On the Approval of

the National Standard of the Republic of Uzbekistan "Valuation with the Purpose of Financial Accounting and the Adjacent Documentation"

                                        Enters into force starting from August 03, 2006

In accordance with the Law of the Republic of Uzbekistan "On the Valuation Activity", Resolution by the President of the Republic of Uzbekistan dated April dated 26, 2006 No PP-335 "On Measures aimed at Perfection of the Activity of the State Property Committee of the Republic of Uzbekistan" and Resolution of the Cabinet of Ministers of the Republic of Uzbekistan dated May 08, 2003 No 210 "On Licensing of the Valuation Activity", the State Committee of the Republic of Uzbekistan for State Property Management RESOLVES:

1. To approve the National Standard of the Republic of Uzbekistan "Valuation for the Purpose of Financial Accounting and the Adjacent Documentation" in accordance with the Appendix attached hereto.

2. The Present Resolution enters into force upon the ten days' expiry since the moment of its State Registration by the Ministry of Justice of the Republic of Uzbekistan.

            Chairman of

        the State Property Committee                                                  D. Musayev

APPROVED by

The Resolution of the State Property Committee

dated June 14, 2006 No 01/19-22,

registered by the Ministry of Justice

dated July 24, 2006 No 1607

THE NATIONAL STANDARD OF THE REPUBLIC OF UZBEKISTAN FOR PROPERTY VALUATION

                                                               NSOI No 4

The present National Standard of the Republic of Uzbekistan for Property Valuation «Valuation for the purposes of Financial Accounting and the Adjacent Documentation » (NSOI No 4) has been elaborated on basis of the Law of the Republic of Uzbekistan "On the Valuation Activity" and constitutes an element of the normative regulation of the Valuation Activity within the Republic of Uzbekistan.

1. PREAMBLE

NSO No 4 sets forth general ideas and principles to be followed by an Appraiser in process of preparation of the Valuation of the Assets for the purposes of Financial Accountings and the According Accounts, so that to reflect influence of the price changes upon the current magnitudes of Cost. It also describes the concepts, which shall be understandable for accountants, staff-members of regulative bodies and other users of Services on Property Valuation.

NSOI No 4 shall be regarded at a context of general provisions and guidance for application contained by the NSOI No 1.

Among the criteria applied during process of Valuation of the Fixed (or the Long-term) Assets, for example, Main Assets, there are those based on usefulness or suitability an Asset subject to consideration, its contribution into the process   of production of the goods and services for which it was designed end installed and other similar Assets being important for calculation of the Market-based Cost. The Assets' Appraisers shall also be aware that the Assets usually considered as the "Fixed" (or Long-term) ones, at certain circumstances may be attributed to the category of "Current Assets". Lands and buildings maintained as a reserve for sale may serve as an example. For this reason Appraisers may deal either with the Fixed Assets or certain kinds of Current Assets.

At application of the NSOI No 4, the strict observance by Appraisers of the Market Principals of Valuation, objectivity and full disclosure of the circumstances related to the assigned Valuation   at the format appropriate and suitable for users, possesses the fundamental significance. In cases when the specialized character of Propert does not allow usage of the Market-based Cost concepts, the NSOI No 4 prescribes performance of the due  interpretation and data disclosure in process of Valuation.

2. SPHERE OF APPLICATION  

The NSOI No 4 is being applicable to all types of Valuation of the Main Assets to be included into any published document available to all. The Accounting Standards recognize Revaluation of a Cost as an alternative to "Historical Costs" , and, in case of acceptance of the recording policies, foreseeing the conduct of regular Revaluations, Enterprises shall disclose the basis for Valuation,  the frequency of Revaluations and indicate whether independent (external) Appraisers were involved for them.

Normative and legal acts of the Republic of Uzbekistan or the Accounting Rules  may require modification of the NSOI No 4. Any deviation caused by such circumstances shall be fixed and grounded in detail and clearly at the Valuation Report.

The NSOI No 4 is inapplicable at Valuation conducted for the particular and internal purposes of a Client, such as, conclusion of a deal, receiving a credit (loan) or any other purposes lying outside of the sphere of public interest.

