Accounting Manual for Asset Securitization Funds

Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv
CNBCR-09/2024 NCF-06
ACCOUNTING MANUAL FOR ASSET SECURITIZATION FUNDS Approval: 09/23/2024 Validity: 10/09/2024

THE STANDARDS COMMITTEE OF THE CENTRAL RESERVE BANK OF EL SALVADOR,

CONSIDERING:

I. That by Legislative Decree No. 470, of November 15, 2007, published in Official Diary No. 235, Volume 377, of December 17 of the same year, the Asset Securitization Law was approved.
II. That Article 60 of the Asset Securitization Law establishes that the accounting of the Securitization Funds must be independent of that of the Originator, the Securitization Company, or any other party involved in the securitization process.
III. That Article 4, letter c) of the Law on Supervision and Regulation of the Financial System establishes that the Superintendency of the Financial System has among its powers to conduct individual and consolidated supervision of the members of the financial system, as well as the supervision of other regulated entities.
IV. That Article 7 of the Law on Supervision and Regulation of the Financial System establishes who is subject to the provisions of said Law and therefore to the supervision of the Superintendency of the Financial System.
V. That Article 35, letter f) of the Law on Supervision and Regulation of the Financial System establishes that it is the obligation of the supervised entities to provide adequate accounting disclosure of the economic and financial reality, and to have the backing of their internal and external audits.
VI. That Article 99, letter c) of the Law on Supervision and Regulation of the Financial System establishes that it is the responsibility of the Standards Committee of the Central Reserve Bank to approve the Technical Standards for the preparation, presentation, and dissemination of Financial Statements and supplementary information of the members of the financial system; to determine accounting obligations and the principles according to which they must keep their accounting; and to establish criteria for the valuation of assets, liabilities, and the creation of provisions and reserves for risks.
VII. That in accordance with Article 101, fourth paragraph of the Law on Supervision and Regulation of the Financial System, the powers to approve, modify, and repeal technical norms to be complied with by the members of the financial system and other supervised entities are transferred to the Central Reserve Bank of El Salvador.

THEREFORE,

by virtue of the regulatory powers conferred upon it by Article 99 of the Law on Supervision and Regulation of the Financial System,

AGREES to issue the following:

ACCOUNTING MANUAL FOR ASSET SECURITIZATION FUNDS

CONTENTS

CHAPTER I
GENERAL PROVISIONS
Comprises the general provisions applicable to the recording of operations of Asset Securitization Funds.

CHAPTER II
FINANCIAL STATEMENTS TO BE SUBMITTED TO THE SUPERINTENDENCY OF THE FINANCIAL SYSTEM AND PUBLISHED Comprises provisions regarding the submission of financial statements to the Superintendency of the Financial System, their publication, among other provisions.

CHAPTER III
CHART OF ACCOUNTS
Comprises the list of accounts provided for the accounting of the respective operations.

CHAPTER IV
APPLICATION MANUAL
Comprises the description of the concept of the accounts and the main applications by which they will be affected.

CHAPTER V
FINANCIAL STATEMENTS
Includes the models of Financial Statements.

CHAPTER VI
OTHER PROVISIONS AND VALIDITY
Comprises provisions corresponding to sanctions, repeals, unforeseen aspects, and validity.

CHAPTER I
GENERAL PROVISIONS

A. OBJECTIVE

The purpose of this Accounting Manual is to provide Asset Securitization Funds with the Technical Accounting treatment that allows the application of International Financial Reporting Standards, regarding the uniform recording of their transactions, preparation and presentation of their Financial Statements, and disclosure of their notes, thus providing a useful instrument for the analysis of information and decision-making by Security Holders, Administrators, the public related to the figure, the Superintendency of the Financial System, and other interested parties.

B. APPLICATION

This document and the provisions contained therein shall be applied by all Asset Securitization Funds that are authorized by the Superintendency to operate as such.
The accounts contained in the Manual do not imply authorization to perform the operations to which they refer; Funds must adhere to the current legal and regulatory norms.
Asset Securitization Funds may not use new accounts, sub-accounts, or sub-sub-accounts without prior authorization from the Central Reserve Bank through its Standards Committee. However, they may open additional detail accounts to those established in the Chart of Accounts, from the eighth and ninth digits, with the exception of those incorporated in this Accounting Manual, to the degree and detail they consider necessary for better recording and control of their operations.
To incorporate additional detail accounts or accounts with more digits in the Chart of Accounts, intended to identify banking entities, the codes and designations established by the Central Reserve Bank, through its Standards Committee, must be used.
Securitization Companies for Asset Securitization Funds must electronically submit the monthly trial balance in the first 8 business days of the following month, with the main accounts and all corresponding sub-accounts, up to the last level of information, as well as the individualized assets that make up the securitization fund, in accordance with what is established in letter D of Chapter II of this Accounting Manual.
Securitizable Assets must be valued daily and real estate periodically, so that accounting records are posted promptly for variations in the value of said assets. All of the above in accordance with International Financial Reporting Standards.

