PERÚ Ministry of Economy and Finance
SMV
Superintendency of the Market in Securities

"Decade of Equal Opportunities for Women and Men" "Year of the Bicentennial, of the consolidation of our Independence, and of the commemoration of the heroic battles of Junín and Ayacucho"

Deputy Superintendency Resolution SMV No. 003-2024-SMV/11

Lima, 01 February 2024

Summary: Sanction JCR Latino América Empresa Clasificadora de Riesgo S.A. with a total fine of 10 UIT, for having incurred in one (1) infraction of a serious nature typified in subsection 2.8 of numeral 2 of Annex I of the Sanctions Regulation

Administered : JCR Latino América Empresa Clasificadora de Riesgo S.A.

Subject
:
Administrative Sanctioning Procedure of dual instance administrative

Main Type : Subsection 2.8 of numeral 2 of Annex I of the Sanctions Regulation SERIOUS INFRACTION

File No. : 2023011431

The Deputy Superintendent (e) of Supervision of Market Conducts

WHEREAS:

Administrative file No. 2023011431, containing the administrative sanctioning procedure initiated by the General Intendancy of Conduct Compliance of the Superintendency of the Market in Securities – SMV (hereinafter, the IGCC), against JCR Latino América Empresa Clasificadora de Riesgo S.A. (hereinafter, JCR Latam); as well as Report No. 717-2023-SMV/11.2 (hereinafter, the Report), issued by said IGCC;

CONSIDERING:

I. FUNCTION AND COMPETENCE OF THE SASCM

1. That, the IGCC —instructing body of the administrative sanctioning procedures (hereinafter, the PAS) referred to in the

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present case—, has brought to the knowledge of the Deputy Superintendency of Supervision of Market Conducts of the SMV (hereinafter, SASCM), the PAS of administrative file No. 2023011431 in order for it to issue a decision as the first instance sanctioning body in said PAS. In this way, the SASCM assumes competence in observance of the exercise of the supervision function and the sanctioning power of the Superintendency of the Market in Securities – SMV established by the Single Concorded Text of its Organic Law, Legislative Decree No. 26126 (hereinafter, LOSMV), and the Single Ordered Text of the Securities Market Law, Legislative Decree No. 861, approved by Supreme Decree No. 020-2023-EF-11 (hereinafter, TUO LMV); as well as by the provisions of the Sanctions Regulation, approved by SMV Resolution No. 035-2018-SMV/01 (hereinafter, Sanctions Regulation); and, in articles 42 and 43 of the Regulation of Organization and Functions of the Superintendency of the Market in Securities – SMV, approved by Supreme Decree No. 216-2011-EF (hereinafter, ROF-SMV), in the sense that it is a specific function of the SASCM to impose sanctions in the first administrative instance for the commission of infractions whose compliance control corresponds to the referred Deputy Superintendency. Likewise, the SASCM has the powers to issue corrective measures aimed at reversing the situation altered by the commission of the infraction;

2. That, the present PAS corresponds to two (2) administrative instances in accordance with article 15 of the Sanctions Regulation, and to the provisions of numeral 26 of article 12 of the ROF-SMV, which establish that the Superintendent of the Market in Securities resolves appeals against resolutions issued in the first instance by the Deputy Superintendent of the SASCM, with the exception of single-instance procedures;

II. FACTS, CHARGES, DEFENSES AND ALLEGATIONS

2.1 Facts

3. That, it was evaluated whether JCR Latam would not have observed the provisions of the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB) in force internationally, in the presentation of its Audited Annual Individual Financial Statements corresponding to fiscal year 2019;

2.2 Charges

4. That, as a result of said evaluation, through Official Letter No. 1350-2023-SMV/11.2 (hereinafter, the Charges Letter) of 4 April 2023, the following charge was formulated:

The charge subject of the present PAS refers to that JCR Latam has breached the IFRS, in particular IAS 12 "Income Taxes", paragraphs 34, 35 and 36, being that as a result of the tax losses obtained during fiscal years 2016, 2017 and 2018 for a total of S/1’093,247.00, JCR Latam recognized in its Interim Individual Financial Statements as of 31 December 2019 an item called "Assets

[1] Through Supreme Decree No. 020-2023-EF, published on 10 February 2023 in the Official Gazette El Peruano, the Single Ordered Text of the Securities Market Law, Legislative Decree No. 861, was approved.

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for deferred income tax»2 for S/ 322,508.00, as a tax benefit that JCR Latam would obtain by offsetting such losses in the following tax periods, in accordance with the provisions of article 50° of the Income Tax Law.

The aforementioned rule grants income tax taxpayers the offset of their tax losses in the following years, in which tax profits are generated, in such a way that a lower taxable base is obtained and, consequently, a lower tax payable.

It should be noted that from the Report of RSM Panez Chacaliaza & Asociados SCRL (hereinafter, SOA Panez) entitled «First-time adoption of International Financial Reporting Standards» and submitted by JCR Latam in the Inspection (File No. 2019042033), it is observed that the accumulated tax loss as of 31 December 2018 is S/ 1,093,247.00, according to Table No. 1, below:

CUADRO N° 1: PÉRDIDA TRIBUTARIA ACUMULADA AL 31 DE DICIEMBRE DE 2018

Ejercicio	Pérdida Tributaria S/
2016	285,397
2017	269,040
2018	538,810
Accumulated Tax Loss	1,093,247

[Fuente:] Source: Report of RSM Panez Chacaliaza & Asociados SCRL «First-time adoption of International Financial Reporting Standards»

The loss offset established in the Income Tax Law allows taxpayers to obtain a tax credit or saving in the following years: i) under system A during the four (4)3 immediately following years, or ii) under system B during all subsequent taxable years, subject to certain conditions.

In this sense, in the preparation of the Annual Individual Audited Financial Statements as of 31 December 2018 (hereinafter, Audited Financial Statements 2018), the Management of JCR Latam determined that, based on its projections, it would obtain sufficient income in the following years to offset its accumulated tax loss, in such a way that it would benefit from a tax saving of income tax of S/

[2] In accordance with IAS 12 paragraph 5, deferred tax assets are the amounts of income taxes recoverable in future periods, related to: a) deductible temporary differences; b) the offset of losses obtained in previous periods that have not yet been subject to tax deduction; and c) the offset of unused credits from previous periods.

[3] Through Legislative Decree No. 1481 published on 08 May 2020, taxpayers domiciled in Peru generating third-category income who opt or have opted for System A are exceptionally authorized to offset the third-category loss they record only in the 2020 taxable year, imputing it year by year until exhausted, against the net third-category income obtained in the five (5) immediately following years, counted from the 2021 taxable year.

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322,508.00, which corresponds to 29.5%4 of its accumulated tax loss as of 31 December 2018 (S/ 1,093,247.00).

In relation to said tax benefit, JCR Latam recognized in its Audited Financial Statements 2018 an asset called "Deferred Tax Asset" for S/ 322,508 and disclosed in note 17.7 of said financial statements that "it is currently applying method A for the offsetting of its losses". JCR Latam continued to recognize the aforementioned deferred asset in its Individual Interim Financial Statements as of 31 March, 30 June, 30 September and 31 December 2019, according to Table No. 2, below:

TABLE No. 2: Recognition of the deferred asset in its financial information

JCR Latam Financial Statements	Deferred Tax Asset S/
Audited Financial Statements as of 31.12.18	322,508.00
Interim Financial Statements as of 31.03.19	322,508.00
Interim Financial Statements as of 30.06.19	322,508.00
Interim Financial Statements as of 30.09.19	322,508.00
Interim Financial Statements as of 31.12.19	322,508.00

Source: Institutional Website of the SMV on the Single Digital Platform of the Peruvian State for Citizen Guidance (www.gob.pe/smv)

In this regard, consideration must be given to the provisions of IAS 12 "Income Taxes", paragraph 345, which establishes that a deferred tax asset must be recognized for the offsetting of unused tax losses or credits, provided that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized.

Additionally, paragraph 34 of IAS 12 refers to paragraphs 35 and 36, which state the following:

"35. (…) the existence of unused tax losses may be evidence to assume that, in the future, taxable profits will not be available. Therefore, when an entity has a history of recent losses, it shall recognize a deferred tax asset arising from unused tax losses or credits only if it has a sufficient amount of taxable temporary differences, or if there is some other convincing evidence that it will have sufficient future taxable profit against which to charge such losses or credits. (…)

[4] In accordance with Legislative Decree No. 1261, the income tax rate that taxes net third-category income for fiscal year 2018 is 29.5%.

