COMMISSION BANCAIRE DE L’AFRIQUE CENTRALE

COBAC REGULATION R-2003/01 ON THE ORGANIZATION OF CREDIT INSTITUTIONS' ACCOUNTING

The Central African Monetary Commission, meeting on January 15, 2003;

Having regard to the Convention of October 16, 1990 establishing a Central African Monetary Commission;

Having regard to Articles 1 and 9 of the Annex to the Convention of October 16, 1990;

Having regard to the Convention of January 17, 1992 on harmonization of banking regulation in Central African States;

Having regard to Articles 32 and 36 of the Annex to the Convention of January 17, 1992;

Having regard to Articles 31, 32 and 34 of the Convention governing the Central African Monetary Union;

Having regard to the Uniform Act on organization and harmonization of accounting of companies located in States party to the Treaty relating to Harmonization of Business Law in Africa;

Having regard to the Uniform Act relating to commercial company law and economic interest grouping in States party to the Treaty relating to Harmonization of Business Law in Africa;

Having regard to COBAC Regulation R-98/01 on the chart of accounts for credit institutions;

Having regard to COBAC Regulation R-2001/07 on internal control in credit institutions;

---

TITLE I: INDIVIDUAL ACCOUNTS

CHAPTER I: GENERAL PROVISIONS

Article 1- Every credit institution, as defined by the Convention of October 16, 1990, is required to establish an accounting system intended for both external information and internal use. To this end:

• it classifies, records, and registers in its accounting all transactions involving value movements that are processed with third parties or recorded/carried out within its internal management;
• it provides, after appropriate processing of these transactions, the account statements to which it is legally or statutorily subject, as well as information necessary for various users.

Article 2- Accounting must satisfy, while respecting the prudence principle, the obligations of regularity, sincerity, and transparency inherent in the preparation, control, presentation, and communication of the information it processes.

Article 3- To guarantee the reliability, understanding, and comparability of information, each credit institution's accounting implies:

• the respect for a terminology and guiding principles common to all credit institutions;
• the implementation of standardized conventions, methods, and procedures;
• an organization that meets at all times the requirements for collecting, maintaining, controlling, presenting, and communicating accounting information relating to the institution's transactions as referred to in Article 1.

Article 4- The pursuit of the objectives assigned to accounting for collecting, maintaining, controlling, presenting, and communicating by credit institutions information established under the same conditions of reliability, understanding, and comparability is ensured by the correct application of the Chart of Accounts for Credit Institutions (PCEC) issued by COBAC Regulation R-98/01.

Article 5- The application of the PCEC implies that:

• the prudence rule is in all cases observed, based on a reasonable assessment of events and transactions to be recorded for the fiscal year;
• the institution complies with existing rules and procedures by applying them in good faith;
• account managers establish and implement internal control procedures essential to the knowledge they should normally have of the reality and importance of events, transactions, and situations related to the institution's activity;
• information is presented and communicated clearly without intent to conceal reality behind appearance.

---

TITLE I: INDIVIDUAL ACCOUNTS (CONTINUED)

Article 6- Each credit institution is required to produce periodic financial statements comprising: monthly or quarterly financial statements, semi-annual financial statements, and annual financial statements.

a) Monthly or quarterly financial statements aggregate accounting information obtained by cumulating balances at the end of the previous period and all transactions recorded over a one-month period, for credit institutions licensed as banks, and three months, for those licensed as financial establishments. They comprise the Monthly or Quarterly Statement and supplementary statements.

b) Semi-annual financial statements aggregate accounting information obtained by cumulating balances at the end of the previous period and all transactions recorded over a six-month period. They comprise the Income Statement and supplementary statements.

c) Annual financial statements aggregate accounting information over a twelve-month period, called the fiscal year. The fiscal year coincides with the calendar year. The duration of the fiscal year is exceptionally less than twelve months for the first fiscal year beginning during the first half of the calendar year. This duration may exceed twelve months for the first fiscal year beginning during the second half of the year. In case of cessation of activity, for any reason, the duration of liquidation operations is counted as a single fiscal year, subject to preparation of provisional annual statements. Annual financial statements comprise the Balance Sheet, Income Statement, Financial Table of Resources and Uses, as well as the Supplementary Statement.

Article 7- Each set of periodic financial statements forms an inseparable whole and describes regularly and sincerely the events, transactions, and situations of the period to provide a true and fair view of the institution's assets, financial position, and, where applicable, results. It is prepared and presented in accordance with provisions of Articles 20 to 26 below, so as to allow comparison over time, period by period, and with periodic financial statements of other credit institutions prepared under same conditions of regularity, fidelity, and comparability.

Article 8- Regularity and sincerity of information grouped in institution's periodic statements result from an adequate, fair, clear, precise, and complete description of events, transactions, and situations relating to covered period.

Comparability of periodic financial statements over successive periods requires permanence in terminology and methods used to trace events, transactions, and situations presented in these statements.

Article 9- Any institution that correctly applies the PCEC is deemed to provide, in its financial statements, the true and fair view of its situation and operations required under Article 7 above.

