Regulation on Requirements for the Formation, Publication and Submission to the National Bank of the Kyrgyz Republic of Financial Reporting of Non-Bank Financial-Credit Organizations

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Creation date: 2023-06-21

REGULATION

on the requirements for the formation, publication and submission to the National Bank of the Kyrgyz Republic of financial reporting of non-bank financial-credit organizations

(In the edition of the Resolution of the Board of the National Bank of the Kyrgyz Republic dated 14.06.2023 No. 2023-P-12/38-2-(NF KU))

Chapter 1. General Provisions

1. This Regulation defines the components, content and main rules for the publication and submission of financial reporting by non-bank financial-credit organizations and other legal entities subject to the supervision of the National Bank.

2. The norms of this Regulation apply to microfinance companies (hereinafter - MFC), housing savings credit companies (hereinafter - HSCC), guarantee funds (hereinafter - GF), microcredit companies conducting external audit of their activities on an annual basis (hereinafter - MCC), microcredit agencies with the participation of state bodies, or having subsidiary (dependent) legal entities that carry out credit and financial activities (hereinafter - MCA), credit unions having a license to attract deposits from their participants (hereinafter - CU), specialized financial-credit organizations (hereinafter - SFCO) (hereinafter - NFCO).

Paragraph 40 of this Regulation applies to all microfinance organizations and credit unions.

3. NFCOs under temporary administration also prepare and submit financial reporting in accordance with this Regulation.

4. The norms of this Regulation do not apply to NFCOs undergoing liquidation and bankruptcy proceedings.

5. NFCOs carrying out activities in accordance with Islamic principles of banking and financing or having an "Islamic window" provide reporting on transactions carried out in accordance with Islamic principles of banking and financing in accordance with the Regulation "On Requirements for the Formation of Financial Reporting and Submission of Information by Non-Bank Financial-Credit Organizations Carrying out Activities in Accordance with Islamic Principles of Banking and Financing or Having an 'Islamic Window', approved by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated December 21, 2016 No. 49/9.

6. The financial reporting of NFCOs must objectively reflect the financial position, financial results of the activities of NFCOs and comply with International Financial Reporting Standards (hereinafter - IFRS) and the requirements of the legislation of the Kyrgyz Republic.

7. Financial reporting of NFCOs is a structured presentation of the financial position and financial results of activities carried out by NFCOs for the reporting period.

8. The purpose of financial reporting of NFCOs is:

• structured presentation of information on the financial position, financial results of activities, assets, liabilities, capital, income, expenses, profits and losses of NFCOs, useful for a wide range of users in making economic decisions;

• presentation of information on the results of resource management in NFCOs;

• presentation of information on the results of activities of a banking group including NFCOs and their investments in the capital of other legal entities, on transactions and deals with these legal entities;

• presentation of information on transactions and deals of participants of a banking group including NFCOs, risks of a banking group including NFCOs.

9. Users of financial reports are interested parties, including state bodies, owners of NFCOs (shareholders/participants), external auditors, investors, creditors, clients, the National Bank and others.

10. Financial reporting is prepared in accordance with the accounting policy of NFCOs.

11. If a participant of a banking group uses an accounting policy different from the accounting policy adopted for the preparation of consolidated financial reporting of a banking group with respect to similar transactions and events under similar conditions, then in the process of preparing consolidated financial reporting, its financial reporting is appropriately transformed.

12. The management of NFCOs must ensure the timely and accurate publication and submission of financial reporting of NFCOs to the National Bank within the established deadlines.

In case of violation by NFCOs of the procedure and deadlines for submitting financial reporting, submission of unreliable information, as well as publication of reports without compliance with the requirements established by legislation, measures of impact provided for by the legislation of the Kyrgyz Republic are applied to NFCOs and its management.

Chapter 2. General Requirements for Financial Reporting and Its Components

13. For the purposes of this Regulation, the financial reporting of NFCOs consists of the following components:

1. statement of financial position;

2. statement of comprehensive income;

3. statement of cash flows;

4. statement of changes in equity;

5. notes to financial reporting;

6. statement of financial position as at the beginning of the earliest comparative period.

14. When publishing financial reporting, each component of the reporting must be highlighted among other information. The following information must be reflected in financial reporting:

• name of the reporting NFCO and other identification details;

• whether the presented financial reporting is individual reporting of NFCOs or consolidated reporting;

• the reporting period covered by this set of financial reports or notes;

• presentation currency;

• unit of measurement used when presenting amounts in financial reporting.

