ORDER OF THE MINISTER OF FINANCE OF THE REPUBLIC OF UZBEKISTAN

of August 5, 2009 No. 79

About approval of the National accounting standard of the Republic of Uzbekistan (NSBU No. 24) "Cost accounting on loans"

According to the Law of the Republic of Uzbekistan "About financial accounting" and the Regulations on the Ministry of Finance of the Republic of Uzbekistan approved by the resolution of the President of the Republic of Uzbekistan of March 18, 2017 No. PP-2847, I order:

1. Approve the National accounting standard of the Republic of Uzbekistan (NSBU No. 24) "The cost accounting on loans" according to appendix.

2. This order becomes effective after ten days from the date of its state registration in the Ministry of Justice of the Republic of Uzbekistan.

Appendix

to the Order of the Minister of Finance of the Republic of Uzbekistan of August 5, 2009 No. 79

National accounting standard of the Republic of Uzbekistan (NSBU No. 24) "Cost accounting on loans"

This National Accounting Standard (NAS) is developed on the basis of the Law of the Republic of Uzbekistan "About financial accounting" and is element of system of normative regulation of financial accounting in the Republic of Uzbekistan.

I. General provisions

1. The purpose of this NSBU is determination of methodology of financial accounting and disclosure of cost information on loans in business entities, irrespective of their form of business and departmental subordination, except insurance companies, banks and other credit institutions (further - business entities).

2. This NSBU is not applied to the actual or implied costs to the equity (including preferred shares) which is not considered as obligations.

3. The main determinations used in this NSBU:

the qualified asset - asset which preparation for intended use or for sale surely requires considerable time;

borrowing costs - the interest and other expenses incurred by business entity in connection with receipt of borrowed funds.

4. Borrowing costs include:

a) percent on the attracted short-term and long-term loans;

b) write-off of discount (discounts) connected with loans including bond discounts (discounts);

c) the interest expenses concerning finance lease and/or leasing reflected in financial accounting according to the National accounting standard of the Republic of Uzbekistan (NSBU No. 6) "Lease accounting" (reg. No. 1946 of April 24, 2009).

5. Depending on specific circumstances assets which require considerable time for finishing them to the condition allowing to use them for designated purpose can be the qualified assets: buildings, constructions, production machines and equipment, intangible assets, power plants,

investment real estate, etc. Other types of investments and those inventory stocks which are daily made in large numbers on the repeating basis even if their production requires long time (for example, production of whisky, wine, cognac, etc.), are not the qualified assets.

6. Assets, in case of their acquisition ready to proper use or sale, do not belong to the qualified assets.

7. The parcel of land is not the qualified asset. However, if on the parcel of land any land management works are carried out, then borrowing costs can be included in the cost of the parcel of land as these costs will be correlated to the income from operation or from realization of this parcel of land.

8. In cases if the parcel of land is acquired and land management works are carried out under construction of buildings or constructions, then borrowing costs will increase to the cost of these objects under construction, but not to the cost of the parcel of land.

II. Accounting treatment for borrowing costs

1. Recognition of borrowing costs

9. Borrowing costs shall be recognized expenses of that period in which they are made (as expenses on financial activities), except for to that their part which is capitalized according to paragraph 2 of this Chapter.

10. The borrowing costs which are directly relating to acquisition, construction or production of the qualified asset shall be capitalized by inclusion in cost of this asset.

11. Borrowing costs are capitalized by inclusion in cost of the qualified asset on condition of possible obtaining by business entity in the future of economic benefits and if at the same time costs can be reliably measured.

2. The borrowing costs permitted for capitalization

12. The borrowing costs which are directly connected with acquisition, construction or production of the qualified asset are those borrowing costs which could be avoided if expenses on the corresponding asset were not made. In case the business entity borrows means only for acquisition of the specific qualified asset, the borrowing costs which are directly connected with this asset can be accurately established.

13. Identification of direct connection between specific loans and the qualified asset, and determination of loans which otherwise could be avoided can be represented difficult. Such difficulties can arise when:

the financial activities of business entity are coordinated on a centralized basis;

the group of business entities uses number of debt obligations for receipt of borrowed funds on various interest rates and lends these means on various basis to the economic societies entering into group.

In addition the situation in case of exchange rate fluctuation, and also use becomes complicated group of the loans denominated in foreign currency or tied to it in the conditions of high inflation. As a result of it determination of size of costs on use of the borrowed funds which are directly connected with acquisition of the qualified asset is complicated and requires assessment on the basis of professional judgment of management of business entity.

14. In those limits in which borrowed funds are borrowed especially for acquisition of the qualified asset the cost amount on loans permitted for capitalization on this asset shall be determined as the actual costs incurred on this loan during the period less any investment revenue from temporary investment of these borrowed funds.

15. Arrangements on financing of the qualified asset can lead to receipt of borrowed funds by business entity and to emergence of the related costs before part of these means or all of them are used as expenses on the qualified asset. In such conditions borrowed funds often temporarily can be invested up to their expenditure on the qualified asset.

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