Approval of the Instruction on Accounting for Intangible Assets in Banks of the Republic of Uzbekistan

Resolution of the Board of the Central Bank of the Republic of Uzbekistan, registered on 14.01.2003, registration number 1199

Date of entry into force

24.01.2003

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27.02.2022

06.10.2014

25.11.2010

24.01.2003

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Document lost its force 27.02.2022

[
OKOZ:
1.
07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.21.00.00 Banking Activity / 07.21.17.00 Accounting and Reporting in Banks;
2.
07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.29.00.00 Accounting. Financial Reporting / 07.29.03.00 Accounting for Intangible Assets;
3.
07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.29.00.00 Accounting. Financial Reporting / 07.29.07.00 Accounting in Specific Industries]
[
TSZ:
1.
Finance / Accounting]

RESOLUTION OF THE BOARD OF THE CENTRAL BANK OF THE REPUBLIC OF UZBEKISTON

On Approval of the Instruction on Accounting for Intangible Assets in Banks of the Republic of Uzbekistan

[Registered by the Ministry of Justice of the Republic of Uzbekistan on October 12, 2002, registration number 1199]

This resolution loses its force on February 27, 2022, based on Resolution No. 20/4 of the Board of the Central Bank of the Republic of Uzbekistan dated November 18, 2021 "On Approval of the Chart of Accounts for Accounting in Commercial Banks" (registration number 3336, dated 26.11.2021).

In accordance with Articles 3, 7, and 51 of the Law of the Republic of Uzbekistan "On the Central Bank of the Republic of Uzbekistan", the Board of the Central Bank of the Republic of Uzbekistan resolves:

Approve the Instruction "On Accounting for Intangible Assets in Banks of the Republic of Uzbekistan" in accordance with the Appendix.
The Department of Accounting, Reporting, and Execution of the State Budget Cash (D.A. Oriov) shall submit this Regulation to the Ministry of Justice of the Republic of Uzbekistan for state registration within 10 days.
This resolution enters into force ten days after the date of its state registration by the Ministry of Justice of the Republic of Uzbekistan.
From the date of entry into force of this resolution, the section on accounting for intangible assets of the Instruction on Accounting for Fixed Assets, Intangible Assets, Low-Value Items, and Rapidly Depreciating Items in Banks of the Republic of Uzbekistan, approved by Resolution No. 462 of the Board of the Central Bank of the Republic of Uzbekistan dated February 5, 2000 (registered under No. 912 on March 18, 2000, "Bulletin of Normative Acts of Ministries, State Committees, and Departments of the Republic of Uzbekistan", 2000, No. 6), is deemed to have lost its force.
Responsibility for monitoring the implementation of this resolution is assigned to the First Deputy Chairman of the Central Bank M.R. Jumagaliev.

Chairman of the Central Bank Board F. MULLAJONOV

Tashkent,
October 12, 2002,
No. 23/8

APPROVED by the Board of the Central Bank of the Republic of Uzbekistan October 12, 2002, No. 23/8

INSTRUCTION
On Accounting for Intangible Assets in Banks of the Republic of Uzbekistan

This Instruction is developed on the basis of the Laws of the Republic of Uzbekistan "On the Central Bank of the Republic of Uzbekistan", "On Banks and Banking Activity", "On Accounting", and International Financial Reporting Standards, and establishes the procedure for accounting for intangible assets in banks of the Republic of Uzbekistan.

I. General Rules

The following main concepts are used in this Instruction:

1) Intangible assets are non-monetary, identifiable assets without physical substance, having a useful life of more than one year, and used in providing banking services or for administrative purposes.

Intangible assets include patents, copyrights, goodwill, trade marks, computer software, licenses, and the like.

If software is an integral part of the relevant equipment, it is considered a tangible asset. If the software is not an integral part of the relevant equipment, it is considered an intangible asset.

2) Initial (fair) value is the sum of actual costs incurred to purchase and develop intangible assets, including paid taxes, customs duties and fees, services, as well as costs directly related to bringing the asset to a condition suitable for its intended use, such as delivery, installation, and other costs.

Directly attributable costs for intangible assets, such as professional fees for legal services, are included. All trade discounts and rebates are deducted to determine the fair value.

The value of intangible assets taking into account revaluation is called the restoration (restored) value. The amount recognized in the balance sheet is called the carrying amount.

3) Goodwill is "good reputation" or "company valuation." Goodwill is defined as the amount paid by the buyer above the value of the bank's net assets (the difference between the market value of all assets and the market value of all liabilities) at the time of purchasing the bank. This indicates that the bank's buyer understands that the purchase includes the acquisition of established relationships with customers, debtors, and depositors over many years.

