• National Professional Organisation Website: The Institute of Professional Accountants of Russia (IPAR)
• National Professional Organisation Website: Russian Collegium of Auditors
• National Accounting Standard Setter Website: National Accounting Standards Board (part of National Organization for Financial Accounting and Reporting Standards)
• Response to IFAC Member Body Survey on Standard Setting and Regulation

Update for December 2011
Update for September 2011
Update for May 2011
Update for March 2011
Update for August 2010
Update for May 2010
Update for December 2009
Update for October 2009
Update for July 2008
Update for April 2005
Update for November 2004
Update for January 2003
Update for July 2002
Update for January 2002
Update for May 2001

In June 2009 Deloitte & Touche Regional Consulting Services Limited (Russia) published Doing Business in Russia 2009 (PDF 2,330k, 80 pages). A section of that report examines the accounting environment in Russia. Here is a summary of what is now required: For historical reasons, the Russian financial reporting has been determined by the state rather than the accounting profession. Russian Accounting Standards (RAS) tend to be a summarised version of IFRSs, with modifications and options that allow the financial statements to be consistent with tax laws and regulations. Accounting and financial reporting in Russia is regulated by the Federal Law No 129-FZ Concerning Accounting of 21 November 1996 and legal acts adopted in accordance with it. The requirements of that Law have many differences with IFRSs. Every legal entity in Russia must prepare financial statements as of each 31 December, with form and content prescribed my the Ministry of Finance. The financial statements must include a balance sheet, income statement, statement of cash flows, summary of accounting policies, and other supplementary accounting data. Consolidated financial statements are generally not prepared. Statutory financial statements must be filed with the tax authorities by 1 April. Since the main purpose of financial statements has tended to be for submission to the tax authorities, the accounting policies adopted by an entity have also tended to reflect the tax rules where such an alternative is permitted by the accounting standards. The financial statements of listed companies are available to the general public and have additional disclosure requirements. The financial statements of the following types of companies must be independently audited: All open joint stock companies Banking, insurance, and investment companies Companies with annual revenue for the preceding financial year exceeding RUB 50 million (approximately USD 1.4 million) Companies with total assets as of the preceding 31 December exceeding RUB 20 million (approximately USD 570,000) Differences between Russian Accounting Standards and IFRSs Russian legislation and regulations are very specific as to the documentation required to support a transaction. In practice, unlike IFRS, transactions are accounted for in accordance with their legal form, rather than their substance. The practical application of RAS results in significant differences compared to IFRS, in particular, the following: Financial statements are generally prepared on a historical cost basis with only limited use of revaluations The fair value concept is not widely applied, except for investments in market traded securities Finance leases may be capitalised, but usually are not Assets are not normally tested for impairment (except for intangible assets) The useful lives of fixed assets tend to be in line with the useful lives specified for tax purposes The assets and liabilities of an entity which has been acquired are measured and maintained at book value at the date of acquisition Goodwill on acquisition (positive and negative) is amortised over the shorter of 20 years or the life of the acquirer and is generally not subject to an annual impairment test Provisions (such as for bad debts) are generally not created Revenue or expenditure is only recognised after all the preceding primary documentation supporting the transaction has been received, in accordance with the tax rules Deferred tax is generally calculated using the income statement method, although the methodology differs There is no direct requirement to prepare consolidated accounts Banks already file financial statements with the Central Bank of Russia that are much closer to IFRSs. An increasing number of Russian companies are now also being required to produce audited annual financial statements that comply with IFRSs, US or other GAAP, in order to meet the following: Reporting and consolidation requirements of a foreign parent Reporting and listing requirements of a foreign stock exchange Information needs of western banks and lenders

In January 2011, Deloitte & Touche CIS (Russia) published МСФО в кармане 2010 (PDF 2,097k, 154 pages) – a Russian translation of IFRSs in your Pocket 2010. Please click here for Information about Deloitte Russia.

2009 Edition

2008 Edition

Update on Russia's IFRS transition

On 25 February 2011, the Russian government signed off an IFRS endorsement procedure. According to the procedure, on 25 November 2011 the Russian Ministry of Finance has endorsed all existing IFRSs, SICs and IFRICs for use in Russia, except for IFRS 9-13 and IFRIC 20.

In its further endorsement decisions for particular standards, the Ministry of Finance will rely on recommendations of a non-governmental expert committee (the National Council on Financial Reporting Standards) and consultations with the Central Bank and the Federal Committee on Securities Markets (FCSM). The supervisory functions over IFRS implementation in Russia are delegated to the FCSM (the Central Bank – for banks).

Consolidated financial statements under IFRS will be required for public interest entities (PIEs). PIEs are defined as: companies with securities traded at stock exchanges, banks and insurance companies. However, the scope of the law is in fact broader as it indicates that “if other Russian laws require preparation/filing/publication of consolidated financial statements, such statements should be prepared according to IFRS.” Therefore, for example, those PLCs that issued their shares by means of open subscription (public offering) to a wide group of investors – even if the shares are not traded – will fall under the requirement to prepare consolidated financials under IFRS.

