INTERNATIONAL TROPICALTIMBER COUNCIL

Distr.
GENERALCOMMITTEE ON
FINANCE AND ADMINISTRATIONCFA(XXXII)/6
30 June 2017
ENGLISH ONLY

THIRTY-SECOND SESSION
27 November – 2 December 2017
Lima, Peru

FINANCIAL 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 2016
prepared by the ITTO Management ...........................................................................................

i

ITTO’s Financial Statements for the year ended 31 December 2016
audited by the Independent Auditors ..........................................................................................

1

CFA(XXXII)/6
Page i

Executive Summary of ITTO’s Financial Statements
for the year ended 31 December 2016

prepared by the ITTO ManagementCFA(XXXII)/6
Page ii

CFA(XXXII)/6
Page iii

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 2016 (FY2016). Dueto the impairment of investments amounting to $18 million, ITTO had a deficiency in funds available to meet its
financial obligations at the beginning of FY2016. However, due to Council Decisions adopted in November
2016 to address the financial shortfall, ITTO was able to reorganize its finances in order to regain sufficientlevels of funds to fully meet its financial obligations and resume its regular operations by the end of FY2016.
Additional measures to strengthen internal control and accountability were implemented at the same timethrough revised Financial Rules and Procedures, and the adoption of International Public Sector AccountingStandards (IPSAS).
For ITTO’s Project accounts in FY2016, new voluntary contribution pledges of $5.4 million were reported while
total project cost expenses during this period were $6.3 million from projects mostly funded prior to FY2016.
Total Administrative Account assessed contribution revenues were $7.4 million, of which $0.8 million were notreceived in cash during FY2016 and accounted for as assessed con tributions receivable (arrears).
In accordance with the revised Financial Rules and Procedures, ITTO has adopted IPSAS as its standard for
preparing its financial statements. As a result, the following changes, among others, in reporting have been
made compared to prior years:
1. Reclassification of liability and net asset items were made in accordance with their obligations. A
total of $3.2 million were moved from liability to net asset, and an amount of $16.9 million from net
asset to liability. Project funds received in advance from donors are now sho wn as a liability toreflect ITTO’s obligation to donors.
2. $4.8 million of assessed contributions receivable (arrears) were written -off based on ageing. It should
be noted that this is only an accounting treatment to re-evaluate the value of the receivables as an
asset and does not free members from their legal obligations to pay arrears.
3. Employee benefits, such as, annual leave, home leave and repatriation benefits, which ITTO has an
obligation to provide to its staff, are now recognized as a liability. The amount of the allowance for
FY2016 was $0.8 million.
4. A budget comparison table has been added to the financial statements comparing the Administrative
budget with actual amounts, which are explained in detail in its corresponding notes.
In November 2016, Council adopted Decision 6(LII) in order to address ITTO’s financial shortfall, whichamounted to $18 million at the time due to impairments in investment made by former management. The
Decision allowed the write-off of $5.3 million in project-related obligations and the reclassification of $12.7
million of funds from various sources, which combined allowed ITTO to bridge the gap created from theimpairment. As a result, there are no more negative net asset items in the financial statements and ITTO is now
able to fully meet its financial obligations.
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 beemphasized through regular reporting from ITTO and adequate oversight from Council members.

CFA(XXXII)/6
Page iv

CFA(XXXII)/6
Page 1

ITTO’s Financial Statements
for the year ended 31 December 2016

audited by the Independent Auditors

CFA(XXXII)/6
Page 2

CFA(XXXII)/6
Page 3

Contents
ChapterI.

Page

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

5

II. Financial statements for the year ended 31 December 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . .

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 2016 financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

CFA(XXXII)/6
Page 4

CFA(XXXII)/6
Page 5Chapter I

CFA(XXXII)/6
Page 6

CFA(XXXII)/6
Page 7

Chapter II
Financial statements for the year ended 31 December 2016
International Tropical Timber Organization
I. Statement of financial position as at 31 December(United States dollars)

Reference

31 December 201631 December 2015
(restated)

19,661,535

20,018,577

AssetsCurrent assets
Cash and cash equivalents

Note 6

Investments

Note 7--

Assessed and voluntary contributions receivable

Note 8

1,936,461

1,412,681

Other accounts receivable

Note 866,741

205,594

Advance transfers - Projects

Note 9614,170

2,202,483

Advance transfers - Others

Note 10

176,226

170,220

Total current assets

22,455,134

24,009,555

Total assets

22,455,134

24,009,555

41,038122,423

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

Note 11

381,563

579,849

Voluntary contributions advance receipts - allocatedNote 127,884,439

10,466,258

Voluntary contributions advance receipts - unallocatedNote 13522,392

2,501,023

Assessed contributions advance receipts

Note 14

Total current liabilities

500,040

46,7059,329,472

13,716,258

Non-current liabilities
Accounts payable - Others

Note 11

813,420

847,837

Voluntary contributions advance receipts - allocatedNote 124,461,310

7,894,400

Total non-current liabilities

5,274,730

8,742,237

Total liabilities

14,604,203

22,458,495

Net of total assets and total liabilities

7,850,931

1,551,060

Net assets
Accumulated surplus - Restricted

Note 155,720,974

13,476,609

Accumulated surplus - Unrestricted

Note 15

279,957(13,425,549)

