In the latest issue of Taxation, Accounting and Reporting in a Commercial Bank, Alexey Borisov, Senior Manager of Audit and Advisory for Financial Institutions at FBK, explores the special procedure for deducting intangible assets (IA) from credit institutions’ own funds.
The author of the paper gives insight into the way banks can avoid severe pressure on capital adequacy ratios during large investments in Russian software and protection of critical information infrastructure (CII).
The expert came to the following key conclusions:
- The mechanism is not automatic. A Bank of Russia decision grants the right to a 48-month phased deduction instead of a one-time deduction. However, this is a voluntary, asset-by-asset procedure: it does not apply to all Russian software indiscriminately.
- Strict conditions for application. To use the relief, several requirements must be met simultaneously: a targeted link to ensuring the technological independence of CII, the software’s inclusion in the Unified Register of Russian Software, documentary evidence of the link to a significant CII facility, and mandatory audit confirmation of the correctness of the calculation.
- The difficulty is not in the mathematics but in the processes. ‘Calculation using the formula is the simplest part of the work. The main practical challenge is to build a continuous chain of evidence between accounting data, IT infrastructure, procurement and FSTEC registers. Without coordinated work by all divisions, it will not be possible to obtain the right to apply the special procedure,’ notes Alexey Borisov.
The expert point out: the draft amendments to Bank of Russia Regulation No. 646-P of 4 July 2018 show that the Bank of Russia considers the phased deduction not as a one-off measure for 2026 but as part of a permanent capital calculation methodology. This makes the quality of the internal process particularly important: it makes sense for banks to build it not for a single audit confirmation but as sustainable regulatory control.
The full text of the article ‘Phased Deduction of Intangible Assets from Bank Capital: Conditions, Calculation and Audit Confirmation’ is available by subscription.
