International Financial Reporting Standards:
Application and challenges

About the forum

On November 30, a practical conference “International Financial Reporting Standards: Application and Challenges” took place in a cozy hall of the Park-Hotel Golosievo in Kiev. The event was organized by the SE “Derzhzovnishinform” (DZI) and the Chamber of Auditors and Accountants of Ukraine (CAAU). The Partners of the event were the International Academy for Certification of Accountants and Auditors (Masbach), the De Visu Group of Companies, the Agency for IFRS. The conference was attended by auditors, lawyers, heads of financial services, and accountants from different cities of Ukraine, representatives of enterprises preparing for the transition to international reporting standards.

Opening the conference, Director of DZI Bogdan Dubas noted that the process of introducing international financial reporting standards has been taking place for several years in Ukraine. It is a difficult, gradual, but very important process for the development of the country and its image. Therefore, the purpose of the conference is to facilitate this issue and provide practical assistance to those enterprises for which everything is just beginning.

In his welcoming speech, the President of the De Visu group of companies Oleksandr Boyko stressed that the use of international standards will contribute to the transparency of Ukrainian business, and the conference will allow to look at IFRS from different angles, as among the speakers there are representatives of the government, experienced auditors, accountants, and bookkeepers that already have the skill of implementing mentioned standards under their belt.

The first session of the conference was dedicated to changes in legislation and challenges in the process of mandatory application of IFRS. It was started by the Director of the department of management of state property of the Ministry of Economic Development and Trade of Ukraine Roman Kropivnitsky. He underlined that the introduction of IFRS has become a real challenge for many state-owned enterprises, in particular, because of the need to make changes to financial plans that were drawn up without compliance to the requirements of the international standards.

Representatives of the National Securities and Stock Market Commission Yanina Ponomarenko and Elena Dubova spoke about the IFRS taxonomy and the XBRL reporting format, as well as the status of their implementation in our country. Now work in this direction is being actively done, but there is no official published Ukrainian version of the IFRS taxonomy yet.

The new reality for Ukraine – non-financial reporting, has been presented by Yana Oleinik, a representative of NIFI DNNU “Academy of Financial Management”. She noted, that the scientific institution she is part of, has developed a draft form of the report on payments to the state, posted for discussion on the official website of the Ministry of Finance of Ukraine. According to Yana Oleinik, the compilation of this report will not require additional efforts from business entities, because all the data that is necessary is in the company’s records, and the Academy has developed guidelines. In addition, it will not be required for everyone to submit a new report, but only for enterprises that extract minerals of national importance or procure wood and enterprises of public interest.

Coordinator of the Regional Program for Strengthening Audit and Reporting in the Eastern Partnership Countries (STAREP), World Bank Financial Management Consultant Natalia Konovalenko, spoke on “Outlook for e-IFRS reporting in Ukraine: global trends and initiatives”, arriving to the conference from Vienna, where the international meeting on global trends in accounting took place. She delivered the message that the international community now was discussing the impact of the new technologies such as blockchain, artificial intelligence, and predictive analytics on the way the reporting is made and what are the outcomes for Ukraine.

The Executive Director of the State Office “UkraineInvest”, Nikolay Osiychuk, in his speech, highlighted the importance of IFRS for attracting investments, since international standards are the language of communication with foreign investors. He has reminded that Ukraine has to withstand high competition in order to attract global players, and statistics show some success in this direction: after a sharp decline in 2014-2015, the inflow of net foreign direct investment reached 4 billion USD during 2016 and the first half of 2018, which indicates a recovery of investment activities. The most appealing industries for foreign investors are food, energy, metallurgy, telecommunications, and finance.

The second session of the conference was purely practical, and its content fully corresponded to the title – “Methodology and methods of transition to IFRS.” The moderator and speaker of this session was Elena Kharlamova – a recognized expert in IFRS, vice president of CAAU, general director of the Agency for IFRS, partner of the group of companies “De Visu”.

Beginning her speech, Elena Kharlamova reminded that, in accordance with the Law of Ukraine “On Accounting and Financial Reporting in Ukraine”, the financial statements in accordance with the international standards should be drawn up by companies of substantial public interest, like public joint-stock companies, enterprises operating in the mining industry, as well as enterprises engaged in economic activities according to the types defined by the Cabinet of Ministers of Ukraine. In brief, this is the state policy towards the implementation of international standards. But the point of view of the speaker is that IFRS is necessary above all for enterprises belonging to those industries that need and seek foreign investment. However, such companies have the option to voluntarily take a course in IFRS.

“The practice of applying IFRS” was the topic of the third session of the conference. Olga Pilipenko, Deputy Chief Accountant in charge of reporting in Energoatom State Enterprise, shared her own experience of transition to IFRS. She spoke about the set of rules developed by the enterprise for working with IFRS, as well as the obstacles that were overcome during the transition.

Alexander Voitsikh, Deputy Chief Accountant of the SE Ports Authority, told about the difficulties and risks that state-owned enterprises are experiencing when switching to IFRS. For example, tender procedures sometimes hamper the prompt solution for attracting contractors (appraisers, auditors, etc.).

Can international standards be a tax optimization tool? Answering this question, Yury Tsyganok, Head of tax and accounting expertise of LigaZakon, stirred attention of the audience on certain opportunities for optimization but also gave several examples of such optimization. At the same time, the expert warned against excessive hopes, and also warned against possible risks, illustrating his warnings with examples. Above all, some accounting rules for financial instruments (the need to depreciate, discount them, etc.) may have negative tax consequences.

It is known, IFRS is very demanding on the valuation of assets and liabilities, and one of the key types of valuation is fair value. In addition, fair value appraisal is one of the prerequisites for a qualitative transformation of financial statements in the transition to IFRS. It is not surprising that the presentation of the certified appraiser, Director of the Evaluation Company “De Visu”, Andrey Bogolyuk, aroused keen interest among those present.

Is it possible to automate the process of transformation of financial statements? Given the potential of the latest technology, it seems absolutely real. The Director of CaseWare Ukraine, Dmitry Tkachenko, said that specialized software can save time at times of transformation, but does not exclude the need for an expert’s professional judgment.

Conference results were summarized by its moderator Elena Kharlamova. She warned participants against possible errors related to the transition to IFRS, gave expert advice on how to make such a transition as comfortable and correct as possible, answered questions. “International standards,” Elena Kharlamova emphasized at the end of her speech, “these are standards of rational business. Irrationality is contrary to IFRS and not compatible with them.”

The event participants noted the high professionalism and competence of the speakers, as well as the flawless organization of the event.

Press service “Derzhzovnishinform” (DZI)