3. TERMS AND DEFINITIONS

Market-based Cost - being a calculated monetary amount for which, by the date of valuation, the exchange of an Asset could take place between an interested Seller and a Buyer as a result of a Commercial Deal struck after performance of a due Marketing, at the conclusion of which each of the Parties Concerned would have been acting being well informed, prudently and without being forced.

Most Effective Usage - shall be defined as that one of the realistic, legally allowed alternative versions of usage, being physically possible, reasonably justified, financially realizable  and at which the Market-based Cost of an Asset subject to Valuation, will be maximal  .

Market-based Cost for Existent Usage - shall be defined as Market-based Cost of an Asset, based on continuation of its current usage, assumed that the given Asset may be sold at an Open Market for the Existent Usage with observance of the conditions, contained at definition of the Market-based Cost, independently whether the Existent Usage is being Most Effective one or not.

Затраты на замещение с учетом износа - the method of "Replacement Cost with Wear and Tear Consideration"  (RCWTC) is applied in case of Valuation of a specialized property which is to be sold rarely (if ever) at an Open Market differently from composition of an operating business and therefore can not be valuated in accordance with definition of an idea of a Market. RCWTC is based on Valuation of the Present Market-based Cost of Land for its Existent Usage plus Gross Expenses for replacement (or reproduction)  improvement with the deduction of discounts for physical wear and tear and with consideration of all according forms of obsolescense and optimization.

  Cost of the Functioning Enterprise (defined and described at the NSOI No 3) - includes in itself the Net Cost of all Tangible and Intangible Assets of an Enterprise less all the Liabilities.

By reason of this magnitude being an expression of the Cost of Business as a whole, it, as a rule, can not be distributed among the separate Assets of an Enterprise. In that way, certain Assets do not possess the Value of a Functioning Enterprise, and by that reason it can not serve as a basis for the Assets' Valuation   to be used for the purposes of Financial Accounting.

The RCWTC method shall always be viewed with taking into consideration the adequate potential profitability or, in case of the State-Owned Assets or the Assets deprived from generation of Free Cash-Flow, - with the adequate functional potential, i.e. characteristics related to the Cost of an Enterprise as a whole. By that reason it combines in itself features of both Market and non-Market character. However in view of the RCWTC being related to Valuation of separate Assets and not to a Business itself, the said method substantially differs from methods and concepts of a Cost for a Functioning Enterprise, and in the according circumstances  the RCWTC's usage in process of the Assets' Valuation for the purposes of Financial Accounting will be completely appropriate.

4. INTERELATION WITH THE NATIONAL ACCOUNTING STANDARDS OF THE REPUBLIC OF UZBEKISTAN

The ideas of the Market-based Cost and Fair Cost are not being synonyms (please see the NSOI No 3). The NSOIs determine and make use of the Market-based Cost with a full assumption that Assets may be put for sale in the numerously different circumstances and conditions. For avoidance of distortion of the meaning and possible misunderstandings, a Valuation Report shall contain the definition of a Market-based Cost and description of its application in respect of an Asset subject to Valuation, explanation of the conditions at which the given Market-based Cost Valuation is being applied, and indication of a way that Asset usually is being transferred from hand to hand at a Market (for example, as a separate Asset or a part of a group of Assets).

The Cost of Fixed or Long-term Assets, indicated at an Accounting Report and the according accounts (records) usually are named as the "Net Accounted Amount" of those Assets. Net Accounted Amount presents the Gross Accounted Amount minus the Cumulative Depreciation. Net Accounted Amount is usually equated with the "Net Revaluated Amount ", determined either in way of indexation of the "Historical" Costs or in way of Valuation or periodical Revaluation of Assets. NSOI No 4 is related to the basis for the Cost Measurement   for the situations when the Cost of Assets shall be based on their Valuation or periodical  Revaluation, reflecting the Changes in Price level. In this respect the Net Current Costs for an Asset's replacement will form the basis for its Valuation there, where the conduct of a Market-based Cost's Valuation is possible.

