PHILIPPINE RED CROSS (A Non-stock, Not-for-profit Organization)

FINANCIAL STATEMENTS December 31, 2015 and 2014

PHILIPPINE RED CROSS (A Non-stock, Not-for-profit Organization)

STATEMENTS OF ASSETS, LIABILITIES AND FUND BALANCES

December 31 Note 2015 2014ASSETS Current Assets Cash and cash equivalents 7 P2,087,129,114 P2,006,693,378 Advances and other receivables - net 8 310,592,540 281,335,542 Advances for chapters’ operations and

employees 9 294,769,290 291,073,148 Materials and supplies 70,426,308 9,455,806 Time deposits - current portion 10 487,416,930 393,510,053

Total Current Assets 3,250,334,182 2,982,067,927

Noncurrent Assets Available-for-sale investments 11 52,141,377 54,480,480 Property and equipment - net 12 1,197,503,940 779,877,555 Intangible assets - net 13 34,947,265 17,569,104 Time deposits - net of current portion 10 117,249,744 63,790,581

Total Noncurrent Assets 1,401,842,326 915,717,720

P4,652,176,508 P3,897,785,647

LIABILITIES AND FUND BALANCES

Current Liabilities Accounts payable and other liabilities 14 P550,596,620 P375,469,768 Fund Balances General fund and special projects 2,041,645,612 1,393,046,599 Disaster relief operations 1,186,696,210 1,195,033,844 Restricted fund 25 873,096,689 931,754,956 Unrealized gain on available-for-sale

investments 11 141,377 2,480,480 4,101,579,888 3,522,315,879

P4,652,176,508 P3,897,785,647

See Notes to the Financial Statements.

PHILIPPINE RED CROSS (A Non-stock, Not-for-profit Organization)

STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31 Note 2015 2014 INCOME Special Donations to PRC 20 P1,900,591,490 P1,586,237,356Blood Service Program 16 833,389,696 474,752,484Fund Campaign Contributions 15 208,889,853 393,012,011Donation for Relief Operation 17 208,069,530 450,816,241Fund Generation 18 177,111,555 75,798,980Project Management Fee 19 62,198,135 34,807,013Miscellaneous income 21 241,847,611 264,670,508 3,632,097,870 3,280,094,593

COST OF SERVICES 23 3,237,655,497 1,914,173,326OPERATING EXPENSES 24 476,410,571 421,689,308 3,714,066,068 2,335,862,634EXCESS OF INCOME OVER EXPENSES (81,968,198) 944,231,959

OTHER COMPREHENSIVE LOSS Unrealized loss on available-for-sale

investments 11 (2,339,103) (6,962,655)TOTAL COMPREHENSIVE INCOME (LOSS) (P84,307,301) P937,269,304

See Notes to the Financial Statements.

PHILIPPINE RED CROSS (A Non-stock, Not-for-profit Organization)

STATEMENTS OF CHANGES IN FUND BALANCES

Years Ended December 31 Unrealized Gain

General Fund and

Special Projects Disaster

Relief Operations Restricted

Fund (Loss) on

AFS Investments Total Fund

(Note 27) (Note 27) (Note 25) (Note 11) Balance Balances at December 31, 2013, as previously reported P657,260,692 P928,463,402 P965,583,279 P9,443,135 P2,560,750,508 Effect of restatements - 24,296,067 - - 24,296,067

Balances at December 31, 2013, as restated 657,260,692 952,759,469 965,583,279 9,443,135 2,585,046,575 Transfer from restricted fund 199,278,414 - (199,278,414) - - Excess of income over expenses 536,507,493 242,274,375 165,450,091 - 944,231,959 Unrealized loss on available-for-sale investments - - - (6,962,655) (6,962,655)

Balances at December 31, 2014 1,393,046,599 1,195,033,844 931,754,956 2,480,480 3,522,315,879 Transfer from restricted fund 87,095,518 - (87,095,518) - - Establishment of equity of 24 Chapters (Class A and B) 663,571,310 663,571,310 Excess of income over expenses (102,067,815) (8,337,634) 28,437,251 - (81,968,198) Unrealized loss on available-for-sale investments - - - (2,339,103) (2,339,103) Balances at December 31, 2015 P2,041,645,612 P1,186,696,210 P873,096,689 P141,377 P4,101,579,888

See Notes to the Financial Statements.

PHILIPPINE RED CROSS

(A Non-stock, Not-for-profit Organization) STATEMENTS OF CASH FLOWS

Years Ended December 31 Note 2015 2014CASH FLOWS FROM OPERATING

ACTIVITIES Excess (deficiency) of income over expenses (P81,968,198) P944,231,959Adjustments for:

Provision for impairment losses 8, 9, 23 73,881,050 45,628,032Depreciation and amortization 12, 13 56,948,683 31,666,861Interest income 21 (25,492,152) (30,197,293)Unrealized foreign exchange gain (47,311,250) - Adjustment to establish the equity of the 24

Class A and B Chapters 663,571,310 - Operating income before changes in working

capital 639,629,443 991,329,559Changes in operating assets and liabilities:

(Increase) decrease in: Advances and other receivables - net (90,785,696) (79,157,905)Advances for chapters’ operations - net (15,055,810) (38,434,812)Materials and supplies (60,970,502) 8,154,656

Increase in: Accounts payable and other liabilities 14 175,126,852 (133,588,135)

Cash provided by operations 647,944,287 748,303,363Interest received 21 24,499,468 28,512,455Net cash provided by operating activities 672,443,755 776,815,818

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of property and equipment 12 (463,862,259) (398,155,040)Acquisition of intangible assets 13 (28,090,970) (20,572,377)Decrease in time deposits 10 (103,186,768) (294,610,616)Net cash used in investing activities (595,139,997) (713,338,033)

NET INCREASE IN CASH 77,303,758 63,477,785EFFECT OF EXCHANGE RATE CHANGES

ON CASH 3,131,978 - CASH AT BEGINNING OF YEAR 2,006,693,378 1,943,215,593CASH AT END OF YEAR 7 P2,087,129,114 P2,006,693,378

See Notes to the Financial Statements.

PHILIPPINE RED CROSS (A Non-stock, Not-for-profit Organization) NOTES TO THE FINANCIAL STATEMENTS

1. Reporting Entity

The Philippine Red Cross (PRC or the “Organization”), formerly The Philippine National Red Cross was created by Republic Act No. 95, as amended by Republic Act 10072 on April 20, 2010 primarily to: Cooperate with public authorities in the prevention of disease, the promotion of

health and the mitigation of human suffering by their own programs in such fields as education, health and social welfare, for the benefit of the community;

Organize, in liaison with public authorities, emergency relief operations and other

services to assist the sick and wounded of armed forces in time of armed conflict, in accordance with the spirit of and under the conditions prescribed by the Geneva conventions to which the Republic of the Philippine Proclaimed its adherence;

Perform all duties devolving upon the Organization as a result of the adherence

of the Republic of the Philippines to the said Convention. Act in matters of voluntary relief and of communication between the people of the

Republic of the Philippines and their Armed Forces, in time of peace and in time of armed conflict, and to act in such matter between similar national societies of other countries and the Governments and people and the Armed Forces of the Republic of the Philippines;

Establish and maintain a system of national and international relief in time of

peace and in time of armed conflict and apply the same in meeting emergency needs caused by typhoons, floods, fires, earthquakes, and other natural or man-made disasters, and to devise and carry on measures for alleviating the suffering caused by such disasters;

Devise and promote such other services in time of peace and in time of armed

conflict as may be found desirable in improving the health, safety and welfare of the Filipino people, and of all peoples in general; and

Make every citizen and resident of the Philippines a member of the Organization; The national headquarters of the Organization is located at 37 EDSA corner Boni Avenue, Mandaluyong City.

