APPLICATION OF IFRS-9 STANDARD BY OJSC “GUARANTEE FUND”
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Publications of OJSC “Guarantee Fund”.
An article on the experience of OJSC “Guarantee Fund” on applying IFRS-9 was published in the second issue of the scientific economic journal of KTU “Manas” “Reforma” for 2019. As it is known, IFRS is an important international system of universally recognized principles (standards) of accounting used in the preparation of financial statements of companies. The National Bank of the Kyrgyz Republic, in 2017, decided to introduce IFRS-9 to commercial banks of Kyrgyzstan.
The implementation of the standard in Kyrgyzstan has been actualized with the consulting support of international audit organizations for several years. The new standard “Financial Instruments” officially commenced on January 1, 2018.
Most of Kyrgyz banks have implemented IFRS-9 standard either by their own efforts or with the involvement of external specialists. OJSC “Guarantee Fund”, too, introduced IFRS-9 standards in 2018 with its own efforts. It is worth to note that the external audit for 2018 confirmed the exactness of the accounting and financial reporting in accordance with IFRS-9.
As a result of the implication of IFRS-9 by OJSC “Guarantee Fund”, the change in reserves amounted to 13.7%, and the impact on capital was 0.1 %, juxtaposed to the applied IFRS-39 standard. The fund’s specialists determined methods for assessing credit and guarantee risks as well as the probability of default in accordance with the principles of IFRS-9.
The standard provides transparent and reliable reports, increases the information content and practicality for users. It allows investors to adequately assess the risk of investments, to predict the performance of the fund on the basis of financial statements.
The Chairman of the Management Board, Malik Abakirov, during international conferences in Turkey and Kyrgyzstan, reported on the achievements of OJSC “Guarantee Fund” in providing guarantee support to entrepreneurs, the formation of a two-level system of guarantee funds, which was highly appreciated and recommended for implementation in the countries of Central Asia and the Caucasus by ADB, as well as introduction of the international standard IFRS-9.
Nowadays, the Kyrgyz Model of guarantee funds is being applied in other countries. Particularly, the first guarantee fund, according to the Kyrgyz model, was established in Tajikistan. Belarus and Uzbekistan are interested in the model.
The experience of the introduction and application of IFRS-9 standard by OJSC “Guarantee Fund”, as well as methods and approaches to assessing guarantee risks and expected credit/ guarantee losses, to leading financial institutions was reported by the management of OJSC “Guarantee Fund”.
The generalized experience of applying the international standard was the basis for an article published in English in the scientific economic journal of Kyrgyz-Turkish University “Reforma” (No. 2, 2019).
According to the authors, the methodology and approaches developed and used at OJSC “Guarantee Fund” can be implemented in guarantee funds in both developing and developed countries. It should be kept in mind that the results of the implementation of IFRS-9 will be affected by macroeconomic indicators, the state of the banking system, the quality of the loan portfolio, sectoral economic development, and other indicators of the host country of the guarantee fund.
The authors of the article are: Malik-Aidar Abakirov –Chairman of the Management Board of the Guarantee Fund, Syrgak Abakirov –expert of the Agency for Promotion and Protection of Investments of the Kyrgyz Republic, Bayalieva Erkin – Chairman of the Association of Guarantee Funds of the Kyrgyz Republic, and leading employees of OJSC “Guarantee Fund” – Emil Avazov, Makhabat Kazieva, Reina Kurmankozhoeva, Elmira Mamytova.
The article is available in the link below: