Preparation of financial statements under International Financial Reporting Standards (IFRS)
Russian legislation provides mandatory compilation of financial statements under IFRS by the following companies (Article 2 of the Federal Law of the Russian Federation "On Consolidated Financial Statements" No. 208-FZ of July 27, 2010):
- credit firms,
- insurance companies (with the exception of insurance medical enterprises that operate exclusively in the field of compulsory health insurance);
- non-state pension funds,
- management companies of investment funds, unit investment funds and non-state pension funds; clearing enterprises,
- Federal state unitary enterprises, the list of which is approved by the Government of the Russian Federation; joint stock companies whose shares are in federal ownership and whose list is approved by the Government of the Russian Federation,
- Other companies whose securities are admitted to organized trading by including them in the quotation list.
For the preparation of financial statements under IFRS, companies usually use one of two methods:
- Parallel record keeping,
- Transformation of reports (from RAS to IFRS).
At the same time, the most common way is to transform the reporting prepared under Russian Accounting Standards (RAS).
Transformation of reporting
Transformation of the reporting is carried out after the end of the reporting period and represents a clear sequence of necessary and sufficient operations to bring accounting (financial) statements, compiled under RAS, into the format of IFRS.
Transformation of RAS accounts typically includes the following stages:
- classification of articles of the Russian reporting and separate economic operations on the basis of the requirements of IFRS,
- preparation of the draft balance sheet,
- correction of the Russian accounting indicators,
- preparation of IFRS statements based on Russian accounting and related adjustments.
The main advantages of parallel accounting are correctness, reliability of data and efficiency of their preparation. Reporting under IFRS is carried out almost simultaneously with the formation of similar reports, the registration of transactions under RAS. Thus the information can be compared, that raises its accuracy.
At the same time, the implementation of parallel accounting requires the use of advanced information technologies, the presence of a developed IT infrastructure and a certain staff of specialists. You need significant cash and time costs for the development and implementation of a specialized information ERP-system, training its users, technical support. Increased costs for the maintenance of specialized personnel.
Consolidation of accounts
Consolidation includes the transformation of the reporting of each individual company in the group, as well as a number of additional procedures:
- adaptation of various accounting systems to a single accounting policy,
- transfer of information from various accounts to a single work plan of accounts,
- exclusion of intra-group turnover,
- calculation of net investment value in subsidiaries and associates,
- valuation of goodwill and determining the proportion of non-controlling shareholders,
- formation of financial statements and explanations to it.