The BOT has overall responsibility for establishing and overseeing the Group's risk management framework. Nevertheless, the analysis above is considered to be representative of the Group's foreign exchange risk.
Legal Proceedings
Submission of Matters to a Vote of Security Holders
OPERATIONAL AND FINANCIAL INFORMATION
Market for Registrants Common Equity and Related Stockholders Matters DIVIDENDS DECLARED FOR THE FISCAL YEAR ENDED MAY 31, 2017
Management’s Discussion and Analysis or Plan of Operation
- Test of Liquidity
- Test of Solvency
- Test of Profitability
- Product Standards
- Market Acceptability
Below is a four-year table showing the adequacy of the Group's net income compared to the total cash dividend declared and paid. This is due to the implementation of the Senior High School levels (grades 11 and 12) as part of the K-12 program.
Financial Statements
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
CONTROL AND COMPENSATION Item 9. Trustees and Executive Officers
Other business affiliations: Chairman and CEO, ALFM Mutual Fund Group and Independent Director, Generika/Actimed Group, East Asia Computer Center, Inc., FERN Realty Corporation and Far Eastern College Silang, Inc. Tinio, 51, Filipino: Senior Vice President for AcademicAffairs, Far Eastern University, Inc. from June 2011 to present) matters, Far Eastern University, Inc. Other Business Connections: Concurrent Director and Corporate Secretary of FERN Realty Corporation and Amon Trading Corporation; Trustee, East Asia Educational Foundation, Inc.; Director, Far Eastern College Silang, Inc., East Asia Computer Center, Inc.
Rosanna Esguerra-Salcedo, 52, Filipino: Treasurer, Far Eastern University, Inc
Business Administration, Major in Accounting from the Philippine School of Business Administration, Quezon City Campus in 1987 and received his Masters in Management from the Asian Institute of Management in 2004. Members of the Board of Directors of the Corporation are elected at the Annual Shareholders Meeting to hold office until at the next annual meeting, or until such time as their respective successors shall have been elected and qualified. Officers are appointed or elected annually by the Board of Trustees at its organizational meeting, each to hold office until the next meeting of the Board in the following year or until a successor has been elected, appointed and qualified.
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management Beneficial Owners of More Than 5% and 10% Securities as of May 31, 2017
Security Ownership of Certain Beneficial Owners and Management Beneficial Owners of More than 5% and 10% Securities as of May 31, 2017.
Related Party Transactions
Outstanding receivables resulting from the transaction amount to P23.4 million, P17.0 million. and P27.5 million. per 31 May 2017 and 2016 and 31 March 2016 respectively and are presented as part of the trade and other receivables account in the consolidated balance sheet. Rental income from this transaction amounted to P1.5 million. for the years ended 31 May 2017 and 31 March 2016 and is presented as part of Rent under Income in the consolidated income statement. The outstanding balance from these transactions is presented as part of the account for Suppliers and other debts in the consolidated financial statements as of 31 May 2017 and 2016 (see note 17 in the consolidated financial statements).
EXHIBITS AND SCHEDULES Item 13. Exhibits and Reports on SEC Form 17-C
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- Basis of Preparation of Financial Statements
- Adoption of Amended PFRS
- Separate Financial Statements and Investments in Subsidiaries and an Associate
- Financial Assets
- Prepayments and Other Assets
- Property and Equipment
- Investment Properties
- Financial Liabilities
- Offsetting Financial Instruments
- Provisions and Contingencies
- Revenue and Expense Recognition
- Leases
- Foreign Currency Transactions and Translation
- Impairment of Non-financial Assets
- Employee Benefits
- Borrowing Costs
- Income Taxes
- Related Party Relationships and Transactions
- Equity
- Earnings (Loss) Per Share
- Segment Reporting
- Events After the End of the Reporting Period
Items included in the University's financial statements are valued using the functional currency. Financial assets are recognized when the University becomes a party to the. contractual terms of the financial instrument. The amount of the reversal is recognized in the profit and loss account. ii) Measured at fair value – AFS financial assets.
SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES
- Critical Management Judgments in Applying Accounting Policies
- Key Sources of Estimation Uncertainty
Any post-year-end event that provides additional information about the university's financial position at the end of the reporting period (adjusting event) is reflected in the financial statements. Currently, all of the university's leases are designated as operating leases. f) Recognition of provisions and contingent liabilities. The accounting values of the university's AFS financial assets and the amount of fair value changes recognized over the years on these assets are disclosed in note 10.
RISK MANAGEMENT OBJECTIVES AND POLICIES
- Market Risk (a) Foreign Currency Risk
- Credit Risk
- Liquidity Risk
The University's exposure to price risk arises from its investments in shares classified as part of the AFS Financial Assets account in the statement of financial position. The University has no past due but unusual financial assets at the end of each year. Per 31 May 2017 and 2016 and 31 March 2016, the university's financial obligations have contractual maturities, which are presented below.
CATEGORIES AND OFFSETTING OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
- Carrying Amounts and Fair Values by Category
- Offsetting of Financial Assets and Financial Liabilities
All other financial assets and financial liabilities are settled on a gross basis; however, each party to the financial instrument (i.e. related parties) has the option of settling all such amounts on a net basis upon approval by the BOT or Board of Directors (BOD) of both parties. As such, the university's outstanding receivables from and payables to the same related parties may be offset against their corresponding outstanding balances.
FAIR VALUE MEASUREMENT AND DISCLOSURES 1 Fair Value Hierarchy
- Financial Instruments Measurement at Fair Value
- Financial Instruments Measured at Amortized Cost for which Fair Value is Disclosed
- Fair Value Measurement for Non-financial Assets (a) Determining Fair Value of Investment Properties
NAVPU is calculated by dividing the fund's total fair value by the total number of units at the end of each reporting period. The fair values of these non-financial assets were determined based on the following approaches: i) Fair value measurement for land. Under this approach, higher estimated costs used in the valuation will result in higher fair value of the properties.
CASH AND CASH EQUIVALENTS
In estimating the fair value of these properties, management considers the market participant's ability to generate economic benefits by using the assets to their highest and best use. The Level 3 fair value of land was obtained using the comparable market approach which reflects recent transaction prices for similar properties in nearby locations and is adjusted for differences in key characteristics such as property size, zoning and accessibility. The Level 3 fair value of the buildings and improvements under the Investment Property Account was determined using the cost approach which reflects the cost to a market participant to acquire an asset of comparable use, construction standards, design and layout, adjusted for obsolescence build.
RECEIVABLES
Interest income from cash and cash equivalents is shown as part of financial income in the income statement (see note 19.1). During the periods ended May 31, 2017 and 2016 and March 31, 2017, certain tuition and other tuition receivables were determined to be impaired, and the corresponding impairment loss was recognized and presented as part of general expenses within operating expenses in the income statement or losses (see Note 18). For all other receivables as of 31/05/2017 and 2016 and 31/03/2016, no value adjustment was made due to impairment, as the management believes that they are fully recoverable.
CROSS-CURRENCY SWAP
The allowance for impairment loss on receivables from students as of 31 May 2017 and 2016 and 31 March 2016 relates to amounts outstanding for more than one semester and specifically identified as impaired. However, during the year ended May 31, 2017, management identified certain accrued interest amounting to P24.5 million which is no longer reasonable, and was therefore written off. This was presented as Loss on write-off of receivables under Finance Costs in the statements of profit or loss (see Note 19.2).
FINANCIAL ASSETS
- Available-for-Sale Financial Assets
- Held-to-Maturity Investments
During the year ended 31 May 2017, these AFS financial assets were reclassified as HTM investments (see Note 10.2). An analysis of the movements in the carrying amounts of the University's investments is presented below. An analysis of the movements in the carrying amount of the University's HTM investments for the year ending 31 May 2017 is presented below.