[5] “34 A deferred tax asset should be recognized, provided that it can be offset against future periods' taxable profits, unused tax losses or tax credits [Reference: paragraphs 35 and 36] that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized.”

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36. When assessing the probability of having taxable profits against which the unused tax losses or tax credits can be charged, the entity may consider the following criteria:

(a) if the entity has sufficient taxable temporary differences, related to the same tax authority, and referring to the same taxable entity, that may give rise to taxable amounts, in sufficient quantity to use the unused tax losses or tax credits against them, before the right of use expires;

(b) if it is probable that the entity will have taxable profits before the right to offset the unused tax losses or tax credits expires;

(d) if the entity has tax planning opportunities (see paragraph 30) that will generate taxable profits in the periods in which the losses or tax credits can be utilized.

To the extent that it is not probable that taxable profits will be available against which the unused tax losses or tax credits can be utilized, deferred tax assets will not be recognized.” (Underlining and highlighting added).

In this regard, during the Inspection, JCR Latam was requested, through Memorandum No. 3995-2019-SMV/11.1 dated 30 October 2019, the “Technical and legal documentation supporting the recording of tax losses in the Deferred Tax Asset account”, in order to determine compliance with the criteria established in IAS 12 for the recognition of a deferred tax asset.

In response, JCR Latam submitted as support, in its brief dated 21 November 2019, the report dated 8 April 2019, entitled «First-time adoption of International Financial Reporting Standards» prepared by its auditors SOA Panez, the firm in charge of the audit of its Audited Financial Statements 2018.

The aforementioned report includes an annex entitled «Annex 2. Report of Projected Income Statements» that contains illegible information; however, during the process of supporting working papers carried out on 12 July 2019 by the General Superintendence of Conduct Supervision of the SMV (hereinafter, IGSC) to SOA Panez (File No. 2019028421), through its audit report on the Audited Financial Statements 2018, the document entitled «Projected Financial Statements 2019-2028» prepared and signed by JCR Latam was obtained, (Annex 1 of the Statement of Charges), in which said company presents the premises and hypotheses on which it would have based the projections of its financial statements.

Indeed, from the evaluation of said document, the following was observed:

JCR Latam determined annual growth ratios at the level of revenues (30%), total number of clients (17.02%), number of new clients (15%), cost of sales (15%), administrative expenses (15%) and selling expenses (15%); without presenting numerical and objective information (calculations, historical data, etc.) that supports such estimates.

JCR Latam's estimates are based on assumptions that cannot be measurable and/or on evidence that can be verifiable, as observed in the following text extracted from the aforementioned document:

“These premises are supported by the following points:

The knowledge of the public issuance market (BVL, MAV) and the perspectives of the private issuance market, which is the one that grows the most annually, are made contemplating a scenario with a high probability of occurrence and quite conservative, which is additionally supported by the growth in the number of the company's clients between 2017 and 2018.
The greater knowledge of our firm in the market of issuers and structurers, supported by the growth of the firm as well as by the backing of the strategic partner (Japan Credit Rating Ltd.) and the differentiated value of the service.
The greater work of brand promotion.
Active participation in MAV issues.
In those criteria dependent on estimates based on actual figures obtained in fiscal year 2018, which was the company's first year of activity.”
JCR Latam does not specify the assumptions related to macroeconomic indicators such as interest rates, exchange rates, inflation adjustments, sector analysis or others.
JCR Latam has projected profits for the following ten (10) years based on the financial statements corresponding to fiscal year 2018 that reflect losses before income tax.

As a result of the evaluation of the financial projections on the basis of which JCR Latam has recognized a Deferred Tax Asset of S/ 322,508 in its Audited Financial Statements 2018 and in its interim financial statements for fiscal year 2019; and, considering that at the close of fiscal year 2018 JCR Latam had a history of losses since the beginning of its activities, the following is observed in relation to compliance with the criteria established in paragraphs 34, 35 and 36 of IAS 12:

a) Absence of taxable temporary differences available against which the tax losses obtained in fiscal years 2016, 2017 and 2018 can be used or offset in the future.

b) Lack of convincing evidence of probable taxable profits before the four (4) years expire to have the right to offset the unused losses.

In that sense, with the foregoing, it is verified that JCR Latam did not have the convincing evidence required in paragraph 35 of IAS 12 to determine that it was probable that sufficient future taxable profits would be available against which to offset its losses; therefore, in accordance with paragraph 36 of IAS 12, JCR Latam should not have recognized the deferred tax asset in the Individual Interim Financial Statements as of 31 December 2019.

Consequently, JCR Latam would not have complied with paragraphs 34, 35 and 36 of IAS 12 in the preparation of its Individual Interim Financial Statements as of 31 December 2019, submitted to the SMV on 17 February 2020 (File No. 2020006056), period in which JCR Latam recognized a Deferred Tax Asset of S/ 322,508.

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It should be noted that the future taxable profits that an entity would have obtained after the recognition of the deferred tax asset do not evidence, in any way, compliance with the requirements established in IAS 12, which must be met at the time of recognition of the asset. Without prejudice to the foregoing, an analysis of variations between the projected and actual results presented in its audited financial statements was carried out:

TABLE No. 3: Income Statement as of 31.12.19

Items	Income Statement as of 31.12.19		Diff. %
	Projected	Actual *
Revenues	1’671,201	550,299	204%
Other Income	83,560	-	100%
Cost of Sales	(1’008,988)	(365,467)	176%
Administrative and Selling Expenses	(290,282)	(313,993)	8%
Financial Expenses	(1,150)	(51,385)	98%
Results for the Year	456,642	(276,037)	265%

[*] *As recognized in the Audited Annual Individual Financial Information for fiscal year 2019

TABLE No. 4: Income Statement as of 31.12.20

Items	Income Statement as of 31.12.20		Diff. %
	Projected	Actual
Revenues	2’069,275	760,590	172%
Other Revenues	103,464	-	100%
Cost of Sales	(1’249,325)	(270,590)	362%
Administrative and Selling Expenses	(333,824)	(277,839)	20%
Financial Expenses	(1,323)	-	100%
Results for the Year	590,912	253,915	133%

[*] *As recognized in the Audited Annual Individual Financial Information for the 2020 fiscal year

TABLE No. 5: Income Statement as of 31.12.21

Items	Income Statement as of 31.12.21		Diff. %
	Projected	Actual
Revenues	2’562,695	616,533	316%
Other Revenues	128,135	-	100%
Cost of Sales	(1’547,227)	269,734	674%
Administrative and Selling Expenses	(383,898)	299,164	228%
Financial Expenses	(1,521)	6,329	124%
Results for the Year	761,226	129,738	487%

[*] *As recognized in the Audited Annual Individual Financial Information for the 2021 fiscal year

It should be noted for informational purposes that, in the Audited Annual Financial Information for the 2019 fiscal year, JCR had losses in the amount of S/ 276,037; in the Audited Annual Financial Information for the 2020 fiscal year, the auditor indicated that the deferred tax asset line item was overstated; in the Audited Annual Financial Information for the 2021 fiscal year, it obtained profits of S/ 253,915, which does not generate implications for the formulated charge.

Additionally, in the brief of 16 March 2020, in response to Official Letter No. 1110-2020-SMV/11.1 (File No. 2019042033), JCR Latam attached new projections for the 2020-2024 period (Annex 2 of the Statement of Charges), without specifying any additional information supporting such projections;

5. That this non-compliance is classified in subsection 2.8 of numeral 2 of Annex I of the Sanctions Regulation;

2.3 Discharges and Allegations

6. That, by means of a document submitted on 20 April 2023, JCR Latam presented its discharges stating the following:

1. JCR Latam states that “the IGSC assumes the function of audit as well as of correct interpretation of IFRS, by stating that it has been verified that JCR Latam did not have the convincing evidence required in paragraph 35 of IAS 12 to determine that it was probable that sufficient future taxable profits would be available against which to offset its losses; therefore, in accordance with paragraph 36 of IAS 12, JCR Latam should not have recognized the deferred tax asset in the Individual Interim Financial Statements as of 31 December 2019. This also disregarding, without being empowered to do so, reports not only from the auditors Panez Chacaliaza & Asociados SCRL, but also from other audit firms that ratify and/or did not observe these aspects.”

