PART IV SCHEDULES AND OTHER REPORTS
Item 13. SEC Form 17-C and Quarterly Report
15. LEASES
construction of its new building located in Lerma St., Sampaloc, Manila. No similar transaction occurred in 2020 and 2018 (see Notes 17 and 20.2).
As of May 31, 2020, 2019 and 2018, certain fully depreciated and amortized assets with acquisition cost of P365.2 million, P547.6 million and P450.4 million, respectively, are still being used in the University’s operations.
The table below describes the nature of the University’s leasing activities by type of ROUA recognized in the 2020 statement of financial position.
Number of Number of
Number of Average leases with leases with
right-of-use Range of remaining extension termination
assets leased remaining term lease term options options
University buildings 5 10 – 26 years 10 years 5 5
As at May 31, 2020, none of the University’s Property and Equipment are used as collateral for any of the University’s interest-bearing loans and borrowings.
Total rental income earned from the sublease of one of the University buildings amounted to P43.9 million, P41.8 million and 39.8 million, for the years ended May 31, 2020, 2019 and 2018, respectively, and is part of Other Operating Income in the statements of profit or loss.
The amount of depreciation is presented as part of Depreciation and amortization which is presented under Operating Expenses account (see Note 19).
Current portion of lease liabilities are presented in the statement of financial position as part of Trade and Other Payables amounting to P39.10 million as at May 31, 2020 (see Note 16).
On the other hand, the non-current portion amounting to P1,186.84 million is presented separately in the statement of financial position as at May 31, 2020.
The use of extension and termination options gives the University added flexibility in the event it has identified more suitable premises in terms of cost and/or location or determined that it is advantageous to remain in a location beyond the original lease term. An option is only exercised when consistent with the University’s regional markets strategy and the economic benefits of exercising the option exceeds the expected overall cost. As at May 31, 2020, the University exercised the extension option on its university buildings for an additional term of 14 years.
As at May 31, 2020, the University has no commitment to any lease contracts which had not commenced.
The lease liabilities are secured by the related underlying assets. The undiscounted maturity analysis of lease liabilities at May 31, 2020 is as follows:
Within 1 to 2 2 to 3 3 to 4 4 to 5 More than 1 year years years years years 5 years Total
Lease payments P 42,607,482 P 198,654,455 P 117,625,370 P 122,827,172 P 123,616,949 P 2,363,265,294 P 2,968,596,722 Finance charges ( 3,510,899) ( 222,212,953 ) ( 113,755,609) ( 113,868,576) ( 113,582,612) ( 1,175,730,061) ( 1,742,660,710)
Net present values P 39,096,583 (P 23,558,498) P 3,869,761 P 8,958,596 P 10,034,337 P 1,187,535,233 P 1,225,936,012
15.2 Lease Payments Not Recognized as Liabilities
The University has elected not to recognize a lease liability for leases of low-value assets.
Payments made under such leases are expensed on a straight-line basis. The expenses relating to leases of low-value assets amounted to P1.2 million is presented as Rental under Operating Expenses in the 2020 statement of profit or loss (see Note 19).
At May 31, 2020, the total future cash outflows for lease of low-value assets amounted to P24,000.
15.3 Additional Profit or Loss and Cash Flow Information
The total cash outflow in respect of leases amounted to P79.5 million in 2020. Interest expense in relation to lease liabilities amounted to P101.4 million and is presented as part of Interest expense under Finance Costs in the 2020 statement of profit or loss (see Note 20.2).
As of May 31, this account consists of:
Notes 2020 2019 2018
Accounts payable P 291,662,485 P 243,445,487 P 150,205,447 Dividends payable 25.2(b) 223,026,631 212,205,101 195,004,540 Accrued expenses 17, 24.2
24.11 203,489,988 117,563,840 90,157,951
Deposits payable 164,235,379 77,331,331 69,246,585
Amounts due to
students 58,764,059 33,174,522 27,982,010
Accrued salaries and
employee benefits 43,465,799 95,138,108 61,330,277
Retention payable 42,233,834 42,233,834 179,544,963
Lease liabilities 15 39,096,583 - -
Withholding and
other taxes payable 15,705,834 16,274,680 14,994,229 Other funds 7,128,911 61,147,635 57,576,661
Others 30,182,724 32,565,769 30,352,188
P 1,118,992,227 P 931,080,307 P 876,394,851
Accounts payable mainly pertains to unpaid amounts for security services, utilities and other expenses already billed by the University’s service providers and suppliers.
Accrued expenses include the University’s accrual for utilities, professional fees, outside services, trustees’ bonuses and interest, among others.
Deposits payable are amounts held by the University on behalf of students and third parties for various specific activities. During the year ended May 31, 2020 and 2018, certain deposits payable recognized in prior years amounting to P57.3 million and P2.7 million, respectively, were recognized as income because the purpose for which the amounts were held have already been fulfilled. The related gains are presented as Reversal of deposits payable and NSTP fund under Other Income in the statements of profit or loss (see Note 21). No similar transactions occurred during the year ended May 31, 2019.
