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Approved by 

Resolution No. 39/5 of the National 

Bank of the Kyrgyz Republic Board  

as of September 30, 2009  

  

REGULATION  

On the Requirements to the Accounting policy of the Commercial Banks,  

Carrying out the Operations under the Principles of  

Islamic Banking and Finance  

 

(Addenda are approved by Resolution of the NBKR Board No. 11/2 as of March 14, 2012, No. 2017-П-12/25-12-(RLA) as of June 15, 2017) 

  

 

This Regulation determines the main requirements made by the National Bank of the Kyrgyz Republic to the accounting policy of the commercial banks carrying out the operations under the Principles of Islamic Banking and Finance including the banks having an “Islamic window” (hereinafter referred to as the banks).  

  

1. Notion and Purpose of the Banks Accounting Policy  

  

1.1. An accounting policy of the bank is a set of principles, frameworks, rules, conditions, procedures and methods adopted by the bank in order to maintain the accounting records in accordance with the current legislation of the Kyrgyz Republic.  

1.2. The main purpose of the banks accounting policy is to create a single system of the accounting records that ensures reliable presentation of the financial reporting and the underlying internal control system of the bank.  

1.3. The management of the bank according to the Law of the Kyrgyz Republic “On accounting records” shall define and apply the accounting policy in such a manner that the methodological basis for maintenance of the accounting records and preparation of the banks financial reporting carrying out the operations under the Principles of Islamic Banking and Finance meets the requirements of the accounting standards for Islamic financial institutions developed by the Accounting and Auditing Organization for Islamic Financial Institutions (hereinafter referred to as the AAOIFI).  

  

2. Format of the Banks Accounting Policy  

  

2.1. The format of the banks accounting policy shall be chosen by the bank. The main requirement to it is to meet the methodological principles of the AAOIFI and to cover fully the issues related to arrangement of the accounting records and the internal control system. The approximate structure of the banks accounting policy is presented in Annex 1 to this Regulation.  

The bank carrying out the operations in accordance with the Principles of Islamic Banking and Finance through the “Islamic window” in the prescribed manner shall adopt a separate accounting policy that envisages the relevant procedure for maintaining the accounting records.  

2.2. The bank can form the accounting policy using one of two methods:  

- the general procedure and the principles of accounting with regard to each type of the operations are described in a separate policy;  

- the procedure and the principles for accounting the operations of the bank are described in one policy reflecting each type of the operation in a separate section.  

2.3. Irrespective of the used method, the accounting policy of the bank shall contain the description of accounting records maintenance for each type of the operations carried out by the bank in accordance with the Principles of Islamic Banking and Finance:  

- The accounting principles of the Murabaha operations;  

- The accounting principles of the Mudaraba operations;  

- The accounting principles of the Musharaka operations;  

- The accounting principles of the Salam and Parallel Salam operations;  

- The accounting principles of the Istisna and Parallel Istisna operations;  

- The accounting principles of the Ijara and Ijara Muntahia Bitt-Tamleek operations;  

- The accounting principles of the Qard Hasan operations;  

- The accounting principles of the Wadiah Yad Amanah operations;  

- The accounting principles of the Wadiah Yad Dhamanah operations;  

- The accounting principles of the currency operations;  

- The accounting principles of the provision for profit equalization.  

  

3. Main Requirements to the Contents of  

the Banks Accounting Policy  

  

3.1. The accounting policy of the bank as a whole and with regard to each type of the operations carried out by the bank shall meet the following underlying assumptions:  

- separate entity;  

- continuity.  

3.2. The accounting policy of the bank shall reflect the requirements, based on which the following principles for presentation of the financial reporting will be observed:  

- qualitative characteristics clearness, topicality, compatibility, reliability, consistency, significance;  

- restrictions of information relevance and reliability timeliness, the balance between profits and costs, the balance between qualitative characteristics, reliable and objective presentation.  

3.3. The accounting policy of the bank shall include a detailed description of the practice and the arrangement of the accounting records in the bank in accordance with the Concept of the AAOIFI standards:  

a) criteria to recognize each element of the financial reporting: assets, liabilities, capital, income, expenses, funds of the holders of unrestricted and restricted investment accounts of the bank;  

b) valuations of the financial reportings elements applied in the bank;  

c) the Chart of accounts under the Principles of Islamic Banking and Finance and the Procedure for formation of the financial reporting under the Principles of Islamic Banking and Finance adopted in the bank;  

d) types of accounting applied in the bank, their purpose and meaning (balance sheet, off-balance sheet and off-system);  

e) terms allowing to alter the accounting policy of the bank, accounting valuations;  

f) disclosing the policy adopted by the bank that does not meet the financial reporting concepts, if any;  

g) the policy adopted by the bank to reflect and to determine doubtful debts and the policies for writing off the debts;  

h) the policies, the basis and the methods adopted by the bank in order to revaluate assets, debts and restricted investments to their equivalent monetary value, if applicable;  

i) using the historical cost as the basis to determine the share of the holders of the unrestricted investment accounts and their equivalent (or the restricted investment accounts or their equivalent), if revaluation of assets, debts and reinvestments to their equivalent monetary value is not mandatory;  

j) the accounting policies adopted by the bank to consolidate the financial statements of the subsidiary companies, if any;  

k) other basis and rules of the accounting records that do not contradict the AAOIFI standards and are adopted in the bank.  

