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Approved by the order of the Minister of Finance of the Republic of Tajikistan of May 27, 2004 No. 68

Methodical recommendations about transition to financial accounting according to IFRS

INTRODUCTION

The order of the Government of the Republic of Tajikistan of November 4, 2002 No. 428 "About international accounting standards" for the purpose of further enhancement of system of financial accounting and the reporting in the Republic of Tajikistan, creation of necessary conditions for further development of international backgrounds acknowledged necessary reduction of national standards of accounting (financial) records according to International accounting standards (further IFRS).

Importance of case in point reforming of system of the financial accounting which is one of the most important levers of market mechanism promotes development of productive and profitable enterprises, employment growth, creation of modern commodity markets and services and economic growth of the country.

With introduction in the national economy of the Republic of International accounting standards approaches to creation of accounting (financial) records change. These Methodical recommendations are developed for the purpose of rendering the practical help to subjects during transition from the operating system of accounting to IFRS.

Transition to IFRS should be carried out for certain date and the accounting period in order that the provided information stated in accounting records was to useful and clear users.

Considering number of difficulties of transition to IFRS the Ministry of Finance of the Republic of Tajikistan the order of 05.03.2004 No. 28 approved the list of 29 companies of industries of the national economy of the Republic, systems of financial accounting and the reporting making according to the procedure of experiment transfer on IFRS proceeding from the new Chart of accounts, balance of the companies and appendix to it. This order notes that the business entities performing independent transition to IFRS are encouraged.

All subjects begin work on the translation of system of financial accounting and accounting records proceeding from the new Chart of accounts with conversion of indicators of analytical, synthetic accounting and balance with appendices according to the made Methodical recommendations. At the same time any adjustment (change) of accounting records for preceding periods shall be provided as adjustment of balance of retained earnings for the beginning of year (period) at which conversion is carried out. Or the received adjustment in accounting records for the current accounting year (period) shall be provided as adjustment of the income and expenses of current period.

Considering that now subjects keep financial accounting according to requirements of the existing Chart of accounts, the made Methodical recommendations to contain the separate recommendations about conversion for the subjects working on old system of financial accounting and for subjects, passing to IFRS.

GENERAL PART

I. Recommendations about development of accounting policy of the subject

According to IFRS subjects develop own accounting policy proceeding from conditions of the activities.

1.1. The tasks solved by accounting policy.

The management of the subject shall choose and apply accounting policy of the subject so that all financial reporting conformed to all requirements of each accepted International accounting standard and interpretation of Standing committee for interpretations.

In the absence of the specific International standard and interpretation the management uses own judgments for development of accounting policy of the subject. The reporting created according to such accounting policy shall contain, nevertheless, useful information for users, that is to be pertinent and reliable, as well as the reporting constituted based on accepted standards.

1.2. Requirements to disclosure of information in accounting policy.

Accounting policy includes (but it is not limited to it) the following:

revenue recognition,

recognition and methods of charge of depreciation of fixed assets and intangible asset deprication,

capitalization of borrowing costs and other costs,

financial instruments and investments,

lease,

research costs and developments,

inventories,

taxes, including delayed taxes,

charge of reserves,

recalculation of foreign currency,

determination of money and their equivalents,

the principles of the data, including affiliated and associates.

The format of accounting policy can be provided by several Sections, namely:

1. The Section of accounting policy to which changes are made in exceptional cases, including:

- the choice between the main and admissible approaches according to applicable accounting standards;

- methods and methods of financial accounting at the subject;

2. The Section of accounting policy which can be reviewed in connection with change of certain circumstances, including:

specific accounting procedures;

accounting estimates;

working chart of accounts;

document flow (organization of internal control system).

1.3. Changes in accounting policy.

The accepted accounting policy of the subject can be changed according to IFRS 8.

II. Recommendations about development of the working chart of accounts of the subject

To each subject, before carrying out conversion, it is necessary to develop and approve the individual chart of accounts, taking into account specifics and features of its economic activity.

