Norms for Accounting for Revaluations of Real Estate of Insurance Companies

Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 1 of 3 CDSSF-39/1998 REGULATION NCS-008 NORMS FOR ACCOUNTING FOR REVALUATIONS OF REAL ESTATE OF INSURANCE COMPANIES Approval: 18/06/1998 Validity: 15/07/1998

The Board of Directors of the Superintendency of the Financial System, based on letter c) of Article 10 of its Organic Law and the second paragraph of Article 85 of the Insurance Companies Law, issues the:

NORMS FOR ACCOUNTING FOR REVALUATIONS OF REAL ESTATE OF INSURANCE COMPANIES

CHAPTER I OBJECTIVE

Art. 1.- The objective of these norms is to establish the accounting procedures related to the recording of the revaluation of real estate in the fixed assets of insurance companies, their depreciation, and retirement.

Art. 2.- The term insurance companies comprises insurance companies constituted in El Salvador, branches of foreign insurers, and cooperative associations that provide insurance services.

CHAPTER II DETERMINATION OF VALUES

Art. 3.- The accounting value of the revaluation will be the difference obtained by subtracting the value of the asset at the date of authorization from the value of the revaluation authorized by the Superintendency.

For the purposes of these norms, the value of the asset will be its original cost or historical cost plus previous revaluations.

Art. 4.- The residual value of the revaluation will be determined by the corresponding entity, based on the same method and criteria used to determine the residual value of the original cost.

Art. 5.- The future depreciation of the revaluation will be established based on the same method and criteria used for the depreciation of the original cost. The amount of the annual depreciation of that revaluation will be determined by dividing the value obtained based on Article 3 of these norms by the estimated useful life at the date of the revaluation plus the elapsed existence.

Art. 6.- To update the depreciation of the asset subject to revaluation, the quotient obtained in the manner established in the previous article will be multiplied by the number of years the asset has been owned, and the resulting value will be the accounting adjustment.

Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 2 of 3 CDSSF-39/1998 REGULATION NCS-008 NORMS FOR ACCOUNTING FOR REVALUATIONS OF REAL ESTATE OF INSURANCE COMPANIES Approval: 18/06/1998 Validity: 15/07/1998

CHAPTER III ACCOUNTING APPLICATIONS

Art. 7.- The value of the revaluation will result in an increase or decrease in the corresponding asset account and an increase or decrease in the equity account that records the revaluations of real estate assets.

The value determined according to Article 6 of these norms will cause a debit in the equity account that records the revaluations of real estate assets and a credit in the account that contains accumulated depreciation.

The depreciation of revalued assets will result in a debit in the corresponding expense account and a credit in the account that records accumulated depreciations.

Art. 8.- The sale of a revalued asset that results in a profit will cause the following accounting applications:

1. Debits: a) In the corresponding asset account, for the sale value; b) In the complementary account containing depreciations, for the accumulated amount at the date of sale; and c) In the equity account containing revaluations, for the amount of the revaluation of the corresponding asset.

2. Credits: a) In the asset account containing the original cost and revaluations; b) In the corresponding non-operational income account, for the value of the profit.

Art. 9.- The sale of a revalued asset that results in a loss will cause the following accounting applications:

1. Debits: a) In the corresponding asset account, for the sale value; b) In the complementary account containing depreciations, for the accumulated amount at the date of sale; c) In the equity account containing revaluations, for the amount of the revaluation of the corresponding asset; d) In the corresponding non-operational expense account, for the value of the loss.

2. Credits: Only the asset accounts containing the original cost and revaluations will be credited.

Alameda Juan Pablo II, between 15 and 17 Av. Norte, San Salvador, El Salvador. Tel. (503) 2281-8000 www.bcr.gob.sv Page 3 of 3 CDSSF-39/1998 REGULATION NCS-008 NORMS FOR ACCOUNTING FOR REVALUATIONS OF REAL ESTATE OF INSURANCE COMPANIES Approval: 18/06/1998 Validity: 15/07/1998

Art. 10.- When the asset is removed from assets for causes other than sales to third parties, the following accounting applications will be made:

1. Debits: a) In the corresponding non-operational expense account, for the net value of the asset, established by subtracting accumulated depreciation from the original cost plus revaluations; b) In the complementary account containing depreciations, for the accumulated amount at the date of asset retirement; and c) In the equity account containing the amount of the revaluation.

2. Credits: Only the asset accounts containing the original cost and revaluations will be credited.

CHAPTER IV OTHER PROVISIONS AND VALIDITY

Art. 11.- In no case can the surplus from revaluations be integrated into social capital, except when the respective assets that were the subject of revaluation have been realized through cash sale, with prior authorization from the Superintendency of the Financial System and in accordance with the norms it issues.

Art. 12.- What is not contemplated in these norms will be resolved by the Board of Directors of the Superintendency of the Financial System.

Art. 13.- These norms will enter into force on July 15, 1998.