2. JCR Latam states that it is ratified that they recorded “correctly in the accounting account Deferred Income Tax Asset, for the amount of S/ 322,508, generated by the tax losses corresponding to the years 2016, 2017, 2018 and 2019. The accounting procedure was proposed by the Audit Firm Panez, Chacaliaza & Asociados Sociedad Civil de R. L, which has fully applied the recognition criteria established in paragraphs 34, 35 and 36 of IAS 12.”.

3. Additionally, JCR Latam indicates that the presentation of the financial information for the years 2019, 2020, 2021 and 2022 was not observed by the SMV, for which it describes the actions carried out with the aforementioned financial information, indicating the following:

Likewise, it adds that “it should be noted that establishing the accounting standards for the preparation of financial statements and their corresponding notes of issuers and other natural or legal persons subject to its control and supervision, as well as the form of presentation of such statements; does not empower the SMV to arbitrarily interpret said standards, disregarding or questioning without further arguments, the work of specialized entities such as audit firms, to finally state that article 1 of the Standards on Preparation and Presentation of FS, in force since 01 January 2017, has been breached.”

“Audit 2019.- were carried out by SOA Vargas Alencastre García & Asociados, on 30 July 2020, expressing an unqualified opinion (Clean)

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Audit 2020.- were carried out by SOA Vargas Alencastre García & Asociados, on 31 March 2021 expressing a qualified opinion. JCR Latam has been presenting a deferred income tax asset generated by the tax losses of the period 2016, 2017 and 2018, which is supported by its strategic plan. However, at the close of 2020 the Company has not updated the estimate of the deferred income tax asset. From our review we can indicate that this item is overstated by an amount of S/ 64 310. Said observation was remedied in the period 2021. Therefore, they validated the initial accounting of the accounting account Deferred Income Tax Asset.

Audit 2021.- were carried out by SOA Portal Vega & Asociados S.C. on 04 November 2022, they expressed a qualified opinion, they are not related to the registration as an asset in the item Deferred Income Tax Assets. Therefore they validated the initial accounting of the accounting account Deferred Income Tax Asset.

Audit 2022.- were carried out by SOA LM Quispe S.C. as of 31 March 2023, expressing a qualified opinion, they are not related to the registration as an asset in the item Deferred Income Tax Assets. Therefore, they ratify the initial accounting of the accounting account Deferred Income Tax Asset.”

4. JCR states that “It should also be mentioned that, as can be accredited, JCR has been making greater efforts not only to maintain its operations but also to comply with the provisions of the SMV, notwithstanding the crisis that the country has been going through and that have led to the adoption by the Government of concrete measures and actions to reactivate the economy, both in terms of financial support and rescheduling of tax and contractual obligations, which we understand are known to the SMV and must be taken into consideration when evaluating the activity of its regulated entities.”

Finally it states that “The estimates presented have been made considering a scenario prior to COVID and to the one caused by political instability (2020 – 2023) which are low-frequency events and that could hardly have been included in our projections, as well as in the business plans of other companies and of the government itself. With this, revenues different from those appearing in the annex included by the SMV in the official letter have been reached, but the reasonableness of the business and of the growth of revenues and results is not distorted. Second, for the estimates the following were considered: a) average exchange rate of previous years, reference price that has not varied significantly; b) the inflation adjustment was not contemplated because it had a variation no greater than 2% average for the projection period; growth of cost and expense accounts higher than those finally achieved. Third, management states that, although the revenues were not those estimated in the document it attaches, it ratifies the reasonableness of the results.”;

7. That, in observance of the provisions of numeral 5 of article 255 of the TUO of the LPAG, by means of Oficio N° 4591-2023-SMV/11 of 10 October 2023, the Report was sent to JCR Latam so that it could submit its arguments within five (5) business days of notification of the aforementioned official letter;

8. That, by written submission of 13 October 2023, JCR Latam requested, among others, an extension of thirty (30) business days in order to present its arguments to the Report;

9. That, by means of Oficio N° 4729-2023-SMV/11 of 17 October 2023, this Deputy Superintendency granted the requested extension;

10. That, on 27 and 28 November 2023, JCR Latam submitted its arguments to the Report, in which it reiterates what was indicated in its discharges and adds, in summary, the following:

(i) JCR Latam insists that the SMV is not empowered by the Norms on Preparation and Presentation of Financial Statements nor by any other to interpret the correct application of the IFRS, disregarding the work carried out by its audit firm, which would enable JCR Latam to make the respective consultations before the SBS and the Contraloría General de la República or to request the pronouncement of the Audit Committee of the Colegio de Contadores de Lima to determine the correctness of the SMV's actions, in addition to initiating legal actions against this administration for the alleged configuration of Abuse of Authority.

(ii) It adds that through its written submissions N° 048-2021 and 049-2021 presented on 10 and 11 June 2021, it indicated that the indications sent by the IGSC had already been subject to evaluation by the external auditors that gave rise to Reports, and that they did not register any observation from the SMV, at the time, on specific aspects subject to its subsequent observation. It affirms that the SMV does not accredit the initiation of any procedure or request for consultation to the audit firms, regarding their position on the alleged material errors identified in the interim financial statements of JCR Latam as of 30 September 2019.

(iii) It requests that it be expressed whether Mr. Ernesto Álvarez Cisneros, with his previous pronouncements, would likewise be subject to grounds for abstention as the Intendente General de Cumplimiento de Conductas.

(iv) It indicates that the report of SOA Panez entitled «First-time adoption of the International Financial Reporting Standards» complies with the provisions of paragraph 2.13 of the Conceptual Framework, linked to the Faithful Representation of information, and includes in its annexes the premises and hypotheses on which the projections of its financial statements were based, concluding that the Financial Information complied with the faithful representation of information, considering that the basis of the estimates on which the Projected Financial Statements were calculated were based on calculations and historical data.

(v) It adds that “it is not clear that the SMV, on the one hand, states that JCR Latam has

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failed to comply with paragraphs 34, 35 and 36 of IAS 12 and, on the other hand, state that this does not imply that the audit reports are being disregarded, because in each of them different situations can be identified, therefore, each of the financial statements of the following years should have its own support or convincing evidence".

(vi) It adds that it is "equally inexplicable that the SMV intends to observe that JCR Latam ratifies the correct accounting of the account Deferred Income Tax Asset, proposed by SOA Panez, applying the recognition criteria established in paragraphs 34, 35 and 36 of IAS 12, with the regulator seeking to give reasonableness to its observations with the incredible and confusing argument that this PAS was initiated against JCR Latam, who is responsible for the fact that the preparation and presentation of the financial statements comply with IFRS, and on the other hand, audit firms are responsible for preparing the audit report in accordance with the International Standards on Auditing - ISA within the framework of the securities market regulations, without recognizing as correct, that the audit reports have a close and direct relationship and validate the operations considered in the preparation and presentation of the Financial Statements and as part of it if they conform to IFRS standards. Disregarding this fact reveals not only an inconceivable incongruity but also a serious lack of knowledge of the work of the auditors, despite affirming and in practice using their reports, to establish strict compliance with IFRS by the regulated entities".

(vii) Finally, it indicates that it is inconsistent to sustain the possible sanction of JCR Latam on the grounds that SOA Panez was sanctioned through Superintendencia Adjunta SMV Resolution No. 038-2022-SMV/11 for having incurred in one (1) infraction of a very serious nature typified in subsection 1.4, numeral 1 of Annex XII of the Sanctions Regulation, as it was verified that it did not comply with preparing and submitting the 2018 Audit Report issued on 10 April 2019 in accordance with NIAS 710, 250, 510, 500 and 540 in the audit of the Audited Financial Statements 2018.

11. That, through Superintendencia Adjunta SMV Resolution No. 126-2023-SMV/11 of 01 December 2023, this Superintendencia Adjunta extended by three (3) months the term to resolve the present PAS, in application of numeral 1) of article 259 of the TUO of the LPAG, and literal b) of article 43 of the Sanctions Regulation.