PREPAYMENTS AND OTHER CURRENT ASSETS The breakdown of this account is as follows
Net amortization of discounts during the year amounting to P3.8 million is recorded as net of other investment income from HTM investments (see Note 19.1).
INVESTMENTS IN SUBSIDIARIES AND AN ASSOCIATE This account consists of the following as of
- Investment in RCI
- Investment in FEUAI
- Investment in FEU High
- Investment in an Associate
- Prior Period Adjustment
As of May 31, 2017, FEUAI is the only subsidiary of the university that has not yet started commercial activities. During the year ended May 31, 2017, the University acquired 52,349 additional shares of RCI from various selling RCI shareholders. During the year ended May 31, 2017, the university paid in full its initial subscription for 187,500 shares of FEUAI for an amount of P18.8 million.
INVESTMENT PROPERTIES
The total rental income from investment properties is presented in Rent under Other income in the income statement (see notes and 23.9). The direct operating expenses, which include depreciation and amortization, insurance as well as taxes and permits held by the university in relation to the investment properties, are presented as part of Depreciation and amortization, Property insurance and Taxes and permits under Operating expenses in profit and loss statements (see note 18). Information on fair value measurement and information regarding investment properties appears in note 6.4.
PROPERTY AND EQUIPMENT
Prior to June 1, 2016, the University incurred various costs for master planning, soil testing and environmental consulting, and architectural and engineering design services for the campus to be built and leased to FEUAI. Based on the latest appraisal report obtained from an independent appraiser in July 2016, management has determined that the total fair value of investment properties is P1.8 billion. Building and Furniture and Lease Miscellaneous Construction Land Improvements Equipment Improvements Equipment In Progress Total balance as of June 1, 2016.
TRADE AND OTHER PAYABLES This account consists of
INTEREST-BEARING LOANS
For the year ended May 31, 2017, accrued interest on this loan amounting to P1.2 million was recognized in the income statement and reported as part of the finance expense in the income statement (see Note 19.2). d) In November 2016, the University secured an interest-bearing loan of P150.0 million from a local commercial bank for general capital expenditures, including financing a corporate acquisition and general corporate financing. Related interest of P2.3 million was recognized in the income statement and reported as part of the finance expense in the income statement for the year ended May 31, 2017 (see Note 19.2). e) In May 2017, the University obtained an interest-bearing loan of P50.0 million from a local commercial bank for general capital expenditures, including financing a corporate acquisition and general corporate funding requirements. Related interest of P0.1 million was recognized in the income statement and reported as part of the finance expense in the income statement for the year ended May 31, 2017 (see Note 19.2). f) On August 16, 2016, the university's BOT approved the acceptance of a credit facility of up to P3.0 billion from another local bank.
EDUCATIONAL REVENUES
The loan is unsecured and interest-bearing and does not have any material or restrictive covenants. Such collections amounting to P8.8 million and P50.4 million as of May 31, 2017 and 2016, respectively, are excluded from tuition fees earned for the period and presented as unearned tuition fees in the statements of financial position. These are recognized as income in the period following the end of the academic class.
OPERATING EXPENSES
- P 120,556,562 P 21,376,018 P 112,303,853 Salaries and
There are no unearned tuition fees as of 31 March 2016, as collections for summer classes began after the end of the term. Other administrative expenses mainly relate to expenses incurred for outsourced services, representation, expenses for seminars and conferences, insurance, various supplies, fuel, repairs and maintenance and others. Other general expenses relate to trustees' and officers' liability insurance and books and other subscriptions.
FINANCE INCOME AND FINANCE COSTS 1 Finance Income
- Finance Costs
OTHER INCOME
EMPLOYEES’ HEALTH, WELFARE AND RETIREMENT FUND (a) Characteristics of the Defined Benefit Plan
An analysis of the university's defined benefit obligation under PIC interpretation with respect to the defined benefit minimum guarantee under RA 7641 is presented below. The present value of the defined benefit obligation is calculated using a discount rate determined from the market interest rates on government bonds. As a result, increases in the life expectancy and salary of the plan participants will lead to an increase in the plan obligation.