Reserves

Note 151,850,000

1,500,000

7,850,931

1,551,060

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

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

Reference

2016

Assessed contributions

Note 16

7,445,429

Other voluntary contributions

Note 16

1,492,454

Financial revenue

Note 17

15,470

Revenue
Administrative Account

Other income

1,637

Project AccountMember States voluntary contributions

Note 16

5,223,502

Other voluntary contributions

Note 16

5,331,013

Programme support Revenue

Note 16

524,727

Financial revenue

Note 17

Total revenue

7,711
20,041,944

Expenses
Administrative AccountEmployee benefits

Note 18

4,298,697

Other operating expenses

Note 19

3,114,974

Note 20

6,328,401

Project AccountProject expenses
Total expenses

13,742,073

Surplus/(deficit) for the year

6,299,871

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

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

Net assets

Restated net assets as at 31 December 2015 (Note 15)

1,551,060

Changes in net assets
Surplus for the year

Net assets as at 31 December 2016 (Note 15)
The accompanying notes are an integral part of the financial statements.

6,299,871

7,850,931

CFA(XXXII)/6
Page 10

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

Reference

Cash flows from operating activities
Surplus for the year2016

6,299,871

Non-cash movements
Increase in allowance for doubtful receivables

Notes 8and 19268,961(Increase) in Assessed contributions receivable

Note 8(385,775)(Increase) in Voluntary contributions receivable

Note 8(406,966)

Decrease in Other accounts receivable

Note 8138,853

Decrease in Advance transfers - Projects

Note 91,588,313(Increase) in Advance transfers - Others

Note 10(6,006)

Changes in assets

Changes in liabilities(Decrease) in Accounts payable - Member States(Decrease) in Accounts payable - Others(Decrease) in Voluntary contributions advance receipts - allocated(Decrease) in Voluntary contributions advance receipts unallocatedIncrease in Assessed contributions advance receipts(81,385)
Note 11(232,703)

Note 12(6,014,909)

Note 13
Note 14(1,978,631)
453,335

Net cash flows from operating activities(357,042)

Net (Decrease) in cash and cash equivalents(357,042)

Cash and cash equivalents — beginning of year

Note 620,018,577

Cash and cash equivalents — end of year

Note 6

19,661,535

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

CFA(XXXII)/6
Page 11

International Tropical Timber Organization
V. Statement of comparison of budget to actual amounts for the year ended 31 December 2016
(United States dollars)

Budget Heading

Note

Original
budgetFinalbudgetActual on

Differencecomparable

between final

basicsand actual

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

Note 5Note 5Note 5Note 5Note 5

Total

Budget Heading

Note

4,264,775
292,387
134,029
1,033,990
108,378
106,202343,940
207,9214,264,775
292,387
134,029
1,033,990
108,378
106,202343,940
207,921

3,358,263
134,029
683,477
34,169101,027
229,218
207,494

906,512292,387
350,513
74,2095,175
114,722427

6,491,622

6,491,622

4,747,677

1,743,945

Original
budgetFinalbudgetActual on

Differencecomparable

between final

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

Note 5

428,675

428,675

372,025

56,650Note 5140,000

140,000

47,02992,971----

Note 5302,000

302,000

230,440

71,560Note 570,00070,00056,12013,880940,675

940,675

705,614235,061

7,432,297

7,432,297

5,453,292

1,979,006

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

CFA(XXXII)/6
Page 12International Tropical Timber Organization
Notes to the 2016 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 (“the Agreement”).
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 adopt s 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). These are the Organization’s first
financial statements prepared in accordance with IPSAS and certain transitional
provisions, as detailed in note 3, have been applied.
The financial statements were authorised for issue by the Executive Director on
30 June 2017.
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.

CFA(XXXII)/6
Page 13

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.
As permitted by IPSAS 1, comparative information is not provided, with the
exception of opening balances for the statement of financial position.
3.
These financial statements are expressed in United States dollars unlessotherwise indicated.
4.
In November 2016, the proposals by the management to execute termination
and/or downsizing of some of the ongoing projects were duly adopted throughDecision 6 (LII) (please also refer to note 16) and as a result, the uncertainty thatmight cease ITTO’s ability to continue at the same level of operations waseliminated.

Initial adoption of International Public Sector Accounting Standards (IPSAS)
5.
Prior to 1 January 2016, ITTO prepared its financial statements based on its
previous accounting principles that were modified cash basis. Th e conversion to
IPSAS (full accrual basis) from 2016 has resulted in significant changes in the typeand measurement of assets, liabilities, revenue and expenses recognized.
6.
The following table shows the adjustments made to audited ITTO member’s
funds under ITTO accounting principles as at 31 December 2015 to its IPSAS
opening net assets as at 1 January 2016. IPSAS requires that initial financial
statements under the new standards reflect its financial position as if IPSAS had
always been applied, with any differences upon transition eliminated through net
assets.
Reconciliation of previously published net assets under previous accounting
principles (modified cash basis) with IPSAS nets assets as at 31 December 2015.
(United States dollars)Member's funds under former accounting principles (published)

12,624,261

IPSAS reclassifications
Arrears in assessed contributions reclassification to assets
Programme support funds reclassification from liabilities
Accumulated surplus reclassification from liabilities
Unallocated contributions advances reclassification to liabilities

6,190,322
1,337,230
1,900,974(1,965,759)

Voluntary contributions with obligations attached deferred
Expenses related to ongoing projects deferred
Allowances for arrears
Accrued employee benefits
Accrued other operating expenses
Provision for onerous contracts(14,941,026)
2,202,483(4,777,641)(843,115)(37,793)(138,876)

IPSAS adjustments

Opening net assets under IPSAS as at 1 January 2016

1,551,060

CFA(XXXII)/6
Page 14B.

