LETTER OF NATIONAL BANK OF THE REPUBLIC OF KAZAKHSTAN

of December 21, 2006 No. 24129/2735

Present the Accounting department of National Bank of the Republic of Kazakhstan sends you for data and use in work methodical recommendations about reflection in financial accounting of banks of the second level of transactions of hedging.

Methodical recommendations about reflection in financial accounting of banks of the second level of transactions of hedging

According to Item 9 of the International accounting standard No. 39 "Financial instruments - recognition and assessment" (further - IFRS 39), the hedging instrument is certain derivative tool or (in relation to hedging of risk of changes only of the currency exchange rates) certain non-productive financial asset or the non-productive financial liability, fair value or cash flows of which, as expected, will compensate changes of fair value or cash flows of a certain hedged Article. The hedged Article is asset, the obligation, the firm agreement, the high-probable predicted transaction or net investment in foreign activities in connection with which (a) the organization is exposed to risk of changes of fair value or future cash flows and (b) which is determined as hedged. Efficiency of hedging is degree in which belonging to the hedged risk of change of fair value or cash flows of the hedged Article are compensated by changes of fair value or cash flows of hedging instrument.

Accounting and reflection of transactions of hedging, and also income/expenses on them, in the financial reporting of Bank it is necessary to perform according to IFRS 39.

IFRS 39 allocate three types of the relations of hedging (hedging of fair value; cash flow hedging; hedging of net investments in the foreign organization) and for each of them establishes separate requirements for accounting.

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