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RESOLUTION OF BOARD OF NATIONAL BANK OF THE KYRGYZ REPUBLIC

of December 29, 2021 No. 2021-P-12/75-2-(NPA)

About approval of the Procedure on accounting of transaction of murabakh

According to articles 20 and 68 of the Law of the Kyrgyz Republic "About National Bank of the Kyrgyz Republic, banks and banking activity" the Board of National Bank of the Kyrgyz Republic decides:

1. Approve the Procedure on accounting of transaction of murabakh it (is applied).

2. This resolution becomes effective since January 1, 2023.

3. To the operating commercial banks working by the Islamic principles of financing including through "Islamic window":

- till March 1, 2022 to provide in National Bank of the Kyrgyz Republic the actions plan on automation of information bank system according to requirements of the Procedure for accounting of transaction of murabakh;

- till January 1, 2023 to bring the automated information bank system and accounting policies into compliance with requirements of the Procedure for accounting of transaction of murabakh.

4. To legal management:

- publish this resolution on the official website of National Bank of the Kyrgyz Republic;

- after official publication to send this resolution to the Ministry of Justice of the Kyrgyz Republic for entering into the State register of regulatory legal acts of the Kyrgyz Republic.

5. To management of methodology of supervision and licensing of banks to bring this resolution to the attention of commercial banks, OYuL "Union of Banks of Kyrgyzstan", the relevant structural divisions, regional managements and representative office of National Bank of the Kyrgyz Republic in Batken Province.

6. To impose control of execution of this resolution on the board member of the National Bank of the Kyrgyz Republic supervising management of methodology of supervision and licensing of banks.

Chairman of National Bank of the Kyrgyz Republic

K. Bokontayev

Appendix

to the Resolution of Board of National Bank of the Kyrgyz Republic of December 29, 2021 No. 2021-P-12/75-2-(NPA)

Procedure on accounting of transaction of murabakh

1. General provisions

1. Action of the Procedure for accounting of transaction of murabakh (further - the Procedure) extends to the banks performing transactions by the Islamic principles of banking and financing including through "Islamic window" (further - bank).

2. This Procedure determines rules of accounting by bank of transaction of murabakh and recognition of the income by transaction of murabakh according to the Standards on financial accounting, audit and management for Islamic financial institutions developed by the Organization of financial accounting and audit for Islamic financial institutions (Accounting and Auditing Organization for Islamic Financial Institutions) (further - standards of AAOIFI).

3. The bank bears responsibility for development and realization of internal procedures of accounting of transaction of murabakh, the internal control systems providing observance of this Procedure.

2. Terms and determinations

4. In this Procedure the following terms and determinations are applied:

arbun - the sum of earnest money paid by the client to bank which after the conclusion of the transaction of murabakh is enlisted in the account of repayment of part of debt of the client of bank.

If the transaction of murabakh did not take place, the bank has the right not to return arbun to the client;

murabakha - installment sale of the asset (goods) acquired by bank according to the request of the client or which is in property of bank by the time of the address of the client;

markup - the profit of bank under the agreement of murabakh established in the form of fixed amount or share of cost of asset (goods);

original cost - the receivables amount on murabakh based on the price approved between the client and bank, and consisting of asset cost and markup of bank according to the transaction;

you are rude dzhiddiya - the amount paid by the client to bank as a witness of gravity of intention of the client to sign the agreement of murabakh. If the transaction of murabakh did not take place, the bank has the right to compensate the size of the arisen losses for the account are rude the dzhiddiya which remained after compensation the amount returns to the client;

fair value - settlement sum of money for which exchange of property for date of assessment between ready to purchase the buyer would take place and ready to sell the seller in the commercial transaction after due marketing during which each of the parties was effective competently, prudently and without coercion.

3. Recognition and subsequent assessment of asset, held for sale under the agreement of murabakh

5. The assets acquired by bank for the subsequent sale under the agreement of murabakh are recognized at cost with increase in the balance sheet item "assets/stock for the subsequent transfer on murabakh".

6. Cost of asset shall join all purchase costs and other costs incurred by delivery and their reduction in the working condition, expenses on insurance and any other agency expenses and commission charges.

Any additional indirect expenses shall be reflected in the profit and loss statement of bank in the corresponding period.

7. The discount (discount) received by bank upon purchase of asset for further resale cannot be considered as the income of bank. The bank shall reduce the cost of goods for the client for discount amount, except as specified, when there is relevant decision of Sharia council.

If the bank does not reduce asset cost (goods) intended for transfer to the client under the agreement of murabakh by the amount, the discount (discount) received by bank on these goods, then such discount (discount) is reflected in the balance sheet of bank under the article "deferred revenues".

8. After initial recognition the asset (goods), held for sale on murabakh, is estimated as follows:

1) when the client of bank incurs the obligation on acquisition of asset at the cost equal or exceeding cost, the bank shall consider asset at cost, irrespective of fluctuations of fair value on them if those are available.

It is considered that the client of bank incurs the obligation on acquisition of asset and it is for it obligatory if the bank expecting execution of such obligation incurred the related costs;

2) when the client of bank does not incur obligations on acquisition of asset:

- real estate is considered on the smallest of net book value (cost minus depreciation and impairment loss) and fair value, according to the Provision "About Separate Transactions / Transactions of Commercial Banks and Microfinance Companies of the Kyrgyz Republic with Real Estate" approved by the resolution of Board of National Bank of the Kyrgyz Republic of August 29, 2012 No. 36/2;

- the personal estate is carried at fair value.

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