4) Active secondary market is a market where prices are disclosed (accessible) to all market participants and where a seller and buyers willing to conclude a transaction at any time can be found.

The main rules for accounting for intangible assets include determining their carrying amount and the depreciation methods applicable to these assets, as well as determining and accounting for changes in the carrying amount of intangible assets, depreciation calculation procedures, and financial results from their disposal.
Bank intangible assets are formed by the following methods:

1) purchase for consideration;

2) internal development;

3) receipt for free.

If an asset item meets the definition of an intangible asset, and if it is probable that future economic benefits associated with the asset will flow to the bank and the cost of the asset can be measured reliably, it shall be recognized as an intangible asset. This requirement applies to both externally acquired and internally generated intangible assets.
The bank must assess the probability of obtaining future economic benefits during the useful life of the asset.
Future economic benefits derived from an intangible asset may include revenue from selling services, cost savings, and other benefits resulting from the bank's use of the asset.
If an intangible asset does not meet the definition of intangible assets or the recognition criteria, expenses related to this item are recognized as expenses of the period in which they were incurred.
In cases where it is not possible to identify an asset as an intangible asset (some intangible assets may exist in physical substance or within it), one should proceed from the importance of the element (for example, in the case of software - compact disc, in the case of a license or patent - legal documents).

II. Initial Recognition and Accounting of Intangible Assets

Intangible assets purchased for consideration are valued and accounted for at their initial (fair) value. Changes in the initial value are permitted only in cases where intangible assets have been revalued.

Analytical accounting for intangible assets is maintained in appropriate personal accounts opened for each type of intangible assets.

Intangible assets purchased in foreign currency are reflected in the balance sheet in national currency at the Central Bank rate on the date of customs declaration processing and are not revalued due to changes in the foreign currency exchange rate.
Intangible assets created internally are reflected in the balance sheet at their actual cost.
Intangible assets received for free are initially reflected in the balance sheet at their real (fair) value. The value of free fixed assets is determined by an appraisal organization or based on information in acceptance-transfer documents.

III. Accounting for Purchase of Intangible Assets

Full or partial prepayment for the value of intangible assets is documented with the following accounting entries:

Dr 19909 "Funds Paid for Goods and Materials"

Cr the bank's representative account or the customer's account

Upon receipt of the asset:

Dr 16601 "Intangible Assets"

Cr 19909 "Funds Paid for Goods and Materials"

If the bank makes payment after the intangible assets have been received, the following accounting entries are made:

1) Reflection of intangible assets in the balance sheet upon receipt:

Dr 16601 "Intangible Assets"

Cr 29802 "Accounts Payable for Services Rendered and Goods and Materials"

2) Upon payment of the asset value:

Dr 29802 "Accounts Payable for Services Rendered and Goods and Materials"

Cr the bank's representative account or the customer's account

When intangible assets are received for free, the following accounting entry is made for the real value of the received intangible assets:

Dr 16601 "Intangible Assets"

Cr 30905 "Property Received for Free"

1-§. Accounting for Subsequent Expenditures

Expenditures related to intangible assets are added to the initial (fair) value of intangible assets only if they provide the opportunity to create future economic benefits exceeding the norms initially accounted for for the asset. All other subsequent expenditures are recognized as expenses of the period in which they were incurred.
Subsequent expenditures made on an intangible asset after it was purchased or created are recognized as current expenses if these expenditures are required to maintain the asset's initially estimated performance indicators.

IV. Intangible Assets Created Internally by the Bank

The quality of intangible assets created internally by the bank must meet the criteria for recognizing intangible assets.
An intangible asset arising from development is recognized by the bank only if it can demonstrate:

a) the technical feasibility of completing the intangible asset so that it will be available for use or sale;

b) its intention to complete the intangible asset and use or sell it;

c) the ability of the intangible asset to generate future economic benefits. The bank must demonstrate the existence of a market for the results of the intangible asset or for the intangible asset itself. If it is intended for internal use, the usefulness of the intangible asset must be assessed;

d) the availability of adequate technical, financial, and other resources to complete the development and use or sell the asset;

e) the ability to reliably measure the expenditure attributable to the intangible asset during its development.

The cost of an internally generated intangible asset includes all expenditures that can be directly attributed to creating and preparing it for its intended use. The cost includes the following expenditures:

1) costs of materials and services purchased or used in creating the intangible asset;

2) salaries of employees directly involved in creating the asset and other expenditures made to them;

3) any expenditures directly attributable to the asset being created, such as payment of fees for registration of legal rights and amortization of patents and licenses;

4) overhead expenditures necessary for creating the asset and which can be attributed to the asset.

The following expenditures do not form part of the cost of an internally generated intangible asset:

1) sales, administrative, and other general overhead expenditures, except for those that can be directly attributed to bringing the asset to a condition ready for use;

2) expenditures for training employees to use the asset.