12. That, through Supreme Decree No. 004-2019-JUS, the new Single Ordered Text of Law No. 27444, General Administrative Procedure Law (hereinafter, TUO of the LPAG) was approved, which contains common rules for the actions of the administrative function of the State and regulates all administrative procedures developed in the entities, including special procedures. Likewise, numeral 3) of article 248 of the TUO of the LPAG indicates the criteria regarding the graduation of the sanction: (a) the illicit benefit resulting from the commission of the infraction, (b) the probability of detection of the

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infraction, (c) the severity of the damage to the public interest and/or protected legal right, (d) the economic harm caused, (e) Recidivism, for the commission of the same infraction within the term of one (1) year from when the resolution that sanctioned the first infraction became final, (f) the circumstances of the commission of the infraction and, (g) the existence or not of intentionality in the conduct of the offender;

13. That, the charges formulated and the criteria regarding the graduation of the sanction have been subject to evaluation in the Report, which has been submitted to the knowledge of the SASCM;

III. ISSUES TO DETERMINE

14. That, in the present PAS it corresponds to determine the following:

(i) Whether JCR Latam incurred or not in the infractions indicated in the Charge Letter and Report.

(ii) Whether it corresponds or not to impose a sanction on JCR Latam;

IV. ANALYSIS

4.1 Applicable regulations

15. That, article 5 literal c) of the LOSMV, provides that it is attribution of the Board of Directors of the SMV the following:

“Issue the norms for the preparation and presentation of individual and consolidated financial statements and any other complementary information, ensuring that they reasonably reflect the financial situation, the results of operations and the cash flows of the companies and entities included within the scope of its supervision, in accordance with international financial reporting standards (IFRS), as well as control their compliance. This norm does not reach the entities that participate in the securities market and that are under the competence of the Superintendence of Banking, Insurance and Private Administrators of Pension Funds (SBS).” (Underline and emphasis added);

16. That, on the other hand, article 32 of the TUO of the LMV indicates the following:

“The SMV establishes the accounting norms for the preparation of the financial statements and their corresponding notes of the issuers and other natural or legal persons subject to its control and supervision as well as the form of presentation of such statements (…).”

17. That, according to the above, in relation to the presentation of financial information without observing the IFRS in the Interim Individual Financial Statements as of 31 December 2019, the non-compliance of article 1 of the Norms on Preparation and Presentation of Financial Statements and Annual Report by the Entities Supervised by the Superintendence of the Securities Market, approved by SMV Resolution No. 016-2015-SMV/01 (hereinafter, Norms on Preparation and Presentation of FS), norm

in force at the date of the commission of the infringement, which were applicable to risk rating companies, according to which:

“Article 1.-Application of IFRS by obligated subjects. Issuing companies with securities registered in the Public Registry of the Securities Market (RPMV), legal entities registered in the RPMV, collective fund management companies, and investment funds must prepare their financial statements in full observance of the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB) in force internationally, and to the extent applicable, the Financial Information Regulation and the Manual for the preparation of Financial Information. (…)” (Underline added);

18. That, it must be indicated that to date, the Standards on Preparation and Presentation of FS, which were in force at the time of the commission of the infringement, have been repealed by Article 1 of SMV Resolution No. 013-2023-SMV/01, which approved the “Standards on Preparation, Presentation and Dissemination of Financial Statements, Annual Report and Management Report applicable to entities supervised by the Superintendency of the Securities Market” whose Article 4 maintains the obligation of risk rating companies to prepare their financial statements, reason why the new regulatory framework does not affect this PAS:

“Article 4.- Applicable standard a. Obligated subjects must prepare their financial statements in full observance of IFRS and, to the extent applicable, the Financial Information Regulation and the Manual for the preparation of Financial Information. (…)”.

19. That, in that sense, JCR Latam was charged with the breach of the provisions established in IFRS, in particular the provisions in IAS 12 «Income Taxes», paragraphs 34, 35 and 36, mentioned above;

20. That, the breach referred to the presentation of financial statements without observing IFRS constitutes an infringement that is typified in subsection 2.8, numeral 2 of Annex I of the Sanctions Regulation, which states that it constitutes a serious infringement: “Presenting to the SMV, to the Exchange, to the entity in charge of the centralized negotiation mechanism, to the investor or, in general, to any other Participant, financial information prepared without observing the International Financial Reporting Standards, issued by the International Accounting Standards Board (IASB) and/or the accounting standards for the preparation and presentation of financial information issued by the SMV, as applicable”.;

4.2 Evaluation of the case

21. That, it should be noted that all information provided by JCR Latam has been analyzed and is part of the evaluation carried out in the Report as well as in this Resolution, for which it is also recorded that extracts of the arguments of the defenses are transcribed as a reference, which does not imply that all the extremes of JCR Latam's defenses have not been analyzed, and even less to assume that by not transcribing all its defenses, an impairment to the right of defense could be argued. In any case, all the actions carried out are in the present file of the PAS.

Next, we proceed to analyze and evaluate each of the defenses and allegations presented by JCR Latam, according to the following:

1. Regarding JCR Latam's argument that the SMV, by establishing accounting standards in the preparation of financial statements and their presentation, is not empowered to interpret said standards arbitrarily, disregarding the work of auditing firms; it should be indicated that the SMV complies with the functions that are within its competence and complies with the provisions of Article 5 literal c) of the LOSMV, which provides that it is the attribution of the Board of Directors of the SMV the following:

“Issue the standards for the preparation and presentation of individual and consolidated financial statements and any other complementary information, ensuring that they reasonably reflect the financial situation, the results of operations and the cash flows of the companies and entities included within the scope of its supervision, in accordance with the international financial reporting standards (IFRS), as well as control their compliance. This standard does not reach the entities that participate in the securities market and that are under the competence of the Superintendency of Banking, Insurance and Private Administrators of Pension Funds (SBS).” (Underline added).

Article 32 of the TUO of the LMV which states:

“The SMV establishes the accounting standards for the preparation of financial statements and their corresponding notes of the issuers and other natural or legal persons subject to its control and supervision as well as the form of presentation of such statements (…).”

In that sense, according to the above, the SMV is empowered not only to issue the standards for the preparation and presentation of financial statements in accordance with IFRS, but also to control and supervise their compliance.

It should be noted that, in this PAS, it is being evaluated that JCR has presented to the SMV the Individual Interim Financial Statements as of December 31, 2019 prepared without observing IFRS, by failing to comply with paragraphs 34, 35 and 36 of IAS 12, which does not imply that the audit reports are being disregarded, because each of them can identify different situations (amounts different from the one being evaluated in this case), therefore, each of the financial statements of the following years should have its own support or convincing evidence prepared by JCR Latam in its financial projections for the recognition of deferred tax asset, the same ones that are not the subject of this procedure.

With regard to JCR Latam's allegation that it would be authorized to make inquiries to various entities to determine "the correctness of the SMV's actions",

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it must be stated that this Deputy Superintendency rejects such statements by JCR Latam, which, as an authorized company supervised by the SMV, seeks to deny the authority and powers of this institution through “queries to determine the correctness of the SMV's actions”; which reflects a questionable degree of commitment and respect towards this institution in its supervision and control activities pursuant to the current legal framework.

The regulated entity is reminded that no rule provides that the decisions of this Superintendency may be challenged before entities such as those it has indicated in its brief of allegations, but rather by the forms provided in the Sanctions Regulations of this institution and the provisions of the TUO of the LPAG through the applicable challenge remedies. What JCR Latam has stated only serves to evidence a lack of knowledge of the rules to which the decisions of this administrative authority are subject.

2. Regarding the fact that JCR Latam indicates that it reiterates that it correctly recorded in the accounting account Deferred Tax Asset, which was raised by SOA Panez, who has applied the recognition criteria established in paragraphs 34, 35 and 36 of IAS 12; it must reiterate what was stated in the Charges Letter, in view of the fact that JCR Latam had a history of tax losses since 2016, as detailed in the SOA Panez Report entitled «First-time Adoption of the International Financial Reporting Standards» and submitted by JCR Latam in the Inspection (File No. 2019042033), it is observed that the accumulated fiscal or tax loss as of December 31, 2018 is S/ 1,093,247.00, in accordance with Table No. 1, cited in item 2.2 Charges of this Resolution, as follows:

TABLE No. 6: ACCUMULATED TAX LOSS AS OF DECEMBER 31, 2018
Fiscal Year	Tax Loss S/
2016	285,397
2017	269,040
2018	538,810
Accumulated Tax Loss	1,093,247

Source: Report of RSM Panez Chacaliaza & Asociados SCRL «First-time Adoption of the International Financial Reporting Standards»

In view of the history of losses mentioned above, it must be taken into account what is provided in paragraph 35 of IAS 12, which states “35. (…) the existence of unused tax losses may be evidence for assuming that, in the future, taxable profits will not be available. Therefore, when an entity has recent losses in its history, it will recognize a deferred tax asset arising from unused losses or credits only if it has a sufficient amount of taxable temporary differences, or if there is any other convincing evidence that it will have sufficient taxable profit in the future against which to deduct such losses or credits. (…).

