Regulation on the Main Requirements for the Accounting Policy of Payment System Operators and Payment Organizations

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Date of creation: 2021-06-02

Appendix to the resolution of the Board of the National Bank of the Kyrgyz Republic of May 31, 2021

No. 2021-P-14/29-3-(PS)

REGULATION

"On the Main Requirements for the Accounting Policy of Payment System Operators/Payment Organizations"

Chapter 1. General Provisions

1. This Regulation establishes the main requirements imposed by the National Bank of the Kyrgyz Republic on the accounting policy of payment system operators/payment organizations (hereinafter – PSO/PO) operating on the basis of a license issued by the National Bank of the Kyrgyz Republic (hereinafter – National Bank) in accordance with the legislation of the Kyrgyz Republic.

2. The accounting policy of PSO/PO is a set of specific principles, bases, generally accepted conditions, rules and practical approaches accepted by PSO/PO when preparing and presenting financial statements to users.

3. The purpose of the accounting policy of PSO/PO is to create a unified system of accounting that ensures a full and fair presentation of financial statements and the underlying internal control system of PSO/PO.

4. The management of PSO/PO must define, approve and apply the accounting policy in order to ensure that the accounting data and financial statements of PSO/PO comply with the requirements of each applicable International Financial Reporting Standard (hereinafter – IFRS) for the activities of PSO/PO.

5. When forming the accounting policy, PSO/PO must be guided by:

• The Law of the Kyrgyz Republic "On Accounting";
• regulatory legal acts (hereinafter – RLA) of the Kyrgyz Republic regulating the activities of PSO/PO;
• IFRS;
• The Regulation "On Document Flow in Accounting of Business Entities, Non-Profit Organizations (excluding budgetary institutions)", approved by the Resolution of the Government of the Kyrgyz Republic of October 7, 2010 No. 231.

Chapter 2. Format of the Accounting Policy of PSO/PO

6. The format of the accounting policy of PSO/PO is chosen by PSO/PO 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 recommended structure of the accounting policy of PSO/PO is presented in the Appendix to this Regulation.

7. The accounting policy of PSO/PO is formed in one of the following ways:

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

Chapter 3. Main Requirements for the Content of the Accounting Policy

8. The accounting policy must ensure the preparation of financial statements taking into account the conceptual framework for the presentation of financial statements, as well as based on the following main principles of accounting: continuity, understandability, relevance, materiality, reliability, completeness, neutrality, substance over form, prudence, comparability, true and fair view.

9. When forming the accounting policy, PSO/PO must adhere to IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors", which defines two main approaches to the formation of the accounting policy:

1. in the event that any IFRS applies to a transaction, other event or condition, the accounting policy of PSO/PO or its provisions applied to this accounting object must be determined by applying this IFRS;
2. in the event that IFRS is not applicable to any transactions, other events or conditions, the management of PSO/PO must use its own judgment in developing and applying the accounting policy to form information that must be relevant and reliable. In this case, the used own judgment must be highlighted or described.

10. The accounting policy must include a detailed description of the practice and organization of accounting in PSO/PO in accordance with IFRS: a) the chart of accounts approved in PSO/PO and the procedure for preparing financial statements; b) criteria for recognition, classification, derecognition or closure of each element of financial statements: assets, liabilities, equity, income and expenses of PSO/PO; c) estimates of elements of financial reporting applied in PSO/PO and the concept of capital maintenance; d) types of accounting applied in PSO/PO, their purpose and significance (balance sheet, off-balance sheet and out-of-system); e) conditions allowing changes in the accounting policy of PSO/PO, accounting estimates; procedure for conducting inventory of assets and liabilities; rules of document flow in accounting; f) other bases and rules of accounting not conflicting with IFRS accepted in PSO/PO.

11. The accounting policy must define the responsibility of the head of the executive body of PSO/PO and the chief accountant (an official whose functional duties are equivalent to those of the chief accountant) regarding the organization of accounting, compliance with the legislation of the Kyrgyz Republic in the implementation of PSO/PO activities, maintenance of accounting records in PSO/PO, preparation and submission of financial statements of PSO/PO. The accounting policy must define the responsibility of PSO/PO officials, including for making decisions in the event of a non-standard transaction (new for PSO/PO or of a one-off nature and not described in the accounting policy) regarding its reflection in accounting records (infrequent immaterial and infrequent material transactions).

12. PSO/PO must determine the following in their accounting policy:

• materiality of transactions/events/conditions in PSO/PO affecting decision-making;
• the level of materiality of errors for each indicator of financial statements or omitted information in financial statements, including for conducted transactions.

13. For each type of assets and liabilities of PSO/PO, the principles, rules and conditions for accounting for assets and liabilities upon initial recognition, subsequent accounting (revaluation, reclassification and amortization of assets, subsequent costs, recognition of impairment, etc.) and their accounting upon derecognition must be described.

14. In cases where IFRS allows main and permissible alternative methods of accounting for assets and liabilities, PSO/PO must clearly indicate the selected accounting method for each type of assets and liabilities in the accounting policy. In this case, PSO/PO must strictly adhere to IFRS requirements on the applicability of different accounting methods and estimates (for example, IFRS requires the application of a single accounting method and valuation to the entire category or group of assets, or allows applying different accounting methods and valuations to each separate asset).

