On Approval of the Regulation on the Procedure for Commercial Banks to Maintain Accounting Records of Investments in Dependent Business Entities

Resolution of the Board of the Central Bank of the Republic of Uzbekistan, registered on 02.12.2004, reg. number 1429

Date of entry into force

12.12.2004

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11.11.2021

12.12.2004

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Act lost force 11.11.2021

[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 / 07.29.07.00 Accounting in specific industries and spheres]

[TSZ:

1. Finance / Banks and other credit institutions. Credits;

2. Finance / Accounting]

Resolution

BOARD OF THE CENTRAL BANK OF THE REPUBLIC OF UZBEKISTAN

ON APPROVAL OF THE REGULATION ON THE PROCEDURE FOR COMMERCIAL BANKS TO MAINTAIN ACCOUNTING RECORDS OF INVESTMENTS IN DEPENDENT BUSINESS ENTITIES

[Registered by the Ministry of Justice of the Republic of Uzbekistan on 02.12.2004. Registration No. 1429]

LexUz Commentary

This resolution will lose force on November 11, 2021 in accordance with the [resolution](/docs/5563535?ONDATE=11.11.2021 00#5566861) of the Board of the Central Bank of the Republic of Uzbekistan dated July 15, 2021 No. 17/3 “On recognizing certain regulatory legal acts adopted by the Central Bank of the Republic of Uzbekistan as having lost force” (reg. No. 3317 of 10.08.2021).

In accordance with the laws of the Republic of Uzbekistan “On the Central Bank of the Republic of Uzbekistan”, “On Banks and Banking Activity” and “On Accounting”, the Board of the Central Bank of the Republic of Uzbekistan resolves:

1. Approve the “Regulation on the Procedure for Commercial Banks to Maintain Accounting Records of Investments in Dependent Business Entities” according to the appendix.

2. This regulation enters into force upon the expiration of ten days from the moment of its state registration in the Ministry of Justice of the Republic of Uzbekistan.

3. Control over the implementation of this resolution is entrusted to the First Deputy Chairman of the Central Bank M.R. Jumagaliev.

Chairman of the Board of the Central Bank F. MULLAZHANOV

Tashkent,

November 6, 2004,

No. 24/9

APPROVED
resolution of the Board of the Central Bank of November 6, 2004 No. 24/9

REGULATION

on the procedure for commercial banks to maintain accounting records of investments in dependent business entities

I. General Provisions

1. This Regulation is developed in accordance with the Civil Code, laws of the Republic of Uzbekistan “On the Central Bank of the Republic of Uzbekistan”, “On Banks and Banking Activity”, “On Accounting” and establishes accounting policy for commercial banks (hereinafter referred to as banks) regarding investments in dependent business entities taking into account the requirements of International Financial Reporting Standards (hereinafter referred to as IFRS).

2. This Regulation establishes the concept of a dependent business entity for accounting purposes and requires the use of the equity method for accounting for investments in dependent business entities.

3. For the purposes of this Regulation, the following terms are used:

dependent business entity — a business partnership or company, more than twenty percent of the charter capital of which belongs to the bank;

equity method — an accounting method according to which investments are initially recognized at cost, and then adjusted for changes in the investor's share in the net assets of the investment object that occurred after acquisition. The investor's share in the profits and losses of the investment object is included in the investor's profits and losses.

4. According to the equity method, the investment is initially reflected at acquisition cost, and its carrying amount is increased or decreased to recognize the investor's share in the profits and losses of the investment object after the acquisition date. The investor's share in the profits and losses of the investment object is recognized in the investor's statement of profit or loss. Distributions received from the investment object reduce the carrying amount of the investment. Adjustments to the carrying amount are also necessary to reflect changes in the investor's share in the investment object arising from changes in the capital of the investment object that were not reflected in the profits and losses of the investment object. Such changes may arise as a result of revaluation of fixed assets and investments, as a result of exchange differences on translating foreign currency financial statements. The investor's share in these changes is recognized directly in the investor's equity section.

5. In the presence of financial instruments giving rise to potential voting rights, the investor's share in the profits and losses of the investment object and in changes in the capital of the investment object is determined based on the current ownership share and does not reflect the possible exercise or conversion of instruments giving rise to potential voting rights.

II. Recognition and Measurement

§ 1. Initial Recognition

6. Investments in dependent business entities are accounted for in accounts: 15801 “Investments in dependent business entities — Financial institutions” and 15805 “Investments in dependent business entities — Others”, respectively. Analytical accounting is kept separately for each dependent business entity.

7. Investments in dependent business entities are initially reflected at acquisition cost. The actual cost of investments must be assessed by the investor as the aggregate sum:

a) fair value (at the date of exchange) of assets transferred, liabilities assumed or equity instruments issued by the investor, plus

b) any costs directly attributable to the acquisition of the investment.

To reflect the initial purchase, the following entry is made:

Dr. 15801 — “Investments in dependent business entities —

Financial institutions”, or

Dr. 15805 — “Investments in dependent business entities — Others”;

Cr. — Cash in the operational cash register, correspondent account of the bank or customer account,

or

Cr. 30318 — “Issued charter capital — Ordinary”.

8. An investment in a dependent business entity is accounted for using the equity method, starting from the date on which it falls under the definition of a dependent business entity. Upon acquisition of the investment, any difference between the actual cost of the investment and the bank-investor's share in the fair value of identifiable assets, liabilities and contingent liabilities is accounted for as follows:

a) goodwill arising in connection with the dependent business entity is included in the carrying amount of the investment. However, amortizing this goodwill is not permitted, so it is not excluded when determining the bank's share in the profits and losses of the dependent business entity;

b) any excess of the bank's share in the fair value of identifiable assets, liabilities and contingent liabilities of the dependent business entity over the actual cost of the investment is excluded from the carrying amount of the investment and instead included in income when determining the bank's share in the profits and losses of the dependent business entity for the period in which this investment is acquired.

Also, corresponding adjustments to the investor's share in the profits or losses of the dependent business entity after acquisition are made to account for the depreciation of depreciable assets, based on their fair value at the acquisition date. Similarly, corresponding adjustments to the investor's share in the profits or losses of the dependent business entity after acquisition are made to account for impairment losses recognized by the dependent business entity, for example, on goodwill or fixed assets.