C. STRUCTURE, CODIFICATION, AND DESIGNATION

DEFINITION OF COMPONENTS OF THE CHART STRUCTURE
a.- The Chart has been structured based on a decimal coding system, with an account designation that contemplates different levels of aggregation, distinguishing:
Element: Identified by the first digit
Category: Identified by the first two digits
Account: Identified by the first three digits
Sub-account: Identified by the first four digits Sub-sub-account: Identified by the first seven digits Detail: Identified by the first nine digits

The eight and nine-digit detail accounts will be opened at the discretion of the Securitization Funds, with the exception of accounts incorporated in this Accounting Manual, observing what is established in Chapter I, letter B, number 3.

ELEMENTS OF ACCOUNTING
The elements defined within the structure are associated with the rights and obligations of Asset Securitization Funds, and changes in such elements. The established elements are presented below:

CODE DESCRIPTION
1 ASSET
2 LIABILITY
3 EQUITY
4 EXPENSES
5 INCOME
6 ORDER AND DEBIT CONTROL ACCOUNTS
7 ORDER AND CREDIT CONTROL ACCOUNTS

CATEGORIES OF GROUPING
Identified by the second digit, starting from one (1), such categories are detailed below:

CODE DESCRIPTION
1 ASSET
11 CURRENT ASSET
12 NON-CURRENT ASSET
2 LIABILITY
21 CURRENT LIABILITY

CODE DESCRIPTION
22 NON-CURRENT LIABILITY
23 ACCUMULATED SURPLUS OF THE SECURITIZATION FUND 3 EQUITY 31 PARTICIPATIONS 32 RESTRICTED EQUITY 4 EXPENSES 41 ADMINISTRATION AND OPERATING EXPENSES 42 FINANCIAL EXPENSES 43 EXPENSES FOR ESTIMATIONS AND AMORTIZATION 44 OTHER EXPENSES 45 COSTS OF SECURITIZED ASSETS 46 INCOME TAX 5 INCOME 51 OPERATING AND ADMINISTRATION INCOME 52 INVESTMENT INCOME 53 REVALUATION OF SECURITIZED ASSETS 54 REVALUATION OF INVESTMENTS 56 INCOME FROM WRITT-OFF ASSETS 58 OTHER INCOME

LEDGER ACCOUNTS
Group homogeneous economic events, identified by the third digit starting with zero (0), allowing a maximum of ten accounts to be grouped per category of accounting elements. An example of account codification is presented below:

CODE DESCRIPTION
110 CASH
111 BANKS
112 ACCOUNTS AND DOCUMENTS RECEIVABLE

SUB-ACCOUNTS
Identified by the fourth digit, they represent aggregations of economic events that provide valuable financial information, coded from the zero (0) digit, allowing up to ten sub-accounts to be generated from the ledger account. An example of codification is presented below:

CODE TYPE DESCRIPTION
110 ACCOUNT CASH
1100 SUB-ACCOUNT CASH

SUB-SUBACCOUNTS
Sub-subaccounts: Identified by the seventh digit, they represent aggregations of economic events that provide valuable financial information, allowing up to 199 sub-subaccounts to be generated, grouped within the sub-accounts and the ledger account. An example of codification is presented below:

CODE TYPE DESCRIPTION
1110 SUB-ACCOUNT BANKS CHECKING ACCOUNT
1110000 SUB-SUBACCOUNT DEPOSITS IN CHECKING ACCOUNT

OPENING OF DETAIL ACCOUNTS FOR BANKS
Bank accounts will be generated in accordance with the following list, assigning the eighth and ninth digits for identification.

