September 18, 2018CNS-1442/06CNS-1443/05

Mr.Luis Carlos Delgado Murillo, PresidentNACIONAL COUNCIL FOR SUPERVISION OF THE FINANCIAL SYSTEM

Dear Mr:

The National Council for Supervision of the Financial System through articles 6 and 5 of the minutes of the meetings 1442-2018 and 1443-2018, both held on September 11, 2018,

Considering that:

Legal and prudential considerations

I. Article 171 b) of the Securities Market Regulatory Law, Law 7732, provides that one of the functions of the National Council for Supervision of the Financial System (CONASSIF) is to approve the rules pertaining to the authorization, regulation, supervision, control and surveillance that, according to the Law, must be executed by the Financial Supervisor (SUGEF), the Securities Supervisor (SUGEVAL) and the Pensions Supervisor (SUPEN); in addition, item ñ) of the referred article confers to CONASSIF the power to establish the provisions related to accounting and auditing standards applicable to entities regulated by SUGEF, SUGEVAL and SUPEN. In this sense, article 28 of the Regulating Insurance Market Law, Law 8653, provides, in relation to the Insurance Supervisor (SUGESE), that "the established provisions shall apply to the superintendent and the intendant in a generic manner and of uniform application, for the other Supervisors under the direction of the CONASSIF and their respective superintendents and intendents".

II. Through articles 8 and 5, of the minutes of the meetings 299-2002 and 300-2002, respectively, held on May 13, 2002, CONASSIF provided that the International Accounting Standards (IAS) will be implemented as of January 1, 2003, in accordance with the terms of the accounting regulations applicable to entities supervised by the Financial Supervisor, the Securities Supervisor and the Pensions Supervisor and Non-Financial Issuers (Accounting Regulations). The common regulation was reformed, in a comprehensive manner, through articles 7 and 13 of the minutes of the meetings 691-2007 and 692-2007, respectively, celebrated both on December 17, 2007. In addition, through article 11 of the act of the session 850-2010 held on May 7, 2010, it was established that the application by the supervised entities of the International Financial Reporting Standards (IFRS), will be in accordance with the IFRS texts in force as of January 1, 2011, with the exception of the special treatments indicated in Chapter II of the indicated Regulation.

III. By means of article 13, of the minutes of session 411-2004 of January 14, 2004, CONASSIF approved the Regulation on Financial Information, regarding the financial information of entities, groups and financial conglomerates, which aims to establish the content , preparation, submission and presentation of the financial information of the individual entities supervised by SUGEF and

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SUGESE; as well as for the financial groups and conglomerates supervised by SUGEF, SUGEVAL, SUPEN and SUGESE.

IV. The Chart of Accounts for Financial Entities, Groups and Conglomerates (Chart of Accounts), approved by the CONASSIF, through articles 8 and 12, of the minutes of the 639-2007 and 640-2007 sessions held on April 9, 2007 and their subsequent reforms, is the basis for the accounting, preparation of the individual and consolidated financial statements and complementary information, whose use is mandatory; additionally, in the case of insurers and insurance intermediaries, the CONASSIF approved, through article 13, numeral 3, of the minutes of session 811-2009, held on October 2, 2009, the Chart of Accounts for Insurance Entities , which was published in the official journal La Gaceta 202 on October 19, 2009.

V. The regulations indicated in paragraphs II, III and IV above are part of the accounting basis of the CONASSIF that is applicable to entities supervised and regulated by any of the Supervisors ascribed to CONASSIF. These regulations are operationally supported in the IFRS approved by the International Accounting Standards Board (IASB) issued in 2011. The IASB has repealed, modified and issued rules and interpretations after 2011, which have significant effects for the registration, valuation, presentation and disclosure of the financial information of the regulated entities; changes that have not been incorporated in the CONASSIF accounting base applicable to supervised subjects. Due to the above and within the framework of globalization, the standardization of the accounting language for the preparation of financial statements that favors corporate transparency is fundamental, which is why it is necessary to update the applicable accounting base, in the regulations to regulated entities, to IFRS.

VI. There is a legal framework that allows the regulatory body to issue regulations related to the preparation, presentation, revelation and disclosure of the financial information of the supervised entities with the purpose that both, Supervisors and users of the products and services provided by the supervised entities, and the public in general have information about their economic-financial situation and can make decisions within an information transparency framework; Among the legal provisions that allow issuing said regulation are:

a. The paragraph ñ) of article 171 of the Securities Market Regulatory Law, Law 7732, provides that it is function of CONASSIF to approve the provisions related to accounting and auditing standards, according to generally accepted accounting principles, as well as the frequency and disclosure of external audits to which the supervised subjects must obligatorily submit. In addition, literal o) of said Law provides that CONASSIF will approve the rules regarding the periodicity, scope, procedures and publication of the reports submitted by the external audits of the audited entities, in order to achieve the highest reliability of these audits.

b. The Organic Law of the Central Bank of Costa Rica, Law 7558, referring to the financial groups and conglomerates, provides that the controlling company must consolidate and supply the financial statements of the financial group, provide separated financial statements, duly audited by each of the companies of the economic group that are not subject to control by any of the supervisory bodies.

VII. Article 72 of the Organic Law of the National Banking System requires that the assets and securities transferred to the banks, in payment of obligations in their favor or adjudicated in judicial auctions, be sold within a maximum period of two years; if they are not sold within said period, the Superintendent of the SUGEF is entitled to extend the term for equal periods at the request of the

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banks and to provide for the creation of a reserve up to 100% of the value of the asset.

In attention to accrual accounting, or vesting, it is considered prudential that such measure is applied as an accounting estimate from the moment of the adjudication or receipt of the property in payment of obligations, for which the registration of a twenty-fourth part per month is required until completing 100% of the value of the good, before the dilemma of making the estimate in a single tract for 100% of the value of the good. Additionally, the Securities Market Regulatory Law, Law 7732, provides in literal ñ) the power of CONASSIF to approve the provisions regarding accounting and auditing standards, according to generally accepted accounting principles, for which reason it is considered pertinent extend its application to the entities supervised by SUGEF in order to avoid regulatory arbitrage between subsectors of the financial system.

VIII. Article 142, Integration and purposes of the holding company, of the Organic Law of the Central Bank of Costa Rica provides that the controlling companies shall at all times own, at least, twenty-five percent of the subscribed capital of each one of the entities of the group and respond subsidiarily and unlimitedly for the fulfillment of the obligations in charge of each of its component entities; Prudentially it has been indicated that the controllers should consolidate their investees, even if IFRS is not complied with. With the purpose of eliminating the gaps between the accounting base CONASSIF and the IFRS, and in application of the provisions of article 57 of the Complementary Private Pensions Scheme Act, Law 7523, which empowers the Supervisors to attribute to the acts and facts a meaning consistent with the reality and not the legal form for audit purposes, it is necessary that the accounting consolidation is carried out as dictated by the IFRS.

IX. Article 57 of Law 7523, indicated in the previous recital, provides that the legal forms adopted by the regulated entities do not bind the Superintendency, for the purposes of its oversight and sanction powers provided in this Law and that the Supervisors may attribute to the situations and the acts occurred a significance according to the facts, attending the reality and not the legal form.

Technical considerations

X. It is necessary that the regulation related to the accounting base CONASSIF be updated periodically, with a regularity that allows the incorporation of the modifications that the IASB issues on a particular topic, in order to guarantee the comparability of the financial information of the entities, national financial groups and conglomerates within the National Financial System and the international scope. In line with the above, the anticipated application of the changes and new IFRS issued by the IASB must be limited, in order to provide sufficient time for the corresponding evaluations of its applications and possible impacts on the supervised entities to be carried out and, if necessary, issue new regulations or modify the current prudential regulations that allow it to meet the supervisory objectives of the Supervisors.

XI. The entities must have the time to adjust their information systems for the accounting process, so the entry into force of the regulation will be on January 1, 2020, so that the entities can prepare financial statements with the new regulations as of the transition date, January 1, 2019 and quantify their impacts. In order to evaluate these impacts, financial entities are required to present the financial statements and the comprehensive income statement to the respective supervisor, with a quarterly frequency for March, June and September 2019. However, as it is indicated later in recital XV, it will be necessary to implement the accounting accounts for the period 2019 for the registration of the custody service by those entities authorized to provide it, given that the new registration scheme allows the mitigation of operational risks that could arise in this activity, which represents a greater benefit for the entire National Account Entry System than the cost of its

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implementation in particular entities or the risks that are assumed for postponing its adoption.

XII. Principle 27 of Financial information and external audit of the basic principles for an effective banking supervision, issued by the Basel Committee on Banking Supervision, provides that the supervisor should require the Governing Body or equivalent authority of the supervised entities to be responsible for ensuring that the financial information, as a whole, is prepared in accordance with accounting practices and policies widely accepted at international level, and publish, annually, information that reasonably reflects its financial situation and results, and is subject to the opinion of an independent external auditor. The supervisor must also verify that the financial information system of regulated entities and banking groups is based on registration systems that generate adequate and reliable data; that the framework, structure and processes for estimating fair value are subject to independent verification and validation and that the supervised entities notify any significant difference between the valuations used for the purpose of presenting financial information and for regulatory purposes. Likewise, standard 7.7 of the basic principles of insurance issued by the International Association of Insurance Supervisors, establish that the supervisory authority requires the Board of Directors of the insurer to guarantee a process of presentation of reliable financial information, both for the public in general as for supervisory purposes.

XIII. Supervisors should verify that financial entities and groups regularly publish information on a consolidated basis and, when appropriate, individually; make this information easily accessible and reasonably reflect your financial situation and results. In addition, the supervisor must verify that disclosure requirements include both qualitative and quantitative information about their results, financial situation, risk management strategies and practices, risk exposures, exposures and related party transactions, accounting policies, as well as about its basic business, management and good governance.

When analyzing the exposed for the preparation, presentation and reasonable disclosure of financial information by the supervised entities, it is necessary to adopt uniform accounting and regulatory policies, consistent with international standards. For this purpose, a process of harmonization of adequate accounting policies was developed, taking into account the legal provisions and the prudential criteria that prevails in the financial system, and the criteria established in the IFRS so that the purposes of transactions and other events can be accounted and presented according to their essence and economic reality, and not according to their legal form.