9. An investment in dependent business entities must be reflected using the equity method, except in cases where, upon acquisition, the bank decided that the carrying amount of a specific investment in a dependent business entity will be recovered primarily through sale rather than through continuing to hold it as an asset, then the bank must classify this asset as held for sale. In this case, this asset is measured at the lower of its carrying amount or its fair value less costs to sell.

§ 2. Subsequent Measurement

10. If within 12 months there is no disposal of the investment in a dependent business entity that was previously accounted for in accordance with paragraph 9 of this Regulation, it must be accounted for using the equity method from the date of its classification as held for sale. Financial statements for periods after classification as held for sale must be restated.

11. Recognition of income based on distributions received (dividends) cannot serve as an adequate measure of income earned by the investor on investments in a dependent business entity, because the distributions received do not reflect the actual operating results of the dependent business entity.

III. Application of the Equity Method

12. The basic concepts underlying the consolidation procedures used upon acquisition of a subsidiary business entity are also accepted for the acquisition of an investment in a dependent business entity.

§ 1. Basic Application

13. The equity method, sometimes referred to as “one-line consolidation”, allows the bank (investor) owning a certain percentage of ordinary shares of another business entity (investment object) to add to its profit the operating results of the investment object in proportion to its share. However, instead of including its share in each component (i.e., in revenue, in cost of services rendered, in operating expenses, etc.) in its financial statements, the bank must include its share in the net profit of the investment object as a separate line item in its statement of profit or loss.

14. There are exceptions to this one-line consolidation rule. The bank's share in adjustments of the previous period of the investment object is presented sequentially in the statement of profit or loss and the statement of retained earnings of the bank, and they are presented separately if they are material in relation to the bank's profit.

15. Subsequently (after initial recognition), the carrying amount of investments is increased (decreased) by recognizing the bank's share in the net profit (loss) of the investment object in proportion to the bank's share in the capital of the investment object.

16. If the business entity that is the investment object has a positive net profit, the bank's share in this net profit is reflected in the reporting of the bank-investor using the following entry:

Dr. 15801 — “Investments in dependent business entities —

Financial institutions”, or

Dr. 15805 — “Investments in dependent business entities — Others”;

Cr. 45701 — “Profit from investments in dependent business

entities — Others”

for the amount of the bank's share in the profit of the investment object.

17. If the business entity that is the investment object incurs losses from operations, the bank's share in this net loss is reflected in the reporting of the bank-investor using the following entry:

Dr. 55702 — “Losses on investments in dependent business entities

— Financial institutions”, or

Dr. 55706 — “Losses on investments in dependent business entities

— Others”;

Cr. 15801 — “Investments in dependent business entities —

Financial institutions”, or

Cr. 15805 — “Investments in dependent business entities —

Others”

for the amount of the bank's share in the losses of the investment object.

18. After initial recognition, dividends received from the investment object reduce the carrying amount of the investment. This operation is reflected by the following entry:

Dr. — Bank's correspondent account or customer account

Cr. 15801 — “Investments in dependent business entities —

Financial institutions”, or

Cr. 15805 — “Investments in dependent business entities —

Others”

for the amount of dividends received.

Example

On January 2, 20X1, Bank “A” acquired 48,000 shares of Joint Stock Company “B” (which equals 20% of all shares of JSC “B”) at a price of 100 sums per share. To reflect the purchase, Bank “A” will make the following entry:

Dr. 15801 — “Investments in dependent business entities

— Financial institutions” 4,800,000;

Cr. — Bank's correspondent account or customer account 4,800,000.

By the end of 20X1, the net profit of Joint Stock Company “B” amounted to 200,000 sums. The proportional share of Bank “A” in this net profit is:

200,000 x 20% = 40,000 sums.

To reflect the increase in its investment, Bank “A” makes the following entry:

Dr. 15801 — “Investments in dependent business entities

— Financial institutions” 40,000;

Cr. 45701 — “Profit from investments in dependent business

entities — Financial institutions” 40,000.

On January 28, 20X2, Joint Stock Company “B” paid dividends in the amount of 100,000 sums. Bank “A” received 20,000 sums (20% x 100,000). To reflect the receipt of dividends, Bank “A” will make the following entry:

Dr. — Bank's correspondent account or customer account 20,000;

Cr. 15801 — “Investments in dependent business entities

— Financial institutions” 20,000.

19. When a dependent business entity is accounted for using the equity method, profits and losses arising from transactions between the bank (its consolidated subsidiary business entities) and dependent business entities (“upward” and “downward”) must be eliminated in proportion to the bank's share in the dependent business entity.

20. When applying the equity method, the bank uses the most recent available financial statements of the dependent business entity. When the reporting dates of the bank and the dependent business entity differ, the latter prepares its financial statements specifically for the bank as of the same date as the bank's reporting date, except in cases where this is not feasible.

21. When financial reports prepared on different dates are used, adjustments are made to account for the impact of any significant events or transactions between the bank and the dependent business entity that occurred in the period between the date of preparation of the financial statements of the dependent business entity and the date of preparation of the bank's financial statements. In any case, the difference between the reporting date of the dependent business entity and the bank's reporting date must not exceed a period of 3 months. The duration of reporting periods and any difference between reporting dates must be the same from period to period.

22. Financial statements of the bank are generally prepared using a single accounting policy for similar transactions and events under similar conditions in accordance with regulatory acts of the Central Bank. In many cases, if the dependent business entity uses an accounting policy different from the policy adopted by the bank for accounting for similar transactions and events under similar conditions, the financial statements of the dependent business entity used by the bank in applying the equity method must be adjusted accordingly.

§ 2. Advanced Application

23. If the dependent business entity has cumulative preferred shares in circulation owned by parties that are not the investor and are not classified as equity investments, the bank-investor calculates its share in the profits and losses of the investment object after adjusting for the amount of dividends on such shares, regardless of whether dividends on cumulative preferred shares were declared or not.

Continuation of the example:

For 20X2, the net profit of Joint Stock Company “B” amounted to 300,000 sums. As of December 31, 20X2, Joint Stock Company “B” had 5,000 cumulative preferred shares in circulation. The undeclared cumulative dividends on these shares for the reporting period amount to 100,000 sums. Thus, the net profit of Joint Stock Company “B” (300,000 sums), minus the amount due to shareholders owning preferred shares (100,000), equals 200,000 sums, and the share of Bank “A” (20%) in the net profit remaining for shareholders owning ordinary shares amounts to 40,000 sums.

