BOARD DECISION OF THE NATIONAL BANK OF UKRAINE

of October 1, 2020 No. 620-rsh

About approval of Methodical recommendations about reflection in financial accounting of transactions of repo with securities in banks of Ukraine

According to Articles 7, of 15, of 41, 56 Laws of Ukraine "About the National Bank of Ukraine", article 68 of the Law of Ukraine "About banks and banking activity", for the purpose of ensuring reflection of transactions of repo in financial accounting in banks of Ukraine the Board of the National Bank of Ukraine SOLVED:

1. Approve Methodical recommendations about reflection in financial accounting of transactions of repo with securities in banks of Ukraine which are applied.

2. To accounting department (Bogdan Lukasiewicz) to bring contents of this decision to the attention of banks of Ukraine for use in work.

3. Control over the implementation of this decision to assign to the vice-chairman of the National Bank of Ukraine Yaroslav Matuzka.

4. The decision becomes effective from the date of its acceptance.

Approved by Board decision of the National Bank of Ukraine of October 1, 2020 No. 620-rsh

Methodical recommendations about reflection in financial accounting of transactions of repo with securities in banks of Ukraine

I. General provisions

1. These Methodical recommendations are intended for rendering methodological support in case of development of domestic accounting policy of banks on transactions of repo for the purpose of their reflection in financial accounting and the financial reporting according to international accounting standards.

2. These Methodical recommendations are developed according to international accounting standards on the basis of the principle of prevalence of economic essence over the legal form.

The procedure of transactions by banks of Ukraine with securities is regulated by the legislation of Ukraine.

3. The terms used in these Methodical recommendations are used in the values determined by normative and legal, administrative acts of the National Bank of Ukraine and international accounting standards.

4. Transactions on purchase (sale) of securities with their return sale (purchase) on fixed price with the same partner are reflected in financial accounting as transaction of repo irrespective of, one or several agreements draw up such transactions.

5. Transaction of repo is reflected in financial accounting as the granted (obtained) loan on the security of securities depending on conditions according to which transfer (sale) of securities and obligation fulfillment by agreement parties is performed.

6. The loans granted (received) on transactions repo are reflected 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 September 11, 2017 No. 89 (with changes) (further - the Chart of accounts), depending on type of the partner and the principles of their assessment according to certain category.

7. The securities sold on transactions of repo continue to be considered on balance of the seller (borrower) on the same accounts which were previously determined by its accounting policy, regularly with recognition of interest income, depreciation of discount/award, revaluation, reduction of usefulness depending on category of assessment.

8. Interest incomes (expenses) on transactions of repo are recognized with use of effective rate of percent.

The buyer (creditor) includes cash flow from the received coupon to which has the right in accordance with the terms of transaction of repo in calculation of effective rate of percent if payment of the coupon falls on the period of the transaction of repo.

9. Security sale by the buyer (creditor) to the third parties is reflected in financial accounting in accounts payable accounts on transactions of the repo carried at fair value through profit/loss.

The accounts payable on transactions of repo which resulted from sale to the third party and carried at fair value through profit/loss is recognized that currency in which transaction of security sale with repurchasing is performed.

10. Examples of application of technique of financial accounting of transactions of repo with securities in banks of Ukraine are given in appendix to these Methodical recommendations.

II. Reflection in financial accounting of transactions of repo by the buyer (creditor)

11. The obligation amount on crediting for transaction date of repo (in day of emergence of the obligation on crediting) is reflected the buyer (creditor) on off-balance accounts such accounting entry:

Table

№ of payment order	Debit	Credit	Note
1	2	3	4
1	The account for accounting of the provided obligations on crediting	Contra account	On the amount of the provided obligation

.

