INTERNATIONAL TROPICALTIMBER COUNCILCOMMITTEE ON
FINANCE AND ADMINISTRATION

THIRTY-THIRD SESSION
5 – 9 November 2018
Yokohama, JapanFINANCIAL REPORTS PREPARED IN ACCORDANCE WITH
ITTO FINANCIAL RULES AND PROCEDURES (ANNEX 4)(Item 9 of the Provisional Agenda)

This document contains the following separate reports:
Page
A.

B.

Executive Summary of ITTO’s Financial Statements for the year ended 31 December 2017prepared by the ITTO Management ...........................................................................................

i

ITTO’s Financial Statements for the year ended 31 December 2017
audited by the Independent Auditors ..........................................................................................

1

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Executive Summary of ITTO’s Financial Statements
for the year ended 31 December 2017prepared by the ITTO ManagementCFA(XXXIII)/6
Page ii

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Executive summary
The audited financial statements provide information on the financial position and performance of theInternational Tropical Timber Organization (ITTO) for the fiscal year ended 31 December 2017 (FY2017).
Following the impairment of investments amounting to $18 million in 2015-16, the International Tropical
Timber Council (ITTC) adopted Decision 6(LII) in November 2016 to address the financial shortfall, which
ITTO implemented to reorganize its finances in order to regain sufficient levels of funds to fully meet its
financial obligations and resume its regular operations. As part of the requirement of the Decision, ITTO, at the53rd Session of the ITTC in November 2017, provided a detailed report on the implementation of the Decisionand concluded that all impacted projects/activities were fully operational and achieving their expected outputs
and objectives and that ITTO is able to fully meet its financial obligations. The measures detailed in this report(ITTC(LIII)/12) were finalized and approved by the ITTC through Decision 7(LIII) on 2 December 2017.
For ITTO’s Project accounts in FY2017, new voluntary contribution pledges of $1.3 million were announced at
the Council Session while total project cost expenses during this period were $4.4 million from projects mostly
funded prior to FY2017. Total Administrative Account assessed contribution revenues were $7.2 million, of
which $1 million was not received during FY2017 and accounted for as assessed contributions receivable(arrears).
In accordance with the Financial Rules and Procedures, ITTO has adopted the International Public Sector
Accounting Standards (IPSAS) as its standard for preparing its financial statements. As this is the second year
reporting under IPSAS, comparative information is available now for most information. Highlights include,
among others:
1. The figures in the statement of financial performance have changed significantly between 2016 and2017. This is due to 2016 including a non-recurring revenue of $5.3 million in write-off ofobligations approved under Decision 6(LII). The surplus/deficit for 2017 is close to zero and can beconsidered reasonable under regular operations for a non-profit organization.
2. Voluntary contributions receivable increased by $3.9 million between 2016 and 2017. This is mainly
due to ITTO receiving assurance on the continuation of funding to certain projects in 2017.
3. Net cash outflow increased by $2.4 million due to the recommencing of projects/activities in 2017,
which were previously suspended in 2016 due to the financial impairment.
ITTO is committed to creating a solid foundation for transparent and effective financial management andreporting. In addition to the adoption of best practices for internal control introduced in the new financial rules,
ITTO has developed an internal audit system in 2017 which is compliant with international standards to giveassurance on the effectiveness and integrity of the controls that are implemented. It is recommended that ITTO
continue to implement and strengthen its internal control and accountability measures by proactively evaluating
and improving its systems and by adopting best practices from Organizations similar in nature. At the same time,the importance of Council’s role as the governing body should be emphasized through regular reporting from
ITTO and adequate oversight from ITTC members.

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CFA(XXXIII)/6
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ITTO’s Financial Statements
for the year ended 31 December 2017

audited by the Independent Auditors

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Contents
ChapterI.

Page

Report of the Independent Auditors on the financial statements: audit opinion . . . . . . . . . . . .

5

II. Financial statements for the year ended 31 December 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

I.

Statement of financial position as at 31 December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

II.

Statement of financial performance for the year ended 31 December . . . . . . . . . . . . . . . . .

8III. Statement of changes in net assets for the year ended 31 December . . . . . . . . . . . . . . . . . .

9

IV. Statement of cash flows for the year ended 31 December . . . . . . . . . . . . . . . . . . . . . . . . . .

10V.

Statement of comparison of budget to actual amounts for the year ended 31 December . . .

11

Notes to the 2017 financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

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CFA(XXXIII)/6
Page 5Chapter I

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Chapter II
Financial statements for the year ended 31 December 2017
International Tropical Timber Organization
I. Statement of financial position as at 31 December(United States dollars)

Reference

31 December 201731 December 2016

AssetsCurrent assets
Cash and cash equivalents

Note 6

16,878,793

19,661,535

Investments

Note 7--

Assessed and voluntary contributions receivable

Notes 8, 21 and 22

6,060,384

1,936,461

Other accounts receivable

Notes 8 and 21

Advance transfers - Projects

Note 9Advance transfers - Others

Note 10

60,686

66,741

1,691,886

614,170

257,687

176,226

Total current assets

24,949,435

22,455,134

Total assets

24,949,435

22,455,134

Liabilities
Current liabilities
Accounts payable - Member States
Accounts payable - Others

Notes 11, 21 and 22-

41,038921,079

381,563

Voluntary contributions advance receipts - allocatedNote 12

4,848,275

7,884,439

Voluntary contributions advance receipts - unallocatedNote 13284,326

522,392

Assessed contributions advance receipts

Note 14

Total current liabilities

305,561

500,040

6,359,241

9,329,472

Non-current liabilities
Accounts payable - Others

Notes 11 and 21

Voluntary contributions advance receipts - allocatedNote 12728,758

813,420

10,031,805

4,461,310

Total non-current liabilities

10,760,563

5,274,730

Total liabilities

17,119,803

14,604,203

Net of total assets and total liabilities

7,829,632

7,850,931

4,886,695

5,720,974

Net assets
Accumulated surplus - Restricted

Note 15

Accumulated surplus - Unrestricted

Note 15442,936

279,957

Reserves

Note 152,500,000

1,850,000

7,829,632

7,850,931

Total net assets
The accompanying notes are an integral part of the financial statements.

CFA(XXXIII)/6
Page 8International Tropical Timber Organization
II. Statement of financial performance for the year ended 31 December(United States dollars)

Reference

2017

2016

Assessed contributions

Note 16

7,178,516

7,445,429

Other voluntary contributions

Note 16852,092

1,492,454

Financial revenue

Note 17

15,197

15,470

1,185

1,637

Revenue
Administrative Account

Other income
Project AccountMember States voluntary contributions

Note 16

3,377,631

5,223,502

Other voluntary contributions

Note 16

66,2685,331,013

Programme support Revenue

Note 16

198,265524,727

Expost evaluation Revenue

Note 16

13,631-

Financial revenue

Note 17

20,764

7,711

11,723,551

20,041,944

Total revenue
Expenses
Administrative AccountEmployee benefits

Note 18

4,147,181

4,298,697

Other operating expenses

Note 193,226,019

3,114,974

Note 20

4,371,650

6,328,401

11,744,850

13,742,073(21,299)

6,299,871

Project AccountProject expenses
Total expenses
Surplus/(deficit) for the year
The accompanying notes are an integral part of the financial statements.

CFA(XXXIII)/6
Page 9International Tropical Timber Organization
III. Statement of changes in net assets for the year ended 31 December(United States dollars)

Restrictedaccumulated
surplus

Unrestrictedaccumulated
surplusReserves

Net assets as at 31 December 2015

13,476,609(13,425,549)

1,500,000

Reclassification following Decision 6(LII)(8,759,725)

8,409,725

350,000

Result of the accounting period

1,004,091

5,295,781-

Net assets as at 31 December 2016 (Note 15)

5,720,974

279,957

1,850,000

Result of the accounting period(834,279)

162,980

650,000

Net assets as at 31 December 2017 (Note 15)

4,886,695

442,9372,500,000

The accompanying notes are an integral part of the financial statements.