In accordance with the foregoing, when evaluating whether JCR Latam has taxable temporary differences or whether there is other convincing evidence, the following was observed:

a) Taxable temporary differences In this regard, from the review of the 2018 Audited FS and the individual interim financial statements for the 2019 fiscal year, it has been observed that JCR Latam has not recognized taxable temporary differences against which the tax losses obtained in the 2016, 2017 and 2018 fiscal years could be used or offset in the future.

b) Other convincing evidence In this regard, in view of the fact that JCR Latam does not have taxable temporary differences in the periods previously indicated, this company should have some other convincing evidence to estimate that it would have sufficient taxable profit in the future, in accordance with paragraph 35 of IAS 12. In this regard, it must be taken into account that with respect to projections, Thomas R. Robinson, Elaine Henry, Wendy L. Pirie and Michael A. Broihahn6 state that “Analysts often need to project future financial performance. (....) they use data on the economy, the industry and the company to develop the company's projections. The results of the financial analysis, including the analysis of the weighting of the financial statement accounts and the analysis of financial ratios, form an integral part of this process, along with the analysts' judgment” (Free translation) (Emphasis added). Considering the foregoing, and when evaluating the document entitled «Projected Financial Statements 2019-2028» prepared and signed by JCR Latam, the following is observed:

JCR Latam does not specify the macroeconomic indicators used in its projections, such as interest rates, exchange rates, inflation adjustments, sector analysis or others.
JCR Latam determined annual growth rates at the level of revenue (30%), total number of clients (17.02%), number of new clients (15%), cost of sales (15%), administrative expenses (15%) and selling expenses (15%); however, it does not present the data that supports such statements, such as numerical and objective information (calculations, historical data, etc.), in addition to the fact that it does not incorporate the results of the financial analysis, including the analysis of the weighting of the financial statement accounts and the analysis of financial ratios.
JCR Latam determined that in addition to an exponential growth of over 20% per year of Revenue -from services-, it was weighted that more than 25% of said Revenue corresponds to a new complementary activity called “Compliance Certification”, however it does not show information that supports the relevant participation in revenue

[6] Henry, E.; Robinson, T.R. and Van Greuning J.H. (2015). Financial Analysis Techniques (pp. 291-362) In Robinson, T.R.;Henry, E.; Pirie W. and Broihahn M.A. International Financial Statement Analysis (Third Edition), Wiley & Sons, Inc.

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future of JCR Latam, such as the performance of this new activity, market study, or commercial or business plans of the company, even more so considering that the methodology for said service was recently approved by Board session of 05 April 20187.

JCR Latam's estimates are based on assumptions that cannot be measurable and/or on evidence that may be verifiable, as observed in the following text extracted from the aforementioned document:

“Said premises are supported by the following points:

Knowledge of the public issuance market (BVL, MAV) and the prospects of the private issuance market, which is the one that grows the most annually, are carried out contemplating a scenario with a high probability of occurrence and quite conservative, which is additionally supported by the growth in the number of the company's clients between 2017 and 2018.
Greater knowledge of our firm in the market of issuers and structurers, supported by the growth of the firm as well as the backing of the strategic partner (Japan Credit Rating Ltd.) and the differentiated value of the service.
Greater work in promoting the brand.
Active participation in MAV issuances.
In those criteria dependent on estimates based on real figures obtained in the 2018 fiscal year, which was the first year of the company's activity.”
JCR Latam indicates that it projects profits for the following ten (10) years based on the financial statements corresponding to the 2018 fiscal year; however, it is observed that JCR Latam obtained losses before income tax of S/ 177,531 in the 2018 fiscal year, which resulted in a net profit of S/ 144,977 upon recognizing the deferred tax asset under observation, this being the first fiscal year in which JCR Latam recorded a positive result. Likewise, JCR Latam recorded losses in the two (02) previous fiscal years corresponding to 2016 and 2017, as follows:

Table No. 7: Results of the 2016, 2017 and 2018 fiscal years

Audited Annual Individual Financial Statements (EEFF)	Result before income tax S/	Result of the fiscal year S/
2016	(285,396)	(285,396)
2017	(298 192)	(298 192)
2018	(177,531)	144,977

[7] Report No. 17-2020-SMV/11.1 on the inspection of JCR Latam (File No. 2019042033).

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Source: Audited annual individual Financial Statements corresponding to 2016 (File No. 2017012837), Audited annual individual Financial Statements corresponding to 2017 (File No. 2018013367) and Audited annual individual Financial Statements corresponding to 2018 (File No. 2019015828) published on the Institutional Page of the SMV on the Single Digital Platform of the Peruvian State for Citizen Guidance (www.gob.pe/smv).

Prepared by SMV

In view of the foregoing, JCR Latam had a history of losses in the 2016 and 2017 fiscal years, and only had a positive result in profits in the 2018 fiscal year due to having recognized a deferred tax asset, therefore, JCR Latam did not have historical information that would allow projecting a change in trend in its results to obtain profits for the following ten (10) years.

JCR Latam states as one of the assumptions of its projections that it has "greater knowledge in the market of issuers and structurers, supported (...) by the backing of the strategic partner". In this regard, in the Annual Report for the 2019 fiscal year (File No. 2020026452) submitted by JCR Latam, it indicated: "There is an agreement signed in 2017 that will be formalized in 2020 in which JAPAN CREDIT RATING LTD. (Japan) is incorporated as shareholders with 15%, (...) in accordance with the provisions of our General Shareholders' Meeting dated 7 December 2017." and in the Annual Report for the 2021 fiscal year (File No. 2022049506) it indicated that said agreement should be finalized in 2024, however, from the review of the information published on the Institutional Page of the SMV on the Single Digital Platform of the Peruvian State for Citizen Guidance (www.gob.pe/smv), it is observed that Japan Credit Rating LTD does not appear as a shareholder of JCR Latam to date, as it only has two (2) shareholders, as follows:

Image No. 1: Shareholders of JCR Latam
Source: Institutional Page of the SMV on the Single Digital Platform of the Peruvian State for Citizen Guidance (www.gob.pe/smv).

JCR Latam states as one of the assumptions of its projections that it has an "active participation in MAV issuances''. In this regard, it has been verified that only in 2018 and 2019 it provided services to issuers of the Alternative Market of Securities (MAV), as follows:
During 2017, JCR Latam did not present classification reports for debt securities of any issuer registered in the Public Registry of the Securities Market (RPMV), according to

information published in the "Risk Classification Report" section of the Institutional Page of the SMV on the Single Digital Platform of the Peruvian State for Citizen Guidance (www.gob.pe/smv) and Annual Report for the 2017 fiscal year.

During 2018, JCR Latam issued classification reports to four (04) MAV issuers corresponding to Gerens Escuela de Gestión y Economía S.A., Viaconsumo S.A.C., Camposur INC S.A.C. and Medrock Corporation S.A.C., according to the Annual Report for the 2018 fiscal year.
During 2019, JCR Latam issued a classification report corresponding to Camposur INC S.A.C., according to the Annual Report for the 2019 fiscal year.

On the other hand, it should be noted that the MAV at the close of 2019 only had fifteen (15) debt issuers with an outstanding balance of around USD 26 million, which represented only 0.32% of the total outstanding balance in the public securities market

JCR Latam states another assumption of its projections that "knowledge of the public issuance market (BVL, MAV) and the perspectives of the private issuance market, which is the one that grows the most annually, are made contemplating a scenario with high probability of occurrence". In this regard, JCR Latam assumes a scenario based on the private issuance market growing, without presenting greater quantitative support, also not evaluating other possible scenarios, such as the conservative and/or negative.

In that sense, it is appropriate to indicate that Thomas R. Robinson, Elaine Henry, Wendy L. Pirie and Michael A. Broihahn8 state that "(...) Projections are not limited to a single point estimate, but should include a range of possibilities. For this, various techniques can be used:

Sensitivity analysis: Also known as "what if" analysis, this sensitivity analysis shows a range of possible outcomes when changing certain assumptions, (...)
Scenario analysis: This type of analysis shows the changes in key financial quantities, which result from certain (economic) events such as the loss of clients, the loss of a supply source or a catastrophic event. (...)"

