Regulation on Requirements for Accounting Policy of Commercial Banks and Other Financial and Credit Organizations Licensed by the National Bank of the Kyrgyz Republic

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Date of creation: 2024-03-14

Approved

by the Resolution of the Board of the National Bank of the Kyrgyz Republic of October 23, 2004 No. 26/2

REGULATION

on requirements for the accounting policy of commercial banks and other financial and credit organizations licensed by the National Bank of the Kyrgyz Republic

(In the edition of the Resolutions of the Board of the National Bank of the Kyrgyz Republic of March 14, 2012 No. 11/2, November 16, 2012 No. 43/1, June 15, 2017 No. 2017-P-12/25-12, September 9, 2019 No. 2019-P-33/47-4, November 1, 2019 No. 2019-P-33/55-3, December 14, 2022 No. 2022-P-12/78-9, January 17, 2024 No. 2024-P-12/1-3)

This Regulation defines the main requirements imposed by the National Bank of the Kyrgyz Republic on the accounting policy of commercial banks, JSC "Financial Company of Credit Unions" (hereinafter - FKKC), housing savings credit companies, guarantee funds, microfinance organizations, and credit unions (hereinafter in the text - FCO) in accordance with the current legislation of the Kyrgyz Republic.

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of January 17, 2024 No. 2024-P-12/1-3)

1. Concept and purpose of accounting policy

1.1. The accounting policy of an FCO is a set of principles, bases, rules, conditions, procedures, and methods adopted by the FCO for the purpose of maintaining accounting records in accordance with current legislation.

1.2. The main goal of the Accounting Policy of an FCO is to create a unified system of accounting that ensures the faithful presentation of financial statements and underlies the internal control system of the FCO.

1.3. The management of the FCO, in accordance with the Law of the Kyrgyz Republic "On Accounting," defines and applies the accounting policy in such a way that the accounting data and financial statements of the FCO strictly comply with all requirements of each applicable International Financial Reporting Standard (hereinafter - IFRS) for banking activities.

2. Format of the FCO's accounting policy

2.1. The format of the FCO's accounting policy is chosen by the FCO independently. The main requirement for it is compliance with the methodological principles of IFRS and a complete coverage of issues related to the organization of accounting and the internal control system. The approximate structure of the Accounting Policy of an FCO is presented in the Appendix.

2.2. The accounting policy of an FCO may be formed in one of two ways:

• the general order and principles of accounting for each type of transaction are described in a separate policy;
• the order and principles of accounting for FCO transactions are described in one policy with each type of transaction reflected in a separate section.

3. Main requirements for the content of the Accounting Policy

3.1. The accounting policy of an FCO as a whole and with respect to each type of transaction carried out by the FCO must adhere to accounting principles that define:

• fundamental assumptions (accrual basis, going concern);
• qualitative characteristics of financial statements (understandability, relevance, materiality, reliability, faithful representation, substance over form, neutrality, prudence, completeness, and comparability);
• limitations on relevance and reliability of information (timeliness, balance between benefits and costs, balance between qualitative characteristics, faithful and objective representation).

3.2. The accounting policy must include a detailed description of the practice and organization of accounting in the FCO in accordance with the IFRS Concept:

a) recognition criteria for each element of financial statements: assets, liabilities, equity, income, and expenses of the FCO; b) application of estimates of financial statement elements and the concept of capital maintenance in the FCO; c) the Chart of Accounts and the Procedure for preparing financial statements adopted in the FCO((1) see note); d) types of accounting used in the FCO, their purpose and significance (on-balance sheet, off-balance sheet, and off-system); e) conditions allowing changes to the accounting policy of the FCO and accounting estimates; f) other bases and rules of accounting not contradicting IFRS, adopted in the FCO.

3.3. The accounting policy must define the responsibility of the Management of the FCO and the Chief Accountant regarding the organization of accounting, compliance with the legislation of the Kyrgyz Republic in carrying out banking operations and maintaining accounting records in the FCO.

The Accounting Policy must define the responsibility of FCO officials for making decisions in the event of a non-standard transaction (new for the FCO or one-off and not described in the Accounting Policy) regarding its reflection in accounting records (infrequent immaterial and infrequent material transactions).

3.4. For each type of assets and liabilities, the FCO must describe the principles, rules, and conditions for accounting for assets and liabilities upon initial recognition, subsequent accounting (revaluation, reclassification of assets, subsequent costs, recognition of impairment, etc.), and their accounting upon disposal.

3.5. In cases where IFRS allows both a primary and an acceptable alternative method for accounting for assets and liabilities, the FCO must clearly indicate the selected method for each type of assets and liabilities.

In this regard, the FCO must strictly adhere to IFRS requirements regarding the applicability of various accounting methods and estimates (for example, IFRS requires the application of a single accounting and valuation method to an entire category or group of assets, or allows the application of different accounting and valuation methods to each individual asset).

3.5-1. Within the framework of the accounting policy, detailed rules for the organization of accounting for payment and settlement operations and their reflection in accounting accounts must be developed, as well as corresponding rules for the organization of internal control. In this regard, each transaction must be reflected in the accounting records (automated accounting system) of the FCO in a timely manner.

The rules for the organization of accounting for payment and settlement operations must contain, among other things, the following main norms:

1. all transactions must have documented confirmation from the bank-counterparty regarding the debit/credit of funds to the account;
2. reflection of transactions in the accounting records of the FCO must be carried out in accordance with accounting rules and:

a) for payments in national currency - no later than the date of the settlement; b) for outgoing payments in foreign currency:

• for banks - on the day of debiting funds from the FCO's account, which must be confirmed by corresponding documents and subsequent receipt of a statement from the correspondent bank;
• for non-bank FCOs - no later than the day of receiving confirmation from the bank that the payment order has been accepted for execution;
  c) for incoming payments in foreign currency - no later than the day of receipt of confirmation of the crediting of funds.

(In the edition of the Resolutions of the Board of the National Bank of the Kyrgyz Republic of March 14, 2012 No. 11/2, November 16, 2012 No. 43/1)

3.6. When developing the Accounting Policy, the FCO must take into account a number of factors that may influence the choice of approaches to reflecting transactions in the accounting books of the FCO.

These factors include:

• organizational and legal form of the FCO;
• features of the FCO's activities according to its Charter and Business Plan;
• presence of branches;
• scale of activities;
• nature of the material and technical base ensuring the development of the FCO.

4. Procedure for development, approval, and revision of accounting policy

4.1. The accounting policy of banks, FKKC, housing savings credit companies, guarantee funds, and microfinance organizations must be approved by the Board of Directors of the FCO (Supervisory Body).

(In the edition of the Resolutions of the Board of the National Bank of the Kyrgyz Republic of November 16, 2012 No. 43/1, September 9, 2019 No. 2019-P-33/47-4, November 1, 2019 No. 2019-P-33/55-3)

4.2. The accounting policy of a credit union must be approved by the General Meeting or the Board of the credit union if these powers are delegated to them by the General Meeting of the credit union.

4.3. The FCO must constantly, but no less than once a year, monitor changes and additions to current IFRS, as well as the entry into force of new standards being developed by the IFRS Committee, and, if necessary, make changes to the accounting policy of the FCO.

Changes to the accounting policy of the FCO are permitted only in cases provided for by IFRS, namely:

• if this is required in accordance with the legislation of the state or standardization bodies;
• if this change will lead to a more faithful representation of accounting events and transactions in financial statements.

5. Methodological basis for forming the accounting policy of the FCO

5.1. When forming the accounting policy, the FCO must be guided by:

• the Law of the Kyrgyz Republic "On Accounting";
• legislative and normative legal acts of the Kyrgyz Republic regulating banking operations;
• International Financial Reporting Standards;
• this Regulation.

As additional methodological support, the FCO may use examples of accounting policies and other methodological materials developed by the National Bank of the Kyrgyz Republic.

Note:

(1) Here, the FCO should bear in mind that these issues are regulated by the National Bank of the Kyrgyz Republic in accordance with banking legislation.

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of December 14, 2022 No. 2022-P-12/78-9)

Appendix

Approximate structure of the Accounting Policy of a financial and credit organization

Approved

by the Resolution (Decision)

of the Board of Directors

No. _____ dated "___" ___________ 200X

ACCOUNTING POLICY

---

(name of the FCO)

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic of June 15, 2017 No. 2017-P-12/25-12)

Section 1. General provisions of the accounting policy.

Purpose of the Accounting Policy of the FCO.

Responsibility for the organization of accounting and compliance with legislation in the performance of economic operations and maintenance of accounting records in the FCO.

Scope of application of the Accounting Policy of the FCO (depending on the format chosen by the FCO) and the right to make decisions regarding the reflection in accounting of material and immaterial items.

Responsibility regarding the organization of accounting, compliance with the legislation of the Kyrgyz Republic in carrying out banking activities and maintaining accounting records in the FCO.

Goal of the Accounting Policy of the FCO.

Main tasks of the Accounting Policy of the FCO.

Compliance of the Accounting Policy with International Financial Reporting Standards in accordance with the legislation of the Kyrgyz Republic.

Organization of accounting: who carries out accounting in the bank (indicate the structural subdivision; chief accountant/accountant or indicate that accounting is outsourced to an accounting firm).

Main accounting principles applied in the FCO.

Section 2. Chart of Accounts adopted in the FCO.

Section 3. Rules for preparing and presenting financial statements of the FCO.

Section 4. Accounting policy of the FCO regarding each transaction carried out by the FCO.

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