DIGITS FINANCIAL INSTITUTION
00 CENTRAL RESERVE BANK
01 AGRICULTURAL BANK, S.A.
02 DAVIVIENDA SALVADORAN BANK, S.A.
03 MORTGAGE BANK OF EL SALVADOR
04 CITIBANK, N.A., EL SALVADOR BRANCH
05 CUSCATLAN BANK OF EL SALVADOR, S.A.
06 AGRICULTURAL DEVELOPMENT BANK
08 PROMERICA BANK, S.A.
11 CENTRAL AMERICA BANK, S.A.
12 ATLANTIDA BANK EL SALVADOR, S.A.
14 BANK OF NEW YORK
15 STATE STREET
16 CLEAR STREAM
17 JP MORGAN
18 ABANK BANK, S.A.
19 AZUL BANK OF EL SALVADOR, S.A.
20 INDUSTRIAL BANK EL SALVADOR, S.A.
21 DEVELOPMENT BANK OF THE REPUBLIC OF EL SALVADOR 22 RURAL DEVELOPMENT BANK, SOCIETY LIMITED

DIGITS FINANCIAL INSTITUTION
23 WORKERS BANK OF THE SALVADORIAN PEOPLE, S.C. OF R.L. DE C.V.

Generating detail accounts immediately after the corresponding bank, for example:

CODE TYPE DESCRIPTION
1110 SUB-ACCOUNT BANKS CHECKING ACCOUNT
1110000 SUB-SUBACCOUNT DEPOSITS IN CHECKING ACCOUNT 111000001 DETAIL AGRICULTURAL BANK, S.A

If new banks arise, they will be added by continuing the sequence of the last assigned code.
This codification is applicable to all accounts, sub-accounts, and sub-sub-accounts that represent deposits of Asset Securitization Funds in financial institutions on their own account.

D. CLOSURE OF THE ECONOMIC YEAR
The economic and accounting period will comprise from January 1 to December 31 of each year.

E. RECORDS

ACCOUNTING BOOKS
The movement and balance of accounts will be recorded in the main books, and that of sub-accounts in auxiliary books as deemed necessary.
The main books that must be legalized are the following:
a. Financial Statements Book; b. General Ledger (If they deem it convenient, they may legalize the books in one single JOURNAL - LEDGER);
c. Journal Book

Accounting records must comply with what is established in Title II, of Book Two, of the Code of Commerce, insofar as applicable.
In particular, in the Financial Statements Book, the Fund's Balance Sheet, the Fund's Statement of Determination of Surplus, and the corresponding notes must be posted, in accordance with what is established in Article 442 of the Code of Commerce. The figures posted in this Book must be presented in absolute values including cents, in a comparative manner with the figures of the previous year.

ADMINISTRATIVE BOOKS AND RECORDS
The Securitization Company must keep, legalize, and complete, in addition to the accounting and tax books established above, the following books:
a. Minutes Book of the General Meeting of Security Holders; b. Minutes Book of the Representative of Security Holders;
c. Register of Security Holders.

The Minutes of the General Meeting of Security Holders and of Management and Administration of the Fund, in addition to complying with the formalities stipulated in Article 246 of the Code of Commerce, must be posted in the corresponding Legal Books no later than 15 days after such sessions are held.

The General Meeting of Security Holders will be governed by what is established in the Asset Securitization Law, and in its absence, by what is provided for General Meetings of Bond Holders in the Code of Commerce.

In the Minutes Book of the Representative of Security Holders, the Minutes will be posted monthly, which must contain all actions taken and decisions made by the Representative of the Holders, based on the powers they hold.

The Register of Security Holders may be kept by the Securitization Company or a Custodian, which must provide permanent real-time access to the Securitization Company. Said register must allow generating reports and establishing the ownership of the securities issued by the asset securitization fund in an updated and historical manner.

TAX BOOKS
The books of legal requirement, in accordance with the Law on Tax on the Transfer of Movable Goods and the Provision of Services, must comply with what is established in Article 141 of the Tax Code and Section Five of Chapter VII of the Regulation for the application of the Tax Code, which are mentioned below:
a. Purchase Registration Book; b. Sales Registration Book to the Taxpayer;
c. Sales Registration Book to the Consumer.

F. INTERNAL CONTROL APPLIED TO ACCOUNTING RECORDS Accounting records must contain the necessary detail regarding the characteristics of assets, liabilities, surpluses, income, and expenses so that all information contained in the different statements to be rendered can be derived clearly from them, which will maintain the necessary correlation both among themselves, when applicable, and with that accounting base.

Likewise, inventories or details of the different items will be kept, independent of the books of an obligatory nature required by Salvadoran legislation. For these purposes, Securitization Companies for Funds will establish internal control systems directed to reasonably ensure the reliability of accounting records, as well as the correct integration of operations.

