Regulation on Requirements for the Preparation, Publication and Submission to the National Bank of the Kyrgyz Republic of Financial Statements of Payment System Operators/Payment Organizations

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Date created: 2023-02-25

Appendix to the Resolution of the Board of the National Bank of the Kyrgyz Republic dated February 22, 2023

No. 2023-P-14/11-5-(PS)

REGULATION on the requirements for the preparation, publication and submission to the National Bank of the Kyrgyz Republic of financial statements of payment system operators/payment organizations

Chapter 1. General Provisions

1. This Regulation defines the components, content and main rules for the publication and submission of financial statements by payment system operators/payment organizations (hereinafter – PSO/PO).

2. The requirements of this Regulation apply to PSO/PO operating on the basis of a license issued by the National Bank of the Kyrgyz Republic (hereinafter – National Bank) in accordance with the legislation of the Kyrgyz Republic.

3. PSO/PO having subsidiaries/branches/representative offices, including outside the Kyrgyz Republic, organizing a group of organizations, shall provide financial statements on a consolidated basis by the parent company of the group of organizations (hereinafter – consolidated financial statements of a group of organizations) in accordance with this Regulation.

4. PSO/PO under temporary administration shall also prepare and submit financial statements in accordance with this Regulation.

5. The provisions of this Regulation do not apply to PSO/PO undergoing liquidation and bankruptcy.

6. The financial statements of PSO/PO represent a structured presentation of the financial position and financial results of activities carried out by the PSO/PO for the reporting period.

7. The financial statements of PSO/PO must objectively present the financial position, financial results of activities, cash flows and comply with International Financial Reporting Standards (hereinafter – IFRS).

8. The purpose of the financial statements of PSO/PO is:

• a structured presentation of information on the financial position, financial results of activities, cash flows, assets, liabilities, equity, income, expenses, profits and losses of the PSO/PO, useful to a wide range of users in making economic decisions;
• presentation of information on the results of resource management within the PSO/PO. To achieve this purpose, financial statements must present information on the following indicators of the PSO/PO: a) assets; b) liabilities; c) equity; d) income and expenses, including profit and loss; e) contributions by owners and distributions to owners; f) cash flows.

9. Users of financial statements are interested parties, including government agencies, owners of the PSO/PO (shareholders/participants), external auditors, investors, creditors, clients, the National Bank and others.

10. Financial statements are prepared in accordance with the accounting policy approved by the management of the PSO/PO.

11. The management of the PSO/PO must ensure timely and accurate preparation and submission of financial statements to the National Bank within established deadlines. In case of violation by the PSO/PO of the procedure and deadlines for submitting financial statements, submission of unreliable information, as well as publication of reports with a violation of the publication deadline, impact measures provided for by the legislation of the Kyrgyz Republic are applied to the PSO/PO and its management.

Chapter 2. General Requirements for annual financial statements and their components

12. In accordance with IFRS (IAS) 1 "Presentation of Financial Statements", the annual financial statements of PSO/PO consist of the following components:

1. statement of financial position (balance sheet) as at the end of the period;
2. statement of profit or loss and other comprehensive income for the period;
3. statement of cash flows for the period;
4. statement of changes in equity for the period;
5. notes to financial statements, consisting of significant accounting policy provisions and other explanatory information;
6. comparative information for the preceding period;
7. statement of financial position as at the beginning of the earliest comparative period, if the PSO/PO:

• retrospectively applies any accounting policy provision, makes retrospective corrections to items in its financial statements or reclassifies items in its financial statements;
• such retrospective application, retrospective correction or reclassification has a material effect on the information in the statement of financial position at the beginning of the preceding period.

13. When presenting and publishing financial statements, each component must be distinguished from other information. The following information must be reflected in the financial statements for adequate understanding of the presented information:

• full name of the PSO/PO and other identification details;
• whether the presented financial statements cover individual reporting of the PSO/PO or consolidated reporting of a group of organizations;
• end date of the reporting period or the period covered by this set of financial statements or notes;
• currency and unit of measurement (degree of rounding) when presenting amounts in the financial statements.

14. When preparing financial statements, the management of the PSO/PO must assess the ability of the PSO/PO to continue its operations. PSO/PO are required to prepare financial statements on a going concern basis, except when liquidation of the PSO/PO or cessation of operations is expected. If management becomes aware during the formation of its opinion of material uncertainties related to events or conditions that may cast significant doubt on the ability of the PSO/PO to continue operations in the future, these uncertainties must be disclosed (in components) in the financial statements. If financial statements are prepared on a basis other than going concern, this fact must be disclosed in the same way as the basis on which the statements are prepared and the reason why the PSO/PO is not considered a going concern.