15. The accounting policy must define the method of amortization of assets.

16. Within the framework of the accounting policy, detailed rules for the organization of accounting for all transactions and their reflection in accounting accounts must be developed, as well as corresponding rules for the organization of internal control. At the same time, the accounting policy of PSO/PO must include rules only for those transactions that are currently occurring or planned in the near future.

17. The accounting policy of PSOs must necessarily reflect the rules for accounting for transactions on:

1. income received for processing and clearing services;
2. accounting for collateral deposited in the issuing bank for the issuance of electronic money (in the event that the PSO is an operator of an electronic money system);
3. other transactions characteristic of PSO activities.

18. The accounting policy of POS must necessarily reflect the rules for accounting for transactions on:

1. movement of funds received from service users in favor of goods/services suppliers, as well as their further transfer to the accounts of goods/services suppliers, settlement with goods/services suppliers, reconciliation with goods/services suppliers, agents;
2. provision of collateral for future payments in favor of goods/services suppliers (advances and prepayments, deposits, as well as for issued bank guarantees);
3. accepted advance payments from agents;
4. crediting and return of unexplained amounts for accepted payments in favor of goods/services suppliers;
5. commission income/expenses:

• subject to deduction/crediting to corresponding accounts and subsequently upon recognition of income for accepting and processing payments;
• payable to agents;
• payable to cashiers (in case of cooperation with cashier services);

6. other transactions characteristic of PO activities. At the same time, accounting for liabilities arising from the acceptance of payments from users in favor of goods/services suppliers must be kept separate from accounting for liabilities arising in the course of administrative and economic activities of the PO.

19. Each transaction must be reflected in the accounting records (automated accounting system) of PSO/PO in a timely and complete manner.

20. PSO/PO must approve the rules of document flow and the forms of accounting documents accepted for use, which must meet the established requirements of RLAs.

21. When developing the accounting policy, PSO/PO must take into account a number of factors that may affect the features in choosing approaches to reflecting transactions in the accounting book of PSO/PO:

• features of PSO/PO activities, according to their charter and business plan;
• scale of activities;
• the nature of the material and technical base ensuring the development of PSO/PO.

Chapter 4. Procedure for Development, Approval and Revision of the Accounting Policy

22. The accounting policy of PSO/PO is formed by the chief accountant (an official whose functional duties are equivalent to those of the chief accountant) based on this Regulation and is agreed upon by the head of PSO/PO.

23. The accounting policy of PSO/PO created in the form of a joint-stock company must be approved by the board of directors.

24. The accounting policy of PSO/PO created in the form of a limited liability company must be approved by the board of directors (if any) or by the general meeting of participants, or by the participant of PSO/PO (in the event that the limited liability company has a single participant).

25. PSO/PO 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 developed by the IFRS Committee. Changes to the accounting policy of PSO/PO are permitted only in cases provided for by IFRS, namely:

• if a new standard has been adopted or changes have been made to an existing one;
• voluntary change of accounting policy, provided that this will result in the financial statements containing reliable and more relevant information about the impact of transactions, other events or conditions on the financial position, financial results or cash flows of PSO/PO.

26. The head of the executive body and the chief accountant (an official whose functional duties are equivalent to those of the chief accountant), choosing methods and methods of accounting, when applying the accounting policy must ensure:

• provision of reliable financial position of PSO/PO as a result of conducted transactions and movement of cash flows of PSO/PO in accordance with IFRS requirements;
• provision of reliable, comparable and accessible information;
• provision of additional disclosure of information necessary for users, in particular significant transactions, events and conditions affecting the financial position and/or activities of PSO/PO.

Chapter 5. Disclosure of Information on the Accounting Policy

27. Requirements for disclosure of information on the accounting policy, as well as information on the application of prospective and retrospective changes in the accounting policy, changes in accounting estimates, as well as on the correction of errors of previous periods, must be presented and disclosed in accordance with IFRS requirements.

Appendix to the Regulation "On the Main Requirements for the Accounting Policy of Payment System Operators/Payment Organizations"

ACCOUNTING POLICY

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(full name of PSO/PO)

Section 1. General provisions of the accounting policy Purpose of the accounting policy of PSO/PO. Responsibility for the organization of accounting and compliance with legislation in the performance of economic transactions and maintenance of accounting records in PSO/PO. Scope of application of the accounting policy of PSO/PO (depending on the format of the accounting policy chosen by PSO/PO) and the right to make decisions regarding the reflection in accounting of significant and immaterial aspects. Responsibility regarding the organization of accounting, compliance with the legislation of the Kyrgyz Republic in the conduct of PSO/PO activities and maintenance of accounting records in PSO/PO. Purpose of the accounting policy of PSO/PO. Main tasks of the accounting policy of PSO/PO. Compliance of the accounting policy with International Financial Reporting Standards, according to the legislation of the Kyrgyz Republic. Organization of accounting: who carries out accounting in PSO/PO (indicate structural subdivision; chief accountant/accountant). Main principles of accounting applied in PSO/PO.

Section 2. Chart of accounts of accounting accepted in PSO/PO.

Section 3. Rules for preparing and presenting financial statements of PSO/PO.

Section 4. Accounting policy of PSO/PO regarding each transaction carried out by PSO/PO and element of financial reporting.

Section 5. Rules for conducting inventory of assets, liabilities. Rules of document flow.

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