Circular No. 1429 — Provides new wording for the Chart of Accounts of the Institutions of the National Financial System (COSIF). Amends items 1.7.3 and 1.11.8 and includes items 1.11.9.6 and 1.11.10.8.

CIRCULAR NO. 001429

We communicate that the Board of Directors of the Central Bank of Brazil, in a meeting held on January 18, 1989, based on Article 4, item XII of Law No. 4,595 of December 31, 1964, by competence delegated by the National Monetary Council, decided to amend items 1.7.3 and 1.11.8, and include items 1.11.9.6 and 1.11.10.8, in the Chart of Accounts of the Institutions of the National Financial System (COSIF), which shall henceforth read as follows:

"COSIF 1.7

3. Advances to Suppliers and Commitment Commissions

4. Advances to suppliers and the respective commitment commissions due by the lessee before the start of the lease contract are recorded as a debit to ADVANCES TO SUPPLIERS ON ACCOUNT OF LESSEES or ADVANCES TO SUPPLIERS ON ACCOUNT OF SUB-LESSEES.

5. Commitment commissions due as a result of advances to suppliers are recorded as a debit to ADVANCES TO SUPPLIERS ON ACCOUNT OF LESSEES or ADVANCES TO SUPPLIERS ON ACCOUNT OF SUB-LESSEES and as a credit to INCOME TO BE APPROPRIATED FROM LEASE COMMITMENT COMMISSIONS or INCOME TO BE APPROPRIATED FROM SUB-LEASE COMMITMENT COMMISSIONS, from the breakdowns of the sub-group Leases Receivable or Sub-leases Receivable.

6. Commitment commissions are recognized as effective revenue on the date they become due, in the accounts for lease income or sub-lease income, as applicable.

7. If commitment commissions are receivable through inclusion in the installments receivable, the following shall be observed:

a) they are recognized as effective revenue on the dates when such installments become due;

b) the value of advances to suppliers on account of lessees or sub-lessees is transferred to LEASED ASSETS, on the date of contract initiation;

c) the value of income to be appropriated from lease or sub-lease commitment commissions is transferred to INCOME TO BE APPROPRIATED FROM LEASES RECEIVABLE - INTERNAL RESOURCES or another appropriate account.

COSIF 1.11

8. Leasing Fixed Assets

9. Leasing Fixed Assets consists of assets owned by the institution, leased to third parties.

10. Assets subject to lease contracts are recorded in the breakdown Leased Assets, at their acquisition cost, composed of the following values: the normal price of the purchase operation plus transportation costs, insurance, taxes, and expenses necessary for installation to place the asset in perfect working condition.

11. The institution must open internal use breakdowns for the sub-titles of LEASED ASSETS, intended to record separately, the assets leased under the auspices of MF Ordinances 564/78 and 140/84.

12. Depreciation of leased assets is recognized monthly, in accordance with current legislation, and must be recorded as a debit to LEASING EXPENSES, sub-title Depreciation of Leased Assets, in counterpart with ACCUMULATED DEPRECIATION OF LEASED ASSETS, which appears as a contra-account of the sub-group Leasing Fixed Assets.

13. Accounting records and financial statements are adjusted to reflect the results of the disposal of leased assets. The adjustments are made monthly, as follows:

a) the present value of the contract installments is calculated, using the internal rate of return of each contract. For this purpose, Leases and Sub-leases Receivable, including those ceded, RESIDUAL VALUES TO BE REALIZED, including those received in advance, and those recorded in LEASE CREDITS IN LIQUIDATION are considered;

b) the book value of the contracts is determined by the sum of the following accounts:

(+) LEASES RECEIVABLE - INTERNAL RESOURCES

(+) LEASES RECEIVABLE - EXTERNAL RESOURCES

(+) LEASES RECEIVABLE IN ARREARS

(-) INCOME TO BE APPROPRIATED FROM LEASES RECEIVABLE - INTERNAL RESOURCES

(-) INCOME TO BE APPROPRIATED FROM LEASES RECEIVABLE - EXTERNAL RESOURCES

(+) SUB-LEASES RECEIVABLE

(+) SUB-LEASES RECEIVABLE IN ARREARS

(-) INCOME TO BE APPROPRIATED FROM SUB-LEASES RECEIVABLE

(+) RESIDUAL VALUES TO BE REALIZED

(-) RESIDUAL VALUES TO BE BALANCED

(+) LEASE CREDITS IN LIQUIDATION

(-) INCOME TO BE APPROPRIATED FROM LEASE CREDITS IN LIQUIDATION

(+) LEASED ASSETS

(-) VALUE TO BE RECOVERED

(-) ACCUMULATED DEPRECIATION OF LEASED ASSETS

(+) ASSETS NOT FOR OWN USE (related to commercial lease credits in liquidation);

(+) LOSSES ON LEASES TO BE AMORTIZED

(-) ACCUMULATED AMORTIZATION OF DEFERRED

Losses on Leases to be Amortized

c) the value resulting from the difference between "a" and "b" above constitutes the portfolio adjustment for each month.

6. The value of the adjustment determined according to letter "c" of the item above is recorded as a complement or reversal, in LEASING EXPENSES or LEASE INCOME - INTERNAL RESOURCES or another appropriate account, in counterpart with INSUFFICIENCIES OF DEPRECIATIONS or SURPRISES OF DEPRECIATIONS.