15. PSO/PO must prepare financial statements using the accrual method, except for the preparation of the statement of cash flows.

16. For annual financial statements, the reporting period for PSO/PO is the period from January 1 to December 31 of the calendar year inclusive. For PSO/PO newly established before October 1, the first reporting year is considered the period from the date of state registration to December 31 inclusive. For PSO/PO established after October 1, the first reporting year is considered the period from the date of state registration to December 31 of the following year inclusive.

17. In exceptional cases when the reporting period of a PSO/PO is changed and financial statements are submitted for a period longer or shorter than one year, the PSO/PO must disclose in addition to the period covered by the financial statements:

• the reason for using a longer or shorter period different from the reporting period;
• the fact that the amounts presented in the financial statements are not fully comparable.

18. Each material class of items must be presented separately in the financial statements. PSO/PO are required to present separately items differing in nature or purpose, except when items are immaterial. An item that is not sufficiently material for separate presentation in financial statements is disclosed in the notes to the financial statements. Materiality of items for the purpose of preparing financial statements is determined independently by the PSO/PO in its Accounting Policy and disclosed in the notes to the financial statements.

19. The content and forms of financial statements are applied consistently from one reporting period to another (principle of consistency).

20. Classification and disclosure of items in financial statements must be preserved from period to period, except when:

• due to a significant change in the nature of activities of the PSO/PO or accounting policy, another presentation of information or classification is more appropriate taking into account the criteria for selection and application of accounting policy;
• IFRS are changed.

21. For each indicator in the financial statements, comparative figures for the previous reporting year must be provided, unless otherwise permitted or required by IFRS. Comparative information must be included in the narrative and descriptive parts when appropriate for understanding the financial statements for the current period.

22. If presentation or classification of items in financial statements is changed, comparative amounts must be reclassified (unless it is practically impossible) to ensure comparability with the current period. In addition, disclosure must be made of the nature and amount of each item or class of items that have been reclassified, as well as the reason for the reclassification. If reclassification of comparative amounts is practically impossible, the PSO/PO must disclose the reason why corresponding amounts were not reclassified and the nature of adjustments that would have been made in case of reclassification.

23. Investments in associated and joint (dependent and related) companies of the PSO/PO are reflected using the equity method, except for those classified as held for sale or exempted from applying this method in accordance with IFRS.

24. Financial statements must be signed by the head and chief accountant of the PSO/PO and certified with the seal of the PSO/PO.

25. In financial statement forms and in items for which no operations were carried out by the date of preparation, a numerical value of "zero" is indicated.

26. Financial statements of PSO/PO must be prepared in the national currency of the Kyrgyz Republic, unless otherwise provided by international treaties ratified in the established manner.

27. Corrections of errors in financial statements are confirmed by the signature of the head, chief accountant and seal of the PSO/PO with indication of the date and reason for correction.

28. In case of adjustment of financial statements, the PSO/PO must provide adjusted financial statements together with a cover letter, reflecting the impact of the adjustment and the reason for correction.

Chapter 3. Procedure and deadlines for submission and publication of financial statements

29. Annual financial statements of PSO/PO, including all components and notes to financial statements, after approval are submitted to the National Bank no later than April 1 of the current year following the reporting year in electronic form (scanned document in PDF format, as well as in Excel format) with subsequent mailing of the paper version.

30. If necessary and/or in case of any discrepancies, errors, incomplete submission or incorrect completion of reporting forms, the National Bank has the right to request additional information and documents arising from the submitted reports. PSO/PO are required to provide the requested information and documents within 10 (ten) working days from the moment of receiving the National Bank's request, unless another period is established in the request.

31. PSOs subject to the requirement of paragraph 91 of the Regulation "On Regulation of Activities of Payment System Operators and Payment Organizations, approved by Resolution of the Board of the National Bank of the Kyrgyz Republic dated September 30, 2019 No. 2019-P-14/50-2-(PS) (hereinafter – Regulation on Regulation), as well as not being subjects of large and medium-sized enterprises according to the Law of the Kyrgyz Republic "On Accounting", together with annual financial statements, submit a copy of the audit report once every 2 (two) years. The period for conducting independent audit is determined based on 2 (two) consecutive years from the date of the last external audit.

