CC BY
70Бюллетень науки и практики / Bulletin of Science and Practice Т. 6. №11. 2020
https://www.bulletennauki.com https://doi.org/10.33619/2414-2948/60
UDC 657.1 https://doi.org/10.33619/2414-2948/60/36
JEL classification: M4, M41, M410
IMPROVEMENT OF NATIONAL ACCOUNTING STANDARDS BASED ON IAS 7
©Khalilov Sh., ORCID: 0000-0002-6230-5278, Ph.D., Tashkent Institute of Finance, Tashkent, Uzbekistan, halilov86@gmail.com ©Karimov A., Dr. habil., Tashkent Institute of Finance, Tashkent, Uzbekistan, karimovaa53@mail.ru
СОВЕРШЕНСТВОВАНИЕ НАЦИОНАЛЬНЫХ СТАНДАРТОВ БУХГАЛТЕРСКОГО
УЧЕТА НА ОСНОВЕ МСФО 7
©Халилов Ш., ORCID: 0000-0002-6230-5278, Ph.D., Ташкентский финансовый институт,
г. Ташкент, Узбекистан, halilov86@gmail.com ©Каримов А., д-р экон. наук, Ташкентский финансовый институт, г. Ташкент, Узбекистан, kaimovaa53@mail.ru
Abstract. As a result of the improvement of the investment climate in the Republic of Uzbekistan, the direct inflow of direct investment to the sectors of the economy and regions is rising. Nowadays, an accounting and reporting system needs to be adapted to the requirements of international accounting standards for joint ventures and foreign companies to conduct their business operations. In accordance with the above requirements, we conducted a study to adapt the national standard to requirements of IFRS standards. As a result of the research, we proposed to change the phrase "Financial Institutions" instead of "Bank Institutions" in NAS 9. Scientifically based proposals were developed to change the national standard to classify for interest and dividends received and interest and dividend paid by type of activity under IFRS.
Аннотация. В результате улучшения инвестиционного климата в Республике Узбекистан увеличивается прямой приток прямых инвестиций в секторы экономики и регионы. В настоящее время систему бухгалтерского учета и отчетности необходимо адаптировать к требованиям международных стандартов бухгалтерского учета для совместных предприятий и иностранных компаний для ведения своей хозяйственной деятельности. В соответствии с вышеуказанными требованиями мы провели исследование по адаптации национального стандарта к требованиям стандартов МСФО. В результате исследования мы предложили заменить фразу «Банковские учреждения» в NAS 9 на фразу «Финансовые учреждения». Были разработаны научно обоснованные предложения по изменению национального стандарта для классификации полученных процентов и дивидендов, а также процентов и дивидендов, выплачиваемых вид деятельности по МСФО.
Keywords: interest, dividend, financial institution.
Ключевые слова: проценты, дивиденды, финансовое учреждение.
Introduction
Nowadays the government has developed laws and regulations to attract direct foreign investments into the economy of the Republic of Uzbekistan. As a result, it was signed by about 700 investment agreements in cooperation with foreign countries and international financial
Бюллетень науки и практики / Bulletin of Science and Practice Т. 6. №11. 2020
https://www.bulletennauki.com https://doi.org/10.33619/2414-2948/60
institutions, planned to build a large-scale infrastructure projects and modern high-tech industries. This requires the accounting system to be adapted to international financial reporting standards. The purpose of IFRS is to ensure economic reliability, transparency, accountability, efficiency and long-term financial sustainability in global financial markets. IFRS standards allow investors and other owners to make the right economic decisions by ensuring transparency through increased international comparability and quality of financial information. That is why Law of On Accounting of Uzbekistan were amendments and additions. The new "Tax Code" was developed on the basis of a Presidential Decree. Study plan and curriculum of higher education institutions were set out tasks for introducing subjects of international auditing standards and international financial reporting standards on the basis of Resolution of the President of the Republic of Uzbekistan On Measures for Further Development of Auditing Activities in the Republic of Uzbekistan [1-3].
Another important factor of the applying of IFRS in Uzbekistan is the adaptation of national accounting standards to IFRS requirements. In this regard, we conducted a series of research on the adjust the National Accounting Standard 9 "Statement of Cash Flows" to the requirements of International Financial Reporting Standards (IAS 7).