Foreign currency translation

Functional and presentation currency
7.
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 balances
8.
Foreign currency transactions are translated into United States dollars at theprevailing United Nations operational rate of exchange at the time of the tra nsaction.
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

9.
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, liabil ities,
revenue and expenses. Since uncertainty is inherent in the use of estimates andassumptions, actual results may differ significantly from management estimates.
10. 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.
11. Information about critical judgments in applying accountin g 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
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);

CFA(XXXII)/6
Page 15(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 2016, 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.
12. 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

13. No recent IPSAS development has been identified which would have asignificant impact on the financial statements of ITTO in the future, considering its
current and foreseen operations.
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

Cash and cash equivalents (with original
maturities of 3 months or less)

Loans and receivables

Contributions and other accounts receivable

Loans and receivables

Prepaid expenses and accrued revenue

Loans and receivables

2. ITTO initially recognizes loans and receivables on the date that they originated.
All other financial assets are recognized initially on the trade date, which is 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.

CFA(XXXII)/6
Page 16

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.
Prepaid expenses are issued where agreements with ITTO and the supplier orservice provider requires payment up front. Prepaid expenses are recorded as acurrent asset until goods and/or services associated with the prepaid expenses aredelivered, at which point the expense is recognized and the prepaid expense isreduced by a corresponding amount.
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.
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.

CFA(XXXII)/6
Page 17

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, it is not required to recognize and/or measure asset s
for reporting periods beginning on a date within three years.

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 as to be liquidated within one year. The amounts paid
to executing agencies are always the contribution amount received from the donors,
hence the financial risks on the advance receipts are considered remote.
Employee benefits
18.

ITTO recognizes the following categories of employee benefits:(a)Short-term employee benefits;(b)Post-employment benefits;(c)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 e mployees 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 pr ovides 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

CFA(XXXII)/6
Page 18

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 defined contribution 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. Termination benefits, if settled within 12 months, are reported at theamount expected to be paid; otherwise, they are reported at present value of theestimated future cash outflows. No termination benefit was recognized at the
beginning nor the end of 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 2016, ITTO has
not been part of any finance lease transaction.
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.

CFA(XXXII)/6
Page 19

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 thestatement of 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, inventory or enforceable
rights to such) are received by ITTO with no or nominal consideration provided
directly in return to the donor. The resources are to be applied towards advancing
the Organization’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.
Voluntary contributions
34. Voluntary contributions are non-exchange transactions, which means that
resources (such as cash, items of property and equipment, inventory or enforceable
rights to such) are received by ITTO with no or nominal consideration provided
directly in return to the donor. The resources are to be applied towards advancing
the Organization’s mission.

CFA(XXXII)/6
Page 20

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 receiva ble 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:(a) Returns of unused funds to donors, transfer of unused funds to regular
resources, transfer of unused funds to other resources and write -downs ofreceivables that are no longer enforceable by ITTO following the expiry or
termination of contribution agreements;(b) Realized gains and losses on foreign exchange as ITTO does not assume
the risk of foreign exchange on contribution revenue.
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

CFA(XXXII)/6
Page 21

enforceable, the asset and related revenue are recognized consistent with therevenue recognition policy for voluntary contributions referred to above. Until thattime, the pledges 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 2016, 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
be delivered in the ordinary course of operations;(c)Cash transfers;(d)Other non-cancellable commitments.

ITTO does not have any non-cancellable lease agreements.

CFA(XXXII)/6
Page 22

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.

Segment reporting
50. ITTO has no requirement for segment reporting as it does not have multiple
operating 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.
(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.

CFA(XXXII)/6
Page 23

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) Senior-level positions including the Executive Director, Assistant
Director of division of operations, financial and administrative officer and projects
manager were left unfilled during the majority the reporting period.
(b)

No personnel were recruited during the reporting period.

