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Taxes and Taxation
Reference:

IFRS and RAS: analysis of differences and methodological inconsistencies

Krichevsiki Evgenii Nikitich

Student, Department of Taxes and Tax Administration, Financial University under the Government of the Russian Federation

04.10.1998, Russia, ulitsa Marksistskaya dom9, kv.121, 3 etazh oblast', g. Moscow, ul. Ulitsa Marksistskaya, 9, kv. 121

evgenyikrichevsky@mail.ru

DOI:

10.7256/2454-065X.2023.2.38181

EDN:

UWZZJO

Received:

30-05-2022


Published:

04-05-2023


Abstract: The article discusses the goals of applying international and Russian standards at the current stage of development of accounting and reporting. The features of the formation of accounting (financial) statements according to the rules of IFRS and RAS are highlighted, the fundamental differences that lie in the concept of accounting documentation are indicated. The features of the financial statements of Russian enterprises that make it up according to the rules of IFRS are given. The problems of applying IFRS by Russian users of financial statements are outlined. Prospects for the development of IFRS in Russian accounting are considered. The conclusions of the conducted research are substantiated within the framework of the development of the methodology of methodological differences in the formation of accounting (financial) statements according to the rules of IFRS and RAS. In order to enter foreign markets and attract foreign investors, the company's financial statements must comply with International Financial Reporting Standards. This is a prerequisite for the implementation of foreign economic activity. Despite certain differences between IFRS and RAS, today it is safe to say that at the moment the country is working to adapt the accounting system in accordance with international standards.Significant differences in the target orientation of reporting under IFRS and RAS; the presence of a large number of methodological differences in accounting lead to the complication of accounting functions. Taken together, these circumstances determine the relevance of this study. The analysis of the regulatory framework of Russia showed that at the first stages some provisions of international standards were used to develop domestic accounting regulations. Today, the practice of using them has expanded. There are structures in the country that are responsible for the application of IFRS. Their functions are normatively fixed, a list of enterprises that are required to prepare reports in accordance with international standards is outlined at the legislative level. Nevertheless, there are a significant number of methodological differences in accounting, which will be discussed in this article.


Keywords:

accounting, accounting statements, standards, information, reliability, IFRS, RAS, analysis, discounting, differences

This article is automatically translated.

 The relevance of research.

 

In order to enter foreign markets and attract foreign investors, the company's financial statements must comply with International Financial Reporting Standards. This is a prerequisite for the implementation of foreign economic activity [1]. Despite certain differences between IFRS and RAS, today we can say with confidence that at the moment the country is working on adapting the accounting system in accordance with international standards. There is no particular activity in the transition to the formation of IFRS reporting. First of all, this is due to the small number of users who are interested in this information.

At the moment, there is limited access to long-term financing in Russia, and the Russian financial market is insufficiently developed. This indicates low investor activity and slow development of investment activity, which is further exacerbated by sanctions restrictions.

Significant differences in the target orientation of reporting under IFRS and RAS; the presence of a large number of methodological differences in accounting lead to the complication of accounting functions. Taken together, these circumstances determine the relevance of this study.

The results of the study. Analysis of the regulatory framework of Russia has shown that at the first stages some provisions of international standards were used to develop domestic accounting regulations. Today, the practice of using them has expanded. There are structures in the country that are responsible for the application of IFRS. Their functions are normatively fixed, a list of enterprises that are required to prepare reports in accordance with international standards is outlined at the legislative level. Nevertheless, there are a significant number of methodological differences in accounting, which will be presented below.

1) Consolidation. In accordance with IFRS, financial statements can be formed not separately for parent and subsidiary companies, but as a whole for the entire group. This allows you to make a single accounting of the entire property of a group of companies, and not each one individually. In accordance with Russian accounting legislation, this is not possible (we do not take into account the institution of a consolidated group of taxpayers in tax accounting). It lacks the very concept of business consolidation. Therefore, the assessment of financial results when using domestic and international standards is carried out in different ways. This is used by large enterprises and holdings. As for the domestic approach, each of the companies of the general structure submits reports separately, it is difficult to determine the overall financial result of all related companies based on it. There is no common reporting form for the entire group of related companies.

2) In accordance with international standards, the economic content is primary, the legal form is secondary. Here, the accountant's judgment is decisive, that is, his competence plays an important role. Much depends on his judgment in matters relating to the classification of financial instruments, the assessment of cash flows. IFRS characterizes a more flexible approach to both the names of articles and their content, i.e. the peculiarity of reporting is its openness and transparency for users.

3) Different approaches to the process of reporting under RAS and IFRS (Figure 1).

