Doing Business in Russia
Doing Business in Russia 45
standards, companies have the right
to develop them independently and to
adopt them by including them in the
decision they have taken regarding their
accounting policies.
Branches and representative offices
of foreign companies located in the
Russian Federation are allowed to
maintain their accounting on the
basis of regulations established in the
country in which the foreign company
resides, unless these regulations
contradict IFRS. However, branches and
Representative Offices are still required
to submit annual activity reports to
the tax authorities along with their tax
returns.
The key accounting principles in the
Russian Federation are:
Separate entity principle: in
accordance with which the assets
and liabilities of the company are
separated from the assets and
liabilities of the owner or the assets
provided to the entity by other
persons.
- Going concern principle: in
accordance with which it is assumed
that the company will continue
operating in the foreseeable future.
Principle of accounting policy
consistency: the accounting policy
selected by the company is applied
consistently from one reporting
year to another, and a change in the
accounting policy is only possible if
there are changes in the legislation
of the Russian Federation or in
accounting regulations, or if new
accounting methods are developed
by the company, or there are
significant changes in operating
conditions.
The matching principle: this
states that business operations are
recorded in the reporting period in
which they occur, regardless of when
receipts or payments related to these
transactions are actually made.
Principle of timeliness and
completeness in recording
transactions: the accountant should
make records according to the
timelines set and reflect all of the
transactions made.
Prudence principle: the accountant
should record liabilities and expenses
rather than assets and income and
should not allow for any hidden
reserves.
Substance-over-form principle:
transactions should be accounted for
based on their economic substance
and business circumstances rather
than their legal form.
Principle of non-contradiction:
analytical accounting data should
be identical to synthetic accounting
data on the last calendar day of each
month.
Rationality principle: application of
a rational accounting method based
on the company's size and business
environment.
Materiality principle: data on
material assets, liabilities, income,
expenses and transactions should
be recorded separately if this
information is essential for evaluation
of the entity's financial position or
financial results.
Companies use a working chart of
accounts developed on the basis of
the centrally (government) established
Chart of Accounts.
All business operations performed by
companies should be supported by
relevant source documents in Russian.
These documents are the primary
accounting documents underlying
the financial statements. Source
or liquidated. If required by law, a
commercial legal entity is required to
prepare and submit interim financial
statements for periods that are shorter
than a financial year. Annual financial
statements, except for when directed
otherwise by legislation, include the
following:
The balance sheet;
Financial result reports;
Appendices to the above two reports
containing additional information
on changes in equity, cash flows,
movements of borrowed funds,
changes in accounts receivable and
payable, notes, etc;
Tax returns and audit opinions are not
included in the financial statements.
The information in the financial
statement for the reporting year and the
previous two years must be presented
in comparable formats. A company's
financial statements must include
the results of the activities of the
company's branches, representative
offices and other structural
subdivisions.
If the company has subsidiaries or
associated companies, consolidated
financial statements must be prepared
for them in addition to the company's
own financial statements. The
consolidated financial statements must
include figures from the reports of
companies located both in the Russian
Federation and abroad.
documents prepared in other languages Companies submit annual financial
should be translated into Russian on a
line-by-line basis.
Statutory reporting
requirements
A company's financial statements must
reflect the company's economic and
financial position fully and reliably along
with any change in this position and
the financial results of the company's
activities.
In accordance with Russian legislation,
commercial legal entities prepare
annual financial statements for
each financial year. A financial year
is the calendar year (1 January-3
-31
December) with exceptions for when
a legal entity is registered, reorganised
statements to:
Shareholders;
Statistics authorities;
Tax authorities;
Other interested users (if the
shareholders so decide).
Currently, according to the Federal Law
"On Consolidated Financial Reporting",
only credit, insurance and listed Russian
companies are obliged to consolidate
financial reporting in accordance with
the version of IFRS which was officially
adopted and published by the Ministry
of Finance of the Russian Federation.
Considering the fact that a typical
company's financial statements are
prepared in accordance with Russian
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