Norm Reforming Articles 9, 10, and 11 of the Standard on Evaluation of Balances in Accounts Receivable and Assets Acquired in Recovery by General Warehouses

Page 1 of 5 Resolution No. CD-SIBOIF-1088-3-DIC6-2018 Dated December 6, 2018

STANDARD REFORMING ARTICLES 9, 10, AND 11 OF THE STANDARD ON EVALUATION OF BALANCES IN ACCOUNTS RECEIVABLE AND ASSETS ACQUIRED IN RECOVERY BY GENERAL WAREHOUSES

The Board of Directors of the Superintendence of Banks and Other Financial Institutions,

CONSIDERING

I That on May 6, 2011, the Standard on Evaluation of Balances in Accounts Receivable and Assets Acquired in Recovery by General Warehouses was approved, contained in Resolution No. CD-SIBOIF-675-2-MAY6-2011, published in La Gaceta, Official Gazette, No. 130 of July 13, 2011.

II That it is necessary to adapt the provisions contained in the aforementioned standard, in accordance with the new Accounting Framework applicable to General Warehouses, which is based on a combination of International Financial Reporting Standards (IFRS) and prudential regulations issued by this Superintendence.

III That based on the authority conferred by Articles 2 and 139 of Law 734, General Warehouse Law; and Article 2, fourth paragraph, Article 3, item 13), and Article 10, item 2) of Law 316, Law of the Superintendence of Banks and Other Financial Institutions, and its reforms; contained in Law No. 974, Law of the Nicaraguan Legal Digest on Banking and Finance Matters, published in La Gaceta, Official Gazette No. 164, of August 27, 2018, and its reforms.

In exercise of its powers,

HAS ISSUED, The following:

Resolution No. CD-SIBOIF-1088-3-DIC6-2018 STANDARD REFORMING ARTICLES 9, 10, AND 11 OF THE STANDARD ON EVALUATION OF BALANCES IN ACCOUNTS RECEIVABLE AND ASSETS ACQUIRED IN RECOVERY BY GENERAL WAREHOUSES

FIRST: Articles 9, 10, and 11 of the Standard on Evaluation of Balances in Accounts Receivable and Assets Acquired in Recovery by General Warehouses, contained in Resolution No. CD-SIBOIF-675-2-MAY6-2011, dated May 6, 2011, published in La Gaceta, Official Gazette, No. 130 of July 13, 2011, are hereby amended, which shall read as follows:

Page 2 of 5

"Art. 9 Valuation Criteria.- Adjudicated goods shall be valued in accordance with the analysis and documentation criteria referred to in the regulations governing the operational and financial matters of general warehouses.

In the case of adjudicated real estate, the valuation of such assets must be performed based on the estimate of the realization value in accordance with the regulations governing appraisers who provide services to institutions of the Financial System.

All real estate whose book value in national currency or foreign currency is greater than the equivalent in cordobas of twenty-five thousand United States dollars (US$25,000.00), at the official exchange rate, must have valuations performed by independent appraisers of the warehouse, duly registered in the Register of Appraisers of the Superintendence of Banks.

The valuation of shares and rights in companies, and generally, financial instruments that have been received in satisfaction of debt or adjudicated, shall be performed at fair value in accordance with the criteria defined in IFRS 13.

The general warehouse shall determine whether the adjudicated asset is recorded as non-current assets held for sale in accordance with the criteria of IFRS 5, or as assets received from recoveries, in case the criteria established in the aforementioned IFRS are not met.

Recognition and Measurement of Adjudicated Assets under IFRS 5 Non-Current Assets Held for Sale.

An entity shall classify an adjudicated asset as a non-current asset held for sale when it meets the criteria established in IFRS 5. The accounting procedure is as follows:

1. Classification to Non-Current Assets Held for Sale (IFRS 5) from the date of asset adjudication.

The institution, for initial registration in accordance with IFRS 5, must take the lower of: a) The amount agreed in the transfer in payment, or adjudication at auction in accordance with the General Warehouse Law or in judicial auction as applicable; this is considered as the cost of the asset, and its b) Fair value (determined in accordance with IFRS 13) less selling costs (in accordance with IFRS 5).

The financial institution must write off the outstanding balance of the credit against the provision, and in case there is a provision surplus, it must be reversed in the corresponding account of the statement of results, being controlled in the sub-account of Undistributable Current Year Result.

Subsequently, all provisions established in IFRS 5 apply.

Page 3 of 5

2. Reclassification of Assets Received in Credit Recovery to Non-Current Assets Held for Sale (IFRS 5).

This is the case when an adjudicated asset meets the IFRS 5 criteria after adjudication and registration as Assets Received in Credit Recovery.

