Major Differences Between Ifrs and Ras (russian Accounting Standard)

Major differences between IFRS and RAS (Russian Accounting Standard)

The major distinction between the two standards, RAS is code law based and IFRS is regulated from a codified case law. Even if there are many similarities between the standards, because Russia aims to converge to IFRS, some differences still occur and our objective is to distinguish them. Historically, the main user of financial information in Russia has been the government. Information produced by companies under IFRS is meant for several target groups such as shareholders, lenders and other creditors.

Financial statement presentation

According to IFRS all the information must be disclosed in order to be comparative to previous periods. Further on liabilities due to a covenant breach is classified as current, except if an agreement is made between the parties involved before the reporting date. According to IFRS the income statement is divided in two different classifications function,- and nature based. Extraordinary items are always prohibited in the presentation of the income statement.

RAS on the other hand have specified which comparative information to include in a financial statement. A covenant violation is always classified as a non-current liability if the auditor prepares the financial statement in accordance to RAS. Contrary to IFRS, RAS takes no consideration to agreements between lender and firm. A company in Russia prepare their expenses in regard of its function in order to be compliant with RAS and allows extraordinary items to be presented in the income statement.

Principles

The prudence principle in IFRS assures that accounts payable are not over or underestimated, and IFRS stresses the importance of this principle. By estimating the probability of receiving payments for an uncertain receivable through historical knowledge, the company will be able to avoid overrated accounts. RAS on the other hand, does not have the same approach. Instead it focuses on the transactions when they occur and only permits potential losses accounted when they happen.

Another principle, which is of importance in IFRS, is the matching principle. The matching principle entails, in economic contexts, that costs and revenues are matched in the same period as they arise. The Russian principle instead puts emphasis on that certain criteria are fulfilled. Revenues and expenses from the same transaction can be realized in different periods. A rigorous set of rules, which decides when revenue is to be recognized. An example that is not included in the IFRS but needs to be fulfilled by RAS is that the ownership must legally be transferred. In conclusion, RAS focuses in payments while IFRS concentrates on sale.

Substance over form is the third principle where RAS and IFRS are