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2. Basis of Preparation Basis of Accounting These financial statements have been prepared on a modified cash basis of accounting. Under this method, income are recognized when received rather than when earned, and expenses are recognized when paid rather than when the related obligation is incurred. The modifications to the cash basis of accounting, which are patterned with the relevant requirements of Philippine Financial Reporting Standards, result from management’s decision to: Recognize advances and other receivable from third parties, chapters, suppliers

and partner national societies. Accounts receivable from chapters and third parties, and advances to suppliers and Partner National Societies are carried at amortized cost, less any allowance for impairment losses;

Recognize advances to chapters’ operations and employees pertaining cash

advances by the Organization in the implementation of the chapters’ operations. Advances to chapters’ operations and employees are carried at cost, less any allowance for impairment losses;

Recognize materials and supplies pertaining to merchandise and souvenir items,

unused membership cards, reagents, blood supplies and blood bags remaining as at year-end. Materials and suppliers are carried at cost;

Recognize available-for-sale (AFS) investments pertaining to investments in

treasury bonds. AFS investments are carried at fair value; Recognize accounts payable and other liabilities to chapters, partner national

societies, government, employees and third parties. Such accounts are carried at cost; and

Recognize property and equipment, depreciated using the straight-line method

based on the estimated useful lives of the assets. The Organization is comprised of the National Headquarters (NHQ), Chapters and Special Projects funds. The accompanying financial statements reflect the consolidated financial position and results of and financial performance of the National Headquarters (NHQ), Chapters and Special Projects funds to reflect the overall performance of the Organization during the year. However, Chapters’ balances are not included in the statement of financial position due to non-availability of balances except for 24 Chapters (Class A and B) in 2015. This report is intended solely for the use of Philippine Red Cross and its management and should not be distributed to or used by other parties who have not taken responsibility on the financial statements. Land and building acquired prior to March 31, 1981, including land donations to the Organization in 1975 are shown at nominal values. Some of the property and equipment were last appraised in 2015. Proceeds of fund campaign contributions of the Organization’s chapters are remitted to NHQ and the corresponding actual budgetary expenditures are reflected and accordingly accounted for under the general fund. Proceeds from fund campaign contributions, special donations to PRC, donations for disaster relief operations, blood processing fees, donations from Partner National Societies, membership contributions and income from other sources are recognized as income when received.

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Donations in kind from foreign and local sources are not recognized in the financial statements as there is no adequate data to properly value the donations in kind. However, these are officially acknowledged by the Organization and the receipts and distributions are accounted for in a schedule. Basis of Measurement The financial statements of the Organization have been prepared on the historical cost basis of accounting except for AFS investments which are measured at fair value. Functional and Presentation Currency The financial statements are presented in Philippine Peso, which is also the Organization’s functional currency. All amounts are rounded off to the nearest peso, except when otherwise indicated.

3. Summary of Significant Accounting Policies

Cash and Cash Equivalents Cash includes cash on hand and cash in banks. They are reported at their face value. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. These are time deposits with maturity of three (3) months or less from its acquisition. They are carried at face value. Financial Instruments Date of Recognition The Organization recognizes a financial asset or a financial liability in the statement of assets, liabilities and fund balances when it becomes a party to the contractual provisions of the instrument. Purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the market place are recognized on the settlement date. Initial Recognition and Classification of Financial Instruments Financial instruments are recognized initially at fair value. The initial measurement of financial instruments, except those financial assets and liabilities at fair value through profit or loss (FVPL), includes transaction costs. On initial recognition, the Organization classifies its financial assets in the following categories: financial assets at FVPL, loans and receivables, held-to-maturity (HTM) investments and AFS investments. The Organization also classifies its financial liabilities as financial liabilities at FVPL and other financial liabilities. The classification depends on the purpose for which the investments are acquired and whether they are quoted in an active market. Management determines the classification of its financial assets and financial liabilities at initial recognition and, where allowed and appropriate, re-evaluates such designation at the reporting date.

Financial instruments are classified as liability or equity in accordance with the substance of the contractual arrangement. Interest, gains and losses relating to a financial instrument or a component that is a financial liability are reported as expense or income. As at December 31, 2015 and 2014, the Organization’s financial assets and financial liabilities consist of cash and cash equivalents, advances and other receivables, time deposits, AFS investments and accounts payable and other liabilities.

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Loans and Receivables Loans and receivables are nonderivative financial assets with fixed or determinable payments that are not quoted in an active market. They are not entered into with the intention of immediate or short-term resale and are not designated as AFS investments or financial asset at FVPL. Loans and receivables are carried at cost or amortized cost, less any allowance for impairment losses. Amortization is determined using the effective interest method. Gains and losses are recognized in profit or loss when the loans and receivables are derecognized or impaired, as well as through amortization process. These financial assets are included in current assets if maturity is within twelve (12) months from the reporting date, otherwise, these are classified as noncurrent assets. As at December 31, 2015 and 2014, the Organization’s loans and receivables include cash in banks, cash equivalents, advances and other receivables and time deposits. AFS Investments AFS investments are those which are designated as such or do not qualify to be classified as financial assets at FVPL, HTM investments or loans and receivables. They are purchased and held indefinitely and may be sold in response to liquidity requirements or changes in market conditions. After initial measurement, AFS investments are subsequently measured at fair value. Unrealized gains and losses arising from the fair valuation of AFS investments are excluded from reported earnings and are reported as “Net unrealized gain (loss) on available-for-sale investments” in the statement of comprehensive income. The losses arising from the impairment of such securities are recognized in profit or loss. When the security is disposed of, the cumulative gain or loss previously recognized in other comprehensive income is transferred to profit or loss. The effective yield component of AFS investments, as well as the impact of restatement on foreign currency-denominated AFS investments, is reported in profit or loss. For investments that are actively traded in organized financial markets, fair value is determined by reference to share exchange-quoted market bid prices at the close of business at the end of each reporting period. For investments where there is no quoted market price, fair value is determined by reference to the current market value of another instrument which is substantially the same or is calculated based on the expected cash flows of the underlying net asset base of the investment. When the fair value of AFS investments cannot be measured reliably because of lack of reliable estimates of unobserved inputs such as in the case of unquoted equity instruments, these financial assets are allowed to be carried at cost less allowance for impairment, if any. As at December 31, 2015 and 2014, the Organization’s AFS investments pertain to treasury bonds carried at fair value.

Other Financial Liabilities This category pertains to nonderivative financial liabilities that are not held for trading or not designated as at FVPL at the inception of the liability. They are initially measured at fair value plus transaction costs. Subsequently, these are measured at amortized cost, taking into account the impact of applying the effective interest method of amortization (or accretion) for any related premium, discount and any directly attributable transaction costs.

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As at December 31, 2015 and 2014, the Organization’s other financial liabilities consist of accounts payable and other liabilities (excluding statutory payables). Impairment of Financial Assets The Organization assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred “loss event”) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the contracted parties or a group of contracted parties is experiencing significant financial difficulty, default or delinquency in interest of principal payments, the probability that they will enter bankruptcy or other financial reorganization, and where observable data indicate that there is measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Loans and Receivables The Organization first assesses whether an objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If there is objective evidence that an impairment loss on loans and receivables carried at amortized cost has been incurred, the amount of the loss is measured as a difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset shall be reduced through the use of an allowance account, and the amount of the loss shall be recognized in the profit or loss. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that the group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective assessment of impairment. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is recognized in profit or loss, to the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date. Derecognition of Financial Assets and Financial Liabilities Financial Assets A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when: the rights to receive cash flows from the asset have expired; the Organization retains the right to receive cash flows from the asset, but has

assumed an obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; or

the Organization has transferred its rights to receive cash flows from the asset and either: (a) has transferred substantially all the risks and rewards of the asset; or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

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When the Organization has transferred its rights to receive cash flows from an asset or has entered into a “pass-through” arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the Organization's continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Organization could be required to pay. Financial Liabilities A financial liability is derecognized when the obligation under the liability is discharged or cancelled or has expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in profit or loss. Fair Value Measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible to the Organization. The fair value of an asset or liability is measured using the assumptions that the market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 - Quoted (unadjusted) market prices in active markets for identical assets

or liabilities; Level 2 - Valuation techniques for which the lowest level input that is significant

to the fair value measurement is directly or indirectly observable; and, Level 3 - Valuation techniques for which the lowest level input that is significant

to the fair value measurement is unobservable.