According to the foregoing, it is evident that the referred document called «Projected Financial Statements 2019-2028» prepared by JCR Latam lacks support to determine that it would have sufficient tax profit in the future, even more so in the face of a scenario characterized by negative results (tax losses) in the 2016, 2017 and 2018 fiscal years, therefore JCR Latam does not have any other convincing evidence as established in paragraph 35 of IAS 12.

[8] Ibid.

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Likewise, it should be noted that this PAS was initiated against JCR Latam, which is responsible for the preparation and presentation of the financial statements, which must comply with IFRS, and on the other hand, the audit firms are responsible for preparing the audit report in accordance with the International Standards on Auditing - ISA within the framework of the securities market regulations. Additionally, with regard to what was indicated in its arguments stating that the initiation of an administrative sanctioning procedure against the audit firms regarding their position on the alleged material errors identified in the interim financial statements of JCR Latam as of 30 September 2019 has not been proven, it should be noted that this is not subject to evaluation in this PAS, in which only the responsibility or lack thereof of JCR Latam for the imputed facts, the subject of the Statement of Charges, is evaluated.

It should be taken into account that what JCR Latam states regarding the accounting having been proposed by SOA Panez does not qualify as an element that justifies its non-compliance, considering that, as has been stated, administrative responsibility is personal and individual, in accordance with the action or omission of the legal entity itself, so the responsibility or lack thereof that a third party may have over another type of infraction does not exempt JCR Latam from its personal responsibility in this administrative sanctioning procedure.

In this regard, without prejudice to the subjective responsibility of JCR Latam in the preparation of the financial statements in accordance with IFRS as indicated above, it should be noted that SOA Panez was sanctioned by means of the Superintendency Resolution SMV No. 038-2022-SMV/11 of 29 April 2022 with a fine of 17.5 UIT for having incurred in one (01) infraction of a very serious nature typified in subsection 1.4, numeral 1 of Annex XII of the Sanctions Regulation, having verified that it failed to prepare and present the 2018 Audit Report issued on 10 April 2019 in accordance with ISA 710, 250, 510, 500 and 540 in the audit of the 2018 Audited Financial Statements. However, it should be noted that the mention of this resolution is made without prejudice to the responsibility that falls on JCR Latam, so what was alleged by said company in stating that the aforementioned Resolution is being used to support the determination of responsibility and sanction of JCR Latam evaluated in this PAS is meaningless.

In this regard, in recitals 4 and 25, literal d) of the aforementioned Resolution, referring to the facts subject to imputation and evaluation of the defenses respectively, it is indicated that SOA Panez acknowledges the imputed infraction stating that it could not perform a detailed analysis in accordance with ISA 500 "Audit Evidence" and ISA 540 "Auditing accounting estimates, including fair value accounting estimates, and related disclosures", because JCR Latam, although it provided SOA Panez with the cash flow projections, did not provide the support for the guidelines and assumptions used in the projection of the Income Statement prepared by JCR Latam to record the losses of the 2016, 2017 and 2018 fiscal years in the item "Deferred Income Tax Assets". In this regard, the aforementioned resolution states the following:

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"SOA Panez, in its defenses, confirms that it did not have sufficient audit evidence, so it should not have concluded in the terms indicated in the "Technical Memorandum for the review of the Income Tax item (IAS 12)", as detailed below: (...)" (Underline added)"

"the Company's Management correctly supports its future recovery of current tax losses" and "complies with the requirements of IAS 12 for the recognition and measurement of the Deferred Income Tax Asset" (Underline added)".

3. Regarding JCR Latam's indication that the presentation of the financial information for the years 2019, 2020, 2021 and 2022 was not observed by the SMV, for which it describes the opinions issued by the audit firms of the aforementioned financial information and indicates that these validated the accounting account "Deferred Income Tax Assets".

In this regard, it should be noted that ISA 510, "Requirements, Audit Procedures. Opening Balances", establishes:

"5. The auditor shall read the most recent financial statements, if any, and the corresponding predecessor auditor's report, if any, for information relevant to the opening balances, including disclosures.

6. The auditor shall obtain sufficient appropriate audit evidence about whether the opening balances contain misstatements that materially affect the current period's financial statements by: (Ref: Paragraphs A1-A2)

(a) determining whether the prior period's closing balances have been correctly brought forward to the current period or, when appropriate, have been restated;

(b) determining whether the opening balances reflect the application of appropriate accounting policies; and

(i) the review of the predecessor auditor's working papers to obtain evidence regarding the opening balances, if the financial statements of the previous year had been audited;

(ii) the evaluation as to whether the audit procedures applied in the current period provide relevant evidence regarding the opening balances; or

(iii) the application of specific audit procedures to obtain evidence regarding the opening balances.”

In that sense, according to ISA 510, audit firms must review the opening balances of the previous auditors, they do not validate; they issue an opinion on the reasonableness of the financial statements examined. On the other hand, the SMV, having the power to issue the rules for the preparation and presentation of financial statements in accordance with the IFRS, as well as to monitor their

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compliance as indicated above, has initiated through the IGCC the present PAS. In that sense, what JCR Latam states is unfounded when it affirms that it is inexplicable that the SMV indicates that the preparation and presentation of financial information in accordance with the IFRS is an obligation of JCR Latam while the SOA has the obligation to prepare the audit report in accordance with the ISA.

On the other hand, it should be noted that compliance with the requirements established in IAS 12 must be met at the time of recognition of the asset, that is, in the present case, it corresponds to the Individual Interim Financial Statements as of 31 December 2019 and not of the subsequent Financial Statements, which are based on projections made in different periods that are not subject to charge, so what is indicated in the evaluation of numeral 1 is reiterated.

4. With regard to JCR Latam's argument referring to the fact that “The estimates presented have been made considering a scenario prior to COVID and to the one caused by political instability (2020 – 2023) which are low-frequency events and that could hardly have been included in our projections, as well as in the business plans of other companies and of the government itself”, it should be noted that the present charge referring to non-compliance with IAS 12 is not questioning the difference between its projections and the actual results; the present charge refers to the fact that at the time of recognition of the accounting account «Deferred Income Tax Assets» in the Individual Interim Financial Statements as of 31 December 2019, JCR Latam did not have convincing evidence of probable future tax profits based on the projections of its Financial Statements, regardless of the declarations of the State of Emergency, which is a situation occurring after the moment of commission of the infringement.

It should be noted that, in the Statement of Charges, the foregoing was specified, indicating that even in the event that an entity had obtained future tax profits after the recognition of the deferred tax asset, it does not evidence, in any way, compliance or non-compliance with the requirements established in IAS 12, which must be met with the aforementioned IAS 12 at the time of recognition of the asset. In this regard, section III of the Instruction Report shows the analysis of variations between the projected and actual results presented in the audited financial statements of the 2019, 2020 and 2021 fiscal years of JCR Latam.

Likewise, for informational purposes, in the Annual Audited Financial Information for the 2019 fiscal year, JCR had losses in the amount of S/ 276,037; in the Annual Audited Financial Information for the 2020 fiscal year, the auditor indicated that the item «Deferred Income Tax Asset» was overstated; in the Annual Audited Financial Information for the 2021 fiscal year, it obtained profits of S/ 253,915, which does not generate implications in the charge formulated.

With regard to the fact that “the estimates considered: a) average exchange rate of the previous years, reference price that has not varied significantly;

b) the inflation adjustment was not contemplated because it had a variation no greater than 2% average for the period used for projection; growth of cost and expense accounts greater than those finally achieved. Third, management states that, although the revenues were not those estimated in the document it attaches, it ratifies the reasonableness of the results.” It should be noted that although the events mentioned by JCR in its defense were unforeseeable – COVID and political crisis – to be considered in its projections; this does not invalidate that the assumptions used for the Document «Projected Financial Statements 2019-2028» should have been reasonable, measurable or verifiable, and furthermore it does not present a document or historical data that it has used to support its projections, as evidenced in the Statement of Charges and subsection 1 of numeral 4.2 “Evaluation of the case” of this report

In that sense, it is reiterated that economic-financial projections must be supported considering an analysis of macroeconomic indicators, analysis of the economic sector to which the company belongs, business plans of the company or the analysis of the evolution of the economic-financial situation of the company, among others; which would allow having reasonable assumptions for the projection of the financial statements under different scenarios.