Retention payable pertains to a portion of the consideration for the acquisition of RCI in 2016 that is retained by the University to ensure compliance by the selling shareholders of RCI to certain terms of the SPA. In 2019, the University paid P137.3 million of the retention payable in compliance with the agreement. The balance of P42.2 million as of May 31, 2020 and 2019 pertain to amounts with is still outstanding claims from the selling shareholders from the University.
Amounts due to students represent excess payment of tuition and miscellaneous fees that are refundable to them.
The NSTP trust fund collected from students amounted to P27.1 million, P28.3 million and P8.0 million for the years ended May 31, 2020, 2019 and 2018. The outstanding balance of NSTP trust fund, reported as part of Other funds amounted to P19.0 million as of
May 31, 2019 and nil as of May 31, 2020 and 2018.
The University’s interest-bearing loans as of May 31, 2020, 2019 and 2018 are as follows:
Original Outstanding Principal Balance Interest Charges Accrued Interest Current
Principal (in Million Pesos) (in Million Pesos) (in Million Pesos) Interest Maturity Principal Amount 2020 2019 2018 2020 2019 2018 2020 2019 2018 Rate* Security Date Repayment
P 800.0 P 495.2 P 609.5 P 761.9 P 27.4 P 38.0 P 27.1 P 6.2 P 2.0 P 1.4 4.16% Unsecured May 2023 Quarterly 425.0 425.0 - - 16.3 - - 6.4 - - 4.19% Unsecured July 2027 Quarterly 680.0 291.4 421.0 550.5 17.2 26.0 23.8 2.7 5.6 4.8 4.01% Unsecured June 2022 Quarterly 150.0 150.0 - - 4.2 - - 2.3 - - 4.19% Unsecured July 2027 Quarterly 120.0 120.0 - - 1.5 - - 1.5 - - 4.08% Unsecured July 2027 Quarterly 100.0 100.0 100.0 100.0 5.6 5.9 0.5 0.4 0.3 0.1 5.15% Unsecured June 2020 End of Term 100.0 100.0 100.0 - 5.6 1.6 - 0.3 0.5 - 5.15% Unsecured June 2020 End of Term 100.0 100.0 - - 0.2 - - 0.2 - - 5.40% Unsecured August 2020 End of Term 150.0 92.9 114.3 142.8 5.1 7.0 5.1 1.2 0.3 0.3 4.16% Unsecured May 2023 Quarterly 200.0 85.7 123.8 161.9 5.0 7.6 7.1 0.8 1.8 1.6 4.01% Unsecured August 2022 Quarterly 80.0 80.0 80.0 80.0 4.5 4.5 0.6 - 0.2 0.1 5.15% Unsecured June 2020 End of Term 70.0 70.0 70.0 - 4.0 1.1 - 0.2 0.3 - 5.15% Unsecured June 2020 End of term 50.0 50.0 - - 2.9 - - 0.1 - - 5.15% Unsecured June 2020 End of Term 100.0 45.0 65.0 85.0 2.6 4.0 3.6 0.4 1.0 0.9 4.01% Unsecured June 2022 Quarterly 200.0 - 200.0 200.0 1.8 11.2 5.8 - 0.3 0.1 6.50% Unsecured July 2019 End of Term 175.0 - 175.0 175.0 1.5 9.8 4.1 - 0.1 0.1 6.50% Unsecured July 2019 End of Term 50.0 - 50.0 50.0 0.4 2.8 1.8 - 0.1 - 6.50% Unsecured July 2019 End of Term 60.0 - - 60.0 - 2.0 1.1 - - 0.2 6.55% Unsecured January 2019 End of Term 148.0 - - - 1.4 - - - - - 5.75% Unsecured February 2020 End of Term
P 2,205.2 P 2,108.6 P 2,367.1 P 107.2 P 121.5 P 80.6 P 22.7 P 12.5 P 9.6
* For certain loans, interest rates are determined based on Philippine Dealing System Treasury Reference three-month bid yields for Philippine government securities plus 0.75% or prevailing rate on special deposit accounts.
acquisition of land (see Note 14). On May 2018, the University’s BOT, through a board resolution, approved to accept the offer of the local commercial bank to increase the existing credit line up to P4.0 billion which will be utilized for the improvement of the facilities of the FEU system of schools. Total drawdown amounted to P3.2 billion as of May 31, 2020.
Likewise in 2016, a P3.0 billon credit facility was obtained with another local commercial bank to finance the University and its affiliates’ capital expenditure requirements, strategic investments and general corporate funding requirements. Total drawdown as of
May 31, 2020 amounted to P500.0 million.
The total interest incurred by the University on all of these loans, which are already exclusive of the capitalized borrowing costs on the property and equipment of the University, are presented as part of Interest expense under Finance Costs in the statements of profit or loss (see Notes 14 and 20.2), while any outstanding interest payable is recognized as part of Accrued expenses under the Trade and Other Payables account in the statements of financial position (see Note 16).
There are no assets used and/or required as collaterals as of May 31, 2020, 2019 and 2018 for the University’s interest-bearing loans and borrowings.
Loans obtain with a local commercial bank are subject to loan covenants effective for the years ended May 31, 2020, 2019 and 2018, which require the University to maintain a debt service coverage ratio of at least 1.2x and debt-to-equity ratio of not more than 2:1. As of May 31, 2020, 2019 and 2018, the University has complied with its loan covenants.