Usually Propert Valuation conducted in connection with preparation of Accounting Report and the according accounts (records), by determination requires that the Assets being at an owner's disposal, shall be valuated based on their Existent Usage and considering that an Enterprise continues its functioning. However some of the Assets being at an owner's disposal may in future become useless for an Enterprise. If such Assets are announced needless by an Enterprise's managers, they shall be valuated based not on their  Present but on their Most Effective Usage. Similarly, the Assets usually attributed to the Investments, are valuated based not on their Present but on their Most Effective Usage.

Logical basis for separation among all the Assets those ones which are being used is that a business, by practical considerations can not sell out the Assets needed for its operation and simultaneously remain being productive. Sales of such Assets would be incompatible with continuation of that business. At the same time Valuation of the Market-based Cost of the Assets being used correctly reflects contribution of those Assets from the point of view of the Market and conforms to methods of the Market-based Cost applied in process of Valuation of other Assets.

Usually during the process of Valuation receives from the managers of an Enterprise or from their professional consultants indications related to the issue whether those Assets have been retained for existent usage, or are considered needless compared to the needs of an Enterprise or shall be attributed to the category of the Investments. In case of the absence of such indications an appraiser, based on his (her) own experience, knowledge and qualification, shall, after having studied the existing facts, determine to what category this or that Asset is to be attributed. In this case such classification and its grounds shall be entirely exposed.

Continuation of a business possesses fundamental significance for the Accounting and Book-keeping and making an assumption in process of Valuation that an Enterprise in question will continue its activity in future (provided that due consultations on planned changes in scale or style of the work process with the accountants are being done). This concept completely differs from the concept of a Cost for a Functioning Enterprise, which is applicable only in respect of the Cost of a Business as itself and includes in it all Assets and Liabilities. This type of Cost is not suitable as a basis for Valuation of separate Assets. On the contrary, the Market-based Cost and, in certain circumstances, Replacement Costs with consideration of Depreciation are recognized as acceptable bases for Valuation of separate Assets for purposes of Financial Accounting.

5. REQUIREMENTS OF NSOI No 4

Valuation of Assets for purposes of Financial Accounting - if details and circle of disclosed information  do not provide the guaranteed magnitudes - the following procedure is to be conducted:

All Investment Property and Assets needless related to the needs of an Enterprise, shall be valuated on base of a Market-based Cost at their Most Effective Usage;

• all Unspecialized Property, being in use by an Owner and not being an Investment or Needless, shall be valuated on base of a Market-based Cost at their Most Existent Usage;
• all Specialized Property, being in use by an Owner, shall be valuated on base of Replacement Costs with consideration of Depreciation. This method of Valuation is not applied in cases when Market-based Cost methods are applicable.

Property usually valuated on base of Trade or Production Potential, shall be separated from the rest pieces of Property being in use by an Owner.

When a Valuation includes Propert, different from Land and Buildings, the Market-based Cost for such Propert shall be indicated separately from Valuation of Land and Buildings. If this kind of Property is usually to be sold together with Land and Buildings, then its Market-based Cost shall be sharply defined as an integral part of a Market-based Cost for Land and Buildings as well as the rest of Property taken together.

Appraisers shall receive from managers of an Enterprise acting as an Owner the List of Assets subject to Valuation with indication of their belonging to one of the following categories: Assets Being in Use, Needless Assets or Investment Assets - with the aim of choice of an appropriate basis for Valuation in accordance with the abovementioned Article.

If as an exclusion, an appraiser accepts the assignment containing no concrete indications in respect of the Assets' category, then he (or she) shall valuate the Assets based on their actual usage, i.e. must determine whether those Assets are the ones Being in Use, Needless Assets or Investment Assets, and reflect the according data in his (her) Valuation Report. Such a situation may emerge in processes of merger or "unfriendly" absorption of a company by another one, as well as in other cases when an Appraiser does not possess the appropriate information or that information is incorrect. The according actions taken by an Appraiser shall be clearly described at a Valuation Report.

When stating the results of Valuation performed for the purposes of Financial Accounting, an Appraiser shall clearly and unequivocally disclose the following data:

• character of the received instructions and purposes of a Valuation;
• basis for Valuation including the type and determination of a Cost;
• period of Ownership over the Assets and classification of the valuated rights;
• Date of Valuation;
• Names of Assets and their location, as well as the date and degree of their examination;
• Limits established by the normative documents;
• all special admissions and / or limiting conditions;
• production means and machines;
• all other circumstances related (substantially) to the conduct of a Valuation.

