The development of an accounting policy is a vital step for any enterprise aiming to ensure stable growth, transparency in financial matters, and investor trust. It helps standardize processes and ensures compliance with legislative requirements.
A well-defined accounting policy guarantees accurate accounting procedures and serves as a solid foundation for preparing financial reporting instructions. Involving professionals proficient in NAS (National Accounting Standards) and IFRS (International Financial Reporting Standards) allows for a flexible accounting system tailored to the business’s needs. Thoughtful development is crucial, as changes in accounting policy can significantly impact bookkeeping and financial reporting.
What is an Enterprise’s Accounting Policy?
Definition of Accounting Policy
An enterprise’s accounting policy is a set of principles, methods and procedures that define the rules for bookkeeping and preparing financial statements. It forms the basis for accurately recognizing and classifying assets, revenues, expenses, and liabilities.
- IFRS: Focused on global accounting norms, facilitating international partnerships regarding accounting and financial indicators.
- NAS: Tailored to Ukrainian realities, aligning with national legislation to standardize accounting processes.
Key Objectives of Accounting Policy Development
- Transparency and Standardization: Establishes uniform rules for reflecting financial operations, enhancing data clarity.
- Compliance with Legal Norms: Aligns accounting procedures with national legislation and/or IFRS requirements, provides accurate data for decision-making by internal (management, owners) and external (investors, creditors, regulators) users.
Developing an Accounting Policy Under NAS
NAS Requirements for Accounting Policy
Accounting policies under NAS adapt procedures to national regulatory requirements. Key principles include:
- Consistency: Policies must remain stable over time, with changes allowed only under specific circumstances (e.g., legislative updates or more precise accounting methods).
- Transparency: Methods must be clear, reflecting the enterprise’s financial position and results.
- Compliance with Legislation: Aligns with NAS, regulatory acts and Ukrainian laws.
- Justification: Methods must be economically feasible and logically sound.
- Comprehensiveness: Covers all aspects of accounting, including assets, liabilities, revenues, expenses, capital and tax obligations.
- Documentation: Policies must be formalized through official orders and have legal standing in internal and external procedures.
These requirements ensure financial reporting is reliable, comparable and transparent.
Developing an Accounting Policy Under IFRS
IFRS Requirements for Accounting Policy
While IFRS shares similarities with NAS requirements, it emphasizes flexibility and detailed disclosure:
- Consistency: Allows greater flexibility in applying specific methods and adapting them over time.
- Transparency: Focuses on deeper disclosure of financial indicators, including assumptions and estimates.
- Compliance with Legislation: Permits variations to align with national regulations while adhering to international standards.
- Justification: Requires thorough explanations for chosen methods, as many decisions are based on estimates that may vary by context.
- Comprehensiveness: More complex due to applying diverse standards for various operations.
- Documentation: Demands detailed descriptions and justifications for accounting estimates and methods, with mandatory disclosure in financial statement notes.
The key requirements, such as consistency, transparency, compliance with legislation, justification, comprehensiveness and documentation, are similar for NAS and IFRS. However, the approaches to their implementation and the level of detail may vary significantly due to different philosophies and requirements for disclosure and transaction assessment. IFRS is more flexible, offering greater room for interpretation and adaptation to various economic realities, with approaches focused on the economic substance of transactions rather than merely their legal form. In contrast, NAS has stricter and more explicitly regulated rules, which are better suited for national reporting.
Steps for Developing Accounting Policy (NAS and IFRS)
Analysis of Enterprise Needs
In the initial stage, the enterprise’s activities are analyzed to determine specific accounting needs for various aspects of its operations. This involves examining the organizational structure, nature of activities, types of products or services, market, and interactions with partners. It is also essential to consider legislative requirements and other regulations that may impact accounting practices.
Development of Accounting Methods for Different Operational Aspects
At this stage, accounting methods are developed for various aspects of the business’s activities. This includes the accounting of revenues, expenses, assets, liabilities, and specific transactions. The methods must comply with national or international standards, depending on the choice between NAS or IFRS.
Preparation and Approval of the Accounting Policy
After developing the accounting methods and principles, the accounting policy must be prepared and formalized, clearly documenting all selected methods and approaches. The accounting policy must be approved by the enterprise’s management and relevant authorities. Additionally, responsible staff members are briefed on the approved accounting policy.
Benefits of Collaborating with UHY-Prostir
Experience and Expertise in Accounting
UHY-Prostir specialists have extensive experience in implementing projects across various industries, backed by numerous successful cases and the trust of clients.
In-depth Knowledge of Accounting Standards
UHY-Prostir experts ensure compliance with standards, helping to avoid errors and providing accurate data adjustments.
Personalized Approach for Each Client
Understanding the specifics of different industries, UHY-Prostir specialists offer tailored solutions that adapt to the unique needs of each business.
How to Order Accounting Policy Development (NAS/IFRS)
- To assess the scope of work and receive a consultation, contact UHY-Prostir via the phone numbers listed on the company’s website or click the contact button at the bottom of the screen.
- During your conversation with a manager, specify the need for a detailed analysis of your enterprise’s requirements and the development of an accounting policy.
The development of an accounting policy under NAS or IFRS is crucial for enterprises aiming to ensure the transparency of financial reporting and reduce financial risks. An accounting policy helps businesses build trust with partners, ensure accuracy during tax audits, and comply with inspections.
The choice between NAS and IFRS may depend on the scale of operations, reporting requirements, business growth, and focus. However, certain entities are required by Ukrainian law to maintain accounting records in accordance with IFRS. In such cases, the development of an accounting policy must be based on international standards.
For efficient development of an accounting policy based on IFRS or NAS, it is best to consult the experts at UHY-Prostir.