XIV. Corporate Governance is the power structure that governs, directs and is determinant for the control of the risk levels to which the supervised entities are exposed; the management, recording, measurement, presentation and disclosure of financial information is part of the work that must be managed by the members of the Government of each entity. It includes the necessary uniformity, impartiality, comprehensibility and comparability as basic ideas on which it has been currently supported by the strengthening of accounting standardization, this is reliability, which allows the supervisor to rely more on the internal processes of the organization, so that in the supervision framework it is considered that the accounting operations included in the Chart of Accounts becomes a rigid regulatory system that must opt for a model based on IFRS and move away from the prescriptive forms that are observed in the current regulation. In this way, the regulation must provide guidance and empower the Governing Body, as primary responsible for the business or activity in the proper registration of transactions, so it is considered timely and appropriate to eliminate the accounting operations of the regulatory framework and to base the regulation as provided by IFRS.

XV. In order to strengthen the supervision processes and provide robust mechanisms in terms of

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internal control that contribute to the mitigation of the inherent risk in the custody service, which in turn are linked to the new service reporting approach and allow the identification of repurchase transactions, specifically if it is a renewal of the operation or newly constituted operations, it is required to incorporate accounts, subaccounts and analytical accounts that allow revealing the real situation of a custodial value and reflect the separation of memorandum accounts on their own account and on behalf of third parties. Given the above, it is considered appropriate to simplify and adapt the accounting catalogs and respective accounting manuals contained in the Chart of Accounts for Entities, Groups and Financial Conglomerates and the Chart of Accounts for Insurance Entities.

XVI. As a result of the amendments to the IFRS issued by the IASB, and the incorporation of these in the CONASSIF accounting regulations, it is required to include or eliminate accounts, subaccounts and analytical accounts, as well as update the definition included in the Chart of Accounts; in addition, other opportunities for improvement that are considered appropriate and relevant to be included in said regulation have been determined.

XVII. The entities, groups and financial conglomerates must consistently adopt the bases of presentation and disclosure of information in their respective intermediate and annual financial statements, for which it is necessary to standardize the criteria related to their presentation and disclosure. In this sense, it is necessary to modify the Regulation regarding the financial information of entities, groups and financial conglomerates so that said information is useful, relevant and represents, faithfully, the reality of the transactions and that incorporates the IFRS provisions that are considered necessary to be comparable, verifiable and understandable, so that the information is presented in a complete, neutral and reasonable manner, so that users can use it for decision making.

Considerations about the adoption of IFRS

XVIII. The College of Public Accountants of Costa Rica (CCPCR) agreed in session 40-2005 and ratified in session 28-2014, that any changes to the Rules or interpretations in force, as well as new rules or interpretations to be duly approved in the future by the IASB, the issuer of the IFRS, will be automatically considered incorporated into the mandatory regulations in Costa Rica. In this way, the regulation must recognize this condition for the special case of non-financial issuers authorized for public offering.

XIX. Through decrees 34918-H, 35616-H and 41039-MH, the Government of Costa Rica decided to adopt the international accounting standards: International Accounting Standards of the Costa Rican Public Sector for entities that are part of the General Government Sector, and International Financial Reporting Standards for public companies. In this way, the regulation must recognize this condition for the special case of non-financial issuers authorized for public offering that are state-owned entities or public institutions.

XX. The Organization for Economic Cooperation and Development (OECD) indicates that transparency guarantees the timely and accurate disclosure of all material issues related to society, including the financial situation, results, ownership and governance of the company. The OECD details that the information should be prepared and disclosed according to high quality standards in accounting and disclosure of financial and non-financial information; In this sense, it is important to indicate that one of the points that the IASB seeks to develop, promote and provide within the single set of financial reporting standards that are reflected in the financial statements is transparency.

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XXI. The document Guidance on credit risk and expected credit loss accounting issued by BASILEA in 2015, establishes guidelines for the accounting of expected credit losses (ECL) that do not contravene IFRS; recognizes that supervised entities may have models for calculating expected losses due to credit risk and unexpected losses for regulatory capital purposes. Such models can be used as a starting point to estimate ECLs for accounting purposes, but may not be directly usable to calculate the expected credit losses due to differences between the objectives and the data used for each of these purposes.

XXII. The latest international financial crisis forced the Basel Committee to reformulate prudential standards; It also motivated the issuers of accounting and financial standards (IASB and FASB) to modify accounting standards, mainly the rules related to the recognition of credit losses, by moving from a model of incurred losses to a model of expected losses. The issuance of standards should seek consistency and transparency and should not lead to the duplication of requirements or regulatory arbitration. In this sense, it is necessary to implement registration, valuation, presentation and disclosure mechanisms where both IFRS and the best prudential practices coexist and that there is consistency between accounting and prudential standards.

In the preparation of this Regulation, what Basel indicated about expected credit losses (ECL) was valued and since other actions and regulatory reforms are required for its implementation, it has been considered reasonable not to incorporate in this regulation the necessary adjustments for the adoption of what is indicated by IFRS 9 on expected losses. In turn, specific regulatory reforms on this subject will be promoted.

XXIII. The Basel Oversight Committee issued in March 2017 Third Pillar Disclosure Requirements - Consolidated and improved framework through which supervised entities are required to reveal the links between financial statements and regulatory exposures; reveal the main differences between accounting and regulatory consolidation scopes and the mapping of categories of financial statements with regulatory risk categories. Also, they must reveal the main sources of differences between the amounts of regulatory exposures and the accounting values of the financial statements. It is expected that the smaller the gap in the regulatory accounting base with respect to adopted IFRS, the greater the comparability and the information requirements resulting from the discrepancies between both accounting bases, prudential and regulatory, promoting the financial culture.

XXIV. Credit and savings cooperative organizations are regulated by the general provisions established in the Cooperative Associations Law; Law 4179, and by the special regulations contained in the Financial Intermediation Regulation of Cooperative Organizations, Law 7391. The social capital of these financial entities is constituted by the contribution certificates, subscribed and paid by their associates and is variable and unlimited. The sums that represent the contribution certificates of each member must be delivered, once the right to withdrawal is exercised or, for any reason, excluded, as established in the statute of each cooperate organization, and any clause or agreement that tends to suppress the right of the associates of voluntary retirement will be absolutely null, while the association has not dissolved.

In line with the foregoing, in accordance with IAS 32 Financial Instruments: Presentation, the issuer of a financial instrument, such as the cooperative with the certificates of contribution, must classify it in its entirety or in each of its component parts, as a financial liability or an equity instrument, in accordance with the economic substance of the contractual agreement and with the definitions of financial liability and equity instrument. The accounting record (recognition,

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measurement and presentation) of these financial instruments does not detract from or hinder the attributes that these securities possess and that have been conferred by law.

Therefore, the supervised cooperative entities must differentiate the contributions of the associates in social and passive capital. The amount of contributions to be returned by voluntary withdrawal of the members who have resigned or for any reason, be excluded, as established in the statute of each cooperative, must be recorded as a liability at the time that the cooperative has been notified of their right of withdrawal or the corresponding body has taken the agreement to exclude it.

Caja de ANDE must follow the same course of treatment, since according to the attributes of the contributions of the members of this Institution, these can be withdrawn according to their constitutive law, so it is necessary to properly identify the financial liabilities and equity instruments.

XXV. With the adoption of IFRS, specifically as dictated by IAS 16, entities must determine the depreciable amount of the assets and systematically distribute it over the useful life expected, to obtain cash flows for the entity, based on the experience that the entity has with similar assets, which should be duly justified in its accounting policies. In this way, the Regulation proposes a change with respect to the previous practice, where it was determined that for depreciation applied the percentages of annual depreciation established for tax purposes, to a scheme in which the entity determines the useful life as indicated by IFRS and if there are differences with respect to what is required by the Tax Authority, proceed to register the corresponding deferred taxes according to the IAS 12 standard.

XXVI. IAS 1, in paragraph 35, establishes that losses or gains arising from a group of similar transactions will be presented compensating the corresponding amounts, as it is the case, for example, in the case of exchange differences in foreign currency, or in the case of losses or gains derived from financial instruments held for trading; however, such losses or gains will be presented separately if they have materiality. For greater disclosure and transparency, it was assessed whether the disclosure of the gains and losses from exchange differences separately in the income statement of the entities generated a better understanding of the information by their potential users, concluding that although individually these gains and losses are relevant to the total income and expenses of the entities in a period, their presentation separately may, in some entities, generate a misrepresentation of operating results, by oversizing the amount of income and expenses despite the fact that the entity takes measures to mitigate its exposure to foreign exchange risk, which could generate erroneous interpretations in the users of the information and affect the decision-making process. Given the foregoing, the current provision is maintained for entities to reveal gains and losses from exchange rate differences in a net form in the income statement; for the purposes of presenting the information; but that the practice of disclosing the information separately through the notes to the financial statements is maintained. The latter is relevant for the calculation of the contributions that the regulated entities must make to the budget of all the supervisors, computation that is carried out in accordance with the proportion of gross income in the income statement of the regulated entities.

XXVII. Article 21 of the Accounting Regulations stipulates that supervisors must present their financial statements in Costa Rican colones and that for all purposes, the functional currency is the Costa Rican colón. Although IAS 21 requires that each entity must establish the functional currency, defined as that of the main economic environment in which the entity operates, in the assessment made it was determined that the adoption of this provision generates a higher implementation cost for the entities, product of the new investment in information systems, capture

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of historical information on exchange rates, and change in procedures for registering transactions; In addition, the adoption of what is required in IAS 21 affects the usual practices for the sectoral analysis of financial entities that participate in the Costa Rican Financial System, since the behavior traditionally observed in income and expense items due to exchange rate differences is modified, the risk of generating erroneous expectations or confusion in the users of the information is increased.

In line with the foregoing, it is found that in the case of financial groups or conglomerates, the use of different functional currencies in their subsidiaries may occur, which makes the process of consolidation and analysis of the financial information of the controlling entities more complex, which has an impact on all users of this information. Thus, it is reasonable to maintain the current practice of using the Costa Rican colón as currency for the presentation of the financial information of the supervised financial entities, with the exception of the collective investment and universality portfolios. The foregoing does not inhibit that those entities that have information systems that allow them or requirements of their owners require them, to be able to generate information about a currency different from the Costa Rican colon., but such information will not be what the Supervisors require for the calculation of prudential indicators or for purposes of publication to the public as required by the legal provisions that regulate the Financial System.

