Report of Independent Auditors
23. RELATED PARTY TRANSACTIONS
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2021 2020 2019
Amount of Outstanding Amount of Outstanding Amount of Outstanding
Notes Transaction Receivable Transaction Receivable Transaction Receivable Terms Conditions Retirement Funds: 23.5
Retirement plan
assets P - P 865,525,239 P - P 892,599,993 P - P756,932,798 not applicable not applicable
Reimbursement due and demandable;
of expenses 3,595,970 5,062,058 1,466,088 1,466,088 - - noninterest-bearing unsecured; not-impaired Others –
Key management personnel
compensation 23.6 116,417,150 - 136,661,205 - 145,341,733 - not applicable not applicable
In 2021, 2020 and 2019, the Group reviewed its receivables from related parties and were accordingly assessed for impairment. Except for those receivables provided with corresponding allowance, no impairment loss was necessary to be recognized for all other receivables in all years presented.
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23.1 Subscription of Preferred Shares of Stock (a) EACCI
During the years ended May 31, 2020 and 2019, East Asia Educational Foundation, Inc. (EAEF) entered into a subscription agreement for the purchase of 100,000 and 112,500 preferred shares with total consideration of P100.0 million and P112.5 million, respectively. Outstanding receivable arising from the transaction amounting
P40.0 million as of May 31, 2020 is presented as part of Other advances to related parties under Trade and Other Receivables account (see Note 9), has been fully paid in 2021.
(b) FEUA
During the year ended May 31, 2021 and 2020, EAEF, a related party under common management, entered into a subscription agreement for the purchase of 22,000 and 26,000 preferred shares of FEUA [see Note 24.5 (b)]. The total consideration paid by EAEF amounted to P22.0 million and P26.0 million for 2021 and 2020, respectively.
There was no outstanding receivable arising from the transaction as the amount was fully paid by EAEF in the year of subscription.
23.2 Noninterest-bearing Advances (a) Advances of the University to a Related Party
The University grants unsecured and noninterest-bearing advances, which are due and demandable to FEU Public Policy Foundation, Inc., related party under common management of the Group for working capital purposes.
Summarized below are the outstanding receivables from these advances as of May 31, 2021, 2020 and 2019 recorded as part of Other advances to related parties under Trade and Other Receivables account in the consolidated statements of financial position (see Note 9):
2021 2020 2019
Balance at beginning of year P 2,779,304 P 1,673,060 P 1,185,000
Additional advances during
the year 2,059,199 1,106,244 488,060
Balance at end of year P 4,838,503 P 2,779,304 P 1,673,060 As of May 31, 2021, management re-assessed that the entire amount of receivable is doubtful of collection, therefore, full allowance for impairment on these receivables were recognized. No allowance was provided in prior years.
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(b) Advances between EACCI and EAEF
During the years ended May 31, 2021, 2020 and 2019, EACCI granted to EAEF cash advances for working capital requirements and other purposes. These advances are noninterest-bearing, unsecured and payable in cash upon demand. As of
May 31, 2021, 2020 and 2019, outstanding advances to EAEF amounting to P29.1 million, P51.7 million and P34.1 million, respectively, are presented as part of Non-trade advances to related parties under the Trade and Other Receivables account in the consolidated statements of financial position (see Notes 9). No impairment loss is recognized by the Group on the receivables arising from advances.
(c) Advances between EACCI and NREF
During the years ended May 31, 2021, 2020 and 2019, certain tuition and other school fees have been ceollected by NREF for the account of EAACI. Conversely, there were also collections received by EACCI for the account of NREF. These collections and remittances came about due to incorrect ID numbers used by the students.
Subsequently, these collections were appropriately transmitted to the entities to which the related receivables are due. The receivable and payable accounts are unsecured, noninterest-bearing and payable in cash immediately upon demand. Outstanding payables amounting to P15.9 million and P5.3 million as of May 31, 2020 and 2019, respectively, (nil in 2021) are presented as part of Other advances from related parties under the Trade and Other Payables account in the consolidated statements of financial position (see Note 16).
(d) Advances of RCI to its Related Party
RCI grants noninterest-bearing and unsecured advances to RCEE, Roosevelt College Scholarship Foundation and Roosevelt College Center for Teacher Education, related parties under common management, for working capital purposes. These advances are generally collectible in cash and are due upon demand or through offsetting arrangement. The outstanding balance from these transactions amounts to P3.6 million, P3.1 million and P2.3 million as of May 31, 2021, 2020 and 2019, respectively, are presented as part of Other advances to related parties under the
|Trade and Other Receivables account in the consolidated statements of financial position (see Note 9). In 2021 and 2020, RCI’s management assessed that certain outstanding balances with the related parties were impaired; hence, impairment losses amounting to P0.2 million and P0.8 million, are recognized.
23.3 Reimbursement of Expenses
During the year ended May 31, 2021, 2020 and 2019, the University billed its related entities for the reimbursement of amounts it initially advanced to third party suppliers and service providers for certain expenses and various allocated expenses, at cost.
These expenses pertain to those incurred in the normal course of operations of the University and its related entities, which include legal fees, various supplies, use of facilities, and salaries and benefits of seconded employees, among others.
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2021 2020 2019
FEU Public Policy Center
Foundation, Inc. P 12,190,775 P 9,613,117 P 5,615,114
NREF 4,526,254 18,004,707 18,875,375
EAEFI - 4,892,015 4,892,015
P 16,717,029 P 32,509,839 P 29,382,504
23.4 Leases
(a) Lease of Certain Floors to EAEF
Outstanding receivables, arising from prior years’ lease of certain floors by the University and EACCI to EAEF, amounted to P2.9 million as of May 31, 2020 and 2019 (nil in 2021), and is presented as part of Rental receivable under Trade and Other Receivables account in the consolidated statements of financial position (see Note 9).
