Regulation of Accounting Standards for Pension Fund Administrator Institutions and for Pension Funds

DE No. 18/1998 DECREE No. 18/1998
REGULATION OF ACCOUNTING STANDARDS FOR PENSION FUND ADMINISTRATOR INSTITUTIONS AND FOR PENSION FUNDS Approval: 11/02/1998 Validity: 07/03/1998

DECREE No. 18

THE PRESIDENT OF THE REPUBLIC OF EL SALVADOR

CONSIDERING:

I. That Art. 5, letter c) of the Organic Law of the Superintendency of Pensions establishes that it is within the powers of the Superintendency to issue technical instructions for the preparation and public presentation of Financial Statements and supplementary information of the supervised entities, as well as to determine the principles according to which they must keep their accounting and establish criteria for the valuation of assets, liabilities, and the creation of provisions.

II. That it is necessary to issue the Regulation that facilitates the application of the aforementioned Law by providing the norms that Pension Fund Administrator Institutions and the Managed Pension Fund must comply with for the uniform presentation of their financial information.

THEREFORE,

in exercise of its constitutional powers;

DECREES the following:

REGULATION OF ACCOUNTING STANDARDS FOR PENSION FUND ADMINISTRATOR INSTITUTIONS AND FOR PENSION FUNDS

CHAPTER I
OBJECTIVE AND DESIGNATIONS

Objective
Art. 1.- The purpose of this Regulation is to standardize the Accounting Standards for the presentation of financial information and the recording of operations carried out by companies authorized to operate as Pension Fund Administrator Institutions and the operations of the Pension Fund that they manage.

Designations
Art. 2.- The following designations will be used in the text of this Regulation:
a) Law: Law of the Pension Savings System; b) Superintendency: Superintendency of Pensions; c) AFP: Pension Fund Administrator Institutions; d) Fund: Pension Fund; e) Accounting Standards: Accounting Standards for Pension Fund Administrators and the Pension Fund; f) Legal Tender Currency: The one established by the Monetary Integration Law. (1)

CHAPTER II
GENERAL APPLICATION OF ACCOUNTING STANDARDS

Application
Art. 3.- The Accounting Standards contained in this Regulation are mandatory for all AFPs.

Applicable accounting standards
Art. 4.- Financial statements must be prepared in accordance with the provisions established by the Superintendency through the respective Instructions. In the event of situations not foreseen by these provisions, International Accounting Standards shall be applied, opting for the most conservative alternative, after consultation with the Superintendency.

Prevalence of economic substance
Art. 5.- For the accounting recording of operations, the economic essence must prevail over the legal form in which they are agreed upon.

Offsetting of balances
Art. 6.- The balances of asset, liability, and equity accounts, whether debit or credit, shall be presented separately without offsetting; unless there is an express provision to that effect issued by the Superintendency. The same treatment shall be given to the balances of the AFP's income statement accounts.

Currency allocation
Art. 7.- Assets, rights, and obligations shall be classified in legal tender currency or foreign currency, expressing the latter in legal tender currency, according to how the transaction is carried out.

Income and expenses of the period shall be classified in legal tender currency or foreign currency according to whether they originate from assets or liabilities in legal tender currency or in foreign currency, expressed in legal tender currency.

Those that do not originate directly from assets and liabilities must be accounted for in the currency in which payment is made, according to the average exchange rate of the Financial System, expressed in legal tender currency. [1]

Cost allocation
Art. 8.- Cost allocation, except in cases where specific standards are established, shall be carried out as follows:
a) Costs linked to specific income must be allocated to the period in which they are recognized accounting-wise; b) Costs not linked to determined income, but to given periods, must be allocated to them; c) The remaining costs must be allocated to the periods in which they are known.

Consolidation of Financial Statements
Art. 9.- The consolidation of the AFP's financial statements with those of other companies must be done when they hold more than fifty percent of the shares with voting rights in these companies.

CHAPTER III
ON ACCOUNTING RECORDS AND ARCHIVES

Recording and archiving of accounting documentation Art. 10.- Each AFP is obliged to maintain, as determined by the Superintendency, all files of its records, those of the Fund, and others required by legal provisions, registering in a totally independent manner what concerns its accounting and that of the Fund it administers.

The operations recorded therein must be supported by the corresponding supporting documentation and complying with the standards established in the Code of Commerce, insofar as it is pertinent.