XXVIII. The IFRS establish that an intangible asset will be initially measured at cost and requires that an intangible asset with an indefinite useful life not be amortized (capital gains). In the case of intangible assets with finite useful life (computer developments), they should be reviewed in each fiscal year, in order to determine if the events and circumstances allow continuing to support the evaluation of defined and indefinite useful life for those who have that characteristic. Article 16 of the Accounting Regulations, provides that after initial recognition, intangible assets must be accounted for at acquisition cost minus the accumulated amortization and accumulated impairment losses that may have affected them, in addition, automated applications in use must be amortized in a period that cannot exceed five years. A similar procedure and term must be used for the amortization of the acquired capital gains, provisions that are not congruent with IFRS, so it is proposed that the accounting treatment for this type of assets be consistent with these standards.

XXIX. The IFRS deepened in the analysis of the uncertainty on the tax treatments through the IFRIC 23 The Uncertainty against the Treatment of the Income Tax that enters into force at the international level on January 1, 2019. This standard allows to give greater clarity about the accounting treatment of what in our environment is called "transfer of charges", so its adoption is proposed to seek the closest approach to IFRS.

IFRIC 23 introduces the concept of "uncertain tax treatment" and in the case of transfer of charges it is found that once the tax administration initiates a transfer of charges, the entity is already facing an uncertain tax treatment where the tax authority has already indicated that it does not accept the treatment provided, and therefore is in dispute, in which case what is appropriate is to reflect the uncertainty according to the method that best predicts its resolution and by registering the corresponding provision. In this sense, it is specified in the Regulation that a specific tax treatment in dispute by the Tax Authority, begins with the notification of a transfer of charges. In the event that the outcome of the "transfer of charges and observations" is unfavorable to the entity and it has not previously made the recording of provisions, the record should be recognized in the results of the period on the date that the legal provisions require the respective payment, which is in line with the provisions of IAS 8 and IFRIC 23.

XXX. The validity of IFRIC 23 at the international level begins with the annual period beginning

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on January 1, 2019, and its adoption, on that date, allows the transition to be made, in light of this Interpretation, without the need to express again the comparative information. Instead, the entity will recognize the cumulative effect of the initial application of this Interpretation as an adjustment to the opening balance of retained earnings for prior periods.

XXXI. The SUGEF has the legal authority and the obligation to ensure the adequate compliance with the IFRS adopted by the CONASSIF, and the safeguard, stability, solidity and efficient functioning of the National Financial System. In this sense, it issued the external circular SGF-2193-2018 SGF-PUBLICO of July 17, 2018 as a result of the assessment that at the date of issue, some supervised entities have not reflected in their accounting records the corresponding provisions for disputes for uncertain tax treatments, reason why it considered necessary to require its accounting record. The omission of this registry can mislead decision-makers, both internal to the entity, as well as to the supervisor and other natural or legal persons who place their trust based on the financial information presented by each entity.

With the purpose of mitigating a negative impact that harms the stability of the supervised entities and with that of the Financial System, the SUGEF required the registration of provisions associated with the transfer of charges, for which it took into account the entity's estimate as of the content of the transfer of charges, the amount it estimates to pay, which must be duly documented, as well as other elements related to progressive scenarios for the accounting for provisions for transfer of charges as expenses for the period, seeking a reasonable impact on the equity sufficiency and profitability of supervised entities.

Given the above, it is considered reasonable and prudent to consider in the final provisions of the Regulation, what is already required by the SUGEF, so as to simplify the transition to the adoption of IFRIC 23 in the prudential period and to the supervised entities defined (which ends in June 2021) and for disputed tax treatments initiated for fiscal periods prior to 2017. For new uncertain tax treatments where the Tax Administration makes transfers of charges, they will be governed by the provisions of IAS 12 and CINIIF23. Given that some entities have expressed interest in the full adoption of IFRIC 23 since the beginning of the 2019 period, even for disputed tax treatments initiated for fiscal periods prior to 2017, the Regulation provides for the possibility of full adoption.

Therefore, it is considered pertinent to implement for the supervised entities the registering of their responsibilities for transfer of charges in the results of the period on a straight line calculation method until June 30, 2021 or as a single adjustment to the opening balance of the accumulated results of previous years. If the amount of accumulated profits is less than the responsibility of the entity for the transfer of charges, the difference must be recorded against results.

The aforementioned methodology must be homologous for all the entities that the Regulation on Financial Regulation meets and covers, with the purpose of not causing non-uniform treatment related to the registration of the transfer of charges for income taxes within a financial group.

XXXII. IFRS 3 Business Combination does not apply to business combinations of entities or businesses under common control. A business combination between entities or businesses under common control is a business combination in which all the entities or businesses that are combined are controlled, ultimately, by the same party or parties, both before and after the business combination, and that control is not transitory. Given that the IFRS does not establish a specific provision on the acquisition of a company under common control, it is necessary to provide guidance on this type of transaction if it occurs between regulated entities, for which the IAS 28 Investments in associates and joint ventures and the IFRS 10 Consolidated Financial Statements are

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observed, regarding that the financial statements will be prepared applying uniform accounting policies for transactions and other events that, being similar, have occurred in similar circumstances.

XXXIII. The valuation of joint portfolios was initially analyzed through article 12, numeral I., of the minutes of session 279-2002 of this Board, in which it was considered that the valuation of the portfolios at market prices would eventually promotes a more active management of the investment, more efficient risk management and greater transparency for the market and for investors. Hence, in its opportunity, CONASSIF considered its adoption relevant for all the joint portfolios managed by the different intermediaries of the financial sector. However, in view of the evolution of market conditions in recent years, as well as the evolution of the accounting registry rules that have been carried out at the international level, it has been considered pertinent to carry out a revision of the previous provision in this regulatory project, in response to the comments received during its public consultation.

As a starting point, it is found that IFRS 9 introduces the "business model" as one of the conditions for classifying financial assets. Recognizes that an entity can have more than one business model and that financial assets are reclassified if said model undergoes significant or exceptional changes. From the above, it is observed in the particular case of pension funds, that they administer contributions from members to meet their objectives, that is, to pay pensions. Therefore, its business model is determined at a level that reflects how groups of financial assets are managed to meet the objectives of the fund, taking into consideration the design of the plan, the financing scheme, the risk profile of the funds and the Affiliates that integrate it, other characteristics of affiliates, stabilization or maximization of pensions or replacement rates.

On the other hand, in the case of investment funds, these are portfolios managed in accordance with the mandates authorized in their prospectuses, so that the same financial asset contained in different portfolios should be able to be classified and valued according to the needs that should be addressed. Therefore, for the Financial Reporting Regulation it has been considered reasonable and pertinent to proceed to an adoption of the International Financial Reporting Standard that deals with the issue of classification of financial instruments, IFRS 9 Financial Instruments, without defining a category in the regulations. specific to use. The managers of the joint portfolios, as responsible for their management vis-à-vis the investors or affiliates, should consider as part of the strategy and general investment guidelines of each fund, the definition of the business model that will be used for their accounting records; which will allow attention to the essential conditions of each pooled portfolio and the economic reality that underlies it.

Other operative considerations

XXXIV. Until IFRS 9 Financial Instruments for the credit portfolio of financial intermediaries is implemented, the provisions established in the Regulations for the qualification of debtors to quantify the credit risk of the debtors and constitute the corresponding estimates, shall remain in force and the entities will continue calculating said estimates according to the methodology provided in the common Regulation.

XXXV. The IFRS have proposed new disclosures since 2011, which are considered that based on better information for the user, they must be assumed in their entirety without any restriction. In this sense, the regulations require entities to disclose the financial statements, in accordance with IFRS, and it is proposed to maintain the regulatory power that the Superintendent may require additional disclosures, in accordance with prudential regulations, when deemed appropriate.

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XXXVI. In accordance with IFRS, the allocation of equity reserves is derived from the distribution of accumulated earnings, generally, and other items that the laws have disposed. These reserves can only be applied to cover the net losses resulting from an economic period, after computed the expenses and income of the entity in its results. As a result, reserves can not be used to directly register against them expenses or losses without previously having passed through the results of the period.

XXXVII. It is convenient to merge into a single regulatory framework the documents Accounting standards applicable to entities supervised by SUGEF, SUGEVAL, SUPEN, SUGESE and to non-financial issuers, Regulation regarding the financial information of entities, groups and financial conglomerates, Chart of Accounts for Entities, Financial Groups and Conglomerates-Approved and Chart of Accounts for Insurance Entities, with the purpose of providing both, supervised and users of financial information, access in a single compendium, and maintain uniformity in all these regulations in such a way that unnecessary duplications are avoided.

XXXVIII. In a globalized economic environment it is necessary that the financial information has a common base of elaboration, interpretation and comprehension, since the internationalization of the economy entails the need for large companies to trade in different financial markets and to interact with other entities located outside of their usual environment. The exchange of basic financial information, such as the annual accounts and intermediate financial information, has been encountering the problem of the lack of harmonization and normalization, producing interpretation problems for the user, given that the image of the economic-financial situation of a Regulated entity includes a series of prudential provisions other than international accounting standards: IFRS. Therefore, it is necessary to strengthen a harmonizing process in order to make the financial information of the entities comparable, since this is the essential element available to the users of the information to judge the behavior of a given entity and take decisions about it.

In this case, there is a need to harmonize the different prevailing accounting standards and, consequently, their promulgation by the regulatory body. The modifications introduced in the national regulations should allow the disclosure of comparable financial information, necessary in the process of internationalization of the economy.

XXXIX. The CONASSIF through articles 6 and 8 of the minutes of the meetings 1389-2018 and 1390-2018 of January 25, 2018, made a firm decision to send the Regulation on Financial Information in consultation; Additionally, by means of article 5 of the minutes of session 1397-2018 of February 20, 2018, it decided to extend the consultation period by ten additional days so that the supervised entities could count on the time needed to evaluate the common proposal. At the end of the consultation, an analysis of the comments and observations received was made and the text was modified in what was considered pertinent.

XL. The proposed Regulation on Financial Information (RFI) and referral in consultation with the National Financial System of a project to modify related regulations affected by the approval of the RIF, was heard by the National Council of Supervision of the Financial System, acting as a de facto official, according to the criteria of the Attorney General of the Republic, C-100-2011, of May 3, 2011 and as resolved in article 1 of this act.

disposed:

1. Approve, in accordance with the attached text, the Regulation on Financial Information:

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"REGULATION ON FINANCIAL INFORMATION

Chapter IGeneral provisions

Article 1. Object.