Difference between NAS and IFRS
The cash flow statement provides information on the receipts and payments of the current business entity on cash flows. The cash flow statement is comprised of cash flows from operating, investing and financing activities. Operating activity in the types of enterprise activities play a crucial role in the fact that this activity is the result of daily business activities. Operating activities are the major part of the statement of cash flows indicating whether the entity is able to make cash flows from its operations. All cash flows are paid out of operating income by the end of the reporting period. The cash flows from operating activities are taken into account when determining the net profit or loss of an enterprise.
The National Accounting Standard-9 "Statement of Cash Flows" (NAS 9) of the Republic of Uzbekistan describes operating activity as follows: Operating activities — the income-generating main activity of the entity, as well as activity of the entity that not related to investment and financial activities. IFRS (IAS 7) explained operating activity as follows. From the above definition, we can see that the definition of operating activity in IAS 7 is more specific than NAS 9 [4].
Interest paid and interest and dividends received are usually classified as operating cash flows for a financial institution under IAS 7, NAS 9 indicates that interest paid and interest and dividends received are classified as operating activity for bank institutions. Financial institutions are wider range than bank institutions. Financial institutions include such as banking institutions, insurance organizations, pawnshops, stock exchanges, brokerage and investment dealers. For that reason, we can say that IAS 7 has wider range to classify cash flows on activity of items [5].
In the process of globalization is an increasing requirement of the adaptation of the accounting system to the requirements of accounting standards which are used in developed countries [6-8].
IAS 7 classifies interest and dividends received as from investments as an either operating or an investments activity, ASC 230 and NAS 9 allows company to classify those items as an operating activity, GAS 21 classifies those items as an investing activity cash flows. IAS 7 classifies interest expense as an operating activity or a financing activity, ASC 230 and NAS 9 allows to classify this item as an operating, GAS 21 classify this item as a financing activity cash flows. ASC 230, GAS 21 and NAS 9 classify dividends paid as a financing activity, IAS 7 allows to classify this item as an operating activity or a financing activity. Bank overdrafts are considered as part of cash
Бюллетень науки и практики / Bulletin of Science and Practice Т. 6. №11. 2020
https://www.bulletennauki.com https://doi.org/10.33619/2414-2948/60
equivalents under IFRS and NAS 9, ASC 230 however, bank overdrafts are simply treated as short-term borrowings and any fluctuation is disclosed as financing activities cash flows. Bank overdrafts are not permitted to be included as a component of cash and cash equivalents. ASC 230, GAS 21 and NAS 9 classifies all income tax expenses as an operating activity. IAS 7 also classifies income tax expense as an operating activity, unless the tax expense can be specifically identified with an investing or financing activity (e. g., the tax effect of the sale of a discontinued operation could be classified under investing activities). Under either of the two sets of standards, companies currently have a choice of formats for presenting cash flow statements, as discussed in the next section. But NAS 9 usually encourage indirect method. In our opinion, IAS 7 has more opportunities than ASC 230, GAS 21 and NAS 9 for reporting on how to classify interest received or paid and dividend received or paid and income tax expense [9-15] (Table).
Table.
DIFFERENCES BETWEEN NAS AND DEVELOPED COUNTRIES' ACCOUNTING STANDARDS
(with the exception of financial institutions)
Classification of cash flows IFRS (IAS 7) US GAAP (ASC 230) Germany Accounting Standards (GAS 21) NAS of Uzbekistan NAS 9
Interest received Operating or Investing Operating Investing Operating
Interest paid Operating or financing Operating Financing Operating
Dividends received Operating or Investing Operating Investing Operating
Dividend paid Operating or Financing Financing Financing Financing
Bank overdrafts Considered part of Not considered part The requirements Considered part
cash equivalents of cash and cash equivalents and classified as financing governing the definition of cash funds were modified as against GAS 2 by removing the option to include 'bank overdrafts of cash equivalents or its elements
Taxes paid Generally operating, but a portion can be allocated to investing or financing if it can be specifically identified with these categories Operating Operating Operating
Format of Direct or indirect, Direct or indirect, Direct or indirect Direct or indirect,
statement direct is encouraged direct is encouraged indirect is encouraged
Disclosures Tax cash flow must Interest and taxes A separate report on Cash flows from
be separately disclosed in the cash paid must be disclosed in tax payments should be disclosed income (profit) tax are to be
flow statement footnotes if not presented on the statement of cash disclosed separately
flows
Бюллетень науки и практики / Bulletin of Science and Practice Т. 6. №11. 2020
https://www.bulletennauki.com https://doi.org/10.33619/2414-2948/60
Suggestions for improvement of NAS 9 under IAS 7
Under the above-mentioned opinions, we have the following suggestions to adapt the NAS 9 standard to IFRS (IAS 7):
1. Use the concept of "Financial institutions" instead of "Banking institutions" in para 24 of NAS 9: Use of the "Financial Institutions" expands the range of activities, including banking institutions, insurance organizations, pawnshops, stock exchanges, brokerage and investment dealers.