3.4. The accounting policy of the bank shall define the responsibility of the banks management and the chief accountant for arrangement of the accounting records, compliance with the legislation of the Kyrgyz Republic in performing the banking activity and maintaining the accounting records in the bank.  

It is necessary to determine the responsibility of the officers in the bank for taking decisions in the accounting policy of the bank when a non-standard operation occurs (new for the bank or one-time and not described in the accounting policy of the bank) to reflect it in the accounting records (rare insignificant and rare significant operations).  

3.5. The principles, the rules and the terms of assets and liabilities accounting in their initial recognition, subsequent accounting (revaluation, reclassification of assets, subsequent costs, recognition of deterioration, etc.) and their accounting when they retire shall be described for each type of assets and liabilities of the bank.  

3.6. When the AAOIFI standards envisage, permit main and allowable alternative methods of assets and liabilities accounting, the bank shall clearly specify the accounting method selected by the bank with regard to each type of assets and liabilities.   

At that, the bank shall strictly adhere to the requirements of the AAOIFI standards regarding applicability of various accounting methods and the preference shall be given to the more conservative method.  

3.6-1. Within the frameworks of the accounting policy, the detailed rules for arrangement of the accounting records of payment and settlement operations and their reflection on bookkeeping accounts as well as the relevant rules for organization of the internal control shall be developed. At that, each operation shall be reflected in time in the accounting records (the automated accounting system) of the financial and credit institution (hereinafter referred to as FCI).  

The rules for arrangement of the accounting records of payment and settlement operations shall also contain the following basic standards: 

1) all operations shall have documented confirmation from a counterparty bank regarding writing off/crediting the funds on the account; 

2) the operations in the accounting records of the bank shall be reflected in accordance with the rules of the accounting records and:  

a) for payments in the national currency no later than the settlement date; 

b) for outgoing payments in the foreign currency at the day when the funds are written off the account with the FCI, which shall be supported by relevant documents and subsequent receipt of a statement on a correspondent account from a correspondent bank; 

c) for incoming payments in the foreign currency no later than the day when the confirmation of the funds crediting is received.  

(As amended by Resolution No. 2017-П-12/25-12-(RLA) of the National Bank of the Kyrgyz Republic Board as of June 15, 2017) 

3.7. When developing the Accounting policy of the bank, it is necessary to take into account some factors that can influence the specific aspects in selection of the approaches to reflection of the operations in the account book of the bank.  

These factors include:  

- the legal form of the bank;  

- the characteristics of the banks activity according to the Charter of the bank and the business plan;  

- presence of the branches;  

- the scales of the activity;  

- the nature of the physical and technical infrastructure ensuring development of the bank.  

  

4. Procedure for Development, Approval  

and Reconsideration of the Banks Accounting Policy  

  

4.1. The accounting policy of the bank shall be approved by the Board of directors of the bank and approved by the Sharia Council.  

4.2. The bank shall constantly, but at least once a year, follow amendments and addenda in the AAOIFI standards as well as entry-into-force of new standards developed by the AAOIFI and, if required, introduce the amendments into the accounting policy of the bank. At that, the following is not alteration of the accounting policy:  

a) adopting an updated version of the accounting policy;  

b) adopting a new accounting policy due to operations and events that occur for the first time or have occurred in the past but have not been used by the bank;  

c) changes in the classification of the financial statements of the current period compared to the classification of the financial statements of the previous period.   

  

5. Methodological Basis for Formation 

of the Banks Accounting Policy  

  

 5.1. When creating the accounting policy, the bank shall be governed by the following:  

- the Law of the Kyrgyz Republic “On accounting records”;  

- the legislative and regulatory legal acts of the Kyrgyz Republic regulating the banking operations;  

- the standards developed by the Accounting and Auditing Organization for Islamic Financial Institutions (the AAOIFI), if there are no definite standards, the bank can use other standards if they do not contradict the Sharia standards.  

- this Regulation.  

The bank can use accounting policies and other methodological materials developed by the National Bank of the Kyrgyz Republic for the banks carrying out the operations under the Principles of Islamic Banking and Finance as an additional methodological support.  

  

  

  

Annex 1  

to the Regulation on the requirements  

to the accounting policy of the commercial  

banks carrying out the operations  

under the Principles of Islamic  

Banking and Finance  

  

ACCOUNTING POLICY 

____________________  

(name of the bank)  

  

Section 1. General provisions of the banks accounting policy  

  

The purpose of the banks accounting policy 

  

The responsibility with regard to arrangement of the accounting records and compliance with the legislation of the Kyrgyz Republic in performing the banking activity, maintaining the accounting records and carrying out the economic operations of the bank.  

The area for application of the banks accounting policy (depending on the format of the accounting policy under the Principles of Islamic Banking and Finance selected by the bank) and the right to take the decisions with regard to reflection of significant and insignificant moments in accounting.  

  

The aim of the banks accounting policy 

  

Main objectives of the banks accounting policy  

  

Compliance of the banks accounting policy under the Principles of Islamic Banking and Finance with the AAOIFI standards according to the legislation of the Kyrgyz Republic.  

Arrangement of the accounting records, who maintains the accounting records in the bank (specify a structural subdivision; the chief accountant/an accountant or maintenance of the accounting records is provided by an accounting company).  

  

Main principles of the accounting records applied in the bank  

  

Section 2. The Chart of accounts adopted in the bank.  

Section 3. The rules for compilation and presentation of the banks financial reporting.  

Section 4. The accounting policy of the bank with regard to each carried out operation.