The purpose of this regulation is to regulate the application of International Financial Reporting Standards (IFRS) and their interpretations (SIC and IFRIC), issued by the International Accounting Standards Board (IASB), considering prudential or regulatory accounting treatments, as well as the definition of a specific treatment or methodology when IFRS proposes two or more application alternatives.

They also aim to establish the content, preparation, submission, presentation and publication of the financial statements of the individual entities, financial groups and conglomerates supervised by the four Supervisors.

Article 2. Scope.

The provisions included in these Regulations are applicable to entities subject to the supervision of the Financial Supervisor (SUGEF), the Securities Supervisor (SUGEVAL) and the Pensions Supervisor (SUPEN), the Insurance Supervisor (SUGESE), to the controllers and entities of the financial groups and conglomerates; to the funds managed by them, to the trusts and funds of administration that they use in the realization of financial intermediation activities, as well as to the non-financial issuers or special-purpose vehicles authorized by SUGEVAL to make a public offering of securities.

The provisions contained in Chapters II and III do not apply to non-financial issuers; and the provisions contained in Chapter III do not apply to funds managed by entities supervised by SUPEN and SUGEVAL.

Article 3. Adoption of accounting standards

The IFRS and its interpretations will be applied in their entirety by the entities indicated in the scope of the previous article, except for the prudential or regulatory treatments indicated in this Regulation.

In the case of financial entities, the new IFRS issued by the IASB, or its amendments, would be incorporated into the accounting process of the supervised entities. However, early application to the effective date is not allowed, unless the National Council of Supervision of the Financial System so provides by means of an agreement or modification to this regulation.

In the case of non-financial issuers or special purpose vehicles authorized to make a public offering of securities, they must apply the IFRS adopted by the College of Public Accountants of Costa Rica (CCPCR). The non-financial issuers of the Costa Rican public sector must apply the accounting rules, as provided by the National Accounting of the Ministry of Finance.The insurance entities authorized under the modality of branch may choose between the adoption of IFRS in the terms indicated in these provisions or the rules applicable in the jurisdiction of origin,

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however, must adopt the Chart of Accounts for entities supervised by SUGESE and comply with the rules on presentation of financial information that are established in this regulation.

Issuers domiciled abroad authorized to make a public offer by SUGEVAL, may choose between the adoption of IFRS in the terms indicated in these provisions or the rules applicable in their country of origin.

Article 4. Economic substance on legal form

For the accounting record of the operations, the economic essence must prevail and not the legal form with which they are agreed upon.

Article 5. Accounting closure

For all the entities that dedicate themselves to the financial activity, the closing of the accounting period is December 31 of each year.

Article 6. Accounting policies applied that differ from IFRS and presentation of Financial Statements.

When the legal provisions and those issued by the CONASSIF differ from the provisions of the IFRS, the IFRS that have been disregarded must be reported in the financial statements and the nature of the specific divergence that applies to the entity for each period in which information is presented.

Chapter IISpecial treatments applicable to supervised entities that are dedicated

to financial activities

Section IPrudencial treatments

Article 7. International Accounting Standard (IAS) 7. Cash Flow Statements.

The presentation of the cash flows of operating activities included in the statement of cash flow must be prepared based on the indirect method.

Article 8. IAS 8. Accounting estimates.

The accounting estimates are the best approximations of values or items that are included in the financial statements to measure the effects of events or economic transactions already occurred, or a current situation that is specific to an asset or liability of the entity, including adjustments that occur after the evaluation of an element as a result of new information or new events.

Any change in the accounting estimates is prospective and is recorded in the results of the period.

Article 9. IAS 8. Accounting estimates - Impairment of premiums receivable due (Insurers and Reinsurers).

For insurers and reinsurance entities supervised by SUGESE, the accounting policy regarding the

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determination of estimates for impairment of premiums due must meet the following conditions:

a. The recognition of the estimate must be made against the corresponding profit and loss account, when the increase in the "Estimation of past-due premiums" is presented, corresponding to the impairment of premiums due, according to the impairment of premiums receivable due with takers.

b. The impairment will be calculated separately for each branch in which the eventual loss resulting from the non-payment of the past due premium is not recoverable, based on other economic rights recognized in favor of the policyholder and will be constituted by the part of the tariff premiums accrued in the year, net of the security surcharge that, foreseeably and in accordance with the experience of previous years of the entity itself, will not be charged. For the purposes of this impairment estimate, the premiums corresponding to floating or open policies will not be considered.

c. The basis for calculation will be determined by decreasing the tariff premiums that should be considered net of the security surcharge, if any, in the amount of the provision for unearned premiums.

d. The calculation of the impairment estimate of the past due premiums will be made at least at the end of the quarterly period, based on the information available on the situation of premiums due at the closing date. If the entity does not have statistical methods that approximate the value of the impairment based on its experience, it will estimate it according to the following criteria:i. Past due premiums equal to or greater than six months not claimed by the court: must be

corrected for their full amount.

ii. Past due premiums equal to or greater than three months and less than six months, not claimed judicially: will be corrected by applying a factor of 50 percent.

iii. Past due premiums less than three months old, not claimed by the court: will be corrected based on the average cancellation coefficient, understood as the average of cancellations, recorded in the premiums that were in this situation in the last three years, conferring the historical series as homogeneous as possible.

In the event that the entity does not have sufficient information to calculate the average cancellation coefficient, it will be estimated at 25 percent of the premiums due.

iv. Overdue premiums judicially claimed: will be corrected individually depending on the circumstances of each case.

v. In the case of premiums from co-insurance and accepted reinsurance, the entities may extend the terms outlined in the previous letters by three months.

This procedure should be considered to reflect the effect that the corrections made to premiums due may have on the commissions.

Article 10. IAS 12. Income tax and IFRIC 23 Uncertainty regarding the Treatment of Income Tax.

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Entities must apply IAS 12 Income Taxes for the records and presentation of assets and liabilities for deferred and current taxes.

In the case of a dispute of a specific tax treatment by the Fiscal Authority, which begins with the notification of a transfer of charges, the entity must:

a. Register against the results of the period in the event that, according to the assessment by senior management, it is concluded that the entity has an obligation of immediate enforceability with the Tax Administration.

b. Record a provision for those treatments not considered in the previous paragraph, and whose amount must reflect the uncertainty for each of the tax treatments in dispute, according to the method that best predicts its resolution, as indicated by IFRIC 23.

Article 11. IAS 16. Properties, plant and equipment.

Subsequent to initial recognition, real estate must be accounted for according to the revaluation model.

When an asset is revalued, the accumulated depreciation on the date of the revaluation of the real estate must be restated proportionally to the change in the gross carrying amount of the asset, so that the net book value thereof is equal to its revalued amount.

The revaluation must be supported with an appraisal made by an independent professional, authorized by the respective college.

Other assets other than real estate are subject to the accounting policy of the cost model.

Article 12. IAS 21. Effects of variations in foreign currency exchange rates.

The supervised entities must keep their records and present their financial statements in Costa Rican colones.

The financial information of the funds managed by the pension operators and the investment fund management companies must be presented in the official currency, “colón”, except for funds denominated in foreign currency, which will present their financial statements in foreign currency. The same treatment will be provided to the universalities administered by the securitization companies.

Supervised entities must use the reference exchange rate of the Central Bank of Costa Rica that prevails at the time of the operation for the accounting record of the conversion of foreign currency to the official currency "colón", except for the special or basic pension funds managed by non-banking public sector institutions, to which Article 89 of the Organic Law of the Central Bank of Costa Rica applies.

At the end of each month, the reference exchange rate for purchase will be used, calculated by the Central Bank of Costa Rica, effective on the last day of each month for the recognition of the foreign exchange adjustment in monetary items in foreign currency.

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The provisions of this article do not inhibit entities from generating information about a currency other than the Costa Rican colón, in the terms described in IAS 21 on functional currency. However, said information may not be used for the purposes of calculating prudential indicators, for presentation to the respective Superintendency or for publication to the public as required by the legal provisions that regulate the Financial System.

Article 13. IAS 27. Separate financial statements and IAS 28. Investments in associates and joint ventures.

In application of IAS 27 Separate financial statements, the entity with legal authority to participate in the equity of other companies or special purpose entities, such as subsidiaries, joint ventures and associates, that prepare separate financial statements will use the equity method.

In application of IAS 28 Investments in associates and joint ventures, the entity with legal authority to participate in the equity of other companies or special purpose entities, such as joint ventures and associated trusts, must use the equity method, from the date on which it acquires said investment or from the date on which it becomes an associate, joint venture or special purpose entity.

Regulated entities must present their separate financial statements.

Article 14. IAS 34. Interim financial information.

The content of the interim financial information includes a complete set of financial statements, in accordance with the presentation established in IAS 1 Presentation of Financial Statements, for which they must take as a basis the formats proposed in the regulatory provisions issued by the CONASSIF , applicable to the entity.

The form and content of the explanatory notes must be consistent with the groups of items and subtotals included in these financial statements, and must be accompanied by the explanatory notes required by IAS 34 Interim financial information, and when appropriate and in the judgment of the management of the entity, additional notes with the purpose that users can interpret the financial information adequately.

Article 15. IAS 40. Investment properties.

Investment properties must be valued at fair value.

For investment properties leased in which the fair value cannot be measured reliably in a continuous manner, its value will be measured by applying the cost model indicated in IAS 16 Properties, Plant and Equipment. The residual value of the investment property must be assumed to be zero.

Article 16. IFRS 5. Non-current assets held for sale and discontinued operations.

In the case of the entities supervised by SUGEF, the property owned by the entity whose destination is its realization or sale: goods held for sale, must be valued at the lower value between its carrying amount and fair value minus the costs to sell.

The entity must implement a sales plan and a program to negotiate the assets at a reasonable price that allows the plan to be completed in the shortest time possible.

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To determine the book value, the entity must record an estimate at a rate of a twenty-four monthly to complete one hundred percent of the book value of the asset. This accounting record will begin as of the month-end closing in which the asset was i) acquired, ii) produced for sale or lease, or iii) discontinued.

Article 17. Contributions from associates of cooperative entities and similar instruments - right of rescue.

