Instructions for Accounting for Forgiven Interest and Legal Costs, and Sanitation Reserves for Refinanced Loans under the Rehabilitation Program for Productive Sectors Directly Affected by the Conflict (D.L.292)

CDSSF-57/1992 NCB-002
INSTRUCTIONS FOR THE ACCOUNTING OF FORGIVEN INTEREST AND LEGAL COSTS, AND SANITATION RESERVES FOR LOANS TO BE REFINANCED, UNDER THE REHABILITATION PROGRAM OF THE PRODUCTIVE SECTORS DIRECTLY AFFECTED BY THE CONFLICT (D.L.292) Approval: 09/12/1992 Validity:
Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv

INSTRUCTIONS FOR THE ACCOUNTING OF FORGIVEN INTEREST AND LEGAL COSTS, AND SANITATION RESERVES FOR LOANS TO BE REFINANCED, UNDER THE REHABILITATION PROGRAM OF THE PRODUCTIVE SECTORS DIRECTLY AFFECTED BY THE CONFLICT (D.L.292)

I. OBJECTIVE
To unify the accounting of forgiven interest and legal costs; as well as the application of sanitation reserves for loans under the scheme.

II. ACCOUNTING
A. OWN PORTFOLIO

1. FORGIVEN INTEREST AND LEGAL COSTS
   1.1 Interest
   The difference (unreserved) resulting from the comparison of the balance of capital and accounted interest (in Loans, Various Debtors, Other Debtors, etc.) against the balance of capital and interest recalculated at 8% (amount to be refinanced) established by the program, shall be accounted for, if it is a reduction, in the asset accounts 160210 (Banks) or 1601-10 (Financial Institutions) or 1801 (FOSSAFFI) which is named "Difference to be Compensated Decree No.292", until the Central Bank of Reserve compensates it with the funds that will be provided by the State. When the recalculation results in an increase in values, the variation must be credited to the respective sanitation reserves. The reduced position that was reserved must be settled against the respective reserve constituted and for that portion of interest that is registered in off-balance sheet accounts, make the counterpart to settle them. See examples in annex.

1.2 Legal Costs
The value of legal costs, accounted for in the Various Debtors or Other Various Debtors account of the loans that are refinanced under this program, must be settled against the constituted sanitation reserve, and in case that this was not constituted for that item, they must be applied to Other Expenses.

2. RECLASSIFIED CASES
   After the recalculation of interest, the debtor's balance will be reduced and therefore, its category could change; however, the reserve constituted by its original classification must be maintained, and the excess, for the reduced part, must be credited to the account "610302 Reimbursements of Reserves" (Banks) or 41.01.05 Excess of Reserves for Loan Sanitation" (Financial Institutions) or 610104 Recovery of Bad Debts (FOSAFFI).

B. CREDITS IN ADMINISTRATION IN BANKS AND FINANCIAL INSTITUTIONS For debtors of the portfolio in administration that adhere to the rehabilitation scheme, the administrator must make a reversal entry in off-balance sheet accounts for the amount of the credit, upon having knowledge that the refinancing has been approved and must register the new refinanced value in the same off-balance sheet accounts.

III. C. RECORDING UNIT
The accounting applications of each debtor must be made in a single journal entry avoiding partial and global accounting.

CDSSF-57/1992 NCB-002
INSTRUCTIONS FOR THE ACCOUNTING OF FORGIVEN INTEREST AND LEGAL COSTS, AND SANITATION RESERVES FOR LOANS TO BE REFINANCED, UNDER THE REHABILITATION PROGRAM OF THE PRODUCTIVE SECTORS DIRECTLY AFFECTED BY THE CONFLICT (D.L.292) Approval: 09/12/1992 Validity:
Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv

Annex
INSTRUCTIONS FOR THE ACCOUNTING OF FORGIVEN INTEREST AND LEGAL COSTS, AND SANITATION RESERVES FOR LOANS TO BE REFINANCED, UNDER THE REHABILITATION PROGRAM OF THE PRODUCTIVE SECTORS DIRECTLY AFFECTED BY THE CONFLICT (D.L.292)

CASE A: Credit D that retains category and decreases net accounting balance.
Situation Amount Differences
Actual Recalculated to adjust
Loan 100 80 20 (1)
Interest 30 - 30 (2)
Gross Balance 130 80 50
Reserve 65 40 25 (3)
Net Balance 65 40 25 (4)
Off-balance sheet accounts 15 - 15
Total Net Balance 80 40 40
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ACCOUNTING ENTRY
Account Debit Credit
(1) Loans 80 100
(2) Interest Receivable Products - 30
(3) Sanitation Reserve 25 -
(4) Difference to Compensate DL 292 25 -
130 130
Off-balance sheet accounts 15 15
Totals of the Entry 145 145
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CDSSF-57/1992 NCB-002
INSTRUCTIONS FOR THE ACCOUNTING OF FORGIVEN INTEREST AND LEGAL COSTS, AND SANITATION RESERVES FOR LOANS TO BE REFINANCED, UNDER THE REHABILITATION PROGRAM OF THE PRODUCTIVE SECTORS DIRECTLY AFFECTED BY THE CONFLICT (D.L.292) Approval: 09/12/1992 Validity:
Alameda Juan Pablo II, between 15 and 17 Norte Ave, San Salvador, El Salvador.
Tel. (503) 2281-8000 www.bcr.gob.sv

Annex
CASE B: Credits D that changes category and increases net accounting balance.
Situation Recalculation Differences
Actual
Loan 100 120 (20) (1)
Interest 30 - 30 (2)
Gross Balance 130 120 10
Reserve 65 60 5 (3)
Net Balance 65 60 5 (4)
Off-balance sheet accounts 15 - 15
Total Net Balance 80 60 20
==== === ===
ACCOUNTING ENTRY
Account Debit Credit

(1) Loans 120 100
(2) Interest Receivable Products - 30
(3) Sanitation Reserve 5 -
(4) Difference to Compensate DL 292 5 130
15 15
Off-balance sheet account 15 15
Totals of the Entry 145 145
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