(c) Certain activities such as the Expert Panel, statistical services,dissemination of publications and workshops were scaled down due to theuncertainty surrounding ITTO’s financial situation arising from the financial
impairment.
(d) Assessed contributions amounting to approximately $800,000 were notreceived during the reporting period, which had an influence on management’s
decision regarding budget spending.
The table below presents the reconciliation of actual budget amounts on acomparable basis in the statement of comparison of budget and actual amounts andthe actual amounts in the statement of cash flows.
(United States dollars)

Budget actual for year 2016

5,453,292

2017 expenses budgeted for Council held outside of host country(200,000)

Working capital reserve expenses in accordance with Council decisions

358,941

Expenses not part of the budget reimbursed by host country

797,009

Donated right to use premises

695,445

Revenue from non-exchange transactions
Project expenses
Other differences in statement of financial performance(20,041,944)
6,328,401
40,024

Changes in assets (from cash flow statement)(928,417)

Changes in liabilities (from cash flow statement)

7,854,292

Net cash flows from operating activities

357,042

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(XXXII)/6
Page 24Note 7
Investments(United States dollars)

Breakdown of Investments

2016

2015

Securities

12,014,000

12,014,000

Total non-current investments

12,014,000

12,014,000(12,014,000)(12,014,000)--

Non-current investments

Provision for Impairment on security
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)Member States
Administrative accountBalance as of 31 December 2015

6,215,042

Assessed Contribution for 2016

7,445,429

Allowance for doubtful
assessed contributions
receivable(4,802,361)

Total assessed
contributions
receivable
1,412,681
7,445,429

Receipt(7,012,949)(7,012,949)-

Advance Receipt Reclassification
Increase of Allowance for doubtful
assessed contributions receivable
Balance as of 31 December 2016

(46,705)(46,705)-(268,961)(268,961)

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

1,529,495

CFA(XXXII)/6
Page 25

Voluntary contributions: receivables from non-exchange transactions(United States dollars)Special accounts
Allowance for
doubtful voluntary
contributions
receivable

Member States
Balance as of 31 December 2015-

Total voluntary
contributions
receivable--

Pledged in 2016

5,433,894

5,433,894

Cash-inReclassification from Donor's poolfunds

(3,005,077)(3,005,077)(2,328,817)(2,328,817)

Balance as of 31 December 2016

100,000-

100,000

Administrative accountAllowance for
doubtful voluntary
contributions
receivable

Member States
Balance as of 31 December 2015-

Total voluntary
contributions
receivable--

Claims506,966

506,966

Cash-in(200,000)(200,000)

Balance as of 31 December 2016

306,966-

306,966

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.

CFA(XXXII)/6
Page 26

Note 9Advance transfers - Projects
Prepaid expenses(United States dollars)

Category

31 December 31 December
2016
2015

Reforestation and Forest Management

501,081

1,434,318

Economics, Statistics and Market

94,160649,219

Forest Industry

18,929118,946--

614,170

2,202,483

Activities
Total prepaid expenses by type

Reconciliation of prepaid expenses balances(United States dollars)

Prepaid expenses as at 31 December 2015

2,202,483

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

Termination of ongoing projects (Decision 6 (LII))(460,801)

Expenses paid in 2016

4,755,924

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

Prepaid expenses as at 31 December 2016

614,170

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.
Note 10
Advance transfers – Others(United States dollars)

Breakdown of Advance transfers – Others

2016

2015

Prepaid expenses - staff

129,902134,562

Prepaid expenses - others

46,32435,658

Total

176,226

170,220

Note 11
Accounts payable - Others(United States dollars)

Breakdown of Accounts payable - Others

2016

2015

Other accounts payable

4,250

10,089

Employee benefits accrued liabilities

971,536

952,722

Other accrued liabilities
Total

219,197

464,875

1,194,983

1,427,686

CFA(XXXII)/6
Page 27

Employee benefits liabilities breakdown(United States dollars)

2016

2015

Home leave

35,01584,891

Accrued salaries and allowances

80,02527,423

Accrued social securities

81,482

82,184

Total current employee benefits liabilities

196,522

194,498

Home leave

38,37913,781

Repatriation benefits

299,932

333,459

Annual Leave

436,703410,984

Total non-current employee benefits liabilities

775,014758,223

Total employee benefits liabilities

971,536

952,722

Current employee benefits liabilities

Non-current employee benefits liabilities

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

Category

2016

2015

Reforestation and Forest Management (F)8,391,381

10,902,032

Economics, Statistics and Markets (M)992,250

1,403,863

Forest Industry (I)892,201

1,365,672

2,069,917

4,689,091

12,345,749

18,360,658

Activities (A)Total deferred revenue by category

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)

Transfers to other liabilities-330,706

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

Deferred revenue as at 31 December 2016

12,345,750

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(XXXII)/6
Page 28

Detail of projects with balance as of 31 December 2016
(United States dollars)

