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Russian GAAP Update

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29 Jan 2002

The Russian Ministry of Finance sets accounting regulations for non-financial institutions. Entities governed by the Central Bank of the Russian Federation (CBRF) are banks and credit institutions.

The CBRF has responsibility for setting their accounting and reporting principles, closely monitor their activity on a regular basis, setting minimum capital requirements and other obligatory prudential ratios, and issuing licenses. The CBRF has declared the following general accounting principles:

  • 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.

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