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International Tropical Timber Organization
IV. Statement of cash flows for the year ended 31 December(United States dollars)

2017

2016

(21,299)

6,299,871

559,409268,961(Increase)/decrease in Assessed contributions receivable(1,019,075)(385,775)(Increase)/decrease in Voluntary contributions receivable(3,664,255)(406,966)

Cash flows from operating activities
Surplus/(deficit) for the year
Adjustments to reconcile deficit/surplus to net cash flows
Increase/(decrease) in allowance for doubtful receivables
Changes in assets

6,055

138,853(Increase)/decrease in Advance transfers - Projects(1,077,715)

1,588,313(Increase)/decrease in Advance transfers - Others(81,461)(6,006)

Changes in liabilities(Decrease)/increase in Accounts payable - Member States(41,038)(81,385)(Increase)/decrease in Other accounts receivable(Decrease)/increase in Accounts payable - Others

454,854(232,703)(Decrease)/increase in Voluntary contributions advance receipts - allocated2,534,330(6,014,909)(Decrease)/increase in Voluntary contributions advance receipts - unallocated(238,067)(1,978,631)(Decrease)/increase in Assessed contributions advance receipts(194,478)

453,335

Net cash flows from operating activities(2,782,742)(357,042)

Net Increase/(decrease) in cash and cash equivalents(2,782,742)(357,042)

Cash and cash equivalents — beginning of year (Note 6)

19,661,535

20,018,577

Cash and cash equivalents — end of year (Note 6)

16,878,793

19,661,535

The accompanying notes are an integral part of the financial statements.

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International Tropical Timber Organization
V. Statement of comparison of budget to actual amounts for the year ended 31 December 2017
(United States dollars)

Budget Heading

Original
budgetFinalbudgetActual on

Differencecomparable

between final

basis (Note 5)

and actual

Basic administrative costs
Salaries and benefits
Installation costs
Official travel
Social security
Special activities
Data processing
Other costs
Council meetings

4,225,326
107,209
134,029
1,054,670
58,378106,202314,412207,9214,225,326
107,209
134,029
1,054,670
58,378106,202314,412207,9213,079,291
55,895
119,784
746,076
53,05994,457242,167
207,469

1,146,035
51,314
14,245308,594
5,319
11,74572,245452

Total

6,208,147

6,208,147

4,598,198

1,609,949

Actual on

Differencecomparable

between final

basis (Note 5)

and actual

Budget Heading

Original
budgetFinalbudgetCore operational costs
Communication andoutreach
Expert meetings byCouncil
Policy work
Statistics, studies &information
Annual report &biennial review
Total
Grand Total

428,675

428,675

393,370

35,305140,000

140,000

104,683

35,317----302,000

302,000

293,859

8,141

30,00030,00028,188

1,812

900,675

900,675

820,100

80,575

7,108,822

7,108,822

5,418,298

1,690,524

The accompanying notes are an integral part of the financial statements.

CFA(XXXIII)/6
Page 12International Tropical Timber Organization
Notes to the 2017 financial statements
Note 1
Reporting entity
1.
The International Tropical Timber Organization (ITTO) was establishedpursuant to the International Tropical Timber Agreement, 1983, with its headquarters
in Yokohama, Japan, and continues to operate from this location. The Agreement
was succeeded by the International Tropical Timber Agreement, 1994 and 2006 (“theAgreement”).
2.
The objectives of the Organization are laid down in Article 1 of the Agreement
and include the provision of a consultative forum for producing and consuming
members on all aspects of the world timber economy; promotion of the expansion,
diversification, and structural improvement of the international tropical timber trade
together with more transparency and better distribution; the encouragement ofreforestation and other forest management activities; promotion of further
processing of tropical timber in the producing countries, with research anddevelopment as well as technology transfer to support both of these goals; andsupport for development of national policies in sustainable utilization andconservation of tropical forests, with special regard for ecological balance andgenetic resources.
3.
ITTO's governing body is the International Tropical Timber Council, which
comprises all the Organization's members. The Council adopts such rules andregulations as are necessary to carry out the provisions of the Agreement. The
Council is also responsible for the approval of ITTO’s financial statements.
4.
The financial statements include only the operations of ITTO. ITTO has no
subsidiaries or interests in associates or jointly controlled entities.

Note 2
Statement of approval of the Executive Director
ITTO’s financial statements have been prepared in accordance with the International
Public Sector Accounting Standards (IPSAS). The financial statements wereauthorised for issue by the Executive Director on 27 June 2018, and will be
submitted to the International Tropical Timber Council (ITTC) for approval at thenext annual Council Session.
Note 3Basis of preparation
A.

Basis of measurement

1.
The financial statements have been prepared on a full-accrual method of
accounting under International Public Sector Accounting Standards (IPSAS). The
accounting policies have been applied consistently throughout the reporting period.
ITTO applies the historical cost principle.

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2.
ITTO applies the transitional provisions of IPSAS 17: Property, plant andequipment, where a first-time adopter, who has not recognized assets under its
previous basis of accounting, it is not required to recognize and/or measure assets
for reporting periods beginning on a date within three years.
The impact of this transitional provision should not affect the fairness of thefinancial statements.
3.
These financial statements are expressed in United States dollars rounded to
the nearest whole number, unless otherwise indicated.
B.

Foreign currency translation

Functional and presentation currency
4.
Items included in the financial statements are measured using the currency ofthe primary economic environment in which an entity operates (“the functional
currency”). The functional and presentation currency of ITTO is the United States
dollar.
Transactions and balances5.
Foreign currency transactions are translated into United States dollars at theprevailing United Nations operational rate of exchange at the time of the transaction.
The United Nations rates approximate market rates. Monetary assets and liabilities
denominated in foreign currencies are revalued at the exchange rate in effect at thereporting date. Non-monetary items in foreign currencies that are measured athistorical cost are translated using the exchange rate at the date of the transaction.
Foreign currency differences arising upon revaluation are recognized in thestatement of financial performance and included under gains and losses.
C.

Use of estimates and critical judgments

6.
The preparation of financial statements in accordance with IPSAS requires
ITTO management to make judgments, estimates and assumptions that affect theapplication of accounting policies and the reported amounts of assets, liabilities,
revenue and expenses. Since uncertainty is inherent in the use of estimates andassumptions, actual results may differ significantly from management estimates.
7.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which theestimates are revised and in any future period affected. Examples of estimates
include: valuation and impairment of investments; collectability of receivables;
provisions and adjustments of advance receipts; accrued liabilities for employee
benefits; recognition of project expenses; and contingencies.
8.
Information about critical judgments in applying accounting policies that havethe most significant effect on the amounts recognized in the financial statements andwhich could have a significant risk of resulting in a material adjustment is includedin the following notes:(a) Investments (Note 7) and receivables (Note 8) valuation ：if there is
objective evidence that an impairment loss has been incurred, the amount of the loss
is measured as the difference between the asset’s carrying amount and the present

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value of estimated future cash flows. The amount of the loss is recognized in thestatement of financial performance.
(b) Note 8, Contributions receivable and other receivables, and note 16,
Revenue from contributions are defined in IPSAS 23: Revenue from non-exchangetransactions (taxes and transfers). Where non-exchange transactions are deemed toinclude conditions, IPSAS 23 requires that a liability be recognized until such timethat the condition is satisfied, at which time revenue may be recorded. The
determination of the existence of conditions for non-exchange transactions requires
significant professional judgment. Many ITTO contribution agreements with donors
include general stipulations; for those that include conditions, deferred revenue isrecognized (advance receipts);(c) Project expenses (Note 20) incurred by the executing agencies arerecognized based on the audit reports of the projects. When those audit reports could
not be obtained for the year 2017, an estimation has been built based on theavailable reports. When no contradictory information is available, it is the best
estimate of the management that the costs are spend by the executing agencies on astraight line basis.
(d) Note 25, Contingencies: legal proceedings covering a wide range ofmatters are or may be pending or threatened in various jurisdictions against ITTO.
9.
Provisions are recorded for pending matters when it is determined that an
unfavourable outcome is probable and the amount of loss can be reasonably
estimated. Owing to the inherently uncertain nature of the matters, the ultimate
outcome or actual cost of settlement may materially vary from estimates.
D.