The chart of accounts and Methodical recommendations about its application approved by the order the Ministry of Finance of RT from 5.03.2004g. No. 28, were developed for the purpose of unification and possibility of receipt of comparable information on various subjects, and also for the purpose of explanation to accounting workers of the main approaches in case of reflection of this or that transaction according to requirements of IFRS. If necessary the subject can enter various sub-accounts if it is required by specifics of activities, or the subject wishes to disaggregate even more some transactions for the managerial purposes. However subjects should mean that in case of disaggregation of accounts it is impossible to break the principle underlain in classification of transactions (assets, obligations, the capital) and for this purpose it is necessary to keep the first 3 figures of the account which mean belonging to certain balance sheet item or the report on results of financial and economic activities.

III. Financial reporting of the subject

According to PKI-8 "Application of IFRS for the first time as the main basis of accounting" the financial reporting of the subject prepares on the basis of assumption that the existing Standards were applied always. Therefore the Standards and Interpretations valid for the periods of their first application, shall be applied retrospectively. However standards provide cases when application of retrospective method is inexpedient, or it is impossible:

(a) separate Standards and Interpretations permit or allow other provisions of transition period; or

(b) the size of the adjustment relating to preceding periods cannot be reliably estimated.

Following requirements of standards and interpretations, when carrying out conversion as of January 01, 2004, any adjustment which is result of transition to IFRS shall be considered as adjustment of opening balance of retained earnings.

The consolidated (summary) financial reporting.

The consolidated financial statements are constituted for representation of activities maternal and affiliated enterprises as single organization.

Consolidation highlights:

The reporting is consolidated if the parent entity owns more than 50% of voices in affiliated enterprise.

The reporting is consolidated if the parent entity, having no more than 50% of voices, exercises control under the agreement with other participants, the subject appoints board members, has majority of votes at meetings of the Board of Directors.

The summary reporting shall include all affiliated the company, except for:

the affiliated enterprises acquired for the subsequent resale in the near future;

the affiliated enterprise is effective within strict long-term restrictions which significantly reduce its capability to transfer funds of parent entity.

Main procedures of consolidation.

In case of consolidation the financial reporting maternal and affiliated enterprises shall be constituted for the same accounting period.

The consolidated financial statements shall be constituted on the basis of single accounting policy.

In case of consolidation the financial reporting maternal and affiliated enterprises unite line-by-line by addition of similar items of assets, obligations, the capital, the income and expenses. In case of consolidation it is necessary to consider the following:

book value of investments of parent entity into each affiliated enterprise and part of the capital of each affiliated enterprise, belonging to parent entity is excluded;

if the parent entity holds not 100% shares of affiliated enterprise, then in case of consolidation of the reporting the share of other companies (minority share) in net assets is reflected in the consolidated statements separately from the capital of parent entity;

the net profit in the consolidated statements shall be corrected on the profit falling to the share of minority and to reflect only net profit belonging to owners of parent entity;

the cross liabilities and transactions reflected in the reporting of affiliated and parent entities shall be excluded completely.

 

Section I. PREPARATORY ACTIVITIES

Upon transition to IFRS subjects should execute the following stages:

Develop and approve accounting policy.

Develop and approve the working chart of accounts.

Carry out inventory count of tangible assets and reconciliation of receivables and payables.

Constitute the trial balance.

