International Financial Reporting Standards
The Law on Accounting and Financial Reporting, effective from 1 January 2000, introduced National Accounting Regulations (Standards) (NR(S)AU). The law states that these local standards should not contradict International Financial Reporting Standards (IFRS), but in practice there are gaps between the two. As at 31 December 2006, 31 NR(S)AU standards have been adopted.
Ukraine accounting regulations
Ukrainian entities, as well as representative offices of foreign entities, must maintain accounting records and financial statements in accordance with NR(S)AU. Financial statements are prepared for a calendar year and relevant interim periods, and must be prepared in Ukrainian UAH as the reporting currency. The financial statements include the balance sheet, income statement, cash flow statement, statement of changes in equity, and notes to financial statements.
Financial statements should be submitted to the founders or shareholders of a legal entity, labour collectives (if required), and the state statistics authorities and registrar.
Other government agencies (e.g., State Commission on Securities and Stock Exchange, NBU, State Commission on Regulation of Financial Services Markets in Ukraine) may prescribe additional requirements for entities under their jurisdiction.
The enterprise's owners or the managing director are responsible for organizing the accounting function and ensuring that all economic transactions are recorded in supporting documents, ledgers and financial statements.
JSCs, bonds issuers, banks, trusts, stock exchanges, investment funds and investment companies, credit unions, non-state pension funds, insurance companies and other financial institutions are required to publish their annual financial statements and consolidated financial statement in the periodical press or by distributing them in the form of individual printed editions.
Differences between NR(S)AU and IFRS
Although NR(S)AU are generally based on IFRS, they are not identical. There are still areas for which no local standards have been introduced (e.g., Accounting for Government Grants and Disclosure of Government Assistance, Interim Financial Reporting, Investment Property, Share-Based Payments). In addition, when local standards do exist, they often lack the detail and some of the disclosure requirements found in IFRS.
NR(S)AU have less interpretative guidance, explanations and illustrations than IFRS, which inevitably leads to some confusion in the application of local standards. This undermines the comparability and quality of financial statements in Ukraine.
Tax considerations also play a role in local standards. Over the past several years, Parliament has enacted numerous tax accounting rules that operate quite independently of accepted accounting principles. For example, new buildings acquired after 1 January 2004 may be depreciated for tax purposes at a rate of 2% per quarter on a reducing value basis, and NR(S)AU 7 "Property, plant and equipment" provides for several depreciation methods, including methods stipulated by Ukrainian tax law. This is not fully consistent with IAS 16, which requires the depreciation method to reflect the pattern in which the asset's economic benefits are consumed by the enterprise.
8.2 Chart of accounts
According to the Decree ?291 of the Ministry of Finance all Ukrainian legal entities should use the specified chart of accounts.
The chart of accounts represents the whole system of accounts, within which each account has a title and numerical symbol, and is assigned to a specific class or group.
According to a decree from 2001, small businesses, non-profit non-government organizations and foreign business entities’ representative offices are permitted to use a simplified set of accounting rules. In addition to the statutory accounts, Ukrainian taxpayers need to maintain a separate set of tax accounting records.
A short form Chart of Accounts.
8.3 Audit requirements
Auditing is primarily regulated by the Law on Auditing, which outlines requirements for auditing firms and auditors in individual practice, regulates auditing methodology, and sets out the legal framework of operations for the Chamber of Auditors of Ukraine (UCA) and the Professional Public Union of Auditors of Ukraine.
The UCA is responsible for approving audit regulations and standards, carrying out the certification of auditors, approving programs of professional training for auditors, and maintaining the register of auditing firms and auditors in individual practice that are eligible to provide audit services in Ukraine.
The UCA adopted the International Standards on Auditing (ISA) as the Ukrainian standards with effect from 1 January 2004.
Several other laws (e.g., Law on Financial Services and State Regulation of Financial Services Markets, Law on Banks and Banking Activities, Law on Securities and Stock Market, Law on Insurance) establish additional requirements for audits and auditors for selected industries.
Audits required by law
Under Ukrainian law, audits are mandatory for a range of enterprises, in particular:
* insurance companies;
* bond issuers;
* investment funds, trusts and other financial enterprises;
* brokers and traders;
* other companies identified in the "Ukraine accounting regulations" section above that are required to publish their financial statements.