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Organization determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. For the purpose of fair value disclosures, the Organization has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

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Materials and Supplies Materials and supplies consist of unused membership cards, reagents, blood supplies, blood bags, souvenir items and other merchandise which are measured at cost. The cost of materials and supplies is based on the weighted average cost method. Property and Equipment Property and equipment are carried at cost less accumulated depreciation and impairment loss, if any. The initial cost of property and equipment consists of their purchase price, including import duties and any directly attributable cost of bringing the assets to their working condition and location for their intended use. Expenditures incurred after the property and equipment have been put into operation, such as repairs and maintenance and overhaul costs, are normally recognized in profit or loss in the period the costs are incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property and equipment beyond its originally assessed standards of performance, the expenditures are capitalized as additional costs of the property and equipment. When an asset is disposed of, or is permanently withdrawn from use and no future economic benefits are expected from its disposal, the cost and the related accumulated depreciation are removed from the accounts and any resulting gain or loss arising from the retirement or disposal is recognized in profit or loss. Depreciation is computed using the straight-line method based on the estimated useful lives of the assets.

Number of Years Building and improvements 5 - 33 Transportation equipment 5 Office and computer equipment 3 - 5 Furniture and fixtures 5 Medical equipment 10 Search and rescue equipment 3

The estimated residual values, useful lives and depreciation and amortization method are reviewed periodically to ensure that the residual values, periods of depreciation and amortization and method of depreciation and amortization are consistent with the expected pattern of economic benefits from items of property and equipment. Land and buildings acquired prior to March 31, 1981, including land donated to the Organization in 1975 are shown at nominal values.

Construction in progress is stated at cost. This includes cost of construction and other direct costs. Construction in progress is transferred to the related property and equipment when the construction or installation and related activities necessary to prepare the property and equipment for their intended use have been completed and the property and equipment are ready for service. Construction in progress is not depreciated until such time that the relevant assets are completed and ready for operational use.

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Intangible Assets Intangible assets acquired by the Organization which have finite useful lives are measured at cost less accumulated amortizations and accumulated impairment losses, if any. Intangible assets are amortized over the estimated useful lives of 3-5 years and are assessed for impairment whenever there is an indication that the assets may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life is reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates. The amortization expense on intangible assets is recognized in the statement of comprehensive income. Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the statements of comprehensive income when the asset is derecognized. Impairment of Nonfinancial Assets The carrying amounts of the Organization’s nonfinancial assets which consist of materials and supplies, property and equipment and intangible assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit (CGU) is the greater of its value in use and its fair value less costs of disposal. Value in use is the present value of the future cash flows expected to be derived from an asset or CGU, while fair value less costs of disposal (or the estimated cash flow from ultimate disposal) of the CGU is the estimated selling price to sell for the assets of the CGU and the liability together, less the costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets or CGUs. An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss.

Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. Fund Balance General fund and Special projects General fund includes all assets of the Organization that are available for general use and not restricted for specific purposes. Special projects are projects intended for specific purpose that are funded by Partner National Societies and implemented by the Organization for

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Disaster Relief Operations This is intended to be used for calamities and relief operations of the Organization. Restricted Fund This comes from the donations that require the funds be used for a specific purpose. It is also for the future needs of the Organization and fulfillment of its purpose through providing various programs as authorized by the Board and within the purpose indicated by the donor.

Income Recognition Income from the following sources are recognized upon receipt of cash: Donations for national blood program, Fund campaign contributions, Disaster relief operations, Special donations to PRC, Project Management Fee, Miscellaneous income except for interest, rent and unrealized foreign exchange gains and Fund generation except for membership and registration fees. Donations of property and equipment are recognized as assets and income in nominal amount when received. Gain on sale of property and equipment is recognized as income under “Miscellaneous income” when the proceeds of sale exceeds the carrying amount on disposal. On the other hand, income from membership and registration fees under “Fund generation”, and interest, rent and unrealized foreign exchange gains under “Miscellaneous income” are recognized when earned regardless of when collected. Expenses Recognition Operating expenses include costs of administering the operation of the Organization and costs incurred to deliver humanitarian services while administrative expenses are associated with the cost incurred for the general administration of the Organization. All of these expenses except salaries, wages and benefits, utilities and outside services are recognized in profit or loss when disbursed. On the other hand, expenses from salaries, wages and benefits, utilities and outside services are recognized when incurred regardless of when disbursed. Operating Leases The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement. Organization as Lessor. Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Any initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same bases as rent income. Rent income is recognized over the lease term on a straight-line basis and is recognized under “Miscellaneous Income” in the statement of comprehensive income.

Organization as Lessee. Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognized as an expense in statement of comprehensive income when paid.

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Employee Benefits Employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Organization has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

4. Accounting Estimates and Judgments The preparation of the financial statements requires management to exercise judgments, make accounting estimates and use assumptions that affect reported amounts of assets, liabilities, income and expenses, and related disclosures. Future events may occur which will cause the assumptions used in arriving at the accounting estimates to change. The effects of any change in accounting estimates are reflected in the financial statements as they become reasonably determinable. Accounting judgments, estimates and assumptions are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Judgments In the process of applying the Organization’s accounting policies, management has made the following judgments, apart from those involving estimations, which has the most significant effect on the amounts recognized in the financial statements: Determining Functional Currency Based on the economic substance of the underlying circumstances relevant to the Organization, the functional currency has been determined to be the Philippine peso. It is the currency that mainly influences the income and expenses of the Organization. Determination of Operating Lease - Organization as Lessor The Organization has entered into commercial property lease on its administrative office location. The Organization has determined that all significant risks and rewards of ownership of the related assets remain with the Organization such the lease is considered as an operating lease. Determination of Operating Lease - Organization as Lessee The Organization has entered into a property lease arrangement as a lessee which it does not transfer substantially all the risks and benefits of ownership of this property, therefore it is accounted for as an operating lease agreement. Estimates The key estimates and assumptions concerning the future and other sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

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Allowance for Impairment Losses on Advances and Other Receivables and Advances for Chapters’ Operations and Employees

The Organization reviews the collectability of its advances and other receivables and provides an allowance for impairment losses on these advances and other receivables, if necessary, at a level considered adequate for potential uncollectible receivables. The Organization reviews the age and status of receivables and identifies accounts that are to be provided with allowances on a continuous basis. The amount of timing of recorded expenses for any period would differ if the Organization made different judgments or utilized different methodologies. An increase in allowance for impairment losses would increase recorded operating expenses and decrease current assets. In 2015 and 2014, the Organization assessed impairment losses of P62.52 million and P31.27 million on advances and other receivables (see Note 8) and P11.36 million and P14.36 million on advances for chapters’ operations and employees (see Note 9), respectively. The carrying amount of advances and other receivables amounted to P310.52 million and P281.34 million (see Note 8) while advances for chapters’ operations amounted to P294.77 million and P291.07 million as at December 31, 2015 and 2014, respectively (see Note 9). Estimation of Useful Lives of Property and Equipment The useful lives of property and equipment are estimated based on the period over which these assets are expected to be available for use. The estimated useful lives of property and equipment are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence, and legal or other limits on the use of the Organization’s assets. It is possible, however, that future results of operations could be materially affected by changes in estimates brought about by changes in the factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. Any reduction in the estimated useful lives of property and equipment would increase depreciation expense and decrease noncurrent assets. The estimated useful lives of property and equipment are discussed in Note 3 to the financial statements. There is no change in the estimated useful lives of property and equipment in 2015 and 2014. The carrying values of property and equipment amounted to P1,197.50 million and P779.88 million as at December 31, 2015 and 2014, respectively (see Note 12). Estimation of Useful Lives of Intangible Assets The Organization reviews annually the estimated useful lives of intangible asset based on the period over which the assets are expected to be available for use and updates them if expectations differ from previous estimates due to technical or commercial obsolescence. It is possible, however, that future financial performance could be materially affected by changes in these estimates brought about by changes in the factors mentioned. The carrying values of intangible assets amounted to P34.95 million and P17.57 million as at December 31, 2015 and 2014, respectively (see Note 13).