24. If the bank-investor's share in the losses of the dependent business entity is equal to or exceeds its share in the dependent business entity, the bank ceases to recognize its share in further losses. The bank's share in the dependent business entity represents the carrying amount of the investment in the dependent business entity, as well as any long-term assets associated with this entity that, in essence, constitute part of the bank's net investment in the dependent business entity. For example, an asset whose repayment is either not planned or unlikely to occur in the near future is, in essence, an additional part of the bank's investment in this dependent business entity. Such assets may include preferred shares and long-term receivables or loans, but this does not include accounts receivable or such long-term receivables for which there is appropriate collateral, such as secured loans. Losses recognized under the equity method in excess of the bank's investment in ordinary shares are charged to other assets associated with this dependent business entity in reverse order of priority in liquidation.

25. After the bank-investor's share is reduced to zero, reserves for additional losses are created, and a liability is recognized only to the extent that the bank has assumed obligations when issuing guarantees or sureties or making payments on behalf of the dependent business entity. If the dependent business entity subsequently reflects profits, the bank resumes recognizing its share in these profits only after its share in these profits equals its share in unrecognized losses.

26. The carrying amount of the investment must include only the carrying amount of instruments providing unlimited rights to participate in profits and losses and in the residual capital of the investment object.

27. Explanations of more complex issues in applying the equity method are provided in the appendix to this Regulation — “Recommendations on the Advanced Application of the Equity Method”.

IV. Impairment of Investments

28. After applying the equity method, including recognizing losses of the dependent business entity in accordance with this Regulation, the bank-investor must assess the existence of impairment indicators for the investment in the dependent business entity at each reporting date.

29. If there is an indicator of possible impairment of the investment in the dependent business entity, the bank applies IFRS requirements on asset impairment. When determining the value in use of the investment, the bank assesses:

a) its share in the discounted value of expected future cash flows that the investment object is expected to generate, including cash flows from its operations and proceeds from the final disposal of the investment;

b) the discounted value of expected future cash flows arising from dividends received from the investment and from its final disposal.

With correct assumptions, both methods yield the same results.

30. The recoverable amount of the investment in the dependent business entity is assessed for each dependent business entity separately.

31. If the bank-investor's share in the losses of the dependent business entity exceeds the carrying amount of the investment, then the carrying amount of the investment is shown in the report as zero, and recognition of further losses ceases, unless the bank has obligations to the investment object or obligations to make payments on behalf of the investment object, which were guaranteed or stipulated by the bank in any other way. The bank must continue to recognize its share in the losses of the investment object to the extent that it has assumed such obligations.

32. Financial investments in the investment object, not included in the carrying amount of the investment according to paragraph 26 of this Regulation, are accounted for and assessed for impairment in accordance with legislation.

33. Ongoing losses of the investment object are considered objective evidence that financial investments in the investment object, including financial investments included in the carrying amount of the investment according to paragraph 26 of this Regulation, and other financial investments, may be impaired. Impairment of the carrying amount of the financial investment included in the carrying amount of the asset is determined based on the carrying amount resulting after all adjustments for losses recognized according to the equity method.

34. If the bank-investor has guaranteed or stipulated in any other way obligations to the investment object or obligations to repay the investment object's obligations, then the bank, in addition to continuing to recognize the investment object's losses in proportion to its share, must determine whether it is necessary to recognize a reserve in accordance with IFRS requirements on contingent liabilities.

V. Cessation of Application of the Equity Method

35. The bank-investor ceases to apply the equity method starting from the date when its share in the charter capital of the investment object falls below twenty percent and it begins to account for the investment in the corresponding accounts of sections 10700 “Securities for sale” or 10800 “Investments in securities held for sale”.

36. The carrying amount of the investment on the date when the bank ceases to account for it as a dependent business entity must be considered as its actual cost at the time of initial assessment when transferring the financial asset to the corresponding accounts of sections 10700 “Securities for sale” or 10800 “Investments in securities held for sale”.

VI. Presentation of Information

37. Investments in dependent business entities are presented as long-term assets in the bank's balance sheet. The bank's share in the profits and losses of such investments must be presented as a separate line item in the statement of profit or loss. The bank's share in adjustments of the previous period must also be presented separately.

VII. Disclosures

38. In its financial statements, the bank must disclose the following information:

a) fair value of investments in dependent business entities for which market quotations are available;

b) summarized financial information about dependent business entities, including aggregate amounts of assets, liabilities, income, profit or loss;

v) the reporting date of the financial statements of the dependent economic entity, when such financial statements are used in applying the equity method, and were prepared for a reporting date or period different from that used by the bank-investor, and the reasons for using different reporting dates or periods;

g) the nature and extent of any significant restrictions (i.e., arising from loan agreements or regulatory requirements) regarding the ability of the dependent economic entity to transfer funds to the investor in the form of cash dividends or repayment of loans or advances;

d) the unrecognized share of losses of the dependent economic entity, both for the period and cumulatively, if the bank has ceased to recognize its share of the losses of the dependent economic entity;

e) the fact that the dependent economic entity is not accounted for using the equity method;

zh) summarized financial information about dependent economic entities, either individually or by groups, which are not accounted for using the equity method, including total assets, total liabilities, income, and profit or loss;

i) its share of contingent liabilities of the dependent economic entity incurred jointly with other investors;

k) contingent liabilities arising from the fact that the bank is strictly liable for all or part of the obligations of the dependent economic entity.

39. Investments in dependent economic entities accounted for using the equity method must be classified as long-term assets and disclosed as a separate line item in the balance sheet. The bank's share in the profits and losses from such investments must be disclosed as a separate line item in the income statement. The bank's share in any discontinued operations of such dependent economic entities must be disclosed separately.

40. The bank's share in changes recognized directly in the equity of the dependent economic entity must be recognized directly by the bank in equity and disclosed in the statement of changes in equity.

41. If the bank ceases to recognize losses of the investment object proportionally to its share, it must disclose in the notes to the financial statements the amount of unrecognized losses of the investment object proportionally to its share, for the reporting period and accumulated as of the reporting date.

42. If the dependent economic entity uses accounting policies different from the accounting policies adopted by the bank regarding similar transactions and events under similar conditions, and if it is not practically possible to calculate the corresponding adjustments to the financial statements of the dependent economic entity when used by the bank applying the equity method, then this fact is also disclosed.