Future accounting changes

10. The International Public Sector Accounting Standards Board has published
IPSAS 39: Employee benefits and impairment of revalued assets (amendments to
IPSAS 21 and IPSAS 26). IPSAS 39: Employee benefits will replace IPSAS 25:
Employee benefits on 1 January 2018 with earlier application encouraged. Initialassessment of the impact of the new IPSAS has been carried out and the impact is
not likely to significantly affect ITTO’s financial statements.
Note 4Significant accounting policies
Financial assets
1.
The designation of financial assets depends on the purpose for which thefinancial assets are acquired and is determined at initial recognition. All financial
assets of ITTO that have a residual value are categorized as loans and receivables.
Major financial asset typeClassification

Contributions and other accounts receivable

Loans and receivables

Other assets

Loans and receivables

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2.
ITTO initially recognizes loans and receivables on the date that they
originated. All other financial assets are recognized initially on the trade date, whichis the date ITTO becomes a party to the contractual provisions of the instrument. All
financial assets are initially measured at fair value.
Loans and receivables
3.
Loans and receivables are financial assets with fixed or determinable paymentsthat are not quoted in an active market. Subsequent to initial recognition, loans andreceivables are measured at amortized cost using the effective interest method, lessany impairment loss.
4.
Loans and receivables are included in current assets, except for those withmaturities greater than 12 months after the end of the reporting period. Such loans
and receivables are classified as non-current assets.
5.
Unused transfers of cash assistance due from executing agencies represent theclaims to the unused cash assistance funds remaining with executing agencies after
the completion or termination of a project. They are recorded as “other receivables”
and are recovered from executing agencies.
6.
Cash generating assets and non-cash generating assets are distinguished basedon whether those assets bring revenue from exchange transactions or not. As ITTO
only generates non-exchange transactions revenue, all assets are considered noncash generating assets.
Impairment of financial assets — assets carried at amortized cost
7.
At the end of each reporting period, ITTO assesses whether there is objective
evidence that a financial asset or a group of financial assets is impaired. ITTO
considers impairment of financial assets at a specific asset level.
8.
A financial asset or a group of financial assets is impaired and impairment loss
is incurred only if there is objective evidence of impairment as a result of one ormore events that occurred after the initial recognition of the asset (a “loss event”)
and that loss event has an impact on the estimated future cash flows of the financial
asset or group of financial assets that can be reliably estimated. No collective
impairment is made.
9.
The amount of the loss is measured as the difference between the carrying
amount of the asset and the estimated recoverable amount. The carrying amount of
the asset is reduced and the amount of the loss is recognized in the statement offinancial performance and reflected in an allowance account in the statement offinancial position.
10. If, in a subsequent period, the amount of the impairment loss decreases and thedecrease can be related objectively to an event occurring after the impairment wasrecognized (such as receipt of funds), the reversal of the previously recognizedimpairment loss is recognized in the statement of financial performance. Off-settingof the impairment is done when there is no legal possibility that the corresponding
asset would be recovered.
11. Receivables relate to contractual amounts agreed to be paid by governments
and intragovernmental organizations.

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Advances to executing agencies
12. Projects prepaid expenses represent transfers of cash where executing agencies
have not yet met performance obligations as specified by ITTO. ITTO monitors theutilization of cash by executing agencies and recognizes expenses only when those
funds have been used by executing agencies as specified by ITTO.
13. Reporting by executing agencies of the utilization of advances is due usually
every six months. Where an executing agency fails to report on the utilization of theadvance, or breaches the performance obligation, those amounts, as well as any
unused funds, are followed up by ITTO with the executing agency.

Property and equipment
14. ITTO applies the transitional provisions of IPSAS 17: Property, plant andequipment, where a first-time adopter, who has not recognized assets under its
previous basis of accounting, is not required to recognize and/or measure assets forreporting periods beginning on a date within three years. In line with this provision,
ITTO will start recognizing fixed assets from the year ending 31 December 2018.

Financial liabilities
15. Other financial liabilities are initially recognized at fair value, less transaction
costs, and subsequently measured at amortized cost using the effective interest
method.
Major financial liability typeClassification

Accounts payable

Loans and receivables

Other liabilities

Loans and receivables

16. Accounts payable and accruals arising from the purchase of goods and services
are recognized when supplies are delivered or services consumed. Liabilities arestated at the invoice amounts, less the payment discounts if eligible at the reporting
date. Where invoices are not available at the reporting date, the liability is estimatedand recorded. Financial liabilities measured at amortized cost, due within 12 monthsof the date of the statement of financial position, are classified as current liabilities.
Otherwise, they are classified as non-current liabilities.
17. There was no discounting of advance receipts by donors as the impact isconsidered as not significant. The amounts paid to executing agencies are always thecontribution amount received from the donors, hence the financial risks on theadvance receipts are considered remote.
Employee benefits
18.

ITTO recognizes the following categories of employee benefits:(a)Short-term employee benefits;(b)Post-employment benefits;

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Other long-term employee benefits;(d)Termination benefits.

Short-term employee benefits
19. Short-term employee benefits are those that are due to be settled within
12 months after the end of the period during which employees have provided related
services. These benefits include wages and salaries, compensated absences (such as
paid leave and annual leave) and other benefits, including medical care and housing
subsidies. An expense is recognized when a staff member provides services inexchange for employee benefits. A liability is reported for any entitlement that has
not been settled as at the reporting date and represents the amount expected to be
paid to settle the liability. Owing to the short-term nature of such entitlements, theliability is not discounted for the time value of money.
Post-employment benefits
20. Post-employment benefits are those payable after completion of or separationfrom employment, excluding termination payments.
21. All staff of ITTO participate in a provident fund as their pension plan, which
was established by the Staff Regulations and Rules to provide retirement related
benefits to employees. Contributions to the provident fund which are payablemonthly are set at the percentage rates defined by the United Nations Joint Staff
Pension Fund (UNJSPF) Therefore, the provident fund is classified as a definedcontribution plan in line with the requirements of IPSAS 25: Employee benefits. The
fund’s contributions to the plan during the financial period are recognized as
expenses in the statement of financial performance.
Other long-term employee benefits
22. Other long-term employee benefits obligations are those that are not due to besettled within 12 months after the end of the period in which employees provide therelated service. These benefits comprise home leave, annual leave and repatriation
grant. The discounting of those obligations was considered not material considering
the amount of the current obligations.
Termination benefits
23. Termination benefits are recognized as an expense only when ITTO isdemonstrably committed, without realistic possibility of withdrawal, to a formal
detailed plan to either terminate the employment of a staff member before the normal
retirement date. No termination benefit was recognized at the beginning nor the endof the reporting period.
Leases24.

ITTO leases certain property and equipment.

25. Leases of property and equipment where ITTO substantially assumes all therisks and rewards of ownership are classified as finance leases. In 2017, ITTO has
not been part of any finance lease transaction.

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26. Leases in which a significant portion of the risks and rewards of ownership are
retained by the lessor are classified as operating leases. Payments under operatingleases (net of incentives received from the lessor, if any) are recognized on astraight-line basis under other expenses in the statement of financial performanceover the period of the lease.
Provisions
27. A provision is recognized if, as a result of a past event, ITTO has a present
legal or constructive obligation that can be estimated reliably, and if it is probablethat an outflow of economic benefits will be required to settle the obligation.
Provisions are measured at the present value of the expenditures expected to berequired to settle the obligation using a rate that reflects current market assessmentsof the time value of money and the risks specific to the obligation. Where theprovision is expected to be settled beyond the next 12 months, the increase in theprovision due to the passage of time is recognized as interest expense. When an
outflow is dependent upon a future event that is not certain to occur, or cannot be
reliably estimated, a disclosure regarding the contingent liability is made in thenotes to the financial statements.
28. A provision for the return of unused funds to donors is reported for unusedbalances related to projects that have expired at year-end where the donor agreement
requires unused funds to be returned and where it is probable that funds will be
returned as opposed to being reallocated. Where the donor has not disbursed all the
cash to ITTO, the receivable balance is written down to net realizable value. A
provision for returns of unused funds is reported only if there are funds to be
returned after the receivable has been fully written down. The effects of changes
resulting from revisions to the timing or the amount of the original estimate of theprovision are reflected on a prospective basis. The expense arising from reporting aprovision (or reducing any receivable) for unused funds is presented in the statementof financial performance.
Revenue recognition
Assessed contributions
29. Assessed contributions are non-exchange transactions, which means that
resources (such as cash, items of property and equipment or enforceable rights tosuch) are received by ITTO with no or nominal consideration provided directly inreturn to the donor. The resources are to be applied towards advancing theOrganization’s mission.
30. Assessed contributions are determined during the Council session of the year
preceding considering the budget of the Organization and the number of votes ofeach member.
31.

Assessed contributions are received from members.

32.

The fair value of assessed contributions is determined by the cash inflow.

33. Assessed contributions are recognized in the year of the budget it is meant tocover.

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Voluntary contributions
34. Voluntary contributions are non-exchange transactions, which means that
resources (such as cash, items of property and equipment or enforceable rights tosuch) are received by ITTO with no or nominal consideration provided directly inreturn to the donor. The resources are to be applied towards advancing theOrganization’s mission.
35. Voluntary contributions are received from members, regional and international
financial institutions, the common fund for commodities, and other sources.
36.

The fair value of voluntary contributions is determined by the cash inflow.