The supervised cooperative entities must distinguish the contributions to the social capital by the associates, in social and passive capital, as indicated below:

a. The amount of contributions to be returned by voluntary withdrawal of members who have resigned or for any reason, be excluded, as established in the statute of each cooperative, must be recorded as a liability at the time that the cooperative has been notified of the exercise of its right or the agreement to exclude it.

b. The difference between the amount determined in paragraph a) above and the total contributions of the associates corresponds to the social capital.

Once the liabilities indicated in a) above are recognized, they will be subsequently measured at amortized cost and this value will be updated based on the proportional change in the net assets of the cooperative until the closing of the fiscal period prior to the date of the settlement.

Regardless of the amount indicated in letter a), under no circumstances may the capital stock of the supervised cooperatives be reduced to an amount that endangers the operation and economic stability of the cooperative. For that purpose, senior management will implement the necessary controls so that periodically and at the accounting close of each year the situation is assessed.

Caja de Ande must proceed in accordance with the provisions of this article, as applicable in the withdrawal or exclusion of its members.

Article 18. IFRS 9. Financial instruments - financial assets.

The conventional purchase or sale of financial assets must be recorded by applying the accounting of the settlement date.

Financial assets are divided into those measured at amortized cost and those measured at fair value. Based on the business model for managing financial assets and the characteristics of the contractual cash flows of the financial asset, the entity must classify its own investments or pooled portfolios in financial assets in accordance with the following valuation categories:

a. Amortized cost. If an entity, according to its business model and the current regulatory framework, classifies part of its investment portfolio in this category, it will disclose:

i. the fair value of the financial assets classified in this category, in the quarterly financial statements and in the audited annual financial statement; and

ii. the gain or loss that should have been recognized in the result of the period, for the financial statements indicated in the previous section.

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b. Fair value with changes in other comprehensive income.

c. Fair value with changes in results: In this category, the shares in open investment funds must be recorded.

Article 19. IFRS 9. Other prudential provisions related to credit portfolio.

Regulated entities must have policies and procedures to determine the time of suspension of the registration of the accrual of interest commissions and loan operations. However, the term of the suspension of the accrual must not be greater than one hundred and eighty days.

Article 20. IFRS 13. Fair value - Financial assets and financial liabilities related to market risks or credit risk of the counterpart.

The valuation at fair value of the portfolios of financial assets and financial liabilities exposed to market risk and credit risk will be made on an individual basis, measurement is not admissible on the basis of the entity's net risk exposure.

Article 21. Other aspects - Reservations.

The patrimonial reserves that by law or voluntarily create the regulated entities cannot be applied to register directly, against them, expenses or losses without having previously passed through the results of the period.

The use of education and social welfare reserves must be recorded as an increase in profits at the end of the fiscal year, without affecting the contributions and participations to which the entity is obligated within its regulatory framework.

Section IIOther clarifications

Article 22. IAS 8. Materiality and accounting errors.

The entity, based on its business model, nature, size, complexity, risk profile and other circumstances specific to its operational activity, must implement policies and procedures to define the representative threshold to determine whether the information is material or not, which involves considerations of quantitative and qualitative factors. The entity must disclose material omissions or inaccuracies in the financial statements, and related accounting policies.

Article 23.- IAS 38. Intangible assets.

After initial recognition, intangible assets with a defined useful life must be accounted for at their acquisition cost minus the accumulated amortization and accumulated impairment losses that may have affected them.

The senior management of the supervised body must establish the mechanisms and procedures to determine if an intangible asset with an indefinite useful life has deteriorated. For the respective verification, it will compare its recoverable amount with its book value. That comparison must be made when there is any indication that the value of the asset could have deteriorated or, at least,

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with an annual periodicity. This provision also applies to capital gains acquired in a business combination.

The automated applications in use must be amortized systematically by the straight line method, during the period in which it is expected to produce the economic benefits for the entity, which should be based on its accounting policy.

In the case of commercial banks, indicated in Article 1 of the Organic Law of the National Banking System, Law 1644, organization and installation expenses may be presented in the balance sheet as an asset, but must be fully amortized by the method of straight line within a maximum period of five years.

Article 24. Business combinations.

In the application of IFRS 3, the non-controlling interests in the acquiree, which are shares in the current property and that grant the right to a proportional participation in the net assets of the entity in the event of liquidation, must be measured by the acquirer, at the acquisition date, at fair value.

The combination that involves entities or businesses under common control or that the acquiree is a subsidiary of an investment entity, must be carried out by integrating its measured assets and liabilities at book value using uniform accounting policies, which is why adjustments in the financial statements of the acquiree must be previously carried out, in order to ensure that the accounting policies correspond to those used by the acquiring entity.

Chapter IIIChart of Accounts

Article 25. Registry of operations by type of entity.

For the entities regulated by SUGEF, SUGEVAL and SUPEN, the financial groups and conglomerates apply the provisions indicated in Annex 1 of this Regulation, which is published on the web page of the Supervisors.

The application of Annex 2 of this Regulation, which is published on the web page of the Supervisors, is mandatory for insurance entities, reinsurance companies, insurance brokers, insurance agencies and the controlling companies of conglomerates and financial groups supervised by SUGESE, since the original record of transactions.

The insurance entities authorized under the modality of branch, are excepted from the full application of the Chart of Accounts from the original registration of transactions, for them will rule the provisions of the jurisdiction of origin. However, these entities must send the specific information that SUGESE requires for the branch in Costa Rica, in accordance with Annex 2, through a converter system developed by the entities and under their responsibility. The converter must be presented to the Superintendency, duly accompanied by a report on its operations, in which the relevant differences in accounting practices between the jurisdiction of origin and the Costa Rican must be explicitly stated.

The chart of accounts for entities regulated by SUGEF, SUGEVAL and SUPEN, the groups and financial conglomerates is applicable to various types of entities, in this regard, accounts have been provided for the registration of their operations; However, this does not imply a tacit authorization

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to carry out operations and services different from what the Law or other regulations dictate.

In order to facilitate the loading and control in the registry of operations, each Superintendency will enable the accounts, subaccounts and analytical accounts according to its activity. In the event that a supervised entity requires the use of an account, subaccount or analytical account, it must process the request in a justified manner before the respective Superintendency.

In accordance with the nature of the activities of each supervised, controlled or conglomerate, it is the responsibility of senior management to have the auxiliary records and controls necessary for tax purposes, so this Chart of Accounts does not establish particular details on this subject.

Article 26. Structure and codification of the Chart of Accounts.

The Chart of Accounts presented in Annexes 1 and 2 will be composed of a catalog of accounts, an account manual and, where appropriate, application guides for the registration of specific operations, in accordance with the following:

a. Accounts catalog: Inventory of classes, groups, accounts, subaccounts and analytical accounts provided for the recording of operations for entities regulated by SUGEF, SUGEVAL and SUPEN (Annex 3, which is published on the web page of the Supervisors); for entities supervised by SUGESE (Annex 4, which is published on the web page of the Supervisors). The controllers of financial groups and conglomerates must use the entire Chart of Accounts in the consolidation of their financial information.

b. Accounts Manual: Defines the concepts of the accounts indicated in the catalog (Annexes 1 and 2).

c. Application guides: Examples of accounting operations or methodology of valuation of accounting items that allows to clarify their registration, valuation, presentation or disclosure.

The Superintendents, jointly or separately, may issue the application guides that they consider necessary to exemplify the operation of some transactions according to the Chart of Accounts by the regulated entities.

The catalog is structured on the basis of a numerical coding system that includes different levels of aggregation, as explained below:

a. Levels of aggregation:

Chart of Accounts ApprovedChart of Accounts of Insurance

and Reinsurance

It is identified with: It is identified with:

Class × First digit × First digit

Group × First two digits × First four digits

Account × First three digits × First seven digits

Subaccount × First five digits × First ten digits

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Currency × Sixth digit × Eleventh digit

Analytical Account × First eight digits × First fourteen digits

In Annex 7 of this Regulation, which is published on the web page of the Supervisors, a diagram of the coding of the accounts catalog is shown.

b. Type of Accounts:

Accounts Chart of Accounts Approved

Chart of Accounts of Insurance and Reinsurance

Assets 100 1000

Liabilities 200 2000

Heritage 300 3000

Expenses 400 4000

Income 500 5000

Oder accounts for contingents 600 6000

Order accounts for trusts 700 7000

Other accounts of order 800 8000

c. Currency:

The sixth digit (M) in the Approved Chart of Accounts or the eleventh digit (M) in the Chart of Accounts of Insurance or Reinsurance, distinguishes the balances by currency type or unit of account in the case of the Development Units corresponding to the operations of the entity. This digit (M) can assume the following values:

M: 1 Used for operations in Costa Rican colonesM: 2 Used for operations in other foreign currenciesM: 3 Used for operations in Development Units (UD)

The original record of every transaction must consider at least the first six digits of the manual. Therefore, in cases where the sixth digit is not indicated in the manual, it is understood that the corresponding sub-accounts present the distinction by currency, according to the indications of this subsection.

The entities regulated by SUGEF, SUGEVAL and SUPEN may open analytical sub-accounts from the ninth digit, as long as their nature is consistent with that of the analytical account.

In accordance with the indicated coding structure, SUGESE will require that the information contained in the accounting balance report be up to the analytical account level (digit fourteen).

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Subsequent to digit fourteen, the entities must open the analytical sub-accounts that allow them to identify the insurance operations according to the expenses by destination, by branch and insurance line.

Article 27. Accounts with related parties.

The Chart of Accounts includes sub-accounts and analytical accounts so that regulated entities and financial groups or conglomerates can register, value, present and disclose information about transactions carried out by regulated entities with related parties, identified in accordance with what IFRS provide. Entities must implement controls for the proper identification of such transactions.

Article 28. Modification to the Chart of Accounts.

If the creation or elimination of groups, accounts, subaccounts and analytical accounts is deemed necessary, the interested party must submit the corresponding modification request, duly substantiated, to the corresponding Supervisor.

Chapter IVPresentation of the Financial Statements

Section IPresentation, revelation and preparation of the financial information

Article 29. Financial information.

The financial information comprises a complete set of annual and interim financial statements, in accordance with the requirements issued by the CONASSIF and the IFRS. In addition, it includes the accounting information according to the information requirements that the corresponding Superintendent dictates.