Project ID

Category

PD 419/06 Rev.3 (F)EXT.TICAD
PD 452/07 Rev.5 (F)PD 454/07 Rev.3 (F)PD 456/07 Rev.4 (F)-JICA E/N
PD 456/07 Rev.4 (F) Non-JICA
PD 470/07 Rev.1 (F)PD 477/07 Rev.4 (F)PD 495/08 Rev.4 (F)PD 507/08 Rev.1 (F)PD 552/09 Rev.1 (F)PD 563/09 Rev.5 (F)PD 577/10 Rev.1 (F)PD 599/11 Rev.1 (M)PD 600/11 Rev.1 (I)PD 601/11 Rev.3 (F)PD 602/11 Rev.3 (F)PD 617/11 Rev.1 (F)PD 620/11 Rev.1 (M)PD 635/12 Rev.2 (F)PD 646/12 Rev.3 (F)PD 668/12 Rev.1 (F)PD 682/13 Rev.1 (F)PD 692/13 Rev.1 (M)PD 696/13 Rev.2 (F)PD 710/13 Rev.1 (F)PD 721/13 Rev.3 (F)PD 723/13 Rev.2(F) Ph.I St.1
PD 725/13 Rev.2 (F)PD 732/14 Rev.2 (M)PD 737/14 Rev.2 (I)PD 740/14 Rev.2 (F)PD 741/14 Rev.3 (F)PD 751/14 Rev.2 (M)PD 754/14 Rev.3 (F)PD 756/14 Rev.1 (M)PD 764/14 Rev.3 (F)PD 765/14 Rev.2 (F) Ph.I
PD 770/15 Rev.1 (I)PD 777/15 Rev.3 (F)PP-A/47-266: ITTO/CBD-ACTO
PP-A/48-274 Int’l C&I Meetings
PP-A/49-291 BWP25b IMM(EU)PP-A/50-297 BWP2 Gender Equity
PP-A/50-304 BWP TAG&CSAG’15-16
PP-A/50-305 BWP27 CPF
PP-A/50-308 BWP33 ITTO & WCO
PP-A/52-315 BWP15-16/4 SFM Guideline
PP-A/52-316 BWP15-16/10 Mangrove
PP-A/52-317 JFIWA Consultancy

F
F
F
F
F
F
F
F
F
F
F
F
M
I
F
F
F
M
F
F
F
F
M
F
F
F
F
F
M
I
F
F
M
F
M
F
F
I
F
A
A
A
A
A
A
A
A
A
A

ITTO
Budget1,800,000
556,963484,422
3,297,355
545,962
206,577
332,477
477,602385,800
615,676
334,000
2,051,039
490,624
532,525
467,839
333,067
899,4112,046,092
496,247
427,210603,383
145,715
264,704
290,346
439,796
440,873
140,000
139,361
321,138
589,863441,842
437,478130,000
541,031
137,643
606,313250,000
196,224
515,590
1,193,040
99,420856,680
30,00070,40260,000223,280
59,032200,000
20,438

Expenses
802,9460243,396
1,948,383
244,509
13,161
84,124367,949
305,130
370,611308,151
1,884,074
95,912
302,401
232,647
222,473504,571
1,873,597
354,393
35,135289,359
110,000
109,179
69,214
108,1450053,2800091,00000040,053000
0208,21735,724
560,501
10,000160
29,19180,000009,037Programme
support
192,857
70,35338,039288,199
015,52425,05636,48829,356
41,844
24,643
151,929
36,88439,78636,762
25,956
100,881
153,561
38,33046,62747,52916,044
24,42733,276
51,42647,23615,00016,00834,40863,20051,942
46,872
13,92957,96816,001
51,886
16,07021,02455,242
97,79415,0020
2,609
15,652
4,565
29,495
7,699
26,086
3,463

Advancereceipts(804,197)(486,610)(202,987)(1,060,773)(301,453)(177,892)(223,297)(73,165)(51,314)(203,221)(1,206)(15,036)(357,828)(190,338)(198,430)(84,638)(293,959)(18,934)(103,524)(345,448)(266,495)(19,671)(131,098)(187,857)(280,225)(393,637)(125,000)(70,073)(286,730)(526,663)(298,900)(390,606)(116,071)(483,063)(81,589)(554,427)(233,930)(175,200)(460,348)(887,029)(48,694)(296,179)(17,391)(54,589)(26,244)(113,785)(51,333)(173,914)(7,938)Advancetransfers
307,3380028,800065,000
5,614
0
0
0
0
0
82,57718,9290000044,9020
0
4,952
46,768
0
0
0
0
0
0
2,661
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0

CFA(XXXII)/6
Page 29

PP-A/52-318 BWP15-16 19b Outreach
PP-A/52-320 : CITES (non-EU)

A
A

ITTO
Budget15,000440,373

Thematic programme projects
RED-PD 029/09 Rev.1 (F)TMT-SPD 010/12 Rev.1 (M)
TMT-SPD 014/13 Rev.1 (M)
TFL-PD 032/13 Rev.2 (M)TFL-PD 033/13 Rev.2 (M)TFL-PD 037/13 Rev.2 (M)TFL-PD 044/13 Rev.2 (M)
TMT-SPD 017/15 Rev.2 (M)
TMT-SPD 020/15 (M)
TMT-SPD 023/15 R.1(M)Recognized as net assets

F
M
M
M
M
M
M
M
M
M

1,080,187
138,033
136,640
431,513478,798
502,464
405,968
149,997
113,400
150,000

779,133
70,000103,089
206,224
306,369
150,037
113,447
80,00072,421
76,886

83,317
10,225
14,64048,93053,13055,58944,202
16,0710
16,071(217,738)(57,808)(18,911)(176,359)(119,299)(296,838)(248,319)(53,926)(40,979)(57,043)
1,287,220

0
0
0
703
0
0
0
0
979
4,950

Fellowship programme
PP-A/52-319 FFF/up to15A
PP-A/52-319 FFF/16A
PP-A/52-319 FFF/17S
Recognized as net assets

AA
A

85,00060,000206,234

25,2893,825
00045,814(59,711)(56,175)(160,420)
276,30500030,618,085

14,043,938

2,664,873(12,345,749)

614,170

Project ID

Total

Category

8,000
52,596

Programme
support1,956
0Advancereceipts(5,044)(387,777)

Expenses

Note 13
Voluntary contributions advance receipts - unallocated
The amounts in Voluntary contributions advance receipts – unallocated correspondto funds pending reimbursement to donors and significantly decreased in 2016 dueto the Decision 6 (LII).

