General Authority for Financial Supervision

Board of Directors Decision No. 138 of 2018

Dated 13/09/2018

Regarding the Rules for Preparing and Presenting Financial Statements and Deadlines for Submitting Them to Licensed Entities Engaging in Financial Leasing and Factoring Activities

The Board of Directors of the General Authority for Financial Supervision Having reviewed Law No. 10 of 2009 regulating supervision over non-banking financial markets and instruments: Law No. 176 of 2018 issuing the law regulating financial leasing and factoring activities: Presidential Decision No. 192 of 2009 issuing the Basic Statute of the General Authority for Financial Supervision: Board Decision No. (31) of 2015 regarding rules and standards for practicing microfinance activities by civil society entities and institutions: FRA Chairman Decision No. 489 of 2015 regarding rules for preparing and presenting financial statements for civil society associations and institutions licensed to practice microfinance:

---

Decided:

( Article One )

Rules for Preparing and Presenting Financial Statements for Licensed Entities Engaging in Financial Leasing and Factoring Activities

1. Licensed entities engaging in financial leasing and factoring activities shall prepare financial statements in accordance with the requirements of Egyptian Accounting Standards.

2. The company's accounts shall be audited by one or more auditors registered in the register maintained by the Authority for this purpose, in accordance with Egyptian Auditing Standards. The Authority may submit its observations on the annual financial statements and notify the company thereof at least one week prior to the date fixed for the General Assembly meeting, and may request that its observations be presented to the General Assembly when discussing the financial statements.

3. The company shall establish a provision or allowance account to cover doubtful debts, and this provision or account shall be reflected in the company's financial statements. The auditor shall disclose in their audit report the adequacy of provisions in accordance with the provision policy approved by the company's Board of Directors.

4. The company shall at all times maintain the accounting records that enable the preparation of its financial statements in accordance with Egyptian Accounting Standards. The company shall also maintain records, documents, premises, and electronic media in compliance with prevailing laws and regulations.

5. The following shall be considered deductible expenses when determining taxable net income in accordance with the Income Tax Law provisions:

• Interest paid by the company on loans and other financing facilities.
• Provisions made by the company for doubtful financing receivables in accordance with the minimum limits set forth in the Authority's standards on this matter, subject to a report issued by the company's auditor.

Debts that the company's Board of Directors decides to write off, exceeding the provisions mentioned in the preceding item, after taking the following measures in order: (a) Notifying the debtor within (3) months from the date of signing the receipt. (b) Taking legal action to recover the leased asset in respect of financial leasing contracts. (c) Taking legal action against the debtor and entering the litigation phase. The company shall prepare a statement regarding these debts, accompanied by a report from the auditor.

6. If the company is licensed to engage in financial leasing and factoring activities, related services, and any other non-banking financial activities related to its business, it must prepare separate accounts for each activity in accordance with Egyptian Accounting Standards.

7. Financial leasing companies shall maintain separate accounts and financial statements for operating leasing activities.

---

( Article Two )

Deadlines for Submitting Financial Statements for Licensed Entities Engaging in Financial Leasing and Factoring Activities

The company shall submit to the Authority the following:

1. A copy of the annual financial statements issued by the company's Board of Directors, accompanied by the Board's report and the auditor's report on the audit of those annual statements, within a period not exceeding three months from the end of the financial year. If submitted less than (21) days before the date of the company's General Assembly meeting, the provisions of Law No. 159 of 1981, its executive regulations, and amendments thereto shall apply. Annual financial statements shall be prepared and approved by the company's General Assembly within a period not exceeding three months from the end of the financial year. In case the Assembly approves amendments to the financial statements, the amended statements shall be sent within ten working days from the date of the General Assembly that amended them, accompanied by the auditor's report on the amended financial statements.

2. A copy of the quarterly (periodic) financial statements issued by the company's Board of Directors, accompanied by the limited assurance report on those periodic financial statements, within a maximum of forty-five days from the end of the financial period.

3. The provisions set forth in Article (12) of the Authority's Board Decision No. 31 of 2015 regarding rules and standards for practicing microfinance activities by civil society associations and institutions, and the FRA Chairman Decision No. 489 of 2015, shall apply to civil society associations and institutions engaging in micro financial leasing activities.

---

( Article Three )

Consolidated Financial Statements

Companies required to prepare consolidated financial statements shall submit to the Authority their standalone and consolidated annual financial statements, accompanied by the Board's report and the auditor's report, within the same deadlines specified in Item 1 of the preceding Article. They shall also submit their quarterly (periodic) financial statements, accompanied by the auditor's report, within sixty days from the end of the said period.

---

( Article Four )

Licensed entities engaging in financial leasing and factoring activities shall prepare annual and periodic financial statements in accordance with the rules set forth in this Decision, effective as of the 2019 financial year.

---

( Article Five )

This Decision shall be published in the Egyptian Gazette and on the Authority's website, and shall take effect from the day following its publication in the Egyptian Gazette.

Chairman of the Board of Directors Dr. Mohamed Omran