(b) Lease of Buildings to Nicanor Reyes Educational Foundation (NREF)
FRC leased out certain buildings to NREF with new effectivity January 31, 2013 to December 31, 2023 for an annual rental fee of P1.2 million or 10% of NREF’s annual gross income, whichever is higher.
In January 2020, the FRC entered into an amended lease agreement with EACCI to cover the lease of certain buildings within campus premises collectively referred to as FEU Diliman Campus. The amended lease term is from February 1, 2020 to
January 31, 2021 for an annual rental fee of 10% of EACCI’s annual gross income from tertiary and senior high school departments and 5% from basic education and junior high school department, but no lower than P25.0 million.
Total rental income of FRC from NREF amounted to P19.2 million and P20.0 million for the years ended May 31, 2020 and 2019 (nil in 2021), respectively, which is
recorded as part of Rental under Revenues in the consolidated statements of profit or loss. Outstanding receivables from this transaction amount to P10.2 million and P7.7 million as of May 31, 2020 and 2019 (nil in 2021), respectively, are presented as part of Rental receivable under the Trade and Other Receivables account in the consolidated statements of financial position (see Note 9). No impairment loss is recognized by the Group on this receivable from NREF.
(c) Lease of Building from NREF
The University had lease agreement with NREF for its lease of facilities. The lease agreements are long-term and renewable.
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Upon adoption of PFRS 16, the Group, as a lessee, recognized right-of-use asset and lease liabilities as at June 1, 2019. Amortization of the right-of-use asset arising from these transactions amounting to P2.8 million is presented as part of Depreciation and amortization under Cost and Operating Expenses in the 2021 and 2020 consolidated statements of profit or loss. Total interest expense on lease liabilities amounting to P0.4 million and P0.6 million for the years ended May 31, 2021 and 2020, respectively, is presented as part of Interest expense on lease liabilities under Finance Costs in the consolidated statements of profit or loss. The outstanding balances arising from these transactions as at May 31, 2021 and 2020, are presented as part of right-of-use asset under Property and Equipment, and Lease Liabilities (current portion under Trade and Other Payable) in the consolidated statements of financial position.
Under PAS 17, total rental expense arising from the lease charged to operations amounting to P3.1 million for the year ended May 31, 2019, is presented as part of Rental under Operating Expenses in 2019 consolidated statement of profit or loss (see Note 19). Outstanding payable arising from the transaction amounting to P6.8 million as at May 31, 2019, is presented as part of Accrued expenses under the Trade and Other Payables account in the consolidated statements of financial position (see Note 16).
23.5 Retirement Funds
The University, FECSI and EACCI’s retirement funds are in the form of
trustee-banks managed accounts. The fair value of the Group’s retirement plan assets amounted to P865.5 million in 2021, P892.6 million in 2020 and P757.0 million in 2019 [see Note 21(b)]. The University, FECSI and EACCI have no transactions with the retirement plans other than contributions and benefit payments in all periods presented.
None of the retirement plan assets are invested in or provided to the University, EACCI or FECSI, their related parties, and to their officers in the form of advances or loans.
The retirement funds neither provide any guarantee nor surety for any obligation of the University, EACCI and FECSI.
In January 2020, the FRC entered into an amended lease agreement with EACCI to cover the lease of certain buildings within campus premises collectively referred to as FEU Diliman Campus. The amended lease term is from February 1, 2020 to
January 31, 2021 for an annual rental fee of 10% of EACCI’s annual gross income from tertiary and senior high school departments and 5% from basic education and junior high school department, but no lower than P25.0 million
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23.6 Key Management Personnel Compensation
Total remunerations of the Group’s key management personnel for the years ended May 31, 2021, 2020 and 2019, which are presented as part of Employee benefits under Operating Expenses in the consolidated statements of profit or loss (see Note 21), are as follows:
2021 2020 2019 Short-term benefits P 101,367,997 P 123,069,612 P 131,260,806 Post-employment benefits 15,049,153 13,591,593 14,080,927
P 116,417,150 P 136,661,205 P 145,341,733
23.7 Financial Guaranty for Subsidiaries’ Loans
In March 2017 and January 2018, the BOT approved that for and in consideration of the loan or credit facilities obtained by any subsidiary of the University, in which the University owns at least 75% of the outstanding voting capital stock of such subsidiary, from a certain local commercial bank, the University gives its full consent and authority to act as surety up to P500 million for the subsidiary’s obligations arising from any loan or availments from any credit facilities granted by the said local bank in favor of the subsidiary, as well as any renewals, increases, extensions of existing obligations obtained by or which may hereafter be obtained by the subsidiary from the local bank, whether direct or indirect, principal or secondary. As of May 31, 2021, 2020 and 2019, RCI has availed a loan amounting to P500.0 million, P400.0 million and P150.0 million, respectively, from the said local bank (see Note 17).
23.8 Others
In July 2014, the FRC’s declaration of stock dividend resulted in 291 fractional shares amounting to P0.3 million, which the FRC also opted to treat as treasury shares.
On October 8, 2019, the FRC’s BOD approved the proposal to increase its par value from P1,000 to P10,000, resulting to fractional shares for stockholders owning less than ten shares. Outstanding liability amounting to P27.1 million and P28.5 million as of May 31, 2021 and 2020, (nil in 2019), respectively, are presented as part of Due to related parties under Trade and Other Payables account in the consolidated statements of financial position (see Note 16).