For the presentation of the financial statements, the entities supervised by the SUGEF must take as a basis the formats included in Annex 5 of this Regulation, which is published on the web page of the Supervisors. Adjustments may be made to financial information with the purpose of adjusting to the nature of its operating activities, but respecting the provisions of IFRS. The entities regulated by the other Supervisors must consider the specific formats that each Superintendency has established.

The notes to the financial statements must be presented in accordance with the disclosures provided in IFRS, and must provide narrative descriptions and breakdowns of items presented in the financial statements, accounting policies and information on items that do not meet the conditions to be recognized in them. The financial information must include explanatory notes, additional, with the purpose that the users can interpret the financial information adequately.

Each Superintendent may request that additional disclosure to the notes required by IFRS be included in the complete set of financial statements.

The financial information used in the accounting consolidation must be adjusted to the intermediate period and to the financial year of the controlling entity, which corresponds to the calendar year except for the non-financial issuers that will use their respective fiscal year. The consolidation worksheet is an integral part of the consolidated financial statements and must be presented jointly

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with them and with their respective elimination entries and additional supplementary information. In the case of issuers of securities not subject to inspection by the SUGEF, the consolidation worksheets with their respective elimination entries and the communications of the external auditor must be available to SUGEVAL for supervision purposes, when it requests it.

The controllers of the financial groups and conglomerates will apply the provisions issued in this Regulation to present the shares in other companies of the group or financial conglomerate. The foregoing does not exempt entities from the presentation of the separate financial statements of each of the entities that make up the group or financial conglomerate; as well as non-financial affiliates that are not part of the financial group or conglomerate.

In the case of insurance entities authorized under the branch modality, supervised by SUGESE, it also includes, in addition to the information required of the branch, the one corresponding to the entity that owns the branch (total or consolidated operation).

In the case of companies of the group or conglomerate that are not subject to the control of any of the supervisory bodies, and in accordance with the provisions of subparagraph b) of article 145 of Law 7558, the controllers must present the audited financial statements of those companies in the same period of presentation of the audited financial statements of the parent company.

Article 30. Responsibility for financial information.

The senior management of each entity is responsible for the presentation of its separate or consolidated financial information, as applicable, in accordance with the relevant regulations issued by the CONASSIF and the IFRS.

All financial statements must be signed by the general manager or whoever performs his function in his absence, by the accountant or whoever replaces him; and for entities supervised by SUGEF, endorsed by the internal auditor or its analogue.

In the case of the entities supervised by the SUGEF, the note of remittance of the financial information must include a photocopy of the approval agreement for the financial information, taken by the respective Management Body.

Article 31. Financial statements of entities supervised by SUGESE.

The entities supervised by SUGESE constituted under the form of a stock corporation, cooperative association, branch of a foreign insurance entity, or created by special law, shall use the models provided for that purpose by the Superintendent in accordance with the provisions of the second paragraph of Article 29.

The presentation of the financial information of the entity that owns an insurance entity authorized under the modality of a branch is governed by the provisions of the following article.

Article 32. Financial statements of foreign companies that are members of financial groups and conglomerates and of foreign companies that own an insurance entity authorized under the modality of a branch.

The annual financial statements (internal and audited) and intermediates of supervised foreign companies, members of groups and conglomerates or owners of insurance entities authorized under

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the modality of branch, will be prepared under the applicable accounting models and practices in the jurisdiction of origin or in the terms indicated in this Regulation.

For purposes of presentation to the corresponding Costa Rican supervisory body, they must be translated into Spanish when appropriate and converted to colones, using the reference purchase exchange rate of the Central Bank of Costa Rica on the closing date of the financial statements.

The entities must disclose in the financial information the divergences between the applicable accounting practices in foreign positions and those applicable to the controlling entity in Costa Rica. The provisions of this paragraph do not apply to foreign companies that own an authorized insurance entity under the modality of a branch.

Article 33. Opinion expressed by the external auditor.

The regulated entity must ensure that the criteria (expert opinion) expressed by the external auditors on the reasonableness of the financial statements is prepared in accordance with the provisions of the International Auditing Standards, adopted by the CCPCR or, in the case of foreign entities, by the standards of the organism homologous to this College in its country or jurisdiction of origin.

In the case of insurance entities authorized under the branch modality, the criteria (expert opinion) of the External Auditor on the specific financial statements of the branch must additionally include an express declaration on the conformity of the technical provisions corresponding to the products placed in the branch. Costa Rica with respect to the provisions of the Regulation on the Solvency of Insurance and Reinsurance Entities and other related regulations.

The annual financial statements audited separate and consolidated, the opinion of the external auditor and the accompanying notes must be submitted in original or by any electronic means accepted by CONASSIF and in a format that allows easy reading.

Article 34. Comparability of financial statements.

The audited or unaudited annual financial statements, separated and consolidated, will be compared with the previous financial year.

For financial entities, groups and conglomerates, the interim financial statements correspond to the quarters that end in March, June and September of each year.

Items with zero balances may be omitted. In the case of comparative financial statements, the omission may be made when the zero balance is presented in the same item for both periods.

Article 35. Remission of financial statements.

Regulated entities must send financial information by the means provided by the Superintendent of the respective supervisory body.

Section IIDeadlines for the submission and publication of financial information

Article 36. Deadlines for the submission of financial information

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The entities supervised by SUGEF and financial groups or conglomerates must present the financial information in accordance with the following terms:

Description Term

Accounting financial information, monthly for the supervised individual entities.

Five business days after the last calendar day of each month.

Interim and annual financial information, internal, separate or consolidated, as appropriate.

The last business day of the following month after the quarterly closing or annual cut.

Audited annual financial information and opinion expressed by the independent external auditor of the owner of the branch, for the insurance entities authorized under the branch modality.

Twenty business days after delivery to the supervisor of the jurisdiction of origin.

Audited annual financial information and opinion expressed by the independent external auditor of the companies other than the financial sector in which the supervised entities hold shares.

Forty business days after the annual closing.

Separate, annual, audited financial information, opinion expressed by the external auditor and communications with those responsible for governance and deficiencies in internal control of governance and management.

Forty business days after the annual closing.

Consolidated annual financial information, audited, opinion expressed by the external auditor and communications with those responsible for governance and deficiencies in internal control of governance and management.

The last business day of the third month following the quarterly closing or annual cut.

The presentation of the monthly financial accounting information mentioned in the previous detail, to the insurers, reinsurers and insurance intermediaries, will be done in accordance with what is indicated by the SUGESE by agreement.

For entities supervised by SUGEVAL, the information must be presented in accordance with the Regulation on the provision of periodic information, relevant facts and other information obligations and their respective Agreement.

For the individual entities regulated by SUPEN, the presentation of the financial information must be made in accordance with the Agreement that the Superintendent issues for that purpose.

In accordance with the provisions of the Law on the Protection of the citizen from excess requirements and administrative procedures, Law 8220, the Supervisors will coordinate the exchange of financial information of the individual entities that by law or regulation should send them, in order not to request it to the entity again.

Section IIIPublications of the financial information

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Article 37. Deadlines and provisions for the publication of financial information.

The entities must publish the financial information on their official website in accordance with the following:

Description Term

Financial Information of the individual entities and non-financial issuers that consolidate with companies located in the Costa Rican territory The insurance entities authorized under the branch modality are exempt from compliance with the aforementioned period, in the case of the fully audited financial statements of the entity that owns the branch, its publication will be twenty business days after delivery to the supervisor of the jurisdiction of origin.

Forty-five business days after the last day of the previous fiscal year.

Consolidated financial information of the group and financial conglomerate.

Sixty-five business days after the last day of the previous fiscal year.

For issuers of non-financial securities, which consolidate with companies located outside Costa Rican territory.

Within the fifty-five business days following the last day of the previous fiscal year.

In general, for the entities regulated by SUPEN, the period of publication of the financial information must be done in accordance with the Agreement that the Superintendent issues for that purpose.

In the case of a financial group or conglomerate, you must publish the information detailed in Annex 6.A. of this Regulation, which is published on the web page of the Supervisors.

The files must be published on the website of the entity, and be accessible through a direct link from its home page; the publication must have a format that does not allow its alteration or modification. In addition, the website and the files must allow printing and downloading to the interested party's devices.

In the case of insurance entities authorized under the branch modality, the publication of the financial information for the branch can be done in a particular website of the branch or in that of the owner entity.

In the case of non-financial issuers, the one that has been indicated in the prospectus will be considered as the official website for publication of the financial information, and for the rest of the entities it will be the one that the supervised entity has informed to the respective Supervisor.

For the Complementary Pension Schemes Created by Special Law or Collective Agreement, the Substitute Public Regimes of the Regime for Disability, Old Age and Death of the Costa Rican

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Social Security Fund and any other special pension regime, it will not be mandatory that they have a Web site, therefore, they may publish the quarterly and audited financial information in an internal communication medium or on the website of the entity in which the Fund was created.

In the Collective Regimes supervised by SUPEN, the complete audited financial statements include the opinion of the external auditor, the Statement of Net Assets (instead of the statement of financial position) and the Statement of Changes in the Net Assets (instead of the comprehensive statement of results), as well as the accounting policies used and the notes established in IFRS.

The opinion issued for the financial statements of the Complementary Pensions Operator, the Administrator of Working Capitalization Funds of the Investment Fund Management Company and of the Titling Companies must be published separately and independently of the Opinion on the financial statements of each of the Funds or Universalities administered by said entities.

The audited financial information for at least the last five years and the interim financial information of the last eight comparative quarterly cuts must be kept publicly available on the entity's website.

In the event that an entity supervised by any of the Supervisors does not have a website, it must publish what is indicated in Annex 6.B., in two written national circulation media, in the same terms established to publish the information in the website. In the case of intermediate financial statements, you must publish the provisions of Annex 6.C.

The publication of the interim financial statements and the audited financial information must correspond exactly to the same information contained in the financial statements presented to the respective Superintendency, and when appropriate, it should be indicated that said information is not audited.

Section IVExtensions, corrections and substitutions

Article 38. Extensions

The granting of extensions to the terms established in these Regulations will be exceptional. For such purposes, entities must submit the application before the expiration of the term, so that it can be known and resolved by the corresponding Supervisor. It must be signed by the legal representative of the applicant entity who must send a copy of it to its Management Body.

