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Notes to the financial statements
 

1. Significant accounting policies

The Center for the Study of Democracy (CSD) is a non profit organization domiciled in Bulgaria. The financial statements were authorized for issue by the President on 2 April 2002.

(a) Activity background

Founded in late 1989, the Center for Study of Democracy (CSD) is an interdisciplinary public policy institute dedicated to the values of democracy and market economy. CSD is a non-partisan, independent organization fostering the reform process in Bulgaria through impact on policy and civil society.

CSD objectives are:

  •   to provide an enhanced institutional and policy capacity for a successful European Integration process;

  •   to promote institutional reform and the practical implementation of democratic values in legal and economic practice;

  •   to monitor public attitudes and serve as well as to monitor the institutional reform process in the country;

  •   to strengthen the institutional and management capacity of NGOs in Bulgaria, and reform the legal framework for their operation.

CSD encourages an open dialogue between scholars and policy makers and promotes public-private coalition building. As a full-service think tank, the Center achieves its objectives through policy research, process monitoring, drafting of legislation, dissemination and advocacy activities, building partnerships, local and international networks.

(b) Statement of compliance

The financial statements of the Center for the study of democracy (CSD) have been prepared in accordance with the international accounting standards (IAS) adopted by the International Accounting Standards Board (IASB), interpretations issued by the Standing Interpretations Committee of the IASB, and the requirements of the Bulgarian law.

(c) Basis of preparation

These financial statements have been drawn up in conformity with International Accounting Standards. The financial statements are presented in BGN. In the last several years the CSD has operated in a hyper-inflationary environment. The officially published by National Institute of Statistics inflation indices for 1996, 1997, 1998, 1999, 2000 and 2001 are 410.8%, 678.6%, 101%, 106.4% ,111.4% and 104.8% respectively.

Hyperinflation adjustments have been made in order to show the effect of inflation on the purchasing power of the equity interest as at 31 December 1998. Due to the insignificant inflation growth in the financial years ended 1999, 2000 and 2001, the Statement of Revenues, Expenditure and Changes in Fund Balances for that years and the Balance Sheet as at 31 December 1999, 31 December 2000 and 31 December 2001 have not been adjusted according the official inflation index.

(d) Foreign currencies

Monetary assets and liabilities in foreign currencies have been revalued on a monthly basis. The resulting translation difference is recognised in Statement of revenues, expenditures and changes in fund balances. The BNB official exchange rates of the USD as at 31 December 1999 is 1.9469 as at 31 December 2000 is 2.1091 BGN/USD and as at 31 December 2001 is 2.21926 BGN/USD and the average exchange rate for the year 2001 is 2.18467 BGN/USD.

(e) Property, plant and equipment

Items of Property, plant and equipment and intangible fixed assets are stated at a cost less accumulated depreciation and are presented at the Balance Sheet applying International Accounting Standard 29 Financial reporting in hyperinflationary economies. The monthly inflation indices (refer to l.b) have been used. Their cost have been inflated as at 31 December 1998. Property plant and equipment and intangible fixed assets have not been inflated for the years ended 31 December 1999 and 31 December 2000 and 31 December 2001. The inflation rate for the twelve months ended 31 December 1999, 31 December 2000 and 31 December 2001 of 6.4 %, 11.4% and 4.8% respectively are considered insignificant, and no restatement of the financial statements as of and for the year ended 31 December 1999, 31 December 2000 and 31 December 2001 have been made.

 

Inflated values as at 31 December 1998 of property plant and equipment and of intangible fixed assets have been depredated using the straight line method. The rates of depredation used are as follows:

Buildings

4%

Machinery and equipment

20%

Fixtures and fittings

25%

Vehicles

15%

Intangible assets

20%

 

 

(f) Investments

Investments classified as long-term assets are carried at cost, less any amounts written off to recognise a decline in the value of the investment. The subsidiaries perform economic activity which is different from the activities performed by the CSD. In relation to the stated above, the financial statements of the subsidiaries are not consolidated and the management carries the investments at cost. In the present report there is an information disclosed (refer to note 8) for the activities of these subsidiaries concerning their net assets and financial results.

