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    Country by Country Financial Reporting and Auditing Framework

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    Russia – Crowe Horwath Rosexpertiza LLC (prepared January 2015)

    Preparation of and Filing of Statutory Financial Statements

     

    Commercial and not-for-profit entities are required to issue financial statements in accordance with the Russian Accounting Standards.

     

    Subsidiaries (representative offices) of foreign and international organizations located on the territory of the Russian Federation have the right not to keep accounting records in accordance with the Russian rules. They prepare financial statements under Russian rules only if it is provided under the accounting policies.

     

    The calendar year starting from 1 January and ending on 31 December inclusively is the reporting period for annual financial statements.

     

    Interim financial statements are prepared in cases stipulated by:

    • Russian legislation (e.g. such statements are mandatory for listed companies and insurance companies);
    • Contracts (e.g. credit contract with a bank);
    • Constituent documents;
    • Shareholders' decisions.

    Interim financial statements are drawn up monthly or quarterly, on a cumulative total from the beginning of the year within 30 days after the end of the reporting period.

     

    Annual financial statements of commercial organizations comprise the balance sheet, the statement of profit or loss and other comprehensive income and explanatory notes to the financial statements. Interim financial statements include only the balance sheet and the statement of profit or loss and other comprehensive income.

     

    Annual financial statements are submitted to the Federal State Statistic Service and to tax authorities by 31 March of the year following the reporting period.

     

    Along with the financial statements prepared in accordance with Russian rules, a number of organizations must submit financial statements prepared in accordance with International Financial Reporting Standards (hereinafter, IFRS) adopted by the Russian Federation. This applies to the following entities:

    • banks;
    • non-state pension funds;
    • insurance companies (with the exception of organizations carrying out activities related to compulsory medical insurance);
    • management companies of investment funds, mutual investment funds and non-state pension funds;
    • clearing organizations;
    • federal state unitary enterprises, the list of which is approved by the Government of the Russian Federation;
    • federal state-owned public companies, the list of which is approved by the Government of the Russian Federation;
    • other listed companies.

    Groups of companies prepare consolidated financial statements either voluntary or due to the legal requirements. The groups of companies required to prepare consolidated financial statements are defined by the Law of the Russian Federation "On the Consolidated Financial Statements" (is consistent with the list of companies required to prepare IFRS financial statements).

     

    Consolidated financial statements are prepared in accordance with IFRS and provided to the participants (shareholders, incorporators) or to the owners of the property, and in certain cases, to the Central Bank of the Russian Federation.

     

    The following entities must publish their annual financial statements:

    • joint stock companies;
    • limited liability companies in the event of a public offering of bonds and other securities;
    • the entities required to prepare annual financial statements in accordance with IFRS (including those preparing consolidated financial statements).

    Financial Reporting Framework

     

    Entities prepare financial statements in accordance with the Russian Accounting Standards.

     

    Russia has adopted the Accounting Reform Programme aimed to prepare financial statements in accordance with IFRS. Under this Programme, a number of Russian accounting standards have already been adapted to requirements of IFRS, new standards are being prepared as well.

     

    Since the accounting reform has not been completed, certain accounting methods are missing in the Russian standards. In such case entities may develop their own standards guided by IFRS.

     

    Entities that are required to prepare financial statements according to IFRS, follow those rules.


    Audit Requirements

     

    Annual financial statements are subject to statutory audit in the following cases:

    • the entity is a joint-stock company;
    • listed companies;
    • the entity is a bank, professional participant of the securities market, insurance company and others;
    • the entity's sales exceed 400 million rubles or the amount of assets on the balance sheet as at 31 December of the previous year exceeds 60 million rubles;
    • the entity publishes its consolidated financial statements;
    • the entities where the state interest in the entity's capital is at least 25 %.

    The above-listed companies file annual financial statements with the Federal State Statistic Service together with the auditor's report. If the auditor's report is not issued by the time of submitting the financial statements (31 March), it shall be submitted within 10 working days from the date of its issue, or by 31 December of the year following the reporting one.


    Auditing Standards

     

    The audit activity is carried out in accordance with:

    • The Law "On Auditing"; 
    • International Auditing Standards developed by the International Federation of Accountants and promulgated by the Russian Government (currently officially not recognized in the Russian Federation);
    • Federal Auditing Standards promulgated by the Russian Government or by the Ministry of Finance (valid until recognition of the International Auditing Standards in the Russian Federation);
    • Code of Ethics for Professional Accountants;
    • Rules of independence of auditors and audit firms.

    Ethical Framework

     

    Code of Ethics for Professional Accountants is a code of conduct, which is mandatory for audit firms (auditors) promulgated by the Audit Council by the Ministry of Finance.


    Audit Regulation

     

    According to the Auditing Standards, any audit firm (any auditor) is required to establish and comply with the rules of the internal quality control.

     

    In addition to the internal control, any audit firm (any auditor) is subject to the external quality control.


    External Monitoring

     

    Audit firm's (auditor's) compliance with the Federal Law "On Auditing", auditing standards, independence rules and Code of Ethics for Professional Accountants is subject to external quality control.

     

    The external quality control of audit firms (auditors) is conducted by the Self-Regulatory Organizations of auditors - non-profit organizations established under the terms of membership in order to ensure conditions for the auditing activity.

     

    Inspections may be both scheduled and unscheduled. A complaint filed to a self-regulatory organization about the actions of an audit firm (auditor), violating the requirements of the Federal Law "On Auditing", standards, independence rules and professional ethics may serve as a basis for an unscheduled quality control inspection of the audit firm (auditor).

     

    Additionally to self-regulatory organizations, external quality control of audit firms may be performed by the Federal Agency of Financial and Budgetary Oversight (Rosfinnadzor) in case of audit of the following entities:

    • listed companies;
    • banks and insurance organizations;
    • non-state pension funds;
    • the entities where the state interest in the entity's capital is at least 25 %;
    • state corporations;
    • state-owned companies;
    • entities preparing consolidated financial statements.


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    London, United Kingdom
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