Said request must contain the reasons and evidence, if applicable, that make it impossible for the entity to comply with its obligation within the term and must demonstrate that the reasons for its request are based on unforeseeable circumstances or force majeure or other causes outside its control.

The Superintendent of the respective supervisory body must know and assess the presented grounds and, in appropriate cases, grant an extension in writing, by reasoned resolution, indicating the additional term granted. The financial entity or the controlling entity of the financial group or

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conglomerate must make public the authorized extensions, through a communication of relevant facts.

Article 39. Corrections

In the case of the entities supervised by the SUGEF, when the financial information received requires corrections, the Superintendent shall notify the entity of the obligation to replace the presented financial information and publish it within five working days after the date of presentation of the corrected information, on its own and in two written media of national circulation, a notice to the public in the terms set forth in Annex 6.D.

Additionally, in the event that the corrections refer to audited financial information, the Superintendent will order the publication of the corrected, separated or consolidated financial information as appropriate, in the means provided in articles 35 and 36 of this Regulation.

Regarding periodic information corrections, for entities regulated by the SUGEVAL, they must abide by the provisions of the Regulation on the provision of periodic information, relevant facts and other information obligations, and their respective Agreement.

In the case of corrections of financial information sent to other supervisory bodies, the communication of relevant facts and publication in written media of national circulation and other means of disclosure, shall be governed by what each Superintendency has regulated in this regard.

Article 40. Substitutions

When an entity supervised by the SUGEF substitutes the financial information, it must publish within five business days after the filing date, on its own behalf and in two written media of national circulation, a notice to the interested public in the terms set out in Annex 6.E.

This situation will constitute a communication of interest and must be published in conjunction with the financial statements corrected by the supervised entity on its website.

Regarding periodic information substitutions, for the entities regulated by the SUGEVAL, they must comply with the provisions of the Regulation on the provision of periodic information, relevant facts and other information obligations, and their respective Agreement.

In the case of substitution of financial information sent to other supervisory bodies, the communication of relevant facts and publication in written media of national circulation and other means of disclosure, will be governed by what each Superintendency has regulated in this regard.

Section VSanctions

Article 41. Sanctions

The Supervisors, following due process, may sanction regulated entities that fail to comply with the provisions of this Regulation in accordance with the sanctionary regime provided for in the Organic Law of the Central Bank of Costa Rica, Law 7558, the Securities Market Regulatory Law, Law 7732, the Complementary Private Pensions Scheme Act, Law 7523, and the Regulating Insurance Market Law, Law 8653, as applicable.

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The sanctions that are imposed must be treated as relevant facts.

Non-authorized breaches in the presentation of financial information within the deadlines established in this Regulation will be considered as a refusal to provide information to SUGEF or the public, in the terms established in article 155 subsection a) apart iii), of the Organic Law of the Central Bank of Costa Rica, Law 7558.

The entity is obliged to publish within five business days after the date of the presentation of the financial information, on its own, in two written media of national circulation, a notice to the public in which the information is indicated referred to in Annex 6.F.

Transitory dispositionsTransient I

The entities must modify the presentation and classification of the financial statements and the comparative amounts, in order to reestablish the comparison at the time of entry into force of this regulation.

Transient II

Intangible assets with an indefinite useful life and capital gains acquired in a business combination will start with the accounting policies established in this Regulation, based on the book value of the last accounting close before its entry into force. In addition, the provisions to assess whether there is any indication of impairment with respect to said value will be applied.

Transient III

For the application of IFRS 9, specifically the measurement of expected credit losses, the prudential regulation issued by CONASSIF will be continued for the loan portfolio and contingent loans granted, until this rule is modified.

Transient IV

Upon entry into force of these provisions, regulated entities must reclassify the balances held in accounts 182.05.M.00 "Deferred direct costs associated with loans" and 251.01.M.01 "Deferred commissions by loan portfolio", to the accounts 136 "Incremental direct costs associated with loans" and 137 "Deferred revenue from credit portfolio". The balance of the analytical accounts 181.01.M.01 "Interests paid in advance" and 181.01.M.02 "Commissions paid in advance" must be reclassified to the sub-accounts 237.03 “Deferred commissions for own credit portfolio" and 237.04 "Deferred interest by own credit portfolio”.

Transient V

Under IFRS 16, entities that have lease agreements in which they are tenants must recognize a lease liability as of the effective date of this regulation for leases previously classified as an operating lease using IAS 17. The tenant will measure that lease liability at the present value of the remaining lease payments, discounted using the incremental loan rate of the tenant on the date of initial application.

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An active right of use must be recognized as of the entry into force of this regulation for leases previously classified as an operating lease using IAS 17.

To measure the asset by right of use, entities must record the amount for an amount equal to the lease liability, adjusted for the amount of any advance or accrued lease payment related to that lease recognized in the statement of financial situation immediately before the effective date of this regulation.

Transient VI

The financial entities, groups or conglomerates must present the financial statements and the comparative amounts, as set forth below:

Accounting Basis Financial Statements2019 Term

March June December

1Accounting regulations that come into force as of January 1, 2020

Comparative, separate, of each of the financial entities that are part of the group or financial conglomerate

X X X

2 IFRS or accounting basis to which are bound

Consolidated comparative of each of the financial entities that are part of the group or financial conglomerate.

X X X

Comparative, separate, of each of the non-financial entities that are part of the economic group.

X X X

1 / Financial information is not public.

Derogatory provisions

The Regulation on financial information of financial entities, groups and conglomerates is repealed; Chart of accounts for financial entities, groups and conglomerates-Approved, Accounting regulations applicable to entities supervised by SUGEF, SUGEVAL, SUPEN, SUGESE and to non-financial issuers and Chart of Accounts for Insurance Entities. Also, upon the entry into force of this Regulation, all provisions of equal or lower rank in terms of accounting regulations that are contrary to the provisions of this Regulation are repealed.

Final provisions

Final provision I - Entry into force

This Regulation applies as of January 1, 2020, except for the following:

a. Order accounts for the registration and control of custody activities. The memorandum accounts for the registration and control of custody activities, accounts 850 and 870, will be effective

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as of January 1, 2019.

b. Article 10. IAS 12 Income Tax and IFRIC 23 Uncertainty regarding the Treatment of Income Taxes:

i. The provisions of Article 10. IAS 12 Income Taxes and IFRIC 23 Uncertainty regarding the Treatment of Income Taxes, will become effective as of January 1, 2019. At the time of the initial application of the IFRIC 23, entities must apply the transition established in paragraph B2 subsection (b) of said Interpretation.

ii. The amount of the provision for disputed tax treatments notified before December 31, 2018, corresponding to 2017 and prior fiscal periods, will be made in the amount that is greater among the best quantification of what they estimate to pay to the Fiscal Authority of the transfer of charges (principal, interests and fines), in accordance with the provisions of IAS 12, and the amount of 50% of the principal of the correction of the self-assessment of its tax obligation.

The record of the provision of disputed tax treatments for the periods indicated in the previous paragraph may be accounted for in one of the following ways:

a. Against results of the period in monthly tracts by means of the straight line method, without exceeding June 30, 2021, or

b. As a single adjustment to the opening balance of the accumulated results of previous years, to reach the amount of the provision. The adjustments derived from subsequent evaluations of the amounts in dispute will be treated as adjustments to the estimates, for which IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors will apply.

c. In the event that the amount of the provision is greater than the opening balance of the accumulated Results of previous years, the adjustment will be imputed first to what corresponds to the balance accumulated Results of previous years and for the complement will be followed as provided in part a).

No later than January 31, 2019, the entity with disputed tax treatments for the periods indicated in this provision, shall communicate to the respective Superintendency the method they will employ among those indicated in the previous paragraphs (a), (b) or (c). This method will be used until the resolution and settlement of the tax obligation.

Final provision II - Repealed and Modified Standards

Any reference to the regulation related to the Chart of Accounts for financial groups and conglomerates entities - Approved, Chart of accounts for insurance entities, Accounting regulations applicable to entities supervised by SUGEF, SUGEVAL, SUPEN and SUGESE and to non-financial issuers and Regulation relative to the financial information of financial entities, groups and conglomerates repealed in the Financial Information Regulations, which is made in the current regulations issued by CONASSIF, should be understood as referring to the latter Regulation, including:

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Current Term Repealed Term

Annex 1 of the Regulation on Financial Information

Chart of Accounts for Financial Entities

Chart of Accounts for Financial Entities, Groups and Conglomerates

(Deterioration of investments in buildings, adaptations and improvements) (Deterioration of investments in buildings)

Adjustments to equity - other comprehensive income Adjustments to the patrimony

Goods acquired for the exploitation of third parties Goods acquired for leasing operations

Goods held for sale Realizable Goods

Charges to be paid for preferred obligations Preferential obligations with redemption clause

Amortized cost Investments held at maturity

Right to use Financial Leasing (tenant)

Liquidity reserve funds and other legal and statutory reserves Reserve funds of cooperative entities

Expenses for obligations by repurchase, tripartite repurchase and securities loans

Expenses for obligations by securities repurchase agreements

Investments at fair value with changes in other comprehensive income Investments available for sale

Investments at fair value with changes in results Investments held for trading

International Market International operation confirmation

Local Market Confirmation BNV Clearing

Other participations on the profit or surplus of the period Other participations

Non-controlling interests Minority Interest

Properties Estate

Investment properties Investments in Properties

Reserves Patrimonial reserves

International Financial Reporting Standards (IFRS) International Accounting Standards (IAS)

2. To require the Superintendencies that with the publication of the Regulation on Financial Information proceed to disseminate on their Websites, the Annexes that are cited in the Regulation in reference, so that they can be easily consulted with supervised entities and the general public.