The date of transition to IFRSs will be 1 January 2011, with the first full set of IFRS financial statements covering 2012 calendar year (with 2011 comparatives), for the following entities (if first-time adopters):

1. Lending agencies (banks, etc.)
2. Insurance companies
3. Issuers with securities traded on stock exchanges
4. Issuers with non-traded securities — with prospectuses registered by the FCSM for:
1. public offerings (open subscription) of securities, or
2. private sale (closed subscription) of securities to > 500 investors

Issuers in category 4 having less than 500 shareholders may be exempt from the requirement to prepare consolidated financial statements if exemption is approved by >3/4 of shareholders and by the FCSM.

For issuers in category 3 but:  

1. Only due to traded bonds; or
2. Already preparing financial statements under US GAAP

the date of transition to IFRSs will be 1 January 2014, with the first full set of IFRS financial statements covering 2015 calendar year (with 2014 comparatives).

Under Russian Law the consolidated annual IFRS financial statements should be audited, presented to the shareholders and filed with the FCSM (or the Central Bank for banks) within 120 days from the year end (approximately by May 1 of the following year). There is also a requirement to publish (e.g., in the Internet) such financial statements.

Please note that IFRSs in Russia do not replace national financial reporting standards – preparing consolidated financial statements under IFRSs does not lift the requirement to prepare standalone financial statements under the Russian statutory rules.

Click for more information:

• 25 November Russia's Ministry of Finance Statement (in Russian, DOC 42k)
• Amended Russian Law on Securities Markets (in Russian, DOC 688k)

Russian translations of amendments to IAS 1

Russian translations of new and revised standards

The IFRS Foundation has announced the publication of translations of six new and revised standards into Russian. The translated standards are the "package of five" new and revised standards addressing the accounting for consolidation, involvements in joint arrangements and disclosure of involvements with other entities published by the IASB in May 2011, IFRS 13 Fair Value Measurement published in May 2011 and the amended IAS 19 Employee Benefits published in June 2011.

All translations are available on the IASB's New and revised standards webpage (eIFRS subscribers only).

IFRS Foundation publishes Russian translations

The IFRS Foundation has announced the publication of Russian translations of:

• the requirements of every IFRS as issued (eIFRS/comprehensive subscriber access only)
• requirements of the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs) 2009 (available to all registered users of the IASB's website).

The translations were foreshadowed in our 10 November 2010 article and are designed to support IFRS adoption in Russian-speaking countries. In February 2011, the Russian government signed off an IFRS endorsement procedure whereby IFRSs will be endorsed for use in Russia by the Ministry of Finance (see our earlier story).
 

IFRSs to be partially adopted in Russia in 2012

On 25 February 2011, the Russian government signed off an IFRS endorsement procedure (Russian / English). According to the procedure, IFRSs will be endorsed for use in Russia by the Ministry of Finance.

While the government decree does not have any implementation dates in it, the Minister of Finance commented to the media that he expects the currently existing IFRSs to be endorsed in Russia before the end of 2011. In that case the date of transition to IFRSs for Russian first-time adopters will be 1 January 2012, with the first full set of IFRS financial statements covering 2013 calendar year (with 2012 comparatives).

IFRSs in Russia will not replace national financial reporting standards – preparing consolidated financial statements under IFRSs will only be required for companies with publicly traded securities, banks and insurance companies – and standalone financial statements of these entities will still be prepared under statutory rules.

In its endorsement decisions for particular standards, the Ministry of Finance will rely on recommendations of a non-governmental expert committee (still to be created) and consultations with the Central Bank and the Federal Committee on Financial Markets (FCFM). The supervisory functions over IFRS implementation in Russia are delegated to the FCFM.
 

New law promotes adoption of IFRS in Russia

The State Duma of the Russian Federation has passed a Law On Consolidated Financial Statements which had remained untouched since almost the end of 2004. On 17 December 2004 the State Duma actually approved the law in the second reading but no attempts to hold the third and final reading of the law were made. The final reading of the draft law finally took place on 7 July 2010, and Russia’s President Dmitry Medvedev recently signed it into law. The law applies to banks, insurance companies, and all companies that have securities accepted to trades at domestic exchanges. It requires these entities to produce, submit to regulators and publish financial statements in accordance with the International Financial Reporting Standards (IFRS). The Law states that IFRS statements are to be produced in addition to statements under the Russian Accounting Standards (RAS) and not in their stead. Requirements formulated in the new Law will come into effect following a formal recognition from the Government and Central bank. The Law does not present a mechanism or a timeline for such recognition, but it is expected to take place some time between 2012 and 2015.

