Changes in the Law “On accounting and financial reporting in Ukraine”

The latest changes in Law “On accounting and financial reporting in Ukraine” were adopted by Verhovna Rada on 5th of October 2017 and will be coming into force from the 1st of January 2018 (except two paragraphs).

Adoption of amendments to the law on accounting and financial reporting in Ukraine will have the following effects:

  1. More companies required to publish financial statements, resulting in increased transparency of their activities;
  2. More companies will be required to prepare financial statements in accordance with IFRS, thereby information on the activities of companies will be more understandable for foreign users for future investments in Ukraine;
  3. As many companies will have to publish their financial statements together with an audit report for the first time, such companies need to choose an audit company (First year to be audited may be 2019 year);
  4. Company financial statements will become more transparent.

Adoption of amendments to the law “On accounting and financial reporting” is a step to towards the convergence of Ukrainian accounting and reporting requirements with the requirements of EU directives.

According to these changes:

Criteria for classifying enterprises have been modified:

Criteria Micro company Small company Medium company Large company
Total assets up to EUR 350 000 up to EUR 4 million up to EUR 20 million above EUR 20 million
Net revenue up to EUR 700 000 up to EUR 8 million up to EUR 40 million  above EUR 40 million
Staff up to 10 employees up to 50 employees up to 250 employees above 250 employees

A new definition has been introduced for "public interest enterprises" (PIE). This includes:

  • companies which have issued publicly traded securities;
  • banks, insurance companies, non-state pension funds, other financial institutions (except microfinance and small financial institutions);
  • large companies (as defined by the law).

All PIEs are required to establish an internal accounting team consisting of a minimum of 2 persons and headed by the Chief Accountant. 

Basic requirements for the chief accountant of PIE:

  • Masters (post graduate) degree;
  • more than 3 years’ work experience in finance, accounting and taxation ;
  • no unspent or recorded conviction for committing an offense against property or an economic crime.

*There is currently no legally established mechanism for verifying the conditions mentioned above.

New rules for signing the financial statements in case the entity relies on the services of an accounting firm:

  • first signature – director or other responsible person of entity;
  • second signature – director of accounting company or other responsible person.

Increase in the number of enterprises required to prepare financial statements according to IFRS standards to include:

  • all PIEs;
  • enterprises engaged in mining activities of national importance.

*All companies may voluntarily choose IFRS standards for preparing financial statements.

The number of enterprises required to publish financial statements together with the audit report was increased:

  • by 30th of April on own web page and in media for all PIEs, public joint-stock companies, entities classed as natural monopolies and entities engaged in mining activities of national importance;
  • by 01st of June on own web page only for large companies, medium companies, other financial institutions (micro and small businesses).

Consolidation report should be published in addition.

New specialized report – management report:

  • contains financial and non-financial information that characterizes the state and prospects for development of the enterprise and highlights the main risks and uncertainties of its activities;
  • should be submitted with financial statements;
  • micro and small companies are exempted from the requirement to submit management reports;
  • medium companies are exempted from the requirement to display non-financial information in the management report.
  • Important correction. Otherwise it sounds as if they are prohibited from doing so.

*The form and procedure for preparing and filing such reports will be established in future regulatory acts.

Changes regarding primary documentation:

  • insignificant shortcomings in documents containing information on a business transaction are not grounds for its non-recognition;
  • rights and obligations of the parties arising out of the implementation of a commercial transaction, executed by a primary document are not dependent on such information having been noted in registers and accounting.

Consolidation report – new additional rule starting 01 January 2018:

Companies that control other companies (except PIE) may not submit consolidated financial statements if, together with the controlled enterprises, their indicators do not exceed two of the following criteria as of the annual financial reporting date:

  • Total assets - up to EUR 4 million;
  • Net revenue - up to EUR 8 million;
  • Staff - up to 50 people.

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