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3. Send in consultation to the National Financial System, in accordance with the provisions of number 2, Article 361, of the General Law of Public Administration, Law 6227, the draft amendment to the first paragraph of Article 1 and the third paragraph of Article 24, and repeal of the first paragraph and subsections f and g of Article 2, of the Regulation on the Valuation of Financial Instruments; repeal of the second paragraph of Article 20 of the General Regulations of External Auditors; modification to Article 24 of the Risk Management Regulations; modification of Article 111 of the Regulation on the opening and operation of authorized entities and the functioning of pension funds, labor capitalization and voluntary savings provided for in the Law on Worker Protection, Law 7983; modification of Article 34 of the Regulation on the Solvency of Insurance and Reinsurance Entities; modification of Annex 1 of the Regulation on the Group Linked to the Entity and Annex 1 of the Regulation on Credit Limits to Individual Persons and Economic Interest Groups; modification of Annex 2 of the Regulation on the Group Linked to the Entity and Regulation on Credit Limits for Individual Persons and Economic Interest Groups; modification of Annex 2 of the Regulation to judge the economic-financial situation of the audited entities and the Regulation to judge the economic-financial situation of the mutual savings and loan associations for housing; and amendment of the second paragraph of Article 28 of the General Regulations on Management Companies and Investment Funds, according to the texts inserted below, so that, within a maximum period of ten working days, counted from the business day following the receipt of this agreement , send your comments and observations on the matter to the Office of the General Superintendency of Financial Institutions. In a complementary way, the electronic file, in Word format, must be sent to the email account: normativaenconsulta@sugef.fi.cr.

Without detriment to the above, the entities consulted may present, in a consolidated manner, their observations and comments through the guilds and chambers that represent them.

“PROJECT OF AGREEMENT

National Council of Supervision of the Financial System,

Considering that:

A. Subparagraph b) of Article 171 of the Securities Market Regulatory Law, Law 7732, provides that one of the functions of the National Council of Supervision of the Financial System (CONASSIF) is to approve the rules pertaining to the authorization, regulation, supervision , control and surveillance that, according to the Law, must be executed by the Financial Supervisor (SUGEF), the Securities Supervisor (SUGEVAL) and the Pensions Supervisor (SUPEN); In addition, the literal ñ) of the referred Article confers on the CONASSIF the power to establish the provisions related to accounting and auditing standards applicable to entities regulated by SUGEF, SUGEVAL and SUPEN. In the same sense, Article 28 of the Insurance Market Regulatory Law, Law 8653, provides, in relation to the Insurance Supervisor (SUGESE), that "the established provisions shall apply to the superintendent and the intendant, in a generic and of uniform application, for the other Supervisors under the direction of the CONASSIF and their respective superintendents and intendents “.

B. Subsection 2), Article 361, of the General Law of the Public Administration establishes that, in the elaboration of general provisions, the representative entities of the interests of a general or corporate nature affected by the provision, are granted the opportunity to state their opinion, except when reasons of public interest or urgency oppose it, duly recorded in the preliminary draft.

C. From the regulatory issuance process of the Regulation on Financial Information, regulations

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were identified to which adjustments should be made to maintain consistency with the new regulations and avoid possible ambiguities between the them. In view of the foregoing and in accordance with the provisions of subsection 2), Article 361, of the General Law of Public Administration that establishes that in the preparation of provisions of a general nature, it would be granted to entities representing interests of a general or corporate character affected by the provision the opportunity to state their opinion, should be submitted to public consultation to entities and guilds the draft of agreement of additional reforms identified.

disposed:

To approve, in accordance with the text that is inserted below, the following amendment to the first paragraph of Article 1 and the third paragraph of Article 24, and repeal of the first paragraph and subparagraphs f and g of Article 2, of the Regulation on the Valuation of Financial Instruments; repeal of the second paragraph of Article 20 of the General Regulations of External Auditors; modification to Article 24 of the Risk Management Regulations; modification of Article 111 of the Regulation on the opening and operation of authorized entities and the operation of pension, labor capitalization and voluntary savings funds provided for in the Law for the Protection of Workers; modification of Article 34 of the Regulation on the Solvency of Insurance and Reinsurance Entities; modification of Annex 1 of the Regulation on the Group Linked to the Entity and Annex 1 of the Regulation on Credit Limits to Individual Persons and Economic Interest Groups; modification of Annex 2 of the Regulation on the Group Linked to the Entity and Regulation on Credit Limits for Individual Persons and Economic Interest Groups; modification of Annex 2 of the Regulation to judge the economic-financial situation of the audited entities and the Regulation to judge the economic-financial situation of the mutual savings and loan associations for housing; and modification of the second paragraph of Article 28 of the General Regulations on Management Companies and Investment Funds:

a. The first paragraph of Article 1 and the third paragraph of Article 24 are modified, and the first paragraph and subparagraphs f and g of Article 2 of the Regulation on the Valuation of Financial Instruments are repealed; which will be read as follows:

'Article 1. Portfolios subject to valuation

The valuation of the portfolio of own investments or of the joint portfolios of the entities supervised by the Financial Supervisor (SUGEF), Securities Supervisor (SUGEVAL), Pensions Supervisor (SUPEN) and Insurance Supervisor (SUGESE) , classified according to the business model at fair values with changes in other comprehensive income or fair value with changes in results; as well as the individual portfolios of third parties over which the indicated supervised entities provide management or advisory services, regardless of the legal vehicle used to do so, must be valued at market prices on a daily basis, for which a valuation methodology must be used.‘‘Article 24. Communication of the selected valuation methodology…The supervised entities belonging to the same group or financial conglomerate must apply the selected valuation methodology in all their portfolios subject to valuation, independently of whether they belong to their own portfolio or to joint portfolios, managed by any group or conglomerate entity.…’

b. The second paragraph of Article 20 of the General Regulations of External Auditors is repealed.

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c. Article 24 of the Risk Management Regulation that applies to entities supervised by SUGEVAL is modified, which will be read as follows:

‘Article 24. Conversion exchange rate

Where applicable, the amounts in foreign currency must be converted to colones according to the reference exchange rate of purchase published by the Central Bank of Costa Rica or an alternate source recognized internationally.

d. Article 111 of the Regulation on the opening and operation of authorized entities and the operation of pension funds, labor capitalization and voluntary savings stipulated in the Law on Worker Protection is amended, which will be read as follows:

Article 111. Of the referral

The financial statements of the funds administered and of the authorized entity must be sent to the Superintendency with the periodicity established in the 'Information Manual' issued by the Superintendent. Likewise, the quarterly interim financial statements must be signed by the general manager or whoever performs his function in his absence, and by the accountant or whoever replaces him.

The financial statements with a cutoff date of December 31 of each year must be audited by external auditors.

e. Article 34 of the Regulation on the Solvency of Insurance and Reinsurance Entities is modified, which will be read as follows:

‘Article 34 Accounting record

Supervised entities must comply with the regulations contained in the Regulation on Financial Information.’

f. Article 13 of the Regulation on the administration of market risk, interest rates and exchange rates is modified (SUGEF 23-17), which will be read as follows:

‘Article 13. Assessment of the instruments.The valuation of the investment portfolio of the supervised entities classified according to their business model in fair values with changes in other comprehensive income or fair value with changes in results must be valued at market prices. Entities must have adequate systems and sufficient control to ensure that positions valued at market prices are revalued as frequently as established in the Regulation on the Valuation of Financial Instruments of the General Superintendency of Securities. [...] ‘

g. The name of the accounts in section a) is modified for the calculation of the adjusted capital in entities regulated by the SUGEF, except savings and loan associations of Annex 1: Adjusted Capital of the Regulation on the Group Linked to the Entity and section b) for the calculation of adjusted capital in mutual savings and loans in Annex 1: Regulation on Credit Limits for Individual Persons and Economic Interest Groups, as well as section c) for the calculation of adjusted capital in the group and consolidated financial conglomerate of the Annexes cited in both Regulations, which will be read as follows:

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ANNEX 1

ADJUSTED CAPITAL

a. For the calculation of adjusted capital in entities regulated by the SUGEF, except mutual savings and loan.

b. For the calculation of the adjusted capital in mutual savings and loans.c. For the calculation of adjusted capital in the group and consolidated financial

conglomerate.

Account Number ACCOUNT

31000000 SOCIAL CAPITAL

[…]

33101000 Real estate revaluation surplus

[…]

33102000 Adjustment for valuation of investments at fair value with changes in other comprehensive income

[…]

33103000 Adjustment for valuation of investments in support of the liquidity reserve

[…]

33108000 Adjustment for valuation of obligations to deliver securities in repos and securities loans

[…]

ANEXO 1

CAPITAL AJUSTADO

a. For the calculation of adjusted capital in entities regulated by the SUGEF, except mutual savings and loan.

No. Cta. ACCOUNT

[…]

38000000 PATRIMONIAL CONTRIBUTIONS IN SPECIAL FUNDS OR SPECIAL RESERVATIONS

[…]

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ANNEX 1

ADJUSTED CAPITAL

b. For the calculation of the adjusted capital in mutual savings and loans

No. Cta. Account

[…]

34000000 RESERVES

[…]

ANNEX 1

ADJUSTED CAPITAL

c. For the calculation of adjusted capital in the group and consolidated financial conglomerate

No. Cta. Account

[…]

38000000 PATRIMONIAL CONTRIBUTIONS IN SPECIAL FUNDS OR SPECIAL RESERVATIONS

37000000 NON-CONTROLLING PARTICIPATIONS

[…]

h. The accounts 12220, 12221 and 12251 of Annex 2: Investments in Securities of the Regulation on the Group Linked to the Entity and Regulation on Credit Limits for Individual Persons and Economic Interest Groups are eliminated.

i. The Numerator of the Patrimonial Commitment Indicator of Annex 2 of the Regulation to judge the economic-financial situation of the audited entities and the Regulation to judge the economic-financial situation of the mutual savings and loan associations for housing are modified. Account C (231.07) is eliminated and Account C (232.23) is added to the denominator at sight with financial cost of the Indicator Productive Asset of Intermediation / Liability with Cost, of the aforementioned Regulations in accordance with the following:

Numerator

Expected losses on assets minus estimates for assets: C(129.00)+C(139.00)+C(149.00)+C(159.00)+C(169.00)

j. The second paragraph of Article 28 of the General Regulation on Management Companies and

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Investment Funds is modified.

‘Article 28. Investment Committee…To this Committee corresponds the definition of the general investment guidelines of the fund, the approval the definition of the business model to manage the financial assets that will be used for its accounting records, the supervision of the work of the portfolio manager, the evaluation of whether the recommendations of the management unit integral risks are accepted, otherwise, to evaluate the respective justifications, and to ensure the proper performance of the portfolio.

These reforms are effective as of January 1, 2020. “

Sincerely,

Jorge Monge BonillaCouncil Secretary

Communicated to: Supervisors, National Financial System (numerals 1 and 3), La Gaceta official journal (numeral 1) (c.a: Intendancies and Internal Audit).

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