APPENDIX
to Regulation on the procedure for commercial banks to maintain accounting records of investments in dependent economic entities

Recommendations for the extended application of the equity method

Difficulties in applying the equity method. Difficulties in applying the equity method arise in two areas. The first is that the actual cost of the investment for the investor may not be equal to the fair value of the investor's share in the net assets of the investment object, which is analogous to the emergence of goodwill in business combinations. In addition, the fair value of the investor's share in the net assets of the investment object may not be equal to its book value. This situation is analogous to the problem of allocating purchase price in the preparation of consolidated financial statements. Since the final income statement resulting from the application of the equity method should generally be the same as in full consolidation, adjustments must be made to account for each of these differences.

The next major difficulty concerns the allocation of income tax (profit) for the period. The equity method leads to the investor reflecting current profits (losses) based on the operating results of the investment object. However, for the purpose of calculating income tax (profit), the investor may report only dividends received or profits and losses from the disposal of the investment. Therefore, temporary differences may arise that will affect deferred taxes.

In the absence of such complicating factors, the equity method is applied by the investor simply: the initial cost of the investment is increased by the investor's share in the profits of the investment object and decreased by the investor's share in the losses of the investment object and by the amount of dividends received.

Example of a simple case not considering deferred taxes

On January 2, 20x1, Bank "B" (investor) purchased 40% of ordinary shares with voting rights of Joint Stock Company "A" (investment object) on the stock market for 100,000 som. On January 2, the share capital of Joint Stock Company "A" consisted of the following accounts:

	Ordinary shares with a par value of 1 som, 50,000 shares are in circulation out of a registered issue volume of 100,000 shares	50,000
	Additional capital	150,000
	Retained earnings	50,000
	Total equity	250,000

Note that the cost of ordinary shares of Joint Stock Company "A" is equal to 40% of the book value of the net assets of Joint Stock Company "A". Assume also that there is no difference between the book value and the fair value of the assets and liabilities of Joint Stock Company "A". Accordingly, the balance on the investment account in the books of Bank "B" is exactly 40% of the share capital (net assets) of Joint Stock Company "A". The net profit of Joint Stock Company "A" amounted to 30,000 som for 20x1, and it paid cash dividends of 10,000 som. Its equity at the end of the year will be:

	Ordinary shares with a par value of 1 som, 50,000 shares are in circulation out of a registered issue volume of 100,000 shares	50,000
	Additional capital	150,000
	Retained earnings	70,000
	Total equity	270,000

Bank "B" will reflect its share in the increase in the net assets of Joint Stock Company "A" during 20x1 as follows:

	Dr 15801 — "Investments in dependent economic entities — Financial institutions"		12,000;
		Cr 45701 — "Profit from investments in dependent economic entities — Financial institutions" (30,000 som x 40%)		12,000;
	Dr — Bank's correspondent account or client account		4,000;
		Cr 15801 — "Investments in dependent economic entities — Financial institutions" (10,000 som x 40%)		4,000.

When preparing the balance sheet of Bank "B" as of December 31, 20x1, the balance on the investment account will be 108,000 som (100,000 som + 12,000 som – 4,000 som). This amount represents 40% of the book value of the net assets of Joint Stock Company "A" at the end of the year (40% x 270,000 som). Note also that the share in the profit of Joint Stock Company "A" is reflected as profit in the income statement of Bank "B".

IFRS require that deferred taxes on income (profit) arising from the impact of temporary differences between accounting profit and the tax base for tax calculation be presented in the reports. According to international standards, the assessment of net deferred tax assets or liabilities is adjusted at each reporting date to reflect possible changes relative to the final tax amount.

Example of a simple case considering deferred taxes

Assume that the same information as described above exists. The income tax rate is 18%, and the bank expects to realize the profits of Joint Stock Company "A" by receiving dividends. In addition, assume that an 80% discount on income tax on dividends received from the investment object is provided for Bank "B", meaning that only 20% of dividend income is subject to tax at the general rate. Assume that income tax on dividends is not withheld at the source. The accounting entries of Bank "B" at the end of 20x1 will look as follows:

1.	Dr 15801 — "Investments in dependent economic entities — Financial institutions"		12,000;
		Cr 45701 — "Profit from investments in dependent economic entities — Financial institutions"		12,000;
2.	Dr 56902 — "Provision for income tax"		432;
		Cr 22508 — "Deferred taxes payable"		432;
	(the taxable part of the profit of the investment object, which will be received in the future, is calculated as the product of dividends and the tax rate: 12,000 som x 20% x 18% = 432 som.)
3.	Dr – Bank's correspondent account or client account		4,000;
		Cr 15801 — "Investments in dependent economic entities — Financial institutions" (10,000 som x 40%)		4,000.
4.	Dr 22508 — "Deferred taxes payable"		144;
		Cr 22502 — "Accrued income tax (profit) payable"		144.
	(the part of the profits of the investment object taxable in the current period (4,000/12,000) x 432 = 144 som.)

The assessment of tax expense must be based on the forecasted tax impact of the reversal of the temporary difference, and it will subsequently be adjusted for a number of reasons, including changes in tax rates and changes in management expectations. Despite this requirement, the actual tax impact of the reversal of the temporary difference may still differ from the recognized deferred tax. Such a difference may arise because the actual tax impact depends on how the income and expenses of the joint stock company are formed in the year of reversal of the temporary difference.

Accounting for the difference between actual cost and book value

The simple examples presented so far excluded the main difficulty of the equity method — the allocation of the difference arising between the actual cost of the investment and the investor's share in the net assets at the book value of the investment object. Since the net effect of equity method accounting must be equal to the effect of full consolidation accounting, it is necessary to analyze the following components of the difference and account for them accordingly:

1. The difference between the book and fair values of the net assets of the investment object at the date of investment.

2. The remaining difference between the investor's share in the fair value of the net assets and the actual cost of the investment, which is usually considered as goodwill.

The difference between the book and fair values of the net assets of the investment object must be attributed to specific types of assets, and these arising differences must then be amortized and charged to the profit from the investment object respectively, for example, over the useful economic life of fixed assets whose fair value exceeded their book value. The difference between the fair value and the actual cost of the investment will be considered as goodwill, and in accordance with IFRS requirements, it is included in the book value of the investment in the dependent economic entity. Goodwill is not amortized but assessed for impairment.

