Norm Reforming Articles 4 and 5 of the Standard on the Accounting of Financial Commissions

Page 1 of 2 Resolution No. CD-SIBOIF-1087-5-DIC4-2018 Dated December 4, 2018

NORM REFORMING ARTICLES 4 AND 5 OF THE STANDARD ON THE ACCOUNTING OF FINANCIAL COMMISSIONS

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

CONSIDERING

I

That on February 28, 2007, the Standard on the Accounting of Financial Commissions, contained in Resolution No. CD-SIBOIF-468-2-FEBR28-2007, was approved, and published in La Gaceta, Official Gazette No. 78 on April 26, 2007.

II

That it is necessary to adapt the provisions contained in Articles 4 and 5 of the aforementioned standard, regarding the recognition and accounting of financial commissions, in accordance with the new accounting framework applicable to banks and financial institutions, which is based on a combination of International Financial Reporting Standards (IFRS) and prudential regulations issued by this Superintendence.

III

That in accordance with the considerations set forth above, and based on the powers conferred by Article 3, numeral 13) and Article 10, numeral 1) of Law No. 316, Law of the Superintendence of Banks and Other Financial Institutions, and its reforms; contained in Law No. 974, Law of the Nicaraguan Legal Digest of the Banking and Finance Sector, published in La Gaceta, Official Gazette No. 164, on August 27, 2018, and its reforms.

In exercise of its powers,

HAS ISSUED

The following:

Resolution No. CD-SIBOIF-1087-5-DIC4-2018 NORM REFORMING ARTICLES 4 AND 5 OF THE STANDARD ON THE ACCOUNTING OF FINANCIAL COMMISSIONS

Page 2 of 2

FIRST: Articles 4 and 5 of the Standard on the Accounting of Financial Commissions, contained in Resolution No. CD-SIBOIF-468-2-FEBR28-2007, dated February 28, 2007, and published in La Gaceta, Official Gazette No. 78 on April 26, 2007, are hereby amended, which shall read as follows:

“Article 4. Recording of financial commissions.- Financial commissions shall be recognized as follows: a) If the loan is held to maturity, the commission shall be deferred over time and recognized in the income statement, except for the portion that compensates direct costs, over the life of the loan, as an adjustment to its yield, using the effective interest method, in accordance with what is established in the Accounting Framework. The financial institution, to determine the direct cost of granting loans, may develop a costing or analytical accounting methodology, which must be approved by the Board of Directors of the institution. In the absence of an analytical or costing accounting that identifies the direct costs of the loan, the financial institution shall defer over time, throughout the life of the loan, one hundred percent (100%) of the financial commissions charged to the client, as defined in Article 3 of this standard. b) If the loan is sold, the net commission referred to in the preceding letter that remains to be deferred over the remaining life of the loan shall be recognized in the income statement at the moment the loan is sold.

Article 5. Accounting of commissions.- Commissions generated by loans must be accounted for based on the accrual method, taking into consideration their term of validity as follows:

For commissions charged in advance, the financial institution must record the amount collected in the asset correction account “Accrued Commissions with Effective Interest Rate” and the accrual of commissions shall be recorded in the corresponding income statement account, in accordance with the recording criteria established in the Accounting Framework.

SECOND: The provisions established in this standard shall be applicable starting January 1, 2019.

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

RAFAEL ÁNGEL AVELLÁN RIVAS Secretary, Board of Directors SIBOIF