12. Money transfer on transaction of repo (loan granting) by the buyer (creditor) is reflected in financial accounting by the following postings:

Table

№ of payment order	Debit	Credit	Note
1	2	3	4
1	Accounts for accounting of receivables, transit accounts	Accounts for the cash accounting and bank metals, customer account	On the amount of the transferred funds on transaction of repo
2	Accounts for accounting of the loan granted on transaction of repo	Accounts for accounting of receivables, transit accounts	On the amount of principal debt
3	Accounts for accounting of award/discount on the loan which is granted on transaction of repo	Accounts for accounting of receivables, transit accounts	On the award amount
4	Accounts for accounting of receivables, transit accounts	Accounts for accounting of award/discount on the loan which is granted on transaction of repo	On the discount amount
5	Accounts for accounting of award/discount on the loan which is granted on transaction of repo	The account for accounting of the income during initial recognition of financial assets at cost, above/below, than fair	On difference amount between fair value and cost under the agreement (without the cost accounting on the transaction) if fair value is higher, than the cost of the agreement
6	The account for the expense accounting during initial recognition of financial assets at cost, above/below, than fair	Accounts for accounting of award/discount on the loan which is granted on transaction of repo	On difference amount between cost under the agreement (without the cost accounting on the transaction) and fair value if fair value is lower, than the cost of the agreement

.

13. Expenses on transactions on the loans which are granted on transactions of repo which are carried at fair value with recognition of revaluation through profits/losses are reflected in financial accounting by the buyer (creditor) the following posting:

Table

№ of payment order	Debit	Credit	Note
1	2	3	4
1	Corresponding accounts on the cost accounting	Accounts for the cash accounting and bank metals, customer account	On expense amount on transaction of repo

.

14. Expenses on transaction which influence increase or reduction of the amount of discount/award on the loans which are granted on transactions of repo join in credit cost if such credit is carried at fair value with recognition of revaluation through other comprehensive income or on the amortized cost.

15. Write-off of the amount of the provided obligations on crediting on off-balance accounts for settlement date is reflected such accounting entry:

Table

№ of payment order	Debit	Credit	Note
1	2	3	4
1	Contra account	The account for accounting of the provided obligations on crediting	On the obligation amount

.

16. The securities acquired on transaction of repo are reflected in financial accounting by the buyer (creditor) as received as a deposit on off-balance accounts by the following posting:

Table

№ of payment order	Debit	Credit	Note
1	2	3	4
1	Accounts for accounting of the received mortgage	Contra account	On the amount of fair value of the securities acquired according to the transaction of repo

.

17. Charge by the buyer (creditor) of interest incomes on the loans which are granted on transactions of repo is reflected such accounting entry:

Table

№ of payment order	Debit	Credit	Note
1	2	3	4
1	Accounts for accounting of the added interest incomes on the loans which are granted on transactions of repo	Accounts for accounting of interest incomes on the loans which are granted on transactions of repo	On the amount of the added percent

.

18. Depreciation of discount/award on the loans which are granted on transaction of repo by the buyer (creditor) is displayed along with charge of percent by the following accounting entries:

Table

№ of payment order	Debit	Credit	Note
1	2	3	4
1	Accounts for accounting of award/discount on the loans which are granted on transactions of repo	Accounts for accounting of interest incomes on the loans which are granted on transactions of repo	On discount depreciation amount
2	Accounts for accounting of interest incomes on the loans which are granted on transactions of repo	Accounts for accounting of award/discount on the loans which are granted on transactions of repo	On award depreciation amount

.

19. Receipt by the buyer (creditor) of interest income (coupon yield) of the issuer of securities if on transaction of repo the agreement he transfer the coupon to the seller of securities, is reflected in financial accounting by the following posting:

Table

№ of payment order	Debit	Credit	Note
1	2	3	4
1	Accounts for the cash accounting and bank metals, customer account	Accounts for accounting of accounts payable on transactions with securities, transit accounts	On the amount of the interest incomes paid by the issuer for the coupon period

.

20. Transfer by the buyer (creditor) of the interest incomes gained from the issuer (coupon yield) to the seller of securities (borrower) is reflected in financial accounting by the following posting:

Table

№ of payment order	Debit	Credit	Note
1	2	3	4
1	Accounts for accounting of accounts payable on transactions with securities, transit accounts	Accounts for the cash accounting and bank metals, customer account	On the amount of interest incomes for the coupon period

.

21. The interest income (coupon yield) gained from the issuer of securities under the agreement of transaction of repo which payment falls on the period of repo which is kept by the buyer (creditor) in financial accounting is reflected the following posting:

Table

№ of payment order

Debit

Credit

Note

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