On this point, in its statement of defense, JCR Latam makes reference to certain macroeconomic indicators, again in general terms, such as: “a) average exchange rate of previous years”; without indicating what the exchange rate was, nor from what period to what period it was averaged, nor the source document or entity from which the historical data was extracted, information to be taken into account when its service income is in a different currency; and, “b) the inflation adjustment was not considered because it had a variation not greater than 2% on average for the period used as a projection (…)”, precisely because it had an extensive projection period from 2019 to 2028 (10 years), the economic variables of the projection should have been exposed to the effects of inflation; notwithstanding this, it should have substantiated in its premises or projection assumptions the non-impact of inflation on its variables.

5. With respect to the allegation of JCR Latam whereby it requests that it be indicated whether Mr. Ernesto Álvarez Cisneros, an official of the IGCC, would be subject to grounds for abstention, it must first be indicated that the abstention of the General Comptroller of Conduct Compliance, Mr. Anderson Vela, was due to the fact that he was in the case of article 99, numeral 4 of the TUO of the LPAG9, and that in his place Mr. Ernesto Álvarez Cisneros was designated for this particular case, regarding whom it was verified that he was not subject to

[9] “Article 99.- Grounds for abstention The authority that has decision-making power or whose opinions on the merits of the procedure may influence the outcome of the resolution must abstain from participating in matters whose competence is attributed to it, in the following cases: (…) 4. When it has close friendship, manifest enmity or an objective conflict of interest with any of the parties involved in the procedure, which become evident through attitudes or facts evident in the procedure. (…)”.

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ninguna causal de abstención, debiendo precisarse que los anteriores pronunciamientos que pudiera haber efectuado este u otros funcionarios en el ejercicio de sus funciones no suponen en absoluto su acaecimiento en alguna causal de abstención del procedimiento.

De acuerdo a la imputación de cargos y la evaluación de los descargos, se verifica que JCR Latam no contaba con la evidencia convincente exigida en el párrafo 35 de la NIC 12 para determinar que era probable disponer de suficiente ganancias fiscales futuras contra las que compensaría sus pérdidas; por lo tanto, de acuerdo con el párrafo 36 de la NIC 12, JCR Latam no debió reconocer el activo por impuesto diferido en los Estados Financieros Intermedios Individual al 31 de diciembre de 2019.

En ese sentido, JCR Latam incumplió los párrafos 34, 35 y 36 de la NIC 12 en la preparación de sus Estados Financieros Intermedios Individual al 31 de diciembre de 2019, presentados a la SMV el 17 de febrero de 2020 (Expediente N° 2020006056), periodo en el que JCR Latam reconoció un Activo por Impuesto Diferido de S/322,508, incurriendo de ese modo en la infracción imputada, tipificada en el inciso 2.8 del numeral 2 del Anexo I del Reglamento de Sanciones;

22. That, insofar as JCR Latam breached the IFRS in the preparation of its Individual Interim Financial Statements as of 31 December 2019, and, having carried out the corresponding analysis of the arguments presented, it is concluded that the conduct constituting the aforementioned infringement has been established. Consequently, the administrative liability of JCR Latam is determined for the aforementioned infringement, and therefore the sanction must be determined in accordance with the provisions of the principle of reasonableness;

V. DETERMINATION OF THE SANCTION

23. That, the aforementioned breach consisting of the submission of financial statements without observing the IFRS constitutes an infringement that is classified in subsection 2.8, numeral 2 of Annex I of the Sanctions Regulation, which states that the following constitutes a serious infringement: “Submitting to the SMV, to the Exchange, to the entity in charge of the centralized trading mechanism, to the investor or, in general, to any other Participant, financial information prepared without observing the International Financial Reporting Standards, issued by the International Accounting Standards Board (IASB) and/or the accounting standards for the preparation and presentation of financial information issued by the SMV, as applicable”. With respect to the applicable sanction, article 34 of the Sanctions Regulation states that said infringement is punishable with a fine of no less than twenty-five (25) UIT and up to fifty (50) UIT.

24. That, having determined the commission of the infringement that is the subject of the charge, it is appropriate to determine the sanction for this breach by evaluating the sanctioning criteria established in article 344 of the TUO LMV, in accordance with numeral 3) of article 246 of the TUO of the LPAG and article 25 of the Sanctions Regulation, according to which the following criteria must be taken into consideration: (i) the sanction history of the administered party; (ii) recidivism for the commission of the same infringement; (iii) the circumstances of the commission of the infringement; (iv) the economic harm caused; (v) the illicit benefit resulting from the commission of the infringement; (vi) the probability of detection of the

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infraction; (vii) the severity of the damage to the public interest and/or protected legal interest; and, (viii) the existence or not of intent in the conduct of the offender (hereinafter, Sanction Criteria);

SANCTION CRITERIA

25. That, in relation to the severity of the damage to the public interest and/or protected legal interest, it must be indicated that the presentation of financial statements observing IFRS by persons registered in the RPMV has the purpose that they use a common language for the exchange of financial and business information, which has quality standards and greater transparency, characteristics that are established in the Conceptual Framework of IFRS and constitutes a fundamental obligation in the transparency of the securities market, since it seeks to guarantee that investors or potential investors can know the financial situation of the risk rating company, being that risk rating companies are empowered to carry out securities rating reports, could be considered by investors in their investment decisions of such or such security, as well as affects the SMV in its supervision and control activities.

In this way, investors are protected and the asymmetry in access to information is reduced, therefore, the protected legal interest is the transparency of the securities market;

26. That, with respect to the sanction antecedents, literal a) of article 25 of the Sanctions Regulation establishes that they are the firm sanctions imposed by the SMV within the term of four (4) years prior to the commission of the infraction to be sanctioned; without prejudice to this, it is specified that the commission of the same infraction in the year prior to the infraction to be sanctioned is not considered as an antecedent. On this matter, from the verification carried out in the SMV Sanctions System, JCR Latam has sanction antecedents, through Deputy Superintendence Resolution SMV No. 067-2019-SMV/11, firm since 16 August 201910, JCR Latam was sanctioned with a fine of 3.50 UIT, for having incurred in an infraction of a minor nature typified in subsection 3.6, numeral 3 of Annex I of the Sanctions Regulation;

27. That, in relation to recidivism for the commission of the same infraction, literal b) of article 25 of the Sanctions Regulation establishes that the firm sanction imposed by the SMV within the term of one (01) year prior to the commission of the infraction to be sanctioned is taken into account. In this regard, from the verification carried out in the Superintendency of the Stock Market's Sanctions System – SMV, it has been noted that JCR Latam has not previously been sanctioned for the commission of this breach; that is, it does not have the status of a repeat offender according to the assessment made in the Report, because JCR Latam filed a lawsuit in the administrative contentious proceedings requesting that the nullity of Deputy Superintendency Resolution SMV N° 072-2019-SMV/11 be declared, a process identified as Case N° 00589-2021-0-1801-SP-CA-02 against the

[10] The aforementioned resolution was challenged by means of a reconsideration resource, which was resolved by Deputy Superintendency Resolution SMV Nº 096-2019-SMV/11, notified on 16 August 2019.

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SMV, before the Second Specialized Chamber in Administrative Contentious Matters of Lima;

28. That, with respect to the circumstances of the commission of the breaches, we must point out that the Interim Individual Financial Statements as of 31 December 2019, submitted by JCR Latam to the SMV on 17 February 2020, were not prepared in full compliance with the IFRS issued by the IASB in force internationally, having breached paragraphs 34, 35 and 36 of IAS 12, as JCR Latam recognized a Deferred Tax Asset of S/322,508.

In this regard, JCR prepared the document entitled «Projected Financial Statements 2019-2028» in which it presents the premises and hypotheses on which it would have based the projections of its financial statements in order to recognize a deferred income tax asset; however, as has been assessed above, the aforementioned document lacks sufficient information to determine that it would have sufficient future taxable profit, so that JCR Latam, not having any other convincing evidence and recognizing the deferred income tax, is breaching what is established in paragraphs 34, 35 and 36 of IAS 12.

