It is registered
Ministry of Justice of Ukraine
January 22, 2008
of December 27, 2007 No. 481
About approval of the Instruction for financial accounting of credit, supplementary (deposit) operations and forming and use of reserves under credit risks in banks of Ukraine
According to article 41 of the Law of Ukraine "About the National Bank of Ukraine", article 68 of the Law of Ukraine "About banks and banking activity" the Board of the National Bank of Ukraine DECIDES:
1. Approve the Instruction for financial accounting of credit, supplementary (deposit) operations and forming and use of reserves under credit risks in banks of Ukraine which is applied.
2. To accounting department (V. I. Rychakivskaya) after state registration in the Ministry of Justice of Ukraine to bring contents of this resolution to the attention of territorial administrations of the National Bank of Ukraine and banks of Ukraine for management and use in work.
3. Declare invalid the resolution of Board of the National Bank of Ukraine of 15.09.2004 No. 435 "About approval of the Instruction for financial accounting of credit, supplementary (deposit) operations and forming and use of reserves under credit risks in banks of Ukraine", registered in the Ministry of Justice of Ukraine 12.10.2004 for No. 1302/9901.
5. To impose control over the implementation of this resolution on territorial administrations of the National Bank of Ukraine.
V. S. Stelmakh
Approved by the Resolution of Board of the National Bank of Ukraine of December 27, 2007 No. 481
1.1. This Instruction determines procedure for reflection in financial accounting of standard credit operations (provision (obtaining) of the credits, implementation of factoring transactions, transactions of repo, taking into account of bills of exchange) and supplementary (deposit) transactions which are estimated on the amortized cost, guarantees, avals and forming and use of reserves under credit risks in banks of Ukraine.
1.2. This Instruction is developed according to the Civil code of Ukraine, the Laws of Ukraine "About the National Bank of Ukraine", "About banks and banking activity", other legal acts of Ukraine, regulatory legal acts of the National Bank of Ukraine and the main requirements of international accounting standards.
1.3. Terms which are used in this Instruction are used in such values:
the active market - the market in which transactions for assets or liabilities happen to sufficient frequency and in sufficient amount to provide information on pricing on continuous basis;
the amortized cost of financial asset or the financial liability is the cost of financial asset or the financial liability during primary recognition less the received or paid means (the main amount of debt, interest incomes (expenses) or other payments which are connected with initiation of financial asset or the financial liability) which is increased or reduced by the size of accumulated depreciation of difference between initially acknowledged amount and repayment sum of the financial instrument, for financial asset - is reduced by the size of acknowledged impairment;
book value is the cost at which asset and liability are displayed in balance. Book value for financial asset and the financial liability consists of the main amount of debt, the added percent, unamortized award (discount), the amount of acknowledged reduction of usefulness;
expenses on transactions - did not acquire additional expenses which are directly connected with acquisition, release or disposal of financial asset or the obligation and which could not arise if the subject of managing did not issue or did not realize the financial instrument. The commission charges paid to agents, consultants, brokers and dealers, charges to regulating authorities, stock exchanges, taxes and the state tax and so forth belong to expenses on transaction;
long-term contribution (deposit) - the placed or raised funds are one term more than one year;
long-term loans - the granted or obtained loans are one term more than one year;
the obligation on crediting - the obligation of bank to grant to the client the loan under certain conditions;
short-term contribution (deposit) - the provided or received funds for term which does not exceed one year;
short-term loan - the granted or obtained loan for term which does not exceed one year;
arrears - debt which is not repaid in time, established by the agreement;
the financial instrument is agreement according to which at the same time there is financial asset at one subject of managing and the financial liability or the tool of equity at other subject of managing.
Other terms which are used in this Instruction are used in the values determined by the laws of Ukraine, normative legal acts of the National Bank of Ukraine and international accounting standards.
1.4. The bank performs credit and supplementary (deposit) operations according to requirements of the legislation of Ukraine and displays in financial accounting on the corresponding accounts of the Chart of accounts of the financial accounting of banks of Ukraine approved by the resolution of Board of the National Bank of Ukraine of 17.06.2004 No. 280, registered in the Ministry of Justice of Ukraine 26.07.2004 for No. 918/9517, with changes (further - the Chart of accounts of financial accounting of banks of Ukraine), depending on category of partners, type of credit/contribution (deposit) and terms of their use.
The bank reflects in financial accounting of transaction on loan granting [placement of contribution (deposit)] and receipt of the credit [attraction of contribution (deposit)] in the interbank market as transactions with derivative financial instruments if such transactions are performed: in different currencies; with the same partner and connected with the same risk; at the same time also cannot separately be carried out; with identical repayment period.
1.5. The bank estimates the granted (obtained) loans, the placed (attracted) deposits (deposits) during primary recognition at fair value, including expenses on transaction and other payments which are connected with initiation of the credits or deposits (deposits).
1.6. The bank displays in financial accounting expenses on transaction and other payments which are directly connected with recognition of the financial instrument, on accounts of discount (award) on this financial instrument.
1.7. The bank estimates the credits, deposits (deposits) after primary recognition on the amortized cost with use of effective rate of percent.