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Impairment of Nonfinancial Assets The Organization assesses at each reporting date whether there is any indication that its materials and suppliers, property and equipment and intangible assets are impaired. Determining the fair value of these assets, which requires the determination of future cash flows expected to be generated from the continued use and ultimate disposition of such assets, requires the Organization to make estimates and assumptions that can materially affect the financial statements. Future events could cause management to conclude that these assets are impaired. Any resulting impairment loss could have a material adverse impact on the Organization’s financial position and financial performance. The preparation of the estimated future cash flows involves significant judgment and estimations. While management believes that the assumptions made are appropriate and reasonable, significant changes in management assumptions may materially affect the assessment of recoverable values and may lead to future additional impairment charges. No impairment losses were recognized in 2015 and 2014.

5. Financial Risk Management Objectives and Policies Financial Risk Management Objectives and Policies The Organization’s activities are exposed to a variety of financial risks: credit risk, liquidity risk and market risk (including foreign exchange and interest rate risk). The Organization’s overall risk management program seeks to minimize potential adverse effects on the financial performance of the Organization. The policies for managing specific risks are summarized below: Credit Risk Credit risk is the risk of financial loss to the Organization if a counterparty to a financial instrument fails to meet its contractual obligations. The maximum credit risk exposure of financial assets is the total carrying amount of the financial assets as shown on the face of the statement of assets, liabilities and fund balances as shown below. Note 2015 2014Cash and cash equivalents* 7 P2,081,638,320 P2,001,843,665Advances and other receivables - net** 8 290,386,605 276,159,059Time deposits 10 604,666,674 457,300,634Available-for-sale investments 11 52,141,377 54,480,480 P3,028,832,976 P2,789,783,838

*Cash and cash equivalents exclude cash on hand.

**Advances and other receivables exclude advances to suppliers.

Accordingly, the Organization has assessed the credit quality of the following financial assets: The credit risk for cash and cash equivalents and time deposits is considered

negligible, since the counterparties are reputable financial institutions. The credit quality of this financial asset is therefore considered to be high grade.

The Organization’s advances and other receivables are actively monitored to

avoid significant concentrations of credit risk.

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Available-for-sale investments is considered as having zero credit risks since the counterparty is the Philippine Government and its settlement is guaranteed. The credit quality of this financial asset is therefore considered to be high grade.

The credit risk exposure and credit quality profile of the Organization as at December 31, 2015 and 2014 are as follows:

December 31, 2015

Neither Past Due nor Impaired Past Due

but not Past Due and Note Class A Class B Impaired Impaired Total

Cash and cash equivalents* 7 P2,081,638,320 P - P - P - P2,081,638,320

Advances and other receivables ** 8 - 290,386,605 - 199,790,958 490,177,563

Time deposits 10 604,666,674 - - - 604,666,674 Available-for-sale

investments 11 52,141,377 - - - 52,141,377 P2,738,446,371 P290,386,605 P - P199,790,958 P3,228,623,934

*Cash and cash equivalents excludes cash on hand. **Advances and other receivables excludes advances to suppliers.

December 31, 2014

Neither Past Due nor Impaired Past Due

but not Past Due and Note Class A Class B Impaired Impaired Total

Cash and cash equivalents* 7 P2,001,843,665 P - P - P - P2,001,843,665

Advances and other receivables ** 8 - 276,159,059 - 159,442,909 435,601,968

Time deposits 10 457,300,634 - - - 457,300,634 Available-for-sale

investments 11 54,480,480 - - - 54,480,480 P2,513,624,779 P276,159,059 P - P159,442,909 P2,949,226,747

*Cash and cash equivalents excludes cash on hand. **Advances and other receivables excludes advances to suppliers. In monitoring and controlling credit extended to counterparty, the Organization reviews and evaluates the financial and non-financial status of counterparty. Financial factors being considered comprised of financial position while non-financial aspects include but not limited to the assessment of settlement and payment of its obligation to the Organization. Class A “High Grade” are accounts with strong financial capacity and business performance and with the lowest default risk. Class B “Moderate Grade” refer to accounts of satisfactory financial capability and credit standing but with some elements of risk where certain measure of control is necessary in order to mitigate risk of default. Liquidity Risk Liquidity risk is the risk that the Organization will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Organization’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Organization’s reputation. In the management of liquidity, the Organization monitors and maintains a level of cash deemed adequate by the management to finance the Organization’s operations and mitigate the effects of fluctuation in cash flows.

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As at December 31, 2015 and 2014, the Organization’s financial liabilities have contractual maturities which are presented below:

December 31, 2015 Note Within 1 Year 1 to 5 Years Total Accounts payable and other

liabilities* 14 P548,525,174 P - P548,525,174 *excluding statutory payables to government agencies amounting to P2,071,446

December 31, 2014 Note Within 1 Year 1 to 5 Years Total

Accounts payable and other liabilities* 14 P373,179,235 P - P373,179,235

*excluding statutory payables to government agencies amounting to P2,290,533

The above contractual maturities reflect the gross flows, which may differ from the carrying values of the financial liabilities at the end of the reporting period. Foreign Currency Risk The Organization’s foreign currency risk results primarily from the foreign exchange rate movements of the Philippine peso mainly against the United States Dollar, Japanese Yen and Euro. The Organization resolved to mitigate this risk by taking advantages of market trends. Proper timing is adhered in order to realize a foreign currency gain. The Organization’s foreign currency denominated monetary assets and liabilities as at December 31 follow:

2015 2014 US$ JPY Euro US$ JPY Euro Current Assets Cash and cash

equivalents 10,242,999 6,507,042 192,814 9,253,142 7,312,375 215,144Time deposits 7,818,413 - - 7,295,815 - - Noncurrent Assets Time deposits 1,937,476 - - 1,429,737 - - Total Assets 19,998,888 6,507,042 192,814 17,978,694 7,312,375 215,144

Current Liabilities Accounts payable

and other liabilities 324,172 - - 3,654,250 1,816,675 - Net foreign currency

assets 19,674,716 6,507,042 192,814 14,324,444 5,495,700 215,144

Peso equivalent of net foreign currency assets P925,892,135 P2,537,746 P9,976,196 P639,156,691 P2,033,409 P11,690,925

The exchange rates used by the Organization as at December 31 are as follows: 2015 2014US$ 47.06 44.62JPY 0.39 0.37Euro 51.74 54.34

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The following table demonstrates the sensitivity to a reasonably possible change in the US$, JPY and Euro rates, against Philippine Peso with all variables held constant, of the Organization’s income before income tax (due to changes in the fair value of US$, JPY and Euro denominated monetary assets and liabilities). There is no other impact on the Organization’s fund balance other than those already affecting the Organization’s income before income tax. The movement used by the Organization is based on the average increase/decrease in the year-end closing rate for the past three years. There is no other impact on the Organization’s fund balance other than those affecting the profit or loss.

2015 2014

Foreign Currency

Appreciates (Depreciates)

Effect onIncome before

Income Tax

Foreign Currency

Appreciates (Depreciates)

Effect on Income before

Income Tax US$ 2.00 P39,349,432 2.12 P30,367,821 (2.00) (39,349,432) (2.12) (30,367,821)JPY 0.04 260,282 0.07 384,699 (0.04) (260,282) (0.07) (384,699)Euro 5.48 1,056,621 5.32 1,144,566 (5.48) (1,056,621) (5.32) (1,144,566)

The impact of changes in foreign exchange rates of other foreign currencies on the Organization’s income before income tax is not significant. Interest Risk The Organization follows a prudent policy on managing its assets and liabilities so as to ensure that exposure to fluctuation in interest rates are kept within acceptable limits. There are no floating rate on financial assets and financial liabilities. Term deposits with the banks are for fixed rates for the period of the deposits. Fund Management The primary objective of the Organization’s fund management is to ensure that it maintains a healthy fund ratio in order to sustain and expand its operations. The Organization monitors its use of fund using fund adequacy ratio, such as fund balance to total assets. As at December 31, 2015 and 2014, the ratios of fund balance to total assets are as follow: 2015 2014Fund balances P4,101,579,888 P3,522,315,879Total assets 4,652,176,508 3,897,785,647

0.88:1 0.90:1 The fund balance of the Organization consists of the general fund and special projects, restricted fund, disaster relief operations and unrealized gain on AFS investments.