 

Figure 1 – Set of financial statements in accordance with IFRS and RAS

4)           The reporting period. The Russian accounting standards set the reporting period as such, it begins on January 1 and ends on December 31. International standards do not clearly link the financial year to the calendar year. The company can set the reporting period independently [10].  For example, the American company Apple Inc set the last Saturday of September as the last day of the reporting period, The Walt Disney Company – September 30, and Microsoft Corporation – June 30.

5)           Currency. In accordance with the accounting legislation of Russia, enterprises and organizations can generate reports exclusively in the national currency. IFRS reporting can be prepared in the currency in which the company performs calculations. But even here there is no clear fixation and restrictions. Such flexibility indicates that IFRS are primarily focused on maximum openness to consumers of financial statements, statements can be formed, depending on the need, both in national and foreign currency.

6) Discounting. The IFRS financial statements take into account the time value of funds in order to protect the interests of investors. This model is used when granting deferred payment, asset valuation, etc. As for domestic enterprises, they do not use such methods [7;10].

7) Fair value. IFRS use the fair value principle in valuation. As for accounting standards in Russia, in accordance with them, the valuation of assets and liabilities is carried out at historical cost. This moment is of crucial importance for investors, since without the availability of up–to-date and reliable information, it is impossible to objectively assess assets and liabilities, which means that the investment risk will be very high [7;11].

An example can be given that, in accordance with IFRS, fixed assets are accounted for at market value, and according to RAS, they are accounted for at the purchase price adjusted for depreciation. That is, international standards give a clear understanding of how much fixed assets currently cost and what profit can be obtained from their sale. The accounting data of domestic companies do not give such a picture [11]

However, this problem has been partially solved in recent years due to the development of Federal Russian Accounting Standards (FSB). Thus, FSB 5/2019 "Reserves" regulates cases when raw materials and materials must be valued at fair value [3]. FSB 6/2020 "Fixed Assets" indicates that when revaluing, the value of the asset must be either equal to or not significantly different from the fair value [4]. Such innovations indicate that the convergence of IFRS and RAS continues to increase.

8) Overestimation of the book value of assets. The book value of assets in the statements formed according to international standards cannot be more than the amount of funds that the company can gain from the use or sale of these assets. In accordance with IFRS, if an asset is long-term, a depreciation check must be carried out. If compared with RAS, there is a risk of overstating the book value of assets.

9)                 Multicomponent agreements. There are no special provisions in Russian legislation that would regulate multicomponent agreements. Personal revenue recognition criteria are applied for each transaction. The absence of provisions on multicomponent operations in RAS carries the risk that the economic meaning of some operations of business entities will be lost or not fully covered [8].

10)            Accounting for long-term financial investments. An important difference that leads to large differences in accounting for long-term financial investments is the criterion for derecognition of a financial asset, where, according to international standards, an enterprise first consolidates all its subsidiaries and evaluates these indicators on the basis of already collapsed statements (IAS 39, paragraph 15). At the same time, RAS does not require consolidation before conducting an analysis (PBU 19/02, paragraph 5) [9].

11) Disclosure of quality information. If RAS does not imply the disclosure of qualitative information about capital management, then IFRS allows this to be done. Additional information helps to improve the quality of analysis and investment decision-making. This makes it possible to take into account the company's policy, its goals and other information relevant to investors.

12)            The relationship of the three forms of reporting. To conduct a comprehensive analysis, the investor needs to study three forms of reporting of the enterprise (see Figure 1). Many of the reports duplicate figures, since several of them may reflect the same operation. The result of the analysis largely depends on whether the analyst understands the relationship between the reports in order to exclude manipulations with indicators and distortions of real data. In accordance with the RAS rules, each of the three report forms is prepared separately. This allows you to clearly display information on cash, income, assets. However, it is difficult for an investor to trace how the same operation was reflected in each of the reports. In the financial statements prepared in accordance with IFRS, this problem has been solved. This makes it easier to perceive information and objectively assess the state of affairs at the enterprise.

Conclusion:There are certain differences between RAS and IFRS, which cause significant discrepancies in the principles of reporting.

Those reports that are formed in accordance with international standards are aimed at a wider range of users, primarily investors, since the information in the reports gives a complete picture, is convenient and understandable for analysis, reflects the real state of affairs. Reports in accordance with IFRS are prepared sequentially, which allows you to trace a logical relationship between each of them.

Various methods can be used to evaluate a business, the most popular of which is the method of discounting cash flows. It is based on the forecast of the dynamics of cash flows of the enterprise. At the last stage, the indicators that were obtained in the first two reports are entered into the balance sheet. Unlike IFRS, the requirements of RAS imply the separate formation of all three reports. The main attention is paid not to the economic content of the reporting, but to the formal content and compliance of tax reporting data.  A clear understanding of the presented methodological differences will allow a more qualitative approach to the process of reporting under IFRS to interested parties. 