+--------------------------------------------------------------------+
¦Мероприятия¦       Для субъектов, работающих по "старой системе"    ¦
+-----------+--------------------------------------------------------¦
¦Разработка ¦Следует  разработать и утвердить учетную политику с уче-¦
¦учетной по-¦том рекомендаций, изложенных выше во введении, а в буду-¦
¦литики     ¦щем также  Рекомендаций по формированию учетной политики¦
¦           ¦субъектов, утвержденные  распоряжением Министерством Фи-¦
¦           ¦нансов РТ от 5.03.2004г. №28                            ¦
+-----------+--------------------------------------------------------¦
¦Разработка ¦Остатки по счетам Главной книги на дату конверсии подле-¦
¦рабочего   ¦жат переклассификации. Для этого необходимо разработать ¦
¦плана сче- ¦субъекту свой план счетов. В качестве основы следует ру-¦
¦тов        ¦ководствоваться Планом счетов, утвержденных распоряжени-¦
¦           ¦ем Министерства Финансов РТ от 5.03.2004г. №28. Также   ¦
¦           ¦следует  учесть, что некоторые новые счета не имеют ана-¦
¦           ¦логов в "старой" учетной системе.                       ¦
+-----------+--------------------------------------------------------¦
¦Проведение ¦Каждый  субъект вне зависимости от того, какая методоло-¦
¦инвентари- ¦гическая основа им используется для составления финансо-¦
¦зации      ¦вой  отчетности,  с целью обеспечения достоверности дан-¦
¦           ¦ных, отраженных в финансовой отчетности, а также контро-¦
¦           ¦ля за  сохранностью активов, должен проводить инвентари-¦
¦           ¦зацию как минимум 1 раз в год.                          ¦
¦           ¦Если же инвентаризация не проводилась,  то ее необходимо¦
¦           ¦провести на момент конверсии с целью выявления следующих¦
¦           ¦позиций:                                                ¦
¦           ¦1) выявление  недостач и излишков активов для соответст-¦
¦           ¦вующего отражения этих фактов в финансовой отчетности;  ¦
¦           ¦2) выявление  активов,  потерявших  свои потребительские¦
¦           ¦свойства  для  проведения  соответствующей оценки данных¦
¦           ¦активов в финансовой отчетности;                        ¦
¦           ¦3) выявление активов, не используемых субъектом в произ-¦
¦           ¦водственной деятельность для проведения  соответствующей¦
¦           ¦оценки  в финансовой отчетности и разработке мер по реа-¦
¦           ¦лизации активов.                                        ¦
¦           ¦Следует  учесть, что  помимо инвентаризации материальных¦
¦           ¦активов,  субъектам  необходимо обратить особое внимание¦
¦           ¦на дебиторскую и кредиторскую задолженности с целью под-¦
¦           ¦тверждения остатков задолженности, а также выявления де-¦
¦           ¦биторов, взыскание долгов с которых сомнительно.        ¦
+-----------+--------------------------------------------------------¦
¦Подготовка ¦Подготовить пробный баланс в соответствии с используемой¦
¦перечня ос-¦на момент  конверсии методологической основой и отразить¦
¦татков     ¦в таблице  1 графа "Сальдо счетов баланса до корректиро-¦
¦(пробного  ¦вок" (см. Приложение 1 "Таблица 1 Пересчет (корректиров-¦
¦баланса) на¦ка) баланса на 01 ___ 200  г").                         ¦
¦дату прове-¦                                                        ¦
¦дения  кон-¦                                                        ¦
¦версии     ¦                                                        ¦
+--------------------------------------------------------------------+

SECTION II. TECHNOLOGY OF CARRYING OUT CONVERSION

In the course of conversion remaining balance of balance sheet accounts for date of conversion shall be modified by results of inventory count, is reclassified according to the working chart of accounts of this subject and closed, by transfer of remaining balance into new accounts (is reclassified). In order to avoid duplication of the analysis of the same accounts when carrying out adjustments and their reclassification it is offered where it is reasonable, to combine adjusting entries with reclassification of specific accounts.

Conversion shall be executed according to recommendations "Tables of adjustments of remaining balance of accounts for forming of balance according to requirements of IFRS".

Highlights which should be considered to the subjects working according to "old system" of accounting:

- Change of method of financial reporting preparation.