15. NFCOs must prepare financial reporting using the accrual method, except for the preparation of the statement of cash flows.

16. For the purposes of annual financial reporting, the reporting period for NFCOs is the period from January 1 to December 31 of the calendar year inclusive.

For NFCOs newly created before October 1, the first reporting year is considered the period from the date of its state registration to December 31 inclusive.

For NFCOs created after October 1, the first reporting year is considered the period from the date of its state registration to December 31 of the following year inclusive.

17. In exceptional cases when the reporting period of NFCOs changes and financial reporting is submitted for a period longer or shorter than one year, NFCOs must disclose in addition to the period covered by financial reporting:

• the reason for using a longer or shorter period different from the reporting period;

• the fact that the amounts presented in financial reporting are not fully comparable.

If the reporting dates of the parent and subsidiary NFCOs do not match, the subsidiary NFCO prepares additional financial reporting for consolidation purposes.

18. Each significant class of similar items must be presented separately in financial reporting. NFCOs are obliged to separately disclose items that are material. The materiality of items for the purposes of forming financial reporting is determined independently by NFCOs in the accounting policy of NFCOs and disclosed in the notes to financial reporting.

19. The content and forms of financial reporting are applied consistently from one reporting period to another (principle of consistency).

20. Classification and disclosure of items in financial reporting must be preserved from period to period, except in cases where:

• due to a significant change in the nature of activities of NFCOs or accounting policy, another presentation of information or another classification is more appropriate taking into account the criteria for selection and application of accounting policy;

• IFRS change.

21. For each indicator of financial reporting, comparative indicators of the previous reporting year must be provided, unless otherwise permitted or required by IFRS. Comparative information must be included in the narrative and descriptive part when it is appropriate for understanding the financial reporting for the current period.

22. If the presentation or classification of items in financial reporting is changed, comparative amounts must be reclassified (unless this is impracticable) to ensure comparability with the current period.

In addition, disclosure must be made of the nature, amount of each item or class of items that were reclassified, as well as the reason for the reclassification. If reclassification of comparative amounts is impracticable, NFCOs must disclose the reason why the reclassification of the corresponding amounts was not carried out, and the nature of adjustments that would have been made in case of reclassification of amounts.

23. NFCOs at the head of one banking group prepare and submit financial reporting to the National Bank on a consolidated basis in accordance with the requirements of regulatory legal acts of the National Bank, taking into account the features provided for by banking legislation and IFRS, in part of providing a consolidated report.

Consolidated financial reporting of a banking group must include the financial reporting of all its subsidiaries, dependent and affiliated companies. At the same time, participants of a banking group are responsible for the accuracy and completeness of data provided by the parent company.

24. When preparing consolidated financial reporting of a banking group, the parent company consolidates the financial reporting of the parent and subsidiary organizations line by line by adding similar items of assets, liabilities, capital, income and expenses.

25. The following information must be disclosed in consolidated reporting:

1. the nature of relations between the parent and subsidiary companies, when the parent company does not own (directly or indirectly through subsidiary companies) more than 50% of voting shares (more than 50% of the share of participation);

2. the reasons why ownership of a share (direct or indirect through subsidiary companies) of more than 50% of voting shares (more than 50% of the share of participation) of the investment object does not lead to obtaining control over it;

3. if the reporting date or period of financial reporting of a subsidiary company used in the preparation of consolidated financial reporting differs from the reporting date or period of financial reporting of the parent company:

• the reporting date of financial reporting of the subsidiary company;

• the reason why another reporting date or period was used;

4. the content and scale of significant restrictions on the ability of subsidiary companies to transfer funds to the parent company in the form of cash dividends or repay loans or advances;

5. a table representing the impact of changes in the parent company's share in the subsidiary company, not leading to loss of control over it, on the amount of capital attributable to the owners of the parent company;

6. in case of loss of control over a subsidiary company, the parent company must disclose information on income and expenses (if any) recognized in accordance with IFRS, including:

a) the part of income or expense attributable to recognition at fair value on the date of loss of control over the investment retained in the former subsidiary company;

b) the item (items) in the consolidated statement of comprehensive income, in which income or expense is recognized (if it is not presented separately in the consolidated statement of comprehensive income).

26. In order for the consolidated financial reporting of the parent company to present financial information about the banking group as a single economic organization, it is necessary:

• to exclude the book value of the parent company's investments in each subsidiary company and the share of parent companies in the capital of each subsidiary company;

• to determine the non-controlling interest (or minority interest) in the profit or loss of consolidated subsidiary companies for the reporting period;

• to determine the non-controlling interest (or minority interest) in the net assets of consolidated subsidiary companies separately from the parent company's share in them.

