COBAC Instruction I-2002/01 Modifying the Accounting Plan for Credit Institutions

CENTRAL AFRICAN BANKING COMMISSION

COBAC INSTRUCTION I-2002/01 MODIFYING THE ACCOUNTING PLAN FOR CREDIT INSTITUTIONS

The President of the Central African Banking Commission,

Having regard to COBAC Regulation R-98/01, Having regard to COBAC Regulation R-99/01,

H E R E B Y D E C I D E S:

Article 1.- The modifications set out in Articles 2 to 19 below are made to the Accounting Plan for Credit Institutions.

Article 2.- The sub-account « 151- Subsidies granted for investment purposes » is subdivided as follows: 1511- Subsidies for investment definitively acquired 1512- Other subsidies

Article 3.- The sub-account « 267- Current account advances » is created within the account « 26- Equity investments and fixed assets » of the Accounting Plan for Credit Institutions. Account 267 is subdivided as follows: 2671- Advances constituting the own funds of other credit institutions established in the CEMAC 2672- Other current account advances

Article 4.- The sub-account « 272- Securitised receivables » is subdivided as follows: 2721- Secured receivables 2722- Other receivables

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Article 5.- The sub-account « 321- Commercial bills » is subdivided as follows: 3211- Commercial discounting 3212- Factoring 3213- Documentary discounting

Article 6.- The sub-account « 324- Support credits for public contracts » is subdivided as follows: 3241- Advances on pledged public contracts 3242- Other support credits

Article 7.- The sub-account « 459- Settled operations » is created within the account « 45- Intercompany accounts » of the Accounting Plan for Credit Institutions. Account 459 is subdivided as follows: 4591- Cash management operations 4592- Credit operations 4593- Operating expenses 4594- Operating income 4595- Collection operations 4596- Miscellaneous operations

The commentary on account 45 is supplemented by the following text: Accounts 451 and 452 are used by the entity (head office, branch, or department) that initiates the operation on the intercompany accounts. The entity that settles the operation uses the account « 459- Settled operations » and sends a settlement notice to the initiating entity. Upon receipt of this notice, the initiating entity transfers the operation from the account where it was previously recorded to account 459.

Article 8.- The sub-account « 473- Merchandise inventory » is created within the account « 47- Adjustment accounts » of the Accounting Plan for Credit Institutions. The commentary on account 47 is supplemented by the following text: The use of sub-account 473 is reserved for credit institutions authorized to conduct direct sales, for cash or on credit, of movable property. These institutions must choose either a perpetual inventory system or a periodic inventory system.

Under the perpetual inventory system, account 473 is debited, upon each acquisition, for the purchase cost of the merchandise by crediting account « 40- Suppliers » or a cash account. It is credited:/

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• upon each sale, for the purchase cost of the sold merchandise by debiting account « 6401- Sold inventory »;
• in the event of merchandise write-offs, for the amount of their acquisition cost by debiting account « 6799- Other extraordinary losses ».

Under the periodic inventory system, account 473 is debited, at each periodic closing, by crediting account « 6402- Purchases of merchandise » for the acquisition value of existing stocks on which the institution holds ownership rights. This entry is reversed at the beginning of the following period.

When the purchase cost of held stocks exceeds the probable resale value, the difference gives rise to the establishment of a provision recorded in account « 497- Provisions for inventory depreciation », regardless of the chosen option.

Article 9.- The sub-account « 497- Provisions for inventory depreciation » is created within the account « 49- Provisions for depreciation of other third-party accounts » of the Accounting Plan for Credit Institutions. The commentary on account 49 is supplemented by the following text:

Account 497 receives provisions for inventory depreciation that must be established when the probable resale value is lower than the purchase cost of the stocks. Account 497 is credited for the difference between these two elements by debiting account « 6914- Provisions for depreciation of third-party and adjustment accounts ».

Provision reversals are made by debiting account 497 and crediting account « 7914- Reversals of provisions for depreciation of third-party and adjustment accounts ». They occur:

• in the event of an upward revaluation of the probable resale value;
• when the merchandise for which these provisions were established has been sold (regardless of the selling price) or written off.

Article 10.- The sub-account « 526- Mandatory reserves » is created within the account « 52- Money Market » of the Accounting Plan for Credit Institutions.

Article 11.- The sub-accounts « 563- Deposits of guarantee provided » and « 564- Deposits of guarantee received » are created within the account « 56- Current accounts of correspondents » of the Accounting Plan for Credit Institutions. The commentary on account 56 is supplemented by the following text:/

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Deposits provided as cover for routine banking operations by the institution with financial institutions or by the latter with the institution are recorded respectively in accounts 563 and 564.

Article 12.- The sub-account « 640- Sold inventory and purchases of merchandise » is created within the account « 64- General operating expenses » of the Accounting Plan for Credit Institutions. Account 640 is subdivided as follows:

6401- Sold inventory; 6402- Purchases of merchandise; 6403- Rebates obtained outside invoices.

The following text is inserted at the beginning of the commentary relating to account 64:

The use of sub-account 640 is reserved for credit institutions authorized to conduct direct sales, for cash or on credit, of movable property.