Example of a complex case not considering deferred taxes

Assume that Bank "B" purchased 40% of the shares of Joint Stock Company "A" on January 2, 20x1, and the payment amount was 140,000 som. The assets and liabilities of Joint Stock Company "A" on this date had the following book and fair values:

		Book value	Fair value
	Cash	10,000	10,000
	Accounts receivable (net)	40,000	40,000
	Inventory (FIFO cost)	80,000	90,000
	Land	50,000	40,000
	Buildings, structures and equipment (net of accumulated depreciation)	140,000	220,000
	Total assets	320,000	400,000
	Liabilities	(70,000)	(70,000)
	Net assets (equity)	250,000	330,000

The first step is to calculate the difference as follows:

	Actual cost of 40% of ordinary shares of Joint Stock Company "A" for Bank "B"	140,000
	Book value of 40% of net assets of Joint Stock Company "A" (250,000 som x 40%)	(100,000)
	Total difference	40,000

Next, 40,000 som is attributed to those specific assets and liabilities whose fair value differs from their book value. In this example, the difference is attributed to inventory, land, buildings, structures, and equipment as follows:

	Item	Book value	Fair value	Difference debited (credited)	40% of difference debited (credited)
	Inventory	80,000	90,000	10,000	4,000
	Land	50,000	40,000	(10,000)	(4,000)
	Buildings, structures, equipment	140,000	220,000	80,000	32,000
	Allocated difference				32,000

The difference between the allocated difference of 32,000 som and the total difference of 40,000 som is goodwill in the amount of 8,000 som. As shown in the following calculation, goodwill represents the excess of the actual cost of the investment over the fair value of the acquired net assets.

	Cost of acquisition of 40% of ordinary shares of Joint Stock Company "A" by Bank "B"	140,000
	40% of fair value of net assets of Joint Stock Company "A" (330,000 som x 40%)	(132,000)
	Excess of actual cost over fair value (goodwill)	8,000

It should be noted here that the allocation of the difference is not formally reflected by either Bank "B" or Joint Stock Company "A". Moreover, Bank "B" does not write off the difference from the investment account and does not distribute it to the corresponding assets, since the use of the equity method (one-line consolidation) does not imply the reflection of individual assets and liabilities. Bank "B" retains the difference of 40,000 som on the investment account as part of the balance of 140,000 som on January 2, 20x1. Accordingly, information related to the allocation of the difference is recorded by the investor, but it is kept outside the official accounting system consisting of journal entries and account balances.

After the difference has been allocated, an amortization schedule for these differences is developed. To develop the schedule, assume that the remaining useful life of the buildings, structures, and equipment of Joint Stock Company "A" is 10 years, and Joint Stock Company "A" depreciates its fixed assets using the straight-line method. Bank "B" will prepare the following amortization schedule:

Item	Difference debited (credited)	Useful life	Amortization
2001	2002	2003
Inventory (FIFO)	4,000 som	Sold in 20x1	4,000	-	-
Land	(4,000)	Indefinite	-	-	-
Buildings, structures and equipment (net of depreciation)	32,000	10 years	3,200	3,200	3,200
Goodwill	8,000	Indefinite	-	-	-
Total	40,000		7,200	3,200	3,200

The entire difference attributed to inventory is amortized in 20x1 because Joint Stock Company "A" uses the FIFO method for accounting for inventory. (The FIFO method means that units of inventory that were acquired first are sold first, and therefore, the units remaining in inventory at the end of the period are those that were acquired or produced last). The difference attributed to land is not amortized, as land is a non-depreciable asset.

The amortization of the difference is officially reflected in the accounting system of Bank "B". The amortization entry adjusts Bank "B"'s share in the profit of Joint Stock Company "A", which Bank "B" reflects based on the income statement of Joint Stock Company "A". The profit of "A" must be adjusted because it is based on the book values of the reporting items of "A", not on the cost at which "B" acquired Joint Stock Company "A". Assume that the net profit of Joint Stock Company "A" in 20x1 amounted to 30,000 som and cash dividends paid amounted to 10,000 som. Then, Bank "B" will make the following accounting entries:

1.	Dr 15801 — "Investments in dependent economic entities — Financial institutions"		12,000;
		Cr 45701 — "Profit from investments in dependent economic entities — Financial institutions" (30,000 som x 40%)		12,000;
2.	Dr 45701 — "Profit from investments in dependent economic entities — Financial institutions"		7,200;
		Cr 15801 — "Investments in dependent economic entities — Financial institutions" (amortization of difference)		7,200;
3.	Dr — Bank's correspondent account or client account		4,000;
		Cr 15801 — "Investments in dependent economic entities — Financial institutions" (10,000 som x 40%)		4,000.

The balance on Bank "B"'s investment account at the end of 20x1 is 140,800 som (140,000 som + 12,000 som – (7,200 som + 4,000 som)), and the equity of Joint Stock Company "A" is 270,000 som. The balance on the investment account of 140,000 som is not equal to 40% of 270,000 som. However, this difference can be easily explained as follows:

	Balance on investment account as of December 31, 20x1 40% of net assets of "A" as of December 31, 20x1			140,800 108,000
		Difference as of December 31, 20x1		32,800
	Difference on January 2, 20x1 Difference amortized during 20x1		40,000 (7,200)
	Unamortized part of the difference as of December 31, 20x1			32,800

Over the years, the balance on the investment account will approach 40% of the book value of the net assets of "A". After 10 years, the remaining difference between these two amounts will relate to the initial difference attributed to land (4,000 som, credit balance) and goodwill (8,000 som, debit balance). This net difference of 4,000 som will remain until "A" sells this property.

To illustrate how the sale of land will affect the equity method procedures, assume that "A" sold the land in 2011 for 80,000 som. Since the actual cost of the land for "A" was 50,000 som, it will reflect a profit of 30,000 som, of which 12,000 som (30,000 som x 40%) will be reflected by Bank "B" when recognizing its 40% share in the net profit of "A", without considering income tax (profit). However, from the bank's perspective, the profit from the sale of land should have been 40,000 som (80,000 som – 40,000 som), because the cost of the land from the bank's perspective was equal to 40,000 som on January 2, 20x1. Therefore, in addition to reflecting the share of 12,000 som in profit, the bank must reflect an additional 4,000 som in profit ((40,000 som – 30,000 som) x 40%), debiting the investment account, and crediting the profit from investment in dependent economic entities account. This debit to the investment account for 4,000 som will write off the difference of 4,000 som attributed to land on January 2, 20x1, since initially the difference was credit (the fair market value of the land was 10,000 som less than its book value).

