SPECIALIZED INDUSTRIES MIDTERMS

Agricultural Cooperatives

Support farmers and agricultural producers.

Agricultural Cooperatives

They allow members to pool resources, share risks, and improve market access.

Agricultural Cooperatives

Combine mutual cooperation principles with business operations.

Corporate Structure

Most cooperatives are organized as corporations

Corporate Structure

They may or may not issue capital stock.

Marketing Cooperatives

Market agricultural products for patrons.

Bargaining Cooperatives

A specialized type of marketing cooperative where the primary goal is to negotiate terms of sale for their members’ products, rather than physically handling or processing them.

Bargaining Cooperatives

Negotiate with packers and processors (marketing cooperatives) and provide market information.

Bargaining Cooperatives

Act as intermediaries between producers and buyers.

Supply or Purchasing Cooperatives

Purchase, manufacture, distribute and provide products to rheir patrons.

Supply or Purchasing Cooperatives

They range from samll retail cooperatives to large regional manufacturing and wholesale organization.

Service Cooperatives

Provide services to members.

Multiple Cooperative Functions

Many cooperatives perform multiple roles, such as Marketing Agricultural Products and Supplying from Inputs.

Members

Often serve as patrons of the cooperative.

Member

Legal owner of the cooperative.

Member

They have formally joined the organization, usually by paying a membership fee or purchasing a share of stock.

Patron

Anyone - member or non-member - who uses the cooperative’s products or services.

Cooperatives

Provides services and distrbutes surplus revenues.

Patronage Income

Income from transactions with/for patrons.

Non-Patronage Income

Income from non-patron transactions.

Cash Paymenta

The cooperative pays out a portion of the net earnings directly to the member in cash.

Cash Payments

This is the simplest form.

Cash and Equity Certificates

This is a “hybrid” approach.

Cash and Equity Certificates

A member receives a portion of their fund in immediate cash (often at least 20% for tax reasons in many regions) and the remainder in equity certifucates.

Revolving-Fund Certificates

These are a unique cooperative tool.

Revolving-Fund Certificates

The co-op keeps the member’s earnings for a set period (e.g., 5 or 10 years) to use as working capital.

Capital Certificates

These are similar to stock in a company.

Capital Certificates

Instead of cash, the member receives a certificate representing a specific dollar amount of the cooperative’s capital.

Redemption of Equity Certificates

The process of the cooperative buying back those certificates from members to return their invested cash.

Patronage Refunds

Represent the distribution of a cooperative’s net surplus to members.

Patronage Refunds

The distribution is based on the member’s level of participation or transactions with the cooperative.

Patronage Refunds

This system ensures that members benefit in proportion to their engagement, reflecting the cooperative principle of fairness.

The Philippine Accounting Standard 24 (PAS 24)

Requires organizations to disclose material related-party transactions.

The Philippine Accounting Standard 24 (PAS 24)

This ensures transparency and accountability in financial reporting.

Supports Accountability

Members are able to evaluate how related-party transactions affect the cooperative’s finances.

Promotes Transparency

Clear disclosures prevents conflicts of interest and unfair advantages.

Ensures Compliance

Proper disclosures ensures adherence to accounting standards and regulatory requirements.

Capital Gains Tax

Applies to sale or disposition of shares of stock or real property classified as capital assets.

Documentary Stamp Tax (DST)

Imposed on transactions with non-members.

Documentary Stamp Tax (DST)

If one party is exempt, the non-exempt party becomes liable for the tax.

Value Added Tax (VAT) on Purchases

Cooperatives may pay VAT on purchases of goods and services.

Value Added Tax (VAT) on Purchases

Agricultural cooperatives may receive VAT exemption on importation of farm inputs and equipment used directly in production.

Withholding Taxes

Cooperatives act as withholding agents for employee compensation, creditable withholding tax, and final withholding tax.

Taxability of Unrelated Income

Income not related to the cooperative’s principal business is taxable.

Taxability of Unrelated Income

This rule applies to all cooperatives, whether they transact only with members or with both members and non-members.

Accounting for Unprocessed Products

Review the method used to account for products delivered by patrons in marketing cooperatives.

Inventory Valuation

Evaluate how finished product inventories are valued, especially when cooperatives operate on a polling basis.

Board Intentions Equity Redemption

Determine whether the board plans to redeem equity certificates or retained patronage allocations.

Forward and Futures Contracts

Examine any forward or future contracts related to agricultural commodities.

Allocation of Gains and Losses

Review the method used to distribute gains and losses among pools of products.

Advance to Members

Assess the timing and amount of advances given to members against estimated proceeds.

Need for Specialists

In some cases, an auditor may require specialists to evaluate the quality or value of cooperative invetories.

Understanding the Control Environment

The auditor evaluates management’s attitude toward internal control, ethica, and compliance.

Understanding the Control Environment

This includes reviewing leadership practices and governance policies.

Flow of Transactions

The auditor analyzes how transactions move through the accounting system.

Preliminary Review for Control Reliance

The auditor determines whether certain internal controls can be relied upon for audit testing.

Preliminary Review for Control Reliance

If controls appear effective, the auditor may reduce the extent of substantive testing.

Testing Control Procedures

These help verify that controls operate as intended.

Pool Accounting

Because individual product identification is impractical, this shstem allows efficient management and fair distribution of proceeds.

Product Delivery and Ownership

Members deliver agricultural products to the cooperative.

Product Delivery and Ownership

The cooperative takes ownership of the products and combines them with similar goods.

Sales and Recordkeeping

The cooperative processes and sells the products.

Sales and Recordkeeping

Sales, costs, and expenses are recorded separately for each product pool.

Distribution of Net Proceeds

Allocation is based on quantity or value of products contributed by each patron.

Pool Duration

May range from a week to over a year, depending on the product’s production and marketing cycle.

Single-Pool Method

All products and revenues are combined into one general pool.

Single-Pool Method

Net proceeds are distributed proportionally based on members’ contributions.

Multiple-Pool Method

Separate pools are created for different products or production periods.

Multiple-Pool Method

Each pool maintains its own sales, expenses, and net proceeds.

Multiple-Pool Method

Proceeds are distributed only to the members who contributed to that specific pool.

Accounting for Losses

A cooperative may incur an overall loss in a given year.

Accounting for Losses

This disposition of losses may be made based on bylaws or he board of directors’ action.

Disposition of Losses

Allocating the loss to members on the basis of current membership.

Disposition of Losses

Allocating the loss to all equities without considering current membership.

Disposition of Losses

Charging the loss to unallocated retained earnings.

Disposition of Losses

Offsetting the loss against amounts available for membership allocation in subsequent years before making opany such allocation to members.