On 30 October 2017 the President of Ukraine signed amendments to the Law on Financial Accounting and Reporting (the “Amendments”) aimed at harmonising Ukrainian legislation with EU Directive No. 2013/34/EU. The changes introduced by the Amendments, inter alia:
- amend and enhance the list of common definitions,
- introduce a new classification of enterprises depending on their size,
- establish special increased compliance requirements applicable to “enterprises of public interest”,
- revise the list of principles on which financial accounting is based,
- allow parallel accounting in Ukrainian and foreign currency,
- clarify rules for engaging outsourced accountants,
- revise terms for filing and publishing financial statements for different types of enterprises.
Implementing the Amendments is an important step towards Ukraine’s euro-integration. It will allow Ukrainian subsidiaries of multinational enterprises to bring their local accounting systems closer to internationally acceptable standards.
The Amendments are expected to enter into force on 1 January 2018, except for provisions establishing new terms of publishing annual financial statements, which are expected to enter into force on 1 January 2019.
Below is an overview of the most significant changes brought by the Amendments.
1. NEW CLASSIFICATION OF ENTERPRISES
The Amendments establish a new system of classification of enterprises, depending cumulatively on their (i) balance sheet value of assets, (ii) net income, and (iii) average number of employees.
In order to fit into a particular category, an enterprise must meet at least 2 of the 3 thresholds set below:
| | Balance Sheet Value of Assets, EUR | Total net income per annum, EUR | Average number of employees |
| Microenterprises | < 350,000 | < 700,000 | < 10 |
| Small enterprises | < 4 mln | < 8 mln | < 50 |
| Medium-sized enterprises | < 20 mln | < 40 mln | < 250 |
| Large enterprises | > 20 mln | > 40 mln | > 250 |
The main reason for introducing the new classification of enterprises is to differentiate the requirements for producing, filing and publishing financial statements.
2. ENTERPRISES OF PUBLIC INTEREST
The Amendments introduce a new category of “enterprises of public interest”, for which there are increased compliance requirements. The category includes:
- Listed joint-stock companies,
- Banks,
- Insurers,
- Non-State Pension Funds,
- Other financial institutions (except for those classified as micro- or small enterprises), and
- Large enterprises.
According to the Amendments, enterprises of public interest are obliged to:
- maintain an accounting department with at least 2 employees and headed by a chief accountant,
- appoint a chief accountant with a degree in economics and at least 3 years’ experience,
- keep accounting records and prepare financial statements in accordance with International Financial Reporting Standards,
- publish their audited annual financial statements along with an audit report no later than on 30 April of the year following the reporting year.
3. PREPARING, FILING AND PUBLISHING FINANCIAL STATEMENTS
(a) Consolidated Reporting
The Amendments clarify the obligation to provide consolidated reporting, which is now applicable to enterprises that exercise control over other enterprises. An exemption is envisaged for a group of enterprises whose cumulative indicators do not exceed the thresholds set for small enterprises.
(b) Management Report
The Amendments introduce a new type of reporting document – a “management report” – which should contain financial and non-financial information that characterises the state and prospects of enterprise development and discloses the main risks and uncertainties of its activities.
A management report must be filed together with financial statements. Micro- and small enterprises are exempt from filing a management report. The composition of the management report of medium-sized enterprises may be limited to financial information only.
(c) Publishing Requirements
The Amendments extend the non-confidentiality clause, establishing that an enterprise’s financial statements do not constitute commercial secrets, confidential information or information with restricted access. All enterprises are required to provide copies of their financial statements upon the request of any legal entity or individual.
The Amendments revisit the terms and deadlines for publishing financial statements. They are as follows:
| - Enterprises of public interest (except for large enterprises that are not joint-stock companies) - Public joint-stock companies - Natural monopolies - Enterprises engaged in mining minerals of national importance | Required to publish financial statements, consolidated financial statements and an audit report (full) on their website by 30 April of the year following the reporting year |
| - Large enterprises that are not joint-stock companies - Mid-sized enterprises | Required to publish financial statements and an audit report (full) on their website by 1 June of the year following the reporting year |
| - Other financial institutions, classified as micro- or small enterprises | Required to publish financial statements and an audit report (full) on their website by 1 June of the year following the reporting year |
| - Other micro- and small enterprises | Required to ensure access to their financial statements for legal entities and individuals |
Source:
Draft Law on the amendment of the Law of Ukraine “On Accounting and Financial Reporting in Ukraine” (on the improvement of certain provisions) available at http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=62044 (in Ukrainian)
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