6. Fair Values of Financial Instruments The Organization elects not to disclose the fair values of financial instruments because the carrying amounts of cash and cash equivalents, advances and other receivables, AFS investments, time deposits and accounts payable and other liabilities approximate their fair values.

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The following methods and assumptions were used to estimate the fair value of each class of the financial instruments for which it is practicable to estimate such value: Cash and Cash Equivalents, Advances and Other Receivables, Other Current

Assets, Accounts Payable and Other Payables The carrying amounts of these financial assets and liabilities approximate their fair values due to relatively short-term maturities. Other Noncurrent Assets The carrying amount approximates its fair value as the effect of discounting using the prevailing market rate is not significant. AFS Investments The fair values of debt investments are based on quoted market prices.

7. Cash and Cash Equivalents This account consists of: 2015 2014Cash in banks P1,535,348,742 P1,511,749,859Cash equivalents 546,289,578 490,093,806Cash on hand 5,490,794 4,849,713 P2,087,129,114 P2,006,693,378

Cash in banks earn interest at prevailing bank interest rate. Interest income earned from cash in banks in 2015 and 2014 amounted to P4.81 million and P3.30 million, respectively (see Note 21). Cash equivalents consist of time deposits maintained with various banks that mature within 90 days from the date of acquisition and with annual interest rates ranging from 0.50% to 2.00% in 2015 and 0.38% to 2.00% in 2014, respectively. Interest income earned in cash equivalents 2015 and 2014 amounted to P6.00 million and P2.50 million, respectively (see Note 21).

8. Advances and Other Receivables This account consists of: 2015 2014Accounts receivable

Chapters P274,684,422 P234,116,791Third parties 9,696,196 31,668,397

Receivable from partners 203,119,424 168,131,943Advances to suppliers 20,205,935 5,176,483Interest receivable 2,677,521 1,684,837 510,383,498 440,778,451Allowance for impairment losses on accounts

receivables Chapters (142,047,609) (131,611,312)Partner National Societies (49,416,055) - Third parties (8,327,294) (27,831,597)

(199,790,958) (159,442,909) P310,592,540 P281,335,542

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Details of the changes in the allowance for impairment losses of accounts receivables are as follows: Note 2015 2014Beginning of year P159,442,909 P128,175,088Provision for impairment losses 23

Partner National Societies 49,416,055 - Chapters 10,436,297 15,159,889Third parties 2,669,030 16,107,932Write-off of previous years’ allowance

for impairment loss on third parties (22,173,333) - 40,348,049 31,267,821 P199,790,958 P159,442,909

Accounts receivable from Chapters are based on a certain percentage share of NHQ from Chapters’ operation, such as membership fees, blood processing fees to cover the cost of blood supplies, shipment of blood and NHQ’s overhead costs in blood processing, and souvenirs and others. Accounts receivable from chapters also pertain to salaries to Chapters’ employees paid in advance by NHQ on behalf of the Chapters. Accounts receivable from third parties pertains to outstanding collections from hospitals that availed blood products and supplies from the Organization. Receivable from Partner National Societies includes project management fees and cash advances made by the Organization to Partner National Societies, international counterpart of the Organization which are used in the implementation of the Organization’s project activities.

9. Advances for Chapters’ Operations and Employees This account consists of: 2015 2014Advances to chapters P224,988,644 P237,722,255Advances to employees 81,294,960 67,711,104 306,283,604 305,433,359Allowance for impairment losses (11,514,314) (14,360,211) P294,769,290 P291,073,148

Advances for chapters’ operations consist of cash advances of Chapters and Chapters’ employees which will be used in the implementation of the Organization’s projects.

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Details of the changes in the allowance for impairment losses of advances to employees are as follows: Note 2015 2014Beginning of year P14,360,211 P - Provision for impairment losses: 23

Chapters 11,359,668 - Employees - 14,360,211Write-off of previous years’ allowance for impairment loss on employees (14,205,565) -

(2,845,897) 14,360,211

P11,514,314 P14,360,211

10. Time Deposits Time deposits with various banks bear annual interest rates ranging from 0.50% to 2.00% in 2015 and 0.38% to 2.00% in 2014. Short-term placements with maturity of less than one (1) year amounted to P487.42 million and P393.51 million as at December 31, 2015 and 2014, respectively. Long-term placements with maturity of more than one (1) year to three (3) years amounted to P117.25 million and P63.79 million as at December 31, 2015 and 2014, respectively. Interest income earned from these deposits placements in 2015 and 2014 amounted to P11.05 million and P5.31 million, respectively (see Note 21).

11. Available-for-Sale Investments AFS investments consist of treasury bonds which are acquired by the Organization on January 27, 2009 that will mature on January 27, 2016 with an annual interest rate of 7%. 2015 2014Balance at January 1 P54,480,480 P61,443,135Unrealized gain (loss) (2,339,103) (6,962,655)Balance at December 31 P52,141,377 P54,480,480

Interest income earned from AFS investments in 2015 and 2014 amounted to P3.64 million each (see Note 21).

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12. Property and Equipment The composition and movement of this account are as follows:

December 31, 2015

Land, Building and

Improvements Transportation

Equipment

Office and Computer

Equipment Furniture and

Fixtures Medical

Equipment

Searchand Rescue Equipment

Construction in Progress Total

Cost Balance at beginning of year P673,960,584 P83,055,445 P27,262,559 P3,055,195 P16,394,155 P6,725,590 P43,378,342 P853,831,870 Acquisitions 98,203,876 13,053,903 8,121,205 3,850,817 14,397,833 7,039,829 - 144,667,463 Reclassification 43,378,342 - - - - - (43,378,342) - Adjustment for 24 Chapters 227,233,352 31,674,549 15,886,860 1,810,574 41,590,774 948,687 50,000 319,194,796 Balance at end of year 1,042,776,154 127,783,897 51,270,624 8,716,586 72,382,762 14,714,106 50,000 1,317,694,129

Accumulated Depreciation Balance at beginning of year 20,149,546 40,590,921 8,506,655 1,547,696 2,057,918 1,101,579 - 73,954,315 Depreciation 17,087,993 13,433,391 8,293,523 959,146 2,810,859 3,650,962 - 46,235,874 Balance at end of year 37,237,539 54,024,312 16,800,178 2,506,842 4,868,777 4,752,541 - 120,190,189

Carrying Amount P1,005,538,615 P73,759,585 P34,470,446 P6,209,744 P67,513,985 P9,961,565 P50,000 P1,197,503,940

December 31, 2014

Land, Building and

Improvements Transportation

Equipment

Office and Computer

Equipment Furniture and

Fixtures Medical

Equipment

Search and Rescue

Equipment Construction

in Progress Total Cost Balance at beginning of year P58,524,605 P49,232,434 P9,113,154 P2,043,117 P5,979,257 P698,154 P330,086,109 P455,676,830 Acquisitions 208,075,001 33,823,011 18,149,405 1,012,078 10,414,898 6,027,436 120,653,211 398,155,040 Reclassification 407,360,978 - - - - - (407,360,978) - Balance at end of year 673,960,584 83,055,445 27,262,559 3,055,195 16,394,155 6,725,590 43,378,342 853,831,870

Accumulated Depreciation Balance at beginning of year 13,085,584 26,991,616 4,107,808 1,250,465 840,317 24,750 - 46,300,540 Depreciation 7,063,962 13,599,305 4,398,847 297,231 1,217,601 1,076,829 - 27,653,775 Balance at end of year 20,149,546 40,590,921 8,506,655 1,547,696 2,057,918 1,101,579 - 73,954,315

Carrying Amount P653,811,038 P42,464,524 P18,755,904 P1,507,499 P14,336,237 P5,624,011 P43,378,342 P779,877,555

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Adjustments for 24 Chapters pertains to the establishment of the statement of financial position of Class A and B Chapters. No related depreciation is recognized for these property and equipment.

