Regulation (NAP) - Chart of Accounts for Financial Institutions (PCIF)

DSB 02/01/2010 09/07/2009 05/2009 Vistos Dados de Revogação: Banco Central de S.T.P NAP PERMANENT APPLICATION STANDARD CODE: RD 09 PROPOSER(S): DSB ISSUE DATE: 09/07/2009 ENTRY INTO FORCE: 02/01/2010 Page: 1/46

Subject: CHART OF ACCOUNTS FOR FINANCIAL INSTITUTIONS (PCIF)

Whereas it is necessary to update the Chart of Accounts for Financial Institutions (PCIF), aligning it with the recent evolution of the São Toméan Financial System and incorporating international accounting directives; Considering that, among the objectives of the Chart of Accounts, the following stand out: the recording and accounting of operations in accordance with uniform practices and procedures; the observance of consistency and rationalization principles for account classes; the imposition of rules and criteria aimed at publishing financial statements and providing information to the public, which ultimately allow for a better and more accurate assessment of the performance of financial institutions. Taking into account the need to design a classification structure that reconciles current international financial standards with the transformations of the São Tomé financial system; In these terms: The Central Bank, in the exercise of the competence attributed to it by Article 40(2) of Law 9/92 - Law on Financial Institutions, approved by the National Assembly on June 17, 1992, and published in the Official Gazette No. 16, determines the following:

Article 1. The accounting of banks shall henceforth be governed by the standards of the Chart of Accounts for Financial Institutions (PCIF), published in this NAP.

Article 2. The accounting elements to be published and those to be sent to the Central Bank are those mentioned in point IV of the annex to this NAP, in accordance with the fundamental accounting principles of prudence, consistency, substance over form, materiality, and period allocation, according to the deadlines set therein.

Article 3. This NAP shall enter into force on January 2, 2010.

Central Bank of São Tomé and Príncipe, July 9, 2009.- FL 1/46

Banco Central de S.T.P NAP PERMANENT APPLICATION STANDARD CODE: RD 09 PROPOSER(S): DSB ENTRY INTO FORCE: 02/01/2010 ISSUE DATE: 09/07/2009 DOC NO: 05/2009 Page: 2/46

ANNEX

I. ACCOUNTING STANDARDS AND PRINCIPLES

1. General Standards 1.1. This Chart of Accounts for Financial Institutions is mandatory for financial institutions authorized to operate in São Tomé and Príncipe under the Law on Financial Institutions, and for financial institutions licensed under Decree-Law 62/95 that report to the Central Bank of São Tomé and Príncipe. 1.2. The creation of new accounts, as well as the modification of the accounts provided for and the accounting report models presented in this Chart, are the exclusive competence of the Central Bank. 1.3. The breakdown of provided accounts at the internal level is free, provided that the content of the main account (broken-down account) is respected and that reports to the Central Bank are submitted only at the level of the accounts existing in the Chart. 1.4. It is also accepted that each institution may maintain a chart of accounts different from the one presented here, provided that a conversion table of the bank's accounts to the accounts of this PCIF is approved by the Banking Supervision Directorate. 1.5. Regarding off-balance sheet accounts, internally used counterparties may be deemed appropriate. 1.6. The existence of accounting titles and accounting standards does not imply permission to carry out operations or services prohibited by law, regulation, or other administrative instrument, subject to prior authorization by the Central Bank. 1.7. Financial institutions regarding bookkeeping must: a) Carry it out completely and maintain permanent records of all transactions, operations, acts, and administrative facts that modify or may modify, immediately or not, the composition of own funds; b) Support all records with legal and legitimate documents; c) Maintain accounts and records in accordance with international accounting standards and observe fundamental accounting principles. 1.8. The principle of periodicity of results must be fully respected, at a minimum, at the end of each month. 1.9. No offsetting is permitted between debtor and creditor balances of the following items: a) Third-party accounts; b) Revenue/gain accounts and cost/loss accounts; and c) Class 5 accounts "Internal reconciliation accounts", except for accounts 50 "Interdepartmental accounts" and "59 - Other internal accounts".

