UNDERSTANDING COOPERATIVE: PURPOSES AND ITS PECULIARITIES By: JOSEPHINE P. YOPO, CPA, MBA
ORLANDO A. FERNANDEZ, CPA, LLB, MBA-TEP
On July 28, 2008, Republic Act 9520 AN ACT AMENDING THE COOPERATIVE CODE OF THE PHILIPPINES TO BE KNOWN AS THE “PHILIPPINE COOPERATIVE CODE OF 2008” AN ACT AMENDING THE COOPERATIVE CODE OF THE PHILIPPINES TO BE KNOWN AS THE “PHILIPPINE COOPERATIVE CODE OF 2008” was promulgated. It is the declared policy of the State to foster the creation and growth of cooperatives as a practical vehicle for promoting self-reliance and harnessing people power towards the attainment of economic development and social justice. The State shall encourage the private sector to undertake the actual formation and organization of cooperatives and shall create an atmosphere that is conducive to the growth and development of these cooperatives. Autonomy and Independence — Cooperatives are autonomous, self- help organizations controlled by their members. If they enter into agreements with other organizations, including government, or raise capital from external sources, they shall do so on terms that ensure democratic control of their members and maintain their cooperative autonomy. Taking into account the above matters, Cooperatives are supposedly created and established for the betterment of the lives of its members. Therefore, it is necessary that Cooperatives through its Board of Directors minimize Financial Risks. Financial Risk Management Objectives and Policies
The Cooperative is exposed to credit, liquidity, and other risks that arise in the normal course of its business. Its risk and control framework includes a focus on minimizing negative effects on the Company's financial performance due to unpredictability of financial markets that drives the risks. THE COOP SHOULD CREATE A RISK MANAGEMENT COMMITTEE
CHAPTER V, ART. 60. Tax Treatment of Cooperatives. — Duly registered cooperatives under this Code which do not transact any business with non-members or the general public shall not be subject to any taxes or fees imposed under the Internal Revenue Laws and other tax laws. Cooperatives not falling under this Article shall be governed by the succeeding section. Furthermore, ART. 61. Tax and Other Exemptions. — Cooperatives transacting business with both members and non-members shall not be subject to tax on their transactions with members. In relation to this, the transactions of members with the cooperative shall not be subject to any taxes and fees, including but not limited to final taxes of members' deposits and documentary stamp tax. In reference to the above, a Cooperative transacting business only with its members is exempt from all government taxes, and therefore cannot apply the PAS for income taxes because of its tax-exempt nature. However, should the cooperative exceed the limits as set forth in the cooperative code, it will adopt the accounting standards for income taxes as stated in PAS 12.
As a rule, cooperatives adopt the accrual basis of accounting. However, for credit and other cooperatives, recognition of revenues is on a modified accrual basis; i.e., interest income, fines, penalties and surcharges shall be recognized when earned and actually collected. This is so because only interest income, fines, penalties and surcharges on loans receivable that has been realized ( i.e., earned and collected) shall be the basis of the income available for distribution to its members through interest on share capital and patronage refund. Also, due to the cash-based income distribution scheme of a cooperative as well as the inherent limitations of small- scale countryside credit cooperatives, it cannot adopt the effective interest method in recognizing interest income on loans receivable.
ACCOUNTS PECULIAR TO COOPERATIVES
The following accounts are peculiar to a Cooperative due to its nature as well as adherence to Cooperative laws, issued policies, rules and...
References: 1. Cooperative Development Authority (CDA)
2. RA 9520
3. Cooperative, Free Dictionary
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