Note 14
Assessed contributions advance receipts
Those amounts correspond to assessed contributions, related to 2017 budget, thatwere received before the end of 2016.

Advancetransfers00CFA(XXXII)/6
Page 30

Note 15
Net assets
Reconciliation of net assets balances(United States dollars)

Reserves
31 December 2015

Restricted accumulated
surplus1,500,000

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

350,000(8,759,725)

8,409,725

0

1,004,091

5,295,781

1,850,000

5,720,974

279,957

Reclassification following
Decision 6(LII)
Result of the accounting period
31 December 2016

Breakdown of net assets

2016
Reserves

Funds provided
by interest income
Thematic programme
funds allocated to projects
Funds allocated to
Fellowship programme
Funds allocated to
expost evaluation
Working Capital reserve
Thematic programme
funds unallocated
Unearmarked funds
unallocatedProgramme support funds
Reserve provided
by interest income
Impairment loss

Unrestricted accumulated
surplus2015

Restrictedaccumulated
surplus

Unrestrictedaccumulated
surplusReserves

Restrictedaccumulated
surplus163

2,306,874

1,287,220

3,037,160

276,305441,914

Unrestrictedaccumulated
surplus854,228
4,157,286

6,836,432
892,443
513,242
90,0791,280,056

189,877

1,870,256(17,981,546)

Special reserve

1,850,000

Total

1,850,000

1,500,000
5,720,974

279,956

1,500,000

13,476,609

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, t his reserve is set
aside to meet obligations towards the staff members of the Organization, arising in
the event that ITTO ceases to exist, such as termination indemnities, repatriation
travel and removal costs, and repatriation grants.

(13,425,549)

CFA(XXXII)/6
Page 31

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

Breakdown of revenue

2016

Contributions from members countries
Member countries

7,445,429

Total Assessed contributions

7,445,429

Reimbursement by Japan

797,009

Voluntary in-kind contributions
Japan695,445

Total voluntary contributions

1,492,454

Total Assessed and Voluntary Contributions

8,937,883

Assessed Contribution receivable

1,529,495

Voluntary Contribution receivable

306,966

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 valued at$695,445.
Special account; Revenue from Voluntary Contributions(United States dollars)

Breakdown of revenue

2016

Contributions from members countries
Member countries

5,223,502

Total Voluntary Contributions

5,223,502

Voluntary in-kind contributions
Total voluntary in-kind contributions-

Revenue from Decision 6 (LII)

5,331,013

Programme Support Revenue

524,727

Total voluntary contributions

11,079,242

Voluntary Contribution receivable

100,000

Prepaid expenses - Project

614,170

Advance receipts

12,345,749

CFA(XXXII)/6
Page 32(United States dollars)

Category
Reforestation and Forest Management

2016
2,999,488

Economics, Statistics and Markets

610,658

Forest Industry

647,669

Activities

965,687

Total voluntary contribution by type

5,223,502

Decision 6 (LII) revenue
Revenue from Decision 6 (LII) corresponds to the termination of project obligations
and amount to $5,332,337. This decision, adopted by the Council in November 2016,brought ITTO’s commitments to a level that matched its available resources (pleasealso 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)Termination 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 compensated

17,981,986

Reconciliation between pledges and revenue(United States dollars)

Pledges announced at the Council Session in 2016
Adjustments to pledges

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

Liabilities recognized for obligations attached to pledges
Revenue recognized from ongoing projects
Other adjustments(4,637,669)
4,845,518
106,487
5,748,229

Programme support revenue
Member States voluntary contributions

524,727
5,223,502

Note 17
Financial revenue
ITTO generates interest revenue from bank accounts. Interest revenue for 2016 is$23,181.

CFA(XXXII)/6
Page 33

Note 18
Administrative account; Employee benefits expenses(United States dollars)

Breakdown of employee benefits expenses

2016

Salaries and benefits

3,615,220

Social security

683,477

Total employee benefits expenses

4,298,697

The total amount of defined contribution plan expenses for pension schemes amount
to $466,326 for the reporting period.
Note 19
Other operating expenses(United States dollars)

Breakdown of other operating expenses

2016

Official travel

130,585

Special activities

70,018

Data processing

101,027

Other costs

229,218

Council meetings

514,460

Expert meetings

47,029Communication and outreach

372,025

Statistics, Studies and information

230,440

Annual Report and Biennial review

56,120Exchange loss

40,704

Allowance expense for debt

268,961

Services received through in-kind contributions

695,445

Working capital reserve expenses in accordance with Council decisions

358,941

Total other expenses

3,114,974

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 net losses

9,165

34,471

43,637

CFA(XXXII)/6
Page 34

Note 20
Project expenses(United States dollars)