(g) Receivables

Receivables are stated at their cost less impairment losses.

(h) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and balances with banks.

(j) Impairment

The carrying amount of the Center's assets are reviewed at each balance sheet to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. For intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement.

(k) Payables

Payables are stated at their cost.


(l) Revenue recognition and expense reporting

Revenue is recognized in the income and expenditure account on the basis of completed stage as reported by the CSD to the commissioning bodies. Revenue is recognized as income for the period to match the related costs, on a systematic basis. Project contracts are denominated in foreign currency, while the related expenses are incurred in BGN.

The revenue of the Center for the Study of Democracy consists of funds extended by international financing bodies for the completion of accepted projects. The amounts are carried in the balance sheet as deferred revenue at their historic values. Every project is commenced with a signing of a contract where the financing body determines the budget, payment installments and the rates at which expenses incurred in BCN are to be translated into the respective foreign currency.

Reports are issued as contracted with financing organization. Respective amount of BGN expenses are translated at the specified rate and an expense report in foreign currency is produced. It is used to report on the progress of the project before the financing organization. Frequency is determined in the contract for the project assignment.

(m) Taxation

CSD is a non profit organization. No corporate tax is levied in accordance with current Bulgarian legislation. For the period ended 31 December 2001 there are no trade operations on which tax is due. Therefore International Accounting Standard 12 Income Taxes is not applied.

2. Revenue fom grants, contributions and projects

In BGN
2001
2000

IDLI - Coalition 2000

65,594

1,943,758

SELDI - phase I

533,454

236,547

SELDI - phase II

307,862

-

Council of Europe

113,970

104,475

InfoDev - World Bank

159,677

-

MSI

66,630

-

CIPE 2000

63,046

-

Santander Group - Phare Democracy Program

80,986

-

CIPE Mass Media

34,597

-

USAID Conference

56,658

-
UNDP Training
-
5,388
CIPE 1999
-
79,809
The German Marshall Fund
49,412
53,350
Mc Arthur Foundation
-
137,433

Other projects

301,925

520,108
 
1,853,775
3,080,868
Income from fiancing NCA
40,932
17,472
 
1,894,707
3,098,340

3. Expenses on grants, contributions and projects

In BGN
2001
2000
Salaries and benefits
71,741

106,481

Hired services
928,492

1,416,144

Depreciation
48,375

43,335

Supplies and consumable
92,873

142,529

Other expenses
659,350

325,757

 
1,520,860

2,367,839

Expenses for hired services include expenses for honoraria of external personnel and the related social security and health insurance contributions, courier and printing services, telephone expenses, utilities.

4. Foreign exchange gains - net

In BGN
2001
2000
Exchange rate gains from operations

328,576

350,723

Exchange rate losses from operations

(322,241)

(187,844)

 
6,335
162,879

5. Impairment losses

In BGN
2001
2000

Balance at the beginning of the year

-

20,873

Impairment losses incurred /(reversed)
during the period

19,611

(11,306)

Write off receivable against impairment
loss incurred in previous years

-

(9,567)

Balance at the end of the year
19,611
-
Total increase/ (decrease) of impairment
losses
19,611
(11,306)

6. Property, plant and equipment

In BGN

Land and buildings

 

Plant & equipment

Vehicles

Fixtures & fittings

Under

construction

Total

Cost

Balance at 1 January 2001

115,769
 

178,213

149,027

90,735

335,923

869,667

Acquisitions

113,893

 

4,664

26,089

5,085

-

149,731

Balance at 31 December 2001

229,662

 