In conformity with the divestment scheme approved by management, with respect to private landholdings of American firms in the Philippines, certain parcels of land with a stipulated fair market value of P24.74 million based on 1974 valuation for real estate tax purposes were donated to the Philippine Red Cross by several donors in 1975. The appraised values of the donated parcels of land that are still being managed by the Organization based on appraisal reports as at December 31, 2015 are as follows:

Donor of the Property Location of the Property Appraised/

Market Value Area

(square meter)DONATED Titled

Goodyear* Parang, Marikina City P720,864,000 153,375 Rhone-Poulenc** Namayan,

Mandaluyong City 268,264,800 18,126

American Wire and Cable Co. Inc.***

Paranaque City 260,000,000 13,000

Energizer Philippines, Inc.****

Jagobino, Mandaue, Cebu City

202,606,000 29,975

Novelty Philippines Inc.*** Bagumbayan, Taguig City 152,449,000 13,859 SBS Realty and

Development Corp.**** Tayabas, Quezon 2,709,000 108,363 Royal Undergarment

Corporation**** Brgy. Apolonio, Samson,

Quezon City 71,647,800 3,412

Bacolod City**** Bacolod City, Negros Occidental

262,500 75

SC Johnson*** Antipolo, Rizal 240,000 632 Procter and Gamble

Philippine Manufacturing Corp.**** San Miguel, Bulacan 201,000 3,651

Untitled San Pablo Manufacturing

Corporation**** San Pablo City, Laguna 69,577,360 22,832 P1,748,821,460 367,300

Below is the list of other donated parcels of land that are not appraised:

Donor of the Property / Composition of the Property Location of the Property

Area (square meter)

Titled Rhone-Poulenc** Namayan, Mandaluyong City 30,720 SC Johnson*** Morong, Rizal 1,000

Untitled Martin E. Ruelo**** Quezon, Palawan 100,000 Procter and Gamble Philippine Manufacturing

Corp.**** Pangpang, Sorsogon 25,054 City Government of Passi**** Passi, Iloilo 15,823 Municipal Government of Dolores**** Dolores, Eastern Samar 5,500

178,097

*This lot is located within the Industrial section, and therefore, only factory buildings maybe constructed on said lot. However, housing facilities for employees and laborers may also be built within the area.

**The Organization shall not use or utilize more than 30% of the value of the land for administrative purposes. ***The donated property shall not be sold or mortgaged without the approval of the Department of Justice and

an annual status report on the land shall be submitted to the said office. ****Donated lands with no restrictions.

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On February 16, 2010, the Organization entered into a contract to sell donated property of 6,000 square meters parcel of land situated in Estrella Street, Guadalupe Viejo, Makati City to SM Development Corporation at the price of P30,630.50 per square meter or with a total amount of P183.78 million. Terms of payment is earnest money amounting to P1.00 million to be paid on February 16, 2010, down payment amounting to P54.13 million to be paid on or before March 2, 2010 which is exclusive of earnest money and equivalent to 30% of the purchase price. Remaining balance is payable on March 2, 2013 in the amount equivalent to 70% or P128.65 million plus simple interest of 3% per annum or 9% over the 3-year period amounting to P11.58 million. On May 9, 2014, the Organization received the full payment on this sale of property, together with the accrued interest, amounting to P143.65 million and P15.44 million, respectively. Such proceeds were recognized by the Organization as an additional restricted fund balance (see Notes 21 and 25). As at December 31, 2015 and 2014, the recorded cost of the land amounted to P31.69 million each. As at December 31, 2014, the construction in progress pertaining to the construction of PRC Logistics and Training Center in Subic Bay Freeport Zone was reclassed to Building upon completion of this property in 2015. The breakdown of depreciation is as follows: Note 2015 2014Cost of services 23 P6,461,821 P2,294,429Operating expenses 24 39,774,053 25,359,346 P46,235,874 P27,653,775

13. Intangible Assets Movements and balances of this account are as follows: 2015 2014Cost Balance at beginning of year P23,146,564 P2,574,187Acquisitions 28,090,970 20,572,377Balance at end of year 51,237,534 23,146,564

Accumulated amortization Balance at beginning of year 5,577,460 1,564,374Amortization 10,712,809 4,013,086Balance at end of year 16,290,269 5,577,460

Carrying Amount P34,947,265 P17,569,104 The amortization is recognized in the operating expenses in the statements of comprehensive income (see Note 24). The intangible assets pertain to the computer softwares such as Navision Advance Management Licenses and Microsoft Exchange Server.

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14. Accounts Payable and Other Liabilities This account consists of: 2015 2014Accounts payable

Chapters P48,067,887 P8,501,211Third parties 379,577,515 233,852,048

Payable to other funds 111,485,099 127,927,882Other current liabilities 11,466,119 5,188,627 P550,596,620 P375,469,768

Accounts payable to third parties includes, among others, purchases of office, medical and blood supplies and donations received from anonymous depositors while accounts payable to chapters pertains to the excess of disbursements of the Chapters over their cash advances made to NHQ and excess of remittance of the Chapters of the budgeted payroll over the actual payroll initially shouldered by NHQ. Payable to other funds consists of remittance of cash advances from the Partner National Societies.

Other current liabilities pertain to the statutory payables to government agencies such as expanded withholding tax, payable to Social Security System, Philippine Health Insurance Corporation and Pag-ibig Fund contributions, advances to employees and accrued expenses related to payroll.

15. Fund Campaign Contributions This account consists of income earned from Classes C, D and Sub Chapters’ operations and services amounting to P208.89 million in 2015 and income earned from Classes A, B, C, D and Sub Chapters’ operations and services amounting to P393.01 million in 2014 which is equivalent to these Chapters’ total expenses, excluding Blood Service Expense (see Note 23). Blood service income earned by the Chapters are recognized as part of the “Donations for National Blood Program” in the statement of comprehensive income (see Note 16).

16. Donations for National Blood Program This account consists of blood processing fees received by the Organization amounting to P833.39 million and P474.75 million in 2015 and 2014, respectively.

17. Disaster Relief Operations This account consists of: 2015 2014Donations for relief operations P124,733,543 P140,030,061Donations for typhoon Haiyan operations 83,335,987 310,786,180 P208,069,530 P450,816,241

Donations for typhoon Haiyan operations include funds for disaster relief operations relating to recovery programs and projects in Haiyan-affected areas.

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18. Fund Generation Fund generation includes sale of membership assistance and accidental benefit (MAAB) cards, souvenir items and registration fees for special events facilitated by the Organization. Sale of MAAB cards pertains to revenues earned from issuance of membership cards to registered members of the Organization. This is an accidental bodily injury insurance in partnership with the Prudential Guarantee as the insurance service provider of the Organization.

19. Project Management Fee Project management fee pertains to the project management cost in relation with the implementation of the project received from the Organization's Partner National Societies. Such income is equivalent to 6% of the actual amount of the project's total expenses. Total project management fee amounted to P62.20 million and P34.81 million in 2015 and 2014, respectively.

20. Special Donations to PRC Special donations to PRC is composed of donations from individual, corporation and government. Total special donations amounted to P1,900.59 million and P1,586.24 million in 2015 and 2014, respectively.

21. Miscellaneous Income This account consists of: Note 2015 2014Safety service P65,254,020 P6,194,245Foreign exchange gain - net 47,547,510 296,688Rent income 22 43,518,710 22,934,482Interest income 7, 10, 11, 12 25,492,152 30,197,293Oversubscription 19,127,538 12,099,235Gain on sale of property and equipment 12 180,993 143,648,100Others 40,726,688 49,300,465 P241,847,611 P264,670,508

Oversubscription pertains to the 25% share of the Organization to the excess of Total Actual Cash Resources Raised over the Budgetary Requirement of the Chapter. The amount is determined by the internal audit or the chapters themselves and checked by the internal audit. The amount recorded by the accounting department is based on the summary report submitted by the internal audit. Safety service includes fees for training services and materials, first-aid facilities and ambulances services. Other income includes reimbursement of NHQ from International Federation of Red Cross and Red Crescent Movement (IFRC) for the latter’s share in the administrative expenses for the Navision system upgrade. This account also includes bid security income from the blood suppliers and association dues from Partner National Societies for the use of facilities of PRC NHQ Tower and PRC Logistics and Training Center.

