This article examines the normative-legal acts, which regulate the procedure of accounting for financial instruments. The relevant regulations, both national and international level. Revealed the order of formation of accounting and tax policy as an internal document regulating the procedure for the recognition, measurement and accounting for financial instruments.
Becoming party to the treaty on the financial instrument, the entity should recognize the financial asset or financial liability in its balance sheet. To reflect the value of a financial instrument in the balance sheet of the company necessary to make an initial assessment of this instrument, i.e. to measure it at a cost that was paid or received in the process of buying a financial asset or financial liability. According to paragraph 5.1.1. International Financial Reporting Standards (IFRS) 9, financial instruments are initially measured at fair value rather than at cost. The fair value could reflect objective and reliable information in the financial statements. Mainly, this approach allows to avoid the problems inherent in the initial evaluation for subsequent recognition in the accounting for financial instruments. Costs transaction increase the initial measurement of all financial assets and financial liabilities. Very often in the initial evaluation costs on financial instruments, such as derivatives, can be zero or insignificant, therefore when assessing their cost they may not be reflected in the statement of financial position and their effects, positive or negative, in reducing financial risks to remain invisible. In this regard, the use of fair value at initial assessment is justified and is an objective necessity.
Initially recognizing a financial instrument in accounting at faừ value in accordance with the methods described in the previous sections, master's thesis, and the company must choose one of two options, which proposed IFRS: either at the fair or at amortized cost. Financial assets are measured at fair value included compensation, whereas financial liabilities - value of consideration received. Subsequent measurement depends on the type of financial instrument.
One of the most urgent problems of Kazakhstani accounting related to disclosures about the initial recognition and valuation of complex financial instruments, in particular with regard to the bonds required by the relevant standard.
Derecognition represents the derecognition of a financial instrument balance sheet. International Accounting Standards (IAS) 32 requires that the company disclose certain information regarding its financial instruments and prescribes the method of recording financial instruments in the financial statements. According to IAS 32 the bonds, including convertible, are classified as complex financial instruments, because they contain both debt and equity elements. Thus there is a certain duality bonds. The value of the debt element is calculated, after which the equity element is defined as the difference between the value of the entire instrument and the debt element.
Laws and regulations affecting financial instruments in the Republic of Kazakhstan is carried out by different legal acts in force in the country, and strict observance of which is mandatory.
After examining the national history of accounting of financial instruments, we came to the conclusion that the Civil Code was in this kind of "pioneer" since being adopted in 1994, the first legislative consolidated requirements for financial instruments in the Republic of Kazakhstan.
In the early 90's accounting was in the nucleus, whereas in the world has long acted IAS 25, "Accounting for Financial Investments", which was adopted January 1,1985 the then Committee of the IASB. IAS 25 was considered all kinds of financial investments as securities and investment properties where the assets are treated as assets of the same type with identical characteristics. Hence the choice of classification to account for the asset was quite common - investments were divided into short and long term, depending on the company's intentions. Specific requirements for the separation of short-term investments on the long-term, in addition to the company's intentions in IAS 25 are not considered. In addition, this division of financial investments was part of the generally accepted concept of accounting for assets, which are subdivided into current up to one year and not more than the current one year, i.e. the long-term.
Laws and regulations affecting financial instruments is carried out in four levels.
The first level defines the general questions of legal regulation of transactions related to accounting for financial instruments. Normative documents that are part of this level is a priority and if the provisions of subordinate regulations inconsistent with the provisions of this level, the accountant should be guided by the documents of the first level.
By the regulatory framework of the first level are the following regulations in force in the territory of the Republic of Kazakhstan:
- The Civil Code of the Republic of Kazakhstan (hereinafter - the Civil Code), in accordance with paragraph 1 OfArticle 1, regulates the commodity-money relations and other property relations in which the participants are based on equality. Regulatory Issues civil legislation of financial instruments defined in the general part of the Civil Code. According to the civil law of financial instruments relate to the objects of civil rights. When accounting for financial instruments accountant should be guided by Articles 128-1 to 128-6 of paragraph 1.1, "Financial Instruments". This article provides a clear definition of the following concepts: a financial instrument, a financial asset and a liability, equity instruments, derivatives, options, swaps, forwards, futures. As defined in Articles 129-139 regulatory requfrements for securities (including bonds, stocks, etc.) [1].
- Law of the Republic of Kazakhstan "On taxes and other obligatory payments to the budget" (hereinafter - the Tax Code) on December 10, 2008 №99-IV as of January 1, 2014. Tax Code, according to Article 1, regulates the relations of power for the establishment, administration, and the calculation and payment of taxes and other obligatory payments to the budget, as well as relations between the state and the taxpayer associated with the execution of tax laws, including transactions in financial instruments. Article 12 of the Tax Code defines the main concepts that should guide the accountant at tax accounting transactions with financial instruments. The Tax Code also defines the procedure for taxation of income from dividends, fees, etc., and other operations associated with financial instruments. [2] In this thesis the tax treatment of transactions in financial instruments discussed in a separate chapter.