Russia may delay move toward adopting IFRSs

In our November 2004 update, we reported that the Russian Duma (parliament) had given preliminary approval to a bill requiring corporations with more than one subsidiary to publish financial statements that conform to IFRSs starting either in 2004 or 2005. We noted that two additional votes of the Duma were required before the bill would become law. It now appears that the legislation is stalled in the Duma. A news story in Vedomosti (Russia's top business newspaper, a joint venture of the Financial Times and Wall Street Journal) on 2 February 2005 was titled 'IFRS to be Adjourned' and stated that "the effort has come to a standstill". A few weeks later (22 February 2005), an editorial in Vedomosti said that neither the business community nor government is ready for transition to IFRS because "there are no incentives for transparency and there are technical difficulties for implementation that may cause chaos in the reporting rather than increase investment attraction". The editorial also questioned the quality of current IFRS implementation by Russian banks, which have been required to use IFRSs since third quarter 2004.

Russia moves toward adopting IFRSs

On 29 October 2004, the Duma (parliament) gave preliminary approval to a bill requiring corporations with more than one subsidiary to publish financial statements that conform to International Financial Reporting Standards within six months of the end of their financial year. All companies will still have to report unconsolidated results to Russian standards. Two additional votes of the Duma are required before the bill would become law. The bill as passed calls for companies to report under IFRSs as of 2004. It may be changed to a 2005 effective date before final adoption. Some large Russian companies already report under IFRSs. Others currently use US GAAP. The US GAAP companies will have until 2008 to switch to IFRSs.

Russian Vice-Premier and Finance Minister Alexei Kudrin has announced government approval of a plan to require all listed holding companies in Russia to prepare consolidated financial statements using IFRS starting in 2004. The individual company financial statements of members of the group would continue to be prepared using Russian GAAP. For banks, not only would consolidated statements under IFRS be required starting in 2004, but also individual banks will have to prepare IFRS financial statements in addition to Russian GAAP statements. IFRS reporting would be extended to additional classes of companies in stages through 2007, though not to small companies. At the same time, the Finance Ministry will work to bring Russian GAAP more in line with international accounting standards.

• Going concern
• Continuity of accounting principles
• Prudence
• Recognition of income and expenses on a cash basis
• Substance over form
• True and fair view of the financial statements

The main difference between Russian Accounting Standards (RAS) and IAS for banks and credit institutions is that income and expenses are accounted for on a cash basis under RAS. Income is recognised when cash (or other consideration) is received and expenses are recorded at the date the payment is made, with some exceptions. Services paid for are recorded in the income statement on receipt of formal supporting documents confirming that services have been received.The CBRF has announced that it will require the use of IAS for all banks from 2004, however, this proposal has not yet been finalised. In addition, an instruction on calculating and recording provisions against possible losses on loans, securities, other assets and off-balance sheet commitments was made obligatory for all credit institutions operating in the Russian Federation.

As for non-financial companies, following a decision to move to IAS in 1998, the Ministry of Finance of the Russian Federation continues to update and issue new RAS modelled on IAS. However, most RAS (or PBU as they are called in Russian) still differ in many significant respects from IAS. Recently, a new PBU was issued 'Accounting for Loans and Costs of Borrowings' effective 1 January 2002. In addition, revisions have been made to PBU on 'Accounting for Inventory', effective 1 January 2002 and 'Accounting for Property, Plant and Equipment' effective for all financial statements issued in 2001.

The Ministry of Finance of the Russian Federation has responsibility for instituting reform to Russian Accounting Standards (RAS) applicable for all organisations, except those that are required to report to the Central Bank of the Russian Federation.

Beginning in 1995, but mostly since 1998, the Ministry of Finance instituted revisions in an effort to account for transactions under more internationally accepted methods. For example, accounting for revenue under the accrual method has been introduced and accruing expenses incurred but not paid is now required in certain situations. Specifically, 14 provisions on accounting (termed PBU) have been issued. These PBUs include:

• Accounting Policy (PBU 1/1998)
• Accounting for Construction Contracts (PBU 2/1998)
• Accounting for Assets and Liabilities Denominated in Foreign Currency (PBU 3/2000)
• Financial Statements (PBU 4/1999)
• Accounting for Inventory (PBU 5/1998)
• Accounting for Property, Plant and Equipment (PBU 6/1997)
• Post-Balance Sheet Events (PBU 7/1998)
• Contingencies (PBU 8/1998)
• Incomes of an Enterprise (PBU 9/1999)
• Expenses of an Enterprise (PBU 10/1999)
• Related Party Disclosures (PBU 11/2000)
• Segment Information (PBU 12/2000)
• Accounting for Government Assistance (PBU 13/2000)
• Accounting for Intangible Assets (PBU 14/2000)

However, even with the issuance of these accounting policies, fundamental differences still remain with internationally accepted methods. While the PBUs may be similar to IAS, important differences still exist. In addition, differences still exist with respect to wholly owned subsidiaries as, under RAS, a subsidiary company does not have to be consolidated.