Presentation in reports of non-comparable elements of the income statement of the investment object

The extended application of the equity method requires that the main lines of the income statement of the investment object retain their character when reflected by the investor proportionally to its share. If, when reflecting in its reports, the investor includes its share in these items in its share in the profits of the investment object due to error corrections, it must be stated that these items are not ordinary, periodically recurring items of profits and losses.

Thus, it is necessary to include the investor's share in such items in similar items of the investor's financial statements. However, this does not apply to the separate presentation of any items of operating income and expenses (gross revenue, salaries, depreciation, etc.).

Example of accounting for items presented separately

Assume that a prior period adjustment reflected in the statement of retained earnings of the investment object is considered a significant item from the investor's perspective.

	Statement of retained earnings of the investment object:
	Retained earnings as of January 1, 20x1, as originally reflected			250,000
	Add prior period adjustment — correction of error made in 20x0 (net of 10,000 som tax)			20,000
	Retained earnings as of January 1, 20x1, after restatement			270,000
	If the bank owns 30% of the ordinary shares of this investment object, it must make
the following journal entries in 20x1:
	Dr 15801 — "Investments in dependent economic entities — Financial institutions"		6,000;
		Cr 45701 — "Profit from investments in dependent economic entities — Financial institutions" (prior period adjustment of the investment object (20,000 som x 30%))		6,000.

The share in the prior period adjustment of the investment object must be presented in the statement of retained earnings of the bank.

Intra-group transactions between the investor and the investment object

When carrying out transactions between the bank (investor) and the dependent economic entity, the bank must make certain adjustments when reflecting its share in the profits of the investment object. According to the realization concept, profits can be recognized by an entity only when they are realized by selling to external (unrelated) parties in transactions (purchases and sales) between the investor and the investment object, conducted on general terms. Such problems may arise in the purchase and sale of fixed assets between these parties. In all cases where the sale is made at book value (i.e., without recognizing profit or loss by either party), no adjustment is necessary.

Exceptions

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When preparing consolidated financial statements, all intra-group (between the head bank and subsidiary business entities) transactions are excluded. However, when accounting for investments in dependent business entities, only the investor's share of unrealized profits from intra-group (between the investor and the investment object) transactions is excluded. This occurs because the equity method does not combine all income statement accounts (such as revenue and cost of goods sold), and therefore does not result in financial statements containing redundant information. Conversely, consolidated reports would include excessive information if gross amounts of all intra-group transactions were not excluded.

Thus, it is required to exclude the investor's share of unrealized profits from transactions between the investor and the investment object.

Example of accounting for intra-group transactions

Continuing the previous example, assume that Joint Stock Company "A" sold goods to Bank "B" in 20x2 for 2,000 sums more than their actual cost to Joint Stock Company "A". Thirty percent of these goods remains unsold by Bank "B" at the end of 20x2. The net profit of Joint Stock Company "A" for 20x2, including gross profit from the sale of goods sold to Bank "B", amounted to 20,000 sums; the income (profit) tax rate is 18%. Bank "B" must make the following journal entries for 20x2 (excluding deferred taxes):

1.	Dr 15801 — "Investments in dependent business entities — Financial institutions"		8,000;
		Cr 45701 — "Profit from investments in dependent business entities — Financial institutions" (20,000 sums x 40%)		8,000.
2.	Dr 45701 — "Profit from investments in dependent business entities — Financial institutions" (amortization of difference)		3,200;
		Cr 15801 — "Investments in dependent business entities — Financial institutions"		3,200.
3.	Dr 45701 — "Profit from investments in dependent business entities — Financial institutions"		197;
		Cr 15801 — "Investments in dependent business entities — Financial institutions" (2,000 sums x 30% x 82% x 40%)		197.

The amount of the last entry requires further explanation. Since 30% of the goods remain unsold, only 600 sums of intra-group profit are unrealized at year-end. This profit, net of income (profit) tax, equals 492 sums. Bank "B"'s share of this profit (197 sums) is included in the amount of the first entry (8,000 sums). Accordingly, the third entry is needed to adjust the investor's share of the reported net profit of the investment object.

Eliminating entries for profits arising from intra-group transactions related to fixed assets are similar to those presented above. However, these intra-group profits are realized only as the acquired asset is amortized by the acquiring party. In other words, if the investor purchases fixed assets from the investment object or sells them to the investment object at a price higher than the book value, the profit will be realized gradually, in parts, over the remaining useful life of the asset. Accordingly, in the year of sale, the proportional share (based on the investor's percentage interest in the investment object, regardless of whether the sale is "top-down" or "bottom-up") of the unrealized portion of intra-group profit must be excluded. In each subsequent year during the useful life of the asset, the proportional share of profit realized during the period will be added to the profit from the investment object.

Example of excluding intra-group profit on fixed assets

Assume that Bank "V", owning 25% of Joint Stock Company "G", sold this company a fixed asset with a remaining useful life of 5 years, with a profit of 100,000 sums. The bank's income (profit) tax rate is 18%. The sale was made at the end of 20x0. Joint Stock Company "G" will use the straight-line method to amortize the asset over the period from 20x1 to 20x5.

The bank will make the following entries related to the above transaction:

	20x0 Year:
		To defer the unrealized portion of profit
1.	Dr 45909 — "Profit from sale or disposal of fixed assets"		25,000;
		Cr 22896 — "Other deferred income"		25,000.
		Tax effect of profit deferral
2.	Dr 19931 — "Deferred taxes"		4,500;
		Cr 56902 — "Income tax assessment"		4,500.
	From 20x1 to 20x5 (each year):
		To amortize deferred profit
1.	Dr 22896 — "Other deferred income"		5,000;
		Cr 45909 — "Profit from sale or disposal of fixed assets"		5,000.
		Tax effect of profit realization
2.	Dr 56902 — "Income tax assessment"		900;
		Cr 19931 — "Deferred taxes"		900.

