II. Read the text and make up the summary. Accounting and Financial Reporting in Ukraine

Accounting in any country reflects the level of its economic development to some extent As a dynamic system, accounting is being constantly improved in response to changes in the practice of managing economic activities and informational needs of users.

In times of command economy the main purpose of accoun­ting was to control the safety of state property. Since the State was almost the sole owner, accounting was subordinated to the State as to the main user.

Transition to the market economy has created new targets and assigned other functions to accounting. This resulted in accounting reforms in Ukraine as a result of bringing the economy into compliance with market requirements.

A new phase of accounting development in Ukraine began on January 1,2000, when the Law 'On Accounting and Financial Reporting in Ukraine' and the Accounting Standards (Provisions) of Ukraine (ASU) came into force. The Verkhovna Rada of Ukraine adopted the Law on July 16. This day is now celebrated as a professional holiday, the Accountant's Day.

The Law of Ukraine "On Accounting and Financial Reporting in Ukraine", dated July 16, 1999, No. 996-XIV (hereafter — the Law on Accounting) determines legal foundations for regulating, organizing and performing the accounting and preparing financial statements in Ukraine. It applies to all legal entities founded in compliance with the legislation of Ukraine, irrespective of their organizational and legal forms, as well as forms of ownership. It also relates to representative offices of foreign economic entities, which are liable to perform the accounting and present financial statements in accordance with the legislation.

In compliance with the Law, the purpose of accounting and financial reporting is to provide full, true and unbiased information on financial situations, activity results and cash flow of an enterprise.

Accounting and financial reporting in Ukraine are founded on the following basic principles: prudence, completeness, autonomy; consistency; going concern, charging and conformity of income and expenses, substance over form, historical (actual) cost, monetary unit principle, periodicity.

Accounting is performed by an enterprise in the currency of Ukraine. Financial, tax, statistical and other types of reporting prepared in monetary terms are grounded on accounting data.

The methodology of accounting and financial reporting is regulated by the Ministry of Finance of Ukraine, which approves the Accounting Standards of Ukraine (hereafter -ASU), the Chart of Accounts, the Instruction on its application, and other normative legal acts related to performing the accounting and compiling the financial reports.

The Accounting Standards of Ukraine are normative legal acts, which determine the principles and methods of performing the accounting and preparing the financial reports. ASU is consistent with the International Accounting Standards (IAS). The Methodological Council, which was founded and attached to the Ministry of Finance of Ukraine as a consultative body, carries out expertise and finishes off the ASU.

The important instrument of accounting regulation in Ukraine is the Chart of Accounts; an arranged list of accounts necessary to reflect activities of enterprises and organizations.

The Chart of Accounts introduced in 2000 is formed in accordance with the elements of financial reports and includes ten classes of accounts (fig. 1).

Classes of accounts
1, 2, 3	4	5, 6	7	8, 9	0
Assets	Owner’s equity	Liabilities	Income	Expenses	Off-balance sheet accounts
Balance Sheet Elements			Elements of Income Statement		Notes to the financial statements

Figure 1. The general scheme of interrelation of the Chart of Accounts and basic forms of financial reporting

The first six classes provide information necessary for preparing a balance sheet. Their purpose is to represent availability, state and changes in assets, owner's equity and liabilities. The interrelation of a balance sheet and these accounts is given in fig. 2

Sections of assets	Accounts			Sections of claims	Accounts
	class	name	code		class	name	code
I. Non-current assets	1	Non-current assets	10-19	I. Owner’s equity	4	Owner’s equity and liability provision	40-46
II. Current assets	2	Inventories	20-29	II. Warranty provision			47-49
	3	Cash, cash equivalents and other assets	30-38, Dt. 64, 65, 68	III. Long-term liabilities	5	Long-term liabilities	50-59
				IV. Current liabilities	6	Current liabilities	60-68, Cr. 37
III. Deferred expenses			39	V. Deferred income			69

Figure 2. Interrelation of the Balance Sheet and Chart of Accounts

Classes of accounts 7, 8, 9 are transit and intended for accounting income, expenses and activity results of an enterprise, and for preparing an income statement (fig. 3).