37. Voluntary contributions may be subject to terms in a binding agreement
imposed upon the use of the resource (termed earmarked funds) or may be free of
specific terms allowing ITTO to direct such resources according to its mandate(termed unearmarked fund). Earmarked funds may be subject to conditions whereterms not only restrict the use of resources, but also require the return of resources,
if not used as specified.
38. With regard to unearmarked funds and earmarked funds with no conditions
attached, ITTO recognizes an asset (cash or receivable) and revenue at the earlier ofcash received or formal acknowledgement/agreement of the contribution to beprovided unless the agreement specifies a later contribution start date.
Examples of such funds with no conditions attached are:-Donors pledges to Thematic Programme funds-

Programme support recognized from donors pledges-

Donors pledges to Fellowship programme-

Projects’ ex-post budgets when the project is officially finished39.

For earmarked contributions:(a) Where the agreement has a legislative clause, the receivable and related
revenue is not recorded until ITTO is notified of the legislative approval;(b) Where the agreement has a performance clause, the receivable andrelated revenue is not recorded until the obligation is met.
40. For earmarked contributions with a condition attached, ITTO recognizes anasset (cash or receivable) and a liability (contributions advance receipts or deferred
revenue)attheearlierofcash
receivedorformalwrittenacknowledgement/agreement of the contribution to be provided (unless thecontribution specifies a later start date). The liability is reduced and revenue isrecognized only when conditions have been satisfied.
41. Revenue from voluntary contributions is shown net of realized gains and losses
on foreign exchange as ITTO does not assume the risk of foreign exchange on
contribution revenue.

CFA(XXXIII)/6
Page 20

Pledges
42. Pledges of contributions to ITTO are received at two annual donor meetings.
ITTO does not recognize pledges as assets or revenue until they are enforceable atthe earlier of written confirmation of the pledge or receipt of funds. Once
enforceable, the asset and related revenue are recognized consistent with the revenue
recognition policy for voluntary contributions referred to above. Until that time, thepledges are disclosed as contingent assets.
Contributions in kind
43. ITTO receives contributions of services and office space and other facilities
from the Host Government. These contributions, as well as in-kind contributions ofgoods, are initially measured and recorded at their fair value at the date of receipt. The
fair value of these non-monetary assets is determined by reference to observable
market values or by independent appraisal. The revenue and the corresponding
expense are recorded in the statement of financial performance as part of voluntary
contributions.
Recognition of expenses
44. Expenses are recognized in the statement of financial performance in the
period to which they relate.
Transfers of cash assistance and programme supplies
45. In fulfilling its mandate, ITTO transfers cash to governments, nongovernmental organizations and other third parties (“executing agencies”). Transfersof cash assistance are initially reported as an advance on the statement of financial
position where there are performance obligations imposed on the executing agency,
and are expensed when ITTO is satisfied that those performance obligations are met.
An accrual against advances is recorded at year-end for expenses incurred byexecuting agencies reported to but not processed by ITTO.
46. Project expenses incurred by the executing agencies are recognized based on theaudit reports of the projects. When those audit reports could not be obtained for theyear 2017, an estimation has been built based on the available reports. When nocontradictory information is available, it is the best estimate of the management thatthe costs are spend by the executing agencies on a straight line basis.
Commitments
47. Commitments are future expenses and liabilities to be incurred on contracts
outstanding at the reporting date for which ITTO has little, if any, discretion to avoid
in the ordinary course of operations, including:(a) Capital commitments: represents the aggregate amount of capital
expenditures contracted for but not recognized as paid or provided for at theperiod-end;(b) Contracts for the supply of goods or services that ITTO is expecting to bedelivered in the ordinary course of operations;(c)Cash transfers;

CFA(XXXIII)/6
Page 21(d)

Other non-cancellable commitments.

ITTO does not have any non-cancellable lease agreements.
Contingencies
Contingent assets
48. A contingent asset is a possible asset that is not wholly within the control of
the organization. Contingent assets are reviewed to ensure that developments areappropriately reflected in the financial statements. If it has become virtually certainthat an asset is no longer contingent and the asset’s value can be measured reliably,
the asset is recognized during the period in which the change occurs.
Contingent liabilities
49. A contingent liability is disclosed unless the possibility that it will be realized
is remote. If it becomes probable that a contingent liability will be realized, aprovision is recorded during the period in which the change of probability occurs. A
contingent liability will also arise in cases where there are liabilities that cannot bemeasured reliably.

Segment reporting
50. The ITTO governing body and management does not manage the organization
based on service segments or geographical segments.
Budget51. ITTO budgets, which are approved by the Council for each financial biennium,
permit expenditures to be incurred within the Administrative Account. ITTO hasclassified its budgets as: (a) basic administrative costs budgets; and (b) core
operational costs budgets.
52. The basic administrative costs budget includes costs such as salaries andbenefits, installation costs, and official travel. The core operational costs budget
includes costs such as those related to communication and outreach, expert meetings
convened by the Council and preparation and publication of studies and assessments
pursuant to articles 24, 27 and 28 of the Agreement.
53. An original budget is defined by IPSAS as “the initial approved budget for thebudget period”. The final budget is defined as:(a)

The original budget as defined above;(b)

All subsequent changes to the budget approved by the Council.

54. While ITTO’s financial statements are prepared under the IPSAS full-accrualbasis, ITTO budgets are prepared and managed on a modified cash basis. The mostsignificant differences are as follows:(a) The budget does not include assets, investing and financing activities.
Revenue is based on estimated expenses.

CFA(XXXIII)/6
Page 22(b) Budget costs are recorded on a modified cash basis in contrast withexpenses in the financial statements that are prepared under the IPSAS full-accrualbasis.
(c) Expenses for projects and activities funded by voluntary contributions are
not included in the budget of ITTO.

Note 5Comparison to budget
Statement V documents the various budgets to the actual amounts incurred against
them. Both budgets and actual amounts (cash and budgetary commitments) arecalculated on the same modified cash basis. Explanations of material differences
between the final budgets and actual amounts are as follows.
(a) There were months where senior-level positions including the Executive
Director, Assistant Director of division of operations, Assistant Director of divisionof forest management, and projects manager were vacant during the reporting
period.
(b) Assessed contributions amounting to approximately $1,000,000 were notreceived during the reporting period, which had an influence on management’s
decision regarding budget spending.
The following table presents the reconciliation of actual budget amounts on acomparable basis in the statement of comparison of budget to actual amounts and theAdministrative Account expenses in the statement of financial performance.

(United States dollars)

Budget actual for year 2017

5,418,298

2016 budget for Council held outside of host country in 2017

200,000

Exchange loss

26,717

Allowance expense for debt

559,409

Services received through in-kind contributions

538,657

Working capital reserve expenses in accordance with Council decisions

308,305

Adjustment for staff income tax

313,435

Accrual for long-term employee benefits
Administrative Account e xpe nse s

8,379
7,373,200

Note 6
Cash and cash equivalents
All cash in ITTO is at bank or on hand and convertible (freely exchanged to othercurrencies without licence or authorization).

CFA(XXXIII)/6
Page 23

Note 7
Investments(United States dollars)

Breakdown of Investments

2017

2016

Securities

12,014,000

12,014,000

Total non-current investments

12,014,000

12,014,000

Provision for Impairment on security(12,014,000)(12,014,000)--

Non-current investments

Net investments$12,014,000 was provided in 2015 on the balance of the investment in Ardent Fund.
On 26 April 2016, Blackstar Capital Star Limited, the sole owner of Ardent
Harmony Inc. presented a petition of voluntary liquidation to the Grand Court of the
Cayman Island and the court issued a supervision order that the liquidation ofArdent Harmony Inc be continued. The management received an official report fromthe liquidator dated on 20 June 2016. Based on the content regarding the residual
assets, the management estimated there was no collectible amount from theinvestment. The investment will continue to be recognized as long as legal
obligations to pay ITTO exist.

