Approved by Board of National Bank of the Azerbaijan Republic of November 7, 2005 the Protocol No. 33

Rules of conducting financial accounting in the credit institutions operating in the Azerbaijan Republic

I. General provisions

1. Purpose of Rules

1.0. These rules are prepared according to the Laws of the Azerbaijan Republic "About banks", "About financial accounting", other legal acts of the Azerbaijan Republic, and also acts of normative nature of National Bank of the Azerbaijan Republic and requirements of the International Standards of Financial Statements (ISFS) and determine rules of the organization and conducting financial accounting in the credit institutions operating in the Azerbaijan Republic (further - "bank").

2. Concepts

For the purpose of these rules the following concepts are used:

2.1. Financial accounting in banks - system of collection, registration and generalization by method of double entry in accounting reports of data on assets, obligations, the capital, the income and expenses of bank.

2.2. The analytical account - the account providing detailed disclosure and grouping of the data containing on the sub-account.

2.3. The sub-account - the account providing detailed disclosure and grouping of the data containing on the synthetic account, reflecting data of analytics.

2.4. The synthetic account - the account serving to generalization of turnovers on assets, obligations, the capital, the debit and the credit of the income and expenses.

2.5. Bookkeeping registers - systematization of banking activities in the relevant accounting magazines, books based on documents of primary accounting.

2.6. Banking activities - the facts reflecting separately property, obligations, the capital, their movement and in general general financial position of credit institutions.

2.7. Documents of primary accounting - the document confirming the fact of implementation by bank of transactions and giving the grounds for accounting entries.

Documents of primary accounting include - the forms of the strict reporting and other accounting documents which are not reflecting money turnover, however giving the grounds for acceptance on accounting of these turnovers.

2.8. Bank documents - the documents reflecting the data, necessary and sufficient for implementation of bank documents, confirming their legality and giving the grounds for reflection of transactions in financial accounting. Bank documents are subdivided into client documents and intra bank documents. Client documents include - payment documents, intra bank - cash and memorial documents.

2.9. Analytics - detailed registration and grouping on the transactions performed on the analytical accounts opened on assets (requirements), obligations of bank with reflection of purpose of the capital on each of them.

2.10. Synthetic accounting - generalization of the data collected on synthetic accounts on assets (requirements), obligations of bank and the capital, the income and expenses.

2.11. The dandy office - the division of bank performing the conclusion of contracts with clients and submission of bank documents according to the concluded bargains in back office for registration.

2.12. Back office - the division of bank performing document registration according to the concluded bargains based on the data received from the dandy office.

2.13. Accounts department - the division of bank exercising control for reflection in financial accounting of information on carrying out transactions according to IFRS.

2.14. The chart of accounts - set synthetic and sub-accounts on the financial accounting signs determined for bank system.

2.15. The ledger - the bookkeeping register reflecting data on the basis of set of the monthly turnovers of the debit and the credit collected on the synthetic accounts received from the relevant accounting magazines (books) according to the chart of accounts for bank system.

2.16. Auxiliary accounting magazines - the bookkeeping register reflecting detailed data on the banking activities performed on analytical accounts.

2.17. The operator - person responsible for implementation of the corresponding transaction for rendering banking service.

2.18. The chief accountant - the responsible person to whom the management behind conducting financial accounting and submission of financial statements according to structure of bank is entrusted.

2.19. The Automated Bank Information Systems (ABIS) - the system of consecutive submission of the corresponding data of financial, economic and analytical nature means of paper and electronic media providing automation of process of accounting for the purpose of effective management of object.

3. Basic rules of conducting financial accounting

3.1. The main objectives of financial accounting in banks consist in following:

- submission of the comprehensive, complete, exact and detailed information about activities, assets, obligations and condition of the capital of bank - to internal users of financial statements to management, founders, members of bank (unitholders, shareholders), and also foreign users - the investors, creditors controlling and state bodies, other users of financial statements;

- conducting detailed, complete and exact accounting of all banking activities, availability of the requirements and obligations and material and financial resources which are used bank;

- ensuring control of availability and movement of bank assets, storage of cash and other values, effective use of the special and raised funds, and also other operations performed by bank.

3.2. According to IFRS banks annually constitute and approve accounting policy on activities. The following documents also shall affirm annually management of bank:

- procedure for conducting inventory count of assets and liabilities;

- procedure for maintaining turnover of documents and technology of preparation of accounting data;

- procedure for control of carrying out the performed intra banking activities.

3.3. Responsibility for the organization and conducting financial accounting, providing the legislation on carrying out banking activities, forming of accounting policy, to exact, complete and timely idea of financial statements bears first of all management of bank.

3.4. Financial accounting in banks shall be carried out continuously from the date of registration of bank as legal entity before date of its reorganization or liquidation in other form according to the legislation.

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