Expenses	Accounts			Income	Accounts
	Class	name	code		class	name	Code
	8	Articled of expenses	80-89		7	Income and activity results	70-78 79
	9	Activity expenses	90-99

Figure 3. Interrelation of the income statement and the Chart of Accounts

The Ministry of Finance of Ukraine approved the Instruction on Applying the Chart of Accounts, to reflect similar economic operations in the corresponding accounts and sub-accounts in a united way. The instruction specifies the application and procedure for maintaining accounts, and contains the typical account correspondence as well.

Since banks and budgetary institutions carry out specific activities, not all ASU apply to them. Specially worked out Charts of Accounts are used under these circumstances. Therefore, the state accounting policy is carried out by:

• The National Bank of Ukraine — concerning the procedure for keeping records and preparing financial reports at banks;

• The State Treasury of Ukraine — related to the procedure for keeping the records and preparing the financial reports on budget performance, and self-supporting operations for budgetary institutions;

• According to industrial peculiarities, ministries and other central executive bodies work out, within their own authority, methodological recommendations pertaining to the application of the Accounting Standards of Ukraine.

Business entities are legal entities, which under the current legislation are deemed to be small business entities, legal entities that do not carry out business activities, except for budget institutions, regardless of the forms of ownership, forms of business and kinds of activities. Business entities are also representative offices of non-residents. All of them should prepare the abridged financial reports according to ASU 25 'Financial Reporting of a Small Business Entity' and may apply the Chart of Accounts.

Therefore, in Ukraine five Charts of Accounts are used (see table 1):

No.	Description	Adopted by whom and when	Date of coming into effect
1	Chart of Accounts of assets, capital, liabilities and economic operations of enterprises and organizations	Order of the Ministry of Finance of Ukraine dated November 30, 1999 No. 291	In 2000 since the date specified by the regulating document of an enterprise’s (organization’s) director
2	Chart of Accounts in the National Bank of Ukraine	Resolution of the National bank of Ukraine dated November 21, 1997 No. 388	January 1, 1998
3	Chart of Accounts of commercial banks of Ukraine	Resolution of the National bank of Ukraine dated November 21, 1997 No. 388	January 1, 1998
4	Chart of Accounts of budgetary institutions	Order of the Chief Department of the State Treasury of Ukraine dated December 10, 1999 No. 114	January 1, 2000
5	Chart of Accounts of assets, capital, liabilities and economic operations of small business entities	Order of the Ministry of Finance of Ukraine	April 19, 2001

All enterprises are to prepare the financial reports on the grounds of accounting data. An enterprise's director and accountant must sign this report.

While preparing and presenting the financial report an enterprise has to follow requirements of the Law "On Accoun­ting," as well as the Procedure for presenting the financial report, approved by the Resolution of the Cabinet of Ministers of Ukraine dated February 28, 2000 No. 419.

The financial report is to be authentic. Therefore, before preparing the financial report it is mandatory to make an inventory of an enterprise's assets and liabilities and to document their availability, state and assessment.

The annual financial statements of enterprises (except for budgetary institutions, small business entities and represen­tative offices of non-residents) comprise the following:

- Balance sheet;

- Income statement;

- Cash flow statement;

- Owner's equity statement;

- Notes to the annual financial statements.

Contents of the reporting forms, general requirements for specifying and revealing their elements as well as certain articles are to be specified by ASU 1—6. Methodological foundations of forming accounting and disclosing the information on certain articles in the financial report are specified by the corresponding Accounting Standards.

A calendar year is the reporting period for preparing the financial reports.

The interim financial reports are to be prepared quarterly as a part of the Balance sheet and Income Statement with the running total beginning in the reporting year.

Enterprises, which have subsidiaries, in addition to financial reports on their own economic operations, are to prepare and present the consolidated financial statement to owners (founders). It should be done within the time limits, but not later than 45 days after the reporting quarter completion and not later than April 15, which follows the reporting year. The procedure for preparing the consolidated financial reports and general requirements for disclosing information on preparing the consolidated financial reports are specified by ASU 20 "The Consolidated Financial Report."

Associations, in addition to their own report, are to prepare and present the general financial report of all enterprises, amalgamated with the above-mentioned if this is provided for by the articles of association of enterprises in accordance with the legislation. The procedure for disclosing information on associations and reflecting in accounting and reporting the purchase of other enterprises and goodwill that arises while purchasing and amalgamating enterprises is specified by ASU 19 "Associations". This Provision is not to be applied to operations on amalgamating enterprises, which are under joint control, and also to accounting for stakes of joint enterprises.