2. Accounting Principles With the objective that the accounts of financial institutions present a true and fair view of the assets, financial position, as well as results, the following general principles shall be observed: 2.1. Going Concern It is presumed that the financial institution will conduct its activities on a going concern basis, having no intention or need to enter liquidation or significantly reduce its activity. 2.2. Consistency Valuation criteria cannot be changed from one period to another. Failure to observe this principle, with materially relevant effects, must be stated in the explanatory notes accompanying the financial statements. 2.3. Accruals (or Specialization) Revenues and costs are recognized when earned or incurred and allocated across monthly periods, according to the "pro rata temporis" rule, when dealing with operations that generate periodic cash flows over a period exceeding one month. 2.4. Prudence Accounts must incorporate levels of caution required by estimates made under conditions of uncertainty, without, however, allowing the creation of hidden reserves or excessive provisions, or the deliberate understatement of assets and revenues or overstatement of liabilities and costs. In particular, foreseeable risks and potential losses originating in the previous period must be weighed, even if these risks or losses are only known between the balance sheet closing date and the date the financial statements are prepared. 2.5. Substance over Form Accounting must consider the substance of operations and their financial reality, not merely their legal form. In particular, apparent profits obtained through the sale of real estate, securities, shareholdings, or other assets to persons or entities linked to the institution, whose price is paid directly or indirectly with funds from this institution, shall not be recognized as results, nor shall revaluations carried out through the sale and subsequent acquisition of assets. Revaluations other than those provided for by law or the Central Bank's regulations cannot be performed. 2.6. Materiality Financial statements must disclose all elements that are relevant and may affect third-party assessments or decisions. 2.7. Correspondence between the opening balance sheet of a period and the closing balance sheet of the preceding period. The opening balances of the balance sheet for a period must be equal to the closing balances stated in the balance sheet of the preceding period. 2.8. Initial recognition of financial assets and liabilities. A financial asset or liability shall be recognized in the balance sheet when: a) Substantially all risks and benefits associated with the asset or liability have been transferred to the institution; b) The cost or equivalent value of the asset or the amount of the obligation assumed can be reliably measured. 2.9. Derecognition of a financial asset or liability. A financial asset or liability shall cease to be recognized in the balance sheet when: a) Substantially all risks and benefits associated with the asset or liability have been transferred to third parties and the value of any retained risks and benefits can be reliably measured; b) The underlying right or obligation has been exercised, cancelled, or expired.

3. Relevant International Standards 3.1. The use of extraordinary gains or loss accounts is prohibited, both in income statement accounts and in the explanatory notes (IAS 1 — §85). 3.2. Gains or losses by nature must be recognized in the appropriate or relevant revenue or profit account, including because every material element of revenue or cost must be subject to separate and detailed information. 3.3. Errors detected in the recognition, measurement, or reporting of accounting data or in the financial statements must be corrected, especially if materially relevant or made intentionally to modify the presented financial position or cash flow. 3.4. Errors detected after the closing of the fiscal year must be corrected: a) If identified before administrative approval for the publication of financial statements, by rectifying the financial statements with the respective adjustments in account 69 and publishing them correctly; b) If identified after the publication of the financial statements, by modifying the balances of accounts with errors and adjusting the differences to the debit or credit of account 66 or 69, as appropriate, and for future financial statements to be published, by rectifying the balances of the previous period's financial statements that will be used comparatively; c) In both cases, informing in the explanatory notes the nature of the error, the affected accounts, and the amounts involved. 3.5. Materially relevant events occurring after the closing date of the fiscal year and before the publication of the financial statements, whether favorable or unfavorable, must receive the following treatment: a) If relating to conditions existing at the balance sheet closing date, adjustments must be made to the financial statements; b) If relating to conditions that arose after the balance sheet closing date, they shall not be subject to any adjustments, but when relevant, must be stated in the explanatory notes. 3.6. Dividends declared after the closing of the accounts cannot appear as liabilities in the financial statements to which they refer. 3.7. At the end of the fiscal year, financial institutions must present, in notes, a classification of their assets and liabilities according to the remaining maturity until due date, in the following categories: up to one month, one to three months, three months to one year, one to five years, and five years and onwards. 3.8. All assets, rights, and obligations, properly recorded in their respective balance sheet accounts, as well as administrative acts recorded in off-balance sheet accounts, must be reconciled during monthly trial balances or, in the case of fixed assets, inventoried during the annual balance sheet. 3.9. Proof of reconciliations and inventory, such as reports, listings, and audit minutes, constitute accounting documents and must be properly archived and authenticated by the responsible parties.