Category

2016

Transfers to executing agencies
Reforestation and Forest Management

3,087,736

Economics, Statistics and Markets

1,199,205

Forest Industry

647,669

Activities

784,075

Programme support expenses

531,991

Ex-post Expenses

74,793

Exchange loss

2,933

Total by type6,328,401

Transfers to executing agencies correspond to the expenses incurred during theaccounting period of 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 value through surplus
or deficit

Breakdown of financial assets

Loans andreceivables

Total fair value

Designated assuch upon
Availableinitialfor-salerecognition

Total carrying
value

2016

2015

Assessed and voluntary
contributions receivable

1,936,461--

1,936,461

1,936,461

1,412,681

Other accounts receivable

66,741--

66,741

66,741

205,594

2,003,202

2,003,202

1,618,275

Total financial assets

2,003,202

CFA(XXXII)/6
Page 35

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)

Total fair value
Breakdown offinancial liabilities

Other financial
liabilities(amortized cost)

Total carrying
value

2016

2015

Accounts payable Member States

41,03841,03841,038122,423

Accounts payable Others

1,194,983

1,194,983

1,194,983

1,427,686

Voluntarycontributions
advance receipts allocated

12,345,749

12,345,749

12,345,749

18,360,658

Voluntarycontributions advancereceipts - unallocated522,392

522,392

522,392

2,501,023

Assessedcontributions
advance receipts

500,040

500,040

500,040

46,705

14,604,203

14,604,203

14,604,203

22,458,495

Total
financial liabilities

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 observab lemarket 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.

CFA(XXXII)/6
Page 36

Note 22
Financial risk management
Exposure to credit risk
1.
Credit risk is the risk of financial loss to ITTO if a donor, customer or othercounterparty to a financial instrument fails to meet its contractual obligations.
Credit risk arises principally from cash and cash equivalents, investments,
receivables from contributions 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)

Assessedcontributions
receivables
Voluntarycontributions
receivables
Allowance
Net Total

0 to 1 year

>1 to 2
years

Over 2
years

817,656

627,250

406,966

2016

2015

5,155,911

6,600,817

6,215,042--

406,966--(125,450)(4,945,872)(5,071,322)(4,802,361)

1,224,622

501,800

210,039

1,936,461

1,412,681

CFA(XXXII)/6
Page 37

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

Overdue

0-3months3-6months6-12monthsMorethan 1year

0-3
months3-6months6-12monthsMorethan 1year

2016 total
carryingvalue

2015 total
carrying
value

Accrued expenses

12,802

12,80225,60438,406––––

89,613

138,876

Total

12,802

12,80225,60438,406––––

89,613

138,8768.

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: employee benefits are mainly made in Japaneseyen;(b) Regarding assets and liabilities: as at 31 December 2016 assets liabilities
in currencies other than United States are as follows.

CFA(XXXII)/6
Page 38

Summary of currency positions(United States dollars)

United States dollar

Yen (converted)

2016

2015

Cash and cash equivalents
Assessed and voluntary
contributions receivable
Other accounts receivable

19,369,555

291,980

19,661,535

20,018,577

1,936,461-

1,936,461

1,412,681

5,034

61,707

66,741

205,594

Advance transfers - Projects

614,170-

614,170

2,202,483

Advance transfers - Others

176,226-

176,226

170,220

22,101,447

353,687

22,455,134

24,009,555

41,038-41,038122,423

1,105,370

89,613

1,194,983

1,427,686

12,345,749-

12,345,749

18,360,658

500,040-

500,040

46,705522,392-

522,392

2,501,023

14,514,589

89,613

14,604,202

22,458,495

7,586,858

264,074

7,850,932

1,551,060

Total financial assets
Accounts payable - Member
States
Accounts payable - Others
Voluntary contributions
advance receipts - allocated
Assessed contributions
advance receipts
Voluntary contributions
advance receipts unallocatedTotal financial liabilities
Net exposure

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 impa ct offorecasted contributions and expenditures.
(United States dollars)

Surplus/(deficit)
As at 31
December 2016

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)

29,242

13. The information presented above is calculated by reference to carrying
amounts of assets and liabilities as at 31 December 201 6.
Sensitivity analysis: interest rates
14.

The exposure of ITTO to interest rates is not material.

CFA(XXXII)/6
Page 39

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 Special Account usable to defray the expenses
of administration of projects, pre-projects, and other activities of theOrganization 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 $4,148,130 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 net assets are partially composed by funds allocated to ongoing projects.
While no obligation is attached to the related assets recognized initially, ITTO hascommitments for both Thematic Programme ongoing projects and the Fellowship
Programme, as follows:(United States dollars)

Thematic Programme

Fellowship Programme

Balance as of 31 December 2015
Reduction of commitments as per
Decision 6 (LII)
Revenue from pledges

3,037,160

441,914(965,923)(347,956)-

266,234

Expenses of 2016

(784,017)(83,886)

Balance as of 31 December 2016

1,287,220

276,305

CFA(XXXII)/6
Page 40

Note 25
Contingencies
Contingent assets
ITTO has not received pledges prior to concluding contribution agreements, or
pledges subject to approval. ITTO has consequently no contingent assets,corresponding to probable inflow of resources, to disclose.
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. During the year 2016, key management was 3.2 full timeequivalents.
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 for the year of 2016 (3.2 full time equivalents)(United States dollars)

Remuneration

753,662

Other Entitlements

114,763

Long-term Benefits

181,414

Total

1,049,838

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.
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 2016 and the date of this report.