Valuation of specialized Objects of Valuation such as, hotels, gas-filling stations, restaurants etc., may be conducted on Market-based Cost considering that not only Land and Buildings but other Assets are to be included into it as well. Such a Property Objects named "Property with Trade Potential" usually are sold at a Market as a United Functioning Complex, for which determining in a separate way the Costs of Land and Buildings and other Objects presents being difficult or impossible. When conducting Valuation of a Market-based Cost, an Appraiser shall mark out the Costs of Land and Buildings and other Components or, in an alternative case, neatly indicate that the Valuation has been done for a Complex as a whole.

Other Duties of an Appraiser

Appraisers in their work shall use the reliable personnel, possessing the appropriate qualifications and needed experience of the Assets' Valuation at an area of their location. Professional Appraisers may undertake the suitable steps so that to valuate in an appropriate manner the Assets in areas being new in their practice.

At some situations an outside professional assistance may be required. In such cases at a Valuation Report or Certificate names of invited specialists, their qualification and contribution into the work done shall be indicated.

An Appraiser can perform his (her) job normally only in a case when no conflict of interests arises in connection with the Valuation to be done. All possible conflicts, both obvious and implicit, are recommended to be discussed with the managers of an Enterprise. Implicit conflicts may be overcome in process of disclosure of the actual data materials, however an appraiser may have to give up a contract if his (her) reputation of an independent Appraiser may become compromised.

6. EXPLANATORY NOTES TO THE NSOI No 4

General Issues

Concepts and principles of the Market-based Cost established by the NSOI No 4 allow thee Appraisers to:

1) distinguish Price from cost at the conditions when due to specific circumstances or influence of short-time factors a Market has become deformed, and

2) apply the definition and concept of the Market-based Cost in respect of Specialized A Property Objects in the situation of a limited or completely absent Market and / or in other unique cases.

Cost during an exchange presents value of an Asset from the point of view of a Market at which in the mind's eye the change in Propert Right for that Asset is supposed to take place. Concept of Cost during the exchange lies at the basis of calculation of the Market-based Cost in accordance with the description given at the NSOI No 2. Cost during an exchange is purely a Market Concept, and its magnitude nay be calculated with the help of objective methods and procedures, based on the Market-based data.

With a term "Most Probable Usage" an expression "Most Effective Usage" is associated. If the latter is regarded in connection with Valuation of Assets Being in Use by a Functioning Enterprise, then the  "Most Probable Usage" and "Most Effective Usage" may differ. On the other hand, for Assets being needless compared to the needs of a Business and which may be put for sale at an Open Market, mening of these two expressions are usually close to coincidence (similarity).

"Most Effective Usage" is usually determined as that one of the real, legally admissible alternative variants of Usage, which is being physically possible, reasonably justifiable, financially realizable and at which the Market-based Cost of an Asset being valuated will be maximal. "Existent Usage" presupposes the same Usage of an Assets as per the Date of Valuation with consideration of that Asset's ability to continue its contribution into the Cost of an Enterprise but without consideration the alternative or more probable variants of Usage in case of its sale.

Determination of the Market-based Cost for Existent Usage or the Cost of Existent Usage is applied in process of the Assets' Valuation for the purposes of Financial Accounting, but it is inapplicable in process of Valuation of a Needless Property, Investment Property or more broadly saying, during Valuation for purposes laying outside the requirements of Financial Accounting.

The Market-based Cost of Needless Assets is based on an assumption that an Enterprise does not need them any further, yet some form of their alternative Usage is still possible - starting from the New Functional Usage up to utilization as a scrap.

The Market-based Cost of an Investment Property is based on the Cost of an Asset at an Open Market assumed that a deal on its sale is being struck in accordance and requirements indicated at definition of a Market-based Cost quoted at the text of the NSOI.