V. Revaluation of Intangible Assets

After being reflected in accounting at initial value, an intangible asset is revalued at its market value on the revaluation date and accounted for at the revalued (restored) value, provided that the market value can be determined reliably.
The market value of an intangible asset can be determined based on prices in an active secondary market for this type of intangible asset. Revaluation must be carried out with sufficient regularity so that the carrying amount on the balance sheet does not differ materially from the market value on the balance sheet reporting date.
If a secondary market does not exist for a revalued intangible asset at the present time, its carrying amount should be taken as its revalued amount on the last revaluation date, provided that this carrying amount does not exceed the asset's restored value.
When carrying out revaluation, the full restored value is determined by direct recalculation based on market prices established on the revaluation date for newly formed objects exactly similar to the intangible assets being valued, confirmed by documents.

When using the method of direct revaluation, the bank may use the following to document the full restored value of intangible assets:

1) information obtained in writing from manufacturing firms and their official dealers regarding prices for the same asset;

2) information on the value of assets in foreign currency (FC) on the date of purchase (if supporting documents are available), using a calculation coefficient defined as the ratio of Central Bank rates on the revaluation date and the date of purchase of intangible assets;

3) information on price levels published in mass media and special literature during the revaluation period;

4) report of an appraisal organization on the value of the asset.

After revaluation, the fair value of assets is compared with their carrying amount and accumulated depreciation, and accounting entries are made for the difference amount.

1) If the revalued amount of the asset exceeds its carrying amount, this increase is reflected in account 30908 "Additional Value upon Revaluation Relative to Initial Value" with the following accounting entry:

a) Dr 16601 "Intangible Assets";
Cr 30908 "Additional Value upon Revaluation Relative to Initial Value";

b) for the difference between the amounts of accumulated depreciation before and after revaluation:

Dr 30908 "Additional Value upon Revaluation Relative to Initial Value"; Cr 16605 "Accumulated Depreciation of Intangible Assets (contra-asset)".

2) The increase in the value of intangible assets as a result of revaluation shall be recognized as income only to the extent that it covers the decrease in the value of this asset previously recognized as an expense.

3) If the revalued amount of the asset is less than its carrying amount, the asset amount decreases, and this decrease is documented with the following accounting entry:

a) for the difference between the amounts of accumulated depreciation before and after revaluation:

Dr 16605 "Accumulated Depreciation of Intangible Assets (contra-asset)"; Cr 30908 "Additional Value upon Revaluation Relative to Initial Value";

b) for the decrease in the asset value determined as a result of revaluation:

Dr 30908 "Additional Value upon Revaluation Relative to Initial Value" (within the limit of previous increase); Cr 16601 "Intangible Assets".

4) If the balance of account 30908 (specifically related to intangible assets of this category) is insufficient, the additional decrease in the revalued asset value is reflected as follows:

Dr 55995 "Other Non-Interest Expenses";
Cr 16601 "Intangible Assets".

After the above entries, the new balance in the intangible assets account is depreciated in accordance with Section VI of this Instruction over the remaining calculated useful life of the asset.
The positive result of revaluation included in account 30908 "Additional Value upon Revaluation Relative to Initial Value" is directly transferred to account 31203 "Retained Earnings (Asset-Liability)" every month. The following accounting entry is made:

Dr 30908 "Additional Value upon Revaluation Relative to Initial Value"; Cr 31203 "Retained Earnings (Asset-Liability)"; In this case, the amount of the positive result of revaluation transferred every month is equal to the difference between the depreciation amount of the restored value of the relevant asset and the depreciation amount of its initial value. The result of revaluation in account 30908 can be fully included when the relevant asset is derecognized.

VI. Depreciation (Amortization) of Intangible Assets

Depreciation for intangible assets is calculated starting from the month following the month they were put into use. The depreciable amount of intangible assets is continuously charged to bank expenses over their useful life.
The useful life of intangible assets is determined by the bank using depreciation rates calculated based on their initial value and useful life.
The useful life may be measured in years of using the asset or in the volume of services provided. The following factors must be taken into account when determining the useful life of an asset:

1) expected usage by the bank, depending on how efficiently it is used;

2) public information on the typical useful life of the asset and the useful lives of similar types of assets in use;

3) technical, technological, or other types of obsolescence. Taking into account the rapid technological development of computer software and similar intangible assets, the useful life will be short;

4) the period during which control over the asset is exercised and legal or other restrictions on the use of the asset (such as the expiration of a lease agreement, etc.);

5) the dependence of the useful life of the asset on the useful lives of other assets of the bank.