32. PSOs not subject to the requirement of paragraph 91 of the Regulation on Regulation, as well as POs not being subjects of large and medium-sized enterprises according to the Law of the Kyrgyz Republic "On Accounting", together with annual financial statements, submit a copy of the audit report once every 3 (three) years. The period for conducting independent audit is determined based on 3 (three) consecutive years from the date of the last external audit.

33. Financial statements and audit reports of PSOs/POs established in the form of a joint stock company, as well as PSOs/POs that are subjects of large enterprises according to the Law of the Kyrgyz Republic "On Accounting", must be published on the official Internet resource (website) of the PSO/PO no later than June 1 of the current year following the reporting year, and remain publicly accessible for 5 (five) years.

34. Additionally, PSOs/POs that are subjects of large and medium-sized enterprises according to the Law of the Kyrgyz Republic "On Accounting", together with the annual financial report, annually submit a copy of the audit report conducted by an independent external auditor in accordance with the requirements of the Law of the Kyrgyz Republic "On Audit Activities", as well as submit financial statements/consolidated financial statements and audit reports within the deadline of June 1 of the year following the reporting year in electronic form to the Public Depository (authorized body).

Chapter 4. Quarterly financial statements, procedure and deadlines for submission

35. PSOs/POs submit quarterly financial statements to the National Bank no later than the 25th (twenty-fifth) day of the month following the reporting quarter in electronic form (scanned document in PDF format, as well as in Excel format) with subsequent mailing of the paper version. In case of necessity and/or any discrepancies, errors, incomplete submission or incorrect completion of reporting forms, the National Bank has the right to request additional information and documents arising from the submitted reports. PSOs/POs are required to provide the requested information and documents within 10 (ten) working days from the moment of receiving the National Bank's request, unless another period is established in the request.

36. The quarterly financial report consists of a complete:

• statement of financial position at the end of the reporting period and for a similar period of the financial year preceding the reporting one, and as at the end of the previous reporting financial year;
• statement of comprehensive income for the current period, for a similar period of the previous year and for the previous financial year immediately preceding the reporting period;
• statement of cash flows for the current period, for a similar period of the previous year and for the previous financial year immediately preceding the reporting period;
• statement of changes in equity at the end of the reporting period and for a similar period of the financial year preceding the reporting one, and as at the end of the previous reporting financial year;
• notes to financial statements, consisting of information on significant facts affecting the financial and economic activities of the PSO/PO that occurred in the reporting quarter;

37. If during the quarter operations occurred that significantly affected or may affect the financial condition of the PSO/PO, then the PSO/PO must disclose these events.

Chapter 5. Consolidated financial statements

38. The purpose of consolidated financial statements of PSOs/POs, in addition to that described in paragraph 8 of this Regulation, is:

• presentation of the results of activities of a group of organizations and their investments in capital of other legal entities, operations and transactions with these legal entities;
• presentation of operations and transactions of participants of a group of organizations, risks of a group of organizations.

39. Consolidated financial statements must include the financial statements of all its subsidiaries and dependent companies. At the same time, participants of a group bear responsibility for the accuracy and completeness of data submitted to the parent company.

40. When preparing consolidated financial statements of a group, the parent company consolidates line by line the financial statements of the parent and subsidiary companies by adding similar items of assets, liabilities, equity, income, expenses and cash flows.

41. The following information must be disclosed in consolidated statements:

• the nature of relationships between parent and subsidiary companies, when the parent company does not own, directly or indirectly through subsidiaries, more than 50% of voting shares;
• the reasons why ownership of a share, direct or indirect, through subsidiaries, exceeding 50% of voting shares of the investment object does not lead to obtaining control over it;
• if the reporting date or period of financial statements of a subsidiary company used when preparing consolidated financial statements differs from the reporting date or period of financial statements of the parent company: a) the reporting date of financial statements of a subsidiary company; b) the reason why another reporting date or period was used;
• content and scale of significant restrictions on the ability of subsidiary companies to transfer funds to the parent company in the form of cash dividends or repay loans or advances;
• a table representing the impact of changes in the parent company's shareholding interest in a subsidiary company, not resulting in loss of control over it, on the amount of capital attributable to owners of the parent company;
• in case of loss of control over a subsidiary company, the parent company must disclose information on income and expenses (if any) recognized in accordance with IFRS, including: a) the portion of income or expense attributable to recognition at fair value on the date of loss of control over the investment retained in the former subsidiary company; b) item(s) in the consolidated statement of comprehensive income, within which income or expense is recognized (if not presented separately in the consolidated statement of comprehensive income).