Investment Property

Propert generating the profit, which is attributed to the Long-term Investment made by the Investment Companies, Pension (Accumulative) Funds, Trust Companies or companies with similar forms of Property Rights, usually is to be valuated on basis of sale of separate Assets  in accordance with the established Sales' Plan. The Market-based Cost of such Assets an Investment Portfolio or as a Group of Property Objects, may be more or less than a total amount of the Market-based Cost of the Assets taken separately. If such a situation emerges, it shall be separately reported to the managers or customers of Valuation.

Special requirements related to Institutional Investments may bring to necessity of a special approach to various categories of Assets, such as the A Property Objects being at Stage of Development. Similarly, besides the usual requirements related to data disclosure to be presented within the framework of Generally Accepted Accounting Agreements, other additional requirements may emerge.

Individual Usefulness compared to Consolidated Usefulness 

Base for an asset's Valuation depends to the way it is being used and / or to the way it is being sold at a Market. Some assets possess an Optimal Usefulness when being used in an Individual Order. Others possess more Usefulness if being used as a Constituent Part of a certain Group of Assets.

At normal conditions separately located and independently functioning A Property Objects, as a rule, are to be sold in an Individual Order and are valuated from this particular point of view. If the cost of such Assets increases (or decreases) due to functional or economic interrelation with other Real A Property Objects, then this Additional or Special Cost may be determined in process of Valuation and fixed at a Report, either on basis of an Appraiser's own observations or in accordance with the instructions received from the client. However, any Cost calculated in such a way shall not be considered as a Market-based Cost without providing the due grounds for that.

A certain A Property Object may possess additional or Special Cost above that Cost it possesses in itself, due to its physical or functional interrelations with another A Property Object adjacent to it or, due to its attractiveness for a Buyer specifically interested in it. At a Report, separately from a Market-based Cost, established in accordance with definition given by the NSOI No 4, the limits or the magnitude of such Additional or Special Cost shall be indicated.

A special thoroughness is required when approaching the determination of an Asset's Usefulness in case when it constitutes a part of a Production Enterprise or an Enterprise possessing numerous Assets either at one location or different locations. At such situations it is usually sensible to say about the Consolidated Usefulness of Assets, due to which an Enterprise is being a functioning one.

If a Purpose of Valuation is connected with preparation of the Financial Reports of an Enterprise as a Functioning Economic Unit and the Cost required in a Report presents being the Cost of a Functioning Enterprise, then this Usefulness of Assets is to be regarded jointly, as a part of a Constantly Functioning Business (with exclusion of the Assets attributed by owners of managers to the Needless or Idle ones). In process of Valuation of Assets in accordance with the concept of a Functioning Enterprise, their Cost reflects the General Cost Being at Usage, i.e. their contribution into Production of Goods and Services, as distinct from their Individual Usefulness in process of their Alternative Usage.

Present Usefulness Future Usefulness 

Usefulness is to be measured at a long-term perspective - as a rule for the whole normative period for an Asset's service. However certain Assets may turn out temporarily Needless for an Enterprise; they may be  "conserved" or in some other way withdrawn from Production Process, transformed for Alternative Usage or merely stay Idle within a period determined beforehand. In other situations, conditions external towards a Market, - economic or political ones - may force cutting down of Production for an uncertain period.

The similar situation takes place in case if the Assets are located at some distant region. It is extremely difficult to establish distinctly the degree of their Usefulness by the date of Valuation. In such circumstances an Appraiser shall, in way of consultations with an Enterprise's owners or managers, determine the most probable variant of the Future Usage of the Assets and the category, to which they are attributed.

In those cases, when the Assets have been "conserved" for Future Usage, a method using the Replacement Cost less Depreciation, with consideration of the Adequate Potential Profitability, shall be applied for their Valuation. In any case an Appraiser shall study the issue related to a Price, a well informed Buyer would be ready to pay. At some situations an experienced Appraiser, prior to a moment when the final definition of a Market-based Cost becomes possible, may conduct Valuation (or interpolate the initial data) in way of comparison with a Market-based Cost existent for similar Assets, possessing the analogous Usefulness and located at the active zones of a Free Market, with consideration of a Time, Risk and Maintenance Expenses (in case of their presence) and other factors.