It should be noted that, subsequent to the commission of the aforementioned breach, the item «Deferred Income Tax Asset» has been reduced as follows:

i) In the Audited Annual Financial Information as of 31 December 2019, JCR Latam reduced the value of its Deferred Tax Asset from S/ 322,508 to S/ 223,400, under the explanation in the notes of having "adjusted its estimate of the deferred income tax asset".

ii) JCR Latam recorded a second reduction from S/ 223,400 to S/ 159,090 from its Interim Financial Statements as of 31 March 2021, explaining in the notes as an "overestimation of the deferred tax"; this in response to the audit report of the Audited Annual Financial Information as of 31 December 2020 of JCR Latam, issued by the audit firm Vargas, Alencastre, García y Asociados S.C.R.L, in which it was indicated that the Deferred Income Tax Asset was overestimated:

"The Company has been presenting a deferred income tax asset generated by tax losses from the period 2016 to 2019, which is supported by its strategic plan; however, at the close of 2020 the Company has not updated the estimate of the deferred income tax asset. From our review we can indicate that this item is overestimated in the amount of S/ 64,310."

(Underlining and Highlighting added).

JCR Latam continues to record S/ 159,090 in its Deferred Tax Asset in the Audited Annual Financial Information as of 31 December 2022 and in the Interim Financial Statements as of 31 March 2023 and 30 June 2023.

29. That, regarding the existence of the economic harm caused and its impact on the market, this criterion assesses the quantifiable or non-quantifiable harm produced by the administrative breach. To assess whether there was an impact on the stock market, the magnitude of the specific harm is taken into consideration, that is, whether other investors or associates have been affected. In this regard, it has not been evidenced that the breaches have produced quantifiable harm, understood as economic damage caused to one or several investors, nor are there complaints related to the present administrative sanctioning procedure;

30. That, regarding the illegally obtained benefit, in the present case, there are not sufficient elements to indicate that JCR Latam obtained an illegal benefit as a consequence of the commission of the breaches under evaluation;

31. That, in relation to the criterion of probability of detection of the breach, it must be pointed out that with respect to the supervision of compliance with the obligation to submit and prepare financial information in accordance with the IFRS, it must be pointed out that the probability of detection is low, or in other words, its detection requires more complex procedures, since a more exhaustive review of the financial information must be carried out in order to identify whether the obligation has actually been complied with;

32. That, regarding the existence or not of intent in the conduct of the offender, it can be pointed out that no elements have been noted that lead to concluding that JCR Latam acted with intent in the commission of the infringement, however, a failure in the duty of diligence is indeed evidenced, because JCR Latam must prepare and present its financial information in accordance with the IFRS;

33. That, finally, for the purposes of determining the sanction, it must be taken into account that in the present PAS it is not observed that there are exonerating or mitigating circumstances of administrative liability established in article 257 of the TUO of the LPAG11, in accordance with articles 2612 and 2713 of the

[11] "Article 257°.- Exemptions and mitigating factors of liability for infringements 1.- The following constitute conditions exempting liability for infringements: a) Force majeure or fortuitous event duly proven. b) Acting in compliance with a legal duty or the legitimate exercise of the right of defense. c) Mental incapacity duly proven by the competent authority, provided that it affects the ability to understand the infringement. d) The mandatory order of a competent authority, issued in the exercise of its functions. e) The error induced by the Administration or by a confusing or illegal administrative provision. f) The voluntary rectification by the possible sanctioned party of the act or omission imputed as constituting an administrative infringement, prior to the notification of the imputation of charges referred to in paragraph 3) of article 235. 2.- The following constitute mitigating conditions of liability for infringements: a) If, once an administrative sanctioning procedure has been initiated, the offender expressly and in writing acknowledges their liability. In cases where the applicable sanction is a fine, it is reduced to an amount not less than half of its value. b) Others established by special regulation."

[12] "Article 26.- MITIGATING FACTORS OF LIABILITY FOR INFRINGEMENTS The following constitute mitigating conditions of liability for infringements: a) Express and written acknowledgment of liability by the offender, once the administrative sanctioning procedure has been initiated. When the applicable sanction is a fine, it is reduced, taking into account the following: (…) 3. If the acknowledgment is submitted after the expiry of the period granted to submit arguments to the instruction report and before the issuance of the sanction resolution, the amount

[13] of the reduction will be ten percent (10%)" 13 "Article 27.- EXEMPTIONS FROM LIABILITY FOR INFRINGEMENTS

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Reglamento de Sanciones;

34. That, in this regard, the last paragraph of article 25 of the Sanctions Regulation states that: "When, from the evaluation of the aforementioned criteria, it is noted that there is no proportionality between the sanction to be imposed and the facts imputed, by exception and by means of a reasoned resolution, a sanction corresponding to a lower classification than that provided for may be imposed.";

35. That, in the present PAS, from the information evaluated it is noted that from the evaluation of the sanction criteria developed above, in which it is observed that JCR Latam has reduced the amount recorded in the "Deferred Income Tax Asset" line item and the existence of intentionality or unlawful benefit has not been evidenced; it is concluded that there would be no proportionality between the sanction that would correspond to be imposed for the commission of a serious infraction and the facts imputed; therefore, by exception, this Deputy Superintendency considers that it corresponds to impose a sanction corresponding to a lower classification than that provided for, that is, to impose a sanction corresponding to minor infractions.

36. That, in accordance with the Sanction Criteria indicated above, from the analysis contained in the Report and from the evaluation carried out by this Deputy Superintendency, it is considered that in the present PAS, a total fine of 10 UIT14 equivalent to S/ 43,000.00 (Forty-Three Thousand and 00/100 Soles) must be imposed on JCR Latam for having submitted to the SMV on 17 February 2020 the Individual Interim Financial Statements as of 31 December 2019, prepared without observing the IFRS, by failing to comply with paragraphs 34, 35 and 36 of IAS 12.

In accordance with the provisions of numerals 13 and 36 of article 43 of the Regulation of Organization and Functions of the Superintendency of the Securities Market, approved by Supreme Decree No. 216-2011-EF;

RESOLVES:

Article 1.- Declare that JCR Latino América Empresa Clasificadora de Riesgo S.A. has incurred in one (1) infraction of a serious nature, typified in subsection 2.8 of numeral 2 of Annex I of the Sanctions Regulation, approved by SMV Resolution No. 035-2018-SMV/01, for presenting its Individual Interim Financial Statements as of 31 December 2019 without observance of the International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB) in force internationally.

The following constitute conditions exempting liability for infractions:

a) Fortuitous event, force majeure or another exceptional situation that, in the opinion of the SMV, is comparable to a duly proven fortuitous event or force majeure.

b) Acting in compliance with a legal duty or the legitimate exercise of a right of defense.

c) Mental incapacity duly proven by the competent authority, provided that it affects the aptitude to understand the infraction.

d) The mandatory order of a competent authority, issued in the exercise of its functions.

e) The error induced by the Administration or by a confusing or illegal administrative provision.

f) The voluntary correction by the possible sanctioned party of the act or omission imputed as constituting an administrative infraction, prior to the notification of the imputation of charges referred to in subsection 3) of article 253 of the LPAG and provided that no communication demanding compliance with the obligation has been sent". 14 Value of the UIT (2020): S/ 4 300 (Supreme Decree No. 380-2019-EF).

Article 2.- Sanction JCR Latino América Empresa Clasificadora de Riesgo S.A. with a fine of 10 UIT equivalent to S/ 43,000.00 (Forty-Three Thousand and 00/100 Soles), for the provisions of Article 1 of this Resolution.

Article 3.- This Resolution does not exhaust the administrative route, and it may be challenged before this Deputy Superintendency of Supervision of Market Conducts by filing a motion for reconsideration or appeal, administrative remedies recognized in article 218 of the Single Ordered Text of Law No. 27444, General Administrative Procedure Law, approved by Supreme Decree No. 004-2019-JUS and its amendments, within a period of fifteen (15) business days, counted from the day following its notification, as it is a procedure of double administrative instance. If this Resolution is not challenged, the corresponding sanction reduction regime may be applied.

Article 4.- If this Resolution is not subject to challenge by motion for reconsideration or appeal, it must be published on the SMV Institutional Page on the Single Digital Platform of the Peruvian State for Citizen Orientation (www.gob.pe/smv), in observance of the provisions of numeral 1 of article 7 of the Policy on publicity of regulatory projects, general legal norms and other administrative acts of the SMV, approved by SMV Resolution No. 014-2014-SMV/01, and by the provisions of the last paragraph of article 14 of the Sanctions Regulation, approved by SMV Resolution No. 035-2018-SMV/01.

Article 5.- Transcribe this Resolution to JCR Latino América Empresa Clasificadora de Riesgo S.A.

Reason:

Signed by: RIVERO ZEVALLOS Carlos

Carlos Rivero Zevallos
Deputy Superintendent (e)
Deputy Superintendency of Supervision of Market Conducts