LETTER OF ACCOUNTING DEPARTMENT OF NATIONAL BANK OF THE REPUBLIC OF KAZAKHSTAN

of March 30, 2009 No. 24405/344

On the letter "JSC Tsesnabank of 27.02.09 No. 1243

Accounting department of National Bank of the Republic of Kazakhstan, having considered your letter, reports the following.

We offer 3 options of accounting of the amount of excess of the income/expenses added in previous period over actually received/paid income/expenses.

1. In case of existence of probability of short-reception of excessively imputed incomes.

According to the Item 34 IFRS 18 "Revenue", revenue is recognized only with probability that the economic benefits connected with transaction will arrive on the company. However in case uncertainty arises concerning opportunity to receive the amount which is already included in revenue, the half-received amount, or the amount which probability of obtaining became improbable is recognized quality of expense, but not as adjustment of the amount of originally acknowledged revenue.

According to Item 58 IFRS 39 "Financial instruments: recognition and measurement" (further - IFRS 39) on each reporting date the company should estimate availability of objective certificates of the fact that financial asset or group of financial assets depreciated. Information which became known to the owner of asset about the events opened in Item 59 IFRS 39 belongs to objective signs of impairment of financial asset or group of financial assets.

According to Item 63 IFRS 39, if there is objective certificate of incurring of impairment loss of loans and receivables the asset carrying amount shall be reduced directly or with use of the account of provision. The amount of loss shall be acknowledged in profit or loss.

Respectively, if there is probability of short-reception of the amount of earlier added remuneration, the bank needs to reduce the added remuneration by the amount which probability of obtaining became improbable for the loss account from impairment, but not by reduction of earlier recognized income (interest incomes). At the same time reduction of the added remuneration we recommend to perform with use of the account of provision (provisions).

Thus, write-off added, but uncollected overdue remuneration shall be made at the expense of expense (loss) from impairment with reflection on separate personal account of the balance sheet account No. 5450 "Assignments for providing". At the same time in explanations to the financial reporting of the organization it is necessary to open information on the fact of write-off of requirements of bank in the form of unpaid overdue remuneration.

At the same time, according to Item 65 IFRS 39, if in subsequent period the size of impairment loss is reduced, and this reducing can be connected objectively with event, the event after impairment was acknowledged (for example, with increase in rating of creditworthness of debtor), earlier recognized impairment loss should be recovered, or is direct, or by adjustment of the account of provision. Such reversive record shall not lead to that book value of financial asset exceeded its depreciated cost calculated as though impairment was not acknowledged, for date of recovery of impairment. The amount of reversive record shall be acknowledged in profit or loss.

Therefore, if in the subsequent ambassador of recognition of impairment loss and reduction of the added remuneration, there is reducing size of impairment loss of assets, it is necessary to reverse earlier recognized losses. At the same time it is recommended to perform reversal through profit, that is by use of the corresponding account of provision and the account on recovery of provisions.

At the same time we report that the described accounting treatment for doubtful and bad debt is provided in the Instruction for conducting financial accounting by banks of the second level and Development Bank of Kazakhstan joint-stock company approved by the resolution of Board of National Bank of December 24, 2007 No. 152.

2. In case of impossibility it is reliable to measure the amounts of income/expenses assumed to obtaining/payment, and also in case of recognition of income/expenses under the agreements having permanent character. At the same time the charged amounts of income/expenses are insignificant according to IFRS 8 "Accounting policy, changes in accounting valuations and mistakes" (further - IFRS 8).

If charge of income/expenses by bank is performed on services according to agreements of bank servicing where payment terms make a reservation (commission charges for the translation, issue of additional statements and other services), the established rates and payment due dates, and also the agreements signed on acceptance/payment of payments for utilities (phone, the electric power, water, the sewerage, garbage removal and other), on telecommunication services, on various maintenances of operating systems, protection and so on, we recommend to consider the amount of excess of the added income/expenses over actually received/paid income/expenses one of the following methods:

1) When charging by bank within accounting year of income/expenses on services is more, than it was supposed to receive/pay, stornirovochny accounting entry on the amount of excess of earlier added income/expenses over actually received/paid income/expenses is made.

Let's consider on the example of charge of the commission income by bank.

Between Bank and the client the agreement of bank servicing according to which the client shall pay commission fee in the first week of the next month is signed.

At the end of current month the bank constitutes calculation of the expected income. For this purpose when charging of the expected income it is recommended to take average value of the commission charges received for the last accounting periods as basis (for example, in three months). On the basis of the made calculation of average value at the end of current month by the bank performs the following accounting entry:

Dt the Added commission income of 1 000 000 tenges of Kt the Commission income

In case of the actual obtaining next month/quarter of money from the client, or write-off of commission charges by bank from the current account of the client on the amount smaller, than earlier added commission charges (700 000 tenges), the following accounting entries are made:

on the amount of earlier imputed incomes:

Dt the Commission income of 300 000 tenges of Kt the Added commission income

on actual amount of commission charges:

Dt Cash in cash desk of 700 000 tenges

Current accounts of clients

Kt the Added commission income

2) When charging by bank in previous year of income/expenses on services is more, than it was supposed to receive/pay current reporting year, current reporting year charge of income/expenses on similar service on the amount smaller excesses of earlier added income/expenses over actually received/paid income/expenses is made.

Let's consider on the example of charge of expenses by bank on communication services.

Between Bank and the service provider the agreement according to which the Bank shall after receipt of the account / scheta-faktury from the supplier is signed pay certain amount of money. Usually payment on communication services is performed at the beginning of the next month after receipt of services.

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