,15
Furniture, fixture and equipment 0 52,065 1,261,215
Transportation equipment 314,167 145,000 459,167
5,955,47
8 590,861 6,546,339
2,864,99
Net book value P 4 P (29,879) P 2,835,115

Depreciation charged to apostolic services and support services amounted to P472,689 and P118,172 in
2019 and P472,689 and P118,172 in 2018.

The Community was allowed free use of land where its buildings and facilities are situated (within the
premises of Xavier University – Ateneo de Cagayan).

NOTE 8 – OTHER NONCURRENT ASSETS/LIABILITIES

This pertains to the cash in bank held in trust by the Community for St. John Vianney Theological
Seminary.

NOTE 9 – TRADE AND OTHER PAYABLES

Trade and other payables consist of:

2019 2018
Trade payable and accrued expenses P 63,661 P 62,800
Government payables 16,975 105,257
P
80,636 P 168,057

Trade and other payables are non-interest bearing.

NOTE 10 – RETIREMENT BENEFIT OBLIGATIONS

The Community provides a noncontributory defined benefit pension plan for all qualified employees
computed based on the Projected Unit Credit Method. Such plan is funded by the Community by
making payments to Private Education Retirement Annuity Association (PERAA). Provisions for
pension obligations are established for benefits payable in the form of retirement pensions. Benefits are
dependent on years of service and the respective employee’s final compensation. Total unfunded
actuarial accrued liability determined as of actuarial valuation date on October 31, 2015 amounted to
P1,516,747 which it plans to amortize over a period of 11 years.

Net retirement benefit obligations at the fiscal year ended May 31 follow:

Actuarial Accrued Liability as of May 31 P 1,345,687 P 1,345,687

Provision during the year - -
11
Strictly for Internal Use of Management Only
 1,345,687 1,345,687
Payments made 742,844 742,844
724,4
724,499 99
Current portion 100,474 100,474

Noncurrent portion P 502,369 P 502,369

Total retirement fund contributions charged to expense amounted to P113,471and P94,965 for the fiscal
years ended May 31, 2018 and 2017, respectively.

Plan Provisions
All full-time, permanent (non-academic) employees of Loyola House – Jesuit Community, Inc., upon
retirement, shall receive a lump sum benefit equal to the employer’s contributions and accumulated
interest or 22.5 days basic salary per year of service, whichever is higher.

Actuarial Assumptions
The following are the principal actuarial assumptions used to determine the defined benefit obligation:

Return on Investment (ROI) 7.00%

Salary Increase Rate 5.00%

NOTE 11 – DONATIONS AND GIFTS

This account consists of:

2019 2018
Jesuits Services – (XU) P 7,200,000 P 7,200,000
Mass Stipends 924,499 924,499
Ministries 149,645 149,645

P 8,274,144 P 8,274,144

Mass Stipends pertains to income received specifically from presiding the Holy Eucharist (both
university and outside university masses). Mass Stipends from XU Chapel and outside XU amounted to
P529,375 and P395,124, respectively, in 2019 and P529,375 and P395,124, respectively, in 2018.

Ministries pertains to income received from pastoral work including sacramentals (confessions,
blessings, etc.), talks, retreat giving, and others.

NOTE 12 – OTHER INCOME

This account consists of:

Foreign exchange gain P 85,226 P 85,226

Interest income 12,617 12,617
Miscellaneous income (loss) (17,621) (17,621)
P 80,222 P 80,222
12
Strictly for Internal Use of Management Only
NOTE 13 – EMPLOYEE’S SALARIES, WAGES AND OTHER BENEFITS

This account consists of:

Salaries and wages P 1,716,123 P 1,716,123

Benefits and incentives 226,476 226,476
SSS premium contributions 103,624 103,624
Philhealth premium contributions 43,730 43,730
Pag-ibig premium contributions 9,200 9,200

P 2,099,153 P 2,099,153

NOTE 14 – FOOD AND BEVERAGES

This account consists of:

2019 2018
Food and beverages P 807,848 P 807,848
Special expense/Feast 8,200 8,200

P 816,048 P 816,048

NOTE 15 – DONATIONS AND CONTRIBUTIONS

This account consists of:

Province tax P 485,056 P 485,056

Gifts 123,955 123,955
Alms - -

P 609,011 P 609,011

NOTE 16 – PER DIEM AND ALLOWANCES

This account consists of:

Personal allowance P 363,500 P 363,500

Personal items 77,031 77,031
Clothing 5,935 5,935

P 446,466 P 446,466

NOTE 17 – MEDICAL AND DENTAL

This account consists of:

Medicines P 306,945 P 306,945

13
Strictly for Internal Use of Management Only
 Medical and dental 131,979 131,979

P 438,924 P 438,924

NOTE 18 – SUPPLIES

This account consists of:

2019 2018
House P 83,249 P 83,249
Kitchen 46,550 46,550
Office 27,458 27,458
Laundry 24,768 24,768
Janitorial 706 706
Chapel 597 597

P 173,328 P 173,328

NOTE 19 – REPAIRS AND MAINTENANCE

This account consists of:

House P 89,768 P 89,768

Vehicle 44,656 44,656
Furniture and fixture 14,267 14,267

P 148,691 P 148,691

NOTE 20 – MISCELLANEOUS

This account consists of:

Penalties P 63,988 P 63,988

Vehicle insurance 24,511 24,511
Honorarium to Student Assistant 2,619 2,619
Funeral - -
Villa 4,881 4,881
Others 64,167 64,167

P 160,166 P 160,166

14
Strictly for Internal Use of Management Only
 15
Strictly for Internal Use of Management Only