Question & AnswerQ&A (BSP CIRCULAR LETTER)
The circular provides clarification on the transfer of 'Undivided Profits' to the 'Surplus-Free' account as prescribed in the Revised Manual of Accounts for Commercial Banks.
The initial guidelines are found in the Circular Letter dated September 20, 1985, as amended, which prescribes the Revised Manual of Accounts for Commercial Banks.
A corresponding transfer should be made of the FCDU assets including foreign currency deposits with the Central Bank, foreign currency deposits with foreign banks, foreign currency swapped with the Central Bank, foreign currency deposits with resident OBUs and other EFCDUs (except deposits with FCDU), and any due from Bank Proper.
The assets include foreign currency deposits with the Central Bank, foreign currency deposits with foreign banks, foreign currency swapped with the Central Bank as represented by peso accounts, foreign currency deposits with residents OBUs and other EFCDUs (except deposits with FCDU), and any due from Bank Proper.
The 'Surplus-Free' account is where the 'Undivided Profits' are transferred to at the end of the accounting period, following the prescribed accounting procedures for commercial banks.
The Circular Letter was signed and adopted by Jose L. Cuisia, Jr., who was the Governor of the Bangko Sentral ng Pilipinas at the time.
Strict compliance ensures that banks adhere to the guidelines for transferring 'Undivided Profits' and corresponding FCDU assets correctly, maintaining accurate accounting and regulatory standards.
They must exclude foreign currency deposits with FCDUs when making the transfer.
FCDU stands for Foreign Currency Deposit Unit, which are banking units authorized to accept foreign currency deposits.
The legal basis is the Circular Letters 343/547, which prescribe the Revised Manual of Accounts for Commercial Banks, including the procedures for the transfer of 'Undivided Profits.'