2. To add 24a para in NAS 9: interest paid is considered in computing profit and loss for the period this indicates that interest paid is disclosed as operating activity. To add 24b para in NAS 9: interest is paid on loans and loans are classified under financing activity therefore any interest paid should be disclosed as financing activity.
3. To add 24c para in NAS 9: shares which are classified as equity (for instance ordinary shares), dividends paid on this type of shares are basically appropriation of profits and are not considered in profit and loss determination therefore, they can be disclosed under financing activity. To add 24d para in NAS 9: Shares which are classified as non-current liability (for example redeemable preference shares), dividends paid on this type of shares is basically an expense and is same as interest expense which also means that such dividends are considered in profit and loss determination therefore, they can be disclosed under operating activities.
4. To add 24e para in NAS 9: interest and dividends received are the basis of investments made by the undertaking, which indicates that any return on investment may be disclosed under investment activity. 24f para indicates that interest and dividend received shall be disclosed under operating activity because incomes are considered in the computation of profit and loss figure and also as such incomes are applied in entity operations.
Conclusion
Developed countries such as USA, Germany, Australia, France, South Korea, and Japan's practice show that every person needs financial services on a regular basis. Therefore, the phrase of "Financial institutions" are used in IFRS (IAS 7) and US GAAP (ASC 230). Using of "Financial institutions" phrase in NAS 9 will adapt to the requirements of the IFRS (IAS 7) based on the definite definition of cash flow statement, not only banking institutions, but also insurance companies, stock exchanges, brokerage, and investor dealer organizations and, as a result, a significant increase in the inflow of foreign investments into the Republic of Uzbekistan. Introduction of items 24 a, b, c, g, d, e integrates the theoretical-methodological and general practice approaches in the formulation of the "Cash Flow Statement", thus increasing the ability to classify interest and dividends, interest payments and dividends by types of activity and full adapt to IFRS requirements.
References:
1. Bakker, E., Rands, E., Balasubramanian, T. V., Unsworth, C., Chaudhry, A., Van der Merwe, M., ... & Yeung, P. (2017). Wiley 2017 Interpretation and Application of IFRS Standards. Wiley.
2. Hoffmann, S., & Zuelch, H. (2014). Lobbying on accounting standard setting in the parliamentary environment of Germany. Critical Perspectives on Accounting, 25(8), 709-723. https://doi.org/10.1016Zj.cpa.2014.04.003
3. Dauderies, H., & Annand, D. (2019). Introduction to financial accounting. Lyryx.
4. Raffournier, B., Van Greuning, H. (2006). International financial reporting standards - A
Бюллетень науки и практики / Bulletin of Science and Practice Т. 6. №11. 2020
https://www.bulletennauki.com https://doi.org/10.33619/2414-2948/60
practical guide. The World Bank, Washington (USA). The International Journal of Accounting, 41(1), 114-116.
5. Van Greuning, H. (2006). International Financial Reporting Standards A Practical Guide. The World Bank.
6. Chakrabarty, B., & Shaw, K. W. (2012). Eliminating the 20-F reconciliation from IFRS to US GAAP: Short-term and long-term liquidity effects. Research in Accounting Regulation, 24(2), 90-95. https://doi.org/10.10167j.racreg.2012.05.008
7. Flood, J. M. (2012). Wiley GAAP 2013: Interpretation and application of generally accepted accounting principles. John Wiley & Sons.
8. Simons, W. B. (1993). Law of the Republic of Uzbekistan "On Foreign Investments in the Republic of Uzbekistan". Review of Central and East European Law, 19(1), 69-79. https://doi.org/10.1163/157303593X00040
9. Street, D. L. (2002). GAAP 2001 - Benchmarking national accounting standards against IAS: summary of results. Journal of International Accounting, Auditing and Taxation, 11(1), 77-90. https://doi.org/10.1016/S1061-9518(02)00055-1
10. Kirk, R. (2008). IFRS: a quick reference guide. Elsevier.
11. Khalilov, S. A. (2014). The Applying of IAS/IFRS in Uzbekistan. Ovidius University Annals, Series Economic Sciences, 14(2), 521-524.
