EQUITY INVESTMENTS
Resolution No. 256 dated 18 February 2000 relative to the inclusion of
“indirect” equity ownership in the computation of total investments that
qualify for equity method of accounting, the Manual of Accounts for
Commercial Banks (under Circular No. 108 dated 6 May 1996, as amended by
Circular Nos. 201 and 231 dated 1 May 1999 and 21 March 2000,
respectively) is hereby amended to include the revised definition of the
account “Equity Investments”. The replacement page (Page 15-b) of the
Manual of Accounts is herein attached as Annex “A”. “Equity Investment”
is, therefore, re-defined as follows:
17. EQUITY INVESTMENTS [1-3-60-00]
” xxx
Subsequent to acquisition, equity investments should still be
carried at recorded value on date of acquisition; except investments
representing more than 50% of the voting stock of the investee company
(directly or indirectly owned) in which case the equity method of
accounting shall be used. The use of the equity method, however, does
not preclude the bank from setting up valuation reserves if warranted.”
A Bank is considered to have an indirect ownership of a certain
investee company if the Bank’s subsidiary and/or affiliate (at least 20%
of the voting stock is directly owned by the Bank) has also direct
ownership in said investee company.
Aforementioned amendment shall apply to financial statements of
expanded and non-expanded banks as of 31 December 1999 and that equity
earnings under the amendment will not be eligible for dividend
declaration.
Adopted: 12 May 2000
(SGD.) RAFAEL B. BUENAVENTURA
Governor