RS Main Russia to Get a New Law on Accounting

Russia to Get a New Law on Accounting

March 2011

In mid-January 2011 the State Duma of the Russian Federation passed the first draft of a new law on accounting. This document contains a lot of innovations which both simplify and complicate the work of Russian accountants at the same time. Let us take a closer look at these innovations.

Requirements for chief accountants

Perhaps the most significant innovation introduced in the new law on accounting is that it imposes professional requirements on the chief accountant of a company. Russian legislators have long been trying to settle this issue by introducing various professional certificates for accountants etc. However, the current Russian accounting laws contain no legal requirements for the qualifications of chief accountants and in theory any legally capable person can hold this position in a company regardless of the level of his education or university major.

The new draft law changes this situation. However, requirements are imposed only on chief accountants of companies whose securities are traded on stock exchanges or by other official traders of securities as well as chief accountants of banks, insurance companies and private pension funds. According to the new draft law, the chief accountants of these kinds of companies must have professional higher education with a master’s degree in accounting and audit and must have worked as an accountant (preparing financial statements) or as an auditor for at least three years of the last five calendar years. Under the new law someone who does not have a degree in accounting and audit may also be considered for the position of chief accountant but only on condition that they have some other higher education degree and that they have worked in audit or accounting (preparing financial statements) for at least five years in the last seven calendar years. And a final requirement that must be met by all chief accountants regardless of their education and work experience is that they must have no criminal record involving economic crimes. And as for banks and other credit institutions, their chief accountants must also meet the requirements imposed by the Central Bank of the Russian Federation.

Accounting outsourcing

One of the positive aspects of the new draft law is perhaps the fact that it provides more detailed regulations on how the accounting function should be outsourced. The current law has just one paragraph on this topic. The new law regulates outsourcing in more detail. Thus under the new law any company, except for a bank, may outsource its accounting function to an outside firm. The decision to outsource accounting must be made by the chief executive officer of the company.

Even after the accounting function has been outsourced the chief accountant remains responsible for the company’s accounting

At the same time, even after the accounting function has been outsourced the chief accountant remains responsible for the company’s accounting. This follows from the provisions of the new law that the chief executive officer must always sign the financial statements of his/her company and that in the event of disagreements about whether or not to account for a specific transaction and how to account for it, the chief executive officer will have the final say; the outsourcer must always follow the written instructions of the chief executive officer.

Note

It should be noted that outsourcing various business functions is becoming more and more popular in Russia as a way to cut expenses; it really took off after the 2008 crisis. Currently accounting outsourcing is in high demand, the accounting functions that get outsourced most frequently include payroll, HR accounting, preparation and submission of reports to supervisory authorities. When selecting a firm to outsource their accounting functions, companies usually look first at the outsourcers’ experience, business reputation and their list o references. After all at the end of the day the chief executive officer remains responsible for everything. For more information about the outsourcing services provided to the representative offices of foreign companies by ICLC see section “From problem to solution”.

Every company will have their own primary documents…

The second most important change to be introduced in the new law has to do with primary documents issued by companies. In effect the proposed law scraps standardised document forms that Russian accountants are so used to. According to the draft law, the forms of accounting documents will be approved by the chief executive officer of each company. In other word, once the law comes into effect, every company will be free to use its own forms and documents. It should be reminded that at the moment companies may use their own forms only for documents for which no state-approved standardised forms exist.

The authors of the new law haven’t stopped here, global changes will be made to the process of regulating and standardising accounting in Russia. You can read more about it in ‘Regulations to be replaced with Standards’.

Aleksei Krainev,
Exclusively for Russian Survey RS