Legalization of accounting books
Art. 11.- AFPs must legalize the accounting books in accordance with what is established in the Code of Commerce for operations related to the AFP and for the accounting records of the operations of the Pension Fund they administer.

In the case of the accounting operations of the Pension Fund, the books to be kept shall be the following:
a) Journal Book, b) Ledger Book, and c) Financial Statements Book.

Balance archive
Art. 12.- AFPs must prepare independent balance archives on March 31, June 30, September 30, and December 31 of each year, which must contain the financial statements, the trial balance and its auxiliaries, reflecting the accounting movements of the AFP and the respective ones of the Pension Fund.

Additionally, the following minimum auxiliary records must be established according to the nature of the Fund:
a) Individual account statements of affiliates; b) Auxiliary records of investment movements; and c) Auxiliary records of delinquency of contributions. d) Others deemed necessary.

In the monthly closing of operations, AFPs must prepare and maintain the necessary auxiliaries that allow for adequate information, taking the necessary precautions to be able to generate all financial and analytical reports at any time. A copy of the balance files must remain at the entity at the disposal of the Superintendency. These files must be safeguarded on magnetic media with their corresponding documentary backup.

CHAPTER IV
ON FINANCIAL STATEMENTS, THEIR PRESENTATION AND PUBLICATION

Basic financial statements
Art. 13.- The basic financial statements of AFPs are: The General Balance Sheet, Statement of Results, Statement of Changes in Equity, Statement of Cash Flows, and Notes to the Financial Statements, which are the only valid ones for all purposes, whether for approval by the General Shareholders' Meeting, inclusion in the annual report, publication in the press, or for any other type of dissemination in the country or abroad, with the exception of financial statements that must be prepared for tax purposes in accordance with the requirements of the Laws on the matter.

Art. 14.- The basic financial statements of the Fund are: The General Balance Sheet, Statement of Changes in Equity, Statement of Cash Flows, and Notes to the Financial Statements, which are the only valid ones for all purposes, whether for the approval of the General Shareholders' Meeting; inclusion in the annual report and publication in the press, or for any other type of dissemination in the country or abroad.

Art. 15.- The basic financial statements of the AFP and the Fund must obligatorily contain the handwritten signatures of the General Accountant, the General Manager, and the Legal Representative of the AFP.

The handwritten signatures must be identified regarding the persons to whom they belong and their corresponding positions, considering that they imply the declaration that the information contained in the documents signed has been extracted from the legal and auxiliary books of the entity and verified for accuracy and integrity. In addition to the above, the quarterly financial statements must be signed by the external auditor.

Formats of financial statements and their notes Art. 16.- The basic financial statements referred to in the previous articles and their notes must be prepared in the formats and with the content established in the Instructions issued for this purpose by the Superintendency.

AFPs must additionally submit this information to the Superintendency on magnetic discs or other optical or electronic media. The financial statements must be expressed in legal tender currency, whole numbers, and without including cents, it being considered for this purpose that any amount greater than 50 cents must be adjusted to the next higher unit. (1)

Closing of the economic year
Art. 17.- AFPs must close their economic and accounting management and that of the respective Fund on December 31 of each year, issuing the corresponding financial statements with the opinion of the external auditor.

On the Annual Report
Art. 18.- The closing financial statements of the economic year and management of the AFP and the Fund must be included in the annual report to be presented to the General Shareholders' Meeting for approval, taking into account the following procedures:
a) The Board of Directors of each AFP must annually prepare the report, to submit it to the General Shareholders' Meeting for its approval or disapproval, within sixty days following the closing of the fiscal year. b) The report must be available to shareholders along with the supporting documents, at least ten days in advance of the holding of the General Shareholders' Meeting. c) In addition to what is stated in the Code of Commerce, the report must contain the opinion of the external auditor on the financial statements. d) The report must be presented in such a way as to clearly reflect the financial and administrative situation of the AFP and the Fund it administers, as well as the results obtained in the past, present, and its projections according to the entity's experience, making a summarized evaluation of each of the most important items, so as to allow the shareholder to have a clear image of the management carried out by the AFP. e) The content of the report will be analyzed by the Superintendency after its approval. For this purpose, AFPs will present it within the timeframe provided in letter a) of this article.

Complementary information
Art. 19.- In addition to the financial statements, AFPs must prepare complementary information, when it is pertinent for the different items of Assets, Liabilities, Equity, Income Accounts, and Expense Accounts, in the forms, deadlines, and periodicity determined by the Superintendency.

On Publication
Art. 20.- AFPs, in accordance with current legal norms, must publish their financial statements in two national circulation newspapers together with their notes, in accordance with what is established in this Regulation.

Frequency and deadlines for publication of financial statements Art. 21.- Financial statements must be published with the following frequency and deadlines:

Period to | Maximum publication deadline
30 June | Within 30 calendar days following the indicated date 30 September | Within 30 calendar days following the indicated date 31 December | Within 60 calendar days following the indicated date

Additionally, the interim report of the external auditor must be published together with the financial statements and their notes for each period, and with an opinion, the one referred to December 31 of each year. [1]

External audit reports
Art. 22.- AFPs must hire the services of an Independent External Audit to examine their financial statements and those of the Fund, in accordance with the instructions of the Regulation for the Provision of External Audit Services to Pension Fund Administrators.

External auditors must send the audit report on the aforementioned financial statements to the Superintendency on the same date of its presentation to the AFP.

CHAPTER V
PRESENTATION OF FINANCIAL STATEMENTS TO THE SUPERINTENDENCY OF PENSIONS

On presentation
Art. 23.- AFPs must present to the Superintendency their financial statements and those of the managed Fund, duly approved, in the forms, deadlines, periodicity, and under the grouping standards established in this Regulation and in the corresponding Instructions.

The financial statements presented to the Superintendency must be considered and approved as follows: those referred to the end of each quarter, by the Board of Directors of the AFP; and those referred to December 31, by the Ordinary General Meeting of Shareholders in the first meeting held after their presentation, attaching the certification of the minutes of said meeting. In the event of observations, these must be reported immediately to the Superintendency.

The trial balance to be presented to the Superintendency must contain information at the level of the accounts established in the Chart of Accounts according to the instructions issued for this purpose by the Superintendency, including additional analytical accounts.

The trial balance must include the balances of all accounts provided for in the Chart of Accounts and the respective Manual of Accounting Instructions, approved by the Superintendency, including, in addition, the movements of the same.

Frequency of presentation of financial statements to the Superintendency Art. 24.- AFPs will present their financial statements and information to the Superintendency with the frequency and deadlines detailed below:

Frequency | Financial Information
Monthly | Quarterly | Semi-annual | Annual
Trial Balance | x | | |
General Balance Sheet | | x | |
Statement of Results | | x | |
Statement of Changes in Equity | | x | |
Statement of Cash Flows | | x | |
Notes to the Financial Statements | | x | |
Interim Report of External Auditor | | x | x | Opinion of External Auditor | | | x |

The aforementioned financial statements must be presented in a comparative manner, as established by the Superintendency. [1]

Deadlines for presentation of financial statements Art. 25.- The presentation to the Superintendency of the aforementioned financial information will be made according to the following deadlines:

Information | Maximum presentation deadlines
Monthly | Within the first 7 days of the following month.
Quarterly (With report) | Within the first 15 days of the month following the end of the quarter Annual (December 31 and without opinion) | Within the first 21 days of the month of January.
Annual (December 31 and with opinion) | Within the first 10 days of the month of February.
Annual (December 31 and with authorization of the General Shareholders' Meeting) | Within the first 20 days of the month of February.

CHAPTER VI
OTHER PROVISIONS AND VALIDITY

Art. 26.- To facilitate the application of this Regulation, the Superintendency will issue the instructions named: Accounting Manual for Pension Fund Administrator Institutions, and Accounting Manual for Pension Funds and those others that are necessary.

Art. 27.- Violations of the norms of this Regulation will be sanctioned in accordance with what is established in the Law.

Art. 28.- What is not contemplated in this Regulation will be resolved by the Superintendency in accordance with the Law.

Art. 29.- This Decree will enter into force eight days after its publication in the Official Diary.

Given in the Presidential House: San Salvador, on the eleventh day of the month of February of nineteen hundred ninety-eight.

ARMANDO CALDERON SOL,
President of the Republic.

MANUEL ENRIQUE HINDS,
Minister of Finance.

EDUARDO TOMASINO HURTADO,

MODIFICATIONS:

1. D.E. No. 14, of February 15, 2006, D.O. No. 63, Volume No. 370, of March 30, 2006. Published in Official Diary No. 40
   Volume No. 338, of February 27, 1998.
   This compilation is an exact copy of what is established in the Official Diary.