Note 8
Accounts receivables
Assessed contributions: receivables from non-exchange transactions(United States dollars)

Administrative accountAllowance for
doubtful assessed
contributions
receivable

Member States

Balance as of 31 December 2015

6,215,042

Assessed Contribution for 2016

7,445,429

Receipt
Advance Receipt Reclassification
Increase of Allowance for doubtful assessed contributions receivable
Balance as of 31 Dece mbe r 2016

(7,012,949)(46,705)

Total assessed
contributions
receivable(4,802,361)-

1,412,681
7,445,429(7,012,949)(46,705)-(268,961)(268,961)

6,600,817(5,071,322)

1,529,495

CFA(XXXIII)/6
Page 24(United States dollars)

Administrative accountMember States

Balance as of 31 December 2016

6,600,817

Assessed Contribution for 2017

7,178,516

Receipt(5,674,230)

Allowance for
doubtful assessed
contributions
receivable

Total assessed
contributions
receivable(5,071,322)

1,529,495-

7,178,516(5,674,230)

Advance Receipt Reclassification(485,211)

Write-off(525,507)

525,507--(559,409)(559,409)

7,094,386(5,105,224)

1,989,162

Allowance for
doubtful voluntary
contributions
receivable

Total voluntary
contributions
receivable

-

-

-

5,433,894

‐
‐
‐
‐
‐
‐
‐
‐

5,433,894

Increase of Allowance for doubtful assessed contributions receivable
Balance as of 31 December 2017-

(485,211)

Voluntary contributions: receivables from non-exchange transactions(United States dollars)

Project accountBalance as of 31 December 2015
Pledges recorded in 2016

Member States

Cash-in(3,005,077)

Reclassification from Donor's pool funds(2,328,817)

Balance as of 31 December 2016
Pledges recorded in 2017
Cash-in

100,000
6,029,311(1,925,322)

Reclassification from Donor's pool funds(192,335)

Balance as of 31 December 2017

4,011,656(3,005,077)(2,328,817)
100,000
6,029,311(1,925,322)(192,335)
4,011,656

CFA(XXXIII)/6
Page 25(United States dollars)

Administrative accountBalance as of 31 December 2015

Allowance for
doubtful voluntary
contributions
receivable

Member States

Total voluntary
contributions
receivable

-

-

-

Claims506,966

Cash-in(200,000)‐‐

506,966(200,000)

Balance as of 31 De ce mbe r 2016

306,966-

306,966

Claims272,397-272,397

Cash-in(519,797)-(519,797)

59,566-59,566

Balance as of 31 De ce mbe r 2017

1.

Receivables are earmarked when agreements specify terms for the use ofcontributions, such as the purpose, geographical area and period of use,
and are unearmarked when contributions are free of specific terms,
allowing ITTO to direct such resources according to its mandate. Bothearmarked and unearmarked receivables are recorded when contributionagreements become enforceable, which occurs at the date when theagreement is signed, free of legislative/parliamentary approval clauses, orat the date when donor’s notification of the amount to be disbursed to
ITTO, when such a clause exists, is fulfilled. Ageing of receivables aswell as the exposure to credit and currency risks related to thosereceivables are disclosed in Note 22, Financial risk management.

2.

The exposure of ITTO to credit and currency risks related to receivables
are disclosed in Note 22, Financial risk management.

Other accounts receivable
Other accounts receivable are mainly composed by amounts related to cancelled
travel expenses pending reimbursement and accrued interest.

CFA(XXXIII)/6
Page 26

Note 9Advance transfers - Projects(United States dollars)

Category
Reforestation and Forest Management

2017

2016

1,306,560

501,081

Economics, Statistics and Market

66,033

94,160Forest Industry

48,832

18,929Activities

270,461-

1,691,886

614,170

Total advance transfe r by type

Reconciliation of advance transfer balances(United States dollars)

Advance transfer as at 31 December 2015

2,202,483

Expenses paid in previous years recognized(1,526,519)

T ermination of ongoing projects (Decision 6 (LII))(460,801)

Expenses paid in 2016

4,755,924

Expenses paid in 2016 recognized(4,356,917)

Advance transfe rs as at 31 De ce mbe r 2016

614,170

Expenses recognized through reports from EAs(4,322,135)

Expenses paid in 2017

5,399,850

Advance transfe rs as at 31 De ce mbe r 2017

1,691,886

Advance transfers - Projects represent transfers of cash where executing agencies
have not yet met performance obligations as specified by ITTO. ITTO monitors theutilization of cash by executing agencies and recognizes expenses only when those
funds have been used by executing agencies as specified by ITTO.

Note 10
Advance transfers – Others(United States dollars)

Breakdown of Advance transfers – Others

2017

2016

Prepaid expenses - staff

185,666

129,902

Prepaid expenses - others

72,021

46,324

Total

257,687

176,226

CFA(XXXIII)/6
Page 27

Note 11
Accounts payable - Others(United States dollars)

Breakdown of Accounts payable - Others

2017

2016

Other accounts payable

359,782

4,250

Employee benefits accrued liabilities

946,973

971,536

Other accrued liabilities

343,082

219,197

1,649,837

1,194,983

2017

2016

89,65035,015

Total

Employee benefits liabilities breakdown(United States dollars)

Curre nt e mploye e be ne fits liabilitie s
Home leave
Accrued salaries and allowances

39,61880,025

Accrued social securities

88,947

81,482

Total curre nt e mploye e be ne fits liabilities

218,215

196,522

13,79238,379Non-curre nt e mploye e be ne fits liabilities
Home leave
Repatriation benefits

301,264

299,932

Annual Leave

413,702436,703

Total non-curre nt e mploye e be ne fits liabilitie s

728,758

775,014

Total e mploye e be ne fits liabilitie s

946,973

971,536

Note 12
Voluntary contributions advance receipts – allocatedDeferred revenue(United States dollars)

Category

2017

2016

Reforestation and Forest Management (F)6,475,397

8,391,381

Economics, Statistics and Markets (M)707,901

992,250

Forest Industry (I)745,942892,201

Activities (A)6,950,839

2,069,917

Total deferre d re venue by cate gory

14,880,080

12,345,749

CFA(XXXIII)/6
Page 28

Reconciliation of deferred revenue balances(United States dollars)

Deferred revenue as at 31 December 2015

18,360,658

Liabilities recognized for obligations attached to pledges

4,637,669

Revenue recognized from ongoing projects(4,845,518)

T ransfers to other liabilities(330,706)

T ermination of ongoing projects (Decision 6 (LII))(5,476,353)

Deferred revenue as at 31 December 2016

12,345,750

Liabilities recognized for obligations attached to pledges

5,764,265

Revenue recognized from ongoing projects(3,324,481)

Reduction of project budget haircut
Deferred revenue as at 31 December 2017

94,546
14,880,080

Deferred revenue consists of contributions receivable which are not yet due, and,based on the terms of agreements, are to be used by ITTO in future periods specified
by donors.

CFA(XXXIII)/6
Page 29

Detail of projects with balance as of 31 December 2017
(United States dollars)

Project ID

Category

ITTO Budget

Programme

Advance

Advancesupportreceipts

transfers

Expenses

PD 419/06 Rev.3 (F)EXT .T ICAD

F

1,800,000

966,018

192,857(641,125)

549,261

PD 452/07 Rev.5 (F)F

556,963

26,26270,353(460,348)

96,563

PD 454/07 Rev.3 (F)F

490,318

378,029

38,039(74,250)

30,832

PD 456/07 Rev.4 (F)-JICA E/NF

3,297,355

2,403,105

244,249(650,001)

46,878PD 456/07 Rev.4 (F) Non-JICA

F

555,556

218,896

43,950(292,709)

130,611

PD 470/07 Rev.1 (F) /C44

F

206,577

11,904

15,524(179,149)

65,000PD 477/07 Rev.4 (F) /C48

F

332,477

177,840

25,056(129,581)

2,636

PD 495/08 Rev.4 (F) /C47F

477,602393,690

36,488(47,424)

26,876

PD 507/08 Rev.1 (F) /C44F

385,800

244,101

29,356(112,343)

61,029PD 552/09 Rev.1 (F) /C45

F

621,578435,880

41,844(143,854)

1,926

PD 563/09 Rev.5 (F) /SP'14

F

460,000

361,31049,286(49,404)-

PD 599/11 Rev.1 (M) /C47

M

490,624

344,51436,884(109,226)-

PD 600/11 Rev.1 (I) 2011

I532,525

477,739

39,786(15,000)-

PD 601/11 Rev.3 (F) /C49

F

473,602370,720

36,762(66,120)

48,992

PD 602/11 Rev.3 (F) /C49

F

333,067

287,681

25,956(19,430)-

PD 617/11 Rev.1 (F) /C47

F

907,948624,588

100,881(182,480)

89,777

PD 635/12 Rev.2 (F) /C48

F

496,247444,50938,330(13,408)-

PD 646/12 Rev.3 (F) /C50

F

427,21088,275

46,627(292,308)-

PD 668/12 Rev.1 (F) /C48

F

611,132

532,41447,529(31,189)-

PD 692/13 Rev.1 (M) /C49

M

264,704

167,510

24,427(72,767)-

PD 696/13 Rev.2 (F) /C49

F

294,444

86,53733,276(174,631)

76,032

PD 710/13 Rev.1 (F) /C49

F

447,936

271,595

51,426(124,915)

25,047

PD 721/13 Rev.3 (F)/03'16

F

440,873

33,753

47,236(359,884)