CFA(XXXII)/6
Page 41

Note 28
Detailed ITTO accounts

Information on assets and liabilities by fund type
(United States dollars)Special Account
Administrative
Account

AssetsCash and time deposits
Investments in securities
Arrears in voluntary contributions
Accounts receivable from Japan
Allowance for arrears
Prepaid expenses
Prepaid expenses - Project

Thematic
Programmes
SubaccountProject
Sub-Account

Sub Total

Bali Partnership
Fund AccountExecuting
Agencies

Eliminations/inter-accounttransactions

2016
Total

5,908,689
6,600,817
306,966(5,071,322)
46,324-

13,634,544
100,000
607,539

6,631

13,634,544
100,000
614,170

118,302
(0)
-

-

-

19,661,535
6,700,817
306,966(5,071,322)
46,324614,170

Advances to and receivable from staff members
and others

129,90260,432

2,960

63,392(3,406)--

189,889

Advances to Special Account(8,312)

-

-

-

-

-

8,312

-

-

114,297-

114,297--(114,297)-Inter-account balance
Accrued revenue
Total assets, 2016

6,755
7,919,819(1,281,839)
13,234,973

1,281,840
1,291,431

0
14,526,404

114,896-(105,985)

0
6,755
22,455,134

Total assets, 2015

11,716,854

34,608,080

2,403,664

37,011,745

31,292,702

32,691,774(88,703,520)

24,009,555

Accounts receivable from Bali Partnership Fund
Account

CFA(XXXII)/6
Page 42

Special Account
Administrative
Account

Project
Sub-AccountThematic
Programmes
Subaccount

Sub Total

Bali Partnership
Fund AccountExecuting
Agencies

Eliminations/inter-accounttransactions

2016
Total

Liabilities
Accounts payable to Special Account
Accounts payable to Administrative Account
Accounts payable to staff members and others
Advances payable to JapanAccrued liabilities
Advance receipts
Membership contributions received in advanceReserve for programme support
Unappropriated fundTotal liabilities, 2016

41,0381,190,733
500,040
1,731,811(8,312)
12,345,749
522,392
12,859,829

4,250
4,250

(8,312)
4,250
12,345,749
522,392
12,864,079

114,297
114,297-(114,297)
8,312(105,985)

4,250
41,0381,190,733
12,345,749
500,040
522,392
14,604,203

Total liabilities, 2015

1,510,166

42,974,883

707,847

43,682,730

31,582,260

34,386,858(88,703,520)

22,458,495

Net assets, 1 January 2016

10,206,688(8,366,802)

1,695,817(6,670,986)(289,559)(1,695,084)-

1,551,060

Accumulated surplus
Reserves

4,338,007
1,850,000

375,144-

1,287,181-

1,662,325
-

599
-

-

-

6,000,931
1,850,000

Net assets, 31 December 2016

6,188,007

375,144

1,287,181

1,662,325

599

-

-

7,850,931

Net assets, 31 December 2015

10,206,688(8,366,802)

1,695,817(6,670,986)(289,559)(1,695,084)-

1,551,060

CFA(XXXII)/6
Page 43

Special Account
Administrative
Account

Project
Sub-AccountThematic
Programmes
Subaccount

Sub Total

Bali Partnership
Fund AccountExecuting
Agencies

Eliminations/inter-accounttransactions

2016
Total

Revenue
Contributions from members countries
Reimbursement by Japan
Voluntary contributions
Revenue From Budget cut
Programme support Revenue
Interest income
Other income

7,445,429
797,00915,470697,082

5,132,723
4,567,804
487,322
3,854-(5,263)(32,494)
37,405-

5,127,460
4,535,311
524,727
3,854-

96,042795,703
3,857
-

-

-

7,445,429
797,0095,223,502
5,331,013
524,727
23,181
697,082

Total revenue, 2016

8,954,990

10,191,703(352)

10,191,352

895,602--

20,041,944

Eexpenses
Salaries and benefits
Official travel
Social security
Special activities
Data processing
Other costs
Council meetings
Expert meetings
Communication and outreach
Statistics, Studies and information
Annual Report and Biennial review
Exchange loss
Ex-post Expense
Programme support Expense
Allowance expense for debt
Project cost
Total expenses, 2016

3,615,220
130,585
683,477
428,959
101,027
924,663
514,460
47,029372,025
230,440
56,12040,704
268,961
7,413,671

2,959
74,793517,823
4,866,999
5,462,573(26)
78774,018774,070

2,933
74,793517,901
5,641,017
6,236,644

0
14,091
77,66791,758--3,615,220
130,585
683,477
428,959
101,027
924,663
514,460
47,029372,025
230,440
56,12043,637
74,793531,991
268,961
5,718,684
13,742,073

Gains and (losses), net 2016
Net surplus/(deficit), 2016

1,541,319
1,541,319

4,729,130
4,729,130(774,422)(774,422)

3,954,708
3,954,708

803,844803,844--6,299,871
6,299,871