- Law of the Republic of Kazakhstan "On Accounting and Financial Statements" dated February 28, 2007: presents the requirements for accounting and financial reporting, defines the principles, methods, etc. accounting, financial reporting requirements of the company. Also defines the responsibility for management of the company to provide information on the financial position, changes in financial position and results.
The first level also includes other normative documents anyway governing transactions in financial instruments.
The procedure for recognition, measurement and accounting for financial instruments are regulated by a number of international standards, namely:
- IAS 32 "Financial Instruments: Presentation", the subject of this standard is a distinction between financial liabilities and equity, etc.;
- IAS 39 "Financial Instruments: Recognition and Measurement", which establishes the requirements for their recognition and measurement;
- IFRS 7 "Financial Instruments: Disclosures", the subject of this standard is the disclosure of relevant information about financial instruments;
- IFRS 9 "Financial Instruments" - this standard has not been completed and some of its sections are still under development experts IASB;
- IFRS 13 "Fair Value Measurements" (hereinafter - IAS 13), here is the information on the measurement of financial instruments at fair value and other disclosure requirements for both financial and non-financial items for.
The purpose of the above five standards is to define requirements for virtually all aspects of recognition, measurement and recording of transactions in financial instruments, including those concerning the delimitation of financial liabilities and equity, the initial recognition, derecognition, measurement and evaluation, taking into account hedging financial risks and disclosure of information on financial instruments in the financial statements.
These international standards have a broad scope of application. The provisions of IFRS are available on all styles and types of financial instruments, including receivables and payables of a commercial nature, loans, investments in debt instruments (bonds) and equity investments (shares) (other than in subsidiaries, associates, joint enterprises), as well as derivative financial instruments [3, 16p.j.
Thus, to the regulatory framework of the second level are the following regulations:
- IAS 32 "Financial Instruments: Presentation": the purpose of the standard - to determine the principles on which the financial instruments are included either as a liability or as equity, as well as carried out netting of financial assets and financial liabilities. IAS 32 applies to the classification of the issuer of financial instruments in the form of a financial asset, financial liability or equity instrument; Similarlyto the classification, which includes dividends, interest, gains and losses on them; as well as conditions where financial assets and financial liabilities are offset;
- IAS 39 "Financial Instruments: Recognition and Measurement establishes principles for recognizing, measuring accounted for as a financial asset or a financial liability and certain contractual agreements for the purchase or sale of non-financial assets;
- IFRS 7 "Financial Instruments: Disclosures" establishes requirements for companies to disclose to the submitted information in the financial statements that enable users to judge them that:
- How much impact the financial assets and liabilities at the financial condition and results of financial and economic activity of the company; and
- Characteristics and magnitude of financial risks to which the company is exposed during the period and the final reporting period in connection with financial instruments and how the company carries out controls these financial risks;
- IFRS 9 "Financial Instruments" establishes principles for the preparation and presentation of financial statements in respect of financial assets and financial liabilities, which would be presented to users of the financial statements relevant to the nature and useful information that allows users to measure the magnitude of these amounts and the timing and uncertain the future cash inflows and outflows of the company;
- IFRS 13 "Fair Value Measurement" establishes the principles of initial and subsequent measurement at fair value, including the measurement of financial instruments at fair value.
There is also a second-level regulations include: national Financial Reporting Standards, IFRS for small and medium businesses, the IFRS for public sector, etc., which also contains requirements for the treatment of transactions with financial instruments. However, the provisions of these regulations in this thesis research reflected not found, because of their branch belonging to the specific activity.
By the regulatory framework of the third level are the following regulations:
- Guidelines on the application of IAS 32 "Financial Instruments: Disclosure and Presentation" from December 28, 2005 №5, which were developed by the authorized state body represented by the Department of methodology of accounting and audit of the Ministry of Finance of the Republic of Kazakhstan with the assistance and close cooperation with experts-ADB consultants that provide practical assistance to companies using IAS 32 "Financial Instruments: disclosure and Presentation" in the Republic of Kazakhstan. In these Guidelines set certain requirements for the submission of information on financial assets and financial liabilities, and a list of information which must be disclosed financial instruments.
- Guidelines on the application of IAS 39 "Financial Instruments: Recognition and Measurement" from January 30, 2006 №1, where their goal was to give an explanation regarding the application of IAS 39 "Financial Instruments: Recognition and Measurement". These guidelines do not replace or contradict the requirements of IFRS and are required to assist in the application of IAS 39 "Financial Instruments: Recognition and Measurement" in the Republic of Kazakhstan. Hence none of the requirement of the guidelines cannot refute IAS 39 "Financial Instruments: Recognition and Measurement".