26,373

PD 723/13 R.2(F) Ph.I St.1/C52

F

140,000

45

15,000(124,955)-

PD 725/13 Rev.2 (F) /C50

F

141,396

90,892

16,008(34,496)

7,297

PD 732/14 Rev.2 (M)/03'16

M

321,138

44

34,408(286,687)-

PD 737/14 Rev.2 (I)/03'16

I

589,863

51,20863,200(475,455)

48,831

PD 740/14 Rev.2 (F) /C50

F450,542

123,178

51,942(275,422)

1,232

PD 741/14 Rev.3 (F)/03'16

F

437,478

71,10546,872(319,501)

9,084

PD 751/14 Rev.3 (M)/C52

M

130,000

69

13,929(116,002)

40,000PD 754/14 Rev.3 (F)/03'16

F

541,031

99,45557,968(383,608)

7,551

PD 756/14 Rev.1 (M) /C50

M

140,01272,21916,001(51,792)-

PD 764/14 Rev.3 (F)/04'16

F

606,313173

51,886(554,254)-

PD 765/14 R.2 (F) Ph.I/C52

F

250,000

294

16,070(233,636)-

PD 770/15 Rev.1 (I)/03'16

I

196,22470

21,024(175,130)-

PD 777/15 Rev.3 (F)/04'16

F

515,59019

55,242(460,329)-

PD 796/15 Rev.2 (M)/C53

M

80,000-8,573(71,427)-

PD 815/16 Rev.2 (I)/C53

I

90,000-9,643(80,357)-

PPD 189/17 Rev.1 (F)/C53

F

50,000-5,357(44,643)-

CFA(XXXIII)/6
Page 30

Project ID

Category

ITTO Budget

Programme

Advance

Advancesupportreceipts

transfers

Expenses

PP-A/47-266: IT T O/CBD-ACT O

A1,218,803

299,082

97,794(821,927)

178,594

PP-A/49-291 BWP25b IMM(EU)A

4,858,597

822,142

57,550(3,978,905)-

PP-A/50-304 BWP T AG&CSAG'15-16

A

110,40243,423

20,870(46,108)-

PP-A/50-305 BWP27 CPF

A85,00041,222

7,825(35,953)-

PP-A/50-308 BWP33 IT T O & WCO

A

223,280

69,67629,495(124,109)

91,867

PP-A/52-320: CIT ES BWP Activities

A

748,268

30,12532,629(685,514)-

PP-A/52-320A:CIT ES T rees ProgrammeA

25,6709,474-(16,196)-

PP-A/53-321 Korea Officer

A

1,055,247

76,889-(978,358)-

PP-A/53-322 BWP18-19/1

A

50,000-6,522(43,478)-

PP-A/53-323 BWP18-19/2

A

100,391-

13,043(87,348)-

PP-A/53-324 BWP18-19/3

A

75,000-9,783(65,217)-

PP-A/53-325 BWP18-19/10(a)A

25,000-3,261(21,739)-

PP-A/54-328 BWP18/6b C&I Mtgs

A

36,117--(36,117)-

PP-A/54-329 BWP18/10 Mangrove

A

4,826

-

-

(4,826)-

PP-A/54-330 BWP18/19b Outreach

A

5,044

-

-

(5,044)-F

1,080,187

964,483

83,317(32,387)

3,563

T hematic programme projects
RED-PD 029/09 Rev.1 (F)/03'10
T FL-PD 032/13 Rev.2 (M)/03'14

M

436,448

350,552

48,930(36,966)

22,031

T FL-PD 033/13 Rev.2 (M)/03'14

M

482,148

425,016

53,130(4,002)

4,002

T FL-PD 037/13 Rev.2 (M)/03'14

M

502,464

387,623

55,589(59,252)-

T FL-PD 044/13 Rev.2 (M)/03'14

M

405,968

186,891

44,202(174,875)-

Recognized as net assets

307,482

Fellowship progmramme
PP-A/52-319 FFF/up to15AA

82,783

41,274-(41,509)-

PP-A/52-319 FFF/16A

A

56,66843,911-(12,757)-

PP-A/52-319 FFF/17A

A

120,829-

10,018(110,811)-

Recognized as net assets

Total

165,076

31,373,264

13,647,423

2,373,203(14,880,080)

Unearmarked funds and earmarked funds with no conditions attached, such as donor
pledges to the Thematic Programme funds or the Fellowship fund, recognize revenue
at the earlier of cash received or formal acknowledgement/agreement of thecontribution to be provided. Therefore, advance receipts from Thematic programme
projects and the Fellowship programmes are recorded in net assets and are excluded
from the reconciliation of deferred revenue balances shown above.

1,691,886

CFA(XXXIII)/6
Page 31

Note 13
Voluntary contributions advance receipts - unallocated
The amounts in Voluntary contributions advance receipts – unallocated correspondto funds that have been pledged by donors but have not been allocated to specificprojects.

Note 14
Assessed contributions advance receipts
Those amounts correspond to assessed contributions, related to 2018 budget, thatwere received before the end of 2017.

Note 15
Net assets(United States dollars)

Breakdown of net assets

2017

2016
Unrestrictedaccumulated
surplusRestrictedaccumulated
surplusFunds provided by interest
incomeT hematic programme funds
unallocatedUnrestrictedaccumulated
surplusRestrictedaccumulated
surplusReserves

Reserves

89,034

‐

‐

163

‐

‐

307,482‐‐

1,287,220‐‐

Funds allocated to
Fellowship programme

287,016‐‐

276,305‐‐

Funds allocated to expost
evaluation

46,439

‐

‐

-

‐

‐

Working Capital reserve

4,156,724‐‐

4,157,286

‐

‐

-

-

‐

‐

-

‐

-

‐

‐

‐

-

‐

Programme support funds-

237,862‐‐

90,079‐Reserve provided byinterest income-

205,075‐‐

189,877‐

Impairment loss

-

‐

‐

‐

-

‐

2,500,000-‐

1,850,000

2,500,000

5,720,974

279,956

1,850,000

T hematic programme funds
unallocated
Unearmarked funds
unallocatedSpecial reserve
Total

4,886,695

442,936

CFA(XXXIII)/6
Page 32

1.
Net assets represent the value of ITTO assets, less its outstanding liabilities at
the reporting date. ITTO net assets comprise accumulated surpluses and reserves.
2.
Accumulated surplus represent the accumulated surpluses and deficits from
ITTO operations over the years. Accumulated surplus is presented as restricted orunrestricted. Restricted accumulated surplus are linked to commitments or require a
Council decision to be utilized.
3.
Reserves represent the special reserve contained in the Administrative
Account. In accordance with the Financial Rules and Procedures of ITTO, thisreserve is set aside to meet obligations towards the staff members of theOrganization, arising in the event that ITTO ceases to exist, such as terminationindemnities, repatriation travel and removal costs, and repatriation grants.

Note 16
Administrative account; Revenue from Assessed Contributions and the other contributions(United States dollars)

Breakdown of revenue

2017

2016

Member countries

7,178,516

7,445,429

Total Asse sse d contributions

Contributions from me mbe rs countrie s

7,178,516

7,445,429

Reimbursement by Japan

313,435

797,009

Voluntary in-kind contributions from Japan

538,657

695,445

Total voluntary contributions

852,092

1,492,454

Total Asse sse d and Voluntary Contributions

8,030,608

8,937,883

Asse sse d Contribution re ce ivable

1,989,162

1,529,495

Voluntary Contribution re ce ivable

59,566306,966

In-kind contributions
In-kind contributions comprise contributions received as goods or services. In-kind
contributions mainly include rights to use assets such as land and buildings.

