RESOLUTION OF BOARD OF NATIONAL BANK OF THE KYRGYZ REPUBLIC

of September 30, 2009 No. 39/5

About the Provision "About Requirements to Accounting Policy of the Commercial Banks Performing Transactions according to the Islamic Principles of Banking and Financing"

Having considered the project of the Provision "About Requirements to Accounting Policy of the Commercial Banks Performing Transactions according to the Islamic Principles of Banking and Financing", being guided by articles 7 and 43 of the Law of the Kyrgyz Republic "About National Bank of the Kyrgyz Republic", the Board of National Bank of the Kyrgyz Republic decides:

1. Approve the Provision "About Requirements to Accounting Policy of the Commercial Banks Performing Transactions according to the Islamic Principles of Banking and Financing" according to appendix to this resolution.

2. This resolution becomes effective after one month after official publication.

3. Send to legal department this resolution to the Ministry of Justice of the Kyrgyz Republic for inclusion in the State register of regulatory legal acts of the Kyrgyz Republic.

4. To impose control of execution of this resolution on the vice-chairman of National Bank of the Kyrgyz Republic Bokontayev K. K.

Approved by the Resolution of Board of National Bank of the Kyrgyz Republic of September 30, 2009 No. 39/5

Regulations on requirements to accounting policy of the commercial banks performing transactions according to the Islamic principles of banking and financing

This Provision determines the main requirements imposed by National Bank of the Kyrgyz Republic to accounting policy of the commercial banks performing transactions according to the Islamic principles of banking and financing including the banks having "Islamic window" (further - banks).

1. Concept and purpose of accounting policy of bank

1.1. Accounting policy of bank is set of the principles, bases, rules, conditions, procedures and methods accepted by bank for the purpose of conducting financial accounting according to the current legislation of the Kyrgyz Republic.

1.2. Main goal of accounting policy of bank - creation of the single system of financial accounting which is providing fair presentation of the financial reporting and, being its cornerstone, internal control systems of bank.

1.3. The management of bank according to the Law of the Kyrgyz Republic "About financial accounting" determines and applies accounting policy so that methodological basis of conducting financial accounting and creation of the financial reporting of the banks performing transactions according to the Islamic principles of banking and financing conformed to requirements of accounting standards for the Islamic financial institutions developed by the Organization of financial accounting and audit for Islamic financial institutions (further - AAOIFI).

2. Format of accounting policy of bank

2.1. The format of accounting policy of bank is chosen bank independently. The main requirement to it is compliance to the methodological principles of AAOIFI and complete scope of the questions connected with the organization of financial accounting and internal control system. The approximate structure of accounting policy of bank is provided in Appendix 1 to this Provision.

The bank performing transactions according to the Islamic principles of banking and financing through "Islamic window" shall accept in accordance with the established procedure the separate accounting policy providing the corresponding procedure for conducting financial accounting.

2.2. The bank can create accounting policy one of two methods:

- the general procedure and accounting principles concerning each transaction type are described in separate policy;

- the procedure and accounting principles of transactions of bank are described in one policy with reflection of each transaction type in the separate Section.

2.3 Irrespective of forming method, accounting policy of bank shall contain the description of conducting financial accounting on each transaction type, performed by bank according to the Islamic principles of banking and financing:

- Accounting principles of transactions of murabakh;

- Accounting principles of transactions of mudarab;

- Accounting principles of transactions the decreasing musharaka;

- Accounting principles of transactions by fat and parallel fat;

- Accounting principles of transactions of istisna and parallel istisnaa;

- Accounting principles of transactions of idzhar and idzhar muntakhiyya bittamlik;

- Accounting principles of transactions of cards;

- Drive accounting principles of transactions" ayad amanat;

- Drive accounting principles of transactions" ayad daman;

- Accounting principles of currency transactions;

- Reserve accounting principles for equalization of profit.

3. Main requirements to content of accounting policy of bank

3.1. Accounting policy of bank in general and concerning each transaction type, made by bank, shall correspond to the following fundamental assumptions:

- property isolation;

- going concern.

3.2. Accounting policy of bank shall reflect requirements proceeding from which the following principles of accounts presentation will be observed:

- quality characteristics - clearness, relevance, comparability, reliability, the sequence, importance;

- restrictions of relevance and reliability informatsiisvoyevremennost, balance between benefits and costs, balance between quality characteristics, fair and objective presentation.

3.3. Accounting policy of bank shall include the detailed description of practice and the organization of financial accounting in bank according to the Concept of standards of AAOIFI:

a) recognition criteria of each financial statement element: assets, obligations, capital, income, expenses, means of owners of unrestricted and limited investment bank accounts;

b) the estimates of financial statement elements applied in bank;

c) accepted in bank the Chart of accounts of financial accounting by the Islamic principles of banking and financing and the Procedure for forming of the financial reporting by the Islamic principles of banking and financing;

d) the accounting types applied in bank, their purpose and value (balance sheet, off-balance and stand-alone);

e) the conditions allowing changes of accounting policy of bank, accounting valuations;

e) disclosure of the policy accepted by bank which does not correspond to concepts of the financial reporting if that takes place;

g) the policy accepted by bank for reflection and determination of doubtful debts, and policy of debt write-off;

i) politicians, the basis and methods accepted by bank for the purpose of revaluation of asset cost, debts and limited investments to their equivalent monetary value if it is applicable;

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