Therefore, independent of the accounts specified to form the financial statements, the details deemed necessary for the preparation of the rest of the complementary informative statements will be established, thus developing an analytical accounting that provides sufficient information for the calculation of costs and returns of the different centers, products, business lines, or other aspects of interest for adequate management control.

G. REGISTRATION AND ARCHIVING OF ACCOUNTING DOCUMENTATION Securitization Companies for Asset Securitization Funds are obligated to keep all accounting, administrative, and those determined by the Superintendency books. The operations registered in them must be backed by the corresponding supporting documentation and comply with the norms established in the Code of Commerce.

Operations will be posted as they are carried out, and only in exceptional cases, justified in writing before the Superintendency of the Financial System, the Securitization Company must not present delays, both in the accounting books, as well as administrative, and other books of legal requirement. This without prejudice to the sanctions, fines, and others that the Securitization Company may incur for such delays established in accordance with the applicable legal norms by other government entities.

H. SEPARATION OF INCOME AND EXPENSES

To associate income with the corresponding expenses, ordinary income and expenses have been determined as: Operating Income, Operating Expenses, and Income Tax.

I. APPROVAL AND MODIFICATION OF ACCOUNTING SYSTEMS
The accounting system consists of the methods and records established to identify, gather, analyze, classify, record, and report the transactions of the Fund, as well as maintain the accounting of the asset, liability, equity, and operations of the Asset Securitization Fund that are relative to it.

The accounting system comprises:

The Chart of Accounts and Application Manual.
The accounting records, support documents, and auxiliary records.
The accounting processing involved from the initiation of a transaction, until its inclusion in the financial statements, including the manner of using computers for data processing.
The financial information process employed to prepare the Fund's financial statements, including estimates and disclosures of important tables.

In consideration of the above, the process to be followed to request initial approval or subsequent modifications derived from the Fund's own initiative regarding the accounting systems will be:
a) The Securitization Company, on behalf of the Asset Securitization Fund, must present the request addressed to the Superintendency of the Financial System, attaching the complete accounting system requested to be authorized in original and copy, with the signature of the Legal Representative. b) If the accounting system is computerized, they must attach the information required for such systems.

The minimum information to be detailed within the accounting system, for approval purposes, will be:

1 DESCRIPTION OF ACCOUNTING SYSTEM
1.1 GENERAL DATA OF THE SECURITIZATION FUND
Name of the Securitization Fund, Address and Phone, etc.
1.2 DATA OF THE SECURITIZATION CONTRACT
1.3 NAME OF THE NOTARY WHO GRANTS THE PUBLIC DEED OF THE SECURITIZATION CONTRACT
1.4 NAME AND REGISTRATION NUMBER OF THE EXTERNAL AUDITOR
1.5 ACCOUNTING POLICIES AND PROCEDURES ADOPTED
Consists of presenting the accounting policies and their procedures that the Securitization Fund will use, in accordance with the minimum disclosures required by the Accounting Manual for Asset Securitization Funds and the applicable International Financial Reporting Standards.

1.6 DETAIL OF PROJECT OF NOTES TO BE USED IN THE PUBLICATION OF FINANCIAL STATEMENTS
Consists of describing the notes to the financial statements to be prepared, in accordance with the minimum disclosures required by the Accounting Manual for Asset Securitization Funds and the applicable International Financial Reporting Standards.

2 REQUIREMENTS OF ACCOUNTING RECORDS
2.1 FORM OF KEEPING ACCOUNTING BOOKS
Indicate whether accounting will be kept in bound and folioed books, on separate sheets, or other physical or electronic means.
2.2 NATURE OF THE SYSTEM TO BE USED
Description of the name and manner of operation of the computer system.
2.3 FORM OF POSTING OPERATIONS
Explain in what manner operations will be posted in the legalized accounting records.
2.4 DETAIL OF AUXILIARY BOOKS TO BE KEPT AND THE FORM OF POSTING OPERATIONS IN THEM

3 DESCRIPTION OF COMPUTERIZED INFORMATION SYSTEMS1
3.1 DESIGN OF THE COMPUTERIZED ACCOUNTING SYSTEM
The content of this section comprises a description of the manner of recording, operating, and generating accounting records, within the computer system.
3.1.1 DESCRIPTION OF MODULES 2

NAME OF THE MODULE
IMPLEMENTATION LANGUAGE
OBJECTIVE OF THE MODULE
Describe generally what is the main function of the specific accounting module.
MAIN SUB-MODULES (With explanation of

Accounting Manual for Asset Securitization Funds

Lineage: In force

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