Review of amendments to the accounting legislation 2017
On October 30, 2017, the President signed the Law of Ukraine “On Amendments to the Law of Ukraine “On Accounting and Financial Reporting in Ukraine “(regarding the improvement of certain provisions)”. The respective law will come into force on January 1, 2018, except for some provisions that will come into force from 2019. The list of main changes is provided below:
1) the national accounting standards are harmonized with the legislation of the European Union. From now on the Law of Ukraine “On Accounting and Financial Reporting in Ukraine” (hereinafter referred to as “The Law”) stipulates that the national accounting standards must comply with international financial reporting standards as well as with the accounting legislation of the European Union;
2) the Law includes provisions regarding primary documents, stipulating that inessential mistakes in primary documents can not lead to non-recognition of a business transaction, in case when such document provides a possibility to identify the person who involved in fulfilment of a business transaction and contains other essential requisites.
At the same time also implemented provisions stipulating that the rights and obligations of the parties of a business transaction cannot depend on the fact whether such a transaction is posted in the accounting of the parties;
3) the main innovation is a new classification of enterprises (previously such a classification was provided by Article 55 of the Commercial Code of Ukraine). A new classification of enterprises enlisted below. Thus, the enterprise belongs to a particular group if meets any two criteria based on figures provided in the annual financial statements. If an enterprise does not meet the criteria for a particular group within two years, such enterprise will be reclassified to the appropriate category. For estimation the value of assets and income, an average rate of UAH to the EUR, established by the National Bank of Ukraine, is used for estimation the value of assets and income;
Table of new criteria for classification of enterprises in Ukraine
|Category/ Criteria||Micro-enterprises||Small enterprises||Medium enterprises||Large enterprises|
|All assets value||up to EUR 350 thousand||up to EUR 8 million||up to EUR 20 million||more than EUR 20 million|
|Net operating income of goods, works, services||up to EUR 700 thousand||up to EUR 4 million||up to EUR 40 million||more than EUR 40 million|
|Average number of employees||up to 10 persons||up to 50 persons||up to 250 persons||more than 250 persons|
4) due to the aforesaid new classification, the new definition “enterprises of public interest” is introduced into the Law, which includes:
- large enterprises according to the classification, stated in the Law;
- enterprises — issuers of securities for trading on the stock exchange;
- banks; insurance companies; non-state pension funds and other financial institutions (except financial institutions belonging to micro and small enterprises);
5) enterprises of public interest (except for non-state pension funds and joint investment institutions) are obliged to create an accounting service, which must include not less than two persons.
At the same time, the job position of chief accountant of an enterprise of public interest may be held by a person with full higher economic education, experience in finance, accounting and taxation for at least three years and has no outstanding or unexpunged conviction for the crime against property and in the sphere of business activity;
6) an expanded list of enterprises which are obliged to maintain accounting records in accordance with international financial reporting standards. From now, following enterprises are included to such list: enterprises of public interest, public joint-stock companies, as well as enterprises engaged in the extraction of minerals of national importance;
7) the form of reporting in accordance with international standards is approved by the Ministry of Finance and will have a single electronic format. The provisions on submission of reports in accordance with international standards in electronic came into force from January 1, 2019;
8) new forms of financial reporting were envisaged, which are subject to be approved by the Ministry of Finance and in cooperation with the State Statistics Service. Inter alia, the “management report” is a document that contains financial and non-financial information which characterizes the condition and prospects of enterprise development and reveals the main uncertainties in its activities. Such reporting is to be provided by medium and large enterprises. Medium enterprises have the right to do not indicate non-financial information in such a report;
9) also a “Report on the Payments in favor of the State” is introduced — a document which contains detailed information on taxes, fees and other payments in favor of the state, which is provided by enterprises engaged in the extraction of minerals of national value or the harvesting of timber and of public interest;
10) the companies (parent companies) that control other companies obliged to submit consolidated financial statements separately from the reporting on their own business operations. Companies are relieved from obligation to submit consolidated financial statements (except for enterprises of public interest), if, together with the controlled enterprise, their figures provided in the annual balance sheets do not exceed the following two criteria:
• book value of assets — up to 4 million EUR;
• net income from the sale of goods, works, services — up to 8 million EUR;
• the average number of employees — up to 50 persons;
11) simplified form of reporting composed of the balance sheet and the report on financial results established for micro and small enterprises, non-business associations and permanent establishments, except for those who keep records in accordance with international standards;
12) a new procedure for the presentation and disclosing of financial statements is envisaged. Enterprises of public interest, except those which considered as large and did not issue securities, public joint stock companies, entities of natural monopolies, at the state level and enterprises engaged in mining activities of state importance are obliged to disclose their annual financial reporting, together with an audit report, on their website before April 30 of the year following the reporting period;
13) large enterprises, which did not issue securities and medium-sized enterprises are obliged to disclose their annual financial statements, together with an audit report, on their website before June 1, of the year following the reporting year (this provision will come into force on January 1, 2019);
14) other financial institutions belonging to micro and small enterprises are required to disclose their annual financial statements, together with an audit report, on their website before June, 1 of the year following the reporting period (this provision will come into force on January 1, 2019);
15) the status of financial reporting is clarified. Thus, financial reporting are not considered as commercial confidential information and should be provided upon requests made on the grounds provided by the Law of Ukraine “On access to the public information”, as well as the financial reporting is not subject to a ban on its shearing for statistical purposes;
16) three principles of accounting are excluded:
- the principle of prudence — the use of accounting methods that underestimate liabilities and costs and overstate assets and income;
- the principle of historical (actual) cost — the priority is to valuation of the assets of the enterprise, based on the cost of their production and acquisition;
- the principle of periodicity — the possibility of dividing the activity of the enterprise for certain periods of time for the purpose of compiling the financial statements;
17) the Law introduces the definition of “income”, “expenses”, “equity capital” and some other definitions that were previously determined only by accounting standards.
The above commentary presents the general statement for information purposes only and as such may not be practically used in specific cases without professional advice.
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