12. Van der Meulen, S., Gaeremynck, A., & Willekens, M. (2007). Attribute differences between US GAAP and IFRS earnings: An exploratory study. The International Journal of Accounting, 42(2), 123-142. https://doi.org/10.1016/j.intacc.2007.04.001
13. Robinson, T. R. (2020). International financial statement analysis. John Wiley & Sons.
14. Sutton, T. (2004). Corporate financial accounting and reporting. Pearson Education.
15. Epstein, B. J., Nach, R., & Bragg, S. M. (2009). Wiley GAAP codification enhanced. John Wiley & Sons.
Список литературы:
1. Bakker E., Rands E., Balasubramanian T. V., Unsworth C., Chaudhry A., Van der Merwe M., ... Yeung P. Wiley 2017 Interpretation and Application of IFRS Standards. Wiley, 2017.
2. Hoffmann S., Zuelch H. Lobbying on accounting standard setting in the parliamentary environment of Germany // Critical Perspectives on Accounting. 2014. V. 25. №8. P. 709-723. https://doi.org/10.1016/j.cpa.2014.04.003
3. Dauderies H., Annand D. Introduction to financial accounting. Lyryx, 2019.
4. Raffournier B. Van Greuning H. International financial reporting standards - A practical guide, The World Bank, Washington (USA) // The International Journal of Accounting. 2006. V. 41. №1. P. 114-116.
5. Van Greuning H. International Financial Reporting Standards A Practical Guide. The World Bank, 2006.
6. Chakrabarty B., Shaw K. W. Eliminating the 20-F reconciliation from IFRS to US GAAP: Short-term and long-term liquidity effects // Research in Accounting Regulation. 2012. V. 24. №2. P. 90-95. https://doi.org/10.1016/j.racreg.2012.05.008
7. Flood J. M. Wiley GAAP 2013: Interpretation and application of generally accepted accounting principles. John Wiley & Sons, 2012.
8. Simons W. B. Law of the Republic of Uzbekistan "On Foreign Investments in the Republic of Uzbekistan" // Review of Central and East European Law. 1993. V. 19. №1. P. 69-79. https://doi.org/10.1163/157303593X00040
Бюллетень науки и практики / Bulletin of Science and Practice Т. 6. №11. 2020
https://www.bulletennauki.com https://doi.org/10.33619/2414-2948/60
9. Street D. L. GAAP 2001 - Benchmarking national accounting standards against IAS: summary of results // Journal of International Accounting, Auditing and Taxation. 2002. V. 11. №1. P. 77-90. https://doi.org/10.1016/S1061-9518(02)00055-1
10. Kirk R. IFRS: a quick reference guide. Elsevier, 2008.
11. Khalilov S. A. The Applying of IAS/IFRS in Uzbekistan // Ovidius University Annals, Series Economic Sciences. 2014. V. 14. №2. P. 521-524.
12. Van der Meulen S., Gaeremynck A., Willekens M. Attribute differences between US GAAP and IFRS earnings: An exploratory study // The International Journal of Accounting. 2007. V. 42. №2. P. 123-142. https://doi.org/10.10167j.intacc.2007.04.001
13. Robinson T. R. International financial statement analysis. John Wiley & Sons, 2020.
14. Sutton T. Corporate financial accounting and reporting. Pearson Education, 2004.
15. Epstein B. J., Nach R., Bragg S. M. Wiley GAAP codification enhanced. John Wiley & Sons, 2009.
Работа поступила Принята к публикации
в редакцию 11.10.2020 г. 19.10.2020 г.
Ссылка для цитирования:
Khalilov Sh., Karimov A. Improvement of National Accounting Standards Based on IAS 7 // Бюллетень науки и практики. 2020. Т. 6. №11. С. 294-299. https://doi.org/10.33619/2414-2948/60/36
Cite as (APA):
Khalilov, Sh., & Karimov, A. (2020). Improvement of National Accounting Standards Based on IAS 7. Bulletin of Science and Practice, 6(11), 294-299. https://doi.org/10.33619/2414-2948/60/36