II. DEFINITIONS AND CONCEPTS For a clear and correct interpretation of the framework rules established in this Chart, the following concepts and definitions are presented: a) Residents Economic agents with a center of interest in the economic territory of a country are considered residents of that country's economy, subject to the sovereignty exercised there by national authorities; for this purpose, a center of interest is presumed when transactions are carried out in that territory for a relatively long period (equal to or greater than one year), that is, economic agents are not present in the economy on a temporary basis, and the economic territory is understood to also include territorial waters and airspace, as well as international maritime and air spaces over which the economy has exclusive jurisdiction. These generic aspects fall under the concepts underlying the definition of residents provided in the current exchange regime, according to which the following are considered residents in national territory: • National citizens with habitual residence in São Tomé and Príncipe; • National citizens with habitual residence abroad, regarding activity developed in national territory in a non-occasional manner; • Foreigners who habitually reside in São Tomé and Príncipe, regarding activity developed in national territory; • Private legal entities with a seat in São Tomé and Príncipe; • Santomean public legal entities, as well as public funds endowed with administrative and financial autonomy; • Branches, agencies, or any other form of stable representation, in national territory, of legal entities or other non-resident entities. • Residence is presumed habitual after one year from its commencement. b) Banking and Non-banking Financial Institutions For the purposes of the Chart of Accounts, banking financial institutions are those mentioned in the Law on Financial Institutions that can accept deposits, such as commercial banks and investment banks. Other financial institutions that do not receive deposits from the resident public, including insurance entities and "offshore" banks authorized under Decree-Law 62/95, are classified as Non-banking Financial Institutions. c) Administrative Public Sector This sector comprises all institutional units whose main economic function consists of producing non-marketable services intended to satisfy collective needs and/or carrying out income and national wealth redistribution operations, with resources mainly coming from taxes and mandatory social contributions levied on other resident institutional sectors, received directly or indirectly. The Administrative Public Sector is subdivided into the following subsectors: Central Administration (State, Services, and Autonomous Funds), Regional (Autonomous Region), and Local (Municipalities). Social Security is also considered a subdivision of the Administrative Public Sector, according to its relationship. d) State Guarantee Credit operations whose guarantee is provided by the Treasury Directorate are considered guaranteed by the State. e) Guarantee by other public sector entities Credit operations guaranteed by other public sector entities are those endorsed by the Services and Autonomous Funds of the Central Administration and Social Security. f) Subordinated Assets Assets represented or not by a title, to which rights are attached that, in the event of liquidation or bankruptcy, can only be exercised after those of other creditors. g) Cash and Cash Equivalents Amounts that can be withdrawn at any time without prior notice or for which a term or 24-hour prior notice, or a business day, has been established. h) Repurchase Agreement Transactions An operation by which an institution or a client (transferor) transfers to another institution or client (transferee) elements of its own assets, such as securities, under reserve of an agreement providing for the return of the same asset elements to the transferor. The transferred asset elements continue to appear in the transferor's balance sheet; the transfer price received by the transferor and the respective interest will appear as a liability to the transferee. Furthermore, the amount of the transferred asset elements will be indicated in the annex to the transferor's accounts. The transferee cannot include the acquired asset elements in its balance sheet; the purchase price paid by the transferee and the respective interest will appear as a credit to the transferor. i) Fixed and Variable Income Securities Fixed income securities are bonds or other negotiable instruments issued by financial institutions, other companies, or public bodies, that promise a fixed or determined remuneration over a period of time. Bonds and securities with variable interest rates based on certain base rates, such as the Euro interbank offered rate (EURIBOR), LIBOR, and the Central Bank reference rate, are also classified as such. Variable income securities are those whose return is not determined by a period of time, such as shares and convertible securities, but which promise return in a similar manner. j) Related Companies Related companies are those between which there exists, directly or indirectly, a relationship of control or dependence in accordance with current regulations. k) Shareholdings Shareholdings are considered to be capital holdings in companies where the interest in their maintenance is linked to the institution's activity and are of a lasting nature. A shareholding is qualified whenever it reaches 10% of the share capital or voting capital of the invested company, or when it can exercise influence on the administration. l) Financial Instrument Any contract that simultaneously gives rise to a financial asset of one entity and a financial liability, or equity instrument, of another. Financial instruments include both primary financial instruments such as loans and other receivables, deposits and other payables, and equity securities, as well as derivative financial instruments such as options, futures, forward transactions, interest rate and currency swaps, whose value is related to the price of an underlying financial instrument, a rate, or an index. m) Financial Asset Any asset that is: • Cash; • A contractual right to receive cash or another financial asset from another entity; • A contractual right to exchange financial instruments with another entity under conditions that are potentially favorable; or • An equity instrument of another company. n) Financial Liability Any liability that is a contractual obligation: • To deliver cash or a financial instrument to another entity; or • To exchange financial instruments with another entity under conditions that are potentially unfavorable.