When application of an accounting requirement proves insufficient or unsuitable to provide this view, supplementary information or necessary justifications are obligatorily communicated by the institution to the General Secretariat of the Central African Monetary Commission and mentioned in the Supplementary Statement attached to annual financial statements.

CHAPTER II: ACCOUNTING ORGANIZATION

Article 10- Accounting organization established in the institution must satisfy regularity and security requirements to ensure authenticity of entries so that accounting can serve as both a measurement instrument for rights and obligations of institution's partners, an evidentiary instrument, a tool for third-party information, and management.

Article 11- Accounting organization must ensure:

• exhaustive, day-to-day, and timely recording of basic information;
• prompt processing of recorded data;
• making available to users required documents within legal deadlines set for their issuance.

Article 12- To maintain continuity in access to information over time, every institution prepares documentation describing accounting procedures and organization.

This documentation is retained as long as presentation of successive financial statements to which it relates is required.

Article 13- Accounting organization must at least respect following regularity and security conditions: a) maintenance of accounting in official language(s) of country and in Central African CFA francs (FCFA or XAF); b) use of double-entry technique, resulting in an entry affecting at least two accounts, one debited and other credited. When a transaction is recorded, total of amounts entered in debit accounts must equal total of amounts entered in credit accounts; c) justification of entries by dated documents, retained and classified in order defined in document describing procedures and accounting organization, capable of serving as evidence, bearing references to their accounting registration and guaranteeing existence of an audit trail; d) respect for chronological recording of transactions.

Transactions affecting institution's assets are recorded in accounting, transaction by transaction, in order of their accounting value date. This date is that of issuance by institution of supporting document or receipt of original external documents. Transactions of same nature carried out in same location and during same day may be summarized on a single supporting document.

Movements are summarized by predetermined periods not exceeding one month.

A procedure to guarantee finality of these movements must be implemented. e) identification of each registration specifying its origin and allocation, content of transaction to which it relates, as well as references to supporting document backing it; f) inventory control of existence and value of institution's assets, receivables, and debts. Inventory operation consists of noting all elements of institution's assets by mentioning their nature, quantity, and value at inventory date. Inventory data are organized and retained to justify content of each listed asset element; g) use, for maintaining institution's accounting, of standardized chart of accounts whose list is in PCEC; h) mandatory maintenance of books or other authorized supports as well as implementation of approved processing procedures, enabling preparation of periodic financial statements referred to in Article 7 above.

Article 14- Accounts in PCEC are grouped by homogeneous categories called classes.

For general accounting, classes include:

• balance sheet accounts;
• management (income/expense) accounts.

Each class is subdivided into main accounts identified by two-digit numbers, subsidiary accounts identified by three-digit numbers, and sub-accounts identified by four or more digits, depending on their degree of dependence relative to higher-level accounts, within a decimal codification framework.

Each institution's chart of accounts must be sufficiently detailed to allow transaction recording.

When PCEC-provided accounts are insufficient for institution to record all its transactions distinctly, it may open all necessary subdivisions.

Conversely, if PCEC-provided accounts are too detailed relative to institution's needs, it may group them into a single global account at same level, more contracted, in accordance with PCEC possibilities and provided that resulting grouping at least allows preparation of periodic financial statements under prescribed conditions.

Transactions are recorded in accounts whose titles correspond to their nature.

Article 15- Accounting books and other mandatory supports are:

• the journal, in which transactions of fiscal year recorded in accounting are entered, under conditions set out in paragraph d) of Article 13 above;
• the ledger, consisting of all accounts of institution, where transactions of fiscal year are posted or entered simultaneously with journal, account by account;
• the general trial balance, a summary statement showing, at period closing, for each account, opening debit or credit balance, cumulative debits and credits since period opening, and closing debit or credit balance at considered date;
• the inventory book, on which Balance Sheet and Income Statement of each fiscal year are transcribed, as well as a summary of inventory operation.

Preparation of journal and ledger may be facilitated by maintaining auxiliary journals or books, or supports serving as such, depending on institution's size and needs. In this case, totals from these supports are periodically centralized at least once a month in journal and ledger respectively.

Article 16- Accounting books and other supports must be maintained without blanks or any kind of alteration.

Any correction of errors is made exclusively by negative entry of erroneous elements; exact registration is subsequently performed.

Article 17- When based on computer processing, accounting organization must use procedures that satisfy regularity and security requirements in this regard, such that: a) data relating to any transaction subject to registration include, upon entry into accounting processing system, indication of origin, content, and allocation of said transaction, and can be output on paper or in a directly intelligible form; b) irreversibility of processed transactions precludes any subsequent deletion, addition, or modification of registration; every entered data must undergo validation to guarantee finality of corresponding accounting entry; this validation procedure must be implemented at end of each period not exceeding one month; c) transaction chronology excludes any possibility of intermediate insertion or subsequent addition; to freeze this chronology, accounting processing system must provide a periodic procedure (called "computer closing") at least monthly for banks and quarterly for financial establishments, implemented respectively no later than end of month or quarter following considered period; d) accounting entries of a closed period are classified in chronological order of accounting value date of transactions to which they relate; however, when accounting value date corresponds to an already closed date, concerned transaction is recorded on first day of not-yet-closed period; in this case, accounting value date is distinctly mentioned in description; e) durability of recorded data offers guarantee and retention conditions conforming to current regulations; any indelible transcription causing irreversible modification of support will be deemed durable in particular; f) accounting organization guarantees all possibilities for eventual control by enabling reconstruction or restitution of audit trail and granting access to documentation relating to analyses, programming, and processing procedures, notably for conducting necessary tests for such control; g) periodic statements provided by processing system are numbered and dated; each registration must be backed by a supporting document established on paper or a support ensuring reliability, retention, and clear restitution of its content during required periods; each data entered into processing system via transmission from another processing system must be supported by probative supporting documentation.

Article 18- Monthly and quarterly financial statements are prepared no later than fifteen days following their cutoff date.

Semi-annual financial statements are prepared no later than three months following their cutoff date.

Annual financial statements are finalized no later than four months following end of fiscal year.

Cutoff date must be mentioned in any transmission of financial statements.

Article 19- Accounting books or documents serving as such, as well as supporting documents, are retained for ten years.

CHAPTER III: PERIODIC FINANCIAL STATEMENTS

Article 20- Monthly or quarterly financial statements and semi-annual financial statements referred to in Article 6 above are presented in accordance with models fixed by instructions of President of Central African Monetary Commission taken under application of Article 3 of COBAC Regulation R-98/01 on chart of accounts for credit institutions.

Annual financial statements referred to in Article 5 above are presented in accordance with models fixed by instruction of President of Commission under this Regulation. They comprise preparation of Balance Sheet, Off-Balance Sheet, Income Statement for fiscal year, Financial Table of Resources and Uses for fiscal year, as well as a Supplementary Statement.

Article 21- Balance Sheet for fiscal year separately describes asset elements and liability elements constituting institution's assets. It distinctly shows equity capital. It also distinctly shows, on asset side: amounts deductible from permanent capital, immobilized values, customer operations, other transactions, and treasury and interbank operations; on liability side: permanent capital, customer operations, other transactions, and treasury and interbank operations.

Article 22- Off-Balance Sheet shows amount of commitments given and received, whose monitoring must be ensured by institution within its accounting organization.

Article 23- Income Statement summarizes revenues and expenses that show, by difference, net profit or net loss of fiscal year. Classification of revenues and expenses allows establishment of characteristic management balances under conditions defined by PCEC.

Article 24- Financial Table of Resources and Uses traces resource flows and use flows for fiscal year. It shows, for fiscal year, investment and financing flows, other uses, financial resources, and variation in treasury.

Article 25- Supplementary Statement completes and specifies information provided by other annual financial statements. It includes all significant elements not highlighted in other financial statements and capable of influencing judgment that document recipients may form regarding institution's assets, financial position, and results.

Any modification in presentation of annual financial statements or evaluation method must be noted in Supplementary Statement.

Article 26- Annual financial statements of each institution respect following provisions:

• opening balance sheet of a fiscal year must correspond to closing balance sheet of previous fiscal year;
• except for cases explicitly mentioned in PCEC, any non-legally founded compensation between asset items and liability items in Balance Sheet and between expense items and revenue items in Income Statement is prohibited;
• presentation of annual financial statements is identical from one fiscal year to another;
• each item in annual financial statements includes amount related to corresponding item of previous fiscal year.

When, due to a change in accounting method, one of numerical items in an annual financial statement is not comparable to that of previous fiscal year, it is latter that must be adapted. Lack of comparability or adaptation of amounts is noted in Supplementary Statement.

CHAPTER IV: EVALUATION AND RESULT DETERMINATION RULES

Article 27- Evaluation method for elements recorded in accounting is based on historical cost convention and application of general prudence and going concern principles. However, revaluation of elements may be carried out under conditions fixed by competent authorities and respecting provisions of Articles 46 to 49 below.

Article 28- Historical cost of assets recorded on balance sheet consists of:

• actual acquisition cost for those purchased from third parties, contribution value for those contributed by State or partners, current value for those acquired free of charge or, in case of exchange, by value of either of two elements whose estimation is most reliable;
• actual production cost for those produced by institution for itself.

Subsidies obtained, where applicable, for acquisition or production of an asset do not influence calculation of cost of acquired or produced asset.

Article 29- Actual acquisition cost of an asset is formed by final purchase price, ancillary charges directly attributable to purchase operation, and installation charges necessary to put asset into usable condition.

Actual production cost of an asset is formed by acquisition cost of materials and supplies used for this production, direct production charges, as well as indirect production charges to extent they can be reasonably attributed to production of asset.

Article 30- When different assets are acquired jointly or produced inseparably for a global acquisition or production cost, entry cost of each considered asset is determined under following conditions:

• if assets are subsequently individualized, initial global cost is allocated proportionally to value attributable to each of them, after defining valuation method;
• in cases where not all assets can be individually valued by reference to a market price, or on a lump-sum basis if no market price exists, those assets not directly valued will be calculated by difference between initial global cost and valuation of other asset(s).

Mention must be made in Supplementary Statement of procedures for...