Annex to Decision No 357-11-2016 Establishing the UMOA Revised Banking Accounting Plan

ANNEX TO DECISION NO 357-11-2016 ESTABLISHING THE UMOA REVISED BANKING ACCOUNTING PLAN

REVISED UMOA BANKING ACCOUNTING PLAN (PCB)

TABLE OF CONTENTS
BOOK ONE: CONCEPTUAL FRAMEWORK OF THE REVISED UMOA BANKING ACCOUNTING PLAN PRELIMINARY CHAPTER: GENERAL PROVISIONS
CHAPTER ONE: OBJECTIVE OF FINANCIAL INFORMATION AND STAKEHOLDERS
Section 1: Objective of financial information
Section 2: Stakeholders in financial information
CHAPTER TWO: FUNDAMENTAL PRINCIPLES
Section 1: Basic assumptions
Section 2: Qualitative characteristics of financial information
Section 3: Accounting principles
CHAPTER THREE: DEFINITION, VALUATION AND ACCOUNTING OF ELEMENTS CONSTITUTIVE OF FINANCIAL STATEMENTS
Section 1: Definition of elements constitutive of financial statements
Section 2: Valuation of elements constitutive of financial statements
Section 3: Accounting of financial statement elements

BOOK II: FINANCIAL STATEMENTS
CHAPTER ONE: RULES FOR PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS
CHAPTER TWO: FINANCIAL STATEMENT MODELS AND COMMENTARIES ON LINE ITEMS

BOOK THREE: ACCOUNTING FRAMEWORK, CHART OF ACCOUNTS AND CONTENT OF ACCOUNTS
CHAPTER ONE: RULES FOR ACCOUNTING ORGANIZATION
Section 1: Accounting procedures manual
Section 2: Recording of accounting transactions
Section 3: Attributes
Section 4: Mandatory books and documents
Section 5: Preparation of summary statements
CHAPTER TWO: CHART OF ACCOUNTS
Section 1: Rules for establishing the chart of accounts
Section 2: Accounting framework and chart of accounts
CHAPTER THREE: CONTENT OF ACCOUNTS
Section 1: Cash and transactions with credit institutions and similar entities accounts
Section 2: Customer operations accounts
Section 3: Securities transactions and other operations accounts
Section 4: Fixed assets accounts
Section 5: Provisions, equity and similar accounts
Section 6: Expense accounts
Section 7: Income accounts
Section 8: Off-balance sheet commitments accounts

ANNEXES
ANNEX 1: BALANCE SHEET MODEL FOR PUBLICATION AND COMMENTARIES ON LINE ITEMS
ANNEX 2: OFF-BALANCE SHEET MODEL FOR PUBLICATION AND COMMENTARIES ON LINE ITEMS
ANNEX 3: INCOME STATEMENT MODEL FOR PUBLICATION AND COMMENTARIES ON LINE ITEMS
ANNEX 4: NOTES TO THE FINANCIAL STATEMENTS
ANNEX 5: ACCOUNTING FRAMEWORK
ANNEX 6: CHART OF ACCOUNTS
ANNEX 7: CONTENT OF ACCOUNTS

BOOK ONE: CONCEPTUAL FRAMEWORK OF THE REVISED UMOA BANKING ACCOUNTING PLAN PRELIMINARY CHAPTER: GENERAL PROVISIONS
Article 1
This Revised UMOA Banking Accounting Plan (PCB) applies to banks and financial institutions with a banking character, as defined by the law governing banking regulation in the UMOA, hereinafter referred to as the subject institutions.
Article 2
The conceptual framework specifies the fundamental concepts underlying the preparation and presentation of financial statements for subject institutions. It forms the foundation of the normative provisions of this accounting reference framework and provides appropriate answers to concerns regarding the purpose, recipients, and nature of financial information.

CHAPTER ONE: OBJECTIVE OF FINANCIAL INFORMATION AND STAKEHOLDERS
Section 1: Objective of financial information
Article 3
The objective of financial information is to provide useful data on the financial position of credit institutions and its changes, as well as their performance. It informs users' decision-making based on the prospects for future cash flows and management's discharge of stewardship responsibilities. Since financial statements cannot contain all the financial information required by various stakeholders, these users must consider information from other sources, such as the general and foreseeable state of the economy, political events and climate, or the prospects for the institution's sector. Financial information provided within the general framework may be supplemented by specific elements useful to certain stakeholders.