178,213

175,116

95,820

335,923

1,019,398

Depreciation and impairment losses

Balance at 1 January 2001

-
 

48,680

109,188

87,817

-

245,685

Depreciation charge for the year

1,433
 
35,927
7,466
924
-
45,750

Balance at 31 December 2001

-
 

46,680

109,188

87,817

-

245,685

Carrying amount

At 1 January 2001
115,769
 
129,533
39,839
2,918
335,923
623,982

At 31 December 2001

228,229

 

98,270

58,462

7,079

335,923

727,963

 

7. Intangible fixed assets

In BGN

Software

Patents and licenses

Total

Cost

Balance at 1 January 2001

13,228

412

13,640

Acquisitions

-
-
-

Balance at 1 January 2001

13,228

412

13,640

Amortisation and impairment losses

Balance at 1 January 2001

1,542
412
1,954

Amortisation charge for the year

2,625

-

2,625

Balance at 31 December 2001

4,167

412

4,579

Carrying amount

At 1 January 2001

11,686

-

11,686

at 31 December 2001

11,686

-

11,686

 

8. Investments

In BGN
2001
2000
Agency Vitosha EOOD
5,006
5,006
Vitosha Research
5,000
5,000
 
10,006
10,006

CSD is a non-profit organisation which has invested in two companies in prior accounting periods. For the financial year 2001 the subsidiaries that perform business activities in line with the overall goals and the mission of CSD have received no further financial support. Their financial statements have been audited by certified chartered accountants according to Bulgarian legislation, for which some details are presented below:

In thousands of BGN
Net Assets
Profit After Tax
Agency Vitosha EOOD
43
4
Vitosha Research
26
18

 

9. Receivables

In BGN
2001
2000

Completed Projects

50,777

579,075

Other receivables

23,863

34,247

Important Losses

(19,611)

-

 
55,029
613,322

 

10. Cash and cash equivalents

In BGN
2001
2000

In local currency

50,050
49,228
In foreign currency
2,280,695
1,473,055

Deposits

800
800

At Bank

2,331,545
1,523,083

In local currency

14,779
12,406

In foreign currency

40,284
9,372
In hand
55,063
21,778
 
2,386,608
1,544,861

 

11. Deferred expenses

In BGN
2001
2000

The German Marshall Fund

24,431

-

Euro Barometer

10,799

-

Office of Research

6,150

-

CIPE 2000

-

43,468

Urban Institute

-

16,892

COLPI

-

8,729

OSF

-

5,198

OSF - Book Donation

-

15,238

Santander Group - Phare Democracy Program
-
85,601

GMF

-

49,971

IMSI
-
787

Other Projects

353

352

 
41,733
226,235

Since revenue and expenses on projects are matched on a yearly basis to conform with the accruals principle, deferred expenses consisting of expenses incurred on projects that have not been completed arise.

12. Payables

In BGN
2001
2000
Payables to the budget
11,577
16,391
Salaries, benefits and social security payable
13,350
16,047
Payable to suppliers
14,893
1,441
Payable related to VISA credit cards
-
3,095
Other payables
14,879
23,693
 
54,699
60,667

 

13. Deferred revenue

In BGN
2001
2000
For project activities
79,369
135,922
For fixed assets
120,189
156,458
 
199,558
292,380

 

14. Related parties

Related party receivables

Nature of the related party relationship

Transaction during the year

Amount

Outstanding balance
31 December 1999

Agency Vitosha

100% of the capital owned by CSD

Paid off financing

 

5,889.17 BGN

-

-

15. Events subsequent to the balance sheet date

There have been no material changes or transactions subsequent to the balance sheet date that require adjustment or disclosure in the financial statements prepared for the period ended 31 December 2001.

16. Contingencies

As expenses under project InfoDev are included VAT expenses for the amount of BGN 2,751 and expenses for social security and health insurance contributions on salaries for the amount of BGN 8,319. According to the terms of the agreement for financing it is possible for those expenses not to be approved, and as a result a contingent liability could arise for the amount of BGN 11,070.

 

 

 
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