In his regular column for the “Neft Rossii” magazine, Anton Oussov, Partner and Head of the KPMG Oil & Gas practice in Russia and the CIS, contemplates the issues arising for oil & gas companies in connection with Russia's transition to IFRS.
As everybody knows, from time to time some provisions of International Financial Reporting Standards are adopted as amendments to Russian Accounting Principles; however, such incomplete adoptions quite often create additional issues and disputes in Russian accounting.
An example of such implications is PBU 8/2010, “Estimated Liabilities, Contingent Liabilities and Contingent Assets”. It seems obvious that a generally accepted Russian standard should reflect (respective) international standards' requirements; however the changes in PBU 8/2010 do not establish a mechanism to be applied for recognition of the liabilities related to fixed assets already existing as at the date of adoption of the standard in the oil & gas industry. Even more, the Russian standards have stipulated a procedure for accounting of changes in such liabilities – different from the one described in IFRS – one that is based on profit & loss account, rather than on the movements in balance sheet entries. As a result, despite all expectations, the RAP and IFRS provisions still do not coincide, and Russian accounting and audit community in the oil & gas industry is facing new issues: how to apply a new legislation development, take into account new requirements and recognize fixed assets?
“This situation for some recent years has already been making extra difficulties and creating risks for accountants in the oil & gas industry. Moreover, it also demonstrates that the practice by many countries which adopted the full IFRS text as national accounting standards turned out to be much more efficient than the efforts to rewrite selected IFRS parts and incorporate them into local accounting regulations. Now key users of financial statements – investors and shareholders – do not perceive the RAP as a fully valid and generally accepted accounting system. And the question of whether it is reasonable to keep both RAP and IFRS accounting simultaneously remains open”, comments Anton.