- Accounting rules on October 14, 2011 №1172: establishes procedural requirements for accounting firms, etc. and developed on the basis of a Law of the Republic of Kazakhstan "On Accounting and Financial Reporting", international and national accounting standards.
Also to regulations of the second level are: Decrees of the President of the Republic of Kazakhstan, the Government Decision, the Ministry of Finance, Department of Revenue, and other legal acts, directly or indirectly regulating transactions in financial instruments.
By the fourth level of the regulatory framework are the following regulations that have been adopted and approved by the companies for the purpose of accounting for financial instruments.
Accounting and tax policy, adopted and approved by the company management. This document defines the specific principles, bases, conventions, rules and practices adopted by the company for the preparation and presentation of financial statements, in particular transactions on financial instruments. In accounting and tax policy management of the company in terms of accounting for financial instruments determines the order of their classification, recognition, measurement, derecognition, impairment and hedge accounting, etc. Once choosing for themselves which method is best, way, model, etc. accounting for financial instruments and gain a foothold in the accounting policies, the company must each year rigorously apply its provisions, thus providing users of financial statements of objective and reliable information. Any changes must be disclosed in the notes to the financial statements (in the notes).
Accounting and tax policy is a kind of summary of any company, learning which you can get an idea of: state accounting; principles, methods, techniques, etc. which the company has chosen for himself; and much more.
Normative-legal acts, which directly establish selection criteria and changes in accounting policies. It is possible that on account of transactions or events none IFRS does not provide relevant information. Then, the formation of accounting policies accountants use their own professional judgment, which is based on knowledge and experience accountant [4, 249p∙].
Normative legal acts, regulating the procedure of formation and changes in accounting and tax policies include:
- IAS 8 Accounting policies, changes in accounting estimates and errors" (IFRS 8), the purpose of which is to establish criteria for selecting and changing accounting policies, accounting treatment and disclosure of changes in accounting policies, changes in accounting estimates and corrections of errors [5].
- The law of the Republic OfKazakhstan "On taxes and other obligatory payments (Tax Code of the Republic OfKazakhstan) dated 10 December 2008 (with the latest amendments and supplements), which establishes requirements for tax accounting policy.
According to paragraph 5 of IFRS 8, under the accounting policy refers to the specific principles, bases, conventions, rules and practices adopted by the company for preparation and presentation of financial statements. The need for the formation of the accounting policy is determined by the fact that for each specific area of accounting you need to make a choice one way, receiving, etc. of several permitted by regulations, and to justify this choice.
Hence the formation of the accounting policy is the process of selecting some set of methods, methods of accounting and establish procedures for their application in different economic situations. The main purpose and the main task of the generated accounting policy is most adequately reflect the activities of the company, to provide complete, objective and reliable information about it for the purposes of the efficient management of this activity in the interests of the case.
Accounting policies should be selected and applied so that the financial statements comply in all material respects to the requirements of each applicable to the company IFRS. The financial statements presented in accordance with IFRS, must be prepared based on the assumption of continuity of the organization's activities in the foreseeable future, but at least 12 months after the reporting date. If the administration does not have reasons for termination, it must declare this in the notes to the financial statements.
The company should select and apply accounting policies consistently for similar transactions, other events and conditions, if any IFRS specifically requires or does not allow the division of articles into categories, which can come from different accounting policies. If any IFRS requires or permits such division by categories, for each category should be selected appropriate accounting policies and apply them consistently.
Thus, the accounting policy of the company is, on the one hand, mandatory regulations of accounting system, on the other hand, the accounting policy is a document that protects the company's interests in the application of its methods of accounting and its staging.
There is also a second-level regulations are different in-house documents directly or indirectly regulating transactions in financial instruments (e.g., risk management policies, etc.). Financial instruments are inextricably linked with a particular level of risk. In order to minimize the negative impact on the financial instruments the company hedges, i.e. primary insurance asset risk exposure.
Overall, regulatory documents, one way or another, regulate the procedure of recognition, accounting and valuation of financial instruments, and changes and additions allow to improve the domestic accounting system.
The list Ofliterature:
- The Civil Code of the Republic of Kazakhstan (General and special parts) from 27.12.1994, (with the latest amendments and additions)
- The Law of the Republic OfKazakhstan "On taxes and other obligatory payments to the budget" №99-IV dated 10 December 2008 (with the latest amendments and additions)
- Adrian Dadd "a Brief overview of IFRS 2013". Bulletin PWC (PricewaterhouseCoopers) "International financial reporting standards", December 2013. - 16p.
- Международные стандарта аудита: принципы и практика: учебное пособие ỉ Э. О. Hypceитoв. - Алматы: Экономика, 2008. - 478 с.
- Tnternational Accounting Standards (IAS) 8 Accounting policies, changes in accounting estimates and errors"