The subjects working on "old system" could constitute the financial reporting by two methods:

accrual method (the income and expenses are recognized the financial reporting at the time of their origin, but not at the time of payment);

cash method (the income and expenses are recognized at the time of payment).

In case of financial reporting preparation according to IFRS application only of accrual method is allowed. Thus, all subjects which constituted the reporting cash method at the time of transition shall reflect the income and expenses unrecognized earlier in the financial reporting.

When carrying out conversion adjustment of the income and expenses can be required. Any received adjustment shall be provided in the reporting as adjustment of balance of retained earnings on 01 ____ 200 g. At the same time there can be additional tax liabilities (see Appendix 1 the table 7 "Influence of Adjustments of Retained Earnings on Taxes"). Because conversion of financial accounting is carried out as of 01 ___ 200 g, all changes of taxes (increase or reduction) shall be made in the coming year.

When carrying out conversion follows:

1. If necessary to carry out adjusting entries in "old system" of accounting for error correction in estimates of the balance sheet items revealed on preparatory stage. These postings shall be numbered, entered in the special magazine of adjusting entries (see Appendix 1 "The table 2 Magazine of Adjusting Entries on 01 ___ 200 g") and are reflected in the Ledger of "old system" of accounting. Turnovers on adjusting entries shall be grouped and transferred to the table 1 "Recalculation (Adjustment) of Balance on 01 ___ 200 G." the column "Adjustment (the Amount of Turnovers on Adjusting Entries)". The counted balance of balance taking into account adjustments shall be reflected in the table 1 "Recalculation (Adjustment) of Balance on 01 ____ 200 G." the column "The Counted Balance of Balance after Adjustments".

Carry out reclassification of accounts of the trial balance. On each account of the counted balance (the table 1 "Recalculation (Adjustment) of Balance on 01 _____ 200 G." the column "The Counted Balance of Balance after Adjustments") it is necessary to execute reklassifikatsionny posting. These postings shall be numbered, entered in the special magazine of reklassifikatsionny postings (see the Appendix Table 3 "Magazine of Reklassifikatsionny Postings")

Turnovers on reklassifikatsionny postings shall be grouped, transferred to the table 1 "Recalculation (Adjustment) of Balance on 01 _____ 200 G." the column "Closing of Accounts of Balance (Reclassification)" and the table 4 "Balance on 01 ____ 200 G after Conversion" the column "Balance on 01. ____ 200 g after conversion". For convenience of grouping of turnovers on reklassifikatsionny postings it is possible to use table 5 "Group of reklassifikatsionny turnovers for closing of accounts of "old system" and table 6 "Group of reklassifikatsionny turnovers for forming of accounts of "new system" of appendix 1.

Attention!

The balance "Total turnovers on the credit of accounts of "old system" of table 5 shall correspond to balance "Total turnovers on the debit of accounts of "new system" of table 6.

The balance "Total turnovers on the debit of accounts of "old system" of table 5 shall correspond to balance "Total turnovers on the credit of accounts of "new system" of table 6.

4. Balance on new accounts (the table 4 "Balance on 01 ____ 200 G after Conversion" the column "Balance on 01. ____ 200 g after conversion") shall be transferred to the Ledger opened according to the new working chart of accounts as opening balances as of 01 _____ 200.

The table of adjustments of remaining balance of accounts for forming of balance according to requirements of IFRS (for the subjects working on "old system of accounting")

Attention! Additional sub-accounts can be open for disaggregation of accounting on each offered account of new system.

