Amendments to the Law of Ukraine "On Accounting and Financial Reporting in Ukraine" are planned

June 15, 2021 In accordance with the requirements of the Law of Ukraine “On Access to Public Information”, the Ministry of Finance of Ukraine announced on its official website the publication of the draft Law of Ukraine “On Amendments to the Law of Ukraine“ On Accounting and Financial Reporting in Ukraine ”(Reg. № 6244) .

As stated in the Notice on the promulgation of the draft Law, the Draft Law proposes:

introduce categories of groups of the parent company and its subsidiaries;

exempt from mandatory preparation and submission of consolidated financial statements, in addition to small groups, also medium-sized groups;

to improve certain norms on the submission of financial statements prepared in accordance with international financial reporting standards on the basis of taxonomy of financial statements in a single electronic format;

clarify the provisions on disclosure of consolidated financial statements;

improve the provisions on primary documents.

As noted by the Ministry of Finance of Ukraine in the news from 10.11.2021, changes are aimed at the practical implementation of European legislation, the adoption of these changes will not only ensure the implementation of Ukraine's commitments to implement the provisions of EU Directive № 2013/34 / EU, but also improve the legal framework for accounting and financial reporting, which will simplify doing business, transparency of financial reporting and a positive investment climate in Ukraine.

Thus, the Bill 246244 is published on the official website of the Ministry of Finance of Ukraine at: https://www.mof.gov.ua/ in the section "Draft regulations" of the section "Legislation", which also contains a comparative table of the current Law of Ukraine "On access to public information" and changes to it.

Consider the proposed changes in more detail.

Introduction of categories of groups of the parent company and its subsidiaries

Let's start with the fact that the Bill proposes to supplement Article 1 of the Law of Ukraine "On Accounting and Financial Reporting in Ukraine" with the following definition: a group is a parent company and all its subsidiaries.

Definitions of "parent company", "subsidiaries" are given in Article 12 of the Draft Consolidated Financial Statements, which states that for the purposes of this Law a group of legal entities consisting of an enterprise that controls other enterprises (parent company) and enterprises controlled (subsidiaries), may belong to small, medium or large groups.

Further, the Bill provides definitions for small, medium and large groups.

Small groups are groups consisting of the parent company and its subsidiaries, which are included in the consolidated financial statements, if their consolidated indicators at the date of preparation of the annual financial statements do not exceed two of the following criteria:

book value of assets - up to 4 million euros;

net income from sales of products (goods, works, services) - up to 8 million euros;

average number of employees - up to 50 people.

Medium groups are groups that do not meet the criteria for small groups consisting of the parent and its subsidiaries, which are included in the consolidated financial statements, if their consolidated figures at the date of preparation of the annual financial statements do not exceed two of the following criteria:

book value of assets - up to 20 million euros;

net income from sales of products (goods, works, services) - up to 40 million euros;

average number of employees - up to 250 people.

Large groups are groups consisting of the parent and its subsidiaries, which are included in the consolidated financial statements, if their consolidated indicators at the date of preparation of the annual financial statements meet two of the following criteria:

book value of assets - more than 20 million euros;

net income from sales of products (goods, works, services) - more than 40 million euros;

the average number of employees is over 250 people.

Also, the draft states that the official hryvnia exchange rate against foreign currencies (average for the period), calculated on the basis of the National Bank's exchange rates set for the euro during the respective year, is used to determine compliance with the criteria set in euros.

If a group of legal entities, one of the above categories of groups on the consolidated indicators at the date of preparation of annual financial statements for two consecutive years does not meet the above criteria, it belongs to the appropriate category of the group.

The draft law amends the exemption from mandatory preparation and submission of consolidated financial statements, in addition to small groups, also medium-sized groups 

Improving certain rules for the submission of financial statements prepared in accordance with international financial reporting standards based on the taxonomy of financial statements in a single electronic format 

in this context, the Bill proposes changes to the procedure for reporting to the following enterprises:

- enterprises of public interest (except for large enterprises that are not issuers of securities), public joint stock companies, natural monopolies in the national market and economic entities operating in the extractive industries

- large enterprises that are not issuers of securities, and medium-sized enterprises

- other financial institutions and non-state pension funds belonging to micro and small enterprises

- parent companies of a large group that do not belong to the category of large enterprises (except for investment entities that do not prepare consolidated financial statements in accordance with international standards)

- parent companies that are both subsidiaries and do not submit consolidated financial statements in accordance with the requirements of national accounting regulations (standards) or international standards

Clarification of the provisions on disclosure of consolidated financial statements

The draft law specifies that the above-mentioned enterprises are required to publish annual financial statements and annual consolidated financial statements on their website or on their website (in full).

Improving the provisions on primary documents.

The main point in this provision is the addition of part 2 of Art. 9 of the Law of Ukraine "On Accounting and Financial Reporting in Ukraine" norm that the primary documents drawn up in electronic form by the information and telecommunication system of the business entity without the physical participation of responsible persons are used in accounting provided that the electronic document qualified electronic seal of such business entity in compliance with the requirements of the Law of Ukraine "On electronic trust services".

It is also proposed to exclude the alternative interpretation of the obligatory requisites of primary documents by excluding the phrase "unless otherwise provided by separate legislative acts of Ukraine". That is, the norm of the Bill №6244 is proposed as an imperative, which clearly defines the mandatory details of primary documents and does not allow to resort to alternative interpretations that may be contained in other legislative acts. The details of the primary documents of the Bill almost do not affect, they are:

document name (form);

date of compilation;

the name of the enterprise on whose behalf the document was drawn up;

the content and scope of the business transaction, the unit of measurement of the business transaction;

positions and surnames of persons responsible for the implementation of the business transaction and the correctness of its design;

personal signature or other data that allows to identify the person who participated in the transaction.

Of all the details, only the names of the persons responsible for the transaction are added.

Also, the Draft Law stipulates that depending on the nature of the business transaction and the technology of accounting information processing, additional details may be included in the primary documents.

The described Bill is being considered by the Verkhovna Rada of Ukraine. So, we are following its consideration by the Parliament. It is planned that in case of adoption this law will come into force from the date of its publication.