2. A) Read the text and single out the main facts and present them in a short review.

From an international perspective, it is important to remember that while based on similar principles, Russian accounting does not fully meet international accounting standards (IAS). The main differences are as follows:

Sales are usually recorded on a cash basis. The cost of goods/services delivered but not yet paid for remains on the balance sheet until payment is received. Most Russian taxes are sales-based. As a result, companies try to minimize sales in their accounts. When sales are recorded on a cash basis, allowances are not made for bad debt, in spite of the fact that bad debts may represent a considerable share of accounts receivable. Sales figures for Russian companies tend to be understated compared with the accrual sales of Western companies.

Cost of goods sold. Russian companies report the full cost of goods sold, which includes production costs, transportation, depreciation, marketing, and financial expenses. No cost items are disclosed separately. Social costs are not included in the cost of goods sold.

Depreciation. Only straight-line depreciation method allowed. The depreciation rates are fixed by the government and are as a rule significantly lower than in the West. Accelerated straight-line depreciation has been permitted since January 1,1995 but is still rarely used.

Fixed assets. Fixed assets pose the most serious problem. Fixed assets are accounted for at historical cost and cover property, plant and equipment. Land is not treated as a fixed asset and does not appear on the balance sheet at all. Even if depreciation rates are lower than in the West, fixed assets are generally undervalued compared with Western practice.

Accounts receivable. Since most Russian companies record sales when they receive payment, the sales margin is not accrued until that time. Therefore accounts receivable are understated given that the sales margin is not reflected. Overdue accounts receivable are not disclosed separately.

Consolidation of accounts. Russian companies, including holding companies, are not required to submit consolidated reports. No consolidation standards have been established yet. Some of the holding companies prepare aggregated reports, summing up 100% of all subsidiaries and associates without accounting for intragroup transactions and minorities. Consequently, the reported results of Russian holding companies are usually significantly overstated.

All other aspects of Russian accounting are basically in line with IAS. The Russian government is taking measures to eliminate the most serious divergences.

Words you may need:

bad debts – безнадійні борги

accounts receivable – дебіторська заборгованість

straight-line depreciation method – метод рівномірного нарахування амортизації

accelerated straight-line depreciation method – метод прискореного нарахування амортизації

sales margin – прибуток від продажу

overdue – прострочений

consolidation of accounts – консолідація рахунків

IAS – international accounting standards

divergence – відхилення