+--------------------------------------------------------------------+
¦№ счета¦Наименование¦Группировка "старых" счетов для формирования   ¦
¦по Пла-¦счета по    ¦  информации по счетам в "новой" системе       ¦
¦ну сче-¦Плану счетов¦                                               ¦
¦тов от ¦от 5.03.2004¦                                               ¦
+-------+------------+-----------------------------------------------¦
¦  10110¦Денежные    ¦Сальдо счета 50  "Касса" в части, соответствую-¦
¦       ¦средства в  ¦щей комментируемому счету. Необходимо из сальдо¦
¦       ¦национальной¦счета 50 "Касса" исключить суммы денежных      ¦
¦       ¦валюте - ос-¦средств, отражающих инвалютную наличность, если¦
¦       ¦таток налич-¦таковая учитывалась на данном счете, и перенес-¦
¦       ¦ных денежных¦ти данную информацию  на  счет  10120 "Денежные¦
¦       ¦средств в   ¦средства в иностранной валюте".                ¦
¦       ¦национальной¦Примечание: не допускается учет иностранной ва-¦
¦       ¦валюте в ка-¦люты на одном счете с национальной валютой.    ¦
¦       ¦ссе.        ¦                                               ¦
+-------+------------+-----------------------------------------------¦
¦  10120¦Денежные    ¦Сальдо счета 50 "Касса": в части, соответствую-¦
¦       ¦средства в  ¦щей комментируемому  счету.  Необходимо  сальдо¦
¦       ¦иностраннной¦счета 50 "Касса" в части  инвалюты  пересчитать¦
¦       ¦валюте - ос-¦по курсу НБТ на дату конверсии и  перенести вы-¦
¦       ¦таток налич-¦веренную сумму  инвалюты, выраженную в национа-¦
¦       ¦ных денежных¦льной валюте, на данный новый счет.            ¦
¦       ¦средств в   ¦                                               ¦
¦       ¦иностранной ¦                                               ¦
¦       ¦валюте в    ¦                                               ¦
¦       ¦кассе       ¦                                               ¦
+-------+------------+-----------------------------------------------¦
¦  10130¦Денежные до-¦Сальдо счета 56 "Денежные документы": в части, ¦
¦       ¦кументы -   ¦соответствующей комментируемому счету.         ¦
¦       ¦имеющиеся в ¦Если субъект использует данный счет для отраже-¦
¦       ¦кассе чеки  ¦ния стоимости собственных акций, выкупленных  у¦
¦       ¦клиентов,   ¦акционеров,  необходимо  стоимость  этих  акций¦
¦       ¦дорожные че-¦списать с данного счета в корреспонденции с но-¦
¦       ¦ки, денежные¦вым  счетом  33040 "Выкупленные собственные ак-¦
¦       ¦переводы,ма-¦ций";                                          ¦
¦       ¦рки государ-¦Если субъект использует данный счет для отраже-¦
¦       ¦ственной по-¦ния  доли участников, приобретенной самим субъ-¦
¦       ¦шлины, выку-¦ектом для передачи другим участникам, необходи-¦
¦       ¦пленные ави-¦мо стоимость  этой доли списать с данного счета¦
¦       ¦абилеты, пу-¦в корреспонденции с новым счетом 33030  "Прочий¦
¦       ¦тевки и дру-¦уставный капитал" - контрсчет "Выкупленная доля¦
¦       ¦гие денежные¦в уставном капитале"                           ¦
¦       ¦документы.  ¦                                               ¦
+-------+------------+-----------------------------------------------¦
¦  10140¦Денежные эк-¦Сальдо  счета 58 "Краткосрочные финансовые вло-¦
¦       ¦виваленты - ¦жения" в части, соответствующей комментируемому¦
¦       ¦суммы инвес-¦счету.                                         ¦
¦       ¦тиций, клас-¦Примечание: информация о денежных  эквивалентах¦
¦       ¦сифицируемых¦приведена в МСФО 7 "Отчеты  о движении денежных¦
¦       ¦как  эквива-¦средств"                                       ¦
¦       ¦ленты денеж-¦                                               ¦
¦       ¦ных средств:¦                                               ¦
¦       ¦краткосроч- ¦                                               ¦
¦       ¦ные, высоко-¦                                               ¦
¦       ¦ликвидные   ¦                                               ¦
¦       ¦вложения

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