In the above example, the current tax paid by Bank "V" (18% x 25,000 sums taxable profit from the transaction) is reflected as a deferred tax asset in 20x0, as taxes on accounting profit recognized from 20x1 to 20x5 will not be payable in those years. Deferred tax assets must be recognized to reflect the tax effect of all deductible temporary differences arising in the future. If the bank cannot demonstrate that future taxable amounts arising from existing temporary differences exist, an equivalent valuation allowance may be created in the bank's balance sheet at the end of 20x0 for the deferred tax asset, due to doubt about whether the asset will be realized. Therefore, the deferred tax asset cannot be recognized net of the valuation allowance for financial reporting purposes until other temporary differences, not included in the example, provide future taxable amounts to offset the net deductible future effect of deferred profit.

Note: The deferred tax effect of the profit item for financial accounting purposes versus tax purposes is the same as the deduction for tax purposes versus financial accounting.

Accounting for partial sale or additional purchase of equity investments

This section addresses accounting issues arising when an investor sells part or all of its share or acquires an additional share in the investment object. The sequence of these actions may lead to the cessation of the equity method, or the resumption of its use.

Example of accounting for the cessation of the equity method

Assume that Bank "D" owns 10,000 ordinary shares (30%) of Joint Stock Company "E", for which it paid 600,000 sums a year ago, i.e., at the beginning of 20x0. In January 20x1, the bank sells 5,000 shares of JSC "E" for 375,000 sums. Assume that no difference arose between actual cost and book value of net assets of the investment object at acquisition. To calculate the profit (loss) from the sale of 5,000 shares, the investment account must first be adjusted to reflect the current situation at the date of sale. Assuming that the net profit of the investment object for 20x0 amounted to 100,000 sums, and that Bank "D"'s income tax rate is 18% (and that 80% of received dividends is deductible for tax purposes), Bank "D" must make the following entries:

1.	Dr 15805 — "Investments in dependent business entities — Others"		30,000;
		Cr 45705 — "Profit from investments in dependent business entities — Others" (100,000 sums x 30%)		30,000.
2.	Dr 56902 — "Income tax assessment"		1,080;
		Cr 22508 — "Deferred taxes payable" (30,000 sums x 20% x 18%)		1,080.
	Profit from sale can be calculated as follows:
	Sale proceeds for 5,000 shares Book value of 5,000 shares (630,000 sums x 50%) Profit from sale of 5,000 ordinary shares of JSC "E"			375,000 315,000 60,000

Two entries must be made to reflect the sale:

1) to reflect proceeds, reduction of investment, and profit (or loss);

2) to reflect the tax effect associated with this sale.

For illustration, assume that the investor, in this example — Bank "D", has deferred taxes at the dividend tax rate of 3.6% (considering the assumed 80% exclusion for dividend taxes). The income tax rate is 18%. For tax purposes, this profit is calculated as 375,000 sums – 300,000 sums = 75,000 sums, resulting in a tax effect of 13,500 sums. For financial reporting purposes, existing deferred taxes equal 3.6% x (315,000 sums – 300,000 sums), or 540 sums. Accordingly, an additional tax expense of 12,960 sums arose upon sale due to the fact that, for financial reporting purposes, additional profit was realized (375,000 sums – 315,000 sums = 60,000 sums; tax at 18% = 10,800 sums) and due to the fact that tax previously accounted for at dividend tax rates was lower than the total tax rate (15,000 sums x (18% – 3.6%) = 2,160 sums additional tax payable). Based on the above calculations, the following entries are made:

1.	Dr — Bank's clearing account or customer account		375,000;
		Cr 15805 — "Investments in dependent business entities — Others"		315,000;
		Cr 45705 — "Profit from investments in dependent business entities — Others"		60,000.
2.	Dr 22508 — "Deferred taxes payable" Dr 56902 — "Income tax assessment"		540; 12,960;
		Cr 22502 — "Accrued income (profit) tax payable"		13,500.

Cessation of the equity method

In the previous example, the sale of the investment object's shares reduced the bank's share to 15%. In such a situation, the bank may need to cease using the equity method. The balance on the investment account at the date the equity method is ceased (in this example, 315,000 sums) remains as an asset but is transferred to other securities accounts, such as investments in securities available for sale:

	Dr 10821 — "Equity securities of enterprises"		315,000;
		Cr 15805 — "Investments in dependent business entities — Others"		315,000.

This change in accounting policy does not require calculating cumulative influence or retrospective application of the new accounting policy in the bank's financial statements. In periods subsequent to this policy change, the bank reflects cash dividends received from the investment as dividend income. Dividends received exceeding the bank's share of the investment object's profits after disposal (i.e., the bank's share of any dividends declared from the investment object's profits prior to its disposal) must be credited to the investment account instead of the income account, as they represent a return of capital.

Resumption of the equity method

If the bank has an investment in ordinary shares of a joint stock company, and this investment is below the level that would give the bank the ability to exercise significant influence, and then this investment increases to the level that gives the ability to exercise significant influence and use the equity method, the difference between the book value of the investment and the fair value of net assets must be calculated at that moment.

Example of accounting for the return to the equity method

Continuing the example, assume that Joint Stock Company "E" reported its profits for 20x1 and 20x2 as 150,000 sums and 350,000 sums, respectively, and paid dividends of 100,000 sums in March 20x2. During 20x1 and 20x2, Bank "D" accounted for its investment in Joint Stock Company "E" as securities available for sale, using the fair value method and reflecting profits (losses) from changes in fair value in equity. On December 31, 20x1, the fair value of the bank's share in JSC "E" shares was assessed at 335,000 sums, and on December 31, 20x2, the fair value was 365,000 sums.

In January 20x3, Bank "D" repurchased 10,000 shares of JSC "E" for 700,000 sums, increasing its share to 45%, and therefore it became necessary to resume the equity method. The fair value of identifiable assets of JSC "E" on this date is 1,000,000 sums. The related entries are as follows:

	20x3 Year:
		1. To reflect the increased value of the investment
	Dr 10895 — "Change in fair value of investments in securities available for sale"		20,000;
		Cr 30907 — "Unrealized profits or losses from changes in fair value of securities available for sale"		20,000.
		2. To reflect deferred taxes on the increase in value (20,000 sums x 0.18) in 20x1
	Dr 30907 — "Unrealized profits or losses from changes in fair value of securities available for sale"		3,600;
		Cr 22508 — "Deferred taxes payable"		3,600.
	20x2 Year:
		3. To reflect dividends received in 20x2
	Dr — Bank's clearing account or customer account		15,000;
		Cr 45809 — "Dividend income from equity investments"		15,000.
		4. To reflect the increase in the value of the investment
	Dr 10895 — "Change in fair value of investments in securities available for sale"		30,000;
		Cr 30907 — "Unrealized profits or losses from changes in fair value of securities available for sale"		30,000.
		5. To reflect taxes on dividends at the current actual tax rate (15,000 sums x 0.036) and deferred taxes on the increase in the value of the investment (30,000 sums x 0.18)
	Dr 56902 — "Income tax assessment"		540;
	Dr 30907 — "Unrealized profits or losses from changes in fair value of securities available for sale"		5,400;
	Cr 22502 — "Accrued income (profit) tax payable"		540;
	Cr 22508 — "Deferred taxes payable"		5,400.
	20x3 Year:
		6. To reclassify the investment from the category "Securities available for sale" to the category "Investments in dependent business entities"
	Dr 15805 — "Investments in dependent business entities — Others"		365,000;
	Cr 10821 — "Equity securities of enterprises"		315,000;
	Cr 10895 — "Change in fair value of investments in securities available for sale"		50,000.
		7. To reflect the additional investment in Joint Stock Company "E"
	Dr 15805 — "Investments in dependent business entities — Others"		700,000;
		Cr — Bank's clearing account or customer account		700,000.
8.	Dr 30907 — "Unrealized profits or losses from changes in fair value of securities available for sale"		41,000;
		Cr 31203 — "Retained earnings"		41,000.

The last entry is explained further as follows. The return to the equity method must result in the recalculation of the investment account, and the retained earnings and unrealized profits or losses in equity accounts must be adjusted to the balance amount that would have accumulated if the equity method had not been ceased earlier. Accordingly, the new valuation of the investment at the time of resuming the equity method must be the adjusted book value, existing immediately before resumption. In this example, the book value was:

Balance as of January 20x1 Adjustment to fair value 12/20x1 Adjustment to fair value 12/20x2 Balance as of 12/20x2 Additional investment, 01/20x3			315,000 20,000 30,000 365,000 700,000
	Book value, 01/20x3		1,065,000

The difference between the value of 1,065,000 sums and Bank "D"'s share in the net assets of "E", equal to 65,000 sums, will be treated as goodwill, but will be included in the book value of the investment. Goodwill is not amortized but is subject to impairment testing.

It would be incorrect to continue accounting for the amount of 41,000 sums reflected in the unrealized profits or losses in equity account, as the investment will no longer be accounted for as securities available for sale. Accordingly, it must be transferred to the retained earnings account, as it was actually realized upon resuming the equity method. Note that the balance of 41,000 sums is the net amount of securities revaluation of 50,000 sums, recognized cumulatively in 20x1 and 20x2, and the assessment of income tax expense of 9,000 sums, at the total income tax rate (in this example, assumed to be 18%). If it is expected that the actual tax rate will differ from the previous one due to significant influence on the investment object's decisions regarding dividend payments, an adjustment must also be made regarding the assessment of deferred tax expenses.

To illustrate the last statement, assume that Bank "D" now decides to realize all its profit from JSC "E" by receiving dividends taxed at the actual rate of 3.6%. The entry adjusting the deferred tax liability will be as follows:

	To reflect the adjustment of deferred taxes
Dr 22508 — "Deferred taxes payable"		7,200;
		Cr 56902 — "Income tax assessment"		7,200.

Note that the deferred tax adjustment is charged to current period tax expenses (i.e., 20x3).

Accounting by the investor for the investment object's capital transactions

Because the final result of applying the equity method must coincide with the results of full consolidation, transactions leading to changes in the investment object's capital accounts that affect the investor's share in the investment object's capital must be accounted for similarly to the accounting for subsidiary business entities. These transactions mainly include situations where the investment object repurchases its own shares from, or sells unissued or repurchased own shares to, external shareholders. If the investor participates in these transactions proportionally to its share, its share does not change and there is no need to account for them separately. The results will be similar when holders of options in circulation or convertible securities acquire ordinary shares of the investment object.

When the investment object conducts one of the above capital-related transactions, the investor's percentage share changes. This results in a profit or loss, depending on whether the price paid (for repurchased own shares) or received (for issued shares) is higher or lower than the book value of the investor's share in the investment object per share. However, since no profit or loss can be recognized for capital-related transactions, these purchases or sales will affect additional capital and/or retained earnings directly, and will not be reflected in the investor's income statement. This method corresponds to the approach that would be applied for accounting for capital transactions of a subsidiary business entity.

Example of accounting for an investment object's capital transaction

Assume that on January 2, 20x1, Bank "A" acquired 25% (2,000 shares) of outstanding shares of Bank "B" for 80,000 sums. The acquisition cost equals the book and fair value of Bank "A"'s share in the available net assets of "B" (i.e., there is no difference to account for). A week later, Bank "B" repurchases 1,000 own shares from other shareholders for 50,000 sums. Since the paid price (50 sums per share) exceeds the book value of Bank "A"'s share (per share) by 40 sums, Bank "A" actually suffers an economic loss from the transaction. Moreover, its percentage share in Bank "B"'s capital increases, as the number of shares held by third parties decreases.

Bank "A"'s new share in the net assets of Bank "B" is calculated as follows:

2,000 shares held by Bank "A" 7,000 total shares outstanding		x Net assets of Bank "B"
0.2857 x (320,000 sums – 50,000 sums) = 77,143 sums.

Thus, the share held by Bank "A" decreased by 2,857 sums (80,000 sums – 77,143 sums). Therefore, Bank "A" must make the following entry:

Dr 30603 — "Additional capital" (or retained earnings)		2,857;
		Cr 15801 — "Investment in dependent business entities — Financial entities"		2,857.
To reflect the adjustment for loss from share purchase

Bank "A" must charge the loss to additional capital if there is additional capital from previous transactions of a similar nature. Otherwise, retained earnings are debited. If the transaction resulted in a profit, the profit would be credited only to additional capital (but not to retained earnings) according to the principle that a transaction with the own shares of any business entity cannot generate profit.

Note that the amount of change in additional capital (or retained earnings) in the above transaction can be confirmed as follows:

Bank "A"'s share in net capital after this transaction (2/7) multiplied by the excess of the paid price (50 sums – 40 sums = 10 sums) and the number of repurchased shares, i.e.:

2/7 x 10 sums x 1,000 = 2,857 sums.

(Collection of Legislation of the Republic of Uzbekistan, 2004, No. 48-49, Art. 499)