When the institution has opted for the perpetual inventory system, the sub-account « 6401- Sold inventory » is debited upon each sale, for the purchase cost of the sold merchandise, by crediting account « 473- Merchandise inventory ».

The sub-account « 6402- Purchases of merchandise » is used only within the framework of the periodic inventory system. It is debited:

• upon each acquisition, for the purchase cost of the merchandise (including ancillary purchase costs), by crediting account « 40- Suppliers » or a cash account;
• at the beginning of each period, to reverse the entry recording existing stock recorded at the end of the previous period, by crediting account « 473- Merchandise inventory ».

It is credited:

• in the event of merchandise write-offs, for the amount of their acquisition cost by debiting the sub-account « 6799- Other extraordinary losses »;
• during periodic closings: • for the acquisition value of existing stocks on which the institution holds ownership rights, by debiting account « 473 - Merchandise inventory »; • for the balance, after posting the previous entry, by debiting the sub-account « 6401- Sold inventory ».

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The sub-account « 6403- Rebates obtained outside invoices » is used in both types of inventory. It records on its credit side (by debiting account « 40- Suppliers ») rebates that cannot be precisely allocated to a batch of merchandise.

Commercial discounts (allowances, discounts, rebates) that can be precisely allocated to a batch of merchandise are deducted from the purchase cost. They are recorded on the credit side of accounts « 473- Merchandise inventory » under perpetual inventory or « 6402- Purchases of merchandise » under periodic inventory.

When determining characteristic management balances, sub-accounts 6401 and 6403 are closed, respectively by debiting and crediting account « 81- Total operating income ».

Article 13.- The sub-account « 740- Sale of merchandise » is created within the account « 74- Ancillary income » of the Accounting Plan for Credit Institutions. Account 740 is subdivided as follows:

7401- Cash sales of merchandise 7402- Credit sales of merchandise 7403- Forfeited deposits on sales 7404- Commercial discounts granted outside invoices.

The following text is inserted at the beginning of the commentary relating to account 74:

The use of sub-account 740 is reserved for credit institutions authorized to conduct direct sales, for cash or on credit, of movable property. Its use is carried out in the same manner regardless of the inventory method chosen by the institution.

The sub-accounts « 7401- Cash sales of merchandise » and « 7402- Credit sales of merchandise » are credited, for each sale, with the net selling price (after deducting granted discounts) and excluding taxes by crediting a cash account (cash sale) or class 3 (credit sale).

The sub-account « 7403- Forfeited deposits on sales » is credited, with the amount of earnest money definitively acquired by the institution following the customer's waiver of purchase commitments, by debiting account « 384- Other sums due to customers » (on which these sums must be charged at the time of payment).

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The sub-account « 7404- Commercial discounts granted outside invoices » records on its debit side (by crediting account « 384- Other sums due to customers ») allowances, discounts, and rebates that are subject to separate credit notes distinct from sales invoices.

When determining characteristic management balances, sub-accounts 7401, 7402, and 7403 are debited while sub-account 7404 is credited, for the balance, respectively by crediting and debiting account « 81- Total operating income ».

Article 14.- The sub-account « 908- Assets managed for the account of correspondents » is created within the account « 90- Commitments given on the order of correspondents » of the Accounting Plan for Credit Institutions. The commentary on account 90 is supplemented by the following text:

The account « 908- Assets managed for the account of correspondents » receives assets for which the institution ensures custody or management on behalf of correspondents. These notably include traveler's checks for which the institution will only become liable to issuers upon their circulation.

Article 15.- The sub-account « 931- Mortgages » is subdivided as follows: 9311- First or second rank firm mortgages on real estate 9312- Other mortgages

Article 16.- The sub-account « 928- Assets managed for the account of customers » is created within the account « 92- Commitments given on the order of customers » of the Accounting Plan for Credit Institutions. The commentary on account 92 is supplemented by the following text:

The account « 928- Assets managed for the account of customers » receives assets for which the institution is not the legal owner. It ensures their custody or management on behalf of customers.

Article 17.- The sub-account « 998- Assets managed for the account of third parties » is created within the account « 99- General off-balance sheet commitments account ».

Article 18.- The sub-account « 999- Computer off-balance sheet deferrals » is created within the account « 99- General off-balance sheet commitments account » of the Accounting Plan for Credit Institutions. The commentary on account 99 is supplemented by the following text:/

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The account « 999- Computer off-balance sheet deferrals » holds accounting entries that, for various reasons, were not posted, during computer data entry, into appropriate off-balance sheet accounts.

Article 19.- Annex I – Identification attributes is supplemented as follows:

X – CORRESPONDENT RATING

Credit institutions must identify by all adequate technical means the holders of sub-accounts opened within accounts 52 to 56, 90, and 91:

• for correspondents established in the CEMAC, according to the rating assigned to them on the COBAC rating scale which ranges from 1 to 4;
• for correspondents outside the CEMAC, according to the equivalence of their rating by an international standing rating agency with the COBAC rating scale.

Article 20.- This instruction shall enter into force as of July 1, 2002.

Done in Yaoundé, on 20 MARCH 2002

The President Jean-Félix MAMALEPOT