7. The result on the sale of residual value, resulting from the exercise of the purchase option by the lessee, or by the appropriation of the guaranteed residual value, is accounted for:

a) as a credit to PROFITS ON ALIENATION OF LEASED ASSETS, if positive;

b) as a debit to LOSSES ON LEASES TO BE AMORTIZED, if negative.

8. Profits or losses on sales to third parties, non-lessees, are recorded, respectively, as a credit to PROFITS ON ALIENATION OF VALUES AND ASSETS or as a debit to LOSSES ON ALIENATION OF VALUES AND ASSETS.

9. For the purpose of accounting for the monthly adjustment provided for in item 1.11.8.5, the following shall be observed:

a) its recording must be made at the gross value;

b) the portion of Income Tax not deductible in the period, incident on negative adjustments, must be recorded in TAX CREDITS - INCOME TAX;

c) the portion of Income Tax related to positive adjustments, due in subsequent periods, is recorded in 8.9.4.10.00-6 INCOME TAX, in counterpart with PROVISION FOR DEFERRED INCOME TAX;

d) the amount recorded in the manner of letter "b" above must be subject to a note in the financial statements, in order to highlight its effects.

10. The residual book value of assets whose purchase option was not exercised by the lessee must be transferred, upon their effective return, to ASSETS NOT FOR OWN USE, including those subject to repossession.

11. In the case of sale of the asset subject to a lease contract by the lessor to third parties for a value higher than the guaranteed residual value or purchase option, the difference must be accounted for in CREDITORS VARIOUS - COUNTRY, whose clearance occurs by return to the lessee.

COSIF 1.11.9

6. Losses on leases are amortized over the remaining useful life of the leased assets, observing the legal provisions in force.

COSIF 1.11.10

8. The amortization of losses on leases is recorded monthly as a debit to LEASING EXPENSES, in counterpart with ACCUMULATED AMORTIZATION OF DEFERRED, in the appropriate sub-title."

9. Create the following titles and sub-titles in COSIF:

1.7.1.60.00-5 ADVANCES TO SUPPLIERS ON ACCOUNT OF LESSEES - attributes AZ

1.7.1.60.10-8 Internal Resources

1.7.1.60.20-1 External Resources

FUNCTION: Record values related to advances made to suppliers, with internal or external resources, for the manufacture of goods specified by lessees and their respective commitment commissions.

1.7.1.98.00-8 INCOME TO BE APPROPRIATED FROM LEASE COMMITMENT COMMISSIONS - attribute A

FUNCTION: Record income to be appropriated arising from lease commitment commissions accounted for in ADVANCES TO SUPPLIERS ON ACCOUNT OF LESSEES.

1.7.3.60.00-1 ADVANCES TO SUPPLIERS ON ACCOUNT OF SUB-LESSEES - attributes AZ

1.7.3.60.10-4 Internal Resources

1.7.3.60.20-7 External Resources

FUNCTION: Record values related to advances made to suppliers, with internal or external resources, for the manufacture of goods specified by sub-lessees and their respective commitment commissions.

1.7.3.98.00-4 INCOME TO BE APPROPRIATED FROM SUB-LEASE COMMITMENT COMMISSIONS - attribute A

FUNCTION: Record income to be appropriated arising from sub-lease commitment commissions accounted for in ADVANCES TO SUPPLIERS ON ACCOUNT OF SUB-LESSEES.

1.7.8.20.00-8 (-) CREDITED COMMERCIAL LEASE CREDITS WITHOUT CO-OBLIGATION - attributes DIASELMN

1.7.8.20.10-1 (-) Leases Receivable - Internal Resources

1.7.8.20.20-4 (-) Leases Receivable - External Resources

1.7.8.20.30-7 (-) Sub-leases Receivable

FUNCTION: Record operations ceded under the modality of cession of credit rights, resulting from commercial lease contracts without co-obligation of the ceding institution.

3. Create the following sub-titles in their respective accounts:

1.7.1.90.60-4 Advances to Suppliers on Account of Lessees

1.7.3.90.60-0 Advances to Suppliers on Account of Sub-lessees

1.7.8.95.10-5 With Co-obligation

1.7.8.95.20-8 Without Co-obligation

4. Change the nomenclature of the following titles and sub-titles to:

2.4.1.80.00-9 LOSSES ON LEASES TO BE AMORTIZED

2.4.1.99.80-1 Losses on Leases to be Amortized

4.9.4.30.00-2 PROVISION FOR DEFERRED INCOME TAX

5. Eliminate the following titles and sub-titles:

1.8.3.10.00-5 LEASE COMMISSIONS RECEIVABLE

1.8.3.20.00-2 SUB-LEASE COMMISSIONS RECEIVABLE

2.3.1.10.00-1 ASSETS TO BE LEASED and its sub-titles

2.3.1.99.00-8 ACCUMULATED DEPRECIATION OF ASSETS TO BE LEASED

2.3.2.99.00-1 PROVISION FOR LOSSES ON SALE OF RESIDUAL VALUE

2.4.1.99.85-6 Losses on Leases - Considered IR

6. Revoke Circular No. 1,285 of January 28, 1988.

7. This Circular shall enter into force on the date of its publication, applying, where applicable, to the balance sheet dated December 31, 1988.

Brasilia-DF, January 20, 1989

Wadico Waldir Bucchi Keyler Carvalho Rocha
Director Director