1.8. The bank displays in financial accounting interest incomes and expenses on the credits, deposits (deposits) and will amortize discount (award) using effective rate of percent. The amount of discount (award) shall be completely amortized for date of repayment/return of the credit [contribution (deposit)] or before the following date of review of interest rate of the financial instrument if it changes depending on fluctuations of market rates. If the amount of discount (award) on the financial instrument with floating rate is connected with change of credit risk of the partner, it will be amortized during the expected effective period of the financial instrument.
The bank reflects in financial accounting interest incomes and expenses on financial instruments by which it is impossible to determine the size of future cash flows and terms of their origin [the credits the overdraft, renewable credit lines, deposits (deposits) on demand] using nominal interest rate.
1.9. The bank reflects in financial accounting in case of initial recognition profit or loss on difference amount between fair value of financial asset or the financial liability and cost of the contract in correspondence with accounts of discount (award) if the effective rate of percent on this tool is higher or lower than market. The difference between fair value of financial asset or the financial liability and cost of the contract on transactions with shareholders of bank is reflected in the capital on accounts of the 5th class and joins parts to retained earnings (loss) during the period of its content or time of disposal of the financial instrument.
Fair value of the financial instrument during primary recognition is the transaction price (that is fair value of the provided or received means). The bank determines fair value of the financial instrument, applying the corresponding method of estimation if the market for the financial instrument is not active, in particular:
reference to market price of other similar tool;
the analysis of the discounted cash flows;
other methods which provide reliable determination of fair value of financial instruments.
For determination of fair value of the credits and deposits (deposits) the most widespread method of estimation is discounting of cash flows.
1.10. The bank performs the analysis of the proofs testimonial of reduction of usefulness of financial asset [granted loans, the placed deposits (deposits)] or group of financial assets, for each date of balance according to the procedure, determined by this Instruction and own techniques and procedures developed according to international accounting standards.
The bank recognizes impairment and reflects reserve in financial accounting if there is certificate of impairment of financial asset or group of financial assets owing to one or several events which took place after initial recognition and influence the size and/or terms of settlement future cash flows from use of financial asset or group of financial assets.
1.11. The bank derecognizes financial asset or group of financial assets (further - financial asset) if:
a) effective period of the rights to cash flows from financial asset which are determined by terms of the contract comes to an end;
b) transfer of financial asset answers criteria of derecognition according to Item 1.13 of this Chapter.
1.12. The bank transfers financial asset if one of such conditions is carried out:
the bank transfers the rights to cash flows from financial asset which are provided by the agreement;
the bank keeps the rights to cash flows from financial asset which are provided by the agreement on transfer, but assumes liability to pay cash flows to one or several receivers for the agreement which answers such conditions:
a) the bank has no obligation to pay the amounts to final buyers till time receipt of the equivalent amounts from primary asset;
b) terms of the contract prohibit to bank to sell or pledge primary financial asset, except its transfer to final receivers as providing the obligation to pay cash flows;
c) the bank has the obligation to transfer any cash flows which it collects at the request of final receivers, without essential delay. Besides, the bank has no right to repeatedly invest such cash flows, except for investments by means or equivalents of means (as it is certain in MSBO 7 "Cash flow statements") during short maturity of date of collection before date of the necessary translation to their final receivers. Percent on such investments are transferred to final receivers.
1.13. The bank estimates borders in which it keeps all risks and remunerations from possession of asset during transfer of financial asset, taking into account it:
a) if the bank transfers in the basic all risks and remunerations from possession of financial asset, then it shall derecognize financial asset and to recognize the rights and obligations created or kept during transfer, separately as asset or liability;
b) if the bank keeps generally all risks and remunerations from possession of financial asset, then he continues to recognize financial asset;
c) if the bank does not transfer, does not keep generally all risks and remunerations from possession of financial asset, then it determines whether control of financial asset remains.
The bank does not exercise control of the transferred asset if the party to which this asset is transferred has real opportunity to sell it to the untied third party, can perform this sale unilaterally without need to set additional restrictions concerning such transfer.
If control of financial asset does not remain, then the bank derecognizes such asset and recognizes the rights and obligations created or kept during transfer, separately as asset or liability. In case of preserving control of financial asset the bank continues to recognize the transferred financial asset within its further participation in it.
1.14. The bank recognizes difference between book value of financial asset on which impairment and the amount of the received compensation as other operating incomes or expenses in case of derecognition of such asset is recognized.
1.15. The bank reflects in financial accounting essential changes of terms of the contract on financial asset which are not connected with reduction of its usefulness which correspond to criteria of derecognition of financial asset as repayment initial and recognition of new financial asset at fair value.
Any expenses or remunerations connected with repayment of initial financial asset and recognition of new are reflected as the other operating income or expenses of change of terms of the contract.
1.16. The bank derecognizes in balance of the financial liability or its part if such obligation is extinguished, cancelled or the term of its accomplishment ended.
1.17. The bank displays in financial accounting exchange between the borrower and the creditor of debt financial liabilities on significantly excellent conditions as repayment of primary financial liability and recognition of the new financial liability. The bank displays similarly essential changes of conditions on the financial liability or its part in financial accounting as repayment of primary financial liability and recognition of the new financial liability.
1.18. The bank determines significantly excellent such conditions according to which the net value of present cash flows on new conditions discounted using primary effective rate of percent (for the financial liability with floating interest rate - effective rate of percent which was calculated during the last change of nominal interest rate), differs at least for 10% of the discounted present cost of cash flows which remained till repayment period of primary financial liability.
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