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Notes to the Financial Statements
 

 

Center for the Study of Democracy Financial Statements for the period ended 31 December 2002

I. 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 Executive Director on 4 March 2003.

(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 have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (LASB), and interpretations issued by the Standing Interpretations Committee of the IASB.

(c) Basis of preparation
These financial statements have been drawn up in conformity with International Financial Reporting Standards.
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 year 1999, 2000, 2001 and 2002, the Statement of Revenues, Expenditures and Changes in Fund Balances for that years and the Balance Sheet as at 31 December 1999, 31 December 2000, 31 December 2001 and 31 December 2002 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. As a result foreign exchange differences have arisen. 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, the average exchange rate for the year 2001 is 2.18467 BGN/USD and as at 31 December 2002 is 2.06604 BGN/USD.

(e) Property, plant and equipment
Items of Property plant and equipment and intangible assets are stated at a cost less accumulated depreciation and impairment losses. They are reported in the Balance Sheet applying International Accounting Standard 29 Financial reporting in hyperinflationary economies. The monthly inflation indices have been used. Their cost have been inflated as at 31 December 1998.
Property plant and equipment and intangible assets have not been inflated for the years ended 31 December 1999, 31 December 2000, 31 December 2001 and 31 December 2002. The inflation rate for the twelve months ended 31 December 1999, 31 December 2000, 31 December 2001, 31 December 2002 of 6.4 %, 11.4%, 4,8% and 3,8% respectively are considered insignificant, and no restatement of the financial statements as of and for the year ended 31 December 1999, 31 December 2000, 31 December 2001 and 31 December 2002 have been made.

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

Buildings 4%
Machines and equipment 20%, 25%
Fixtures and fittings 20%
Vehicles 20%
Computers and software 33%
Intangible assets 20%

(f) Investments in associates
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 is disclosed (refer to note 8) for the activities of these subsidiaries concerning their net assets and financial results.

(g) Other investments
As other investments are classified held-to-maturity assets measured at amortised cost less impairment losses. Amortised cost is calculated on the effective interest rate method. Premiums and discounts, including initial transaction costs, are included in the carrying amount of the related instrument and amortised based on the effective interest rate of the instrument.

(h) Receivables
Receivables are stated at cost less any amounts, which are not expected to be collected. The latter are presented as impairment losses on the basis of the calculated recoverable amount of trade receivables (refer to accounting policy (k)).
(j) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and balances with banks.

(k) Impairment
The carrying amount of the Center's assets is 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.

(l) Payables
Payables are stated at their cost.

(m) 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 BGN are to be translated into the respective foreign currency.
Reports are prepared 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.

(n) Taxation
CSD is a non - profit organization. No corporate tax is levied in accordance with current Bulgarian legislation. For the period ended 31 December 2000 and 31 December 2001 there are no trade operations on which tax is due.
As at 31 December 2002 the Center has gained financial income from dealing with securities under agreement for trading of securities and bonds. Under Bulgarian tax legislation income and municipality tax is levied.
Center for the Study of Democracy Financial Statements for the period ended 31 December 2002


2. Revenue from grants, contributions and projects

In BGN

2002

2001

Council of Europe - Information Centre on the Council of Europe

122,004

113,970

The German Marshall Fund - Illegal Trafficking and Corruption in Southeast Europe (2001-2002);

60,460

49,412

Corruption Assessment in Southeast Europe (2002-2003)

Royal Norwegian Embassy - Trafficking and Corruption: Monitoring and Prevention

224,282

-

Royal Norwegian Embassy - Reforming the Judiciary in Bulgaria: Towards the Introduction of Modern Registration System

46,811

-

InfoDev World Bank - Country Development Gateway

-

159,677

SELDI phase I - Assessment and Introductory Training of Coalition Building and Monitoring

-

553,454

SELDI phase II - Coalition Building and Monitoring for Anti-Corruption

586,740

307,826

CIPE - Balkan/Black Sea Anti-Corruption Workshop

19,851

Conflict Management Group - Conflict Vulnerability in Bulgaria

57,600

-

CIPE - Corporate Governance Reform and the Mass Media

-

34,597

IDLI - Implementing Anti-Corruption Action Plan for Bulgaria

-

65,594

USAID, American Embassy, Sofia - International Conference "Beyond Anticorruption Rhetoric"

-

56,658

CIPE - Transforming Business Practice through Corporate Governance

-

63,046

MSI - Support for Armenia Anti-Corruption Study

-

66,630

Tour Santander group - Phare Democracy

80,986

Program - Citizen Participation and Public Hearings

Other projects

447,314

301,925

 

1,565,062

1,853,775

 

 

Income from financing for assets

35,146

40,932

 

1,600,208

1,894,707

3. Expenses on grants,contributions and projects

In BGN

2002

2001

Salaries and benefits

92,002

71,741

Hired services

747,313

928,492

Depreciation

51,604

48,375

Supplies and consumable

58,729

92,873

Other expenses

360,253

379,379

 

1,309,901

1,520,860

Hired services are related particularly to undertaking of the projects activities and reported to the grantors to the amount of BGN 47,313.They include expenses for honoraria,communication and printing services.Substantial amount of honoraria consist of payment for consulting services to outside and local consultants and experts.