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22. Leases The Organization has entered into operating lease agreements with various lessees for its office premises in Mandaluyong City. Noncancellable period of the lease is for two (2) to six (6) years and is renewable under such terms and conditions mutually agreed upon by the parties. The lease contains an escalation clause. Rent income amounted to P43.52 million and P22.93 million in 2015 and 2014, respectively (see Note 21). As at December 31, the future minimum lease receivables under non-cancellable leases are as follows: 2015 2014Within one year P15,967,876 P10,999,364Between more than one year and six years 26,374,975 14,158,369 P42,342,851 P25,157,733

The Organization has various operating lease agreements as a lessee covering the lease of vehicles, warehouses, offices, equipment and facilities. The rental expenses recognized in 2015 and 2014 amounted to P6.25 million and P4.40 million, respectively (see Notes 23 and 24).

23. Cost of Services This account consists of: Note 2015 2014Meals and snacks P812,772,553 P33,751,196 Salaries, wages and benefits 705,331,801 425,060,444 Blood service expense 580,081,568 414,549,886 Relief expense 260,957,700 630,879,718 Capital expenditure 109,858,232 32,055,231 Membership costs 107,407,045 39,200,527 Travel and transportation 84,775,403 67,594,224 Trainings and seminars 82,427,929 46,518,226 Project Management Cost 77,644,682 17,787,559Rental expense 22 74,972,592 29,482,492 Materials and supplies 74,189,228 35,769,488 Provision for impairment losses 8, 9 73,881,050 45,628,032Professional fees 56,849,843 17,458,743 Outside services 24,867,657 8,054,952 Freight 17,985,410 12,265,842 Representation and entertainment 15,473,222 1,396,168Repairs and maintenance 10,887,766 7,167,109 Utilities 8,057,421 3,636,422 Depreciation 12 6,461,821 2,294,429 Communication expense 5,761,412 3,938,798 Insurance 2,415,306 1,648,288 Taxes and licenses 482,743 514,915Others 44,113,113 37,520,637 P3,237,655,497 P1,914,173,326

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24. Operating Expenses This account consists of: Note 2015 2014Salaries, wages and benefits P117,996,168 P141,503,421Depreciation and amortization 12, 13 50,486,862 29,372,432Utilities 41,441,012 36,797,710Meals and snacks 40,129,169 11,245,979Outside services 32,479,446 21,288,635Repairs and maintenance 26,908,240 24,290,636Capital expenditure 24,482,952 7,587,261Professional fees 24,196,091 8,254,235Representation and entertainment 19,372,330 18,635,165Communications 18,280,236 12,374,950Project management cost 12,466,510 13,321,686Travel and transportation 12,262,577 6,472,181Materials and supplies 11,986,172 11,789,550Insurance 10,755,292 3,729,691Rental expense 22 6,662,833 4,974,226Trainings and seminars 4,628,099 3,718,322Relief expense 4,058,569 30,908,061Freight 3,850,905 11,917,313Taxes and licenses 3,650,592 4,032,529Membership costs 507,617 205,869Others 9,808,899 19,269,456 P476,410,571 P421,689,308

Compensation of Key Management Personnel Key management personnel are defined as executives holding position of at least a manager. Compensation represents salaries and other employee benefits. These are recognized in “Salaries, wages and benefits” under cost of services and operating expenses in the statements of comprehensive income. The compensation of key management personnel of the Organization amounted to P18.19 million and P17.52 million in 2015 and 2014, respectively.

25. Restricted Funds This account represents proceeds from the sale of a certain property and equipment and donated funds with restrictions provided by the donors. These were invested in short and long-term placements, interests of which may be used to defray the necessary operating and administrative expenses of the Organization when authorized. In 2015 and 2014, restricted funds amounting to P87.10 million and P199.28 million, respectively, were transferred to general fund for the capital expenditures of the Organizations as authorized by the Board.

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26. Income Tax Under Section 5(c) of Republic Act No. 10072, to allow the Organization to fully realize its mandate under the Geneva Conventions, the Statutes of the International Red Cross and Red Crescent Movement and the said act, the Organization has the following tax privileges: Be exempt from payment of all direct and indirect taxes, all provisions of law to

the contrary notwithstanding, including value-added tax (VAT), fees and other charges of all kinds on all income from its operations, including the use, lease or sale of its real property, and provision of services.

Be exempt from direct and indirect taxes, including VAT, duties, fees and other

charges on importations and purchases for its exclusive use. All donations, legacies and gifts made to the Philippine Red Cross to support its

purposes and objectives shall be exempt from the donor’s tax and shall be deductible from gross income of the donor for income tax purposes or from the computation of the donor-decedent’s net estate as a transfer for public use for estate tax purposes.

Be exempt from the payment of real property taxes on all real properties owned

by the Organization. Revenue Regulations (RR) No. 15-2010 In addition to the disclosures mandated under Philippine Financial Reporting Standards, and such other standards and/or conventions as may be adopted, companies are required by the Bureau of Internal Revenue to provide in the notes to the financial statements, certain supplementary information for the taxable year. The amounts relating to such information may not necessarily be the same with those amounts disclosed in the financial statements which were prepared in accordance with modified cash basis. The following tax information/disclosure required for the taxable year include the following: (a) amount of VAT output taxes declared during the year with account title and amount/s; (b) amount of VAT input taxes claimed; (c) landed cost of imports and the amount of customs duties and tariff fees; (d) amount of exercise taxes, classified per major product category; (e) documentary stamp tax on loan instruments and other transactions; (f) all other taxes, local and national, license and permit fees lodged under taxes and licenses account both under the Cost of services and operating expense accounts; (g) amount of withholding taxes; (h) periods covered and amounts of deficiency assessments; and (i) tax cases and amounts involved. The Organization is exempt from all taxes for the year ended December 31, 2015, except for the following withholding taxes: Tax on compensation and benefits P40,387,309Creditable withholding taxes 14,183,379 P54,570,688

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27. Restatements and Reclassifications In 2015, the Organization’s management made the following adjustments in its 2014 financial statements:

Note

As Previously Reported Adjustments As Adjusted

Statement of Financial Position

Property and equipment - net a P727,762,747 P52,114,808 P779,877,555 General fund, Special

projects and Disaster relief operations b 2,535,965,635 (2,535,965,635) -

General fund and Special projects b - 1,393,046,599 1,393,046,599

Disaster relief operations a, b - 1,142,919,036 1,142,919,036 Statement of

Comprehensive Income Disaster relief operations c 140,030,060 310,786,181 450,816,241 Special donations to PRC c 2,027,621,519 (441,384,163) 1,586,237,356 Fund generation c - 75,798,980 75,798,980 Project management fee c - 34,807,013 34,807,013 Miscellaneous income c 244,678,519 19,991,989 264,670,508

a. The Organization restated the 2014 and 2013 “Capital expenditures” account

under cost of services and operating expenses to “Property and equipment” amounting to P37.60 million and P24.73 million, respectively, to capitalize those property and equipment that were acquired using the “Disaster relief operations” fund account which were previously recognized as expense. Related depreciation expense amounting to P9.78 million and P0.44 million in 2014 and 2013, was also recognized.

b. “General fund, Special projects and Disaster relief operations” amounting to

P2,535.97 million was reclassified and presented separately as “General fund and Special projects ” and “Disaster relief operations” amounting to P1,393.05 million and P1,142.92 million, respectively.

c. The Organization preferred to present its income based on its major sources of

revenues which resulted to the following reclassifications: Donations to typhoon Haiyan operations amounting to P310.79 million was

reclassified from “Special donations to National Headquarters” to “Disaster relief operations”.

Sale of MAAB cards, souvenir items and registration fees for the

Organization’s special events amounting to P75.80 million was reclassified from “Special donations to National Headquarters” to “Fund generation”.

Project management cost in relation with the implementation of the project

received from the Organization's Partner National Societies amounting to P34.81 million was reclassified from “Special donations to National Headquarters” to “Project Management Fee”.

Oversubscription, safety service and venue and accommodation amounting

to P19.9 million was reclassified from “Special donations to National Headquarters” to “Miscellaneous income”.