The enterprises' financial statement does not represent any commercial secret (except cases provided for by the legislation) and is to be presented to:

1. Bodies whose management competence the enterprises belong to;

2. Working collectives at their demand;

3. Owners (founders) in accordance with the documents of association;

4. Other bodies and users under the legislation.

The date of presenting the financial reports for enterprises is deemed the date of their actual submission to the assigned place, in case of sending it by mail, the date of receiving the report by an addressee, which is indicated on the stamp of a post-office that services the addressee. If the date of presenting the report falls on a non-working day, the term of presentation should be transferred to the first working day following the day-off.

Open joint-stock companies, enterprises — issuers of bonds, banks, trust companies, currency and stock exchanges, investment funds, investment companies, credit unions, non-state pension funds, insurance companies and other financial institutions should promulgate the annual financial report and consolidated report in periodical publications, or publish it in the form of separately printed issues, no later than June 1 following the reporting period.

An owner or an authorized body managing an enterprise in compliance with the current legislation and documents of association, is responsible for:

• Organizing the accounting;

• The control source documentation of all business operations;

• The security of processed documents, registers and reports.

The Law on Accounting regulates the accounting and financial reporting in direction of harmonization with the International Standards. At the same time, business entity is given the right to choose:

• The form of organizing the accounting at an enterprise;

• Accounting policy of an enterprise;

• The form of keeping the accounts at an enterprise;

• The system and form of managerial accounting, reporting and control over economic operations, etc.

The reform of accounting and financial reporting in Ukraine is an integral part of events aimed at introducing the market-oriented economic relations. This reform should be carried out within realization of a strategic course towards the integration with the world economic area and adapting the legislation of Ukraine according to the global economy requirements.

NOTES

financial reporting – финансовая отчётность

in response to changes in – в ответ на изменения

managing economic activities – ведение хозяйственной деятельности

command economy – планово-административная экономика

subordinated – подчинён

transition – переход

new target – новая цель

this resulted in – это привело к

accounting reform – реформа бухучета

bringing into compliance with – приведение в соответствие с

came into force – вступить в силу

legal foundation – правовая основа

regulating – регулирование

performing – ведение

preparing – составление

in compliance with – в соответствии с

irrespective of – независимо от

foreign economic entity – иностранный субъект предпринимательской деятельности

which are liable – которые обязуются

prudence – осмотрительность

completeness – полное освещение

consistency – последовательность

going concern – непрерывность

charging – начисление

conformity – соответствие

substance over form – превалирование сущности над формой

financial, tax, statistical reporting – финансовая, налоговая и статистическая отчётность

prepared in monetary terms – которые используют денежный измеритель

methodology – методология

Accounting Standards of Ukraine – положения бухучета

Chart of Accounts – план счетов

instructions on its application – инструкция о его применении

consistent with – не противоречат

Methodological Council – методологический совет

accounting regulation – регламентация бухучета

arranged list – систематизированный список

off-balance sheet account – забалансовый счет

notes to the financial statements – примечания к финансовым отчетам

interrelation – взаимосвязь

availability – доступность, присутствие

state – состояние

liability provision – обеспечение обязательств

warranty provision – обеспечение будущих затрат и платежей

cash equivalents – расчеты

deferred expenses – затраты будущих периодов

intended for accounting – предназначены для учета

articles of expenses – затраты по элементам

cost accounting – учет затрат

legal entity – юридическое лицо

except for – кроме

budgetary institution – бюджетное учереждение

aforesaid – вышеупомянутый

detached sub-unit – обособленное подразделение

transferred to – переведенные на

State Treasury of Ukraine – Госказначейство Украины

self-supporting operation – госхозрасчётная операция

pertaining to – относительно

date o coming into effect – дата вступления в действие

order – приказ

assessment – оценка

specifying – уточнение

revealing – раскрытие

certain article – определенная статья

disclosing – раскрытие

reporting period – отчетный период

interim – промежуточный

quarterly – ежеквартально

running total – нарастающий итог

amalgamated – объединенный

article of association – учредительный документ

management competence – сфера управления

Body of State statistics – орган госстатистики

Raiyon State Administration – Райгосадминистрация

City Executive Committee – Горисполком

is to be submitted – необходимо подавать

аctual submission – фактическая подача

in case of sending – в случае отсылки