4. Foreign exchange gains or losses

In BGN

2002

2001

Exchange rate gains

128,527

328,576

Exchange rate losses

(400,501)

(322,241)

 

(271,974)

6,335

5. Impairment of assets

In BGN

2002

2001

Balance at the beginning of the year

(19,611)

-

Losses on impairment of receivables incurred during the period

-

(19,611)

Write off receivable against provisions
incurred in previous years

-

-

Balance at the end of the year

(19,611)

(19,611)

Total (increase)/ decrease of bad debt allowance

(19,611)

(19,611)

6. Property, plant and equipment

In BGN

Land and buildings

Plant and equipment

Vehicles

Fixtures and fittings

Under
construction

Total

Cost

Balance at 1 January 2002

229,662

182,877

175,116

95,820

335,923

1,019,398

 

Acquisitions

-

19,983

-

32,028

-

52,011

Disposals

_______-

(67,613)

_______-

(37,648)

_______-

(105,261)

Balance at 31 December 2002

229,662

135,247

175,116

90,200

335,923

966,148

 

Depreciation and impairment losses

Balance at 1 January 2002

1,433

84,607

116,654

88,741

-

291,435

Depreciation charge for the year

4,298

31,745

10,654

2,466

-

49,163

Depreciation of disposals

_______-

(58,096)

_______-

(32,410)

(90,506)

Balance at 31 December 2002

5,731

58,256

127,308

58,797

_______-

250,092

 

Carrying amount

At 1 January 2002

228,229

98,270

58,462

7,079

335,923

727,963

At 31 December 2002

223,931

76,991

47,808

31,403

335,923

716,056

7. Intangible assets

In BGN

Software

Total

Cost

13,228

13,228

Balance at 1 January 2002

_______-

_______-

Acquisitions

13,228

13,228

Balance at 31 December 2002

 

Amortisation and impairment losses

Balance at 1 January 2002

4,167

4,167

Amortisation charge for the year

2,441

2,441

Balance at 31 December 2002

6,608

6,608

 

Carrying amount

At 1 January 2002

9,061

9,061

At 31 December 2002

6,620

6,620

8. Investments in associates

In BGN

2002

2001

Agency Vitosha EOOD

5,006

5,006

Vitosha Research ROOD

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 2002 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:

 

Net Assets

Profit after tax

In BGN

2002

2001

2002

2001

Agency Vitosha EOOD

49 740

43 061

6 766

3 787

Vitosha Research EOOD

67 525

27 016

40 609

18 222

 

117 265

70 077

47 375

22 009

9.Other investments

 

Maturity

Nominal value

Number of bonds

Balance as at 31 December 2002

31 December 2002  

EUR

BGN

 

BGN

Bulgarian -American Bank 28 March 2005

300,000

586,749

300

590,529

First Investment Bank 24 October 2003

300,000

586,749

300

601,525

         

1,192,054

The financial assets held-to-maturity realise gains accounted for as financial income in the Statement of revenues, expenditures and changes in fund balances in the amount of BGN 30,433.
The Center has accrued income and municipality tax in the Statement of revenues, expenditures and changes in fund balances in the amount of BGN 7,151.

10. Receivables

In BGN

2002

2001

Completed Projects

107,219

50,777

Other receivables

66,394

23,863

Impairment of assets

(19,611)

(19,611)

 

154,002

55,029

11. Cash and cash equivalents

In BGN

2002

2001

In local currency

5,114

50,050

In foreign currency

1,342,928

2,280,695

Deposits

2,560

800

At bank

1,350,602

2,331,545

     
In local currency

25,078

14,779

In foreign currency

29,269

40,284

In hand

54,347

55,063

 

1,404,949

2,386,608

12. Deferred expenses

In BGN

2002

2001

USAID/DPK Consulting - Coalition 2000 Anti-Corruption Program

595,416

-

European Commission - Promoting European Standards in Human Rights: Establishment of Ombudsman Institution in Bulgaria

85,324

-

The German Marshall Fund - Illegal Trafficking and Corruption in Southeast Europe (2001-2002); Corruption Assessment in Southeast Europe (2002-2003)

25,218

24,431

European Commission - The Informal Economy in the EU Accession Countries (Inforec)

38,117

-

British Embassy - Promoting European Standards in Human Rights: Establishment of Ombudsman Institution in Bulgaria

20,299

-

InterMedia - International Audience Research Program

4,942

-

GVG - Study on the Social Protection Systems in the 13 Applicant Countries

5,412

-

EC/Gallup Hungary - Eurobarometer Surveys in Countries applying for EU Membership

-

10,799

Office of Research - Public Opinion Survey in Bulgaria

-

6,150

Other projects

2,587

353

 

777,315

41,733

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.

13. Payables

In BGN

2002

2001

Payable to the budget

36,159

11,577

Salaries,benefits and social security payable

20,010

13,350

Payable to suppliers

10,595

14,893

Other payable

22,620

14,879

 

89,384

54,699

14. Deferred revenue

In BGN

2002

2001

For project activities

1,112,440

79,369

For fixed assets

123,702

120,189

 

1,236,142

199,558

15. Financial instruments

Effective interest rates and repricing analysis

In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at the balance sheet date and the periods in which they reprice.

In BGN

Note

Effective Interest rate

Total

6 months or less

Cash and cash equivalents:        
Deposit in Bulgarian - American Bank -fixed rate per a.n.   4,05%

565,488

565,488

Cash in hand   -

25,078

25,078

Cash at bank   0,2 -0,5%

814,383

814,383

  11  

1,404,949

1,404,949

Bonds issued by the Bulgarian -American Bank   6,67%

590,529

590,529

Bonds issued by the First Investment Bank   4,61%

601,525

601,525

  9  

1,192,054

1,192,054

16. Related parties

Related party
payables

Nature of the
related party relationship

Transaction during the year

Amount

Outstanding balance 31 December 2002

         

ARC Fund

Management control

Partner organization within Coalition 2000 initiative

35,772 USD

67,251 BGN

17. 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 2002.

18. Contingencies

There are no contingencies to report on.

 

 
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