Estimating the useful life of an intangible asset becomes increasingly unreliable as the duration of the useful life increases, because according to certain international standards with established limits, the useful life of some intangible assets does not exceed twenty years.
If future economic benefits from an intangible asset are obtained through legal rights (such as patents, copyrights), the useful life of such intangible assets should not exceed the period of validity of the legal right, except in the following cases:

1) if the legal right is considered renewable;

2) if renewal is actually certain.

There may be both economic and legal factors affecting the useful life of an intangible asset: economic factors determine the period of obtaining economic benefits; legal factors may limit the period during which the bank exercises control over the receipt of these benefits. In such cases, the useful life reflects the shorter of these periods.
The useful life of intangible assets should be reviewed periodically during the period the asset exists, depending on technological changes or changes in the service market. In this case, the useful life and, accordingly, the depreciation rate are adjusted for the current and future periods.
The depreciable amount of an asset is determined by deducting the asset's residual value from its carrying amount. The residual value of an intangible asset should be assumed to be zero, except in the following cases:

1) if there is an obligation of a third party to purchase it at the end of the asset's useful life; or

2) if there is an active market and:

a) the residual value can be determined by evidence from this market;

b) there is a likelihood that such a market will exist at the end of the asset's useful life.

1-§. Depreciation Methods

The depreciation method used should reflect the pattern in which the bank consumes the economic benefits from the asset. If such a schedule cannot be clearly determined, the straight-line depreciation method should be applied.
Depreciation is calculated using the following methods:

1) straight-line (linear) calculation method;

2) method of calculating depreciation proportional to the volume of work performed;

3) declining balance method.

Different methods of calculating depreciation may be applied to different types of assets. However, only one method should be applied to one type of intangible assets.
The selected method of calculating depreciation must be specified in the accounting policy and applied consistently from one reporting period to another and not changed during the year.
The straight-line calculation method is based on calculating an unchanged depreciation (amortization) amount in equal shares over the useful life of the assets, based on their value. The following formula is appropriate to use:

VII. Disposal and Sale of Intangible Assets

Intangible assets are derecognized from the balance sheet as a result of:

1) full depreciation;

2) sale;

3) free transfer;

4) force majeure circumstances.

Gains or losses arising from the disposal of intangible assets are determined as the difference between the estimated amount of net proceeds from the sale and their residual value, and are reflected as income or expense in the statement of profit and loss.
Intangible assets whose use has been discontinued and are intended for disposal are accounted for at their carrying amount on the date they are taken out of active use.
The residual value of disposed intangible assets is determined as follows:

1) by the accumulated depreciation amount:

Dr 16605 "Accumulated Amortization of Intangible Assets" (contra-asset) Cr 16601 "Intangible Assets"

2) by the balance amount existing in account 30908 for this intangible asset:

Dr 30908 "Additional Value upon Revaluation Relative to Initial Cost" Cr 31203 "Retained Earnings (Asset-Liability)"

When disposed intangible assets are sold, the following accounting entries are made:

1) if payment is made by the buyer after the intangible assets are delivered:

Dr 19909 "Funds Paid for Goods and Materials"
Cr 16601 "Intangible Assets".

2) accounting records after payment is received:

a) if the selling price is greater than the residual value of the intangible assets:

Dr Bank's representative account or Buyer's account Cr 19909 "Funds Paid for Goods and Materials" Cr 45913 — "Profit from Sale or Disposition of Other Private Property of the Bank"

b) if the selling price is less than the residual value of the intangible assets:

Dr Bank's representative account or Buyer's account Dr 55906 "Losses from Sale or Disposition of Other Private Property of the Bank" Cr 19909 "Funds Paid for Goods and Materials"

3) if prepayment is made:

Dr Bank's representative account or Buyer's account Cr 29802 "Settlements for Funds Payable for Rendered Services and Material Goods and Materials" and simultaneously:

a) if the selling price is greater than the residual value of the intangible assets:

Dr 29802 "Settlements for Funds Payable for Rendered Services and Material Goods and Materials" Cr 45913 "Profit from Sale or Disposition of Other Private Property of the Bank" Cr 16601 "Intangible Assets"

b) if the selling price is less than the residual value of the intangible assets:

Dr 29802 "Settlements for Funds Payable for Rendered Services and Material Goods and Materials" Dr 55906 "Losses from Sale or Disposition of Other Private Property of the Bank" Cr 16601 "Intangible Assets"

The value of intangible assets is written off as a loss in the prescribed manner due to full depreciation, force majeure circumstances, or free transfer, and is documented with the following entry:

for the residual value amount:

Dr 55906 "Losses from Sale or Disposition of Other Private Property of the Bank" Cr 16601 "Intangible Assets"

If intangible assets remain fit for use, the bank may continue to use them even after the expiration of their service life. In this case, no depreciation is calculated for the intangible assets.

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