INCOME TAXES
RELATED PARTY TRANSACTIONS
- Dividend Income
- Noninterest-bearing Advances
- Lease of Manila Campus Premises from FRC
- Lease of Makati Campus Premises from FRC
- Lease of Certain Building Floor to FRC
- Lease of Campus Premises to FECSI
- Reimbursement of Expenses
- Lease of Nursing Building to FEU High
- Lease of Certain Buildings to EAEF and EACCI
- Management Services
- Lease of Facilities from EACCI
- Lease of Facilities from Nicanor Reyes Educational Foundation, Inc
- Financial Guaranty for Subsidiaries’ Loans
- Key Management Personnel Compensation
- Retirement Fund
Accordingly, the University charged FECSI to reimburse such expenses, which are presented as part of management fees under other income in the statement of profit or loss for the year ended 31 March 2016 (see Note 20). During the year ended May 31, 2017, the University billed FEU High for light, water and other utilities. During the periods ended May 31, 2017 and 2016, the University financed the pension payment of certain employees benefiting from the ERGP (see note 21), which will be reimbursed by the Fund.
EQUITY
- Capital Stock
- Retained Earnings
The pension fund does not provide any guarantee or guarantee for any obligation of the University. During the fiscal year ended March 31, 2016, the University made an additional allocation, in the amount of P707.5 million, for the purchase of properties and investments. There were no changes in retained earnings divided during the periods ended May 31, 2017 and 2016.
EARNINGS (LOSS) PER SHARE
Unenforced checks relating to dividends declared as at 31 May 2017 and 2016 and 31 March 2016 are shown as Dividend Payables in the Operating and Other Liabilities account in the Statements of Financial Position (see Note 15).
EVENTS AFTER THE END OF THE REPORTING PERIOD
COMMITMENTS AND CONTINGENCIES
- Operating Lease Commitments – University as Lessee (a) Lease Agreement with FRC
- Operating Lease Commitments – University as Lessor
- Open Legal Cases
- Others
As of May 31, 2017, the university has a case pending against the local government of the City of Manila, where it contests the levying of local business tax on tuition fees collected. The university's protest is based on the following premises: (i) the lack of a specific provision in the Local Government Code and in the Local Tax Code of Manila authorizing the City of Manila to levy a 1% corporate tax on tuition fees to lift;. ii) recipe; and (iii) violation of due process. There are other contingencies that arise in the normal course of business that are not accounted for in the university's financial statements.
CAPITAL MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES The University aims to provide returns on equity to shareholders while managing
SUPPLEMENTARY INFORMATION REQUIRED BY THE BUREAU OF INTERNAL REVENUE
Pursuant to section 109, transactions exempt from VAT, of the National Internal Revenue Code of 1997, the University's receipts from tuition and other fees related to. The University did not have any transactions in fiscal year 2017 that are subject to excise duty. As of May 31, 2017, the University does not have any final tax assessment of deficiencies with the BIR nor does it have any tax matters outstanding or pending in courts or bodies outside the BIR in any of the open tax years.
CORPORATE INFORMATION 1 Background of the University
- Acquisition of New Subsidiaries
- Change in Fiscal Year
- Other Corporate Information
- Approval for Issuance of Consolidated Financial Statements
- Basis of Preparation of the Consolidated Financial Statements (a) Statement of Compliance with Philippine Financial Reporting Standards
The consolidated financial statements for and for the year ended 31 May 2017 (including the comparable consolidated financial statements for and for the two months ended 31 May 2016 and the year ended 31 March 2016) were approved for publication by BOT on August 15, 2017. The consolidated financial statements have been prepared in accordance with Philippine Financial Reporting Standards (PFRS). Items included in the group's consolidated financial statements are measured in its functional currency.
