RUSSIAN ACCOUNTING

First Adoption of IFRS in Russia



First Adoption of IFRS in Russia

Introduction

Many companies, due to international operations and transaction have been converting their Financial Reporting Standards from GAAP to IFRS. For this reason, they need to apply IFRS-1 i.e. First time adoption of International Financial Reporting Standards. The issuance of IFRS-1 by IASB is to assist companies with the conversion process of current GAAP to IFRS.

The paper focuses on Russian based company aimed at translating its financial statements into IFRS for the first time. Hence, the paper explains main process of first adoption of IFRS along with the preparation of financial statements in order to highlight main differences between GAAP adopted by Russia and IFRS (Alexander & Britton, 2012, p. 305).

Discussion

Part 1: Differences between Russian Accounting Principles (RAP) and IFRS

The procedure of Russian Accounting has been conquered more via Tax Regulation than Commercial Standards. Since, there are so many documents missing in various transaction adopted by Russian GAAP, that has been essential to report in IFRS, this has resulted economical biasness.

Lets looks the main difference between the Russian Accounting Principle - GAAP or RAP and International Financial Reporting Standards - IFRS. Financial information by IFRS will owned few characteristics that will be useful. In order words, information will relevant, understandable, comparable and reliable (Reback & Hines, 2012, p. 212).



Source: KPMG - (2005, pp. 6-114)

Russian GAAP

IFRS

Bases of Measurement

In RAP, historical cost is considered excluding few specific components of assets such as derivatives and other over the counter market securities. Usually, fair value is used to measure assets.

In IFRS, the bases of measurement are on historical cost. But certain assets might be revaluate such as Property, Plant And Equipment , Intangible assets ( Goodwill, patents, copy rights etc) and investment due to fluctuation in their market value.

Furthermore, biological assets as well as Derivatives also revaluated in order to determine gain or loss.

Full set of financial statements

RAP requires preparing Income Statement, Balance Sheet, Change in equity Statement and Cash Flow Statement along with notes to financial statements. This note to financial statements further comprises of accounting policies and auditors comments.

Nevertheless, in some cases, Statement of changes in equity and Cash slow statements is not a requirement (p. 12-15).

In IFRS, it is necessary for a company to prepare Statement of Comprehensive Income Statement, Financial position Statements, Statement of change in Equity and Statement of cash flow.

Beside this, a portion of accounting policies, notes and management comments are essential part (p. 12-15).

Financial Statements Format

RAP has recommended a format for financial statements which has to be followed by the company. Annual statement shall be dated at 31st December (p. 11).

IFRS has not stated any standard for financial statements (p. 10)

Elements of financial statements

There is no explanation of any elements of financial statement by RAP.

IFRS has clearly defined assets, Liabilities, equity and income & expenses in the Conceptual Framework of IFRS (p. 8).

Functional currency

RAP has stated any Functional ...