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24.02.2011: Double-entry bookkeeping not necessary for small businesses in Ukraine

This first sounds like an April fool’s joke (let alone the fact that changes to the accountancy legislation are coming into force precisely on 1 April 2011) but it looks like there’s no mistake here. Ukrainian lawmakers, desperately trying to harmonize the new Tax code and accounting rules, introduced amendments to the Accounting Standard (UAS) 25 “Financial accountancy of a small business entity” which contradict one of the most fundamental principles of the whole system.

So, what’s new here (and what the standard is all about) is that its provisions are to be applied for preparation of financial accountancy by small business entities, which means legal entities recognized as such by the legislation, with the exception of mutual funds, insurance companies, banks, pawnbrokers, or other credit institutions, or non-banking financial institutions engaged in currency exchange, production or import of excisable goods, also entities where 25% of capital belongs to other companies which are not small businesses.

The rules are also applied to offices of foreign economic agents - of course, if they correspond to the notion of a small business entity.

The 25th standard may be also used by small businesses (legal entities) if they meet criteria of the new Tax code (section 154.6) and are allowed to apply simplified accounting for expenses and revenues.

Small business entities which are allowed to apply simplified methodology for their revenues and expenses may recognize non-current assets only at historic cost without depreciation and consequent revaluation at fair value. They do not create reserves on expenses and payments (such as employee benefits, guarantee payments, etc.) and they only recognize corresponding expenses in the period they are incurred. Those companies also recognize revenues and expenses correspondingly to the Tax code, which means that if the latter doesn’t recognize as such revenues or expenses, then those amounts are applied by companies directly to after-tax financial results.

Finally, small business entities which are allowed to apply simplified methodology and which are not registered VAT payers are allowed to systemize information contained in primary accounting documents (like accounting registers, for example) without double-entry bookkeeping.


Source: Financial Accountancy and Audit

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