SPECIFIC ACCOUNTING STANDARDS

1. Cash and Cash Equivalents 1.1. This class includes available or near-available values and other similar items. 1.2. The Cash account includes banknotes and coins with legal tender status in the country or abroad. 1.3. The national currency is recognized at nominal value. Foreign currencies with convertibility must be recognized at the purchase exchange rate published by the Central Bank. 1.4. Checks and other documents registered as cash cannot compose the account balance at the end of the day. The Cash account must exclusively express the cash on hand. The remaining cash elements must be settled daily by correspondence with the appropriate account. 1.5. Any item in cash or uncredited debit, representing a transaction made during business hours or even after, cannot be post-dated and must form an integral part of the day's movement for accounting purposes. 1.6. Cash differences must be recorded in account 5830 — Cash Differences. 1.7. The gold stock must be daily valued at market quotation and the results recorded in revenue or cost accounts. 1.8. The institution must carry out cash counts for verification, at least during monthly trial balances and the annual balance sheet.
2. Demand Deposits at the Central Bank and with Financial Institutions 2.1. The Demand Deposits at the Central Bank account must represent resources that are immediately mobilizable by the financial institution. Minimum mandatory reserve resources shall be recorded in account 20003/20103 — Mandatory Deposits. Creditor balances maintained in deposit accounts at other institutions must be accounted for daily in the "Other resources" subaccount of accounts 30 and 31, for liabilities towards financial institutions. 2.2. The Accounts Receivable account includes checks drawn by third parties on other institutions in the country or abroad. Checks to be collected domestically cannot remain in this account for more than one business day. 2.3. Maintaining checks drawn against the bank itself in the accounts receivable accounts is not permitted. 2.4. Institutions must reconcile deposit accounts during monthly trial balances and balance sheets.
3. Credit Operations 3.1. Credit operations must be classified in the appropriate accounts and subaccounts of Class 2 — Applications at the value of the capital of the credit granted. 3.2. Accrued interest on credits must be recognized daily or monthly to the debit of the Receivable Revenue account and to the credit of the appropriate Interest Revenue account, using the effective interest rate method. 3.3. The effective interest rate method...