CFA(XXXIII)/6
Page 33

Project account; Revenue from Voluntary Contributions(United States dollars)

Breakdown of revenue

2017

2016

3,377,631

5,223,502

66,268-

13,631--5,331,013

Programme Support Revenue

198,265524,727

Total voluntary contributions

3,655,795

11,079,242

Voluntary Contribution receivable

4,011,656

100,000

Advance transfer - Project

1,691,886

614,170

Advance receipts

14,880,080

12,345,749

2017

2016

Contributions
Donors
Non-recurring revenue from Donors' funds inaccordance with Decision 9 (LIII)
Revenue from closed projects to the Pooled Fundfor Ex-Post Evaluation
Revenue from Decision 6 (LII)

Category
Reforestation and Forest Management

2,128,398

2,999,488

Economics, Statistics and Markets

339,210

610,658

Forest Industry

226,617647,669

Activities

683,406

965,687

3,377,631

5,223,502

Total donors' voluntary contribution by type

Revenue from Decision 6 (LII)
Revenue from Decision 6 (LII) corresponds to the termination of project obligations.
This decision, adopted by the Council in November 2016, brought ITTO’s
commitments to a level that matched its available resources (please also see Note 7).
The table below show the reorganization of ITTO’s finances in order to regain
sufficient levels of funds to fully meet its financial obligations.
(United States dollars)

2017

2016

T ermination of ongoing obligations-

5,331,013

Utilization of restricted accumulated surplus-

8,409,725

Utilization of unrestricted accumulated surplus-

4,241,248

Total financial loss compe nsated-

17,981,986

CFA(XXXIII)/6
Page 34

Reconciliation between pledges and revenue(United States dollars)

Ple dge s announce d at the C ouncil Se ssion in 2016
Adjustments to pledges

4,982,824
451,070
5,433,894

Liabilities recognized for obligations attached to pledges(4,637,669)

Revenue recognized from ongoing projects

4,845,518

Other adjustments

106,486
5,748,229

Programme support revenue(524,727)

Membe r State s voluntary contributions

5,223,502

Ple dge s announce d at the C ouncil Se ssion in 2017

1,308,761

Adjustments to pledges(172,968)

Pledged in previous years but arrears booked in 2017

4,893,519
6,029,313

Liabilities recognized for obligations attached to pledges(5,764,265)

Revenue recognized from ongoing projects

3,324,481
3,589,528

Programme support revenue(198,265)

Ex-Post evaluation revenue(13,631)

Membe r State s voluntary contributions

3,377,631

Ex-Post evaluation revenue from Thematic Programme projects are recognized at
the start of the project. An amount of $32,808 was transferred in 2017 as Thematic
Programme related Ex-post evaluation revenue. There were no transfers in 2016.
Note 17
Financial revenue
ITTO generates interest revenue from bank accounts. Interest revenue for 2017 is$35,961 and 2016 is $23,181.
Note 18
Administrative account; Employee benefits expenses(United States dollars)

Breakdown of employee benefits expenses
Salaries and benefits
Social security
Total e mploye e be ne fits e xpe nse s

2017

2016

3,401,105

3,615,220

746,076

683,477

4,147,181

4,298,697

The total amount of defined contribution plan expenses for pension schemes amount
to $533,942 for 2017 and $466,326 for 2016.

CFA(XXXIII)/6
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Note 19
Other operating expenses(United States dollars)

Breakdown of other operating expenses

2017

2016

Installation costs

55,895-

Official travel

119,784

130,585

Special activities

53,05970,018

Data processing

94,457101,027

Other costs

242,167

229,218

Council meetings

407,469

514,460

Expert meetings

104,683

47,029Communication and outreach393,370372,025

Statistics, Studies and information

293,859

230,440

Annual Report and Biennial review

28,18856,120Exchange loss

26,71740,704

Allowance expense for debt

559,409268,961

Services received through in-kind contributions

538,657

695,445

Working capital reserve expenses in accordance with Council decisions

308,305

358,941

3,226,019

3,114,974

Total othe r e xpe nse s

Net foreign exchange gains or losses(United States dollars)

Breakdown of foreign exchange gains or losses

Unrealized

Realized

2016

Gains

61,15017,23578,384Losses70,31551,706122,022

Total ne t losse s

9,165

34,471

43,637

Unrealized

Realized

2017

Gains

50,0892,673

52,762Losses30,32347,315

77,639(19,765)

44,64324,877

Breakdown of foreign exchange gains or losses

Total ne t losse sCFA(XXXIII)/6
Page 36

Note 20
Project expenses(United States dollars)

Category

2017

2016

Reforestation and Forest Management

2,313,748

3,087,736

Economics, Statistics and Markets

T ransfers to executing agencies

1,109,075

1,199,205

Forest Industry

226,617647,669

Activities

672,695

784,075

51,354531,991

Programme support expenses
Ex-post Expenses-

74,793(1,840)2,933

4,371,650

6,328,401

Exchange loss / (gain)
Total by typeTransfers to executing agencies correspond to the expenses incurred during theaccounting period of 2017 and 2016 by those agencies.
Ex-post expenses are expenses incurred by ITTO for the evaluation of finishedprojects.
Note 21
Financial instruments
1.
ITTO has exposure to the following risks from its use of financial instruments:
credit risk, liquidity risk and market risk. The present note contains information
about the exposure to each of the above risks, its objectives, policies and processes
for measuring and managing risk and its management of capital. Further quantitative
disclosures are included throughout the financial statements.
Accounting classifications and fair values
2.
The following tables detail the value of financial assets and financial liabilities
by class of instrument and by category, as defined in the accounting policies.
Financial assets as at 31 December(United States dollars)
Fair v alue thro ugh s urplus o r de fic it

B re ak do wn o f financ ial as s e ts

Assessed and voluntary contributions receivable

Lo ans and re c e iv able s

T o tal fair v alue

De s ignate d as s uc h
upo n initial re c o gnitio n

A v ailable -fo r-s ale

1,936,461--

Other accounts receivable

66,741--

Total financial assets

2,003,202

T o tal c arrying v alue

2016

1,936,461

1,936,461

66,741

66,741

2,003,202

2,003,202

Fair v alue thro ugh s urplus o r de fic it

B re ak do wn o f financ ial as s e ts

Assessed and voluntary contributions receivable

Lo ans and re c e iv able s

T o tal fair v alue

De s ignate d as s uc h
upo n initial re c o gnitio n

A v ailable -fo r-s ale

T o tal c arrying v alue2017

6,060,384--

6,060,384

6,060,384

Other accounts receivable

60,686--

60,686

60,686

Total financial assets

6,121,070

6,121,070

6,121,070

CFA(XXXIII)/6
Page 37

3.
The carrying value of financial assets is considered to be a reasonableapproximation of fair value.
Financial liabilities as at 31 December(United States dollars)

Other financial
liabilities (amortized
cost)

Total carrying value

Total carrying value

Breakdown of financial liabilities
Accounts payable - Member States

2016
41,03841,03841,038

Accounts payable - Others

1,194,983

1,194,983

1,194,983

Total financial liabilities

1,236,021

1,236,021

1,236,021

Other financial
liabilities (amortized
cost)

Total carrying value

Total carrying value

Breakdown of financial liabilities
Accounts payable - Member States

2017
-

-

-

Accounts payable - Others

1,649,837

1,649,837

1,649,837

Total financial liabilitie s

1,649,837

1,649,837

1,649,837

4.
Most liabilities are short-term and are expected to be settled within the next 12months. Non-current liabilities are reported at amortized cost in the statement offinancial position, and it is assumed that the carrying amounts don’t materially deviate
from the fair values of the financial instruments.
Valuation method5.
The valuation method of the different levels of financial instruments carried atfair value has been defined as follows:(a) Level 1. Average quoted prices from two separate sources (unadjusted) in
active markets for identical assets or liabilities;(b) Level 2. Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (as price) or indirectly (derived
from prices);(c) Level 3. Inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
6.
ITTO does not hold any financial liabilities that are recognized at fair value
through surplus or deficit. All ITTO’s financial assets and liabilities are of level 3.
Note 22
Financial risk management
Exposure to credit risk
1.
Credit risk is the risk of financial loss to ITTO if a donor or other counterparty
to a financial instrument fails to meet its contractual obligations. Credit risk arises

CFA(XXXIII)/6
Page 38

principally from cash and cash equivalents, investments, receivables fromcontributions and other receivables.
2.

ITTO holds bank accounts only in Japan and United States.

3.
In its new financial rules and procedures, ITTO has a detailed investment
policy along with a charter for an investment oversight panel with quarterly
reporting requirements to Council members.
4.
The significant receivables of ITTO are all towards member countries. ITTO
has established an allowance for impairment that represents its estimate of incurred
losses in respect of receivables from contributions and other receivables, based on
the following rules representing the management’s best estimate of the risk.
For all assessed contributions receivables that are overdue 4 years and more, 100%
allowance is recommended for financial reporting purposes. Write-off of receivables
is not addressed by this IPSAS policy framework, as the Council is the final
authority to determine the write-offs of balances of assessed receivables outstanding
from Member States.
Fair values of unpaid assessed contributions that are outstanding for periods up to 4
years are to be computed using allowance of 80% for receivables overdue by morethan 36 months, allowance of 60% for receivables overdue by more than 24 months,
and 20% for receivables overdue by more than 12 months.
5.
The carrying value of all financial instruments represents the maximum
exposure to credit risk.

