Palestine Monetary Authority

Instructions No. (02) of 2018

Regarding Minimum Disclosure Requirements for Final Financial Statements

Based on the provisions of Decision No. (132) of 2011 on the Licensing and Supervision of Specialized Lending Institutions, particularly Articles (3) and (22), and in accordance with the powers delegated to us, and in pursuit of the public interest, we have issued the following Instructions:

Article (1)

Scope of Application

The provisions of these Instructions shall apply to specialized lending institutions licensed by the Palestine Monetary Authority.

Article (2)

General Provisions

1. A specialized lending institution shall comply with the following:

   • Use of Annex No. (1) attached regarding "Minimum Disclosure Requirements for Final Financial Statements", which constitutes an integral part of these Instructions.

2. Send Annex No. (1) to the external auditor of the specialized lending institution to be relied upon in the disclosure mechanism.

3. The main financial statements of the final financial data of the specialized lending institution shall be signed by the Chief Financial Officer and the General Manager.

4. Disclose any exceptional items not mentioned in the final financial statements in accordance with the requirements of International Financial Reporting Standards.

5. Prepare final financial statements in accordance with International Financial Reporting Standards and its amendments, and in accordance with accounting, auditing, and financial control standards for Islamic institutions providing Islamic financing services.

6. Provide the Palestine Monetary Authority with the following documents along with the final financial statements:

   • a. A report from the external auditor addressed to the Palestine Monetary Authority and a copy to the board of directors of the lending institution.
   • b. A report from the Shariah Supervisory Board for institutions providing Islamic financing services.
   • c. A letter from the external auditor addressed to the board of directors of the institution containing the institution's response to the observations (Management Letter).
   • d. A certificate from the tax advisor indicating the adequacy of the income tax and value-added tax provisions.
   • e. A statement of cases filed against the institution and the legal advisor's opinion on the adequacy of the provision established against them.
   • f. A certificate from the external auditor regarding the adequacy of the special provision established against the decline in the value of loans and/or financing.
   • g. A copy of the external auditor's report regarding information technology (IT) (Management Letter).
   • h. A copy of any reports submitted by the external auditor to the institution within the scope of its mandate.
   • i. A detailed statement of bad debts during the period, including provisions, suspended interest/yields, and their recoveries.
   • j. A statement of amounts spent related to the lending institution's contribution to social responsibility; including: the target sector, the amount, and the percentage of each sector.
   • k. A statement of repossessed assets acquired by the lending institution which became its property as a result of loan and/or financing defaults.

7. A copy of the minutes of the board of directors meeting of the lending institution in which the final financial statements of the institution were approved.

8. A copy of the engagement letter signed between the institution and the external auditor.

9. The final deadline for providing the Palestine Monetary Authority with a draft of the final financial statements shall be March 31 of each year, whereby the Palestine Monetary Authority shall be provided with a hard copy and electronic copy in Arabic.

Article (3)

Implementation and Enforcement

All competent authorities shall, each within their respective jurisdiction, implement the provisions of these Instructions, which shall apply from the date of their issuance.

Issued in Ramallah on Thursday, dated 05/04/2018.

Supervision and Evaluation Department
Palestine Monetary Authority

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Note:
The following pages (4 to 8) show templates for Annex No. (1) "Minimum Disclosure Requirements for Final Financial Statements of Specialized Lending Institutions".

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Annex No. (1): Minimum Disclosure Requirements for Final Financial Statements of Specialized Lending Institutions

Independent Auditor's Report

Addressed to the Chairman and Board of Directors of the (Institution/Company) Specialized Lending Institution

The items of the external auditor's report are listed in accordance with the requirements of Revised International Standard on Auditing (ISA) 700 regarding the External Auditor's Report.

Audit Firm and Signature
Name of Auditor in Charge (Partner)
Address
Date

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Statement of Financial Position as at .........

Notes	Current Period	Previous Period
Assets
Cash and Cash Equivalents	3
Net Loan/Financing Portfolio	4
Other Assets	5
Deferred Tax Assets	6
Property, Plant and Equipment	7
Intangible Assets	8
Deposit with Palestine Monetary Authority	9
Total Assets
Liabilities:
Credit Facilities	10
Provision for End of Service Benefits	11
Tax Provisions	12
Other Provisions	13
Other Liabilities	14
Deferred Tax Liabilities	15
Total Liabilities:
Equity:
Paid-up Capital	16
Share Premium	16
Mandatory Reserve	17
Risk Reserve	18
Other Reserves	19
Accumulated Profits / Losses
Total Equity
Total Liabilities and Equity
Off-Balance Sheet Items	20

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Statement of Income for the Period Ended .........

Notes	Current Period	Previous Period
Income:
Credited Interest/Yields and Commissions (Income)	21
Debited Interest/Yields and Commissions (Expense)	22
Net Income from Interest/Yields and Commissions
Recovery of Provision for Non-Performing Loans/Financing	3
Net (Profit/Loss) from Foreign Exchange Transactions *
Other Income	23
Total Income
Expenses:
Staff Expenses and Allowances	24
Other Operating Expenses	25
Provision for Non-Performing Loans/Financing	3
Expense for End of Service Benefits Provision	11
Depreciation and Amortization Expense	7
Expense for Other Provisions	26
Bad Debts for which no provisions were established
Fines from Palestine Monetary Authority	27
Total Expenses
Profit for the Period before Tax
Tax Expense
Net Profit/Loss after Tax

• If it constitutes 5% or more of net income, a detailed note is required.

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Statement of Comprehensive Income for the Period Ended .......

Notes	Current Period	Previous Period
Net Profit/Loss for the Period
Other Comprehensive Income Items
Net Change in Fair Value of Financial Assets through Comprehensive Income
Net (Profits/Losses) from Foreign Currency Translation Differences for Foreign Operations
Other (to be specified)
Total Other Comprehensive Income Items
Total Comprehensive Income for the Period

Items of the Statement of Comprehensive Income may be presented in a single statement.

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Statement of Changes in Equity for the Period Ended .......

						Current Period
						Paid-up Capital
						Share Premium
						Mandatory Reserve
						Risk Reserve
						Other Reserves
						Accumulated Profits/Losses
						Total
Opening Balance
Transferred from Profits to Reserves
Distributed Profits
Other Comprehensive Income Items
Profit/Loss for the Financial Period
Total Comprehensive Income
Closing Balance Current Period
						Previous Period
Opening Balance
Transferred to Reserves
Distributed Profits
Other Comprehensive Income Items
Profit/Loss for the Financial Period
Total Comprehensive Income
Closing Balance Previous Period