1 Principal activities
The Center for the Study of Democracy (hereafter
”CSD“ or the ”Center“) is an independent not for profit, public
policy research organisation founded in late 1989.
Its main activities are concentrated in the
organisation and operation of programs including economic, law
reform, sociological and information resources aiming at speeding
up the market oriented development of the Bulgarian economy and
democratisation of the Bulgarian society. The programs are financed
by West European and American not for profit organisations,
governmental institutions and private companies such as American
Bar Association, Center for International Private Enterprise
(U.S.A.), Commission of the European Communities, Council of
Europe, C. S. Mott Foundation, Hanns Seidel Foundation (Germany),
International Center for Economic Growth, US Agency for
International Development and World Bank.
Other activities include publishing of materials and
distribution.
2 Principal Accounting Policies
CSD’s accounting policies are established in
compliance with the Bulgarian Accountancy Act, the Bulgarian
National Accounting Standards, and the United States Circular A-133
Standard concerning ”grants and agreements with Institutions of
Higher Education, Hospitals and other Nonprofit Organizations“, as
well as with the requirements set under Standard A-122 (Cost
Principles for Nonprofit Organizations).
Revenue recognition
The Center’s revenue arises from its activities
relating to projects financed by third parties. The activity can be
divided into the following types:
- restricted funds, representing funding for specific
projects; and
- unrestricted funds for general expenditures and
maintenance.
Project revenue is recognised based upon
stipulations and duration of the contract with the organisation
requesting the project. Project revenue can be recognised upon
completion of a stage in the project or upon completion of the
project and submission of the final report.
At the end of each year a review of each project is
performed. Amounts received in excess of the estimated work
performed are deferred and disclosed in the balance sheet as part
of deferred revenue. The estimated value of work performed in
excess of the amounts received is recorded as project receivables
thus matching concept is being observed.
Revenue earned from the act of publishing and
distributing of books is recognised at the point of sale.
Taxation
The CSD is a not for profit organisation and is
exempt from corporate taxation and VAT on its not for profit
activities.
Foreign currency
Transactions in other currencies have been
translated into Bulgarian Leva at the rate of exchange ruling at
the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are
translated into Bulgarian Leva at the exchange rate ruling at that
date. All resulting exchange differences are recognised in arriving
at the result for the year and are disclosed in other income
(expense). Foreign currency accounts are maintained by using the
FIFO method.
USD to Leva foreign exchange rates were the
following for the respective periods:
At 31.12.1995 |
70,704
|
At 31.12.1996 |
487,350
|
Average for 1995 |
68
|
Average for 1996 |
178
|
Inflation accounting
Consistent with other entities operating in
Bulgaria, International Accounting Standard No 29 ”Financial
Reporting in Hyper-inflationary Economics“ has not been applied
despite the hyper-inflationary environment, as defined by IAS 29,
in Bulgaria. The annualised rate of inflation for 1996 was 311%
(1995 32.9%).
The effect of performing hyperinflation adjustments
would be to increase the value of the non-monetary balances of the
organisation to account for the loss in purchasing power as a
result of inflation. However the majority of the organisations
funds are received in foreign currency and converted to local
currency only as required. The loss of purchasing power caused by
inflation is therefore substantially avoided.
Related party transactions
The Center for the Study of Democracy has had
transactions with the Applied Research and Communications Fund
(ARC) during 1996. The two have different members of the Board of
Directors, different operational employees but occupy the same
premises. Amounts receivable from and payable to the ARC as at 31
December 1996 are Nil.
3 Other income
Other income in Leva’000 for the period included the
following:
|
Realized
|
Unrealized
|
1996
|
1995
|
|
|
|
|
|
Foreign exchange gains |
32,484
|
146,457
|
178,941
|
5,215
|
Foreign exchange losses |
(170)
|
(24,673)
|
(24,843)
|
(3,185)
|
Interest income |
1,725
|
-
|
1,725
|
698
|
Other income (expense |
(1,223)
|
|
(1,221)
|
34
|
Total |
32,816
|
121,784
|
154,601
|
2,762
|
|
|
|
|
|
4 Cash at bank and in hand
|
1996
|
1995
|
|
Leva’000
|
Leva’000
|
Deposits-foreign currency |
16,115
|
7,682
|
Deposits-Leva |
247
|
50
|
Cash at bank-foreign currency |
180,824
|
11,125
|
Cash at bank-Leva |
436
|
1,400
|
Cash in hand-foreign currency |
8,010
|
389
|
Cash in hand-Leva |
1,021
|
125
|
|
|
|
|
206,653
|
20,771
|
5 Receivables
|
1996
|
1995
|
|
Leva’000
|
Leva’000
|
Other receivables |
14,376
|
3,015
|
Investment receivable |
230
|
230
|
Project receivable |
21,070
|
3,894
|
|
|
|
|
35,676
|
7,139
|
6 Fixed assets
The Center acquires its fixed assets through purchases with its
own funds or by obtaining the fixed assets upon the completion of
projects. Assets are valued on the basis of acquisition cost and
are shown at cost less accumulated depreciation. Depreciation is
charged on a straight-line basis and the following rates are
applied:
Machinery and equipment |
20%
|
Vehicles |
20%
|
Office furniture and equipment |
25%
|
Software |
20%
|
The activity for tangible assets for 1996 is as
follows:
|
1996
|
|
Leva’000
|
Cost or valuation |
|
At 1 January 1996
|
12,416
|
Additions
|
2,676
|
Disposals
|
(880)
|
At 31 December 1996
|
14,212
|
Accumulated Depreciation |
|
At 1 January 1996
|
3,681
|
Charge for the year
|
2,793
|
Less disposal
|
(819)
|
At 31 December 1996
|
5,655
|
Net book value |
|
At 31 December 1996
|
8,557
|
7 Long-term liabilities
|
1996
|
1995
|
|
Leva’000
|
Leva’000
|
|
|
|
Deferred capital subsidies |
1,547
|
395
|
|
|
|
Deferred capital subsidies consist of the remaining
balance of funds received for specific projects.
8 Reconciliation between local statutory
reporting and these financial statements
|
Leva’000
|
Surplus for the year per local
statutory reporting |
55,598
|
Adjustments for recognition of unrealised gains
(losses) on amounts held in foreign currency as follows:
Cash |
131,144
|
Receivables and deferred expenses |
(958)
|
Liabilities |
(8,402)
|
Surplus per IAS financial
statements |
177,382
|
9 Reconciliation of excess of income over
expenditure to net cash outflow from operating activities.
|
1996
|
1995
|
|
Leva’000
|
Leva’000
|
Excess of income over expenditure |
177,382
|
12,506
|
Depreciation |
2,793
|
1,840
|
Loss on sale of fixed assets |
62
|
52
|
Increase of receivables and deferred
expenses |
(28,682)
|
(2,017)
|
Increase(decrease) of payables |
35,852
|
(1,023)
|
|
|
|
Net cash from operating activities |
187,407
|
11,358
|
|