Section 2: Stakeholders in financial information
Article 4
The stakeholders in financial information are monetary and banking regulatory authorities, investors, credit institutions, depositors, States and public bodies, and, more generally, the public.
Article 5
Monetary and banking regulatory authorities include the Central Bank of West African States (BCEAO), the Banking Commission, and the Ministers in charge of Finance of UMOA member States, whose functions contribute to managing the common currency and ensuring financial stability. In fulfilling their missions, monetary and banking authorities must be able to access, as needed or at any time, various data, individual or aggregated, particularly within the framework of collecting monetary statistics, monitoring the solvency and liquidity of credit institutions, and overall surveillance of the banking system.
Article 6
Financial information enables investors in equity and/or debt instruments, who accept financial risk in exchange for remuneration in the form of dividends or interest, to analyze and assess their risk-taking policies and assume their specific responsibilities.
Article 7
For the management of credit institutions, financial information reflecting the economic and financial structure as well as the performance of subject institutions appears as an indispensable element for their management and balanced development.
Article 8
Through available financial information, depositors must be able to ensure the proper management of their deposits, which constitute the main source of financing for credit institutions' activities. They thus show particular interest in the risk management undertaken by subject institutions and information regarding their capacity to meet commitments towards them.
Article 9
States and public bodies constitute an important stakeholder in financial information, particularly regarding its use for fiscal and statistical purposes, and for the orientation of economic and social public policies.
Article 10
The public is understood in a broad sense and includes service providers, suppliers, staff, media, and specialized analysts, including rating agencies.
Financial information on the quality of credit institutions' management, risk control, and potentially their partners and reputation helps to establish the confidence that the public places in these institutions, which is essential to their operations.

CHAPTER TWO: FUNDAMENTAL PRINCIPLES
Section 1: Basic assumptions
Article 11
The two basic assumptions below govern the application and validity of the fundamental principles regulating financial information production by credit institutions:

• going concern;
• accrual basis accounting.
  Article 12
  The going concern assumption determines the valuation methods for transactions performed. It postulates that the entity will continue its activities in the foreseeable future and has neither the intention nor the obligation to cease them or significantly reduce their scope. If such an intention or necessity exists, financial statements must be presented on a different basis, which must be disclosed. For example, the accounts of a company in liquidation must be prepared on a liquidation basis, and all consequences resulting from such cessation of operations must be taken into account.
  Article 13
  The accrual basis assumption implies that the financial effects of transactions and other events are recorded as soon as they occur or take place, without waiting for the settlement or receipt of equivalent cash.

Section 2: Qualitative characteristics of financial information
Article 14
The application of normative accounting provisions must result in providing, through financial statements, a true and fair view of the assets, financial position, and results of subject institutions. This view is reflected in the expected qualitative characteristics of financial information. The required qualitative characteristics of financial information must ensure that it is relevant, faithful, comparable, verifiable, and understandable.
Article 15
Information is considered relevant when it has the potential to influence the economic decisions of financial statement users, particularly by helping them evaluate past, present, or future events, or confirming or correcting their past evaluations. The relevance of information depends on its materiality or relative importance and the timeliness with which it is obtained.
Article 16
To provide a faithful representation, financial information must be:

• complete, by presenting all information necessary to understand the described phenomenon;
• free from error, insofar as the process followed to produce financial information has been rigorously chosen and applied throughout.
  Article 17
  Comparability assumes the permanence of methods used in evaluating and presenting transactions and events. Information produced is more useful if it can be compared with similar information from other credit institutions, or regarding the same entity for at least two periods. Comparability implies that users are informed of the accounting methods used in preparing financial statements and any changes made to these methods, as well as the effects of such changes.
  Article 18
  Verifiability assumes that different users of financial information could reach a consensus on the meaning and scope of the presented information, absent complete agreement on its content.
  Article 19
  Information presented in financial statements must be understandable to users possessing reasonable knowledge of business and economic and financial activities, as well as accounting. Understandable information is classified, defined, and presented clearly and concisely.

Section 3: Accounting principles
Article 20
The accounting principles detailed below result from the qualitative characteristics of financial information, which they facilitate achieving. They include consistency of methods, transparency, prudence, periodicity (specialization of periods), integrity of the opening balance sheet, materiality, and the primacy of economic substance over legal form.
Article 21
Consistency of methods implies that valuation and presentation methods for accounts should not be modified from one period to the next, unless an exceptional change occurs in the subject institution's situation. Modifications are then described and justified in the notes to the financial statements.
Article 22
Transparency includes concepts of compliance with rules for presenting clear and fair information, as well as non-offsetting.
Asset and liability items are accounted for separately. No offsetting should be made between balance sheet assets and liabilities, or between income statement expenses and revenues.
However, for the preparation of summary documents, subject institutions are authorized to offset:

• the amount of retention amounts withheld during presentation for discounting by an account holder and the debit balance of that same holder's current account;
• debts and sight deposits of the same legal person, provided that the accounts concerned are of the same nature, kept in the same currency, and that the institution holds a signed account merger letter from the client. In this case, accounts are also merged for interest purposes. No offsetting should be made when deposit accounts are pledged in favor of the institution;
• gains or losses on trading, investment, and similar portfolios as well as on fixed assets;
• head office and agency liaison accounts;
• collection accounts and the counterpart accounts of collection accounts;
• calls on consortium credit accounts and the counterpart accounts of calls on consortium credit accounts.
  Article 23
  Prudence consists in taking a certain degree of caution when exercising judgments necessary to prepare estimates under conditions of uncertainty, so that assets or revenues are not overstated and liabilities or expenses are not understated. It involves a reasonable assessment of facts to avoid the risk of transferring present uncertainties, which may affect the assets and results of a subject institution, to the future. The application of this principle does not authorize the creation of hidden reserves or excessive provisions. Deviation from the prudence principle may be made for accounting certain banking operations, particularly foreign currency transactions, trading and investment securities, in accordance with specific provisions governing them.
  Article 24
  According to the periodicity (specialization of periods) principle, all revenues and expenses relating to each period must be allocated exclusively to that period, as business life is divided into periods following which financial statements are published. In this framework, and consistent with the accrual basis assumption, the recognition of assets, liabilities, revenues, and expenses does not depend on payment or receipt dates but on the effective dates of the corresponding commitments. At each accounting cutoff, accrued interest calculated, referred to as receivables or payables due (accruals), must, on the one hand, be recorded in the balance sheet in accounts designated for this purpose by this reference framework, and on the other hand, be carried to the income statement. Interest paid in advance to or by the subject institution does not constitute receivables and payables due. They are recorded in regularization accounts designated for this purpose. The accounting period corresponds to a twelve (12) month period. It coincides with the calendar year. The duration of the period is exceptionally less than twelve months for the first period starting during the first half of the calendar year. This duration may be greater than twelve months for the first period starting during the second half of the year.
  Article 25
  The integrity of the opening balance sheet requires that the opening balance sheet of a period corresponds to the closing balance sheet of the preceding period.
  Exceptional deviation from this principle may be made under conditions prescribed by common law accounting rules.
  Article 26
  According to materiality, financial statements must essentially reflect operations whose importance may affect valuations or decisions. Materiality reflects the ability of information to influence the judgment that financial statement recipients may hold regarding the entity. This principle finds its primary application in the valuation and presentation of financial statements.
  Article 27
  The primacy of economic substance over legal form postulates that the substance of transactions and other events is not always consistent with the legal structure underlying them. Therefore, this principle provides that operations are accounted for and presented in accordance with their economic substance resulting notably from an analysis and interpretation of contracts and/or practice. This principle determines the general accounting treatment retained for certain transactions, particularly finance lease operations, assets acquired with a retention of title clause, external personnel expenses, and stock lending/borrowing operations.

CHAPTER THREE: DEFINITION, VALUATION AND ACCOUNTING OF ELEMENTS CONSTITUTIVE OF FINANCIAL STATEMENTS
Section 1: Definition of elements constitutive of financial statements
Article 28
Financial statements trace the financial effects of transactions and other events, through their constitutive elements: the balance sheet, off-balance sheet commitments, income statement, and notes to the financial statements. The balance sheet is composed of assets, liabilities, and equity. Off-balance sheet commitments consist of given and received commitments. The income statement includes revenues and expenses.
Article 29
An asset is a resource controlled by a subject institution as a result of past events and from which future economic benefits are expected. Economic benefit is the potential of this asset to contribute to generating cash flows and cash equivalents. An asset may be:

• used alone or in combination with other assets;
• exchanged for other assets;
• used to settle a liability; or
• distributed to the owners of the subject institution.
  The existence of an asset is not tied to a right of ownership. An element may thus satisfy the definition of an asset even if there is no legal control by the subject institution, in accordance with the principle of primacy of economic substance over legal form.
  Article 30
  A liability is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits. An obligation is a duty or responsibility to act, as a consequence of a firm contract, commercial practices arising from customs or the desire to maintain good business relations, or acting equitably. The extinction of an obligation may occur by:
• payment in cash;
• transfer of other assets;
• provision of services;
• substitution of this obligation by another obligation;
• conversion of the obligation into equity;
• waiver or forfeiture of its rights by the creditor.
  In some cases, liabilities may only be evaluated with a high degree of estimation. They are then called provisions. These include payments to be made under existing warranties and employee retirement obligations.
  Article 31
  Equity is the residual interest in the assets of the entity after deducting all its liabilities. They consist notably of funds contributed by shareholders, undistributed results, reserves representing the allocation of undistributed results, and reserves representing adjustments for capital maintenance.
  Article 32
  Off-balance sheet commitments represent the rights and obligations of credit institutions, the quantifiable effects on the amount and composition of assets being subject to the realization of subsequent conditions or events.
  Article 33
  Revenues are increases in economic benefits during the accounting period, in the form of inflows or increases in assets or decreases in liabilities that result in an increase in equity other than from contributions by the capital owners.
  Article 34
  Expenses are decreases in economic benefits during the accounting period, in the form of outflows or decreases in asset values, or incurrence of debts that result in a decrease in equity other than by distributions to capital owners.

Section 2: Valuation of elements constitutive of financial statements
Article 35
Valuation is the process of determining the monetary values at which financial statement elements will be accounted for and recorded in the balance sheet, off-balance sheet commitments, and income statement. It implies a choice among valuation conventions: historical cost and fair value.