42. In order for consolidated financial statements of a parent company to represent financial information about a group of organizations as a single economic entity, it is necessary:

• to exclude the book value of investments of the parent company in each subsidiary company and the share of parent companies in the capital of each subsidiary company;
• to determine the non-controlling interest (or minority interest) in profit or loss of consolidated subsidiary companies for the reporting period;
• to determine the non-controlling interest (or minority interest) in net assets of consolidated subsidiary companies separately from the shareholding interest of the parent company in them. Non-controlling interest (or minority interest) in net assets consists of the following: a) amount of non-controlling interest (or minority interest) on the date of initial business combination; b) non-controlling interest (or minority interest) in changes in capital since the date of business combination.

43. When preparing consolidated financial statements, intra-group assets, liabilities, equity, income, expenses and cash flows within a group of organizations must be fully eliminated.

44. Financial statements of a subsidiary company cannot be excluded from consolidated financial statements on the grounds that:

• activities of a subsidiary company differ from activities of other participants of a group of organizations;
• investors are venture capital organizations, mutual funds, trusts or similar structures.

45. The nature of relationships between the parent company and subsidiary companies must be disclosed in financial statements regardless of whether operations were carried out between these related parties.

46. If a participant of a group of organizations uses an accounting policy different from the accounting policy adopted for preparing consolidated financial statements of a group of organizations with respect to similar operations and events under similar conditions, then during the preparation of consolidated financial statements its financial statements are appropriately transformed. If reporting dates of parent and subsidiary companies do not coincide, the subsidiary company prepares additional financial statements for consolidation purposes as at the end of the reporting period of the parent company.

47. The correctness and accuracy of reflecting data on the financial condition of a group of organizations in consolidated financial statements are certified by the head and chief accountant of the parent company of a group of organizations.

48. Annual consolidated financial statements of a group of organizations are submitted in accordance with paragraph 29 of this Regulation. Quarterly financial statements of a group of organizations are submitted to the National Bank in accordance with paragraph 35 of this Regulation.

Chapter 6. Statement of Financial Position

49. In the statement of financial position, assets and liabilities are grouped by their nature in a manner reflecting their relative liquidity (in descending order of liquidity or maturity dates).

50. An asset item is not subject to offset against a liability item in the statement of financial position and vice versa, except when required or permitted by IFRS, with disclosure of these facts in the notes.

51. PSOs/POs established in the form of a joint stock company must disclose the following information in the statement of financial position or in notes to financial statements, or in the statement of changes in equity: a) for each class of share capital:

• number of shares authorized for issue;
• number of issued and fully paid shares, as well as number of shares issued but not fully paid;
• par value of a share, or indication that shares have no par value;
• reconciliation of the number of shares in circulation at the beginning and end of the period;
• rights, privileges and restrictions provided for this class, including restrictions on distribution of dividends and return of capital;
• shares of the PSO/PO held by the PSO/PO itself or its subsidiaries, or associated organizations;
• shares reserved for issue upon exercise of options and contracts for sale of shares, including issuance conditions and amounts; b) description of the nature and purpose of each reserve within equity.

52. PSOs/POs established in the form of a limited liability company (hereinafter – LLC) must disclose information equivalent to that required according to paragraph 51, with indication of changes during the period for each category of equity participation, as well as information on rights, privileges and restrictions provided for each category of shares in capital.

53. PSOs/POs must disclose in the statement of financial position or in notes to it further subclasses of each of the presented items, classified in accordance with operations of these PSOs/POs.

54. The name of the form "Statement of Financial Position" must be presented in the following format: "Statement of Financial Position as at '_' _____ 20 year (inclusive)". At the same time, the reporting date as at which the statement is prepared must be indicated.

Chapter 7. Statement of Profit or Loss and Other Comprehensive Income

55. PSOs/POs are required to present all items of income and expenses either: a) in one statement of comprehensive income (combined statement); or b) in two separate statements:

• in the statement of profit and loss (which includes components of profit and loss);
• in the statement of comprehensive income, which starts with the profit and loss indicator and contains components of other comprehensive income. In case of presenting a report using the second approach (presentation in separate statements), the statement of profit and loss must be presented directly before the statement of comprehensive income.

56. Income and expenses arising in