Instruction No. 141 on the Procedure for Accounting for Financial Leasing in Banks

«Registered»
Ministry of Justice of the Republic of Tajikistan by Order No. from 2005

«Approved»
Resolution of the Board of the National Bank of Tajikistan of July 06, 2005 No. 178

Instruction No. 141
"On the Procedure for Accounting for Financial Leasing (Lease) in Banks"

1. General Provisions
   This regulation is developed on the basis of Article 41 of the Law of the Republic of Tajikistan "On Banks and Banking Activity" and defines the procedure for accounting for financial leasing (lease) in cases where the bank or its subsidiary acts as the lessor (lessor).

2. Leasing Payment and Calculation Methodology
   2.1. The amount of the leasing payment consists of the lease payment, the leasing rate (interest on credit), commission payments, and fees for additional services provided. Insurance payments paid by the lessor for the insurance of the leased object in accordance with the terms of the leasing contract may also be included in the leasing payment.
   2.2. The leasing rate is determined similarly to the calculation of the interest rate on a loan.
   2.3. Leasing payments are made by the lessee in accordance with a schedule agreed upon by the parties and forming an integral part of the leasing contract.
   2.4. When transferring the leasing payment, the lessee is obliged to provide a breakdown of the leasing payment, dividing it into lease payment, interest, commission, and additional payments.
   2.5. Upon receipt of the leasing payment, the bank, according to its breakdown, makes the corresponding accounting entries:

• the lease payment is directed to repay the loan by crediting the credit of the corresponding loan account, where leasing is accounted for;
• interest on leasing, commissions, and other payments are credited to the bank's income in accordance with the accounting of additions and changes No. 5 to the Guide "On the Structure of Accounting for Commercial Banks".

3. Accounting for Financial Leasing (Lease)
   3.1. The subject of the lease is accounted for on the balance sheet of the lessor or the lessee with the consent of the parties.
   3.2. If, according to the terms of the financial leasing (lease) contract, the accounting for the subject of the lease is kept on the balance sheet of the lessee, and the conclusion of the leasing contract between the lessor and the lessee precedes the conclusion of the leasing contract between the lessor and the seller (supplier) or is concluded simultaneously, then the reflection of such operations in the accounting of the lessor is carried out in accordance with paragraph 3.3 of this Procedure.
   3.3. Accounting by the lessor.
   3.3.1. Accounting for investment expenditures is carried out by the lessor on the balance sheet account for leasing accounting. For the purposes of this Procedure, investment expenditures are understood as the expenses and costs of the lessor associated with the acquisition of the subject of the lease, as well as the fulfillment of other obligations arising from the leasing contract.
   3.3.2. The lessor does not accrue depreciation on the leased property.
   3.3.3. The subject of the lease transferred to the lessee is accounted for in off-balance sheet accounting for property transferred to the lessee's balance sheet.
   3.3.4. Transfer of advances by the lessor to sellers (suppliers) and other organizations performing work or providing services in the course of the leasing transaction, payment for supplies (work and services):

Debit of account 17515 "Accounts Receivable"
Credit of account 10101, 10105, 10301, 10305, 10501, 10505, 10507, 10509 "Cash" or "Correspondent Account"

3.3.5. Acceptance of documents from suppliers (sellers) and other organizations confirming the delivery of products, performance of work, provision of services:
Debit of account 10701, 10703 "Accounting for Financial Leasing" Credit of account 17515 "Accounts Receivable"

When accruing the leasing rate (interest on financial leasing):
Debit of account 17531, 17535 "Accrued Interest Receivable" Credit of account 40200 (40226, 40236, 40246, 40254, 40264) "Interest Income"

In case of overdue interest payments for more than 30 days, the accrued interest amount is reversed and transferred to off-balance sheet accounting.

3.3.6. Leased items and additional leasing services by the lessor are reflected in off-balance sheet accounting during the term of the financial leasing contract.
3.3.7. Receipt of the leasing payment in the specified amount and within the time frame established by the contract:
Debit of account 10101, 10105, 10301, 10305, 10501, 10505, 10507, 10509 "Cash" or "Correspondent Account" Credit of account 10701, 10703 "Accounting for Financial Leasing" Credit of account 17531, 17535 "Accrued Interest Receivable on Financial Leasing" Credit of account 40402 "Accounting for Income from Commissions and Banking Services".

3.3.8. In the event of non-receipt (partial receipt) of the leasing payment within the established time frame, at the end of the working day, the amount of unrecovered funds is transferred to the account "Accounting for Overdue Debt of Financial Leasing".
3.3.9. Upon the purchase of leased items by the lessee, their cost on the date of transfer of ownership is written off by the lessor from off-balance sheet accounting.
3.3.10. Withdrawal (return) of leased property in established cases:
Debit of account 15953 "Received Pledge for Sale" Credit of account 10701, 10703 "Accounting for Financial Leasing" and/or Credit of account 10705, 10707, 10709, 10711, 10731, 10733, 10735, 10737, 10739, 10741 "Accounting for Overdue Debt on Financial Leasing".

3.3.11 If, according to the terms of the contract, costs associated with the withdrawal (return) of leased property (dismantling, transportation, etc.) are borne by the lessor, they are also reflected on the Debit of account 15953 "Received Pledge for Sale".