A widespread result of uncertainty, including the economic situation, is the change in Usefulness, expressed by Productivity or Effectiveness data. In such cases an Appraiser, having had consultations with an Enterprise's managers and / or other competent persons, is obliged to present facts concerning the Market Expectations in respect of duration of such events. Temporary closures of Enterprises may apply insignificant (or zero) influence upon the Assets' Cost, while the perspectives of the long-term cessation of activity may cause the constant decline of a Cost. The Assets under process of Valuation shall be regarded in light of all internal and external factors influencing upon the results of their functioning.

Specific Assets and the Assets with Limited Possibility for Sale

Specific Assets and the Assets with Limited Possibility for Sale are rarely being sold at an Open Market otherwise than within the composition a Business, constituting the integral part of it (sometimes it is called "Business in Ownership"). If the Most Proper Usage of such Assets is inseparably connected with a Business in Ownership, the their Cost Valuation process would not be a Market-based and may require Valuation of the Cost of a whole Enterprise with the consequent distribution of this Cost among its component parts. Some Assets may possess a Special Cost only as part of a Functioning Enterprise. In case of conduct of such a Valuation, this type of a Cost and its distinction from the Market-based Cost shall be separately indicated  at a Valuation Certificate or a Report (please see the NSOI No 3).

For Assets with Limited Possibility for Sale the most appropriate Valuation procedure in most cases will be a method using the Replacement Cost less Depreciation, with consideration of the Adequate Potential Profitability or the Functional Potential. Application of this method requires from an Appraiser the according explanation to be indicated at a Valuation Certificate or a Valuation Report, specifically, - a more precise/accurate definition whether it is grounded on the Market-based data or some other kind of information.

Intercompany Lease (Rent)

Propert Object occupied by a Company in accordance with an Intercompany Agreement on Lease (Rent) to take place within a certain - formal or informal - group of companies, shall be valuated  as Propert occupied by an Owner.

A Property Objects occupied by Owners

If an Appraiser, based on legal or other grounded reasons, is required to accept an assumption that a given A Property Object has been abandoned by an Owner, in this case, a Valuation Certificate or a Valuation Report shall concern a Cost established on basis of a Market-based data about sales of comparable Objects. In other cases A Property Objects occupied by Owners shall be valuated based on their Existent Usage.

7. REQUIREMENTS IN RESPECT OF INFORMATION DISCLOSURE

Valuation Reports shall not be misleading. Usually the Valuation Reports composed in accordance with the NSOI No 4 shall satisfy the requirements in respect of reports as prescribed at the NSOI No 2. In particular, a Valuation Certificate or a Valuation Report shall contain precise indications of the Purpose of Valuation, sphere of application and date of Valuation performed, as well as instructions received by an Appraiser and information placed at his (her) disposal. In case of presence of contradictions between those instructions and the NSOI No 4 an Appraiser shall draw the attention of a user of a Report to the existent discrepancies and indicate cases of deviations from the NSOI No 4. Analogously, at a Valuation Certificate or a Valuation Report cases of absence of full information or presence of special assumptions, resulting from specific circumstances connected with the conduct of Valuation shall be stipulated.

A Valuation Certificate or a Valuation Report shall contain a Paragraph forbidding publication of that Report wholly or its separate parts, as well as any references to it or data contained by it, names and professional   membership of Appraisers, otherwise than by a written permission of those Appraisers in respect of a form and context of such a publication.

A Valuation Certificate or a Valuation Report shall also contain a statement that the Valuation has been performed in accordance with the present or other recognized Standards, independently and without bias in respect of a client or other parties concerned as well as other kinds of information to be disclosed by the requirements of the present Standard.

As a condition of his (her) assignment, an Appraiser shall require that any published document with a reference to the Appraiser's conclusions shall contain the account  of all special limitations, assumptions and deviations from the NSOI.

In case of a Valuation being performed by an "Internal Appraiser", i.e. by those who work either at an Enterprise possessing the Property subject to Valuation, or at an Accounting Firm being responsible (assigned for), preparation of the Financial Documentation and / or Financial Reports of an Enterprise,  a special Paragraph about the existence and character of such relations shall be present at a Valuation Certificate or a Valuation Report.