Non-controlling interest (or minority interest) in net assets consists of the following:

• the amount of non-controlling interest (or minority interest) on the date of initial business combination;

• non-controlling interest (or minority interest) in changes in capital since the business combination.

27. When preparing consolidated financial reporting, balances on settlements, transactions, income and expenses within the banking group must be completely excluded.

28. The financial reporting of a subsidiary company cannot be excluded from consolidated financial reporting on the grounds that its activities differ from the activities of other participants of a banking group.

29. The financial reporting of a subsidiary company cannot be excluded from consolidated financial reporting on the grounds that the investors are an organization with venture capital, a mutual fund, a trust or a similar structure.

30. Relations between the parent company and subsidiary companies must necessarily be disclosed in financial reporting regardless of whether transactions were carried out between these related parties.

31. A parent company located in the Kyrgyz Republic is exempt from providing consolidated financial reporting in accordance with this Regulation if it prepares and provides consolidated financial reporting in accordance with IFRS and the requirements of the National Bank.

32. Investments in subsidiary (jointly controlled and associated) organizations are disclosed in consolidated financial reporting in accordance with IFRS.

33. Financial reporting must be signed by the head, chief accountant of NFCOs and sealed with the seal of NFCOs.

The correctness and accuracy of reflecting data on the financial state of a banking group in consolidated financial reporting is certified by the chairman of the supervisory body (if any), the executive body and the chief accountant of the parent company of the banking group.

34. In the forms of financial reporting, in items for which no transactions were carried out by the date of preparation of the report, the numerical value "zero" is indicated.

35. Financial reporting of NFCOs must be prepared in the national currency of the Kyrgyz Republic, unless otherwise agreed by international treaties ratified in the established order.

36. Correction of errors in financial reporting is confirmed by the signature of the persons specified in paragraph 33 of this Regulation and the seal of NFCOs with the indication of the date and reason for the correction.

Chapter 3. Procedure and deadlines for submission and publication of annual financial reporting

37. Publication in mass media (hereinafter - MM) of annual financial reporting of MFCs, GFs, HSCCs and SFCOs (statement of financial position at the end of the day of December 31 of the reporting year, statement of comprehensive income for the period, statement of cash flows and statement of changes in equity) together with an audit report is carried out in the state language and, if necessary, in the official language after the completion of the audit no later than April 30 of the year following the reporting year.

MCCs, MCAs and CUs must publish annual financial reporting together with an audit report (if any) or in mass media, or on the portal of an information agency, or on the official website, or on their information boards in all offices, branches, representative offices and structural subdivisions in the state language and, if necessary, in the official language after the completion of the audit (in case it is conducted in accordance with the requirements of the legislation of the Kyrgyz Republic) no later than April 30 of the year following the reporting year.

When publishing annual financial reporting in mass media or on an information board, MCCs, MCAs and CUs must place the statement of financial position at the end of the day of December 31 of the reporting year, the statement of comprehensive income for the period, the statement of cash flows and the statement of changes in equity together with an audit report (if any), and when publishing on the official website - annual financial reporting, including all components, notes to financial reporting and an audit report (if any).

When publishing in mass media, a note must necessarily be included that the annual financial reporting, notes and explanations to it in full can be studied in the head office of NFCOs, its branches, representative offices and structural subdivisions located outside the location of the head office.

MFCs, GFs, HSCCs and SFCOs must place annual financial reporting (statement of financial position at the end of the day of December 31 of the reporting year, statement of comprehensive income for the period, statement of cash flows and statement of changes in equity) on their information boards in all offices, branches, representative offices and structural subdivisions.

Financial reporting of MFCs, GFs, HSCCs and SFCOs, including all components, notes to financial reporting and an audit report, must be published on the official website (if available).

Additionally, MFCs, GFs, HSCCs and SFCOs provide annual financial reporting/consolidated financial reporting and an audit report in electronic form by June 1 of the year following the reporting year to the authorized body for publication via the Public Depository of Financial Reporting, in accordance with the requirements of the legislation of the Kyrgyz Republic.

38. Annual financial reporting of NFCOs may be published on the portal of an information agency.

A link to the portal of an information agency must be sent by e-mail to the authorized structural subdivision of the National Bank.

39. NFCOs choose mass media for publishing forms of financial reporting together with an audit report in order to ensure its wide dissemination and accessibility to users.

40. Annual financial reporting must be available in NFCOs in the state and official languages (head office, branches, representative offices, structural subdivisions located outside the location of the head office) for users in full and must be provided upon their first request for review.