Ageing of assessed and voluntary contributions receivables(United States dollars)

0 to 1 year

>1 to 2 years

Over 2 years

2016

Assessed contributions receivables

817,656

627,250

5,155,911

6,600,817

Voluntary contributions receivables

406,966--

406,966

Allowance-(125,450)(4,945,872)(5,071,322)

Ne t Total

1,224,622

501,800

210,039

1,936,461

0 to 1 year

>1 to 2 years

Over 2 years

Assessed contributions receivables

1,032,211

804,521

5,257,654

Voluntary contributions receivables

2017
7,094,386

4,071,221--

4,071,221

Allowance-(160,904)(4,944,320)(5,105,224)

Ne t Total

5,103,432

643,617313,334

6,060,384

CFA(XXXIII)/6
Page 39

Exposure to liquidity risk
6.
Liquidity risk is the risk that ITTO will encounter difficulty in meeting its
obligations associated with its accounts payables, other liabilities and promisedtransfers of cash to programmes. ITTO holds sufficient financial assets to cover all
its obligations and contingent liabilities. ITTO does not have any borrowings.
7.
ITTO strictly monitors its budget to avoid engaging in commitments which
sufficient budget is unavailable from contributions received and liquidated by thedonors.
Contractual maturities of financial liabilities(United States dollars)Due

0-3 months

3-6 m onths

Overdue

6-12 months

More than 1
year

0-3 months

3-6 m onths

6-12 months

More than 1
year2016 total
carrying value

Accrued expenses

12,802

12,80225,60438,406––––

89,614

Total

12,802

12,80225,60438,406––––

89,614Due

Overdue2017 total
carrying value

0-3 months

3-6 m onths

6-12 months

More than 1
year

0-3 months

3-6 m onths

6-12 months

More than 1
year

Accrued expenses

11,876

11,87618,136

-

–

–

–

–

41,888

Total

11,876

11,87618,136

-

–

–

–

–

41,8888.

No other financial liabilities have contractual maturities.

9.
It is not expected that the cash flows included in the maturity analysis could
occur significantly earlier, or at significantly different amounts.
Exposure to market risk
10. ITTO financial instruments are only composed by loans and receivables,
consequently ITTO exposure to market risk is considered as not significant.
Currency risk
11. Currency risk (or foreign exchange risk) arises with regard to financial
instruments that are denominated in a foreign currency. ITTO is exposed to currency
risk on expenses, assets and liabilities that are denominated in a currency other thanthe United States dollar. The currencies in which these transactions are primarily
denominated are as follows:(a) Regarding expenses for the year employee benefits are mainly made inJapanese yen;(b) Regarding assets and liabilities as at 31 December are mainly balanced in
the United States dollar.

CFA(XXXIII)/6
Page 40

Summary of currency positions(United States dollars)

United States
dollarYen(converted)

2016

Cash and cash equivalents

19,369,555

291,980

19,661,535

Assessed and voluntary contributions receivable

1,936,461-

1,936,461

5,034

61,707

66,741

21,311,050

353,687

21,664,737

41,038-41,038

Accounts payable - Others

1,105,370

89,613

1,194,983

Total financial liabilitie s

1,146,408

89,613

1,236,021

Ne t e xposure

20,164,642

264,074

20,428,716

United States
dollarYen(converted)Euro(converted)

Cash and cash equivalents

16,756,065

122,728

Assessed and voluntary contributions receivable

2,998,095-

3,062,289

6,060,384

9,322

51,364-60,686

19,763,482

174,091

3,062,289

22,999,863

-

-

-

-

Accounts payable - Others

1,283,101

366,736-

1,649,837

Total financial liabilitie s

1,560,224

89,613-

1,649,837

Ne t e xposure

18,203,258

84,4783,062,289

21,350,026

Other accounts receivable
Total financial asse ts

Accounts payable - Member States

Other accounts receivable
Total financial asse ts

Accounts payable - Member States

2017

16,878,793

CFA(XXXIII)/6
Page 41

Sensitivity analysis: foreign currency
12. The following table shows the sensitivity of net assets and surplus/deficits tothe strengthening and weakening of key currencies used by ITTO. This analysis isbased on foreign currency exchange rate variances that ITTO considered to bereasonably possible as at the reporting date. This analysis assumes that all othervariables, in particular interest rates, remain constant and ignores any impact offorecasted contributions and expenditures.
(United States dollars)

Surplus/(deficit)
Strengthening of United States dollar
by 10 per cent

Weakening of United States dollar by
10 per centJapanese yen(24,007)

29,342

Total(24,007)

29,242As at 31 December 2016

Surplus/(deficit)
Strengthening of United States dollar
by 10 per cent

Weakening of United States dollar by
10 per centJapanese yen(11,157)

13,636

Total(11,157)

13,636As at 31 December 2017

13. The information presented above is calculated by reference to carrying
amounts of assets and liabilities.
Sensitivity analysis: interest rates
14.

The exposure of ITTO to interest rates is not material.

Note 23
Capital management
1.
ITTO defines the capital as the aggregate of its net assets, which comprises
accumulated surpluses and reserve balances. ITTO does not have any long-termborrowings and its Financial Rules and Procedures prohibit ITTO from borrowing
funds for the Administrative Account.
2.
Except for unrestricted accumulated surplus, the utilization by ITTO of net
assets requires a Council decision or termination of commitments. Unrestrictedaccumulated surplus are composed by:(a) Interest earned on funds in the Administrative Account usable by the Executive
Director to hire on a temporary and intermittent basis, consultants andcontractors to support the Secretariat in carrying out its duties; and(b) Programme Support within the Project Account usable to defray the expenses
of administration of projects, pre-projects, and other activities of the

CFA(XXXIII)/6
Page 42

Organization approved by the Council. Such administrative expenses shallcomprise bank charges, project-related communication costs, the remunerationof project administration staff, and other expenses related to project
administration.
3.
The Executive Director shall notify the Council if the amount of the Working
Capital Reserve falls below 15% or approximately two months of annual operating
expenses of the Administrative Budget. Working Capital Reserve is part of therestricted accumulated surplus and amount to $4,156,724 at the end of 2017 and$4,148,130 at the end of 2016.
Note 24
Commitments
ITTO had no open purchase orders at the end of the reporting period.
Long-term agreements
ITTO is not part of any long term agreement.
Ongoing projects and activities
Restricted accumulated surplus are partially composed by funds allocated to ongoingprojects. While no obligation is attached to the related assets recognized initially,
ITTO has commitments for both Thematic Programme ongoing projects and theFellowship Programme, as follows:(United States dollars)

T hematic Programme

Fellowship Programme

Balance as of 31 December 2015

3,037,160

441,914

Reduction of commitments as per Decision 6 (LII)(965,923)(347,956)-

266,234

Expenses of 2016

(784,017)(83,886)

Balance as of 31 De ce mbe r 2016

1,287,220

276,305

8,285

-

-

66,781

Revenue from pledges

Amendment to commitments
Revenue from pledges
T ransfer to the Ex-post pooled fund(32,808)

Expenses of 2017

(955,215)(56,071)

307,482

287,016

Balance as of 31 De ce mbe r 2017

CFA(XXXIII)/6
Page 43

Note 25
Contingencies
Contingent assets
At the Fifty-third Council Session on 2 December 2017, the Government ofGermany indicated that they are in the process of completing administrative
procedures for the pledge of $1,000,000 to finance Activity no.4 of the ITTO
Biennial Work Programme 2018-2019: Enhancing Teak Management.
Contingent liabilities
ITTO has no pending litigation representing a financial risk for the organization.
Note 26
Related parties
Key management personnel
1.
The leadership structure of ITTO consists of the Executive Director and theAssistant Directors of each division, including those who substitute these positions
as Officer-in-charge.
There are no close family members of key management personnel employed by
ITTO nor have there been any transactions made with them by ITTO during thereporting period.
Costs of Key management(United States dollars)

2017

2016

Remuneration

690,320753,662

Other Entitlements

204,465

114,763

Long-term Benefits

165,025

181,414

1,059,811

1,049,838

Total

2.
The remuneration paid to key management personnel includes salary, post
adjustment, dependency allowances, medical and social insurance and otherentitlements such as educations grants.
3.
Key management personnel are also eligible for post-employment employee
benefits such as pension defined contributions plan, repatriation and home leave
benefits and payment of unused annual leave. The total amount of defined
contribution plan expenses for pension schemes for key management personnel was$144,692 for 2017 and $116,171 for 2016.
4.
There were no loans or advances granted to key management personnel during
the reporting period.
Note 27
Events after the reporting dateNo significant adjusting or non-adjusting event occurred between the closing date of
31 December 2017 and the date of this report.