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28. Others Special project funds that were incorporated in this report are as follows:

Special Project Funds 2015 2014

AirAsia Foundation Haiyan (P2,936,673) P13,559,563American Red Cross Haiyan TTL 23,638,048 11,322,506AMRC Typhoon Ruby 28,357 -ARC CBDRM Brace (Taguig Project) 3,274,539 7,621,706ARC Recovery Project (Haiyan) 39,505,675 26,392,071ARC Samar Integrated Resiliency Project 161,077 (220,683)ARC-CHAST (La union/Pangasinan) 559,221 1,299,817AUS RC E.VISAYAS CA SA 4,021,609 4,021,609AUSAID 143 (Stockpile) (156,629) -AusAid Haiyan 2,091,137 14,082,736AudAid Project 143 1,097,736 1,096,782AusAid Typhoon Pedring 1,439,577 1,436,003AusAid Typhoon Sendong (Cagayan De Oro

Flashflood) 3,696,180 3,687,054AusRC Haiyan (4,154,055) -AusRC Typhoon Ruby 3,979 1,114,963AUSRC - Samar Leyte (3,916,859) -Australian Agency for Int'l Dev't Stockpile and

Replenishment 2,693,440 2,945,440Australian Agency for Int'l Devt Typhoon Pablo

(Stockpiling of NFI) (67,669) 2,029,161BHRC Typhoon Haiyan Iloilo Recovery 70,851,288 35,303,246British RC Haiyan 61,516,269 -Canadian Red Cross RCAT 143 (26,340,663) -Canadian Red Cross Haiyan (359,049) -Canadian Red Cross Nepal- Earthquake (1,535,004) -Canadian Red Cross Typhoon Glenda (6,837,196) -Citibank Haiyan 9,691,559 -CRC Emergency Field Hospital Readiness

Project 41,281,010 41,931,193Cube Limited Haiyan 7,995,917 11,801,956DOH BP Capacity Building 835,918 7,596,066DRC Healthy Lifestyle Programme 1,463,383 2,805,086FRC - ECHO 340,422 340,422FRC Europe Aid Project 2,784,929 1,170,616FRC Haiyan (1,533) -FRC KARA Supporting Community Disaster

Response Aklan 1,237,936 313,726FRC-Community Based Disaster Risk

Management 1,856,794 1,750,583French RC Haiyan 9,306,359 3,051,965German Red Cross Core (22,933,177) -German Red Cross Haiyan (4,440,955) 12,526,727GRC (PRC)-SWISS CAPIZ 1,009,370 2,915,034GRC- BMZ 610,296 1,982,439GRC- ECHO SAMAR 50,434 435,764GRC Europe Aid Project (905,987) 680,151GRC- GIZ (1,142,083) -GRC- HAIYAN CEBU 8,667,486 15,775,999GRC- HAIYAN DULAG 1,225,614 8,935,516

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Special Project Funds 2015 2014GRC-DISASTER MANAGEMENT CAPACITY

BUILDING (P44,282) P183,039GRC-DP SIEMENS (190,848) -GRC-DRR In Schools 203,286 374,734GRC-INTEGRATED COMMUNITY DISASTER

PREPAREDNESS PROGRAM (361,537) -GRC-INTEGRATED COMMUNITY DISASTER

PREPAREDNESS PROGRAM DIPECHO II 205,026 -HKRC Haiyan 11,186,672 15,026,186HKRC Transitional Shelter Project (Zambales) 915,701 910,698HSBC Haiyan 9,631,920 -ICRC Programme and Projects 3,184,408 (583,832)IFRC Haiyan (3,311,656) -IFRC HIV-AIDS Project (6,583,579) 5,120,198IFRC Typhoon Labuyo (Utor) (8,253,302) (162,313)JRC Community Health Program (CHP) Aurora 2 400,025 1,747,072JRC CHP Nueva Vizcaya (1,100,582) 412,238JRC Haiyan 40,158,897 69,754,610JRC PHC 65,033 66,533JRC CHP Aurora (32,730) -JRC CHP Quirino 414,401 489,100JRC-IFP 344,126 356,272KBRCO Haiyan 4,352,137 -Korean Red Cross Project 143 1,136,423 1,133,406Korean Red Cross Project School based Water

and Sanitation and Hygiene Promotion (WASH) 1,403,351 2,438,376Korean Red CrossHaiyan 161,765,845 51,018,907Macau Red Cross Haiyan (420,964) -NLRC Europe Aid Project 1,494,242 2,216,353NLRC Haiyan 202,332 114,540NLRC Maternal Neonatal and Child Health Project 17,034 8,989,978NLRC- Proud of My Purok (NPL) 1,465,302 324,088NLRC- Recovery Assistance -Typhoon Haiyan (1,605,833) 836,268NLRC- Strategic Partnership for Resilience 50,000 -NLRC Wash (Reduction of Child Mortality) 1,688,292 4,108,572NLRC- Young Expert Programme (YEP) 29,866 (341)NLRC-Community Based Disaster Risk

Management 2,062,306 835,321Norwegian RC Haiyan 158,820 23,788,329Norwegian RC-Urban Disaster Risk Reduction 1,495,803 2,252,580NZAID - Strenghtening the Response Capacity of

PRC 53,080,462 114,157,501PDAF FUND 2,729,549 5,115,078SRC Co-Financing Convenio Fondo Cooperacion 247,174 799,885Qatar Red Crescent Society Haiyan 20,711,255 17,028,278Qatar Red Crescent Society Shelter Rehabilitation

Project 1,215,912 2,633,901SGRC Haiyan 15,055,908 21,380,172SGRC Transitional Shelter for Ketsana-affected

Families in Zambales (3,481,989) (3,465,519)SGRC Transitional Shelter Project (Zambales) 4,112,626 -SGRC Typhoon Chedeng (April 2015) (1,187) -SRC Accenture Project 204,317 489,056SRC AECID Bohol Earth 16,006 836,308SRC AECID DIPECHO (595,043) (316,005)

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Special Project Funds 2015 2014

SRC AECID Proyectos P10,550 P117,012SRC BOHOL Propios 33 33SRC CHNS Project (99,529) -SRC Co Echo 4 NESAT-NALGAE Project - 189,035SRC Co Fi ECHO6 Campaña (1,335,361) -SRC Co-Financing AECID Proyectos - 634,481SRC Co-Financing Convenio 7,198 (22,139)SRC Co-Financing Dipecho 1,171,716 931,246SRC Convenio AECID 10-C01-033 (PHASE II) 2,497,664 6,528,194SRC ECHO 6 Sendong (163,259) -SRC ECHO 7 (Wash SWM) (36,205) (15,173)SRC ECHO 8 Emergency Project 129,968 727,693SRC ECHO AD HOC 284,164 314,049SRC EIBAR Project 6745 305,152 -SRC Emergency AECID Project - 154,779SRC Emergency Convenio Project - 898SRC Europe Aid Project 2,052,000 2,076,733SRC Haiyan 2,374,653 5,787,794SRC Quirino Livelihood 2,680,440 697,422SRC SRC Echo 3 -Isabela (2,229,766) -SRC Typhoon Pablo 122012 18,630 9,887,710SRC Yolanda AECID 25,891 371,606SRC Yolanda Propios 38,787,301 61,462,342SRC ZUMMARAGA 420,358 420,358SRC-CBH-DRR Masbate Project 6718 1,866,759 -Swiss Red Cross Haiyan 24,498,995 16,956,077SWRC- Palawan Livelihood 2,044,960 -SWRC- Palawan Shelter 11,493,150 -Taiwan Red Cross Haiyan 7,377,821 3,836,452UAERC Haiyan (15,000) -UAERC Typhoon Pablo 122012 12,152,599 12,135,210AusAid Sendong C/A 10,000 10,000 P648,959,834 P713,316,596

Special project funds such as ARC Community Based Disaster Risk Management (CBDRM) Brace (Taguig Project), DOH BP Capacity Building, FRC CBDRM, JRC Community Health Program (CHP), NLRC projects such as CBDRM, Wash (Reduction of Child Mortality) and Maternal Neonatal and Child Health Project, Norwegian Red Cross UDRR, AusAid projects such as Typhoon Pedring, Project 143, Typhoon Sendong, Typhoon Pablo (Stockpiling of NFI), Stockpile and Replenishment are audited by another auditors in 2015 and 2014. The rest of the projects were unaudited.