41. Information about the publication of financial reporting must be provided to the National Bank within 5 (five) working days after publication with the attachment of 1 (one) copy (copy) of the publication or with the indication of a link to the official website of NFCOs (portal of an information agency), on which the annual financial reporting is published, with the attachment of a copy of the publication.

A link to the portal of an information agency must also be sent by e-mail.

42. Consolidated financial reporting of a banking group is published and provided to users in compliance with the requirements of this chapter of this Regulation.

Chapter 4. Quarterly financial reporting, procedure and deadlines for submission

43. In addition to publishing annual financial reporting, MFCs, GFs, HSCCs and SFCOs publish quarterly financial reporting in mass media and provide a message about publication to the authorized structural subdivision of the National Bank.

44. Quarterly financial reporting consists of:

• statement of financial position at the end of the reporting period and for a similar period of the financial year preceding the reporting period, and as at the end of the previous reporting financial year;

(Invalidated in accordance with the Resolution of the Board of the National Bank of the Kyrgyz Republic dated June 14, 2023 No. 2023-P-12/38-2-(NF KU))

• statement of comprehensive income for the current period, for a similar period of the previous year and for the previous financial year immediately preceding the reporting period;

• information on all securities issued by NFCOs during the reporting quarter;

• a list of all major shareholders and shareholders-holders of a controlling package of shares and their share in the number of shares of NFCOs according to the forms specified in Appendix 1 (NFCOs not formed in the form of a joint-stock company indicate a list of participants and their share of participation in NFCOs);

• information on significant facts affecting the financial and economic activities of NFCOs that occurred in the reporting quarter;

• other information provided for by regulatory legal acts adopted in accordance with the legislation of the Kyrgyz Republic.

45. Quarterly financial reporting of MFCs, GFs, HSCCs and SFCOs must be published on the official website (if available), in mass media and on their information boards in all offices, branches, representative offices and structural subdivisions in the state language and, if necessary, in the official language no later than 30 calendar days from the end of the quarter.

When publishing in mass media, a note must necessarily be included that the quarterly financial reporting in full can be studied in the head office, branches, representative offices and structural subdivisions located outside the location of the head office.

Mass media must meet the criteria specified in paragraph 39 of this Regulation.

MCCs, MCAs and CUs must publish quarterly financial reporting on the official website (if available) or on information boards in all offices, branches, representative offices and structural subdivisions no later than 30 calendar days from the end of the quarter.

46. Information about the publication of quarterly financial reporting must be provided to the National Bank within 5 (five) working days after publication with the attachment of 1 (one) copy (copy) of the publication and/or with the indication of a link to the official website (portal of an information agency), on which the quarterly financial reporting is published, or with the indication of a link to the portal of an information agency, on which the financial reporting was published, with the attachment of a copy of the publication.

A link to the official website/portal of an information agency must also be sent by e-mail to the authorized structural subdivision of the National Bank.

Users of financial reporting of NFCOs must have the opportunity to receive for study quarterly financial reporting of NFCOs in full, specified in paragraph 44 of this Regulation, in connection with which NFCOs (head office, branches, representative offices, structural subdivisions located outside the location of the head office) must freely provide reporting in the state and official languages in full upon the first request of users.

47. If during the quarter transactions occurred that significantly affected or may affect the financial state of NFCOs, then NFCOs must disclose these events.

48. Significant facts include an event (fact) that can affect the financial and economic activities of NFCOs and/or the price of securities issued by NFCOs, including:

• changes in the list of persons included in the management bodies of NFCOs (except for the general meeting of participants);

• changes in the size of participation of persons included in the elected management bodies of NFCOs in the capital of NFCOs, as well as its subsidiaries and dependent companies;

• changes in the list of owners of 5 or more percent of shares, as well as changes in the share of owners of 5 or more percent of shares (for NFCOs not formed in the form of a joint-stock company, changes in the list of participants and their share of participation in NFCOs);

• changes in the list of legal entities in which NFCOs owns 20 or more percent of the authorized capital;

• one-time transactions of NFCOs, the size of which or the cost of property of which constitutes 10 or more percent of the assets of NFCOs on the date of the transaction;

• fact (facts) that led to a one-time increase or decrease in the cost of assets of NFCOs by more than 10 percent;

• fact (facts) that led to a one-time increase in net profit or net losses of NFCOs by more than 10 percent;

• reorganization of NFCOs, its subsidiaries and dependent societies;

• accrued and (or) paid

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