Update on Russia's IFRS Transition
On 25 February 2011, the Russian government signed off an IFRS endorsement procedure. According to the procedure, on 25 November 2011 the Russian Ministry of Finance has endorsed all existing IFRSs, SICs and IFRICs for use in Russia, except for IFRS 9-13 and IFRIC 20.
In its further endorsement decisions for particular standards, the Ministry of Finance will rely on recommendations of a non-governmental expert committee (the National Council on Financial Reporting Standards) and consultations with the Central Bank and the Federal Committee on Securities Markets (FCSM). The supervisory functions over IFRS implementation in Russia are delegated to the FCSM (the Central Bank – for banks).
Consolidated financial statements under IFRS will be required for public interest entities (PIEs). PIEs are defined as: companies with securities traded at stock exchanges, banks and insurance companies. However, the scope of the law is in fact broader as it indicates that “if other Russian laws require preparation/filing/publication of consolidated financial statements, such statements should be prepared according to IFRS.” Therefore, for example, those PLCs that issued their shares by means of open subscription (public offering) to a wide group of investors – even if the shares are not traded – will fall under the requirement to prepare consolidated financials under IFRS.
The date of transition to IFRSs will be 1 January 2011, with the first full set of IFRS financial statements covering 2012 calendar year (with 2011 comparatives), for the following entities (if first-time adopters):
1. Lending agencies (banks, etc.)
2. Insurance companies
3. Entities with securities traded on stock exchanges/trading systems.
Issuers with non-traded securities — with prospectuses registered by the FCSM for:
a. public offerings (open subscription) of securities, or
b. private sale (closed subscription) of securities to more than 500 investors (unless an issuer has less than 500 shareholders and an exemption from filing is approved by more than 3/4 of shareholders and by the FCSM).*
* For those in category 3 but a) Only due to traded bonds; or b) already preparing financial statements under US GAAP. The date of transition to IFRSs will be 1 January 2014, with the first full set of IFRS financial statements covering 2015 calendar year (with 2014 comparatives).
Under Russian Law the consolidated annual IFRS financial statements should be audited, presented to the shareholders and filed with the FCSM (or the Central Bank for banks) within 120 days from the year end (approximately by May 1 of the following year). There is also a requirement to publish (e.g., in the Internet) such financial statements.
Please note that IFRSs in Russia do not replace national financial reporting standards – preparing consolidated financial statements under IFRSs does not lift the requirement to prepare standalone financial statements under the Russian statutory rules.