References
1. International Financial Reporting Standard (IAS) 1 "Presentation of Financial Statements" (as amended on 01.01.2022)
2. The main directions of development of the financial market of the Russian Federation for the period 2019-2021 (developed by the Bank of Russia)
3. Order of the Ministry of Finance of the Russian Federation dated 15.11.2019 No. 180n "On Approval of the Federal Accounting Standard FSB 5/2019 "Reserves" (together with "FSB 5/2019 ...")
4. Order of the Ministry of Finance of the Russian Federation dated 17.09.2020 No. 204n "On Approval of Federal Accounting Standards FSB 6/2020 "Fixed Assets" and FSB 26/2020 "Capital Investments"
5. Federal Law No. 402-FZ dated 06.12.2011 (as amended on 30.12.2021) "On Accounting"
6. Ashaganov A.Yu., Khasieva A.S. Formation of a cash flow statement under IFRS in comparison with RAS / A.Yu. Ashaganov // Economics and Business: theory and practice. – 2019. – ¹ 10-1 (56). – Pp. 19-22.
7. Gonchar E.A., Danilova E.N. Convergence of IFRS, RAS and tax accounting of reserves for doubtful debts / E.A. Gonchar // Bulletin of the South Ural State University. Series: Economics and Management. – 2019. – Vol. 13. No. 2. – pp. 110-117.
8. Kargina T.S., Kolesnik N.F. Disclosure of information on the solvency of financial statements in the format of IFRS and RAS / T.S. Kargina // Managerial accounting. – 2020. – No. 6. – pp. 36-42.
9. Robak A.A. Comparative analysis of the principles of RAS and IFRS on the example of JSC "Russian Railways" / A.A. Robak // Scientific Almanac of the Association France-Kazakhstan. – 2021. – No. 4. – pp. 229-243.
10. Tikhonova A.V. Trends in the development of accounting and tax accounting of profits in the conditions of IFRS / A.V. Tikhonova // Taxes and Finance. – 2017. – ¹ 4 (36). – Pp. 7-14.
11. Schneider O.V. Theoretical aspects of the main differences between RAS and IFRS / O.V. Schneider // Vestnik SamGUPS. – 2016. – ¹ 3 (33). – Pp. 119-126.

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The subject of the study. Based on the title of the article, its content should be devoted to the analysis of differences and methodological inconsistencies between Russian Accounting Standards (RAS) and International Financial Reporting Standards (IFRS). The content of the article corresponds to the stated topic. Research methodology. The study is based on a comparative analysis of Russian accounting standards and international financial reporting standards. When making a comparison, the author formed one drawing, but it does not allow you to visually understand the differences – it is recommended to write paragraphs separated by semicolons in separate lines. The relevance of the research on the development of accounting, comparing Russian and foreign approaches is beyond doubt, because this has a direct impact on the activities of economic agents when reflecting the economic facts of their activities. In general, there is no scientific novelty in the presented material, since these facts are well known from other scientific and journalistic materials. At the same time, when supplementing the problems identified by the author and substantiating the recommendations of the study, scientific novelty will appear in this article. It is recommended that the author pay special attention to this when finalizing the article. Style, structure, content. The style of presentation is scientific. The structure of the article is clearly marked: relevance, research results, conclusion. The content of the article corresponds to the stated subtitle of each block, but at the same time is not accompanied by a justification of any problems and, accordingly, reasoned proposals for their solution. In the 2nd paragraph of the article, the author justifies the presence of low investor activity by arguing "At the moment there is limited access to long-term financing in Russia, and the Russian financial market is underdeveloped," but this is rather one of the reasons for its presence, but is not a justification for the very fact of low investor activity. This thesis requires additional justification, including the use of numerical data. It is also interesting to study the dynamics of the number of organizations using RAS and IFRS in the Russian Federation and abroad, as well as the justification of the author's forecasts for the next 5-10 years. Bibliography. The bibliographic list consists of 11 sources. At the same time, during its formation, the hierarchy of regulatory legal acts was violated (first federal laws should go, and then only Orders of the Ministry of Finance of the Russian Federation; foreign legal acts are mentioned last of all). The author has not studied foreign literature on the topic under consideration, although the issues of implementation and development of international financial reporting standards are given great attention by the authors in foreign publications. Appeal to opponents. Despite the presence of a bibliographic list, the text of the article contains links only to individual sources. At the same time, no discussion with the results obtained by other authors is given, primarily due to the lack of a subject for scientific discussion. Conclusions, the interest of the readership. The article may be of interest to practitioners in the field of accounting and financial analysts, as well as to scientific, pedagogical and scientific workers in their professional activities.