The reclassification can be made to the Non-Current Assets Held for Sale account and will be performed at the lower of: a) The initial amount recognized in the Assets Received in Credit Recovery account, without considering provisions, and its b) Fair value (determined in accordance with IFRS 13) less selling costs (in accordance with IFRS 5).

For assets that are reclassified to IFRS 5 in the Opening Balance applying what is established in IFRS 1 First-time Adoption of International Financial Reporting Standards, the accumulated provision for these shall be reversed in the corresponding sub-account of Transition Adjustment.

The reclassification of Assets Received in Credit Recovery to IFRS 5 can only be performed in a period not exceeding 6 months counted from the date of adjudication.

In case there is an excess provision resulting from the reclassification of the asset received in credit recovery to non-current assets held for sale, this must be reversed in the corresponding account of the statement of results, being controlled in the sub-account of Undistributable Current Year Result.

Subsequently, all provisions established in IFRS 5 apply.

3. Changes in the sales plan of the asset classified as Non-Current Assets Held for Sale (IFRS 5).

When there is a change in the sales plan because the IFRS 5 criteria are no longer met, the asset will be reclassified to the Assets Received in Credit Recovery account, at the book amount recognized in the Non-Current Assets Held for Sale account, adjusted from the date of adjudication, by the provision established in Article 10 of this standard, for which it must consider the provision constituted as impairment, and in case there is a provision deficit, this shall be constituted against the corresponding expense account of the statement of results.

When the change in the sales plan corresponds to assets that were originally reclassified to IFRS 5 in the opening financial statements of January 1, 2018, the provision to be constituted from the date of adjudication shall be debited from the Transition Adjustment account, provided that the specific asset has a positive balance in the aforementioned account for this concept. In case there is a provision deficit as required in Article 10 of this standard, this shall be constituted and recognized as an expense in the corresponding account of the statement of results.

Subsequently, the remaining positive balance of the specific asset, registered in the Transition Adjustment account, can be: i) reversed against accumulated results until the asset is sold; ii)

Page 4 of 5

and while the asset is not sold, it will complement the provision requirement established in Article 10 of this standard.

An asset registered as IFRS 5 and reclassified to the Assets Received in Credit Recovery account cannot be reclassified again under the scope of IFRS 5.

4. Treatment of Undistributable Results.

Amounts registered in the sub-account of Undistributable Current Year Result and Undistributable Accumulated Results of Previous Years, shall be distributable until the sale of the asset that generated it is performed or 100% provision is registered.

Art. 10 Constitution of Provisions.- In the case of adjudication of assets received in recovery of accounts receivable, the warehouse must transfer the respective provisions from accounts receivable to provisions for adjudicated assets received in recoveries, until the cancellation by the sale of the asset is performed.

In any case, the accounted provision cannot be less than the following percentages of the value of the asset registered in the books: a) In movable assets: 30% From its registration until 6 months after the adjudication of the asset. 100% After 6 months of the adjudication of the asset. b) In real estate: 30% After 6 months until 12 months from the adjudication. 50% After 12 months and up to 18 months from the adjudication. 75% After 18 months until 24 months from the adjudication. 100% After 24 months from the adjudication.

Art. 11 Reversal of Constituted Provisions.- The constituted provisions may be reversed once the sale of the corresponding asset is performed, considering previously against these provisions, the possible losses that are determined by the effect of the decrease in the value of the asset at the time of sale. If the asset in question is sold for a higher value, both the excess of the sale value and the constituted provisions must be registered as gain on sale of various assets.

The provisions of assets received in credit recovery, reclassified to non-current assets held for sale (IFRS 5), must be reversed, registering income from decrease in provision of assets received in credit recovery."

SECOND: The provisions established in this standard shall govern from January 1, 2019; nevertheless, for the purposes of implementation of IFRS 1 - First-time Adoption of International Financial Reporting Standards, General Warehouses must apply these provisions to the first financial statements generated during the transition period, as referred to in the regulations governing the matter on implementation of Accounting Frameworks.

THIRD: This standard shall enter into force upon its notification, without prejudice to its subsequent publication in La Gaceta, Official Gazette. (F) S. Rosales C (F) V. Urcuyo (F) Fausto Reyes B. (F) Illegible (Silvio Moisés Casco Marenco) (F) Illegible (Rafael Ángel Avellán Rivas) Secretary.

RAFAEL ÁNGEL AVELLÁN RIVAS Secretary of the Board of Directors SIBOIF